Centrepoint Alliance Limited · ASX:CAF
Centrepoint Alliance — H1 FY2019 Earnings Presentation
39 slides from Centrepoint Alliance's earnings presentation, Feb 22, 2019
Slide 1: FY19 First Half Results Presentation and Strategy Update
22 February 2019 FY19 First Half Results Presentation and Strategy Update Centrepoint Alliance Limited
Slide 2: Disclaimer
DISCLAIMER This presentation is for general information purposes only and should be read in conjunction with the Half Year Financial Report for the six months ended 31 December 2018 and the Appendix 4D lodged with the Australian Securities Exchange by Centrepoint Alliance Limited (ASX:CAF) on 22 Feb
Slide 3: Summary
Summary • Strong profit turnaround, with Group net profit of $1.7m before tax for 1H19, resulting from consistent operating earnings and significantly reduced legacy claims • Financial advice market offers significant opportunities for quality scale providers − Structural demand for advice remains s
Slide 4: Financial Results
Financial Results CENTREP@INT ALLIANCE
Slide 5: 1H19 Financial Results
1H19 Financial Results Total $m 1H18* 2H18 1H19 • Strong turnaround in profitability Gross Profit 16.0 16.3 16.1 Management Expenses (13.6) (13.2) (14.0) • Profit before tax of $1.7m, due to: EBITDA (excluding one-off adjustments) 2.4 3.1 2.1 Cost to income ratio 85% 81% 87% − Material reduction in
Slide 6: Cash flow
Cash flow YTD Cash Movement 14 • Closing cash position of $7.4m $0.7 -$3.8 12 $1.3 • $1.3m Cashflow from operations $9.5 10 8 -$0.3 $7.4 • $3.8m paid in legacy claims, previously fully provisioned $M 6 • Divestment in Neos Life $0.7m 4 2 • Strategic Refresh investment in digital and data foundations
Slide 7: Group balance sheet
Group balance sheet $m 30/06/2018 31/12/2018 • Increase in tangible assets following Cash & Term Deposits 9.5 7.4 payment of claims over the period and Intangible Assets & Goodwill 1.7 1.7 operating earnings accumulated in the Other Assets 26.9 25.0 half Total Assets 38.1 34.1 Total Liabilities 19.1
Slide 8: Claims & Adviser Service Fee Remediation
Claims & Adviser Service Fee Remediation Legacy Claims Adviser Service Fees • No significant new legacy claims in the • Proactive assessment process of network period advisers commenced at the end of 2018 • As at 31 December 2018 an overall • Given the early stage of the network provision of $1.8m c
Slide 9: Grandfathered rebate analysis
Grandfathered rebate analysis • $6.2m was received in the half from ‘grandfathered’ rebate revenue Rebates 1H18 2H18 1H19 • We expect product providers to phase out these rebates over the next 2 years by either Total Rebate $k 6,575 6,554 6,171 Insurance Rebate $k 2,096 1,712 1,641 − replacing old p
Slide 10: Strategy Update
Strategy Update ALLIANCE
Slide 11: 1H FY19 a strategic refresh
1H FY19 “Building the future of a strategic refresh advice to deliver quality outcomes for advisers and their clients. ”
Slide 12: Our strategy will ensure Centrepoint is the lead provider of advice and business services
Our strategy will ensure Centrepoint is the lead provider of advice and business services to the financial adviser community STRATEGIC REFRESH GROW RECREATE FOCUS Grow differently and Recreate a new offer that will Focus on our community of aggressively to build scale as position Centrepoint as a ad
Slide 13: The Strategic Refresh sets us on the right path to meet Royal Commission recommendations
The Strategic Refresh announced last August has set us on the right path to meet the recommendations from the Hayne Royal Commission Grandfathered Absence of conflicted independence remuneration to be explained to to cease by 1 Jan 2021 customers Ongoing Fee Regulatory Arrangements enforcement • ann
Slide 14: The themes we flagged six months ago are more relevant than ever
The themes we flagged six months ago… … are more relevant than ever. (Baby) Boomers: those born between 1946 and 1965 HENRYs: High Earners Not Rich Yet 1HFY19 Results Presentation & Strategy Update 14
Slide 15: Underlying demand for financial advice remains attractive
Underlying demand for financial advice remains attractive Regulatory complexity + retirement boom + Large, growing retirement intergenerational wealth transfer savings pool (superannuation) 2.1M $1.5T Australian adults intend to $2.8T in private wealth will change use an adviser in the next 2 years
Slide 16: The supply side of the market is undergoing significant disruption
The supply side of the market is undergoing significant disruption ALL OTHER ADVISERS ‘Big Six’ Advisers Authorised Representatives Boutiques/Self-licenced (30 Licensee) (70 Licensee) (2,812 Licensee) 6% 18% 14% (8,748) (10,235) (9,072) Note: ‘Big Six’ relates to the four major banks, AMP and IOOF.
Slide 17: Centrepoint is in a unique position - the only quality scale provider servicing both growth segments
Centrepoint is in a unique position - the only quality scale provider servicing both growth segments Authorised Representatives Boutiques/Self-licenced SMS Advisers Network Advice firm % Morgans Market Centrepoint size share Synchron Licences 2,296 150 7% Merit Wealth < 5 ARs GPS Wealth Advisers 2,6
Slide 18: Financial advisers are seeking a quality partner
Financial advisers are seeking a quality partner to help manage their businesses efficiently and confidently in this changing landscape Enhance their status as a trusted adviser In a highly regulated industry, reassurance that their individual and business obligations are met Save advisers time and
Slide 19: Centrepoint's offer makes us an attractive proposition for advisers
Centrepoint’s offer makes us an attractive proposition for advisers Not owned or controlled by a product Enhance their status as a trusted adviser manufacturer Commitment and ongoing investment in In a highly regulated industry, reassurance that providing industry leading legal, governance & their i
Slide 20: Quality and scale validates that Centrepoint will be increasingly attractive
Quality and scale validates that Centrepoint will increasingly be attractive in a disrupted and increasingly scrutinised market The new advice market reality • A financial advice licence has a legal obligation to operate efficiently, honestly, and fairly under section 912A of the Corporations Act Di
Slide 21: Strong momentum delivering Strategic Refresh over the last six months
Strong momentum has been built delivering Centrepoint’s Strategic Refresh over the last six months 1H FY19 2H FY19 ✓ Conduct portfolio review of businesses Introduce new governance and standards framework ✓ Implement new organisation structure FOCUS ✓ Build new relationship Service Model ✓ Launch
Slide 22: Centrepoint's new offer provides differentiated support to advisers
Centrepoint’s new offer provides differentiated support to advisers and takes advantage of the unfolding market disruption BUSINESS MANAGEMENT LICENSEE SERVICES SERVICES NEW AFSL SETUP BUSINESS COACHING GOVERNANCE AND COMPLIANCE ACQUISITION AND SUCCESSION RESPONSIBLE MANAGER TRAINING PARTNERED SERVI
Slide 23: All aspects of Centrepoint's business are changing to deliver value to advisers
All aspects of Centrepoint’s business are changing to deliver value to advisers and respond rapidly to opportunities New Executive Redeployment of Investment in Agile project New unbundled Team & resources and scalable management advice and refreshed new capabilities technology to capability and bus
Slide 24: Executive team – track record and experience to deliver
Executive team – track record and experience to deliver Angus Benbow Chief Executive Officer • 20 years in wealth management and strategic leadership Natalie Ellisdon Soula Cargakis Paul Cullen Chief Technology & Marketing Officer Group Executive Advice Group Executive Advice Services • 15 years in
Slide 25: Summary
Summary • Strong profit turnaround, with Group net profit of $1.7m before tax for 1H19, resulting from consistent operating earnings and significantly reduced legacy claims • Financial advice market offers significant opportunities for quality scale providers − Structural demand for advice remains s
Slide 26: Appendices
Appendices CENTREP@INT ALLIANCE
Slide 27: Centrepoint's advice network
Centrepoint’s advice network 868 (QLD) Self Licenced 672 Corp – Licenced 128 Salaried 2 143 (WA) Mortgage Brokers 66 Self Licenced 98 Corp – Licenced 39 603 (NSW) Salaried 0 Self Licenced 498 Mortgage Brokers 6 Corp – Licenced 65 Salaried 3 213 (SA) Mortgage Brokers 37 Self Licenced 169 Corp – Licen
Slide 28: 1H19 Operating segment results
1H19 Operating segment results Funds Management and Licensee and Advice Services Corporate Total Administration $m 1H18 1H19 1H19 v 1H18 1H18 1H19 1H19 v 1H18 1H18 1H19 1H19 v 1H18 1H18* 1H19 1H19 v 1H18 Statutory Revenue 6.5 6.8 5% 55.5 53.3 -4% 0.1 0.1 0% 62.1 60.2 -3% Gross Profit 4.2 4.6 10% 11.
Slide 29: Supporting professional advisers
Supporting professional advisers Key Performance Indicator FY17 FY18 1H19 • Ongoing recruitment success with 16 Number of New High Quality Firms (Gross) 39 37 16 high potential firms recruited Number of Advice Firms 483 476 469 • Reduction in the number of Advice - Corporate Firms 251 240 237 Firms
Slide 30: Firm segment analysis
Firm segment analysis Firms AR's Firms Firms Firms AR's Firms AR's Key Performance Indicator FY18 FY18 Ceased New Dec 18 CLOSE Dec 18 CLOSE Variance Variance Corporate Licence 240 338 (14) 11 237 351 (3) 13 High Quality Firms 141 234 (7) 11 145 253 4 19 Value 99 104 (7) 0 92 98 (7) (6) Self Licence
Slide 31: Funds under management and administration
Funds under management and administration Key Performance Indicator 1H17 2H17 1H18 2H18 1H19 • FUMA increased by 1% (vs 1H18) and decreased by 4% (vs 2H18), impacted Gross Funds Inflows ($m) 161 161 155 156 123 by market movements and outflows Net Funds Flow ($m) 66 59 65 57 5 • Managed Account FUMA
Slide 32: Claims Overview
Claims Overview 1H 19 Specific Adviser Legacy claims Non-legacy Total Number $m Number $m Number $m Number $m • Claims Provision balance as at 31 20 0.9 11 2.9 9 0.3 40 4.2 December 2018 is $1.8m comprising Opening claims $1.2m of Legacy claims* and fees New claims 14 0.7 3 0 13 0.0 30 0.7 incurred
Slide 33: Accounting partnerships and insurance business investments
Accounting partnerships and insurance business investments Accounting partnerships Life insurance partnerships • RFE continues to establish new joint ventures and • Neos Life is a new Australian life insurance business clients focused solely on the advised life insurance market • Centrepoint has pro
Slide 34: Prior period comparative adjustments
Prior period comparative adjustments Half year to 31 Dec Half year to 31 Dec $m 2017 previously Adjustment 2017 restated reported Condensed consolidated statement of profit or loss • During the period, it was identified that a receivable under the Centrepoint Alliance Interest income 1.1 (0.8) 0.3 E
Slide 35: Authorised representatives: a new business model is critical
Authorised representatives: a new business model is critical Authorised Advice core offering Characteristics Disruption representatives (ARs) • Group of advisers not • ARs expected to decline as owned/controlled by a education standards Governance & product-owned financial become an onerous and comp
Slide 36: Boutiques/Self-licenced: seek scale and expertise from a partner
Boutiques/Self-licenced: seek scale and expertise from a partner Boutique/ Advice core offering Characteristics Disruption Self-licenced • Advisers with own licence • Increased scrutiny from Regulators to ensure Governance & • Has seen strong growth in compliance with licence compliance reassurance
Slide 37: Regulatory and market forces that Centrepoint is actively managing
Regulatory and market forces that Centrepoint is actively managing Legislative impact Market impact Royal Commission • Royal Commission issued its Final • The Royal Commission highlighted Fees For No service as an industry wide problem. The Company has commenced a into Financial Report on 1 February
Slide 38: Definitions
Definitions Term Definition Basic EPS Basic Earnings per Share is NPAT divided by average number of ordinary shares Includes assets and revenue in respect of self-licenced firms, Salaried Advice, Licenced Practices (flat fee model), Contemporary Business Model Open Administration Platforms, Managed
Slide 39: Definitions
Definitions Term Definition Gross Profit Revenue received less Direct Costs LICs Listed Investment Companies are a type of investment, incorporated as companies and listed on a stock exchange Managed Accounts Funds invested in Ventura Managed Account Portfolio Solutions (VMAPS), which is included in
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