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NVEST FINANCIAL HOLDINGS LIMITED - Unaudited Interim Results for the 6 months ended 31 August 2018 & Interim Dividend Declaration (No 8)

Release Date: 20/11/2018 08:08
Code(s): NVE     PDF:  
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Unaudited Interim Results for the 6 months ended 31 August 2018 & Interim Dividend Declaration (No 8)

NVEST FINANCIAL HOLDINGS LIMITED AND ITS SUBSIDIARIES
(Incorporated in the Republic of South Africa)
(Registration number 2008/015990/06)
(“NVest” or “the Company” or “the Group”)
ISIN Code: ZAE000199865 JSE Code: NVE


UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 AUGUST 2018 AND INTERIM DIVIDEND
DECLARATION (NUMBER 8)


HIGHLIGHTS:

-      Group Revenue increased by 10,7% to R 148,1 million (compared with R 133,8 million as at 31
       August 2017) which was driven primarily by growth in the Private Wealth Management
       subsidiaries, despite tough market conditions.
-      Group Net Profit After Tax increased by 11,1% to R 32,069,850 (R 28,887,973 as at 31 August 2017).
-      Assets under Management and Administration increased by 5,2% to R30,6 billion compared with
       R29,1 billion as at 31 August 2017.
-      Headline Earnings Per Share increased by 16,1 % from 9,40 cents to 10,91 cents on the back of
       good revenue growth and cost control.
-      Declaration of an interim dividend (and eighth dividend as a listed company) of 5,5 cents per
       share reflecting a 10,0 % increase on the 5,00 cents dividend for the same period last year.

    Statement of Financial Position
                                                                 Unaudited          Audited        Unaudited
                                                                 31 August      28 February        31 August
    Figures in Rands                                                  2018             2018             2017

    Assets


    Non-Current Assets

    Property, plant and equipment                               43,321,844       41,099,087       38,997,153
    Investment property                                        305,779,149      308,338,397      308,738,912
    Goodwill                                                    87,008,312       87,438,936       86,996,053
    Investment in associates                                       562,421          150,100              100
    Deferred tax                                                 2,955,941        1,909,073        1,355,220
    Operating lease asset                                        7,602,947        7,654,398        7,861,237
    Other financial assets                                         484,957          484,957          617,126
                                                               447,715,571      447,074,948      444,565,801
    Current Assets


    Loans to shareholders                                           36,361          120,381          200,022
    Other financial assets                                      25,000,000       31,008,508       14,750,825
    Operating lease asset                                        1,215,805        1,153,480        1,084,725
    Current tax receivable                                         707,737        1,088,576          308,822
    Trade and other receivables                                 28,971,518       30,807,328       22,904,701
    Cash and cash equivalents                                  146,097,981      125,818,709      137,771,899
                                                               202,029,402      189,996,982      177,020,994
    Total Assets                                               649,744,973      637,071,930      621,586,795

                                                    Unaudited       Audited     Unaudited
                                                    31 August   28 February     31 August
Figures in Rands                                         2018          2018          2017
 

Equity and Liabilities

Equity

Share capital                                     324,779,200   324,779,200   324,779,200
Reserves                                            5,249,644     4,874,481     4,051,260
Retained income                                   104,963,431    91,437,240    76,563,574
Equity attributable to equity holders of parent   434,992,275   421,090,921   405,394,034
Non-controlling interest                            1,460,925     2,053,817     2,314,534
                                                  436,453,200   423,144,738   407,708,568
Liabilities


Non-Current Liabilities
Deferred tax                                       15,955,235    15,724,829    15,360,234
Other financial liabilities                       135,769,596   142,233,919   148,760,012
                                                  151,724,831   157,958,748   164,120,246
Current Liabilities
Current tax payable                                 2,076,211       158,166     1,463,901
Other financial liabilities                        12,462,929    11,819,600    11,257,076
Provisions                                                  -       500,000             -
Trade and other payables                           47,027,802    43,490,678    37,037,004
                                                   61,566,942    55,968,444    49,757,981
Total Liabilities                                 213,291,773   213,927,192   213,878,227
Total Equity and Liabilities                      649,744,973   637,071,930   621,586,795
Statement of Comprehensive Income

                                                   Six months        Six months
                                                    Unaudited         Unaudited
 Figures in Rands                              31 August 2018    31 August 2017

 Revenue                                          148,074,478       133,798,582
 Cost of sales                                    -55,127,706       -47,732,578
 Gross profit                                      92,946,772        86,066,004
 Other income                                       3,141,890           531,963
 Operating expenses                               -49,512,904       -45,103,218
 Operating profit                                  46,575,758        41,494,749
 Investment revenue                                 6,938,115         6,219,615
 Fair value adjustment                             -1,614,551                 -
 Finance costs                                     -6,962,258        -7,967,571
 Profit before taxation                            44,937,064        39,746,793
 Taxation                                         -12,867,214       -10,858,820
 Profit for the period ended                       32,069,850        28,887,973
 Other comprehensive income                           375,163                 -
 Total comprehensive income                        32,445,013        28,887,973

 Total comprehensive income attributable to:
 Owners of the parent                              32,065,858        28,369,405
 Non-controlling interest                             379,155           518,568
                                                   32,445,013        28,887,973

 Share information:

 Weighted average number of shares                302,741,722       302,741,722
 Earnings per share (cents)                             10,59              9,37
 Headline earnings per share (cents)                    10,91              9,40

 Net asset value per share (cents)                     143,68            133,91
 Net tangible asset value per share (cents)            114,94            105,17
Statement of Cash Flows

                                                   Six months     Six months
                                                    Unaudited      Unaudited
                                                    31 August      31 August
 Figures in Rands                                        2018           2017

 Cash flows from operating activities
 Cash generated from operations                    52,397,093     55,231,446
 Interest received                                  6,319,568      5,537,428
 Dividends received                                   618,547        682,187
 Finance costs                                     -6,962,258     -7,967,571
 Tax paid                                         -11,384,792    -10,422,506
 Net cash from operating activities                40,988,158     43,060,984

 Cash flows from investing activities
 Purchase of property, plant and equipment         -1,451,982       -863,068
 Disposal of property, plant and equipment             20,433              -
 Additional investments in current subsidiaries      -259,846     -1 259 552
 Purchase of investment property                            -       -778,388
 Net cash acquired in business combination                  -     -3,976,989
 Purchase of investment in associate                 -412,321
 Purchase of other financial assets                         -     -4,402,299
 Disposal of investment property                            -     18,220,578
 Proceeds on disposal of financial assets           6,008,508              -
 Net cash from investing activities                 3,904,792      6,940,282

 Cash flows used in financing activities
 Dividends paid to non-controlling interests         -712,200       -285,000
 Proceeds from shareholders’ loans repaid              84,020        389,317
 Dividends paid                                   -18,164,504    -15,137,086
 Net movement in other financial liabilities       -5,820,994    -12,647,776
 Net cash used in financing activities            -24,613,678    -27,680,545

 Total cash movement for the 6 months              20,279,272     22,320,721
 Cash at the beginning of the 6 months            125,818,709    115,451,178
 Total cash at end of the 6 months                146,097,981    137,771,899
Statement of Changes in Equity
                                                                               Share                            Total
                                                                               based                   attributable to          Non-
                                              Total stated    Revaluation    payment      Retained     equity holders    controlling
                                                   capital        reserve    reserve        income       of the Group       interest   Total equity
                                                                                   -
 Balance at 1 March 2017                       324,779,200      3,866,845               64,360,955        393,007,000      2,310,826    395,317,826
 Share option expense                                    -              -    184,415             -            184,415              -        184,415
 Acquisition from non-controlling interest               -              -          -    -1,029,692         -1,029,692       -229,860     -1,259,552
 Total comprehensive income for the 6 months             -              -          -    28,369,405         28,369,405        518,568     28,887,973
 Dividends                                               -              -          -   -15,137,086        -15,137,086       -285,000    -15,422,086

 Balance at 31 August 2017                     324,779,200      3,866,845    184,415    76,563,582        405,394,042      2,314,534    407,708,576
 Total comprehensive income for the 6 months             -        597,291    225,930    30,677,491         31,500,712        385,442     31,886,154
 Acquisition from non-controlling interest               -              -          -      -666,747           -666,747       -382,889     -1,049,636
 Other                                                   -              -          -             -                  -        180,000        180,000
 Dividends                                               -              -          -   -15,137,086        -15,137,086       -443,270    -15,580,356

 Balance at 28 February 2018
                                               324,779,200      4,464,136    410,345    91,437,240        421,090,921      2,053,817    423,144,738

 Total comprehensive income for the 6 months             -        375,163          -    31,690,695         32,065,858        379,155     32,445,013
 Acquisition from non-controlling interest               -              -          -             -                  -       -259,846       -259,846
 Dividends                                               -              -          -   -18,164,504        -18,164,504       -712,200    -18,876,704

 Balance at 31 August 2018                     324,779,200      4,839,299    410,345   104,963,431        434,992,275      1,460,926    436,453,201

SEGMENT ANALYSIS

The following information relates to segment financial information of the group:

 31 August 2018
                                                        Profit
 Figures in Rand                      Revenue       Before tax           Assets      Liabilities

 Insurance broking                 10,787,501        1,571,912        8,450,955        1,961,597
 Wealth management                134,966,367       34,442,449      115,493,089       56,819,202
 Administration of estates
 and trusts                         2,502,570          975,754        3,151,637        1,531,454
 Property services                 27,515,613        2,285,450      373,750,277      287,992,018
 Investments                       38,108,309       29,691,981      336,155,896          348,927

 Intercompany eliminations        -65,805,882      -24,030,482     -187,256,881     -135,361,425
                                  148,074,478       44,937,064      649,744,973      213,291,773


 31 August 2017
                                                        Profit
 Figures in Rand                      Revenue       before tax           Assets       Liabilities
 Insurance broking                  9,564,564        1,404,677       10,005,219         1,964,850
 Wealth management                113,496,965       29,015,847       93,543,208        43,450,351
 Administration of estates
 and trusts                         1,161,841           67,031        2,814,728         1,232,206
 Property services                 27,875,537        3,760,513      387,274,361       306,163,539
 Investments                       28,255,633       24,491,170      317,475,732         1,530,112

 Intercompany eliminations        -46,555,958      -18,992,445     -189,526,453      -140,462,831
                                  133,798,582       39,746,793      621,586,795       213,878,227
COMMENTARY

BASIS OF PREPARATION AND ACCOUNTING POLICIES

The accounting policies and method of measurement and recognition applied in the
preparation of these condensed unaudited consolidated interim results are in terms of
International Financial Reporting Standards (“IFRS”) and are consistent with those applied in
the audited annual financial statements for the previous year ended 28 February 2018. The
unaudited consolidated interim results are prepared in accordance with the requirements of
the JSE Limited Listings Requirements for interim reports and the requirements of the Companies
Act, 71 of 2008.

The unaudited consolidated interim results are presented in terms of the minimum disclosure
requirements set out in International Accounting Standards (“IAS”) 34 – Interim Financial
Reporting, as well the SAICA Financial Reporting Guides as issued by the Accounting Practices
Committee and Financial Reporting Pronouncements as issued by the Financial Reporting
Standards Council.

The results were prepared by an independent compiler, Professor Sean Weldon CA(SA) M
Comm (Acc), in conjunction with the Financial Director, Mr Glenn Orsmond CA(SA).

Any reference to future financial performance included in this announcement has not been
reviewed nor reported on by the Group’s external auditors.

The directors of NVest (“the Board”) take full responsibility for the preparation of the interim
report.
RECONCILIATION OF HEADLINE EARNINGS PER SHARE

                                                                            Group
                                                                 Six months        Six months
                                                                  Unaudited         Unaudited
 Figures in Rands                                            31 August 2018    31 August 2017
 Earnings attributable to equity holders of the parent           32,065,858        28,369,405
 Fair value adjustments of investment property                    1,614,551                 -
 Property revaluation gain                                         -375,163                 -
 Loss on disposal of property, plant and equipment                    5,550           107,694
 Taxation effect                                                   -279,177           -30,154

 Headline earnings attributable to equity holders of
 the parent                                                      33,031,619        28,446,945

  Per share information:

  Weighted average number of shares                             302,741,722       302,741,722
  Earnings per share                                                  10,59              9,37
  Headline earnings per share (cents)                                 10,91              9,40


FINANCIAL COMMENTARY

NVest has performed well during the period under review and has achieved a strong set of
results despite challenging operating conditions. This performance is underpinned by double
digit growth in Group Revenue (up by 10,7% compared with 31 August 2017) and Net Profit
After Tax (up by 11,1% compared with 31 August 2017). There was also continued growth in
Assets under Management and Administration which increased to R30,6 billion compared with
R29,1 billion as at 31 August 2017. This growth has been driven primarily by the underlying
performance of the core Private Wealth Management, Asset Management and Stockbroking
subsidiaries within the Group which continue to attract assets and perform strongly. The internal
integration of those assets across product and value propositions is also maturing and
contributing to the overall profit numbers. Complementary business subsidiaries such as Short-
Term Insurance and the Wills and Estates subsidiaries are performing to expectation and
continue to provide valuable service propositions to clients. Operating margins have improved
as a result of robust cost controls.

PROSPECTS

The Group continues to perform strongly and provides consistently attractive returns for
shareholders despite turbulent operating and market conditions which present significant
headwinds to the financial services and Private Wealth Management industry. This underlying
performance bears testimony to the Group’s business model, its diverse income streams and
market position in its core revenue generating businesses.

The Group has positive operating cash flows and substantial capital reserves to leverage from
and the Board and Management remain committed to investing in the organic and acquisitive
growth of the Group to create a sustainable, long-term business which generates meaningful
returns for all its stakeholders.

The acquisitive growth agenda of the Group remains a priority. Focus in this regard will be on
strengthening market share and distribution channels and footprint of existing business
operations as well as diversification opportunities within the broader financial services sector.
CHANGES TO THE BOARD

The following changes were made to the Board of Directors during the period under review
and to the date of this report:

-   Christopher Grant Lemmon was appointed to the Board in the capacity of Executive
    Director with effect from 1 March 2018.
-   Brendan Joseph Connellan was appointed to the Board in the capacity of Executive
    Director with effect from 20 August 2018
-   Glenn Wayne Orsmond was appointed to the Board in the capacity of Financial Director
    with effect from 1 September 2018 (after the reporting period).

DIVIDEND DECLARATION

The Board has declared an interim dividend (Number 8) of 5,50 cents per share, which amounts
to 55% of headline earnings. The dividend is declared out of income reserves of the Group. The
dividend will be subject to a dividend withholding tax rate of 20% or 1.10 cents per ordinary
share. Shareholders, unless exempt or qualifying for a reduced withholding tax rate, will receive
a net dividend of 4.40 cents per share. NVest’s tax reference number is 9053981180.

The number of ordinary shares which will be eligible for the dividend at the declaration date is
302 741 722. The salient dates for the dividend will be as follows:

                                                                                     2018
 Last date to trade “cum? dividend                                   Tuesday, 11 December
 Shares commence trading ”ex” dividend                             Wednesday, 12 December
 Record date (date shareholders recorded in share register)           Friday, 14 December
 Payment date                                                        Tuesday, 18 December

Shareholders may not dematerialise or rematerialise their share certificates between
Wednesday, 12 December 2018 and Friday 14 December 2018, both dates inclusive.

For and on behalf of the Board

Anthony Godwin                                                             Glenn Orsmond CA(SA)
Chief Executive Officer                                                     Financial Director

East London
20 November 2018

 Executive Directors:                                              Non-executive Directors:
 Anthony Godwin (Chief Executive Officer)                  Jonathan Goldberg# (Chairperson)
 Glenn Orsmond (Financial Director)                                         Siviwe Kwatsha#
 Brendan Connellan (Executive Director)                                        Lana Weldon#
 Michael Estment (Executive Director)                                         Dylan Schemel
 Christopher Lemmon (Executive Director)                                    # - independent

 Company Secretary:                                                      Designated Advisor:
 Brendan Connellan                               Arbor Capital Sponsors Proprietary Limited

 Transfer Secretaries:                                                    Registered Office:
 Computershare Investor Services Proprietary                                  42 Beach Road
 Limited                                                                             Nahoon
 70 Marshall Street                                                       East London, 5241
 Johannesburg, 2001                                              (PO Box 8132, Nahoon, 5210)
 (PO Box 61051 Marshalltown, 2107)

 Website:
 http://www.nvestholdings.co.za/

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