Up on the screen, I will just remind you that analysts can raise their hand and ask questions audibly, or alternatively for others, you can submit a question through the Q&A button at the bottom of your Zoom screen. But with that, Scott, I will hand it over to you.
Thank you, Simon, and thanks shareholders for dialing in today to listen to our FY 2026 results. I am pleased to say that FY 2026 was very much a year of resetting the base, but we are delighted to have delivered on our profit guidance that we set at the AGM last year, increasing our normalized NPAT to AUD 36.1 million, growing our earnings around 14.7% per share. The other thing that characterized FY 2026 was the return to growth for the Australian business. The loan book closed in Australia at AUD 920 million and continues to grow. June was one of the best months the group has ever produced in terms of settlements, and that is not just the Bennji commercial business growing, but also complemented by AFS and the Money3 business all returning to quite good growth. I am pleased to say that that momentum has continued through July and continues in August as well.
We have had good positive momentum coming into FY 2027. Other things I would like to call out on this page in terms of what characterized FY 2026 is our proposed or our planned reduction of exposure to New Zealand is well underway. We had a very good result with the sale of the post write-off loan book in New Zealand. NZD 9.4 million agreed, 8 million in cash paid, New Zealand dollars, I must admit, this last financial year in FY 2026, and that is progressing well. That loan book is coming down. You will see it in the results here is only about AUD 33 million. So it really is the end of that chapter for us. The other thing that we should call out is meaningful growth coming through our commercial operations. Loan commercial receivables for the group now exceed AUD 109 million and growing, powered by the Bennji business.
As we highlighted to shareholders, we would be in a setup year in FY 2026. Bennji continues to move from setup to growth. It is now writing around AUD 10 million a month. That will drive our loan book, along with the growth that we have seen at AFS and Money3, towards that billion dollars, hopefully by Christmas this year. I know Siva and I brought that out just before COVID, that that was our aim. It took us a few years. We had some challenges, COVID being one of those, but we are well on track to hit that number by the end of the year. Why that is important is that loan book growth in the Australian operations will allow us to replace the revenue that was coming out of New Zealand in years to come. So that is a positive momentum there.
The other key thing to call out in terms of achievements throughout FY 2026 is that reestablishing funding as an advantage for our business. You would note that we established a new warehouse. We also improved the margins in our facilities. We now have over AUD 400 million of available funding to grow our business, which as you will see in the balance sheet as you read through the results this year, have created quite a bit of surplus cash in our business. We have been able to establish a very solid funding platform for which to grow from here. Apologies, bit of a cold, but we are well-placed to grow our loan book into FY 2027 by leveraging the existing debt that we've got in place without the need for any additional capital. FY 2027 and the future is going to be about creating operating leverage with what we've done.
We've resolved our issues with the regulator here in Australia. We're not far away from the resolution of the matter in New Zealand. We have a strong funding base, and we have good momentum for growth. Bennji is leading our business units in terms of driving that growth, but pleasingly, our Money3 has been consistently lately delivering more than AUD 30 million a month, and our other two businesses around AUD 10 million. That is driving our loan book growth. If we could go to the next page. In terms of highlight, we talked about loan book AUD 920 million. I think we very much put out to our team, driving that growth to around a billion dollars by Christmas this year. Momentum is good in that regard. Interest income, this is the Australian interest income at AUD 180 million.
You'll appreciate interest income has been coming down in our organization as a result of the contraction of the loan book in New Zealand. We've hit the trough. It's now starting to grow again. As a result of the loan book growth that you'll see in Australia, interest income will lift in FY 2027. Cash collections, amazingly strong. Just evidence of a resilient consumer in this current market. If anything, cash collections are probably stronger than we'd like them to be. It's indicative of early redemption, early payout of customers, but a very strong result from our customer care and collections teams. Origination, AUD 470 million. Certainly, our June, July were near record levels.
For many investors that were at the AGM, you would appreciate we highlighted some of our challenges with our software rollout when we retired platforms at AFS, which essentially saw the first four months of FY 2026, our loan book go backwards as a result of some challenges. We've turned that around in the second half. Second half growth has been very good with overall loan book has grown a little bit over 10% for the year. If you look year on year in that second half, I think we are around up in terms of originations in Australia, up around 40%. That is now you'll start to benefit from that growth starting to come through. Bad debts were at the bottom end of our range. We just want to call out that that is principally as a result of that one-off sale in New Zealand.
Australian bad debts, which is predominantly the one that investors should focus on, 4.4%, which is at the upper end of guidance, upper end of our target range and almost spot on to where we told investors in October, November last year where we thought we would land. It is pleasing that while our bad debts were at the upper end of their range, our arrears improved over the course of the year. It does set us up to have a good FY 2027. Normalized NPAT of AUD 36.1 million. We will step through that in another slide. We are moving to dividends.
This year, we declared, as in FY 2026, we declared three special dividends aligned with the rundown of the loan book in New Zealand, totaling AUD 0.075, and two ordinary dividends of AUD 0.06 each for the interim and final year, bringing dividends paid to AUD 0.195 for the full year. The next dividend to be paid in October is AUD 0.085, which is a combination of two there. Net tangible assets is AUD 1.66. It is a slight reduction on last year, and that is a result of those special dividends and returning some of that capital back to investors as a result of running down our New Zealand loan book. The other place that we used some of those funds for was the share buyback program.
We bought under the net tangible asset value of the business, which means EPS will improve for all the shareholders that are on the register today as a result of that buyback. While the program is in place, if the share price stays where it is, we do not plan to use that tool. We plan to leverage the special dividend in order to use up some of the franking credits that are sitting on our balance sheet, which has been the feedback that we got at the AGM last year and continues from a number of shareholders. Next slide, please. This is the earnings bridge, just in terms of what did we normalize. For shareholders that were at the AGM or have read the notice in November last year, these are the three core elements of normalization that we said we would have this year.
We have resolved the issue with ASIC, which was the principal legal cost or one-off legal cost that was going through our business, including the penalty that has now been resolved. We normalized that out. As a result of our rundown in New Zealand, we repatriated funds from New Zealand back to Australia, and we did crystallize some loss as a result of FX fluctuations there. The other part is just normalizing out the setup costs of Bennji. Most of that cost is actually a non-cash provision that we have taken up for potential impairment of our commercial receivables. That brings us back to AUD 36.1 million. Next page, please, Simon. I will hand over to Siva to take you through the financials.
Thank you, Scott, and good morning, everyone. Just to quickly summarize the income statement for the group. You will notice that our interest income appears to come down. That is predominantly as a result of the rundown of our New Zealand book. Equally, our interest expense, bad debts, and operating expenses have also come down. What is pleasing to inform is we had an orderly rundown of our New Zealand book. The book is roughly AUD 30 million at the end of FY 2026. Going forward, you would see less of this distraction coming out of New Zealand on our P&L, and you will see more of the contribution coming from our emerging and growing segments in AFS and Bennji. Hence the group results presented going forward will reflect more of the continuing operations, predominantly in Australia. The three items that we have normalized to Scott's comments earlier were predominantly one-off.
We did include the startup investment cost of setting up Bennji. What we expect is Bennji's contribution to the income line will start to materially increase over FY 2027 and beyond as the loan book starts to mature. We will move on to the next slide. A couple of key call-outs on this slide. You would notice that the bad debts at a group level has come down to 3.6. To the comment made earlier, that reflects the one-off sale of the New Zealand write-off book. Notwithstanding that, we are still within our range of 3.5%-4.5%. Probably the additional call-out is as the Australian book continues to grow with Bennji and AFS contributing significantly to the loan book mix, we expect the trend of the bad debts continuing to go down over future years.
The loan book quality slide on the far right also reflects a good picture to Scott's comment earlier. We had been quite resilient in our arrears management, even though the inflationary struggles are still visible in the economy. What is pleasing to note is a strong and good part of the book has increased from 77%- 81% of the overall portfolio. At the same time, Australian leverage has also gone up from 71%- 74%, reflecting that the growth engines of AFS and Bennji are well-funded. You would also note that we have over AUD 400 million in funding capacity that provides strong support for future loan growth.
The thing is probably worth calling out because investors will bring it up, I am sure, about our return on equity. That improved. We have the right foundation. Our return on equity is not where we want it to be. You can see the programs we have built, the special dividends and the buyback, helping with that. We know that we are carrying a large amount of cash. The leverage has been a contributor to that. It does give the business optionality to continue to fund in a tighter environment. I guess more than anything, we want investors to be aware. We are well aware and conscious that over the course of this year, that cash that has come back on the balance sheet, that we will use it appropriately, supporting dividends return and potential buybacks if needed, along with using that to grow our business.
The positive is certainly the resetting of the base in terms of our funding and giving us that additional leverage for which to grow our business. We've talked about some of these headroom. There is plenty of headroom to grow our business, particularly the Money3 business within our group. Talked about return on equity. We are very conscious about improving that over time. Just trying to call out on the dividend slide, the return of capital through special dividends, and separate them out from our normal dividends so that you can see that the base dividend is a sustainable payment into the future, and the buybacks that we've done through the course of the year. Next slide, please, Simon. The outlook. As I was saying earlier, we think we are well on track to exceed a billion dollars of receivables this year. Loan book has been growing.
The combination of Australia and New Zealand is now at AUD 966 million as you can see there. I think the Australian loan book was well past AUD 940 million as we speak. There's good growth coming out of AFS and Bennji, and a very solid performance near record levels coming out of Money3 as well. We see our loan book growth coming, returning to all parts of our business as some of our challenges with that software are now behind us, as well as the closure of the ASIC matter. Excuse me. We expect to see interest income or revenue, in a non-accounting term, grow at a double-digit manner in FY 2027. The leading indicator is the growth of the loan book. You can see our loan book is, as a portfolio, yields around 20%, a little bit better.
You can see that growth will come back as a result of that. The revenue growth, that is, will come back as a result of growing loan book, which is a positive in our business because we're very conscious of managing our operational expenditure ratios, which will improve through the course of FY 2027. Lots of funding headroom. As a result of a little bit more time on our hands now, we've actually been able to look at some other avenues of under-service markets within Australia that we think provide opportunities to fund. In the appendix, you'll see some new assets that we have funded there. Some of those, some trucks as well as some other vans and other assets that we don't normally fund, but not a huge exposure to the book, but driving some of that growth.
In terms of operations, we are making a sizable investment in FY 2027 into improving our platform, that takes applications from the broker site or from a website. I think we talk about different parts of technology innovation that occurs every year. This is probably one of our bigger investments to try and change that platform, really aimed at providing a better software base for which to leverage AI that is coming. We've had a few goes, as we've talked about, implementing AI, particularly around improving our record keeping, which is a big burden from a governance and compliance point of view in our organization. The more we can use AI to record conversations and to provide notes on accounts and manage the client interactions that we have on a daily basis, the better it will improve our productivity in our business.
A significant investment going on to retire more platforms and have a better software foundation for which to grow our AI initiatives on top of those. Just moving to the market, I am sure it is not lost on most people attending call. We have seen record amounts of new car sales. A lot of that is driven by imports from China. We typically benefit in a delayed fashion in the used car market. Most of what the Solvar group funds is used assets. I think there is no coincidence that we are starting to see record levels of Australian originations coming through the group, a couple of months after we have seen record levels of new car sales.
We think that there are headwinds in terms of customers affordability and market, which I think from a used asset finance company is benefiting us as our customers coming into our space is growing, and our business is benefiting from that. I think, in terms of outlook, I think the market, we are well-placed within the market to have a really good FY 2027. A number of the issues that we have talked about are now behind us, whether it is software, regulatory, or some of our other issues that are there. Growth is returning to the business powered by our commercial operations. All parts of our business are benefiting, and we are investing in tools that will improve our productivity as an organization, which will result in higher EPS growth and better return on equity. With that, we will hand back to Simon for any questions.
Thanks so much, Scott, and thanks, Siva. Our first question comes from Allan Franklin at Canaccord. Allan, please go ahead.
Thank you. Morning, guys. Keen to just get a bit of a feel for Bennji through the fourth quarter. Maybe just a bit of detail on origination breadth. How are you going adding new brokers through the channels?
Well, a big part of Bennji was levering the existing distribution channels. What we haven't wanted to do is bring on all broker partners at the same time. Part of that growth of origination is the team at Bennji starting to broaden, attend a few conferences, mainly from your other listed aggregators. That's where the volume is coming from, pushing into our group. There's a lot more brokers that we can add to the Bennji platform. We're just not ready for it at the moment. Our intent is to stay around that AUD 10 odd million a month through Bennji while we continue to refine our underwriting models, and behind just the other processes. But nearly all of the growth we have received is coming from our existing distribution partners.
Okay, makes sense. Just on the loss experience in Australia in recent quarters, could you just sort of align the experience versus, I guess, your framing of lower watchlist loans, I guess that's coming out of the period?
Yeah, look, majority of bad debts do come out of the Money3 operation, and we have been through a number of loans with a view that where people are suffering some level of hardship, writing them off earlier. That is part of the contributor to overall portfolio quality improving through the year, which you could see in the previous slides. We think those same cost of living pressures continue through FY 2027, but given our target range of 3.5%-4.5%, I think we can manage those cost of living pressures and continue to meet the goals of the organization. But it is Money3 where most of that is coming from.
Yep, following. Just the last one on, sticking with Money3, perhaps just framing pricing and competition in the market as it stands today. I think you do reference secondhand vehicle pricing getting a bit more palatable from your side of the equation. But yeah, talk to pricing and competition within Money3 and how you're thinking about volume V prospects.
Yeah, there's been a bit of an uptick in volume, number of customers, but the average loan size has actually been fairly consistent over the last two or three years at Money3. The growth that we're seeing is actually more customers, and more customers will have a positive impact on yield. We have a static application fee, so if the loan size is lower, the yield will come up a little bit out of that. But Money3 has been a beneficiary of that. Long term, I expect Money3's bad debt experience to decline. Over the last three years, as you're aware, we've spent a lot of time with the regulator, and we've become a more conservative lender in that space as a result of that.
It takes a year or two before the portfolio flows through, but we expect to see Money3's bad debt performance continue to decline as we've shifted where our bulk of that business is exposed.
Helpful. Thanks.
Thank you.
Thanks so much, Allan. Next up, we've got Larry Gandler at Shaw and Partners. Larry, please go ahead.
Oh, thanks, Scott and Siva. Well done on the excellent result for 2026 and transition to a clean year. Just a couple of questions. With regards to the remaining New Zealand loan book, AUD 30 million or so, as those loans are collected, is it the intention to pay those proceeds out by way of dividends?
Look, I think, the way we would context that is a special dividend. The board is open to a special dividend in FY 2027, but performance over the first quarter is usually what dictates that. So, it is right to think that we will align special dividends with the rundown of New Zealand. But we would give a more definite answer to what that might look like towards the AGM. But yes, you're right. When New Zealand is done, the special dividends will stop.
Okay, great. Another question is, can you discuss the system changes or the new systems you're implementing, FY 2026, developing FY 2027 and implementing, and how that is going to drive growth for Bennji and AFS?
A lot of the systems, if we go back 18 months ago, we recognized the platform AFS was aging and in need of an update. So we licensed some software from one of the aggregators, and we had some challenges rolling that out. As a result, AFS origination volume picked up. Through the course of FY 2027, our intent is to build our own origination platform, which means when a broker wants to deal with AFS and the beneficiary being Money3, that we will have them originate or write that loan into our own software rather than into a third party's.
Our intent is to reach not just into the front end, but also into the underwriting platform that we have today. The underwriting platform for Money3 has been in place for about eight years. Our intent is to replace that in FY 2028. The work starts in FY 2027. What that will give us, now, most of this is about improving our speed, our time it takes to say yes to the broker or to the intermediary or the customer, that we're happy to write the loan. The heart of the new platform is about accessing more and more third-party data, which is as the world becomes more digitized, things like bank statements, payslips, confirmation of income, all of these things, there are government databases that we can leverage in a more automated fashion than what we have in the past.
As a lender that does lend to a slightly higher credit risk applicant, we do more searching at the underwriting stage than probably many of our peers, given the credit, and we rely on more sources of data to make a decision to underwrite people. The more of that that we can place our rules over digital data, the more it will drive productivity through our group. That's a big part of what we are wanting to do. Replace that software. It allows the AI to sit on top of it better to do things like mining the data that's available through databases, and also manage some of that customer interaction. So, there's less reliance on people.
Excellent. Thanks, guys. That's my questions.
Thanks, Larry.
Thanks very much, Larry. Just got a few more submitted questions, guys. First up, is commercial mainly small business lending, and is there much exposure to construction in the commercial loan book? What are the main industry exposures?
What we tried to do to answer that, people can go to the appendix later, but we've given you a highlight of where the assets we've funded. But it's nearly all small business or sole trader. So, if you think of a small business director, vans, there is some trucks in there, but think more of your 4.5 ton Isuzu truck, more so than a prime mover. There are a few that we've taken that we have lent to, but the vast majority of the assets we are funding are to small business sole traders. So, you think somebody working for themselves that is a sole trader that buys a ute, continues to be the focus.
But Bennji is opening up more of a platform for small business that might have a handful of staff and a couple of assets rather than where we've been in the past, where it was nil. I think we've said last year, the number one commercial asset we funded was a Ford Ranger, followed by a Hilux, and the third one was an Isuzu D-MAX. That's changing a little bit with the introduction of some slightly larger asset categories in there. But it is all to sole traders, small business, or what would be defined as small business. Big business is turning over a couple of million dollars or less.
Thanks, Scott. What's the quantum of the investments in tech in 2027?
We think that this year, the sum of the whole program will be in the range of AUD 3 million-AUD 5 million. Some of that will be expensed this year, some of that will be capitalized. As anyone that's followed the story knows, we constantly invest. We spend about AUD 6 million-AUD 7 million a year on our tech platform, and we invest about AUD 1 million-AUD 2 million a year. This year, we're increasing that AUD 1 million-AUD 2 million that we've invested in the past to, if you said, AUD 3 million-AUD 5 million.
Thanks, Scott.
Some of that will be capitalized and released over the following three years, I think was your intent, as we build a dedicated underwriting engine for our business.
Thanks. Just to confirm, Money3 underwriting standards have been tightened over FY 2026, and have there also been changes to customers that are served? Can you just expand on that, please?
I think it is not 2026. For the last three years, you can see, if you have looked at the loan book, that our loan book is the best predictor of revenue, and we have been flat. We acknowledge that we have had some issues to resolve in our business. That tightening of our loan book, we have really pulled back on lending into remote areas. Also, low-income borrowers, we have been a lot more stricter. Anybody that has a poor credit rating, we have lifted all of our minimum standards in our organization. I stress a lot of this is not driven by credit risk, but driven by improving our governance, also listening to the regulator in terms of what their level of expectation is, and we have to interpret that, in terms of who we are lending to.
I will come back to, because one of the next questions usually follows, does that lead to then a reduction in net interest margin or yield? As we have sought out other groups of markets, particularly in the used car space, some of that is being offset by higher volume of lower dollar value assets with a set application fee. Our intent is to write more volume in a slightly better credit risk segment, but continuing to focus on, particularly in Money3, lower ticket sized assets that we are funding.
Thanks, Scott. Just last question. Following dealing with the engine operations and legal issues, will you look at some kind of M&A in Australia or prefer to stay organic in your approach?
We are in an envious position of having around AUD 70 million of unrestricted cash on our balance sheet. M&A is something that we've done in the past and are very much open to. We do have strict guidelines of what we would be prepared to pay for assets in this segment. We think that the non-bank sector, that there are opportunities for consolidation given the scale that can be created. The stars haven't aligned, is what I'm trying to say, in terms of value versus price that we'd be prepared to pay. There's nothing to inform people at the moment, but we are very much looking for businesses that fit our lending appetite, which is consumer lending and commercial lending in Australia, and businesses that fit that, we would be open to at the right price.
Great. Thanks, Scott. That concludes the Q&A. I might just hand it back to you, closing remarks.
No, thanks, Simon, and thank you everyone for dialing in today. I'm really pleased that the start of FY 2027, we delivered on our commitments to FY 2026. We can put that behind us. Loan book growth is continuing. We're starting to see as the market gets a little bit more challenging, that tends to benefit the Solvar group in our focus in specialized markets. I look forward to coming back to shareholders and sharing what the first quarter looked like at the AGM, because we're quite confident that we've got some good momentum growing. Thanks everyone for your time today.