Wrap Text
Unaudited Interim Financial Results for the Six Months Ended 28 February 2018
EFFICIENT GROUP LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 2006/036947/06)
JSE share code: EFG ISIN: ZAE000151841
(“Efficient Group” or “the Group”)
UNAUDITED INTERIM FINANCIAL RESULTS
For the six months ended 28 February 2018
BRAND SIGNIFICANCE
The Efficient brand embodies the core of our commitment to our key stakeholders, and serves as a
benchmark for our company’s products and services.
It defines the values and principles of our employees, and expresses our approach to performance
and service delivery.
OUR VISION
Our vision is to become a leading financial services business through a client-centred and
entrepreneurial business model attuned to sustainable growth and profitability.
OUR MISSION
Our mission is to create value for our clients through a comprehensive financial services offering.
The business strategy of the Efficient Group is to be a diversified financial services provider
offering customised products, professional services and added value throughout the financial
services value chain.
KEY FACTS
+ Listed on the Johannesburg Stock Exchange (JSE) under the share code EFG since 2009
+ Market capitalisation of R344 million as at 28 February 2018
+ 520 shareholders
+ 240 financial advisors
+ 446 full-time employees
+ Offices throughout South Africa
+ The operational structure is divided into three clusters, specifically designed to
meet client needs and align with the financial services value chain
+ Value added for clients through both people and processes
KEY PERFORMANCE INDICATORS
(Compared to the six months ended 28 February 2017)
REVENUE: R549 million (2017: R465 million) 18%
PROFIT AFTER TAX: R19 million (2017: R18 million) 6%
HEADLINE EARNINGS: R19 million (2017: R18 million) 6%
HEADLINE EARNINGS PER SHARE: 21.15 cents (2017: 20.22 cents) 5%
ASSETS UNDER ADVICE: R18.6 billion (2017: R15.0 billion) 24%
ASSETS UNDER ADMINISTRATION: R103.9 billion (2017: R104.2 billion) (0.3%)
ASSETS UNDER CONSULTING: R27.2 billion (2017: R25.2 billion) 8%
ASSETS UNDER MANAGEMENT: R19.6 billion (2017: R18.2 billion) 8%
NUMBER OF ADVISORS: 240 (2017: 107) 124%
CASH GENERATED FROM OPERATIONS PER SHARE: 26 cents (2017: 14 cents) 86%
CASH GENERATED BY OPERATIONS: R23 million (2017: R12 million) 92%
NET ASSET VALUE PER SHARE: 306 cents (2017: 260 cents) 18%
AN INTRODUCTION TO EFFICIENT GROUP
NATURE OF BUSINESS
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, multi-management, asset consulting,
asset administration, fiduciary services, private client services, and independent employee benefits
consulting services, which are offered to clients throughout South Africa.
The Group structure consists of a three-pillared organisational structure which centres around a
Financial Services cluster, a Services and Solutions cluster and an Investments cluster.
The Financial Services cluster is focussed on providing professional financial planning services
and financial products to clients. The Services and Solutions cluster is focussed on empowering and
enabling the financial advisor to provide market-leading and value-added services to the clients of
the financial advisor. The Investment cluster is focused on investing in and growing financial
services opportunities where we believe we can add value for our clients through a competitive
advantage.
Following on an extensive restructuring process in 2015 and 2016, and 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.
Two operational functions remain centralised from a control perspective, namely finance and compliance.
BUSINESS MODEL
Efficient Group’s business model is an expression of its vision, mission and values, and is supported
by robust corporate governance structures and processes. Our strategy is to maximise opportunities
in the financial services sector, while simultaneously mitigating risks effectively. Operational and
management structures are specifically designed to deliver on these objectives.
The Group started out primarily as an asset management company in 1999 and listed on the JSE in 2009.
We have always followed a sustainable growth plan – incorporating strategy, knowledge, innovation and
sound business practices – with the objective of evolving into a multi-faceted financial solutions
provider.
BUSINESS PHILOSOPHY
Our business philosophy is to meet the needs and serve the requirements of all stakeholders,
including clients, shareholders, employees, government, regulatory authorities and the broader
community. It is our aim to remain attuned and responsive to the needs of these groups at all times.
We remain firm in our resolve to ensure that relationships with clients and employees are founded on
mutual appreciation, trust and long-lasting partnerships. The focus of every business unit is to
create and deliver sustainable, profitable and efficient solutions.
VALUE ADDED
Efficient Group adds value to its clients’ businesses and portfolios in two key ways; through its
people and through its processes.
Our people are highly skilled professionals with wide-ranging abilities and an unswerving dedication
to what they do. Whether it is in asset management, economic research and analysis, financial planning,
client portfolio administration or compliance, everyone shares the same enthusiasm and passion for
service excellence.
Through our processes, we create wealth, protect capital, reduce costs, minimise risk, increase audit
and compliance efficiency, streamline services and deliver client satisfaction. The management team
of each business unit has the mandate and power to organise operations as it sees fit, within levels
of authority, in order to secure sustainability and deliver on its key objectives. The business units
are supported by standardised and centralised processes for finance and compliance.
BUSINESS STRATEGY
The business strategy of Efficient Group is to be a diversified financial services provider offering
customised products, professional services and added value throughout the financial services value
chain. In order to be optimally positioned to do this, the Group adopted its Vision 2020 strategy in
2015.
Since then, we have focused on implementing this strategy in order to ensure that the business remains
relevant, competitive and sustainable within an increasingly constrained economic environment. While
our focus is appropriately strategic, we recognise the need to be responsive to changes in the
operating environment, as well as flexible in the implementation of our strategy. It was for this
reason that we initiated an extensive restructuring of the Financial Services cluster during the
course of the 2017 financial year with, amongst other objectives, consolidating various of the brands
and entities within this cluster.
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 a rapidly changing environment, a strong reputation and integration throughout the value chain
will remain the most important determinants of success. Our strategy, therefore, focuses not only on
consolidating the acquisitions and operational changes we have made over the past two years, but also
on continuing to secure the kind of strong corporate culture on which sustainable reputations are
built.
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 through merger and acquisition.
THE REPORTING PERIOD AT A GLANCE
STRATEGY
+ Efficient Group’s strategic objective remains to be a leading diversified financial services
provider with a national footprint.
+ The Group’s short- and medium-term objectives, as defined in its Vision 2020 strategy of 2015
remain applicable.
+ All aspects of the strategy are being implemented on an ongoing basis.
BUSINESS DEVELOPMENT
+ The consolidation in the Financial Services cluster continues.
+ In line with the expected outcomes of the Retail Distribution Review we are in the process of
rebranding the cluster under two primary brands, Efficient Wealth, which we expect to be classified
under the Retail Distribution Review as a Registered Financial Advisor model (RFA) and Efficient
Independent Distribution Services which we expect to be classified as a Product Supplier Agency
model (PSA).
+ Efficient Benefit Consulting (Pty) Ltd is a business that was established and developed in 2017,
and launched in October 2017, to focus on providing employee benefit consulting and intermediary
services to companies and members of retirement funds.
ASSETS UNDER MANAGEMENT, CONSULTING, ADVICE AND ADMINISTRATION
+ Total assets increased by R6.7 billion to R169.3 billion.
+ Assets under Advice grew by 24% to R18.6 billion due to acquisitions and a successful business
development programme.
+ Assets under Administration were negatively affected by the planned expiry of a fixed-term mandate.
OPERATIONS
+ We are continuing with our Vision 2020 strategy in order to align the business’s structure with its
strategic objectives and the financial services value chain.
+ The Group’s national distribution footprint was strengthened and expanded.
+ The development of Efficient Group’s proprietary software, FutureSight, is ongoing.
COMMUNICATION
+ The Group has a well-established internal and external communication programme, and has a special
focus on soliciting and responding to client feedback.
+ Strong focus on integrating and consolidating corporate culture to align with values.
GOVERNANCE
+ In preparing for the implementation of King IV, the Group commenced training and commissioned a gap
analysis of the King IV requirements. The gap analysis included testing the relevant policies and
statutory documents against the principles and recommended practices of King IV.
+ Treating Customers Fairly (TCF) is a natural extension to our vision of becoming a leading
financial services business through a client-centred and entrepreneurial business model, attuned
to sustainable growth and profitability. In this regard, a roll-out plan for the implementation
of TCF and reinforcement of a TCF culture was designed and approved in the period under review.
FINANCIAL COMMENTARY
OVERVIEW
The Board is pleased with the financial performance of the Group over this reporting period, against
a backdrop of continuing low economic growth. Management expects more recent enhanced investor
confidence to lead to improved economic growth and business confidence. Further investments have been
made and continue to be made in the sustainable expansion of the distribution business as well as
expanding the services to our clients through the appointment of an experienced team of independent
Employee Benefit Consulting specialists.
The Group achieved revenue growth of 18% over the six-month period ended 28 February 2018 (“the
Reporting period”) and was able to contain the increase in fixed expenses at inflationary levels. The
Gross contribution percentage decreased from 31% to 28%. Profit for the period is 6% higher and the
cash generated by operations increased by 92% compared to the six months ended 28 February 2017 (“the
Comparative period”). Net tangible assets per share increased from 16.20 cents per share at 31
August 2017 to 33.21 cents per share at the end of the reporting period.
The key focus over the past six months has been on:
+ Implementation of the Vital Consult and Vital Wealth transactions;
+ The consolidation of our Financial Services Cluster distribution strategy;
+ The roll out of Efficient Benefit Consulting;
+ Concluding various smaller advisory book acquisitions.
Feb 2018 Feb 2017 Aug 2017
Assets under Advice R18.6 billion R15.0 billion R18.3 billion
Assets under Management R19.6 billion R18.2 billion R19.5 billion
Assets under Administration R103.9 billion R104.2 billion R117.3 billion
Assets under Consulting R27.2 billion R25.2 billion R26.9 billion
Total Assets R169.3 billion R162.6 billion R182.0 billion
Total assets were up 4% from February 2017 and down 7% compared to total assets as at 31 August 2017.
In the 2016 financial year Boutique Collective Investments added a significant client on a short-term
mandate. This mandate expired with effect from December 2017 and clarifies the lower Assets under
Administration at the end of the reporting period. Whilst the growth in the JSE All Share Index of
14% over the comparative period and 3% since 31 August 2017 contributed positively to our financial
results, a strengthening of the rand against the dollar of 10% over the comparative period and 9%
since 31 August 2017 had a negative impact on our performance.
FINANCIAL RESULTS
Statement of Comprehensive Income
The Group generated a net profit after tax of R19 million for the reporting period, compared to a
profit after tax of R18 million for the comparative period.
The Group reported headline earnings of R19 million for the reporting period (February 2017: R18
million).
Headline earnings per share was calculated at 21.15 cents per share (February 2017: 20.22 cents).
Revenue of R549 million was 18% higher than revenue reported for the comparative period. The
Financial Services cluster achieved revenue growth of 38% mainly due the Vital transaction concluded
in the 2017 financial year, while revenue from asset administration services increased by 14%. The
“best-in-class” strategy for Efficient Select is proving to be successful with revenue growth of 23%.
Revenue for the Investment cluster increased by 13%. The lower revenue in the Services and Solutions
cluster was due to lower fees earned in the multimanager business, offset by higher revenue at
Efficient Private Clients on the back of higher assets under management.
Operating expenses consist of:
Unaudited Six months Unaudited Six months % Audited Year
ended 28-Feb-18 ended 28-Feb-17 change ended 31-Aug-17
R’000 R’000 R’000
Variable expenses 395 983 319 747 24% 702 054
Fixed expenses 70 355 65 629 7% 143 960
Profit share 43 035 36 130 19% 78 972
Staff incentives 4 960 9 480 (48%) 13 242
Non-cash flow expenses 8 331 9 806 (15%) 19 394
Operating expenses 522 664 440 792 19% 957 622
The increase in variable expenses correlates with the movement in revenue and resulted in a lower
Gross Contribution percentage mainly due to the changes in the Financial Services cluster. 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 the financial advisors in
response to competing distribution models.
Fixed expenses increased by 7%.
Staff incentives are provided for based on the business unit performance against its target and the
outperformance of its targets. It is expected that business units will achieve their year-end targets.
The profit share provision is linked to the performance of the asset administration and consulting
business units. The increase in the provision is in line with the higher profits generated by these
business units.
Non-cash flow expenses consist of amortisation costs and depreciation. Intangible assets acquired in
earlier years are now fully amortised and this explains the lower non-cash flow expenses.
STATEMENT OF CASH FLOWS
The Group generated cash of R36 million from operating activities during the six months under review
and paid tax of R10 million, resulting in net cash generated by operating activities of R26 million.
Cash generated from operating activities was reduced by R12 million due to the increase in working
capital. The Group generated cash from operations of 26 cents (Feb 2017: 14 cents) per share for the
reporting period.
Cash of R30 million was used as follows:
+ Investment activities that mainly consisted of the acquisitions of IFA client bases, increase of
loans receivable as part of the Vital transaction and the last portion of the renovation cost of
the Head Office in Pretoria;
+ Financing activities that mainly consisted of the repayment of vendor finance, payment of a
dividend, repurchase of company shares and repayment of borrowings.
STATEMENT OF FINANCIAL POSITION
The net tangible asset value per share improved by 17.01 cents per share, to 33.21 cents, as at 28
February 2018, compared to the net tangible asset value per share as at 31 August 2017.
At 28 February 2018 current liabilities exceed current assets by R21 million. Included in the current
liabilities is an amount owed to the Select Manager Vendors for phase 2 of the transaction and
payable on 31 May 2018. A facility of R25 million has been granted by Standard Bank to cover this
payment. Management also assessed the Group’s cash flow forecast and is of the opinion that the Group
will be able to settle its short-term commitments as and when they become due.
Excluding the facility obtained to settle the Select Manager Phase 2 liability the Debt to Equity
ratio at the end of February 2018 was at 15.02% (2017: 19.81%).
The Board believes that the current trading price on the JSE of the EFG share is less than the
intrinsic value. Therefore, in terms of a Board approved share repurchase program, the company
repurchased 416 551 shares for R1.7 million. The share repurchase program is expected to continue.
BUSINESS SEGMENTAL RESULTS
FINANCIAL SERVICES
Nature of Business
The delivery of comprehensive financial planning and management solutions, and the distribution of
both proprietary
and external financial products to identified target markets through a national network of financial
advisors.
Business Units (Majority Shareholding)
+ Efficient Independent Distribution Services
+ Efficient Wealth
+ Wayne Allen-White Brokers
+ Exceed Asset Management
+ Stead Wealth
+ Secure Capital Investments
Services
+ Cash Management
+ Employee Benefits
+ Estate Planning
+ Financial Planning
+ Healthcare
+ Investment Management
+ Life and Business Assurance
+ Retirement Planning
+ Short-term Insurance
+ Stockbroking
+ Trust and Executorship
Clients
Private, institutional, SME and corporate clients
Six Months Six Months % 12 months Comment
Ended Feb 2018 Ended Feb 2017 Change ended Aug 2017
Number of 365 225 62% 375 The increase in the number
employees of employees is mainly due
to the Vital transaction
and various other
acquisitions.
Assets under 18 553 000 14 985 000 24% 18 300 000 The increase in AUA is
Advice (AUA) mainly due to the Vital
R’000 transaction and various
other acquisitions.
Revenue 112 820 81 810 38% 190 289 The increase in revenue
R’000 is mainly due to the Vital
transaction and various
other acquisitions.
Profit for the 7 215 5 774 25% 10 030 Profits increased, despite
period the decreasein the gross
R’000 contribution percentage due
to the Vital Transaction,
and thefixed expense base
increase. The fullperiod
effect of other prior
period acquisitions, also
contributed to the
increased profit.
SERVICES AND SOLUTIONS
Nature of Business
The delivery of customised, value-added financial services and solutions.
Business Units
+ Naviga Solutions
+ Efficient Benefit Consulting
+ Efficient Board of Executors
+ Efficient Private Clients
Services
+ Deceased Estates
+ Model Portfolios (Wrapped Funds)
+ Multi-Managed Funds
+ Share Portfolios
+ Trusts
+ Wills
+ Retirement Fund Benefit Consulting
Clients
Financial advisors and private, institutional and corporate clients
Six Months Six Months % 12 months Comment
Ended Feb 2018 Ended Feb 2017 Change ended Aug 2017
Number of 21 17 24% 17 The employee benefit
employees company, Efficient Benefit
Consulting added six new
employees.
Assets under 6 650 000 5 944 000 12% 6 200 000 The multimanager and
Management (AUM) private client businesses
R’000 grew assets under management
over the reporting period.
Revenue 17 157 18 179 (6%) 34 234 The multi-manager fee
R’000 reduction project
negatively affected revenue.
This negative effect was
countered by a 42% increase
in revenue in the Efficient
Private Client business.
The rollout of the Efficient
Benefit Consulting value
proposition was delayed and
it is expected that this
business unit will start
generating revenue in the
next quarter.
Profit for the (270) 4 152 (100%) 7 121 The delay in the rollout of
period Efficient Benefit Consulting
R’000 decreased the cluster’s
profit by R2 million. In
Efficient Benefit addition,
the fee restructuring project
also had a negative impact
on the cluster’s profit.
INVESTMENTS
Nature of Business
The administration and distribution of co-branded collective investments to both retail and
institutional investors.
Business Units (Majority Shareholding)
+ Boutique Collective Investments
+ Boutique Investment Partners
+ Efficient Select
+ Select Manager
Services
+ Fund Administration
+ Fund Management
+ Investment Consulting
+ Multi-management
Clients
Financial advisors and private, institutional and corporate clients
Six Months Six Months % 12 months Comment
Ended Feb 2018 Ended Feb 2017 Change ended Aug 2017
Number of 38 49 (22%) 39 The conversion from an
employees inhouse asset manager to an
outsourced “best-in-class”
strategy resulted in the
reduction in the number of
employees in this cluster.
Assets under 12 965 000 12 225 000 6% 13 300 000 The successful implementation
Management (AUM) of the “best-in-class”
R’000 strategy explains the increase
in the AUM, compared to the
comparative period.
Assets under 103 912 000 104 211 000 (0.29%) 117 300 000 The decrease in AUAdmin is
Administration a direct result of the
(AUAdmin) expiration of a short-term
R’000 mandate from a significant
client.
Assets under 27 158 000 25 168 000 8% 26 900 000 Boutique Investment Partners
Consulting (AUC) (BIP) remains one of the
R’000 largest independent multi-
management companies in the
country.
Revenue 456 877 404 010 13% 854 275 The short-term mandate was
R’000 cancelled in December 2017
and therefore revenue was
earned on the higher AUAdmin
or 4 out ofthe 6 months in
the reporting period.
Profit for the 18 385 17 876 3% 37 414 The asset administration
period division increased profit
R’000 by 15%. The profit growth for
this cluster was reduced by
the decrease inprofits from
Select Manager due to lower
average fees earned.
DIVIDENDS
Dividends are declared at the discretion of the Board after taking the financial position
of the company into consideration. As a guideline, 80% of free cash flow is paid as a dividend. Based
on this policy the directors determined that a dividend of 2.00000 cents per share will be paid to
shareholders. A dividend of 1.63000 cents per share was paid for the comparative period.
The salient dates for this dividend payment are as follows:
Last date to trade “cum” dividend Tuesday, 15 May 2018
Securities trade “ex” dividend Wednesday, 16 May 2018
Record date Friday, 18 May 2018
Payment date Monday, 21 May 2018
Share certificates may not be dematerialised or rematerialised between Wednesday, 16 May 2018 and
Friday, 18 May 2018, both days inclusive. The dividend will be transferred to dematerialised
shareholders’ CSDP/broker accounts on Monday, 21 May 2018. Certificated shareholders’ dividend
payments will be posted on or paid to certificated shareholders’ bank accounts on or about, Monday,
21 May 2018.
Shareholders are advised of the following additional information:
+ The dividend has been declared out of profits generated during the reporting period;
+ The local dividend withholding tax rate is 20%;
+ The gross local dividend amount is 2.00000 cents per share;
+ The net local dividend amount for shareholders:
+ Exempt from payment of dividend tax is 2.00000 cents per share
+ Liable to pay the dividends tax is 1.60000 cents per share
+ The issued share capital of the company is 90 176 422 shares; and
+ The company’s tax reference number is 9071679170.
CHANGES TO THE BOARD OF DIRECTORS
Mr Jerry Mabena resigned as a non-executive director with effect from 20 February 2018. The Board
would like to thank Mr Jerry Mabena for his valued contribution to the Group. Mr Stephen Rushton, who
was initially appointed as an alternate director to Mr Jerry Mabena on 8 May 2017, was appointed as a
non-executive director in the place and stead of Mr Jerry Mabena.
The unaudited interim results for the six months ended 28 February 2018 were approved by the board of
directors on 25 April 2018 and are signed on their behalf by:
Steve Booysen Heiko Weidhase
Chairman Chief Executive Officer
25 April 2018
UNAUDITED INTERIM FINANCIAL RESULTS
BASIS OF PREPARATION
The interim results for the six months ended 28 February 2018 are presented on a consolidated basis
and are prepared in accordance with the recognition and measurement requirements of International
Financial Reporting Standards and presentation and disclosure requirements of IAS 34 (Interim Financial
Reporting), the JSE Listings Requirements, the Companies Act of South Africa and the SAICA Financial
Reporting Guides as issued by the Accounting Practices Board. The accounting policies applied are
consistent with those applied in the previous interim period and previous financial year-end, except
where indicated differently. No material events occurred after the interim period which requires an
adjustment to the financial information. These interim results have not been audited or reviewed by
the Group’s auditors, KPMG Inc. The summarised unaudited interim financial results are prepared by
Yazeed Patel CA(SA), the Group Financial Manager of Efficient Group.
UNAUDITED INTERIM FINANCIAL RESULTS
For the six months ended 28 February 2018
SUMMARISED STATEMENT OF COMPREHENSIVE INCOME
R’000 Unaudited six Unaudited six % Change Audited year
months ended months ended ended
28-Feb-18 29-Feb-17 31-Aug-17
Revenue 548 512 464 968 18% 1 002 096
Asset management fees 16 940 13 634 24% 51 971
Asset administration and
consultation fees 403 375 350 729 15% 731 987
Financial services income 110 620 78 495 41% 183 522
Services and solutions income 15 965 18 179 (12%) 31 461
Other 1 612 3 931 (59%) 3 155
Operating expenses (522 664) (440 792) 19% (957 622)
Variable expenses (395 983) (319 747) 24% (702 054)
Fixed expenses (70 355) (65 629) 7% (143 960)
Profit share (43 035) (36 130) 19% (78 972)
Staff incentives (4 960) (9 480) (48%) (13 242)
Non-cash flow expenses (8 331) (9 806) (15%) (19 394)
Operating profit 25 848 24 176 7% 44 474
Dividend income on other
investments 38 35 10% 152
Profit on disposal of equipment 214 - >100% 134
Profit on disposal of customer
contracts and customer relationships 1 342 - >100% 139
Gain on derecognition of loan payable
to non-controlling interests - - >100% 1 577
Realised fair value adjustment on
available-for-sale investments (6) - >100% 161
Fair value adjustment of investments
designated at fair value through
profit or loss (190) 98 (293%) (8)
Other income (expenses) 334 (302) (211%) 4 448
Impairment of goodwill - - - (9 324)
Impairment of intangible assets - - - (118)
Share of profits from investments
in equity-accounted associates, net
of taxation 540 509 6% 1 037
Impairment of investments in
equity-accounted associates - - - (5 265)
Re-measurement of loans and
borrowings at fair value through
profit or loss (1 471) (3 247) (55%) 22 558
Operating profit before net
finance income 26 649 21 269 25% 59 965
Net finance income 1 030 4 551 (77%) 1 850
Finance income 2 358 6 975 (66%) 7 934
Finance costs (1 328) (2 424) (45%) (6 084)
Profit before taxation 27 679 25 820 7% 61 815
Taxation (8 760) (7 932) 10% (14 924)
Profit for the period 18 919 17 888 6% 46 891
Other comprehensive income
Items that may subsequently be
reclassified to profit or loss - (14) (100%) (57)
Unrealised fair value adjustment
of available-for-sale investments - (19) (100%) 135
Realised fair value adjustment of
available-for-sale investments
reclassified to profit or loss - - - (161)
Related taxation - 5 (100%) (31)
Items that may not be subsequently
reclassified to profit or loss - - - 1 125
Revaluation of property - - - 1 563
Related taxation - - - (438)
Other comprehensive income, net
of taxation for the period - (14) (100%) 1 068
Total comprehensive income for
the period 18 919 17 874 6% 47 959
Profit for the period
attributable to:
Equity holders of the parent 20 097 18 263 10% 47 798
Non-controlling interests (1 178) (375) >100% (907)
18 919 17 888 6% 46 891
Total comprehensive income for
the period attributable to:
Equity holders of the parent 20 097 18 249 10% 48 866
Non-controlling interests (1 178) (375) >100% (907)
18 919 17 874 6% 47 959
Number of shares in issue at the
end of the period ('000) 90 176 90 593 90 593
Weighted average number of
ordinary shares in issue at the
end of the period, net of
treasury shares ('000) 90 081 90 302 90 272
Diluted weighted average number
of shares, net of treasury
shares ('000) 90 081 90 302 90 272
Basic and diluted earnings per
share (cents) 22.31 20.22 10% 52.95
Headline and diluted headline
earnings per share (cents) 21.15 20.22 5% 69.01
Headline and diluted headline
earnings:
Attributable earnings 20 097 18 263 10% 47 798
Profit on sale of equipment (214) - >100% (134)
Taxation on profit on sale
of equipment 60 - >100% 38
Profit on disposal of customer
contracts and customer
relationships (1 342) - >100% (139)
Taxation on profit on disposal
of customer contracts and
customer relationships 455 - >100% 31
Impairment of goodwill - - - 9 324
Impairment of intangible assets - - - 118
Impairment of investments in
equity-accounted associates - - - 5 265
Headline earnings 19 056 18 263 4% 62 301
SUMMARISED STATEMENT OF FINANCIAL POSITION
R’000 Notes Unaudited six Unaudited six % Change Audited year
months ended months ended ended
28-Feb-18 29-Feb-17 31-Aug-17
Assets
Non-current assets
Property and equipment 1 54 164 36 079 50% 52 198
Goodwill 2 154 076 157 361 (2%) 153 056
Intangible assets 3 126 105 131 606 (4%) 130 565
Unit-linked investments 328 1 146 (71%) 323
Investments in equity-
accounted associates 7 178 11 853 (39%) 6 638
Loans receivable 3 086 3 550 (13%) -
Deferred tax assets 24 994 9 746 >100% 14 703
369 931 351 341 5% 357 483
Current assets
Unit-linked investments 1 157 3 084 (62%) 4 302
Trade and other receivables 90 542 85 138 6% 110 203
Cash and cash equivalents 90 066 73 465 23% 106 936
Short-term portion of loans
receivable 2 030 113 >100% 1 084
Current tax receivable 318 196 62% 950
184 113 161 996 14% 223 475
Total assets 554 044 513 337 8% 580 958
Equity and liabilities
Equity attributable to
equity holders of the
parent
Share capital and
share premium 4 148 645 150 325 (1%) 150 325
Treasury share reserve (532) (532) (0%) (532)
Fair-value adjustment
reserve 1 44 (98%) 1
Revaluation reserve 1 125 - >100% 1 125
Accumulated income 125 785 85 445 47% 111 487
275 024 235 282 17% 262 406
Non-controlling interests 4 071 1 941 >100% 5 592
Total equity 279 095 237 223 18% 267 998
Non-current liabilities
Loans and borrowings 5 38 380 94 276 (59%) 28 011
Provisions for onerous
contracts 19 - >100% 133
Deferred tax liabilities 31 178 30 074 4% 32 707
69 577 124 350 (44%) 60 851
Current liabilities
Short-term portion of
loans and borrowings 5 44 734 26 066 72% 70 283
Provisions for onerous
contracts 210 - >100% 342
Trade and other payables 141 080 123 627 14% 171 879
Current tax payable 11 217 2 071 >100% 710
Cash and cash equivalents 8 131 - >100% 8 895
205 372 151 764 35% 252 109
Total liabilities 274 949 276 114 (0%) 312 960
Total equity and liabilities 554 044 513 337 8% 580 958
Net asset value per share
(cents) 306.07 259.71 18% 290.68
Net tangible asset value
per share (cents) 33.21 (26.88) (224%) 16.20
SUMMARISED STATEMENT OF CHANGES IN EQUITY
R’000 Share Treasury Fair-value Reval- Accum- Total Non-con- Total
capital share adjust- uation ulated attribut- trolling equity
and share reserve ment reserve income able to interest
premium equity
holders of
the parent
Balance at
31 August 2016 150 325 (440) 58 - 72 530 222 473 (2 443) 220 030
Transactions
with owners - (92) - - (5 348) (5 440) 4 759 (681)
Dividends declared - - - - (5 348) (5 348) - (5 348)
Recognition of non-
controlling interests - - - - - - 4 759 4 759
Treasury shares
acquired - (92) - - - (92) - (92)
Total comprehensive
income for the period - - (14) - 18 263 18 249 (375) 17 874
- Profit - - - - 18 263 18 263 (375) 17 888
- Other comprehensive
income - - (14) - - (14) - (14)
Balance at 28
February 2017 150 325 (532) 44 - 85 445 235 282 1 941 237 223
Transactions with
owners - - - - (3 493) (3 493) 4 183 690
Dividends declared - - - - (1 062) (1 062) - (1 062)
Derecognition of
non-controlling
interests - - - - (2 431) (2 431) 2 431 -
Recognition of non-
controlling interests - - - - - - 1 752 1 752
Total comprehensive
income for the period - - (43) 1 125 29 535 30 617 (532) 30 085
- Profit - - - - 29 535 29 535 (532) 29 003
- Other comprehensive
income - - (43) 1 125 - 1 082 - 1 082
Balance at 31
August 2017 150 325 (532) 1 1 125 111 487 262 406 5 592 267 998
Transactions with
owners (1 680) - - - (5 799) (7 479) (343) (7 822)
Dividends declared - - - - (5 799) (5 799) (343) (6 142)
Repurchase of
shares (1 680) - - - - (1 680) - (1 680)
Total comprehensive
income for the period - - - - 20 097 20 097 (1 178) 18 919
- Profit - - - - 20 097 20 097 (1 178) 18 919
- Other comprehensive
income - - - - - - - -
Balance at 28
February 2018 148 645 (532) 1 1 125 125 785 275 024 4 071 279 095
SUMMARISED STATEMENT OF CASH FLOWS
R’000 Notes Unaudited six Unaudited six % Audited
months ended months ended Change year ended
28-Feb-18 28-Feb-17 31-Aug-17
Cash flows from operating activities
Cash generated from operations 7 22 973 12 382 86% 71 056
Finance income received 2 358 6 975 (66%) 7 934
Finance costs paid (1 328) (2 424) (45%) (6 084)
Dividends received from unit-linked
investments 38 35 10% 152
Dividends received from investments in
equity-accounted associates - 382 (100%) 860
Taxation paid (10 183) (4 191) >100% (20 337)
Net cash inflow from operating activities 13 858 13 159 5% 53 581
Cash flows from investing activities
Acquisition of businesses, net of cash
acquired (3 471) (4 256) (18%) (8 388)
Proceeds on disposal of business 1 495 - >100% 4 445
Proceeds from loans receivable 115 3 514 (97%) 6 001
Loans receivable advanced (3 403) - >100% -
Acquisition and development of intangible
assets (137) (1 985) (93%) (136)
Proceeds on disposal of intangible assets - - >100% 6
Acquisition of unit-linked investments - (92) (100%) -
Proceeds from disposal of unit-linked
investments 3 329 4 115 (19%) 3 388
Acquisition of property (2 085) (8 622) (76%) (21 395)
Acquisition of equipment (988) (921) 7% (3 969)
Proceeds on disposal of equipment 249 - >100% 204
Net cash (outflow)/inflow from investing
activities (4 896) (8 247) (41%) (19 844)
Cash flows from financing activities
Repurchase of shares (1 680) - -
Proceeds from long-term liabilities 185 12 137 (98%) 22 389
Repayment of long-term liabilities (11 058) (8 008) 38% (13 596)
Repayment of forward purchase and dividend
liabilities (5 061) (11 862) (57%) (21 861)
Repayment of vendor finance liabilities (1 312) (8 484) (85%) (6 336)
Dividends paid (6 142) (5 348) 15% (6 410)
Net cash outflow from financing activities (25 068) (21 565) 16% (25 814)
Cash and cash equivalents movement for the
period (16 106) (16 653) (3%) 7 923
Cash and cash equivalents at the beginning
of the period 98 041 90 118 9% 90 118
Cash and cash equivalents at the end of the
period 81 935 73 465 12% 98 041
SEGMENTAL ANALYSIS
’000 Financial Services and Investments Other Total
Services Solutions
Unaudited - for the six
months ended 28 February 2018
Revenue 112 820 17 157 456 877 (38 342) 548 512
External 112 478 17 157 429 335 (10 458) 548 512
Inter-segment 342 - 27 542 (27 884) -
Profit/(loss) for the period 7 215 (270) 18 385 (6 411) 18 919
Assets 63 871 31 473 214 749 244 526 554 619
Liabilities (28 040) (9 972) (139 465) (98 047) (275 524)
Unaudited - for the six
months ended 28 February 2017
Revenue 81 810 18 179 404 010 (39 031) 464 968
External 77 744 17 060 380 884 (10 720) 464 968
Inter-segment 4 066 1 119 23 126 (28 311) -
Profit/(loss) for the period 5 774 4 152 17 876 (9 914) 17 888
Assets 56 725 29 548 175 463 251 601 513 337
Liabilities (48 666) (504) (127 129) (99 815) (276 114)
Audited - for the year
ended 31 August 2017
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) -
Profit/(loss) for the period 10 030 7 121 37 414 (7 674) 46 891
Assets 65 980 29 927 235 309 249 742 580 958
Liabilities (47 264) (10 735) (182 839) (72 122) (312 960)
Other consists of intergroup eliminations and consolidation entries, Efficient Group Ltd, Efficient
Capital (Pty) Ltd, Efficient Group Central Services (Pty) Ltd, AS Sure Investment Services (Pty) Ltd,
Efficient Equity (Pty) Ltd and the Efficient Group Share Trust. All operations take place in Southern
Africa.
NOTES TO THE UNAUDITED INTERIM FINANCIAL RESULTS
1. Property and equipment
R’000 Land Buildings Furniture Total
(including computers
assets under and leasehold
construction) improvement
Unaudited - for the six months ended
28 February 2018
Opening balance 10 560 36 255 5 383 52 198
Additions - 2 085 988 3 073
Depreciation - - (1 072) (1 072)
Disposals - - (35) (35)
Closing balance 10 560 38 340 5 264 54 164
Unaudited - for the six months ended
28 February 2017
Opening balance - 23 984 3 369 27 353
Additions - 8 622 921 9 543
Depreciation - - (817) (817)
Closing balance - 32 606 3 473 36 079
Audited - for the year ended
31 August 2017
Opening balance - 23 984 3 369 27 353
Additions 9 600 11 795 3 969 25 364
Depreciation - (127) (1 885) (2 012)
Disposals - - (70) (70)
Revaluations 960 603 - 1 563
Closing balance 10 560 36 255 5 383 52 198
2. Goodwill
R’000 Unaudited six Unaudited six Audited year
months ended months ended ended
28-Feb-18 28-Feb-17 31-Aug-17
Opening balance 153 056 155 050 155 050
Acquired through business combinations 1 020 2 311 8 598
Disposals - - (1 268)
Impairments - - (9 324)
Closing balance 154 076 157 361 153 056
Goodwill is allocated to the following
cash-generating units:
Efficient Financial Services (Pty) Ltd 13 882 13 469 12 862
Efficient Wealth (Pty) Ltd 22 148 17 590 22 148
Efficient Select (Pty) Ltd 8 369 8 369 8 369
Naviga Solutions (Pty) Ltd 25 118 29 674 25 118
Select Manager (Pty) Ltd 66 954 65 166 66 954
Stead Wealth Management (Pty) Ltd 4 127 15 112 4 127
Exceed Asset Management (Pty) Ltd 6 088 6 088 6 088
W-Allen White Brokers (Pty) Ltd 1 016 1 893 1 016
Secure Capital Investments (Pty) Ltd 4 237 - 4 237
Efficient Private Clients (Pty) Ltd 1 851 - 1 851
Vital Consult Wealth Management (Pty) Ltd 286 - 286
154 076 157 361 153 056
3. Intangible assets
R’000 Trade Customer Computer Total
names contracts and software
customer
relationships
Unaudited - for the six months ended
28 February 2018
Opening balance 1 361 124 283 4 921 130 565
Additions - - 137 137
Amortisation (139) (6 195) (925) (7 259)
Disposals - (956) - (956)
Acquired through business combinations - 3 618 - 3 618
Closing balance 1 222 117 132 4 133 126 105
Unaudited - for the six months ended
28 February 2017
Opening balance 2 025 123 844 6 496 132 365
Additions - - 1 985 1 985
Amortisation (698) (7 437) (854) (8 989)
Acquired through business combinations - 6 245 - 6 245
Closing balance 1 327 122 652 7 627 131 606
Audited - for the year ended
31 August 2017
Opening balance 2 025 123 844 6 496 132 365
Additions - - 136 136
Amortisation (664) (15 013) (1 705) (17 382)
Disposals - (4 438) (6) (4 444)
Acquired through business combinations - 20 008 - 20 008
Impairments - (118) - (118)
Closing balance 1 361 124 283 4 921 130 565
4. Share capital and share premium
Number of shares Unaudited six Unaudited six Audited year
months ended months ended ended
28-Feb-18 28-Feb-17 31-Aug-17
Share capital
Authorised
361 350 000 ordinary shares of R 0.00000277 each 1 1 1
Issued
90 176 422 (28-Feb-17 and 31-Aug-17: 90 592 973)
ordinary shares of R 0.00000277 each - - -
Share premium on shares issued
Opening balance 150 325 150 325 150 325
Repurchase of shares (1 680) - -
Closing balance 148 645 150 325 150 325
Reconciliation of number of shares in issue
Opening balance 90 592 973 90 592 973 90 592 973
Repurchase of shares (416 551) - -
Closing balance 90 176 422 90 592 973 90 592 973
5. Loans and borrowings
R’000 Unaudited six Unaudited six Audited year
months ended months ended ended
28-Feb-18 28-Feb-17 31-Aug-17
Forward purchase liabilities 32 113 60 184 32 112
Dividend liability 2 359 7 785 5 375
Contingent consideration liabilities 5 636 - 6 210
Vendor finance liabilities 326 2 812 1 312
Working capital loans 12 262 37 879 30 961
Mortgage loans 29 038 11 682 21 012
Loans from non-controlling interests 1 380 - 1 312
83 114 120 342 98 294
Non-current liabilities 38 380 94 276 28 011
Current liabilities 44 734 26 066 70 283
83 114 120 342 98 294
The forward purchase liabilities and dividend liability relates to the acquisition of Select Manager
(Pty) Ltd and its subsidiaries, which took effect on 1 March 2018. The liabilities are due to be
settled on 31 May 2018. The contingent consideration liabilities relate to the acquisition of W-Allen
White Brokers (Pty) Ltd and Secure Capital Investments (Pty) Ltd.
The working capital loans and mortgage loans are payable to Standard Bank of South Africa Ltd.
During December 2017, the Group settled R8.4 million of the working capital loans by capitalising
this debt to the mortgage loans.
6. Analysis of financial assets and financial liabilities
The fair values of financial assets and liabilities measured at fair value in the statement of
financial position can be summarised as follows:
Fair value hierarchy level
R’000 Level 1 Level 2 Level 3 Total
Unaudited at 28 February 2018
Financial assets
Financial assets at fair value through
profit or loss
Unit-linked investments - - - -
Available-for-sale financial assets
Unit-linked investments 1 486 - - 1 486
1 486 - - 1 486
Financial liabilities
Financial liabilities at fair value through
profit or loss
Business acquisition liabilities - - (40 107) (40 107)
- - (40 107) (40 107)
Unaudited at 28 February 2017
Financial assets
Financial assets at fair value through
profit or loss
Unit-linked investments 2 376 - - 2 376
Available-for-sale financial assets
Unit-linked investments 1 146 - - 1 146
3 522 - - 3 522
Financial liabilities
Financial liabilities at fair value
through profit or loss
Business acquisition liabilities - - (67 969) (67 969)
- - (67 969) (67 969)
Audited at 31 August 2017
Financial assets
Financial assets at fair value through
profit or loss
Unit-linked investments 2 000 - - 2 000
Available-for-sale financial assets
Unit-linked investments 2 625 - - 2 625
4 625 - - 4 625
Financial liabilities
Financial liabilities at fair value
through profit or loss
Business acquisition liabilities - - (43 697) (43 697)
- - (43 697) (43 697)
There were no transfers of any financial instruments between fair value hierarchy Levels 1, 2 and 3
during any of the reporting periods.
The carrying values of all financial instruments not presented at fair value on the statement of
financial position are reasonable approximations of their fair values.
Business acquisition liabilities are included in the “Loans and borrowings” line on the statement
of financial position. These include forward purchase liabilities, committed dividend liabilities to
legal non-controlling interest shareholders as well as contingent consideration liabilities.
Valuation techniques and inputs used in the fair value measurement of Level 3 financial instruments
Business acquisition liabilities
Business acquisition liabilities are valued at the present value of the expected payments set out in
the contracts, discounted using discount rates between 7.75% and 10.88% during the comparative periods
being reported on. The effect of discounting these liabilities for the period ending 28 February
2018, was not considered to be material.
The unobservable inputs used for calculating the fair value of the forward purchase liabilities,
contingent consideration liabilities and dividend liabilities for contractual dividends include
budgets and forecasts with estimated annual profit growth rates, planned independent financial
advisor book buys and free cash flows.
As there is a contractual maximum purchase price that was used in calculating the business acquisition
liabilities, or the liabilities are directly linked to the performance of the related entity, the
Group’s profit is not materially sensitive to the inputs of the models applied when calculating fair
value.
R’000 Unaudited six Unaudited six Audited year
months ended months ended ended
28-Feb-18 28-Feb-17 31-Aug-17
Opening balance (43 697) (81 906) (81 906)
Fair value adjustments for the period
recognised in profit or loss (1 471) (3 247) 22 558
Business acquisitions during the period - - (9 955)
Payments and settlements during the period 5 061 17 184 25 606
Closing balance (40 107) (67 969) (43 697)
7. Cash generated from operations
R’000 Unaudited six Unaudited six Audited year
months ended months ended ended
28-Feb-18 28-Feb-17 31-Aug-17
Profit before taxation 27 679 25 820 61 815
Adjustments for:
Depreciation on property and equipment 1 072 817 2 012
Amortisation on intangible assets 7 259 8 989 17 382
Dividend income from other investments (38) (35) (152)
Profit on disposal of equipment (214) - (134)
Profit on disposal of customer contracts and
customer relationships (1 342) - (139)
Re-measurement of loans and borrowings at fair
value through profit or loss 1 471 3 247 (22 558)
Fair value adjustment of investment designated
at fair value through profit or loss 190 (98) 8
Purchase price adjustment on acquisitions 147 - -
Realised fair value adjustment on
available-for-sale investments 6 - (161)
Gain on derecognition of loan payable
to non-controlling interest - - (1 577)
Finance income (2 358) (6 975) (7 934)
Finance costs 1 328 2 424 6 084
Impairment of goodwill - - 9 324
Impairment of intangible assets - - 118
Impairment of investments in
equity-accounted associates - - 5 265
Share of profits from investments in
equity-accounted associates, net of taxation (540) (509) (1 037)
Operating profit before changes in working capital 34 660 33 680 68 316
Changes in working capital:
Trade and other receivables 19 661 (5 462) (29 852)
Trade and other payables (31 100) (15 836) 32 117
Provisions (248) - 475
22 973 12 382 71 056
Non-executive directors: S Booysen*, Z Cele*, J Rosen*, B Ngonyama*, O Goosen and S Rushton (*Independent)
Alternate director: I Groenewald (for O Goosen)
Executive directors: DD Roodt, H Weidhase, AT de Klerk and R Walton
Registered address: 81 Dely Road, Hazelwood, 0081
Business address: 81 Dely Road, Hazelwood, 0081
Company secretary: Jonathan Ngonidzashe Nyahuye
Transfer secretaries: Link Market Services South Africa (Pty) Ltd
Sponsor: Merchantec Capital
REGISTRATION AND CONTACT DETAIL
Efficient Group Limited (“Efficient Group” or “the Group”)
Incorporated in the Republic of South Africa
Registration number 2006/036947/06
JSE share code: EFG
ISIN: ZAE000151841
Telephone: +27 (0)87 944 7999
81 Dely Road, Hazelwood, Pretoria, 0081, South Africa
t: +27 (0)87 944 7999 | e: info@efgroup.co.za | www.efgroup.co.za
Date: 26/04/2018 01:09:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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