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EFFICIENT GROUP LIMITED - Unaudited Interim Financial Results for the six months ended 28 February 2013

Release Date: 24/04/2013 17:30
Code(s): EFG     PDF:  
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Unaudited Interim Financial Results for the six months ended 28 February 2013

EFFICIENT GROUP LIMITED
(Incorporated in the Republic of South Africa)
(Registration nr: 2006/036947/06)
Share code: EFG ISIN: ZAE 000151841
(EFG or the Group)

UNAUDITED INTERIM FINANCIAL RESULTS FOR THE SIX MONTHS ENDED 28 FEBRUARY 
2013

HIGHLIGHTS
- 40% increase in Revenue
- HEPS increased from 0.32 to 5.69 cents
The Group reports a loss after tax of R 248 000 for the six months ended 28 
February 2013 (the reporting period), compared with a profit of  R 133 000 
for the six months ended 29 February 2012 (comparative period), as a result 
of the impairment of the investment in Thebe Stockbroking (Pty)Ltd, as 
disclosed in more detail in the business segmental results.

Fund management results continue to improve  due to consistent results achieved 
by the  application of the embedded investment philosophy and process. The 
successful rollout of the distribution business through Efficient Advise 
continues to improve the financial results of the financial services business, 
and the good returns achieved on surplus funds improved the overall performance 
of the Group. 

The Group reports headline earnings of R 2.3 million for the reporting period 
(R 129 000 for the comparative period).   

1.Financial Results

Statement of Comprehensive Income:

Revenue increased by 40% during the six months ended 28 February 2013. The 
increase in revenue is mainly a result of the growth in the distribution network 
(114% increase relative to the  comparative period) and higher performance fees 
(41% increase relative to  the comparative period) earned by the asset management 
division. Fixed fees earned during the reporting period from asset management and 
administration are 2% lower than the fees earned in the comparative period due to 
lower assets under management.

Operating expenses consist of:
 
         			 Unaudited   	 Unaudited    		   Audited
				Six Months   	Six Months		Six Months
				     ended	     ended	   %	     ended
    		                 28-Feb-13       28-Feb-12    Change     31-Aug-12
                                     R000           R000     R000         R000
Operating Expenses		  (34,837)	  (26,078)    	 34%	  (58,516)
Variable expenses    		  (10,942)     	   (5,377)   	103%	  (13,213)	                 
Fixed expenses			  (21,723)	  (18,409)	 18%	  (40,871)
Non-cash flow expenses    	   (2,172)   	   (2,292)     (-5%)       (4,432)            

Variable expenses consist mainly of commissions paid to our financial advisors and 
asset administration costs. The increase in these expenses is attributable to and 
in line with the expansion of the distribution network.

The increase in fixed expenses signifies the Groups investment in infrastructure 
to support the growth in distribution, investment in the brand and realignment of 
the asset management division.
 
Non-cash flow expenses relate to the amortisation of intangible assets and 
depreciation of equipment. The depreciation charges for the reporting period were 
lower than the charges for the comparative period.
      
The Group invested surplus cash in one of the unit trust funds managed by the asset 
management division. The unrealised fair value adjustment on this investment 
resulted in an increased return on surplus funds.
    
The Groups share of comprehensive losses from associates  and the further 
impairment of the investment in Thebe Stockbroking had a negative impact on the 
profit for the reporting period.
 
The Group reported a loss of R 248 000  for the six months ended 28 February 2013.   

Statement of Financial Position:

The terms of a loan to one of the Groups associates were amended to a loan with no 
fixed repayment terms. 

This loan now forms part of the equity accounted investments whereas it was 
previously disclosed as a long-term receivable.
  
The net tangible asset value per share is  62.07 cents for the reporting period 
compared to the net tangible asset value per share of 59.94 cents for the year 
ended 31 August 2012.
   
The statement of financial position as at 29 February 2012 was restated due to a 
prior year error as disclosed in the annual financial statements for the year ended 
31 August 2012.

Cash flow:

The Group generated cash of R 4.3 million from operations as a result of profits 
generated and the decrease in accounts receivable. An amount of R 1 million  was 
utilised  for investment activities, including business acquisitions, increased 
loans to associates and acquisition of equipment.

2. Business Segmental  Results

The Group consists of three divisions namely Asset Management and -Administration, 
Financial Services and Asset Finance.

Asset Management and Administration:

The focus of the asset management division, Efficient Select, is to deliver 
consistent returns in line with specified investment objectives through a defined 
Quality Investment Philosophy and disciplined investment process. Assets are 
managed in a streamlined and competitive product range consisting of unit trust 
investments (local and international) and private client share portfolios. 

The contribution from the asset management division is dependent on the amount of 
assets under management, fund performance relative to fund benchmarks, and where 
applicable, a high watermark. Efficient Select is currently reviewing and 
implementing a number of changes to product fee structures in order to align with 
local and international best practices and market trends.    

Efficient Select has R 2 544 million under management.

The administration of assets comprises liability- and asset administration. 
Efficient Collective Investments administrates assets totalling R 2 275 million, 
of which R 161 million are external funds. This division reported revenue of 
R 22.3 million for the period under review, an increase of 14% to the comparative 
period. Following the outsourcing of a component of the private share portfolio 
management, margins were lower than during the comparative period and fixed expenses 
increased by 33% resulting from the realignment project within the asset management 
division. The division posted a profit after tax of R 4.3 million for the reporting 
period compared to a profit of R 5.2 million for the comparative period.
 
Financial Services:
 
The core business of Efficient Financial Services trading as Efficient Advise entails 
the delivery of comprehensive financial planning and investment management expertise 
for the benefit of individual and corporate clients. This is achieved through the 
provision of an integrated financial planning solution to appropriately address clients 
requirements for financial planning, investment management, risk cover (including 
short-term insurance and medical aid), employee benefit structures, cash management, 
stockbroking, asset finance and fiduciary services. 

Efficient Advise is focused on establishing a distribution network throughout southern 
Africa. The distribution network consists of a national branch and advisory 
infrastructure comprising 46 registered representatives, complimented by a highly 
skilled support structure. 

The financial services division reported revenue growth of 93% when compared to the 
comparative period. This increase is directly linked to the expansion of the 
distribution network. Variable costs increased in line with the growth in revenue and 
the increase in fixed expenses is as a result of the greater support infrastructure. 
This division reported a loss after tax of R 1.2 million (excluding stockbroking).

Part of the financial services offering is stockbroking through an associate, Thebe 
Stockbroking . This associate reported a loss for the reporting period of R 282 000, 
increasing the loss  after tax reported by Efficient Advise. 

EFG and Thebe Investment Corporation (Pty) Ltd, as joint shareholders in Thebe 
Stockbroking, explored various avenues regarding the possibility of incorporating 
the stockbroking business under the Efficient brand, unfortunately without success. 
The EFG Board, in the absence of exercising control over Thebe Stockbroking or a change 
in the strategic direction of that company, is not convinced that the future economic 
benefits from Thebe Stockbroking will exceed the carrying value of this investment. 
The investment was accordingly impaired, which further increased the loss of this 
division. 

At the end of February 2013, Efficient Advise had R 2 105 million of Assets under 
Advice compared to R 1 323 million at the end of August 2012.

Asset Finance:

Efficient Asset Finance offers an asset finance intermediary service to the 
Efficient Advise distribution channel as well as other markets. 

This division reported revenue of R 1.5 million at a gross margin of 34%. Fixed 
expenses amounted to R 589 000 for the reporting period and the division posted an 
after tax loss of R 68 000.  

3. Acquisition Activities

As part of the extension of the financial services distribution network Efficient 
Financial Services (Pty) Ltd acquired various financial advisory client bases for 
R 437 000. The transactions were effective at various dates during the reporting 
period and the purchase prices are paid/payable in cash up to 12 months after the 
effective dates. 

4. Strategy

The Groups strategy is focused on:

- Enhancing distribution through the development of the distribution network;
- Increasing assets under management, administration and advice;
- Expanding the current product offering of the asset finance division to other 
  related services and products; 
- Integrating the various media channels utilised in our communications with 
  clients and the market to ensure a focused and cohesive brand  strategy.

5. Dividends 

The companys dividend policy is to declare dividends biannually at the 
discretion of the board of directors, determined by the financial position of the 
Group and equal to 80% of free cash flow of the Group. Free cash flow is calculated 
after making provision for cash reserves equal to three months operating expenses, 
capital expenditure and budgeted acquisitions. Based on this policy the directors 
determined that no interim dividend can be paid. 

6. Basis of preparation

The interim results are presented on a consolidated basis and are prepared in 
accordance with the recognition and measurement requirements of International 
Financial Reporting Standards and presentation and disclosure requirements of 
IAS 34 (Interim Financial Reporting), the JSE Listings Requirements, and the 
Companies Act of South Africa and the AC 500 series of Interpretation as issued by 
the APB. The accounting policies applied are consistent with those applied in the 
previous interim period and previous financial year-end, except where indicated 
differently. No material events occurred after the interim period which requires 
an adjustment to the financial information. These interim results have not been 
audited or reviewed by the Groups auditors, KPMG Inc. The condensed unaudited 
interim financial results are prepared by Anton de Klerk, the Chief Financial 
Officer of Efficient Group. 

7. Change to the board of directors

Mickey Giles and Ronald Paterson resigned as directors and Jerry Mabena joined 
the board during this period.

Steve Booysen						     Heiko Weidhase
Chairman					    Chief Executive Officer 

10 April 2013

Non-executive directors: S Booysen*, Z Cele*,L Taylor*, J Mabena, and M Cassim.
* Independent
Executive directors: DD Roodt, H Weidhase, AT de Klerk
Registered address: 81 Dely Road, Hazelwood, 0081
Business address: 81 Dely Road, Hazelwood, Pretoria, 0081
Company secretary: Adv Rudi Barnard
Transfer secretaries: Link Market Services South Africa (Pty) Ltd
Sponsor: Java Capital (Pty) Ltd


Efficient Group Unaudited Interim Financial Results For the six months ended 
28 February 2013

CONDENSED CONSOLIDATED 		 Unaudited 	 Unaudited 		  Audited 
STATEMENT OF COMPREHENSIVE 	Six Months	Six Months		     Year
INCOME				     ended	     ended	     %	    ended
				 28-Feb-13	 28-Feb-12	Change	31-Aug-12
				     R'000	     R'000		    R'000
					
Revenue		 		    36 880 	    26 304 	   40%	   55 433 
Asset Management fees					
 - Fixed fees		    	    11 832 	    12 059 	  (2%)	   23 983 
 - Performance fees		    10 425 	     7 411 	   41%	   13 917 
Financial Services income	    14 374 	     6 722 	  114%	   17 007 
Other		 		       249 	       112 	  122%	      526 
					
Operating expenses		  (34 837)	  (26 078)	   34%	 (58 516)
 - Variable expenses		  (10 942)	   (5 377)	  103%	 (13 213)
 - Fixed expenses		  (21 723)	  (18 409)	   18%	 (40 871)
 - Non-cash flow expenses	   (2 172)	   (2 292)	  (5%)	  (4 432)
					
Operating profit/(loss)		     2 043 	       226 	  804%	  (3 083)
					
Finance Income		 	       721 	       729 	  (1%)	    1 537 
Finance Cost		 	      (10)	      (24)	   58%	     (26)
Profit on sale of equipment		 - 	 	 - 	     -        436 
Realised fair value adjustment of 	 - 	       247 	  100%	      247 
investment designated at fair 
value through profit or loss		 
Unrealised fair value adjustment 
ofinvestment designated at fair 
value through profit or loss	       786 	 	 - 	     -        285 		 
Remeasurement of long-term liability    305 	         - 	     -        316 
Other Income/(expenses)		 	90 	       (2)	 4600%	      (3)
Impairment of investment in 
associates			   (2 555)	         - 	     -    (6 010)
Share of comprehensive losses from 
associates		             (574)	      (559)	    3%	  (1 983)
					
Profit/(loss) before taxation	       806 	        617 	   31%	  (8 284)
Taxation		 	   (1 054)	      (484)		    (147)
Profit/(loss) for the period	     (248)	        133 	(286%)	  (8 431)
					
Other comprehensive income:					
Realised fair value adjustment of 
available-for-sale financial assets	 - 	        (6)	(100%)	      (6)
Unrealised fair value adjustment of 
available-for-sale financial assets     35 	         97 	 (64%)	       48 
		 - 			
Total comprehensive income for the 
period		 		     (213)	        224 	(195%)	  (8 389)
					
Profit/(loss) for the period 
attributable to:					
Equity holders of the parent	     (234)	        133 	(276%)	  (8 407)
Non-controlling interest	      (14)	          - 	     -       (24)
		 		     (248)	        133 	(286%)	  (8 431)
					
Total Comprehensive income/(loss) 
for the period attributable to:					
Equity holders of the parent	     (199)	        224 	(189%)	  (8 365)
Non-controlling interest	      (14)	          - 	     -       (24)
		 		     (213)	        224 	(195%)	  (8 389)
					
Number of shares in issue ('000)    40 760 	     40 760 		   40 760 
Weighted average number of shares 
('000)		                    40 760 	     40 760 		   40 380 
Diluted Weighted average number 
of shares ('000)		    40 760 	     40 730 		   40 380 
					   
Earnings/(loss) per share (cents)   (0.57)	       0.33 	(276%)	  (20.82)
Diluted earnings/(loss) per share 
(cents)		 		    (1.11)	       0.33 	(441%)	  (21.38)
Headline earnings per share (cents)   5.69 	       0.32 	 1699%	   (6.71)
Diluted headline earnings per share 
(cents)		 		      5.15 	       0.32 	 1527%	   (7.28)

Headline earnings/(loss) are 
calculated as follows:
Profit for the period atttributable
to equity shareholders of the parent (234)		133		  (8,407)
Impairment of investment in 
associate			     2,555		  -                 6,010
Profit on disposal of equipment		 -                -                 (436)
Taxation on disposal of equipment	 -                -                   122
Realised fair value adjustment of
available-for-sale financial assets
through profit and loss			 -              (6)                     -
Less: Taxation on realised fair 
value adjustment of available-
for-sale financial assets through
profit and loss				 -                2                     -
Headline earnings/(loss)	     2,321              129               (2,711)

CONDENSED CONSOLIDATED STATEMENT 	  	 	 Unaudited	  
OF FINANCIAL POSITION 		        Unaudited	     as at 	Audited 
			 		    as at  	  Restated 	  as at	
		 		    	28-Feb-13 	 28-Feb-12    31-Aug-12 
		 	             	    R'000 	     R'000 	  R'000 
Non-current assets					
Equipment		 	       	      720 	     2 344          649 
Goodwill		 	    	   23 617 	    23 494       23 494 
Intangible assets		    	   19 364 	    20 854 	 20 784 
Investments		 	     	    6 446 	       384 	  5 625 
Equity accounted investments	 	    5 654 	    10 119 	  6 865 
Long-term receivable		 	    1 871 	     2 387 	  2 902 
Deferred taxation asset		 	      260 	       337 	    256 
		 			   57 932 	    59 919       60 575 
Current assets					   
Trade and other receivables		    7 366 	    10 566 	  9 583 
Cash and cash equivalents		   19 210 	    24 291 	 15 861 
Short-term portion of long-term 
receivables		 		      725 	 	 - 	  1 042 
Taxation receivable		 	      390 		 - 	     19 
		 			   27 691 	    34 857       26 505 
					
Total assets		 		   85 623 	    94 776 	 87 080 
					
Equity					
Total equity attributable to equity 
holders of the parent		 	   68 281 	    79 263 	 68 480 
Share capital and share premium		   58 657 	    58 657 	 58 657 
Shares to be issued		 	        - 	     2 214 	      - 
Treasury shares		 		    (149)	     (149)	  (149)
Fair-value adjustment reserve		       74 	        88 	     39 
Retained earnings		 	    9 699 	    18 453 	  9 933 
					
Non-controlling interest		     (58)	         - 	   (44)
Total Equity		 		   68 223 	    79 263 	 68 436 
					
Non-current liability		 	    5 972 	     7 806 	  7 152 
Long-term liabilities		 	    1 994 	     2 400 	  2 298 
Deferred taxation liability		    3 978 	     5 406 	  4 854 
					
Current liabilities		           11 428 	     7 707 	 11 492 
Trade and other payables		    9 092 	     6 736 	  9 615 
Short-term portion of long-term liability   1 250 	         - 	  1 250 
Taxation payable		 	    1 086 	       971 	    627 
					
Total equity and liabilities		   85 623 	    94 776 	 87 080 
					
Net asset value per share (cents)	   167.52 	    194.46 	 169.59 
Net tangible asset value per share (cents)  62.07 	     85.66 	  59.94 

CONDENSED CONSOLIDATED 
STATEMENT OF CHANGES 
IN EQUITY										
	    R'000    Share	   
		   capital  Shares	     Fair-value 	 Non-control
		 and Share   to be Treasury  adjustment Retained        ling   Total
		   premium  issued   shares     reserve earnings    interest  Equity
Balance at 31 
August 2011	    57 221 	 -    (149)	    (3)	  22 938 	  69  80 076 
Issue of share 
capital		     1 436 	 -	 -	      -	       -	   -   1 436 
Shares to be 
issued		         -   2 214       -	      -	       -           -   2 214 
Acquisition of 
minority interest 
in Efficient 
Financial Services 
(Pty) Ltd		 -	 -	 -	      -  (3 580)	(69) (3 649)
Realised fair value 
adjustment of 
available-for-sale 
financial asset		 -       -	 -	    (6)	       -           -     (6)
Total comprehensive 
income for the period	 -	 -	 -	     97      133 	   -	 230 
Dividend paid	         -	 -	 -	      -	 (1 038)	   - (1 038)
Balance at 29 
February 2012 
(Restated)	    58 657   2 214   (149)	     88   18 453 	   -  79 263 
Shares to be issued 
transferred to long 
term liability		-  (2 214)	 -	      -	       -	   - (2 214)
Disposal of 20% of 
the investment in 
Efficient Asset 
Finance (Pty) Ltd	-	 -	 -	      -       20         (20)	  - 
Total comprehensive 
income for the period	-	 -	 -	   (49)	 (8 540)         (24)(8 613)
Balance at 31 
August 2012        58 657        -    (149)	     39    9 933         (44) 68 436 
Total comprehensive 
income for the period	-	 -	  -	     35    (234)         (14)  (213)
								
Balance at 28 
February 2013	   58 657        -    (149)	     74    9 699         (58) 68 223 

CONDENSED CONSOLIDATED STATEMENT 
OF CASH FLOWS		 		  Unaudited  	 Unaudited     Audited  
		 			 Six Months 	Six Months 	  year 
		 			      ended 	     ended 	 ended 
		 			  28-Feb-13 	 28-Feb-12   31-Aug-12 
		 			      R'000 	     R'000 	 R'000 
Cash flows from operating activities					
Cash generated from operations		      5 745 	   (1 252)	 1 241 
Finance income		 		        536 	       729 	 1 537 
Finance cost		 		       (10)	      (24)	  (26)
Dividends paid		 			  - 	   (1 038)     (1 038)
Tax paid		 		    (1 968)	     (358)     (1 154)
Net cash flow from operating activities	      4 303 	   (1 943)	   560 
					
Cash flows from investing activities					
Acquisition of business		 	      (188)	     (134)     (2 453)
Long-term loan to associate		      (526)	         -     (2 265)
Decrease/(Increase) in long-term receivable     144 	     (467)     (1 624)
Acquisition of available-for-sale financial 
asset		 				  - 	 	 -     (5 000)
Proceeds on disposal of available-for-sale 
financial asset					  - 	     3 247       3 247 
Acquisition of non-controlling interest		  - 		 - 	     - 
Proceeds on disposal of equipment		  - 	 	 - 	     1 
Acquisition of equipment		      (384)	   (1 482)     (1 675)
Net cash outflow from investing activities    (954)	     1 164     (9 769)
					
Movement in cash and cash equivalents for 
the period		 		      3 349 	     (779)     (9 209)
Cash and cash equivalents at the beginning 
of the period		 		     15 861 	    25 070 	25 070 
Cash and Cash equivalents at the end of 
the period		 		     19 210 	    24 291 	15 861 

SEGMENTAL ANALYSIS					
		  R'000         Asset   Financial     Asset    Other	 Total
			   Management	 Services   Finance
			          and
		       Administration

For the six months ended 
28 February 2013:					
Revenue	 		       22 257 	   12 833     1 541 	 249 	36 880 
Profit for the period	 	4 257 	  (4 065)      (68)    (372)	 (248)
Net asset value	 	       28 051 	  (3 151)      (38)   43 361 	68 223 
					
For the six months ended 29 
February 2012:					
Revenue	 		       19 512 	    6 634 	88 	  71 	26 305 
Profit for the year	 	5 241 	    (201)     (64)   (4 843)	   133 
Net asset value	 	       27 925 	    1 595    (163)    49 906 	79 263 
					
For the year ended 31 August 
2012:					
Revenue	 		       45 097 	   18 641      992   (2 183)	62 547 
 - External		       45 097 	   16 016      992 	 442 	62 547 
 - Inter-segment	 	    - 	    2 625  	     (2 625)	     - 
Profit for the year	 	1 603 	  (8 552)    (121)   (1 361)   (8 431)
Net asset value	 	       23 761 	      632    (220)    44 263 	68 436 
					
"Other consists of consolidation entries, amortisation of intangible assets and 
Efficient Capital. The comparative figures were restated due to the change in 
the composition of the reporting segments.



Transactions between segments take place at arm's length.			

Date: 24/04/2013 05:30:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
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