1H FY2024 Investor Presentation
1H FY2024 Investor Presentation
22 February 2024
1H FY24 Key Takeaways 1H FY24 Investor Presentation 2
$557K $43.9M
Underlying EBITDA1 Revenues from Ordinary Activities (1H FY23: -$947K) (1H FY23 : $37.5M)
$3.3B 3,115 Gross Value of Properties Sold No. of Properties Sold (1H FY23 : $2.6B) (1H FY23 : 2,847)
$56.9M 411 GCI2 No of Agents (1H FY23 : $45.7M) (30 June 2023: 399)
1. Underlying adjusted for the impact of AASB16 Leasing Standard, Gain on Sale and other one off items. 2. Gross Commission Income (“GCI”) is the fees the vendor pays for the sale of a property.
1H FY24 Investor Presentation 3
Record transaction volume $3.0bn $3.3bn $52.9m $56.9m
underpinned growth $45.8m 316,068 $2.6bn
in other metrics 2,910 2,847 3,115
266,598 $2.2bn $38.1m 260,470 2,407 236,535 226,503
$1.5bn $24.9m 1,595
Record six month result of 3,115 transactions under pinned record Gross Sale Volume and Gross Commission Income level.
Improved transaction contributions from East Coast states assisted the growth in Gross Sales Volume. No of Properties Sold National Transaction Volume* Gross Sales Volume Gross Commission Income ($M)^ NSW Average Sale Price in the period was +17.1% in 1H FY24, while WA Average Sale Price was +11.6% which were both above the Australian market average growth of 8.1%*. 1H FY20 1H FY21 1H FY22 1H FY23 1H FY24
* Source: CoreLogic Economist Park (Dec 2023). ^ Gross Commission Income (“GCI”) is the fees the vendor pays for the sale of a property.
1H FY23 Investor Presentation 4
A growing brand with 411 agents with presence across six states and territories.
The Agency has continued to expand its presence during 2022 and 2023, adding additional geographical areas to its operations. The Agency is also focused on building depth in existing markets to increase overall national market share.
1H FY24 Investor Presentation 5
Over 10,000 investment properties managed by The Agency
As at 31 December 2023, The Group managed 10,092 (31 Dec 2022: 5,868) properties with an asset value of some $9bn. The property management business is comprised of 5,089 (31 Dec 2022: 4908) that are owned by the Agency and 5,003 (31 Dec 2022: 960) externally owned management rights. Management’s estimated value of it’s 5,089 management rights and its Mortgage Book as at 31 December 2023 was $29.31m. Since its announcement, MDC Trilogy Group have deployed nearly $25m in purchasing rent roll assets across NSW and Queensland. These purchased rent roll assets comprise of over 4,000 properties under management which are now managed by The Agency under a services arrangement. Combined, the 10,000 plus managed properties collected $135m of rent in the six month period on behalf our landlords and represent an estimated $9 billion of Australian’s property investors wealth. Our national footprint enables Landlords with a geographically dispersed portfolio the opportunity to have all their properties managed by a single company. The increased portfolio scale enables greater cost synergies across The Agency owned portfolio.
1H FY24 Investor Presentation 6
Financial Highlights
1H FY24 Investor Presentation 8
Business Performance Update Record six month GCI result
A disciplined approach to expenses enabled the cost of doing business in the half to 1H FY24 GCI of $56.9m was a record GCI for the materially reduce to 32.8% of revenue with further reductions targeted. company, growing from $49.8m in 2H FY23.
UNDERLYING1 Agent Mix ($M) 1H FY24 1H FY23 Change During 1H FY24, a higher percentage of sales by GCI 56.9 45.7 24.5% independent contractors resulted in Revenue growth below GCI growth2. Revenue2 43.92 37.49 17.2%
Gross Profit 14.61 12.21 19.7%
Other Income 0.37 0.32 -0.5%
Operating Expenses (14.43) (13.47) 6.7% Fractionalising Cost Base
Cost of Doing Business3 32.8% 35.9% -310 basis points As The Agency continues to scale GCI and revenue, management remains committed to reducing the Cost of Doing Business Ratio and taking advantage of EBITDA 0.56 (0.95) n/a economies of scale as our agent population and sales revenue grows. 1H FY24 Cost of Doing business ratio was 32.8%, 1. Underlying adjusted for the impact of AASB16 Leasing Standard, Gain on Sale and other one off items. materially below 1H FY23 result of 35.9%. 2. According to accounting standards, recognition of revenue is dependent on the engagement mechanism of the Agent. A sale by a payroll agent will result as revenue equal to GCI, with an agent commission expense in Cost of Sales. A sale by a non payroll independent contractor agent, revenue is equal to The Agency share GCI. There is no cost of sale expense for a non payroll agent. As a general rule, Western Australia agents are predominantly Payroll agents, while East Coast agents are predominantly non payroll agents. 3. Operating Expenses Pre AASB16 Leasing Standard as a percentage of revenue
1H FY24 Investor Presentation 8
Significant shareholder value + The value attached to internally generated Property Management and remaining Mortgage book is not recorded in the balance sheet. Despite the value of the property held off Balance Sheet management portfolio increasing in the period, under the accounting standard rules, the Profit & Loss statement for the six month period includes an amortisation charge of the externally purchased property management assets held as an intangible asset. This amortisation charge has resulted in a reduction of Statutory Net assets and results in an increase in assets not recognised in the balance sheet. + Management valuation of the Property Management portfolio is calculated on a blended valuation multiple of 3.35x on Q2 STATUTORY FY24 Annualised Property Management fees and 2.25x Net Trail Income relating to the remaining Mortgage Book The ($M) 31 December 2023 30 June 2023 Change estimated combined value of these assets as at 31 December 2023 was $29.31m ($27.67m at 30 June 2023.). Cash at Bank 4.70 4.63 +1.5% + Only $9.35m of this value is held on the Balance Sheet as an intangible asset as at 31 December 2023 ($11.30m as at 30 Net Assets 9.64 12.54 -23.1% June 2023), leaving $19.96m of shareholder value off balance sheet at 31 December 2023 ($16.56m at 30 June 2023). Assets not on balance sheet 19.96 16.56 +20.5% + Adjusting for these off balance sheet assets, Estimated Shareholder Net Assets has increased 1.6% to $29.59m Estimated Shareholder Net Assets 29.59 29.11 +1.6% ($29.11m at 30 June 2023). + In conjunction with the settlement of Bushby Property Group, The Agency entered into a Primary lender banking facility with Macquarie Bank, with a facility limit of $8.40m for a 3 year term expiring on 20 July 2025.
1H FY24 Investor Presentation 9
Industry Highlights
1H FY24 Investor Presentation 10
Market Residential Real Estate $10.3 Tn
Update. Australian Superannuation $3.5 Tn
56.7% of Australian Household Wealth is held in Residential Housing with a Australian Listed Stocks $2.9 Tn $6.2 Billion annual addressable sales commission market.
Commercial Real Estate $1.3 Tn
488,898 $416.1Bn $6.2 Bn Sales in CY23 Gross Value of Sales in CY23 CY23 Total Annual Addressable Market* (GCI)
Source: CoreLogic, RBA, APRA, ASX * Assessed at 1.50% Average Commission Rate of Gross Sales 3.25M $3Tn Volume of $400.9Bn. Number of investment Estimated Value of investment properties in Australia properties in Australia
1H FY24 Investor Presentation 11
Change in sales volumes, six months to Dec 2023
1H FY24 Market Sales NSW 11.0%
Volume VIC 10.6%
QLD 7.5% In the six months to 31 December 2023, Australian market volumes have increased 10.1% from 1H FY23 levels. SA 18.1%
WA 11.3%
TAS 7.9%
ACT -1.6%
+10.1% +5.0% +13.1% Source: CoreLogic Australia Combined Regionals Combined Capitals
1H FY24 Investor Presentation 12
State Breakdown State Breakdown of Transactions Volume (6 months to December 2023) of Sales. WA; 65,770; 13%
NSW; 140,819; 29% In the six months to 31 December 2023, NSW represented 29% of the national sales SA; 34,246; 7% volume, followed closely by Queensland at 25% and Victoria at 21%.
Combined these 3 states represent three NT; 3,298; 1% quarters of the nationals sales volume. TAS; 9,678; 2% Increased organic agent recruitment and MDC Trilogy Group capital deployment will ACT; 8,961; 2% improve The Agency’s market share in these key growth markets.
QLD; 121,162; 25% VIC; 104,964; 21% Source: CoreLogic
1H FY24 Investor Presentation 13
Investor Portion of new lending for investment housing Investors as a % of housing finance Participation (excluding refinance) commitments by state (Dec’23)
ACT 34.6%
Investor Participation at 36.2% is marginally TAS 27.9% above the decade average of 34.1%.
NSW is the state with the highest investor WA 34.8% participation with 40.7% of lending to investors, while WA has grown to 34.8% in December 2023. The Agency has growing property SA 34.3% management rights in both of these key investor markets. QLD 36.6%
VIC 31.7%
NSW 40.7%
AUST 36.2%
Source: CoreLogic, ABS
1H FY24 Investor Presentation 14
Cautious lending 10.2% % of loans originated with an LVR >= 90%
improving quality 9.6% 9.5% 8.3% 8.0% 7.7% 7.3% 6.6% of loans. 6.1%
2.9% 3.0% 2.8% 2.5% 2.4% 2.3% 2.4% 2.4% 2.3%
Mortgage originations for ‘risker’ types of lending trended notably lower through 2022 Sep-21 Dec-21 Mar-22 Jun-22 Sep-22 Dec-22 Mar-23 Jun-23 Sep-23 and throughout 2023. Investors Owner Occupiers Furthermore, as increased interest rates were incorporated into new mortgage application assessments, the percentage of loans with a loan to income ration of greater than 6.0x reduced to 2.9% in the Sep 2023 quarter, % of Loans originated with income ratio >= 6.0x down from a peak of 11.0% in the December 2021 quarter. 24.3% 23.3% 23.1% 22.1% 17.7%
10.3% 11.0% 10.3% 10.1% 11.0% 7.1% 7.5% 6.1% 5.7% 4.5% 3.2% 2.8% 2.9%
Source: CoreLogic, APRA Sep-21 Dec-21 Mar-22 Jun-22 Sep-22 Dec-22 Mar-23 Jun-23 Sep-23
Loan to income ratio >= 6.0x Debt to income ratio >= 6.0x
1H FY24 Investor Presentation 15
Outlook
1H FY24 Investor Presentation 16
CY2024 Outlook
Volume increases expected. Greater price stability. Shift towards larger agent Market consolidation to Mixed consumer sentiment. teams. continue. Across CY24, states are Following the expectation that Super Agent Teams to continue Market Consolidation continues 1H CY24 consumer sentiment expected to transact around interest rates are at or very near to grow as inexperienced as smaller independents and to remain broadly at currently their above decade average the terminal rates, CY24 is agents continue to leave the franchisees look to access levels. A rebound in consumer volume levels. expected to see a period of industry. operating efficiencies. The sentiment during 2H FY24 as price stabilisation across the MDC Trilogy Group alliance economic data supports country. However it may be a 2- means we are well placed to interest rate reductions. tier market, with more listings in capitalise on this trend in a lower value properties capital light way. potentially causing price falls, while higher value properties may experience price increases.
1H FY24 Investor Presentation 17
Appendix
1H FY24 Investor Presentation 18
Profit and loss statement. UNDERLYING1 STATUTORY
($M) 1H FY24 1H FY23 Change 1H FY24 1H FY23 Change Revenue 43.93 37.49 17.2% 43.93 37.49 17.2% Cost of Sales (29.31) (25.29) 15.9% (29.31) (25.29) 15.9% Gross Profit 14.61 12.21 19.7% 14.61 12.21 19.7% Other Income 0.37 0.32 +15.6% 0.37 0.37 -0.5% Operating Expenses (14.43) (13.47) 7.1% (13.30) (12.44) 6.9% EBITDA 0.56 (0.95) n.m 1.69 0.14 n.m Depreciation and Amortisation (2.45) (2.32) 5.6% (3.35) (3.20) 4.7% Share-based payments expense (0.22) (0.26) -15.4% (0.22) (0.26) -15.4% Fair Value Gain on Financial Asset – – n.a. (0.11) – n.a One off legal fees2 – – n.a. (0.32) – n.a Acquisition of business costs – – n.a. – (0.07) n.a Profit/(Loss) on Sale of Asset – – n.a. 0.05 1.51 n.m EBIT (2.11) (3.52) 40.1% (2.26) (1.88) n.m Net Finance Income (Expense) (0.56) (0.62) 9.6% (0.76) (0.78) -2.6% Embedded derivative non-cash finance gain/(cost) – – n.a. (0.50) 0.76 n.m Net Profit/(Loss) Before Tax (2.67) (4.14) n.m (3.52) (1.91) n.m Income Tax Expense/(Benefit) 0.40 0.24 n.m 0.40 0.24 n.m Net Profit After Tax (2.28) (3.91) n.m (3.12) (1.67) n.m
1. Underlying adjusted for the impact of AASB16 Leasing Standard, Gain on Sale and other one off items. 2. Legal costs associated with The Agency Group’s intellectual property action against the company H.A.S. Real Estate, the registered owner of The North Agency. n.a – Not Applicable / n.m – Not Meaningful
1H FY24 Investor Presentation 19
Balance Sheet. UNDERLYING1
($M) 31 Dec 2023 30 June 2023 Change
4.70 4.63 +1.5% Cash at Bank
14.43 13.24 +9.0% Other Current Assets
29.34 31.85 -7.9% Non Current Assets
48.47 49.72 -2.5% Total Assets
(23.20) (21.66) +7.1% Total current liabilities
(15.64) (15.52) +0.8% Total Non current liabilities
(38.84) (37.18) +4.5% Total Liabilities
9.64 12.54 -23.1% Net Assets
19.96 16.56 +20.5% Assets not on balance sheet1
29.29 29.11 +1.6% Estimated Shaerholder Net Assets
1: Management valuation of the Property Management portfolio is calculated on a blended valuation multiple of 3.35x on Q4 FY23 Annualised Property Management fees and 2.25x Net Trail Income relating to the remaining Mortgage Book (combined value of $29.31m). Only $9.35m of this value is held on the Balance Sheet as an intangible asset, leaving $19.96m value off balance sheet.
1H FY24 Investor Presentation 20 1H FY24 Investor Presentation 20
Cashflow Statement. 1HFY24 1H FY24 (Statutory) 1H FY23 (Statutory) ($M) (Underlying)* (Post AASB16) (Post AASB16) (Pre AASB16)^ EBITDA 0.56 1.68 0.14 Change in net working capital 0.19 0.46 (0.36 ) Net interest Paid (0.35) (0.38) (0.36) Net Cashflow from Operating Activities 0.40 1.76 0.58 Purchase of property, plant and equipment (0.21) (0.21) (0.35) Purchase of intangibles (0.11) (0.11) (0.54) Deposit for bank guarantees (0.00) (0.00) (0.04) Net Loans to other entities (0.06) (0.06) (0.06) Net cash received on disposal of asset (0.05) (0.05) (0.04 ) Payment for acquisition of subsidiary, net of cash – – (4.37) acquired Net cash (used in) / received from investing activities (0.33) (0.33) (5.40)
Payment of principal portion of lease liabilities – (1.36) (1.20)
Proceeds of borrowings – – 3.40
Net cash used in financing activities – (1.36) 2.20
Net (decrease)/increase in cash and cash equivalents 0.07 0.07 (3.80 ) held
Cash and cash equivalents at the beginning of the year 4.63 4.63 8.22
Cash and cash equivalents at the end of the year 4.70 4.70 4.41
* Underlying adjusted for the impact of AASB16 Leasing Standard, Gain on Sale and other one off items. ^ This is a non A-IFRS measure Note – may not add through due to rounding differences
1H FY24 Investor Presentation 21
Geoff Lucas
Managing Director & CEO geofflucas@theagency.com.au https://www.linkedin.com/in/geoff-lucas/
1H FY24 Investor Presentation 22 1H FY24 Investor Presentation 22
Not an offer This presentation is for information purposes only. This presentation political and social uncertainties and contingencies; does not comprise a prospectus, product disclosure statement or involve known and unknown risks and uncertainties that other offering document under Australian law (and will not be lodged could cause actual events or results to differ materially with the Australian Securities and Investments Commission) or any from estimated or anticipated events or results reflected other law. in such forward looking statements; and may include, among other things, statements regarding estimates and assumptions in respect of prices, costs, results and Summary information capital expenditure, and are or may be based on This presentation does not purport to be all inclusive or to contain all assumptions and estimates related to future technical, information about the Company or any of the assets, current or economic, market, political, social and other conditions. future, of the Company. This presentation contains summary The Company disclaims any intent or obligation to information about the Company and its activities which is current as publicly update any forward looking statements, at the date of this presentation. The information in this presentation is whether as a result of new information, future events or of a general nature and does not purport to contain all the information results or otherwise. which a prospective investor may require in evaluating a possible investment in the Company. The words “believe”, “expect”, “anticipate”, “indicate”, “contemplate”, “target”, “plan”, “intends”, “continue”, The Company does not undertake to provide any additional or “budget”, “estimate”, “may”, “will”, “schedule” and similar updated information whether as a result of new information, future expressions identify forward looking statements. events or results or otherwise. All forward looking statements contained in this Presentation are qualified by the foregoing cautionary Forward looking statements statements. Recipients are cautioned that forward looking statements are not guarantees of future Certain statements contained in this presentation, including performance and accordingly recipients are cautioned information as to the future financial or operating performance of the not to put undue reliance on forward looking statements Company and its projects, are forward looking statements. Such due to the inherent uncertainty therein. forward looking statements: are necessarily based upon a number of estimates and assumptions that, while considered reasonable by the Company, are inherently subject to significant technical, business, economic, competitive,