COUNT LIMITED — Interim / Quarterly Report 2012

Feb 28, 2012

ASX ANNOUNCEMENT – CUP 29 February, 2012 Half Year Report

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Countplus Limited

Operating Profit (EBITA): $10.51m Net Profit after Tax: $6.93m Earnings Per Share: 6.3 cents 3c Interim Quarterly Dividend Declared

The Directors of Countplus Limited (CUP) are pleased to report for the half year ended 31 December 2011 an Operating Profit (EBITA) for the period of $10.51m and Consolidated Net Profit after Tax of $6.93 million of which $6.87 million is attributable to CUP shareholders.

Operating profit (EBITA) increased by 11.4% over the prior period, however consolidated net profit after tax was down 10.7% due to non-cash fair value revaluation uplift in the corresponding period. Normalising for the revaluation and a one-off tax benefit derived from tax consolidation in the current year, consolidated net profit increased by 17%.

Countplus, is an aggregation of 19 established professional services businesses across Australia, including 17 accounting practices, one financial planning services practice and a financial planning dealership. The Company listed on the ASX on 22 December 2010.

The Vendors of the Countplus businesses are collectively the largest block of shareholders. CBA, via its purchase of Count Financial Limited, is the largest single shareholder with 37% equity holdings.

1. Results for announcement to the market

Key Information

1. Gross Revenue: $46.00 million (up 12.9%)

2. Consolidated Operating Profit (EBITA): $10.51 million (up 11.4%)

3. Consolidated Net Profit After Tax: $6.93 million (down 10.7%)

4. Net Profit after Tax attributable to Shareholders: $6.87 million (up 94.7%)

5. Basic Earnings per Share: 6.30 cents. Diluted Earnings per Share: 6.29 cents

6. 3[rd] Quarterly interim dividend declared – 3 cents per share (payable 15 May 2012)

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2. Analysis of Financial Results

2.1 Group performance

	Dec11$ 000	Dec10$ 000	Change
Total NetRevenue (Member Firms)	45,153	40,919	10.3%
Salaries andEmploymentExpense	(25,665)	(22,871)	12.2%
PremisesExpense	(2,512)	(1,950)	28.8%
Depreciation Expense	(657)	(590)	11.4%
OtherOperatingExpenses	(5,700)	(5,672)	0.5%
Total Expenses	(34,534)	(31,083)	11.1%
Net Income	10,619	9,836	8.0%
Member FirmContribution Margin	23.5%	24.0%	(2.2%)
Head Office Contribution (net cost)	(107)	(398)	(73.1%)
Operating Profit	10,512	9,438	11.4%
InterestExpense	(359)	(547)	(34.4%)
Non Cash fair value adjustments	**57 **	3,858	(98.5%)
Amortisation Expenses	(1,721)	(1,451)	18.6%
**Profit before Tax **	8,489	11,298	(24.9%)
Tax	(1,563)	(3,542)	(55.9%)
**Consolidated Net Profit after Tax **	6,926	7,756	(10.7%)
Diluted Earnings per share (cents)	6.29

2.2 Balance sheet

	$ 000
CurrentAssets	26,855
CurrentLiabilities	17,490
Current Ratio	_1.54 _
Non-CurrentAssets	58,624
Non-CurrentLiabilities	12,539
Net Assets	55,450
Total Loans and Borrowings	3,709
Debt to Equity Ratio	6.7%

2.3 Net profit result and earnings per share

Net profit after tax was down 10.7% on the prior year due to the impact of non-cash fair value adjustments. Primarily these adjustments arose on consolidation of 16 member firms on 1 July 2010. Removing these fair value adjustments, consolidated net profit after tax is up 33.5%. This is primarily driven from an 11.4% increase in operating profit and a 55.9% reduction in tax expense (see 2.9).

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Diluted earnings per share was 6.29 cents for the period. The comparison of earnings per share over the prior period is not meaningful as the final acquisition of the majority of the member firms was completed as part of the IPO in December 2010.

2.4 Revenues

Revenue is primarily derived from accounting and related services. Financial planning/services revenue makes up 20.2% of total group revenue.

CBA owned Count Financial is the AFS Licensee for all businesses, except the Financial Planning Dealership, Total Financial Solutions (TFS).

Accounting services revenue increased by 5.4%. Financial services revenue up 42.0% due primarily to the full period contribution from TFS, which was acquired 30 September 2010. Excluding the impact of “tuck in” acquisitions, both accounting and financial services revenue across the group increased organically over the period despite challenging business conditions.

2.5 Expenses

Salaries and employment expense increased by 12.2% due primarily to acquisitions made partway this year or post the prior period.

Other expenses were impacted by the introduction of a group provisioning policy on debtors based on ageing (provision for doubtful debts was up $0.7m on the comparable period). While our Member Firms have negligible write-off history, a group policy is a considered prudent, which ensures fairness in performance measurement across the group and provides an incentive to improve collections and cash flow. This is expected to be a largely “one-off” impact now that the policy is in place.

2.6 Net Income from Member Firms (contribution margin)

Net income from Member firms, which includes non-cash fair value adjustments, was $10.62m for the period, up 8%. This equates to a margin of 23.5% of net revenue. While acquisitions have contributed to this increase, the result has also been negatively impacted by the group debtor provisioning policy described in 2.5 above.

2.7 Head Office contribution

Head Office did not provide a material cost to the group ($0.1m). This is expected to continue in the second half of 2012 and into the future.

2.7 Amortisation expense

Amortisation expenses (non-cash) relate primarily to acquired client/adviser relationships (noncash).

2.8 Interest expense

Interest expense for the period arises primarily from equipment finance loans not financed by Countplus. At 31 December 2011 Countplus had a net surplus of funds – see 4.1 below.

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2.9 Tax consolidation

Countplus has formed a tax consolidated group from 5 November 2010. As a consequence of amendments announced for the consolidation rules and resetting the tax cost base of the assets in the various subsidiaries, there is a substantial one-off tax benefit recognised by Countplus in this period.

3. Future Acquisitions and „tuck-ins”

New acquisitions are expected to be largely initiated by the existing subsidiaries (Member Firms), who are regularly coming across new opportunities for their consideration. The decisions to complete “tuck-ins” and “bolt-on” acquisitions are driven by the Member Firm Principals who take responsibility for their performance. The equity reward scheme (see section 4.3) assists in ensuring only those acquisitions likely to be bedded down quickly and grow the acquirer’s earnings per share will be considered.

Given its strong balance sheet, Countplus will make further acquisitions at the group level (beginning at a minority interest level) although “tuck-ins” and “bolt-on” acquisitions are likely to prove more rewarding and more numerous.

Further “tuck-ins” continue to be considered by Member Firms in consultation with Countplus.

Post 31 December 2011 Countplus has announced an acquisition by our Melbourne firm, Kidmans, of the Pacific East Coast Group, a property broking service which offers a potential new service to many Countplus businesses and accounting firms nationally (see ASX release dated 13 February).

4. Capital Management

4.1 Net Debt

Total loans and borrowings as at 31 December 2011 was $3.7m. Total cash on hand was $5.7m. The current ratio (current assets over current liabilities) was 1.5X.

The Company has a $10 million facility with Count Financial of which $2.2m was drawn at balance date. Member Firms are generally strong cash generators and it is expected that future borrowings will generally only be required for larger acquisitions, pending a build-up of retained earnings to a level where little or no new borrowings will be required.

4.2 Dividends

An interim quarterly dividend of 3 cents per share has been declared, payable on 15 May 2012.

Dividends	Cents per share	Payable
First postlisting dividend	4cents	01/07/2011
2011 Final Dividend	2cents	15/08/2011
1stInterim Dividend	3 cents	15/11/2011
2ndInterim Dividend	3 cents	15/02/2012
Dividend Declared	Cents per share	Payable
3rdInterim Dividend	3 cents	15/05/2012

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Dividends are expected to be payable on 15 February, May, August and November of each year.

4.3 Employee Equity Rewards

Countplus intends to reward employee loyalty and performance through equity. As disclosed in the Prospectus, for the first 3 years post listing, the Directors will grant an annual issue of $1,000 worth of tax-free shares to all full-time employees (excluding Firm Principals) with 12 months service or more (part-time employees will receive a pro-rated entitlement).

The initial grant was issued to 333 employees in April 2011. A second grant will be issued in April 2012.

Member Firms were allocated additional (bonus) shares per terms of the prospectus for the year ended 30 June 2011. The number of shares on issue is now 109,047,446. Loan Funded Shares will be issued each year on the growth of their profits to those firms growing their EPS by 10% or more over the previous highest prior year profits, ie only above a high watermark. The first issue of loan-funded shares will be after the 2012 year end.

4.4 Funding acquisitions and “tuck-ins”

It is expected that some Countplus scrip will be used to fund acquisitions made at the group level and smaller “tuck-ins” by subsidiaries. It is preferred that the proportion in scrip is capped at around 50% of the purchase price to maximise earnings per share growth. Using some scrip for consideration does ensure that the acquiree has an interest in continuing to perform strongly over an extended period of time.

5. Shareholding

Countplus’ largest single shareholder, Count Financial Limited (37.6%), was acquired by Commonwealth Bank of Australia (CBA) through a scheme of arrangement on 9 December 2011. Countplus will continue to operate as a stand-alone entity. It is anticipated that this relationship will prove to be very positive for Countplus.

6. Management Comment and Dividend Guidance

The Company’s results are largely in line with expectations. Queensland Member Firms have bounced back from the impact of the Brisbane floods in early 2011, however other Firms have been adversely impacted by the general economic uncertainty. Traditionally, the accounting businesses within the group have a slightly stronger first half than second. However, the financial services business is more consistent over both periods. The one–off impact of the group provisioning policy in this period should also help ensure a more even operating result in the second half.

A quarterly dividend of 3 cents has been declared today, payable 15 May 2012.

The current high dividend of 12 cents per annum remains above our preferred 50%-75% payout ratio, but as profits increase we intend to reduce the percentage payout ratio so that most, and preferably all acquisitions, can be funded from retained earnings, issue of shares to vendors as well as conservative borrowings.

The Directors remain confident that dividends of 12 cents per share will be payable for the full year.

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7. 2012 Key Events

13March 2012	Countplus annualconference
15May2012	2012 -3rdinterimdividend
15August2012	2012 - Finaldividend
28August2012	Annual results announced
13November 2012	AnnualGeneral Meeting
15November 2012	2013– 1stinterimdividend

8. Material Developments post the reporting period

Apart from that disclosed above, there have been no material developments post the reporting period.

For further information please contact:

Barry Lambert Michael Spurr Executive Chairman Chief Executive Officer Telephone: 02 8272 0212 Telephone: 02 8272 0293 Mobile 0408 427 701 Mobile 0425 224 960 Email: barry.lambert@countplus.com.au Email: michael.spurr@countplus.com.au www.countplus.com.au www.countplus.com.au

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