ANNUAL
FINANCIAL
REPORT
2019
For the year ended 30 June 2019
Centrepoint Alliance Limited
ands its Controlled Entities
ABN 72 052 507 507
FY19 Highlights
$2.4m
EBITDA
$1.2m
Profit before tax
Strategy on track
$3.2m
Cashflow
86%
Fee-based service
offer successful
Existing firms retained
Compelling value
proposition
80%
Increase in
new advisers
Contents.
Letter from the Chairman
CEO Report
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
01
02
05
12
21
22
23
24
25
26
76
77
84
86
Our year ahead
To sum up, FY19 was a year in which we achieved
our strategic objectives, launched our new pricing
model and built significant momentum behind our
business transformation.
Our business is well positioned for the future and
we are confident that our strategy will create
opportunities for growth.
We will continue implementing our strategic
priorities, launching a fee-based offer for self-
licensed advisers, investing in technology and data
to enable greater scale and superior service to
advice firms, and driving continued growth in our
licensed network.
On behalf of everyone at Centrepoint, thank you for
your continued support.
Alan Fisher
Chairman
Centrepoint Alliance
PAGE 1
Letter from the
Chairman
Dear Shareholders,
This has been an important year for Centrepoint
Alliance Limited (Centrepoint). We embarked on a new
strategy to focus on providing services to advisers
and introduced a new pricing model which repositions
our business for growth. Today, Centrepoint offers
a complete suite of governance, advice, business
management and client growth services that enable
advisers to spend more time providing advice to their
clients.
Centrepoint has led by example, being one of the first
in the market to move to a fee-based revenue model, as
we move the business towards a revenue mix sourced
predominantly from service fees paid by advisers.
Profit turnaround
The result has been a turnaround in profit for the
financial year, with a profit before tax of $1.2m
(compared to FY18 $3.4m loss) and an EBITDA of $2.4m
(compared to FY18 $1.6m loss).
Our business transformation is progressing well, and we
remain focused on assessing partnerships, acquisition
opportunities and enhancing shareholder value.
Financial advice market
Underlying demand for financial advice remains
strong, although advisers themselves are experiencing
significant disruption. Rising costs, increasing regulatory
requirements and revised education standards are
transforming the industry. Centrepoint is committed to
supporting advisers through this change.
This is why we implemented a model where both self-
licensed and corporate licensed advisers can access
our suite of business services and support. With the
quality and scale of our offer, we are well placed to
support advisers as they adapt to this new landscape by
providing the tools and services they need to succeed.
Validation of our strategy
Already we have seen our strategy validated with
86% of firms in our authorised representative network
transitioning to the new pricing model, and an 80%
increase in new onboarded advisers. We continue to
assess more firms as they are increasingly attracted to
our service offer.
Annual Report 2019 | Letter from the Chairman CEO Report
PAGE 2
Centrepoint’s strategy
Centrepoint announced a new strategy in August
2018 and has now had 12 months of focused
delivery. This included a redesign of the service
offer to enable financial advisers to provide quality
advice and run their business. Centrepoint is now
repositioned as a provider of business services to
advisers, offering a complete suite of services:
• Governance and compliance systems to help
advisers manage regulatory obligations
• Advice tools, technologies and services to help
advisers provide quality advice
• Business management services and support to
help improve advisers’ business performance
• Client growth templates, guides and
methodologies to engage existing and new
clients
Centrepoint has a distinctive value proposition,
with a clear focus on serving the needs of advisers.
As a listed company, Centrepoint brings scale and
discipline together with an uncompromising focus
on quality services to its community of advisers.
A focus on compliance and governance, earned through
many years of delivering advice under regulatory
scrutiny, sets Centrepoint apart from other mid-sized
providers. To support the delivery of the new offer,
Centrepoint invested in its digital and data capabilities
to enable greater scale and superior service.
The service offer, incorporating a core bundle with a
range of variable extras, is one of the first fee-based
revenue models launched in the post Royal Commission
environment. Centrepoint developed the new offer in
collaboration with its community of advisers, helping
to ensure transparency of pricing and support from the
adviser community.
This has enabled Centrepoint to position itself in the
market as a contemporary advice services firm. The
value of this proposition has clearly resonated with
the market, resulting in 86% of existing licensed firms
retained and transitioned to the new fee model and
a record number of new advisers joining Centrepoint
following the launch of the new service offer and fee
model.
FOCUS
RECREATE
GROW
Conduct portfolio review of
businesses
Implement new organisation
structure
Build new relationship
Service Model
Review adviser governance
and standards
Introduce new governance
and standards framework
Launch education transition
support model
Harness internal data for
efficiency gains
Design new Centrepoint
Service Offering
Create new advice life-stage
segments
Introduce new pricing
packages and bundles
Create long-term data
ecosystem strategy
Launch new Centrepoint
Service Offering
Develop ‘transition’ package
for advisers moving to the
new model
First stage of data
ecosystem built with new
Adviser Portal
Identify targeted segments
for growth
Aligned (licensed) adviser
community
Self-licenced business
partnerships
Introduce new governance
and standards framework
Launch education transition
support model
Harness internal data for
efficiency gains
Annual Report 2019 | CEO Report PAGE 3
FY19 Progress
This financial year was a critical juncture for the
business, with the conversion of its community of
financial advisers to the new fee model requiring
a focused transition plan to minimise attrition and
maintain confidence. The transformation was achieved
by redirecting or redeploying resources to new
capability areas as required. At the same time, the runoff
in legacy rebates continued to accelerate, validating the
underlying assumptions of our strategic refresh.
The result is a return to profitability, with a profit before
tax of $1.2m and a new model for licensed advisers in
place to help mitigate revenue risk. Pleasingly, legacy
claims have seen a significant reduction from the last
financial year, with no significant new legacy claims in
FY19. Further, Centrepoint’s cash balance of $7.9m at 30
June 2019 provides a strong and stable balance sheet
through the Centrepoint transformation.
In a challenging year, all key strategic and operational
milestones were achieved.
Outlook for FY20
Underlying consumer demand for advice remains strong
and Centrepoint is unwavering in its belief in the value
of advice. Demand for advice is driven by changing
demographics, particularly retirement of the Baby
Boomers, and a maturing superannuation system. As
ever more Australians transition from full time work to
retirement, or from accumulation to pension phase, they
need good financial advice. Clearly, the underlying need
for advice is currently tempered by distrust in the wake
of the Hayne Royal Commission. This is why Centrepoint
is determined to build its business on a transparent fee
for service model.
The financial advice industry is today facing
unprecedented disruption as ramifications of the Royal
Commission unfold, particularly in the banking sector.
More than 1,500 advisers have been displaced by AFSL
closures in the 18 months to June 2019. A further 4,900
will be affected in some way by recently announced
strategic changes among the largest advice providers*.
The changes will accelerate the migration of planners
from the Top 6 providers to small and self-licensed firms
that has been unfolding for several years now.
* Source: (ASIC Financial Adviser Register, NMG Adviser Model)
The trend towards smaller, independent advice
firms will favour Centrepoint’s strategy. As a service
provider focused on advice, Centrepoint enables
advisers to select the products and services that
are in their clients’ best interest. Centrepoint is
equally able to provide licensing services to those
advisers who want to operate under a corporate
licence or provide business support to advisers
who prefer to maintain their own licence. A key
focus of the business will be to attract a healthy
share of displaced advisers who seek a quality and
sustainable service provider. The context of industry
disruption presents an ideal marketing platform
to launch Centrepoint’s new fee-based service for
self-licensed advisers, which is a critical deliverable
in FY20.
The coming year will also see the launch of a new
digital content portal for advisers, Centrepoint
Connect, which provides intuitive access to over
700 essential policies and documents. The phased
roll out of Centrepoint.AI, Centrepoint’s data-driven
practice management dashboard, will continue
as the platform is upgraded during the year. With
these enhancements, Centrepoint continues to
develop its contemporary value proposition,
investing in services and capabilities that support
advice firms and the financial advice industry to
provide quality advice and make a meaningful
difference to the Australian community.
Angus Benbow
Chief Executive Officer
Centrepoint Alliance
Annual Report 2019 | CEO Report “
... Centrepoint
brings scale
and discipline
together with an
uncompromising
focus on quality
services to its
community of
advisers.
”
PAGE 5
Directors’ Report for the Year Ended
30 June 2019
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 2019.
Directors
Alan Fisher
BCom, FCA, MAICD
Chairman of the Board,
Independent Non-Executive
Director.
Appointed on 12 November 2015.
Martin Pretty
BA, CFA, GAICD, Graduate
Diploma of Applied Finance
Independent Non-Executive
Director.
Appointed on 27 June 2014.
Experience and expertise
Experience and expertise
Alan has extensive and proven experience in restoring
and enhancing shareholder value. 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.
Alan holds a Bachelor of Commerce from Melbourne
University, is a Fellow of the Institute of Chartered
Accountants in Australia and a member of the Australian
Institute of Company Directors.
Martin brings to the Board over 19 years’ experience in
the finance sector. The majority of this experience was
gained within ASX-listed financial services businesses,
including Hub24, Bell Financial Group and IWL
Limited. Martin has also previously worked as a finance
journalist with The Australian Financial Review.
Martin holds a Bachelor of Arts (Honours) from The
University of Melbourne, and a graduate Diploma
of Applied Finance from Finsia. Martin is a CFA
charterholder and a Graduate of the Australian
Institute of Company Directors.
Other Current Directorships
Other Current Directorships
• Non-Executive Director and Chairman of IDT Australia
No other directorships of Australian listed entities.
Limited (ASX:IDT).
• Non-Executive Director and Chairman of Audit
and Risk Committees of Bionomics Limited
(ASX:BNO),Thorney Technologies Limited (ASX:TEK)
and Simavita Limited (ASX:SVA).
Special responsibilities
• Chairman of the Board.
• Chairman of the Nomination, Remuneration and
Governance Committee.
• Member of the Group Audit, Risk & Compliance
Committee.
Interests in shares and options
Nil
Special responsibilities
• Member of the Group Audit, Risk & Compliance
Committee.
• Member of the Nomination, Remuneration and
Governance Committee.
Interests in shares and options
105,000
Annual Report 2019 | Directors’ Report PAGE 6
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
Georg brings over 25 years of experience in the financial services industry,
online media and real estate industry. 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 offices across
nine countries providing residential and commercial real estate as well as
financial services.
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
Other Current Directorships
• Executive Director and Chairman of iCar Asia Limited (ASX: ICQ).
Former Directorships
• Director of iProperty Group Limited (ASX:IPP) (from 1 January 2011 to
16 February 2016).
• Non-Executive Director of Mitula Group Limited (ASX: MUA) (from 18
Jan 2017 to 8 Jan 2019).
Special responsibilities
• Chairman of the Group Audit, Risk & Compliance Committee.
• Member of the Nomination, Remuneration and Governance
Committee.
Interests in shares and options
150,000
Annual Report 2019 | Directors’ Report PAGE 7
Company Secretary
Debra Anderson
B. Law (LLB) Hons, Post
Graduate Diploma in Legal
Practice, Diploma of Financial
Planning, AGIA, ACIS, MAICD
Senior Corporate Counsel &
Company Secretary
Marty Carne
BM, BBus, LLB, LLM, MBA
(Grad), GDLP, GCAIF
Chief Legal Officer &
Company Secretary
Experience and expertise
Experience and expertise
Debra is a lawyer who began her career in private
practice in Australia and worked in New Zealand and
Hong Kong, before joining the Company in 2003. She
has gained extensive experience in financial services over
the past 15 years and was appointed Company Secretary
in November 2013.
Debra is a member of the Queensland Law Society and is
a qualified Chartered Secretary and is an Associate of the
Institute of Chartered Secretaries and Administrators and
the Governance Institute of Australia and a member of
the Australian Institute of Company Directors.
Marty joined the Company in April 2016 and holds
executive responsibility for Legal, Professional
Standards, Risk and Claims Management.
Marty has over 26 years’ experience in regulation and
financial services. Marty has held senior positions
with a range of financial services companies and
the Australian Securities Commission. Marty has
strong commercial and client-centric skills and
experience in the delivery of strategic legal advice
and management of risk.
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 2019 | Directors’ Report PAGE 8
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
A. D. Fisher
H. W. Robertson#
M. P. Pretty
G. Chmiel
A. E. Slattery*
Board of Directors
Nomination, Remuneration
& Governance Committee
Group Audit, Risk &
Compliance Committee
Held
Attended
25
7
24
24
5
25
2
24
24
5
Held
3**
1
3
1***
1
Attended
Held
Attended
3
0
3
1
1
5
-
5
5
-
5
-
5
5
-
#retired effective 29 October 2018 *appointed 6 November 2018 and resigned 31 January 2019
**Change of membership effective 6 November 2018 & 31 January 2019
***Change of membership effective 31 January 2019.
Principal Activities
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.
Operating and Financial Review
Operating Review
In August 2018 we announced our Strategic Refresh program, which was the culmination of a critical review of
all aspects of the Centrepoint business. Having taken on feedback from our community of financial advisers,
and studying the market disruption externally, we felt it important and timely to reset the Centrepoint business.
We have a strong community of financial advisers and our focus is concentrated on supporting advisers both as
professionals providing quality advice to clients and as business owners.
Over the past year we have been building and investing in a new service offering that provides specialist
advisory and business services to help advisers navigate what is an increasingly complex operating and
regulatory environment. We have made steady progress in bringing the new service offering to life, which
includes significant investment in digital capability and the provision of data-led insights.
This, combined with our scale and resources, means our strong and connected community of advisers will be
well placed to meet both the challenges and opportunities that come from the changing landscape around us.
Annual Report 2019 | Directors’ Report
PAGE 9
Financial Performance
For the financial year to 30 June 2019, the Group reported a net loss after tax of $1.6m compared to a net loss
after tax for the financial year to 30 June 2018 of $6.9m.
Gross profit from contracts with customers
Gross profit
Expenses
Profit/(Loss) before tax
Net (loss) for the year
*Refer note 21 on restatement to prior year comparative for details
2019
$’000
2018 restated *
$’000
30,016
30,664
31,048
32,275
(29,444)
(35,666)
1,220
(1,576)
(3,391)
(6,884)
The Group held $7.9m in cash and cash equivalents as at 30 June 2019 (2018: $9.5m). Cash provided by
continuing operations was $3.2m (2018: $6.4m) from which $4.5m was paid out in claims (2018: $5.3m), $1.3m
for acquisition of software (2018: $0.1m). $1.2m was received for the Neos divestment and loan repayment (2018:
Nil).
The Group has net assets at 30 June 2019 of $16.9m (2018: $19.0m) and net tangible assets of $11.8m (2018:
$12.5m) representing net tangible assets per share of 7.92 cents (2018: 7.96 cents).
Dividends
No dividends were paid during the year. No dividends have been declared since the end of the financial year to
the date on this report.
Shares and Performance Rights
During the year, under a Long-Term Incentive (LTI) award CESP21, 6,850,000 performance rights were issued on
7 February 2019 and 2,700,000 performance rights on 28 February 2019. 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 the prior year. The 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) were cancelled in the current financial year, following approval by
shareholders at the 2018 Annual General Meeting.
In March 2019, 400,000 options expired unvested and 2,000,000 performance rights issued under LTI award
CESP19 have been forfeited. 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
In December 2018 Centrepoint entered an agreement with Australian Life Development Pty Limited, trading as
NEOS Life (‘ALD’) that changed the nature of its investment in ALD from a convertible note to a loan capitalising
interest that requires a faster return of capital to Centrepoint. The Convertible Note and Option Deed were
replaced with a loan agreement, pursuant to which principal and interest repayments are required to be made
in 6 monthly tranches between June 2019 and June 2021. In addition, the shares owned in ALD by Centrepoint
were sold to a related party of ALD for full value on vendor finance. The first payment to the Group was paid on
31 December 2018 and the second is due on 31 December 2021.
In June 2019 a key milestone was reached in the Strategic Refresh program with 195 of Centrepoint’s 227
licensed adviser firms being contracted to transition to the Group’s new transparent pricing arrangements,
commencing 1 July 2019. The new licensee service offering was launched in March 2019 and the transition was
completed successfully.
Annual Report 2019 | Directors’ Report PAGE 10
Events After The Financial Year Other Than Outlined Above
There are no matters or events which have arisen since the end of the financial year 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 Group 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 2019 was approved by the
Board on 22 August 2019. 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 Group 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.
Restatement to prior year comparative
During the year, the Company completed the cancellation of shares for the closure of the Centrepoint Alliance
Employee Share Plan (‘Plan’). Upon full review by the Group, it was identified that a receivable under the Plan in
the 31 December 2017 and 30 June 2018 financial reports was incorrectly recognised. As a result, the receivable
and related income and tax impacts have been adjusted in the comparative figures disclosed in these financial
statements. Refer to note 21 for details.
Annual Report 2019 | Directors’ Report “
...there is an opportunity for
Centrepoint to become a
leader in providing advice
and business services,
focused on supporting
advisers of a similar mindset.
”
Remuneration Report
This Remuneration Report for the year ended 30 June 2019 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.
PAGE 12
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)
H. W. Robertson
Director (non-executive) – Resigned 29 October 2018
M. P. Pretty
G. Chmiel
J. S. Cowan
Director (non-executive)
Director (non-executive)
Chief Financial Officer – Resigned 6 November 2018
A.G.R. Benbow
Chief Executive Officer - Appointed 2 April 2018
P. Loosmore
Interim Chief Financial Officer – Appointed 17 December 2018
A.E. Slattery
Director (non-executive) – Appointed 6 November 2018 and Resigned 31 January 2019
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.
Annual Report 2019 | Remuneration Report PAGE 13
Group Performance
Shareholder returns for the last five years have been as follows:
GROUP
Net (loss)/profit after tax
EPS (basic) - (cents per share)
EPS (diluted) - (cents per share)
Share price ($)
Dividends paid - (cents per share)
*Refer note 21 on restatement to prior year comparative for details
2019
$’000
2018
restated *
$’000
(1,576)
(6,884)
(1.06)
(1.06)
0.10
-
(4.62)
(4.62)
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
Nomination, Remuneration & Governance Committee (NRGC)
The role of the NRGC includes the setting of policy and strategy for the appointment, compensation and
performance review of Directors and Executives, approving senior executive service agreements and severance
arrangements, overseeing the use of equity-based compensation and ensuring appropriate communication and
disclosure practices are in place.
Non-Executive Directors are not employed under specific employment contracts but are subject to provisions
of the 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 2019, 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 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.
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.
The sign-on incentive of $120,000 was paid during the financial year to purchase shares on-market which was
completed on 5 July 2019.
Annual Report 2019 | Remuneration Report PAGE 14
Short-term incentive
A short-term incentive to a value of $237,500 at target (50% of fixed salary) up to a potential STI to a value of
$356,250 (75% of fixed salary) and subject to Transitional Terms (refer to page 17 for further details).
A short-term incentive of $178,125 was paid in October 2018 in recognition of the CEO’s achievements based on
the structure outlined in the CEO Transitional Terms disclosed in the Remuneration Report.
A short-term incentive for the 2019 financial year will be payable based on the structure outlined in the CEO
Transitional Terms disclosed in the Remuneration Report.
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 17 for further details).
Issue of up to 2,700,000 performance rights at $0.0199 cents per performance right, that are legally held by the
CESPT until satisfaction of the vesting conditions determined on 1 September 2021 as disclosed in the long-term
incentive plans. These performance rights were issued as part of a scheme of performance rights to be issued
in 3 tranches of 2,700,000 rights each (the 2 future tranches to be approved by shareholders). This scheme
replaced the contractual rights formerly agreed with the CEO.
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 Cowan - Chief Financial Officer
Employment period: 12 January 2015 – 6 November 2018
Term: Resigned as Chief Financial Officer effective 6 November 2018
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 $62,000 was paid after the end of the 2018 financial year based on the Group-wide
short-term incentive scheme structure outlined in the Remuneration Report.
A retention incentive of $100,000 was paid in October 2018.
Long term incentive – (Refer to page 17 for further details)
CESP19
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. The three-year performance period for this award ended on 30 June 2019. The
Performance Conditions have not been met and the performance rights will be forfeited unvested.
CESP20
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.
Peter Loosmore – Interim Chief Financial Officer
Employment period: 17 December 2018 – current
Term: 12 months
Required notice by Executive and Company: 4 weeks
Termination Entitlements: Not applicable
Those Executives that do not meet the KMP definition are not included here.
Annual Report 2019 | Remuneration Report
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Annual Report 2019 | Remuneration Report
PAGE 17
Shareholdings of Key Management Personnel
Shares held in Centrepoint Alliance Limited (Number)
A. D. Fisher
M. P. Pretty
G. Chmiel
A. G. R. Benbow
P Loosmore3
Former KMP's
J. S. Cowan1
H. W. Robertson2
A. E. Slattery1 3
Balance
1 July 2018
Ordinary
Granted as
remuneration
Ordinary
On exercise
of options
Ordinary
Net change
other #
Ordinary
Balance
30 June 2019
Ordinary
-
-
25,000
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-
571,8784
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105,000
125,000
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50,000
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105,000
150,000
571,878
50,000
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-
-
1Resigned during the year 2Retired during the year 3Appointed during the year 4Shares acquired on-market as part of Sign-on incentive (refer page 14)
*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
The objective of long-term incentives (LTI) is
to reward Executives in a manner that aligns
remuneration with the creation of shareholder wealth.
As such, LTI grants are only made to executives who
are able to significantly influence the generation of
shareholder wealth and thus have an impact on the
Group's performance against the relevant long-term
performance hurdle.
LTI awards to Executives are made under the
Executive LTI plans and are delivered in the form
of shares or rights. Shares vest in tranches over
a specified time period and may also have other
performance hurdle requirements, typically related to
shareholder return, as determined by the NRGC.
Performance rights are rights that can be converted
to fully paid ordinary shares in the Company for
no monetary consideration subject to specific
performance criteria being achieved. The
performance rights will only vest if certain profit
targets are met.
Objective
Structure
The objective of short-term incentives (STI) is to
link the achievement of the Group's operational
targets with the remuneration received by the
executives charged with meeting those targets. The
total potential STI available is set at a level so as
to provide sufficient incentive to the executive to
achieve the operational targets and the cost to the
Group is reasonable. The purpose of 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.
In August 2017 the Directors approved a new
executive STI scheme based on EBITDA and the
achievement of underlying organisational and
team goals. The Target EBITDA is approved by
the Board for each financial year. To be eligible for
a STI payment a threshold EBITDA must be met
and executives must achieve at least 70% of their
individual performance objectives and minimum job
competency and core values ratings. The Target STI
payable to Executives is 40% (CEO is 50%) of Total
Fixed Remuneration. The Maximum STI payable
for Executives is 60% (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.
Annual Report 2019 | Remuneration Report
Awards
Short-term incentives
Long-term incentives
PAGE 18
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 CAESPT 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. The LTI awards CAESP17 and CAESP18
were terminated in the prior year. The 8,050,000
ordinary shares (associated with these plans) legally
held by the CAESPT were cancelled in the current
period, following approval by shareholders at the 2018
Annual General Meeting.
CESP19
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
CESP at 51.0 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 9 December 2019
based on the following:
If the Total Shareholder Return1 (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.
CESP20
The Board approved the grant of 700,000
performance rights on 2 October 2017 to the senior
executives of the Group under the CESP 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
25 September 2020 based on the following:
If the Total Shareholder Return1 (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.
1TSR 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
Annual Report 2019 | Remuneration Report PAGE 19
Awards
Short-term incentives
Long-term incentives
CESP21
The Board approved the grant of 6,850,000
performance rights on 7 February 2019 to the senior
executives and other senior leaders of the Group
under the CESP at 0.0144 cents per performance
right. The Board approved the grant of 2,700,000
performance rights on 28 February 2019 to the CEO
under the CESP at 0.0199 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 1
September 2021 based on the following:
If the absolute Total Shareholder Return1 (TSR) for 30
June 2021 financial year is:
•
Target share price hurdle of 28.0 cents, 50% of
the performance rights will vest;
•
Stretch share price hurdle of 32.0 cents, 100% of
the performance rights will vest
The VWAP2 at the start of the performance period i.e.
1 February 2019 was $0.10 for the awards granted on
7 February 2019.
The VWAP at the start of the performance period i.e.
25 February 2019 was $0.12 for the awards granted on
28 February 2019.
CEO Transitional Terms (short-term and long-term incentives)
The CEO will be entitled to STI (50% - 75%) and LTI (40% - 60%) benefit limits, 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
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.
1TSR 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
2Volume Weighted Average Price of Centrepoint Shares traded on the Australian Securities Exchange and Chi-X Australia during the 10 trading days prior to and
including the start date of the performance period.
Annual Report 2019 | Remuneration Report PAGE 20
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 2019. The Independence Declaration which
forms part of this report is on page 21.
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.
Fees payable to the Group’s auditor for the non-audit services to
the Company and other controlled entities
Taxation services
Other non-audit services
2019
$
3,000
72,900
75,900
2018
$
2,450
14,000
16,450
Signed in accordance with a resolution of the Directors.
A. D. Fisher
Chairman
22 August 2019
Annual Report 2019 | Remuneration Report PAGE 21
Annual Report 2019 | Auditor’s Independence Declaration Consolidated Statement of Profit or Loss and
Other Comprehensive Income
For the year ended 30 June 2019
PAGE 22
Revenue
Revenue from contracts with customers
Contractual payments to advisers
Gross profit from contracts with customers
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
Fair value loss on financial instrument
Impairment expenses
Other general and administrative expenses
Profit/(Loss) before tax
Income tax expense
Net (loss) for the year
Other comprehensive income
Items that will not be reclassified subsequently to profit or loss
Net fair value loss on equity investment designated at FVTOCI^
TOTAL COMPREHENSIVE LOSS FOR THE YEAR
Net (loss) attributable to:
Owners of the parent
Net (loss) for the year
Total comprehensive (loss) attributable to:
Owners of the parent
Total comprehensive (loss) for the year
Note
4(a)
4(a)
4(b)
4(c)
2019
$’000
2018
restated *
$’000
116,859
121,991
(86,843)
(90,943)
30,016
31,048
628
20
511
716
30,664
32,275
4(b)
4(a)
(26)
(35)
(18,990)
(18,246)
15(a)
8.3.2
5(a)
(420)
(907)
(1,122)
-
(1,551)
(2,108)
(363)
(912)
(777)
(286)
(84)
(1,898)
(579)
(827)
(1,142)
(550)
(1,504)
(2,072)
(6,056)
(888)
(923)
-
(837)
(2,007)
(29,444)
(35,666)
1,220
(2,796)
(1,576)
(3,391)
(3,493)
(6,884)
(600)
(2,176)
(1,576)
(1,576)
(2,176)
(2,176)
-
(6,884)
(6,884)
(6,884)
(6,884)
(6,884)
Earnings per share for profit attributable to the ordinary equity
holders of the parent
Basic loss cents per share
Diluted loss cents per share
10
10
Cents
Cents
(1.06)
(1.06)
(4.62)
(4.62)
*Refer note 21 on restatement to prior year comparative for details
^Fair value through other comprehensive income.
The Consolidated Statement of Profit or Loss and Other Comprehensive Income is to be read in conjunction with the attached Notes.
Annual Report 2019 | Consolidated Statement of Profit or Loss and Other Comprehensive Income PAGE 23
Consolidated Statement of Financial
Position
As at 30 June 2019
Note
2019
$’000
2018
restated *
$’000
ASSETS
Current
Cash and cash equivalents
Trade and other receivables
Loan receivables
Other assets
Current tax asset
Total current assets
Non-current
Loan 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
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
* Refer note 21 on restatement to prior year comparative for details
The Consolidated Statement of Financial Position is to be read in conjunction with the attached Notes.
6(a)
8.1.2
8.1.3
8.1.3-4
8.1.5
13
14
5(d)
8.1.6
15
15
11(a)
12
7,917
9,183
2,572
756
-
9,469
9,754
345
788
286
20,428
20,642
4,007
116
886
531
2,675
2,409
10,624
31,052
9,430
19
4,221
6,572
2,482
890
951
1,651
4,868
17,414
38,056
9,715
82
8,781
13,670
18,578
-
502
502
14,172
16,880
34,673
12,610
(30,521)
16,762
118
19
455
474
19,052
19,004
34,673
12,174
(27,961)
18,886
118
16,880
19,004
Annual Report 2019 | Consolidated Statement of Financial Position Consolidated Statement of Cash Flows
For the year ended 30 June 2019
PAGE 24
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
Regulatory costs associated with the Royal Commission
Net cash flows (used in) operating activities
CASH FLOWS FROM INVESTING ACTIVITIES
Interest received
Payments to acquire financial assets
Repayments on convertible loan
Proceeds from investment
Acquisition of intangible assets
Acquisition of property, plant & equipment
Dividend received from investments
Net cash flows provided by/(used in) investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid
Net cash flows (used in) financing activities
Note
2019
$’000
2018
$’000
128,456
134,503
(125,239)
(128,090)
3,217
(550)
15(a)
(4,520)
-
6(b)
(1,853)
398
-
500
750
(1,336)
(11)
-
301
-
-
14
13
9(a)
6,413
(1,441)
(5,315)
(77)
(420)
505
(6,700)
-
-
(15)
(322)
199
(6,333)
(15,020)
(15,020)
Net (decrease) in cash & cash equivalents
(1,552)
(21,773)
Cash & cash equivalents at the beginning of the year
Cash & cash equivalents at the end of the year
The Consolidated Statement of Cash Flows is to be read in conjunction with the attached Notes.
9,469
7,917
31,242
9,469
Annual Report 2019 | Consolidated Statement of Cash Flows 4
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Annual Report 2019 | Consolidated Statement of Changes in Equity
PAGE 26
Notes to the Consolidated Financial
Statements
Basis of preparation
1. Corporate information ..................................................................................................................................................................................27
2. Summary of significant accounting policies ........................................................................................................................................27
Financial performance
3. Segment information ....................................................................................................................................................................................33
4. Revenue and expenses .................................................................................................................................................................................36
5.
Income tax ........................................................................................................................................................................................................38
6. Notes to statement of cash flows .............................................................................................................................................................42
Working Capital
7. Commitments ..................................................................................................................................................................................................43
8. Financial assets, liabilities and related financial risk management .............................................................................................43
Shareholder returns
9. Dividends ..........................................................................................................................................................................................................59
10. Earnings per share .........................................................................................................................................................................................60
Capital and funding structure
11. Contributed equity .........................................................................................................................................................................................61
12. Reserves ............................................................................................................................................................................................................62
Capital Investment
13. Property, plant and equipment ...................................................................................................................................................................62
14. Intangible assets .............................................................................................................................................................................................64
Risk Management
15. Provisions ..........................................................................................................................................................................................................68
16. Contingent liabilities .....................................................................................................................................................................................70
Other information
17. Remuneration of auditors .............................................................................................................................................................................71
18. Information relating to Centrepoint Alliance Limited ........................................................................................................................71
19. Related party disclosures ..............................................................................................................................................................................72
20. Share-based payment plans .........................................................................................................................................................................73
21. Restatement to prior year comparative ..................................................................................................................................................75
22. Events after the financial year ......................................................................................................................................................................75
Annual Report 2019 | Notes to the Consolidated Financial Statements PAGE 27
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 2019 were authorised for issue in accordance with a
resolution of the Directors’ on 22 August 2019.
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 19.
2. Summary of significant accounting policies
Basis of preparation
The financial report is a general purpose financial report, which has been prepared 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 Group is a for-profit entity. The
financial report has been prepared on the going concern basis which contemplates continuity of normal
business activities and the realisation of assets and settlement of liabilities in the ordinary course of business.
The Company has responded to changes in the regulatory and operating environment where traditional product
commissions and platform rebates are reducing by replacing these revenues with new pricing arrangements
with adviser firms through a contemporary advice and business service offer. During this financial year the
business transitioned the majority of adviser firms to contracts reflecting the new pricing arrangements.
Subsequent to this financial year ended 30 June, the Group is entering a phase-in period for transition to the
new pricing arrangement. The Group has prepared cash flow forecasts which indicate that the current cash
resources will be sufficient to cover a range of reasonably likely scenarios which consider the reduction in
product commissions and platform rebates and the transition to the new pricing arrangements. Based on the
Group’s cash flow forecast, the Directors believe that the Group will be able to continue as a going concern.
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 and interpretations issued but not yet effective
The Australian Accounting Standards and Interpretations, that have recently been issued or amended but are
not yet effective and have not been adopted by the Group for the annual reporting year ended 30 June 2019 are
set out below.
AASB 16 Leases
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
Statement of Financial Position, or operating leases, which are not recognised on the Statement of Financial Position.
The application of AASB 16 will result in the recognition of all leases on the Statement of Financial Position in the form
of a right-of-use asset and a corresponding ease 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. Currently, a detailed review and assessment is
being undertaken for leases in Sydney (expire February 2021), Melbourne (expire January 2020) and Gold Coast (expire
November 2021). The impact of bringing these on balance sheet will be immaterial to the financial statements, refer to
commitments Note 7.
AASB Interpretation 23 Uncertainty over Income Tax Treatment
The standard was issued during 2019 regarding uncertainty over the appropriate tax treatment of a transaction or class
of transactions, and whether treatment will be acceptable by the Australian Taxation Office. In cases, where there is
uncertainty over tax authority acceptance on income tax treatment, the Entity is required to recognise and measure
its current or deferred tax asset/liability by applying standard AASB 112 based on taxable profit/(loss), tax bases,
unused tax losses/credit and tax rates. The Group takes the view the tax authority will accept tax treatment applied in
preparation of income tax calculation.
Annual Report 2019 | Notes to the Consolidated Financial Statements PAGE 28
The Group has not early adopted any other standard, interpretation or amendment that has been issued but is
not yet effective.
New and revised Standards
AASB 15 Revenue from contracts with customers
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.
A detailed review of each contract has been undertaken in order to identify the performance criteria of each contract.
The results of which has ensured the Group’s current revenue recognition continues to comply with requirements of the
standard.
Type of service
Authorised
Representative
Fees – fees
charged to
authorised
representatives
Advice
Revenue –
commissions
paid by
product
manufacturers
Nature of
performance
obligations
Ongoing use
of Australian
Financial
Services
License
(AFSL) by
authorised
representatives
(ARs)
Use of
approved
product list by
the ARs with
own AFSLs
Virtual Services
– software
licenses offered
to advisers
Educational
and
administration
services
Investment
Product
Revenue
– platform
rebates
Investor
directed
portfolio
services and
investment
management
services
Significant
judgements
used to identify
performance
obligations
Performance
obligation
identified as
per the terms
of the individual
contracts with
similar revenue
streams
Recognition
(at a point in
time or over
time)
Over time:
revenue is
recognised
on a monthly
basis as
services are
provided to the
advisers
Performance
obligation
identified as
per the terms
of the individual
contracts with
similar revenue
streams
Performance
obligation
identified as
per the terms
of the individual
contracts with
similar revenue
streams
Performance
obligation
identified as
per the terms
of the individual
contracts with
similar revenue
streams
Over time:
revenue is
recognised
on a monthly
basis as
services are
provided to the
advisers
Over time:
revenue is
recognised
on a monthly
basis as
services are
provided to the
advisers
Over time:
revenue is
recognised
monthly basis
as services are
provided to the
advisers
Revenue
recognition
policy under
AASB 15
Nature of
change in
accounting
policy
No impact
No impact
No impact
No impact
Performance
obligations
satisfied
over time
throughout
the contract
period
Performance
obligations
satisfied
over time
throughout
the contract
period
Performance
obligations
satisfied
over time
throughout
the contract
period
Performance
obligations
satisfied
over time
throughout
the contract
period
Revenue recognition
policy under AASB 118
Ongoing revenue is
recorded monthly for
the ongoing services
provided to clients
Ongoing revenue is
recorded monthly or
quarterly for the ongoing
services provided to
clients
Ongoing revenue is
recorded monthly or
quarterly for the ongoing
services provided to
clients
The fee charged is
calculated based on
a fixed percentage
of Funds Under
Management (FUM) as
stated in the contract
with the customer.
Revenue is recognised
as the service is provided
given the customer is
receiving and consuming
the benefits as they are
provided by the Group.
Annual Report 2019 | Notes to the Consolidated Financial Statements PAGE 29
AASB 9 Financial Instruments
In the current year, the Group has applied AASB 9 (as revised) and the related consequential amendments to other
Accounting Standards for the first time. AASB 9 introduces new requirements for:
1.
2.
3.
the classification and measurement of financial assets and liabilities;
impairment of financial assets; and
General hedge accounting.
The classification and measurement, and impairment requirements are applied retrospectively by adjusting opening
retained earnings at 1 July 2018. The Group has elected not to restate comparative figures on adoption of the new
standard.
Details of these new requirements as well as their impact on the Group’s consolidated financial statements are
described below.
Classification and measurement
All recognised financial assets that are within the scope of AASB 9 are required to be subsequently measured at
amortised cost or fair value on the basis of the entity’s business model for managing the financial assets and the
contractual cash flow characteristics of the financial assets.
Specifically:
•
•
•
debt investments that are held within a business model whose objective is to collect the contractual cash flows,
and that have contractual cash flows that are solely payments of principal and interest on the principal amount
outstanding, are subsequently measured at amortised cost;
debt investments that are held within a business model whose objective is both to collect the contractual cash
flows and to sell the debt instruments, and that have contractual cash flows that are solely payments of principal
and interest on the principal amount outstanding, are subsequently measured at fair value through other
comprehensive income (FVTOCI); and
all other debt investments and equity investments are subsequently measured at fair value through profit or loss
(FVTPL).
However, at initial recognition of a financial asset:
•
•
the Group may irrevocably elect to present subsequent changes in fair value of an equity investment that is neither
held for trading nor contingent consideration recognised by an acquirer in a business combination to which AASB
3 Business Combinations applies in other comprehensive income; and
the Group may irrevocably designate a debt investment that meets the amortised cost or FVTOCI criteria as
measured at FVTPL if doing so eliminates or significantly reduces an accounting mismatch.
Equity instruments designated at FVTOCI are subsequently measured at fair value with gains and losses arising from
changes in fair value recognised in other comprehensive income and accumulated in the investments revaluation
reserve. The cumulative gain or loss is not be reclassified to profit or loss on disposal of the equity investments, instead,
it is transferred to retained earnings. Dividends on these investments in equity instruments are recognised in profit or
loss in accordance with AASB 9.
When a debt investment measured at FVTOCI is derecognised, the cumulative gain or loss previously recognised in
other comprehensive income is reclassified from equity to profit or loss as a reclassification adjustment. In contrast, for
an equity investment designated as measured at FVTOCI, the cumulative gain or loss previously recognised in other
comprehensive income is not subsequently reclassified to profit or loss.
Debt instruments that are subsequently measured at amortised cost or at FVTOCI are subject to impairment.
Annual Report 2019 | Notes to the Consolidated Financial Statements PAGE 30
The directors of the company reviewed and assessed the Group’s existing financial assets as at 1 July 2018 based on
the facts and circumstances that existed at that date and concluded that the initial application of AASB 9 has had the
following impact on the Group’s financial assets in regards to their classification and measurement:
• Financial assets classified as loans and receivables under AASB 139 that were measured at amortised cost continue
to be measured at amortised cost under AASB 9 as they are held within a business model to collect contractual
cash flows and these cash flows consist solely of payments of principal and interest on the principal amount
outstanding;
• Group’s convertible notes were previously classified as loans and receivables under AASB 139 that were measured
at amortised cost are now classified as FVTPL; and
•
The Group’s other investments in unlisted equity instruments (neither held for trading nor a contingent
consideration arising from a business combination) that were previously classified as available-for-sale financial
assets and were measured at cost under AASB 139 have been designated as at FVTOCI. The change in fair value
on these equity instruments will be accumulated in the investment revaluation reserve. No adjustment has been
made within the financial statements due to immateriality;
The table below illustrates the classification and measurement of financial assets and financial liabilities under AASB 9
and AASB 139 at the date of initial application of 1 July 2018:
Type of financial
instrument
Financial assets
AASB 139
measurement
category
AASB 9
measurement
category
AASB 139
Carrying Amount
$’000
Additional Loss
Allowance
$’000
AASB 9 Carrying
Amount
$’000
Loans and
receivables
Loans and
receivables
Amortised cost
Amortised cost
Amortised cost
Amortised cost
FVTPL
(mandatory)
FVTOCI – equity
(designated)
Cash and cash
equivalents
Trade and other
receivables –
Commissions
receivables
Trade and other
receivables
Loans
Loans and
receivables
Loans and
receivables
Convertible notes Loans and
receivables
Cost
Investments in
unlisted shares
Financial
Liabilities
Trade and other
payables
9,469
7,937
1,817
478
6,439
600
-
-
-
-
NA
NA
9,469
7,937
1,817
478
6,055
600
Amortised cost
Amortised cost
9,715
NA
9,715
Impairment of financial assets
AASB 9 requires impairment to be measured using an Expected Credit Loss (ECL) model as opposed to AASB 139’s
incurred credit loss model. The expected credit loss model requires the Group to account for expected credit losses and
changes in those expected credit losses at each reporting date to reflect changes in credit risk since initial recognition of
the financial assets. In other words, it is no longer necessary for a credit event to have occurred before credit losses are
recognised.
Specifically, AASB 9 requires the Group to recognise a loss allowance for expected credit losses on debt investments
subsequently measured at amortised cost or at FVTOCI.
AASB 9 requires the Group to measure the loss allowance for a financial instrument at an amount equal to the lifetime
ECL if the credit risk on that financial instrument has increased significantly since initial recognition. On the other hand, if
the credit risk on a financial instrument has not increased significantly since initial recognition (except for purchased or
originated credit-impaired financial assets), the Group is required to measure the loss allowance for that financial instrument
at an amount equal to a 12 month ECL. AASB 9 also provides a simplified approach for measuring the loss allowance at an
amount equal to lifetime ECL for trade receivables, contract assets and lease receivables in certain circumstances.
Annual Report 2019 | Notes to the Consolidated Financial Statements PAGE 31
As at 1 July 2018, the directors of the company reviewed and assessed the Group’s existing financial assets for
impairment using reasonable and supportable information that is available without undue cost or effort in accordance
with the requirements of AASB 9 to determine the credit risk of the respective items at the date they were initially
recognised, and compared that to the credit risk as at 1 July 2018. The result of the assessment is as follows;
Items existing as at 1 July 18 that are
subject to the impairment provisions
of AASB 9
Cash and cash equivalents
Loans
Trade and other receivables
Credit risk attributes at 1 July 18
Cumulative additional loss allowance
recognised on 1 July 18
-
-
-
Management believes that cash and
cash equivalents and due from other
financial institutions are subject to a
very low credit risk at initial recognition
with negligible default probability. As a
result, the corresponding ECL on these
financial assets is immaterial.
Management have developed a model
to assess the credit risk of each loan.
A lifetime credit risk is recognised on
loans considered to have experienced
a significant increase in credit risk. A
12 month ECL is recognised on those
loans on which credit risk has not
increased since initial recognition.
Simplified approach to assessing
impairment has been performed
which requires the recognition of
lifetime expected credit losses. Under
this approach, the Group considers
forward-looking assumptions and
information regarding expected
future conditions affecting historical
customer default rates. The trade
receivables were grouped into various
customer segments with similar loss
patterns.
No additional credit loss allowance has been recognised against opening retained earnings on 1 July 2018.
Disclosure relating to initial application of classification and measurement requirements of AASB 9
The following table is a reconciliation of the carrying amounts in the Group’s statement of financial position from AASB 139 to
AASB 9 as at 1 July 2018;
AASB 139
carrying
amount
30 Jun 18
$‘000
Reclassification Re-measurement
$‘000
$‘000
AASB 9
carrying
amount
1 Jul 18
$‘000
Retained
earnings impact
1 Jul 18
$‘000
6,439
(6,439)
-
-
-
6,439
(384)
6,055
600
-
(600)
600
-
-
-
600
-
384
-
-
Convertible notes
Loans and receivables
under AASB 139
Reclassification to FVTPL
under AASB 9
Investment in unlisted
shares
At cost under AASB 139
Reclassification to
FVTOCI under AASB 9
Annual Report 2019 | Notes to the Consolidated Financial Statements PAGE 32
Basis of consolidation
The consolidated financial statements comprise the financial statements of the Company and its subsidiaries as
at 30 June 2019.
Subsidiaries are entities that are controlled by the Company. The financial results and financial position of the
subsidiaries are included in the consolidated financial statements from the date control commences until the
date control ceases. A list of the Company’s controlled entities (subsidiaries) is included in Note 19.
Significant accounting judgements, estimates and assumptions
The key assumptions concerning the future and other key sources of estimation and uncertainty at the end of
the financial year, that have a significant risk of causing a material adjustment to the carrying amounts of assets
and liabilities within the next financial year, are described below. The Group based its assumptions and estimates
on parameters available when the consolidated financial statements were prepared. Existing circumstances and
assumptions about future developments, however, may change due to market changes or circumstances arising
beyond the control of the Group. Such changes are reflected in the assumptions when they occur.
Intangible assets and goodwill recoverable amounts – Note 14
Accounting estimates with significant areas of uncertainty and critical judgements have been applied to the
following:
•
• Provision for client claims - Note 15
• Recognition of deferred tax assets - Note 5
• Convertible loan write-down - Note 8.1.4
• Adviser service fees - Note 16
Foreign currency
Both the functional and presentation currency of the Group is Australian dollars ($).
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 Profit or Loss and Other
Comprehensive Income, as exchange gains or losses, in the year 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, refer Note 21. 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.
Annual Report 2019 | Notes to the Consolidated Financial Statements PAGE 33
3. Segment information
Key Accounting Policies
Operating Segments
Under AASB 8 Operating Segments, the Group determines and presents operating segments based on the
nature of the products and services provided and the markets in which it operates.
Board, corporate finance, company secretarial and other administration functions of the Group not allocated to
the above reportable segments are identified as Corporate and Unallocated.
Business segment
Operations
Licensee and advice services
Fund management and
administration
Corporate and unallocated
This segment represents the business that provides Australian Financial
Services License services to financial advisers and their clients and mortgage
broking services
This segment provides investor directed portfolio services and investment
management services to financial advisers, accountants and their clients
This segment represents Board, corporate finance, company secretarial and
other administration functions of the Group
The Group operated only in Australia during the financial year. A detailed review of these segments is included
in the Director’s 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.
Annual Report 2019 | Notes to the Consolidated Financial Statements PAGE 34
Licensee
& Advice
Services
(wealth)
$’000
Funds
Management &
Administration
(wealth)
$’000
Corporate &
Unallocated
$’000
Total
$’000
5,185
86,044
12,177
546
(81,971)
(693)
21,288
56
16
21,360
(13)
(363)
(639)
-
(84)
(17,739)
1,024
(3,810)
(2,786)
-
-
12,903
-
-
(4,179)
8,724
236
3
8,963
-
-
(35)
-
-
-
4
-
-
-
-
4
5,185
86,048
25,080
546
(81,971)
(4,872)
30,016
336
1
628
20
341
30,664
(13)
-
(103)
(286)
-
(26)
(363)
(777)
(286)
(84)
-
(2,769)
20,508
5,651
1,142
(5,455)
1,220
(128)
(2,796)
6,793
(5,583)
(1,576)
3. Segment information (cont.)
Year-ended 30 June 2019
Segment revenue
Revenue from contracts with customers
- Authorised representative fees
- Advice revenue
- Investment products revenue
- Virtual services
Contractual payments to advisers
- Advice revenue paid to advisers
- Fees paid to advisers/fund managers
Gross profit from contracts with customers
Interest income
Other revenue
Total segment gross profit
Segment results
- Interest charges
- Client claims
- Depreciation & amortisation
- Fair value loss on the financial instrument
- Impairment of assets
- Inter-segment expenses*
Segment profit/(loss) before tax
Income tax (expense)/benefit
Segment (loss)/profit after tax
Other comprehensive income
Items that will not be reclassified subsequently
to profit or loss
Net fair value loss on equity investment designated
at FVTOCI
-
-
(600)
(600)
Total comprehensive (loss)/income for the year
(2,786)
6,793
(6,183)
(2,176)
Addback: Legacy claims expense
Segment profit/(loss) before tax (excl legacy
claims)
Statement of Financial Position at 30 June 2019
Total assets
Total liabilities
Net assets
162
1,186
18,201
(8,658)
9,543
-
-
162
5,651
(5,455)
1,382
4,041
(568)
3,473
8,810
31,052
(4,946)
(14,172)
3,864
16,880
*The Inter-segment expenses represent employee related costs and other expenses paid centrally which are allocated to the segments in which they are incurred.
Annual Report 2019 | Notes to the Consolidated Financial Statements PAGE 35
3. Segment information (cont.)
Year-ended 30 June 2018 restated
Segment revenue
Revenue from contracts with customers
- Authorised representative fees
- Advice revenue
- Investment products revenue
- Virtual services
Contractual payments to advisers
- Advice revenue paid to advisers
- Fees paid to advisers/fund managers
Gross profit from contracts with customers
Interest income
Other revenue
Total segment gross profit
Segment results
- Interest charges
- Client claims
- Depreciation & amortisation
- Impairment of assets
- Inter-segment expenses*
Licensee
& Advice
Services
$’000
Funds
Management &
Administration
(wealth)
$’000
Corporate &
Unallocated
$’000
Total
$’000
5,297
89,348
14,182
210
(85,202)
(1,053)
22,782
223
1,139
24,144
(22)
(6,056)
(817)
63
-
-
12,950
-
-
(4,688)
8,262
196
(1,000)
7,458
(1)
-
(74)
-
(16,974)
(3,605)
-
4
-
-
-
-
4
5,297
89,352
27,132
210
(85,202)
(5,741)
31,048
92
577
673
511
716
32,275
(12)
(35)
-
(6,056)
(32)
(900)
20,579
(923)
(837)
-
Segment profit/(loss) before tax
Income tax benefit/(expense)
Segment (loss)/profit after tax
Addback: Legacy claims expense
Segment profit/(loss) before tax (excl legacy
claims)
(2,346)
766
5,358
3,012
3,948
(1,184)
(4,993)
(3,391)
(3,075)
(3,493)
(6,884)
-
-
5,358
3,948
(4,993)
1,967
Statement of Financial Position at 30 June 2018 restated
Total assets
Total liabilities
Net assets
16,640
(12,887)
3,753
3,566
(609)
2,957
17,850
38,056
(5,556)
(19,052)
12,294
19,004
*The Inter-segment expenses represent employee related costs and other expenses paid centrally which are allocated to the segments in which they are incurred.
Annual Report 2019 | Notes to the Consolidated Financial Statements PAGE 36
4. Revenue and expenses
a) Revenue from contracts with customers (AASB 15 Revenue from contracts with
customers)
Authorised representative fees: On a monthly basis, the financial advisers are billed for AFSL licensing fees in
line with the contract between the Group and the adviser. The Group’s obligation under this contract is to
provide support to advisers and access to one of the Group’s AFSLs to enable them to sell financial advice. The
fees charged to the adviser are based on a fixed fee structure outlined in the contract with the adviser. Revenue
is recognised on a monthly basis as services are provided to the advisers.
Advice revenue: Commission is received from product providers earned either at inception or renewal of
products on the approved product list. Under the contract with the adviser, the Group receive the full
commission from the product provider and subsequently pay on the portion relating to the adviser. The Group’s
obligation is to act as an intermediary between the product provider and the adviser. Where the advisers are
employed by the Group, the commission earned is retained in the Group.
Investment products revenue: The Group earns revenue from its customers through the provision of fund
management services to its customers. Under this arrangement, the fee charged is calculated based on a fixed
percentage of Funds Management and Administration (FUMA) as stated in the contract with the customer.
Revenue is recognised as the service is provided given the customer is receiving and consuming the benefits as
they are provided by the Group. Included within investment products revenue are rebates paid to the Group by
platform providers who offer the advisers an integrated insurance, superannuation and investment web-based
solution. The Group performance obligation is to act as an agent for the platform providers, enabling them
access to their adviser network. The rebate earned by the Group is dependent on the nature of the underlying
product sold, either based on in-force policies or funds under management invested through the platform.
Revenue is recognised monthly based on Management’s best estimate using the most recent information
provided by the platform provider and is trued up based on rebate receipts as and when they are received from
the platform provider.
Virtual services: As part of the authorised representative fee charged to the adviser, advisers may also add
software packages to their monthly fee. The Group’s obligation under this contract is to provide the adviser with
the use of the software licenses of the Group. The fees charged are variable dependent on the volume of users
that require access to the software. Revenue is recognised on a monthly basis as services are provided to the
advisers.
b) Interest Income (AASB 9 Financial instruments)
Per AASB 9 Financial Instruments interest income from a financial asset is accrued on a time basis, by reference
to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts
estimated future cash receipts through the expected life of the financial asset to that assets’ net carrying
amount on initial recognition.
c) Other revenue
Other revenue represents other sundry income received by the Group.
Annual Report 2019 | Notes to the Consolidated Financial Statements PAGE 37
4. Revenue and expenses (cont.)
Note
2019
$’000
2018
restated *
$’000
Revenue
Revenue from contracts with customers
4(a)
- Authorised representative fees
- Advice revenue
- Investment products revenue
- Virtual services
5,185
86,048
25,080
546
5,297
89,352
27,132
210
Total revenue from contracts with customers
116,859
121,991
Contractual payments to advisers
- Advice revenue paid to advisors
- Fees paid to advisers/fund managers
Total contractual payments to advisers
(81,971)
(4,872)
(85,202)
(5,741)
(86,843)
(90,943)
Gross profit from contracts with customers
30,016
31,048
Interest income
4(b)
628
511
Other revenue
- Cost recoveries from advisers
- Retail and wholesale asset and service fees
- Other
Total other revenue
Gross profit
* Refer note 21 on restatement to prior year comparative for details
Employee related expenses
- Wages and salaries
- Share-based compensation expense
- Termination costs
Total employee related expenses
4(c)
8
10
2
20
331
201
184
716
30,664
32,275
2019
$’000
2018
$’000
Note
4(a)
18,422
436
132
17,103
354
789
18,990
18,246
Annual Report 2019 | Notes to the Consolidated Financial Statements 5. Income tax
a) Income tax expense
The major components of income tax expense for the years ended 30 June 2019 and 2018 are:
PAGE 38
Current income tax
Current income tax charge
Adjustment to current tax of prior period
Deferred income tax
Deferred income tax charge
Income tax expense
2019
$’000
2018
restated *
$’000
-
338
2,458
2,796
(980)
-
4,473
3,493
b) Amounts charged or credited directly to equity
No income tax was charged directly to equity for the year ended 2019 (2018: 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:
Profit/(loss) before tax
At the Company's statutory income tax rate of 30% (2018: 30%)
Non-deductible expenses
Amounts not included in assessable income
Effective tax losses not recognised
Aggregate income tax expense
* Refer note 21 on restatement to prior year comparative for details
2019
$’000
2018
restated *
$’000
1,220
(3,391)
366
217
-
2,213
2,796
(1,017)
65
(28)
4,473
3,493
In the current year there has been a significant reduction in provisions that gave rise to deferred tax assets.
Given the size of the reduction in provisions, particularly those related to legacy claims and doubtful debts, the
reduction in deferred tax asset was greater than current tax profit generated in the financial year. Accordingly,
a significant deferred tax expense has been recognised in the current year as no further tax losses are being
recognised as noted below.
In the prior year the Group 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.
The Group is forecasting to generate future taxable profits in excess of the profits arising from the reversal of
existing taxable temporary differences however the timing of these taxable profits is inherently uncertain.
Annual Report 2019 | Notes to the Consolidated Financial Statements PAGE 39
5. Income tax (cont.)
d) Recognised deferred tax assets and liabilities
Deferred income tax relates to the following:
Statement of Financial Position
Statement of Comprehensive
Income
2019
$'000
2018 restated *
$’000
2019
$'000
2018 restated *
$’000
-
-
378
625
-
253
92
110
951
-
2,409
2,409
(7)
(7)
1,626
1,096
165
91
121
730
1,046
-
4,875
4,868
7
7
(1,247)
(471)
(165)
162
(28)
(619)
(94)
-
(2,462)
185
185
223
(403)
165
13
(74)
167
47
(4,473)
(4,335)
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
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
2019
$’000
27,642
35,953
63,595
2018
restated *
$’000
23,969
35,953
59,922
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.
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 $3.7m.
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 Group 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
Annual Report 2019 | Notes to the Consolidated Financial Statements PAGE 40
5. Income tax (cont.)
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
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.
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 year 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 or Loss and Other Comprehensive Income.
a) Current Tax
Current tax assets and liabilities for the year are measured at the amount expected to be recovered from
or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that
are enacted or substantively enacted, at the reporting date in the countries where the Group operates and
generates taxable income.
b) Deferred Tax
Deferred tax assets and liabilities are recognised for all deductible and taxable temporary differences at
the tax rates that are expected to apply to the year when the asset is realised or liability is settled, based
on tax rates (and tax laws) that have been enacted or substantially enacted at the reporting date.
Deferred income tax liabilities are recognised on all taxable temporary differences except:
• When the deferred income tax liability arises from the initial recognition of Goodwill or of an asset
or liability in a transaction that is not a business combination and that, at the time of the transaction,
affects neither the accounting profit nor taxable profit or loss; or
Annual Report 2019 | Notes to the Consolidated Financial Statements
PAGE 41
5. Income tax (cont.)
•
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 toallow 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 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.
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.
Annual Report 2019 | Notes to the Consolidated Financial Statements 6. Notes to Statement of Cash flows
a) Reconciliation of cash & cash equivalents
Cash at bank
Total
PAGE 42
2019
$’000
2018
$’000
7,917
7,917
9,469
9,469
b) Reconciliation of net profit after tax to net cash provided by operating activities
Net loss after income tax
Adjustments to reconcile profit before tax to net cash flows:
Depreciation and amortisation
Fair value loss on financial instrument
Impairment of investments
Expected credit losses
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
* Refer note 21 on restatement to prior year comparative for details
2019
$’000
2018
restated *
$’000
(1,576)
(6,884)
777
286
-
86
39
(398)
-
-
436
-
813
26
2,221
(368)
301
(4,157)
(24)
(88)
(550)
323
(1,853)
923
-
900
(63)
17
(505)
-
(199)
(709)
(980)
2,437
(128)
4,150
424
(406)
742
-
(255)
550
(434)
(420)
Annual Report 2019 | Notes to the Consolidated Financial Statements PAGE 43
7. Commitments
Contracted operating lease expenditure
The Group has entered into commercial leases on certain properties expiring at various times up to 5 years from
reporting date. The leases have varying terms, options and rent renewals. On renewal, if applicable, the terms
are renegotiated. The Group 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
Total
2019
$’000
2018
$’000
788
457
1,245
1,341
1,349
2,690
8. Financial assets, liabilities and related financial risk management
8.1. Categories of financial instruments
Financial assets
Cash and cash equivalents
Trade and other receivables
Loans
Note
Classification
8.1.1
8.1.2
8.1.3
Amortised Cost
Amortised Cost
Amortised Cost
Convertible notes
8.1.4
FVTPL
Investments in unlisted shares
8.1.5
FVTOCI – equity (designated)
Total financial assets
Financial Liabilities
Trade and other payables
8.1.6
Amortised Cost
Total financial liabilities
* Refer note 21 on restatement to prior year comparative for details
Accounting policies
Financial instruments
2019
$’000
2018
restated *
$’000
7,917
9,183
6,049
530
116
9,469
9,754
478
6,439
2,482
23,795
28,622
9,430
9,430
9,715
9,715
Financial assets and financial liabilities are recognised in the Group’s statement of financial position when the
Group becomes a party to the contractual provisions of the instrument.
Recognised financial assets and financial liabilities are initially measured at fair value. Transaction costs that
are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than
financial assets and financial liabilities at FVTPL) are added to, or deducted from, the fair value on recognition.
Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at FVTPL are
recognised immediately in profit or loss.
If the transaction price differs from fair value at initial recognition, the Group will account for such difference as
follows:
•
•
if fair value is evidenced by a quoted price in an active market for an identical asset or liability or based on a
valuation technique that uses only data from observable markets, then the difference is recognised in profit
or loss on initial recognition (i.e. day 1 profit or loss); and
in all other cases, the fair value will be adjusted to bring it in line with the transaction price (i.e. day 1 profit
or loss will be deferred by including it in the initial carrying amount of the asset or liability).
Annual Report 2019 | Notes to the Consolidated Financial Statements
PAGE 44
8.1. Categories of financial instruments (cont.)
After initial recognition, the deferred gain or loss will be released to profit or loss on a rational basis, only to the
extent that it arises from a change in a factor (including time) that market participants would take into account
when pricing the asset or liability.
Financial assets
Financial assets are recognised on the trade date when the purchase is under a contract whose terms require
delivery of the financial asset within the timeframe established by the market concerned. Financial assets are
initially measured at fair value, plus transaction costs, except for those financial assets classified as at FVTPL.
Transaction costs directly attributable to the acquisition of financial assets classified as at FVTPL are recognised
immediately in profit or loss.
All recognised financial assets that are within the scope of AASB 9 are required to be subsequently measured at
amortised cost or fair value on the basis of the entity’s business model for managing the financial assets and the
contractual cash flow characteristics of the financial assets.
Specifically:
• debt instruments that are held within a business model whose objective is to collect the contractual
cash flows, and that have contractual cash flows that are solely payments of principal and interest on the
principal amount outstanding (SPPI), are subsequently measured at amortised cost;
• debt instruments that are held within a business model whose objective is both to collect the contractual
cash flows and to sell the debt instruments, and that have contractual cash flows that are SPPI, are
subsequently measured at FVTOCI;
•
all other debt instruments (e.g. debt instruments managed on a fair value basis, or held for sale) and equity
investments are subsequently measured at FVTPL.
However, the Group may make the following irrevocable election / designation at initial recognition of a financial
asset on an asset-by-asset basis:
•
•
the Group may irrevocably elect to present subsequent changes in fair value of an equity investment that is
neither held for trading nor contingent consideration recognised by an acquirer in a business combination to
which AASB 3 applies, in OCI; and
the Group may irrevocably designate a debt instrument that meets the amortised cost or FVTOCI criteria as
measured at FVTPL if doing so eliminates or significantly reduces an accounting mismatch (referred to as
the fair value option).
Debt instruments at amortised cost or at FVTOCI
The Group assesses the classification and measurement of a financial asset based on the contractual cash flow
characteristics of the asset and the Group’s business model for managing the asset.
For an asset to be classified and measured at amortised cost or at FVTOCI, its contractual terms should give
rise to cash flows that are solely payments of principal and interest on the principal outstanding (SPPI). For the
purpose of SPPI test, principal is the fair value of the financial asset at initial recognition. That principal amount
may change over the life of the financial asset (e.g. if there are repayments of principal). Interest consists of
consideration for the time value of money, for the credit risk associated with the principal amount outstanding
during a particular period of time and for other basic lending risks and costs, as well as a profit margin. The SPPI
assessment is made in the currency in which the financial asset is denominated.
Contractual cash flows that are SPPI are consistent with a basic lending arrangement. Contractual terms that
introduce exposure to risks or volatility in the contractual cash flows that are unrelated to a basic lending
arrangement, such as exposure to changes in equity prices or commodity prices, do not give rise to contractual
cash flows that are SPPI. An originated or an acquired financial asset can be a basic lending arrangement
irrespective of whether it is a loan in its legal form.
An assessment of business models for managing financial assets is fundamental to the classification of a
financial asset. The Group determines the business models at a level that reflects how groups of financial assets
are managed together to achieve a particular business objective. The Group’s business model does not depend
on management’s intentions for an individual instrument, therefore the business model assessment is performed
at a higher level of aggregation.
Annual Report 2019 | Notes to the Consolidated Financial Statements PAGE 45
8.1. Categories of financial instruments (cont.)
When a debt instrument measured at FVTOCI is derecognised, the cumulative gain/loss previously recognised in OCI
is reclassified from equity to profit or loss.
Debt instruments that are subsequently measured at amortised cost or at FVTOCI are subject to impairment.
Financial assets at FVTPL
Financial assets at FVTPL are:
•
•
assets with contractual cash flows that are not SPPI; or/and
assets that are held in a business model other than held to collect contractual cash flows or held to collect and
sell; or
•
assets designated at FVTPL using the fair value option.
Such assets are measured at fair value, with any gains/losses arising on re-measurement recognised in profit or loss.
Equity investments
On initial recognition, the Group classifies the investment in equity instruments either at FVTPL if it is held for trading
or at FVTOCI if designated as measured at FVTOCI. When an equity investment designated as measured at FVTOCI
is derecognised, the cumulative gain/loss previously recognised in OCI is not subsequently reclassified to profit or
loss but transferred within equity.
Derecognition of financial assets
The Group derecognises a financial asset only when the contractual rights to the asset’s cash flows expire (including
expiry arising from a modification with substantially different terms), or when the financial asset and substantially all
the risks and rewards of ownership of the asset are transferred to another entity. If the Group neither transfers nor
retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Group
recognises its retained interest in the asset and an associated liability for amounts it may have to pay. If the Group
retains substantially all the risks and rewards of ownership of a transferred financial asset, the Group continues to
recognise the financial asset and also recognises a collateralised borrowing for the proceeds received.
On derecognition of a financial asset in its entirety, the difference between the asset’s carrying amount and the
sum of the consideration received and receivable and the cumulative gain/loss that had been recognised in OCI
and accumulated in equity is recognised in profit or loss, with the exception of equity investment designated as
measured at FVTOCI, where the cumulative gain/loss previously recognised in OCI is not subsequently reclassified to
profit or loss.
Reclassifications
If the business model under which the Group holds financial assets changes, the financial assets affected are
reclassified. The classification and measurement requirements related to the new category apply prospectively from
the first day of the first reporting period following the change in business model that results in reclassifying the
Group’s financial assets. During the current financial year and previous accounting period there was no change in the
business model under which the Group holds financial assets and therefore no reclassifications were made.
Financial liabilities
A financial liability is a contractual obligation to deliver cash or another financial asset or to exchange financial
assets or financial liabilities with another entity under conditions that are potentially unfavourable to the Group or a
contract that will or may be settled in the Group’s own equity instruments and is a non-derivative contract for which
the Group is or may be obliged to deliver a variable number of its own equity instruments, or a derivative contract
over own equity that will or may be settled other than by the exchange of a fixed amount of cash (or another
financial asset) for a fixed number of the Group’s own equity instruments.
Financial liabilities are classified as either financial liabilities at FVTPL or other financial liabilities. The Group does not
have any financial liabilities which are classified at FVTPL.
Other financial liabilities, including trade and other payables, are initially measured at fair value, net of transaction
costs. Other financial liabilities are subsequently measured at amortised cost using the effective interest method.
Annual Report 2019 | Notes to the Consolidated Financial Statements 8.1. Categories of financial instruments (cont.)
8.1.1. Cash and cash equivalents
Cash and Cash equivalents
Total Cash and cash equivalents
8.1.2. Trade and other receivables
Current
Commissions receivable
Trade receivables
Other
Total
* Refer note 21 on restatement to prior year comparative for details
Refer to Note 8.2.3.1 for ageing analysis
PAGE 46
2019
$’000
7,917
7,917
2018
$’000
9,469
9,469
2019
$’000
2018
restated *
$’000
7,431
1,609
143
9,183
7,937
1,817
-
9,754
Group applies simplified approach for assessing impairment which requires the recognition of lifetime expected
credit losses. Under this approach, the Group considers forward-looking assumptions and information
regarding expected future conditions affecting historical customer default rates. The trade receivables were
grouped into various customer segments with similar loss patterns.
Trade receivables generally have 30-90 day terms and no interest is charged on outstanding debts. The Group
measures the loss allowance for trade receivables at an amount equal to lifetime expected credit loss.
Collectability of trade receivables is reviewed on an ongoing basis. Debts that are known to be uncollectible are
written off when identified. A loss allowance for trade receivables is raised using a provision matrix to analyse
past default activity and a review of the debtors’ current financial position adjusted for factors that are specific
to the debtors and an assessment of both the current as well as the forecast direction of conditions at the
reporting date.
The Group has recognised a loss allowance of 100% against all receivables over 90 days past due (with
exception of legal agreements for recoverability) because historical experience has indicated that these
receivables are generally not recoverable.
The amount of the expected credit loss is recognised in the profit or loss within other expenses. When a
trade receivable for which an expected credit loss 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.
Annual Report 2019 | Notes to the Consolidated Financial Statements PAGE 47
8.1. Categories of financial instruments (cont.)
8.1.3. Loans
Current
Loan receivables
Loan receivables - financial advisers
Expected credit losses
Total current loans
Non-current
Loan receivables
Loan receivables - financial advisers
Expected credit losses
Total non-current loans
Total loans
Loans - ALD
2019
$’000
2018
$’000
2,500
72
-
2,572
3,399
680
(602)
3,477
6,049
-
435
(90)
345
-
603
(470)
133
478
The Group has $5.9m invested in ALD, represented by the current and non-current loan receivables above.
As part of the strategy review, the Group declined to take up an additional option in the current year. The
convertible loan of $5.1m was replaced with a new loan agreement with interest capitalising at the rate of
2.5% above the 6 month Bank Bill Swap Rate as published by the Australian Financial Markets Association
(the BBSR) or 12.35% if any Repayment Amount (or part thereof) is not repaid by the date required under the
Loan Agreement. During the year, the Group also sold a 5% equity stake in ALD for $1.75m (book value) to
Astle Capital Ltd (‘Astle’). This was settled with a cash payment of $0.75m received from Astle and an interest-
bearing loan of $1.0m to Astle (related company of ALD) which will become due on or by 31 December 2021. A
repayment of $0.5m on the ALD interest-bearing loan was received in June 2019.
Loans – Financial Advisers
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.
Expected Credit Losses
Allowance for expected credit losses
Opening Balance
Movement in the allowance for expected credit losses
Closing balance
Expected credit losses expense
Expected credit losses expense
Bad debts (recovery)/written-off directly
Total expense
For details on expected credit losses against loans see section 8.2.3.1
2019
$’000
2018
$’000
557
45
602
45
39
84
585
(28)
557
(28)
(35)
(63)
Annual Report 2019 | Notes to the Consolidated Financial Statements 8.1. Categories of financial instruments (cont.)
8.1.4. Convertible Notes
Convertible loan
Total current loans
Convertible notes
PAGE 48
2019
$’000
2018
$’000
530
530
6,439
6,439
The Group subscribed to $1.2m in a convertible note in RFE to provide seed funding to the business. The first
advance of $1.0m was made on 6 July 2017 and a further $0.2m was advanced on 28 February 2018. The Group
has subsequently fair valued the convertible note to $0.5m. The Group has a 15% interest in the business and had
invested in convertible notes which if converted would increase our interest by 12% to 27%.
8.1.5. Investments in unlisted shares
This represents investments in equity securities which have been classified fair value through other
comprehensive income.
Investments
Fair value adjustment
Total investments
2019
$’000
2018
$’000
716
(600)
116
3,382
(900)
2,482
In October 2016, an investment of $1.5m was made in RFE unlisted shares which represents a 15% stake of equity.
An impairment provision of $0.9m was raised against this investment in 2018 financial year. RFE has reduced
their revenue growth forecast to reduce cash strain and focus on profitability. During the year, the Group has
further reduced the value of its investment in RFE to nil with a reassessment of current and projected levels of
profitability.
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.
During the year, the Group also sold a 5% equity stake in ALD for $1.75m (book value) to Astle Capital Ltd
(‘Astle’). This was settled with a cash payment of $0.75m received from Astle and an interest-bearing loan of
$1.0m to Astle (related company of ALD) which will become due on or by 31 December 2021.
8.1.6. Trade and other payables
Current
Amounts payable to financial advisers
Trade payables
Other creditors and accrued expenses
Total
2019
$’000
2018
$’000
5,694
1,959
1,777
9,430
5,474
1,696
2,545
9,715
Annual Report 2019 | Notes to the Consolidated Financial Statements PAGE 49
8.2. Financial risk management
8.2.1. Risk exposures and responses
The Group’s principal financial instruments comprise cash and cash equivalents, trade receivables and payables,
loans, investments in unlisted shares and convertible notes.
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 expected credit loss 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.
8.2.2. Credit Risk
Credit risk arises from the financial assets of the Group, which comprise cash and cash equivalents, loans 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 loans 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 (credit rating: Aa2) and Westpac Banking Corporation (credit
rating: Aa2).
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.
8.2.3. Sources of credit risk
Key sources of credit risk for the Group predominantly emanate from its business activities including loans and
trade and other receivables. The Group monitors and manages credit risk by class of financial instrument. The
table below outlines such classes of financial instruments identified, their relevant financial statement line item,
maximum exposure to credit risk at the reporting date and expected credit loss recognised:
Class of financial instrument
Note
Financial statement line
Cash and cash equivalents
Trade and other receivables
Loans
Total
8.1.1
8.1.2
8.1.3
Cash and cash equivalents
Trade and other receivables
Loans
Maximum
exposure to
credit risk
$’000
Expected
credit loss
$’000
7,917
11,265
6,651
25,833
-
2,082
602
2,684
Annual Report 2019 | Notes to the Consolidated Financial Statements PAGE 50
8.2. Financial risk management (cont.)
Accounting policies
Impairment of financial assets
The Group recognises loss allowances for ECLs on loans and trade and other receivables that are not measured
at FVTPL.
ECLs are required to be measured through a loss allowance at an amount equal to:
•
•
12-month ECL, i.e. lifetime ECL that result from those default events on the financial instrument that are
possible within 12 months after the reporting date, (referred to as stage 1); or
full lifetime ECL, i.e. lifetime ECL that result from all possible default events over the life of the financial
instrument, (referred to as stage 2 and stage 3).
A loss allowance for full lifetime ECL is required for a financial instrument if the credit risk on that financial
instrument has increased significantly since initial recognition. For all other financial instruments, ECLs are
measured at an amount equal to the 12-month ECL.
For trade receivables, the Group has applied the simplified approach in AASB 9 to measure the loss allowance
at lifetime ECL. The Group determines the expected credit losses on these items by using a provision matrix,
estimated based on historical credit loss experience based on the past due status of the debtors, adjusted as
appropriate to reflect current conditions and estimates of future economic conditions. Accordingly, the credit
risk profile of these assets is presented based on their past due status in terms of the provision matrix.
Definition of default
The Group considers the following as constituting an event of default:
•
•
the borrower is past due more than 90 days on any material credit obligation to the Group; or
the borrower is unlikely to pay its credit obligations to the Group in full.
The definition of default is appropriately tailored to reflect different characteristics of different types of assets.
When assessing if the borrower is unlikely to pay its credit obligation, the Group takes into account both
qualitative and quantitative indicators. The information assessed depends on the type of the asset, for example
in corporate lending a qualitative indicator used is the breach of covenants, which is not relevant for retail
lending. Quantitative indicators, such as overdue status and non-payment on another obligation of the same
counterparty are key inputs in this analysis.
Write off
Loans, receivables and debt securities are written off when the Group has no reasonable expectations of
recovering the financial asset (either in its entirety or a portion of it). This is the case when the Group
determines that the borrower does not have assets or sources of income that could generate sufficient
cash flows to repay the amounts subject to the write off. A write off constitutes a derecognition event. The
Group may apply enforcement activities to financial assets written off. Recoveries resulting from the Group’s
enforcement activities will result in impairment gains.
Key estimates and judgements
Significant increase in credit risk
ECL are measured as an allowance equal to 12-month ECL for stage 1 assets, or lifetime ECL assets for stage 2 or
stage 3 assets. An asset moves to stage 2 when its credit risk has increased significantly since initial recognition.
AASB 9 does not define what constitutes a significant increase in credit risk. In assessing whether the credit risk
of an asset has significantly increased the Group takes into account qualitative and quantitative reasonable and
supportable forward-looking information.
Models and assumptions used
The Group uses models and assumptions in measuring fair value of financial assets as well as in estimating
ECL. Judgement is applied in identifying the most appropriate model for each type of asset, as well as for
determining the assumptions used in these models, including assumptions that relate to key drivers of credit
risk.
Annual Report 2019 | Notes to the Consolidated Financial Statements PAGE 51
8.2. Financial risk management (cont.)
Forward looking scenarios
The Group establishes the number and relative weightings of forward-looking scenarios for each type of
product/market and determines the forward-looking information relevant to each scenario. When measuring
ECL the Group uses reasonable and supportable forward-looking information, which is based on assumptions
for the future movement of different economic drivers and how these drivers will affect each other.
Probability of default (PD)
PD constitutes a key input in measuring ECL. PD is an estimate of the likelihood of default over a given time
horizon, the calculation of which includes historical data, assumptions and expectations of future conditions.
Loss Given Default (LGD)
LGD is an estimate of the loss arising on default. It is based on the difference between the contractual cash
flows due and those that the lender would expect to receive, taking into account cash flows from collateral and
integral credit enhancements.
8.2.3.1. Measurement of Expected Credit Loss (ECL)
The key inputs used for measuring ECL are:
• probability of default (PD);
•
•
loss given default (LGD); and
exposure at default (EAD).
PD is an estimate of the likelihood of default over a given time horizon. It is estimated as at a point in time. The
Group has developed a PD model for loans and advances based on the likelihood of a default event occurring
within the next 12 months, based on the current status of each loan. A lifetime PD is also computed where
appropriate. Historical data on loan behaviours is captured to enable projections on loans going into default.
This provides statistical data that is used in the PD model for calculating the probability of default.
LGD is an estimate of the loss arising on default.
EAD is an estimate of the exposure at a future default date, taking into account expected changes in the
exposure after the reporting date, including repayments and principal and interest, and expected drawdowns on
committed facilities. The Group has developed a single EAD model to cover all applicable loan exposures.
The Group measures ECL considering the risk of default over the maximum contractual period (including
extension options) over which the entity is exposed to credit risk and not a longer period. The risk of default is
assessed by considering historical data as well as forward looking information through a macroeconomic overlay
and management judgement.
The Group’s risk function constantly monitors the ongoing appropriateness of the ECL model and related
criteria, where any proposed amendments will be reviewed and approved by the Group’s management
committees.
Incorporation of forward-looking information
The Group uses forward-looking information that is available without undue cost or effort in its assessment
of significant increase of credit risk as well as in its measurement of ECL. The Group uses this information to
generate a ‘base case’ scenario of future forecast of relevant economic variables along with a representative
range of other possible forecast scenarios.
The Group applies probabilities to the forecast scenarios identified. The base case scenario is the single most-
likely outcome and consists of information used by the Group for strategic planning and budgeting.
The Group has identified and documented key drivers of credit risk and credit losses for each loan historical
data and has estimated relationships between macro-economic variables, credit risk and credit losses.
The principal macroeconomic indicators included in the economic scenarios used at 1 July 2018 and 31
June 2019 are GDP, GDP index, GDP index change and unemployment. Management have derived that
Annual Report 2019 | Notes to the Consolidated Financial Statements PAGE 52
8.2. Financial risk management (cont.)
GDP has economic correlations to inflation and unemployment, which generally have a corresponding impact on
loan performance.
The base case scenario is derived from forecasted changes to GDP, CPI and unemployment rates, using
management’s judgement. Adjustments to these forecasts are made to develop a further 2 scenarios for less
likely but plausible economic expectations. A weighting is applied to each scenario, based on management’s
judgement as to the probability of each scenario occurring. These economic forecasts are then applied to
a statistical model to determine the macroeconomic effects on the expected loss allowance on the lending
portfolios.
The incorporation of forward-looking information on the assessment of ECL on other assets required to be
assessed for impairment is a qualitative approach. A range of economic outlooks, from an economist, the RBA
and OECD, have been considered in making an assessment of whether there are economic forecasts that would
indicate a potential impairment on the assets being assessed.
Significant increase in credit risk
The Group monitors all financial assets that are subject to impairment requirements to assess whether there has
been a significant increase in credit risk since initial recognition. If there has been a significant increase in credit
risk the Group will measure the expected loss allowance based on lifetime rather than 12-month ECL.
The Group has used the assumption that 30 days past due represents significant increase in credit risk. The
Group considers 90 days past due as representative of a default having occurred and a loan being credit
impaired.
The Group has identified the following three stages in which financial instruments have been classified in regard
to credit risk;
•
•
•
stage 1 - Performing exposure on which loss allowance is recognised as 12 month expected credit loss;
stage 2 - Where credit risk has increased significantly and impairment loss is recognised as lifetime
expected credit loss; and
stage 3 - Assets are credit impaired and impairment loss is recognised as lifetime expected credit loss.
Interest is accrued on a net basis, on the amortised cost of the loans after the ECL is deducted.
The table below shows analysis of each class of financial asset subject to impairment requirements by stage at
the reporting date:
Class of financial instrument
Maximum expsoure to credit risk
Expected credit loss
Stage 1
$'000
Stage 2
$'000
Stage 3
$'000
Cash and cash equivalents
7,917
-
Trade and other receivables*
Loans
Total
11,265
-
-
-
6,651
6,651
7,917
11,265
6,651
25,833
Total
$'000
7,917
11,265
-
-
Stage 1
$'000
Stage 2
$'000
Stage 3
$'000
Total
$'000
-
-
-
-
-
2,082
-
-
-
2,082
-
602
602
2,082
602
2,684
*There are no trade receivables at stage 1, because the Group’s accounting policy is to apply the simplified approach to measure lifetime credit losses on trade
receivables
Movement in gross carrying amounts and expected credit losses
There has been no significant movement in gross carrying amount and expected credit losses of financial assets
of the Group therefore the movement has not been disclosed.
Summary of movements in expected credit loss by financial instrument
The following table summarises the movement in expected credit loss by financial instruments for the financial
year:
Annual Report 2019 | Notes to the Consolidated Financial Statements PAGE 53
8.2. Financial risk management (cont.)
Expected credit loss
Loans
$’000
Trade and other
receivables
$’000
Loss allowance as at 1 July 2018
Loss allowance recognised during the year
Loss allowance at 30 June 2019
557
45
602
3,653
(1,571)
2,082
Total
$’000
4,210
(1,526)
2,684
Credit risk concentrations are diversified across a large number of advisers and are geographically based within
Australia. They are mainly derived from the financial services industry and the main business segments include
Professional Investment Services Pty Ltd.
At 30 June 2019, the Group made a downward estimate of the fair value of the RFE convertible note based
on future expected cash flows discounted at a determined weighted average cost of capital (WACC). The
downward adjustment was attributed to the risk in the RFE business and profitability forecasts. As per AASB
9 transitional provisions, the Group revised the fair value of the convertible note at 1 July 2018 to $0.8m with a
further fair value reduction at 30 June 2019 of $0.3m.
Financial instruments classified at FVTPL
The maximum exposure to credit risk of the convertible notes held designated at FVTPL is their carrying
invested amount, which was $0.5m at 30 June 2019 (2018: $1.2m). The change in fair value due to credit risk is
$0.2m for the year (2018: $nil) and $0.5m on a cumulative basis as at 30 June 2019 (2018: $0.3m). The Group
uses the performance of the portfolio to determine the change in fair value attributable to changes in credit risk.
Equity instruments classified at FVTOCI
The maximum exposure to credit risk of the equity instrument designated at FVTOCI is their carrying amount.
Total
$'000
9,183
752
Total
$'000
9,754
1,038
0-30
Days
$'000
8,907
12
0-30
Days
$'000
9,472
157
31-60
Days
$'000
8
7
31-60
Days
$'000
21
4
2019
61-90
Days
PDNI
$'000
-
7
2018
61-90
Days
PDNI
$'000
20
4
61-90
Days
CI
$'000
-
-
61-90
Days
CI
$'000
-
-
+91
Days
PDNI
$'000
268
106
+91
Days
PDNI
$'000
241
404
+91
Days
CI
$'000
-
620
+91
Days
CI
$'000
-
469
Ageing Analysis
Trade receivables
Loan receivables - advisers
Ageing Analysis
Trade receivables
Loan receivables - advisers
* Past due not impaired (PDNI)
8.2.4. Market risk
8.2.5. Interest rate risk
Interest rate risk is the potential for loss of earnings to the Group due to adverse movements in interest
rates. 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.
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.
Annual Report 2019 | Notes to the Consolidated Financial Statements PAGE 54
8.2. Financial risk management (cont.)
The Group’s exposure to interest rate risks and the effective interest rates of financial assets and financial
liabilities, both recognised and unrecognised at the balance date, are as follows:
2019
Weighted
average
effective
interest rate
%
Fixed
≤ 6
Months
$'000
Fixed
> 6
Months
$'000
Financial Assets
Cash and cash equivalents
1.46%
3,664
Trade and other receivables
Loans
Convertible notes
Investments in unlisted shares
3.28%
2.87%
-
36
-
-
-
-
716
-
-
Non-
interest
bearing
$'000
Total carrying
amount per
balance sheet
$'000
-
9,183
-
-
116
7,917
9,183
6,049
530
116
Variable
$'000
4,253
-
5,297
530
-
Total financial assets
3,700
716
10,080
9,299
23,795
Financial Liabilities
Trade and other payables
Total financial liabilities
Net Exposure
-
-
-
-
-
-
3,700
716
10,080
9,430
9,430
(131)
9,430
9,430
14,365
2018
Weighted
average
effective
interest rate
%
Fixed
≤ 6
Months
$'000
Fixed
> 6
Months
$'000
Financial Assets
Cash and cash equivalents
2.90%
4,904
Trade and other receivables
Loans
Convertible notes
Investments in unlisted shares
2.77%
3.02%
-
181
-
-
-
-
857
-
-
Variable
$'000
4,565
-
-
6,439
-
Total financial assets
5,085
857
11,004
Financial Liabilities
Trade and other payables
Total financial liabilities
Net Exposure
8.2.6. Price risk
-
-
-
-
-
-
5,085
857
11,004
Non-
interest
bearing
$'000
Total carrying
amount per
balance sheet
$'000
-
9,754
-
-
2,482
12,236
9,715
9,715
2,520
9,469
9,754
1,038
6,439
2,482
29,182
9,715
9,715
19,467
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.
Annual Report 2019 | Notes to the Consolidated Financial Statements PAGE 55
8.2. Financial risk management (cont.)
8.2.7. 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
88% 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.
Maturity analysis of financial assets and liability based on management’s expectation.
The risk implied from the values shown in the table below, reflects a balanced view of cash inflows and outflows.
Leasing obligations, trade payables and other financial liabilities mainly originate from the financing of assets
used in ongoing operations such as property, plant, equipment and investments in working capital e.g. trade
receivables. These assets are considered in the Group’s overall liquidity risk.
To monitor existing financial assets and liabilities as well as to enable an effective controlling of future risks, the
Group has established reporting requirements which monitor maturity profiles and anticipated cash flows from
Group assets and liabilities.
The tables below are based on the carrying values at reporting date and includes future interest receivable or
payable.
Financial Assets
Cash and cash equivalents
Trade and other receivables
Loans
Convertible notes
Investments in unlisted shares
Total financial assets
Financial Liabilities
Trade and other payables
Total financial liabilities
Net Maturity
2019
≤ 6 Months
$'000
6-12 Months
$'000
1-5 Years
$'000
Total
$'000
7,917
9,007
36
-
-
16,960
9,430
9,430
7,530
-
-
716
-
-
716
-
-
716
-
176
-
530
116
822
-
-
822
7,917
9,183
753
530
116
18,499
9,430
9,430
9,069
Annual Report 2019 | Notes to the Consolidated Financial Statements
8.2. Financial risk management (cont.)
PAGE 56
2018
≤ 6 Months
$'000
6-12 Months
$'000
1-5 Years
$'000
Total
$'000
9,469
9,625
181
-
-
19,275
9,715
9,715
9,560
-
29
857
-
-
886
-
-
886
-
100
-
6,439
2,482
9,021
-
-
9,021
9,469
9,754
1,038
6,439
2,482
29,182
9,715
9,715
19,468
Financial Assets
Cash and cash equivalents
Trade and other receivables
Loans
Convertible notes
Investments in unlisted shares
Total financial assets
Financial Liabilities
Trade and other payables
Net Maturity
8.2.8. Foreign currency risk
The Group undertakes transactions denominated in foreign currencies (THB, NZD, USD and EURO);
consequently, exposures to exchange rate fluctuations arise. The transactions include the annual conference
and recruitment agency fees.
8.3. Fair value measurements
Some of the Group’s financial assets and financial liabilities are measured at fair value at the end of each
financial year.
The following table provides an analysis of financial instruments that are measured subsequent to initial
recognition at fair value, grouped by fair value hierarchy level.
8.3.1. Financial instruments measured at fair value on recurring basis
30 June 2019
Investment securities mandatorily measured at FVTPL
Convertible notes
Equity instruments designated at FVTOCI
Unlisted shares
Total assets
30 June 2018
Investment securities mandatorily measured at FVTPL
Convertible notes
Equity instruments designated at FVTOCI
Unlisted shares
Total assets
Level 1
$’000
Level 2
$’000
Level 3
$’000
Total
$’000
-
-
-
-
-
-
530
530
116
646
116
646
Level 1
$’000
Level 2
$’000
Level 3
$’000
Total
$’000
-
-
6,439
6,439
-
-
-
-
2,482
8,921
2,482
8,921
There are no financial liabilities which are measured at fair value.
There have been no transfers between level 1 and level 2 categories of financial instruments.
Annual Report 2019 | Notes to the Consolidated Financial Statements
PAGE 57
8.3. Fair value measurements (cont.)
8.3.2. Reconciliation of Level 3 fair value measurements of financial assets
30 June 2019
Balance at beginning of year
Fair value loss on adoption of AASB 9
Conversion of convertible loan to interest bearing loan
Sale of investment
Total gains or losses:
- in profit or loss
- in other comprehensive income
Balance at end of year
30 June 2018
Balance at beginning of year
Total gains or losses:
- in profit or loss
Purchases
Balance at end of year
Accounting policies
Fair value measurements
FVTOCI
Unlisted shares
$’000
FVTPL
Convertible notes
$’000
2,482
-
-
(1,750)
(16)
(600)
116
6,439
(384)
(5,239)
-
(286)
-
530
FVTOCI
Unlisted shares
$’000
FVTPL
Convertible notes
$’000
1,632
6,439
(900)
1,750
2,482
-
-
6,439
The Group measures some of its assets and liabilities at fair value on either a recurring or non-recurring basis,
depending on the requirements of the applicable Accounting Standard.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly (i.e.
unforced) transaction between independent, knowledgeable and willing market participants at the measurement
date.
As fair value is a market-based measure, the closest equivalent observable market pricing information is used to
determine fair value. Adjustments to market values may be made having regard to characteristics of the specific
asset or liability. The fair values of assets and liabilities that are not traded in an active market are determined
using one or more valuation techniques. These valuation techniques maximise, to the extent possible, the use of
observable market data.
To the extent possible, market information is extracted from either the principal market for the asset or liability
(i.e. the market with greatest volume and level of activity for the asset or liability) or, in the absence of such a
market, the most advantageous market available to the entity at the end of the financial year (i.e. the market
that maximises the receipts from the sale of the asset or minimises the payments made to transfer the liability,
after taking into account transaction costs and transport costs).
For non-financial assets, the fair value measurement also takes into account a market participant’s ability to
use the asset in its highest and best use or to sell it to another market participant that would use the asset in
its highest and best use. In measuring fair value, the Group uses valuation techniques that maximise the use of
observable inputs and minimise the use of unobservable inputs.
Assets and liabilities measured at fair value are classified, into three levels, using a fair value hierarchy that
reflects the significance of the inputs used in making the measurements. Classifications are received at each
reporting date and transfers between levels are determined based on a reassessment of the lowest level input
that is significant to the fair value measurement.
Annual Report 2019 | Notes to the Consolidated Financial Statements PAGE 58
8.3. Fair value measurements (cont.)
The categories are as follows:
• Level 1 - measurements based on quoted prices (unadjusted) in active markets for identical assets or
liabilities that the entity can access at the measurement date.
• Level 2 - measurements based on inputs other than quoted prices included in Level 1 that are observable for
the asset or liability, either directly or indirectly.
• Level 3 - measurement based on unobservable inputs for the asset or liability.
The fair values of assets and liabilities that are not traded in an active market are determined using one or more
valuation techniques. These valuation techniques maximise, to the extent possible, the use of observable market
data. If all significant inputs required to measure fair value are observable, the asset or liability is included
in Level 2. If one or more significant inputs are not based on observable market data, the asset or liability is
included in Level 3.
The Group financial assets and liabilities are measured at fair value that approximates the carrying amount.
8.3.3. Summary of valuation methodologies applied in determining fair value of financial
instruments
Each valuation technique requires inputs that reflect the assumptions that buyers and sellers would use when
pricing the asset or liability, including assumptions about risks. When selecting a valuation technique, the
Group gives priorities to those techniques that maximise the use of observable inputs and minimise the use
of unobservable inputs. Inputs that are developed using market data (such as publicly available information
on actual transactions) and that reflect the assumptions that buyers and sellers would generally use when
pricing the asset or liability are considered observable, whereas inputs for which market data is not available
and therefore are developed using the best information available about such assumptions are considered
unobservable.
The fair value of liabilities and the entity’s own equity instruments (excluding those related to share-based
payment arrangements) may be valued, where there is no observable market price in relation to the transfer of
such financial instrument, by reference to observable market information where such instruments are held in
assets. Where this information is not available, other valuation techniques are adopted and where significant, are
detailed in the respective note to the financial statements.
The Group selects a valuation technique that is appropriate in the circumstances and for which sufficient data is
available to measure fair value. The availability of sufficient and relevant data primarily depends on the specific
characteristics of the asset or liability being measured. The valuation techniques selected by the economic entity
are consistent with one or more of the following valuation approaches:
• Market approach - valuation techniques that use prices and other relevant information generated by market
transactions for identical or similar assets or liabilities.
•
Income approach - valuation techniques that convert estimated future cash flows or income and expenses
into a single discounted present value.
• Cost approach - valuation techniques that reflect the current replacement cost of an asset at its current
service capacity.
Annual Report 2019 | Notes to the Consolidated Financial Statements PAGE 59
8.3. Fair value measurements (cont.)
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.
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 2019.
Loans
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 $7,721 (2018: $10,353).
For variable rate loans, excluding impaired loans, fair value approximates the
carrying amount as they are repriced frequently.
The carrying values of variable rate trade and other receivables approximate their
fair value as they are short term in nature and reprice frequently.
The carrying values of variable rate trade and other payables approximate their fair
value as they are short term in nature and reprice frequently.
Trade and other
receivables
Trade and other payables
9. Dividends
Dividends payable are recognised when declared by the Group.
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
2019
$’000
2018
$’000
-
-
-
4,035
10,985
15,020
2019
$’000
2018
$’000
b) Franking credit balance
Franking account balance as at the end of the financial year
17,563
17,563
The tax rate at which paid dividends were franked is 30%. Franking credits are reported on a tax paid basis.
Annual Report 2019 | Notes to the Consolidated Financial Statements
PAGE 60
10. Earnings per share
Key accounting policies
Basic Earnings Per Share (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 year that would result from the dilution
of potential dividend by ordinary shares.
The following reflects the income used in the basic and diluted Earnings per share computations:
2019
$’000
2018
restated *
$’000
a) Profit used in calculating profit per share
Net (loss) attributable to ordinary equity holders of the Company
(1,576)
(6,884)
b) Weighted average number of shares
Weighted average number of ordinary shares
Effect of dilution:
Performance rights and LTI shares
Weighted average number of ordinary shares (excluding reserved shares)
adjusted for the effect of dilution
Basic loss cents per share
Diluted loss cents per share
* Refer note 21 on restatement to prior year comparative for details
No. of shares
No. of shares
148,882,969
148,882,969
9,101,781
12,321,644
157,984,750
161,204,613
(1.06)
(1.06)
(4.62)
(4.62)
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.
Annual Report 2019 | Notes to the Consolidated Financial Statements PAGE 61
11. Contributed equity
Key accounting policies
Ordinary shares are classified as equity and recognised at the fair value of the consideration received by the
Group. 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.
Paid up capital
Ordinary shares
Reserved shares
i) Ordinary shares (issued & fully paid)
Balance at start of year
Movements during the year:-
- cancellation of shares
On issue at end of year
ii) Reserved shares
Balance at start of year
Movements during the year:-
- cancellation of shares
On issue at end of year
Reference
2019
$’000
2018
$’000
(i)
(ii)
34,673
-
34,673
39,108
(4,435)
34,673
Number of
shares
2019
$’000
Number of
shares
2018
$’000
156,932,969
39,108
156,932,969
39,108
(8,050,000)
(4,435)
-
-
148,882,969
34,673
156,932,969
39,108
(8,050,000)
(4,435)
(8,050,000)
(4,435)
8,050,000
4,435
-
-
-
-
(8,050,000)
(4,435)
Total contributed equity
148,882,969
34,673
148,882,969
34,673
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.
Annual Report 2019 | Notes to the Consolidated Financial Statements 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
PAGE 62
2019
$’000
2018
$’000
951
11,659
12,610
515
11,659
12,174
2019
$’000
2018
$’000
515
436
-
951
1,224
354
(1,063)
515
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 year, 9,550,000 performance rights were issued to the chief executive officer and senior
executives and other senior leaders of the Group as follows:
Performance rights
Chief Executive Officer
Number of
shares
Vesting
period
2,700,000
2.50 years
Senior Executives and other senior leaders
6,850,000
2.58 years
b) Dividend reserve
Balance at start of year
Dividends paid
Transfer from current year profits
Balance at end of year
13. Property, plant and equipment
Key accounting policies
Issue price
Fair Value at
issue date
$0.1350
$0.1150
$0.0199
$0.0144
2019
$’000
2018
$’000
11,659
-
-
11,659
14,465
(15,020)
12,214
11,659
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 2019 | Notes to the Consolidated Financial Statements
PAGE 63
13. Property, plant and equipment (cont.)
Depreciation is calculated on a straight-line basis over the estimated useful lives of the assets as follows:
Asset
Useful Life
Plant and equipment
2 – 7 years
Leasehold improvements
Lease term
Motor vehicles
5 years
Derecognition: 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 derecognition 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 Other 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.
Leasehold
Improvements
$’000
Plant &
Equipment
$’000
Total
$’000
Cost
At 1 July 2017
Additions
Disposals
At 30 June 2018
Reclassification
Additions
Disposals
At 30 June 2019
Depreciation and impairment
At 1 July 2017
Depreciation charge for the year
Disposals
At 30 June 2018
Depreciation charge for the year
Disposals
At 30 June 2019
Net carrying value
At 30 June 2019
At 30 June 2018
1,986
-
-
1,986
-
-
-
1,986
1,522
155
-
1,677
99
-
1,776
210
309
2,786
322
(9)
3,099
(135)
11
(110)
2,865
2,274
186
(3)
2,457
157
(70)
2,544
321
642
4,772
322
(9)
5,085
(135)
11
(110)
4,851
3,796
341
(3)
4,134
256
(70)
4,320
531
951
Annual Report 2019 | Notes to the Consolidated Financial Statements PAGE 64
14. Intangible assets
Accounting policies
Goodwill
Goodwill acquired in a business combination is initially measured at cost, being the excess of the cost of the
business combination over the Group’s interest in the net fair value of the identifiable assets, liabilities and
contingent liabilities recognised at the date of the acquisition. Goodwill is subsequently measured at cost less
any accumulated impairment losses.
Impairment of assets
For the purpose of impairment testing, goodwill is allocated to each of the Group’s cash-generating units (or
groups of cash-generating units) that is expected to benefit from the synergies of the business combination.
A cash-generating unit or groups of cash-generating units to which goodwill has been allocated are tested for
impairment annually, or more frequently if events or changes in circumstances indicate that goodwill might be
impaired. If the recoverable amount of the cash-generating unit is less than its carrying amount, the impairment
loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other
assets of the unit pro rata based on the carrying amount of each asset in the unit. Any impairment loss on
goodwill is recognised directly in profit or loss. An impairment loss recognised for goodwill is not reversed in
subsequent periods.
On disposal of the relevant cash-generating unit, the attributable amount of goodwill is included in the
determination of the profit or loss on disposal.
Key judgements
The cash-generating units determined by management are:
• Licensee Services
• Ventura Investment Management Limited (Ventura)
•
xseedwealth Pty Ltd (xseedwealth)
• Centrepoint Alliance Lending Services Pty Ltd (Centrepoint Lending Services)
•
Investment Diversity Pty Ltd (Investment Diversity)
Key estimates
Impairment testing of goodwill was carried out by comparing the net present value of cash flows from the cash-
generating unit to the carrying value of the cash-generating unit. The cash flows were based on projections of
future earnings before taxation, depreciation and amortisation, minus forecast capital expenditure.
The cash flows have been projected over a period of five years. The terminal value of the Group beyond year five
has been determined using a constant growth perpetuity.
The key assumptions used in carrying out the impairment testing were as follows:
• Budgeted operating cashflows for the financial years ending 30 June 2020 – 2024 represents the Group’s
estimate of future cashflows based on the forecast approved by the Board of Directors. The business
has moved to a fee-based model which primarily impacts the Licensee Services CGU and given some
uncertainty around this, change sensitivities have been disclosed below.
• Terminal growth rate 1.0% (2018: 1.0%) represents the terminal growth rate (beyond five years).
• Discount rate 12.35% (2018: 12.35%) is the discount rate used in impairment testing for all CGUs at 30 June
2019. The business believes the discount rate applied is appropriate based upon the risks inherent in the
business.
The goodwill disclosed in the Statement of Financial Position at 30 June 2019 was supported by the impairment
testing and no impairment adjustment was required.
Annual Report 2019 | Notes to the Consolidated Financial Statements PAGE 65
14. Intangible assets (cont.)
The CGUs where a ‘reasonably possible’ change in estimates could lead to the carrying amount exceeding the
value in use are Centrepoint Lending Services and Licensee Services. The reasonably possible trigger points
at which the carrying value of the cash-generating unit would exceed its recoverable amount, while holding all
other variables constant, are as follows:
• Licensee services – the primary sensitivity for Licensee Services relates to fee income earned under the
new revenue model and forecast fees would need to decrease by 27% and remain flat for five years before
carrying amount would exceed recoverable amount. The Group believes the likelihood of this scenario
occurring is remote; and
• Centrepoint Lending Services – the primary sensitivity for Centrepoint Lending Services is the discount rate
used in the calculation of value in use. The discount rate would need to increase to 25% before carrying
amount would exceed recoverable amount. The Group believes the risks associated with the cashflows in
this CGU are lower than average in the Group and the discount rate used is appropriate.
Intangible
asset
Cash
Generating
Units
Goodwill
Description of the
Group’s intangible
assets
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 Licensee
Services,
Investment
Diversity Pty Ltd
and xseedwealth
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
Key Accounting
Policies
Goodwill is tested
annually for impairment
by calculation of value
in use at the CGU level.
Management is of
the view that core
assumptions such as
cost of equity and
terminal growth rate
are the same across all
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% (2018: 1.00%)
Cost of equity: 12.35%
(2018: 12.35%)
The testing resulted in
no impairment being
required.
No indicators of
impairment are noted
for the remaining
CGUs.
Impairment Test
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 carrying value
may be impaired. As at acquisition date, any
Goodwill acquired is allocated to each of the
CGUs which are expected to benefit from
the acquisition. Impairment is determined by
assessing the recoverable amount of the CGU 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 CGU 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 CGU retained.
Impairment losses recognised are not
subsequently reversed.
Annual Report 2019 | Notes to the Consolidated Financial Statements
14. Intangible assets (cont.)
Intangible
asset
Networks
and client
lists
Description of the
Group’s intangible
assets
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 2019 of
$348,000 (2018:
620,000).
Software
The Group has
developed or
acquired software,
which are being
amortised over
their expected
useful lives.
PAGE 66
Key Accounting Policies
Impairment Test
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% (2018:
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
$127,342 (2018: $187,858).
The value of the developed
or acquired software of
the Group is amortised on
a straight-line basis over
a 5 year period, which the
Directors assess as the
intangible asset’s useful life.
No software is considered to
be impaired.
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 financial year.
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 Other
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 year-
end 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.
Under the standard software cost can be
capitalised as an asset or expensed in the
year in which they are incurred.
Value of software assets recorded by the
entity in their financial statement continues
to reflect the expected benefits to be
obtained from their use. The Group needs
to determine the useful life of software
assets and amortise the cost over useful
life of the assets.
At each reporting date, the entity will
assess whether there is any indication
that an asset is recorded at greater than
its recoverable amount. If applicable,
recognise an impairment loss.
Annual Report 2019 | Notes to the Consolidated Financial Statements PAGE 67
14. Intangible assets (cont.)
The estimated useful lives in the current and comparative periods are as follows:
Software
Network and Client Lists
5 years
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.
14.1.1. Reconciliation of carrying amounts at the beginning and end of the financial year
Financial year ending 30 June 2019
At 1 July 2018 net of accumulated amortisation
and impairment
Reclassification
Additions
Amortisation
At 30 June 2019 net of accumulated amortisation
and impairment
At 30 June 2019
Cost
Accumulated amortisation and impairment
Net carrying value
Financial year 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
956
-
-
-
956
1,209
(253)
956
956
-
-
-
956
1,209
(253)
956
Goodwill
$’000
Software
$’000
Network &
Client Lists
$’000
75
135
1,202
(41)
1,371
620
-
134
(406)
348
5,110
(3,739)
1,371
10,520
(10,172)
348
16,839
(14,164)
2,675
Goodwill
$’000
Software
$’000
Network &
Client Lists
$’000
123
(13)
-
(35)
75
1,152
-
15
(547)
620
3,773
(3,698)
75
10,387
(9,767)
620
15,369
(13,718)
1,651
Total
$’000
1,651
135
1,336
(447)
2,675
Total
$’000
2,231
(13)
15
(582)
1,651
Annual Report 2019 | Notes to the Consolidated Financial Statements PAGE 68
15. Provisions
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.
Provision for onerous lease contract
In 2018, the Gold Coast office was consolidated from two floors to one and an onerous contract was created for
the unused space. There is no onerous lease provision for 2019 (2018: $86k). A tenant sub-leased the unused
space in the Gold Coast office for the remaining duration of the lease which expired in October 2018.
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 reporting 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 Group 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 Group. A corresponding amount is recognised directly in equity. A provision
for claims is recognised when client claims received by advisers are notified to the Group 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.
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.
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 financial year. The unwinding of the discounting is recognised as a finance cost.
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.
Employee
benefits
Make good
costs for
leased
property
Onerous
contracts
Annual Report 2019 | Notes to the Consolidated Financial Statements PAGE 69
15. Provisions (cont.)
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
Total
a) Movement in provision for claims
Opening balance
Movement in the provision is as follows:
Claims provisioning expense for the year
Claims settlements & fees paid (net of recoveries)
Closing balance
b) Movement in provision for employee benefits
Opening balance
Movement in the provision is as follows:
Provision for year
Leave and other employee benefits paid
Closing balance
c) Movement in provision for property make good
Opening balance
Movement in the provision is as follows:
Provision for year
Closing balance
2019
$’000
2018
$’000
1,232
2,963
26
-
-
4,221
29
208
265
502
5,393
2,669
83
86
550
8,781
25
198
232
455
2019
$’000
2018
$’000
5,418
4,589
363
(4,520)
1,261
5,992
(5,163)
5,418
2019
$’000
2018
$’000
2,867
3,275
3,332
(3,028)
3,171
2,681
(3,089)
2,867
2019
$’000
2018
$’000
315
(24)
291
315
-
315
Annual Report 2019 | Notes to the Consolidated Financial Statements 15. Provisions (cont.)
d) Movement in provision for onerous lease
Opening balance
Movement in the provision is as follows:
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
Restructuring costs paid
Closing balance
16. Contingent liabilities
Client Claims
PAGE 70
2019
$’000
2018
$’000
86
343
(86)
-
-
(222)
(35)
86
2019
$’000
2018
$’000
550
-
-
(550)
-
550
-
550
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.
On 18 June 2019 the Australian Securities and Investments Commission (ASIC) announced that it has approved
a change to Australian Financial Complaints Authority (AFCA) Rules to allow it to investigate certain complaints
dating back to 1 January 2008. The Group is unable to reliably estimate the quantum of any such claims and
accordingly no specific provision has been made for possible claims. There have been 4 claims re-opened from
1 July 2019 where we have been able to quantify with reasonable certainty, and hence an amount has been put
aside as a provision for these at 30 June 2019.
Adviser Service Fees
Under the service arrangements between clients and their advisers, clients generally pay an adviser service fee
to receive an annual review, together with other services. The Group is assessing whether clients who have paid
for these services have been provided with the agreed services.
An assessment of financial advisers employed by the Group (xseedwealth salaried advisers) has been completed
and where client compensation is probable and can be reliably estimated a provision has been taken at 30 June
2018.
The assessment process has commenced identifying clients associated with authorised representatives
licensed by the Group’s wholly owned subsidiaries, Professional Investment Services and Alliance Wealth. The
assessment is still in progress.
Given the early stage of the assessment process and time period and availability of records, it is not practicable
to provide an estimate of final remediation costs. The program is ongoing, however refund amounts identified
up to 22 August 2019 are not material and accordingly, no provision has been recognised in relation to this
matter at 30 June 2019. The costs of the program are being expensed as incurred.
Annual Report 2019 | Notes to the Consolidated Financial Statements PAGE 71
16. Contingent liabilities (cont.)
Royal Commission
The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry
(Royal Commission) handed down its report on 1 February 2019. The Group has reviewed the report and
the Government’s response to the report released on 4 February 2019. The proposed ban on grandfathered
commissions and other forms of conflicted renumeration is expected to impact the way the Group receives
income for some of its products and services. The Strategic Refresh program announced in August 2018, which
includes the design of new arrangements with advisers and product providers, is consistent with the recent
recommendations from the Royal Commission.
At the date of this report the Directors are not aware of any other material contingent claims. There were no
other contingent liabilities at the reporting date.
17. Remuneration of auditors
The primary auditor of the Group was Deloitte Touche Tohmatsu.
Amounts received or due and receivable by Deloitte Touche Tohmatsu
Fees payable to the Group’s auditor for the audit of the financial report for the
Company and other controlled entities
Fees payable to the Group’s auditor for the audit related assurance services to the
Company and other controlled entities
Fees payable to the Group’s auditor for the non-audit services to the Company and
other controlled entities
- Taxation services
- Other non-audit services
18. Information relating to Centrepoint Alliance Limited
The Consolidated Financial Statements of the Group are:
Current assets
Non-current assets
Current liabilities
Net Assets
Issued capital
Dividend reserve
Accumulated profit
Total Shareholder Equity
Net loss after tax of the parent entity
Total comprehensive loss of the parent entity
At reporting date the Group has given nil guarantees to external parties (2018: nil).
Contractual operating lease expenditure commitments of the Group are as follows:
2019
$
2018
$
259,656
224,780
63,000
64,600
3,000
72,900
2,450
14,000
398,556
305,830
2019
$’000
2018
$’000
23,965
5,596
(21)
29,540
33,497
10,504
(14,461)
29,540
(6,409)
(6,409)
32,323
8,968
35
41,326
37,933
10,504
(7,111)
41,326
(7,191)
(7,191)
Annual Report 2019 | Notes to the Consolidated Financial Statements 18. Information relating to Centrepoint Alliance Limited (cont.)
Not later than one year
Later than one year but not later than five years
Total
PAGE 72
2019
$’000
2018
$’000
146
-
146
370
370
740
The Group 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.
19. Related party disclosures
a) Information relating to subsidiaries
Name
Country of
Incorporation
Ownership
Interest
Principal Activity
2019
2018
Licensee and Advice Services
Centrepoint Alliance Lending Pty Ltd
Alliance Wealth Pty Ltd
Australia
Australia
Professional Investment Services Pty Ltd Australia
Associated Advisory Practices Pty Ltd
Australia
xseedwealth pty ltd
Australia
Funds Management and Administration
Investment Diversity Pty Ltd
Australia
Ventura Investment Management Ltd
Australia
Corporate
Centrepoint Alliance Services Pty Ltd
Australia
Centrepoint Services Pty Ltd
Centrepoint Wealth Pty Ltd
De Run Securities Pty Ltd
Presidium Research and Investment
Management Pty Ltd (formerly Imagine
Your Lifestyle Pty Ltd)
Professional Accountants Pty Ltd
Professional Investment Services (NZ)
Limited**
Ginger Group Financial Services Limited
** Currently under Solvent Voluntary Liquidation
b) Ultimate parent
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
56%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
56%
100%
100%
43%
Mortgage broker/ aggregator
Financial advice
Financial advice
Support services AFSL licensee
Salaried advice
Packages investment platforms
Packages managed funds
Trustee – Employee share plan
Service company
Holding company
Financial services
Dormant
Loans to advisers
Dormant
Australia
Australia
Australia
Australia
Australia
100%
New Zealand
43%
New Zealand
50%
50%
Financial advice
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 financial 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 2019, the Group has not recorded any impairment of receivables relating to amounts
owed by related parties (2018: 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.
Annual Report 2019 | Notes to the Consolidated Financial Statements
PAGE 73
19. Related party disclosures (cont.)
d) Transactions with Key Management Personnel
The aggregate compensation made to Directors and other members of KMP 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
2019
$’000
2018
$’000
1,485
76
-
289
233
2,083
2,109
87
-
-
441
2,637
In addition to the above compensation provided to Directors and other KMP, out of pocket costs for Peter
Loosmore (Interim Chief Financial Officer) of $2,262 has been incurred in the financial year.
20. Share-based payment plans
a) Types of share-based payment plans
i) Performance Rights (CESP)
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.
b) Recognised share-based payment expenses
Expense arising from performance rights
Total
Key accounting policies
i) Equity settled transactions:
2019
$’000
2018
$’000
436
436
354
354
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.
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
Other Comprehensive Income is the product of:
•
•
the grant date fair value of the award;
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
•
the expired portion of the vesting period.
Annual Report 2019 | Notes to the Consolidated Financial Statements PAGE 74
20. Share-based payment plans (cont.)
The charge to the Statement of Profit or Loss and Other Comprehensive Income for the financial year is
the cumulative amount as calculated above less the amounts already charged in previous years. 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 Company 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 Company’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
Profit or Loss and Other Comprehensive Income on the purchase, sale, issue or cancellation of the Company’s
own equity instruments.
Movements during the year
All current option awards are fully vested at reporting date. The 8,050,000 shares that were held within the
CAESP which were held as reserved shares were cancelled during the financial year, following approval by
shareholders at the 2018 Annual General Meeting.
2019
2018
No
WAEP*
No
WAEP*
(i) Shares under the CAESP
Outstanding at beginning of the financial year
Forfeited during the financial year
Outstanding at end of period
8,050,000
(8,050,000)
-
(ii) Performance rights under the CESP
Outstanding at beginning of period
Granted during the financial year
Vested during the financial year
Expired during the financial year
2,450,000
9,550,000
-
-
Outstanding at end of financial year
12,000,000
*WAEP is weighted average exercise price
0.18
(0.18)
-
-
-
-
-
-
8,050,000
-
8,050,000
3,750,000
700,000
-
(2,000,000)
2,450,000
0.18
-
0.18
-
-
-
-
-
Annual Report 2019 | Notes to the Consolidated Financial Statements PAGE 75
20. Share-based payment plans (cont.)
Performance rights pricing model
The fair value of the performance rights issued are calculated as at the date of grant using the Monte Carlo
Model. This Model takes into account the terms and conditions upon which they were granted and market based
inputs as at the grant date.
21. Restatement to prior year comparative
AASB 108 “Accounting Policies, Changes in Accounting Estimates and Errors” requires corrections to
comparative information be disclosed in the financial statements.
During the year, the Company completed the cancellation of 8,050,000 shares which represented the final
step in the closure of the Centrepoint Alliance Employee Share Plan. Upon full review by the Group, it was
identified that a receivable under the Plan in the 31 December 2017 and the 30 June 2018 financial reports was
incorrectly recognised. As a result, the receivable and related income and tax impacts have been adjusted in
the comparative figures disclosed in these financial statements. The relevant financial statement line items
impacted are as follows:
Condensed consolidated statement of profit or loss and other
comprehensive income
Interest income
Total revenue
Total expenses
Net loss before tax
Income tax expense
Net loss after tax
Earnings per share
Net profit/(loss) attributable to ordinary equity holders of the
Company
Basic earnings/(loss) per share
Diluted earnings/(loss) per share
Condensed consolidated statement of financial position
Trade and other receivables
Deferred tax assets
Total assets
Total liabilities
Net assets
Equity
Accumulated losses
Equity attributable to shareholders
Non-controlling interests
Total equity
30 June 2018
previously
reported
$’000
Adjustment
$’000
30 June 2018
restated
$’000
1,298
33,062
(35,666)
(2,604)
(3,729)
(6,333)
(787)
(787)
511
32,275
-
(35,666)
(787)
236
(551)
(3,391)
(3,493)
(6,884)
(6,333)
(551)
(6,884)
(4.25)
(4.25)
(0.37)
(0.37)
(4.62)
(4.62)
30 June 2018
previously
reported
$’000
Adjustment
$’000
30 June 2018
restated
$’000
10,541
4,632
38,607
19,052
19,555
(27,410)
19,437
118
19,555
(787)
236
(551)
-
(551)
(551)
(551)
-
9,754
4,868
38,056
19,052
19,004
(27,961)
18,886
118
(551)
19,004
22. Events after the financial year
There are no matters or events which have arisen since the end of the financial year 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 2019 | Notes to the Consolidated Financial Statements PAGE 76
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 2019 are in accordance with the Corporations Act 2001, including:
i)
ii)
giving a true and fair view of its financial position as at 30 June 2019 and of its
performance for the year ended on that date; and
complying with Australian Accounting Standards (including the Australian Accounting
Interpretations) and the Corporations Regulations 2001;
(b)
(c)
The financial statements and notes also comply with International Financial Reporting Standards
as disclosed in Note 2; and
there are reasonable grounds to believe that the Company will be able to pay its debts as and
when they become due and payable.
2. This declaration has been made after receiving the declarations required to be made to the Directors by the
Chief Executive Officer and Chief Financial Officer in accordance with section 295A of the Corporations Act
2001 for the financial year ended 30 June 2019.
On behalf of the Directors:
A. D. Fisher
Chairman
22 August 2019
Annual Report 2019 | Directors’ Declaration
PAGE 77
Independent Auditor’s report to the Directors of Centrepoint Alliance
Annual Report 2019 | Independent Auditor’s Report Independent Auditor’s report to the Directors of Centrepoint Alliance
PAGE 78
Annual Report 2019 | Independent Auditor’s Report PAGE 79
Independent Auditor’s report to the Directors of Centrepoint Alliance
Annual Report 2019 | Independent Auditor’s Report Independent Auditor’s report to the Directors of Centrepoint Alliance
PAGE 80
Annual Report 2019 | Independent Auditor’s Report PAGE 81
Independent Auditor’s report to the Directors of Centrepoint Alliance
Annual Report 2019 | Independent Auditor’s Report Independent Auditor’s report to the Directors of Centrepoint Alliance
PAGE 82
Annual Report 2019 | Independent Auditor’s Report PAGE 83
Independent Auditor’s report to the Directors of Centrepoint Alliance
Annual Report 2019 | Independent Auditor’s Report PAGE 84
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 11 September 2019.
1) Class of securities and voting rights
a) Ordinary shares
Ordinary shares of the Company are listed (quoted) on the ASX. There are 1,793 holders of ordinary shares,
holding 148,882,969 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
No. of ordinary shareholders
No. of performance right holders
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,000 and over
293
467
241
649
143
18
The number of shareholdings held in less than marketable parcels is 700.
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
AD & MP Beard ATF
Fully paid
No. of Shares
48,591,871
11,003,890
Annual Report 2019 | ASX Additional Information PAGE 85
4) Twenty largest holders of quoted equity securities
Ordinary Shareholders
Fully paid
No. of Shares
% Held
UBS NOMINEES PTY LTD
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
MR ALEXANDER BEARD + MRS PASCALE MARIE BEARD
35,705,098
14,998,216
10,268,889
ONE MANAGED INVT FUNDS LTD
4,541,382
NATIONAL NOMINEES LIMITED
SUPERTCO PTY LTD
RICHARD JOHN NELSON + KAYE MARIE NELSON
GRIFFIN FUND MANAGEMENT PTY LTD
BNP PARIBAS NOMINEES PTY LTD
WAYLEX PTY LTD
FETTERPARK PTY LTD
AGRB PTY LTD
AVANTEOS INVESTMENTS LIMITED <2024279 LUBBO A/C>
CATHAYS PTY LTD
KORO KIDS PTY LTD
MR DANIEL BARON DROGA + MRS LYNDELL DROGA
MR JASON MAXWELL YU
MILA INVESTMENT CO PTY LTD
MRS CHRISTINE ANN MOSSMAN
3,440,630
3,000,000
2,729,660
1,891,231
1,655,153
1,418,051
1,217,603
1,198,434
1,092,000
1,089,500
1,069,946
1,000,000
950,000
900,000
829,600
816,857
20
MR PETER HOWELLS
89,812,250
60.32
23.98
10.07
6.90
3.05
2.31
2.02
1.83
1.27
1.11
0.95
0.82
0.80
0.73
0.73
0.72
0.67
0.64
0.60
0.56
0.55
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
Annual Report 2019 | ASX Additional Information PAGE 86
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 General Meeting
11:00am (AEDT) Friday, 15 November 2019
Deloitte Touche Tohmatsu
Grosvenor Place
Level 9, 225 George Street
Sydney, New South Wales 2000
Australia
Corporate Directory
Securities Exchange
Listing
Centrepoint Alliance Limited’s shares are
listed on the 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 23, 123 Eagle Street
Brisbane Queensland 4000
Australia
Annual Report 2019 | Corporate Directory PAGE 87
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Annual Report 2019 | Centrepoint Alliance Centrepoint Alliance Limited
and its Controlled Entities
ABN 72 052 507 507
1300 557 598
centrepointalliance.com.au