Centrepoint profit climbs but advice numbers fall

Centrepoint Alliance Limited, the parent group of Professional Investment Services (PIS), has reported an increase in pre-tax profit across the group but has been hit by declining numbers and ongoing claims against advisers in its wealth management division. 

In its half year report for the six months to the end of December 2013 Centrepoint reported a pre-tax profit of $2.2 million, which was an increase of 229 per cent from the $1.7 million loss, compared with the prior corresponding period. 

Overall revenues increased by 2 per cent to $27.4 million and total expenses dropped by 12 per cent compared with the prior corresponding period. 

In the statement released to the Australian Stock Exchange, Centrepoint stated that its Wealth Management business - which includes PIS and associated advisory practices - reported an underlying pre-tax profit of $3 million driven by “stronger financial adviser engagement and cost management”. However this number was a decrease from $5.3 million reported in the first half of 2013. 

The revenue of PIS fell by 7 per cent to $11.49 million, down from $12.36 million from the second half of 2012, while operating expenses increased by 8 per cent to $11.34 million, up from $10.53 million from the second half of 2012. 

Centrepoint said these shifts were the result of lower adviser numbers, which decreased from 701 to 533 in 2013, and a decline in related funds under product distribution agreements. Expenses had increased due to restructuring costs and the hiring of compliance and claims management staff to handle claims against advisers relating to the period from 2004 to 2010. 

Costs related to these claims were reduced, according to Centrepoint, with claims management moved inhouse “to reduce costs incurred through use of external legal consultants and to improve outcomes”. 

At the same time the level of claims had fallen, with Centrepoint stating the decrease in claims activity was in line with that projected by an independent actuary and the total cost would be reassessed at the release of the group’s full year results. 

The claims relate to advice given between 2004 and 2010, the same year in which PIS was given an enforceable undertaking (EU) by the Australian Securities and Investments Commission. However Centrepoint also stated that professional fees on ASIC monitoring programs related to the EU had decreased from $3.7 million in 2012 to $0.5 million in the second half of 2013. 

While no dividends have been earmarked, net tangible assets per share have increased from 3.92 cents to 6.52 cents from 30 June to 31 December 2013.