Wrap Text
Condensed Consolidated Reviewed Interim Results for the 6 months ended 30 June 2016
ECSPONENT LIMITED
Incorporated in the Republic of South Africa
Registration number: 1998/013215/06
JSE Code: ECS - ISIN: ZAE000179594
(“the Company” or “Ecsponent”)
Condensed Consolidated Reviewed Interim Results for the 6 months ended 30 June 2016
The Board of Directors is pleased to advise shareholders of continued exponential growth of
Ecsponent and its subsidiaries (“the Group”) as reflected in further improved, consolidated
results for the 6 months ended 30 June 2016.
Ecsponent increased its strategic focus on selected markets during the first half of the 2016 financial
year by effecting further investments in niche financial services companies. Assets which have clear
African and Global market application have received priority. The directors envisage that this expansion
strategy will be further refined in order to dominate niche sectors of the markets in which the Group
operates.
RESULTS HIGHLIGHTS
The access to capital through the issue of preference shares resulted in continued improvement in the
Group’s performance and generated increased returns for the 6 months ended 30 June 2016. Highlights
of the Group’s 2016 interim results compared to the 2015 interim results are set out below:
- Total revenue increased by 74.7% to R116.7 million compared to R66.8 million;
- Gross profits increased by 97.8% to R95.8 million compared to R48.4 million;
- Operating profits increased by 166.7% to R58.4 million compared to R21.9 million;
- Profits before tax increased by 61.5% to R28.5 million compared to R17.7 million;
- Current assets increased by 265.3% to R652 9 million compared to R178.7 million;
- Total assets increased by 163.6% to R777.1 million compared to R294.8 million; and
- Resultant earnings per share (“EPS”) increased by 26.3% to 2.23 cents per share compared to1.76
cents per share.
The EPS increase unfortunately did not flow through to headline earnings per share (“HEPS”) as a
result of IFRS categorisation. In the comparative period for 2015 the benefit on the disposal of the
financial asset was categorised under IFRS 39 and therefore included in the calculation of HEPS while
the disposal of the Swaziland retail credit business during the period under review was categorised
under IFRS 10 and is therefore excluded from the HEPS calculation.
External revenue generated by the Group’s financial services operations increased by 238.2% to
R85.9 million compared to R25.4 million, comprising 73.6% of total revenue in the 2016 interim results.
Funding for the Group’s expansion strategy continues to be facilitated through Ecsponent’s preference
share programme, enabling the Company to raise capital to fund investments on an ongoing basis.
Continued market subscriptions of preference shares have been very encouraging and the Company
has raised approximately R441 million through Preference Shares issues since implementation in
September 2014.
OPERATIONAL REVIEW
Group overview
Below is an overview of the Group’s operations during the first half of the 2016 financial year.
Financial Services SA
The period under review highlighted the Group’s successful shift in the provision of secured credit to
small medium enterprises (“SME”). The comparative period to June 2015 reflects a predominantly retail,
unsecured employee benefits credit business. The strategy to focus predominantly on enterprise
finance and the provision of credit to specific niche market SME’s has realised immediate improvement
in the Group’s results.
The Group’s financial services operations continued their exponential growth during the period. Total
assets increased by 98.1% to R706 million while revenue increased by 378% to R142.6 million, resulting
in an operating profit increase of 296.2% to R92.7 million.
The demand for credit remains buoyant particularly in the enterprise development sector. The South
African financial services operation has begun to make significant inroads in this high demand sector.
In addition, the Group’s securitisation policy provides a competitive edge in unlocking value for all
stakeholders in the chain.
The Sanceda Collections operations have expanded their footprint to include both Botswana and
Swaziland and the start-up costs of these operations have been expensed by the businesses for the
period under review. Both of the new operations have concluded agreements for third party collections
with large blue chip multinational companies. The benefits of the various contracts will begin to be
realised in the balance of the financial year and beyond.
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
company in those countries 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. In addition to employee benefits Ecsponent
Botswana provides both enterprise and SME credit on a secured basis to qualifying clients.
The performance of the Botswana operations reflected a continued steady improvement compared to
the half year ended June 2015. Botswana grew revenue by 51% to R23.2 million, total assets increased
by 21.3% to R126.2 million, and operating profits increased by 164.8% to R10.9 million.
The growth in the Botswana economy, stability of the currency and demand for credit continues to drive
growth of the Ecsponent operation in the territory. The directors are confident that the growth will
continue.
Swaziland
The Swaziland operation includes capital raising opportunities which mirror the South African process
and provides ongoing liquidity to the country’s credit operations which includes consumer credit,
enterprise and SME finance.
The country has ambitious goals which are targeted to be realised by 2022 and which require significant
development in the country’s SME sector. The directors believe that the Group is perfectly positioned
to provide funding and services in support of the country’s objectives.
The period under review witnessed the initiation of the roll out of the Group’s enterprise finance model
in Swaziland. A co-operation agreement has been entered into with the Federation of the Swaziland
Business Community in order to gauge demand for enterprise development services in Swaziland. The
evaluation is well advanced and the Company will shortly be engaging the local regulator to facilitate
implementation.
Consequent to the strategy deployed in South Africa the Group has disposed of its interests in the
strategic alliance with GetBucks. The Group continues to provide SME credit to GetBucks on a secured
basis. The proceeds from the sale will be deployed in the provision of SME and enterprise credit.
The performance of the Swaziland operations reflect a steady improvement compared to the 2015
interim results. Swaziland grew revenue by 209.2% to R16.4 million whilst operating profits increased
by 1401.8% to R7.4 million. The company has a liability of R57.9 million to preference share investors
in Swaziland.
The directors have confidence that the business will continue to grow.
Zambia
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 Group’s products are likely to be profitable
and successful.
The Group has a Tier 2 Deposit Taking Licence regulated by the Bank of Zambia and the operations
are directed from the head office situated in Lusaka.
The country has been depressed by the dramatic reduction in international commodity prices/demand
and has also suffered significant currency fluctuation depressing both investments and business
confidence. The Group has delayed its normally bold start up planning as a result of the uncertain
business climate.
Although in its infancy Ecsponent Zambia has begun providing credit to SME enterprises that qualify,
as well as enterprise finance for secured transactions. The directors are confident that the Zambian
operations will provide profitable future returns to the Group.
Private Equity
Biotechnology
The biotechnology sector is directly linked to the fluctuations in the international economy and margins
remain under pressure. During the period under review the Group has continued to protect its market
share and is bullish about prospects for the future.
The Group’s biotechnology operations have had an exciting half year which realised the development
of a new and extensive range of products to complement the existing cord blood and tissue stem cell
products. Development is now complete and commercialisation has begun. In order to reduce
overheads and align the operations with the new strategy the underlying company infrastructures have
been rationalised and the benefits from these developments will begin to be realised during the second
half of the year.
The contracts with pharmaceutical and medical aid companies concluded by both Cryo-Save and
Salveo have begun to translate into sales and this is anticipated to ramp up during the second half of
the year. Further channels to market are being negotiated by management and these are anticipated
to be realised in the near future.
As per the Group’s policy, the development costs of all the new ventures have been expensed and are
included in the operating results.
PROSPECTS
Key elements of the on-going expansion strategy are:
• the continued investment in the credit operations of the Group;
• the continued growth of underlying assets through product and market extension;
• the focus on core businesses;
• aggressive trading and cost rationalisation/reduction; and
• increased emphasis on high yield private equity opportunities.
The abovementioned approach is aimed at the continued development of a robust and complementary
financial services Group which provides sustainable returns.
FINANCIAL RESULTS
Presented below are the reviewed condensed consolidated financial statements for the 6 months ended
30 June 2016.
Condensed Consolidated Interim Statement of Financial Position as at 30 June 2016
Reviewed Unaudited Audited
30 June 30 June 31 December
2016 2015 2015
Group Group Group
R’000 R’000 R’000
ASSETS
Non-current assets
Property, plant and equipment 10 567 8 200 8 475
Intangible assets and Goodwill 20 131 5 909 8 557
Investment in associates - 5 097 -
Other financial assets 70 980 78 553 98 066
Deferred tax 18 150 16 048 12 191
Other non-current receivables 4 314 2 279 3 127
Current assets
Inventories 2 045 918 1 819
Other financial assets 509 455 136 090 278 450
Trade and other receivables 100 401 31 121 40 379
Current tax payable 88 - -
Cash and cash equivalents 40 936 10 594 15 115
TOTAL ASSETS 777 067 294 809 466 179
EQUITY AND LIABILITIES
Equity 47 322 72 475 78 191
Non-controlling interest (26 569) (5 215) (4 653)
Non-current liabilities
Other financial liabilities 517 441 159 270 324 840
Deferred revenue 11 396 - 9 552
Deferred tax 4 232 6 872 5 939
Current liabilities
Other financial liabilities 173 559 19 803 17 259
Deferred revenue 3 513 - 4 144
Current tax payable 15 358 2 107 3 142
Trade and other payables 30 790 31 393 22 391
Bank overdraft 25 8 104 5 374
TOTAL EQUITY AND LIABILITIES 777 067 294 809 466 179
Condensed Consolidated Statement of Profit and Loss and Other Comprehensive Income for
the interim period ending 30 June 2016
Reviewed Unaudited Audited
6 months 6 months 12 months
ended 30 ended 30 ended 31
June 2016 June 2015 December
Group Group 2015
Group
R’000 R’000
R’000
Revenue 116 704 66 790 159 712
Cost of sales (20 926) (18 374) (27 123)
GROSS PROFIT 95 778 48 416 132 589
Other income 18 543 16 482 21 953
Operating expenses (55 915) (42 998) (107 161)
OPERATING PROFIT 58 406 21 900 47 381
Fair value adjustments - 2 132 5 639
Net finance costs (29 867) (7 174) (27 195)
Income from equity accounted investment - 813 1 742
PROFIT BEFORE TAXATION 28 539 17 671 27 567
Taxation (11 080) (4 418) (7 633)
PROFIT FROM CONTINUING OPERATIONS 17 459 13 253 19 934
Profit from discontinued operations - 579 -
PROFIT FOR THE PERIOD 17 459 13 832 19 934
Other comprehensive income / (loss) 113 (77) (301)
TOTAL COMPREHENSIVE INCOME 17 572 13 755 19 633
Loss attributable to non-controlling interest 2 631 2 053 3 298
TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO 20 203 15 808 22 931
ORDINARY SHAREHOLDERS
Profit attributable to owners of the parent from:
Continuing operations 20 090 15 446 23 359
Discontinued operations - 439 -
20 090 15 885 23 359
Total comprehensive income/(loss) attributable to:
Owners of the parent 20 203 15 808 22 931
Non-controlling interest (2 631) (2 053) (3 298)
17 572 13 755 19 633
Basic and fully diluted earnings per share (cents) from 2.226 1.713 2.591
continuing operations attributable to equity holders of the
parent
Basic and fully diluted earnings / (loss) per share (cents) from - 0.049 -
discontinued operations attributable to equity holders of the
parent
Basic and fully diluted earnings per share (cents) attributable 2.226 1.762 2.591
to equity holders of the parent
Condensed Statement of Changes in Equity for the 6 months ended 30 June 2016
Share Non-distributable Foreign Common Accumulated Non- Total
capital reserve currency control profit/(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 118 071 3 842 (55) (36 687) (28 505) (3 795) 52 871
2015
Total comprehensive - - (428) - 23 359 (3 298) 19 633
profit for the year
Purchase of non - (3 842) - - 2 435 2 440 1 033
controlling interest
Balance at 1 January 118 071 - (483) (36 687) (2 711) (4 653) 73 537
2016
Issue of shares 5 869 - - - - - 5 869
Business - - - (56 824) (19 400) (76 224)
combinations
Total comprehensive - - 62 - 20 090 (2 580) 17 572
profit for the 6
months
Profit for the 6 - - - - 20 090 (2 631) 17 459
months
Other - - 62 - - 51 113
comprehensive
income
Purchase of non - - - (65) 65 -
controlling interest
Balance at 30 June 123 940 - (421) (93 511) 17 314 (26 568) 20 754
2016
Condensed Consolidated Cash Flow Statement for the 6 months ended 30 June 2016
Reviewed Unaudited Audited
6 months 6 months 12 months
ended ended ended
30 June 30 June 31 Dec
2016 2015 2015
Group Group Group
R’000 R’000 R’000
NET CASH INFLOW FROM OPERATING ACTIVITIES 20 271 (9 085) 1 002
NET CASH OUTFLOW FROM INVESTING ACTIVITIES (211 075) (89 922) (251 845)
NET CASH INFLOW FROM FINANCING ACTIVITIES 222 386 108 403 268 244
Movement in cash and cash equivalents for the period 31 582 9 396 17 401
Cash and cash equivalents at the beginning of the period 9 741 (6 950) (6 950)
Effect of exchange rate movement on cash balances (413) 44 (710)
Cash and cash equivalents at the end of the period 40 910 2 490 9 741
Notes to the Condensed Consolidated Financial statements for the 6 months ended 30 June
2016
ACCOUNTING POLICIES, BASIS OF PREPARATION OF RESULTS AND REVIEW OPINION
The condensed consolidated interim financial statements have been prepared in accordance with
International Financial Reporting Standards (“IFRS”), (IAS) 34 Interim Financial Reporting, 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 of South Africa and the JSE Listings Requirements. The principle accounting
policies applied in the preparation of the condensed consolidated interim financial statements are in
terms of IFRS and are consistent with those applied in the comparative consolidated annual financial
statements.
The results of the Group, were prepared under supervision of the Group’s financial director, Mr B
Shanahan CA (SA).
These interim condensed consolidated financial statements for the period ended 30 June 2016 have
been reviewed by Nexia SAB&T, who expressed an unmodified review conclusion. A copy of the
auditor’s review report is available for inspection at the company’s registered office together with the
interim condensed consolidated financial statements identified in the auditor’s report.
REVIEW OF RESULTS AND FINANCIAL POSITION
The condensed consolidated interim 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
Reviewed Unaudited Audited
30 June 30 June 31 December
2016 2015 2015
BASIC AND HEADLINE EARNINGS R’000 R’ 000 R’ 000
Basic earnings 20 090 15 885 23 359
Headline earnings 8 900 16 670 22 453
Basic and fully diluted earnings per share (cents) attributable 2.226 1.762 2.591
to equity holders of the parent
Headline and fully diluted headline earnings per share 0.986 1.849 2.490
(cents) attributable to equity holders of the parent
Number of shares in issue 930 531 435 901 588 049 901 588 049
Weighted average number of shares 902 676 200 901 588 049 901 588 049
RECONCILIATION BETWEEN BASIC EARNINGS AND
HEADLINE EARNINGS
IAS 33 Basic earnings 20 090 15 885 23 359
IAS 16 (Profit) / Loss on disposal of property plant and (25) - 10
equipment
IAS 38 Impairment of intangible assets - 785 494
IFRS 10 Gain on disposal of subsidiary (11 165) - (1 410)
Headline earnings 8 900 16 670 22 453
ASSET VALUE PER SHARE
30 June 30 June 31 December
2016 2015 2015
R’000 R’ 000 R’ 000
Net asset value 47 322 72 475 78 191
Net tangible asset value 27 190 66 566 69 633
Net asset value per share (cents) 5.24 8.04 8.67
Net tangible asset value per share (cents) 3.01 7.38 7.72
ACQUISITIONS AND DISPOSALS
The board actively investigates acquisition opportunities aimed at improving earnings and cash
generation for the Group.
Return on Innovation (Pty) Ltd (“ROi”)
ROi provides strategic management inputs across all media platforms from the rumblings on social
media, through the wide variety of print media to radio and TV – all managed through one intelligence
platform. The business provides a strategic high ground for its corporate clients. For Ecsponent, this
acquisition is in line with its growth strategy in that ROi is an opportunity that is high tech, offers high
margins, high barriers to entry and can effectively be applied in both a South African as well as in an
international context. The Group concluded an agreement to acquire 51% of the company, effective
1 March 2016. ROi reported sales amounting to R3.3 million, and a loss after tax and contributions
toward group overheads of R977 588 for the interim period ended 30 June 2016.
Fair value of the assets acquired and liabilities assumed are as follows:
2016
R
Property, plant and equipment 3 221 303
Deferred taxation 1 434 674
Trade and other receivables 1 570 226
Cash and cash equivalents 282 528
Other financial liabilities (6 059 728)
Trade and other payables (1 714 290)
Total identifiable net liabilities (1 265 287)
Non-controlling interest 619 991
Common control reserve 2 145 296
Purchase consideration 1 500 000
Ecsponent Development Fund (Pty) Ltd (“ECS Developments”)
ECS Developments, a 74% owned subsidiary of the Company, agreed to acquire the business
conducted by Ecsponent Investment Holdings (Pty) Ltd as a going concern. The business provides high
yielding financing opportunities which offer an attractive proposition for the Company. The Group
concluded an agreement to acquire the business of the company, effective 30 June 2016.
Fair value of the assets acquired and liabilities assumed are as follows:
2016
R
Property, plant and equipment 368 871
Deferred taxation 446 087
Trade and other receivables 44 608 966
Trade and other payables (357 332)
Total identifiable net assets 45 066 592
Non-controlling interest 19 211 569
Common control reserve 54 679 081
Purchase consideration 118 957 242
Clade Investment Management (Pty) Ltd (“Clade”) and its subsidiary
Ecsponent acquired 51% of the ordinary share capital of Clade, which wholly own the shares of
Exchange Trade Fund Ltd, effective 30 June 2016. It has category 2 and 2A investment licences with
the Financial Services Board.
Fair value of the assets acquired and liabilities assumed are as follows:
2016
R
Property, plant and equipment 8 606
Deferred taxation 3 400 896
Trade and other receivables 1 621 142
Cash and cash equivalents 11 453 166
Other financial liabilities (11 452 166)
Trade and other payables (1 608 171)
Bank overdraft (2 360)
Total identifiable net assets 3 421 113
Non-controlling interest (1 676 345)
Intangible assets and goodwill 9 255 232
Purchase consideration 11 000 000
Start-up businesses
The Board of Directors established the following new businesses in line with the expansion strategy:
Ecsponent Asset Management (Pty) Ltd Botswana (“Ecsponent Asset Management”)
Ecsponent Asset Management was awarded a licence to operate as an Investment Company with
Variable Capital (ICVC). Ecsponent through its local holding structures has a 70% interest in this
operation. The Group is currently rolling out products in the sector.
Disposals
Disposal of 51% of Ligagu Investments (Pty) Ltd Swaziland (“Ligagu Investments”)
Ecsponent entered into an agreement to dispose of its 51% shareholding in Ligagu Investments, its
subsidiary in Swaziland providing retail credit loans to individuals. The investment was effectively sold
on 30 June 2016 for a total purchase consideration of R16 million, payable in twelve equal instalments
from 31 July 2016.
Fair value of the assets and liabilities disposed of are as follows:
2016
R
Property, plant and equipment 199 222
Intangible assets 275 321
Deferred taxation 759 219
Other financial assets 29 629 448
Trade and other receivables 751 854
Cash and cash equivalents 2 615 690
Other financial liabilities (19 897 090)
Trade and other payables (9 746 114)
Current tax payable (1 729 620)
Total identifiable net assets 2 857 930
Non-controlling interest (1 245 645)
Net assets derecognised 1 612 285
Profit on disposal 14 387 715
Consideration receivable 16 000 000
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 in 12 equal instalments. The collection books had a carrying value of R8.9
million on the effective date.
OTHER FINANCIAL ASSETS
The other financial asset category incorporates the benefits provided to employees against payroll
facilities contracts, business funding and purchase price repayment facilities. Total other financial
assets increased by 170% compared to the comparative period. Provided below is the detail regarding
the Group’s other financial assets:
Reviewed Unaudited Audited
Group Group Group
30 June 30 June 31 December
2016 2015 2015
R ‘000 R ‘000 R ‘000
At fair value through profit and loss – designated
Acquired debt - 8 981 8 874
Loans and receivables
Employee benefit loans 80 397 54 242 77 645
Secured SME loans 112 377 43 726 73 140
Ecsponent Capital RF Limited 247 082 39 407 134 917
Ecsponent Investment Holdings (Pty) Ltd 114 282 21 987 81 940
Getbucks (Pty) Ltd – purchase price facility 2 571 46 300 -
Virtual Shared Services (Pty) Ltd – purchase price 16 000 - -
facility
Ecsponent Business Finance (Pty) Ltd – purchase price 7 726 - -
facility
TOTAL OTHER FINANCIAL ASSETS 580 435 214 643 376 516
Total included in non-current assets 70 980 105 624 98 066
Total included in current assets 509 455 109 019 278 450
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 again on 15 December 2015. By 30 June 2016 Ecsponent Limited had received subscription
investments of R441 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 326 798 688 485 1 641 290
Issue of preference shares during the year 30 790 319 804 1 414 569
357 588 1 008 289 3 055 859
Weighted average issue price per share 95.33 100.00 100.00
(Rands)
Ecsponent Limited (Swaziland)
Class A Class E
Reported at the beginning of the period 18 058 000 18 174 000
Issue of preference shares during the year 9 158 000 11 910 700
27 216 000 30 084 700
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 14 764 000 2 067 000
Repayment of preference shares during the year (1 014 000) -
13 750 000 2 067 000
Weighted average issue price per share (Pula) 1.00 1.00
Weighted average issue price per share (Rand) 1.33 1.33
OTHER FINANCIAL LIABILITIES
In terms of IFRS the preference share capital is classified as debt and disclosed as other financial
liabilities in the Condensed Consolidated Statement of Financial Position as at 30 June 2016.
Consequently, the preference share dividends are classified as funding costs and disclosed as such in
the Condensed Consolidated Statement of Profit and Loss and Other Comprehensive Income for the 6
months ended 30 June 2016.
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:
Reviewed Unaudited Audited
Group Group Group
30 June 30 June 31 December
2016 2015 2015
R ‘000 R ‘000 R ‘000
Held at amortised cost
Preference share liability 508 828 157 830 313 837
Experite NV Group 6 445 3 561 6 498
Capital bank - Term loan facilities 34 647 - 8 977
Getbucks (Pty) Ltd - 9 207 4 054
Ecsponent Capital (RF) Limited 1 082 - -
Ecsponent Projects (Pty) Ltd 684 5 225 4 873
Ecsponent Investment Holdings – purchase price 118 957 - -
facility
Debentures 11 452 -
Capital protected investments 2 668 -
Other 6 237 3 250 3 860
TOTAL OTHER FINANCIAL LIABILITIES 691 000 179 073 342 099
Total included in non-current liabilities 517 441 159 270 324 840
Total included in current liabilities 173 559 19 803 17 259
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:
Reviewed Unaudited Audited
30 June 30 June 31 December
2016 2015 2015
R’000 R’000 R’000
Related party balances
Loan accounts - Owing (to) / by related parties
Ecsponent Capital (RF) Limited 247 082 39 407 134 917
Ecsponent Capital (RF) Limited (1 082) - -
Ecsponent Investment Holdings (Pty) Ltd 114 282 21 987 81 940
Ecsponent Investment Holdings (Pty) Ltd (118 957) - -
Ecsponent Business Finance (Pty) Ltd 7 726 - -
Ecsponent Projects (Pty) Ltd (684) (5 225) (4 873)
Amounts included in Trade receivable / (Trade Payable)
regarding related parties
Ecsponent Capital (RF) Limited 4 015 - -
Ecsponent Capital (RF) Limited (113) - -
Ecsponent Investment Holdings (Pty) Ltd 1 373 579 -
Ecsponent Investment Holdings (Pty) Ltd (218) - -
Ecsponent Business Finance (Pty) Ltd 41 - -
Ecsponent Business Finance (Pty) Ltd (549) - -
Related party transactions
Interest (received from) / paid to related parties
Ecsponent Capital (RF) Limited (26 304) (3 008) (14 110)
Ecsponent Investment Holdings (Pty) Ltd (20 400) (3 139) (18 644)
Administration fees paid to (received from) related
parties
Ecsponent Capital (RF) Limited (630) (995) (5 962)
Ecsponent Investment Holdings (Pty) Ltd (780) (402) (3 240)
Return on Innovation (Pty) Ltd (216) - -
Commission paid to (received from) related parties
Ecsponent Business Finance (Pty) Ltd (1 114) - (1 500)
Ecsponent Investment Holdings (Pty) Ltd (500) - -
Recoveries paid to (received from) related parties
Ecsponent Capital (RF) Limited (2 844) - -
Ecsponent Business Finance (Pty) Ltd (40) - -
Ecsponent Investment Holdings (Pty) Ltd (37) - -
Return on Innovation (Pty) Ltd 117 - -
FINANCIAL INSTRUMENTS – FAIR VALUE AND RISK MANAGEMENT
Financial instruments measured in the statement of financial position at fair value require disclosure.
Financial instruments of the Group carried at fair value are disclosed below.
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.
Reviewed 30 June 2016
Financial instrument carried at fair value Carrying value - Fair value -
Designated at Level 3
fair value R’000
R’000
Other financial assets - -
Unaudited 30 June 2015
Financial instrument carried at fair value Carrying value - Fair value -
Designated at Level 3
fair value R’000
R’000
Other financial assets 8 981 8 981
Audited 31 December 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
Financial instrument carried at fair value Reviewed Unaudited Audited 31
30 June 30 June December
2016 2015 2015
Fair value gains recognised in profit and loss - - 5 639
Financial instrument carried at fair value Reviewed Unaudited Audited 31
30 June 30 June December
2016 2015 2015
Opening balance at the start of the period 8 874 3 241 3 241
Purchases & revaluations 126 5 854 5 854
Transfer of realised gains recognised in profit and loss - (114) (221)
Disposal of financial instrument (9 000) - -
Balance at the end of the period - 8 981 8 874
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 applying reference to the current increase/(decrease)
the discounted cash flow collection performance of the if:
valuation technique, book, benchmark information - the forecast
which incorporates the available within the debt collections were
determination of collection industry as well as higher/(lower); or
discount rate containing expected recovery rates - the risk adjusted
an appropriate risk determined by the collection discount rate
premium. service provider. The expected waslower/ (higher).
recovery rates are 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.
FINANCIAL INSTRUMENTS
The carrying amount of all significant financial instruments approximates the fair value.
FINANCIAL RISK MANAGEMENT
The Group's financial risk management objectives and policies are consistent with those disclosed in
the consolidated annual financial statements as at and for the year ended 31 December 2015.
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
2015 annual financial statements.
The continued expansion of the Group has resulted in the need for geographic segmentation in
addition to the operational segmentation.
Period ended 30 June 2016
Operating Segment Total Assets Revenue Operating profit /
(loss)
R’ 000 R’ 000 R’000
Financial Services 706 336 142 567 92 661
Private equity 38 500 30 810 (2 746)
Collections 3 992 1 873 (2 170)
Corporate 565 806 37 479 43 801
Eliminations (537 567) (96 025) (73 140)
Group total 777 067 116 704 58 406
Geographic Segment Total Assets Revenue Operating profit /
(loss)
R’ 000 R’ 000 R’000
South Africa 1 149 233 171 884 114 518
Botswana 126 209 23 243 10 918
Swaziland 24 743 16 431 7 409
Namibia 192 233 135
Zambia 14 257 938 (1 434)
Eliminations (537 567) (96 025) (73 140)
Group total 777 067 116 704 58 406
Period ended 30 June 2015
Operating Segment Total Assets Revenue Operating profit /
(loss)
R’ 000 R’ 000 R’000
Financial Services 356 626 29 824 23 386
Private Equity 23 240 18 633 (2 299)
Collections 12 184 10 214 7 958
Corporate 231 410 10 717 5 777
Eliminations (328 651) (1 025) (12 118)
Transfer to discontinued operations - (1 573) (804)
Group total 294 809 66 790 21 900
Geographic Segment Total Assets Revenue Operating profit /
(loss)
R’ 000 R’ 000 R’000
South Africa 481 101 73 298 30 213
Botswana 104 064 15 388 4 123
Swaziland 32 346 5 313 493
Namibia 161 313 39
Zambia 5 788 - (46)
Eliminations (328 651) (25 949) (12 118)
Transfer to discontinued operations - (1 573) (804)
Group total 294 809 66 790 21 900
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 834 788 190 292 63 494
Botswana 183 856 40 956 20 969
Swaziland 81 321 13 438 6 362
Namibia 187 562 (157)
Zambia 11 263 1 143 (759)
Eliminations (645 236) (86 679) (42 528)
Group total 466 179 159 712 47 381
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, which require disclosure.
CORPORATE ACTIONS
During the financial period ended 30 June 2016, the following corporate actions were implemented by
the Group:
Related party acquisitions
ECS Developments, a subsidiary of the Company, acquired the business conducted by Ecsponent
Investment Holdings Proprietary Limited 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.
Class G Preference Shares
At the annual general meeting held on 25 August 2015, shareholders approved the creation of an
additional Class G preference share, which contains provisions for conversion into ordinary shares on
certain default events. Specific approval for the issue of convertible Class G shares was obtained from
shareholders at a general meeting held on 3 May 2016, however none have been issued to date.
Issue of ordinary shares to Directors
The Company’s remuneration committee approved the partial settlement of future directors’ fees for the
non-executive directors and for the executive directors’ salaries through the issue of ordinary shares to
the directors in lieu of a cash settlement of the fees (“the Directors’ Issue”).
Odd lot offer and specific repurchase
The Company undertook an odd-lot offer and a specific repurchase of ordinary shares at 20.55 cents
per share in order to reduce the ongoing administration costs associated with the Company’s large
minority ordinary shareholder base, as follows:
• an odd-lot offer to repurchase holdings equal to or less than 532 ordinary shares (“the Odd-Lot Offer”);
• a specific offer to repurchase holdings of more than 532 ordinary shares and equal to or less than
10 000 ordinary shares (“the Specific Repurchase”).
In terms of the Odd-Lot Offer and the Specific Repurchase, a total of 542 758 ordinary shares were
repurchased and subsequently cancelled.
Amendment of the Memorandum of Incorporation
The Company’s MOI was amended to specifically allow the Company to expropriate shares pursuant
to the Odd-Lot Offer.
SHARE CAPITAL
The following ordinary shares were issued during the 6 months ended 30 June 2016.
Number of Issued share Total
shares capital
‘000 R’000 R’000
Opening balance 1 January 2016 901 588 118 072 118 072
Acquisition of Clade Investment Management 19 096 4 000 4 000
Shares issued pursuant to the Directors’ Issue 10 070 1 869 1 869
Closing balance 30 June 2016 930 753 123 941 123 941
DIVIDENDS
No ordinary dividends have been declared or proposed for the year.
The Company 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, but redeeming at a rate equal to 170% of the Initial Issue Price;
and
- Class C – prime plus 4% floating rate monthly dividend.
Preference Share dividends and interest of R23.8 million accrued to investors for the 6 months ended
30 June 2016. The dividends are classified as finance costs and included in the finance cost expense
in the Condensed 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 HEPS. The impact of the misstatement
is 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
No changes to the Group’s directors took place during the 6 months ended 30 June 2016.
COMPANY SECRETARY
During the period, Mr. Dirk van der Merwe was appointed as the company secretary.
AUDITORS
Nexia SAB&T continued in office as auditors for the Group for 2016 financial interim period.
At the Annual General Meeting held on 27 May 2016, shareholders reappointed 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 Condensed Consolidated Interim Financial Statements for the 6
months ended 30 June 2016 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.
For and on behalf of the Board
E Engelbrecht
Pretoria
26 September 2016
Directors: RJ Connellan* (Chairman), KA Rayner*, BR Topham*. (* Independent Non-Executives), E
Engelbrecht (Chief Executive Officer), TP Gregory (Chief OperatingOfficer), B Shanahan (Financial
Director)
Company Secretary: Dirk 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: 27/09/2016 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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