Wrap Text
Unaudited Interim Results for the six months ended 30 June 2014
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
UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2014
HIGHLIGHTS
- Adjusted HEPS grew by 283% to 13.73 cents per share.
- Assets under management grew by 171% to R4.6bn at 30 June 2014.
- Listed on the Alternative Exchange of the JSE on 16 September 2014, raising R60m
- Declaration of maiden interim dividend of 3 cents per share.
Condensed consolidated statements of financial position
% Unaudited Unaudited Audited
Figures in Rand Change 30-Jun-14 30-Jun-13 31-Dec-13
Assets
Non-Current Assets
Plant and equipment 402% 1 645 388 327 507 508 882
Goodwill 0% 3 118 776 3 118 776 3 118 776
Intangible assets 103% 555 148 273 031 447 617
Investments in subsidiaries 748 614 - -
Deferred tax 67% 432 430 259 154 808 172
6 500 356 3 978 468 4 883 447
Current Assets
Financials assets 285% 3 832 156 994 124 3 339 859
Trade and other receivables 222% 7 862 372 2 443 591 6 329 130
Cash and cash equivalents 246% 11 728 243 3 388 425 6 999 865
23 422 773 6 826 140 16 668 854
Total Assets 29 923 130 10 804 608 21 552 301
Equity and Liabilities
Equity
Stated Capital / Share Capital 8 765 737 500 500
Retained income
393% 13 060 209 2 021 330 5 945 685
Reserve (3 099 376) - -
Equity Attributable to Equity Holders of Parent 826% 18 726 570 2 021 830 5 946 185
Non-controlling interest - 344 681 2 088 939
18 726 570 2 366 511 8 035 124
Liabilities
Current Liabilities
Other financial liabilities -25% 4 123 174 5 497 402 6 493 057
Trade and other payables 144% 4 635 192 1 898 119 5 657 059
Current tax payable 134% 2 438 193 1 042 576 1 367 061
11 196 559 8 438 097 13 517 177
Total Equity and Liabilities 29 923 130 10 804 608 21 552 301
Condensed consolidated statements of comprehensive income
% Unaudited Unaudited Audited
Figures in Rand change 30-Jun-14 30-Jun-13 31-Dec-13
Revenue 169% 28 172 333 10 470 504 31 642 624
Operating Expenses 138% (17 965 422) (7 557 992) (24 453 181)
Operating profit 250% 10 206 911 2 912 512 7 189 443
Finance Costs (125 686) (108 734) (173 772)
Share of losses from associates (402 576)
Profit before taxation 245% 9 678 649 2 803 778 7 015 671
Taxation expense 2 564 125 750 590 2 234 222
Total comprehensive income period /
year 247% 7 114 524 2 053 188 4 781 449
Total comprehensive income
attributable to:
Owners of the parent 7 114 524 1 793 540 3 754 453
Non-controlling interest 0 259 648 1 026 996
7 114 524 2 053 188 4 781 449
Headline earnings reconciliation:
Earnings attributable to shareholders 7 114 524 2 053 188 4 781 449
Non-controlling interest - (259 648) (1 026 996)
Earnings and headline earnings
attributable to ordinary shareholders 364% 7 114 524 1 793 540 3 754 453
Share based Payment Expense 1 391 324 - -
Adjusted headline earnings attributable
to ordinary shareholders 455% 8 505 848 1 793 540 3 754 453
Earnings per share
Earnings per share and diluted earnings
per share (cents) 220% 11.49 3.59 7.51
Headline earnings per share and diluted
headline earnings per share (cents) 220% 11.49 3.59 7.51
Adjusted headline earnings per share
and diluted adjusted headline earnings
per share (cents) 283% 13.73 3.59 7.51
Number of shares in issue 62 600 000 500 500
Weighted average number of shares in
issue 61 933 333 50 000 000 50 000 000
Condensed statements
of changes in equity
Total
Share Equity attributable
reserve due Retained Non-
capital / to equity Total
to change in income / controlling
Stated holders of equity
control of (loss) interest
Capital the group /
interest company
Figures in Rand
Group
Balance at 01 January
2013 500 - (31 858) (31 358) 85 033 53 675
Changes in equity
Total comprehensive
income for the six month
period - - 2 053 188 2 053 188 259 648 2 312 837
Total changes - - 2 053 188 2 053 188 259 648 2 312 837
Balance at 30 June
2013 500 2 021 330 2 021 830 344 681 2 366 511
Changes in equity
Total comprehensive
income for the six month
period - - 1 701 265 1 701 265 767 348 2 468 612
Sale of shares in
subsidiary to non-
controlling interest - - 2 223 090 2 223 090 976 910 3 200 000
Total changes - - 3 924 355 3 924 355 1 744 258 5 668 612
Balance at 31
December 2013 500 - 5 945 685 5 946 185 2 088 939 8 035 124
Changes in equity
Issue of shares to
acquire non-controlling
interest 8 973 913 (3 099 376) 5 874 537 (2 088 939) 3 785 598
Buy back of shares (1 600 000) - - (1 600 000) - (1 600 000)
Issue of shares to
employee 1 391 324 - - 1 391 324 - 1 391 324
Total comprehensive
income for the six month
period - - 7 114 524 7 114 524 - 7 114 524
Total changes 8 765 237 (3 099 376) 7 114 524 12 780 385 (2 088 939) 10 691 446
Balance at 30 June
2014 8 765 737 (3 099 376) 13 060 209 18 726 570 - 18 726 570
Abridged statement of cash flows
Unaudited Unaudited Audited
Figures in Rand 30-Jun-14 30-Jun-13 31-Dec-13
Cash flows from operating activities
Cash generated from / (utilised in) operations 9 451 521 2 828 244 10 158 585
Interest Income 35 711 5 496 23 444
Dividends Received 44 702
Finance Costs (133 232) (108 734) (173 772)
Tax Paid (1 708 166)
Net Cash from / (utilised in) operating activities 9 354 000 2 725 006 8 344 793
Cash flows from / (utilised in) investing activities
Purchase of Plant and Equipment (1 136 506) (141 030) (420 385)
Expenditure on product development (107 531) (273 031) (447 617)
Decrease / (increase) in loans to associates (1 151 164)
Acquisition of financial assets (492 297) (40 442) (2 386 177)
Net Cash from / (utilised in) investing activities (2 887 498) (454 503) 3 254 179
Cash flows from financing activities
Movement in other financial liabilities (1 738 124) (2 218 439) (1 427 110)
Net Cash from financing activities (1 738 124) (2 218 439) (1 427 110)
Total cash and cash equivalents movement for the year 4 728 378 52 064 3 663 504
Cash and cash equivalents at the beginning of the year 6 999 865 3 336 361 3 336 361
Total cash and cash equivalents at end of the year 11 728 243 3 388 425 6 999 865
Segmental information
Total
Ripple group
30 June 2014 Anchor Effect 4 revenue
Asset Management Fees 27 120 261 27 120 261
Sale of courses and course materials 1 052 072 1 052 072
27 120 261 1 052 072 28 172 333
Total
Ripple group
31 December 2013 Anchor Effect 4 revenue
Asset Management Fees 28 882 789 28 882 789
Sale of courses and course materials 2 759 835 2 759 835
28 882 789 2 759 835 31 642 624
Total
Ripple group
30 June 2013 Anchor Effect 4 revenue
Asset Management Fees 9 579 235 9 579 235
Sale of courses and course materials 891 269 891 269
9 579 235 891 269 10 470 504
COMMENTARY
The Anchor Group is primarily an asset manager. It began managing assets in 2012 and has grown
rapidly to reach group-wide assets under management of R6bn. These are primarily private client and
retail assets, with recent growth in the corporate and institutional markets.
The asset management subsidiary Anchor Capital Proprietary Limited (“Anchor Capital”), which is the
primary business in the group, runs segregated portfolios (both locally and internationally) and has a
series of funds in both the Collective Investment Scheme (“CIS”) and hedge categories.
In addition, the group also has the following subsidiaries, associates and investments:
- Ripple Effect 4 Proprietary Limited (65% held), which provides financial services education and
research, primarily to Anchor Capital.
- Anchor Securities Proprietary Limited (25% held), which provides trading and portfolio
management services, primarily to private clients.
- Cartesian Capital Proprietary Limited (19.9% held), which is a majority black-owned asset
management business.
The long term strategy of the Anchor Group is to become a major player in South African asset
management. This will be achieved by both organic and acquisitive growth.
RESULTS
The turnover of the group grew by 169% to R28.2 million (2013: R10.5 million) for the six months ended
30 June 2014. This was driven by growth in assets under management, which ended the period at
R4.6bn (2013: R1.7bn). This represents 171% growth on a year ago and 64% growth on the assets under
management of R2.8bn at the end of 2013. The yield on average assets for the period was 1.31% (2013:
1.4%).
Costs grew by 138% to R18 million (2013: R7.6 million), as the business grew its research, sales and
administration capabilities.
The business achieved positive operating leverage, as turnover grew faster than costs, to achieve an
operating margin of 36.2% (2013: 27.8%). Operating profits grew by 250% to R10.2 million (2013: R2.9
million).
The share of losses from equity accounted associates was R0.4 million. (2013: nil). This was due to the
establishment costs of Anchor Securities during the period.
Headline earnings grew by 220% to R7.1 million (2013: R1.5 million), while adjusted headline earnings
grew by 283% to R8.5 million (2013: R1.8 million). Adjusted headline earnings per share grew 234% to
13.73 cents (2013: 3.59 cents).
The adjustment to headline earnings arises from an IFRS charge of R1.4 million due to the issue of 2
million shares to key staff ahead of the listing in relation to a pre-existing commitment.
The business is highly cash generative and 86% of operating profits were generated in cash. The rapid
growth resulted in an increase of R2.8 million in net working capital. Debtors are routinely collected within
15 days of month end.
Shareholders' equity grew by 826% to R18.7 million (2013: R2 million), as a result of the profit generated
and the issue of 2 million shares. R15.6 million of this is represented by liquid assets (Cash of R11.7
million and Financial Instruments of R3.8 million).
OPERATIONAL REVIEW
Asset management
The asset management business under Anchor Capital is proceeding well. The asset management
business of the group started managing external assets in 2012 with just less than R1bn in group-wide
assets under management at the end of 2012. This increased to over R2.8bn at the end of 2013, and was
R4.6bn at the end of July 2014. This is expected to exceed R6bn by the end of September 2014, which
represents R3.2bn (over 100%) growth in assets under management in the first nine months of 2014.
Collective Investment Scheme (“CIS”) assets have increased from R91m at the end of December 2013 to
over R600m currently.
The marketing initiatives are proving effective and Anchor Capital 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 majority of assets are managed in segregated
portfolios where the average client performance has been excellent. 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.
Anchor Capital 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.
Anchor Capital has a long term strategy of being a meaningful South African asset management
company and places a great deal of emphasis on fundamental research. Accordingly it has constructed a
large investment team relative to its size. The group has five CA?s and four CFA's among its 15-strong
investment team.
Other businesses / associates / investments
- Ripple Effect 4 grew turnover by 18%, but incurred a loss for the period. This business is primarily
servicing the needs of Anchor Capital, but has incurred costs in developing a range of products for
the broader market.
- Anchor Securities launched during the period and was granted its own FSP (Financial Services
Provider) licence by the Financial Services Board (“FSB”). It has achieved great success in signing on
new private clients and has exceeded R1bn in assets.
- Cartesian Capital launched during the period (after being established in 2013) and was granted its
own FSP licence by the FSB. It has embarked on its initial marketing initiatives and has over R375m
under management.
BASIS OF PREPARATION AND ACCOUNTING POLICIES
The financial information has been prepared in accordance with the framework concepts and the
measurements and recognition requirements of the International Financial Reporting Standards (“IFRS”);
the International Accounting Standard 34 Interim Financial Reporting; the Listings Requirements of the
Johannesburg Stock Exchange (“JSE”); the SAICA Financial Reporting Guides as issued by the
Accounting Practices Committee and Financial Reporting Pronouncements as issued by the Financial
Reporting Standards Council, as well as the South African Companies Act, 2008 (Act 71 of 2008). The
condensed consolidated financial statements are unaudited and have not been reviewed by the
Company's auditors.
These condensed consolidated financial statements have been prepared in accordance with the historical
cost basis except for certain financial instruments which are stated at fair value. The condensed
consolidated financial statements are presented in rand.
The consolidated condensed financial statements have taken into account the requirements of IFRS 13
and the amended IAS 34, which became effective during the current period. In terms of IFRS 13, the
financial assets are carried at fair value, level 1. Other standards that have become effective have been
considered and have no material impact. The accounting policies applied in the presentation of the
condensed financial statements are in terms of IFRS and, except as noted above, are consistent with
those presented in the previous annual financial statements.
These interim results have been prepared under the supervision of financial manager, O Khan CA(SA).
STRATEGY AND NEW INITIATIVES
Anchor Capital has a large and highly skilled investment team, which it will continue to develop. This is
largely established and the business can achieve financial leverage by growing its base of assets under
management. The growth of assets will be driven by existing marketing methods, expanding the current
marketing force, expanding into new investment segments and by strategic acquisitions.
Planned initiatives include:
- Utilising information technology: The group intends launching an internet-based investment
offering, targeted at the 25-35 year-old category. It aims to be first to market in this category in South
Africa.
- New geographies: The group currently has sales forces in Sandton and Cape Town. Anchor Capital
intends increasing its stake in Anchor Capital Cape Town from 18% to 100% and a separate
announcement will be made in this regard once an agreement has been signed. It also intends
expanding its marketing force to Pretoria and Durban in the next three months.
- New asset classes: The group has plans to expand its fixed income capabilities in coming months
and has expanded its skills in the global macro hedge category.
- New funds: The group will continually expand its investment offering to service its targeted client
bases. Anchor Capital will launch its first two global funds, domiciled in Ireland, in coming months to
supplement its segregated portfolio offering (global equity and global macro hedge). Further new local
Collective Investment Scheme funds will be launched in the next year.
- New market segments: The group is investigating the best way to approach offering its services to
the retirement industry and intends launching these initiatives in the next 6-12 months.
- New businesses: Anchor is a young, entrepreneurial group and will partner with other business, in
various stage of development. Asset management is not a capital intensive industry and significant
value can be created by backing talented individuals who have the skills to deliver investment
performance and attract assets under management.
PROSPECTS
The prospects for the second half of the 2014 financial year are positive. The key driver for the business
is assets under management, which averaged R3.7bn for the period under review. The second six month
period of 2014 began with assets under management of R4.6bn and they are currently R6bn. The results
for the second six months will also be influenced by:
- The issue of a further 30 million shares, which will have a dilutory impact on earnings per share until
the additional cash balance is deployed,
- The performance of local and global markets,
- The exchange rate between the Rand and other currencies (we estimate across the business that the
Rand hedge base is approximately 60%), and
- An improved performance from Anchor Securities which has now reached critical mass.
In its listing prospectus, Anchor Group published a forecast of headline earnings per share of 21.72c for
the financial year ended 31 December 2014 and 27.61c for the financial year ended 31 December 2015.
CHANGES TO THE BOARD OF DIRECTORS
The following changes were made to the board of directors during the period under review:
- Andrew Blades and David Polkinghorne (alternate) resigned as non-executive directors,
- Ivan Clark changed his role to a non-executive director,
- Mike Teke was appointed as non-executive Chairman,
- Alastair Adams was appointed as an independent non-executive director,
- Paul Nkuna was appointed as an independent non-executive director,
- Todd Kaplan was appointed as an executive director.
LISTING
The Anchor Group listed on the Alternative Exchange (“AltX”) of the JSE on 16 September 2014. R60
million was raised by the issue of 30 million shares at an issue price of 200 cents per share. Subsequent
to the listing, the company has 92.6 million shares in issue.
DIVIDEND
The company has an intention of paying out half of its earnings as a dividend going forward as a listed
business.
For the period under review the company has declared an interim gross dividend (Number 1) of 3 cents
per share (2013: Nil) for the six months ended 30 June 2014. The dividend has been declared out of
income reserves.
The dividend will be subject to a dividend withholding tax rate of 15% or 0.45 cents per ordinary share.
As no STC credits are available for utilisation, shareholders, unless exempt or qualifying for a reduced
withholding tax rate, will receive a net dividend of 2.55 cents per share.
Anchor's tax reference number is 9527/450/16/8. The number of ordinary shares in issue at the
declaration date is 92 600 000.
The salient dates for the dividend will be as follows:
Last date to trade 'cum' dividend Friday, 31 October 2014
Shares commence trading 'ex' the dividend Monday, 3 November 2014
Record date (date shareholders recorded in share register) Friday, 7 November 2014
Payment date Monday, 10 November 2014
Shareholders may not dematerialise or rematerialise their share certificates between Monday,
3 November 2014 and Friday, 7 November 2014, both dates inclusive.
For and on behalf of the Board
Peter Armitage Todd Kaplan
Chief Executive Officer Financial Director
29 September 2014
DIRECTORS
Executive Directors: Peter Armitage (Chief Executive Officer), Todd Kaplan (Financial Director)
Non-executive directors: Mike Teke (Chairman), Ivan Clark, Paul Nkuna (independent), Alastair Adams
(independent)
DESIGNATED ADVISOR
Arcay Moela Sponsors Proprietary Limited
(t/a Arbor Capital Sponsors Proprietary Limited)
TRANSFER SECRETARIES
Link Market Services South Africa Proprietary Limited
(Registration number 2000/007239/07)
11 Diagonal Street, Johannesburg, 2001
(PO Box 4844, Johannesburg, 2000)
REGISTERED OFFICE
25 Culross Road, Bryanston, Sandton, 2191
POSTAL ADDRESS
PO Box 1337, Gallo Manor, 2052
WEBSITE: www.anchorgroup.co.za
Date: 29/09/2014 05:45:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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