The non-bank lending sector is one that has me excited.
Represented by companies like Mortgage Choice Limited (ASX: MOC), Money3 Corporation Limited (ASX: MNY) and Home Loans Limited (ASX: HOM), the sector enjoys rapid growth as customers look for better alternatives to deals offered by the 'Big Four' banks like Westpac Banking Corp (ASX: WBC) and National Australia Bank Ltd. (ASX: NAB).
Yellow Brick Road Holdings Ltd (ASX: YBR) is a relative upstart into the sector, and combines non-bank lending with financial management services to make it one of the most promising junior companies in the field.
An impressive growth strategy over the past few years has paid dividends, with the company today delivering its first ever cash-positive results in the second quarter of 2015.
Here's what you need to know:
· First operating cash-positive surplus (excluding integration, acquisition and underwriter payments) of $1.4m, an improvement of $3.3m on the previous quarter deficit of $1.9m
· Includes the first full quarter of results from the Resi Mortgages and Vow Financial businesses
· Receipts from customers rose 138% to $38.2m
· Underlying cash outflows (excluding integration, acquisition, and underwriter payments) increased by 106% to $36.8m
· $10.6m in cash at end of quarter, company has drawn $5m of a $12.5m debt facility ($7.5m remaining)
The Vow Financial acquisition has proven to be particularly well thought out, with growth in that business 60% higher on the same time last year.
Yellow Brick Road also continues to actively manage its businesses with new products, lower rates, and advertising that has led to strong growth in customer numbers.
The company recently launched a new Income product for its fund-management business, and received accolades from researcher Morningstar who declared that the company's Smarter Money Active Cash Fund had outperformed competitors over every measurable period since inception in February 2012.
While customers might be drawn to advertising, they stick to results and investors will be happy to know that Yellow Brick Road has displayed competence thus far in its funds management, delivering above-benchmark performance to customers.
Management reiterated that its focus was still on driving new revenues through its established branch network, while an 'operational redesign' (integrating new businesses) is ongoing and expected to deliver further positive results later in the year.
Overall this quarterly report was another gold star on Yellow Brick Road's impressive track record, and investors might even consider adding to their holdings considering the company's recent low prices.
