Wrap Text
Unaudited summary consolidated results for the six months ended 29 February 2016
PURPLE GROUP LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1998/013637/06) - Share code: PPE - ISIN: ZAE000185526 - ("Purple Group" or "the Company" or "the Group")
REVENUE
4.6% up
R65.5
MILLION
HY 2015:
R62.6 MILLION
CLIENT FUNDS
46.3% up
R1.158
BILLION
EASY-
EQUITIES’
PARTNER’S
CLIENT FUNDS
R23.1
MILLION
HY 2015:
ZERO
ACTIVE
CLIENTS
101.6% up
EARNINGS
AND HEADLINE
EARNINGS PER
SHARE (CENTS)
35.5% down
1.29
FY 2015:
2.00
CAPITAL
DISTRIBUTION TO
SHAREHOLDERS
0.65
CENTS
HY 2015:
DIVIDEND OF
1.00 CENT
UNAUDITED SUMMARY CONSOLIDATED RESULTS
FOR THE SIX MONTHS ENDED 29 FEBRUARY 2016
CHAIRMAN’S LETTER
After so many years of conserving capital and restrained growth the Purple Group
is back into expansion mode. Investments already made across the board in people,
systems and technology, and new product development have moved us up a notch in
the markets we chose to operate in.
The expanded client base and investment and trading entry points into Purple Group
will naturally introduce the opportunity for partnerships and alliances, where these
make short-term and strategic sense we will maintain an open mind to explore them.
In order to take up my role as CEO of the South African Post Office I stepped aside
from executive responsibilities in Purple Group. I do however remain Chairman, albeit
non-executive, and a major shareholder.
Of course I’m still involved, but I have the fullest confidence in Charles, Gary and their
executive team to continue Purple Group’s growth path. In practice, they have been
running the day-to-day business for some time now, although I’ve always been in the
room. I will still play a role in doing deals and in client and shareholder relationships,
but "the green shoots of future earnings growth" referred to in the CEO’s letter are
products of their intellect and energy, not mine – they have my full support going
forward.
Mark Barnes
Chairman
CHIEF EXECUTIVE OFFICER’S LETTER
"As a group, making correct choices means ensuring that we strike the right balance
of growth, income and investment; that we partner the best opportunities into the
right places and that we grow our people, remaining focused on making things #easy."
This quote was taken from my CEO’s letter in our most recent full year results. It
hinted at a future that required the Purple Group to balance income statement growth,
returns and dividends against investing in partnership opportunities, people, projects
and marketing initiatives that would support the future growth aspirations of the
group. We are always mindful of the need to build out our client assets and further our
strategic positioning of making investing #easy for everyone.
In this regard we have done well. We are a small team with limited financial and human
capital resources and so it’s even more important that our initiatives and investments
deliver the desired results.
Modest Group Revenue growth of 4.6% was a solid result, market conditions were
tough and an increased focus on future growth initiatives meant that we certainly left
some revenue on the table. However, I am comfortable that we made the right choices
and have every confidence that we can make up the difference in the periods ahead.
Partnering Satrix and launching SatrixNow (www.SatrixNow.co.za) in December 2015
was one such notable future growth initiative. The partnership firmly entrenches
EasyEquites in the fastest growing sector of the JSE, exchange traded funds (ETFs),
and with anticipated growth in this sector not expected to slow down anytime soon it
was important for us to partner the leading provider of ETFs in South Africa.
Partnership is a critical aspect of our future growth strategy and whilst this won’t
return markedly to our income statement in the short term, there is no doubt that
it will deliver handsomely into the future. EasyEquities is well positioned to partner
the Purple Group into other opportunities and it’s really a case of choosing the right
partners, who share our #easy vision.
In Satrix we found a shared vision and common purpose that made the decision easy.
We are very proud to be their partner and grateful for their support. Satrix CEO, Helena
Conradie, had this to say in their SatrixNOW media launch.
"We looked at the different technologies and options that are out there, and even
considered building our own platform," Conradie says. "But EasyEquities is just really
attractive in terms of making it easy for people to save money. They won by far."
The decline in Purple Group’s earnings by 35.5% should be seen in context. The
Group CFO review below should provide you with adequate insights into the increased
expenditure that primarily drove the earnings result.
The ultimate test of whether this increased expenditure is delivering the desired
outcomes, if not in the income statement for now, must lie in our client assets and
acquisition rates. These are the true valuation metrics, over time.
Client funds have increased by a strong 46.3%, for the first time breaching the
R1 billion mark at R1.158 billion and active client accounts posted triple digit growth
of 101.6% over the respective reporting periods.
Returning to my opening quote and in context of my letter and the CFO’s review, I hope
that like me you share my excitement for the future prospects of the Purple Group.
As always I would like to reaffirm my gratitude to #TeamPurple and its shareholders
for their ongoing efforts and support. Congratulations on posting a solid set of interim
results. Whilst the magic that is so apparent in our work environment may not yet be
obvious in our income statement, the green shoots of future earnings growth are clear
and the Purple Group continues to strengthen its foundations and build out a market
leading Fintech position.
Charles Savage
Group CEO
CHIEF FINANCIAL OFFICER’S REVIEW
REVENUE
Total Revenue increased by 4.6% during the six months ended 29 February 2016
(HY 2016), compared to the prior comparative period (HY 2015).
GT247.com
Key revenue drivers HY 2016 HY 2015 % move
Revenue (R'000) 50 366 48 370 4.1
Nominal traded (R'bn) 178.9 156.3 14.5
Market volatility 20.2 16.1 25.5
A 25.5% increase in market volatility during HY 2016 resulted in a commensurate
increase of 14.5% in the nominal value traded by our clients. This translated into a
4.1% increase in revenue. This further increase in revenue was offset by a reduction in
commission rates during January 2015, which is consistent with our strategy to be the
lowest cost retail broker in South Africa.
A primary driver of growth over the same period last year was our asset management
execution business. Market conditions over this period resulted in growth being muted
for this revenue stream, however, we expect this line of business to return to strong
growth as soon as investing conditions improve.
GT Private Broking (GTPB)
Key revenue drivers HY 2016 HY 2015 % move
Revenue (R'000) 9 716 10 825 (10.2)
Nominal traded (R'bn) 27.6 15.3 80.4
Client funds (R'm) 104.8 152.2 (31.1)
Market volatility 20.2 16.1 25.5
Revenue decreased by 10.2% mainly due to a 31.1% decrease in client funds during
the year, which was partially offset by increased trading activity. The decrease in client
funds was primarily driven by difficult trading conditions over the period.
EasyEquities
Key revenue drivers HY 2016 HY 2015 % move
Net trading income/(expense) (R'000) 1 578 (1 148) 237.5
Accounts opened 19 653 4 086 381.0
Client funds (R’m) 480.1 62.1 673.1
EasyEquities has started to make a positive contribution to net revenue, having
generated R1.6 million in net revenue for HY 2016, compared to a loss of R1.1 million
realised during HY 2015.
Accounts opened at 29 February 2016 (16 months since launch) totalled, 19 653
accounts with assets totalling R480.1 million (excluding SatrixNOW).
The primary drivers of this growth were our direct marketing activities (PR, online and
billboards) (42.82%) and referrals (friends and affiliates) (48.9%).
Emperor Asset Management (EAM)
Key revenue drivers HY 2016 HY 2015 % move
Management fees (R'000) 2 097 1 661 26.2
Performance fees (R'000) 1 727 2 914 (40.7)
Total revenue (R’000) 3 824 4 575 (16.4)
Client funds (R'm) 523.1 522.2 0.2
Total asset management fees decreased by 16.4% during HY 2016 compared to
HY 2015, due to lower performance fees earned.
The decline in performance fees was mostly attributable to the underperformance,
relative to its benchmark, experienced by our largest and flagship Robert Falcon Scott
strategy. Whilst underperformance, over the short term, is an observed outcome of our
Momentum-based strategy, our 10 year-plus, track record gives us every confidence
that the strategy will return to benchmark beating performance.
In contrast, our Unit Trust (Emperor IP Momentum Equity Fund) and Hedge Fund
(Emperor Long/Short Hedge Fund) both ranked in the top 5, in South Africa, in their
respective sectors over the 12 months ended 31 December 2015.
TRADING EXPENSES
Trading expenses, comprising introducing agent commissions, sales commissions
and third-party research costs, amounted to 9.7% (HY 2015 – 8.1%) of revenue. The
increase is primarily due to a new research offering introduced by GT Private Broking
to its client base during the last 12 months. The utilisation of this research is being
monitored in order to assess the benefits thereof to our clients and the business.
OPERATING EXPENSES
Operating expenses (R’000) HY 2016 HY 2015 % move
Employment costs 21 029 15 732 33.7
IT costs 7 521 6 502 15.7
Marketing 4 255 3 565 19.4
Office costs 3 534 2 929 20.7
Professional fees 2 443 2 826 (13.6)
Other 2 222 2 804 (20.8)
Total 41 004 34 358 19.3
Operating expenses increased by 19.3% during HY 2016 compared to HY 2015.
Employment, IT and marketing costs were the main contributors to this increase.
The increase in employment and marketing costs reflect the investment that the
business has made in order to achieve its future growth ambitions. The majority of
the increase in these expenses has been directed at the front end of the business,
increasing our brand awareness in the market and increasing our sales, customer
service and marketing resources.
IT costs primarily include hosting and connectivity fees, various data-feed expenses
and licensing costs. The 15.7% increase during HY 2016 compared to HY 2015 included
an inflationary increase from various service providers, the impact of the depreciating
Rand on the cost of our Bloomberg and Reuters data feeds and various other IT
solutions and systems sourced from foreign suppliers. In addition, our hosting fees
increased with the launch of EasyEquities, and increased capacity required to cater for
future growth in our asset management business.
EBITDA
Earnings before interest, taxation, depreciation and amortisation from core operations
decreased by 26.6% to R18.4 million for the six months ended 29 February 2016
compared to the prior year comparatives.
Net Interest Expense
The increase in the net interest expense is attributable to the additional funding
facilities secured to part fund Purple Group’s R26 million direct investment in Real
People Investment Holdings (RPIH) during January 2015.
Depreciation and Amortisation
Depreciation and amortisation costs increased due to various new product development
costs being capitalised during the year, mainly comprising IT development expenses in
respect of the EasyEquities platform.
Current and Deferred Tax
The tax debit of R4.9 million for HY 2016 mainly comprises current tax paid by First
World Trader Proprietary Limited in respect of current year profits.
Profit for the Period
Basic earnings and Headline earnings per share for HY 2016 have decreased from a
profit of 2.00 cents in HY 2015 to a profit of 1.29 cents per share for HY 2016.
Summarised Consolidated Statement of Financial Position
Non-current assets increased by R34.7 million during HY 2016 mainly comprising the
write-up of Purple Group’s direct investment in RPIH.
The increase in non-current liabilities is due to the provision raised for the financial
guarantee in respect of Purple Group’s indirect investment in RPIH through
Blockbuster Trading.
The decrease in current assets of R184.0 million was matched by a corresponding
decrease in current liabilities of R194.9 million.
The equity attributable to owners increased by R2.9 million (during HY 2016), after
payment of capital distributions totalling R10.8 million, and an increase in capital
reserves of R0.9 million, resulting from staff exercising share options during HY 2016.
Gary van Dyk
Chief Financial and Operations Officer
OPERATING SEGMENTS
The operating segments are distinguished by the type of business and the management team
responsible for the business unit. The Group comprises the following operating segments:
-GT247.com and Emperor Asset Management (EAM) which includes GT Private Broking, EasyEquities
and EAM: are the derivatives trading, equity brokerage and asset management operations of the
Group;
-Purple Group: manages the treasury and risk for the Group companies and is the Group’s head
office;
-Investments: fees and dividends earned on investments and fair value adjustments made against
them.
GT247.com Purple
and EAM Group Investments Total
R’000 R’000 R’000 R’000
As at 29 February 2016
Segment asset
Non-current assets 13 173 230 830 57 664 301 667
Current assets 113 099 471 6 348 119 918
Total assets 126 272 231 301 64 012 421 585
Segment liabilities
Non-current liabilities – – (31 058) (31 058)
Current liabilities (113 429) (8 643) – (122 072)
Total liabilities (113 429) (8 643) (31 058) (153 130)
There are no unallocated amounts. The only material inter-segment revenue is the management fees
that Purple Group charged First World Trader Proprietary Limited of R1.7 million (HY 2015: R2.0 million)
for the year.
Inter-
GT247.com Purple segment
and EAM Group Investments revenues Total
R’000 R’000 R’000 R’000 R’000
For the six months ended
29 February 2016
Revenue 65 484 1 731 – (1 731) 65 484
Trading expenses (6 325) – – – (6 325)
Operating expenses* (38 987) (3 748) – 1 731 (41 004)
Net income/(loss) 20 172 (2 017) – – 18 155
Other income 197 – – – 197
Earnings/(loss) before interest,
depreciation and amortisation 20 369 (2 017) – – 18 352
Interest expense (64) (468) – – (532)
Depreciation and amortisation (1 815) – – – (1 815)
Profit/(loss) before tax 18 490 (2 485) – – 16 005
Current and deferred tax (5 534) 679 – – (4 855)
Profit/(loss) after tax 12 956 (1 806) – – 11 150
*Share-based payment expense of R1 770 000 is included in operating expenses. The split per segment
is as follows:
-GT247.com and EAM: R1 526 000
-Purple Group: R244 000
Inter-
GT247.com Purple segment
and EAM Group Investments revenues Total
R’000 R’000 R’000 R’000 R’000
For the six months ended
28 February 2015
Revenue 62 622 2 032 – (2 032) 62 622
Trading expenses (5 087) – – – (5 087)
Operating expenses* (32 947) (3 443) – 2 032 (34 358)
Net income/(loss) 24 588 (1 411) – – 23 177
Other income 1 810 – – – 1 810
Earnings/(loss) before interest,
depreciation and amortisation 26 398 (1 411) – – 24 987
Interest expense (94) (290) – – (384)
Depreciation and amortisation (955) (2) – – (957)
Profit/(loss) before tax 25 349 (1 703) – – 23 646
Current and deferred tax (7 795) 419 – – (7 376)
Profit/(loss) after tax 17 554 (1 284) – – 16 270
*Share-based payment expense of R1 256 000 is included in operating expenses. The split per segment
is as follows:
-GT247.com and EAM: R1 016 000
-Purple Group: R240 000
SUBSEQUENT EVENTS
The directors are not aware of any other matter or circumstances arising since 29 February 2016 up to
the date of this announcement, not otherwise dealt with in this announcement.
Basis of preparation of the unaudited results
The unaudited condensed group interim financial statements are prepared in accordance with the
recognition and measurement requirements of International Financial Reporting Standards ("IFRS"),
the presentation and disclosure requirements of IAS 34 - Interim Financial Reporting, the SAICA
Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Reporting
Pronouncements as issued by the Financial Reporting Standards Council, the Listing Requirements of
the JSE Limited and in the manner required by the South African Companies Act 71 of 2008.
This announcement does not include the information required pursuant to paragraph 16A(j) of IAS 34,
however the areas that include significant judgements made by management in applying the Group’s
accounting policies and key sources of estimation uncertainty were the same as those that were
identified in the audited consolidated annual financial statements as at and for the year ended
31 August 2015, and which are available on the company’s website, at its registered office and
upon request.
Accounting policies which comply with IFRS have been applied consistently by all entities in the
group and are consistent with those applied in the previous financial year. The preparation of these
unaudited condensed group interim financial statements for the six months ended 29 February 2016
was supervised by the Financial Director, Gary van Dyk CA (SA).
Any forward looking statements contained in this announcement have not been reviewed or reported
on by the Company’s auditors.
Capital distribution out of share premium in lieu of a dividend
The directors declared a capital distribution out of share premium, by way of a
reduction of contributed capital of 1.25 (one point two five) cents per share, in lieu
of a dividend, paid on 30 November 2015 to ordinary shareholders recorded in the
Company’s register at the close of business on 27 November 2015.
In respect of the six months ended 29 February 2016, the directors resolved
that a capital distribution of 0.65 (zero point six five) cents per share be paid
to shareholders, by way of a reduction of share premium on 25 April 2016.
The proposed distribution is payable to all shareholders on the Register of
Members on 22 April 2016. The total estimated capital distribution to be paid
is R5.6 million. The payment will not have any tax consequences for the Group.
As this capital distribution was declared after the reporting date, it will only be
accounted for in the full year results for the year ending 31 August 2016, which
would result in a R5.6 million decrease in share premium.
Please refer to the announcement released on SENS on 1 April 2016 for the
salient dates for the payment of the capital distribution.
On behalf of the board
Mark Barnes (Non-Executive Chairman)
Charles Savage (Chief Executive Officer)
Gary van Dyk (Chief Financial and Operations Officer)
Johannesburg
31 March 2016
CONDENSED GROUP STATEMENT OF FINANCIAL POSITION
as at 29 February 2016
Audited
Unaudited Unaudited twelve
six months six months months
29 February 28 February 31 August
2016 2015 2015
R’000 R’000 R’000
ASSETS
Equipment 4 336 2 819 2 828
Intangible assets and goodwill 210 889 208 007 209 637
Other investments 57 664 25 999 57 556
Other financial assets 932 740 3 170
Deferred tax assets 27 846 29 375 28 275
Total non-current assets 301 667 266 940 301 466
Trade and other receivables 11 112 10 262 7 479
Other investments 6 348 – 6 233
Other financial assets 1 834 – 137
Cash and cash equivalents 100 624 293 610 272 352
Total current assets 119 918 303 872 286 201
Total assets 421 585 570 812 587 667
EQUITY AND LIABILITIES
Share capital and premium 451 769 450 474 461 720
Accumulated loss (203 434) (216 994) (212 454)
Other reserves 20 120 20 370 16 251
Equity attributable to owners 268 455 253 850 265 517
Financial guarantee 31 058 – 31 058
Total non-current liabilities 31 058 – 31 058
Bank overdraft 9 147 22 846 9 851
Tax payable 1 621 6 150 844
Trade and other payables 111 304 287 966 280 397
Total current liabilities 122 072 316 962 291 092
Total equity and liabilities 421 585 570 812 587 667
Net asset value per ordinary share
(cents) 31.06 31.12 30.86
CONDENSED GROUP STATEMENT OF PROFIT AND LOSS
for the six months ended 29 February 2016
Audited
Unaudited Unaudited twelve
Change six months six months months
2015 to 29 February 28 February 31 August
2016 2016 2015 2015
% R’000 R’000 R’000
Revenue 4.6 65 484 62 622 131 433
Trading expenses 24.3 (6 325) (5 087) (10 231)
Operating expenses 19.3 (41 004) (34 358) (76 676)
Net income (21.7) 18 155 23 177 44 526
Other income (89.1) 197 1 810 554
Earnings before interest,
depreciation and
amortisation (26.6) 18 352 24 987 45 080
Interest expense (532) (384) (1 043)
Depreciation and
amortisation (1 815) (957) (2 265)
Profit before fair value,
impairment adjustments
and tax (32.3) 16 005 23 646 41 772
Fair value, impairments
and guarantee
adjustments – – 499
Profit before tax (32.3) 16 005 23 646 42 271
Current and deferred tax (4 855) (7 376) (12 833)
Profit for the period (31.5) 11 150 16 270 29 438
Audited
Unaudited Unaudited twelve
Change six months six months months
2015 to 29 February 28 February 31 August
2016 2016 2015 2015
% R’000 R’000 R’000
Profit attributable to:
Owners of the company 11 150 16 270 29 438
Non-controlling interest – – –
11 150 16 270 29 438
Weighted number of
shares in issue at end
of period (’000) 861 282 815 576 839 121
Earnings per share
Basic earnings per
share (cents) (35.5) 1.29 2.00 3.51
Diluted earnings per
share (cents) (33.0) 1.22 1.82 3.38
Headline earnings
Profit for the period 11 150 16 270 29 438
Headline profit for the
period 11 150 16 270 29 438
Headline earnings per share
(cents) (35.5) 1.29 2.00 3.51
Diluted headline earnings per
share (cents) (33.0) 1.22 1.82 3.38
CONDENSED GROUP STATEMENT OF OTHER COMPREHENSIVE INCOME
for the six months ended 29 February 2016
Audited
Unaudited Unaudited twelve
six months six months months
29 February 28 February 31 August
2016 2015 2015
R’000 R’000 R’000
Profit for the period 11 150 16 270 29 438
Other comprehensive income
Items that may be reclassified
subsequently to profit/loss
Foreign currency translation reserve (31) (145) (623)
Total comprehensive income 11 119 16 125 28 815
Total comprehensive income
attributable to:
Owners of the Company 11 119 16 125 28 815
Non-controlling interest – – –
11 119 16 125 28 815
CONDENSED GROUP STATEMENT OF CASH FLOWS
for the six months ended 29 February 2016
Audited
Unaudited Unaudited twelve
six months six months months
29 February 28 February 31 August
2016 2015 2015
R’000 R’000 R’000
Cash flow (utilised in)/generated by
operating activities (156 498) 178 017 161 349
Cash flows utilised in investing
activities (4 575) (26 571) (32 509)
Cash flows (utilised in)/generated by
financing activities (9 951) (12 044) 2 299
Net (decrease)/increase in cash
and cash equivalents (171 024) 139 402 131 139
Cash and cash equivalents at the
beginning of the period 262 501 131 362 131 362
Cash and cash equivalents at the end
of the period 91 477 270 764 262 501
CONDENSED GROUP STATEMENT OF CHANGES IN EQUITY
for the six months ended 29 February 2016
Audited
Unaudited Unaudited twelve
six months six months months
29 February 28 February 31 August
2016 2015 2015
R’000 R’000 R’000
Balance at beginning of the period 265 517 244 699 244 699
Shares issued 857 – 6 142
Profit for the period 11 150 16 270 29 438
Share-based payments 1 770 1 256 2 719
Foreign currency translation reserve (31) (145) (623)
Dividend payment – – (8 628)
Capital distribution (10 808) (8 230) (8 230)
268 455 253 850 265 517
Registered office
Block B, The Offices of Hyde Park, Strouthos Place, Hyde Park, 2196
Independent auditors
BDO South Africa Incorporated
Chartered Accountants (SA)
Registered Auditors
22 Wellington Road, Parktown, 2193, Private Bag X60500, Houghton, 2041
Group secretary
Trifecta Statutory and Governance Services, a division of Trifecta Capital Services Proprietary Limited
31 Beacon Road, Florida North, 1709
Sponsor
Deloitte & Touche Sponsor Services Proprietary Limited
Building 8, Deloitte Place, The Woodlands, 20 Woodlands Drive, Woodmead, 2196
Private Bag X6, Gallo Manor, 2052
Directors
Mark Barnes Non-executive Chairman
Charles Savage Chief Executive Officer
Gary van Dyk Chief Financial and Operations Officer
Dennis Alter Non-executive Director
Craig Carter Independent Non-executive Director
Thembeka Gwagwa Independent Non-executive Director
Ronnie Lubner Non-executive Director
These unaudited results are available on the Company’s website:
www.purplegroup.co.za
Date: 01/04/2016 09:15:00 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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