Mortgage Choice has spoken out about its fall in market share and deteriorating share price.
Mortgage Choice recently announced that its loan book had reached $50 billion for the first time in its 23-year history, driven by strong settlement growth and an ever-expanding network of franchisees and loan writers. However, despite these positive results, the listed group has seen its share price fall by more than 30 per cent over the last six months.
At its annual general meeting in Sydney yesterday, Mortgage Choice chairman Peter Ritchie acknowledged the sliding share price, which has seen the company’s value fall to approximately $230 million.
“To say we are disappointed with our share price would be a significant understatement,” Mr Ritchie said. “We think the market is making a monumental error.”
Also speaking at the AGM, Mortgage Choice chief executive John Flavell highlighted the group’s strong performance but admitted that this was not enough to grow its share of the home loan market, with records showing a 2.6 per cent drop in market share over the 2015 financial year.
“While our performance was very strong in terms of our mortgage business, the market was very strong indeed,” Mr Flavell said. “Despite the fact that we increased the number of our franchises, despite the fact that we increased the number of our loan writers, we couldn’t keep pace with the market growing at somewhere in the vicinity of 12 or 13 per cent,” he said. “The market was outpacing us.”
Mr Flavell noted that Mortgage Choice continues to increase the proportion of its revenue that comes from diversified offerings beyond mortgages. However, he added that mortgages are “very much the engine room and at the heart of revenue generation for the enterprise and will be for some to come”.
Commenting on the group’s operating expenses in relation to revenue, Mr Flavell said that over the last three to five years the gradient for revenue growth and the gradient for expense growth has “basically kept the same”.
“We can certainly do better than that,” he said. “We will continue to invest in the future. So our expense signature will increase, but we will demand rigor around our business cases and if we are spending a dollar, then we better make sure that we get more than a dollar back as far as revenue is concerned.
“Having an environment where a gradient on our expense growth exceeds the gradient on our revenue growth is not acceptable. It is not acceptable to me, it is not acceptable to the board.”
Mortgage Choice shut down its online business, Help Me Choose (HMC) last month after the unit failed to meet its expected sales targets.
“The result was very poor indeed,” Mr Flavell said yesterday. “We had the business for close to four years. Over that time the business made a positive profit once, in the 2014 financial year, of $200,000,” he said. “That business has represented about 25 per cent of our operating expenses.”
Mortgage Choice took a $763,000 cash loss for the HMC business in the 2015 financial year. Had the group not shut it down, Mr Flavell said the losses could have exceeded $1 million.
However, the group has seen a positive start to the 2016 financial year.
Home loan settlements are up 8.0 per cent year-on-year, while cash group revenue is up 10 per cent over the same period of time.
Mortgage Choice’s head office generated home loan leads are up 46 per cent on this time last year.
[Related: Mortgage Choice boasts $50 billion loan book]
James Mitchell has over eight years’ experience as a financial reporter and is the editor of Wealth and Wellness at Momentum Media.
He has a sound pedigree to cover the business of mortgages and the converging financial services sector having reported for leading finance titles InvestorDaily, InvestorWeekly, Accountants Daily, ifa, Mortgage Business, Residential Property Manager, Real Estate Business, SMSF Adviser, Smart Property Investment, and The Adviser.
He has also been published in The Daily Telegraph and contributed online to FST Media and Mergermarket, part of the Financial Times Group.
James holds a BA (Hons) in English Literature and an MA in Journalism.
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