Investor Presentation – FY22 Results
(ASX: AU1) Investor Presentation for the FY2022 Full Year Results
30 June 2022
KEY TAKEAWAYS
UNDERLYING EBITDA1 Revenues from Ordinary Activities GCI2
$3.85M $72.7M $102.5M (FY21: $3.06M) → +26% (FY21: $58.4M) → +24% (FY21: $80.7M) → +27%
Gross Value of Properties Sold No. of Properties Sold No of Agents
$5.9Bn 5,709 393 (FY21: $4.8Bn) → +23% (FY21: 4,964) → +15% (FY21: 308) → +28%
1. Underlying EBITDA adjusted for the impact of AASB16 and Government Incentives received in the prior period 2. Gross Commission Income (“GCI”) is the fees the vendor pays for the sale of a property. FY22 Investor Presentation 2
INCREASE IN AGENT NUMBERS UNDERPINNING GCI GROWTH
28% 27% Net increase of Growth Growth 71%
85 12% Growth 393 15% 21% Growth $102.5m
Agents from 30 June 2021 Growth Growth 58% 67% $80.7m 308 Growth Growth $5.9bn 5,709 276
15% 4,964 $4.8bn
$47.9m Increase in No. of Properties Sold 3,147 $2.9bn
27% Increase in Gross Commission Income No of Agents No of Properties Sold Gross Sales Volume Gross Commission Income ($M)^
FY20 FY21 FY22
^ Gross Commission Income (“GCI”) is the fees the vendor pays for the sale of a property. FY22 Investor Presentation 3
A growing brand now 30 with presence in 6 186 states and territories 147
Since 30 June 2021, The Agency has invested in 10 new geographical markets of Manly NSW, Sunshine Coast, Gold Coast and Toowoomba in 20 Queensland and Canberra in the ACT.
Post financial year end in July 2022, The Agency has entered its sixth state being Tasmania through its acquisition of Bushby Property Group. 11
FY22 Investor Presentation 4
Bushby Property Group Acquisition Bushby Property Group, to be renamed The Agency – Team Bushby consists of nine sales agents within the 32 staff who have sold over $125m in residential property over the past 12 months and circa 1,300 properties under management, operating out of its large ‘hub’ office in Launceston.
Consideration of c. $5M subject to a number of earn out provisions based on performance and growth
Funded via combination of bank debt and existing cash reserves
Extension of Macquarie Bank facility until July 2025
Extension of Convertible Note issued by Peters Investments until Jan 2026 (subject to shareholder approval)
Settlement occurred 22 July 2022
FY22 Investor Presentation 5
Why agents are At The Agency, we’re not a traditional franchise structure. Instead, we’ve removed the ‘middle layer’ and created a more responsive, efficient and effective model for our agents. This means our agents are better rewarded and their clients receive a
choosing The Agency superior service. This differentiated business model has a number of benefits, leading agents to choose The Agency:
NO FRANCHISE MORE SUPPORT SERVICES. MORE FINANCIALLY MORE RESPONSIVE. CONSTRAINTS OR BENEFICIAL. COSTLY OUTLAYS.
Unlike most other real estate We’ve taken away the overheads and The Agency reduces expenditure on The Agency has strategic partnerships businesses, there are no franchise administrative burden so agents can fixed costs – such as set premises and with suppliers and various tech rules or restrictions at The Agency. focus on the high dollar value activities office locations – which allows us to platforms that make selling real estate Our agents can operate their business that will propel their business forward. pay the agent higher commission more efficient and streamlined, at a wherever they choose, under our splits in a sustainable way. It’s a more lower cost; enabling the agent to national flagship brand, The Agency. financially beneficial model for both quickly and easily get their product to parties. market.
FY22 Investor Presentation 6
Reimagining the office In line with The Agency Group’s innovative approach to disrupting the status quo, The Agency’s newly opened satellite office in Western Suburbs of Perth completements the existing Hub office in the Perth CBD.
In an innovative approach, the office also doubles as an Art Gallery that facilitates community engagement while building brand awareness.
Artwork displayed, which will be constantly rotated, is currently showcasing works by students from Curtin University.
Initial feedback has seen increased foot traffic and brand awareness compared to a typical office and the Gallery is generating positive engagement with the community.
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How agent recruitment Across the past 12 month period, there has been an increase of 85 Agents. The profitability of FY22 recruits is yet to fully flow through to The Agency operating profit (as visualised below).
assists the agency profitability
Recruitment Month JAN 22 Agents recruited in existing, established, FEB 22 geographical areas have a quicker path to profitability. MAR 22
APR 22 It takes approx. 3-4 months for a new agent in an MAY 22 existing area to contribute to profitability. JUN 22 It takes approx. 6 months for agents in a new area to JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC JAN FEB MAR APR MAY JUNE contribute to profitability, as it takes slightly longer to establish themselves. Month of the Year End of FY22 Before entering a new geographical area, any initial investment is carefully considered by Management against sufficient scale benefits, to ensure entry into a new market is profitable over the medium term. Not Yet Joined Not yet contributing profit Contributing operating profit
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Financial Highlights
FY22 Investor Presentation 9
Positive jaws delivering EBITDA growth
24% 430 basis point 26% Increase in Revenues Decrease in Increase in EBITDA Cost of Doing Business
UNDERLYING1 STATUTORY FY22 FY21 Change FY22 FY21 Change Revenue $72.66m $58.38m 24% $72.66m $58.38m 24% Cost of Doing Business2 30.3% 34.6% -430 bps n.a. n.a. n.a. EBITDA $3.85m $3.06m 26% $5.69m $6.37m -11% Net Profit/(Loss) After tax ($0.84m) ($1.68m) n.m. $1.59m ($1.85m) n.m.
1. FY22 Underlying adjusted for the impact of AASB16 Leasing Standard and Impairment Reversal. FY21 Underlying adjusted for the impact of AASB16, Gain on Sale and Government Incentives received in the prior period. Refer to Appendix for detailed calculations 2. Operating Expenses as a percentage of revenue n.a. – Not Applicable n.m. – Not Meaningful FY22 Investor Presentation 10
Double digit growth in key metrics as the business reaches scale delivering profitable growth and increasing cash at bank 61%
26% 26% Growth 70% Growth Growth
24% Underlying EBITDA Growth Growth 86% 39% Growth $8.2m $3.9m $4.6m Growth
$72.7m $3.1m $5.1m
$4.6m $41.9m $58.4m $2.7m
$2.7m FY22 Operational Cash Flow (Pre AASB16)
-$0.4m
$8.2m -$1.7m Cash at Bank as at 30 June 2022 Total Revenue Underlying EBITDA* Net Cash Received from operating Cash at Bank Activites^
FY20 FY21 FY22 * Underlying EBITDA P(re AASB16 Leasing Standards Adjustment and Government Grants in relevant period) ^ Pre AASB16 Leasing Standards Adjustment FY22 Investor Presentation 11
Reducing cost of doing business as revenue grows UNDERLYING1 $72.7m FY20 FY21 FY22 GCI (Fees the vendor pays $47.9m $80.7m $102.5m for the sale of a property) $58.4m Non Payroll Agent GCI2 ($20.4m) ($35.4m) ($41.8m) Commissions Revenue $27.5m $45.3m $60.7m Other Revenue $14.2m $13.1m $12.0m $41.7m Revenue2 $41.7m $58.4m $72.7m Operating Expenses ($20.0m) ($20.2m) ($22.0m) Cost of Doing Business 48.0% 34.6% 30.3% $22.0m $20.0m $20.2m Notwithstanding we are a growth business, we are targeting further decreases in cost of doing business ratio as we further achieve economies of scale.
Additional Fixed costs are incurred when we enter a new geographical area which FY20 FY21 FY222 could include rental expenses, marketing expenses and state management expenses. We are careful to ensure that any growth from entry into a new geographical market is Revenue Operating Expenses profitable growth, and ensure that this additional fixed cost is only incurred once we have sufficient scale in that geographical area.
1. FY22 Underlying adjusted for the impact of AASB16 Leasing Standard. FY21 and FY20 Underlying adjusted for the impact of AASB16, Gain on Sale and Government Incentives received in the prior period. 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 agent, revenue is equal to The Agency share pf 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. FY22 Investor Presentation 12
Strengthened balance sheet underpinned by net cash Net (Debt) / Cash2 Position STATUTORY
Net Cash $5m $3.2m KEY INDICATOR 30 June 2022 30 June 2021 Change Cash at Bank $8.2m $5.1m +61.2% $0m Statutory Net Assets $16.4m $14.1m +16.0% Value of Assets not ($5m) $12.7m $11.2m +13.4% on balance sheet
Net Debt Estimate Net Assets1 $29.1m $25.3m +15.0% ($10m)
($15m) Dec-19 Jun-20 Dec-20 Jun-21 Dec-21 Jun-22
Borrowings of $5.0m is below The value attached to internally Management valuation of the Adjusted for this off balance sheet $8.2m Cash at Bank resulting in a Net generated Property Management and Property Management portfolio is assets, Estimated Net Assets has Cash2 position of $3.2m, a significant Mortgage book is not recorded in the calculated on a blended valuation increased 15.0% to $29.1m turnaround from prior year positions balance sheet. multiple of 3.65x on Q4 FY22 and represents the strength of the Annualised Property Management balance sheet repair. fees and 2.25x Net Trail Income relating to the Mortgage Book (combined value of $22.8m). Only $10.1m of this value is held on the Balance Sheet as an intangible asset, 1 This is a non A-IFRS measure leaving $12.7m value off balance 2. Excludes Convertible note held as Financial Liabilities sheet. FY22 Investor Presentation 13
Industry Highlights
FY22 Investor Presentation 14
57% OF AUSTRALIAN HOUSEHOLD WEALTH IS HELD IN RESIDENTIAL HOUSING WITH $7.8 BILLION ANNUAL ADDRESSABLE COMMISSION MARKET
Residential 584,917 $9.95T Sales in FY22 Real Estate
$521.2Bn Australian $3.4T Gross Value of Sales in FY22 Superannuation
Australian $2.6T Listed Stocks Total Annual Addressable Market* (GCI)
Commercial Real $1.1T $7.8 Bn Estate
Source: CoreLogic, RBA, APRA, ASX * Assessed at 1.50% Average Commission Rate of Gross Sales Volume of $521.2Bn. FY22 Investor Presentation 15
National 16,000 Monthly house and unit approvals, National
dwelling 14,000
12,000 Decade
approvals 10,000 Average Houses
8,000 Decade Following the expiry of 6,000 Average HomeBuilder, house approvals Units have adjusted downwards to 4,000 decade average. Record high price 2,000 differences between Units and Houses in key markets is resulting MAY 92 MAY 97 MAY 02 MAY 07 MAY 12 MAY 17 MAY 22 in a recovery in the Unit market due to affordability, with new Unit approvals trending towards their decade average. Units Houses
Australia Houses Units
197k approvals in FY22 124k 73k approvals in FY22 approvals in FY22
Source: CoreLogic FY22 Investor Presentation 16
FY22 Sales Change in sales volumes, twelve months to June 2022
Volumes Sydney -9.4%
Melbourne 10.7%
Brisbane 14.5%
Adelaide 16.9%
Across the country there were Perth 17.6% variances in sales volume movements compared to FY21. Hobart 0.2% Market volumes had growth in Capital Cities markets, with slightly Canberra -5.6% lower volumes in Regional markets after a very strong FY21.
Importantly, The Agency FY22 Sales Transaction increase of 15.0% outperformed the national growth of 3.2%. Australia Combined Regionals Combined Capitals
3.2% -1.2% 6.0% Recent months of sales volumes are modelled estimates, and are subject to revision
Source: CoreLogic FY22 Investor Presentation 17
FY22 Rental FY22 change in rental rates
Market Canberra 9.3%
Hobart 8.6% Rents grew strongly across FY22 in all markets, as demand for rental Perth 6.7% properties outstripped supply.
The rental growth has assisted in Adelaide 10.6% increasing yields for investors which have increased to be 3.33% Brisbane 12.1% nationally at 30 June 2022, up from a recent low of 3.21% in January 2022. Melbourne 7.5%
Sydney 9.7%
Australia Combined Regionals Combined Capitals
9.5% 10.8% 9.1%
Source: CoreLogic FY22 Investor Presentation 18
Investor Portion of new lending for investment housing (excluding refinance)^ Investors as a % of housing finance commitments by state (May ‘22)^
participation ACT 32.8% 50%
TAS 32.6% 45% Investor participation at 34.5% of lending has recovered to be in line WA 27.1% with the decade average of new 40% lending volume. SA 30.8% 35% 34.8% NSW is the state with the highest 34.5% QLD 34.0% investor participation with 38.7% of lending to investors. 30% VIC 31.5%
25% NSW 38.7%
20% National 34.5% MAY MAY MAY MAY MAY MAY MAY MAY MAY 06 08 10 12 14 16 18 20 22
3.25m # of Investment Properties across Australia*
Source: ^ CoreLogic, Source: CoreLogic * ATO FY22 Investor Presentation 19
Strategic Objectives and Outlook
FY22 Investor Presentation 20
STRATEGIC OBJECTIVES
Further expansion of Enhancement of adjacency Further development and Training initiatives to ensure Leveraging technology and geographical regions across offerings to our agents and rollout of a Multi Brand our Agents are positioned to cost of doing business Australia in a disciplined customers to increase the Strategy. capitalise on changing market efficiencies to enhance agent capital and operating share of wallet. conditions. experience and ensure a solid expenses approach. scalable platform for growth.
Continued growth in agent numbers across the company.
FY22 Investor Presentation 21
OUTLOOK
Until there is certainty around We have revised our CY22 Vendors look to experienced Market Consolidation as Consumer sentiment to interest rates, we expect National price growth to be agents who have a track smaller independents and rebound as the quantum of transaction volumes to remain -4% to -8%. record in changing market franchisees look to access interest rate movements volatile at a national level. conditions. operating efficiencies. reduce. For the first 7 months for the States with lower median year, the reduction was -1.0%, Upon the tipping point of price points are expected to meaning we expect more rates reaching their terminal outperform higher median rapid declines in the 2nd half value for this cycle, we believe priced states in terms of of the calendar year this will lead to a recovery in transaction volume movement. transaction volumes in some movements. states.
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Appendix
FY22 Investor Presentation 23
PROFIT & LOSS STATEMENT
UNDERLYING1 STATUTORY FY22 FY21 Change FY22 FY21 Change Revenue $72.66m $58.04m 24% $72.66m $58.38m 24% Cost of Sales ($47.43m) ($35.65m) 33% ($47.43m) ($35.65m) 33% Gross Profit $25.22m $22.39m 13% $25.22m $22.73m 13% Other Income $0.53m $0.63m -16% $0.61m $1.29m -53% Operating Expenses ($21.90m) ($19.96m) 10% ($20.15m) ($17.65m) 14% EBITDA $3.85m $3.06m 26% $5.69m $6.37m -11% Depreciation and Amortisation ($3.85m) ($3.94m) 2% ($5.44m) ($5.47m) -1% Share-based payments expense ($0.68m) ($0.22m) n.m ($0.68m) ($0.22m) n.m Impairment recovery/(expense) $- $- n.a $0.40m ($0.40m) n.m Fair Value Gain on Financial n.a $- $- $0.12m $- n.a Asset Profit on Sale of Asset $- $- n.a $0.00m $0.20m n.m EBIT ($0.68m) ($1.10m) n.m $0.10m $0.49m -73% Net Finance income/(expense) ($0.52m) ($1.30m) 60% ($0.78m) ($1.99m) n.m Embedded derivative non cash $- $- n.a $1.14m ($2.24m) n.m financing gain/(cost) Net Profit/(Loss) Before Tax ($1.20m) ($2.40m) 50% $0.46m ($3.75m) n.m Income Tax Benefit $0.36m $0.72m -50% $1.12m $1.89m -19% Net Profit/(Loss) After tax ($0.84m) ($1.68m) n.m. $1.59m ($1.86m) n.m. 1. FY22 Underlying adjusted for the impact of AASB16 Leasing Standard and Impairment Reversal. FY21 Underlying adjusted for the impact of AASB16, Gain on Sale and Government Incentives received in the prior period. n.a – Not Applicable FY22 Investor Presentation 24 n.m – Not Meaningful Note – may not add through due to rounding differences
BALANCE SHEET
STATUTORY 30 June 2022 30 June 2021 Change Cash at bank $8.26m $5.10m 61% Other Current Assets $11.60m $8.68m 34% Non Current Assets $27.84m $31.49m -12% Total Assets $47.65m $47.65m 5% Total current liabilities ($28.25m) ($15.59m) 81% Total Non current liabilities ($3.00m) ($15.54m) -81% Total Liabilities ($32.82m) ($31.12m) 0% Net Assets $16.40m $14.14m 16% Assets not on balance sheet1 $12.68m $11.19m 13% Estimated Net Assets2 $29.08m $25.32m 15%
1: Property Management Portfolio Management Valuation calculated on a blended valuation multiple of 3.65x on Q2 FY22 Annualised Property Management fees and 2.25x Net Trial Income relating to the Mortgage Book (combined value of $22.8m). Only $10.1m of this value is held on the Balance Sheet as an intangible asset. 2: This is a non A-IFRS measure Note – may not add through due to rounding differences FY22 Investor Presentation 25
CASHFLOW STATEMENT FY22 FY22 FY21 (Underlying)* (Statutory) (Statutory) (Pre AASB16)^ (Post AASB16) (Post AASB16) EBITDA $3.85m $5.69m $6.37m Change in net working capital $1.03m $1.34m ($0.23m) Net interest Paid ($0.24m) ($0.43m) ($0.98m) Net Cashflow from Operating Activities $4.64m $6.60m $4.64m Purchase of property, plant and equipment ($0.97m) ($0.97m) ($0.24m) Purchase of intangibles ($0.32m) ($0.32m) $- Deposit for bank guarantees ($0.01m) ($0.01m) $- Net Loans to other entities ($0.71m) ($0.71m) ($0.22m) Net cash received on disposal of asset group $0.49m $0.49m $2.62m Net cash (used in) / received from investing activities ($1.52m) ($1.52m) $2.16m Payment of principal portion of lease liabilities $- ($1.96m) ($1.92m) Proceeds from borrowings $- $- $5.00m Repayment of borrowings $- $- ($7.84m) Proceeds from exercise of options $- $- $0.39m Share issue costs $- $- ($0.06m) Net cash used in financing activities $- ($1.96m) ($4.42m) Net increase in cash and cash equivalents held $3.12m $3.12m $2.37m Cash and cash equivalents at the beginning of the year $5.10m $5.10m $2.72m Cash and cash equivalents at the end of the year $8.22m $8.22m $5.10m
* Underlying EBITDA adjusted for the impact of AASB16 ^ This is a non A-IFRS measure Note – may not add through due to rounding differences FY22 Investor Presentation 26
Geoff Lucas Managing Director & CEO geofflucas@theagency.com.au LinkedIn: www.linkedin.com/in/geoff-lucas
David Tasker Chapter One Advisors dtasker@chapteroneadvisors.com.au
FY22 Investor Presentation 27
DISCLAIMER
NOT AN OFFER This presentation is for information purposes only. This political and social uncertainties and contingencies; presentation does not comprise a prospectus, product involve known and unknown risks and uncertainties disclosure statement or other offering document under that could cause actual events or results to differ Australian law (and will not be lodged with the materially from estimated or anticipated events or Australian Securities and Investments Commission) or results reflected in such forward looking statements; any other law. and may include, among other things, statements SUMMARY INFORMATION regarding estimates and assumptions in respect of prices, costs, results and capital expenditure, and are This presentation does not purport to be all inclusive or or may be based on assumptions and estimates to contain all information about the Company or any of related to future technical, economic, market, political, the assets, current or future, of the Company. This social and other conditions. presentation contains summary information about the Company and its activities which is current as at the The Company disclaims any intent or obligation to date of this presentation. The information in this publicly update any forward looking statements, presentation is of a general nature and does not whether as a result of new information, future events purport to contain all the information which a or results or otherwise. prospective investor may require in evaluating a The words “believe”, “expect”, “anticipate”, “indicate”, possible investment in the Company. “contemplate”, “target”, “plan”, “intends”, “continue”, The Company does not undertake to provide any “budget”, “estimate”, “may”, “will”, “schedule” and additional or updated information whether as a result similar expressions identify forward looking of new information, future events or results or statements. otherwise. All forward looking statements contained in this FORWARD LOOKING STATEMENTS Presentation are qualified by the foregoing cautionary statements. Recipients are cautioned that forward Certain statements contained in this presentation, looking statements are not guarantees of future including information as to the future financial or performance and accordingly recipients are cautioned operating performance of the Company and its not to put undue reliance on forward looking projects, are forward looking statements. Such forward statements due to the inherent uncertainty therein. 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, FY22 Investor Presentation 28