Annual
Report
2019
For the year ended
30 June 2019
Netwealth Group Limited
ABN: 84 620 145 404
Contents
Appendix 4E
Chairman’s letter
Joint Managing Directors’ letter
Corporate highlights
Review of operations
Financial operating performance
Board of Directors
Directors’ report
Remuneration report (audited)
4
6
8
11
12
24
29
31
37
Auditor’s independence declaration
Consolidated Statement of profit or loss and other
comprehensive income
Consolidated statement of financial position
Consolidated statement of changes in equity
Consolidated statement of cash flows
Notes to the Financial Statements
Directors’ declaration
Independent Auditor’s review report
Shareholder information
50
51
52
53
54
55
101
102
106
Our purpose is
To enable people to
see wealth differently
and discover a
brighter future
Appendix 4E
Report for the year ended 30 June 2019 (FY2019).
Netwealth Group Limited
ABN: 84 620 145 404
1. Details of the reporting period
Report for the year ended 30 June 2019 (FY2019).
Previous corresponding period year ended 30 June 2018 (FY2018).
2. Results for announcement to the market
FY2019
$’000
FY2018
Increase/
Var %
$’000
(Decrease)
Revenue from ordinary activities
98,770
83,260
15,510
50,083
29,189
20,894
18.6%
71.6%
Profit from ordinary activities before tax
attributable to members
Net profit for the period attributable to
members
Underlying net profit for the period
attributable to members
34,295
20,818
13,477
64.7%
35,986
29,047
6,939
23.9%
The FY2019 net profit for the period attributable to members includes a one off $0.8 million cost of
client rectification costs and legal expenses and an impairment of $0.9 million in deferred receivables
due to lower than expected amounts received from the sale of discontinued operations in FY2018.
The FY2018 net profit for the period attributable to members includes a one off $8.7 million cost of
listing on the Australian Stock Exchange (ASX).
Refer to the attached annual report (Directors’ report – Review of operations section), for further
commentary on the full year results.
3. Net tangible assets per ordinary security
Net tangible assets as per ordinary security
26.7 cents
28.2 cents
FY2019
FY2018
Net tangible assets declined in FY2019 primarily due to a special dividend of $12,300,000 declared and
paid during the financial year.
4 | netwealth Annual Report 2019 For the year ended 30 June 2019
4. Dividends information
Final 2018 dividend per share (paid 27 Sep 2018)
Special 2018 dividend per share (paid 27 Sep 2018)
Interim 2019 dividend per share (paid 28 Mar 2019)
Final 2019 dividend per share (to be paid 26 Sep
2019)
Final Dividend Dates
Ex-dividend date
Record date
Payment date
There is no dividend reinvestment plan.
5. Control gained/loss over entities
Amount
per Share
(cents)
Franked
Amount
per Share
(cents)
%
Franked
Tax rate
for
Franking
Credit
5.38
5.18
5.50
6.60
2.31
2.22
2.36
2.83
100%
100%
100%
100%
30%
30%
30%
30%
26 August 2019
27 August 2019
26 September 2019
Two fully owned non – operating subsidiaries, Pathway Licensee Services Pty Ltd and Bridgeport
Financial Services Pty Ltd, were deregistered on 17 July 2019.
6. Details of associates and joint venture entities
Not applicable.
7. Compliance statement
This report is based on the consolidated financial statements for the year ended 30 June 2019 which
have been audited by Netwealth Group Limited’s auditors, Deloitte Touche Tohmatsu, with the review
report attached.
Michael Heine
Joint Managing Director
19 August 2019
5 | netwealth Annual Report 2019 For the year ended 30 June 2019
Jane Tongs
Independent
Non-Executive
Chairman
Chairman’s Letter
Dear Shareholder,
It is my pleasure to present to you, on behalf of the Board of Directors (the Board) of Netwealth Group
Limited, the FY2019 Annual Report.
We have experienced an excellent result in our 20th year. Netwealth Group Limited and its controlled
entities (“Netwealth” or “the Group”) has expanded its financial performance, operating metrics and
delivered its strategic objectives.
We grew Funds Under Administration (FUA) by 29.9% in the year to $23.3 billion, increased underlying
NPAT by 23.9% to $36.0 million while investing in our people and technology platform. During the year,
we continued to invest in our staff and our number of employees increased by 34 people to 271 people
at 30 June 2019. Our success is driven by two key factors. First our continued investment in market
leading technology. We have invested in IT infrastructure, IT security, compliance and Platform
functionality. Second, our non-wavering commitment to provide best-in-class service to our clients.
Illustrating this is our achievement of again being ranked by Investment Trends as the No. 1 Platform
for Platform functionality and having the highest overall user satisfaction for a platform provider.
Netwealth operates in a highly regulated environment and the Board takes its compliance and
governance responsibilities very seriously. During the year, the final report of the Royal Commission
into misconduct in Banking, Superannuation and Financial Services Industry (Royal Commission) was
released. The report made a number of recommendations including the phasing out of grandfathered
commissions and increased compliance and regulatory requirements for intermediaries. Some of
these findings have had a positive impact for Netwealth and have led to an acceleration in the number
of advisers from major wealth management institutions who can now use our services. Voluntarily,
Netwealth conducted an internal review in relation to its current and historical processes with
reference to matters identified during the Royal Commission hearings. This review identified matters
involving client rectification costs and legal expenses of $1.1 million. Our commitment has always been
that when we make errors, we rectify them. The Board is committed to always acting ethically, being
transparent and accountable. These attributes are essential for the long-term performance,
sustainability and success of Netwealth.
Netwealth’s purpose of ‘enabling people to see wealth differently and discover a brighter future’
shines through our community partnerships. For a third year, Netwealth supported Banqer, a financial
educational platform for Australian kids. By improving the way financial education is delivered to the
next generation, it is hoped that financial literacy in Australia will improve significantly. We have
supported over 180 schools around the country with over 8,000 school children involved in the
program. Our target with Banqer is 15,000 in the coming years.
In addition to Banqer, Netwealth has supported various charities and causes through involvement in
other events, fundraisers and direct donations.
The Board is active and engaged in oversight of the Group and its strategy and have continued to
invest in best-practice risk and governance processes and people to ensure that we maintain our high
standards. In the current year, we have completed the implementation of a best-in-class risk and
compliance system that enables accountability to be allocated to individuals and timely monitoring of
6 | netwealth Annual Report 2019 For the year ended 30 June 2019
key controls. The strategic goals and plans approved for the year ahead are designed to ensure we
achieve sustainable growth in revenues and profitability while ensuring a high level of governance and
employee engagement.
Our staff are our greatest asset and they have embraced our core value of collaboration and
partnering with our clients to provide them an unparalleled customer service experience. With
employees from across the globe and of different gender, ethnicity and religion, we are reflective of
Australia’s multi-cultural and gender-equal society. The Board is appreciative of our employees’
sustained contributions throughout the year and believes Netwealth has the vision, people,
technology, systems and leadership to constantly innovate and grow to maintain its market leadership
position. On behalf of the Board, I would like to thank the entire team of dedicated and talented
people that work at Netwealth, they are the reason for our successful journey.
Finally, the Board would like to thank our shareholders and clients for their continued contribution to
our success and we look forward to sharing our journey with them for many years ahead.
Yours sincerely
Jane Tongs
Chairman
19 August 2019
7 | netwealth Annual Report 2019 For the year ended 30 June 2019
Joint Managing Director’s Letter
Dear Shareholders,
Netwealth is now in its 20th year and has a track record of exceptional growth. The foundation of
Netwealth’s success has been a focus on product innovation delivering market leading functionality
coupled with exceptional customer service.
Established in December 1999, Netwealth achieved its first billion dollars of FUA in 2007 and FUA has
increased to $23.3 billion at the end of FY2019. FUA growth for the past 3 years has averaged in excess
of $1 billion per quarter and in FY2019 we achieved record growth in FUA of $5.4 billion.
We are confident in our future growth outlook, with a strong pipeline of business, including existing
and new wealth management groups transitioning clients onto the platform in FY2020 and beyond.
Netwealth’s clients are our number one priority and it was very gratifying that Netwealth has been
recognised by Investment Trends as the No 1. platform for overall user satisfaction for the eighth
consecutive year and was ranked No. 1 platform for overall functionality for the fourth year in a row 1.
Michael Heine
Joint Managing
Director
Matthew Heine
Joint Managing
Director
Some other key achievements for the year included:
• NPAT of $36.0 million, growth of $6.9 million (23.9%) on FY20182, EBITDA of $52.0 million, growth of
$9.7 million (22.9%) on FY2018 2
1
Investment Trends – April 2019 Planner Technology Report and Investment Trends – December 2018 Platform Competitive Analysis
and Benchmarking Report
2 Underlying EBITDA, NPAT, Operating Cashflow and Earnings Per Share (EPS) have been prepared to exclude non-recurring expenses
for FY2019 and consistent with pro forma calculations for FY2018. A reconciliation is provided on page 26. Underlying EPS has been
calculated based on the ordinary and performance shares currently on issue.
8 | netwealth Annual Report 2019 For the year ended 30 June 2019
•
EBITDA margin increased to 52.6% in FY2019, up from 50.8% in FY20182
• Operating cash flow pre-tax of $49.5 million, an exceptionally high cash conversion ratio of 95.3%2
• Netwealth remains debt free
• A fully franked final dividend of 6.60 cents per share was declared, payable on 26 September 2019,
in addition to the interim dividend of 5.5 cents per share paid 28 March 2019
•
EPS of 14.8 cents, up 2.9 cents versus FY20182
• Average platform revenue per account increased by $55 to $1,460 from FY2018.
The size of the Australian Retail Platform market in which Netwealth operates is $859 billion3.
Netwealth is the largest specialist platform provider4 and ninth largest platform overall. Our market
share in the 12 months to March 2019 increased to 2.5% having achieved the highest industry platform
net inflows for this period of $4.3 billion for the second consecutive year.
In FY2019 we continued to increase our investment in our platform technology and functionality with
significant number of enhancements implemented throughout the year. In December 2018,
Netwealth’s cash management tool was recognised as the ‘best new functionality’ by Investment
Trends. We have won this award for two consecutive years, last year for our automated record of
advice functionality5. Other platform enhancements for the year included: a new web portal for clients
and advisers, the addition of annuities to the platform and the ongoing enhancements of our reporting
suite.
Regulatory compliance remains a key priority for Netwealth. The Group has a strong Legal, Risk and
Compliance division which is focused on maintaining a very high standard of compliance with existing
and new regulatory obligations and meeting community expectations at all times. We will continue to
develop platform functionality to support the changes to regulatory requirements for both Netwealth
and for financial intermediaries using our platform.
Recent years have seen considerable change and upheaval in the financial services industry. The
Royal Commission came at a time when major financial institutions were already reviewing their
commitment to the Wealth Management Industry and provided additional impetus for change. This
has already benefited Netwealth and we see further benefits still to come.
Nonetheless, there are also many challenges which we and the industry face. We at Netwealth are
confident that we have the skills and ability to manage these challenges and to keep growing our
3 Strategic Insight: Master Trusts, Platforms & Wrap (March 2019)
4
5
Specialist platform providers specialise in providing wealth management solutions via platform with the major providers being
Netwealth, HUB24, OneVue, Praemium and Xplore Wealth (previously Managed Accounts Holdings).
Investment Trends – December 2018 Platform Competitive Analysis and Benchmarking Report
9 | netwealth Annual Report 2019 For the year ended 30 June 2019
business profitably. We are also confident of meeting our obligations to all stakeholders in this
changing regulatory environment.
There has been considerable broad coverage of greater pricing competition in the platform market.
Netwealth always sought to maintain a strong but competitive pricing policy and have been
successful in winning both small and large mandates from wealth managers seeking a platform that
can provide for their needs and those of their clients.
We are particularly focused on expanding our whole of wealth solution to affluent and high net-worth
clients which eventually benefits all clients using the Netwealth platform. We are a leader in solutions
for high net-worth and wholesale clients and have broadened our offering over the past year and are
continuing to do so.
While our superannuation products lead the market and have grown strongly, we have also
experienced significant growth in our Investor Directed Portfolio Service (IDPS or Wrap account)
which now represents approximately 60% of our FUA and 70% of our annual net inflows.
As Netwealth grows, our commitment to our people and clients remains a key focus. We are delighted
to congratulate Amanda Atkinson on her recent promotion to the Executive team as Head of Investor
Services. Amanda led the team for the past 12 years and has played a critical role in delivering and
driving the high level of service Netwealth clients have become accustomed to. Amanda has a deep
understanding and knowledge of our people, processes and systems and provides invaluable insights
and guidance to the Executive team and to ensure that we maintain a clear focus on our clients and
their advisers.
Netwealth’s Executive team with their extensive industry expertise are “hands on” in the business and
work closely with our highly qualified board of Directors. We thank and acknowledge the valuable
contribution, commitment and leadership of the Executive team and Directors throughout the year.
We would like to thank all our existing clients for their ongoing support and welcome our new clients.
We strive to continually enhance our products and services to meet their needs with new features
that are innovative, whilst always delivering exceptional customer service.
We look forward to working with our staff, our clients and our valued shareholders now and in the
future.
Yours sincerely
Michael Heine
Joint Managing Director
19 August 2019
Matt Heine
Joint Managing Director
19 August 2019
10 | netwealth Annual Report 2019 For the year ended 30 June 2019
Corporate highlights
Netwealth has continued to experience significant growth in FY2019. Some highlights for the year
were (comparative period being year to 30 June 2018):
1
2
3
4
Underlying EBITDA, NPAT, Operating Cashflow and EPS have been prepared to exclude non-recurring expenses for FY2019
and consistent with pro forma calculations for FY2018. A reconciliation is provided on page 26. Underlying EPS has been
calculated based on the ordinary and performance shares currently on issue.
Recurring platform revenue is based on 30 June 2019 expected future revenue streams excluding insurance transition fees
and transaction fees.
$5.4 billion growth includes $1.1 billion growth from market movement.
Investment Trends – December 2018 Platform Competitive Analysis and Benchmarking Report and Investment Trends – April
2019 Planner Technology Report.
11 | netwealth Annual Report 2019 For the year ended 30 June 2019
Review of Operations
About Netwealth
Netwealth was created with an entrepreneurial spirit to challenge the conventions of Australia’s
financial services.
We are a technology company, a superannuation fund and an administration business. Above all we
exist to inspire people to see wealth differently and discover a brighter future.
Founded in 1999, Netwealth is one of the fastest growing wealth management businesses in Australia.
We are rated No.1 by our clients for providing exceptional service and independent researchers
continue to rate our technology as best in class.
Our financial products are:
• Superannuation including accumulation and retirement income products;
•
Investor directed portfolio services for self-managed super and non-super investments;
• Managed Accounts; and
• Managed Funds.
Netwealth’s digital platform supports how our financial products are delivered to market. For
instance, via the platform, financial intermediaries and clients can invest and manage a wide array of
domestic and international products.
The platform is built, developed and maintained by Netwealth’s technology team. It is continuously
enhanced using feedback from financial intermediaries, clients and other users and receives wide
industry recognition as having market-leading functionality.
Supporting our financial products and technology platform is a significant investment in our people
and resources to administer support, risk and governance and our custodial services.
12 | netwealth Annual Report 2019 For the year ended 30 June 2019
Operational performance
FUA of $23.3 billion as at 30 June 2019, increased by $5.4 billion (29.9%) from 30 June 2018.
Netwealth was the market leader in terms of FUA net inflows6 and achieved record yearly FUA net
inflows of $4.3 billion in FY2019. Market movement during FY2019 accounted for the further $1.1 billion
growth in FUA.
Netwealth’s FUA growth was primarily driven by:
•
Existing Financial Intermediaries: Continued support from our existing clients accounted for
approximately 75% of the FUA added during FY2019, through adding new member accounts to the
platform and by increasing the amount of FUA of existing member accounts. At 30 June 2019,
Netwealth had 2,579 Financial Intermediaries with member accounts on the platform; and
• New Financial Intermediaries: Inflows from 308 new Financial Intermediaries from FY2019
contributed approximately 25% of the FUA increase in FY2019 and underpins Netwealth’s future
growth.
Figure 1: Source Netwealth
Funds Under Management (FUM) as at 30 June 2019 of $3.9 billion, increased by $1.1 billion (38.7%)
from 30 June 2018. The increase included $0.9 billion FUM net inflows and $0.2 billion FUM market
movement.
Managed Account FUM as at 30 June 2019 of $2.8 billion, increased by $0.9 billion (50.4%) from 30
June 2018. The increase included $0.8 billion Managed Account FUM net inflows and $0.1 billion of
Managed Account FUM market movement.
6 Strategic Insight: Master Trusts, Platforms & Wraps (12 months flows to Mar 2019)
13 | netwealth Annual Report 2019 For the year ended 30 June 2019
Member accounts as at 30 June 2019 of 71,424, increased by 9,327 accounts (up 15.0%) from 30 June
2018.
Pricing commentary has received a lot of attention in the industry as many competitor platform
providers reduced/restructured their pricing offerings during FY2019. Importantly Netwealth’s pricing,
technology and service strategy continued to be successful during the year and a significant number
of Licensees and Financial Intermediaries selected Netwealth as their preferred platform against
incumbent platforms and/or in-house administration.
In the 12 months to 30 June 2019, Netwealth’s platform revenue over average FUA decreased to
48.1bps, from 53.4bps in FY2018. A more important measure for Netwealth is the average revenue
earned per account which increased by $55 to $1,460 per account during FY2019. A key driver of this
increase was the increase in the average account size to $323,000 per account at year end. Larger
accounts typically earn higher transaction and ancillary fee income as these clients desire higher
functionality.
Netwealth is the market leader for platform functionality and service and has an experienced
executive team that are focused on cost management, growing profitable business and capitalising
on current market opportunities.
Industry recognition
Netwealth continues to be recognised as the leading specialist platform in the market. For the eighth
year in a row, Netwealth was ranked No.1 for overall user satisfaction in the Investment Trends Planner
Technology report (May 2019). In addition, Netwealth was ranked No.1 for net promoter score from its
users.
For the fourth year in a row, Netwealth was ranked No.1 for having the best platform functionality in
the Investment Trends Platform Competitive Analysis & Benchmarking Report (Dec 2018). In addition,
Netwealth won the ‘Best Reporting’ and ‘Best Transaction Tools’ awards and was awarded ‘Best New
Functionality’ for its cash management tool. The graph below shows Netwealth’s user satisfaction and
overall functionality rating compared to eight of its competitors.
14 | netwealth Annual Report 2019 For the year ended 30 June 2019
Figure 2: Source Investment Trends – December 2018 Platform Competitive Analysis and
Benchmarking Report and Investment Trends – April 2019 Planner Technology Report. Figure:
Composite score based on weighted average using Very Good = 100%, Good = 67%, Average = 50%,
Poor = 17%, Very Poor = 0%
Further illustrating our market-leading capabilities:
• Netwealth won the “Best Advised Product” award for the second year in a row: Chant West Super
Awards (2019).
•
In July 2018, Netwealth was ranked 15th most innovative company in Australia and New Zealand
by the Australian Financial Review. The Australian Financial Review survey defines innovation as
“change that adds value” and our Sophisticated Modelling and Rebalancing Technology (SMART)
ROA functionality was recognised as change that adds value for our clients, Financial
Intermediaries noting the time saved.
• Netwealth was awarded “SMSF platform provider of the year”: Momentum Media SMSF awards
(2019).
•
Leading administration platforms in terms of adviser satisfaction and investment functionality:
Adviser Ratings research published in July 2018.
15 | netwealth Annual Report 2019 For the year ended 30 June 2019
Outlook
The size of the Australian Retail Platform market in which Netwealth operates is $859 billion.
Netwealth is the largest specialist platform provider and 9th largest platform.
Our market share in the 12 months to March 2019 increased to 2.5% having achieved the highest
industry platform inflows for this period of $4.3 billion for the second consecutive year.
Netwealth is committed to retaining its market leadership by:
•
Increasing its investment in technology to continue to develop market leading functionality and
features, and ensuring its infrastructure is secure, stable, flexible and scalable;
• Providing quality administration and service excellence; and
• Winning and retaining profitable business and developing new revenue streams to diversify
revenue sources.
Netwealth will continue to invest in sales and distribution to win new business and to grow our
existing Financial Intermediaries and clients.
We expect that the number of advisers changing platforms will continue to increase and Netwealth, as
the best-rated platform, is well positioned to take advantage of this opportunity. While Industry Super
Funds are also benefiting from this shift, the Specialist Platform Providers are also a major beneficiary.
Netwealth continues to receive net inflows from all Platforms and Industry funds.
Netwealth will continue to enhance product investment options and functionality, provide clients with
efficiency in portfolio management and prioritise functional enhancements.
Netwealth operates in a highly regulated environment and FY2020 will be highly influenced by
regulatory reform and more critical consumers in the superannuation and banking sectors. Netwealth
16 | netwealth Annual Report 2019 For the year ended 30 June 2019
intends to stay abreast of regulatory obligations and community expectations to ensure compliance
and minimise risk of breach and or reputational damage. Our functionality, service and pricing
strategy have been successful in winning new business and developing a strong new business
pipeline for future growth. Pricing competition is set to continue and Netwealth will continue to
provide competitive pricing which offers clients value, quality service and market leading technology
and functionality. We are focused on delivering profitable growth and developing new revenue
streams to ensure our successful journey continues.
Innovations
At Netwealth, we constantly challenge ourselves to think differently and to identify opportunities that
matter – to our clients, to the industry and to us.
During FY2019 Netwealth released a range of new platform features and products focused on
improving the delivery of advice and increasing client engagement. These included:
Challenger annuities
Netwealth partnered with Challenger to give financial intermediaries and their clients access to
annuities at the same rates as if they went directly to Challenger. Through a single online
environment, users can apply for a range of Challenger annuities and track them alongside their
platform account assets. Additional tools are available to manage an annuity account, including
consolidated reporting of all client assets, annuity performance reports, calculators and a document
vault for easy access to relevant annuity correspondence.
Managed Accounts innovations
A range of Managed Accounts enhancements were made during the year including:
•
•
•
The addition of managed models to Netwealth’s re-investment and auto-sell transactions and
new client preference options to allow for greater client customisation;
The expansion of Netwealth’s Retail and Private Label Managed Accounts service, including the
addition of new models, strategies and functionality;
The addition of four new Netwealth diversified index models available on both the Core and Plus
investment menus providing simple and low-cost investment solutions for clients; and
• Managed Accounts models were added to our SMART solution (“Sophisticated Modelling and
Rebalancing Technology”) to provide additional multi-asset capabilities.
17 | netwealth Annual Report 2019 For the year ended 30 June 2019
Sophisticated cash management tools
In December 2018 Investment Trends awarded Netwealth
the best new functionality award for its Cash Management
Tool. This was the second year in a row we have been
awarded this. This tool provides platform users a simple,
efficient way to manage monthly cash liquidity
requirements for all types of accounts.
Cash settings allows users to manage their excess cash via a set of investment instructions. It also
provides users with the ability to establish rules for what happens when cash balances fall below
defined limits.
The ability to set rules or triggers for the points in which cash should be invested and/or investment
instructions for buys or sells provide users comfort that regular withdrawals such as pensions or
insurance payments are always able to be met and that clients are able to automatically invest cash
inflows if desired.
Image: Cash setting screen, part of the cash management functionality
18 | netwealth Annual Report 2019 For the year ended 30 June 2019
Our people
Netwealth is a fast-growing financial services company focused on attracting, keeping, motivating and
developing talented, innovative, creative and team-orientated people.
We are focused on creating a workplace that encourages an engaged and fulfilled workforce. In
FY2019, our engagement results continue to be in the top quartile of comparable businesses that we
benchmarked against, with an overall engagement rate of 78% (from 85% staff participation rate).
In the same engagement survey, culture, company confidence, innovation and management all
received over 80% employee satisfaction.
Netwealth’s key values are to be Curious, Optimistic, Courageous, Collaborative, Agile and Genuine.
These organisational values and behaviours guide the way our people work together, communicate
and live on a day-to-day basis.
Staff Recognition
In the last 12 months we have recognised and publicly celebrated over 20 of our team who have
displayed role-model behaviours for our values during our quarterly staff town hall meetings.
19 | netwealth Annual Report 2019 For the year ended 30 June 2019
Training, employee benefits and community involvement
We recognise that to attract and motive our workforce, it is important to have a well-rounded training,
support and employee benefits program. This program looks at supporting individual growth,
fostering team activities and encouraging people to get involved with social and community activities.
Our training program continued to accelerate with programs at all team levels. . This year we invested
more in our leadership program for senior team members, professional scrum master workshops, and
“inspiring communications” sessions, as well as continued our industry qualification program. Our
monthly “lunch and learn” internal knowledge sharing sessions were popular and well attended.
Netwealth team members continue to enjoy the access to a wide range of benefits including paid
parental leave, subsidised holiday programme for school age ready kids, health and wellbeing benefits,
a variety of social events organised by Netwealth and discounts to a number of services including
transportation and financial services. This year we extended employee benefits by offering Netwealth
funded income protection and private health insurance discounts.
The team also worked to raise funds for some of their favourite charities and events, having
participated in Red25 (a blood donation drive), Bring your Dog to Work Day, Corporate Triathlon,
Steptember, the Bloody Long Walk and Oxfam Trailwalker during the year.
Diversity, inclusion and gender equality
Australia is a multi-cultural and gender-equal society and, mimicking that, is Netwealth’s workplace.
We have employees from across the globe, from our 271 people we can speak 37 different languages.
On International Friendship Day, we celebrated by cooking and sharing dishes originating from at least
10 different countries. Inclusion and diversity led to greater empathy within our team members and
customers, helping us to better live our core value of Collaboration.
Netwealth does not believe in differential pay for persons performing the same job with equivalent
experience, we therefore embrace the principles of the Workplace Gender Equality Agency report. We
20 | netwealth Annual Report 2019 For the year ended 30 June 2019
remain committed to working towards our targets for gender balance. As at 30 June 2019, these
figures are:
Executive and Non-Executive Directors
Senior Executive (excluding Executive Directors)7
Managers
All Employees (excluding Non-Executive Directors)
% of Staff that are Women
2018-19
20%
33%
38%8
46%
2019-20 Target
30%
30%
40%
45%
Community partnership & programs
Netwealth’s community partnerships and programs support our continual commitment to
Netwealth’s purpose of enabling people to see wealth differently and discover a brighter future.
Continuing to support financial literacy initiatives in schools
For the third year, Netwealth continues to support Banqer, a financial education platform for
Australian kids, with the joint aim to improve financial literacy in schools.
As a business we recognise the importance of continuing to support financial literacy initiatives,
particularly preparing young Australians for their financial futures.
Banqer brings financial education to life in primary schools across Australia, through an online
platform that gives children hands on experience with saving, budgeting, credit, loans,
superannuation, insurance, property, taxes and much more.
7 Refers to the executive leadership team (excluding Michael and Matt Heine) in Director’s Report on page 33 and 34
8 The increase from prior year relates to reclassification of certain roles to better reflect the nature of their positions.
21 | netwealth Annual Report 2019 For the year ended 30 June 2019
Alex, a Primary Teacher from Western Australia, has seen tangible benefits from the platform in his
classroom. He says, “there aren't many adults who know how to use money responsibly”. Through
Banqer, “students [make] independent decisions about what to do with their money [and it’s even
helped me by] reinforcing the simple ways to make the most of your money through saving”.
By improving the way financial education is delivered to include hands on experience, it’s hoped that
financial literacy in Australia will improve significantly in the years to come.
By the end of 2018, Netwealth had sponsored 8,279 Australian students across 160 number of schools
to access independent financial education at no financial cost to them or the school. During this time
students have shown the most interest in making contributions to their savings and making mortgage
payments on their property.
Netwealth and Banqer form a strong partnership based on their shared mission to enable, educate
and inspire people to see wealth differently and to discover a brighter future.
Students challenged to enhance the financial advice experience
For the second year in a row, Netwealth teamed up with Swinburne University and design studio
MASS to run a five-day innovation challenge for final-year and honour students.
As leading global service providers such as Netflix, Amazon and Apple continue to change consumer
expectations it is important that all businesses, including financial advisers, keep up or they risk
leaving clients frustrated.
For this reason, our innovation challenge was for students to examine ways to improve the customer
experience for Australians who receive or seek financial advice from a financial adviser.
22 | netwealth Annual Report 2019 For the year ended 30 June 2019
Students also benefit by having
the opportunity to apply their
studies and experiences to real-
life business and social
challenges in an accessible and
immediate manner. Although
various programs do exist today,
they are typically long-term
graduate programs or internships
which typically require months, if
not longer. 'The Netwealth-
Swinburne Design Sprint'
addresses this by working on a
real-life business challenge with
industry specialists utilising
creative design thinking
techniques in only 5 days!
The outcome of this year’s challenge was over 40 ideas and 7 winning concepts were generated with
an overall high level of satisfaction being the participants’ feedback. The post-event survey indicated
100% would participate again. One student outlined some of the benefits they gained from this
experience: “Networking, interview and user testing tips, how to prioritise and delegate when under
time restriction, and a tonne of financial knowledge I never would’ve known for at least a few more
decades!”
23 | netwealth Annual Report 2019 For the year ended 30 June 2019
Financial operating performance
Platform revenue increased by $14.9 million (18.3%) to $96.4 million for FY2019. Revenue growth
resulted from strong FUA growth and increased transactional revenue and other ancillaries. 93.8% of
platform revenue was recurring revenue for FY2019 9. Total revenue of $98.8 million for FY2019 has
grown at a compound annual growth rate (CAGR) of 24.5% over the past four years.
• Operating expenses of $46.8 million for FY2019, increased by $5.8 million (14.2%) compared to
FY201810.
•
•
•
Employee benefits expense increased by $3.6 million (12.5%) to $32.3 million for FY201910.
Headcount increased by 34 during FY2019. Employee benefits expense represented 69% of total
operating expenses, Netwealth continued to increase its investment in information technology
with two additional scrum teams added during FY2019.
Total other operating expenses increased by $2.2 million to $14.5 million for FY201910. The
increases were primarily in software licences, insurance, compliance, advertising, marketing, and
other expenses.
EBITDA of $52.0 million for FY2019 increased by $9.7 million (22.9%) versus FY2018 and underlying
EBITDA margin of 52.6% increased by 1.8% versus FY2018 10.
• Netwealth’s NPAT of $36.0 million for FY2019 increased by $6.9 million or 23.9% versus FY2018 and
NPAT margin of 36.4% for FY2019 increased by 1.5% versus FY201810. EPS of 14.8 cents for FY2019,
increased by 2.9 cents versus FY201810.
• Operating net cash flow pre-tax was $49.5 million for FY2019, a 95.3% cash conversion ratio of
EBITDA10.
• Statutory FY2019 results included $2.0 million of costs associated with non-recurring expenses
($1.7 million after tax). A full reconciliation between pro forma and statutory is provided on page
26.
9 Recurring platform revenue is based on 30 June 2019 expected future revenue streams excluding insurance transition fees and
transaction fees
10 Underlying EBITDA, NPAT, Operating Cashflow and EPS have been prepared to exclude non-recurring expenses for FY2019 and
consistent with pro forma calculations for FY2018. A reconciliation is provided on page 26. Underlying EPS has been calculated based
on the ordinary and performance shares currently on issue
24 | netwealth Annual Report 2019 For the year ended 30 June 2019
Statutory results FY2019
The table below sets out a summary of Netwealth’s statutory statement of profit.
Consolidated Group for Year Ended
30 June 2019
30 June 2018
Variance
Variance
$’000
$’000
$’000
%
Income
Platform revenue
Other income
Total income
Expenses
96,369
2,401
98,770
81,460
1,800
83,260
Employee benefits expenses
(32,344)
(28,739)
Other costs and expenses
(15,584)
(24,654)
Total expenses
(47,928)
(53,393)
EBITDA on continuing operations
50,842
EBITDA margin
Depreciation and Amortisation
NPBT on continuing operations
Income tax expense
NPAT on continuing operations
NPAT margin
Profit/(Loss) from discontinued
operations
51.5%
(759)
50,083
(14,882)
35,201
35.6%
(906)
29,867
35.9%
(678)
29,189
(9,572)
19,617
23.6%
1,201
14,909
601
15,510
3,605
(9,070)
(5,465)
20,975
15.6%
81
20,894
5,310
15,584
12.0%
(2,107)
18.3%
33.4%
18.6%
12.5%
(36.8%)
(10.2%)
70.2%
-
11.9%
71.6%
55.5%
79.4%
-
(175.4%)
NPAT for the period
34,295
20,818
13,477
64.7%
25 | netwealth Annual Report 2019 For the year ended 30 June 2019
Reconciliation of underlying adjustments to the consolidated statement of profit or loss and other
comprehensive income
Set out in the table below is a reconciliation of underlying adjustments to the statutory profit
statement. In presenting the underlying statement of profit and loss, underlying adjustments have
been made for material one-off expenses or receipts which will not occur going forward.
Consolidated Group for Year Ended
30 June 2019
30 June 2018
Variance
Variance
$’000
50,842
$’000
29,867
$’000
20,975
%
70.2%
-
12,423
(12,423)
(100.0%)
1,121
-
1,121
100.0%
51,963
42,290
9,673
22.9%
52.6%
(759)
50.8%
(678)
1.8%
81
-
11.9%
51,204
41,612
9,592
23.1%
(14,882)
(9,572)
5,310
55.5%
-
-
(336)
(3,729)
3,729
100.0%
736
-
(736)
(100.0%)
(336)
(100.0%)
35,986
29,047
6,939
23.9%
Statutory EBITDA on
continuing operations
Add back: IPO transaction
costs
Add back: Client rectification
costs and legal expenses
Underlying EBITDA on
continuing operations
Underlying EBITDA margin
Depreciation and
Amortisation
Underlying NPBT on
continuing operations
Statutory Income Tax
expense
Add back: Tax impact from
IPO transaction costs &
listing cost
Add back: Tax impact from
Group Tax Consolidation
Add back: Tax impact from
legal expense and
compensation
Underlying NPAT on
continuing operations
Underlying NPAT margin
36.4%
34.9%
1.5%
-
26 | netwealth Annual Report 2019 For the year ended 30 June 2019
Underlying results FY2019
Set out in the table below is the underlying statement of profit for FY2019 and FY2018.
Consolidated Group for Year Ended
30 June 2019
30 June 2018
Variance
Variance
$’000
$’000
$’000
%
Income
Platform revenue
Other income
Total income
Expenses
96,369
2,401
98,770
81,460
1,800
83,260
Employee benefits expenses
Other costs and expenses
(32,344)
(14,463)
(28,739)
(12,231)
Total expenses
(46,807)
(40,970)
51,963
42,290
52.6%
(759)
50.8%
(678)
14,909
601
15,510
3,605
2,232
(5,837)
9,673
1.8%
81
18.3%
33.4%
18.6%
12.5%
18.3%
(14.2%)
22.9%
-
11.9%
51,204
41,612
9,592
23.1%
(15,218)
35,986
36.4%
14.8
(12,565)
29,047
34.9%
11.9
2,653
6,939
1.5%
2.9
21.1%
23.9%
-
24.4%
Underlying EBITDA on
continuing operations
Underlying EBITDA margin
Depreciation and
Amortisation
Underlying NPBT on
continuing operations
Income tax expense
Underlying NPAT on
continuing operations
Underlying NPAT margin
Underlying EPS (cents per
share)1
1Underlying EPS has been calculated based on the ordinary and performance shares currently on
issue. During the year, 280,000 performance shares were cancelled.
27 | netwealth Annual Report 2019 For the year ended 30 June 2019
Underlying Cash Flow Statement FY2019
The table below sets out the summary consolidated statement of cash flows for FY2019 and FY2018.
Consolidated Group for Year Ended
30 June 2019
30 June 2018
Variance
Variance
$’000
51,963
214
(1,645)
(741)
(291)
$’000
42,290
(69)
(2,193)
(912)
268
$’000
9,673
283
(548)
(171)
(559)
%
22.9%
410.1%
(25.0%)
(18.8%)
(208.6%)
49,500
39,384
10,116
25.7%
Underlying EBITDA
Non-cash items in EBITDA
Changes in working capital
Capital expenditure
Net (purchases)/sale
proceeds on investments
Underlying Operating net
cash flows before taxation
Key platform statistics
Set out in the below table is a summary of Netwealth’s key operating and financial metrics for FY2019
and FY2018.
Consolidated Group for Year Ended
30 June 2019
30 June 2018
Variance
Variance %
FUA (EOP*) ($ million)
23,337
17,960
3,946
4,334
899
2,846
4,166
983
48.1 bps
53.4 bps
(5.3 bps)
5,377
1,100
168
(84)
29.9%
38.7%
4.0%
(8.5%)
(9.9%)
1,460
1,405
55
3.9%
FUM (EOP*) ($ million)
FUA net inflows ($ million)
FUM net inflows ($ million)
Platform revenue/average
FUA (bps)
Platform revenue/average
number of accounts ($)
* EOP=End of Period
28 | netwealth Annual Report 2019 For the year ended 30 June 2019
Board of Directors
The Directors bring to the Board a breadth of expertise and skills, including industry and business
knowledge, financial management skills and corporate governance experience.
Name and title
Profile
•
Jane has served as the independent Chairman of Netwealth (and its related
entities) since April 2000.
• Prior to 2000, Jane was a partner at PricewaterhouseCoopers, specialising in the
financial services sector. She has experience with insurance, funds management
and superannuation entities.
•
•
•
Jane has over 20 years’ experience as non-executive director and superannuation
fund trustee and is currently a director of Cromwell Property Group, Warakirri
Group, CCI Insurance Ltd, Hollard General Insurance and Brighton Grammar
School.
Jane holds a Bachelor of Business and a Master of Business Administration. Jane is
a Fellow of the Institute of Chartered Accountants and a member of the Australian
Institute of Company Directors.
Jane is a member of the Group Audit Committee, Group Compliance and Risk
Management Committee, Group Remuneration Committee and is Chair of the
Group Nomination Committee and Netwealth Investment Limited (NIL) Investment
Committee.
• Michael has been a Director of Netwealth since its establishment in 1999.
• Michael was instrumental in the establishment of Netwealth in 1999. Michael acted
as sole Managing Director from 1999 to 2014 and has acted as Joint Managing
Director together with his son Matthew since January 2015.
• Michael has experience in Australian and European financial markets, including
commodity trading, international financing, mortgage lending and property
development. Michael was instrumental in the establishment of the Heine Brothers
funds management business in 1982 and was its Managing Director from 1982 to
1999 when the company was acquired by ING (then Mercantile Mutual).
• Michael is a member of NIL Investment Committee.
• Matthew joined Netwealth in July 2001 and was appointed a Director in March 2004.
He was appointed Joint Managing Director in January 2015.
• Matthew has been instrumental in the development of the netwealth platform and
products as well as the distribution, branding and marketing of the Group.
Matthew’s role and experience in the sales, marketing and strategy field brings a
firsthand understanding of the industry and client base. In his executive capacity,
Matthew has the Product, Technical, Sales and Marketing teams reporting to him.
• Matthew holds a Diploma of Financial Services and an Advanced Diploma of
Management.
Jane Tongs
Independent
Non-Executive
Chairman
Michael Heine
Joint Managing
Director
Matthew Heine
Joint Managing
Director
29 | netwealth Annual Report 2019 For the year ended 30 June 2019
Name and title
Profile
Davyd Lewis
Independent
Non-Executive
Director
Timothy Antonie
Independent
Non-Executive
Director
• Davyd has been a Director of Netwealth since July 2009.
• Davyd was a partner of Mallesons Stephen Jaques for 20 years until his retirement
in 2008. Davyd’s role included Partner in Charge of the Melbourne Centre, Managing
Partner Practice of Mergers & Acquisitions, Property and Construction, Dispute
Resolution and Intellectual Property, National Practice Team Leader of the Mergers
& Acquisitions Group and responsibility for supervising the relationship with 50 of
the firm’s biggest clients.
• Davyd holds a Bachelor of Economics, a Bachelor of Laws and a Master of Laws
(majoring in securities markets and takeovers).
• Davyd is a member of the Group Audit Committee and Group Nomination
Committee. Davyd is the Chair of the Group Compliance and Risk Management
Committee, the Group Remuneration Committee and the Group Due Diligence
Committee.
•
•
•
•
Timothy has been a Director of Netwealth since November 2015.
Timothy commenced his career at Price Waterhouse (now
PricewaterhouseCoopers) and qualified as a chartered accountant. He
subsequently worked at several investment banks, including UBS Investment Bank
as a Managing Director, where he advised major Australian companies in large
scale mergers, acquisitions, sales and restructures and equity transactions, as well
as day-to-day equity market facing matters.
Timothy is currently also a director of Breville Group Limited, Premier Investments
Limited, Village Roadshow Limited and a principal of Stratford Advisory.
Timothy is a member of the Group Compliance and Risk Management Committee,
Group Remuneration Committee, Group Nomination Committee and NIL
Investment Committee. Timothy is the Chair of the Group Audit Committee.
30 | netwealth Annual Report 2019 For the year ended 30 June 2019
Directors’ Report
The directors present their report on Netwealth Group Limited “the Company” and its controlled
entities for the year ended 30 June 2019 (FY2019). The consolidated entity is referred to as “the Group
or Netwealth”. In order to comply with the provisions of the Corporations Act 2001, the directors report
as follows:
Directors
The names of the Directors in office at any time during, or since the end of the period are:
•
Jane Tongs (Chairman)
• Michael Heine
• Matthew Heine
• Davyd Lewis
•
Timothy Antonie
Directors have been in office since the start of the financial year to the date of this report.
Company overview
Netwealth is a financial services business listed on the ASX on 20 November 2017 (ASX: NWL).
Netwealth was founded in 1999 and established to provide investors and wealth professionals with a
better way to invest, protect and manage their current and future wealth. Netwealth seeks to enable,
educate and inspire Australians to see wealth differently and to discover a brighter future.
Netwealth offers a range of innovative portfolio administration, superannuation, retirement,
investment and Managed Accounts solutions to investors and intermediaries including Financial
Intermediaries, private client and high net worth firms.
Netwealth's award-winning platform is currently rated Australia’s Number 1 Platform for overall
functionality and overall satisfaction providing wealth professionals with the technology required to
efficiently manage and add value to our clients11.
11 Investment Trends - December 2018 Platform Competitive Analysis and Benchmarking Report & Investment Trends –
April 2019 Planner technology report
31 | netwealth Annual Report 2019 For the year ended 30 June 2019
Directors meetings
During the financial year, 17 Group meetings of Directors (including committees of directors) were
held. Attendances by each Director during the year were as follows:
Board of
Directors’
meetings
(B)
(A)
17
17
17
17
17
17
17
17
Directors
Jane Tongs
Davyd Lewis
Timothy Antonie
Michael Heine
Audit
Committee
Remuneration
Committee
Nomination
Committee1
(A)
(B)
(A)
(B)
(A)
(B)
Compliance
& Risk
Committee
(B)
(A)
8
8
8
-
8
8
8
-
8
8
8
-
8
8
8
-
1
1
1
-
1
1
1
-
11
11
11
-
11
11
11
-
-
17
Matthew Heine
-
(A) Number of meetings held during the time the director held office and was eligible to attend as a member
(B) Number of meetings attended
1 Meetings called on an as needed basis
14
-
-
-
-
-
-
The qualifications and experience of Directors are detailed on page 29 to 30 of the Annual Report.
Corporate governance
Netwealth is committed to being ethical, transparent and accountable. We believe this is essential for
the long-term performance and sustainability of our Company and supports the interests of our
shareholders and clients. The full corporate governance statement is available on the Company’s
website at https://www.netwealth.com.au/web/about-netwealth/shareholders/
Diversity strategy
Netwealth understands the importance of diversity across styles of thought, religion, race, ethnicity,
language, gender, sexual orientation, disability, age or any other area of potential difference and
recognises that a diverse workforce with different skills and different ways of thinking can lead to a
more innovative and efficient workplace and deliver stronger outcomes.
Netwealth has identified gender equality as a key area of focus, whilst also working on a number of
other initiatives to support overall inclusion and diversity.
32 | netwealth Annual Report 2019 For the year ended 30 June 2019
Executive leadership team
Profiles of Netwealth’s senior management team are set out below.
Name and title
Profile
• Refer to Board of Directors section
Michael Heine
Joint Managing
Director
Matthew Heine
Joint Managing
Director
Grant Boyle
Chief Financial
Officer and Joint
Company Secretary
Rachel Axton
General Manager,
Legal, Risk and
Compliance and Joint
Company Secretary
• Refer to Board of Directors section
• Grant joined Netwealth in May 2017.
• Grant has more than 30 years’ experience in financial services and the
accounting profession. Most recently the Chief Financial Officer of EMR
Capital, Grant has held several Chief Financial Officer and Chief
Operating Officer roles within financial services, including at BlackRock,
Powerwrap and Phillip Capital.
• Prior to entering the funds/Platform space. Grant was a finance manager
with ANZ Group Finance and a manager in the Corporate Recovery and
Insolvency division of Ernst & Young.
• Rachel joined Netwealth in February 2016.
• Rachel has 20 years of experience in financial services working across a
range of wealth management providers, specialising in superannuation
and investment services. Prior to joining Netwealth, Rachel managed the
Colonial First State Custom Solutions Risk and Compliance team and
contributed to Netwealth’s strategic direction as part of the executive
team.
• Rachel is a Fellow of the Association of Super Funds of Australia. Rachel
holds a Graduate Diploma in Superannuation Management and is
completing a Bachelor of Business (Economics).
33 | netwealth Annual Report 2019 For the year ended 30 June 2019
Name and title
Profile
Philip Coldwell
General Manager,
Product
• Philip joined Netwealth in November 2011.
• Philip has over 30 years’ experience in the financial services industry
including positions in the management of financial planning operations,
technical services, product development and marketing. From 2000 to
2011 Philip was an owner and director of Integrity Financial Planners Pty
Ltd.
• Philip holds a Bachelor of Business from Swinburne and a Diploma of
Financial Planning.
• Alistair joined Netwealth in May 2002.
• Having previously held a leadership role within Netwealth’s IT
Development Team, he has been Netwealth’s General Manager,
Operations, since September 2010.
Alistair Densley
General Manager,
Operations
• Alistair has over 15 years’ experience in the financial services industry and
has played an important role in establishing and achieving scalability for
many administrative processes across Netwealth’s Platform.
• Alistair holds a Bachelor of Commerce.
•
•
•
John joined Netwealth in May 2012.
John has responsibility for application development, technology
infrastructure, business analysis, project management and technology
vendor management. John has more than 20 years of experience in
financial services technology. Prior to joining Netwealth, John led the
Australian technology team for BlackRock.
John holds a Bachelor of Business (Banking and Finance) from Monash
University.
• Amanda joined Netwealth in February 2004.
• Amanda is Head Investor Services. Her other responsibilities include
designing and improving the scalability of the administrative processes
and procedures across the Netwealth platform.
• Amanda has over 15 years’ experience in the financial services industry.
• Amanda joined the Netwealth Executive Committee in March 2019.
John Hanrahan
Chief Information
Officer
Amanda Atkinson
Head of Investor
Services
34 | netwealth Annual Report 2019 For the year ended 30 June 2019
Indemnification of Directors and Officers
The Group has paid premiums to insure each director and officer under a Directors and Officers
Insurance policy. Further disclosure of information in relation to this policy is not permitted under the
contract of insurance.
Review of Operations
Information on the operating and financial performance of the Group and its business strategies and
outlook are set out in the Review of Operations and Financial Operating Performance on pages 12 to
28 of this annual report.
Significant changes in the state of affairs
The remaining Bridgeport Financial Services Pty Ltd assets and liabilities were wound down during the
financial year. As at 17 July 2019, Bridgeport Financial Services Pty Ltd has been deregistered.
The remaining Pathway Licensee Services Pty Ltd assets and liabilities were wound down during the
financial year. As at 17 July 2019, Pathway Licensee Services Pty Ltd has been deregistered.
There were no other significant changes in the state of affairs during the year.
Dividends
During the year, the Company declared on 18 February 2019 and paid on 28 March 2019 a fully franked
dividend of 5.50 cents per share, representing a total dividend of $13,072,000. There is no Dividend
Reinvestment Plan.
Options and shares
No shares or options were issued during the financial year. There were no outstanding options at the
end of the financial year.
Events subsequent to the end of the reporting period
On the 19th of August the Company declared a fully franked final divided for FY2019 of 6.60 cents per
share (total dividend of $15,686,868) bringing the total fully franked dividends to 12.10 cents per share
for the twelve months. The final dividend is payable on 26 September 2019.
There are no other matters or circumstances that have arisen since the end of the year which
significantly affected or may significantly affect the operations of the Group, the results of those
operations, or the state of affairs of the Group.
Environmental regulation
Netwealth’s operations are not regulated by a significant environmental regulation under law of the
Commonwealth or of a state or territory.
Proceedings on behalf of the Group
No person has applied for leave of court to bring proceedings on behalf of the Group or intervene in
any proceedings to which the Group is a part for the purpose of taking responsibility on behalf of the
Group for all or any part of those proceedings. The Group was not a party to any such proceedings
during the year.
Auditor’s independence declaration
A copy of the auditor’s independence declaration as required under s307C of the Corporations Act
2001 is set out on page 50.
35 | netwealth Annual Report 2019 For the year ended 30 June 2019
Rounding of amounts
The Group is of a kind referred to in the Australian Securities and Investments Commissions
Corporations (Rounding in Financials/Directors’ Reports) Instrument 2016/191 and therefore the
amounts contained in the financial statements have been rounded to the nearest thousand dollars,
unless otherwise stated.
Signed in accordance with a resolution of the Board of Directors:
Jane Tongs
Chairman
19 August 2019
36 | netwealth Annual Report 2019 For the year ended 30 June 2019
Remuneration Report (Audited)
Dear Shareholders
Letter from the Remuneration Committee Chair
On behalf of the Board, I am pleased to present Netwealth’s FY2019 Remuneration Report.
The Board is committed to driving excellent customer service, integrity and a strong performance culture. Aligning
employee remuneration with excellent customer service and shareholder interest assists in doing so.
The Board recognises the importance of suitably incentivising senior executives and key staff. Our objective for our
remuneration structure is to encourage appropriate behaviours among staff to meet our compliance, governance,
growth targets and to retain our talent.
Netwealth’s performance in FY2019
FY2019 was another successful year for Netwealth, with underlying EBITDA growth of 22.9% and underlying NPAT
growth of 23.9%. This performance was driven principally by growth in FUA of 29.9% and FUM of 38.7%. This was
achieved despite the increasing competition from our competitors and was the result of exceptional performance
of our employees.
Short term incentives (STIs)
Netwealth’s primary focus is on long term performance and our remuneration is structured on this basis.
Generally, other than for the sales and distribution team and the Joint Managing Directors (JMDs), Netwealth only
pays cash bonuses to employees on a discretionary basis where the employee has made an exceptional
contribution. This year, one of those employees was the CFO, Grant Boyle. The JMDs were each also entitled to
cash bonuses under the terms of their employment contracts. Details of these bonuses are set out in the
Remuneration Report.
Long term incentives (LTIs)
The Board has put in place a new LTI scheme designed to incentivise and retain staff in the future. The first offers
under the new LTI scheme will be made in FY2020. A summary of the new LTI scheme is set out in the
Remuneration Report.
The Board also proposes in FY2020 to make a free shares offer to all permanent full-time and part-time employees
with 3 or more years of service of $1,000 worth of shares in the Company. Under the terms of the offer, the shares
will be subject to a trading restriction for 3 years or until the employee ceases employment. This reward is to
recognise the value that our committed staff bring to Netwealth and to our clients.
The Remuneration Committee believes the Remuneration Report will assist both our shareholders and other
stakeholders to understand our remuneration policy, objectives and practices. We are committed to engaging with
our shareholders and other stakeholders and we welcome your feedback.
Yours faithfully
Davyd Lewis
Chairman of the Remuneration Committee
19 August 2019
37 | netwealth Annual Report 2019 For the year ended 30 June 2019
Introduction
Remuneration Objectives
Remuneration Governance
Remuneration Framework
Remuneration Mix
Contents
A.
B.
C.
D.
E.
F. Overview of the Group Performance
G.
H. Non-Executive Directors Remuneration
I.
J.
Executive Remuneration
Other Information
Previous Comments or Resolutions in Relation to Remuneration Report
A. Introduction
This FY2019 Remuneration Report for Netwealth is prepared in accordance with the requirements of
the Corporations Act 2001 and its regulations. The report outlines the remuneration arrangements in
place for the Key Management Personnel (KMP) of the Group. KMP are the individuals who have
authority and responsibility for planning, directing and controlling the activities of Netwealth, as
defined under AASB 124 Related Party Disclosure. The following table lists Netwealth’s KMP for
FY2019.
Name
Position
Non-executive Directors
Jane Tongs
Independent Non-Executive Chairman
Davyd Lewis
Independent Non-Executive Director
Timothy Antonie
Independent Non-Executive Director
Executive Directors
Michael Heine
Joint Managing Director
Matthew Heine
Joint Managing Director
Senior executive
Grant Boyle
Chief Financial Officer (CFO) & Joint Company Secretary
All KMP held office for the whole of FY2019. No KMP retired during FY2019.
B. Remuneration Objectives
The Board is committed to a remuneration framework targeted on driving excellent customer service,
integrity and a performance culture. Netwealth’s objectives for remuneration of all employees
include:
•
to promote achievement of the Netwealth’s strategic objective of building short, medium and
long-term shareholder and enterprise value;
• while remuneration arrangements are designed to promote and reward performance, they must
also promote conduct consistent with the Board’s risk appetite and protection of the interests of
Netwealth’s stakeholders;
38 | netwealth Annual Report 2019 For the year ended 30 June 2019
•
•
•
•
the structure for remuneration must be consistent with and promote adherence to Netwealth’s
ethics, values, policies and procedures;
employees are to be fairly remunerated for work undertaken, having regard to the remuneration of
employees in comparable positions in comparable organisations;
remuneration levels should attract and retain high-quality employees;
there is no gender bias in remuneration; and
• when setting the levels of remuneration, Netwealth’s long term financial soundness and its
prospective financial position and performance are to be considered.
Netwealth’s objectives for remuneration of non-executive directors are:
•
•
•
•
remuneration must be sufficient to attract and retain high quality non-executive directors;
remuneration for non-executive directors must not create a conflict with their obligation to bring
an independent judgement to matters before the Board;
remuneration for each non-executive director should be appropriate based on their role and
responsibilities, including the time commitment involved; and
there must be no gender bias in determining remuneration.
C. Remuneration Governance
The Board is ultimately responsible for establishing Netwealth’s remuneration policy (the
Remuneration Policy) and determining non-executive director remuneration, senior executive
remuneration and Netwealth’s incentive structures. The Board is assisted by the Remuneration
Committee (the Committee). The Committee is comprised of the Group’s three independent non-
executive directors. The Committee’s responsibilities include:
•
•
•
•
•
•
•
reviewing and making recommendations to the Board on the Remuneration Policy;
annually reviewing the performance of the JMDs;
determining whether the JMDs have met the conditions for payment of STIs and LTIs under the
terms of their contracts and/or under the terms of relevant STI and LTI schemes;
annually reviewing and recommending remuneration arrangements for the JMDs, the JMD’s
direct reports, other persons determined by APRA to be ‘responsible persons’ and the non-
executive directors;
approving remuneration packages over a threshold amount;
approving major changes in remuneration-related policies;
reviewing and recommending changes and developments in relation to LTI schemes;
39 | netwealth Annual Report 2019 For the year ended 30 June 2019
•
•
•
•
•
•
overseeing the operation of LTI schemes and recommending whether offers are to be made under
the schemes;
recommending bonuses;
reviewing and making recommendations on remuneration by gender and addressing any pay gap;
reviewing and recommending changes to board remuneration;
reviewing and recommending the Remuneration Report;
ensuring remuneration for non-executive directors must not create a conflict with their
obligations; and
• where applicable, approving the appointment of remuneration advisers for the purposes of the
Corporations Act.
D. Remuneration Framework
Fixed remuneration
Netwealth’s employees’ fixed remuneration is determined on an annual basis in accordance with the
its remuneration objectives. The JMDs and the CFO remuneration were set having regard to their
individual roles and responsibilities, their skills and experience and a comparison with remuneration
paid to officers and employees of comparable companies. Consideration was given to the financial
performance of Netwealth during the period of their tenure. The Board has conducted a similar review
for FY2020.
Short term incentives (STIs)
Generally, other than for sales and distribution team and the JMDs, Netwealth pays STIs in the form of
cash bonuses where, in the opinion of the Board, an employee has made an exceptional contribution.
The total remuneration packages under the contracts of employment with each of the JMDs were set
to include a cash bonus in respect of FY2019 if, in addition to meeting personal performance and
behavioural requirements, certain Netwealth’s performance hurdles were met, which they were in
part. Details of these STIs are set out below.
JMD
STI structure
Michael Heine
Matthew Heine
Cash bonus based on the Group statutory
NPAT achieved compared to a specified
target NPAT with the minimum bonus
payable at 95% of target NPAT and the
maximum at 105% or more of target NPAT
Maximum STI
$150,000
$250,000
The personal performance requirements for the JMDs were based on a range of financial and non-
financial KPIs based on 4 key result areas: risk, customer, efficiency and innovation and business. The
Board assessed that each of the JMDs had met these KPI standards as well as meeting required
behavioural standards. Based on the Group’s statutory NPAT, each JMD was entitled to 72% of the
maximum STI. Michael Heine, consistent with 2018, has informed the Board that given his substantial
40 | netwealth Annual Report 2019 For the year ended 30 June 2019
holdings in the Group with a majority shareholding, he has voluntarily forgone the STI earned for
FY2019. Matthew Heine will be paid the STI earned within 30 days after the release of this report.
The CFO, Grant Boyle was paid a discretionary bonus of $25,000 based on the Board’s assessment
that he had made an exceptional contribution in FY2019.
Long term incentive schemes
Prior to listing on the Australian Stock Exchange, Netwealth established an LTI scheme (“the Pre-
listing LTI Scheme”) under which senior employees and directors could be issued performance shares,
financed by a limited-recourse loan from Netwealth. Participating employees and directors were
issued performance shares in previous years and all of the outstanding performance shares are still
subject to restriction under the Pre-listing LTI Scheme. In each case, if certain personal and
Netwealth’s performance milestones are satisfied and the loan is repaid, the performance shares will
be converted to ordinary shares between 31 December 2020 and 31 October 2022 and will cease to be
subject to restriction under the Pre-listing LTI Scheme. The personal milestones require each
individual to meet performance and behavioural standards and Netwealth’s performance conditions
are based on the EPS of the Company in FY2020.
If the personal milestones are not reached, the performance shares will be forfeited. Some or all of the
performance shares will be forfeited if the EPS milestone is not achieved. Details of the Pre-listing LTI
Scheme and the shares issued under it were set out in the Company’s listing prospectus. Further
details of the Pre-listing LTI scheme and the performance share holdings by KMP are set out below.
The Board adopted a new LTI scheme (“the New LTI Scheme”) in FY2019 which will apply from FY2020
onwards. Under the New LTI Scheme, the Board at its discretion may make offers of ‘incentive
securities’ in the form of rights, options, restricted shares or a combination of these to eligible
employees. The New LTI Scheme will not apply to non-executive Directors. The Board has
determined that offers of ‘incentive securities’ will be made under the New LTI Scheme to a number of
senior and key employees in FY2020. These employees will include Matthew Heine (subject to
shareholder approval at the FY2019 Annual General Meeting) and Grant Boyle. The ‘incentive
securities’ offered will be options over ordinary shares in the Company with key terms including:
•
•
•
•
•
•
•
•
exercise price equal to an average market price at the time of the offer;
personal behavioural and performance gateways, all of which must be met for the options to
‘vest’;
vesting conditions tested over a 3-year vesting period;
trading restriction on half of the shares allotted on exercise for 12 months after the end of the
vesting period, with claw back provisions in that period;
vesting condition applicable to half of each employee’s entitlement based on comparison of
Netwealth’s total shareholder return (TSR) with constituents of the S&P/ASX 300 Diversified
Financials Index over vesting period and a positive TSR;
vesting condition applicable to half of each employee’s entitlement based on CAGR of the
Netwealth’s EPS over vesting period;
options have no dividend or voting rights and do not participate in rights or bonus issues;
subject to Board discretion, options generally lapse on cessation of employment due to
termination or resignation; and
• Board may determine that options vest on change of control event occurring.
41 | netwealth Annual Report 2019 For the year ended 30 June 2019
Remuneration framework and Netwealth’s performance
Netwealth’s Remuneration Framework is structured to tie remuneration to Netwealth’s performance
through cash bonuses and other STIs and LTIs. The JMD’s FY2019 STI entitlements were based on
statutory NPAT, the CFO’s cash bonus was based on exceptional contribution in a year of excellent
Netwealth’s performance and the Pre-listing LTI scheme is based on achievement of EPS
performance. The vesting of entitlements under the New LTI Scheme will also be tied to the Group’s
performance over the vesting periods.
E. Remuneration Mix
Remuneration mix refers to the proportion of total remuneration that is made up of each
remuneration component. The JMDs are the KMP who received STIs in FY2019 (other than Grant
Boyle who received a discretionary cash bonus). The following diagrams set out the remuneration mix
for the JMDs in FY2019:
•
Fixed remuneration including base salary, superannuation and other benefit; and
• Cash Short-Term Incentive (At Risk component).
Michael
Heine
Matthew
Heine
These diagrams do not include performance shares issued under the Pre-listing LTI Scheme.
The Board has determined that for FY2020 the fixed remuneration of each JMD will remain the same
and the cash short term incentive at-risk component will be up to a maximum of the fixed component.
The at-risk component will be subject to personal and corporate performance gateways and will be
tied to Netwealth’s performance. In addition, Matthew Heine will participate in the new LTI scheme.
F. Overview of the Group Performance
The following table sets out information about the Group’s key financial performance for FY2018 and
FY2019:
Financial Period Ended 30 June
NPAT ($ million)
Dividends paid ($ million)
NPAT earnings per share (cents)
2019
2018
2017
34,295
20,818
13,554
38,171
8,300
4,555
14.43
8.96
6.20
It has therefore been a successful year for the Group, with NPAT increasing 64.7% on prior
comparative period.
42 | netwealth Annual Report 2019 For the year ended 30 June 2019
G. Executive Remuneration
The table below sets out details of the remuneration of the JMDs and the CFO (the three KMP who are
employee executives) for FY2019 and FY2018.
Joint Managing Directors
Michael Heine
2018
2019
$
$
Matthew Heine
2018
2019
$
$
CFO
Grant Boyle
Total
2019
$
2018
$
2019
$
2018
$
228,311
-
-
228,311
-
-
479,469
180,000
2,995
479,952
150,000
2,855
325,000
25,000
-
325,000
-
-
1,032,780
205,000
2,995
1,033,263
150,000
2,855
(16,391)
3,805
7,991
7,999
5,417
5,417
(2,983)
17,221
21,689
21,689
20,531
20,048
25,000
25,000
67,220
66,738
-
-
-
-
-
-
14,299
-
14,299
-
2,447
-
2,447
-
16,746
-
16,746
-
-
-
-
-
-
-
Short term benefits
Cash salary
STI1
Other2
Long term benefits
Leave3
Post-employment
benefits
Superannuation4
Share-based payments
Pre-listing LTI scheme5
New LTI scheme6
Termination benefits
Termination payments
Total
233,609
253,806
705,286
675,154
382,864
357,864
1,321,759
1,286,824
% Performance related
0%
0%
28%
24%
7%
1%
17%
13%
1. An STI payment for FY2019 was earned by Matthew Heine as described in section D above. Michael Heine
opted to waive his STI payment earned for FY2018 and FY2019. A discretionary STI payment for FY2019 was
awarded to Grant Boyle as described in section D above.
The Group paid a short-term benefit of club membership fees on behalf of Matthew Heine.
Long term benefits related to long service leave entitlements accrued for the year, net of leave taken.
Superannuation payments are made in accordance with the relevant statutory requirements.
2.
3.
4.
5. Performance shares held under the Pre-listing LTI Scheme did not convert to ordinary shares during FY2019 as
they remain subject to vesting conditions.
6. No rights, options or shares have been issued under the New LTI Scheme during the financial year.
Service agreements
The remuneration and other terms of employment for the KMP are formalised in employment
contracts, which are reviewed annually. The JMDs and CFO are entitled to receive pay in lieu of notice
of resignation, in addition to any leave entitlements upon cessation of employment. All services
agreements are for unlimited duration but may be terminated immediately in the event of serious
misconduct, in which case the executive is not entitled to any payment in lieu of notice. The following
table outlines the key contractual arrangement for the JMDs and senior executive KMP.
Position
JMDs
CFO
Contractual
Term
Employer Notice
Period
Employee Notice
Period
Post-Employment Restraints
Ongoing
Six months
Six months
Six-month non-competition period
Ongoing
Six months
Six months
Six-month non-competition period
43 | netwealth Annual Report 2019 For the year ended 30 June 2019
H. Non-Executive Directors Remuneration
The table below sets out details of the remuneration of the three Non-Executive Directors for FY2019.
Fees/benefits
Description
Board fees
Board
Chair – Jane Tongs
Members – other Non-Executive Directors
Committee fees
Audit Committee
Chair – Timothy Antonie
Members – Jane Tongs, Davyd Lewis
Remuneration Committee
Chair – Davyd Lewis
Members – Jane Tongs, Timothy Antonie
Compliance and Risk Management Committee
Chair – Davyd Lewis
Members – Jane Tongs, Timothy Antonie
Due Diligence Committee
Chair – Davyd Lewis
Members – No other Directors are members
Investment Committee1
Chair – Jane Tongs
Member - Timothy Antonie
FY2019
$120,000
$100,000
$5,000
-
$5,000
-
$5,000
-
$5,000
-
$5,000
-
Superannuation
Other benefits
The fees set out above include superannuation payment in
accordance with the relevant statutory requirements.
Superannuation is paid up to the relevant concessional
contributions cap, with the remainder paid in cash.
Non-Executive Directors are entitled to reimbursements for
business-related expenses, including travel expenses and all
receive the benefit of coverage under a Director and Officers
insurance policy. The Group has paid premiums to insure each
director and officer under a Directors and Officers Insurance
policy. Further disclosure of information relating to this policy is
not permitted under the contract of insurance.
1 Relates to the Investment Committee for Netwealth Investments Limited
44 | netwealth Annual Report 2019 For the year ended 30 June 2019
The table below sets out the total non-executive director fees paid for FY2019.
Jane Tongs
Davyd Lewis
Timothy Antonie
Total
2019
2018
2019
2018
2019
2018
2019
2018
$
$
$
$
$
$
$
$
Fees and
allowances
Board and
Committee fees
Post-
employment
benefits
114,155
114,155
105,023
105,023
95,890
95,890
315,068
315,068
Superannuation
10,845
10,845
9,977
9,977
9,110
9,110
29,932
29,932
Share-based
payments
Pre-listing LTI
scheme1
1,787
1,787
1,787
1,787
1,787
1,787
5,361
5,361
Total
126,787
126,787
116,787
116,787
106,787
106,787
350,361
350,361
1 Performance shares held under the Pre-listing LTI Scheme did not convert to ordinary shares during FY2019 as
they remain subject to vesting conditions.
The total amount paid to all Non-Executive Directors for their services as Directors must not exceed in
aggregate in any financial year the amount fixed by the Netwealth in general meeting. This amount
was fixed by the Board at $800,000 per annum.
45 | netwealth Annual Report 2019 For the year ended 30 June 2019
I. Other information
KMP share movements
The table below sets out the shareholdings of ordinary shares of each KMP for FY2019.
Ordinary shares
Sale of shares
Purchases of
shares
Balance at
beginning of
financial
period
Other
changes
during the
year
Balance at
end of
financial
period
FY2019
Number
Number
Number
Number
Number
Non-Executive Directors
Jane Tongs
Davyd Lewis
1,930,060
200,333
Timothy Antonie
-
Executive Directors
-
-
-
Michael Heine
125,904,990
40,000
-
-
-
-
Matthew Heine2
3,211,405
829,230
(829,230)
Senior Executive
Grant Boyle1
20,269
-
(20,093)
-
-
-
-
-
-
1,930,060
200,333
-
125,944,990
3,211,405
176
1 Shares held by Grant Boyle through an allocation made to him during the IPO were sold in FY2019 with the
associated loan fully repaid during the financial year.
2 The shares purchased and sold by Matthew Heine were the result of transferring his holdings that were previously
issuer sponsored into his account held within the Netwealth Wrap Service.
46 | netwealth Annual Report 2019 For the year ended 30 June 2019
KMP shareholdings under the Pre-listing LTI scheme
The table below set out the shareholdings of performance shares issued under the Pre-listing LTI
scheme to each KMP. The employee loans are interest-free non-recourse loans that must be repaid if
the vesting conditions are met for the performance shares to convert to ordinary shares. The loans
must be repaid within 10 years of grant date.
Performance Shares
Balance at
beginning of
financial
period
Granted
during the
year
Vested
Forfeited
Balance at
end of
financial
period
FY2019
Number
Number
Number
Number
Number
Non-Executive Directors
Jane Tongs
Davyd Lewis
Timothy Antonie
Executive Directors
175,000
175,000
175,000
Michael Heine
-
Matthew Heine
1,400,000
Senior Executive
Grant Boyle
175,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
175,000
175,000
175,000
-
1,400,000
175,000
Performance shares were originally issued to the KMP in FY2016 and FY2017 and were funded by
interest-free non-recourse loans. At the time of the IPO, the Pre-listing LTI Scheme was revised to
provide performance shares on the same terms as those previously held but in the new parent
company of the Group. The performance shares do not confer the right to attend and vote at
meetings and do not confer the right to participate in dividends. The performance shares remain
subject to ‘vesting’ conditions.
Under the Pre-listing LTI Scheme, the proportion of shares vesting on expiry of the three-year
performance period (ending FY2020) will be as set out in the table below.
Earnings Per Share (EPS)
Proportion of Performance Shares that vest
$0.1571 or more
$0.1414 or more but less than $0.1571
$0.1271 or more but less than $0.1414
$0.1143 or more but less than $0.1271
less than $0.1143
100%
90%
80%
70%
Nil
47 | netwealth Annual Report 2019 For the year ended 30 June 2019
The following vesting conditions apply to the performance shares:
•
•
•
The holder must be either continuously employed by or hold office continually with until 31
December 2020;
In each of the four financial years ending with the FY2020, the holder must achieve performance
ratings of ‘Achieving’; and
In each of the four financial years ending with FY2020, the holder must achieve behaviour ratings
of ‘Effectively displays’.
Performance shares that do not vest will be compulsorily divested at a price of $0.6143 per
performance share as at 31 December 2020. A holder does not receive any part of the proceeds of
divestiture. Participants are entitled to keep their vested shares after leaving the Group – subject to
the basis of termination.
Limited recourse loans to KMP
There were limited recourse loans made during the year or remaining unsettled at 30 June 2019
between the Group and its KMP. The table below summarises the movement in limited recourse
loans during the year:
Balance at
beginning of
financial
period
$
FY2019
Non-Executive Directors
Jane Tongs
Davyd Lewis
Timothy Antonie
Executive Directors
82,500
82,500
82,500
Michael Heine
-
Matthew Heine
862,394
Senior Executive
Grant Boyle
107,500
Limited recourse loans
Increase in
Loan
Repayment
of Loan
Other
changes
during the
year
$
-
-
-
-
-
-
$
-
-
-
-
-
-
$
-
-
-
-
-
-
Balance at
end of
financial
period
$
82,500
82,500
82,500
-
862,394
107,500
Limited recourse loans were previously offered to employees where the loan value is tied to the value
of the associated shares issued. Repayments are triggered when the associated ordinary shares are
sold which requires the loan amount to be repaid. In the event total value of the shares sold cannot
cover the associated loan, there is no further recourse on the loan
48 | netwealth Annual Report 2019 For the year ended 30 June 2019
Full recourse loans to KMP
All full recourse loans have been repaid as at 30 June 2019 between the Group and its KMP. The table
below summarises the movement in full recourse loans during the year:
Full Recourse Loans
Increase in
Loan
Repayment
of Loan
Balance at
Beginning of
Financial
Period
Other
changes
during the
year
Balance at
end of
financial
period
FY2019
Non-Executive Directors
Jane Tongs
Davyd Lewis
Timothy Antonie
Executive Directors
Michael Heine
Matthew Heine
Senior Executive
$
-
-
-
-
-
Grant Boyle
50,000
$
-
-
-
-
-
-
$
-
-
-
-
-
(50,000)
$
-
-
-
-
-
-
$
-
-
-
-
-
-
J. Previous comments or resolutions in relation to Remuneration Report
At the 14 November 2018 annual general meeting, no comments were made in relation to the FY2018
Remuneration Report and the Remuneration Report was adopted by a vote of 99% in favour.
49 | netwealth Annual Report 2019 For the year ended 30 June 2019
Auditor’s Independence Declaration
50 | netwealth Annual Report 2019 For the year ended 30 June 2019
Consolidated Statement of Profit or Loss and Other
Comprehensive Income
For the year ended 30 June 2019.
Consolidated Group for Year Ended
Note
30 June 2019
$’000
30 June 2018
$’000
Continuing operations
Income
Revenue
Other income
Total income
Expenses
Employee benefits expenses
Other operating expenses
Occupancy expenses
IT and communication expenses
Depreciation
Amortisation
Total expenses
Profit before income tax
Income tax expense
Profit for the period from continuing operations
Discontinued operations
Profit/(Loss) for the period from discontinued
operations
Profit for the period
Total comprehensive income for the period
Total comprehensive income attributable to:
Members of the parent entity
Earnings per share
From continuing and discontinued operations:
Basic (cents per share)
Diluted (cents per share)
From continuing operations:
Basic (cents per share)
Diluted (cents per share)
4
4
5
5
5
6
20
9
9
9
9
The accompanying notes form part of these financial statements
51 | netwealth Annual Report 2019 For the year ended 30 June 2019
96,369
2,401
98,770
(32,344)
(10,828)
(1,614)
(3,142)
(664)
(95)
(48,687)
50,083
(14,882)
35,201
81,460
1,800
83,260
(28,739)
(20,637)
(1,687)
(2,330)
(614)
(64)
(54,071)
29,189
(9,572)
19,617
(906)
1,201
34,295
34,295
20,818
20,818
34,295
20,818
14.43
14.43
14.81
14.81
8.96
8.96
8.44
8.44
Consolidated Statement of Financial Position
As at 30 June 2019.
Consolidated Group as at
Note
30 June 2019
30 June 2018
$’000
$’000
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Other current assets
Financial assets
Assets classified as held for sale
Total current assets
Non-current assets
Property, plant and equipment
Intangible assets
Financial assets
Deferred tax assets
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Provisions
Current tax liabilities
Liabilities directly associated with assets
classified as held for sale
Total current liabilities
Non-current liabilities
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Retained earnings
Total equity
10
11
12
20
13
14
12
6
15
16
20
16
17
18
The accompanying notes form part of these financial statements
52 | netwealth Annual Report 2019 For the year ended 30 June 2019
58,459
52,669
8,565
3,484
3,301
-
5,959
2,510
5,606
52
73,809
66,796
2,533
383
-
4,700
7,616
81,425
6,327
3,206
7,378
-
2,859
343
2,227
6,526
11,955
78,751
4,290
3,490
2,916
60
16,911
10,756
667
667
17,578
63,847
23,504
844
39,499
63,847
583
583
11,339
67,412
23,259
778
43,375
67,412
Consolidated Statement of Changes in Equity
For the year ended 30 June 2019.
Consolidated Group
Note
Issued
capital
$’000
Reserves
Retained
earnings
Total
$’000
$’000
$’000
Balance at 1 July 2017
20,205
712
30,478
51,395
Shares issued during the period
Total comprehensive income for the period
Amounts recognised on issue of employee
shares
Return of Capital
Dividends paid or provided for
Balance at 30 June 2018
Balance at 1 July 2018
Shares fully paid during the period
Total comprehensive income for the period
Amounts recognised on issue of employee
shares
Dividends paid or provided for
8
2,817
-
237
-
-
23,259
23,259
245
-
-
-
-
-
66
-
-
778
778
-
-
66
-
2,817
20,818
20,818
-
303
379
379
(8,300)
(8,300)
43,375
67,412
43,375
67,412
-
245
34,295
34,295
-
66
-
(38,171)
(38,171)
Balance at 30 June 2019
23,504
844
39,499
63,847
The accompanying notes form part of these financial statements.
53 | netwealth Annual Report 2019 For the year ended 30 June 2019
Consolidated Statement of Cash Flows
For the year ended 30 June 2019.
Consolidated Group for Year Ended
Note
30 June 2019
30 June 2018
$’000
$’000
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Dividends received
Interest received
Income tax paid
Net cash generated by operating activities
24
Cash flows from investing activities
Purchase of property, plant and equipment
Proceeds from sale of Investments
Purchase of Investments
Purchase of intangibles
Sale of intangibles
Net cash generated/(used) used in investing
activities
Cash flows from financing activities
Proceeds from issue of shares
Dividends paid
Net cash used in financing activities
Net increase in cash held
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
The accompanying notes form part of these financial statements.
102,168
(53,636)
31
846
(8,652)
40,757
(593)
4,799
(1,099)
(148)
-
2,959
245
(38,171)
(37,926)
5,790
52,669
58,459
95,908
(68,124)
29
624
(10,382)
18,055
(911)
1,939
(1,672)
(300)
5,813
4,869
3,056
(8,300)
(5,244)
17,680
34,989
52,669
54 | netwealth Annual Report 2019 For the year ended 30 June 2019
Notes to the Financial Statements
1 General Information
The Financial Report of Netwealth Group Limited which covers ‘the Company’ as an individual entity
(disclosed in Note 26) and its controlled entities (together referred to as ‘the Group’) for the year
ended 30 June 2019 as required by the Corporations Act 2001 was authorised for issue in accordance
with a resolution of the Directors on 19 August 2019. The Company is limited by shares and
incorporated and domiciled in Australia.
The addresses of its registered office and principle place of business are as follows:
Registered office of the company:
Netwealth Group Limited
Level 8, 52 Collins Street
MELBOURNE VIC 3000
Principle place of business:
Netwealth Group Limited
Level 8, 52 Collins Street
MELBOURNE VIC 3000
The principal activities of the Group are to provide Financial Intermediaries and investors with
financial services including managed funds, investor directed portfolio services, a superannuation
master fund, separately managed accounts and self-managed superannuation administration
services.
2 Significant Accounting Policies
Basis of preparation
This consolidated financial report for the year ended 30 June 2019:
•
•
is for the consolidated entity consisting of Netwealth Group Limited and its controlled entities
(trading on the ASX under the symbol ‘NWL’);
is presented in Australian dollars, with all values rounded to the nearest thousand dollars, or in
certain cases, the nearest dollar, in accordance with the Australian Securities and Investment
Commission Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191;
• has been prepared on a going concern basis using historical costs in accordance with Australian
Accounting Standards (AASBs) and Interpretations issued by the Australian Accounting
Standards Board, and the Corporations Act 2001;
•
complies with International Financial Reporting Standards as issued by the International
Accounting Standards Board; and
• has accounting policies and methods of computation which are consistent to all periods
presented, unless stated.
55 | netwealth Annual Report 2019 For the year ended 30 June 2019
Principles of consolidation
The consolidated financial statements incorporate the financial statements of the Company and
entities controlled by the Company and its subsidiaries. Control is achieved when the Company:
• has power over the investee;
•
is exposed, or has rights, to variable returns from its involvement with the investee; and
• has the ability to use its power to affect its returns.
Consolidation of a subsidiary begins when the Company obtains control over the subsidiary and
ceases when the Company loses control of the subsidiary.
The financial statements of all the entities are prepared for the same reporting period as the parent
entity with consistent accounting policies.
Profit or loss and each component of other comprehensive income are attributed to the owners of the
Company.
All intragroup assets and liabilities, equity, income, expenses and cash flows relating to transactions
between members of the Group are eliminated in full on consolidation.
Changes in the Group's ownership interests in existing subsidiaries
Changes in the Group's ownership interests in subsidiaries that do not result in the Group losing
control over the subsidiaries are accounted for as equity transactions. The carrying amounts of the
Group's interests and the non-controlling interests are adjusted to reflect the changes in their relative
interests in the subsidiaries.
When the Group loses control of a subsidiary, a gain or loss is recognised in profit or loss and is
calculated as the difference between the fair value of the consideration received and the previous
carrying amount of the assets (including goodwill), liabilities of the subsidiary and any non-controlling
interests.
Business combinations
Acquisitions of businesses are accounted for using the acquisition method. The consideration
transferred in a business combination is measured at fair value, which is calculated as the sum of the
acquisition-date fair values of the assets transferred by the Group, liabilities incurred by the Group to
the former owners of the acquiree and the equity interests issued by the Group in exchange for
control of the acquiree. Acquisition-related costs are generally recognised in profit or loss as incurred.
Critical accounting estimates and key sources of estimation uncertainty
In the application of the Group's accounting policies, the Directors are required to make judgements,
estimates and assumptions about the carrying amounts of assets and liabilities that are not readily
apparent from other sources. The estimates and associated assumptions are based on historical
experience and other factors that are considered to be relevant. Actual results may differ from these
estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting
estimates are recognised in the period in which the estimate is revised if the revision affects only that
56 | netwealth Annual Report 2019 For the year ended 30 June 2019
period, or in the period of the revision and future periods if the revision affects both current and future
periods.
Adoption of new and revised Australian Accounting Standards and Interpretation
The Group has adopted all the new and revised Standards and Interpretations issued by the Australian
Accounting Standards Board (the AASB) which are mandatorily applicable to the current interim
period. Disclosures required by these standards that are deemed material have been included in this
financial report on the basis that they represent a significant change in information from that
previously made available.
AASB 9 - Financial Instruments (applicable to annual reporting periods beginning on or after 1
January 2018)
From 1 July 2018, AASB 9 replaced AASB 139 Financial Instruments: Recognition and Measurement.
The new standard includes three areas of change:
• Classification and measurement of financial instruments;
• A forward-looking view at impairment with an Expected Credit Loss Model; and
• A new approach to hedge accounting.
Under AASB9, the initial recognition of the financial assets is measured at amortised cost which is
unchanged from AASB 139. In subsequent periods the financial asset is then measured either at
amortised cost, fair value through other comprehensive income (FVOCI) or fair value through profit or
loss (FVTPL). The previous measurement of financial assets ‘held-to maturity’ and ‘available-for-sale’
under AASB 139 is no longer available as an option.
The Group has adopted the retrospective approach to AASB 9 Financial Instruments and did not
restate prior period comparatives. The application of AASB 9 introduces an expected credit loss
model to assess impairment of financial instruments and a new Business Model test to combine with
Solely Payments of Principal and Interest (SPPI) test in classifying financial instruments.
For Netwealth, this involve assessing the following financial instruments;
•
•
•
Trade Debtors;
Intercompany Loans; and
Listed Redeemable Notes.
As part of implementing the new credit loss model, management has applied the following
probabilities for bad debts by assessing historical trends of bad debts across the group:
57 | netwealth Annual Report 2019 For the year ended 30 June 2019
Aging Category
Current
1 – 30 Days overdue
31 – 60 Days overdue
61 – 90 Days overdue
Over 90 Days overdue
Bad Debt Probability
0.10%
0.50%
0.75%
1.00%
3.00%
Based on the assessment of the Group’s financial instruments under AASB 9, the Directors
determined that adoption of the new standard has no material changes in classification and
measurement of its financial assets and the financial impact to the Group is immaterial. Additional
information on the classification and measurement of the Group’s financial instrument and the
recognition of the Expected Credit Loss are included in Note 21.
AASB 15 – Revenue from Contracts with Customers (applicable to annual reporting periods
beginning on or after 1 January 2018)
From 1 July 2018, AASB 15 replaced AASB 118 Revenue. Under AASB 15, an entity recognises revenue
when a performance obligation is satisfied, i.e. when control of the goods or services underlying the
particular performance obligation is transferred to the customer.
As part of AASB 15 assessment, the Group has applied the following 5-step approach to revenue
recognition:
1.
Identify the contract(s) with a customer;
2.
Identify the performance obligations in the contract(s);
3. Determine the transaction price;
4. Allocate the transaction price to the performance obligation in the contract(s); and
5. Recognise revenue when (or as) the performance obligations are satisfied.
From 1 July 2018, the Group has adopted the full retrospective approach to AASB 15 Revenue from
Contracts with Customers. From the initial application of the standards, the cumulative impact to the
opening balance of retained earnings is nil, as the timing of revenue recognition from contracts that
were in progress at 1 July 2018 has not changed.
The Group has conducted a detailed review of its revenue contract and their respective services
delivered to customers. As a result, the Group has recognised the following separate performance
obligations on the platform as:
• Services provided to investors which include administration and management of their
investments; and
• Services provided to fund managers which include listing financial products issued by fund
managers on the platform.
58 | netwealth Annual Report 2019 For the year ended 30 June 2019
Under AASB 15, revenue recognition for each of the revenue streams is as follows:
Revenue Stream
Performance
Obligation
Timing of recognition
Services provided to
investors which include
administration,
transacting and
management of their
investments
Services provided to fund
managers which include
listing financial products
issued by fund managers
on the platform.
Platform Services on
Netwealth’s
Platform
Over time as the customer simultaneously
receives and consumes the benefits of accessing
the platform and the services utilised.
Revenue is calculated based on the daily Funds
Under Administration (FUA) and the services
utilised by the investor.
Listing Fund/Model
Services on
Netwealth’s
Platform
Over time as services are provided.
Revenue is calculated based on the number of
funds/models listed, proportion to the duration
the service has been rendered.
Revenue from providing Platform Administration Services is recognised in the accounting period in
which the services are rendered.
For fixed-price Listing Fund/Model Services, revenue is recognised based on the actual service
provided to the end of the reporting period over the duration of the agreed contractual period.
The Group’s Platform Administration services also includes rebates under certain circumstances
(family linked accounts). This is where clients can receive a partial rebate on the Platform
Administration services for bringing family linked accounts onto the Platform. This was recognised
under the ‘expected value’ methodology, which is based on a probability methodology.
During the FY2019, revenue of the contracts is summarised below:
Revenue stream
Platform Services
Listing Fund/Model Services
Total Platform Revenue
Revenue Recognition
Over time
Over time
$’000
92,711
3,658
96,369
Based on the assessment of the Group’s adoption of AASB 15 during the year, the Directors have
determined that the financial impact from the new standard was not material. Additional information
of the recognition of the Group’s Revenue are included in Note 4.
59 | netwealth Annual Report 2019 For the year ended 30 June 2019
New and revised Australian Accounting Standards and Interpretation on issue but not yet effective
New and revised Standards and Interpretations issued by the Australian Accounting Standards Board
(the AASB) which are not mandatory for the 30 June 2019 reporting period have not yet been applied
in these financial statements. The Group’s assessment of the impact of these new Standards and
Interpretations are as below:
AASB 16 – Leases (applicable to annual reporting period beginning on or after 1 January 2019)
From 1 July 2019, the Group is required to adopt AASB 16 Leases, replacing AASB 117 Leases. The
Group has elected to apply the modified retrospective approach. The Group has identified that
Netwealth’s only type of lease commitment is the Group’s leases for office premises.
Under AASB 16, Netwealth’s leases will be deemed financial leases and recognised on the
Consolidated Statement of Financial Position over the period of the lease. From Netwealth’s
perspective, it will result in the recognition of a right-of-use (ROU) asset (less any incentive) and an
associated lease liability, being the present value of future lease payments.
An interest expense will be recognised on the lease liabilities, together with depreciation of the ROU
asset until the expiry of the lease, extended lease expiry (based on the likelihood on whether the
extended lease period will be taken up) or early termination of the lease.
The change in the accounting standards will result in more of the recognition of expense to be
brought forward in the earlier stages of the lease, as the lease liability is treated like a loan was taken
out to acquire the premises.
Transition
The Group has elected to apply the modified retrospective approach as permitted by AASB 16. The
cumulative effect of adopting AASB 16 will be recognised as an adjustment to the opening balance (if
any) of retained earnings at 1 July 2019 with no restatement of comparative information.
The Group has chosen to measure the existing operating leases at the present value of the remaining
lease payments, discounted using the Group’s incremental borrowing rate at the date of initial
application.
Based on the elected transition method, the Group has assessed the estimated impact of AASB 16 on
the Consolidated Statement of Financial Position on 1 July 2019 as follows:
Expected impact on Statement of Financial Position
Increase in new lease liabilities
Increase in new right-of-use assets
Decrease from the existing lease incentive liability
Net impact on statement of financial position
$’000
(2,535)
2,073
462
-
At transition, the Group has lease incentive liability of $0.5 million, which will be recognised as a
reduction in the ROU assets.
60 | netwealth Annual Report 2019 For the year ended 30 June 2019
NPAT is not expected to materially change, however, EBITDA will be positively impacted as the
operating lease expense associated with these leases will be recognised as interest and depreciation,
which is below EBITDA. These expenses will not be available for income tax deductions. The
expected impact for FY2020 are:
Expected Impact on Statement of Profit or Loss
Decrease in operating leases expense
Increase in interest expense
Increase in depreciation expense
Decrease in net profit before tax
$’000
(1,366)
59
1,327
(20)
3 Segment Information
The Group is organised into one reportable operating segment.
The reportable operating segment is based on the internal reports that are reviewed and used by the
Board of Directors and the executive management team, identified as the Chief Operating Decision
Makers (CODM), in assessing performance and in determining the allocation of resources. The CODM
reviews segment profits (Segment EBITDA) on a monthly basis. The accounting policies adopted for
internal reporting to the CODM are consistent with those adopted in the financial statements.
All the Group’s operations are based in Australia.
61 | netwealth Annual Report 2019 For the year ended 30 June 2019
4 Revenue
Revenue and other income
Revenue
Platform revenue
Total platform revenue
Other income
Net gain on disposal of investments
Unrealised investments gains
Dividends and distributions received
Interest received
Cost of capital recovery
Other Income
Total other income
Total income
Consolidated Group
30 June 2019
30 June 2018
$’000
$’000
96,369
96,369
73
1
31
846
1,438
12
2,401
98,770
81,460
81,460
171
3
29
617
911
69
1,800
83,260
Key Accounting Policies
Revenue is measured by reviewing each revenue contract and its respective services to customers to
determine its performance obligation while allocating the transaction price to each performance obligation
either over time or at a point in time. The performance obligations identified are:
Platform revenue
•
Platform Services is recognised over time as the customer receives and consumes the benefits of
accessing the platform and the services utilised
Listing Fund/Model Services is recognised over time as the actual service are provided to the end of the
reporting period over the duration of the agreed contractual period
•
• Other income
• Gain from disposal of investments is recognised when the asset has been disposed
• Unrealised gains from investments is recognised when the fair value of the underlying asset has
increased but not been disposed
• Dividend revenue is recognised when the right to receive a dividend has been established
• Cost of capital recovery is recognised when the right to recover the cost of subscribed Operational Risk
•
Financial Requirement (ORFR) capital has been established
Interest revenue is accrued on a time basis, by reference to the principal outstanding and the effective
interest rate applicable, which is the rate that discounts the estimated future cash receipt thorough the
expected life of the financial asset to that asset’s net carrying amount on initial recognition
62 | netwealth Annual Report 2019 For the year ended 30 June 2019
5 Expenses
5.1 Employee benefits expense
Salaries and wages (including payroll tax)
Contributed superannuation
Share-based payment expense
Other employee benefits expenses
Total employee benefits expenses
5.2 Other operating expenses
Operating expenses
Costs associated with the Group’s Initial Public Offering
Non recurring client rectification costs and legal expenses
Total other operating expenses
5.3 Occupancy expenses
Operating lease expense
Other occupancy expenses
Occupancy expenses
Consolidated Group
30 June 2019
30 June 2018
$’000
27,626
2,414
66
2,238
32,344
$’000
24,804
2,020
66
1,849
28,739
Consolidated Group
30 June 2019
30 June 2018
$’000
9,707
-
1,121
10,828
$’000
8,214
12,423
-
20,637
Consolidated Group
30 June 2019
30 June 2018
$’000
1,327
287
1,614
$’000
1,394
293
1,687
63 | netwealth Annual Report 2019 For the year ended 30 June 2019
Key Accounting Policies
Short-term employee benefits
Current liabilities for wages and salaries (other than termination benefits) that are expected to be settled
wholly within 12 months after the end of the annual reporting period for the employees’ services rendered.
They are measured at the amounts expected to be paid when the obligation is settled.
Other long-term employee benefits
Long service leave are long-term employee benefits, where they are not expected to be settled wholly within 12
months after the end of the annual reporting period for the employees’ services rendered. It is measured at the
present value of the probability on expected future payments to be made to employees and are discounted at
rates determined by reference to Group of 100 (G100) discount rate.
They are presented as non-current provisions in its statement of financial position, except where the Group
does not have an unconditional right to defer settlement for at least 12 months after the end of the reporting
period, in which case the obligations are presented as current provisions.
Retirement benefit obligations
All employees of the Group receive defined contribution superannuation entitlements, for which the Group
pays the fixed superannuation guarantee contribution to the employee’s superannuation fund of choice.
Operating lease
Operating lease payments are recognised as an expense on a straight-line basis over the lease term, except
where another systematic basis is more representative of the time pattern in which economic benefits from
the leased asset are consumed.
In the event that lease incentives are received to enter into operating leases, such incentives are recognised
as a liability. The aggregate benefit of incentives is recognised as a reduction of rental expense on a straight-
line basis, except where another systematic basis is more representative of the time pattern in which
economic benefits from the leased asset are consumed.
64 | netwealth Annual Report 2019 For the year ended 30 June 2019
6
Income Taxes
a) The components of tax expense/(income) comprise:
Current tax
Deferred tax
Under/(Over) provision from prior years
b) The prima facie tax on profit before income tax is
reconciled to income tax as follows: Prima facie tax
before income tax at 30% (2018:30%):
Impact from tax consolidation
Other non-allowable/assessable items
Non-deductible impairment
Income tax expense attributable to entity
c) The components of deferred tax assets comprise:
Tax losses
Expenditure deductible over 5 years
Temporary differences
d) The components of deferred tax liabilities comprise:
Property, equipment and intangible assets
Investments
Temporary differences
Consolidated Group
30 June 2019
30 June 2018
$’000
$’000
16,707
(1,826)
1
14,882
15,024
-
(142)
-
14,882
7,188
2,400
(16)
9,572
8,756
736
80
-
9,572
Consolidated Group
30 June 2019
30 June 2018
$’000
$’000
-
3,538
1,625
5,163
445
-
18
463
820
4,838
1,727
7,385
623
203
33
859
65 | netwealth Annual Report 2019 For the year ended 30 June 2019
Effective tax rate
Consolidated Group
30 June 2019
30 June 2018
29.7%
32.8%
The effective tax rate for FY2019 includes a capital tax loss recognised after the election to form a
consolidated tax group. The effective tax rate excluding this for the year ended 30 June 2019 is 30.2%.
Opening
Balance
Charged to
Income
Charged
Directly to
Equity
Transferred
to Assets
Held for Sale
Closing
Balance
$’000
$’000
$’000
$’000
$’000
Deferred tax
assets/liabilities
Expenditure deductible
over 5 years
Provision
Tax losses
Property, plant &
equipment and
intangible assets
FVTPL financial assets
Other temporary
difference
Balance at 30 June 2018
Expenditure deductible
over 5 years
Provision
Tax losses
Property, plant &
equipment and
intangible asset
FVTPL financial assets
Other temporary
differences
2,431
2,407
1,508
-
-
-
187
4,126
4,838
1,496
820
(623)
(203)
198
(12)
820
(623)
(203)
11
2,400
(1,299)
(206)
(820)
178
203
118
Balance at 30 June 2019
6,526
(1,826)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
4,838
1,496
820
(623)
(203)
198
6,526
3,539
1,290
-
(445)
-
316
4,700
66 | netwealth Annual Report 2019 For the year ended 30 June 2019
Key Accounting Policies
The income tax expense/(income) for the year comprises current income tax payable/receivable and deferred
tax expense/(income).
Current tax
The Group's current tax is calculated using tax rates that have been enacted or substantively enacted by the
end of the reporting period.
Deferred tax
Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in
the consolidated financial statements and the corresponding tax bases used in the computation of taxable
profit.
Deferred tax liabilities are recognised for taxable temporary differences associated with investments in
subsidiaries and associates, except where the Group is able to control the reversal of the temporary difference
and it is probable that the temporary difference will not reverse in the foreseeable future.
Deferred tax assets arising from deductible temporary differences associated with such investments and
interests are only recognised to the extent that it is probable that there will be sufficient taxable profits against
which to utilise the benefits of the temporary differences and they are expected to reverse in the foreseeable
future.
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the
extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the
asset to be recovered.
Offsetting within tax consolidated group
Netwealth and its wholly owned subsidiaries have applied the tax consolidation legislation which
result in these entities being taxed as a single entity. The deferred tax assets and deferred tax
liabilities of these entities have been offset in the consolidated financial statements.
Key Accounting Policies
Netwealth Group Limited and its wholly-owned Australian subsidiaries formed an income tax consolidated
group under the tax consolidation legislation with effect from 30 June 2018. Netwealth Group Limited is the
head entity of the Group.
The tax consolidated group has entered a tax funding arrangement which sets out the funding obligations of
members of the tax-consolidated group in respect of tax amounts. The amounts payable or receivable under
the tax-funding arrangement between the company head entity and the entities in the tax consolidated group
are determined using the ‘standalone taxpayer method’ approach for allocation of the tax contributions
payable or receivable by each member of the tax-consolidated group. This approach results in the tax effect of
transactions being recognised in the legal entity where the transaction occurred and does not affect
transactions that do not have tax consequences to the group.
Each entity in the Group recognises its own current and deferred tax assets and liabilities. Current tax
liabilities/(assets) and deferred tax assets arising from unused tax losses and tax credits in the subsidiaries are
immediately transferred to the head entity as under Australian taxation law, the head entity has the legal
obligation (or right) to these amounts.
67 | netwealth Annual Report 2019 For the year ended 30 June 2019
7 Key Management Personnel Compensation
Short term employee benefits
Post-employment benefits
Share based payments
Key management personnel compensation
Consolidated Group
30 June 2019
30 June 2018
$’000
1,556
94
22
1,672
$’000
1,501
114
22
1,637
The remuneration paid to KMP of the Group during the year, was paid by Netwealth Group Services
Pty Ltd, a subsidiary of the company. The remuneration disclosures are provided in the ‘Remuneration
Report’ on pages 37 to 49 of the Annual Report.
8 Dividends
Dividends paid or declared by the Company in the year ended 30 June 2019 were:
Cents Per Share
Total Amount
% Franked Date of Payment
2019
Interim 2019 ordinary
Total dividend
2018
Final 2018 ordinary
Special 2018 ordinary
Total dividend
$’000
13,072
13,072
12,799
12,300
25,099
5.50
5.50
5.38
5.18
10.56
100%
28 Mar 2019
100%
100%
27 Sep 2018
27 Sep 2018
During the year, the Company declared on 18 February 2019 and paid on 28 March 2019 a fully franked
dividend of 5.50 cents per share representing a total dividend of $13,072,000. There is no dividend
reinvestment plan.
Franking credits
Franking credits available to shareholders of the Company amount to $14,722,573 (2018: $17,804,548) at
the 30 percent (2018: 30 percent) corporate tax rate.
Subsequent events
Since the end of the financial year, the Company declared the following dividend on 19 August 2019.
The dividend has not been provided for as at 30 June 2019 and there are no tax consequences.
68 | netwealth Annual Report 2019 For the year ended 30 June 2019
Cents Per
Share
Total Amount
$’000
% Franked Date of Payment
6.60
6.60
15,686
100%
26 Sep 2019
15,686
Final 2019 ordinary
Total dividend
9 Earnings Per Share
Basic earnings per share (EPS) is calculated by dividing the profit/(loss) attributable to owners of the
Company by the weighted average number of ordinary shares on issue during the year.
Diluted EPS is determined by adjusting the profit/(loss) attributable to owners of the Company and the
weighted average number of ordinary shares on issue for the effects of all dilutive ordinary shares. As
there were no options at the start of the financial year or granted during the year, the basic and diluted
EPS are identical and summarised below. Note that the performance shares are not considered
dilutive as the shares are yet to vest.
Basic and diluted earnings per share
From continuing operations
From discontinued operations
Basic and diluted earnings per share
Consolidated Group
30 June 2019
30 June 2018
Cents per Share
Cents per Share
14.81
(0.38)
14.43
8.44
0.52
8.96
The earnings and weighted average number of ordinary shares used in the calculation of basic and
diluted earnings per share are as follows:
Profit for the year from continuing operations attributable
to owners of the Company
(Loss)/Profit for the year from discontinued operations
attributable to owners of the Company
Profit for the year attributable to owners of the Company
Consolidated Group
30 June 2019
30 June 2018
$’000
35,201
(906)
34,295
$’000
19,617
1,201
20,818
30 June 2019
30 June 2018
Number
Number
Weighted average number of issued ordinary shares
237,679,816
232,282,857
69 | netwealth Annual Report 2019 For the year ended 30 June 2019
10 Trade and Other Receivables
Product account receivables
Trade and sundry receivables
Total current receivables
Total trade and other receivables
Consolidated Group
30 June 2019
30 June 2018
$’000
8,336
229
8,565
8,565
$’000
5,733
226
5,959
5,959
Trade and other receivables classified as financial assets*
8,565
5,959
* Refer to Note 21 for further information about Financial Assets
11 Other Current Assets
Accrued income
Prepayments
Other receivables
Total other current assets
Consolidated Group
30 June 2019
30 June 2018
$’000
1,376
1,950
158
3,484
$’000
1,148
1,270
92
2,510
70 | netwealth Annual Report 2019 For the year ended 30 June 2019
12 Financial Assets
FVTPL* financial assets
Total financial assets
Current
Non-current
Total financial assets
FVTPL* financial assets comprise at fair value:
Netwealth managed funds
Netwealth wrap and super accounts
Other investments#
Total FVTPL financial assets
Consolidated Group
30 June 2019
30 June 2018
$’000
3,301
3,301
3,301
-
3,301
$’000
7,833
7,833
5,606
2,227
7,833
Consolidated Group
30 June 2019
30 June 2018
$’000
$’000
16
1,114
2,171
3,301
16
750
7,067
7,833
* Fair Value through Profit or Loss (FVTPL)
# The Group expects to receive the final deferred payment of $2.1 million in April 2020 (minimum guaranteed
amount) from sale of BFS operations. Refer to Note 20 and 21 for more information.
13 Property and Equipment
Carrying amount of:
Leasehold improvements
Equipment
Total property and equipment
Consolidated Group
30 June 2019
30 June 2018
$’000
$’000
1,643
890
2,533
2,077
782
2,859
71 | netwealth Annual Report 2019 For the year ended 30 June 2019
Cost
Balance at 30 June 2017
Additions
Disposals
Balance at 30 June 2018
Additions
Disposals
Balance at 30 June 2019
Accumulated Depreciation
Balance at 30 June 2017
Depreciation expense
Disposals
Balance at 30 June 2018
Depreciation expense
Disposals
Balance at 30 June 2019
Net carrying amount
At 30 June 2018
At 30 June 2019
Leasehold
Improvements
$’000
Equipment
$’000
3,075
436
(138)
3,373
101
(363)
3,111
(1,087)
(298)
89
(1,296)
(281)
109
(1,468)
1,963
475
(101)
2,337
491
(152)
2,676
(1,338)
(316)
99
(1,555)
(383)
152
(1,786)
Leasehold
Improvements
$’000
Equipment
$’000
2,077
1,643
782
890
Total
$’000
5,038
911
(239)
5,710
592
(515)
5,787
(2,425)
(614)
188
(2,851)
(664)
261
(3,254)
Total
$’000
2,859
2,533
72 | netwealth Annual Report 2019 For the year ended 30 June 2019
Key Accounting Policies
Each class of property and equipment is carried at cost less, any accumulated depreciation and impairment
losses.
Leasehold improvements
Leasehold improvements are measured on the cost basis and are therefore carried at cost less accumulated
depreciation and any accumulated impairment losses.
Repairs and maintenance are recognised as an expense in profit or loss during the financial period in which
they are incurred.
Depreciation
The depreciable amount of all fixed assets is depreciated on a straight-line basis over the asset’s useful life to
the Group commencing from the time the asset is held ready for use. Depreciation is recognised in profit or
loss.
The depreciation rates used for each class of depreciable assets are:
Class of Fixed Asset
Leasehold improvements
Office equipment
Computer equipment
Laptop computers and software
Depreciation Rate
10%
20%
25% to 33%
33.33%
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each
reporting period.
Gains or losses on disposal
Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These gains
or losses are included in profit or loss in the period in which they arise.
An item of property and equipment is derecognised upon disposal or when no future economic benefits are
expected to arise from the continued use of the asset.
73 | netwealth Annual Report 2019 For the year ended 30 June 2019
14
Intangible Assets
Carrying amount of:
Non-contractual customer relationships
Software and website developments costs
Total intangibles
Cost
Balance at 30 June 2017
Additions
Disposals
Balance at 30 June 2018
Additions
Disposals*
Balance at 30 June 2019
Consolidated Group
30 June 2019
30 June 2018
$’000
$’000
240
143
383
Customer
relationship
$’000
Software and
website
$’000
-
300
-
300
-
-
300
5,276
-
-
5,276
149
(5,080)
345
300
43
343
Total
$’000
5,276
300
-
5,576
149
(5,080)
645
*This relates to the write-off on redundant external software and website development costs capitalised between
2002 and 2011 and which were fully amortised by FY2016.
Customer
relationship
$’000
Software and
website
$’000
Total
$’000
Accumulated amortisation and impairment
Balance at 30 June 2017
Amortisation
Disposal
Balance at 30 June 2018
Amortisation
Disposals*
Balance at 30 June 2019
-
-
-
-
(60)
-
(60)
(5,169)
(5,169)
(64)
-
(64)
-
(5,233)
(5,233)
(35)
5,066
(202)
(95)
5,066
(262)
*This relates to the write-off on redundant external software and website development costs capitalised between
2002 and 2011 and which were fully amortised by FY2016.
74 | netwealth Annual Report 2019 For the year ended 30 June 2019
Key Accounting Policies
Intangible assets acquired separately
Intangible assets with finite useful lives that are acquired separately are carried at cost less accumulated
amortisation and accumulated impairment losses. Amortisation is recognised on a straight-line basis over
their estimated useful lives. The estimated useful life and amortisation method are reviewed at the end of
each reporting period. Intangible assets with indefinite useful lives that are acquired separately are carried at
cost less accumulated impairment losses.
Derecognition of intangible assets
An intangible asset is derecognised on disposal, or when no future economic benefits are expected from use.
Gains or losses arising are measured as the difference between the net disposal proceeds and the carrying
amount of the asset and are recognised in profit or loss.
Goodwill
Goodwill arising on an acquisition of a business is carried at cost as at the date of acquisition of the business
less accumulated impairment losses, if any. For the purposes of impairment testing, goodwill is allocated to
each of the Group's cash-generating units that is expected to benefit from the synergies of the combination.
On disposal of the relevant cash-generating unit, the attributable amount of goodwill is included in the
determination of the profit or loss on disposal.
Impairment of tangible and intangible assets other than goodwill
At the end of each reporting period, the Group reviews the carrying amounts of its tangible and intangible
assets to determine whether there is any indication that those assets have suffered an impairment loss. If any
such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of
the impairment loss.
Intangible assets with either indefinite useful lives or not yet available for use are tested for impairment at
least annually. If the recoverable amount of an asset is estimated to be less than its carrying amount, the
carrying amount of the asset is reduced to its recoverable amount. An impairment loss is recognised
immediately in profit or loss.
When an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised
estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying
amount that would have been determined had no impairment loss been recognised for the asset in prior
years. A reversal of an impairment loss is recognised immediately in profit or loss.
Amortisation
The amortisation amount of all intangibles is amortised on a straight-line basis over the intangible’s useful life
to the Group commencing from the time the asset is held ready for use. Amortisation is recognised in profit or
loss.
The amortisation rates used for each class of amortisable assets are:
Class of Intangibles
Customer relationships
Software and website
Amortisation Rate
20%
20%
75 | netwealth Annual Report 2019 For the year ended 30 June 2019
15 Trade and Other Payables
Financial liabilities measured at amortised cost:
Trade payables
GST payables / (receivables)
Other payables
Total financial liabilities measured at amortised cost
Financial liabilities at amortised costs classified as trade
and other payables
Consolidated Group
30 June 2019
30 June 2018
$’000
$’000
5,914
413
-
6,327
4,444
(161)
7
4,290
Total financial liabilities at amortised cost
6,327
4,290
Less:
GST payable / (receivables)
Total financial liabilities as trade and other payables
413
5,914
(161)
4,451
Goods and Services Tax (GST)
Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST
incurred is not recoverable from the Australian Taxation Office (ATO).
Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of
GST recoverable from, or payable to, the ATO is included as part of trade and other payables in the statement
of financial position.
16 Provisions
Employee benefits
Legal and other associated costs
Other provisions
Total provisions
Current
Non-current
Total provisions
Consolidated Group
30 June 2019
30 June 2018
$’000
3,635
-
238
3,873
3,206
667
3,873
$’000
3,169
619
285
4,073
3,490
583
4,073
76 | netwealth Annual Report 2019 For the year ended 30 June 2019
Employee
Benefits
Legal and Other
Associated
Costs
Other
Provisions
Total
Provisions
$’000
$’000
$’000
$’000
3,169
2,628
(2,162)
3,635
619
-
(619)
-
285
31
(78)
238
4,073
2,659
(2,859)
3,873
Analysis of Provisions
Consolidated Group
Balance at 30 June 2018
Additional amounts raised
during the year
Amount used or reversed
during the year
Balance at 30 June 2019
16.1 Provision for employee benefits
Provision for employee benefits represents and amount accrued for annual leave and long service
leave. The current portion for this provision includes the total amount accrued for annual leave
entitlements and the amount accrued for long service leave is a pro-rata amount accrued based on
the current years of service, adjusted for an assumed rate of salary increase and discounted to allow
for when the leave is expected to be taken. Based on experience the Group does not expect the full
amount of annual leave or long service leave balances classified as current liabilities to be settled
within the next 12 months.
Current
Annual leave
Long service leave
Total current employee provisions
Non-current
Long service leave
Total non-current employee provisions
Total employee provisions
Consolidated Group
30 June 2019
30 June 2018
$’000
$’000
1,692
1,276
2,968
667
667
3,635
1,548
1,038
2,586
583
583
3,169
77 | netwealth Annual Report 2019 For the year ended 30 June 2019
16.2 Provisions for legal and other associated costs
As part of the sale of Australian Planning Services Pty Ltd (APS), the Group has agreed to indemnify
APS in respect of claims, up to an amount of $1.0 million. During FY2019, the remaining $619,008 was
utilised to cover outflows in relation to claims in the previous financial year, which had been disclosed
in the 2017 and 2018 annual financial report. No further indemnities or warranties in relation to the
liabilities of APS or litigation against APS were provided to the purchaser.
16.3 Other provisions
A provision of $0.2 million has been recognised for the cost to make good premises that the Group
has an obligation under existing lease commitments.
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 the Group will be required to settle the obligation, and a reliable estimate can be
made of the amount of the obligation.
The amount recognised as a provision is the best estimate of the consideration required to settle the present
obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the
obligation. When the effect of the time value of money is material, provision is discounted using the current
pre-tax rate that reflects the risks specific to the liability.
78 | netwealth Annual Report 2019 For the year ended 30 June 2019
17
Issued Capital
Issued capital comprised:
237,679,816 Fully Paid Ordinary shares
(June 2018: 237,679,816)
6,177,500 Performance shares
(June 2018: 6,457,500)
Total share capital
Restricted shares
Reorganisation reserve
Issued capital
Consolidated Group
30 June 2019
30 June 2018
$’000
879,415
$’000
879,415
2,937
3,095
882,352
(3,340)
882,510
(3,743)
(855,508)
(855,508)
23,504
23,259
The Company has recognised in FY2018 a Reorganisation Reserve of $856 million to reflect the market
value of $3.70 per Fully Paid Ordinary share from the restructure of equity at listing.
Consolidated group
30 June 2019
30 June 2018
Number
Number
Fully Paid Ordinary shares
At the beginning of the reporting period
237,679,816
29,662,249
Shares issued during the year
Converted from Partly Paid Ordinary shares
Converted from Class ‘A’ shares
Converted from Foundation shares
Exercised option to convert
Splitting of shares at IPO (seven shares for every one share)
Employee share gift issued at IPO
-
-
-
-
-
-
-
-
3,000,000
352,869
890,000
40,000
203,670,708
63,990
At the end of the reporting period
237,679,816
237,679,816
Shares with value
Restricted shares
235,531,493
233,930,359
2,148,323
3,749,457
79 | netwealth Annual Report 2019 For the year ended 30 June 2019
Consolidated group
30 June 2019
30 June 2018
Number
Number
Performance shares
At the beginning of the reporting period
6,457,500
937,500
Shares issued during the year
Shares cancelled during the year
-
-
(280,000)
(15,000)
Splitting of shares at IPO (seven shares for every one share)
-
5,535,000
At the end of the reporting period
Restricted shares
6,177,500
6,457,500
6,177,500
6,457,500
The Company has issued share capital amounting to 237,679,816 Ordinary shares (2018: 237,679,816
shares) of no par value and 6,177,500 Performance shares (2018: 6,457,500 shares) of no par value. As
part of the capital reorganisation in FY2018, each share on issue was split into seven shares.
At shareholders’ meetings each Ordinary share is entitled to one vote when a poll is called, otherwise
each Ordinary shareholder has one vote on a show of hands. Performance shares are not entitled to
vote and do not participate in dividends. Restricted shares have no value until the employee loan
associated with the Share Based Payment arrangement has been fully repaid.
18 Reserves
Share reserve
Consolidated Group
30 June 2019
30 June 2018
$’000
844
$’000
778
The Share reserve records the fair value of shares granted via Share-based payment transactions.
Key Accounting Policies
Ordinary shares are classified as equity. The incremental costs directly attributable to the issue of new equity
instruments are expensed, net of GST, in the consolidated statement of profit or loss and other
comprehensive income.
80 | netwealth Annual Report 2019 For the year ended 30 June 2019
19 Controlled Entities
Country of
Incorporation
Percentage Owned
30 June 2019
30 June 2018
%
%
Subsidiaries of Netwealth Group Limited
Netwealth Holdings Limited
Australia
100
100
Subsidiaries of Netwealth Holdings Limited
Netwealth Investment Limited
Netwealth Group Services Pty Ltd
Bridgeport Financial Service Pty Ltd
Netwealth Advice Group Pty Ltd
Australia
Australia
Australia
Australia
100
100
-
100
100
100
100
100
Subsidiaries of Netwealth Advice Group Limited
Pathway Licensee Services Pty Ltd
Australia
-
100
On 17 July 2019, Bridgeport Financial Services Pty Ltd and Pathway Licensee Services Pty Ltd (PLS)
were deregistered as these were non-operating businesses.
Subsidiary financial statements prepared for Netwealth Investment Limited as at the same reporting
date were used in the preparation of these consolidated financial statements. Refer to page 56 on the
‘Principles of Consolidation’.
20 Divestments and discontinued operations
20.1 Disposal of non-core businesses
The Group has divested its interests held in non-core businesses of BFS, PLS and APS in prior financial
years. Collectively, they were recognised as the Group’s Discontinued Operations in FY2018 and
FY2017.
20.2 Adjustment in current period to amounts previously presented in discontinued operations
In April 2019, the Group received the first deferred payments of $4.0 million from the sale of the
business of BFS that occurred on 1 March 2018. The recurring revenues for the preceding 12 months to
March 2019 which were used to calculate the deferred payments were lower than previous estimates,
resulting in the impairment of $0.8 million. Following further estimates of recurring revenues for the
following 12 months to March 2020, the Group has further impaired the remaining receivables by $0.1
million. No further impairment is expected as the sale agreement guarantee a minimum payment,
which is now recognised as the fair value. As this is an adjustment to an amount previously presented
in discontinued operations, the Group has continued to classify this impairment in discontinued
operations.
81 | netwealth Annual Report 2019 For the year ended 30 June 2019
20.3 Analysis of profit for the year from discontinued operations
Profit/(loss) before tax
Attributable income tax expense
Profit/(Loss) after tax
Profit/(Loss) for the year from discontinued operations
(attributable to owners of the Company)
Consolidated Group
30 June 2019
30 June 2018
$’000
(906)
-
(906)
(906)
$’000
1,557
(356)
1,201
1,201
20.4 Analysis of asset and liabilities associated with discontinued operations operation held for sale
Net liabilities of businesses classified as held for sale
Consolidated Group
30 June 2019
30 June 2018
$’000
-
$’000
(8)
Key Accounting Policies
Non-current assets and disposal groups are classified as held for sale if their carrying amount will be
recovered principally through a sale transaction rather than through continuing use. This condition is
regarded as met only when the asset (or disposal group) is available for immediate sale in its present condition
subject only to terms that are usual and customary for sales of such asset (or disposal group) and its sale is
highly probable. Management must be committed to the sale, which should be expected to qualify for
recognition as a completed sale within one year from the date of classification.
When the Group is committed to a sale plan involving loss of control of a subsidiary, all of the assets and
liabilities of that subsidiary are classified as held for sale when the criteria described above are met, regardless
of whether the Group will retain a non-controlling interest in its former subsidiary after the sale.
21 Financial Instruments
21.1 Capital management
The Board controls the capital of the Group to ensure that the Group can fund its operations and
continue as a going concern while maintaining an appropriate debt to equity ratio.
The Group’s capital and debt includes share capital, retained earnings, and financial liabilities,
supported by financial assets. The Group’s financial liabilities are Trade and Other Payables and
Borrowings.
The Board manages the Group’s capital by assessing the Group’s financial risks and commitments and
adjusting its capital structure in response to these risks and the market.
There have been no changes in the strategy adopted to control the capital of the Group during the
financial year.
82 | netwealth Annual Report 2019 For the year ended 30 June 2019
Under the RSE license granted by APRA, the licensed entity is required to maintain sufficient level of
capital known as Operational Risk Financial Requirements (ORFR) to cover operational risk. At 30
June 2019, this ORFR requirement was $24.5 million. Combined with ASIC’s RG166 capital
requirements for Australian Financial Services Licensees, the licensed entity was also required to
maintain an additional $10.0 million in net tangible assets as at 30 June 2019. The licensed entity
satisfied both of these requirements at all times during the year.
21.2 Categories of financial instruments
The Group’s financial instruments consist mainly of deposits with banks, local money markets
investments, short term investments, accounts receivable and payable. For the year ended 30 June
2019, the Group did not utilise derivatives, was debt free and has not traded in financial instruments
including derivatives other than listed and unlisted securities. The carrying amount for each category
of financial instruments, measured in accordance with AASB 9 Financial Instruments, as detailed in
the accounting policies to these financial statements, are as follows:
Financial assets
Cash and Cash Equivalents
Trade and Other Receivables
Financial Assets
Total financial assets
Financial liabilities
Trade and Other Payables
Total financial liabilities
Consolidated Group
30 June 2019
30 June 2018
$’000
$’000
58,459
8,565
3,301
70,325
6,327
6,327
52,669
5,959
7,833
66,461
4,290
4,290
21.3 Financial risk management objectives
The Board’s overall risk management strategy seeks to assist the Group in meeting its financial
targets, while minimising potential adverse effects on financial performance. Risk management
policies are approved and reviewed by the Board on a regular basis. These include the credit risk
policies and future cash flow requirements.
Senior executives meet on a regular basis to analyse financial risk exposure in the context of the most
recent economic conditions and forecasts. The overall risk management strategy seeks to assist the
Group in meeting its financial targets, whilst minimising potential adverse effects on financial
performance.
83 | netwealth Annual Report 2019 For the year ended 30 June 2019
Specific financial risk exposures and management
The main risks the Group is exposed to through its financial instruments are credit risk, liquidity risk
and market risk, relating to interest rate risk and other price risk.
There have been no substantive changes in the types of risks the Group is exposed to, how these risks
arise, or the Board of Director’s objectives, policies and processes for managing or measuring the risks
from the previous period.
21.4 Market risk
i. Interest Rate Risk
Exposure to interest rate risk arises on financial assets and financial liabilities recognised at the end of
the reporting period whereby a future change in interest rates will affect future cash flows or the fair
value of fixed rate financial instruments.
The Group also manages interest rate risk by ensuring that, whenever possible, payables are paid
within pre-agreed credit terms.
ii. Other Price Risk
Other price risks relate to the risk that the fair value or future cash flows of a financial instrument will
fluctuate because of changes on market prices largely due to demand and supply factors (other than
those arising from interest rate risk) for securities. The Group’s exposure to securities price risk arises
mainly from FVTPL financial assets.
Sensitivity analysis
The following table illustrates sensitivities to the Group’s exposures to changes in interest rates and
equity prices. The table indicates the impact on how profit and equity values reported at the end of
the reporting period would have been affected by changes in the relevant risk variable that
management considers to be reasonably possible.
These sensitivities assume that the movement in a variable is independent of other variables.
84 | netwealth Annual Report 2019 For the year ended 30 June 2019
Consolidated Group
Profit (Before Tax)
$’000
Equity
$’000
Year ended 30 June 2019
+/- 1% interest rates (interest income)
+488/-488
+342/-342
Year ended 30 June 2018
+/- 1% interest rates (interest income)
+465/-465
+325/-325
There have been no changes in any of the assumptions used to prepare the above sensitivity analysis
from the prior year.
21.5 Credit risk management
Exposure to credit risk relating to financial assets arises from the potential non-performance by
counterparties of contract obligations that could lead to a financial loss to the Group. The Group’s
objective in managing credit risk is to minimise the credit losses incurred, mainly on trade and other
receivables and loans. There is no significant credit risk exposure on fair value through profit and loss
(FVTPL) financial assets and held to maturity investments.
Credit risk is managed through maintaining procedures ensuring, to the extent possible, that
customers and counterparties to transactions are of sound credit worthiness and the monitoring of
the financial stability of significant customers and counterparties. Such monitoring is used in
assessing receivables for impairment. Credit terms are generally 30 days from the date of invoice. For
fees with longer settlements, terms are specified in the individual client contracts. In the case of loans
advanced, the terms are specific to each loan.
Credit Risk Exposures
The maximum exposure to credit risk by class of recognised financial assets at the end of the
reporting period is equivalent to the carrying value and classification of those financial assets as
presented in the statement of financial position.
The Group has no significant concentration of credit risk with respect to any single counterparty or
group of counterparties other than those receivables specifically mentioned within Note 10. The main
source of credit risk to the Group is considered to relate to the class of assets described as “trade and
other receivables” and “loans”.
The following table details the Group’s trade and other receivables exposed to credit risk (prior to
collateral and other credit enhancements) with ageing analysis and impairment provided for thereon.
Amounts are considered as “past due” when the debt has not been settled within the terms and
conditions agreed between the Group and the customer or counterparty to the transaction.
Receivables that are past due are assessed for impairment by ascertaining solvency of the debtors
and are provided for where there are specific circumstances indicating that the debt may not be fully
repaid to the Group.
The balances of receivables that remain within initial trade terms (as detailed in the table) are of high
credit quality.
85 | netwealth Annual Report 2019 For the year ended 30 June 2019
Amount
Past Due but Not Impaired
(Days Overdue)
31 - 60
61 - 90
>90
Within Initial
Trade Terms
Past Due and
Impaired
$’000
$’000
$’000
$’000
$’000
$’000
229
8,336
8,565
226
5,733
5,959
9
-
9
9
-
9
10
-
10
2
-
2
2
-
2
3
-
3
208
8,336
8,544
212
5,733
5,945
-
-
-
-
-
-
2019
Trade and term
receivables
Other
Receivables
Total
2018
Trade and term
receivables
Other
Receivables
Total
Cash and cash equivalents are held with large reputable financial institutions within Australia where
the credit risk is considered very low or in the cash account within the Netwealth Wrap service. The
cash holdings within the Netwealth Wrap service are also held with a large reputable financial
institution within Australia where the credit risk is considered low.
21.6 Liquidity risk management
Liquidity risk arises from the possibility that the Group might encounter difficulty in settling its debts
or otherwise meeting its obligations related to financial liabilities. The Group manages this risk
through the following mechanisms:
•
preparing forward-looking cash flow analysis in relation to its operational, investing and financing
activities;
• maintaining a reputable credit profile;
• managing credit risk related to financial assets;
•
•
only investing surplus cash with major financial institutions; and
comparing the maturity profile of financial liabilities with the realisation profile of financial assets.
Cash flows realised from financial assets reflect management’s expectation as to the timing of
realisation. Actual timing may therefore differ from that disclosed.
86 | netwealth Annual Report 2019 For the year ended 30 June 2019
Within 1 Year
1 to 5 Years
Over 5 Years
$’000
$’000
$’000
2019
Trade & Other Payables
Total Expected Outflows
Cash and Cash Equivalents
Trade and Other Receivables
Financial Assets
Total anticipated inflows
Net (outflow)/inflow of
financial instruments
2018
Trade & Other Payables
Total Expected Outflows
Cash and Cash Equivalents
Trade and Other Receivables
Financial Assets
Total anticipated inflows
Net (outflow)/inflow of
financial instruments
5,914
5,914
58,459
8,565
3,301
70,325
64,411
4,451
4,451
52,669
5,959
5,606
64,234
59,783
-
-
-
-
-
-
-
-
-
-
-
2,227
2,227
2,227
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Total
$’000
5,914
5,914
58,459
8,565
3,301
70,325
64,411
4,451
4,451
52,669
5,959
7,833
66,461
62,010
21.7 Fair value of financial instruments
The fair values of financial assets and financial liabilities are presented in the following table and can
be compared to their carrying values as presented in the statement of financial position. Fair values
are those amounts at which an asset could be exchanged, or a liability settled, between
knowledgeable, willing parties in an arm’s length transaction.
Fair values derived may be based on information that is estimated or subject to judgment, where
changes in assumptions may have a material impact on the amounts estimated. Areas of judgment
and the assumptions have been detailed below. Where possible, valuation information used to
calculate fair value is extracted from the market, with more reliable information available from
markets that are actively traded. In this regard, fair value for listed securities is obtained from quoted
market bid prices. Where securities are unlisted and no market quotes are available, fair value is
obtained using discounted cash flow analysis and other valuation techniques used by market
participants.
87 | netwealth Annual Report 2019 For the year ended 30 June 2019
Net Carrying Value
Net Fair Value
2019
$’000
2018
$’000
2019
$’000
2018
$’000
Financial assets
Cash & Cash Equivalent
58,459
52,669
58,459
52,669
Trade & Other Receivables
FVTPL Financial Assets
Loans & Receivables
8,565
3,301
-
5,959
7,833
-
8,565
3,301
-
5,959
7,833
-
Total financial assets
70,325
66,461
70,325
66,461
Financial liabilities
Trade & Other Payables
Total financial liabilities
5,914
5,914
4,451
4,451
5,914
5,914
4,451
4,451
The fair values disclosed in the above table have been determined based on the following
methodologies:
i. Cash and cash equivalents, trade and other receivables and trade and other payables are
short-term instruments in nature whose carrying value is equivalent to fair value. Trade
and other payables exclude amounts relating to the provision of annual leave and
deferred revenue which is outside the scope of AASB 9.
ii. For listed FVTPL, closing quoted bid prices at the end of the reporting period are used.
iii. Loans and receivables are non-derivative financial assets with fixed or determinable
payments that are not traded in an active market and approximate their fair value.
88 | netwealth Annual Report 2019 For the year ended 30 June 2019
Financial instruments measured at fair value
The financial instruments recognised at fair value in the statement of financial position have been
analysed and classified using a fair value hierarchy reflecting the significance of the inputs used in
making the measurements. The fair value hierarchy consists of the following levels:
•
•
•
quoted prices in active markets for identical assets or liabilities (Level 1);
inputs other than quoted prices included within Level 1 that are observable for the asset or
liability, either directly (as prices) or indirectly (derived from prices) (Level 2); and
inputs for the asset or liability that are not based on observable market data (unobservable
inputs) (Level 3).
Level 1
$’000
Level 2
$’000
Level 3
$’000
Total
$’000
2019
Financial assets
FVTPL financial assets:
Listed Investments
Other
Total FVTPL financial assets
2018
Financial assets
FVTPL financial assets:
Listed Investments
Other
Total FVTPL financial assets
1,021
-
1,021
661
-
661
-
-
-
-
-
-
-
2,280
2,280
-
7,172
7,172
1,021
2,280
3,301
661
7,172
7,833
The listed investments are valued by reference to the quoted prices in active markets for identical
securities and are deemed to be Level 1 securities in accordance with AASB 13 fair value hierarchy of
measurement. In this regard, there is no subjectivity in relation to their value as listed investments.
In valuing investments that maybe included in Level 2 of the hierarchy, valuation techniques, such as
comparison to similar investments for which market observable prices are available, are adopted to
determine the fair value of these investments.
Level 3 inputs are unobservable inputs for the asset or liability. Majority relate to deferred payments
receivable from the sale of BFS with the reconciliation shown in the table below:
89 | netwealth Annual Report 2019 For the year ended 30 June 2019
Reconciliation of Level 3 fair value measurements
Unlisted
Investments
Deferred
Receivables*
$’000
$’000
2019
Opening balance
Total gains or losses
Purchases
Disposal
Impairment
Closing balance
2018
Opening balance
Total gains or losses
Purchases
Disposal
Closing balance
156
5
1
(2)
-
160
249
2
85
(180)
156
7,016
-
-
(3,990)
(906)
2,120
-
-
7,016
-
7,016
Total
$’000
7,172
5
1
(3,992)
(906)
2,280
249
2
7,101
(180)
7,172
*relates to deferred payments receivable from sale of Bridgeport Financial Services Pty Ltd
Expected credit losses
The table below presents the gross exposure and related expected credit losses allowance for assets,
subject to impairment requirements of AASB 9.
2019*
2018
Gross
Exposure
$’000
ECL Allowance
$’000
Gross
Exposure
$’000
ECL Allowance
$’000
8,505
12,932
3,301
24,738
4
13
14
31
5,959
19,678
7,833
33,470
-
-
-
-
Trade Receivables^
Intercompany Loans~
Other#
Total
* ECL Allowance were introduced under AASB 9 effective from FY2019.
^ Intercompany debtors excluded from ECL Allowance calculations as generally collected within 14 days.
~ Intercompany loans were assessed on a stand-alone company basis
# FY2019 includes $2.1 million BFS deferred payments receivables due in April 2020.
90 | netwealth Annual Report 2019 For the year ended 30 June 2019
Key Accounting Policies
Initial recognition and measurement
Financial Instruments are recognised when the Group becomes a party to the contractual provisions of the
instrument. For financial assets, this is equivalent to the date that the Group commits itself to either purchase
or sell the asset. Financial liabilities are derecognised if the Group’s obligations in the specified in the
contract expire, discharge or cancelled.
Financial instruments are initially measured at fair value. Transaction costs that are directly attributable to the
acquisition or issue of financial instruments are adjusted against the fair value of the financial assets or
financial liabilities, on initial recognition.
Financial assets
Financial assets are required to be subsequently measured at Amortised Costs, Fair Value Through Profit and
Loss (“FVTPL”) or Fair Value Though Other Comprehensive Income (“FVTOCI”).
Debt instruments
For debt instruments to be subsequently measured at amortised cost, the financial asset must be held within
a business model whose objective is to collect contractual cash flows that are solely payments of principal
and interest.
For debt instruments to be subsequently measured at FVTOCI, the financial assets must be held within a
business model whose objectives are to collect contractual cash flows that are solely payments of principal
and interest and selling financial assets.
Trade and other receivables, cash and cash equivalents and trade, other payables and Unlisted Investments
are non-derivative financial assets with fixed or determinable payments that are not quoted in an active
market, resulting in being subsequently measured at FVTPL.
All other debts and equity investments are subsequently measured at FVTPL.
Listed Investments are comprised of Redeemable Notes which are quoted on an active market, resulting in
being subsequently measured at FVTPL.
Impairment of financial assets
Financial assets, other than those at FVTPL, are assessed for indicators of impairment at the end of each
reporting period. Financial assets are required to assess the financial asset against an Expected Credit Losses
(ECL) model to recognise the possible loss that could be derived. On top of applying the ECL model, when
there is objective evidence that, as a result of one or more events that occurred after the initial recognition of
the financial asset, the estimated future cash flows of the investment have been affected, the recognition of
the ECL is adjusted to reflect it.
Expected credit losses (ECL)
Financial assets are required to determine the ECL to recognise the possible loss derived from the Financial
Asset.
91 | netwealth Annual Report 2019 For the year ended 30 June 2019
Key Accounting Policies continued...
Trade and Other receivables are assessed for ECL on a collective basis. Any intergroup receivables are
excluded from the ECL assessment as they are typically paid within 14 days. A credit loss model is applied and
using historical trend, management has determined the Expected Loss Probability as:
Category
Current
1 – 30 Days
31 – 60 Days
61 – 90 Days
Over 90 Days
Expected Loss Probability
0.10%
0.50%
0.75%
1.00%
3.00%
These Expected Loss Probability is applied to each aging category to calculate the ECL.
Intercompany Loans are required to calculate it’s ECL on a stand-alone basis despite being fully eliminate
across the Group at consolidation. Management has assessed the risk of an intercompany loan being unable
to repay the intercompany loan to be low as control of the intercompany loan remains within the Group. The
lowest Expected Loss Probability has been applied against the intercompany loan to determine the ECL.
For Listed Investments that are measured at FVTPL, the amount of the ECL is measured by applying the 3-
month average 1-year price return discounted rate to ascertain the probable risk the value of the Listed
Investment drops below FVTPL. The difference between the probable impact on present value and the cost is
the ECL.
Derecognition of financial assets
The Group derecognises a financial asset when the contractual rights to the cash flows from the asset expire,
or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to
another party.
Financial liabilities and equity instruments
Debt and equity instruments issued by a group entity are classified as either financial liabilities or as equity in
accordance with the substance of the contractual arrangements and the definitions of a financial liability and
an equity instrument.
22 Share Based Payments
22.1 Details of the employee share plans of the Group
Netwealth employee share loan plan
The Group has an existing share loan plan, the Pre-Listing LTI Scheme described on pages 47 to 48
which applies to performance shares and has been in effect since 2013.
The Group has adopted the New LTI Scheme described on page 41 under which the Group will, from
time to time, grant performance securities to certain employees at the discretion of the Board.
It is at the discretion of the directors which employees will be issued invitations to apply for shares
pursuant to the Scheme and the number of shares subject to the invitation.
92 | netwealth Annual Report 2019 For the year ended 30 June 2019
Performance shares
Performance shares issued under the Pre-Listing LTI Scheme are subject to vesting conditions set by
the Board at the time of grant in respect of tenure, individual performance and behaviour ratings and
the Group’s EPS performance and are issued at an exercise price which the Board of Director’s
determined to be their value as at the date of grant. Under the rules of the Pre-Listing LTI Scheme and
the terms of grant, the number of shares vesting on expiry of the employment period (ending
December 2020) shall be determined by reference to the following EPS target for FY2020.
Earnings Per Share for FY2020
Proportion of Performance Shares That Vest
$0.1571 or more
$0.1414 or more but less than $0.1571
$0.1271 or more but less than $0.1414
$0.1143 or more but less than $0.1271
less than $0.1143
100%
90%
80%
70%
Nil
The following vesting conditions apply to the Performance shares:
•
•
•
The holder must be either continuously employed by or hold office continually with until 31
December 2020;
In each of the four financial years ending with the FY2020, the holder must achieve performance
ratings of ‘Achieving’; and
In each of the four financial years ending with FY2020, the holder must achieve behaviour ratings
of ‘Effectively displays’.
Performance shares that do not vest will be compulsorily divested at a price of $0.6143 per
Performance Share as at 31 December 2020. A holder does not receive any part of the proceeds of
divestiture. Employees are entitled to keep their shares after termination of employment – subject to
the basis of termination.
The following shares were granted during the previous financial years and are included in share-based
payment:
Series Grant date Number
Plan
Expiry Date
Exercise
Price
Fair Value at
Grant Date
Series
10
11 August
2016
6,002,500 Performance
8 November 2026
$0.47
$0.04
shares
Series
13
19 May
2017
175,000
Performance
shares
8 November 2026
$0.61
$0.05
22.2 Share options
No share options were exercised during the year (2018: $40,000). There are no outstanding share
options at the end of the year (2018: nil).
93 | netwealth Annual Report 2019 For the year ended 30 June 2019
Key Accounting Policies
Equity-settled share-based payments to employees and others providing similar services are measured at the
fair value of the equity instruments at the grant date.
The fair value determined at the grant date of the equity-settled share-based payments is expensed on a
straight-line basis over the vesting period, based on the Group's estimate of equity instruments that will
eventually vest, with a corresponding increase in equity. At the end of each reporting period, the Group revises
its estimate of the number of equity instruments expected to vest. The impact of the revision of the original
estimates, if any, is recognised in profit or loss such that the cumulative expense reflects the revised estimate,
with a corresponding adjustment to the equity-settled employee benefits reserve.
23 Related Party Transactions
The Group’s main related parties are as follows:
23.1 Entities exercising control over the Group
The parent entity, which exercises control over the Group is Netwealth Group Limited.
23.2 Key management personnel
For details of disclosures relating to key management personnel, refer to the Remuneration Report on
pages 37 to 49 and Note 7.
23.3 Other related parties
Other related parties include immediate family members of key management personnel and entities
that are controlled or jointly controlled by those key management personnel, individually or
collectively with their close family members.
Transactions between related parties are on normal commercial terms and conditions no more
favourable than those available to other parties unless otherwise stated. Balances and transactions
between the Company and its subsidiaries, which are related parties of the Company, have been
eliminated on consolidations and are not disclosed in this note.
Director related entities
Netwealth Group Services has generated revenue by providing
administration services to director related entities during the year are
as follows:
Other entities:
Australian Planning Services Pty Ltd
Heine Brothers Pty Ltd
Consolidated Group
30 June 2019
30 June 2018
$’000
$’000
-
12,000
56,647
12,000
94 | netwealth Annual Report 2019 For the year ended 30 June 2019
Related parties
Netwealth Investments Limited is the Responsible Entity and receives management fees for
managing the operations of managed investment schemes. The 16 managed investment schemes
that Netwealth Investments Limited is the Responsible Entity for are:
• Netwealth Index Opportunities Conservative Fund
• Netwealth Index Opportunities Balanced Fund
• Netwealth Index Opportunities Growth Fund
• Netwealth Active Conservative Fund
• Netwealth Active Balanced Fund
• Netwealth Active Growth Fund
• Netwealth Active High Growth Fund
• Netwealth Australian Bond Index Fund
• Netwealth Australian Property Index Fund
• Netwealth Australian Equities Index Fund
• Netwealth Unhedged International Equities Index Fund
• Netwealth Global Bond Index Fund
• Netwealth Hedged International Equities Index Fund
• Netwealth Managed Account
• Netwealth Managed Account Service
• Netcash
Netwealth Investments Limited also holds units in some of these Schemes through which
distributions are paid from the above Schemes.
95 | netwealth Annual Report 2019 For the year ended 30 June 2019
Management fees:
Management fee revenue
Distributions:
Distribution income
Consolidated Group
30 June 2019
30 June 2018
$
$
4,334,624
3,368,364
792
861
Netwealth Investments Ltd holds units in the Netwealth Managed Investment Schemes in its capacity
as custodian of the Netwealth Wrap Service and trustee of the Netwealth Superannuation Master
Fund. It does not exercise control over these Managed Investment Schemes and therefore they are
not considered subsidiaries of the Group.
Netwealth Investments Limited holds investments in Netwealth products as follows:
FVTPL financial assets
Netwealth Managed Funds
Netwealth Wrap and Super Accounts
Consolidated Group
30 June 2019
30 June 2018
$
$
17,430
16,280
1,247,970
864,988
96 | netwealth Annual Report 2019 For the year ended 30 June 2019
24 Cash Flow Note
Reconciliation of cash flow from operations with profit after income tax
Profit for the year
Consolidated Group
30 June 2019
30 June 2018
$’000
34,295
$’000
20,818
Income tax expense recognised in profit or loss
14,882
9,628
Depreciation & amortisation
Impairment
Share based payment expense
Unrealised (gain)/loss on investments
Adjustments on make good provision
Loss/(gain) on disposal of assets
Gain on disposal of investments
Movements in working capital
(Increase)/decrease in trade & other receivables
(Increase)/decrease in other assets
Increase/(decrease) in trade & other payables
Increase/(decrease) in provisions
Cash generated from operations
Income tax paid
Net cash provided by operating activities
759
906
66
-
(47)
268
(73)
741
627
66
(3)
(7)
(171)
(1,249)
51,056
30,450
(2,159)
(975)
1,641
(154)
71
(945)
(996)
(143)
49,409
28,437
(8,652)
(10,382)
40,757
18,055
97 | netwealth Annual Report 2019 For the year ended 30 June 2019
Reconciliation of liabilities arising from financing activities
30 June 2018
Cash Flows
Non-Cash Changes
30 June 2019
$’000
-
-
Acquisitions New Leases
-
-
-
-
-
-
$’000
-
-
Lease liabilities1
Total liabilities from
financing activities
1 The Group does not have any leases arising from financing activities.
Key Accounting Policies
Cash and cash equivalents includes:
•
•
•
cash on hand
deposits held at-call with banks; and
other short-term highly liquid investments with original maturities of three months or less,
(including products managed via the netwealth platform).
25 Capital and Leasing Commitments
Operating lease commitments
Non-cancellable operating leases contracted for but not capitalised in the financial statements:
Payables – minimum lease payments:
Not later than 12 months
Between 12 months and 5 years
Total operating lease payables
Consolidated Group
30 June 2019
30 June 2018
$’000
$’000
1,499
1,704
3,203
1,635
2,639
4,274
The consolidated property leases are non-cancellable leases with terms of up to five years. Contingent
rental provisions within the lease agreement require that the minimum lease payments shall be
increased by either the Consumer Price Index (CPI) or defined per annum. Options exist over various
leases to renew the lease at the end of the five-year term for an additional term of five years. Various
leases also allow for subletting of lease areas. The operating lease payments for FY2019 is $1,567,539
(FY2018: $1,291,099).
Capital commitments
The Group had no capital commitments as at 30 June 2019.
98 | netwealth Annual Report 2019 For the year ended 30 June 2019
26 Parent Entity Disclosures
The accounting policies of the parent entity, which have been applied in determining the financial
information shown below, are the same as those applied in the consolidated financial statements.
Refer to Note 2 for a summary of the significant accounting policies relating to the Group.
Statement of Financial Position
Assets
Cash and cash equivalents
Current assets
Non-current assets
Investment in subsidiaries
Total assets
Liabilities
Current liabilities
Total liabilities
Net assets
Equity
Issued Capital
Reserves
Retained Earnings
Total equity
Statement of profit or loss and comprehensive income
Total Profit/(Loss) for the year
Total Comprehensive Profit / (Loss) for the year
Parent Entity
30 June 2019
30 June 2018
$’000
$’000
121
11,064
2,245
43,576
57,006
22,710
22,710
-
4,789
6,039
43,576
54,404
19,420
19,420
34,296
34,984
879,011
878,767
(834,889)
(834,889)
(9,826)
34,296
37,238
37,238
(8,894)
34,984
(8,894)
(8,894)
Guarantees: During the financial year, the parent entity has entered into a deed of cross guarantee
with its subsidiaries; Netwealth Holdings Limited, Netwealth Group Services Pty Ltd and Netwealth
Advice Group Pty Ltd in order for them to be relieved from financial reporting obligations under ASIC
Corporations (Wholly-owned Companies) Instrument 2016/785.
Contractual commitments: At 30 June 2019, the parent entity had not entered into any contractual
commitments for the acquisition of property and equipment or any operating leases (2018: nil).
Contingent liabilities: At 30 June 2019, the parent entity does not have any contingent liabilities (2018:
nil).
99 | netwealth Annual Report 2019 For the year ended 30 June 2019
27 Auditor’s Remuneration
Fees payable for audit and review of financial reports
Current auditors
Fees payable for other services
Taxation
Current auditor
Other
Current auditor
Total fees paid to group auditor
Consolidated Group
30 June 2019
30 June 2018
$’000
$’000
132
124
-
-
268
400
540
664
28 Events Occurring after Reporting Date
On the 19th of August the Company declared a fully franked final divided for FY2019 of 6.60 cents per
share (total dividend of $15,686,868). The final dividend is payable on 26 September 2019.
In the opinion of the Board, there are no other matters or circumstances which have arisen between
30 June 2019 and the date of this report that have significantly affected or may significantly affect the
operations of the Group, the results of those operations and the state of affairs for the Group in
subsequent financial periods.
100 | netwealth Annual Report 2019 For the year ended 30 June 2019
Directors’ Declaration
The Directors declare that:
a.
b.
c.
the attached financial statements and notes in accordance with the Corporations Act 2001,
comply with Accounting Standards, Corporation Regulations 2001 and other mandatory
professional reporting requirements;
the attached financial statements and notes thereto give a true and fair view of the financial
position and performance of the consolidated entity; and
in the Directors’ opinion, there are reasonable grounds to believe that the Company will be
able to pay its debts as and when they become due and payable.
Signed in accordance with a resolution of the Directors made pursuant to s.303(5) of the Corporations
Act 2001.
On behalf of the Directors
Jane Tongs
Chairman
Dated 19 August 2019
101 | netwealth Annual Report 2019 For the year ended 30 June 2019
Independent Auditor’s Review Report
102 | netwealth Annual Report 2019 For the year ended 30 June 2019
103 | netwealth Annual Report 2019 For the year ended 30 June 2019
104 | netwealth Annual Report 2019 For the year ended 30 June 2019
105 | netwealth Annual Report 2019 For the year ended 30 June 2019
Shareholder Information
Ordinary Shares (ASX Listed)
The shareholder information set out below was applicable at 1 August 2019.
Distribution of shareholdings
Range
1-1,000
1,001-5,000
5,001-10,000
10,001-100,000
100,001 and over
There were no holder of less than a marketable parcel of ordinary shares.
Top 20 Holders
Rank
Name
Ordinary
Shares
Number of
shareholders
801,201
3,903,411
2,527,880
3,517,982
226,929,343
1,730
1,574
348
158
30
Ordinary
shares
% of Issued
Capital
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
Heine Brothers Pty Ltd
HSBC Custody Nominees (Australia) Limited
Leslie Max Heine Pty Ltd
J P Morgan Nominees Australia Limited
Netwealth Investments Limited
BNP Paribas Noms Pty Ltd
Citicorp Nominees Pty Limited
Netwealth Investments Limited
BNP Paribas Nominees Pty Ltd
National Nominees Limited
Citicorp Nominees Pty Ltd
Matthew Alexander Max Heine
BNP Paribas Nominees Pty Ltd Hub24 Custodial Serv Ltd DRP
Buttonwood Nominees Pty Ltd
Asset Plus Pty Ltd
Sandhurst Trustees Ltd
Mirrabooka Investments Ltd
John Hanrahan
Primecare Pty Ltd
Paul O’Connor
Total
Balance of register
Grand total
125,904,990
30,574,111
22,109,465
14,585,038
13,366,806
4,289,083
2,581,555
2,554,649
1,981,617
1,974,149
947,627
829,231
751,969
710,421
467,642
388,334
338,440
308,468
270,116
269,234
225,202,945
12,476,872
237,679,817
52.97%
12.86%
9.30%
6.14%
5.62%
1.80%
1.09%
1.07%
0.83%
0.83%
0.40%
0.35%
0.32%
0.30%
0.20%
0.16%
0.14%
0.13%
0.11%
0.11%
94.73%
5.27%
100.00%
106 | netwealth Annual Report 2019 For the year ended 30 June 2019
Substantial holdings (as at 1 August 2019)
Substantial Holder
Heine Brothers Pty Ltd
HSBC Custody Nominees (Australia) Limited
Leslie Max Heine Pty Ltd
Netwealth Investments Limited
Number of Ordinary shares in which the
holder (or their associates) have a
relevant interest)
125,904,990
30,725,414
22,109,465
13,366,806
Ordinary shares voting rights
At a general meeting of the Company, every shareholder present in person or by proxy has on vote on
a show of hands. Upon a poll, each share has one vote.
On-market buy-back
Currently the Company does not have an on-market buy back scheme in operation.
Unlisted Performance Shares
As at 1 August 2019, there were a total of 6,177,500 unlisted performance shares on issue.
Distribution of shareholdings
Range
1-1,000
1,001-5,000
5,001-10,000
10,001-100,000
100,001 and over
Performance shares voting rights
Performance shareholders have no voting rights.
Ordinary
Shares
Number of
shareholders
-
-
-
437,500
5,740,000
-
-
-
6
25
107 | netwealth Annual Report 2019 For the year ended 30 June 2019
Level 8, 52 Collins Street
Melbourne, VIC 3000
PO Box 336
South Melbourne, VIC 3205
Freecall 1800 888 223
Phone +61 3 9655 1300
Fax +61 3 9655 1333
Email contact@netwealth.com.au
Web netwealth.com.au
ABN 84 620 145 404