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2023 ReportC o u n t P l u s A n n u a l R e p o r t 2 0 2 2 T R O P E R 2 2 0 2 L A U N N A APPENDIX 4E FOR THE YEAR ENDED 30 JUNE 2022 1 Company details Name of entity CountPlus Limited ABN 11 126 990 832 Reporting period For the year ended 30 June 2022 Previous period For the year ended 30 June 2021 2 Results for announcement to the market Revenue from contracts with customers Profit from ordinary activities after tax attributable to the owners of CountPlus Limited Profit for the year attributable to the owners of CountPlus Limited up up up 6% to 4% to 4% to Comments The profit for the Group after providing for income tax and non-controlling interest amounted to $5,112,000 (30 June 2021: $4,938,000). $’000 85,293 5,112 5,112 3 Net tangible assets Net tangible assets per ordinary security Reporting period Cents Previous period Cents 27.53 37.50 Right-of-use assets and lease liabilities recognised under AASB 16 as well as contract assets and contract liabilities recognised under AASB 15 have been excluded from this calculation. 4 Entities where control was gained or lost Names of entities 4Front Holdings Pty Ltd Wealth Axis Holdings Pty Ltd Accurium Holdings Pty Ltd There was no loss of control of entities during the period. Ownership % Date of acquisition 51% 51% 85% 01/07/2021 20/08/2021 01/11/2021 2 COUNTPLUS ANNUAL REPORT 2022 APPENDIX 4E FOR THE YEAR ENDED 30 JUNE 2022 5 Dividends 2022 Half Year dividend paid on 6 April 2022 2022 Final dividend to be paid on 12 October 2022 Amount per security Cents Franked amount per security Cents 1.50 2.00 1.50 2.00 The record date for determining entitlement to the 2022 Final dividend is 23 September 2022 and payable on 12 October 2022. The Final dividend is not provided for at 30 June 2022 and there is no dividend reinvestment plan in place for the group. 6 Details of associates Name of associate One Hood Sweeney Pty Ltd Hunter Financial Planning Pty Ltd OBM Financial Services Pty Ltd Rundles CountPlus Pty Ltd Rundles Financial Planning Pty Ltd DMG Financial Holdings Pty Ltd Southern Cross Business Holdings Pty Ltd Group's aggregate share of associates profit Profit from ordinary activities after income tax Reporting entity's percentage holding Contribution to profit Reporting period % Previous period % Reporting period $’000 Previous period $’000 32.36% 40.00% 43.00% 40.00% 20.00% 30.00% 49.00% 32.36% 40.00% 40.00% 40.00% 20.00% 30.00% – 1,165 355 373 359 64 732 468 3,516 1,192 255 332 312 54 353 – 2,498 7 Audit qualification or review The financial statements have been audited and an unmodified opinion has been issued. 3 COUNTPLUS ANNUAL REPORT 2022 S U L P T N U O C T U O B A CountPlus partners with leading firms and provides valued services to a professional community of financial advisers. We will, collectively, secure the financial well being of our clients. 4 COUNTPLUS ANNUAL REPORT 2022 CONTENTS 6 8 10 14 16 18 22 35 37 98 99 Chairman's Report CEO Report Firm Profiles Financial Summary CountPlus Board Directors' Report Remuneration Report Auditor's Independence Declaration Financial Statements ASX Additional Information Investors' Information 5 COUNTPLUS ANNUAL REPORT 2022 CHAIRMAN'S REPORT It’s my pleasure to once again deliver our CountPlus full year results. FY22 was a year of change for us all and we were pleased to announce Hugh Humphrey as our new Chief Executive Officer commencing on 1 July 2022, and to broaden Laurent Toussaint’s CFO responsibilities to include Operations. All our non-executive directors continued to bring a wealth of expertise and experience, providing a stable source of guidance throughout the year. Across the CountPlus group we now represent a strong community of 3,455 people in 136 accounting, wealth, and services firms with national presence. In FY22 the group served over 75,000 clients. As a result, group revenues for the year increased +6% to $85.3M providing our foundation for targeted growth. We are pleased to report a final dividend of 2.00 cents per share, fully franked representing an increase of 33% over the prior year and returning 3.50 cents to shareholders for the full year. In the period, we made two acquisitions to establish our Services segment, consistent with our strategic intent to complement and strengthen the operations of our Accounting and Wealth firms and support the delivery of our integrated client-centric advisory model. Whilst demand for the services we provide continues to grow, we are acutely aware of the increased competition for fewer advisers, and higher valuations for acquisitions of Accounting and Wealth firms. Despite this, the strength of our proposition is reflected in the growth of our acquisitions pipeline which has increased over 2021. We will continue our focus on attracting the best talent and enable them to do their best work through delivering efficient processes and access to market leading technology, which is key to growing engagement with both existing firms and prospects. 6 COUNTPLUS ANNUAL REPORT 2022 We are not immune to the volatility in global markets and we continue to closely monitor and respond to the rapidly changing economic conditions. In particular, as a professional services business the rapid inflation we have seen in wages to secure talent. However, we remain well positioned to mitigate inflationary pressures and our business continues to reflect low levels of borrowing with an overall net cash position. We will be prudent in our firm acquisitions as we see valuations climb, to select only the best businesses for our network. The Board was pleased to approve the first CountPlus ESG statement, the first step in an active and ongoing conversation about how we continue to make positive impacts in our community and the environment. It is aligned to the long-term service value that we offer, and the quality of our sustainable accounting, wealth and services firms. We announced a share buyback of up to 11,422,255 ordinary shares commencing in July 2022 and can report good progress with execution and the shareholder value this will create. Thank you to our employees and partners for their contribution to CountPlus. Your efforts have delivered a robust business foundation and market leading proposition. From this position, the board will confidently seek to deliver greater value to shareholders, delivering profitability and growth from both existing businesses and the acquisition strategy we have successfully established this year. Thank you for being a CountPlus shareholder. Ray Kellerman Chairman 7 COUNTPLUS ANNUAL REPORT 2022 CEO REPORT It is my pleasure to deliver the first full year results as CEO of CountPlus. Our profit attributable to CountPlus shareholders for the FY22 grew +4% to $5.1M. The unaudited forecast we released on 27 June 2022 was realised, with the business delivering EBITA growth in all three segments. After removing government grants (FY22 $0.2M vs FY21 $2.5M) and grandfathered commissions (FY22 nil vs FY21 $1.8M), Accounting grew +1% to $13.5M, Wealth grew +450% to $3.2M and Services grew to $1.3M (n/a). Importantly, these results have been delivered in a year where we faced a challenging economic environment. FY22 results also present our first full year without any conflicted remuneration following the end of grandfathered commissions on 1 January 2021. This year 31,439 customers received a total of $35M in refunds to remediate conduct under prior business ownership. In our Accounting segment, we grew firm numbers to 18, increased clients to over 35,000 and generated reported revenues of $64.5M (-0.6%). We successfully closed two acquisitions and two tuck-ins to our existing equity partnerships. 94% of our equity partnerships now offer converged Tax, Accounting and Financial Planning services to clients. Lockup days reduced from 79 days to 76 days. Average firm EBITA margin increased +2% from 19% in FY21 to 21% excluding government grants and grandfathered commissions. Our Wealth segment reported consistent revenues at $15.4M (-1%). 24,606 Statements of Advice (SoA) and Record of Advice (RoA) were delivered to clients. We grew Authorised Representatives by +12% from 248 to 278. 22 new firms joined Count as Corporate Authorised Representatives. We welcomed former Commonwealth Financial Planning customers to Count Financial as part of an agreement for the Commonwealth Bank of Australia to reimburse Count Financial Limited for a period of two years: subject to agreed caps, this includes certain onboarding costs and expenses for customers who chose to move across. 8 COUNTPLUS ANNUAL REPORT 2022 Our newly established Services segment demonstrates our ability to execute against our strategy. Overall revenue of $5.4M was delivered, representing the recent acquisition of Accurium and Wealth Axis. Accurium provided services to around 4,000 accounting firms and produced over 40% of the actuarial certificates required by Australian SMSFs, and we are pleased with early progress in education and consulting. I can report that Accurium has completed full separation from Challenger Limited in August, three months ahead of schedule and within budget. Wealth Axis continues to invest in people to support new business growth and lifted revenues by +87% to $1.9M. 15 businesses are now supported for outsourced administration, and more than 900 SoAs are produced per year. One in every six Count Financial firms now use Wealth Axis services. These results demonstrate a stable business platform with a defined path of future growth in every segment. When I personally observed a client advice presentation on my first day as CEO, the unique and enviable role we occupy for our clients was evident, and our ability to offer integrated advice across tax, accounting and financial planning is more relevant than ever. We support Treasury’s ‘Quality of Financial Advice Review’ and welcome any recommendations that make advice more accessible and more affordable. We agree that upfront financial advice should be tax deductable, as is already the case for ongoing financial advice. We support a principles-based approach that treats the industry as a profession. In this regard we are committed to work constructively with government to reduce red tape. And we anticipate a future that places greater recognition on the experience of our team and enables our business to leverage technology as we streamline the advice process and unlock further benefits from our uniquely integrated offer. This integrated approach extends to our proud history of community connection. In the last year, the Count Charitable Foundation (“CCF”) delivered meaningful impact across a diverse range of relevant causes: from important domestic concerns including homelessness, mental health, and the recent Australian east coast floods, to global support for Ukraine. These initiatives demonstrate the heart and spirit of our work. We were delighted to support CCF in distributing $1.1M over the last year to people in need. I have committed to personally visit all our equity partnerships by the end of December this year and can report that I am already halfway towards this goal. With the stable business platform we have now established, we will continue to pursue targeted growth in each of our segments in FY23. Hugh Humphrey CEO 9 COUNTPLUS ANNUAL REPORT 2022 FIRM PROFILES Accurium Expanding digital horizons with Accurium With the acquisition of Wealth Axis in August 2021, CountPlus signalled the start of a new era investing in the services segment offerings to support its accounting and advisory firms. This focus continued in November 2021 with an 85% investment in Accurium the latest strategic move to enhance the range of services available to CountPlus and Count Financial Member firms. Accurium is Australia’s largest supplier of actuarial certificates to SMSFs, provided directly via their easy to use online portal and integrations with leading SMSF accounting software platforms. They are also one of the largest education providers in this space, with solutions that are a natural fit for a community of accounting and advisory firms that offer SMSF solutions to their client base. CountPlus’ $7.65 million Accurium investment continues the move into diversified revenue opportunities, while at the same time enhancing the ‘technology-led’ approach the business has been focused on. CountPlus has partnered with a number of technology partners since 2020, aimed at introducing new solutions to support client engagement and improve practice efficiency. Doug McBirnie, Managing Director at Accurium, speaks passionately about the new era under CountPlus in the past nine months, and how the cultural alignment between the businesses is helping to drive positive growth outcomes. “Since joining the CountPlus community, we have experienced a shared strategic vision thanks to the clear commitment the business has to innovation and digital solutions. With access to capital and the support of the broader CountPlus team, we feel like we’re able to grasp opportunities and expand into new areas. It makes our job a lot simpler when we can tap into the broader network of subject matter experts and share in that collective wisdom.” Helping to drive this expansion is a loyal existing client base which provides a solid foundation to invest in new opportunities. 10 “It’s easier to innovate when you have a large group of clients and a strong reputation for professionalism and expertise in the SMSF space. That gives us confidence to try new things because we know the feedback we receive will be honest, constructive and relevant to what we’re trying to achieve”, he added. So where does McBirnie see the opportunities for Accurium’s next phase of strategic growth? “One area where we see real potential is our professional education and technical support offering for accountants, which we plan to accelerate in the next couple of years. That includes expanding our TechHub (an online learning platform) to provide a broader range of educational content and new ways to learn. The partnership that we have with CountPlus is key to bringing our vision to reality, along with the additional exposure to Member firms which is opening up new opportunities for us.” COUNTPLUS ANNUAL REPORT 2022 Southern Cross Business Advisers Developing high-performing teams, a focus for Southern Cross Business Advisers As part of a dedicated shift in strategic approach, leading Mildura-based accounting firm Southern Cross Business Advisers (SCBA) has doubled down on their commitment to developing their team in order to enhance their client service. “Developing and investing in our people is key to creating future leaders and delivering better client outcomes. There are many capabilities needed in our profession and not all of them are complementary. Our core focus is to ensure that our teams are given every opportunity to succeed through their desired career path with the structured mentoring and skills-based training programs”, said Noel Costa, SCBA Managing Principal. Their developmental focus has concentrated on two main areas; implementing efficient business practices which creates more capacity, and behavioural coaching/ mentoring to foster stronger relationship building. These ‘soft’ skills work hand-in-hand with rigorous education programs to help staff navigate delicate client related matters. “We introduced offshore support so that we can spend more solution focussed and commercial advisory time on client files and presentation skills, rather than compliance workflow. We’ve also implemented a program where our Partners spend more time coaching/mentoring our team on a one-on-one basis, meeting fortnightly in order to fast track their professional development. We encourage our team members to set the agenda and bring a client file to the table where we view it from a commercial perspective and identify advisory work that may otherwise be overlooked. Our mantra is ‘teach it forward’”, he added. SCBA is now an established member of the CountPlus community, following a 49% equity investment in the business in September 2021. Throughout that time, we have had access to CountPlus’ head office resources to help with their strategic business planning. “Having a partnership with CountPlus has helped us immensely. Being able to leverage additional capabilities feels like having extra people in our team. This in turn improves the quality of the service we can deliver to our clients”, Costa added. SCBA Director, Tony Jones, adds that their approach to individual development is paying dividends, with client satisfaction improving as a result. “Building an aspiring team culture, our team feel more confident and empowered when they know we are investing in their careers. The preparation for client meetings and confidence shines through when presenting and communicating to clients. It’s little things like this that ensure that we are on the path to becoming a leading advisory service”, he said. With a tightknit and loyal group of clients across north- west regional Victoria, the SCBA team understands the value of relationship building and maintaining a close connection to the community. “We have a diverse client base, but they all have one thing in common – a desire to have financial peace of mind and security for their future. The most satisfying element of our work is knowing that we can have a truly strong influence in making that a reality”, he said. So what’s next on the horizon for the SCBA team? “Our goal is keep enhancing our reputation as an employer of choice where people can grow their careers in a supportive environment. There’s a close link between the investments we make in our people and the success of our clients. We are all working towards a common goal which gives us a clear purpose”, Jones concluded. 11 COUNTPLUS ANNUAL REPORT 2022 Smart Private Wealth Smart clients, the key for Smart Private Wealth For Shannon Smit and the team at Smart Private Wealth, providing a service centred around client education is one of their most important objectives. It is viewed as their defining point of difference. “That’s our why – to put people in a position to make better financial choices and make a real difference to their lives.” The Mornington-based accounting and advisory firm has been part of the Count Financial network since 2019, and in that time forged a strong reputation for their client-centric approach. They aim to empower their clients by imparting as much valuable information as possible, through direct conversations, e-books, workshops and webinars. “The webinars serve a double purpose. They give us the opportunity to educate, but also the opportunity to expand our client base. We now have clients all over Australia because they’ve been able to attend one of our webinars to get a better understanding of how we can help them.” Smit, who is CEO and Founding Director at Smart Private Wealth, says this educational approach is as a key differentiator for their business. “Providing our clients with knowledge is important. It’s our job to assess their circumstances and make recommendations, but at the end of the day they’re the ones who need to make decisions. It’s our responsibility to instil that confidence in them. It’s easy for them to simply say ‘I trust you’, but the smarter we can make the client, the more empowered they become. Our smartest, most informed clients are the ones whose financial portfolios are performing best.” According to Smit, generating client trust is also a critical step in the advisory process. It opens up honest conversations about where the client is placed and what they want to achieve. “Trust is huge in any professional services relationship. Clients need to know that the advice is coming from someone that wholly understands their situation and can work with them to achieve success. We pride ourselves on building that foundation from the first interactions we have because we genuinely care about our clients and want them all to do well.” That client-centric mindset has paid off, with Smit and the Smart Private Wealth team taking out a number of recent award wins, including Goals Based Adviser of the Year and Marketing Consultant of the Year at the 2021 IFA Awards, along with the Financial Adviser of the Year at the 2021 Women in Finance Awards. They were also voted as Count Financial’s New Member Firm of the Year 2019 and Innovator Of The Year 2021. It has given them the reputation as the most awarded team on the Mornington Peninsula. “The award wins are wonderful. We don’t take them for granted and they certainly help to recognise the hard work of the entire team. They’re also a valuable marketing tool for our business because they send a powerful message to the community that we have the expertise, experience and can be trusted”, Smit concluded. 12 COUNTPLUS ANNUAL REPORT 2022 Premium Business Group A commitment to the community When Premium Business Group joined the Count Financial network in March 2022, it signalled the beginning of a new era for the Hobart-based advisory firm. They chose to move to Count Financial based on the overwhelming sense of community and non-institutional alignment that the CountPlus-owned licensee is known for. Tom Whitley, Financial Adviser at Premium Business Group, explains the thought process behind the decision to join and the benefits the move has brought to their business and clients so far. “Changing licensees isn’t a decision that’s made lightly, so we did our due diligence and thoroughly assessed the options in the market. Being able to sit down with key people inside the business and get a better understanding of what they could offer made Count Financial a compelling option. For us, those conversations with key management personnel were the driving force behind our decision. They have a team which works closely with us and operates like an extension of our business, with the technology and systems that can support us along the way.” Whitley also explains the genuine commitment to creating positive client outcomes made Count Financial stand out from its competitors. The next phase for Premium Business Group involves growing their existing client base, which is also being supported through Count Financial’s dedicated head office referrals team. Count Financial is actively committed to fostering growth opportunities for its national network of Member firms and promoting the value of financial advice to more Australians. “We have been conducting local area marketing campaigns targeting former advice clients who are in need of a new financial adviser, introducing them to our team and explaining the ways that we can support their needs. This has been successful in helping us generate a number of new referrals from the area”, Whitley added. “We have an amazing group of clients and supporting their needs is paramount. We hold an in-person client information session once a year and it was terrific to be joined by our Practice Development Manager Wally David and Andrew Kennedy (Chief Advice Officer at Count Financial) at the most recent event. There were around 100 clients in attendance where we spoke about the current state of the markets, interest rate rises and the importance of having a financial plan. Spending time with clients in that forum and hearing first-hand about their experiences is really valuable for us.” So far, the targeted marketing activity has resulted in over 30 new referrals from just 120 prospective clients contacted, demonstrating a strong appetite for advice in the community. A further batch of marketing letters will be sent to more prospects in the coming weeks, assisting the continued growth and success of Premium Business Group and highlighting Count Financial’s commitment to supporting its Member firms. 13 COUNTPLUS ANNUAL REPORT 2022 Y R A M M U S I L A C N A N F I # 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Revenue from contracts with customers Other income Total operating expenses Earnings before interest, tax and amortisation (‘EBITA’) before profit from associates Share of net profit from associates EBITA Interest income Interest expense Amortisation Profit before tax Income tax expense Net profit from operations after income tax Profit attributable to owners of CountPlus Profit attributable to non-controlling interest Basic earnings per share (cents) Diluted earnings per share (cents) Current assets Current liabilities Current ratio Non-Current assets Non-Current liabilities Net assets Net cash 14 2022 $'000 85,293 3,573 (80,863) 8,003 3,516 11,519 27 (1,096) (2,154) 8,296 (941) 7,355 5,112 2,243 4.58 4.57 300,215 285,627 1.05 128,313 54,437 88,464 11,739 2021 $'000 80,521 3,530 (74,603) 9,448 2,498 11,946 53 (1,059) (1,377) 9,563 (2,479) 7,084 4,938 2,146 4.43 4.39 321,451 299,725 1.07 95,212 35,116 81,822 21,911 Change % 6% 1% 8% (15%) 41% (4%) (49%) 3% 56% (13%) (62%) 4% 4% 5% 3% 4% (7%) (5%) (2%) 35% 55% 8% (46%) COUNTPLUS ANNUAL REPORT 2022 Notes to Financial Summary 1. Revenue from contracts with customers 7. Amortisation Revenue is generated from accounting services, financial planning, wealth and services. Accounting related revenue represents 60% of revenue from contracts with customers and was down on the prior period by 3%. Financial planning revenue makes up 14% of revenue from contracts with customers and was up on the prior period by 6%. Wealth revenue makes up 10% of revenue from contracts with customers and was down 7% on prior period. Services revenue represents 6% of revenue from contracts with customers and was a new revenue stream for this year. Revenue from contracts with customers was higher than the prior year by 6% primarily due to the revenue recognised from the new services revenue stream. 2. Total operating expenses Total operating expenses were 8% higher than the prior period. This is primarily due to additional expenses from the new services revenue stream. Amortisation (non-cash) of $2.2M (2021: $1.4M) relates primarily to an accounting requirement to write down the value of intangible assets, acquired client relationships and adviser networks, over their expected lifetime. The increase from prior year of 56% is driven by the additional acquired client relationships and adviser networks acquired through business combinations during FY22. 8. Income tax expense Income tax expense is lower when compared to the prior year due to the non-taxable gains on the sale of fee parcels and subsidiaries. 9. Net profit from operations after income tax Net profit after tax increased in the current year due to a lower income tax expense offset by a reduction in government grants. Profit attributable to CountPlus Ltd shareholders was $5.1M. 3. Share of net profit from associates 10. Current assets Share of net profit from associates increased by 41% due to earnings of Southern Cross Business Holdings Pty Ltd which was acquired in FY22. 4. EBITA EBITA decreased by 4% due to a decrease in government grants received by $2.22M due to COVID-19 and offset by an increase in the Group’s share of net profit from associates. 5. Interest income The 49% decrease in interest income was driven by reductions in the cash interest rate in the current period. 6. Interest expense Interest expense remained consistent with the prior year and includes finance costs recognised in line with accounting standard AASB 16 Leases. Current assets decreased due to the indemnity asset, due from CBA, decreasing by $22M to $238M. 11. Current liabilities The decrease in current liabilities was due largely to the decrease in the remediation provision within Count Financial by $22M to $238M due to payments being made as part of the remediation program. 12. Non-current assets Non-current assets have increased by $33M to $128M due to an increase in goodwill and acquired client relationships and advisor networks as a result of subsidiaries acquired through the equity partnership strategy as well as an increase in ongoing insurance trail commissions receivable. 13. Non-current liabilities Non-current liabilities increased compared to prior year due to an increase in ongoing insurance trail commission payable in Count Financial. 14. Net cash Net cash (cash and cash equivalent less interest bearing liabilities) has decreased to $11.7M (2021: $21.9M) due to cash being used in acquisitions during FY22. COUNTPLUS ANNUAL REPORT 2022 15 COUNTPLUS BOARD Ray Kellerman Ray has over 30 years of experience in the financial services industry including in the funds management, financial advisory, life insurance and corporate and structured finance industries. Previous appointments include Independent Chairman of ClearView Wealth, an ASX listed life insurance and financial services company, and Independent Chairman of Credit Suisse Asset Management Australia. Prior to this he was with Perpetual Trustees Australia for 10 years before establishing his own financial services and compliance advisory business in 2001. Ray is an owner and Executive Director of Quentin Ayers, an implemented asset advisor specialising in alternative private market investments. He holds qualifications in law, economics, investment securities and management. Ray currently acts as a director for Goodman Funds Management Australia, Ironbark Asset Management (Fund Services) and Ryder Capital. He is also active in a number of governance related roles for some major fund managers operating in Australia. Ray was appointed a Director of CountPlus in January 2017 and Chairman in April 2017. Alison Ledger Alison has more than 30 years of experience in the financial services industry. She has held senior operational and strategic roles in banking, funds management and insurance with Chase, Bankers Trust and IAG. As a Partner with McKinsey & Company, Alison advised leading global and Australian banks on strategy, performance improvement and organisational change. Alison’s more recent experience has been in digital transformation and customer experience (CX). As Executive General Manager of Product, Pricing and eBusiness, Alison ran IAG’s digital business and CX for the consumer brands including NRMA, SGIO and SGIC. Alison is Chair of CountPlus’ Remuneration and Nominations Committee and a member of the Audit and Risk Committee. She is also a Non-Executive Director of Audinate Group Limited (ASX:AD8) and Latitude Group Holdings Limited (ASX: LFS) as well as Hallmark Insurance, a Latitude subsidiary. Alison holds a Bachelor of Arts (Hons) in Economics from Boston College and an MBA from Harvard University. She is also a graduate of the Australian Institute of Company Directors. Kate Hill Kate has over 20 years experience as an audit partner with Deloitte Touche Tohmatsu, working with ASX listed and privately-owned clients. She has worked extensively in regulated environments including assisting with Initial Public Offerings, capital raising and general compliance, as well as operating in an audit environment. She held a variety of leadership and executive roles in Deloitte and served for a period on the Board of Partners of the Australian firm. Kate Hill is an independent Non-Executive Director, chair of the Audit and Risk Committee and member of the Acquisitions Committee. She is also an Independent Non-Executive Director of Elmo Software Limited (ASX: ELO) where she serves as Chair of the Audit and Risk Committee, and is a member of the Remuneration and Nominations Committee. She is the Chair of Seeing Machines Limited (AIM: SEE) as well as being a member of the Finance and Risk Committee, and the People and Culture Committee. Kate holds a Bachelor of Science (Hons) from Bristol University, is a member of the Institute of Chartered Accountants in Australia and New Zealand, and a graduate of the Australian Institute of Company Directors. 16 COUNTPLUS ANNUAL REPORT 2022 Andrew McGill Andrew has more than 30 years financial markets experience, including investment and management experience within the alternative asset sector and the funds management industry generally. He was previously Managing Director and CEO of ASX-listed Pacific Current Group Limited and in this capacity also served on the Board of a number of affiliated companies. Prior to joining Pacific Current Group, he was a founding partner of Crescent Capital Partners, an independent mid-market private equity firm where he worked from 2000 to 2010. Earlier in his career, Andrew held executive roles within Macquarie Bank’s Corporate Finance and Direct Investment teams. He was also a consultant with The LEK Partnership, an international firm of business strategy consultants. Andrew is currently Chairman of the advisory board of Besen Pty Ltd. Andrew holds a Bachelor of Commerce and a Bachelor of Laws from the University of New South Wales and a Graduate Diploma in Applied Finance (FinSIA). He is also a Fellow of the Financial Services Institute of Australasia. Carolyn Colley Carolyn has more than 30 years leadership experience spanning financial services, product development and innovation. Carolyn was most recently a co-founder and Chief Operating Officer of Faethm Pty Ltd, a global Software-as-a-Service augmented analytics platform which enables companies, governments and educators to understand the impact of emerging technologies on the Future of Work. She was the Chief Operating Officer of Asgard Wealth Solutions and St. George’s Wealth Management business and was the Head of Strategy for Macquarie Advisor Services and the Head of Personal Banking at Macquarie Bank. Carolyn was also the CEO of formerly listed software business, Decimal Software Limited. Carolyn is an Independent Non-Executive Director of the subsidiary settlement and clearing boards of the Australian Securities Exchange (ASX:ASX) and a member of the ASX Technology Committee. An Independent Non-Executive Director, Chair of the Information Technology committee and member Remuneration and Nominations Committee of ASX listed salary packaging and leasing business Smartgroup (ASX: SIQ). An independent Non-Executive Director and Chair of the Digital Committee of Chartered Accountants Australia and New Zealand. Non-Executive Director and member of the Board Risk and Compliance Committee of Milford Asset Management Limited and Chair of Milford Australia Pty Limited. Carolyn is also a Non- Executive Director and Chair of the Digital Technology Committee of Chartered Accountants Australia and New Zealand and Non-Executive Director and Deputy Chair of Liverpool Neighbourhood Connections, a community based not for profit organisation. Hugh Humphrey Hugh is the Chief Executive Officer and Managing Director of CountPlus, and a Director of Count Financial. Hugh is a highly regarded executive in the financial services sector. He started his career at global accounting giant PricewaterhouseCoopers, has been the CEO of Hillross Financial Services and was the Executive General Manager for Wealth at Commonwealth Bank. Most recently he was the senior executive responsible for NAB’s personal banking business in NSW. Hugh is renowned as a growth leader and has delivered large-scale change programs including wealth transformations at AMP and CBA. He has significant expertise in effective risk management, business compliance and customer remediation. He has deep client experience capabilities and digital expertise that he developed in his time leading consumer and enterprise businesses in telecommunications with Optus and Vodafone. He is a non-executive Director of The Infants’ Home and has previously been a director of Hillross Pty Ltd, Vodafone Fiji and a non-executive Director of the Future2 Foundation. Hugh holds a Bachelor of Commerce from The University of Sydney with double majors in Economics and Marketing. He has an MBA from Henley Business School at the University of Reading, UK. He is a Chartered Banker and he has completed the Australian Institute of Company Directors course. 17 COUNTPLUS ANNUAL REPORT 2022 DIRECTORS' REPORT The Directors present their report, together with the financial statements, on the consolidated entity (referred to hereafter as the 'Group') consisting of CountPlus Limited (referred to hereafter as the 'Company' or 'parent entity') and the entities it controlled at the end of, or during, the year ended 30 June 2022. Board of Directors and Company Secretaries The following persons were Directors and Company Secretaries of CountPlus Limited during the whole of the financial year and up to the date of this report, unless otherwise stated: Ray Kellerman Chairman Alison Ledger Independent Non-Executive Director Kate Hill Independent Non-Executive Director Andrew McGill Independent Non-Executive Director Carolyn Colley Independent Non-Executive Director Matthew Rowe Managing Director and Chief Executive Officer – Resigned 24 February 2022 Hugh Humphrey Managing Director and Chief Executive Officer – Appointed 1 July 2022 Laurent Toussaint Company Secretary and Interim Chief Executive Officer (24 February 2022 – 30 June 2022) Narelle Wooden Company Secretary Doug Richardson Company Secretary Meetings of Directors Board of Directors Name Position Ray Kellerman Non-Executive Chair Alison Ledger Non-Executive Director Kate Hill Non-Executive Director Andrew McGill Non-Executive Director 7/7 7/7 6/7 6/7 Member Chair 4/4 4/4 Carolyn Colley Non-Executive Director 6/7 Member 4/4 Audit and Risk Committee Acquisitions Committee Remuneration and Nominations Committee Technology and Innovation Committee Meetings Attended Position Meetings Attended Position Meetings Attended Position Member Chair Meetings Attended Position Meetings Attended 7/7 7/7 Member Chair 3/3 3/3 Member 6/7 Member 2/2 2/2 1/1 Chair Member Matthew Rowe* Managing Director and CEO 3/4 Member 2/2 * Matthew Rowe resigned effective 24 February 2022. 18 COUNTPLUS ANNUAL REPORT 2022 Principal activities During the financial year the principal continuing activities of the Group consisted of: Î Accounting, tax and audit services; Î Financial planning and advice in relation to investment, superannuation and personal insurance; Î Wealth services being the operator of financial advice licence business; and Î Actuarial certificate and paraplanning services. Review of operations The profit for the Group after providing for income tax and non-controlling interest amounted to $5,112,000 (30 June 2021: $4,938,000). The management team has been focussed on working with our member firms to improve the key financial, cultural and strategic drivers and grow organically, through working with our member firms, and inorganically by acquisitive activity which is reflected in the improved financial results for the year ended 30 June 2022. Capital management Interest-bearing debt has increased from $4,328,000 at 30 June 2021 to $9,801,000 at 30 June 2022. CountPlus continues to focus on prudent capital management by improving cashflows generated by Partner firms, paying dividends from operating cashflows and investing in earnings accretive acquisitions after undergoing a rigorous acquisition process. Significant changes in the state of affairs On 1 July 2021, CountPlus Limited merged its member firm 100% owned Cooper Reeves Pty Ltd with 4Front Holdings Pty Ltd, resulting in CountPlus’ ownership interest being transferred into a 51% ownership of 4Front Holdings Pty Ltd. On 30 July 2021, CountPlus Limited sold the Audit and Corporate Finance business units of member firm Bentleys (WA) Pty Ltd to Hall Chadwick (WA) Pty Ltd for $3.935M. On 20 August 2021, CountPlus Limited acquired a 51% shareholding in Wealth Axis Holdings Pty Ltd, a provider of paraplanning and administration support services to financial advice firms for $1.328M. The acquisition was the first step in building the CountPlus services strategy of investing in activities that enhance operational capacity within member firms. On 20 August 2021, CountPlus Limited’s member firm, Unite Advisory Pty Ltd, acquired the business of Bentley, Brett & Vincent (BBV) for $1.659M. Unite Advisory also completed a 25% equity sell down to Key Management Personnel under the CountPlus equity partnership model for $0.875M. CountPlus retains a 75% shareholding in Unite Advisory. On 3 September 2021, CountPlus Limited acquired a 49% shareholding in Southern Cross Business Holdings Pty Ltd, a leading accounting firm located in Victoria for a total purchase consideration of $2.741M. On 1 November 2021, CountPlus Limited acquired an 85% shareholding in Accurium Holdings Pty Ltd, Australia’s largest supplier of Self Managed Superannuation Fund (SMSF) actuarial certificates from Challenger Limited for $7.650M. COUNTPLUS ANNUAL REPORT 2022 19 Dividends CountPlus’ dividend policy is set at a range of between 60% to 90% of maintainable net profit after tax and minority interests, subject to market conditions and company performance. CountPlus is committed to the following principles in determining the dividend policy: Î Payment of dividends out of operating cashflows; and Î Consideration of debt reduction, working capital and investments. The Board is pleased to declare a final dividend of 2.00 cents per share fully franked for the financial year ended 30 June 2022 (30 June 2021: 1.50 cents per share). The half-year 2022 dividend paid and final 2022 dividend declared were 80% of maintainable net profit after tax and minority interest. Dividends paid during the financial year were as follows: Financial year ended Franking 2021 2022 Fully franked Fully franked Status Paid Paid Cents per share Payment date 1.50 (per fully paid share) 13 October 2021 1.50 (per fully paid share) 6 April 2022 Events after reporting date On 1 July 2022, CountPlus Limited appointed Hugh Humphrey as Chief Executive Officer. On 1 July 2022, CountPlus Limited finalised terms to acquire a 32.75% shareholding in WSC Group Pty Ltd on 1 August 2022. On 4 July 2022, CountPlus Limited member firm, NSW based CountPlus One Pty Ltd (CP1) acquired 100% of the business CDC Partners Pty Ltd. On 13 July 2022, CountPlus Limited commenced a share buy-back scheme to enhance returns to shareholders with specific capital management initiatives. A maximum of 11,422,255 shares will be repurchased. The timing and number of shares repurchased will depend on the Group’s share price and market conditions. 761,089 shares have repurchased up to the date of this report. There can be no certainty that all of the shares will be repurchased. On 26 August 2022, the Directors resolved to declare a full year final dividend for FY22 of 2.00 cents (fully franked) to be paid on 12 October 2022 (Record date 23 September 2022). No other matters or circumstances have arisen since the end of the financial year which significantly affected or could significantly affect: (a) the Group's operations in future financial periods, or consolidated entity, (b) the results of those operations in future financial periods, or (c) the Group's state of affairs of the consolidated entity in future financial periods. Our business by segments The Group consists of three operating segments: Accounting which comprises the provision of accounting, audit and assurance, taxation, financial planning services and business and corporate advisory services. Wealth which comprises of Financial Advice services provided by Australian Financial Services Licence (AFSL) holders. Services which comprises of services that support the activities of the Accounting segment. The Group will continue to align, build, and grow its core business through organic and acquisitive growth. 20 COUNTPLUS ANNUAL REPORT 2022 Legislative risk In terms of legislative risk, any substantive changes that impact the provision of accounting / tax services or financial planning services, could have a material impact on the Group. For accounting / tax related services, initiatives being considered by the Federal Government to further reduce the requirement for individuals to lodge tax returns may have some impact on the compliance based work for some accounting and business advisory firms. Legislative risk is not currently expected to significantly impact the profitability of accounting and business advisory firms and the Group, but it will continue to be closely monitored by the Board’s Audit and Risk Committee. Other risks In addition to the two main risk categories, the following are some of the additional risks assessed by the Board: Î Integration risk: risk relating to the successful integration of newly acquired member firms; Î Expense management: failure to control expenses such as staff costs would result in earnings for CountPlus not reflecting revenue performance by member firms; and Î Equity partnership: the timing and implementation of this initiative will be subject to the underlying performance of the participating firms against key performance indicators. Material business risks The main risks for the Group are classified into three categories, operational, legislative and other. Group risks are regularly assessed by the Board and the Board’s Audit and Risk Committee. Risks are addressed in an appropriate manner and are reflected through changes in Group policies as required. Operational risk The main operational risk for our accounting and business advisory firms relates to inappropriate or inadequate client advice. All firms are required to have quality assurance processes and appropriate professional indemnity insurance either directly or as part of the Group policy. Accounting and business advisory firms who are part of the Count Financial licensee network are covered under Count Financial's professional indemnity insurance arrangements for their financial planning services. Regarding the acquisition of Count Financial, which completed on 1 October 2019, the Commonwealth Bank of Australia has provided a $300 million indemnity to cover remediation of past conduct. A further operational risk relates to potential loss of clients, working capital management and staff costs which may be triggered by either senior team departures or declining service levels. Accounting and business advisory firms have regular board and management meetings in which the performance of the firm and forecasts are analysed. Any operational issues are also addressed at those meetings. Accounting and business advisory firms Principals are subject to restraint clauses as part of their employment contracts. In addition, all accounting and business advisory firms have succession plans in place. Training and compliance monitoring have been implemented to ensure standards are being met. 21 COUNTPLUS ANNUAL REPORT 2022 REMUNERATION REPORT (AUDITED) This Remuneration Report for the year ended 30 June 2022 forms part of the Directors’ Report. It has been prepared in accordance with the Corporations Act 2001 (Cth) (the Act), the Corporations Regulations 2001 (Cth) and AASB124 Related Party Disclosures and audited as required by the Act. It also includes additional information and disclosures that are intended to enable a deeper understanding by shareholders of CountPlus’ remuneration governance and practices. Dear Shareholders, On behalf of the Board, I am pleased to present the Remuneration Report for the year ended 30 June 2022 (FY22). The Remuneration Report aims to provide information regarding the remuneration framework and structure for Key Management Personnel (KMP) including non-executive and executive directors of CountPlus for FY22 with a focus on addressing the interests of all stakeholders. This year, we have updated the structure of the Report to improve disclosure and communications to our Shareholders. The Board acknowledges the valuable feedback from Shareholders regarding the disclosure surrounding the STI metrics and outcomes. As such, we have addressed these concerns by clearly disclosing what key performance indicators and weightings applied in respect of FY22 performance and the outcomes (refer to section 4.1 for more information). The current executive remuneration strategy and framework which focuses on the attraction, retention and motivation of high-calibre individuals through the reward of fair but competitive remuneration which includes base pay as well as short and long-term incentives. This ensures that executives are aligned with shareholders and rewarded for their performance. During the financial year, our CEO and Managing Director Mr Matthew Rowe’s contract ended and was not renewed. He was on a 5-year contract with CountPlus and did not receive any termination benefits. Our CFO, Mr Laurent Toussaint acted as Interim CEO effective 24th February 2022 until 30 June 2022. Mr Hugh Humphrey was appointed as CEO and Managing Director on 1 July 2022. With corporate social responsibility becoming an increasingly prevalent topic, CountPlus is committed to best practice in corporate governance, compliance, and ethical behaviour within the ESG landscape with the health, safety and wellbeing of our members, staff and partners is our primary focus. Several initiatives that we have implemented to assist with this goal include: Î a formal diversity policy, to ensure that we are attracting and hiring talent from a range of diverse backgrounds, Î a whistle-blower policy, to ensure a safe and confidential process when raising suspected corrupt, illegal or unethical behaviour, Î giving back to the community through the Count Charitable Foundation which is aimed at providing members and staff the opportunity to pursue philanthropic endeavours aimed at improving their local communities. Alison Ledger Chair of the Remuneration and Nomination Committee 22 COUNTPLUS ANNUAL REPORT 2022 People covered by this report 1 This report covers Key Management Personnel (KMP) which are defined as those who have the authority and responsibility for planning, directing and controlling the activities of CountPlus. Name Role Non-Executive KMP Committee Membership Appointed Audit & Risk Remuneration & Nomination Acquisitions Technology & Innovation Ray Kellerman Non-Executive Chairman 27/04/2017 Alison Ledger Independent Non-Executive Director 1/10/2016 Kate Hill Independent Non-Executive Director 26/06/2017 Andrew McGill Independent Non-Executive Director 4/12/2017 Carolyn Colley Independent Non-Executive Director 6/10/2020 C C C C Executive KMP Laurent Toussaint Interim Chief Executive Officer & Chief Financial Officer Graham McGeagh Chief Operating Officer 24/02/2022 22/01/2018 1/10/2018 Narelle Wooden General Counsel and Company Secretary 19/11/2018 Andrew Kennedy Chief Advice Officer, Count Financial 13/01/2020 Matthew Rowe Chief Executive Officer Hugh Humphrey Chief Executive Officer 24/02/2017 1/07/2022 C = Chair of Committee = Member of Committee The following changes to KMP occurred during FY22 or between the end of FY22 and the date of publication of this report: (a) Laurent Toussaint was acting as the interim CEO from 24/02/2022 to 30/06/2022. Effective 1/07/2022 he was appointed as Chief Financial and Operating Officer. (b) Matthew Rowe departed during the financial year on 24/02/2022, he was previously the CEO & Managing Director. (c) Graham McGeagh departed during the financial year on 06/03/2022, he was previously the Chief Operating Officer. (d) Hugh Humphrey was appointed as CEO on 01/07/2022. 23 COUNTPLUS ANNUAL REPORT 2022 2 Remuneration Overview 2.1 Executive Remuneration Structure At-A-Glance During FY22, the remuneration structures in place were unchanged from the prior year, and the same structure is expected to apply in FY23. The following diagrams outline CountPlus’ approach to executive remuneration and the remuneration cycle under the framework applicable to FY22: Purpose Delivery Clawback Base Pay Variable Remuneration Short-Term Incentive Long-Term Incentive To reward executives with reference to position, responsibility and performance relative to market benchmarks. To reward Executive KMP for meeting annual performance targets set by the Board at the beginning of the reporting period. To align Executive KMP remuneration with shareholder value over the longer term subject to the satisfaction of challenging performance conditions. Base Salary, Super, and Non-Monetary Benefits. Cash Performance Rights over a Measurement Period of 4 years. The Group may immediately terminate employment at any time in the case of serious misconduct, and the CEO and Other Executive KMP will only be entitled to payment of total base pay up to the date of termination. On termination without notice by the Group in event of serious misconduct: all unvested short-term incentive (‘STI’) or long- term incentive (‘LTI’) benefits will be forfeited; and any equity instruments provided to the employee on vesting of STI and LTI awards that are held in trust, will be forfeited. 2.2 FY22 Executive Remuneration Opportunities and Outcomes At-A-Glance The following charts outline the remuneration target / maximum opportunity under CountPlus’ executive remuneration structures: MD / CEO – Target 45% 22% 33% Average Other Execs – Target 68% 19% 13% Base Pay Cash STI LTI 24 COUNTPLUS ANNUAL REPORT 2022 3 CountPlus’ Remuneration Strategy, Policy and Framework 3.1 Remuneration Philosophy, Policy and Governance Remuneration Philosophy Policy and Governance CountPlus’ Remuneration Policy (Policy) has been approved by the Board which outlines overall responsibility for all remuneration decisions. The Policy is reviewed at least once every three years to ensure ongoing compliance with regulatory changes, as more information becomes known and the changes are due to take effect. CountPlus has an established Remuneration and Nomination Committee which, among other things, is responsible for overseeing the remuneration and human resource practices for the Group. In discharging these responsibilities, the Remuneration and Nomination Committee adheres to CountPlus’ Remuneration Policy, which is in place to: Î Outline employee obligations and CountPlus’ obligations; Î Set out roles, responsibilities and accountabilities of the KMP; Î Set out clear reporting and controls; Î Define various terms to ensure a common understanding; and Î Clarify what happens if this policy or associated procedures are breached. The guiding principles that underpin our remuneration philosophy across CountPlus include: Î Shareholder Aligned: Our executive remuneration framework supports the delivery of our strategy and helps to create shareholder value by linking remuneration outcomes to relevant and measurable financial and non-financial goals. Î Simple and transparent: Our remuneration framework is designed to ensure the highest level of transparency and understanding, externally and internally. Remuneration should maintain appropriate proportions of fixed and performance-related pay to avoid excessive risk-taking. Î Clear remuneration governance: Our remuneration framework, policies and processes are governed by clear guidelines and accountabilities balanced with the ability for the Board to apply judgement over potential unintended or unequitable outcomes. All remuneration for the CEO and KMP requires final approval by the CountPlus Board with support of the Remuneration & Nominations Committee. Î Fair, equitable and motivational: Our remuneration arrangements are designed to attract and retain high-calibre individuals who live our values and are collectively motivated by our vision, purpose, and achievement of our business strategy. Remuneration should, where possible for a comparable role, sit in the mid-quartile of the industry-sector we operate. Î Personal accountability and shared responsibility: Our remuneration framework appropriately rewards individual discretionary effort, teamwork, and behaviour that is aligned with our values-based culture. This is balanced with business unit / team performance and must be reflective of the overall performance of CountPlus. Î Recognises the importance of our non-financial strategic drivers: These include, Firms, People, Focus, Partners, Clients and Community. 25 COUNTPLUS ANNUAL REPORT 2022 3.2 Executive Remuneration The Group aims to reward executives based on their position, responsibility, and performance, with a level and mix of remuneration which has both fixed and variable components. The Executive remuneration and reward framework has three components: Î base pay, which includes salary, superannuation and non-monetary benefits; Î short-term performance incentives; and Î long-term performance incentives. The combination of these make up the Executive’s total remuneration. Base pay, consisting of base salary and non-monetary benefits, are reviewed annually by the Committee based on individual and business unit performance, the overall performance of the consolidated entity and comparable market remuneration. The STI program is designed to align the targets of the business units with the performance hurdles of executives. STI payments are granted to executives based on specific annual targets and key performance indicators being achieved. The LTI include share-based payments. Performance rights are awarded to executives over a period based on long-term incentive measures. These measures are growth in earnings per share (‘EPS’) and return on equity (‘ROE’) performance hurdles. The Committee reviews the long-term equity-linked performance incentives for executives annually. 3.3 FY22 Short-Term Incentive (STI) Plan A description of the STI structure applicable for FY22 is set out below: Purpose To reward Executive Key Management Personnel for meeting annual performance targets set by the Board at the beginning of the reporting period. Measurement Period The financial year of the company (1 July – 30 June) Opportunity Opportunity as % of Base Salary CEO 50% Target* Other Execs 30% Outcome Metrics and Weightings * Target Opportunity is the maximum opportunity that executives may be awarded. Short-term incentives are in place to reward Executive Key Management Personnel for meeting annual performance targets set by the Board at the beginning of the reporting period. The STI is set as a percentage of base salary and performance is assessed against a balanced scorecard of both financial and non-financial key performance indicators (‘KPIs’). Financial KPIs may change year to year but can include; revenue growth, net profit after tax growth and acquisitions. Non-financial KPIs may change year to year but can include: employee engagement and implementing strategic initiatives. All STIs awarded are recommended by the Committee to the Board for approval. As a listed Company, the Directors are mindful of shareholder expectations for the Group's performance when setting and approving these incentives. Refer to the section “The Link Between Performance and Reward in FY22” for additional information regarding performance outcomes relative to objectives. Gate A Gate of 90% Targeted net profit after tax (‘NPAT’) is in place in order for any vesting to occur under the STI award (i.e. if the Gate is not met, nil vesting will occur). Awards will be calculated following the auditing of financial statements. These are delivered in cash. The Group may immediately terminate employment at any time in the case of serious misconduct, and the CEO and Other Executive KMP will only be entitled to payment of total base pay up to the date of termination. On termination without notice by the Group in event of serious misconduct: all unvested STI or LTI benefits will be forfeited; and any equity instruments provided to the employee on vesting of STI and LTI awards that are held in trust, will be forfeited. Award, Settlement and Deferral Clawback 26 COUNTPLUS ANNUAL REPORT 2022 3.4 FY22 Long-Term Incentive (LTI) Plan A description of the LTI structure applicable for FY22 is set out below: Purpose To align Executive Key Management Personnel’s remuneration with shareholder value and CountPlus’ strategy, as well as strike an appropriate balance between growth and long-term profitability. This is subject to the satisfaction of two performance milestones, Diluted EPS Growth and Average ROE. Instrument The LTI is in the form of Performance Rights with a nil Exercise Price, which are subject to performance and service vesting conditions. Measurement Period 1 July 2021 to 30 June 2025 (4 Years) Opportunity Opportunity as % of Base Pay CEO Other Execs Target / max 75% 20% Grant Calculation The number of Rights in a Tranche of LTI to be granted are calculated via the application of the following formula: Maximum LTI Award Value ÷ 30-day Volume Weighted Average Price (VWAP) where Right Value is the 30-day VWAP value of a Right (ignoring vesting conditions and not discounted). Performance Metric and Vesting Scale Tranche 1 – Diluted EPS growth (50%) Target and Vesting Schedule: Diluted EPS Growth % of Performance Rights Vesting* Target Threshold 12.50% 10% 100% 50% * Straight-line vesting between threshold and target. Tranche 2 – Average ROE (50%) Target and Vesting Schedule: Target Threshold Average ROE % of Performance Rights Vesting* 15% 9% 100% 50% * Straight-line vesting between threshold and target. Retesting No retesting. Change of Control On a takeover or change in control of the company, any unvested Performance Rights may vest on a pro-rata basis based on the most current financial reports available at the time the change of control occurs unless otherwise determined by the Board. The pro-rata period will be calculated from the Performance Rights grant date to the change of control date. If the KMPs remain employed with the company after a change of control has occurred, and assuming the company remains listed, any unvested Performance Rights will remain available for vesting at their original vesting dates. 27 COUNTPLUS ANNUAL REPORT 2022 Cessation of Employment If an executive ceases employment before the vesting conditions are satisfied, the Performance Rights will automatically lapse (unless the Board determines otherwise). In the case of cessation of employment because of retirement, redundancy, death, or permanent incapacity, the Board may approve a pro-rata vesting of the Performance Rights. The number of Performance Rights that may vest on cessation of the KMPs’ employment in these circumstances will be calculated as follows: Date of Grant to Date of termination (in days) ÷ Date of Grant to Intended Vesting Date (in days) × No. of Performance rights held on cessation. Disposal Restriction Performance Rights cannot be transferred, disposed of, or have a security interest imposed over them. Clawback The Group may immediately terminate employment at any time in the case of serious misconduct, and the CEO and Other Executive KMP will only be entitled to payment of total base pay up to the date of termination. On termination without notice by the Group in event of serious misconduct: all unvested STI or LTI benefits will be forfeited; and any equity instruments provided to the employee on vesting of STI and LTI awards that are held in trust, will be forfeited. 3.5 FY22 Non-Executive Director (NED) Remuneration 3.5.1 Fee Policy The following outlines the principles that CountPlus applies to governing NED remuneration: Policy Fees and payments to Non-Executive Directors reflect the demands and responsibilities of their role. Non- Executive Directors' fees and payments are reviewed annually by the Committee. The Committee may, from time to time, receive advice from independent remuneration consultants to ensure Non-Executive Directors' fees and payments are appropriate and in line with the market. The Chairman's fees are determined independently to the fees of other Non-Executive Directors taking into account the fees paid for similar roles in comparable companies. The Chairman is not present at any discussions relating to the determination of his own remuneration. Non-executive Directors are not entitled to participate in equity schemes of the Company and are not entitled to receive performance-based bonuses. Non-executive Directors are not entitled to retirement benefits other than in respect of any superannuation entitlements. The following outlines the Board Fees that were paid in FY22 and which are anticipated to apply for FY23 (note: an increase to Board Fees was approved in FY21): Role Chair Member Main Board Committees $150,685 $80,412 $10,000 n/a Fees are inclusive of superannuation Aggregate Board Fees The total amount of fees paid to Non-Executive Directors in the year ended 30 June 2022 is within the aggregate amount of $700,000 which was approved at the Annual General Meeting on 16/11/2021. 28 COUNTPLUS ANNUAL REPORT 2022 The Link Between Performance and Reward in FY22 4 The Board views the outcomes of remuneration for FY22 performance as appropriately aligned to stakeholder interests, given the strong group and individual performance against annual objectives, the shareholder value created, and progress towards strategic objectives made by the executive team. 4.1 FY22 STI Outcomes The STI plan is designed to reward executives for the achievement against annual performance objectives set by the Board at the beginning of the performance period. The payment of an STI is dependent on delivery of performance against a range of outcome metrics. Overall STI outcomes for FY22 expressed as a % of maximum opportunity awarded and forfeited in the graph below: Laurent Toussaint Narelle Wooden Andrew Kennedy Matthew Rowe Graham McGeagh 100% 85% 94% 100% 100% 15% 6% Awarded % Forfeited % 4.2 FY18 LTI Outcomes The LTI Plan is designed to reward executives for meeting long-term value creation targets specified by the Board at the start of the financial year, and to align executives' interests with those of shareholders. The performance criteria for the FY18 LTI award were met for Tranche 1 (100%) and partially met for Tranche 2 (34.75%) in FY22 and subject to service criteria being met on 19th November 2022, the award will be paid in FY23. Instrument Performance Rights Measurement Period FY18 to FY22 completion. Performance Metrics and Weightings Tranche 1 Diluted EPS growth 50% weighting Tranche 2 Average ROE 50% weighting Service Conditions A one-year service test for each year of the measurement period ending on 19 November 2022. Performance Outcome and Vesting Determination The Board has assessed that the performance vesting conditions have been met. Should the service vesting conditions be met, 100% of Tranche 1 and 34.75% of Tranche 2 vesting will apply in respect of the completed FY22 reporting period for Participants that held unvested FY18 Performance Rights at the Vesting Date. This is in the Board’s view appropriate given the value created for shareholders over the Measurement Period. Board Discretions Applied The Board did not apply any discretionary adjustments to the performance assessment or vesting. 29 COUNTPLUS ANNUAL REPORT 2022 The following table outlines the FY18 LTI outcomes for executive KMP: Name Role Tranche Weighting Laurent Toussaint Interim Chief Executive Officer & CFO Narelle Wooden General Counsel & Company Secretary Andrew Kennedy Chief Advice Officer, Count Financial Matthew Rowe CEO & Managing Director Graham McGeagh Chief Operating Officer EPS Tranche ROE Tranche EPS Tranche ROE Tranche EPS Tranche ROE Tranche EPS Tranche ROE Tranche EPS Tranche ROE Tranche 50% 50% 50% 50% 50% 50% 50% 50% 50% 50% Number Eligible to Vest during FY22 for FY23 Completion 51,278 51,277 23,930 23,929 Target Performance Actual Outcome % of Max / Stretch / Grant Vested Number Vested Grant Date VWAP 12.50% 192.15% 100% 51,278 15% 10.80% 34.75% 17,818 12.50% 192.15% 100% 23,930 15% 10.80% 34.75% 8,316 – – – – – – 12.50% 192.15% 100% 15% 10.80% 34.75% 12.50% 192.15% 100% 15% 10.80% 34.75% 12.50% 192.15% 100% 15% 10.80% 34.75% – – – – – – $ Value of LTI that Vested (as per Grant Date VWAP) $29,998 $10,513 $13,999 $4,906 – – – – – – $0.59 $0.59 $0.59 $0.59 – – – – – – TOTAL \ AVERAGE 150,414 101% 67% 101,342 $0.59 $59,416 4.3 Use of Board Discretion During the financial year and to the date of this report, the Board did not exercise any discretions available to it to exceed maximum STI or LTI outcomes, vesting or awards. 5 Statutory Tables and Supporting Disclosures 5.1 Executive KMP Statutory Remuneration for FY22 The following table outlines the statutory remuneration of executive KMP: Base Pay Variable Remuneration Total for the year Other Statutory items Non- Monetary Benefits*** Total Base Pay Cash STI* LTI** Total Remuneration Package (TRP) Variable Remuneration % TRP Termination Benefits Name Role(s) Year Salary Super Laurent Toussaint Interim Chief Executive Officer & CFO 2022 $387,421 $23,568 Chief Financial Officer & Company Secretary 2021 $333,306 $21,694 Narelle Wooden General Counsel & Company Secretary 2022 $299,791 $23,568 General Counsel & Company Secretary 2021 $293,306 $21,694 – – – – $410,989 $108,558 $33,234 $552,781 $355,000 $65,545 $26,121 $446,666 $323,359 $77,343 $25,735 $426,437 $315,000 $54,862 $20,000 $389,862 Andrew Kennedy Matthew Rowe Chief Advice Officer, Count Financial 2022 $302,916 $23,568 – $326,484 $56,887 $11,025 $394,396 Chief Advice Officer, Count Financial 2021 $298,425 $21,694 $4,881 $325,000 $16,969 $11,025 $352,994 CEO & Managing Director 2022 $396,173 $15,500 – $411,673 – – $411,673 CEO & Managing Director 2021 $478,306 $21,694 – $500,000 $135,106 $106,627 $741,733 Graham McGeagh Chief Operating Officer Chief Operating Officer 2022 $285,276 $16,044 2021 $313,306 $21,694 – – $301,320 – – $301,320 $335,000 $52,856 $23,624 $411,480 26% 20% 24% 19% 17% 8% – 32% – 18% Change in Accrued Leave $5,735 $6,348 $3,548 $2,814 $5,481 – – – – – – $11,466 – – – $15,423 – – – $3,129 * ** Note that the STI / bonus value reported in this table is the bonus that was awarded during the reporting period, being the award earned during the current period. Variable remuneration outcomes for the reporting period are outlined elsewhere in this report. Note that the LTI / Equity value reported in this table is the amortised accounting charge of all grants that have not lapsed or vested as at the start of the reporting period. *** Other benefits include items such as car parking, car allowances, FBT, insurance etc. 30 COUNTPLUS ANNUAL REPORT 2022 5.2 Non-executive Director (NED) KMP Statutory Remuneration for FY22 The following table outlines the statutory and audited remuneration of NEDs ($, except where otherwise indicated): Name Role Ray Kellerman Alison Ledger Kate Hill Andrew McGill Carolyn Colley Non-Executive Chairman Non-Executive Chairman Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director Year 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 Board Fees Committee Fees Superannuation $136,986 $136,986 $80,412 $73,060 $73,102 $73,060 $73,102 $73,060 $73,102 $51,267 – – $10,000 $9,132 $9,091 $9,132 $9,091 $9,132 $9,091 $6,408 $13,699 $13,014 – $7,808 $8,219 $7,808 $8,219 $7,808 $8,219 $5,479 Total $150,685 $150,000 $90,412 $90,000 $90,412 $90,000 $90,412 $90,000 $90,412 $63,154 5.3 KMP Equity Interests and Changes During FY22 Movements in equity interests held by executive KMP during the reporting period, including their related parties, are set out below: Number Held at Open FY22 Granted FY22 Forfeited during FY22 Vested during FY22 FY22 Exercised (or Shares received from Exercising) FY22 Purchased / Other FY22 Sold Number Held at Close 2022 Name Instrument Number Date Granted Number Number Number Number Number Number Number Laurent Toussaint Shares 20,000 – – Unvested Rights 230,827 10/12/21 76,083 Narelle Wooden Shares – – – Unvested Rights 160,769 10/12/21 63,453 Andrew Kennedy Shares Unvested Rights 10,394 84,769 – – – – – – Matthew Rowe Graham McGeagh Shares 2,400,000 Unvested Rights 994,968 10/12/21 394,695 (1,389,663 ) Shares 28,330 – – – Unvested Rights 216,701 10/12/21 69,768 (286,469 ) TOTALS 4,146,758 N/A 603,999 (1,676,132) – – – – – – – – – – – – – – – – – – – – – – – – – – – 30,000 – – – – – 175,000 – – – 205,000 – – – – – – – – – – – 50,000 306,910 – 224,222 10,394 84,769 2,575,000 – 28,330 – 3,279,625 31 COUNTPLUS ANNUAL REPORT 2022 Movements in equity interests held by non-executive KMP during the reporting period, including their related parties, are set out below: Name Instrument Ray Kellerman Alison Ledger Kate Hill Andrew McGill Carolyn Colley TOTALS Shares Shares Shares Shares Shares Number Held at Open FY22 FY22 Purchased FY22 Sold Number Held at Close FY22 Number 1,800,000 10,000 200,000 10,000 6,000 Number 450,000 – – – – 2,026,000 450,000 Number – – – – – – Number 2,250,000 10,000 200,000 10,000 6,000 2,476,000 The following outlines the accounting values and potential future costs of equity remuneration granted during FY22 for executive KMP: 2022 Equity Grants Name Tranche Grant Type Vesting Conditions Grant Date Total Value at Grant Value Expensed in FY 22 Max Value to be Expensed in Future Years Laurent Toussaint FY22 LTI Performance Rights FY22 LTI Performance Rights Narelle Wooden FY22 LTI Performance Rights FY22 LTI Performance Rights FY22 LTI Performance Rights FY22 LTI Performance Rights Matthew Rowe TOTALS LTI LTI LTI LTI LTI LTI EPS Growth Average ROE EPS Growth Average ROE EPS Growth Average ROE 10/12/21 10/12/21 10/12/21 10/12/21 10/12/21 10/12/21 $36,144 $36,143 $30,144 $30,143 $187,500 $187,499 $5,077 $5,077 $4,234 $4,234 – – $31,067 $31,066 $25,910 $25,909 – – $507,573 $18,622 $113,952 Note: the minimum value to be expensed in future years for each of the above grants made in FY22 is nil. A reversal of previous expense resulting in a negative expense in the future may occur in the event of an executive KMP departure or failure to meet non market-based conditions including failure for gate to open. 5.4 KMP Service Agreements 5.4.1 Executive KMP Service Agreements The following outlines current executive KMP service agreements: Name Position Held at Close of FY22 Employing Company Duration of Contract From Company From KMP Termination Payments* Laurent Toussaint Interim Chief Executive Officer & CFO CountPlus Limited No Fixed Term Three months Three months Narelle Wooden General Counsel & Company Secretary CountPlus Limited No Fixed Term Three months Three months Andrew Kennedy Chief Advice Officer, Count Financial CountPlus Limited No Fixed Term Three months Three months Hugh Humphrey** CEO & Managing Director CountPlus Limited No Fixed Term Six months Six months 106,250 83,688 84,070 288,750 Period of Notice * Under the Corporations Act, broadly the Termination Benefit Limit is 12 months average Salary (over prior 3 years) unless shareholder approval is obtained. ** In the case of redundancy within three years of the commencement date, where the employee has not otherwise obtained suitable employment, the Company will pay a redundancy payment of six months remuneration, in addition to the six month termination notice period payment. 32 COUNTPLUS ANNUAL REPORT 2022 5.4.2 Non-executive directors (NEDs) Service Agreements The appointment of NEDs is subject to a letter of appointment. The letter summarises the Board policies and terms, including remuneration. The NEDs are not eligible for any termination benefits following termination of their office, nor any payments other than those required under law such as in respect of superannuation. There are no notice periods applicable to either party under this approach. 5.5 Other Statutory Disclosures 5.5.1 Loans to KMP and their related parties During the financial year and to the date of this report, the Company made no loans to directors and other KMP and none were outstanding as at 30 June 2022 (2021: Nil). 5.5.2 Other transactions with KMP Former Managing Director and CEO, Matthew Rowe is a Director and indirect shareholder of My Accounts Pty Ltd ('My Accounts'). In FY22 CountPlus used the services of My Accounts for which it paid $46,789 (excluding GST). Mr Rowe did not participate or bear any kind of influence in decisions relating to transactions with My Accounts. There are no other transactions which involved the Key Management Personnel during the 2022 financial year. 5.5.3 External Remuneration Consultants During FY22, the Remuneration and Nominations Committee engaged Godfrey Remuneration Group Pty Ltd (GRG) as an External Remuneration Consultant (ERC) to assist with the preparation of CountPlus’ FY22 Remuneration Report. A total of $22,000 (including GST) was paid in FY22. No remuneration recommendations were made under Section 9B and Section 300A of the Corporations Act 2001. This concludes the remuneration report, which has been audited. Indemnity and insurance of officers During the financial year, the Group paid a premium in respect of a contract to insure the Directors and Executives of the Group against a liability to the extent permitted by the Corporations Act 2001. The contract of insurance prohibits disclosure of the nature of the liability and the amount of the premium. Environmental regulation The Group is not subject to any significant environmental regulation under Australian Commonwealth or State law. Non-audit services The auditors, Grant Thornton Audit Pty Limited (including any other person or firm on the auditor's behalf) did not provide any non-audit services during the year. Auditor's independence declaration A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 is set out immediately after this Directors' report. Rounding of amounts The Group is of a kind referred to in Corporations Instrument 2016 / 191, issued by the Australian Securities and Investments Commission, relating to 'rounding-off'. Amounts in this report have been rounded off in accordance with that Corporations Instrument to the nearest thousand dollars, or in certain cases, the nearest dollar. 33 COUNTPLUS ANNUAL REPORT 2022 Corporate Governance statement The Group's Directors and management are committed to conducting the business of the Group in an ethical manner. The Group has adopted and has substantially complied with the ASX Corporate Governance Principles and Recommendations (Fourth Edition) (Recommendations) to the extent appropriate to the size and nature of the Group's operations. The Group has prepared a statement which sets out the corporate governance practices that were in operation throughout the financial year for the Group, identifies any recommendations that have not been followed, and provides reasons for not following such recommendations (Corporate Governance Statement). In accordance with the ASX Listing Rules 4.7.4 and 4.10.3, the Corporate Governance Statement will be available for review on CountPlus’ website (www.countplus.com. au) and will be lodged together with an Appendix 4G with the ASX while this Annual Report is lodged with ASX. The Appendix 4G will identify each recommendation that needs to be reported against by CountPlus and will provide shareholders with information as to where relevant governance disclosures can be found. The Group's corporate governance policies and charters and policies are all available on CountPlus’ website. This report is made in accordance with a resolution of Directors, pursuant to section 298(2)(a) of the Corporations Act 2001. On behalf of the Directors, Ray Kellerman Chairman 26 August 2022 Sydney 34 COUNTPLUS ANNUAL REPORT 2022 AUDITOR'S INDEPENDENCE DECLARATION Grant Thornton Audit Pty Ltd Level 17 383 Kent Street Sydney NSW 2000 Locked Bag Q800 Queen Victoria Building NSW 1230 T +61 2 8297 2400 Auditor’s Independence Declaration To the Directors of CountPlus Limited In accordance with the requirements of section 307C of the Corporations Act 2001, as lead auditor for the audit of CountPlus Limited for the year ended 30 June 2022, I declare that, to the best of my knowledge and belief, there have been: a no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and b no contraventions of any applicable code of professional conduct in relation to the audit. Grant Thornton Audit Pty Ltd Chartered Accountants S M Thomas Partner – Audit & Assurance Sydney, 26 August 2022 www.grantthornton.com.au ACN-130 913 594 Grant Thornton Audit Pty Ltd ACN 130 913 594 a subsidiary or related entity of Grant Thornton Australia Limited ABN 41 127 556 389 ACN 127 556 389. ‘Grant Thornton’ refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients and/or refers to one or more member firms, as the context requires. Grant Thornton Australia Limited is a member firm of Grant Thornton International Ltd (GTIL). GTIL and the member firms are not a worldwide partnership. GTIL and each member firm is a separate legal entity. Services are delivered by the member firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate one another and are not liable for one another’s acts or omissions. In the Australian context only, the use of the term ‘Grant Thornton’ may refer to Grant Thornton Australia Limited ABN 41 127 556 389 ACN 127 556 389 and its Australian subsidiaries and related entities. Liability limited by a scheme approved under Professional Standards Legislation. 35 COUNTPLUS ANNUAL REPORT 2022 36 COUNTPLUS ANNUAL REPORT 2022 S T N E M E T A T S I L A C N A N F I CONTENTS 39 40 41 42 43 92 93 94 Consolidated Statement of Profit or Loss and Other Comprehensive Income Consolidated Statement of Financial Position Consolidated Statement of Changes in Equity Consolidated Statement of Cash Flows Notes to the Consolidated Financial Statements Corporate Directory Directors' Declaration Independent Auditor’s Report COUNTPLUS ANNUAL REPORT 2022 37 38 COUNTPLUS ANNUAL REPORT 2022 CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2022 Revenue from contracts with customers Direct costs Contribution Margin Other income Indirect salaries and employee benefits expense Administrative expenses Other operating expenses Operating profit Share of net profits of associates accounted for using equity method Net finance costs Profit before income tax expense Income tax expense Profit after income tax expense for the year Other comprehensive income Other comprehensive income for the year, net of tax Total comprehensive income for the year Profit for the year is attributable to: Owners of CountPlus Limited Non-controlling interest Total comprehensive income for the year is attributable to: Owners of CountPlus Limited Non-controlling interest Basic earnings per share Diluted earnings per share Note 2.2 2.3 2.1 2.1 2.3 2.3 6.2 2.4 6.3 6.3 2.5 2.5 2022 $’000 85,293 (42,167) 43,126 3,573 (20,513) (10,304) (10,033) 5,849 3,516 (1,069) 8,296 (941) 7,355 17 7,372 5,112 2,243 7,355 5,129 2,243 7,372 Cents 4.58 4.57 2021 $’000 80,521 (39,592) 40,929 3,530 (19,139) (9,153) (8,096) 8,071 2,498 (1,006) 9,563 (2,479) 7,084 (23) 7,061 4,938 2,146 7,084 4,915 2,146 7,061 Cents 4.43 4.39 The above Consolidated Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction with the accompanying notes. 39 COUNTPLUS ANNUAL REPORT 2022 CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2022 Assets Current assets Cash and cash equivalents Trade and other receivables Contract assets Loans and advances Indemnity asset Assets of disposal groups classified as held for sale Total current assets Non-current assets Trade and other receivables Contract assets Investments in associates Property, plant and equipment Right-of-use assets Intangible assets Deferred tax assets Total non-current assets Total assets Liabilities Current liabilities Trade and other payables Contract liabilities Interest bearing loans and borrowings Lease liabilities Current tax liabilities Provisions Remediation provision Other liabilities Total current liabilities Non-current liabilities Contract liabilities Interest bearing loans and borrowings Lease liabilities Provisions Other liabilities Total non-current liabilities Total liabilities Net assets Equity Contributed equity Reserves Retained earnings / (accumulated losses) Equity attributable to the owners of CountPlus Limited Non-controlling interest Total equity Note 2022 $’000 2021 $’000 3.1 3.2 3.3 6.6 4.1 3.2 3.3 6.2 5.2 5.3 5.1 2.4 3.4 3.3 7.4 5.3 2.4 3.5 4.2 3.6 3.3 7.4 5.3 3.5 3.6 7.1 7.2 6.3 21,540 24,601 16,064 57 237,953 300,215 – 300,215 381 35,830 22,214 3,617 12,047 52,338 1,886 128,313 428,528 18,161 13,628 911 3,589 2,726 7,195 237,962 1,455 285,627 34,075 8,890 9,849 1,446 177 54,437 340,064 88,464 123,153 (47,896) 96 75,353 13,111 88,464 26,239 19,514 12,926 236 259,810 318,725 2,726 321,451 490 21,839 18,236 4,006 13,103 36,514 1,024 95,212 416,663 14,201 10,332 2,610 3,439 1,403 6,797 259,827 1,116 299,725 20,668 1,718 10,994 1,533 203 35,116 334,841 81,822 123,153 (47,767) (4,217) 71,169 10,653 81,822 The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes. 40 COUNTPLUS ANNUAL REPORT 2022 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2022 Issued Capital $’000 Treasury Shares* $’000 Share Based Payment Reserve $’000 Acquisition Reserve $’000 Foreign Currency Translation Reserve $'000 Retained earnings / (accumulated losses) $’000 Non-controlling interests (NCI) $’000 Total Equity $’000 Total $’000 Balance at 1 July 2021 126,566 (3,413) 814 (48,548) Profit after income tax expense for the year Other comprehensive income for the year, net of tax Total comprehensive income for the year Transactions with owners in their capacity as owners Transactions with non-controlling interests (NCI) Share-based payments for long-term incentives (LTI) Recognition of deferred tax on equity transaction Dividends paid – – – – – – – – – – – – – – – – – – (146) – – – – – – – – – (33) – 17 17 – – – – (4,217) 71,169 10,653 81,822 5,112 5,112 2,243 7,355 – 17 – 17 5,112 5,129 2,243 7,372 2,025 2,025 2,237 4,262 – (146) 524 524 – – (146) 524 (3,348) (3,348) (2,022) (5,370) Balance at 30 June 2022 126,566 (3,413) 668 (48,548) (16) 96 75,353 13,111 88,464 Issued Capital $’000 Treasury Shares* $’000 Share Based Payment Reserve $’000 Acquisition Reserve $’000 Foreign Currency Translation Reserve $'000 Accumulated losses $’000 Non-controlling interests (NCI) $’000 Total Equity $’000 Total $’000 Balance at 1 July 2020 126,566 (3,501) 645 (48,548) Profit after income tax expense for the year Other comprehensive income for the year, net of tax Total comprehensive income for the year Transactions with owners in their capacity as owners Transactions with non-controlling interests (NCI) Share-based payments for long-term incentives (LTI) Transfer of treasury shares Reallocation of employee share reserve Dividends paid – – – – – – – – – – – – – 88 – – – – – – 187 (41) 23 – – – – – – – – – (10) – (23) (6,435) 68,717 4,938 4,938 9,395 78,112 2,146 7,084 – (23) – (23) (23) 4,938 4,915 2,146 7,061 – – – – – 116 116 874 990 – 187 (47) – – 23 – – – 187 – 23 (2,789) (2,789) (1,762) (4,551) Balance at 30 June 2021 126,566 (3,413) 814 (48,548) (33) (4,217) 71,169 10,653 81,822 * The Company has formed a trust to administer a Loan Funded Share Plan. Shares held by the trust are disclosed as Treasury Shares and deducted from contributed equity. The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes. 41 COUNTPLUS ANNUAL REPORT 2022 CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2022 Cash flows from operating activities Receipts from customers (inclusive of GST) Payments to suppliers and employees (inclusive of GST) Government grants received Interest received Interest and other finance costs paid Income taxes paid Net cash from operating activities Cash flows from investing activities Purchase of shares under equity partnership Proceeds from payment adjustment – associates Purchase of business assets Purchase of equipment and other non-current assets Proceeds from sales under the equity partnership Payments for acquisition of subsidiary, net of cash acquired Payments for acquisition of associates Proceeds from sale of business assets Dividends / distributions received from associates Payment for deferred consideration on acquisition of controlled entities and associates Net cash used in investing activities Cash flows from financing activities Proceeds from borrowings Repayment of lease liability Dividends paid Repayment of borrowings Payment of dividends by controlled subsidiaries to non-controlling interests Net cash used in financing activities Net (decrease) / increase in cash and cash equivalents Cash and cash equivalents at the beginning of the financial year Cash and cash equivalents at the end of the financial year Note 2022 $’000 2021 $’000 151,463 (139,420) 97 146,365 (134,268) 2,389 12,140 21 (1,096) (2,765) 8,300 (1,304) – (1,681) (962) 1,487 (9,374) (2,261) 3,152 2,358 (1,530) (10,115) 10,620 (3,134) (3,348) (5,000) (2,022) (2,884) (4,699) 26,239 21,540 3.1 6.3 3.1 14,486 37 (1,062) (3,865) 9,596 (220) 69 (2,798) (1,442) 979 – – 449 1,821 (464) (1,606) 963 (3,005) (2,789) (1,000) (1,762) (7,593) 397 25,842 26,239 The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes. 42 COUNTPLUS ANNUAL REPORT 2022 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2022 1 Basis of Preparation 1.1 General information CountPlus Limited (‘the Company’) is a listed public company limited by shares, incorporated and domiciled in Australia, whose shares are publicly traded on the Australian Securities Exchange ('ASX'). The consolidated financial report for the year ended 30 June 2022 (‘the financial report’) comprises the parent and its controlled entities (‘the Group’). CountPlus Limited is the ultimate parent entity in the Group. The Group's core business is to collaborate with leading accounting and advice firms for the long-term success of the clients, people and shareholders by the way of shared values, mutual success and sense of community. The financial statements were authorised for issue, in accordance with a resolution of Directors, on 26 August 2022. 1.2 Critical accounting judgements, estimates and assumptions The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts in the financial statements. Management continually evaluates its judgements and estimates in relation to assets, liabilities, contingent liabilities, revenue and expenses. Management bases its judgements, estimates and assumptions on historical experience and on other various factors, including expectations of future events, management believes to be reasonable under the circumstances. The resulting accounting judgements and estimates will seldom equal the related actual results. The judgements, estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below or within their respective note. Impairment At each reporting date, the Group reviews the recoverable amount of its tangible and intangible assets to determine whether there is any indication that these assets may be impaired. If such an indication exists, the recoverable amount of the asset, assessed as the higher of its fair value less costs to sell and its value in use, is compared to its current carrying amount. Any excess of the asset’s carrying value over its recoverable amount is expensed in the Statement of Profit or Loss and Other Comprehensive Income. The Group determines whether goodwill is impaired at least on an annual basis. This requires estimation of the recoverable amount of the Cash Generating Unit (‘CGU’) by determining the value in use of each individual CGU. The following key assumptions are used in determining the value in use calculation for each CGU: Î Revenue growth – 3%; Î Employment expense ratio – 59% to 68%; Î Discount rates – 13% or 18% (post tax); and Î Long-term growth rate (terminal rate) – 2.5%. Lease make good provision A provision has been made for the present value of anticipated costs for future restoration of leased premises. The provision includes future cost estimates associated with closure of the premises. The calculation of this provision requires assumptions such as application of closure dates and cost estimates. The provision recognised for each site is periodically reviewed and updated based on the facts and circumstances available at the time. Changes to the estimated future costs for sites are recognised in the statement of financial position by adjusting the asset and the provision. Reductions in the provision that exceed the carrying amount of the asset will be recognised in profit or loss. AASB 16 Leases Lease term Where lease arrangements contain options to extend the term or terminate the contract, the Group assesses whether it is ‘reasonably certain’ that the option to extend or terminate the contract will be made. Consideration is given to the prevalence of other contractual arrangements and or the economic circumstances relevant to the lease contract, that may indicate the likelihood of the option being exercised. Lease liabilities and Right of Use assets are measured using the reasonably certain contract term. Lease discount rates The discount rate applicable to a lease arrangement is determined at the inception of the contract or when certain modifications are made to the contract. The discount rate applied is the rate implicit in the arrangement, or if unknown, the Group’s incremental borrowing rate. The incremental borrowing rate is determined with reference to the Group’s borrowing portfolio at the inception of the arrangement or the time of the modification and the amount and nature of the lease arrangement. If the arrangement relates to a specialised asset, incremental project financing assumptions are considered. 43 COUNTPLUS ANNUAL REPORT 2022 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2022 2 Financial Performance 2.1 Operating segments Identification of reportable operating segments The consolidated entity is organised into three operating segments. These operating segments are based on the internal reports that are reviewed and used by the Board of Directors (who are identified as the Chief Operating Decision Makers ('CODM')) in assessing performance and in determining the allocation of resources. There is no aggregation of operating segments. Accounting Wealth Services which comprises the provision of accounting, audit and assurance, taxation, financial planning services and business and corporate advisory services. which comprises of financial services provided by Australian Financial Services licence (AFSL) holders. which comprises of services that support the activities of the accounting segment and wealth segment. The CODM primarily uses the measure of EBITA and contribution margin (revenue less direct costs) to assess the performance of the operating segments. As a result of the Services related acquisitions during the period (Wealth Axis and Accurium), the identifiable operating segments have revised. These acquired businesses have formed a new segment called Services which will include businesses that support the activities of our accounting and wealth segment. Separately, the previously reported Accounting and Financial planning operating segments have been merged into the ‘Accounting’ operating segment. The revised operating segments will form the key economic drivers of the future growth of the Group. No segment assets and liabilities are disclosed because there is no measure of segment assets and liabilities regularly reported to the CODM. The information reported to the CODM is on a monthly basis. At 30 June 2022 Revenue Intercompany revenue Revenue from external parties Segment contribution margin Other income Expenses Share of net profit of associates earnings Segment EBITA At 30 June 2021 Revenue Intercompany revenue Revenue from external parties Segment contribution margin Other income Expenses Share of net profit of associates earnings Segment EBITA Reconciliation of segment EBITA to profit from operations before income tax Segment EBITA Corporate office costs and other income Amortisation expense Net finance costs Profit before income tax The segment revenue described above represents revenue generated from external customers. 44 Accounting $’000 Wealth $’000 Services $’000 Total $’000 65,081 (568) 64,513 29,458 2,485 (21,781) 3,516 13,678 15,530 (121) 15,409 10,096 1,088 (7,968) – 3,216 5,864 (493) 5,371 3,572 – (2,246) – 1,326 86,475 (1,182) 85,293 43,126 3,573 (31,995) 3,516 18,220 Accounting $’000 Wealth $’000 Services $’000 Total $’000 65,063 (180) 64,883 30,660 2,932 (20,136) 2,498 15,954 15,938 (300) 15,638 10,269 – (7,884) – 2,385 – – – – – – – – 2022 $’000 18,220 (6,701) (2,154) (1,069) 8,296 81,001 (480) 80,521 40,929 2,932 (28,020) 2,498 18,339 2021 $’000 18,339 (6,393) (1,377) (1,006) 9,563 COUNTPLUS ANNUAL REPORT 2022 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2022 Other income Cost reimbursements Gain on deferred consideration Gain on disposal of intangible asset Net gain on disposal of assets of disposal groups classified as held for sale Gain on lease variation Other income Government grants – COVID-19 2022 $’000 1,088 – 536 1,103 474 275 97 3,573 2021 $’000 – 355 396 – 110 280 2,389 3,530 Significant accounting policy Cost reimbursements Cost reimbursements are recognised at the point in time when the costs are incurred and owed to the Company. Net gain on disposal of assets of disposal groups classified as held for sale A net gain on disposal of assets of disposal groups classified as held for sale is recognised when the consideration received for the sale of these assets is greater than the fair value of the assets of the disposal group. Government grants The Company received Jobseeker payments of $97,000 from the Australian Government in support of businesses significantly affected by COVID-19. In the prior year, the Company received Jobkeeper payments of $2,389,000. Grants from the government are recognised at their fair value where there is reasonable assurance that the grant will be received and the Group will comply with all attached conditions. Grants that compensate the Group for expenses incurred are recognised in other income in the Consolidated Statement of Profit or Loss and other Comprehensive Income on a systematic basis in which the expenses are recognised. 2.2 Revenue from contracts with customers From continuing operations Accounting services revenue Financial planning revenue Wealth revenue Services revenue Other operating revenue Revenue from contracts with customers Timing of revenue recognition Transferred at a point in time Transferred over time Accounting services revenue 2022 $’000 51,311 12,034 8,154 5,371 8,423 85,293 2022 $’000 24,513 60,780 85,293 2021 $’000 52,681 11,379 8,725 – 7,736 80,521 2021 $’000 20,104 60,417 80,521 Accounting services revenue includes fees generated by CountPlus firms from accounting services provided to clients. Financial planning revenue Financial planning revenue includes commissions and fees generated by CountPlus firms from financial planning services provided to clients. 45 COUNTPLUS ANNUAL REPORT 2022 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2022 Wealth revenue Wealth revenue includes revenue generated from services performed by authorised representatives of Count Financial Limited (‘Count Financial’) (an AFSL holder) and product margin rebates that are paid by product providers to Count Financial, which are variable in nature. Total Financial Solutions Australia Pty Ltd (an AFSL holder in the prior year) generated wealth revenue in a similar manner in the prior year. Count Financial is considered to be acting as agent under the requirements of AASB 15 Revenue from Contracts with Customers (‘AASB 15’). Fees, commissions and related costs are deducted from the gross number to obtain the reported net revenue figure as disclosed in the Consolidated Statement of Profit or Loss and Other Comprehensive Income. Services revenue Services revenue includes fees generated by CountPlus firms for the provision of actuarial certificates, paraplanning, administration and merged solution services to clients. Significant accounting policy Revenue recognition To determine whether to recognise revenue, the Group follows a five-step process: 1. Identifying the contract with a customer; 2. Identifying the performance obligations; 3. Determining the transaction price; 4. Allocating the transaction price to the performance obligations; and 5. Recognising revenue when / as performance obligation(s) are satisfied. The Group often enters into transactions involving a range of the company's products and services, for accounting, financial planning, wealth and services. In all cases, the total fee charged for an engagement is allocated amongst the various performance obligations based on their relative stand-alone fees. The fee charged for an engagement excludes any amounts collected on behalf of third parties. Revenue is recognised either at a point in time or over time, when (or as) the Group satisfies performance obligations by transferring the promised services to its customers. Performance obligations for accounting, financial planning, wealth and services revenue The Group’s contracts comprise performance obligations around completing client deliverables in line with engagement letter terms (based on the agreed billing method, standard of work and timeline). Under AASB 15, the Group must evaluate the separability of the promised services based on whether they are ‘distinct’. A promised service is ‘distinct’ if both: Î Î it is ‘separately identifiable’ (i.e. the Group does not provide a significant service integrating, modifying or customising it). the customer benefits from the item either on its own or together with other readily available resources; and Accounting services revenue Accounting services revenue is recognised over a period of time. Accounting revenue from the provision of accounting services is recognised on an accrual basis in the period in which the service is provided, based on time spent and performance obligations satisfied. Any amounts unbilled at the end of the reporting period are presented in the Statement of Financial Position as contract assets. Recognition is in accordance with the terms of the client services agreement or engagement letter, adjusted for any time that may not be recoverable with reference to the professional hours incurred. Client engagement letter gives an enforceable right to payment for performance completed to date, including a reasonable margin if the contract is terminated by the customer for reasons other than CountPlus' failure to perform as promised. Financial planning revenue Financial planning revenue is recognised at a point in time. Financial planning revenue from the provision of financial planning services, loan commission and leasing commission is recognised at a point in time in the period in which the service is provided. Wealth revenue Wealth revenue is measured at the fair value of the consideration received or receivable. Wealth revenue is recognised when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the Group, and specific criteria have been met for each of the Group’s activities as described below. (i) Fee income – ongoing service fees Service fees are received from end customers for ongoing advice services which are available to a client over a 12 months period. The performance obligation is to provide advice services to the customer throughout the period, as well as the continuous administration and maintenance of the end customers’ portfolios. Income is recognised on an annual basis in accordance with rates specified in agreements with Corporate Authorised Representatives and product providers. These fees are recognised and charged over the length of the service. (ii) Rebate income Rebate income is an incentive bonus received from various product providers based on the achievement of new business written targets outlined in an agreement. The frequency of settlement varies by counterparty. Income is recognised in accordance with these agreements. These fees are recognised and charged when the related service is completed which is typically at the time of the transaction. 46 COUNTPLUS ANNUAL REPORT 2022 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2022 (iii) Commission income Commission income is received for the referral services which triggered a successful referral of a customer into a product where the customer has renewed the product for a second / subsequent year. The net present value of future trail commissions is recognised at the start of a contract when the performance obligation has been met, typically when a customer is introduced to a new product. For investment referral services, the Group is unable to forecast the trail commission revenue in line with the highly probable test in AASB 15. Therefore trail commission revenue on investment referral balances are recognised when received or paid. (iv) Adviser fees Adviser fees are received from financial advisers for financial advice licensee services which are provided on an ongoing basis. The performance obligation is to provide advisers with an authority to trade, to provide training services and financial advice support. Income is recognised over time in accordance with rates specified in agreements with advisers. Services revenue Services revenue consists mainly from the provision of s390 and death benefit actuarial certificates to clients. This revenue is recognised at a point in time when the certificates are issued to the client and the performance obligation is met. The remainder of services revenue mostly consists of administration and merged solution services, which are recognised over time, in the period in which the service is provided and paraplanning which is recognised at a point in time. Other revenue Other revenue includes fees received where the Company acts in the capacity of an agent rather than principal through the facilitation of software licences and IT equipment. Interest revenue is recognised when there is control of the right to receive the interest payment. Dividends received from associates are accounted for in accordance with the equity method of accounting. Other revenue is recognised when the right to receive payment is established. All revenue is stated net of the amount of goods and services tax (GST). 2.3 Expenses Direct Costs Direct salaries and employee benefits expense Other direct costs Administrative and other operating expenses Acquisition related expenses Audit Fees Legal Fees Accounting and other professional fees Sales and marketing expenses Insurance expenses Technology expenses Premises expenses Office administrative expenses Share based payment (income) / expenses Depreciation expenses Amortisation expenses Net loss on disposal of property, plant and equipment Impairment of receivables / (reversal) of Impairment Loss on deferred consideration payment Other expenses 2022 $’000 36,854 5,313 42,167 2022 $’000 460 373 413 689 1,035 1,429 4,767 1,603 595 (146) 4,303 2,154 242 276 114 2,030 2021 $’000 34,223 5,369 39,592 2021 $’000 334 437 381 698 1,108 1,136 3,645 1,748 690 187 4,133 1,377 26 (422) – 1,771 20,337 17,249 47 COUNTPLUS ANNUAL REPORT 2022 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2022 2.4 Taxation Income tax expense Income tax expense Current tax Deferred tax – origination and reversal of temporary differences Over provision Aggregate income tax expense Income tax expense is attributable to: Profit from continuing operations Deferred tax included in income tax expense comprises: Increase in deferred tax assets Increase in deferred tax liabilities Deferred tax – origination and reversal of temporary differences Numerical reconciliation of income tax expense and tax at the statutory rate Profit before income tax Tax at the statutory tax rate of 30% Tax at statutory tax rate of 30% Share of equity accounted investments Non-deductible expenses Non-taxable accounting gains Initial recognition of deferred tax asset on losses Loss / (gain) on deferred considerations Taxable capital gain on sale of shares Taxable capital gain on disposal of fees Non-taxable income Non-deductible depreciation and amortisation Benefit on trail commission Taxable capital gain on exit of tax consolidated group Other items Over provision in prior years Income tax expense 48 2022 $’000 3,705 (2,738) (26) 941 2021 $’000 3,530 (1,061) 10 2,479 941 2,479 (3,267) 529 (2,738) (18,251) 17,190 (1,061) 2022 $’000 8,296 2,489 2022 $’000 2,489 (990) 60 (303) (354) 43 – 26 (36) 15 – – 17 967 (26) 941 2021 $’000 9,563 2,869 2021 $’000 2,869 (709) 199 (119) – (110) 271 80 (37) 17 (8) 7 9 2,469 10 2,479 COUNTPLUS ANNUAL REPORT 2022 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2022 Deferred tax assets The balance comprises temporary differences attributable to: Employee liabilities (annual leave and long service leave) Allowance for expected credit losses – trade receivables Professional fees Make good Accruals Contract liability – accrued trail commission expense Tax losses Right of Use Assets Depreciation Remediation Provision Other Total deferred tax assets Set-off of deferred tax liabilities pursuant to set-off provisions Net deferred tax assets Movements in deferred tax assets Opening balance Charged to income tax expense Deferred tax balances on acquisition of subsidiary Charged directly to equity Increase in tax losses Under provision in prior year Net deferred tax assets Deferred tax liabilities The balance comprises temporary differences attributable to: Work in progress Prepaid expenses Fair valued intangible assets Accrued income Contract asset – accrued trail commission income Indemnity asset Other Total deferred tax liabilities Set-off of deferred tax assets pursuant to set-off provisions Net deferred tax liabilities 2022 $’000 2,276 143 9 36 527 13,700 3,899 662 111 73,775 193 95,331 (93,445) 1,886 2022 $’000 91,386 3,267 154 524 – – 95,331 2022 $’000 1,106 16 3,970 1 14,409 73,759 184 93,445 2021 $’000 2,158 100 12 51 434 8,902 888 608 124 77,958 151 91,386 (90,362) 1,024 2021 $’000 72,937 18,251 14 – 191 (7) 91,386 2021 $’000 1,025 8 1,970 2 9,405 77,941 11 90,362 (93,445) (90,362) – – 49 COUNTPLUS ANNUAL REPORT 2022 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2022 Movement in deferred tax liabilities At 1 July 2020 Net deferred tax balance on acquisition of subsidiaries* Charged to the income tax expense Other adjustments At 30 June 2021 At 1 July 2021 Net deferred tax balance on acquisition of subsidiaries* Charged to the income tax expense At 30 June 2022 * Includes business assets acquired by member firms. Fair Valued intangible assets $’000 2,241 21 (292) – 1,970 1,970 2,513 (512) 3,971 Other $’000 70,911 – 17,482 (1) 88,392 88,392 41 1,041 89,474 Total $’000 73,152 21 17,190 (1) 90,362 90,362 2,554 529 93,445 AASB Interpretation 23 Uncertainty over Income Tax Treatments (Interpretation 23) Interpretation 23 clarifies the application of the recognition and measurement criteria in AASB 12 Income taxes where there is uncertainty over income tax treatments. It requires an assessment of each uncertain tax position to determine whether it is probable that a taxation authority will accept the position. Where it is not considered probable, the effect of the uncertainty will be reflected in determining the relevant taxable profit or loss, tax bases, unused tax credits or tax rates. The amount will be determined as either the single most likely amount or the sum of the probability weighted amounts in a range of possible outcomes, whichever better predicts the resolution of the uncertainty. Significant accounting policy Income tax The income tax expense or benefit for the period is the tax payable on that period’s taxable income based on the applicable income tax rate for each jurisdiction, adjusted by the changes in deferred tax assets and liabilities attributable to temporary differences, unused tax losses and the adjustment recognised for prior periods, where applicable. Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to be applied when the assets are recovered, or liabilities are settled, based on those tax rates that are enacted or substantively enacted, except for: Î when the deferred income tax asset or liability arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and that, at the time of the transaction, affects neither the accounting nor taxable profits; or Î when the taxable temporary difference is associated with interests in subsidiaries, associates or joint ventures, and the timing of the reversal can be controlled, and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses. Tax consolidation legislation The parent and its 100% owned Australian subsidiaries formed an income tax consolidation group with effect from 5 November 2010. Subsidiaries joined the tax consolidation group from the date they became wholly owned. They would exit the tax consolidation group once they are less than 100% owned. The parent and the controlled entities in the tax consolidated group account for their own current and deferred tax amounts. These tax amounts are measured as if each entity in the tax consolidated group continues to be a stand-alone taxpayer. Members of the CountPlus tax consolidation group entered into a tax sharing and funding agreement. Under the terms of this agreement, each member in the tax consolidation group agreed to make a tax equivalent payment to the parent based on their current tax liability or current tax asset. Deferred taxes are recorded by members of the tax consolidation group in accordance with the principles of AASB 112 Income Taxes. 50 COUNTPLUS ANNUAL REPORT 2022 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2022 Current tax assets and liabilities Current tax payable 2022 $’000 2,726 2021 $’000 1,403 Significant accounting judgements, estimates and assumptions Income taxes The Group is subject to taxes in Australia. The application of tax law to the specific circumstances and transactions of the consolidated entity requires the exercise of judgement by management. The tax treatments adopted by management in preparing the financial statements may be impacted by changes in legislation and interpretations or be subject to challenge by tax authorities. Recognition of deferred tax assets on capital losses Deferred tax assets are recognised for deductible temporary differences only if the Group considers it is probable that future taxable amounts will be available to utilise those temporary differences and losses. CountPlus has recognised a deferred tax asset on tax capital losses. CountPlus plans to continue with the successful equity partnership model which is expected to result in transactions with firms in the Accounting segment over the next two to three years. A consequence of these transactions is likely to create taxable capital gains. The envisaged structure of most of the transactions, being share sale transactions, are subject to pre-defined financial hurdles being met by firms. Both the structure of the transactions and the potential increase in value in the firms are likely to give rise to taxable capital gains which the Group has concluded will result in the deferred tax assets being utilised in the foreseeable future. 2.5 Earnings per share Earnings per share for profit Profit after income tax Non-controlling interest Profit after income tax attributable to the owners of CountPlus Limited Profit after income tax attributable to the owners of CountPlus Limited used in calculating diluted earnings per share Weighted average number of ordinary shares used in calculating basic earnings per share Adjustments for calculation of diluted earnings per share Long-term incentive performance rights 2022 $’000 7,355 (2,243) 5,112 5,112 2021 $’000 7,084 (2,146) 4,938 4,938 2022 Number 2021 Number 111,610,249 111,583,310 308,346 776,671 Weighted average number of ordinary shares used in calculating diluted earnings per share 111,918,595 112,359,981 Basic earnings per share Diluted earnings per share Significant accounting policy Basic earnings per share is calculated by dividing: 2022 Cents 4.58 4.57 2021 Cents 4.43 4.39 Î the profit attributable to owners of the Group, excluding any costs of servicing equity other than ordinary shares; and Î by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the year and excluding treasury shares. Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to consider: Î Î the after-income tax effect of interest and other financing costs associated with dilutive potential ordinary shares; and the weighted average number of additional ordinary shares that would have been outstanding assuming the conversion of all dilutive potential ordinary shares. 51 COUNTPLUS ANNUAL REPORT 2022 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2022 2.6 Dividends Dividends paid during the financial year were as follows: Dividends paid during the year 1.5 cent per share dividend paid in respect of the six months to 30 June 2021 1.5 cent per share dividend paid in respect of the six months to 31 December 2021 1.25 cent per share dividend paid in respect of the six months to 30 June 2020 1.25 cent per share dividend paid in respect of the six months to 31 December 2020 Total dividends paid during the year Franking credits Franking credits available for subsequent financial years based on a tax rate of 30% 2022 $’000 1,674 1,674 – – 3,348 2022 $’000 9,160 2021 $’000 – – 1,395 1,394 2,789 2021 $’000 7,893 The above amounts represent the balance of the franking account as at the end of the financial year, adjusted for: Î Î Î franking credits that will arise from the payment of the amount of the provision for income tax at the reporting date; franking debits that will arise from the payment of dividends recognised as a liability at the reporting date; and franking credits that will arise from the receipt of dividends recognised as receivables at the reporting date. 3 Working Capital 3.1 Cash and cash equivalents Current assets Cash at bank Reconciliation to cash and cash equivalents at the end of the financial year The above figures are reconciled to cash and cash equivalents at the end of the financial year as shown in the statement of cash flows as follows: 2022 $’000 2021 $’000 21,540 26,239 Balance as per statement of cash flows 21,540 26,239 Risk exposure The Group's exposure to interest rate risk is discussed in note 7.5. The maximum exposure to credit risk at the end of each reporting period is the carrying amount of cash and cash equivalents mentioned above. Significant accounting policy Cash and cash equivalents Cash and cash equivalents comprise cash on hand, demand deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities on the Consolidated Statement of Financial Position. 52 COUNTPLUS ANNUAL REPORT 2022 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2022 Reconciliation of profit after income tax to net cash from operating activities Profit after income tax expense for the year Depreciation and amortisation Share-based payments Impairment of receivables / (reversal) of impairment Loss / (gain) on deferred consideration (Gain) on lease variation (Gain) on disposal of non-current assets Deferred tax on equity transaction adjustment Insurance trail commission accounting adjustment (Gain) / loss on disposal of non-current assets Share of associate net profit Employee entitlements Make good provision discount unwind Accrued Interest income (Increase) / decrease in trade and other receivables (Decrease) in contract liabilities Increase in trade and other payables (Increase) in income tax refund due (Decrease) in deferred tax liabilities (Decrease) in employee benefits Net cash from operating activities 3.2 Trade and other receivables Current assets Trade receivables Less: Allowance for expected credit losses Other receivables Prepayments Count Financial Limited adviser revenue receivable Deferred cash consideration receivable Total current assets Other receivables Deferred cash consideration receivable Total non-current assets 2022 $’000 7,355 6,457 (146) 276 114 (474) (1,103) 524 (491) (286) (3,516) 1,810 – (6) (1,934) (1,195) 4,030 (1,323) (862) (930) 8,300 2022 $’000 9,652 (404) 9,248 1,432 3,554 8,662 1,705 2021 $’000 7,084 5,510 187 (422) (355) (108) (396) – 552 26 (2,498) 1,229 (3) (16) 790 (1,113) 1,023 (125) (1,261) (508) 9,596 2021 $’000 8,992 (247) 8,745 789 3,065 6,915 – 24,601 19,514 2022 $’000 299 82 381 2021 $’000 490 – 490 53 COUNTPLUS ANNUAL REPORT 2022 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2022 Ageing analysis of trade receivables As at 30 June, the ageing analysis of receivables is as follows and represents both current and overdue but not impaired receivables: Current 0 to 3 months 3 to 6 months Over 6 months 2022 2021 Trade receivables $’000 Allowance for expected credit losses $’000 Trade receivables $’000 Allowance for expected credit losses $’000 7,370 895 681 706 9,652 (28) (14) (136) (226) (404) 6,248 1,114 996 634 8,992 (15) (2) (85) (145) (247) Trade receivables are non-interest bearing and are generally on 30-day terms. Allowance for expected losses is based on the lifetime expected credit loss and Group policies, grouped based on days overdue, and makes assumptions to allocate an overall expected credit loss rate for each group. These amounts have been included on the face of the Statement of Profit or Loss and Other Comprehensive Income. Movements in the allowance for expected credit losses are as follows: Opening balance (Additional) / reduction provisions recognised Receivables written off / (recovered) during the year as uncollectable 2022 $’000 (247) (276) 119 (404) 2021 $’000 (558) 422 (111) (247) The creation and release of the allowance for expected credit losses has been included in expense in note 2.3. Amounts charged to the allowance account are generally written off when there is no expectation of recovery. The maximum exposure to credit risk at reporting date is the carrying amount of each class of receivables mentioned above. Refer to note 7.5 for more information on the risk management policy of the Group. Significant accounting policy Trade receivables Trade receivables are initially recognised at their fair value and subsequently measured at amortised cost using the effective interest method, less allowance for expected losses. Recoverability of trade receivables is reviewed on an ongoing basis. Trade receivable balances which are known to be uncollectable are written off by reducing the carrying amount directly. An allowance for expected losses on trade receivables is raised by applying a rate based on historic collection rates for overdue balances, which are reassessed each year, and adjusted specific debtors where management is aware of specific conditions which affect the likely recovery of outstanding balances. The loss allowance is the amount equal to the expected lifetime credit losses. Significant accounting judgements, estimates and assumptions Allowance for expected losses of receivables The allowance for expected losses of receivables assessment requires a degree of estimation and judgement. It is based on the lifetime expected credit loss, grouped based on days overdue, and makes assumptions to allocate an overall expected credit loss rate for each group. Outstanding debts that are deemed to be uncollectable are written off when identified. Historical experience, information of the Group’s client base and available forward-looking information are considered when determining the allowance for expected credit losses. The allowance for expected credit loss of receivables includes assumptions about risk of default and expected loss rates; management judgment is applied in determining these rates. The allowance for expected credit loss of receivables includes assumptions about risk of default and expected loss rates; management judgment is applied in determining these rates. 54 COUNTPLUS ANNUAL REPORT 2022 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2022 3.3 Contract assets and liabilities Contract Assets Current assets Contract assets Allowance for expected credit losses of contract assets Ongoing insurance trail commission receivable Loss allowance on trail commission receivable Non-current assets Ongoing insurance trail commission receivable Loss allowance on trail commission receivable 2022 $’000 4,068 (204) 12,217 (17) 16,064 2022 $’000 35,852 (22) 35,830 2021 $’000 3,625 (209) 9,630 (120) 12,926 2021 $’000 22,096 (257) 21,839 Contract assets Contract assets represents costs incurred and profit recognised on client assignments and services that are in progress and have not yet been invoiced at reporting date. Contract assets are valued at net realisable value after providing for any expected credit losses. Contract assets are recognised in the Statement of Financial Position and the movement recognised in the Statement of Profit or Loss and Other Comprehensive Income. Ongoing insurance trail commission receivable Contract assets have been raised to reflect the recognition of ongoing insurance trail commissions receivable across various commission arrangements. This reflects the upfront recognition of ongoing insurance commission income when a performance obligation has been met, e.g. a new customer is introduced to a product. The amount of ongoing insurance trail commission revenue and the associated expenses paid to aligned advisers is dependent on assumptions about the term of the underlying insurance policies generating the commission. The Group has recognised the net present value of expected future risk insurance trail commission income. Included in the recognition of the income are assumptions around the remaining life of the product and the likely run off of products over time. Ongoing insurance trail commission income, present valued, is only recognised to the extent that it is highly probable and on the basis that it is not expected to reverse in future periods. Ageing of contract assets As at 30 June, the ageing of the contract assets is as follows: Current 0 to 3 months 3 to 6 months over 6 months 2022 Contract assets $’000 1,516 1,015 822 715 4,068 Expected credit loss $’000 (13) (51) (56) (84) (204) 2021 Contract asset $’000 Expected credit loss $’000 1,379 901 595 750 3,625 – (19) (38) (152) (209) 55 COUNTPLUS ANNUAL REPORT 2022 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2022 Movement in allowance of credit losses At 1 July Unused amounts reversed 2022 $’000 (209) 5 (204) 2021 $’000 (387) 178 (209) The maximum exposure to credit risk at reporting date is the carrying amount of each class of receivables mentioned above. Refer to note 7.5 for more information on the risk management policy of the Group. Balance at 1 July Amount recognised in revenue from contracts with customers Receipt of ongoing insurance trail commission Balance at 30 June Contract Liabilities Current liabilities Unearned revenue Ongoing insurance trail commission Non-current liabilities Ongoing insurance trail commission Unearned revenue 2022 $’000 31,726 29,915 (13,611) 48,030 2022 $’000 2,038 11,590 13,628 2022 $’000 2021 $’000 37,249 6,537 (12,060) 31,726 2021 $’000 1,328 9,004 10,332 2021 $’000 34,075 20,668 Unearned revenue represent the Group’s obligation to transfer goods or services to a customer and are recognised when a customer pays consideration before the Group has transferred the goods or services to the customer. Ongoing insurance trail commission Contract liabilities have been raised to reflect the recognition of ongoing insurance commissions payable across various commission arrangements. This reflects the recognition of certain future trail commission expenses when a performance obligation has been met, e.g. a new customer is introduced to a product. The expense and contract liability is calculated based upon the estimated payout to aligned advisers. Ongoing insurance commission liability acquired Amount recognised in revenue from contracts with customers Payment of ongoing insurance trail commission Balance at 30 June 2022 $’000 29,672 29,150 (13,157) 45,665 2021 $’000 34,642 6,543 (11,513) 29,672 56 COUNTPLUS ANNUAL REPORT 2022 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2022 Movement in unearned revenue Opening balance Payments received in advance Transfer to revenue – included in the opening balance Transfer to revenue – other balances Closing balance 2022 $’000 1,328 4,343 (1,198) (2,435) 2,038 2021 $’000 2,441 2,041 (2,333) (821) 1,328 Significant accounting judgements, estimates and assumptions Allowance for expected credit losses The allowance for expected credit losses assessment requires a degree of estimation and judgement. It is based on the lifetime expected credit loss, grouped based on days overdue, and makes assumptions to allocate an overall expected credit loss rate for each group. Contract assets where amounts are in excess of net recoverable value are written off when identified. Historical experience, information of the Group’s client base and available forward-looking information are considered when determining the allowance for expected credit losses. The allowance for expected credit loss of receivables includes assumptions about risk of default and expected loss rates; management judgment is applied in determining these rates. Ongoing insurance trail commission The key assumptions underlying the ongoing insurance trail commission assets and liability are the remaining life of the insurance products, the likely run off of products over time and the adviser payout ratio. It has been estimated that the insurance policies have a remaining life of five years and that 10% (2021: 20%) of policies are cancelled at the end of each year. These assumptions are subject to change depending on the actual experience of the insurance arrangements over time. In respect of the adviser payout ratio, it has been estimated that 95% (2021: 93.5%) of ongoing insurance trail commission is paid to aligned advisers. This is subject to change if Count Financial's adviser pricing changes or if the average payout ratio changes across the portfolio; this may occur given the tiered pricing model applicable to aligned advisers. 3.4 Trade and other payables Current liabilities Trade payables Other payables Adviser payments GST payable Sundry payables and accrued expenses Refer to note 7.5 for further information on financial instruments risk. 3.5 Provisions Provisions Current liabilities Employee benefits – annual leave Employee benefits – long service leave Sick leave Bonus provision Other 2022 $’000 1,216 229 10,473 1,651 4,592 18,161 2022 $’000 3,299 3,289 38 569 – 7,195 2021 $’000 1,291 67 8,111 1,420 3,312 14,201 2021 $’000 3,323 2,895 38 518 23 6,797 57 COUNTPLUS ANNUAL REPORT 2022 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2022 Non-current liabilities Employee benefits – long service leave Lease make good Other 2022 $’000 1,000 431 15 1,446 2021 $’000 966 567 – 1,533 Significant accounting judgements, estimates and assumptions Provisions Provisions are recognised when the economic entity has a legal, equitable or constructive obligation to make a future sacrifice of economic benefits to other entities as a result of past transactions or other past events. It is probable that a future sacrifice of economic benefits will be required, and a reliable estimate can be made of the amount of the obligation. Employee benefits Further disclosures relating to Key Management Personnel are set out in the remuneration report which starts on page 22 of the Directors’ Report. Short-term obligations Liabilities for wages and salaries, including non-monetary benefits, annual leave and long service leave expected to be settled within 12 months after the end of the period in which the employees render the related service, are recognised in respect of employees’ services up to the end of the reporting period and are measured at the amounts expected to be paid when the liabilities are settled. All short-term employee benefit obligations are presented as payables and as provisions. Long-term obligations The liability for long service leave not expected to be settled wholly within 12 months after the end of the period in which the employees render the related service, is recognised in the provision for employee benefits and measured as the present value of expected future payments to be made in respect of services provided by employees up to the end of the reporting period using the projected unit credit method. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using market yields at the end of the reporting period of high-quality corporate bonds with terms and currencies that match, as closely as possible, the estimated future cash outflows. Remeasurements as a result of experience, adjustments and changes in actuarial assumptions are recognised in the Statement of Profit or Loss and Other Comprehensive Income. The obligations are presented as current liabilities in the Statement of Financial Position if the entity does not have an unconditional right to defer settlement for at least twelve months after the reporting period, regardless of when the actual settlement is expected to occur. 3.6 Other liabilities Current liabilities Deferred cash consideration Other current liabilities Non-current liabilities Deferred cash consideration 58 2022 $’000 1,337 118 1,455 2022 $’000 177 177 2021 $’000 1,063 53 1,116 2021 $’000 203 203 COUNTPLUS ANNUAL REPORT 2022 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2022 Movements in deferred consideration and other liabilities Current At 1 July 2021 Arising during the year Payments made during the year Net loss on deferred consideration Transfer from non-current deferred consideration Total current Non-current At 1 July 2021 Arising during the year Transfer to current deferred consideration Total non-current Total $’000 1,116 1,243 (993) (114) 203 1,455 $’000 203 177 (203) 177 1,632 Significant accounting judgements, estimates and assumptions Deferred consideration Some acquisitions involve the payment of deferred consideration to vendors. This consideration is determined based on a multiple of actual earnings over a fixed period and is dependent on revenue or client retention. Consideration payable to the vendors in relation to acquisitions is recognised at fair value based on expected financial performance over the applicable future financial years. The fair value is reassessed at each reporting period or when there has been a substantial change to expected performance in future financial years. Subsequent changes in the fair value of the contingent consideration is recognised in the Statement of Profit or Loss and Other Comprehensive Income. The component of deferred consideration not expected to be settled within 12 months after the end of the reporting period is measured as the present value of expected future payments to be made in respect of this deferred consideration, using a risk adjusted discount rate. 4 Indemnity asset and remediation provision 4.1 Indemnity asset Current assets Indemnity Asset 2022 $’000 2021 $’000 237,953 259,810 Indemnity asset Included in the Statement of Financial Position of Count Financial is a provision for remediation amounting to $237,953,000. A corresponding indemnity asset has been recognised which represents an amount receivable pursuant to an indemnity deed granted by the Commonwealth Bank of Australia (‘CBA’). The provision is for ongoing service fees charged to clients where no service was provided and for other advice issues. The provision relates to the acquisition of Count Financial by CountPlus in 2019. The indemnity provided by CBA relates directly to the remediation provision and is reduced as clients are remediated. The indemnity at 30 June 2022 was $300,000,000. The remaining indemnity available to cover remediation payments at 30 June 2022 is $260,063,000 (2021: $295,038,000). The indemnity is subject to renegotiation if some of the underlying assumptions behind the provision are reassessed. Recoveries of remediation amounts are expected to be assessable for tax purposes. Note that remediation payments are expected to be deductible for tax purposes. 4.2 Remediation provision Current liabilities Remediation provision – ongoing service fees – Count Financial Remediation provision – other advice issues – Count Financial Remediation provision – Total Financial Solutions Australia 2022 $’000 237,209 744 9 237,962 2021 $’000 258,082 1,728 17 259,827 59 COUNTPLUS ANNUAL REPORT 2022 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2022 Remediation provision – Count Financial The Count Financial remediation provision represents the estimated cost of remediation of current and former clients in respect of advice issues, including ongoing service fees charged where no service was provided. The advice issues occurred prior to the acquisition of Count Financial by CountPlus on 1 October 2019. The provision includes the following elements: Ongoing service fees – cost of remediation of clients Ongoing service fees – interest on amounts payable to clients Other advice issues 2022 $’000 122,075 115,134 744 237,953 2021 $’000 129,040 129,042 1,728 259,810 The following key assumptions have been reflected in the remediation provision: 2022 Value of ongoing service fees charged $454,751,000 Number of years in which issues occurred 11 years Refund rate (excluding straight to pay) 24% 2021 $451,575,000 11 years 24% Interest calculation methodology RBA cash rate plus 6% compounded monthly RBA cash rate plus 6% compounded monthly Value below which refunds will be made without investigation $3,000 (excluding interest) $2,000 (excluding interest) A change in each of the key assumptions above may impact the value of the remediation provision. We set out below an estimate of the impact of a change in two of the key assumption on the value of the provision. Note that the impact of the movements in the assumptions (as set out below) are independent of each other. Key assumption Value of ongoing service fees charged Refund rate Movement Impact on provision $'000 +$10,000,000 -$10,000,000 +1% -1% 6,060 (6,060) 8,109 (8,109) Remediation settlements will not be known until individual cases have been reviewed and compensation offers accepted. Differences in amounts paid to the amount of provision recorded at 30 June 2022 will be recorded as profit or loss in future periods. Remediation payments are expected to be deductible for tax purposes. If a remediation settlement is tax deductible, CountPlus will receive the net amount from the CBA. Similarly, if the reimbursement is deemed to be assessable, the CBA will remit the grossed up amount to CountPlus. Other advice issues ‘Other advice issues’ presented above relate to additional items covered under the CBA indemnity deed including remediation due to specifically identified clients, deceased estates, clients of specific financial advisers and in respect of litigation matters. While these items formed part of the indemnity provided by CBA to Count Financial at 30 June 2020, they were unable to be estimated at that date. Since 1 July 2020, resolution of these items has been prioritised, and at 30 June 2022, future expected payments are able to be estimated. Provision at 1 July 2021 Additional provisions Additional provisions Amounts utilised during the year Provision at 30 June 2022 60 $’000 259,810 13,118 (34,975) 237,953 COUNTPLUS ANNUAL REPORT 2022 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2022 Significant accounting judgements, estimates and assumptions The key accounting judgements and estimates used in calculating the remediation provision include the value of ongoing service fees charged, the number of years in which issues have occurred, the refund rate, the interest calculation methodology, the length of time taken to make the refund and the value below which fee refunds will be made without investigation. The key assumptions reflected in the remediation provision are subject to a high degree of uncertainty. The key assumptions will become clearer over time as the remediation program obtains greater insight into the actual quantum of the issues identified. The value of ongoing service fees charged has been estimated using Count Financial’s books and records and the books and records of third-party product providers where relevant; the population of impacted customers is subject to some uncertainty and is yet to be finalised. The refund rate has been estimated by reference to testing conducted on a small sample of client cases. The refund rate is subject to change as actual refund rate data (incurred by Count Financial) becomes available. The interest calculation methodology that has been applied is based on a rate equivalent to the RBA cash rate plus 6% compounded monthly. This methodology is subject to change. Some customers may be remediated without investigation where the combined value of the refund and the interest is below a certain amount, however this is dependent on the availability of underlying customer records. This is subject to change. 5 Capital Investments 5.1 Intangibles Reconciliations Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out below: Acquired client relationship / Adviser networks $’000 Goodwill $’000 IT software $’000 Brand $’000 Other intangible assets $’000 Balance at 1 July 2020 Additions Additions through business combinations Classified as held for sale Disposals Amortisation expense Balance at 30 June 2021 Additions Additions through business combinations Disposals Amortisation expense Balance at 30 June 2022 28,437 – 728 (1,826) – – 27,339 8,829 – – – 36,168 6,287 – 2,854 (937) (120) (1,164) 6,920 – 7,518 (986) (1,574) 11,878 186 457 12 – (27) (110) 518 74 1,058 (4) (302) 1,344 1,448 – – – – (60) 1,388 – 792 – (80) 2,100 Total $’000 36,741 466 3,594 (2,763) (147) (1,377) 36,514 8,903 10,065 (990) (2,154) 383 9 – – – (43) 349 – 697 – (198) 848 52,338 At 30 June 2021 Cost Accumulated amortisation and impairment Net book value At 30 June 2022 Cost Accumulated amortisation and impairment Net book value Acquired client relationship / Adviser networks $’000 Goodwill $’000 IT software $’000 Brand $’000 Other intangible assets $’000 Total $’000 37,329 (9,990) 27,339 46,158 (9,990) 36,168 29,833 (22,913) 6,920 34,571 (22,693) 11,878 1,163 (645) 518 2,108 (764) 1,344 1,493 (105) 1,388 2,285 (185) 2,100 512 (163) 349 70,330 (33,816) 36,514 1,077 (229) 86,199 (33,861) 848 52,338 61 COUNTPLUS ANNUAL REPORT 2022 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2022 Impairment tests for goodwill Goodwill acquired through business combinations has been allocated to and is tested at the level of the respective CGUs, for impairment testing. A CGU is the smallest group of assets that independently generates cash flow and whose cash flow is largely independent of the cash flows generated by other assets. The concept is used by the International Financial Reporting Standards in the determination of asset impairment. For the purpose of impairment testing, fifteen of the eighteen member firms listed in note 6.4, are considered as separate CGUs, operating largely independently from other businesses in the Group. All subsidiaries are separately identified in note 6.4. The Group utilises a value in use calculation using cash flow projections from financial budgets approved by the Board covering a five-year period to assess the recoverable amount of the CGUs. For the purpose of annual impairment testing, goodwill is allocated to the following CGU: Significant cash generating units CountPlus One Pty Ltd MBA Group Partnership Pty Ltd Kidmans Partners Holdings Pty Ltd Unite Advisory Pty Ltd 4Front Holdings Pty Ltd / Cooper Reeves Crosby Dalwood Pty Ltd Mogg Accounting + Advisory Pty Ltd Accurium Holdings Pty Ltd Remaining cash-generating units Impairment of goodwill 2022 $’000 4,759 5,639 4,245 4,653 2,879 1,782 2,229 3,783 6,199 2021 $’000 4,759 5,639 4,245 3,502 – 1,782 2,229 – 5,183 36,168 27,339 At 30 June 2022 management performed impairment testing for each CGU of CountPlus . No impairment losses were identified at 30 June 2022. Key assumptions used for value in use calculations Key assumptions for this value in use calculation at 30 June 2022 were: Î Revenue growth of 3%; Î Employment expense ratio of 59% – 68%; and Î The long-term growth rate (terminal rate) was estimated to be 2.5% p.a. Revenue growth is based on the Board approved member firm budget for the next financial year as well as management assessment over the forecast period. Budget revenue for 2022 is based on management expectations and the average annual revenue growth thereafter is assumed to be maintained at 3% p.a. over the remaining forecast period for all CGUs. Employment expense ratios are based on the Board approved member firm budget for the next financial year and management assessment over the forecast period. Employment expense ratio shows the employment cost as a percentage of net revenue. This is assumed to be maintained between 59% and 68% over the forecast period. Discount rates represent the current market assessment of the risks specific to the Group, considering the time value of money and specific risk of the underlying assets that have not been incorporated into the cash flow estimates. The discount rate is calculated using the weighted average cost of capital (WACC) and reflects management’s estimation of the time value of money and specific risk estimated for the Group. The WACC considers both debt and equity. The cost of equity is derived from the expected return on investment by the Group’s investors. It incorporates a beta factor to reflect the specific risk associated with the industries in which the Group operates. The cost of debt is based on the interest-bearing borrowings the Group is obliged to service. Management utilised a pre-tax discount rate of 18.57% (13% post tax) (2021: 18.57% (13% post tax)) for all CGU’s with the exception of Accurium where a pre tax discount rate of 25.7% (18% post tax) was used. It is assumed for the purpose of the analysis that the long-term growth rate (terminal rate) will equate to the long-term average growth rate of the national economy. Management estimate this to be 2.5% p.a. which is in line with the long-term expected Australian inflation rate. The sensitivity analysis concluded that changing this rate to reflect possible lower growth projections would not materially impact the valuations of the individual CGUs. 62 COUNTPLUS ANNUAL REPORT 2022 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2022 Sensitivity to changes in assumptions Sensitivity has been tested for the following three CGUs based on management assessment that the assumptions in the value in use calculation for these CGUs were most sensitive to change. For Kidmans Partners: The recoverable amount as determined by the value in use calculation exceeds the carrying value by $2,577,000 or 34%. Reasonably possible changes in assumptions may result in impairment as set out below: Î Î Î Î Other things being equal, if the company’s yearly revenue is 5% less than expected over the forecast period, an impairment of $338,000 would result. Other things being equal, if the pre-tax discount rate is increased from 18.57% to 25.00%, an impairment of $130,000 would result. If the company’s employment cost margin (its single largest expense item) increases from 53% to 58% over the forecast period, an impairment of $106,000 would result. If the long-term average growth rate decreases from 2.5% to 1% p.a., the recoverable amount would exceed the carrying amount by $1,726,000. For Wealth Axis Holdings Pty Ltd: The recoverable amount as determined by the value in use calculation exceeds the carrying value by $2,233,000 or 197%. Reasonably possible changes in assumptions may result in impairment as set out below: Î Other things being equal, if the company’s yearly revenue is 5% less than expected over the forecast period, the recoverable amount would exceed the carrying amount by $940,000. Î Other things being equal, if the pre-tax discount rate is increased from 18.57% to 25.00%, the recoverable amount would exceed the carrying amount by $1,259,000. Î Î If the company’s employment cost margin (its single largest expense item) was moved to 65% over the forecast period, an impairment of $265,000 would result. If the long-term average growth rate decreases from 2.5% to 1% p.a., the recoverable amount would exceed the carrying amount by $1,919,000. Unite Advisory Pty Ltd: The recoverable amount as determined by the value in use calculation exceeds the carrying value by $2,690,000 or 45%. Reasonably possible changes in assumptions may result in impairment as set out below: Î Other things being equal, if the company’s yearly revenue is 5% less than expected over the forecast period, the recoverable amount would exceed the carrying amount by $416,000. Î Other things being equal, if the pre-tax discount rate is increased from 18.57% to 20.00%, the recoverable amount would exceed the carrying amount by $369,000. Î Î If the company’s employment cost margin (its single largest expense item) increases from 56% to 61% over the forecast period, the recoverable amount would exceed the carrying amount by $180,000. If the long-term average growth rate decreases from 2.5% to 1% p.a., the recoverable amount would exceed the carrying amount by $1,953,000. The factors that are considered in determining the useful life of an intangible asset are: Î Î Î Î the expected usage of the asset by the entity and whether the asset could be managed efficiently by another management team; typical product life cycles for the asset and public information on estimates of useful lives of similar assets that are used in a similar way; technical, technological, commercial or other types of obsolescence; the stability of the industry in which the asset operates and changes in the market demand for the products or services output from the asset; Î expected actions by competitors or potential competitors; Î the level of maintenance expenditure required to obtain the expected future economic benefits from the asset and the entity’s ability and intention to reach such a level; the period of control over the asset and legal or similar limits on the use of the asset, such as the expiry dates of related leases; and Î Î whether the useful life of the asset is dependent on the useful life of other assets of the entity. 63 COUNTPLUS ANNUAL REPORT 2022 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2022 Significant accounting judgements, estimates and assumptions Intangible assets acquired as part of a business combination, other than goodwill, are initially measured at their fair value at the date of the acquisition. Intangible assets acquired separately are initially recognised at cost. Indefinite life intangible assets are not amortised and are subsequently measured at cost less any impairment. Finite life intangible assets are subsequently measured at cost less amortisation and any impairment. The gains or losses recognised in profit or loss arising from the derecognition of intangible assets are measured as the difference between net disposal proceeds and the carrying amount of the intangible asset. The method and useful lives of finite life intangible assets are reviewed annually. Changes in the expected pattern of consumption or useful life are accounted for prospectively by changing the amortisation method or period. Impairment of non-financial assets At each reporting date, the Group reviews the recoverable amount of its tangible and intangible assets to determine whether there is any indication that these assets may be impaired. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. Recoverable amount is the higher of an asset's fair value less costs of disposal and value-in-use. The value-in-use is the present value of the estimated future cash flows relating to the asset using a pre-tax discount rate specific to the asset or cash-generating unit to which the asset belongs. Assets that do not have independent cash flows are grouped together to form a cash-generating unit. Goodwill Goodwill arises on the acquisition of a business. Goodwill is not amortised. Instead, goodwill is tested annually for impairment, or more frequently if events or changes in circumstances indicate that it might be impaired, and is carried at cost less accumulated impairment losses. Impairment losses on goodwill are taken to profit or loss and are not subsequently reversed. IT software Costs incurred in developing products or systems and costs incurred in acquiring software and licenses that will contribute to future period financial benefits through revenue generation and / or cost reduction, are capitalised to software and systems. Costs capitalised include external direct costs of materials and service and direct payroll and payroll related costs of employees' time spent on the project. Significant costs associated with software are deferred and amortised on a straight-line basis over the period of their expected benefit, being their finite life of 3–5 years. Acquired client relationships and adviser networks Acquired client relationships and adviser networks are intangible assets identified in the acquisition of businesses and represent that part of the purchase consideration that is attributable to and represented by the clients and customers with long-term relationships with the business being acquired. The useful life of these assets are 10–15 years and they are amortised and expensed using the straight-line method. Brands Brands are intangible assets identified in the acquisition of businesses and represent that part of the purchase consideration that is attributable to and represented by the value of the brand being acquired. They are amortised over 10–25 years and they are amortised and expensed using the straight-line method. Other intangible assets Other intangible assets acquired are recognised at cost at acquisition. Following initial recognition, they are carried at cost less any accumulated amortisation and accumulated impairment losses. These assets are amortised over the useful economic life and assessed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised in the Statement of Profit or Loss and Other Comprehensive Income for the amount by which the asset’s carrying amount exceeds its recoverable amount. This is in accordance with the expected pattern of future benefits based on the net cash flows expected from those assets. The amortisation period and the amortisation method are reviewed at least annually as at 30 June to ensure the amortisation expense reflects the performance of the intangible asset. 64 COUNTPLUS ANNUAL REPORT 2022 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2022 5.2 Property, plant and equipment Reconciliations Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out below: Office equipment $’000 Furniture, fixtures and fittings $’000 Leasehold improvements $’000 Other property, plant and equipment $’000 Motor vehicle $’000 1,148 455 52 (12) (15) (433) 1,195 553 68 (67) (458) 1,291 768 106 48 (21) (20) (195) 686 142 15 (6) (166) 671 2,066 406 – – – (407) 2,065 193 36 (285) (393) 1,616 51 1 – (4) 10 (33) 25 – – (7) (6) 12 45 – – – – (10) 35 – – – (8) 27 Office equipment $’000 Furniture, fixtures and fittings $’000 Leasehold improvements $’000 Other property, plant and equipment $’000 Motor vehicle $’000 3,962 (2,767) 1,195 4,141 (2,850) 1,291 2,871 (2,185) 686 2,239 (1,568) 671 3,420 (1,355) 2,065 2,925 (1,309) 1,616 387 (362) 25 286 (274) 12 69 (34) 35 69 (42) 27 Total $’000 4,078 968 100 (37) (25) (1,078) 4,006 888 119 (365) (1,031) 3,617 Total $’000 10,709 (6,703) 4,006 9,660 (6,043) 3,617 Balance at 1 July 2020 Additions Additions through business combinations Disposals Transfers in / (out) Depreciation expense Balance at 30 June 2021 Additions Additions through business combinations Disposals Depreciation expense Balance at 30 June 2022 At 30 June 2021 Cost Accumulated depreciation Net book value At 30 June 2022 Cost Accumulated depreciation Net book value Significant accounting policy Property, plant and equipment Property, plant and equipment is stated at historical cost less accumulated depreciation and any impairment loss. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to profit or loss during the reporting period in which they are incurred. Depreciation is calculated using the straight-line method to allocate their cost, net of their residual values, over their estimated useful lives or, in the case of leasehold improvements and certain leased plant and equipment, the shorter lease term, as follows: Furniture, fixtures and fittings Leasehold improvements Î Office equipment Î Î Î Make good Î Motor vehicle 4% – 20% 8% – 37% over the estimated life of the asset or shorter of the lease term over the estimated life of the lease 20% – 25% The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period. Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in the Statement of Profit or Loss and Other Comprehensive Income. 65 COUNTPLUS ANNUAL REPORT 2022 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2022 5.3 Leases Right-of-use assets The Group as a lessee The Group considers whether a contract is, or contains a lease. A lease is defined as ‘a contract, or part of a contract, that conveys the right to use an asset (the underlying asset) for a period of time in exchange for consideration’. To apply this definition the Group assesses whether the contract meets three key criteria, which include: Î Î Î the contract contains an identified asset, which is either explicitly identified in the contract or implicitly specified by being identified at the time the asset is made available to the Group; the Group has the right to obtain substantially all of the economic benefits from use of the identified asset throughout the period of use, considering its rights within the defined scope of the contract; and the Group has the right to direct the use of the identified asset throughout the period of use. The Group assesses whether it has the right to direct ‘how and for what purpose’ the asset is used throughout the period of use. Measurement and recognition of leases as a lessee At lease commencement date, the Group recognises a right-of-use asset and a lease liability on the Statement of Financial Position. The right-of-use asset is measured at cost, which is made up of the initial measurement of the lease liability, any initial direct costs incurred by the Group, an estimate of any costs to dismantle and remove the asset at the end of the lease, and any lease payments made in advance of the lease commencement date (net of any incentives received). The Group depreciates the right-of-use assets on a straight-line basis from the lease commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The Group also assesses the right-of-use asset for impairment when such indicators exist. At the commencement date, the Group measures the lease liability at the present value of the lease payments unpaid at that date, discounted using the interest rate implicit in the lease if that rate is readily available or the Group's incremental borrowing rate. Lease payments included in the measurement of the lease liability are made up of fixed payments (including in substance fixed), variable payments based on an index or rate, amounts expected to be payable under a residual value guarantee and payments arising from options reasonably certain to be exercised. Subsequent to initial measurement, the liability will be reduced for payments made and increased for interest. It is remeasured to reflect any reassessment or modification, or if there are changes in in-substance fixed payments. When the lease liability is remeasured, the corresponding adjustment is reflected in the right-of-use asset, or profit or loss if the right-of-use asset is already reduced to zero. The Group has elected to account for short-term leases and leases of low-value assets using the practical expedients. Instead of recognising a right-of-use asset and lease liability, the payments in relation to these are recognised as an expense in profit or loss on a straight-line basis over the lease term. 2022 $’000 26,512 (14,645) 11,867 770 (592) 178 15 (13) 2 2021 $’000 24,345 (11,516) 12,829 709 (441) 268 15 (9) 6 12,047 13,103 Non-current assets Premises – right-of-use Less: Accumulated depreciation Total Office equipment – right-of-use Less: Accumulated depreciation Total Others – right-of-use Less: Accumulated depreciation Total Balance at 30 June 66 COUNTPLUS ANNUAL REPORT 2022 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2022 Reconciliations Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out below: Balance at 1 July 2020 Additions Depreciation expense Balance at 30 June 2021 Additions Depreciation expense Balance at 30 June 2022 Lease liabilities Lease liabilities are presented in the Statement of Financial Position as follows: Current liabilities Lease liabilities Non-current liabilities Lease liabilities Right-of-use assets $’000 13,950 2,208 (3,055) 13,103 2,240 (3,272) 12,047 2022 $’000 2021 $’000 3,589 3,439 9,849 10,994 The Group has leases for office buildings and office equipment. With the exception of short-term leases and leases of low-value underlying assets, each lease is reflected on the Statement of Financial Position as a right-of-use asset and a lease liability. Variable lease payments which do not depend on an index or a rate (such as lease payments based on a percentage of Group sales) are excluded from the initial measurement of the lease liability and asset. The Group classifies its right-of-use assets in a consistent manner to its property, plant and equipment (see note 5.2). Each lease generally imposes a restriction that, unless there is a contractual right for the Group to sublet the asset to another party, the right-of-use asset can only be used by the Group. Leases are either non-cancellable or may only be cancelled by incurring a substantive termination fee. For leases over office buildings the Group must keep those properties in a good state of repair and return the properties in their original condition at the end of the lease. At 30 June 2022, 42 right-of-use assets were leased. The average lease term for premises is nine years, office equipment is five years and others is four years. The average lease term includes option periods which management are reasonably certain will be exercised. At 30 June 2022, the average remaining lease term for premises was four years, office equipment was two years and others was four years. The lease liabilities are secured by the related underlying assets. Future minimum lease payments at 30 June 2022 is $12,712,000. Lease payments not recognised as a liability The Group has elected not to recognise a lease liability for short-term leases (leases with an expected term of 12 months or less) or for leases of low value assets. Payments made under such leases are expensed on a straight-line basis. In addition, certain variable lease payments are not permitted to be recognised as lease liabilities and are expensed as incurred. At 30 June 2022 the Group was not committed to short-term leases. Variable lease payments expensed on the basis that they are not recognised as a lease liability include rentals based on revenue from the use of the underlying asset and excess use charges on office equipment. Variable payment terms are used for a variety of reasons, including minimising costs for IT equipment with infrequent use. Variable lease payments are expensed in the period they are incurred. Total cash outflow for leases for the year ended 30 June 2022 was $3,767,000 (2021: $3,702,000). 67 COUNTPLUS ANNUAL REPORT 2022 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2022 Amounts relating to leases recognised for the reporting period The following amounts are recognised in Statement of Profit or Loss and Other Comprehensive Income: Depreciation charge for the right of use assets by class of asset Premises Office equipment Others Total depreciation charge Interest expense on lease liabilities (included in finance cost) Total expense related to leases The following amounts are recognised in the Statement of Cash Flows: Cash outflow for leases (AASB 16) – financing activity Cash outflow for leases – operating activity 6 Group structure 6.1 Business Combinations Material Acquisition Acquisition of Accurium Holdings Pty Ltd 2022 $’000 3,129 151 4 3,284 633 3,917 2022 $’000 3,134 633 3,767 2021 $’000 2,919 128 8 3,055 697 3,752 2021 $’000 3,005 697 3,702 On 1 November 2021, the Company acquired 85% of the ordinary shares of Accurium Holdings Pty Ltd (‘Accurium’) from Challenger Limited for net cash consideration of $7.737M. Key management personnel of Accurium acquired 15% under the Company’s equity partnership model. Accurium is Australia’s largest supplier of Self-Managed Superannuation Fund (SMSF) actuarial certificates, with circa 45% market share. It was acquired as part of the Company's services strategy of investing in entities that are concerned with inputs / outputs (downstream) within member firms which enhance operational capacity. Details of the acquisition accounting included in the reported results is as follows: $’000 7,737 697 (4,647) 3,787 Purchase consideration Non-controlling interest Less: net assets acquired Acquired Goodwill 68 COUNTPLUS ANNUAL REPORT 2022 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2022 Net assets of material acquisition Cash Trade receivables IP and Software TechHub Material Brand Customer relationships Deferred tax liability Trade and other payables Provision for Employee Benefits Group's share of net assets Other Acquisitions $’000 199 362 1,058 697 792 3,728 (1,819) (149) (221) 4,647 The Group has made the following other acquisitions during the period: On 1 July 2021, the company acquired a 51% ownership interest in 4Front Holdings Pty Ltd. As part of this transaction, the Company’s 100% owned subsidiary, Cooper Reeves Pty Ltd, was acquired by 4Front Holdings Pty Ltd. The consideration paid in this transaction was the transfer of the Company’s ownership interest in Cooper Reeves Pty Ltd. Total value of the consideration has been included in the combined table below. On 20 August 2021, the Company acquired a 51% shareholding in Wealth Axis, a provider of paraplanning and administration support services to Financial Advice firms for $1.328M. The acquisition was the first step in building out the Company services strategy of investing in activities that enhance operational capacity within member firms. On 20 August 2021, the Company's member firm, Unite Advisory Pty Ltd, acquired Bentley, Brett & Vincent (BBV) for $1.659M. Unite Advisory also completed a 25% equity sell down to Key Management Personnel under the CountPlus equity partnership model in for $0.875M. The Company retains a 75% shareholding in Unite Advisory. Purchase consideration Non-controlling interest Less: net assets acquired Acquired Goodwill $’000 6,233 619 (1,810) 5,042 69 COUNTPLUS ANNUAL REPORT 2022 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2022 6.2 Investments in associates Investments in associates are accounted for using the equity method of accounting. Information relating to associates are set out below: Name One Hood Sweeney Pty Ltd Hunter Financial Planning Pty Ltd OBM Financial Services Pty Ltd Rundles CountPlus Pty Ltd Rundles Financial Planning Pty Ltd DMG Financial Holdings Pty Ltd Southern Cross Business Holdings Pty Ltd Principal place of business / Country of incorporation Australia Australia Australia Australia Australia Australia Australia Ownership interest 2022 % 32.36% 40.00% 43.00% 40.00% 20.00% 30.00% 49.00% 2021 % 32.36% 40.00% 40.00% 40.00% 20.00% 30.00% – The percentage of ownership interest held is equivalent to the percentage of voting rights for all associates. All associates have the same year end as the parent entity (30 June). There are no significant restrictions on the ability of associates to transfer funds in the form of cash dividends or to repay loans or advances to the consolidated entity. Summary of associates held during the year One Hood Sweeney Pty Ltd One Hood Sweeney is a South Australian professional services firm located across Adelaide, Whyalla and Kadina. It provides accounting, business advisory, financial planning, finance and technology services to its clients. Hunter Financial Planning Pty Ltd Hunter Financial is a financial planning specialist based in Newcastle. Hunter Financial offers a consultative approach to wealth management particularly in the area of wealth creation budgeting, insurance, estate planning and SMSF. Hunter is a Count Financial member firm. OBM Financial Services Pty Ltd OBM Financial Services Pty Ltd is a professional services firm based in Ivanhoe, Victoria. It provides accounting and financial planning services to its clients. OBM is a Count Financial member firm. Rundles CountPlus Pty Ltd Rundles CountPlus is a professional services firm based in Melbourne, Victoria. It provides accounting and business advisory services to its clients. Rundles Financial Planning Pty Ltd Rundles Financial Planning is a professional services firm based in Melbourne, Victoria. It provides financial planning services to its clients. DMG Financial Holdings Pty Ltd DMG Financial Holdings is a professional services firm located in Sale and Yarram, Victoria. It provides accounting and business advisory services to its clients. Southern Cross Business Holdings Pty Ltd Southern Cross Business Holdings is a professional services firm located in Mildura, Victoria. It provides accounting and business advisory services to its clients. 70 COUNTPLUS ANNUAL REPORT 2022 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2022 Material associates 2022 Summarised Consolidated Statement of Financial Position Current assets Non-current assets Current liabilities Non-current liabilities Net assets / equity Summarised Consolidated Statement of Profit or Loss and Other Comprehensive Income Revenue Profit for the year Total comprehensive income Group share of profit for the year 2021 Summarised Consolidated Statement of Financial Position Current assets Non-current assets Current liabilities Non-current liabilities Net assets / equity Summarised Consolidated Statement of Profit or Loss and Other Comprehensive Income Revenue Profit for the year Total comprehensive income Group share of profit for the year One Hood Sweeney $'000 Hunter Financial Planning $’000 OBM Financial Services $’000 Rundles CountPlus $’000 DMG Financial Holdings $’000 Southern Cross Business Holdings $’000 6,795 8,603 (5,006) (1,841) 8,551 23,765 3,600 3,600 1,165 990 8,040 (687) (752) 7,591 3,764 888 888 355 1,915 2,396 (672) (1,821) 1,818 5,089 901 901 373 2,009 4,774 (2,930) – 3,853 5,509 1,149 1,149 359 1,361 5,885 (814) (1,438) 4,994 6,057 2,439 2,439 732 1,705 2,503 (1,338) (2,638) 232 6,700 956 956 468 One Hood Sweeney $'000 Hunter Financial Planning $’000 OBM Financial Services $’000 Rundles CountPlus $’000 DMG Financial Holdings $’000 5,310 8,702 (5,366) (1,933) 6,713 21,789 3,683 3,683 1,192 641 8,133 (538) (840) 7,396 3,055 637 637 255 1,093 1,494 (796) (586) 1,205 4,507 831 831 332 1,766 4,791 (2,704) – 3,853 4,804 780 780 312 1,095 5,800 (779) (2,042) 4,074 7,432 1,176 1,176 353 71 COUNTPLUS ANNUAL REPORT 2022 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2022 Carrying amount of investments in associates Reconciliation of carrying amount of investments in associates to summarised financial information for associates accounted for using the equity method: 2022 $’000 7,725 1,165 (642) 8,248 2,714 355 (289) 2,780 1,755 79 373 (224) 1,983 2,240 359 (272) 2,327 337 64 (52) 349 3,465 732 (621) 3,576 2,740 468 (257) 2,951 2022 $’000 22,214 3,516 2021 $’000 7,277 1,192 (744) 7,725 2,742 255 (283) 2,714 1,532 (69) 332 (40) 1,755 2,228 312 (300) 2,240 347 54 (64) 337 3,503 353 (391) 3,465 – – – – 2021 $’000 18,236 2,498 One Hood Sweeney Pty Ltd Opening balance Share in profit Dividends Carrying amount based on share in net assets of associate Hunter Financial Planning Pty Ltd Opening balance Share in profit Dividends Carrying amount based on share in net assets of associate OBM Financial Services Pty Ltd Opening balance Completion adjustment of acquisition of associate Share in profit Dividends Carrying amount based on share in net assets of associate Rundles CountPlus Pty Ltd Opening balance Share of profit Dividends Carrying amount based on share in net assets of associate Rundles Financial Planning Pty Ltd Opening balance Share of profit Dividends Carrying amount based on share in net assets of associate DMG Financial Holdings Pty Ltd Opening balance Share of profit Dividends Carrying amount based on share in net assets of associate Southern Cross Business Holdings Pty Ltd Completion adjustment of acquisition of associate Share in profit Dividends Carrying amount based on share in net assets of associate Total carrying value of investments in associates as at 30 June Total share of net profit of associates accounted for using the equity method Contingent liabilities and capital commitments The associates had no contingent liabilities or capital commitments as at 30 June 2022 or 30 June 2021. 72 COUNTPLUS ANNUAL REPORT 2022 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2022 6.3 Non-controlling interest Reconciliation of non-controlling interest in controlled entities Opening balance Acquisitions Purchase of shares from non-controlling interest holder Disposal of shares to non-controlling interest holder Share of net profit for the period Dividends paid by subsidiaries to non-controlling interests Closing Balance The MBA Group Pty Ltd Opening non-controlling interest at 1 July Additions Disposals The profit allocated to non-controlling interest for the period Dividends paid Closing non-controlling interest at 30 June Kidmans Partners Pty Ltd Opening non-controlling interest at 1 July Additions The profit allocated to non-controlling interest for the period Dividends paid Closing non-controlling interest at 30 June AdviceCo CA Pty Ltd Opening non-controlling interest at 1 July Additions The profit allocated to non-controlling interest for the period Dividends paid Closing non-controlling interest at 30 June Mogg Accounting + Advice Pty Ltd Opening non-controlling interest at 1 July Additions The profit allocated to non-controlling interest for the period Dividends paid Closing non-controlling interest at 30 June Count Financial Limited Opening non-controlling interest at 1 July The profit allocated to non-controlling interest for the period Dividends paid Closing non-controlling interest at 30 June Accurium Holdings Pty Ltd Opening non-controlling interest at 1 July Additions The profit allocated to non-controlling interest for the period Dividends paid Closing non-controlling interest at 30 June 2022 $’000 10,653 1,411 (1,335) 2,161 2,243 (2,022) 13,111 2022 $’000 2,492 – (1,062) 575 (375) 1,630 1,292 – 112 (64) 1,340 1,712 – 236 (220) 1,728 1,283 179 341 (335) 1,468 2,423 233 (149) 2,507 – 697 138 (159) 676 2021 $’000 9,395 487 (358) 745 2,146 (1,762) 10,653 2021 $’000 2,144 487 (358) 734 (515) 2,492 1,278 10 196 (192) 1,292 1,450 154 404 (296) 1,712 1,188 – 319 (224) 1,283 2,528 110 (215) 2,423 – – – – – 73 COUNTPLUS ANNUAL REPORT 2022 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2022 Other Opening non-controlling interest at 1 July Additions Disposals The profit allocated to non-controlling interest for the period Dividends paid Closing non-controlling interest Total non-controlling interest at 30 June 2022 $’000 1,451 2,696 (274) 608 (719) 3,762 13,111 The following information is provided for non-controlling interests that are material to the consolidated entity. Figures are as per the subsidiaries' financial statements: 2022 $’000 14,597 5,456 11,181 1,236 345,136 329,856 15,409 1,967 11,202 4,436 7,423 460 6,308 1,555 4,844 913 7,117 2,541 5,331 735 2,251 1,728 3,950 1,316 The MBA Group Pty Ltd Assets Liabilities Revenue Net Profit Count Financial Limited Assets Liabilities Revenue Net Profit Kidmans Partners Holdings Pty Ltd Assets Liabilities Revenue Net Profit AdviceCo. Pty Ltd Assets Liabilities Revenue Net Profit Mogg Accounting & Advisory Pty Ltd Assets Liabilities Revenue Net Profit Accurium Holdings Pty Ltd Assets Liabilities Revenue Net Profit 74 2021 $’000 807 581 – 383 (320) 1,451 10,653 2021 $’000 15,112 6,687 11,710 1,469 307,492 293,138 14,785 1,091 11,661 5,173 7,273 548 6,092 1,415 4,585 1,062 7,210 2,791 5,044 909 – – – – COUNTPLUS ANNUAL REPORT 2022 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2022 6.4 Interests in subsidiaries The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance with the accounting policy described in: Ownership interest Principal place of business / Country of Incorporation Name 1. MBA Group Pty Ltd* (a) Î The MBA Partnership Pty Ltd Î Digital O2 Pty Ltd Î MBA Financial Services (Rawsons) Pty Ltd Î The MBA Partnership (NSW) Pty Ltd Î The MBA Partnership BNE Pty Ltd Î Specialised Business Solutions Pty Ltd Î Collective Outsourcing Pty Ltd Î Collective Outsourcing Incorporated 2. Bentleys (WA) Pty Ltd* Î Australian Superannuation & Compliance Pty Ltd Î Bentleys Advisory (WA) Pty Ltd (b) Î Bentleys Corporate Finance (WA) Pty Ltd (b) 3. Addvantage Financial Freedom Pty Ltd* Î Addvantage Accountants Pty Ltd 4. Beames and Associates Accounting and Financial Services Pty Ltd Î Cooma Accounting and Financial Services Pty Ltd 5. Moggs Accounting + Advisory Pty Ltd* (c) 6. Crosby Dalwood Pty Ltd* (c) 7. 4Front Holdings Pty Ltd*(d) Î Cooper Reeves Pty Ltd Î 4Front Pty Ltd Î 4Front Accountant Pty Ltd Î Profile management Services Pty Ltd Î 4Front Mortgage Broking Pty Ltd 8. CountPlus One Pty Ltd* 9. Evolution Advisers Pty Ltd* 10. AdviceCo. Pty Ltd* 11. Kidmans Partners Holdings Pty Ltd* Î Kidmans Partners Pty Ltd Î Kidmans Partners Mortage Pty Ltd Î Kidmans Partners Services Pty Ltd Î Kidmans Partners Wealth Pty Ltd 12. Unite Advisory Pty Ltd* (c) 13. Twomeys Group Pty Ltd* (a) Î Twomeys Pty Ltd Î Twomeys Accounting & Advisory Pty Ltd 14. Count Financial Limited* 15. CountPlus FS Holdings Pty Ltd (TFS Group) Î Total Financial Solutions Australia Pty Ltd (e) Î TFS Operations Pty Limited Î TFS Advice Pty Limited (f) 16. Wealth Axis Holdings Pty Ltd* (g) Î Wealth Axis Pty Ltd 17. Accurium Holdings Pty Ltd* (h) Î Accurium Pty Ltd 18. Kidmans PEC Pty Ltd (f) 19. BLUE789 Pty Ltd (f) 20. ADVICE389 Pty Ltd * These subsidiaries are separate cash generating units. Australia Australia Australia Australia Australia Australia Australia Australia Phillippines Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia 2022 % 86.08% 100.00% 100.00% – 100.00% 100.00% 61.28% 100.00% 100.00% 100.00% 100.00% – – 100.00% 100.00% 100.00% 100.00% 60.00% 90.00% 51.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 60.00% 64.15% 100.00% 100.00% 100.00% 100.00% 75.00% 60.00% 100.00% 100.00% 85.00% 100.00% 100.00% 100.00% – 51.00% 100.00% 85.00% 100.00% – – 100.00% 2021 % – 68.11% 100.00% 100.00% 100.00% 100.00% 61.28% 100.00% 100.00% 95.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 65.00% 100.00% – 100.00% – – – – 100.00% 100.00% 60.00% 64.15% 100.00% 100.00% 100.00% 100.00% 100.00% – 60.00% 100.00% 85.00% 100.00% 100.00% 100.00% 100.00% – – – – 100.00% 100.00% 100.00% 75 COUNTPLUS ANNUAL REPORT 2022 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2022 These entities are consolidated into the respective CGUs identified above. The class of shares acquired for all the subsidiaries are ordinary shares. (a) A restructure of these entities occurred during the year with a new head entity added to the group (b) These entities were sold to Hall Chadwick effective 31 July 2021 (c) CountPlus' ownership interest in these entities have been reduced during the year due to equity partnership transactions (d) 4Front was acquired on 1 July 2021, refer to Note 6.1 (e) This entity was reclassified from a public company to a private company during the year (f) These entities were deregistered during the year (g) Wealth Axis was acquired on 20 August 2021, refer to Note 6.1 (h) Accurium was acquired on 1 November 2021, refer to Note 6.1 Significant restrictions relating to subsidiaries There are no statutory, contractual or regulatory restrictions on any of the subsidiary’s ability to access or transfer or use its assets and settle the liabilities of the consolidated entity. There are no guarantees given or other requirements that may restrict dividends and other capital distributions being paid, or loans and advances being made or repaid to (or from) other entities within the consolidated entity. Consolidated structured entities The Group does not have any consolidated structured entities other than the ones which are consolidated in these financial statements and listed as subsidiaries above. 6.5 Parent entity information The individual financial statements for the parent entity show the following aggregate amounts: Statement of Financial Position 2022 $’000 2,789 66,085 68,874 (2,405) (6,112) (8,517) 60,357 126,552 709 (66,904) 60,357 2021 $’000 6,142 55,025 61,167 (1,701) (491) (2,192) 58,975 126,552 855 (68,432) 58,975 Assets Current assets Non-current assets Total assets Liabilities Current liabilities Non-current liabilities Total liabilities Equity Contributed equity Share based payment reserve Accumulated losses 76 COUNTPLUS ANNUAL REPORT 2022 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2022 Statement of Profit or Loss and Other Comprehensive Income Profit for the year 2022 $’000 4,450 2021 $’000 2,521 Guarantees entered into by the parent entity in relation to the debts of its subsidiaries The parent entity had no guarantees in relation to the debts of its subsidiaries as at 30 June 2022 and 30 June 2021. Contingent liabilities The parent entity had no contingent liabilities as at 30 June 2022 and 30 June 2021. Capital commitments – Property, plant and equipment The parent entity had no capital commitments for property, plant and equipment as at 30 June 2022 and 30 June 2021. Significant accounting policies The accounting policies of the parent entity are consistent with those of the Group, as disclosed in note , except for the following: Î Î Investments in subsidiaries are accounted for at cost, less any impairment, in the parent entity; Investments in associates are accounted for at cost, less any impairment, in the parent entity; and Î Dividends received from subsidiaries are recognised as other income by the parent entity and its receipt may be an indicator of an impairment of the investment. Parent entity financial information The financial information for the parent entity, CountPlus Limited, disclosed above have been prepared on the same basis as the consolidated financial statements, except as set out below. Investments in subsidiaries and associates. Investments in subsidiaries, associates and joint venture entities are accounted for at the lower of cost and recoverable value in the financial statements of CountPlus Limited. Dividends received from associates are recognised in the parent entity’s profit or loss, rather than being deducted from the carrying amount of these investments. Tax consolidation legislation CountPlus Limited (‘the Corporate Entity’) and its 100% owned Australian subsidiaries formed an income tax consolidation group with effect from 5 November 2010. Subsidiaries joined the tax consolidation group from the date they became wholly owned. The Corporate Entity and the controlled entities in the tax consolidated group account for their own current and deferred tax amounts. These tax amounts are measured as if each entity in the tax consolidated group continues to be a standalone taxpayer. Members of the CountPlus tax consolidation group entered into a tax sharing and funding agreement. Under the terms of this agreement, each member in the tax consolidation group agreed to make a tax equivalent payment to the Corporate Entity based on their current tax liability or current tax asset. Deferred taxes are recorded by members of the tax consolidation group in accordance with the principles of AASB 112 Income Taxes. Financial guarantees The Group currently has banking facilities with Westpac Bank. These comprise a $5,000,000 revolving line of credit facility and a $20,000,000 Bank Bill Business Loan. $5,901,000 was drawn during the year and a bank guarantee of $546,000 has been provided for property leases. Share based payments The grant by the Group of options over its equity instruments to key management personnel in the Group is treated as a capital contribution to the relevant subsidiary. The fair value of employee services received, measured by reference to the grant date fair value, is recognised over the vesting period as an increase to investment in subsidiaries, with a corresponding credit to equity. 77 COUNTPLUS ANNUAL REPORT 2022 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2022 6.6 Related party transactions Parent entity CountPlus Limited is the parent entity. Subsidiaries Transactions between the Company and its subsidiaries during the year consisted of: Î Î Î Î the loans advanced by the parent to subsidiaries; the loan repayments by the subsidiaries to the parent; the payment of dividends to the parent by subsidiaries; and recharges from the parent to the subsidiaries. At the year end, all loan balances, payment of dividends and recharges between the parent and these subsidiaries were eliminated on consolidation. Associates Interests in associates are set out in note 6.2. Key management personnel Short-term employee benefits Post-employment benefits Long-term benefits Share-based payments Transactions with related parties The following transactions occurred with related parties: Sale of goods and services Net fees and commissions received from Colonial First State Group Premises expenses Catalyst Finance Pty Ltd The Southport Unit Trust Rosebead Pty Ltd Mark & Bronwyn Kenmir Superannuation Fund Bronwyn Kenmir Payments from related parties 2022 $ 2,388,341 140,605 14,764 69,994 2,613,704 2021 $ 2,488,105 150,387 39,180 187,397 2,865,069 2022 $’000 2021 $’000 94 211 292 55 29 44 195 210 203 63 29 44 As at 31 July 2022, the Commonwealth Bank of Australia held 35.91% of CountPlus Limited’s quoted ordinary shares. During the year, Count Financial Limited (a majority owned subsidiary) received payments totalling $34,975,000 from the Commonwealth Bank of Australia. Following the announcement by the Commonwealth Bank of Australia in October 2021 to close the remaining part of its Commonwealth Financial Planning business, the Commonwealth Bank of Australia agreed, following a competitive tender process, to reimburse Count Financial Limited for a period of two years (subject to agreed caps) for certain costs and expenses actually incurred in connection with onboarding those Commonwealth Financial Planning customers that became customers of Count Financial Limited. Payments have been made in relation to costs incurred for client engagement, reporting, data migration and transition, and, in relation to those advisers that successfully applied for roles with Count Financial, adviser onboarding, training and support and adviser operating costs. 78 COUNTPLUS ANNUAL REPORT 2022 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2022 Receivable from and payable to related parties There were no trade receivables from or trade payables to related parties at the current and previous reporting date. Loans to / from related parties The following balances are outstanding at the reporting date in relation to loans with related parties: Current receivables: Loan to Count Member Firm Pty Ltd Loan to other related parties 7 Capital Management 7.1 Contributed equity Ordinary shares – fully paid Treasury shares – Issued capital held by loan funded share plan Ordinary shares 2022 $’000 57 – 57 2021 $’000 197 39 236 2022 Shares 114,222,559 (2,612,310) 2021 Shares 114,222,559 (2,612,310) 2022 $’000 126,566 (3,413) 2021 $’000 126,566 (3,413) 111,610,249 111,610,249 123,153 123,153 Ordinary shares entitle the holder to participate in dividends and the proceeds on the winding up of the Group in proportion to the number of and amounts paid on the shares held. The fully paid ordinary shares have no par value and the Group does not have a limited amount of authorised capital. On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each share shall have one vote. Share buy-back At 30 June 2022 there is no current on-market share buy-back. Refer to note 8.5 for details of share buy-backs post reporting period. Capital risk management When managing capital, the Board's objective is to ensure the Group continues as a going concern as well as to maintain optimal returns to shareholders and benefits for other stakeholders. Management monitors the capital structure to ensure that the Group is positioned to take advantage of favourable costs of capital or higher expected returns on assets. The Group currently has a facility of $20,000,000, with the Westpac Bank, which has been drawn down by $5,901,000 as at 30 June 2022. The Group has an overdraft facility of $5,000,000 which was drawn down by lease guarantees of $546,000 at 30 June 2022. In addition, there are four bank loans in member firms totalling $5,294,000 which have been drawn down by $3,901,000. Future acquisitions and investments will be funded from existing and future cash flows as well as funds received under the Group’s equity partnership model. In the long-term, the Group expects to maintain a dividend payout ratio of between 60% and 90% of maintainable net profit after tax and minority interests, subject to market conditions and Group performance. The Group is not subject to any externally imposed capital requirements. Significant accounting policy Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction, net of tax, from the proceeds. Incremental costs directly attributable to the issue of new shares for the acquisition of a business are not included in the cost of the acquisition as part of the purchase consideration. 79 COUNTPLUS ANNUAL REPORT 2022 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2022 7.2 Reserves Acquisition reserve Share-based payments reserve Foreign currency reserve Movements in reserves 2022 $’000 (48,548) 668 (16) (47,896) Movements in each class of reserve during the current and previous financial year are set out below: Share based payment reserve $’000 Acquisition reserve $’000 Foreign Currency Reserve $’000 Balance at 1 July 2021 Foreign currency translation Share based payments for long-term incentive plan Balance at 30 June 2022 814 – (146) 668 (48,548) – – (48,548) (33) 17 – (16) 2021 $’000 (48,548) 814 (33) (47,767) Total $’000 (47,767) 17 (146) (47,896) Share based payment reserve In addition, the reserve is used to recognise the value of equity benefits provided to the Chief Executive Officer and other Key Management Personnel as part of their remuneration for the long-term incentive plan. For further details see the remuneration report on pages 22 to 33. Acquisition reserve The acquisition reserve arises on the acquisition of the non-controlling interests of subsidiaries. On 1 July 2010, the Group’s interests in 15 associates were consolidated with the non-controlling interest being measured as the present ownership’s proportionate share of identifiable net assets. The acquisition of these non-controlling interests as part of the public listing was not a business combination but was an equity transaction between owners. Accordingly, in 2011, the difference between the consideration paid and fair value of the identifiable net assets of the non-controlling interests has been accounted for in the acquisition reserve. 7.3 Share plans Long-term incentive plan The long-term incentive plans are set out on pages 27 to 28 of this report. 7.4 Interest bearing loans and borrowings Current liabilities Bank loans – funding facility and other loans Acquisition facility Hire purchase Non-current liabilities Acquisition facility Bank loans – funding facility and other loans Refer to note 7.5 for further information on financial instruments risk. 80 2022 $’000 911 – – 911 5,901 2,989 8,890 2021 $’000 717 1,891 2 2,610 – 1,718 1,718 COUNTPLUS ANNUAL REPORT 2022 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2022 Total facilities Bank overdraft Bilateral funding facility Used at the reporting date Bank overdraft Bilateral funding facility Unused at the reporting date Bank overdraft Bilateral funding facility 2022 $’000 5,000 25,295 30,295 1,141 9,801 10,942 3,859 15,494 19,353 2021 $’000 5,000 23,430 28,430 1,141 4,328 5,469 3,859 19,102 22,961 The interest-bearing loans and borrowings balance is $9,801,000 (Non-current: $8,890,000 Current: $911,000) (2021: Non-current: $1,718,000 Current: $2,610,000) borrowings from Westpac Bank. There are currently seven lines of credit with Westpac Bank. CountPlus Limited has an overdraft facility with Westpac Bank, the limit is $5,000,000 (2021: $5,000,000). From this facility, bank guarantees on properties are offset against this balance. CountPlus Limited has a revolving line of credit with Westpac Bank, the limit is currently $20,000,000 (2021: $20,000,000) and is charged with a variable rate. This five-year facility with Westpac was renewed on 20 January 2022. The rate is determined with reference to the Bank Bill Swap Bid Rate (BBSY). Reference Rates are published in the Australian Financial Review plus a margin. A guarantee and charge as security for the facility is provided by CountPlus Limited. Kidmans Partners Pty Ltd has two bank loans with Westpac Bank, the total limit is $1,655,000 repayable between two and four years. In addition, there is a line fee on this facility. A guarantee and charge as security for the facility is provided by Kidmans Partners Pty Ltd. The MBA Partnership Pty Ltd has a bank loan with Westpac Bank, the limit is $1,239,000 repayable over three years. In addition, there is a line fee on this facility. A guarantee and charge as security for the facility is provided by The MBA Partnership Pty Ltd. Unite Advisory Pty Ltd has a bank loan with Westpac Bank, the limit is $1,700,000 repayable over two years. In addition, there is a line fee on this facility. A guarantee and charge as security for the facility is provided by Unite Advisory Pty Ltd. 4Front Pty Ltd has two bank loans with Westpac Bank, the total limit is $700,000 repayable either at call or over one year. In addition, there is a line fee on this facility. A guarantee and charge as security for the facility is provided by 4 Front Pty Ltd. Defaults and breaches During the current and prior year, there were no defaults or breaches on any of the loans. Significant accounting policy Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in profit or loss over the period of the borrowings, using the effective interest method. Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all the facility will be drawn down. In this case, the fee is deferred until the draw down occurs. To the extent whereby there is no evidence that it is probable that some or all the facility will be drawn down, the fee is capitalised as a prepayment for liquidity services and amortised over the period of the facility to which it relates. Changes in liabilities arising from financing activities Long-term borrowings Short-term borrowings Hire purchase short-term liabilities Total liabilities from financing activities 2021 $’000 1,718 2,608 2 4,328 Non-cash changes Reclassification to short-term $’000 Cash flow $’000 Other changes $’000 12,300 (6,825) (2) 5,473 (5,128) 5,128 – – – – – – 2022 $’000 8,890 911 – 9,801 81 COUNTPLUS ANNUAL REPORT 2022 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2022 7.5 Capital and financial risk management Financial assets and liabilities Note 8.4 provides a description of each category of financial assets and financial liabilities and the related accounting policies. The carrying amounts of financial assets and financial liabilities in each category are as follows: Note Amortised cost $’000 3.1 3.2 3.2 6.6 Note 3.4 7.4 5.3 3.6 3.6 21,540 23,195 1,787 57 46,579 Other liabilities (amortised cost) $’000 1,216 9,801 13,438 1,514 118 26,087 Note Amortised cost $’000 3.1 3.2 6.6 Note 3.4 7.4 5.3 3.6 3.6 26,239 20,004 236 46,479 Other liabilities (amortised cost) $’000 1,291 4,328 14,433 1,266 620 21,938 Total $’000 21,540 23,195 1,787 57 46,579 Total $’000 1,216 9,801 13,438 1,514 118 26,087 Total $’000 26,239 20,004 236 46,479 Total $’000 1,291 4,328 14,433 1,266 620 21,938 30 June 2022 Financial assets Cash and cash equivalents Trade and other receivables Deferred cash consideration Loans and advances Total financial assets 30 June 2022 Financial liabilities Trade payables Interest bearing loans and borrowings Lease Liability Deferred cash consideration Other liabilities Total financial liabilities 30 June 2021 Financial assets Cash and cash equivalents Trade and other receivables Loans and advances Total financial assets 30 June 2021 Financial liabilities Trade payables Interest bearing loans and borrowings Lease Liability Deferred cash consideration Other liabilities Total financial liabilities 82 COUNTPLUS ANNUAL REPORT 2022 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2022 The carrying amount of the following financial assets and liabilities is considered a reasonable approximation of fair value: trade and other receivables; cash and cash equivalents; loans and advances; Î Î Î Î trade payables; Î other liabilities; and Î interest bearing borrowings. Financial instruments risk Financial risk management objectives The Group's principal financial assets and liabilities, which arise directly from its operations, comprise of cash and cash equivalents, trade and other receivables, interest bearing loans, borrowing, trade and other payables. The Group's activities expose it to a variety of financial risks: market risk (including interest rate risk), credit risk and liquidity risk. The Group's overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the Group. The Group uses different methods to measure different types of risk to which it is exposed. These methods include sensitivity analysis in the case of interest rate and ageing analysis for credit risk. Risk management is carried out by senior finance executives ('Finance') under policies approved by the Board of Directors ('the Board'). These policies include identification and analysis of the risk exposure of the Group and appropriate procedures, controls and risk limits. Finance identifies and evaluates financial risks within the Group's operating units. Finance reports to the Board on a monthly basis. Price risk The Group is not exposed to any significant price risk. Interest rate risk The Group's main interest rate risk arises from long-term borrowings. Borrowings obtained at variable rates expose the Group to interest rate risk. Borrowings obtained at fixed rates expose the Group to fair value interest rate risk. At 30 June 2022, the Group had total bank loans outstanding of $9,801,000 (2021: $4,328,000). The Group also had an overdraft facility of $5,000,000 of which $1,141,000 is reserved for bank guarantees. $546,000 was utilised from this bank guarantee limit. The effect on profit as a result of changes in interest rate with all other variables remaining constant would be as follows: Change in profit +1% (100 basis points) -1% (100 basis points) Credit risk 2022 $’000 (82) 82 2021 $’000 (168) 168 The Group is exposed to credit risk from its operating activities (primarily cash and cash equivalents and trade and other receivables). The Group trades only with creditworthy third parties, and as such collateral is not requested nor is it the Group's policy to securitise its trade and other receivables. There are no significant concentrations of credit risk within the Group and financial instruments are spread amongst several counterparties to spread the risk of default of counterparties. The Group's exposure to credit risk arises from potential default of the counterparty, with a maximum exposure equal to the carrying amount of these instruments, as indicated in the consolidated statement of financial position. The maximum credit risk exposure does not consider the value of any collateral or other security held, in the event other entities / parties fail to perform their obligations under the financial instruments in question. In addition, receivable balances are monitored on an ongoing basis. The Group observes its provision policy. 83 COUNTPLUS ANNUAL REPORT 2022 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2022 Liquidity risk Vigilant liquidity risk management requires the Group to maintain sufficient liquid assets (mainly cash and cash equivalents) and available borrowing facilities to be able to pay debts as and when they become due and payable. The Group manages liquidity risk by maintaining adequate cash reserves and available borrowing facilities by continuously monitoring actual and forecast cash flows and matching the maturity profiles of financial assets and liabilities. As at 30 June 2022, the Group’s non-derivative financial liabilities have contractual maturities (including interest payments where applicable) as summarised below: 30 June 2022 Trade payables Interest bearing loans and borrowings Deferred cash consideration Lease liabilities Current within 6 months $’000 6 to 12 months $’000 Non-current 1 to 5 years $’000 later than 5 years $’000 1,216 414 1,112 1,787 4,529 – 497 225 1,786 2,508 – 10,192 227 7,649 18,068 – 368 – 4,124 4,492 This compares to the maturity of the Group’s non-derivative financial liabilities in the previous reporting period as follows: 30 June 2021 Trade payables Interest bearing loans and borrowings Deferred cash consideration Lease liabilities Current within 6 months $’000 6 to 12 months $’000 Non-current 1 to 5 years $’000 later than 5 years $’000 1,291 382 771 1,861 4,305 – 380 115 1,642 2,137 – 3,853 764 10,082 14,699 – 47 235 2,928 3,210 Fair value of financial instruments Unless otherwise stated, the carrying amounts of financial instruments reflect their fair value. Fair value measurement The carrying amounts of cash and cash equivalents, trade and other receivables, trade payables, loans, advances and other receivables and interest-bearing borrowings approximate their fair value. The fair value of financial assets and financial liabilities must be estimated for recognition and measurement or for disclosure purposes. Fair value hierarchy The following tables detail the Group's assets and liabilities, measured or disclosed at fair value, using a three level hierarchy, based on the lowest level of input that is significant to the entire fair value measurement, being: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date. Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Unobservable inputs for the asset or liability. Level 1 $'000 Level 2 $'000 Level 3 $'000 Total $'000 – – – – 1,787 1,787 (1,127) (1,127) Level 1 $'000 Level 2 $'000 Level 3 $'000 Total $'000 – – (1,266) (1,266) Level 1 Level 2 Level 3 2022 Assets Contingent assets Financial liabilities Contingent liabilities 2021 Financial liabilities Contingent liabilities 84 COUNTPLUS ANNUAL REPORT 2022 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2022 Balance at beginning of year Gain on deferred consideration in profit or loss Additions to deferred cash & equity consideration for acquisitions of assets, subsidiaries & associates during the year Cash paid for settlement of deferred cash consideration $’000 (1,266) 114 (861) 886 (1,127) The fair value of the financial assets and liabilities represents 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. The following methods and assumptions were used to estimate the fair values. Fair value of other investments held at fair value through profit and loss is determined based on observable market transactions. Observable market transactions considered are those transactions which occurred on 30 June 2022, excluding new issue of shares. The fair value is calculated by multiplying the total number of shares outstanding by the market price. Fair value of contingent cash consideration is derived from management expectations of the performance of the acquired businesses and assets. Fair value of deferred equity consideration is derived from management expectations of the performance of the acquired businesses and assets. There were no transfers between levels during the financial year. The maximum potential payment for deferred consideration is $1,514,000 (2021: $1,266,000). Management believes no reasonable change in any other key assumptions would have a material impact on the fair value of the other investments and deferred consideration. 8 Other information 8.1 Remuneration of auditors During the financial year the following fees were paid or payable for services provided by Grant Thornton Audit Pty Limited, the auditor of the Group: 2022 $ 2021 $ 436,000 371,000 – 436,000 5,000 376,000 Audit services – Grant Thornton Audit Pty Limited Audit or review of the financial statements Other services – Related entity of Grant Thornton Audit Pty Limited Other advisory services Total remuneration of Grant Thornton Audit Pty Limited and related entities 8.2 Contingencies Contingent assets The Group has no contingent assets as at 30 June 2022 (2021: nil) Contingent liabilities Class action lawsuit Class action proceedings have been filed by Piper Alderman in the Federal Count of Australia against CountPlus Limited’s member firm, Count Financial Limited. The proceedings seek financial compensation and relates to commissions paid to Count Financial and its authorised representative financial advisers. The commissions were in respect of financial products (including insurance) and certain obligations of its financial advisers to provide ongoing advice in the period 21 August 2014 to 21 August 2020. CountPlus Limited acquired Count Financial Limited from Commonwealth Bank of Australia (CBA) on 1 October 2019. CBA has provided an indemnity to CountPlus Limited in relation to certain conduct that occurred prior to and after the acquisition of Count Financial by CountPlus Limited for an amount of $300M. A reliable estimate of the expected future inflows and / or outflows related to the class action cannot be formed at this stage. 85 COUNTPLUS ANNUAL REPORT 2022 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2022 Claim against Corporate Authorised Representative This matter relates to a claim by a client, brought through her tutor, the Public Trustee, in the Supreme Court of NSW, against a Corporate Authorised Representative of Count Financial. Neither the Group nor its subsidiaries have been named in the proceedings. A reliable estimate of the expected future inflows and / or outflows related to this matter cannot be formed at this stage. Corporate Actions This matter has arisen out of remediation proceedings ASIC commenced against third parties. The Group has commenced an investigation to ascertain the value of any potential liability. A reliable estimate of the expected future inflows and / or outflows related to this matter cannot be formed at this stage. The Group has no other contingent liabilities as at 30 June 2022 (30 June 2021: nil). 8.3 Commitments Capital commitments The Group has total capital commitments of $546,000 (2021: $1,024,000), to various landlords in form of bank guarantees. No material losses are anticipated in respect of these guarantees. 8.4 Summary of other significant accounting policies Significant accounting policies The principal accounting policies adopted in the preparation of the financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. The financial statements are for the Group. Consolidated entity consisting of CountPlus Limited and its subsidiaries. Basis of preparation These consolidated general-purpose financial statements have been prepared in accordance with Australian Accounting Standards, Australian Accounting Interpretations, other authoritative pronouncements of the Australian Accounting Standards Board and the Corporations Act 2001. CountPlus Limited is a for-profit entity for the purpose of preparing the financial statements. Both the functional and presentation currency of CountPlus Limited and its subsidiaries is Australian dollars (A$) and the financial report is presented in Australian dollars (A$). In accordance with ASIC Corporations (Rounding in Financial / Directors' Reports) Instrument 2016 / 191, amounts in the financial report are rounded off to the nearest thousand dollars unless otherwise indicated. Compliance with IFRS These consolidated financial statements of the Group also comply with International Financial Reporting Standards as issued by the International Accounting Standards Board (IASB). Critical accounting estimates and judgments The preparation of financial statements requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group's accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed in note 1.2. Historical cost convention The Consolidated financial statements have been prepared on an accrual basis and are based on historical costs modified by the revaluation of certain financial assets and financial liabilities for which the fair value basis of accounting has been applied. Changes to presentation Wherever necessary, CountPlus Limited has regrouped and reclassified certain balances in the financial statements in order to provide more relevant information to our stakeholders. The comparative information has been reclassified accordingly. These reclassifications do not have any impact on the profit for the current year or prior year. Parent entity information In accordance with the Corporations Act 2001, these financial statements present the results of the Group only. Supplementary information about the parent entity is disclosed in note 6.5. Going concern The consolidated financial statements have been prepared on a going concern basis, which contemplates the continuity of normal operations and the realisation of assets and discharges of liabilities in the ordinary course of business. 86 COUNTPLUS ANNUAL REPORT 2022 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2022 New or amended Accounting Standards and Interpretations adopted The Group has adopted all relevant new or amended Accounting Standards and Interpretations issued by the Australian Accounting Standards Board ('AASB') that are mandatory for the current reporting period. None of the new standards or amendments to standards that are mandatory for the first time materially affected any of the amounts recognised in the current period or any prior period. Accounting standards and interpretations issued but not yet effective Certain new accounting standards and interpretations have been published that are not mandatory for 30 June 2022 reporting period and have not been early adopted by the Group. These standards are not expected to have a material impact on the entity in the current or future reporting periods and on foreseeable future transactions. Î AASB 2020–1 Amendments to Australian Accounting Standards – Classification of Liabilities as Current or Non-Current Î AASB 2020–6 Amendments to Australian Accounting Standards – Classification of Liabilities as Current or Non-current – Deferral of Effective Date Î AASB 2021–2 Amendments to Australian Accounting Standards – Disclosure of Accounting Policies and Definition of Accounting Estimates Î AASB 2021–5 Amendments to Australian Accounting Standards – Deferred Tax related to Assets and Liabilities arising from a Single Transaction Principles of consolidation Subsidiaries The consolidated financial statements incorporate the assets and liabilities of CountPlus Limited and its subsidiaries as at 30 June 2022 and the results of CountPlus Limited and its subsidiaries for the year then ended. CountPlus Limited and its subsidiaries together are referred to in these financial statements as (‘the Group’). Subsidiaries are all those entities over which the Group has control. The Group controls an entity when the Group 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 to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases. Intercompany transactions, balances and unrealised gains on transactions between entities in the Group are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group. The acquisition of subsidiaries is accounted for using the acquisition method of accounting. A change in ownership interest, without the loss of control, is accounted for as an equity transaction, where the difference between the consideration transferred and the book value of the share of the non-controlling interest acquired is recognised directly in equity attributable to the parent. Non-controlling interest in the results and equity of subsidiaries are shown separately in the Statement of Profit or Loss and Other Comprehensive Income, Statement of Financial Position and Statement of Changes in Equity of the Group. Investments in subsidiaries are accounted for at cost in the financial statements of CountPlus Limited less any impairment charges. Where the Group loses control over a subsidiary, it derecognises the assets including goodwill, liabilities and non-controlling interest in the subsidiary together with any cumulative translation differences recognised in equity. The Group recognises the fair value of the consideration received and the fair value of any investment retained together with any gain or loss in profit or loss. Associates Associates are all entities over which the Group has significant influence but not control or joint control, generally accompanying a shareholding of between 20% and 49% of the voting rights. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies. Investments in associates are accounted for using the equity method of accounting, after initially being recognised at cost. The Group's share of its associates' post acquisition profits or losses is recognised in profit or loss and its share of post-acquisition other comprehensive income, is recognised in other comprehensive income. The cumulative post acquisition movements are adjusted against the carrying amount of the investment. Dividends from associates are recognised as reduction in the carrying amount of the investment. When the Group's share of losses in an associate equal or exceeds its interest in the associate, including any other unsecured long-term receivables, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate. Employee share trust The Company has formed a trust to administer the Group's Loan Funded Share Plan. This trust is consolidated as the substance of the relationship is that the trust is controlled by the Group. Shares held by the trust are disclosed as Treasury Shares and are deducted from contributed equity. 87 COUNTPLUS ANNUAL REPORT 2022 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2022 Foreign currency translation The financial statements are presented in Australian dollars, which is CountPlus Limited's functional and presentation currency. Foreign currency transactions Foreign currency transactions are translated into Australian dollars using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at financial year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss. Foreign operations The assets and liabilities of foreign operations are translated into Australian dollars using the exchange rates at the reporting date. The revenues and expenses of foreign operations are translated into Australian dollars using the average exchange rates, which approximate the rates at the dates of the transactions, for the period. All resulting foreign exchange differences are recognised in other comprehensive income through the foreign currency reserve in equity. The foreign currency reserve is recognised in profit or loss when the foreign operation or net investment is disposed of. Financial Instruments Recognition, initial measurement and derecognition Financial assets and liabilities are recognised when the Group becomes a party to the contractual provisions of the financial instrument, and are measured initially at fair value adjusted by transactions costs, except for those carried at fair value through profit or loss, which are measured initially at fair value. Subsequent measurement of financial assets and financial liabilities are described below. Financial assets are derecognised when the contractual rights to the cash flows from the financial asset expire, or when the financial asset and all substantial risks and rewards are transferred. A financial liability is derecognised when it is extinguished, discharged, cancelled or expires. Classification and subsequent measurement of financial assets Except for those trade receivables that do not contain a significant financing component and are measured at the transaction price in accordance with AASB 15, all financial assets are initially measured at fair value adjusted for transaction costs (where applicable). For the purpose of subsequent measurement, financial assets other than those designated and effective as hedging instruments are classified into the following categories upon initial recognition: Î Î amortised cost; or fair value through profit or loss (‘FVPL’). All income and expenses relating to financial assets that are recognised in profit or loss are presented within finance costs, finance income or other financial items, except for impairment of trade receivables which is presented within other expenses. Classifications are determined by both: Î Î the contractual cash flow characteristics of the financial assets. the entities business model for managing the financial asset; and Financial assets at amortised cost Financial assets are measured at amortised cost if the assets meet the following conditions (and are not designated as FVPL): Î Î they are held within a business model whose objective is to hold the financial assets and collect its contractual cash flows; and the contractual terms of the financial assets give rise to cash flows that are solely payments of principal and interest on the principal amount outstanding. After initial recognition, these are measured at amortised cost using the effective interest method. Discounting is omitted where the effect of discounting is immaterial. The Group’s cash and cash equivalents, trade and most other receivables fall into this category of financial instruments. Financial assets at fair value through profit or loss (FVPL) Financial assets that are held within a different business model other than ‘hold to collect’ or ‘hold to collect and sell’ are categorised at fair value through profit and loss. Further, irrespective of business model financial assets whose contractual cash flows are not solely payments of principal and interest are accounted for at FVPL. 88 COUNTPLUS ANNUAL REPORT 2022 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2022 Impairment of financial assets AASB 9’s impairment requirements use more forward looking information to recognise expected credit losses – the ‘expected credit losses model’. Instruments within the scope of the new requirements included loans and other debt-type financial assets measured at amortised cost and fair value through other comprehensive income (‘FVOCI’), trade receivables, contract assets recognised and measured under AASB 15 and loan commitments and some financial guarantee contracts (for the issuer) that are not measured at fair value through profit or loss. The Group considers a broader range of information when assessing credit risk and measuring expected credit losses, including past events, current conditions, reasonable and supportable forecasts that affect the expected collectability of the future cash flows of the instrument. In applying this forward-looking approach, a distinction is made between: Î Î financial instruments that have not deteriorated significantly in credit quality since initial recognition or that have low credit risk (‘Stage 1’); and financial instruments that have deteriorated significantly in credit quality since initial recognition and whose credit risk is not low (‘Stage 2’). ‘Stage 3’ would cover financial assets that have objective evidence of impairment at the reporting date. ‘12-month expected credit losses’ are recognised for the first category while ‘lifetime expected credit losses’ are recognised for the second category. Measurement of the expected credit losses is determined by a probability-weighted estimate of credit losses over the expected life of the financial instrument. Trade and other receivables and contract assets The Group makes use of a simplified approach in accounting for trade and other receivables as well as contract assets and records the loss allowance at the amount equal to the expected lifetime credit losses. In using this practical expedient, the Company uses its historical experience, external indicators and forward-looking information to calculate the expected credit losses using a provision matrix. The Group assesses impairment of trade receivables on a collective basis as they possess credit risk characteristics based on the days past due. Classification and measurement of financial liabilities The Group's financial liabilities include borrowings, trade and other payables, contract liabilities and other liabilities. Financial liabilities are initially measured at fair value, and, where applicable, adjusted for transaction costs unless the Company designated a financial liability at fair value through profit or loss. Subsequently, financial liabilities are measured at amortised cost using the effective interest method except for financial liabilities designated at FVPL, which are carried subsequently at fair value with gains or losses recognised in profit or loss. All interest-related charges and, if applicable, changes in an instrument’s fair value that are reported in profit or loss are included within finance costs or finance income. Current and non-current classification Assets and liabilities are presented in the statement of financial position based on current and non-current classification. An asset is classified as current when: it is either expected to be realised or intended to be sold or consumed in the Group's normal operating cycle; it is held primarily for the purpose of trading; it is expected to be realised within 12 months after the reporting period; or the asset is cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least 12 months after the reporting period. All other assets are classified as non-current. A liability is classified as current when: it is either expected to be settled in the Group's normal operating cycle; it is held primarily for the purpose of trading; it is due to be settled within 12 months after the reporting period; or there is no unconditional right to defer the settlement of the liability for at least 12 months after the reporting period. All other liabilities are classified as non-current. Deferred tax assets and liabilities are always classified as non-current. 89 COUNTPLUS ANNUAL REPORT 2022 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2022 Non-current assets or disposal groups classified as held for sale Non-current assets and assets of disposal groups are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continued use. They are measured at the lower of their carrying amount and fair value less costs of disposal. For non-current assets or assets of disposal groups to be classified as held for sale, they must be available for immediate sale in their present condition and their sale must be highly probable. An impairment loss is recognised for any initial or subsequent write down of the non-current assets and assets of disposal groups to fair value less costs of disposal. A gain is recognised for any subsequent increases in fair value less costs of disposal of a non-current assets and assets of disposal groups, but not in excess of any cumulative impairment loss previously recognised. Non-current assets are not depreciated or amortised while they are classified as held for sale. Interest and other expenses attributable to the liabilities of assets held for sale continue to be recognised. Non-current assets classified as held for sale and the assets of disposal groups classified as held for sale are presented separately on the face of the statement of financial position, in current assets. The liabilities of disposal groups classified as held for sale are presented separately on the face of the statement of financial position, in current liabilities. Right-of-use assets A right-of-use asset is recognised at the commencement date of a lease. The right-of-use asset is measured at cost, which comprises the initial amount of the lease liability, adjusted for, as applicable, any lease payments made at or before the commencement date net of any lease incentives received, any initial direct costs incurred, and, except where included in the cost of inventories, an estimate of costs expected to be incurred for dismantling and removing the underlying asset, and restoring the site or asset. Right-of-use assets are depreciated on a straight-line basis over the unexpired period of the lease or the estimated useful life of the asset, whichever is the shorter. Where the Group expects to obtain ownership of the leased asset at the end of the lease term, the depreciation is over its estimated useful life. Right-of use assets are subject to impairment or adjusted for any remeasurement of lease liabilities. The Group has elected not to recognise a right-of-use asset and corresponding lease liability for short-term leases with terms of 12 months or less and leases of low-value assets. Lease payments on these assets are expensed to profit or loss as incurred. Lease liabilities A lease liability is recognised at the commencement date of a lease. The lease liability is initially recognised at the present value of the lease payments to be made over the term of the lease, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group's incremental borrowing rate. Lease payments comprise of fixed payments less any lease incentives receivable, variable lease payments that depend on an index or a rate, amounts expected to be paid under residual value guarantees, exercise price of a purchase option when the exercise of the option is reasonably certain to occur, and any anticipated termination penalties. The variable lease payments that do not depend on an index or a rate are expensed in the period in which they are incurred. Lease liabilities are measured at amortised cost using the effective interest method. The carrying amounts are remeasured if there is a change in the following: future lease payments arising from a change in an index or a rate used; residual guarantee; lease term; certainty of a purchase option and termination penalties. When a lease liability is remeasured, an adjustment is made to the corresponding right-of-use asset, or to profit or loss if the carrying amount of the right-of-use asset is fully written down. Employee benefits Short-term employee benefits Liabilities for wages and salaries, including non-monetary benefits, annual leave, long service leave and accumulating sick leave expected to be settled wholly within 12 months of the reporting date are measured at the amounts expected to be paid when the liabilities are settled. Non-accumulating sick leave is expensed to profit or loss when incurred. Goods and Services Tax ('GST') and other similar taxes Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the tax authority. In this case it is recognised as part of the cost of the acquisition of the asset or as part of the expense. Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the tax authority is included in other receivables or other payables in the statement of financial position. Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which are recoverable from, or payable to the tax authority, are presented as operating cash flows. Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the tax authority. 90 COUNTPLUS ANNUAL REPORT 2022 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2022 Rounding of amounts The Group is of a kind referred to in Corporations Instrument 2016 /191, issued by the Australian Securities and Investments Commission, relating to 'rounding-off'. Amounts in this report have been rounded off in accordance with that Corporations Instrument to the nearest thousand dollars, or in certain cases, the nearest dollar. Comparatives The significant accounting policies adopted in the preparation of the financial statements have been consistently applied to the current year and the comparative period, unless otherwise stated. Where necessary, comparative information has been reclassified to be consistent with current period disclosures. 8.5 Events after the reporting period On 1 July 2022, CountPlus Limited appointed Hugh Humphrey as Chief Executive Officer and director. On 1 July 2022, CountPlus Limited finalised terms to acquire a 32.75% shareholding in WSC Group Pty Ltd from 1 August 2022. On 4 July 2022, CountPlus Limited member firm, NSW based CountPlus One Pty Ltd acquired 100% of the business CDC Partners Pty Ltd. On 13 July 2022, CountPlus Limited commenced a share buy-back scheme to enhance returns to shareholders with specific capital management initiatives. A maximum of 11,422,255 shares will be repurchased. The timing and number of shares repurchased will depend on the Group’s share price and market conditions. 761,089 shares have repurchased up to the date of this report. There can be no certainty that all of the shares will be repurchased. On 26 August 2022, the Directors resolved to declare a full year final dividend for FY22 of 2.00 cents (fully franked) to be paid on 12 October 2022 (record date 23 September 2022). No other matters or circumstances have arisen since the end of the financial year which significantly affected or could significantly affect: (a) the Group's operations in future financial periods, or consolidated entity, (b) the results of those operations in future financial periods, or (c) the Group's state of affairs of the consolidated entity in future financial periods. 91 COUNTPLUS ANNUAL REPORT 2022 INTERIM CHIEF EXECUTIVE OFFICER Laurent Toussaint 24 February 2022 – 30 June 2022 CHIEF FINANCIAL OFFICER Laurent Toussaint COMPANY SECRETARY Laurent Toussaint PRINCIPAL REGISTERED OFFICE IN AUSTRALIA SHARE REGISTRY INDEPENDENT AUDITOR SOLICITORS BANKER STOCK EXCHANGE LISTING Narelle Wooden Doug Richardson Level 8 1 Chifley Square Sydney NSW 2000 Telephone +61 2 8218 8778 Computershare Investor Services Pty Ltd Level 3, 60 Carrington Street Sydney NSW 2000 Telephone +61 2 8234 5000 Grant Thornton Audit Pty Ltd Level 17, 383 Kent Street Sydney NSW 2000 Telephone +61 2 8297 2400 Baker McKenzie Level 46, Tower One International Towers Sydney 100 Barangaroo Avenue Barangaroo NSW 2000 Telephone +61 2 9225 0200 Westpac Banking Corporation CountPlus Limited shares are listed on the Australian Securities Exchange (ASX code: CUP) WEBSITE ADDRESS www.countplus.com.au ABN 11 126 990 832 CORPORATE DIRECTORY DIRECTORS Ray Kellerman Chairman Alison Ledger Independent Non-Executive Director Andrew McGill Independent Non-Executive Director Carolyn Colley Independent Non-Executive Director Appointed 6 October 2020 Kate Hill Independent Non-Executive Director Matthew Rowe Managing Director and Chief Executive Officer Resigned 24 February 2022 Hugh Humphrey Managing Director and Chief Executive Officer Appointed 1 July 2022 92 COUNTPLUS ANNUAL REPORT 2022 DIRECTORS' DECLARATION 1. In the opinion of the Directors of CountPlus Limited: a. The consolidated financial statements and notes of CountPlus Limited are in accordance with the Corporations Act 2001, including i. Giving a true and fair view of its financial position as at 30 June 2022 and of its performance for the financial year ended on that date; and ii. Complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001. b. There are reasonable grounds to believe that CountPlus Limited 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 and Chief Financial Officer for the financial year ended 30 June 2022. 3. Note 8.4 confirms that the consolidated financial statements also comply with International Financial Reporting Standards. Signed in accordance with a resolution of the Board of Directors. Ray Kellerman Chairman 26 August 2022 Sydney 93 COUNTPLUS ANNUAL REPORT 2022 INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF COUNTPLUS LIMITED Grant Thornton Audit Pty Ltd Level 17 383 Kent Street Sydney NSW 2000 Locked Bag Q800 Queen Victoria Building NSW 1230 T +61 2 8297 2400 Independent Auditor’s Report To the Members of CountPlus Limited Report on the audit of the financial report Opinion We have audited the financial report of CountPlus Limited (the Company) and its subsidiaries (the Group), which comprises the consolidated statement of financial position as at 30 June 2022, the consolidated statement of profit or loss and other comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies, and the Directors’ declaration. In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001, including: a giving a true and fair view of the Group’s financial position as at 30 June 2022 and of its performance for the year ended on that date; and b complying with Australian Accounting Standards and the Corporations Regulations 2001. Basis for opinion We conducted our audit in accordance with Australian Auditing Standards. 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 auditor independence requirements of 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 (including Independence Standards) (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. www.grantthornton.com.au ACN-130 913 594 Grant Thornton Audit Pty Ltd ACN 130 913 594 a subsidiary or related entity of Grant Thornton Australia Limited ABN 41 127 556 389 ACN 127 556 389. ‘Grant Thornton’ refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients and/or refers to one or more member firms, as the context requires. Grant Thornton Australia Limited is a member firm of Grant Thornton International Ltd (GTIL). GTIL and the member firms are not a worldwide partnership. GTIL and each member firm is a separate legal entity. Services are delivered by the member firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate one another and are not liable for one another’s acts or omissions. In the Australian context only, the use of the term ‘Grant Thornton’ may refer to Grant Thornton Australia Limited ABN 41 127 556 389 ACN 127 556 389 and its Australian subsidiaries and related entities. Liability limited by a scheme approved under Professional Standards Legislation. 94 COUNTPLUS ANNUAL REPORT 2022 INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF COUNTPLUS LIMITED 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. These matters were 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 these matters. Key audit matter How our audit addressed the key audit matter Business combinations (Note 6.1) The Group acquired 85% of Accurium Holdings Pty Ltd during the year for $7,737,000. Goodwill of $3,787,000 was recognised in the acquisition. In addition, the Group made the following material acquisitions which resulted in $5,042,000 of goodwill recognised: • On 1 July 2021, the Group acquired a 51% ownership interest in 4Front Holdings Pty Ltd. As part of this transaction, the Group’s 100% owned subsidiary, Cooper Reeves Pty Ltd, was acquired by 4Front Holdings Pty Ltd. The consideration paid in this transaction was the transfer of the Group’s ownership interest in Cooper Reeves Pty Ltd; • On 20 August 2021, the Group acquired a 51% shareholding in Wealth Axis for consideration of $1.328m; and Our procedures included, amongst others: • obtaining the purchase agreements and management’s accounting memorandums and assessing the terms of the contracts; • obtaining the acquisition balance sheet of the acquired entities and agreeing on the material balances to supporting information; • assessing the capability, competence and objectivity of management’s independent expert; • consulting with our valuation specialists to evaluate the Independent Expert’s Valuation Report, including; • assessing whether the appropriate intangible assets had been identified; • assessing the appropriateness of the valuation • On 20 August 2021, the Group's member firm, methodologies; Unite Advisory Pty Ltd, acquired Bentley, Brett & Vincent (BBV) for $1.659m. These transactions have been accounted for in accordance with AASB 3: Business Combinations which is complex and includes a high degree of estimation uncertainty and judgement when determining the fair value of acquired assets and liabilities. This is a key audit matter due to the complexity and judgements involved in assessing AASB 3 and the estimation uncertainty involved in valuing intangible assets. • challenging the assumptions used were reasonable and supportable; • testing the mathematical accuracy of the underlying calculations; • evaluating the forecasts provided by management upon which the valuations were based by assessing forecast revenues, operating costs based on our knowledge of the market and sector trends; and • assessing the adequacy of the Group’s disclosures in respect of the business acquisitions against the requirements of AASB 3: Business Combinations. Grant Thornton Australia Limited (cid:3) 95 COUNTPLUS ANNUAL REPORT 2022 INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF COUNTPLUS LIMITED Key audit matter How our audit addressed the key audit matter Recoverable amount of intangible assets (Note 5.1) As at 30 June 2022, the Group’s intangible assets of $52,338,000 consist of goodwill, acquired client relationships/advisor networks, brands, IT software and other intangible assets. No impairment expense has been recognised during the year. AASB 136: Impairment of Assets requires that goodwill acquired in a business combination be allocated to each of the Group’s cash-generating units (CGU) for impairment testing purposes. Each CGU to which goodwill has been allocated must be tested for impairment annually. Our procedures included, amongst others: • enquiring with management to obtain and document an understanding of their processes and controls related to the assessment of impairment, including identification of CGUs and the calculation of the recoverable amount for each CGU; • evaluating the value-in-use models against the requirements of AASB 136, including consultation with our valuations experts; • obtaining management’s value-in-use calculations Management has assessed that the group has 15 CGUs and has allocated the goodwill and other intangible assets to these CGUs. Management has tested the CGUs for impairment by comparing their carrying amounts with recoverable amounts. The recoverable amounts were determined using value-in-use models. This is a key audit matter due to the significant judgements required to determine the appropriate CGUs and the inherent estimation uncertainty in calculating the recoverable amount. and: • testing the mathematical accuracy of the model; • evaluating management’s ability to forecast future results; • • testing the reasonableness of forecasted cash flows to be derived by the CGUs’ assets; reviewing discount rates applied to forecast future cash flows; • performing sensitivity analysis on the significant inputs and in preparing the calculation; and • assessing the adequacy of the Group’s disclosures in respect of the requirements of AASB 136. Information other than the financial report and auditor’s report thereon The Directors are responsible for the other information. The other information comprises the information included in the Group’s annual report for the year ended 30 June 2022, but does not include the financial report and our auditor’s report thereon. Our opinion on the financial report does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, 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. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of the Directors’ for the financial report The Directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the Directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In preparing the financial report, the Directors are responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so. Grant Thornton Australia Limited (cid:3) 96 COUNTPLUS ANNUAL REPORT 2022 INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF COUNTPLUS LIMITED Auditor’s responsibilities for the audit of the financial report Our objectives are 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 the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and 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 this 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_2020.pdf.This description forms part of our auditor’s report. Report on the remuneration report Opinion on the remuneration report We have audited the Remuneration Report included in pages 22 to 33 of the Directors’ report for the year ended 30 June 2022. In our opinion, the Remuneration Report of CountPlus Limited, for the year ended 30 June 2022 complies with section 300A of the Corporations Act 2001. Responsibilities The Directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. Grant Thornton Audit Pty Ltd Chartered Accountants S M Thomas Partner – Audit & Assurance Sydney, 26 August 2022 Grant Thornton Australia Limited (cid:3) 97 COUNTPLUS ANNUAL REPORT 2022 ASX ADDITIONAL INFORMATION The shareholder information set out below was applicable as at 31 July 2022. Distribution of equitable securities Analysis of number of equitable security holders by size of holding: 1 to 1,000 1,000 to 5,000 5,001 to 10,000 10,001 to 100,000 100,001 and over Holding less than a marketable parcel Equity security holders Twenty largest quoted equity security holders The names of the twenty largest security holders of quoted equity securities are listed below: Colonial Holding Company Ltd J P Morgan Nominees Australia Pty Limited Mr Barry Martin Lambert Pacific Custodians Pty Limited (Employee Share Tst A/C) HSBC Custody Nominees (Australia) Limited National Nominees Limited Rowe Heaney Super Fund Pty Ltd (Rowe Heaney Super Fund A/C) Mirrabooka Investments Limited Santos L Helper Pty Ltd (SBS Van Paassen A/C) 1 2 3 4 5 6 7 8 9 10 Mr Joseph Zanca & Mrs Szerenke Zanca (Zanacorp Super Fund A/C) 11 12 13 14 15 Mr Raymond John Kellerman & Mrs Ruth Kellerman (The Kellerman S/F A/C) 16 17 Mr Michael Allan Beddoes (Beddoes Practice A/C) 18 Mr Barry Martin Lambert 19 Supergeneration Pty Ltd (Supergeneration A/C) 20 Dr Andrew Richard Conway + Dr Vanessa Joy Teague RK Sydney Pty Ltd (RK Family A/C) Citicorp Nominees Pty Limited Zanacorp Financial Group Pty Ltd Colonial First State Inv Ltd (7749080 Ritchie A/C) Harvey Investment Company Pty Ltd (Seastar Investment A/C) Substantial holders 1 2 Colonial Holding Company Ltd Ryder Capital Ltd 98 Listed Ordinary Shares – Fully Paid Number of Holders Number of Shares 408 631 263 468 94 1,864 285 229,040 1,672,162 2,055,113 15,075,830 95,002,730 114,034,875 119,050 Listed Ordinary Shares – Fully Paid Number held % of Total Shares 40,945,747 9,658,960 3,300,000 2,612,310 2,514,646 2,482,487 2,235,000 2,215,943 2,100,000 1,525,000 1,400,000 1,373,294 1,200,000 1,162,528 850,000 835,561 800,000 764,729 533,600 500,000 79,009,805 35.91 8.47 2.89 2.29 2.21 2.18 1.96 1.94 1.84 1.34 1.23 1.20 1.05 1.02 0.75 0.73 0.70 0.67 0.47 0.44 69.29 Listed Ordinary Shares – Fully Paid Number held % of Total Shares 40,945,747 8,342,197 49,287,944 35.91 7.32 43.23 COUNTPLUS ANNUAL REPORT 2022 INVESTORS' INFORMATION Share Trading Shareholders’ Enquiries CountPlus Limited’s fully paid ordinary shares are listed on the Australian Stock Exchange (ASX) and are traded under the code CUP. Investors seeking information regarding their shareholding or wishing to change their address, should contact our share registry: Voting rights Computershare Investor Services Pty Ltd At a General Meeting, every member present in person or by proxy or attorney, or in the case of a corporation by a representative duly authorised under the seal of that corporation, has one vote on a show of hands and in the event of a poll, one vote for each fully paid ordinary share held by the member. Options carry no voting rights. Address Telephone Fax Level 3, 60 Carrington Street Sydney NSW 2000 1300 850 505 +61 2 8234 5000 +61 2 8235 8150 Any other enquiries relating to CountPlus Limited can be directed to CountPlus at: Postal Address Telephone Email ABN GPO Box 1453 Sydney NSW 2001 +61 2 8218 8778 info@countplus.com.au 11 126 990 832 99 COUNTPLUS ANNUAL REPORT 2022 C o u n t P l u s A n n u a l R e p o r t 2 0 2 2
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