Mortgage group profit drops 28%

A mortgage and wealth group saw its net profit after tax (NPAT) drop by 28 per cent in one year, largely due to “the impact of the deferred tax adjustment … and a final onerous lease adjustment related to [its] Gold Coast property”. 

According to Centrepoint Alliance’s financial results for the year ended 30 June 2016, the company made $4.3 million NPAT, down from $5.9 million in the financial year 2015. 

This figure included a deferred tax asset recognition of $1.3 million “to account for the benefit of past losses for the first time as expectation of future profitability strengthened”. 

The NPAT was also affected by an onerous lease provision of $1 million, which manifested after the group consolidated two floors of its Gold Coast office into one (resulting in an onerous contract for the unused space). 

Despite this fall in NPAT, the group reported a 79 per cent increase in net profit before tax (NPBT), from $2.5 million in the financial year 2015, to $4.6 million in 2016. 

According to the group’s chairman, Alan Fisher, the company made “significant progress” during the year, following “significant investment in new businesses and capabilities”. 

Mortgage brokers on the rise

The lending arm of the group reported a 22 per cent increase in profit before tax (to $2.5 million) and an 8 per cent increase in total revenue (to $12.3 million) on the funding of steady premiums and improved funding costs. 

This was partly attributed to the fact that there was a 13 per cent rise in the number of mortgage brokers distributing home loans, taking the total to 164. 

In total, the premium funding business wrote $377 million of loans in the year ending 30 June. 

The company said: “Net margins have remained steady and shown improvement in the second half year due to reduced borrowing costs associated with lower bank facility interest charges and commitment limits. 

“The number of active general insurance broker relationships has grown as has the number of loans written, driven by expansion of the east coast presence.” 

The company also said that it had invested in “technology enhancements” to “ensure consistent, quality and reliable service over the longer term to all of [its] business partner relationships” and had outsourced its back office “to improve efficiency”. 

However, it noted that the mortgage business “continues to be impacted by a softer general insurance market which impacts the value of premiums funded”, with average loan value declining over the last two years. 

The wealth business grew its NPAT by 75 per cent to $5.4 million, which reportedly “reflects the transformation in business model with strong revenue growth in funds flowing to the bottom line”. 

However, the wealth business revenues dropped by one per cent to $30 million, but Centreline has said that this does not reflect “strong second-half growth in adviser numbers” and “significant” improvement in profit performance. 

In all, Centrepoint’s operating cash flow improved by $6.9 million to $4.3 million, and cash and cash equivalents were $10.2 million at 30 June 2016. 

The company has announced a final dividend of 1.2 cents per share fully franked to be paid on 19 October 2016. Total dividends for the financial year 2016 of 2.2 cents per share were consistent with the prior year. 

Lending team “did a superb job” 

Chairman Alan Fisher said: “The team have done a fabulous job executing on the strategy over the last three years and this is beginning to be recognised in our results and by the market. 

“The focus on quality client outcomes has differentiated Centrepoint from traditional, and typically institutional, competitors and is increasingly attracting like-minded client centric non-aligned advisers and brokers. We look forward to continuing to drive improvements across all areas of our business and improve the experience for our clients.” 

Managing director John de Zwart added: “The strategy to create a truly differentiated financial advice business in a rapidly evolving sector is leading to solid growth in an exciting market. The lending team, who have achieved positive results over the past few years in a sector challenged by premium rate reductions, did a superb job to lift profit and maintain volumes.”

[Related: Centrepoint announces funding agreement with NAB]

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