Centrepoint Alliance Annual Report 2018

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ANNUAL
REPORT
2018

For the year ended 30 June 2018

Centrepoint Alliance Limited
and its Controlled Entities
ABN 72 052 507 507

Annual Report 2018 | Directors’ ReportPAGE 2

Centrepoint Alliance Limited
and its Controlled Entities
Annual Report
30 June 2018

Annual Report 2018 | Directors’ ReportContents.

Directors’ Report

Remuneration Report

Auditor’s Independence Declaration

Consolidated Statement of Profit or
Loss and Other Comprehensive Income

Consolidated Statement of Financial Position

Consolidated Statement of Cash Flows

Consolidated Statement of Changes in Equity

Notes to the Consolidated Financial Statements

Directors’ Declaration

Independent Auditor’s Report

ASX Additional Information

Corporate Directory

PAGE 3

Annual Report 2018 | Directors’ ReportPAGE 2

Directors’ Report

The Directors of Centrepoint Alliance Limited (the Company) present their report together
with the financial statements of the Consolidated Entity, being the Company and its
Controlled Entities (the Group) for the year ended 30 June 2018.

Directors

Directors were in office for this entire period unless otherwise stated.

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.

Alan Fisher
Bcom, FCA, MAICD.
Chairman of the Board,
Independent Non-Executive
Director.
Appointed on 12 November
2015.

Georg Chmiel
Diplom-Informatiker,
MBA, CPA (USA), FAICD
Independent Non-Executive
Director, Chairman of the
Group Audit Risk &
Compliance Committee.
Appointed on 7 October 2016.

Experience and expertise

Alan has extensive and proven experience in restoring

Georg brings over 24 years of experience in the financial

and enhancing shareholder value.

services industry, online media and real estate industry.

He spent 24 years at world-leading accounting firm

Coopers & Lybrand where he headed and grew the

Melbourne Corporate Finance Division. Following

this tenure, he developed his own corporate advisory

business specialising in M&A, strategic advice, business

restructuring and capital raisings.

Previously he was Managing Director and CEO of

iProperty Group, the owner of Asia’s No. 1 network of

property portal sites and related real estate services. He

played a key role in finalising the sale of iProperty Group

to REA Group, Southeast Asia’s largest ever internet

buyout. Prior to iProperty Group, Georg was Managing

Director and CEO of LJ Hooker Group with 700

Alan holds a Bachelor of Commerce from Melbourne

offices across nine countries providing residential and

University, is a Fellow of the Institute of Chartered

commercial real estate as well as financial services.

Accountants in Australia and a member of the Australian

Institute of Company Directors.

Other current directorships

Non-Executive Director and Chairman of IDT Australia

Limited (ASX:IDT).

Georg holds a Master of Business Administration from

INSEAD, a Diplom-Informatiker (Computer Science

Degree) from Technische Universität München and is

a member of the American Institute of Certified Public

Accountants and a Fellow of the Australian Institute of

Company Directors.

Non-Executive Director and Chairman of Audit and

Risk Committees of Bionomics Limited (ASX:BNO) and

Other current directorships

Thorney Technologies Limited (ASX:TEK).

Executive Director and Chairman of iCar Asia Limited

Special responsibilities

Chairman of the Board.

Chairman of the Nomination, Remuneration and

Governance Committee.

Interest in shares and options
Nil

(ASX: ICQ).

Non-Executive Director of Mitula Group Limited (ASX:

MUA).

Former Directorships
Director of iProperty Group Limited (ASX:IPP)

(from 1 January 2011 to 16 February 2016).

Special responsibilities

Chairman of the Group Audit, Risk & Compliance

Committee.

Interest in shares and options
25,000

Annual Report 2018 | Directors’ ReportMartin Pretty
BA, CFA, Graduate Diploma
of Applied Finance
Independent Non-Executive
Director, Chairman of the
Group Investment Committee.
Appointed on 27 June 2014.

PAGE 3

Hugh Robertson
Independent Non-Executive
Director.
Appointed on 2 May 2016.

Experience and expertise

Martin brings to the Board over 17 years’ experience in

Hugh has over 30 years’ experience in the financial

the finance sector. The majority of this experience was

services sector having been involved in a number of

gained within ASX-listed financial services businesses,

successful stockbroking and equity capital markets

including Hub24, Bell Financial Group and IWL Limited.

businesses. Hugh is a senior investment adviser with Bell

Martin has also previously worked as a finance journalist

Potter. He has worked with a variety of stockbroking

with The Australian Financial Review.

firms including Falkiners stockbroking, Investor First and

Martin holds a Bachelor of Arts (Honours) from The

with NSX Ltd, OAMPS Ltd and Catalyst Recruitment Ltd.

Wilson HTM. Previously, Hugh has also held directorships

University of Melbourne, and a Graduate Diploma

of Applied Finance from Finsia. Martin is a CFA

charterholder and a member of the Australian

Institute of Company Directors.

Other current directorships
No other directorships of Australian listed entities.

Special responsibilities

Other current directorships

Non-Executive Director and Chairman of the Audit and

Risk Committee of Primary Opinion Limited (ASX:POP)

(appointed 26 October 2015).

Former directorships

Non-Executive Director of TasFoods Limited (ASX: TFL)

(21 February 2014 to 10 February 2017), he also held the

Chairman of the Group Investment Committee.

position of Chairman (25 May 2015 to 3 September 2015).

Member of the Group Audit, Risk and Compliance

Executive and Non-Executive Directorship positions with

Committee.

HUB24 Limited (ASX:HUB) (20 April 2011 to 29 February

Interest in shares and options
Nil

2016).

Non-Executive Director of AMA Group Limited (ASX:

AMA) (2 June 2015 to 3 August 2018).

Special responsibilities

Member of the Group Audit, Risk and Compliance

Committee (until 21 October 2016).

Member of the Nomination, Remuneration and

Governance Committee (from 21 October 2016).

Member of the Group Investment Committee

(from 21 October 2016).

Interest in shares and options

Nil

Annual Report 2018 | Directors’ ReportPAGE 4

Company Secretary

Debra Anderson
B. Law (LLB) Hons, Post
Graduate Diploma in Legal
Practice, Diploma of
Financial Planning, AGIA,
ACIS, MAICD
Senior Corporate Lawyer &
Company Secretary

Marty Carne
BM, BBus, LLB, LLM, MBA
(Grad), GDLP, GCAIF
General Counsel & Company
Secretary

Experience and expertise

Debra is a lawyer who began her career in private

Marty joined the Company in April 2016 and holds

practice in Australia and worked in New Zealand and

executive responsibility for Legal, Professional Standards

Hong Kong, before joining the Company in 2003.

and Risk and Claims Management.

She has gained extensive experience in financial services

over the past 14 years and was appointed Company

Secretary in November 2013.

Marty has over 25 years’ experience in regulation and

financial services. Marty has held senior positions with a

range of financial services companies and the Australian

Debra is a member of the Queensland Law Society and is

Securities Commission. Marty has strong commercial

a qualified Chartered Secretary and is an Associate of the

and client-centric skills and experience in the delivery of

Institute of Chartered Secretaries and Administrators and

strategic legal advice and management of risk.

the Governance Institute of Australia and a member of

the Australian Institute of Company Directors.

Marty was appointed as joint Company Secretary on 27

April 2017.

Marty holds qualifications in law and business and is a

member of the Queensland Law Society and the

Association of Financial Advisers.

Annual Report 2018 | Directors’ ReportPAGE 5

Meetings of Directors
The following table sets out the number of Directors’ meetings (including meetings of committees of Directors)

held during the financial year and the number of meetings attended by each Director (while they were a Director or

committee member).

Members

Board of Directors

Nomination,
Remuneration
& Governance
Committee

Group Audit, Risk
& Compliance
Committee

Group Investment
Committee

Held

Attended

Held

Attended

Held

Attended

Held

Attended

A. D. Fisher

J. A. O'Shaughnessy**

H. W Robertson#

J. M. de Zwart*#

J.S. Cowan

M. Walker***

M. P. Pretty

G. Chmiel

5****

2****

# changed to an alternate member from 21 October 2016 *resigned 19 September 2017 **retired effective 27 November 2017

***resigned 11 August 2017 ****Change of membership effective 27 November 2017

Corporate Information

Strategies and Prospects

As a result of the new CEO, Angus Benbow starting on 3 April 2018, a whole of company strategy refresh program

was undertaken. This coincided with the significant uncertainty resulting from the initial Royal Commission hearings

on financial advice. The resultant uncertainty, through the fundamental industry structural change emerging and

the likelihood of further regulatory change, has been a key input to this work. The program identified six macro

themes and when matched to Centrepoint’s key competencies, the regulatory and market environment, there is an

opportunity for Centrepoint to become a leader in providing advice and business services, free of conflict, focussed on

supporting advisers of a similar mindset.

Centrepoint has already started the journey to the new model recently restructuring the business. The speed and

impact of the transition will to a large extent be driven by the Royal Commission findings and thereafter the regulatory

changes that are approved.

Annual Report 2018 | Directors’ ReportPAGE 6

Centrepoint is well positioned in an industry that remains very attractive for long-term growth driven by growing

national savings, the greater need for advice and the services and solutions that are required to support advisers given

the complexity of the regulatory environment, tax system and market.

As regulatory, technology and consumer driven change occurs, the Group is well positioned to realise opportunities

that emerge from the disruption occurring across financial services and is ahead of the curve in creating a

differentiated contemporary adviser-centric advice and business services company that leverages our scale.

The Group has a strong balance sheet and will continue to explore further opportunities to transform the wealth

advice market.

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 Securities Exchange Limited (ASX) in June 2002.

On 30 September 2005, Centrepoint Alliance Limited merged with Centrepoint Finance Pty Ltd.

During the 2009 financial year, 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.

The insurance premium funding business was sold on 30 December 2016 to BOQ Finance (Aust) Limited as

part of the Group’s business strategy to focus on and grow the Wealth business.

Principal Activities

The principal activities of the Company and its controlled entities during the financial year were:

• Licensee and Advice Services, which provides a range of financial advice and licensee support services (including

licensing, technology, business support, training, compliance and professional standards); and

• Funds Management and Administration, which is a provider of investment solutions (platforms and managed

portfolios and funds) to financial advisers, accountants and their clients across Australia.

Post balance date the business restructured to have two business lines, Advice and Advice Services and Solutions. The

new structure also reflects the important role we believe data and technology will play in the future.

Corporate Structure

Centrepoint Alliance Limited is a company limited by shares that is incorporated and domiciled in Australia and listed

on the ASX (ASX: CAF). Information on the Group structure is provided in Note 23 to the Consolidated Financial

Statements.

Operating and Financial Review

Group Business Operation

Centrepoint Alliance Limited (the Parent Entity) and its controlled entities (the Group) operates in the financial

services industry within Australia and provides a range of financial advice and licensee support services (including

licensing, systems, compliance, training and technical advice) and investment solutions to financial advisers,

accountants and their clients across Australia, as well as lending mortgage aggregation services to mortgage brokers.

Annual Report 2018 | Directors’ ReportPAGE 7

Financial Performance

Earnings before Interest, Tax, Depreciation and Amortisation (EBITDA) for the year to 30 June 2018 was

$5.5m (2017: $5.3m), excluding, CEO replacement and restructure costs ($0.3m), legacy claims adjustment

($5.4m) and regulatory costs largely associated with the impacts of the Royal Commission ($0.7m). The 4% increase in

EBITDA is a reflection of the increasing pace of transformation and growth of the Wealth business, which is performing

well in challenging regulator and competitor markets. Based on the significant regulatory and competitor environment and

the transition of strategy, the deferred tax assets related to prior tax losses ($4.5m) has been taken off the Balance Sheet.

Licensee and Advice Services

Funds Management and Administration

Description

Provider of a range of financial advice and

Provider of funds management and platform

licensee support services (including licensing,

solutions to financial advisers, accountants and

technology, business support, training, compliance

their clients across Australia.

and professional standards) to financial advisers,

accountants and their clients across Australia.

Business Model

Services are provided to authorised

The business sources best of breed fund

representatives under its Australian Financial

managers and platforms, constructs portfolio

Services Licences (AFSL) through Professional

solutions and managed funds through

Investment Services Pty Ltd (PIS) and Alliance

Investment Diversity Pty Ltd and Ventura

Wealth Pty Ltd (AW). Services are also provided

Investment Management Ltd.

to authorised representatives of other AFSL

holders through Associated Advisory Practices

Pty Ltd (AAP).

Centrepoint Alliance Lending Pty Ltd (CALP) is

an aggregator of mortgage and asset finance

solutions. It is a boutique player in a large market,

designed to primarily service the

needs of advice businesses and offers lending

services to financial planning clients.

Key Drivers

The number of advice firms, fee income, operating

Funds under administration, funds under

costs, funds under distribution agreements,

management, margins and operating costs.

lending volumes and lending margins.

Overview

Licensee and Advice Services operates with

Funds Management and Administration

non-institutionally owned financial advisers and

provides financial advisers, accountants and

operates in a market alongside large institutions.

their clients with world class investment

The market is attractive with over $2.6 trillion in

solutions across the risk/return spectrum,

superannuation assets expected to continue to

which are managed by world class investment

grow over the next twenty years and the need for

managers and provide a choice of investment

quality advice continuing to grow.

styles to deliver on overall client and business

objectives.

The Group continues to focus on being a client-

centric business, which involves improving the

The Group is an early promoter of managed

quality of advice and wealth solutions provided

accounts, which has continued to grow during

to Australians, and is capturing the benefits from

the financial period. The Group has $4.1b of

industry disruption.

funds under management and administration.

1 APRA Quarterly Superannuation Performance – March 2018

Annual Report 2018 | Directors’ ReportPAGE 8

Financial
Performance

Licensee and Advice Services

Funds Management and Administration

Segment revenue was $24.1m (FY17 $24.0m)

Gross revenue was $12.9m (FY17 $12.6m)

and Profit before tax was $3.0m (FY17 $4.0m).

and profit before tax was $3.9m (FY17:

Recruitment of quality advisers continues as

$4.0m). The result reflects consistent

the business transitions away from rebate

growth of Centrepoint solutions.

revenue.

The EBITDA excludes the impact of $5.4m

legacy claims expenses. (Claims from advice

provided prior to 1 July 2010). The business

specifically monitors these claims to provide a

best estimate amount for each claim on a case

by case basis.

Corporate
The costs of the Centrepoint Board of Directors, company secretarial functions and the administration of the listed

public entity are reflected in Corporate.

In 2016, the Long Term Incentive Plan (LTIP) was reviewed and re-structured to performance rights based on total

shareholder return against peer group.

Minority Investments
The Group has made several investments in start-up businesses.

R Financial Educators Pty Ltd (RFE) establishes joint ventures with accountants to leverage their client base and

provide financial advice. Centrepoint has a 15% interest in the business and provided a convertible loan which if

converted would increase our interest by 12% to 27%. RFE has struggled to achieve its revenue forecast and has

refocused on generating positive cash earnings. As a result the Group reviewed and reduced the holding value of the

asset.

Neos Life (Neos) is a registered business name of Australian Life Development Pty Ltd (ALD), who released their

products in June 2018. It is an Australian based insurance distribution business offering non-complex, customer-

focused life insurance products through the financial adviser channel. The Group has $6.75m invested in ALD, now

branded as Neos. There is a $5m convertible loan which if converted would equate to a minimum 30%. The Group

exercised an option for $1.75m during the period which represents a 5% equity stake. As part of the strategy review,

the Group declined to take up an additional option post balance date.

Ginger Group Financial Services Limited (Ginger Group) is a New Zealand based business with the sole asset of 37.5%

interest in Kepa Financial Services Limited (Kepa). Kepa provides support services to its New Zealand network of

financial advisers. The Group has a 50% interest in Ginger Group.

Refer to Note 15 for further details.

Cash Flows
The Group held $9.5m in cash and cash equivalents as at 30 June 2018 (2017: $31.2m).

Cash provided by continuing operations was $6.4m (2017: $5.4m) from which $5.2m was paid out in legacy claims

(2017: $4.2m), $15.0m paid in dividends (2017: $5.1m) and $6.7m for investment (2017: $3.0m) resulting in an overall

cash movement of $21.7m in the year (2017: $21.0m).

Annual Report 2018 | Directors’ ReportPAGE 9

Financial Position

The Group has net assets at 30 June 2018 of $19.6m (2017: $41.6m) and net tangible assets of $13.3m (2017: $30.4m)

representing net tangible assets per share of 8.46 cents (2017: 19.35 cents).

Risks and Risk Management

The business regularly reviews operational and strategic risks faced by the Group that could affect its financial

prospects. These include:

• Legacy advice claims – the Consolidated Statement of Financial Position includes a provision for client advice

claims in relation to advice provided prior to 1 July 2010.

The provision is based on a detailed review of legacy claims as a specific provision for each claim. Actual claims

may exceed the provision and it is impracticable to quantify the amount of any such additional liability. The

provision includes a discrete estimate set aside for claims incurred but not yet reported.

Class action lawyers and the Australian Securities & Investments Commission have been active within the financial

advice industry in relation to poor advice and failed investment products. There is an unquantifiable risk that such

action may be taken against a Group subsidiary in the future.

• Loss of financial advisers – The Company 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 towards the Company being the leading advice business in Australia.

• Regulatory change – Regulatory change continues to evolve the future direction of Australia’s financial system.

Depending on the outcome of these changes, including any changes that result from recommendations from the

Royal Commission, possible impacts on the Group could include costs relating to operational change, reduced

numbers of advisers recruited and increased ongoing costs, loss of grandfathered revenue and risks associated

with regulatory compliance including remediating clients for non-compliance.

• Loss of rebate income – the Group receives rebates from product issuers in relation to products that it placed

with them prior to the introduction of Future of Financial Advice Reforms (FOFA). The natural consequence of

FOFA is that as time goes by and consumers receive advice this grandfathered rebate income will reduce.

• Loss of key personnel – Centrepoint has a relatively small team and could be negatively impacted if one or more

of the key team members were to leave. A comprehensive staff review and feedback process is actively employed.

Regular reviews of remuneration to ensure market competitiveness are undertaken, short-term and long-term

incentive programs are in place for staff.

• Competitor behaviour – the financial services industry has several participants which have large market shares

and are subsidiaries or operating divisions of large financial services businesses. The size of these competitors and

their greater access to the resources of their institutions provide them with a strong position on which to compete.

There is also the emergence of smaller businesses looking to disrupt the traditional business models. There is a

risk that earnings of the Group could be adversely impacted by the activities of competitors. The Group is focused

on building and maintaining the leading service propositions in the industry and its position as a non-institutional

service provider helps to mitigate this risk.

The Board is responsible for ensuring that risks, as well as opportunities, are identified on a timely basis and that the

Group’s objectives and activities are aligned with those risks and opportunities.

Annual Report 2018 | Directors’ ReportPAGE 10

Risk management is monitored and assessed by the Group Audit, Risk and Compliance (GARC) Committee of the

Board, which comprises three Non-Executive Directors. The Chief Executive Officer, General Counsel and Chief

Financial Officer are standing attendees. As detailed in the Corporate Governance Statement the GARC Committee is

governed by a charter and is responsible on behalf of the Board for overseeing:

• The Group’s system of risk management and internal controls; establishing an active risk management framework;

the current and future risk appetite; recommendations to the risk appetite statement and active risk management

strategic plan; 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:

• 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 Key Performance Indicators (KPIs) of both a financial and

non-financial nature; and

• Board approved Risk Management Policy and Risk Framework, Risk Appetite Statement and Active Risk

Management Strategic Plan to assist in the identification, analysis, evaluation and treatment of Group risks.

Dividends
On 23 February 2018 the Board approved an interim ordinary dividend of 1.2c fully franked, paid on 4 April

2018. Based on the current strategic direction and with reference to the dividend policy, the Board agreed

not to pay a final dividend.

Shares and Performance Rights
During the year, under a Long-Term Incentive (LTI) award CAESP20, 700,000 performance rights were issued in

October 2017 and have not yet vested. 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. These are

legally held by the Centrepoint Alliance Services Pty Ltd ATF the Centrepoint Employee Share Plan Trust (CESPT) and

not converted into fully paid ordinary shares until satisfaction of the vesting conditions.

The LTI awards CAESP17 and CAESP18 were terminated in November 2017. At the date of this report there are

8,050,000 ordinary shares (associated with these plans) legally held by Centrepoint Alliance Services Pty Ltd ATF

the Centrepoint Alliance Employee Share Plan Trust (CAESPT). These shares will be cancelled, subject to approval by

shareholders at a General Meeting.

No shares have been issued as a result of the exercise of options during the financial year and up to the reporting date.

Significant Changes in the State of Affairs
On 3 April 2018 Angus Benbow started as CEO. A Strategic Refresh was initiated which included an assessment of the

issues arising from the Royal Commission. Post balance date the business was restructured to deliver the strategy with

a key focus of the strategy on data and technology. It was announced that the Chief Financial Officer, John Cowan will

leave Centrepoint on 6 November 2018.

Events After Reporting Period
The following matters have occurred subsequent to the end of the financial year:

On 7 August 2018, the business was restructured to align with the strategy. This included the announcement that John

Cowan, CFO will leave in November 2018.

Annual Report 2018 | Directors’ ReportPAGE 11

On 23 August 2018, the Directors of Centrepoint Alliance Limited resolved not to pay a final dividend with reference to

the dividend policy and based on the current strategic direction.

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 requiring disclosure.

Environmental Regulation
The Group’s operations are not regulated by any significant environmental regulation under a law of the

Commonwealth or of a State or Territory.

Corporate Governance Statement and Practices

The Group’s Corporate Governance Statement for the financial year ended 30 June 2018 was approved by the Board

on 23 August 2018. The Corporate Governance Statement is available on our website:

http://www.centrepointalliance.com.au/investor-centre/corporate-governance/

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 Act).

The liabilities insured are legal costs that may be incurred in defending civil or criminal proceedings that may be

brought against the officers in their capacity as officers of the Group, and any other payments arising from liabilities

incurred by the officers in connection with such proceedings, other than where such liabilities arise out of conduct

involving a wilful breach of duty by the officers or the improper use by the officers of their position or of information

to gain advantage for themselves or someone else to cause detriment to the Group.

Details of the amount of the premium paid in respect of insurance policies are not disclosed as such disclosure is

prohibited under the terms of the contract.

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, Deloitte Touche Tohmatsu, 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 Deloitte Touche Tohmatsu during or since the end of

the financial year.

Rounding
The Company is a company of the kind referred to in ASIC Corporation’s (Rounding in Financial/Directors’ Reports)
Instrument 2016/191, dated 24 March 2016 and in accordance with that Instrument, amounts in the financial report are
presented in Australian dollars and have been rounded off to the nearest thousand dollars, unless otherwise stated.

Annual Report 2018 | Directors’ ReportPAGE 12

“

...there is an opportunity for
Centrepoint to become a
leader in providing advice
and business services, free of
conflict, focused on supporting
advisers of a similar mindset.

”

Annual Report 2018 | Directors’ ReportAnnual Report 2018 | Remuneration Report

PAGE 13

Remuneration Report

This Remuneration Report for the year ended 30 June 2018 outlines the remuneration arrangements of the Key

Management Personnel of the Group in accordance with the requirements of 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 committee (NRGC)

• 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:

A. D. Fisher

Chairman & Director (non-executive)

J. A. O'Shaughnessy

Director (non-executive) – Retired 27 November 2017

J. M. de Zwart

H. W. Robertson

M. P. Pretty

G. Chmiel

J. S. Cowan

E. Cargakis

Managing Director & Chief Executive Officer – Resigned 19 September 2017

Director (non-executive)

Chief Financial Officer

Interim Chief Executive Officer - appointed from 24 November 2017 to 2 April 2018

A. G. R. Benbow

Chief Executive Officer - appointed 2 April 2018

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 to provide 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 competition 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, internal relativities where appropriate and external advice on

policies and practices.

Short-term incentives in the form of potential cash bonuses are made available to Executive KMP. Any award is based

on the achievement of pre-determined objectives.

Long-term incentives are made available to certain Executive KMP in the form of performance rights, shares or

options. The Directors consider these to be the best means of aligning incentives of Executive KMP with the interests

of shareholders.

The remuneration of Non-Executive Directors of the Company consists only of Directors’ fees and committee fees.

Annual Report 2018 | Directors’ ReportPAGE 14

Annual Report 2018 | Remuneration Report

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 ($)

Dividends paid - (cents per share)

2018

$'000

(6,333)

(4.25)

0.38

9.40

2017

$'000

6,544

4.41

4.11

0.63

3.45

2016

$'000

4,262

2.94

2.75

0.41

2.20

2015

$'000

5,880

4.14

3.96

0.50

3.20

2014

$'000

3,223

3.20

3.13

0.37

Nomination, Remunertion & Governance Committe (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 Act in terms of appointment and termination. The Company applies the ASX listing rules that specify 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 2018, which was approved by a resolution of shareholders at the

Annual General Meeting on 29 November 2016, is $550,000.

The remuneration of the Non-Executive Directors does not currently incorporate a component based on performance.

Within the limits approved by Company shareholders, individual remuneration levels are set by reference to market

levels.

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 prohibits 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 KMPs, where they exist, are shown under the disclosure of their

contracts below.

Annual Report 2018 | Directors’ ReportAnnual Report 2018 | Remuneration Report

PAGE 15

Employment Contracts
Details of the terms of employment of the named KMP Executives are set out below:

Angus Benbow – Chief Executive Officer
Employment commencement date: 2 April 2018

Term: No term specified

Discretionary Incentives:

Sign-on incentive

A one-off equity allocation of fully paid ordinary Centrepoint Alliance Limited shares up to a value of

$120,000, which have yet to be issued

Short-term incentive
A short-term incentive to a value of $237,500 at target, subject to Transitional Terms (refer to page 22 for

further details)

Long-term incentive

A long-term incentive to a value between $142,500 up to a potential value of $285,000, subject to

Transitional Terms (refer to page 22 for further details)

Required notice by Executive and 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.

John de Zwart – Managing Director & Chief Executive Officer

Employment period: 15 April 2013 - 19 September 2017

Term: Resigned as Managing Director effective 19 September 2017 and as Chief Executive Officer effective

24 November 2017.

Incentives:

Short-term incentive

A short-term incentive of $232,048.80 was paid after the end of the 2017 financial year and on achievement

of key performance targets set by the Board. The key performance targets are measures of underlying

EBITDA, growth in business lines, 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.

An additional short-term incentive of $350,000 was paid after the end of the 2017 financial year based on

recognition of achievement of outstanding performance resulting in increased shareholder value during the

period since June 2013.

Long-term incentive – (Refer to page 20 for further details)

CAESP19

Issue of up to 1,500,000 performance rights at 51.0 cents per performance right, that are legally held by the CESPT

until satisfaction of the vesting conditions is determined on 9 December 2019 as disclosed in the long-term incentive

plans.

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.

Annual Report 2018 | Directors’ ReportPAGE 16

Annual Report 2018 | Remuneration Report

John Cowan - Chief Financial Officer

Contract commencement date: 12 January 2015

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.

A short-term incentive of $147,048.80 was paid after the end of the 2017 financial year based on the Group-wide

short-term incentive scheme structure. An additional short term incentive of $100,000 was paid after

the end of the 2017 financial year based on recognition of outstanding performance resulting in increased

shareholder value during the period since June 2013.

A short-term incentive for the 2018 financial year will be payable based on the objective and structure outlined in this

Remuneration Report.

A retention incentive of $75,000 was paid in September 2017.

A retention incentive was approved by the Board in September 2017 for a payment of $100,000 on or after 30

September 2018.

The incentive is subject to employment criteria.

Long term incentive – (Refer to page 20 for further details)

CAESP19

Issue of up to 750,000 performance rights at 51.0 cents per performance right, that are legally held by the CESPT until

satisfaction of the vesting conditions is determined on 9 December 2019 as disclosed in the long-term incentive plans.

CAESP20

Issue of up to 250,000 performance rights at 41.0 cents per performance right, that are legally held by the CESPT

until satisfaction of the vesting conditions determined on 25 September 2020 as disclosed in the long-term incentive

plans.

Required notice by Executive and Company: 6 months.

Termination Entitlements: Statutory entitlements.

Efrossiney (Soula) Cargakis, Interim Chief Executive Officer (24 November 2017 to 2
April 2018) and Distribution and Marketing Executive

Contract commencement date: 15 October 2008. A Higher Duties allowance was paid for the period that Efrossiney

(Soula) Cargakis acted as Interim Chief Executive Officer.

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.

A short-term incentive for the 2018 financial year will be payable based on the objective and structure outlined in this

Remuneration Report.

There were no short-term incentives paid during the period as acting Interim Chief Executive Officer.

Required notice by Executive and the Company: 6 months.

Termination Entitlements: Statutory entitlements.

Those Executives that do not meet the KMP definition are not included here.

Annual Report 2018 | Directors’ Report%

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Annual Report 2018 | Directors’ Report

Annual Report 2018 | Remuneration Report

PAGE 19

“

The 4% increase in
EBITDA is a reflection of
the increasing pace of
transformation and growth
of the Wealth business,
which is performing well in
challenging regulator and
competitor markets.

”

BREAK PAGE

)

(

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Annual Report 2018 | Directors’ Report

PAGE 20

Annual Report 2018 | Remuneration Report

Shareholdings of Key Management Personnel*

Shares held in Centrepoint Alliance Limited (Number)

A. D. Fisher

M. P. Pretty

J. S. Cowan

H. W. Robertson

G. Chmiel

E. Cargakis3

A. G. R. Benbow3

Former KMP’s

J. M. de Zwart1

J. A. O’Shaughnessy2

Balance
1 July 2017

Granted as
remuneration

On exercise
of options

Net change
other #

Balance
30 June 2018

Ordinary

25,000

3,230,743

100,000

25,000

3,230,7434

100,0004

1 Resigned during the year 2 Retired during the year 3 Appointed during the year 4Balance as at date of Resignation and Retirement

* Includes shares held directly, indirectly and beneficially by KMP

# All equity transactions with KMP other than those arising from the exercise of remuneration options have been entered into under terms and

conditions no more favourable than those the Company would have adopted if dealing at arm’s length.

Short-term incentives

Long-term incentives

Objective

The objective of short term incentives (STI) is

The objective of long-term incentives (LTI) is

to link the achievement of the Group’s

to reward Executives in a manner that aligns

operational targets with the remuneration

remuneration with the creation of shareholder

received by the executives charged with

wealth. As such, LTI grants are only made to

meeting those targets. The total potential STI

executives who are able to significantly influence

available is set at a level so as to provide

the generation of shareholder wealth and thus

sufficient incentive to the executive to achieve

have an impact on the Group’s performance

the operational targets and the cost to the

against the relevant long-term performance

Group is reasonable. The purpose of

hurdle.

STI is to focus the Group’s efforts on those

performance measures and outcomes that

are priorities for the Group for the relevant

financial year and to motivate the employees

to strive to achieve stretch performance

objectives.

Annual Report 2018 | Directors’ ReportAnnual Report 2018 | Remuneration Report

PAGE 21

Short-term incentives

Long-term incentives

Structure

In August 2017 the Directors approved a new

LTI awards to Executives are made under the

executive STI scheme based on EBITDA and

Executive LTI plans and are delivered in the

the achievement of underlying organisational

form of shares or rights. Shares vest in

and team goals. The Target EBITDA is

tranches over a specified time period and may

approved by the Board for each financial year.

also have other performance hurdle

To be eligible for a STI payment a threshold

requirements, typically related to shareholder

EBITDA must be met and executives must

return, as determined by the NRGC.

achieve at least 70% of their individual

performance objectives and minimum job

Performance rights are rights that can be

competency and core values ratings. The

converted to fully paid ordinary shares in the

Target STI payable to Executives is 40% and

Company for no monetary consideration

the former Managing Director and CEO is 50%

subject to specific performance criteria being

of Total Fixed Remuneration. The Maximum

achieved. The performance rights will only

STI payable for Executives is 60% and the

vest if certain profit targets are met.

former Managing Director and CEO 75% of

Total Fixed Remuneration. On an annual

basis, after consideration of performance

against KPIs the NRGC will review results and

determine individual amounts approved for

payment.

For other employees there is a STI scheme

where a bonus pool based on results and

approved by the Board is weighted by a two

tiered approach with weightings assigned to

each level, being Centrepoint Group results

and individual KPIs.

Awards

CAESP17 and CAESP18

On 21 November 2017, the Board and the
CAESPT approved the termination of
participants (including the former Managing
Director & Chief Executive Officer and other
senior executives) of the CAESP17 and
CAESP18 plans. The participants loan shares
were purchased by the CAESP at $0.59 per
share (which was the equivalent to the ASX
market close price of CAF shares on 17
November 2017) in accordance with the plan
rules.

CAESP19

The Board approved the grant of 3,750,000
performance rights on 19 December 2016 to
the former Managing Director and Chief
Executive Officer and other senior executives
of the Group under the CAESP at 51.0 cents
per performance right. These are legally held
by the CAESPT and not converted into fully
paid ordinary CAF shares until satisfaction of
the vesting conditions determined on
9 December 2019 based on the following:

Annual Report 2018 | Directors’ ReportPAGE 22

Annual Report 2018 | Remuneration Report

Awards

2
If the Total Shareholder Return (TSR) for the peer group for 30
June 2019 financial year is:
• Below 25th percentile, none will vest;
• Between 25th percentile and 49th percentile, 25% of the
performance rights will vest;
• Between 50th percentile and 74th percentile, 50% of the
performance rights will vest;
• Above 75th percentile, 100% of the performance rights will vest

CAESP20

The Board approved the grant of 700,000 performance rights
on 2 October 2017 to the senior executives of the Group under
the CAESP at 41.0 cents per performance right. These are
legally held by the CESPT and not converted into fully paid
ordinary CAF shares until satisfaction of the vesting conditions
determined on 24 September 2020 based on the following:

If the Total Shareholder Return (TSR) for the peer group for 30
June 2020 financial year is:
• Below 25th percentile, none will vest;
• Between 25th percentile and 49th percentile, 25% of the
performance rights will vest;
• Between 50th percentile and 74th percentile, 50% of the
performance rights will vest;
• Above 75th percentile, 100% of the performance rights will vest;

The TSR of Centrepoint is compared and ranked to the TSR
of each peer group constituent. The rank is converted to a
percentile ranking which is used to determine the proportion of
awards vesting based on the above set vesting schedule.

CEO Transitional Terms (short-term and long-term incentives)

The CEO will be entitled to STI (50% - 75%) and LTI (40% - 60%) benefit limits as set out on page 15,
varied in accordance with the below commencement and ending periods:
• On or before 2 April 2018 to 30 September 2018, pro-rata portion of STI and LTI benefit
• 1 October 2018 to 30 June 2019, pro-rata portion of STI and LTI benefit
• 1 July 2019 to 30 June 2020
Successive annual periods

Total TSR is a measure of investment return in percentage terms, adjusted for dividends and capital movements, from the start to the

end of the performance period

Option holdings of Key Management Personnel

No options to purchase shares were held by KMP.

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. There are no transactions by Directors in the current or prior financial

year other than the ones disclosed above.

Annual Report 2018 | Directors’ ReportPAGE 23

Auditor Independence and
Non-Audit Services

The auditor, Deloitte Touche Tohmatsu, has provided a written independence declaration to the Directors in relation

to its audit of the financial report for the year ended 30 June 2018. The Independence Declaration which forms part of

this report is on page 24.

The Directors are satisfied that the provision of non-audit services is compatible with the general standard of

independence for auditors imposed by the Act. The nature and scope of non-audit services provided means that

auditor independence was not compromised.

2018

2017

66,830

72,207

96,598

61,132

139,037

157,730

Taxation services provided by Deloitte Touche Tohmatsu

Other regulatory services

Total

Signed in accordance with a resolution of the directors.

A. D. Fisher
Chairman

23 August 2018

Annual Report 2018 | Directors’ Report

PAGE 24

Annual Report 2018 | Directors’ ReportAnnual Report 2018 |

Consolidated Statement of Profit or
Loss and other Comprehensive Income

PAGE 25

Consolidated Statement of Profit or Loss and other Comprehensive Income

For the year ended 30 June 2018

CONTINUING OPERATIONS

Revenue

Advice and financial product revenue (gross)

Advice and financial product fees

Advice and financial product revenue (net)

Interest income

Other revenue

Gross Profit

Expenses

Interest charges

Employee related expenses

Marketing and promotion

Travel and accommodation

Property costs

Restructuring provision

Subscriptions & licences

Professional services

Client claims

IT and communication expenses

Depreciation and amortisation

Impairment expenses

Other general and administrative expenses

(Loss)/Profit before tax from continuing operations

Income tax expense

Net loss from continuing operations after tax

Discontinued operations

Profit after tax from discontinued operations

Net (loss)/profit for the year

TOTAL COMPREHENSIVE INCOME FOR THE YEAR

Net (loss)/profit attributable to:

Owners of the parent

Net (loss)/profit for the period

Total comprehensive (loss)/profit attributable to:

Owners of the parent

Total comprehensive (loss)/profit for the period

2018

2017

Note

$'000

121,781

128,624

(90,943)

(97,193)

30,838

31,431

4(a)

1,298

926

458

362

33,062

32,251

(35)

(53)

4(b)

(18,246)

(18,609)

(579)

(827)

(1,142)

(550)

(1,504)

(2,072)

19(a)

(6,056)

(888)

(923)

(837)

(2,007)

(481)

(949)

(710)

(1,309)

(1,180)

(4,193)

(1,195)

(1,106)

(134)

(2,156)

(35,666)

(32,075)

(2,604)

(3,729)

(6,333)

176

(264)

(88)

6,632

6,544

Earnings per share for profit attributable to the ordinary equity holders of the parent

Cents

Basic earnings per share

Diluted earnings per share

Basic (loss)/earnings per share from continuing operations

Diluted (loss)/earnings per share from continuing operations

(4.25)

4.41

4.11

(0.06)

The Consolidated Statement of Profit or Loss and other Comprehensive Income is to be read in conjunction with the attached Notes.

Annual Report 2018 | Directors’ Report

PAGE 26

Annual Report 2018 | Consolidated Statement of Financial Position

Consolidated Statement of Financial Position

As at 30 June 2018

ASSETS

Current

Cash and cash equivalents

Trade and other receivables

Interest-bearing receivables

Other assets

Current tax asset

Total current assets

Non-current

Interest-bearing receivables

Investments

Other assets

Property, plant & equipment

Intangible assets & goodwill

Deferred tax assets

Total non-current assets

TOTAL ASSETS

LIABILITIES

Current

Trade and other payables

Lease incentives

Provisions

Current tax liability

Total current liabilities

Non-current

Lease incentives

Provisions

Total non-current liabilities

TOTAL LIABILITIES

NET ASSETS

EQUITY

Contributed equity

Reserves

Accumulated losses

Equity attributable to shareholders

Non-controlling interests

TOTAL EQUITY

The Consolidated Statement of Financial Position is to be read in conjunction with the attached Notes.

2018

Note

$'000

2017

$'000

6(a)

5(d)

9,469

10,540

345

789

286

31,242

11,362

345

529

21,429

43,478

6,572

2,482

890

951

1,651

4,632

17,178

1,642

1,632

1,015

976

2,231

9,018

16,514

38,607

59,992

9,715

8,781

9,109

8,020

372

18,578

17,533

455

474

19,052

19,555

34,673

12,174

252

590

842

18,375

41,617

34,673

15,689

(27,410)

(8,863)

19,437

41,499

118

19,555

41,617

Annual Report 2018 | Directors’ ReportAnnual Report 2018 | Consolidated Statement of Cash Flows

PAGE 27

Consolidated Statement of Cash Flows

For the year ended 30 June 2018

CASH FLOWS FROM OPERATING ACTIVITIES

Cash receipts from customers

Cash paid to suppliers and employees

Cash provided by operations

Restructure costs

Claims and litigation settlements

Note

2018

$'000

2017

$'000

134,503

141,031

(128,090)

(135,614)

6,413

(1,441)

5,417

19(a)

(5,315)

(4,216)

Regulatory costs associated with the Royal Commission

Net cash flows (used in)/provided by operating activities

6(b)

(77)

(420)

1,201

CASH FLOWS FROM INVESTING ACTIVITIES

Interest received

Interest and borrowing expenses paid

Payments to acquire financial assets

Proceeds from sale of interest in a subsidiary

Acquisition of intangible assets

Acquisition of property, plant & equipment

Dividend received from investments

505

(6,700)

(15)

(322)

199

458

(12)

(3,022)

21,422

(362)

(213)

14, 15

17(a)

Net cash flows provided by/(used in) investing activities

(6,333)

18,271

CASH FLOWS FROM FINANCING ACTIVITIES

Net (decrease)/increase in borrowings

Loan repayments received from advisers

Dividends paid

Net cash flows used in financing activities

(15,020)

(26)

108

(5,136)

(5,054)

Net increase/(decrease) in cash & cash equivalents

(21,773)

14,418

Profit after tax from discontinued operations

Cash & cash equivalents at the beginning of the year

Cash & cash equivalents at the end of the period

31,242

9,469

6(a)

6,632

10,192

31,242

The Consolidated Statement of Cash Flows is to be read in conjunction with the attached Notes.

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Annual Report 2018 | Directors’ Report

Annual Report 2018 | Notes to the Consolidated Financial Statements

PAGE 29

Notes to the Consolidated Financial Statements
Basis of preparation
1. Corporate information .................................................................................................................................................................................30
2. Summary of significant accounting policies ..................................................................................................................................30

Financial performance
3. Segment information ...................................................................................................................................................................................32
4. Revenue and expenses ...............................................................................................................................................................................35
5. Income tax .........................................................................................................................................................................................................37
6. Notes to Statement of Cash Flows .......................................................................................................................................................41
7. Commitments .....................................................................................................................................................................................................42

Working capital
8. Trade and other receivables and payables .......................................................................................................................................43

Shareholder returns
9. Dividends ............................................................................................................................................................................................................44
10. Earnings per share .......................................................................................................................................................................................45

Capital and funding structure
11. Contributed equity ....................................................................................................................................................................................... 46
12. Reserves .............................................................................................................................................................................................................47
13. Interest-bearing liabilities .......................................................................................................................................................................... 48

Capital investment
14. Interest-bearing receivables .................................................................................................................................................................. 48
15. Investments .......................................................................................................................................................................................................51
16. Property, plant and equipment ..............................................................................................................................................................52
17. Intangibles assets ..........................................................................................................................................................................................54

Risk management
18. Financial risk management.......................................................................................................................................................................58
19. Provisions ............................................................................................................................................................................................................63
20. Contingent liabilities ....................................................................................................................................................................................66

Other information
21. Remuneration of auditors ........................................................................................................................................................................66
22. Information relating to Centrepoint Alliance Limited .............................................................................................................67
23. Related party disclosures ........................................................................................................................................................................68
24. Share-based payment plans .................................................................................................................................................................69
25. Events after reporting period ................................................................................................................................................................71

Annual Report 2018 | Directors’ ReportPAGE 30

Annual Report 2018 | Notes to the Consolidated Financial Statements

1. Corporate information
The consolidated financial statements of Centrepoint Alliance Limited (the Company or the Parent Entity) and its

subsidiaries (the Group) for the year ended 30 June 2018 were authorised for issue in accordance with a resolution of

the Directors on 23 August 2018.

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 disclosures is provided in Note 23.

2. Summary of significant accounting policies

Basis of preparation

The financial report is a general purpose financial report, which has been prepared on a going concern basis and in

accordance with the requirements of the Act, Australian Accounting Standards, Interpretations and other authoritative

pronouncements of the Australian Accounting Standards Board (AASB). The financial report has also been prepared

on a historical cost basis.

For the purposes of preparing the consolidated financial statements, the Company is a for profit entity.

Compliance with International Financial Reporting Standards

The financial report complies with International Financial Reporting Standards (IFRS) as issued by the International

Accounting Standards Board.

Standards 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 ended 30 June 2018 are set out

below. The Directors have assessed the impact of the new standards for the reporting period ending 30 June 2019

onwards.

Title

Application
date of
standard

Application date
for Group

AASB 15 Revenue from contracts with customers

1 January 2018

1 July 2018

AASB 15 outlines a single comprehensive model for entities to use in accounting
for revenue arising from contracts with customers.

The core principle is that an entity recognises revenue to depict the transfer
of promised goods or services to customers in an amount that reflects the
consideration to which the entity expects to be entitled in exchange for those
goods or services.

Management are continuing to assess the impact of AASB 15 and have reached
initial conclusions on all key revenue types. Based on the work completed to
date, the impact of implementing AASB 15 is expected to be immaterial for
total Revenue as a whole. For product margins revenue, amounts are paid/
invoiced to product providers on a monthly, quarterly or annual basis and can
be in arrears or in advance. A detailed review of each contract will then need
to be undertaken in order to identify the performance criteria of each contract.
That detailed review on an individual contract level will be completed by 31
December 2018 half year reporting to ensure the Group’s current revenue
recognition continues to comply with requirements of the standard and/or
adjust current and retrospective periods as required.

1 January 2018

1 July 2018

Annual Report 2018 | Directors’ ReportAnnual Report 2018 | Notes to the Consolidated Financial Statements

PAGE 31

Title

AASB 9 Financial Instruments (December 2014), AASB 2014-7
Amendments to Australian Accounting Standards arising from AASB 9
(December 2014)

The final version of AASB 9 brings together the classification and
measurement, impairment and hedge accounting phases of the IASB’s
project to replace AASB 139 Financial Instruments: Recognition and
Measurement. This version adds a new expected loss impairment model and
limited amendments to classification and measurement for financial assets.

This version supersedes AASB 9 (December 2009) and AASB 9 (December
2010).

There is no impact to the Group on the changes to the standard.

Application date
of standard

Application date
for Group

1 January 2018

1 July 2018

1 January 2018

1 July 2018

AASB 16 Leases

1 January 2019

1 July 2019

The Standard was issued during 2016 and will replace existing accounting
requirements for leases. Under current requirements, leases are classified
based on their nature as either finance leases, which are recognised on the
balance sheet, or operating leases, which are not recognised on the balance
sheet. The application of AASB 16 will result in the recognition of all leases
on the balance sheet in the form of a right-of-use asset and a corresponding
lease liability, except for leases of low value assets and leases with a term of
12 months or less. As a result, the new standard is expected to impact leases
which are currently classified by the Group as operating leases which is
primarily the leases over premises. The Group’s operating lease commitments
are disclosed in Note 7.

1 January 2019

1 July 2019

AASB 2016-5 Amendments to Australian Accounting Standards –
Classification and Measurement of Share-based Payment Transactions

1 January 2018

1 July 2018

Basis of consolidation

The consolidated financial statements comprise the financial statements of the Company and its subsidiaries as at 30

June 2018.

Subsidiaries are entities that are controlled by the Company. The financial results and financial position of the

subsidiaries are included in the consolidated financial statements from the date control commences until the datecont

rol ceases. A list of the Company’s controlled entities (subsidiaries) is included in Note 23.

Significant accounting judgements, estimates and assumptions

The key assumptions concerning the future and other key sources of estimation and uncertainty at the end of the

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:

• Intangible assets and Goodwill recoverable amounts – Note 17

• Provision for client claims – Note 19

• Recognition of deferred tax assets – Note 5

Annual Report 2018 | Directors’ ReportPAGE 32

Annual Report 2018 | Notes to the Consolidated Financial Statements

Foreign currency

Both the functional and presentation currency of the Group is Australian dollars (A$).

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.

Comparative information

Certain adjustments have been made to the prior year’s financial statements to enhance comparability with the

current year’s financial statements. As a result, certain line items have been amended in the financial statements.

Comparative amounts have been adjusted to conform to the current year’s presentation.

3. Segment information

The Group has organised its businesses reportable segments based on the nature of the products and services

provided and the markets in which it operates and Corporate. Internal reports are regularly reviewed by the

management on this basis.

The Group’s reportable segments are:

Reportable Wealth segments

Operations

Licensee and Advice Services

Provides Australian Financial Services Licence related services to financial
advisers and their clients and mortgage broking services.

Funds Management and Administration

Provides investor directed portfolio services and investment management
services to financial advisers, accountants and their clients.

Board, corporate finance, company secretarial and other administration functions of the Company not allocated to the

above reportable segments are identified as Corporate and unallocated.

The Group operated only in Australia during the reporting period. A detailed review of these segments is included in

the Directors’ Report.

The accounting policies of the reportable segments are the same as the Group’s accounting policies. The Group does

not currently manage its assets and liabilities on an individual segment basis.

The segment results are presented on a continuing operations basis.

Annual Report 2018 | Directors’ Report3. Segment information (cont.)

Annual Report 2018 | Notes to the Consolidated Financial Statements

PAGE 33

Licensee
& Advice
Services

Funds
Management &
Administration

Wealth
Total

Corporate &
Unallocated

Consolidated

$'000

Year ended 2018

Revenue

Gross Revenue

Commissions paid

Net revenue

Other revenue

External customers

Inter-segment revenue

Interest income

Segment revenue

Total revenue

Segment results

Interest charges

Client claims

Depreciation & amortisation

Impairment of assets

Inter-segment expenses

Segment profit/(loss) before tax

Income tax benefit/(expense)

Addback: Legacy claims expense

Segment profit/(loss) before tax (excl
legacy claims)

Balance Sheet at 30 June 2018

Current assets

Interest-bearing receivables

Other current assets

Total current assets

Non-current assets

108,826

(86,255)

22,571

690

23,261

661

223

24,145

(22)

(6,056)

(817)

(16,974)

(2,346)

766

5,358

3,012

345

10,703

11,048

Interest-bearing receivables

133

Other non-current assets

Total non-current assets

Total Assets

Current liabilities

Other current liabilities

Total current liabilities

Non-current liabilities

Other non-current liabilities

Total non-current liabilities

Total Liabilities

Net Assets

5,459

5,592

16,640

12,791

12,887

3,753

12,950

121,776

(4,688)

(90,943)

8,262

30,833

8,262

(1,000)

196

7,458

690

31,523

(339)

419

236

241

339

879

31,603

1,459

(1)

(74)

(23)

(6,056)

(891)

(3,604)

(20,578)

3,948

(1,184)

1,602

(418)

5,358

(12)

(32)

(900)

20,578

(4,206)

(3,311)

121,781

(90,943)

30,838

926

31,764

1,298

33,062

(35)

(6,056)

(923)

(837)

(2,604)

(3,729)

5,358

3,948

6,960

(4,206)

2,754

3,566

345

14,269

14,614

133

5,459

5,592

3,566

20,206

609

2,957

13,400

13,496

6,710

6,815

6,439

5,147

11,586

18,401

5,178

378

5,556

12,845

345

21,084

21,429

6,572

10,606

17,178

38,607

18,578

474

19,052

19,555

Annual Report 2018 | Directors’ ReportPAGE 34

Annual Report 2018 | Notes to the Consolidated Financial Statements

3. Segment information (cont.)

Licensee
& Advice
Services

Funds
Management &
Administration

Wealth
Total

Corporate &
Unallocated

Consolidated

$'000

Year ended 2017

Revenue

Gross Revenue

Commissions paid

Net revenue

Other revenue

External customers

Inter-segment revenue

Interest income (gross)

Segment revenue

Inter-segment elimination

Total revenue

Segment results

Interest charges

Client claims

Depreciation & amortisation

Impairment of assets

Inter-segment expenses

Segment profit/(loss) before tax

Income tax benefit/(expense)

Addback: Legacy claims expense

Segment profit/(loss) before tax (excl legacy
claims)

Balance Sheet at 30 June 2017

Current assets

Interest-bearing receivables

Other current assets

Total current assets

Non-current assets

116,052

(92,448)

23,605

300

23,905

121

12,567

128,619

(4,746)

(97,193)

7,821

31,426

300

31,726

150

24,026

7,850

31,876

(39)

(4,182)

(530)

(143)

(16,432)

(34)

4,040

4,055

345

12,101

12,446

(11)

(103)

(3,318)

4,033

(1,232)

4,033

5,559

(39)

(4,193)

(633)

(134)

(19,750)

4,047

(1,266)

4,040

8,088

345

17,660

18,005

216

6,145

6,361

Interest-bearing receivables

216

Other non-current assets

Total non-current assets

Total Assets

Current liabilities

Interest bearing liabilities

Other current liabilities

Total current liabilities

Non-current liabilities

Interest bearing liabilities

Other non-current liabilities

Total non-current liabilities

Total Liabilities

Net Assets

6,028

6,244

18,690

12,349

447

12,796

5,894

117

5,676

24,366

1,881

3,795

14,230

447

14,677

9,689

The Inter-segment sales are carried out on an arm’s length basis and are eliminated on consolidation.

6,000

308

6,375

(14)

(473)

19,750

(3,871)

1,002

128,626

(97,193)

31,432

361

31,793

6,000

458

38,251

(6,000)

32,251

(53)

(4,193)

(1,106)

(130)

176

(264)

4,040

(3,871)

4,216

25,473

1,426

8,727

10,153

35,626

3,303

395

3,698

31,928

345

43,133

43,478

1,642

14,872

16,514

59,992

17,533

842

18,375

41,617

Annual Report 2018 | Directors’ ReportAnnual Report 2018 | Notes to the Consolidated Financial Statements

PAGE 35

4. Revenue and expenses

a) Interest and other income

Interest income

Interest expense

Bank fees & other

Interest income (net)

Cost recoveries from advisers

Retail and wholesale asset and service fees

Services

Other

Total other revenue

2018

$'000

2017

$'000

1,298

(35)

1,263

458

(12)

(41)

405

2018

$’000

2017

$’000

331

201

210

184

926

265

362

Rate of Interest

Average Balance

Interest

Average Rate p.a.

2018

2017

2018

2017

2018

$'000

2017

Loan receivables

Cash and deposits

3,331

692

14,225

23,611

413

376

2.77%

11.96%

2.90%

1.59%

b) Employee benefit expenses

Wages and salaries

Share-based compensation expense

Termination costs

Total employee benefit expenses

Key Accounting Policies

Revenue recognition

2018

$'000

2017

$'000

17,103

354

789

18,313

136

160

18,246

18,609

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.

The Inter-segment sales are carried out on an arm’s length basis and are eliminated on consolidation.

Annual Report 2018 | Directors’ ReportPAGE 36

Annual Report 2018 | Notes to the Consolidated Financial Statements

4. Revenue and expenses (cont.)

Revenue type

Recognition

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
client and the right to receive the revenue is established.

Service revenue

Ongoing revenue

Revenue for services provided is recognised at the point of delivery of the
service to clients.

Ongoing financial advice fee revenue is recorded monthly for ongoing
services provided to clients.

Dividend and distribution revenue

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.

Leases

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.

In the event that lease incentives are received to enter into operating leases, such incentives are recognised as a

liability. The aggregate benefit of the incentives is recognised as a reduction of rental expense on a straight-line basis,

except where another systematic basis is more representative of the time pattern in which economic benefits from the

leased asset are consumed.

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.

Annual Report 2018 | Directors’ ReportAnnual Report 2018 | Notes to the Consolidated Financial Statements

PAGE 37

5. Income tax

a) Income tax (benefit)/expense

The major components of income tax expense for the years ended 30 June 2018 and 2017 are:

Current income tax

Current income tax charge

Adjustment to current tax of prior period

Deferred income tax

Adjustment to deferred tax of prior period

Income tax expense/(benefit) reported in the income statement

2018

$'000

2017

$'000

(744)

256

4,473

3,729

264

Based on the significant regulatory and competitor environment and the transition of strategy, the deferred tax assets

related to prior tax losses ($4.5m) has been taken off the Balance Sheet.

b) Amounts charged or credited directly to equity

No income tax was charged directly to equity for the year ended 2018 (2017: Nil).

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 is reconciled as follows:

Accounting profit before tax from continuing operations

At the Company's statutory income tax rate of 30% (2017: 30%)

Non-deductible expenses

Amounts not included in assessable income

Adjustment in respect of current tax of prior years

Adjustment in respect of deferred tax of prior years

Aggregate income tax expense/(benefit)

2018

$'000

2017

$'000

(2,604)

176

(781)

(28)

4,473

3,729

203

264

Annual Report 2018 | Directors’ Report

PAGE 38

Annual Report 2018 | Notes to the Consolidated Financial Statements

5. Income tax (cont.)

d) Recognised deferred tax assets and liabilities

Deferred income tax relates to the following:

Deferred tax liabilities

Deferred revenue

Gross deferred tax liabilities

Deferred tax assets

Provisions for claims

Provisions for doubtful debts

Provision for restructure

Provision for impairment of loan receivables

Provision for leases

General accruals and other costs

Employee benefits

Tax losses available

Gross deferred tax assets

Net deferred tax assets

Statement of Financial
Position

Statement of
Comprehensive Income

2018

2017

2018

2017

$'000

(7)

(192)

1,626

1,096

165

(147)

121

732

1,046

4,639

4,632

1,403

1,499

195

563

999

4,473

9,210

9,018

185

223

(403)

165

(225)

(74)

169

(4,473)

(4,571)

(186)

(174)

156

(234)

(95)

(151)

213

(191)

The Group has decided to reduce the deferred tax asset by removing the tax benefit of past losses previously

recognised due to the initial investment to drive the new strategy. The recognition of this asset was subject to

estimation uncertainty as the utilisation of the deferred tax asset is dependent on estimates of future taxable profits in

excess of the profits arising from the reversal of existing taxable temporary differences.

In addition, the utilisation of certain acquired tax losses is also subject to fractioning under Australian tax legislation

which effectively prescribes the rate at which such acquired tax losses may be offset against the Group’s taxable

income. Given that the available fraction of the transferred losses is based on the relative market value of the Group,

the determination of the available fraction is subject to some uncertainty.

e) Unrecognised 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 losses

2018

$'000

2017

$'000

23,969

35,953

59,922

29,609

35,953

65,562

The above losses are available indefinitely for offset against future taxable income and capital gains subject to

continuing to meet relevant statutory tests. Unrecognised tax loss were increased by $4.5m and reduced by $10.1m

related to a review of a historic tax loss.

Annual Report 2018 | Directors’ Report

Annual Report 2018 | Notes to the Consolidated Financial Statements

PAGE 39

5. Income tax (cont.)

f) Tax consolidation

Tax effect accounting by members of the tax consolidated group

a) Measurement method adopted under AASB interpretation 1052 Tax Consolidation Accounting

The Parent 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

Parent 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.

Key accounting policies

Taxation

i) Income Tax

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.

Annual Report 2018 | Directors’ ReportPAGE 40

Annual Report 2018 | Notes to the Consolidated Financial Statements

5. Income tax (cont.)

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; or 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 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.

The deferred tax balance will be written down if there are changes in circumstances and forecasts are not met.

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 Parent 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 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, the Company 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.

Annual Report 2018 | Directors’ ReportAnnual Report 2018 | Notes to the Consolidated Financial Statements

PAGE 41

5. Income tax (cont.)

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.

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.

6. Notes to Statement of Cash flows

a) Reconciliation of cash & cash equivalents

Cash and cash equivalents

Total cash and cash equivalents

2018

2017

$'000

9,469

31,242

Annual Report 2018 | Directors’ ReportPAGE 42

Annual Report 2018 | Notes to the Consolidated Financial Statements

6. Notes to Statement of Cash Flows (cont.)

b) Reconciliation of net profit after tax to net cash provided by operating activities

Net loss after income tax from continuing operations

(6,333)

(88)

Adjustments to reconcile profit before tax to net cash flows:

2018

2017

$'000

Depreciation and amortisation

Impairment of investments

Loss on disposal of non-current assets

Interest received

Interest expense

Dividend received from investments

Share based compensation (income)/expense

Tax expense current year

Working capital adjustments:

(Increase)/decrease in assets:

Trade and other receivables

Other assets

Deferred tax assets

(Decrease)/increase in liabilities:

Trade and other payables

Provisions for employee entitlements

Provision for client claims

Provision for property make good

Provision for onerous lease

Provision for restructure costs

Provision for tax

Net cash from operating activities from continuing operations

7. Commitments
Contracted operating lease expenditure

923

900

(505)

(199)

(709)

(744)

1,586

(128)

4,386

424

(406)

742

(255)

550

(669)

(420)

1,106

(458)

136

264

334

4,058

377

(3,551)

(488)

(65)

(120)

(659)

312

1,201

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. The Company has also entered into corporate services agreements for IT and telecommunications

hardware and support. The agreements have terms between 1 and 3 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

Later than five years

Total

2018

$'000

2017

$'000

1,341

1,349

2,690

2,272

2,394

4,666

Annual Report 2018 | Directors’ Report

Annual Report 2018 | Notes to the Consolidated Financial Statements

PAGE 43

8. Trade and other receivables and payables

Current

Commissions receivable

Trade receivables

Total

Refer Note 18(c) for Ageing analysis.

Current

Amounts payable to financial advisers

Trade payables

Other creditors and accrued expenses

Total

2018

2017

$'000

7,937

2,603

10,540

8,570

2,792

11,362

2018

2017

$'000

5,474

1,696

2,545

9,715

6,292

1,182

1,635

9,109

Terms and conditions

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.

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.

Financial guarantees

No guarantees have been given over trade and other payables.

Related party payables

For terms and conditions relating to related party payables refer to Note 23.

Interest rate, foreign
exchange and liquidity risk

Information regarding interest rate, foreign exchange and liquidity risk exposure is set
out in Note 18.

Annual Report 2018 | Directors’ Report

PAGE 44

Annual Report 2018 | Notes to the Consolidated Financial Statements

8. Trade and other receivables and payables (cont.)

Key accounting policies

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 180 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.

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.

9. 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

Special Dividends paid on ordinary shares

Total dividends

2018

$'000

2017

$'000

4,035

10,985

15,020

5,136

2018

$'000

2017

$'000

b) Franking credit balance

Franking account balance as at the end of the financial year

17,563

23,886

The tax rate at which paid dividends were franked is 30%. Franking credits are reported on a tax paid basis.

Annual Report 2018 | Directors’ Report

Annual Report 2018 | Notes to the Consolidated Financial Statements

PAGE 45

10. Earnings per share

The following reflects the income used in the basic and diluted Earnings per share (EPS) computations:

a) Profit used in calculating profit per share

Net (loss)/profit attributable to ordinary equity holders of the Company

Net profit attributable to ordinary equity holders of the Company from
discontinued operations

Net (loss)/profit attributable to ordinary equity holders of the Company from
continuing operations

2018

$'000

2017

$'000

(6,333)

6,544

6,632

(6,333)

(88)

b) Weighted average number of shares

No. of shares No. of shares

Weighted average number of ordinary shares (excluding reserved shares)

148,882,969

148,533,913

Effect of dilution:
Performance rights and LTI shares

Weighted average number of ordinary shares (excluding reserved shares)
adjusted for the effect of dilution

Basic earnings per share from discontinued operations

Basic (loss)/earnings per share from continuing operations

Basic earnings per share

Diluted earnings per share

12,321,644

10,863,470

161,204,613

159,397,383

(4.25)

4.47

(0.06)

4.41

4.11

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.

c) Information on the classification of securities

Reserved shares (Centrepoint Alliance Employee Share Plan)

As at reporting date 8,050,000 reserved shares were held by the CAESPT and are excluded from the calculations of
earnings per share because they are treated as reserved shares under AASB 132 Financial Instruments: Presentation.

Key accounting policies

Earnings per share

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.

Annual Report 2018 | Directors’ Report

PAGE 46

Annual Report 2018 | Notes to the Consolidated Financial Statements

11. Contributed equity

a) Paid up capital

Ordinary shares

Reserved shares

Reference

2018

$’000

2017

$’000

(i)

(ii)

39,108

(4,435)

34,673

39,108

(4,435)

34,673

Number of
Shares

2018

$’000

Number of
Shares

2017

$’000

i) Ordinary shares (issued & fully paid)

Balance at start of year

156,932,969

39,108

155,434,080

38,585

Movements during the year:-

- Share issue - long-term incentive plan

1,498,889

On issue at end of year

156,932,969

39,108

156,932,969

ii) Reserved shares

Balance at start of year

On issue at end of year

(8,050,000)

(4,435)

(8,050,000)

(4,435)

(8,050,000)

523

39,108

(4,435)

Total contributed equity

148,882,969

34,673

148,882,969

34,673

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 resolved not to declare a final dividend having referred to the dividend

policy and strategic direction of the business.

Key accounting policies

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.

Annual Report 2018 | Directors’ Report

Annual Report 2018 | Notes to the Consolidated Financial Statements

PAGE 47

12. Reserves

Employee equity benefits reserve

Dividend reserve

Total

a) Employee equity benefits reserve

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

2018

$'000

515

11,659

12,174

2017

$'000

1,224

14,465

15,689

2018

2017

$'000

1,224

354

(1,063)

515

1,088

136

1,224

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, 700,000 performance rights were issued to senior executives of the Group as follows:

Performance rights

No. of shares

Vesting period

Issue price

Fair value at
issue date

Senior Executives

700,000

3 years

$0.585

$0.410

b) Dividend reserve

Balance at start of year

Dividends paid

Transfer from current year profits

Balance at end of year

2018

2017

$'000

14,465

(15,020)

12,214

11,659

14,810

(5,136)

4,791

14,465

Annual Report 2018 | Directors’ ReportPAGE 48

Annual Report 2018 | Notes to the Consolidated Financial Statements

13. Interest-bearing liabilities

Fair value of interest-bearing liabilities

Interest-bearing liabilities are carried at amortised cost. The
carrying value of borrowings approximates their fair value.

Financial risk

Key accounting policies

Refer to Note 18 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.

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 as well as any discount or
premium on settlement.

14. Interest-bearing receivables

Current

Loan receivables - financial advisers

Provision for impairment - specific

Total current interest-bearing receivables

Non-current

Loan receivables - financial advisers

Convertible loans

Provision for impairment - specific

Total non-current interest-bearing receivables

An ageing analysis of loan receivables is provided in Note 18(b)

2018

$'000

2017

$'000

435

(90)

345

603

6,439

(470)

6,572

435

(90)

345

711

1,426

(495)

1,642

Annual Report 2018 | Directors’ Report
Annual Report 2018 | Notes to the Consolidated Financial Statements

PAGE 49

14. Interest-bearing receivables (cont.)

Allowance for Impairment

Opening Balance

Movement in the allowance is as follows

Adjustment for disposal of subsidiary

Allowance for impairment

Closing balance

Receivables impairment expense

Impairment expense

Bad debts (recovery)/written-off directly

Total expense

Term and conditions

Impairment

2018

$'000

2017

$'000

585

1,071

(28)

557

(28)

(35)

(63)

(522)

585

134

Loans due from financial advisers have terms ranging from 1 to 5
years and varying interest terms at or above commercial rates. The
majority of these loans were secured through charges over assets,
by guarantees, or by retention of financial advice fees.

Impairment expense amounts are included in the Statement of
Profit or Loss and Comprehensive Income under ‘Other general and
administrative expenses’.

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.

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.

Annual Report 2018 | Directors’ ReportPAGE 50

Annual Report 2018 | Notes to the Consolidated Financial Statements

14. Interest-bearing receivables (cont.)

Related party receivables

There are currently no related party receivables.

Fair value and risk management

Convertible Notes

Key accounting policies

The carrying value of interest-bearing receivables approximates
their fair value.

Credit risk, interest rate risk and currency risk is addressed in Note
18.

ALD
The Group subscribed to $5m in a convertible loan in ALD to
provide seed funding to the business. The first advance of $1.25m
was made in February 2017 with the remaining amount of $3.75m
transferred in July 2017 on achievement of certain milestones.

As part of the convertible note arrangements, the Group was
granted four call options of $1.75m each (totalling $7.0m) to
purchase shares which expire by January 2020.

The Group declined to take up an additional option post balance
date.

The Group exercised the first option for $1.75m on 11 September
2017 which represents a 5% equity stake. As at 30 June the Group
has a total $6.75m in ALD.

RFE
The Group subscribed to $1.2m in a convertible loan in RFE to
provide seed funding to the business. The first advance of $1.0m
was made in 6 July 2017 and a further $0.2m was advanced on 28
February 2018.

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.

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.

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.

Annual Report 2018 | Directors’ ReportAnnual Report 2018 | Notes to the Consolidated Financial Statements

PAGE 51

14. Interest-bearing receivables (cont.)

Key accounting policies

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 profit or loss.

Convertible notes are initially recognised at cost, including acquisition charges
associated with the loan. Subsequent to initial recognition, the convertible loans are
measured at amortised cost using the effective interest method, less any impairment.
Interest income is recognised by applying the effective interest rate.

15. Investments

Investments

Impairment on investments

Total investments

2018

2017

$'000

3,382

(900)

2,482

1,632

In October 2016, an investment of $1.5m was made in RFE which represents a 15% stake of equity. An impairment

provision of $0.9m was raised against this investment during the year. RFE has reduced their revenue growth forecast

to reduce cash strain and focus on profitability. As a result the investment was reviewed and the holding value was

reduced.

In September 2016 $0.1m was invested in Ginger Group, which increased the Group’s equity interest to 50% from

37.5%. Ginger Group has a 37.5% shareholding in Kepa.

In September 2017 the Group exercised an option for an investment of $1.75m in ALD, which represents a 5% equity

stake. ALD launched in June 2018.

Key accounting policies

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 Profit or Loss and 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.

Annual Report 2018 | Directors’ ReportPAGE 52

Annual Report 2018 | Notes to the Consolidated Financial Statements

16. Property, plant and equipment

Leasehold Improvements

Plant & Equipment

$’000

Total

$’000

Cost

At 1 July 2016

Additions

Disposals

At 30 June 2017

Additions

Disposals

At 30 June 2018

Depreciation and impairment

At 1 July 2016

Depreciation charge for the year

Disposals

At 30 June 2017

Depreciation charge for the year

Disposals

At 30 June 2018

Net carrying value

At 30 June 2018

At 30 June 2017

Key accounting policies

2,002

(16)

1,986

1,247

275

1,522

155

1,677

309

464

3,115

213

(542)

2,786

322

(9)

3,099

2,429

186

(341)

2,274

186

(3)

2,457

642

512

5,117

213

(558)

4,772

322

(9)

5,085

3,676

461

(341)

3,796

341

(3)

4,134

951

976

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.

Annual Report 2018 | Directors’ ReportAnnual Report 2018 | Notes to the Consolidated Financial Statements

PAGE 53

16. Property, plant and equipment (cont.)

Depreciation is calculated on a straight line basis over the estimated useful lives of the assets as follows:

Asset

Plant and equipment

Leasehold improvements

Motor vehicles

Useful Life

2 – 7 years

Lease term

5 years

De-recogntion: 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

Profit or Loss and 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.

Annual Report 2018 | Directors’ ReportPAGE 54

Annual Report 2018 | Notes to the Consolidated Financial Statements

17. Intangible assets

a) Reconciliation of carrying amounts at the beginning and end of the year

Period ending 30 June 2018

At 1 July 2017 net of accumulated amortisation and
impairment

Disposals

Additions

Amortisation

At 30 June 2018 net of accumulated amortisation
and impairment

At 30 June 2018

Cost

Accumulated amortisation and impairment

Net carrying value

Year ending 30 June 2017

At 1 July 2016 net of accumulated amortisation and
impairment

Disposals

Additions

Amortisation

At 30 June 2017 net of accumulated amortisation
and impairment

At 30 June 2017

Cost

Accumulated amortisation and impairment

Net carrying value

Goodwill

Software

Network &
Client Lists

Total

$'000

956

1,209

(253)

956

2,132

(1,176)

956

1,209

(253)

956

123

(13)

(35)

1,152

(547)

2,231

(13)

(582)

620

1,651

3,773

(3,698)

10,387

(9,767)

620

15,369

(13,718)

1,651

337

(141)

(88)

123

1,362

347

(557)

3,831

(1,317)

362

(645)

1,152

2,231

3,786

10,372

(3,663)

(9,220)

123

1,152

15,367

(13,136)

2,231

Annual Report 2018 | Directors’ ReportAnnual Report 2018 | Notes to the Consolidated Financial Statements

PAGE 55

17. Intangible assets (cont.)

Intangible asset

Description of the
Group’s intangible
assets

Key Accounting Policies

Impairment Test

Cash Generating
Units
Goodwill

Cash Generating Units (CGU)

Goodwill was created during
2012 on the acquisitions of
the externally owned interests
in Ventura Investment
Management Ltd of $93,000
and in Centrepoint Alliance
Lending Pty Ltd (previously
Centrepoint Lending Solutions
Pty Ltd) of $863,000.

Other CGUs include
Professional Investment
Services Pty Ltd and
Investment Diversity Pty Ltd.

Goodwill is tested on an
annual basis and when there
is an indication of potential
impairment.

The current carrying value of
Goodwill is $956,000

Goodwill is tested annually for
impairment by calculation of
value in use at the CGU level.
As there were no indicators of
impairments in any CGUs and
goodwill only exists within the
Centrepoint Alliance Lending
Pty Ltd CGU and Ventura
Investment Management
Limited CGU, impairment
testing was only performed for
these 2 CGUs.

Management is of the view
that core assumptions such
as cost of equity and terminal
growth rate are the same
across these 2 CGUs.

Value in use is calculated
using discounted cash flow
projections for five years and
terminal values prepared from
current forecasts using the
following assumptions:

Terminal growth rate 1.00%
(2017: 1.00%)

Cost of equity: 12.35% (2017:
12.35%)

The testing resulted in no
impairment being required.

The value in use model is not
materially sensitive to any
of the above assumptions.
Sensitivity suggests that no
reasonable change in any
assumptions gives rise to
impairment.

No indicators of impairment
are noted for the remaining
CGUs.

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 annually or more
frequently, if events or changes
in circumstances indicate
that the carryingvalue may
be impaired. As at acquisition
date, any Goodwill acquired is
allocated to each of the cash-
generating units which are
expected to benefit from 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 CGU is less
than the carrying amount, an
impairment loss is recognised.

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.

Annual Report 2018 | Directors’ ReportPAGE 56

Annual Report 2018 | Notes to the Consolidated Financial Statements

17. Intangible assets (cont.)

Intangible
asset

Description of the
Group’s intangible
assets

Key Accounting Policies

Impairment Test

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
2018 of $620,000 (2017:
$1,152,000).

Adviser network businesses
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 of 4 years
and 1 year respectively.

Cash flows associated with
remaining advisers and clients
are inflated only at CPI with no
growth assumed.

Cost of equity: 12.35% (2017:
12.35%)

The testing resulted in no
impairment losses.

The value in use calculations
are most sensitive to
the remaining useful life
assumption. Sensitivity
analysis indicates a decrease
in the assumed useful life of
1 year would have resulted
in an impairment expense of
$187,858 (2017: $86,463).

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 Profit or Loss and
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.

Annual Report 2018 | Directors’ ReportAnnual Report 2018 | Notes to the Consolidated Financial Statements

PAGE 57

17. Intangible assets (cont.)

Intangible
asset

Software

Description of the
Group’s intangible
assets

The Group has developed
or acquired software,
which are being amortised
over their expected useful
lives.

Key Accounting Policies

Impairment Test

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.

The estimated useful lives in the current and comparative periods are as follows

Software

2.5 years

Network and Client Lists

5 – 15 years

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.

Annual Report 2018 | Directors’ ReportPAGE 58

Annual Report 2018 | Notes to the Consolidated Financial Statements

18. 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 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 GARC 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, interestbearing

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 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.

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.

Concentration levels of loan assets were monitored continuously to ensure that there are no
significant concentrations of credit risk within the Group.

Loans receivable –
financial advisers

Loans to financial 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 weekly financial advice fee payments.

Annual Report 2018 | Directors’ ReportAnnual Report 2018 | Notes to the Consolidated Financial Statements

PAGE 59

18. Financial risk management (cont.)

At reporting date, the ageing analysis of receivables is as follows:

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 14.

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 below. 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:

Ageing analysis

Ageing Analysis

2018

Total
$'000

0-30 Days
$'000

31-60 Days
$'000

61-90 Days
PDNI*
$'000

61-90 Days
CI**
$'000

+91 Days
PDNI*
$'000

+91 Days
CI**
$'000

Trade receivables

10,540

10,259

Loan receivables - Adviser

1,038

157

Ageing Analysis

2017

241

404

469

Total
$'000

0-30 Days
$'000

31-60 Days
$'000

61-90 Days
PDNI*
$'000

61-90 Days
CI**
$'000

+91 Days
PDNI*
$'000

+91 Days
CI**
$'000

11,362

11,066

1,146

157

266

(28)

486

495

Trade receivables

Loan receivables -
advisers

* Past due not impaired (PDNI)

** Considered impaired (CI)

Annual Report 2018 | Directors’ ReportPAGE 60

Annual Report 2018 | Notes to the Consolidated Financial Statements

18. Financial risk management (cont.)

Weighted average
effective interest
rate

2018

Fixed

Variable

≤ 6
Months

> 6
Months

$'000

2.90%

4,904

2.77%

181

5,085

2017

857

890

1,747

4,565

Weighted average
effective interest
rate

Fixed

Variable

≤ 6
Months

> 6
Months

$'000

1.59%

24,517

6,725

11.96%

182

24,699

964

1,017

1,981

6,725

Financial Assets

Cash and term deposits

Interest bearing receivables

Security deposits

Net Exposure

Financial Assets

Cash and term deposits

Interest bearing receivables

Security deposits

Net Exposure

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.

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 policy is to match debt with the nature and term of the underlying assets. At reporting date over 99% of

the Group’s financial assets mature in less than 12 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.

Annual Report 2018 | Directors’ ReportAnnual Report 2018 | Notes to the Consolidated Financial Statements

PAGE 61

18. Financial risk management (cont.)

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.

Financial Assets

≤ 6 Months

6-12 Months

1-5 Years

Total

$’000

$'000

2018

Cash and term deposits

Trade and commissions receivable

Loan receivables - financial advisers

Security deposits

Financial Liabilities

Trade and other payables

Other liabilities

9,469

10,411

181

20,061

9,715

9,756

254

283

100

603

890

9,469

10,540

1,038

890

1,593

21,937

9,715

101

9,816

12,121

Net Maturity

10,305

242

1,574

2017

Financial Assets

≤ 6 Months

6-12 Months

1-5 Years

Total

$’000

$'000

Cash and term deposits

Trade and commissions receivable

Loan receivables - financial advisers

Security deposits

Financial Liabilities

Trade and other payables

Other liabilities

31,242

11,234

181

42,662

9,109

9,125

139

254

393

(11)

711

1,017

1,717

252

31,242

11,362

1,146

1,022

44,772

9,109

284

9,393

Net Maturity

33,537

377

1,465

35,379

e) Foreign currency risk

The Group undertakes transactions denominated in foreign currencies; consequently, exposures to exchange rate

fluctuations arise.

Annual Report 2018 | Directors’ ReportPAGE 62

Annual Report 2018 | Notes to the Consolidated Financial Statements

18. Financial risk management (cont.)

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 levels 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.

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.

Financial asset/liability

Fair value assumptions

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 small business loans
adjusted using quoted BBSW interest rates to reflect the average remaining term of the
loans as at 30 June 2018.

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 $10,353 (2017: $11,460).

Annual Report 2018 | Directors’ Report
Annual Report 2018 | Notes to the Consolidated Financial Statements

PAGE 63

18. Financial risk management (cont.)

Financial asset/liability

Fair value assumptions

Interest-Bearing Receivables

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.

Key accounting policies

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.

19. Provisions

Current

Provision for claims

Provision for employee entitlements

Property make good

Onerous lease

Restructuring

Total

Non-current

Provision for claims

Provision for employee entitlements

Property make good

Onerous lease

Total

a) Movement in provision for 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

2018

2017

$'000

5,393

2,669

550

8,781

198

232

455

4,589

3,093

255

8,020

182

232

590

2018

2017

$'000

4,589

4,743

5,992

(5,163)

5,418

4,150

(4,216)

4,677

Annual Report 2018 | Directors’ Report

PAGE 64

Annual Report 2018 | Notes to the Consolidated Financial Statements

19. Provisions (cont.)

Provision for claims

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 (Legacy Claims) by authorised representatives of the Group. The Group makes a

specific provision for claims arising from advice provided prior to 1 July 2010.

The provision for general claims is the estimated cost of resolving claims from external parties that may arise as the

Group becomes aware of them.

Legacy Claims are expected to be reported and resolved by approximately 2021. Resolution is dependent on the

circumstances of each claim and the level of complexity involved. Any costs are offset against the provision as

incurred.

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

c) Movement in provision for property make good

Opening balance

Movement in the provision is as follows:

Disposal of subsidiary

Closing balance

d) Movement in provision for onerous lease

Opening balance

Movement in the provision is as follows:

Provision for year

Onerous lease unwind

Sub-lease reduction

Closing balance

e) Movement in provision for restructuring costs

Opening balance

Movement in the provision is as follows:

Provision for year

Closing balance

2018

2017

$'000

3,275

3,763

2,681

(3,089)

2,867

2,954

(3,442)

3,275

2018

2017

$'000

315

435

(120)

315

2018

2017

$'000

343

1,001

(222)

(35)

(523)

(135)

343

2018

2017

$'000

550

Annual Report 2018 | Directors’ ReportAnnual Report 2018 | Notes to the Consolidated Financial Statements

PAGE 65

19. Provisions (cont.)

Provision for onerous lease contract

The Gold Coast office was consolidated from two floors to one and an onerous contract was created for the unused

space. This resulted in the creation of an onerous lease provision for $1,001,000. A tenant subleases the unused space

in the Gold Coast office for the remaining duration of the lease, being to October 2018 and the remaining amount of

the onerous lease provision is $87,521.

Provision for restructuring costs

On 3 April 2018, Angus Benbow was appointed CEO and initiated a Strategic Refresh of the Group. The

implementation of the updated strategy included a formal plan for restructuring and direct expenditure arising from

the restructuring.

Key accounting policies

Provisions

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 Entity 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.

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 wholly 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.

Make good
costs for
leased
property

A provision for make good costs for leased property is recognised when a make good obligation exists in
the lease contracts.

The provision is the best estimate of the present value of the expenditure required to settle the make
good obligation at the reporting date. Future make good costs are reviewed annually and any changes
are reflected in the present value of the make good provision at the end of the reporting period. The
unwinding of the discounting is recognised as a finance cost.

Onerous
Contracts

Present obligations arising under onerous contracts are recognised and measured as provisions. An
onerous contract is considered to exist where the Group has a contract under which the unavoidable
costs of meeting the obligations under the contract exceed the economic benefits expected to be
received from the contract.

Annual Report 2018 | Directors’ ReportPAGE 66

Annual Report 2018 | Notes to the Consolidated Financial Statements

20. 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 a specific provision as

described in Note 19.

The regulatory environment, specifically the Royal Commission is expected to result in changes in regulations and the

approach used by the regulator. The Group is actively reviewing and managing these impacts.

At the date of this report the Directors are not aware of any other material contingent claims in relation to advice

provided after 1 July 2010.

There were no other contingent liabilities at reporting date.

21. Remuneration of auditors

The primary auditor of the Group was Deloitte Touche Tohmatsu.

2018

2017

Amounts received or due and receivable by Deloitte Touche Tohmatsu

Audit of the financial report of the entity and other entities in the consolidated
group

204,173

224,074

Other services in relation to the entity and other entities in the consolidated group

Taxation services - Deloitte Touche Tohmatsu

Other regulatory audit services

Amounts received or due and receivable by other audit firms for:

Audit fees - managed funds & international businesses

66,830

72,207

96,598

61,132

343,210

381,804

310,640

53,220

Annual Report 2018 | Directors’ Report

Annual Report 2018 | Notes to the Consolidated Financial Statements

PAGE 67

22. Information relating to Centrepoint Alliance Limited

The Consolidated Financial Statements of the Company are:

Current assets

Non-current assets

Current liabilities

Net Assets

Issued capital

Dividend reserve

Accumulated profit

Total Shareholder Equity

Net profit after tax of the parent entity

Total comprehensive income of the parent entity

At reporting date the Company has given nil guarantees to external parties (2017: nil).

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

2018

$'000

2017

$'000

32,323

8,968

41,326

37,934

10,504

(7,111)

41,326

(7,191)

54,939

8,370

(39)

63,270

37,934

13,971

11,365

63,270

11,285

2018

$'000

2017

$'000

370

740

1,091

740

1,831

The Company has various corporate services agreements for IT and telecommunications hardware and support. The

agreements have terms between 1 and 3 years with options to renew at expiry of the initial term on a month to month

basis.

Annual Report 2018 | Directors’ ReportPAGE 68

Annual Report 2018 | Notes to the Consolidated Financial Statements

23. Related party disclosures

a) Information relating to subsidiaries

Name

Licensee and Advice Services

Country of
Incorporation

Ownership
Interest

2018

2017

Principal Activity

Centrepoint Alliance Lending Pty Ltd

Australia

100%

100% Mortgage broker / aggregator

Associated Advisory Practices Pty Ltd

Australia

100%

100% AFSL licensee support services

xseedwealth pty ltd

Australia

100%

100% Salaried advice

Professional Investment Services Pty Ltd

Australia

100%

100% Financial advice

Funds Management and Administration

Investment Diversity Pty Ltd

Australia

100%

100% Packages investment platforms

Ventura Investment Management Ltd

Australia

100%

100% Packages managed funds

Corporate

Centrepoint Alliance Services Pty Ltd

Australia

100%

100% Trustee – Employee share plan

Centrepoint Services Pty Ltd

Australia

100%

100% Service company

Centrepoint Wealth Pty Ltd

Australia

100%

100% Holding company

De Run Securities Pty Ltd

Australia

56%

56% Financial services

Presidium Research and Investment Management Pty
Ltd (formerly Imagine Your Lifestyle Pty Ltd)

Australia

100%

100% Dormant

Professional Accountants Pty Ltd

Australia

100%

100% Loans to advisers

Professional Investment Services (NZ) Limited**

New Zealand

43%

43% Dormant

R Financial Educators Pty Ltd

Australia

15%

Business partnering/

Financial advice

Ginger Group Financial Services Limited

New Zealand

50%

50% Financial advice

** Currently under Solvent Voluntary Liquidation

Annual Report 2018 | Directors’ ReportAnnual Report 2018 | Notes to the Consolidated Financial Statements

PAGE 69

23. Related party disclosures (cont.)
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 2018, the Company has not recorded any impairment of receivables relating to amounts owed by related parties

(2017: 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:

Short term employee benefits

Post employment benefits

Long term benefits

Share based payments

Termination/resignation benefits

Total compensation

24. Share based payment plans

a) Types of share-based payment plans

i) Performance Rights

2018

2017

$'000

2,109

441

2,637

2,289

11 1

2,400

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.

ii) Centrepoint Alliance Employee Share Plan (CAESP)

The purpose of the CAESP is to provide employees with an opportunity to acquire a financial interest in the Company,

which will align their interests more closely with shareholders and provide a greater incentive to focus on the

Company’s longer-term goals.

iii) Centrepoint Alliance Employee Share Option Plan (CAESOP)

Share options may be granted to employees as determined by the Board of Directors. The CAESOP is designed to

align participant’s interests with those of the shareholder by increasing the value of the Company’s shares.

Annual Report 2018 | Directors’ ReportPAGE 70

Annual Report 2018 | Notes to the Consolidated Financial Statements

24. Share based payment plans (cont.)
b) Recognised share-based payment expenses

Expense arising from equity-settled share-based payment transactions under the
CAESP

Expense arising from performance rights

Total

c) Movements during the year

2018

2017

$'000

354

659

(523)

136

All current option awards are fully vested at reporting date. There are 8,050,000 shares which are held within the

CAESP which are held as reserved shares.

2018

2017

WAEP*

i) Shares under the CAESP

Outstanding at beginning of period

8,050,000

0.18

10,885,001

Forfeited during the period

(2,835,001)

Outstanding at end of period

8,050,000

0.18

8,050,000

0.19

0.21

0.18

ii) Options under CAESOP

Outstanding at beginning of period

Expired during the period

Outstanding at end of period

iii) Performance rights under the CESP

Outstanding at beginning of period

Issued during the period

Vested during the period

Expired during the period

Outstanding at end of period

*WAEP is weighted average exercise price

d) Performance rights pricing model

3,750,000

700,000

(2,000,000)

2,450,000

400,000

0.40

(400,000)

3,566,666

3,750,000

(1,498,889)

(2,067,777)

3,750,000

The fair value of the performance rights issued are calculated as at the date of grant using the Monte Carlo Model.

This Model take into account the terms and conditions upon which they were granted and market based inputs as at

the grant date.

Key accounting policies

i) Equity settled transactions:

The Group provides benefits to its employees, including KMP, in the form of share-based payments, whereby

employees render services in exchange for rights over shares (equity-settled transactions).

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.

Annual Report 2018 | Directors’ Report
Annual Report 2018 | Notes to the Consolidated Financial Statements

PAGE 71

24. Share based payment plans (cont.)

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 Profit or Loss and

Comprehensive Income is the product of:

i. the grant date fair value of the award;

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.

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.

25. Events after the reporting period

The following matters have occurred subsequent to the end of the financial year:

On 7 August 2018, the business was restructured to align with the strategy. This included the announcement that

John Cowan, CFO will leave in November 2018.

On 23 August 2018, the Directors of Centrepoint Alliance Limited resolved not to pay a final dividend with reference

to the dividend policy and based on the current strategic direction.

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.

Annual Report 2018 | Directors’ ReportPAGE 72

Annual Report 2018 | Directors’ Declaration

Directors’ Declaration

In accordance with a resolution of the Directors of Centrepoint Alliance Limited, I state that:

1. In the opinion of the Directors:

(a) The consolidated financial statements and notes of Centrepoint Alliance Limited for the financial year

ended 30 June 2018 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 2018 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

become due and payable.

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 ended 30 June 2018.

On behalf of the Directors:

A. D. Fisher
Chairman

23 August 2018

Annual Report 2018 | Directors’ Report
Annual Report 2018 | Independent Auditors’ Report

PAGE 73

Annual Report 2018 | Directors’ ReportPAGE 74

Annual Report 2018 | Independent Auditors’ Report

Key Audit Matter

Provision for claims

How the scope of our audit responded to the Key
Audit Matter
Our procedures, performed in conjunction with our
actuarial specialists included, but were not limited to:

As disclosed in Note 19a, the Group has
provided $5.4 million for the estimated cost of
resolving adviser client claims for financial
advice provided by authorised representatives
of the Group prior to 1 July 2010 and estimated
cost of resolving claims from external parties
that may arise as the Group becomes aware of
them. As disclosed, the Group does not believe
it is appropriate to recognise any provision for
financial advice provided post 1 July 2010.

The determination of the provision for adviser
client claims requires management to exercise
significant judgement to estimate the likely
value of claims already reported and the
estimated volume and value of unreported
claims.



Understanding
the provisioning process
management undertook to estimate the
claims provision
including management’s
process to assess whether a provision is
required for financial advice provided post 1
July 2010

Evaluating controls over the completeness of
the data in the claims database

Selecting a sample of open claims and
agreeing details to underlying records and
external correspondence
the
accuracy of the data used to estimate the cost
of settling open claims and the value and
volume of unreported claims; and

to assess

Challenging the core assumptions applied by
management in estimating claim volume for
unreported claims and value per claim with
regard to historical claims experience.

We have also assessed the appropriateness of the
disclosures included in Note 19a to the financial
statements.

Recoverability of deferred tax assets

Our procedures, performed with the support of our tax
specialists included, but were not limited to:

As disclosed in Note 5d and 5e, the Group has
recognised deferred tax assets of $4.6 million
which relate to the future reversal of existing
temporary differences for which Group expects
to utilise against future taxable profits.

The ability to recognise deferred tax assets is
dependent on the estimation of future taxable
profits against which the deferred tax assets can
be utilised. Significant judgement is required in
forecasting future taxable profit.

The Group makes an estimate of the extent of
carried forward losses that can be utilised
against future taxable profits with reference to
the available fraction concept set out in the
Income Tax Assessment Act 1997. This applies
due to changes in the group structure over time.

$4.5 million of recognised tax losses have been
written off during the year in response to
continuing sector wide challenge and to reflect
that the Group is now conducting a strategic
refresh in response to those challenges. The
Group has unrecognised revenue losses of
$24.0 million and capital losses of $36.0 million.



the

reasonableness

Challenging
of
management’s estimation of future taxable
profits (including but not limited to the
reasonableness of estimates of growth in
financial advice revenues) and assessing
whether these estimates were consistent with
the forecasts used as part of the impairment
testing of goodwill and intangible assets

Evaluating the competence, capabilities and
objectivity of management’s external tax
expert used to assess the available fraction;
and

the appropriateness of

the
Challenging
available fraction applied to estimate the
extent to which carried forward tax losses can
be recognised as a deferred tax asset.

We have also assessed the appropriateness of the
disclosures included in Note 5d and 5e to the financial
statements.

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PAGE 75

Other Information

The directors are responsible for the other information. The other information comprises the
information included in the Group’s annual report for the year ended 30 June 2018, but does not
include the financial report and our auditor’s report thereon.

Our opinion on the financial report does not cover the other information and we do not express any
form of assurance conclusion thereon.

In connection with our audit of the financial report, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
report or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If,
based on the work we have performed, we conclude that there is a material misstatement of this
other information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of the Directors for the Financial Report

The directors of the Company are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
and for such internal control as the directors determine is necessary to enable the preparation of
the financial report that gives a true and fair view and is free from material misstatement, whether
due to fraud or error.

In preparing the financial report, the directors are responsible for assessing the ability of the Group
to continue as a going concern, disclosing, as applicable, matters related to going concern and using
the going concern basis of accounting unless the directors either intend to liquidate the Group or to
cease operations, or have no realistic alternative but to do so.

Auditor’s Responsibilities for the Audit of the Financial Report

Our objectives are to obtain reasonable assurance about whether the financial report as a whole is
free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that
an audit conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered
material if, individually or in the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of this financial report.

As part of an audit in accordance with the Australian Auditing Standards, we exercise professional
judgement and maintain professional scepticism throughout the audit. We also:



Identify and assess the risks of material misstatement of the financial report, whether due
to fraud or error, design and perform audit procedures responsive to those risks, and obtain
audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk
of not detecting a material misstatement resulting from fraud is higher than for one resulting
from error, as
intentional omissions,
involve collusion,
fraud may
misrepresentations, or the override of internal control.

forgery,

 Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing
an opinion on the effectiveness of the Group’s internal control.



Evaluate the appropriateness of accounting policies used and the reasonableness of
accounting estimates and related disclosures made by the directors.

Conclude on the appropriateness of the directors’ use of the going concern basis of
accounting and, based on the audit evidence obtained, whether a material uncertainty exists
related to events or conditions that may cast significant doubt on the Group’s ability to
continue as a going concern. If we conclude that a material uncertainty exists, we are
required to draw attention in our auditor’s report to the related disclosures in the financial
report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are
based on the audit evidence obtained up to the date of our auditor’s report. However, future
events or conditions may cause the Group to cease to continue as a going concern.

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Annual Report 2018 | Independent Auditors’ Report



Evaluate the overall presentation, structure and content of the financial report, including the
disclosures, and whether the financial report represents the underlying transactions and
events in a manner that achieves fair presentation.

 Obtain sufficient appropriate audit evidence regarding the financial information of the
entities or business activities within the Group to express an opinion on the financial report.
We are responsible for the direction, supervision and performance of the Group’s audit. We
remain solely responsible for our audit opinion.

We communicate with the directors regarding, among other matters, the planned scope and timing
of the audit and significant audit findings, including any significant deficiencies in internal control
that we identify during our audit.

We also provide the directors with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and other
matters that may reasonably be thought to bear on our independence, and where applicable, related
safeguards.

From the matters communicated with the directors, we determine those matters that were of most
significance in the audit of the financial report of the current period and are therefore the key audit
matters. We describe these matters in our auditor’s report unless law or regulation precludes public
disclosure about the matter or when, in extremely rare circumstances, we determine that a matter
should not be communicated in our report because the adverse consequences of doing so would
reasonably be expected to outweigh the public interest benefits of such communication.

Report on the Remuneration Report

Opinion on the Remuneration Report

We have audited the Remuneration Report included in pages 13 to 22 of the Directors’ Report for
the year ended 30 June 2018.

In our opinion, the Remuneration Report of Centrepoint Alliance Limited, for the year ended 30 June
2018, complies with section 300A of the Corporations Act 2001.

Responsibilities

The directors of the Company are responsible for the preparation and presentation of the
Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our
responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in
accordance with Australian Auditing Standards.

DELOITTE TOUCHE TOHMATSU

David Rodgers
Partner
Chartered Accountants
Brisbane, 23 August 2018

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Annual Report 2018 | Directors’ ReportAnnual Report 2018 | ASX Additional Information

PAGE 77

ASX Additional Information

Additional information required by the Australian Securities Exchange Limited and not shown elsewhere in this report

is as follows. The information is current as at 16 August 2018.

1. Class of securities and voting rights

a) Ordinary shares

Ordinary shares of the Company are listed (quoted) on the ASX. There are 1,903 holders of ordinary shares, holding

156,932,969 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

No. of ordinary shareholders

No. of performance right holders

295

512

262

733

101

The number of shareholders with less than a marketable parcel is 380.

3. Substantial shareholders

The names of substantial holders in the Company who have notified the Company in accordance with section 671B of

the Corporations Act 2001 are set out below:

Ordinary Shareholders

TIGA Trading Pty Ltd

Adam Smith Asset Management Pty Ltd

River Capital Pty Ltd

Fully paid

No. of Shares

41,596,497

10,069,911

5,689,719

Annual Report 2018 | Directors’ Report
PAGE 78

Annual Report 2018 | ASX Additional Information

ASX Additional Information

4. Twenty largest holders of quoted equity securities

Ordinary Shareholders

1 HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED

2 UBS NOMINEES PTY LTD

3 CITICORP NOMINEES PTY LIMITED

CENTREPOINT ALLIANCE SERVICES PTY LTD

5 J P MORGAN NOMINEES AUSTRALIA LIMITED

6 ONE MANAGED INVT FUNDS LTD

7 NATIONAL NOMINEES LIMITED

MR RICHARD JOHN NELSON + MRS KAYE MARIE NELSON

9 SUPERTCO PTY LTD

10 GRIFFIN FUND MANAGEMENT PTY LTD

11 WAYLEX PTY LTD

12 SOBA PTY LTD

Fully paid

No. of Shares

% Held

34,292,131

2 1.85

32,804,489

20.90

9,331,061

5.95

8,050,000

5.13

5,127,176

4,914,761

2,819,289

2,729,660

2,000,000

1,991,231

1,418,051

1,352,652

3.27

3.13

1.80

1.74

1.27

0.90

0.86

MR DANIEL BARON DROGA + MRS LYNDELL DROGA

1,250,000

0.80

14 FETTERPARK PTY LTD

15 CATHAYS PTY LTD

16 EDSONMERE PTY LTD

17 AUSTIN SUPERANNUATION PTY LTD

18 HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED - A/C 2

19 LAYUTI PTY LTD

20 MR DAVID O’ROURKE

1,200,000

909,500

829,600

739,075

712,830

567,767

554,944

0.76

0.58

0.53

0.47

0.45

0.36

0.35

113,594,217

72.38

Annual Report 2018 | Directors’ ReportAnnual Report 2018 | Corporate Directory

PAGE 79

Corporate Directory

Securities Exchange Listing
Centrepoint Alliance Limited’s shares are listed on the

Annual General Meeting
10:30am (AEDT) Tuesday, 30 October 2018

Deloitte Touche Tohmatsu

Level 10, 550 Bourke Street

Melbourne, Victoria Australia

Australian Securities Exchange (ASX) and are traded

under the ASX code CAF

Share Registry
Computershare Investor Services Pty Limited

Level 11, 172 St George’s Terrace,

Perth Western Australia 6000, Australia

GPO Box 2975, Melbourne Victoria 3001, Australia

Telephone:

(within Australia) 1300 763 925

(outside Australia) +61 3 9415 4870

Facsimile: +61 3 9473 2500

Email: web.queries@computershare.com.au

Website: www.computershare.com.au

Auditor

Deloitte Touche Tohmatsu

Riverside Centre

Level 25, 123 Eagle Street

Brisbane Queensland 4000

Australia

Registered Address

Centrepoint Alliance Limited

Registered Address and Head Office:

Level 9, 10 Bridge Street

Sydney New South Wales 2000

Australia

Telephone:

(within Australia) 1300 557 598

(outside Australia) +61 2 8987 3000

Facsimile: +61 2 8987 3075

Website: www.centrepointalliance.com.au

Annual Report 2018 | Directors’ ReportPAGE 80

Annual Report 2018 | Directors’ ReportPAGE 81

Annual Report 2018 | Directors’ ReportPAGE 82

Centrepoint Alliance Limited
and its Controlled Entities
ABN 72 052 507 507

1300 557 598
centrepointalliance.com.au

Annual Report 2018 | Directors’ Report

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