AFG delivers positive first half operating results

AFG (ASX: AFG) has today announced its financial results for the first six months of FY2016.

Today’s results show the company’s continued strength and capacity to deliver solid profit results through increased settlements, improved securitisation margins and growth in the company’s own-branded products. AFG has reported a 2016 half year net profit after tax (NPAT) of $11.7 million, up 27% on the first half FY2015.

AFG Managing Director Brett McKeon said the results are a pleasing reflection of positive results in both the residential and commercial arms of the business.

“AFG’s loan book is currently sitting at $114 billion. Our core residential and commercial businesses both posted solid growth on the same period in 2015, and the higher margin AFG Home Loans business contributed $2.4m profit before tax in HY16.

“Residential settlements for the first half of 2016 were $17.7 billion, which is 16% up on the corresponding period last year,” said Mr McKeon. “Our commercial business also performed well with $1.4 billion in settlements – up 35% on the first half of 2015.”

“AFG’s continued recruitment of top performing brokers across the country is testament to our key strategy of delivering market leading technology and support to our geographically diverse network.

“The past five years has seen consistent growth in both residential and commercial settlements, particularly in the country’s biggest markets – New South Wales and Victoria.

Strong growth in the AFG Home Loans business was aided by improved margins with the AFG Securities business and good growth with the AFG Home Loans products. The result reflects 79% profit before tax of full year AFG Home Loans forecast in the company’s Prospectus.

Key features of the result compared to the prior corresponding period include:

  • HY16 NPAT of $11.7 million
  • HY16 Residential settlements of $17.7 billion
  • HY16 Commercial settlements of $1.4 billion
  • AFGHL contributed $2.4 million profit before tax in HY16
  • Interim dividend of 3c per share (fully franked) to be paid
  • AFG’s loan book is currently sitting at $114.5 billion
  • Excellent progress against full year key Prospectus forecast KPIs


“Our half year results are further evidence of the positive outlook for the broker distribution channel in the Australian market. The key drivers of the broker value proposition are policy, pricing and service – the right policy for the borrower’s individual circumstances, at the right price, with the lender that can provide the best service to meet the needs of their customer.

“This capability is unique to the broker channel and Australian consumers are voting with their feet. More than half of all Australians taking out a mortgage are doing so with the help of a mortgage broker, and AFG is at the forefront of that movement,” concluded Mr McKeon.

AFG shareholders will be paid a fully franked dividend on 28 March 2016.



Further information:
Brett McKeon
AFG Managing Director
+61 8 9420 788

Alison Clarke
AFG Head of Corporate Communications
+61 402 781 367


Download Market Release:?AFG 1H FY16 Results Market Release

Innovation nation – how the government is helping small business

The Government wants to encourage entrepreneurs to think outside the box with a range of recent changes to remove the stigma – and some penalties – around business failure.

The Government’s Innovation Statement has been roundly welcomed by small business, with changes to insolvency and tax laws aimed at encouraging businesses to push the envelope.

CPA Australia chief executive Alex Malley was quick to embrace the $1 billion package, saying a recent survey of 3000 companies across the Asia Pacific showed Australian small businesses trailed their Asian counterparts significantly on a number of innovation indicators. “On the key measure of innovation – looking at the percentage of small businesses that will introduce a product, service or process in the next year that is new to their market; for Australia it’s only five percent compared to Indonesia’s 46 percent, China at 32 percent, Malaysia 29 percent and Vietnam 26 percent,” Malley said of CPA’s Asia Pacific Small Business Survey 2015.

The survey also found that while 83 percent of Asian small businesses generated revenue from online sales, little more than a third of Australian businesses surveyed did the same. And looking to the future, only eight percent of Australian businesses reported plans to grow this part of their business compared to 40 percent of their Asian counterparts. “Backing an ‘ideas boom’ to replace the mining boom represents a sea-change in thinking and attitude necessary to propel Australia’s future prosperity in the ultra-competitive Asian century,” Malley said.

To encourage innovation, the Government has tailored its package to help companies grasp new opportunities and survive any unforeseen rough patches without incurring penalties from regulators or the taxman.

Below are some of the headline items for small business.

  1. RELAX INSOLVENCY LAWS – Key changes will:
    1. Introduce ‘safe harbour’ provisions to shield company directors from liability for insolvent trading in cases where a restructuring adviser has been engaged to draw up plans for the company to trade out of difficulty.
    2. Reduce the current default bankruptcy period from three years to one.
    3. Render ‘ipso facto’ clauses that allow contracts to be terminated solely due to an insolvency event, unenforceable if the company is undertaking a restructure.

The changes are aimed at striking a better balance between encouraging entrepreneurship and protecting investors from reckless or negligent directors. Many believed Australia’s previous laws were too heavy handed, with the Government saying concerns over inadvertent breaches of insolvent trading laws were frequently cited by investors and professional directors as a reason they were reluctant to get involved with start-ups. The Government also aimed to reduce the?stigma associated with business failure. Most seemed to welcome the changes, although SelfWealth founder Andrew Ward cautioned the reduction in the default bankruptcy period “almost helps spruikers”

  1. GREATER ACCESS TO COMPANY LOSSES – Changes to this section of the tax law are aimed at encouraging companies not turning a profit to be flexible and seek out innovative new opportunities without fear they may lose the ability to write off previous losses. Currently, the Government’s stringent same business test means if a company expands its activities into new profit-generating areas, it may not be able to offset previous losses against new profits. In the first half of this year, the same business test will be replaced by a predominantly similar business test. The new test relaxes laws, allowing companies to access historical losses if their business, while not the same, uses similar assets and generates income from similar sources. “This measure will encourage entrepreneurship by allowing loss-making companies to ‘pivot’ and seek out new opportunities to return to profitability,” the Government’s Innovation Statement read.
  2. INTANGIBLE ASSET DEPRECIATION The Government is changing the rate at which intangible assets – such as patents, trademarks and copyrights – can be depreciated. Innovative companies are more likely to hold a high proportion of intangible, or knowledge-based, assets. At present these assets can only be depreciated in line with their statutory life. For example, a 20-year patent must be depreciated over 20 years, even though it may only generate cash flow for about five years. From July 1, businesses will have the option of self-assessing the tax effective life of any acquired intangible assets. This allows faster tax deduction over a shorter period, which is likely to reduce the cost of investing in these assets?and make them more attractive to investors.
  3. ESTABLISH A ‘DIGITAL MARKETPLACE’ – With an aim to go live in January 2017, the Government is establishing what it calls a digital marketplace. The marketplace, modelled on a UK site launched last year, will be an online directory of information and communication technology (ICT) services and products offered by a range of small to medium sized businesses.The directory will be used by public servants to source and secure software and hardware products and services.“Business suppliers of ICT software and hardware will be able to join the directory easily; while government buyers will be able to easily search for services, identify suitable suppliers and procure the best value option to get the job done,” the Government’s Innovation Statement said. The initiative has the dual aim of allowing SMEs to better compete for government contracts and getting a better deal for taxpayers.
  4. TAX BREAKS FOR EARLY INVESTORS – Investors in eligible start-up companies will receive a 20 percent tax offset on cash invested (capped at $200,000). They will also get a 10-year capital gains tax exemption provided investments are held for three years. These tax breaks will only be available to investments in companies that:
    1. Undertake an eligible business (this is yet to be determined).
    2. Were incorporated in the past three years.
    3. Are not listed on any stock exchange.
    4. Have expenditure and income of less than $1 million and $200,000 respectively

For more information, please see:

Buying time — the benefits and risks when it comes to outsourcing

Cost-conscious, time-poor business owners are driving a boom in offshore office work, and we thought we’d walk you through some of the basics to consider before you look at whether this is an option for your business or not.

Outsourcing was once the domain of large corporations, who slashed costs by moving some business operations – such as help desks – offshore. Now small, medium and even micro businesses are jumping on board, outsourcing time-intensive but low-skilled tasks such as data entry and bookkeeping to overseas workers. Local businesses can hire staff in developing countries for a fraction of the costs they would incur here, with a vast array of enterprises connecting businesses with overseas workers. We talk to three different players in this growing field to examine how they have made it work for them.

The small business owner

Nathan Scholz is passionate about coffee. Keeping track of invoices? Not so much. Like many small business owners, he wanted to turn a buck from what he loves, opening coffee roaster Budan Beans and espresso bar Mug Shots on Brisbane’s bayside six years ago. And, like many small business owners, he quickly found himself overwhelmed by paperwork. “There’s so much to do with actually running your business,” he said. “Then you come home and suddenly you’ve got this mountain of invoices and receipts and billables and accounts payable.”

Some recent business advice was ringing in his ears: “Any tasks you can pass off to others at low cost, then invest your time in building and improving your business is what you should do.” Paying someone in Australia to input invoice data was not financially viable, but Scholz had heard about online outsourcing and decided to give it a go. He used the website Elance (which merged with o-Desk earlier this year to become Upwork) to advertise a data entry job and hired a qualified accountant in the Philippines. The accountant was emailed the businesses invoices and, with limited access to the company’s accounting software, entered them into the system. It proved a massive time saver, which allowed Scholz to jump straight to reconciling his ingoing and outgoings. It also helped restore some much-needed work/life balance. “The idea?originally was to invest more of the time in the business, but I think really what it means is it actually just returns some time to us as a family,” Scholz said. He found it also gave him “headspace” to come up with new ideas for his business.

Scholz said the questions he was most commonly asked in relation to outsourcing were ethical ones. Where small and micro businesses like his were concerned, Scholz said it was not a matter of a local missing out on a job. “It was a question of: were we going to be doing this ourselves at 8, 9, 10 o’clock at night on the kitchen table or were we going to get someone in another country to do it?” he said. Scholz has since switched to global data entry company Receipt Bank, simply because it provided the same service at around the same cost, but removed the need for him to directly manage a relationship with his overseas outsourcer.

The agency

My Virtual Workforce is one of the many BPO (Business Process Outsourcing) agencies springing up in the Philippines. Founded five years ago by Australian Tim Reading, the company recruits and trains staff from a base in the Filipino city of Cebu to provide a range of back office functions, from data entry and bookkeeping?to social media marketing and search engine optimisation. The agencies provide staff to Australian businesses, based on a minimum of 10 hours a week.

My Virtual Workforce director of partnerships Paul Winters says that while larger corporations kicked off outsourcing, the bulk of his clients were now small, medium and even micro businesses. “It’s great now there’s a vehicle for the small businessperson to take advantage of some of the absolute benefits of outsourcing,” he said. “You’re looking at half the cost in many cases, or lower, of what you’re going to pay (in Australia).” Winters admitted he had a few preconceptions about outsourcing when he first travelled to the Philippines in 2007. “I thought, `Well, the economics will make up, maybe, for a dip in quality’,” he said. But he found the reverse was true. The comparative buying power of the Australian and US dollars meant his company attracted university graduates in the Philippines for roles that were hard to fill with qualified staff back home.

My Virtual Workforce has about 200 employees, who work for a broad range of clients. “We have a range of clients; from real estate agents who need to build their database, small micro businesses that have just started up a webpage selling different products from their home, law firms and accounting firms, and dry cleaners that utilise us for book keeping,” Winters said. He was aware of the sometimes-valid perception that offshoring was sending Australian jobs overseas. But he argued that judiciously used, outsourcing could help businesses grow to the point they needed to employ more high-value staff on home turf. “We have small companies that are trying to grow and certain costs are prohibitive to them.

One example is lead generation. It will cost them a tremendous amount of money in Australia to get a crew in to create leads for their sales force,” Winters said. Outsourcing lead generation could cut costs dramatically and deliver strong returns, which allowed businesses to expand and hire more high-value staff at home.

The accountant

While outsourcing has been a boon for some businesses, it has been a disrupter for the accounting industry. With bread and butter services such as book keeping and compliance being hit, some may see accountants as victims of the disruption. But Sydney chartered accountant John Beale saw an opportunity to work smarter. “In Australia, we get bogged down as accountants in the compliance rules; for example, lodgment deadlines – every quarter there’s a BAS that has to be lodged,” he said. “It’s very time-consuming and it doesn’t give you time to spend with your clients to help them grow and build their business.” To that end, Beale jumped on board the outsourcing train. His practice, BMG, has started outsourcing lower-end process work to staff in the Philippines, allowing his Australian-based accountants to focus on providing clients with more proactive business advice, such as identifying turnover trends and suggesting new opportunities. “We (accountants) have got to become advisors to business … not historical bookkeepers,” he says.

His accountancy practice now straddles Australia and the Philippines, with offices in Sydney and Clark, north of Manila. And while he was upfront about outsourcing some functions, Beale said he still had Australian clients who wanted their work done at home. “We’re fine with that if they’re happy to pay more and get that service from us,” he said. In addition to regular accounting work, BMG has also expanded to act as an agent, recruiting and managing staff for Australian businesses who wanted to offshore some back office functions.

In the Philippines, BMG employs 15 accountants, along with about 10 marketing and social media specialists. In addition, Beale manages more than 25 additional staff based at the Clark office who work directly for other Australian business clients.

The savings were significant, somewhere between a third and half the cost of doing the comparative work in Australia. Typically his clients were SMEs with 5-20 staff and more and more businesses were starting to recognise the ease and efficiencies of outsourcing. “Now anybody can offshore, there’s good ways of doing it and bad ways of doing it,” Beale said. As with any industry experiencing fast-paced growth, there were unscrupulous practitioners. “Find a firm that has some accountability back into Australia,” he said. “Our firm is covered under our professional indemnity insurance and we comply with Australian privacy rules. It is wholly owned by myself so the buck stops with me.”

Sourcing your outsourcing

  • All boxes ticked: Ensure any outsourced activity meets your compliance and privacy obligations, and you’re complying with all legislation at every turn.
  • DIY or Agency: Once you have decided to outsource a role in your business, the next decision is whether you are comfortable recruiting, and therefore managing, your own overseas staffer through sites such as Upwork,, Guru or peopleperhour. Or, would you rather work through a BPO agency, which manages the relationship for you? Alternately, you may seek out an accountant who offshores some functions at a lower cost to clients.
  • Choosing an agent: If you use a third-party, do your homework. Accountant John Beale advised business owners to look for firms that had strong links back into Australia. Be aware, if you choose an agency, the rate you pay them will be more than your worker receives (to cover compliance, office space and other incidentals). One business owner reported being dismayed to find her overseas worker was receiving less than half the $7 per hour she was paying to an agency.
  • Try before you buy: Set a trial period to see how it works for you.
  • Keep an eye on the clock: Research time-tracking facilities, which allow you to check you are getting what you have paid for. And ensure you have thought through any privacy and security issues in relation to remote access to your accounting system.
  • In the zone: Choosing to outsource to a country in a similar time zone will save you a lot of hassle should you need to communicate with your remote staffer during business hours.

How to market to Millennials

Millennials are here, and they are the future of your business as they are on the cusp of heading into consumer prime-time. You may be one, or be related to one.? Regardless, it’s good to paint a picture on who they are and what motivates them as a whole. They may be the youth of today but they are your customer of tomorrow.? So, what do you need to know about this generation of Australians to ensure you’re maximising business opportunities in this space?

Keeping up with the kids – Australia has just hit the 24 million mark in terms of its population. By far the largest subset of this population is the Millennial – those born between 1980 and 2000, aged between 16 and 36. Millennials make up a whopping 30% of the Australian population.

Their size is impressive, as is the business opportunity they present as they enter the home buying zone for the first time. They are entering their consumer ‘prime time’ and it’s critical you’re there alongside them as their first port of call when it comes to their finance needs.

They don’t come without their challenges though by way of how best to engage and attract; their behaviours and expectations are markedly different. Businesses that aren’t reshaping, repackaging and repositioning to meet these needs are simply being left behind.

Who are they again? – Those defined by their birthdate: born between 1980 and 2000.? They (generalising here we know but work with us!) are street-smart, mature, resilient, highly tech-savvy and fully informed. They are by nature of their technological abilities and appetites, traditionally over-stimulated and can be impatient; wanting solutions to their problems and answers to their questions here and now. They hanker after simplicity.

They are relaxed in their communications but blunt; speed is everything for these ‘digital natives’ who’ve not had to adapt to new technologies – born with them as the norm.

Their numbers – There are a lot of them. ?In terms of Australia, the ABS tells us there are around 7 million Millennials, just nudging 30% of our country’s population, the largest generational subset by a long shot. The size alone of this generation clearly making them the biggest opportunity to be seized on in terms of the Australian economy as they enter consumer ‘prime time’.

And, they are also the largest generation in terms of employment with Millennials making up 34% of the Australian workforce compared to Gen X who make up 31%.

US reports suggest that Millennials are predicted to surpass the spending power of baby boomers by 2018.

Their smarts – Millennials are a pretty well-educated lot; by far the most educated generation. The ABS tells us that in 2011 over half of young adults (52%) had a non-school qualification, and around a quarter (26%) had a bachelor’s degree or higher qualification. This is compared to 1976 when less than a third of young adults in Australia had a non-school qualification and only 5% had a bachelor degree or higher qualification. So, they know what they are talking about, can be sceptical when it comes to marketing tactics, thus the need for transparency at every step.

Their connectivity – These kids are wired for sound. They move fast, consume a great deal of information on the go, and they consume in bite sized pieces – commonly known as ‘digital snacking’. As a result, they process quickly, and they expect businesses to do the same; such an important message particularly for those of us in the finance game with such traditionally lengthy mortgage transactions. They are far more likely to take advantage of non-traditional payment companies, mobile wallet concepts and peer to peer funding models?and see huge value in convenience, mobility and ease of use.

Millennials and their day jobs – By 2025, Millennials will make up 75% of the global workforce,10?and they are an entrepreneurial lot with 70 percent of the Millennial generation already having or planning to have their own business. They don’t hang around long either. On average, Millennials will have 17 jobs in their lifetimes, moving on from each job after an average of 3.3 years.

Their incomes – They are big earners for their years. The median income, for Australians aged 18-35, bearing in mind some are yet to even join the workforce, is currently between $40,000 and $50,000 per year. Of those, roughly 9% of Australians aged 18-35 are in a much higher bracket, currently earning between $90,000 and $100,000 per year. A great deal of them also have, or plan to have, multiple income streams to supplement their ‘day jobs’ such as monetizing their social media activity, income generating asset sharing and consulting.

When you look at other generations, between 2011 and 2012 the average annual household income was approx $116,000 for Gen X, $93,000 for Baby Boomers, and $44,000 for those over the age of 70.

When you marry up their high levels of education and their income levels which are rising fast, it’s not hard to see why Millennials are such a golden opportunity in terms of our brokers’ pipelines.

Millennials and sensible things like home ownership – So, like we said, with 7 million Millennialsii?in the country, just nudging 30% of Australia’s population, their size alone makes them a hot prospect to attract as they enter consumer ‘prime time’.

Recent research reveals that around 63% of Australian Millennials do not currently have a home loan17?and that 41% of Millennials live with their parents to save on rent.

In a survey done by REST on the saving goals of Millennials, over 85% said they were saving for travel or a holiday and roughly 64% stated they were saving for a property deposit.

They are saving?and waiting longer to step into the property market for the first time, with the average age of a first home buyer in Australia increasing from 27 in 1982 to early 30s today.

Having also been very quick to embrace ‘the sharing economy’, with fast adoption concepts such as car sharing companies, crowd-funding, Uber and Airbnb, it follows suit that Millennials are more comfortable either staying at home or renting for longer than previous generations who had greater ‘ownership’ aspirations.

After watching their parents suffer on the back of the 2008 GFC, how they plan to spend is also markedly different from their older counterparts; recent US research suggesting that concepts such as mortgage-free ‘tiny houses’ appeal to around 57%.
























[22]?Ipsos Mori – Global Trends 2014 : Navigating the New



Industry groups target cash flow killers

Any small business owner knows that one of the most important aspects of operating, yet also the most difficult to manage, is cash flow.

A campaign calling on big business to cut their payment terms to 30 days is gaining momentum. Kate Carnell cut to the chase on breakfast radio at the end of last year with a very simple observation. “If we want small businesses to be the engine room of the economy – and everybody does. Engines need petrol and petrol is cash flow,” she said.

The message was simple – Australia’s SMEs were being starved of cash flow by a blowout in payment times which forced many to wait months for invoices to be paid.

Ms Carnell, who was appointed Australia’s first Small Business and Family Enterprise Ombudsman last year, has wasted little time launching an inquiry into long payment times.

In recent years, settlement terms to SMEs had extended from 30 days to 60, 90 and even 120 days in some instances.? And some of the main late payment offenders were big business and government, with small businesses lacking the clout needed to demand shorter payment terms.? Add in late payments and many small businesses were going to the wall waiting for invoices to be paid.

Australian Securities and Investment Commission (ASIC) data indicated inadequate cash flow was the leading reason businesses failed.? A recent spike in business failures has underlined the importance of SMEs ensuring they have access to adequate working capital or flexible cash flow finance in uncertain times.

In the third quarter of 2016 Dun & Bradstreet reported 15,116 business failures across Australia, a jump of 42 percent on the previous quarter and the highest since Q1, 2013.? The ASBFEO inquiry into long and late payments was prompted after extensive consultation with SMEs in 2016, which highlighted payment lags as a critical issue. The office was seeking input from small business operators and would holds a series of public consultations through February before delivering a final report in March.

Along with the inquiry, the Ombudsman’s office has joined other major industry groups – Council of Small Business Australia (COSBOA), AiGroup (Australian Industry Group) and the Australian Institute of Company Directors (AICD) – in calling for big business to commit to reducing payment times.

COSBOA head Peter Strong urged CEOs of major companies make public pledges their companies would pay 30-day terms by June 2018.

“Not many people are aware of how entrenched this behaviour has become in our business world.” Mr Strong said.? While 90-day terms were becoming increasingly common in the B2B sphere, even individual contractors were facing 60-day payment terms.

“Individual contractors, unlike B2B payments, often rely on this money to live, to pay mortgages and to put food on the table. In these instances, late payments can have a huge impact,” he said.

Ms Carnell echoed this sentiment and said cutting payment times would deliver a significant boost to the economy and benefit all by ensuring cash was available for SMEs to hire and expand.

Talking on ABC radio, Ms Carnell said: “There are a couple of states in the US, I think, that have taken a really smart approach. They said: ‘Look things are tight, budgets are tight, but one thing we can do to stimulate small business is to pay in 15 days.’ So, just by governments speeding up their payment times, it can make a huge difference to the economy more broadly.”

Collectively, Australian small businesses were owed around $26 billion in unpaid debts, which averaged about $13,000 per business.? Longer payment terms dictated by larger businesses unfairly disadvantaged small business owners.? “You can’t say to your staff, ‘Sorry we’ll pay you in 90 days’,” she said.

Ms Carnell hoped to see protocols enacted to bring the current average payment time of 45 days down to 30 days.? She also praised moves to even the playing field with the introduction in November of a new law protecting small businesses from being forced into unfair contract terms with larger operators.

Visit for more information.

To find out more about the ASBFEO Payment Times and Practices Inquiry or to complete a survey on how late payments have affected your business, visit the ASBFEO website.

Remember, the start of the new year is a good time to review your working capital arrangements. There are a number of lender options available, some of which may not even require your home as security.