1. 74.0k
    Posts

    Dear
    shareholder
    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
    and protect.
    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.
    Strong
    balance sheet

    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
    CountPlus shareholders.
    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,
    measurable growth.
    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.
    Dividend
    payment
    Core-Related
    Strategy
    The Company has built a position of relative
    market strength, and is now poised for
    further strategic, measurable growth.
    CEO LETTER 1H2021 4
    Opportunity
    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
    in Australia.
    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
    seeking advice.
    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,
    not retreating.
    CEO LETTER 1H2021 5
    Count Financial
    leaner, smarter.
    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
    Count Financial.
    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
    throughout Australia.
    CEO LETTER 1H2021 6
    Continuing
    strategic
    growth
    The Company has identified several key opportunities
    evident in current market dynamics for which it is
    equipped to leverage.
    These include:
    • 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
    style revenue.
    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
    =====================================================================

    DYOR

    DYOR

    i hold CUP

    has been a relatively wild ride considering in is an accountancy business

Your browser is too old for TopStocks and not secure. Please update your browser