Annual Report 2012
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Annual Report 2012 Yellow Brick Road Holdings Limited ABN 44 119 436 083 2012 represented a year of investing for growth in Yellow Brick Road. In a 12 month timeframe, we’ve launched a nationally recognised brand, built a network of branches across the country, and created a suite of products and services to rival any major banking institution... and we’re just getting started. ANNUAL REPORT 2012 Section One 04 Executive Chairman’s Letter 06 Chief Executive Officer’s Report 10 Year in Review Highlights 12 Building the Brand 14 The Road to Advice 16 Our Product and Service Capability 18 Directors’ Profiles 20 Executive Committee Bios Section Two 01 2012 Directors’ Report and Financial Statements Executive Chairman’s Letter 2012 has been a defining year for Yellow Brick Road with a deliberate focus on investing for growth. The GFC provided us with an opportunity to capitalise on the shrinking banking sector by building a business to challenge the major institutions and their stranglehold on the market. We’ve had the chance to be significantly competitive against the banks, and we’ve taken the opportunity and built one of the most recognised alternatives in the market on a very modest investment and in a very short timeframe. Over the past year we have invested shareholder’s funds to build a nationally recognised brand, a network of branches across the country and correlated a product and services portfolio that financial consumers want, rolled out through training programs to our network. Your company has done this in record time for a modest amount of money in relative terms and against enormous head winds that even the four big banks of Australia are now making reference to. The proposition that was laid down after the GFC in 2009 was that financial services revenue in Australia would be largely the domain of the big four banks in this country. This structural change has created a unique opportunity for a disruptive business model like Yellow Brick Road. We are independent and growing at a rapid rate, and I am very pleased with what we have achieved in 2012. From experience in previous business building, this outcome would ordinarily take a significantly longer timeframe and a far larger investment. This year’s results are well within our expectations and are a testament to our business model, our capital investment, and our long-term value proposition. Economic headwinds have made growing a business in this climate and in this industry a difficult task. For quite a few industries, these headwinds are some of toughest the market has ever experienced, yet Yellow Brick Road has established strong momentum in revenue which has increased 31 per cent from last year. What is important to note here is that our revenue growth has been quite phenomenal in all categories when it has been originated by the branches. Mortgage growth has increased, and wealth and general insurance have also increased pleasingly. This revenue growth can be attributed to the development and productivity of our branch network and the dedicated work of our professional services teams in Accounting and Investment Services who have maintained close relationships with our clients when they too are facing volatile economic conditions. 05 Much of Yellow Brick Road’s success this year can be attributed to the partnerships we have formed. Our strategic alliance with Nine Entertainment Company has been a dynamic force behind our efforts to build the brand and it has offered us a national platform to deliver our message to the masses. The partnerships we have built through various product partners, including Gateway Credit Union, OneVue, Allianz, Australian Life Insurers (ALI) and MetLife have been another key area of development that has allowed us to deliver a portfolio of products that rivals that of any major Executive Chairman’s Letter financial institution. Our relationship with Coolabah Capital deserves specific mention because, through it, we have been able to create an investment product called Smarter Money that has consistently delivered higher returns than any other bank deposit, term deposit or cash management trust known to us in the market. It is these points of differentiation that make Yellow Brick Road a business that I believe is in a class by itself. Also, the partnerships we have with our branch principals and their staff are a constant source of inspiration within our business. It is their personal motivation and success that pushes each and every one of us to work harder, smarter and better. I’d like to thank our partners, our shareholders, the branches and our team at head office for their 66 dedication and support over the past year. By working together, we have grown the business against the headwinds and we look forward to achieving even more momentum in the coming years. From experience in The financial year ahead in 2013 will be one of “compounding” growth for Yellow Brick Road. previous business By building on the foundations put in place in 2012, we can add to the value already created and building, this outcome grow the business to the next level. This coming year, we’ll step it up with a higher level of intensity and a greater focus than ever before. would ordinarily take We have an opportunity to take this industry head on, to challenge convention and to bring a new a significantly longer level of customer care, advice and support to the market. There is room for an alternative and timeframe and a far Yellow Brick Road is the company to quite literally change the game in financial services. I thank you for your support and look forward to sharing our future with you. larger investment. Regards, 66 Mark Bouris Executive Chairman Chief Executive Officer’s Report CEO’S Report ON Annual RESultS to 30 June 2012 After a successful capital raising and listing on the ASX in June 2011, the company set about implementing its strategy to establish Yellow Brick Road as an emerging challenger in the Wealth Management sector. As outlined in last year’s Annual Report and subsequent communications, the company has 07 focused on three key elements of the strategy, which include building the brand, delivering advice via a growing branch network and assembling a comprehensive range of products and services. Investments were made throughout the year to support each of these strategies and will provide benefits to the company in the short, medium and long term. It’s important to note that the major assets of the business are ‘off balance sheet,’ which include our brand, our distribution network, our mortgage book, our funds under management and our in-force premium. Revenue grew strongly to finish 31 per cent higher year on year Chief Executive Officer’s Report • Branch revenue has a strong growth profile and forward momentum as more branches are appointed and existing branches become more productive • Mortgage revenue up 77 per cent • Wealth Management up 396 per cent • General Insurance up 99 per cent Quarterly Revenue Momentum Professional Services revenue was down 13 per cent overall in millions • Accounting revenue was down three per cent, a solid result given the market and our strong client retention • Investment Services down eight per cent, impacted by low growth and low consumer confidence • General Insurance was down 73 per cent, impacted from a restructure in June 2011 to focus on branch growth General Insurance Wealth Management Accounting Lending (Retail) Total expenditure of $21.7 million supported the company’s focus on investing for growth • Branch ‘pass through’ (commissions and fees) finance costs, depreciation and amortisation expenses totalling $7.5 million • Planned Investments for growing the business and operational expenses for running the business totalling $14.2 million, which are further analysed below: Breakdown of ‘Investment’ (growing the business) and ‘Operational’ (running the business) expenditure *Expense breakdown excludes “pass through” to branches (Commission and Fees), Finance costs, Depreciation and Amortisation expenses. The FY 2011 expenses further exclude listing costs of $0.423m. The Annual Result after investing for growth was a loss of $6.83 million The company has invested in line with the three key elements of the strategy with excellent results. Consumer awareness of the brand has increased substantially, our branch network has doubled and is increasingly providing advice across a broad range of products and our product suite has expanded with strong growth in key product areas such as mortgages, investments, insurance and advice. Importantly the investments made during the last 12 months will be leveraged in the next 12 months and beyond. Yellow Brick Road Wealth Management FY 2013 Strategy There are three core elements of our strategy Building a nationally recognised Delivering advice via a growing Developing a comprehensive and trusted advice brand distribution footprint product suite Key objectives Key objectives Key objectives • Leverage brand investment made in • Continued growth in the number of • Identify consumer needs and preferences FY2012 to increase consumer awareness branches and a concentrated focus on (present and future) not currently being and consumer consideration productivity of branches served and establish solutions to satisfy • Execute specific initiatives with • Expand financial planning capability and client demand Nine to generate consumer enquiry support within branches and via targeted • Establish and maintain close product for the branch network recruitment and acquisition of specialists relationships with key strategic partners • Create local campaigns for branches • Embed a quality and compliance culture • Investigate opportunities to play a more connecting with their community and framework across the network prominent role in the product value chain ie vertical integration Strategy underpinned by quality, dedicated and client focused people Yellow Brick Road is a people business where the majority of the value created is about our people (employees, branches and their staff) helping everyday Australians.