As an industry participant, I disagree quite strongly with the proposition of no value in licensees. The cash generation is entirely dependent on the overhead structures and rate of return objectives.
CBA had a break even rate of return of 16% to make it's advice model viable having paid $360m for Count as part of its cost base. That high watermark strained the both the advice process and its integrity.CUP got the business for an unheard of Discount on Acquisition (negative Goodwill) that was booked as a profit in the H1 accounts. That changes the cost and rate of return hurdle rate on its head.
Even an 8% return on the business would amount to a doubling of the Countplus NPBT.We are less than 10 months into the handover, so the licensee clean up is still underway. The profitability of fee based financial planning services leaves hourly based accounting/advice models in its dust. I believe I can categorically defend that view, having lived it for a long long time.
At 84c-86c I am a buyer and have quietly topped up over the last week on extremely light volume. Would love to make a major additional purchase, but this stock has no depth and I refuse to be a market maker.
CUP Price at posting:
85.0¢ Sentiment: Buy Disclosure: Held
