Mortgage broking and wealth management services provider Yellow Brick Road Holdings Ltd (ASX: YBR) reported a half-year net loss of $4.3 million, while achieving a strong improvement in underlying EBITDA.
Here are the key half-year results:
- Revenue $59.2 million, up 281.1%
- Earnings before interest, tax, depreciation and amortisation (EBITDA) reported EBITDA minus $6.2 million, down from minus $3.2 million / underlying EBITDA minus $494,000, up from minus $3.2 million
- Net profit after tax (NPAT) attributable net loss $4.3 million, down from attributable loss of $3.5 million
- Earnings per share minus 1.69 cents per share, up from minus 1.83 cps
- Dividend per share no interim dividend was declared
Half-year business highlights:
— After completing the acquisition of Vow Financial Holdings, Yellow Brick Road's underlying mortgage network grew strongly, leading to a 288% increase in revenue.
— The August acquisition of mortgage originator and aggregator Resi expanded Yellow Brick Road's loan product capability and improved the group's product margin.
— Together with white label products from Macquarie Group Ltd (ASX: MQG), the company's mortgage loan book grew 21% to $27.6 billion and settlements were up 52% to $6.2 billion. Yellow Brick Road's position as a non-bank lender has grown steadily and the company has increased its market share of the residential mortgage market.
— In wealth management, funds under management expanded from $381 million to $524 million, up 37.5%.
Yellow Brick Road operates in a residential loan market still dominated by the big four banks, which combined account for a little over 80% of market share among bank lenders. Non-bank lenders like Yellow Brick Road and Mortgage Choice Limited (ASX: MOC) have to compete aggressively to grow market share.
Growth in home loan volumes are up thanks to the record low interest rates, however lower rates mean smaller margins for lenders. On top of that, lenders may offer rate discounts to attract borrowers as well. Macquarie Group, a substantial shareholder of Yellow Brick Road, assists Yellow Brick Road in growing its lending network with competitive loan products to increase its residential loan market share versus the big four banks.
Although still in its early development years, it would be better for investors to wait until Yellow Brick Road generates a net profit before taking a substantial position.
