The brokerage is set to be removed from the All Ordinaries index following a review from the ASX.
As of 22 June, Mortgage Choice will no longer feature on the ASX’s All Ordinaries Index (All Ords) of Australia’s top 500 listed companies, following a review of the hierarchy of all its indices.
This marks the second time in less than two years in which Mortgage Choice has been demoted by the ASX, after it was removed from the ASX 300 list in September 2018, after no longer meeting selection criteria.
To be included in the All Ords, a listed company must retain a market value of at least 0.2 per cent of all domestic equities quoted on the ASX and must maintain an average turnover of at least 0.5 per cent of its quoted shares per month.
However, Mortgage Choice’s financial performance has been subdued over the past few years.
Mortgage Choice posted a cash net profit after tax (NPAT) of $5.5 million in the first half of the 2020 financial year (1H20), down 22 per cent from $7.1 million in the previous corresponding period. This followed a 40 per cent decline in the group’s NPAT in FY19.
The group’s financial performance has triggered a sharp fall in its share price, down from a 2020 peak of $1.49 in February, to just under 80 cents per share.
In a statement to The Adviser, Mortgage Choice CEO Susan Mitchell acknowledged recent profitability pressures, but stressed that they’ve reflected investment in the group’s long-term sustainability.
“Last year, we made a considerable investment in our broker and financial planning franchisees so they could invest in their businesses and grow,” she said.
“This has already resulted in a more revitalised and productive network.
“While it has altered the near-term profitability of our business, it was part of a deliberate strategy to build a resilient and sustainable business that benefits shareholders over time.”
Mortgage Choice is not the only major financial institution to be demoted by the ASX, as it has also been announced that AMP Limited is set to be removed from the S&P/ASX 50 index.
AMP reported a 4.7 per cent decline in its underlying revenue in FY19, from $148 million to $141 million. The group’s share price currently sits at approximately $1.75 per share.
AFG promoted to ASX 300 list
Meanwhile, aggregator Australian Finance Group (AFG) has been promoted to the S&P/ASX 300 list.
The group recently recorded a net profit after tax of $18.3 million in 1H20, up 10 per cent from $16.6 million in 1H19.
The result lifted the group’s share price to a record high of $2.90 per share but has since moderated to just under $1.70 per share.
Speaking to The Adviser, AFG CEO David Bailey welcomed the ASX’s decision, commenting: “Our entry into the ASX top 300 marks a significant milestone for AFG, it’s a proud day for the company. The success of our business is a result of a determined strategy to deliver for our brokers, our customers and our shareholders.
“As evidenced by our recent equity raise, our intention is to continue to grow the business in a considered manner. I am proud that we have achieved a strong diversified business model that continues to deliver promising opportunities.
“AFG has been working to support our brokers and their businesses for over 26 years. The success of our business rests with the commitment we have to providing the platform for their success.”
Mr Bailey concluded: “AFG’s entry into the ranks of Australia’s top 300 companies will also serve to raise awareness of the important role mortgage brokers play in delivering a competitive lending market and choice for Australian consumers.”
Following its initial public offering in June 2019, small-business lender Prospa was also promoted and will list on the All Ords Index as of 22 June.
[Related: AFG completes equity raise]