Centrepoint Alliance Limited (CAF) Earnings Call Transcript & Summary

Good morning, everyone. My name is Alan Fisher, and I am the Chairman of Centrepoint Alliance Limited. And on behalf of the Board of Directors, it's my pleasure to welcome you all to our AGM of the shareholders for 2022. As there is a quorum present, I declare the 2022 AGM of Centrepoint open. Thank you for everyone attending today, either in person or using the online AGM technology. Before proceeding with the business of the meeting, I would like to mention some procedural matters. For those of you attending our Sydney venue, you should have registered your attendance as you entered the room today. If any member or proxy holder has not registered their attendance at the door with our share register Computershare, we ask that you please do so now. Staff from Computershare are here to assist you. Visitors are also -- can be registered electronically on Computershare's meeting registration system. If any visitors have not yet registered their attendance, we ask that you please do so. And at this time, in respect to those around you, may we request to put to silence all mobile phones. The technology you would log into allows shareholders, proxy holders and guests to virtually attend the meeting. All attendees can watch a live webcast of the meeting. In addition, shareholders and proxy holders 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 the relevant time of the meeting. Please also note that your questions may be moderated or, if we receive multiple questions on the topic, amalgamated together. Finally, due to time constraints, may we 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. For those shareholders who wish to ask a verbal question, an audio question facility is available during this meeting. [Operator Instructions] If you have any issues using the system, please refer to the online meeting guide available at www.computershare.com.au/virtualmeetingguide, or contact Computershare on (+613) 9415-4024. I encourage shareholders who are attending online to submit questions about and/or request to address the meeting as early as possible. I will ask the company's secretary Kim Clark to act as moderator for the meeting and read out any written questions or advise of any shareholders or proxy holders with verbal questions received via the online platform. For those shareholders attending our Sydney venue, should you wish to ask a question, when invited to do so, please raise the voting card you received at the time of registration. We will ask that you state your name and, if applicable, the name of the shareholder you represent. Finally, due to time good constraints, we may run out of time to answer all your questions. If this happens, we will answer them in due course via email or by posting responses on our website. We'll certainly give our best efforts to answer everyone's questions. 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, for those who are attending online, 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 to 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. For those of you attending our Sydney venue, you should have received a voting card upon registration, which I will ask you to complete upon consideration of each resolution. Computershare representatives will contact your voting cards on -- will collect your voting cards on -- at the conclusion of the meeting. I now declare the voting open. I wish to introduce you to the Directors of the Board: Martin Pretty; Georg Chmiel; Alexander Beard; and Simon Swanson; as well as our CEO, John Shuttleworth. Attending from Centrepoint Alliance Executive Team is our CFO, Brendon Glass; and Company Secretary, Kim Clark. In addition, we have senior management attendance as well as the company's auditor, BDO, represented by [ James Sanel ]. 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. As Chair, and on behalf of the Board of Directors, it is my pleasure to welcome you to the 2022 AGM for Centrepoint. Since our last AGM, Centrepoint has continued to develop substantially, and your company now commands an enviable position in a rapidly evolving industry as a leading provider of licensing, advice business services and technology solutions for Australian financial advisers. It has been my privilege to be part of this development. And we, as a company, are proud to support the advisers and businesses that make up the Australian financial advice and wealth management sector. Their contribution is critical to support Australians navigating a challenging economic environment and to help empower the creation and preservation of wealth. Over the past 12 months, Centrepoint Alliance continued to demonstrate its capacity to support financial advisers and enable practice owners to focus on their core business in the face of rising costs and compliance pressures. Although more than 9,000 advisers have left the profession since the Hayne Royal Commission was established in 2017, it is a validation of our service quality that over the same period, Centrepoint Alliance has significantly scaled up its network of self-licensed practices and are growing the number of licensed advisers it supports. This net growth marks the company as an accretively favorable destination of choice for advisers and reflects positively on Centrepoint Alliance ability to meet the changing needs of the financial services industry. The company has worked hard to regain high-quality advisers and attract new culturally aligned professionals with organically -- both organically and via acquisition. Through these qualities, Centrepoint Alliance has repositioned itself into a much stronger business over the course of FY '22 with financial stability, scale, strengthened leadership and improved capabilities. Centrepoint Alliance net profit before tax of $2.6 million in FY '22, representing a year-on-year growth of 66%. On August 2022, the Board declared a fully franked dividend of $0.01 per share. This dividend, paid in relation to FY '22, brings the dividend for the year up to $0.015 per share fully franked for the year. This exhibits our robust capability to invest to expand Centrepoint Alliance service offering while also returning excess capital and delivering consistent value for shareholders. During the year, we remain focused on our growth strategy, which revolves around building scale and capability in our core license business, developing revenue adjacencies that enhance our offer and improved margins, whilst differentiating ourselves through useful technology and high-quality services that empower advisers to their best -- to do their best. Our transformation acquisition of ClearView Financial Advice announced in August 2021 and completed on November 1 of that year has brought scale and efficiency to the business and has significantly improved our competitive position. The combined business brought together complementary enterprise services, technology brands and strengthened our management team. We finished FY '22 with a strong balance sheet with a closing cash balance of $14.7 million that will support the continued execution of the growth -- company's growth strategy. In the year ahead, we will continue to improve our business and the services we provide to our clients and provide them a scale that generates growth in revenue and increasing profitability for years to come. Throughout the last financial year, Centrepoint's Alliance management employees and licensed advisers have gone above and beyond to grasp opportunities in what has been a challenging operating environment for financial services. I'd like to thank the team for their ongoing dedication. I would also like to thank my fellow Board Members and shareholders for their commitment and continuing support throughout the year. I will now hand over to our CEO, John Shuttleworth, to provide an operational review of the year and report on the company's outlook for the year ahead. Thank you.

Thanks, Alan, and good morning, everyone. 2022 has been a transformational year for Centrepoint Alliance. We successfully completed and integrated the ClearView Financial Advice acquisition whilst organically growing advisers. We also made good progress commencing several strategic initiatives to deliver growth, margin improvement and revenue diversification. The key operating highlights for the year were ClearView's advice business was acquired on 1 November and successfully integrated all identifiable -- identified expense synergies were delivered to budget. At the end of June 2022, the business was in a significantly stronger position due to greater scale and profitability. Licensed advisers grew by 45% from 356 to 517. Self-licensed firms grew by 27% from 151 to 192, with revenue growth up 57%. Our cost-to-income ratio was down, from 86% to 77%. We generated strong cash from operations of $6.4 million. EBITDA before LTI and one-offs of $7.2 million increased 112% on FY '21. Service levels were also maintained in 2022 with our increased scale. We had approximately 31,500 service inquiries that we responded to in an average of 1.6 days. The divestment of the non-core venture funds business was completed in July 2022 for a consideration of $1.5 million plus a variable performance payment for the 12 months post divestment. The venture funds contributed $300,000 to FY '22 EBITDA. The industry we operate in has undergone significant change. Since 2017, the number of advisers has declined 37% with bank-owned financial advice exiting the market and other institutional players reducing their adviser footprint. There are now less than 16,000 advisers in the industry. During the same period, Centrepoint Alliance has grown from 10th position to #3 in the market. Centrepoint Alliance is profitable, and has the scale to invest in people, technology and processes to support financial planning businesses giving us a strategic advantage in the market. Our strategy is focused on 3 key areas. Firstly, building scale and capability in the core licensee business. Growing licensed advisers continues to be a priority. We're focused on organic growth as well as acquisitions to continue to build scale. We see an opportunity to become a major provider of services to self-licensed advisers, with 192 firms representing approximately 800 advisers. We will continue to expand our depth of services and digitized service provision. Secondly, developing revenue adjacencies that enhance our offer and improve our margin, leveraging our footprint of 1,300 advisers in the network. The turnaround of our asset management business is underway. With the divestment of venture of managed funds complete, we're focused on building our diversified managed accounts capability. Leveraging our mortgage broking service and infrastructure, we launched a new initiative, Lending as a Service, enabling advisers to offer lending services to their clients while building a compliant lending business. Lending as a Service was launched in the first quarter of the 2023 financial year. Thirdly, differentiating through quality of advisers, service quality and technology. Differentiating through technology is a key priority with the integration activities complete. Our focus is now on investing in technology to improve advisers, practice efficiency and enhancing our service offering. Centrepoint Alliance has a strong platform for future growth with sustainable financials, quality advisers, operating scale, diversification of revenue and a high-quality team that has successfully executed on an acquisition while organically growing the business. We've made a solid start to FY '23. Our first half FY '23 revenue is forecast to be slightly ahead of the second half FY '22 revenue after removing discontinued platform revenue of $700,000 reported in the full year results update. Revenue uplift has been circa 5% increase in licensee fees. First half '23 EBITDA before LTI and one-offs is expected to be down 5% on the second half FY '22, $4 million, after removing discontinued platform revenue of $700,000 reported in the full year results update. This is driven by inflationary cost increases, seasonal adviser summit costs, as well as an increase in travel and entertainment costs post-COVID lockdowns. The second half of FY '23 is expected to benefit from ramping up Lending as a Service with the hiring of a lending specialist team, together with new business sales focus from our expanding salaried and licensee service business units. We continue to explore M&A opportunities to meet our criteria -- that meet our criteria of adviser quality, cultural alignment, comparable field -- comparable fees and realizable synergies. So with that, thank you, and I'll pass back to our Chairman, Alan.

Thanks, John. Kim, are there any questions from online attendees in respect to the item of business?

No questions at this time.

Thank you. There being no further questions, we'll move on to the next item. The Notice of Meeting has been circulated to shareholders, and copies have been made available to those attending today. So if there is no objection, I'll 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 2022 annual report, which includes the financial statements of the company for the year ended 30 June 2022, together with the directors' statement and report and the auditor's report for those financial statements. The 2022 annual report has been published and was circulated to shareholders who requested a copy and is available on the company website. I trust everyone has had ample opportunity to consider the accounts. 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, to 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 the preparation and content of the audit report. Kim, are there any questions online -- from online attendees in relation to this item of business?

There are no questions at this time.

Are there any questions from shareholders in attendance at our venue today? There being no questions, I will then move on to the next item. The next item of business is the adoption of the remuneration report for the year ended 30th of June 2022. 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 30 June 2022 be adopted. The remuneration report is contained within the company's 2022 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 screen. 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 those 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 purpose of this resolution, a prohibited voter includes a member of the key management personnel named in the remuneration report. Kim, are there any questions online in relation to this side of the business?

No questions at this time.

Thank you. Are there any questions in the room in relation to this item of business? Okay. There being no questions, we will move on to the next item. The next motion before the meeting proposes a reelection of Georg Chmiel. As a director, the motion is to consider and if thought fit pass the following resolution as an ordinary resolution: that Georg Chmiel who retires by rotation according to 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 on the screen. Kim, are there any questions online in relation to this item of the business?

There are no questions at this time.

Thank you. Are there any questions from the floor in relation to this item? There being no questions, I will then move on to the next item. The next motion before the meeting proposes the adoption of a new constitution, which is a special resolution requiring 75% of votes cast. The motion is to consider and if thought fit pass the following resolution as a special resolution: that, with effect from the close of the meeting, the existing constitution of the company be repealed in its entirety in accordance with Section 136(2) of the Corporations Act 2001, and the company adopts the constitution contained in Annexure B as the constitution of the company in accordance with Section 136(1)(b) of the Corporations Act 2001. The proxy details are displayed on the screen. Kim, are there any questions from online attendees in relation to this item of the business?

There are no questions at this time.

Thank you. Any questions from the floor in relation to this item of the business? There being no questions, I will move on to the next item. The next motion before the meeting proposes the approval of long-term incentive plan. The motion is to consider and if thought fit pass the following resolution as an ordinary resolution. That the company's long-term incentive plan, and any issue of securities on the LTIP, including performance rights, be approved for the purposes of Listing Rule 7.2, Exception 13(b) and for all other purposes. The proxy details are displayed on the screen. Kim, are there any questions on -- from online attendees in relation to this item of business?

There are no questions at this time.

Thanks, Kim. Any questions from the floor? No questions. I will then move on to the next item. The next motion before the meeting proposes the approval of the variation to the grant of 8 million performance rights to John Shuttleworth, our CEO. This motion is to consider and if thought fit pass the following resolution as an ordinary resolution: that for the purposes of Listing Rule 10.14 and Sections 200B, 200C and 200E and Part 2E of the Corporations Act and for all other purposes, the vesting terms of the 8 million performance rights issued to CEO, Mr. John Shuttleworth, or his nominee, pursuant to the approval by shareholders at the AGM held on 1st of November 2021, be varied as set out in the Explanatory Statement. The proxy details are displayed on screen. Kim, are there any online questions in relation to this item of business?

Alan, there are no questions at this time.

Thank you, Kim. Any questions from the floor? No questions from the floor. We will move on to the next item. Ladies and gentlemen, please ensure you have cast your vote on all resolutions. For those of you in our Sydney venue, please ensure that you have placed your voting cards in the poll box held by Computershare. I'll now pause to allow time to cast finalized votes. [Voting]

Okay. Now -- voting is now closed. We will publish final results with the ASX and on our website. Thank you for your attendance today. That concludes the formal business of the meeting. And there being no further business, I now declare the meeting closed.