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Yellow Brick Road would be “highly unlikely” to post its first ever profit in 2014/2015 if not for its two recent acquisitions.
The mortgage and wealth group recently announced that it was on target to post the first profit in its history this financial year following $29 million of losses over seven years.
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Chief executive Matt Lawler said Yellow Brick Road as a standalone business was “tracking towards” a profit, although it would be “highly unlikely” to come in 2014/2015.
However, he said the combined $53.6 million acquisitions of two “profitable” businesses, Vow Financial and Resi Mortgage Corporation, had accelerated the group’s move to profit.
Mr Lawler told The Adviser that the group had invested heavily in Yellow Brick Road over the past three years, and that losses had peaked last year and costs had been brought under control.
The expansion of the branch network has improved Yellow Brick Road’s financial position, he said.
There were 206 branches as of June 30, after the network expanded by 26.3 per cent during 2012/2013 and 22.6 per cent during 2013/2014.
“The branch numbers are increasing, but also the existing branches are getting more and more productive every year because they go from start-up to building their business,” he said.
“Some of them are operating at an optimal level, but we’ve still got quite a few branches that are in their build phase.”
Mr Lawler said adding Vow and Resi to the group would give it greater buying power and might also allow it to offer services that weren’t previously viable.
“A lot of the investment that we’ve done into Yellow Brick Road – particularly around white label mortgage products – can now be leveraged into Vow and Resi,” he said.
“When you talk about the investments that have gone into Yellow Brick Road to build up the capability and the infrastructure, a lot of that benefit can now be leveraged into a much larger distribution network.”
Mr Lawler told The Adviser that Yellow Brick Road’s ‘territory model’ allows for the opening of about 300 branches.
He added that there are still gaps in every state, especially Western Australia, South Australia and Tasmania.
[Related: Vow acquisition ‘ticks all the boxes’]
