ASX Announcement
22 August 2014
______________________________________________________________________
Appendix 4E & Annual Report for year ended 30 June 2014
• FY14 statutory NPAT of $3.3m, up 142% on the prior year
• FY14 underlying profit before tax of $8.3m, up 43% on FY13
• Fully franked FY14 dividend of 2.2 cents per share
Centrepoint Alliance Limited (ASX Code: CAF) (‘Centrepoint’) is pleased to announce a strongly
improved performance with a profit of $3.3m up 142% from a $7.8m loss in the prior year.
Underlying profit before tax increased 43% to $8.3m.
The Chairman, Rick Nelson commented ‘We are pleased with the Group’s turnaround and the
progress in executing strategy. The Group has strong positions in very attractive markets as the
leading non-institutional service provider from which to continue its growth.’
Centrepoint also announces the resumption of dividends with a final dividend of 2.2 cps fully
franked to be paid on 15 October 2014.
The Funding division had an excellent year with strong growth in profits and market share. The
Wealth division made good progress in its transformation to become the leader in the wealth
advice market.
Centrepoint Funding delivered a strong underlying pre-tax profit of $5.3m, up 43% on the prior
year. The leading broker proposition combined with industry consolidation has provided the
opportunity to grow market share with the number of insurance brokers actively providing
business increasing by 31%. The strategy of rebalancing the business by improving market
share on the east coast is succeeding with a 35% increase in active brokers and a 43%
increase in loans originated from the eastern states. Investment in enhancing IT systems is
continuing to benefit broker productivity and customer experience, whilst also improving the cost
to income ratio.
Centrepoint Wealth delivered a solid underlying pre-tax profit of $6.5m, in-line with prior year.
Revenue was 10% lower than the prior year due to the decline in adviser numbers in 2013. That
decline was almost entirely offset by reductions in expenses, achieved while also making
substantial investments in new capabilities and transformation of the business.
In July 2014 confirmation was received from the Australian Securities and Investments
Commission (‘ASIC’) that Professional Investment Services Pty Ltd had successfully completed
its Ongoing Monitoring Program. The independent expert reported on the significant
improvement in compliance and internal audit functions along with the commitment to
enhancing the financial advice risk management framework.
Improvements in adviser systems and ongoing professional development have been achieved
and continue as a key focus.
Management capabilities continue to be strengthened and the culture aligned with our vision of
being a highly respected non-institutional financial service provider.
Cash Position
The Group had cash and term deposits of $21.4m at 30 June 2014. The Group has a strong
financial position from which to continue its growth and execution of strategy.
1
Outlook
The Group holds strong positions in segments of the financial services market which are
expected to continue to grow well in excess of GDP with attractive margins for well run
businesses. The business has an experienced team that is rapidly executing its strategy,
growing market share through consistent reliable service and delivering solid returns to
shareholders.
Significant investment is being made in people and technology to position the Group for
sustainable, above market growth, by delivering leading solutions designed to meet our
customers’ needs whilst assisting brokers and financial advisers to operate efficient and
profitable businesses.
Investor Briefing
Mr John de Zwart, Managing Director, will hold an investor briefing at 9am (AEST) on Monday,
25 August 2014.
If you wish to participate in the briefing please register by visiting our Financial Reports section
of the Investor Centre on the Centrepoint website - http://www.centrepointalliance.com.au.
Centrepoint’s Appendix 4E and Annual Report are appended.
For further information please contact:
John de Zwart
Managing Director
Centrepoint Alliance Limited
Ph: +612 8987 3002
2
CENTREPOINT ALLIANCE LIMITED
AND ITS CONTROLLED ENTITIES
ABN 72 052 507 507
Appendix 4E
Year ended 30 June 2014
RESULTS FOR ANNOUNCEMENT TO THE MARKET
Revenues from ordinary activities
Down
2%
$51,651,000
$52,630,000
Profit before tax and non-controlling interests
Up
164%
$4,254,000
$(6,632,000)
Profit after tax attributable to members
Up
142%
$3,299,000
$(7,781,000)
30 June 2014
30 June 2013
Dividends (distributions)
Final dividend
Amount
per security
Franked amount
per security
2.2 cents
2.2 cents
Previous corresponding period
0.0 cents
0.0 cents
Record date for determining entitlements to dividend
26 September 2014
Payment date of dividend
15 October 2014
Net tangible assets per share
30 June 2014
30 June 2013
15.50 cents
3.92 cents
Centrepoint Wealth’s net profit before tax increased by $9.1m despite revenues falling 10%,
primarily the result of the fall in the number of Authorised Representatives up to the end of the
2013 calendar year, with offsetting gains from improved operational efficiency and reduced client
claims expense.
Centrepoint Funding’s revenue grew by 16% through growth in the premium funding business
which has been successful in building new broker relationships and expanding its east coast
business. Its new loan volumes grew by 21% and profit before tax by $1.5m.
PAGE 1
CENTREPOINT ALLIANCE LIMITED
AND ITS CONTROLLED ENTITIES
ABN 72 052 507 507
ANNUAL FINANCIAL REPORT
FOR THE YEAR ENDED 30 JUNE 2014
CENTREPOINT ALLIANCE LIMITED AND ITS CONTROLLED ENTITIES
Annual Financial Report
30 June 2014
Contents
Chairman’s Report
Directors’ Report
Remuneration Report
Auditor’s Independence Declaration
Corporate Governance Statement
Statement of Comprehensive Income
Statement of Financial Position
Statement of Cash Flows
Statement of Changes in Equity
Notes to the Consolidated Financial Statements
Directors’ Declaration
ASX Additional Information
Independent Auditor’s Report
1
2
14
24
25
30
31
32
33
34
88
89
91
CENTREPOINT ALLIANCE LIMITED AND ITS CONTROLLED ENTITIES
Chairman’s Report
30 June 2014
Dear Shareholders,
On behalf of my fellow directors I am pleased to present the Centrepoint Alliance Limited (‘Centrepoint’)
annual report for the year ended 30 June 2014 (‘FY14’) and to report a very successful year in our strategy
to become Australia’s most respected financial services business.
Centrepoint Funding has continued its strong growth in FY14 with revenue up 16% and pre-tax profits by
43%. New active broker relationships increased by 31% with significant growth in the east coast business.
Strong progress has been made on the transformation of Centrepoint Wealth including a change in the
organisational structure to align with our strategy of developing a customer and adviser centric wealth
business. Cost savings offset revenue losses in prior years and also enabled investment in new capabilities
and future revenue generating activities.
Centrepoint acquired the remaining 45% of the shares in Associated Advisory Practices Pty Ltd and
Associated Advisory Practices (No 2) Pty Ltd via schemes of arrangement in October 2013 positioning that
business for continued growth.
In April-May $13.63m in equity was raised through a placement to institutional and sophisticated investors
and a 1 for 3 non-renounceable, fully underwritten entitlement offer. The equity raising has strengthened
the balance sheet and provided for future capital requirements for the AFSL holding entities and both
organic and inorganic growth of the Centrepoint group.
Your Board is pleased to announce that following the improvement in statutory profit and cash position, a
final dividend of 2.2 cents per share, fully franked, is to be paid on 15 October 2014.
Thank you to the staff, our clients and business partners, and you, our shareholders, for your continued
support as we strive to become the leading and most highly respected non-institutional financial services
business in Australia.
Yours sincerely
Rick Nelson
Chairman
PAGE 1
CENTREPOINT ALLIANCE LIMITED AND ITS CONTROLLED ENTITIES
Directors’ Report
30 June 2014
Your directors present their report for the year ended 30 June 2014.
Directors
The names and details of the Company’s directors in office during the financial year and until the date of
this report are as follows. Directors were in office for this entire period unless otherwise stated.
Richard (Rick) Nelson
FAICD
Chairman & Non-executive Director
Rick began his career in finance with the Australian Guarantee Corporation Ltd in 1972.
In 1982, Rick founded the Centrepoint Finance Group, which grew rapidly and made two major
acquisitions, resulting in it becoming one of Australia’s largest commercial finance brokers. Centrepoint
Finance merged with Alliance Finance in 2005 and Rick assumed the role of Managing Director of the
merged group. In 2007 he stepped aside to take on the position of Deputy Chairman and non-executive
director.
Rick was appointed chairman of the Company in June 2009.
John de Zwart
B.Econ., CA
Managing Director and Chief Executive Officer
Over the past 25 years, John has worked in Australia, NZ and the UK and prior to his current role was the
Chief Financial Officer for TAL Limited (2008-2012) and TOWER Limited (2005-2008), responsible for all
financial activities of these businesses. This included strategy, investor relations, asset management,
alliances, information technology, mergers and acquisitions and the formation of new business lines.
Prior to TAL/TOWER, John worked at AMP, Credit Suisse and Price Waterhouse.
Noel Griffin
MBA (Harvard)
Non-executive Director, Chairman of the Nomination, Remuneration & Governance Committee
Noel has been involved in the refrigerated transport industry since 1966. He has had extensive experience
in management, operation and ownership of transport and agri-businesses.
From 1982 to 1995, Noel was managing director of Refrigerated Roadways Pty Ltd. TNT acquired the
company in 1995 and Noel served for two years on the executive council of TNT.
In addition to his interests in the transport industry, Noel was managing director and a shareholder of Table
Grape Growers Pty Ltd from 1997 to 2001. Noel is managing director of Prime Qld Pty Ltd, a member of the
Pacca Advisory Council and a life member of the World Presidents’ Organisation.
PAGE 2
CENTREPOINT ALLIANCE LIMITED AND ITS CONTROLLED ENTITIES
Directors’ Report
30 June 2014
Stephen Maitland
OAM, RFD, B.Ec, M.Bus, LLM, FCPA, FAICD, FCIS, FAIM, SFFin
Non-executive Director, Chairman of the Group Audit, Risk & Compliance Committee
Stephen has over 30 years of experience in the banking and finance industry, with wide-ranging knowledge
in areas such as strategic planning, businesses in transition, risk management and corporate governance.
Stephen’s previous roles include CEO of the Queensland Office of Financial Supervision, a statutory
authority that supervised Queensland’s non-bank financial institutions.
Currently Stephen holds various directorships, and is a member of CPA’s Queensland Divisional Council.
During the past three years Stephen has served as a director of the following other listed companies:
Listed Company
Buderim Ginger Limited
Period of directorship
From 2002 to October 2012
Matthew Kidman
BEc, LLb, Graduate Diploma of Applied Finance
Non-executive Director
Matthew has over 19 years of experience in the finance industry and currently specialises in corporate
strategy, investor relations and capital markets.
During the period from 1998 to 2011 Matthew worked with the Wilson Asset Management funds
management group in a variety of roles including dealer, analyst, portfolio manager and chief executive
officer. He is also a former director of Australian Leaders Fund Limited (formerly Wilson Leaders Fund
Limited).
Matthew has also worked as a finance reporter with the Sydney Morning Herald, where in 1997 he was
appointed as Investment Editor.
During the past three years Matthew has served as a director of the following other listed companies:
Listed Company
WAM Capital Limited
WAM Research Limited
WAM Active Limited
Sandon Capital Investments Limited
Watermark Market Neutral Fund Limited
Martin Pretty (appointed 27 June 2014)
BA, CFA, Graduate Diploma of Applied Finance
Non-executive Director
Period of directorship
From 1999 and continuing
From 2002 and continuing
From 2007 and continuing
From 2013 and continuing
From 2013 and continuing
Martin is currently an Investment Manager with the Thorney Investment Group, a substantial shareholder,
and brings to the Board over 14 years experience in the finance sector. The majority of this experience was
gained within ASX-listed financial services businesses, including Hub24, Bell Financial Group and IWL
Limited. Martin has also previously worked as a finance journalist with The Australian Financial Review.
PAGE 3
CENTREPOINT ALLIANCE LIMITED AND ITS CONTROLLED ENTITIES
Directors’ Report
30 June 2014
Directors’ Interests in Shares
As at the date of this report, the interests of the directors in the shares of the company were:
Number of
ordinary shares
Number of
ordinary shares
Director
Fully Paid
Partly Paid
Number of
Options over
ordinary shares
Number of
performance
rights
R. J. Nelson
N. J. Griffin
S. J. Maitland
M. Kidman
J. M. de Zwart
M. P. Pretty
Total
4,141,732
2,501,841
66,667
1,230,563
1,980,452
-
9,921,255
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,500,000
-
1,500,000
No interests were held in other securities of the Company or related bodies corporate.
Company Secretaries
Debra Anderson
B. Law (LLB) Hons, Post Graduate Diploma in Legal Practice, Diploma of Financial Planning
Debra is a lawyer who began her career in private practice in Australia and worked in New Zealand and
Hong Kong, before joining the Company in 2003. She has gained extensive experience in financial services
over the past 11 years and was appointed Company Secretary in November 2013.
Glenn Toohey
B. Economics, FCA
Glenn joined the Company in 2013 and was appointed as Chief Financial Officer and Company Secretary in
November 2013. He has been a Chartered Accountant for over 25 years and has held senior roles in leading
Australian financial services companies for over 20 years.
Committee membership
As at the date of this report, the Company had a Nomination, Remuneration and Governance committee
(‘NRGC’), and Group Audit, Risk and Compliance committee (‘GARCC’).
Directors acting on the committees of the board during the year were:
NRGC
N. J. Griffin (Chairman)
R. J. Nelson
GARCC
S. J. Maitland (Chairman)
M. Kidman
M. P. Pretty
PAGE 4
CENTREPOINT ALLIANCE LIMITED AND ITS CONTROLLED ENTITIES
Directors’ Report
30 June 2014
Meetings of Directors
Number of meetings held:
Number of meetings attended:
R. J. Nelson
N. J. Griffin
S. J. Maitland
M. Kidman
J. M. de Zwart
M. P. Pretty
Directors'
meetings
18
18
18
17
18
18
1
NRGC
5
GARCC
4
5
5
-
-
-
-
-
-
4
4
-
-
All directors were eligible to attend all meetings held, except for Martin Pretty who was eligible to attend
one directors’ meeting.
Corporate Information
History
Centrepoint Alliance Limited (formerly Alliance Finance Corporation Limited) was founded in 1991 as an
insurance premium funding company. It was incorporated in Australia as a company limited by shares and
listed on the Australian Stock Exchange in June 2002.
On 30 September 2005, Centrepoint Alliance Limited merged with the Centrepoint Finance Pty Ltd, of
which Rick Nelson was a co-founder.
During the year ended 30 June 2009, the Group ceased its commercial finance activities, which involved the
sale on 31 December 2008 of its finance broking businesses and the cessation of its equipment finance
operations.
On 13 December 2010 the Company acquired 100% of Centrepoint Wealth Pty Ltd (formerly Professional
Investment Holdings Limited) and its controlled entities through a scheme of arrangement.
Principal activities
The principal activities of the Company and its related entities during the course of the financial year were:
• The funding of insurance premiums for both corporate and retail clients; and
• The provision of services and solutions to financial advisers and their clients.
Corporate structure
Centrepoint Alliance Limited is a company limited by shares that is incorporated and domiciled in Australia
and listed on the Australian Stock Exchange. Information on the group structure is provided in Note 27 to
the Consolidated Financial Statements.
PAGE 5
CENTREPOINT ALLIANCE LIMITED AND ITS CONTROLLED ENTITIES
Directors’ Report
30 June 2014
Operating & Financial Review
Group Business Operations
Centrepoint Alliance Limited and its controlled entities (the ‘Group’) operates predominantly in the
financial services industry within Australia and has two core business segments:
• Centrepoint Funding, which provides insurance premium funding and mortgage broking services;
and,
• Centrepoint Wealth, which provides a range of financial advice support services (including
licensing, systems, compliance, training and technical advice) and wealth solutions to financial
advisers, accountants and their clients across Australia.
Financial Performance
Profit before tax from continuing operations for the year to 30 June 2014 was $4.254m (2013: $6.632m
loss) reflecting improved operating results in both Funding and Wealth.
a) Centrepoint Funding
Description: Provides finance primarily to corporate clients to fund insurance premiums and
provides aggregation and licencing services to mortgage brokers.
The Group’s finance broking business (Australian Loan Company Pty Ltd) which was previously
included with Corporate was restructured during the year and now forms part of Funding.
Business Model: Insurance premium funding is distributed to customers through a national network
of general insurance brokers. A large volume of relatively small short term loans are currently
funded using a receivables finance facility from a major Australian bank. Mortgage broking provides
full service aggregation specialising in residential property mortgages, and access to personal and
business finance.
Key Drivers: The number of supporting brokers, volume of loans written, insurance premium levels
and property prices, lending margins, credit management and operating expenses.
Overview: The insurance premium funding market is estimated to be around $5bn per annum and
is dominated by two institutions. Centrepoint Alliance Premium Funding is now the third largest
provider and fastest growing with a 9% market share.
During the year Premium Funding made excellent progress in its strategy growing the proportion of
loans originated from the east coast. Key sales staff were appointed and the number of originated
loans on the east coast increased by 43%.
Financial Performance: Profit before tax increased by 43% to $5.143m.
Revenue grew by 16% to $18.598m primarily through growth in premium funding which has been
successful in building new broker relationships and expanding the east coast business. Active
broker relationships grew by 31% leading to strong growth of 21% in loan volumes written to
$445m (2013: $368m) while lending margins tightened slightly due to market competition. Credit
quality remained strong with improved low levels of losses.
During the year additional sales staff were employed to grow the premium funding east coast
business.
PAGE 6
CENTREPOINT ALLIANCE LIMITED AND ITS CONTROLLED ENTITIES
Directors’ Report
30 June 2014
b) Centrepoint Wealth
Description: Provider of a range of financial advice support services (including licensing, systems,
compliance, training and technical advice) and wealth solutions (platforms and managed funds) to
financial advisers, accountants and their clients across Australia.
Business Model: Wealth provides services to authorised representatives under its Australian
Financial Services Licences (‘AFSL’) and to other AFSL holders, and packages investment platforms
and managed funds for distribution. Revenue is generated from retention of a portion of advice
revenue earned by Wealth’s authorised representatives, distribution or reseller margin fees paid by
investment and insurance product providers, margins on packaged investment platforms and
managed funds and other fees for services.
Key Drivers: Funds under distribution agreements (‘FUDA’), funds under administration (‘FUAdm’),
funds under management (‘FUM’), margin and revenue retention rates and operating costs.
Overview: Wealth operates in a market dominated by large institutions. Wealth is the largest non-
institutional full advice business in Australia. The wealth market is attractive with superannuation
assets expected to continue to grow by 8% p.a. over the next twenty years and the need for quality
advice continuing to grow. The market has experienced significant regulatory change with the
commencement of the first phase of the Future of Financial Advice legislation in July 2013 and the
second in July 2014.
During the year the Group has been executing a strategy to improve the quality of advice and
wealth solutions provided to Australians. This has involved a significant change program including
realigning the organisational structure to better suit its strategy to develop a customer centric
wealth business. The two previously reported Financial Advice Services segments and the
Investment Products segment were combined during the year to form Wealth.
During the year Wealth invested in staff and capabilities to develop a range of wealth related
products and services consistent with its strategy. This suite of products and services together with
systems and methodologies are being developed to deliver high quality advice and outcomes to
financial advisers and their clients.
The Australian Securities and Investments Commission (‘ASIC’) concluded its Ongoing Monitoring
Program of Professional Investment Services Pty Ltd (‘PIS’) on 28 July 2014. The independent expert
(PricewaterhouseCoopers) recognised the significant improvement in PIS’s compliance and audit
functions and the commitment to enhancing its financial advice risk management framework. ASIC
also acknowledged PIS’s commitment, level of work undertaken and senior executives’ constructive
engagement throughout the process.
The processing of client claims in relation to financial advice was restructured during the year with
the majority of claims now managed by an internal claims team. This transformation has reduced
the costs of managing claims and resulted in better outcomes for clients and the Group.
Centrepoint Alliance Limited acquired the remaining 45% of the shares in Associated Advisory
Practices Pty Ltd and Associated Advisory Practices (No 2) Pty Ltd via schemes of arrangement in
October 2013 positioning that business for continued growth and enabling the integration into
Wealth.
Financial Performance: Profit before tax was $2.962m for the year compared to a loss of $6.085m
in 2013. Operational efficiencies and a reduction in client claims expense from $9.980m in 2013 to
$1.886m in 2014 were the major contributors to the return to profitability.
Revenue from external customers decreased by 10% to $32.405m due primarily to the reduction in
the number of Wealth’s Authorised Representatives up to the end of the 2013 calendar year. The
PAGE 7
CENTREPOINT ALLIANCE LIMITED AND ITS CONTROLLED ENTITIES
Directors’ Report
30 June 2014
number of Wealth’s Authorised Representatives stabilised in the second half of the year with net
increases occurring in the last quarter.
Expenses, excluding client claims, depreciation, amortisation and impairment expenses, were
reduced by $4.016m or 13% compared to 2013. Expenses include $500k in employee termination
costs associated with restructuring. During the first half of the year a cost reduction was executed
delivering $3.6m in annualised savings. During the second half Wealth implemented further
expense reductions and has invested in staff and capabilities to execute its strategy and generate
future revenue.
c) Corporate
Description: The costs of the Centrepoint board of directors, finance and company secretarial
functions and the administration of the listed public entity are reflected in Corporate. For segment
reporting purposes this is combined with the trading results of minor non-core businesses
controlled by the Group.
The Group’s finance broking business (Australian Loan Company Pty Ltd) which was previously
included with Corporate was restructured during the year and now forms part of Centrepoint
Funding.
Overview: Centrepoint Alliance Limited completed a $13.630m equity raising via a placement of
8,000,000 ordinary shares to institutional and sophisticated investors and a 1 for 3 non-
renounceable, fully underwritten entitlement offer of 35,697,906 ordinary shares. The equity
raising has strengthened the balance sheet and provided for future capital requirements for the
AFSL holding entities and both organic and inorganic growth of the Group. Cash that is not
immediately required is held in term deposits with major Australian banks with varying maturities
of up to 6 months.
There has been further simplification of the corporate structure. The sale of the Malaysian business
was completed in February 2014, the remaining Singapore entity was deregistered in July 2014, and
there has been significant simplification of the New Zealand corporate structure. There were
minimal expenses associated with the non-operating international businesses during the year.
Centrepoint Alliance Limited acquired the remaining 45% of the shares in Associated Advisory
Practices Pty Ltd and Associated Advisory Practices (No 2) Pty Ltd via schemes of arrangement in
October 2013. Subsequently, Centrepoint Wealth Pty Ltd sold its shares in these companies to
Centrepoint Alliance Limited which now holds 100% of their issued capital.
Financial Performance: Profit before tax was $49,000 including $3.900m of dividends received from
subsidiaries. Total expenses of $4.245m were down 10% on the prior year and include $345,000 of
termination payments in relation to restructuring.
Cash Flows
The Group held $21.373m in cash and term deposits as at 30 June 2014.
Cash provided by operations was $7.541m (2013: $12.453m) during the period. The reduction in cash
provided from operations was primarily due to a fall in receipts in Wealth in relation to advice partially
offset by improved receipts from Funding. Payments of $8.879m (2013: $11.295m) were made in relation
to adviser client claims.
$5.000m of cash was invested in a term deposit which remains available to the Group at short notice if
required. $1.394m was invested in property, plant and equipment; primarily fit-outs of office space
associated with moves to smaller premises. $1.034m investment in intangible assets is primarily business
software, including development of Wealth’s CRM tool.
PAGE 8
CENTREPOINT ALLIANCE LIMITED AND ITS CONTROLLED ENTITIES
Directors’ Report
30 June 2014
Centrepoint Alliance Limited raised $13.630m (net of expenses) in equity via a placement of 8,000,000
ordinary shares to institutional and sophisticated investors in April 2014 and a 1 for 3 non-renounceable,
fully underwritten entitlement offer of 35,697,906 ordinary shares in May 2014.
An additional $22.884m was lent to customers, primarily as insurance premium loans, funded by a net
increase in borrowings, substantially through the insurance premium funding facility.
Financial Position
The Group has net assets at 30 June 2014 of $34.521m (30 June 2013: $17.238m) and net tangible assets of
$22.130m (30 June 2013: $3.665m) representing net tangible assets per share of 15.50 cents (30 June
2013: 3.92 cents).
Total assets increased to $184.816m (30 June 2013: $150.223m) primarily as a result of the increase in
cash, term deposit and insurance premium funding receivables discussed above. Total liabilities increased
to $150.295m (30 June 2013: $132.985m) due largely to increased external funding of insurance premium
funding receivables partially offset by the reduction in the provision for client advice claims.
The Group held a total of $16.373m in cash and cash equivalents at 30 June 2014 (30 June 2013: $9.352m)
plus $5.000m in a term deposit held with a major Australian bank.
Risks & Risk Management
The material business risks faced by the Group that could affect its financial prospects include:
•
•
Legacy advice claims – The Consolidated Statement of Financial Position includes a provision for
incurred but not reported client advice claims in relation to advice provided prior to 1 July 2010.
The provision is based on an external actuarial model that projects future claims based on historical
data. Actual claims may exceed the provision and it is impracticable to quantify the amount of any
such additional liability.
The actuarial model does not project claims from potential class actions. Class action lawyers have
been active within the financial advice industry in relation to failed investment products and there
is an unquantifiable risk that such action may be taken against a Group subsidiary in the future.
Loss of financial advisers – Wealth depends on revenue generated from financial advisers. Financial
advisers are able to leave the Group if they are dissatisfied with the services provided. Considerable
effort and progress is being made to develop the leading advice business in Australia which will aid
retention of existing financial advisers and attract external advisers to the Group.
• Regulatory change – The Government has introduced changes to the Future of Financial Advice
(‘FOFA’) legislation that regulates the industry in which the Group operates. In addition, the
Government has announced the Financial System Inquiry (‘FSI’) which will establish a direction for
the future of Australia’s financial system. Depending on the outcome of these changes it could
impact the Group including change costs, slowing down adviser recruitment, and increasing the
ongoing costs and risks associated with regulatory compliance.
investment products but allows grandfathered
FOFA prohibits commission revenue for
arrangements to continue. Grand-fathered revenue will decline over time however the rate of that
decline is uncertain. Wealth is responding to these changes with new business and revenue models,
products and services.
•
Loss of key personnel – A comprehensive staff review and feedback process is actively employed.
Regular reviews of remuneration to ensure market competitiveness are undertaken, and the Board
has approved a structured short-term incentive program and long-term incentive program for staff.
PAGE 9
CENTREPOINT ALLIANCE LIMITED AND ITS CONTROLLED ENTITIES
Directors’ Report
30 June 2014
• Competitor behaviour – The financial services industry and the insurance premium funding industry
have several participants which have relatively large market shares (relative to the Group) and are
subsidiaries or operating divisions of large financial services businesses. The size of these
competitors and their greater access to funding provide them with a strong position on which to
compete with the Group. There is a risk that earnings of the Group could be adversely impacted by
the activities of competitors. The Group is focussed on building and maintaining the leading service
propositions in the industry and its position as a non-aligned service provider helps to mitigate this
risk.
Strategies & Prospects
The Group is focussed on becoming the most respected financial services business in Australia.
Considerable effort has also been devoted in the last two years to simplify the group structure and exit
non-core activities. This process is now substantially complete and allows the Group to improve its
operations and minimise costs.
The capital raising in April and May 2014 has provided the insurance premium funding business with the
ability to raise further debt to enable further growth and expansion to occur. Industry consolidation is
providing opportunities for organic growth stemming from the Group’s position as the largest non-aligned
premium funder with a strong track record of service and delivery. It may also create opportunities for in-
organic growth as small sub-scale businesses look to exit the industry.
Funding will continue its strategy of growing the insurance funding business on the east coast. The
mortgage broking business was restructured during the year and is now being repositioned to take greater
advantage of the Group’s relationships with financial advisers and brokers.
The Wealth business is implementing its strategy to become a leading customer centric wealth business
focussed on customer outcomes and building sustainable financial advice practices.
It is well positioned in an industry that remains very attractive for the long-term growth driven by growing
national savings and investment pool increases and the greater need for advice as the complexity of the
regulatory environment, tax system and market increases.
During the next financial year Wealth will launch new products and services consistent with its strategy to
diversify its sources of revenue and profit. Ventura Investment Management Limited has had its Australian
Financial Services Licence varied to allow it to offer a Managed Account product with the first expected to
be launched in the first quarter of the 2014/15 financial year.
The Group will continue to invest in its capabilities to grow revenue and profitability over the medium
term.
Dividends
On 22 August 2014, the directors of Centrepoint Alliance Limited declared a final dividend on ordinary
shares in respect of the 2014 financial year. The dividend is to be paid out of the dividend reserve. The
total amount of the dividend is $3,141,374 which represents a fully franked dividend of 2.20 cents per
share. The record date is 26 September 2014 and payment date is 15 October 2014.
PAGE 10
CENTREPOINT ALLIANCE LIMITED AND ITS CONTROLLED ENTITIES
Directors’ Report
30 June 2014
Options
Unissued shares
As at the date of this report, there were 400,000 fully vested options exercisable at $0.40 each on or before
31 December 2016. The Option holder does not have any right, by virtue of the options, to participate in
any share issue of the Company or any related body corporate.
In August 2013 the Company granted 4,100,000 performance rights, which is a right that can be converted
to an ordinary fully paid share in the Company for no monetary consideration subject to specific
performance criteria being achieved. 1,500,000 of these rights were granted to Managing Director and
Chief Executive Officer, John de Zwart, (approved by shareholders during the 2013 Annual General
Meeting) and the remaining 2,600,000 were offered to five senior executives in December 2013. 400,000 of
the 2,600,000 rights have now been forfeited due to the departure of one executive. All or some of the
rights will vest in September 2016 if certain profit targets are met. Earlier vesting can occur under certain
circumstances, such as a takeover of the Company.
At the date of this report there are no other unissued ordinary shares subject to options.
Shares issued as a result of the exercise of options
No shares have been issued as a result of the exercise of options during the financial year and up to the
reporting date.
Risk Management
The Board is responsible for ensuring that risks, and also opportunities, are identified on a timely basis and
that the Group's objectives and activities are aligned with those risks and opportunities.
Risk management is monitored and assessed by the Group Audit, Risk and Compliance Committee of the
Board, which comprises two non-executive directors, the Managing Director and Chief Executive Officer
and an independent external member. The Chairman of the Board may not chair this committee. As
detailed in the Corporate Governance Statement the Committee is governed by a charter and is responsible
on behalf of the Board for overseeing:
• The effectiveness of the Group’s system of risk management and internal controls; and
• The Group’s systems and procedures for compliance with applicable legal and regulatory
requirements.
The Board has a number of mechanisms in place to ensure that management's objectives and activities are
aligned with the risks identified by the Board. These include the following:
• Board approval of a strategic plan, which encompasses the Group's vision and strategy statements,
•
designed to meet stakeholders' needs and manage business risk.
Implementation of Board approved operating plans and budgets and Board monitoring of progress
against these budgets, including the establishment and monitoring of KPIs of both a financial and
non-financial nature.
• Board approved Risk Management Policy and Risk Framework to assist in the identification,
analysis, evaluation and treatment of Group risks.
PAGE 11
CENTREPOINT ALLIANCE LIMITED AND ITS CONTROLLED ENTITIES
Directors’ Report
30 June 2014
Significant Changes in the State of Affairs
During May 2014, the Company finalised a $13.630m equity raising. On 10 April 2014, 8,000,000 ordinary
shares were issued through a placement to institutional and sophisticated investors. On 12 May 2014,
35,697,906 ordinary shares were issued pursuant to the terms of the non-renounceable entitlement offer.
In October 2013, the Company acquired the remaining 45% of the shares in Associated Advisory Practices
Pty Ltd (‘AAP’) and Associated Advisory Practices (No 2) Pty Ltd (‘AAP2’) that was not previously owned. As
a result 5,626,172 shares were allocated and issued to the AAP and AAP2 shareholders. The Company also
acquired 55% of the shares held in AAP and AAP2 by Centrepoint Wealth Pty Ltd, a wholly owned
subsidiary of the Company.
Other than disclosed above, there are no matters or events constituting a significant change in the state of
affairs of the Company.
Significant Events Subsequent to Balance Date
The following matters have occurred subsequent to the year end:
On 27 July 2014, ASIC provided Professional Investment Services Pty Ltd (‘PIS’) with formal notification of
the conclusion of the ongoing monitoring program (‘OMP’) which had been in place since 1 July 2013. The
successful conclusion of the OMP results in PIS not being subject to any ongoing regulatory actions nor any
non-standard conditions applying to its AFSL.
There are no other matters or events which have arisen since the end of the financial period which have
significantly affected or may significantly affect the operations of the Group, the results of those operations
or the state of affairs of the Group in subsequent financial years.
Likely Developments
Likely developments in the operations of the Company and the expected results of those operations in
future financial years have been addressed in the Operating and Financial Review and in the subsequent
events disclosure. The directors are not aware of any other significant material likely developments.
Environmental Regulation
The Consolidated Entity’s operations are not regulated by any significant environmental regulation under a
law of the Commonwealth or of a State or Territory.
PAGE 12
CENTREPOINT ALLIANCE LIMITED AND ITS CONTROLLED ENTITIES
Directors’ Report
30 June 2014
Indemnification and Insurance of Directors and Officers
During the financial year, the Company paid a premium for a policy insuring all directors of the Company,
the company secretaries and all executive officers against any liability incurred by such director, secretary
or executive officer to the extent permitted by the Corporations Act 2001.
The policy does not allocate an identifiable part of the premium to specific directors or officers.
Accordingly, the premium paid has not been apportioned to directors’ remuneration.
The Company has not otherwise during or since the end of the financial year, indemnified or agreed to
indemnify any officer of the Company against a liability incurred as such officers.
Indemnification of auditors
To the extent permitted by law, the Company has agreed to indemnify its auditors, Ernst & Young, as part
of the terms of its audit engagement agreement against claims by third parties arising from the audit (for
an unspecified amount). No payment has been made to indemnify Ernst & Young during or since the end of
the financial year.
Rounding
The amounts contained in this report and in the financial report have been rounded to the nearest $1,000
(where rounding is applicable) under the option available to the Company under ASIC Class Order 98/100.
The Company is an entity to which the Class Order applies.
PAGE 13
CENTREPOINT ALLIANCE LIMITED AND ITS CONTROLLED ENTITIES
Directors’ Report
30 June 2014
Remuneration Report (audited)
This Remuneration Report for the year ended 30 June 2014 outlines the remuneration arrangements of the
directors and executives of the Group in accordance with the requirements of the Corporations Act 2001
(the ‘Act’) and its regulations. This information has been audited as required by section 308(3C) of the Act.
The remuneration report is presented under the following sections:
• Key management personnel
• Remuneration philosophy
• Group performance
• Nomination, Remuneration & Governance (NRGC) Committee
• Employment contracts
• Remuneration of Key Management Personnel
• Short-term incentives
•
Long-term incentives
For the purposes of this Report, key management personnel (‘KMP’) of the Group are defined as those
persons having authority and responsibility for planning, directing and controlling the major activities of the
Group, directly or indirectly, including any director (whether executive or otherwise) of the Company.
Key management personnel
The key management personnel of the Company during the financial year were as follows:
R. J. Nelson
N. J. Griffin
S. J. Maitland
M. Kidman
M. P. Pretty
J. M. de Zwart
G. P. Toohey
R. M. Dodd
I. R. Magee
Chairman & Director (non executive)
Director (non-executive)
Director (non-executive)
Director (non-executive)
Director (non-executive) – appointed 27 June 2014
Managing Director & Chief Executive Officer
Chief Financial Officer & Company Secretary – appointed 1 November 2013
Chief Executive Officer – Centrepoint Alliance Premium Funding Pty Ltd
Chief Financial Officer & Company Secretary – resigned 1 November 2013
There were no changes of KMP after the reporting date and before the signing of this Report.
Remuneration philosophy
The performance of the Company depends on the quality of its directors, executives and employees. To
prosper, the Company must attract, motivate and retain skilled and high performing individuals.
Accordingly, the Company’s remuneration framework is structured around the central principle and goal of
providing competitive rewards to attract the highest calibre people.
The level of fixed remuneration is set to provide a base level of remuneration that is appropriate to the
position and competitive in the market. It is not directly related to the performance of the Company. Fixed
remuneration is reviewed annually and the process consists of a review of company-wide, business unit
and individual performance, relevant comparative remuneration in the market and internal and, where
appropriate, external advice on policies and practices.
Short-term incentives in the form of potential cash bonuses are made available to employees. Any award is
based on the achievement of pre-determined objectives.
PAGE 14
CENTREPOINT ALLIANCE LIMITED AND ITS CONTROLLED ENTITIES
Directors’ Report
30 June 2014
Long-term incentives are made available to certain key management personnel (‘KMP’) in the form of
performance rights, shares or options. The Directors consider these to be the best means of aligning
incentives of KMP with the interests of shareholders.
The remuneration of non-executive directors of the Company consists only of directors’ fees and
committee fees.
Group performance
Shareholder returns for the last five years have been as follows:
GROUP*
Net profit/(loss) after tax
EPS (basic) - (cents per share)
EPS (diluted) - (cents per share)
Share price ($)
2014
$'000
2013
$'000
2012
$'000
2011
$'000
2010
$'000
3,223
3.20
3.13
0.37
(7,288)
(8.04)
(8.04)
0.27
(17,299)
(17.90)
(17.90)
0.18
(13,125)
(16.21)
(16.21)
0.90
1,315
0.25
0.25
0.95
**Comparatives for 2010 are the Professional Investment Holdings Limited group which was acquired by the Company in the 2011 financial year.
Nomination, Remuneration & Governance Committee (‘NRGC’)
The role of the NRGC includes the setting of policy and strategy for the appointment, compensation and
performance review of directors and executives, approving senior executive service agreements and
severance arrangements, overseeing the use of equity-based compensation and ensuring appropriate
communication and disclosure practices are in place.
Non-executive directors are not employed under specific employment contracts but are subject to
provisions of the Corporations Law in terms of appointment and termination. The Company applies the ASX
listing rules that specify that aggregate remuneration shall be determined from time to time by
shareholders in a general meeting. The maximum aggregate remuneration for the financial year ended 30
June 2014, which was approved by a resolution of shareholders at the Annual General Meeting on 29
November 2012, is $425,000 (2013: $425,000).
The remuneration of the non-executive directors does not currently incorporate a component based on
performance. Within the limits approved by shareholders, individual remuneration levels are set by
reference to market levels and consultation with independent advisers.
Executive directors and executives are employed under contracts or agreed employment arrangements
that specify remuneration amounts and conditions.
The Board has introduced for executives and senior employees an incentive system based on issuing
performance rights, shares or options in the Company.
The Company’s Securities Trading Policy forbids directors from entering into margin lending arrangements
and also forbids directors and senior executives from entering into hedging transactions involving the
Company’s securities.
Details of current incentive arrangements for key management personnel, where they exist, are shown
under the disclosure of their contracts below.
PAGE 15
CENTREPOINT ALLIANCE LIMITED AND ITS CONTROLLED ENTITIES
Directors’ Report
30 June 2014
Employment contracts
Details of the terms of employment of the Managing Director & Chief Executive Officer and the named
executives are set out below:
John de Zwart – Managing Director & Chief Executive Officer
Contract commencement date: 15 April 2013
Term: No term specified
Incentives:
Short term incentive –
Consists of a cash bonus of $75,000 that was paid in April 2014 after the first anniversary of the
commencement date. An additional short term incentive of $125,000 is payable after the end of the 2014
Financial Year and on achievement of key performance targets set by the Board. The key performance
targets are measures of underlying profit, improvement of customer retention and engagement,
strengthening the organisational capability and business sustainability through talent acquisition, retention
and development, improvement in compliance levels and risk management.
Long term incentive –
Issue of up to 1,500,000 fully paid ordinary Centrepoint Alliance Limited (‘CAF’) shares at nil cost based on
achievement of growth targets in the consolidated underlying profit of the Group (as determined by the
Directors) over three financial years, as follows:
If the cumulative underlying Group profit of financial years 2014, 2015 and 2016 divided by 3 is:
Less than 133% of 2013 underlying profit, none will be issued;
•
• 133% to 138% of 2013 underlying profit one-third of the total will be issued;
• 139% to 145% of 2013 underlying profit two-thirds of the total will be issued;
• 146% or greater of 2013 underlying profit 100% will be issued.
Required notice (Executive): 3 months.
Required notice (Company): 6 months.
Termination Entitlement: Statutory entitlements and so much of the total fixed remuneration as is due and
owing on the date of termination.
Glenn Toohey - Chief Financial Officer & Company Secretary
Contract commencement date: 1 November 2013
Term: No term specified
Incentives:
Short term incentive –
Eligible from the date of appointment to participate in the Company’s short term incentive plan as
amended or varied from time to time by the Company in its absolute discretion and without any limitation
on its capacity to do so.
Long term incentive –
A grant of $300,000 performance rights to be issued no later than twelve months after the commencement
date.
Required Notice (Executive): 3 months.
Required notice (Company): 3 months.
Termination Entitlements: Statutory entitlements.
PAGE 16
CENTREPOINT ALLIANCE LIMITED AND ITS CONTROLLED ENTITIES
Directors’ Report
30 June 2014
Bob Dodd - Chief Executive Officer (Insurance Premium Funding)
Contract commencement date: 1 December 2006
Term: 5 years with 5 year option (evergreen)
Incentives:
Short term incentive –
For the financial year ended 30 June 2014, eligible for a cash bonus of $50,000 if the Insurance Premium
Funding business unit generates a net profit pre-tax (pre-abnormal items) at least equal to the CAF Board
agreed budget; a further $50,000 if the Insurance Premium Funding business unit business generates a net
profit pre-tax (pre-abnormal items) of at least 20% higher than the prior year and premiums funded
increase by at least 20%; and 10% of pre-tax profit in excess of the CAF Board agreed budget, was granted.
‘Net profit pre-tax (pre-abnormal items)’ is defined as net profit before tax adjusted for any other items as
determined by the Board to be unrelated to normal business operations. This financial performance
measure was chosen as it aligns the executive’s remuneration with shareholder returns.
For the 2015 – 2019 financial years, a payment of $120,000 each year upon achievement of the
Centrepoint Wealth budget for that year.
A retention incentive was approved by the Board in June 2014 with the first payment of $300,000 made in
June 2014 and the second payment of $200,000 scheduled for 20 April 2015. The incentive is subject to
employment and service criteria.
Long term incentive –
An entitlement to 107,143 fully paid ordinary shares through the Employee Share Plan at a price of $0.40
per share. The entitlement is fully vested and expires on 31 October 2014.
Issue of up to 600,000 fully paid ordinary shares in the Company at nil cost subject to the achievement of
the profit hurdles outlined below.
If the cumulative underlying Group profit of financial years 2014, 2015 and 2016 divided by 3 is:
Less than 133% of 2013 underlying profit, none will be issued;
•
• 133% to 138% of 2013 underlying profit one-third of the total will be issued;
• 139% to 145% of 2013 underlying profit two-thirds of the total will be issued;
• 146% or greater of 2013 underlying profit 100% will be issued.
A grant of 200,000 performance rights to be made in the 2014 LTI scheme to be approved by the Board.
Commencing 1 July 2015, 10% of the total value added profit over the performance period (1 July 2015 to
30 June 2019). Value added profit in Centrepoint Alliance Premium Funding Pty Ltd’s statutory profit
before tax (‘CAPF PBT’) less the total minimum return on equity for that year. Growth in CAPF PBT must be
at least 10% each year and an average of at least 15% over the performance period.
Required notice (Executive): 3 months.
Required notice (Company): 3 months.
Termination entitlements: Statutory entitlements and 9 months’ notice or equivalent salary in lieu of
notice.
PAGE 17
8
1
E
G
A
P
d
e
t
a
e
R
l
d
e
t
a
e
r
l
e
r
a
h
S
e
c
n
a
m
r
o
f
r
e
P
l
a
t
o
T
n
o
i
t
a
n
m
r
e
T
i
s
t
n
e
m
y
a
p
s
t
n
e
m
y
a
p
d
e
s
a
b
-
e
r
a
h
S
s
t
i
f
e
n
e
b
m
r
e
t
-
g
n
o
L
t
s
o
P
t
n
e
m
y
o
p
m
E
l
s
t
i
f
e
n
e
b
m
r
e
t
-
t
r
o
h
S
s
y
a
d
f
o
.
o
N
n
o
i
t
a
r
e
n
u
m
e
r
r
a
e
Y
%
-
-
%
-
-
$
6
8
2
,
5
2
1
7
1
4
,
0
1
1
%
4
4
.
7
2
%
3
4
.
1
1
7
1
9
,
5
5
6
-
-
-
-
-
-
-
-
-
-
-
-
%
3
5
.
1
%
2
8
.
7
%
2
4
.
1
%
4
9
.
5
-
-
-
-
-
-
-
-
-
%
9
8
.
1
1
-
%
3
2
.
5
%
7
3
.
6
%
4
1
.
4
5
%
1
3
.
3
3
%
2
9
.
0
2
3
4
4
,
4
8
1
5
1
,
6
6
0
0
0
,
6
6
1
5
1
,
6
6
0
0
0
,
6
6
1
5
1
,
6
6
0
0
0
,
0
6
5
4
5
0
0
5
,
6
1
8
6
3
,
0
2
4
6
6
2
,
2
9
1
3
3
1
,
5
3
5
9
8
0
,
4
1
3
8
4
4
,
9
6
8
7
6
4
,
2
1
5
6
8
6
,
4
3
8
8
4
0
,
7
7
5
,
2
0
7
9
,
4
8
4
,
2
-
-
-
-
-
-
-
-
-
-
-
-
0
0
0
,
0
5
-
5
5
3
,
0
0
3
-
-
-
5
0
1
,
9
0
2
5
5
3
,
0
0
3
5
0
1
,
9
5
2
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
4
9
7
,
4
$
-
-
0
0
0
,
0
8
1
-
-
-
-
-
-
-
-
-
-
-
-
-
4
6
2
,
7
0
0
6
,
9
4
-
-
-
0
0
0
,
8
6
8
5
6
,
1
6
-
-
0
0
0
,
8
4
2
s
e
r
a
h
S
s
n
o
i
t
p
o
e
r
a
h
S
e
c
i
v
r
e
s
g
n
o
L
h
s
a
C
e
v
a
e
l
s
e
v
i
t
n
e
c
n
I
$
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
6
8
5
,
5
5
4
3
,
1
1
8
9
9
,
2
3
0
5
,
7
-
4
8
5
,
8
8
4
8
,
8
1
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
n
o
i
t
a
u
n
n
a
r
e
p
u
S
$
8
0
6
,
0
1
7
1
1
,
9
5
4
9
,
3
3
2
7
9
,
6
1
0
6
,
5
0
5
4
,
5
1
0
6
,
5
0
5
4
,
5
1
0
6
,
5
4
5
9
,
4
7
4
-
7
6
8
,
7
2
8
7
4
,
4
1
0
5
6
,
9
0
5
9
,
2
2
0
5
7
,
7
2
0
0
0
,
7
2
3
7
5
,
6
1
h
s
a
C
s
u
n
o
B
$
-
-
&
y
r
a
l
a
S
s
e
e
F
$
8
7
6
,
4
1
1
0
0
3
,
1
0
1
0
0
0
,
5
7
2
7
9
,
6
6
3
-
-
-
-
-
-
-
-
-
-
-
8
4
3
,
8
1
0
0
0
,
0
2
1
7
4
,
7
7
0
5
5
,
0
6
0
5
5
,
0
6
0
5
5
,
0
6
0
5
5
,
0
6
0
5
5
,
0
6
6
4
0
,
5
5
8
9
4
0
0
5
,
6
1
1
0
5
,
2
4
3
8
8
7
,
7
7
1
4
9
1
,
1
0
2
0
0
0
,
5
5
2
0
0
7
,
0
7
4
0
0
0
,
0
0
3
0
0
7
,
0
7
1
0
0
0
,
0
0
3
0
0
0
,
5
2
1
8
0
4
,
4
3
4
5
6
3
5
6
3
5
6
3
6
7
5
6
3
5
6
3
5
6
3
5
6
3
5
6
3
5
6
3
3
4
1
2
4
0
3
2
4
2
4
2
1
5
6
3
5
6
3
5
6
3
2
9
2
1
8
2
,
3
1
1
3
3
3
,
6
2
1
8
4
0
,
4
6
5
0
8
7
,
2
4
3
,
1
0
0
7
,
5
1
3
6
2
3
,
3
0
7
,
1
4
1
0
2
3
1
0
2
4
1
0
2
3
1
0
2
4
1
0
2
3
1
0
2
4
1
0
2
3
1
0
2
4
1
0
2
3
1
0
2
4
1
0
2
3
1
0
2
3
1
0
2
4
1
0
2
4
1
0
2
3
1
0
2
4
1
0
2
3
1
0
2
3
1
0
2
4
1
0
2
3
1
0
2
n
o
s
l
e
N
.
J
.
R
t
r
a
w
Z
e
d
M
.
.
J
d
n
a
l
t
i
a
M
.
J
.
S
n
a
m
d
i
.
K
M
n
i
f
f
i
r
G
.
J
.
N
3
,
1
s
e
l
t
s
a
C
.
J
.
C
2
y
t
t
e
r
P
.
.
P
M
1
n
o
s
n
i
b
o
R
.
D
.
A
2
y
e
h
o
o
T
.
P
.
G
1
e
e
g
a
M
.
R
.
I
1
r
e
h
t
l
a
W
.
B
.
P
l
a
t
o
T
l
a
t
o
T
d
d
o
D
M
.
.
R
y
t
i
t
n
e
d
e
t
a
e
r
l
r
o
t
c
e
r
i
d
a
o
t
e
l
b
a
y
a
p
r
o
d
i
a
p
e
r
a
s
t
n
u
o
m
A
3
r
a
e
y
e
h
t
g
n
i
r
u
d
d
e
t
n
i
o
p
p
A
2
r
a
e
y
e
h
t
g
n
i
r
u
d
d
e
n
g
i
s
e
R
1
S
E
I
T
I
T
N
E
D
E
L
L
O
R
T
N
O
C
S
T
I
D
N
A
D
E
T
I
M
I
L
E
C
N
A
I
L
L
A
T
N
I
O
P
E
R
T
N
E
C
t
r
o
p
e
R
’
s
r
o
t
c
e
r
i
D
4
1
0
2
e
n
u
J
0
3
l
e
n
n
o
s
r
e
P
t
n
e
m
e
g
a
n
a
M
y
e
K
f
o
n
o
i
t
a
r
e
n
u
m
e
R
9
1
E
G
A
P
d
e
t
s
e
v
n
U
d
n
a
d
e
t
s
e
V
e
h
t
t
a
e
c
n
a
a
B
l
d
o
i
r
e
p
e
h
t
g
n
i
r
u
d
d
e
s
p
a
L
d
o
i
r
e
p
e
h
t
g
n
i
r
u
d
d
e
s
i
c
r
e
x
E
g
n
i
r
u
d
n
o
i
t
a
s
n
e
p
m
o
c
s
a
d
e
t
n
a
r
G
e
h
t
t
a
e
c
n
a
a
B
l
l
e
b
a
s
i
c
r
e
x
e
d
o
i
r
e
p
e
h
t
f
o
d
n
e
d
o
i
r
e
p
e
h
t
e
h
t
f
o
t
r
a
t
s
P
M
K
y
b
d
l
e
h
s
t
h
g
i
r
e
c
n
a
m
r
o
f
r
e
p
d
n
a
s
e
r
a
h
s
,
s
n
o
l
i
t
p
o
f
o
e
u
a
v
r
i
a
f
d
n
a
r
e
b
m
u
n
e
h
t
f
o
n
o
i
t
a
i
l
i
c
n
o
c
e
R
0
0
0
,
0
0
6
0
0
0
,
0
0
5
,
1
-
-
0
0
0
,
0
0
6
0
0
0
,
0
0
5
,
1
-
-
5
1
7
,
0
7
3
4
1
,
7
0
1
5
1
7
,
0
7
3
4
1
,
7
0
1
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
0
0
0
,
4
0
2
0
0
0
,
0
0
6
0
0
0
,
0
4
5
0
0
0
,
0
0
5
,
1
-
-
-
-
-
-
5
1
7
,
0
7
3
4
1
,
7
0
1
.
o
N
.
o
N
.
o
N
)
$
(
l
e
u
a
V
.
o
N
)
$
(
l
e
u
a
V
.
o
N
)
$
(
l
e
u
a
V
.
o
N
d
o
i
r
e
p
.
o
N
r
a
e
Y
e
m
a
N
4
1
0
2
4
1
0
2
4
1
0
2
4
1
0
2
s
t
h
g
i
r
e
c
n
a
m
r
o
f
r
e
P
t
r
a
w
Z
e
d
.
M
.
J
d
d
o
D
.
M
.
R
P
S
E
A
C
r
e
d
n
u
s
e
r
a
h
S
d
d
o
D
.
M
.
R
1
e
e
g
a
M
.
R
.
I
r
a
e
y
e
h
t
g
n
i
r
u
d
d
e
n
g
i
s
e
R
1
r
a
e
y
n
i
d
e
s
p
a
L
.
o
N
n
i
d
e
t
s
e
V
r
a
e
y
.
o
N
e
c
i
r
p
e
s
i
c
r
e
x
E
e
t
a
d
y
r
i
p
x
E
$
e
t
a
D
g
n
i
t
s
e
V
e
u
a
v
l
r
i
a
F
t
h
g
i
r
r
e
p
t
n
a
r
g
t
a
e
t
a
d
$
e
t
a
d
t
n
a
r
G
r
o
s
t
h
g
i
R
d
e
t
n
a
r
g
s
n
o
i
t
p
o
r
a
e
y
n
i
.
o
N
r
a
e
Y
e
m
a
N
s
t
h
g
i
r
e
c
n
a
m
r
o
f
r
e
P
-
-
-
-
-
-
6
1
0
2
p
e
S
1
6
1
0
2
p
e
S
1
-
-
-
-
6
1
0
2
p
e
S
1
6
3
.
0
6
1
0
2
p
e
S
1
4
3
.
0
$
$
3
1
0
2
r
e
b
m
e
c
e
D
8
1
0
0
0
,
0
0
6
3
1
0
2
r
e
b
m
e
v
o
N
9
2
0
0
0
,
0
0
5
,
1
4
1
0
2
4
1
0
2
t
r
a
w
Z
e
d
.
M
.
J
d
d
o
D
.
M
.
R
-
-
-
-
4
1
0
2
d
d
o
D
.
M
.
R
P
S
E
A
C
r
e
d
n
u
s
e
r
a
h
S
S
E
I
T
I
T
N
E
D
E
L
L
O
R
T
N
O
C
S
T
I
D
N
A
D
E
T
I
M
I
L
E
C
N
A
I
L
L
A
T
N
I
O
P
E
R
T
N
E
C
t
r
o
p
e
R
’
s
r
o
t
c
e
r
i
D
4
1
0
2
e
n
u
J
0
3
d
e
s
p
a
l
d
n
a
d
e
t
s
e
v
,
d
e
d
r
a
w
a
s
n
o
i
t
p
o
d
n
a
s
e
r
a
h
s
,
s
t
h
g
i
r
e
c
n
a
m
r
o
f
r
e
P
,
2
3
7
1
4
1
4
,
,
4
3
9
7
4
1
1
,
,
2
5
4
0
8
9
1
,
,
1
4
8
1
0
5
2
,
7
6
6
6
6
,
,
3
6
5
0
3
2
1
,
-
-
-
8
6
3
7
,
3
2
6
,
8
2
9
,
9
,
2
5
4
0
8
9
1
,
-
-
1
6
9
2
4
7
,
7
6
6
6
1
,
1
0
7
1
4
5
,
-
)
7
5
4
6
(
,
8
5
2
,
3
2
4
,
4
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
,
8
9
7
3
9
9
2
,
,
0
8
8
8
5
7
1
,
-
-
0
0
0
0
5
,
2
6
8
8
8
6
,
7
5
4
6
,
8
6
3
7
,
5
6
3
,
5
0
5
,
5
e
c
n
a
a
B
l
4
1
0
2
e
n
u
J
0
3
d
r
O
e
g
n
a
h
c
t
e
N
f
o
e
s
i
c
r
e
x
e
n
O
s
a
d
e
t
n
a
r
G
#
r
e
h
t
o
d
r
O
s
n
o
i
t
p
o
d
r
O
n
o
i
t
a
r
e
n
u
m
e
r
d
r
O
e
c
n
a
a
B
l
3
1
0
2
y
l
u
J
1
d
r
O
t
r
a
w
Z
e
d
M
.
.
J
n
o
s
l
e
N
.
J
.
R
4
1
0
2
Y
F
d
n
a
l
t
i
a
M
.
J
.
S
n
i
f
f
i
r
G
.
J
.
N
2
y
e
h
o
o
T
.
P
.
G
y
t
t
e
r
P
.
.
P
M
n
a
m
d
i
.
K
M
1
e
e
g
a
M
.
R
.
I
d
d
o
D
M
.
.
R
l
a
t
o
T
0
2
E
G
A
P
o
n
s
n
o
i
t
i
d
n
o
c
d
n
a
s
m
r
e
t
r
e
d
n
u
o
t
n
i
d
e
r
e
t
n
e
n
e
e
b
e
v
a
h
s
n
o
i
t
p
o
n
o
i
t
a
r
e
n
u
m
e
r
f
o
e
s
i
c
r
e
x
e
e
h
t
m
o
r
f
g
n
i
s
i
r
a
e
s
o
h
t
n
a
h
t
r
e
h
t
o
P
M
K
h
t
i
w
s
n
o
i
t
c
a
s
n
a
r
t
y
t
i
u
q
e
l
l
A
#
.
h
t
g
n
e
l
s
'
m
r
a
t
a
g
n
i
l
a
e
d
f
i
d
e
t
p
o
d
a
e
v
a
h
d
l
u
o
w
y
n
a
p
m
o
C
e
h
t
e
s
o
h
t
n
a
h
t
e
l
b
a
r
u
o
v
a
f
e
r
o
m
P
M
K
y
b
y
l
l
a
i
c
i
f
e
n
e
b
d
n
a
y
l
t
c
e
r
i
d
n
i
,
y
l
t
c
e
r
i
l
d
d
e
h
s
e
r
a
h
s
s
e
d
u
l
c
n
I
*
r
a
e
y
e
h
t
g
n
i
r
u
d
d
e
t
n
i
o
p
p
A
2
r
a
e
y
e
h
t
g
n
i
r
u
d
d
e
n
g
i
s
e
R
1
S
E
I
T
I
T
N
E
D
E
L
L
O
R
T
N
O
C
S
T
I
D
N
A
D
E
T
I
M
I
L
E
C
N
A
I
L
L
A
T
N
I
O
P
E
R
T
N
E
C
t
r
o
p
e
R
’
s
r
o
t
c
e
r
i
D
4
1
0
2
e
n
u
J
0
3
*
l
e
n
n
o
s
r
e
P
t
n
e
m
e
g
a
n
a
M
y
e
K
f
o
s
g
n
d
o
h
e
r
a
h
S
i
l
)
r
e
b
m
u
N
(
d
e
t
i
m
i
L
e
c
n
a
i
l
l
i
A
t
n
o
p
e
r
t
n
e
C
n
i
d
l
e
h
s
e
r
a
h
S
CENTREPOINT ALLIANCE LIMITED AND ITS CONTROLLED ENTITIES
Directors’ Report
30 June 2014
Short term incentives
Objective
The objective of short term incentives (‘STI’) is to link the achievement of the Group's operational targets
with the remuneration received by the executives charged with meeting those targets. The total potential
STI available is set at a level so as to provide sufficient incentive to the executive to achieve the operational
targets and the cost to the Group is reasonable.
Structure
In July 2013 the directors approved a Group-wide structured STI scheme applicable to all employees,
excluding the Group CEO and the CEO – Centrepoint Alliance Premium Funding Pty Ltd. Under the STI
scheme, employees may be able to achieve a cash bonus based on a percentage of their annual base salary.
Bonuses will be weighted by a three tiered approach with weightings assigned to each level, being CAF
Group results, Business Unit results and Individual Performance. For eligible Group Key Management
Personnel the respective weightings are 40%, 40% and 20%. The maximum bonus payable is 50% of the
KMP annual salary. On an annual basis, after consideration of performance against KPIs, the NRGC, in line
with their responsibilities, determine the total amount, if any, of the short term incentive the amounts to
be paid to each employee. This process usually occurs within three months of the reporting date.
The STI system is a simple, consistent method of remunerating and rewarding employees. The directors
believe it aligns their interests with those of the shareholders and will improve staff engagement and
performance.
Long term incentives
Objective
The objective of long term incentives (‘LTI’) is to reward executives in a manner that aligns remuneration
with the creation of shareholder wealth. As such, LTI grants are only made to executives who are able to
significantly influence the generation of shareholder wealth and thus have an impact on the Group's
performance against the relevant long term performance hurdle.
Structure
LTI awards to executives are made under the executive LTI plan and are delivered in the form of options
and shares. Both options and shares vest in tranches over a specified time period and may also have other
performance hurdle requirements, typically related to shareholder return, as determined by the NRGC.
Performance rights are rights that can be converted to fully paid ordinary shares in the Company for no
monetary consideration subject to specific performance criteria being achieved. The performance rights
will only vest if certain profit targets are met.
Awards
In August 2013 the Board approved the grant of up to 1,500,000 performance rights to the Managing
Director (approved by shareholders at the 2013 AGM) and up to 2,600,000 performance rights to
nominated senior executives of the Group, which are subject to achievement of the profit hurdles outlined
below:
If the cumulative underlying profit of financial years 2014, 2015 and 2016 divided by 3 is:
Less than 133% of 2013 underlying profit, none will be issued;
•
• 133% to 138% of 2013 underlying profit one-third of the total will be issued;
• 139% to 145% of 2013 underlying profit two-thirds of the total will be issued;
• 146% or greater of 2013 underlying profit 100% will be issued.
PAGE 21
CENTREPOINT ALLIANCE LIMITED AND ITS CONTROLLED ENTITIES
Directors’ Report
30 June 2014
On the departure of a senior executive, 400,000 of the 2,600,000 performance rights issued were forfeited
during the year.
Underlying profit is a measure of consolidated net profit after tax for the Group from its core trading
activities. It excludes gains or losses from unusual or rarely-occurring events and from any misalignment
between economic value and accounting treatment. The final underlying profit or loss for a period will be
determined by the Board.
These arrangements form part of the Company’s long term incentive scheme for senior executives, the
purpose of which is to align their interests with those of the shareholders and to provide a key retention
incentive. Upon issue, the shares will rank equally with all other fully paid ordinary shares in the Company
then on issue.
a) Option holdings of key management personnel
No options to purchase shares were held by key management personnel.
b) Loans to key management personnel
There were no loans to directors or other key management personnel during the financial year.
c) Other transactions with key management personnel and their related parties
Directors of the Company, or their related entities, conduct transactions with the Company or its controlled
entities within a normal employee, customer or supplier relationship on terms and conditions no more
favourable than those with which it is reasonable to expect the entity would have adopted if dealing with
the director or director related entity at arm’s length in similar circumstances.
These transactions by director are as follows:
Consulting Fees $14,208 (2013: $178,286)
R.J Nelson
J. M. de Zwart None
None
N.J Griffin
None
S.J Maitland
None
M. Kidman
None
M. Pretty
During May 2014, the Company finalised a 1 for 3 non-renounceable fully underwritten rights issue. The
underwriter of the rights issue entered into sub-underwriting arrangements with 2 parties who are related
to Directors of the Company:
• Optiplus Super Pty Ltd (an entity associated with Managing Director, John de Zwart). 332,890
shares were acquired under the sub-underwriting arrangement for $106,525;
• GEJK Pty Limited (an entity associated with Director, Matthew Kidman). 312,080 shares were
acquired under the sub-underwriting arrangement for $99,866.
No sub-underwriting fees were received by John de Zwart, Matthew Kidman or their related entities in
relation to the above transactions.
PAGE 22
CENTREPOINT ALLIANCE LIMITED AND ITS CONTROLLED ENTITIES
Directors’ Report
30 June 2014
Auditor Independence and Non-audit Services
The auditor, Ernst & Young, has provided a written independence declaration to the directors in relation to
its audit of the financial report for the year ended 30 June 2014. The independence declaration which
forms part of this report is on page 24.
The following non-audit services were provided by the entity’s auditor, Ernst & Young. The directors are
satisfied that the provision of non-audit services is compatible with the general standard of independence
for auditors imposed by the Corporations Act 2001. The nature and scope of non-audit service provided
means that auditor independence was not compromised.
Taxation services
Other services associated with the rights issue
Total
Signed in accordance with a resolution of the directors.
2014
$
76,643
12,500
89,143
2013
$
167,633
-
167,633
R. J. Nelson
Chairman
22 August 2014
PAGE 23
PAGE 24
CENTREPOINT ALLIANCE LIMITED AND ITS CONTROLLED ENTITIES
Corporate Governance Statement
30 June 2014
Corporate Governance Policies and Practices
The Board of directors of Centrepoint Alliance Limited is responsible for establishing the corporate
governance framework of the Company. The Board guides and monitors the business and affairs of
Centrepoint Alliance Limited on behalf of the shareholders by whom they are elected and to whom they
are accountable.
Key aspects of the Company’s corporate governance are set out below and, with the exception of those
matters specifically referred to, the Company has followed the ASX “Corporate Governance Principles and
Recommendations with 2010 amendments” 2nd edition (‘the Recommendations’). Many of the detailed
provisions of these Recommendations are embedded in the Company’s corporate policies, and are not
repeated in this Statement. The Company’s corporate governance policies and practices were updated in
June 2014 to incorporate the ASX “Corporate Governance Principles and Recommendations” 3rd edition.
For further information on corporate governance policies and charters adopted by Centrepoint Alliance
Limited, please refer to our website: http://www.centrepointalliance.com.au/corporate-governance/.
Board of Directors
The Board has established structures, policies and systems to clearly define the respective roles of the
Board and management and to clearly reserve certain functions and powers to the Board.
The activities of the Board are governed by a Board Charter that sets out requirements relating to
membership,
independence, operations and responsibilities. The Board has the following key
responsibilities:
(a) Overall guidance – including the determination of strategic and financial objectives;
(b) Effective oversight of management – including overseeing and monitoring; implementation of policies
and resources to achieve those strategies and financial objectives; and
(c) Ensuring compliance with the Company’s constitution, and all legal and regulatory requirements, and
ethical standards.
The Board has particular responsibility for the appointment, remuneration and performance review of the
CEO; and oversight of the engagement of senior executives, including the company secretary.
The principles above have been applied continuously by the Board. The Board Charter is reviewed at least
annually.
There are procedures in place, agreed by the Board to enable directors, in furtherance of their duties, to
seek independent professional advice at the Company’s expense.
The directors and their terms in office at the date of this report are:
Name
Position
Term in
office
R. J. Nelson
Chairman & Non-Executive Director
9 years
J. M. de Zwart Managing Director
N. J. Griffin
Non-Executive Director
S. J. Maitland
Non-Executive Director
M. Kidman
Non-Executive Director
2 years
9 years
3 years
3 years
M. P. Pretty
Non-executive Director
2 months
PAGE 25
CENTREPOINT ALLIANCE LIMITED AND ITS CONTROLLED ENTITIES
Corporate Governance Statement
30 June 2014
Nomination, Remuneration & Governance Committee (‘NRGC’)
The role of the NRGC is to ensure that the Company has appropriate corporate governance measures in
place and to set policy and strategy for the appointment, compensation and performance review of
directors and executives, to approve senior executive service agreements and severance arrangements, to
oversee use of equity-based compensation and to ensure appropriate communication and disclosure
practices are in place.
Nomination duties and responsibilities include:
• Assisting and advising the Board with regard to appointments, terminations and succession
planning of directors and senior executives, specifically including the company secretary;
• Assessing necessary competencies of directors and senior executives; and
• Reviewing the performance of directors in accordance with documented evaluation criteria.
Remuneration duties and responsibilities include:
• Assisting and advising the Board with regard to remuneration policies and strategy for the
Company;
• Setting the framework for remuneration of the directors and senior executives; and
• Approving and monitoring company
incentive schemes and equity based remuneration
arrangements.
Governance duties and responsibilities include:
• Developing and reviewing corporate governance policies; and
• Advising the Board on regulatory and compliance issues, with particular reference to disclosure;
ASX Listing Rules and Recommendations.
This committee consists of two independent non-executive directors and is chaired by Noel Griffin and
meets at least bi-annually.
The committee operates under a charter approved by the Board of directors, which is reviewed at least
annually.
Group Audit, Risk and Compliance Committee (‘GARCC’)
The combination of audit, risk and compliance responsibilities in one committee is a decision of the Board
to reflect the relative size of the Company and the interlocking nature of these activities in the financial
services sector.
The GARCC is responsible for:
• Overseeing the integrity of the financial reporting process and the financial statements, the
appointment of independent and competent external auditors, performance and review of the
external audit process; review of internal controls;
• Overseeing the Company’s system of risk management and internal controls; and
• Overseeing the company’s systems and procedures for compliance with applicable legal and
regulatory requirements.
The committee comprises two non-executive directors and one externally appointed member and is
chaired by Stephen Maitland.
The committee operates under a Board Charter approved by the Board of directors, which is reviewed at
least annually.
PAGE 26
CENTREPOINT ALLIANCE LIMITED AND ITS CONTROLLED ENTITIES
Corporate Governance Statement
30 June 2014
Board Composition
Biographies of the current Board are contained in the Directors’ Report and on the Company’s website
http://www.centrepointalliance.com.au/our-board.
A majority of the non-executive directors are deemed by the Board to be Independent.
The Board has developed a skills matrix to identify the required skills and experience against those of
current directors and as a guide to the skills and experience required of future directors. Amongst the skill
groups identified are strategic expertise, financial sector experience, financial literacy at an advanced level;
marketing and brand management; information technology and communication; risk management;
investments and financial markets; change management; regulation and compliance.
The Company has an induction program for new directors. It encourages and has policies for payment for
on-going professional development by directors.
Securities Trading
The Company has strict regulations governing any trading in company shares by directors or employees,
which are set out in the Company’s Securities Trading Policy, which is reviewed at least annually. Breaches
of the policy are subject to disciplinary action that may result in termination of employment.
Integrity in Corporate Reporting
The Company has an independent and effective Group Audit, Risk and Compliance Committee, described
above.
The Company receives certifications in accordance with s295A of the Corporations Act 2001 from the CEO
and CFO with each published financial report.
The Company’s Auditor attends General Meetings and the Annual General Meeting to respond to questions
from shareholders in regard to the Audit.
Remuneration
For details on performance measurement and remuneration of directors and specified executives in the
current period, please refer to the Remuneration Report which is contained within the Directors’ Report.
There is no scheme to provide retirement benefits, other than statutory superannuation, to non-executive
directors, who receive a fixed fee.
Ethical Standards
The Board is committed to establishing and maintaining appropriate ethical standards to underpin the
Company’s operations and corporate practices. The Board has adopted the following codes of conduct
governing the Company’s activities:
• An overall corporate code of conduct;
• A code of conduct for directors; and
• A code of conduct for employees.
PAGE 27
CENTREPOINT ALLIANCE LIMITED AND ITS CONTROLLED ENTITIES
Corporate Governance Statement
30 June 2014
Diversity
The Board is committed to creating an inclusive workplace where everyone is treated equally and fairly,
and where discrimination, harassment and inequity are not tolerated. A Diversity, Anti-Discrimination &
Equal Employment Opportunity Policy has been established and is reviewed regularly.
The Board is committed to:
• Promoting an inclusive culture which treats the workforce with fairness and respect (the Company
has set a zero tolerance against discrimination of employees).
• Providing career development opportunities for all employees irrespective of gender, cultural or
other differences (the Company encourages training and advancement for all employees through
regular reviews and assessments).
• Monitoring and reporting on the percentage of females in the workforce and in senior
management positions (currently 55% of employees and 18% of senior manager positions,
including directors, are female).
The Company continues to review and update the measurable objectives to promote diversity for the
future.
Timely and Balanced Disclosure
The Board aims to ensure shareholders, investors and all other appropriate parties are fully informed of any
matters that may impact on the financial interests of the Company.
The Company’s policies on these matters are set out in the Company’s Disclosure & Communication Policy
and Disclosure & Materiality Guidelines, which are reviewed at least annually.
Information is communicated to shareholders as follows:
• The Annual Report is distributed as required by law.
• The Board ensures the Annual Report includes relevant information about the operations of the
Company during the year, changes in the state of affairs of the Company and details of future
developments, and other disclosures required by the Corporations Act 2001.
• The half-yearly report contains summarised financial information and a review of the operations of
the Company during the period. The half-year reviewed financial report is prepared in accordance
with the requirements of applicable accounting standards, the Corporations Act 2001 and is lodged
with ASIC and the ASX. The financial report is sent to any shareholder who requests it.
• Proposed major changes in the Company that may impact on share ownership rights are submitted
to a vote of shareholders.
• Notices of all meetings of shareholders.
All documents
http://www.centrepointalliance.com.au/investor-centre/.
that are
released publicly are available on
the Company’s website at
The external auditors are required to attend the Annual General Meeting and are available to answer any
shareholder questions about the conduct of the audit and preparation of the audit report.
The Board encourages full participation of shareholders at the Annual General Meeting to ensure a high
level of accountability and identification with the Company’s strategy and goals. Written questions are
encouraged. Important issues are presented to shareholders as single resolutions.
The shareholders vote on the appointment and aggregate remuneration of directors, granting of options
and shares to directors and changes to the Constitution. A copy of the Constitution is available to any
shareholder who requests it.
PAGE 28
CENTREPOINT ALLIANCE LIMITED AND ITS CONTROLLED ENTITIES
Corporate Governance Statement
30 June 2014
Rights of Security holders
The Company maintains a section of its website that provides comprehensive investor information about
its governance and disclosures and electronic communication links.
Risk Management
The GARCC assists the Board in its role in identifying and managing the risks in the Company. The Company
also has a detailed Risk Management Policy and Risk Management Framework, which are reviewed at least
annually. Individual business units appoint risk officers and maintain risk registers for their businesses
including a description and rating of the risk, risk implications and detailed treatment and mitigation
strategies.
Each business unit is required to report to the Committee on a regular basis to summarise their risks,
provide detail on high and very high risks and update on any changes and progress in relation to risk
management.
The CEO regularly reports to the Board on group risks and the group risk management process is managed
by a dedicated manager.
The Company does not have a formal internal audit function, and the Board does not consider it necessary
to establish this capacity at this stage of the Company’s development. This places a greater reliance on
management system controls. Some of the greatest risks in the businesses relate to compliance with AFSL
and other licence conditions; which are monitored through a well-resourced, specialist internal compliance
function combined with an external independent review at least annually. A large volume of the financial
transactions are the result of payments from platform and other providers that are large and sophisticated
entities whose systems and controls assist in providing data integrity.
The Company does not have any material exposure to economic, environment or social sustainability risks.
PAGE 29
CENTREPOINT ALLIANCE LIMITED AND ITS CONTROLLED ENTITIES
Consolidated Statement of Comprehensive Income
For the year ended 30 June 2014
CONTINUING OPERATIONS
Revenue
Advice and financial product revenue (gross)
Advice and financial product fees
Advice and financial product revenue (net)
Interest income
Other revenue
Expenses
Borrowing expenses
Employee benefit expenses
Professional consulting fees
Client claims
Insurances
Property costs
Impairment of assets
Other general and administration expenses
Share of loss of associates
Profit/(Loss) before tax from continuing operations
Income tax (expense)/credit
Net profit/(loss) from continuing operations after tax
Discontinued operations
Loss after tax from discontinued operations
Net profit/(loss) for the year
OTHER COMPREHENSIVE INCOME
Other comprehensive income to be reclassified to profit or loss
in subsequent periods
Foreign currency translation
TOTAL COMPREHENSIVE INCOME FOR THE YEAR
Net profit/(loss) attributable to:
Owners of the parent
Non-controlling interests
Net profit/(loss) for the period
Total comprehensive profit/(loss) attributable to:
Owners of the parent
Non-controlling interests
Total comprehensive profit/(loss) for the period
Earnings/(loss) per share for profit/(loss) attributable to the
ordinary equity holders of the parent
Basic profit/(loss) per share
Diluted profit/(loss) per share
Basic profit/(loss) per share from continuing operations
Diluted profit/(loss) per share from continuing operations
Note
2014
$'000
2013
$'000
6
7
8
9
22 (a)
9
9
11
120,099
(86,588)
33,511
17,181
959
51,651
(5,108)
(22,930)
(2,522)
(1,886)
(1,953)
(2,871)
(693)
(9,434)
-
4,254
(1,031)
3,223
-
3,223
-
-
3,223
3,299
(76)
3,223
3,299
(76)
3,223
128,013
(92,685)
35,328
15,245
2,057
52,630
(5,015)
(22,550)
(4,313)
(9,980)
(2,066)
(3,689)
(993)
(10,580)
(76)
(6,632)
(571)
(7,203)
(85)
(7,288)
-
1,456
(5,832)
(7,781)
493
(7,288)
(6,325)
493
(5,832)
Cents
Cents
3.20
3.13
3.20
3.13
(8.04)
(8.04)
(7.95)
(7.95)
13
13
13
13
The Consolidated Statement of Comprehensive Income is to be read in conjunction with the attached notes included in pages 34 to
87.
PAGE 30
CENTREPOINT ALLIANCE LIMITED AND ITS CONTROLLED ENTITIES
Consolidated Statement of Financial Position
As at 30 June 2014
ASSETS
Current
Cash and cash equivalents
Trade and other receivables
Interest bearing receivables
Other assets
Current tax asset
Total current assets
Non-current
Trade and other receivables
Interest bearing receivables
Other assets
Property, plant & equipment
Intangible assets & goodwill
Deferred tax assets
Total non-current assets
TOTAL ASSETS
LIABILITIES
Current
Trade and other payables
Interest bearing liabilities
Provisions
Current tax liability
Total current liabilities
Non-current
Trade and other payables
Interest bearing liabilities
Provisions
Total non-current liabilities
TOTAL LIABILITIES
NET ASSETS
EQUITY
Contributed equity
Reserves
Accumulated losses
Equity attributable to shareholders
Non-controlling interests
TOTAL EQUITY
Note
25(a)
14
15
16
14
15
16
18
19
11(d)
20
21
22
20
21
22
23
24
2014
$'000
2013
$'000
16,373
13,038
130,609
9,205
-
169,225
117
453
667
1,963
6,029
6,362
15,591
184,816
36,172
95,749
10,108
140
142,169
90
249
7,787
8,126
150,295
34,521
40,015
4,318
(9,938)
34,395
126
34,521
9,352
13,730
107,622
2,760
225
133,689
92
557
1,119
1,193
6,521
7,052
16,534
150,223
37,544
71,656
10,250
121
119,571
-
90
13,324
13,414
132,985
17,238
24,809
69
(7,913)
16,965
273
17,238
The Consolidated Statement of Financial Position is to be read in conjunction with the attached notes included in pages 34 to 87.
PAGE 31
CENTREPOINT ALLIANCE LIMITED AND ITS CONTROLLED ENTITIES
Consolidated Statement of Cash Flows
For the year ended 30 June 2014
Cash Flows from Operating Activities
Cash receipts from customers
Cash paid to suppliers and employees
Cash provided by operations
Claims and litigation settlements
Income tax refunded
Net cash flows (used in)/provided by operating activities
Cash Flows from Investing Activities
Interest received
Dividends received from investments
Investment in Term deposits
Proceeds from sale of investments
Acquisition of intangible assets
Acquisition of property, plant & equipment
Proceeds from sale of property, plant & equipment
Net cash flows (used in)/provided by investing activities
Cash Flows from Financing Activities
Interest and borrowing expenses paid
Net increase in borrowings
Net increase in loan funds advanced
Proceeds from issue of share capital
Transaction costs on issue of share capital
Dividends paid
Net cash flows provided by/(used in) financing activities
Note
2014
$'000
2013
$'000
160,280
(152,739)
7,541
(8,879)
58
(1,280)
172,007
(159,554)
12,453
(11,295)
1
1,159
22
25(b)
403
74
(5,000)
333
(1,034)
(1,394)
141
(6,477)
(66)
24,252
(22,884)
13,984
(508)
-
14,778
711
-
-
-
-
(439)
-
272
(326)
6,540
(12,225)
-
-
(920)
(6,931)
18
12
Net increase in cash & cash equivalents
7,021
(5,500)
Cash & cash equivalents at the beginning of the year
Effect of exchange rate fluctuations on cash held
Cash & cash equivalents at the end of the period
25(a)
25(a)
9,352
-
16,373
14,621
231
9,352
The Consolidated Statement of Cash Flows is to be read in conjunction with the attached notes included in pages 34 to 87.
PAGE 32
l
a
t
o
T
y
t
i
u
q
E
0
0
0
'
$
-
n
o
N
g
n
i
l
l
o
r
t
n
o
C
s
t
s
e
r
e
t
n
I
0
0
0
'
$
l
a
t
o
T
0
0
0
'
$
l
d
e
t
a
u
m
u
c
c
A
(
/
)
s
e
s
s
o
l
i
d
e
n
a
t
e
R
i
s
g
n
n
r
a
e
0
0
0
'
$
r
e
h
t
O
s
e
v
r
e
s
e
R
0
0
0
'
$
d
n
e
d
i
v
i
D
e
v
r
e
s
e
R
0
0
0
'
$
3
2
2
,
3
8
3
2
,
7
1
-
3
2
2
,
3
-
9
2
4
1
3
6
,
3
1
-
-
-
1
2
5
,
4
3
2
6
1
,
7
2
)
8
8
2
,
7
(
6
5
4
,
1
)
2
3
8
,
5
(
)
6
6
8
,
3
(
-
2
7
2
2
6
)
0
2
9
(
8
3
2
,
7
1
3
3
E
G
A
P
3
7
2
)
6
7
(
-
)
6
7
(
-
-
-
)
2
4
1
(
-
1
7
6
2
1
)
8
0
1
(
3
9
4
-
3
9
4
-
-
2
2
6
6
8
1
)
0
2
9
(
3
7
2
9
9
2
,
3
5
6
9
,
6
1
-
9
9
2
,
3
-
1
3
6
,
3
1
9
2
4
2
4
1
)
1
7
(
-
5
9
3
,
4
3
0
7
2
,
7
2
)
1
8
7
,
7
(
6
5
4
,
1
)
5
2
3
,
6
(
-
2
7
-
)
6
8
1
(
)
6
6
8
,
3
(
)
3
1
9
,
7
(
9
9
2
,
3
-
9
9
2
,
3
)
0
2
8
,
3
(
-
-
)
3
3
4
,
1
(
-
)
1
7
(
)
8
3
9
,
9
(
-
)
1
8
7
,
7
(
-
)
1
8
7
,
7
(
-
4
5
)
6
8
1
(
5
6
9
,
6
1
)
3
1
9
,
7
(
-
-
-
-
-
9
6
9
2
4
-
-
-
8
9
4
)
5
0
4
,
1
(
-
6
5
4
,
1
6
5
4
,
1
-
8
1
-
-
-
9
6
-
-
-
-
-
-
-
-
0
2
8
,
3
0
2
8
,
3
-
-
-
-
-
-
-
-
-
-
9
0
8
,
4
2
y
r
a
n
d
r
O
i
s
e
r
a
h
s
0
0
0
'
$
s
e
t
o
N
-
-
-
-
-
5
7
5
,
1
1
3
6
,
3
1
-
-
5
1
0
,
0
4
5
7
6
,
8
2
-
-
-
)
6
6
8
,
3
(
-
-
-
-
9
0
8
,
4
2
3
2
8
2
3
2
8
2
2
1
t
s
e
r
e
t
n
i
y
t
i
r
o
n
m
i
f
o
n
o
i
t
i
s
i
u
q
c
a
n
o
l
a
t
i
p
a
c
e
r
a
h
s
f
o
e
u
s
s
I
s
e
c
n
e
r
e
f
f
i
d
n
o
i
t
a
l
s
n
a
r
t
y
c
n
e
r
r
u
c
n
g
i
e
r
o
F
r
a
e
y
e
h
t
r
o
f
e
m
o
c
n
i
e
v
i
s
n
e
h
e
r
p
m
o
c
l
a
t
o
T
d
o
i
r
e
p
e
h
t
r
o
f
)
s
s
o
L
(
/
t
i
f
o
r
P
3
1
0
2
y
l
u
J
1
t
a
e
c
n
a
a
B
l
e
v
r
e
s
e
R
d
n
e
d
i
v
i
D
o
t
r
e
f
s
n
a
r
T
l
a
t
i
p
a
c
e
r
a
h
s
f
o
e
u
s
s
I
t
n
e
m
y
a
p
d
e
s
a
b
-
e
r
a
h
S
s
e
i
r
a
i
d
i
s
b
u
s
s
a
e
s
r
e
v
o
f
o
e
l
a
s
d
n
a
n
o
i
t
a
d
i
l
o
s
n
o
c
e
D
s
e
c
n
e
r
e
f
f
i
d
n
o
i
t
a
l
s
n
a
r
t
y
c
n
e
r
r
u
c
n
g
i
e
r
o
F
r
a
e
y
e
h
t
r
o
f
e
m
o
c
n
i
e
v
i
s
n
e
h
e
r
p
m
o
c
l
a
t
o
T
m
o
r
f
s
e
r
a
h
s
f
o
n
o
i
t
a
l
l
e
c
n
a
c
d
n
a
k
c
a
b
y
u
B
s
s
e
n
i
s
u
b
e
r
o
p
a
g
n
i
S
f
o
e
l
a
s
t
n
e
m
y
a
p
d
e
s
a
b
-
e
r
a
h
S
)
s
e
s
s
o
l
(
/
s
n
i
a
g
n
o
i
t
u
l
i
D
3
1
0
2
e
n
u
J
0
3
t
a
e
c
n
a
a
B
l
d
i
a
p
s
d
n
e
d
i
v
i
D
)
s
e
s
s
o
l
(
/
s
n
i
a
g
n
o
i
t
u
l
i
D
4
1
0
2
e
n
u
J
0
3
t
a
e
c
n
a
a
B
l
2
1
0
2
y
l
u
J
1
t
a
e
c
n
a
a
B
l
d
i
a
p
s
d
n
e
d
i
v
i
D
d
o
i
r
e
p
e
h
t
r
o
f
)
s
s
o
L
(
/
t
i
f
o
r
P
.
7
8
o
t
4
3
s
e
g
a
p
n
i
d
e
d
u
l
c
n
i
s
e
t
o
n
d
e
h
c
a
t
t
a
e
h
t
h
t
i
w
n
o
i
t
c
n
u
n
o
c
n
j
i
d
a
e
r
e
b
o
t
s
i
y
t
i
u
q
E
n
i
s
e
g
n
a
h
C
f
o
t
n
e
m
e
t
a
t
S
d
e
t
a
d
i
l
o
s
n
o
C
e
h
T
S
E
I
T
I
T
N
E
D
E
L
L
O
R
T
N
O
C
S
T
I
D
N
A
D
E
T
I
M
I
L
E
C
N
A
I
L
L
A
T
N
I
O
P
E
R
T
N
E
C
y
t
i
u
q
E
n
i
s
e
g
n
a
h
C
f
o
t
n
e
m
e
t
a
t
S
d
e
t
a
d
i
l
o
s
n
o
C
4
1
0
2
e
n
u
J
0
3
d
e
d
n
e
r
a
e
y
e
h
t
r
o
F
CENTREPOINT ALLIANCE LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Consolidated Financial Statements
30 June 2014
1. Corporate information
The consolidated financial statements of Centrepoint Alliance Limited and its subsidiaries (collectively, the
‘Group’) for the year ended 30 June 2014 were authorised for issue in accordance with a resolution of the
directors on 22 August 2014.
Centrepoint Alliance Limited is a company limited by shares incorporated in Australia whose shares are
publicly traded on the Australian Stock Exchange.
The nature of the operations and principal activities of the Group are described in the Directors’ Report.
Information on the Group’s structure and other related party relationships is provided in Note 27.
2. Summary of significant accounting policies
Basis of preparation
General
The financial report is a general purpose financial report, which has been prepared in accordance with the
requirements of the Corporations Act 2001, Australian Accounting Standards, Interpretations and other
authoritative pronouncements of the Australian Account Standards Board. The financial report has also
been prepared on a historical cost basis.
Rounding
The financial report is presented in Australian dollars and all values are rounded to the nearest thousand
$1,000 (unless otherwise stated) under the option available to the Company under ASIC Class Order
98/100. The Company is an entity to which the class order applies.
Compliance with International Financial Reporting Standards
The financial report complies with International Financial Reporting Standards (‘IFRS’) as issued by the
International Accounting Standards Board.
New accounting standards and interpretations
Accounting Standards and Interpretations issued but not yet effective
The Australian Accounting Standards and Interpretations, that have recently been issued or amended but
are not yet effective and have not been adopted by the Group for the annual reporting period ending 30
June 2014 are set out below. The directors believe that the application of these new or amended
accounting standards and interpretations may not have any material financial effect on the Consolidated
Financial Statements presented, however the directors are still assessing the impact of the new standards
for the reporting period ending 30 June 2016 onwards.
Title
AASB 2012-3: Amendments to Australian Accounting Standards –
offsetting Financial Assets and Financial Liabilities (Amendments to AASB
132)
Addresses inconsistencies in current practice when applying the offsetting
criteria in AASB 132 ‘Financial Instruments: presentation’.
Application date
of standard
Application date
for Group
1 January 2014
1 July 2014
PAGE 34
CENTREPOINT ALLIANCE LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Consolidated Financial Statements
30 June 2014
Title
AASB 2013-3: Amendments to AASB 136 – Recoverable Amount
Disclosures for Non-Financial Assets
Addresses disclosure of information about the recoverable amount of
impaired assets if that amount is based on fair value less costs of disposal.
AASB 1031: Materiality
Revised AASB 1031 is an interim standard that cross-references to other
Standards and the Framework for the Preparation and Presentation of
Financial Statements (issued December 2013) that contain guidance on
materiality.
AASB 2014-1: Part A Annual Improvements 2010-2012 Cycle
Amends a number of pronouncements as a result of the IASB’s 2010-2012
annual improvements cycle. Key amendments include:
• AASB 2 – definition of a vesting condition;
• AASB 3 – accounting for contingent consideration in a business
combination;
• AASB 8 – aggregation of operating segments and reconciliation of
the total of the reportable segments’ assets to the entity’s assets;
• AASB 116 & 138 – revaluation method: proportionate restatement
of accumulated depreciation and accumulated amortisation
• AASB 124 – key management personnel; and
AASB 2014-1: Part A Annual Improvements 2011-2013 Cycle
Annual improvements to IFRS’s 2011-2013 Cycle and addresses the
following items:
• AASB 13 – scope of paragraph 52 (portfolio exception); and
• AASB 40 – clarifying that judgement is needed to determine
whether an acquisition of investment property is solely the
acquisition of an investment property or whether it is the
acquisition of a group of assets or a business combination in the
scope of AASB 3. That judgement is based on guidance in AASB 3.
AASB 9 / IFRS 9: Financial Instruments
On 24 July 2014 the IASB issued the final version of IFRS 9 which replaces
IAS 39 and includes a logical model for classification and measurement, a
single,
impairment model and a
substantially reformed approach to hedge accounting.
forward-looking
‘expected
loss’
Application date
of standard
Application date
for Group
1 January 2014
1 July 2014
1 January 2014
1 July 2014
1 July 2014
1 July 2014
1 July 2014
1 July 2014
1 January 2018
1 July 2018
IFRS 15: Revenue from contracts with customers
IFRS 15 establishes principles for reporting useful information to users of
financial statements about the nature, amount, timing and uncertainty of
revenue and cash flows arising from an entity’s contracts with customers.
1 January 2017
1 July 2017
PAGE 35
CENTREPOINT ALLIANCE LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Consolidated Financial Statements
30 June 2014
Title
Amendments to IAS 16 and IAS 38: Clarification of acceptable methods of
depreciation and amortisation
The IASB has clarified that the use of revenue based methods to calculate
the depreciation of an asset is not appropriate because revenue generated
by an activity that includes the use of an asset generally reflects factors
other than the consumption of the economic benefits embodied in the
asset. The IASB also clarified that revenue is generally presumed to be an
inappropriate basis for measuring the consumption of the economic
benefits embodied in an intangible asset. This presumption, however, can
be rebutted in certain limited circumstances.
AASB 2013-9: Amendments to Australian Accounting Standards –
Conceptual Framework, Materiality and Financial Instruments
The standard contains three main parts and makes amendments to a
number of Standards and Interpretations.
Part A of AASB 2013-9 makes consequential amendments arising from the
issuance of AASB CF 2013-1
Part B makes amendments to particular Australian Accounting Standards to
delete references to AASB 1031 and also makes minor editorial
amendments to various other standards.
Part C makes amendments to a number of Australian Accounting
Standards, including incorporating Chapter 6 Hedge Accounting into AASB 9
Financial Instruments.
Application date
of standard
Application date
for Group
1 January 2016
1 July 2016
20 December 2013
30 June 2014
1 January 2014
1 July 2014
1 January 2015
1 July 2015
a) Changes in accounting policy, disclosures, standards and interpretations
i) Changes in accounting policies, new and amended standards and interpretations
The Group has adopted the following new and amended Australian Accounting Standards and AASB
Interpretations that are mandatorily effective for the first time for the financial year beginning 1 July 2013:
AASB 10: Consolidated Financial
Statements
AASB 10 establishes a new control model that applies to all entities. It
replaces parts of AASB 127 Consolidated and Separate Financial Statements
dealing with the accounting for consolidated financial statements and UIG-112
Consolidation - Special Purpose Entities.
The new control model broadens the situations when an entity is considered
to be controlled by another entity and includes new guidance for applying the
model to specific situations, including when acting as a manager may give
control, the impact of potential voting rights and when holding less than a
majority voting rights may give control.
Consequential amendments were also made to this and other standards via
AASB 2011-7 and AASB 2012-10.
The Group has considered the application of this standard and has reviewed
all subsidiaries including investments in associates to confirm their inclusion
for consolidation purposes. This has resulted in no impact on the amounts
recognised in the consolidated financial statements.
PAGE 36
CENTREPOINT ALLIANCE LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Consolidated Financial Statements
30 June 2014
AASB 12: Disclosure of Interests in
Other Entities
AASB 12 includes all disclosures relating to an entity's interests in subsidiaries,
joint arrangements, associates and structured entities. New disclosures have
been introduced about the judgments made by management to determine
whether control exists, and to require summarised information about joint
arrangements, associates, structured entities and subsidiaries with non-
controlling interests. The application of AASB 12 does not have any material
impact on the amounts recognised in the consolidated financial statements.
AASB 13: Fair Value Measurement
and AASB 2011-8: Amendments to
Australian Accounting Standards
arising from AASB 13
AASB 13 establishes a single source of guidance for determining the fair value
of assets and liabilities. AASB 13 does not change when an entity is required
to use fair value, but rather, provides guidance on how to determine fair value
when fair value is required or permitted. Application of this definition may
result in different fair values being determined for the relevant assets.
AASB 13 also expands the disclosure requirements for all assets or liabilities
carried at fair value. This includes information about the assumptions made
and the qualitative impact of those assumptions on the fair value determined.
Consequential amendments were also made to other standards via AASB
2011-8.
AASB 13 requires prospective application from 1 July 2013. In addition,
specific transitional provisions were given to entities such that they need not
apply the disclosure requirements set out in the Standard in the comparative
information provided for periods before the initial application of the Standard.
In accordance with these transitional provisions, the Group has not made any
new disclosures required by AASB 13 for the 2013 comparative year. Other
than the additional disclosures, the application of AASB 13 does not have any
material impact on the amounts recognised in the consolidated financial
statements.
AASB 119: Employee Benefits (2011) The main change introduced by this standard is to revise the accounting for
defined benefit plans. The amendment removes the options for accounting for
the liability, and requires that the liabilities arising from such plans is
recognised in full with actuarial gains and losses being recognised in other
comprehensive income. It also revised the method of calculating the return on
plan assets.
The revised standard changes the definition of short-term employee benefits.
The distinction between short-term and other long-term employee benefits is
now based on whether the benefits are expected to be settled wholly within
12 months after the reporting date.
Consequential amendments were also made to other standards via AASB
2011-10.
The application of AASB 119 does not have any material impact on the
amounts recognised in the consolidated financial statements.
PAGE 37
CENTREPOINT ALLIANCE LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Consolidated Financial Statements
30 June 2014
AASB 2012-2: Amendments to
Australian Accounting Standards –
Disclosures – Offsetting Financial
Assets and Financial Liabilities
AASB 2012-2 principally amends AASB 7 Financial Instruments: Disclosures to
require disclosure of the effect or the potential effect of netting
including rights of set-off associated with the entity’s
arrangements,
recognised financial assets and recognised financial liabilities, on the entity’s
financial position, when all the offsetting criteria of AASB 132 are not met.
As the Group does not have any offsetting arrangements in place, the
application of the amendments does not have any material impact on the
consolidated financial statements.
AASB 2012-5: Amendments to
Australian Accounting Standards
arising from Annual Improvements
2009 – 2011 Cycle
AASB 2012-5 makes amendments resulting from the 2009-2011 Annual
Improvements Cycle. The standard addresses a range of improvements,
including the following:
• Repeat application of AASB 1 is permitted (AASB 1)
•
Clarification of the comparative information requirements when an
entity provides a third balance sheet (AASB 101 Presentation of
Financial Statements)
AASB 2012-9: Amendment to AASB
1048 arising from the withdrawal of
Australian Interpretation 1039
AASB 2012-9 amends AASB 1048 Interpretation of Standards to evidence the
withdrawal of Australian Interpretation 1039 Substantive Enactment of Major
tax Bills in Australia. The adoption of this amending standard does not have
any material impact on the consolidated financial statements.
AASB 2011-4: Amendments to
Australian Accounting Standards to
Remove Individual Key Management
Personnel Disclosure Requirements
(AASB 124)
This amendment deletes from AASB 124
individual key management
personnel disclosure requirements for disclosing entities that are not
companies. It also removes the individual KMP disclosure requirements for all
disclosing entities in relation to equity holdings, loans and other related party
transactions.
In the current year, the individual key management personnel disclosure
previously required by AASB 124 (note 27 in the 30 June 2013 financial
in the remuneration report due to an
statements)
amendment to Corporations Regulations 2001 issued in June 2013.
is now disclosed
The Group has not elected to “early adopt” any new standards or amendments that are issued but not yet
effective.
PAGE 38
CENTREPOINT ALLIANCE LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Consolidated Financial Statements
30 June 2014
b) Basis of consolidation
The consolidated financial statements comprise the financial statements of the Company, Centrepoint
Alliance Limited, and its subsidiaries as at 30 June 2014. Control is achieved when the Group is exposed, or
has rights, to variable returns from its involvement with the investee and has the ability to affect those
returns through its power over the investee. Specifically, the Group controls an investee if and only if the
Group has:
• Power over the investee (i.e. existing rights that give it the current ability to direct the relevant
activities of the investee)
• Exposure, or rights, to variable returns from its involvement with the investee, and
• The ability to use its power over the investee to affect its returns.
When the Group has less than a majority of the voting or similar rights of an investee, the Group considers
all relevant facts and circumstances in assessing whether it has power over an investee, including:
•
•
•
The contractual arrangement with the other vote holders of the investee
Rights arising from other contractual arrangements, and
The Group’s voting rights and potential voting rights.
The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there
are changes to one or more of the three elements of control. Consolidation of a subsidiary begins when the
Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary.
Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included
in the statement of comprehensive income from the date the Group gains control until the date the Group
ceases to control the subsidiary.
Profit or loss and each component of other comprehensive income (‘OCI’) are attributed to the equity
holders of the parent of the Group and to the non-controlling interests, even if this results in the non-
controlling interests having a deficit balance. When necessary, adjustments are made to the financial
statements of subsidiaries to bring their accounting policies into line with the Group’s accounting policies.
All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions
between members of the Group are eliminated in full on consolidation.
A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity
transaction. If the Group loses control over a subsidiary, it:
• De-recognises the assets (including goodwill) and liabilities of the subsidiary
• De-recognises the carrying amount of any non-controlling interests
• De-recognises the cumulative translation differences recorded in equity
• Recognises the fair value of the consideration received
• Recognises the fair value of any investment retained
• Recognises any surplus or deficit in profit or loss, and
• Reclassifies the parent’s share of components previously recognised in OCI to profit or loss or
retained earnings, as appropriate, as would be required if the Group had directly disposed of the
related assets or liabilities.
Interests in associates are equity accounted and are not part of the consolidated Group.
Non-controlling interests not held by the Group are allocated their share of net profit after tax in the
Statement of Comprehensive Income and are presented within equity in the Consolidated Statement of
Financial Position, separately from Company shareholders’ equity.
PAGE 39
CENTREPOINT ALLIANCE LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Consolidated Financial Statements
30 June 2014
c) Significant accounting judgements, estimates and assumptions
i) Significant accounting judgements
There were no significant judgements made by management in applying the Group’s accounting policies.
ii) Significant estimates and assumptions
The key assumptions concerning the future and other key sources of estimation uncertainty at the end of
reporting period, that have a significant risk of causing a material adjustment to the carrying amounts of
assets and liabilities within the next financial year, are described below. The Group based its assumptions
and estimates on parameters available when the consolidated financial statements were prepared. Existing
circumstances and assumptions about future developments, however, may change due to market changes
or circumstances arising beyond the control of the Group. Such changes are reflected in the assumptions
when they occur.
Accounting estimates with significant areas of uncertainty and critical judgements have been applied to the
following;
• Business combinations – notes 2(d) and 4.
• Goodwill & intangible assets recoverable amounts – notes 2(l) and 19.
•
Impairment of loan receivables – note 15(b).
• Provision for client claims – notes 2(q) and 22.
• Recognition of deferred tax assets – notes 2(u) and 11.
d) Business combinations
Business combinations are accounted for using the acquisition method. The consideration transferred in a
business combination is measured at fair value, which is calculated as the sum of the acquisition date fair
values of the assets transferred, the liabilities incurred to former owners of the acquiree, and any equity
issued by the acquirer, plus the amount of any non-controlling interest in the acquiree. For each business
combination, the non-controlling interest in the acquiree is measured either at fair value or at the
proportionate share of the acquiree's identifiable net assets. Acquisition-related costs are expensed as
incurred, and included in administrative expenses.
When the Group acquires a business, it assesses the financial assets acquired and liabilities incurred for
appropriate classification and designation in accordance with the contractual terms, economic conditions,
the Group’s operating or accounting policies and other pertinent conditions as at the acquisition date. This
includes the separation of embedded derivatives in host contracts by the acquiree.
If a business combination is achieved in stages, the fair value of the previously held equity interest in the
acquiree is remeasured to fair value at the acquisition date through profit or loss. It is then considered in
the determination of goodwill (refer Note 2 (l)).
Any contingent consideration is recognised at fair value at the acquisition date. Contingent consideration
which is classified as an asset or liability that is a financial instrument and within the scope of AASB 139
Financial Instruments: Recognition and Measurement is measured at fair value with changes in fair value
recognised either in profit or loss or as a change to other comprehensive income. Contingent consideration
that is classified as equity is not remeasured and subsequent settlement is accounted for within equity.
PAGE 40
CENTREPOINT ALLIANCE LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Consolidated Financial Statements
30 June 2014
e) Foreign currency
Both the functional and presentation currency of Centrepoint Alliance Limited and its Australian
subsidiaries is Australian dollars (A$).
i) Foreign currency transactions and balances
Transactions in foreign currencies are initially recorded by the Group’s entities at their respective functional
currency spot rates at the date the transaction first qualifies for recognition.
Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency
spot rates of exchange at the reporting date.
Exchange differences relating to monetary items are included in the statement of comprehensive income,
as exchange gains or losses, in the period when the exchange rates change.
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using
the exchange rate at the date of the initial transaction.
ii) Foreign operations
On consolidation, the assets and liabilities of foreign operations, including goodwill and fair value
adjustments arising on acquisition, are translated to Australian dollars at the rate of exchange prevailing at
the dates of the transactions. The income and expenses of foreign operations are translated to Australian
dollars at annual average exchange rates.
Foreign currency differences arising on translation for consolidation are recognised in other comprehensive
income. When a foreign operation is disposed of, in part or in full, the relevant amount in the foreign
currency translation reserve (‘FCTR’) is transferred to profit or loss.
Foreign exchange gains and losses arising from a monetary item receivable from or payable to a foreign
operation, the settlement of which is neither planned nor likely in the foreseeable future, are considered to
form part of a net investment in a foreign operation and are recognised directly in the FCTR.
f) Cash and cash equivalents
Cash and cash equivalents in the Statement of Financial Position are stated at nominal value and comprise
cash at bank and in hand and short-term deposits with a maturity of three months or less that are readily
convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.
For the purpose of the Consolidated Statement of Cash Flows, cash and cash equivalents consist of cash
and short-term deposits as defined above, net of outstanding bank overdrafts.
g) Loan receivables
All loan receivables are non-derivative financial assets with fixed and determinable payments that are not
quoted in an active market. Such assets are carried at amortised cost using the effective interest rate
method.
Insurance Premium Finance
i)
Loan receivables are comprised of finance provided to customers by way of insurance premium finance
loans. Insurance premium receivables are for terms not exceeding twelve months.
ii) Financial advisers
These are comprised of loans to advisers for terms varying from 1 to 5 years and attract interest at market
rates. The majority of these loans are secured through charges over assets, by guarantees, or by retention
of financial advice fees.
PAGE 41
CENTREPOINT ALLIANCE LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Consolidated Financial Statements
30 June 2014
iii) Impairment of loan receivables
Impairment of a loan is recognised when there is objective evidence that not all the principal and interest
can be collected in accordance with the terms of the loan agreement. Impairment is assessed by specific
identification in relation to individual loans and by estimation of expected losses in relation to loan
portfolios where specific identification is impracticable.
Bad debts are written off when identified. If a provision for impairment has been recognised in relation to a
loan, write offs for bad debts are made against the provision. If no provision for impairment has previously
been recognised, write offs for bad debts are recognised as expenses in the Statement of Comprehensive
Income.
h) Trade and other receivables
Trade receivables, which generally have 30-90 day terms, are measured at amortised cost using the
effective interest method, less provision for impairment. Collectability of trade receivables is reviewed on
an ongoing basis. Debts that are known to be uncollectible are written off when identified. An allowance
for impairment is raised when there is objective evidence that the Group will not be able to collect the
debt. The criterion for impairment is if the debt is 60 days overdue with no repayments or payment
arrangement and/or the debtor is placed in administration or liquidation. The amount of the impairment
allowance is the difference between the asset’s carrying amount and the present value of estimated future
cash flows, discounted at the original effective interest rate.
The amount of the impairment loss is recognised in the profit or loss within other expenses. When a trade
receivable for which an impairment allowance has been recognised becomes uncollectible in a subsequent
period, it is written off against the allowance account. Subsequent recoveries of amounts previously
written off are credited against other expenses in profit or loss.
i)
Investments and other financial assets
Investments are initially recognised at cost, including acquisition charges associated with the investment.
Subsequent to initial recognition, investments are measured at fair value. Gains or losses arising from
changes in the fair value of investments are recognised in the Statement of Comprehensive Income.
For investments that are actively traded in organised financial markets, fair value is determined by
reference to quoted market bid prices at the close of business on the reporting date.
Financial assets are stated at cost where there is no quoted market price and the fair value cannot be
reliably measured.
Financial assets (excluding available for sale investments) are reviewed at each reporting date to determine
whether there is objective evidence of impairment. If any such indication exists, the asset’s carrying
amount is written down to the asset’s estimated recoverable amount.
Financial assets and liabilities are offset and the net amount is reported in the Statement of Financial
Position if there is a currently enforceable legal right to offset the recognised amounts and there is an
intention to settle on a net basis.
PAGE 42
CENTREPOINT ALLIANCE LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Consolidated Financial Statements
30 June 2014
i) Derecognition
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial
assets) is derecognised when:
•
•
The rights to receive cash flows from the asset have expired; or
The Group has transferred its rights to receive cash flows from the asset or has assumed an
obligation to pay them in full without material delay to a third party under a ‘pass-through’
arrangement; and either (a) the Group has transferred substantially all the risks and rewards of the
asset, or (b) the Group has neither transferred nor retained substantially all the risks and rewards of
the asset, but has transferred control of the asset.
When the Group has transferred its rights to receive cash flows from an asset or has entered into a pass-
through arrangement, it evaluates if and to what extent it has retained the risks and rewards of ownership.
When it has neither transferred nor retained substantially all of the risks and rewards of the asset nor
transferred control of the asset, the asset is recognised to the extent of the Group’s continuing
involvement in the asset. Continuing involvement that takes the form of a guarantee over the transferred
asset is measured at the lower of the original carrying amount of the asset and the maximum amount of
consideration received that the Group could be required to repay.
When continuing involvement takes the form of a written and/or purchased option (including a cash-
settled option or similar provision) on the transferred asset, the extent of the Group’s continuing
involvement is the amount of the transferred asset that the Group may repurchase, except that in the case
of a written put option (including a cash-settled option or similar provision) on an asset measured at fair
value, the extent of the Group’s continuing involvement is limited to the lower of the fair value of the
transferred asset and the option exercise price.
Impairment
ii)
The Group assesses at each reporting date, whether there is objective evidence that a financial asset or
group of financial assets are impaired.
The Group considers evidence of impairment for receivables at both a specific asset and collective level. All
individually significant receivables are assessed for specific impairment. All individually significant
receivables found not to be specifically impaired are then collectively assessed for any impairment that has
been incurred but not yet identified. Receivables that are not individually significant are collectively
assessed for impairment by grouping together receivables with similar risk characteristics.
In assessing collective impairment the Group uses historical trends of the probability of default, timing of
recoveries and the amount of loss incurred, adjusted for management’s judgement as to whether current
economic and credit conditions are such that the actual losses are likely to differ from historical trends.
An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference
between its carrying amount and the present value of the estimated future cash flows discounted at the
asset’s original effective interest rate. Losses are recognised in profit or loss and reflected in an allowance
account against receivables. If a subsequent event causes the amount of impairment loss to decrease, the
decrease in impairment loss is reversed through profit or loss.
Impairment losses on available-for-sale investment securities are recognised by transferring the cumulative
loss that has been recognised in other comprehensive income, and presented in the fair value reserve in
equity, to profit or loss. The cumulative loss that is removed from other comprehensive income and
recognised in profit or loss is the difference between the acquisition cost, net of any principal repayment
and amortisation, and the current fair value, less any impairment loss previously recognised in profit or
loss. Changes in impairment provisions attributable to time value are reflected as a component of interest
income.
PAGE 43
CENTREPOINT ALLIANCE LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Consolidated Financial Statements
30 June 2014
j) Plant and equipment
At each reporting date, the Group assesses whether there is any indication that an asset may be impaired.
Plant and equipment is carried at cost, net of accumulated depreciation and any accumulated impairment
losses. The carrying values of plant and equipment are reviewed for impairment when events or changes in
circumstances indicate the carrying value may not be recoverable.
Where an indicator of impairment exists, the Group makes a formal estimate of recoverable amount.
Where the carrying amount of an asset exceeds its recoverable amount, an impairment loss is recognised
and the asset is written down to its recoverable amount. The recoverable amount of plant and equipment
is the greater of fair value less costs to sell and value in use.
In assessing value in use, estimated future cash flows are discounted to their present value using a pre-tax
discount rate that reflects current market assessments of the time value of money and the risks specific to
the asset.
For an asset that does not generate largely independent cash inflows, the recoverable amount is
determined by reference to the cash-generating unit to which the asset belongs.
Depreciation is calculated on a diminishing value basis over the estimated useful lives of the assets as
follows:
Plant and equipment
Leasehold improvements
Motor vehicles
2 – 7 years
Lease term
5 years
De-recognition
An item of plant and equipment is derecognised upon disposal or when no future economic benefits are
expected to arise from its use or disposal. Any gain or loss arising on de-recognition of the asset (calculated
as the difference between the net disposal proceeds and the carrying amount of the item) is included in the
Statement of Comprehensive Income when the asset is derecognised.
Residual values, useful lives and methods of depreciation of plant and equipment are reviewed at each
financial year end and adjusted prospectively, if appropriate.
k)
Impairment of non-financial assets other than goodwill
At each reporting date, the Group assesses whether there is any indication that an asset may be impaired.
Non-financial assets are carried at cost, net of accumulated depreciation and any accumulated impairment
losses. The carrying values of non-financial assets are reviewed for impairment when events or changes in
circumstances indicate the carrying value may not be recoverable.
Where an indicator of impairment exists, the Group makes a formal estimate of recoverable amount.
Where the carrying amount of an asset exceeds its recoverable amount, an impairment loss is recognised
and the asset is written down to its recoverable amount. The recoverable amount of a non-financial asset
is the greater of fair value less costs to sell and value in use.
In assessing value in use, estimated future cash flows are discounted to their present value using a pre-tax
discount rate that reflects current market assessments of the time value of money and the risks specific to
the asset.
PAGE 44
CENTREPOINT ALLIANCE LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Consolidated Financial Statements
30 June 2014
l) Goodwill and intangibles
i) Goodwill
Goodwill acquired in a business combination is initially measured at cost being the excess of the cost of the
business combination over the Group’s interest in the net fair value of the identifiable assets, liabilities and
contingent liabilities.
Following initial recognition, goodwill is measured at cost less any accumulated impairment losses.
Goodwill is reviewed for impairment semi-annually or more frequently, if events or changes in
circumstances indicate that the carrying value may be impaired. As at acquisition date, any goodwill
acquired is allocated to each of the cash-generating units which are expected
the
acquisition. Impairment is determined by assessing the recoverable amount of the cash-generating unit to
which the goodwill relates. Where the recoverable amount of the cash-generating unit is less than the
carrying amount, an impairment loss is recognised.
to benefit
from
Where goodwill forms part of a cash-generating unit and part of the operation within that unit is disposed
of, the goodwill associated with the disposed operation is included in the carrying amount of the operation
when determining the gain or loss on disposal. Goodwill disposed in these circumstances is measured
based on the relative values of the disposed operation and the portion of the cash-generating unit
retained.
Impairment losses recognised are not subsequently reversed.
Intangibles
ii)
Intangible assets acquired separately are initially measured at cost. The cost of an intangible asset acquired
in a business combination is its fair value as at the date of acquisition. Following initial recognition,
intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment
losses.
The useful lives of intangible assets are assessed to be either finite or indefinite. Intangible assets with
finite lives are amortised over the useful life and tested for impairment whenever there is an indication
that the intangible asset may be impaired. The amortisation period and the amortisation method for an
intangible asset with a finite useful life are reviewed at least at the end of each reporting period. Changes
in the expected useful life or the expected pattern of consumption of future economic benefits embodied
in the asset are accounted for prospectively by changing the amortisation period or method, as
appropriate, which is a change in an accounting estimate. The amortisation expense on intangible assets
with finite lives is recognised in the Statement of Comprehensive Income.
Intangible assets with indefinite useful lives are not amortised, but are tested for impairment at least
annually either individually or at the cash-generating unit level. The assessment of indefinite life of an
intangible asset is reviewed each reporting period to determine whether indefinite life assessment
continues to be supportable. If not, the change in the useful life from indefinite to finite is accounted for as
a change in an accounting estimate and is thus accounted for on a prospective basis.
The estimated useful lives in the current and comparative periods are as follows:
Software
Network and Client Lists
2.5 years
5 – 15 years
PAGE 45
CENTREPOINT ALLIANCE LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Consolidated Financial Statements
30 June 2014
m) Investments in associates
An associate is an entity over which the Group has significant influence. 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.
The considerations made in determining significant influence or joint control are similar to those necessary
to determine control over subsidiaries.
The Group’s investments in its associate are accounted for using the equity method.
Under the equity method, the investment in an associate is initially recognised at cost. The carrying
amount of the investment is adjusted to recognise changes in the Group’s share of net assets of the
associate since the acquisition date. Goodwill relating to the associate is included in the carrying amount of
the investment and is neither amortised nor individually tested for impairment.
The statement of profit or loss reflects the Group’s share of the results of operations of the associate. Any
change in OCI of those investees is presented as part of the Group’s OCI. In addition, when there has been a
change recognised directly in the equity of the associate, the Group recognises its share of any changes in
the statement of changes in equity. Unrealised gains and losses resulting from transactions between the
Group and the associate are eliminated to the extent of the interest in the associate.
The aggregate of the Group’s share of profit or loss of an associate is shown on the face of the statement of
profit or loss outside operating profit and represents profit or loss after tax.
The financial statements of an associate are prepared for the same reporting period as the Group. When
necessary, adjustments are made to bring accounting policies in line with those of the Group.
After application of the equity method, the Group determines whether it is necessary to recognise an
impairment loss on its investment in its associate. At each reporting date, the Group determines whether
there is objective evidence that the investment in the associate is impaired. If there is such evidence, the
Group calculates the amount of impairment as the difference between the recoverable amount of the
associate and its carrying value, then recognises the loss as ‘Share of profit of an associate’ in the
statement of profit or loss.
Upon loss of significant influence over an associate, the Group measures and recognises any retained
investment at its fair value. Any difference between the carrying amount of the associate upon loss of
significant influence or joint control and the fair value of the retained investment and proceeds from
disposal is recognised in profit or loss.
n) Trade and other payables
Liabilities for trade creditors and other amounts payable are carried at amortised cost and represents
liabilities that arise when the Group becomes obliged to make future payments in respect of the purchase
of these goods and services for goods and services provided to the Group prior to the end of the financial
year.
Liabilities are recognised, whether or not the liability has been billed to the economic entity.
Deferred cash settlements are recognised at the present value of the outstanding consideration payable on
the acquisition of an asset discounted at prevailing commercial borrowing rates.
PAGE 46
CENTREPOINT ALLIANCE LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Consolidated Financial Statements
30 June 2014
o) Interest-bearing loans and borrowings
All loans and borrowings are initially recognised at cost, being the fair value of the consideration received
net of issue costs associated with the borrowing.
After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised
cost using the effective interest method. Amortised cost is calculated by taking into account any issue costs,
and any discount or premium on settlement.
Borrowing costs are recognised as an expense when incurred. They include interest on bank overdrafts,
bills of exchange and other borrowings. The Group does not currently hold qualifying assets but, if it did,
the borrowing costs directly associated with these assets would be capitalised (including any other
associated costs directly attributable to the borrowing and temporary investment income earned on the
borrowing).
p) Leases
i) Operating Leases
Leases where the lessor retains substantially all the risks and benefits of ownership of the asset are
classified as operating leases. Operating lease assets are not capitalised and rental payments are expensed
on a straight line basis over the lease term.
ii) Finance Leases
Finance leases, which transfer to the Group substantially all the risk and benefits incidental to ownership of
the leased item, are capitalised at the inception of the lease at the fair value of the leased item or, if lower,
at the present value of the minimum lease payments. Lease payments are allocated between finance
charges and reduction in the lease liability. Finance charges are charged directly against income.
Assets acquired under finance leases are capitalised and amortised over the life of the relevant lease, or
where ownership is likely to be obtained on expiration of the lease, over the expected useful life of the
asset.
q) Provisions and employee benefits
i) Provisions (refer to Note 22)
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a
past event. It is probable that an outflow of resources embodying economic benefits will be required to
settle the obligation and a reliable estimate can be made of the amount of the obligation.
Provisions are measured at the present value of management’s best estimate of the expenditure required
to settle the present obligation at the balance sheet date. If the effect of the time value of money is
material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that
reflects current market assessments of the time value of money and, where appropriate, the risks specific
to the liability.
The Company recognises a liability to make cash or non-cash distributions to equity holders of the parent
when the distribution is authorised and the distribution is no longer at the discretion of the Company. A
corresponding amount is recognised directly in equity. A provision for claims is recognised when client
claims received by advisers are notified to the Company or the Group expects to incur liabilities in the
future as a result of past advice given. It is measured at the present value of the future costs that the Group
expects to incur to settle the claims.
PAGE 47
CENTREPOINT ALLIANCE LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Consolidated Financial Statements
30 June 2014
ii) Employee benefits
Provision is made for employee benefits accumulated as a result of employees rendering services up to the
reporting date. These benefits include wages and salaries, annual leave and long service leave.
Liabilities for wages and salaries, including non-monetary benefits, annual leave, and other benefits,
expected to be settled within 12 months of the reporting date are measured at the amounts due to be paid
when the liability is settled.
The liability for long service leave is recognised and measured as the present value of expected future
payments to be made in respect of services provided by employees up to the reporting date using the
projected unit credit method. Consideration is given to the expected future wage and salary levels,
experience of employee departures, and periods of service. Expected future payments are discounted using
market yields at the reporting date on national government bonds with terms to maturity and currencies
that match, as closely as possible, the estimated future cash outflows.
r) Share-based payment transactions
Equity settled transactions:
i)
The Group provides benefits to its employees, including key management personnel, in the form of share-
based payments, whereby employees render services in exchange for rights over shares (equity-settled
transactions).
Current equity settled transactions are:
• Performance rights issued in August 2013;
• The Centrepoint Alliance Employee Share Option Plan, which provides benefits to employees by
invitation from the Board; and
• The Centrepoint Alliance Employee Share Plan, which provides benefits to employees by invitation
from the Board.
The cost of these equity-settled transactions with employees is measured by reference to the fair value of
the equity instruments at the date at which they are granted.
In valuing equity-settled transactions, no account is taken of any vesting conditions, other than conditions
linked to the price of the shares of Centrepoint Alliance Limited (market conditions) if applicable.
The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over
the period in which the performance and/or service conditions become fully entitled to the award (vesting
date).
At each subsequent reporting date until vesting, the cumulative charge to the Statement of Comprehensive
Income is the product of:
the grant date fair value of the award;
i)
ii) The current best estimate of the number of awards that will vest, taking into account such factors as
the likelihood of non-market performance conditions being met; and
iii) The expired portion of the vesting period.
The charge to the Statement of Comprehensive Income for the period is the cumulative amount as
calculated above less the amounts already charged in previous periods. There is a corresponding entry to
equity.
Until an award has vested, any amounts recorded are contingent and will be adjusted if more or fewer
awards vest than were originally anticipated to do so. Any award subject to a market condition is
considered to vest irrespective of whether or not that market condition is fulfilled, provided that all other
conditions are satisfied.
PAGE 48
CENTREPOINT ALLIANCE LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Consolidated Financial Statements
30 June 2014
If the terms of an equity-settled award are modified, the minimum expense recognised is the expense had
the terms not been modified. An additional expense is recognised for any modification that increases the
total fair value of the share-based payment arrangement, or is otherwise beneficial to the employee, as
measured at the date of the modification.
If an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any
expense not yet recognised for the award is recognised immediately. However, if a new award is
substituted for the cancelled award and designated as a replacement award on the date that it is granted,
the cancelled and new award are treated as if they were a modification of the original award, as described
in the previous paragraph.
The dilutive effect, if any, of outstanding options is reflected as additional share dilution in the computation
of diluted earnings per share.
Shares in the Group reacquired on market and held by the Employee Share Plan Trust are classified and
disclosed as reserved shares and deducted from equity.
ii) Reserved shares
The Group’s own equity instruments, which are reacquired for later use in employee share-based payment
arrangements (reserved shares), are deducted from equity. No gain or loss is recognised in the Statement
of Comprehensive Income on the purchase, sale, issue or cancellation of the Group’s own equity
instruments.
s) Contributed Equity
Ordinary shares are classified as equity and recognised at the fair value of the consideration received by the
Company. Any transaction cost arising on the issue of ordinary shares is recognised, net of tax, directly in
equity as a reduction of the share proceeds.
t) Revenue recognition
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group
and the revenue can be reliably measured, regardless of when the payment is received. Revenue is
measured at the fair value of the consideration received or receivable, taking into account contractually
defined terms of payment and excluding taxes or duty.
The specific recognition criteria described below must also be met before revenue is recognised.
i) Financial advice and product margin revenue
Financial advice and product margin revenue is recorded at the time business is written as at this point all
services have been provided to the customer and the right to receive the revenue is established.
ii) Service revenue
Revenue for services provided is recognised at the point of delivery of the service to clients.
iii) Ongoing revenue
Ongoing financial advice fee revenue is recorded monthly for ongoing services provided to clients.
iv) Interest income – Insurance Premium Funding
Interest income from insurance premium funding and asset finance operations is brought to account using
the effective interest rate method which is the rate that exactly discounts estimated future cash receipts
through the expected life of the financial asset to the net carrying amount of the financial asset. Loan
commission costs and over-riding commission costs are amortised over the expected life of the loan.
PAGE 49
CENTREPOINT ALLIANCE LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Consolidated Financial Statements
30 June 2014
v) Document fees – Insurance Premium Funding
Fee income is recognised when services are rendered and the right to receive the payment is established.
vi) Dividend and distribution income
Dividend and distribution revenue is recognised when the right to receive a dividend has been established.
Dividends received from associates are accounted for in accordance with the equity method of accounting.
u) Taxation
Income Tax
i)
The income tax expense for the period represents the tax payable on the pre-tax accounting profit adjusted
for changes in the deferred tax assets and liabilities attributable to temporary differences between the tax
bases of assets and liabilities and their carrying amounts in the financial statements, and unused tax losses.
Income taxes relating to items recognised directly in equity are recognised in equity and not in the
statement of profit and loss.
a) Current tax
Current tax assets and liabilities for the period are measured at the amount expected to be recovered from
or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that
are enacted or substantively enacted, at the reporting date in the countries where the Group operates and
generates taxable income.
b) Deferred tax
Deferred tax assets and liabilities are recognised for all deductible and taxable temporary differences at the
tax rates that are expected to apply to the year when the asset is realised or liability is settled, based on tax
rates (and tax laws) that have been enacted or substantially enacted at the reporting date.
Deferred income tax liabilities are recognised on all taxable temporary differences except:
• When the deferred income tax liability arises from the initial recognition of goodwill or of 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 profit nor taxable profit or loss; or
In respect of taxable temporary difference associated with investments in subsidiaries, associates
or interests in joint ventures, when the timing of the reversal of the temporary difference 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, carry forward tax credits and any
unused tax losses. Deferred tax assets are recognised to the extent that it is probable that taxable profit
will be available against which deductible temporary differences, unused tax credits and unused tax losses
can be utilised, except:
• When a deferred tax asset relating to the deductible temporary difference arises from the initial
•
recognition of an asset or liability in a transaction that is not a business combination and, at the
time of the transaction, affects neither the accounting profit nor taxable profit or loss;
In respect of deductible temporary differences associated with investments in subsidiaries,
associates and interests in joint ventures, deferred tax assets are recognised only to the extent that
it is probable that the temporary differences will reverse in the foreseeable future and taxable
profit will be available against which the temporary differences can be utilised.
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent
that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred
income tax asset to be utilised. Unrecognised deferred tax assets are reassessed at each reporting date
PAGE 50
CENTREPOINT ALLIANCE LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Consolidated Financial Statements
30 June 2014
and are recognised to the extent that it has become probable that future taxable profit will allow a
deferred tax asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the year when
an asset is realised or a liability is settled, based on tax rates (and tax laws) that have been enacted or
substantively enacted at the reporting date.
Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off
current tax assets against current tax liabilities and deferred tax assets and liabilities relate to the same
taxable entity and the same taxation authority.
c) Tax consolidation legislation
Centrepoint Alliance Limited and its wholly-owned Australian controlled entities implemented tax grouping
under the tax consolidation legislation as of 1 July 2007.
The head entity, Centrepoint Alliance Limited and the controlled entities in the tax consolidated group
continue to account for their own current and deferred tax amounts. The Group has applied the Group
allocation approach in determining the appropriate amount of current taxes and deferred taxes to allocate
to members of the tax consolidated group.
In addition to its own current and deferred tax amounts, Centrepoint Alliance Limited also recognises
current tax liabilities (or assets) and deferred tax assets arising from unused tax losses and unused tax
credits assumed from controlled entities in the tax consolidated group.
Assets or liabilities arising under tax funding agreements with tax consolidated entities are recognised as
amounts receivable from or payable to other entities in the Group. Details of the tax funding agreement
are disclosed in note 11.
Any difference between the amounts assumed and amounts receivable or payable under the tax funding
agreement are recognised as a contribution to (or distribution from) wholly owned tax consolidated
entities.
ii) Goods and Services Tax (‘GST’)
Revenues, expenses and assets are recognised net of the amount of GST except:
• When the GST incurred on a purchase of goods and services is not recoverable from the taxation
authority, in which case the GST is recognised as part of the cost of acquisition of the asset or as an
expense item as applicable; and
• When receivables and payables are stated with the amount of GST included.
The net amount of GST recoverable from, or payable to, a taxation authority is included as part of
receivables or payables in the Statement of Financial Position.
Cash flows are included in the Statement of Cash Flows on a gross basis and the GST component of cash
flows arising from investing and financing activities, which is recoverable from, or payable to, a taxation
authority, are classified as part of operating cash flows.
Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, a
taxation authority.
PAGE 51
CENTREPOINT ALLIANCE LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Consolidated Financial Statements
30 June 2014
v) Earnings per share (‘EPS’)
Basic EPS is calculated as net profit attributable to members of the Company, adjusted to exclude any costs
of servicing equity (other than dividends) and preference dividends, divided by the weighted average
number of ordinary shares, adjusted for any bonus element.
Diluted EPS is calculated as net profit attributable to members of the Company, adjusted for:
• Costs of servicing equity (other than dividends) and preference share dividends;
• The after tax effect of dividends and interest associated with dilutive potential ordinary shares that
have been recognised as expenses; and
• Other non-discretionary changes in revenues or expenses during the period that would result from
the dilution of potential ordinary shares;
divided by the weighted average number of ordinary shares and dilutive potential ordinary shares, and
adjusted for any bonus element.
3. Financial risk management
a) Risk exposures and responses
The Group’s principal financial instruments comprise receivables, payables, bank and other loans, bank
overdrafts, finance leases, cash and short-term deposits.
The Group manages its exposure to key financial risks in accordance with the Group's financial risk
management policy. The objective of the policy is to support the delivery of the Group's financial targets
whilst protecting future financial security.
The main risks arising from the Group’s financial instruments are cash flow credit risk, interest rate risk, and
liquidity risk. The Group uses different methods to measure and manage different types of risks to which it
is exposed. These include monitoring levels of exposure to interest rate and assessments of market
forecasts for interest rates. Ageing analyses and monitoring of specific credit allowances are undertaken to
manage credit risk and liquidity risk is monitored through the development of regular short and long-term
cash flow forecasts.
Primary responsibility for identification and control of financial risks rests with the Group Audit, Risk and
Compliance Committee under the authority of the Board. The Board reviews and agrees policies for
managing each of the risks identified below.
b) Credit risk
Credit risk arises from the financial assets of the Group, which comprise cash and cash equivalents, interest
bearing receivables and trade and other receivables. The Group's exposure to credit risk arises from
potential default of the counter-party, with a maximum exposure equal to the carrying amount of these
assets (as outlined in each applicable note).
The Group’s maximum exposure to credit risk for interest bearing receivables and trade receivables at the
reporting date is limited to Australia.
The Group has credit insurance cover for the majority of its insurance premium funding loan receivables
but does not hold any credit derivatives to offset its other credit exposures. The terms of the credit
insurance cover include a deductible of $10,000, 90% indemnity percentage and an aggregate first loss
limited of $250,000.
PAGE 52
CENTREPOINT ALLIANCE LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Consolidated Financial Statements
30 June 2014
The Group trades only with recognised, creditworthy third parties and the majority of the Group’s cash
balances are held with National Australia Bank Limited and Westpac Banking Corporation.
It is the Group's policy that all customers who wish to trade on credit terms are subject to credit
verification procedures. In addition, all receivable balances are monitored on an ongoing basis with the
result that the Group's exposure to bad debts is monitored and managed.
Outlined below are the requirements for collateral, credit quality and concentration levels for the various
categories of receivables.
i) Trade and other receivables
The Group does not have any significant credit risk exposure to any single counter-party or any group of
counter-parties having similar characteristics. Trade and other receivables relate mainly to financial advice
revenue and product margins earned as a financial dealer group and the majority is receivable from major
financial institutions with high credit-ratings assigned by international credit-rating agencies. The Group
does not require collateral in respect of trade and other receivables.
ii) Loans receivable – insurance premium funding
Wherever possible, collateral is obtained on the insurance premium funding receivables in the form of
cancellable insurance policies. In the majority of cases insurance policies can be cancelled or terminated in
the event of loan default, and the Group is generally entitled to the proceeds from any returned premiums
net of other costs.
A risk assessment process is used for new loan applications, which ranges from credit background checks to
formal reviews by a credit committee and, where appropriate, the obtaining of guarantees from directors
and/or related entities. Each new loan is assessed in terms of total exposure risk to the customer
concerned and pre-determined limits are applied to ensure appropriate analysis and approval procedures
are applied.
Concentration levels of loan assets are monitored continuously to ensure that there are no significant
concentrations of credit risk within the Group. Loans are provided to a large number of customers who are
generally not related.
iii) Loans receivable – investment advisers
Loans to advisers have terms ranging from 1 to 5 years. Full credit submissions are prepared and reviewed
and security is usually obtained in the form of charges over assets or guarantees and financial advice fees
payable.
In some cases repayments are deducted from monthly financial advice fee payments.
No new loan facilities to investment advisers are being approved.
PAGE 53
CENTREPOINT ALLIANCE LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Consolidated Financial Statements
30 June 2014
iv) Ageing analysis
At reporting date, the ageing analysis of receivables is as follows:
Ageing Analysis
2014
Total
$'000
0-30
Days
$'000
31-60
61-90 Days 61-90 Days
+91 Days
+91 Days
Days
$'000
PDNI
$'000
CI
$'000
PDNI
$'000
CI
$'000
Trade receivables
13,155
11,340
Loan receivables - IPF
131,378
129,658
Loan receivables - Adviser
1,163
421
Ageing Analysis
666
837
1
.
682
358
1
2013
-
194
-
450
84
468
17
247
272
Total
$'000
0-30
Days
$'000
31-60
61-90 Days 61-90 Days
+91 Days
+91 Days
Days
$'000
PDNI
$'000
CI
$'000
PDNI
$'000
CI
$'000
Trade receivables
13,822
11,313
Loan receivables - IPF
107,755
107,084
Loan receivables - Adviser
1,472
44
131
173
43
163
54
43
-
93
-
21
259
1,342
2,194
92
-
* Past due not impaired (PDNI)
** Considered impaired (CI)
No further credit is provided to PDNI debtors until full repayment of overdue amounts is made. Payment
terms for some PDNI debtors have been re-negotiated to aid recovery. Each operating unit has been in
direct contact with the relevant debtor and is satisfied that payment will be received in full.
Impairment analysis is included at note 15.
c)
Interest rate risk
The Group’s exposure to the risk of changes in market interest rates relates primarily to the Group’s debt
obligations as disclosed in note 21. The Group adopts a policy to minimise exposure to interest rate risk by
depositing excess funds in interest bearing accounts at a variable rate or with short date maturities.
At reporting date, the Group had the following mix of financial assets and liabilities exposed to interest rate
risk:
PAGE 54
CENTREPOINT ALLIANCE LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Consolidated Financial Statements
30 June 2014
Fixed
2014
Fixed
Variable
Fixed
2013
Fixed
Variable
<= 6 Months > 6 Months
<= 6 Months > 6 Months
$'000
$'000
$'000
$'000
$'000
$'000
14,977
-
6,396
5,458
-
3,894
Financial Assets
Cash and term deposits
Loan receivables - insurance
premium funding
65,630
65,748
Loan receivables - investment
advisers
Security deposits
Financial Liabilities
Receivables finance facility
431
-
81,038
732
803
67,283
- insurance premium funding
95,484
Equipment hire and software
finance
178
95,662
-
336
336
Net Exposure
(14,624)
66,947
-
-
-
6,396
-
-
-
6,396
54,378
53,377
-
1,226
53
61,115
71,456
100
71,556
-
1,029
54,406
-
190
190
(10,441)
54,216
245
-
4,139
-
-
-
4,139
The Group’s objective is to minimise exposure to adverse risk and therefore it continuously analyses its
interest rate exposure. Within this analysis consideration is given to potential renewals of existing
positions, alternative financing, alternative hedging positions and the mix of fixed and variable interest
rates. Individual insurance premium funding loans are at fixed interest rates however the book consists of
thousands of small loans with new loans written daily. The average term of the loans is 10 months resulting
in the average duration of the book being 5 to 6 months. Movements in borrowing interest rates can be
passed on quickly to new borrowers with the result that the average interest rate of the book responds
relatively quickly to changes in market interest rates.
The following sensitivity analysis is based on the interest rate risk exposures in existence at the reporting
date. If interest rates had moved, as illustrated in the table below, with all other variables held constant,
consolidated post tax profit and equity would have been affected as follows:
Judgements of reasonably possible
movements:
+1%
-1%
Post Tax Profit
Higher/(lower)
2014
2013
$'000
$'000
Other Comprehensive
Higher/(lower)
2014
2013
$'000
$'000
(168)
168
(71)
71
(168)
168
(71)
71
The movements in profit are due to higher/lower interest costs from variable rate debt and cash balances.
The movement in other comprehensive income is the same because there are no cash flow hedges in use.
Significant assumptions used in the interest rate sensitivity analysis include:
PAGE 55
CENTREPOINT ALLIANCE LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Consolidated Financial Statements
30 June 2014
a) Reasonably possible movements in interest rates were determined based on the Group’s current credit
rating and mix of debt, relationships with finance institutions
b) The level of debt that is expected to be renewed.
c) The net exposure at reporting date is representative of the expected exposure in the twelve months
from reporting date.
d) Liquidity risk
The Group’s objective is to maintain a balance between continuity of funding and flexibility through the use
of instruments such as bank overdrafts, bank loans, subordinated debt, preference shares, finance leases
and other committed available credit lines from time to time as required. The Group’s unused facility limits
are stated in note 21(c).
The Group’s policy is to match debt with the nature and term of the underlying assets. At reporting date
over 90% of the Group’s assets mature in less than 12 months. The insurance premium funding interest
bearing receivable, which is the majority of the receivables, consists of multiple small loans with an average
maturity of 5 to 6 months.
The table below reflects all contractually fixed pay-offs and receivables for settlement, repayments and
interest resulting from recognised financial liabilities. The respective undiscounted cash flows for the
respective upcoming fiscal years are presented. Cash flows for financial liabilities without fixed amount or
timing are based on the conditions existing as at reporting date.
i) Maturity analysis of financial assets and liability based on management’s expectation:
The risk implied from the values shown in the table below, reflects a balanced view of cash inflows and
outflows. Leasing obligations, trade payables and other financial liabilities mainly originate from the
financing of assets used in ongoing operations such as property, plant, equipment and investments in
working capital e.g. trade receivables. These assets are considered in the Group’s overall liquidity risk. To
monitor existing financial assets and liabilities as well as to enable an effective controlling of future risks,
the Group has established reporting requirements which monitor maturity profiles and anticipated cash
flows from Group assets and liabilities.
The tables below are based on the carrying values at reporting date and includes future interest receivable
or payable.
PAGE 56
CENTREPOINT ALLIANCE LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Consolidated Financial Statements
30 June 2014
Financial Assets
Cash and term deposits
Trade and commissions receivable
Loan receivables - insurance premium funding
Loan receivables - investment advisers
Security deposits
Financial Liabilities
Trade and other payables
Receivables finance facility
Equipment hire and software finance
Net Maturity
Financial Assets
Cash and term deposits
Trade and commissions receivable
Loan receivables - insurance premium funding
Loan receivables - investment advisers
Security deposits
Financial Liabilities
Trade and other payables
Receivables finance facility
Equipment hire and software finance
Net Maturity
2014
<= 6 Months 6-12 Months
$'000
$'000
1-5 Years
$'000
Total
$'000
21,373
12,562
65,630
431
136
-
576
65,748
7
-
-
17
-
725
667
21,373
13,155
131,378
1,163
803
100,132
66,331
1,409
167,872
36,081
47,673
178
83,932
16,200
90
47,811
87
47,988
18,343
2013
90
-
249
339
1,070
36,261
95,484
514
132,259
35,613
<= 6 Months 6-12 Months
$'000
$'000
1-5 Years
$'000
Total
$'000
9,352
12,714
54,378
505
53
-
1,016
53,377
154
-
77,002
54,547
37,174
36,060
100
73,334
3,668
370
35,396
100
35,866
18,681
-
92
-
811
1,029
1,932
-
-
90
90
1,842
9,352
13,822
107,755
1,470
1,082
133,481
37,544
71,456
290
109,290
24,191
PAGE 57
CENTREPOINT ALLIANCE LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Consolidated Financial Statements
30 June 2014
e) Foreign currency risk
The Group’s activities do not expose it to the financial risks of changes in foreign currency exchange rates.
Any foreign currency risk for the Group is now negligible.
f) Market and price risk
The Group’s exposure to commodity and equity securities price risk is significant because a portion of the
Group’s net advice and investment products revenue is governed by the amount of funds under
management or under advice, which is impacted by the market price of equities and other investment
assets.
This risk is effectively a feature of the financial advice industry and cannot easily be managed. However, the
increasing proportion of fee for service revenue and the ability of the Group to adjust resource inputs in
relation to market movements decreases the level of risk.
g) Fair value of financial instruments
The Group uses various methods in estimating the fair value of a financial instrument. The objective of
valuation techniques is to arrive at a fair value measurement that reflects the price that would be received
to sell the asset or paid to transfer the liability in an orderly transaction between market participants at the
measurement date. The methods comprise:
Level 1 – the fair value is calculated using quoted (unadjusted) market prices in active markets for identical
assets or liabilities.
Level 2 – the fair value is estimated using inputs other than quoted (unadjusted) market prices included in
Level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from
prices).
Level 3 – the fair value is estimated using inputs for the asset or liability that are not based on observable
market data.
Quoted (unadjusted) market price represents the fair value determined based on quoted prices on active
markets as at the reporting date without any deduction for transaction costs. The fair value of listed equity
investments are based on quoted market prices.
For financial instruments not quoted in active markets, the Group uses valuation techniques such as
present value techniques, comparison to similar instruments for which market observable prices exist and
other relevant models used by market participants. These valuation techniques use both observable and
unobservable market inputs.
For assets and liabilities that are recognised in the financial statements on a recurring basis, the Group
determines whether transfers have occurred between
in their hierarchy by re-assessing
categorisation (based on the lowest level input that is significant to the fair value measurement as a whole)
as the end of each reporting period.
levels
There were no transfers between categories during the year.
The following methods and assumptions are used to determine the net fair values of financial assets and
liabilities.
Cash and Cash equivalents: Fair value approximates the carrying amount as these assets are receivable on
demand or short term in nature.
Interest Bearing Receivables: For fixed rate loans, excluding impaired loans, fair value is determined by
discounting expected future cash flows by the RBA Indicator Lending Rate for 3 year fixed small business
loans adjusted using quoted BBSW interest rates to reflect the average remaining term of the loans as at 30
June 2014.
PAGE 58
CENTREPOINT ALLIANCE LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Consolidated Financial Statements
30 June 2014
The calculated fair value using this Level 3 methodology approximates carrying value. Increasing the
interest rate used to discount future cash flows by 1% would reduce fair value by less than $400,000.
For variable rate loans, excluding impaired loans, fair value approximates the carrying amount as they are
repriced frequently.
Interest Bearing Liabilities: The carrying values of variable rate interest bearing liabilities approximate their
fair value as they are short term in nature and reprice frequently.
4. Acquisition of non-controlling interests
On 14 October 2013, the Group acquired the 45% non-controlling interests in the ordinary shares of
Associated Advisory Practices Pty Ltd (‘AAP’) and Associated Advisory Practices (No 2) Pty Ltd (‘AAP2’) via
Schemes of Arrangement increasing its ownership to 100% in both entities. Consideration of $1,575,329
was paid by the Company issuing 5,626,175 ordinary shares at 28 cents per share in exchange for 3,030,209
AAP ordinary shares and 1,584,822 AAP2 ordinary shares. Non-controlling interests of $142,190 were
derecognised with the difference of $1,433,139 recognised in accumulated losses.
There have been no business combinations during the period.
5. Segment information
The Group has organised its businesses and identified its operating segments based on the nature of the
products and services provided and the markets in which it operates. Operating segments with similar
economic characteristics have been aggregated into single reportable segments, and internal reports are
regularly reviewed by the Managing Director and Chief Executive Officer on this basis.
The Group’s reportable segments are:
•
Centrepoint Wealth – provides Australian Financial Services Licence related services, investor
directed portfolio services and investment management services to financial advisers and their
clients;
Centrepoint Funding – provides insurance premium funding and mortgage broking services; and
Corporate – Board, corporate finance, company secretarial and other administration functions of the
Company.
•
•
The Group operated only in Australia during the reporting period. A detailed review of these segments is
included in the Directors’ Report.
Segment performance is evaluated using operating profit or loss before tax which is measured using the
Group’s accounting policies described in Note 2. The Group does not currently manage its assets and
liabilities on an individual segment basis. Accordingly, assets and liabilities have not been allocated to
individual segments.
Restatement of prior year comparatives
During the year the Group changed the structure of its internal organisation. Previously reported segments
Financial Advice Services – own AFSL, Financial Advice Services – licensees and Investment Products now
form the Centrepoint Wealth segment. The previously reported Insurance Premium Funding segment is
included in the Centrepoint Funding segment, which also includes mortgage broking previously included in
Corporate and Other. Discontinued international operations are no longer a reportable segment with prior
year comparative information disclosed in Note 17.
PAGE 59
CENTREPOINT ALLIANCE LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Consolidated Financial Statements
30 June 2014
2014
Revenue
External customers
Inter-segment revenue
Interest income
Segment revenue
Inter-segment elimination
Total revenue
Segment results
Borrowing expenses
Client claims
Depreciation & amortisation
Impairment of assets
Share of profit/(loss) of associates
Segment profit/(loss) before tax and
discontinued operations
Inter-segment elimination
Profit before tax and discontinued
operations
2013 (Restated)
Revenue
External customers
Inter-segment revenue
Interest income
Segment revenue
Inter-segment elimination
Total revenue
Segment results
Borrowing expenses
Client claims
Depreciation & amortisation
Impairment of assets
Share of profit/(loss) of associates
Segment profit/(loss) before tax and
discontinued operations
Centrepoint
Wealth
$'000
Centrepoint
Funding
$'000
Corporate
$'000
Consolidated
$'000
32,405
259
64
32,728
(64)
(1,886)
(1,701)
15
-
1,764
52
16,782
18,598
(5,044)
-
(293)
(555)
-
301
4,338
335
4,974
(1)
-
(28)
(153)
-
2,962
5,143
49
34,470
4,649
17,181
56,300
(4,649)
51,651
(5,109)
(1,886)
(2,022)
(693)
-
8,154
(3,900)
4,254
Centrepoint
Wealth
$'000
Centrepoint
Funding
$'000
Corporate Consolidated
$'000
$'000
35,959
250
93
36,302
(292)
(9,980)
(1,638)
(559)
-
2,462
48
13,557
16,067
(4,723)
-
(235)
(434)
-
2
-
557
559
-
-
(33)
-
(76)
38,423
298
14,207
52,928
(298)
52,630
(5,015)
(9,980)
(1,906)
(993)
(76)
(6,085)
3,588
(4,135)
(6,632)
The Inter-segment sales are carried out on an arm’s length basis and are eliminated on consolidation.
Revenue from one customer amounted to $6,886,709 (2013: $9,270,468) arising from sales in the Wealth
segment.
PAGE 60
CENTREPOINT ALLIANCE LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Consolidated Financial Statements
30 June 2014
6.
Interest revenue
Interest income - Insurance premium funding
Interest income - Other
Total interest income
2014
$'000
2013
$'000
16,779
402
17,181
14,591
654
15,245
Rate of Interest
Average Balance
2014
2013
$'000
$'000
Interest
2014
$'000
2013
$'000
Average Rate p.a.
2014
2013
%
%
Loan receivables - premium funding
Loan receivables - investment advisers
Cash and deposits
138,983
775
9,494
118,722
1,682
8,508
16,779
101
301
14,591
188
466
12.07%
13.07%
3.17%
12.29%
11.15%
5.48%
7. Other revenue
Cost recoveries from advisors
Gain on sale of investments
Retail and wholesale asset and service fees
Other
Total other revenue
8. Borrowing expenses
Interest expense
Bank fees & other
Total borrowing expenses
2014
$'000
2013
$'000
450
243
77
189
959
1,256
621
24
156
2,057
2014
$'000
2013
$'000
3,771
1,337
5,108
3,701
1,314
5,015
Rate of Interest
Average Balance
2014
2013
$'000
$'000
Interest
Average Rate p.a.
2014
$'000
2013
$'000
2014
%
2013
%
Interest expense
95,225
78,077
3,771
3,701
3.96%
4.74%
PAGE 61
CENTREPOINT ALLIANCE LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Consolidated Financial Statements
30 June 2014
9. Other Expenses
2014
$'000
2013
$'000
a) Employee benefit expenses
Wages and salaries
Share based compensation expense
Termination costs
Total employee benefit expenses
b) Impairment of assets
Impairment of receivables
Impairment of intangibles
Total impairment of assets
c) Other general and administrative expenses
Audit fees
Communication expenses
Computer expenses
Advisor conference & training expenses
Depreciation and amortisation
Directors fees and expenses
Entertainment
Foreign exchange (loss)/gain
Licensing, subscriptions and registrations
Marketing and promotion
Management fees
Printing, stationary and postage
Travel and accommodation
Other expenses
Total other general and administrative expenses
22,501
429
-
22,930
623
70
693
472
450
367
795
2,022
334
221
(1)
1,029
518
649
223
919
1,436
9,434
22,219
72
259
22,550
605
388
993
491
662
1,105
1,379
1,906
356
301
75
574
403
619
312
932
1,465
10,580
PAGE 62
CENTREPOINT ALLIANCE LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Consolidated Financial Statements
30 June 2014
10. Remuneration of auditors
The primary auditor of Centrepoint Alliance Limited was Ernst & Young.
Amounts received or due and receivable by Ernst & Young for:
Audit of the financial report of the entity and other entities
in the consolidated group
Other services in relation to the entity and other entities
in the consolidated group
Taxation services
Other services associated with the rights issue
Other regulatory audit services
Amounts received or due and receivable by other audit firms for:
Audit fees - managed funds & international businesses
Other non-audit services
2014
$
2013
$
335,500
379,000
76,643
12,500
45,444
470,087
90,408
32,112
122,520
167,633
-
20,000
566,633
120,945
-
120,945
11. Income tax
a) Income tax expense
The major components of income tax expense for the years ended 30 June 2014 and 2013 are:
Current income tax
Current income tax charge
Adjustment to current tax of prior period
Deferred income tax
Relating to origination and reversal of temporary differences
Adjustment to deferred tax of prior period
Income tax expense reported in the income statement
2014
$'000
2013
$'000
140
46
768
77
1,031
138
188
(361)
606
571
b) Amounts charged or credited directly to equity
Income tax of $154,000 was charged directly to equity for the year ending 2014 (2013: Nil).
PAGE 63
CENTREPOINT ALLIANCE LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Consolidated Financial Statements
30 June 2014
c) Reconciliation between aggregate tax expense recognised in the income statement and tax
expense calculated per the statutory income tax rate
The difference between income tax expense provided in the financial statements and the prima facie
income tax expense/ (benefit) is reconciled as follows:
Accounting profit/(loss) before tax from continuing operations
At the Company's statutory income tax rate of 30% (2013: 30%)
Tax on discontinued operations
Non-deductible expenses
Amounts not included in assessable income
Effect of tax losses not taken into account
Tax adjustment in respect to non-consolidated entities
Adjustment in respect of current tax of prior years
Adjustment in respect of deferred tax of prior years
Aggregate income tax expense
d)
Recognised deferred tax assets and liabilities
Deferred income tax relates to the following:
2014
$'000
2013
$'000
4,254
1,276
-
96
(128)
(463)
121
52
77
1,031
(6,686)
(2,006)
(30)
135
(177)
1,855
-
188
606
571
Statement of Financial
Position
Statement of
Comprehensive Income
2014
$'000
2013
$'000
2014
$'000
2013
$'000
Deferred tax liabilities
Deferred revenue
Intangibles - net of impairment
Prepayments
Gross deferred tax liabilities
Deferred tax assets
Provisions for claims
Provision for impairment of loan receivables
Deferred fee income
General accruals
Employee benefits
Prepaid revenue
Deferred transaction costs
Gross deferred tax assets
Net deferred tax assets
Movement in deferred tax assets/liabilities
Amounts charged directly to equity
Deferred income tax expense is attributable to:
Continuing operations
(1,057)
(866)
-
(1,923)
5,612
381
-
509
1,253
196
334
8,285
6,362
(16)
-
(1,838)
(1,854)
6,231
1,099
64
537
700
-
275
8,906
7,052
(1,041)
(866)
1,838
(69)
502
-
(1,133)
(631)
(619)
(718)
(64)
(28)
553
196
(95)
(775)
(844)
154
(394)
848
12
111
(56)
-
(135)
386
(245)
-
(690)
(245)
PAGE 64
CENTREPOINT ALLIANCE LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Consolidated Financial Statements
30 June 2014
e) Tax losses
The Group has the following Australian tax losses for which no deferred tax assets are recognised at
reporting date.
Revenue losses
Capital losses
Total unrecognised
2014
$'000
2013
$'000
48,175
29,097
77,272
49,867
29,096
78,963
The above losses are available indefinitely for offset against future taxable income and capital gains
subject to continuing to meet relevant statutory tests.
f) Unrecognised temporary differences
At 30 June 2014, the tax value of unrecognised temporary differences associated with the Group's
investments in subsidiaries or associates is Nil (2013: $497,000).
g)
Tax consolidation
i) Tax effect accounting by members of the tax consolidated group
a) Measurement method adopted under AASB interpretation 1052 Tax Consolidation Accounting
The head entity and the controlled entities in the tax consolidated group continue to account for
their own current and deferred tax amounts. The Group has applied the ‘separate taxpayer within
group’ approach whereby the Company measures its current and deferred taxes as if it continued
to be a separately taxable entity in its own right, with adjustments for its transactions that do not
give rise to a tax consequence for the group or that have a different tax consequence at the level
of the group. The current and deferred tax amounts are measured by reference to the carrying
amount of assets and liabilities in the Statement of Financial Position and their tax bases applying
under the tax consolidation, this approach being consistent with the broad principles in AASB 112
Income Taxes. The nature of the tax funding agreement is discussed further below.
In addition to its own current and deferred tax amounts, the head entity also recognises current
tax liabilities (or assets) and the deferred tax assets arising from unused tax losses and unused tax
credits assumed from controlled entities in the tax consolidated group.
b) Nature of the tax funding agreement
Members of the tax consolidated group have entered into a tax funding agreement. Under the
funding agreement the funding of tax within the Group is based on taxable profit. The tax funding
agreement requires payments to/from the head entity to be recognised via an inter-entity
receivable (payable) which is at call.
The amounts receivable or payable under the tax funding agreement are due upon receipt of the
funding advice from the head entity, which is issued as soon as practicable after the end of each
financial year. The head entity may also require payment of interim funding amounts to assist with
its obligations to pay tax instalments. These amounts are payable at call.
PAGE 65
CENTREPOINT ALLIANCE LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Consolidated Financial Statements
30 June 2014
12. Dividends
Dividends payable are recognised when declared by the company.
a) Dividends paid or payable
The following fully franked dividends were provided for or paid during
the year:
Dividends paid on ordinary shares
Dividends paid to non-controlling interests in:
Associated Advisory Practices Pty Ltd
Associated Advisory Practices (No 2) Pty Ltd
Total dividends paid or payable to non-controlling interests
b) Franking credit balance
2014
$'000
2013
$'000
-
-
-
-
-
525
395
920
2014
$'000
2013
$'000
Franking account balance as at the end of the financial year at 30% (2013: 30%)
28,902
27,985
Franking credits that will arise from the payment of income tax payable as
at the end of the financial year
-
28,902
917
28,902
The tax rate at which paid dividends were franked is 30%. Franking credits are reported on a tax paid
basis.
13. Earnings per share (‘EPS’)
The following reflects the income used in the basic and diluted EPS computations:
a) Profit/(loss) used in calculating profit/(loss) per share
Net profit/(loss) attributable to ordinary equity holders of the Company
Net profit/(loss) attributable to ordinary equity holders of the Company
from continuing operations
2014
$'000
2013
$'000
3,299
3,299
(7,781)
(7,696)
b) Weighted average number of shares
Weighted average number of ordinary shares (excluding reserved shares)
Effect of dilution:
Performance rights
Weighted average number of ordinary shares (excluding
reserved shares) adjusted for the effect of dilution
No. of shares
103,169,149
No. of shares
96,840,753
2,237,534
-
105,406,683
96,840,753
On 14 October 2013 the Group completed two Schemes of Arrangement whereby it acquired the 45%
externally held shares of Associated Advisory Practices Pty Ltd and Associated Advisory Practices (No 2) Pty
Ltd through the issue of 5,626,172 ordinary shares.
PAGE 66
CENTREPOINT ALLIANCE LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Consolidated Financial Statements
30 June 2014
The Company finalised a $13.630m equity raising (net of transaction costs) in May 2014 and as a result
8,000,000 ordinary shares were issued through a placement to institutional and sophisticated investors on
10 April 2014 and 35,697,906 ordinary shares were issued pursuant to the terms of the non-renounceable
entitlement offer on 12 May 2014.
There have been no other transactions involving ordinary shares or potential ordinary shares that would
significantly change the number of ordinary shares or potential ordinary shares outstanding between the
reporting date and the date of completion of these financial statements.
There was no impact from share options or performance rights on the earnings per share calculations.
c) Information on the classification of securities
i) Reserved shares (Centrepoint Alliance Employee Share Plan)
For the entire financial year 856,431 shares were held by the Centrepoint Alliance Employee Share Plan
Trust on behalf of employees under the rules of the Plan. All shares held by the Trust are excluded from the
calculations of earnings per share because they are treated as reserved shares under AASB 132 Financial
Instruments: Presentation.
ii) Partly Paid Shares
There are no partly paid shares. In the prior financial year, to calculate both the basic and diluted earnings
per share, the appropriate proportion, as determined by the percentage paid, of the 428,572 partly paid
shares (which were bought back and cancelled in October 2012) were included in determining weighted
average shares as appropriate.
14. Trade and other receivables
Current
Commissions receivable
Trade receivables
Other
Total
Non-current
Claims recoveries
Total
2014
$'000
2013
$'000
11,635
1,403
-
13,038
117
117
11,941
1,615
174
13,730
92
92
An ageing analysis is provided in note 3(b) (iv).
An impairment expense of Nil (2013: $123,000) was incurred as a result of impairment of receivables.
PAGE 67
CENTREPOINT ALLIANCE LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Consolidated Financial Statements
30 June 2014
15. Interest bearing receivables
Current
Loan receivables - Insurance premium funding
Provision for impairment - collective
Provision for impairment - specific
Loan receivables - Investment advisers
Provision for impairment - specific
Total current interest bearing receivables
Non-current
Loan receivables - Investment advisers
Provision for impairment - specific
Total non-current interest bearing receivables
a) Terms and conditions
2014
$'000
2013
$'000
131,378
(354)
(508)
130,516
438
(345)
93
130,609
725
(272)
453
107,755
(315)
(270)
107,170
535
(83)
452
107,622
936
(379)
557
Insurance Premium Funding loans are fixed interest loans with an average term of 10 months. Repayments
are made monthly in advance in accordance with the terms of the loan contract.
Loans due from investment advisers have terms ranging from 1 to 5 years and varying interest terms at or
above commercial rates. The majority of these loans are secured through charges over assets, by
guarantees, or by retention of financial advice fees.
b) Impairment of loan receivables
Impairment expense amounts are included in the Statement of Comprehensive Income under ‘impairment
of assets’.
(i)
(ii)
Allowance for Impairment
Opening Balance
Movement in the allowance is as follows
Allowance for impairment
Bad debts written off (gross)
Closing balance
Receivables impairment expense
Impairment expense
Bad debts written off directly
Amounts recovered against debts previously written off
Total expense
2014
$'000
2013
$'000
2,617
764
(1,251)
2,130
764
1
(142)
623
2,409
605
(397)
2,617
605
222
(222)
605
PAGE 68
CENTREPOINT ALLIANCE LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Consolidated Financial Statements
30 June 2014
(iii) Non-Accrual Loans
Total of loan receivables with allowance
Specific allowance for impairment
Non-accrual loans included in loan receivables (net)
Interest foregone on non accrual loans
2014
$'000
2013
$'000
1,195
(508)
687
62
690
(270)
420
7
“Non-accrual loans” are loan receivables where the debt has been written down to recoverable value. Once
classified as a non-accrual loan, interest accruing on insurance premium funding loans is not brought to
account as income unless actually received.
An ageing analysis of loan receivables is provided in note 3(b) (iv).
c) Related party receivables
There are currently no related party receivables.
d) Fair value and risk management
The carrying value of interest bearing receivables approximates their fair value.
Credit risk, interest rate risk and currency risk is addressed in note 3.
16. Other assets
Current
Security deposits
Interest bearing term deposits
Prepayments
Total
Non-current
Deposits
Investments in associates
Total
a) Investments in associates
2014
$'000
2013
$'000
136
5,000
4,069
9,205
667
-
667
53
-
2,707
2,760
1,029
90
1,119
During the current year, the Group held a 40% interest in GPS IP Pty Ltd (a company providing products and
services to financial advisers) and accounted for the investment as an associate. In December 2013, the
Group disposed of its 40% interest in GPS IP Pty Ltd to GPS IP Group Holdings Ltd for $333,000. The
carrying value of the Investment in Associate as at date of sale was $90,000. This transaction resulted in
the recognition of a gain on sale of associate of $243,000 calculated as follows:
PAGE 69
CENTREPOINT ALLIANCE LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Consolidated Financial Statements
30 June 2014
Proceeds from sale of associate
Less Carrying value of investment at date of sale
Gain on sale of investment
Investment in associate
Reconciliation of investment in associate:
Balance at the beginning of the financial year
Share of profit/(loss) for the year
Proceeds on disposal of associate
Gain on sale of associate
Balance at the end of the financial year
2014
$'000
2014
$'000
2013
$'000
-
90
-
(333)
243
-
333
(90)
243
90
166
(76)
-
-
90
Investment in associate
Entities
GPS IP Pty Ltd
Country
Reporting
Date
Ownership interest
2014
2013
%
%
Australia
30 June
-
40%
Summarised financial information in respect of the Group's associate is set out below:
Financial position
Total assets
Total liabilities
Groups's share of associate's net assets
Financial performance
Total revenue
Total profit/(loss) for the year
Groups's share of associate's profit/(loss)
2014
$'000
2013
$'000
-
-
-
-
-
-
1,074
(1,557)
(76)
5,976
(189)
(76)
The Group received no dividends from the associate and there were no contingent liabilities, capital
commitments and other expenditure commitments of the associate.
PAGE 70
CENTREPOINT ALLIANCE LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Consolidated Financial Statements
30 June 2014
17. Discontinued operations
On 11 February 2014, the sale of the Malaysian businesses were completed following a conditional sale
agreement being entered in the prior reporting period.
In the prior financial year the sale of the Singapore business was completed (de-registration occurred July
2014). The Group has a number of dormant entities in New Zealand and is in the process of exiting from
the New Zealand business.
The results of the International operations for the reporting period are presented below:
Advice and financial product revenue
Other revenue
Borrowing expenses
Client claims
Depreciation and amortisation
Other expenses
(Loss)/profit before tax
Income tax (expense)/credit
(Loss)/profit after tax
2014
$'000
2013
$'000
-
-
-
-
-
-
-
-
-
-
2,776
101
2,877
(6)
(4)
(74)
(2,847)
(54)
(31)
(85)
There were no major classes of assets and liabilities as at 30 June 2014 or 30 June 2013.
PAGE 71
CENTREPOINT ALLIANCE LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Consolidated Financial Statements
30 June 2014
18. Property, plant and equipment
Cost
At 1 July 2012
Additions
Disposals
At 30 June 2013
Additions
Disposals
At 30 June 2014
Depreciation and impairment
At 1 July 2012
Depreciation charge for the year
Impairment
Disposals
At 30 June 2013
Depreciation charge for the year
Impairment
Disposals
At 30 June 2014
Net carrying value
At 30 June 2014
At 30 June 2013
Leasehold
Improvement
$’000
Plant &
Equipment
$’000
564
-
-
564
954
(237)
1,281
438
25
-
-
463
123
-
(175)
411
870
101
5,964
283
(655)
5,592
440
(286)
5,746
4,497
-
-
3
4,500
373
-
(220)
4,653
1,093
1,092
Total
$’000
6,528
283
(655)
6,156
1,394
(523)
7,027
4,935
25
-
3
4,963
496
-
(395)
5,064
1,963
1,193
PAGE 72
CENTREPOINT ALLIANCE LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Consolidated Financial Statements
30 June 2014
19. Intangible assets
a) Reconciliation of carrying amounts at the beginning and end of the year
Period ending 30 June 2014
At 1 July 2013 net of accumulated amortisation
and impairment
Additions
Impairment
Amortisation
At 30 June 2014 net of accumulated amortisation
and impairment
At 30 June 2014
Cost
Accumulated amortisation and impairment
Net carrying value
Year ending 30 June 2013
At 1 July 2012 net of accumulated amortisation
and impairment
Additions
Business combination
Disposal
Impairment
Amortisation
At 30 June 2013 net of accumulated amortisation
and impairment
At 30 June 2013 (restated)
Cost
Accumulated amortisation and impairment
Net carrying value
Goodwill Software
$'000
$'000
Network
& Client
Lists
$'000
Total
$'000
2,132
-
-
-
403
1,034
-
(427)
3,986
70
(70)
(1,099)
6,521
1,104
(70)
(1,526)
2,132
1,010
2,887
6,029
2,385
(253)
2,132
3,509
(2,499)
1,010
10,025
(7,138)
2,887
15,919
(9,890)
6,029
2,132
-
-
-
-
-
354
148
6
(9)
-
(96)
5,746
-
-
-
(388)
(1,372)
8,232
148
6
(9)
(388)
(1,468)
2,132
403
3,986
6,521
2,385
(253)
2,132
2,475
(2,072)
403
9,956
(5,970)
3,986
14,816
(8,295)
6,521
PAGE 73
CENTREPOINT ALLIANCE LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Consolidated Financial Statements
30 June 2014
b) Description of the Group’s intangible assets
i) Goodwill
Goodwill of $1,176,000 was created as a result of the reverse acquisition of Centrepoint Alliance Limited by
Centrepoint Wealth Pty Ltd in December 2010. It represents goodwill on the insurance premium funding
business.
Goodwill was also created during 2012 on the acquisitions of the externally owned interests in Ventura
Investment Management Ltd of $93,000 and in Australian Loan Company Pty Ltd of $863,000, (net of an
impairment of $253,000).
Goodwill is regularly tested and is not considered impaired.
ii) Networks and client lists
Intangible assets in the form of adviser network businesses and adviser client lists acquired to expand the
adviser network. These had a total book value at 30 June 2014 of $2,887,000 (2013: $3,986,000).
iii) Software
The Group has developed or acquired software, which are being amortised over their expected useful lives.
c)
Impairment tests for goodwill and intangibles
i) Goodwill
Goodwill is regularly tested for impairment by calculation of value in use at the cash generating unit (‘CGU’)
level which is the same as the business unit described above.
Value in use is calculated using discounted cash flow projections for five years and terminal values
prepared from current forecasts using the following assumptions:
•
•
•
Growth rate 0% (2013: 0%)
Pre-tax risk-adjusted discount rate for cash flows: 17.64% (2013: 17.64%)
Cost of equity: 12.35% (2013: 12.35%)
Growth rates – represent the change in forecast earnings used to derive future cash flows used in the
impairment test calculation. The Board approved budget for financial year ended 30 June 2015 has been
used as the basis for future cash flows. Key assumptions incorporated into the 2015 budget are on the
volume of new loans for both the insurance premium funding business and the Australian Loan Company
business; effective interest rate attained for the insurance premium funding business; and the commission
retention rate for the Australian Loan Company business. The growth rate applied to future periods after
2015 is nil.
Cost of Equity – this is the weighted average cost of capital used to calculate the pre-tax risk adjusted
discount rate and is equal to 12.35%. This rate was determined by the Board with reference to risk free
interest rates and cost of equity of ASX listed peers.
Pre-tax risk-adjusted discount rate for cash flows – the discount rate used to discount future cash flows and
equals the Cost of Equity rate grossed up by the Company’s tax rate i.e. 12.35% / (1 - .30) = 17.64%
The testing resulted in no impairment being required.
The value in use model is not sensitive to any of the above assumptions.
PAGE 74
CENTREPOINT ALLIANCE LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Consolidated Financial Statements
30 June 2014
ii) Networks and client lists
Adviser networks and client lists are regularly tested for impairment by calculation of value in use when
indicators of potential impairment arises.
Value in use is calculated using discounted cash flow projections associated with the applicable asset using
the following assumptions:
•
•
•
•
•
The number of revenue generating advisers and clients declines to nil over the remaining useful life
Revenue growth from advisers and clients: -5% to 0% depending on the asset (2013: 0%)
Inflation rate for expenses: 2.5%
Pre-tax risk-adjusted discount rate for cash flows: 17.64% (2013: 17.64%)
Cost of equity: 12.35% (2013: 12.35%)
The testing resulted in impairment losses of $69,000 (2013: $388,000).
The value in use calculations are most sensitive to the remaining useful life assumption. Sensitivity analysis
indicates that a decrease in the assumed useful life of 1 year would have resulted in a further impairment
expense of $100,000 (2013: Nil).
iii) Software
The value of the developed or acquired software of the Group is amortised on a straight line basis over a
2.5 year period, which the directors assess as the intangible asset’s useful life. No software is considered to
be impaired.
PAGE 75
CENTREPOINT ALLIANCE LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Consolidated Financial Statements
30 June 2014
20. Trade and other payables
Current
Insurance premium funding - commissions payable
Insurance premium funding - premiums payable
Amounts payable to financial advisers
Trade payables
Other creditors and accrued expenses
Total
Non-current
Other creditors and accrued expenses
Total
a) Terms and conditions
2014
$'000
2013
$'000
551
20,880
8,898
2,312
3,531
36,172
90
90
423
20,353
9,256
2,838
4,674
37,544
-
-
Trade and other payables are non-interest bearing. The trade payables relate principally to financial advice
fees payable to advisers and insurance premiums and commissions payable to insurance brokers.
Other creditors and accrued expenses relate mainly to operating expenses and are normally payable within
60 days.
b) Fair value
Due to the short term nature of the majority of the current trade and other payables, their carrying value is
assumed to approximate their fair value.
c) Financial guarantees
No guarantees have been given over trade and other payables.
d) Related party payables
For terms and conditions relating to related party payables refer to note 27.
e) Interest rate, foreign exchange and liquidity risk
Information regarding interest rate, foreign exchange and liquidity risk exposure is set out in note 3.
PAGE 76
CENTREPOINT ALLIANCE LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Consolidated Financial Statements
30 June 2014
21. Interest bearing liabilities
Current
Receivables finance facility - insurance premium funding
Equipment hire and software finance liabilities
Total
Non-current
Equipment hire and software finance liabilities
Total
2014
$'000
2013
$'000
95,484
265
95,749
249
249
71,456
200
71,656
90
90
a) Fair value of interest bearing liabilities
Interest bearing liabilities are carried at amortised cost. The carrying value of borrowings approximates
their fair value.
b) Financial risk
Refer to note 3 for interest rate risk and liquidity risk. There is no exchange rate risk as the interest bearing
liabilities are documented and payable in Australian dollars.
c) Finance facilities
Centrepoint Alliance Premium Funding Pty Ltd has a multi option facility, including an insurance premium
funding receivables finance facility with the National Australia Bank Limited (‘NAB’). The insurance
premium funding receivables finance facility has a tiered limit arrangement that varies up to $145m to
match the seasonality of the business. Advances under the facility are available up to 30 January 2015. It is
secured by a registered mortgage debenture over all the assets and undertakings of that company. In
addition, amounts advanced under the receivables finance facility are secured by the partial assignment to
the NAB of loan contract receivables and an unlimited interlocking guarantee and indemnity given by the
Company.
The Group’s finance facilities and their usage as at reporting date was as follows:
30 June 2014
NAB Multi option facility
WBC equipment finance facility
30 June 2013
NAB Multi option facility
WBC equipment finance facility
Accessible
$'000
Used
$'000
Unused
$'000
115,000
-
80,000
540
95,484
-
71,456
540
19,516
-
8,544
-
d) Defaults and breaches
There were no defaults or breaches of lending covenants during the year.
PAGE 77
CENTREPOINT ALLIANCE LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Consolidated Financial Statements
30 June 2014
22. Provisions
Current
Provision for adviser client claims
Provision for employee entitlements
Total
Non-current
Provision for adviser client claims
Provision for employee entitlements
Total
2014
$'000
2013
$'000
6,705
3,403
10,108
7,070
717
7,787
8,515
1,735
10,250
12,253
1,071
13,324
The provision for adviser client claims is the estimated cost of resolving claims from clients arising from
financial advice provided prior to 1 July 2010 by Authorised Representatives of the Group. The provision is
the estimated cost of resolving reported and ‘incurred but not reported’ (‘IBNR’) claims. The estimate was
determined using an independent actuarial valuation assessment in August 2014 that used internal
historical data on claims up to 30 June 2014. It is measured based on the present value of future costs that
the Group expects to incur to resolve such claims. Claims are expected to be reported and resolved over a
period between zero and five years. Resolution is dependent on the circumstances of each claim and the
level of complexity involved. Any costs are offset against the provision as incurred.
a) Movement in provision for adviser client claims
Opening balance
Movement in the provision is as follows:
Claims provisioning expense during the period
Claims settlements & fees paid (net of recoveries)
Closing balance
b) Movement in provision for employee benefits
Opening balance
Movement in the provision is as follows:
Provision for year
Leave and other employee benefits paid
Closing balance
2014
$'000
2013
$'000
20,768
22,083
1,886
(8,879)
13,775
9,980
(11,295)
20,768
2014
$'000
2013
$'000
2,806
2,719
3,505
(2,192)
4,119
1,415
(1,328)
2,806
PAGE 78
CENTREPOINT ALLIANCE LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Consolidated Financial Statements
30 June 2014
23. Contributed equity
a) Paid up capital
Ordinary shares
Reserved shares
Partly paid shares
Reference
2014
$'000
2013
$'000
(i)
(ii)
(iii)
41,188
(1,173)
-
40,015
25,982
(1,173)
-
24,809
i) Ordinary shares (issued & fully paid)
Balance at start of year
Movements during the year:-
- Share issue - net of transaction costs
- Rights issue - net of transaction costs
- Transfer from cancelled partly paid shares
- Acquisition of minority interest
- Buyback and cancellation of shares from
sale of Singapore business
On issue at end of year
ii) Reserved shares
Balance at start of year
On issue at end of year
iii) Partly paid shares
Balance at start of year
Movements during the year:-
- Buyback and cancellation of shares
- Transfer to ordinary share capital
On issue at end of year
Total contributed equity
Number of
shares
2014
$'000
Number of
shares
2013
$'000
93,465,646
25,982
101,197,330
29,749
8,000,000
35,697,906
-
5,626,172
2,487
11,144
-
1,575
-
-
-
-
-
-
99
-
-
142,789,724
-
41,188
(7,731,684)
93,465,646
( 3,866 )
25,982
(856,431)
(856,431)
(1,173)
(1,173)
(856,431)
(856,431)
( 1,173 )
( 1,173 )
-
-
-
-
-
141,933,293
-
40,015
428,572
99
(428,572)
-
-
92,609,215
-
( 99 )
-
24,809
b) Capital management
The Company’s capital is currently only comprised of shareholder funds.
When managing capital, management's objective is to ensure the entity continues as a going concern as
well as to maintain optimal returns to shareholders and benefits for other stakeholders. Management also
aims to maintain a capital structure that ensures the lowest cost of capital available to the entity.
Subsequent to balance date the directors declared a dividend in respect of the 2014 financial year of 2.20
cents per ordinary share amounting to $3,141,374 (2013: Nil). No provision has been recognised as at 30
June 2014.
PAGE 79
CENTREPOINT ALLIANCE LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Consolidated Financial Statements
30 June 2014
24. Reserves
Employee equity benefits reserve
Dividend reserve
Total
a) Employee equity benefits reserve
2014
$'000
2013
$'000
498
3,820
4,318
2014
$'000
2013
$'000
Balance at start of year
Value of share based payments provided or which vested during the year
Value of share based payments expired during the year
Balance at end of year
69
429
-
498
69
-
69
51
72
(54)
69
The employee equity benefits reserve is used to record the value of share based payments provided to
employees, including KMP, as part of their remuneration.
During the current period, the following performance rights were granted to the Managing Director and
Chief Executive Officer and other senior executives of the Group which are accounted for as share options.
These share based remuneration awards were valued using the Black Scholes model as follows:
Performance rights
Managing Director
Senior Executives*
No. of
options
1,500,000
2,600,000
Vesting
period
3 years
3 years
Exercise
price
Fair Value at
grant date
$0.00
$0.00
$0.36
$0.34
* 400,000 performance rights of the 2,600,000 issues were forfeited due to the departure of a senior
executive.
b) Foreign currency translation reserve
Balance at start of year
Foreign currency translation differences
Balance at end of year
2014
$'000
2013
$'000
-
-
-
(1,456)
1,456
-
The foreign currency translation reserve comprised all foreign exchange differences arising from the
translation of the financial statements of foreign operations where their functional currency is different to
the presentation currency of the reporting entity.
PAGE 80
CENTREPOINT ALLIANCE LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Consolidated Financial Statements
30 June 2014
c) Dividend reserve
Balance at start of year
Transfer from current year profits
Balance at end of year
2014
$'000
2013
$'000
-
3,820
3,820
-
-
-
The dividend reserve represents current year profits transferred for payment of potential future dividends.
25. Notes to cash flow statement
a) Reconciliation of cash & cash equivalents
Cash at bank
Total
2014
$'000
16,373
16,373
2013
$'000
9,352
9,352
b)
Reconciliation of net profit after tax to net cash provided by operating activities
Net profit/(loss) after income tax
Adjustments to reconcile profit before tax to net cash flows:
Depreciation and amortisation
Foreign exchange losses/(gains)
Impairment of intangibles assets and receivables
(Profit)/loss on disposal of non-current assets
Interest received
Dividend received from investments
Gain on sale of investments
Interest expense
Share based compensation expense
Share of loss of associates
Tax expense
Working capital adjustments:
(Increase)/decrease in assets:
Receivables
Other assets
Deferred tax assets
(Decrease)/increase in liabilities:
Payables
Provisions for employee entitlements
Provision for client claims
Provision for tax
Net cash from operating activities
2014
$'000
2013
$'000
3,223
(7,288)
2,022
1
693
(13)
(402)
(74)
(243)
66
429
-
1,031
201
(1,083)
(186)
(1,285)
1,313
(6,993)
20
(1,280)
1,906
75
993
16
(654)
-
-
321
72
76
571
7,620
2,227
245
(3,650)
87
(1,315)
(143)
1,159
PAGE 81
CENTREPOINT ALLIANCE LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Consolidated Financial Statements
30 June 2014
c)
Non-cash financing and investing activities
During the financial period there were no non–cash financing or investing transactions reflected in the
Statement of Cash Flows.
26. Information relating to Centrepoint Alliance Limited (the ‘Company’)
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Net Assets
Issued capital
Employee equity benefits reserve
Dividend reserve
Accumulated losses
Total Shareholder Equity
Net profit after tax of the parent entity
Total comprehensive income of the parent entity
2014
$'000
2013
$'000
22,722
14,212
(472)
-
36,462
40,015
498
3,820
(7,871)
36,462
3,832
3,832
3,115
14,523
(631)
(12)
16,995
24,809
69
-
(7,883)
16,995
(6,279)
(6,279)
At reporting date the Company had given guarantees to external parties totalling $45,804 (2013: $46,804).
In addition the Company has given an unlimited interlocking guarantee and indemnity to the National
Australia Bank as a condition of its banking facility arrangements to secure the borrowings of Centrepoint
Alliance Premium Funding Pty Ltd.
Contractual operating lease expenditure commitments of the Company are as follows:
Not later than one year
Later than one year but not later than five years
Total
2014
$'000
2013
$'000
897
2,042
2,939
82
41
123
The Company entered into a commercial lease on a property in January 2013 expiring December 2014. The
lease has a rent renewal option and on renewal if applicable, terms may be renegotiated. In January 2014,
the Company also entered into corporate services agreements for IT and telecommunications hardware
and support. The agreements have terms between 2 and 4 years with options to renew at expiry of the
initial term on a month to month basis.
At reporting date the Company had no contingent liabilities.
PAGE 82
CENTREPOINT ALLIANCE LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Consolidated Financial Statements
30 June 2014
27. Related party disclosures
a) Information relating to subsidiaries
The Consolidated Financial Statements of the Company are:
Name
Centrepoint Funding
Australian Loan Company Pty Ltd
Centrepoint Alliance Premium Funding
Pty Ltd
Centrepoint Wealth
Alliance Wealth Pty Ltd (formerly AAP
Advantage Pty Ltd)
Associated Advisory Practices Pty Ltd
Associated Advisory Practices (No 2) Pty
Ltd
Investment Diversity Limited
Professional Investment Services Pty Ltd
Ventura Investment Management Ltd
Corporate
Centrepoint Alliance Services Pty Ltd
Centrepoint Adviser Services Pty Ltd
Centrepoint Wealth Pty Ltd (formerly
Professional Investment Holdings Ltd)
De Run Securities Pty Ltd
Imagine Your Lifestyle Pty Ltd
Professional Accountants Pty Ltd
Professional Investment Services
(Malaysia) Sdn. Bhd.
SFP Adviser Sdn Bhd
Standard Financial Planner Sdn Bhd
Advisors Worldwide (NZ) Ltd**
Ausiwi Limited**
Discovery Investment Corporation (NZ)
Ltd
Professional Investment Holdings (NZ)
Ltd**
Professional Investment Services (NZ)
Ltd**
Professional Lending Services Limited**
Fifth Floor Pte Ltd
** Currently under Solvent Liquidation
Country of
Incorporation
Ownership
Interest
2014 2013 Principal Activity
Australia
Australia
100% 100% Mortgage broker / aggregator
100% 100% Insurance premium funding
Australia
100% 100% Financial advice
Australia
Australia
100% 55% AFSL licensee support services
100% 55% AFSL licensee support services
Australia
Australia
Australia
100% 100% Packages investment platforms
100% 100% Financial advice
100% 100% Packages managed funds
Australia
Australia
Australia
100% 100% Trustee – Employee share plan
100% 100% Dormant
100% 100% Holding company
Australia
Australia
Australia
Malaysia
56% 56% Financial services
50% 50% Dormant
100% 100% Loans to adviser network
0% 100% Disposed of during the period
Malaysia
Malaysia
0% 55% Disposed of during the period
0% 55% Disposed of during the period
New Zealand 100% 100% Dormant
New Zealand 100% 100% Holding company
New Zealand 0% 100% Disposed of during the period
New Zealand 43% 43% Holding company
New Zealand 43% 43% Dormant
New Zealand 38% 38% Dormant
Singapore 100% 100% De-registered 10 July 2014
PAGE 83
CENTREPOINT ALLIANCE LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Consolidated Financial Statements
30 June 2014
b) Ultimate parent
The ultimate holding company is Centrepoint Alliance Limited, a company incorporated and domiciled in
Australia.
c) Terms and conditions of transactions with related parties other than KMP
Sales to and purchases from related parties are made on terms equivalent to those that prevail in arm’s
length transactions. Outstanding balances at year end are unsecured and interest free and settlement
occurs in cash. There have been no guarantees provided or received for any related party receivables or
payables. For the year ended 30 June 2014, the Company has not recorded any impairment of receivables
relating to amounts owed by related parties (2013: Nil). An impairment assessment is undertaken each
financial year through examination of the financial position of related parties and the market in which a
related party operates.
d) Transactions with key management personnel
The aggregate compensation made to directors and other members of key management personnel of the
company and the Group is set out below:
2014
$'000
2013
$'000
1,907
113
-
300
2,320
2,019
126
62
259
2,466
Short term employee benefits
Post employment benefits
Share based payments
Termination/resignation benefits
Total compensation
28. Share based payment plans
a) Types of share-based payment plans
i) Performance Rights
Performance rights are rights that can be converted to fully paid ordinary shares in the Company for no
monetary consideration subject to specific performance criteria, as determined by the Board for each issue
of rights, being achieved.
b) Recognised share-based payment expenses
Expense arising from equity-settled share-based
payment transactions under the CAESP
Expense arising from equity-settled share-based
payment transactions under the CAESOP
Expense arising from performance rights
Total
2014
$'000
2013
$'000
-
-
429
429
22
50
-
72
PAGE 84
CENTREPOINT ALLIANCE LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Consolidated Financial Statements
30 June 2014
c) Movements during the year
(i) Shares under the CAESP
Outstanding at beginning of period
Expired during the period
Outstanding at end of period
(ii) Options under CAESOP
Outstanding at beginning of period
Issued during the period
Expired during the period
Outstanding at end of period
(ii) Performance rights
Outstanding at beginning of period
Issued during the period
Expired during the period
Outstanding at end of period
*WAEP is weighted average exercise price
2014
2013
No
WAEP*
No
WAEP*
285,001
-
285,001
400,000
-
-
400,000
-
4,100,000
(400,000)
3,700,000
0.40
-
0.40
0.40
-
-
0.40
-
-
-
-
856,431
(571,430)
285,001
-
2,250,000
(1,850,000)
400,000
-
-
-
-
1.07
(1.40)
0.40
-
0.36
(0.35)
0.40
-
-
-
-
All current share and option awards are fully vested at reporting date, and there are 571,430 (2013:
571,430) unallocated shares from expired awards which are held within the CAESP. Performance rights
have not yet vested.
Range of exercise prices
Weighted average fair value
at date of issue
CAESP
Shares
$
2014
CAESOP
Options
$
0.40
0.068
0.40
0.124
Performance
Rights
$
-
0.309
CAESP
Shares
$
2013
CAESOP
Options
$
Performance
Rights
$
0.40
0.226
0.40
0.124
-
-
2014
2013
CAESP
Shares
Yrs
CAESOP
Performance
Options
Yrs
Rights
Yrs
CAESP
Shares
Yrs
CAESOP
Performance
Options
Yrs
Rights
Yrs
Weighted average remaining
contractual life
0.33
2.50
2.00
1.33
3.50
3.50
d) Option pricing model
The fair value of the shares issued or acquired under the CAESP, the options issued under the CAESOP and
performance rights are estimated as at the date of allocation using a Binomial Model taking into account
the terms and conditions upon which they were granted.
PAGE 85
CENTREPOINT ALLIANCE LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Consolidated Financial Statements
30 June 2014
29. Commitments
a) Contracted operating lease expenditure
The Group has entered into commercial leases on certain properties expiring at various times up to 5 years
from reporting date. The leases have varying terms, options and rent renewals. On renewal, if applicable,
the terms are renegotiated. In January 2014, the Company also entered into corporate services
agreements for IT and telecommunications hardware and support. The agreements have terms between 2
and 4 years with options to renew at expiry of the initial term on a month to month basis.
Not later than one year
Later than one year but not later than five years
Total
b) Contracted finance lease expenditure
2014
$'000
2013
$'000
2,128
4,181
6,309
1,989
4,568
6,557
The Group has finance leases for items of office equipment and software. Material finance leases relate to
the following:
• Software used in the business. The Group entered into a 3 year commitment for licences and
software in August 2013. There are no terms of renewal or an option to purchase the software at
the expiry of the lease.
• Software developed and customised for the business. The Group entered into a 2 ½ year
commitment in November 2013. There are no terms of renewal or an option to purchase the
software at the expiry of the lease.
• Printers and copiers utilised in the business. The Group entered into the lease for provision of
hardware in November 2011. There are no terms of renewal, however, there is an option to
purchase the assets at expiry of the lease for $1 per unit.
Future minimum lease payments under the finance leases together with the present value of the net
minimum lease payments are as follows:
Within one year
After one year but not later than five years
Total minimum lease payment
Less amounts representing finance charges
Present value of minimum lease payment
2014
2013
Minimum
Lease
$'000
Present Value
of Lease
$'000
Minimum
Lease
$'000
Present Value
of Lease
$'000
278
262
540
(26)
514
186
151
337
-
337
178
93
271
(18)
253
101
65
166
-
166
PAGE 86
CENTREPOINT ALLIANCE LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Consolidated Financial Statements
30 June 2014
c) Remuneration commitments
Commitments for the payment of salaries and other remuneration under long-term employment contracts
in existence at the reporting date but not recognised as liabilities, payable:
Not later than one year
Later than one year but not later than five years
Total
2014
$'000
2013
$'000
200
-
200
-
-
-
Amounts disclosed as remuneration commitments include commitments arising from the service contracts
of directors and executives referred to in the remuneration report of the directors’ report that are not
recognised as liabilities and are not included in the compensation of KMP.
30. Contingent liabilities
The nature of the financial advice business is such that from time to time advice given by the Group or its
Authorised Representatives results in claims by clients for compensation.
The Group has provided for claims arising from advice provided prior to 1 July 2010 based on an actuarial
model of past claims as described in Note 22. The actuarial model does not project claims from class
actions. Class action lawyers have been active within the financial advice industry in relation to failed
investment products and there is an unquantifiable risk that such action may be taken against a Group
subsidiary in the future.
At the date of this report the directors are not aware of any material contingent claims in relation to advice
provided after 1 July 2010.
There were no other contingent liabilities at reporting date.
31. Events after the reporting period
The following matters have occurred subsequent to the year end:
On 27 July 2014, ASIC provided Professional Investment Services Pty Ltd (‘PIS’) formal notification of the
conclusion of the ongoing monitoring program (‘OMP’) which has been in place since 1 July 2013. The
successful conclusion of the OMP results in PIS not being subject to any ongoing regulatory actions or any
non-standard conditions applying to its AFSL.
On 22 August 2014, the directors of Centrepoint Alliance Limited declared a final dividend on ordinary
shares in respect of the 2014 financial year. The dividend is to be paid out of the dividend reserve. The
total amount of the dividend is $3,141,374 which represents a fully franked dividend of 2.20 cents per
share.
There are no other matters or events which have arisen since the end of the financial period which have
significantly affected or may significantly affect the operations of the Group, the results of those operations
or the state of affairs of the Group in subsequent financial years.
PAGE 87
CENTREPOINT ALLIANCE LIMITED AND ITS CONTROLLED ENTITIES
Directors’ Declaration
30 June 2014
In accordance with a resolution of the directors of Centrepoint Alliance Limited, I state that:
1.
In the opinion of the directors:
(a) the financial statements and notes of Centrepoint Alliance Limited for the financial year
ended 30 June 2014 are in accordance with the Corporations Act 2001, including:
i) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2014
and of its performance for the year ended on that date; and
ii) complying with Australian Accounting Standards (including the Australian Accounting
Interpretations) and the Corporations Regulations 2001;
(b) the financial statements and notes also comply with International Financial Reporting
Standards as disclosed in Note 2; and
(c) there are reasonable grounds to believe that the Company will be able to pay its debts as
and when they become due and payable.
2.
This declaration has been made after receiving the declarations required to be made to the directors
by the chief executive officer and chief financial officer in accordance with section 295A of the
Corporations Act 2001 for the financial year ending 30 June 2014.
On behalf of the directors:
R. J. Nelson
Chairman
22 August 2014
PAGE 88
CENTREPOINT ALLIANCE LIMITED AND ITS CONTROLLED ENTITIES
ASX Additional Information
30 June 2014
Additional information required by the Australian Stock Exchange Ltd and not shown elsewhere in this
report is as follows. The information is current as at 31 July 2014.
1. Class of securities and voting rights
a) Ordinary shares
Ordinary shares of the Company are listed (quoted) on the ASX. There are 1,882 holders of ordinary shares,
holding 142,789,724 fully paid ordinary shares.
Holders of ordinary shares are entitled to one vote per share when a poll is called, otherwise each member
present at a meeting or by proxy has one vote on a show of hands.
b) Performance rights
A performance right is a right that can be converted to an ordinary fully paid share in the Company for no
monetary consideration subject to specific performance criteria being achieved. Details of Performance
rights are not quoted on the ASX and do not have any voting rights.
2. Distribution of shareholders and performance rights
Size of holding
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,000 and over
The number of shareholdings held in less than marketable parcels is 335.
3. Substantial shareholders
Ordinary Shareholders
TIGA Trading Pty Ltd
No. of
ordinary
shareholders
302
515
251
690
124
No. of
performance
right holders
5
Fully paid
No. of Shares
% Held
34,821,230
24.39%
PAGE 89
CENTREPOINT ALLIANCE LIMITED AND ITS CONTROLLED ENTITIES
ASX Additional Information
30 June 2014
4. Twenty largest holders of quoted equity securities
Ordinary Shareholders
Fully paid
No. of Shares
% Held
RBC Investor Services Australia Nominees Pty Ltd
UBS Nominees Pty Ltd
1
2 HSBC Custody Nominees (Australia) Limited
3
4 Citicorp Nominees Pty Ltd
5 National Nominees Ltd
6 Entities representing the interests of R Nelson
7 J P Morgan Nominees Australia Ltd
8 Entities representing the interests of N Griffin
9
One Managed Investment Funds Ltd ACF Sandon Capital
Investments Ltd
ABN Amro Clearing Sydney Nominees Pty Ltd
10 Soba Pty Ltd
11
12 Entities representing the interests of J de Zwart
13 Bellglow Pty Ltd
14
15 Fetterpark Pty Ltd
16 Entities representing the interests of M Kidman
17
Aust Executor Trustees Ltd
Centrepoint Alliance Services Pty Ltd
18 Edsonmere Pty Ltd
19
20 Kerstat Pty Ltd
Sandhurst Trustees Ltd
20,958,349
18,628,011
14,043,049
8,862,818
5,255,932
4,141,732
3,938,927
2,501,841
2,347,067
2,202,360
2,004,516
1,980,452
1,494,998
1,485,780
1,342,653
1,230,563
856,431
829,600
718,595
693,810
95,517,484
14.68%
13.05%
9.83%
6.21%
3.68%
2.90%
2.76%
1.75%
1.64%
1.54%
1.40%
1.39%
1.05%
1.04%
0.94%
0.86%
0.60%
0.58%
0.50%
0.49%
66.89%
PAGE 90
PAGE 91
PAGE 92
Annual Results
30 June 2014
FY14 Summary
• Underlying pre-tax profit up 43% to $8.3m, statutory profit up 142%
• Strong performance from Centrepoint Funding
• Centrepoint Wealth repositioned with new strategy and executing well
• Heavily over-subscribed capital raising
• Strong governance and risk management
• Financially strong and improving operating performance
• Resumption of dividends
• Positive outlook with good momentum and client engagement across all business lines
Page 2
Investor Presentation, 22 August 2014
Results highlights
Financial
• Underlying profit before tax $8.3m, up 43%
• Cost reductions in Centrepoint Wealth offset prior period lost revenue and
allowed for investment in new capabilities and systems
• Premium Funding loan volumes up 21% to $445m
• Strong underlying operating cash flows of $9.5m
Operating
• Single Centrepoint team created
• Scale efficiencies continuing in Funding
• Wealth service model revamped including new adviser platform
• Claims management internalised and claims outcomes improving
Strategic
• Strong progress in developing the Centrepoint brand
• Acquired remaining 45% of Associated Advisory Practices
• $13.6m in new equity for balance sheet strengthening and growth
• New Wealth customer and adviser centric strategy
Regulation
• Professional Standards upgrade and cultural change program implemented
• Ongoing monitoring program completed
• Regulatory changes (FOFA) implemented without significant impact on
revenues to date
Page 3
Investor Presentation, 22 August 2014
Financial summary
FY14
FY13
Change
Financial Highlights
Underlying PBT
Statutory NPAT
Total Revenue1
$8.3m
$5.8m
43%
$3.3m
($7.8m)
142%
$51.7m
$52.6m
(2%)
(8%)
(6%)
Total Expenses (ex claims)1
$45.5m
$49.2m
Cost to Income Ratio
88%
94%
Total Assets
Total Equity
$184.8m $150.2m
23%
$34.5m
$17.2m
101%
Cash & Term Deposits
$21.4m
$9.4m
128%
Underlying PBT EPS (cents)
7.9
6.0
32%
Statutory EPS (cents)
(Continuing Operations, Diluted)
3.13
(7.95)
139%
1 From Continuing Operations
•
•
•
•
Underlying profit growth from
consistently good performances
across all teams
Statutory NPAT up 142% due to
strong operational performance
combined with lower claims
costs
6% improvement in Cost to
Income ratio. Operational
efficiency improvements
resulted in an 8% reduction in
expenses (ex claims). Further
savings were made within
claims with the insourcing of
claims management
The financial strength of the
Group is strong with cash and
term deposits of $21.4m
Page 4
Investor Presentation, 22 August 2014
Centrepoint’s vision
To be the most respected financial services business in Australia
By:
• Delivering consistent, reliable and valued outcomes for clients and customers
• Having experienced, aligned people who want to deliver the best and who have the
resources to deliver
• Having a strong brand and financial performance
• Looking to innovate and find better, simpler solutions for our clients
Page 5
Investor Presentation, 22 August 2014
Attractive markets with strong positions
Non-Bank Funding Market
Premium Funding
•
$5bn premium funding market growing at a
long term avg rate of 5% pa.
• Distributed via General Insurance brokers to
SME and corporate customers
•
•
2 large institutional incumbents, otherwise
fragmented market thereafter
Attractive margins increasing with scale
Mortgage broking and other non-bank funding
• Mortgage broking is a fast growing sector
•
•
•
•
A range of product extension opportunities
exist
Centrepoint Premium Funding
c9% market share in premiums funded
Premiums funded up 21% in FY14
Profitability increasing with scale
•
•
Wealth Market
Australian superannuation market of $1.8 trillion
expected to grow at an average of 8% pa over the
next 20 years
The nature of the Australian regulatory,
superannuation, welfare and tax environment
ensures most Australians would benefit from quality
financial advice
• Market controlled by large institutions primarily
through acquisition – not service or proposition
•
•
•
•
Significant regulatory, customer and technology
changes are making customer centric full advice
models more achievable
Attractive margins and scale advantages
Centrepoint Wealth Management
c8% market share with around one in every two
non-institutional advisers associated with
Centrepoint
Largest non-institutional full advice business
• Well supported by funders
•
Experienced and capable management team
• Client-centric wealth management strategy
•
Experienced and capable management team
Page 6
Investor Presentation, 22 August 2014
Centrepoint’s proposition
Funding
Customer
• Quick and easy
Centrepoint Group
Customer
• Great experiences
• Quality, reliable outcomes
Wealth
Customer
• Peace of mind
• Low risk/volatility
• Maximise retirement financial
outcomes
Brokers
• Strong relationships, independence
• Consistent, reliable, friendly service
and easy to use systems
• Highly profitable
Clients
• Strong relationships, independence
• Market leading service and solutions
• Highly respected brand
• Financially rewarding
Adviser / Accountant
• Strong relationships, independence
• Consistent, reliable, friendly service
and easy to use systems
• Highly profitable
Shareholder
• Loans funded >15% CAGR
• ROE >20%
Our People and Shareholders
• Well trained, highly respected team
• Sustainable profit growth >20% pa
Shareholder
• Sustainable profit growth >20% pa
Page 7
Investor Presentation, 22 August 2014
Profit summary
Segment
FY14
FY13
Change
Summary
Centrepoint Wealth
$6.5m
$6.7m
(3%)
Centrepoint Funding
$5.3m
$3.7m
Corporate
($3.5m)
($4.6m)
Group Underlying PBT
$8.3m
$5.8m
43%
24%
43%
Legacy claims expense
($1.9m)
($10.0m)
Impairments & amortisation
($0.9m)
($2.0m)
Restructure & other
($1.2m)
($0.4m)
Group Statutory PBT
$4.3m
($6.6m)
165%
• Centrepoint Wealth stabilised and
positioned for growth. Prior
period lost revenue offset by
operational efficiencies in FY14
• Strong performance from
Centrepoint Funding, particularly
during a period of intense
competitor activity in 2H14
• Corporate expenses were further
contained as a result of cost
savings initiatives
• Claims costs down $8.1m to
$1.9m
Page 8
Investor Presentation, 22 August 2014
Centrepoint Funding highlights
Financial
• Underlying PBT up 43% to $5.3m
• Premiums funded up 21% to $445m and growing at circa three times
market
• Premium Funding’s east coast sales up 43% YOY
• Mortgage broking PBT up 2% to $0.2m
Operating
• Operational efficiencies continued to be gained from prior year IT
investment. Further capacity available
• Customer experience further improved
• Strong credit risk and expense management maintained
Strategy and people
• Strengthened east coast sales team and rebalanced client base
• Renewed IBNA and CQIB premium funding agreements
• Reweighted business to higher margin small loan size business
• Low risk profile maintained
• Investment in developing the team continuing
Page 9
Investor Presentation, 22 August 2014
Centrepoint Funding results
FY14
FY13
Change
Summary
Revenue
Expenses
$18.6m $16.0m
16%
($13.3m) ($12.3m)
8%
Underlying PBT
$5.3m
$3.7m
43%
Impairments & amortisation
($0.2m)
($0.1m)
Statutory PBT
$5.1m
$3.6m
43%
Key metrics –
(Premium Funding unless specified)
Loan volume ($m)
Active brokers
Loans
445
321
368
245
27,168
19,801
21%
31%
37%
Average size ($)
16,370
18,585
(12%)
• Active general insurance brokers up
31% - underpins future growth
• FY14 premiums funded up 21%.
Revenue growth at 16% as a result of
lower interest rates
• Rebalancing business to higher
margin east coast clients
• Improved risk and credit management
with lower bad debt write-off ratio
Statutory profit comprises
FY14
FY13
Premium Funding
$4.7m $3.4m
Australian Loan Company
$0.2m $0.2m
Bad debts written off (bps)
Mortgage book ($bn)
7.6
4.4
12.1
(37%)
Inter-segment
4.5
(2%)
$0.2m $0.0m
$5.1m $3.6m
Page 10
Investor Presentation, 22 August 2014
Centrepoint Wealth highlights
Financial
• Underlying profit flat at $6.5m and statutory PBT up 149%
• Prior year revenue reductions offset by operational efficiency program
• $6m in annualised savings achieved, partially offset by new investments
Operating
• Significant investment in people, processes and systems funded by
operational efficiencies
• Successfully re-engaged with advisers
• Claims management process transformed
• Range of market leading services launched for independent advisers
significantly strengthening quality of proposition and service
Strategy and people
• New customer and adviser centric strategy launched
• Disposed of non-core assets i.e. Malaysian advice business, GPS, New
Zealand advice business
• Acquired remaining 45% of Associated Advisory Practices
• Launched salaried advice
Regulation
• Completed transformation of professional standards team and processes
• Strong relationship with regulators and industry bodies
• Ongoing Monitoring Program completed in July 2014
• Regulatory changes (FOFA) implemented without any significant impact on
revenues to date
Page 11
Investor Presentation, 22 August 2014
Centrepoint Wealth results
FY14
FY13
Change
Summary
Revenue
Expenses
$32.5m
$35.9m
(10%)
($25.9m)
($29.2m)
(11%)
• Revenue lower due to reduced
number of advisers partially offset
by favourable markets
Underlying PBT
$6.5m
$6.7m
(3%)
Legacy claims expense
($1.9m)
($10.0m)
Impairments & amortisation
($0.8m)
($1.8m)
Restructure & other
($0.8m)
($1.0m)
Statutory PBT
$3.0m
($6.1m)
149%
Key Metrics $m
Funds Under Distribution Agt
Funds Under Administration
Funds Under Management
Life Policies in Force
8,018
1,788
684
141
7,651
1,590
637
131
5%
12%
7%
8%
• Expense reductions fully factored
into 2H14 results with further
savings being reinvested
• Significant investment in the team
and new capabilities enabling
improved retention and future
growth
• Growth in FUM/DA/Admin due to
increased support for in-house
solutions by advisers offset by
outflows driven by advisers leaving
in 2013
Page 12
Investor Presentation, 22 August 2014
Centrepoint Wealth plan and priorities
Position for Growth
2014-15
Stabilise
2013-14
Implement FOFA (done)
•
• Re-engage advisers (done)
• Enhance service to advisers
(done)
• Minimise legacy claims costs
(ongoing)
• Reduce costs and strengthen
financial performance (ongoing)
• Ensure consistent quality advice
(ongoing) and complete Ongoing
Monitoring Program (done)
• Exit non-core activities (done)
Integrate and simplify Wealth
•
Management businesses (done)
• Align staff remuneration (done)
• Build experienced
transformational management
team (done)
• Deliver modern investment
solution (Sep 14)
• Standardise business systems,
processes and collateral (in
progress)
• Develop financial analysis and
profitability systems (in
progress)
• Build SMART Practice solutions
(ongoing)
• Launch practice funding and
succession planning solutions
(done)
• Build culture and team expertise
(ongoing)
Grow
2014-15 onwards
• Strengthen brand and grow
awareness (ongoing)
• Support practices build high
quality sustainable businesses
(ongoing)
• Build marketing capabilities
• Grow and recruit quality
practices (net adviser growth
since April 14)
• Grow salaried advisers (begun
July 14)
• Increase adoption of
Centrepoint solutions
(ongoing)
• Consider inorganic and
collaboration opportunities
(ongoing)
Page 13
Investor Presentation, 22 August 2014
Corporate
FY14
FY13
Change
Summary
Revenue
Expenses
$0.4m
$0.1m
300%
($3.9m)
($4.7m)
(17%)
Underlying PBT
($3.5m)
($4.6m)
24%
• Revenue is primarily interest income
• Underlying expenses down 17% on
reduced use of external professionals
• Expenses include CEO, Finance
Restructure & other
($0.4m)
$0.5m
(180%)
Team, Board and shareholder costs
Statutory PBT
($3.9m)
($4.1m)
5%
Page 14
Investor Presentation, 22 August 2014
RCapital management
Key initiatives in 2014:
•
•
Strengthen financial position of the group i.e. $13.6m capital raising, ensure all
business lines profitable, exit non-core assets, simplify business
Secure short and longer term funding lines i.e. NAB refinancing, second lender
• Contain and manage risks and legacy liabilities i.e. Advice based claims
•
Position the group for long term sustainable growth – organic and inorganic
• Create tax efficiencies i.e. AAP schemes
• Release capital and franking credits i.e. Resume dividend payments and
unlock franking credits
Key initiatives for 2015 and onwards:
• Focus on risk adjusted high return business lines
• Lower cost to income ratio, increase free cash flow and potential for future
dividends
Page 15
Investor Presentation, 22 August 2014
RDebt management
• Refinanced nab receivables funding in July 2013 for 18 months
• Significant increase in funding lines to $145m with improved terms, lower capital
requirements and margin
• NAB review and refinancing progressing positively
• Second funder negotiations well progressed to enable future Centrepoint Funding growth.
Announcement expected in 1H15
• Nil corporate bank debt. Negligible lease and software financing debt
• Net cash, term deposit and corporate debt of $21m at 30 June 2014
• Corporate gearing (excluding receivables financing) nil
Page 16
Investor Presentation, 22 August 2014
Resumption of dividends
• The Board has declared a final dividend for FY14 of 2.2c per share fully franked
• Record date is 26 September 2014 with payment on 15 October 2014
• There is no dividend reinvestment plan given the cash position and financial strength of
the Group
• The aim of the dividend policy is to provide shareholders with sustainable and increasing
fully franked dividends. The Board’s intention is to distribute the maximum amount of
annual profits subject to maintaining the capital required to support the growth of the
business
Page 17
Investor Presentation, 22 August 2014
ROutlook
•
All business lines expected to continued to perform strongly
• Continue to build brand strength and awareness
• Continued market share growth for premium funding offsetting low or falling general
insurance premiums
•
Begin to leverage strength of Centrepoint Wealth’s proposition and adviser engagement
to grow revenues
• Continue de-risking of the business and building sustainable revenues and margins
• Consider inorganic growth and partnering opportunities
• Work closely with our advisers, business partners, industry associations, ASIC and the
Government to continue to improve the quality of advice Australians receive
Page 18
Investor Presentation, 22 August 2014
Appendices
Page 19
Investor Presentation, 22 August 2014
Group balance sheet
Cash and Term Deposits
$21.4m
$9.4m
128%
• Strong cash position
FY14
FY13
Change
Highlights
Interest Bearing Receivables
$130.6m $107.6m
21%
Other Current Assets
$17.2m
$16.7m
3%
Intangible Assets and Goodwill
$6.0m
$6.5m
Other Non-current Assets
$9.6m
$10.0m
(8%)
(4%)
Total Assets
$184.8m $150.2m
23%
Interest Bearing Liabilities
$95.7m
$71.7m
33%
Other Current Liabilities
$46.5m
$47.9m
(3%)
Non-current Liabilities
$8.1m
$13.4m
(40%)
Total Liabilities
$150.3m $133.0m
13%
Net Assets
$34.5m
$17.2m
101%
• Increase in assets due to growth of
Premium Funding affecting both
Interest Bearing Receivables and
Other Current Assets
• Current liabilities increased in line
with Premium Funding growth
• Non-current liabilities down in line
with claims provisions
• Corporate debt remained
insignificant
Page 20
Investor Presentation, 22 August 2014
Cash flows
Source and use ($m)
FY14
FY13
Summary
Cash flows from operations
$7.5m $12.5m
• Underlying cash flows of $9.1m
• Gearing increased in premium
Add Underlying PBT cash adjustments
$1.6m
$1.1m
funding to boost return on equity
Underlying cash from operations
$9.1m $13.6m
Equity raising (net of transaction costs)
$13.5m
0.0
Net change in Premium Funding financing
$1.4m ($5.7m)
Payment of legacy claims
Capital expenditure
Other net cash movements
($8.9m) ($11.3m)
($2.4m)
($0.4m)
$0.9m ($0.5m)
Net underlying cash movement
$13.6m ($4.3m)
• Claims payments of $8.9m, 21.4%
down on FY13 of $11.3m
• $1.0m software acquisition, $1.0m
leasehold improvements and
$0.4m furniture & fittings
Page 21
Investor Presentation, 22 August 2014
Legacy claims
Opening balance
FY14
FY13
Change
$20.8m
$22.1m
($1.3m)
Claims provisioning expense during the period
$1.9m
$10.0m
($8.1m)
Claims settlements & fees paid (net of recoveries)
($8.9m)
($11.3m)
$2.4m
Closing balance
$13.8m $20.8m
($7.0m)
•
•
•
•
Legacy claims provision at 30 June 2014 of $13.8m is 34% down from $20.8m in the prior year
This provision for claims relates to advice given prior to July 2010
The provision is based on an external actuarial modelling completed in August 2014 based on data
to 30 June 2014. The actuarial model does not project claims costs arising from possible class
actions
The number of claims received in 2014 was higher than previously projected and resulted in an
increase in the projected number of future claims. This resulted in an additional $0.7m provision.
Discount unwind added another $0.6m and other general and specific provisions accounted for
$0.4m and $0.2m respectively
Page 22
Investor Presentation, 22 August 2014
Tax benefits
Franking account balance as at year end
$28.9m
$28.0m
• The company is in a position to
FY14
FY13
Summary
Ability to fully frank future dividends
$67.4m
$65.3m
Unrecognised Revenue Tax Losses
$48.2m
$49.9m
Unrecognised Capital Tax Losses
$29.1m
$29.1m
begin unlocking its unrecognised (off
balance sheet) tax assets
• The company has sufficient franking
credits to pay $67m in fully franked
dividends
• The company can offset historical
tax losses of $48.2m against future
taxable profits
• Revenue and capital losses are
available indefinitely. The available
fraction decreased during the year
due to the capital raising (this
determines the rate at which losses
can be utilised against future profits)
• AAP’s integration increases tax
efficiencies
Page 23
Investor Presentation, 22 August 2014
Contact Details:
John de Zwart
Managing Director
Telephone: +61 2 8987 3002
Email: jdezwart@cpal.com.au
Glenn Toohey
Chief Financial Officer and Company Secretary
Telephone: +61 2 8987 3033
Email: glenn.toohey@cpal.com.au
Level 6, 2 Elizabeth Plaza
North Sydney NSW 2060
Level 6, 2 Elizabeth Plaza
North Sydney NSW 2060
Page 24
Investor Presentation, 22 August 2014