Wrap Text
Audited results for the year ended 31 August 2012
Purple Capital Limited
(Incorporated in the Republic of South Africa)
(Registration number 1998/013637/06)
Share code: PPE ISIN: ZAE000071411
(“Purple Capital” or “the group”)
Audited results for the year ended 31 August 2012
Condensed Consolidated Statement of Comprehensive Income
Group
2012 2011
R?000 R?000
Revenue 87,397 59,614
Trading and operating expenses (89,398) (65,631)
Net loss (2,001) (6,017)
Fair value adjustments 3,356 13,318
Other income 6,275 1,125
Profit before interest, depreciation and
amortisation 7,630 8,426
Net interest expense (971) (442)
Depreciation and amortisation (3,024) (5,612)
Profit before tax 3,635 2,372
Current and deferred tax (421) (250)
Profit for the period 3,214 2,122
Profit attributable to:
Owners of the company 3,948 2,720
Minorities (734) (598)
3,214 2,122
Weighted number of shares in issue at end of
period (,000) 819,982 773,207
Basic profit per share (cents) 0,48 0,35
Diluted profit per share (cents) 0,46 0,33
Condensed Consolidated Statement of Other
Comprehensive Income
Group
2012 2011
R'000 R'000
Profit for the period 3,214 2,122
Other comprehensive income (478) 12
Total comprehensive income 2,736 2,134
Profit attributable to:
Owners of the company 3,470 2,732
Minorities (734) (598)
2,736 2,134
Condensed Reconciliation of Capital and Reserves
Group
2012 2011
R'000 R'000
Balance at beginning of period 267,612 236,536
Shares issued 619 25,233
Profit for the period 3,214 2,720
Share based payments 2,902 3,297
Revaluation reserve 2 (11)
Foreign currency translation reserve (480) 23
Distributions to minorities 252 489
Other Reserves (517) (675)
273,604 267,612
Condensed Consolidated Statement of Financial Position
Group
2012 2011
R'000 R'000
ASSETS
Equipment 1,439 1,987
Goodwill 208,146 208,146
Other intangible assets 7,043 6,366
Investments, subsidiaries & associates 51,701 48,295
Long-term receivables 1,102 1,069
Deferred tax asset 17,283 14,402
Total non-current assets 286,714 280,265
Trade and other receivables 4,187 6,607
Cash and cash equivalents 63,687 50,877
Total current assets 67,874 57,484
Total Assets 354,588 337,749
EQUITY AND LIABILITIES
Share capital and premium 475,975 475,356
Accumulated loss (217,268) (221,216)
Other reserves & minorities 14,897 13,472
Total equity 273,604 267,612
Loans and borrowings 1,731 7,778
Total non-current liabilities 1,731 7,778
Trade and other payables 70,879 55,323
Loans and borrowings 7,814 7,036
Tax payable 560 -
Total current liabilities 79,253 62,359
Total equity and liabilities 354,588 337,749
Net asset value per ordinary share (cents) 33,34 32,70
Condensed Consolidated Cash Flow Statement
Group
2012 2011
R'000 R'000
Cash flow generated from/(utilised) in operating
activities 21,297 (1,172)
Cash flow utilised in investing activities (3,550) (1,215)
Cash flow (utilised) in/generated from financing
activities (4,937) 19,777
Net increase in cash and cash equivalents 12,810 17,390
Cash and cash equivalents at the beginning of the
period 50,877 33,487
Cash and cash equivalents at the end of the period 63,687 50,877
HEADLINE EARNINGS PER SHARE
Profit for the period 3,948 2,720
Headline profit for the period 3,948 2,720
Headline profit per share (cents) 0,48 0,35
Diluted headline profit per share (cents) 0,46 0,33
COMMENTARY
Chairman's Report
Global Trader had a great year. Although trading volumes in markets
worldwide were particularly subdued over the last few months, our client
base and client funds on deposit have grown by close to two thirds.
These confidence indicators auger well for our business in the year
ahead. EBITDA in GT, our core business, more than doubled from R10,7
million in 2011 to R22,5 million this year. The exciting part is that we
do not see this as a peak, but rather a foundation for real earnings
growth into the foreseeable future.
Sports betting is growing as never before in South Africa, as it gains
an ever increasing share of the gaming and entertainment wallets. Our
continued investment has resulted in Voltbet being established as the
leading online sports betting company in South Africa. We have had a
number of approaches for strategic alliances within the industry and, no
doubt, some of these will be pursued as we spread the footprint. Voltbet
turnover grew by 98% over the past year and gross gaming revenue was up
40%. We expect these growth rates to continue for the next few years,
with profits surely to follow.
Treasury's disappointing results motivated a thorough re-costing and
restructuring of its economic model. In the result certain major clients
were found not to be profitable and that business was terminated. Purple
Treasury provides an error free treasury outsourcing capability in the
foreign exchange and money markets. Here also, alliances are being
considered. Turnover may be down in the ensuing year, but I do expect
profits.
Once Voltbet and Treasury yield profits this will have a remarkable
effect on Group earnings.
The Emperor Asset Management model gains broader acceptance every day.
Funds under management crossed the R100 million mark in July this year,
over 86% up on the previous year. At the year end the figure was R113,5
million. Fund performance has significantly outperformed the JSE Top 40
since the inception of Emperor in October 2004.
Risk management is a top priority in Purple Capital. In part as a result
of increased client flows across the group, we were able to increase our
21 day average profitability on the overall risk book by 37% whilst at
the same time reducing average value at risk down to 0,42% of market
capitalisation.
Real People continues to outperform as the leader in its various retail
funding and acquired debt businesses with a 23% growth in profits and a
28% growth in assets for their latest half year comparative results at
30 September 2012.
Purple Capital shareholders should draw comfort from the combination of
a strong earnings base in Global Trader, the impressive growth prospects
for Emperor Asset Management and Voltbet and the corrective action
completed in Treasury.
My gratitude goes to the shareholders and management who have been with
us through the turnaround of the last 5 years.
The profit and debt profiles over the past five years clearly illustrate
the Group's turnaround. Debt has been reduced from R163,2 million in
2008 to R9,5 million and we have moved from a loss of R110,4 million to
a profit of R3,9 million over that period.
I am now less concerned about any downside threats and very encouraged
by the upside possibilities. We have a great team and it is only a
matter of time before the upside starts paying dividends and providing
capital appreciation for shareholders.
CFO's Report
Key features of the 2012 financial year include:
• The Group made an after tax profit (for the 2nd year in succession) of
R3,9 million (2011: R2,7 million);
• Revenue for the year was R87,4 million, an increase of 46,6% over 2011
(R59,6 million);
• The Group's cash on hand at 31 August 2012 was R63,7 million (2011:
50,9 million);
• Loans and borrowings were R9,5 million (2011:R14,8 million) at the end
of the period; and
• Shareholder funds increased from R267,6 million to R273,6 million at
31 August 2012.
Global Trader had a good year contributing R77,7 million in revenue and
R17,8 million in profit. Revenue increased 56% over 2011 to R77,7
million on the back of strong markets towards the end of 2011. Operating
and headline expenses were R55,2 million which was an increase over 2011
of 42%. The main area of growth in overheads was in salaries as more
people were hired to grow the business and improve on the level of
service provided. The increase in revenue resulted in an increase in
profits to R17,8 million from R7,3 million in 2011.
Voltbet grew its betting revenue from R2,5 million in 2011 to R3,9
million in 2012. This was as a result of an increased number of clients
betting and an extension in the number of markets made available. It
made a loss of R8,2 million in 2012 (2011: R5,0 million) as it is still
in the early stages of its growth.
Purple Capital Treasury had a tough year making a loss of R4,5 million
(2011:R2,6 million) on revenue of R5,1 million (2011: R5 million). The
business has been restructured with more focus on sales and on
developing partner relationships that should provide more robust revenue
streams for the business in the new financial year.
The Purple Capital Company made a loss of R1,1 million (2011: profit
R3,0 million) for the year. This includes the corporate office costs,
investment fair value adjustments (see below) and the Corporate Finance
division. The staff in Corporate Finance was reduced during the course
of the year and the remaining people are focused on internal projects.
The Group did not raise any capital during the year (2011:R25 million)
but has reduced long term borrowings from R14,8 million in 2011 to R9,5
million at the end of the period.
The Group still maintains its investments in Real People and Cipla
Medpro. Real People has again performed exceptionally well and generated
a conservative R4,0 million fair value adjustment during 2012. Cipla
Medpro started the year well but the corporate action driven drop in the
share price which resulted in a negative fair value adjustment for the
year of R0,6 million.
CEO's Report
In the outcome a positive set of results for the Purple Capital Group.
These were characterised by continued growth across our entire score
card and underpinned by a very strong set of results out of Global
Trader which has extended on its turnaround performance of last year and
posted strong growth across all its key performance measures.
Whilst the Group continues to invest in high growth opportunities,
specifically in its sports betting and treasury operations, the
profitability will initially underperform revenue and turnover growth
numbers. This will inevitably turn into profit.
Active clients grew by 58%. This was driven by strong client acquisition
across all our retail facing business units and resulted in client funds
on deposit increasing by an impressive 63%.
Return on market capitalisation improved markedly, however is still some
way off our target return objectives.
GLOBAL TRADER
Global Trader's results for the 2012 financial year pay tribute to the
staff, executive team and shareholders who have resolutely committed
themselves to the turnaround of the business since 2008.
The strategies employed by the business over the last three years are
now beginning to return value to the shareholders and at the same time
are receiving notable validation from the market. Most recently Global
Trader was ranked 3rd (2011: 6th) in the Annual Business Day Investor
Monthly Stock Broker Awards.
The results are more impressive in the context of the stock broking
community where significant contractions of volumes and revenue have
been experienced by the industry.
The diversity of our offering, commitment to innovation and leverage off
our extensive technology assets continue to drive our differentiation
and growth. The change in management structure and disciplined execution
of our strategy are also paying in the result.
The year ahead holds some very exciting developments and promises to
extend on the results achieved this year. Congratulations to the team on
a set of results you can be proud of in the circumstances.
In the first half of the year trading revenue achieved levels last seen
pre 2008 which was fuelled by higher levels of client activity driven by
increased market volatility and client acquisition. In the second 6
months of the year a significant decrease in market volatility impacted
negatively on client activity and with it trading revenue. This was
buoyed to some extent by continued high levels of client acquisition.
Spread Trading continues to lead Global Trader's revenue growth posting
impressive growth of 45.3% this year. CFD Trading revenue also
contributed strongly and reversed the negative revenue trend experienced
since 2008 posting aggressive growth of 81.7%.
The primary driver of this growth continues to be client acquisition and
activity which posted increases of 64% and 28% respectively.
Our highly differentiated strategy and unique investment in our
financial collaborative social platform, the Wire, as well as continued
commitment to education, sales and service excellence is certainly
driving the result. Stronger equity markets over the reporting period
also played out in the result.
Client Equity grew strongly over the reporting period. Primarily as a
result of fantastic client growth and returns achieved through our
Emperor Asset Management division is the strongest contributor to client
equity.
The impressive 108% increase in EBITDA is evidence of the substantial
leverage Global Trader has over its fixed cost base where increases in
revenue translate into strong earnings growth.
VOLTBET.COM
Voltbet.com continues to post strong growth across all of its key
metrics. Turnover grew by 99.8% which was underpinned by strong growth
in deposits, bet volumes and active clients.
Pursuing a high growth strategy is delivering the requisite results
albeit at an expected high marketing cost and lower margin levels which
have depressed the profitability of the business unit in the short term
but building a solid foundation over time.
Voltbet.com continues to invest heavily in forging strong industry
partnerships and several of these initiatives in South Africa and Africa
are expected to drive additional growth and revenue in the year ahead.
The sports betting industry is experiencing unprecedented growth both
locally and globally and it?s an exciting industry to be involved in.
PURPLE CAPTIAL TREASURY
Purple Capital Treasury had a disappointing year despite good growth
across most of its key performance metrics. The business has been
restructured for growth both operationally and in terms of resource
application and focus. Considerable effort has been applied in the last
quarter in building out the sales team and supporting management systems
and processes. This has driven strong client new growth in the period
and this will deliver better returns from the business in the year ahead.
Growth through partnership and the disciplined execution of the sale
strategy in the year ahead should prove in next year's result.
The Group remains committed to delivering on the considerable revenue
potential of this business unit.
Operating segments
The results by operating segment are as follows:
Segmental Reporting
Purple Purple
GT Capital Voltbet Treasurey Total
2012 R'000 R'000 R'000 R'000 R'000
Revenue 77,746 4,027 3,859 5,121 90,753
Trading and
Operating Expenses (55,266) (4,035) (13,641) (10,181) (83,123)
Earnings before
interest,
depreciation and
amortisation 22,480 (8) (9,782) (5,060) 7,630
Net interest (13) (958) - - (971)
Depreciation and
amortisation (1,563) (1,428) (2) (31) (3,024)
Profit/(loss)
before tax 20,904 (2,394) (9,394) (5,091) 3,635
Current and
deferred tax (3,085) 1,248 1,403 13 (421)
Profit/(loss)
before tax 17,819 (1,146) (8,381) (5,078) 3,214
Non-controlling
interest - - 147 587 734
17,819 (1,146) (8,234) (4,491) 3,948
Subsequent events
Purple Capital acquired the 25% of Purple Capital Treasury that it did
not already own for a nominal consideration.
Annual general meeting
The annual general meeting of Purple Capital will be held at 3rd Floor,
10 Melrose Boulevard, Melrose Arch on Friday, 14 December 2012 at 10h00.
Accounting policies
The financial results have been prepared in accordance with
International Financial Reporting Standards (“IFRS”), the
interpretations adopted by the International Accounting Standards Board,
the requirements of the South African Companies Act and in terms of
IAS34. The financial results were prepared under the supervision of Mike
Wilson CA (SA).
Forward looking statements have not been reviewed or reported on by the
Company's auditors.
The accounting policies are those presented in the consolidated annual
financial statements for the year ended 31 August 2012 and have been
applied consistently to the periods presented in these condensed
financial statements.
Report of the independent auditors
BDO South Africa Incorporated's unmodified auditors' reports included in
the annual consolidated financial statements and on the summarised
financial statements contained in this condensed report are available
for inspection at the company's registered office.
On behalf of the board
Mark Barnes Mike Wilson
Chairman Financial Director
Johannesburg
8 November 2012
Registered office Transfer secretaries
3rd Floor Link Market Services (Pty) Limited
10 Melrose Boulevard 11 Diagonal Street
Melrose Arch 2076 Johannesburg, 2001
(PO Box 411449 Craighall 2024) (PO Box 4844, Johannesburg, 2000)
Independent auditors Sponsor
BDO South Africa Incorporated Deloitte & Touche
Chartered Accountants (SA) Building 6
Registered Accountants and Auditors Deloitte Place
13 Wellington Road The Woodlands
Parktown, 2193 20 Woodlands Drive
Private Bag X60500 Sandton, Woodmead 2052
Houghton, 2041 (Private Bag X6,Gallo Manor, 2052)
Executive Directors: Mark Barnes (Chairman), Charles Savage, Mike Wilson
Non-executive Directors: Dennis Alter (American), Craig Carter, Thembeka
Gwagwa, Ronnie Lubner (British)
Date: 08/11/2012 04:40:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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