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2023 Report
Netwealth Group Limited
Level 8, 52 Collins Street
Melbourne, VIC 3000
Freecall 1800 888 223
Fax +61 3 9655 1333
Email contact@netwealth.com.au
Web: netwealth.com.au
ABN 84 620 145 404
22
23
24
25
not defined.
26
27
28
Share Based Payments _______________________ 89
Related Party Transactions ____________________ 92
Cash Flow Note _____________________________ 94
Capital and Leasing Commitments Error! Bookmark
Parent Entity Disclosures _____________________ 96
Auditor’s Remuneration ______________________ 97
Events Occurring after Reporting Date __________ 97
Directors’ Declaration ______________________________ 98
Independent Auditor’s Review Report ________________ 99
Shareholder Information __________________________ 103
Contents
Appendix 4E _______________________________________ 4
Chairman’s Letter __________________________________ 6
Joint Managing Director’s Letter ______________________ 8
Corporate highlights _______________________________ 11
Review of Operations ______________________________ 12
Financial operating performance_____________________23
Board of Directors _________________________________ 27
Directors’ Report _________________________________ 29
Remuneration Report (Audited) _____________________ 35
Auditor’s Independence Declaration ________________ 49
Consolidated Statement of Profit or Loss and Other
Comprehensive Income ___________________________ 50
Consolidated Statement of Financial Position ________ 50
Consolidated Statement of Changes in Equity _________52
Consolidated Statement of Cash Flows ______________ 53
Notes to the Financial Statements __________________ 54
General Information _________________________ 54
1
Significant Accounting Policies _______________ 54
2
Segment Information ________________________ 59
3
Revenue ___________________________________ 59
4
Expenses __________________________________ 60
5
Income Taxes_______________________________ 62
6
Key Management Personnel Compensation ____ 65
7
Dividends __________________________________ 65
8
Earnings Per Share __________________________ 66
9
Trade and Other Receivables _________________ 67
10
Other Current Assets ________________________ 67
11
Financial Assets ____________________________ 68
12
Property and Equipment ______________________70
13
Intangible Assets ____________________________ 73
14
Trade and Other Payables _____________________ 75
15
Provisions ___________________________________ 75
16
Issued Capital _______________________________ 77
17
Reserves ___________________________________ 79
18
19
Controlled Entities __________________________ 79
20
Divestments and discontinued operations ___ Error!
Bookmark not defined.
21
Financial Instruments _______________________ 80
3 | netwealth Annual Report 2020 For the year ended 30 June 2020
Appendix 4E
Report for the year ended 30 June 2020.
Netwealth Group Limited
ABN: 84 620 145 404
1. Details of the reporting period
Report for the year ended 30 June 2020 (FY2020).
Previous corresponding period year ended 30 June 2019 (FY2019).
2. Results for announcement to the market
FY2020
FY2019
Increase/
Var %
$’000
$’000
(Decrease)
Revenue from ordinary activities
123,910
98,770
25,140
62,745
50,083
12,662
25.5%
25.3%
Profit from ordinary activities before tax
attributable to members
Net profit for the period attributable to
members
43,661
34,295
9,366
27.3%
The FY2019 net profit for the period attributable to members includes a non-recurring cost of $0.8
million of client rectification cost.
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
31.9 cents
26.7 cents
FY2020
FY2019
4 | netwealth Annual Report 2020 For the year ended 30 June 2020
4. Dividends information
Final 2019 dividend per share (paid 26 Sep 2019)
Interim 2020 dividend per share (paid 26 Mar
2020)
Final 2020 dividend per share (to be paid 24 Sep
2020)
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
6.60
6.90
2.83
2.96
100%
100%
30%
30%
7.80
3.34
100%
30%
25 August 2020
26 August 2020
24 September 2020
Netwealth Advice Group Ltd changed its name to Netwealth Fiduciary Services Pty Ltd on 3 October
2019.
Netwealth Superannuation Services Pty Ltd and Wealthtech Pty Ltd were newly incorporated on 21
October 2019 and 11 November 2019 respectively. These fully owned subsidiaries are not currently
operating.
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 2020 which
have been audited by Netwealth Group Limited’s auditors, Deloitte Touche Tohmatsu, with the review
report attached.
Michael Heine
Joint Managing Director
18 August 2020
5 | netwealth Annual Report 2020 For the year ended 30 June 2020
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 (Netwealth or the Group), the FY2020 Annual Report. Revenue of $123.9 million increased by
$25.1 million (25.5%) and our profit growth continued. Underlying NPAT increased by $7.8 million
(21.7%) to $43.8 million for FY2020, and Underlying EPS of 17.9 cents increased by 21.2%1. Just as
importantly, we met or exceeded our strategic objectives of best in class technology and service and
continue to deliver to our clients functionality and services that empower them to see and manage
their wealth differently.
This year has been far from normal. All over the world COVID-19 has impacted business and
communities. In the second half of the year our people transitioned the business from our office
environment to remote working. We were able to achieve this in a very short period not just because
of the resilience of our systems and processes but mostly because of the commitment of our staff at
all levels in the organisation to provide our normal services as seamlessly as possible. The Board is
very grateful to our staff for their commitment. All our staff based in Melbourne, continue to provide
their skills whilst having to endure current lock down conditions. We are very aware that all have
challenges in their personal lives that make this not always a pleasant experience. They are supported
by, and are in regular communication with, our leadership team. The health and safety of our staff is
our key priority, and we strive to ensure they continue to feel supported and safe during these difficult
times. The Board would like to acknowledge the extraordinary efforts of our staff and thank them.
Our strategic focus remains in investing in technology, developing market leading functionality and
features, and ensuring the infrastructure is secure, stable, flexible and scalable. We are dedicated to
provide a best-in-class service to our clients. This is done in combination with our values of
collaboration, agility, courage, and curiosity. We continued to strategically invest in IT infrastructure, IT
security and compliance throughout the year and increased our investment in our people.
Netwealth operates in highly regulated environment and the Board takes its compliance and
governance responsibilities very seriously. The Board is committed to the Netwealth’s value of being
genuine and to always act ethically, be transparent and accountable for our actions. These attributes
are essential for the long-term performance, sustainability and success of Netwealth. The Board has
been pro-active in adopting the royal commission recommendation for the appointment of a single-
purpose trustee of the superannuation fund. Netwealth has incorporated a company, Netwealth
Superannuation Services Pty Ltd, for that purpose and is resourcing it appropriately to take on the
responsibilities of trustee. Our expectation is for this company to be licenced and operating in this
financial year and we are progressing to achieve this.
1 Underlying EBITDA, EBITDA margin, NPAT, NPAT margin, Operating net cashflow and EPS prepared applying accounting standard
AASB117 Leases and to exclude non-recurring expenses for FY2019. Accounts have been stated in accordance with the new accounting
standard AASB 16 Leases adopted from 1 July 2019. A reconciliation is provided page 24-25. Underlying EPS has been calculated including
all of the ordinary shares, performance shares and options on issue at the end of the period.
6 | netwealth Annual Report 2020 For the year ended 30 June 2020
I would like to acknowledge my fellow directors for their commitment and thoughtful counsel during
the year. I would like to also acknowledge and thank our leadership team and our staff for their
commitment, innovation and client centric focus. They are the reason growth momentum continues
to increase for Netwealth and why Netwealth retains its number one position for overall satisfaction
among primary users and overall platform functionality, year after year2.
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
18 August 2020
2 Investment Trends May 2020 Planner Technology Report & Investment Trends December 2019 Platform Competitive Analysis and
Benchmarking Report
7 | netwealth Annual Report 2020 For the year ended 30 June 2020
Michael Heine
Joint Managing
Director
Matthew Heine
Joint Managing
Director
Joint Managing Directors’ Letter
Dear Shareholders,
Although the global and economic environment and subsequent social impacts remain a significant
cause of concern for us personally and as a business, we are pleased to advise that Netwealth has
performed strongly during the financial year and that we are well positioned to meet the challenges
presented by COVID-19 and the worldwide health threat and economic disruption that has resulted.
The Group has a strong balance sheet, no debt, a high level of recurring revenue and a growing market
share driven by existing and new clients.
We have continued to invest in R&D, our new SaaS services and our core platform offering to ensure
our continued industry leadership and will continue to do so in the year ahead.
Our staff have been incredibly resilient and have adapted well to remote working, whilst maintaining
the high level of service and innovation our clients have come to expect.
To this end we would like to thank all the Netwealth staff for the incredible effort they have put in and
the commitment they have shown.
We are grateful for the ongoing strong support we have received from our clients and financial
intermediaries all of whom have also been severely challenged by this pandemic.
Key highlights for FY2020;
• Underlying NPAT3 of $43.8 million ($36.0 million for FY2019), an increase of $7.8 million (21.7%) for
the year,
• Underlying EPS3 of 17.9 cents (14.8 cents for FY2019), an increase of 3.1 cents (21.2%) for the year,
• High underlying EBITDA3 margin of 52.3%,
•
•
•
•
Very high correlation between underlying EBITDA and underlying operating net cashflow pre-tax
of 99.4%3, reflecting exceptional cash generation,
Very high level of recurring and predictable revenue,
Low capital expenditure, debt free and significant cash on hand, and
Strategic investment across IT infrastructure, people and software to support ongoing growth
and market leading position.
3 Underlying EBITDA, EBITDA margin, NPAT, NPAT margin, Operating net cashflow and EPS were prepared applying accounting standard
AASB117 Leases and to exclude non-recurring expenses for FY2019. Accounts have been stated in accordance with the new accounting
standard AASB 16 Leases adopted from 1 July 2019. A reconciliation is provided on pages 24-25. Underlying EPS has been calculated
including all of the ordinary shares, performance shares and options on issue at the end of the period.
8 | netwealth Annual Report 2020 For the year ended 30 June 2020
Consistent growth momentum in Funds
Under Administration (FUA), Funds Under
Management (FUM) and Account numbers is
a simple but effective measure of our
success to date. FUA at 30 June 2020 of $31.5
billion, an increase of $8.2 billion (35.0%
increase) for FY2020. FUM of $7.3 billion, an
increase of $3.3 billion (84.4% increase) for
FY2020.
Netwealth achieved record FUA net inflows
of $9.1 billion for the year and a strong uptake
of our Managed Account offering with record
net inflows of $3.3 billion for FY2020.
Accounts increased to 81,804 at 30 June
2020, a 14.5% increase for the year.
Of the major platforms for the year ended March 2020, Netwealth is the fastest growing platform in
absolute terms and relative to its size (excluding the IOOF/ANZ acquisition) and is now the 7th largest
platform provider in the market with market share of 3.6%, up 1.1% for the year 4 providing significant
potential for further growth.
In the latest Strategic Insights platform market update for March 2020, Netwealth recorded the
largest quarterly FUA net inflows of $3.2 billion, more than double that of its nearest competitor and
the highest net fund flows for the eighth consecutive quarter.
Complementing this are indicators of our growth in the affluent advice segment of the market.
Average Account size increased to $385,000 for June 2020, up from $323,000 for June 2019 and
Platform Revenue per Account increased to $1,604 for FY2020, an increase of $144 per account for the
year. The affluent advice segment, high net-worth and private wealth groups represent a significant
opportunity for the industry and for Netwealth to capitalise as we are well placed to support the
unique and differentiated needs of this segment and provide a premium offering for sophisticated and
high net-worth clients.
We are confident of sustaining our growth momentum into the future by benefiting from the
significant changes currently reshaping the industry and our continued and increasing investment in
technology, features, functionality and service.
Our strategy is to deliver best-in-class technology, best in-class service and provide insights that
matter.
In FY2021 strategically increasing our investment across IT infrastructure, people and software we will
further build out our “Whole of Wealth” solution. We will focus predominantly on a new digital client
engagement and mobile first “Whole of Wealth” offering, as well as, enhancing reporting, transactional
capabilities and client service tools and channels. For the high net-worth and private wealth groups
4 Strategic Insights, Master Trusts, Platforms Wraps (March 2020)
9 | netwealth Annual Report 2020 For the year ended 30 June 2020
we provide our premium offering. Key initiatives will be supported by 30 additional IT resources, 40%
of who will be focused on developing significant new functionality.
Guided by our strategy, our in-house platform development team focus on innovative, agile, market
leading functionality that is tailored to our clients’ needs.
While we see revenue margins declining, as our repricing of legacy products continues to flow through
and lower returns being earned from the cash transaction administration fee, resulting from lower
RBA rates, we remain very positive about our growth over the years ahead with a strong pipeline of
new and existing business as well as new revenue streams.
We continue to gain industry recognition as the leading specialist platform provider. During the year
we achieved the highest overall satisfaction score among primary users for the ninth year in a row, the
highest rank for digital wealth applications and services among established wealth institutions and
ranked number one for overall platform functionality for the fifth year in a row, according to research
by Investment Trends5.
We would like to thank the Board for their continued oversight, expertise and guidance throughout the
year.
We look forward to working with our staff, our loyal clients and our valued shareholders now and in the
future.
Yours sincerely
Michael Heine
Joint Managing Director
18 August 2020
Matt Heine
Joint Managing Director
18 August 2020
5 Investment Trends May 2020 Planner Technology Report, Investment Trends January 2020 Digital Wealth Report & Investment
Trends December 2019 Platform Competitive Analysis and Benchmarking Report
10 | netwealth Annual Report 2020 For the year ended 30 June 2020
Corporate highlights
Netwealth has continued to experience significant growth in FY2020. Some highlights for the year
were (comparative period being FY2019):
$123.9M
Total Income
Growth $25.1M (+25.5%)
$64.8M 1
Growth $12.9M (+24.8%)
EBITDA
$43.8M 1
Growth $7.8M (+21.7%)
NPAT
17.9 cents 1
EPS
52.3% 1
EBITDA margin
$64.5M 1
Operating net cash flow pre tax
$31.5B FUA
Growth $8.2B (+35.0%)
$9.1B
Dividend 14.7 cps
FUA net inflows
Growth of $4.7B (+109.5%)
Interim dividend 6.9 cps
Final dividend 7.8 cps
$7.3B FUM
Growth $3.3B (+84.4%)
$3.7B
ASX 200
FUM net inflows
Growth of $2.8B (+312.4%)
Inclusion from 23 September 2019
1
Underlying EBITDA, EBITDA margin, NPAT, Operating net cashflow and EPS are prepared applying accounting standard AASB
117 Leases and to exclude non-recurring expenses for FY2019. Accounts have been stated in accordance with the new
accounting standard AASB16 Leases, adopted from 1 July 2019. A reconciliation is provided in pages 24-25. EPS has been
calculated on the basis all performance shares and options currently on issue will vest in full.
EPS – Earnings per share; CPS – Cents per share
11 | netwealth Annual Report 2020 For the year ended 30 June 2020
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 trustee 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 class6.
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
example, via the platform, financial intermediaries and clients can invest in 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, governance and our custodial services.
6 Investment Trends; December 2019 Platform Competitive Analysis and Benchmarking Report & Investment Trends, April 2019 Planner
Technology Report
12 | netwealth Annual Report 2020 For the year ended 30 June 2020
Operational performance
FUA of $31.5 billion as at 30 June 2020, increased by $8.2 billion (35.0%) from 30 June 2019.
Netwealth remains the market leader in terms of FUA net inflows and achieved yearly record FUA net
inflows of $9.1 billion in FY2020. FUA market movement was negative $0.9 billion during the year7.
FUM as at 30 June 2020 of $7.3 billion, increased by $3.3 billion (84.4%) from 30 June 2019. The
increase included $3.7 billion FUM net inflows and negative $0.4 billion FUM market movement.
Managed Account FUM as at 30 June 2020 of $5.8 billion, increased by $3.0 billion (110.0%) from 30
June 2019. The increase included $3.3 billion Managed Account FUM net inflows and negative $0.3
billion of Managed Account FUM market movement.
Netwealth continues to diversify its revenue composition. Transaction fee revenue increased to 9% of
platform revenue for FY2020, and increased by 3% from FY2019, driven by a significant increase in
trading volumes from March onwards combined with renegotiated trading costs and the addition of
new revenue streams.
In FY2020, Netwealth’s platform revenue over average FUA decreased to 43.7bps, from 48.1bps in
FY2019. A more important measure for Netwealth is the average revenue earned per account which
continued to increase to $1,604 per account, $144 higher than FY2019. A key driver of the changes in
revenue margin and revenue per account, was the growth in the average account size by $62,000 to
$385,000 per account at year end. Netwealth continued to attract high net-worth clients and larger
accounts typically earn higher transaction and ancillary fee income as these clients desire higher
functionality and trade more frequently.
Accounts as at 30 June 2020 were 81,804, an increase of 10,380 accounts (14.5%) from 30 June 2019.
7 Strategic Insight: Master Trusts, Platforms & Wraps (12 months flows to Mar 2020)
13 | netwealth Annual Report 2020 For the year ended 30 June 2020
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 ninth
year in a row, Netwealth achieved the highest overall satisfaction score among primary users in the
Investment Trends Planner Technology report (May 2020).
Netwealth also ranked 1st for digital wealth applications and services among wealth institutions by
Investment Trends January 2020 Digital Wealth report.
For the fifth year in a row, Netwealth continued to be ranked No.1 for overall platform functionality in
the Investment Trends Platform Competitive Analysis & Benchmarking Report (Dec 2019).
Figure 1: Source Investment Trends – December 2019 Platform Competitive Analysis and Benchmarking Report and
Investment Trends – May 2020 Planner Technology Report.
Further illustrating our market-leading capabilities:
• Netwealth won the “Best Advised Product” award for the third year in a row: Chant West Super
Awards (2020).
• Netwealth ranked 1st in the Adviser Ratings 2019 Financial Advice Landscape Report released in
December 2019 for net promoter score, adviser experience, ongoing adviser support, overall
functionality and client experience.
14 | netwealth Annual Report 2020 For the year ended 30 June 2020
Outlook
Netwealth are well positioned to meet the challenges presented by COVID-19 and subsequent
economic disruption.
Given the dynamic and evolving nature of COVID-19 and the unknown duration of this pandemic,
Netwealth will continue to assess and monitor any further impacts.
The size of the Australian Retail Platform market in which Netwealth operates is $777 billionError! B
ookmark not defined.. Netwealth is the largest specialist platform provider and 7th largest platform. It
has increased market share to 3.6% for the year to 31 March 2020 up from 2.5% at 31 March 20198.
Netwealth expects to continue to benefit from the significant changes currently reshaping the
industry and remains positive about the future and continued market share growth.
In addition to growing market share within the affluent advice segment, high net-worth and private
wealth groups represent a significant growth opportunity for the industry. Netwealth is well placed to
support the unique and differentiated needs of the segment.
Having regard to this uncertain environment, and based on Netwealth’s current pipeline, existing
clients and the growth in new clients currently transitioning onto the platform, projected FUA net
inflows for FY2021 is forecast at approximately $8 billion.
To capitalise on the current market opportunity and to retain our market leadership across key market
segments, Netwealth will continue to strategically increase its investment in IT infrastructure, people
and software. Key initiatives are supported by the planned addition of 30 IT resources (20
Melbourne/10 Vietnam) in FY2021 who, will focus predominately on a new digital client engagement
and mobile first “Whole of Wealth” offering, as well as, enhancing reporting, transactional capabilities
and client service tools and channels.
In addition to investment in technology, Netwealth will launch in August the first of two new active
funds, Magellan Global Specialist Series Infrastructure Fund and Magellan Global Specialist Series
Global Fund. The funds, which will be available in our Wealth and Super Accelerator Core and Plus
8 Strategic Insights, Master Trusts, Platforms Wraps – March 2020
15 | netwealth Annual Report 2020 For the year ended 30 June 2020
products, are the first in a series of new mandated funds which will continue to be rolled out
progressively in the coming 12-18 months.
With the legislated end to all grandfathered commissions on 31 December 2020, Netwealth expects
additional transition opportunities as advisers seek to provide their clients greater competitive pricing
and functionality.
Fees and ancillaries in FY2021 will be impacted by the previously announced new pricing of our back
book and the full year impact of a lower cash margin.
Depending on market volatility and investor behaviour, compared to Q4 2020, Netwealth may also be
impacted by a reduction in the percentage of its clients FUA held in their cash transaction account
and lower transaction revenues, should market volatility reduce.
Netwealth as a trusted technology provider for our clients is in a unique position to support and
evolve business models, drive efficiency and deliver better client outcomes.
We have grown our sales and distribution team over recent years to win new business and to grow
FUA from our existing Financial Intermediaries and clients.
Operating in a highly regulated environment Netwealth is committed to meeting or exceeding our
regulatory obligations and community expectations.
Finally, and importantly, Netwealth remains in a very sound financial position:
• Highly profitable, with strong EBITDA margin,
• A very high correlation between EBITDA and operating cashflow, resulting in exceptional cash
generation,
•
•
Very high levels of recurring revenue, which results in predictable revenue, and
Very low capital expenditure, debt free and significant cash reserves.
16 | netwealth Annual Report 2020 For the year ended 30 June 2020
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 FY2020 Netwealth released a range of new platform features and products, in addition to
innovations in how we service our clients.
This was recognised by achieving the highest overall satisfaction score among primary users for the
ninth consecutive year in the latest Investment Trends Planner Technology Report, and for the third
consecutive year were awarded Best Advised Product by Chant West.
Value for money, efficient administration, feature-rich functionality and leading customer support
were some of the reasons advisers rated us highly and we remain as committed as ever to delivering
on these areas and more through innovations in all elements of our business.
Over the past 12 months, Netwealth released the following noteworthy product and operational
enhancements:
•
•
•
Integrated AWS call-centre and Zendesk capabilities into our organisational technology stack to
enhance the operations of our contact centre. With centralised customer data, optimised
workflows and self-service tools, our team was able to cope with the increased demands from the
COVID-19 pandemic remotely whilst maintaining our client service standards.
Broadened the investment universe for wholesale and sophisticated clients with options that
include exclusive managed funds, Australian and International bonds and foreign currencies. We
also added a range of new managed account models including those from Watershed and Russell
Investments.
Enhanced the transaction functionality by incorporating digital solutions such as BPAY® allow for
bill payments, and DocuSign® to support remote digital signing of documents. These
enhancements demonstrate our commitment to remove friction from the advice investment
process and improving the end user experience.
• Continued investing in new technologies to help advisers and investors obtain a better picture of
investors’ total wealth by enhancing our 3rd party data feeds into the platform. In addition to 170
banks and credit unions already available, users can now access data from other superannuation
funds, broking and share trading accounts.
•
Recognising that some advice businesses prefer to appoint an external responsible entity (RE) for
our managed account service, we partnered with Ironbark Asset Management Limited as an
alternative RE option to provide a more flexible Managed Account offering.
17 | netwealth Annual Report 2020 For the year ended 30 June 2020
Client portals are a technology innovation demanded by
•
the advice community to improve how they work with their
clients, with 8 in 10 advice businesses expecting them to
improve client satisfaction, client collaboration, client
engagement, client satisfaction and transparency 9.
What key benefits do you currently get or expect to
get from your client portal?
Improved business
efficiency
Improved marketing to
clients
Improved transparency
Improved client satisfaction
Improved client engagement
Improved client education
Improved client
collaboration
Improved client
communication
0.0% 20.0% 40.0% 60.0% 80.0% 100.0%
Currently or expect get
Don’t expect to get
Source: Netwealth 2020 Advice Tech Report
We continue to develop user interaction and interface designs
for our new "mobile 1st" client engagement experience which
we believe will lead the market
Other initiatives to be launched over the next 12 months
include cost-effective investment options for our Super and
Wealth Accelerator Core members, new reporting
functionalities, enhanced transaction capabilities and
continued enhancement on how we service our clients across
multiple channels.
Illustration of client portal ‘all of wealth’
portfolio summary
9 Netwealth 2020 Advice Tech Report
18 | netwealth Annual Report 2020 For the year ended 30 June 2020
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 pleased with the results from the FY2020 staff engagement survey in meeting our goal to
maintain a workplace that promotes an engaged and fulfilled workforce. Netwealth continues to be in
the top quartile of comparable businesses that we were benchmarked against, with an overall
engagement rate of 79% from 86% staff participation rate.
In the engagement survey results; risk culture, general culture, leadership, company confidence,
management, work & life blend, innovation and teamwork and ownership all received over 80%
employee satisfaction.
Netwealth has six key organisational values that guide the way our people approach work and each
other. These values are to be Curious, Optimistic, Courageous, Collaborative, Agile and Genuine. The
behaviours associated with these values model the way our people work together, communicate and
live on a day-to-day basis.
Staff recognition
We regularly recognise and publicly celebrate members of our team who display role-model
behaviours for our values. Usually acknowledged in our quarterly staff town hall meetings, we did
things differently this year and went virtual. In the last 12 months we have witnessed many staff
members going above and beyond to achieve under the extreme situation of the COVID-19 pandemic,
with more than 45 nominations being received, and 18 awards presented.
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.
This year our training programs reached more broadly throughout Netwealth. We continued to invest
in leadership programs for senior team members and recognised upcoming leaders by offering an
“emerging leader” program. Core training courses continued that included professional scrum master
workshops, “inspiring communications” sessions, our industry qualification program and our monthly
19 | netwealth Annual Report 2020 For the year ended 30 June 2020
“lunch and learn” internal knowledge sharing sessions. We also launched a series of wellbeing
initiatives that focused on mental and physical health and wellness.
Notwithstanding the constraints of COVID-19, Netwealth team members continued to enjoy access to
a wide range of employee benefits including paid parental leave, health and wellbeing benefits,
discounts to services such as transportation and financial services and access to Netwealth’s
discounted income protection and private health insurance services.
Various new initiatives were introduced to staff to assist them in getting through the impacts of
COVID-19 while working remotely. These initiatives include live virtual sessions of weekly mindfulness
and meditation sessions, personal training sessions and performance and well-being program
conducted by a highly recognised performance coach. There have also been an increase in
educational resources and online training courses for managers and teams in how to work effectively
and keep up connectedness, increased frequency of all-staff updates delivered virtually,
implementation of tools to facilitate remote working (e.g. Microsoft Teams and Zendesk),
encouragement of social interactions via informal team get-togethers and weekly online ‘iso-
challenges’. The Group has implemented a working from home policy and conducts regular pulse
surveys to gauge how staff are going.
Diversity, inclusion and gender equality
Netwealth strives for a multi-cultural and gender-equal workplace. With over 37 different languages
spoken, we have strong representation from across the globe. Recognising inclusiveness and diversity
as an asset, it is has led to stronger sociability between team members and also our customers.
Netwealth embrace the principles of the
Workplace Gender Equality Agency report
and rewards everyone equally by paying the
same regardless of gender when performing
the same job and having equivalent
experience. We also remain committed to
working towards our targets for gender
balance, which at 30 June 2020 were:
Team day out at the Corporate Triathlon held early in
the year
% of Staff that are Women
FY2020
33%
33%
36%
44%
FY2021 Target
30%
30%
40%
45%
Executive and Non-Executive Directors
Senior Executive (excluding Executive Directors)10
Managers
All Employees (excluding Non-Executive Directors)
10 Refers to the executive leadership team (excluding Michael and Matt Heine) in Director’s Report on page 27 and 28.
20 | netwealth Annual Report 2020 For the year ended 30 June 2020
Our clients and community
Across the Group, there are a number of initiatives where we actively support our staff in contributing
to the community. Our staff supported some of their favourite charities and events through fundraises
and by volunteering their time and service. Some of these activities include staff participating in the
Corporate Triathlon, the bushfire appeal in early 2020 and a staff-led Market Day held in the office late
last year with all funds raised donated to various charities including The Lord Smith Animal Hospital
and the Make a Wish foundation.
Netwealth strives to provide education and
insights to our clients to help them “see wealth
differently.” Every year we produce a range of
business and investor resources including
webinars, events, special reports, workshops
and podcasts on a range of topics.
Our Business IQ series covers a range of topics
from technical strategies to AdviceTech to
innovation to marketing, all designed to help
advice businesses grow their business, service
and customer engagement capabilities.
In June, we released the 2020 Netwealth
AdviceTech Report which is the fourth edition
of the annual report exploring how leading
businesses approach the task of planning and
investing in AdviceTech to support their activities.
Matt Heine, our Joint Managing Director, hosts a regular podcast where he discusses with industry
professionals and thought leaders the opportunities and challenges faced by financial advisers and
the wealth industry. Some of his guests this year included luminaries such as David Smorgon, Grant
Hackett, Andrew Inwood and Paul Barret.
The Portfolio Construction Series is designed for investors with our investment research team
extracting unique insights from wealth management professionals on areas in which they are
passionate on and relevant to the current market conditions.
This year, we hosted a special COVID-19 series which explored the topic of investing during market
disruption and volatility. Guests included Roger Montgomery and professional managers from
Schroders, Magellan and PIMCO.
21 | netwealth Annual Report 2020 For the year ended 30 June 2020
Continuing to support financial literacy initiatives in schools
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.
Netwealth has continued its partnership with Banqer for the 4th year in a row. Banqer is a financial
education platform with the primary aim to improve financial literacy in schools within Australia and
New Zealand for school children of all ages.
Netwealth’s support enables free access to Banqer’s online platform for children across Australia,
which provides a hands-on experience on saving, budgeting, superannuation, insurance, taxes and
more. This year alone, Netwealth has helped to showcase the Banqer program to over 7,500 students
in 253 classrooms across 151 schools. Throughout the partnership, Netwealth has supported over
20,000 primary school students to access Banqer’s online financial learning platform.
In continuing the partnership, both Netwealth and Banqer are dedicated to fostering financial literacy
in the broader community and to continue supporting families, teachers and advisers in teaching the
next generation. Together, Netwealth and Banqer are on a shared mission of enabling, educating and
inspiring young Australians to see wealth differently and to discover a brighter future.
As a result of the COVID-19 global pandemic, many schools now require students to learn remotely
and parents now having to take on new and challenging responsibilities of being both teacher and
parent. Banqer, with the support of Netwealth has offered a set of home resources for some of these
children. The free program makes it simple for parents to teach their children the importance of
money management at home. Over two consecutive weeks, the children will explore budgeting,
financial risk, managing debt and more which on its own are fun activities but also serves to promote
learning and assists them in developing their financial confidence for the future.
22 | netwealth Annual Report 2020 For the year ended 30 June 2020
Underlying financial operating performance
Platform revenue increased by $25.0 million (25.9%) to $121.3 million for FY2020. Revenue growth
resulted from strong FUA growth and increased transactional revenue and other ancillaries. Total
income of $123.9 million for FY2020 has achieved a compound annual growth rate (CAGR) of 26.5%
over the past three years.
•
•
•
•
Total expenses of $59.1 million for FY2020, increased by $12.3 million (26.2%) compared to FY201911.
Employee benefits expense increased by $9.2 million (28.5%) to $41.6 million for FY202011.
Headcount increased by 68 during FY2020. Employee benefits expense represented 70% of total
expenses, Netwealth continued to increase its investment in IT to drive innovation and further
growth with 32 additional headcount added during FY2020.
Total other expenses increased by $3.0 million to $17.5 million for FY202011. The increase was our
increased investment in technology spend on areas relating to security, collaboration &
communication, server technology, storage and networking and occupancy, insurance and client
rectification expenses.
EBITDA of $64.8 million for FY2020 increased by $12.9 million (24.8%) versus FY2019 and underlying
EBITDA margin of 52.3% decreased by 0.3% versus FY202011.
• Netwealth’s NPAT of $43.8 million for FY2020 increased by $7.8 million or 21.7% versus FY2019 and
NPAT margin of 35.3% for FY202011. EPS of 17.9 cents for FY2020, increased by 3.1 cents versus
FY201911.
• Operating net cash flow pre-tax was $64.5 million for FY2020, a 99.4% cash conversion ratio of
EBITDA11.
11 Underlying EBITDA, EBITDA margin, NPAT, NPAT margin, Operating net cashflow and EPS were prepared applying accounting
standard AASB117 Leases and to exclude non-recurring expenses for FY2019. Accounts have been stated in accordance with the
new accounting standard AASB 16 Leases adopted from 1 July 2019. A reconciliation is provided pages 24 to 25. Underlying EPS has
been calculated including all of the ordinary shares, performance shares and options on issue at the end of the period.
23 | netwealth Annual Report 2020 For the year ended 30 June 2020
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 consolidated statement
of profit or loss and other comprehensive income. The underlying adjustments relate to a one-off
client rectification cost incurred in FY2019 and on the basis of pre-transition to AASB 16 Leases
Standard. The Board and management monitor the underlying EBITDA pre AASB 16 and this
information is provided to enable comparison with the prior corresponding period.
Consolidated Group for Year Ended
30 June 2020
30 June 2019
Variance
Variance
Net profit before tax
Depreciation and
amortisation
Depreciation on right-of-use
assets (post AASB 16)
Interest on leases (post
AASB 16)
$’000
62,745
1,910
1,377
121
Rental expense (pre AASB 16)
(1,313)
Client rectification costs and
legal expenses
Underlying EBITDA
Underlying EBITDA margin
Income tax expense
Depreciation and
amortisation
Net tax impact from leases
(adoption of AASB 16)
Tax impact from client
rectification costs and legal
expenses
Underlying NPAT
Underlying NPAT margin
$’000
50,083
759
$’000
12,662
1,151
%
25.3%
151.6%
-
-
-
-
1,121
64,840
52.3%
(19,084)
(1,910)
51,963
52.6%
(14,882)
(759)
1,377
100.0%
121
100.0%
(1,313)
(1,121)
12,877
(0.3%)
(4,202)
(1,151)
(100.0%)
(100.0%)
24.8%
-
(28.2%)
(151.6%)
(55)
-
(55)
(100.0%)
-
(336)
336
100.0%
43,791
35.3%
35,986
36.4%
7,805
(1.1%)
21.7%
-
24 | netwealth Annual Report 2020 For the year ended 30 June 2020
Underlying results of profit or loss for FY2020 (pre-transition to AASB 16 Leases)
Set out in the table below is the underlying consolidated statement of profit or loss and other
comprehensive income for FY2020 presented in full to reflect a one off adjustment on client
rectifications costs in FY2019 and pre-transition to AASB 16 Leases.
Consolidated Group for Year Ended
30 June 2020
30 June 2019
Variance
Variance
$’000
$’000
$’000
%
Income
Platform revenue
Other income
Total income
Expenses
Employee benefits expenses1
Other costs and expenses2
121,345
2,565
123,910
(41,578)
(17,492)
96,369
2,401
98,770
(32,344)
(14,463)
Total expenses
(59,070)
(46,807)
64,840
51,963
52.3%
-
(1,910)
52.6%
-
(759)
24,976
164
25,140
9,234
3,029
12,263
12,877
(0.3%)
-
1,151
25.9%
6.8%
25.5%
28.5%
20.9%
(26.2%)
24.8%
-
0.0%
151.6%
62,930
51,204
11,726
22.9%
(19,139)
43,791
35.3%
17.9
(15,218)
35,986
36.4%
14.8
3,921
7,805
(1.1%)
3.1
25.8%
21.7%
-
21.2%
1Employee benefits expense includes $0.4 million of non-cash share-based payments
2Restated to exclude a non-recurring client rectification cost of $0.8M in FY2019 and on the basis of pre-transition
to AASB 16 Leases. Refer to table on page 24 for the adjustments.
3Underlying EPS has been calculated on the basis all performance shares and options currently on issue will vest in
full.
25 | netwealth Annual Report 2020 For the year ended 30 June 2020
Underlying EBITDA on
continuing operations
Underlying EBITDA margin
Interest on leases
Depreciation and
amortisation
Underlying NPBT on
continuing operations
Income tax expense
Underlying NPAT on
continuing operations
Underlying NPAT margin
Underlying EPS (cents per
share)3
Underlying Cash Flow Statement FY2020
The table below sets out the summary consolidated statement of underlying cash flows for FY2020
and FY2019.
Consolidated Group for Year Ended
30 June 2020
30 June 2019
Variance
Variance
$’000
64,840
587
(61)
(919)
15
$’000
51,963
214
(1,645)
(741)
(291)
$’000
12,877
373
1,584
(178)
306
%
24.8%
174.3%
96.3%
(24.0%)
105.2%
64,462
49,500
14,962
30.2%
Underlying EBITDA
Non-cash items in EBITDA
Changes in working capital
Capital expenditure
Net (purchases)/sale
proceeds on investments
Underlying operating net
cash flows before taxation
Key platform statistics
Set out in the below table is a summary of other key platform statistics for FY2020 and FY2019.
Consolidated Group for Year Ended
30 June 2020
30 June 2019
Variance
Variance %
31,502
7,277
9,080
3,706
23,337
3,946
4,334
899
8,165
3,331
4,746
2,807
43.7 bps
48.1 bps
(4.4 bps)
35.0%
84.4%
109.5%
312.4%
(9.2%)
1,604
1,460
144
9.9%
FUA (EOP*) ($ million)
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
26 | netwealth Annual Report 2020 For the year ended 30 June 2020
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 director and is currently a director of Cromwell Property Group,
Warakirri Group, 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
27 | netwealth Annual Report 2020 For the year ended 30 June 2020
Name and title
Profile
Davyd Lewis
Independent
Non-Executive
Director
Timothy Antonie
Independent
Non-Executive
Director
Sally Freeman
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 NIL 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 a director of Breville Group Limited, Premier Investments
Limited, and a principal of Stratford Advisory.
Timothy was previously a director of Village Roadshow Limited from November 2010
till December 2019
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.
• Sally joined Netwealth as a director in October 2019.
• Sally was a partner of KPMG for 15 years until her retirement in 2019. Prior to that,
she was a partner at Ernst & Young. She has over 25 years’ experience as a Risk
Consulting and Corporate Governance executive and was head of KPMG’s National
Risk Consulting Practice, advising clients in financial risk management, actuarial
insurance, forensics and compliance matters.
• Sally holds a Bachelor of Commerce, is a member of the Australian Institute of
Chartered Accountants, the Australian Institute of Company Directors and Chief
Executive Women.
• Sally is currently a director of Eastern Health and independent expert on the audit
committee of Commonwealth Games Australia and Royal Children’s Hospital.
• Sally is a member of the Group Audit Committee, Group Compliance and Risk
Management Committee, Group Remuneration Committee, Group Nomination
Committee and NIL Investment Committee.
28 | netwealth Annual Report 2020 For the year ended 30 June 2020
Directors’ Report
The directors present their report on Netwealth Group Limited “the Company” and its controlled
entities for the year ended 30 June 2020 (FY2020). 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
• Sally Freeman (appointed on 10 October 2019)
Directors have been in office since the start of the financial year to the date of this report, unless
otherwise stated.
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 achieved the highest overall satisfaction score among primary users providing
wealth professionals with the technology required to efficiently manage and add value to our clients12.
12 Investment Trends - December 2019 Platform Competitive Analysis and Benchmarking Report & Investment Trends –
May 2020 Planner technology report
29 | netwealth Annual Report 2020 For the year ended 30 June 2020
Directors meetings
During the financial year, 16 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)
Audit
Committee
Remuneration
Committee
Nomination
Committee1
(A)
(B)
(A)
(B)
(A)
(B)
Compliance
& Risk
Committee
(B)
(A)
Directors
Jane Tongs
Davyd Lewis
Timothy Antonie
Sally Freeman2
Michael Heine
16
16
16
11
16
15
16
16
11
15
11
11
11
8
-
11
11
11
7
-
10
10
10
7
-
10
10
10
6
-
2
2
2
1
-
2
2
1
1
-
12
12
12
9
-
15
16
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
2 Appointed as independent non-executive director on 10 October 2019
-
-
-
-
-
-
12
12
12
8
-
-
The qualifications and experience of Directors are detailed on page 27 to 28 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.
30 | netwealth Annual Report 2020 For the year ended 30 June 2020
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.
• Grant holds a Bachelor of Business (Accounting) from Latrobe University
and a member of Chartered Accountants Australia & New Zealand.
• 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.
Rachel contributes 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 a
Bachelor of Business (Economics).
31 | netwealth Annual Report 2020 For the year ended 30 June 2020
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.
John Hanrahan
Chief Information
Officer
Amanda Atkinson
Head of Investor
Services
32 | netwealth Annual Report 2020 For the year ended 30 June 2020
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.
Coronavirus (COVID-19) impact
Like the majority of businesses, we have been impacted in different ways by COVID-19. When the
crisis first hit in early March 2020, the business transitioned to remote working and enacted our
pandemic plan which evolved as the situation unfolded. Additional processes and new technologies
implemented which included a contact centre capable of operating remotely using cloud based
telephony meant other than the initial limited disruption, we have continued to operate effectively and
productively throughout the year.
As our head office is based in Victoria, we are in stage 4 lock down and will continue to work from
home for the foreseeable future. At the current time the Board and management can see no reason
why the business will not continue to operate as normal. The COVID-19 pandemic has not resulted in
additional net costs or impacted the value of any business assets. Economic uncertainties currently
prevailing around the world make it challenging to forecast the future, but Netwealth remains positive
given its strong pipeline of new and existing business and growing market share. We are aware of the
emotional impact on our staff and continue to explore and adopt wellness programs to help them
through this period.
Significant changes in the state of affairs
Netwealth Superannuation Services Pty Ltd and Wealthtech Pty Ltd, both fully owned subsidiaries of
Netwealth Group Limited were established during the half year. Neither are operating as at 30 June
2020.
Netwealth Advice Group Pty Ltd changed its name to Netwealth Fiduciary Services Pty Ltd on 3
October 2019.
There were no other significant changes in the state of affairs during the year.
Dividends
During the year, the Company declared on 18 February 2020 and paid on 26 March 2020 a fully franked
dividend of 6.90 cents per share, representing a total dividend of $16,401,000. There is no Dividend
Reinvestment Plan.
Shares and options
On 4 October 2019, eligible employees who had served 3 or more years were offered ordinary shares
valued at $1,000 as a gift for no consideration. As a result, 15,180 new ordinary shares were issued at
$7.5544 per share during the year.
On 4 October 2019, eligible employees nominated by the Board were granted ordinary share options as
part of the Group’s long-term incentive plan. This resulted in the Group issuing 1,046,377 options at an
exercise price of $7.5544 per share during the half year.
33 | netwealth Annual Report 2020 For the year ended 30 June 2020
Events subsequent to the end of the reporting period
On the 18 August 2020, the Company declared a fully franked final dividend for FY2020 of 7.80 cents
per share (total dividend of $18,540,210) bringing the total fully franked dividends to 14.70 cents per
share for the twelve months. The final dividend is payable on 24 September 2020.
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.
Non-audit services
During the year, Deloitte Touche Tohmatsu, the Group’s auditor has performed other services in
addition to its statutory duties. Details of the amounts paid or payable to the auditor for audit and
non-audit services provided during the year are set out in Note 26 to the financial statements. The
Directors, in accordance with advice received from the Audit Committee, are satisfied that the
provision of those non-audit services during the year did not compromise the auditor independence
requirements of the Corporations Act 2001 for the following reasons:
• All non-audit services have been reviewed by the Audit Committee to ensure that they do not
impact the impartiality and objectivity of the auditor; and
• None of the services undermine the general principles relating to auditor independence as
set out in APES 110 Code of Ethics for Professional Accountants, including reviewing or
auditing the auditor’s own work, acting in a management or a decision making capacity for
the Group, acting as advocate for the Group or jointly sharing economic risk and rewards.
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 49.
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
18 August 2020
34 | netwealth Annual Report 2020 For the year ended 30 June 2020
Remuneration Report (Audited)
Dear Shareholders
Letter from the Remuneration Committee Chair
On behalf of the Board, I am pleased to present Netwealth’s FY2020 Remuneration Report.
The second half of FY2020 has been significantly impacted by the health, social and economic consequences of
the COVID-19 pandemic. Netwealth responded to this crisis by prioritising the welfare of its staff and clients and
successfully transitioned most of its staff to working remotely from home, whilst maintaining a high level of service
and support for our customers. Netwealth’s staff responded exceptionally well to working in this challenging
environment.
Netwealth’s performance in FY2020
Netwealth’s strong client focus, risk management and market-leading technology have contributed to the record
level of profitability in FY2020, with performance remaining resilient throughout the second half of FY2020, despite
the impact of COVID-19. In FY2020 NPAT and EPS each grew by 27.3%. This was driven principally by the growth in
FUA of 35.0% and FUM of 84.4%. This performance could not have been achieved without the skill, agility and
resilience of our staff.
Remuneration framework
Netwealth’s remuneration framework is targeted at driving excellence in customer service, values and a
performance culture and the Board recognises the importance of suitably incentivising our staff. The objective for
our remuneration framework is to recruit and retain talent and motivate our staff to be innovative and creative to
continue growing Netwealth, but also to be accountable for all their decisions in order to maintain our high level of
compliance, governance and customer satisfaction.
Short term incentives (STIs)
Netwealth’s primary focus remains on long term performance and our remuneration is structured on this basis.
Other than the Joint Managing Directors (JMDs) and Sales and Distribution team, Netwealth pays cash bonuses to
employees on a discretionary basis where in the opinion of the Board the employee has made an exceptional
contribution.
Long term incentives (LTIs)
Last year, the Board adopted a new LTI scheme designed to incentivise and retain staff and a number of offers
were made under the scheme to senior and key employees in FY2020.
During the year, Netwealth was pleased to welcome the addition of Sally Freeman to the Board and as a member of
the Remuneration Committee. Sally’s previous experience as the head of KPMG’s National Risk Consulting
Practice will ensure the strong compliance and risk management culture remains a key focus and strength of
Netwealth.
The Board believes this Remuneration Report will assist our shareholders and other stakeholders to understand
our remuneration policy, objectives and practices. We are committed to engaging with you and welcome your
feedback.
Yours faithfully
Davyd Lewis
Chairman of the Remuneration Committee
18 August 2020
35 | netwealth Annual Report 2020 For the year ended 30 June 2020
Introduction
Remuneration Objectives
Remuneration Governance
Remuneration Framework
Remuneration Mix of KMPs
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 FY2020 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 Netwealth. 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
FY2020.
Name
Position
Non-executive Directors
Jane Tongs
Independent Non-Executive Chairman
Davyd Lewis
Independent Non-Executive Director
Timothy Antonie
Independent Non-Executive Director
Sally Freeman
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
Sally Freeman joined Netwealth as an Independent Non-Executive Director on 10 October 2019. All other KMP held
office for the full year. No KMP retired during the year.
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;
36 | netwealth Annual Report 2020 For the year ended 30 June 2020
• 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;
•
•
•
•
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 enough 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 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 Netwealth’s four 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;
37 | netwealth Annual Report 2020 For the year ended 30 June 2020
•
•
•
•
•
•
•
•
approving major changes in remuneration-related policies;
reviewing and recommending changes and developments in relation to the LTI scheme;
overseeing the operation of LTI schemes and recommending whether offers are to be made under
the scheme;
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
The Board reviews the structure and the effectiveness of Netwealth’s remuneration arrangements
annually to ensure the alignment with business performance and strategy. The Board monitors
changing market conditions as well as any regulatory and corporate governance developments and
alters remuneration arrangements if appropriate to respond to changing conditions. The
remuneration framework is structured to tie remuneration to Netwealth’s performance through cash
bonuses and other STIs and LTIs.
Purpose of each remuneration component in promoting Netwealth’s performance
Fixed remuneration
Short-term incentive (at risk)
Long-term incentive (at risk)
• Based on the individual
skills, complexity of role
and experience. To be
market competitive, roles
are benchmarked annually
with reference to peer
companies within the
industry.
• Bonuses are paid to staff
•
at all levels for
demonstrated exceptional
performance which as
contributed to Netwealth’s
success.
• Bonuses are paid to Sales
and Distribution staff for
sales performance
• Offers of up to $1,000 in
free shares are made to all
eligible employees under
Netwealth’s Employee
Share Gift Plan on a
periodic basis to provide
an interest in the long-
term success of
Netwealth.
LTI securities are granted
to senior and key
employees with vesting
conditions linked to
personal and corporate
performance. Corporate
performance is linked to
both the total shareholder
return, compared to
similar listed companies,
and growth in earnings per
share which is a key
measure of the return to
shareholders on their
capital.
38 | netwealth Annual Report 2020 For the year ended 30 June 2020
The table below summarises the elements of Netwealth’s remuneration framework in FY2020.
Fixed remuneration
Fixed
•
Each employee’s fixed remuneration is set having regard to their individual
responsibilities, skills and experience and with consideration to remuneration paid
to employees of comparable companies within the industry. Remuneration reviews
normally occur annually and apply from 1 July. In FY2020 the Board deferred the
annual remuneration review for 6 months, except for anomalies, so as to be able to
better assess the impact on COVID-19 on Netwealth and the economy generally.
Performance-based remuneration
Discretionary
cash bonuses
STIs for JMDs
(At risk)
STIs for
Marketing and
Distribution
staff (At risk)
LTIs
(At risk)
• Permanent employees, including the CFO, are paid discretionary cash bonuses
where, in the opinion of the Board, they have made an exceptional contribution.
• CFO Grant Boyle was paid a discretionary bonus of $35,000 in FY2020 based on the
Board’s assessment that he had made exceptional contribution, particularly in
relation to Netwealth’s response to COVID-19. A number of other employees at all
levels were also paid discretionary cash bonuses for similar reasons.
•
•
•
JMD Michael Heine elected not to receive an STI in FY2020, given his substantial
shareholding in Netwealth.
JMD Matthew Heine’s STI of up to $250,000 was divided into 2 components:
‒
75% (up to $187,500) was based on Netwealth’s statutory FY2020 NPAT
compared to budget NPAT, with the minimum STI payable at 95% of budget
NPAT and the maximum STI at 105% or more of budget NPAT. The full amount
of this component is payable; and
25% of the STI (up to $62,500) was based on the Board’s assessment of how
effectively Matthew Heine implemented Netwealth’s FY2020 strategic plan.
The Board has determined that 75% of this component ($46,875) is payable,
making a total STI of $234,375. The STI will be paid within 30 days after the
release of this report.
‒
The STIs in the form of cash bonuses are payable to sales staff based on pre-
agreed performance targets. Part of the STI is payable based on the first 6 months’
performance and the balance is payable after the end of the financial year. The
performance targets are based on fee-earning FUA and FUM.
• Netwealth currently has 2 LTI schemes; an LTI scheme adopted prior to Netwealth
being listed on the ASX (the Pre-listing LTI Scheme) which was discontinued for
new offers prior to listing, and an LTI scheme adopted by the Board in FY2019 (the
New LTI Scheme).
Pre-listing LTI Scheme (summary of key terms):
•
The Pre-listing LTI Scheme provided loans to eligible employees and non-executive
directors to acquire ‘performance shares’ which convert to ordinary shares if
vesting conditions are met (including repayment of the loans);
• Performance shares do not participate in dividends;
• Performance shares confer the right to receive notices of general meetings of the
Company but not to attend or to vote at general meetings of the Company;
• One of the vesting conditions was that Netwealth achieve a target level of EPS in
•
FY2020 and this condition has been met;
The remaining vesting conditions relate to attainment by the employee or director
of personal performance and behavioural standards and these conditions continue
to apply until 31 December 2020;
39 | netwealth Annual Report 2020 For the year ended 30 June 2020
•
•
•
The personal performance vesting condition is that in each of the four financial
years ending with the FY2020, the holder must achieve performance ratings of
‘Achieving’ or equivalent;
The personal behavioural vesting condition is that in each of the four financial
years ending with FY2020, the holder must achieve behaviour ratings of ‘Effectively
displays’ or equivalent;
The holder must be either continuously employed by or hold office continually with
Netwealth until 31 December 2020;
• Between 31 December 2020 and 31 October 2022, the performance shares can be
converted to ordinary shares if the vesting conditions have been met and the loan
is repaid; and
• Performance shares that do not vest will be compulsorily divested, and the
proceeds used to repay the applicable loan. The holder does not receive any part
of the proceeds of divestiture.
New LTI Scheme (summary of key terms):
•
The New LTI Scheme is open to eligible senior and key employees selected by the
Board but is not open to non-executive directors;
• Options were offered under the New LTI Scheme to selected senior and key
employees in FY2020;
•
•
•
•
• Upon exercise, the options convert to ordinary shares on a one for one basis;
•
The options do not confer the right to attend and vote at meetings and do not
confer the right to participate in dividends;
The exercise price is equal to volume weighted average price of ordinary shares at
time of offer of the options;
The holder must be either continuously employed or hold office with Netwealth
until 30 June 2022;
The options are subject to vesting conditions which are tested over a 3-year period
from the date of the offer (the Vesting Period);
There are 2 types of vesting condition; personal behavioural and performance
conditions for the employee (the personal vesting conditions) which apply over the
Vesting Period, and corporate performance conditions based on Netwealth’s Total
Shareholder Return (TSR) (the TSR vesting condition) and earnings per share (EPS)
(the EPS vesting condition);
50% of each employee’s options are subject to the TSR vesting condition. If
Netwealth’s TSR is in the 75th or higher percentile of companies in the S&P/ASX
300 Diversified Financials Index over the Vesting Period, all of that 50% of options
can vest. This number decreases proportionately so that if Netwealth’s TSR is
lower than the 50th percentile, none of that 50% of options can vest;
50% of each employee’s options are subject to the EPS vesting condition. If
Netwealth’s EPS over the Vesting Period grows at a compound average growth
rate (CAGR) of 22.5% or more, all of that 50% of options can vest. This number
decreases proportionately so that if the CAGR is less than 17.5%, none of that 50%
of options can vest;
If the employee does not meet the personal vesting conditions, all their options
lapse;
•
•
•
• A restriction period applies to shares issued upon exercise of options. A holder
may only dispose of up to 50% of the shares that they are entitled to have issued to
them for the first 12 months after the end of the Vesting Period;
• Options must be exercised within 15 years of date of grant; and
40 | netwealth Annual Report 2020 For the year ended 30 June 2020
• Should a liquidity event or change of control even occur, the Board has a discretion
to automatically exercise all vested and unvested options.
E. Remuneration Mix of KMPs
The remuneration mix offer to the JMDs in FY2020 is shown in the diagram below. Remuneration mix
refers to the proportion of total remuneration that is made up of each remuneration component. The
‘Fixed’ component is base salary plus superannuation. The ‘At Risk’ component is the amount of the
maximum STI payable to the JMD. Michael Heine elected to waive his STI for FY2020. The ‘At Risk
Equity’ component is the value of options issued to Matthew Heine under the New LTI Scheme. The
value of performance shares issued to Matthew Heine under the Pre-listing LTI Scheme is not
included.
Michael
Heine
Matthew
Heine
As with all other employees, other than for anomalies, the Board has determined to defer Netwealth’s
annual remuneration review for 6 months, so the JMD’s fixed remuneration has remained the same for
the time being. The Board has determined that Matthew Heine’s maximum STI will however be
increased for FY2021 to $500,000. 50% of the STI will be linked to Netwealth’s NPAT for FY2021 and
50% will be linked to achievement of strategic and other objectives in the Board’s FY2021 strategic
plan. The STI is subject to personal and corporate performance gateways.
CFO Grant Boyle’s remuneration comprises his fixed remuneration and the cash bonus paid to him for
exceptional contribution in FY2020 (refer section D).
F. Overview of the Group Performance
The following table sets out Netwealth’s NPAT, dividend payments and EPS for FY2018, FY2019 and
FY2020:
Financial period ended 30 June
NPAT ($ million)
Dividends paid ($ million)
EPS (cents)
2020
2019
2018
43,661
34,295
20,818
32,088
38,171
8,300
18.37
14.43
8.96
As shown in the table, FY2020 has been a successful year for Netwealth, with NPAT and EPS
increasing 27.3% on FY2019.
Netwealth’s share price on the ASX as at the end of FY2018, FY2019 and FY2020 is shown below:
Financial period ended 30 June
Netwealth Share Price*
*Closing price for the last trading day in the financial year
2020
8.97
2019
8.00
2018
8.22
As shown in the table, Netwealth’s share price increased 12.1% in FY2020
41 | netwealth Annual Report 2020 For the year ended 30 June 2020
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 FY2020 and FY2019.
Joint Managing Directors
Michael Heine
2019
2020
$
$
Matthew Heine
2019
2020
$
$
CFO
Grant Boyle
Total
2020
$
2019
$
2020
$
2019
$
228,311
-
-
228,311
-
-
478,997
234,375
-
479,469
180,000
2,995
335,000
35,000
-
325,000
25,000
-
1,042,308
269,375
-
1,032,780
205,000
2,995
(33,954)
(16,391)
7,625
7,991
5,936
5,417
(20,393)
(2,983)
21,689
21,689
21,003
20,531
25,000
25,000
67,692
67,220
-
-
-
-
-
-
14,299
64,887
14,299
-
2,447
23,561
2,447
-
16,746
88,448
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
216,046
233,609
821,186
705,286
426,944
382,864
1,464,176
1,321,759
% Performance related
0%
0%
38%
28%
14%
7%
26%
17%
1. An STI payment for FY2020 was earned by Matthew Heine (refer section E). Michael Heine waived his STI payment for FY2019
and FY2020. Discretionary STI payments were made to Grant Boyle in FY2019 and FY2020 (refer section D).
2. Netwealth paid a short-term benefit of club membership fees on behalf of Matthew Heine in FY2019.
Long term benefits related to long service leave entitlements accrued for the year, net of leave taken.
3.
4.
Superannuation payments are made in accordance with the relevant statutory requirements.
5. Performance shares held under the Pre-listing LTI Scheme remain subject to vesting conditions.
6. Options on ordinary shares were issued under the New LTI Scheme during the financial year and are subject to vesting
conditions (refer section D).
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
42 | netwealth Annual Report 2020 For the year ended 30 June 2020
H. Non-Executive Directors Remuneration
The table below sets out details of the remuneration of the four Non-Executive Directors for FY2020.
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, Sally Freeman
Remuneration Committee
Chair – Davyd Lewis
Members – Jane Tongs, Timothy Antonie, Sally Freeman
Compliance and Risk Management Committee
Chair – Davyd Lewis
Members – Jane Tongs, Timothy Antonie, Sally Freeman
Due Diligence Committee1
Chair – Davyd Lewis
Members – No other Directors are members
Investment Committee2
Chair – Jane Tongs
Member - Timothy Antonie, Sally Freeman
Nomination Committee
Chair – Jane Tongs
Member – Davyd Lewis, Timothy Antonie, Sally Freeman
FY2020
$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. Netwealth 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 Due Diligence Committee for Netwealth Investments Limited
2 Relates to the Investment Committee for Netwealth Investments Limited
43 | netwealth Annual Report 2020 For the year ended 30 June 2020
The table below sets out the total Non-Executive Director benefits paid for FY2020.
Jane Tongs
Davyd Lewis
Timothy Antonie
Sally Freeman2
Total
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
$
$
$
$
$
$
$
$
$
$
Fees and
allowances
Board and
Committee fees
Post-
employment
benefits
114,155
114,155
105,023
105,023
95,890
95,890
66,503
-
381,571
315,068
Superannuation
10,845
10,845
9,977
9,977
9,110
9,110
6,318
-
36,250
29,932
Share-based
payments
Pre-listing LTI
Scheme1
1,792
1,787
1,792
1,787
1,792
1,787
-
-
5,376
5,361
Total
126,792
126,787
116,792
116,787
106,792
106,787
72,821
-
423,197
350,361
1 Performance shares held under the Pre-listing LTI Scheme remain subject to vesting conditions.
2 Sally Freeman was appointed as Non-Executive Director from 10 October 2019.
The Non-Executive Directors are not eligible to participate in the New LTI Scheme.
The total remuneration paid to all Non-Executive Directors must not exceed in aggregate in any
financial year the amount fixed by the Company in general meeting. This amount has been fixed by
the Company at $800,000 per annum.
44 | netwealth Annual Report 2020 For the year ended 30 June 2020
I. Other information
KMP share movements
The table below sets out the holdings and changes of holdings of ordinary shares for each KMP in
FY2020.
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
FY2020
Number
Number
Number
Number
Number
Non-Executive Directors
Jane Tongs
Davyd Lewis
Timothy Antonie
Sally Freeman
Executive Directors
1,930,060
200,333
-
-
Michael Heine
125,944,990
Matthew Heine
3,211,405
Senior Executive
-
-
-
-
-
-
Grant Boyle
176
1,428
(76,159)
(60,050)
-
-
(7,100,000)
-
-
-
-
-
-
-
-
-
1,853,901
140,283
-
-
118,844,990
3,211,405
1,604
45 | netwealth Annual Report 2020 For the year ended 30 June 2020
KMP shareholdings under the Pre-listing LTI Scheme
The table below sets out the shareholdings of performance shares issued under the Pre-listing LTI
Scheme to each KMP. The loans are interest-free and non-recourse, and must be repaid before the
performance shares can 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
FY2020
Number
Number
Number
Number
Number
Non-Executive Directors
Jane Tongs
Davyd Lewis
Timothy Antonie
Sally Freeman
Executive Directors
Michael Heine
175,000
175,000
175,000
-
-
Matthew Heine
1,400,000
Senior Executive
Grant Boyle
175,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
175,000
175,000
175,000
-
-
1,400,000
175,000
46 | netwealth Annual Report 2020 For the year ended 30 June 2020
KMP option holdings under the New LTI scheme
The table below sets out the holdings of options issued under the New LTI Scheme to each KMP
entitled to participate.
Performance Shares
Balance at
beginning of
financial
period
Granted
during the
year
Vested
Forfeited
Balance at
end of
financial
period
FY2020
Number
Number
Number
Number
Number
Non-Executive Directors
Jane Tongs
Davyd Lewis
Timothy Antonie
Sally Freeman
Executive Directors
Michael Heine
Matthew Heine
Senior Executive
Grant Boyle
Employee Share Gift Plan
-
-
-
-
-
-
-
-
-
-
-
-
132,373
66,667
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
132,373
66,667
Under the Group’s Employee Gift Plan, all eligible permanent and part time employees of the Group may
be offered the opportunity to receive, for no consideration, up to $1,000 in shares at market value.
Employees who receive employee gift shares will be restricted from dealing in those shares until the
earlier of three years from acquisition date or the date the employees ceases employment. The operation
of this plan is assessed annually by the Board.
During FY2020, the Group made an offer under its Employee Gift Plan to grant all eligible permanent and
part time employees that have been employed by the Group for a continuous period of 3 years as at 1 July
2019 resulting in 15,180 new ordinary shares issued at $7.5544 during the year (FY2019: nil).
47 | netwealth Annual Report 2020 For the year ended 30 June 2020
Limited recourse loans to KMP
No new limited recourse loans were made during FY2020 to KMP. The table below summarises the
limited recourse loans made under the Pre-listing LTI Scheme which continued to be in place in
FY2020:
Balance at
beginning of
financial
period
$
FY2020
Non-Executive Directors
Jane Tongs
Davyd Lewis
Timothy Antonie
Sally Freeman
Executive Directors
Michael Heine
82,500
82,500
82,500
-
-
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
J. Previous comments or resolutions in relation to Remuneration Report
At the 12 November 2019 annual general meeting, no comments were made in relation to the FY2019
Remuneration Report and the Remuneration Report was adopted by a vote of 99% in favour.
48 | netwealth Annual Report 2020 For the year ended 30 June 2020
Auditor’s Independence Declaration
49 | netwealth Annual Report 2020 For the year ended 30 June 2020
Consolidated Statement of Profit or Loss and Other
Comprehensive Income
For the year ended 30 June 2020.
Consolidated Group for Year Ended
Note
30 June 2020
$’000
30 June 2019
$’000
Continuing operations
Income
Revenue
Other income
Total income
Expenses
Employee benefits expenses
Other operating expenses
Occupancy expenses
IT and communication expenses
Finance cost
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
6
9
9
9
9
The accompanying notes form part of these financial statements
50 | netwealth Annual Report 2020 For the year ended 30 June 2020
121,345
2,565
123,910
(41,578)
(10,643)
(1,157)
(4,379)
(121)
(3,197)
(90)
(61,165)
62,745
(19,084)
43,661
96,369
2,401
98,770
(32,344)
(10,828)
(1,614)
(3,142)
-
(664)
(95)
(48,687)
50,083
(14,882)
35,201
-
(906)
43,661
43,661
34,295
34,295
43,661
34,295
18.37
18.37
18.37
18.37
14.43
14.43
14.81
14.81
Consolidated Statement of Financial Position
As at 30 June 2020.
Consolidated Group as at
Note
30 June 2020
30 June 2019
$’000
$’000
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Other current assets
Financial assets
Total current assets
Non-current assets
Property, plant and equipment
Intangible assets
Right-of-use assets
Deferred tax assets
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Provisions
Current tax liabilities
Lease liability
Total current liabilities
Non-current liabilities
Lease liability
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Retained earnings
Total equity
10
11
12
14
15
13
6
16
17
13
13
17
18
19
85,516
10,324
4,411
1,186
101,437
1,603
297
4,748
3,807
10,455
111,892
7,467
4,277
18,099
1,297
31,140
3,774
949
4,723
35,863
76,029
23,122
1,286
51,621
76,029
58,459
8,565
3,484
3,301
73,809
2,533
383
-
4,700
7,616
81,425
6,327
3,206
7,378
-
16,911
-
667
667
17,578
63,847
23,504
844
39,499
63,847
The accompanying notes form part of these financial statements
51 | netwealth Annual Report 2020 For the year ended 30 June 2020
Consolidated Statement of Changes in Equity
For the year ended 30 June 2020.
Consolidated Group
Note
Issued
capital
$’000
Reserves
Retained
earnings
Total
$’000
$’000
$’000
Balance at 1 July 2018
23,259
778
43,375
67,412
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
Balance at 30 June 2019
Balance at 1 July 2019
Shares issued and fully paid during the period
Total comprehensive income for the period
Amounts recognised on issue of employee
shares
245
-
-
-
23,504
23,504
167
-
-
-
-
66
-
245
34,295
34,295
-
66
-
(38,171)
(38,171)
844
844
-
-
39,499
63,847
39,499
63,847
-
167
43,661
43,661
442
-
442
Reclassification1
(549)
549
-
Dividends paid or provided for
8
-
-
(32,088)
(32,088)
Balance at 30 June 2020
23,122
1,286
51,621
76,029
1 A prior period reclassification of equity in relation to dividends recognised in 2017 on unvested shares granted to
employees
The accompanying notes form part of these financial statements.
52 | netwealth Annual Report 2020 For the year ended 30 June 2020
Consolidated Statement of Cash Flows
For the year ended 30 June 2020.
Consolidated Group for Year Ended
Note
30 June 2020
30 June 2019
$’000
$’000
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Dividends received
Interest received
Interest paid
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
Payment of lease liabilities
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.
130,698
(64,296)
33
567
(120)
(7,470)
59,412
(915)
2,757
(621)
(4)
-
1,217
31
(1,515)
(32,088)
(33,572)
27,057
58,459
85,516
53 | netwealth Annual Report 2020 For the year ended 30 June 2020
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
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 25) and its controlled entities (together referred to as ‘the Group’) for the year
ended 30 June 2020 as required by the Corporations Act 2001 was authorised for issue in accordance
with a resolution of the Directors on 18 August 2020. 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 2020:
•
•
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.
54 | netwealth Annual Report 2020 For the year ended 30 June 2020
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
55 | netwealth Annual Report 2020 For the year ended 30 June 2020
period, or in the period of the revision and future periods if the revision affects both current and future
periods.
Coronavirus (COVID-19) impact
Like the majority of businesses, we have been impacted in different ways by COVID-19. When the
crisis first hit in early March 2020, the business transitioned to remote working and enacted our
pandemic plan which evolved as the situation unfolded. Additional processes and new technologies
implemented which included a contact centre capable of operating remotely using cloud based
telephony meant other than the initial limited disruption, we have continued to operate effectively and
productively throughout the year.
As our head office is based in Victoria, we are in stage 4 lock down and will continue to work from
home for the foreseeable future. At the current time the Board and management can see no reason
why the business will not continue to operate as normal. The COVID-19 pandemic has not resulted in
additional net costs or impacted the value of any business assets. Economic uncertainties currently
prevailing around the world make it challenging to forecast the future, but Netwealth remains positive
given its strong pipeline of new and existing business and growing market share. We are aware of the
emotional impact on our staff and continue to explore and adopt wellness programs to help them
through this period.
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 16 – Leases (applicable to annual reporting period beginning on or after 1 January 2019)
The Group has adopted AASB 16 Leases from 1 July 2019, replacing AASB 117 Leases.
Under AASB 16, all leases are accounted under a single on-balance sheet model, similar to accounting
for finance leases under the old standard. Other than short-term leases of less than twelve months
and leases of low-value assets, there is a recognition of right-of-use (ROU) assets and corresponding
lease liabilities in the statement of financial position. Straight line operating lease expense recognition
is replaced with a depreciation charge for the ROU assets (included in operating costs) and an interest
expense on remaining lease liabilities (included in finance costs).
For classification within the statement of cash flows, the interest portion is disclosed in operating
activities and the principal portion of the lease payments are separately disclosed in financing
activities.
Transition
The Group has elected to apply the “modified retrospective approach” when transitioning to the new
AASB 16 Leases standard. Under this approach, the Group has not restated comparative reporting
periods.
The Group has elected to recognise the ROU asset to be equal to the lease liability, adjusted by the
amount of any prepaid or accrued lease payments relating to that lease recognised in the statement
of financial position immediately before the transition to AASB 16.
56 | netwealth Annual Report 2020 For the year ended 30 June 2020
The weighted average incremental borrowing rate applied to lease liabilities recognised in the
statement of financial position on 1 July 2019 is 3.136%.
The following table shows the operating lease commitments disclosed applying AASB 117 at 30 June
2019, discounted using the incremental borrowing rate at the date of initial application and the lease
liabilities recognised in the statement of financial position at the date of initial application.
Reconciliation of operating lease commitments to lease liabilities
Operating lease commitments at 30 June 2019
Operating lease commitments modifications
Discounted using the incremental borrowing rate at 1 July 2019
Lease liabilities recognised at 1 July 2019
$’000
3,203
(421)
(243)
2,539
Impact on Statement of Financial Position upon transition to AASB 16 on 1 July 2019 as follows:
Impact on Statement of Financial Position
Increase in new lease liabilities
Increase in new right-of-use assets
Decrease of the existing lease incentive liability
Net impact on statement of financial position
$’000
(2,539)
2,077
462
-
The following practical expedients have been applied, as permitted by the standard:
• Application of a single incremental borrowing rate for a portfolio of leases with reasonable similar
characteristics;
•
Excluding direct costs from the measurement of the right-of-use asset at the date of initial
application;
• Operating leases with a term of less than 12 months from the date of initial application is treated
as short-term leases; and
• Application of hindsight in determining lease terms where the contract contains options to
extend or terminate the lease.
At initial measurement, the Group had lease incentive liability of $0.5 million, which has been
recognised as a reduction in the ROU asset.
At transition on 1 July 2019, the Group reassessed the lease terms for each lease held and determined
that the existing Melbourne office leases would be terminated on 1 September 2020.
57 | netwealth Annual Report 2020 For the year ended 30 June 2020
Impact of AASB 16 adoption on earnings
Adoption of the new standard results in higher expense in the earlier years of the lease and lower in
later years due to the interest expense calculated on the remaining balance of the lease liability
compared to straight-lined lease expenses under AASB 117.
Adoption of the new standard did not materially change the NPBT with the impact during the financial
year as follows:
Impact on Statement of Profit or Loss on Adopting AASB 16
Decrease in operating leases expense
Increase in interest expense
Increase in depreciation expense
Decrease in net profit before tax
$’000
(1,506)
121
1,377
(8)
In 2H2020 Netwealth changed plans in relation to its leased premises, resulting in the remeasurement
of the lease liability from 1 January 2020. This change has resulted in additional interest and
depreciation expense being charged in the 2H2020. Refer to Note 13 regarding the remeasurement of
lease liability.
AASB Interpretation 23 – Uncertainty over Income Tax Treatment (applicable to annual reporting
period beginning on or after 1 January 2019)
Interpretation 23 clarified the application of the recognition and measurement criteria in AASB 112
Income Taxes in relation to uncertainty over income tax treatments. For any uncertain tax position,
they must be all individually assessed for whether it is probable that the taxation authority will accept
the position.
When it is not probable the taxation authority will accept the tax position, the uncertainty must be
reflected in determining the relevant taxable profit or loss, tax bases, unused tax losses and unused
tax credits or tax rates. The amount would either be based on:
•
•
The single most likely amount; or
The sum of the probability weighted amounts in a range of possible outcomes, which ever best
estimates reflects the impact of the uncertainty.
As more information about the nature of the tax treatment becomes available, the amounts are
reassessed.
Interpretation 23 is effective for the Group’s financial reporting period beginning on 1 July 2019. The
Group’s existing recognition and measurement of accounting policies along with accounting related
judgements were in alignment with those required by Interpretation 23, hence no transition
adjustment to retained earnings was required.
58 | netwealth Annual Report 2020 For the year ended 30 June 2020
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.
4 Revenue
Revenue and other income
Revenue
Platform revenue
Total platform revenue
Other income
Net gain on disposal of investments
Unrealised investment (loss)/gain
Dividends and distributions received
Interest received
Cost of capital recovery
Other Income
Total other income
Total income
Consolidated Group
30 June 2020
30 June 2019
$’000
$’000
121,345
121,345
40
(19)
52
567
1,908
17
2,565
96,369
96,369
73
1
31
846
1,438
12
2,401
123,910
98,770
59 | netwealth Annual Report 2020 For the year ended 30 June 2020
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/loss 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/decreased 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
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
Non recurring client rectification costs and legal expenses
Total other operating expenses
60 | netwealth Annual Report 2020 For the year ended 30 June 2020
Consolidated Group
30 June 2020
30 June 2019
$’000
34,741
2,915
446
3,446
41,548
$’000
27,626
2,414
66
2,238
32,344
Consolidated Group
30 June 2020
30 June 2019
$’000
10,643
-
10,643
$’000
9,707
1,121
10,828
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.
Rent expense
Rent expense are recognised when rental agreements are not considered Leases under AASB16. This will
include:
•
•
rental agreement where it does not create a transfer of goods or services to the lessee; or
rental agreement is considered short term which has a lease term less than 12 months.
Other occupancy expenses
Occupancy expenses are not capitalised as part of leases and are expensed as they are incurred.
61 | netwealth Annual Report 2020 For the year ended 30 June 2020
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%
Other non-allowable/assessable items
Income tax expense attributable to entity
c) The components of deferred tax assets comprise:
Expenditure deductible over 5 years
Lease liability
Temporary differences
d) The components of deferred tax liabilities comprise:
Property, equipment and intangible assets
Right-of-use assets
Temporary differences
Consolidated Group
30 June 2020
30 June 2019
$’000
$’000
18,203
893
(12)
19,084
18,824
260
19,084
13,055
1,826
1
14,882
15,024
(142)
14,882
Consolidated Group
30 June 2020
30 June 2019
$’000
$’000
2,053
1,522
1,902
5,477
189
1,425
56
1,670
3,538
-
1,625
5,163
445
-
18
463
62 | netwealth Annual Report 2020 For the year ended 30 June 2020
Effective tax rate
Consolidated Group
30 June 2020
30 June 2019
30.4%
39.7%
The effective tax rate for FY2019 included a capital tax loss recognised after the election to form a
consolidated tax group. Excluding this, the effective tax rate 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 2019
Expenditure deductible
over 5 years
Provision
Property, plant &
equipment and
intangible asset
Leases
Other temporary
differences
4,838
(1,299)
1,496
820
(623)
(203)
198
6,526
3,539
1,290
(445)
-
316
(206)
(820)
178
203
118
(1,826)
(1,485)
277
202
97
16
Balance at 30 June 2020
4,700
(893)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
3,539
1,290
-
(445)
-
316
4,700
2,054
1,567
(243)
97
332
3,807
63 | netwealth Annual Report 2020 For the year ended 30 June 2020
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.
64 | netwealth Annual Report 2020 For the year ended 30 June 2020
7 Key Management Personnel Compensation
Short term employee benefits
Post-employment benefits
Share based payments
Key management personnel compensation
Consolidated Group
30 June 2020
30 June 2019
$’000
1,694
84
111
1,889
$’000
1,556
94
22
1,672
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 35 to 48 of the Annual Report.
8 Dividends
Dividends paid or declared by the Company in the year ended 30 June 2020 were:
Cents Per Share
Total Amount
% Franked Date of Payment
2020
Interim 2020 ordinary
Total dividend
2019
Final 2019 ordinary
Total dividend
$’000
16,401
16,401
15,687
15,687
6.90
6.90
6.60
6.60
100%
26 Mar 2020
100%
26 Sep 2019
During the year, the Company declared on 18 February 2020 and paid on 26 March 2020 a fully franked
dividend of 6.90 cents per share representing a total dividend of $16,401,000. There is no dividend
reinvestment plan.
Franking credits
Franking credits available as at 30 June 2020 to shareholders of the Company amount to $8,526,263
(2019: $14,722,573) at the 30 percent corporate tax rate.
Subsequent events
Since the end of the financial year, the Company declared the following dividend on 18 August 2020.
The dividend has not been provided for as at 30 June 2020 and there are no tax consequences.
65 | netwealth Annual Report 2020 For the year ended 30 June 2020
Cents Per
Share
Total Amount
$’000
% Franked Date of Payment
7.80
7.80
18,540
100%
24 Sep 2020
18,540
Final 2020 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 exercisable 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 2020
30 June 2019
Cents per Share
Cents per Share
18.37
-
18.37
14.81
(0.38)
14.43
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 2020
30 June 2019
$’000
43,661
-
43,661
$’000
35,201
(906)
34,295
30 June 2020
30 June 2019
Number
Number
Weighted average number of issued ordinary shares
237,690,475
237,679,816
66 | netwealth Annual Report 2020 For the year ended 30 June 2020
10 Trade and Other Receivables
Products account receivables
Trade and sundry receivables
Total current receivables
Total trade and other receivables
Consolidated Group
30 June 2020
30 June 2019
$’000
10,191
133
10,324
10,324
$’000
8,336
229
8,565
8,565
Trade and other receivables classified as financial assets*
10,324
8,565
* 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 2020
30 June 2019
$’000
1,471
2,752
188
4,411
$’000
1,376
1,950
158
3,484
67 | netwealth Annual Report 2020 For the year ended 30 June 2020
12 Financial Assets
FVTPL* financial assets
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 2020
30 June 2019
$’000
1,186
1,186
$’000
3,301
3,301
Consolidated Group
30 June 2020
30 June 2019
$’000
$’000
16
1,108
62
1,186
16
1,114
2,171
3,301
* Fair Value through Profit or Loss (FVTPL)
# The Group has received the final deferred payment of $2.1 million in April 2020 (minimum guaranteed amount)
from the sale of its subsidiary operations in 2018.
13 Leases
Right-of-use assets
Balance as at 30 June 2019
Change on initial applications of AASB 16
Balance as at 1 July 2019
Depreciation
Remeasurement of Head Office lease on 1 January 2020
Total right-of-use assets as at 30 June 2020
Property
$’000
-
2,077
2,077
(1,377)
4,048
4,748
68 | netwealth Annual Report 2020 For the year ended 30 June 2020
Lease liability
Balance as at 30 June 2019
Change on initial applications of AASB 16
Balance as at 1 July 2019
Lease payments
Interest on leases
Remeasurement of Head Office lease on 1 January 2020
Total lease liability as at 30 June 2020
Current
Non-current
Total lease liability as at 30 June 2020
Property
$’000
-
2,539
2,539
(1,637)
121
4,048
5,071
1,297
3,774
5,071
The weighted average incremental borrowing rate applied to lease liabilities recognised in the
statement of financial position throughout FY2020 is 3.133%.
Undiscounted lease payments to be paid
Year 1
Year 2
Year 3
Year 4
Year 5
> 5 years
Total
Property
$’000
1,437
1,423
1,477
1,044
-
-
5,381
Subsequent remeasurement of Leases
The impact of COVID-19 has changed the occupancy requirements for Netwealth. Due to government
restrictions and likely permanent changes to working behaviours going forward, management has
deferred its plans to move to new premises and intends to instead opt to exercise its available option
to extend the existing lease on Collins Street by 3 years to 31 March 2024.
As a result of the changing circumstances, Netwealth has remeasured its leases under AASB16 on the
following basis:
•
Exercise the extension option for the existing Melbourne lease; and
69 | netwealth Annual Report 2020 For the year ended 30 June 2020
• No rental increase negotiated for FY2021 on Melbourne lease.
Impact on Statement of Financial Position upon transition to AASB 16 on 1 January 2020 as follows:
Impact on Statement of Financial Position
Increase in new lease liabilities
Increase in new right-of-use assets
Net impact on statement of financial position
$’000
(4,048)
4,048
-
Short-term leases
Payments associated with short-term leases are directly expensed within ‘Occupancy expenses’ in the
consolidated income statement. Short-term leases are leases with a contractual term of 12 months or
less. Netwealth has no low-value assets. For the year ended 30 June 2020, $0.2 million of short-term
lease payments has been recognised in the income statement.
Key Accounting Policies
At the lease commencement date, the Group recognises the ROU assets with the equivalent lease liability
measured at cost less incentives received at commencement date. The ROU depreciates in a straight line
over the lease term. The lease liability is measured at the present value of the lease’s future lease payments
from commencement date, discounted using the Group’s incremental borrowing rate.
Lease liability is subsequently remeasured when there is a change in an index, rate used, residual guarantee,
lease term or termination penalties. When it is remeasured, the Group’s incremental borrowing rate is also
used to update the discount rate, and a corresponding adjustment is also made to the carrying amount of the
ROU asset.
Lease which are less than 12 months are treated as short term leases and will be directly expensed to the
profit and loss.
In determining the lease term, management considers all facts and circumstances that create and economic
incentive to exercise and extension option. Such option is only included in the lease term if the lease is
14 Property and Equipment
Carrying amount of:
Leasehold improvements
Equipment
Total property and equipment
Consolidated Group
30 June 2020
30 June 2019
$’000
$’000
309
1,294
1,603
1,643
890
2,533
70 | netwealth Annual Report 2020 For the year ended 30 June 2020
Cost
Balance at 30 June 2018
Additions
Disposals
Balance at 30 June 2019
Additions
Disposals
Balance at 30 June 2020
Accumulated depreciation
Balance at 30 June 2018
Depreciation expense
Disposals
Balance at 30 June 2019
Depreciation expense
Disposals
Balance at 30 June 2020
Net carrying amount
At 30 June 2019
At 30 June 2020
Leasehold
Improvements
$’000
Equipment
$’000
3,373
101
(363)
3,111
17
-
3,128
(1,296)
(281)
109
(1,468)
(1,351)
-
(2,819)
2,337
491
(152)
2,676
898
(550)
3,024
(1,555)
(383)
152
(1,786)
(469)
525
(1,730)
Leasehold
Improvements
$’000
Equipment
$’000
1,643
309
890
1,294
Total
$’000
5,710
592
(515)
5,787
915
(550)
6,152
(2,851)
(664)
261
(3,254)
(1,820)
525
(4,549)
Total
$’000
2,533
1,603
71 | netwealth Annual Report 2020 For the year ended 30 June 2020
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.
72 | netwealth Annual Report 2020 For the year ended 30 June 2020
15
Intangible Assets
Carrying amount of:
Non-contractual customer relationships
Software and website developments costs
Total intangibles
Cost
Balance at 30 June 2018
Additions
Disposals*
Balance at 30 June 2019
Additions
Disposals
Balance at 30 June 2020
Consolidated Group
30 June 2020
30 June 2019
$’000
$’000
180
117
297
Customer
relationship
$’000
Software and
website
$’000
300
-
-
300
-
-
300
5,276
149
(5,080)
345
4
(52)
297
240
143
383
Total
$’000
5,576
149
(5,080)
645
4
(52)
597
*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 2018
Amortisation
Disposal*
Balance at 30 June 2019
Amortisation
Disposals
Balance at 30 June 2020
-
(60)
-
(60)
(60)
-
(120)
(5,233)
(5,233)
(35)
5,066
(202)
(30)
52
(180)
(95)
5,066
(262)
(90)
52
(300)
*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.
73 | netwealth Annual Report 2020 For the year ended 30 June 2020
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%
74 | netwealth Annual Report 2020 For the year ended 30 June 2020
16 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 2020
30 June 2019
$’000
$’000
6,786
595
86
7,467
5,914
413
-
6,327
Total financial liabilities at amortised cost
7,467
6,327
Less:
GST payable / (receivables)
Total financial liabilities as trade and other payables
595
6,872
413
5,914
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.
Cash flows are presented on a gross basis. The GST component of operating cash flows is included in receipts
from customers or payments to suppliers.
17 Provisions
Employee benefits
Other provisions
Total provisions
Current
Non-current
Total provisions
Consolidated Group
30 June 2020
30 June 2019
$’000
5,013
213
5,226
4,277
949
5,226
$’000
3,635
238
3,873
3,206
667
3,873
75 | netwealth Annual Report 2020 For the year ended 30 June 2020
Analysis of provisions consolidated
Group
Balance at 30 June 2019
Additional amounts raised during the
year
Amount used or reversed during the
year
Balance at 30 June 2020
Consolidated Group
Other Provisions
Total Provisions
$’000
$’000
238
6
(31)
213
3,873
3,416
(2,063)
5,226
Employee
Benefits
$’000
3,635
3,410
(2,032)
5,013
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 2020
30 June 2019
$’000
$’000
2,531
1,533
4,064
949
949
5,013
1,692
1,276
2,968
667
667
3,635
76 | netwealth Annual Report 2020 For the year ended 30 June 2020
16.3 Other provisions
A provision of $0.1 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.
18
Issued Capital
Issued capital comprised:
237,694,996 Fully Paid Ordinary shares
(June 2019: 237,679,816)
6,177,500 Performance shares
(June 2019: 6,177,500)
Total share capital
Restricted shares
Reorganisation reserve
Issued capital
Consolidated Group
30 June 2020
30 June 2019
$’000
879,530
$’000
879,415
2,937
2,937
882,467
(3,310)
882,352
(3,340)
(856,035)
(855,508)
23,122
23,504
The Company 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.
77 | netwealth Annual Report 2020 For the year ended 30 June 2020
Consolidated group
30 June 2020
30 June 2019
Number
Number
Fully Paid Ordinary shares
At the beginning of the reporting period
237,679,816
237,679,816
Shares issued during the year
15,180
-
At the end of the reporting period
237,694,996
237,679,816
Shares with value
Restricted shares
235,581,149
235,531,493
2,113,847
2,148,323
On 17 October 2019, 15,180 ($114,676) Fully Paid Ordinary shares were issued as part of the Employee
Gift Offer.
Consolidated group
30 June 2020
30 June 2019
Number
Number
Performance shares
At the beginning of the reporting period
6,177,500
6,457,500
Shares issued during the year
Shares cancelled during the year
At the end of the reporting period
Restricted shares
-
-
-
(280,000)
6,177,500
6,177,500
6,177,500
6,177,500
The Company has issued share capital amounting to 237,694,996 Ordinary shares (2019: 237,679,816
shares) of no par value and 6,177,500 Performance shares (2019: 6,177,500 shares) of no par value.
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 shareholders are entitled to
attend meetings but 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.
78 | netwealth Annual Report 2020 For the year ended 30 June 2020
19 Reserves
Share reserve
Consolidated Group
30 June 2020
30 June 2019
$’000
1,286
$’000
844
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.
20 Controlled Entities
Country of
Incorporation
Percentage Owned
30 June 2020
30 June 2019
%
%
Subsidiaries of Netwealth Group Limited
Netwealth Holdings Limited
Netwealth Superannuation Services Pty Ltd
Wealthtech Pty Ltd
Subsidiaries of Netwealth Holdings Limited
Netwealth Investment Limited
Netwealth Group Services Pty Ltd
Netwealth Fiduciary Services Pty Ltd*
*Previously known as Netwealth Advice Group Pty Ltd
Australia
Australia
Australia
Australia
Australia
Australia
100
100
100
100
100
100
100
-
-
100
100
100
Netwealth Advice Group Pty Ltd changed its name to Netwealth Fiduciary Services Pty Ltd on 3
October 2019.
Netwealth Superannuation Services Pty Ltd and Wealthtech Pty Ltd are new subsidiaries established
during the year, neither are operating as at 30 June 2020.
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 55 on the
‘Principles of Consolidation’.
79 | netwealth Annual Report 2020 For the year ended 30 June 2020
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.
Under the RSE licence 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 2020, this ORFR requirement was $29.0 million. Combined with ASIC’s RG166 capital
requirements for Australian Financial Services Licensees, the licensed entity was also required to
maintain an additional $10.2 million in net tangible assets as at 30 June 2020. 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
2020, 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:
Consolidated Group
30 June 2020
30 June 2019
$’000
$’000
85,516
10,324
1,186
97,026
7,467
7,467
58,459
8,565
3,301
70,325
6,327
6,327
Financial assets
Cash and cash equivalents
Trade and other receivables
Financial assets
Total financial assets
Financial liabilities
Trade and other payables
Total financial liabilities
80 | netwealth Annual Report 2020 For the year ended 30 June 2020
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.
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.
81 | netwealth Annual Report 2020 For the year ended 30 June 2020
Consolidated Group
Profit (Before Tax)
$’000
Equity
$’000
Year ended 30 June 2020
+/- 1% interest rates (interest income)
+538/-538
+377/-377
Year ended 30 June 2019
+/- 1% interest rates (interest income)
+488/-488
+342/-342
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.
82 | netwealth Annual Report 2020 For the year ended 30 June 2020
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
318
10,006
10,324
229
8,336
8,565
2
-
2
9
-
9
-
-
-
10
-
10
24
-
24
2
-
2
292
10,006
10,298
208
8,336
8,544
-
-
-
-
-
-
2020
Trade and term
receivables
Other
receivables
Total
2019
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.
83 | netwealth Annual Report 2020 For the year ended 30 June 2020
Within 1 Year
1 to 5 Years
Over 5 Years
$’000
$’000
$’000
2020
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
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
6,872
6,872
85,516
10,324
1,186
97,026
90,154
5,914
5,914
58,459
8,565
3,301
70,325
64,411
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Total
$’000
6,872
6,872
85,516
10,324
1,186
97,026
90,154
5,914
5,914
58,459
8,565
3,301
70,325
64,411
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.
84 | netwealth Annual Report 2020 For the year ended 30 June 2020
Net Carrying Value
Net Fair Value
2020
$’000
85,516
10,324
1,186
-
2019
$’000
58,459
8,565
3,301
-
2020
$’000
85,516
10,324
1,186
-
2019
$’000
58,459
8,565
3,301
-
Financial assets
Cash & cash equivalent
Trade & other receivables
FVTPL financial assets
Loans & receivables
Total financial assets
97,026
70,325
97,026
70,325
Financial liabilities
Trade & other payables
Total financial liabilities
6,872
6,872
5,914
5,914
6,872
6,872
5,914
5,914
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.
85 | netwealth Annual Report 2020 For the year ended 30 June 2020
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
2020
Financial assets
FVTPL financial assets:
Listed investments
Other
Total FVTPL financial assets
2019
Financial assets
FVTPL financial assets:
Listed investments
Other
Total FVTPL financial assets
1,003
-
1,003
1,021
-
1,021
-
-
-
-
-
-
-
182
182
-
2,280
2,280
1,003
182
1,185
1,021
2,280
3,301
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 its subsidiary operations in 2018 with the reconciliation shown in the table
below:
86 | netwealth Annual Report 2020 For the year ended 30 June 2020
Reconciliation of Level 3 fair value measurements
Unlisted
Investments
Deferred
Receivables*
$’000
$’000
2020
Opening balance
Total gains or losses
Purchases
Disposal
Closing balance
2019
Opening balance
Total gains or losses
Purchases
Disposal
Impairment
Closing balance
160
22
3
(3)
182
156
5
1
(2)
-
160
2,120
-
-
(2,120)
-
7,016
-
-
(3,990)
(906)
2,120
Total
$’000
2,280
22
3
(2,123)
182
7,172
5
1
(3,992)
(906)
2,280
*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.
2020
2019
Gross
Exposure
$’000
ECL Allowance
$’000
Gross
Exposure
$’000
ECL Allowance
$’000
10,191
25,201
1,186
36,578
4
25
21
50
8,505
12,932
3,301
24,738
4
13
14
31
Trade receivables^
Intercompany loans~
Other#
Total
^ 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 deferred payment received on sale of its subsidiary operations in 2018.
87 | netwealth Annual Report 2020 For the year ended 30 June 2020
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.
88 | netwealth Annual Report 2020 For the year ended 30 June 2020
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
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 39 to 40
which applies to performance shares and has been in effect since 2013.
The Group has adopted the New LTI Scheme described on pages 40 to 41 under which the Group has
offered options over ordinary shares to senior and key employees.
It is at the discretion of the directors which employees will be issued invitations to apply for shares
pursuant to the New LTI Scheme and the number of shares subject to the invitation.
89 | netwealth Annual Report 2020 For the year ended 30 June 2020
Performance shares (Pre-Listing LTI Scheme)
The Performance shares give the participant the right to convert to fully paid ordinary shares in
Netwealth Group Ltd upon meeting specific performance hurdles. These Performance shares carry
no dividend or voting rights until the vest and converts to fully paid ordinary shares.
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
The following vesting conditions apply to all 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’;
In each of the four financial years ending with FY2020, the holder must achieve behaviour ratings
of ‘Effectively displays’; and
In FY2020, the Group must achieve an EPS equal to or more than the tiered EPS hurdle of $0.1143
to vest 70% of holdings, capping at 100% if EPS of $0.1571 is achieved.
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.
Ordinary share options (New LTI Scheme)
In the FY2019 annual report, it was disclosed that the Board has adopted a new LTI scheme which will
apply from FY2020 onwards. Under the new 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.
During the half year, the Board offered options over ordinary shares to senior and key employees
including Matthew Heine and Grant Boyle resulting in the Group issuing 1,046,377 ordinary share
options to 115 employees:
90 | netwealth Annual Report 2020 For the year ended 30 June 2020
Series Grant date
Number
Plan
Expiry Date
Exercise
Price
Fair Value at
Grant Date
Series
14
17 October 2019
914,004
Options - LTI
30 June 2022
$7.5544
$2.73
Series
15
12 November
2019
132,373
Options - LTI
30 June 2022
$7.5544
$3.00
The following vesting conditions apply to the Options:
•
•
•
•
The holder must be either continuously employed by or hold office continually with until 30 June
2022;
In each of the three financial years ending with the FY2022, the holder must achieve performance
ratings of ‘effectively displays’ and achieve all minimum KPI’s as detailed in the performance plan
applicable for the relevant year;
50% of Options are subjected to achieving a Total Shareholder Return relative to the Group’s
ranking in the Comparator Group (being the ASX 300 Diversified Financial Index);
50% of Options are subjected to the Group achieving the compound average annual growth rate
EPS over the vesting period. It is tiered hurdles with a minimum 17.5%pa to vest 4.5%, capping at
50.0% once 22.5%pa is achieved.
22.2 Share options
No share options were exercised during the year (2019: nil). There are no outstanding share options at
the end of the year (2019: nil).
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.
91 | netwealth Annual Report 2020 For the year ended 30 June 2020
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 35 to 48 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 2020
30 June 2019
$’000
$’000
-
-
12,000
12,000
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
92 | netwealth Annual Report 2020 For the year ended 30 June 2020
• 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.
Management fees:
Management fee revenue
Distributions:
Distribution income
Consolidated Group
30 June 2020
30 June 2019
$
$
6,686,765
4,334,624
1,246
792
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 2020
30 June 2019
$
$
16,623
17,430
1,268,859
1,247,970
93 | netwealth Annual Report 2020 For the year ended 30 June 2020
24 Cash Flow Note
Reconciliation of cash flow from operations with profit after income tax
Profit for the year
Income tax expense recognised in profit or loss
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
Consolidated Group
30 June 2020
30 June 2019
$’000
43,661
19,084
3,287
-
578
19
6
25
(40)
$’000
34,295
14,882
759
906
66
-
(47)
268
(73)
66,620
51,056
(Increase)/decrease in trade & other receivables
(1,765)
(2,159)
(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
(927)
1,607
1,347
66,882
(7,470)
59,412
(975)
1,641
(154)
49,409
(8,652)
40,757
94 | netwealth Annual Report 2020 For the year ended 30 June 2020
Reconciliation of liabilities arising from financing activities
30 June 2019
Cash Flows
Non-Cash Changes
30 June 2020
$’000
Acquisitions New Leases
-
-
(1,515)
(1,515)
-
-
6,586
6,586
$’000
5,071
5,071
Lease liabilities
Total liabilities 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).
95 | netwealth Annual Report 2020 For the year ended 30 June 2020
25 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
Parent Entity
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
30 June 2020
30 June 2019
$’000
$’000
58
20,429
1,496
43,546
65,529
31,199
31,199
121
11,064
2,245
43,576
57,006
22,710
22,710
34,330
34,296
879,158
879,011
(835,033)
(834,889)
(9,795)
34,330
32,121
32,121
(9,826)
34,296
37,238
37,238
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 2020, the parent entity had not entered into any contractual
commitments for the acquisition of property and equipment or any operating leases (2019: nil).
Contingent liabilities: At 30 June 2020, the parent entity does not have any contingent liabilities
(2019: nil).
96 | netwealth Annual Report 2020 For the year ended 30 June 2020
26 Auditor’s Remuneration
Fees payable for audit and review of financial reports
Group
Subsidiaries
Total audit and review of financial reports
Statutory assurance services
Audit and review of the Funds
Audit on Internal Controls – GS007
Audit of IDPS and Investor Statements
Total fees paid to group auditor
Consolidated Group
30 June 2020
30 June 2019
$’000
$’000
101
40
141
19
157
84
24
425
94
48
142
18
84
75
22
341
27 Events Occurring after Reporting Date
On the 18 August 2020, the Company declared a fully franked final divided for FY2020 of 7.80 cents per
share (total dividend of $18,540,210). The final dividend is payable on 24 September 2020.
In the opinion of the Board, there are no other matters or circumstances which have arisen between
30 June 2020 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.
97 | netwealth Annual Report 2020 For the year ended 30 June 2020
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
18 August 2020
98 | netwealth Annual Report 2020 For the year ended 30 June 2020
Independent Auditor’s Review Report
99 | netwealth Annual Report 2020 For the year ended 30 June 2020
100 | netwealth Annual Report 2020 For the year ended 30 June 2020
101 | netwealth Annual Report 2020 For the year ended 30 June 2020
102 | netwealth Annual Report 2020 For the year ended 30 June 2020
Shareholder Information
Ordinary Shares (ASX Listed)
The shareholder information set out below was applicable at 5 August 2020.
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
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
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