The diversified mortgage and financial advice business has returned to an operating cash surplus, but its performance mortgage market has slowed.
Yellow Brick Road (YBR) has released its financial results for the quarter ending 31 March 2019 (3Q19), recording an operating cash surplus of $40,000, a $110,000 increase from a deficit of $70,000 in the previous quarter.
The increase was partly driven by a 5 per cent reduction in its operating cash outflows (excluding its branch and broker share of revenue), which declined from $8.4 million to $8 million.
The improvement in YBR’s cash position was reported against a backdrop of falling home lending volumes, with settlements declining by 20 per cent in 3Q19, from $3.1 billion to $2.5 billion.
YBR’s underlying mortgage book increased by 1 per cent over the quarter, rising to $49.2 billion.
The group stated that its lending performance was “impacted by regulatory factors and the royal commission into banking and financial services”.
YBR’s 3Q19 update follows the release of its unqualified audit-reviewed half-year report for the six months to 31 December 2018, which showed a net loss after tax (NLAT) of $34.15 million.
The loss was largely comprised of a non-cash asset write-down of $33.95 million ($30.96 million after tax) on the carrying value of the wealth management and lending business – as well as other intangible assets across the group.
The balance sheet reset therefore indicated that no goodwill was being carried forward.
As such, the only remaining item and largest cash-delivering asset on the balance sheet was the group’s trail commission book, which reportedly totals around $49 million.
However, the group is currently pushing ahead with its mortgage securitisation program in an effort to strengthen its position in the marketplace.
It was recently revealed that YBR entered into two separate non-binding term sheets relating to the creation of a securitisation business, which would fund its initial working capital requirements, as well as the initial $6 million subordinated/first loss C Note required for a $300 million RMBS warehouse facility.
The group said that once definitively agreed and implemented, the funding arrangements would satisfy a “major commercial condition” precedent to the RMBS warehouse facility.