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ECSPONENT LIMITED - Abridged Report for the year ended 31 December 2015 and notice of annual general meeting

Release Date: 01/04/2016 07:05
Code(s): ECS     PDF:  
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Abridged Report for the year ended 31 December 2015 and notice of annual general meeting

ECSPONENT LIMITED
Incorporated in the Republic of South Africa
Registration number: 1998/013215/06
JSE Code: ECS - ISIN: ZAE000179594
(“the Company” or “Ecsponent” or “the Group”)

Abridged Report for the year ended 31 December 2015 and notice of annual general meeting

The Board of Directors is pleased to advise shareholders of Ecsponent of the significantly
improved consolidated results for the 2015 financial year.

Ecsponent increased its strategic focus during the 2015 financial year by effecting further investments
in financial services companies which have clear African and Global market application. These
companies are required to produce products or services with high barriers to entry and high gross profit
margins. The directors envisage that this expansion strategy, which remained in place throughout the
2015 financial period, will continue indefinitely.

RESULTS HIGHLIGHTS

The Group showed sustained improvement in performance and generated substantially increased
returns for the 2015 financial year ended.

Certain highlights of the Group’s operations for the 2015 financial year compared to the 2014 financial
year ended are set out below:

-   Total revenue increased by 178% to R159.7 million compared to R57.4 million;
-   Total assets increased by 210% to R466.2 million compared to R150.2 million;
-   After tax profit, before other comprehensive income, increased by 281% to R19.9 million compared
    to R5.2 million: and

External revenue generated by the Group’s financial services operations increased by 175.5% to R64.5
million compared to R23.4 million, comprising 40.4% of total revenue for the 2015 financial year.
Funding for the expansion strategy was secured through the registration and listing of Ecsponent’s
Preference Share programme enabling, the Company to raise capital to fund investments on an ongoing
basis. Continued market subscriptions of the Preference Shares has been very encouraging.

OPERATIONAL REVIEW

Group overview

Below is an overview of the Group’s operations during the 2015 financial year.

Financial Services SA

The period under review witnessed a significant shift in the Group’s credit focus from a predominantly
retail, unsecured employee benefits credit business to the provision of secured credit to SME’s,
including enterprise finance. The key driver underlying the change was the change to the National Credit
Act substantially reducing regulated margins for credit providers in the sector.

The Group’s Financial Services operations continued their exponential growth during the period. Total
assets increased by over 420% to R443 million with a healthy net asset value of R93 million.

The demand for credit remains buoyant particularly in the enterprise development sector. The South
African Financial Services operation is well positioned to maximise opportunities. The change in
emphasis to the provision of SME credit has not only improved margins but has realised the additional
benefits of the provision of security for the credit and the reduction of infrastructure costs.

The primary cost in the Financial Services business is the cost of capital required to fund the growth of
the unsecured loan book. Management continues to seek alternative funding options to reduce funding
costs, thereby improving profitability.

The Sanceda Collections operations were rationalised during the period and all call centre activities
were outsourced realising significant cost savings. The business in South Africa generated a revenue
of R15.1 million a growth of 110% compared with the R7.2 million for the 2014 period. Profit after tax
increased to R1 801 566 versus a loss of R871 841 for the previous financial period.


Financial Services Africa

The roll out of the Group’s financial services offering into Africa replicates the South African model and
leverages off the infrastructure, systems, products and management expertise of the local business.
The African operations provide continuing opportunities for the growth in deposit taking and retail credit
operations. The regulatory framework of each country is fully complied with and the directors of each
country are operationally autonomous whilst the South African backbone provides the required
governance and control.

Botswana
The Botswana operations mirror the South African processes and the Group provides management
oversight and liquidity to the country’s credit operations. Ecsponent Botswana provides both enterprise
as well as SME credit on a secured basis to qualifying clients.

In its first full financial, year of operation in the Group, compared to the 2014 financial year ended,
Botswana grew revenue by 390% to R41 million, total assets increased by over 200% to R184 million,
and operating profits increased by 263% to R21 million.

The demand for credit in Botswana continues to grow and the directors are confident that the growth of
the business will continue


Swaziland
The Swaziland operation includes capital raising opportunities which mirror the South African process
and provides on going liquidity to the country’s credit operations which includes consumer credit,
enterprise and SME finance. Employee benefit products in Swaziland have the added security of a
government payroll deduction code.

The Group has a strategic alliances with GetBucks in the territory to penetrate the short term retail credit
market. GetBucks are specialists in this field and are responsible for the day-to-day operations with
Ecsponent providing the funding. It is the directors’ opinion that this alliance allows the Group to deploy
its resources optimally whilst ensuring the growth of the retail credit business in Swaziland. Albeit off a
small base, the Swaziland operation has reflected satisfying growth compared to 2014 with revenue up
459% to R13.4 million and total assets up 420% to R81.3 million. The company has a liability of R36.1
million to preference share investors in Swaziland.

The directors have confidence that the business will continue to grow in the territory.

Zambia
The process of transferring the depositors of the failed Graypages Financial Solutions to Ecsponent
Financial Services Limited Zambia has been completed and the reporting requirements in terms thereof,
to the Bank of Zambia, have been successfully concluded. The Zambian operation currently has
retained clients as a result of the transfer. Local staff have been appointed including the appointment
of a local CEO.

The Bank Of Zambia awarded Ecsponent Financial Services Limited (“Ecsponent Zambia”) a Tier 2
Deposit Taking Licence and the company subsequently secured a head office in Lusaka.

The Zambian operation provides similar products and services as the rest of the Group. The country’s
demand for both retail and business credit ensures that the company’s products are likely to be
immediately successful.

Ecsponent Zambia will shortly begin to provide credit to small and medium enterprises that qualify, as
well as enterprise finance for secured transactions.

Private Equity

Biotechnology

The Group’s Biotechnology Operations maintained market share and contributed R25.8 million to
revenue compared with R20.1 million for the comparative period. Margins were under extreme pressure
due to foreign exchange movements, combined with the start-up costs of the third biotech brand in the
Group, Salveo, resulted in a loss position for the biotech sector.

Towards the end of the financial year both Cryo-Save, the Group’s premium brand, and Salveo recorded
all-time record sales, the benefits of which will be realised in the new financial period. Cryo-Save and
Salveo have concluded significant contracts with a large medical aid group and large pharmacy/clinic
group, respectively. Management anticipate that this will substantially improve both volumes and
margins during the 2016 financial year.

Management have identified and developed additional product ranges which leverage the biotech
organisational infrastructure thereby amortising overheads across a wider product base. The directors
are bullish about the opportunities and the resultant improvement in profitability going forward.

PROSPECTS

Key elements of the on-going expansion strategy are:
- the continued investment in the credit operations of the Group;
- the continued growth of subsidiaries through product and market extension;
- aggressive trading and cost reduction;
- the acquisition of new subsidiaries which are profit generating and aligned with the Group’s
   strategy.

The abovementioned approach is aimed at developing a robust and complementary financial services
Group which provides sustainable returns.

FINANCIAL RESULTS

Presented below are the summarised consolidated audited financial results for the year ended 31
December 2015.


Summarised Consolidated Statement of Financial Position as at 31 December 2015
                                                           31 December       31 December
                                                                  2015              2015
                                                                 Group             Group

                                                                 R’000              R’000

 ASSETS

 Non-current assets

 Property, plant and equipment                                   8 475              6 134

 Intangible assets                                               8 557              1 132

 Other financial assets                                         98 066             54 406

 Deferred tax                                                   12 191             12 737

 Other non-current receivables                                   3 127              2 042

 Total current assets                                          335 763             73 732


 TOTAL ASSETS                                                  466 179            150 183



 EQUITY AND LIABILITIES

 Equity                                                         78 191             56 667

 Non-controlling interest                                       (4 653)            (3 795)



 Non-current liabilities

 Other financial liabilities                                   324 840             49 029

 Deferred revenue                                                9 552              4 350

 Deferred tax                                                    5 939              1 169


 Total current liabilities                                      52 310             42 763



 TOTAL EQUITY AND LIABILITIES                                  466 179            150 183




Summarised Consolidated Statement of Profit and Loss and Other Comprehensive Income for
the year ended 31 December 2015

                                                             Year ended        Year ended
                                                           31 December       31 December
                                                                   2015              2014
                                                                  Group             Group

                                                                 R’000              R’000
Revenue                                                        159 712             57 396

Cost of sales                                                  (27 123)            (9 046)

GROSS PROFIT                                                   132 589             48 350

Other income                                                    21 953                478

Operating expenses                                            (107 161)           (37 729)

OPERATING PROFIT                                                47 381             11 099

Fair value adjustments                                           5 639                598

Net finance costs                                              (27 195)            (5 214)

Bargain Purchase                                                      -               166

Income from equity accounted investment                          1 742                   -

PROFIT BEFORE TAXATION                                          27 567              6 650

Taxation                                                        (7 633)            (2 601)

PROFIT FROM CONTINUING OPERATIONS                               19 934              4 049

Profit / (Loss) from discontinued operations                          -             1 182

PROFIT FOR THE PERIOD                                           19 934              5 231

Other comprehensive loss                                          (301)               (70)

TOTAL COMPREHENSIVE INCOME                                      19 633              5 161

Loss attributable to non-controlling interest                    3 298              1 575

TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO
ORDINARY SHAREHOLDERS                                           22 931              6 736
        



Profit attributable to owners of the parent from:

Continuing operations                                           23 359              5 894

Discontinued operations                                             -                 897

                                                                23 359              6 791



Total comprehensive income/(loss) attributable to:

Owners of the parent                                            22 931              6 736

Non-controlling interest                                       (3 298)             (1 575)

                                                                19 633              5 161
Basic and fully diluted earnings per share (cents) from          2.591              0.983
continuing operations attributable to equity holders of the
parent

Basic and fully diluted earnings / (loss) per share (cents)          -              0.207
from discontinued operations attributable to equity holders of
the parent

Basic and fully diluted earnings per share (cents) attributable  2.591              1.190
to equity holders of the parent

Summarised Statement of Changes in Equity for the year ended 31 December 2015

                          Share    Non-distributable        Foreign       Common        Accumulated          Non-      Total
                         capital             reserve       currency        control             loss    controlling    equity
                                                         translation       reserve                        interest
                                                            reserve
                          R’000               R’000           R’000             R’000         R’000         R’000      R’000

 Balance at 1 January    55 226               3 842                -                -       (35 296)       (1 240)    22 532
 2014

 Total comprehensive           -                   -            (55)                -         6 791        (1 575)     5 161
 profit for the year

 Issue of shares         62 845                    -               -                -             -             -     62 845
 
 Business                     -                    -               -          (36 687)            -          (980)   (37 667)
 reorganisation
 
 Balance at 1 January   118 071               3 842             (55)                -        (28 505)      (3 795)     52 871
 2015

 Total comprehensive           -                   -           (428)                 -        23 359       (3 298)    19 633
 profit for the year
 
 Profit for the year           -                   -               -                 -        23 359       (3 425)    19 934

 Other                         -                   -           (428)                 -                        127      (301)
 comprehensive
 income

 Purchase of non               -              (3 842)              -                 -        2 435        2 440       1 033
 controlling interest

 Balance at 31           118 071                    -           (483)          (36 687)      (2 711)       (4 653)     73 537
 December 2015 


Summarised Consolidated Cash Flow Statement for the year ended 31 December 2015


                                                                       Year ended            Year ended
                                                                      31 December           31 December
                                                                             2015                  2014
                                                                            Group                 Group

                                                                             R’000                 R’000


 NET CASH INFLOW FROM OPERATING ACTIVITIES                                   1 002                 2 745



 NET CASH OUTFLOW FROM INVESTING ACTIVITIES                              (251 845)               (63 538)



 NET CASH INFLOW FROM FINANCING ACTIVITIES                                268 244                 53 091



 Movement in cash and cash equivalents for the period                       16 690                (7 834)

 Cash and cash equivalents at the beginning of the period                  (6 949)                   885

 Cash and cash equivalents at the end of the period                          9 741                (6 949)




Notes to the Summarised Financial Statements for the year ended 31 December 2015

ACCOUNTING POLICIES AND BASIS OF PREPARATION OF RESULTS

The summarised consolidated financial statements have been prepared in accordance with IAS 34 –
Interim Financial Reporting in accordance with the accounting policies (which have been applied
consistently compared to the prior financial year) that comply with International Financial Reporting
Standards (IFRS), the SAICA Financial Reporting Guides as issued by the Accounting Practices
Committee and Financial Pronouncements as issued by the Financial Reporting Standards Council
and in the manner required by the Companies Act and the JSE Listings Requirements. The principle
accounting policies applied in the preparation of the summarised consolidated financial statements
are in terms of IFRS and are consistent with those applied in the comparative consolidated annual
financial statements, except for the adoption of new standards which became effective during the
year.

The results of the Group, were prepared under supervision of the Group’s financial director, Mr B
Shanahan CA (SA).

The summarised consolidated financial statements for the year ended 31 December 2015 have been
extracted from audited information but is not in itself audited. The directors take full responsibility for
the preparation of these abridged financial results and that the financial information has been correctly
extracted from the underlying annual financial statements. A copy of the unmodified audit report
prepared by Nexia SAB&T on the underlying annual financial statements, together with the
consolidated financial statements identified in the auditor’s report, is available for inspection at the
Company’s registered office.

REVIEW OF RESULTS AND FINANCIAL POSITION

The summarised consolidated financial results represent the trading results of the Company and its
subsidiaries which are active in the financial services and private equity markets. The Group showed
sustained improvement in its performance for the period under review. The expansion strategy,
substantially increased the portfolio of financial services assets. Funding for the expansion strategy was
secured through the registration of Ecsponent’s listed Preference Share programme enabling the
company raise capital to fund its investments on an ongoing basis. The market subscription of the
Preference Shares has continued to grow.


EARNINGS AND FULLY DILUTED EARNINGS PER SHARE

                                                                                 2015                   2014

 BASIC AND HEADLINE EARNINGS                                                    R’000                 R’ 000

 Basic earnings                                                                23 359                  6 791

 Headline earnings                                                             22 453                  5 334


 Basic and fully diluted earnings per share (cents) attributable                 2.59                   1.19
 to equity holders of the parent

 Headline and fully diluted headline earnings per share                          2.49                   0.94
 (cents) attributable to equity holders of the parent



 Number of shares in issue                                                901 588 049            901 588 049

 Weighted average number of shares                                        901 588 049            570 498 813


 RECONCILIATION BETWEEN BASIC EARNINGS AND                                      2015                   2014
 HEADLINE EARNINGS
                                                                               R’000                 R’ 000

 IAS 33 Basic earnings                                                        23 359                  6 791

 IFRS 5 Gain on disposal of discontinued operation                                 -                 (1 326)

 IFRS 3 Bargain purchase                                                           -                   (135)

 IAS 16 (Profit) / Loss on disposal of property plant and                          10                    (3)
 equipment

 IAS 16 Impairment of property, plant and equipment                                -                       7

 IAS 38 Impairment of intangible assets                                           494                      -

 IFRS 3 Gain or loss on disposal of subsidiary, JV or                         (1 410)                      -
 associate

 Headline earnings                                                             22 453                  5 334


ASSET VALUE PER SHARE
                                                                                2015                     2014

                                                                               R’000                   R’ 000

 Net asset value                                                              78 191                   56 667

 Net tangible asset value                                                     69 633                   55 535

 Net asset value per share (cents)                                              8.67                     6.29

 Net tangible asset value per share (cents)                                     7.72                     6.16



ACQUISITIONS AND DISPOSALS
The board actively investigates acquisition opportunities aimed at improving earnings and cash
generation for the Group.

Quilibet
Quilibet is an engineering supply company which supplies the enterprise development and SME
parastatal vendors. The acquisition enables Ecsponent to not only provide hardware supplies to
customers but to also provide credit in order to satisfy orders. The Group effected an agreement to
acquire 100% of the company, effective 1 March 2015. Quilibet reported sales amounting to R13.8
million, and profit after tax of R1 million for the 10 months ended 31 December 2015.

Fair value of the assets acquired and liabilities assumed are as follows:

                                                                                    2015
                                                                                       R
 Property, plant and equipment                                                 1 600 081
 Inventory                                                                       526 785
 Trade and other receivables                                                   1 540 818
 Cash and cash equivalents                                                       600 148
 Other financial liabilities                                                  -2 417 794
 Trade and other payables                                                       -741 788
 Total identifiable net liabilities                                            1 108 250
 Goodwill                                                                      3 991 750
 Purchase consideration                                                        5 100 000

Acquisition of investment in associate

Living 4 U
Ecsponent acquired a 25% interest in the property development company Living 4 U for a total
consideration of R4.3 million. It was the group’s first property investment. An offer was received for
the sale of the property development and the shareholders resolved to sell and thereby also
repurchase the 25% held by Ecsponent with the proceeds from the sale. Ecsponent realised a 22.5%
return on the disposal.

                                                                                             2015
                                                                                                R
 Cost of investment in associate                                                        4 283 500
 Equity accounted post acquisition profit                                               1 741 813
                                                                                        6 025 313
 Disposal of investment in associate                                                   -6 025 313
 Investment in equity accounted investment                                                      -


 Acquisition date fair value of consideration paid
 Cash consideration paid                                                               -1 033 500
 Other consideration (*)                                                               -3 250 000
                                                                                       -4 283 500



Start-up businesses
The board established the following new businesses in line with the expansion strategy:

Sanceda Swaziland
The Kingdom of Swaziland does not have professional debt collection business. Ecsponent was
approached to establish the first such agency in Swaziland and a due diligence reflected the
significant need for the services. The collections business provides significant synergies with the
Groups financial services operations.

Since incorporation the business has been retained by a number of large corporates to provide
collection services for the recovery of their outstanding debt.
The company has just completed the installation of its corporate office and has potential third party
debt of over R400 million under contract.

The directors have high expectations for the future profitability of Sanceda Swaziland.

Sanceda Botswana
Botswana has a similar requirement for professional debt collection services. Ecsponent Limited
establish the Sanceda Botswana operations in order to provide such services in the territory. Since
incorporation the business has been retained by a number of large corporates and state organisations
to provide collection services for the recovery of outstanding debts.

The company has just completed the installation of its corporate office and has potential third party
debt of over R300 million under contract.

The directors have high expectations for the future profitability of Sanceda Botswana.

Disposals
Disposal of the Retail Credit Business
The Group disposed of its retail client book debtors to GetBucks for a purchase consideration of R52
million in May 2015. As reported earlier this was a strategic decision made by the Directors in order to
ensure that the Groups credit operations are able to maintain or improve on gross margins.

Disposal of 51% of Komo Finance
Komo Finance is a payroll based retail credit provider. Ecsponent’s decision to exit the retail credit
market resulted in Ecsponent no longer requiring the credit provider. The 51% interest was sold to
Ecsponent Business Finance for R450 000 on 31 July 2015.

Disposal of investment in associate
As mentioned above, the group disposed of its investment in an equity accounted investment in
associate during the financial period. The disposal realised a generous short term return of 22.5%


OTHER FINANCIAL ASSETS

The other financial asset category incorporates the benefits provided to employees against payroll
facilities contracts and business funding which increased by 254% compared to the comparative period.
Provided below is the detail regarding the Group’s other financial assets:
                                                                           Group                Group
                                                                     31 December          31 December
                                                                            2015                 2014

                                                                          R ‘000               R ‘000

 At fair value through profit and loss – designated
 Acquired debt                                                             8 874                3 241

 Loans and receivables
 Employee benefit loans                                                   77 645               64 321
 Secured SME loans                                                        73 140               34 921
 Ecsponent Capital RF Limited                                            134 917                3 817
 Ecsponent Investment Holdings (Pty) Ltd                                  81 940                    -

 TOTAL OTHER FINANCIAL ASSETS                                            376 516              106 300

 Total included in non-current assets                                     98 066               54 406
 Total included in current assets                                        278 450               51 894


PREFERENCE SHARE CAPITAL

Ecsponent’s business model requires funding for both existing business growth and to pursue further
acquisitions. Funding is deployed in the growth of financial services assets and the acquisition of new
assets which contribute to the growth strategy. Preference Shares are considered an optimal source of
funding for these on-going business needs and accordingly the Company has registered a R5 billion
Preference Share Programme (“the Programme”) under which Ecsponent may, from time to time, issue
multiple Tranches of Preference Shares. The Programme was approved by the JSE on 8 September
2014 and by 31 December 2015 Ecsponent Limited had received subscription investments of R263.6
million.

 Reconciliation of the number of preference shares in issue:

                                                                Ecsponent Limited (South Africa)
                                                            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 year                 267 590         623 855        1 425 590
                                                            326 798         688 485        1 641 290

 Weighted average issue price per share                        93.82         100.00           100.00
 (Rands)

                                                        Ecsponent Limited (Swaziland)
                                                            Class A         Class E
 Reported at the beginning of the period                   6 120 000       6 351 806
 Issue of preference shares during the year               11 938 000      11 822 194
                                                          18 058 000      18 174 000

 Weighted average issue price per share                         1.00            1.00
 (converted to Rand)

                                                         Ecsponent Limited (Botswana)
                                                            Class A         Class B
 Reported at the beginning of the period                   4 864 000         587 219
 Issue of preference shares during the year                9 900 000       1 479 781
                                                          14 764 000       2 067 000

 Weighted average issue price per share (Pula)                  1.00            1.00
 Weighted average issue price per share (Rand)                  1.37            1.37



OTHER FINANCIAL LIABILITIES

In terms of IFRS the preference share capital is classified as debt and disclosed as an other financial
liability in the Summarised Consolidated Statement of Financial Position as at 31 December 2015.
Consequently the preference share dividends are classified as funding costs and disclosed as such in
the Summarised Consolidated Statement of Profit and Loss and Other Comprehensive Income for the
year ended 31 December 2015.

The other financial liabilities category incorporates external funding facilities with either banks,
individuals or corporate funding entities. Provided below is the detail regarding the Group’s other
financial liabilities:
                                                                           Group                Group
                                                                     31 December          31 December
                                                                            2015                 2014

                                                                          R ‘000               R ‘000

 At fair value through profit and loss
 Collection Guarantee                                                           -               1 308

 Held at amortised cost
 Preference share liability                                              313 837               48 522
 Experite NV Group                                                         6 498                5 201
 Komo Funding (Pty) Ltd                                                        -                4 271
 Capital bank - Term loan facility                                         8 977                    -
 Getbuck (Pty) Ltd                                                         4 054                    -
 Ecsponent Projects (Pty) Ltd                                              4 873                    -
 Fixed term deposits                                                       2 007                    -
 Other                                                                     1 853                  712

 TOTAL OTHER FINANCIAL LIABILITIES                                       342 099               60 014

 Total included in non-current liabilities                               324 840               49 029
 Total included in current liabilities                                    17 259               10 985


RELATED PARTY DISCLOSURES
The group entered related party transactions with its holding company and related subsidiaries during
the financial period. Below is a summary of the relevant balances and transactions in this regard:
                                                                                 2015           2014
                                                                                R’000          R’000
    Related party balances
    Loan accounts - Owing (to) by related parties
    Ecsponent Capital (RF) Limited                                            134 917          3 817
    Ecsponent Investment Holdings (Pty) Ltd                                    81 940             -



    Related party transactions
    Interest (received from) / paid to related parties
    Ecsponent Capital (RF) Limited                                            -14 110           2 130
    Ecsponent Investment Holdings (Pty) Ltd                                   -18 644


    Administration fees paid to (received from) related parties
    Ecsponent Capital (RF) Limited                                             -5 962               -
    Ecsponent Investment Holdings (Pty) Ltd                                    -3 240               -
    Ecsponent Business Finance (Pty) Ltd                                       -1 500               -


FINANCIAL INSTRUMENTS – FAIR VALUE AND RISK MANAGEMENT
Fair value measurements are categorised into Level 1, 2 or 3 based on the degree to which the inputs
to the fair value measurements are observable and the significance of the inputs to the fair value
measurement in its entirety, which are described as follows:

-      Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities
       that the entity can access at the measurement date;
-      Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable
       for the asset or liability, either directly or indirectly; and
-      Level 3 inputs are unobservable inputs for the asset or liability.

                                                                                             2015
    Financial instrument carried at fair value                             Carrying value -        Fair value -
                                                                              Designated at             Level 3
                                                                                 fair value              R’000
                                                                                      R’000

    Other financial assets                                                            8 874               8 874
    Other financial liabilities                                                           -                   -


                                                                                            2014
    Financial instrument carried at fair value                            Carrying value -        Fair value -
                                                                             Designated at             Level 3
                                                                              fair value              R’000
                                                                                   R’000

    Other financial assets                                                         3 241              3 241
    Other financial liabilities                                                  (1 308)            (1 308)


                                                                                    2015              2014
                                                                                   R’000             R’000
Fair value gains recognised in profit and loss                                     5 639             1 697

Measurements of fair value – valuation techniques and significant unobservable inputs
The following table reflects the valuation techniques used in measuring Level 3 fair values, as well as
the significant unobservable inputs used:

    Type               Valuation technique       Significant unobservable         Inter-relationship
                                                 inputs                           between
                                                                                  significant
                                                                                  unobservable
                                                                                  inputs and fair
                                                                                  value
                                                                                  measurement

 Acquired debt    The fair value of         - The expected future cash            The estimated fair
                  acquired debt is          flows are determined with             value would
                  determined by             reference to the current              increase/(decrease)
                  applying the              collection performance of the         if:
                  discounted cash flow      book, benchmark information           - the forecast
                  valuation technique,      available within the debt               collections were
                  which incorporates the    collection industry as well as          higher/(lower); or
                  determination of          expected recovery rates               - the risk adjusted
                  discount rate             determined by the collection            discount rate were
                  containing an             service provider. The                   lower/ (higher).
                  appropriate risk          expected recovery rates are
                  premium.                  measured against the
                                            collection service provider’s
                                            model that takes key
                                            considerations into account
                                            like the quality of the contact
                                            details of the individual
                                            debtors contained in the
                                            book, the age of the debt
                                            and the quality of the original
                                            loan
                                            - A risk adjusted discount
                                            rate of 16.5% was applied.


 Collection       The fair value of the     - The future cash flows are       The estimated fair
 guarantee        collection guarantee is   determined with reference to      value would
                  determined by             the contractual collection        increase/(decrease)
                  applying the              agreement.                        if:
                  discounted cash flow                                        - the risk adjusted
                  valuation technique,                                        discount rate were
                  which incorporates the                                      lower/ (higher).
                  determination of
                  discount rate
                  containing an
                  appropriate risk
                  premium.



SUMMARISED CONSOLIDATED SEGMENTAL INFORMATION

The segments identified are based on the operational and financial information reviewed by
management for performance assessment and resource allocation. There has been no change in the
basis of operational segmentation or in the basis of measurement of segment profit or loss since the
2014 annual financial statements.

The continued expansion of the Group has resulted in the need for geographic segmentation in
addition to the operational segmentation.

Year ended 31 December 2015

 Operating Segment                        Total Assets    Revenue    Operating profit /
                                                                                (loss)
                                               R’ 000     R’ 000                 R’000

 Financial Services                           710 672    132 833               65 193
 Private equity – Biotechnology                36 088     39 623              (5 644)
 Collections                                    8 802     16 209                (258)
 Corporate                                    355 853     57 727               30 618
 Eliminations                               (645 236)   (86 679)             (42 528)
 Group total                                  466 179    159 712               47 381


 Geographic Segment                      Total Assets   Revenue    Operating profit /
                                                                              (loss)
                                               R’ 000     R’ 000               R’000

 South Africa                                 834 784    190 292               63 494
 Botswana                                     183 856     40 956               20 969
 Swaziland                                     81 321     13 438                6 362
 Namibia                                          187        563                (157)
 Zambia                                        11 263      1 143                (759)
 Eliminations                               (645 236)   (86 679)             (42 528)
 Group total                                  466 179    159 712               47 381



Year ended 31 December 2014

 Operating Segment                       Total Assets   Revenue    Operating profit /
                                                                              (loss)
                                               R’ 000     R’ 000               R’000

 Financial Services                          123 109     23 415               3 642
 Biotechnology                                15 915     20 081              (1 284)
 Collections                                  15 518      7 166                (357)
 Agricultural packaging – discontinued             -        576                1 513
 operation
 Corporate                                   220 646     37 065               28 503
 Eliminations                               (210 620)   (30 331)            (19 405)
 Transfer to discontinued operations               -       (576)             (1 513)

 Group total                                 150 183     57 972               11 099



 Geographic Segment                      Total Assets   Revenue    Operating profit /
                                                                              (loss)
                                               R’ 000     R’ 000              R’000

 South Africa                                 284 033     77 169              25 191
 Botswana                                      61 087      8 356               5 722
 Swaziland                                     15 630      2 403                 964
 Namibia                                           54        374                  89
 Eliminations                               (210 620)   (30 331)            (19 405)
 Transfer to discontinued operations                -      (576)             (1 512)
 Group total                                  150 183    57 972               11 099



EVENTS AFTER THE REPORTING PERIOD

The directors are not aware of any material event, other than the matters listed below, which occurred
after the reporting date and up to the date of this report requiring disclosure. The following events
initiated during the period were concluded past the year end:

Clade Asset Management
Clade Asset Management was founded in 2004. The company holds category 2 and 2A investment
licences with the Financial Services Board. Clade offers a comprehensive range of alternative,
traditional long-only and hybrid investment solutions for investors in South Africa and Africa.

Clade focuses on providing high-quality, low-cost solutions, with high service levels, to knowledgeable
and demanding professional investors in South Africa.

Clade has four retail funds which have all been top performers in their categories.
The company has received a mandate to manage funds amounting to R500 million. Negotiations are
currently in progress to access a network of more than 100 financial advisors to market products to a
retail and institutional client base.

Ecsponent has acquired 51% of the ordinary share capital of Clade, subject to suspensive conditions
being fulfilled for a cash consideration of R7 million, settled over a period of seven months in equal
monthly instalments of R1 million each plus the issue of 19 095 617 ordinary shares in Ecsponent.

Clade’s products complement the Ecsponent financial services offering and there are significant
synergies which the directors intend to leverage to the benefit of the Group.

Return on Innovation
ROI is a high technology media intelligence business which provides its clients with state of the art
media monitoring, early phase trend detection, trend analysis, brand management, etc. The real time
tracking of media empowers clients to respond appropriately to current opportunities or threats. At the
heart of the monitoring system is ultra-high speed digitization of multimedia with specialist matching
algorithms for identification of key words. The source includes all media from TV and social media to
print media and covers an international base.

The profile of the business fits the high technology and barrier to entry requirements of Ecsponent. The
directors are of the opinion that ROI will provide sustainable future returns for the Ecsponent.


Disposal of acquired debt collection books
Ecsponent decided, as part of its new focus on financial services, to dispose of its collection books.
This disposal consideration of R9 million is payable in cash to Ecsponent Credit Services (Pty) Ltd for
the acquired debt books, having a carrying value of R8.9 million at year end.

Business of Ecsponent Investment Holdings
The Group signed an agreement to acquire the Business of Ecsponent Investment Holdings (Pty) Ltd
(EIH), subject to shareholders approval at the general meeting on 3 May 2016.

The EIH business will provide high yielding financing opportunities which offer an attractive proposition
for the Company, and the acquisition is in line with both Ecsponent’s expansion strategy as well as its
positioning as a provider of wholesale funding. Ecsponent Development Fund (Pty) Ltd (EDF) will focus
predominantly on providing funding and expertise in the enterprise development niche markets. EDF is
investing in significant infrastructure and skills in the sector and the acquisition provides improved deal
flow to the business unit.

A total purchase consideration of R200 million is payable by EDF to EIH as consideration for the
business of EIH as a going concern, which includes, inter alia, its assets, intellectual property,
trademarks, brands, designs, etc. and goodwill.
Further information on the proposed acquisition of EIH is contained in the announcement released on
SENS on 1 December 2015 and the circular to shareholders dated 31 March 2016 that can be
downloaded from the Company’s website www.ecsponentlimited.com.

CORPORATE ACTIONS

In June 2015 Ecsponent successfully acquired, through a scheme of arrangement in terms of section
114 of the Companies Act, the non-controlling shares in Ecsponent Management Services (Pty) Ltd
(previously known as Vinguard Limited) in exchange for R0.02 per EMS share up to a maximum of
R1000, and to the extent applicable thereafter the issue of one Class A Preference share to the
shareholders for every 5 000 EMS shares held, and to the extent that any EMS shares remain thereafter
R0.02 per EMS share for the balance of the EMS shares held. A total of 24.13% was acquired for
R100 390 cash settlement and the issue of R375 000 in Class A preference shares


SHARE CAPITAL

There were no ordinary shares issued during the 31 December 2015 financial period.

DIVIDENDS

No ordinary dividends have been declared or proposed for the year.

Ecsponent Limited has issued and listed three classes of Preference Shares with the following
dividend terms:
 - Class A – 10% fixed rate monthly dividend;
 - Class B – 0% monthly dividend; and
 - Class C – prime plus 4% floating rate monthly dividend.

Preference Share dividends and interest of R25.1 million accrued to investors for the period ended 31
December 2015. The dividends are classified as finance costs and included in the finance cost expense
in the Summarised Consolidated Statement of Profit and Loss and Comprehensive Income.

RESTATEMENT OF PUBLISHED INTERIM RESULTS

During the finalisation of the 31 December 2015 results it was identified that an incorrect interpretation
of the SAICA circular relating to the quantification of Headline earnings was applied, resulting in the
misstatement of the 30 June 2015 headline earnings and related Headline earnings per share. The
impact of the misstatement can be summarised as follows:

                                                                                    2015
                                                                                    R’000

Headline earnings reported in 30 June 2015 results                                   4 653

Adjustment - IAS 39 Profit on disposal of Financial Instruments                     12 017

Restated Headline earnings for the period ending 30 June 2015                       16 670



Headline earnings per share reported in 30 June 2015 results                         0.516

Restated Headline earnings for the period ending 30 June 2015                        1.849



CONTINGENCIES

The directors are not aware of any material contingent liability which existed at the reporting date and
up to the date of this report that requires disclosure.


DIRECTOR CHANGES

The following changes in the directorate took place during the year, effective 1 December 2015:
 -  Eune Engelbrect (previous a non-executive director) was appointed as the Company and
    Group’s Chief Executive Officer (“CEO”);
 -  Terence Gregory resigned as Company and Group CEO and was appointed as Chief Operating
    Officer (“COO”) of the Company and Group from the same date. He will continue to be
    responsible for the ongoing day to day operations of the Company;
 -  Bryan Shanahan was appointed as the Financial Director of the Company and Group; and
 -  Dirk van der Merwe resigned as Financial Director of the Company and Group, but will continue
    to provide consulting services to the Company and Group.


COMPANY SECRETARY

No changes in the company secretary took place during the year.


AUDITORS

Nexia SAB&T continued in office as auditors for the Group for 2015 financial year.

At the Annual General Meeting, shareholders will be requested to reappoint Nexia SAB&T as the
independent external auditors of the group for the 2016 financial year.


GOING CONCERN

The directors believe that the Group has adequate financial resources to continue in operation for the
foreseeable future and accordingly the Summarised Consolidated Financial Statements have been
prepared on a going concern basis. The directors have satisfied themselves that the Group is in a sound
financial position and that it has access to sufficient equity and borrowing facilities to meet its
foreseeable cash requirements.

The directors are not aware of any new material changes that may adversely affect the Group. The
directors are also not aware of any material non-compliance with statutory or regulatory requirements
or of any pending changes to legislation which may affect the group.

NOTICE OF ANNUAL GENERAL MEETING

Notice is hereby given that the twelfth Annual General Meeting of the members of Ecsponent Limited
(Registration number 1998/013215/06) will be held on Friday, 27 May 2016 at the registered office,
Acacia House, Green Hill Village Office Park, On Lynwood Road, Cnr Botterklapper and Nentabos
Street, The Willows, Pretoria East at 08:30.

The record date on which shareholders must be recorded as such in the Company’s share register
maintained by the transfer secretaries in order to be entitled to attend and vote at the annual general
meeting is Friday, 20 May 2016. The last day to trade in order to be recorded on the register on the
record date is Friday, 13 May 2016



For and on behalf of the Board
E Engelbrecht
Pretoria
31 March 2016

Directors: RJ Connellan* (Chairman), KA Rayner*, BR Topham*. (* Independent Non-Executives), E
Engelbrecht (Chief Executive Officer), TP Gregory (Chief Operating Officer), B Shanahan (Financial
Director),

Company Secretary: Timbavati Business Consultants represented by HJ van der Merwe

Registered Office: Acacia House, Green Hill Village Office Park, on Lynnwood, Cnr Botterklapper and
Nentabos Street, The Willows, Pretoria East, PO Box 39660, Garsfontein East 0060

Transfer Secretaries: Computershare Investor Services Proprietary Limited, (Registration number
2004/003647/07), Ground Floor, 70 Marshall Street, Johannesburg, 2001, (PO Box 61051,
Marshalltown, 2107)

Auditors: Nexia SAB&T Inc.

Sponsor: Questco (Pty) Ltd
Date: 01/04/2016 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
 the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct, 
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
 information disseminated through SENS.

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