Wrap Text
Summarised audited financial results for the year ended 31 August 2015
EFFICIENT GROUP LIMITED
(Incorporated in the Republic of South Africa)
(Registration No 2006/036947/06)
JSE share code: EFG
ISIN: ZAE000151841
(“Efficient Group” or “the Company”)
SUMMARISED AUDITED FINANCIAL RESULTS FOR THE YEAR ENDED 31 AUGUST 2015
HIGHLIGHTS
+ Revenue increased by 207%
+ Profit after tax for the year
increased from R5 million to
R29 million
+ Headline earnings per share
increased from 9.37 cents
to 32.32 cents
+ Cash generated from
operations increased from
R13.6 million to R102.4 million
+ Dividend of 12 cents per
share declared
COMMENTARY
1. Commentary
The business strategy of the Efficient Group is to be a diversified financial services provider offering
customised products, professional services and added value throughout the financial services value chain.
In order to be well positioned to do this, the Group restructured during the 2015 financial year, paring down
from four product-focused divisions with centralised support services to three market-focused clusters of
business units that are supported by standardised and centralised processes for finance and compliance.
This structure is in line with international trends towards intrapreneurship, which aims to empower business
units to function independently and so be more responsive to market needs.
The three clusters of business units are focused on:
Financial Services;
Services and Solutions; and
Investments.
With these structural changes, the focus is on growing and acquiring entrepreneurial, like-minded entities
to expand the Group’s value chain. From a strategic perspective, the Group prefers to acquire a majority
shareholding in businesses, but it will consider and pursue minority interests throughout the value
chain where synergistic-, cross-sell- or future consolidation opportunities exist or where the acquisition
opportunities are accretive.
In support of this new structure, the Group has substantially extended its reach over the past year,
specifically with reference to independent boutique asset managers. It is the intention that these boutique
managers will provide access for both individual and institutional clients to quality investment solutions
administered by the Group, and that the Group will be able to develop long-term relationships with like-
minded boutique partners, some of whom may present future consolidation opportunities.
The Group is also extending its footprint into new areas, and has already launched a Fiduciary Services
business unit. As part of its diversification strategy, it will in future also consider quality value propositions
in the healthcare, short-term insurance, life and employee benefits areas.
Highlights of the year include:
+Financial Services
-The number of financial advisors increased from 84 to 96;
-The number of financial services branches increased from 7 to 10;
-Revenue grew by 72% to R118 million;
-Assets under advice grew by 43% to R12.7 billion;
-The successful rebranding of Efficient Wealth; and
-The acquisition of Stead Wealth, Exceed Asset Management and Exceed Private Client Services.
+Services and Solutions
-Successful rebranding of Naviga Solutions;
- An enhanced focus on the development of proprietary software; and
-The packaging and roll-out of proprietary investment solutions.
+Investments
-The acquisition of Select Manager;
-Assets under administration grew by 54% to R63.2 billion;
-Assets under management grew by 31% to R18.2 billion;
-Assets under consulting grew by 22% to R24 billion; and
-Revenue grew by 289% to R646 million.
1.1 Financial results
In the 2014 financial year, the Group made several significant investments in order to expand its distribution
network, grow its asset administration division and expand its product offering to include asset consulting.
The full-year effect of these investments, which contributed 131% to the growth in revenue in the 2015
financial year, is evident in the higher profits and cash generated during the course of the year.
A substantial share of the Group’s revenue accrues from the value of assets under management, assets
under administration, assets under consulting and assets under advice. Assets under management are
represented by amounts invested in unit trust funds, unit trust funds of funds and private share portfolios
managed by the asset management division. The Group had R18 183 million (2014: R13 888 million) assets
under management by the end of the 2015 financial year. Assets under administration are represented by
unit trust funds and unit trust funds of funds administered by the Group. Administration of assets includes
liability administration and asset administration, such as monitoring of the daily pricing of unit trust funds.
The Group administers assets to the value of R63 173 million (2014: R41 041 million). Assets under consulting
are represented by assets on which Boutique Investment Partners supply investment consulting services.
These consist primarily of portfolio construction, strategic and tactical asset allocation, and manager
selection services. The Group consults on assets to the value of R23 978 million (2014: R 19 691 million).
Assets under advice are represented by client investments made on the recommendation of, or with the
guidance of, financial advisors employed by the Financial Services division. Total assets under advice
amount to R12 707 million (2014: R8 945 million).
Revenue increased by 207%, which is attributable to the full-year effect of investments made in the 2014
financial year (131%), organic growth (69%) and the investment in Select Manager (7%), which was made
during the reporting period.
The investments made in growing the asset administration division and expanding the product range
to include asset consulting during the course of the 2014 financial year were particularly successful.
Not only did this division exceed its original target, but it also increased combined assets from R66 billion
to R96 billion during the reporting period, contributing substantially to organic growth.
The other investments made in the previous financial year performed satisfactorily. The acquisition of Select
Manager contributed R11.4 million in additional revenue to asset management and R5.1 million to financial
services. Excluding fees received from the investment in Select Manager, asset management earned slightly
lower performance fees compared to the previous reporting period. The base fee earned (after the re-
allocation of the multi-manager fee to financial services) is 11% higher than the previous financial year.
Fixed expenses associated with the organic growth of the Group increased by 8%. The full-year effect of
the previous year’s investments and the acquisition of Select Manager increased the fixed expense base
by 22%. Staff incentives and profit-share provisions also increased as a result of the increase in operating
profit. The increase in the non-cash flow expenses is due to higher amortisation charges related to the
intangible assets that formed part of this year’s business combinations. Management is focused on ensuring
that future increases in the expense base are kept at acceptable levels.
The Group reports an operating profit of R33 million (2014: R7 million) for the 2015 financial year.
The following non-operational items impacted on the operating profit:
–AS Sure contributed R908 000 to profits, below agreed expectations. The result of this
underperformance resulted in a reversal of part of the outstanding vendor loans on this transaction and
an impairment of a portion of the Group’s non-controlling interest in this entity.
–During the reporting period the Group disposed of its investment in Marion Technology and recouped
an amount of R2.6 million on this transaction.
–The non-controlling interest in Rudiarius Fund Management contributed R824 000 to profit.
–Fair value adjustments of R2.8 million were made to the outstanding purchase price related to the
Select Manager acquisition.
–Net interest received amounted to R4.4 million.
The profit after tax for the year ended 31 August 2015 is R29 million (2014: R5 million). Net tangible
liabilities per share is reported at 71.30 cents (2014: Net tangible assets per share of 30.84 cents).
The net tangible liabilities per share is as a result of cash utilised and liabilities raised to acquire
intangible assets.
On 31 August 2015 the Group had R211 million (2014: R126 million) of tangible assets, including cash and
cash equivalents (including unit trust investments) of R97 million (2014: R34 million). It had R316 million
(2014: R127 million) in liabilities. The increase in liabilities is directly related to the acquisition of Select
Manager and consists mainly of vendor finance.
At the end of the reporting period the Group’s current liabilities exceed its current assets. Management
assessed the Group’s cash flow forecast and its access to credit and it is of the opinion that the Group will
be able to settle its short-term commitments as and when due.
Cash of R44.5 million (2014: R18.3 million) was generated from operations during the reporting period.
The decrease in working capital further increased cash and cash equivalents by R58 million. Net finance
income earned contributed R4.4 million to cash flow. Tax paid reduced cash by R35 million.
The cash utilised for investment activities relates mainly to the Select Manager acquisition, the acquisition
of financial advisory client bases and unit trust investments. This reduced cash by R48.7 million. The
investments and working capital requirements were financed through retained income and borrowings
from Standard Bank.
1.2 Operating overview
From a Group perspective, the main focus during the year was on the integration of newly acquired and
newly established businesses. This did not only include the integration of Select Manager, Stead Wealth,
Exceed Asset Management and Exceed Private Client Services, all of which were acquired during the course
of the year, but also the continued integration of Efficient Wealth (formerly Verso Investment Services) and
Naviga Solutions (formerly Verso Multi Manager). Boutique Collective Investments and Boutique Investment
Partners also enjoyed their first full year of operations within the Efficient Group.
During the financial year a decision was made to disinvest from the Group’s previous IT partner and to
outsource IT services to entities specialising in specific service categories in order to optimise the return on
investment related to these services. Outsourcing provides the Group with enhanced flexibility and control,
and allows for greater accountability from suppliers.
The Group has also undergone an extensive cost and functional comparison in relation to third-party
software providers as this relates to key systems requirements. As a result, a decision was made to further
invest in the development of proprietary software, which will be deployed across a number of entities within
the Group. The software will provide the Group with a consolidated platform to view key performance
indicators across a number of subsidiaries, as well as the tools to improve efficiency and accountability
across the board. Development of the solution has commenced and the Group intends to start deployment
during the course of the 2016 financial year.
Another major focus was the restructuring of the Group’s operations in order to align these with
our strategic objectives and the financial services value chain. This process included the continued
decentralisation of various support functions and the strengthening of the Group’s primary control
functions, namely finance and compliance.
1.3 Conclusion
In line with the Group’s new business strategy, the Group will continue to concentrate on growing the
business organically and by acquiring entrepreneurial, like-minded entities to expand the Group’s value
chain.
Key performance targets 2016 target 2015
Number of financial planners 108 96
Assets under advice R14.9 billion R12.7 billion
Assets under management R20.2 billion R18.2 billion
Assets under administration R74.4 billion R63.2 billion
Assets under consulting R25.9 billion R24 billion
1.4 Cash dividend
Dividends are declared at the discretion of the board of directors, after taking the financial position of the
group into consideration. As a guideline 80% of the free cash flow is paid as a dividend. Based on this policy
the directors determined that a final dividend of 6.15000 cents per share will be paid.
The salient dates for this dividend payment are as follows:
Last date to trade “cum” dividend Friday, 27 November 2015
Securities trade “ex” dividend Monday, 30 November 2015
Record date Friday, 4 December 2015
Payment date Monday, 7 December 2015
Share certificates may not be dematerialised or rematerialised between Monday, 30 November 2015 and
Friday, 4 December 2015, both days inclusive.
Shareholders are advised of the following additional information:
+the dividend has been declared out of the 2015 profits;
+the local dividend tax rate is 15%;
+the gross local dividend amount is 6.15000 cents per share;
+the net local dividend amount for shareholders:
+exempt from payments of dividend tax is 6.15000 cents per share;
+liable to pay the dividends tax is 5.22750 cents per share;
+the issued share capital of the company is 90 592 973 shares of R0.00000277 each; and
+the company’s tax reference number is 9071679170.
1.5 Basis of preparation
These summarised Group financial results for the year ended 31 August 2015 constitute a summary of
the Group’s audited financial statements, prepared in accordance with the framework concepts and the
measurement and recognition requirements of IFRS and the SAICA Financial Reporting Guides as issued
by the Accounting Practices Committee and Financial Pronouncements as issued by Financial Reporting
Standards Council, and the presentation and disclosure requirements of International Accounting
Standard 34.
The accounting policies are in terms of International Financial Reporting Standards and consistent, except
where new standards have been adopted, with those of the previous financial statements. The Group has
adopted the following new standards:
+ IFRS 10, IFRS 12 and IAS 27 amendment – Investment Entities (effective 1 January 2014)
+ IAS 32 – Offsetting Financial Assets and Financial Liabilities (effective 1 January 2014)
+ IAS 36 – Recoverable amount disclosures for Non-financial Assets (effective 1 January 2014)
+ IAS 39 – Novation of Derivatives and Continuation of Hedge Accounting (effective 1 January 2014)
+ IFRIC 21 – Levies (effective 1 January 2014)
+ IAS 19 – Defined Benefit Plans: Employee Contributions (effective 1 July 2014)
+ Amendments to 6 standards: Improvements to IFRSs 2010 – 2012 Cycle (effective 1 July 2014)
+ Amendments to 4 standards: Improvements to IFRSs 2011 – 2013 Cycle (effective 1 July 2014)
The adoption of these standards had no significant impact on the measurement of the Group’s assets and
liabilities.
These summarised Group financial results do not include all of the information required for full financial
statements, and should be read in conjunction with the audited consolidated financial statements of the
Group as at and for the year ended 31 August 2015.
This summarised report is extracted from audited information, but is not itself audited. The audited
consolidated financial statements and unmodified audit report, as issued by KPMG Inc., are available for
inspection at the company’s registered office. The directors take full responsibility for the presentation of
the summarised report and for ensuring that the financial information has been correctly extracted from
the underlying audited consolidated financial statements.
The summarised financial results were prepared by Ernes Smit CA(SA), the Group Financial Manager of
Efficient Group.
Summarised Audited
Statements of Financial Position
As at 31 August 2015
2015 2014
R’000 R’000
ASSETS
Non-current assets
Property and equipment 4 103 2 668
Goodwill 153 274 66 255
Intangible assets 140 965 102 637
Investments 1 657 6 761
Equity accounted investments 10 913 16 973
Long-term receivables 1 898 3 889
Deferred tax 20 081 3 736
332 891 202 919
Current assets
Related party loans 39 –
Investments 41 931 –
Trade and other receivables 74 255 56 507
Cash and cash equivalents 53 833 33 552
Short-term portion of long-term receivables 1 377 727
Tax receivable 976 1 231
172 411 92 017
Total assets 505 302 294 936
Equity and liabilitieS
Equity
Share capital and share premium 150 325 150 325
Treasury shares (389) (149)
Accumulated income 41 982 18 441
Fair value adjustment reserve (3) 98
Equity attributable to equity holders of the parent 191 915 168 715
Non-controlling interest (2 420) (1 041)
Total equity 189 495 167 674
Non-current liabilities
Long-term liabilities 95 226 25 244
Deferred tax 33 824 26 407
129 050 51 651
Current liabilities
Trade and other payables 136 687 64 485
Short-term portion of long-term liabilities 47 940 8 754
Tax payable 2 130 2 372
186 757 75 611
Total liabilities 315 807 127 262
Total equity and liabilities 505 302 294 936
Net asset value per share (cents) 212.38 186.23
Net tangible asset value per share (cents) (71.30) 30.84
Summarised Audited
Statements of Comprehensive Income
For the year ended 31 August 2015
2015 2014
R’000 R’000
Revenue 716 179 233 360
Operating expenses (683 599) (226 673)
Operating profit 32 580 6 687
Dividends received 258 –
Finance income 7 126 2 797
Finance cost (2 711) (1 210)
Profit on sale of equipment 82 24
Profit on sale of shares in associate 2 607 527
Profit on sale of financial advisory client base 73 35
Other income 765 619
Fair value adjustment of investments designated at fair value through profit or loss (57) 926
Re-measurement of liabilities at fair value through profit or loss 3 097 –
Fair value adjustments of liabilities (2 830) –
Impairment of intangible assets (420) (1 070)
Impairment of investment in associate and loan to associate (869) (194)
Share of profits/(losses) from associates, net of taxation 1 808 (839)
Profit before taxation 41 509 8 302
Taxation (12 207) (3 342)
Profit for the year 29 302 4 960
Other comprehensive income:
Items that may be reclassified subsequently to profit or loss (101) 33
Unrealised fair value adjustment of available-for-sale financial assets, net of taxation (101) 33
Total comprehensive income for the year 29 201 4 993
Profit/(loss) for the year attributable to:
Equity holders of the parent 30 681 5 988
Non-controlling interest (1 379) (1 028)
29 302 4 960
Total comprehensive income for the year attributable to:
Equity holders of the parent 30 580 6 021
Non-controlling interest (1 379) (1 028)
29 201 4 993
Basic and diluted earnings per share (cents) 33.91 8.53
Summarised Audited
Statements of Changes in Equity
For the year ended 31 August 2015
Ordinary
shares Fair value Non-
and share Treasury Accumulated adjustment controlling Total
premium shares income reserve Total interest equity
R’000 R’000 R’000 R’000 R’000 R’000 R’000
Balance at
31 August 2013 58 657 (149) 12 453 65 71 026 (13) 71 013
Issue of shares 91 668 – – – 91 668 – 91 668
Total comprehensive
income for the year
– Profit/(loss) – – 5 988 – 5 988 (1 028) 4 960
– Other comprehensive
income – – – 33 33 – 33
Balance at
31 August 2014 150 325 (149) 18 441 98 168 715 (1 041) 167 674
Repurchase of company’s
own equity instruments – (240) – – (240) – (240)
Total comprehensive
income for the year
– Profit/(loss) – – 30 681 – 30 681 (1 379) 29 302
– Other comprehensive
income – – – (101) (101) – (101)
Dividends declared – – (7 140) – (7 140) – (7 140)
Balance at
31 August 2015 150 325 (389) 41 982 (3) 191 915 (2 420) 189 495
Summarised Audited
Statements of Cash Flows
For the year ended 31 August 2015
2015 2014
R’000 R’000
Cash flows from operating activities
Cash receipts from customers 698 431 185 418
Cash paid to suppliers and employees (596 017) (171 828)
Cash generated by operations 102 414 13 590
Interest received 7 126 2 671
Interest paid (2 711) (1 210)
Dividend received 258 –
Dividend received from associate 863 216
Taxation paid (35 070) (7 922)
Net cash inflow from operating activities 72 880 7 345
Cash flows from investing activities
Acquisition and disposal of businesses (12 239) (34 044)
Investment in associate – (7 751)
Long-term loan to associate – (1 062)
Repayment of long-term receivables 1 727 511
Acquisition of investments (37 225) (1 065)
Acquisition of intangible assets (7 048) (14)
Decrease in long-term liabilities – (606)
Proceeds on the disposal of investments – 4 514
Proceeds on the sale of investments in associates 8 743 527
Proceeds on the disposal of equipment 160 34
Acquisition of equipment (2 826) (2 693)
Net cash outflow from investing activities (48 708) (41 649)
Cash flows from financing activities
Decrease in related party loans (39) –
Increase/(decrease) in long-term liabilities 3 483 (1 652)
(Decrease)/increase in loans from non-controlling shareholders of subsidiaries (195) 1 324
Issue of share capital – 48 924
Dividends paid (7 140) –
Net cash (outflow)/inflow from financing activities (3 891) 48 596
Total cash and cash equivalents movement for the year 20 281 14 292
Total cash and cash equivalents at the beginning of the year 33 552 19 260
Total cash and cash equivalents at the end of the year 53 833 33 552
Notes to the Summarised
Audited Financial Statements
For the year ended 31 August 2015
Accumulated Carrying
Cost depreciation value
R’000 R’000 R’000
1 Property and equipment
Furniture, fixtures and office equipment 4 899 (3 463) 1 436
Computer equipment 6 935 (5 570) 1 365
Leasehold improvements 1 945 (643) 1 302
Other fixed assets 247 (247) –
Total 14 026 (9 923) 4 103
Aug 2014
R’000 R’000 R’000
Furniture, fixtures and office equipment 3 622 (2 689) 933
Computer equipment 5 794 (4 321) 1 473
Leasehold improvements 796 (546) 250
Other fixed assets 232 (220) 12
Total 10 444 (7 776) 2 668
Aug 2015
Acquired
Opening through
business Closing
balance Disposals combination Additions Depreciation balance
R’000 R’000 R’000 R’000 R’000 R’000
Reconciliation of property and
equipment
Furniture, fixtures and office
equipment 933 (39) 124 841 (423) 1 436
Computer equipment 1 473 (39) 44 821 (934) 1 365
Leasehold improvements 250 – – 1 149 (97) 1 302
Other fixed assets 12 – – 15 (27) –
Total 2 668 (78) 168 2 826 (1 481) 4 103
Aug 2014
Furniture, fixtures and office
equipment 252 – 103 1 086 (508) 933
Computer equipment 395 (10) 557 1 288 (757) 1 473
Leasehold improvements 5 – – 299 (54) 250
Other fixed assets 6 – – 20 (14) 12
Total 658 (10) 660 2 693 (1 333) 2 668
A register containing the information required by paragraph 25(3) of Part C of Chapter 2 of the Companies
Regulations 2011 is available for inspection at the registered office of the company and its subsidiaries.
2015 2014
R’000 R’000
2Goodwill
Recognised on acquisition of business combinations 153 274 66 255
Impairment testing for cash-generating units containing goodwill:
For the purpose of impairment testing, goodwill is allocated to the group's operating
divisions which represents the lowest level within the group at which the goodwill is
monitored for internal management purposes.
The aggregate carrying amounts of goodwill allocated to each cash-generating unit
are as follows:
Efficient Financial Services (Pty) Ltd 11 275 10 622
Efficient Select (Pty) Ltd 8 369 13 275
Efficient Wealth (Pty) Ltd (group of companies) 47 264 42 358
Select Manager (Pty) Ltd (group of companies) 86 366 –
153 274 66 255
Reconciliation of goodwill:
Opening balance 66 255 23 703
Acquisitions
– Independent financial advisory client bases 653 194
– Efficient Wealth (Pty) Ltd (group of companies) – 42 358
– Select Manager (Pty) Ltd (group of companies) 86 366 –
Closing balance 153 274 66 255
During the financial year the Efficient Funds of Funds were transferred from Efficient Select to Naviga. As a result
of this transaction, intangible assets and goodwill related to the Efficient Funds of Funds, with carrying amounts of
R2.8 million and R4.9 million respectively, were transferred from Efficient Select to the Efficient Wealth group.
Aug 2015
Accumulated
amortisation
and Carrying
Cost impairments value
R’000 R’000 R’000
3 Intangible assets
Trade names 5 902 (2 674) 3 228
Customer contracts and customer relationships 169 631 (38 710) 130 921
Computer software 7 455 (639) 6 816
Total 182 988 (42 023) 140 965
Aug 2014
accumulated
amortisation
and Carrying
Cost impairments value
R’000 R’000 R’000
Trade names 5 112 (1 476) 3 636
Customer contracts and customer relationships 126 928 (27 927) 99 001
Computer software – – –
Total 132 040 (29 403) 102 637
Aug 2015
Acquired
through
Opening business Closing
balance Impairments Disposal Acquisitions combination Amortisation balance
R’000 R’000 R’000 R’000 R’000 R’000 R’000
Reconciliation of
intangible assets
Trade names 3 636 – – – 790 (1 198) 3 228
Customer contracts
and customer
relationships 99 001 (420) (275) – 43 404 (10 789) 130 921
Computer software – – – 7 048 319 (551) 6 816
Total 102 637 (420) (275) 7 048 44 513 (12 538) 140 965
Aug 2014
Acquired
through
Opening business Closing
balance Impairments Disposals Acquisitions combination Amortisation balance
R’000 R’000 R’000 R’000 R’000 R’000 R’000
Trade names 907 – – – 3 354 (625) 3 636
Customer contracts
and customer
relationships 16 914 (1 070) (264) 14 90 088 (6 681) 99 001
Total 17 821 (1 070) (264) 14 93 442 (7 306) 102 637
The remaining useful life of the trade names are between 2 and 20 years (2014: 3 and 13 years), customer
contracts and customer relationships, between 2 and 20 years (2014: 3 and 15 years) and computer software
between 4 and 7 years.
2015 2014
R’000 R’000
4 Investments
Available-for-sale financial assets
Available-for-sale financial assets consists of:
Linked unit investments (Fair value hierarchy: Level 1) 1 298 842
Listed share portfolios (Fair value hierarchy: Level 1) 359 464
1 657 1 306
Investments designated at fair value through profit or loss
Investments designated at fair value through profit or loss consists of:
Linked unit investments (Fair value hierarchy: Level 1) 41 931 5 455
41 931 5 455
Less current portion of investments (41 931) –
Non-current investments 1 657 6 761
5 Equity accounted investments
Proportion
Country of of ownership Principal
Name incorporation interest activities
C & A F Financial Services (Pty) Ltd RSA 49.0% Financial Services
Rudiarius Capital Management (Pty) Ltd RSA 30.0% Financial Services
AS Sure Investment Services (Pty) Ltd RSA 25.1% Financial Services
Efficient Financial Services (Namibia) (Pty) Ltd NAM 50.0% Financial Services
Efficient Financial Services (Namibia) (Pty) Ltd is an equity accounted investment because the Group does not hold
the majority of the voting rights, nor does it have the ability to appoint the majority of the board.
The equity accounted investments in Rebalance Fund Managers (Pty) Ltd and Marion Technology (Pty) Ltd were
disposed of by the Group on 1 June 2015 and 1 March 2015 respectively.
2015 2014
R’000 R’000
Equity accounted investments consist of:
C & A F Financial Services (Pty) Ltd – –
Rudiarius Capital Management (Pty) Ltd 263 329
Rebalance Fund Managers (Pty) Ltd – 40
AS Sure Investment Services (Pty) Ltd 10 650 11 012
Marion Technology (Pty) Ltd – 5 592
Efficient Financial Services (Namibia) (Pty) Ltd – –
10 913 16 973
Reconciliation of equity accounted investments:
Opening balance 16 973 6 313
Profit/(loss) for the year per statement of comprehensive income 1 808 (839)
Profit/(loss) for the year 1 808 (879)
Realisation of inter-company profit on sale of equipment to associate – 56
Deferred tax on realisation of inter-company profit on sale of equipment to
associate – (16)
Impairment of investment in associate (869) –
Repayment of loan to associate (412) –
Long-term loan granted and transferred from long-term receivables to associate
during the year – 1 062
Impairment of loans – (194)
Dividend received (863) (216)
Acquisition of investment in associate – 10 847
Disposal of investment in associate (5 724) –
Investment in associates 10 913 16 973
2015 2014
R’000 R’000
Aggregate amounts relating to associates:
Assets 8 350 14 573
Liabilities (4 571) (19 994)
3 779 (5 421)
Group’s share of net assets 1 001 (2 686)
Revenues 39 908 23 486
Profit/(loss) after tax 6 453 (1 591)
Group’s share of net profit/(loss) after tax 1 808 (879)
The respective year-ends for some of the associates differ from the year end of the Group. C & A F Financial
Services (Pty) Ltd and AS Sure Investment Services (Pty) Ltd have a February year-end. The results of these
associates are equity accounted using management-prepared information on a basis co-terminus to the Group's
year-end.
Due to a decrease in the expected financial performance of the entity, the recoverable amount of the investment
in AS Sure Investment Services (Pty) Ltd decreased to below its carrying amount. The recoverable amount has
been based on a value in use calculation. The calculation uses pre-tax cash flow projections based on financial
budgets approved by management covering a five-year period, a pre-tax discount rate of 29.5% and a terminal
value discount rate of 4% (2014: 3%). The recoverable amount decreased to below the asset's carrying value and
an impairment loss amounting to R869 000 was recognised in profit or loss.
2015 2014
R’000 R’000
6 Long-term receivables
6.1 L Benade 1 470 1 922
The loan to L Benade forms part of the acquisition of a customer base. This loan
is unsecured and repayable in 60 monthly instalments of R60 477 each. The loan
bears interest at the prime interest rate.
Less: Short-term portion of long-term receivables (1 109) (616)
361 1 306
6.2 T Maree 198 280
The loan to T Maree forms part of the acquisition of a customer base. This loan
is unsecured and repayable in 36 monthly instalments of R9 215 each. The loan
bears interest at the prime interest rate.
Less: Short-term portion of long-term receivable (102) (111)
96 169
6.3 H Raath 177 –
The loan to H Raath forms part of the acquisition of a customer base. This loan is
unsecured and repayable in 30 monthly instalments of R9 137 each. The loan bears
interest at the prime interest rate.
Less: Short-term portion of long-term receivable (98) –
79 –
6.4 CJ van Zyl 139 –
The loan to CJ van Zyl forms part of the acquisition of a customer base. This loan
is unsecured and repayable in 24 monthly instalments of R6 451 each. The loan
bears interest at the prime interest rate.
Less: Short-term portion of long-term receivable (68) –
71 –
6.5 Share purchase scheme 1 291 2 414
In terms of the Share Incentive Scheme loans were granted to fund 75% of the
acquisition of Efficient Group shares by employees. The loans are repayable on
31 August 2018. The loans bear interest at the Official Rate of Interest as defined
by the Income Tax Act. Employees cannot trade the shares until the debt is repaid
in full.
The fair value of the long-term receivable is R1 192 458 (2014: R2 139 000) and
the instrument is classified as level 3 on the fair value hierarchy. The valuation
considers the present value of the payments set out in the agreement, discounted
using a discount rate of 9.50%
1 898 3 889
2015 2014
R’000 R’000
7 Share capital and share premium
Authorised
361 350 000 ordinary shares of R0.00000277 each 1 1
Issued
90 592 973 ordinary shares of R0.00000277 each – –
Share premium 150 325 150 325
150 325 150 325
The Efficient Share Incentive Trust holds 227 502 (2014: 61 695) shares in Efficient Group Ltd. These shares are
disclosed as treasury shares.
The unissued ordinary shares are under the control of the directors in terms of a resolution of shareholders
passed at the last annual general meeting. This authority remains in force until the next annual general meeting.
2015 2014
R’000 R’000
8 Long-term liabilities
8.1 Vendor finance 1 744 652
These liabilities form part of the acquisition of customer bases. The loans are
unsecured, interest free and repayable at various instalment dates and amounts.
The last instalment is payable in 2018.
Less: Short-term portion (524) (285)
1 220 367
The fair value of the outstanding liabilities is R1 583 941 (2014: R557 000). The
fair value hierarchy is level 3. The valuation considers the present value of the
payments set out in the agreements, discounted using a discount rate of 9.50%
(2014: 9.25%).
8.2 Select Manager forward purchase liability
This liability forms part of the acquisition of the Select Manager group through
a forward purchase contract entered into with effective date 1 March 2015, and is
payable in two phases over a period of three years.
Phase 1 liability 42 243 –
This liability is presented at fair value and is payable in equal instalments of
R15 million over two years. The fair value hierarchy is level 3. The valuation
considers the present value of the expected payments set out in the contract,
discounted using a discount rate of 9.80%.
Phase 2 liability 52 763 –
This liability is presented at fair value and payable on 1 March 2018. The fair value
hierarchy is level 3. The valuation considers the present value of the expected
payments set out in the contract, discounted using a discount rate of 6.60%.
Less: Short-term portion (27 957) –
The unobservable inputs for calculating the forward purchase liability include
budgets and forecasts, the conversion ratio of independent financial advisor book
buys, profit targets and free cash flows.
67 049 –
8.3 Select Manager dividend liability 15 336 –
This liability is presented at fair value and payable over a period of three years.
The fair value hierarchy is level 3. The valuation considers the present value of the
expected payments set out in the contract, discounted using a discount rate of
6.60%.
Less: Short-term portion (7 267) –
The unobservable inputs for calculating the dividend liability include budgets and
forecasts, the conversion ratio of independent financial advisor book buys, profit
targets and free cash flows.
8 069 –
8.4 Incentive liability 662 928
This liability relates to a percentage of an incentive scheme payment that is due
to the asset managers, that is retained and payable after an agreed employment
period.
Less: Short-term portion (662) (607)
– 321
8.5 Working capital loan
The liability relates to an amortising term loan from Standard Bank of South Africa
to assist the subsidiaries with their respective working capital requirements, and
consists of two facilities.
Facility 1 21 038 28 687
The loan bears interest at JIBAR plus 3.75% per annum and is repayable in 16
equal and quarterly payments of R1 912 500 plus interest accrued for the period.
The loan is guaranteed by Efficient Wealth (Pty) Ltd, Naviga Solutions (Pty) Ltd,
Boutique Investment Partners (Pty) Ltd and Efficient Financial Services (Pty) Ltd.
All loan covenants have been met.
Facility 2 9 167 –
The loan bears interest at JIBAR plus 3.5% per annum and is repayable in 12
variable quarterly capital payments plus interest accrued for the period. The loan
is guaranteed by Efficient Wealth (Pty) Ltd, Naviga Solutions (Pty) Ltd, Boutique
Investment Partners (Pty) Ltd and Efficient Financial Services (Pty) Ltd. All loan
covenants have been met.
Less: Short-term portion (11 317) (7 650)
18 888 21 037
8.6 P S J Dynes and Associates 212 635
This loan is unsecured and bears no interest. The capital is repayable in 10
instalments, with a payment every six months, with the first instalment paid on
1 December 2011 and the last instalment payable on 1 June 2016.
Less: Short-term portion (212) (212)
– 423
8.7 A Knowles
On 1 August 2014 the company acquired 25.1% of the shares and voting interest
in AS Sure Investment Services (Pty) Ltd. R7 750 000 of the purchase price
was settled in cash. The balance is payable on 1 August 2017 subject to the
achievement of a profit target. No interest is charged on this liability. – 3 096
The fair value hierarchy is level 3. The valuation considers the present value of
the expected payment. The expected payment is determined by considering the
possible scenarios of forecast profit after tax, the amount to be paid under each
scenario and the probability of each scenario. After assessing the performance of
AS Sure Investment Services (Pty) Ltd during the 2015 financial year, as well as
the forecast performance presented in the budgets, the liability was remeasured
at Rnil.
95 226 25 244
9 Contingent liabilities and capital commitments
Efficient Group issued a guarantee to the amount of R300 000 in terms of a lease agreement for Efficient Select’s
offices in Cape Town.
Efficient Wealth issued a guarantee to the amount of R317 550 in terms of a lease agreement for their offices in
Cape Town.
2015 2014
R’000 R’000
10 Impairments
Impairment of intangible asset – 1 052
In 2012 Efficient Asset Finance (Pty) Ltd acquired an asset-based finance business
to expand the product offering of the Group. Due to industry changes the asset
based finance product was scaled down to the extent that the acquired business
was no longer profitable, and was subsequently impaired during 2014.
Impairment of other intangible assets 420 18
Impairment of loans to associates – 194
The loans to Efficient Financial Services Namibia (Pty) Ltd and C & A F Financial
Services (Pty) Ltd are not recoverable and were impaired.
Impairment of investment in associate 869 –
Due to a decrease in the expected financial performance of the entity, the
recoverable amount of the investment in AS Sure Investment Services (Pty) Ltd
decreased to below its carrying amount. The recoverable amount has been based
on a value in use calculation. The calculation uses pre-tax cash flow projections
based on financial budgets approved by management covering a five-year
period, a pre-tax discount rate of 29.5% and a terminal value discount rate of 4%
(2014: 3%). The recoverable amount decreased to below the asset's carrying value
and an impairment loss amounting to R869 790 was recognised in profit or loss.
Total impairments included in the statement of comprehensive income 1 289 1 264
2015 2014
’000 ’000
11 Basic and diluted earnings per share
Basic and diluted earnings per share is calculated by dividing the profit attributable
to equity holders of the company by the weighted average number of ordinary
shares in issue during the year.
Weighted average number of ordinary shares in issue
Number of shares in issue at the end of the year 90 593 90 593
Less: Issue of ordinary shares during the year – (49 833)
90 593 40 760
Add: Rights issue bonus element – 4 476
Add: Weighted average number of ordinary shares issued/(repurchased) during
the year (121) 24 975
Weighted average number of ordinary shares in issue 90 472 70 211
Basic and diluted earnings per share (cents) 33.91 8.53
Attributable earnings (R'000) 30 681 5 988
Weighted average number of ordinary shares in issue 90 472 70 211
Headline and diluted headline earnings per share (cents) 32.32 9.37
Headline earnings (R'000) 29 245 6 577
Weighted average number of ordinary shares in issue 90 472 70 211
R’000 R’000
Headline and diluted headline earnings are calculated as follows 29 245 6 577
Attributable earnings 30 681 5 988
Profit on sale of equipment (82) (24)
Taxation on profit on sale of equipment 23 7
Profit on sale of shares in associate (2 607) (527)
Taxation on profit on sale of share in associate – 98
Impairment of intangible asset 420 1 070
Impairment of investment in associate 869 –
Profit on sale of financial advisor client base (73) (35)
Taxation on profit on sale of financial advisor client base 14 –
12 Acquisition and disposal of businesses
The Group made the following acquisitions during the year under review as part of its strategy to increase assets
under management and assets under advice:
On 1 March 2015 the Group entered into a forward purchase agreement to acquire 100% of the shares and
voting interest in Select Manager (Pty) Ltd and its subsidiaries (70% on the acquisition date and 30% on
1 March 2018), a group providing asset management and financial advisory services, obtaining control of Select
Manager (Pty) Ltd. All the suspensive conditions were met on 27 April 2015 (the acquisition date). The purchase
consideration of R122.5 million will be settled by cash payments and the issue of the company’s own equity
over a period of three years from the date of acquisition. During the four months leading up to 31 August 2015,
Select Manager contributed revenue of R16.5 million and profit after tax of R4.0 million to the Group's results. If
the acquisition had occurred on 1 September 2014, management estimates that the consolidated revenue would
have been R49.4 million and consolidated profit after tax for the year R13.2 million. In determining these amounts
management has assumed that the fair value adjustments that arose on the date of acquisition would have been
the same if the acquisition had occurred on 1 September 2014.
In addition to the above acquisition, the Group also acquired 11 financial advisory client bases from various
independent financial advisors for a total purchase price of R2.6 million which will be settled on different dates,
in cash, based on the respective agreements. These acquisitions were accounted for as business combinations.
Consideration transferred
The table below summarises the acquisition date fair value of each major class of consideration transferred:
Select Financial
Manager advisory
client bases Total
R’000 R’000 R’000
Cash 15 000 1 305 16 305
Liability raised as part of business combination 107 512 1 270 108 782
122 512 2 575 125 087
Financial advisory client bases
The consideration for the financial advisory client bases is structured as a lump sum cash payment with the
remaining balance paid in future instalments over a period of 12 to 36 months.
Select Manager
The agreement for the acquisition of Select Manager constitutes a forward purchase contract whereby the Group
acquires 100% of Select Manager over a three-year period. The Group accounts for forward purchase acquisitions
using the anticipated-acquisition method, resulting in the recognition of a forward purchase and dividend liability
measured at fair value. Refer to note 8.
Acquisition-related costs
The Group incurred acquisition-related costs on legal fees, due diligence costs and other expenses. The table
below summarises the costs:
Financial
Select advisory
Manager client bases Total
R’000 R’000 R’000
Costs included in operating expenses 742 – 742
742 – 742
Identifiable assets acquired and liabilities assumed
Identifiable assets acquired and liabilities assumed 47 799 2 575 50 374
Less: Deferred tax raised on intangible assets (11 653) (653) (12 306)
36 146 1 922 38 068
The valuation techniques used for measuring the fair value of intangible assets acquired were as follows:
Trade names
Relief-from-royalty method was used to calculate the intangible assets for trade names. This method considers the
discounted estimated royalty payments that are expected to be avoided as a result of trade names being owned.
Customer related intangible assets
Multi-period excess earnings method was used to calculate the customer related intangible assets. This method
considers the present value of net cash flows expected to be generated by the customer relationships, by
excluding any cash flows related to contributory assets.
Goodwill
Goodwill arising from the acquisitions has been recognised as follows:
Financial
Select advisory
Manager client bases Total
R’000 R’000 R’000
Consideration transferred 122 512 2 575 125 087
Fair value of identifiable net assets (36 146) (1 922) (38 068)
Goodwill 86 366 653 87 019
The goodwill is attributable mainly to the skills and technical talent of Select Manager and the synergies expected
to be achieved from integrating the company into Efficient Group's existing Financial Services and Investments
businesses. None of the goodwill recognised is expected to be deductible for tax purposes.
2015 2014
R’000 R’000
Net cash paid on acquisition and disposal of businesses:
Gross trade receivables 5 247 2 510
Equipment 168 660
Intangible assets 44 513 93 443
Deferred tax asset (34) 161
Trade payables (2 017) (8 828)
Taxation payable (1 607) (480)
Cash and cash equivalents 4 104 11 927
Long-term liabilities – (31 474)
Identifiable assets acquired and liabilities assumed 50 374 67 919
Goodwill 87 019 42 551
Add: Long-term receivable raised as part of the purchase price 386 280
Less: Long-term liability raised as part of the purchase price (108 782) (488)
Less: Deferred tax raised on intangible asset acquired (12 306) (25 721)
Less: Cash acquired (4 104) (11 927)
Less: Fair value of shares issued as part of the purchase price – (38 272)
Net cash paid on acquisition of businesses 12 587 34 342
disposal:
Intangible assets (348) (298)
Net cash received on disposal of businesses (348) (298)
Net cash paid on acquisition and disposal of businesses 12 239 34 044
2015 2014
R’000 R’000
13 Related PartieS
13.1 Related party loans
Loans to related parties
Rudiarius Capital Management (Pty) Ltd 39 –
39 –
Accounts receivable from related parties
Rudiarius Capital Management (Pty) Ltd 15 –
15 –
Accounts payable to related party
Midnight Storm Investments 299 (Pty) Ltd (97) –
Rudiarius Capital Management (Pty) Ltd (1 256) –
(1 353) –
The current loans are unsecured, bear no interest and have no fixed repayment terms.
During the year, Efficient Group Ltd provided financial support to the Efficient Share Incentive Scheme Trust
to enable the structured entity to purchase some of Efficient Group's own equity instruments. Efficient Group
provided assistance of R254 000 (2014: Rnil) during the 2015 financial year for this purpose.
2015 2014
R’000 R’000
13.2 Related party transactions
Rent paid to Midnight Storm Investments 299 (Pty) Ltd 976 830
Administration fees received:
Rudiarius Capital Management (Pty) Ltd 55 –
Rebalance Fund Managers (Pty) Ltd 78 –
Dividends received:
C & A F Financial Services (Pty) Ltd – 216
Rudiarius Capital Management (Pty) Ltd 450 –
Rebalance Fund Managers (Pty) Ltd 11 –
AS Sure Investment Services (Pty) Ltd 402 –
Marion technology (Pty) ltd:
Information Technology Services paid and software development 2 155 1 416
Interest received 26 59
Service fees paid to Rudiarius Capital Management (Pty) Ltd by
Boutique Collective Investments (RF) (Pty) Ltd 10 106 2 021
13.3 Transactions with directors and prescribed officers (including their families)
Remuneration paid and accrued to directors and prescribed officers
– Remuneration 63 287 13 251
– Share-based payments 504 304
63 791 13 555
14 Segmental analysis
The Group changed the reporting segments from the previous financial year to better reflect the core business
activities in the Group. The Asset Management, Consulting and Administration businesses were combined in one
segment. The Services and Solutions segment, a new segment, now contains Naviga Solutions (Pty) Ltd.
The group is organised into three main business segments:
Financial Services
The following entities are included in this segment: Efficient Financial Services, Efficient Asset Finance,
Efficient Wealth, Twist Street Securities, Efficient Fiduciary Services, Stead Wealth Management, Exceed Asset
Management, Exceed Private Clients and AS Sure Investment Services.
Services and Solutions
The following entity is included in this segment: Naviga Solutions.
Investments
The following entities are included in this segment: Efficient Select, Efficient International Investments,
Boutique Collective Investments, Boutique Investment Partners, Select Manager, Rudiarius and Rebalance.
2015
Services
Financial and
Services Solutions Investments Other Total
R’000 R’000 R’000 R’000 R’000
Revenue 118 363 35 974 645 918 (84 076) 716 179
– External 111 537 1 398 602 790 454 716 179
– Inter-segment 6 826 34 576 43 128 (84 530) –
Operating expenses (117 930) (10 475) (625 258) 70 064 (683 599)
Finance cost (1 255) – (318) (1 138) (2 711)
Finance income 1 183 368 5 213 362 7 126
Impairment of investment in associates (869) – – – (869)
Impairment of intangible assets (420) – – – (420)
Profit/(loss) for the year 383 18 623 19 348 (9 052) 29 302
Taxation (718) (7 245) (7 692) 3 448 (12 207)
Net asset value (8 574) 15 754 66 486 115 829 189 495
Assets 45 410 20 802 189 236 249 854 505 302
Liabilities (53 983) (5 048) (122 750) (134 026) (315 807)
Depreciation and amortisation (1 228) (1 378) (1 914) (9 499) (14 019)
Share of profit from associates 908 – 890 10 1 808
2014 (Restated)
Services
Financial and
Services Solutions Investments Other Total
R’000 R’000 R’000 R’000 R’000
Revenue 68 628 22 170 165 705 (23 143) 233 360
– External 65 468 15 529 151 938 425 233 360
– Inter-segment 3 160 6 641 13 767 (23 568) –
Operating expenses (68 828) (7 484) (165 425) 15 064 (226 673)
Finance cost (913) – (4) (293) (1 210)
Finance income 633 166 1 258 740 2 797
Impairment of investment in associates (101) – – (93) (194)
Impairment of intangible assets (1 070) – – – (1 070)
Net (loss)/profit for the year (1 173) 10 523 959 (5 349) 4 960
Taxation 251 4 159 492 (1 560) 3 342
Net asset value (12 973) (2 869) 29 915 153 601 167 674
Assets 27 823 8 502 107 710 150 901 294 936
Liabilities (40 807) (11 371) (77 790) 2 706 (127 262)
Depreciation and amortisation (939) (3) (2 824) (4 875) (8 641)
Share of loss from associates (2) – – (837) (839)
Other consists of consolidation entries, amortisation of intangible assets, C & A F Financial Services,
Efficient Capital, Efficient Select Swaziland, Efficient Share Incentive Scheme Trust and Efficient Group.
All operations take place in southern Africa.
15 Liquidity
At the end of the reporting period the Group's current liabilities exceed its current assets. Management assessed
the Group's cash flow forecasts and its access to secured credit, which includes the realisation of net deferred tax
assets of R21 million in the next 12 months. Based on the cash flow forecast and the timing of cash inflows and
outflows, management is of the opinion that the Group will be able to settle its short-term commitments as and
when they become due.
16 Events after reporting date
No significant events occurred subsequent to the financial year that requires any additional disclosure or
adjustments to the financial statements.
17 Dividend paid
A dividend of 2 cents per share and a dividend of 5.88235 cents per share were paid in December 2014 and
May 2015 respectively (2014: nil).
Corporate Information
Non-Executive Directors
Dr SF Booysen (Chairman)*, LC Cele*, L Taylor*, J Rosen*, JA Mabena , AP du Preez and MM du Preez#
(*) Independent; (#) Alternate
Executive Directors
DD Roodt, H Weidhase, AT De Klerk, RH Walton and CP Burger.
Registered and Business address
81 Dely Road, Hazelwood, 0081
Company Secretary
Adv Rudi Barnard
Sponsor
Java Capital
Reporting Accountants and Auditors
KPMG Inc.
Transfer Secretaries
Link Market Services South Africa (Pty) Ltd
13 November 2014
(Incorporated in the Republic of South Africa)
(Registration No 2006/036947/06)
JSE share code: EFG
ISIN: ZAE000151841
(“Efficient Group” or “the Company”)
Pretoria
81 Dely Road, Hazelwood
Pretoria, 0081
South Africa
Tel: +27 (0)12 460 9580
Fax: +27(0)12 346 6135
info@efgroup.co.za
www.efgroup.co.za
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