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Abridged Prospectus relating to the listing of Anchor Group Limited
ANCHOR GROUP LIMITED
(formerly Andotorque Investments Proprietary Limited)
(Incorporated in the Republic of South Africa)
(Registration number 2009/005413/06)
(“Anchor” or “the Company”)
ISIN Code: ZAE000193389 JSE Code: ACG
ABRIDGED PROSPECTUS RELATING TO THE LISTING OF ANCHOR GROUP LIMITED
The board of directors of Anchor are pleased to announce the issue of a prospectus prepared and issued
in terms of the Listings Requirements (“the Listings Requirements”) of the Johannesburg Stock Exchange
(“the JSE”) and the Companies Act, 2008 (No. 71 of 2008), as amended (“the Act”), relating to an offer for
subscription of Anchor ordinary shares by way of:
- an offer by the Company by way of a Private Placing of 7.5 million shares at 200 cents each and
Preferential Offer for subscription of 22.5 million shares of 200 cents each, totalling 30 000 000
ordinary no par value shares (“together the Private Placement”) in the issued share capital of the
Company at an issue price of 200 cents per ordinary share; and
- the subsequent listing of 92 600 000 ordinary shares of 200 cents each in Anchor on the
Alternative Exchange (“AltX”) of the JSE.
Opening date of the Private Placement at 09h00 on Tuesday, 2 September 2014
Closing date of the Private Placement at 12h00 on* Tuesday, 9 September 2014
Anticipated listing date on AltX at commencement of trade on Tuesday, 16 September2014
*Shareholders wishing to subscribe for ordinary Shares in dematerialised form must advise their Central
Securities Depository Participant (“CSDP”) or broker of their acceptance of the Private Placement of
Shares in the manner and within the cut-off time stipulated by their CSDP or broker.
In the event of an over-subscription in terms of the Private Placement, the directors will adjust the
allocation of applicants on an equitable basis in accordance with paragraph 5.18 of the JSE Listings
Requirements. The Shares placed in terms of the Prospectus will rank pari passu with the existing
ordinary Shares in Anchor and rank equally as to voting, share in profits, dividends and distributions. The
Company has already identified the participants in both the Preferential Offer and the Private Placing.
At the date of closing of the Private Placement and assuming that the Private Placement is fully
subscribed, Anchor share capital will comprise 1 000 000 000 authorised ordinary Shares of no par value
and 92 600 000 issued ordinary Shares of no par value with stated capital of R68 765 694 (before write
off of share issue expenses). There will be no convertible or redeemable Shares issued.
There is no minimum subscription in terms of the Private Placement as the company has
sufficient profits and working capital. The listing will only be subject to meeting the minimum
spread requirements for companies listing on the Alternative Exchange (“AltX”) as detailed below.
Subject to achieving the required spread of public shareholders in terms of the JSE Listings
Requirements, being obtained pursuant to the Private Placement and Preferential Offer, the JSE has
granted Anchor a listing in respect of up to 92 600 000 ordinary Shares on the AltX under the abbreviated
name “Anchor”, share code “ACG” and ISIN ZAE000193389. It is anticipated that the listing of the
Shares on AltX will become effective from the commencement of business on Tuesday, 16 September
2014.
The Private Placement has not been underwritten.
The Company does not have any treasury Shares or debentures in issue.
Applications for ordinary Shares in Anchor must be for a minimum of 10 000 ordinary Shares at 200 cents
per share, amounting to R20 000, and in multiples of 100 ordinary Shares thereafter. Fractions of Shares
in Anchor will not be issued.
The Shares in Anchor will be tradable on the JSE in dematerialised form only and, as such, all investors
who elect to receive their ordinary Shares in Anchor in certificated form, will have to dematerialise their
certificated Shares should they wish to trade therein.
The directors of Anchor, collectively and individually accept full responsibility for the accuracy of the
information given and certify that to the best of their knowledge and belief there are no facts that have
been omitted which would make any statement false or misleading, that all reasonable enquiries to
ascertain such facts have been made and that the Prospectus contains all information required by law
and the JSE Listings Requirements.
The Designated Advisor, Auditors and Reporting Accountants, Attorney, Commercial Banker and
Transfer Secretary, whose names are set out in the prospectus, have given and have not, prior to
registration, withdrawn their written consents to the inclusion of their names in the capacities stated.
An English copy of the Prospectus, accompanied by the documents referred to under “Registration of
Prospectus” in paragraph 4.2 of the Prospectus, was registered by the Commissioner of CIPC on 29
August 2014 in terms of Regulation 52(5) of the Companies Act, 2008 (No. 71 of 2008), as amended.
Background, incorporation and nature of business
Anchor was incorporated as a private company under the name Andotorque Investments Proprietary
Limited and was converted to a public company and changed its name to Anchor Group Limited on
23 July 2014. The special resolutions were registered by CIPC on 25 August 2014.
The Anchor Group was founded in 2009 by Peter Armitage and Todd Kaplan and acquired the two
businesses of Anchor Capital and Ripple Effect 4 in 2011. Anchor Capital, co-founded by Peter Armitage
and Todd Kaplan, was acquired in December 2011, effective 1 January 2012, with a view to establishing
a large South African asset management business. The business has grown rapidly and intends to
continue doing so.
Ripple Effect 4, founded by Todd Kaplan, has been in operation for over a decade and has developed
experience in the delivery of knowledge via the use of information technology, with a focus on the
financial services sector. This business also provides research and information technology services to
Anchor Capital.
The long term strategy of the Anchor Group is to become a major player in South African asset
management and related services through Anchor Capital, while in the knowledge sector the intention is
to globalise the business and provide services to international listed businesses.
The strategic direction and intent of the Group can be described as follows:
- Operate a high quality investment process, analysing both local and global markets. Everything in
the Group feeds off this.
o This will be driven by highly skilled individuals schooled in the principles and culture of Anchor
Capital.
- Deliver excellent investment performance across the products and services that the Group offers.
o This is defined as performance ahead of appropriate benchmarks.
- Build and grow a quality base of clients.
o This will be achieved by delivering investment performance, maintaining strong client relationships
and effectively marketing the services of the business.
- Grow the asset management business into the institutional market, off an already strong and
established retail base.
o This is a process which has already begun but requires long and consistent track records,
- Grow a base of clients to whom financial services training and research services are provided, both
locally and globally.
o This will be achieved by offering the appropriate range of products and services and effective
marketing.
There are no government protection or investment encouragement laws that impact on the Company or
the Group.
The core business of Anchor is divided into two distinct areas:
- Asset Management
This business is conducted by Anchor Capital (www.anchorcapital.co.za), which is a five year old
asset management business and a registered Financial Services Provider. This business
contributes the majority of the earnings of the Group. The Group is also a minority investor in the
newly-formed Cartesian Capital and Anchor Securities holding 19.9% and 25% respectively.
- The business of knowledge
Established 13 years ago, this business is conducted by Ripple Effect 4 (www.re4.co.za), which is
a business that conducts training, information services and outsourced research, primarily in the
financial services sector.
The business is proceeding well. The asset management business of the Group effectively started in
2012 with just less than R1 billion in Group wide assets under management at the end of 2012. This
increased to over R2.8 billion by the end of 2013, and was over R5.25 billion by the end of July 2014 as
extracted from the management accounts.
The Group has the potential to double its assets under management in 2014 based on year to date
targets achieved, current growth rates being experienced and the pipeline of opportunities, as long as
equity markets are reasonably positive. The marketing initiatives are proving effective and Anchor has
achieved net inflows of around R100 to R150 million per month consistently over the last two years.
The investment performance of the Group has been excellent since inception and it is ahead of stipulated
benchmarks across all investment mandates. The flagship Anchor BCI Equity Fund is in the top 10 funds
(out of +/-180) in its category for the 12 months to June 2014, as measured by Morningstar, a recognised
rating agency.
The Group’s business model is highly cash generative and after investing material amounts in systems,
fixed assets and funding of minority subsidiaries, the Group still had in excess of R13 million in cash at
the end of June 2014.
Compliance is taken very seriously and in, addition to internal compliance procedures, regular monthly
compliance meetings are held with highly qualified external consultants, namely Tenfour Consulting, to
confirm that the business is complying with the letter and spirit of the FSB regulations. Tenfour
Consulting lodge the compliance report for Anchor Capital on a bi-annual basis and act as the external
compliance officer for Anchor Capital, overseeing the whole compliance process and communicating to
the FSB on Anchor’s behalf.
Anchor has received support from over 25 Financial Advisor groups and has begun interactions with
some of the country’s largest asset advisors and multi-managers.
The AUM mix as at the end of July 2014 was:
Nature of holding Approximate Rand Value
Long only fund structures R975 million
Segregated local portfolios R1 962 million
Global segregated portfolios R769 million
Hedge funds R257 million
Other categories R1 318 million
Prospects
The directors of the Company believe that the Group has excellent prospects based on the following:
- Anchor Group has an experienced, well-balanced, innovative and motivated management team;
- Anchor Capital has achieved critical mass and the operating margin expands with increased
turnover;
- Anchor Capital has an experienced and sizeable investment process team;
- Anchor Capital has evidenced an ability to grow assets under management by attracting new
investors;
- Anchor Capital has an excellent investment track record since inception across asset classes and
Anchor Capital’s investment process and team, positions it well to sustain performance levels;
- Anchor Capital has developed a strategic range of investment options, across local and offshore
as well as across conservative and more aggressive portfolios. The resultant mix of assets
under management should result in the business being relatively resilient to any market
conditions; and
- Ripple Effect 4 has developed products in and around investor education many of which have exciting
potential. Ripple Effect 4 also supports the research and analysis side of the Anchor Capital business.
SUMMARY OF FORECAST FINANCIAL INFORMATION
The profit forecasts of Anchor Group for the years ending 31 December 2014 and 31 December 2015
respectively, the preparation of which is the responsibility of the directors of Anchor, are set out below.
The accounting policies applied in arriving at the forecast incomes are consistent in all respects with IFRS
and with those accounting policies to be applied by the Anchor Group.
The following forecasts are based on assumptions outlined below and have been prepared in accordance
with the JSE Listings Requirements.
The profit forecasts have been prepared for illustrative purposes only, to provide information on what the
directors believe will be the results of Anchor Group for the years ending 31 December 2014 and 31
December 2015. The nature of the profit forecasts may not fairly present Anchor’s financial position,
changes in equity, and results of operations or cash flow information after the Private Placing. The
forecast financial information has been prepared in accordance with paragraph 8.35 to 8.43 of the JSE
Listings Requirements
The reporting accountants’ reports on the profit forecasts have been included in Annexure 8.
2014 2015
R'000 R'000
Revenue 58 414 75 982
Operating expenses (39 359) (48 470)
Operating profit 19 055 27 512
Investment revenue 1 650 8 156
Finance costs - -
Profit before taxation 20 705 35 668
Taxation (6 201) (9 694)
Total comprehensive income 14 504 25 974
Total comprehensive income 14 504 25 974
Total comprehensive income attributable to: 14 504 25 974
Owners of the parent 14 504 25 607
Non-controlling interest - 367
Profit attributable to: 14 504 25 974
Owners of the parent 14 504 25 607
Non-controlling interest - 367
Earnings per share
Basic earnings per share 21.72 27.65
Headline earnings per share 21.72 27.65
Diluted earnings per share 21.48 27.21
Diluted headline earnings per share 21.48 27.21
Estimated weighted average shares in issue 66 767 92 600
Fully diluted shares 67 530 94 096
Assumptions and comments on the forecast financial information
The forecast of the Group is presented on a consolidated basis. The forecast is prepared on the
assumption that there will be no significant circumstances which affect the Group’s operations which are
outside of the control of the directors apart from market determined indicators such as foreign exchange,
interest and inflation rates.
Key assumptions applied in preparing the forecast are listed below:
1. The current market conditions in the industry in which the business operates are not expected to
change substantially.
2. The estimate and forecast numbers have been prepared in terms of IFRS.
3. The forecast financial information in the 2014 financial year includes actual results for the 6 month
period ended 30 June 2014, being the period for which the latest financial information is available.
4. Growth in assets under management has been assumed as follows:
- existing assets under management are forecast to grow at 1% per month throughout the forecast
periods; and
- new funds under management of R100m are forecast to be obtained per month throughout the
forecast period.
5. Fees have been assumed to increase in line with the growth in assets under management, but the
yield on assets in the forecast period is assumed to decrease gradually, as the performance fee
component of yield cannot be forecast with any certainty.
6. An inflationary increase of 6% has been assumed for all inflationary linked general and
administration costs. In addition to these increases, additional fees payable as a result of the Group
being a listed company have been forecast.
7. Expenditure relating to sales and marketing has been forecast to increase based on existing rates
paid to service providers in line with increases in fees.
8. Staff costs have been forecast to increase by 6% per annum for existing staff as well as reasonable
costs for anticipated new staff hires, with bonuses being forecast in accordance with the Group’s
remuneration policy. In addition to these increases, additional staff costs as a result of the Listing in
respect of new directors have been included in the forecast.
9. Transaction costs of R2 million, as per paragraph 1.13 of the Prospectus, have been incurred on the
listing. The transaction costs have been capitalised to stated capital as these primarily relate to
issuing new shares, in accordance with IAS32, and accordingly are not reflected in the forecast
statements of comprehensive income.
10. The forecast has been prepared on the basis of a Preferential Offer of 22.5 million Anchor Group
shares at an issue price of 200 cents per share and a Private Placement of 7.5 million Anchor Group
shares at an issue price of 200 cents per share
11. The proceeds of the Preferential Offer and the Private Placement, net of the repayment of
shareholder loans of R5.3m and transaction costs of R2 million, have been placed in the Anchor BCI
Flexible Fund, a low to medium risk fund which has delivered a return of 12.2% for the 12 months
ended 30 June 2014. The return assumed in the forecast periods is 10% per annum on these funds.
The return on these additional funds has been recognised in investment revenue.
12. Taxation has been calculated at 28% of net profit before tax.
13. A share based payment expense has been recognised as a result of the share option scheme
granted to employees. The fair value of the options has been accounted for as equity settled options
in terms of IFRS2. The fair value of these options has been determined using an option pricing
model. The expense to be recognised in the 2014 year is an amount of R366 000 and in the 2015
year is an amount of R1.465 million.
14. The dilutive effect of the share scheme has been taken into account in calculating the diluted
earnings per share and diluted headline earnings per share.
15. At the beginning of the period the number of shares in issue was an amount of 500. On 1 January
2014, there was a simultaneous issue of 129 shares to shareholders and a repurchase of 23 shares.
On 1 March 2014, 20 shares were issued to staff members in terms of an existing commitment. An
IFRS2 charge of R1.391 million has been recognised in respect of the share issue. A sub-division of
the shares was effected at 23 June 2014 at a ratio of 10 000:1 and conversion to shares of no par
value. The weighted number of shares in the 2014 year has been calculated by weighting the 200
000 shares (post sub-division) issued to staff members on 1 March 2014 as well as the 30 million
shares to be issued through the Preferential Offer and Private Placing over the remaining three
months of the year. The fully diluted shares have been calculated in accordance with IAS33. The
amount of the dilution has been calculated as the difference between the weighted average number
of shares under option less the weighted average number of shares that would have been issued at
an average market price.
AUTHORISED AND ISSUED SHARE CAPITAL
The authorised and issued share capital of the Company as at the last practicable date is as follows:
R
Authorised share capital
1 000 000 000 ordinary Shares of no par value
Issued stated share capital
62 600 000 ordinary Shares of no par value 8 765 694
The authorised and issued share capital of the Company on the date of listing, assuming that the Private
Placing of 30 000 000 new Shares is fully subscribed (but before listing costs), will be as follows:
R
Authorised share capital
1 000 000 000 ordinary Shares of no par value
Issued stated share capital
92 600 000 ordinary Shares of no par value (before write off of share issue expenses 68 765 694
The remaining authorised and unissued Shares, after the Private Placing, will be under the control of the
directors of the Company, subject to the provisions of the MOI, the Act and the JSE Listings
Requirements.
There are no treasury Shares held as at the last practicable date.
Directors of Anchor
The full name, ages, addresses and occupations of the directors of Anchor are set out below:
Peter Armitage (45)
Nationality South African
Business address 25 Culross Road, Bryanston, Sandton, 2191
Appointment date 1 November 2011
Qualifications CA(SA)
Occupation Chartered Accountant and Analyst
Position in Company Chief Executive Officer
Term of office Executive appointment
Todd Kaplan (41)
Nationality South African
Business address 25 Culross Road, Bryanston, Sandton, 2191
Appointment date 1 August 2014
Qualifications BSc. Hons (Ecology)
Occupation Businessman
Position in Company Financial Director
Term of office Executive appointment
Ivan Clark (70)
Nationality South African
Business address Suite 6, Block 3, Rydall Vale Office Estate, La Lucia Ridge, 4019
Appointment date 1 August 2014
Qualifications CA(SA)
Occupation Managing director of Clark Investments
Position in Company Non-Executive Director
Term of office Subject to rotation every three years
Michael Teke (50)
Nationality South African
Business address 25 Rudd Road, Illovo, Johannesburg, 2196
Appointment date 1 August 2014
Qualifications BA (Ed), B.Ed, BA (Hons), MBA
Occupation Managing Director of Masimong Group Holdings Proprietary Limited
Position in Company Non-Executive Chairman
Term of office Subject to rotation every three years
Alastair Adams (35)
Nationality South African
Business address Unit 7, 77 Park Drive, Northcliff, 2195
Appointment date 1 August 2014
Qualifications B.Comm (Law), LLB, Admitted Attorney of the High Court of South
Africa
Occupation Attorney
Position in Company Independent Non-Executive Director
Term of office Subject to rotation every three years
Paul Nkuna (62)
Nationality South African
Business address 163 Rodeo Drive( Presidents Ranch) Geduld Springs 1559
Appointment date 1 August 2014
Qualifications National Teacher’s Qualification, Management Advanced Programme
(MAP) Certificate, University of the Witwatersrand Business School,
Effective Directorship Certificate, Kagiso Leadership School and
Gordon Institute of Business
Occupation Retired businessman and director of companies
Position in Company Independent Non-Executive Director
Term of office Subject to rotation every three years
Abridged CVs of the Company’s directors are set out in the Prospectus.
PURPOSE OF THE OFFER AND LISTING
The key listing rationale of Anchor is the retention, attraction and incentivisation of staff members.
Asset management and knowledge businesses have people as their key asset. People deliver investment
returns and develop and maintain relationships with clients.
In order for people to be incentivised and share in the value which they are creating for a company, a
listed instrument which is valued independently by financial markets is the most effective instrument.
Listing existing staff equity, as well as the establishment of share incentive schemes, is a core part of the
Anchor growth strategy.
Through the listing, Anchor also intends to employ the benefits of the listed environment to its advantage,
being:
- Enhancing its profile as a leading and growing asset manager;
- Clients can participate in the growth of the entity with whom they are doing business;
- Confidence and transparency espoused through the JSE listing environment;
- Flexibility and depth of funding options available to listed entities; and
- External capital to fund the growth aspirations of the Group, which might involve the establishment
of offshore offices and operations.
Anchor has certain regulatory cash requirements and the proposed R60 million to be raised through the
Private Placing will ensure that the company meets these requirements and still has capacity for:
- Expansion into related fields;
- Acquisition of allied businesses or teams of individuals; and
- Expansion of the Ripple Effect 4 IT business globally.
In addition, the purpose of the Private Placing is to expand the capital base and shareholder spread of the
Company in order to achieve a minimum spread of shareholders in terms of the JSE Listings Requirements.
The Company has already received sufficient commitments to subscribe for shares through its book building
efforts and will meet the spread requirements in terms of the JSE Listings Requirements.
SALIENT DATES AND TIMES
2014
Date on which the Private Placing will be open at 09h00 on Tuesday, 2 September
Date on which the Private Placing will close at 12h00 on Tuesday, 9 September
Listing of securities on the JSE at the commencement of business on Tuesday, 16 September
Shareholders wishing to subscribe for ordinary shares in dematerialized form must advise their Central
Securities Depository Participant (“CSDP”) or broker of their acceptance of the offer to subscribe for
shares in the manner and within the cut-off time stipulated by their CSDP or broker, provided that they are
eligible to participate in the Preferential Offer or the Private Placing.
A copy of the prospectus can be obtained from the registered office of the Company in Johannesburg and
at the office of the Designated Advisor in Johannesburg or on the Company’s website at
www.anchorgroup.co.za.
2 September 2014
By order of the board
Johannesburg
Designated Advisor Attorney
Arcay Moela Sponsors (to be renamed Arbor Adams Attorney
Capital Sponsors)
Joint Funding Arranger Auditor, Reporting Accountants
Manhattan Advisory Grant Thornton
Date: 02/09/2014 03:24:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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