Blessing in disguise? Centrepoint's 2017 Royal Commission takeaway

It’s December 2017 and Australia’s financial industry was delivered its lump of coal as an early Christmas present when a Royal Commission was established to address misconduct in banking, superannuation and financial services.

Among the affected businesses that took a big hit was Centrepoint Alliance, a financial services provider that saw its share price plunge nearly 50 cents between February 2018 and May 2019. The final Royal Commission report was tabled in the Australian Parliament in February 2019. “It provided so much uncertainty and shook up the whole industry. As a result of that, all the institutional shareholders of Centrepoint rushed out,” said Joseph Constable, Portfolio Manager at Hancock & Gore (H&G).

Speaking on Reach Markets’ The Insider: Meet the Fund Manager in September 2022, Mr Constable selected Centrepoint Alliance as one of his favourite stocks. Watch the full The Insider: Meet the Fund Manager session.

“We looked at it and we thought, the business is being priced essentially for extinction but it still had a lot of cash on the balance sheet. We realised there would be a future where financial advice was really important for society,” he said. Hancock & Gore met with financial advisers and clients serviced by Centrepoint and came to understand that it was a solid company, but was ‘just being valued as if it was going out of business’.

“We invested at what we thought was a very attractive price and coincidentally before we were working directly together, Sandy Beard, our Chairman, also invested his own money and joined as a Director,” he said, highlighting his firm’s philosophy of rolling up its proverbial sleeves and getting involved.

Mr Constable thought that despite the uncertainty from the Royal Commission, the industry was yet to fully reconcile. He also stated that Centrepoint may have even benefitted from the ensuing fallout due to the massive dislocation of financial advisers that had moved from larger planning firms and banks to smaller independents that had used Centrepoint’s services.

“Centrepoint also made a really successful and significant acquisition of a competitor, ClearView Financial Advice, about a year ago and it’s synergised extremely well,” he said. “We think that the company really is in a good position to pursue further consolidation which is very necessary in this industry.”

John Shuttlewoth, CEO of Centrepoint Alliance, joined Reach Markets’ The Insider: Meet the CEO session last week (8th March 2023) where he provided an update on the business, highlighting the company’s recent wins and its position in the industry. Watch the full The Insider: Meet the CEO session.

Mr Shuttleworth joined Centrepoint Alliance as CEO in August 2021, after accumulating 15 years’ worth of experience at BT Financial Group running various parts of the business from platforms to its ‘inhouse fund of funds’ business and superannuation. Three weeks into his stint at Centrepoint, the company acquired ClearView.

“I came into this business because I saw a small cap that I thought still has incredible potential, “ Mr Shuttleworth said, before going on to explain the four main lines of Centrepoint’s diversified financial services business – Licensee Solutions, Lending Solutions, Investment Management and Technology Solutions.

“The business is actually in a really strong position 14 months post the ClearView acquisition,” he said, adding that the management team had proven their ability to integrate merger & acquisition (M&A) targets and took a disciplined approach to capital management.

During the session, Mr Shuttleworth also talked through Centrepoint’s financial activity and key financial metrics highlighting the company’s 95% recurring revenue and stated that the company was well-positioned to capitalise on more M&A opportunities.

“The big players in the market Insignia and AMP have really had significant exits from their licence over the two years. Centrepoint has had a slight increase,” he said. According to the company and based on adviser rankings, Centrepoint stands third Australia-wide in the number of authorised representatives (behind Insignia Financial and AMP) and is the only company in the top-6 to demonstrate positive growth in the number of adviser appointments.

With ~$45 billion in funds under advice (as at March 2023), the company expects a positive business outlook with continued strong financial performance, a robust sales pipeline with conversion slated to result in organic growth amid increasing demand for adviser services and, to top it all off, H2 FY23 earnings guidance in line with H1 FY23 actuals of $3.8 million EBITDA (excluding one-offs).

Click here to view more videos from Joseph Constable’s The Insider: Meet the Fund Manager session, or click here to view the full The Insider: Meet the CEOs session with Centrepoint Alliance CEO John Shuttleworth.

Reach does not assume responsibility for the accuracy or completeness of any information provided, and the views expressed are not reflective of Reach Markets’ position. Any advice contained within this presentation is general advice and does not consider your personal circumstances, you should consider whether it is appropriate for you. 

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