Mortgage Choice Limited

New Remuneration Model Will Support the Organic Growth: Mortgage Choice Limited’s (ASX: MOC) shares moved up 3.497 per cent on July 12, 2018 as the group found out the way to maintain a strategic distance from getting into a tiff with its franchisees.

In relation to this, the Board has approved a new broker remuneration framework which will provide franchisees with higher remuneration and reduced income volatility. As per the new model, the company will offer 74% average commission payout rate on residential lending from the previous rate of 65%, effective from next month. The key feature of this new model is to reduce the income volatility and provide better protection for its franchisees during the market slowdown.

Further, the Company is certain about its new remuneration model enabling its franchisees to invest in their business and support to add new, high-quality franchisees and loan writers into the business network. This will provide a platform for growth and support the long-term sustainability of the company. The Company will continue to invest in its IT systems and expects to roll out its new broker platform in August 2018, which will improve the customer experience and franchisee productivity. As a result of the changes being introduced, there will be a one?off, non-cash negative adjustment of about $30 Mn to IFRS NPAT for FY18 to reflect the higher level of franchisee shares of future trail revenue. Following this, the group expects its cash NPAT for FY18 to be between $23.2 Mn and $23.4 Mn after accounting settlement of one-off costs and projected FY19’s profit to be around $16.5 Mn. Meanwhile, the stock has fallen 20.56 per cent in the past three months (as at July 11, 2018) owing to challenges erupting on business model; and one can wait for more positives as the stock can be avoided at the current price of $ 1.480. It might be better to wait and see the changes under new renumeration policy within the franchisees network.


Franchise Movement as on 1HFY18 (Source: Company Reports)

 
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