Yahoo Finance

• Residential Mortgage Book: $205 billion, grew 4% for the period.

• AFG Home Loans Book: $13 billion.

• Asset Finance Settlements: 12% growth to $1.8 billion.

• AFG Securities Book Growth: 23% increase.

• Think Tank Loan Book Growth: 10% increase to $6 billion.

• Dividend Yield: 5%, fully franked.

• Return on Equity: 16%.

• Cash and Liquid Assets: $185 million.

• Distribution Business Growth: 8% growth, return on equity of 39%.

• Equity Investments EBITDA Contribution: $5 million to $7 million annualized.

• Net Interest Margin (NIM): 113 basis points, expected to improve.

• Profit Before Tax: $22.3 million.

• Residential Settlements: 13% increase to $32 billion.

• Gross Margin Increase: 6% to $15.3 million.

• Operating Expenses (Opex): Increased by 7% or $3.3 million.

• Dividend Per Share: $0.08, 60% payout ratio.

• Distribution Earnings: $92 million, up 8%.

• Manufacturing Earnings: Stabilized at $8 million.

• Gross Profit Growth: 4% increase.

• Cash Conversion Ratio: 80%, expected to return to 90-100% range.

• Warning! GuruFocus has detected 7 Warning Sign with ASX:AFG.

Release Date: February 28, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Australian Finance Group Ltd (ASX:AFG) reported record settlements and a growing loan book size, indicating strong business performance.

• The company experienced an 8% growth in its distribution business, which is its highest capital segment, with a return on equity of about 39%.

• AFG's investment in broker technology has resulted in a 35% productivity improvement among brokers.

• The company's securities loan book grew by 23%, reflecting robust growth in its securities business.

• AFG declared a fully franked dividend yield of 5%, showcasing its commitment to returning value to shareholders.

Negative Points

• The cost to income ratio remains higher than desired, indicating potential inefficiencies in operations.

• AFG's contribution from its Think Tank investment was lower than expected, impacting overall earnings.

• The payout ratio for brokers has increased, which could affect profit margins.

• The company's essential services segment recorded a loss, driven by higher full-time equivalent (FTE) costs.

• AFG's cash conversion ratio was lower than usual at 80%, affected by timing of commission payments and additional payment runs.

Q & A Highlights

Q: Can you provide more details on the equity broker investments and the timeline for reaching your goal of 35 investments? A: Luca Pietro Piccolo, CFO, explained that they expect to invest in 4 to 8 broker groups per annum. The first year will focus on building the pipeline, with a target of 4 investments. They aim to take minority equity interests of 20% to 40% in these businesses, ensuring they meet financial hurdle rates.