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Listed aggregator reduces losses with strong digital growth

James Mitchell 9 minute read

An ASX-listed mortgage aggregator has significantly reduced the $20 million loss it reported for the 2014-15 financial year.

In a trading update last week, eChoice reported a net loss after tax of $1.6 million for the six months to 31 December. The group managed to reduce its operating costs by $3.1 million compared to the prior corresponding period, while also increasing its revenue.

In September, eChoice recorded a statutory net loss after tax of $21.1 million.

Commenting on the half-year results, released on 25 February, eChoice CEO Peter Andronicos said they affirmed the benefits of the company’s growth strategy and it positions the aggregator to capitalise on its strengths to generate improved financial returns.

“Our half-year result reflected higher settlement volumes, initial revenues from our digital business, significantly reduced operating costs, lower interest expense and a smaller movement of the NPV asset than in the prior period,” Mr Andronicos said.


“We were particularly pleased to deliver a substantial reduction in debt.”

Revenue from continuing operations increased by 3.8 per cent to $30.1 million in the period. The improved revenue result was driven by a 10.8 per cent increase in settlement volumes, including a 19.7 per cent increase in direct and aggregation settlements compared to the prior period, the group said in an ASX statement.

“eChoice’s growth in settlement volumes was driven by our expanded broker numbers - from new recruits and graduates from our Broker Academy - who began writing new loans in the current period,” Mr Andronicos said.

Other Revenue, which includes revenue from the new digital business lines and the existing asset finance business increased 16.4 per cent to $0.9 million on the prior corresponding period.

“Digital solution revenues accounted for 62.5 per cent of 'other revenue', a 94.7 per cent increase over the prior half-year,” the group said.

Mr Andronicos noted that the increase in other revenue reflects early successes in the roll-out of new business strategies and partnerships.

“Specifically, during the period the business consolidated its relationships with Domain and other established brands including major banks and real estate online businesses,” he said.

“The results also benefited from the major operational restructure undertaken in early 2015, which facilitated a reduction in operating costs of $3.1 million compared to the prior corresponding period, notwithstanding an increase in targeted marketing spending during the period.

“Further cost reductions are expected over the full year, driven in part by lower occupancy costs associated with the relocation to Ultimo in late 2015.”

eChoice exited the mortgage securitisation business in October 2015, following the sale of the non-core Firstfolio Capital business. Net proceeds from the transaction were $7.8 million, comprising sale proceeds before costs of $2.0 million and the release of $5.8 million in cash collateral.

The company’s proceeds from the Firstfolio Capital transaction and strong operating cashflows enabled it to reduce corporate net debt by $10.5 million in the first quarter of 2015-16, to $47.7 million.

“The major business restructuring last year has delivered significant cost savings and positive cultural change to the business. But most importantly, it paves the way forward for us to utilise our unique market expertise and in-house capabilities to drive activity in rapidly developing business channels," Mr Andronicos said.

“In the coming year, we expect to grow settlement volumes above system growth as graduate and recruited broker numbers increase,” he said.

“We are continuing to develop new revenue streams and are actively pursuing new partnerships in the digital solutions market to leverage eChoice’s intellectual property and the wealth of data already held by the business."

While it is early days for the digital solutions business and the revenue contribution remains small, Mr Andronicos said the growth rate is highly encouraging.

“A targeted approach to growth in this area is expected to support revenue, margins and shareholder returns, while providing attractive benefits to the company’s employees, customers and business partners,” he said.

[Related: Listed aggregator bullish despite $20m loss]

Listed aggregator reduces losses with strong digital growth
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James Mitchell

James Mitchell

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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