Diverger still believes there is merit to its proposed acquisition of Centrepoint Alliance with this week’s FY22 results showing their initial offer providers fair value.
Both firms released annual reports to the ASX on Wednesday morning and Diverger managing director Nathan Jacobsen tells Professional Planner Centrepoint’s earnings fell below the assumption made based on their acquisition offer in June.
“We made an offer based on certain assumptions around their earnings and they’re not actually achieving those earnings,” Jacobsen says. “Centrepoint is a great business and we’re interested in having a conversation with them, but we can’t progress the offer without meaningful dialogue.”
Diverger proposed the non-binding offer, which was withdrawn around seven weeks later due to lack of “meaningful engagement” on the part of Centrepoint.
Stating in its investor presentation it will continue to pursue acquisition opportunities, Diverger is in a “strong position” to invest with $2.5million in net cash after investing more than $3 million of capital during FY22.
“Consumers and advisers will benefit from further consolidation across the service providers,” Jacobsen says. “We can solve some of the challenges around affordability and accessibility of advice; to do that requires capacity and capital.”
Diverger net profit after tax (NPAT) is up 26 per cent to $3.75 million and the business currently has more 155 advice firms and 1,340 accounting firms using its service platform.
Roughly 92 per cent of its recurring revenue spread across four core products – adviser services, managed portfolios, membership, and training.
Of the 155 advice firms using its services, each practice averages 1.4 adviser with an average net revenue of $37,000 per adviser.
The Alliance remains strong
Centrepoint reported a 100 per cent increase of NPAT to $6.5 million, driven by the ClearView Advice acquisition.
Rebuffing Diverger’s advances, Centrepoint cited a “strong pipeline” of further acquisitions with other discussions ongoing.
Acquiring ClearView’s advice arm last year, its licensed advisers grew from 356 to 517 while self-licensed firms increased from 151 to 192.
Centrepoint has roughly 1,300 advisers using its service with an average of 100 clients.
Diverging strategies
Both firms noted acquisitions being a key priority and Diverger outlined a planned timeframe for FY23 to FY25 for key strategic initiative for equity investment into financial advice practices to assist with growth.
The first move of the new financial year was a 35 per cent stake in McGregor Wealth made in July.
Jacobsen says businesses are challenged by not corporatising their business despite gaining growth and momentum.
“By coming in as a shareholder we can bring capital and resources to help them scale their business more quickly.”
Jacobsen says the future is a mid-tier market and the market today is evolving rapidly towards that.
“There is a consolidation phase going but a lot of businesses are challenged by that. It’s a big step to go from two or three staff to 20. In our organisation we have the skills and resources to do that. By coming in as a shareholder we can help partner together on that.”
