To view the PDF file, sign up for a MySharenet subscription.

EFFICIENT GROUP LIMITED - Summarised audited annual financial results for the year ended 31 August 2014

Release Date: 13/11/2014 16:19
Code(s): EFG     PDF:  
Wrap Text
Summarised audited annual financial results for the year ended 31 August 2014

EFFICIENT GROUP LIMITED
(Incorporated in the Republic of South Africa)
(Registration Number: 2006/036947/06)
JSE share code: EFG     ISIN: ZAE000151841
(“Efficient” or “the Group”)

SUMMARISED AUDITED ANNUAL FINANCIAL RESULTS FOR THE YEAR ENDED 31 AUGUST 2014

HIGHLIGHTS
- Revenue increased by 195%
- Profit for the year increased from R2.5 million to R5.0 million
- Normalised headline earnings per share increased from 5.62 cents to
  14.15 cents
- Cash generated from operations increased by 15% to R13.5 million
- Dividend of 2 cents per share

1.   COMMENTARY
We remain focused on building a quality financial services business using
product performance and personal relationships with our clients as our
strategic guides. Our corporate structure is streamlined, enabling our
decision making process and ensuring that we execute our strategy and
provide products and services that meet and exceed our client’s
expectations.
The successful delivery of our strategy to clients lies in the ease of
use, the timely delivery and communication, and the consistent performance
of products and services.
Our achievements and successes in 2014
- We established Boutique Investment Partners and welcomed a team of
highly skilled and experienced investment professionals.
- We concluded the transformation of Efficient Collective Investments to
Boutique Collective Investments, significantly strengthening our
collective investments, investment consulting and multi management
capabilities. The collective investments team was expanded from 4 to 19.
- We concluded the acquisition of Verso Investment Services (Pty) Ltd
(“Verso Investment Services”).
- Efficient Advise, continued to deliver on its growth in the number of
financial planners and its assets under advice and concluded an exclusive
distribution agreement with BKB Ltd.
- Efficient Select continued to make progress in the fixed income and
private client divisions, both in terms of performance as well as net
inflows.
- Peter Hewett, the managing director of Efficient Advise, won the coveted
2014 FPI Financial Planner of the Year award.
Where our performance has fallen short
- Efficient Select’s defensive positioning did not yield benchmark beating
returns over the short term.
- Efficient Asset Finance, formerly structured as a stand-alone entity
under Efficient Capital, experienced numerous challenges during the year
which affected its sustainability. The asset finance division struggled to
gain traction and was accordingly restructured.
1.1   Financial Results
In support of our philosophy to create a sustainable and profitable
business, the Group invested R141 million to expand our distribution
network, grow our asset administration division and expand our product
offering to include asset consulting. Acquisition activities account for
R97 million of this investment and R44 million relate to the increase in
the expense base associated with the expansion of the asset administration
division and the business combinations concluded during the reporting
period.
A substantial share of the Group’s revenue is based on the value of assets
under management, assets under administration, assets under consulting and
assets under advice. Assets under management are represented by amounts
invested in the unit trust funds, unit trust funds of funds and private
share portfolios managed by the asset management division. The Group has
R13 888 million (2013: R2 544 million) under management. Assets under
administration are represented by unit trust funds and unit trust funds of
funds administered by the Group. Administration of assets includes
liability administration and asset administration, such as daily pricing
of unit trust funds. The Group administers assets amounting to R41 041
million (2013: R2 253 million). Assets under consulting represent assets
on which Boutique Investment Partners supply investment consulting
services, primarily consisting of portfolio construction, strategic and
tactical asset allocation, and manager selection services. The Group
consults on assets totalling R19 691 million (2013: Nil). Assets under
advice are represented by client investments made on the recommendation of
or with the guidance of financial advisors employed by Efficient Financial
Services. Total assets under advice amounts to R8 945 million (2013: R2
264 million).
Revenue increased from R79 million to R233 million. The increase in
revenue is a combination of organic growth in financial services, the
effect of the acquisitions made during the reporting period and the
expansion of the asset administration division. Revenue increased by 45%
in the Financial Services division due to organic growth, the appointment
of 20 additional Independent financial advisors and as a result of the 21%
increase in the average income per advisor. The acquisition of Verso
Investment Services contributed R43 million in additional revenue to
Financial Services. The increase in assets under consulting and
administration at Efficient Invest contributed R114 million to Group
revenue. Compared to the previous period, performance fees in asset
management declined by 74% primarily resulting from the fee alignment
project embarked on in 2013, and below benchmark fund performance. Asset
management base fees remain constant. Verso Investment Services offers
its clients a range of unit trust solutions. Multi manager fees generated
from the Verso Investment Services solutions are included in the Financial
Services business, and contributed to an increase in gross margin for
financial services of 4%. Following the implementation of industry best
practices in 2013 relating to fee structures in asset management,
Efficient Select delivered lower asset management margins. The lower
margin at Boutique Collective Investments is consistent with the higher
Assets under Administration. We however expect margins to remain at
current levels.
The relatively low increase in fixed expenses is a result of cost savings
in the asset management division and lower incentive payments throughout
the Group. Fixed expenses associated with the Verso Investment Services
acquisition and the increase in assets under administration and consulting
doubled the fixed expense base of the Group. Management is focused on
ensuring that future increases in the fixed expense base are kept at
acceptable levels.
The Group reports an operating profit of R6.7 million (2013: R2.2 million)
for the financial year under review. The impairment of the investments in
an associate and the losses from associates further decreased the
operating profit. The profit after tax for the year ended 31 August 2014
is R5 million (2013: R2.5 million)
Net tangible assets per share are reported at 30.84 cents (2013: 72.38
cents). The lower net tangible assets per share is a result of cash
utilised to acquire intangible assets and the increase in shares issued.
At 31 August 2014 the Group had R34 million (2013: R19 million) cash and
cash equivalents.
Cash of R13.5 million (2013: R11.7 million) was generated from operations
for the 12 months ended 31 August 2014. The increase in working capital
decreased cash and cash equivalents by R4.7 million. Net finance income
earned contributed R1.4 million to the cash flow. Tax paid reduced the
cash by R8 million. The cash utilised for investment activities relates
mainly to the Verso Investment Services acquisition and the acquisition of
financial advisory client bases. Net cash outflow from investing
activities reduced cash by R42 million. The investments and working
capital requirements were financed through a rights offer and borrowings
from Standard Bank.
1.2   Operating overview
Efficient Advise (including Verso Investment Services) continues to
deliver on its strategy of aggressively growing the distribution network,
assets under advice and delivering quality financial planning and products
to its client base. The business currently has 84 financial planners
servicing clients in more than 30 towns and cities throughout South
Africa. Our strategy remains to grow the distribution business to 135
financial planners by the end of 2015. Assets under Advice have grown to
R8.7 billion through both organic growth as well as the acquisition of
Verso Investment Services. The cross-selling of products and services
across the client base has continued to improve and we expect this to
accelerate going forward.
The core focus of the Efficient Select asset management division remains
the achievement of consistent, long-term investment performance for its
clients. In the past year further refinements were made to the Efficient
Select strategy to enhance the services and products that are offered to
clients. Changes to the fee structures, although necessary, unfortunately
had a negative impact on the company’s financial performance. However,
from a strategic perspective Efficient Select is well poised to take
advantage of opportunities in the boutique investment environment. In
order to conclude the transformation from both a fund and fund of fund
manager to a specialist fund manager, the management of the fund of funds
(i.e. core solutions) has recently been outsourced to a specialist multi-
manager, Boutique Investment Partners. Efficient Select will now focus
solely on the management of specialist funds and private client
portfolios. Whilst Efficient Select has delivered on a number of key
objectives in the roll-out of its strategy, the business’s key focus going
forward remains the delivery of consistent investment performance in line
with its objectives, growing assets under management and growing
profitability.
Efficient Invest, consisting of Boutique Collective Investments (formerly
Efficient Collective Investments) and Boutique Investment Partners, offer
asset administration, asset management and asset consulting to their
respective clients. Boutique Collective Investments focuses on the savings
and investments needs of institutional and retail clients in South Africa,
overlaid by a focus on boutique manager partnerships. The initial
expectations for these two businesses have already been exceeded and we
believe that Efficient Invest will make significant contributions to the
Group profitability going forward.
1.3   Conclusion
In line with our strategy we will continue to concentrate on growing our
business organically, delivering quality investment products and services
to our client base
Key performance targets              2015 target            2014
Number of financial planners                 135              84
Assets under advice                 R9.5 billion    R8.7 billion
Assets under management            R16.9 billion   R13.8 billion
Assets under administration          R45 billion     R41 billion
Assets under consulting              R23 billion     R20 billion
Further key focus areas will be driving business revenue synergies and
continuing the process of diversifying and expanding our business through
appropriate transactions.
Going forward, we expect our financial results to continue to improve as
the recent transactions are bedded down, revenue growth continues to
accelerate and we benefit from the scalability of our cost structure.
1.4   Cash Dividend
Dividends are declared at the discretion of the board of directors, after
taking the financial position of the group into consideration. As a
guideline 80% of the free cash flow is paid as a dividend. Based on this
policy the directors determined that a dividend of 2 cents per share will
be paid.
The salient dates for this dividend payment are as follows:
Last date to trade “cum” dividend Friday, 28 November 2014
Securities trade “ex” dividend Monday, 1 December 2014
Record date Friday, 5 December 2014
Payment date, Monday 8 December 2014
Share certificates may not be dematerialised or rematerialised between
Monday, 1 December 2014 and Friday, 5 December 2014, both days inclusive.
Shareholders are advised of the following additional information:
- the dividend has been declared out of the 2014 profits;
- the local dividend tax rate is 15%;
- there is no secondary tax on companies credits utilised against the
dividend;
- the gross local dividend amount is 2 cents per share;
- the net local dividend amount for shareholders:
     - exempt from payments of dividend tax is 2 cents per share
     - liable to pay the dividends tax is 1.7 cents per share
- the issued share capital of the company is 90 592 973 shares of
R0.00000277 each; and
- the company’s tax reference number is 9071679170.
1.5   Changes to the board
During the period under review there was only one change to the membership
of the board and that was the appointment of Christo Burger as an
executive director of the company on 1 April 2014. Christo was supported
by an alternate, Fred Liedtke, until 31 August 2014. Subsequent to year end
Mariam Cassim resigned and her resignation follows from her employment
resignation at Thebe Investment Corporation.
1.6   Basis of preparation
These summarised Group financial results for the year ended 31 August 2014
constitute a summary, prepared in accordance with the framework concepts
of the JSE Listings Requirements; the Companies Act 71 of 2008; the
recognition and measurement requirements of International Financial
Reporting Standards; the presentation and disclosure requirements of
International Accounting Standard 34, excluding paragraph 16A(j), and the
SAICA Financial Reporting Guides as issued by the Accounting Practices
Committee and Financial Reporting Pronouncements as issued by the
Financial Reporting Standards Council, of the Group's audited financial
statements.
The accounting policies are in terms of International Financial Reporting
Standards and consistent, except where new standards have been adopted,
with those of the previous financial statements. New accounting standards
adopted during the financial year had no significant impact on the
measurement of the Group’s assets and liabilities.

These summarised Group financial results do not include all of the
information required for full financial statements, and should be read in
conjunction with the audited consolidated financial statements of the
Group as at and for the year ended 31 August 2014
This summarised report is extracted from audited information, but is not
itself audited. The audited consolidated financial statements and
unmodified report, as issued by KPMG Inc., are available for inspection at
the company’s registered office. The directors take full responsibility
for the presentation of the summarised report and for ensuring that the
financial information has been correctly extracted from the audited
consolidated financial statements.
The summarised financial results were prepared by Anton de Klerk CA (SA),
the Chief Financial Officer of Efficient.
Summarised statement of financial position as at 31 August 2014:
                                                          Group
                                                     2014          2013
                                                    R'000         R'000
Assets
Non-Current Assets
Property and equipment                              2 668           658
Goodwill                                           66 255        23 703
Intangible assets                                 102 637        17 821
Investments                                         6 761         9 252
Equity accounted investments                       16 973         6 313
Long-term receivables                               3 889         1 518
Deferred tax                                        3 736         1 344
                                                  202 919        60 609
Current Assets
Trade and other receivables                        56 507         8 565
Cash and cash equivalents                          33 552        19 260
Short-term portion of long-term                       727           915
receivables
Tax receivable                                      1 231           302
                                                   92 017        29 042
Total Assets                                      294 936        89 651
Equity and Liabilities
Equity
Share capital and share premium                   150 325        58 657
Treasury shares                                     (149)         (149)
Accumulated income                                 18 441        12 453
Fair value adjustment reserve                          98            65
Equity attributable to equity holders of          168 715        71 026
the parent
Non-controlling interest                          (1 041)          (13)
Total Equity                                      167 674        71 013
Non-Current Liabilities
Long-term liabilities                              25 244           715
Deferred tax                                       26 407         3 217
                                                   51 651         3 932
Current Liabilities
Trade and other payables                           64 485        13 460
Short-term portion of long-term                     8 754           482
liabilities
Tax payable                                         2 372           764
                                                   75 611        14 706
Total Liabilities                                 127 262        18 638
Total Equity and Liabilities                      294 936        89 651
Net asset value per share (cent)                   186.23        174.25
Net tangible asset value per share (cent)           30.84         72.38

Summarised statement of comprehensive income for the year ended 31
August 2014
                                                    Group
                                                     2014          2013
                                                    R'000        R'000
Revenue                                           233 360       79 012
Operating expenses                              (226 673)     (76 772)
Operating profit                                    6 687        2 240
Dividends received                                      -            88
Finance income                                      2 797        1 284
Finance cost                                      (1 210)          (12)
Profit on sale of equipment                            24            60
Profit on sale of shares in                           527             -
associate
Profit on sale of Financial                            35             -
Advisory Client base
Other income /(expenses)                              619           (3)
Realised fair value adjustment of                       -            51
available-for-sale financial
assets
Fair value adjustment of                              926        1 301
investment designated at fair
value through profit or loss
Re-measurement of liabilities                           -        2 222
Re-measurement of loan to                               -           500
associate
Impairment of intangible asset                    (1 070)             -
Impairment of investment in                         (194)      (2 837)
associate and loan to associate
Share of losses from associates,                    (839)      (1 091)
net of taxation
Profit before taxation                              8 302        3 803
Taxation                                          (3 342)      (1 302)
Profit/(loss) for the year                          4 960        2 501
Other comprehensive income:
Items that may be reclassified                         33            26
subsequently to profit or loss
Realised fair value adjustment of                       -          (51)
available-for-sale financial
assets
Unrealised fair value adjustment                       33               77
of available-for-sale financial
assets
Total comprehensive income for the                  4 993             2 527
year
Profit for the year attributable
to:
Equity holders of the parent                        5 988             2 520
Non-controlling interest                          (1 028)              (19)
                                                    4 960             2 501
Total comprehensive income for the
year attributable to:
Equity holders of the parent                        6 021             2 546
Non-controlling interest                          (1 028)              (19)
                                                    4 993             2 527
Basic and diluted earnings per                       8.53              5.57
share (cents)

Summarised statement of changes in equity for the year ended 31 August
2014:
Group           Ordina- Treasu         Fair
                                 Accumu-         Total      Non-        Total
                ry      ry       lated value                control     Equity
                shares  shares   Incomeadjust-              ling
                and                    ment                 Inte-
                share                  for                  rest
                premium                availa-
                                       ble for
                                       sale
                                       assets
                                       reserve
                R'000   R'000  R'000   R'000    R'000       R'000    R'000
Balance at 31    58 657  (149)   9 933       39  68 480         (44)   68 436
August 2012
Non-                 -       -         -      -        -         50           50
controlling
interest
share of the
issue of
share capital
by Efficient
Asset Finance
(Pty)Ltd
Total
comprehensive
income for
the year
 - Profit /           -       -    2 520       -     2 520      (19)    2 501
(loss)
 - Other              -       -        -      26        26         -       26
comprehensive
income
Balance at 31    58 657   (149)   12 453      65    71 026      (13)   71 013
August 2013
Issue of         91 668       -        -       -    91 668         -   91 668
shares
Total
comprehensive
income for
the year
 - Profit /           -       -    5 988       -     5 988   (1 028)    4 960
(loss)
 - Other              -       -        -      33        33         -       33
comprehensive
income
Balance at 31   150 325   (149)   18 441      98   168 715   (1 041)   167 674
August 2014

Summarised statement of cash flows for the year ended 31 August 2014:
                                                            Group
                                                        2014        2013
                                                       R'000       R'000
Cash flows from operating activities
Cash receipts from customers                         185 418      80 030
Cash paid to suppliers and employees               (171 828)   (68 279)
Cash generated by operations                          13 590      11 751
Interest received                                      2 671       1 280
Interest paid                                        (1 210)        (12)
Dividends received from associates                       216           -
Taxation paid                                        (7 922)    (4 398)
Net cash inflow from operating activities              7 345       8 621
Cash flows from investing activities
Acquisition of business                             (34 044)       (382)
Investment in associate                              (7 751)           -
Long-term loan to associate                          (1 062)    (1 059)
Decrease in long-term receivable                         511         123
Acquisition of investments                                 -    (2 596)
Acquisition of financial assets                      (1 065)           -
Decrease in long-term liabilities                      (606)    (1 250)
Proceeds on the disposal of financial assets           4 514         441
Proceeds on sale of investment in associate              527           -
Proceeds from disposal of equipment                       34          63
Acquisition of equipment                             (2 693)       (612)
Acquisition of intangible asset                         (14)          -
Net cash outflow from investing activities          (41 649)    (5 272)
Cash flows from financing activities
Increase in long-term liabilities                    (1 652)          -
Increase in loans from minority shareholding           1 324          -
of subsidiaries
Issue of Share Capital                                48 924          -
Non-controlling interest portion of share                  -         50
capital issued in subsidiary
Net cash inflow from financing activities             48 596         50
Total cash and cash equivalents movement for          14 292      3 399
the year
Total cash and cash equivalents at the                19 260    15 861
beginning of year
Total cash and cash equivalents at the end            33 552    19 260
of the year

Notes to the summarised financial statements for the year ended 31 August
2014:

1. Goodwill                                             Group    Group
                                                         2014     2013
                                                       R '000   R '000
Recognised on acquisition of business combinations     66 255   23 703
Impairment testing for cash-generating units
containing goodwill:
For the purpose of impairment testing, goodwill is allocated to the
group’s operating divisions which represents the lowest level within
the group at which the goodwill is monitored for internal management
purposes.
The aggregate carrying amounts of goodwill
allocated to each cash generating unit are as
follows:
Efficient Financial Services (Pty) Ltd                 10 622   10 428
Efficient Select (Pty) Ltd                             13 275   13 275
Verso Investment Services (Pty) Ltd                    42 358         -
                                                       66 255   23 703
Reconciliation of Goodwill:
Opening balance                                        23 703   23 494
Acquisitions
- Independent financial advisor client bases              194       209
- Verso Investment Services (Pty) Ltd                  42 358         -
Closing balance                                        66 255   23 703

2. Intangible Assets
Group – Aug 2014                                   Cost      Accumulated       Carrying
                                                            Amortisation          value
                                                          and Impairment
                                               R'000               R'000           R'000
Trade names                                    5 112             (1 476)           3 636
Customer contracts and customer              126 928            (27 927)          99 001
relationships
Total                                        132 040              (29 403)       102 637
Group – Aug 2013
Trade names                                    1 758                 (851)           907
Customer contracts and customer               36 799              (19 885)        16 914
relationships
Total                                         38 557              (20 736)        17 821

Reconciliation of intangible assets
Group - Aug 2014     Opening Impairment    Dispo Acquisi-         Acquired   Amorti-   Closing
                     Balance          of    sals    tions          through    sation   balance
                              Intangible                          business
                                  Assets                       combination
                       R'000       R'000   R'000      R’000          R'000     R'000     R'000

Trade names              907          -        -           -         3 354     (625)     3 636
Customer contracts    16 914    (1 070)    (264)          14        90 088   (6 681)    99 001
and customer
relationships
Total                 17 821    (1 070)    (264)          14        93 442   (7 306)   102 637
Group - Aug 2013
Trade names              973          -                    -             -      (66)       907
                                               -
Customer contracts    19 811          -        -           -           746   (3 643) 16 914
and customer
relationships
Total                 20 784          -                    -           746   (3 709)   17 821
                                               -
The remaining useful life of the trade names are between 3 and 13 years
(2013:14 years), and customer contracts and customer relationships are
between 3 and 15 years.(2013:4 – 10 years).In 2012 Efficient Asset Finance
(Pty) Ltd acquired an asset-based finance business to expand the product
offering of the Group. Due to industry changes the asset based finance
product was scaled down to the extent that the acquired business was no
longer profitable. The customer related intangible assets were impaired to
zero and the statement of comprehensive income debited with R 1 052 000.
Other impairments amounted to R 18 000. All the impairment cost were
recognised in profit and loss.


 3. Equity accounted investments
Name                      Country of                 Ownership                 Principal
                       incorporation                  interest                activities
C & A F Financial                      RSA                 49,0%     Financial Services
Services (Pty) Ltd
Rudiarius Capital                RSA          30,0%   Financial Services
Management (Pty) Ltd
Rebalance Fund                   RSA          28,0%   Financial Services
Managers (Pty) Ltd
AS Sure Investment               RSA          25,1%   Financial Services
Services (Pty) Ltd
Marion Technology                RSA          50,0%          IT Services
(Pty) Ltd
Efficient Financial              NAM          50,0%   Financial Services
Services (Namibia)
(Pty) Ltd
Marion Technology (Pty) Ltd and Efficient Financial Services (Namibia) Pty
Ltd are equity accounted because the Group does not hold the majority of
voting rights nor does it have the authority to appoint the majority of the
board.

The Equity Accounted Investment consists of:                 Group
                                                         2014            2013
                                                        R'000           R'000
The Equity accounted investments consists of:
C & A F Financial Services (Pty) Ltd                        -             487
Rudiarius Capital Management (Pty) Ltd                    329               -
Rebalance Fund Managers (Pty) Ltd                          40               -
AS Sure Investment Services (Pty) Ltd                  11 012               -
Marion Technology (Pty) Ltd                             5 592           5 826
Efficient Financial Services (Namibia) (Pty) Ltd            -               -
                                                       16 973           6 313

4. Long-term liabilities                                        Group
                                                         2014            2013
4.1 Vendor Finance                                        652             647
These liabilities form part of the acquisition of
customer bases. These loans are unsecured and
interest free. These loans are repayable at
various instalment dates and amounts. The last
instalment is payable in September 2016.
Less: Short-term portion                                (285)           (482)
                                                          367             165
4.2 Incentive liability                                   928             550
This liability relates to a percentage of an
incentive scheme payment that is due to the asset
managers, that is retained and payable after an
agreed employment period.
Less: Short-term portion                                (607)              -
                                                          321            550
4.3 Working Capital loan                               28 687              -
The liability relates to an amortising term loan
from Standard Bank of South Africa to assist the
subsidiaries with their respective working capital
requirements. The loan bears interest at JIBAR
plus 3.75% per annum and is repayable in 16
(sixteen) equal and quarterly payments of R1 912
500 plus interest accrued for the period. The loan
is guaranteed by Verso Investment Services (Pty)
Ltd, Verso Multi Managers (Pty) Ltd, Boutique
Investment Partners (Pty) Ltd and Efficient
Financial Services (Pty) Ltd. All loan covenants
have been met.
Less: Short-term portion                               (7 650)             -
                                                        21 037             -
4.4 PSJ Dynes and Associates                               635             -
This loan is unsecured and bears no interest. The
capital is repayable in 10 instalments, with a
payment every six months, with the first
instalment paid on 1 December 2011 and the last
instalment payable on 1 June 2016.
Less: Short-term portion                                 (212)             -
                                                           423             -
4.5 A Knowles                                            3 096             -
On 1 August 2014 the company acquired 25.1% of the
shares and voting interest in AS Sure Investment
Services (Pty) Ltd. R 7 750 000 of the purchase
price was settled in cash. The balance is payable
on 1 August 2017 subject to the achievement of a
profit target. No interest is charged on this
liability.
                                                        25 244        715
5. Earnings and diluted earnings per
ordinary share                                           Group
                                               2014       2013      2013
                                                     Restated Previously
                                                                Reported
                                              R'000     R'000      R'000
Basic and diluted earnings per ordinary share is calculated by dividing
the profit attributable to equity holders of the company by the weighted
average number of ordinary shares in issue during the year.
Weighted average number of ordinary
shares in issue
Number of shares in issue at the end of       90 593    40 760    40 760
the year
Less: Issue of ordinary shares during the   (49 833)         -         -
year
                                              40 760    40 760    40 760
Add: Rights issue bonus element               4 476     4 476           -
Add: Weighted average number of ordinary     24 975         -           -
shares issued during the year
Weighted average number of ordinary          70 211    45 236     40 760
shares in issue
Basic and diluted earnings per share           8.53      5.57       6.18
(cents)
Attributable earnings                         5 988     2 520      2 520
Weighted average number of ordinary          70 211    45 236     40 760
shares in issue
Headline and diluted headline earnings         9.37     11.75      13.04
per share (cents)
Headline earnings                             6 577     5 314      5 314
Weighted average number of ordinary          70 211    45 236     40 760
shares in issue
Headline and diluted headline earnings        6 577     5 314      5 314
are calculated as follows
Attributable earnings                         5 988     2 520      2 520
Profit on sale of equipment                    (24)      (60)       (60)
Taxation on profit on sale of equipment           7        17          17
Profit on sale of shares in associate         (527)         -           -
Taxation on Profit on sale of share in           98         -           -
associate
Impairment of intangible asset                1 070         -           -
Impairment of loan to associates                  -     2 837      2 837
Profit on sale of financial advisory           (35)         -           -
client base
The weighted average number of ordinary shares in issue were amended to
take account of the bonus element of the rights issue concluded in the
2014 financial year.


6. Acquisition/Disposal)of business
During the period under review the group acquired 100% of the voting
rights in Verso Investment Services, and various financial advisory
customer bases from independent financial advisors. A previously acquired
customer base was sold during the year. In the 2013 financial year the
group acquired various financial advisory customer bases from independent
financial advisors.
Consideration transferred
The table below summarises the acquisition date fair value of each major
class of consideration transferred:
                                           Verso    Financial       Total
                                      Investment     Advisory
                                                       Client
                                        Services        bases


Cash                                      45 780          487      46 267
Share capital                             38 272            -      38 272
Contingent consideration                       -          208         208
                                          84 052          695      84 747
Share capital issued
Efficient Group Ltd's share are closely held and the trade volumes are
significantly lower than that of its peers. For this reason management
believes that the listed share price of Efficient Group Ltd does not
represent the fair value of the share. An independent valuation of
Efficient Group Ltd was performed on 7 March 2014 to determine the fair
value of Efficient Group shares at that date. The valuation was based on
a discounted cash flow model. The calculation uses cash flow projections
based on financial budgets approved by management covering a five-year
period, and a discount rate of 19.85%. Cash flows beyond that five-year
period have been extrapolated using a steady 4% growth rate. This growth
rate does not exceed the long-term average rate for the market in which
the company operates. Management then applied a 20% lack of liquidity
discount to determine the fair value.
Contingent consideration
The Group agreed to pay some of the Independent Financial Advisors that
sold the customer bases to the group an additional consideration over the
next 12 to 24 months when certain targets are met.
Acquisition-related cost
The group incurred acquisition-related cost on legal fees, due diligence
cost and other expenses. The table below summarises the cost:
                                           Verso    Financial       Total
                                      Investment     Advisory
                                        Services       Client
                                                        bases
Cost included in operating expenses        2 184            -       2 184
Cost deducted from share premium           1 675            -       1 675
                                           3 859            -       3 859
Identifiable assets acquired and
liabilities assumed
Identifiable assets acquired and           67 223         696       67 919
liabilities assumed
Less: Deferred tax raised on             (25 529)       (195)     (25 724)
intangible assets
                                           41 694         501       42 195

The valuation techniques used for measuring the fair value of intangible
assets acquired were as follows:
Trade names
Relief-from-royalty method was used to calculate the intangible asset for
trade names. This method considers the discounted estimated royalty
payments that are expected to be avoided as a result of trade names being
owned.
Customer related intangible assets
Multi-period excess earnings method was used to calculate the customer
related intangible assets. This method considers the present value of net
cash flows expected to be generated by the customer relationships, by
excluding any cash flows related to contributory assets.
Goodwill
Goodwill arising from the acquisition has been recognised as follows:
                                            Verso   Financial           Total
                                       Investment    Advisory
                                         Services      Client
                                                        bases
Consideration transferred                  84 052         695       84 747
Fair value of identifiable net
assets                                   (41 694)       (501)     (42 195)
Goodwill                                   42 358         194       42 552
The goodwill is attributable mainly to the skills and technical talent of
Verso Investment Services and the synergies expected to be achieved from
integrating the company into Efficient Group's existing Financial
Services business. None of the goodwill recognised is expected to be
deductible for tax purposes.


6. Acquisition /(Disposal)of business (continued)               Group
                                                         2014           2013
Net cash paid on acquisition of business:
Gross trade receivables                                2 510           1 140
Equipment                                                660               -
Intangible assets                                     93 443             746
Deferred tax asset                                       161               -
Trade payable                                        (8 828)           (912)
Taxation payable                                       (480)               -
Cash and cash equivalents                             11 927               -
Long-term liabilities                               (31 474)               -
Identifiable assets acquired and liabilities          67 919             974
assumed
Goodwill                                              42 551            209
Investment in subsidiary                                   -              -
Add: Long term receivable raised as part of the          280              -
purchase price
Less: Long-term liability raised as part of the        (488)           (247)
purchase price
Less: Other creditors raised as part of the                -           (345)
purchase price
Less: Deferred tax raised on intangible asset       (25 721)           (209)
acquired
Less: Cash acquired                                 (11 927)              -
Less: Fair value of shares issued as part of the    (38 272)              -
purchase price
Net cash paid on acquisition                          34 342            382

Disposal:
Intangible assets                                      (298)              -
Net cash received on disposal of business              (298)              -
Net cash paid on acquisition of business              34 044            382



6.1 Related party transactions                                 Group
                                                        2014            2013
                                                       R'000           R'000
Rent paid - Midnight Storm Investments 299 (Pty)         830             760
Ltd
Marion Technology (Pty) Ltd
Information technology services paid and software      1 416           1 464
development
Rent received                                              -             32
Interest received                                         59             35
Service fees paid to Rudiarius Capital Management      2 021              -
(Pty) Ltd by Boutique Collective Investments RF
(Pty) Ltd
7. Segmental Analysis
The group changed the reporting segments from the previous financial
year, by separately disclosing Asset Administration and Consulting
previously included in Asset Management. Asset Finance was consolidated
with Financial Services and Verso Investment Services, acquired during
the year, is also included in Financial Services.
The group is organised into 3 main business segments:
1. Asset Management, and includes the following companies and divisions:
Efficient Select, Efficient Select Swaziland and Efficient International
Investments.
2. Asset Administration and Consultation, and includes the following
companies and divisions:
Boutique Collective Investments and Boutique Investment Partners.
3. Financial Services, and includes Efficient Advise, Verso Investment
Services, Verso Multi Managers, Efficient Asset Finance and C & A F
Financial Services.
2014
                             Asset            Asset   Financial     Other    Total
                        Management   Administration    Services
                                     & Consultation

Revenue                   20 541            145 162     90 800   (23 143)  233 360
- External                 7 950            143 925     80 998        487  233 360
- Inter-segment           12 591              1 237      9 802   (23 630)        -
Operating Expenses        25 392            141 647     76 430   (16 796)  226 673
Finance cost                   -                  3        913        294    1 210
Finance income               175              1 092        799        731    2 797
Impairment of                  -                  -        101       (93)      194
investment in
associates
Impairment of                  -                  -      1 070          -    1 070
intangible assets
Net Profit for the       (3 327)              3 251      9 349    (4 313)    4 960
year
Taxation                 (1 253)              1 353      4 409    (1 167)    3 342
Net Asset Value           23 982              4 904   (15 842)    154 630  167 674
Assets                    42 346             66 915     36 326    149 349  294 936
Liabilities               18 363             62 011     52 177    (5 289)  127 262
Depreciation and           2 570                344        966      4 761    8 641
amortisation
Share of profit /              -                  -        (2)      (837)    (839)
(loss) from
associates
2013 (Restated)
                             Asset            Asset   Financial     Other      Total
                        Management   Administration    Services
                                     & Consultation

Revenue                   37 169           23 744        32 848   (14 749)    79 012
- External                23 969           23 744        30 876        423    79 012
- Inter-segment           13 200                -         1 972   (15 172)         -
Operating Expenses        27 353           23 170        36 250    (9 991)    76 772
Finance cost                   4                2             -          6        12
Finance income               274              426           266        318     1 284
Impairment of                  -                -             -      2 837     2 837
Investment in
associates
Impairment of                    -              -             -          -         -
intangible assets
Net Profit for the         7 300              845       (1 910)     (3 734)    2 501
year
Taxation                   2 854              154         (848)       (858)     1 302
Net Asset Value           27 281            4 653       (1 249)      40 328    71 013
Assets                    33 335            7 924         4 211      44 181    89 651
Liabilities                6 054            3 271         5 460       3 853    18 638
Depreciation and           2 396               15           601       1 297     4 309
amortisation
Share of                         -              -           53      (1 144)   (1 091)
profit/(loss) from
associates

Other consists of consolidation entries, amortisation of intangible
assets, investments in associates, Efficient Capital and Efficient Group.
All operations take place in southern Africa.

8. Events after reporting date
No significant events occurred subsequent to the financial year that
requires any additional disclosure or adjustments to the financial
statements.
2. Corporate Information
Non-Executive Directors
Dr SF Booysen (Chairman)*, LC Cele*, L Taylor*, J Rosen*, JA Mabena, AP du
Preez, and MM du Preez#.
(*) Independent; (#) Alternate
Executive Directors
DD Roodt, H Weidhase, AT De Klerk, RH Walton and CP Burger.
Registered and Business address:
81 Dely Road, Hazelwood, 0081
Company Secretary:
Adv Rudi Barnard
Sponsor:
Java Capital
Reporting Accountants and Auditors:
KPMG Inc.
Transfer Secretaries:
Link Market Services South Africa (Pty) Ltd
13 November 2014

Date: 13/11/2014 04:19:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
 the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct, 
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
 information disseminated through SENS.

Share This Story