ANNUAL
REPORT
2018
CONTENTS
Overview
01 Highlights
Performance
02 Operating and Financial Review
06 Directors’ Report (Including Remuneration Report)
15 Lead Auditor’s Independence Declaration
Financial Statements
16 Statement of Profit or Loss
17 Statement of Comprehensive Income
18 Statement of Financial Position
19 Statement of Changes in Equity
20 Statement of Cash Flows
21 Notes to the Financial Statements
59 Directors’ Declaration
60 Independent Auditor’s Report
Other Information
65 Shareholder Information
67 Directory
Bell Financial Group – ABN 59 083 194 763
HIGHLIGHTS
Bell Financial Group Ltd
is an Australian-based
provider of stockbroking,
investment and financial
advisory services to
private, institutional and
corporate clients. Bell
Financial Group has
over 650 employees,
operates across 16
offices in Australia and
has offices in New York,
London, Hong Kong and
Kuala Lumpur.
Full Year Dividend
7.0 cents
11.8% Gross dividend yield
Earnings per share
8.5 cents
Increased by 9%
Revenue
$220 million
Increased by 7%
Net Profit After Tax
$24.7 million
Increased by 20%
Funds Under Advice
$46.8 billion
Decreased by 1%
01
Annual Report 2018 – Bell Financial Group
CAPITALFXCOMMODITIES OPERATING AND FINANCIAL REVIEW
2018 was a significant year for Bell Financial Group.
In addition to a strong operating performance we moved
to 100% ownership of Third Party Platform, opened a
New York office and launched a new investment service,
the “Bell Potter Guided Portfolio Service”.
Group revenue increased by 7% to
$220 million producing a net profit after
tax of $24.7 million, a 20% increase on
the previous year (2017: $20.6 million).
The Board declared a final fully franked
dividend of 4.25 cents per share, taking
the full year dividend to 7.0 cents per
share, fully franked.
Based on our year end closing price
of 85 cents per share this represents
a grossed up dividend yield of 11.8%.
Third Party Platform
Acquisition
The acquisition of Third Party Platform
(TPP), which took our ownership
from 56.63% to 100%, was completed
on 3rd July 2018. The transaction,
executed via a renounceable rights
issue, received strong support with
99.7% of eligible shareholders voting
in favour of the acquisition and 95.4%
of eligible shareholders taking up
their entitlements.
This is an important transaction for
the Group. Investment in technology
and platforms is a core strategy which
brings value through diversification
and growth of non-traditional revenue
streams and provides us with a
significant competitive edge.
The TPP platform through its brand
names, Bell Direct, Desktop Broker
and Bell Potter Online, plus its white
label partners Macquarie Online and
HSBC Online provides access to the
only fully integrated open architecture
platform in Australia. It has a high
degree of operating leverage and
we anticipate will be an important
contributor to the Group.
In addition we expect to achieve
significant regulatory capital and
operating synergies as TPP’s platform
and technologies are rolled out and
integrated across the Group.
Bell Potter Guided Portfolio
Service – (www.bellpotter.
com.au/gps)
At the end of the year we launched a
new investment service, the Bell Potter
Guided Portfolio Service (GPS). GPS
is an efficient, cost effective way
for clients to invest in a number of
professionally designed model portfolios
while retaining ownership and control
of the underlying assets.
We anticipate this product will have
particular appeal to clients of Bell Direct
and Desktop Broker and to certain private
clients of Bell Potter Securities.
Bell Potter New York Office
Our US licence application was approved
in July and the Bell Potter New York
office is now fully operational. We are
confident New York will be a positive
addition to the Group and will provide
a new dimension to our international
institutional capabilities.
In addition to Australia we now have
a presence in Hong Kong, the UK and
the US.
02
Annual Report 2018 – Bell Financial Group
Technology
Technology is the key to our future
growth. Our intellectual property (IP)
provides efficiencies across all areas
of our business. It has applications
for marketing, business development,
compliance, trade execution, clearing
and settlement, customer service,
price discovery, and adviser efficiency
and education.
It is already a crucial element in our
staff recruitment programme.
We have a dedicated technology team
of 69 across the Group. In addition to
IT infrastructure and support staff, we
employ professional developers and
programmers who not only maintain
and enhance our existing platforms,
but also have a number of projects
in the development stage.
IQ – our price discovery and trade
execution platform is being progressively
rolled out across the network. We believe
we will have the opportunity to market IQ
to third party users in the future.
FUSION – our unique client relationship
management (CRM) and compliance
desktop application, purpose built for
Adviser productivity.
TPP – our fully integrated open
architecture execution and
clearing platform.
We also provide product and platform
services such as cash, margin lending,
superannuation, portfolio administration,
fixed income and managed funds which
utilise third party technologies.
Aggregate revenues across these
various products and services in 2018
was $52.1 million representing 24%
of Group gross revenue.
Platform, Product and Service
Fee Income ($Am) 2014–2018
Equity Capital Markets Revenue
($Am) 2014–2018
60
50
40
30
20
10
0
52.1
18.3
13.0
17.5
47.8
16.2
12.1
16.1
41.7
14.4
10.7
13.6
3.1
2016
3.4
2017
3.3
2018
35.0
13.5
7.0
11.4
3.1
2014
37.2
13.4
8.5
12.1
3.1
2015
Other
PAS
Bell Direct
Finance Income (inc. Bell Potter Capital)
70
60
50
40
30
20
10
0
66.6
54.7
46.3
41.9
31.1
2014
2015
2016
2017
2018
Revenue Growth
The Group provides a range of products
and services to customers across our
network. These produce a diversified
revenue stream, leverage to the market,
growth opportunities, scalability and
most importantly reinforce the value
and sustainability of our business model.
Revenue ($Am) 2014–2018
250
200
150
100
50
0
220.0
205.8
175.6
184.3
153.2
2014
2015
2016
2017
2018
2018 was another consecutive year of
consistent growth with gross revenues
up 7% on the previous year. The increase
was broadly based with a strong
contribution from Equity Capital Markets
(ECM) division.
03
Annual Report 2018 – Bell Financial Group
Over the course of the year our ECM
division successfully completed 120
transactions raising $1.7 billion in new
equity capital and generating nearly
$67 million in fee income.
This was the divisions strongest
performance to date and underpins
our belief that Bell Potter Securities
is the Equity Capital Markets leader
in the Australian equities small and
mid-cap sector.
Portfolio Administration Service
Revenue ($Am) 2014–2018
20
16
12
8
4
0
17.5
16.1
13.6
11.4
12.1
2014
2015
2016
2017
2018
The Portfolio Administration Service
(PAS) produced its fifth consecutive year
of revenue growth with an increase of
9% in 2018. We believe this is a high
quality service which now has 2,350
clients with $3.3 billion in assets under
administration across our Portfolio
Administration, Super Solutions and
Super Command products.
OPERATING AND FINANCIAL REVIEW continued
Bell Potter Capital ($Am) 2014–2018
Third Party Platform ($Am) 2014–2018
12
10
8
6
4
2
0
10.5
9.6
7.8
6.6
6.5
2.6
2.1
3.2
1.4
1.4
2014
2015
2016
2017
2018
16
12
8
4
0
15.2
14.2
12.4
10.1
8.6
0.4
2014
1.2
2015
2.0
2.7
2.3
2016
2017
2018
Bell Potter Capital revenue grew by 9% in 2018 to $10.5 million.
Third Party Platform (TPP) revenue grew by 7% to $15.2 million.
While average loan and cash balances were generally higher
during the year, the extremely volatile market conditions
experienced in the 4th quarter resulted in only modest loan book
growth of 4% to $296 million. The cash book was actually down
by 13% to $276 million reflecting repayment of margin loans.
There were additional development costs incurred over the
course of the year with the rollout of new products such as GPS
and IQ plus one-off set up costs relating to new Desktop Broker
clients involving Chi-X, Bloomberg and Omgeo connectivity
resulting in a small net profit decline for the year.
Profit before tax grew by 22% to $3.2 million as a result of the
higher average cash and loan balances throughout the course
of the year and steady margins.
The business now has 130,000 active clients with sponsored
holdings of $16.5 billion and client cash of $115 million.
TPP operates out of three offices in Sydney, Perth and Kuala
Lumpur and will play an increasingly important role in
consolidation of systems and operations across the entire Group.
Funds Under Advice ($Am) 2014–2018
Net Profit/(Loss) After Tax ($Am) 2014–2018
50
40
30
20
10
0
47.2
46.8
38.8
33.1
30.1
2014
2015
2016
2017
2018
25
20
15
10
5
0
24.7
20.6
15.9
16.4
5.8
2014
2015
2016
2017
2018
Funds under Advice at the end of the year also reflected the
sharp 4th Quarter market sell off and at $46.8 billion
were slightly lower than $47.2 billion
at the end of 2017. $5.2 billion of this was held in various fee
for service products, marginally ahead of the
$5 billion in 2017.
• Net profit after tax: $24.7 million
• Earnings per share: 8.5 cents
• Final dividend: 4.25 cents per share (fully franked)
• Full year dividend: 7.0 cents per share (fully franked)
• Gross dividend yield1: 11.8%
• PE multiple1: 11 times
1. Based on 31 December 2018 share price.
04
Annual Report 2018 – Bell Financial Group
Outlook
There are presently too many variables
in play to make an accurate assessment
of likely market outcomes for 2019.
Globally, uncertainty surrounds Brexit,
the European economy and the ongoing
trade war between China and the US.
Domestically, we have an uncertain
interest rate environment, a continuing
downturn in the residential property
market and the prospect of upcoming
State and Federal elections. We expect
market volatility to continue to be a
factor in the short to medium term.
What we do know is our business and
business model are both robust which
has enabled us to successfully navigate
many different economic cycles over the
last four decades. Additionally, we have
a solid pipeline of work and we remain
committed to investing in and growing
our business.
Colin Bell
Executive Director
Alastair Provan
Managing Director
05
Annual Report 2018 – Bell Financial Group
DIRECTORS’ REPORT
For the year ended 31 December 2018
The Directors of Bell Financial Group Limited (Bell Financial or the Company) present their report, together with the financial
report, on the consolidated entity (Group) consisting of Bell Financial and its controlled entities for the financial year ended
31 December 2018.
Board of Directors
The names and details of the Directors of the Company holding office during the financial year and as at the date of this report
are listed below. Directors were in office for the entire period, unless otherwise stated.
Colin Bell
BEcon (Hons)
Alastair Provan
Craig Coleman
BComm
Mr Bell was the Executive Chairman of Bell Financial during the financial year with responsibility
for the business development of Bell Financial and all associated businesses within the Group.
Mr Bell founded Bell Commodities in 1970 after working with the International Bank for
Reconstruction and Development in Washington DC, USA. Mr Bell temporarily stepped down
as Chairman on 24 January 2019, however remains on the Board as an Executive Director.
Mr Provan is the Managing Director of Bell Financial and is responsible for the day-to-day
management of all businesses within the Group. Since 24 January 2019, Mr Provan has also
held the role of Acting Chairman. Mr Provan joined Bell Commodities in 1983 and held a number
of dealing and management roles prior to becoming Managing Director in 1989. Mr Provan is a
member of the Remuneration Committee.
Mr Coleman was appointed as a Director in July 2007 and has been a Non-Executive Director since
October 2007. He is a member of the Group Risk and Audit Committee and the Remuneration
Committee. Mr Coleman is Executive Chairman of private and public equities fund manager,
Viburnum Funds Pty Ltd. Previously, he was Managing Director and a Non-Executive Director
of Home Building Society Limited. Prior to joining Home Building Society, Mr Coleman held a
number of senior executive positions and directorships with ANZ, including Managing Director –
Banking Products, Managing Director – Wealth Management and Non-Executive Director of Etrade
Australia Limited.
Other listed companies – past three years
Chairman, Pacific Star Network Ltd (November 2017–present)
Chairman, Universal Biosensors Inc (June 2016–present)
Chairman, Rubik Financial Limited (December 2006–May 2017)
Non-Executive Director, Pulse Health Limited (January 2010–May 2017)
Non-Executive Director, Keybridge Capital Limited (March 2014–May 2016)
Non-Executive Director, Amcom Telecommunications Limited (October 2008–July 2015)
Graham Cubbin
BEcon (Hons), FAICD
Mr Cubbin was appointed as a Non-Executive Director in September 2007 and is an independent
Director. He is the Chairman of the Group Risk and Audit Committee and the Remuneration
Committee. Mr Cubbin was a senior executive with Consolidated Press Holdings Limited (CPH)
from 1990 until September 2005, including Chief Financial Officer for 13 years. Prior to joining
CPH, he held senior finance positions with a number of major companies including Capita Financial
Group and Ford Motor Company. Mr Cubbin has over 20 years’ experience as a Director and Audit
Committee member of public companies in Australia and the US. He is a Non-Executive Director
of Teys Australia Pty Ltd.
Other listed companies – past three years
Chairman, McPherson’s Limited (September 2010–present)
Non-Executive Director, WPP AUNZ Limited (May 2008–present)
Non-Executive Director, White Energy Company Limited (February 2010–present)
Non-Executive Director, Challenger Limited (January 2004–October 2018)
06
Annual Report 2018 – Bell Financial Group
Brian Wilson AO
MComm (Hons), Hon DUniv
Mr Wilson was appointed as a Non-Executive Director in October 2009 and is an independent
Director. He is a Senior Advisor to The Carlyle Group and a member of the Payments System Board
of the Reserve Bank of Australia. Mr Wilson is the former Chairman of the Foreign Investment
Review Board and a former Chancellor of University of Technology Sydney. He was a member
of the Commonwealth Government Review of Australia’s Superannuation System and a member
of the ATO Superannuation Reform Steering Committee. Mr Wilson retired in 2009 as a Managing
Director of the global investment bank Lazard, after co-founding the firm in Australia in 2004
and prior to that was a Vice-Chairman of Citigroup Australia and its predecessor companies.
Brenda Shanahan
BComm, FAICD
Ms Shanahan was appointed as a Non-Executive Director in June 2012 and ceased on
20 November 2018. Ms Shanahan was an independent Director and a member of the Group Risk and
Audit Committee and the Remuneration Committee. She has served in senior executive and board
roles in Australia and overseas, primarily in the finance and stockbroking industries, during a career
spanning more than 30 years. Ms Shanahan is the Chair of the Aikenhead Centre for Medical
Discovery, a Director of the Kimberley Foundation Australia and a Non-Executive Director of DMP
Asset Management Ltd. Ms Shanahan has previously been an Executive Director of JM Financial
Group Limited, May Mellor, Equitlink Limited and Mercer.
Other listed companies – past three years
Non-Executive Director, Clinuvel Pharmaceuticals Limited (February 2007–present)
Non-Executive Director, Phoslock Environmental Technologies Limited (September 2017–present)
Non-Executive Director, Challenger Limited (April 2011–October 2017)
07
Annual Report 2018 – Bell Financial Group
DIRECTORS’ REPORT continued
For the year ended 31 December 2018
Principal activities
Bell Financial is an Australian-based provider of stockbroking, investment and financial advisory services to private, institutional
and corporate clients. The Group has over 650 employees, operates across 16 offices in Australia and has offices in New York,
London, Hong Kong and Kuala Lumpur.
Review and results of operations
Information on the operations and financial position of the Group is set out in our Operating and Financial Review on pages 2 to 5.
Dividends
On 20 February 2019, the Directors resolved to pay a fully franked final dividend of 4.25 cents per share.
Dividends paid to shareholders during the year ended 31 December 2018 were as follows:
Dividend
Final 2017 ordinary
Interim 2018 ordinary
Per share
5.50 cents
2.75 cents
Total
$’000
14,570
8,742
Fully
Franked
Yes
Yes
Date of
payment
21 March 2018
29 August 2018
Significant changes in the state of affairs
There were no significant changes in Bell Financial’s state of affairs or the nature of its principal activities during the financial
year ended 31 December 2018.
Business strategies, prospects and likely developments
The Operating and Financial Review sets out key information on Bell Financial’s operations and financial position, and provides
an overview of its business strategies and prospects for future financial years. Details likely to result in unreasonable prejudice to
the Group (e.g. information that is commercially sensitive, confidential or which could give a third party a commercial advantage)
have not been included.
Events after the end of the financial year
There has not arisen in the interval between the end of the financial year and the date of this report, any matter or circumstance
that has significantly affected, or may significantly affect, in the opinion of the Directors of Bell Financial:
(a) the Group’s operations in future financial years, or
(b) the results of those operations in future financial years, or
(c) the Group’s state of affairs in future financial years.
Directors’ meetings
The number of Board and Committee meetings held during the year that each Director was eligible to attend, and the number
of meetings attended by each Director were:
Director
Colin Bell
Alastair Provan
Craig Coleman
Graham Cubbin
Brian Wilson AO
Brenda Shanahan1
Board
Group Risk and
Audit Committee
Remuneration
Committee
Independent Directors
Committee2
Eligible
to attend
5
5
5
5
5
5
Attended
2
5
5
5
5
5
Eligible
to attend
–
–
4
4
–
3
Attended
–
–
4
4
–
3
Eligible
to attend
–
1
1
1
–
1
Attended
–
–
1
1
–
1
Eligible
to attend
–
–
–
5
5
5
Attended
–
–
–
5
5
4
1. Ceased on 20 November 2018.
2. For the purposes of the acquisition of 43.37% of Third Party Platform Ltd and the underwritten entitlement offer.
08
Annual Report 2018 – Bell Financial Group
Directors’ shareholdings in Bell Financial Group
As at the date of this report, the relevant interests of each Director in BFG ordinary shares, as notified to the ASX in accordance
with the Corporations Act, are set out below. No Directors held options over BFG shares during the year ended 31 December 2018.
Director
Colin Bell
Alastair Provan
Craig Coleman
Graham Cubbin
Brian Wilson AO
Fully paid
ordinary shares
4,324,361
4,699,070
2,126,740
216,000
1,200,000
Deemed relevant
interest
146,230,3501
146,230,3501
–
–
–
Total
150,554,711
150,929,420
2,126,740
216,000
1,200,000
1. Bell Group Holdings Pty Limited (BGH) holds 143,998,350 BFG ordinary shares. BGH’s wholly-owned subsidiary, Bell Securities Pty Limited (BSPL) holds
2,232,000 BFG ordinary shares. Colin Bell and Alastair Provan each hold more than 20% of BGH and therefore under the Corporations Act they are each
deemed to have a relevant interest in the 146,230,350 BFG ordinary shares held by BGH and BSPL.
Company Secretary
Cindy-Jane Lee, BEc, LLB, GAICD was appointed as Company Secretary on 10 January 2014 and is also the Group’s General
Counsel. Before joining Bell Financial, Ms Lee held the position of Regional Legal Counsel, South Asia with Mercer. Ms Lee has
over 18 years’ experience in corporate and financial services law working in law firms and multinational companies in Australia,
London and Singapore. Ms Lee holds a Bachelor of Economics and a Bachelor of Laws from Monash University.
Corporate Governance
Bell Financial recognises the importance of good corporate governance. As required under the ASX listing rules, Bell Financial
has a Corporate Governance Statement which has been lodged with the ASX, disclosing the extent to which it has followed the
recommendations set by the ASX Corporate Governance Council during the reporting period. A copy of our Corporate Governance
Statement is located at the Corporate Governance section of our website: www.bellfg.com.au/corporategovernance. Copies
of Bell Financial’s charters (Board Charter, Group Risk and Audit Committee Charter, and Remuneration Committee Charter)
and policies (Code of Conduct, Diversity Policy, Disclosure and Communication Policy, Risk Management Policy Summary, and
Trading Policy) are also located here.
Directors’ and officers’ indemnity and insurance
Bell Financial has agreed to indemnify the Directors against all liabilities to another person (other than Bell Financial or related
entity) that may arise from their position as officers of Bell Financial or its controlled entities, except where the liability arises
out of conduct including a lack of good faith. Except for the above, neither Bell Financial nor any of its controlled entities has
indemnified any person who is or has been an officer or auditor of Bell Financial or its controlled entities. Since the end of
the previous financial year Bell Financial has paid a premium for an insurance policy for the benefit of the Directors, officers,
company secretaries and senior executives. The insurance policy prohibits disclosure of the premium payable under the policy
and the nature of the liability covered.
Environmental regulation
The operations of the Group are not subject to any particular and significant environmental regulation under a law of the
Commonwealth or of a State or Territory.
Non-audit services
During the year, Bell Financial’s auditor, KPMG, performed certain other services in addition to its statutory auditor duties.
Details of the amounts paid to KPMG for audit and non-audit services during the year are set out in Note 39 of the Financial
Statements.
The Directors are satisfied, based on advice provided by the Group Risk and Audit Committee, that the provision of these non-
audit services during the year by the auditor is compatible with, and does not compromise, the general standard of independence
for auditors imposed by the Corporations Act 2001, for the following reasons:
• services provided during the year are not considered to be materially in conflict with the role of the auditor; and
• the Directors are unaware of any matter relating to the provision of non-audit services which would impair the impartial
and objective judgement of the auditor.
A copy of the Lead Auditor’s Independence Declaration is set out on page 15.
09
Annual Report 2018 – Bell Financial Group
DIRECTORS’ REPORT continued
For the year ended 31 December 2018
Remuneration Report (audited)
This Remuneration Report describes Bell Financial’s ‘Key Management Personnel’ (KMP) remuneration arrangements as required
by the Corporations Act.
1. KMP
Bell Financial’s KMP during the reporting period were:
Directors
Colin Bell
Alastair Provan
Craig Coleman
Executive Chairman
Managing Director
Non-Executive Director
Graham Cubbin
Non-Executive Director
Brian Wilson AO
Non-Executive Director
Brenda Shanahan
Non-Executive Director (ceased on 20 November 2018)
Senior Executives
Lewis Bell
Head of Compliance
Andrew Bell
Executive Director – Bell Potter Securities Ltd
Dean Davenport
Chief Financial Officer
Rowan Fell
Executive Director – Bell Potter Capital Ltd
In this report, “Executive KMP” refers to the above persons excluding Non-Executive Directors.
2. Overview of remuneration policy and framework
Bell Financial remunerates Executive KMP and other executives, management and advisers by one or more of fixed salary,
commission entitlements and other short-term and long-term incentives. Non-Executive Directors receive a fixed fee and the
superannuation guarantee rate only for their role on the Board. Where remuneration is linked to performance, net profit/(loss)
after tax and Earnings per Share are key performance measures, in addition to individual objectives. In considering the Group’s
performance and benefits for shareholder wealth, the Remuneration Committee and the Board have regard to the following
financial indicators in respect of the current financial year and previous financial years.
Net profit/(loss) after tax $’000
Share price at year end $
Earnings per Share (cents)
Dividends paid $’000
2014
$5,952
$0.43
2.3
$3,852
2015
$16,399
$0.575
6.2
$8,948
2016
$16,905
$0.725
6.2
$12,502
2017
$21,443
$0.75
7.8
$15,196
2018
$25,070
$0.85
8.5
$23,312
The Company has established two equity-based plans to assist in the attraction, retention and motivation of Executive KMP,
management and employees of the Company, the Long-Term Incentive Plan (LTIP) and the Employee Share Acquisition (Tax Exempt)
Plan. Each plan contains customary and standard terms for dealing with the administration of an employee share plan, and the
termination and suspension of the plan. Participants in the plans must not enter into a transaction or arrangement or otherwise
deal in financial products which operate to limit the economic risk of the unvested Bell Financial securities issued under the plans.
3. Fixed compensation
Fixed compensation consists of base compensation as well as employer contributions to superannuation funds. Compensation
levels are reviewed annually through a process that considers individual performance and that of the overall Group.
4. Commission
Commission entitlements are determined by the Board from time to time and aim to align the remuneration of Executive KMP
and advisers with the Company’s performance. Certain executives and advisers are paid a commission based on revenue generated
by the individual during the year. This creates a strong incentive for key executives and advisers to maximise the Company’s
revenue and performance.
10
Annual Report 2018 – Bell Financial Group
5. Performance linked compensation
Performance linked compensation includes both short-term and long-term incentives and is designed to reward Executive KMP
for meeting or exceeding their financial and individual objectives. The short-term incentive is an ‘at risk’ bonus provided in the
form of cash, while the long-term incentive is provided as options or performance rights over ordinary shares of the Company.
6. Short-term incentive bonus
The Company may pay Executive KMP and other executives a short-term incentive (STI) annually. The Company’s Remuneration
Committee is responsible for determining who is eligible to participate in STI arrangements, as well as the structure of
those arrangements.
There are two types of STI arrangements, being:
• the STI payable to executives who are not remunerated by reference to commission, which is a discretionary annual cash bonus
determined based on the Company’s financial performance during the year, key performance indicators, industry competitive
measures and individual performance over the period; and
• the STI payable to the Executive Chairman and the Managing Director, which is a discretionary annual cash bonus, up to three
times annual salary, determined based on the Company’s financial performance during the year, key performance indicators
and individual performance over the period.
These STI arrangements aim to ensure that executive remuneration is aligned with the Company’s financial performance and growth.
7. Long-term incentive plan (LTIP)
The LTIP is part of the Company’s remuneration strategy and is designed to align the interests of the Company’s Executive
KMP, other executives and advisers with the interests of shareholders to assist the Company in the attraction, motivation and
retention of Executive KMP, other executives and advisers. In particular, the LTIP is designed to provide relevant Executive
KMP, other executives and advisers with an incentive for future performance, with conditions for the vesting and exercise of
the options or performance rights under the LTIP, therefore encouraging them to remain with the Company and contribute
to its future performance.
Eligible persons participating may be granted options or performance rights on the terms and conditions in the LTIP rules and as
determined by the Board from time to time. An option or performance right is a right, subject to the satisfaction of the applicable
vesting conditions and exercise conditions, to subscribe for a share in the Company.
If persons become entitled to participate in the LTIP and their participation requires approval under Chapter 10 of the ASX listing
rules, they will not participate in the LTIP until that shareholder approval is received.
No options or performance rights were granted under the LTIP in 2018.
8. Service agreements
8.1 Executive Chairman and Managing Director
Bell Financial entered into service agreements with its Executive Chairman, Colin Bell, and its Managing Director, Alastair Provan,
effective from listing in December 2007. These agreements set out the terms of each appointment, including responsibilities,
duties, rights and remuneration.
A summary of the remuneration packages including benefits under the short-term and long-term incentive plans for each
of Mr Bell and Mr Provan is set out in the KMP remuneration table in Section 8.4 below.
Bell Financial may terminate either service agreement on 12 months’ notice, or immediately for cause. If either agreement is
terminated on 12 months’ notice, Bell Financial has agreed to vest early any unvested options under the LTIP and to allow their
early exercise. Mr Bell and Mr Provan may terminate their respective service agreements on six months’ notice. Mr Bell and
Mr Provan have entered into non-competition covenants with Bell Financial which operate for six months from termination of
their respective service agreements.
8.2 Senior Executives
All key executives are permanent employees of Bell Financial. Each executive has an employment contract with no fixed end date.
Any executive may resign from their position by giving four weeks’ written notice. The Company may terminate an employment
contract by providing written notice and making payment in lieu of notice in accordance with the Company’s termination policies.
The Company may terminate an employment contract at any time for serious misconduct.
11
Annual Report 2018 – Bell Financial Group
DIRECTORS’ REPORT continued
For the year ended 31 December 2018
Remuneration Report (audited) (continued)
8. Service agreements (continued)
8.3 Non-Executive Directors
On appointment to the Board, each Non-Executive Director was provided with a letter of appointment setting out the terms of
their appointment, including responsibilities, duties, rights and remuneration, relevant to the office of director. Non-Executive
Directors do not receive bonuses, incentive payments or equity-based pay. They receive a fixed annual fee inclusive of compulsory
superannuation contributions. Their remuneration for the reporting period was:
Name
Craig Coleman
Brian Wilson AO
Graham Cubbin
Brenda Shanahan1
1. Ceased on 20 November 2018
8.4 KMP remuneration
Details of the remuneration of each KMP are tabled below.
Directors’ fees
$
91,324
91,324
91,324
83,714
Superannuation
$
8,676
8,676
8,676
7,953
Total
$
100,000
100,000
100,000
91,667
Directors
Executive Directors
Colin Bell, Executive Chairman
Alastair Provan, Managing Director
Non-Executive Directors
Craig Coleman
Graham Cubbin
Brian Wilson AO
Brenda Shanahan2
Total compensation: Directors (consolidated)
Senior Executives
Lewis Bell, Head of Compliance
Andrew Bell, Executive Director of Bell Potter Securities
Dean Davenport, Chief Financial Officer 3
Rowan Fell, Director – Investment Services3
Total compensation: Executives (consolidated)
Salary
& fees
$
599,710
600,168
523,985
524,443
91,324
166,324
91,324
91,324
91,324
91,324
83,714
91,324
1,481,381
1,564,907
369,212
369,670
498,531
516,189
300,999
318,053
272,001
264,463
1,440,743
1,468,375
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
Short-term
STI cash
bonus
$
Non-monetary
benefits
$
250,000
250,000
250,000
250,000
–
–
–
–
–
500,000
500,000
–
–
–
–
200,000
200,000
300,000
200,000
500,000
400,000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Total
$
849,710
850,168
773,985
774,443
91,324
166,324
91,324
91,324
91,324
91,324
83,714
91,324
1,981,381
2,064,907
369,212
369,670
498,531
516,189
500,999
518,053
572,001
464,463
1,940,743
1,868,375
1. Voluntary super contributions above the minimum legislative requirements are classified as post-employment benefits.
2. Ceased on 20 November 2018.
3. For Executive KMP, the short-term incentive bonus is for performance during the financial year ended 31 December 2018 using the criteria set out in
Section 6 of the Remuneration Report.
12
Annual Report 2018 – Bell Financial Group
Post-employment
Superannuation
benefits1
$
Share-based
payments
Other
long term
Termination
Total amortisation
benefits
value of LTI options
Proportion of
remuneration
performance
related %
20,290
19,832
20,290
19,832
8,676
8,676
8,676
8,676
8,676
8,676
7,953
8,676
74,561
74,368
20,290
19,832
11,976
25,000
22,078
19,832
25,000
30,000
79,344
94,664
$
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
26,923
12,115
32,999
35,537
59,922
47,652
$
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
$
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Total
$
870,000
870,000
794,275
794,275
100,000
175,000
100,000
100,000
100,000
100,000
91,667
100,000
2,055,942
2,139,275
389,502
389,502
510,507
541,189
550,000
550,000
630,000
530,000
2,080,009
2,010,691
29%
29%
31%
31%
0%
0%
0%
0%
0%
0%
0%
0%
24%
23%
0%
0%
100%
100%
36%
36%
48%
38%
49%
47%
Remuneration Report (audited) (continued)
8. Service agreements (continued)
8.3 Non-Executive Directors
On appointment to the Board, each Non-Executive Director was provided with a letter of appointment setting out the terms of
their appointment, including responsibilities, duties, rights and remuneration, relevant to the office of director. Non-Executive
Directors do not receive bonuses, incentive payments or equity-based pay. They receive a fixed annual fee inclusive of compulsory
superannuation contributions. Their remuneration for the reporting period was:
Name
Craig Coleman
Brian Wilson AO
Graham Cubbin
Brenda Shanahan1
1. Ceased on 20 November 2018
8.4 KMP remuneration
Details of the remuneration of each KMP are tabled below.
Directors’ fees
Superannuation
$
91,324
91,324
91,324
83,714
$
8,676
8,676
8,676
7,953
Total
$
100,000
100,000
100,000
91,667
Directors
Executive Directors
Colin Bell, Executive Chairman
Alastair Provan, Managing Director
Non-Executive Directors
Craig Coleman
Graham Cubbin
Brian Wilson AO
Brenda Shanahan2
Short-term
STI cash
Non-monetary
bonus
benefits
250,000
250,000
250,000
250,000
Salary
& fees
$
599,710
600,168
523,985
524,443
91,324
166,324
91,324
91,324
91,324
91,324
83,714
91,324
369,212
369,670
498,531
516,189
300,999
318,053
272,001
264,463
1,440,743
1,468,375
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
$
–
–
–
–
–
–
–
–
–
200,000
200,000
300,000
200,000
500,000
400,000
Total
$
849,710
850,168
773,985
774,443
91,324
166,324
91,324
91,324
91,324
91,324
83,714
91,324
1,981,381
2,064,907
369,212
369,670
498,531
516,189
500,999
518,053
572,001
464,463
1,940,743
1,868,375
$
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Total compensation: Directors (consolidated)
1,481,381
1,564,907
500,000
500,000
Senior Executives
Lewis Bell, Head of Compliance
Andrew Bell, Executive Director of Bell Potter Securities
Dean Davenport, Chief Financial Officer 3
Rowan Fell, Director – Investment Services3
Total compensation: Executives (consolidated)
1. Voluntary super contributions above the minimum legislative requirements are classified as post-employment benefits.
2. Ceased on 20 November 2018.
Section 6 of the Remuneration Report.
3. For Executive KMP, the short-term incentive bonus is for performance during the financial year ended 31 December 2018 using the criteria set out in
Post-employment
Superannuation
benefits1
$
Share-based
payments
Other
long term
$
Termination
benefits
$
Total amortisation
value of LTI options
$
20,290
19,832
20,290
19,832
8,676
8,676
8,676
8,676
8,676
8,676
7,953
8,676
74,561
74,368
20,290
19,832
11,976
25,000
22,078
19,832
25,000
30,000
79,344
94,664
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
26,923
12,115
32,999
35,537
59,922
47,652
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Total
$
870,000
870,000
794,275
794,275
100,000
175,000
100,000
100,000
100,000
100,000
91,667
100,000
2,055,942
2,139,275
389,502
389,502
510,507
541,189
550,000
550,000
630,000
530,000
2,080,009
2,010,691
Proportion of
remuneration
performance
related %
29%
29%
31%
31%
0%
0%
0%
0%
0%
0%
0%
0%
24%
23%
0%
0%
100%
100%
36%
36%
48%
38%
49%
47%
13
Annual Report 2018 – Bell Financial Group
DIRECTORS’ REPORT continued
For the year ended 31 December 2018
Remuneration Report (audited) (continued)
8. Service agreements (continued)
8.5 Options and equity instruments
No options over the Company’s shares or other equity instruments are held by KMP.
9. Loans to KMP and their related parties
All loans to KMP and their related parties are margin loans provided in the ordinary course of business on standard terms and
conditions that are no more favourable than those provided to other employees or clients, including the interest rate and security
required. Details on the aggregate loans provided to KMP and their related parties are as follows.
Opening balance
Closing balance1
Interest charged
31 Dec 18
$
3,808,983
3,039,829
165,932
1. The aggregate loan amount at the end of the reporting period includes loans to 6 KMP.
Details of KMP (including their related parties) with an aggregate of loans above $100,000 during the reporting period are as follows:
Colin Bell2
Craig Coleman
Lewis Bell2
Andrew Bell2
Rowan Fell
Dean Davenport
Balance
1 Jan 18
$
1,292,752
1,009,222
539,027
300,000
583,958
84,024
Balance
31 Dec 18
$
373,315
952,734
475,515
300,000
837,786
100,479
Interest
paid and
payable in
period
$
45,596
35,607
25,639
13,092
42,050
3,948
Highest
balance in
period1
$
2,403,008
1,045,850
1,140,754
473,283
1,119,179
124,651
1. Represents the highest loan balance during the reporting period for the individual KMP. All other items in the table relate to KMP and their related parties.
2. In addition to the loans detailed above, Colin Bell, Lewis Bell, Andrew Bell and Alastair Provan have joint control over one entity with a margin loan.
The balance at 1 January 2018 was $6,062,473, the balance at 31 December 2018 was $6,661,712 and the highest balance in the reporting period
was $6,661,712. The interest paid and payable in the reporting period was $346,280.
Lead auditor’s independence declaration
The lead auditor’s independence declaration is set out on page 15 and forms part of the Directors’ Report for the financial year
ended 31 December 2018.
Rounding of amounts
Bell Financial is an entity to which ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191 applies.
Amounts in this report have been rounded off in accordance with that instrument to the nearest thousand dollars, or in certain
cases, to the nearest dollar.
This report is made on 20 February 2019 in accordance with a resolution of the directors.
Alastair Provan
Managing Director
20 February 2019
14
Annual Report 2018 – Bell Financial Group
LEAD AUDITOR’S INDEPENDENCE DECLARATION
For the year ended 31 December 2018
15
Annual Report 2018 – Bell Financial Group
KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.Liability limited by a scheme approved under ProfessionalStandards Legislation.Lead Auditor’s Independence Declaration under Section 307C of the Corporations Act 2001 To the Directors of Bell Financial Group Limited I declare that, to the best of my knowledge and belief, in relation to the audit of Bell Financial Group Limited for the financial year ended 31 December 2018 there have been: i.no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit; and ii.no contraventions of any applicable code of professional conduct in relation to the audit. KPM_INI_01 KPMG Christopher Wooden Partner Melbourne 20 February 2019 PAR_SIG_01 PAR_NAM_01 PAR_POS_01 PAR_DAT_01 PAR_CIT_01 STATEMENT OF PROFIT OR LOSS
For the year ended 31 December 2018
Rendering of services
Finance income
Investment (losses)/gains
Other income
Total revenue
Employee expenses
Depreciation and amortisation expenses
Occupancy expenses
Systems, communication and ASX expenses
Professional expenses
Finance expenses
Other expenses
Total expenses
Profit/(loss) before income tax
Income tax expense
Profit/(loss) for the year
Attributable to:
Equity holders of the Company
Non-controlling interests
Profit/(loss) for the year
Earnings per share:
Basic earnings per share
Diluted earnings per share
Note
6
10
8
9
7
11
16, 17
10
Consolidated
2018
$’000
202,223
18,250
(927)
470
220,016
(134,344)
(1,471)
(11,920)
(19,075)
(2,301)
(5,007)
(9,898)
(184,016)
2017
$’000
188,783
16,226
(106)
860
205,763
(125,447)
(1,523)
(11,528)
(18,044)
(2,962)
(4,585)
(10,515)
(174,604)
36,000
31,159
12
(10,930)
(9,716)
25,070
21,443
24,692
378
25,070
Cents
8.5
8.5
20,635
808
21,443
Cents
7.8
7.8
29
29
The notes on pages 21 to 58 are an integral part of these Consolidated Financial Statements.
16
Annual Report 2018 – Bell Financial Group
STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 December 2018
Profit/(loss) for the year
Other comprehensive income
Items that may be classified to profit or loss
Change in fair value of cash flow hedge
Foreign operations – foreign currency translation differences
Other comprehensive income for the year, net of tax
Consolidated
2018
$’000
25,070
2017
$’000
21,443
(51)
328
277
24
(189)
(165)
Total comprehensive income for the year
25,347
21,278
Attributable to:
Equity holders of the Company
Non-controlling interests
Total comprehensive income for the year
24,969
378
25,347
20,470
808
21,278
Other movements in equity arising from transactions with owners are set out in note 27.
The notes on pages 21 to 58 are an integral part of these Consolidated Financial Statements.
17
Annual Report 2018 – Bell Financial Group
STATEMENT OF FINANCIAL POSITION
As at 31 December 2018
Assets
Cash and cash equivalents
Trade and other receivables
Prepayments
Financial assets
Derivative assets
Loans and advances
Deferred tax assets
Property, plant and equipment
Goodwill
Intangible assets
Total assets
Liabilities
Trade and other payables
Deposits and borrowings
Current tax liabilities
Derivative liabilities
Employee benefits
Provisions
Total liabilities
Net assets
Equity
Contributed equity
Other equity
Reserves
Non-controlling interests
Retained earnings
Total equity attributable to equity holders of the Company
Consolidated
2018
$’000
2017
$’000
Note
13
14
15
31
20
19
16
17
17
21
22
23
31
25
24
27
27
27
27
27
193,622
120,659
960
1,045
–
296,217
7,624
703
130,413
10,654
761,897
213,190
312,441
162
132
32,643
–
558,568
197,976
101,360
737
3,812
102
286,188
9,492
731
130,413
8,738
739,549
185,850
317,380
2,682
24
31,463
300
537,699
203,329
201,850
204,237
(28,858)
(455)
–
28,405
203,329
167,886
1,806
(693)
5,826
27,025
201,850
The notes on pages 21 to 58 are an integral part of these Consolidated Financial Statements.
18
Annual Report 2018 – Bell Financial Group
STATEMENT OF CHANGES IN EQUITY
Share
Capital
$‘000
167,886
Other
Equity
$‘000
1,806
Treasury
Shares
Reserve
$‘000
(2,106)
Share
Based
Payments
Reserve
$‘000
2,324
Cash Flow
Hedge
Reserve
$‘000
(48)
Foreign
Currency
Reserve
$‘000
529
Non-
Controlling
Interests
$‘000
5,018
Balance at 1 January 2017
Total comprehensive income
Profit/(loss) for the year
Other comprehensive income
Change in fair value of cash
flow hedges
Translation of foreign
currency reserve
Total other comprehensive
income
Total comprehensive income
for the year
Transactions with owners,
directly in equity
Transfer of retained earnings
Employee options expired
Share based payments
Employee share awards
exercised
Dividends
Balance at 31 December 2017
Balance at 1 January 2018
Total comprehensive income
Profit/(loss) for the year
Other comprehensive income
Change in fair value
of cash flow hedges
Translation of foreign
currency reserve
Total other comprehensive
income
Total comprehensive income
for the year
Transactions with owners,
directly in equity
Increase in Share Capital
Decrease in Non-controlling
interests
Transfer of retained earnings
Purchase of treasury shares
Share based payments
Employee share awards
exercised
Decrease in other equity
Dividends
Balance at 31 December 2018
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
167,886
167,886
–
–
1,806
1,806
710
–
(1,396)
(1,396)
–
–
–
–
–
36,351
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(323)
–
–
–
–
204,237
–
(30,664)
–
(28,858)
407
–
–
(1,312)
–
–
–
–
–
–
(1,627)
400
(710)
–
387
387
–
–
–
–
–
–
–
–
–
284
(407)
–
–
264
–
24
–
24
24
–
–
–
–
–
(24)
(24)
–
(51)
–
(51)
–
–
(189)
(189)
(189)
–
–
–
–
–
340
340
–
–
328
328
(51)
328
–
–
–
–
–
–
–
–
(75)
–
–
–
–
–
–
–
–
668
The notes on pages 21 to 58 are an integral part of these Consolidated Financial Statements.
19
Annual Report 2018 – Bell Financial Group
Retained
Earnings
$‘000
19,959
Total
Equity
$‘000
195,368
21,443
21,443
–
–
–
24
(189)
(165)
21,443
21,278
–
–
–
–
–
808
–
–
–
–
5,826
5,826
(808)
1,627
–
–
–
400
–
(15,196)
27,025
27,025
–
(15,196)
201,850
201,850
–
25,070
25,070
–
–
–
–
–
–
–
–
(51)
328
277
25,070
25,347
–
36,351
(6,204)
378
–
–
–
(378)
–
–
(6,204)
–
(323)
284
–
–
–
–
–
–
(23,312)
28,405
–
(30,664)
(23,312)
203,329
Note
26
STATEMENT OF CASH FLOWS
For the year ended 31 December 2018
Cash flows from/(used in) operating activities
Cash receipts from customers and clients
Cash paid to suppliers and employees
Net cash from client related receivables and payables
Cash generated from operations1
Dividends received
Interest received
Interest paid
Income taxes paid
Net cash from operating activities
Cash flows from/(used in) investing activities
Net proceeds from sale of investments
Acquisition of property, plant and equipment
Proceeds of property, plant and equipment
Acquisition of other investments
Net cash from/(used in) investing activities
Cash flows from/(used in) financing activities
Dividends paid
On market share purchases
Acquisition of Third Party Platform Pty Ltd
Proceeds from issue of share capital
Bell Potter Capital (Margin Lending)
Deposits (used in)/from client cash balances
Drawdown of margin loans
Drawdown of borrowings
Net cash used in financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at 1 January
Cash and cash equivalents at 31 December
13, 26
The notes on pages 21 to 58 are an integral part of these Consolidated Financial Statements.
Consolidated
2018
$’000
215,607
(193,513)
9,387
31,481
15
18,247
(5,007)
(11,549)
33,187
2,093
(255)
–
(259)
1,579
(23,312)
(323)
(36,868)
36,351
(40,939)
(10,029)
36,000
(39,120)
(4,354)
197,976
193,622
2017
$’000
202,850
(173,986)
22,114
50,978
7
16,171
(4,585)
(7,647)
54,924
402
(298)
–
(1,309)
(1,205)
(15,196)
–
–
–
28,413
(58,790)
–
(45,573)
8,146
189,830
197,976
1. ‘Cash generated from operations’ includes Group cash reserves and client balances. Refer to note 13 for further information on cash and cash equivalents.
20
Annual Report 2018 – Bell Financial Group
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2018
Bell Financial Group Ltd (“Bell Financial”
or the “Company”) is domiciled
in Australia. The address of the
Company’s registered office is Level 29,
101 Collins Street, Melbourne, VIC. The
Consolidated Financial Statements of
the Company comprise the Company,
and its controlled entities (the “Group”
or “Consolidated Entity”). The Group is
a for-profit entity. Bell Financial Group
Ltd is an Australian-based provider
of broking, investment and financial
advisory services.
1. Significant accounting
policies
Set out below is a summary of significant
accounting policies adopted by the
Company and its subsidiaries in
the preparation of the Consolidated
Financial Statements.
(a) Basis of preparation
Statement of compliance
The financial report is a general
purpose financial report prepared in
accordance with Australian Accounting
Standards (AASBs) (including Australian
Accounting Interpretations) adopted by
the Australian Accounting Standards
Board (AASB) and the Corporations Act
2001. The consolidated financial report
of the Group and the financial report of
the Company comply with International
Financial Reporting Standards (IFRS)
and interpretations adopted by the
International Accounting Standards
Board (IASB).
The Financial Statements were
approved by the Board of Directors
on 20 February 2019.
Functional and presentation currency
These Consolidated Financial Statements
are presented in Australian dollars,
which is the Company’s functional
currency and the functional currency
of the majority of the Group. The
Company is of a kind referred to in
ASIC Corporations (Rounding in Financial/
Directors’ Reports) Instruments 2016/191
and in accordance with that Instrument,
all financial information presented in
Australian dollars has been rounded
to the nearest thousand dollars unless
otherwise stated.
Removal of parent entity
financial statements
The Group has applied amendments to
the Corporations Act 2001 that remove
the requirement for the Group to lodge
parent entity financial statements. Parent
entity financial statements have been
replaced by the specific parent entity
disclosures in note 33.
Comparative amounts
2017 comparative amounts for
rendering of services revenue and
employee expenses have been restated
by $2,815,000 in order to present the
amounts on a consistent basis with
the way they are presented in 2018.
There is no impact on the 2017 profit
after tax or equity.
(b) Principles of consolidation
Business combinations
The Group applies AASB 3 Business
Combinations (2008) and amended
AASB 127 Consolidated and Separate
Financial Statements (2008) for
business combinations.
The accounting policies set out below,
except as noted, have been applied
consistently to all periods presented in
these Consolidated Financial Statements,
and have been consistently applied by all
entities within the consolidated entity.
Basis of measurement
These Consolidated Financial
Statements have been prepared under
the historical cost convention, except for
financial assets and liabilities (including
derivative instruments) at fair value
through the profit or loss.
Subsidiaries
Subsidiaries are all entities controlled by
the Group. The Group controls an entity
when it is exposed to, or has rights to,
variable returns from its involvement
with the entity and has the ability to
affect those returns through its power
over the entity. The financial statements
of subsidiaries are included in the
Consolidated Financial Statements
from the date that control commenced
until the date that control ceases. All
controlled entities have a 31 December
balance date.
21
Annual Report 2018 – Bell Financial Group
Intra-group balances, and any unrealised
income and expenses arising from
intra-group transactions, are eliminated
in preparing the Consolidated Financial
Statements.
Non-controlling interest (NCI)
NCI are measured at their proportionate
share of the acquiree’s identifiable net
assets at the date of acquisition. Changes
in the Group’s interest in a subsidiary
that do not result in a loss of control are
accounted for as equity transactions.
AASB 15 Revenue from Contracts
with Customers
The Group has initially applied AASB 15
Revenue from Contracts with Customers
from 1 January 2018. AASB 15
establishes a comprehensive framework
for determining whether, how much
and when revenue is recognised. It
replaced AASB 118 Revenue and related
interpretations. It requires identification
of discrete performance obligations
within a transaction and an associated
transaction price allocation to these
obligations. Revenue is recognised
upon satisfaction of these performance
obligations, which occur when control
of the goods or services are transferred
to the customer.
The Group has adopted AASB 15 using
the cumulative effect method (without
practical expedients), with the effect of
initially applying this standard recognised
at the date of initial application (1 January
2018). Accordingly, the information
presented for 2017 has not been restated.
Under AASB 15, revenue is recognised
when a customer obtains control
of the goods or services. Determining
the timing of the transfer of control –
at a point in time or over time – requires
judgement. AASB 15 specifically excludes
financial instruments recognised under
AASB 9 Financial Instruments. As such,
the impacted revenue streams for
Bell Financial are limited to fee-based
revenue items such as brokerage, fee
income, commissions and portfolio
administration fees.
in the foreseeable future. Deferred tax
is measured at the tax rates that are
expected to be applied to the temporary
differences when they reverse, based
on the laws that have been enacted
or substantively enacted by the
reporting date.
Deferred tax assets and liabilities are
offset if there is a legally enforceable
right to offset current tax liabilities and
assets, and they relate to income taxes
levied by the same tax authority on the
same taxable entity, or on different tax
entities, but they intend to settle current
tax liabilities and assets on a net basis
or their tax assets and liabilities will be
realised simultaneously.
Deferred tax assets are recognised for
unused tax losses, unused tax credits
and deductible temporary differences to
the extent that it is probable that future
taxable profits will be available against
which they can be used. Future taxable
profits are determined based on the
reversal of relevant taxable temporary
differences. If the amount of taxable
temporary differences is insufficient to
recognise a deferred tax asset in full,
then future taxable profits, adjusted
for reversals of existing temporary
differences, are considered, based
on the business plans for individual
subsidiaries in the Group. Deferred tax
assets are reviewed at each reporting
date and are reduced to the extent that it
is no longer probable that the related tax
benefit will be realised; such reductions
are reversed when the probability of
future taxable profits improves.
Tax consolidation
Effective 1st January 2003, the
Company elected to apply the tax
consolidation legislation. All current
tax amounts relating to the Group have
been assumed by the head entity of the
tax-consolidated group, Bell Financial
Group. Deferred tax amounts in relation
to temporary differences are allocated
as if each entity continued to be a
taxable entity in its own right.
1. Significant accounting
policies (continued)
(c) Revenue recognition (continued)
AASB 15 Revenue from Contracts
with Customers
Based on the Group’s assessment
of revenue streams, there is no impact
on the Group’s consolidated financial
statements upon adoption and no
transition adjustment has been made
to opening retained earnings. The
application of the requirements of
AASB 15 are broadly consistent with
the Group’s current accounting policies.
Revenue under AASB 15 is recognised
when the Group transfers control over
a service to a customer. The Group
measures revenue based on the
consideration specified in a contract
with a customer. The following specific
criteria must also be met before revenue
can be recognised.
Rendering of services
Revenue arising from brokerage,
fee income and corporate finance
transactions are recognised by the Group
when performance obligations under the
contract with a customer are satisfied.
Brokerage is recognised when a trade
is executed and payment is received
upon settlement, which is normally
2 days after the trade.
Portfolio administration fees are
recognised over time as the service
is provided and are collected on a
quarterly basis.
Corporate fees are recognised at a
point in time when the Group satisfies
its performance obligation, which is
usually upon the successful completion
of the transaction. Payment is normally
received within 7 days of the completion
of the transaction.
Other revenue streams
Other revenue is recognised to the
extent that it is probable that the
economic benefit will flow to the
Group and the revenue can be reliably
measured.
Interest income
Interest income is recognised as it
accrues using the effective interest rate
method, in accordance with AASB 9.
Dividend income
Dividend income is recognised when
the right to receive the payment is
established, in accordance with AASB 9.
(d) Statement of Cash Flows
The Statement of Cash Flows is
prepared on the basis of net cash flows
in relation to settlement of trades. This
is consistent with the Group’s revenue
recognition policy whereby the entity
acts as an agent and receives and
pays funds on behalf of its clients,
however only recognises as revenue,
the Group’s entitlement to brokerage
commission. For the purpose of the
Statement of Cash Flows, cash and cash
equivalents comprise cash at bank and
on hand, investments in money market
instruments maturing within less than
14 days (net of bank overdrafts) and
short-term deposits with an original
maturity of 3 months or less. It is
important to note that the Statement
of Financial Position discloses trade
debtors and payables that represent net
client accounts being the accumulation
of gross trading.
(e) Income tax
Income tax expense or benefit for the
period comprises current and deferred
tax. Income tax is recognised in the
Statement of Profit or Loss except
to the extent that it relates to items
recognised directly in equity, in which
case it is recognised in equity.
Current tax is the expected tax payable
on the taxable income for the year,
using tax rates enacted or substantially
enacted at the balance sheet date,
and any adjustments to tax payable
in respect of previous years.
Deferred tax is recognised using the
balance sheet method, providing
for temporary differences between
the carrying amounts of assets and
liabilities for financial reporting
purposes and the amounts used for
taxation purposes. Deferred tax is not
recognised for the following temporary
differences: the initial recognition of
goodwill, the initial recognition of assets
or liabilities in a transaction that is not
a business combination and that affects
neither accounting nor taxable profit,
and differences relating to investments
in subsidiaries to the extent that they
probably will not reverse
22
Annual Report 2018 – Bell Financial Group
NOTES TO THE FINANCIAL STATEMENTS continuedFor the year ended 31 December 2018 (f) Goods and services tax
Revenues, expenses and assets are
recognised net of the amount of goods
and services tax (GST), except where
the amount of GST incurred is not
recoverable from the Australian Tax
Office (ATO). In these circumstances the
GST is recognised as part of the cost of
acquisition of the asset or as part of an
item of the expense.
Receivables and payables are stated
with the amount of GST excluded. The
net amount of GST recoverable from,
or payable to, the ATO is included
as a current asset or liability in the
Statement of Financial Position.
Cash flows are included in the Statement
of Cash Flows on a gross basis. The GST
components of cash flows arising from
investing and financing activities that are
recoverable from, or payable to, the ATO
are classified as operating cash flows.
(g) Cash and cash equivalents
Cash and cash equivalents comprise
cash balances, investments in money
market instruments maturing within less
than 14 days and short-term deposits
with original maturity of less than
three months. Bank overdrafts that are
repayable on demand are included as a
component of cash and cash equivalents
for the purpose of the Statement of Cash
Flows. Cash held in trust for clients
(refer to note 13) is included as cash and
cash equivalents and is included within
trade and other payables.
(h) Derivatives
Derivative financial instruments are
contracts whose value is derived from
one or more underlying price indices
or other variables. They include swaps,
forward rate agreements, options or
a combination of all three.
Certain derivative instruments are held
for trading for the purpose of making
short-term gains. These derivatives
do not qualify for hedge accounting.
The right to receive options arising from
the provision of services to corporate
fee clients are valued using the Black
Scholes model. On disposal of options
any realised gains/losses are taken
to the Statement of Profit or Loss.
Derivatives are recognised initially at
fair value and attributable transaction
costs are recognised in profit or loss
when incurred.
Derivative financial instruments are also
used for hedging purposes to mitigate
the Group’s exposure to interest rate risk.
The Group applied the new general hedge
accounting model in AASB 9 Financial
Instruments from 1 January 2018 (refer
to Note 1q)iii for further information).
Derivative financial instruments are
recognised initially at fair value.
An impairment loss, with the exception
of goodwill, is reversed if the reversal
can be related objectively to an event
occurring after the impairment loss
was recognised. For financial assets
measured at amortised cost and
available-for-sale financial assets
that are debt securities the reversal
is recognised in profit or loss.
(j) Trade and other receivables
Trade debtors to be settled within 2
trading days are carried at amortised
cost. Term debtors are also carried
at amortised cost. Recoverability of
Trade and other receivables is assessed
using the lifetime expected credit
loss approach.
(k) Trade and other payables
Liabilities for trade creditors and other
amounts are carried at cost, which is the
fair value of the consideration to be paid in
the future for goods and services received,
whether or not billed to the parent entity
or Group. Trade accounts payable are
normally settled within 60 days.
(l) Leased assets
Leases in terms of which the Group
assumes substantially all the risks and
rewards of ownership are classified as
finance leases. Upon initial recognition
the leased asset is measured at an
amount equal to the lower of its fair
value and the present value of minimum
lease payments. Subsequent to initial
recognition, the asset is accounted for
in accordance with the accounting policy
applicable to that asset.
Other leases are operating leases and
are not recognised on the Group’s
Statement of Financial Position.
(m) Borrowing costs
Borrowing costs are recognised as
expenses in the period in which they
are incurred.
Where the derivative is designated
effective as a hedging instrument, the
timing of the recognition of any resultant
gain or loss is dependent on the hedging
designation. The Group designated
interest rate swaps as cash flow hedges
during the period. Details of the hedging
instruments are outlined below:
Cash flow hedges
Changes in the fair value of cash flow
hedges are recognised directly in
equity to the extent that the hedges
are effective. To the extent hedges are
ineffective, changes in the fair value are
recognised in the profit or loss. Hedge
effectiveness is tested at each reporting
date and is assessed against the hedge
effectiveness criteria in AASB 9.
If the hedging instrument no longer
meets the criteria for hedge accounting,
expires or is sold, terminated or exercised,
the hedge accounting is discontinued
prospectively. The cumulative gain or
loss previously recognised in equity
remains there until the forecast
transaction occurs.
(i) Impairment of assets
At each reporting date, the Group reviews
the carrying values of its tangible and
intangible assets to determine whether
there is any indication that those assets
have been impaired. If such an indication
exists, the recoverable amount of the
asset, being the higher of the asset’s
fair value less costs to sell and value in
use, is compared to the asset’s carrying
value. Any excess of the asset’s carrying
value over its recoverable amount is
expensed to the Statement of Profit
or Loss.
Where it is not possible to estimate
the recoverable amount of an individual
asset, the Group estimates the recoverable
amount of the cash-generating unit to
which the asset belongs.
23
Annual Report 2018 – Bell Financial Group
i. Classification and measurement
of financial assets and financial
liabilities
AASB 9 largely retains the existing
requirements in AASB 139 for the
classification and measurement
of financial liabilities. However, it
eliminates the previous AASB 139
categories for financial assets of held
to maturity, loans and receivables and
available for sale. The impact of AASB 9
on the classification and measurement
of financial assets is set out below.
Under AASB 9, on initial recognition, a
financial asset is classified as measured
at: amortised cost; fair value through
other comprehensive income (FVTOCI)
– debt investment; FVTOCI – equity
investment; or fair value through profit
or loss (FVTPL). The classification
of financial assets under AASB 9
is generally based on the business
model in which a financial asset is
managed and its contractual cash
flow characteristics.
A financial asset is measured at
amortised cost if it meets both of
the following conditions and is not
designated as at FVTPL:
• It is held within a business model
whose objective is to hold assets to
collect contractual cash flows; and
• Its contractual terms give rise on
specified dates to cash flows that
are solely payments of principal
and interest on the principal
amount outstanding.
All financial assets not classified as
measured at amortised cost or FVTOCI
are measured at FVTPL. On initial
recognition, the Group may irrevocably
designate a financial asset that otherwise
meets the requirements to be measured
at amortised cost or at FVTOCI as
at FVTPL if doing so eliminates or
significantly reduces an accounting
mismatch that would otherwise arise.
The following accounting policies apply
to the subsequent measurement of
financial assets held by the Group.
1. Significant accounting
policies (continued)
(n) Provisions
A provision is recognised if, as a result
of a past event, the Group has a present
legal or constructive obligation that
can be estimated reliably, and it is
probable that an outflow of economic
benefits will be required to settle the
obligation. Provisions are determined
by discounting the expected future cash
flows at a pre-tax rate that reflects
current market assessments of the time
value of money and the risks specific to
the liability.
Customer lists
Customer lists that are acquired by
the Group, which have finite lives, are
measured at cost less accumulated
amortisation and accumulated
impairment losses.
Amortisation is recognised in the profit
or loss on a straight-line basis over
the estimated useful lives of intangible
assets. The estimated useful lives are
as follows:
Software
Customer list
2018
10 years
10 years
2017
10 years
10 years
(o) Deposits and borrowings
All deposits and borrowings are
recognised at amortised cost, being
the fair value of the consideration
received net of issue costs associated
with the borrowings.
(p) Goodwill and intangible assets
Goodwill
Goodwill on acquisition is initially
measured at cost being the excess of
the costs of the business combination
over the acquirer’s interest in the net fair
value of the identifiable assets, liabilities
and contingent liabilities.
Following initial recognition, goodwill
is measured at cost less accumulated
impairment losses. Goodwill is reviewed
for impairment, annually or more
frequently if events or changes in
circumstances indicate that the carrying
amount is impaired. An impairment loss
in respect to goodwill is not reversed.
Other intangible assets
Research and development
Expenditure on research activities
is recognised in profit or loss as
incurred. Development expenditure is
capitalised only if the expenditure can
be measured reliably, the product or
process is technically and commercially
feasible, future economic benefits are
probable and the Group intends to and
has sufficient resources to complete
development and to use or sell the asset.
Otherwise, it is recognised in profit or
loss as incurred. Subsequent to initial
recognition, development expenditure
is measured at cost less accumulated
amortisation and any accumulated
impairment losses.
(q) Financial instruments
All investments are initially recognised
at fair value of the consideration given,
plus directly attributable transaction
costs. Subsequent to initial recognition,
investments, which are classified
as financial assets are measured
as described below.
Fair value measurement
AASB 13 Fair Value Measurement
that establishes a single framework
for measuring fair value and
making disclosures about fair
value measurements when such
measurements are required or
permitted by other AASBs. It unifies
the definition of fair value as the price
that would be received to sell an asset
or paid to transfer a liability in an
orderly transaction between market
participants at the measurement date.
AASB 9 Financial Instruments
The Group has initially applied AASB 9
Financial Instruments from 1 January
2018. AASB 9 sets out requirements
for recognising and measuring financial
assets and financial liabilities. This
standard replaces AASB 139 Financial
Instruments: Recognition and Measurement.
No material change to recognition and
measurement of financial assets and
financial liabilities, however disclosure
requirements of AASB 9 apply.
The details of new significant accounting
policies and the nature and effect of the
changes to previous accounting policies
are set out below.
24
Annual Report 2018 – Bell Financial Group
NOTES TO THE FINANCIAL STATEMENTS continuedFor the year ended 31 December 2018 Financial assets at amortised cost
These assets are subsequently
measured at amortised cost using the
effective interest method. The amortised
cost is reduced by impairment losses
(see (ii) below). Interest income, foreign
exchange gains and losses and
impairment are recognised in profit or
loss. Any gain or loss on derecognition
is recognised in profit or loss.
Financial assets at FVTPL
These assets are subsequently
measured at fair value. Net gains and
losses, including any interest or dividend
income, are recognised in profit or loss.
The Group does not have any debt or
equity investments at FVTOCI.
Business model assessment
The Group will determine the business
model at the level that reflects how groups
of financial assets are managed using
all relevant evidence that is available at
the date of the assessment, including:
• The stated policies and objectives
for the portfolio and the operation
of those policies in practice;
• How the performance of the portfolio
is evaluated and reported to the
Group’s management;
• The risks that affect the performance
of the business model (and the financial
assets held within that business
model) and how those risks are
managed; and
• How managers of the business are
compensated.
Assessment whether contractual cash
flows are solely payments of principal
and interest (SPPI)
For the purposes of this assessment,
‘principal’ is defined as the fair value of
the financial asset on initial recognition.
‘Interest’ is defined as consideration
for the time value of money and for the
credit risk associated with the principal
amount outstanding during a particular
period of time and for other basic
lending risks and costs (e.g. liquidity
risk and administrative costs), as well
as profit margin.
In assessing whether the contractual
cash flows are SPPI, the Group considers
the contractual terms of the instrument.
This includes assessing whether the
financial asset contains a contractual
term that could change the timing or
amount of contractual cash flows such
that it would not meet this condition.
ii. Impairment of financial assets
AASB 9 replaces the ‘incurred loss’
model in AASB 139 with an ‘expected
credit loss’ (ECL) model. The new
impairment model applies to financial
assets measured at amortised cost.
Under AASB 9, credit losses are
recognised earlier than under AASB 139.
Under AASB 9, loss allowances are
measured on either of the following bases:
• 12-month ECLs: these are ECLs
that result from possible default
events within the 12 months after
the reporting date; and
• Lifetime ECLs: these are ECLs
that result from all possible default
events over the expected life of a
financial instrument.
For all financial assets at amortised
cost, the Group measures loss
allowances at an amount equal to
lifetime ECLs, except for loans and
advances, which are measured at
12-month ECLs where credit risk has
not increased significantly since initial
recognition and lifetime ECLs where
credit risk has increased significantly
since initial recognition.
When determining whether credit
risk of a financial asset has increased
significantly since initial recognition
and when estimating ECLs, the Group
considers reasonable and supportable
information that is relevant and available
without undue cost or effort. This
includes quantitative and qualitative
information and analysis based on
the Group’s historical experience
and forward-looking information.
The Group assumes that the credit
risk on a financial asset has increased
significantly if it is more than 30 days
past due or the expected probability
of default has increased significantly.
The Group considers a financial asset
to be in default when:
• The borrower is unlikely to pay its
credit obligations to the Group in
full, without recourse by the Group
to actions such as realising security
(if any is held); or
• The financial asset is more than
90 days past due.
Measurement categories
of financial assets
Cash and cash equivalents, Trade
and other receivables, and Loans
and advances are now classified as
amortised cost. Financial assets and
Derivative assets are now classified
as mandatorily at FVTPL.
Modifications of financial assets
and financial liabilities
Financial assets
If the terms of a financial asset are
modified, the Group evaluates whether
the cash flows of the modified asset
are substantially different. If the cash
flows are substantially different, the
contractual rights to cash flows from
the original financial asset are deemed
to have expired. The original financial
asset is derecognised and a new financial
asset is recognised at fair value.
If the cash flows of the modified asset
are not substantially different, the Group
recalculates the gross carrying amount
of the financial asset and recognises
the derecognition as a modification
gain or loss in profit or loss. If such a
modification is carried out because of
financial difficulties of the borrower, the
gain or loss is presented together with
impairment losses.
Financial liabilities
The Group derecognises a financial
liability when its terms are modified
and the cash flows of the modified
liability are substantially different. A new
financial liability based on the modified
terms is recognised at fair value. The
difference between the carrying amount
of the financial liability extinguished and
the new financial liability with modified
terms is recognised in profit or loss.
There was no impact to opening retained
earnings on the carrying amounts of
financial assets or financial liabilities
at 1 January 2018 from the adoption
of AASB 9.
25
Annual Report 2018 – Bell Financial Group
1. Significant accounting
policies (continued)
(q) Financial instruments (continued)
ii. Impairment of financial
assets (continued)
The maximum period considered
when estimating ECLs is the maximum
contractual period over which the Group
is exposed to credit risk.
Measurement of ECLs
ECLs are a probability-weighted estimate
of credit losses. Credit losses are
measured as the present value of all
cash shortfalls (i.e. the difference
between the cash flows due to the
entity in accordance with the contract
and the cash flows that the Group
expects to receive). ECLs are discounted
at the effective interest rate of the
financial asset.
Credit-impaired financial assets
At each reporting date, the Group
assesses whether financial assets
carried at amortised cost are credit-
impaired. A financial asset is ‘credit-
impaired’ when one or more events
that have a detrimental impact on
the estimated future cash flows of the
financial asset have occurred.
Presentation of impairment
Loss allowances for financial assets
measured at amortised cost are
deducted from the gross carrying
amount of the assets.
Impairment losses are presented
separately in the Consolidated Statement
of Profit or Loss and OCI. There were
no impairment losses for the year
ended 31 December 2018 (2017: Nil).
Trade and other receivables
ECLs are calculated based on actual
historical credit loss experience.
Exposures are segmented based on
past events, current conditions and
reasonable and supportable information
about future events and economic
conditions. There were no significant
changes during the period to Group’s
exposure to credit risk and there was
no significant impact to credit
provisioning over trade and other
receivables as at 1 January 2018.
Loans and advances
ECLs are calculated based on actual
historical credit loss experience.
Exposures are segmented based on
past events, current conditions and
reasonable and supportable information
about future events and economic
conditions. There were no significant
changes during the period to Group’s
exposure to credit risk and there
was no significant impact to credit
provisioning over loans and advances
as at 1 January 2018.
iii. Hedge accounting
The Group has elected to adopt the
new general hedge accounting model
in AASB 9. This requires the Group
to ensure that hedge accounting
relationships are aligned with its risk
management objectives and strategy
and to apply a more qualitative and
forward-looking approach to assessing
hedge effectiveness.
The Group only uses interest rate swaps
to hedge exposure to fluctuations in
interest rates.
The Group has determined that there
was no material impact arising from the
application of AASB 9’s hedge accounting
requirements at 1 January 2018.
iv. Transition
Changes in accounting policies resulting
from the adoption of AASB 9 have been
applied retrospectively, except as
described below.
• The Group has taken an exemption
not to restate comparative information
for prior periods with respect to
classification and measurement
(including impairment) requirements.
• The following assessments have been
made on the basis of the facts and
circumstances that existed at the date
of initial application.
• The determination of the business
model within which a financial
asset is held.
• The designation and revocation
of previous designations of certain
financial assets and financial
liabilities as measured at FVTPL.
• Changes to hedge accounting policies
have been applied prospectively.
• All hedging relationships designated
under AASB 139 at 31 December 2017
met the criteria for hedge accounting
under AASB 9 at 1 January 2018 and
are therefore regarded as continuing
hedging relationships.
Share capital
Ordinary shares
Ordinary shares are classified as equity.
Incremental costs directly attributable
to issue of ordinary shares and share
options are recognised as a deduction
from equity, net of any tax effects.
Dividends
Dividends are recognised as a liability
in the period in which they are declared,
being appropriately authorised and no
longer at the discretion of the Company.
Treasury shares
When share capital recognised as
equity is repurchased, the amount of
the consideration paid is recognised as
a deduction from equity. Repurchased
shares are classified as treasury shares
and are presented in the reserve until
sold or reissued.
(r) Property, plant and equipment
Property, plant and equipment is
included at cost less accumulated
depreciation and any impairment in
value. All property, plant and equipment
is depreciated over its estimated useful
life, commencing from the time assets
are held ready for use.
Items of property, plant and equipment
are depreciated/amortised using the
straight-line method over their estimated
useful lives. The depreciation rates for
each class of asset are as follows:
Leasehold
improvements
Office
equipment
Furniture
and fittings
2018
2017
20 – 25% 20 – 25%
20 – 50% 20 – 50%
20 – 50% 20 – 50%
26
Annual Report 2018 – Bell Financial Group
NOTES TO THE FINANCIAL STATEMENTS continuedFor the year ended 31 December 2018 (s) Employee entitlements
Wages, salaries and annual leave
The provisions for entitlements to wages,
salaries and annual leave expected to
be settled within 12 months of reporting
date represent the amounts which the
Group has a present obligation to pay
resulting from employees’ services
provided up to reporting date.
Long-service leave
The provision for salaried employee
entitlements to long-service leave
represents the present value of the
estimated future cash outflows to be
made resulting from employees’ service
provided up to reporting date. Liabilities
for employee entitlements, which are
not expected to be settled within twelve
months, are discounted using the
rates attaching to national government
securities at balance date, which most
closely match the terms of maturity of
the related liabilities.
In determining the liability for employee
entitlements, consideration has been
given to future increases in wage and
salary rates, and experience with staff
departures. Related on-costs have also
been included in the liability.
Bonuses
The Company recognises a liability
and an expense for bonuses. The
Company recognises a provision where
contractually obliged or where there is
a past performance that has created a
constructive obligation.
Defined contribution plans
A defined contribution plan is a post-
employment benefit plan under which
the Company pays fixed contributions into
a separate entity and will have no legal
or constructive obligation to pay further
amounts. Obligations for contributions to
defined contribution plans are recognised
as an employee expense in profit or loss
when they are due.
Share-based payments
The Company has adopted a number
of share-based equity incentive plans
in which employees and Directors
participate. The grant date fair value of
shares expected to be issued under the
various equity incentive plans, including
options, granted to employees and
Directors is recognised as an employee
expense, with a corresponding increase
in equity over the period in which the
employees become unconditionally
entitled to the shares.
The fair value of options at grant date
is independently determined using the
Black Scholes option pricing model
that takes into account the exercise
price, the vesting period, the vesting
and performance criteria, the impact
of dilution, the share price at grant
date and the expected price volatility of
the underlying share and the risk free
interest rate for the vesting period.
(t) Earnings per share
The Group presents basic and diluted
Earnings Per Share (EPS) data for its
ordinary shares.
Basic earnings per share
Basic EPS is calculated by dividing the
profit or loss attributable to ordinary
shareholders of the Company by the
weighted average number of ordinary
shares outstanding during the period.
Diluted earnings per share
Diluted EPS is determined by adjusting
the profit or loss attributable to ordinary
shareholders and the weighted average
number of ordinary shares outstanding
for the effects of all dilutive potential
ordinary shares and share options
granted to employees and Directors.
(u) Foreign currency
Foreign currency transactions
Transactions in foreign currencies are
translated to the functional currency
of the Group at exchange rates at the
date of the transaction. Monetary assets
and liabilities denominated in foreign
currencies at the reporting date are
retranslated to the functional currency
at the foreign exchange rate at that date.
Non-monetary assets and liabilities
denominated in foreign currencies
that are measured at fair value are
retranslated to the functional currency
at the exchange rate at the date that the
fair value was determined.
Foreign currency differences arising on
retranslation are recognised in profit or
loss, except for differences arising on
available-for-sale equity instruments
that are recognised directly in equity.
27
Annual Report 2018 – Bell Financial Group
Foreign operations
The assets and liabilities of foreign
operations, including goodwill and fair
value adjustments arising on acquisition,
are translated into Australian dollars at
the exchange rates at the reporting date.
The income and expenses of foreign
operations are translated into Australian
dollars at the exchange rates at the dates
of the transactions. Foreign currency
differences are recognised in OCI and
accumulated in the translation reserve,
except to the extent that the translation
difference is allocated to NCI.
(v) Segment reporting
The Group determines and presents
operating segments based on the
information that is internally provided to
the Chief Decision Makers in accordance
with AASB 8 Operating Segments.
An operating segment is a component
of the Group that engages in business
activities from which it may earn
revenues and incur expenses, including
revenues and expenses that relate to
transactions with any of the Group’s
other components. An operating
segment’s results are reviewed regularly
by management to make decisions
about resources to be allocated to the
segment and assess its performance.
Segment results that are reported to
management include items directly
attributable to a segment as well as
to those that can be allocated on a
reasonable basis.
(w) New standards and
interpretations not yet adopted
A number of new standards, amendments
to standards and interpretations are
effective for annual periods beginning
after 1 January 2019, and have not been
applied in preparing these Consolidated
Financial Statements. Those which
may be relevant to the Group are set
out below. The Group does not plan
to adopt these standards early.
AASB 16 Leases
AASB 16 Leases introduces a single,
on-balance sheet accounting model for
lessees. A lessee recognises a right-of-
use asset representing its right to use
the underlying asset and a lease liability
representing its obligation to make
lease payments. There are optional
exemptions for short-term leases and
leases of low value items.
1. Significant accounting
policies (continued)
(w) New standards and
interpretations not yet
adopted (continued)
AASB 16 Leases (continued)
Lessor accounting remains similar
to the current standard – i.e. lessors
continue to classify leases as finance
or operating leases.
AASB 16 Leases replaces existing
leases guidance including AASB 117
Leases, IFRIC 4 Determining whether an
Arrangement contains a Lease.
The standard is effective for annual
periods beginning on or after 1 January
2019. Early adoption is permitted for
entities that apply AASB 15 Revenue from
Contracts with Customers at or before
the initial date of initial application of
AASB 16. The Group has assessed the
potential impact on its Consolidated
Financial Statements resulting from
the application of AASB 16 and whilst
there will be an impact on certain line
items of the Consolidated Financial
Statements, the Group does not expect
there to be a material impact to the
profit or net assets of the Group. The
Group has a number of property leases.
At transitional date, a right of use asset
of approximately $31m will be recorded
as an asset, with a corresponding lease
liability of approximately $39.7m. There
will be a reduction in trade & other
payables of $8.6m.
2. Significant accounting
judgements, estimates
and assumptions
In applying the Group’s accounting
policies management continually
evaluates judgements, estimates and
assumptions based on experience and
other factors, including expectations of
future events that may have an impact
on the Group. All judgements, estimates
and assumptions made are believed
to be reasonable based on the most
current set of circumstances available
to management and are reviewed on an
ongoing basis. Actual results may differ
from the judgements, estimates and
assumptions. Significant judgements,
estimates and assumptions made by
management in the preparation of these
financial statements are outlined below:
Recovery of deferred tax assets
Deferred tax assets are recognised
for deductible temporary differences
as management considers that it is
probable that future taxable profits will
be available to utilise those temporary
differences. (Refer to note 19).
Impairment of loans and advances
The Company assesses impairment
of all loans at each reporting date by
evaluating the expected credit loss on
those loans. In the Directors’ opinion,
no such impairment exists beyond
that provided at 31 December 2018
(2017: Nil). (Refer to note 20).
Long service leave provisions
The liability for long service leave is
recognised and measured as the present
value of the estimated future cash flows
to be made in respect of all employees
at balance date. In determining the
present value of a liability, attrition rates
and pay increases through promotion
and inflation have been taken into
account. A discount rate equal to the
government bond rate has been used
in determining the present value of the
obligation. (Refer to note 25).
Legal provision
From time to time claims are made
against the Group. The recognition of
any provision requires judgement to
determine managements best estimate
of the provision.
As at 31 December 2018, no provision
has been accrued to reflect potential
claims. In the Directors’ opinion, no
provision is required. (Refer to note 24).
Intangible assets
The customer lists acquired have been
valued using the net present value
of the unlevered free cash flow from
each business’ client list and software
development costs incurred are initially
measured at cost and are amortised
over the useful life. These valuations are
outlined below:
Bell Foreign Exchange and
Futures business
The amortisation period for the
acquired intangible assets of the
Foreign Exchange and Futures business
is deemed to be 10 years. This was
determined by analysing the average
length of the relationship clients have
with the business.
Development costs
Amortisation period for the incurred
intangible asset development costs
is deemed to be 10 years. This was
determined by assessing the average
length of the useful life of the assets.
Impairment of goodwill
Goodwill is tested for impairment
annually or more frequently if events
or changes in circumstances indicate
that it might be impaired. For the
purpose of impairment testing, goodwill
is allocated to Retail and Wholesale
which represents the lowest level
at which it is monitored for internal
management purposes.
The recoverable amount of the business
to which each goodwill component is
allocated to a cash-generating unit
is estimated based on its value in use
and is determined by discounting the
future cash flows generated from
continuing use. At 31 December 2018,
goodwill allocated to the cash-generating
units was $57.5 million for Retail and
$72.9 million for the Wholesale segment.
Key assumptions used in discounted
cash flow projections
The assumptions used for determining
the recoverable amount are based on
past experience and expectations for
the future. Projected cash flows for
each group of cash-generating units
are discounted using an appropriate
discount rate and a terminal value
multiple is applied.
The following assumptions have been
used in determining the recoverable
amount of each cash-generating unit:
Discount rates:
A post-tax discount rate of 11% was used
for each cash-generating unit, based
on the risk free rate, adjusted for a risk
premium to reflect both the increased
risk of investing in equities and specific
risks associated with the business.
28
Annual Report 2018 – Bell Financial Group
NOTES TO THE FINANCIAL STATEMENTS continuedFor the year ended 31 December 2018 Terminal value multiple:
A terminal value multiple of 7 times was
used for each cash-generating unit.
The multiple was applied to extrapolate
the discounted future maintainable
after tax cash flows beyond the five year
forecast period.
Brokerage revenue:
An increase in brokerage revenue of
2.7% p.a. average growth over the five
year forecast period for Retail and 5.9%
p.a. average growth over the five year
forecast period for Wholesale. This
assumption reflects past experience.
Corporate fee income:
Corporate fee income maintained
at current levels for the five year
forecast period for Retail. An increase
in corporate fee income of 3.7% p.a.
average growth over the five year
forecast period for Wholesale. This
assumption reflects past experience.
Sensitivity analysis
As at 31 December 2018, the recoverable
amounts for the retail and wholesale
segments exceeds the carrying values.
The recoverable amounts are sensitive to
several key assumptions and a change
in these assumptions could cause
the carrying amounts to exceed the
recoverable amounts. Using the discount
rate above, if brokerage and corporate
fee revenue decreases by approximately
4.5% for retail and 34% for wholesale
from the estimated amounts in each of
the five years of the forecast period, the
estimated recoverable amounts would
be equal to the carrying amounts. If the
discount rate increased to 14% for retail
and 21.5% for wholesale, the estimated
recoverable amounts would be equal
to the carrying amounts. Further, if the
terminal value multiple decreased to
approximately 5.7 times for retail and
3.3 times for wholesale, the estimated
recoverable amounts would be equal
to the carrying amounts at that date.
3. Financial risk management
Overview
The Group’s principal financial
instruments comprise listed securities,
derivatives, term deposits and cash. The
Group has exposure to the following risks
from its use of financial instruments:
• Market risk
• Credit risk
• Liquidity risk
Risk Management Framework
The Board of Directors has overall
responsibility for the establishment
and oversight of the risk management
framework. The Board has established
the Group Risk and Audit Committee
(GRAC), which is responsible for
developing and monitoring risk
management policies. The Committee
reports regularly to the Board of
Directors on its activities.
Risk management policies are
established to identify and analyse
the risks faced by the Group, to set
appropriate risk limits and controls,
and to monitor risks and adherence to
limits. Risk management policies and
systems are reviewed regularly to reflect
changes in market conditions and the
Group’s activities. The Group, through
its training and management standards
and procedures, aims to develop a
disciplined and constructive control
environment in which all employees
understand their roles and obligations.
The Group Risk and Audit Committee
oversees how management monitors
compliance with the Group’s risk
management policies and procedures
and reviews the adequacy of the risk
management framework in relation to
the risks faced by the Group. Internal
Audit assists the Group Risk and Audit
Committee in its oversight role. Internal
Audit undertakes both regular and
ad hoc reviews of risk management
controls and procedures, the results
of which are reported to the Group
Risk and Audit Committee.
The risk management framework
incorporates active management and
monitoring of a range of risks. These
include operational, information
technology, cyber, market, credit,
liquidity, legal, regulatory, reputation,
fraud and systemic risks.
The Board of Directors recognises
that cyber risk is an increasing area of
concern across the financial services
industry, and is committed to the
ongoing development of cyber security
measures through awareness training,
implementation of network security
measures, and preventive controls to
protect our assets and networks. Cyber
resilience is an integral component of
effective risk management.
Market risk
Market risk is the risk that changes in
market prices, such as interest rates,
equity prices and foreign exchange
rates will affect the Group’s income
or the value of its holdings of financial
instruments. The objective of market
risk management is to manage and
control exposures within acceptable
parameters, while optimising returns.
Equity price risk
All instruments are subject to the risk
that future changes in market conditions
may make an instrument less valuable.
As trading instruments are valued with
reference to the market or Black Scholes
model, changes in equity prices directly
affect reported income in each period.
The Group continually monitors equity
price movements to ensure the impact
on the Group’s activities is managed.
Interest rate risk
Interest rate risk arises from the
potential for change in interest rates
to have an adverse effect on the Group’s
net earnings. The Group continually
monitors movements in interest rates
and manages exposure accordingly.
The Board has also approved the use
of derivatives, in the form of interest
rate swaps, to mitigate its exposure to
interest rate risk. Changes in the fair
value and effectiveness of interest rate
swaps (which are designated cash flow
hedging instruments) are monitored
on a six-monthly basis.
29
Annual Report 2018 – Bell Financial Group
3. Financial risk
management (continued)
Market risk (continued)
Currency risk
The Group is exposed to currency
risk on monetary assets and liabilities
held in a currency other than the
respective functional currency of the
Group. The Group ensures the net
exposure is kept to an acceptable level
by buying or selling foreign currencies
at spot rates where necessary to
address short-term imbalances.
Liquidity risk
Liquidity risk is the risk that the Group
will not be able to meet its financial
obligations as they fall due. The Group’s
approach to managing this risk is
to ensure that it will always have
sufficient liquidity to meet its liabilities
when due, under both normal and
stressed conditions, without incurring
unacceptable losses or risking damage
to the Group’s reputation.
Ultimate responsibility for liquidity risk
management rests with the Board of
Directors, which has built an appropriate
liquidity risk management framework
for the management of the Group’s
short, medium and long-term funding
requirements. The Group manages
liquidity by maintaining reserves,
banking facilities and reserve borrowing
facilities and by continuously monitoring
forecast and actual cash flows and
matching up maturity profiles of
financial assets and liabilities.
With respect to the maturity of financial
liabilities, the Group also:
• holds financial assets for which there
is a liquid market and that they are
readily saleable to meet liquidity
needs; and
• has committed borrowing facilities or
other lines of credit that it can access
to meet liquidity needs.
Credit risk
Credit risk is the financial loss to the
Group if a debtor or counterparty to a
financial instrument fails to meet its
contractual obligations.
Trade and other receivables
The credit risk for these accounts
is that financial assets recognised
on the balance sheet exceed their
carrying amount, net of any provisions
for doubtful debts. In relation to
client debtors, the Group’s credit
risk concentration is minimised as
transactions are settled on a delivery
versus payment basis with a settlement
regime of trade day plus two days.
Margin lending
Management monitors exposure to
credit risk on an ongoing basis. The
Group requires collateral in respect
of margin loans made in the course
of business. This collateral is generally
in the form of the underlying security
the margin loan is used to invest in.
Loan-to-value ratios (LVRs) are assigned
to determine the amounts of lending
allowed against each security. Loans
balances are reviewed daily and are
subject to margin calls once the geared
value falls 10% lower than the loan
balance. Warnings are sent between
5% and 10%. The lender can also
require the borrower to repay on
demand part or all of the amount
owing at any time, whether or not the
borrower or any guarantor is in default.
Capital management
The Board’s policy is to maintain a
strong capital base so as to maintain
investor, creditor and market confidence
and to sustain future development
of the business. Capital consists of
ordinary shares and retained earnings
of the Group. The Group is required to
comply with certain capital and liquidity
requirements imposed by regulators
as a licensed broking firm. All capital
requirements are monitored by the Board
and the Group was in compliance with
all requirements throughout the year.
Security arrangements
The ANZ Bank has a Registered
Mortgage Debenture over the assets
|and undertakings of the Company.
4. Determination of fair values
A number of the Group’s accounting
policies and disclosures require the
determination of fair value, for both
financial and non-financial assets
and liabilities. Fair values have been
determined and disclosed based on
the following methods. Where
applicable, further information about
the assumptions made in determining
fair values is disclosed in the notes
specific to that asset or liability.
Investments in equity
The fair values of financial assets at
fair value through profit or loss are
determined with reference to the quoted
bid price, or if unquoted determined
using a valuation model at reporting date.
Derivatives
The fair value of interest rate swaps is
based on a mark-to-market model with
reference to prevailing fixed and floating
interest rates. These quotes are tested
for reasonableness by discounting
estimated future cash flows based on
term to maturity of each contract and
using market interest rates for a similar
instrument at the measurement date.
The fair value of currency swaps is
determined using quoted forward
exchange rates at the reporting date
and present value calculations based
on high quality yield curves in the
respective currencies.
The fair value of options is determined
using the Black Scholes option-
pricing model.
Share based payments
The fair value of employee stock options
is determined using a Black Scholes
model. Measurement inputs include
share price, exercise price, volatility,
weighted average expected life of the
instrument, expected dividends and
risk free interest rate. Service and
non-market conditions are not taken
into account in determining fair value.
30
Annual Report 2018 – Bell Financial Group
NOTES TO THE FINANCIAL STATEMENTS continuedFor the year ended 31 December 2018 5. Segment Reporting
Business segments
The segments reported below are consistent with internal reporting provided to the chief decision makers:
• Retail – equities, Bell Direct, futures, foreign exchange, corporate fee income, portfolio administration services, margin lending
and deposits; and
• Wholesale – equities, Desktop Broker, white label clients and corporate fee income.
31 December 2018
Revenue from operations
Profit/(loss) after tax
Segment assets
Total assets
Segment liabilities
Total liabilities
Other segment details
Interest revenue
Interest expense
Depreciation/amortisation
31 December 2017
Revenue from operations
Profit/(loss) after tax
Segment assets
Total assets
Segment liabilities
Total liabilities
Other segment details
Interest revenue
Interest expense
Depreciation/amortisation
Retail
$’000
160,526
11,996
667,939
667,939
542,634
542,634
18,250
(5,007)
(1,418)
Retail
$’000
161,727
13,023
660,087
660,087
526,958
526,958
16,226
(4,585)
(1,479)
Wholesale
$’000
59,490
13,074
93,958
93,958
Consolidated
$’000
220,016
25,070
761,897
761,897
15,934
15,934
558,568
558,568
–
–
(53)
18,250
(5,007)
(1,471)
Wholesale
$’000
44,036
8,420
79,462
79,462
Consolidated
$’000
205,763
21,443
739,549
739,549
10,741
10,741
537,699
537,699
–
–
(44)
16,226
(4,585)
(1,523)
Geographical segments
The Group operates predominantly within Australia and has offices in Hong Kong, London and New York.
6. Rendering of services
Brokerage
Fee income
Portfolio administration fees
Other1
1. 2017 comparative amounts have been restated. Refer to Note 1(a) for further information.
31
Annual Report 2018 – Bell Financial Group
Consolidated
2018
$’000
112,880
66,826
17,548
4,969
202,223
2017
$’000
112,997
55,057
16,112
4,617
188,783
7. Revenue
The below Group’s revenue is derived from contracts with customers.
In the following table, revenue is disaggregated by major products and service lines. The table also includes a reconciliation
of the disaggregated revenue with the Group’s reportable segments in note 5.
Brokerage
Fee income
Portfolio administration fees
Other1
Retail
Wholesale
Consolidated
2018
$’000
94,263
26,118
17,548
4,804
142,733
2017
$’000
96,102
28,333
16,112
4,200
144,747
2018
$’000
18,617
40,708
–
165
59,490
2017
$’000
16,895
26,724
–
417
44,036
2018
$’000
112,880
66,826
17,548
4,969
202,223
2017
$’000
112,997
55,057
16,112
4,617
188,783
1. 2017 comparative amounts have been restated. Refer to Note 1(a) for further information.
8. Investment gains/(losses)
Dividends received
Profit/(loss) on financial assets held at fair value through profit or loss
9. Other income
Sundry income
10. Finance income and expenses
Interest income on bank deposits
Interest income on loans and advances
Total finance income
Bank interest and fee expense
Interest expense on deposits
Total finance expense
Net finance income/(expense)
Consolidated
2018
$’000
15
(942)
(927)
2017
$’000
7
(113)
(106)
Consolidated
2018
$’000
470
470
2017
$’000
860
860
Consolidated
2018
$’000
3,173
15,077
18,250
(1,601)
(3,406)
(5,007)
13,243
2017
$’000
2,965
13,261
16,226
(919)
(3,666)
(4,585)
11,641
32
Annual Report 2018 – Bell Financial Group
NOTES TO THE FINANCIAL STATEMENTS continuedFor the year ended 31 December 2018 11. Employee expenses
Wages and salaries1
Superannuation
Payroll tax
Other employee expenses
Equity-settled share-based payments
1. 2017 comparative amounts have been restated. Refer to Note 1(a) for further information.
12. Income tax expense
Current tax expense
Current period
Taxable loss/(income) not recognised/(utilised)
Adjustment for prior periods
Utilisation of tax losses
Deferred tax expense
Recognition of previously unrecognised tax losses
Relating to origination and reversal of temporary differences
Consolidated
2018
$’000
(119,283)
(6,829)
(6,523)
(1,425)
(284)
(134,344)
2017
$’000
(111,081)
(6,703)
(6,079)
(1,184)
(400)
(125,447)
Consolidated
2018
$’000
10,977
2
(6)
(1,713)
9,260
–
1,670
2017
$’000
10,115
(44)
199
–
10,270
–
(554)
Total income tax expense/(benefit)
10,930
9,716
Numerical reconciliation between tax expense and pre-tax profit
Accounting profit/(loss) before income tax
Income tax using the Company’s domestic tax rate
Non-deductible expenses
Adjustments in respect of current income tax of previous year
Income tax credit not recognised/(utilised)
Consolidated
2018
Consolidated
2017
%
30.00%
0.38%
(0.03%)
0.01%
30.36%
$’000
36,000
10,800
136
(9)
3
10,930
%
30.00%
1.32%
0.01%
(0.14%)
31.19%
$’000
31,159
9,348
410
2
(44)
9,716
Tax consolidation
Bell Financial Group Ltd and its wholly owned Australian controlled entities are a tax-consolidated group.
On 3 July 2018, the Group acquired the remaining shares it did not already own in Third Party Platform Pty Ltd, increasing its
ownership from 56.63% to 100%. Third Party Platform Pty Ltd joined the Bell Financial Group Ltd tax consolidated group at this
time and income tax losses of $16.5m were transferred from Third Party Platform Pty Ltd to the Bell Financial Group Ltd tax
consolidated group.
33
Annual Report 2018 – Bell Financial Group
13. Cash and cash equivalents
Group cash reserves1
Cash on hand
Cash at bank
Margin lending cash
Cash at bank
Client cash
Cash at bank (Trust account)
Cash at bank (Segregated account)
Cash and cash equivalents in the Statement of Cash Flows
Cash on hand and at bank earns interest at floating rates based on daily bank deposit rates.
Segregated cash and Trust bank balances earn interest at floating rates based on daily bank rates.
Consolidated
2018
$’000
14
86,942
86,956
19,585
19,585
33,512
53,569
87,081
193,622
2017
$’000
12
84,962
84,974
34,001
34,001
55,754
23,247
79,001
197,976
Segregated cash and Trust bank balances are client funds, and are not available for general use by the Group. A corresponding
liability is recognised within trade and other payables (note 21).
The Group’s exposure to interest rate risk for financial assets and liabilities is disclosed in note 31.
1. Group Cash – summary of key movements
Group cash – 1 January 2018
Cash profit
Cash Revenue
Less Cash Expenses
Employee expenses
Occupancy expenses
Systems, communications and ASX expenses
Professional expenses
Finance expenses
Other expenses
Total Expenses
Net Cash operating profit
Balance Sheet
Tax instalments paid
Dividend paid
Clearing house deposits paid
Financial asset sales (net)
General working capital movement
Group cash – 31 December 2018
2018
$’000
84,974
2017
$’000
69,430
217,859
205,409
(135,080)
(12,081)
(19,075)
(2,301)
(5,007)
(9,898)
(183,442)
34,417
(11,549)
(23,312)
(278)
1,834
870
86,956
(118,901)
(9,560)
(18,044)
(2,962)
(4,585)
(10,515)
(164,567)
40,842
(7,647)
(15,196)
905
(223)
(3,137)
84,974
34
Annual Report 2018 – Bell Financial Group
NOTES TO THE FINANCIAL STATEMENTS continuedFor the year ended 31 December 2018 14. Trade and other receivables
Trade debtors
Less: provision for impairment
Clearing house deposits
Segregated deposits with clearing brokers
Less: provision for impairment
Sundry debtors
No impairment allowance in respect of loans and receivables noted during the year (2017: Nil).
15. Financial assets
Held at fair value through profit or loss
Shares in listed corporations
Options held in listed corporations
Consolidated
2018
$’000
77,187
–
77,187
4,715
32,275
–
36,990
6,482
120,659
2017
$’000
70,071
–
70,071
4,420
21,463
–
25,883
5,406
101,360
Consolidated
2018
$’000
555
490
1,045
2017
$’000
2,584
1,228
3,812
35
Annual Report 2018 – Bell Financial Group
16. Property, plant and equipment
Consolidated
Cost
Balance at 1 January 2017
Additions
Disposals
Effect of movements in exchange rates
Balance at 31 December 2017
Balance at 1 January 2018
Additions
Disposals
Effect of movements in exchange rates
Balance at 31 December 2018
Accumulated depreciation
Balance at 1 January 2017
Depreciation charge for the year
Disposals
Effect of movements in exchange rates
Balance at 31 December 2017
Balance at 1 January 2018
Depreciation charge for the year
Disposals
Effect of movements in exchange rates
Balance at 31 December 2018
Carrying amount
At 1 January 2017
At 31 December 2017
At 31 December 2018
Fixtures and
fittings
$’000
Office
equipment
$’000
Leasehold
improvements
$’000
1,776
104
–
2
1,882
1,882
50
–
9
1,941
(1,546)
(84)
–
(1)
(1,631)
(1,631)
(60)
–
(8)
(1,699)
230
251
242
4,592
194
–
2
4,788
4,788
205
–
11
5,004
(4,352)
(159)
–
(3)
(4,514)
(4,514)
(171)
–
(12)
(4,697)
240
274
307
6,323
–
–
–
6,323
6,323
–
–
8
6,331
(6,048)
(69)
–
–
(6,117)
(6,117)
(52)
–
(8)
(6,177)
275
206
154
Total
$’000
12,691
298
–
4
12,993
12,993
255
–
28
13,276
(11,946)
(312)
–
(4)
(12,262)
(12,262)
(283)
–
(28)
(12,573)
745
731
703
36
Annual Report 2018 – Bell Financial Group
NOTES TO THE FINANCIAL STATEMENTS continuedFor the year ended 31 December 2018 17. Goodwill and intangible assets
Cost
Balance at 1 January 2017
Acquisitions – internally developed
Balance at 31 December 2017
Balance at 1 January 2018
Acquisitions – internally developed
Balance at 31 December 2018
Accumulated amortisation and impairment losses
Balance at 1 January 2017
Amortisation
Balance at 31 December 2017
Balance at 1 January 2018
Amortisation
Balance at 31 December 2018
Carrying amount
At 1 January 2017
At 31 December 2017
At 31 December 2018
Goodwill
$’000
Identifiable
intangibles
$’000
130,413
–
130,413
130,413
–
130,413
–
–
–
–
–
–
130,413
130,413
130,413
11,240
2,873
14,113
14,113
3,104
17,217
4,164
1,211
5,375
5,375
1,188
6,563
7,076
8,738
10,654
Total
$’000
141,653
2,873
144,526
144,526
3,104
147,630
4,164
1,211
5,375
5,375
1,188
6,563
137,489
139,151
141,067
37
Annual Report 2018 – Bell Financial Group
18. Non-Controlling interest (NCI)
The following table summarises the information relating to each of the Group’s subsidiaries that has material NCI, before
any intra-group eliminations. At 31 December 2018, the non-controlling interest in Third Party Platform Pty Ltd was nil
(2017: 43.37%). Effective 3 July 2018, Bell Financial Group Ltd acquired the remaining shares in Third Party Platform Pty Ltd
that it did not already own, increasing its ownership from 56.63% to 100%.
Assets
Liabilities
Net Assets
Carrying amount of NCI
Revenue
Profit/(loss) after tax
Total Comprehensive Income
Profit allocated to NCI
Cash flows from operating activities
Cash flows from investing activities
Cash flows from financing activities
Net increase/(decrease) in cash and cash equivalents
19. Deferred tax assets and liabilities
The movement in deferred tax balances are as follows:
Consolidated 2018
Property, plant and equipment
Employee benefits
Carry forward tax loss
Utilisation of tax losses
Other items
Consolidated 2017
Property, plant and equipment
Employee benefits
Carry forward tax loss
Other items
Third Party
Platform Pty Ltd
2018
$’000
–
–
–
–
7,583
871
871
378
5,987
(118)
(500)
5,369
2017
$’000
40,216
(26,784)
13,432
5,825
14,355
1,863
1,863
808
3,704
(12)
(2,000)
1,692
Balance as at
1 January
$’000
8
3,081
5,254
–
1,149
9,492
Balance as at
1 January
$’000
17
2,837
5,920
830
9,604
Recognised in
profit or loss
$’000
(7)
23
(198)
(1,713)
27
(1,868)
Recognised in
profit or loss
$’000
(9)
244
(666)
319
(112)
Balance at
31 December
$’000
1
3,104
5,056
(1,713)
1,176
7,624
Balance at
31 December
$’000
8
3,081
5,254
1,149
9,492
Unrecognised deferred tax assets relating to tax losses at 31 December 2018: $19,000 (2017: $17,000).
Management has determined there is sufficient evidence that there will be profits available in future periods against which the tax
losses will be utilised as set out in note 2. The assessment was based on forward projections that indicate tax losses will be fully
utilised against profits within a 5-year period.
38
Annual Report 2018 – Bell Financial Group
NOTES TO THE FINANCIAL STATEMENTS continuedFor the year ended 31 December 2018 20. Loans and advances
Margin lending
Consolidated
2018
$’000
296,217
296,217
2017
$’000
286,188
286,188
Loans and advances are repayable on demand. There were no impaired, past due or renegotiated loans at 31 December 2018
(2017: nil).
There is significant turnover in loans and advances. Based on historical experience the Group’s expectation is all but
approximately 6% of loans may be realised in the next 12 months (2017: 8%), with the balance being realised after 12 months.
Refer to note 31 for further detail on the margin lending loans.
21. Trade and other payables
Settlement obligations
Sundry creditors and accruals
Segregated client liabilities
Consolidated
2018
$’000
92,842
20,948
99,400
213,190
2017
$’000
101,688
20,923
63,239
185,850
Settlement obligations are non-interest bearing and are normally settled on 2-day terms. Sundry creditors are normally settled
on 60-day terms.
22. Deposits and borrowings
This note provides information about the contractual terms of the Group’s interest-bearing deposits and borrowings. For more
information about the Group’s exposure to interest rate and foreign currency risk, see note 31.
Deposits (cash account)1
Bell Cash Trust2
Cash advance facility3
1. Deposits relate to Margin Lending/Cash Account business (Bell Potter Capital) which are largely at call.
2. Represents funds held on behalf of Bell Potter Capital Limited in the Bell Cash Trust which are held at call.
3. Represents drawn funds from the Bell Potter Capital cash advance facility of $100m (2017: $100m).
Interest rate risk exposures
Details of the Group’s exposure to interest rate changes on borrowings are set out in note 31.
Consolidated
2018
$’000
1,644
274,797
36,000
312,441
2017
$’000
3,806
313,574
–
317,380
39
Annual Report 2018 – Bell Financial Group
22. Deposits and borrowings (continued)
Terms and debt repayment schedule
Terms and conditions of outstanding deposits and borrowings were as follows:
Consolidated
Cash advance facility
Deposits (Cash Account)
Bell Cash Trust
Average effective
interest rate
2018
2017
2018
%
2.66
1.08
1.08
2017
%
N/A
1.21
1.21
Face value
$’000
36,000
1,644
274,797
312,441
Carrying
amount
$’000
36,000
1,644
274,797
312,441
Face value
$’000
–
3,806
313,574
317,380
Carrying
amount
$’000
–
3,806
313,574
317,380
2018
Balance at 1 January 2018
Changes from financing cash flows
Deposits/(withdrawals)
from client cash balances
Drawdown/(repayment) of borrowings
Total changes from financing cash flows
Cash
advance
facility
$’000
–
Liabilities
Deposits
(Cash
Account)
$’000
3,806
Bell Cash
Trust
$’000
313,574
–
36,000
36,000
(2,162)
–
(2,162)
–
(38,777)
(38,777)
Changes in fair value
–
–
–
Other charges
Liability-related
Interest expense
Interest paid
Total liability-related other changes
752
(752)
–
171
(171)
–
3,253
(3,253)
–
Balance at 31 December 2018
36,000
1,644
274,797
Derivatives (assets)/
liabilities held to hedge
long-term borrowings
Interest rate swap
contracts used for hedging
Assets
$’000
–
Liabilities
$’000
24
Total
$’000
317,404
–
–
–
–
–
–
–
–
–
–
–
51
–
–
–
(2,162)
(2,777)
(4,939)
51
4,176
(4,176)
–
75
312,516
40
Annual Report 2018 – Bell Financial Group
NOTES TO THE FINANCIAL STATEMENTS continuedFor the year ended 31 December 2018 Cash
advance
facility
$’000
–
Liabilities
Deposits
(Cash
Account)
$’000
42,894
Bell Cash
Trust
$’000
246,073
Derivatives (assets)/
liabilities held to hedge
long-term borrowings
Interest rate swap
contracts used for hedging
Assets
$’000
–
Liabilities
$’000
48
Total
$’000
289,015
–
–
–
–
–
–
–
–
(39,088)
–
(39,088)
–
67,501
67,501
–
–
537
(537)
–
3,201
(3,201)
–
3,806
313,574
–
–
–
–
–
–
–
–
–
–
–
(39,088)
67,501
28,413
(24)
(24)
–
–
–
3,738
(3,738)
–
24
317,404
2017
Balance at 1 January 2017
Changes from financing cash flows
Deposits/(withdrawals)
from client cash balances
Drawdown/(repayment) of borrowings
Total changes from financing cash flows
Changes in fair value
Other charges
Liability-related
Interest expense
Interest paid
Total liability-related other changes
Balance at 31 December 2017
23. Current tax liabilities
The current tax liability of the Group is $161,555 (2017: $2,682,269). This amount represents the amount of income taxes payable
in respect of current and prior financial periods.
41
Annual Report 2018 – Bell Financial Group
24. Provisions
Legal provision
Balance at 1 January
Arising during the year:
Legal/other
Utilised:
Legal/other
Balance at 31 December
Consolidated
2018
$’000
–
–
300
75
(375)
–
2017
$’000
300
300
750
20
(470)
300
Legal provision
This amount represents a provision for certain legal claims brought against the Group. In the Directors’ opinion, the provision
is appropriate to cover losses that are quantifiable or measureable at 31 December 2018.
25. Employee benefits
Salaries and wages accrued
Liability for annual leave
Total employee benefits
Liability for long-service leave
Total employee benefits
Consolidated
2018
$’000
23,422
5,251
28,673
3,970
32,643
2017
$’000
22,987
4,910
27,897
3,566
31,463
The present value of employee entitlements not expected to be settled within twelve months of balance date have been calculated
using the following inputs or assumptions at the reporting date:
Assumed rate of increase on wage/salaries
Discount rate
Settlement term (years)
Number of employees at year end
Consolidated
2018
$’000
3.0%
2.5%
7
690
2017
$’000
3.0%
2.5%
7
668
42
Annual Report 2018 – Bell Financial Group
NOTES TO THE FINANCIAL STATEMENTS continuedFor the year ended 31 December 2018 26. Reconciliation of cash flows from operating activities
Cash flows from operating activities
Profit after tax:
Adjustments for:
Depreciation & amortisation
Net loss on investments
Equity settled share-based payments
(Increase) client receivables
(Increase) other receivables
(Increase)/decrease derivative asset
(Increase) other assets
Decrease deferred tax assets
(Increase) intangibles
Increase client payables
Increase other payables
Increase derivative liability
Increase/(decrease) current tax liabilities
Increase provisions
Increase deferred tax liability
Net cash from operating activities
Reconciliation of cash
For the purpose of the cash flow statement, cash and cash equivalents comprise:
Group cash reserves
Cash on hand
Cash at bank
Margin lending cash
Cash at bank
Client cash
Cash at bank (Trust account)
Segregated cash at bank (client)
Consolidated
2018
$’000
2017
$’000
25,070
21,443
1,471
933
284
27,758
(18,223)
(1,076)
102
(223)
1,231
(3,104)
27,643
25
57
(2,520)
880
637
33,187
14
86,942
86,956
19,585
19,585
33,512
53,569
87,081
193,622
1,523
110
400
23,476
(22,886)
(7,116)
(102)
(52)
112
(2,873)
44,667
9,714
–
1,957
8,027
–
54,924
12
84,962
84,974
34,001
34,001
55,754
23,247
79,001
197,976
43
Annual Report 2018 – Bell Financial Group
27. Capital and reserves
Ordinary shares
On issue at 1 January
Share issue 3 July 20181
On issue at 31 December
Consolidated
2018
$’000
167,886
36,351
204,237
2017
$’000
167,886
–
167,886
1. On 3 July 2018, the Group completed a renounceable pro rata entitlement offer and issued 53,457,468 shares at $0.68 per share, raising $36,351,078.
Proceeds from the share issue were used to fund the acquisition of the remaining 43.37% of Third Party Platform Pty Ltd the Group did not already own,
increasing its ownership from 56.63% to 100%.
Movements in ordinary share capital
Date
1 January 2017
31 December 2017
1 January 2018
Share issue 3 July 2018
31 December 2018
Detail
Opening balance
Balance
Opening balance
Balance
Number
of shares
267,286,480
267,286,480
267,286,480
53,457,468
320,743,948
Ordinary Shares
The authorised capital of the Group is $204,236,590 representing 320,743,948 fully paid ordinary shares.
The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share
at meetings of the Company.
All ordinary shares rank equally with regard to the Company’s residual assets.
Treasury shares
As at 31 December 2018, there were 2,845,906 treasury shares outstanding (2017: 3,004,922).
Retained earnings
As at 31 December 2018, there were retained profits of $28.4m (2017: $27m).
Non-controlling interests
The non-controlling interests relate to ownership of Third Party Platform Pty Ltd at 0.00% (2017: 43.37%). Balance at
31 December 2018: Nil (2017: $5.8m). Effective 3 July 2018, Bell Financial Group Ltd acquired the remaining shares in
Third Party Platform Pty Ltd that it did not already own, increasing its ownership from 56.63% to 100%.
Foreign currency reserve
The foreign currency reserve comprises of any movements in the translation of foreign currency balances. Balance at
31 December 2018: $668,000 (2017: $340,000).
Other equity
Other equity comprises movements in equity as a result of transactions with subsidiaries in Bell Financial Group Ltd’s capacity
as a shareholder. Balance at 31 December 2018: $28,858,000 debit (2017: $1,806,000 credit). The decrease in other equity of
$30,664,000 related to the difference between the consideration paid for the remaining 43.37% of Third Party Platform Pty Ltd and
the non-controlling interest derecognised at that time.
44
Annual Report 2018 – Bell Financial Group
NOTES TO THE FINANCIAL STATEMENTS continuedFor the year ended 31 December 2018 Cash flow hedging reserve
The cash flow hedging reserve comprises the effective portion of the cumulative net change in the fair value of the interest rate
swap related to hedged transactions. Balance at 31 December 2018: $75,000 (2017: $24,000).
Share based payments reserve
The share based payments reserve arises on the grant of options, performance rights and deferred share rights to select
employees under the Company’s equity-based remuneration plans. Balance at 31 December 2018: $264,000 (2017: $387,000).
Treasury shares reserve
The treasury shares reserve represents the cost of shares held by the Employee Share Trust that the Group is required to include
in the Consolidated Financial Statements. Balance at 31 December 2018: $1.3m (2017: $1.4m).
28. Dividends
Dividends recognised in the current year by the Group are:
2018
Interim 2018 ordinary dividend
Final 2018 ordinary dividend
2017
Interim 2017 ordinary dividend
Final 2017 ordinary dividend
Cents
per share
Total amount
$‘000
Franked/
unfranked
Date of
payment
2.75
–
2.00
5.50
8,742
–
5,286
14,570
Franked
–
29 August 2018
–
Franked 13 September 2017
21 March 2018
Franked
Dividend franking account
30 percent franking credits available to shareholders of Bell Financial Group Ltd
for subsequent financial years
Company
2018
$ ‘000
2017
$ ‘000
28,292
26,801
The above available amounts are based on the balance of the dividend franking account at year-end adjusted for:
1. Franking credits that will arise from the payment of current tax liabilities.
2. Franking debits that will arise from payment of dividends recognised as a liability at year-end.
3. Franking credits that will arise from the receipt of dividends recognised as receivable at year-end.
The ability to utilise the franking credits is dependent upon there being sufficient available profits to declare dividends.
The impact on the dividend franking account of dividends declared but not recognised as a liability is to reduce it by $5.8m
(2017: $6.2m).
45
Annual Report 2018 – Bell Financial Group
29. Earnings per share
Earnings per share at 31 December 2018 based on profit after tax and a weighted average number of shares outlined below
was 8.5 cents (2017: 7.8 cents). Diluted earnings per share at 31 December 2018 was 8.5 cents (2017: 7.8 cents).
Reconciliation of earnings used in calculating EPS
Basic earnings per share
Profit/(loss) after tax
Profit attributable to ordinary equity holders used for basic EPS
Adjustments for calculation of diluted earnings per share
Profit attributable to ordinary equity holders used to calculate basic EPS
Effect of stock options issued
Profit attributable to ordinary equity holders used for diluted EPS
Weighted average number of ordinary shares used as the denominator
Weighted average number of ordinary shares used to calculate basic EPS (net of treasury shares)
Weighted average number of ordinary shares at year-end
Weighted average number of ordinary shares used to calculate diluted EPS
Consolidated
2018
$’000
25,070
24,692
24,692
–
24,692
2017
$’000
21,443
20,635
20,635
–
20,635
Consolidated
2018
291,266,813
291,266,813
291,266,813
2017
263,913,293
263,913,293
263,913,293
30. Share-based payments
Long-Term Incentive Plan (LTIP)
The Board is responsible for administering the LTIP Rules and the terms and conditions of specific grants of options or performance
rights to participants in the LTIP. The LTIP Rules include the following provisions:
• The Board may determine which persons will be eligible to participate in the LTIP from time to time. Eligible persons may
be invited to apply to participate in the LTIP. The Board may in its discretion accept such applications.
• A person participating in the LTIP (“Executive”) may be granted options or performance rights on conditions determined
by the Board.
• The options or performance rights will vest on, and become exercisable on or after, a date predetermined by the Board
(“the Vesting Date”), provided that the Executive remains employed as an executive of the Company as at that date. These
terms may be accelerated at the discretion of the Board under specified circumstances.
• An unvested option or performance right will generally lapse at the expiry of the exercise period applicable to that option or
performance right.
• Following the Vesting Date, the vested option or performance right may be exercised by the Executive subject to any exercise
conditions and the payment of the exercise price (if any), and the Executive will then be allocated or issued shares on a one
for one basis.
• The Company has established an Employee Share Trust for the purpose of acquiring and holding shares in the Company for
the benefit of participants.
Fair value of options granted
There were no share options granted during the year to 31 December 2018 (2017: Nil). During 2017, remaining outstanding
options of 19,550,000 lapsed.
Performance Rights
Under the LTIP Rules, performance rights are deferred equity taken as 100% shares, with the conditions, including vesting and
the period of deferral, governed by the terms of the grant. Unvested performance rights are forfeited in certain situations set out
in the LTIP Rules. Ordinary shares allocated under the LTIP on exercise of performance rights may be held in trust beyond the
deferral period. The issue price for the 2015 performance rights is based on the closing price of the shares traded on the ASX
on the grant date and performance hurdles are time related.
46
Annual Report 2018 – Bell Financial Group
NOTES TO THE FINANCIAL STATEMENTS continuedFor the year ended 31 December 2018 Reconciliation of outstanding performance rights:
Outstanding 1 January
Granted during the year
Forfeited during the year
Exercised during the year
Outstanding balance 31 December
Expenses arising from share-based payment transactions
Employee share options
Performance rights
Employee share issue
Total expense recognised as employee costs
Consolidated
2018
000
334
–
–
(334)
–
2017
000
667
–
–
(333)
334
Consolidated
2018
$’000
–
29
255
284
2017
$’000
–
160
240
400
31. Financial instruments
Exposure to credit, interest rate, currency and liquidity risks arise in the normal course of the Group’s business.
Credit risk
Management has a process in place to monitor the exposure to credit risk on an ongoing basis. The Group requires collateral in
respect of margin loans made in the course of business within Bell Potter Capital. This collateral is generally in the form of the
underlying security the margin loan is used to invest in. A loan-to-value ratio (LVR) is determined for each security with regard
to market weight, index membership, liquidity, volatility, dividend yield, industry sector and advice from Bell Financial’s research
department. A risk analyst performs a review of the LVR and the recommendation is submitted to management. Management
does not expect any counterparty to fail to meet its obligations.
Advisers and clients are provided with early warning of accounts in deficit from 5% up to 10% and clients receive a margin call
if their account is in deficit by more than 10%. Margin calls are made based on the end-of-day position but can be made intraday
at management’s discretion.
The maximum exposure to credit risk is represented by the carrying amount of each financial asset in the Statement of Financial
Position as outlined below:
Trade debtors
Clearing house deposits
Segregated deposits with clearing brokers
Loans and advances
Sundry debtors
Consolidated
2018
$’000
77,187
4,715
32,275
296,217
6,482
2017
$’000
70,071
4,420
21,463
286,188
5,406
Note
14
14
14
20
14
47
Annual Report 2018 – Bell Financial Group
31. Financial instruments (continued)
Credit risk (continued)
The ageing of trade receivables at reporting date is outlined below:
Consolidated
Ageing of receivables
Not past due
Past due 0 – 30 days
Past due 31 – 365 days
More than one year
Gross
2018
$’000
77,043
133
11
–
Impairment
2018
$’000
–
–
–
–
Gross
2017
$’000
69,939
122
10
–
Impairment
2017
$’000
–
–
–
–
Collectability of trade receivables is reviewed on an ongoing basis. Debts that are known to be uncollectible are written off.
A provision for impairment of trade receivables is established based on lifetime expected credit losses. This assessment is based
on past events, current conditions and reasonable and supportable information about future events and economic conditions.
Liquidity risk
The following are the contractual maturities of financial liabilities, including estimated interest and excluding the impact of
netting agreements.
Consolidated 2018
Non-derivative liabilities
Trade & other payables
Cash deposits
Cash advance facilities
Bell Cash Trust
Derivative liabilities
Hedging derivative
Foreign currency swap
Consolidated 2017
Non-derivative liabilities
Trade & other payables
Cash deposits
Cash advance facilities
Bell Cash Trust
Derivative liabilities
Hedging derivative
Carrying
Amount
$’000
Contracted
Cashflow
$’000
6 months
or less
$’000
6–12
months
$’000
1–2 years
$’000
2–5 years
$’000
5+ years
$’000
213,190
1,644
36,000
274,797
(213,190)
(1,644)
(36,000)
(274,797)
(213,190)
(1,644)
(36,000)
(274,797)
75
57
(75)
(57)
(75)
(57)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Carrying
Amount
$’000
Contracted
Cashflow
$’000
6 months
or less
$’000
6–12
months
$’000
1–2 years
$’000
2–5 years
$’000
5+ years
$’000
185,850
3,806
–
313,574
(185,850)
(3,806)
–
(313,574)
(185,850)
(3,806)
–
(313,574)
24
(24)
(24)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
The Group manages liquidity by maintaining reserves, banking facilities and reserve borrowing facilities and by continuously
monitoring forecast and actual cash flows and matching up maturity profiles of financial assets and liabilities. Rolling cash
projections are used to monitor cash flow requirements and optimise cash returns on investments. A bank facility is also available
to be drawn upon in order to meet both short and long-term liquidity requirements.
48
Annual Report 2018 – Bell Financial Group
NOTES TO THE FINANCIAL STATEMENTS continuedFor the year ended 31 December 2018
Market risk
Market risk is the risk that changes in market prices, such as interest rates, equity prices and foreign exchange rates will affect
the Group’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage
and control exposures within acceptable parameters, while optimising returns.
Interest rate risk
The Group’s investments in fixed-rate debt securities and its fixed-rate borrowings are exposed to a risk of change in their fair
value due to changes in interest rates. The Group’s investments in variable-rate debt securities and its variable-rate borrowings
are exposed to a risk of change in cash flows due to changes in interest rates. Interest rate swaps are used to hedge exposure to
fluctuations in interest rates. Changes in the fair value of these derivative hedging instruments are recognised directly in equity
to the extent that the hedge is effective. To the extent the hedge is ineffective, changes in the fair value are recognised in profit
or loss.
In managing interest rate risk the Group aims to reduce the impact of short-term fluctuations on the Group’s earnings. Over the
longer-term, however, permanent changes in interest rates will have an impact on profit.
Investments in equity securities and short-term receivables and payables are not exposed to interest rate risk.
Equity price risk
All instruments are subject to the risk that future changes in market conditions may make an instrument less valuable. As trading
instruments are valued with reference to the market or Black Scholes model, changes in equity prices directly affect reported
income each period. The Group monitors equity price movements to ensure there is no material impact on the Group’s activities.
The Group is exposed to equity price risks through its listed and unlisted investments. These investments are classified as financial
assets or liabilities at fair value through the profit or loss.
Foreign currency risk
The Group is exposed to insignificant currency risk on monetary assets and liabilities held in a currency other than the respective
functional currency of the Group. The Group ensures the net exposure is kept to an acceptable level by buying or selling foreign
currencies at spot rates where necessary to address short-term imbalances.
Sensitivity analysis
Interest rate risk
At 31 December 2018, it is estimated that a general decrease of one-percentage point in interest rates would decrease the
Group’s profit before income tax by approximately $1,700,000 (2017: $1,600,000 decrease to profit) and would decrease equity
by approximately $1,190,000 (2017: $1,120,000 decrease to equity). Interest rate swaps have been included in this calculation.
A general increase of one-percentage point in interest rates would have an equal but opposite effect.
Equity price risk
At 31 December 2018, it is estimated that a 10% decrease in equity prices would decrease the Group’s profit before income tax by
approximately $100,000 (2017: $380,000 decrease to profit) and would decrease equity by approximately $70,000 (2017: $266,000
decrease to equity). A 10% increase in equity prices would have an equal but opposite effect.
49
Annual Report 2018 – Bell Financial Group
31. Financial instruments (continued)
Effective interest rates
In respect of income-earning financial assets and interest-bearing financial liabilities, the following tables indicate their average
effective interest rates at the reporting date and the expected periods in which they mature.
2018
2017
Consolidated
Fixed rate instruments
Loans and advances
Deposits and borrowings
Cash advance facility
Variable rate instruments
Cash and cash
equivalents
Loans and advances
Deposits and borrowings
Bell Cash Trust
Average
Effective
interest rate
%
Note
Total
$’000
6 months
or less
$’000
6 – 12
months
$’000
1 – 2 years
$’000
2 – 5 years
$’000
More than
5 years
$’000
20
22
22
13
20
22
22
4.44%
0.00%
2.66%
96,851
–
(36,000)
60,851
92,897
–
(36,000)
56,897
1.50%
5.07%
1.08%
1.08%
193,622
199,366
(1,644)
(274,797)
116,547
193,622
199,366
(1,644)
(274,797)
116,547
704
–
–
704
–
–
–
–
–
3,250
–
–
3,250
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Fair value measurements
(a) Accounting classifications and fair values
The following table shows the carrying amounts and fair values of financial assets and financial liabilities, including their levels
in the fair value hierarchy.
31 DECEMBER 2018
Financial assets measured at fair value
Equity securities/unlisted options
Note
15
Financial assets not measured at fair value
Trade and other receivables
Cash and cash equivalents
Loans and advances
Financial liabilities measured at fair value
Interest rate swaps used for hedging
Foreign currency swap
Financial liabilities not measured at fair value
Trade and other payables
Deposits and borrowings
14
13
20
21
22
Carrying Amount
Designated
at fair
value
$’000
Fair value
hedging
instruments
$’000
Loans and
receivables
$’000
Other
financial
liabilities
$’000
1,045
1,045
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
75
57
132
–
–
–
–
–
120,659
193,622
296,217
610,498
–
–
–
–
–
–
Total
$’000
1,045
1,045
120,659
193,622
296,217
610,498
75
57
132
–
–
–
–
–
–
–
–
–
201,726
312,441
514,167
201,726
312,441
514,167
50
Annual Report 2018 – Bell Financial Group
98,759
89,614
2,070
7,075
6 – 12 months
1 – 2 years
2 – 5 years
More than 5
years
$’000
$’000
$’000
2,070
$’000
7,075
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Average
Effective
interest rate
%
4.35%
0.0%
N/A
1.50%
4.53%
1.21%
1.21%
Total
$’000
6 months or
less
$’000
98,759
89,614
–
–
197,976
187,429
(3,806)
(313,574)
68,025
197,976
187,429
(3,806)
(313,574)
68,025
Fair Value
Level 1
$’000
Level 2
$’000
Level 3
$’000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Total
$’000
1,045
1,045
75
57
132
555
555
–
–
–
–
–
–
–
–
–
–
490
490
–
–
–
–
–
–
–
75
57
132
NOTES TO THE FINANCIAL STATEMENTS continuedFor the year ended 31 December 2018 31. Financial instruments (continued)
Effective interest rates
In respect of income-earning financial assets and interest-bearing financial liabilities, the following tables indicate their average
effective interest rates at the reporting date and the expected periods in which they mature.
Consolidated
Note
%
Average
Effective
interest rate
6 months
6 – 12
Total
$’000
or less
$’000
months
1 – 2 years
2 – 5 years
$’000
$’000
$’000
More than
5 years
$’000
Fixed rate instruments
Loans and advances
Deposits and borrowings
Cash advance facility
Variable rate instruments
Cash and cash
equivalents
Loans and advances
Deposits and borrowings
Bell Cash Trust
20
22
22
13
20
22
22
96,851
92,897
704
3,250
4.44%
0.00%
2.66%
–
–
(36,000)
(36,000)
60,851
56,897
704
3,250
1.50%
5.07%
1.08%
1.08%
193,622
199,366
193,622
199,366
(1,644)
(1,644)
(274,797)
(274,797)
116,547
116,547
Fair value measurements
(a) Accounting classifications and fair values
in the fair value hierarchy.
The following table shows the carrying amounts and fair values of financial assets and financial liabilities, including their levels
31 DECEMBER 2018
Note
$’000
$’000
$’000
Carrying Amount
Designated
Fair value
at fair
hedging
Loans and
value
instruments
receivables
Other
financial
liabilities
$’000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
75
57
132
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
120,659
193,622
296,217
610,498
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Total
$’000
1,045
1,045
120,659
193,622
296,217
610,498
75
57
132
201,726
312,441
514,167
201,726
312,441
514,167
Financial assets measured at fair value
Equity securities/unlisted options
Financial assets not measured at fair value
Trade and other receivables
Cash and cash equivalents
Loans and advances
Financial liabilities measured at fair value
Interest rate swaps used for hedging
Foreign currency swap
Financial liabilities not measured at fair value
Trade and other payables
Deposits and borrowings
15
14
13
20
21
22
1,045
1,045
–
–
–
–
–
–
–
–
–
–
2018
2017
6 months or
less
$’000
6 – 12 months
$’000
1 – 2 years
$’000
2 – 5 years
$’000
More than 5
years
$’000
Average
Effective
interest rate
%
4.35%
0.0%
N/A
1.50%
4.53%
1.21%
1.21%
Total
$’000
98,759
–
–
98,759
197,976
187,429
(3,806)
(313,574)
68,025
89,614
–
–
89,614
197,976
187,429
(3,806)
(313,574)
68,025
Fair Value
Level 1
$’000
Level 2
$’000
Level 3
$’000
555
555
–
–
–
–
–
–
–
–
–
–
490
490
–
–
–
–
75
57
132
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
7,075
–
–
7,075
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2,070
–
–
2,070
–
–
–
–
–
Total
$’000
1,045
1,045
–
–
–
–
75
57
132
–
–
–
51
Annual Report 2018 – Bell Financial Group
Fair Value
Level 1
$’000
Level 2
$’000
Level 3
$’000
2,584
2,584
1,228
102
1,330
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
24
24
Total
$’000
3,812
102
3,914
–
–
–
–
–
–
–
24
24
–
–
–
–
–
–
–
–
–
–
–
–
31. Financial instruments (continued)
31 DECEMBER 2017
Financial assets measured at fair value
Equity securities/unlisted options
Currency swaps
Financial assets not measured at fair value
Trade and other receivables
Cash and cash equivalents
Loans and advances
Financial liabilities measured at fair value
Interest rate swaps used for hedging
Financial liabilities not measured at fair value
Trade and other payables
Deposits and borrowings
Note
15
14
13
20
21
22
Carrying Amount
Designated
at fair
value
$’000
Fair value
hedging
instruments
$’000
Loans and
receivables
$’000
Other
financial
liabilities
$’000
3,812
102
3,914
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
24
24
–
–
–
–
–
–
101,360
197,976
286,188
585,524
–
–
–
–
–
Total
$’000
3,812
102
3,914
101,360
197,976
286,188
585,524
24
24
–
–
–
–
–
–
–
–
–
174,982
317,380
492,362
174,982
317,380
492,362
(b) Accounting classifications and fair values
The following shows the valuation techniques used in measuring level 1, 2 and 3 values, as well as the significant unobservable
inputs used.
Level 1 – Equity securities – the valuation is based on quoted prices in active markets for identical assets and liabilities.
Level 2 – Unlisted options – the valuation technique uses observable inputs. The observable inputs include strike price, expiry
date and market price. The valuation is based on Black Scholes model.
Level 2 – Interest rate swaps – the fair values are based on broker quotes. Similar contracts are traded in an active market and
the quotes reflect the actual transactions in similar instruments.
Level 2 – Currency swaps – the fair value is determined using quoted forward exchange rates at the reporting date and present
value calculations based on high quality yield curves in the respective currencies.
52
Annual Report 2018 – Bell Financial Group
NOTES TO THE FINANCIAL STATEMENTS continuedFor the year ended 31 December 2018 31. Financial instruments (continued)
31 DECEMBER 2017
Note
$’000
$’000
$’000
Carrying Amount
Designated
Fair value
at fair
hedging
Loans and
value
instruments
receivables
Other
financial
liabilities
$’000
Financial assets measured at fair value
Equity securities/unlisted options
Currency swaps
Financial assets not measured at fair value
Trade and other receivables
Cash and cash equivalents
Loans and advances
Financial liabilities measured at fair value
Interest rate swaps used for hedging
Financial liabilities not measured at fair value
Trade and other payables
Deposits and borrowings
(b) Accounting classifications and fair values
inputs used.
15
14
13
20
21
22
3,812
102
3,914
–
–
–
–
–
–
–
–
–
Total
$’000
3,812
102
3,914
101,360
197,976
286,188
585,524
24
24
–
–
–
–
–
–
–
–
–
174,982
317,380
492,362
174,982
317,380
492,362
–
–
–
–
–
–
–
–
–
–
24
24
101,360
197,976
286,188
585,524
–
–
–
–
–
–
–
–
The following shows the valuation techniques used in measuring level 1, 2 and 3 values, as well as the significant unobservable
Level 1 – Equity securities – the valuation is based on quoted prices in active markets for identical assets and liabilities.
Level 2 – Unlisted options – the valuation technique uses observable inputs. The observable inputs include strike price, expiry
date and market price. The valuation is based on Black Scholes model.
Level 2 – Interest rate swaps – the fair values are based on broker quotes. Similar contracts are traded in an active market and
the quotes reflect the actual transactions in similar instruments.
Level 2 – Currency swaps – the fair value is determined using quoted forward exchange rates at the reporting date and present
value calculations based on high quality yield curves in the respective currencies.
Fair Value
Level 1
$’000
Level 2
$’000
Level 3
$’000
2,584
–
2,584
1,228
102
1,330
–
–
–
–
–
–
–
–
–
–
–
–
–
24
24
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Total
$’000
3,812
102
3,914
–
–
–
–
24
24
–
–
–
53
Annual Report 2018 – Bell Financial Group
32. Operating lease commitments
Leases as lessee
Future minimum rental payments under the non-cancellable operating leases at 31 December are as follows:
Less than one year
Between one and five years
More than five years
Consolidated
2018
$’000
10,850
28,325
5,177
44,352
2017
$’000
8,894
32,847
8,032
49,773
The Group has entered into commercial property leases for its office accommodation. These leases have a remaining life of up to
10 years. The Group has no other capital or lease commitments.
33. Parent entity disclosures
As at, and throughout the financial year ending 31 December 2018 the parent company of the Group was Bell Financial Group Ltd.
Results of the parent entity
Profit for the year
Total comprehensive income for the year
Financial position of parent entity at year end
Current assets
Non-current assets
Total assets
Current liabilities
Total liabilities
Total equity of the parent entity comprising of:
Contributed equity
Reserves
Retained earnings/(losses)
Total equity
There are currently no complaints or claims made against the parent entity.
Consolidated
2018
$’000
2017
$’000
23,615
23,615
15,379
15,379
2,298
209,260
211,558
22,483
22,483
204,237
(1,057)
(14,105)
189,075
–
169,918
169,918
17,456
17,456
167,886
(1,018)
(14,406)
152,462
54
Annual Report 2018 – Bell Financial Group
NOTES TO THE FINANCIAL STATEMENTS continuedFor the year ended 31 December 2018 34. Related parties
The following were key management personnel of the Group at any time during the reporting period:
Executive Directors
C Bell
A Provan
Senior Executives
L Bell
A Bell
R Fell
D Davenport
Non-Executive Directors
C Coleman
G Cubbin
B Wilson AO
B Shanahan (Ceased 20 November 2018)
Key management personnel compensation
The key management personnel compensation comprised:
Short-term employee benefits
Other long-term benefits
Post-employment benefits
Termination benefits
Share-based payments
Consolidated
2018
3,922,124
59,922
153,905
–
–
4,135,951
2017
3,933,282
47,652
169,032
–
–
4,149,966
Loans to key management personnel and their related parties
Details regarding loans outstanding at the reporting date to key management personnel and their related parties at any time
in the reporting period, are as follows:
Total for key management personnel 2018
Total for key management personnel 2017
Total for other related parties 2018
Total for other related parties 2017
Total for key management personnel and their related
parties 2018
Total for key management personnel and their related
parties 2017
Opening
balance
$
3,808,983
5,155,432
–
–
Closing
balance
$
3,039,829
3,808,983
–
–
Interest paid
and payable in
the reporting
period
$
165,932
160,663
–
–
Number
in Group at
31 December1
36
32
–
–
3,808,983
3,039,829
165,932
5,155,432
3,808,983
160,663
36
32
1. Number in Group includes KMP and other related parties with loans at any time during the year.
Interest is payable at prevailing market rates on all loans to key management persons and their related entities. These rates are
available to all clients and may vary marginally depending on individual negotiations. The principal amounts are repayable per
terms agreed on an individual basis. Interest received on the loans totalled $165,932 (2017: $160,663). No amounts have been
written-down or recorded as allowances for impairment, as the balances are considered fully collectable.
55
Annual Report 2018 – Bell Financial Group
34. Related parties (continued)
Movements in shares 2018
The movement during the reporting period in the number of ordinary shares in Bell Financial Group Ltd held, directly, indirectly
or beneficially, by each Director and key management person, including their related parties, is as follows:
Directors
C Bell2
A Provan2
C Coleman
G Cubbin
B Wilson AO
B Shanahan 3
Senior Executives
LM Bell2
AG Bell2
R Fell
D Davenport
Held at
1 January
2018
35,364,230
35,676,488
1,772,283
180,000
1,000,000
401,000
34,802,065
26,325,554
700,000
184,949
Purchases
7,718,924
7,781,375
354,457
36,000
200,000
80,200
7,746,490
5,764,418
140,000
36,990
Received on
exercise of
options
Held at
31 December
2018
Sales
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
43,083,154
43,457,863
2,126,740
216,000
1,200,000
–
42,548,555
32,089,972
840,000
221,939
2. The number of shares held by Colin Bell, Alastair Provan, Lewis Bell and Andrew Bell includes those held indirectly through Bell Group Holdings Pty Limited
and Bell Securities Pty Ltd.
3. Brenda Shanahan ceased to be a related party as at 20 November 2018 therefore her shareholding as at 31 December 2018 is not shown.
Movements in shares 2017
Directors
C Bell2
A Provan2
C Coleman
G Cubbin
B Wilson AO
B Shanahan
Senior Executives
LM Bell2
AG Bell2
R Fell
D Davenport
Held at
1 January
2017
34,215,800
34,528,058
1,772,283
180,000
1,000,000
250,000
33,502,635
25,710,843
610,000
184,949
Purchases
1,148,430
1,148,430
–
–
–
151,000
1,299,430
614,711
90,000
–
Received on
exercise of
options
Held at
31 December
2017
Sales
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
35,364,230
35,676,488
1,772,283
180,000
1,000,000
401,000
34,802,065
26,325,554
700,000
184,949
2. The number of shares held by Colin Bell, Alastair Provan, Lewis Bell and Andrew Bell includes those held indirectly through Bell Group Holdings Pty Limited.
Other key management personnel transactions
Craig Coleman, currently a non-executive director, provided consultancy services to a Group company in 2017 and was paid for
those services (2018: Nil, 2017: $75,000).
Effective 3 July 2018, Global U & I Management Pty Ltd, a wholly owned subsidiary of Bell Financial Group Limited, acquired
shares that it did not already own in Third Party Platform Pty Ltd from Colin Bell (16,620 shares for $6,022,099), Alistair Provan
(16,620 shares for $6,022,099), Craig Coleman (639 shares for $231,536) and Dean Davenport (1,799 shares for $651,850).
There are no other transactions with key management persons or their related parties other than those that have been disclosed
in this report.
56
Annual Report 2018 – Bell Financial Group
NOTES TO THE FINANCIAL STATEMENTS continuedFor the year ended 31 December 2018 Ultimate parent
Bell Group Holdings Pty Ltd is the ultimate parent company of Bell Financial Group Ltd. There are no outstanding amounts owed
by or to the ultimate parent entity at 31 December 2018 (2017: nil). There is no interest receivable or payable at 31 December 2018
(2017: nil).
Subsidiaries
The table below outlines loans made by the Company to wholly owned subsidiaries.
Subsidiary
Bell Potter Platforms Pty Ltd1
Third Party Platform Pty Limited2
Bell Potter Capital Limited3
Bell Potter (US) Holdings Inc1
Bell Potter Securities (US) LLC
1. Loan is interest free and unsecured.
2018
$
2017
$
463
174,438
8,121,666
1,932,809
1,912
10,231,288
232
1,000,000
8,078,137
456,734
–
9,535,103
2. The loan from the parent entity to Third Party Platform Pty Limited represents a subordinated loan that attracts interest at 3.33% per annum
(2017: 3.21% per annum).
3. The loan from the parent entity to Bell Potter Capital Limited represents a subordinated loan that attracts interest at 3.00% per annum (2017: 3.00% per annum).
Loans made by wholly owned subsidiaries to the Company: $22,483,326 (2017: $15,200,378).
During the course of the financial year subsidiaries conducted transactions with each other on terms equivalent to those on an
arm’s length basis. They are fully eliminated on consolidation. As at 31 December 2018, all outstanding amounts are considered
fully collectable.
35. Group entities
Bell Financial Group Ltd
Significant subsidiaries
Bell Potter Securities Limited
Bell Potter Capital Limited
Third Party Platform Pty Ltd
Bell Potter Securities Limited (UK)
Bell Potter Securities (HK) Limited
Bell Potter (US) Holdings Inc
Incorporation
Interest
Consolidated
2018
2017
Australia
Australia
Australia
United Kingdom
Hong Kong
United States
100%
100%
100%
100%
100%
100%
100%
100%
56.63%
100%
100%
100%
57
Annual Report 2018 – Bell Financial Group
36. Guarantees
From time to time Bell Financial has provided financial guarantees in the ordinary course of business which amount to $6.6m
(2017: $6.6m) and are not recorded in the Statement of Financial Position as at 31 December 2018.
37. Contingent liabilities and contingent assets
The Company has agreed to indemnify its wholly owned subsidiary, Bell Potter Securities Limited, in the event that any contingent
liabilities of Bell Potter Securities Limited results in a loss.
38. Subsequent events
There were no significant events from 31 December 2018 to the date of this report.
Final Dividend
On 20 February 2019, the Directors resolved to pay a fully franked final dividend of 4.25 cents per share.
39. Auditor’s remuneration
Audit services
Auditor of the Company
KPMG:
Audit and review of financial reports
Total remuneration for audit services
Audit related services
Auditor of the Company
KPMG Australia:
Other regulatory audit services
Total remuneration for audit related services
Non-audit related services
Consolidated
2018
$
2017
$
347,584
412,750
347,584
412,750
104,000
104,000
39,000
490,584
117,500
117,500
30,000
560,250
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Annual Report 2018 – Bell Financial Group
NOTES TO THE FINANCIAL STATEMENTS continuedFor the year ended 31 December 2018 DIRECTORS’ DECLARATION
1. In the opinion of the Directors of Bell Financial Group Limited (‘the Company’):
(a) the Consolidated Financial Statements and notes that are set out on pages 16 to 58 and the Remuneration Report
on pages 10 to 14 in the Directors’ Report, are in accordance with the Corporations Act 2001, including:
(i) giving a true and fair view of the Group’s financial position as at 31 December 2018 and of its performance, for the
financial year ended on that date; and
(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001;
(b) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and
payable.
2. The Directors have been given the declarations required by section 295A of the Corporations Act 2001 from the Managing
Director and Chief Financial Officer for the financial year ended 31 December 2018.
3. The Directors draw attention to note 1(a) of the Consolidated Financial Statements which includes a statement of compliance
with International Financial Reporting Standards.
Signed in accordance with a resolution of the Directors:
Dated at Sydney this 20th day of February 2019.
Alastair Provan
Managing Director
20 February 2019
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Annual Report 2018 – Bell Financial Group
INDEPENDENT AUDITOR’S REPORT
60
Annual Report 2018 – Bell Financial Group
KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.Liability limited by a scheme approved under Professional Standards Legislation. Independent Auditor’s Report To the shareholders of Bell Financial Group Ltd Report on the audit of the Financial Report Opinion We have audited the Financial Report of Bell Financial Group Ltd (the Company). In our opinion, the accompanying Financial Report of the Company is in accordance with the Corporations Act 2001, including: •giving a true and fair view of the Group’s financial position as at 31 December 2018 and of its financial performance for the year ended on that date; and •complying with Australian Accounting Standards and the Corporations Regulations 2001. The Financial Report comprises : •Consolidated statement of financial position as at 31 December 2018 •Consolidated statement of profit or loss, Consolidated statement of comprehensive income, Consolidated statement of changes in equity, and Consolidated statement of cash flows for the year then ended •Notes including a summary of significant accounting policies •Directors’ Declaration. The Group consists of the Company and the entities it controlled at the year-end or from time to time during the financial year. Basis for opinion We conducted our audit in accordance with Australian Auditing Standards. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the Financial Report section of our report. We are independent of the Group in accordance with the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the Financial Report in Australia. We have fulfilled our other ethical responsibilities in accordance with the Code. 61
Annual Report 2018 – Bell Financial Group
Key Audit Matters Key Audit Matters are those matters that, in our professional judgement, were of most significance in our audit of the Financial Report of the current period. This matter was addressed in the context of our audit of the Financial Report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on this matter. Valuation of Goodwill ($130,413,000) Refer to Note 17 to the financial report The key audit matter How the matter was addressed in our audit A key audit matter for us was the Group’s annual testing of goodwill for impairment given the size of the balance (being 17% of total assets). We focused on the significant forward-looking assumptions the Group applied in their value in use model, including: •Forecast cash flows – the Group has continued to experience competitive market conditions in the current year as a result of volatility in the global investment market. This increases the risk of inaccurate forecasts for us to consider and goodwill being impaired. •Forecast growth rates and terminal multiples – in addition to the uncertainties described above, the Group’s models are highly sensitive to small unfavourable changes in these assumptions, reducing available headroom. This drives additional audit effort specific to their feasibility and consistency of application to the Group’s strategy. •Discount rates - these are complicated in nature and vary according to the conditions and environment the specific Cash Generating Unit (CGU) is subject to from time to time. The Group’s modelling is highly sensitive to small changes in the discount rate. We involved our valuation specialists with the assessment. The Group uses a complex model to perform their annual testing of goodwill for impairment. The model uses historical performance adjusted for a range of internal and external sources as inputs to the assumptions. Certain CGU’s of the Group have Working with our valuation specialists, our procedures included the following: •We considered the appropriateness of the value in use method applied by the Group to perform the annual test of goodwill for impairment against the requirements of the accounting standards. •We assessed the integrity of the value in use model used, including the accuracy of the underlying formulas. •We assessed the accuracy of previous Group forecasts to inform our evaluation of forecasts incorporated in the model. We noted previous trends where forecasts for certain CGU’s were not achieved and how they impacted the business, for use in our testing. •We considered the sensitivity of the model by varying key assumptions, such as forecast growth rates, terminal multiples and discount rates, within a reasonably possible range, to identify those CGUs at higher risk of impairment and to focus our further procedures. •We challenged the Group’s significant forecast cash flow and growth assumptions in light of competitive market conditions. We applied increased scepticism to forecasts in the CGU’s where previous forecasts were not achieved. We compared forecast expense growth rates to published studies and considered differences for the Group’s operations. We used our knowledge of the INDEPENDENT AUDITOR’S REPORT continued
62
Annual Report 2018 – Bell Financial Group
not met prior forecasts in some instances historically, increasing our audit effort in assessing the reliability of current forecasts for each CGU. Complex modelling, using forward-looking assumptions tends to be prone to greater risk for potential bias, error and inconsistent application. These conditions necessitate additional scrutiny by us, in particular to address the objectivity of sources used for assumptions, and their consistent application. We involved valuation specialists to supplement our senior audit team members in assessing this key audit matter. Group, the Group’s past performance, business and customers, and our industry experience. •We checked the consistency of the growth rate to the past performance of the Group, and our experience regarding the feasibility of these in the industry in which they operate and compared the forecast cash flows contained in the value in use model to those contained within the Board reviewed goodwill impairment assessment memorandum. •We assessed the current net profit after tax multiples and to those of comparable companies. •We independently developed a discount rate range considered comparable using publicly available market data for comparable entities to the Group and the industry it operates in. •We assessed the Group’s analysis of the market capitalisation compared to net assets of the Group. This included consideration of the market capitalisation range implied by recent share price trading ranges to the Group’s net assets. •We assessed the disclosures in the Financial Report using our understanding of the issues obtained from our testing and against the requirements of the accounting standards. 63
Annual Report 2018 – Bell Financial Group
Other Information Other Information is financial and non-financial information in Bell Financial Group Ltd’s annual reporting which is provided in addition to the Financial Report and the Auditor’s Report. The Directors are responsible for the Other Information. Our opinion on the Financial Report does not cover the Other Information and, accordingly, we do not express an audit opinion or any form of assurance conclusion thereon, with the exception of the Remuneration Report and our related assurance opinion. In connection with our audit of the Financial Report, our responsibility is to read the Other Information. In doing so, we consider whether the Other Information is materially inconsistent with the Financial Report or our knowledge obtained in the audit, or otherwise appears to be materially misstated. We are required to report if we conclude that there is a material misstatement of this Other Information, and based on the work we have performed on the Other Information that we obtained prior to the date of this Auditor’s Report we have nothing to report. Responsibilities of the Directors for the Financial Report The Directors are responsible for: •preparing the Financial Report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 •implementing necessary internal control to enable the preparation of a Financial Report that gives a true and fair view and is free from material misstatement, whether due to fraud or error •assessing the Group and Company’s ability to continue as a going concern and whether the use of the going concern basis of accounting is appropriate. This includes disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless they either intend to liquidate the Group and Company or to cease operations, or have no realistic alternative but to do so. Auditor’s responsibilities for the audit of the Financial Report Our objective is: •to obtain reasonable assurance about whether the Financial Report as a whole is free from material misstatement, whether due to fraud or error; and •to issue an Auditor’s Report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error. They are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the Financial Report. A further description of our responsibilities for the audit of the Financial Report is located at the Auditing and Assurance Standards Board website at: http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf This description forms part of our Auditor’s Report. INDEPENDENT AUDITOR’S REPORT continued
64
Annual Report 2018 – Bell Financial Group
Report on the Remuneration Report Opinion In our opinion, the Remuneration Report of Bell Financial Group Ltd for the year ended 31 December 2018, complies with Section 300A of the Corporations Act 2001. Directors’ responsibilities The Directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with Section 300A of the Corporations Act 2001. Our responsibilities We have audited the Remuneration Report included in pages 10 to 14 of the Directors’ report for the year ended 31 December 2018. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. KPM_INI_01 PAR_SIG_01 PAR_NAM_01 PAR_POS_01 PAR_DAT_01 PAR_CIT_01 KPMG Chris Wooden Partner Melbourne 20 February 2019 SHAREHOLDER INFORMATION
The following information is current as at 31 January 2019.
Distribution of shares
Range
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
Total
Number of
shareholders
280
686
443
1,122
225
2,756
Number
of shares
154,153
2,118,837
3,494,112
38,037,990
276,938,856
320,743,948
% of issued
capital
0.05
0.66
1.09
11.86
86.34
100.00
There were 163 shareholders who held less than a marketable parcel (less than $500 of shares).
Twenty largest shareholders
Rank Name
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
BELL GROUP HOLDINGS PTY LIMITED
EQUITAS NOMINEES PTY LIMITED
BELL POTTER NOMINEES LIMITED
CITICORP NOMINEES PTY LIMITED
MR ANAND SELVARAJAH
MR JAMES GORDON MAXWELL MOFFATT
NATIONAL NOMINEES LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
COLIN BELL PTY LTD
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
MORSON HOLDINGS PTY LTD
FRANUNTA SUPER PTY LTD ‹FRANUNTA SUPER FUND A/C›
MR ALASTAIR PROVAN + MRS JANIS PROVAN ‹A & J PROVAN SUPER FUND A/C›
MR LEE WILLIAM MUCO
BELL SECURITIES PTY LIMITED
CERTUS CAPITAL PTY LTD
MR LIONEL ALEXANDER MCFADYEN + MRS JENNIFER JUNE MCFADYEN
‹THE MCFADYEN FAMILY A/C›
BOND STREET CUSTODIANS LIMITED
MR ALASTAIR PROVAN + MRS JANIS PROVAN ‹ALASTAIR & JANIS PROVAN A/C›
MR COLIN BELL
18.
19.
20.
Number of
shares
143,998,350
21,772,959
5,163,906
4,698,264
3,892,334
3,700,000
3,364,848
3,022,735
2,814,627
2,626,856
2,609,699
2,400,000
2,400,000
2,300,000
2,232,000
2,079,623
1,687,480
1,669,097
1,560,876
1,458,194
% of issued
capital
44.90
6.79
1.61
1.46
1.21
1.15
1.05
0.94
0.88
0.82
0.81
0.75
0.75
0.72
0.70
0.65
0.53
0.52
0.49
0.45
65
Annual Report 2018 – Bell Financial Group
SHAREHOLDER INFORMATION continued
Substantial shareholdings
The following shareholders were registered by the Company as substantial shareholders, having declared a relevant interest
in accordance with the Corporations Act:
Substantial shareholder
BELL GROUP HOLDINGS PTY LIMITED
ALASTAIR PROVAN
COLIN BELL
LEWIS BELL
AHMED FAHOUR
Number of
shares
146,230,350
150,929,420
150,554,711
149,650,112
21,772,959
% of issued
capital
45.591
47.061,2
46.941,3
46.661,4
6.79
1. Bell Group Holdings Pty Limited (BGH) holds 143,998,350 BFG ordinary shares. BGH’s wholly-owned subsidiary, Bell Securities Pty Limited (BSPL) holds
2,232,000 BFG ordinary shares. Colin Bell, Alastair Provan and Lewis Bell each hold more than 20% of BGH and therefore under the Corporations Act
they are each deemed to have a relevant interest in the 146,230,350 BFG ordinary shares held by BGH and BSPL.
2. Alastair Provan has a relevant interest in 4,699,070 BFG ordinary shares.
3. Colin Bell has a relevant interest in 4,324,361 BFG ordinary shares.
4. Lewis Bell has a relevant interest in 3,419,762 BFG ordinary shares.
Voting rights
Bell Financial has one class of fully paid ordinary shares. On a show of hands, every member present at the meeting in person
or by proxy shall have one vote and upon a poll each share shall have one vote. There are no voting rights attached to the options
or performance rights.
On-market buy-back
There is no current on-market buy-back.
66
Annual Report 2018 – Bell Financial Group
DIRECTORY
Bell Financial Group Ltd
ABN
59 083 194 763
Directors
Alastair Provan, Acting Chairman & Managing Director
Colin Bell, Executive Director
Craig Coleman, Non-Executive Director
Graham Cubbin, Non-Executive Director
Brian Wilson AO, Non-Executive Director
Company Secretary
Cindy-Jane Lee
Registered Office
Level 29, 101 Collins Street
Melbourne VIC 3000
Telephone 03 9256 8700
Share Registry
Computershare Investor Services Pty Limited
452 Johnston Street
Abbotsford VIC 3067
Telephone 03 9415 5000
ASX Code
BFG
Shares are listed on the Australian Securities Exchange
Banker
Australia and New Zealand Banking Group Limited
Auditor
KPMG
Website Address
www.bellfg.com.au
67
Annual Report 2018 – Bell Financial Group
Bell Financial Group Limited
Level 29, 101 Collins Street
Melbourne VIC 3000
Australia
GPO Box 4718
Melbourne VIC 3001
Australia
www.bellfg.com.au