Centrepoint Alliance : 1H FY21 Results Presentation

DISCLAIMER

This presentation is for general information purposes only and should be read in conjunction with the Half Year Financial Report for the six months ended 31 December 2020 and the Appendix 4D lodged with the Australian Securities Exchange by Centrepoint Alliance Limited (ASX:CAF) on 26 February 2021. This presentation does not provide recommendations or opinions in relation to specific investments or securities.

This presentation has been prepared in good faith and with reasonable care. Neither CAF nor any other person makes any representation or warranty, express or implied, as to the accuracy, reliability, reasonableness or completeness of the contents of this presentation (including any projections, forecasts, estimates, prospects and returns), and any omissions from this presentation. To the maximum extent permitted by law, CAF and its respective officers, employees and advisers disclaim and exclude all liability for any loss or damage (whether or not foreseeable) suffered or incurred by any person acting on any information (including any projections, forecasts, estimates, prospects and returns) provided in, or omitted from, this presentation or any other written or oral information provided by or on behalf of CAF.

It is not intended that this presentation be relied upon and the information in this presentation does not take into account your financial objectives, situations or needs. Investors should consult with their own legal, tax, business and/or financial advisers in connection with any investment decision.

All numbers are as at 31 December 2020 unless otherwise stated. Numbers may not add up due to rounding.

The release of this announcement has been authorised by the Board of Directors.

Our purpose is to enable the Australian community's trust in financial advice, because good advice promotes wellbeing

$70.6m15%

Gross revenue

on 1H FY20

$2.1m$1.8m

on 1H FY20

EBITDA (excl. legacy claims)

$14.7m107%

Cash (at 31 December 2020)

on 1H FY20

3c 1c

SpecialOrdinary

Dividend

(fully franked)

paid 26 February 2021

Core business

New opportunities

Revenue extensions

• • Leading provider of licensing, advice and business services, and advice technology solutions to Australian financial advisers

  • • Largest scale service provider for self-licensed advice firms with new offering launched

    • • Leverage advice technology capability with continued extensions through:

• • Licensed financial adviser market of +16,000, with scale advantage now being realised for larger licensees

  • • ~1,900 self-licensed firms addressable market

    • ‒ Partnership with Intelliflo and Enzumo for Australian market entry

    • ‒ 'reg-tech' exploration

• • 109% increase in underlying AR revenue since 1H FY19, transitioned to recurring revenue model

  • • Dealer-to-dealer wholesale licensee service offering continued early success with another major contract signed in 1H FY21

  • • Continue to aggressively pursue core and extension inorganic opportunities

• • Increasing consolidation opportunities to drive organic and inorganic growth

CENTREPOINT ALLIANCE IS A NATIONAL ADVICE AND BUSINESS SERVICES FIRM WITH A SCALABLE CORE OFFER

Sources: ASIC Financial Advisers Dataset as of 28/01/2021; Centrepoint Alliance analysis. Per ASIC register, Centrepoint Alliance advisers add up to 314 (Professional Investment Services & Alliance Wealth). Difference between the ASIC 4 register and the AR reported number on slide 12 is attributed to Centrepoint Alliance employees and timing adjustments. Self licenced adviser numbers no longer include four large licensees previously utilising CAF services through legacy rebate arrangements, that were represented in this diagram in previous results announcements, defined as Self licensed (XL)

FINANCIAL RESULTS

FINANCIAL RESULTS SUMMARY

For the period

1H FY20

2H FY20

1H FY21

($m)

($m)

($m)

Gross Revenue

Adviser fees and commissions Gross Profit

Management Expenses

EBITDA (excluding Legacy Claims)

Cost to Income Ratio Legacy Claims EBITDA

Depreciation, Amortisation, Impairment, Finance Costs

Profit/(Loss) before Tax Tax

Net Profit/(Loss) after Tax

61.5

(47.4) 14.1

(13.8)

0.3

98% (0.7)

(0.4)

(0.8)

(1.2)

(0.3)

(1.5)

Note : Statutory expenses down 7% on PCP (14% excluding Enzumo acquisition)

69.5 70.6

(54.3) (55.1) 15.2 15.5

(11.8) (13.4)

3.4 2.1

78% 86% (2.9) 0.0 0.5 2.1

(1.5) (0.9)

(1.0) 1.2 0.5 0.4

(0.5) 1.6

Sources: Centrepoint Alliance financial analysis; FY20 annual results and 1H FY21 half yearly results.

• • Gross revenue up $9.1m (+15% PCP) due to higher advice fees & Enzumo integration, partially offset by rebate run-off

• • Gross Profit up 10% on PCP mainly due to Enzumo acquisition

• • Management expenses down 3% on PCP (10% excluding Enzumo acquisition)*

• • Cost to income down to 86% due to advice and inorganic revenue growth, and decrease in employment, travel and professional costs

• • EBITDA (excl. legacy claims) of $2.1m up $1.8m on PCP due to Gross Profit from advice fee growth whilst final rebates run off, and core employment costs and additional annual leave taken (COVID) savings realised

• • PBT of $1.2m up $2.4m on PCP due to EBITDA driven by revenue growth, management fee expense savings, and nominal claims expenses ($17k)

REVENUE AND EXPENSE ANALYSIS

Revenue movement ($m)

$2.3

$2.0

1H FY20

Adviser FeesRebates

Expense movement ($m)

InvestmentEnzumoOther

1H FY21

Margin

$13.8

$0.9

1H FY20

Employment Professional

FeeTravel & marketingOthers

Sources: Centrepoint Alliance financial analysis; FY20 annual results and 1H FY21 half yearly results.

Key revenue movements (PCP):

• • Adviser Fees up $2.3m with fee final step up in July 2020

• • Rebates down $2.0m due to grandfathered runoffs, with platform rebates ceased from 1 January 2021

• • Investment Solutions down $0.3m due to lower net inflows and competitive pricing pressure

• • Enzumo acquisition the primary driver of net revenue growth of $1.3m

Enzumo

1H FY21

Key expense movements (PCP):

• • Excluding impact of Enzumo acquisition, down $1.4m (10%) mainly driven by:

  • • Employment down $0.9m (10%) with headcount down from 107.5 FTE 1H FY20 to 90.6 FTE 1H FY21

  • • Professional fees down $0.4m (30%) due to lower consulting and audit costs

  • • Travel and Marketing down $0.3m (52%) due to lower spend with COVID-19 restrictions

• • Enzumo 8.7 FTEs primary driver of $1m managementexpense increase

BALANCE SHEET

For the period ended	FY20 ($m)	1H FY21 ($m)
Cash & Term Deposits 12.2	14.7
Trade and Other Receivables 7.8	7.1
Loans Receivable 3.6	1.2

3.6 3.3

Intangible Assets and Goodwill Other Assets

Total Assets

Trade and Other Payables Claims Provision

Other liabilities

Total liabilities Net Assets

Net Tangible Assets

Net Tangible Assets (cents per share)

5.4 6.0

32.6 32.4

9.9 9.7

3.0 2.1

4.8 4.0

17.7 15.8

14.9 16.5

8.7 10.3

5.9 7.1

• • Cash of $14.7m up $2.5m on June 2020 due to NEOS Life repayment of $2.4m*

• • Cash from operations up $1.8m offset by claims settlements of $0.9m

• • Reduction in claims provision driven by $0.9m legacy settlements relating to extended claims period by AFCA that closed June 2020

• • Net Assets increased due to net profit after tax generated and some working capital timing benefits

Cash Balance (at period end)

Jun'18

Dec'18

.Note: *Neos life divestment announced in ASX release 12 December 2018 'Centrepoint announces changes to its investment in Australian Life Development pty ltd' Sources: Centrepoint Alliance financial analysis; FY20 annual results and 1H FY21 half yearly results.

$14.7mJun'19

Dec'19

Jun'20

Dec'20

CAPITAL MANAGEMENT (OVER CALENDAR YEAR 2020)

• • Audited cash on hand 31 December 2020 -

  $5.3

  $1.8

  1H FY20 Tax Deferral Neos Life

  Net Cash Claims Enzumo

  Closing Cash

  Outstanding Principal & Flow From Settlements Acquisition

  (Covid)Interest ReceivedOperations

  (Net of Cash Acquired)

  Sources: Centrepoint Alliance financial analysis; FY20 annual results and 1H FY21 half yearly results.

  $14.7m

• • Deferred COVID tax payments to be settled August 2021

• • Fully franked 3 cents special and 1 cent interim ordinary dividends declared 2 February 2021 - $5.8 million distribution

• • Franking credits of $15.0m available after dividends paid 26 February 2021

• • Leveraging strong share price appreciation and balance sheet flexibility to actively pursue consolidation and strategic options opportunities to create value

Share Buyback

1H FY21 Closing Cash

BUSINESS RESULTS

THE THREE-YEAR TRANSFORMATION OF CENTREPOINT ALLIANCE HAS DELIVERED A SCALABLE BUSINESS MODEL WITH REVENUE CERTAINTY

Gross Revenue ($m)

70.6

Highlights

60.2

1H FY19

1H FY21

• • 17% increase in gross revenue since 1H FY19

• • 109% increase in underlying AR revenue since 1H FY19, transitioning to recurring fee for service revenue model

1H FY20

13.8

Expenses ($m)

13.8

1H FY19

• • Reduced costs while transforming the business through Strategic Refresh, with minimal capital investment

  1H FY21

• • 90.6 FTE 1H FY21, reduced from 109.4 FTE 1H FY19

• • Reduction in corporate and support staff, with reinvestment in front-line support for advisers, despite overall FTE reduction

1H FY20

Cash ($m)

14.7

1H FY21

1H FY19

1H FY20

Sources: Centrepoint Alliance financial analysis; FY19 & FY20 annual results and 1H FY21 half yearly results.

• • 99% increase in cash since 1H FY19

• • Simple and clean balance sheet, with no debt

• • Business model certainty and strong cash position has seen a return to paying dividends

CENTREPOINT ALLIANCE CONTINUES TO ATTRACT QUALITY FINANCIAL ADVISERS TO ITS OFFER, WITH 27 NEW ADVISERS JOINING IN 1H FY21

Industry exits result in flat net growth

…despite consistent adviser growth

…with improved revenue certainty

Departed (Oct 18 - Dec 20)

27 new advisers

12-month adviser movement

55

1H FY20

New RecruitsExited

(36) 2H FY20

Organic GrowthCeased as AR

(36) 1H FY21

Wholesale

Improving adviser quality

Retained (pre-Oct 18)Added (Oct 18 - Dec 20)

Fees as a % of revenueRevenue per adviser

Sources: ASIC Financial Advisers Dataset as of 28/01/2021; Centrepoint Alliance analysis for AR's on licence as of 15 Feb 21; difference between the ASIC register and the above reported number is attributed to Centrepoint Alliance employees and timing adjustments

$366k

CENTREPOINT ALLIANCE IS WELL-POSITIONED IN A RAPIDLY EVOLVING INDUSTRY WHERE CONSOLIDATION IS IMPERATIVE FOR SURVIVAL

Licensees are facing significant structural pressures

The industry has become increasingly fragmented

Licensees1 vs Advisers

• • Adviser market has been contracting over the last 3 years largely due to regulatory reform, structural, business model and generational change

• • Regulatory reform, increasing needs of advisers and Professional Indemnity insurance are driving a significant increase in licensee costs

• • Intense competition is placing downward pressure on licensee revenue at the same time

Advisers (# Authorised Reps.)

85

83

76

1H FY17

1H FY18

1H FY19

Licensees

(# AFSLs)

254

254

308

Consolidation likely to accelerate and leverage the benefits of scale

Note: 1. Licensees excluded those self-licensed (1-10 ARs). 2. Peer Group includes large licensees, excluding IOOF and AMP Sources: ASIC Financial Advisers Dataset as of 28/01/2021; Centrepoint Alliance analysis

Ave. adviser per licensee

Centrepoint Alliance in prime position to benefit from industry change

• • Leading licensee with growing adviser market share within Top 10

25,000

20,000

peer group2

15,000

10,000

• • Recurring fee-based business model positioned to benefit from economies of scale

  5,000 • -

  Scalable advice service platform

1H FY20

1H FY21

• • Advice technology capability scalable across licensees and advisers

  269

  237

• • Strong capital position allows the Group to capitalise on market opportunities

WHOLESALE LICENSEE OPPORTUNITY OFFERS A REVENUE POOL POTENTIAL OF $30-60 MILLION IN LICENSEE FEES

Market opportunity - revenue pool of $30-60 million

Opportunity in small licensee segment

(11-250 ARs)

CAF offer and economics - to pass on to smaller licensees

Small licensees (11-250 advisers)

Economies of scale

Licensees

Costtoserve(peradviser)

1 10

250

Advisers

Licensee size (# of advisers)

Sources: ASIC Financial Advisers Dataset as of 28/01/2021; Centrepoint Alliance analysis; Wholesale services potential estimated between $500,000 and $1,000,000 or ancillary and technology services required or potential for outsourcing

STRONG EXECUTION ACROSS STRATEGIC INITIATIVES IN THE FINAL YEAR OF STRATEGIC REFRESH

•  Continue to attract and retain quality advisers

•  Leverage scale advantage through enhancing service experience for advisers

•  Migrate to single use systems for all adviser engagement

•  Prepare advisers and licence for final Royal Commission changes

•  Continue to grow and invest in our people

•  Reconfigure the (AAP) self-licensed market offering and take to market

•  Explore reg tech options and make decision on build, buy, or partner

•  Continue to invest in data-led insights for advisers to help them run better businesses


Continue to review our portfolio of
businesses

 Enhance Centrepoint Lending	Aggressively pursue inorganic
Solutions offer (2H FY21)	opportunities

•  Complete Enzumo integration

•  Create a tailored and distinct wholesale offering for small and mid-sized licensees

 Review salaried advice market entry options (2H FY21)

BUSINESS MODEL DELIVERS SERVICING AT SCALE, LEADING TO HIGH RETENTION AND SUBSCRIPTION LIKE REVENUE FROM SATISFIED ADVISERS

~8,000 enquiries were resolved in Oct - Dec 20

Adviser retention flywheel

Sources: Centrepoint Alliance servicing data and analysis; Centrepoint Alliance satisfaction measures from Centrepoint Alliance Adviser Survey July 2020 independently conducted by Woolcott Research. Satisfaction measured as greater than or equal to 7 / 10.

Total Enquiries

Number of enquiries by team (Oct-Dec 2020)

3,500

3,000

2,500

2,000

1,500

1,000

500 -

Advice Revenue

Practice TransitionsTechnicalEducationGovernanceClient EngagementResearch

More responsive more satisfied

Response time vs Client satisfaction

3.0

2.5

2.0

1.5

1.0

0.5

0.0

Research

Client Engagement

EducationGovernanceAverage of # Days to ResolveSatisfactionAdvice Revenue

8.5

Technical Advice

8.0

7.5

7.0

6.5

erocS noitcafsitaS tneilC

LEADING ADVICE TECHNOLOGY OFFERING WITH THREE YEARS OF INVESTMENT IN CAPABILITIES, DATA, TEAM AND PARTNERSHIPS

CentrepointAlliance AdviceTechnologyinvestments

Centrepoint Alliance Xplan site investment

Centrepoint AI launch (live practice management)

Intelliflo partnership commences

acquisition

All service teams migrated to Salesforce, 8,000 enquiries tracked in Q2 FY21

Outlook

Centrepoint Alliance Advice Technology capability

• - Breadth of specialist staff

• - ~20 staff (incl. Enzumo)

• - Multiple vendors

  FY18

  1H FY19

  Data team & data warehouse build

  2H FY19

  1H FY20

  2H FY20

  1H FY21

  Centrepoint Connect launch

  (adviser

  intranet hub)Centrepoint Connect instant support for financial advisers during

  COVID-19

  Compass (Xplan site)

  integration with third party Advice Technology applications

• - Leverage internal data platform

• - Reg-tech exploration

• - Advice automation and digitisation

CentrepointAlliance AdviceTechnologypartnerships

ADVICE TECHNOLOGY EXTENSION THROUGH PARTNERSHIP WITH INTELLIFLO, PROVIDING MORE CHOICE TO FINANCIAL ADVISERS

Centrepoint Alliance Group

Centrepoint Alliance advisers piloting first market release of IO, in addition to Enzumo appointed as the Australian implementation partner for Intelliflo

• • Intelliflo memorandum of understanding signed in 2019

• • Pilot Centrepoint Alliance firms engaged for Intelliflo Australian market testing and readiness

• • Centrepoint Alliance committed to providing Financial Advisers choice in best of breed advice technology solutions

• • Continued support for 'Compass', Centrepoint Alliance's

Ce

industry leading Xplan offering

CENTREPOINT ALLIANCE HAS A MARKET LEADING OFFER ACROSS MULTIPLE MARKET SEGMENTS, WITH STRONG GROWTH AMBITIONS

Market segments

Licensee

Self-licensed

Wholesale LicenseeRevenue extensions

Core business

Extension

New offer

New growth

Definition

Target segment

Client need

Market size1

1H FY21

Centrepoint Alliance Advisers2

2 - 3 year

Centrepoint Alliance ambition

Large licensee for individual advice practices	Service provider for small self-licensed firms	Licensee and tailored wholesale services and solutions for larger firms	Revenue opportunities in addition to core licensing and advice offer
Small advice firms (1-10 advisers) Medium advice firm (10+ advisers) Licence (AFSL) to operate Bundled advice & business services	Small advice firms (1-10 advisers) Unbundled advice services & solutions	Small sized licensee (30-100 advisers) Outsourced services at scale, reducing fixed costs of licensee	Revenue expansion within existing Centrepoint Alliance network Outsourced workforce services Technology solutions Business services
Advisers - 15,943	Firms - 1,954 Advisers - 5,074	Licensees - 70 Advisers - 3,858	Market size based on 2 yr CAF ambitions3 : ~600 firms ~2,000 advisers
Advisers - 308	Firms - 149 Advisers - 807	2 wholesale contracts in place	Firms - ~70 Advisers - ~90
Advisers - 500	Firms - 250 (+10% market share) Advisers - 1,000+	15 wholesale clients (~20% market share)	Firms - ~120 Advisers - ~400 (~20% network cross-sell of services)

Sources: 1 ASIC Financial Advisers Dataset as of 28/01/2021

• 2 Centrepoint Alliance financial analysis; 1H FY21 half yearly results; Centrepoint Alliance analysis for AR's on licence as of 15 Feb 21

• 3 Revenue extension market size based on 2yr Centrepoint Alliance ambition: 600 firms made up of licensee market firms of 250 (2 AR's assumed for firm), plus 250 self-licensed firms, plus assumed 100 firms in wholesale, across 15 wholesale licensees

CLEAR FOCUS TO ENHANCE VALUE IN SECOND HALF OF FY21

• • Capitalise on market leadership position in providing quality advice and business services to financial advisers and mortgage brokers

• • Drive aggressive organic growth in the licensed and self-licensed market

• • Take advantage of scale advantage through adviser technology investments and extensions

• • Leveraging strong share price appreciation and balance sheet flexibility to actively pursue consolidation opportunities to create value

CONTACT DETAILS

CORPORATE SNAPSHOT

Capital structure

ASX Stock Code

CAF

1H FY21 gross revenueCash balance as at 31 December 2020

$70.6m $14.7mShare price as at 22 February 2021

$0.29

Shares on issue

144.3m

Performance rights (nil ex price, various expiries)

11.9mFully diluted shares

156.2m

Fully diluted market capEnterprise Value1

$45.3m $32.0m

12 month CAF share price and volume

Sources: Nasdaq Boardvantage; ASX; 1H FY21 half yearly results. 12 month CAF share price, ASX pricing 17 Feb 20 to 16 Feb 21 Note 1 Enterprise Value is adjusted for $1.4m tax deferrals (included in cash and payable to the ATO).

Experienced and invested leadership team

Board & Management

Mr Alan Fisher

Role

Non-Executive Chairman

Shares held As at 15/1/21

-

Mr Angus Benbow

Chief Executive Officer

1.2m (0.8%)

Mr Georg Chmiel

Non-Executive Director

0.8m (0.6%)

Mr Martin Pretty

Non-Executive Director

0.1m (0.1%)

Mr Alexander Beard

Non-Executive Director

11.0m (7.6%)

Mr Brendon Glass

Chief Financial Officer

-

Total Board & KMP

13.1m (9.1%)

Top shareholders

Shares held (% of SOI)

Investors
As at 15/1/2021
Thorney Investment Group	51.6m (35.8%)
Alexander Beard	11.0m (7.6%)
Richard Nelson	4.1m (2.9%)
Total Top 20	97.2m (67.4%)

CENTREPOINT ALLIANCE SERVICES - SCALABLE SERVICE PLATFORM

Sources: Centrepoint Alliance internal service metrics (1H FY21)

FIRM SEGMENT ANALYSIS

Key Performance Indicator	Firms FY20	AR's FY20	New Firms 1H FY21	Ceased Firms 1H FY21	New AR's 1H FY21	Ceased AR's 1H FY21	Firms 1H FY21 Close	AR's 1H FY21 Close
Corporate Licence 228 317 15 (15) 27 (36) 228	308

Self Licensed

159

864

8

(18)

113

(170)

149

807

• • 23 firms recruited (Corporate Licensed 15 and Self Licensed 8)

• • Reduction of 18 Self Licensed firms driven by firms opting-out of the transition to new service offer

• • 1,115 advisers in Group (Corporate Licensed 308, Self Licensed 807)

Corporate Licence - Half Years

Half on Half ComparisonCorporate License AR's

1H FY20

2H FY20

Open AR's

300

329 317

AR's Added

25

19 27

AR's Ceased

(26)

(35) (33)

Wholesale AR's Added

Wholesale AR's Ceased

30 -5

-

(1)

(3)

Close AR's

329

317

308

Close AR's - Non Wholesale

299

283 277

Close AR's - Wholesale

30

34 31

1H FY21

Sources: ASIC Financial Advisers Dataset as of 28/01/2021; Centrepoint Alliance analysis for AR's on licence as of 15 Feb 21

GRANDFATHERED REBATES

$m	1H FY20 2H FY20 1H FY21
Total Rebate Insurance Rebate Platform Rebate 4.0 1.1 2.9 4.2 2.0 1.2 0.6 3.0 1.4

Sources: Centrepoint Alliance financial analysis; FY20 annual results and 1H FY21 half yearly results.

Key points

• • Strategic Refresh began in August 2018 to move from a legacy funded revenue model to a new sustainable revenue model, pre-empting legislative changes passed in October 2019 to phase out Platform Rebates by 1 Jan 2021

• • Grandfathered platform rebate run off driving overall rebate reduction

DEFINITIONS

Term

Definition

AFCA AFSL APRA AR ASIC

Australian Financial Complaints Authority Australian Financial Services Licence Australian Prudential Regulation Authority

Authorised Representative of AFSL Licensee to provide financial advice Australian Securities and Investments Commission

Corporate Licensed advisers CPD

Advisers authorised under Professional Investment Services Pty Ltd or Alliance Wealth Pty Ltd Continuing Professional Development

EBITDA (excl. Legacy Claims) Firms

Earnings before interest, tax, depreciation and amortisation excluding legacy claims

Gross Profit

Accumulated total of corporate licensed firms and self-licensed firms in the Centrepoint Alliance Group Revenue received less Direct Costs

Net Tangible Assets

Total assets of a company, minus any intangible assets such as goodwill, patents and trademarks, less all liabilities and the par value of preferred stock

Operating Expenses PCP

Expenses excluding cost of sales, interest, depreciation and amortization Prior corresponding period

Royal Commission Salaried advisers

The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, established 14 December 2017 Adviser authorised under Alliance Wealth Pty Ltd and employed by Centrepoint Alliance

Self Licensed advisers

Advisers part of firms having their own AFSL