COUNT FINANCIAL LIMITED
COU - Full Yearly Results - Ms Marianne Perkovic, CEO
Mon, 18 Aug 2008 10:00AM
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Ms Marianne Perkovic
Mon, 18 Aug 2008
10:00AM Australia/NSW
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COUNT FINANCIAL LIMITED (COU)
ASX code: COU
Website: http://www.count.com.au
Industry: Diversified Financials
Principal Activities:
Financial Services
Address:
1 Alfred Street, Gold Fields House, Level 19
SYDNEY
NSW
Phone: (02) 8272 0200
Fax: (02) 9241 7342
Executives & Directors
Mr Barry M Lambert , Executive Chairman
Ms Marianne Perkovic , Executive Director, CEO
Mr Noel Davis, LLB , Director
Ms Joycelyn Morton , Director
Mr Andrew W Geddes , Non Exec. Director
Mr Alden J Halse , Non Exec. Director
Ms Caress Andrews (Assist.Co. Secretary) , Company Secretary
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Company ASX Announcements
Company ASX announcements can be viewed on the ASX website.
Announcements from the preceding six months are shown below.
Please refer to the relevant stock exchange if any of the above information is incorrect
COUNT FINANCIAL LIMITED (COU) Events
Australia/NSW
COUNT FINANCIAL LIMITED (COU)
| Appendix 3Y - Barry Lambert | Wed, 3 Dec 2008 |
| Daily share buy-back notice - Appendix 3E | Tue, 2 Dec 2008 |
| Daily share buy-back Notice - Appendix 3E Amended | Tue, 2 Dec 2008 |
| Appendix 3 Y - Barry Lambert | Tue, 2 Dec 2008 |
| COU - Appendix 3Y - Barry Lambert | Mon, 1 Dec 2008 |
| Daily share buy-back notice - Appendix 3E | Mon, 1 Dec 2008 |
| Appendix 3B | Fri, 28 Nov 2008 |
| Amended - Appendix 3B | Fri, 28 Nov 2008 |
| COU - Appendix 3Y - Barry Lambert | Fri, 28 Nov 2008 |
| cancellation of unlisted options | Thu, 27 Nov 2008 |
Please note: This company appears on this website as a result of its listing on the Australian Securities Exchange. Boardroom Radio does not claim any association with any company listed on this site.
MS. MARIANNE PERKOVIC, CHIEF EXECUTIVE OFFICER COUNT FINANCIAL LIMITED (COU)
“Count Financial Full Yearly Results”
http://www.brr.com.au/event/49363
MONDAY, AUGUST 18 2008, 10:00 AM.
COU Good morning, everybody, and welcome to Count Financial Limited Annual Results. I welcome everybody that made it to our presentation today and then
10 also, for all those our listeners on Boardroom Radio. I’d like to go through and mention the slides I’m talking about for our Boardroom Radio listeners.
As I’ve said today, we’re going through the results and also give you an update on the business. But before I start, just really want to make mention
15 that Count Model Financial Services was not being immune to the effects of the market and management knows no other reasons for this depreciation of the shared price other than challenging market condition. Despite the market, the Count has performed well when we consider it to the All Ords Index. We’re also at peak in the financial services area, and also despite the
20 challenging market conditions, I’m really pleased today, on behalf of the chairman and also our directors to deliver Count’s 28th consecutive profit.
Our results in brief is an EBIT of $33.4 million and that’s up 16%, and net profit after tax is down 6% to $21.3 million. Today, we’ve announced our final
25 “Risk/Reward” dividend of 4% payable on the 15th of October and that the full year dividend up 25% totalling 10 cents. Our first interim “Christmas” dividend has also been announced today and that would be a dividend of 2 cents payable on the 15th of December.
30 Well, we have to a look at our historical results, our EBIT growth has been very strong, and over the last eight years, we’ve enjoyed a 31% increase. On the dividend side of things, we’ve had an average increase in dividends for the last eight years to 28%, and as noted before, we had our “Risk/Reward” dividends declared today at 4 cents and also our interim “Christmas” dividend
35 of 2 cents.
Now we may look and go through the results, we have a breakdown of our results. We had three key revenue line items, at this one being on net fees and commission. Net fees and commission is actually made of our traditional
40 retail investments and that investments, pensions, and also superannuation. We also had our loan and lending commissions in the structured asset finance and also insurance. Under the structure account traditionally, we see an actual balance of a share in the brokerage with some (inaudible) (00:02:21). The net fees and commissions for 2007/08 was $17.34 million
45 and that’s up at 7%.
Having a look at the markdown and breakdown of asset based results, first is the outstanding loans. Our loans outstanding includes residential, commercial, margin lending, and also protected lending, and our loans outstanding finished at $4.33 billion and that was up 40% for the year. And also just note 2007, our large increase was due to the introduction of the Finconnect business which is where we did all of the Count lending services from.
5
Now just making a brief mention about margins in the future set in the mortgage broking industry in the midyear and certainly this year has been in turmoil with banks reducing commission to brokers. All our commission rates are basically reductions on new business going forward, and does not affect
10 the existing book. In addition to that, the challenging market conditions have slowed the demand of lending and adding all the banks reducing their commissions. Westpac certainly came up with the most aggressive model. The other banks have followed but they’ve really having their commission rights to volume and also the quality of online submissions. The impact that
15 we believe is obviously going to be to reduce competition and squeeze out mortgage brokers. However, management of Count believes Finconnect’s strong professional and independent model is in a good position to gain market share. Finconnect referrals as well as from a trusted accounting based franchising networks, and these networks will continue to have clients
20 through the different market cycles that would need lending and know better to service them and they have been our professional lending managers and also advisers in the Finconnect business.
Risk insurance and we call it risk insurance at Count Wealth Protection with
25 risk insurance presented increase in inforce premium up 26% and historically this business tends to perform better when markets are challenging, and our challenge is to continue with these trends when the market recovers. Count Australia is actually experiencing an insurance gap and Count continues to help ensure that we reduce that gap on ensuring that Australian not only
30 create well but also protect well.
This year, in its business, we’ve actually introduced the professional referral model leveraging off the success that we’ve had under the Finconnect banner and that saw the introduction of an absolute model called Risk-Easy but also
35 the introduction of a new Count franchisee called (inaudible) (00:05:04) Financial Services that is just a risk specialist, and both of these enjoy referrals from the Count member networks.
Our second revenue item, which is obviously the key driver of revenue, is our
40 asset-based income. Now asset-based income is a franchise that collected by the platforms and under the value proposition to advisers, the Count franchisees that prized their advice to clients gave a 100% of their advisee because Count collects its pay-through the platform. Asset-based income was up 23% and that was $31.57 million. This enjoyed a good increased
45 despite our total Funds Under Advice and our preferred platforms being down just less than 7%.
Showing now a breakdown of our Funds Under Advice, the consolidated platforms, so as I mentioned our preferred platforms are down just less than 7%, but we have stayed well ahead of the market returns. The industry Funds Under Advice was actually down 12% and the All Ords Accumulation Index was down to 12%. Our fastest growing platform remained platform 2 that actually saw an increase of 14% over the year for Funds Under Advice.
5 That’s our high net worth low cost platforms. Wealth-e account being a BT platform continues to gain the market share of that platform business and Skandia One, WealthFocus, and also FirstChoice funds did considerably well.
On the platform side of the business, again this is an area that continued to
10 have debate about margins, and because of Count size, we enjoy scale benefits in this year and currently still we’re negotiating increased rights output on our platform business. The Wrap Advantage Program is when the Count continues to support and our Funds Under Advice continues to grow in this area because of the rebates offered to clients. The title rebate offered to
15 all BT Wrap clients was just down $4.7 million.
Having said that, management account notes that 2007, we really started off with a great year with the government-legislated cessation of the undeducted contribution, so we started at a very high price of our Funds Under Advice,
20 and this year, we will be challenging to actually make up the loss of that Funds Under Advice. However, management is very confident that our fund model and our trusted professional network will continue to enjoy an increase as they continue to service their clients and the market returns.
25 So this comes through our first line item, which is our revenue and that was down 5%, but as we previously discussed with the market that we expect this autumn to decrease, not because under our value proposition to our franchisee as they move through our different waivers, as I did through different thresholds they enjoy an annual fee waiver.
30
Other sales and commission was down 5% as noted and that was just under $3 billion. However, a line item that does make our revenue in this line item is our revenue that we collect through our new service called SuperCentral which I’ll discuss a little bit later. So well, this line item will decline with the
35 annual fee being waived. It will also have an inducement with our new businesses that comes through this line item. So our total net revenue was just down to $52 million and that’s an increase of 16%.
Having a look at our expenses, employment remains to be our largest
40 expense and that was a change of 7%. There is no really change in headcount, that increases primarily just to new salaries negotiated at the beginning of the financial year. Other expenses, up 19% and this continues to be out due to the funding of our new businesses. We also had incurred a lot of training costs this year and that was with our commitment to continually
45 train our advisers to ensure that they keep (inaudible) (00:09:24) not only the legislative changes but deliver the perspective to their clients. Our share-based payments expense was up 36% and that was to $3.07 million and this increase is primarily because of the extra pricing of the Count shares at that time. That pricing obviously resolved last year when we get a weighted average of the price and at that time the Count shared price did enjoy an accelerated period.
Despite that increase in expenses, our income to expense ratio did remain
5 steady at 36% and that shows our strong cost control effective method and over the years, we’ve been able to keep our expenses partly held but continue to grow our revenue.
Our Net Operating Profit was $51.98 million, and as noted, our expenses
10 $18.56, and that takes our EBIT to 33.42 up 16%. Our investment income actually had a loss of $1.56 million. This investment, (inaudible) (00:10:35), basically attributes to the investment portfolio that Count Financial Limited has and obviously challenging market conditions, and the fact that we have to mark this portfolio to the market means that we had a loss in this portfolio.
15 The largest holding in this portfolio is our investment in Mortgage Choice. All I can note about Mortgage Choice at the end, however, at the time that we mark this portfolio and Mortgage Choice shares were down, and so we did have a loss on that portfolio. I’m happy to say that since then, the share price has recovered and that’s above our profit of purchase. Our net profit before
20 tax is $31.7 million and the net profit after tax was $21.3 million and that is the final results. So I’ve noted despite the challenging market conditions, we, you know, certainly delivered a good result and we certainly expect to ensure that the business is sound, and the business continues with our franchising network.
25
Now focusing on a couple of things about the business and things that certainly the team and that we’re working on over the next 12 months and beyond to ensure our growth.
30 Now on slide 17, just a reminder, the core business is at financial planning advice and we hold an Australian Financial Services License. Our head office is a team of 100 and we have 412 franchisee offices including seven CountPlus firms, 846 authorized representatives, and 278 Finconnect members. So potentially we have a client base through all of these networks
35 of over 300,000 Australians. We remained focused to grow and certainly Count is in good shape.
We’ve noted a strong and stable professional network, and our 3-plank growth strategy remains unchanged, that is if we look to increase the number
40 of quality members to the group. We look to improve the efficiency of the existing franchisees, and we also add on non-investment products and services and other businesses to strengthen and also diversify our income.
Our first strategy to grow a number of quality members happens with our
45 three K offerings. That’s the K offering being Count Financial Limited through the branding with accountants that hold the strength of financial services license. Finconnect is our lending referral assistance and also (inaudible) (00:13:08), our mortgage aggregator, and CountPlus, the wealth creation integration model for accounting and financial planning firms.
Turning to each of these three, the Count, again, we focus on quality and over the last 12 months, we had 13 new franchisees. This year, we had been very successful in recruiting franchisees from other dealer groups to other
5 financial services networks, and predominantly, these groups came from Genesys, Professional Investment Services, and also Tandem. Our existing professional network is strong and stable, and we also have a very good track record of our sound research process.
10 In an independent research we see by Brand Management, when by ask to the industry questions about how valuable they have felt about their dealer, how loyal they were to their dealer, if the dealer was focused on their need, and also if we felt the dealer developed your businesses, Count achieved results well above the Industry average. I do note the first question, which is
15 “have you experienced profit growth in your business” where the industry average was 89.9% and Count advisers expect a little bit less than that, but that really demonstrates the fact that the Count advisers are here to build long-term businesses that actually service the needs of their clients.
20 On the Count side of things, steadily their growth and the contribution that they have is based on CTC, contributions to Count, and that’s the driver on the financial planning side. So, we’re very pleased with these wonderful results from their clients. They are loyal and trusted, and really enjoy being part of this Count network. Again, on the Count financial side of things, we’re
25 very pleased with a sound and structured research process along with our risk management and board of directors, risks and compliance committee, and never on our APLs, whether disaster and investment collections that we have seen over the last two years, such as Westpoint, Fincorp, ACR, MFS, Basis Capital, and Opes Prime.
30
Moving to Finconnect, it is pleasing to see the growth that we have had to date, and certainly as mentioned before with the margins and the pressures on the economy, we really see any negative impact to reduce competition and any stress in the market share that Finconnect can have, basically
35 because they’re really sourcing their referrals through the professionally qualified networks that we have. We have 35 Lending Managers who work as independent contractors and (inaudible) (00:15:40) Finconnect membership to 278 members.
40 On the CountPlus side of things, it’s progressing well. Again, quality remains the focus, and seven acquisitions have been settled to date. We have a purchased agreed 2007/08 EBITA of $5.47 million, and the budget 08/09 EBITA of $7.04 million, and that’s up 28%, and just a reminder that we own 25% of these firms. Management remains confident of achieving a $25-million
45 EBIT target prior to listing.
Our second strategy is to improve the efficiency of existing franchisees. We continue to invest in our technology that enhances not only efficiency in working in an extremely inefficient industry, financial services, and also the compliant service, that regulation, and also the regulators put to ensure that both risk factors and clients are serviced well. We continue to enhance and embrace technology to drive the efficiency to make sure that clients of Count Wealth and Count Wealth advisers are paying for quality advice and not for
5 inefficiency. Technology remains a source of our organic growth, and our Internet-based systems is certainly in competitive advantage.
Under the Count model, the franchisees have a choice of platforms and also investment that they can utilize to make clients, and that’s all consolidated
10 through a Propriety System called Wealth Planner™ where we develop and embrace improvement in the financial planning process, such as delivering tools for them to review their clients to think effectively and also helping and ensure that statements of advice are documents that are produced timely, that are also clear and concise.
15
Our strategy three is a non-investment products and services and also adding businesses, and again, we continue the leverage of a strong network and introduce to them new services, products, and businesses so that they can continue to service the needs of their clients.
20
SuperCentral, which I mentioned is one that comes in our line item three (inaudible) (00:17:47) is one that we introduced some two years ago and enjoys phenomenal success in being a new revenue strain coming through to Count and also from the compliant perspective ensures that our accountants
25 and advisers are issuing and also using quality deed structures for their clients. Over the year and certainly since inception, we’ve enjoyed over 4000 deeds, some of them have come from converting existing self-managed (inaudible) (00:18:16) but also some new self-managed funds deeds establishment.
30
A new service that we launched this year, we call Count GPS, which is Count Growth Profit System, and that’s an accounting-based best practice tools, procedures, and templates. This is actually a joint venture between Count and QLD Countplus member, a specialised business solutions where we
35 provide the technology to deliver this in an efficient and cost effective way like the financial planning tools that we deliver, and SPS delivers the content.
This service was launched in May 2008 and has had a 32% membership take up through the Count group. At this stage, service is only available to Count
40 members. Count generate a revenue growth by two ways, obviously through a licence and user fee, but over time, the biggest driver of this is the income that would be earned through the use of services through this structure. So, not only are they templates and tools that the advisers can use, but there also the will and trust that they can establish. The SuperCentral service is going to
45 be included on the Count GPS site, so that will actually be another avenue to be able to access SuperCentral. Count GPS is a platform for future CountPlus accounting franchise.
Just finishing up and turning to our investment and mortgage choice. On the 28th of July, we did advise the market of a 4.9% interest in mortgage choice as a strategic investment. Count believed that the merged entity would actually certainly help strengthen mortgage choice, which faces challenges
5 on a stand-alone mortgage broking entity. We felt culturally with a strong independence of our brand and certainly the independence of their brand, that culturally the businesses would benefit in a merged entity and we would be able to establish a good referral network through the mortgage choice franchisee as we have already done on the Finconnect side of our business.
10 Unfortunately, the indicative opposites we presented to the chairman and the CEO was not explored any further and the Count Board feels still interested obviously in the opportunity that we haven’t moved from the operate price that we had which was $1.05. So, given the right prices, we will continue to be something that we will have to look at and as we said, we believe the merged
15 entity would only strengthen the referral network that we already have created. Now, having settled that is nothing progressive, we will remain as an investor in mortgage choice and as noted before, we already have a very strong Finconnect banner under the mortgage broking side, and as you can see on slide 32, the extra growth that Finconnect has had over the year has
20 been great and that on the mortgage side of things, certainly we’re working on two different bases with the mortgage choice on the right hand side scale, Finconnect on the left hand side scale had certainly progressed over the years. The mortgage choice investment for us was a way to actually introduce non-residential lending into the mortgage choice network as we have done
25 with Finconnect. So our Finconnect brokers not only enjoy residential lending services, but they also can service the client’s needs to commercial lending, they have an out-source non advised margin line component to the business and also including in that is a non advanced space insurance model.
30 So again, really just summarizing today’s result, despite the challenging market condition, certainly management and directors are very pleased with the results and we continue to ensure that the business grows. We look at certainly the franchisees, the activities, and the servicing of those franchisees as we look at how we run our operation head office. The challenging market
35 as analysts and other experts predict, it may not be over yet, but we’ll be in a well position to ensure that we enjoy the benefits of our market returns. The reality is that future counts and really understanding the Count model and network within our accounting based franchisees who continue to service clients through all of their life stages. These clients will continually have a
40 need for particular service whether it be investment, insurance, lending, asset finance, or other options just as creating a self-managed super fund deed or even the franchisees looking at ways to enhance and improve their operating efficiencies on the accounting side like the Count GPS assistance will ensure that there’ll always be a need and a service that our members and clients can
45 enjoy. So, we believe that the future is very bright and really look forward to the next year, obviously like the rest of the industry, you know, really waiting and hoping for a market return but the business is structured to outlast any market cycle.
So, thank you for attending today and I’ll happy to take any question.
The kind of questions that people on Boardroom Radio has if we’re looking for any other opportunities, if mortgage choice doesn’t go ahead; the answer
5 I’ll get to that if we continually look for opportunities or have opportunities presented to us. So, we would just really say what happens in the market price, we actively don’t have any other things against it that we have announced to the market after this time and with Count’s strong position having noted in our business, if there are opportunities, they will have look at
10 &nbs