ANNUAL REPORT
2019
$0.42
Dec 2014
SHARE PRICE GROWTH
$1.19
Dec 2019
CONTENTS
Overview
01 — Highlights
Performance
02 — Operating and Financial Review
08 — Directors’ Report (Including Remuneration Report)
17 — Lead Auditor’s Independence Declaration
Financial Statements
18 — Statement of Profit or Loss
19 — Statement of Comprehensive Income
20 — Statement of Financial Position
21 — Statement of Changes in Equity
22 — Statement of Cash Flows
23 — Notes to the Financial Statements
61 — Directors’ Declaration
62 —
Independent Auditor’s Report
Other Information
67 — Shareholder Information
69 — Directory
Bell Financial Group Ltd ABN 59 083 194 763
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 680 employees,
operates across 15 offices in
Australia and has offices in
New York, London, Hong Kong
and Kuala Lumpur.
International
London
New York
Hong Kong
Kuala Lumpur
Australia
Adelaide
Brisbane
Cairns
Coolum
Geelong
Hobart
Mackay
Melbourne
Mornington
Orange
Perth
Sydney
Toowoomba
Bell Potter Securities Limited
COMMODITIES
FX
Bell Potter Capital Limited
BELL POTTER CAPITAL
Third Party Platform Pty Ltd
POTTER ONLINE
HIGHLIGHTS
Revenue
Net Profit After Tax
Funds Under Advice
$254.5m
$32.4m
$58.4b
Increased
by 15.7%
Increased
by 33.2%
Increased
by 25%
Earnings Per Share
10.2¢
Increased
by 21.4%
Full Year Dividend
8.0¢
9.6% Gross
dividend yield
Retail and Institutional Equities
Futures and Foreign Exchange
International Equities
Portfolio Administration
Superannuation
Fixed Income
Cash
Margin Lending
Structured Products
Retail Online Broking
Wholesale Online Broking
Institutional Online Broking
01
Annual Report 2019 Bell Financial Group OPERATING AND FINANCIAL REVIEW
1. Group
2019 was another successful year
for Bell Financial Group. Our various
revenue streams grew strongly, our
Funds under Advice (FUA) are at record
levels and our closing share price on
31 December was 40% higher than
a year ago.
All businesses within the Group were
again profitable, with our Equity Capital
Markets (ECM) division making a notable
contribution.
In August we completed the acquisition
of two structured loan products (Equity
Lever and Geared Equity Investments)
and the associated sales and
product development teams from
Macquarie Bank.
The acquisition increased the size of
Bell Potter Capital’s (BPC) loan book
to almost $550 million, and significantly
increases direct sales access to the
Independent Financial Planners
channel, in addition to providing new
products for our stockbroking clients.
We expect the acquisition to have a
significant impact on BPC’s revenues
in 2020.
We continue to invest in the
development of our proprietary
platforms and systems to achieve
greater efficiency, provide better
client service and access further
cost synergies.
We are preparing for the Group to
provide third party clearing services
in the Australian Equities and
Derivatives market.
Revenue ($M)
NPAT ($M)
Earnings Per Share (Cents)
CAGR
+9.71
254.5
220.0
205.8
175.6
184.3
300
250
200
150
100
50
0
CAGR
+19.61
32.4
24.4
20.6
15.9
16.4
35
30
25
20
15
10
5
0
12
10
8
6
4
2
0
CAGR
+13.25
10.2
8.4
7.8
6.2
6.2
2015
2016
2017
2018
2019
2015
2016
2017
2018
2019
2015
2016
2017
2018
2019
2019 Revenue grew 15.7% year on
year resulting in a Compound Annual
Growth Rate (CAGR) of approximately
10% over the last five years.
Similarly our Net Profit after Tax (NPAT)
has grown consistently over the five
year period with 2019 producing another
strong result with NPAT of $32.4 million,
up 33% year on year and a five year
CAGR of 19.6%.
Earnings per Share (EPS) presents
a similar growth story. 2019 EPS
of 10.2 cents per share was up 21%
year on year and represents a five
year CAGR of 13.25%.
Return On Equity
Dividend Paid ($M)
25%
20%
15%
10%
11.7%
12.5%
CAGR
+17.03
22.0%
17.3%
14.9%
$30
$25
$20
$15
8.0c
$25.6
7.5c
7.0c
$22.3
5.5c
$19.9
4.5c
$14.5
$10
$11.7
$5
$0
2015
2016
2017
2018
2019
2015
2016
2017
2018
2019
5%
0%
10
8
6
4
2
0
2019 Return on Equity (ROE) of 22%,
and a 5 year CAGR of 17%.
Dividends Paid ($M)
Cents Per Share
Growth in fully franked dividends over
a five year period is consistent with
growth in earnings.
Bell Financial Group Annual Report 2019
02
Funds Under Advice ($B)
BFG Share Price ($A) – 1 Year
CAGR
+15.25
58.4
47.2
46.8
38.8
33.1
70
60
50
40
30
20
10
0
2015
2016
2017
2018
2019
Funds under Advice (FUA) closed
the year at $58.4 billion up 25%
on 2018. The increase reflects market
movements over the year, and strong
growth in internal Products and
Services including Portfolio
Administration, Superannuation,
Cash and Margin Lending.
Platform, Product & Service Fee
Income (PP&S)($AM) 2015–2019
70
60
50
40
30
20
10
0
CAGR
+13.61
47.7
16.2
12.1
16.1
61.8
24.3
15.4
18.9
52.1
18.3
13.0
17.5
3.4
2017
3.3
2018
3.2
2019
37.1
13.4
8.5
12.1
3.1
2015
41.7
14.4
10.7
13.6
3.1
2016
Other
PAS
Bell Direct
Finance Income (inc. Bell Potter Capital)
Our various Platforms, Products
and Services continue to be a priority
and a focus for our commitment to
ongoing investment.
In 2019 revenues for the various
platforms, products and services grew
by 18.6% to $61.8 million representing
24% of total Group revenues.
$1.20
$1.10
$1.00
$0.90
$0.80
$0.70
J
a
n
1
9
F
e
b
1
9
M
a
r
1
9
A
p
r
1
9
M
a
y
1
9
J
u
n
1
9
J
u
l
1
9
A
u
g
1
9
S
e
p
1
9
O
c
t
1
9
N
o
v
1
9
D
e
c
1
9
BFG Share Price ($A)
BFG Share Price ($A) – 5 Years
$1.30
$1.20
$1.10
$1.00
$0.90
$0.80
$0.70
$0.60
$0.50
$0.40
D
e
c
1
4
M
a
r
1
5
J
u
n
1
5
S
e
p
1
5
D
e
c
1
5
M
a
r
1
6
J
u
n
1
6
S
e
p
1
6
D
e
c
1
6
M
a
r
1
7
J
u
n
1
7
S
e
p
1
7
D
e
c
1
7
M
a
r
1
8
J
u
n
1
8
S
e
p
1
8
D
e
c
1
8
M
a
r
1
9
J
u
n
1
9
S
e
p
1
9
D
e
c
1
9
BFG Share Price ($A)
BFG share price closed at $1.19 on 31 December 2019, a 40%
increase on the previous year, a five year high.
03
Annual Report 2019 Bell Financial Group
OPERATING AND FINANCIAL REVIEW continued
2. Bell Potter Securities Limited (BPS)
BPS Brokerage Revenue ($M)
BPS ECM Revenue ($M)
110
100
90
80
70
60
50
40
30
20
10
0
97.6
74.1
102.2
101.2
82.9
81.4
106.3
84.4
90.1
65.1
11.8
13.1
2015
11.7
11.9
2016
9.7
9.6
2017
10.2
9.7
2018
10.2
11.7
2019
Futures & FX
Wholesale
Retail
Total Brokerage Revenue
Brokerage from our Institutional and
Retail desks plus our Futures, Foreign
Exchange and Fixed Income business
was $106 million for the year, a 5%
improvement on the previous year.
A pleasing result given the relatively
tough equity market conditions and
the current extremely low interest
rate environment.
BPS Portfolio Administration
Services & Super Solutions
Revenue ($M)
83.0
66.4
54.6
46.2
41.8
2015
2016
2017
2018
2019
20
18
16
14
12
10
8
6
4
2
0
CAGR
+11.69
17.5
16.1
18.9
13.6
12.1
2015
2016
2017
2018
2019
90
80
70
60
50
40
30
20
10
0
Our Equity Capital Markets (ECM) team
had a standout year.
We completed 120 capital raisings on
behalf of ASX listed companies raising
$2.5 billion in new equity capital over
the year.
Portfolio Administration Services
(PAS) and Superannuation products
is an area in which we continue to
invest. Funds under Advice on PAS and
Superannuation now exceed $4.0 billion
(a 21% increase on 2018) and generate
revenues approaching $19 million.
We believe our ECM team, supported
by our substantial retail and institutional
(domestic and international) distribution
network, is the market leader in the
Small and Mid-Cap segment of the
Australian market.
In 2019 the team generated $83 million
gross corporate revenue, a 25% increase
on the previous year.
An outstanding effort.
04
Bell Financial Group Annual Report 2019
3. Third Party Platform Pty Ltd (TPP)
TPP Revenue ($M)
TPP Sponored Holdings ($B)
TPP Client Accounts (’000)
18
16
14
12
10
8
6
4
2
0
CAGR
+15.38
$17.9
$15.2
$14.2
$12.4
$10.1
2.0
2.7
2.3
3.4
2016
2017
2018
2019
1.2
2015
Revenue
Net Profit Before Tax
25
20
15
10
5
0
CAGR
+28.85
22.0
16.7
15.7
10.8
8.0
200
180
160
140
120
100
80
60
40
20
0
CAGR
+11.23
160
144
176
130
115
2015
2016
2017
2018
2019
2015
2016
2017
2018
2019
TPP’s revenue, sponsored holdings and
client numbers have grown consistently
over the last five years.
TPP currently has three core
businesses.
Gross revenue of $17.9 million in 2019
was up 17.8% on the previous year.
$3.4 million profit before tax was
up 48% on the previous year.
• Bell Direct – online broking services
for retail clients.
• Desktop Broker – online broking
services for Institutional and
Wholesale (dealer groups and
Independent Financial Advisers)
clients.
• White Label – end to end online
solutions for corporate clients
(currently Macquarie Bank, HSBC,
and Bell Potter).
We are committed to the ongoing
investment in TPP’s platforms
and systems.
4. Bell Potter Capital Limited (BPC)
BPC Net Revenue ($M)
14
12
10
8
6
4
2
0
CAGR
+18.69
12.9
10.5
9.6
7.8
6.5
2015
2016
2017
2018
2019
Bell Potter Capital (BPC) net revenue
increased 23.3% year on year to
$12.9 million.
In August 2019, BPC completed the
acquisition of two structured loan
products (Equity Lever and Geared Equity
Investments) and the associated sales
and product development teams from
Macquarie Bank.
The acquisition increased the size of
BPC’s loan book to almost $550 million
and significantly improves direct sales
access to the Independent Financial
Planners channel, in addition to providing
new products for our stockbroking clients.
Acquisition costs of approximately
$1.5 million were fully expensed during
the course of the year and we expect the
acquisition to have a significant impact
on BPC’s revenues in 2020.
05
Annual Report 2019 Bell Financial Group OPERATING AND FINANCIAL REVIEW continued
4. Bell Potter Capital Limited (BPC) (continued)
BPC Loan & Cash Book ($M)
600
500
400
300
200
100
0
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Loan Book
Cash Book
5. Technology, Platforms
and Systems
We have a dedicated development team
working on our platform to enable TPP
to execute, clear and settle equity and
derivative transactions for our online
and full service businesses as well as
providing these services to external
third parties.
As part of this project TPP has applied
to ASX to become a General Clearing
Participant enabling it to clear Bell
Group members as well as external
third parties. We expect formal
approval shortly.
We anticipate TPP will process and
clear the first full service trades for
Bell Potter Securities (BPS) in the
second quarter of 2020.
We are currently engaged in discussions
with a major ASX Participant who we
hope will become our first external
client.
This initiative presents us with both
an opportunity to materially reduce our
cost of producing a contract note and
to grow via a new business stream.
BPS will be TPP’s initial cornerstone
client and as such TPP will clear all
BPS Australian Equities, Futures and
Options business.
We are aware of the compliance and risk
management requirements associated
with this strategy and are comfortable
we have the appropriate procedures
and oversight in place.
06
Bell Financial Group Annual Report 2019 FUSION – CRM
FUSION is our proprietary productivity
and efficiency tool designed to provide
the Adviser immediate access to client
data, markets, products and services
in a tight compliance framework.
FUSION is a desktop application
covering all aspects of the Adviser’s day
to day functions in one fully integrated
convenient application covering:
• Compliance – SOA, ROA, Profile
• Research – BPS, Citi, Morningstar
• Markets – Local & International
• Term Deposits /Cash Management/
Margin Lending
• ECM
• CRM – Prospector
• Comprehensive Reporting
• Workflow
• Operations
We believe FUSION provides our
Advisers with measurable efficiencies
in relation to compliance and client
management and gives us a real
market edge.
Outlook
The environment for 2020 appears
to be similar to last year.
Again there are many variables in
place. Currently Coronavirus, the UK
& Europe post Brexit, the US – China
trade tensions, and the lead up to
the US Presidential Election will be
with us for almost the entire year.
All this against the backdrop of record
high stock prices and ultra-low global
interest rates.
Last year’s momentum market has
moved on seamlessly to the early
part of 2020.
In Australia we have record low interest
rates, a recovering residential real
estate market, strong cash balances and
investors searching for yield. Our equity
market has been an obvious beneficiary
of this scenario and barring some as yet
unseen negative event, the trend looks
set to continue.
We have a business model that has
successfully negotiated many economic
cycles. We actively invest in our
business, our people and our proprietary
technologies in order to enhance and
improve the products and services we
provide our clients. We have been doing
this for many years and will continue
to do so.
We have had a strong start to the
year. All our business divisions are
performing well. We have a solid
capital market pipeline and we are
at the advanced stage of rolling out a
number of significant business initiatives
such as consolidating our back office
operations, third party clearing,
IQ and structured products.
Finally I would like to thank our staff
and clients for their ongoing support and
contribution to what was an extremely
successful year for the Bell Financial
Group in 2019.
Alastair Provan
Executive Chairman
07
Annual Report 2019 Bell Financial Group
DIRECTORS’ REPORT
For the year ended 31 December 2019
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 2019.
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.
Alastair Provan
Craig Coleman
BComm
Mr Provan is the Executive Chairman of Bell Financial and he is responsible for the day-to-day
management of all businesses within the Group. He was appointed as Executive Chairman on
15 August 2019. Mr Provan was the Acting Chairman and Managing Director from 24 January 2019
to 15 August 2019. Mr Provan joined Bell Commodities in 1983 and held a number of dealing and
management roles prior to becoming Managing Director in 1989.
Mr Coleman is an Independent Director. He is also a member of the Group Risk and Audit
Committee. Mr Coleman was appointed to the Board in July 2007. 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)
Graham Cubbin
BEcon (Hons), FAICD
Mr Cubbin is an Independent Director. He is also Chairman of the Group Risk and Audit Committee.
Mr Cubbin was appointed to the Board in September 2007. 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)
08
Bell Financial Group Annual Report 2019 Brian Wilson AO
MComm (Hons),
Hon DUniv
Mr Wilson is an Independent Director. He is also a member of the Group Risk and Audit Committee.
Mr Wilson was appointed to the Board in October 2009. 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.
Colin Bell
BEcon (Hons)
Mr Bell was the Executive Chairman of Bell Financial until 24 January 2019 and thereafter he
continued on the Board as an Executive Director. On 15 August 2019, Mr Bell retired from the
Board of Bell Financial however he remains involved with the Group on a day-to-day basis. Mr Bell
founded Bell Commodities in 1970 after working with the International Bank for Reconstruction
and Development in Washington DC, USA.
09
Annual Report 2019 Bell Financial Group DIRECTORS’ REPORT continued
For the year ended 31 December 2019
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 680 employees, operates across 15 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 7.
Dividends
On 20 February 2020, the Directors resolved to pay a fully franked final dividend of 4.5 cents per share.
Dividends paid to shareholders during the year ended 31 December 2019 were as follows:
Dividend
Final 2018 ordinary
Interim 2019 ordinary
Per share
4.25 cents
3.5 cents
Total
$’000
13,523
11,137
Fully
Franked
Yes
Yes
Date of
payment
20 March 2019
29 August 2019
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 2019.
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:
Board
Group Risk and
Audit Committee
Director
Alastair Provan
Craig Coleman
Graham Cubbin
Brian Wilson AO1
Colin Bell2
Eligible to attend
6
6
6
6
4
Attended
6
6
6
6
2
Eligible to attend
-
5
5
4
-
Attended
-
5
5
4
-
1. Appointed to the Group Risk and Audit Committee on 20 February 2019.
2. Ceased on 15 August 2019.
10
Bell Financial Group Annual Report 2019 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 2019.
Director
Alastair Provan1
Craig Coleman
Graham Cubbin
Brian Wilson AO
Fully paid
ordinary shares
4,699,070
2,176,740
216,000
1,200,000
Deemed relevant
interest
146,230,350
-
-
-
Total
150,929,420
2,176,740
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. Alastair Provan holds more than 20% of BGH and therefore under the Corporations Act is 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 20 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
the Board Charter, Code of Conduct, Group Risk and Audit Committee Charter, Diversity Policy, Disclosure and Communication
Policy, Description of Risk Management Policy and Framework, Trading Policy and Whistleblower 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 38 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 17.
11
Annual Report 2019 Bell Financial Group DIRECTORS’ REPORT continued
For the year ended 31 December 2019
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
Alastair Provan1
Executive Chairman
Craig Coleman
Non-Executive Director
Graham Cubbin
Non-Executive Director
Brian Wilson AO
Non-Executive Director
Colin Bell2
Executive Director
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
1. Mr Provan commenced as Executive Chairman effective 15 August 2019, was Acting Chairman and Managing Director from 24 January 2019
to 15 August 2019 and prior to that was the Managing Director.
2. Ceased on 15 August 2019.
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 Board has 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
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
20181
$24,737
$0.85
8.4
$23,312
2019
$32,443
$1.19
10.2
$24,660
1. 2018 comparative amounts have been restated. Refer to note 1(a) for further information.
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.
12
Bell Financial Group Annual Report 2019
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 Board 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 2019.
8. Service agreements
8.1 Executive Chairman
Bell Financial entered into service agreements with its Executive Chairman, Alastair Provan, and its former Executive Chairman,
Colin Bell, 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.
13
Annual Report 2019 Bell Financial Group DIRECTORS’ REPORT continued
For the year ended 31 December 2019
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
8.4 KMP remuneration
Details of the remuneration of each KMP are tabled below.
Directors’ fees
$
91,324
91,324
91,324
Superannuation
$
8,676
8,676
8,676
Total
$
100,000
100,000
100,000
Short-term
Post-employment
Salary & fees
$
STI cash
bonus
$
Non-monetary
benefits
$
523,508
523,985
599,233
599,710
91,324
91,324
91,324
91,324
91,324
91,324
-
83,714
1,396,713
1,481,381
368,735
369,212
505,563
498,531
277,439
300,999
270,731
272,001
1,422,468
1,440,743
350,000
250,000
-
250,000
-
-
-
-
-
-
-
-
350,000
500,000
-
-
-
-
200,000
200,000
550,000
300,000
750,000
500,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Total
$
873,508
773,985
599,233
849,710
91,324
91,324
91,324
91,324
91,324
91,324
-
83,714
1,746,713
1,981,381
368,735
369,212
505,563
498,531
477,439
500,999
820,731
572,001
2,172,468
1,940,743
Superannuation
Other
Termination
Share-based
benefits
long term
benefits
payments
$
$
$
$
Proportion of
remuneration
performance
related
%
Value of options
as proportion of
remuneration
20,767
20,290
20,767
20,290
8,676
8,676
8,676
8,676
8,676
8,676
-
7,953
67,562
74,561
20,767
20,290
33,555
11,976
25,447
22,078
25,000
25,000
104,769
79,344
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
47,114
26,923
34,269
32,999
81,383
59,922
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
48,000
48,000
Total
$
894,275
794,275
620,000
870,000
100,000
100,000
100,000
100,000
100,000
100,000
-
91,667
1,814,275
2,055,942
389,502
389,502
539,118
510,507
598,000
550,000
880,000
630,000
2,406,620
2,080,009
39%
31%
0%
29%
0%
0%
0%
0%
0%
0%
0%
0%
19%
24%
0%
0%
100%
100%
41%
36%
63%
48%
56%
49%
%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
Directors
Executive Directors
Alastair Provan, Executive Chairman
Colin Bell, Executive Director
Non-Executive Directors
Craig Coleman
Graham Cubbin
Brian Wilson AO
Brenda Shanahan
Total compensation: Directors (consolidated)
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
Senior Executives
Lewis Bell, Head of Compliance
Dean Davenport, Chief Financial Officer
2019
2018
Andrew Bell, Executive Director of Bell Potter Securities 2019
2018
2019
2018
2019
2018
2019
2018
Total compensation: Executives (consolidated)
Rowan Fell, Director – Investment Services
See footnotes on page 12.
14
Bell Financial Group Annual Report 2019
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
8.4 KMP remuneration
Details of the remuneration of each KMP are tabled below.
Directors’ fees
Superannuation
$
8,676
8,676
8,676
Total
$
100,000
100,000
100,000
$
91,324
91,324
91,324
bonus
$
350,000
250,000
250,000
-
-
-
-
-
-
-
-
-
-
-
-
-
350,000
500,000
200,000
200,000
550,000
300,000
750,000
500,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
873,508
773,985
599,233
849,710
91,324
91,324
91,324
91,324
91,324
91,324
-
83,714
1,746,713
1,981,381
368,735
369,212
505,563
498,531
477,439
500,999
820,731
572,001
2,172,468
1,940,743
Directors
Executive Directors
Alastair Provan, Executive Chairman
Colin Bell, Executive Director
Non-Executive Directors
Craig Coleman
Graham Cubbin
Brian Wilson AO
Brenda Shanahan
Total compensation: Directors (consolidated)
Senior Executives
Lewis Bell, Head of Compliance
Andrew Bell, Executive Director of Bell Potter Securities 2019
Dean Davenport, Chief Financial Officer
Rowan Fell, Director – Investment Services
Total compensation: Executives (consolidated)
See footnotes on page 12.
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2018
2019
2018
2019
2018
2019
2018
523,508
523,985
599,233
599,710
91,324
91,324
91,324
91,324
91,324
91,324
-
83,714
1,396,713
1,481,381
368,735
369,212
505,563
498,531
277,439
300,999
270,731
272,001
1,422,468
1,440,743
Short-term
Post-employment
STI cash
Non-monetary
Salary & fees
$
benefits
$
Total
$
Superannuation
benefits
$
Other
long term
$
Termination
benefits
$
Share-based
payments
$
20,767
20,290
20,767
20,290
8,676
8,676
8,676
8,676
8,676
8,676
-
7,953
67,562
74,561
20,767
20,290
33,555
11,976
25,447
22,078
25,000
25,000
104,769
79,344
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
47,114
26,923
34,269
32,999
81,383
59,922
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
48,000
-
-
-
48,000
-
15
Proportion of
remuneration
performance
related
%
Value of options
as proportion of
remuneration
%
39%
31%
0%
29%
0%
0%
0%
0%
0%
0%
0%
0%
19%
24%
0%
0%
100%
100%
41%
36%
63%
48%
56%
49%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
Total
$
894,275
794,275
620,000
870,000
100,000
100,000
100,000
100,000
100,000
100,000
-
91,667
1,814,275
2,055,942
389,502
389,502
539,118
510,507
598,000
550,000
880,000
630,000
2,406,620
2,080,009
Annual Report 2019 Bell Financial Group
DIRECTORS’ REPORT continued
For the year ended 31 December 2019
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 19
$
3,039,829
2,835,739
120,672
1. The aggregate loan amount at the end of the reporting period includes loans to 5 KMP.
Details of KMP (including their related parties) with an aggregate of loans above $100,000 during the reporting period are as follows:
Craig Coleman
Lewis Bell2
Andrew Bell2
Rowan Fell
Dean Davenport
Colin Bell2
Balance
1 Jan 19
$
952,734
475,515
300,000
837,786
100,479
373,315
Balance
31 Dec 19
$
791,104
-
300,000
1,055,965
126,449
562,221
Interest paid
and payable
in period
$
32,712
11,983
13,586
37,860
4,703
19,828
Highest
balance in
period1
$
1,148,966
806,087
634,765
1,226,446
191,662
661,645
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 2019 was $6,661,712, the balance at 31 December 2019 was Nil and the highest balance in the reporting period
was $6,692,547.75. The interest paid and payable in the reporting period was $55,818.
Lead auditor’s independence declaration
The lead auditor’s independence declaration is set out on page 17 and forms part of the Directors’ Report for the financial year
ended 31 December 2019.
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 2020 in accordance with a resolution of the directors.
Alastair Provan
Executive Chairman
20 February 2020
16
Bell Financial Group Annual Report 2019 LEAD AUDITOR’S INDEPENDENCE DECLARATION
For the year ended 31 December 2019
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 2019 there have been:
i.
ii.
no contraventions of the auditor independence requirements as set out in the
Corporations Act 2001 in relation to the audit; and
no contraventions of any applicable code of professional conduct in relation to the audit.
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 2020
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.
17
Annual Report 2019 Bell Financial Group
STATEMENT OF PROFIT OR LOSS
For the year ended 31 December 2019
Rendering of services
Finance income
Investment gains/(losses)
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, 7
10
8
9
11
16,17, 31
10
Consolidated
2019
$’000
227,462
24,318
2,030
660
254,470
(152,153)
(10,370)
(2,770)
(21,754)
(2,137)
(7,740)
(11,046)
(207,970)
2018
$’000
202,223
18,250
(927)
470
220,016
(134,677)
(1,471)
(11,920)
(19,075)
(2,301)
(5,007)
(9,898)
(184,349)
46,500
35,667
12
(14,057)
(10,930)
32,443
24,737
32,443
-
32,443
Cents
10.2
10.2
24,359
378
24,737
Cents
8.4
8.4
28
28
The notes on pages 23 to 60 are an integral part of these Consolidated Financial Statements.
18
Bell Financial Group Annual Report 2019
STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 December 2019
Profit for the year
Other comprehensive income/(loss)
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/(loss) for the year, net of tax
Consolidated
2019
$’000
32,443
2018
$’000
24,737
(305)
103
(202)
(51)
328
277
Total comprehensive income for the year
32,241
25,014
Attributable to:
Equity holders of the Company
Non-controlling interests
Total comprehensive income for the year
32,241
-
32,241
24,636
378
25,014
Other movements in equity arising from transactions with owners are set out in note 26.
The notes on pages 23 to 60 are an integral part of these Consolidated Financial Statements.
19
Annual Report 2019 Bell Financial Group
STATEMENT OF FINANCIAL POSITION
As at 31 December 2019
Assets
Cash and cash equivalents
Trade and other receivables
Prepayments
Financial assets
Derivative assets
Loans and advances
Right of use assets
Deferred tax assets
Property, plant and equipment
Goodwill
Intangible assets
Total assets
Liabilities
Trade and other payables
Deposits and borrowings
Current tax liabilities
Lease liabilities
Derivative liabilities
Employee benefits
Provisions
Total liabilities
Net assets
Equity
Contributed equity
Other equity
Reserves
Retained earnings
Total equity attributable to equity holders of the Company
Note
13
14
15
30
19
31
18
16
17
17
20
21
22
31
30
24
23
26
26
26
26
Consolidated
2019
$’000
195,137
167,958
930
13,559
103
543,489
22,801
4,420
1,104
130,413
12,497
1,092,411
245,611
559,430
2,152
30,568
380
42,966
-
881,107
2018
$’000
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
211,304
203,329
204,237
(28,858)
691
35,234
211,304
204,237
(28,858)
499
27,451
203,329
The notes on pages 23 to 60 are an integral part of these Consolidated Financial Statements.
20
Bell Financial Group Annual Report 2019
STATEMENT OF CHANGES IN EQUITY
Share
Capital
$’000
167,886
Other
Equity
$’000
1,806
Treasury
Shares
Reserve
$’000
(1,396)
Share
Based
Payments
Reserve
$’000
1,008
Cash
Flow
Hedge
Reserve
$’000
(24)
Foreign
Currency
Reserve
$’000
340
Non-
Controlling
Interests
$’000
5,826
Retained
Earnings
$’000
26,404
Total
Equity
$’000
201,850
-
-
-
-
-
36,351
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(30,664)
-
204,237 (28,858)
204,237 (28,858)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(323)
-
407
-
-
(1,312)
(1,312)
-
-
-
617
(407)
-
-
1,218
1,218
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
46
-
-
-
-
-
-
204,237 (28,858)
1,603
-
-
291
(1,255)
-
-
9
-
(51)
-
(51)
(51)
-
-
-
-
-
-
-
-
(75)
(75)
-
(305)
-
(305)
(305)
-
-
-
-
-
-
(380)
-
-
328
328
328
-
-
-
-
-
-
-
-
668
668
-
-
103
103
103
-
-
-
-
-
-
771
-
-
-
-
-
-
(6,204)
378
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
24,737
24,737
-
-
-
(51)
328
277
24,737
25,014
-
36,351
-
(378)
-
-
(6,204)
-
(323)
617
-
-
(30,664)
-
(23,312)
(23,312)
27,451 203,329
27,451 203,329
32,443
32,443
-
-
-
(305)
103
(202)
32,443
32,241
-
-
-
-
-
46
348
-
-
-
(24,660)
(24,660)
35,234 211,304
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
Balance at 1 January 2019
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
Purchase of treasury shares
Share based payments
Employee share awards
exercised
Decrease in other equity
Dividends
Balance at 31 December 2019
The notes on pages 23 to 60 are an integral part of these Consolidated Financial Statements.
21
Annual Report 2019 Bell Financial Group Note
25
STATEMENT OF CASH FLOWS
For the year ended 31 December 2019
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
Payment of lease liabilities
Bell Potter Capital (Margin Lending)
Deposits (used in)/from client cash balances
Drawdown of margin loans
Acquisition 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, 25
The notes on pages 23 to 60 are an integral part of these Consolidated Financial Statements.
Consolidated
2019
$’000
241,953
(211,249)
8,583
39,287
5
24,361
(7,740)
(8,895)
47,018
238
(778)
-
(9,213)
(9,753)
(24,660)
-
-
-
(9,313)
105,989
19,401
(268,167)
141,000
(35,750)
1,515
193,622
195,137
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
1. ‘Cash generated from operations’ includes Group cash reserves and client balances. Refer to note 13 for further information on cash and cash equivalents.
22
Bell Financial Group Annual Report 2019 NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2019
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 2020.
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 and loans) at fair
value through the profit or loss.
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 Section 295(2)(b) of 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 32.
Comparative amounts
2018 comparative numbers have been
restated to reflect the issue of certain
employee performance rights in 2016.
As a result the following accounts have
been restated: 2018 Employee Expenses
have increased by $333,000 (from
$134,344,000 to $134,677,000), Retained
Earnings decreased by $622,000 (from
$28,405,000 to $27,451,000), Share
Based Payments Reserves increased by
$955,000 (from $264,000 to $1,218,000)
and Basic and diluted earnings per share
decreased from 8.5 cents to 8.4 cents.
(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.
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
23
from the date that control commenced
until the date that control ceases. All
controlled entities have a 31 December
balance date.
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.
(c) Revenue recognition
AASB 15 Revenue from Contracts
with Customers
AASB 15 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.
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. Revenue streams for
Bell Financial are limited to fee-based
revenue items such as brokerage, fee
income, commissions and portfolio
administration fees.
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.
Annual Report 2019 Bell Financial Group
NOTES TO THE FINANCIAL STATEMENTS continued
For the year ended 31 December 2019
1. Significant accounting
policies (continued)
(c) Revenue recognition (continued)
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
performance obligations are satisfied
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) Leases
AASB 16 Leases
The Group initially applied AASB
16 using the modified retrospective
approach, from 1 January 2019.
Accordingly the comparative information
is presented, as previously reported,
under IAS 17 and related interpretations.
The details of the changes in accounting
policies are disclosed below, additionally,
the disclosure requirements in AASB
16 have not generally been applied to
comparative information.
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. 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.
Impact on transition
The Group has a number of property
leases. At transitional date 1 January
2019, a right of use asset of $31m
was recorded as an asset, with a
corresponding lease liability of $39.7m.
There was a reduction in trade & other
payables of $8.6m.
The Group recognises a right-of-use
asset and a lease liability at the lease
commencement date. The right-of-
use asset is initially measured at
cost, and subsequently at cost less
any accumulated depreciation and
impairment losses.
The lease liability is initially measured at
the present value of the lease payments
that are not paid at initial application
date, discounted using the incremental
borrowing rate determined by the
Group. The lease liability is subsequently
increased by the interest cost on
the lease liability and decreased
by the lease payment made.
When measuring lease liabilities
for leases that were classified as
operating lease, the Group discounted
lease payments using its incremental
borrowing rate at 1 January 2019.
The weighted-average rate applied
is 4.1%.
Impacts for the period
As a result of initially applying AASB
16 in relation to the leases that were
previously classified as operating leases,
the Group recognised $22.8m of right-
of-use assets (including investment
property) and $30.6m of lease liabilities
as at 31 December 2019.
24
Also in relation to those leases under
AASB 16, the Group has recognised
depreciation and interest costs, instead
of operating lease expense. During
the year ended 31 December 2019, the
Group recognised $8.4m of depreciation
charges and $1.6m of interest costs
from these leases.
(e) 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.
(f) 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
Bell Financial Group Annual Report 2019
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 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.
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.
that affects neither accounting nor
taxable profit, and differences relating
to investments in subsidiaries to the
extent that they probably will not reverse
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 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.
(g) 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.
(h) 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.
(i) 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
25
Annual Report 2019 Bell Financial Group NOTES TO THE FINANCIAL STATEMENTS continued
For the year ended 31 December 2019
1. Significant accounting
policies (continued)
(j) 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.
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.
(k) 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.
(l) 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.
(m) Borrowing costs
Borrowing costs are recognised using
effective yield.
(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.
(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.
26
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
2019
10 years
10 years
2018
10 years
10 years
(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.
Bell Financial Group Annual Report 2019
i. Classification and measurement
of financial assets and financial
liabilities
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.
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.
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.
Measurement categories of
financial assets
Cash and cash equivalents, Trade
and other receivables, and Loans and
advances that meet SPPI are classified
and measured at amortised cost.
Certain loans and advances and other
financial assets do not meet SPPI and
are classified and measured at FVTPL.
There were no changes in classification
and measurements of the Group’s
financial assets.
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.
27
Annual Report 2019 Bell Financial Group NOTES TO THE FINANCIAL STATEMENTS continued
For the year ended 31 December 2019
1. Significant accounting
policies (continued)
(q) Financial instruments (continued)
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.
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 2019
(2018: 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 31 December 2019.
Loans and advances
ECLs are calculated based on actual
historical credit loss experience.
Exposures are segmented based on
28
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 31 December 2019.
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.
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.
Bell Financial Group Annual Report 2019 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
2019
2018
20–25%
20–25%
20–50%
20–50%
20–50%
20–50%
(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.
29
(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
FVOCI instruments that are recognised
directly in OCI.
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.
Annual Report 2019 Bell Financial Group
NOTES TO THE FINANCIAL STATEMENTS continued
For the year ended 31 December 2019
1. Significant accounting
policies (continued)
(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.
The following amended standards and
interpretations are not expected to have
a significant impact on the Group’s
consolidated financial statements.
• Definition of Business (Amendments
to IFRS3).
• Definition of Material (Amendments
to IAS 1 and IAS 8).
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 18).
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 2019 (2018:
Nil). (Refer to note 19 and note 1q(ii)).
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 24).
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
2019, no provision has been accrued to
reflect potential claims. In the Directors’
opinion, no provision is required.
(Refer to note 23).
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 2019, 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 9% (2018: 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.
30
Bell Financial Group Annual Report 2019 Terminal value multiple:
A terminal value multiple of 7 times
(2018: 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 (2018: 2.7% p.a) average
growth over the five year forecast period
for Retail and 5.9% p.a (2018: 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 and wholesale.
Sensitivity analysis
As at 31 December 2019, 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 5.6% for retail and
42.5% 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 12.55% for retail and
24.1% for wholesale, the estimated
recoverable amounts would be equal
to the carrying amounts. Further, if the
terminal value multiple decreased to
approximately 5.5 times for retail and
2.15 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 loans and
advances, 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.
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.
31
Annual Report 2019 Bell Financial Group NOTES TO THE FINANCIAL STATEMENTS continued
For the year ended 31 December 2019
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.
32
Bell Financial Group Annual Report 2019 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 2019
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 20181
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
148,936
13,293
999,533
999,533
860,125
860,125
24,318
(7,740)
(8,583)
Retail
$’000
160,526
11,996
667,939
667,939
542,634
542,634
18,250
(5,007)
(1,418)
Wholesale
$’000
78,526
19,150
92,878
92,878
Consolidated
$’000
227,462
32,443
1,092,411
1,092,411
20,982
20,982
881,107
881,107
-
-
(1,787)
24,318
(7,740)
(10,370)
Wholesale
$’000
59,490
12,741
93,958
93,958
Consolidated
$’000
220,016
24,737
761,897
761,897
15,934
15,934
558,568
558,568
-
-
(53)
18,250
(5,007)
(1,471)
1. 2018 comparative amounts have been restated. Refer to note 1(a) for further information.
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
Other
Consolidated
2019
$’000
120,056
83,814
18,896
4,696
227,462
2018
$’000
112,880
66,826
17,548
4,969
202,223
33
Annual Report 2019 Bell Financial Group NOTES TO THE FINANCIAL STATEMENTS continued
For the year ended 31 December 2019
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
Other
Retail
Wholesale
Consolidated
2019
$’000
99,584
31,726
18,896
3,423
153,629
2018
$’000
94,263
26,118
17,548
4,804
142,733
2019
$’000
20,472
52,088
-
1,273
73,833
2018
$’000
18,617
40,708
-
165
59,490
2019
$’000
120,056
83,814
18,896
4,696
227,462
2018
$’000
112,880
66,826
17,548
4,969
202,223
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
Interest expense on leases
Total finance expense
Net finance income/(expense)
34
Consolidated
2019
$’000
5
2,025
2,030
2018
$’000
15
(942)
(927)
Consolidated
2019
$’000
660
660
2018
$’000
470
470
Consolidated
2019
$’000
3,320
20,998
24,318
(3,235)
(2,863)
(1,642)
(7,740)
16,578
2018
$’000
3,173
15,077
18,250
(1,601)
(3,406)
-
(5,007)
13,243
Bell Financial Group Annual Report 2019 11. Employee expenses
Wages and salaries
Superannuation
Payroll tax
Other employee expenses
Equity-settled share-based payments
1. 2018 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
2019
$’000
(135,707)
(7,224)
(7,330)
(1,498)
(394)
(152,153)
20181
$’000
(119,283)
(6,829)
(6,523)
(1,425)
(617)
(134,677)
Consolidated
2019
$’000
13,722
40
(131)
(3,240)
10,391
-
3,666
2018
$’000
10,977
2
(6)
(1,713)
9,260
-
1,670
Total income tax expense/(benefit)
14,057
10,930
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
2019
Consolidated
20181
%
30.00%
0.43%
(0.28%)
0.09%
30.24%
$’000
46,500
13,950
198
(131)
40
14,057
%
30.00%
0.38%
(0.03%)
0.01%
30.36%
$’000
35,667
10,700
236
(9)
3
10,930
1. 2018 comparative amounts have been restated. Refer to note 1(a) for further information.
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 unutilised income tax losses of $16.5m were transferred from Third Party Platform Pty Ltd to the Bell Financial Group
Ltd tax consolidated group. Tax losses have been fully utilised as at 31 December 2019.
35
Annual Report 2019 Bell Financial Group NOTES TO THE FINANCIAL STATEMENTS continued
For the year ended 31 December 2019
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
2019
$’000
13
82,534
82,547
16,381
16,381
38,106
58,103
96,209
195,137
2018
$’000
14
86,942
86,956
19,585
19,585
33,512
53,569
87,081
193,622
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 20).
The Group’s exposure to interest rate risk for financial assets and liabilities is disclosed in note 30.
1. Group Cash – summary of key movements
Group cash – 1 January 2019
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
Dividends paid
Clearing house deposits paid
Financial asset sales (net)
General working capital movement
Group cash – 31 December 2019
36
2019
$’000
86,956
2018
$’000
84,974
253,940
217,859
(145,244)
(13,726)
(21,754)
(2,137)
(6,098)
(11,046)
(200,005)
53,935
(8,895)
(24,660)
(22,411)
(756)
(1,622)
82,547
(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
Bell Financial Group Annual Report 2019 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 (2018: Nil).
15. Financial assets
Held at fair value through profit or loss
Shares in listed corporations
Options held in listed corporations1
Consolidated
2019
$’000
86,221
-
86,221
27,129
49,003
-
76,132
5,605
167,958
2018
$’000
77,187
-
77,187
4,715
32,275
-
36,990
6,482
120,659
Consolidated
2019
$’000
2,706
10,853
13,559
2018
$’000
555
490
1,045
1. Financial assets include $7.1m in options acquired as part of the acquisition of Macquarie Structured loan book. The options are held as a hedge against
the limited recourse loans issued to client.
37
Annual Report 2019 Bell Financial Group
NOTES TO THE FINANCIAL STATEMENTS continued
For the year ended 31 December 2019
16. Property, plant and equipment
Consolidated
Cost
Balance at 1 January 2018
Additions
Disposals
Effect of movements in exchange rates
Balance at 31 December 2018
Balance at 1 January 2019
Additions
Disposals
Effect of movements in exchange rates
Balance at 31 December 2019
Accumulated depreciation
Balance at 1 January 2018
Depreciation charge for the year
Disposals
Effect of movements in exchange rates
Balance at 31 December 2018
Balance at 1 January 2019
Depreciation charge for the year
Disposals
Effect of movements in exchange rates
Balance at 31 December 2019
Carrying amount
At 1 January 2018
At 31 December 2018
At 31 December 2019
Fixtures and
fittings
$’000
Office
equipment
$’000
Leasehold
improvements
$’000
1,882
50
-
9
1,941
1,941
190
-
5
2,136
(1,631)
(60)
-
(8)
(1,699)
(1,699)
(84)
-
(4)
(1,787)
251
242
349
4,788
205
-
11
5,004
5,004
196
-
(41)
5,159
(4,514)
(171)
-
(12)
(4,697)
(4,697)
(188)
-
42
(4,843)
274
307
316
6,323
-
-
8
6,331
6,331
392
-
6
6,729
(6,117)
(52)
-
(8)
(6,177)
(6,177)
(107)
-
(6)
(6,290)
206
154
439
Total
$’000
12,993
255
-
28
13,276
13,276
778
-
(30)
14,024
(12,262)
(283)
-
(28)
(12,573)
(12,573)
(379)
-
32
(12,920)
731
703
1,104
38
Bell Financial Group Annual Report 2019 17. Goodwill and intangible assets
Cost
Balance at 1 January 2018
Acquisitions – internally developed
Balance at 31 December 2018
Balance at 1 January 2019
Acquisitions – internally developed
Balance at 31 December 2019
Accumulated amortisation and impairment losses
Balance at 1 January 2018
Amortisation
Balance at 31 December 2018
Balance at 1 January 2019
Amortisation
Balance at 31 December 2019
Carrying amount
At 1 January 2018
At 31 December 2018
At 31 December 2019
Goodwill
$’000
130,413
-
130,413
130,413
-
130,413
-
-
-
-
-
-
130,413
130,413
130,413
Identifiable
intangibles
$’000
14,113
3,104
17,217
17,217
3,413
20,630
(5,375)
(1,188)
(6,563)
(6,563)
(1,570)
(8,133)
8,738
10,654
12,497
Total
$’000
144,526
3,104
147,630
147,630
3,413
151,043
(5,375)
(1,188)
(6,563)
(6,563)
(1,570)
(8,133)
139,151
141,067
142,910
39
Annual Report 2019 Bell Financial Group NOTES TO THE FINANCIAL STATEMENTS continued
For the year ended 31 December 2019
18. Deferred tax assets and liabilities
The movement in deferred tax balances are as follows:
Consolidated 2019
Property, plant and equipment
Employee benefits
Carry forward tax loss
Utilisation of tax losses
Other items
Consolidated 2018
Property, plant and equipment
Employee benefits
Carry forward tax loss
Utilisation of tax losses
Other items
Balance as at
1 January
$’000
1
3,104
5,056
(1,713)
1,176
7,624
Balance as at
1 January
$’000
8
3,081
5,254
-
1,149
9,492
Recognised in
profit or loss
$’000
9
1,374
(7)
(3,240)
(1,340)
(3,204)
Recognised in
profit or loss
$’000
(7)
23
(198)
(1,713)
27
(1,868)
Balance at
31 December
$’000
10
4,478
5,049
(4,953)
(164)
4,420
Balance at
31 December
$’000
1
3,104
5,056
(1,713)
1,176
7,624
Unrecognised deferred tax assets relating to tax losses at 31 December 2019: $55,000 (2018: $19,000).
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.
19. Loans and advances
Margin loans measured at amortised cost
Margin loans measured at fair value through profit and loss
Consolidated
2019
$’000
397,520
145,969
543,489
2018
$’000
296,217
-
296,217
There were no impaired, past due or renegotiated loans at 31 December 2019 (2018: nil).
Refer to note 30 for further detail on the margin lending loans.
On the 5th August 2019, Bell Potter Capital Limited (a wholly owned subsidiary of Bell Financial Group Limited) completed
the acquisition of two structured products, Equity Lever and Geared Equity Investments from Macquarie Bank, along with the
associated clients and loan books and a dedicated product and business development team.
40
Bell Financial Group Annual Report 2019 20. Trade and other payables
Settlement obligations
Sundry creditors and accruals
Segregated client liabilities
Consolidated
2019
$’000
108,293
19,024
118,294
245,611
20181
$’000
93,581
20,948
98,661
213,190
1. 2018 comparative amounts for settlement obligations and segregated client liabilities have been reclassified by $739k in order to present the amounts
on a consistent basis with the way they are presented in 2019. There is no impact on the 2018 profit after tax or equity.
Settlement obligations are non-interest bearing and are normally settled on 2-day terms. Sundry creditors are normally settled
on 60-day terms.
21. 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 30.
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 in the Bell Cash Trust which are held at call.
3. Represents drawn funds from the Bell Potter Capital cash advance facility of $250m (2018: $100m).
Interest rate risk exposures
Details of the Group’s exposure to interest rate changes on borrowings are set out in note 30.
Consolidated
2019
$’000
635
381,795
177,000
559,430
2018
$’000
1,644
274,797
36,000
312,441
41
Annual Report 2019 Bell Financial Group NOTES TO THE FINANCIAL STATEMENTS continued
For the year ended 31 December 2019
21. 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
2019
%
2.08
0.61
0.61
2018
%
2.66
1.08
1.08
Face value
$’000
177,000
635
381,795
559,430
2019
2018
Carrying
amount
$’000
177,000
635
381,795
559,430
Face value
$’000
36,000
1,644
274,797
312,441
Carrying
amount
$’000
36,000
1,644
274,797
312,441
2019
Balance at 1 January 2019
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
36,000
Liabilities
Deposits
(Cash
Account)
$’000
1,644
Bell Cash
Trust
$’000
274,797
-
141,000
141,000
(1,009)
-
(1,009)
-
106,998
106,998
Changes in fair value
-
-
-
Other charges
Liability-related
Interest expense
Interest paid/payable
Total liability-related other changes
1,664
(1,664)
-
422
(422)
-
2,558
(2,558)
-
Balance at 31 December 2019
177,000
635
381,795
Derivatives (assets)/
liabilities held to hedge
long-term borrowings
Interest rate swap
contracts used for
hedging
Assets
$’000
-
Liabilities
$’000
75
Total
312,516
-
-
-
-
-
-
-
-
-
-
-
(1,009)
247,998
246,989
305
305
-
-
-
4,644
(4,644)
-
380
559,810
42
Bell Financial Group Annual Report 2019
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
317,404
-
-
-
-
-
-
-
-
-
-
-
51
-
-
-
(2,162)
(2,777)
(4,939)
51
4,176
(4,176)
-
75
312,516
22. Current tax liabilities
The current tax liability of the Group is $2,152,006 (2018: $161,555). This amount represents the amount of income taxes payable
in respect of current and prior financial periods.
43
Annual Report 2019 Bell Financial Group NOTES TO THE FINANCIAL STATEMENTS continued
For the year ended 31 December 2019
23. Provisions
Legal provision
Balance at 1 January
Arising during the year:
Legal/other
Utilised:
Legal/other
Balance at 31 December
Consolidated
2019
$’000
-
-
-
-
-
-
2018
$’000
-
-
300
75
(375)
-
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 2019.
24. Employee benefits
Salaries and wages accrued
Liability for annual leave
Total employee benefits
Liability for long-service leave
Total employee benefits
Consolidated
2019
$’000
33,174
5,416
38,590
4,376
42,966
2018
$’000
23,422
5,251
28,673
3,970
32,643
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
2019
$’000
3.0%
1.25%
7
719
2018
$’000
3.0%
2.5%
7
690
44
Bell Financial Group Annual Report 2019 25. Reconciliation of cash flows from operating activities
Cash flows from operating activities
Profit after tax:
Adjustments for:
Depreciation & amortisation
Net (gain)/loss on investments
Equity settled share-based payments
(Increase) client receivables
Decrease/(increase) other receivables
(Increase)/decrease derivative asset
Decrease/(increase) other assets
Decrease deferred tax assets
(Increase) intangibles
Increase client payables
Increase other payables
(Decrease)/increase derivative liability
Increase/(decrease) current tax liabilities
Increase provisions
(Decrease)/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)
1. 2018 comparative amounts have been restated. Refer to note 1(a) for further information.
Consolidated
2019
$’000
20181
$’000
32,443
24,737
10,370
(2,045)
394
41,162
(48,176)
877
(103)
30
3,660
(3,413)
34,447
6,734
(57)
1,990
10,323
(456)
47,018
13
82,534
82,547
16,381
16,381
38,106
58,103
96,209
195,137
1,471
933
617
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
45
Annual Report 2019 Bell Financial Group NOTES TO THE FINANCIAL STATEMENTS continued
For the year ended 31 December 2019
26. Capital and reserves
Ordinary shares
On issue at 1 January
Share issue 3 July 20181
On issue at 31 December
Consolidated
2019
$’000
204,237
-
204,237
2018
$’000
167,886
36,351
204,237
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 2018
Share issue 3 July 2018
31 December 2018
1 January 2019
Share issue
31 December 2019
Detail
Opening balance
Balance
Opening balance
Balance
Number of shares
267,286,480
53,457,468
320,743,948
320,743,948
-
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.
Retained earnings
As at 31 December 2019, there were retained profits of $35.2m (2018: $27.5m).
Foreign currency reserve
The foreign currency reserve comprises of any movements in the translation of foreign currency balances. Balance at
31 December 2019: $771,000 (2018: $668,000).
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 2019: $28,858,000 debit (2018: $28,858,000 debit).
46
Bell Financial Group Annual Report 2019
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 2019: $380,000 (2018: $75,000).
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 2019: $9,000 (2018: $1,218,000).
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 2019: $0.3m (2018: $1.3m).
27. Dividends
Dividends recognised in the current year by the Group are:
Cents
per share
Total amount
$’000
Franked/
unfranked
Date of
payment
2019
Interim 2019 ordinary dividend
Final 2019 ordinary dividend
2018
Interim 2018 ordinary dividend
Final 2018 ordinary dividend
3.50
-
2.75
4.25
11,137
-
8,742
13,523
Dividend franking account
30 percent franking credits available to shareholders of Bell Financial Group Ltd for
subsequent financial years
Franked 29 August 2019
-
-
Franked
Franked
29 August 2018
20 March 2019
Company
2019
$’000
2018
$’000
26,558
28,292
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 $6.2m
(2018: $5.8m).
47
Annual Report 2019 Bell Financial Group
NOTES TO THE FINANCIAL STATEMENTS continued
For the year ended 31 December 2019
28. Earnings per share
Earnings per share at 31 December 2019 based on profit after tax and a weighted average number of shares outlined below was
10.2 cents (2018: 8.4 cents). Diluted earnings per share at 31 December 2019 was 10.2 cents (2018: 8.4 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
1. 2018 comparative amounts have been restated. Refer to note 1(a) for further information.
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
2019
$’000
32,443
32,443
32,443
-
32,443
20181
$’000
24,737
24,359
24,359
-
24,359
Consolidated
2019
318,559,138
318,599,138
318,599,138
2018
291,266,813
291,266,813
291,266,813
29. 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 2019 (2018: Nil).
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 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.
48
Bell Financial Group Annual Report 2019 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
1. 2018 comparative amounts have been restated. Refer to note 1(a) for further information.
Consolidated
2019
000
2,000
-
-
(2,000)
-
2018
000
2,334
-
-
(334)
2,000
Consolidated
2019
$’000
-
-
394
394
20181
$’000
-
362
255
617
30. 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. There are no individual loans greater than 10% of the total loans
and advance balance.
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
2019
$’000
86,221
27,129
49,003
543,489
5,605
2018
$’000
77,187
4,715
32,275
296,217
6,482
Note
14
14
14
19
14
49
Annual Report 2019 Bell Financial Group
NOTES TO THE FINANCIAL STATEMENTS continued
For the year ended 31 December 2019
30. 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
2019
$’000
85,909
78
234
-
Impairment
2019
$’000
-
-
-
-
Gross
2018
$’000
77,043
133
11
-
Impairment
2018
$’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 2019
Non-derivative liabilities
Trade & other payables
Cash deposits
Cash advance facilities
Bell Cash Trust
Derivative liabilities
Hedging derivative
Foreign currency swap
Consolidated 2018
Non-derivative liabilities
Trade & other payables
Cash deposits
Cash advance facilities
Bell Cash Trust
Derivative liabilities
Hedging derivative
Foreign currency swap
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
245,611
635
177,000
381,795
(245,611)
(635)
(177,000)
(381,795)
(245,611)
(635)
(177,000)
(381,795)
380
-
(380)
-
(380)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
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)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
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.
50
Bell Financial Group Annual Report 2019 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 2019, 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 $1,800,000 (2018: $1,700,000 decrease to profit) and would decrease equity
by approximately $1,260,000 (2018: $1,190,000 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 2019, it is estimated that a 10% decrease in equity prices would decrease the Group’s profit before income tax by
approximately $1,356,000 (2018: $100,000 decrease to profit) and would decrease equity by approximately $949,000 (2018: $70,000
decrease to equity). A 10% increase in equity prices would have an equal but opposite effect. The impact of an equity price
decrease excludes the impact on options that are used to mitigate the risk on limited recourse margin loans issued to clients.
51
Annual Report 2019 Bell Financial Group NOTES TO THE FINANCIAL STATEMENTS continued
For the year ended 31 December 2019
30. 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.
2019
Average
Effective
interest
rate
%
Total
$’000
6 months
or less
$’000
6–12
months
$’000
1–2
years
$’000
2–5
years
$’000
More than
5 years
$’000
5.14%
221,752
2.08% (177,000)
44,752
215,041
(177,000)
38,041
6,711
-
6,711
195,137
1.17%
321,737
5.43%
0.61%
(635)
0.61% (381,795)
134,444
195,137
321,737
(635)
(381,795)
134,444
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Consolidated
Fixed rate instruments
Loans and advances
Cash advance facility
Variable rate instruments
Cash and cash equivalents
Loans and advances
Deposits and borrowings
Bell Cash Trust
Note
19
21
13
19
21
21
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.
Carrying Amount
Fair value
hedging
instruments
$’000
Designated
at fair
value
$’000
Note
Loans and
receivables
$’000
Other
financial
liabilities
$’000
31 DECEMBER 2019
Financial assets measured at fair value
Equity securities/unlisted options
Foreign currency swap
Loans and advances
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
Total
$’000
13,559
103
145,969
159,631
167,958
195,137
397,520
760,615
380
-
380
-
-
-
-
-
-
-
-
-
-
-
242,701
559,430
802,131
242,701
559,430
802,131
13,559
103
-
13,662
-
-
-
-
-
-
-
-
-
-
15
19
14
13
19
20
21
52
-
-
-
-
-
-
-
-
380
-
380
-
-
-
-
-
145,969
145,969
167,958
195,137
397,520
760,615
-
-
-
-
-
-
Average
Effective
interest rate
%
4.44%
2.66%
1.50%
5.07%
1.08%
1.08%
Total
$’000
96,851
(36,000)
60,851
193,622
199,366
(1,644)
(274,797)
116,547
2018
6–12
months
$’000
704
-
704
-
-
-
-
-
6 months
or less
$’000
92,897
(36,000)
56,897
193,622
199,366
(1,644)
(274,797)
116,547
Fair Value
1–2
years
$’000
3,250
3,250
-
-
-
-
-
-
2–5
years
$’000
More than
5 years
$’000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Level 1
$’000
2,706
2,706
-
-
-
-
-
-
-
-
-
-
-
-
Level 2
$’000
10,853
103
-
10,956
-
-
-
-
-
-
-
380
-
380
Level 3
$’000
145,969
145,969
-
-
-
-
-
-
-
-
-
-
-
-
Total
$’000
13,559
103
145,969
159,631
-
-
-
-
-
-
-
380
-
380
Bell Financial Group Annual Report 2019 30. 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.
Average
Effective
interest
rate
%
Total
$’000
6 months
or less
$’000
6–12
months
$’000
1–2
years
$’000
2–5
More than
years
$’000
5 years
$’000
Consolidated
Note
Fixed rate instruments
Loans and advances
Cash advance facility
Variable rate instruments
Cash and cash equivalents
Loans and advances
Deposits and borrowings
Bell Cash Trust
19
21
13
19
21
21
2019
-
-
-
-
-
-
5.14%
221,752
215,041
6,711
2.08% (177,000)
(177,000)
44,752
38,041
6,711
1.17%
5.43%
0.61%
195,137
321,737
195,137
321,737
(635)
(635)
0.61% (381,795)
(381,795)
134,444
134,444
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
Carrying Amount
Designated
Fair value
at fair
value
$’000
hedging
Loans and
instruments
receivables
$’000
$’000
Other
financial
liabilities
$’000
31 DECEMBER 2019
Note
Financial assets measured at fair value
Equity securities/unlisted options
Foreign currency swap
Loans and advances
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
19
14
13
19
20
21
13,559
103
-
13,662
-
-
-
-
-
-
-
-
-
-
145,969
145,969
167,958
195,137
397,520
760,615
-
-
-
-
-
-
-
-
-
-
-
380
-
380
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Total
$’000
13,559
103
145,969
159,631
167,958
195,137
397,520
760,615
380
-
380
242,701
559,430
802,131
242,701
559,430
802,131
Average
Effective
interest rate
%
4.44%
2.66%
1.50%
5.07%
1.08%
1.08%
Total
$’000
96,851
(36,000)
60,851
193,622
199,366
(1,644)
(274,797)
116,547
6 months
or less
$’000
92,897
(36,000)
56,897
193,622
199,366
(1,644)
(274,797)
116,547
Fair Value
Level 1
$’000
2,706
-
-
2,706
-
-
-
-
-
-
-
-
-
-
Level 2
$’000
10,853
103
-
10,956
-
-
-
-
380
-
380
-
-
-
2018
6–12
months
$’000
704
-
704
-
-
-
-
-
Level 3
$’000
-
-
145,969
145,969
-
-
-
-
-
-
-
-
-
-
53
1–2
years
$’000
3,250
-
3,250
-
-
-
-
-
2–5
years
$’000
More than
5 years
$’000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Total
$’000
13,559
103
145,969
159,631
-
-
-
-
380
-
380
-
-
-
Annual Report 2019 Bell Financial Group Fair Value
Level 1
$’000
Level 2
$’000
Level 3
$’000
555
555
490
490
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
75
57
132
Total
$’000
1,045
1,045
-
-
-
-
-
-
75
57
132
-
-
-
-
-
-
-
-
-
-
-
NOTES TO THE FINANCIAL STATEMENTS continued
For the year ended 31 December 2019
30. Financial instruments (continued)
Fair value measurements (continued)
31 DECEMBER 2018
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
Carrying Amount
Designated
at fair value
$’000
Note
Fair value
hedging
instruments
$’000
Loans and
receivables
$’000
Other
financial
liabilities
$’000
15
14
13
19
20
21
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
(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.
Level 3 – Loans and advances – the fair value is based on the option value used to mitigate the risk on the limited recourse
margin loans and the interest rate implicit in the loan.
There were no reclassifications on the fair value levels during the years ended 31 December 2019 and 2018.
54
Bell Financial Group Annual Report 2019 31 DECEMBER 2018
Note
$’000
$’000
$’000
$’000
Carrying Amount
Fair value
Other
Designated
hedging
Loans and
financial
at fair value
instruments
receivables
liabilities
Fair Value
Level 1
$’000
Level 2
$’000
Level 3
$’000
555
555
-
-
-
-
-
-
-
-
-
490
490
-
-
-
-
75
57
132
-
-
-
-
-
-
-
-
-
-
-
-
-
30. Financial instruments (continued)
Fair value measurements (continued)
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
(b) Accounting classifications and fair values
inputs used.
15
14
13
19
20
21
1,045
1,045
-
-
-
-
-
-
-
-
-
-
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
-
-
-
-
-
-
-
-
-
75
57
132
120,659
193,622
296,217
610,498
-
-
-
-
-
-
-
-
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.
Level 3 – Loans and advances – the fair value is based on the option value used to mitigate the risk on the limited recourse
margin loans and the interest rate implicit in the loan.
There were no reclassifications on the fair value levels during the years ended 31 December 2019 and 2018.
Total
$’000
1,045
1,045
-
-
-
-
75
57
132
-
-
55
Annual Report 2019 Bell Financial Group NOTES TO THE FINANCIAL STATEMENTS continued
For the year ended 31 December 2019
31. Leases
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.
Right-of-use assets
Balance at 1 January 2019
Depreciation charge for the year
Additions to right-of-use assets
Effect of movements in exchange rates
Balance at 31 December 2019
Lease Liabilities
Balance at 1 January 2019
Interest on lease liabilities for the year
Addition to lease liabilities
Rent payments
Effect of movements in exchange rates
Balance at 31 December 2019
Amounts recognised in statements of cash flows
Total cash outflows for lease
2018 Operating leases under IAS 17
Lease expense
$’000
31,019
(8,420)
132
70
22,801
39,677
1,642
131
(10,955)
73
30,568
(10,955)
(10,721)
32. Parent entity disclosures
As at, and throughout the financial year ending 31 December 2019, the parent company of the Group was Bell Financial Group Ltd.
Consolidated
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
1. 2018 comparative amounts have been restated. Refer to note 1(a) for further information.
There are currently no complaints or claims made against the parent entity.
56
2019
$’000
24,441
24,441
2,029
206,125
208,154
18,904
18,904
204,237
290
(15,277)
189,250
20181
$’000
23,282
23,282
2,298
209,260
211,558
22,483
22,483
204,237
(102)
(15,060)
189,075
Bell Financial Group Annual Report 2019 33. 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
Key management personnel compensation
The key management personnel compensation comprised:
Non-Executive Directors
C Coleman
G Cubbin
B Wilson AO
Short-term employee benefits
Other long-term benefits
Post-employment benefits
Termination benefits
Share-based payments
Consolidated
2019
3,919,181
81,383
172,331
-
48,000
4,220,895
2018
3,922,124
59,922
153,905
-
-
4,135,951
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 2019
Total for key management personnel 2018
Total for other related parties 2019
Total for other related parties 2018
Total for key management personnel and their
related parties 2019
Total for key management personnel and their related
parties 2018
Opening
balance
$
3,039,829
3,808,983
-
-
Interest paid
and payable in
the reporting
period
$
120,672
165,932
-
-
Closing
balance
$
2,835,739
3,039,829
-
-
3,039,829
2,835,739
120,672
3,808,983
3,039,829
165,932
Number
in Group at
31 December1
42
36
-
-
42
36
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 $120,672 (2018: $165,932). No amounts have been
written-down or recorded as allowances for impairment, as the balances are considered fully collectable.
57
Annual Report 2019 Bell Financial Group NOTES TO THE FINANCIAL STATEMENTS continued
For the year ended 31 December 2019
33. Related parties (continued)
Movements in shares 2019
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
A Provan2
C Coleman
G Cubbin
B Wilson AO
C Bell2
Senior Executives
LM Bell 2
AG Bell 2
R Fell
D Davenport
Held at
1 January
2019
43,457,863
2,126,740
216,000
1,200,000
43,083,154
42,548,555
32,089,972
840,000
221,939
Received on
exercise of
options
Held at
31 December
2019
Sales
Purchases
-
50,000
-
-
-
175,000
214,000
35,000
106,100
-
-
-
-
-
-
-
-
-
-
-
-
-
-
43,457,863
2,176,740
216,000
1,200,000
43,083,154
-
-
-
(100,000)
42,723,555
32,303,972
875,000
228,039
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.
Movements in shares 2018
Directors
C Bell2
A Provan2
C Coleman
G Cubbin
B Wilson AO
B Shanahan3
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.
Other key management personnel transactions
There are no other transactions with key management persons or their related parties other than those that have been disclosed
in this report.
58
Bell Financial Group Annual Report 2019 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 2019 (2018: nil). There is no interest receivable or payable at 31 December 2019
(2018: 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 Limited1
Bell Potter Capital Limited2
Bell Potter (US) Holdings Inc1
Bell Potter Securities (US) LLC
1. Loan is interest free and unsecured.
2019
$
2018
$
632
-
8,052,473
1,935,735
1,912
9,990,752
463
174,438
8,121,666
1,932,809
1,912
10,231,288
2. The loan from the parent entity to Bell Potter Capital Limited represents a subordinated loan that attracts interest at 2.67% per annum (2018: 3.00%
per annum).
Loans made by wholly owned subsidiaries to the Company: $17,036,667 (2018: $22,483,326).
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 2019, all outstanding amounts are considered
fully collectable.
34. 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
2019
2018
Australia
Australia
Australia
United Kingdom
Hong Kong
United States
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
59
Annual Report 2019 Bell Financial Group NOTES TO THE FINANCIAL STATEMENTS continued
For the year ended 31 December 2019
35. Guarantees
From time to time Bell Financial has provided financial guarantees in the ordinary course of business which amount to $6.6m
(2018: $6.6m) and are not recorded in the Statement of Financial Position as at 31 December 2019.
36. 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.
37. Subsequent events
Except as noted below, there were no significant events from 31 December 2019 to the date of this report.
Final Dividend
On 20 February 2020, the Directors resolved to pay a fully franked final dividend of 4.5 cents per share.
38. 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
2019
$
2018
$
366,204
347,584
366,204
347,584
109,000
109,000
27,185
502,389
104,000
104,000
39,000
490,584
60
Bell Financial Group Annual Report 2019 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 23 to 60 and the Remuneration Report
on pages 12 to 16 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 2019 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 Chief Executive
Officer (who is the Executive Chairman) and the Chief Financial Officer for the financial year ended 31 December 2019.
Note 1(a) of the Consolidated Financial Statements includes a statement of compliance with International Financial Reporting
Standards.
This declaration is made on 20 February 2020 in accordance with a resolution of the Directors:
Alastair Provan
Executive Chairman
20 February 2020
61
Annual Report 2019 Bell Financial Group
INDEPENDENT AUDITOR’S REPORT
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
2019 and of its financial performance for
the year ended on that date; and
•
•
The Financial Report comprises :
• Consolidated statement of financial position as at 31
December 2019
• 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
complying with Australian Accounting
Standards and the Corporations
Regulations 2001.
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.
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.
62
Bell Financial Group Annual Report 2019 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 12% 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 and 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
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. The
Group’s modelling is 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
63
Annual Report 2019 Bell Financial Group
INDEPENDENT AUDITOR’S REPORT continued
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.
forecasts
in some
not met prior
instances
historically, increasing our audit effort in assessing
the reliability of current forecasts for each CGU.
Complex modelling,
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
their
consistent application.
for assumptions, and
using
We involved valuation specialists to supplement
our senior audit team members in assessing this
key audit matter.
64
Bell Financial Group Annual Report 2019
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.
65
Annual Report 2019 Bell Financial Group INDEPENDENT AUDITOR’S REPORT continued
Report on the Remuneration Report
Opinion
Directors’ responsibilities
In our opinion, the Remuneration Report
of Bell Financial Group Ltd for the year
ended 31 December 2019, complies with
Section 300A of the Corporations Act
2001.
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 12 to 16 of the Directors’ report for the year ended
31 December 2019.
Our responsibility is to express an opinion on the
Remuneration Report, based on our audit conducted in
accordance with Australian Auditing Standards.
KPMG
Chris Wooden
Partner
Melbourne
20 February 2020
66
Bell Financial Group Annual Report 2019
SHAREHOLDER INFORMATION
The following information is current as at 31 January 2020.
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
344
838
571
1,383
237
3,373
Number
of shares
195,702
2,511,372
4,556,474
46,247,736
267,232,664
320,743,948
% of issued
capital
0.06
0.78
1.42
14.42
83.32
100.00
There were 77 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
CITICORP NOMINEES PTY LIMITED
MR JAMES GORDON MOFFATT
MR ANAND SELVARAJAH
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
NATIONAL NOMINEES LIMITED
BELL POTTER NOMINEES LTD
NEWECONOMY COM AU NOMINEES PTY LIMITED <900 ACCOUNT>
COLIN BELL PTY LTD
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
MORSON HOLDINGS PTY LTD
MR ALASTAIR PROVAN + MRS JANIS PROVAN
MR LEE WILLIAM MUCO
FRANUNTA SUPER PTY LTD
BELL SECURITIES PTY LIMITED
CERTUS CAPITAL PTY LTD
MR LIONEL ALEXANDER MCFADYEN + MRS JENNIFER JUNE MCFADYEN
BOND STREET CUSTODIANS LIMITED
MR ALASTAIR PROVAN + MRS JANIS PROVAN
MR CON ZEMPILAS
18.
19.
20.
Number of
shares
143,998,350
5,970,452
5,200,000
3,892,334
3,741,343
3,733,060
3,503,906
2,864,067
2,814,627
2,808,071
2,609,699
2,400,000
2,300,000
2,240,000
2,232,000
2,129,623
1,687,480
1,669,097
1,560,876
1,500,000
% of issued
capital
44.90
1.86
1.62
1.21
1.17
1.16
1.09
0.89
0.88
0.88
0.81
0.75
0.72
0.70
0.70
0.66
0.53
0.52
0.49
0.47
67
Annual Report 2019 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
Number of
shares
146,230,350
150,929,420
150,554,711
149,810,112
% of issued
capital
45.591
47.061,2
46.941,3
46.711,4
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 3,579,762 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.
68
Bell Financial Group Annual Report 2019 DIRECTORY
Bell Financial Group Ltd
ABN
59 083 194 763
Directors
Alastair Provan, Executive Chairman
Craig Coleman, Independent Director
Graham Cubbin, Independent Director
Brian Wilson AO, Independent 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
69
Annual Report 2019 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