23 August FY2018 Results Presentation and Strategy Update

Transcription

1 23 August 2018 FY2018 Results Presentation and Strategy Update

2 DISCLAIMER This presentation is for general information purposes only and should be read in conjunction with the Annual Financial Report and the Appendix 4E lodged with the Australian Securities Exchange by Centrepoint Alliance Limited (ASX:CAF) on 23 August This presentation does not provide recommendations or opinions in relation to specific investments or securities. This presentation has been prepared in good faith and with reasonable care. Neither CAF nor any other person makes any representation or warranty, express or implied, as to the accuracy, reliability, reasonableness or completeness of the contents of this presentation (including any projections, forecasts, estimates, prospects and returns, and any omissions from this presentation. To the maximum extent permitted by law, CAF and its respective officers, employees and advisers disclaim and exclude all liability for any loss or damage (whether or not foreseeable) suffered or incurred by any person acting on any information (including any projections, forecasts, estimates, prospects and returns) provided in, or omitted from, this presentation or any other written or oral information provided by or on behalf of CAF. It is not intended that this presentation be relied upon and the information in this presentation does not take into account your financial objectives, situations or needs. Investors should consult with their own legal, tax, business and/or financial advisers in connection with any investment decision. All numbers are as at 30 June 2018 unless otherwise stated. Numbers may not add up due to rounding. 2

3 FY18 Summary $5.5m EBITDA excluding one off expenditure up 4% from FY17 ($6.4m) in one-off adjustments relating to legacy claims, restructure and Royal Commission related activities ($6.3m) statutory loss after tax impacted by one off adjustments and a change to the deferred tax asset $6.4m Cashflow from operation, an 18% increase, highlighting strength in the underlying business Capital management 8m executive shares to be cancelled*; no final dividend declared $4.1b in funds under Management and Administration up 11% from FY17 Ongoing adviser recruitment 37 High Quality firms Recruited (26 to Corporate License and 11 to Self Licence) Stronger adviser and employee engagement NPS above industry average and solid employment satisfaction Neos Life Product Launch June 2018 Launched Technology Solutions Hub to focus technology as a core enabler of our future business model *Subject to shareholder approval Sources: NPS data Core Data Survey, May 2018; Employee engagement scores internal Employee Engagement Survey, May

4 Strategy update 4

5 My priorities since joining as CEO in April Stakeholder engagement including advisers, shareholders, our people, industry partners and regulators Completed portfolio review of all business units, with strategic options assessed Initiated Strategic Refresh program to review all operating units and market positioning Completed organisational re-structure to simplify operations and align to future strategy Against a backdrop of the Royal Commission and the significant industry uncertainty and disruption unfolding 5

6 Significant, multi-faceted disruption presents challenges and opportunities (Baby) Boomers: those born between 1946 and 1965 HENRYs: High Earners Not Rich Yet 6

7 Other areas of the wealth value chain have experienced significant change, where to for the traditional dealer group? Advice FOFA reforms, enshrining of best interest duty Historical product revenue and commission incentive structures removed with some grandfathered FASEA launched significant uplift in education standards Emerging fin-tech and robo-advice new entrants Product Margin pressure across Asset Management Rise of passive investment thematic / active boutiques New investment structures: ETFs, MDAs, SMAs, LICs Insourcing of investment capability within larger Industry Superannuation Funds Platform Consolidation and scale winning Technology innovation with new entrants and existing players making large capital investments Significant margin pressure and unwinding of historical badge arrangements Large SMSF market remains Dealer group Traditional role of the dealer group as an aggregator for aligned distribution increasingly less relevant Significant consolidation and now disaggregation of licenses and move to self-licensing Industry structural changes, with limited evolution of actual dealer group business models 7

8 There remains a large and attractive market for the right network of advisers >2x 3million Australians intend to turn to a financial adviser for advice within 2 years Underlying need for financial advice remains increase in licenses granted in 2016 & 17 than in the previous 2 years; driven by self-licensed practices 10% decline in advisers at the big six in the 12 months to July /3 Generation transition: up to 1/3 of advisers could exit the industry within 5 yrs, driven by demographics and new professional standards requirements This transition will require support Advisers are moving away from the big six Note: Big six refers to the four major banks and AMP and IOOF Sources: Estimation of demand for financial advice Investment Trends 2017 Financial Advice Report; Adviser movements - analysis of ASIC financial adviser register, data as of 1 July 2017 and 1 July 2018; Increase in licensees analysis of ASIC licensee register, data as of 16 August 2018; Adviser exits ABC News interview of industry expert; 26 June

9 Centrepoint is well positioned in a changing industry environment Product manufacturer owned # of advisers Other # of advisers 10% decline in advisers at the big six in the 12 months to July 2018 Note: AAP network includes advisers of self-licensed practices to whom Centrepoint offers some services Sources: Adviser numbers analysis of ASIC financial adviser register, data as of 1 July 2018 excluding Dover Financial advisers and Wyndham Vacation Clubs; Centrepoint data >2x increase in licenses granted in 2016 & 17 than in the previous 2 years; driven by self-licensed practices 9

10 Centrepoint s advice network 10

11 Centrepoint solves two categories of problems for financial advisers A typical SME A typical advice firm employs less than 20 staff engages > 15 vendors works with 9 regulators finds cashflow management to be the biggest of many pain points Running a small to medium sized business Operating as a financial adviser employs on average 8 advisers with each adviser servicing ~250 clients engages > 15 vendors works with 6 regulators needs training, technical and compliance support ~200k SMEs in financial and insurance services ~34k of which have less than 20 staff 2,911 licensees 24,606 advisers Note: SMEs refer to businesses with 199 or less employees and includes sole traders (as per ABS definition) Sources: SMEs in Financial and Insurance Services ABS Counts of Australian Businesses, including Entries and Exits (June 2017); Adviser, licensee, average adviser numbers analysis of ASIC financial adviser register, data as of 1 July 2018 excluding Dover Financial Advisers and Wyndham Vacation Clubs; Client numbers - Business Health Insights Survey June

12 Centrepoint services clients needs as financial advisers and business owners Cashflow tools HR/legal support Business coaching Governance & Compliance New AFSL setup Responsible manager training Acquisition and succession Business management services Licensee services Licensee reviews Peer group facilitation Running a small to medium sized business Operating as a financial adviser File audits Website design and development Advice technology Client segmentation and pricing Client growth services Client marketing Technical support Advice services Training/ webinars Client-facing advice tools Lead generation Research services Adviser education 12

13 Centrepoint s future offer will have 4 key elements BUSINESS MANAGEMENT SERVICES LICENSEE SERVICES CLIENT GROWTH SERVICES ADVICE SERVICES 13

14 Centrepoint s future offer will have 4 key elements BUSINESS MANAGEMENT SERVICES BUSINESS COACHING ACQUISITION AND SUCCESSION PARTNERED SERVICES DASHBOARD REPORTING HR SUPPORT LEGAL SUPPORT PEER GROUP FACILITATION LICENSEE SERVICES NEW AFSL SETUP GOVERNANCE AND COMPLIANCE RESPONSIBLE MANAGER TRAINING LICENSEE REVIEWS FILE AUDITS ADVICE POLICY & PROCEDURE AFSL AUDITS CASHFLOW TOOLS CLIENT MARKETING CLIENT FACING ADVICE TOOLS WEBSITE DESIGN AND DEVELOPMENT CLIENT EDUCATION LEAD GENERATION CLIENT SEGMENTATION AND PRICING ADVISER EDUCATION CLIENT COMMUNICATION TECHNICAL SUPPORT RESEARCH SERVICES INVESTMENT SOLUTIONS TRAINING/WEBINARS ADVICE TECHNOLOGY ADVICE HELPDESK CLIENT GROWTH SERVICES ADVICE SERVICES 14

15 Centrepoint s new business model will be oriented around four principles Solving advisers problems through expertise, insight and scale benefits Standalone adviser community, not controlled by a product manufacturer Harnessing data to generate insights and create network effects Underpinned by a service culture of trust, transparency and quality advice 15

16 Financial results 16

17 FY18 Financial Results Total $m FY16 FY17 FY18 Revenue Adviser fees and commissions (84.5) (97.1) (90.9) Gross Profit Management Expenses (27.5) (27.0) (26.8) EBITDA core continuing operations Cost to income ratio 86% 84% 83% Legacy claims - (4.0) (5.4) Other one-offs - - (1.0) Depreciation, amortisation, impairment (2.1) (1.1) (1.7) Profit/(loss) before tax continuing operations (2.6) Tax 0.4 (0.3) (3.7) Profit after tax from discontinued operations (premium funding) Net profit/(loss) after tax (6.3) EBITDA excluding one-off adjustments grown by 4% to $5.5m Revenue continuing to transition from rebates Cost to income ratio improvement year on year The FY17 result reflects sale of Premium Funding One-off cost impacts resulted in a loss after tax of $6.3m 17

18 One-off adjustments EBTIDA excluding One-Off's One-Off's Legacy Claims Restructure Costs Royal Commission RFE impairment Reduction in Deferred Tax Asset Total One-off adjustments Loss after Tax $5.5m ($5.4m) ($0.3m) ($0.7m) ($0.9m) ($4.5m) ($11.8m) ($6.3m) Legacy Claims relate to a historical period (pre- 1/7/10). The provision was increased by $4.7m during the year Restructuring costs represents the costs associated with replacing the CEO, the one-off costs associated with reviewing and updating the strategy, and the restructure of the business Royal Commission costs represent the costs associated with responding and actioning issues associated with the Royal Commission RFE impairment reflects a decrease in the holding value of RFE as a result of the business focussing on profit and reducing revenue forecast Deferred tax reflects a reduction in tax losses held on balance sheet, moving off balance sheet to unrecognised tax losses. This change is a reflection of the outlook which is impacted by regulatory and market risk in addition to the implementation of the new strategic direction 18

19 Group balance sheet $m 30/06/17 30/06/18 Cash & Term Deposits Intangible Assets & Goodwill Other Assets Total Assets Other Liabilities Total Liabilities Simple, clean balance sheet Other Assets includes $4.6m in deferred tax assets, down from $9.1m in FY17 reflecting the $4.5m reduction in tax losses Unrecognised tax losses increased by $4.5m, and a review of historical tax items reduced Revenue losses to $24m Decrease in tangible assets and cash reflects dividends paid Net Assets Net Tangible Assets Net Tangible Assets (cents per share) Off Balance Sheet Revenue losses Capital losses

20 Cash flow FY18 Cash flow Closing cash position of $9.5m $31.2m $6.8m -$5.5m $-1.2m $-5.3m $-1.5m $-15.0m $6.8m Cashflow from operations includes core operating cashflow of $6.4m (an increase of 18%), and $0.4m for interest, dividends, property/plant/equipment Investments in Neos Life and R Financial Educators Pty Ltd (RFE) $6.7m $ m 20 Claims paid $5.3m $9.5m Restructure and Royal Commission costs of $1.5m $15m of dividends paid to investors in the period 0 Opening Cash Net Cashflow from Operations Investment in Loan to RFE Claims paid Neos Life Restructure costs Dividend payment Closing Cash 20

21 Capital management Dividends per share (cents per share) Dividends As at 30 June 2018 there are distributable earnings of $11m and franking account reserve of $18m (equivalent to $41m of fully franked dividends) The Company s dividend policy is for 50-80% of NPAT to be paid out in dividends semi annually Given the strategic direction of the business and dividend policy, the board have resolved not to pay a Final Ordinary dividend FY14 FY15 FY16 FY17 FY18 Interim Ordinary Final Ordinary Special Loan shares There are 8m loan shares owned by the Company s Employee Share Plan Trust. Centrepoint will be seeking shareholder approval at the AGM to cancel these shares 21

22 Strategy outlook 22

23 Regulatory and market forces that Centrepoint is actively managing Regulatory/market force Impact Royal Commission into Financial Services Royal commission has a high likelihood of impacting us, the extent to which will be unclear until it comes to a close in 2019 Professionalising Advice (FASEA) FASEA has imposed increased education requirements for new and existing financial advisers which will affect some of our adviser network Australian Financial Complaints Authority (AFCA) AFCA expected to commence in late 2018 to provide greater consumer protection. Centrepoint has experienced a diminishing number of Legacy Claims (i.e. claims relating to 2010 & prior) ASIC Increased surveillance and regulatory activity; annual supervisory costs will be recovered through adviser fees Life insurance industry changes Life Insurance reforms commenced 1 January 2018 overall reducing life insurance advice remuneration. Business models in a state of flux Structural and pricing changes amongst the big six, and the rise of self-licensed models driving a renewed re-setting of the wealth industry landscape 23

24 Centrepoint is moving towards a new identity FROM TO Licensee and dealer group Advice and business services Competing with platforms and fund managers Complement to platform innovation players Industry conflict and opaqueness Leading through trust and transparency Reactive follower Proactive industry leader All things to all advisers Leaders in quality advice set the standard 24

25 Centrepoint s strategy is to grow its strong community of advisers whilst transitioning to a new service model powered through data and insight OPTIMISE Realign organisation to core advice business Improve service to existing adviser community Strengthen core enablers for industry disruption ahead RECREATE Create the future of advice and business services Targeted packages for attractive advice segments Harness data to build insights for the adviser community GROW Licensed and self-licensed advice practices Transition current firms to new advice packages and bundles Explore growth opportunities 25

26 Over the next 6-12 months, we have a clear set of priorities H1 FY19 H2 FY19 OPTIMISE Conduct portfolio review of businesses Implement new organisation structure Build new relationship Service Model Review adviser governance and standards Introduce new governance and standards framework Launch education transition support model Harness internal data for efficiency gains Design new Centrepoint Service Offering Launch new Centrepoint Service Offering RECREATE Create new advice life-stage segments Introduce new pricing packages and bundles Create long-term data ecosystem strategy Develop transition package for advisers moving to the new model First stage of data ecosystem built with new Adviser Portal GROW Identify targeted segments for growth Aligned (licensed) adviser community Self-licensed business partnerships New package take-up in aligned advice practises Grow packages and unbundled offering in self-licensed advice community 26

27 Questions? 27

28 Appendices 28

29 Operating segment results Funds Management and Administration Licensee and Advice Services Corporate Total $m FY17 FY18 % FY17 FY18 % FY17 FY18 % FY17 FY18 % Statutory Revenue % % % % Gross Profit % % % % Operating Expenses** EBITDA ex Claims & one-off's % % % % % % (3.4) (1.9) 43% % Funds Management and Administration: Funds Under Management & Administration net flows, and favorable market movement drove balances and revenues EBITDA is $4.9m excluding $0.8m invested in Presidium, which is a 20% increase from FY2017. This investment in Presidium ceased in June 2018 following a Portfolio review Licensee and Advice Services: Licensee & Advice Services gross profit is impacted by grandfathered rebate revenue run off Expense increase in Licensee & Advice Services includes increased costs as a result of the Royal Commission Corporate: Corporate expense improvement is attributable to a reduction in employment cost (CEO vacancy) ** excludes legacy claims costs, Restructure costs and Royal Commission costs 29

30 Supporting professional advisers Key Performance Indicator FY16 FY17 FY18 Number of New High Quality Firms (Gross) Number of Advice Firms Advice Revenue per Corporate Licence Firm ($k) n/a Revenue per Self Licenced Firm ($k) n/a Services Revenue ($k) 0 1,788 2,058 Ongoing recruitment success with 37 high value, high potential, and partner circle firms which equates to 54 new AR s Reduction in the number of Advice Firms reflects the strategy of targeting and retaining only High Quality firms Improved adviser net promoter score which is better than industry average Increasing average revenue per firm Increasing services revenue through additional services to advisers 30

31 Firm segment analysis Firms AR's Firms Firms Firms AR's Firms AR's Key Performance Indicator FY17 FY17 Ceased New FY18 FY18 Variance Variance Corp Licence (39) (11) (48) High Quality Firms (12) (20) Value Firms (27) (25) (28) AR Fee Revenue ($k) 5,665 5,545 AR Fee Revenue firm / Adviser ($k) Self Licence 232 1,510 (11) , High Quality Firms (19) ,103 (8) High Quality Firms recruited (Corp Licence 26 and Self Licence 11) Overall increase in adviser numbers with decline in Value segment reflecting increasing standards 2,097 adviser in Group (Corp Licence 338*, Self Licence 1,759) Self licence advisers growing strongly Revenue by Firm and Adviser improving Services revenue increasing as Advisers increase usage Value Firms AR Fee Revenue ($k) Services Revenue ($k) 1,788 2,058 *ASIC register for Corporate licence is 347 due to timing differences 31

32 Funds under management and administration Key performance indicator FY16 FY17 FY18 Gross Funds Inflows ($m) Net Funds Flow ($m) Funds Under Management ($m) ,114 Gross Platform Inflows ($m) Net Platform Flows ($m) FUMA reached milestone of $4.1 billion growing by 11% from FY18 Managed Account FUMA continues to be well supported growing 47% to $505m in FY18 Net Flows impacted by runoff in legacy platforms and funds Implementation of family fee discount and fee capping is impacting margins A portfolio review resulted in the closure of Presidium prior to launch Platform Funds ($m) 2,282 2,694 2,951 Total Funds under Management and Administration 3,086 3,664 4,065 Net Margin (bps)

33 Salaried advice and Lending Solutions Salaried Advice Lending Solutions Focused on extracting value from existing clients and driving adviser performance Adviser growth and retention strategies continue to be a focus Reduced cost base in 2H18 resulting in EBITDA improvement Providing access to lenders and products and distribution support for mortgage brokers The tightening of lending conditions has slowed growth and lowered new book volumes to $546m, in part offset by slower old book run-off 33

34 Accounting partnerships and insurance Accounting partnerships Life insurance partnerships RFE continues to establish new joint ventures and clients Centrepoint has provided funding of $1.2m (12%) in a convertible note and $1.5m (15%) equity stake in RFE In FY18 RFE generated $1.2m in revenue and it has adjusted its business model to reduce the growth strain The business is expected to produce a small profit in FY19 Centrepoint have reduced the value of the investment in RFE from $1.5m to $0.6m with a reassessment of current and projected levels of profitability Neos Life is a new Australian life insurance business focused solely on the advised life insurance market Centrepoint Alliance provided seed funding of $6.75m comprising a $5m convertible note representing a minimum 30% economic interest and a further 5% equity interest was acquired via an option exercise in September 2017 The insurance product was launched to the market on 15 June 2018; is well rated, and 100% online and is fast and easy to interact with Distribution agreements have been executed with more than 250 registered advisers More than 25 advisers already submitting business 34

35 Claims Overview FY 18 Specific Adviser Legacy claims Non-legacy Total Number $m Number $m Number $m Number $m Opening claims New claims Resolved claims Closing Claims IBNR Claims Provision Total Provision 5.4 Claims Provision balance as at 30 June 2018 is $5.4m comprising $3.9m of Legacy claims* and fees incurred, an Incurred But Not Reported (IBNR) of $1.3m, and Non Legacy claims of $0.2m $4.7m additional provision was established during the year, in the following two tranches: $3.7m set aside to cater for claims by an individual former authorised representative s business $1m established for strengthening of case estimate reserves for specific claims, largely those that are older and litigious FY18 impact on profit was $6.0m. Additional to the $4.7m provision mentioned above, there was a further $1m impact to profit from the excess of a claims/ fee payment over the estimate and $0.3m in Non Legacy claims *Legacy claims relate to claims incurred prior to 1 July

36 0 Claims origination, lodgement and paid Legacy claims received significantly lags advice provided and given the statute of limitations is expected to decline further Legacy claims paid has been impacted by Special claims and resolution of larger litigated claims Claims Origination by Financial Year (#) Claims Paid by Financial Year ($m) Claims Received by Financial Year (#) Legend: Others Litigated over $200k Special Claims Non-legacy (others)

37 Significant, multi-faceted disruption presents challenges and opportunities Boomers and HENRYs Social licence to operate Game-changing technology Business models in flux Raising the bar Power of the iron fist Ageing population with longer life expectancy and growing retirement needs Intergenerational wealth transfer increasing wealth of younger clients Increasing awareness and accessibility of financial advice services driving demand Royal Commission highlighting significant conflicts of interest within the industry Societal and regulatory pressure on advice firms to maintain high ethical and professional standards Heightened disclosure requirements creating transparency for clients on pricing and adviser renumeration structures Superannuation funds increasing advice footprint by leveraging their scale to offer lower cost advice Technological developments in planner tools creating efficiencies and cost savings Growth of robo-advice and AI enabling scalable and costeffective advice delivery Loss of passive income from traditional business models Reduction in sale multiples creating succession planning issues Move to self-licensed models to differentiate from banks and vertically integrated models Raising of adviser educational standards and codes of conduct creating barriers to remain Separation of advice/product forcing advisers to demonstrate value Increased monitoring of advisers (e.g. via Adviser Ratings) surfacing misconduct and quality issues raising the bar for performance Harsher penalties for misconduct Greater resources committed to the scrutiny of the industry Potential for a dedicated body for professional discipline of licensees threatening licensee service businesses 37

38 Example of some of Centrepoint s advisers and their needs Catherine Mid-thirties >15 years of experience Bought business from previous owner ~250 clients 6 staff incl. 2 planners and 4 support staff AQF 7 (Bachelor s degree) Murray Early-fifties 20 years as a financial adviser Built several financial planning businesses ~260 clients 5 staff incl. 2 planners and 3 support staff AQF 7 (Bachelor s degree) Business owner needs Financial advice needs Business owner needs Financial advice needs Needs HR support to manage processes, policies and changing regulation Technology solutions to simplify operational processes so she can spend more time with clients Looking for acquisition opportunities to accelerate growth Quality advice education and training for new staff members Needs technology solutions tailored for self-licensees to simplify operational processes and reduce friction Understand how industry changes might impact if and how succession might occur Assessing impact of mandatory education requirements by FASEA 38

39 Regulatory and market forces that Centrepoint is actively managing Royal Commission into Financial Services Legislative impact Royal commission into misconduct in the Banking, Superannuation and Financial Services Industry established 14 December 2017 Market impact Like many others in the Financial Services sector Centrepoint provided information and evidence to the Commission Significant industry issues identified before the Royal Commission Possibility for reforms on Fees for no service and rebates but uncertainty surrounds these issues Hearings will conclude in November 2018; Final Report due in February 2019 Professionalising Advice (FASEA) Australian Financial Complaints Authority (AFCA) Increased education requirements for new and existing financial advisers Required to meet standard by 1 January 2024 New advisers must meet requirements sooner Australian Financial Complaints Authority expected to commence 1 November 2018 Increased reporting obligations for the authority and licensees Increased monetary limit Enhancing the reputation of the industry Improving the quality of advice to consumers Encouraging succession planning for mature practices however there is likely to be a significant decrease in the number of advisers Centrepoint working with providers and advisers to meet standard Greater consumer protection Increased visibility for regulators to identify trends Centrepoint has diminishing levels of legacy complaints ASIC Annual levy applicable for companies, licensees, auditors and liquidators regulated by ASIC applies to current financial year with first notices to commence 1 January 2019 Vertically integrated institutions face conflicts of interest Increased surveillance and greater effectiveness from the regulator expected with increased funding Centrepoint adviser fees will recover supervisory cost Life insurance industry changes Life Insurance reforms commenced 1 January 2018 Commission rates capped and increased claw-back provisions Reducing the perception of conflicts Encouraging longer term insurance strategies Potential for advisers to incorporate fee for advice Business models in a state of flux Regulators reviewing Bank ownership of financial services businesses, with focus on conflicts of interest Banks have sold Life Insurance businesses and some are now in the process of selling/ separating their Platform and Funds businesses Large players in the platform market have introduced significant cuts to platform fees and price caps in response to Royal Commission inquiry 39

40 Definitions Term Definition Basic EPS Contemporary Business Model Diluted EPS Direct Costs EBITDA core continuing operations ETFs FASEA Firms FoFA Funds under Advice ( FUA ) Funds under Distribution Agreements ( FUDA ) Funds under Administration ( FUAD ) Funds under Management ( FUM ) Funds under Management and Administration ( FUMA ) Basic Earnings per Share is NPAT divided by average number of ordinary shares Includes assets and revenue in respect of self-licensed firms, Salaried Advice, Licensed Practices (flat fee model), Open Administration Platforms, Managed Accounts and Open Ventura Funds Diluted Earnings per Share is NPAT divided by average number of adjusted for the effect of dilution Advice and financial product fees Earnings before interest, tax, depreciation and amortisation excluding legacy claims (claims related to advice pre 1/7/10), Restructure costs including CEO replacement costs, strategy and restructure costs, Royal Commission advice, review and actions arising An exchange-traded fund is an investment fund traded on stock exchanges Financial Adviser Standards and Ethics Authority Accumulated total of corporate licensed Firms and self-licensed Firms in the Centrepoint Group Future of Financial Advice legislation Funds upon which advisers associated with the Centrepoint group provide advice to clients Funds under Distribution Agreements for which the business receives revenue Funds where advisers invest clients monies on Centrepoint Administration Platform and Centrepoint derives fees as the responsible entity or as the promoter of badged investment administration solutions Funds where advisers invest clients monies in Centrepoint Investment solutions including Managed Accounts and Centrepoint derives fees as the responsible entity or as the promoter of a badged funds management product Funds under Advice, Funds under Administration and Funds under Management 40

41 Definitions Term Gross Profit LICs Managed Accounts MDAs Net Margin bps Net Tangible Assets NPAT Operating Expenses PBT PCP PP Pre FoFA Revenue ROCE Revenue received less Direct Costs Listed Investment Companies are a type of investment, incorporated as companies and listed on a stock exchange Funds invested in Ventura Managed Account Portfolio Solutions (VMAPS), which is included in FUM and FUAD Managed discretionary account (MDA) is a service where a portfolio of investments is maintained discretion is provided to an investment manager to make decisions on that portfolio FUMA Revenue divided by Average FUMA basis points Total assets minus any intangible assets such as goodwill Net Profit After Tax Expenses excluding cost of sales, interest, depreciation and amortisation Profit Before Tax Prior corresponding period Prior period Definition Includes assets and revenue in respect of Licensed Practices (excluding flat fee model), closed Administration Platforms (Mentor, Blueprint & DPM), Closed Ventura Funds and Allstar Funds Revenue comprises financial advice and product margin revenue, service revenue and dividend and distribution income Return on Capital Employed is Profit after tax divided by Average equity Royal Commission The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, established 14 Dec SMAs Wealth Separately managed account is a customised share portfolio where the assets are owned by individual investors Funds management & administration, Licensee and advice solutions adjusted for legacy claims 41