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ECSPONENT LIMITED - Category 2 disposal, update on the acquisition of Ecsponent Investment Holdings (Pty) Ltd and trading statement

Release Date: 05/07/2016 17:47
Code(s): ECS     PDF:  
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Category 2 disposal, update on the acquisition of Ecsponent Investment Holdings (Pty) Ltd and trading statement

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


Category 2 disposal, update on the acquisition of Ecsponent Investment Holdings (Pty) Ltd
and trading statement for the six months ended 30 June 2016

1. Category 2 disposal

1.1. Introduction

Shareholders are advised that Ecsponent has entered into an agreement with Virtual Shared Services
Proprietary Limited (“VSS”) for the disposal of its entire 51% interest in Ligagu Investment Proprietary
Limited, trading as GetBucks Swaziland (“Ligagu”) to VSS for a total consideration of R16 million, to be
settled in cash in twelve equal instalments, with the first instalment due on 31 July 2016 (“the
Transaction”). The outstanding purchase consideration will accrue interest at a rate of 11.5% from the
effective date (as detailed below) and will be payable together with the monthly instalment, comprising
12 instalments of R1 417 841 each.

1.2. Description of the business of Ligagu

Ligagu provides retail credit loans to individuals secured by payroll deductions.

1.3. Rationale for the Transaction

The board of directors of Ecsponent (“the Board”) has determined that Ligagu does not realise the
return expected by the Ecsponent group (“the Group”) and accordingly has become non-core to the
Group.

1.4. Financial information

The audited net asset value of Ligagu as at 31 December 2015 was R972 230 (51%: R495 837),
applying the Swazi Lilangeni (“SZL”) : Rand exchange rate of 0.99865 as at 31 December 2015.

For the 12 months to 31 December 2015, Ligagu generated profits after tax of R 1 081 962 (51%: R551
801), applying the average SZL : Rand exchange rate over the 12 months to 31 December 2015 of
0.9472.

1.5. Application of the sale proceeds by Ecsponent

Ecsponent intends to re-invest the proceeds received pursuant to the Transaction into Group assets
and working capital.

1.6. Conditions precedent to the Transaction and effective date

The Transaction is not subject to any conditions precedent and has an effective date of 30 June 2016.
The Transaction is a Category 2 transaction in terms of the JSE Listings Requirements and accordingly
no shareholder approval is required.

2. Update in respect of the EIH Transaction

Shareholders are referred to an announcement, dated 1 December 2015, the circular to shareholders
dated 31 March 2016 (“the Circular”) and the subsequent announcement dated 12 May 2016, in terms
of which shareholders were advised that Ecsponent Development Fund Proprietary Limited (“ECS
Developments”), a 74% owned subsidiary of the Company, agreed to acquire the business conducted
by Ecsponent Investment Holdings Proprietary Limited (“EIH”) as a going concern (“the EIH
Transaction”).

The EIH Transaction was approved by the requisite number of shareholders at a general meeting held
on 3 May 2016 and became effective on 30 June 2016.

As disclosed in the Circular, parties to the EIH Transaction agreed, inter alia, that the collective value
(being the outstanding balance on capital, interest and administration costs) (the “Debt Balance”) of the
debt portfolio (“Debt Portfolio”) included in the EIH business would be at least R75 000 000 as at the
effective date of the EIH Transaction (the “Receivable Warranty”), providing a maximum purchase
consideration of R200 million. However, should the resultant Debt Balance be more than 5% below the
Receivable Warranty (“95% Threshold”), a downward purchase price adjustment (as set out in the
Circular), in favour of ECS Developments, would be applicable.

Shareholders are hereby advised that, as at 30 June 2016, the Debt Balance was R44.6 million and
accordingly a purchase price adjustment in the amount of R81 million, in favour of ECS Developments,
will be applicable, resulting in the purchase consideration being R119 million.

3. Trading Statement

In terms of the JSE Listings Requirements the Board wishes to advise shareholders that it is reasonably
certain that, when compared with the published results for the period ending 30 June 2015
(“Comparative Period”), for the period ending 30 June 2016:

-    Earnings per share (“EPS”) are expected to increase by a minimum of 20%, resulting in a minimum
     EPS of 2.114 cents per share, as compared to the EPS of 1.762 cents per share for the
     Comparative Period; and

-    Headline earnings per share (“HEPS”) are expected to decrease by a minimum of 45%, resulting
     in a maximum HEPS of 1.017 cents per share, as compared to the restated* HEPS of 1.849 cents
     per share for Comparative Period.

* Shareholders are referred to the announcement dated 31 March 2016 which contained details of the
restatement.

The financial information on which this trading statement is based has not been reviewed or reported
on by the Company’s external auditors.

An updated trading statement will be released as soon as the Board has a greater degree of certainty
in respect of the above.


5 July 2016

Pretoria


Sponsor

Questco (Pty) Ltd

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