Review of Financial Results and Operations
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ASX MARKET RELEASE
Review of Financial Results and Operations
Ausnet Financial Services (AU1) continues stellar growth as
“The Agency” doubles in size and grabs market share
Highlights
• Group Revenue up 44.7%
• The Agency starts national expansion opening in NSW with recognised industry
leaders
• The Agency achieves REIWA Top Office ranking in WA for month of July for volume
and value of sales grabbing 3% market share
• The Agency number of settlements increases 263%
• The Agency gross commission increases 145%
• Strong internal referral rates continuing
• Purchases Beaufort Realty adding 430 property managements and highly respected
sales team
The past twelve months have been pivotal to Ausnet and we have achieved a great deal.
Most notably, we listed on the ASX on 28 December 2016 having successfully completed a
reverse take-over transaction with Namibian Copper NL (NCO) and a raise of $5.8m.
This is a truly transformative event. It has not only ensured the company was suitably
capitalised to meet its well thought out expansion objectives, within and outside of the
Western Australian market where the company was formed, but in our view, also validated
the disruptive real estate model Ausnet has launched called “The Agency”.
Within months of listing we expanded into the East Coast launching “The Agency” in Sydney,
having signed a licence agreement with Top Level Pty Ltd to use The Agency brand and IP
exclusively in NSW. Top level was formed by a group of highly respected and experienced
industry Executives and Sale Representatives that are nationally recognised, Ausnet also
signed a 12-month option to buy Top Level Pty Ltd which expires on 30 Jan 2018.
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The investment market had set 2 main bench marks for Ausnet to deliver and keep
delivering. These were:
1) Demonstrate revenue growth via sales and the attraction of quality sales
representatives,
2) Deliver the referral rates set to the ancillary businesses being the mortgage broking
business and the settlement /conveyance business.
These targets were set at:
20% of all sales to be referred to the mortgage business (which is three times the
industry rate); and 40% of all sales to be referred to the settlement business.
These targets were set in a WA real estate market that has contracted 9% in sales turn over
and 9% in value of the average home and deemed by most experts as the worst real estate
market in the country.
This decline along with the banks tightening of lending requirements also lead to the
number of residential loan applications for WA declining an average of 12.5% since March
16 quarter.
Despite this Ausnet is pleased to report very strong growth and that targets set have all
been met or exceeded with respect to our WA operations.
“The Agency” continued its stellar growth with the three main indicators of listings,
settlements and gross commissions exceeding 100% growth.
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Group Results
In terms of the Group the highlights are as follows:
Revenue
Revenue is up 44.7%
June 17 June 16 % change
Revenue $9.59 m $6,631m +44.7%
Commissions $6.335m $3.725m +70%
Fees $3.018m $2.858m + 6%
Total cashflow from operating activities was up 41%
Reducing the net cash outflow from operations from ($1.4m) in June 16 to ($0.84m) in June
17.
In comparison to the prior years results, taking into account non-recurring costs, non-cash
costs and costs associated with the ASX listing and maintenance of an ASX listed entity, the
actual loss due to operations for the year was $840k down on $1.84m previous year.
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A 54% improvement in operational results despite our expansion into NSW
Net Assets
The Net Assets increased from ($1.43m) to $2.67m.
These numbers do not include the off-balance sheet market value of the loan book which is
estimated to have a market value of $4m.
The company also has no bank finance and has not leveraged on the acquired rent roll from
Beaufort, valued at approximately $2M.
The Agency
“The Agency”, is a high quality disruptive real estate brand wholly owned by Ausnet. In the
past 12 months, it has seen significant growth in agent numbers, listings and settlements.
In the month of July 2017, based on independent industry numbers produced by the Real
Estate Industry of Western Australia ("REIWA"), the Agency was recognised as the Top
Office by Value of Properties Sold and Top Office by Number of Properties Sold for Perth
metro sales.
1573 properties were sold in Perth during July, with the Agency selling 54 properties, with a
combined value of $ 28,652,500.
For the June quarter, the Agency sold 187 properties from a total of 5497, giving “The
Agency” a market share of 3.4%.
It is important to note that the real estate market both nationally and in WA is highly
fragmented with the leading brand in WA Ray White holding approximately 10% for Perth
Metro. (Note: REIWA does not capture private/online sales and non-members).
The Top Franchise Group, Ray White with 43 Branches/Offices sold 2086 properties for a
value of $841.4m.
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Overall “The Agency” Office finished 6th in the REIWA Office ranking for the year, in only its
2nd full year of operations.
With just on 50 sales representatives The Agency sold 366 properties for $229m.
(Of which 12 sales representatives only joined in the last month and are still to be fully
integrated)
As a comparison, the top office which was established 6 years ago, with 141 sales
representatives sold 627 properties for $308m.
Meaning that the office that finished on top had three times the number of sales
representatives and sold only 30% more in dollar value.
Since launching “The Agency” brand in Western Australia, the company set and achieved its
target of securing +50 high quality and respected Sales Agents by 30 June 2017.
The Agency has attracted, and it believes will continue to attract, significant interest from
sales representatives wishing to join its business. As a Group, our 50 sales representatives
are punching above their weight, out selling the Real Estate Offices with larger numbers of
sales representatives in July.
Securing these sales representatives, who come to the business with a strong sales
capability and network in the location in which they are based, are central to the successful
expansion of the Agency model.
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Highlights
June 17 June 16 % increase
Listings 639 307 108%
Settlements 359 113 263%
Gross Commissions $4.71m $1.28m 145%
Referral Rates
Mortgage referrals Settlement Notes
referrals
Total Settlements 359 359
Referrals 298 440 Due to both the
buyer and seller
being referred
% of settlements 83% 123%
referred
Conversion of 21% 72%
referrals
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Deals from our Mortgage business are also converting at a rate of 10% into Financial
Planning and General Insurance leads.
The Agency Year on Year
June 17 June 16
Revenue $5m $2m
GP $884k $341k
Expenses ($1.38m) ($1.1m)
Add backs $371k $220k
Operating deficit ($125k) ($539)
(prior to head office management fee)
In March Ausnet concluded the acquisition of Beaufort Realty. The business had 430
property managements which has now grown to 450.
Beaufort Reality numbers for 3 months April to June 2017 were;
Sales Revenue: $ 314k
Property Management Revenue: $ 152k
Operating Profit after Tax: $ 92k
These numbers are ahead of expectation and will be incorporated into “The Agency”
numbers going forward.
Top Level
In January 2017 Ausnet entered into a Licence and Option to Acquire agreement, with
Sydney based real estate business Top Level Real Estate Pty Ltd (“Top Level”).
Not only does this agreement provide Ausnet with immediate expansion of “The Agency” on
to the east coast of Australia, but it also sees us working with some of the most highly
skilled real estate professionals in the country.
The agreement, in the view of the Board, will contribute greatly to the growth and
expansion of the business. Under the agreement with Top Level Pty Ltd Ausnet accrues a 3%
license fee for the use of the brand and IP, with an option to purchase the company for a
pre-agreed consideration at any time before 31 January 2018.
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As at 30th June Top Level had achieved the following numbers in only 4 months:
Agents recruited - 32
Agents confirmed not started - 45
Agents from Acquisitions - 18
Total Gross Commissions - $4.15m
Total Settlements - 97
Property Managements - 65
As reported in June, Top Level Pty Ltd completed its first acquisition, “Province” in the lower
North Shore of Sydney.
The acquisition added approximately 1,150 property managements and 18 sales
representatives to the Top Level business. This acquisition partially completed the condition
precedent to the Option Agreement, that if exercised would see Ausnet acquire the Top
Level business.
It is anticipated that Top Level will sign the second acquisition that is part of the condition
precedent over the coming weeks.
About Ausnet
Ausnet consists of a group of successful businesses which deliver finance broking, real
estate services, settlement services, property management (2017), project marketing,
insurance and financial planning initially to the Western Australian market with an aim to be
rolled out nationally.
This model has been created to build the core asset being a loan book currently at ~$1.1
billion by cross referring clients between business units. The largest growing referral area
has been built on a highly successful and disruptive real estate agency model named “The
Agency”. The agents have been referring ~60% of all sales for financing broking.
Ausnet is aiming to recruit ~100 sales representatives to “The Agency” in Western Australia
that will eventually deliver over 1000 property transactions per year with the aim of
converting into cross sales for mortgages, settlements and insurance. Each sales
representative that joins Ausnet not only add sales activities but also on average bring in a
database of ~2000 clients. Ausnet’s target is to have ~600 sales representatives nationally.
The Company is also backed by Finsure Group, one of Australia's fastest growing retail
finance brokerages writing over $1 billion in new mortgages every month across 850
brokers.
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Corporate website: www.ausnetrealestateservices.com.au
The Agency website: www.theagency.com.au
Investors
Ausnet Financial Services Ltd
Paul Niardone
T: +61 08 9204 7955
paul@ausnetrealestate.com.au
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