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Summarised Audited Financial Results for the Year Ended 31 August 2017
EFFICIENT GROUP LIMITED
Incorporated in the Republic of South Africa
Registration number 2006/036947/06
JSE share code: EFG
ISIN: ZAE000151841
SUMMARISED AUDITED FINANCIAL RESULTS FOR THE YEAR ENDED 31 AUGUST 2017
HIGHLIGHTS
Revenue increased by 14% to R1 billion
+ Profit for the year increased from R37.5 million to R46.9 million
+ Headline earnings per share increased from 41.53 cents to 69.01 cents
+ Dividends of 8 cents per share declared (2016: 7 cents)
+ Assets under administration increased by 16% to R117.3 billion
INTRODUCTION
The vision of Efficient Group ("the Group") is to become a leading financial services business
through a client-centred and entrepreneurial business model attuned to sustainable growth and
profitability.
Efficient Group is a diversified financial services group focused on providing professional
advice, custom-designed products and quality service across the entire financial services value
chain. Our offering includes financial planning services, asset management, asset consulting,
asset administration, fiduciary services, advisory services and private client services which
are offered to clients throughout South Africa.
Following on an extensive restructuring process in 2015 and 2016, a period of consolidation in
2017, further acquisitions and changes in the operating environment led to the Board taking the
decision to restructure the Financial Services cluster. This was done in order to streamline
service delivery and to ensure that the cluster is optimally aligned to the Group's Vision
2020 strategy, Treating Customers Fairly and the Retail Distribution Review.
We also continue to align our strategy, structure, products and services with developing
megatrends that are redefining the financial services sector worldwide. With this in mind,
we continue to emphasise the value of intrapreneurship, being able to act like an entrepreneur
within a larger organisation, both to our clients and to our business. This approach enables
each of the three clusters to function independently and to be responsive to client and market
needs.
In 2017, we reviewed our 2020 objectives, including updating our goals, such as achieving R100
million in profit after tax and headline earnings per share of 100 cents by 2020. Further changes
include an update on our targets for assets under management, consulting and administration.
In order to achieve our goals, we will continue to focus on the core aspects of our business:
delivering client-centred and customised products and solutions; maintaining a solid yet flexible
operational structure; extending our national footprint; expanding into new sectors; and growing
both organically as well as by merger and acquisition.
HIGHLIGHTS OF THE YEAR INCLUDE:
+ Financial Services
+ Revenue grew by 24% to R190 million;
+ Assets under advice grew by 24% to R18.3 billion;
+ The number of financial advisors increased from 101 to 229; and
+ An extensive repositioning and rebranding process was undertaken, establishing Efficient
Wealth as the core brand for the cluster.
+ Services and Solutions
+ Revenue grew by 13% to R34 million;
+ Efficient Private Clients generated revenue of R8.5 million and added 194 clients;
+ Developed and established Efficient Benefit Consulting; and
+ The packaging and roll-out of proprietary investment solutions continued.
+ Investments
+ Revenue grew by 9% to R854 million;
+ Assets under administration grew by 16% to R117 billion;
+ Assets under management decreased by 13% to R19.5 billion; and
+ Assets under consulting grew by 2% to R26.9 billion.
1.1 FINANCIAL RESULTS
Despite the challenging political and economic environment in which the Efficient Group operates,
it was able to report excellent results for the period under review. This outstanding performance
can be attributed to appropriate deal structuring, as well as to exceptional growth in assets under
administration and assets under advice.
+ The Group concluded the following notable transactions during the course of the year:
+ The expansion and restructuring of the Private Client offering through the merger of Efficient
Select's Private Client division and that of Uhuru Asset Management;
+ The outsourcing of the single-manager funds at Efficient Select; and
+ The expansion of the distribution network with the acquisition of Vital Consult, W-Allen White
Brokers and Secure Capital Investments in the Financial Services cluster.
A substantial share of the Group's revenue accrues from the value of assets under management, assets
under administration, assets under consulting and assets under advice. Assets under management are
represented by amounts invested in unit trust funds, unit trust funds of funds and private share
portfolios managed by the asset management division. The Group had R19 504 million (2016: R22 330
million) assets under management by the end of the 2017 financial year. Assets under administration
are represented by unit trust funds and unit trust funds of funds administered by the Group.
Administration of assets includes liability administration and asset administration, such as
monitoring the daily pricing of unit trust funds. The Group administers assets to the value of
R117 331 million (2016: R101 096 million). Assets under consulting are represented by assets on
which Boutique Investment Partners supply investment consulting services. These consist primarily
of portfolio construction, strategic and tactical asset allocation, and manager selection services.
The Group consults on assets to the value of R26 879 million (2016: R26 440 million). Assets under
advice are represented by client investments made on the recommendation of, or with the guidance of,
financial advisors employed by the Financial Services division. Total assets under advice amount to
R18 288 million (2016: R14 766 million).
Statement of comprehensive income:
The growth in revenue during the reporting period was largely due to the acquisitions undertaken in
the Financial Services cluster and to the increase in assets under administration in the Investment
cluster. Organic growth in the Financial Services cluster accounted for 7% of the increase in revenue.
The decrease in asset management and consulting fees were mainly due to lower assets under management
and consulting. Low equity market returns and absolute benchmarks also resulted in the Group earning
lower performance fees.
The increase of 7% in revenue in the Services and Solutions cluster was mainly due to the increase
in assets in the private share portfolios. This growth in revenue was countered by the portfolio and
fee restructuring project at Naviga Solutions.
The gross contribution decreased by 9% due to a lower gross contribution %. To some extent, this was
countered by higher revenue. The Financial Services cluster reported a lower gross contribution
percentage as a result of the Vital Consult transaction and further changes to remuneration structures
for financial advisors in response to competing distribution models. The asset administration business
increased margins in the period under review.
Fixed expenses increased by 15% to R143 960, mainly due to growth by acquisition. We expect that the
restructuring of Efficient Select and the consolidation in the Financial Services cluster will result
in savings in fixed expenses during the 2018 financial year.
Profit share payments are linked to the performance of the asset administration and consulting business
units. The increase in profit share payments is in line with the higher profits generated by these
business units during the reporting period.
The incentive provision is 39% lower than in the previous year.
Non-cash flow expenses include the amortisation of intangible assets and the depreciation of fixed assets.
The increase of 8% to R19 394 in non-cash flow expenses during the reporting period is directly related
to acquisition activities.
The 10% decrease in operating profit relates to higher revenue and margins at the administration business.
Lower margins in the Financial Services cluster; lower revenue in the Investment cluster, which was a
result of lower assets under management; lower performance fees; and the high expenses associated with
the acquisitions.
The Group's dividend policy is to pay a dividend equal to 80% of free cash flow. Free cash flow is
calculated after making provision for cash reserves, planned capital expenditure, acquisitions and debt
repayments. Based on this guideline, the Directors determined that a final dividend of 6.41 cents per
share will be paid for the 2017 financial year. This dividend will be paid in addition to the interim
dividend of 1.63 cents per share paid in May 2017.
Cash flow analysis:
Cash generated from operations increased by R7 million. Investment activities consist mainly of the
acquisition and renovation of the Head Office in Pretoria and the business combinations concluded during
the financial year. Please refer to the summarised financial statements for more detail on the business
combinations concluded during the reporting period. The Group utilises cash to repay vendors (R28 million)
and long-term borrowings (R14 million). An additional working capital drawdown of R5 million was made and
long-term borrowings increased, with R16 million used to finance the property acquisition and renovation
project.
The Group had R102 million (2016: R97 million) in cash and cash equivalents (inclusive of liquid
investments) as at 31 August 2017. Included in this amount was the R38 million (2016: R55 million)
required to comply with financial soundness
requirements prescribed by the regulator.
Statement of financial position:
Tangible non-current assets increased by 25% and non-current liabilities decreased by 34%. The increase
in tangible non-current assets was due to the acquisition and renovation of the Dely Road building in
Pretoria. Non-current liabilities include the short-term portion of loans and borrowings and exclude
deferred tax liabilities on intangible assets.
Working capital also increased during the reporting period. Working capital is made up of cash, cash
equivalents, accounts and other receivables minus current liabilities and excluding the short-term portion
of long-term liabilities. Including the short-term portion of long-term liabilities, the Group's current
liabilities exceed its current assets. Management assessed the Group's cash flow forecast and its access
to credit, and is of the opinion that the Group will be able to settle its short-term commitments as and
when they become due.
1.2 OPERATIONAL OVERVIEW
From an operational perspective, adaptations to both structure and processes were required in order to
accommodate the restructuring and rebranding of the Financial Services cluster, the outsourcing of the
single-manager funds in the Efficient Select portfolio, and the new acquisitions undertaken to further
our vertical integration objectives.
The decision to restructure and reposition the Financial Services cluster was perhaps the most significant
of the year.
A new retail distribution strategy for the Financial Services cluster was approved by management in
February 2017. This allowed for the consolidation of the Financial Services cluster under a single brand,
Efficient Wealth. A new focus for the brand was also defined, moving to a broader definition of wealth
management as a process of not only managing investments, but of managing our clients' welfare. The
decision to do this was based on our understanding that, as the financial services environment becomes
more complex and unpredictable, our clients require comprehensive financial planning, not just investment
advice. Holistically, all of a client's financial needs and decisions impact on their wealth, which was
the reason why Efficient Wealth was adopted as the primary brand.
The Efficient Wealth brand is designed to encapsulate the fundamental quality of professionalism, which
gives expression to the qualities of competence, integrity, morality, and an unselfish devotion to the
welfare of our clients. This is in keeping with Efficient Group's values-based culture, as well as with
the Code of Conduct outlined in the Financial Advisory and Intermediary Services Act (No. 37 of 2002) (FAIS).
We continued to grow our national footprint and undertook three acquisitions in the financial services cluster
during the course of the year. The three companies acquired are Secure Capital Investments, W-Allen White
Brokers, and Vital Consult (which has been integrated into Efficient Wealth).
In the Investments cluster, a decision was taken at Efficient Select to outsource the management of our single
manager unit trust funds to a number of independent asset managers. The rationale for this was for each fund
to benefit from 'best-in-class' management, as well as for the Group to benefit from economies of scale, a
larger skills pool and access to innovation in the segment. In order to reflect this change and the value it
brings to our clients, a decision was taken to rebrand the individual funds from the overall brand name
Efficient to the name Select. So, for example, the Efficient BCI Equity Fund has been rebranded as Select
BCI Equity Fund.
We also developed the business plan for Efficient Benefit Consulting in the latter part of the financial year
and successfully launched the business on 1 October 2017. Efficient Benefit Consulting is a business that has
been established to focus on providing employee benefit consulting and intermediary services to companies and
members of retirement funds.
1.3 CONCLUSION
In line with the Group's new business strategy, the Group will continue to concentrate on growing the
business organically and by acquiring entrepreneurial, like-minded entities to expand the Group's value chain.
Key performance targets 2017 2018 target
Number of financial planners 229 248
Assets under administration R117.3 billion R117.3 billion
Assets under consulting R26.7 billion R28.7 billion
Assets under management R19.5 billion R19.6 billion
Assets under advice R18.3 billion R20.7 billion
1.4 CASH DIVIDEND
Dividends are declared at the discretion of the Board, after taking the financial position of the Group into
consideration. The directors determined that a final dividend of 6.41000 cents per share will be paid.
The salient dates for this dividend payment are as follows:
Last date to trade "cum" dividend Tuesday, 28 November 2017
Securities trade "ex" dividend Wednesday, 29 November 2017
Record date Friday, 1 December 2017
Payment date Monday, 4 December 2017
Share certificates may not be dematerialised or rematerialised between Wednesday, 29 November 2017 and Friday,
1 December 2017, both days inclusive.
Shareholders are advised of the following additional information:
+ the dividend has been declared out of the 2017 profits;
+ the local dividend tax rate is 20%;
+ the gross local dividend amount is 6.41000 cents per share;
+ the net dividend amount for local shareholders:
+ exempt from payment of dividend tax, is 6.41000 cent per share;
+ liable to pay dividend tax, is 5.12800 cent per share;
+ the issued share capital of the company is 90 592 973 shares of R 0.00000277 each; and
+ the company's tax reference number is 9071679170.
1.5 BASIS OF PREPARATION
The summarised Group financial results for the year ended 31 August 2017 constitute a summary of the Group's
audited financial statements, prepared in accordance with the framework concepts and the measurement and
recognition requirements of IFRS and the SAICA Financial Reporting Guides as issued by the Accounting Practices
Committee and Financial Pronouncements as issued by Financial Reporting Standards Council, and the presentation
and disclosure requirements of International Accounting Standard 34 Interim financial reporting.
The accounting policies are in terms of International Financial Reporting Standards and consistent with those of
the previous financial statements.
The adoption of this standard had no significant impact on the measurement of the Group's assets and liabilities.
These summarised Group financial results do not include all of the information required for full financial
statements, and should be read in conjunction with the audited consolidated financial statements of the Group
for the year ended 31 August 2017.
This summarised report is extracted from audited information, but is not itself audited. The audited consolidated
financial statements and unmodified audit report, as issued by KPMG Inc., are available for inspection at the
company's registered office. The directors take full responsibility for the presentation of the summarised report
and for ensuring that the financial information has been correctly extracted from the underlying audited
consolidated financial statements.
The summarised financial results were prepared by Yazeed Patel CA(SA), the Group Financial Manager.
1.6 CHANGES TO THE BOARD
There were three resignations from the Board during the reporting period, namely that of:
+ Mr Thys du Preez resigned as the alternate director to non-executive director, Mr Abrie du Preez, with effect
from 8 May 2017;
+ Mrs Lynette Taylor resigned as an independent non-executive director with effect from 23 August 2017 for health
reasons; and
+ Mr Abrie du Preez retired as a non-executive director with effect from 23 August 2017.
The Board thanks Mrs Lynette Taylor, Mr Thys du Preez and Mr Abrie du Preez for their valued contributions to the
Group. We are deeply saddened to announce that Mrs Lynnette Taylor passed away on 21 September 2017.
Mr Ockert Goosen, who was initially appointed as an alternate director to Mr Abrie du Preez on 8 May 2017, was
appointed as a non-executive director in the place and stead of Mr Abrie du Preez.
There were also three new appointments to the Board in the reporting period, namely that of:
+ Mr Ian Groenewald was appointed as an alternate director to non-executive director, Mr Ockert Goosen, with effect
from 23 August 2017;
+ Mrs Babalwa Ngonyama was appointed as an independent non-executive director, with effect from 23 August 2017; and
+ Mr Stephen Rushton was appointed as an alternate director to non-executive director, Mr Jerry Mabena with effect
from 8 May 2017.
SUMMARISED AUDITED STATEMENT OF FINANCIAL POSITION AT 31 AUGUST 2017
2017 2016
Notes R'000 R'000
ASSETS
Non-current assets
Property and equipment 1 52 198 27 353
Goodwill 2 153 056 155 050
Intangible assets 3 130 565 132 365
Investments 4 323 1 383
Investments in equity-accounted associates 5 6 638 11 726
Long-term receivables 6 - 3 436
Deferred tax 7 14 703 12 172
357 483 343 4851
Current assets
Investments 4 4 302 6 503
Trade and other receivables 110 203 79 676
Cash and cash equivalents 106 936 90 118
Short-term portion of long-term receivables 6 1 084 3 741
Current tax receivable 950 550
223 475 180 588
Total assets 580 958 524 073
EQUITY AND LIABILITIES
Equity
Share capital and share premium 150 325 150 325
Treasury shares reserve (532) (440)
Accumulated income 111 487 72 530
Fair value adjustment reserve 1 58
Revaluation reserve 1 125 -
Equity attributable to equity holders of the parent 262 406 222 473
Non-controlling interest 5 592 (2 443)
Total equity 267 998 220 030
Non-current liabilities
Loans and borrowings 8 28 011 85 465
Provisions 133 -
Deferred tax liabilities 7 32 707 30 991
60 851 116 456
Current liabilities
Trade and other payables 171 879 139 547
Provisions 342 -
Short-term portion of loans and borrowings 8 70 283 47 847
Current tax payable 710 193
Cash and cash equivalent 8 895 -
252 109 187 587
Total liabilities 312 960 304 043
Total equity and liabilities 580 958 524 073
Net asset value per share (cent) 290.68 246.28
Net tangible asset value per share (cent) (16.20) (30.86)
SUMMARISED AUDITED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 AUGUST 2016
2017 2016
Note R'000 R'000
Revenue 1 002 096 879 978
Operating expenses (957 622) (830 566)
Operating profit 44 474 49 412
Dividend income 152 226
Profit on disposal of equipment 134 25
Profit on disposal of customer contracts and customer relationships 139 -
Other income/(expenses) 4 448 (915)
Fair value adjustment of investment designated at fair value through profit or loss (8) 108
Realised fair value adjustment on available-for-sale investments 161 -
Gain on derecognition of loan payable to non-controlling interest 1 577 -
Re-measurement of loans and borrowings at fair value through profit or loss 22 558 (6 589)
Impairment of goodwill (9 324) -
Impairment of intangible asset (118) -
Impairment of investments in equity-accounted associates (5 265) -
Share of profits from investments in equity-accounted associates, net of taxation 1 037 1 823
Profit before net finance income 59 965 44 090
Net finance income 1 850 10 270
Finance income 7 934 13 900
Finance costs (6 084) (3 630)
Profit before taxation 61 815 54 360
Taxation (14 924) (16 845)
Profit for the year 46 891 37 515
Other comprehensive income
Items that may be reclassified subsequently to profit or loss (57) 61
Unrealised fair value adjustment of available-for-sale financial assets, net of taxation 135 61
Realised fair value adjustment of available-for-sale investments reclassified to profit or loss (161) -
Related taxation (31) -
Items that may not be reclassified subsequently to profit or loss 1 125 -
Revaluation of property 1 563 -
Related taxation (438) -
Other comprehensive income for the year 1 068 61
Total comprehensive income for the year 47 959 37 576
Profit for the year attributable to:
Equity holders of the parent 47 798 37 538
Non-controlling interests (907) (23)
46 891 37 515
Total comprehensive income for the year attributable to:
Equity holders of the parent 48 866 37 599
Non-controlling interests (907) (23)
47 959 37 576
Basic and diluted earnings per share (cents) 10 52.95 41.55
SUMMARISED AUDITED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 AUGUST 2017
Ordinary Treasury Accumulated Fair value Revaluation Total equity Non- Total
shares shares income adjustment adjustment attributable controlling equity
and share reserve reserve reserve to equity interest
premium holders of
the parent
R'000 R'000 R'000 R'000 R'000 R'000 R'000 R'000
Balance at 31 August 2015 150 325 (389) 41 982 (3) - 191 915 (2 420) 189 495
Total comprehensive income
for the year - - 37 538 61 - 37 599 (23) 37 576
Profit for the year - - 37 538 - - 37 538 (23) 37 515
Other comprehensive income
for the year - - - 61 - 61 - 61
Transactions with owners - (51) (6 990) - - (7 041) - (7 041)
Treasury shares acquired - (51) - - - (51) - (51)
Dividends declared - - (6 990) - - (6 990) - (6 990)
Balance at 31 August 2016 150 325 (440) 72 530 58 - 222 473 (2 443) 220 030
Total comprehensive income
for the year - - 47 798 (57) 1 125 48 866 (907) 47 959
Profit for the year - - 47 798 - - 47 798 (907) 46 891
Other comprehensive income
for the year - - - (57) 1 125 1 068 - 1 068
Transactions with owners - (92) (8 841) - - (8 933) 8 942 9
Treasury shares acquired - (92) - - - (92) - (92)
Derecognition of
non-controlling interests - - (2 431) - - (2 431) 2 431 -
Recognition of
non-controlling interests - - - - - - 6 511 6 511
Dividends declared - - (6 410) - - (6 410) - (6 410)
Balance at 31 August 2017 150 325 (532) 111 487 1 1 125 262 406 5 592 267 998
Unrealised fair value adjustments to available-for-sale investments are recorded in the fair value adjustment
reserve in equity through other comprehensive income. Upon realisation of these fair value adjustments, the same are
transferred from the fair value adjustment reserve to accumulated income through profit or loss.
SUMMARISED AUDITED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 AUGUST 2017
2017 2016
Note R'000 R'000
Cash flows from operating activities
Cash receipts from customers 976 692 874 500
Cash paid to suppliers and employees (905 636) (810 574)
Cash generated from operations 71 056 63 926
Finance income received 7 934 13 900
Finance cost paid (6 084) (3 630)
Dividends received from other investments 152 226
Dividends received from investments in equity-accounted associates 860 1 010
Taxation paid (20 337) (15 199)
Net cash inflow from operating activities 53 581 60 233
Cash flows from investing activities
Acquisition of businesses, net of cash acquired 13 (8 388) (1 967)
Proceeds on disposal of business 13 4 445 -
Proceeds from loans receivable (loans receivable advanced) 6 001 (3 751)
Acquisition of intangible assets (136) (1 217)
Proceeds on disposal of intangible assets 6 -
Disposal of other investments 3 388 35 844
Proceeds on the disposal of equipment 204 117
Acquisition of property (21 395) (23 984)
Acquisition of equipment (3 969) (1 133)
Net cash (outflow)/inflow from investing activities (19 844) 3 909
Cash flows from financing activities
Proceeds from long-term liabilities 22 389 29 039
Repayment of long-term liabilities (13 596) (14 881)
Repayment of forward purchase and dividend liabilities (21 861) (30 572)
Repayment of other vendor finance liabilities (6 336) (4 453)
Dividends paid (6 410) (6 990)
Net cash outflow from financing activities (25 814) (27 857)
Cash and cash equivalents movement for the year 7 923 36 285
Cash and cash equivalents at the beginning of the year 90 118 53 833
Cash and cash equivalents at the end of the year 98 041 90 118
NOTES TO THE SUMMARISED AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 AUGUST 2017
August 2017
Cost Accumulated Carrying
depreciation value
and impairments
R'000 R'000 R'000
1. PROPERTY AND EQUIPMENT
Land 10 560 - 10 560
Buildings 36 255 - 36 255
Assets under construction - - -
Furniture, fixtures and office equipment 4 522 (2 342) 2 180
Computer equipment 6 984 (4 937) 2 047
Leasehold improvements 1 725 (569) 1 156
60 046 (7 848) 52 198
August 2016
Cost Accumulated Carrying
depreciation value
and impairments
R'000 R'000 R'000
Buildings 21 096 - 21 096
Assets under construction 2 888 - 2 888
Furniture, fixtures and office equipment 3 815 (2 748) 1 067
Computer equipment 5 594 (4 304) 1 290
Leasehold improvements 1 945 (933) 1 012
35 338 (7 985) 27 353
August 2017
Opening Closing
balance Transfers Disposals Additions Revaluation Depreciation balance
R'000 '000 R'000 R'000 R'000 R'000 R'000
Reconciliation of property
and equipment
Land - - - 9 600 960 - 10 560
Buildings 21 096 2 888 - 11 795 603 (127) 36 255
Assets under construction 2 888 (2 888) - - - - -
Furniture, fixtures and office equipment 1 061 7 (48) 1 580 - (420) 2 180
Computer equipment 1 296 (7) (22) 1 819 - (1 039) 2 047
Leasehold improvements 1 012 - - 570 - (426) 1 156
27 353 - (70) 25 364 1 563 (2 012) 52 198
August 2016
Opening Closing
balance Transfers Disposals Additions Revaluation Depreciation balance
R'000 '000 R'000 R'000 R'000 R'000 R'000
Buildings - - - 21 096 - - 21 096
Assets under construction - - - 2 888 - - 2 888
Furniture, fixtures and office equipment 1 436 - (32) 135 - (478) 1 061
Computer equipment 1 365 - (60) 998 - (1 007) 1 296
Leasehold improvements 1 302 - - - - (290) 1 012
4 103 - (92) 25 117 - (1 775) 27 353
A register containing the information required by paragraph 25(3) of Part C of Chapter 2 of the Companies Regulations
is available for inspection at the registered office of the Company and its subsidiaries.
Details relating to land and buildings
During the prior year, the Group acquired sections 35 to 43 in the sectional title scheme known as Bella Rosa One,
in Belville, the City of Cape Town (the Catnia building) on Erf 39624 for a purchase price of R21.10 million. The
building is carried under the revaluation model and its carrying amount at the reporting date representing its
revalued amount was R22 million (2016: R21.10 million).
During the prior year, the Group started development of its new office building in Hazelwood, Pretoria. At 31
August 2016, the development costs incurred before transfer of the property to the Group as the owner, were
recognised as assets under construction.
During March 2017, the transfer of the Group's Hazelwood offices (the Dely property) was complete. The property was
purchased for R9.60 million and is situated on Erf 106, Alphenpark, Pretoria. The Group completed phase 1 (construction
of the building) by 31 August 2017. Phase 2 and 3 (construction of the parking-lot and widening of the road and walk-ways)
were also in progress at 31 August 2017. The property is carried under the revaluation model and its carrying amount at
the reporting date representing its revalued amount was R24.81 million at 31 August 2017, of which R10.56 million was
attributable to the land and R14.25 million to the building.
At the reporting date, property with a carrying amount of R46.81 million (2016: R21.10 million) was pledged as security
for bank borrowings (refer to note 8.5).
The Group's properties were revalued on 31 August 2017 for the first time to its fair value by external, independent
valuers, having appropriate recognised professional qualifications and recent experience in the location and category
of the properties being valued. Independent valuers will provide the fair value of the Group's properties on an annual
basis. The Catnia building and Dely property were revalued by DDP Valuations & Advisory Services (Pty) Ltd (represented
by Mr Shawn Crous, Professional Valuer) and Standard Bank of South Africa Ltd (represented by Mr Johan Terblanche,
Professional Valuer) respectively.
In determining the fair value of the Group's properties, the property portfolio is considered to be categorised as a
Level 3 on the fair value hierarchy. The valuation model used to value both properties was the income approach model.
This model determines the market value based on capitalisation of the property's first year net operating income. The
capitalisation rate is best determined by referring to market transactions of comparable properties as it is based on
information derived from market analysis.
The following represent the significant unobservable inputs for determining the fair value of the properties:
+ Expected market rental growth on average of 6.50% for both properties;
+ Vacancy rates on average of 2.50% for the Catnia building and 3% for the Dely property; and
+ Risk-adjusted capitalisation rates of 9% for the Catnia building and 9.25% for the Dely property.
The estimated fair value would increase (decrease) if:
+ expected market rental growth were higher (lower);
+ the vacancy rates were lower (higher); or
+ the risk-adjusted capitalisation rates were lower (higher).
The valuation model does not assume that significant rent-free periods are anticipated for the Group's leases to realise
its net operating income.
The residual values of the Catnia building and the building on the Dely property amounted to R17.62 million (2016: R21.10
million) and R12.67 million respectively. Had no revaluation to fair value taken place, the carrying amount of the Group's
properties would have been R20.98 million (2016: R21.10 million) for the Catnia building, R9.60 million for the land
component of the Dely property and R14.67 million for the building constructed on the Dely property.
All gains and/or losses are accounted for in profit or loss, except for the revaluation of property, which is accounted
for in other comprehensive income.
2017 2016
R'000 R'000
2. GOODWILL
Recognised on acquisition of business combinations 153 056 155 050
The aggregate carrying amounts of goodwill allocated to each cash-generating
unit are as follows:
Efficient Financial Services (Pty) Ltd 12 862 13 051
Efficient Select (Pty) Ltd 8 369 8 369
Efficient Wealth (Pty) Ltd 22 148 17 590
Naviga Solutions (Pty) Ltd 25 118 29 674
Select Manager (Pty) Ltd 66 954 65 166
Stead Wealth Management (Pty) Ltd 4 127 15 112
Exceed Asset Management (Pty) Ltd (1) 6 088 6 088
W-Allen White Brokers (Pty) Ltd 1 016 -
Secure Capital Investments (Pty) Ltd 4 237 -
Efficient Private Clients (Pty) Ltd 1 851 -
Vital Consult Wealth Management (Pty) Ltd 286 -
153 056 155 050
Reconciliation of goodwill
Balance at the beginning of the year 155 050 153 274
Acquisitions through business combinations 8 598 1 776
Disposals (1 268) -
Impairment (9 324) -
Balance at the end of the year 153 056 155 050
(1) During the prior year, this cash-generating unit included fellow-subsidiary Exceed Private Clients (Pty) Ltd. On 1
September 2016, Exceed Private Clients (Pty) Ltd sold its business to Exceed Asset Management (Pty) Ltd, after which it
ceased to trade.
Impairment testing of cash-generating units containing goodwill
For the purpose of impairment testing, goodwill is allocated to cash-generating units which represent the lowest level
within the Group at which the goodwill is monitored for internal management purposes.
The goodwill and intangible assets allocation for Efficient Wealth (Pty) Ltd and its former subsidiary, Naviga Solutions
(Pty) Ltd was re- assessed during the year to reflect the appropriate allocation of these cash-generating units, which were
acquired as a group of companies. With the sale of Naviga Solutions (Pty) Ltd by Efficient Wealth (Pty) Ltd to the Company
during the current year, amongst others, was one of the contributing factors to re-assess these two cash-generating units.
The re-allocation was done based on each cash-generating unit's proportionate share of the combined free-cash flow valuation.
The goodwill and intangible assets allocation for Select Manager (Pty) Ltd and its subsidiary, Stead Wealth Management (Pty)
Ltd was re- assessed during the year to reflect the appropriate allocation of these cash-generating units based on a change
in business-model which affected the cash flows of each of these cash-generating units estimated on the initial allocation
of the goodwill. The re-allocation was done based on each cash-generating unit's proportionate share of the combined value-
in-use free-cash flow valuation.
A key estimate used in the Group's investment and cash-generating unit (goodwill and intangible assets) impairment testing
calculations is the expected growth in future cash flows beyond the projection period (terminal growth rate). Management
considered the following factors and determined that 4.50% (2016: 4.50%) would be an appropriate growth rate to use in these
calculations:
+ The relationship between the discount rate and the terminal growth rate;
+ The forecast period;
+ Nature of the factors affecting growth;
+ Historical growth; and
+ Peer comparison and market norms.
The growth rate used does not exceed the long-term average rate for the market in which the Group operates.
The recoverable amount for all the cash-generating units and investments was based on a value-in-use calculation, which
uses pre-tax cash flow projections based on financial budgets approved by management covering a five-year period.
Values assigned to key assumptions in all impairment tests reflect past experience, increased for expected efficiency
improvements.
The table below summarises the pre-tax discount rates at which cash flows were discounted at for the purposes of
impairment testing per cash-generating unit (or investment):
The aggregate carrying amounts of goodwill allocated to each cash-generating unit are as follows:
2017 2016
% %
Efficient Financial Services (Pty) Ltd 23.66 24.90
Efficient Select (Pty) Ltd 25.40 27.01
Efficient Wealth (Pty) Ltd 25.20 23.50
Naviga Solutions (Pty) Ltd 25.15 23.50
Select Manager (Pty) Ltd 24.66 23.70
Stead Wealth Management (Pty) Ltd 25.05 23.40
Exceed Asset Management (Pty) Ltd (1) 24.75 23.50
W-Allen White Brokers (Pty) Ltd 24.90 -
Secure Capital Investments (Pty) Ltd 24.65 -
Efficient Private Clients (Pty) Ltd 23.70 -
Vital Consult Wealth Management (Pty) Ltd 25.45 -
The discount rates above approximated the Group's weighted average cost of capital and was adjusted for cash-generating
unit (investment) specific risks based on the respective entity as well as effects to determine the rate, per-tax.
For each of the cash-generating units included in the Financial Services cluster, the key assumptions used in the
value-in-use calculations are the amount of assets under advise, number of independent financial advisors, the average
income per advisor as well as portfolio performance against benchmarks.
For each of the cash-generating units included in the investments cluster and the Services and Solutions cluster, the key
assumptions used in the value-in-use calculations are the amount of assets under management as well as portfolio
performance against benchmarks.
The carrying amounts of the cash-generating units relating to Select Manager (Pty) Ltd and Stead Wealth Management (Pty)
Ltd was determined to be higher than their recoverable amounts at 31 August 2017 and impairment losses of R6.87 million
and R2.45 million were recognised respectively on these cash-generating units in profit or loss. The recoverable amounts
at 31 August 2017 for these cash-generating units were R88.45 million and R7.40 million respectively. At 31 August 2016,
the carrying amounts of these cash-generating units was determined to be lower than the recoverable amounts and no
impairment losses were recognised.
Management believes that any reasonable possible change in key assumptions on which the recoverable amounts were based would
not cause the carrying amounts of the cash-generating units attributable to Select Manager (Pty) Ltd and Stead Wealth
Management (Pty) Ltd to significantly exceed its recoverable amount after the impairment for the current year was recognised.
The carrying amounts of all other cash-generating units assessed for impairment was determined to be lower than their
recoverable amounts and no impairment losses were recognised (2016: Rnil).
Management believes that any reasonable possible change in key assumptions on which the recoverable amounts for all other
cash-generating units tested for impairment, is based would not cause the cash-generating units' carrying amounts to exceed
their recoverable amounts.
August 2017
Accumulated
amortisation
and Carrying
Cost impairments value
R'000 R'000 R'000
3. INTANGIBLE ASSETS
Trade names 5 902 (4 541) 1 361
Customer contracts and customer relationships 191 116 (66 833) 124 283
Computer software 8 794 (3 873) 4 921
205 812 (75 247) 130 565
August 2016
Accumulated
amortisation
and Carrying
Cost impairments value
R'000 R'000 R'000
Trade names 5 902 (3 877) 2 2025
Customer contracts and customer relationships 176 029 (52 185) 123 844
Computer software 8 672 (2 176) 6 496
190 603 (58 238) 132 365
August 2017
Acquired
through
Opening business Closing
balance Impairments Disposals combinations Additions Amortisation balance
R'000 R'000 R'000 R'000 R'000 R'000 R'000
Reconciliation of
intangible assets
Trade names 2 025 - - - - (664) 1 361
Customer contracts and
customer relationships 123 844 (118) (4 438) 20 008 - (15 013) 124 283
Computer software 6 496 - (6) - 136 (1 705) 4 921
132 365 (118) (4 444) 20 008 136 (17 382) 130 565
August 2016
Acquired
through
Opening business Closing
balance Impairments Disposals combination Acquisitions Amortisation balance
R'000 R'000 R'000 R'000 R'000 R'000 R'000
Trade names 3 228 - - - - (1 203) 2 025
Customer contracts and
customer relationships 130 921 - - 6 398 - (13 475) 123 844
Computer software 6 816 - - - 1 217 (1 537) 6 496
140 965 - - 6 398 1 217 (16 215) 132 365
The disposal of customer contracts and customer relationships during the current year relates to a disposal of a portion
of a business of Efficient Financial Services (Pty) Ltd.
The remaining useful life of the trade names are between 1 and 18 years (2016: 1 and 19 years), customer contracts and
customer relationships, between 1 and 18 years (2016: 1 and 19 years) and computer software between 2 and 5 years (2016:
3 and 6 years).
2017 2016
R'000 R'000
4. INVESTMENTS
Available-for-sale investments
Linked unit investment (Fair value hierarchy: Level 1) 2 625 1 383
Investments designated at fair value through profit or loss 2 000 6 503
Linked unit investment (Fair value hierarchy: Level 1) 4 625 7 886
Total investments 4 625 7 886
Non-current assets 323 1 383
Current assets 4 302 6 503
5. EQUITY ACCOUNTED ASSOCIATES
Name Country of Proportion Principal Nature of relationship
incorporation of ownership activities with the Group
interest
Rudiarius Capital Management RSA 30% Asset Independent and not strategic
(Pty) Ltd Management to the Group's activities
AS Sure Investment Services RSA 25.10% Financial Independent and not strategic
(Pty) Ltd Servives to the Group's activities
Efficient Financial Services NAM 50% Financial Independent and not strategic
(Namibia) (Pty) Ltd Servives to the Group's activities
Efficient Financial Services (Namibia) (Pty) Ltd is an equity accounted investment as the Group does not hold the
majority of the voting rights, nor does it have the ability to appoint the majority of the Board.
2017 2016
R'000 R'000
Material investments in equity-accounted associates
Rudiarius Capital Management (Pty) Ltd 1 274 1 224
AS Sure Investment Services (Pty) Ltd 5 364 10 502
6 638 11 726
Reconciliation of investments in equity-accounted associates
Balance at the beginning of the year 11 726 10 913
Share of profits, net of taxation 1 037 1 823
Impairments (5 265) -
Dividend income (860) (1 010)
Balance at the end of the year 6 638 11 726
Aggregate financial position of equity-accounted associates
Non-current assets 1 643 1 583
Current assets 7 041 7 486
Non-current liabilities (468) (969)
Current liabilities (2 552) (2 524)
Net assets 5 664 5 576
Attributable portion of net assets 1 622 1 591
Aggregate financial performance of equity-accounted associates
Revenue 27 383 29 744
Rudiarius Capital Management (Pty) Ltd 10 168 12 142
AS sure Investment Services (Pty) Ltd 17 215 17 602
Total comprehensive income 3 706 5 622
Attributable portion of total comprehensive income 1 037 1 823
Equity-accounted associates AS Sure Investment Services (Pty) Ltd's year end is February. Its results are equity-
accounted using its management-prepared information on a basis co-terminus to the Group's year-end.
Impairment testing of investments in equity-accounted associates
The investments in both equity-accounted associates that have carrying amounts recognised on the Group's statement of
financial position, were tested for impairment at the reporting date.
The recoverable amounts were calculated on a value-in-use basis, based on pre-tax cash flow projections from financial
budgets approved by management covering a five-year period. Pre-tax discount rates of 26.85% (2016: 33.55%) and 27.85%
(2016: 33.40%) were applied to the calculation for Rudiarius Capital Management (Pty) Ltd and AS Sure Investments (Pty)
Ltd respectively. A terminal value discount rate of 4.50% (2016: 4.50%) was applied to both impairment tests.
The equity-accounted investment's carrying amount for Rudiarius Capital Management (Pty) Ltd was lower than its
recoverable amount and no impairment loss was recognised (2016: Rnil).
The equity-accounted investment's carrying amount for AS Sure Investments (Pty) Ltd was higher than its recoverable
amount, and an impairment loss of R5.27 million was recognised in profit or loss (2016: Rnil as the carrying amount
was lower than its recoverable amount).
2017 2016
R'000 R'000
6. LONG-TERM RECEIVABLES
6.1 Loans to independent financial advisors 176 554
These loans form part of the acquisition of customer contracts and customer relationships.
The loans are unsecured and bear interest at the prime rate. The loans are repayable in
monthly instalments per the agreements with the independent financial advisors. Monthly
instalments range from between R1 450 to R60 000. Initial payment periods over which the
loans are settled range from between 5 months to 30 months. The effective interest rate
at the reporting date on these loans was 10.25% (2016: 10.50%).
6.2 Loan to CS Sutherland and Celtis Financial Services (Pty) Ltd - 3 000
The loan to CS Sutherland and Celtis Financial Services (Pty) Ltd (Celtis) was secured
by portfolio management fees receivable by Celtis on certain assets under management,
and cession of a policy on the life of CS Sutherland. The loan was repayable as follows;
R500 000 before March 2017, R1 000 000 before 31 March 2018 and the balance before
31 March 2019. The loan bore no interest when it was payable, but Boutique Investment
Partners (Pty) Ltd earned a profit-share from certain Celtis funds as part of the loan
agreement. The loan was settled during the current year.
The fair value of the long-term receivable was R2.37 million at 31 August 2016 and the
instrument was classified as Level 3 on the fair value hierarchy. The valuation considered
the present value of the expected payments as set out in the agreement, discounted using a
discount rate of the prime rate plus 3%. There were no gains or losses recovered for this
loan during the current year (2016: Rnil).
6.3 Loan to Quantum Asset Management (Pty) Ltd - 2 554
The loan to Quantum Asset Management (Pty) Ltd is unsecured, bears interest at the
prime interest rate plus 3%, and is repayable in 4 quarterly payments of R625 000
plus interest.
6.4 Share purchase scheme loans 908 1 069
In terms of the share purchase scheme, loans were granted to certain employees to fund
75% of the acquisition of Efficient Group Ltd shares. The loans are repayable on 31
August 2018 and bear interest at the official rate of interest as defined in the Income
Tax Act. Employees cannot trade the shares until the debt is repaid in full.
Total long-term receivables 1 084 7 177
Non-current assets - 3 436
Current assets 1 084 3 741
2017 2016
R'000 R'000
7. DEFERRED TAX
Non-current assets 14 703 12 172
Non-current liabilities 32 707) (30 991)
(18 004) (18 819)
The net deferred tax (liability)/asset comprises the following temporary differences
Accruals and provisions 10 833 10 135
Fair value adjustment on investments 141 202
Calculated tax losses 7 913 7 287
Prepaid expenses (569) (206)
Fair value adjustments on investments (65) (246)
Intangible assets (35 892) (35 991)
Property and equipment (365) -
(18 004) (18 819)
Reconciliation of deferred tax (liability)/asset
Balance at the beginning of the year (18 819) (13 743)
Acquisitions through business combinations (5 602) (1 896)
Disposals of businesses 1 400 -
Charge recognised in profit or loss 5 486 (3 157)
Charge recognised in other comprehensive income (469) (23)
Balance at the end of the year (18 004) (18 819)
The deferred tax assets of the Group includes an amount of R10.97 million (2016: R10.34 million) relating to temporary
differences on current assets and current liabilities, and R7.91 million (2016: R7.28 million) relating to temporary
differences on non-current assets and non-current liabilities. The deferred tax assets relating to current assets and
current liabilities are expected to realise within 12 months.
The deferred tax liabilities of the Group includes an amount of R634 365 (2016: R452 000) relating to temporary
differences on current assets and current liabilities, and R36.26 million (2016: R35.99 million) relating to temporary
differences on non-current assets and non- current liabilities. The deferred tax liabilities relating to current assets
and current liabilities are expected to be settled within 12 months.
The utilisation of the deferred tax asset raised on calculated losses is dependent on future taxable profits in excess
of the profits arising from the reversal of existing taxable temporary differences. Management is confident that the
deferred tax assets recognised will be recovered in future years based on approved budgets and forecasts.
2017 2016
R'000 R'000
8. LONG-TERM LIABILITIES
8.1 Vendor finance liabilities 1 312 5 337
These loans form part of the acquisition of intangible assets. The loans are unsecured,
interest-free and repayable at various instalment dates and amounts. The last instalment
is payable in 2019. The fair value of the outstanding liabilities at the reporting date
is R1.24 million (2016: R4.94 million). The fair value hierarchy is Level 3. The valuation
considers the present value of the payments set out in the agreements, discounted using a
discount rate of 10.25% (2016: 10.50%).
8.2 Forward purchase liabilities
This liability forms part of the acquisition of the Select Manager group through a forward
purchase contract entered into with effective date 1 March 2015.
Phase I liability - 14 210
Phase II liability 32 112 54 885
The liability is presented at fair value and is repayable on 1 March 2018. The fair value
hierarchy is Level 3. The valuation considers the present value of the expected payments
set out in the contract. The payments were discounted using a discount rate of 7.75% at
31 August 2016. No discounting was applied at 31 August 2017 due to the short period in
which the liability will be settled after the reporting date.
The unobservable inputs for calculating the forward purchase liability include budgets and
forecasts, the conversion ratio of independent financial advisor book buys, profit targets
and free cash flows.
8.3 Dividend liability 5 375 12 811
This liability relates to future dividends expected to be paid to the non-controlling
shareholders of Select Manager (Pty) Ltd until the Group acquires the remaining 20.52%
interest in this subsidiary from these shareholders in terms of the forward purchase
agreement.
This liability is presented at fair value and payable over a year and a half. The fair
value hierarchy is Level 3. The valuation considers the present value of the expected
payments set out in the contract. The expected payments at 31 August 2016 were discounted
using a discount rate of 7.75%. No discounting was applied to the expected payments due
at 31 August 2017, as the liability is expected to be settled within 6 months after the
reporting date. The unobservable inputs for calculating the dividend liability include
budgets and forecasts, planned independent financial advisor book buys, profit targets
and free cash flows.
8.4 Working capital loans
These liabilities relate to an amortising term loan from Standard Bank of South Africa to
assist the subsidiaries with their respective working capital requirements, and consists
of four facilities. The loan is guaranteed by Efficient Wealth (Pty) Ltd, Naviga Solutions
(Pty) Ltd, Boutique Investment Partners (Pty) Ltd and Efficient Financial Services (Pty)
Ltd. All loan covenants have been met.
Facility A 5 738 13 388
Facility A bears interest at JIBAR plus 3.75% per annum and is repayable in 16 equal and
quarterly payments of R1.91 million plus interest accrued for the period. This facility
shall be fully repaid by 31 May 2018. The effective interest rate at the reporting date
was 10.83% (2016: 11.10%).
Facility B 5 573 9 250
Facility B bears interest at JIBAR plus 3.50% per annum and is repayable in 12 variable
quarterly capital payments plus interest accrued for the period. This facility shall be
fully repaid by 28 February 2018. The effective interest rate at the reporting date was
10.58% (2016: 10.85%).
Facility C 6 750 8 550
Facility C bears interest at JIBAR plus 3.95% per annum and is repayable in 20 quarterly
and equal capital payments of R450 000 plus interest accrued for the period. This
facility shall be fully repaid by 31 May 2021. The effective interest rate at the
reporting date was 11.03% (2016: 11.30%).
Facility D 12 900 3 000
Facility D is to finance renovations at the Group's Dely property in Hazelwood, Pretoria.
The facility bears interest at JIBAR plus 2.95% per annum and based on the current terms
is due for settlement by 30 November 2017. The effective interest rate at the reporting
date was 10.03% (2016: 10.30%).
8.5 Mortgage loans
Catnia building loan 11 643 11 881
Dely property loan 9 369 -
Both loans are amortising term loans payable by Efficient Capital (Pty) Ltd from Standard
Bank of South Africa Ltd and are secured by property with a carrying amount of R46.81
million (2016: R21.10 million). Refer to note 1.
The Catnia building loan bears interest at the prime interest rate less 1%. The capital
is repayable in 60 escalating monthly instalments and shall be fully repaid by 31 May 2021.
The effective interest rate on this loan at the reporting date was 9.25% (2016: 9.50%).
The Dely property loan, which was advanced during the current year, bears interest at the
prime interest rate less 0.75%. The capital is repayable in 60 escalating monthly instalments
and shall be fully repaid by 31 March 2022. The effective interest rate on this loan at the
reporting date was 9.50%.
8.6 Contingent consideration liabilities
Wayne Allen-White 1 876 -
Jacques Jacobs 4 334 -
The liabilities represent the balance of the purchase price payable for the acquisition
of W-Allen White Brokers (Pty) Ltd and Secure Capital Investments (Pty) Ltd, which
were acquired during the current year by Select Manager (Pty) Ltd. The amount payable is
dependent on the value of additional assets invested by the clients of W-Allen White
Brokers (Pty) Ltd and Secure Capital Investments (Pty) Ltd in the Collective Investment
Schemes managed by Select Manager (Pty) Ltd, up to the measurement date. No interest is
charged on these liabilities.
The liability payable to Jacques Jacobs is contractually due to be settled in two
instalments amounting to R3.57 million and R766 800 which are due on 28 February 2018
and 28 February 2021 respectively.
The liabilities are recognised at fair value and represents management's best estimate
of the amounts payable under the acquisition agreements. The fair value hierarchy for
this liability is Level 3. The valuation considers the present value of expected payments
to be made. The effect of discounting of this liability was not considered to be material.
8.7 Loans from non-controlling interests 1 312 -
These loans are payable to the non-controlling interest shareholders of Efficient
Private Clients (Pty) Ltd and were advanced to the Group during the current year. The
loans are unsecured, bear interest at the prime rate and have no fixed repayment terms.
At 31 August, all the shareholders have agreed not to recall payment on this loan, until
31 October 2018. The effective interest rate at the reporting date on these loans was
10.25%. The shareholders agreement provides for additional interest of 3% above the prime
rate should the proportion of any of the stakeholders' loans payable exceed the
proportion of shareholding interest held in Efficient Private Clients (Pty) Ltd The
effective interest rate on the excess shareholder loans payable at the reporting date
was 13.25%.
Total loans and borrowings 98 294 133 312
Non-current liabilities 28 011 85 465
Current liabilities 70 283 47 847
98 294 133 312
9. CONTINGENT LIABILITIES
Efficient Group Ltd has the following outstanding guarantees:
+ A guarantee in the amount of R300 000 in terms of a lease agreement for Efficient Select (Pty) Ltd's offices in
Cape Town.
+ A guarantee in the amount of R3 million in terms of a mortgage loan agreement between Efficient Capital (Pty) Ltd
and Standard Bank Limited related to the purchase of the Catnia building.
+ A guarantee in the amount of R955 000 issued to the City of Tshwane Metropolitan Municipality for performance
obligations in terms of a rezoning service agreements related to the construction of the new Dely Road offices.
Efficient Wealth (Pty) Ltd has the following outstanding guarantees:
+ A guarantee in the amount of R38 000 in terms of an agreement for offices in Port Elizabeth.
10.BASIC AND DILUTED EARNINGS PER SHARE
Basic and diluted earnings per share is calculated by dividing the profit attributable to equity holders of the
company by the weighted average number of ordinary shares in issue during the year.
2017 2016
R'000 R'000
Weighted average number of ordinary shares in issue for all earnings
Ordinary shares in issue at the beginning of the year 90 593 90 593
Effect of treasury shares acquired during the year (60) (13)
Effect of treasury shares held from the beginning of the year (261) (228)
Weighted average number of ordinary shares at the end of the year 90 272 90 352
Earnings and diluted earnings - Attributable earnings
Net profit for the year attributable to equity holders of the parent 47 798 37 538
Headline earnings 62 301 37 520
Attributable earnings 47 798 37 538
Profit on disposal of equipment (134) (25)
Taxation on disposal of equipment 38 7
Profit on disposal of customer contracts and customer relationships (139) -
Taxation on disposal of customer contracts and customer relationships 31 -
Impairment of goodwill 9 324 -
Impairment of intangible assets 118 -
Impairment of investments in equity-accounted associates 5 265 -
Earnings per share Cents Cents
Basic and diluted earnings per share 52.95 41.55
Headline and diluted headline earnings per share 69.01 41.53
2017 2016
R'000 R'000
11. RELATED PARTIES
11.1 Balances with related parties
Trade receivables owing by related parties
Midnight Storm Investments 299 (Pty) Ltd 50 296
Rudiarius Capital Management (Pty) Ltd 64 94
AS Sure Investment Services (Pty) Ltd - 104
114 494
Trade payables owing to related parties
Rudiarius Capital Management (Pty) Ltd 964 966
AS Sure Investment Services (Pty) Ltd 937 1 017
Midnight Storm Investments 299 (Pty) Ltd 4 -
1 905 1 983
During the year, Efficient Group Ltd provided financial support amounting to R91 548 (2016: R51 000) to the Efficient
Group Share Trust to enable the structured entity to purchase some of Efficient Group Ltd's own equity instruments.
Refer to note 15 for details on additional financial support, pledged by the company to its subsidiaries.
11.2 Related party transactions
Administration and support fees earned from related parties
Rudiarius Capital Management (Pty) Ltd 28 -
Asset consulting fees earned from related parties
AS Sure Investment Services (Pty) Ltd 1 071 1 247
Asset management fees charged by related parties
Rudiarius Capital Management (Pty) Ltd 10 169 12 142
AS Sure Investment Services (Pty) Ltd 10 084 10 598
20 253 22 740
Dividend income earned from related parties
Rudiarius Capital Management (Pty) Ltd 660 150
AS Sure Investment Services (Pty) Ltd 200 860
860 1 010
Rent expense charged by related parties
Midnight Storm Investments 299 (Pty) Ltd 610 973
DD Roodt, H Weidhase and SF Booysen (directors of the Company) are shareholders and directors of Midnight Storm
Investments 299 (Pty) Ltd. The Group rented its Dely Road offices in Alphenpark from Midnight Storm Investments 299
(Pty) Ltd at market related tariffs and thereafter purchased the property from this related party at a market
related consideration of R9.60 million.
AH Ernst is a shareholder and director of Uhuru Asset Management (Pty) Ltd and also key management of the Group. During
the current year, the Group acquired the business of Uhuru Asset Management (Pty) Ltd at a market related consideration
of R6.61 million (including contributions from the previous shareholders of Uhuru Asset Management (Pty) Ltd).
12.SEGMENT ANALYSIS
Efficient Group Limited is organised into three main business segments:
Financial Services
Included in this segment are Efficient Financial Services (Pty) Ltd, Efficient Wealth (Pty) Ltd, Twist Street
Securities (Pty) Ltd, Efficient Infund Consult (Pty) Ltd, Stead Wealth Management (Pty) Ltd, Exceed Asset Management
(Pty) Ltd, Exceed Private Clients (Pty) Ltd, W-Allen White Brokers (Pty) Ltd, Secure Capital Investments (Pty) Ltd,
and Efficient Group Central Services (Pty) Ltd (for 2016, formerly Efficient Asset Finance (Pty).
Services and Solutions
Included in this segment are Naviga Solutions (Pty) Ltd, Efficient Board of Executors (Pty) Ltd and Efficient Private
Clients (Pty) Ltd.
Investments
Included in this segment are Efficient Select (Pty) Ltd, Boutique Collective Investments (RF) (Pty) Ltd, Boutique
Investment Partners (Pty) Ltd, Instit (Pty) Ltd, Select Manager (Pty) Ltd, Vital Consult Wealth Management (Pty) Ltd,
Efficient Select Swaziland (Pty) Ltd and Rudiarius Capital Management (Pty) Ltd.
2017
Financial Services and Investments Other Total
Services Solutions
R'000 R'000 R'000 R'000 R'000
Revenue 190 289 34 234 854 275 (76 702) 1 002 096
- External 189 634 34 234 807 628 (29 400) 1 002 096
- Inter-segment 655 - 46 647 (47 302) -
Operating expenses (182 144) (26 317) (820 960) 71 799 (957 622)
Finance cost (1 986) (179) (868) (3 051) (6 084)
Finance income 1 931 476 5 031 496 7 934
Impairment of goodwill - - - (9 324) (9 324)
Impairment of intangible assets (118) - - - (118)
Impairment of investments in
equity-accounted associates - - - (5 265) (5 265)
Net profit for the year 10 030 7 121 37 414 (7 674) 46 891
Taxation (3 558) (2 211) (12 134) 2 979 (14 924)
Net asset value 18 716 19 192 52 470 177 620 267 998
Assets 65 980 29 927 235 309 249 742 580 958
Liabilities (47 264) (10 735) (182 839) (72 122) (312 960)
Depreciation and amortisation (2 140) (3 473) (1 927) (11 854) (19 394)
Share of profits from investments in
equity-accounted associates, net of taxation - - 710 327 1 037
2016
Financial Services and Investments Other Total
Services Solutions
R'000 R'000 R'000 R'000 R'000
Revenue 152 868 30 265 785 895 (89 050) 879 978
- External 148 848 29 456 701 412 262 879 978
- Inter-segment 4 020 809 84 483 (89 312) -
Operating expenses (142 734) (13 194) (754 991) 80 353 (830 566)
Finance cost (1 018) - (109) (2 503) (3 630)
Finance income 1 169 308 11 959 464 13 900
Net profit for the year 6 958 12 527 31 719 (13 689) 37 515
Taxation (1 249) (4 886) (16 446) 5 736 (16 845)
Net asset value 2 142 15 606 44 529 157 753 220 030
Assets 55 833 19 610 180 191 268 439 524 073
Liabilities (53 691) (4 004) (135 662) (110 686) (304 043)
Depreciation and amortisation (1 846) (2 352) (1 888) (11 904) (17 990)
Share of profits from investments in
equity-accounted associates, net of taxation - - 1 248 575 1 823
The segment analysis for the prior year has been restated to agree to the statement of comprehensive income.
Other consists of consolidating entries, intergroup eliminations and Efficient Group Ltd, Efficient Capital (Pty) Ltd,
Efficient Group Central Services (Pty) Ltd (for 2017) and A S Sure Investment Services (Pty) Ltd. All operations take place
in Southern Africa.
13. ACQUISITIONS AND DISPOSAL OF BUSINESSES
During the current year, the Group acquired various financial advisory customer bases from independent financial
advisers as well as a significant portion of the business of Vital Group Holdings (Pty) Ltd as a going concern through
Efficient Financial Services (Pty) Ltd. It also acquired the businesses of W-Allen White Brokers (Pty) Ltd, Secure
Capital Investments (Pty) Ltd and Vital Consult Wealth Management (Pty) Ltd. The Group acquired the business of Uhuru
Asset Management (Pty) Ltd, which is housed in Efficient Private Clients (Pty) Ltd.
During the prior year, the Group acquired various financial advisory customer bases from independent financial advisers.
2017 2016
R'000 R'000
Acquisition of businesses, in net of cash acquired
Trade and other receivables 675 -
Intangible assets 20 008 6 398
Deferred tax liabilities (5 602) (1 775)
Trade and other payables (215) -
Current tax payable (44) -
Cash and cash equivalents 92 -
Net identifiable assets acquired 14 914 4 623
Goodwill 8 598 1 775
Non-controlling interests recognised at acquisition (6 511) -
Loans receivable recognised as part of the purchase price - 151
Loans and borrowings recognised as part of the purchase price (8 521) (4 582)
Cash acquired (92) -
Net cash paid on acquisition of businesses 8 388 1 967
Disposal of businesses
Intangible assets (4 438) -
Goodwill (1 268) -
Deferred tax liabilities 1 400 -
Net identifiable assets disposed (4 306) -
Profit on disposal of customer contracts and customer relationships (139) -
Net cash received on disposal of businesses (4 445) -
DETAILS OF BUSINESS COMBINATIONS
The Group's acquisitions were all in the Republic of South Africa, either by subscribing for ordinary shares (directly
or indirectly) in the entities controlling the businesses, by acquiring the businesses as going concerns or by only
acquiring the financial advisory client bases (customer contracts and customer relationships). No significant
acquisition costs have been incurred by the Group during its acquisitions. Any incidental costs incurred by the Group,
were expensed.
The acquisitions all contribute to the Group's strategy to increase its local footprint in the Financial Services
industry.
Details of the assets, liabilities and consideration transferred for the Group's acquisitions executed during the
current year are stated below:
Secure Vital Consult Various
Efficient W-Allen White Capital Wealth financial
Private Clients Brokers (Pty) Investments Management advisory client
(Pty) Ltd Ltd (Pty) Ltd (Pty) Ltd bases Total
R'000 R'000 R'000 R'000 R'000 R'000
Net tangible identifiable assets - 142 386 (20) - 508
Intangible assets 6 612 3 627 4 428 1 020 4 321 20 008
Deferred tax liabilities on
intangible assets (1 851) (1 016) (1 240) (286) (1 209) (5 602)
Net identifiable assets 4 761 2 753 3 574 714 3 112 14 914
Goodwill acquired 1 851 1 016 4 236 286 1 209 8 598
Consideration transferred 6 612 3 769 7 810 1 000 4 321 23 512
The consideration transferred is
made up as follows:
Cash 1 852 1 893 1 725 1 000 2 010 8 480
Contingent consideration liabilities - 1 876 4 334 - - 6 210
Vendor finance liabilities - - - - 2 311 2 311
Non-controlling interests 4 760 - 1 751 - - 6 511
6 612 3 769 7 810 1 000 4 321 23 512
The net tangible identifiable assets consists of trade and other receivables, cash and cash equivalents, trade and other
payables and current tax payable.
The above analysis of net assets represents the fair value of assets acquired. In determining the fair value of
intangible assets acquired, the multi-period excess earnings method was used, which is commonly used in the financial
services industry. This method considers the present value of net cash flows expected to be generated by intangible
assets recognised at acquisition, excluding any cash flows related to contributory assets.
The financial advisory client bases were acquired from various independent financial advisors. It is impractical to
disclose the acquisition and other details for each of them as they are homogenous. Four of the acquisitions were
undertaken within Efficient Financial Services (Pty) Ltd, acquired throughout the year. One of the acquisitions were
undertaken within Stead Wealth Management (Pty) Ltd, effective on 28 February 2017. Included in the acquisitions of
Efficient Financial Services (Pty) Ltd is the acquisition of the business of Vital Consult National Holdings (Pty) Ltd.
The goodwill arising on the above acquisitions is mainly attributable to the skills and technical talent of the
key-management and independent financial advisors who come on board to the Group with the acquisitions, as well as
the synergies that are expected to be achieved from integrating the above businesses into the existing suite of
businesses of the Group. None of the goodwill recognised on acquisition is expected to be deductible for tax purposes.
The acquisition dates for the businesses acquired during the year are as follows:
Business acquired Effective date
Efficient Private Clients (Pty) Ltd 1 September 2016
W-Allen White Brokers (Pty) Ltd 1 September 2016
Secure Capital Investments (Pty) Ltd 1 June 2017
Vital Consult Wealth Management (Pty) Ltd 1 March 2017
In addition to the above, the Group also acquired the business of Efficient Independent Distribution Services (Pty) Ltd
through subscribing to 100% of its share capital. At the date of acquisition, this entity was dormant and had no
identifiable assets and liabilities. The purchase consideration for the acquisition was Rnil.
14. NON-CONTROLLING INTERESTS
The table below sets out the subsidiaries of the Group which have non-controlling interests:
NCI ownership interest
Operating Principal place of 2017 2016
segment business % %
Efficient Select Swaziland (Pty) Ltd(1) Investments Swaziland 74.00% 73.99%
Efficient Group Central Services (Pty) Ltd(2) Other Republic of South Africa - 20.00%
Efficient Board of Executors (Pty) Ltd Services and Solutions Republic of South Africa 49.99% 49.99%
Efficient Private Clients (Pty) Ltd Services and Solutions Republic of South Africa 49.90% -
(1) The holding company of this subsidiary, Efficient Group Swaziland (Pty) Ltd also has a non-controlling interest of
49%, however, this holding company does not have any net assets or total comprehensive income during the current and
prior years.
(2) The operating segment in which Efficient Group Central Services (Pty) Ltd operates changed due to it being the
Group's administration and support services company during the current year, compared to it being established to provide
asset-finance previously.
FINANCIAL POSITION AND FINANCIAL PERFORMANCE OF SUBSIDIARIES WITH NON-CONTROLLING INTERESTS
The following table summarises the financial information of subsidiaries with non-controlling interests (NCI) prepared
in accordance with IFRS. The information is presented before intragroup eliminations:
2017
Efficient Board of Efficient Private Secure Capital
Executors (Pty) Ltd Clients (Pty) Ltd Investments (Pty)Ltd
NCI - 49.99% NCI - 49.90% NCI - 49%
R'000 R'000 R'000
Revenue 1 387 8 465 841
(Loss) profit and total comprehensive income for the year (23) (1 862) 69
(Loss) profit and total comprehensive income for the year
attributable to non-controlling interests (11) (929) 34
Non-current assets 17 11 292 4 387
Current assets 36 3 261 564
Non-current liabilities - (4 460) (1 199)
Current liabilities (100) (2 418) (110)
Net (liabilities) assets (47) 7 675 3 642
Net (liabilities) assets attributable to non-controlling interests (23) 3 830 1 785
Cash flows from operating activities 23 (1 152) 112
Cash flows from investing activities - (44) -
Cash flows from finance activities - 2 444 -
Net increase in cash and cash equivalents 23 1 248 112
2016
Efficient Select Efficient Group Efficient Board of
Swaziland (Pty) Ltd Central Services (Pty) Executors (Pty) Ltd
NCI - 74% Ltd NCI - 20% NCI - 49.99%
R'000 R'000 R'000
Revenue - - -
Profit (loss) and total comprehensive income for the year 11 (58) (39)
Profit (loss) and total comprehensive income for the year
attributable to non-controlling interests 8 (12) (19)
Non-current assets - - 33
Current assets 4 6 3
Non-current liabilities - - -
Current liabilities (2 772) (1 923) (60)
Net liabilities (2 768) (1 917) (24)
Net liabilities attributable to non-controlling interests (2 048) (383) (12)
Cash flows from operating activities (508) (35) 11
Cash flows from investing activities - - -
Cash flows from finance activities - - -
Net decrease in cash and cash equivalents (508) (35) 11
Although the Group only has a 70.48% interest in Select Manager (Pty) Ltd and its subsidiaries, it has an obligation to
acquire the remaining 29.52% within the next 6 months after the reporting date. The anticipated acquisition method is
used to account for the Select Manager sub-group. As Select Manager has a 100% interest in all of its underlying
subsidiaries, except for Secure Capital Investments (Pty) Ltd, the only non-controlling interest recognised is in
respect of Secure Capital Investments (Pty) Ltd.
15. EVENTS AFTER THE REPORTING DATE
On 9 November 2017, the company's board approved the financial support to be issued to various subsidiaries within the
Group. Other than the above, no significant events occurred subsequent to the financial year that requires any
additional disclosure or adjustments to the financial statements.
16. DIVIDENDS PAID
Dividends of 5.47 cents per share and 1.63 cents per share were declared and paid in December 2016 (2016: 6.15 cents
per share paid in December 2015) and May 2017 (2016: 1.59 cents per share paid in May 2016) respectively.
CORPORATE
INFORMATION
NON-EXECUTIVE DIRECTORS
Dr SF Booysen (Chairman)*, LC Cele*, J Rosen*, B Ngoyama*, JA Mabena, OJ Goosen, SDL Rushton# and I Groenewald#
(*) Independent; (#) Alternate
EXECUTIVE DIRECTORS
DD Roodt, H Weidhase, AT De Klerk and RH Walton
COMPANY SECRETARY
JN Nyahuye
REPORTING ACCOUNTANTS AND AUDITORS
KPMG Inc.
SPONSOR
Merchantec Capital
TRANSFER SECRETARIES
Link Market Services South Africa (Pty) Ltd
13 November 2017
EFFICIENT GROUP
81 Dely Road
Hazelwood
Pretoria
0081
South Africa
Tel: +27 (0)87 944 7999
info@efgroup.co.za
http://www.efgroup.co.za
Date: 13/11/2017 03:58:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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