Wrap Text
Unaudited Interim Financial Results For The Six Months Ended 29 February 2016
EFFICIENT GROUP LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 2006/036947/06)
JSE share code: EFG
ISIN: ZAE000151841
(“Efficient Group” or “the Group”)
UNAUDITED INTERIM FINANCIAL RESULTS For the six months ended 29 February 2016
HIGHLIGHTS
- Revenue growth of 24%
- EPS and HEPS growth of 51%
- Assets under Administration increased to R 84.3 billion
- Assets under Management increased to R 21.0 billion
- Assets under Advice increased to R 13.5 billion
1. Nature of business
The Efficient Group is a diversified financial services group focused on providing professional
advice, custom-designed products and quality service across the entire financial services value
chain. Its offering includes financial planning services, financial products, value-added financial
services and solutions, asset administration, asset management and asset consulting, which are
offered to clients throughout South Africa.
The acquisition of ARX Investment Partners (Pty) Ltd, which was subsequently renamed Select
Manager, in March 2015 impacted positively on the results for the reporting period and should be
taken into account when analysing the results for the six months ended 29 February 2016. The
acquisition included Select Manager and its subsidiaries, Stead Wealth Management (“Stead”), Exceed
Asset Management and Exceed Private Clients, collectively Exceed (“Exceed”). Please refer to our
2015 Integrated Report for more detail on the acquisition.
2. Business segments
The operating structure of the Group provides for three business divisions which are made up as
follows:
2.1 Financial Services
a. Efficient Advise
b. Efficient Wealth
c. Stead Wealth Management
d. Exceed Asset Management
e. Exceed Private Clients
f. AS Sure Investments (associate)
2.2 Investments
a. Boutique Investment Partners (“BIP”)
b. Boutique Collective Investments (“BCI”)
c. Efficient Select
d. Select Manager
e. Rudiarius Capital Management (associate)
2.3 Services and Solutions
a. Naviga Solutions
b. Efficient Board of Executors
The Financial Services division delivers comprehensive financial planning solutions and to
distribute associated proprietary and external financial products to identified target markets
through a national network of financial advisors. Since the previous reporting period the Financial
Services division has been extended with the acquisition of Stead and Exceed.
The Services and Solutions division delivers customised, value-added financial services and
solutions to corporate and institutional clients. Naviga Solutions offers an integrated value
proposition by consolidating various investment products, services and systems currently used by
various Efficient Group business units in order to create an end-to-end value proposition for
financial advisors that actively promotes best practice financial planning and investment
principles. Efficient Board of Executors, a new business unit that was launched at the start of the
Group’s financial year, provides fiduciary services, including specifically the drafting of wills
and the administration of deceased estates, to clients.
The investments division administers, manages and consults on proprietary and co-branded collective
investments for both retail and institutional investors. During the second half of the 2015
financial year the investment division was augmented by the acquisition of Select Manager, which
increased the Group’s asset management capacity.
3. Commentary
Despite the 1.1% contraction by the JSE All Share Index over the six months ended 29 February 2016,
the Group increased assets under advice, assets under administration and assets under management,
which resulted in satisfying performance on a consolidated group level. The good performance of the
Group for the reporting period is specifically a result of: the successful integration of
businesses acquired during the previous two years, both in the financial services- and investment
division, and the increase in assets under advice, assets under administration and assets under
management.
Feb-16 Feb-15 Aug-15
Assets under advice R 13.5 billion R 10.4 billion R 12.7 billion
Assets under administration R 84.3 billion R 50.9 billion R 63.2 billion
Assets under consulting R 24.5 billion R 21.9 billion R 24.0 billion
Assets under management R 21.0 billion R 15.3 billion R 18.2 billion
Financial Services
Assets under advice grew by 6% to R 13.5 billion over the reporting period. This is on the back of
the successful roll-out of our investment value propositions to clients of the financial services
businesses and the integration of the acquisitions done in this division during the second half of
the 2015 financial year.
Investments
The investments division reported profit after tax for the period of R 16 million, an increase of
291% compared to the prior comparative period. The increase in profit is directly related to the
growth in assets through organic and acquisitive growth. Assets under administration, for the six
months ended 29 February 2016, grew by 33% to R 84.3 billion, assets under consulting increased by
2% to R 24.5 billion, and assets under management increased by 15% to R21.0 billion.
Services and Solutions
At the end of the reporting period this division had R 5.3 billion (February 2015: R 6.2 billion)
of assets under management. The lower assets under management resulted in a decrease in profit for
the period. Efficient Board of Executors drafted approximately 300 wills for clients of the Group
in its first three months of operation. The successful roll-out of this service offering is an
important step in enhancing our comprehensive value proposition to our clients and in securing both
current assets and future assets under management.
4. Financial results
Statement of Comprehensive Income
The Group generated a net profit after tax of R 19 million for the six months ended 29 February
2016 (“the reporting period”), compared to an after tax profit of R 12 million for the six months
ended 28 February 2015 (“comparative period”).
The Group reported headline earnings of R 19 million for the reporting period (February 2015: R 13
million). Headline earnings per share increased by 51% from 14.11 cents for the comparative period
to 21.26 cents for the reporting period.
Revenue increased by 24% from R 345 million to R 428 million. The increase can be attributed to the
following factors:
- Organic growth in the Investments division, with a specific focus on the increase of assets
under administration,
- The inclusion of the results of Select Manager in the Investment division and that of Stead
and Exceed in the financial services division.
Performance fees as a percentage of total revenue is 1% compared to 3% for the comparative period,
which confirms that the Group’s dependency on performance fees has decreased considerably over the
last few years. Performance fees earned were lower than in the comparative period due to most of
our performance fee earning products having absolute benchmarks (CPI +), whilst the equity markets
in which these products invest, i.e. the JSE All Share Index, had flat to negative returns over the
reporting period.
Variable expenses consist mainly of commissions paid to our financial advisors who deliver products
and services to a retail and corporate client base, as well as the asset and liability
administration costs of BCI. The increase in these expenses is attributable to and in line with our
expansion and growth in revenue. The Groups’ gross margin increased from 29% to 31%. The increase
in margin can be explained by the higher margins earned by Select Manager and its subsidiaries and
the benefit of lower variable cost due to the increase in assets under administration.
The increase in fixed expenses relates to the inclusion of the acquisitions made in the previous
financial year.
The profit share provision is linked to the financial performance of Efficient Invest in accordance
with an agreement with the Efficient Invest management team. Efficient Invest consists of BIP and
BCI. The staff incentive provision is based on employee and business unit performance, in-line with
the Group’s Remuneration Policy. The increases in the profit share and staff incentive provisions
are in-line with the higher operating profit reported by Group business units.
Non-cash flow expenses relate to the amortisation of intangible assets and depreciation of
equipment. Customer related intangible assets account for the bulk of the assets acquired in the
Select Manager transaction and amortisation of this intangible asset explains the increase in non-
cash flow expenses.
Income from Associates is boosted by the profits from AS Sure Investment Services and Rudiarius
Capital Management.
Investment income includes interest received on cash generated through operations, and finance
costs relate to the costs associated with external funding to provide for the increased working
capital requirements of the Group. The fair value adjustment of liabilities is mainly due to a
liability raised on the conclusion of the Select Manager transaction.
Operating expenses consist of:
R’000 Unaudited Six Unaudited Six % Change Audited Year
Months ended Months ended ended
29-Feb-16 28-Feb-15 31-Aug-15
Operating expenses (404 063) (330 075) 22% (683 599)
- Variable expenses (293 729) (245 968) 19% (489 875)
- Fixed expenses (60 538) (48 499) 25% (108 955)
- Profit share and (40 672) (29 602) 37% (70 442)
staff incentives
provision
- Non-cash flow (9 124) (6 006) 52% (14 327)
expenses
Cash flow
The Group generated cash of R 34 million from operations before taking into account the movement in
working capital.
5. Business segmental results
Financial Services
The core business of this division entails the delivery of comprehensive financial planning
services for the benefit of individual and corporate clients. This is achieved through the
provision of an integrated financial planning solution to appropriately address clients’
requirements for Financial Planning, Asset Finance, Investment Management, Life and Business
Assurance, Short-term Insurance, Stockbroking and Cash Management. The distribution network
increased to 116 financial advisors (100 for the comparative period) through organic growth and the
acquisition of Stead and Exceed as part of the Select Manager transaction.
The financial services division reported revenue growth of 41% for the period under review. The
increase is directly related to the expansion of the distribution network. Variable costs increased
in line with the growth in revenue. The increase in fixed expenses is related to the acquisition of
Stead and Exceed.
The profitability of the financial services division has improved from a break-even position in the
comparative period to a profit of R 4 million. We expect the profitability of the financial
services division to continue to improve as a result of the economies of scale.
Services and Solutions
The core business of this division is collective investment scheme administration, fund and private
client wealth management and investment consultation. This business segment reported revenue of R
15 million for the reporting period (February 2015: R 18 million) and a profit after tax of R 7
million (February 2015: R 10 million) for the period under review. The lower profit is a result of
a decrease in assets under management due to the restructuring of portfolios and lower fees earned
on these portfolios.
Investments
The core business of this division includes model portfolio and multi-managed fund solutions, which
have been subjected to a rigorous quantitative and qualitative due diligence process that is
tailormade for financial planners, individuals and institutional clients’ needs. This business
division reported revenue of R 376 million for the period under review. Margins increased during
the comparative period and are in line with the increase in activities in this segment. The
increase in expenses relates to the Select Manager acquisition. This business division posted a
profit after tax of R 16 million for the reporting period compared to a profit of R 4 million for
the comparative period. The growth in this division has been primarily in the high volume, low-
margin asset administration business, impacting on the overall profitability of this division. The
success and the growth of this division is structured on the performance of the core management
team.
Acquisition activities and subsequent events
The two main premises from where the Group operates are situated in Hazelwood, Pretoria and in
Bellville, Cape Town. The Group’s Head Office and a part of the Financial Services division are
housed in the Pretoria office. The Investment division and another part of the Financial Services
division operate from the Cape Town office. To ensure sustainability and continuity, the Group
acquired the Cape Town office for an amount of R22 million. The purchase price will be settled in
cash on date of registration of the property in the purchasing entity’s name by utilisation of a
bond to be registered over the property. It is expected that the property will be registered in the
name of the Group during this financial year. It is also the intention of the Group to acquire the
Pretoria property and to refurbish the office within the next 8 to 12 months.
6. Strategy
With its expansionary and progressive strategy, as outlined in the company’s previous Integrated
Report, Efficient Group remains well positioned for future growth.
Our key focus areas remain:
- To optimise return on capital employed,
- To drive the organic growth of our core businesses and to enhance continuity across our
business divisions, and
- Positioning Efficient Select to enter the institutional asset management space.
7. Dividends
Dividends are declared at the discretion of the board of directors after taking the financial
position of the company into consideration. As a guideline, 80% of free cash flow is paid as a
dividend. The free cash flow of the group was significantly reduced by the acquisition activities
of the Group in terms of the Select Manager transaction and working capital loan repayments. Based
on this policy and the lower free cash flow the directors determined that 1.58824 cents per share
dividend will be paid to shareholders. A dividend of 5.88235 cents per share was paid for the
comparative period.
The salient dates for this dividend payment are as follows:
Last date to trade “cum” dividend Friday, 20 May 2016
Securities trade “ex” dividend Monday, 23 May 2016
Record date Friday, 27 May 2016
Payment date Monday, 30 May 2016
Share certificates may not be dematerialised or rematerialized between Monday, 23 May 2016 and
Friday, 27 May 2016, both days inclusive. The dividend will be transferred to dematerialised
shareholders’ CSDP/broker accounts on Monday, 30 May 2016. Certificated shareholders’ dividend
payments will be posted on or paid to certificated shareholders’ bank accounts on or about, Monday,
30 May 2016.
Shareholders are advised of the following additional information:
- the dividend has been declared out of profits generated during the reporting period
- the local dividend tax rate is 15%;
- the gross local dividend amount is 1.58824 cents per share;
- the net local dividend amount for shareholders:
- exempt from payment of dividend tax is 1.58824 cents per share
- liable to pay the dividends tax is 1.35000 cents per share
- the issued share capital of the company is 90 592 973 shares; and
- the company’s tax reference number is 9071679170.
8. Basis of preparation
The interim results for the six months ended 29 February 2016 are presented on a consolidated basis
and are prepared in accordance with the recognition and measurement requirements of International
Financial Reporting Standards and presentation and disclosure requirements of IAS 34 (Except for
the disclosure requirements per IAS 34 paragraph 16 A(j)) (Interim Financial Reporting), the JSE
Listings Requirements, the Companies Act of South Africa and the SAICA Financial Reporting Guides
as issued by the Accounting Practices Board. The accounting policies applied are consistent with
those applied in the previous interim period and previous financial year-end, except where
indicated differently. No material events occurred after the interim period which requires an
adjustment to the financial information. These interim results have not been reviewed or reported
on by the Group’s auditors, KPMG Inc. The condensed unaudited interim financial results are
prepared by Anton de Klerk, the Chief Financial Officer of Efficient Group. The summarised
financial information, including the disclosure requirements per IAS 34 paragraph 16 A(j), is
available on the company website.
9. Changes to the board of directors
There were no changes to the board of directors during the reporting period.
Steve Booysen Chairman 05 May 2016
Heiko Weidhase Chief Executive Officer
SUMMARISED STATEMENT OF COMPREHENSIVE INCOME
R’000 Unaudited Unaudited % Audited
Six Months Six Months Change Year
ended ended ended
29-Feb-16 28-Feb-15 31-Aug-15
Revenue 428 235 344 556 24% 716 179
Asset management fees 54 349 7 132 >100% 26 066
Asset administration and 309 399 266 144 16% 535 323
consultation fees
Financial services income 62 288 70 189 (11%) 154 336
Other 2 199 1 091 >100% 454
Operating expenses (404 063) (330 075) 22% (683 599)
Variable expenses (293 729) (245 968) 19% (489 875)
Fixed expenses (60 538) (48 499) 25% (108 955)
Profit share and staff (40 672) (29 602) 37% (70 442)
incentives provision
Non-cash flow expenses (9 124) (6 006) 52% (14 327)
Operating profit 24 172 14 481 67% 32 580
Dividends received 120 24 >100% 258
Finance income 6 375 3 412 87% 7 126
Finance cost (1 588) (1 963) (19%) (2 711)
Profit on sale of 23 - >100% 82
equipment
Profit on sale of share in - - - 2 607
associate
Profit on sale of - - - 73
financial advisory client
base
Fair value adjustment of (219) 250 (>100%) (57)
investments designated at
fair value through profit
or loss
Other income 461 240 92% 765
Impairment of intangible - - - (420)
asset
Impairment of investment - - - (869)
in associate
Share of profits from 822 536 53% 1 808
associates, net of taxation
Remeasurement of - - - 3 097
liabilities at fair value
through profit or loss
Fair value adjustment of (3 569) - >100% (2 830)
liabilities
Profit before taxation 26 597 16 980 57% 41 509
Taxation (7 340) (4 947) 48% (12 207)
Profit for the period 19 257 12 033 60% 29 302
Other comprehensive income
Items that may
subsequently be
reclassified to profit or
loss
Unrealised fair value 145 362 (60%) (101)
adjustment of available-
for-sale financial assets,
net of taxation
Total comprehensive income 19 402 12 395 57% 29 201
for the period
Profit for the period
attributable to
Equity holders of the 19 226 12 779 50% 30 681
parent
Non-controlling interest 31 (746) >100% (1 379)
19 257 12 033 29 302
Total comprehensive income
for the period attributable
to
Equity holders of the 19 371 13 141 47% 30 580
parent
Non-controlling interest 31 (746) >100% (1 379)
19 402 12 395 29 201
Number of shares in issue 90 593 90 593 90 593
at the end of the period
('000)
Weighted average number of 90 365 90 593 90 472
ordinary shares in issue at
the end of the period, net
of treasury shares ('000)
Diluted weighted average 90 365 90 593 90 472
number of shares, net of
treasury shares ('000)
Basic and diluted earnings 21,28 14,11 50,8% 33,91
per share (cent)
Headline and diluted 21,26 14,11 50,7% 33,91
headline earnings per share
(cent)
Headline and diluted
headline earnings are
calculated as follows
Attributable earnings 19 226 12 779 30 681
Impairment of intangible - - 420
asset
Profit on sale of equipment (23) - (82)
Taxation on profit on sale 6 - 23
of equipment
Profit on sale of share in - - (2 607)
associate
Impairment of investment in - - 869
associate
Profit on sale of financial - - (73)
advisor client base
Taxation on profit on sale - - 14
of financial advisor client
base
Headline and diluted 19 209 12 779 29 245
headline earnings
SUMMARISED STATEMENT OF FINANCIAL POSITION
R’000 Unaudited Unaudited Audited
as at as at as at
29-Feb-16 28-Feb-15 31-Aug-15
Assets
Non-current assets
Property and equipment 3 549 2 361 4 103
Goodwill 153 505 66 353 153 274
Intangible assets 134 346 97 670 140 965
Investments 1 313 7 877 1 657
Equity accounted investments 11 252 17 341 10 913
Long-term receivables 1 504 3 204 1 898
Deferred tax 19 834 9 256 20 081
325 303 204 062 332 891
Current assets
Related party loans - - 39
Trade and other receivables 81 089 64 084 74 255
Cash and cash equivalents 68 056 31 316 53 833
Investments 1 340 22 832 41 931
Short-term portion of long-term 692 708 1 377
receivables
Tax receivable 2 214 378 976
153 391 119 318 172 411
Total assets 478 694 323 380 505 302
Equity and liabilities
Equity attributable to equity 205 715 180 044 191 915
holders of the parent
Share capital and share premium 150 325 150 325 150 325
Treasury shares (389) (149) (389)
Fair-value adjustment reserve 142 460 (3)
Accumulated income 55 637 29 408 41 982
Non-controlling interest (2 389) (1 787) (2 420)
Total equity 203 326 178 257 189 495
Non-current liabilities 128 699 44 962 129 050
Long-term liabilities 95 700 20 298 95 226
Deferred tax 33 599 24 664 33 824
Current liabilities 146 669 100 161 186 757
Related party loans 958 - -
Trade and other payables 113 615 86 853 136 687
Short-term portion of long-term 28 528 7 650 47 940
liabilities
Taxation payable 3 568 5 658 2 130
Total liabilities 275 368 145 123 315 807
Total equity and liabilities 478 694 323 380 505 302
Net asset value per share 227,08 198,74 212,38
(cent)
Net tangible asset value per (54,59) 46,79 (71,30)
share (cent)
SEGMENTAL ANALYSIS
R’000 Financial Services Other Total
Services and Investments
Solutions
For the six months
ended 29 February
2016:
Revenue 74 297 14 839 376 341 (37 242) 428 235
External 68 736 249 357 826 1 424 428 235
Inter-segment 5 561 14 590 18 515 (38 666) -
Profit/(loss) for 3 674 6 891 16 120 (7 428) 19 257
the period
Assets 45 144 18 346 133 954 281 250 478 694
Liabilities 47 613 3 990 91 288 132 477 275 368
For the six months
ended 28 February
2015:
Revenue 52 813 17 977 283 501 (9 735) 344 556
External 52 813 11 077 280 493 173 344 556
Inter-segment - 6 900 3 008 (9 908) -
Profit/(loss) for 41 10 318 4 120 (2 446) 12 033
the perio
Assets 36 600 15 813 119 906 151 061 323 380
Liabilities 44 936 8 364 86 539 5 284 145 123
For the year ended
31 August 2015:
Revenue 118 363 35 974 645 918 (84 076) 716 179
External 111 537 1 398 602 790 454 716 179
Inter-segment 6 826 34 576 43 128 (84 530) -
Profit/(loss) for 383 18 623 19 348 (9 052) 29 302
the period
Assets 45 410 20 802 189 236 249 854 505 302
Liabilities 53 983 5 048 122 750 134 026 315 807
Other consists of consolidation entries, amortisation of intangible assets,
C&A F Financial Services, Efficient Capital, Efficient Select Swaziland,
Efficient Share Incentive Scheme Trust, Efficient Board of Executors and
Efficient Group.
All operations take place in southern Africa.
SUMMARISED STATEMENT OF CHANGES IN EQUITY
R’000 Share Treas- Fair- Accumula Total Non- Total
capital ury value ted controll Equity
and shares adjust income ing
share ment interest
premium reserv
e
Balance at 31 150 325 (149) 98 18 441 168 715 (1 041) 167 674
August 2014
Dividends - - - (1 812) (1 812) - (1 812)
declared
Total
comprehensive
income for the
period
- Profit/ - - - 12 779 12 779 (746) 12 033
(loss)
- Other - - 362 - 362 - 362
comprehensive
income
Balance at 28 150 325 (149) 460 29 408 180 044 (1 787) 178 257
February 2015
Repurchase of - (240) - - (240) - (240)
company's own
equity
instruments
Dividends - - - (7 140) (7 140) - (7 140)
declared
Total
comprehensive
income for the
period
- Profit/ - - - 19 714 19 714 (633) 19 081
(loss)
- Other - - (463) - (463) - (463)
comprehensive
income
Balance at 31 150 325 (389) (3) 41 982 191 915 (2 420) 189 495
August 2015
Dividends - - - (5 571) (5 571) - (5 571)
declared
Total
comprehensive
income for the
period
- Profit - - - 19 226 19 226 31 19 257
- Other - - 145 - 145 - 145
comprehensive
income
Balance at 29 150 325 (389) 142 55 637 205 714 (2 389) 203 326
February 2016
SUMMARISED STATEMENT OF CASH FLOWS
R’000 Unaudited Six Unaudited Six Audited year
Months ended Months ended ended
29-Feb-16 28-Feb-15 31-Aug-15
Cash flows from operating
activities
Cash generated by operations 33 739 20 728 44 534
before changes in working
capital
Changes in working capital
Increase in trade and other (6 834) (7 577) (12 501)
receivables
(Decrease)/increase in trade (23 072) 22 367 70 381
and other payables
3 833 35 518 102 414
Interest received 6 375 3 412 7 126
Interest paid (1 588) (1 963) (2 711)
Taxation paid (7 118) (8 210) (35 070)
Dividends received 622 24 1 121
Net cash inflow from 2 124 28 781 72 880
operating activities
Cash flows from investing
activities
Acquisition and disposal of (1 094) (281) (12 239)
businesses
Long-term loan repayment from - 168 -
associate
Decrease in long-term 1 079 704 1 727
receivable
Acquisition of investments - (23 336) (37 225)
Proceeds on disposal of 40 861 - -
investments
Proceeds on disposal of - - 160
equipment
Proceeds on disposal of - - 8 743
investment in associate
Acquisition of intangible (777) - (7 048)
assets
Acquisition of equipment (288) (410) (2 826)
Net cash inflow/(outflow) from 39 781 (23 155) (48 708)
investing activities
Cash flows from financing
activities
(Decrease)/increase in long- (23 108) (6 050) 3 483
term liabilities
Decrease in loans from non- - - (195)
controlling shareholders of
subsidiaries
Increase/(decrease) in related 997 - (39)
party loans
Dividends paid (5 571) (1 812) (7 140)
Net cash outflow from financing (27 682) (7 862) (3 891)
activities
Movement in cash and cash 14 223 (2 236) 20 281
equivalents for the period
Cash and cash equivalents at 53 833 33 552 33 552
the beginning of the period
Cash and cash equivalents at 68 056 31 316 53 833
the end of the period
Non-executive directors: S Booysen*, Z Cele*, L Taylor*, J Rosen*, J Mabena, A du Preez
(*Independent)
Alternate director: T du Preez (for A du Preez).
Executive directors: DD Roodt, H Weidhase, AT de Klerk, R Walton and C Burger.
Registered address: 81 Dely Road, Hazelwood, 0081
Business address: 81 Dely Road, Hazelwood, Pretoria, 0081
Company secretary: Jonathan Nyahuye
Transfer secretaries: Link Market Services South Africa (Pty) Ltd
Sponsor: Java Capital
Efficient Group Ltd is a JSE-listed financial services company. Tel: +27(0)12 460 9580 / Fax:
+27(0)12 346 6135 81 Dely Road, Hazelwood, Pretoria, 0081 www.efgroup.co.za
Date: 05/05/2016 05:39:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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