Of course, you can raise your hand and ask a question verbally. With that, Scott, I'll hand it over to you. Thanks.
Thank you, Simon, and thanks for the opportunity for everyone that's dialed in today to go through our investor presentation. Appreciate the opportunity to talk to you. FY 2025, we feel has been a very good year of resetting our business. We posted 5% loan book growth over that period of time, while we also maintained a very disciplined approach to new lending and new credit. Over time, investors should see the benefits of improved funding margins, greater leverage across our warehouses as a result of this improving credit quality across our business. We're confident that bad debts will trend to the bottom end of our range over the medium term over the next few years as a result of originating new credit. You might appreciate that it does take some time for loans to go through the process.
We also had a soft launch of our new dedicated commercial operations, which we've named Bennji. Companion in finance is the intent of what we're trying to convey with our new brand. We launched this new dedicated channel for commercial loans because we felt that was the best way to leverage our existing distribution channels across our business. The soft launch so far has been very well received. We expect Bennji to move from a startup position to growth towards the end of this calendar year. We expect Bennji is going to make a material contribution to the loan book growth across the business in years to come. Shareholders also note our recent investment in Earlypay. Solvar, you know, we continue to evolve as a company and continue to focus on being a premium financer in specialized markets.
That investment is aligned with our intent and our strategy to expand our product offering into commercial lending. We're doing this to expand the group's addressable market to leverage the strong distribution channels that we have across our group. Trying to sell more to the existing broker channels that we have then is the intent of broadening our product base. We think the investment that we've made in Earlypay complements and accelerates that vision of growth into commercial. With the backdrop of ever-increasing cyber challenges, not just in our company but in the world in general, Solvar invested heavily over the last 12 months in our cyber resilience. That came together with the certification of ISO 27001.
We call that out because it's been a significant expense for the business, but also something we think that not only protects our customers and our staff's data, but also protects shareholders' investments in the company. Throughout FY 2025, the board of Solvar has had a very strong focus on capital management. You would note that we implemented a share buyback program technically in 2024, but most of that ran through FY 2025. Through that period, we acquired some 14 million shares in the organization. All of those purchased on average below the net tangible assets, which has contributed to EPS expansion for the group, which is positive for all of us. Another capital management program that we are really delighted about is we managed to get our first asset-backed securitization away, and all ABS has been done. This essentially creates perpetual funding for our business.
We did this out of the Money3 warehouse, taking approximately $200 million receivables out and selling them into the market. The great thing from my point of view, Siva did all the work on that one, and he will talk more about that soon, but it improved our cost of funding on that senior tranche of debt by about 1%. It also matches the maturity of the loan to the debt that backs it. It unlocked an alternate source of funding from the traditional ways we funded our business. Finally, in terms of capital management, we declared this morning a fully franked final dividend of $0.08, bringing the full year dividend to $0.14, a 40% increase on last year. I think that is our confidence in the underlying profitability and growth of the business is why the directors were confident to lift that final dividend.
Finally, on this slide, the group has made continual investment. You would remember last year we talked about the back end of our software platform at AFS is getting replaced. This year we replaced the front end of that. All of the aging software at the Automotive Financial Services business unit has been replaced and upgraded to newer platforms. We partnered with one of our aggregators to build out and actually white label some of their front-end origination software in order to better service a broader section of brokers. That is working well. Still more work to go there as we onboard more brokers to the AFS business, but that replacement of software has now completed, retiring a number of costs from our business and making it easier for brokers to submit loans to us.
Just in terms of highlights and results, you know, with the backdrop of ever-changing market expectations, the group did maintain a very disciplined approach to credit and new originations, which has delivered that modest growth in revenue across the Australian operations. We certainly anticipate moving into FY 2026 as we turn our attention to growing Australian operations, greater loan book growth in this year than last year. We'll also see easing of cost of living pressures and easing of used car prices, all being some tailwinds to our business as we come into this year. We're delighted bad debts came in at the middle end of our target range. Our target consumer base has suffered for some cost of living pressures, which everyone would be aware of. It's a testament to the resilience of our client base.
I think how well that's performed in the Australian business and also emphasizes the importance of transport and the ability for consumers to participate in society. That's what the loan gives to people, access to transport, and we're really happy with where our bad debts have come in as a result of that. We continue to maintain a very disciplined approach in regard to our repositioned lending appetite, and that will continue. It puts us in a good position that bad debts will maintain into the future. We'll come back to the net profit after tax on the next slide because we're very happy to announce that we came in slightly above our guidance at $31.4 million of normalized net profit after tax.
The normalization is the legal expenses that we've incurred as a result of the regulatory matter that we're facing, which I think everyone will be well aware of, but a very good return, 17.4% up on last year's results. Now that the trial has completed and we're awaiting judgment, it allows the business to focus on growth. Very pleased with that 17.4% uplift on last year. The decrease in interest income that people see across the group is really just attributable to the strategic decision to run down the loan book in New Zealand. That has been a very orderly collection of the loans there, and that's very much contributed to the cash position of the group and the board's confidence to lift that fully franked final dividend to $0.08, taking the full year to $0.14, a 40% uplift on last year.
It probably won't be the last time you hear me say that. It's a great result of how things have turned around in the business. In light of the changing composition of our business that investors will be well aware of, we placed a significant amount of attention over the course of the year in managing the operating expenses of the group. I know as you start to look through the results, you can dice and slice that between Australia and New Zealand. What we have done is take around $6 million of cost out of our business. We've had more of the operations here in Australia pick up work for the New Zealand business. We are very happy with where our OpEx ratio has come in.
It's a reasonable reduction on last year, and it really shows that the investment we are making in technology can flow through to, you know, in terms of improving revenue to OpEx in the business. This focus on investment, too, I wanted to point out, has led to one of the lowest headcounts in our operations, well under 300 people that we've had in a number of years. That is a big part. Technology is providing that leverage and giving us that ability to scale our business without the need for more and more people. You should expect to see more investment in technology as time goes by, which is helping us grow. In terms of the operating performance of the business, this is our newest division. We've called it Benji, you know, with the dog there as the corporate logo.
The real intent behind the brand, and I've had some feedback on that, is to really say to borrowers what we intend, and that is to be a companion, to be there with our customers and to support them through time. We found that this business has been very well received with its soft launch. Our intent here is to leverage the distribution channels that the business already has. It is a very large addressable market, and we are well aware that there is plenty of competition in this space. Where we are gaining scale is by going back to our usual partners and providing, you know, an additional product that aligns with what those clients are after, which has been good for us in terms of broadening our product and to grow our addressable market. In terms of talent, Craig Bowring joined our group, joined us from Angle Finance.
He's had a whole career in commercial asset finance, qualified valuer, brings a lot of skill and experience into this space, which has complemented our team's distribution and others, helped us build out the right products, and is helping us grow that business. Indicative of the assets we're funding there is the RAM. Lots of vans, utes, and a few light commercial assets have been funded by this group. Investors should look forward to seeing some good loan book growth across the business as a result of lending in the Bennji segment. The Australian loan book continues to grow with a very disciplined approach to underwriting. That's pleasing to see. The introduction of Bennji commercial loans will see the portfolio mix continue to change.
You can see AFS taking a larger percentage of the overall group portfolio, and investors should expect to see that mix continue to change and Bennji making a meaningful contribution to the loan book in the future. Let's start with sort of focus on bad debts here. I mean, we are delighted. Five years now we've come in as an Australian operations within our target band. We think the disciplined approach to underwriting that we've taken over the last 12 months and the repositioning of our Money3 and AFS product appetite continues to work for us. We expect that bad debt profile to maintain in FY 2026. We think we're very well positioned with that. We're also pleased with the modest loan book growth that we've got, driving interest income growth across our business with bad debts well within our medium target range.
All of these focuses across the business have led to that 70% increase in net profit after tax this year, which we think is a good result in turning things around. As we move on to the financial results, I'll hand over to Siva to take you through some key points.
Thank you, Scott, and good morning, everyone. You would have seen that our annual report consolidates both Australia and New Zealand operations. What we had tried to do here is to provide a bit more spotlight on what's going on with our Australian operations. I think the key takeaway messages are the Scott's comment earlier. Australia continues to grow, and we expect that to grow strongly in FY 2026 as well.
For FY 2025 results, I think the key highlights are the portfolio yield is very healthy and well above the 20% mark, and we expect that to continue in FY 2026 as well. You would also see that our net interest income has grown around 5%, and that's both from the interest income growth as well as interest expense reduction. Just to put a bit more spotlight on interest expense, to Scott's comment earlier, we put a lot of initiatives during the year, including introducing the first asset-backed securitization, which helped reduce our cost of funds or funding margins by circa 1%. That roughly translates to $140 million of external debt that we introduced to the business. At the same time, this also created capacity within the warehouse for future growth. The takeaway point is it's helping us to reduce funding margins, but also opening up more capacity for future growth.
The bad debts, to Scott's comment earlier, I would say the same, which is a pleasing outcome. We're well within the range, and we expect that to continue to trend down in the future. The other elements to unpack, which is within our operating expense line, you may see that it has got a modest growth. The key takeaway point is there are two factors to consider. There is an element of cost management, which is still contributing to reduction in our operating expenses by circa $1 million- $1.5 million. However, the increase that you're seeing is some spend that we're doing on our technology side, which will continue to provide productivity dividends in the future. You'll continue to see this line operating within that below 30% of our income range. We have obviously normalized for the legal cost that Scott mentioned earlier.
Moving on to the group results, the key takeaway point is that we made $34.1 million of normalized impact for the financial year 2025, which is marginally above the guidance that we provided. On this slide, there are three key elements, starting with the left-hand side, the bad debts. The key takeaway point, it's continuing to be stable. You'll see year- on- year, there is no significant increase in our bad debts. This is despite the cost of living pressures that we continue to see in FY 2025. Having said that, as inflation starts to come down and unemployment continues to be stable, we expect that these ratios will start to improve in FY 2026. On the middle graph, you have the different stack of debt facilities that we have.
You'll see that there is adequate headroom, well north of $300 million to support growth, but there is also diversification between warehouse and term securitization, which helps, which puts the business in a very strong position to create a sustainable funding model. That will be a big contributor to future growth of this business. On the right-hand side, you have the credit quality slide that we've put in the past, and it continues to compare over the last four years. You'll see that we are still very strong in terms of the credit quality, as in around 80% of our book is within that strong and good part of our credit quality. There's obviously marginal reductions that you see compared to FY 2024, which we expect to ease out and become again stronger in FY 2026. Probably hand it over back to Scott.
Thanks, Siva.
There's not a lot to update from previous announcements here, but I am pleased to say that our Money3's attendance at court has now concluded, and we're awaiting judgment from the judge in regard to that matter. In terms of our matter with the Commerce Commission, it's yet to appear in front of a court, so there's nothing further to update in terms of our regulatory matters other than to say we are waiting, and we will inform the market as soon as something material comes to the air. Look, with consumer sentiment and the RBA rate cutting cycle, we're expecting to see some good tailwinds start to emerge in our business. Cost of living pressures are coming off. They have been real and felt by our client base.
This is why we are really happy with where our bad debts have positioned themselves because, while some segments of the community have managed them easier than others, I think generally our Money3 customers have certainly felt the cost of living pressures. They are managing that well. We keep getting reminded by customers how important access to a vehicle is to them. What we've seen, record new car sales in many parts of the business. We'd not necessarily have seen that come through the used cars, but we are very well aware that most dealerships have probably the best stock of used vehicles that we've seen for some time.
Coupled with the fact that the cost of living pressures are starting to ease a little bit and the positive sentiment that comes from the rate cutting cycle from the RBA, we're quite optimistic about what the rest of particularly 2026 looks like as we look forward to the future. It probably means cheaper cars and it certainly means more finance opportunities for us. That repricing is a good thing from our point of view because it's likely to drive more volume. While we're a reasonable player in used car finance, it's still a very large market with a large opportunity for us to continue to grow and take market share.
This, coupled with our expansion efforts around commercial lending, is why we think that FY 2026 will be a very solid result for this year as we replace all the income that was there from New Zealand in the Australian operations and you start to see growth. With that, we'll hand back to Simon to see if there are any questions from shareholders.
Great. Thanks, Scott. Thanks, Siva. First question, please provide further rationale for the Earlypay investment other than receiving dividends. Does the Earlypay investment, rather than investing excess capital into Money3 loan originations that have now declined two years in a row, mean that the company's market share has plateaued in this area and will grow at a low rate subject to credit quality going forward?
A lot of questions in that one question, Simon. Thank you. We think Earlypay is a very good business focused on commercial lending. As we've sort of highlighted strategically, our intent is to grow our presence in that space. The board spent some time looking at the Earlypay transaction, and we felt that it was a good stepping stone into that space. As we get to know Earlypay and explore other opportunities, we will keep people informed. At this point, it's part of our strategic investment to broaden our access to the consumer market, commercial market.
Thanks, Scott. AFS bad debts appear to have increased significantly in the period. Can you please provide further detail?
Look, AFS bad debts are still well under 1%. We have seen some cost of living pressures, and yes, the AFS bad debts have come up a little bit, but they are still at record low levels, well under 1% for that business unit. We think that's a good result. As that business continues to grow, it's pushed through $200 million of receivables to see it lift off. We're coming from having $300,000, close to $1 million of bad debt in a business that's about 0.5%. It's a good result, but it has come up. Yes, we acknowledge that.
Perfect. Thanks, Scott. Can you please comment on the 2023 investment in Viro, and does that investment still align with the strategy of the Solvar business?
Look, Viro has had a strategic change in the business. If I go back to when our original rationale, there were two arms to the Viro business, one being a platform for sales for EVs in the country, and two being the retail outlet and financing of those EVs. Our AFS business unit did provide a financing arm for Viro, and that worked quite nicely. There was a change to legislation that many of you would be aware of that the Labor government brought in, which provided a tax benefit from EVs when purchased through a novated lease. We made a conscious decision as an organization not to compete in the novated space, which is why we haven't benefited to the same degree as we originally anticipated in Viro.
I'm happy to say that Viro continues to grow and continues to broaden our knowledge and our conversation, particularly with manufacturers of EVs and potentially other sources of funding options for our group.
Scott, regarding Bennji, as you're entering a new market, what does Solvar's edge please? Also, shall we expect a price-aggressive entry into this market, and would it be reasonable to expect a couple of millions of startup losses in their first year of operation?
Yeah, look, absolutely. There will be, depending on how Siva expenses the software cost, part of launching Bennji will be a dedicated commercial software piece in order for brokers to submit an application. The key differentiator is for us to leverage our distribution channel. We had a number of our partners saying to us we are providing some of the consumer opportunity that would otherwise be presented to the Solvar Group to other funders as a result of us not being able to satisfy both their needs for consumer and commercial lending. There is a gray area in the middle, particularly when people are looking for a ute, as a utility vehicle for commercial purposes or for consumer. Sometimes there's a choice on behalf of the applicant. To miss out on some good business was strategically not a good thing for us.
What we needed was the right product in order to address that demand. We have built that right product out now. We are leveraging the distribution channels that we have today, so there isn't an incremental marketing cost to get volume. We're not trying to compete with some of the banks in town, so don't expect Bennji to come along writing $100 million a month. We certainly think that there is a good avenue to get to that $5 million- $10 million a month leveraging our distribution channel in the next 24 months. We're investing in order to do that. It is not unreasonable for investors to expect there will be some costs that will come through this year as we set that up, predominantly software costs in that business. It gives us a dedicated commercial channel into our brokers for which they will submit applications to us.
Great. Thanks, Scott. Do you expect the buyback to continue? If so, to what extent?
The buyback is currently in place today. The board will consider the parameters of that buyback, but it is still in place. There is still, let's just say, around $11 million undeployed in the buyback program that's currently afoot. It sort of depends on where the share price moves and the board's decision in terms of the metrics there. Certainly, as we consider our capital management tools in our bag, buyback is one of them. We're also very conscious of the franking credit balance that sits in the company. I think it's just over $75 million at the concluded financial year. The board does look at these three sort of avenues around improving EPS through buyback, returning some of those franked dividends back to shareholders, as you've seen with the uplifted dividend recently announced today, as well as funding organic and inorganic growth.
Right. You refer to the introduction of a new commercial lending product. Is that a reference to invoice finance?
It is not intended to be the invoice financing product, obviously being delivered to the market through Earlypay. Bennji, a commercial loan contract is a different contract to a consumer contract. My reference is around having slightly different structured terms for the customer in that product.
Right. You explained that there is $300 million headroom in the facilities, and last year there was $500 million cash received. Will that be able to be lent over the next 12 months? How much is Bennji expected to take up?
Look, in terms of the lending, as we walk into FY 2026, we expect growth in each of the three business units, including Bennji. Bennji obviously has done, we launched it in May, so it's got a very low base. It's got a strong growth ahead of it in FY 2026. In terms of the funding availability, that's to demonstrate that we have enough headroom as things start to ease in the market. If we have to accelerate growth, you're not going to be short of cash to support the growth that's expected in FY 2026.
Right. Thanks, Siva. Question from Ellen at Canaccord. Please comment on the progress of the New Zealand book wind down. Is there a range in mind for book balance by June 2026?
If you look in the accounts, you'll see it's just under $70 million is where the book is. We expect to see that. It's halved over the last 12 months almost. It'll come down much faster than that over the course of this year. We continue to explore our options there in terms of the best way to manage our Go Car Finance business. The profile is you should expect that to be circa $30 million come June 30 or less this year, which is probably around the right size and scale for some other type of result.
Perfect. Just a question from James at Morgans. It's only been a few months in for Bennji. Can you talk to how the product is resonating in the market, maybe early traction and originations? How should we think about the loan book for the segment in FY 2026?
Look, it's still early days. What's been well received is particularly in the delivery and real estate sector. If you think of the asset that we're funding, it tends to be a ute or a van. I know that the team off the back of that launch is looking at a partnership at the moment, which would give us access to a number of transit vans supporting ever-increasing deliveries to the front door of everyone's house. Utes, vans, light commercials is the type of asset that we're seeing come through that channel. The distribution partners that have come to us with this product, people are well known to the group that do quite a bit of business with us today. For them, it's been wanting this product because they already have relationships with the group. They already have agreements between the Solvar Group and our brands.
It's been leveraging those so that it's not just us in the industry looking at simplification and productivity options. It is easier for our brokers, as we keep telling them, to deal with fewer lenders and put more volume through them, and we satisfy their clients' needs. Bennji is delivering on that. I would expect to see some good growth coming out of our Bennji business. I do think the next three months in particular is coming to conclusion with our software build to make it easier and to finalize integration with brokers. Certainly, we expect to see several million dollars a month being originated a year from now. There's still a few months of just testing and trying and making sure we're getting things right in terms of our turnaround times.
Right. Thanks. Just last question. Do you want to use Earlypay's tech as a white label product?
I do appreciate there's lots of questions around Earlypay. As sort of highlighted, our intent in that space is to grow our presence in commercial. I think it's a great business and it's well run. As soon as we have more to share with investors, we will definitely make an announcement and explain the rest of our strategy there.
Perfect. That concludes the Q&A, Scott. I might just hand it back to you for closing remarks.
No, thanks, Simon. Thanks, everyone, for joining today. I think investors would be well aware that there's been some headwinds to our business. If you sit here today and look forward, a lot of those have now concluded, whether it's building out our cyber resilience, better tech, and certainly getting clearer on our disciplined credit approach, that people should look to see that we really start to grow again as an organization led by our three brands in the market focused on higher credit risk applicants, that near prime segment through AFS and commercial through Bennji. I think we've got the right team and are well positioned to leverage the distribution channels that we have with brokers.
We haven't talked about it today, but we also have invested in building our direct-to-market option as a business, and that has improved conversion, particularly in the May-June starting to come together. We feel that FY 2026 will be a better year than FY 2025. We thank everyone for listening in. Appreciate your time.
Great. Thanks, Scott. Thanks, Siva. Thanks all for attending. Cheers.