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Unaudited Interim Results for the period ended 30 June 2015
ECSPONENT LIMITED
Incorporated in the Republic of South Africa
Registration number: 1998/013215/06
JSE Code: ECS - ISIN: ZAE000179594
("the Company" or "ECS" or "the Group")
UNAUDITED INTERIM RESULTS FOR THE 6 MONTH PERIOD ENDED 30 June
2015
The Directors are pleased to inform shareholders of the continued
improvement in the results of Ecsponent Limited. The financial
performance reflects the organic and acquisition growth of the
Group both in South Africa and rest of Africa.
The results for the six months ended 30 June 2015 compared to the
comparative period improved as per below:
- EPS improved by 354% from 0.388 cents to 1.762 cents per
share; and
- HEPS improved by 3 125% from 0.016 cents to 0.516 cents per
share
Ecsponent’s strategy continues to focus on investing in financial
service operations which have clear African and Global market
application. In particular, these operations are required to
produce products or provide services with high barriers to entry
and generate above average margins. The board envisage that this
expansion strategy will continue into the future.
RESULTS HIGHLIGHTS
Group overview
The 30 June 2015 consolidated interim results represents the
trading results of the corporate head office and its subsidiaries
active in the financial services industry and private equity
investments.
The acquisition of growth businesses in the second half of the
31 December 2014 financial year to expand the portfolio of
financial services assets has resulted in significant growth in
the Group’s asset base and revenue compared to the 6 months
ended 30 June 3014.
Group revenue increased by 284.8% to R66.8 million compared to the
comparative six month period. The increase is largely attributable
to the 457.2% increase in financial services revenue to R50.8
million. The revenue of the private equity operations increased
with 85.2% to R18.6 million for the 6 months to June 2015 compared
to R10.1 million for the comparative 6 month period.
Profit before tax increased to R17.7 million compared to profit
before tax of R3.1 million for the comparative six month period
ended 30 June 2014, an improvement of 463.5%.
The results include a R12.2 million after tax gain on disposal of
the Group’s South African employee benefit advances loan book in
order to exit the South African retail loan market. The board
intends focusing on commercial funding in the South African market
and growing both its commercial and retail loan assets in other
African markets.
The employee benefit loan book established in other African markets
comprised R54.2 million at 30 June 2015. At the end of the
comparative period 30 June 2014 the total employee benefit
advances, including the South African retail loans, comprised
R34.6 million.
The Group continues to increase its investment in the operating
processes and structures required to underpin the operational
growth. In addition, the credit committee has tightened its
provisioning policies governing the advances, resulting in higher
levels of provisioning. The on-going investment in operations
together with the acquisition of growth businesses in the second
half of 2014 resulted in the Group’s operating expenses increasing
by 245.5% to R43.0 million from R12.4 million for the comparative
period.
Total assets increased by R144.6 million in the six months ended
30 June 2015 from R150.2 million at 31 December 2014 to R294.8
million at 30 June 2015.
Total assets at 30 June 2014 comprised R81.1 million and the
increase to total assets of R294.8 million at 30 June 2015
comprises an increase of 263.7%.
At 30 June 2015 the current assets of the Group amount to R178.8
million compared to current liabilities of R61.4 million, a
ratio of R2.91 current assets for each R1 of current
liabilities.
The strategy of combining aggressive management of existing
subsidiaries and further strategic acquisitions is aimed at the
future sustainability of the Group.
Financial Services
The core of the current Financial Services division of Ecsponent
is the provision of transactional business finance, term loans to
Small and Medium Enterprises (SME) and employee benefits finance
which satisfy the Group’s credit criteria.
The demand for credit remains buoyant and the Financial Services
operation is well positioned to maximise opportunities. The
feasibility of additional credit products are being investigated
on an ongoing basis.
The Group’s Financial Services operations continued the
significant growth initiated during the December 2014 financial
year through a combination of acquisitions and organic growth.
The operations in Botswana and Swaziland, established during the
December 2014 financial year, continued to expand with the
operations in Botswana contributing significantly to the Group’s
operating profits.
In addition, the Board announced on 26 February 2015 that the Group
has secured a deposit-taking license from the Bank of Zambia. The
operational infrastructure was established in Zambia during the
30 June 2015 interim reporting period and the board expects Zambia
to contribute to the growth of the Group going forward.
The Financial Services operations reported a 457.2% increase in
revenue to R50.8 million for the 6 months ended 30 June 2015
compared to the R9.1 million for the comparative period. The total
value of advances at 30 June 2015 increased by 313.3% to R205.7
million compared to R49.8 million at 30 June 2014.
The primary costs in the Financial Services business is the cost
of capital required to fund the growth of advances. Management
continues to seek alternative funding options to reduce Group
funding costs, thereby improving profitability.
Private Equity
The Group continues to grow its private equity assets and added
operations within the residential property development market
and the engineering component supply market to the existing
assets held in the biotechnology industry.
The biotechnology operations maintained market share and
contributed R12.9 million to the Group’s revenue for the 6 months,
compared to R9.9 million revenue for the comparative period ended
30 June 2014.
The 25% investment in the property development company is
disclosed as an investment in an associate.
The engineering component supply business contributed R498 681
to the Group’s operating profit.
The SO2 gas sheet division which operated in a specialised
agricultural packaging market was disposed of with effect from
31 January 2014. The Competition Commission is reviewing the
impact of the transaction. During the 6 months ended 30 June
2015 the Group realised a profit on sale of remaining SO2 sheets
on hand.
FUNDING
Ecsponent’s expansion strategy requires funding for both organic
growth within its existing businesses and to pursue further
acquisitions. Preference shares are considered an optimal source
of funding for these on-going business needs at this point in the
Groups development. The Company has accordingly registered a R5
billion Preference Share Programme (“the Programme”) under which
Ecsponent may, from time to time, issue multiple tranches of
preference shares. The JSE approved the Programme on 8 September
2014.
The initial market uptake has been very encouraging with total
preference share funding increasing by 225.3% to R157.8 million at
30 June 2015 compared to R48.5 million at 31 December 2014 and no
such funding at 30 June 2014.
The preference shares are classified as debt and disclosed as part
of the Group’s other financial liabilities. The preference share
dividends are classified accordingly as funding cost and disclosed
as part of the Statement of Profit and Loss and other Comprehensive
Income.
PROSPECTS
Key elements of the on-going expansion strategy are the continued
growth of financial services operations through product and market
extension, aggressive trading and cost reduction as well as the
acquisition of new subsidiaries which are profit generating and
aligned with the Group’s strategy. This approach is aimed at
developing a robust and complementary financial services Group
which will provide sustainable returns.
RESULTS
Presented below are the unaudited interim results for the 6
month period ended 30 June 2015.
Unaudited Condensed Statement of Financial Position as at
30 June 2015
Interim Interim Audited
Unaudited Unaudited Group
Group Group
30 June 30 June 31 December
2015 2014 2014
R ‘000 R ‘000 R ‘000
ASSETS
Non-current assets
Property, plant and 8 200 5 128 6 134
equipment
Intangible assets 5 909 706 1 132
Investment in 5 097 - -
associates
Other financial assets 78 553 23 817 54 406
Deferred tax 16 048 11 430 12 737
Other non-current 2 279 - 2 042
receivables
Total current assets 178 723 39 972 73 732
TOTAL ASSETS 294 809 81 053 150 183
EQUITY AND LIABILITIES
Equity 72 475 25 916 56 667
Non-controlling (5 215) (783) (3 795)
interest
Non-current liabilities
Other financial 159 270 33 986 49 029
liabilities
Deferred tax 6 872 438 1 168
Total current 61 407 21 496 47 114
liabilities
TOTAL EQUITY AND 294 809 81 053 150 183
LIABILIIES
Net assets value 72 475 25 916 56 667
Net tangible asset 66 566 25 210 55 535
value
Net asset value per 8.04 5.80 6.29
share (cents)
Net tangible asset 7.38 5.64 6.16
value per share (cents)
Unaudited Condensed Statement of Profit and Loss and Other
Comprehensive Income for the 6 months ended 30 June 2015
Interim Interim
Unaudited Unaudited Audited
Group Group Group
6 months 6 months 12 months
ended ended ended
30 June 30 June 31 December
2015 2014 2014
R ‘000 R ‘000 R ‘000
Revenue 66 790 17 359 57 396
Cost of sales (18 374) (3 978) (9 046)
GROSS PROFIT 48 416 13 381 48 350
Other income 16 482 250 478
Operating expenses (42 998) (12 444) (37 729)
OPERATING PROFIT 21 900 1 187 11 099
Fair value adjustment 2 132 - 598
Income from equity 813 - -
accounted investments
Gain on disposal of - 2 154 -
discontinued operations
Bargain Purchase - - 166
Net Finance costs (7 174) (205) (5 214)
PROFIT BEFORE TAXATION 17 671 3 136 6 650
Taxation (4 418) (844) (2 601)
PROFIT FROM CONTINUING 13 253 2 292 4 049
OPERATIONS
Profit/ (Loss) from 579 (609) 1 182
discontinued operations
PROFIT FOR THE PERIOD 13 832 1 683 5 231
Other comprehensive (77) - (70)
income
TOTAL COMPREHENSIVE 13 755 1 683 5 161
INCOME
Loss attributable to 2 053 40 1 575
non-controlling income
TOTAL COMPREHENSIVE 15 808 1 723 6 736
INCOME ATTRIBUTABLE TO
ORDINARY SHAREHOLDERS
Profit attributable to
owners of the parent
from:
Continuing operations 15 446 703 5 609
Discontinued operations 439 1 020 1 182
15 885 1 723 6 791
Total comprehensive
income attributable to:
Owners of the parent 15 808 1 723 6 736
Non-controlling interest (2 053) (40) (1 575)
13 755 1 683 5 161
Basic and fully diluted 1.713 0.158 0.983
earnings per share
(cents) from continuing
operations attributable
to equity holders of the
parent
Basic and fully diluted 0.049 0.230 0.207
earnings per share
(cents) from
discontinued operations
attributable to equity
holders of the parent
Basic and fully diluted 1.762 0.388 1.190
earnings per share
(cents) attributable to
equity holders of the
parent
Unaudited Condensed Statement of Changes in Equity for the 6 months ended 30 June 2015
Share Non Foreign Common Accumulat Non- Total
capital distribute- currency control ed loss controlli equity
able translati reserve ng
reserves on interest
reserve
R’000 R’000 R’000 R’000 R’000 R’000 R’000
Unaudited Group 30 June 2015
Balance as at 1 January 118 071 3 842 (55) (36 687) (28 505) (3 795) 52 871
2015
Total comprehensive - - (77) - 15 885 (2 053) 13 755
profit for the 6 months
Profit for the 6 months - - - - 15 885 (2 053) 13 832
Other comprehensive - - (77) - - - (77)
income
Acquisition of non- (3 842) 3 842 634 634
controlling interest
Balance as at 30 June 118 071 - (132) (36 687) (8 778) (5 214) 67 260
2015
Share Non Accumulat Non- Total
capital distribute- ed loss controlli equity
able ng
reserves interest
R’000 R’000 R’000 R’000 R’000
Unaudited Group 30 June 2014
Balance as at 1 55 226 3 842 (35 296) (1 240) 22 532
January 2014
Issue of shares 420 - - - 420
Total comprehensive - - 1 723 (40) 1 683
profit for 6 months
Business combinations - - - 497 497
Balance as at 30 June 55 646 3 842 (33 753) (783) 25 132
2014
Share Non Foreign Common Accumulat Non- Total
capital distribute- currency control ed loss controlli equity
able translati reserve ng
reserves on interest
reserve
R’000 R’000 R’000 R’000 R’000 R’000 R’000
Audited Group 31 December 2014
Balance at 1 55 226 3 912 - - (37 421) (193) 21 524
January 2013
Total comprehensive - - - - 2 125 (1 092) 1 033
profit for the year
Acquisition of non- - (70) - - - 45 (25)
controlling
interest
Balance as at 1 55 226 3 842 - - (35 296) (1 240) 22 532
January 2014
Total comprehensive - - (55) - 6 791 (1 575) 5 161
profit for the year
Profit for the year - - - - 6 791 (1 560) 5 231
Other comprehensive - - (55) - - (15) (70)
income
Issue of shares 62 845 - - - - - 62 845
Business - - - (36 687) - (980) (37 667)
combinations
Balance at 31 118 071 3 842 (55) (36 687) (28 505) (3 795) 52 871
December 2014
Unaudited Condensed Cash Flow Statement for the 6 months ended 30
June 2015
Interim Interim Audited
Unaudited Unaudited Group
Group Group
6 months 6 months 12 months
ended ended ended
30 June 30 June 31 December
2015 2014 2014
R ‘000 R ‘000 R ‘000
NET CASH (9 085) (1 291) 2 745
(OUTFLOW)/INFLOW FROM
OPERATING ACTIVITIES
NET CASH OUTFLOW FROM (89 922) (669) (63 538)
INVESTING ACTIVITIES
NET CASH (OUTFLOW) 108 403 (1 526) 53 090
/INFLOW FROM FINANCING
ACTIVITIES
Movement in cash and 9 396 (3 486) (7 703)
cash equivalents for
the period
Cash and cash (6 950) 885 885
equivalents at the
beginning of the period
Effect of exchange rate 44 - (132)
movement on cash
balances
Cash and cash 2 490 (2 601) (6 950)
equivalents at the end
of the period
Notes to the Unaudited Financial Statements for the 6 months ended
30 June 2015
ACCOUNTING POLICIES AND BASIS OF PREPARATION OF RESULTS
The unaudited interim results have been prepared in accordance
with IAS 34 – Interim Financial Reporting in accordance with the
accounting policies that comply with International Financial
Reporting Standards, the SAICA Financial Reporting Guides and in
the manner required by the Company’s Act and the JSE Listing
Requirements. The principle accounting policies adopted in
preparation of these financial statements are consistent with
those of the prior period.
The interim results for the 6 months ended 30 June 2015, which
were prepared under supervision of the Group’s financial director,
Mr DP van der Merwe CA(SA), were not reviewed or audited by the
auditors.
EARNINGS AND FULLY DILUTED EARNINGS PER SHARE
BASIC AND HEADLINE
EARNINGS
Basic and diluted 15 885 1 723 6 791
earnings
Headline and diluted 4 653 72 5 334
headline earnings
Basic and fully diluted 1.762 0.388 1.190
earnings per share
(cents) attributable to
equity holders of the
parent
Headline and fully 0.516 0.016 0.935
diluted headline
earnings per share
(cents) attributable to
equity holders of the
parent
Number of shares in 901 588 049 447 132 678 901 588 049
issue
Weighted average number 901 588 049 444 132 678 570 498 813
of shares
RECONCILIATION BETWEEN BASIC EARNIGS AND HEADLINE EARNINGS
IAS 33 Basic Earnings 15 885 1 723 6 791
IAS 38 Impairment of 785 - -
intangible assets
IAS 39 Profit on (12 017) - -
disposal of financial
instruments
IFRS 5 Gain on disposal - (1 482) (1 326)
of discontinued
operations
IFRS 3 Bargain purchase - (166) (135)
IAS 16 (Profit)/Loss on - (3) (3)
disposal of property,
plant and equipment
IAS 16 Impairment of - - 7
property, plant and
equipment
Headline Earnings 4 653 72 5 334
ACQUISITIONS AND DISPOSALS
The board is actively investigating acquisition opportunities
aimed at improving earnings and cash generation for the Group.
There were no other acquisitions or disposals during the 6 month
period ended 30 June 2014, other than as listed below.
Acquisition of Quilibet
The Group acquired a 100% stake in Quilibet (Pty) Ltd (“Quilibet”)
effective on 1 March 2015 for R5 100 000. Quilibet supplies
components and specialized products to the engineering industry.
Fair value of the Quilibet assets acquired and liabilities assumed
at 30 June 2015 is as follows:
Assets R’000
Property, plant and equipment 1 600
Other current assets 2 668
TOTAL ASSET 4 268
Liabilities
Other financial liabilities 2 418
Other current liabilities 742
Total identifiable assets 1 108
Goodwill 3 992
Purchase price 5 100
Acquisition of non-controlling interest in Vinguard
The Company concluded on a scheme of arrangement and acquired the
non-controlling interest in Vinguard Limited (“Vinguard”) on
24 June 2015. The scheme offer was priced at 2 cents per Vinguard
share and total scheme offer amount comprised R475 390.
At 30 June 2015 Vinguard is a wholly owned subsidiary.
INVESTMENT IN ASSOCIATE
The Company obtained a 25% stake for R4.3 million in
Living 4 U (Pty) Ltd a company that holds land earmarked for a
residential property development.
OTHER FINANCIAL ASSETS
The other financial asset category incorporates commercial
business funding provided which increased by 900.3% to
R151.4 million compared to the comparative period. Below is the
detail regarding the Group’s other financial assets:
Unaudited Unaudited Audited
Group Group Group
30 June 30 June 31 December
2015 2014 2014
R ‘000 R ‘000 R ‘000
At fair value through profit
and loss – designated
Acquired debt 8 981 3 625 3 241
Loans and receivables
Employee benefit loans 54 242 34 623 64 321
Business funding 112 013 15 142 34 921
Escalator Capital RF 39 407 - 3 817
Limited
TOTAL OTHER FINANCIAL 214 643 53 390 106 300
ASSETS
Total included in non- 105 624 23 817 54 406
current assets
Total included in current 109 019 29 573 51 894
assets
Unaudited Condensed Segmental Information for the 6 months ended
30 June 2015
The segments identified are based on the operational and
financial information reviewed by executive management for
performance assessment and resource allocation.
In terms of the strategic direction, the group is focusing on
expanding its financial services footprint throughout Africa.
The basis of segmentation has been adjusted accordingly in
recognition of the progress towards the strategic vision.
Below are the combined segments presented in the 6 months ended
30 June 2015 financial results, reconciled to the previously
reported segmental information.
6 months ended 30 6 months ended 30 12 months ended 31
June 2015 June 2014 December 2014
Financial Services - Financial Services - Financial
- Corporate head Services
office - Collections
- Corporate head
office
Private Equity - Biotechnology - Biotechnology
- Agricultural - Agricultural
Packaging Packaging
In addition to the combined operational segment disclosure,
geographic segmental information is presented per country in
which Ecsponent operates.
In the comparative interim period the Group’s operations were
materially concentrated to the South African market and no
geographical segment information is disclosed.
Unaudited for the 6 months ended 30 June 2015
Operating Segment Revenue Operating
profit /
(loss)
R’000 R’000
Financial Services 50 755 37 121
Private Equity 18 633 (2 299)
Eliminations (1 025) (12 118)
Transfer to discontinued operations (1 573) (804)
Group total 66 790 21 900
Geographic Segment Revenue Operating
profit /
(loss)
R’000 R’000
South Africa 73 298 37 213
Botswana 15 388 4 123
Swaziland 5 313 493
Namibia 313 39
Zambia - (46)
Eliminations (25 949) (12 118)
Transfer to discontinued operations (1 573) (804)
Group total 66 790 21 900
Unaudited for the 6 months ended 30 June 2014
Operating Segment Revenue Operating
profit /
(loss)
R’000 R’000
Financial Services 9 109 1 781
Private Equity 10 062 (935)
Eliminations (1 743) (598)
Transfer to discontinued operations (69) 939
Group total 17 359 1 187
Audited for the 12 months ended 31 December 2014
Operating Segment Revenue Operating
profit /
(loss)
R’000 R’000
Financial Services 67 645 31 788
Private Equity 20 657 229
Eliminations (30 331) (19 405)
Transfer to discontinued operations (575) (1 513)
Group total 57 396 11 099
Geographic Segment Revenue Operating
profit /
(loss)
R’000 R’000
South Africa 77 169 23 150
Botswana 8 356 5 722
Swaziland 2 403 917
Namibia 374 89
Eliminations (30 333) (17 266)
Transfer to discontinued operations (573) (1 513)
Group total 57 396 11 099
EVENTS AFTER THE REPORTING PERIOD
The directors are not aware of any material event which occurred
after the reporting date and up to the date of this report
requiring disclosure.
CONTINGENCIES
The directors are not aware of any matter or circumstance of material
significance that requires disclosure as a contingent liability.
CHANGES TO DIRECTORS
No changes in the directorate took place during the period.
GOING CONCERN
The directors are of the opinion that the group will continue as
a going concern for the foreseeable future in particular due to
the financial support by the Company to its subsidiaries.
ORDINARY SHARE CAPITAL
No changes to the company’s authorised or issued ordinary share
capital took place during the 6 months ended 30 June 2015.
PREFERENCE SHARE CAPITAL
Shareholders approved the increase of the company’s authorised
preference share capital by approving the creation of 1 000 000 000
Class G preference shares. No further changes were made to the
Group’s authorised preference share capital.
Below is a reconciliation of the number of preference shares in
issue:
Ecsponent Limited
Class A Class B Class C
Reported at the beginning
of the period 59 208 64 630 215 700
Issue of preference shares
during the 6 months 132 754 212 570 461 250
Issued preference shares
at 30 June 2015 191 962 277 200 676 950
DIVIDENDS
No ordinary dividends have been declared and no ordinary dividend
is proposed.
Preference share dividends of R5.6 million were declared and paid
by the Group during the 6 month interim period ended 30 June 2015.
The dividends are classified as a finance cost expense and included
in the statement of profit and loss and other comprehensive income.
AUDITORS
Shareholders resolved to re-appoint Nexia SAB&T as the Group
auditors on 25 August 2015 at the annual general meeting.
For and on behalf of the Board
Johannesburg
30 September 2015
Directors: RJ Connellan* (Chairman), TP Gregory (Chief Executive
Officer), DP van der Merwe (Financial Director), BP Topham*, KA
Rayner*, E Engelbrecht (Non-executive).
(* Independent non-executive)
Company Secretary: Timbavati Business Consultants (Pty) Ltd
represented by HJ van der Merwe
Registered Office: Acacia House, Green Hill Village Office Park,
on Lynnwood Road, Cnr Botterklapper and Nentabos Street, The
Willows, Pretoria East.
Transfer Secretaries: Link Market Services (Pty) Ltd, 13th Floor
Rennie House, 19 Ameshoff Street, Braamfontein 2000, PO Box 4844,
Johannesburg 2000
Auditors: Nexia SAB&T
Sponsor: Questco(Pty) Ltd
Date: 01/10/2015 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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