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Centrepoint Alliance Limited
Capital Raising (ASX:CAF)
Investor Presentation
April 2014
Not for distribution or release in the United States
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Capital Raising Investor Presentation
Disclaimer
This presentation is dated 1 April 2014 and has been prepared by Centrepoint Alliance Limited ACN 052 507 507 (Company). The entitlement offer is
being made without a prospectus under section 708AA Corporations Act 2001 (Cth) (Corporations Act) (as notionally modified by ASIC Class Order
08/35) (Entitlement Offer). The information in this presentation is of a general nature and does not purport to be complete, nor does it contain all the
information which would be required in a prospectus prepared in accordance with the requirements of the Corporations Act.
An investment in the Company’s shares is subject to known and unknown risks, many of which are beyond the control of the Company. In considering
an investment in the Company’s shares, investors should have regard to (amongst other things) the risks outlined in this presentation.
This presentation contains statements, opinions, projections, forecasts and other material (forward looking statements), based on various assumptions.
Those assumptions may or may not prove to be correct. None of the Company, its respective officers, employees, agents, advisers nor any other person
named in this presentation makes any representation as to the accuracy or likelihood of fulfilment of the forward looking statements or any of the
assumptions upon which they are based.
The Company may make additional announcements after the date of this presentation and throughout the period that the Entitlement Offer is open that
may be relevant to your consideration about whether you should participate in the Entitlement Offer.
The information contained in this presentation does not take into account the investment objectives, financial situation or particular needs of any recipient
and is not financial product advice. Before making an investment decision, recipients of this presentation should consider their own needs and situation
and, if necessary, seek independent, professional advice.
Any opinions expressed reflect the Company’s position at the date of this presentation and are subject to change. No assurance is given by the
Company that any capital raising referred to in this presentation will proceed.
To the extent permitted by law, the Company and its respective officers, employees, agents and advisers give no warranty, representation or guarantee
as to the accuracy, completeness or reliability of the information contained in this presentation. Further, none of the Company and its respective officers,
employees, agents and advisers accept, to the extent permitted by law, responsibility for any loss, claim, damages, costs or expenses arising out of, or
in connection with, the information contained in this presentation. Any recipient of this presentation should independently satisfy themselves as to the
accuracy of all information contained herein.
Not an offer in the US: This presentation does not constitute an offer to sell, or a solicitation of an offer to buy, securities in the United States. This
presentation may not be distributed or released in the United States. The securities in the proposed offering have not been and will not be registered
under the US Securities Act of 1933, or under the securities laws of any state or other jurisdiction of the United States. Accordingly, the securities in the
proposed offering may not be offered, or sold, directly or indirectly, in the United States, except in a transaction exempt from, or subject to, the
registration requirements of the US Securities Act and any applicable securities laws of any state or other jurisdiction of the United States.
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Capital Raising Investor Presentation
The offer
Offer terms:
a placement of approximately 8 million ordinary shares (“Placement”) to raise approximately $2.6 million gross proceeds through subscriptions from institutional investors and other sophisticated and professional investors; and
an underwritten 1 for 3 non-renounceable rights issue of approximately 35.7 million ordinary shares to raise approximately $11.4 million gross proceeds (“Entitlement Offer”).
Eligible shareholders on the register at 7.00pm AEST on 11 April 2014 will be able to participate in the Entitlement Offer
Pricing
The Placement and Entitlement Offer will be conducted at the same issue price of 32 cents per share. This is a 9% discount to the last trading price of Centrepoint shares on 31 March 2014
Underwriting
The offer is fully underwritten by Wilson HTM and will be partly sub-underwritten by two directors (John de Zwart and Matthew Kidman)
Other
Parties who received shares under the Placement will be eligible to participate in the Entitlement Offer
Shareholders taking up their full entitlement in the Entitlement Offer may apply for further shares under the top up facility
New shares issued under the Placement and Entitlement Offer will be fully paid and will rank equally with existing shares on issue
Centrepoint’s directors intend to participate in the Entitlement Offer
The Entitlement Offers closes at 5.00pm AEST on 2 May 2014
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Capital Raising Investor Presentation
Vision and strategy
To be a leading and highly respected non institutional financial services
business in Australia
One Centrepoint team:
Delivering consistent, reliable and valued outcomes for clients and customers
Having experienced aligned people who want to deliver the best
Having a respected brand and strong balance sheet
Looking to innovate and find better, simpler ways of doing things
Foundations:
Leading non-institutional premium funder
Leading non-institutional full advice business
Independent
Capable and experienced management team
Leading advocate for non-institutional financial services in AustraliaFor
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Capital Raising Investor Presentation
Group structure
Centrepoint Alliance Limited
Wealth
Division
Funding
Division
Financial
Advice
Associated Advisory
Practices
Professional
Investment Services
Funds
Management
Ventura Funds
AllStar Funds
Platforms and
Administration
Investment Diversity
Premium
Funding
Centrepoint Alliance
Premium Funding
Mortgage
Broking
Australian Loan
Company
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Capital Raising Investor Presentation
Attractive markets with strong positions
Premium Funding Market Wealth Management Market
$5bn market grew at 5% pa between 2012 and 2013
Distributed via General Insurance brokers to SME and
corporate customers
2 large institutional incumbents with otherwise
fragmented market thereafter
Stable and attractive margins
Australian superannuation market of $1.8 trillion
expected to grow at an average of 8% pa over the next
20 years
The nature of the Australian regulatory,
superannuation, welfare, health and tax environment
ensures most Australians would benefit from
independent financial advice
Market controlled by large institutions primarily through
acquisition
Significant regulatory, customer and technology
changes are making independent full advice service
providers a better alternative for Australians to the
institutional options
Attractive margins and scale advantages
Centrepoint Premium Funding Centrepoint Wealth Management
~ $418m pa premiums funded in 2013.
Premiums funded up 23% in 1H14 compared to prior
corresponding period (pcp)
Profitability increasing with scale
Experienced and capable management team
Well supported by banking partner
Largest non-institutional full advice business
New vertically integrated strategy
Experienced and capable management team
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Capital Raising Investor Presentation
Growth opportunities
Premium Funding
Organic Growth
- 25% increase in active brokers in 1H14 compared to pcp
- Continue to expand share of premium funding business from those new brokers
- Benefits from efficiencies and scale
- Grow mortgage broking business
Inorganic
- Target and potentially acquire small and mid sized funding businesses
Wealth Management
Organic Growth
- Over the next 2 years the industry expects a migration of advisers from institutionally owned to independent licensees and service providers
- Increase penetration of in house solutions (platform, investment, risk, mortgages)
- Increase margins through product changes and scale benefits
Inorganic
- Target and potentially acquire additional wealth management capabilities
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Capital Raising Investor Presentation
Capital raising – key objectives
Organic growth The Premium Funding business is expected to
continue to grow requiring capital. Additional equity
investment will give the ability to raise further debt
The Wealth Management business is positioning itself
for growth requiring funding for further capability
development
Australian Financial Services
License Capital Requirements
A Centrepoint subsidiary is currently applying to
become the responsible entity for certain platforms
and products which are likely to have increased
capital requirements
Inorganic Growth Enable Centrepoint to participate in future
consolidation within the Australian financial services
industry
Strengthened Balance Sheet A strengthened balance sheet to support growth
Additional financial flexibility including ability to
manage current and future claims payments
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Capital Raising Investor Presentation
Uses of funds
Item
Premium Funding growth $5m
Wealth Management capability funding $1m
AFSL Capital requirements $3m
Balance sheet strengthening $4.4m
Capital raising costs $0.6m
Total $14m
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Capital Raising Investor Presentation
Risks
Centrepoint is subject to legal claims in the ordinary course of its business, with the bulk of recent claims relating to
legacy advisor issues which occurred between 2004 and 2008. Further amounts may arise beyond existing claims
provisions
Financial services businesses are exposed to a variety of risks arising from process error, fraud, systems failure, security
and physical protection, customer service, staff skills and performance
PIS, a subsidiary of Centrepoint, is subject to an ASIC monitoring program, with a final report by the independent expert
due to be delivered to ASIC in May 2014. An adverse report could lead to damage to the brand and/or penalties from
ASIC
The Centrepoint group’s business relies on various sources of revenue from financial advisers and general insurance
brokers. Centrepoint’s performance would be impacted if a significant number of these parties fail to meet their
obligations or terminate their arrangements with Centrepoint
The financial services and insurance premium funding industries are competitive markets, with several participants,
including those with larger market shares and resources than Centrepoint
Changes in legislation, government policy or regulation could adversely impact Centrepoint’s business performance. In
particular, proposals to make regulatory and legislative changes to the Future of Financial Advice (FOFA) legislation that
regulates the industry in which Centrepoint operates could increase Centrepoint’s regulatory and other costs
Centrepoint’s existing business has several key personnel. Any loss of these individuals may result in a loss of revenue
and consequential impact on Centrepoint’s business
Centrepoint is also subject to general risks including changes to taxation, accountings standards, exchange rates, interest
rates and other general market conditions
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Capital Raising Investor Presentation
Claims provisioning
• The provision for pre July 2010 advice claims is reviewed by external actuaries as at 30 June annually
• When calculating the provision, sufficient new data is required to update the projections given the high
variability of short term data. The Board has determined to therefore review the provision annually
• The primary factors which impact on the calculation of the provision includes new claims received,
settlements and average fees
• The number of new claims received on a quarterly basis can be very volatile. The number of new claims
received in the Sep 13 and Mar 14 quarters were above expected and were below expected in the Dec
13 quarter. Depending on the actuarial reports, there is a risk that the provision will increase
• Management have a number of initiatives underway to minimize the total cost of claims, including fees
including:
‐ Managing claims in-house
‐ Settling claims directly with the claimant or via conciliation with a mediator
‐ Resolving claims faster
‐ Obtaining co-contributions from advisers for claims costs
• The Board received and declined an offer for ‘stop loss’ insurance cover for these liabilities from Lloyds
UK in February and March 2014
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Capital Raising Investor Presentation
Premium Funding highlights – YTD
Financial (1H14) PBT up 32% to $2.5m
Premiums funded up 23% to $254m
Volumes growing at circa 3 times market rate
25% increase in active brokers in 1H14 compared to pcp
Operating Productivity gains extracted from prior year IT investment
Further capacity available to increase scale benefits
Customer experience further improved
Strong credit risk and expense management maintained
Strategy and people Successfully growing east coast business, up 38% pcp
Reducing average loan size: good for profitability and risk
profile
Building east coast sales team
Started externally facilitated staff development program
focussing on growth
Stable team with long tenure
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Capital Raising Investor Presentation
Wealth Management highlights – YTD
Financial (1H14) Cost reduction program executed delivering $3.6m in
annualised savings
Disposed non-core assets i.e. Malaysian advice business,
GPS
Operating Successful re-engagement with advisers
Claims management process transformed
New financial adviser desk top CRM system implemented
Significant strengthening of proposition and service
Legacy claims insurance offer received and declined
AAP professional indemnity program launched
Strategy and people Strengthened team
Customer centric capability and culture change program
underway
A new staff incentive scheme introduced
Strengthening and promoting Centrepoint brand
Acquired remaining 45% of Associated Advisory Practices
Wealth strategy designed. Implementation underway
Regulation Completed transformation of professional standards team and
processes
Ongoing monitoring program progressing well
Regulatory changes (FOFA) implemented For
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Capital Raising Investor Presentation
Experienced management
driving transformation
John de Zwart, Managing Director
20 years executive experience in Australian, UK and NZ financial services companies including TAL, AMP, Credit Suisse
and PricewaterhouseCoopers
Bob Dodd, CEO Premium Funding and ALCo
30 years executive experience in leading and developing UK and Australian lending distribution companies including
Lombard (Nat West Bank), GE Consumer Finance & GE Capital Commercial Finance
Soula Cargakis, CEO Associated Advisory Practice
27 years executive experience growing Australian wealth management companies including Aviva and Navigator and
founder of AAP
Anne Fitzgerald, General Manager Strategic Initiatives
20 years executive experience providing Australian wealth management and financial services consulting including AMP,
MLC and PricewaterhouseCoopers
Mat Walker, CEO Investment Diversity and Ventura
28 years executive management experience in financial services including Norwich Union Navigator and co-founder of
Investment Diversity
The executive team have a track record in competing in institutionally dominated markets,
transforming their markets and creating significant shareholder value
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Capital Raising Investor Presentation
Capital management initiatives
Proposed Dividend Program
Board has an intention to recommence a dividend program effective FY 2014
Targeting a 2.2c fully franked dividend to be paid from 2014 profits in September 2014
Shares issued under the Placement and Entitlement Offer will be entitled to the dividend (if
paid)
Assumes normal trading conditions between now and the time the dividends are intended
to be declared
Thereafter dividends to be determined semi-annually based on the profit of the group
The Board recognises the strong support demonstrated by shareholders since the
GFC and intends to recommence a dividend program
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Capital Raising Investor Presentation
Continued strong performance and market share growth in Premium Funding
Grow revenues off the strength of Wealth Management’s independence and
quality service proposition
Deliver the next stage of ‘SMART practice’ - a combination of technology and
advice delivery solutions designed to make advisers’ practices simpler and more
profitable
Respond to wealth market changes as industry responds to post FOFA
environment
Consider inorganic growth opportunities
ROutlookF
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Capital Raising Investor Presentation
Pro forma financial statements31 Dec 2013
Historical
(unaudited)
PlacementEntitlement
Offer
31 Dec 2013
Pro Forma
Historical
(unaudited)
Cash and cash equivalents 7,518 2,453 10,944 20,915
Receivables & other assets 19,686 19,686
Interest bearing receivables 152,367 152,367
Total current assets 179,571 2,453 10,944 192,968
Receivables & other assets 2,834 2,834
Intangible assets and goodwill 5,798 5,798
Deferred tax assets 6,512 6,512
Total non-current assets 15,144 0 0 15,144
Total assets 194,715 2,453 10,944 208,112
Trade and other payables 47,421 47,421
Interest bearing liabilities 108,276 108,276
Provisions 8,808 8,808
Total current liabilities 164,505 0 0 164,505
Interest bearing liabilities 364 364
Provisions 11,080 11,080
Total non-current liabilities 11,444 0 0 11,444
Total liabilities 175,949 0 0 175,949
Net assets 18,766 2,453 10,944 32,163
Equity
Contributed equity 26,385 2,453 10,944 39,782
Reserves 306 306
Accumulated losses -8,094 -8,094
Equity attributable to
shareholders18,597 2,453 10,944 31,994
Non-controlling interests 169 169
Total equity 18,766 2,453 10,944 32,163
$’000
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Capital Raising Investor Presentation
Unrecognised Tax Assets
Franking credits
- Ability to pay full franked dividends to:*
$29.2m
$68.1m
Tax value of revenue losses not recognised
- Potential taxable income that could be absorbed1*
$15.0m
$49.9m
Tax value of capital losses not recognised
- Potential profit on asset sales before paying tax
$8.7m
$29.1m
Fully franked dividends can be paid from current profits whilst tax losses are being
absorbed
1. Includes $36.3m of Transferred Revenue Losses which are subject to taxation provisions that will significantly slow the rate at which
this benefit would otherwise be recognized.
* The ability to utilise both franking credits and revenue losses is subject to the Company generating profits to allow those losses to be
absorbed and for dividends to be paid.
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Capital Raising Investor Presentation
Timetable
Activity Date*
Announcement of the Entitlement Offer 3 April 2014
Ex-date 7 April 2014
Settlement of the Placement 9 April 2014
Allotment and trading of new shares issued under the Placement 10 April 2014
Record Date for Entitlement Offer (7.00pm (AEST)) 11 April 2014
Information Booklet and Entitlement & Acceptance Form despatched 15 April 2014
Entitlement Offer opens 15 April 2014
Closing Date for acceptances under Entitlement Offer (5.00pm (AEST)) 2 May 2014
New Shares quoted on deferred settlement basis 5 May 2014
Company notifies ASX of under subscriptions 7 May 2014
Allotment of New Shares under the Entitlement Offer 12 May 2014
Despatch of holding statements for New Shares issued under the Entitlement Offer 13 May 2014
Normal ASX trading for New Shares issued under the Entitlement Offer commences 13 May 2014
*This timetable is indicative only and subject to change. The Directors may vary these dates, in consultation with the underwriter, subject to
the Listing Rules. An extension of the Closing Date will delay the anticipated date for issue of the new Shares
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