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Condensed reviewed group financial statements for the year ended 31 August 2012
EFFICIENT GROUP LIMITED
(Incorporated in the Republic of South Africa)
(Registration Number: 2006/036947/06)
Share Code: EFG ISIN: ZAE 000151841
(Efficient)
CONDENSED REVIEWED GROUP FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 AUGUST
2012
1. COMMENTARY
Considering the changes that have taken place in the financial services industry over the
past few years, we need to ensure that the practical roll-out of our business strategy is
aligned with prevailing industry trends at all times. Whilst changes in the regulatory
environment add additional costs to the business, they also provide us with an
opportunity for accelerated growth. We have therefore, over the past two years and in
line with our stated strategic intent, successfully invested in and implemented the
infrastructure to support the additional regulatory requirements and the concomitant
growth of our business, the scalability of which is now becoming evident.
Other changes and pressures affecting our industry include the uncertainty around global
growth, changes in consumer savings and spending patterns, the use of technology, the
multitude of regulatory initiatives, pressure on commissions and fees and the surfeit of
similar investment products offered by numerous financial services providers.
The importance of a strong brand, distribution channel relationships, product
competitiveness, the use of technology, product performance and differentiation, and
staff retention will play an ever increasing important role in ensuring the sustainability
of our business as a financial services provider. Over the past few years the Efficient
Group has invested comprehensively in these areas and we are pleased to report on the
substantial progress we have made with the majority of these key issues affecting our
business. We can confidently report that we have built a foundation for growth.
1.1 Financial Results
In line with the group strategy to, amongst others, invest in the expansion of its
distribution network (and the increase in support services associated with this growth),
investment in our brand and the realignment of the asset management division, fixed
expenses increased by 22%.
Although the success of the strategy rollout is already expressed in the growth in revenue
from the financial services division and the increase in performance fees, the full effect
of this strategy is expected to materialise in the next two financial years.
The poor performance of our investments in associates and the subsequent impairment
of one of the investments is the main contributor to the loss reported by the group for
the year under review followed by the increase in expenses and lower fixed fees as a
result of the assets under management.
A substantial share of the groups revenue is based on the value of assets under
management, assets under administration and assets under advice.
Assets under management are represented by amounts invested in the unit trust funds,
unit trust funds of funds and private share portfolios managed by the asset management
division. The group has R 2 990 million (2011: R 2 965 million) assets under management.
Assets under administration are represented by unit trust funds and unit trust funds of
funds administrated by the group.
Administration of assets includes liability administration and asset administration such as
daily pricing of unit trust funds. The group administrates assets amounting to R 2 177
million (2011: R 1 566 million).
Assets under advice are represented by client investments under a mandate in favour of
Efficient Financial Services. Total investments by clients on a mandate amount to R 1 323
million (2011: R582 million).
Revenue increased by 14% compared to the previous financial year. For the 12 months
ended 31 August 2012, the group generated R 55 million in revenue. Performance fees
increased by 15%, in line with the growth in the JSE All Share Index.
The asset management division launched a fixed income fund to further enhance
revenue. The positive effect of the performance fees and revenue from the new fund was
eroded by lower fixed fees earned by the asset management division, mainly due to the
cancellation of the ABSA mandates as reported in the previous integrated report, and
lower fixed fee generating assets under management.
Asset administration revenue increased by 38% as a result of an increase in assets under
management, and the increase in white label administration.
Financial services almost doubled its revenue by increasing the number of independent
financial advisors from 17 to 36. In line with the increase in revenue the variable
expenses also escalated and the net effect of the increase in revenue and variable
expenses is the improvement of gross contribution (revenue less variable expenses)
by financial services with 33%.
Fixed expenses increased by 22% due to the cost relating to the companys investment in
its brand and distribution network and the realignment of the asset management division.
The company is reporting an operating loss for the financial year under review. The
impairment of the investment in an associate and the losses from associates increased
the operating loss. The operating loss was reduced by higher investment income on
surplus funds and the profit with the sale of software developed by the Group.
Net tangible assets per share are reported at 59.94 cents (2011: 86.91 cents). The
decrease in the net tangible assets per share is mainly due to the increase in the long-
term liabilities (relating to the acquisitions of financial advisory client bases and the
buy-out of the minority shareholder in Efficient Financial Services (Pty) Ltd) and the
increase in trade and other receivables due to the increase in operational activities.
Cash and cash equivalents represent 66% (2011: 72%) of the net tangible assets. The
reduction in cash and cash equivalents is due to the funding of the investment activities
as detailed in the cash flow statement. The cash is reserved for the groups expansion and
diversification strategy.
Cash of R 1.2 million (2011: R 8.7 million) was generated from operations for the 12
months ended 31 August 2012. Interest earned contributed R 1.5 million to the cash flow.
The dividend paid in terms of the 2011 financial year and tax paid, reduced the cash
inflow by R 1 million and R 1.1 million respectively. The cash utilised for investment
activities of R9.8 million relates mainly to the acquisition of financial advisory client
base and loans to Marion Technology (Pty) Ltd.
1.2 Operating overview
Efficient Advise, our financial planning business, continued to make solid progress during
the financial year, especially in the expansion of our distribution footprint across South
Africa and in the expansion of its client base. Efficient Advise now has representation
through branches and advisory agencies in all nine provinces across South Africa. During
the year under review, 19 financial advisers joined Efficient Advise, growing the number
of advisers to 36. Further infrastructure and support services have been put in place to
underpin this divisions rapid expansion. Going forward the focus will remain on
increasing the number of advisors whilst ensuring that at Group level, through increased
spending on branding, advertising and the roll-out of technology, we assist this
distribution network to grow client numbers and revenue.
Efficient Advise was awarded Professional Practice status by the Financial Planning
Institute of South Africa.
Efficient Select, our asset management business, delivered investment performance to
clients in line with investment objectives and benchmarks. A fixed income division has
also successfully been established, expanding the range of asset classes managed by
Efficient Select.
Efficient Select received a Raging Bull award for the Efficient Active Allocation Fund in
the Worldwide Asset Allocation Flexible Fund.
Efficient Transact, our asset administration business, remains focused on delivering
administrative services of the highest quality. Our strategy for Efficient Transact
provides for the acquisition or development of further administrative financial services
offerings.
Efficient Capital, through its subsidiary Efficient Asset Finance, concluded the
acquisition of Zeal Finance, expanding the number of asset finance intermediaries from
two to twelve. With financing agreements with most financial institutions in place,
Efficient Asset Finance is well positioned for servicing the white and yellow goods
markets.
1.3 Cash Dividend
A dividend of 2.60 cents per share was paid on 5 December 2011 from profits generated
in the 2011 financial year. No dividend was declared in respect of the 2012 financial year.
1.4 Changes to the board
Jerry Mabena joined the board in August 2012 as a Non-Executive Director after the
resignation of Lindiwe Gadd and her alternate Rapulane Mogototoane in June 2012.
Ronald Paterson and his alternate, Linda Whitfield also resigned in September 2012.
Mickey Giles resigned in October 2012.
1.5 Basis of preparation
The condensed preliminary group financial statements 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 Listing Requirements, the Companies Act of South Africa 2008 and the
AC 500 series of Interpretation as issued by the APB. The accounting policies applied are
consistent with those applied in the previous reporting periods.
The condensed group financial statements of Efficient Group Limited for the year ended
31 August 2012 have been reviewed by the companys auditor, KPMG Inc. In their review
report dated 7 November 2012, which is available for inspection at the Companys
Registered Office, KPMG Inc state that their review was conducted in accordance with the
International Standard on Review Engagements 2410, Review of Interim Information
Performed by the Independent Auditor of the Entity, which applies to a review of group
preliminary financial information, and have expressed an unmodified conclusion on the
condensed group preliminary financial statements.
The reviewed condensed group financial statements are prepared by Anton de Klerk
(CA) SA, the Chief Financial Officer of Efficient Group.
2. CONDENSED PRELIMINARY GROUP FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 AUGUST 2012
2.1 Condensed reviewed statements of Group Group Company Company
financial position 2012 2011 2012 2011
R000 R000 R000 R000
Assets
Non-Current Assets
Equipment (Note 1) 649 1 418 289 557
Goodwill 23 494 23 494 - -
Intangible assets (Note 2) 20 784 21 803 - -
Investments 5 625 3 297 152 509 143 574
Equity accounted investments (Note 3) 6 865 10 678 2 934 8 944
Long-term receivable (Note 4) 2 902 - 895 -
Deferred tax 256 250 168 125
60 575 60 940 156 795 153 200
Current Assets
Related party loans (Note 8.1) - - 26 396 21 754
Trade and other receivables 9 583 5 137 840 684
Cash and cash equivalents 15 861 25 070 589 11 916
Short-term portion of long-term receivables 1 042 - 494 -
Tax receivable 19 - 36 -
26 505 30 207 28 355 34 354
Total Assets 87 080 91 147 185 150 187 554
Equity and Liabilities
Equity
Share capital and share premium (Note 5) 58 657 57 221 171 862 170 426
Treasury shares (149) (149) - -
Accumulated income 9 933 22 938 8 777 15 839
Fair-value-adjustment reserve 39 (3) - -
Total equity attributable to equity holders 68 480 80 007 180 639 186 265
of the parent
Non-controlling interest
parent (44) 69 - -
Non-Current Liabilities
Long-term liabilities (Note 6) 2 298 - 1 898 -
Deferred tax 4 854 5 721 - -
7 152 5 721 1 898 -
Current Liabilities
Trade and other payables 9 615 5 078 2 613 1 289
Short-term portion of long-term liability 1 250 - - -
Tax payable 627 272 - -
11 492 5 350 2 613 1 289
Total Liabilities 18 644 11 071 4 511 1 289
Total Equity and Liabilities 87 080 91 147 185 150 187 554
Net asset value per share (cent) 169.59 200.32
Net tangible asset value per share (cent) 59.94 86.91
2.2 Condensed reviewed statements of Group Group Company Company
comprehensive income 2012 2011 2012 2011
R000 R000 R000 R000
Continuing operations
Revenue 55 433 48 782 11 758 10 687
Operating expenses (58 516) (45 190) (13 133) (11 461)
Operating (loss)/profit (3 083) 3 592 (1 375) (774)
Dividends received - 110 - -
Finance income 1 537 1 451 815 700
Finance cost (26) (165) - -
Profit on sale of equipment 436 48 4 34
Other expenses (3) - 1 -
Realised fair value adjustment of 247 - - -
investment designated at fair value
through profit or loss
Unrealised fair value adjustment of 285 - 285 -
investment designated at fair value
through profit or loss
Remeasurement of long-term liability 316 - 316 -
Impairment of investment in associates (6 010) - (6 010) -
Share of losses from associates (1 983) (241) - -
(Loss)/profit before taxation (8 284) 4 795 (5 964) (40)
Taxation (147) (1 704) (60) (310)
(Loss)/profit for the year (8 431) 3 091 (6 024) (350)
Other comprehensive income:
Realised fair value adjustment of
available-for-sale financial assets (6) - - -
Unrealised fair value adjustment of
available-for-sale financial assets 48 (22) - -
Total comprehensive (loss)/income for
the year (8 389) 3 069 (6 024) (350)
(Loss)/profit for the year attributable to:
Equity holders of the parent (8 407) 3 104 (6 024) (350)
Non-controlling interest (24) (13) - -
(8 431) 3 091 (6 024) (350)
Total comprehensive (loss)/income for the
year attributable to:
Equity holders of the parent (8 365) 3 082 (6 024) (350)
Non-controlling interest (24) (13) - -
(8 389) 3 069 (6 024) (350)
(Loss)/Earnings per share (cents) (Note 7) (20.82) 7.77
Diluted (loss)/earnings per share (cents)
(Note 7) (21.38) 7.77
2.3 Condensed reviewed Ordinary Treasury Non- Accumula- Fair value Total
statements ofchanges shares and shares control- ted adjust- equity
in equity share ling income ment for
premium interest available-
for-sale
-assets
reserve
Group R'000 R'000 R'000 R'000 R'000 R000
Balance at 31 August 2010 54 189 (7 200) 672 30 699 19 78 379
Prior year adjustment
- Issue of share capital 1 763 - - - - 1 763
Restated balance as at 31
August 2010 55 952 (7 200) 672 30 699 19 80 142
Issue of share capital 1 269 - - - - 1 269
Share repurchase by the Share
Incentive Trust - (149) - - - (149)
Acquisition of minority interest
in Efficient Collect
Investments (Pty) Ltd - - (476) (424) - (900)
Cancellation of treasury shares - 7 200 - (7 200) - -
Dividend paid - - (114) (3 241) - (3 355)
Total comprehensive income for
the year - - (13) 3 104 (22) 3 069
Balance at 31 August 2011 57 221 (149) 69 22 938 (3) 80 076
Issue of share capital 1 436 - - - - 1 436
Acquisition of minority
interest in Efficient
Financial Services (Pty) Ltd - - (69) (3 580) - (3 649)
Disposal of 20% of the
investment in Efficient Asset
Finance (Pty) Ltd - - (20) 20 - -
Dividend paid - - - (1 038) - (1 038)
Total comprehensive loss for
the year - - (24) (8 407) 42 (8 389)
Balance at 31 August 2012 58 657 (149) (44) 9 933 39 68 436
Company R'000 R'000 R'000 R'000 R'000 R000
Balance at 31 August 2010 167 394 - - 19 324 - 186 718
Prior year adjustment
- Issue of share capital 1 763 - - - - 1 763
Restated balance as at 31
August 2010 169 157 - - 19 324 - 188 481
Issue of share capital 1 269 - - - - 1 269
Dividend paid - - - (3 135) - (3 135)
Total comprehensive loss for
the year - - - (350) - (350)
Balance at 31 August 2011 170 426 - - 15 839 - 186 265
Issue of share capital 1 436 - - - - 1 436
Dividend paid - - - (1 038) - (1 038)
Total comprehensive loss for
the year - - - (6 024) - (6 024)
Balance at 31 August 2012 171 862 - - 8 777 - 180 639
Group Group Company Company
2.4 Condensed reviewed statements of 2012 2011 2012 2011
cash flows R'000 R'000 R'000 R'000
Cash flows from operating activities
Cash receipts from customers 50 987 49 480 11 602 10 622
Cash paid to suppliers and employees (49 746) (40 758) (11 444) (10 745)
Cash generated by /(utilised from)
from operations 1 241 8 722 158 (123)
Finance income 1 537 1 451 815 700
Interest paid (26) (165) - -
Dividends received - 110 - -
Dividends paid (1 038) (3 355) (1 038) (3 135)
Taxation paid (1 154) (742) (140) (321)
Net cash inflow/(outflow) from operating
activities 560 6 021 (205) (2 879)
Cash flows from investing activities
Acquisition of business (2 453) (1 193) - -
Long-term loan to associate (2 265) - - -
Increase in long-term receivable (1 624) - (1 389) -
Acquisition of available-for-sale financial
asset (5 000) (2 300) (5 000) -
Proceeds on the disposal of available-for-
sale financial assets 3 247 - - -
Acquisition of non-controlling interest - (900) - -
Proceeds from disposal of equipment 1 - - -
Acquisition of equipment (1 675) (772) (2 212) (233)
(9 769) (5 165) (8 601) (233)
Cash flows from financing activities
Share repurchase - (149) - -
(Decrease) / increase in related party loans - - (2 521) 4 693
- (149) (2 521) 4 693
Total cash and cash equivalents movement for
the year (9 209) 707 (11 327) 1 581
Total cash and cash equivalents at the
beginning of year 25 070 24 363 11 916 10 335
Total cash and cash equivalents at the end
of the year 15 861 25 070 589 11 916
2.5 Notes to condensed reviewed group financial statements
Opening Disposals Additions Depreciation Closing
1. Equipment Balance Balance
Group - Aug 2012 R000 R000 R000 R000 R000
Furniture, fixtures and office equipment 421 (2) 83 (218) 284
Computer equipment 828 (1 545) 1 592 (552) 323
Leasehold improvements 132 - - (99) 33
Other fixed assets 37 - - (28) 9
Total 1 418 (1 547) 1 675 (897) 648
Group - Aug 2011 R000 R000 R000 R000 R000
Furniture, fixtures and office equipment 448 - 184 (211) 421
Computer equipment 657 8 582 (419) 828
Leasehold improvements 231 - - (99) 132
Other fixed assets 73 - 6 (42) 37
Total 1 409 8 772 (771) 1 418
Company - Aug 2012 R000 R000 R000 R000 R000
Furniture, fixtures and office equipment 242 - 12 (109) 145
Computer equipment 176 (2 121) 2 199 (149) 105
Leasehold improvements 132 - - (99) 33
Other fixed assets 7 - 1 (2) 6
Total 557 (2 121) 2 212 (359) 289
Company - Aug 2011 R000 R000 R000 R000 R000
Furniture, fixtures and office equipment 289 - 51 (98) 242
Computer equipment 138 - 182 (144) 176
Leasehold improvements 231 - - (99) 132
Other fixed assets 9 - - (2) 7
Total 667 - 233 (343) 557
A register containing the information required by paragraph 25(3) of Part C of Chapter 2 of
the Companies Regulations 2011 is available for inspection at the registered office of the
Company
Opening Disposals Acquired Amortisation Closing
Balance through Balance
2. Intangible assets business
combination
Group - Aug 2012 R000 R000 R000 R000 R000
Trade Names 1 039 - - (66) 973
Customer contracts and customer
relationships 20 764 (2 320) 4 833 (3 466) 19 811
Total 21 803 (2 320) 4 833 (3 532) 20 784
Group - Aug 2011 R000 R000 R000 R000 R000
Trade Names 1 105 - - (66) 1 039
Customer contracts and customer
relationships 22 842 - 1 274 (3 352) 20 764
Total 23 947 - 1 274 (3 418) 21 803
The remaining useful life of the trade names is 15 years, and customer contracts and customer
relationships are between 5 and 9 years.
3. Equity accounted investments
Name Country of Proportion Principal
incorporation of ownership activities
interest
C & A Financial Services (Pty) Ltd RSA 49.0% Financial Services
Thebe Stockbroking (Pty) Ltd RSA 25.1% Financial Services
Marion Technology (Pty) Ltd RSA 50.0% IT Services
Efficient Financial Services (Namibia) (Pty) Ltd NAM 50.0% Financial Services
The Equity accounted investment Group Company
consists of:
2012 2011 2012 2011
R000 R000 R000 R000
C & A Financial Services (Pty) Ltd 434 316 - -
Thebe Stockbroking (Pty) Ltd 2 837 10 362 2 841 8 944
Marion Technology (Pty) Ltd 3 594 - - -
Efficient Financial Services (Namibia) (Pty) Ltd - - 93 -
6 865 10 678 2 934 8 944
Reconciliation of the Equity accounted investments Group Company
2012 2011 2012 2011
R000 R000 R000 R000
Opening balance 10 678 10 919 8 944 8 944
Loss for the year (1 983) (241) - -
Impairment of investment in associate (6 010) - (6 010) -
Elimination of inter-company profit on sale of
equipment to associate (285) - - -
Realisation of inter-company profit on sale of
equipment to associate 75 - - -
2 475 10 678 2 934 8 944
Long-term loan to associate 4 390 - - -
Investment in associate 6 865 10 678 2 934 8 944
4. Long-term receivable 2012 2011 2012 2011
R000 R000 R000 R000
Marion Technology (Pty) Ltd 1 389 - 1 389 -
The loan to Marion Technology forms part of the
acquisition of the 50% share in Marion Technology
(Pty) Ltd. This loan is unsecured and repayable in
36 monthly instalments of R43 460.65 and bears
interest at prime plus 2%
L. Benade 2 555 - - -
The loan to L. Benade forms part of the acquisition
of a customer base. This loan is unsecured and
repayable in seven monthly instalments of R20 758.36,
and then in 53 monthly instalments of R60 477.18.
The loan bears interest at prime rate.
Less: Short-term portion of long-term receivable (1 042) - (494) -
2 902 - 895 -
During the year under review, the number of shares authorised and in issue changed as follows:
5. Share Capital Number of shares R/share R000
000
Authorised
As at 31 August 2011 361 350 0.00000277 1.0
Issued:
At beginning of year 39 939 0.00000277 0.11
Add: Issue of ordinary shares (February 2012) 821 0.00000277 0.02
Issued share capital at the end of year 40 760 0.00000277 0.13
Group Company
6. Long-term liabilities
2012 2011 2012 2011
R000 R000 R000 R000
Vendor finance 1 650 - - -
This liability forms part of the acquisition of a
customer base as referred to in the business
combination note. This loan is unsecured and interest
free. It is repayable in two instalments,one of
R1 250 000 on 1 March 2013 and the balance on
1 March 2014.
Shares to be issued 1 898 - 1 898
This liability relates to the acquisition of the
non-controlling share (10%) held in Efficient
Financial Services (Pty) Ltd from the managing director
of that company. The amount is re-measured at the end
of each reporting period.
3 548 - 1 898 -
Less: Short-term portion (1 250) - - -
2 298 - 1 898 -
7. Earnings per ordinary share Group Group
2012 2011
R000 R000
Weighted average number of ordinary shares
Number of shares in issue at the end of the year 40 760 39 939
Less: issue of ordinary shares during the year (821) (233)
39 939 39 706
Add: Weighted average number of ordinary shares issued during the
year 441 233
Weighted average number of ordinary shares in issue 40 380 39 939
(Loss)/Earnings per share (cents) (20.82) 7.77
Attributable (loss)/earnings (8 407) 3 104
Weighted average number of ordinary shares in issue 40 380 39 939
Diluted (loss)/earnings per share (cents) (21.38) 7.77
Diluted (loss)/earnings (8 635) 3 104
Weighted average number of ordinary shares in issue 40 380 39 939
Diluted (loss)/earnings are calculated as follows (8 635) 3 104
Attributable (loss)/earnings (8 407) 3 104
Less: Re-measurement of long-term liability (316) -
Add: Taxation on re-measurement of long-term liability 88 -
Headline (loss)/earnings per share (6.71) 7.77
Headline (loss)/earnings (2 711) 3 104
Weighted average number of ordinary shares in issue 40 380 39 939
Diluted headline (loss)/earnings per share (7.28) 7.77
Diluted headline (loss)/earnings (2 939) 3 104
Weighted average number of ordinary shares in issue 40 380 39 939
Headline (loss)/earnings are calculated as follows (2 711) 3 104
Attributable (loss)/earnings (8 407) 3 104
Add: Impairment of investment in associate 6 010 -
Less: Profit on disposal of equipment (436) -
Add: Taxation on profit on disposal of equipment 122 -
Diluted headline (loss)/earnings are calculated as follows (2 939) 3 104
Headline (loss)/earnings (2 711) 3 104
Less: Re-measurement of long-term liability (316) -
Add: Taxation on re-measurement of long-term liability 88 -
8. Related Parties
Group Company
8.1 Loans to related parties
2012 2011 2012 2011
R000 R000 R000 R000
Efficient Collective Investments (Pty) Ltd - - 2 639 2 367
Efficient Select (Pty) Ltd - - 11 960 16 235
Efficient Financial Services (Pty) Ltd - - 6 118 2 459
Efficient Asset Finance (Pty) Ltd - - 921 278
Efficient Share Incentive Scheme Trust - - 149 149
Efficient Capital (Pty) Ltd - - 4 537 -
C & A Financial Services (Pty) Ltd - - 21 -
Efficient International Investments (Pty) Ltd - - 51 266
- - 26 396 21 754
The loans are unsecured, bear no interest and have no fixed repayment terms.
Included in the equity accounted investments is an amount of R93 000 owed by Efficient
Financial Services (Namibia) (Pty) Ltd to Efficient Financial Services (Pty) Ltd and an amount
of R4 297 000 owed by Marion Technology (Pty) Ltd to the Group.
Included in long-term receivable is an amount of R1 389 000 owed by Marion Technology (Pty)
Ltd. Included in trade and other receivables is an amount of R260 809 owed by Marion
Technology (Pty) Ltd, and included in trade and other payables an amount of R155 616 owed to
Marion Technology (Pty) Ltd.
Included in long-term liability is an amount of R1 898 000 that relates to a share-base
payment with a prescribed officer of the company.
Group Company
8.2 Related party transactions
2012 2011 2012 2011
R000 R000 R000 R000
Rent paid - Midnight Storm Investments
299 (Pty) Ltd 735 600 448 340
Administration fees and rent received -
Efficient Select (Pty) Ltd - - 5 171 6 752
Administration fees and rent received -
Efficient International Investments (Pty) Ltd - - 474 834
Administration fees and rent received -
Efficient Collective Investments (Pty) Ltd - - 1 666 1 063
Administration fees and rent received -
Efficient Financial Services (Pty) Ltd - - 5 177 1 794
Information Technology services paid -
Marion Technology (Pty) Ltd 761 - 618 -
Rent received from Marion Technology
(Pty) Ltd 13 - - -
Interest received from Marion Technology
(Pty) Ltd 72 - - -
Service fees received by Efficient
Collective Investments (Pty) Ltd from: - - - -
Efficient Prudential Fund 2 101 1 289 - -
Efficient Prudential Fund of Funds 5 660 3 684 - -
Efficient Flexible Fund of Funds 1 781 2 157 - -
Efficient Money Market Fund 256 305 - -
Efficient CPI + 2% Fund of Funds 394 163 - -
Efficient CPI + 4% Fund of Funds 1 661 97 - -
Efficient CPI + 6% Fund of Funds 596 109 - -
Efficient Active Quant Fund 784 1 673 - -
Efficient General Equity Fund 2 029 2 258 - -
Efficient Active Allocation Fund 1 341 1 393 - -
Efficient Fixed Income Fund 628 - - -
Efficient Property Fund 1 487 2 732 - -
8.3 Transactions with directors and prescribed Group Company
officers (including their families)
2012 2011 2012 2011
R000 R000 R000 R000
Remuneration paid to executive directors and prescribed officers
- Remuneration 9 800 9 353 5 693 4 545
- Share-based payment (49) 99 (28) (40)
9 751 9 452 5 665 4 505
9. Business Combinations
The group had the following business combinations and other acquisitions during the year under
review:
On 1 September 2011 the Group purchased the non-controlling share (10%) held in Efficient
Financial Services (Pty) Ltd from the managing director of that company. The total acquisition
price is R3 649 625, and will be settled by issuing 820 500 Efficient Group Ltd shares on
fulfilment of the suspensive conditions and a further allocation of shares when certain
performance conditions are met over the next three years. This transaction forms part of the
groups initiative to incentivise senior personnel on a group level rather than on a subsidiary
level. This additional allocation will be limited to 1 265 000 shares.
The Group purchased a 50% share in Marion Technology (Pty) Ltd, an Information Technology company,
in partnership with Marion IT Solutions (Pty) Ltd effective 1 April 2012. The acquisition price of
R5 625 000 was settled in cash of R3,5 million and the balance by transferring software developed
by Efficient Group Ltd to the acquired entity. The acquisition price was credited to a loan in
favour of Efficient Group Ltd. This was a strategic acquisition that is important to support our
information technology needs and the commercialisation of the Efficient Group investment reporting
and information software.
Acquisition of a Financial Advisory Client base was purchased for a net amount of R580 000 and is
payable in 4 instalments which is reviewed on the due date based on the profit guaranteed by the
financial advisor. Efficient Financial Services (Pty) Ltd appointed an Independent Financial Adviser
to service the acquired client base. The effective date of this transaction was 1 November 2011.
The Group also purchased 6 other Financial Advisory Client bases from various Independent Financial
Advisers for a total purchase price of R450 653 which will be settled on different dates, in cash,
based on the agreements.
Efficient Asset Finance acquired an asset-based finance business for a total purchase consideration
of R1 08 million. Part of the purchase consideration (R756 000) was paid in cash on fulfilment of
the suspensive conditions. The balance is payable on the first anniversary of the agreement
subject to the achievement of anticipated turnover. The transaction was effective 1 June 2012.
The fair value acquisition is as follows:
Group
2011 2012
R000 R000
Acquisition
Cash and cash equivalents - 4
Gross trade receivables 643 103
Equipment 18 8
Intangible assets 4 833 1 274
Deferred tax (550) (238)
Trade payables (517) (112)
Net assets acquired 4 427 994
Goodwill - 1 472
Less: Fair value of shares issued - (1 269)
Less: Long-term liability raised as part of the purchase price (1 650) -
Less: Other creditors raised as part of the purchase price (324) -
Less: Cash of business acquired - (4)
Cash paid on acquisition 2 453 1 193
Disposal
Intangible assets (2 320) -
Long-term receivable 2 320 -
- -
Net cash paid (received) on aquisition/(disposal) of business 2 453 1 193
10. Dividend paid
A dividend of 2.60 cents per share was paid on 5 December 2011 from profits generated in the
2011 financial year.
11. Impairment of investment in associate
Group Company
Thebe Stockbroking (Pty) Ltd is a black empowered stockbroking
company focusing on both the retail (private wealth) and 2012 2011 2012 2011
institutional market. The institutional division is not
profitable due to low volumes and the research cost required R000 R000 R000 R000
to attract institutional
business.
The value in use was determined by discounting the future cash 6 010 - 6 010 -
flows generated from the continuing use of the private wealth
division and was based on cash flows that were projected on a
4-year forecast. Cash flows beyond this were extrapolated
using a constant growth rate of 5%, which does not exceed the
long-term average growth rate for the industry. The cash flows
are discounted using a WACC of 21.31%.
12. Events after reporting date
No significant events occurred subsequent to the financial year that require any additional
disclosure or adjustment to the annual financial statements
13. Contingent liabilities and capital commitments
The company issued a guarantee in favour of Old Mutual properties in terms of a lease
agreement for Efficient Select (Pty) Ltd offices in Cape Town. Thebe Stockbroking (Pty) Ltd is
a co-defendant in a matter in which the plaintiff is claiming damages of R 17.6 million plus
interest. Thebe Stockbroking (Pty) Ltd disputes this claim and has, to this extent, instructed
its lawyers to vigorously defend the claim. At the reporting date the litigation matter was
yet to be resolved. The carrying amount of the investment is R2.8 million.
14. Prior period error
During the 2008 financial year, Efficient Group acquired FHS Financial Services (Pty) Ltd.
The purchase consideration was settled by issuing Efficient Group shares. As part of the
acquisition shares were issued to an option holder of FHS Financial Services (Pty) Ltd.
This issue was not previously recognised. As a result the calculation of goodwill did not
include the fair value of these shares. The following adjustment has been made at the
beginning of the 2010 financial year:
Group Company
R000 R000
Dr/(Cr) Dr/(Cr)
Statement of financial position
Assets
Non-current assets
Goodwill 1 763 -
Investment in subsidiaries - 1 763
Equity
Share capital and premium (1 763) (1 763)
Other than the entries above, no further changes were made to the 2010, 2011 and 2012 periods
presented.
No impairment of this goodwill or investments were necessary in any of these years and as the
consideration does not vary subsequent to the issue of the shares, there is no further impact
on profit or loss. There has been no impact on basic or diluted earnings per share and headline
earnings per share as the shares issued as consideration were previously included in the
calculations.
15. Segmental analysis
The Group is organised into 3 main business segments:
1. Asset management, and includes the following companies and divisions:
Efficient Select and Efficient International Investments.
2. Asset administration, and includes the following companies:
Efficient Collective Investments.
3. Financial services, and includes the following companies
Efficient Financial Services, C&A Financial Services, Efficient Asset Finance and Thebe
Stockbroking.
Asset
Asset Management Administration Financial Services Other Total
2012 R000 R000 R000 R000 R000
Revenue 26 097 19 000 19 633 (9 297) 55 433
- External 18 983 19 000 17 008 442 55 433
- Inter - segment 7 114 - 2 625 (9 739) -
Expenses 27 606 16 362 15 424 (876) 58 516
Interest received / (paid) 201 354 284 672 1 511
Net loss for the year (683) 2 286 (8 673) (1 361) (8 431)
Assets 26 213 6 422 5 073 49 372 87 080
Liabilities 6 259 2 615 4 661 5 109 18 644
Acquisition of equipment 350 47 139 1 139 1 675
Depreciation and amortisation 2 488 52 474 1 415 4 429
Share of loss from associates - - (1 489) (494) (1 983)
Impairment of investment in
associate - - (6 010) - (6 010)
Asset
Asset Management Administration Financial Services Other Total
2011 R000 R000 R000 R000 R000
Revenue 30 643 15 943 8 916 (6 720) 48 782
- External 23 363 15 943 8 916 560 48 782
- Inter - segment 7 280 - - (7 280) -
Expenses 25 503 14 638 9 721 (4 672) 45 190
Interest received / (paid) 430 229 131 496 1 286
Net profit for the year 4 063 1 141 (876) (1 237) 3 091
Assets 42 496 5 356 5 190 38 105 91 147
Liabilities 21 906 3 354 4 074 (18 263) 11 071
Acquisition of equipment 383 27 132 238 780
Depreciation and amortisation 2 479 22 294 1 394 4 189
Share of profit from associates - - (241) - (241)
Other consists of consolidation entries, amortisation of intangible assets and Efficient Capital.
Transactions between segments take place at arms length.
3. CORPORATE INFORMATION
Non-Executive Directors
Dr S Booysen (Chairman) *, Z Cele*, L Taylor *, M Cassim, J Mabena
(*) Independent
Executive Directors
DD Roodt, H Weidhase, AT De Klerk
Registered and Business address
81 Dely Road, Hazelwood, 0081
Company Secretary
Adv Rudi Barnard
Corporate Advisor, Legal Advisor and Sponsor
Java Capital
Reporting Accountants and Auditors
KPMG Inc.
Transfer Secretaries
Link Market Services South Africa
09 November 2012
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