Centrepoint Alliance Limited (CAF) Earnings Call Transcript & Summary

Good morning, everybody. My name is Alan Fisher. I'm the Chairman of Centrepoint Alliance. And on behalf of the Board of Directors, it is my pleasure to welcome you all to the AGM of Shareholders for 2021. As there is a quorum present, I declare the 2021 AGM of Centrepoint open. The technology that you have logged in to allow shareholders, proxyholders and guests to virtually attend the meeting. All attendees can watch a live webcast in the meeting. In addition, shareholders and proxyholders have the ability to submit questions and vote. Written questions can be submitted at any time. [Operator Instructions] Please note that while you can submit questions from now on, I will not address them until a relevant time in the meeting. Please also note that your questions may be moderated or if we receive multiple questions on one topic and all related together. Finally, due to the time constraints, we may run out of time to answer all of your questions. If this happens, we will answer them in due course via e-mail or on our website. [Operator Instructions] In the event that I am disconnected from the meeting and cannot immediately rejoin due to technology failure, Georg Chmiel will assume the role of Chair of this meeting. Voting today will be conducted by way of a poll on all items of business. In order to provide you with enough time to vote, I will shortly open voting for all resolutions. At that time, if you are eligible to vote at this meeting, a new polling icon will appear. Selecting this icon will bring up a list of resolutions and present you with voting options. To cast your vote, simply select one of the options. There is no need to hit a submit or enter button as the vote is automatically recorded. You do, however, have the ability to change your vote up until the time I declare voting closed. I now declare the voting open. I would like to introduce you to the Board of Directors: Martin Pretty, Georg Chmiel and Alexander Beard; as well as our CEO, John Shuttleworth. Attending from Centrepoint Alliance is our CFO, Brendon Glass; and Company Secretary, Kim Clark. In addition, we have senior management in attendance as well as the company's auditors, BDO, represented by Partner, Tim Aman. BDO will be available to take questions on the audit report later in the meeting, if so required. John Shuttleworth and I will now provide a company update prior to commencing the formal business of the meeting. I'm pleased to present the 2021 Annual Report for Centrepoint Alliance and report on a year in which we have consolidated that position as a leading provider of licensing, advice business services and technology solutions for Australian financial advisers. It has been a privilege this year to be part of the substantial development of Centrepoint Alliance since our last AGM. We must acknowledge the continuing impacts of COVID-19 pandemic on the markets in which we operate and our stakeholders, including our staff, adviser, partners and shareholders. In FY '21, we have mitigated these impacts and have delivered a strong financial turnaround in this challenging market. The financial, operational and strategic outcomes of Centrepoint Alliance achieved in F '21 have vindicated our decision to move away from provider rebates to a scalable and recurring fee-based revenue model. Making this change has allowed Centrepoint Alliance to strengthen its reputation from leadership and integrity while also providing a first-mover advantage during a time of industry disruption. With our transition to a fee-for-service model now complete, our company is well positioned in a rapidly evolving industry. Centrepoint Alliance achieved a 6% increase in gross revenue during FY '21 and earned a net profit after tax of $1.8 million compared to a net loss after tax of $2 million in FY '20. In parallel, expenses were reduced by nearly 16%, demonstrating our continuing commitment to generate value to shareholders. A strong cash performance saw our operations generate net operational cash flow of $2.6 million, providing the balance sheet support not only to execute the company's growth strategy but also to pay shareholders fully franked dividends, totaling $0.04 per share during FY '21. We believe these financial achievements validate our strategy and underline the success of Centrepoint Alliance as it focuses on its core business of providing valuable services to financial advisers. We will continue to seek to improve our business and the services that we provide to our clients and provide them at a scale that generates growth in revenue and increased profitability for years to come. To complement our retuned business model and improved performance, we continue to seek opportunities to build scale and operational leverage. Today, we agreed to acquire ClearView Advice in early FY '22 to build our combined group into a market-leading advice service business. Acquiring ClearView Advice is a natural fit for Centrepoint Alliance. This transformational combination of 2 strong brands will be substantially accretive, adding a strong technology and compliance capability to our business while welcoming 281 advisers to our network. Through this transaction, ClearView Wealth Limited will become a strategic shareholder in Centrepoint Alliance. And we have been fortunate to welcome ClearView's Managing Director and CEO, Mr. Simon Swanson, to the Centrepoint Alliance Board as a nonexecutive director. We continue to assess partnerships and other acquisition opportunities as well as look at ways in which we can deliver stronger financial results and enhanced shareholder value in the years ahead. We finished FY '21 with a strong balance sheet and a closing cash balance of $11.1 million to fund the continued execution of the company's growth strategy. Looking ahead to FY '22, we will continue to execute our plan to extend new services to our existing adviser network while also aiming to attract high-quality financial advice firms and individual advisers to our ranks. This plan will see Centrepoint Alliance lead the charge to ensure the financial services industry provides the very best service to its many clients. We will actively explore consolidation opportunities in what it is a fragmented industry but one which continues to improve and strengthen. I will now hand over to our CEO, John Shuttleworth, to provide an operational review of the year and a report on the company's outlook for the year ahead.

Good morning, everyone. Thank you for joining our meeting today. As Centrepoint Alliance's CEO, I'd like to give an overview of our business and our achievements during the past financial year and also to provide some insight into our plans for the year ahead. Centrepoint Alliance provides licensee services, including compliance, research, technical and practice management support to advisers across Australia. We provide our services to more than 700 licensed -- self-licensed financial advisers as well as 320 individual advisers who utilize our license, creating a community of 1,000 advisers throughout Australia. These advisers, in turn, provide advice to thousands of business individuals -- businesses and individuals seeking advice on personal and business-related financial matters. Our business is well-positioned to take full advantage of strengthening tailwinds for the advice industry. A range of factors impacting the wealth management market mean the need for advice has never been greater. Australians now have $3.1 trillion in superannuation assets, which is the fourth largest pool globally. Australian retirees are also living longer, running the risk of outliving their retirement savings. At the same time, the interplay of superannuation, retirement, tax and social security is increasingly complex, with fewer advisers in the industry post Royal Commission to meet the demand for these services. Under this rapidly evolving industry backdrop, the strength of our platform empowers us to deliver services at scale, positioning Centrepoint Alliance as a destination of choice for advisers who value autonomy and flexibility, along with industry-leading advice and governance support and technology. Centrepoint Alliance differentiates itself from its peers by helping advisers to spend more facetime with clients, reduce their administrative burden, run an efficient practice and stay compliant at all times. Our focus on creating a community for our members and providing them with the best available support, services, technology solutions and opportunities allows advisers to deliver the best quality advice to their clients. We continue to focus on providing service excellence to our advisers. Of the 21,000 inquiries that our adviser network made between October 2020 and June 2021, we resolved 93% within 2 days, leading to 83% of advisers expressing satisfaction with the Centrepoint Alliance service. This also helps us attract new advisers and boosts the engagement and average tenure of licensed advisers on our platform. Our results for the year show a business with disciplined financial management. In 2021, we increased gross revenue by $8.2 million, an increase of 6% year-on-year through higher authorized rep fees, through recruitment of quality advisers, strong performance of the licensee solutions business and the impact of having integrated Enzumo, which we acquired in late 2020. We maintained a diligent focus on expense management during the year given the uncertain environment created by COVID-19 pandemic. This focus has been really important in allowing us to deliver sustainable growth, particularly as the runoff of rebates saw gross profit down slightly compared to the previous year. However, the expected runoff of legacy claims expenses allowed us to deliver strong -- stronger net profit after tax of $1.8 million compared to a net loss after tax of $2 million in 2020. This result represents solid performance through challenging trading conditions. This return to profitability, along with a strong cash flow performance, has created a solid platform for future growth. Our growth strategy is based on 3 key pillars: firstly, growing the licensee solutions business to build scale and profitability; secondly, investing in financial services technology to improve efficiency and productivity; and thirdly, providing the highest quality portfolio implementation solutions at the lowest cost. In August 2020, we announced the acquisition of ClearView's advice business to accelerate the growth of the licensee solutions business, delivering to our first strategic pillar. The acquisition of ClearView Advice will transform our company by boosting our financial scale and delivering new compliance and technology capabilities, which are highly complementary to our existing business. The acquisition creates a powerful combination of complementary intellectual property, skills, experience and balance sheet access, setting the platform to participate in further organic and strategic transactional growth as industry disruption continues. Post-acquisition, we will have more than 1,300 licensed and self-licensed advisers across Australia, making the company one of a select number of independent advice business services firms with scale and efficiently -- scale and efficiency to deliver strong profitability. We have been impressed in the first few months by what the award-winning ClearView, Matrix and LaVista advice businesses have contributed operationally and also by what ClearView Wealth has delivered -- has contributed strategically as a key partner and stakeholder. With the combined business expected to deliver in excess of $8 million in annualized EBITDA, we're excited by what the future will bring us together. Since announcing the acquisition, we are well advanced with our integration planning. The operating model and organizational structure has been finalized. We have a strengthened senior leadership team, comprising employees from both ClearView and Centrepoint, and we are well advanced with our integration planning. From tomorrow, employees will be co-located in the Centrepoint offices, and we will commence operating as one integrated company. When I joined Centrepoint Alliance in August, I found a company that benefits from a very favorable position in a rapidly evolving advice industry, with competitive pricing and capabilities in both the licensed and self-licensed segments. In a regulatory environment that is becoming increasingly complex, Centrepoint Alliance remains well positioned to assist advice firms to run compliant practices and benefit from quality support services. Focusing on our core business has positioned Centrepoint Alliance with a strong platform for growth that continues to present an attractive destination for advisers. The company has entered 2022 well positioned financially and strategically to achieve its growth agenda, from a robust, cash-generative and scalable platform, backed by balance sheet strength to grow quickly and opportunistically. We continue to explore opportunities for the industry consolidation and further acquisitions to build and enhance our services and customer base. We have a wonderful team and pipeline of opportunities and remain well placed to deliver high quality and sustainable growth. I look forward to keeping you up-to-date on our achievements through the remainder of the year. And I thank you for your time today and for your interest in Centrepoint Alliance.

Kim, is there any questions in respect to this item of business?

No, we haven't received any questions, Alan.

Okay. Thank you, John. Now to the formal business of the meeting. The notice of meeting has been circulated to shareholders, and copies have been made to those attending today. So if there's no objection, I shall take the notice of meeting as read. The agenda items for our meeting today are shown on the screen. Where a vote is required on a particular item, the valid proxies received in advance of the meeting for the proposed resolution will be shown on the screen to enable shareholders to view them as each item is considered. These figures may be varied if a shareholder who submitted a proxy is attending the meeting today and has revoked their proxy. I will address each resolution and any questions received in respect of each resolution during each item of business. I note that, as Chair, I intend to vote undirected proxies held in favor of each resolution. The first item of business is for shareholders to receive and consider the 2021 Annual Report, which contains the financial statements of the company for the year ended 30th of June 2021, together with the directors' statement to report from the auditor's report on those financial statements. The 2021 Annual Report has been published and was circulated to shareholders in October 2021 and is available on the company's website. I trust everyone has had an ample opportunity to consider. No shareholder vote is required in relation to this item of business. This is an appropriate time to raise any questions on these reports or on our business in general, so raise them now. This is also the appropriate time to raise any questions you may have of the auditor, which are relevant to the conduct of the audit and preparation and content of the audit report. Are there any questions in respect to this item of business, Kim?

No questions have been received, Alan.

Okay. There being no further questions, we will move on to the next item, adoption of the remuneration report. The next item of business is the adoption of the remuneration report for the year ended 30th of June 2021. The motion before the meeting is to consider and, if thought fit, pass the following resolution in accordance with Section 250R(2) of the Corporations Act, that the remuneration report for the year ended 30th of June 2021 be adopted. The remuneration report is contained within the company's 2021 Annual Report. The vote on this resolution is advisory only and does not bind the directors of the company. The proxy details are displayed on the slide. As you can see, proxies have been appointed for over 45.11% of the shares on issue and over 66.7 million shares, 98.49% of proxy votes have been voted in favor of the resolution. I would like to highlight that in accordance with the Corporations Act, no votes may be cast on this resolution by or on behalf of a member of the company's key management personnel or their closely related parties. I will refer to these people collectively as prohibited voters. A prohibited voter may vote directed proxies where they do so for another person who is not themselves a prohibited voter. As Chairman, I may also vote undirected proxies for a person that is not a prohibited voter in accordance with my stated voting intention to vote all available proxies in favor of this resolution. For the purposes of this resolution, a prohibited voter includes a member of the key management personnel named in the remuneration report. Are there any questions in respect to this item of business, Kim?

No questions have been received, Alan.

Thank you. There being no further questions, we will move on to the next item. As the next item relates to my appointment, I will hand the meeting to Georg Chmiel to Chair. Georg?

Thank you, Alan. The next motion -- before the meeting proposes the reelection of Alan Fisher as our Director, the motion is to consider and, if thought fit, pass the following resolution as an ordinary resolution: that Alan Fisher, who retires by rotation in accordance with Rule 58(a)(ii) of the company's constitution and being eligible, be reelected as a director of the company. The proxy details are displayed. As you can see, proxies have been appointed, and 98.93% of proxies have voted in favor, representing 53.27% of the total votes. Are there any questions in respect of this item of business?

No question, Georg.

There being no further questions, I will hand back the meeting to Mr. Fisher. Alan?

Thank you, Georg. The next motion before the meeting proposes a reelection of Martin Pretty as a director. The motion is to consider and, if thought fit, pass the following resolution as an ordinary resolution: that Martin Pretty, who retires by rotation in accordance with Rule 58(a)(ii) of the company's constitution and being eligible, be reelected as a director of the company. The proxy details are displayed. As you can see, proxies have been appointed for over 52.42% of shares on issue, and over 77.5 million shares, representing 97.3% of proxy votes, have been voted in favor of the resolution. Are there any questions, Kim?

No questions have been received, Alan.

Thank you, Kim. The next motion before the meeting proposes the issuance of consideration shares pursuant to the proposed transaction with ClearView Wealth. The motion is to consider and, if thought fit, pass the following resolution as an ordinary resolution: that for the purposes of Item 7, Section 611 of the Corporations Act 2001 and for all other purposes, shareholders approve and authorize the company to issue 48 million shares to ClearView Wealth Limited as the consideration shares under the proposed transaction and on the terms and conditions set out in the explanatory statement accompanying this notice. The proxy details are displayed. As you can see, proxies have been appointed for over 45.47% of shares on issue and over 67.2 million shares, representing 98.75% of proxy votes, have been voted in favor of the resolution. Are there any questions, Kim?

I have no questions, Alan.

Thank you. The next motion before the meeting proposes the appointment of Simon Swanson as director of the company. The motion is to consider and, if thought fit, pass the following resolution as an ordinary resolution: that subject to and with effect from completion of the proposed transaction, Simon Swanson be appointed as a director of the company. The proxy details are displayed. As you can see, proxies have been appointed for over 48.61% of shares on issue and over 71.8 million shares, 98.18% of proxy votes, have been in favor of the resolution. Are there any questions, Kim?

No questions have been received, Alan.

Thank you. The next motion before the meeting proposes the approval of voluntary escrow arrangements. The motion is to consider and, if thought fit, pass the following resolution as an ordinary resolution: that subject to Resolution 4 being passed and for the purposes of Item 7, Section 611 of the Corporations Act and for all other purposes, shareholders approve the acquisition by the company of a relevant interest in the 48 million shares to be issued to ClearView Wealth Limited as the consideration shares under the proposed transaction, which is an acquired result of the escrow restriction described in the explanatory statement. The proxy details are displayed on the screen. As you can see, proxies have been appointed for over 45.38% of shares on issue and over 67.1 million shares, 98.8% of proxy votes, have been voted in favor of the resolution. Are there any questions, Kim?

No questions have been received, Alan.

Thank you. The next motion before the meeting proposes the approval of the appointment of the auditor. The motion is to consider and, if thought fit, pass the following resolution as an ordinary resolution: that for the purposes of Section 327(c)(ii) of the Corporations Act and for all other purposes, BDO Audit Proprietary Limited have consented in writing to act as auditors of the company, be appointed as auditors of the company. The proxy details are shown on the screen. As you can see, proxies have been appointed for over 53.28% of the shares on issue and over 78.7 million shares, being 98.94% of proxy votes, have been voted in favor of the resolution. Are there any questions, Kim?

No questions have been received, Alan.

Thank you. The next motion for the meeting proposes the approval of the granting of performance rights to Mr. John Shuttleworth. The motion is to consider and, if thought fit, pass the following resolution as an ordinary resolution: that for the purposes of Listing Rule 10.15 and Sections 200B, 200C, 200E and Part 2E of the Corporations Act and for all other purposes, the company will be authorized to issue 8 million performance rights to the company's CEO, Mr. John Shuttleworth, or his nominee and to issue or transfer shares to or for the benefit of Mr. Shuttleworth or his nominee upon divesting and exercise of those performance rights and the company's long-term incentive plan and on the terms and conditions set out in the explanatory statement. Proxy details are displayed. As you can see, proxies have been appointed for over 44.7% of shares on issue and over 66.1 million shares, being 97.2% of proxy votes, have been voted in favor of the resolution. Are there any questions in respect to this item of business, Kim?

I have no questions, Alan.

Thank you. The next motion before the meeting proposes the approval of proposed termination benefits. The motion is to consider and, if thought fit, pass the following resolution as an ordinary resolution: that for the purposes of Section 200B and 200E of the Corporation's Act, ASX Listing Rule 10.19 and for all other purposes, approval is given for the giving of benefits described in the explanatory statement to any person from -- who, from time to time, is or has been a member of the key management personnel or holds or has held a managerial or executive office in the company or related body corporate, in connection with that person ceasing to hold that managerial or executive office. This approval applies for benefits given in the period prior to the conclusion of the third Annual General Meeting of the company after the date on which this Resolution 9 is passed. Proxy details are displayed. As you can see, proxies have been appointed for over 43.78% of shares on issue and over 64.7 million shares, being 95.27% of proxy votes, have been voted in favor of the resolution. Are there any questions, Kim, on this item?

No questions have been received, Alan.

Okay. Ladies and gentlemen, please ensure that you have cast your vote on all resolutions. I will now pause to allow you time to finalize those votes.