Thank you for standing by, and welcome to the investor briefing for AFG 2022 full year results announcement. All participants are in a listen only mode. There will be a presentation followed by a question and answer session. If you do wish to ask a question, you will need to press the Star key followed by the number one on your telephone keypad. I would now like to hand the conference over to Mr. David Bailey, CEO. Thank you. Please go ahead. Thank you and good morning, and thanks everyone for joining the call today. I'm going solo today. As you're aware, our CFO, Ben Jenkins, resigned, and left us a couple of weeks ago. We're in the process getting very close to finalizing, hopefully finalizing, an appointment of a new CFO. In the interim, you've got the ex-CFO talking about financials, which may be a little dangerous, but we'll get started. Thank you very much. Yeah, we did preempt our results by a release to the market, late last or early last week. The FY 2022, I'm gonna jump straight to page three. The FY 2022 results really just underpins the earnings diversification, which journey that we've been on, and it's delivered a 20% growth in NPAT to AUD 61.3 million. The reported NPAT after the Volt and technology related impairments we advised the market of last week mean it lands at about AUD 38.8 million. The result was as a consequence of record settlements within the residential mortgage broking business, which is up 36% on FY 2021. Mortgage brokers continue to dominate the residential mortgage market, reaching a market share at the end of the March quarter. We're still waiting on the June quarter numbers, a market share of 69.5%. The other part of the results which are probably important to highlight are AFG Securities, which is a main driver of our earnings and diversification strategy, saw settlements up by 102% in FY 2022. Fintelligence and BrokerEngine, which were two acquisitions we undertook during the financial year, are performing above expectation. The other key investment, which is our investment in Thinktank, which is around about a 32% interest, saw our earnings from that grow by a further 16% to AUD 66.1 million. The cash flow generation capability of the business continues to grow, and that it's therefore enhanced our historical dividend policy. We're driving a dividend, a fully franked dividend of AUD 0.096 per share, which is an increase of 30% on FY 2021. The other highlight for us for the year was that AFG was awarded the Aggregator of the Year at the recent Mortgage & Finance Association of Australia Awards. It's just a strong validation and vindication of all the hard work our team has undertaken over the last 12 months to win that award. The strong results we've talked about are after some disappointing impairments relating to Volt and BrokerEngine, sorry, broker-related technology. While we have some learnings from those events, we remain committed to the ongoing investment in technology to deliver improved experiences for our brokers and their customers. If I jump to page four, we can talk about some of the highlights. You know, the one thing that drives home to me is the number of customers that our AFG brokers are now helping and service. That's over 500,000 customers, and included in that as a subset are nearly 21,000 white label customers and just under 11,500 AFG Securities customers. That business and that part of the business continues to grow and grow successfully. 3,700 brokers are now associated with AFG. Importantly, BrokerEngine subscribers. Subscribers to the technology, workflow technology which BrokerEngine provided has grown to 1,650 brokers. That represents since our acquisition in December 2021, a growth of 40%. You can see there the other highlight for us is the AFG Securities settlements, the loan book is up 41% to arrive at about AUD 4.8 billion. The other one I'll call out, it's been quite a stellar year for commercial settlements. This is up 67% from FY 2021. That number sits at AUD 3.9 billion, arriving at a book size of AUD 10.9 billion. Investment highlights on page five. There's a couple I'll call out. TSR five-year growth of 98%. The dividend yield, which we talked about previously at 9%. We continue to have a capital light balance sheet, and our normalized EPS represents 18% growth between FY 2015 and FY 2022. The summing up, the strategy we've embarked on is really about providing choices to Australian consumers and competition to Australian consumers by building the distribution, providing competitive products, and investing in companies who are also providing those competitive products. What we're seeing or starting to see here is it's generating ongoing shareholder returns. If I just flip across to the next page, a couple of pages, we can talk about some operating performance statistics. We've talked about those residential settlements being up by 36% to AUD 59.4 billion. We've also talked about the AFG Securities book with AUD 4.8 billion, which is up 41%. It's really a driver of earnings and future earnings for us into the future. The commercial and AFG business volumes are up 67% and 26% respectively. That's really a reflection of what we're seeing, starting to see coming into the marketplace, not only in commercial mortgages and commercial activity on the up. What we're starting to see is a higher level of engagement with brokers through customers through brokers to the lenders in terms of how they access these products. You know, that's probably one thing I would call out throughout the observations over the last 12 months. Not only have you seen a shift from lenders and the level of engagement of lenders with broker to generate business in the residential piece, we've also seen. You've also seen an increased level of engagement from these lenders into the broker market to access customers as well. We have over 75 lenders on our lending panel now, and the large lift in those is in relation to commercial lenders coming onto the AFG panel. The Thinktank business continues to go from strength to strength. We're very, very pleased with that. The internal white label settlements for Thinktank are up 84%. The leasing and asset finance results are reflective of that level of activity in the market and really does endorse our decision and our investment in the distribution business, which is the Fintelligence business. AFG Securities on the next page shows strong growth in volumes and lodgments. We're seeing a change in mix towards some higher margin products, which is our Link, Retro Lite, and Self Managed Super Fund products, which are providing some level of protection against margin compression. You know, we did call out, and we have been calling out that the margins we've been enjoying over the last 12 months in particular, industry highs, and that there would be some normalization. The change in mix for us allows us to offset some of that. We've undertaken AUD 1.7 billion in RMBS term outs over FY 2022, both in conforming and non-conforming transactions. Whilst we're seeing pricing in the RMBS market being impacted by market conditions, we are fully expecting LVR pricing to normalize over the year. We do recognize that the majority of our funding is already locked in. During July and early August, we also negotiated an increased level of our warehouse capacity of AUD 700 million, and we'll continue to issue RMBS paper throughout the cycle, 'cause with our constant eye on minimizing balance sheet risk for the business, we have mandated a term transaction as of two days ago. We'll continue with that process over the next week or so. Credit risk and margin is a bit of a focus for the market at the moment. You know, one of the things in the history of AFG Securities performance has been its loan performance, exceptionally low loss history of AUD 260,000, which we attribute to obviously a conservative credit approach, but also more importantly, some of the data insights we were able to gain from the other broad church of lodgements coming through the pipe from our brokers. That helps guide and steer our credit policy. 44% of our loan book is a balance below AUD 500,000, and 88% of the book has an LVR below 80% at the time of settlement. The other point to mention is we've talked about the constriction of the net interest margin. You know, we are taking action. You know, over the last two rate rises, we have put around about 25 basis points back into the back book. We are continuing to change the mix of product where the credit makes sense for us. We've talked briefly about that arrears performance. I think the important point to realize is that of the AUD 260,000 worth of losses since we started AFG Securities, only AUD 32,000 relate to post GFC conditions. We've had 31 loans in arrears, which are greater than 30 days. 30 loans out of 11,000 loans is quite insignificant. Loan hardships are at 9 loans or 0.08% of the book. The performance of the book continues to be so strong that our underlying provisions have through the ECL calculations reduced by AUD 395,000 compared to June, despite the fact that the book has grown strongly. A lot of that's due to our conservative credit policy, but us utilizing our insights across the broking business to assist in that credit policy design. White label and aggregation obviously are key parts of our business. We've talked about those settlements across the broader business, and the loan book now sits at AUD 182 billion. It's been our best year of recruitment for brokers in over 10 years, with 200 groups recruited into AFG under the AFG banner. White label volumes have seen settlements grow by 36% up to AUD 2.9 billion. Leasing and asset finance volumes are up 132% to AUD 1.5 billion, which includes Fintelligence settlements since January. That component's around about AUD 700 million. The commercial update really just emphasizes the growing impact that we're seeing with commercial within part of our business, a 67% increase in settlements and 19% increase in the loan book. We continue to invest in technology, and we will continue to invest in technology. You know, the investments in Fintelligence and BrokerEngine businesses are all about providing better services and better products for our brokers and in turn, our customers. You know, we'll continue to invest in our lodgement platform. You know, we have refocused our in-house technology development to really look at a multi-layered architecture which incorporates the platforms from BrokerEngine and Fintelligence and some of the pieces that we've developed along the journey. We talk about subscriptions in BrokerEngine, you know, they're up 41%. It's clear that BrokerEngine is a really important part of what a broker sees in value. So it made a very strong and logical sense for us to consider BrokerEngine as a broader part of our architectural platform moving forward. We've talked about our investments in Volt. Now, we're disappointed in Volt in terms of how it's turned out. But we're not using that as an opportunity to stop investment in technology. We'll continue to invest in technology and look at ways of learning from those investments, continue to invest in people and businesses as well. Then also exploring ways to partner with organizations of a like mind. An example of that is our recent partnership and agreement or decision to partner with Tic:Toc, who are looking to start their own broking business that will see us integrating with their technology along the way, but also see us consider some parts of their technology to assist in our own ongoing technology journey. If I turn to page 13, we talk about our investments. Now, what people sometimes don't necessarily recognize is our Thinktank investment is equity accounted. It sits in the balance sheet around AUD 28 million, which is a historical cost. It's contributed AUD 6.1 million to our earnings for the year, which is up 16%. I'll let you do the math in terms of what the true carrying value of that investment is, if you back solve a 32% interest driving a AUD 6.1 million return, for the year. Fintelligence earnings contribution of AUD 3.6 million since acquisition. That's at 100%, and that's after tax, and that's for six months. We're actually seeing, we've seen AUD 700 million in additional asset finance settlements come through, and we are seeing a very positive response from some of our brokers who wish to be early adopters of the platform into their own business. The cross-fertilization of what Fintelligence is doing, as well as what AFG is doing, is starting to take seed. BrokerEngine is an important plank in our technology offering, and I've talked about those 1,650 subscribers into the business. As you can see with our tech, with the majority of our investments, we place Volt aside, we're very happy with the progress of all of those investments over the last 2022, FY 2022. I'm gonna jump to the financial results now. You can see revenue is up 25% across all of our high volumes across all the pillars of our growth. Net interest margin, because we've got a larger book, is up 17%. We talked about our Thinktank investment. We've talked about the contribution that Fintelligence is now making to our business. You can just see that the operating cash flow is down. That's really a timing difference between when we receive commission payments and when we pay them out. We expect that to convert. In fact, it did convert in the first month of FY 2023. All this drives a dividend at 80% of underlying profit. You remember at 31 December, we changed our dividend policy to actually say we are paying dividends. We used to pay dividends purely on the cash or dividend received from our associates. We are now paying dividends on the contribution to the trading results of those entities into our business. Trail book accounting, you can see there underlying normal NPATA is 12% above FY 2022, really driven by the size of the loan book, and growth in settlements rather than any significant changes in the assumptions. You know, the key change you can see there compared to FY 2021 is the variability. The average loan life has come off a little bit, compared to FY 2022, which is understandable given the level of activity in the marketplace. Obviously the discount rate we would expect over next year, given the recent rate rises to impact future settlements moving forward. The slide 17 is the one which, you know, is really trying to illustrate, or we think it does illustrate, the transformation the business has been going through over the last three to five years. Aggregation remains a core part of our business. The majority of our gross profit now comes from services and products delivered through the broker network. You can see the contribution and comparison between FY 2015 and FY 2022. It's important because aggregation is a competitive market. It's a competitive market and our offering is a little different to some of the others. It is more a broader service offering. The important piece is that's being supplemented through these other other investments and other revenue generating capabilities. The other income provides a level of offsetting for margin creep, which I'll talk about shortly. The asset finance, combined with our investment in Fintelligence, provides another avenue for future growth for our business. On page 18, we talk about our financial strength. You know, one of the key strengths of AFG is its cash flow and annuity generating ability. These annuities are coming from ADIs, predominantly ADIs or highly rated financial institutions. That enables us to continue to generate strong cash flows. The strong balance sheet enables further growth through acquisition and investing in further strategic initiatives. You can see there, we've got a number there of AUD 217 million in assets, which are unrestricted net trail book and investments. Again, I'll highlight the fact that our investments are carried at cost. That AUD 217 million is a robust base for the business and therefore if you throw in, if you look at that compared to the market cap, the valuation of the business as it currently stands, I would suggest is rather unchallenging. The subordinated notes increased during the period purely driven off the back of the growth in the loan book and obviously the warehousing capability. As with all RMBS businesses or asset-backed finance businesses, there is an opportunity to recycle those cash when we turn them out into the marketplace. That AUD 217 million I've talked about is really around providing core balance sheet strength for the business moving forward. On page 19, we talk about the summary of our cash flow. It is a capital light business model. It generates strong cash, you know, and excluding some timing differences which I mentioned earlier, NPATA really converts to operating cash flow at 95%. That really just, you know, that conversion of profit into cash flow is really a reason why our dividend policy can be more sustained and maintained at that 80% level. The balance sheet strength, the trail book accounting means and the net asset now, if you combine the residential home loans, resi trail home loans and commercial trail books, that net asset now is about AUD 106 million. You can see on that balance sheet, you know, for the first time, we're recognizing goodwill in relation to the Fintelligence acquisition. That is now currently being amortized at around about AUD 300 thousand per month washing through there. The other income, I mentioned that earlier in terms of being a nice offset. You can see the other income has increased. Service fees are up 8% due to the number of brokers, you know, the increase in the number of brokers using our services. The services include things like compliance, professional indemnity, insurance, and marketing services. We have had an increase in sponsorship income. The last couple of years due to COVID, we've seen a level of our ability to spend on broker events has been impacted, and so therefore we've been able to save. This year, as the country's opened up, we've had more broker events, which means more sponsorship has been brought to account. What that also translates into is obviously in the below the line in terms of the expenses, some of the marketing expense and broker facing or conferencing expenses and the like have also increased. There's kind of a one-for-one replacement of sponsorship income and conference expenses in the period. The other important thing I wanted to raise and we've got there in FY 2018 is FY 2018 was a year that we received volume bonus income of around AUD 1.3 million. That volume-based income was banned following recommendations coming out of the Royal Commission. FY 2018 was probably the last year that that bonus income was received. You take AUD 1.8 million out of the FY 2018 result and then compare it to an FY 2022 result, even adjusting for the additional sponsorship income. The quality of the earnings within the other income of the business has improved and is now maintainable and sustainable over a period as we bring more services to our brokers, and more brokers adopt and embrace those services. I think that's a really important part of our other income assessment. I'm just gonna jump to FY 2023 to page 23 in terms of the strategy for growth. The strategy has always been about building the distribution and then moving up the value chain. As you can see, we've built distribution in residential, and we'll continue to grow that and continue to invest in that part of our distribution, but we're moving into other asset classes for that distribution. You can see with the increase in settlements and volumes coming through from the commercial business, you know, we are creating a pipeline of new brokers wishing to embrace and adopt commercial mortgage commercial broking. We've also, obviously through our investment in Fintelligence, moved into a different type of asset class in a more sizable and meaningful way in terms of asset finance. Having established that base of distribution, we'll move up that value chain. You've seen us do that with residential, with the white labels and obviously into the RMBS sector. We've now got AUD 4.8 billion book. You've now also seen we've done the same thing. We've also embraced white label in the commercial space with our arrangement with Thinktank. We will look to bring on a white label partner in due course around the asset finance piece. Where we can't necessarily move straight into the manufacturing capability, we would look at investments in commercial providers, such as what we've done with equity investment in Thinktank. You know, the strategy is all around, you know, building the distribution, moving up the value chain, whether it be through white label, whether it be direct involvement and participation in the RMBS or ABS market, or if we can't or if the option's available for us to take a direct investment in an organization which is always doing that. Match that distribution capability of AFG and white label capability with the capability of manufacturing with a potential investment. That part is relatively consistent. I think what you should be able to start seeing, particularly on where our earnings diversification is coming from, it's starting to take seed in terms of broadening the asset base and broadening the areas in which we're generating income. The final piece is our investment in BrokerEngine, is providing tools for our brokers to enable them to take time out of their day. That's an important part and important consideration of a broker. It take time out of a broker's day to allow them to become more efficient in a market which is continuing to be busy. I wanna turn now just to the outlook, just in terms of FY. I'm on page 25 now. The broker and lending market, we remain a key player in the lending market, broker market share. One in ten mortgages written in the country are coming from an AFG broker. We remain part of a broking industry which now generates 69.5% of all flow. We would expect that to be maintained as branch footprints continue to reduce and customers continue to embrace the competition and choice which the broker channel provides. Our home ground advantage in terms of the, you know, industry information we obtain and how we apply that in terms of our own business decisions and our own business and investment decisions continues to assist us in executing our plans. Now, there's ongoing talk about the rising interest rates. Historically, we've performed very well in a rising interest rate. It's been some time since that's happened, but our history has shown that customers will continue to look for the right and appropriate deal for them in a rising interest rate environment. We're seeing that level of activity and engagement with our brokers continue at a good level. We're seeing also a quite unique part of the market going on right now, where we're coming off the back of nearly 40% of all mortgages were written in a fixed rate environment. Those fixed rate environment over the next 2-3 years will return to the market because those fixed rate terms will cease. You know, AFG brokers during this period have written over AUD 36 billion worth of fixed rate product. You know, we would fully expect all our AFG brokers to be participating in that AUD 36 billion worth of activity over the next 2-3 years, because they've created a relationship over this time with these brokers. Our, the other part, the housing sector, generally, residential mortgages generally do perform well across the cycle. We've got a proven track record of strong arrears performance, and low losses compared to our peers. The current AFG Home Loans book is high quality. Using that robust credit process as well as that home ground advantage, do not underestimate the power of that home ground advantage that we have in terms of data. We can see what every lender's doing in the marketplace, and we understand the credit impact and the flow impact of those decisions. In terms of more broader, it will more definitive around the outlook for the aggregation business. You know, rates and employment levels still are at historical levels, despite the fact that the speed of uplift in the cash rate is quite rapid. We think our market offering is compelling. We've got balance sheet strength, we've got industry-leading compliance, advocacy, analytics capability, sorry, and a broad technology offering. We've seen our broker numbers increase just over 3,700. The aggregation business in other asset classes provide further opportunities for growth. The other thing which some people don't continue to overlook is that the trail book which we talk about, which generates so much cash flow, does provide a hedging capability in areas of lower activity. What that means is that in lower levels of activity, the loan book's loans extend and more cash comes through than originally expected. It means we don't necessarily participate in the peaks and troughs from a cash flow perspective as much as some other businesses might. Mortgage customers are continuing to embrace the channel. It is now clearly the dominant channel for mortgage origination, and it's acknowledged by customers, but it's also being acknowledged by lenders. Lenders are saying, "We finally accept that broking is where customers want to access our product." It's been solidified by a concept called best interests duty. It's the only place where customers will know if they go get advice, it's the only place that they are compelled, that the person giving advice are compelled by law to provide them with the best advice which is in their best interest. Lenders are finally saying, "Where brokers, customers want to access a product, we need to be there." The level of engagement we're seeing from lenders across the platform has never been stronger. In terms of the manufacturing and lending, you know, we remain positive around our manufacturing and lending business. We've got increased capacity through the business. Lenders predominantly respond to the rate rises by passing on the rates in full to customers. While that timing of their ability to pass that rate rise will be impacted in the short term, we think we are in a position to broadly preserve longer term net interest margins. When I say longer term, you know, there is an expectation we have been telegraphing that the historical NIMs that we've been generating over the last 18 months have been higher than we would've normally produced, but still at a level which is comfortable for us. That home ground advantage I've talked about and sort of drilling down into means that our ability to identify pockets of distribution and pockets of product manufacturing capability and design means that we are capable of identifying proper areas of expansion. You know, we talk about that 38% of customers adopting to use a fixed rate product in 2021. That number is now 8%. Even that drop from 38% to 8% just means because AFG has never offered a fixed rate product, AFG Securities has never offered a fixed rate product, the addressable market for AFG Securities is increased by 48%. Those 38.6 billion dollars of residential mortgages provide a nice opportunity for us, not only in terms of the number of customers coming back or who will be coming back to customers, but also an ability for our brokers to get close to customers who are looking for the best option for their finances. July trading, you can see the numbers were softer, so the market has slowed. July was quite interesting. If I look at the month to date in August, they're not down as much as July is. In fact, some states are, such as Victoria, are pretty flat. Western Australia is flat. New South Wales is softer. The overall number is down. I think it's down in July by about 13%. In August, that number is probably around about 4% month to date. From that perspective, it's not overly concerning in terms of volume. You know, the RBA's activities around increasing interest rates is having the impact of slowing the marketplace. In terms of other statistics and you know, feedback from brokers, that the level of inquiry remains high and you know, it's just generating some level of fence sitters with customers who are probably just waiting to see what's going to happen. In conclusion, I know I've been talking for a while and dying for a drink of water. We've got a leading aggregation platform and an ability to continue to invest in technology and services. We serve. Our brokers service over 500,000 customers. You know, the package of what AFG provides is validated by the Aggregator of the Year award. We've got a capital light and robust balance sheet. Those net cash investments and other financial assets of AUD 217 million. We've had a track record of strong returns and fully expect those strong returns to be maintained. We've got growing distribution across a number of asset classes, which, you know, does diversify the business even further. Our investments in Thinktank, and we're very, very pleased with our investments in Thinktank. Our investments in BrokerEngine and Fintelligence, whilst early days, are providing positive returns for us above our expectation. The dividend consistency has been maintained. You know, AUD 188 million in fully franked dividends since listing in 2015, and that's before the dividend we've just announced today. We're well-positioned to take advantage of increasing broker penetration of commercial and asset finance markets. We have capacity to outperform in a rising interest rate environment, given the positive demand drivers for broker, our high-quality loan book, and proven performance in the past in rising interest rate periods. I might just pause there, take a drink of water and open it up to questions. Thank you. If you do wish to ask a question, please press the star key, then one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press the star key, then two. If you are on a speakerphone, please pick up the handset to ask your question. Thank you. Your first question is from Minh Phan from Barrenjoey. Go ahead, thank you. Hi, David. Thanks for taking the question. Just looking at slide nine, where you're talking about actions taken to offset contraction includes rate rises and ongoing change in mix of new products written. You have spoken a lot about your outlook for margins. It does sound like you are moving up the risk curve to manage margins. Two questions on that, if I could. Is the higher margin products you're talking about still, I think we've mentioned before, is it still 40 basis points higher than your full doc? Do you think it's the right time to be moving up the risk curve given the outlook? Yeah, it is 40 basis points. We talk about moving up the risk curve. We call it conforming versus non-conforming. You know, the characteristics of the product, you know, still sub-70% LVR, good credit scores, and obviously the thorough credit assessment process that we normally go through, Minh. I'm not talking, you know, dual income, no kids, the sort of jumbo junk loans or the like. We have built our profile and our business on a very conservative setting. The view that we're moving up the risk curve. It means probably better interpreted as we're not looking for pure prime as what we've done in the past. you know, our decision to move up that path was taken 12 months ago and, you know, we haven't changed credit appetite since then. We've just refocused the sales team on those opportunities. Great. Thank you. Maybe just a second one, if I could, on operating expenses. There have been large increases. Appreciate there's acquisitions that have pulled into that number. Could you tell us how much of that is FTE increase versus wage inflation? Amortization has also picked up. Just interested in the outlook for cost management given the rising inflation and continual need to invest in technology. Sure. Yeah, headcount's our biggest cost. If I look at the expenses for the year, maybe about AUD 5 million of it is acquisition-related. We've also got around about AUD 1.5 million of it related to conferencing expense, which I mentioned earlier. We've also got clearly we've had an increase in staff numbers over the journey. We've now got nearly 300 staff in the business, and 12 months ago, that number was probably closer to 200 and just over 200. The other components of, as you mentioned, there's about AUD 1.7 million in acquisition amortization. Obviously, we have an increased level of term out cost because we've increased the number of term outs during the period. IT costs will continue to be, you know, we have had a historical policy of trying to expense as much of that as possible, and that's predominantly headcount. So, IT costs in this marketplace, you know, we've been through a rate rise. We've been through a round of salary increases over the last six months. We think we're reasonably well set on that. We think, you know, feedback from the market is it's coming off a little bit. Probably the biggest area of sales, sorry, of wages increases, probably, you know, yes, we've got IT people, but we've also got, you know, one of the side effects of 70% of the pro-customers now using Broker is that all lenders have now turned around and said that they need to have more of a footprint and presence in the Broker channel, and that requires headcount. You know, they have the best hunting ground for lenders to access the broking market is probably the aggregation channel employee base. That's driven up some costs there as well. Does that answer your question, Minh? Yeah. Great. Thank you. Thank you. Your next question is from Brendan Sproules from Citi. Go ahead. Thank you. Hi. Good morning, David. Look, I've just got a couple of questions. Firstly, just on the July slide, I think it's slide 28. Yeah. I was wondering if you could make some comment around the performance of AFG Securities. Obviously, it's quite a significant softening in the market 12 months ago, but obviously AFG Securities is performing quite differently to that. I'm wondering if you could expand further on where the successes have come there. Look, it's, you know, the 3% is higher. Yeah, again, some of those niche products that we've talked about, I just talked about with Min. It's, you know, AFG Securities has slowed down in July, sorry, in August, but not horrendously so. We also did slow down a little bit of originations in AFG Securities just in terms of, you know, we talked about that conservative approach and outlook for AFG Securities, Brendan. You know, the proposition of good rate, good turnaround times and consistent credit position still holds true. Even in that market where it is quite competitive in the prime market, but in the non-conforming near prime type market, you know, we have got a strong following, and we are creating a growing footprint in that space as well. Terrific. Just the second question, if I may, just on slide 17. I mean, it's an interesting cut of your gross profit over a seven-year period. I guess I'm interested in this. You described your business now as having a lot of sort of low risk annuity style cash flows. Mm-hmm. I was wondering whether you could contrast the deals here in terms of if we do get a slowdown, I mean, you're a much larger business over the seven years, and you're obviously a lot more diverse. Mm-hmm. I mean, how much, I guess, of the current gross profit is linked to the current year activity versus how much is, you know, contributed to, you know, a trail book or? Mm-hmm, mm-hmm. margin of a loan book that's obviously gonna not be as impacted by what potentially may be a slower unit next year? Yeah. Look, you know, I mentioned before that we do have a, you know, if you look at the P&L, and I don't have the exact numbers, but historically, around 50% of our revenue in the resi side was trail book and 50% was upfront, you know, historically on a longer-term average. What we've seen is that that delta moves up and down based on the levels of activity. We do, you know, we do feel relatively cushioned by a softening in the marketplace in terms of overall cash flow being generated. The headline profit number might move up or down based on, you know, the big driver is obviously upfront commission. If that slows down, the cash flow comes through, but the profit number is a bit softer. If I look at it, the other part is, you know, the AFG Securities book. The irony is if the AFG Securities book slows, you know, the growth of securities slows down, and on the assumption that you retain those customers, you know, you don't have the cash flow impact up front of commission payments for new customers and, you know, the annuity style of that loan book continues to wash through. Commercial, you know, we're seeing strong, you know, we've moved into Thinktank, if you Google the commercial product, Thinktank, our investment in Thinktank. If that market slows down, again, they'll have a similar experience as we'd expect in the AFG Securities business that will probably spin off more cash. The asset finance business in terms of is transactional, so that might come off a little bit, but the Fintelligence part of it, you know, there is, brokers are paying a fee for that to have access to the platform. I'm just trying to think if I've hit all the main areas. The only other one is, you know, our other income and fees are really driven now at the number of brokers using our services. You know, compliance services, you wanna be in the market, you need to have compliance. If you wanna be a broker, you need professional indemnity insurance, you need a marketing platform, you need a technology platform. Those, that quality of those earnings, yeah, are probably linked to the number of brokers we have. I'm not sure I've answered that, but, you know, I think we've broadened where we get our business from, and therefore it provides us some, you know. If I look at the commercial business at the moment, you know, I talked about those numbers in residential being sort of in August as an example, being a little softer. You know, in commercial for August, you know, it's up 52% on the same period, and Thinktank commercial is up 22% in the same period. There are some contrasts going on. The level of slowdown of economic activity, we're not seeing it just yet, Brendan. Yeah. Oh, that's hugely helpful, David. Thank you. Thank you. Your next question comes from Richard Wiles from Morgan Stanley. Go ahead. Thank you. Good morning, David. I've I've got a couple of questions. The first one also relates to slide 28. Why is New South Wales so bad in July, down 24%, Victoria down just 6%? Yeah. Well, you tell me. You live there, Richard. I don't know, you know. To be honest, I really don't know. August numbers down 7%, so it might sound like it might be one out of the box. Victoria is our strongest state from an AFG perspective. We're a little softer in New South Wales, but it's not from loss of broker groups. You know, I'm looking at data. You know, New South Wales is particularly strange. You know, sometimes July is also a month of school holidays. New South Wales was probably locked down in that period. I'm not sure, you know. In the quiet period, yeah, I'm not sure people traveling. What we do find is when brokers have an ability to travel over school holidays, they do. Yeah. Okay. My second question relates to these fixed rate mortgages. I understand that the banks are engaging their fixed rate mortgage customers in the months leading up to the fixed rate maturities. Mm. It seems that customers have three options. They can either accept the previously agreed discount on the standard variable rate when the maturity comes through. They could negotiate with their existing lender for even bigger discount, or they could reengage with your brokers and look to refinance to a different lender. Yeah. perhaps get your brokers to help them get a bigger discount from Mm. Their existing lender. Can you give us an idea of sort of what proportion of customers will fall into each bucket? What are you seeing or what are you expecting? I notice we've got a couple of brokers on the call here, so maybe my gut feel here is that most brokers who have a good relationship with their customer, and we will be helping them prompt that with our marketing capability as well. Whilst the bank might be contacting the customer, our brokers will be contacting the customer as well. The broker will then be doing their best to, once the broker's engaged, applying a best interests duty lens across a transaction. If there's a better offer in the marketplace, the broker will move them to that new lender. Yeah. Given what's happened with pricing in the last year or two, there probably is a better offer in the marketplace. You can guarantee that. Is that a fair comment? I think you can guarantee that. Yeah. Yeah. Yeah. Okay. Thank you. Yeah. I think, Richard, the key piece there is, you know, the one thing that's different from our last interest rate rise and fixed interest cycle that we may have gone through is that the level of broker engagement with the customer base now at 70%. Also the fact we've got best interests duty. Yeah. If there is a better offer in the marketplace and your brokers help to get that better offer for the customer, nothing changes. If it's with the existing lender, nothing changes in terms of your revenue or cash flow, does it? That's correct. You continue to get the trail on the principal. But if there was a switch to a new lender, if there was a refinance, then obviously that impacts your cash flow and your profitability in the way that you were talking about before with the change in the up-front versus the trail. Correct. Yeah. Correct. Okay. Perfect. Thanks, Dave. No problem. Thank you. Your next question comes from Tim Lawson from Macquarie. Go ahead, thank you. Hi, David. Thanks for taking my question. Absolutely. I joined the call a bit late, so apologies if this has been asked, but can you just talk about the H2 margin in particular, sort of maybe any sort of thoughts on where the exit margin was given there's been competition and repricing and you're shifting this book mix around a little bit as well? Yeah, we don't actually give exit margins, but we, I would say, yeah, I think, yeah, you can probably read the math. You know, I would say the number's probably around about 163 with our average margin. If you take away the noise, you know, one of the things, you know, when you have an increase in interest rates, you carry 50 basis points. You know, you've got to advise the customer. So you do carry that increased cost for a week or two weeks in terms of your cost of funds, and that impacts your NIM, a little bit of noise. If you exclude that bit of noise, the number's probably around about, oh, I'm probably guessing, probably around about 160. Yep. Yeah. Okay. Mid-150s, maybe a touch below with that headwind from the timing of repricing, looks more like about AUD 160 in that half. Is that right? That's right. Understood. Yeah. Okay. That's right. Probably laying that, yeah. Thank you. Thank you. Your next question is from Azib Khan from AMP. Go ahead, thank you. Thank you very much. Good morning, David. David, if I understood you correctly, it sounded like when you were talking about R&D spreads earlier, you were saying that the widening that we've seen in recent times is being driven by transient factors, and that it's going to normalize over time. Did I hear you correctly? If that's true, what are the transient factors that you think will dissipate? No, I think what I was saying, Azib, was the fact that if you look at the long-term averages of cost of funds, in terms of the senior notes and what they go for, you know, we're currently sitting at, you know, I think Pepper did a deal at 155 yesterday, and that's probably a longer term higher average. The longer term average is probably 130-145, somewhere in that for the senior notes. I'm just comparing to longer term averages in the marketplace. The other piece is I'm saying the other factor is cash to bill. It has returned from being inverse to around about that 10-15 basis points over at the moment. Yeah, I'm not suggesting that we've seen a magic wand appear. What I'm saying is if you compare the longer term averages and you run a rule over cost of funds for a senior note for an organization like ours, 160 is at the very top end of the mark versus 1, you know, versus 70 basis points on one of our term deals. Somewhere in the middle is probably where that longer term average sits. Right. Thank you. Just one more question from me, David. Obviously, you've talked again about the natural hedge between the upfront commission and the trail commission. We're starting to see the drop-off in lodgements come through with rate rises. It's still early days, but have you started to see the amortization rate of the trail book start to slow down? I mean, it's hard to know exactly what's happening based on slide 16 and your average loan life assumptions. But have you started to see a slowing in that amortization rate? I think if I compare the cash being generated compared to our predicted model, it's above. That implies that the loans are staying on longer, Azib. Thank you. Okay. Thank you. There are no further questions at this time. That does conclude our conference for today. Thank you all very much for participating. You may now disconnect.