CEO LETTER 1H2021
I am pleased to report on the Company’s continued progress in the half year to 31 December 2020.
A dominant theme for this reporting period is an ongoing caution concerning the impact of the
global coronavirus pandemic, balanced with considered optimism.
CountPlus has in place the capital, talent and processes to focus on selective growth in its chosen
markets with deliberate assessment of risk and opportunity.
It is pleasing to report both the resilience of the CountPlus financial position and the continued
improvement in the operations of Count Financial.
As the 2020 calendar year taught us, we must remain alert to the emergence of unknown risks
and to also be ready to mitigate known risks. Nobody could foresee the terrible global impact
of the COVID-19 pandemic that marked most of the 2020 calendar year.
Everyone can now see the benefit of strong business foundations, of relying on core values, robust
processes, of taking care of others in our communities, and remaining vigilant to new opportunity,
with an eye to further potential downside risks.
CountPlus sees measures of risk and opportunity on the horizon across the full spectrum of our
activities and within the uncertainties of overarching global, domestic and industry economics.
I am pleased to address the latter in some detail in this CEO Letter.
CEO LETTER 1H2021 2
Key financial numbers for the 1H21 period demonstrated
a pleasing upward trend. Earnings, profit and cash at
hand each increased on the prior (1H20) period. Excluding
government assistance to our firms EBITA was $6.176M
which represents an increase of 21% on prior year.
It should be noted that the CountPlus parent entity
received $165,000 of jobkeeper. The remaining jobkeeper
funding was paid to partner firms, being small business
entities with employee shareholders. These firms suffered
operational disruption during the COVID pandemic
and jobkeeper enabled the retention of employees and
assisted these firms to navigate the challenges created by
the pandemic. The impact of COVID-19 remains a watching
brief for CountPlus and our partner firms. We remain
vigilant to the potential risk that future COVID-19 related
health directives may have on our core SME client segment.
We have taken a prudent approach to provisioning for
work in progress and accounts receivable and have
increased our level of provisioning compared to prepandemic levels.
Net profit attributable to shareholders was $4.082M or a
65% increase on the $2.472M result from the same period
last year. Likewise, cash at hand to CountPlus increased by
37% against the 2020 first half result, boosting available
cash reserves to $27.638M.
The results represent steady ongoing financial
improvement, delivered by disciplined financial controls,
diligent operational process, and a focus on deliverables
in core businesses.
The Company also managed six tuck-in acquisitions
throughout the six months to 31 December 2020. The
build out of the Company’s Merger & Acquisition (M&A)
capabilities and process, and the execution discipline of
the M&A team, signals our intent for strategic growth.
Complementing our capacity and balance sheet strength
are the additional levers of scale and client-centric culture.
Maintaining and optimising these elements are a constant
internal focus for the Company and its executive team.
Selective growth provides scale benefits. Balance sheet
strength in turn provides financial capacity to attract
and retain high-quality additional firms and advisers to
CountPlus and Count Financial. The culture of client-centric
focus within the Company, our partner firms and associates
is a universal benefit that we prize, nurture
New entrants to the combined CountPlus community
join a cohort of firms operating at strength through
shared best practice. The Owner, Driver – Partner model is
working as it should to encourage and enable passionate,
proactive involvement from the talent in our firms.
The Count Financial network, though purposely fewer
in number today than when acquired by CountPlus
on 1 October 2019, is delivering improved earnings
and profitability – due in large part to identifying and
removing inefficient or untenable past practices and
flawed economic models.
We have seen early gains from our combined efforts.
Count Financial made headway during this 1H21 period
increasing its earnings to $1.601M (EBITA) or a 74% increase
on the prior corresponding period of $0.926M. However,
it must be noted that 1H21 saw the end of grandfathered
revenue part way through this reporting period. We expect
this transition to negatively impact earnings in 2H2021.
The executive team is focused on recruitment of quality
advisers to our ‘clean’ model and the continued
improvement of Count Financial operations, focusing
on the efficient and sustainable delivery of financial
advice by partner firms.
As a further solid reflection of maintained Company
discipline, average profit margin for CountPlus partner
firms remained steady for the 1H21 period at 20% after
the exclusion of Federal Government payments.
Another pleasing result was lock-up, or the statistic we
use to track the number of days from a professional firm
starting a job, completing it, invoicing and being paid.
This ‘cashflow health indicator’ remained steady at 81
days, a commendable achievement given the impact
of lock downs on small to medium sized businesses in
predominantly key eastern States like Victoria, Queensland
and NSW battling second wave infections of the virus.
CountPlus is pleased to announce that it will pay a fully
franked 1.25 cents per share dividend for the first half
of 2021. This is consistent with the dividend paid in the
prior (1H20) year.
The Company is targeting a dividend pay-out ratio of 60%
to 90% of maintainable net profit after tax attributable to
This important financial milestone is a welcome outcome
to the Company’s adherence to a simple underlying
operational philosophy: focus on values-based culture,
build leaders and talent in our firms, have robust systems
and disciplined processes in place, and a consistent,
conservative approach to build a better CountPlus.
The Company has built a position of relative market
strength, and is now poised for further strategic,
Part of this strategic endeavour for CountPlus is to look
to traditional places for growth – aligned advice and
accounting/advice firms and practitioners. However,
we are also looking further afield for investment and
growth opportunity in what we describe as ‘core-related’
businesses or adjacent service lines.
This may mean, for example investment into value
chain activities (like information technology) that
directly and positively impact our core firm activities
and earnings drivers.
Investment into activities with a regulatory aspect,
or that enable or enhance core firm activities, are a
key and important element in this strategic approach.
The Company has built a position of relative
market strength, and is now poised for
further strategic, measurable growth.
CEO LETTER 1H2021 4
in Financial Advice
‘Building a better CountPlus’ paraphrases our collective
journey to date. It is also our mission ahead. Risk is
abundant during these times, but we aim to address
risk through implementing a conservative, systematic
and process-driven model.
Opportunity derives from many sources: industry
aggregation; the flight of fewer remaining ‘institutionallyowned’ advisers to quality homes; unmet consumer
demand for high-quality advice; the increased use of
digital technology for efficiency, client centric advice;
and the overdue changing of the guard in terms of
grandfathered revenue, product commission structures
and portfolio administration margins that for too long
characterised past industry practices and favoured the
economics of conflicted product distribution models.
The opportunity that captures much of our current
attention is the fundamental re-writing of the economic
model upon which sustainable, consumer-focused
and regulatory compliant financial advice will prosper
Better foundations are being laid to address this structural
challenge and opportunity in Australia in 2021 and beyond.
CountPlus stands ready to lead in this respect: to respond
and adapt rapidly to each of these specific and interrelated
opportunities for growth.
Sustainability is paramount, in contrast to the product
subsidy priority of the sector’s past industry practice.
Some two decades ago the arrival to the wealth and advice
sector in Australia by institutional (bank) owners prompted
a race to the bottom. In building market share via product
‘sales and distribution’ channels, losses were incurred in
running unprofitable advice business units. In other words,
offsetting losses on advice against upstream profits made
on product (investment and insurance products).
Today, we have witnessed the legacy of these untenable
industry stress points: the exit of large banks from financial
advice, the concurrent rise in regulation and the scrutiny
of a Royal Commission, the uplift in education and ethical
standards, fewer adviser numbers and gaps in the supply
side of advice relative to the number of Australians
However, with institutions having mostly exited the
vertically integrated (bancassurance) model of advice, the
remnants of their institutional influence on the economic
models of advice are also being dismantled and leaving
‘clear air’ for a better way. This ‘clear air’ will also enable
technology solutions to flourish as advice businesses are
disentangled from institutional bureaucracy and allowed
to think outside the square.
Moreover, focus on specific legacy issues – like
transparency in the pricing of the risk of advice failures
and poor practice – has become prevalent. Where once
cases of advice malpractice or failure were borne by the
shareholders of the institution without substantive cost
to the adviser, the holistic ‘safety net’ must now be priced
into a user pays approach. Transparency in liability and
risk pricing is a significant move forward in order to create
a cleaner, more functional advice (not product) licensee
and user pays advice structure.
The Company believes the emergence of new, sustainable
models will take root or be allowed the space and
opportunity to flourish. This market opportunity view is
shared by several expert market observers and analysts.
US-based management consulting firm Oliver Wyman in
its recent (January 2021) research report ‘Future of Financial
Advice’ characterised the opportunity for local market
participants to embrace a ‘Renaissance’ period for advice in
Australia, despite some external perceptions of a collapse
or at least fracturing of the sector.
For, as the Oliver Wyman report authors’ foreword
said: ‘the current period represents an opportunity
for rebuilding a sector that better meets customer and
regulatory outcomes and is economically sustainable.’
CountPlus is doubling down on advice during this time,
CEO LETTER 1H2021 5
As the challenges of the pandemic
continue to drive client inquiry and
assurance, household wealth across
Australia continues to grow.
A leaner, smarter Count Financial (Count) is driving hard
towards its goal of being the natural ‘clean’ advice model
for quality financial advisers. The business is experiencing
fewer headwinds, with positive signals for growth.
Overall adviser numbers have been reduced – deliberately
– as Count Financial aligns its value proposition towards
the ’clear air’ for financial advice described above, the
benefits of discipline and focus are being observed.
In terms of known roadblocks, Count Financial has entered
a period of cessation of grandfathered commissions and
product rebates, and the start of a wholly fee-based
and user-pays model. Historically, these grandfathered
commissions and product rebates have represented 47%
of Count Financial revenue. As outlined above, this is a
necessary and purposeful shift. The transition is now fully
integrated in our operating model with our firms and
this shift may have a negative financial impact in the
second half. We are focused on mitigating this earnings
shift, in the medium-term, through growth in quality
adviser numbers and continued efficiency gains.
Some efficiency yields are already evident. For example,
Count Financial halved the amount of time taken to
produce client advice documents compared with a year
ago. The number of advice documents produced has in
fact increased by 37% between the same period, and the
business recorded a 73% increase in advice documents
produced per financial adviser.
All this while Count Financial adviser numbers fell (from
284 on 31 December 2019 to 238 on 31 December 2020).
However, the Company expects a further 40+ advisers
to join the revamped Count Financial business in the
second half of this financial year. We have a strong
pipeline of 100+ potential new advisers seeking to join
We know that demand for quality, efficient advice is not
diminishing. As the challenges of the pandemic continue
to drive client inquiry and assurance, household wealth
across Australia continues to grow.
At a macro level, financial advisers will seek to service
both an aging population and those involved in
the intergenerational wealth transfer occurring
CEO LETTER 1H2021 6
The Company has identified several key opportunities
evident in current market dynamics for which it is
equipped to leverage.
• The ability to invest in underlying earnings of core
firms that generate revenue through the delivery
of client-centric accounting and financial advice;
• The ability to ‘tuck-in’ client fee revenue purchased
from smaller firms. Tuck-ins have been highly earnings
accretive for partner firms and in the large part have
been funded from available cash and the deferred
consideration structure, i.e., where consideration
is paid over an agreed number of years based on
client fee retention hurdles;
• Create a logical home for quality advisers to join
Count Financial and generate earnings through
our ‘clean’ licensee leverage model;
• Investment into core-related activities that are
concerned with inputs / outputs (downstream) into
core firm related activities. These investments will
have a subscription style revenue or margin share
CountPlus has proven its ability to act and resilience
to the unforeseen stresses of the global pandemic,
the consequential domestic economic challenges
and to the direct industry risks mentioned in this letter.
CountPlus will thrive as we continue to align our people,
partner firms and new business acquisitions with the
CountPlus vision of shared values, mutual success, and
our strong sense of community.
Thank you for your support as a shareholder in CountPlus.
courtesy of Bell Direct
i hold CUP
has been a relatively wild ride considering in is an accountancy business