Homeloans delivers solid HY result after returning $35.7m in capital
Mortgage lender Homeloans Limited (ASX:HOM) has today announced a solid interim financial result in line with expectations, reflecting the Company’s ongoing consolidation and consistent half year earnings in a challenging mortgage lending and credit market.
Highlights for the six months to 31 December 2010
- Net Profit After Tax and after normalising for the capital return increased to $4.4m, up 3% on the previous corresponding period result of $4.3m.
- Revenue increased to $39.7m, up 8% on the previous corresponding period result of $36.7m
- Lending volumes increased 59% on the previous corresponding period which resulted in a 42% increase in net fee and commission income to $8.4m, up from the previous corresponding result of $5.9m
- Despite the strong growth in lending volumes, underlying operating expenses were stable at $8.5m, reflecting the company’s continued improvement in operating efficiencies. A national brand building advertising campaign commenced during the half which resulted in a 10% increase in total reported operating expenses to $9.3m.
- Statutory Net Profit After Tax decreased to $4.4m, down 4% on the previous corresponding period result of $4.6m. This decrease was also in line with expectations with the Company having returned 35 cents per share to shareholders, totaling approximately $35.7m, via a reduction in capital in September 2010, which impacted interest earnings over the last three months of the half year period
- Board has declared a fully franked interim dividend of 2.5 cents per share, down from the corresponding period, as a result of the capital return and the retention of capital in order to support substantial increases in sales growth.
Basic earnings per share stood at 4.33 cents per share compared to 4.57 cents per share for the previous corresponding period. Net tangible asset backing per share stood at 21.86 cents compared to 52.01 cents for the previous corresponding period.
Homeloans Executive Chairman Tim Holmes said, “These solid half year results reflect a continuation of consistent and stable earnings performance over the past four half year periods. They have been achieved amidst continued challenges within the volatile Australian housing market and the mortgage lending and credit markets broadly.
“Whilst consumers shied away from non-bank lenders during the global financial crisis (GFC), we have seen a very positive increase in demand for our home loan products this half as reflected in our 59% increase in lending volumes. We have worked closely with our key wholesale funding partners to improve and expand our product offering.
“We continue to streamline our front end application and credit approval processes, allowing us to be more flexible and customer orientated, and continue to provide a very real and refreshing alternative to the big four banks for home finance.”
Growth and expansion strategy
During the first half of the financial year, Homeloans continued to focus on expanding its retail presence nationally in order to generate increased loan volumes from this channel.
“Whilst we remain committed to maintaining our strong position in the third party broker channel, we see great opportunity in expanding our distribution footprint and capabilities. During the first half of the year, Homeloans opened two new retail offices in Melbourne, two in Queensland, and has several more in the pipeline,” Mr Holmes said.
To support this growth and expansion phase, Homeloans has invested in a national branding and advertising campaign.The company has forged partnerships with two high profile sporting entities – rugby league legend Shane Webcke, and Matthew Pavlich, captain of the Fremantle Dockers. Both Shane and Matthew are the face of national TV, online and outdoor advertising activity for Homeloans which has seen brand awareness increase by 53% in four months, according to ongoing Homeloans consumer research.
Outlook for the next six months to 30 June 2011
Homeloans will continue to explore opportunities for retail expansion in addition to exploring alternative channels for distributing its broad range of homeloan products to consumers.
Proposed legislative changes with regards to banking competition – in particular the proposed ban on early exit fees from 1 July 2011 – will provide challenges for the industry, including banks and other mortgage lenders. Homeloans anticipates some noticeable changes to take place across the market over the ensuing period as lenders respond to these changes. This environment will provide opportunities for the company to further differentiate itself and strengthen its position as a genuine alternative to the major banks.