ANNUAL
FINANCIAL
REPORT
2020
For the year ended 30 June 2020
Centrepoint Alliance Limited
and its Controlled Entities
ABN 72 052 507 507
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
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PAGE 1
Annual Report 2020 |
Letter from the Chairman
Dear shareholder,
It is my pleasure to present the 2020 Annual Report
for Centrepoint Alliance Limited (ASX: CAF) as we
reflect on a year that has been both challenging and
transformational for our company.
We continue to assess partnerships and other
acquisition opportunities, as well as looking at ways
in which we can deliver stronger financial results and
enhanced shareholder value in the years ahead.
I thank our shareholders for their continued support,
particularly during the testing times in our market
in the recent past, and I also thank my fellow Board
members and management and staff for their
contributions and dedication during the past year.
We enter FY21 with a positive outlook for growth,
with confidence that we can build on the momentum
of our new adviser fee model, greater capabilities,
improved operating performance and with a strong
cash balance. We look forward to providing quality
business services and support to a broader audience
of financial advice professionals over the next
12 months and beyond.
Alan Fisher
Chairman
Centrepoint Alliance
The financial services industry continues to undergo
once-in-a-generation structural change, while the
COVID-19 pandemic has also impacted our business.
At the same time, we are taking hold of new
opportunities to demonstrate our value to advisers
and their clients.
Centrepoint Alliance is a leading provider of licensing,
advice and business services as well as advice
technology solutions for Australian financial advisers.
Our model has evolved in recent years as we have
executed a strategic refresh, shifting to a fee-based
revenue model which is scalable and recurring. As a
result, Centrepoint Alliance enjoyed a first-mover
advantage in adapting our business model during a
time of industry disruption, and this has given us an
opportunity to grow our reputation for integrity and
leadership. This is demonstrated by our retention of
nearly 84% of advisers this year under our new pricing
structure as well as onboarding 79 new advisers, an
improvement of 16% on the record we set in FY19.
In addition, our licensed adviser base increased by
6% to 317 in a market that contracted 13% in FY20.
These outcomes validate our strategy.
We continue to invest in technology and digital tools,
as shown by our acquisition of leading financial
planning software solutions provider, Enzumo, just
prior to year-end. This was the latest step in our
strategic refresh and accelerates our development
of a scalable, recurring, fee-based revenue model.
Enzumo brings a growing adviser base, increased
recurring revenue and provides tangible value
for financial advisers and their clients through its
capability in consulting and customising of Xplan,
an industry-leading software platform for the
financial planning and wealth sectors. Our acquisition
of Enzumo follows rising demand for technology
support services from authorised representatives
and self-licensed businesses. Enzumo was a natural
fit for Centrepoint Alliance, given our shared culture
of providing services and support to financial advice
firms so that they can provide the best advice to
their clients.
Letter from the Chairman
CEO Report
Centrepoint Alliance is an Australian company
providing technical, compliance and business
management support to financial advisers across the
country. We have approximately 320 advisers under
our own licenses and additionally we provide services
to more than 160 self-licensed practices, comprising
almost 1,500 advisers.
Our core offering is based on building a community
of like-minded peers, and providing the support,
services, technology solutions and opportunities
for advisers to deliver quality advice to their clients.
We provide tools, technologies, and the assistance
of in-house technical, research and professional
standards experts to our advice community, enabling
our members to provide the best solutions to clients.
A key focus of Centrepoint Alliance over the past
two years has been the transition to a fee-for-service
model, as we move the business towards a revenue
mix sourced predominantly from service fees paid
by advisers. This replaces our previous model
which involved traditional product commissions
and platform rebates. Having implemented this new
revenue structure in FY19, we saw a large increase
in adviser fee revenue this year, increasing by 61% to
$10m, and the average annual adviser fee also grew
substantially to $33,000, up 76% on last year. These
subscription fees should bring substantial recurring
revenue given that the advisers in our network have
an average tenure of 11 years, underpinning the
resilience of our new service model. We will continue
to transition existing self-licensed firms to our new fee
structure progressively throughout FY21.
Our acquisition of leading advice technology
firm, Enzumo, completed in June 2020 for $1.5m,
has delivered us a high-quality team and further
accelerated the transition of our business model to
a scalable, recurring subscription fee revenue model.
The acquisition of Enzumo enhances our capability
and licensee service offering, specifically in advice
technology solutions.
Centrepoint Alliance posted gross revenue of $131m,
an increase of 11%, driven by our strong growth in
new advisers and a significant increase in average
gross revenue per advice firm. Our 2H20 gross profit
was up $1.1m. Pleasingly, management expenses were
down $2.0m on 1H20, an important outcome given
the uncertain environment we were operating in due
to the impacts of COVID-19. Overall, management
expenses decreased by 7% through efficiency gains
on employment and travel and marketing reductions.
Our cost-to-income ratio reached a three-year low of
78% in 2H20, through disciplined cost and execution
| Annual Report 2020
PAGE 2
management, and we expect to continue this
disciplined approach to maintain our cash position.
Due predominantly to an increase of $3.4m in legacy
claims in FY20, lodged ahead of the extension to
Australian Financial Complaints Authority’s (AFCA)
jurisdiction closing on 30 June 2020, our net loss
before tax was $2.2m. The AFCA window on legacy
claims is now closed. We expect all legacy claims are
now lodged and we look forward to resolving the
$3.0m in legacy claim provisions on our balance sheet
as at 30 June 2020.
Despite these challenges, we achieved positive
EBITDA of $0.1m in FY20 ($3.7m excluding legacy
claims), with a robust closing cash balance of $12.2m,
up 54% year-on-year. This strong cash balance sheet
will empower us to grow quickly and nimbly take
advantage of new opportunities in the year ahead.
The past two years has underlined the importance of
the services Centrepoint Alliance provides to financial
advice firms and their clients across Australia. During
the last 12 months, our services have included more
than 60 education webinars and masterclasses,
6,500 coaching interactions, more than 10,000
advice technology enquiries and 4,000 technical or
regulatory enquiries.
While we have built a strong customer base to date,
we see significant potential for further growth.
Australia has a licensed financial adviser market
of more than 16,000 advisers with an addressable
revenue pool of about $800m in licensee fees. We
understand the opportunity this provides for us to
grow at scale and expect to execute on this further in
the year ahead.
Our plans for FY21 include continuing to attract
high quality advisers and self-licensed firms to our
community, enhancing the value of our scalable
service platform, and exploring opportunities for
industry consolidation and opportunistic acquisitions.
Based on our achievements in the past 12 months, we
are well-positioned to achieve these goals, in what is
expected to be a more stable operating environment.
Angus Benbow
Chief Executive Officer
Centrepoint Alliance
CEO Report PAGE 3
Annual Report 2020 |
“
The past two years
has underlined
the importance
of the services
Centrepoint
Alliance provides
to financial advice
firms and their
clients across
Australia.
”
CEO Report FY20 Highlights
| Annual Report 2020
PAGE 4
Gross Revenue
Gross revenue up by
11%
Gross Profit
2HY20 gross profit up
$1.1m
Expenses down
Management expenses decreased by
7%*
Cash balance
Closing cash balance of
$12.2m up 54%
New offers launched – largest scale
service provider for self-licensed
advice firms and new dealer to dealer
wholesale licensee service
Adviser recruitment
running at record levels
New offers launched
Enzumo Acquisition
Acquisition of leading advice
technology firm, Enzumo
Launch of advice technology
solutions, Centrepoint Connect
and Centrepoint AI
* Management expenses noted above comprises total expenses per the financial statements of $31,452k (2019: $29,444k) and excludes client
claims $3,608k (2019: $363k), depreciation and amortisation $1,368k (2019: $777k), impairment expenses $271k (2019: $84k) and finance
costs $57k (2019: $26k).
CEO Report PAGE 5
Annual Report 2020 |
Directors’ Report
For the Year Ended 30 June 2020
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 2020.
Directors
Alan Fisher
BCom, FCA, MAICD
Chairman of the Board,
Independent Non-Executive
Director
Appointed on 12 November
2015.
Georg Chmiel
Diplom-Informatiker, MBA,
CPA (USA), FAICD
Independent Non-Executive
Director, Chairman of the
Group Audit, Risk and
Compliance Committee
Appointed on 7 October 2016.
Experience and expertise
Experience and expertise
Alan has extensive and proven experience in restoring
and enhancing shareholder value. He spent 24 years
at the 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
mergers and acquisitions, strategic advice, business
restructuring and capital raisings.
Alan holds a Bachelor of Commerce from the University
of Melbourne, is a Fellow of the Institute of Chartered
Accountants Australia and New Zealand and a member
of the Australian Institute of Company Directors.
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 market-leading
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. 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, and Diplom-Informatiker (Computer
Science Degree).
Other current directorships
Other current directorships
Non-Executive Director and Chairman of IDT Australia
Limited (ASX:IDT).
Executive Director and Chairman of iCar Asia Limited
(ASX: ICQ).
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).
Non-Executive Director of Real Estate Investar Group
Limited (ASX:REV).
Special responsibilities
Chairman of the Board
Interests in shares and options
Nil
Former directorships
Non-Executive Director of Mitula Group Limited (ASX:
MUA) (from 18 January 2017 to 8 January 2019).
Special responsibilities
Chairman of the Group Audit, Risk and Compliance
Committee
Interests in shares and options
800,000
Directors’ Report | Annual Report 2020
PAGE 6
Martin Pretty
Graduate Diploma of Applied
Finance, BA, CFA, GAICD
Appointed on 27 June 2014.
Alexander Beard
BCom, FCA, MAICD
Appointed on 1 January 2020.
Experience and expertise
Experience and expertise
Martin brings to the Board over 18 years’ experience in
the finance sector. The majority of this experience was
gained within ASX-listed financial services businesses,
including Hub24 Limited, Bell Financial Group Limited
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.
Alexander has a long and distinguished career as a chief
executive of ASX-listed CVC Limited and as a director of
numerous public companies over the past 17 years.
He is a professional investor, Fellow of the Institute
of Chartered Accountants Australia and New
Zealand and a member of the Australian Institute of
Company Directors.
Other current directorships
Other current directorships
Non-Executive Director of Scout Security Limited
(ASX:SCT) and MGM Wireless Limited (ASX:MWR).
Non-Executive Director of Probiotec Limited (ASX:PBP),
TasFoods Limited (ASX:TFL) and Pure Foods Tasmania
Limited (ASX:PFT).
Special responsibilities
Interests in shares and options
Chairman of the Nomination, Remuneration and
Governance Committee
555,000 shares directly held
10,443,296 shares indirectly held
Interests in shares and options
105,000
Directors’ Report PAGE 7
Annual Report 2020 |
Company Secretary
Dr Marty Carne
BM, BBus, LLB, LLM,
DBA,GDLP, GCAIF
Chief Legal Officer and
Company Secretary
Debra Anderson
B. Law (LLB) Hons, Post
Graduate Diploma in Legal
Practice, Diploma of Financial
Planning, AGIA, ACIS, MAICD
Senior Corporate Counsel and
Company Secretary
Resigned on 27 November
2019.
Experience and expertise
Experience and expertise
Marty joined the Company in April 2016 and holds
executive responsibility for Legal, Professional Standards,
Risk and Claims Management.
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.
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 and
Investments Commission. Marty has strong commercial
and client-centric skills and experience in the delivery of
strategic legal advice and risk management.
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 a
qualified Chartered Secretary. She is an Associate of the
Governance Institute of Australia, and a member of the
Australian Institute of Company Directors.
Marty was appointed as joint Company Secretary on
27 April 2017.
Marty holds qualifications in law and business and is a
member of the Queensland Law Society.
Julian Rockett
B. Law (LLB), B. Arts (Social Science), Graduate
Diploma of Legal Practice (GDLP)
Company Secretary
Appointed on 27 November 2019.
Julian is a corporate lawyer and Company Secretary.
His legal background includes advising on initial public
offerings, mergers and acquisitions, registered training
organisations and substantial capital raising for ASX-
listed companies.
His corporate secretarial experience for ASX-listed
companies includes representing fin-tech, artificial
intelligence, medical technology, logistics, equity,
resources, mining, building, energy, media and financial
advisory companies.
Directors’ Report | Annual Report 2020
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. Fisher1
M. P. Pretty1
G. Chmiel2
A. Beard3
Board of Directors
Nomination, Remuneration
and Governance Committee
Group Audit, Risk and
Compliance Committee
Held
Attended
Held
Attended
Held
Attended
13
13
12
9
13
13
12
9
2
2
1
2
2
1
N/A
N/A
2
2
3
1
2
2
3
1
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 mortgage aggregation services to
mortgage brokers.
Operating and
Financial Review
Operating Review
The Group provides technical, compliance and
business management support to financial
advisers. The Group has circa 320 advisers under
its own licenses and provides services to over 160
self-licensed practices (who themselves have almost
1,500 advisers).
The Group’s core offer is based on building a
community of like-minded peers, providing the
support, services, technology solutions and
opportunities for advisers to deliver quality advice
to their clients.
The Group provides tools, technologies, and
the assistance of inhouse technical, research
and professional standards experts to its advice
community to provide the best solutions to clients.
A key focus of the Group over the last two years
has been to transition the business to a fee for
service model, from a legacy revenue model with
cross-subsidisation. In 2018 the Group announced that
fees would increase progressively to firms that are
authorised under the Group’s licenses. Pleasingly, the
Group has completed this process, having successfully
retained more than 86% of firms following the fee
increase last financial year, and has continued to
attract quality practices to its community throughout
this financial year, with 79 new advisers joining. In the
first half of this financial year, the Group launched a
new fee for service offer to self-licensed firms, and
will continue to progressively transition existing
self-licensed firms throughout the course of the next
financial year.
During the 2020 financial year, the Group continued
to invest in its digital capabilities including the
implementation of a portal for advisers to access
over 700 essential standards and policies, plus
critical technical information to ensure compliant
client advice. The Group also delivered a practice
management tool that harnesses its previous
investment in data and analytics. This tool takes
information held on various Centrepoint systems,
and provides real-time insights to advisers, helping
them better understand and run their businesses.
This leverages the scale of the Group, and is a unique
data offering in the advice market.
1. During the year Alan Fisher and Martin Pretty were members for only two of the GARCC meetings.
2. During the year Georg Chmiel was not required to attend the 13th Board meeting which was a sub-committee of only two directors. Mr
Chmiel was a member for only one of the Nomination, Remuneration and Governance Committee (NRGC) meetings.
3. During the year Alexander Beard was a member for only one of the Group Audit, Risk and Compliance Committee (GARCC) meetings.
Directors’ Report PAGE 9
Annual Report 2020 |
Through its adviser community, the Group is focused
on providing the breadth and depth of services that
advisers need, without conflict or vested interest,
through digital, data and technology innovation.
This focus has allowed the Group to continue to
develop a suite of services to meet the needs of all
types of advice businesses, whether they are looking
to be supported by a licensee or are working under a
self-licensed model.
The Group is proactively leading the evolution of the
delivery of financial advice licensee and services,
not only through its transparent fee for service
model, but importantly through providing scale and
breadth of services that meet the needs of licensed
and self-licensed firms and other licensees, powered
by investments in digital and data tools and the
technology solutions advisers need to evolve their
businesses. In June 2020, the Group acquired Enzumo
Corporation Pty Limited and Enzumo Consulting Pty
Limited (Enzumo) from Chant West Holdings Limited.
Enzumo is a leading provider of technology and
software services to the financial planning industry.
Enzumo enhances the Group’s capability and licensee
service offering, specifically in advice technology
solutions. This acquisition accelerates the Group’s
development of a scalable, recurring fee-based
revenue model. Enzumo brings a strong track record
of delivering expansion in its adviser base, growth
in recurring revenue and tangible value for financial
advisers and their clients.
Centrepoint Alliance Limited continues to introduce
internal robust compliance and governance measures
allowing it to be resilient to regulatory reform. The
Group’s revenue transformation and investments in
infrastructure and core systems led to the successful
implementation of its Business Continuity Plan
throughout the COVID-19 crisis, with no material
impact to the delivery of services to the advisers the
Group supports.
The Group’s strategy remains unchanged for the
coming year, being fit for purpose to take advantage
of opportunities in the disrupted financial advice
industry market, and it will continue to focus on and
deliver against its strategic priorities.
Financial Performance and Position
For the financial year ended 30 June 2020, the Group
reported a net loss after tax of $2.0m compared to a
net loss after tax of $1.6m for the financial year ended
30 June 2019.
Gross profit from
contracts with customers
Gross profit
Expenses
(Loss)/Profit before tax
Net (loss) for the year
2020
$’000
2019
$’000
28,800
29,283
30,016
30,664
(31,452)
(29,444)
(2,169)
(2,000)
1,220
(1,576)
The Group had contractual fee increases to advisers
in three stages on 1 January, 1 April and 1 July of 2020.
In response to COVID-19, the Group provided special
dispensation to not pass on the fee increase for 1
April. This fee deferral resulted in a revenue reduction
of $0.3m.
Gross profit on customer contracts for the quarter
ended 30 June 2020 was $7.6m ($7.3m for the
quarter ended 31 March 2020), increasing by $0.3m.
Note that the increase would have been a further
$0.3m, if the previously mentioned fee waiver had not
been offered to advisers after the onset of COVID-19.
The largest increase in expenses during the year
arose from legacy claims of $3.6m (2019: $0.4m)
and $1.4m (2019: $0.8m) relating to depreciation and
amortisation. The major increase in legacy claims
is a result of an additional provision of $2.1m being
taken up in June 2020 to factor in probability-based
settlements of claims lodged within the Australian
Financial Complaints Authority (AFCA) window,
which closed on 30 June 2020. The increase in
depreciation and amortisation expense is mainly a
result of the impact of AASB 16 on the depreciation
of right-of-use assets pertaining to the Group’s
operating leases reclassified from property costs.
The Group implemented a purchased leave scheme
and a temporary 20% reduction in executive salaries,
which delivered a $0.2m saving. In addition, a
$0.3m saving was achieved for marketing and travel
and entertainment expenses in the quarter ending
30 June 2020 (compared to prior comparable
quarter). Overall, these initiatives have resulted in no
negative impact to the financial performance of the
Group. There have been no other adverse impacts to
the Group, and the Board approved the reinstatement
of salaries to normal levels from 1 July 2020.
Directors’ Report The Group has net assets at 30 June 2020 of $14.8m
(2019: $16.9m) and net tangible assets of $8.6m
(2019: $11.8m) representing net tangible assets per
share of 5.86 cents (2019: 7.92 cents).
The Group’s net assets reduced by $2.0m during the
year due to the increase in legacy claims provisions
of $1.8m and $0.5m due to a fair value reduction of
the R Financial Educators Pty Ltd (RFE) convertible
note from $0.53m to nil, as a result of underlying
business performance.
The Group held $12.2m in cash and cash equivalents
as at 30 June 2020 (2019: $7.9m). Cash receipts
during the year included $5.8m from operations
(2019: $3.2m) and $2.5m from the Australian Life
Development Pty Ltd (ALD) for loan repayments
(2019: $1.2m). Tax payments of $1.4m were deferred
as a result of an Australian Taxation Office (ATO)
concession relating to COVID-19.
Cash payments during the year included $1.5m paid
out for the acquisition of Enzumo (2019: nil), $1.7m
was paid out in legacy claims (2019: $4.5m), $0.6m
for repayment of lease liabilities and finance costs
(2019: nil), $0.2m for the acquisition of software
(2019: $1.3m) and $0.37m for a share buy-back
(2019: nil).
The Group’s financial and non-financial assets have
been assessed for impairment as a result of COVID-19,
with the Group applying an additional 25% ($18.8k)
expected credit losses (ECL) to the collectability of
adviser fees receivable on the basis that past models
and historical experience may not be representative
of current expectations. Consideration has been given
to negative macroeconomic factors and systematic
market risk, which could have an adverse impact on
repayment behaviour and future collectability of debt.
Dividends
No dividends were paid during the year (2019: nil).
No dividends have been declared since the end of the
financial year to the date on this report.
Shares and Performance Rights
The Board approved the grant of 4,000,000
performance rights on 20 February 2020 to senior
executives of the Group under the CESP at $0.0579
per performance right.
| Annual Report 2020
PAGE 10
Significant Changes in the State
of Affairs
On 11 March 2020, the Group announced the intention
to undertake an on-market buy-back to acquire up
to 10% of its ordinary shares during the ensuing
12 months. On 30 March 2020, the Group launched
its on-market buy back, purchasing 4,600,000 shares
($0.37m).
The Enzumo unconditional acquisition was completed
on 17 June 2020 for consideration of $1.5m in
cash. The purchase price represents a multiple
of approximately 0.6 unaudited 2020 financial
year revenue and 4.2 unaudited stand-alone 2020
financial year EBITDA. Both the Group and Enzumo
will continue to service and support advisers and
licensees and their advisers, and there will be no
immediate changes to either business model. The
Enzumo brand name is retained and will continue
to trade under its existing name, branding and
corporate structure.
From 1 July 2019, Australian consumers were able
to lodge complaints with AFCA about the conduct
of financial firms dating back to 1 January 2008.
AFCA had a 12-month window to accept and
investigate these complaints. This window closed on
30 June 2020.
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 (including COVID-19 considerations) 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, Note 22. The Directors are not aware of
any other significant material likely developments
requiring disclosure.
Environmental Regulation
On 11 March 2020, the Group purchased 4,600,000
ordinary shares for $0.37m via an on-market share
buy-back (refer to Note 10).
The Group’s operations are not regulated by any
significant environmental regulation under a law of
the Commonwealth or of a State or Territory.
Directors’ Report 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 the 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.
PAGE 11
Annual Report 2020 |
Corporate Governance Statement
and Practices
The Group’s Corporate Governance Statement for
the financial year ended 30 June 2020 was approved
by the Board on 19 August 2020. The Corporate
Governance Statement is available on the Group’s
website: 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.
Directors’ Report | Annual Report 2020
PAGE 12
Remuneration Report
The Remuneration Report for the year ended 30 June 2020 outlines the remuneration arrangements of the
Key Management Personnel of the Group in accordance with the requirements of the Act and its regulations.
This information has been audited as required by section 308(3C) of the Act.
The Remuneration Report is presented under the following sections:
• Key Management Personnel
• Remuneration philosophy
• Group performance
• Nomination, Remuneration and Governance committee (NRGC)
• Employment contracts
• Remuneration of Key Management Personnel
• Short-term incentives
• Long-term incentives
For the purposes of the 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
M. P. Pretty
G. Chmiel
Chairman and Director (non-executive)
Director (non-executive)
Director (non-executive)
A.D.H Beard
Director (non-executive), (appointed 1 January 2020)
A.G.R. Benbow
Chief Executive Officer
P. Loosmore
B.M. Glass
Interim Chief Financial Officer (resigned 7 April 2020)
Chief Financial Officer (appointed 4 June 2020)
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.
Remuneration Report
PAGE 13
Annual Report 2020 |
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)
2020
$’000
2019
$’000
2018
restated
$’000
2017
$’000
2016
$’000
(2,000)
(1,576)
(6,884)
6,544
4,262
(1.35)
(1.35)
0.09
–
(1.06)
(1.06)
0.10
–
(4.62)
(4.62)
0.38
9.40
4.41
4.11
0.63
3.45
2.94
2.75
0.41
2.20
Nomination, Remuneration and 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 2020, 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 (of which there are none) and executives are employed under contracts or agreed
employment arrangements that specify remuneration amounts and conditions.
The Board has introduced an incentive system for Executives and senior employees 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.
Remuneration Report Employment Contracts
Details of the terms of employment of the named KMP Executives are set out below:
| Annual Report 2020
PAGE 14
Angus Benbow
Chief Executive Officer
Employment commencement date:
2 April 2018
Term:
No term specified
Discretionary incentives:
Short-term incentive
A short-term incentive to the 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) (refer to page
18 for further details).
A short-term incentive of $250,000 was paid
in September 2019 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 2020 financial year
will be payable based on structure outlined in the
Remuneration Report.
Long-term incentive
As approved in the 2019 Annual General Meeting, the
CEO was issued with 2,700,000 performance rights
issued on 29 February 2019 under the Company’s
approved Long-Term Incentive Plan (LTIP). The 2019
Annual General Meeting also approved the issue to
the CEO of a further 5,400,000 performance rights
under the LTIP in two equal tranches of 2,700,000
each. Neither of these have been issued.
Required notice by Executive and Company:
Six months.
Termination entitlement:
Statutory entitlements and so much of the total fixed
remuneration as is due and owing on the date of
termination.
Peter Loosmore
Interim Chief Financial Officer
Employment period:
17 December 2018–07 April 2020
Term:
12 months
Required notice by Executive and Company:
Four weeks
Termination entitlements:
Not applicable
Brendon Glass
Chief Financial Officer
Employment commencement date:
4 June 2020
Term:
No term specified
Discretionary 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.
Required notice by Executive and Company:
Six months
Those Executives that do not meet the KMP definition
are not included here.
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Remuneration Report
PAGE 17
Annual Report 2020 |
Shareholdings of Key Management Personnel
Shares held in Centrepoint Alliance Limited (Number)
Balance
1 July 2019
Ordinary
Granted as
remuneration
Ordinary
On exercise
of options
Ordinary
Net change
other1
Ordinary
Balance
30 June 2020
Ordinary
A.D. Fisher
M.P. Pretty
G. Chmiel
A.G.R. Benbow
A.D.H. Beard2
B.M. Glass2
Former KMPs
P. Loosmore3
–
105,000
150,000
571,878
–
–
50,000
Objective
Short-term incentives
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
650,000
626,556
–
105,000
800,000
1,198,434
10,998,296
10,998,296
–
(50,000)
–
–
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.
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.
Structure
Short-term incentives
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 an 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.
Long-term incentives
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.
1. 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. Shares include indirect interests.
2. Appointed during the year.
3. Resigned during the year.
Remuneration Report | Annual Report 2020
PAGE 18
Shareholdings of Key Management Personnel continued
Awards
Long-term incentives
CAESP17 and CAESP18
On 21 November 2017, the Board and the CAESPT approved the termination of participants
(including the former Managing Director and Chief Executive Officer and other senior
executives) in 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, and legally held by the CAESPT, were cancelled in 2019 financial year, 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. All of these performance rights have
lapsed unvested.
CESP20
On 2 October 2017, the Board approved the grant of 700,000 performance rights 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 Return (TSR) for the peer group for 30 June 2020 financial year is:
• Below 25th percentile, none will vest;
• Between 25th percentile and 49th percentile, 25% of the performance rights will vest;
• Between 50th percentile and 74th percentile, 50% of the performance rights will vest;
• Above 75th percentile, 100% of the performance rights will vest.
The TSR of Centrepoint is compared and ranked to the TSR of each peer group constituent.
The rank is converted to a percentile ranking, which is used to determine the proportion of
awards vesting based on the above vesting schedule.
CESP21
On 7 February 2019, the Board approved the grant of 6,850,000 performance rights 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 Return (TSR) for the financial year ended 30 June 2021 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 VWAP1 at the start of the performance period – being 1 February 2019, was $0.10 for the
awards granted on 7 February 2019.The VWAP at the start of the performance period – of
25 February 2019, was $0.12 for the awards granted on 28 February 2019.
1. Volume 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.
Remuneration Report PAGE 19
Annual Report 2020 |
Shareholdings of Key Management Personnel continued
Awards
(continued)
CESP22
The Board approved the grant of 4,000,000 performance rights on 20 February 2020 to senior
executives of the Group under the CESP at $0.0579 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 December 2022 based on the following:
If the absolute Total Shareholder Return (TSR) for 30 June 2022 financial year is:
• Target share price hurdle of 18.0 cents, 50% of the performance rights will vest;
• Stretch share price hurdle of 20.0 cents, 100% of the performance rights will vest.
The VWAP1 at the start of the performance period – 29 November 2019, was $0.13 for the awards
granted on 31 January 2020.
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 commencement and ending periods noted below:
• 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
The CEO’s STI will continue for 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.
1.
Volume Weighted Average Price of Centrepoint Alliance Limited Shares traded on the Australian Securities Exchange and Chi-X Australia
during the ten trading days prior to, and including, the start date of the performance period.
Remuneration Report | Annual Report 2020
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 2020. The Independence Declaration
which forms part of this report is on page 22.
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 for the audit or review of the statutory financial report and assurance
services that are required by legislation to be provided by the auditor
Fees for other services
Signed in accordance with a resolution of the Directors.
2020
$’000
2019
$’000
497
60
557
476
141
617
A. D. Fisher
Chairman
19 August 2020
Remuneration Report PAGE 21
Annual Report 2020 |
Auditor’s Independence Declaration
Deloitte Touche Tohmatsu
ABN 74 490 121 060
Grosvenor Place
225 George Street
Sydney NSW 2000
PO Box N250 Grosvenor Place
Sydney NSW 1220 Australia
Tel: +61 (0) 2 9322 7000
Fax: +61 (0) 2 9322 7001
www.deloitte.com.au
19 August 2020
Board of Directors
Centrepoint Alliance Limited
Level 9, 10 Bridge Street
Sydney, NSW 2000
Dear Board members
Centrepoint Alliance Limited and its controlled entities
In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the following declaration of
independence to the directors of Centrepoint Alliance Limited and its controlled entities.
As lead audit partner for the review of the financial statements of Centrepoint Alliance Limited and its controlled entities for
the year ended 30 June 2020, I declare that to the best of my knowledge and belief, there have been no contraventions of:
(i)
(ii)
the auditor independence requirements of the Corporations Act 2001 in relation to the review; and
any applicable code of professional conduct in relation to the review.
Yours sincerely
DELOITTE TOUCHE TOHMATSU
Jonathon Corbett
Partner
Chartered Accountants
Sydney, 19 August 2020
Auditor’s Independence Declaration
| Annual Report 2020
PAGE 22
Consolidated Statement of Profit or Loss
and Other Comprehensive Income
For the year ended 30 June 2020
Revenue
Revenue from contracts with customers
Contractual payments to advisers
Gross profit from contracts with customers
Interest income
Other revenue
Gross Profit
Expenses
Employee related expenses
Marketing and promotion
Travel and accommodation
Property costs1
Low value and variable costs related to property & equipment2
Subscriptions & licences
Professional services
Client claims
IT and communication expenses2
Depreciation and amortisation
Fair value loss on financial instrument
Impairment expenses
Finance costs
Other general and administrative expenses
(Loss)/Profit before tax
Income tax (benefit)/expense
Net (loss) for the year
Other comprehensive income
14(c)
14(c)
16(a)
14(b)
7.3.2
14(a)
5(a)
Items that will not be reclassified subsequently to profit or loss
Net fair value loss on equity investment designated at FVTOCI3
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
Earnings per share for profit attributable to the ordinary equity
holders of the parent
Basic loss cents per share
Diluted loss cents per share
9
9
Note
4(a)
4(a)
4(b)
4(c)
2020
$’000
130,480
(101,680)
28,800
417
66
2019
$’000
116,859
(86,843)
30,016
628
20
29,283
30,664
4(d)
(17,470)
(18,735)
(306)
(612)
(19)
(732)
(1,401)
(2,379)
(3,608)
(428)
(1,368)
(530)
(271)
(57)
(2,271)
(31,452)
(2,169)
(169)
(2,000)
–
(2,000)
(2,000)
(2,000)
(2,000)
(2,000)
Cents
(1.35)
(1.35)
(420)
(907)
(705)
(423)
(1,551)
(2,108)
(363)
(912)
(777)
(286)
(84)
(26)
(2,147)
(29,444)
1,220
2,796
(1,576)
(600)
(2,176)
(1,576)
(1,576)
(2,176)
(2,176)
Cents
(1.06)
(1.06)
The Consolidated Statement of Profit or Loss and Other Comprehensive Income is to be read in conjunction with
the attached Notes.
1. For comparative purposes the Group reclassified property costs for FY19 due to the adoption of AASB 16 Leases standard.
2. Year on year IT and low value property cost movements are driven by classification changes per AASB 16 Leases standard.
3. Fair value through other comprehensive income.
Consolidated Statement of Profit or Loss and Other Comprehensive Income PAGE 23
Annual Report 2020 |
Consolidated Statement of
Financial Position
As at 30 June 2020
ASSETS
Current
Cash and cash equivalents
Trade and other receivables
Loan receivables
Other assets
Total current assets
Non-current
Loan receivables
Investments
Other assets
Property, plant & equipment
Right-of-use assets
Intangible assets and goodwill
Deferred tax assets
Total non-current assets
TOTAL ASSETS
LIABILITIES
Current
Trade and other payables
Lease liabilities
Lease incentives
Provisions
Total current liabilities
Non-current
Lease liabilities
Provisions
Total non-current liabilities
TOTAL LIABILITIES
NET ASSETS
EQUITY
Contributed equity
Reserves
Accumulated losses
Equity attributable to shareholders
Non-controlling interests
TOTAL EQUITY
Note
6(a)
7.1.2
7.1.3
7.1.3-4
7.1.5
13
14(d)
15
5(d)
7.1.6
14(e)
16
14(e)
16
10(a)
11
2020
$’000
2019
$’000
12,187
7,835
2,448
469
22,939
1,199
116
803
424
954
3,622
2,578
9,696
32,635
9,960
708
–
6,309
16,977
280
527
807
17,784
14,851
34,301
12,918
(32,486)
14,733
118
14,851
7,917
9,183
2,572
756
20,428
4,007
116
886
531
–
2,675
2,409
10,624
31,052
9,430
–
19
4,221
13,670
–
502
502
14,172
16,880
34,673
12,610
(30,521)
16,762
118
16,880
The Consolidated Statement of Financial Position is to be read in conjunction with the attached Notes.
Consolidated Statement of Financial Position | Annual Report 2020
PAGE 24
Consolidated Statement of
Cash Flows
As at 30 June 2020
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
Net cash flows provided by/(used in) operating activities
CASH FLOWS FROM INVESTING ACTIVITIES
Interest received
Repayments on interest bearing loan
Proceeds from investment
Acquisition of intangible assets
Acquisition of property, plant & equipment
Acquisition of subsidiary
Net cash flows provided by investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of lease liabilities
Finance costs
Dividends paid
Payments in respect of share-buy backs and costs
Net cash flows used in financing activities
Note
2020
$’000
2019
$’000
143,858
(138,058)
5,800
–
(1,705)
4,095
386
2,500
–
(173)
(37)
(1,500)
1,176
(600)
(30)
–
(372)
(1,001)
128,456
(125,239)
3,217
(550)
(4,520)
(1,853)
398
500
750
(1,336)
(11)
-
301
–
–
–
–
–
16(a)
6(b)
15
13
12
14(a)
8(a)
Net increase/(decrease) in cash & cash equivalents
4,270
(1,552)
Cash & cash equivalents at the beginning of the year
Cash & cash equivalents at the end of the year
7,917
12,187
9,469
7,917
The Consolidated Statement of Cash Flows is to be read in conjunction with the attached Notes.
Consolidated Statement of Cash Flows 0
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Consolidated Statement of Changes in Equity
| Annual Report 2020
PAGE 26
Notes to the Consolidated
Financial Statements
30 June 2020
Basis of preparation
1. Corporate information ............................................................................................................................................. 27
2. Summary of significant accounting policies .................................................................................................. 27
Financial performance
3. Segment information .............................................................................................................................................. 32
4. Revenue and expenses ........................................................................................................................................... 35
5. Income tax ................................................................................................................................................................. 37
6. Notes to Statement of Cash flows .....................................................................................................................41
Working capital
7. Financial assets, liabilities and related financial risk management ........................................................42
Shareholder returns
8. Dividends .....................................................................................................................................................................59
9. Earnings per share ...................................................................................................................................................59
Capital and funding structure
10. Contributed Equity................................................................................................................................................ 60
11. Reserves ....................................................................................................................................................................... 61
Capital investment
12. Acquisition of subsidiaries ................................................................................................................................... 62
13. Property, plant and equipment ........................................................................................................................64
14. Leases (Group as a lessee) ................................................................................................................................66
15. Intangible assets ....................................................................................................................................................68
Risk management
16. Provisions ................................................................................................................................................................... 74
17. Contingent liabilities ............................................................................................................................................... 76
Other information
18. Remuneration of auditors .................................................................................................................................... 77
19. Information relating to Centrepoint Alliance Limited ............................................................................... 77
20. Related party disclosures .................................................................................................................................. 78
21. Share-based payment plans ............................................................................................................................... 79
22. Events after the financial year .........................................................................................................................80
Notes to the Consolidated Financial Statements PAGE 27
Annual Report 2020 |
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 2020 were authorised for issue in accordance
with a resolution of the Directors on 19 August 2020.
• Revenue from contracts with customers (AASB 15)
– consideration for COVID-19 impact has been
highlighted under the Directors’ Report within
operating and financial review
• Expenses – consideration for COVID-19 impact is
further discussed below in Summary of significant
accounting policies.
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 20.
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.
COVID-19 was reported to the World Health
Organisation as an unknown virus in December 2019,
and spread worldwide throughout the year 2020.
Initially, the effects of the virus were impacting the
travel industry and education providers, however
the impact escalated and has created significant
instability in the financial and commodities markets
globally. Both Federal and State Governments have
implemented various stimulus packages to provide
both financial and non-financial assistance to
affected organisations.
The Group identified various sections in the financial
statements where additional disclosure was
imperative in relation to COVID-19:
• Asset impairment/changes in assumptions
for impairment testing (AASB 136) – Note 15,
which covers recoverability and impairment of
intangible assets
• Change in fair value of assets (AASB 13) – Note 7.3
• Changes in expected credit losses for loans and
other financial assets (AASB 9) – Note 7.2
• Leases (AASB 16) – Note 2.2
AASB 1 Presentation of Financial Statement requires
management to assess the entity’s ability to continue
as a going concern. In making the assessment, the
standard requires that all available information about
the future 12 months from the reporting period or
date of issue of financial statements, needs to be
taken into consideration. Any material uncertainties
that cast significant doubt on the capability to
continue as a going concern such as scope of the
impact on future costs and revenues, need to be
disclosed in the financial statements.
The Group considered the below factors when making
the assessment:
• the extent of operational disruption;
• potential diminished demand for products
or services;
• contractual obligations due or anticipated within
one year;
• potential liquidity and working capital shortfalls;
• access to existing sources of capital (e.g. available
line of credit, government aid); and
• any commercial or operational impact from
COVID-19.
To minimise the impact on operational cash flow in
the current financial year 2020 and early 2021, the
Group has utilised the COVID-19 Government stimulus
where eligible, which included securing monthly
deferrals of the Group’s tax obligations including
GST, PAYG and payroll tax. The payment of these
obligations at 30 June 2020 amounts to $1.4m and
is currently forecast for payment commencing from
September 2020 and will be funded by cash reserves.
In addition, in order to manage working capital
shortfalls, further COVID-19 cash saving initiatives
were implemented from March 2020 via a purchased
leave scheme for employees and a 20% executive
pay cut. This has resulted in a monthly cash saving of
$0.2m (expense saving $0.1m per month). This was a
temporary measure to manage operational cash flow
with the Board approving employment costs reverting
to normal from 1 July 2020.
Notes to the Consolidated Financial Statements | Annual Report 2020
PAGE 28
2. Summary of significant accounting policies continued
Basis of preparation continued
(a) Impact of the new definition of a lease
Positive cash balances are projected over the
next 14 months. Apart from the deferred taxation
obligations, requiring payment from September 2020,
the outflows relate to general operational spend
unrelated to events of COVID-19. Inflows are projected
to increase due to the commencement of the fee
increase from 1 July 2020. At 30 June 2020, the
Group has factored the risk of not realising revenue
due to COVID-19 through an additional 25% ECL to
the collectability of adviser fees receivable relating to
the Group’s authorised representative fees charged
to advisers. This amounted to an additional $18.8k
bringing the total ECL provision to $94k.
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
There are no new Australian Accounting Standards
and Interpretations, that have recently been issued or
amended, which have not been adopted by the Group
for the annual reporting year ended 30 June 2020.
New and revised Standards
AASB 16 Leases
2.1. Impact of initial application of
AASB 16 Leases
In the current year, the Group has applied AASB 16
Leases for the first time (as issued by the AASB in
January 2016), which is effective for annual periods
beginning on or after 1 January 2019.
The date of initial application of AASB 16 for the
Group is 1 July 2019.
AASB 16 introduces new and amended requirements
with respect to lease accounting. It introduces
significant changes to the lessee accounting by
removing the distinction between operating and
finance leases, and requiring the recognition of
right-of-use assets and lease liabilities at the lease
commencement for all leases, except for short-term
leases and leases of low value assets. In contrast
to lessee accounting, the requirements for lessor
accounting have remained largely unchanged. The
impact of the adoption of AASB 16 on the Group’s
consolidated financial statements is described below.
The Group has made use of the practical expedient
available on transition to AASB 16 not to reassess
whether a contract is or contains a lease. Accordingly,
the definition of a lease in accordance with AASB 117
will continue to be applied to those contracts entered
into or modified before 1 July 2019.
The change in definition of a lease mainly relates to
the concept of control. AASB 16 determines whether
a contract contains a lease on the basis of whether
the customer has the right to control the use of an
identified asset for a period of time in exchange for
consideration. The Group applies the definition of a
lease and related guidance set out in AASB 16 to all
lease contracts entered into or modified on or after 1
July 2019 (whether it is a lessor or a lessee in the lease
contract). In preparation for the first-time application
of AASB 16, the Group has determined that the new
definition in AASB 16 will not change significantly the
scope of contracts that meet the definition of a lease
for the Group.
(b) Impact on Lessee Accounting
Former operating leases
AASB 16 changes how the Group accounts for leases
previously classified as operating leases under
AASB 117, which were off-balance-sheet.
Applying AASB 16, for all leases (except as noted
below), the Group:
(a) recognises right-of-use assets and lease liabilities
in the consolidated statement of financial position,
initially measured at the present value of future
lease payments;
(b) recognises depreciation of right-of-use assets
and interest on lease liabilities in the consolidated
statement of profit or loss or other comprehensive
income; and
(c) separates the total amount of cash paid into a
principal and interest portion (both presented
within financing activities) in the consolidated
statement of cash flows.
Lease incentives (such as free rent periods) are
recognised as part of the measurement of right-of-use
assets and lease liabilities, whereas under AASB 117
they resulted in the recognition of a lease incentive
liability, amortised as a reduction of rental expense on
a straight-line basis.
Under AASB 16, right-of-use assets are tested for
impairment in accordance with AASB 136 Impairment
of Assets. This replaces the previous requirement to
recognise a provision for onerous lease contracts.
Notes to the Consolidated Financial Statements PAGE 29
Annual Report 2020 |
2. Summary of significant accounting policies continued
(b) Impact on Lessee Accounting continued
For short-term leases (lease term of 12 months or less) and leases of low-value assets (such as telephone
equipment), the Group has opted to recognise a lease expense on a straight-line basis as permitted by AASB 16.
This expense is presented within ‘Other expenses’ in the consolidated statement of profit or loss or ‘Other
comprehensive income’.
(c) Financial impact of initial application of AASB 16
The application of AASB 16 to leases resulted in the recognition of right-of-use assets and leases liabilities.
This resulted in a decrease in property expense and an increase in depreciation and amortisation expense and
interest expense. The Group has applied an incremental borrowing rate of 3.51% to lease liabilities recognised
in the statement of financial position at the date of initial application. The below table summarises the financial
impact for the financial year end.
AASB 16 Lease Standard Application
Asset Class
Depreciation charge on right-of-use assets
Interest expense on lease liabilities
Variable lease payments
Total cash outflows for leases
Carrying amount of right-of-use assets for the year end
The application of AASB 16 has an impact on the
consolidated statement of cash flows of the Group.
Under AASB 16, lessees must present:
• short-term lease payments, payments for leases of
low-value assets and variable lease payments not
included in the measurement of the lease liabilities
as part of operating activities (the Group has
included these payments as part of payments to
suppliers and employees);
• cash paid for the interest portion of lease liabilities
as either operating activities or financing activities,
(the Group has opted to include the interest paid as
part of financing activities); and
• cash payments for the principal portion for leases
liabilities, as part of financing activities.
Under AASB 117, all lease payments on operating
leases were presented as part of cash flows from
operating activities.
2.2. The Group as a lessee
The Group assesses whether a contract is, or
contains, a lease at inception of a contract. The Group
recognises right-of-use assets and corresponding lease
liabilities with respect to all lease agreements in which
it is the lessee, except for short-term leases (defined
as leases with a lease term of 12 months or less)
and leases of low value assets (such as tablets and
personal computers, small items of office furniture and
telephones). For these leases, the Group recognises
the lease payments as an operating expense on a
straight-line basis over the term of the lease.
Building
($’000)
Equipment
($’000)
Total
($’000)
652
29
275
587
930
12
1
4
13
24
664
30
279
600
954
The lease liabilities are initially measured at the
present value of the lease payments that are not
paid at the commencement date, discounted using
the rate implicit in the lease. If this rate cannot be
readily determined, the Group uses its incremental
borrowing rate.
The lease liabilities are presented as a separate line in
the consolidated statement of financial position.
The lease liabilities are subsequently measured by
increasing the carrying amount to reflect interest
on the lease liabilities (using the effective interest
method) and by reducing the carrying amount to
reflect the lease payments made.
The right-of-use assets comprise the initial
measurement of the corresponding lease
liabilities, lease payments made at or before the
commencement day and any initial direct costs. They
are subsequently measured at cost less accumulated
depreciation and impairment losses.
Whenever the Group incurs an obligation for costs to
dismantle and remove a leased asset, restore the site
on which it is located or restore the underlying asset
to the condition required by the terms and conditions
of the lease, a provision is recognised and measured
under AASB 137. The costs are included in the related
right-of-use asset, unless those costs are incurred to
produce inventories.
Notes to the Consolidated Financial Statements 2. Summary of significant accounting policies continued
| Annual Report 2020
PAGE 30
The Group was assigned a commercial lease as
a result of the acquisition of Enzumo. The office
building has been added to the lease portfolio from
the acquisition date of 17 June 2020.
AASB 16 Leases, requires the acquirer to measure the
acquiree’s lease liability at the present value of the
remaining lease payments as if the acquired lease
were a new lease at the date of acquisition. Measuring
the acquired lease as if it were a new lease at the date
of acquisition includes undertaking a reassessment of
all of the following:
• the lease term;
• any lessee options to purchase the underlying asset;
• lease payments (for example, amounts probable
of being owed by the lessee under a residual value
guarantee); and
• the discount rate for the lease.
The right-of-use asset amortisation continues on
a straight-line basis over the remaining term of
the lease.
The Group recalculated the Enzumo building lease
and recognised right-of-use asset and lease liability at
the same amount using the Group’s IBR of 3.5%.
Basis of consolidation
The consolidated financial statements comprise
the financial statements of the Company and its
subsidiaries as at 30 June 2020.
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 20.
2.2 The Group as a lessee continued
Right-of-use assets are depreciated over the shorter
period of lease term and useful life of the underlying
asset. The depreciation starts at the commencement
date of the lease. The right-of-use assets are
presented as a separate line in the consolidated
statement of financial position.
The Group applies AASB 136 Impairment of Assets to
determine whether a right-of-use asset is impaired,
and accounts for any identified impairment loss. The
impairment assessment performed by the Group
concluded that COVID-19 did not have any adverse
impact and therefore no impairment was taken up for
the year end.
The Group considered below factors:
• incremental borrowing rate for lease calculation
needed to be reconsidered due to the impact of
the COVID-19 pandemic, this included changes to
interest rate and the entity’s own credit risk; and
• operational disruptions associated with COVID-19
(such as office closures) could result in lessors and
lessees agreeing to modify the lease arrangements.
The modification may be in the form of a new lease
or a modified lease.
AASB 16 proposes a practical expedient where the
lessee may select not to assess whether a COVID-19
related rent concession is a lease modification. If the
lessee makes this election, they shall account for any
amendment in lease payments resulting from the
COVID-19 related rent concession in the same way it
would account for the change applying AASB 16 if the
change were not a lease modification.
The Group believes COVID-19 has not impacted the
incremental borrowing rate for lease calculation as it
continues to generate surplus cash at year end and
continues to maintain a strong liquidity management
framework and sufficient cashflow from operations
available to fund general working capital without the
requirement for external funding.
The Queensland office lessor offered deferral of
payment on rent from April to June 2020. The Group
decided to take up this offer and only paid 50% of
rent for those periods. The offer did not modify the
lease contract as it was a deferral of payment not a
rent-free period. The lease contract was not modified
in any way, however the lease liabilities calculation
was adjusted to take into account the deferral of 50%
of the rent amount. The balance of rent from April to
June 2020 of $30k has been accrued to be paid out
from July to December 2020 on a monthly repayment
of $5k.
Notes to the Consolidated Financial Statements PAGE 31
Annual Report 2020 |
2. Summary of significant accounting policies continued
Business combinations
The Group applies the acquisition method in
accounting for business combinations in accordance
with AASB 3 Business combinations. The consideration
transferred by the Group to obtain control of a
subsidiary is calculated as the sum of the acquisition
date fair values of assets transferred, liabilities
incurred and the equity interests issued by the Group,
which includes the fair value of any asset or liability
arising from a contingent consideration arrangement.
Acquisition costs are expensed as incurred.
At the acquisition date, the identifiable assets
acquired and the liabilities assumed are recognised at
their fair value, except that:
• deferred tax assets or liabilities, and assets or
liabilities related to employee benefit arrangements,
are recognised and measured in accordance with
AASB 112 Income taxes and AASB 119 Employee
Benefits respectively;
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.
Accounting estimates with significant areas of
uncertainty and critical judgements have been applied
to the following:
• Intangible assets and goodwill recoverable
• liabilities or equity instruments related to share-
amounts – Note 15
based payment arrangements of the acquiree or
share-based payment arrangements of the Group
entered into to replace share-based payment
arrangements of the acquiree are measured
in accordance with AASB 2 at the acquisition
date; and
• assets (or disposal groups) that are classified
as held for sale in accordance with AASB 5 are
measured in accordance with that Standard.
Goodwill is measured as the excess of the sum of the
consideration transferred, the amount of any non-
controlling interests in the acquiree, and the fair value
of the acquirer’s previously held equity interest in the
acquiree (if any) over the net of the acquisition date
amounts of the identifiable assets acquired and the
liabilities assumed. If, after reassessment, the net of
the acquisition date amounts of the identifiable assets
acquired and liabilities assumed exceeds the sum
of the consideration transferred, the amount of any
non-controlling interests in the acquiree and the fair
value of the acquirer’s previously held interest in the
acquiree (if any), the excess is recognised immediately
in profit or loss as a bargain purchase gain.
With the exception of deferred tax assets and liabilities
related to employee benefits, the Group recognises
the assets acquired and the liabilities assumed of
Enzumo at fair value on acquisition date of 17 June
2020. The Group has recorded goodwill on acquisition
as the consideration transferred is in excess of the net
identifiable assets acquired. The Group does not have
any previously held equity interest in Enzumo or has
acquired any assets held for sale.
• Provision for client claims – Note 16
• Recognition of deferred tax assets – Note 5
• Convertible loan write-down – Note 7.1.4
• Adviser service fees – Note 17.
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.
Notes to the Consolidated Financial Statements | Annual Report 2020
PAGE 32
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
This segment represents the business that provides Australian Financial Services Licence
services to financial advisers and their clients and mortgage broking services
Fund management
and administration
This segment provides investor directed portfolio services and investment management
services to financial advisers, accountants and their clients
Corporate and
unallocated
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 Directors’ report. The accounting policies of the reportable segments are the same as the
Group’s accounting policies. The Group does not currently manage its assets and liabilities on an individual
segment basis.
Notes to the Consolidated Financial Statements PAGE 33
Annual Report 2020 |
3. Segment information continued
Year ended 30 June 2020
Segment revenue
Revenue from contracts with customers
– Authorised representative fees
– Advice revenue
– Product 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 & interest on lease liabilities
– Client claims
– Depreciation and amortisation
– Fair value loss on the financial instrument
– Impairment of assets
– Inter-segment expenses1
Segment profit/(loss) before tax
Income tax (benefit)/expense
Segment profit/(loss) after tax
Addback: Legacy claims expense
Segment profit/(loss) before tax (excl legacy claims)
Statement of Financial Position at 30 June 2020
Total assets
Total liabilities
Net assets
Licensee
& Advice
Services
$’000
Funds
Management &
Administration
$’000
Corporate &
Unallocated
$’000
Total
$’000
7,936
100,890
9,499
922
(96,580)
(1,330)
21,337
22
91
21,450
(13)
(3,618)
(1,044)
–
(263)
(14,575)
598
(155)
753
3,463
4,061
10,862
(9,728)
1,134
–
–
11,231
–
–
(3,770)
7,461
171
(23)
7,609
(0)
10
(75)
–
–
(1,740)
5,189
–
5,189
–
5,189
18,430
(477)
17,953
–
2
–
–
–
–
2
7,936
100,892
20,730
922
(96,580)
(5,100)
28,800
224
(2)
224
417
66
29,283
(44)
(57)
–
(3,608)
(249)
(530)
(8)
16,315
(1,368)
(530)
(271)
–
(7,956)
(2,169)
(14)
(169)
(7,942)
(2,000)
–
(7,956)
3,463
1,294
3,343
32,635
(7,579)
(17,784)
(4,236)
14,851
1.
Inter-segment expenses represent employee related costs and other expenses paid centrally, which are allocated to the segments in
which they are incurred. Year on year inter-segment expense reduction for Licensee and Advice Services, and Funds Management and
Administration, is primarily due to executive employment costs retained in the Corporate segment for 2020 financial year, $1.5m and $0.1m
respectively. Non-executive headcount savings have contributed to a further $0.5m saving for Licensee and Advice Services, and $0.6m
saving for Funds Management and Administration as part of the overall Group expense saving initiative.
Notes to the Consolidated Financial Statements 3. Segment information continued
Year ended 30 June 2019
Segment revenue
Revenue from contracts with customers
– Authorised representative fees
– Advice revenue
– Product 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 and amortisation
– Fair value loss on the financial instrument
– Impairment of assets
– Inter-segment expenses1
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
| Annual Report 2020
PAGE 34
Licensee
& Advice
Services
$’000
Funds
Management &
Administration
$’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)
–
–
12,903
–
–
(4,179)
8,724
236
3
8,963
–
–
(35)
–
–
(17,739)
(2,769)
1,024
3,810
(2,786)
5,651
(1,142)
6,793
–
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)
–
20,508
(5,455)
128
(26)
(363)
(777)
(286)
(84)
–
1,220
2,796
(5,583)
(1,576)
–
–
(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
–
–
5,651
(5,455)
162
1,382
4,041
(568)
3,473
8,810
31,052
(4,946)
(14,172)
3,864
16,880
1. The Inter-segment expenses represent employee related costs and other expenses paid centrally which are allocated to the segments
in which they are incurred. Year on year intersegment expense reduction for Licensee & Advice Services and Funds Management &
Administration is primarily due to executive employment costs retained in the Corporate segment for FY20, $1.5m and $0.1m respectively.
Non-executive headcount savings have contributed to a further $0.5m saving for Licensee & Advice Services, and $0.6m saving for Funds
Management & Administration as part of the overall Group expense saving initiative.
Notes to the Consolidated Financial Statements 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
asset’s net carrying amount on initial recognition.
(c) Other revenue
Other revenue represents other sundry income
received by the Group.
(d) Employee related expenses
Employee related expenses represent employee costs
payable by the Group.
PAGE 35
Annual Report 2020 |
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 receives the
full commission from the product provider and
subsequently pays 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.
Product revenue: The Group earns revenue from its
customers through the provision of fund management
services. 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.
Notes to the Consolidated Financial Statements 4. Revenue and expenses continued
Revenue
Revenue from contracts with customers
– Authorised representative fees
– Advice revenue
– Product revenue
– Virtual services
Total revenue from contracts with customers
Contractual payments to advisers
– Advice revenue paid to advisors
– Fees paid to advisers/fund managers
Total contractual payments to advisers
| Annual Report 2020
PAGE 36
Note
4(a)
2020
$’000
2019
$’000
7,936
100,892
20,730
922
130,480
5,185
86,048
25,080
546
116,859
(96,580)
(5,100)
(81,971)
(4,872)
(101,680)
(86,843)
Gross profit from contracts with customers
28,800
30,016
Interest income
Other revenue
– Cost recoveries from advisers
– Retail and wholesale asset and service fees
– Other
Total other revenue
Gross profit
Employee related expenses
– Wages and salaries
– Share-based compensation expense
– Termination costs
Total employee related expenses
4(b)
4(c)
Note
4(d)
417
628
25
41
–
66
8
10
2
20
29,283
30,664
2020
$’000
17,396
–
74
17,470
2019
$’000
18,167
436
132
18,735
Notes to the Consolidated Financial Statements PAGE 37
Annual Report 2020 |
5. Income tax
(a) Income tax (benefit)/expense
The major components of income tax (benefit)/expense for the years ended 30 June 2020 and 2019 are:
Current income tax
Adjustment to current tax of prior period
Deferred income tax
Deferred income tax charge
Income tax (benefit)/expense
2020
$’000
–
(169)
(169)
2019
$’000
338
2,458
2,796
(b) Amounts charged or credited directly to equity
No income tax was charged directly to equity for the year ended 2020 (2019: nil).
(c) Reconciliation between aggregate tax (benefit)/expense recognised in the income
statement and tax (benefit)/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:
(Loss)/Profit before tax
At the Company’s statutory income tax rate of 30% (2019: 30%)
Non-assessable income
Effective tax losses not recognised
Derecognition of deferred tax on increase of provision for claims
Utilisation of tax losses
Adjustment in respect of current tax of prior years
Aggregate income tax (benefit)/expense
2020
$’000
(2,169)
(651)
268
–
526
(305)
(7)
(169)
2019
$’000
1,220
366
217
2,213
–
–
–
2,796
In the current year there has been a significant reduction in provisions that gave rise to deferred tax assets. The
size of the reduction in provisions, particularly those related to legacy claims and doubtful debts was greater
than tax profit. Accordingly, a significant deferred tax expense has been recognised in the prior year as no
further tax losses are being recognised as noted below.
Notes to the Consolidated Financial Statements | Annual Report 2020
PAGE 38
5. Income tax continued
(d) Recognised deferred tax assets and liabilities
Deferred income tax relates to the following:
Deferred tax liabilities
Prepayments
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
Gross deferred tax assets
Net deferred tax assets
(e) Unrecognised tax losses
Statement of
Financial Position
Statement of
Comprehensive Income
2020
$’000
2019
$’000
2020
$’000
2019
$’000
(11)
(11)
378
699
–
337
85
134
957
–
–
378
625
–
253
92
110
951
2,589
2,589
2,409
2,409
(11)
(11)
–
74
–
84
(8)
23
6
179
7
7
(1,247)
(471)
(165)
162
(28)
(619)
(94)
(2,462)
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
2020
$’000
26,626
35,953
62,579
2019
$’000
27,642
35,953
63,595
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 losses were s decreased by $1.0m.
(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’s 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 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.
Notes to the Consolidated Financial Statements
PAGE 39
Annual Report 2020 |
5. Income tax continued
(b) Current tax
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
(a) 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.
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.
(c) Deferred tax
Deferred tax assets and liabilities are recognised for
all deductible and taxable temporary differences at
the tax rates that are expected to apply to the year
when the asset is realised or liability is settled, based
on tax rates (and tax laws) that have been enacted or
substantially enacted at the reporting date.
Deferred income tax liabilities are recognised on all
taxable temporary differences except:
• When the deferred income tax liability arises
from the initial recognition of Goodwill or of an
asset or liability in a transaction that is not a
business combination and that, at the time of the
transaction, affects neither the accounting profit
nor taxable profit or loss; or
• In respect of taxable temporary difference
associated with investments in subsidiaries,
associates or interests in joint ventures, when the
timing of the reversal of the temporary difference
can be controlled and it is probable that the
temporary difference will not reverse in the
foreseeable future.
Deferred tax assets are recognised for deductible
temporary differences, carry forward tax credits
and any unused tax losses. Deferred tax assets
are recognised to the extent that it is probable
that taxable profit will be available against which
deductible temporary differences, unused tax credits
and unused tax losses can be utilised, except:
• When a deferred tax asset relating to the
deductible temporary difference arises from
the initial recognition of an asset or liability in a
transaction that is not a business combination and,
at the time of the transaction, affects neither the
accounting profit nor taxable profit or loss; 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.
Notes to the Consolidated Financial Statements | Annual Report 2020
PAGE 40
5. Income tax continued
The carrying amount of deferred tax assets is
reviewed at each reporting date and reduced to the
extent that it is no longer probable that sufficient
taxable profit will be available to allow all or part
of the deferred income tax asset to be utilised.
Unrecognised deferred tax assets are reassessed at
each reporting date and are recognised to the extent
that it has become probable that future taxable profit
will allow a deferred tax asset to be recovered.
Deferred tax assets and 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.
(d) 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.
Notes to the Consolidated Financial Statements PAGE 41
Annual Report 2020 |
6. Notes to Statement of Cash flows
(a) Reconciliation of cash and cash equivalents
Cash at bank
Total
2020
$’000
12,187
12,187
(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
Expected credit losses
Loss on disposal of non-current assets
Interest received
Share-based compensation expense
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
2019
$’000
7,917
7,917
2019
$’000
(1,576)
777
286
86
39
(398)
436
813
26
2,221
(368)
301
(4,157)
(24)
(88)
(550)
323
2020
$’000
(2,000)
1,368
530
271
35
(386)
308
1,137
370
(170)
517
432
1,758
(75)
–
–
–
4,095
(1,853)
Notes to the Consolidated Financial Statements | Annual Report 2020
PAGE 42
7. Financial assets, liabilities and related financial risk management
7.1. Categories of financial instruments
Financial assets
Cash and cash equivalents
Trade and other receivables
Loans
Convertible note
Note Classification
7.1.1 Amortised Cost
7.1.2 Amortised Cost
7.1.3 Amortised Cost
7.1.4 FVTPL
Investments in unlisted shares
7.1.5 FVTOCI – equity (designated)
Total financial assets
Financial Liabilities
Trade and other payables
7.1.6 Amortised Cost
2020
$’000
2019
$’000
12,187
7,835
3,647
–
116
7,917
9,183
6,049
530
116
23,785
23,795
9,960
9,960
9,430
9,430
Total financial liabilities
Key accounting policies
Financial instruments
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 fair
value through profit or loss (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
(that is, day one profit or loss);
• In all other cases, the fair value will be adjusted to
bring it in line with the transaction price (that is, day
one profit or loss will be deferred by including it in
the initial carrying amount of the asset or liability).
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 (for example, debt
instruments managed on a fair value basis or held
for sale) and equity investments are subsequently
measured at FVTPL.
Notes to the Consolidated Financial Statements PAGE 43
Annual Report 2020 |
7. Financial assets, liabilities and related financial risk management continued
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 other comprehensive income (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
(for example, 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.
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.
Notes to the Consolidated Financial Statements | Annual Report 2020
PAGE 44
7. Financial assets, liabilities and related financial risk management continued
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.
7.1.1. Cash and cash equivalents
Cash and cash equivalents
Total cash and cash equivalents
7.1.2. Trade and other receivables
Current
Commissions receivable
Trade receivables
Other
Total
Refer to Note 7.2.3.2 for ageing analysis
2020
$’000
12,187
12,187
2019
$’000
7,917
7,917
2020
$’000
2019
$’000
4,373
3,462
–
7,835
7,431
1,609
143
9,183
The Group applies the 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.
Notes to the Consolidated Financial Statements PAGE 45
Annual Report 2020 |
7. Financial assets, liabilities and related financial risk management continued
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 each debtor’s current financial position adjusted for factors that are specific
to the debtor, 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).
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.
7.1.3. 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 – Australian Life Development
2020
$’000
2019
$’000
2,419
2,500
29
–
72
–
2,448
2,572
1,132
671
(604)
1,199
3,647
3,399
680
(602)
3,477
6,049
The Group has $3.5m invested in ALD (2019: $5.9m), represented by the current and non-current loan
receivables above. The loan agreement has interest capitalising at the rate of 2.5% above the 6-month Bank
Bill Swap Rate (the BBSR) as published by the Australian Financial Markets Association, or 12.35% if any
Repayment Amount (or part thereof) is not repaid by the date required under the Loan Agreement. The ALD
loan consists of an interest-bearing loan of $1.0m to Astle Capital Limited (Astle), a related company of
ALD which will become due on or by 31 December 2021. In addition, a $5.1m ALD interest-bearing loan with
semi-annual repayments with final payment due by December 2021. To date, $3.0m has been repaid on the
ALD interest-bearing loan. Interest accrued to date of $0.4m, will be repaid on final loan repayment date in
accordance with ALD loan agreements.
Loans – Financial Advisers
Loans due from financial advisers have terms ranging from one to five years, and varying interest terms at or
above commercial rates. The majority of these loans are secured through charges over assets, by guarantees, or
by retention of financial advice fees.
Notes to the Consolidated Financial Statements 7. Financial assets, liabilities and related financial risk management continued
Expected Credit Losses
| Annual Report 2020
PAGE 46
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 7.2.3.1.
7.1.4. Convertible Note
Convertible note
Total current note
Convertible note
2020
$’000
2019
$’000
602
2
604
2
269
271
557
45
602
45
39
84
2020
$’000
–
–
2019
$’000
530
530
The Group subscribed to $1.2m in a convertible note (the ‘Note’) in R Financial Educators Pty Ltd 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 nil (2019:
$0.5m). The Group has a 15% interest in the business and had invested in the convertible note, which if
converted would increase the Group’s interest by 12% to 27%. The Note is due for repayment in two tranches
commencing July 2020. However given the current cash and financial performance of the loan holder and the
inability to settle on the contractual maturity dates for payment, the Group has subsequently fair valued the
convertible note to nil at 30 June 2020.
7.1.5. Investments in unlisted shares
This represents investments in equity securities that have been classified as fair value through other
comprehensive income.
Investments
Fair value adjustment
Total investments
2020
$’000
116
–
116
2019
$’000
716
(600)
116
In September 2016 $0.1m was invested in Ginger Group, which increased the Group’s equity interest from 37.5%
to 50%. Ginger Group has a 37.5% shareholding in Kepa.
Notes to the Consolidated Financial Statements PAGE 47
Annual Report 2020 |
7. Financial assets, liabilities and related financial risk management continued
7.1.6. Trade and other payables
Current
Amounts payable to financial advisers
Trade payables
Other creditors and accrued expenses
Total
7.2. Financial risk management
7.2.1. Risk exposures and responses
2020
$’000
2019
$’000
5,326
1,674
2,959
9,960
5,694
1,959
1,777
9,430
The Group’s principal financial instruments comprise cash and cash equivalents, trade receivables and payables,
loans, investments in unlisted shares and convertible note.
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 the different types of risks to which it is exposed.
These include monitoring levels of exposure to interest rates, 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.
7.2.2. 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: Aa3) 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 kept to a minimum.
7.2.3. 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:
Notes to the Consolidated Financial Statements | Annual Report 2020
PAGE 48
7. Financial assets, liabilities and related financial risk management continued
Class of financial instrument
Note Financial statement line
Cash and cash equivalents
7.1.1 Cash and cash equivalents
Trade and other receivables
7.1.2 Trade and other receivables
Loans
Total
7.1.3 Loans
Maximum
exposure to
credit risk
$’000
Expected
credit loss
$’000
12,187
10,163
4,251
26,601
–
2,328
604
2,932
Key accounting policies
Impairment of financial assets
The Group recognises loss allowances for expected
credit losses (ECL) 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, that is, 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, that is, 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.
Notes to the Consolidated Financial Statements PAGE 49
Annual Report 2020 |
7. Financial assets, liabilities and related financial risk management continued
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.
7.2.3.1. Measurement of Expected Credit Loss
The key inputs used for measuring ECL are:
• Probability of default (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
of loans going into default. This provides statistical
data that is used in the PD model for calculating
the probability of default.
• Loss given default (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.
• Exposure at 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 2019 and 30
June 2020 are GDP, GDP index, GDP index change
and unemployment. Management have derived that
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 two 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.
Notes to the Consolidated Financial Statements | Annual Report 2020
PAGE 50
7. Financial assets, liabilities and related financial risk management continued
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
2020
Maximum exposure to credit risk
Expected credit loss
Stage 1
$’000
Stage 2
$’000
Stage 3
$’000
Total
$’000
Stage 1
$’000
Stage 2
$’000
Stage 3
$’000
Total
$’000
Cash and cash equivalents
12,187
Trade and other receivables1
Loans
Total
–
10,163
–
–
–
4,251
12,187
10,163
4,251
12,187
10,163
4,251
26,601
–
–
–
–
–
2,328
–
2,328
–
–
604
604
–
2,328
604
2,932
Class of financial instrument
2019
Maximum exposure to credit risk
Expected credit loss
Stage 1
$’000
Stage 2
$’000
Stage 3
$’000
Total
$’000
Stage 1
$’000
Stage 2
$’000
Stage 3
$’000
Total
$’000
Cash and cash equivalents
7,917
Trade and other receivables1
Loans
Total
–
11,265
–
–
–
6,651
7,917
11,265
6,651
7,917
11,265
6,651
25,833
–
–
–
–
–
2,082
–
2,082
–
–
602
602
–
2,082
602
2,684
–
–
–
–
Movement in gross carrying amounts and expected credit losses
There has been no significant movement in the gross carrying amount and expected credit losses of financial
assets of the Group, therefore the movement has not been disclosed.
1. 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.
Notes to the Consolidated Financial Statements PAGE 51
Annual Report 2020 |
7. Financial assets, liabilities and related financial risk management continued
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:
Expected credit loss
Loss allowance as at 1 July 2019
Loss allowance recognised during the year
Loss allowance at 30 June 2020
Expected credit loss
Loss allowance as at 1 July 2018
Loss allowance recognised during the year
Loss allowance at 30 June 2019
2020
2019
Loans
$’000
Trade and other
receivables
$’000
602
2
604
2,082
246
2,328
Loans
$’000
Trade and other
receivables
$’000
557
45
602
3,653
(1,571)
2,082
Total
$’000
2,684
248
2,932
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 providing
support to financial advisers.
At 30 June 2020, the Group made a downward estimate of the fair value of the RFE convertible note based on
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 30 June 2019 to $0.5m with a further $0.5m fair value reduction at 30
June 2020 to nil.
The Group considered the below factors when assessing ECL in relation to impact of COVID-19:
• entity’s ECL needs to factor negative economic position and cash flow difficulties suffered by the customers
due to COVID-19 into the entity’s forecast of future conditions, which may result in increase in provision
for ECLs;
• a heightened probability of default across many borrowers, even those that currently do not exhibit
significant increases in credit risk but may in the future; and
• a higher magnitude of loss given default, due to possible decreases in the value of collateral and other assets.
The amount and timing of the ECL as well as the probability allocated must be founded on rational and
acceptable data that is accessible. This results in a significant judgement area for the Group.
From a review of the recent repayment behaviour and collection history, as a conservative measure giving
consideration to COVID-19, an additional 25% expected credit losses (ECL) has been applied to the Group’s
adviser fee receivables (2019: nil) based on general market risk factoring in potential risk of collectability.
An additional $18.8k in ECL was applied bringing total ECL on trade debtors to $94k.
It has been concluded that no additional ECL was required to be incurred for the Group’s other receivables
and loans (ALD) given the historical loan repayment behaviour and current and future forecasted cash
and profitability.
Notes to the Consolidated Financial Statements | Annual Report 2020
PAGE 52
7. Financial assets, liabilities and related financial risk management continued
Financial instruments classified at FVTPL
The maximum exposure to credit risk of the convertible note held designated at FVTPL is their carrying invested
amount, which was nil at 30 June 2020 (2019: $0.5m). The change in fair value due to credit risk is $0.5m for
the year (2019: $0.2m) and 100% on a cumulative basis as at 30 June 2020 (2019: $0.5m). 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.
7.2.3.2. Analysis of financial instrument by days past due status
Ageing Analysis
Trade receivables
Loan receivables – advisers
Ageing Analysis
Trade receivables
Loan receivables – advisers
7.2.4. Market risk
7.2.4.1. Interest rate risk
Total
$’000
7,835
700
Total
$’000
9,183
752
0–30
Days
$’000
7,708
15
0–30
Days
$’000
8,907
12
31–60
Days
$’000
83
5
31–60
Days
$’000
8
7
2020
61–90
Days
PDNI1
$’000
10
5
2019
61–90
Days
PDNI1
$’000
–
7
61–90
Days
CI
$’000
–
–
61–90
Days
CI
$’000
–
–
+91 Days
PDNI
$’000
+91 Days
CI
$’000
34
207
–
468
+91 Days
PDNI
$’000
+91 Days
CI
$’000
268
106
–
620
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.
1. Past due not impaired (PDNI)
Notes to the Consolidated Financial Statements PAGE 53
Annual Report 2020 |
7. Financial assets, liabilities and related financial risk management continued
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:
2020
Weighted
average
effective
interest
rate
%
Fixed
≤ 6 Months
$’000
Fixed
> 6 Months
$’000
Variable
$’000
Total
carrying
amount per
balance
sheet
$’000
Non–
interest
bearing
$’000
Financial Assets
Cash and cash equivalents
0.68%
Trade and other receivables
Loans
3.27%
Investments in unlisted shares
Total financial assets
Financial Liabilities
Trade and other payables
Total financial liabilities
Net Exposure
280
–
28
–
308
–
–
308
2019
–
–
671
–
671
–
–
11,907
–
2,948
–
–
7,835
–
116
12,187
7,835
3,647
116
14,855
7,951
23,785
–
–
9,960
9,960
9,960
9,960
13,825
671
14,855
(2,009)
Weighted
average
effective
interest
rate
%
Fixed
≤ 6 Months
$’000
Fixed
> 6 Months
$’000
Variable
$’000
Total
carrying
amount per
balance
sheet
$’000
Non–
interest
bearing
$’000
Financial Assets
Cash and cash equivalents
1.46%
3,664
Trade and other receivables
Loans
Convertible note
Investments in unlisted shares
3.76%
2.87%
–
36
–
–
–
–
716
–
–
4,253
–
5,297
530
–
–
9,183
–
–
116
7,917
9,183
6,049
530
116
Total financial assets
3,700
716
10,080
9,299
23,795
Financial Liabilities
Trade and other payables
Total financial liabilities
Net Exposure
7.2.4.2. Price risk
–
–
–
–
–
–
3,700
716
10,080
9,430
9,430
(131)
9,430
9,430
14,365
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.
Notes to the Consolidated Financial Statements | Annual Report 2020
PAGE 54
7. Financial assets, liabilities and related financial risk management continued
7.2.4.3. Liquidity risk
The Group’s objective is to maintain a balance
between continuity of funding and flexibility through
the use of instruments such as bank overdrafts, bank
loans, subordinated debt, preference shares, finance
leases and other committed available credit lines from
time to time as required.
The Group’s policy is to match debt with the nature
and term of the underlying assets. At reporting
date, over 99% (2019: 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 liabilities are
based on management’s expectations.
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, for example, 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 include future interest receivable
or payable.
Financial Assets
Cash and cash equivalents
Trade and other receivables
Loans
Investments in unlisted shares
Total financial assets
Financial Liabilities
Trade and other payables
Total financial liabilities
Net Maturity
Financial Assets
Cash and cash equivalents
Trade and other receivables
Loans
Convertible note
Investments in unlisted shares
Total financial assets
Financial Liabilities
Trade and other payables
Total financial liabilities
Net Maturity
2020
≤ 6 Months
$’000
6–12 Months
$’000
1–5 Years
$’000
Total
$’000
12,187
7,827
29
–
20,043
9,960
9,960
10,083
–
8
–
–
9
–
–
9
–
–
671
116
787
–
–
787
12,187
7,835
700
116
20,838
9,960
9,960
10,878
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
Notes to the Consolidated Financial Statements PAGE 55
Annual Report 2020 |
7. Financial assets, liabilities and related financial risk management continued
7.2.5. Foreign currency risk
The Group undertakes seasonal transactions denominated in foreign currencies (THB, NZD, USD and GBP), and
consequently, exposures to exchange rate fluctuations arise. The transactions include the annual conference, IT
subscriptions and recruitment agency fees.
7.3. 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.
7.3.1. Financial instruments measured at fair value on recurring basis
30 June 2020
Equity instruments designated at FVTOCI
Unlisted shares
Total assets
30 June 2019
Investment securities mandatorily measured at FVTPL
Convertible notes
Equity instruments designated at FVTOCI
Unlisted shares
Total assets
There are no financial liabilities that are measured at fair value.
Level 1
$’000
Level 2
$’000
Level 3
$’000
Total
$’000
–
–
–
–
116
116
116
116
Level 1
$’000
Level 2
$’000
Level 3
$’000
Total
$’000
–
–
–
–
–
–
530
530
116
646
116
646
There have been no transfers between Level 1 and Level 2 categories of financial instruments.
Notes to the Consolidated Financial Statements 7. Financial assets, liabilities and related financial risk management continued
7.3.2. Reconciliation of Level 3 fair value measurements of financial assets
| Annual Report 2020
PAGE 56
30 June 2020
Balance at beginning of year
Total gains or losses:
– in profit or loss
Balance at end of year
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
Fair value measurements
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.
FVTOCI
Unlisted shares
$’000
FVTPL
Convertible notes
$’000
116
–
116
530
(530)
–
FVTOCI
Unlisted shares
$’000
FVTPL
Convertible notes
$’000
2,482
–
–
(1,750)
(16)
(600)
116
6,439
(384)
(5,239)
–
(286)
–
530
To the extent possible, market information is extracted
from either the principal market for the asset or
liability (that is, 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 (that is, 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.
Notes to the Consolidated Financial Statements PAGE 57
Annual Report 2020 |
7. Financial assets, liabilities and related financial risk management continued
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. 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; and
• 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.
7.3.3. 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 which 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.
Notes to the Consolidated Financial Statements | Annual Report 2020
PAGE 58
7. Financial assets, liabilities and related financial risk management continued
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.
Loans
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 2020.
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 $6,993 (2019: $7,721).
For variable rate loans, excluding impaired loans, fair value approximates the
carrying amount as they are repriced frequently.
Trade and other receivables The carrying values of variable rate trade and other receivables approximate their
fair value as they are short-term in nature and reprice frequently.
Trade and other payables
The carrying values of variable rate trade and other payables approximate their
fair value as they are short-term in nature and reprice frequently.
The fair value measurement of assets reflects the market data at the measurement date under current market
conditions. The valuations are subject to substantial measurement uncertainty due to COVID-19. There will
be a growth in the amount of subjectivity involved in fair value measurements specifically those founded
on unobservable inputs. Circumstances may result in the Group selecting more unobservable inputs since
appropriate observable inputs are no longer obtainable.
Factors considered when assessing fair value of assets:
• decline in fair value of financial assets particularly equity securities; and
• ability for debtors to comply with the terms of loans and similar instruments affected.
The Group’s assets currently measured at fair value is RFE. As per note 7.1.4, the Group has subsequently fair
valued the RFE convertible note to nil, which is unrelated to COVID-19.
Notes to the Consolidated Financial Statements PAGE 59
Annual Report 2020 |
8. 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
2020
$’000
2019
$’000
–
–
–
–
–
–
2020
$’000
2019
$’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.
9. Earnings per share
Key accounting policies
Earnings per share
Basic EPS is calculated as net profit attributable to members of the Company, adjusted to exclude any costs of
servicing equity (other than dividends) and preference dividends, divided by the weighted average number of
ordinary shares, adjusted for any bonus element.
Diluted EPS is calculated as net profit attributable to members of the Company, adjusted for:
• Costs of servicing equity (other than dividends) and preference share dividends;
• The after-tax effect of dividends and interest associated with dilutive potential ordinary shares that have been
recognised as expenses; and
• Other non-discretionary changes in revenues or expenses during the year that would result from the dilution
of potential dividends by ordinary shares.
The following reflects the income used in the basic and diluted earnings per share (EPS) computations:
(a) Profit used in calculating profit per share
Net (loss) attributable to ordinary equity holders of the Company
Net (loss) attributable to ordinary equity holders of the Company
(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
2020
$’000
(2,000)
(2,000)
2019
$’000
(1,576)
(1,576)
No. of shares No. of shares
147,739,253
148,882,969
13,650,273
9,101,781
161,389,526
157,984,750
(1.35)
(1.35)
(1.06)
(1.06)
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.
Notes to the Consolidated Financial Statements
| Annual Report 2020
PAGE 60
10. 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.
On 30 March 2020, the Group purchased 4,600,000 million ordinary shares for $0.37m via an on-market
share buy-back.
(a) Paid up capital
Ordinary shares
Reserved shares
Reference
(i)
(ii)
2020
$’000
34,301
–
34,301
2019
$’000
34,673
–
34,673
2020
2019
Number of
shares
$’000
Number of
shares
$’000
(i) Ordinary shares (issued & fully paid)
Balance at start of year
148,882,969
34,673
156,932,969
39,108
Movements during the year:
– cancellation of shares
– share buy–back
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
–
–
(8,050,000)
(4,435)
(4,600,000)
144,282,969
(372)
34,301
148,882,969
34,673
–
–
–
–
–
–
(8,050,000)
(4,435)
8,050,000
–
4,435
–
Total contributed equity
144,282,969
34,301
148,882,969
34,673
(b) Capital management
The Company’s capital is currently only comprised of shareholder funds. When managing capital, management’s
objective is to ensure the entity continues as a going concern, as well as to maintain optimal returns to
shareholders and benefits for other stakeholders. Management also aims to maintain a capital structure that
ensures the lowest cost of capital available to the entity.
Subsequent to balance date the Directors resolved not to declare a final dividend having referred to the
dividend policy and strategic direction of the business.
Notes to the Consolidated Financial Statements PAGE 61
Annual Report 2020 |
11. 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
Balance at end of year
2020
$’000
1,259
11,659
12,918
2020
$’000
951
308
1,259
2019
$’000
951
11,659
12,610
2019
$’000
515
436
951
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, 4,000,000 performance rights were issued to the senior executives of the Group
as follows:
Performance rights
Senior Executives
No. of shares
Vesting period
Issue price
Fair Value at
issue date
4,000,000
2.83 years
$0.1250
$0.0579
(b) Dividend reserve
Balance at start of year
Dividends paid
Transfer from current year profits
Balance at end of year
2020
$’000
2019
$’000
11,659
11,659
–
–
–
–
11,659
11,659
Notes to the Consolidated Financial Statements | Annual Report 2020
PAGE 62
12. Acquisition of subsidiaries
On 17 June 2020, the Group paid $1.5m in cash to acquire 100% of the Enzumo financial planning technology
solutions business comprising Enzumo Corporation Pty Ltd and Enzumo Consulting Pty Ltd, from Chant West
Holdings Limited (ASX: CWL). As part of the acquisition, the Group has recognised right-of-use assets (ROU)
and lease liability of $0.17m. This is consolidated in the Group and shown in Note 14.
Enzumo specialises in financial planning software consulting, customisation and implementation across
Australia. By delivering technology customisation and integration services to dealer groups and financial
planners and advisers, Enzumo helps to improve business efficiencies that contribute to client engagement, as
well as revenue growth.
Enzumo’s offerings are highly complementary to the Group’s advice services business, bringing a new and highly
valued extension to the Company’s offering to financial advisers, at a time when the Group identifies the rising
demand for technology support services from both authorised representatives and self-licensed businesses.
12.1. Impact of acquisition on the results of the Group
From the acquisition date to 30 June 2020, Enzumo contributed revenue of $145k and profit of $35k to the
Group’s results. The Group has accounted for this profit in retained earnings at 30 June 2020.
12.2. Acquisition related costs
The Group incurred acquisition related costs of $24.2k for legal and professional fees and these have
been expensed.
12.3. Consideration transferred
The below table outlines the purchase consideration resulting from the acquisition.
Cash
Total
Enzumo
Corporation
$’000
Enzumo
Consulting
$’000
1,135
1,135
339
339
Notes to the Consolidated Financial Statements PAGE 63
Annual Report 2020 |
12. Acquisition of subsidiaries continued
12.4. Assets acquired and liabilities assumed at the date of acquisition
The following table summarises the recognised amount of assets acquired and liabilities assumed at the date
of acquisition.
Enzumo
Corporation
$’000
Enzumo
Consulting
$’000
Total
$’000
Current assets
Cash and cash equivalents
Trade receivables
Prepayments
Intercompany loan
Non–current assets
Other assets
Plant and equipment
Right–of–use assets
Intangible assets
Current liabilities
Trade and other payables
Lease liabilities
Provisions
Non-current liabilities
Lease liabilities
Provisions
Net identifiable assets acquired
Goodwill arising on acquisition
Net assets acquired
223
100
65
(61)
32
47
180
885
(207)
(64)
(113)
(119)
(69)
899
899
–
125
–
61
–
–
–
264
(14)
–
–
–
–
436
436
223
225
65
–
32
47
180
1,149
(221)
(64)
(113)
(119)
(69)
1,335
139
1,474
The fair value of the trade and other receivables acquired as part of the business combination amounted to
$0.22m. Note that the assets acquired varied from the $1.5m cash consideration paid due to $26k working
capital adjustment in the completion accounts.
12.5. Goodwill arising on acquisition
Goodwill of $0.14m arising from the acquisition is principally associated with projected future profitability,
growth prospects and significant skill and proficiency of the long-serving Enzumo personnel.
Goodwill arose in the acquisition of Enzumo because the acquisition included the customer lists and trade name
of Enzumo as part of the acquisition. These assets were identified and separately recognised from goodwill.
None of the goodwill arising on this acquisition is expected to be deductible for tax purposes.
Notes to the Consolidated Financial Statements | Annual Report 2020
PAGE 64
12. Acquisition of subsidiaries continued
12.6. Net cash outflow arising on acquisition of businesses
Consideration paid in cash
Less: Cash and cash equivalent balances acquired
Net outflow of cash – investing activities
13. Property, plant and equipment
Key accounting policies
2020
$’000
1,474
(255)
1,219
2019
$’000
–
–
–
At each reporting date, the Group assesses whether there is any indication that an asset may be impaired.
Plant and equipment are carried at cost, net of accumulated depreciation and any accumulated impairment
losses. The carrying values of plant and equipment are reviewed for impairment when events or changes in
circumstances indicate the carrying value may not be recoverable.
Where an indicator of impairment exists, the Group makes a formal estimate of recoverable amount. Where the
carrying amount of an asset exceeds its recoverable amount, an impairment loss is recognised and the asset is
written down to its recoverable amount. The recoverable amount of plant and equipment is the greater of fair
value less costs to sell and value in use.
In assessing value in use, estimated future cash flows are discounted to their present value using a pre-tax
discount rate that reflects current market assessments of the time value of money and the risks specific to
the asset.
For an asset that does not generate largely independent cash inflows, the recoverable amount is determined by
reference to the cash-generating unit to which the asset belongs.
Depreciation is calculated on a straight-line basis over the estimated useful lives of the assets as follows:
Asset
Plant and equipment
Leasehold improvements
Motor vehicles
Useful Life
2–7 years
Lease term
5 years
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.
Notes to the Consolidated Financial Statements PAGE 65
Annual Report 2020 |
13. Property, plant and equipment continued
Cost
At 1 July 2018
Reclassification
Additions
Disposals
At 30 June 2019
Additions
Disposals
At 30 June 2020
Depreciation and impairment
At 1 July 2018
Depreciation charge for the year
Disposals
At 30 June 2019
Depreciation charge for the year1
Disposals
At 30 June 2020
Net carrying value
At 30 June 2020
At 30 June 2019
Leasehold
Improvements
$’000
Plant & Equipment
$’000
Total
$’000
1,986
–
–
–
1,986
–
(451)
1,535
1,677
99
–
1,776
54
(420)
1,410
125
210
3,099
(135)
11
(110)
2,865
117
(23)
2,959
2,457
157
(70)
2,544
134
(18)
2,660
299
321
5,085
(135)
11
(110)
4,851
117
(474)
4,494
4,134
256
(70)
4,320
188
(438)
4,070
424
531
1. The depreciation charge for the year included plant & equipment for Enzumo. Enzumo Profit or Loss amount has not been reflected in the
Statement of Profit or Loss and Other Comprehensive Income. Therefore, the depreciation expense does not agree to the Statement of Profit
or Loss and Other Comprehensive Income.
Notes to the Consolidated Financial Statements | Annual Report 2020
PAGE 66
14. Leases (Group as a lessee)
(a) Finance costs
The table below summarises the finance costs for the Group:
Bank interest charges
Interest on lease liabilities
(b) Depreciation and amortisation
The table below summarises the depreciation and amortisation for the Group:
ALD legal costs
Intangibles
Property, plant & equipment
Right-of-use assets
2020
$’000
27
30
57
2020
$’000
36
514
154
664
1,368
2019
$’000
26
–
26
2019
$’000
74
447
256
–
777
(c) Amounts recognised in statement of profit or loss and other comprehensive income
The Group has elected not to recognise lease liabilities for short-term leases (leases with a term of 12 months or
less) and leases of low value assets. Payments made for such leases are expensed on a straight-line basis. The
variable payments associated with the Group’s building and equipment leases are recognised as expense as they
are incurred.
The table below summarises the amounts recognised in profit or loss and other comprehensive income for
the year:
Depreciation expense on right-of-use assets
Interest expense on lease liabilities
Expenses relating to short-term leases
Expenses relating to low value assets
Expenses relating to variable lease payments not included in the
measurement of the lease liabilities
2020
$’000
664
30
19
435
279
1,427
2019
$’000
–
–
–
–
–
–
Notes to the Consolidated Financial Statements PAGE 67
Annual Report 2020 |
14. Leases (Group as a lessee) continued
(d) Right-of-use assets
The table below summarises the carrying amount of the right-of-use assets for the Group’s building and
equipment leases:
Cost
At 1 July 2019
Additions
At 30 June 2020
Accumulated depreciation
At 1 July 2019
Charge for the year
At 30 June 2020
Carrying amount
At 30 June 2020
Building
$’000
Equipment
$’000
–
1,584
1,584
–
654
654
930
–
36
36
–
12
12
24
Total
$’000
–
1,620
1,620
–
666
666
954
The Group leases include buildings and the average lease term is three years (2019: Four years).
Approximately 75% of the leases expired in the current financial year. The expired contracts were replaced by
new leases for identical underlying assets. From the adoption date, the Group recognised right-of-use assets of
$1.45m and Enzumo acquisition resulted in the addition of $0.17m (2019: nil).
(e) Lease liabilities
The table below summarises the carrying amount of the lease liabilities for the Group’s building and
equipment leases:
Current
Non-current
2020
$’000
708
280
988
2019
$’000
–
–
–
(f) Reconciling operating lease commitments to lease liabilities
The table below summarises the reconciliation process between operating lease commitments to lease liabilities
for the Group:
Reconciling operating lease commitments to lease liabilities
Commitments as at 30 June 2019
Adjustment to commitments
Operating lease commitments as at 30 June 2019
Less: Short term leases
Discounting effects using incremental borrowing rates as at 1 July 2019
Finance lease liabilities as at 1 July 2019
Repayment of lease liabilities
Additional lease liabilities due to new contract and Enzumo acquisition
Lease liabilities as at 30 June 2020
$’000
1,246
39
1,285
(487)
(23)
775
(600)
813
988
Notes to the Consolidated Financial Statements 14. Leases (Group as a lessee) continued
14.1. Maturity analysis of lease liabilities
The table below summarises maturity analysis of lease
liabilities for the Group:
Year 1
Year 2
Year 3
Total
2020
$’000
729
232
53
1,014
15. Intangible assets
Key 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
are expected to benefit from the synergies of the
business combination.
A cash-generating unit or groups of cash-generating
units to which goodwill or other identifiable
intangibles, such as Enzumo client lists, have been
allocated and are tested for impairment annually, or
more frequently if events or changes in circumstances
indicate that goodwill or other identifiable intangibles
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 or other identifiable
intangibles 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 or other identifiable
intangible is included in the determination of the
profit or loss on disposal.
| Annual Report 2020
PAGE 68
Intangible assets acquired in a
business combination
Intangible assets acquired in a business combination
and recognised separately from goodwill are
recognised initially at their fair value at the acquisition
date (which is regarded as their cost). Subsequent
to initial recognition, intangible assets acquired
in a business combination are reported at cost
less accumulated amortisation and accumulated
impairment losses, on the same basis as intangible
assets that are acquired separately.
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)
• Enzumo Corporation & Consulting Pty Ltd
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 (CGU). The cash flows were
based on projections of future earnings after adjusting
for taxation, depreciation and amortisation, forecast
capital expenditure and working capital changes.
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 2021-2025 represents the
Group’s estimate of future cash flows 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% (2019: 1.0%) represents
the terminal growth rate (beyond five years).
• Discount rate 13.10% (2019: 12.35%) is the discount
rate used in impairment testing for all CGUs at
30 June 2020. The business believes the discount
rate applied is appropriate based upon the risks
inherent in the business.
Notes to the Consolidated Financial Statements PAGE 69
Annual Report 2020 |
15. Intangible Assets continued
Key estimates continued
• Goodwill
– the testing for write-down or impairment of
a substantial asset group;
– a loss of key personnel that is other than
temporary (such as death);
– a significant decline in the entity’s share price,
which could result in the carrying amount of
the entity’s net assets exceeding its market
capitalisation; and
– a significant adverse modification in legal
aspects or in the business climate.
The impairment assessment performed by the Group
concluded that the underlying future cash flows will
not be impacted by any business risk, and a further
evaluation of COVID-19 impacts also concludes no
adverse impact on future cash flows. As a result, no
impairment was taken up for the year end.
The goodwill and other identifiable intangibles
disclosed in the Statement of Financial Position at 30
June 2020 were supported by the impairment testing
and no impairment adjustment was required.
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. Forecast fees
would need to decrease by 11% in FY22 and remain
flat from FY23 to FY25 with a 10% reduction in the
employment cost base from FY22 to FY25, before
the 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 45%
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.
As a result of COVID-19, the measures undertaken
by Federal and State Governments have required
businesses to review their operations and follow
social distancing rules. These have had an economic
and financial impact, and are therefore required to be
considered for indication of impairment.
In determining the recoverable value of non-financial
assets, the Group considered the below factors:
• Property, plant and equipment and intangible assets
– decrease in market interest rates causes a
decrease in the asset’s value in use;
– significant changes in the extent or way in which
the asset is used or is expected to be used;
– a decline or termination of the need for the
services provided by the asset; and
– significant changes in the legal aspects or
business climate that could affect the worth of
the asset.
Notes to the Consolidated Financial Statements 15. Intangible Assets continued
Intangible
asset
Description of the Group’s
intangible assets
Cash
Generating
Units
Goodwill
Goodwill was created
during 2012 on the
acquisitions of the
externally owned interests
in Ventura Investment
Management Limited of
$93k and in Centrepoint
Alliance Lending Pty Ltd
(previously Centrepoint
Lending Solutions Pty Ltd)
of $863k.
Goodwill was created on
the acquisition of Enzumo
on 17 June 2020 of $0.13m.
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 $1.09m.
| Annual Report 2020
PAGE 70
Key Accounting Policies
Impairment Test
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
capital and terminal growth rate are
the same across all CGUs.
Goodwill acquired in a business
combination is initially measured at
cost, being the excess of the cost of
the business combination over the
Group’s interest in the net fair value
of the identifiable assets, liabilities
and contingent liabilities.
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 1.0%
(2019: 1.0%)
Cost of capital: 13.10%
(2019: 12.35%)
The testing resulted in no
impairment being required.
No indicators of impairment are
noted for the remaining CGUs.
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.
Notes to the Consolidated Financial Statements PAGE 71
Annual Report 2020 |
15. Intangible Assets continued
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 2020 of $1.1m
(2019: $0.35m).
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 arise.
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 four years and one year
respectively.
Cash flows associated with
remaining advisers and clients are
inflated only at CPI with no growth
assumed.
Cost of capital: 13.10%
(2019: 12.35%).
The testing resulted in no
impairment losses.
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.
Notes to the Consolidated Financial Statements 15. Intangible Assets continued
Intangible
asset
Software
Description of the Group’s
intangible assets
The Group has developed
or acquired software,
which are being amortised
over their expected
useful lives.
The Group has acquired
software as part of the
Enzumo acquisition at
fair value on acquisition
date as determined by an
independent valuer.
This has been written
down to nil at the time of
acquisition.
| Annual Report 2020
PAGE 72
Key Accounting Policies
Impairment Test
The value of the developed or
acquired software of the Group is
amortised on a straight-line basis
over a 5-year period, which the
Directors assess as the intangible
asset’s useful life. No software is
considered to be impaired.
Under the Accounting 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 the 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.
Client
contracts
(Customer
relationships)
Brands and
trademarks
The Group has acquired
client contracts as part of
the Enzumo acquisition at
fair value on acquisition
date as determined by an
independent valuer.
The current carrying value
of customer relationships
is $1m.
The Group has acquired
the Enzumo Brand and
trademark as part of the
Enzumo acquisition at
fair value on acquisition
date as determined by an
independent valuer.
The current carrying value
of trade name $0.1m.
The client contracts are acquired in
a business combination as its fair
value as at the date of acquisition.
Following initial recognition, the
intangible asset – client contracts,
are carried at cost less any
accumulated amortisation and any
accumulated impairment losses.
The value of the acquired client
contracts is amortised on a
straight-line basis over the period
in which future economic benefits
are expected to be derived,
being a period of 10 years. No
client contracts are considered to
be impaired.
The Enzumo brand and trademark
is acquired in a business
combination as its fair value as
at the date of acquisition. They
have an indefinite useful life
and following initial recognition,
Enzumo brand is carried at cost
less any impairment losses.
The value of the acquired Enzumo
brand is not amortised as they are
seen to have an indefinite useful life
which will be impairment tested on
an annual basis. To date, the brand
is not considered to be impaired.
The estimated useful lives in the current and comparative periods are as follows:
Software
Network and Client Lists
5 years
5–15 years
Notes to the Consolidated Financial Statements PAGE 73
Annual Report 2020 |
15. Intangible Assets continued
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.
15.1.1. Reconciliation of carrying amounts at the beginning and end of the financial year
Financial year ending 30 June 2020
At 1 July 2019 net of accumulated
amortisation and impairment
Reclassification
Additions
Amortisation
Goodwill
$’000
Software
$’000
Network &
Client Lists
$’000
Trade
Name
$’000
Total
$’000
956
–
139
–
1,371
–
173
(269)
348
–
1,048
(245)
–
2,675
101
–
–
1,461
(514)
At 30 June 2020 net of accumulated
amortisation and impairment
1,095
1,275
1,151
101
3,622
At 30 June 2020
Cost
Accumulated amortisation and impairment
Net carrying value
1,348
(253)
1,095
5,283
11,568
(4,008)
(10,417)
1,275
1,151
101
–
101
18,300
(14,678)
3,622
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
Goodwill
$’000
Software
$’000
Network &
Client Lists
$’000
Trade
Name
$’000
956
75
620
–
–
–
135
1,202
(41)
–
134
(406)
956
1,371
348
1,209
(253)
956
5,110
10,520
(3,739)
(10,172)
1,371
348
–
–
–
–
–
–
–
–
Total
$’000
1,651
135
1,336
(447)
2,675
16,839
(14,164)
2,675
Notes to the Consolidated Financial Statements | Annual Report 2020
PAGE 74
16. Provisions
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 provision for general claims is the estimated cost of resolving claims from external parties that may arise as
the Group becomes aware of them.
Based on information currently available, 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.
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. The liability is measured at the present value of the future costs that the
Group expects to incur to settle the claims.
Employee benefits
Provision is made for employee benefits accumulated as a result of employees rendering
services up to the reporting date. These benefits include wages and salaries, annual
leave and long service leave.
Liabilities for wages and salaries, including non-monetary benefits, annual leave, and
other benefits, expected to be settled wholly within 12 months of the reporting date are
measured at the amounts due to be paid when the liability is settled.
The liability for long service leave is recognised and measured as the present value of
expected future payments to be made in respect of services provided by employees
up to the reporting date using the projected unit credit method. Consideration is given
to the expected future wage and salary levels, experience of employee departures, and
periods of service. Expected future payments are discounted using market yields at the
reporting date on national government bonds with terms to maturity and currencies
that match, as closely as possible, the estimated future cash outflows.
Make good costs for
leased property
A provision for make good costs for leased property is recognised when a make good
obligation exists in the lease contracts.
The provision is the best estimate of the present value of the expenditure required to
settle the make good obligation at the reporting date. Future make good costs are
reviewed annually and any changes are reflected in the present value of the make good
provision at the end of the financial year. The unwinding of the discounting is recognised
as a finance cost.
Notes to the Consolidated Financial Statements PAGE 75
Annual Report 2020 |
16. Provisions continued
Current
Provision for claims
Provision for employee entitlements
Property make good
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
2020
$’000
3,019
3,169
121
6,309
–
432
95
527
2019
$’000
1,232
2,963
26
4,221
29
208
265
502
2020
$’000
2019
$’000
1,261
5,418
3,463
(1,705)
3,019
2020
$’000
363
(4,520)
1,261
2019
$’000
3,171
2,867
3,499
(3,069)
3,601
2020
$’000
291
(75)
216
3,332
(3,028)
3,171
2019
$’000
315
(24)
291
Notes to the Consolidated Financial Statements | Annual Report 2020
PAGE 76
17. Contingent liabilities
Client claims
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 had approved
a change to AFCA rules to allow it to investigate certain complaints dating back to 1 January 2008. It was
noted in the 2019 accounts that the Group was unable to reliably estimate the quantum of such claims, and
accordingly no specific provision was made for them. The AFCA extension period is now complete and the
Group has provided for known obligations based on historical information at 30 June 2020 (refer to provisions
note 16 (b)).
Adviser service fees
Under the service arrangements with authorised representatives, customers generally pay an adviser a service
fee to receive an annual review, together with other services. The Group is assessing whether customers 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 customer compensation is probable – and can be reliably estimated, a provision has been
taken at 30 June 2018.
The assessment process of identifying customers associated with authorised representatives licensed by
the Group’s wholly owned subsidiaries, Professional Investment Services (PIS) and Alliance Wealth (AW),
commenced in February 2019.
The assessment process is well progressed. To date, out of 214 PIS and AW practices, 115 (54%) have been
reviewed with 10% identified with a Fee for No Service issue. Refunds of $0.3m are being paid or are expected to
be paid by the practices. As no current potential obligation for the Group exists and review is on-going, it is not
practicable to provide an estimate of final remediation costs. Refund amounts identified up to 19 August 2020
are not material and accordingly, no provision has been recognised in relation to this matter at 30 June 2020.
Notes to the Consolidated Financial Statements PAGE 77
Annual Report 2020 |
18. Remuneration of auditors
The primary auditor of the Group was Deloitte Touche Tohmatsu.
Amounts received or due and receivable by Deloitte Touche Tohmatsu
Fees to the group auditor for the audit or review of the statutory
financial reports of the Group, subsidiaries and joint operations
Fees for statutory assurance services that are required by legislation to
be provided by the auditor
Fees for other services
19. Information relating to Centrepoint Alliance Limited
The Consolidated Financial Statements of the Group are:
Current assets
Non-current assets
Current liabilities
Non-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 (2019: nil).
2020
$’000
2019
$’000
396
101
60
557
2020
$’000
18,260
2,906
(157)
(16)
417
59
141
617
2019
$’000
23,965
5,596
(21)
–
20,993
29,540
33,126
10,504
(22,637)
20,993
(7,852)
(7,852)
33,497
10,504
(14,461)
29,540
(6,409)
(6,409)
Notes to the Consolidated Financial Statements | Annual Report 2020
PAGE 78
20. Related party disclosures
(a) Information relating to subsidiaries
Name
Licensee & Advice Services
Country of
Incorporation
Ownership
Interest
Principal Activity
2020
2019
Centrepoint Alliance Lending Pty Ltd
Australia
100% 100% Mortgage broker/aggregator
Alliance Wealth Pty Ltd
Australia
100% 100% Financial advice
Professional Investment Services Pty Ltd Australia
100% 100% Financial advice
Associated Advisory Practices Pty Ltd
Australia
100% 100% Support services AFSL licensee
xseedwealth Pty Ltd
Australia
100% 100% Salaried advice
Funds Management and Administration
Investment Diversity Pty Ltd
Australia
100% 100% Packages investment platforms
Ventura Investment Management Limited Australia
100% 100% Packages managed funds
Corporate
Centrepoint Alliance Services Pty Ltd
Australia
100% 100% Trustee – employee share plan
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)
Australia
Australia
Australia
Australia
100% 100% Service company
100% 100% Holding company
56%
56% Financial services
100% 100% Dormant
Professional Accountants Pty Ltd
Australia
100% 100% Loans to advisers
Ginger Group Financial Services Limited
New Zealand
50%
50% Financial advice
Enzumo Corporation Pty Ltd
Enzumo Consulting Pty Ltd
Australia
Australia
100%
100%
– Service company
– Consulting services
(b) Ultimate parent
The ultimate holding company is Centrepoint Alliance Limited, a company incorporated and domiciled
in Australia.
(c) Terms and conditions of transactions with related parties other than KMP
Sales to and purchases from related parties are made on terms equivalent to those that prevail in arm’s length
transactions. Outstanding balances at 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 2020, the Group has not recorded any impairment of receivables relating to
amounts owed by related parties (2019: 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.
Notes to the Consolidated Financial Statements PAGE 79
Annual Report 2020 |
20. Related party disclosures continued
(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
2020
$’000
1,287
52
–
0
–
1,339
2019
$’000
1,485
76
–
289
233
2,083
In addition to the above compensation provided to Directors and other KMP, out of pocket costs for Peter
Loosmore (Interim Chief Financial Officer) of $1,322 have been incurred in the financial year (2019: $2,262).
21. 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:
2020
$’000
308
308
2019
$’000
436
436
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.
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.
Notes to the Consolidated Financial Statements | Annual Report 2020
PAGE 80
21. Share-based payment plans continued
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
The 12,000,000 performance rights issued in previous financial years have not yet vested, and 4,000,000
performance rights were granted in the financial year.
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.
(i) Shares under the CAESP
Outstanding at beginning of the financial year
Forfeited during the financial year
Outstanding at end of period
(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
Outstanding at end of financial year
22. Events after the financial year
2020
No
WAEP1
2019
No
–
–
–
12,000,000
4,000,000
–
–
16,000,000
–
–
–
–
–
–
–
–
8,050,000
(8,050,000)
–
2,450,000
9,550,000
–
–
12,000,000
WAEP1
0.18
(0.18)
–
–
–
–
–
–
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 the subsequent financial year.
1. WAEP is weighted average exercise price.
Notes to the Consolidated Financial Statements PAGE 81
Annual Report 2020 |
Directors’ Declaration
30 June 2020
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 2020 are in accordance with the Corporations Act 2001, including:
(i) giving a true and fair view of its financial position as at 30 June 2020 and of its performance for the
year ended on that date; and
(ii) complying with Australian Accounting Standards (including the Australian Accounting
Interpretations) and the Corporations Regulations 2001;
(b) the financial statements and notes also comply with International Financial Reporting Standards as
disclosed in Note 2; and
(c) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they
become due and payable.
2. This declaration has been made after receiving the declarations required to be made to the Directors by the
Chief Executive Officer and Chief Financial Officer in accordance with section 295A of the Corporations Act
2001 for the financial year ended 30 June 2020.
On behalf of the Directors:
A. D. Fisher
Chairman
19 August 2020
Directors’ Declaration | Annual Report 2020
PAGE 82
Independent Auditor’s Report
Independent Auditor’s report to the Directors of Centrepoint Alliance
Deloitte Touche Tohmatsu
ABN 72 490 121 060
Grosvenor Place
225 George Street
Sydney NSW 2000
Independent Auditor’s Report to the members of
Centrepoint Alliance Limited
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of Centrepoint Alliance Limited (the “Company”) and its
controlled entities (the “Group”) which comprises the consolidated statement of financial position as
at 30 June 2020, the consolidated statement of statement of profit or loss and other comprehensive
income, the consolidated statement of changes in equity and the consolidated statement of cash flows
for the year then ended, and notes to the financial statements, including a summary of significant
accounting policies and other explanatory information, and the directors’ declaration.
In our opinion, the accompanying financial report of the Group is in accordance with the Corporations
Act 2001, including:
(i)
giving a true and fair view of the Group’s financial position as at 30 June 2020 and of its
financial performance for the year then ended; and
(ii)
complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial
Report section of our report. We are independent of the Group in accordance with the auditor
independence requirements of the Corporations Act 2001 and the ethical requirements of the
Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional
Accountants (including Independence Standards) (the Code) that are relevant to our audit of the
financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with
the Code.
We confirm that the independence declaration required by the Corporations Act 2001, which has been
given to the directors of the Company, would be in the same terms if given to the directors as at the
time of this auditor’s report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.
Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited (“DTTL”), its global network of member firms, and their related entities (collectively, the
“Deloitte organisation”). DTTL (also referred to as “Deloitte Global”) and each of its member firms and related entities are legally separate and independent
entities, which cannot obligate or bind each other in respect of third parties. DTTL and each DTTL member firm and related entity is liable only for its own acts
and omissions, and not those of each other. DTTL does not provide services to clients. Please see www.deloitte.com/about to learn more.
Liability limited by a scheme approved under Professional Standards Legislation.
Member of Deloitte Asia Pacific Limited and the Deloitte organisation.
Independent Auditor’s Report
PAGE 83
Annual Report 2020 |
Independent Auditor’s Report
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance in
our audit of the financial report for the current period. These matters were addressed in the context
of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters.
Key Audit Matter
Impairment of non-current assets including
goodwill and intangible assets
How the scope of our audit responded to the
Key Audit Matter
In conjunction with our valuation specialists our
procedures included, but were not limited to:
Refer to:
Obtaining
- Note 2 Significant accounting policies
- Note 15 Intangible assets
Included in the group’s consolidated statement
of financial position as at 30 June 2020 are
intangible assets, goodwill and property, plant
and equipment totalling $3.5m arising from
acquisitions of businesses, software and client
lists.
Management assesses impairment indicators at
each reporting date and conducts impairment
tests where indicators exist, or goodwill exists
within a Cash Generating Unit (‘CGU’) to assess
the recoverability of the carrying value of non-
requires
current assets. The assessment
significant judgement due to assumptions and
estimates involved in preparing a value in use
model
recoverable amount,
including:
to estimate
Future cash flows for CGUs
-
- Discount rates; and
-
Terminal value growth rates
an
of
understanding
forecasting assumptions
management’s
related to their revenue contracts
Assessing the design and implementation of
in place to manage the
key controls
Company’s liquidity risk
Assessing the accuracy of prior year
business forecasts compared to actual
results
Challenging the assumptions adopted in
models supporting the recoverability of
non-current assets
Challenging the assumptions contained in
management’s future cash flow forecasts, in
particular its future revenue projections and
expense projections; and
Performing a
retrospective
review of
adviser acceptance and attrition rates and
comparing
forecasted
assumptions.
this analysis
to
We have also assessed the appropriateness of
the disclosures in Note 2 and Note 15 to the
financial statements.
Acquisition of Enzumo Corporation Pty Ltd and
Enzumo Consulting Pty Ltd (‘Enzumo’)
Refer to:
- Note 12 Acquisition of subsidiaries
- Note 15 Intangible assets
During the period, the Company acquired
Enzumo for cash of $1.5m. As a result of the
transaction, Goodwill of $139k, Customer
In conjunction with our valuation specialists our
procedures included, but were not limited to:
Obtaining an understanding of the acquired
business
Assessing the design and implementation of
key controls in place for the acquisition
accounting of Enzumo
Assessing the competency and objectivity of
management’s external expert and the
scope of their work
Independent Auditor’s Report
Independent Auditor’s Report
| Annual Report 2020
PAGE 84
Relationships of $1,173k and Trade names of
$101k were recognised.
Accounting for the transaction is complex and
includes a number of significant judgements, in
particular in the valuation of the acquired
intangible assets and allocation of goodwill.
Obtaining and
reading management’s
external expert’s report to understand the
valuation
key
assumptions used in determining the fair
values, such as:
methodology
and
o Cash flow projections
o Attrition rates
o
o Weighted average cost of capital
o Estimated useful economic lives of
Internal rate of return
the intangibles
Assessing
the appropriateness of
the
valuation methodology of the intangible
assets employed by management’s external
expert and evaluating the key assumptions
used in determining the fair values; and
Assessing
the appropriateness of
the
allocation of goodwill to the cash generating
unit.
Provision for adviser client claims
Refer to:
- Note 16 Provisions
The Group has provided $3.0 million for the
estimated cost of resolving:
adviser client claims for financial advice
provided by authorised representatives of
the Group prior to 1 July 2010; and
claims from external parties that the Group
has become aware of.
As disclosed, the Group does not believe it is
appropriate to recognise any provision for
financial advice provided post 1 July 2010.
The determination of the provision for adviser
client claims requires management to exercise
significant judgement to estimate the likely
value of claims already reported and the
estimated volume and value of unreported
claims.
We have also assessed the appropriateness of
the disclosures in Note 12 and Note 15 to the
financial statements.
Our procedures included, but were not limited
to:
Assessing the design and implementation of
the controls in place for the claims provision
Assessing the accuracy of management’s
prior estimates of the claims provision by
comparing the claims provision to the
claims paid
Reading claims and risk committee minutes
to assess the accuracy and completeness of
the provision recognised;
Obtaining and reading adviser client claims
information and evaluating the impact of
any new information regarding the claim on
the provision
Inquiring with management if there was any
change to the approach and methodology
for calculation of the provision for claims
since 30 June 2019; and
Obtaining information up to date of signing
of the financial report in relation to the
development of claims and assessing the
impact on the provision.
We also assessed the appropriateness of the
disclosures
the financial
statements.
in Note 16
to
Independent Auditor’s Report
PAGE 85
Annual Report 2020 |
Independent Auditor’s Report
Business model change
Refer to:
- Note 2 Significant accounting policies
- Note 7 Financial risk management
- Note 15 Intangible assets
In the 2019 financial year the Company
announced changes to its business model across
a two-year period in order to respond to a
changing market for financial planning licensees,
where traditional platform commissions and
rebates are reducing, by establishing a new fee
driven model.
Significant
judgement has been applied by
management in relation to the forecasting of
cashflows generated under the new business
model in this transition period, which has an
impact
impairment,
recoverability of deferred tax assets and
liquidity.
assessment
on
of
Our procedures in relation to the impacts of the
business model change included, but were not
limited to:
Inquiring of management in relation to
the new
forecasting assumptions
revenue streams
for
Assessing of the design and implementation
of key controls in place to manage the
Company’s liquidity risk
Challenging the assumptions adopted in
models supporting the recoverability of
non-current assets and deferred tax assets;
and
Challenging the assumptions contained in
management’s future cash flow forecasts, in
particular its future revenue projections and
expense projections.
We also assessed the appropriateness of the
disclosures to the financial statements.
Other Information
The directors are responsible for the other information. The other information comprises the
information included in the Group’s annual report for the year ended 30 June 2020, but does not
include the financial report and our auditor’s report thereon.
Our opinion on the financial report does not cover the other information and we do not express any
form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
report or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If,
based on the work we have performed, we conclude that there is a material misstatement of this
other information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of the Directors for the Financial Report
The directors of the Company are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
and for such internal control as the directors determine is necessary to enable the preparation of the
financial report that gives a true and fair view and is free from material misstatement, whether due
to fraud or error.
In preparing the financial report, the directors are responsible for assessing the ability of the Group to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
Independent Auditor’s Report
Independent Auditor’s Report
| Annual Report 2020
PAGE 86
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or has no realistic alternative but to do so.
Auditor’s Responsibilities for the Audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is
free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of this financial report.
As part of an audit in accordance with the Australian Auditing Standards, we exercise professional
judgement and maintain professional scepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the financial report, whether due to
fraud or error, design and perform audit procedures responsive to those risks, and obtain
audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of
not detecting a material misstatement resulting from fraud is higher than for one resulting
from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations,
or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing
an opinion on the effectiveness of the Group’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of
accounting estimates and related disclosures made by the directors.
Conclude on the appropriateness of the directors’ use of the going concern basis of accounting
and, based on the audit evidence obtained, whether a material uncertainty exists related to
events or conditions that may cast significant doubt on the Group’s ability to continue as a
going concern. If we conclude that a material uncertainty exists, we are required to draw
attention in our auditor’s report to the related disclosures in the financial report or, if such
disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit
evidence obtained up to the date of our auditor’s report. However, future events or conditions
may cause the Group’s to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the financial report, including the
disclosures, and whether the financial report represents the underlying transactions and
events in a manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities
or business activities within the Group to express an opinion on the financial report. We are
responsible for the direction, supervision and performance of the Group’s audit. We remain
solely responsible for our audit opinion.
We communicate with the directors regarding, among other matters, the planned scope and timing
of the audit and significant audit findings, including any significant deficiencies in internal control that
we identify during our audit.
Independent Auditor’s Report
PAGE 87
Annual Report 2020 |
Independent Auditor’s Report
We also provide the directors with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and other
matters that may reasonably be thought to bear on our independence, and where applicable, actions
taken to eliminate threats or safeguards applied.
From the matters communicated with the directors, we determine those matters that were of most
significance in the audit of the financial report of the current period and are therefore the key audit
matters. We describe these matters in our auditor’s report unless law or regulation precludes public
disclosure about the matter or when, in extremely rare circumstances, we determine that a matter
should not be communicated in our report because the adverse consequences of doing so would
reasonably be expected to outweigh the public interest benefits of such communication.
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included on pages 12 to 20 of the Directors’ Report for the
year ended 30 June 2020.
In our opinion, the Remuneration Report of Centrepoint Alliance Limited for the year ended 30 June
2020, complies with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the
Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our
responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in
accordance with Australian Auditing Standards.
DELOITTE TOUCHE TOHMATSU
Jonathon Corbett
Partner
Chartered Accountants
Sydney, 19 August 2020
Independent Auditor’s Report
ASX Additional Information
| Annual Report 2020
PAGE 88
Additional information required by the Australian Securities Exchange Limited (ASX) and not shown elsewhere
in this report is as follows. The information is current as at 15 September 2020.
(1) Class of securities and voting rights
(a) Ordinary shares
Ordinary shares of the Company are listed (quoted) on the ASX. There are 1,614 holders of ordinary shares,
holding 144,282,969 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
Range
1–1,000
1,001–5,000
5,001–10,000
10,001–100,000
100,001 Over
Total holders
291
445
225
533
129
Units
110,422
1,144,749
1,697,258
17,974,448
123,356,092
% Units
0.08
0.79
1.18
12.46
85.50
The number of shareholders with less than a marketable parcel is 579.
(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
Mr Alexander Beard and Mr Alexander Beard and Mrs Pascale
Marie Beard ATF AD & MP Beard Super a/c
Fully paid
No. of Shares
49,968,226
10,998,296
ASX Additional Information PAGE 89
Annual Report 2020 |
(4) Twenty largest holders of quoted equity securities
1
2
3
4
5
5
7
8
9
10
11
12
13
14
15
16
17
18
19
Ordinary Shareholders
UBS NOMINEES PTY LTD
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
MR ALEXANDER BEARD + MRS PASCALE MARIE BEARD
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
BONDIA INVESTMENTS PTY LTD
SUPERTCO PTY LTD
RICHARD JOHN NELSON + KAYE MARIE NELSON
MRS FIONA WILLIAMS
BNP PARIBAS NOMINEES PTY LTD
MILA INVESTMENT CO PTY LTD
M CONWAY INVESTMENTS PTY LTD
MR JASON MAXWELL YU
WAYLEX PTY LTD
FETTERPARK PTY LTD
AGRB PTY LTD
MS KYLIE LYNETTE NUSKE + MR MATTHEW JAMES COOK
MR PETER HOWELLS
CATHAYS PTY LTD
MR DANIEL BARON DROGA + MRS LYNDELL DROGA
Fully paid
No. of Shares
37,681,453
14,864,027
% Held
26.12
10.30
10,268,889
3,058,810
3,000,000
3,000,000
2,729,660
2,627,140
2,211,025
2,023,330
1,600,000
1,430,000
1,418,051
1,217,603
1,198,434
1,085,800
1,031,575
1,004,914
1,000,000
7.12
2.12
2.08
2.08
1.89
1.82
1.53
1.40
1.11
0.99
0.98
0.84
0.83
0.75
0.71
0.70
0.69
20
NETWEALTH INVESTMENTS LIMITED
897,289
93,348,000
0.62
64.70
ASX Additional Information | Annual Report 2020
PAGE 90
Corporate Directory
Securities Exchange Listing
Registered Address
Centrepoint Alliance Limited’s shares are listed on the
Australian Securities Exchange (ASX) and are traded
under the ASX ticker code CAF.
Centrepoint Alliance Limited
Registered Address and Head Office:
Share Registry
Level 9, 10 Bridge Street
Sydney NSW 2001 Australia
Computershare Investor Services Pty Limited
Level 11, 172 St George’s Terrace
Perth WA 6000 Australia
Telephone: (within Australia) 1300 557 598
(outside Australia) +61 2 8987 3000
Facsimile: +61 2 8987 3075
GPO Box 2975
Melbourne VIC 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
Website: www.centrepointalliance.com.au
Annual General Meeting
11:00am (AEDT) Friday, 13 November 2020
Digital videoconference (online) at
https://web.lumiagm.com
Auditor
Deloitte Touche Tohmatsu
ABN 74 490 121 060
Grosvenor Place
225 George Street
Sydney NSW 2000
Corporate Directory PAGE 91
Annual Report 2020
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Centrepoint Alliance Limited
and its Controlled Entities
ABN 72 052 507 507
1300 557 598
centrepointalliance.com.au