Centrepoint Alliance Limited (CAF) Earnings Call Transcript & Summary

Welcome to the Centrepoint Alliance Full Year Results Presentation. [Operator Instructions] For those that don't know me, my name is John Shuttleworth. I'm the CEO of the business. And with me is Brendon Glass, our Chief Financial Officer. There will be an opportunity to ask questions at the end of the call. If you do have a question please enter it into the Q&A panel and we will attempt to answer those that we can. If you ask a question we don't answer it, then I myself and Brendon will get back to you. So let's kick off. The opening comment I'll make is when I'm about to go through some slides, and we have reformatted the way we're presenting the data. And we're going to show you some detail on our 2026 performance, but we're going to set the context of how we've performed over the last few years, and we're also going to give you some guidance on what the business looks like going forward. I'd have to say, in August, it rolled around 5 years I've been in the business, and I've never felt so positive about the business. We've got really strong momentum within the business. I think you'll see the slides will demonstrate that. We've got some great emerging opportunities with Salaried Advice and some of the other initiatives. And then if we actually overlay the things we're doing with AI, which we'll touch on briefly and provide further updates, it's an incredibly exciting time to be in the business. So with that, let's kick off on. So the way I would summarize the results in the business. We have delivered another year of profitable another year of profitable growth, and we're positioned for continued expansion. The sort of thematics are when you see the detailed slides, we've had 5 years of execution have transformed the business. We've got a very strong licensee franchise. The Salaried Advice business is emerging as a material growth platform and also a material contributor to earnings. The acquisitions we've done have expanded earnings and really validate our company's capital allocation approach. Operating margins have continued to improve as the business scales. We've delivered strong shareholder returns that demonstrate value creation. And the team that we have in place has a historical record of executing in the business. And so there's credibility that it's the same team that will provide a pathway to higher future earnings. If you look at the results, normalized EBITDA, $12.3 million, up 16% on F '25, revenue of $43 million, profit before tax, $7.3 million, the final dividend of $0.0175. So that takes the total for the year at $0.03 and the cash at the end of June was $14.4 million. This chart is sort of useful because it sets some of that historical context. So I'll just run through some of the key metrics. So you can see the EBITDA growth we've had in -- from $3.4 million in 2021 up to the $12.3 million, which represents a 262% increase. Our net revenue growth has increased from $28 million to $43 million, which is 53%. The employees have gone from 90 to 119. So we've had a 32% increase in staff. But pleasingly, what we've managed to do is really lower the cost-to-income ratio that's been progressively dropping from 88% down to the current 71%. The profit before tax -- you can see the growth up 387% from where we were some time ago. The business has consistently paid dividends kind of year-on-year. And down the bottom, I've just labeled some of the M&A. So a pleasing set of results, but I think really important to shape the context of where we've been, and that will set some context for where we're heading. As an investor, if you were in the stock 5 years ago, you would have had 130% total shareholder return. Obviously, the addition of the share price accumulation, the dividends paid, we've put down below a table that shows how we've actually derived that. So strong shareholder returns and strong dividend yield within the business. Before we get on to some of the detailed slides, I really wanted to set some context about the industry we operate in and some of the tailwinds. So the need for advice has really never been greater. And just a reminder to everyone, the scale of the pool, we have $19.2 trillion in household wealth, and that's an ABS number. The superannuation system is $4.4 trillion and continuing to grow. There's $13 trillion in land and dwellings. And 2 key stats that I'll draw on later in the slide. We've got around 2.5 million Australians retiring this decade and another 2 million Australians over the age of 50 with more than $250,000 in super. Now why advice is growing is there's 5 thematics, which are really important. The first is there's a great shift from accumulation to retirement, which is driven by an aging population as the baby boomer cohort moves from building wealth to drawing income. We operate in a very complex system, and it's the interplay of superannuation and pension rules, retirement, tax and social security. A lot of people need advice to navigate that. The number of advisers has declined and been static in recent years. So you're seeing demand exceeding the number of advisers, so more demand, fewer advisers. So -- and I'll elaborate that on the following slide. Our superannuation system is the fourth largest pool in the world and projected to become the second largest by the early 2030s. And the other thing is Australians living longer. So when you start thinking about those thematics, you understand why advisers have a lot of work. What this chart is trying to sort of demonstrate is the advice gap. Now the horizontal black line is derived from if you take 15,000 advisers, and there's varying numbers about the number of clients advisers have reported and looking at our own data, it's around 100, some say 112. So I've got a range there of -- there's probably capacity of around 1.5 million to 1.7 million people that could receive advice. But if you overlay the number of people that are forecast to retire, the number of people who have large superannuation balances or getting to a significant superannuation balance that need help, there's a significant gap. Now what we expect will happen is the existing advisers in the absence of increasing the number of advisers, there's some technology and capabilities that are going to help them service more clients. Firstly, AI. Many advisers are using file note transcription, starting to use tools to generate records of advice and the whole administration process of delivering advice is becoming easier, which means they can spend more time in front of clients and obviously more -- manage more client book. So we're expecting to see some really positive tailwinds that will help advisers grow their business. If you look at our franchise, firstly, turning to our licensee services business. We're the #2 licensee in the market. What this chart shows in the dark blue bars that are the advisers that are under our license. The numbers in the brackets are the employed advisers that are with the business. So you can see we've gone from 315 because we tend to sell services based on the number of firms, and that's grown from 149 to around 200. So we've had, if you look cumulatively, around a 61% growth in the adviser numbers within our business. Now if you look at the relative health of the advisers within our franchise, it remains strong and a couple of different lenses to look at. Firstly, the fees that they charge per client are rising. So what we've done here is we've analyzed because we collect all the adviser fee revenue through a system called ComPay, we see exactly what is being charged. And in '23, the average fee across the cohort of licensed advisers was $2,750. That's increased to $3,624. There's many advisers on their forward book charging more, but this is an average fee across the book. And then obviously, based on the number of clients and the rising fees, we have seen the average revenue per adviser rise from $442,000 to $541,000. So strong underlying economics within the business. I mentioned earlier about the Salaried Advice business emerging as a growth platform and making a strong contribution. And I'll just walk you through and explain this chart and some of the underlying drivers. So if you look back in 2024, the blue line indicates the average revenue per adviser and the bars are looking at the total revenue across our Salaried Advice business, and we've got the '24 number where the average revenue per adviser was $338,000. This year, we're at $502,000. And based on the modeling, we will be close to $577 by FY '27; that is demonstrating some growth where we've gone from $5.75 million to just over $10 million and FY '27 see that at $13.28 million. Now what's driving this growth is firstly, we're seeing productivity benefits I just mentioned on the previous slide, which is file noting transcription ROA generation, reducing administration. We're also seeing the adoption of separately managed accounts where they are professionally managed investments being rebalanced by the investment manager, removing some of the investment administration burden from advisers, who we've been repricing the advice to reflect market-based fees and also focused on new client acquisitions. So those underlying thematics are helping us grow the business. And I think we expect to see really strong growth, and I'll show you on the later slides. So over the 3 years, we've seen a 2.3x increase in revenue. Now if we look forward beyond '27, which is known, we think a bit further forward, we think it's not difficult to see we could add another $150,000 in revenue per adviser that could generate another roughly $3.5 million incremental revenue at a 50% margin, and we've seen the margin improve. That would add another $1.7 million in contribution from this segment of the market. So we're very focused on Salaried Advice and can see that growing significantly. The other piece we're providing a bit more detail on the platform and the IconiQ platform, we are very modest in terms of where the baseline funds under administration are, but we see real potential for this to grow. It's taken us a bit longer to commercialize. There's been some headwinds that we've been facing, but we're sort of through that and I'll just walk you through the details. So the first comment would be if you actually look at the platform and the feedback we get, and we've got around 60 advisers using the platform today, they're incredibly happy with it. The advisers rated on par with incumbent platforms. We have very sharp pricing and pricing relative to other platforms is very competitive, both on the IDPS for investments or self-managed super funds and super when we're working with clients on setting up bespoke or custom SMAs, being a flexible business, we can stand these things up in 2 to 3 months with reputable asset consultants, and we're really focused on a red carpet service, which is resonating well. Now the proposition has been validated, and we've actually got real money transitioning. This is in not a loose pipeline, this is real dollars. So you've got the baseline FUA. We've got -- I mentioned there's around $1 billion that will transition. We've reflected risk-weighted number of $620 million that will transition. We'll get further retail penetration as advisers start to use the platform and obviously recruit new key accounts, and then there'll be new retail recruitment. So whilst the time frame is within a range of sort of '27 to '28, we actually see a pathway of getting to over $1 billion in funds under administration. And I'll just reiterate, this platform is really strong. If we can successfully commercialize it, it's a very strong offering relative to others in the market. Now what I also wanted to share was a bit of an extended pathway of the business of how does this business get to $20 million in earnings. And this is just to make sure it's clear, this is largely organic growth. So if you look at our track record historically that I presented on an earlier slide, the walk from $3.4 million to $12.3 million, we've had a 262% increase in 5 years. If you look on the right-hand side that we believe that we can get -- and this is sort of illustrative and I'll finish with some earnings guidance later, $15 million in FY '27. What are the drivers? Well, the licensee service area and the fees we generate from additional recruitment of advisers and some modest adjustments to fees will add $2.1 million. The Salaried Advice business will add another $1.5 million. We've got a modest contribution from platforms. And then we acquired some -- a couple of practices that in July when we announced it and completed, which will add another $650,000, and we've got some direct costs. So that gets us to the $15 million. Now if we look at '28 and '29, if we just look at our licensee services business, we think that can quite easily based on historical momentum and projections add $3 million and the Salaried Advice business could add $3.5 million. And then we've obviously got some direct costs associated. So without adding further acquisitions, we can see a clear pathway to getting to $20 million in earnings based on the existing modeling and track record we have and then also the lens we have going forward within the business. On acquisitions, I just wanted to give a bit of a recap on some of the deals we've done, and some of these were over a period. And you can see the timeline going a few years back, the ClearView business that was bought for $12 million. We then bought the Financial Advice Matters business, recently, the Brighter Super Book and more recently, Cairns and Pinnacle. The key message is that we have actually bought well and we've integrated well. We've done 5 transactions, all up $24 million in total consideration, $12.5 million in cash deployed. Each of the transactions has been earnings accretive. We've been quite selective about the transactions we've done, and we look forward to in the future announcing some more transactions because we think that, coupled with the organic growth can really generate some significant growth for the business. Finally, before I hand over to Brendon, just 2 slides and talking about AI. I don't almost feel that the amount of effort and work we're putting into this. But the key message firstly is we work to build the core foundations. So when AI first came out, I'd describe it as a lot of ad hoc experimentation, and we're moving to a governed in-house capability on an extensible architecture and infrastructure to support our road map. So what we've completed is, firstly, we set all the governance frameworks up. We've got all the policies. We've got firm-wide training. All staff have access to AI and the adoption is strong within the business. The capability building is really moving to that extensible architecture. We've recently hired a Head of AI engineering that has been appointed to work with the business to build in-house capabilities. So we're not going to just go out and buy external capabilities. We see this as a core capability and a distinctive competence we need to build within our business that we can really leverage and augment our traditional business with. The third area is really building this platform. So this extensible governed architecture. So it's all the infrastructure where we build it once and then can configure and deploy different agents and applications on top of that core platform. The way to think about some of the things that we're doing, and it's the AI road map, there's a couple of different themes. The first one is making advisers more efficient, and that's how we give them time back. So that's file noting and transcription, SOA generation, ROA, pre-vetting advice documents is getting the AI to review advice before it goes out, which is helpful to the adviser and reduces risk. There are tools on the market, but we're also building some of our own capability. Making ourselves more efficient. So there are things like we do file audits with the professional standards team to review it, how do we augment the existing professional standard team with AI to improve the breadth of coverage, the depth and make that business more efficient. If you do audit, then you can pre-vet documents. We're also doing lots of work because we are a service business. We get a lot of service queries about AI augmentation through service bots for the different queries we get. And then down the track, once we've got all this infrastructure, we'll look at can we build new services and products and basically turn our platform into new propositions sort of broadly under the thematic digital advice. The way to think about this build is it all requires foundational infrastructure. So the knowledge corpuses we build that the AI draws on, the data and the richness of the data we have in the business, having the appropriate guardrails to make sure that the AI doesn't hallucinate the management of access and obviously, the robust infrastructure that we build. So that's a bit of a signal on what we're doing. I'll now hand over to Brendon, who will take you through some of the detailed financial slides.

Thank you, John. Looking at the financial results summary. Our gross revenue was up $39.6 million and that's underpinned by the growth in our advisers within our licensee network as well as our in-house advisers, servicing the increased demand from our clients. Our net revenue was up $2.1 million on PCP, 5x faster growth than our expense growth of $0.4 million. Our normalized EBITDA of $12.3 million was up 16%, and that's driven by organic licensee fee growth, increased contributions from our Salaried Advice business and continued operating leverage. Our net profit before tax of $7.3 million. Once you strip out the $1.3 million in contingent liability release for the financial advice acquisition in 2025, was up 22%, and our NPAT was up 25% to $6.4 million. Now looking at the normalized EBIT earnings walk for the last 5 years, you can see that it's grown by nearly 3.5x. And that's underpinned by 2 high-quality businesses. As John has mentioned, we've seen licensee fees contributing $15.2 million over that 5-year period and Salaried Advice emerging in particular in the last 3 years since Financial Advice Matters acquisition, contributing $9.2 million. Now further my comments on the revenue growth contribution to the EBITDA improvements. I just want to take you through how the business has managed offsetting headwinds as well as how we've managed the cost base to deliver that earnings growth. So you can see in the orange bar that in the last 5 years, there's been a reduction in Investment Solutions revenue of $6.7 million. That's a result of the cessation of platform rebates that were discontinued, and they are no longer a prevalent issue in the business. You can see that the cost base has been managed very effectively compared to the revenue growth of $24.4 million. Employment costs are up just $5.6 million, including the acquisition of FAM and the Brighter Super book and other direct costs are up just $2.4 million, driving that growth to $12.3 million. From a balance sheet perspective, I'll take you through the cash and cash equivalents in the following slide. The intangibles and goodwill has decreased by $1.8 million, and that's due to the $2 million annual amortization of our client book intangibles. From a loan movement perspective, the loan payables increased by $1.4 million. That's due to the $3 million additional drawdown in June 2026 for the recently announced Astute acquisitions and $1.6 million in principal repayments for the year. From a timing perspective, our trade and other payables decreased by $1.4 million and our NTA increased by $2.5 million to $5 million. Now taking a look at the cash flow in some detail. The start position was $13.7 million. We delivered really strong cash from operations of $10.6 million. There was one-off costs of $0.6 million for the year. Now that was primarily due to the redundancy costs for the sale of the lending business to Astute in April as well as some advisory costs from our M&A projects. From a timing perspective, our working capital outflow was $0.9 million. We had income tax cash payments of $2.2 million for the year. We derived interest income of $0.5 million. I've commented on the net bank borrowing impacts. From an operational risk financial requirement perspective, there was a $0.4 million loan reserve outflow for our investments platform business, which is emerging, as John mentioned. In our other bucket, there was $1.6 million in outflows, and that is principally the lease liability payments of circa $1 million, and we returned $6.1 million in dividends to our shareholders. Now looking at the financial snapshot. The P&L management category shows some really strong trends over the last 3 years. Our employment cost to net revenue has decreased continuously from 52.6% to 51.3%. You can see the continued positive operating jaws of the business. Our normalized EBIT margin has increased from 25.2% to 28.6%. Our recurring revenue has gone from 84% to 88%, showcasing that highly annuitized sticky revenue base from licensee services and Salaried Advice. Our licensee contribution margin has continued to increase as well, 43.9%, up to 47.9%. And you can see the emerging impact of the Salaried Advice revenue, $6.2 million to $10.3 million, noting there's a $200,000 increase on the slide that John took you through because there's a $200,000 amount that's not attributable to the advisers themselves. From a cash profit after tax perspective, again, strong growth, $7 million in F '24, rising to $8.5 million in 2026. From a shareholders' return perspective, you can see that strong dividend yield, 8.6% in 2026. From a basic earnings per share perspective, growth from $0.0259 to $0.0312 and our annualized return on equity remains above 20% at 21%. So over to you, John, for the outlook.

Yes. Look, the final slide before we just see if there's any questions online is that the guidance we're putting out for normalized EBITDA is $14.5 million to $15.5 million, putting a range in there. I think what we've hopefully demonstrated is there's strong momentum in the business, some really good initiatives. And as I said at the outset, we're feeling really positive about where the business is at. You're really looking at a business that has got a team that's delivered over the last 5 years. If we continue to execute just organically, that will give us growth. And then Brendon and myself are very focused on additional acquisition opportunities that will hopefully put some growth on top of that. So thanks for your time and listening. We might just see if there's any questions on the call. So Sona and I think can you just let us know if we've got any questions in the Q&A chat.

Yes, John. So EBITDA from funds management seems to be going backwards. When do you expect this division to break even?