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Unaudited interim results for the six months ended 28 February 2013
PURPLE CAPITAL LIMITED
(Incorporated in the Republic of South Africa) (Registration number 1998/013637/06)
Share code: PPE ISIN: ZAE 000071411 ("Purple Capital" or "the group")
Unaudited results
for the six months ended 28 February 2013
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Unaudited Audited Unaudited
six months 12 months six months
28 February 2013 31 August 2012 29 February 2012
R'000 R'000 R'000
Revenue 40 435 87 397 46 166
Trading and operating expenses (44 600) (89 398) (37 359)
(Net loss)/profit (4 165) (2 001) 8 807
Fair value adjustments 9 255 3 356 (274)
Other income 146 6 275 1 982
Profit before interest, depreciation and amortisation 5 236 7 630 10 515
Net interest expense (344) (971) (791)
Depreciation and amortisation (1 575) (3 024) (1 494)
Profit before tax 3 317 3 635 8 230
Current and deferred tax (2 064) (421) (2 633)
Profit for the period 1 253 3 214 5 597
Other comprehensive (loss)/income (524) (478) (421)
Total comprehensive profit 729 2 736 5 176
Profit attributable to:
Owners of the company 1 253 3 948 6 029
Non-controlling interests (734) (432)
1 253 3 214 5 597
Weighted number of shares in issue at end of period ('000) 820 738 819 982 819 292
Basic profit per share (cents) 0,15 0,48 0,74
Diluted profit per share (cents) 0,15 0,46 0,70
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
Unaudited Audited Unaudited
six months 12 months six months
28 February 2013 31 August 2012 29 February 2012
R'000 R'000 R'000
Cash flow generated by operating activities 14 689 21 297 20 422
Cash flow utilised in investing activities (348) (3 550) (1 933)
Cash flow utilised in financing activities (1 817) (4 937) (3 135)
Net increase in cash and cash equivalents 12 524 12 810 15 354
Cash and cash equivalents at the beginning of the period 63 687 50 877 50 877
Cash and cash equivalents at the end of the period 76 211 63 687 66 231
HEADLINE PROFIT PER SHARE
Unaudited Audited Unaudited
six months 12 months six months
28 February 2013 31 August 2012 29 February 2012
R'000 R'000 R'000
Profit for the period 1 253 3 948 6 029
Headline profit for the period 1 253 3 948 6 029
Headline profit per share (cents) 0,15 0,48 0,74
Diluted profit per share (cents) 0,15 0,46 0,70
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Unaudited Audited Unaudited
as at as at as at
28 February 2013 31 August 2012 29 February 2012
R'000 R'000 R'000
ASSETS
Equipment 1 080 1 439 1 731
Goodwill 207 068 208 146 208 146
Other intangibles 7 373 7 043 8 034
Investments and associates 60 876 51 701 49 718
Long-term receivables 1 102 1 085
Deferred tax asset 16 065 17 283 13 955
Total non-current assets 292 462 286 714 282 669
Trade and other receivables 4 044 4 187 7 173
Cash and cash equivalents 76 211 63 687 66 231
Total current assets 80 255 67 874 73 404
Total assets 372 717 354 588 356 073
EQUITY AND LIABILITIES
Share capital and premium 476 062 475 975 475 974
Accumulated loss (216 016) (217 268) (215 189)
Other reserves 15 624 14 897 14 254
Total equity 275 670 273 604 275 039
Long-term liabilities 1 731 11 170
Total non-current liabilities 1 731 11 170
Trade and other payables 89 618 70 879 69 864
Loans and borrowings 7 429 7 814
Tax payable 560
Total current liabilities 97 047 79 253 69 864
Total equity and liabilities 372 717 354 588 356 073
Net asset value per ordinary share (cents) 33,58 33,34 33,51
STATEMENT OF CHANGES IN EQUITY
Unaudited Audited Unaudited
as at as at as at
28 February 2013 31 August 2012 29 February 2012
R'000 R'000 R'000
Balance at beginning of period 273 604 267 612 267 612
Shares issued 88 619
Profit for the period 1 253 3 214 6 029
Share-based payments 1 249 2 902 2 107
Revaluation reserve (103) 2 (227)
Foreign currency translation reserve (421) (480) (194)
Non-controlling interests 252 (288)
Shareholder loan (517)
275 670 273 604 275 039
COMMENTARY
Chairman's Report
As a result of completing a full review of our operations, the management of Purple Capital concluded that definitive changes are required
to be made in order to provide shareholders with a clear understanding of what we do and how cash returns will be extracted from the
business going forward.
The following actions have been implemented:
- Purple Capital Treasury ("PCT") has not delivered the required returns since its acquisition. Effective 1 April 2013 PCT was sold for
R1,05 million. Although this will result in a write-off of R4,1 million to the carrying value of the investment, the group would no longer incur
the direct net loss of this business, estimated at R2,9 million per annum.
- Voltbet.com is now established as the leading online sports betting company in South Africa. A substantial investment of R27 million
(in addition to the general running costs of the business) has been made by the group and previous partners and shareholders,
comprising:
- Core Sports Betting Systems and trading platforms R9 million;
- Voltbet.com Brand and Marketing R12 million;
- Securing, implementing and delivering on strategic partnership development (Sports betting partner to the Blue Bulls and Sports
betting service provider to large gaming distribution) R5 million; and
- Capacity building to service the expected increase in trading volumes R1 million.
With the current business comprising sport only, the expected introduction of horse racing (in the next six months) and the launch of
broader gaming partnerships, will secure the next growth phase of Voltbet.com.
Voltbet.com is managed autonomously from our core businesses, and will in future be reported on separately.
- Our structured BEE investments continued to grow in value. Real People Investment Holdings (Pty) Limited, and Cipla Medpro Limited
have net carrying values of R36,9 million and R7,8 million, respectively. In the aggregate these values amount to 5,4 cents per share.
- Our core business remains GT247.com (Global Trader) and Emperor Asset Management. These businesses are experiencing strong
growth in funds flow but the group cost ratios have become unacceptable over the last three years. A major rationalisation has now
been completed which resulted in a reduction of 30% in head count and 32% in fixed salary costs at group level and Global Trader.
The upfront retrenchment and other costs associated with the rationalisation will amount to R3,5 million but the anticipated annual
savings amount to R12 million. In addition, management incentives are being restructured to reward longer-term performance but
immediately reduce monthly running costs even further.
I wish to thank and congratulate the Executive Team for completing this difficult exercise.
In summary the rationalisation is expected to save at least R14,9 million per annum at the EBITDA level.
Directors
Mike Wilson will resign as Financial Director of Purple Capital with effect from 15 April 2013. Personally, and on behalf of shareholders,
I would like to thank Mike for his invaluable contribution to the group, during difficult times, over the past five and a half years.
Gary van Dyk, a Chartered Accountant who has been with Purple Capital for six and a half years, for the most part heading up Corporate
Finance, will be appointed to the board of Purple Capital as Chief Financial and Operations Director with effect from 15 April 2013.
I welcome him as a director and look forward to his input.
CEO's Report
GT247.com
The last six-month period was affected by substantially lower levels of market volatility and a continuation of the bull market conditions
that saw equity markets run up to record levels. This was significantly different from the high levels of market volatility experienced in the
previous comparative period.
Spread Trading revenue benefits mostly from increased market volatility and the resultant heightened levels of client trading activity.
This provides a natural balance to our equity-linked CFD business which benefits mostly from increased investor confidence, typical in
sustained bull market conditions.
In this context a pull-back in Spread Trading revenue was expected. However, this decline was mostly offset by CFD revenue which was
buoyed by increased investor confidence. Further support came from retail investors returning to equity markets as well as strong growth
experienced in Emperor Asset Management and our restructured GT Private Broking division.
In the result Trading Revenue remained resilient over the reporting period, recording R36,4 million which represents a moderate
decline over the comparative period last year. Over a period of two years the upward trend in Trading Revenue remains intact with growth
of 93,4%.
Funds on Deposit posted very strong growth of 83,5% over the comparative review periods. As at 28 February 2013 just over
R310,0 million was on deposit with the group. The continued increase in client funds held with GT247.com is a positive indicator for future
revenue as well as a strong vote of confidence from our clients.
EBITDA declined over the comparative reporting period. However the half-year results represent a more balanced result from the
comparative reporting period that is underpinned by a more diversified and resilient set of revenue contributions across the business.
GT247.com is a great business which is well on track to post strong annual growth in Trading Revenue and post the current restructure
initiatives, deliver further value to shareholders.
Emperor Asset Management ("EAM")
EAM is a unique alternative asset investment solution, tailored to meet your individual life stage and risk profile requirements and geared
according to your particular risk appetite to ensure you get the maximum return from the Fund's stock selection performance.
Our investment in EAM is rapidly transforming the mix of income and client profiles in GT247.com and delivering excellent results to the
group as well as to its clients.
EAM is now profitable, having reached economic scale at R200 million assets under management after growth of 174% over the last
12-month period. This was in part fuelled by excellent market returns of 51,7% for clients over the 2012 calendar year, one of the highest
realised returns in the asset management industry.
EAM's Robert Falcon Scott Fund's returns were more than double that of the benchmark FTSE/JSE Top 40, placing EAM in the top funds
amongst its peers.
Voltbet.com
The focus at Voltbet.com was shifted from turnover growth to extracting Gross Gaming Revenue ("GGR") and improving operating
margins whilst retaining high levels of client engagement and activity.
GGR has improved by 51% over the comparative review period, posting revenue of R2,4 million at a 60% improved operating margin
of 6,39%.
In addition, active clients grew by 12% over the comparative review period, partially offset by deposits and bets struck which were
moderately down 11,4% and 18,87%, respectively.
Financial Director's Review
The Purple Capital Group recorded an after-tax profit of R1,3 million for the six months to 28 February 2013, compared to a profit of
R6,0 million for the same period last year and R3,9 million for financial year ended 31 August 2012.
The group's cash on hand at 28 February 2013 was R76,2 million (29 February 2012: R66,2 million), including Global Trader client cash
held on margin against which there is a client liability included under current liabilities in the Statement of Financial Position.
Total debt was R7,4 million (29 February 2012: R11,1 million) at the end of the period.
Shareholder funds have increased from R275,0 million to R275,7 million since 29 February 2012.
Operating Segments
The results by operating segments are as follows:
Purple Global Purple
Capital Trader Voltbet Treasury Total
R'000 R'000 R'000 R'000 R'000
Revenue 9 189 36 432 2 413 1 802 49 836
Operating expenses (4 818) (27 074) (8 706) (4 002) (44 600)
Earnings before interest, depreciation
and amortisation 4 371 9 358 (6 293) (2 200) 5 236
Net interest expense (698) (3) (701)
Depreciation and amortisation (370) (841) (7) (1 218)
Profit/(loss) before tax 3 303 8 514 (6 300) (2 200) 3 317
Current and deferred tax (108) (1 956) (2 064)
Profit/(loss) for the period 3 195 6 558 (6 300) (2 200) 1 253
There is no material inter-segment revenue.
Subsequent Events
Purple Capital Treasury was sold with effect from 1 April 2013.
Accounting Policies
These unaudited interim financial statements have been prepared in accordance with the framework concepts, the recognition and
measurement criteria of International Financial Reporting Standards ("IFRS") and the International Accounting Standard 34: Interim Financial
Reporting, as issued by the International Accounting Standards Board ("IASB"), the AC 500 standards as issued by the Accounting
Practices Board, the JSE Limited Listings Requirements and the requirements of the Companies Act, No 71 of 2008, as amended.
All policies are consistent with those used in the previous interim period and at year-end. These unaudited interim results were prepared
under the supervision of Mike Wilson, CA(SA) and were approved by the board on 11 April 2013.
Any forward-looking statements or general profit forecasts included in this announcement have not been reviewed nor reported on by the
company's auditors.
On behalf of the board
Mark Barnes Charles Savage
Chairman CEO
Johannesburg
11 April 2013
Registered office Transfer secretaries
3rd Floor Link Market Services South Africa (Pty) Limited
10 Melrose Boulevard, Melrose Arch, 2076 13th Floor, Rennie House, 19 Ameshoff Street, Braamfontein, 2001
(PO Box 411449, Craighall, 2024) (PO Box 4844, Johannesburg, 2000)
Independent auditors Sponsor
BDO South Africa Incorporated Deloitte & Touche Sponsor Services (Pty) Limited
Registered Auditors and Accountants Building 6, Deloitte Place, The Woodlands
13 Wellington Road, Parktown, 2193 20 Woodlands Drive, Sandton, Woodmead, 2196
(Private Bag X60500, Houghton, 2041) (Private Bag X6, Gallo Manor, 2052)
These unaudited results are available on the company's website: www.purplecapital.com
Executive Directors: Mark Barnes (Chairman), Charles Savage (CEO), Mike Wilson (CFO)
Non-executive Directors: Dennis Alter (American), Craig Carter, Thembeka Gwagwa, Ronnie Lubner (British)
Date: 11/04/2013 04:45:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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