In the recent ASX reporting season, two small-cap companies, ClearView Wealth and Centrepoint Alliance, showcased promising results. Although their earnings may not dominate headlines like tech giants such as Nvidia (NASDAQ: NVDA), the progress they're making is noteworthy for investors and market analysts alike. In the competitive landscape of Australian financial services, how did the closely-linked Clearview Wealth (ASX: CVW) and Centrepoint Alliance (ASX: CAF) distinguish themselves with their 2023 achievements?
Key 2023 Highlights:
ClearView Wealth (ASX: CVW) is an ASX-listed diversified financial services company that partners with financial advisers to provide life insurance and wealth management products. In a strategic move expected to finalise in FY24, ClearView is divesting its wealth management division. Historically, in 2021, there was a significant shift when Centrepoint Alliance acquired ClearView’s financial advisory business. Yet, ClearView still holds a 24% stake in Centrepoint. In a prior article, we discussed ClearView's strategic pivots and spotlighted the company as a potential takeover target here.
The company delivered an increase in gross premiums of 9% to $325 million and raised its 2023 final dividend to 3 cents per share up from 2 cents in the prior period.
ClearView continued to gain ground with new business and an increase in market share. The company saw an increase of 25% in new advice business with a solid end to the year up 41% in the second half alone. Market share is up to an estimated 9% surpassing the previous highs of 8.6% set back in FY19. ClearView shifted its strategy from a customer retention focus in earlier financial years to now honing in on growth which has driven the transformation strategy to launch new products and structural market changes. As financial adviser numbers across the industry begin to stabilise the business see itself in a strong position to take advantage of a further potential market rebound.
Managing Director Nadine Gooderick went on to say:
“Our decision to reset and transform the business in early 2020 by simplifying and investing in our systems, processes and technology, as well as expanding our people capability, is starting to deliver benefits and growth through efficiencies, productivity gains and scale benefits.”
The ClearView report set itself up for some lofty goals in FY26.
The company believes it has established a path forward to grow its life insurance business to close in on $400 million in premiums and is targeting Underlying Life Insurance NPAT (net profit after tax) margin of 11%-13% by FY26.
With increasing premiums, market share and a stabilising industry ClearView delivered strong results. Time will tell whether it can continue its momentum and push towards the expansive goals that are undoubtedly exciting shareholders.
Centrepoint Alliance Ltd
Centrepoint Alliance Limited (ASX: CAF) operates in the financial services industry and provides a range of financial advice and licensee support services (including licensing, systems, compliance, training and technical advice) and investment solutions to financial advisers, accountants and their clients across Australia, as well as mortgage aggregation services to mortgage brokers.
Key 2023 Highlights:
Centrepoint saw revenue grow to $43.1 million, a 19% increase over the previous comparable period (pcp). The performance by the Company can be attributed to two key factors: a $22.4 million expansion in organic licensed advisers and the $20.7 million contribution from the ClearView Advisory (CVA) acquisition. This flowed through to a 4% rise in gross profit, amounting to $1.3 million above the pcp.
Excluding one-off costs and asset sales, Centrepoint’s operating earnings (EBITDA) rose to $7.6 million, a 6% increase from the pcp. This growth was again driven by the CVA acquisition and organic licensee fee expansion. Profit Before Tax reached $6.6 million, an impressive $4 million increase compared to 2022. The bulk of this increase can be attributed to Asset Sales ($1.8 million), and reduced LTI/One-Off costs ($1.7 million).
Centrepoint’s cash balance increased to $15.6 million, up by $0.9 million from June 2022. The company remains debt free and delivered a fully franked dividend for FY23 of 3 cents per share, increasing from 1.5 cents in the prior year.
Centrepoint maintains its status as the third-largest licensee, boasting 511 authorised representatives under its licences, and supporting 196 self-licensed practices with an estimated 797 advisers.
The strength of services firms is their people. Centerpoint’s retention rates remain high, with fewer than 5% of firms switching to another licensee.
The business is seeing its "Lending as a Service" (LaaS) initiative gaining traction, with 30 participating firms and $25 million in settled loans. LaaS empowers advisers to establish lending businesses by acting as authorised representatives under Centerpoint’s credit licence. This approach allows advisers to maintain client ownership while capitalising on the Company's infrastructure and in-house lending experts for support.
Following a set of solid results and a continued strengthening of its advisor network, shareholders can be optimistic about Centrepoint’s future performance.
Disclosure: Clearview Wealth (ASX: CVW) and Centrepoint Alliance (ASX: CAF) are currently held in the TAMIM Portfolios
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TAMIM Asset Management provides general information to help you understand our investment approach. Any financial information we provide is not advice, has not considered your personal circumstances and may not be suitable for you.