Date Theme Sector

29 August 2022 Financial Result Industrials

Company

Countplus (CUP)

New O/W: Back to the future

Recommendation OVERWEIGHT
12-mth target price (AUD) $1.20
Share price @ 26-Aug-22 (AUD) $0.69
CountPlus reported FY22a EBITA of $11.4m, ahead of its guidance range for $10.5-11.0m. Forecast 12-mth capital return 75.2%
Revenue beat moderately, driven by Accounting which is encouraging given the macro backdrop. Forecast 12-mth dividend yield 7.2%
This flowed through earnings lines but was partially offset by higher operating expenses. 12-mth total shareholder return 82.3%
Operating cash flow declined yoy due to Jobkeeper payments and reflects normalisation. Looking
forward, it is clear there will be no significant strategy changes under the new management team
Market cap ($m) 76.5
but a focus to improve utilisation performance and further improve operational metrics. We make
Enterprise value ($m) 64.7
minor changes to our forecasts and take the opportunity to remove our valuation discount,
previously applied to recognise strategic and key person uncertainty following the surprise Shares on issue (m) 111.6
departure of the former CEO in February 2022. Accordingly, we upgrade to O/W on valuation. Sold short (%) 0.0
ASX All Ords weight (%) 0.0
 Key Points Median turnover/day ($m) 0.1

Valuation: TP of $1.20/share (+84.6% vs. prev.). Our valuation is based on a blended

methodology (DCF valuation of $1.44/share and PE valuation of $0.99/share) and implies a John Hynd
FY23e PE of 19.4x and EV/EBITDA of 7.3x. As highlighted above, we take this opportunity to john.hynd@wilsonsadvisory.com.au
remove the valuation discount. We have also made small compositional changes to our DCF Tel. +61 2 8247 6661
inputs that are explained in more detail on Page 3.
Tom Camilleri
Model Changes: NPAT forecasts +10.3% and +5.5% to $6.9m and $7.6m in FY23e and FY24e tom.camilleri@wilsonsadvisory.com.au
respectively. Changes are largely driven by; (i) The higher rebasing of Accounting revenue from Tel. +61 2 8247 3106
FY22a; (ii) Tiered GBE discount wind-down profile for new advisers and; (iii) consolidation of
WSC acquisition which adds ~$0.44k in associate income.
12-mth price performance ($)
Guidance: No quantitative guidance. However, underlying metrics have improved for Accounting
and Wealth on a yoy basis. Given the additional new advisers in Wealth and acquisition of new 1.05
firms in Accounting and growth investment in Services, we believe earnings growth is implied.
0.97

0.88
Services: Includes recently acquired Wealth Axis (August 2021) and Accurium (November 2021)
and reported underlying EBITA of $1.3m. Both businesses are executing on varying early stage 0.80
growth programs which likely still mask full underlying earnings potential. Based on Services 0.72
FY22a NCI’s, we estimate Wealth Axis reported a loss of $0.250m in 2H22a (Accurium $0.786m
0.63
EBITA). We expect Services costs to normalise from early 1H23e and FY23e EBITA of $2.7m.
0.55
Aug-21 Dec-21 Apr-22 Aug-22
Remediation: The remediation provision declined to $238.0m in FY22a from $273.2m in 1H22a. CUP XAO
This figure remains within the $300.0m indemnity provided by CBA. Total payments were
$35.0m at 30 June 2022, demonstrating clear progress on a yoy basis ($5.6m at 31 December 1-mth 6-mth 12-mth
2022). CUP has owned Count Financial since October 2019. Abs return (%) (2.1) (8.7) (27.5)
Rel return (%) (5.7) (8.9) (22.8)

Financial summary (Y/E Jun, AUD) FY21A FY22A FY23E FY24E FY25E Key changes 27-Jun After Var %
Sales ($m) 80.7 85.4 93.5 97.2 100.0 Sales FY23E 91.4 93.5 2%
EBITDA norm ($m) 16.1 15.7 18.3 19.5 21.9 ($m) FY24E 94.9 97.2 2%
NPAT norm ($m) 5.3 5.0 6.9 7.6 9.0 FY25E 100.0
Consensus NPAT ($m) 6.9 8.0 NPAT FY23E 6.3 6.9 10%
P/E (x) 14.3 15.3 11.1 10.1 8.5 norm FY24E 7.2 7.6 5%
Dividend yield (%) 4.0 5.1 7.2 7.9 9.3 ($m) FY25E 9.0
Price target 0.65 1.20 85%
Source: Company data, Wilsons estimate, Refinitiv.
Rating M/W O/W
All amounts are in Australian Dollar (A$) unless otherwise stated.

Wilsons Equity Research

Analyst(s) who owns shares in the Company: n/a Issued by Wilsons Advisory and Stockbroking Limited (Wilsons) ABN 68 010 529 665 – Australian Financial Services
Licence No 238375, a participant of ASX Group and should be read in conjunction with the disclosures and disclaimer in this report. Important disclosures regarding companies
that are subject of this report and an explanation of recommendations can be found at the end of this document.
29 August 2022 Industrials
Countplus Limited

 Business Description  Investment Thesis

CountPlus (CUP) is an Australian network of professional accounting and
advice firms. CUP listed on the ASX in 2010 and was launched in 2006
as a subsidiary of Count Financial (which dates back to 1980). CUP
operates an ‘Owner, Driver – Partner’ model that provides investment,
leadership and intellectual capital to the firms in its network.
CUP’s revenue streams are largely recurring in nature and while it
operates in a low growth environment, customer retention within the
industry is typically high. The sector is undergoing material change and
we expect the sector to continue to evolve driven by FOFA reforms,
Royal Commission recommendations and FASEA requirements. CUP has
a strong balance sheet and may be able to execute on attractive
acquisition opportunities during this period of turbulence.

 Catalysts  Risks
Further acquisitions in the financial advice and core firms’ segments, Ongoing regulatory changes, greater penetration of robo-advice, advisers
vertical integration, more advisers joining CUP or advisers increasing leaving CUP to change careers or go to competing firms.
their book size (FUM).

P&L ($m) FY21A FY22A FY23E FY24E FY25E Balance sheet ($m) FY21A FY22A FY23E FY24E FY25E
Sales 80.7 85.4 93.5 97.2 100.0 Cash & equivalents 26.2 21.5 24.3 38.3 57.1
EBITDA norm 16.1 15.7 18.3 19.5 21.9 Current receivables 19.5 24.6 15.4 16.0 16.4
EBIT norm 10.6 9.3 12.2 13.4 16.0 Current inventory 0.0 0.0 0.0 0.0 0.0
PBT norm 9.5 8.2 11.4 12.6 15.2 PPE 4.0 3.6 4.8 4.8 4.8
NPAT norm 5.3 5.0 6.9 7.6 9.0 Intangibles 36.5 52.3 49.6 47.0 44.6
NPAT reported 4.9 4.8 6.9 7.6 9.0 Other assets 330.4 326.4 320.7 323.4 326.2
EPS norm (cents) 4.8 4.5 6.2 6.8 8.1 Total assets 416.7 428.5 414.9 429.6 449.2
DPS (cents) 2.8 3.5 4.9 5.4 6.4 Current payables 14.2 35.4 11.2 9.3 9.6
Total debt 4.3 9.8 9.8 9.8 9.8
Growth (%) FY21A FY22A FY23E FY24E FY25E Other liabilities 316.3 294.9 290.2 290.2 290.2
Sales (2.3) 5.8 9.6 3.9 2.9 Total liabilities 334.8 340.1 311.2 309.3 309.6
EBITDA norm (0.4) (2.3) 16.0 6.6 12.8 Minorities 10.7 13.1 13.1 13.1 13.1
NPAT norm (11.4) (5.2) 38.1 10.0 18.7 Shareholders equity 71.2 75.4 90.5 107.2 126.5
EPS norm (cents) (11.4) (6.2) 38.1 10.0 18.7
DPS (cents) 10.0 27.3 40.0 10.2 18.5 Cash flow ($m) FY21A FY22A FY23E FY24E FY25E
Operating cash flow 9.6 8.3 20.2 28.2 34.6
Margins and returns (%) FY21A FY22A FY23E FY24E FY25E Maintenance capex (2.0) (1.0) (5.1) (4.4) (4.4)
EBITDA margin 20.0 18.4 19.5 20.0 22.0 Free cash flow 7.6 7.3 15.1 23.9 30.2
EBIT margin 13.1 10.9 13.1 13.8 16.0 Growth capex 0.0 0.0 0.0 0.0 0.0
PBT margin 11.8 9.6 12.2 13.0 15.2 Acquisitions/disposals (1.2) (16.2) (1.7) (1.7) (1.7)
NPAT margin 6.5 5.9 7.4 7.8 9.0 Dividends paid (2.8) (3.3) (5.5) (6.1) (7.2)
ROA 2.5 2.2 2.9 3.1 3.6 Other cash flow (3.2) 1.8 (5.2) (2.2) (2.6)
ROIC 17.7 12.1 13.7 14.6 17.3 Cash flow pre-financing 0.4 (10.3) 2.8 14.0 18.8
ROE 6.4 5.7 6.7 6.3 6.5 Funded by equity 0.0 0.0 0.0 0.0 0.0
Funded by cash/debt (0.4) 4.7 (2.8) (14.0) (18.8)
Interims ($m) 2H21A 1H22A 2H22A 1H23E 2H23E
Sales 38.4 41.9 43.5 48.0 45.5 Liquidity FY21A FY22A FY23E FY24E FY25E
EBITDA norm 5.2 8.1 7.6 10.4 7.9 Cash conversion (%) 59.5 52.7 110.6 145.2 157.7
EBIT norm 2.4 5.1 4.1 7.6 4.7 Net debt ($m) (21.9) (11.7) (14.5) (28.5) (47.3)
PBT norm 1.8 4.6 3.6 7.2 4.3 Net debt / EBITDA (x) (1.4) (0.7) (0.8) (1.5) (2.2)
NPAT norm 1.2 3.5 1.5 4.3 2.6 ND / ND + Equity (%) (36.6) (15.3) (16.3) (31.0) (51.2)
NPAT reported 0.8 3.5 1.4 4.3 2.6 EBIT / Interest expense (x) 10.0 8.5 15.6 17.1 20.4
EPS norm (cents) 1.1 3.1 1.4 3.9 2.3
DPS (cents) 1.5 1.5 2.0 3.1 1.8 Valuation FY21A FY22A FY23E FY24E FY25E
EV / Sales (x) 0.7 0.8 0.7 0.5 0.3
Stock specific FY21A FY22A FY23E FY24E FY25E EV / EBITDA (x) 3.4 4.1 3.4 2.5 1.3
Core Firm rev (A$m) 64.9 64.5 65.8 67.4 69.0 EV / EBIT (x) 5.1 7.0 5.1 3.6 1.8
Financial Advice rev (A$m) 8.9 15.5 19.2 21.0 21.9 P / E (x) 14.3 15.3 11.1 10.1 8.5
Core Related rev (A$m) 0.0 5.4 8.6 8.8 9.1 P / BV (x) 0.9 0.9 0.7 0.6 0.5
EBITA (A$m) 12.0 11.4 14.0 15.1 17.6 FCF yield (%) 10.0 9.6 19.8 31.2 39.6
Dividend yield (%) 4.0 5.1 7.2 7.9 9.3
Payout ratio (%) 57.6 78.1 79.2 79.4 79.2
Franking (%) 100.0 100.0 100.0 100.0 100.0
Weighted shares (m) 110.4 111.6 111.6 111.6 111.6

Source: Company data, Wilsons estimate, Refinitiv.

All amounts are in Australian Dollar (A$) unless otherwise stated.

Wilsons Equity Research Page 2

29 August 2022 Industrials
Countplus Limited

Three key points

• Strategy: Hugh Humphrey delivered his first result as CEO on Friday without a material change to group
strategy, but indicating a desire to improve transparency and better leverage the existing platforms. While
we expect a degree of change as the company moves forward, we believe the ability to better measure
the performance of underlying businesses and growth investments should be well received.

• Wealth: EBITA +431.6% to $3.216m, driven by improved revenue. We are encouraged by the result,
specifically given it was the first full year result without grandfathered commissions (FY21a $1.8m).
Performance data including number of advice documents, gross business earnings and gross earnings per
adviser are all trending in the right direction and we are encouraged by the potential the latest round of
adviser inflows (+30 net in FY22a) will have on EBITA in the coming years as varying welcome rates run-
down. On an annualised basis, we estimate 30 advisers writing $0.5m/year could add $0.788k in EBITA.

• Valuation: Our valuation +84.6% to $1.20/share. Changes to our methodology include; (i) We now use
PE/DCF as this is more reflective of finance related companies and considers CUP’s affiliate ownership
position; (ii) the removal of our valuation discount which reflected strategy/key role uncertainty post
surprise departure of previous CEO in February 2022; (iii) lower beta due to CUP’s defensive qualities and;
(iv) lower TGR given greater prominence of Accounting and Advice revenue streams.

 Changes to forecasts

Our NPAT forecasts +10.3% (vs. prev.) to $6.9m in FY23e, reflective of changes outlined below:

• Revenue: +2.3% (vs. prev.) to $94.5m, driven by:

o Accounting revenue: +3.3% (vs. prev.) to $65.8m driven by the better than expected revenue
growth in this segment (+3.4% vs. WILSe in FY22a). Our forecasts reflect +2.5% yoy growth for
Accounting firms in FY23e.

o Wealth revenue: Largely unchanged (vs. prev.) in FY23e. However, our forecasts +5.1% (vs.
prev.) to FY24e as we estimate growth in the CUP’s share of GBE (+100bps yoy to 6.5%) as
adviser discounts roll off. We assume adviser growth of 12 per year in the Wealth vertical.

o Services revenue: Largely unchanged (vs. prev.) in FY23e. However, our forecasts -9.3% (vs.
prev.) to $8.8m in FY24e as we lower expectations for the education platform revenue within
Accurium (Actuarial certificate business).

• Associate income: +10.1% (vs. prev.) to $4.4m, Now reflective of the WSC Group acquisition (32.75%
stake), effective 1 August 2022. We estimate CUP’s share of EBITA in WSC is $0.4m.

Figure 1: CUP old vs. new forecasts (A$m)

FY23e FY24e

Old New Change Old New Change

Accounting revenue 63.7 65.8 3.3% 65.2 67.4 3.3%
Wealth revenue 19.2 19.2 -0.4% 20.0 21.0 5.1%
Services revenue 8.5 8.6 0.9% 9.7 8.8 -9.3%
Other Income 1.0 1.0 0.0% 1.0 1.0 0.0%
Total Revenue 92.4 94.5 2.3% 95.9 98.2 2.4%
Operating Expenses -79.2 -80.7 1.9% -81.4 -83.5 2.6%
Associate Income 4.0 4.4 10.1% 4.4 4.8 10.5%
Depreciation -4.4 -4.2 4.6% -4.4 -4.4 1.6%
EBITA (post Associates) 12.9 14.0 9.1% 14.4 15.1 4.6%
EBITA margin 13.9% 14.8% 93 bp 15.0% 15.4% 32 bp
Amortisation -1.7 -1.8 -4.5% -1.6 -1.7 -4.5%
EBIT 11.1 12.2 9.8% 12.8 13.4 4.6%
Interest -0.8 -0.8 -2.3% -0.8 -0.8 -2.3%
Tax -1.9 -2.1 -10.5% -2.3 -2.3 -1.5%
Underlying NPAT 8.5 9.3 10.3% 9.7 10.3 5.5%
Minority Interest -2.2 -2.4 -10.3% -2.5 -2.7 -5.5%
Underlying NPAT attributable to Ow ners of CUP 6.3 6.9 10.3% 7.2 7.6 5.5%
Abnormal items 0.0 0.0 n.a 0.0 0.0 n.a
Reported NPAT attributable to shareholders 6.3 6.9 10.3% 7.2 7.6 5.5%

Source: WILSe.

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29 August 2022 Industrials
Countplus Limited

Key charts
Figure 2: Revenue by vertical (A$m) Figure 3: Net cash and NPAT forecasts (A$m)
120.0 30.0 28.5

93.5 97.2
100.0
85.4 8.8 25.0
76.3 8.6 21.1 21.9
80.0 73.8 5.4
19.2 21.0
12.5 8.9 15.5 20.0
A$m

60.0
14.5
15.0
40.0 11.7
63.8 64.9 64.5 65.8 67.4
10.0 7.6
20.0 6.9
6.0 5.3 5.0
0.0 5.0
FY20a FY21a FY22a FY23e FY24e
0.0
FY20a FY21a FY22a FY23e FY24e
Accounting revenue Wealth revenue Services revenue
Net cash NPAT

Source: CUP Company data, WILSe. Source: CUP Company data, WILSe.

Figure 2: EBITA forecasts (A$m) Figure 3: CUP multiples vs. Kelly Partners
16.0 18.0% 35.0
14.0 16.0% 29.7
30.0
12.0 14.0%
EBITA margin (%)

12.0% 25.0
EBITA (A$m)

10.0
10.0%
Multiple

8.0 20.0
8.0%
6.0 15.0
6.0%
4.0 10.6 10.7
4.0%
10.0
2.0 2.0% 5.1
0.0 0.0% 5.0
FY20a FY21a FY22a FY23e FY24e
0.0
EBITA EBITA margin FY23e EV/EBITDA FY23e P/E

Countplus Ltd Kelly Partners Group Holdings Ltd

Source: CUP Company data, WILSe. Source: Refinitiv.

Figure 2: Revenue by vertical Figure 3: Revenue growth by vertical

25.0% 16.0 15.1
14.0
14.0
20.0% 12.2 12.0
EBITA margins (%)

12.0 11.4
10.3
15.0% 10.0 9.3
A$m

7.7 7.4
8.0 7.2
10.0%
6.0

5.0% 4.0

2.0
0.0%
Accounting Wealth Services 0.0
FY20a FY21a FY22a FY23e FY24e
FY21a FY22a EBITA Underlying NPAT

Source: CUP Company data, WILSe. Source: CUP Company data, WILSe.

Wilsons Equity Research Page 4

29 August 2022 Industrials
Countplus Limited

Disclaimers and Disclosures

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Wilsons Equity Research Page 5

29 August 2022 Industrials
Countplus Limited

Disclaimers and Disclosures

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has been appointed as broker for the CountPlus Limited Securities on-market buyback, announced June 2022, for which it received fees or will receive
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Wilsons Equity Research Page 6