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Australian Finance Group Ltd
AFG Details
Profit Upgrade FY17: During the six months to 30 June 2017 (FY17), the AFG Home Loans (‘AFGHLs’) white label mortgage products have matured to the extent that there is sufficient history and data to enable the actuarial estimation of future customer behavior. It is therefore, in accordance with Australian Accounting Standards, now necessary to adopt an actuarial model to estimate the future trail revenue relating to the AFGHLs white label program, and this will impact NPAT for FY17 and will result in AFG in future recognizing a trail revenue receivable for AFGHLs white label program on balance sheet. As a result of this accounting change, AFG now expects the NPAT of $37.0 to $37.8 million for FY17 against the previous estimation of ~$25.5 million for FY17.
Reconciliation of the impact of the change to the expected underlying result; (Source: Company reports)
The AFGHLs business continues to be a driver of ongoing earnings growth and this revenue recognition provides evidence of the value this segment of the business is generating for the Group. The impact of the trail book has been split between AFGHLs settled during the FY17 financial year and those settled in previous financial years. However, there will be no impact on cash profit, cash flow or dividends paid on FY17 earnings. The recognition of the value of future trail receivable on the AFGHLs white label program is consistent with existing accounting treatment of the trail book from the AFG residential business which has been eligible for actuarial estimation for many years. we give a “Buy” recommendation on this dividend yield stock at the current market price of $1.46
AFG Daily chart; (Source: Thomson Reuters)
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