Bell Potter 22nd August, 2011
Analyst TS Lim
Cost effective distribution channel
As a virtual mortgage lender, FFF operates without the usual restrictions faced by the banks. These include credit risk, infrastructure constraints and excess capital/liquidity requirements. The emergence of specialist fighting brands amongst the majors is designed to provide choice to customers and sustain growth in a soft yet competitive credit environment. FFF would strategically enhance the banks’ overall distribution capabilities at a far lower cost, either as a takeover target or strategic partner.
Solid 2011 performance despite headwinds
FFF increased 2011 NPAT by 42% to $6.4m and operating EBITDA (excluding $3.7m of acquisition and restructuring costs) by 49% to $15.6m. This was largely due to contributions from recent acquisitions (e.g. Club Financial Services and Apple Loans), margin management (operating EBITDA margin increased by 1% to 17%) and tight cost control (overheads as a % of revenue decreased by 1% to 24%). Operating EBITDA was short of the $17-18m guidance largely as a result of the QLD floods (20% of all loans sourced from the state).
