PRIME FINANCIAL GROUP LIMITED Audio Webcast

PRIME FINANCIAL GROUP LIMITED (PFG)

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PRIME FINANCIAL GROUP LIMITED (PFG) Events

Company (Stock Code)	Date/Time	Event	Timezone: Australia/NSW
PRIME FINANCIAL GROUP LIMITED (PFG)	Wed, 27 Aug 2008 04:30PM	PFG - 2008 Full Year Results - Mr Simon Madder, MD and CEO
PRIME FINANCIAL GROUP LIMITED (PFG)	Wed, 20 Feb 2008 10:15AM	PFG - 2008 Half Year Results - Mr Simon Madder, MD and CEO
PRIME FINANCIAL GROUP LIMITED (PFG)	Tue, 4 Dec 2007 09:00AM	PFG - Emerging Companies Online Conference Presentation - Mr Simon Madder, MD and CEO
PRIME FINANCIAL GROUP LIMITED (PFG)	Thu, 1 Nov 2007 09:30AM	PFG - 2007 Annual General Meeting - Mr Simon Madder, MD and CEO
PRIME FINANCIAL GROUP LIMITED (PFG)	Mon, 20 Aug 2007 04:00PM	PFG - 2007 Full Year Results - Mr Simon Madder, MD and CEO
PRIME FINANCIAL GROUP LIMITED (PFG)	Tue, 25 Nov 2008 10:30AM	Annual General Meeting The Langham Melbourne, Podium Level, 1 Southgate Avenue, Southbank, VIC
PRIME FINANCIAL GROUP LIMITED (PFG)	Tue, 14 Oct 2008	Date Payable
PRIME FINANCIAL GROUP LIMITED (PFG)	Tue, 30 Sep 2008	Record Date
PRIME FINANCIAL GROUP LIMITED (PFG)	Wed, 24 Sep 2008	Ex Div Date
PRIME FINANCIAL GROUP LIMITED (PFG)	Wed, 27 Aug 2008	Full Year Results
PRIME FINANCIAL GROUP LIMITED (PFG)	Mon, 31 Mar 2008	Date Payable
PRIME FINANCIAL GROUP LIMITED (PFG)	Tue, 18 Mar 2008	Record Date
PRIME FINANCIAL GROUP LIMITED (PFG)	Wed, 12 Mar 2008	Ex Div Date
PRIME FINANCIAL GROUP LIMITED (PFG)	Wed, 20 Feb 2008	Interim Results
PRIME FINANCIAL GROUP LIMITED (PFG)	Fri, 26 Oct 2007 10:00AM	Annual General Meeting Langham Hotel, Level 25, 1 Southgate Avenue Southbank VIC 3006
PRIME FINANCIAL GROUP LIMITED (PFG)	Tue, 2 Oct 2007	Date Payable
PRIME FINANCIAL GROUP LIMITED (PFG)	Tue, 18 Sep 2007	Record Date
PRIME FINANCIAL GROUP LIMITED (PFG)	Wed, 12 Sep 2007	Ex Div Date
PRIME FINANCIAL GROUP LIMITED (PFG)	Wed, 15 Aug 2007	Full Year Results
PRIME FINANCIAL GROUP LIMITED (PFG)	Tue, 3 Apr 2007	Date Payable
PRIME FINANCIAL GROUP LIMITED (PFG)	Tue, 20 Mar 2007	Record Date
PRIME FINANCIAL GROUP LIMITED (PFG)	Wed, 14 Mar 2007	Ex Div Date
PRIME FINANCIAL GROUP LIMITED (PFG)	Thu, 22 Feb 2007	Interim Results
PRIME FINANCIAL GROUP LIMITED (PFG)	Wed, 30 Aug 2006	Full Year Results
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PRIME FINANCIAL GROUP LIMITED (PFG)

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PRESENTATION BY SIMON MADDER, MANAGING DIRECTOR AND CHIEF EXECUTIVE OFFICER OF PRIME FINANCIAL GROUP LIMITED (PFG)

“PFG - 2008 Full Year Results Presentation”

http://www.brr.com.au/event/50263

 

WEDNESDAY, AUGUST 27, 2008, 4:30 P.M.

 

            PFG     Good morning and welcome to the Prime Financial Group Limited Full-Year Results Presentation. My name is Simon Madder and what I’d like to start

10                    doing is just giving you a review of our results, which we’re particularly pleased with. The 2008 full-year impact for the year is $6.82 million. That’s up 33% over the previous corresponding period.  That’s up from $5.12 million in 2007.  It’s a particularly pleasing result given the current volatility in equity markets and we’ve been very pleased with the outcome.  In addition to that.

15                    we’ve increased our dividend to shareholders, that’s going from 2.3 cents per share in 2007 to 2.8 cents per share. That’s a 22% increase.  We’ve had positive operating cash flow for the business for the last 12 months, and that’s…..almost matches the 6.82, it’s $6.82 million for the full year.  The important I think that I’d like to make to comment around about the ongoing

20                    income that is part of our revenue as a group and around about 70%/75% of the revenue that we generate is on an ongoing basis. So we’re particularly pleased with that also.

 

                        Next part of the presentation I just like to cover off is the key points in the last

25                    12 months, so a bit of an overview. Financial planning, self-managed super and accounting continue to grow.  Its contribution was larger than what it was from a percentage point of view in the previous year. That’s contributed 108%. That’s actually not a typo. The reason it’s over 100% is because there was an early contribution from funds management and listed investments. 

30                    But overall, fantastic results on the financial planning and self-managed super and accounting side of things.  The difficult part of the business for the last 12 months has been funds management and listed investments and not dissimilar to a lot of other people in the market, our Funds Management division has underperformed.  We’ve had a negative contribution to earnings

35                    and our listed investments have not performed in line with our expectation.  So it has been a negative contribution of 8%, but, you know, there is quite a difference from the positive contribution of 23% to our earnings than the previous year.  The really key thing I think to focus on here is the fact that we’ve been able to improve and refocus our operations in the last 12 months 

40                    and that’s very much around our key growth areas and that is financial planning, self-managed super and accounting.  As you’ll see there, our NPAT has gone from 3.9 million to 7.34 million over the previous 12 months so that’s a very good growth. What we’ve done is we’ve simplified our operations. We’ve divested non-core businesses, we’ve divested three and

45                    the listed investments were divested progressively over the last 12 months.  Also, our Corporate Advisory Business, we had 30% investment in that and we have divested that. We also divested our investment in the financial planning business GPCA.  We also have focused very much on continuing to integrate our operations with Carroll, Pike & Piercy.  That was a significant investment that we made in February.  And I’m particularly pleased as to the progress of that integration process and the way the team is working together.  The last 12 months really confirms, I think, the strength in the Prime business model.  The fact that we’ve been able to increase our earnings by

5                      33% in a tough economic climate and also with that the contribution from the division and our investments that contribute 23% to our earnings in the previous year really just shows how robust the financial planning, self-managed super and accounting part of the business is.  Also, last year, one of the key points that we put in place was a shared buyback and that was as

10                    part of our ongoing capital management program. 

 

                        This next slide, financial information, is just a summary of the key points.  I’ll touch on a few of these so I will go through this fairly quickly.  The EBIT number is up 22% to 9.11 million from 7.49 million.  NPAT as I said up to 6.82

15                    million from 5.12, it’s a 33% increase.  Dividends that are going to be paid and have been proposed will be 22% up and that’s up to $3.8 million from $3.11 million in the previous year.  Basically, EPS was up around about 6%  but importantly, diluted earnings was up 11% for the year.  The dividend that will be paid has also been an increase of 22% over the previous year.  The

20                    group’s structured chart is just more a reminder than anything else as to how the business is structured. The core operations are around financial planning, self-managed super and accounting, and funds management is part of what we do as well.  Our operations in Melbourne, Sydney, Brisbane, Perth and Hobart are the core of our business and the head office is located in

25                    Melbourne.  From operational and investment point of view, 80% to 90% of our earnings going forward will continue to be contributed by the financial planning and self-managed super part of our business. That really is around retail direct to market financial planning where we don’t go through any third-party distribution and that is headed by Carroll, Pike & Piercy and also by

30                    Prime.  We have a real strong competency around financial planning, direct equities, retirement planning, and self-managed super services for client, and we think that’s a good point of difference.  We also want to label our financial planning service and allow 30 accounting firms to offer under their own name but Prime has a 50% equity interest in those financial planning operations

35                    and essentially runs our business on behalf of the equity holders.  The other part of our business is the accounting services.  We have seven key investors in accounting services.  Going forward, it will continue to contribute 10% to 20% of our earnings.  And we don’t typically make an investment of any more than 50% into accounting firms.  Funds management, I’ll cover off, we have

40                    one core investment, that’s Armytage Private Limited.  and that will contribute up to 10% of our earnings moving forward. 

 

                        The next slide on our profit contribution is just showing the movement between the two years. As you’ll see, going from left to right,  64% of our

45                    earnings coming from financial planning and self-managed super in `07.  And that’s been up to 90% in `08.  The accounting services part of what we do has gone from 12% up to 18%; funds management from 10% to a negative contribution of 2%; and the listed investments through yourself which is, as I said being solved progressively through the `08 financial year that went from contributing 39% of our profit last year to negative 6% this year.  Just note that the `07 numbers, there’s a 1% variance for the Corporate Advisory Business that contributed 1% of what we did in the `07 year so that’s the reason why there’s a slight variance there. Just dissecting those results a little

5                      bit more, the financial planning and self-managed super operation went from 3.26 million to 6.2 million. These are after tax fees so that’s a 90% increase.  We also saw some good margin improvement within that business and that was particularly pleasing given the second half; we really did knock around the ongoing income phase that we generate due to equity market volatility 

10                    but we’ve very, very pleased with our financial planning and self-managed super has operated.  On the accounting front, we’ve seen a 91% increase over the previous corresponding period and that’s up from $647,000 to 1.22 million.  Margin is pretty much consistent with the previous year.  This part of the business is fairly stable with respects to margins and margin

15                    improvement.  It isn’t actually a typo that the fact that they’ve got 90% and 18% and that adds up to 108% obviously, but there’s the negative contribution from funds management and listed investments is the reason why that’s in excess of 100%.  I’ve covered off on funds management and listed investments are probably the main thing to cover here is the fact that

20                    the investment has been sold now so that will no longer have an impact on our earnings going forward. 

 

                        Just covering off in a little bit more detail our financial planning and self-managed super. We see this is a really cool growth area for the business. 

25

                        This has been a real engine for us, if you’d like, as part of our growth.  We’ve got access to 40,000 clients through our accounting firm relationships.  Our last seven or eight years, we’re pretty well versed in growing our revenue and obviously our earnings, and we’ll continue to.  So that plus the fact that the

30                    way our superannuation is structured in, the continual contribution process that should increase our funds under management but the challenges have really been with respects to the equity markets and the movements, particularly in the last six to nine months.  I think we’re well positioned.  You know, choice is really the main thing and not the choice of super legislations. 

35                    That matches this choice in products and service for clients.  The fact that we’re able to offer clients access to all the managed funds, throughout equities like it can be on a platform or not on a platform, and various  different insurance companies means that regardless of what happens going forward that we can provide the choice to the client.  I think that’s a good part about

40                    having independent operating model and that really does work well for us.  The focus will continue to be on wealth production, retirement planning.  But we are seeing a good niche for ourselves within self-managed super and being able to deliver a product to the client where everything can be looked after, including a mailhouse (?) for direct equities as well.  So we see there’s

45                    a good point now if we cover off self-managed super on the next slide in a little bit more detail. 

 

                        Life insurance and direct equities. Direct equities first. It’s becoming an increasingly large part of our business, partly because of the focus it brought to us with the Carroll, Pike & Piercy investment that we made and now having a 100% ownership of that business but we see that it’s a real growth engine moving forward as we do for life insurance. On the life insurance front, you tend to find that clients are more conscious of their personal and business

5                      risks when the economy slows down a little bit and we’ll tend to see some growth coming out of life insurance moving forward.  With respect to self-managed super, this really is the fastest-growing segment of the superannuation market at the moment and this projected to be the largest sector by 2015.  So, we’re pleased to have a good foothold in that market. 

10                    We’ve got currently around about 807 self-managed super funds where we advise on them.  There’s another 4,000 within the group where we do the administration.  We do aim to be able to cross sell our advisory services to those 4,000 clients and we’ll continue to work with our accounting firm partners from that point of view. There is a great opportunity to work together.

15                    but I think, also, the thing that we are really paying quite a bit of attention to is the establishment of new set of funds.  There is an opportunity to be involved at this level within the sector and we really do want to push really hard.  The market downturn typically sees an increase in the number of self-managed super fund set up but we’ll position ourselves accordingly to take advantage

20                    of the opportunities of ourselves there. There other thing on financial planning is margin improvement and the use of technology.  We’ve really been working hard to improve the use of technology, things like introducing X plan within the business, the use of Premium and working in conjunction with our accounting firms, because Premium does actually download into most of the

25                    important superannuation software packages that accounting firms use but the continued use of technology, improving our processes and systems a management we should be able to continue to improve our margins as we grow the business.  The fact that we’re centralized, our main operations are here in Melbourne, it does put us in a good position that we’re not having to

30                    end up with a situation where we’ve got offices all over the country. So market condition is maybe a little challenging at the moment, but it does present some opportunities and we’re definitely not seeing any lack of opportunities at the moment.  There is a level of cautiousness from clients.  I think that, you know, the opportunity is still there where we’re still seeing good

35                    growth in our core business of financial planning and self-managed super. 

 

                        Onto accounting services now, we’ve got seven current investors there. Two of them didn’t grow substantially at all last year.  Three of them grew at 5% to 10% and two really exceeded our expectations for growing than 20% which

40                    was very pleasing.  The good part about accounting firm investments in the last 12 months is this has been a good hedge against the equity market movements and the effect that they have on ongoing asset-based fees.  So we’re very pleased with the accounting firms.  They have overall performed ahead of our expectations and we’re hopeful that will continue in the `09

45                    financial year.  The good part about, I guess, accounting firms is they don’t typically suffer too much in a slowdown, and the diversifications of our investments through those different states is different and positive as well.  The main challenge for us in accounting firms continues to be staff and labour. 

                        The access to good quality staff is difficult in some cases but I think it comes down to also considering other alternatives.  A few of our investee firms are actually considering outsourcing at the moment, particularly for functions that are repetitive and can be standardized.  So that’s a consideration which could

5                      over time lead to some margin improvement and something that we are very conscious of.  We will look tuck-in acquisitions, but, you know, it has to be the right culture fit for the existing investee and we very much work very closely with the accounting firms from that point of view. That’s part of our accounting firms as we really do see them as being long-term growth distribution and

10                    investee partners.  We want to make sure that we’re adding value to the relationship where we have an equity interest, and vice versa. I believe the firms are looking to grow and looking to us to be able to deliver some solutions that can help their business to move forward as well.  But, the fact that you can put together accounting, financial planning, self-managed super

15                    under the one roof for a client I think is a pretty compelling offering and that the integrated advice model is something that we’re continuing to move forward with, and so far,  has been very, very well received.  On the funds management front, I’ve touched on this a little bit, but it has been a particularly difficult operating environment for all funds managers in the last

20                    12 months, and the equity markets have done no favours to anyone.  The main reason for the under-performance in this component of our business has been the reduction in the asset-based management fees and the fact that there wasn’t any performance fees payable this year.  It was probably the first time in around about five years and redemptions were a little higher than

25                    usual.  So that those factors combined took business from making a good profit last year to making a small loss.  So, we’re very conscious of this part of our business. We see opportunities to grow, but we also see some challenges and I want to make sure that the business is of sufficient enough in size, in scope to grow from a nice steady platform moving forward but

30                    we’re conscious of the opportunities around funds management and it continues to be part of the operations of Prime. 

 

                        So looking forward, I just want to try and give you a bit of a summary.  The presentation is not to go over 20 minutes, so I’ll try to give you a bit of a wrap-

35                    up here on how we’re seeing things moving forward.  There’s definitely a focus on core operations. We know what we do well, and that’s in financial planning, self-managed super and accounting. So, we see great growth opportunities we can access to new clients, we’ve gotten good scale, we can drive margin improvement, we’re getting better with our systems and our

40                    processes and the use of technologies. So we will focus on our core operations.  I’ll cover off the margin improvement.  Cost control is important.  I think it’s something that everyone is conscious of at the moment because of the effect of the fall on the equity market just had on the ongoing asset-based management fees.  But, as I said, the use of technology, making sure that

45                    you’re not undertaking actions or tasks that don’t need to be done and just being efficient with the focus for your operations I think can definitely improve the cost control as well. On the acquisition front, we’ll continue to look at opportunities and we’ve got a pipeline of opportunities there, but I think valuations need to be reassessed in the private market.  It’s definitely a case-by-case basis.  The things that we look for in any investees are the access to distribution, growth opportunities, and I guess a commitment to wanting to grow the business.  More recent partners that have joined us have been very much aligned to our philosophy which has seen some fantastic results from

5                      new investees.  Current market hasn’t changed substantially in the last two or three months; it is very, very challenging.  But I think the key thing is to make sure that you stay in front of your existing clients and service them and make sure you’ve got a differentiated offering.  You know, you don’t want to being made to within this environment.  I think the fact that we’ve got such a diverse

10                    offering full clients I think it protects us well.  So from a forecast point of view, the company at the moment is in probably the best share it has been.  It, you know, it’s got a good track record of growth, profits, good strong stable cash flow, minimal debt.  We’re very, very pleased with the momentum that we’ve got coming out of the `08 year.  So we think we’re well positioned to continue

15                    to move this business forward, But at the moment, there is no precise guidance that we’re providing just simply from the point of view that there’s a little bit of uncertainty out there in the market at the moment.  You know, we’re still confident as to what we need to do to continue to grow the business, and we’ll do that.  But we’ll review the guidance at the half year. 

20                    And we’re in advance of that if we can provide the guidance to the market.

 

                        Just to wrap it up, thank you very much to everyone for your time in listening to this presentation.  We’re particularly pleased and we think it’s been a great result to grow.  Net profit after tax by 33% increased our dividends by 22% for

25                    our shareholders.  So my contact detail is on the last slide.  Don’t hesitate to contact me if you have any queries.  Thank you.

 

PRESENTATION CONCLUDED

 

 

 

 

Contact brr@brr.com.au for more information

 

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