Mark Bouris’ financial services company Yellow Brick Road has revealed a deterioration in its second quarter accounts, with the group’s operating loss widening to $1.94 million over the three months through December.
It’s slight blow out on the $1.7m quarterly operating deficit book during the same period a year earlier. In a statement to the market on Monday afternoon, chief financial officer Richard Shaw said settlements through Yellow Brick Road’s mortgage aggregator, Vow Financial, fell over the quarter due to regulatory pressures on lending practices.
“But this has made little impression on the bottom line,” Mr Shaw said. “Underlying trends are positive and consistent with reduced costs and improving gross profit.”
Prudential limits on investment lending, higher standards for foreign property buyers, and new financial advice legislation are understood to have added pressures to the group’s operating model.
Still, YBR settled $4 billion worth of mortgages during the quarter, an increase on the prior quarter’s $3.9bn result and the third-highest result in the company’s history. However, the result is down 6 per cent year-on-year.
The YBR loan book now stands at $40.8bn. Mr Shaw said Vow mortgage brokers were compensating for the regulatory pressures by pulling more opportunities into the business — applications increased 23 per cent in the quarter. Settlements at the YBR-branded businesses, which run at a higher margin, were up 21 per cent.
It came after YBR booked a net loss of $9.5 million last financial year, and Mr Bouris twice overhauled the company’s structure in 2016. He also signalled the company would lower its generous media ad spend. Nine Entertainment is one of YBR’s major shareholders and broadcasts Celebrity Apprentice, which advertises Mr Bouris and his company.
Meanwhile, cash outflows during the quarter were slightly lower than the preceding three-month period, and included a $1.1m payment to media providers for services the prior financial year. This meant advertising outflows increased 156 per cent compared to the first quarter of the year, to $2.3m.
The company said an overhaul in the wealth division had reignited growth, with funds under management up 30 per cent compared to the preceding quarter.
Golden Wealth Holdings, owned by Mr Bouris, received more than $300,000 during the quarter for consultancy fees, while BBB Capital, the investment advisory group founded by Mr Bouris and his brother Adrian, received $132,000 for consulting on the sale of the accounting practice and for acquisition services. It is understood BBB capital charges below-market rates for its services.
YBR is yet to book an annual profit since listing. All up, the company has lost a cumulative $36.9m over the last six financial years since its joining the ASX.
YBR Price at posting:
14.0¢ Sentiment: Hold Disclosure: Held
