Release Date: August 22, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Centrepoint Alliance Ltd (ASX:CAF, Financial) reported a strong financial performance with EBITDA of $9.1 million, up 20% from the previous year.
- The company achieved the highest net growth with 38 new advisers, doubling the nearest competitor.
- The acquisition of Financial Advice Matters contributed $3.6 million in revenue and $1 million in EBITDA.
- Net Promoter Score reached an all-time high of 41, indicating high customer satisfaction.
- Centrepoint Alliance Ltd (ASX:CAF) launched new iQ Managed Portfolios and is on track to launch the IconiQ platform, expanding its product offerings.
Negative Points
- Cash at year-end was $12.2 million, down from the prior year due to the Financial Advice Matters acquisition.
- The company incurred $0.9 million in one-off costs, including $600,000 in employment redundancies and $300,000 in acquisition-related costs.
- Net profit before tax was $5.6 million, down $1 million from the previous year due to the absence of asset sales.
- The final cessation of platform rebates resulted in a $0.9 million revenue reduction.
- Employee entitlements increased by $0.5 million, and there was a $1.5 million increase in provisions, including $1.3 million for deferred consideration related to the FAM acquisition.
Q & A Highlights
Q: You flagged an underlying EBITDA of circa $10 million in FY25. Should we expect a similar percentage increase in the net profit before tax?
A: On the basis of cash from operations and the increase in EBITDA being cash from operations, if you align that to the NPBT, you get a consistent alignment. So, intuitively, yes, you can expect a similar percentage increase.
Q: Does having salaried advisors not create a conflict of interest with the client base?
A: In fact, it's the opposite. Many businesses in our network see it as a positive. They approach us about potential acquisitions or partnerships, and we have ongoing discussions. Additionally, running a model advice practice allows us to showcase efficient technology and business processes, which has been a net positive.
Q: Can you provide more details on the financial impact of the FAM acquisition?
A: The FAM acquisition contributed $3.6 million in revenue and $1 million in EBITDA for the seven months included in these results. We expect an annualized run rate of $1.5 million to $1.7 million in EBITDA, with FAM earning around a 28% EBITDA margin, on track to reach 30%.
Q: What are the key drivers behind the 20% increase in EBITDA to $9.1 million?
A: The increase was mainly driven by the FAM acquisition and organic license fee growth. We also had $0.9 million in one-off costs, including $600,000 in employment redundancies and $300,000 in acquisition-related costs.
Q: How is the new IconiQ platform expected to impact your business?
A: The IconiQ platform, set to go live in October for investments and by the end of the year for superannuation, is expected to significantly enhance our service offerings. Partnering with FNZ, the platform will offer a range of account structures, broad investment options, and low fees, making it highly competitive in the market.
Q: What is the outlook for adviser recruitment given the current market conditions?
A: We believe the market disruption due to recent M&A activities will create a lucrative recruitment environment over the next 12 to 18 months. With a strong presence in both licensed and self-licensed segments, we are well-positioned to benefit from this trend.
Q: Can you elaborate on the growth strategy for the salaried advice business?
A: The salaried advice business, bolstered by the FAM acquisition, is expected to contribute roughly 30% of total EBITDA. We aim to grow this segment through further acquisitions and book buys, given its higher margins compared to the traditional licensee business.
Q: How has the transition to an annuitized revenue model impacted your financials?
A: Despite a 41% reduction in non-controllable platform rebates, we've seen a 9% uplift in group revenue over the last three years. The transition to an annuitized, more controllable revenue profile has resulted in a more sustainable business model.
Q: What are the key financial metrics that showcase your expense management effectiveness?
A: Our expense management is reflected in metrics such as a 10% reduction in both subscriptions and general administration costs, and a 2% decrease in expenses excluding the FAM acquisition. This disciplined approach has helped improve our EBITDA margin from 12% to 25%.
Q: What are the future projections for the lending business?
A: The lending business grew by 22% to $1.8 million in FY24, with EBITDA increasing by 33%. With only 8% of our network currently using the Lending as a Service initiative, there is significant potential for growth as we increase penetration and productivity.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
