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Summarised Audited Financial Results for the year ended 31 August 2016
EFFICIENT GROUP LIMITED
Incorporated in the Republic of South Africa
Registration number 2006/036947/06
JSE share code: EFG
ISIN: ZAE000151841
SUMMARISED AUDITED FINANCIAL RESULTS FOR THE YEAR ENDED 31 AUGUST 2016
HIGHLIGHTS
+ Revenue increased by 23%
+ Profit after tax for the year increased from R29 million to R38 million
+ Headline earnings per share increased from 32.32 cents to 41.53 cents
+ Final dividend of 5.47059 cents per share declared
+ Assets under administration increased by 60% to R101.1 billion
INTRODUCTION
The vision of Efficient Group (“the Group”) is to be a diversified financial services provider offering customised
products, professional services and added value throughout the financial services value chain.
In 2015, the Group undertook an extensive restructuring process in order to reflect and support its new five-year
strategy, Vision 2020. We now have a three pillared structure expressing how the business units are designed to
meet client needs. The three clusters are:
+ Financial Services;
+ Services and Solutions; and
+ Investments.
Only two operational functions remain centralised from a control perspective, namely finance and compliance.
The structure is in line with the international trends towards intrapreneurship, which aims to empower business
units to function independently and to be more responsive to market needs. Intrapreneurship is the act of
behaving like an entrepreneur while working within a large organisation. Intrapreneurship is known as the practice
of a corporate management style that integrates risk-taking and innovation approaches, as well as the reward
and motivational techniques, which are more traditionally thought of as being the province of entrepreneurship.
During the 2016 financial year, we consolidated this new structure, focusing on the complete integration of
governance, processes, procedures, communications and culture.
This new structure will enable us to tap into a financial services world that is seamless, customer-driven, flexible,
customised and externalised. In this new environment, a strong reputation and integration throughout the
value chain will be the most important determinants of success. Our strategy therefore focuses not only on
consolidating our recent integration process but on continuing to build the kind of strong corporate culture on
which sustainable reputations are built.
We have also set ourselves challenging but attainable goals, such as achieving R100 million in profit after tax
and headline earnings per share of 100 cents by 2020. By this time, we aim to have R60 billion in assets under
management, R40 billion in assets under consulting and R115 billion in assets under administration.
In order to achieve these goals, we will continue to focus on the core aspects of our business: delivering customer-
focused and customised products and solutions; maintaining a solid yet flexible operational structure; extending
our national footprint; expanding into new sectors; and growing both organically and by merger and acquisition.
HIGHLIGHTS OF THE YEAR INCLUDE:
+ Financial Services
+ Assets under advice grew by 17% to R14.8 billion;
+ The number of financial advisers increased from 96 to 101; and
+ Stead Wealth and Exceed Asset Management were integrated into operations.
+ Services And Solutions
+ The launch of Efficient Board of Executors;
+ An enhanced focus on the development of proprietary software; and
+ The packaging and rollout of proprietary investment solutions.
+ Investments
+ Integration of Select Manager;
+ Revenue grew by 22% to R786 million;
+ Assets under administration grew by 60% to R101.1 billion;
+ Assets under management grew by 23% to R22.3 billion; and
+ Assets under consulting grew by 10% to R26.4 billion.
1.1 FINANCIAL RESULTS
During the 2015 financial year, the Group acquired Select Manager as part of its strategy to increase its
distribution network and assets under management. This investment was implemented in May 2015 and the full-
year effect must be considered for comparison purposes. No significant strategic investments were made during
the reporting period.
A substantial share of the Group’s revenue accrues from 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 unit trust funds, unit trust funds of funds and private share portfolios managed by the
asset management division. The Group had R22 330 million (2015: R18 183 million) assets under management
by the end of the 2016 financial year. 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 monitoring of the daily pricing of unit trust funds. The Group administers assets
to the value of R101 096 million (2015: R63 173 million). Assets under consulting are represented by assets on
which Boutique Investment Partners supply investment consulting services. These consist primarily of portfolio
construction, strategic and tactical asset allocation, and manager selection services. The Group consults on assets
to the value of R26 440 million (2015: R23 978 million). Assets under advice are represented by client investments
made on the recommendation of, or with the guidance of, financial advisors employed by the Financial Services
division. Total assets under advice amount to R14 766 million (2015: R12 707 million).
Statement of comprehensive income:
Revenue increased by 23%, which is attributable to the full-year effect of Select Manager and the significant
increase in assets under administration.
The 255% increase in asset management base fees was mainly due to the full-year effect of Select Manager,
while the significant increase in assets under administration resulted in the 20% increase in revenue generated
by the asset administration business unit. The lower revenue for the asset consulting business is a result of lower
performance fees earned by this business unit. The Financial Services cluster also benefitted from the full-year
effect of the Select Manager transaction, with 14% growth.
The gross contribution % for the Investments cluster increased during the year due to higher administration
fees and lower variable expenses. The lower gross contribution % in the Financial Services cluster came about
as a result of changes to the remuneration structure for independent financial advisors as the clusters’ response
to regulatory changes. The gross contribution % in the Services and Solutions cluster decreased due to higher
distribution fees paid.
Variable Expenses increased by 23% to R604 848, which correlates with the increase in revenue and the change
in the gross contribution %. The full-year effect of Select Manager and the additional expenses associated with
the higher assets under administration explains the 15% increase in fixed expenses.
The profit share payment is linked to the performance of the asset administration and consulting business units.
The increase in this payment is in line with the higher profits generated by these business units. The incentive
provision is 9% lower than in the previous year.
The higher amortisation of intangible assets is linked to the Select Manager transaction and the amortisation of
software developed by Naviga Solutions during the reporting period.
The Group’s dividend policy is to pay a dividend equal to 80% of free cash flow. Free cash flow is calculated after
making provision for cash reserve, planned capital expenditure and acquisitions and debt repayments. Based on
this guideline, the Directors determined that a final dividend of 5.46 cents per share will be paid for the 2016
financial year. This will be in addition to the interim dividend of 1.59 cents per share paid in May 2016.
The total dividend is 41% lower than last year because the Group utilised cash generated during the year to repay
debt associated with the acquisition activities of the previous financial year.
Cash flow analysis:
The 37% lower cash generated from operations is due to the timing of the actual payment of the Efficient Invest
profit share. This expense was not provided for at year-end but actually paid. The actual payment of the profit
share increased the working capital and as a result reduced the income tax payments for the year under review.
The Investing activities consist mainly of the acquisition of Catnia Building in Bellville and the renovation cost of
the Head Office in Pretoria (R24 million), less the disposal of unit trust investments (R36 million).
The Group utilised cash to repay vendors (R35 million) and long-term borrowings (R15 million). An additional
working capital drawdown of R5 million was made and long-term borrowings were increased by R 24 million to
finance the property acquisition and renovation projects.
The Group had R97 million (2015: R96 million) in cash and cash equivalents as at 31 August 2016. Included in
this amount is R52 million (2015: R33 million), which is required in order to comply with financial soundness
requirements prescribed by the regulator. The Group is required to hold this amount, which is calculated based on
both fixed and variable expenses, in liquid assets.
Statement of financial position:
Tangible assets increased by 49% and liabilities decreased by 8%. The increase in tangible assets is due to the
acquisition of the Catnia Building in Bellville.
Working capital consists of cash, cash equivalents, accounts and other receivables less current liabilities (excluding
the short-term portion of long-term liabilities). Working capital increased during the year. Including the short-term
position of the long-term liabilities, the Group’s current liabilities exceed its current assets. Management assessed
the Group’s cash flow forecast and its access to credit and it is of the opinion that the Group will be able to settle
its short-term commitments as and when due.
Debt and Gearing:
The debt service cover ratio (i.e. the free cash flow to interest-bearing debt service obligation) decreased from
17.06 times during the previous reporting period to 6.31 times for the current reporting period. Lower free cash
flow resulted from the payment of the profit share associated with the asset administration and consulting
business units. In addition to the lower free cash flow, the debt service obligation increased due to additional
working capital loans and the property finance required for the Catnia building. The debt equity ratio increased
from 15.8% in the previous financial year to 20.7% at the end of August 2016.
1.2 OPERATIONAL OVERVIEW
From a Group perspective, the focus during the 2016 financial year was on the integration of recently acquired
and newly established businesses. This did not only include the integration of Select Manager, Stead Wealth and
Exceed Asset Management, all of which were acquired during the 2015 financial year, but also the continued
integration of Efficient Wealth and Naviga Solutions. Boutique Collective Investments and Boutique Investment
Partners also enjoyed their second full year of operations.
This process of integration and consolidation required consistent, focused communications with all stakeholders.
It also involved an engaging process of including management in regular meetings, as well as discussions aimed at
entrenching the Group’s culture into the newly acquired businesses.
Further, the comprehensive Investment and Corporate Governance Framework, adopted by the board of directors
(“Board”) in 2015, was fully entrenched in 2016. This not only guides management in terms of identifying potential
mergers and acquisitions and in measuring target companies against agreed benchmarks, but also serves as the
first point of reference for the integration and corporatisation of new business units.
We have continued to strengthen and expand our distribution footprint on a national basis. We have also recorded
unprecedented growth in our asset base. This was driven by initiatives across the business and by ongoing growth
in both Boutique Collective Investments and Boutique Investment Partners.
The Efficient Group has a highly skilled and experienced executive management team that oversees the daily
operations of all of the Group’s business units.
1.3 CONCLUSION
In line with the Group’s new business strategy, the Group will continue to concentrate on growing the
business organically and by acquiring entrepreneurial, like-minded entities to expand the Group’s value chain.
Key performance targets 2016 2017 target
Number of financial planners 101 118
Assets under administration R101.1 billion R136.9 billion
Assets under consulting R26.4 billion R32.2 billion
Assets under management R22.3 billion R25.9 billion
Assets under advice R14.8 billion R17.9 billion
1.4 CASH DIVIDEND
Dividends are declared at the discretion of the Board, after taking the financial position of the Group into
consideration. The directors determined that a final dividend of 5.47059 cents per share will be paid.
The salient dates for this dividend payment are as follows:
Last date to trade “cum” dividend Tuesday, 29 November 2016
Securities trade “ex” dividend Wednesday, 30 November 2016
Record date Friday, 2 December 2016
Payment date Monday, 5 December 2016
Share certificates may not be dematerialised or rematerialised between Wednesday, 30 November 2016 and
Friday, 2 December 2016, both days inclusive.
Shareholders are advised of the following additional information:
+ the dividend has been declared out of the 2016 profits;
+ the local dividend tax rate is 15%;
+ the gross local dividend amount is 5.47059 cents per share;
+ the net dividend amount for local shareholders:
+ exempt from payment of dividend tax, is 5.47059 cent per share;
+ liable to pay dividend tax, is 4.65000 cent per share;
+ the issued share capital of the company is 90 592 973 shares of R 0.00000277 each; and
+ the company’s tax reference number is 9071679170.
1.5 BASIS OF PREPARATION
The summarised Group financial results for the year ended 31 August 2016 constitute a summary of
the Group’s audited financial statements, prepared in accordance with the framework concepts and the
measurement and recognition requirements of IFRS and the SAICA Financial Reporting Guides as issued by the
Accounting Practices Committee and Financial Pronouncements as issued by Financial Reporting Standards
Council, and the presentation and disclosure requirements of International Accounting Standard 34 Interim
financial reporting.
The accounting policies are in terms of International Financial Reporting Standards and consistent with those of
the previous financial statements.
The adoption of this standard 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 2016.
This summarised report is extracted from audited information, but is not itself audited. The audited consolidated
financial statements and unmodified audit 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 underlying audited
consolidated financial statements.
The summarised financial results were prepared by Ernes Smit CA(SA), the Group Financial Manager of Efficient
Group.
1.6 CHANGES TO THE BOARD
There was one resignation from the Board during the reporting period, namely that of Christo Burger as an
Executive Director, due to increasing business commitments at Efficient Wealth, a wholly-owned subsidiary of the
Group.
The Board otherwise remains stable and continues to guide the Efficient Group in an increasingly uncertain and
highly regulated financial services environment.
SUMMARISED AUDITED STATEMENT OF FINANCIAL POSITION AS AT 31 AUGUST 2016
2016 2015
Notes R'000 R'000
ASSETS
Non-current assets
Property and equipment 1 27 353 4 103
Goodwill 2 155 050 153 274
Intangible assets 3 132 365 140 965
Investments 4 1 383 1 657
Equity accounted investments 5 11 726 10 913
Long-term receivables 6 3 436 1 898
Deferred tax 7 12 172 20 081
343 485 332 891
Current assets
Related party loans 11.1 - 39
Investments 4 6 503 41 931
Trade and other receivables 79 676 74 255
Cash and cash equivalents 90 118 53 833
Short-term portion of long-term receivables 6 3 741 1 377
Tax receivable 550 976
180 588 172 411
Total assets 524 073 505 302
EQUITY AND LIABILITIES
Equity
Share capital and share premium 150 325 150 325
Treasury shares (440) (389)
Accumulated income 72 530 41 982
Fair value adjustment reserve 58 (3)
Equity attributable to equity holders of the parent 222 473 191 915
Non-controlling interest (2 443) (2 420)
Total equity 220 030 189 495
Non-current liabilities
Long-term liabilities 8 85 465 95 226
Deferred tax 7 30 991 33 824
116 456 129 050
Current liabilities
Trade and other payables 139 547 136 687
Short-term portion of long-term liabilities 8 47 847 47 940
Tax payable 193 2 130
187 587 186 757
Total liabilities 304 043 315 807
Total equity and liabilities 524 073 505 302
Net asset value per share (cent) 246.28 212.38
Net tangible asset value per share (cent) (30.86) (71.30)
SUMMARISED AUDITED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 AUGUST 2016
2016 2015
Note R'000 R'000
Revenue 879 978 716 179
Operating expenses (830 566) (683 599)
Operating profit 49 412 32 580
Dividends received 226 258
Finance income 13 900 7 126
Finance cost (3 630) (2 711)
Profit on sale of equipment 25 82
Profit on sale of shares in associate - 2 607
Profit on sale of financial advisory client base - 73
Other (expenses)/income (915) 765
Fair value adjustment of investment designated at fair value through profit or loss 108 (57)
Re-measurement of liabilities at fair value through profit or loss (6 589) 267
Impairment of intangible asset - (420)
Impairment of investment in associate - (869)
Share of profits from associates, net of taxation 1 823 1 808
Profit before taxation 54 360 41 509
Taxation (16 845) (12 207)
Profit for the year 37 515 29 302
Other comprehensive income
Items that may be reclassified subsequently to profit or loss 61 (101)
Unrealised fair value adjustment of available-for-sale financial assets, net of taxation 61 (101)
Total comprehensive income for the year 37 576 29 201
Profit for the year attributable to:
Equity holders of the parent 37 538 30 681
Non-controlling interest (23) (1 379)
37 515 29 302
Total comprehensive income for the year attributable to:
Equity holders of the parent 37 599 30 580
Non-controlling interest (23) (1 379)
37 576 29 201
Basic and diluted earnings per share (cent) 10 41.55 33.91
SUMMARISED AUDITED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 AUGUST 2016
Ordinary Treasury Accumulated Fair value Total equity Non- Total
shares shares income adjustment attributable controlling equity
and share reserve to equity interest
premium holders of
the parent
R'000 R'000 R'000 R'000 R'000 R'000 R'000
Balance at 31 August 2014 150 325 (149) 18 441 98 168 715 (1 041) 167 674
Repurchase of company's own
equity instruments - (240) - - (240) - (240)
Total comprehensive income for
the year
- Profit/(loss) - - 30 681 - 30 681 (1 379) 29 302
- Other comprehensive income - - - (101) (101) - (101)
Dividends declared - - (7 140) - (7 140) - (7 140)
Balance at 31 August 2015 150 325 (389) 41 982 (3) 191 915 (2 420) 189 495
Repurchase of company's own
equity instruments - (51) - - (51) - (51)
Total comprehensive income for
the year
- Profit/(loss) - - 37 538 - 37 538 (23) 37 515
- Other comprehensive income - - - 61 61 - 61
Dividends declared - - (6 990) - (6 990) - (6 990)
Balance at 31 August 2016 150 325 (440) 72 530 58 222 473 (2 443) 220 030
Unrealised fair value adjustments to available-for-sale financial assets are recorded in the fair value adjustment reserve in
equity through other comprehensive income. Upon realisation of these fair value adjustments, the same are transferred from
the fair value adjustment reserve to accumulated income through profit or loss.
SUMMARISED AUDITED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 AUGUST 2016
2016 2015
R'000 R'000
Cash flows from operating activities
Cash receipts from customers 874 500 698 431
Cash paid to suppliers and employees (810 574) (596 017)
Cash generated by operations 63 926 102 414
Interest received 13 900 7 126
Interest paid (3 630) (2 711)
Dividends received 226 258
Dividends received from associate 1 010 863
Taxation paid (15 199) (35 070)
Net cash inflow from operating activities 60 233 72 880
Cash flows from investing activities
Acquisition and disposal of businesses (1 967) (12 239)
(Increase)/decrease in long-term receivable (3 751) 1 727
Acquisition of intangible assets (1 217) (7 048)
Disposal/(acquisition) of investments 35 844 (37 225)
Proceeds on sale of investment in associate - 8 743
Proceeds on the disposal of equipment 117 160
Acquisition of property (23 984) -
Acquisition of equipment (1 133) (2 826)
Net cash inflow/(outflow) from investing activities 3 909 (48 708)
Cash flows from financing activities
Increase/(decrease) in related party loans 39 (39)
Proceeds from long-term liabilities 29 000 10 000
Repayment of long-term liabilities (14 881) (8 483)
(Repayment of)/proceeds from vendor finance (35 025) 1 966
Repayment of loans from non-controlling shareholders of subsidiaries - (195)
Dividends paid (6 990) (7 140)
Net cash outflow from financing activities (27 857) (3 891)
Total cash and cash equivalents movement for the year 36 285 20 281
Total cash and cash equivalents at the beginning of the year 53 833 33 552
Total cash and cash equivalents at the end of the year 90 118 53 833
NOTES TO THE SUMMARISED AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 AUGUST 2016
August 2016
Cost Accumulated Carrying
depreciation value
R'000 R'000 R'000
1. PROPERTY AND EQUIPMENT
Land and buildings 21 096 - 21 096
Assets under construction 2 888 - 2 888
Furniture, fixtures and office equipment 3 815 (2 748) 1 067
Computer equipment 5 594 (4 304) 1 290
Leasehold improvements 1 945 (933) 1 012
Other assets - - -
Total 35 338 (7 985) 27 353
August 2015
Cost Accumulated Carrying
depreciation value
R'000 R'000 R'000
Land and buildings - - -
Assets under construction - - -
Furniture, fixtures and office equipment 4 899 (3 463) 1 436
Computer equipment 6 935 (5 570) 1 365
Leasehold improvements 1 945 (643) 1 302
Other assets 247 (247) -
Total 14 026 (9 923) 4 103
August 2016
Acquired
through
Opening business Closing
balance Disposals combination Additions Depreciation balance
R'000 R'000 R'000 R'000 R'000 R'000
1. RECONCILIATION OF PROPERTY
AND EQUIPMENT
Land and buildings - - - 21 096 - 21 096
Assets under construction - - - 2 888 - 2 888
Furniture, fixtures and office equipment 1 436 (32) - 135 (478) 1 061
Computer equipment 1 365 (60) - 998 (1 007) 1 296
Leasehold improvements 1 302 - - - (290) 1 012
Other assets - - - - - -
Total 4 103 (92) - 25 117 (1 775) 27 353
August 2015
Acquired
through
Opening business Closing
balance Disposals combination Additions Depreciation balance
R'000 R'000 R'000 R'000 R'000 R'000
Land and buildings - - - - - -
Assets under construction - - - - - -
Furniture, fixtures and office equipment 933 (39) 124 841 (423) 1 436
Computer equipment 1 473 (39) 44 821 (934) 1 365
Leasehold improvements 250 - - 1 149 (97) 1 302
Other assets 12 - - 15 (27) -
Total 2 668 (78) 168 2 826 (1 481) 4 103
On 27 May 2016, the Group acquired sections 35 to 43 in the sectional title scheme known as Bella Rosa One, Bellville,
City of Cape Town (“Catnia building”) for a purchase price of R21.0 million. The property is carried under the revaluation
model and its carrying amount at year-end approximates what it would have been under the cost model.
During July 2016, the Group started development of its new office building in Hazelwood, Pretoria. At
31 August 2016, the Group had a remaining contractual commitment to acquire property and construct the buildings
amounting to R19.8 million.
At year-end, property with a carrying value of R21.1 million (2015: Rnil) was pledged as security for bank borrowings
(refer to note 8).
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 and its subsidiaries.
2016 2015
R'000 R'000
2. GOODWILL
Recognised on acquisition of business combinations. 155 050 153 274
Impairment testing for cash-generating units containing goodwill:
For the purpose of impairment testing, goodwill is allocated to cash generating units
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 units are as follows:
Efficient Financial Services (Pty) Ltd 13 051 11 275
Efficient Select (Pty) Ltd 8 369 8 369
Efficient Wealth (Pty) Ltd 17 590 47 264
Naviga Solutions (Pty) Ltd 29 674 -
Select Manager (Pty) Ltd 65 166 65 166
Stead Wealth Management (Pty) Ltd 15 112 15 112
Exceed Asset Management (Pty) Ltd and Exceed Private Clients (Pty) Ltd 6 088 6 088
155 050 153 274
Reconciliation of goodwill
Opening balance 153 274 66 255
Acquisitions
- Independent financial advisory client bases 1 776 653
- Select Manager (Pty) Ltd group of companies - 86 366
Closing balance 155 050 153 274
The Efficient Wealth (Pty) Ltd group of companies were reassessed and Efficient Wealth (Pty) Ltd and Naviga Solutions
(Pty) Ltd were identified as separate cash generating units for goodwill allocation and impairment testing.
A key estimate used in Group goodwill and investment impairment testing calculations is the expected growth in future
cash flows beyond the projection period (terminal growth rate). Management considered the following factors and
found 4.5% (2015:4.0%) to be a more appropriate growth rate to use in these calculations:
- The relationship between the discount rate and the terminal growth rate
- The forecast period
- Nature of the factors affecting growth
- Historical growth
- Peer comparison and market norms
August 2016
Accumulated
amortisation
and Carrying
Cost impairments value
R'000 R'000 R'000
3. INTANGIBLE ASSETS
Trade names 5 902 (3 877) 2 025
Customer contracts and customer relationships 176 029 (52 185) 123 844
Computer software 8 672 (2 176) 6 496
Total 190 603 (58 238) 132 365
August 2015
Accumulated
amortisation
and Carrying
Cost impairments value
R'000 R'000 R'000
Trade names 5 902 (2 674) 3 228
Customer contracts and customer relationships 169 631 (38 710) 130 921
Computer software 7 455 (639) 6 816
Total 182 988 (42 023) 140 965
August 2016
Acquired
through
Opening business Closing
balance Impairments Disposals combination Acquisitions Amortisation balance
R'000 R'000 R'000 R'000 R'000 R'000 R’000
Reconciliation of
intangible assets
Trade names 3 228 - - - - (1 203) 2 025
Customer contracts and
customer relationships 130 921 - - 6 398 - (13 475) 123 844
Computer software 6 816 - - - 1 217 (1 537) 6 496
Total 140 965 - - 6 398 1 217 (16 215) 132 365
August 2015
Acquired
through
Opening business Closing
balance Impairments Disposals combination Acquisitions Amortisation balance
R'000 R'000 R'000 R'000 R'000 R'000 R’000
Trade names 3 636 - - 790 - (1 198) 3 228
Customer contracts and
customer relationships 99 001 (420) (275) 43 404 - (10 789) 130 921
Computer software - - - 319 7 048 (551) 6 816
Total 102 637 (420) (275) 44 513 7 048 (12 538) 140 965
The remaining useful life of the trade names are between 1 and 19 years (2015: 2 and 20 years), customer contracts and customer
relationships, between 1 and 19 years (2015: 2 and 20 years) and computer software between 3 and 6 years (2015: 4 and 7 years).
2016 2015
R'000 R'000
4. INVESTMENTS
Available-for-sale financial assets 1 383 1 657
Investments designated at fair value through profit or loss 6 503 41 931
Total investments 7 886 43 588
Current portion of investments 6 503 41 931
Non-current portion of investments 1 383 1 657
5. EQUITY ACCOUNTED ASSOCIATES
Name Country of Proportion Principal Nature of relationship
incorporation of ownership activities with the Group
interest
C & A F Financial Independent and not strategic
Services (Pty) Ltd RSA 49% Financial Services to the Group's activities
Rudiarius Capital Independent and not strategic
Management (Pty) Ltd RSA 30% Financial Services to the Group's activities
AS Sure Investment Independent and not strategic
Services (Pty) Ltd RSA 25% Financial Services to the Group's activities
Efficient Financial Independent and not strategic
Services (Namibia) (Pty) Ltd NAM 50% Financial Services to the Group's activities
Efficient Financial Services (Namibia) (Pty) Ltd is an equity accounted investment as the Group does not hold the
majority of the voting rights, nor does it have the ability to appoint the majority of the Board.
The equity accounted investments in Rebalance Fund Managers (Pty) Ltd and Marion Technology (Pty) Ltd were disposed
of by the Group on 1 June 2015 and 1 March 2015 respectively.
2016 2015
R'000 R'000
Equity accounted associates consist of
C & A F Financial Services (Pty) Ltd - -
Rudiarius Capital Management (Pty) Ltd 1 224 263
AS Sure Investment Services (Pty) Ltd 10 502 10 650
Efficient Financial Services (Namibia) (Pty) Ltd - -
11 726 10 913
Reconciliation of equity accounted associates
Opening balance 10 913 16 973
Profit/(loss) for the year per statement of comprehensive income 1 823 1 808
Impairment of investment in associate - (869)
Repayment of loan to associate - (412)
Dividend received (1 010) (863)
Disposal of investment in associate - (5 724)
Closing balance 11 726 10 913
Aggregate amounts relating to associates
Current assets 7 486 5 100
Non-current assets 1 583 3 250
Current liabilities (2 524) (2 384)
Non-current liabilities (969) (2 187)
5 576 3 779
Efficient Group Ltd's share of net assets 1 591 1 001
Revenue 29 744 39 908
Total comprehensive income 5 622 6 453
Efficient Group Ltd's share of other comprehensive income 1 823 1 808
The respective year-ends of the following associates differ from that of the Group:
- C & A F Financial Services (Pty) Ltd (February year-end)
- AS Sure Investment Services (Pty) Ltd (February year-end)
The results of these associates are equity accounted using associate management prepared information on a basis
co-terminus to the Group’s year-end.
Due to a decrease in the expected financial performance of the entity, the recoverable amount of the investment in AS Sure
Investment Services (Pty) Ltd decreased to below its carrying amount and was impaired in the 2015 financial year. As a result,
the investment was again assessed for impairment during the 2016 financial year by comparing its recoverable amount to its
carrying value.
The recoverable amount was calculated on a value-in-use basis, based on pre-tax cash flow projections from financial budgets
approved by management covering a five-year period, a pre-tax discount rate of 33.4% (2015:29.5%) and a terminal value
discount rate of 4.5% (2015:4.0%). The investment’s carrying value was found to approximate its recoverable amount, and
no impairment loss (2015:R870 000) was recognised in profit or loss. The increase in pre-tax discount rate compared to the
discount rate used in the prior period is due to a risk-based adjustment to the rate as a result of the prior period impairment.
2016 2015
R'000 R'000
6. LONG-TERM RECEIVABLES
6.1 Customer base acquisition loans 554 1 984
These loans form part of customer base acquisitions. The loans are unsecured, have
varying repayment terms and bear interest at the prime interest rate.
6.2 CS Sutherland and Celtis Financial Services (Pty) Ltd 3 000 -
The loan to CS Sutherland and Celtis Financial Services (Pty) Ltd ("Celtis") is
secured by portfolio management fees receivable by Celtis on certain assets under
management, and cession of a policy on the life of CS Sutherland. The loan is
repayable as follows; R500 000 before March 2017, R1 000 000 before 31 March
2018 and the balance before 31 March 2019. The loan bears no interest, but Boutique
Investment Partners (Pty) Ltd will earn a profit-share from certain Celtis funds as part
of the loan agreement.
The fair value of the long-term receivable is R2 365 000 and the instrument is
classified as level 3 on the fair value hierarchy. The valuation considers the present
value of the expected payments as set out in the agreement, discounted using a
discount rate of the prime rate plus 3%.
6.3 Quantum Asset Management (Pty) Ltd 2 554 -
The loan to Quantum Asset Management (Pty) Ltd is unsecured, bears interest at the
prime interest rate plus 3%, and is repayable in 4 quarterly payments of R625 000
plus interest.
6.4 Share purchase scheme 1 069 1 291
In terms of the share purchase scheme loans were granted to certain employees to
fund 75% of the acquisition of Efficient Group Ltd shares. The loans are repayable
on 31 August 2018 and bear interest at the "official rate of interest" as defined in the
Income Tax Act. Employees can not trade the shares until the debt is repaid in full.
The fair value of the long-term receivable is R1 025 000 (2015:R1 192 000) and the
instrument is classified as level 3 on the fair value hierarchy. The valuation considers
the present value of the payments set out in the agreement, discounted using a
discount rate of 10.5% (2015:9.5%).
Total long-term receivables 7 177 3 275
Current portion of long-term receivables
Customer base acquisition loans 513 1 377
CS Sutherland and Celtis Financial Services (Pty) Ltd 500 -
Quantum Asset Management (Pty) Ltd 2 554 -
Share purchase scheme 174 -
3 741 1 377
Non-current portion of long-term receivables 3 436 1 898
7 177 3 275
7. DEFERRED TAX
Asset per statement of financial position 12 172 20 081
Liability per statement of financial position (30 991) (33 824)
Net deferred tax liability (18 819) (13 743)
Deferred tax assets/(liabilities) comprise
Accruals 10 135 21 116
Fair value adjustment of investments 202 232
Liability on lease assets - 92
Assessed losses 7 287 3 008
Prepaid expenses (206) (302)
Fair value adjustment of investments (246) -
Intangible assets (35 991) (37 889)
(18 819) (13 743)
Reconciliation of deferred tax balance
Opening balance (13 743) (22 671)
Deferred tax recognised in the statement of financial position (1 896) (12 341)
Deferred tax recognised in the statement of profit or loss (3 157) 21 250
Deferred tax recognised in other comprehensive income (23) 19
(18 819) (13 743)
The deferred tax assets of the Group includes an amount of R10 337 000 (2015:R21 348 000) relating to temporary
differences on current assets and current liabilities, and R7 287 000 (2015:R3 100 000) relating to temporary
differences on non-current assets and non-current liabilities. The deferred tax assets relating to current assets and
current liabilities are expected to realise within 12 months.
The deferred tax liabilities of the Group includes an amount of R452 000 (2015:R302 000) relating to temporary
differences on current assets and current liabilities, and R35 991 000 (2015:R37 889 000) relating to temporary
differences on non-current assets and non-current liabilities. The deferred tax liabilities relating to current assets and
current liabilities are expected to be settled within 12 months.
The utilisation of the deferred tax asset raised on calculated losses is dependent on future taxable profits in excess
of the profits arising from the reversal of existing taxable temporary differences. Management is confident that the
deferred tax asset will be recovered in future years based on approved budgets and forecasts.
2016 2015
R'000 R'000
8. LONG-TERM LIABILITIES
8.1 Vendor finance 5 337 1 744
These liabilities form part of the acquisition of customer bases. The loans are
unsecured, interest free and repayable at various instalment dates and amounts. The
last instalment is payable in 2018.
The fair value of the outstanding liabilities is R4 944 000 (2015:R1 584 000). The fair
value hierarchy is level 3. The valuation considers the present value of the payments
set out in the agreements, discounted using a discount rate of 10.50% (2015:9.50%).
8.2 Select Manager forward purchase liabilities
This liability forms part of the acquisition of the Select Manager group through
a forward purchase contract entered into with effective date 1 March 2015, and is
payable in two phases over a period of three years.
Phase I liability 14 210 42 243
This liability is presented at fair value and is repayable in equal instalments of R15
million over one year. The fair value hierarchy is level 3. The valuation considers the
present value of the expected payments set out in the contract, discounted using a
discount rate of 10.88% (2015:9.80%).
Phase II liability 54 885 52 763
This liability is presented at fair value and repayable on 1 March 2018. The fair value
hierarchy is level 3. The valuation considers the present value of the expected
payments set out in the contract, discounted using a discount rate of 7.75%
(2015:6.60%).
The unobservable inputs for calculating the forward purchase liability include budgets
and forecasts, the conversion ratio of independent financial advisor book buys, profit
targets and free cash flows.
8.3 Select Manager dividend liability 12 811 15 337
This liability is presented at fair value and payable over a year and a half. The fair
value hierarchy is level 3. The valuation considers the present value of the expected
payments set out in the contract, discounted using a discount rate of 7.75%
(2015:6.60%).
The unobservable inputs for calculating the dividend liability include budgets and
forecasts, planned independent financial advisor book buys, profit targets and free
cash flows.
8.4 Incentive liability - 662
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.
8.5 Working capital loans
The liability relates to an amortising term loan from Standard Bank of South Africa to
assist the subsidiaries with their respective working capital requirements, and consists
of four facilities. The loan is guaranteed by Efficient Wealth (Pty) Ltd, Naviga Solutions
(Pty) Ltd, Boutique Investment Partners (Pty) Ltd and Efficient Financial Services (Pty)
Ltd. All loan covenants have been met.
2016 2015
R'000 R'000
Facility A 13 388 21 038
The facility bears interest at JIBAR plus 3.75% per annum and is repayable in 16 equal
and quarterly payments of R1 912 500 plus interest accrued for the period.
Facility B 9 250 9 167
The facility bears interest at JIBAR plus 3.50% per annum and is repayable in 12
variable quarterly capital payments plus interest accrued for the period.
Facility C 8 550 -
The facility bears interest at JIBAR plus 3.95% per annum and is repayable in 20
quarterly and equal capital payments of R450 000 plus interest accrued for the
period.
Facility D 3 000 -
The purpose of this facility is to finance renovations at the Group's new offices in
Hazelwood, Pretoria. The facility bears interest at JIBAR plus 2.95% per annum,
has no repayment date, and shall be refinanced on maturing date (expected to be 31
August 2017) under renewed terms.
All working capital loans are secured by guarantees from Efficient Financial Services,
Efficient Wealth, Naviga Solutions and Boutique Investment Partners issued to the
lender.
8.6 Mortgage loan 11 881 -
This loan is secured by property with a carrying amount of R21.1 million (refer to note
1) and bears interest at the prime interest rate less 1%. The capital is repayable in 60
escalating monthly instalments and shall be fully repaid in 2021.
8.7 PSJ Dynes and associates - 212
This loan was unsecured, bore no interest and the last instalment was paid in June
2016.
Total long-term liabilities 133 312 143 166
Current portion of long-term liabilities
Vendor finance 3 680 524
Select Manager forward purchase liabilities 14 210 27 957
Select Manager dividend liability 10 834 7 268
Incentive liability - 662
Working capital loans 18 617 11 317
Mortgage loan 506 -
PSJ Dynes and associates - 212
47 847 47 940
Non-current portion of long-term liabilities 85 465 95 226
133 312 143 166
9. CONTINGENT LIABILITIES AND CAPITAL COMMITMENTS
Efficient Group Ltd has the following outstanding guarantees:
- A guarantee in the amount of R300 000 in terms of a lease agreement for Efficient Select (Pty) Ltd’s offices in Cape Town.
- A guarantee in the amount of R3 000 000 in terms of a mortgage loan agreement between Efficient Capital (Pty)
Ltd and Standard Bank Limited related to the purchase of the Catnia building.
- A guarantee in the amount of R955 000 issued to the City of Tshwane Metropolitan Municipality for performance
obligations in terms of a rezoning service agreements related to the construction of the new Dely Road offices.
Efficient Wealth (Pty) Ltd has the following outstanding guarantees:
- A guarantee in the amount of R38 000 in terms of an agreement for offices in Port Elizabeth.
10.BASIC AND DILUTED EARNINGS PER SHARE
Basic and diluted earnings per 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.
2016 2015
'000 '000
Weighted average number of ordinary shares in issue
Number of ordinary shares in issue at the end of the year 90 593 90 593
Weighted average number of ordinary shares repurchased during the year (13) (59)
Treasury shares (228) (62)
Weighted average number of ordinary shares in issue, net of treasury shares 90 352 90 472
Basic and diluted earnings per share (cent) 41.55 33.91
Attributable earnings (R'000) 37 538 30 681
Weighted average number of ordinary shares in issue (‘000) 90 352 90 472
Headline and diluted headline earnings per share (cent) 41.53 32.32
Headline earnings (R'000) 37 520 29 245
Weighted average number of ordinary shares in issue (‘000) 90 352 90 472
R'000 R'000
Headline and diluted headline earnings are calculated as follows 37 520 29 245
Attributable earnings 37 538 30 681
Profit on sale of equipment (25) (82)
Tax on profit on sale of equipment 7 23
Profit on sale of shares in associate - (2 607)
Tax on profit on sale of share in associate - -
Impairment of intangible asset - 420
Impairment of investment in associate - 869
Profit on sale of financial advisor client base - (73)
Tax on profit on sale of financial advisor client base - 14
2016 2015
R'000 R'000
11. RELATED PARTIES
11.1 Related party loans
Loans to related parties
Rudiarius Capital Management (Pty) Ltd - 39
Accounts receivable from related parties
Midnight Storm Investments 299 (Pty) Ltd 296 -
AS Sure Investment Services (Pty) Ltd 104 146
Rudiarius Capital Management (Pty) Ltd 94 15
494 161
Accounts payable to related parties
Midnight Storm Investments 299 (Pty) Ltd - (97)
AS Sure Investment Services (Pty) Ltd (1 017) (1 044)
Rudiarius Capital Management (Pty) Ltd (966) (1 256)
(1 983) (2 397)
The Loans to related parties are unsecured, bear no interest and have no fixed repayment terms.
During the year, Efficient Group Ltd provided financial support amounting to R51 000 (2015:R254 000) to the Efficient
Group Share Trust to enable the structured entity to purchase some of Efficient Group Ltd’s own equity instruments.
11.2 Related party transactions
Administration fees received
Rudiarius Capital Management (Pty) Ltd - 55
Rebalance Fund Managers (Pty) Ltd - 78
Dividends received
Rudiarius Capital Management (Pty) Ltd 150 450
Rebalance Fund Managers (Pty) Ltd - 11
AS Sure Investment Services (Pty) Ltd 860 402
Other
Midnight Storm Investments 299 (Pty) Ltd - Rent paid (973) (976)
Rudiarius Capital Management (Pty) Ltd - Service fees received 12 142 10 106
AS Sure Investment Services (Pty) Ltd - Asset management fees paid (10 598) (12 296)
AS Sure Investment Services (Pty) Ltd - Asset consulting fee received 1 247 1 196
DD Roodt, H Weidhase and SF Booysen are shareholders of Midnight Storm Investments 299 (Pty) Ltd. A sale
agreement was entered into between Midnight Storm Investments 299 (Pty) Ltd and Efficient Group Ltd for the
purchase of the Group’s Dely Road offices. All conditions to the agreement have been met and registration of
the transfer is in progress. The property was valued by an independent valuer and purchased at a market related
consideration.
12.SEGMENT ANALYSIS
Efficient Group Limited is organised into three main business segments:
Financial Services
Included in this segment are Efficient Financial Services, Efficient Asset Finance, Efficient Wealth, Twist Street
Securities, Efficient Fiduciary Services, Stead Wealth Management, Exceed Asset Management, Exceed Private Clients
and AS Sure Investment Services.
Services and Solutions
Included in this segment are Naviga Solutions and Efficient Board of Executors.
Investments
Included in this segment are Efficient Select, Efficient International Investments, Boutique Collective Investments,
Boutique Investment Partners, Select Manager, Instit and Rudiarius.
2016
Financial Services and Investments Other Total
Services Solutions
R'000 R'000 R'000 R'000 R'000
Revenue 152 868 30 265 785 895 (89 050) 879 978
- External 148 848 29 456 701 412 262 879 978
- Inter-segment 4 020 809 84 483 (89 312) -
Operating expenses (142 734) (13 194) (754 991) 80 353 (830 566)
Finance cost (1 535) - (108) (1 987) (3 630)
Finance income 1 432 309 11 834 325 13 900
Impairment of investment in associate - - - - -
Impairment of intangible assets - - - - -
Net profit for the year 6 958 12 527 31 719 (13 689) 37 515
Tax (3 207) (4 853) (11 995) 3 210 (16 845)
Net asset value 2 142 15 606 44 529 157 753 220 030
Assets 55 833 19 610 180 191 268 439 524 073
Liabilities (53 691) (4 004) (135 662) (110 686) (304 043)
Depreciation and amortisation (1 846) (2 352) (1 888) (11 904) (17 990)
Share of profit from associates - - 1 248 575 1 823
2015
Financial Services and Investments Other Total
Services Solutions
R'000 R'000 R'000 R'000 R'000
Revenue 118 363 35 974 645 918 (84 076) 716 179
- External 111 537 35 968 568 220 454 716 179
- Inter-segment 6 826 6 77 698 (84 530) -
Operating expenses (117 930) (10 475) (625 258) 70 064 (683 599)
Finance cost (1 255) - (318) (1 138) (2 711)
Finance income 1 183 368 5 213 362 7 126
Impairment of investment in associate (869) - - - (869)
Impairment of intangible assets (420) - - - (420)
Net profit for the year 383 18 623 19 348 (9 052) 29 302
Tax (718) (7 245) (7 692) 3 448 (12 207)
Net asset value (8 574) 15 754 66 486 115 829 189 495
Assets 45 410 20 802 189 236 249 854 505 302
Liabilities (53 983) (5 048) (122 750) (134 026) (315 807)
Depreciation and amortisation (1 228) (1 378) (1 914) (9 499) (14 019)
Share of profit from associates 908 - 890 10 1 808
Other consists of consolidation entries, amortisation of intangible assets, C&A F Financial Services, Efficient Capital,
Efficient Select Swaziland, Efficient Share Trust and Efficient Group. All operations take place in southern Africa.
13. ACQUISITIONS AND DISPOSAL OF BUSINESSES
During the 2016 financial year, the Group acquired 15 (2015:11) financial advisory client bases from various independent
financial advisors for a total purchase price of R6.4 million (2015:R2.6 million) which will be settled in cash on varying
dates based on the respective agreements. These acquisitions were accounted for as business combinations. In addition
to the above, the Group acquired Saambou Board of Executors (Pty) Ltd (subsequently renamed to Efficient Board of
Executors (Pty) Ltd), a dormant company with no identifiable assets and liabilities, at a purchase consideration of Rnil.
Due to the high number of homogeneous financial advisory client base acquisitions, it is impractical to disclose a
description, the acquisition date and primary reason for each acquisition, as well as the amount of revenue and profit or
loss of each acquiree as if the acquisition occurred at the beginning of the financial year.
Consideration transferred
The table below summarises the acquisition date fair value of each major class of consideration transferred. The
acquisitions did not contain any contingent consideration arrangements.
Financial
advisory Total
client bases
Cash 1 967 1 967
Net liability raised as part of business combination 4 431 4 431
Financial advisory client bases 6 398 6 398
The consideration for the financial advisory client bases is structured as a lump sum cash payment with the remaining
balance paid in future instalments over a period of 12 to 36 months.
Acquisition-related costs
During 2016 the Group incurred no acquisition-related costs.
Identifiable assets acquired and liabilities assumed
Financial
advisory Total
client bases
Identifiable assets acquired and liabilities assumed 6 398 6 398
Less: Deferred tax raised on intangible assets (1 775) (1 775)
4 623 4 623
The valuation techniques used for measuring the fair value of intangible assets acquired were as follows:
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:
Financial
advisory Total
client bases
Consideration transferred 6 398 6 398
Fair value of identifiable net assets (4 623) (4 623)
Goodwill 1 775 1 775
The goodwill is attributable mainly to the skills and technical talent of the respective financial advisors and the
synergies expected to be achieved from integrating their client bases into Efficient Group’s existing financial services
business. None of the goodwill recognised is expected to be deductible for tax purposes.
2016 2015
R'000 R'000
Acquisition of businesses
Gross trade receivables - 5 247
Equipment - 168
Intangible assets 6 398 44 513
Deferred tax asset - (34)
Trade payables - (2 017)
Taxation payable - (1 607)
Cash and cash equivalents - 4 104
Identifiable assets acquired and liabilities assumed 6 398 50 374
Goodwill 1 775 87 019
Add: Long-term receivable raised as part of the purchase price 151 386
Less: Long-term liability raised as part of the purchase price (4 582) (108 782)
Less: Deferred tax raised on intangible asset acquired (1 775) (12 306)
Less: Cash acquired - (4 104)
Net cash paid on acquisition of businesses 1 967 12 587
Disposal of businesses
Intangible assets - (348)
Net cash received on disposal of businesses - (348)
Net cash flow on acquisition and disposal of businesses 1 967 12 239
14. EVENTS AFTER THE REPORTING DATE
No significant events occurred subsequent to the financial year that requires any additional disclosure or adjustments
to the financial statements.
15. DIVIDENDS PAID
Dividends of 6.15000 cent per share and 1.58824 cent per share were paid in December 2015 (2014:2.00000 cent per
share) and May 2016 (2015:5.88235 per share) respectively.
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 and RH Walton.
COMPANY SECRETARY
JN Nyahuye
REPORTING ACCOUNTANTS AND AUDITORS
KPMG Inc.
SPONSOR
Merchantec Capital
TRANSFER SECRETARIES
Link Market Services South Africa (Pty) Ltd
11 November 2016
EFFICIENT GROUP
81 Dely Road
Hazelwood
Pretoria
0081
South Africa
Tel: +27 (0)12 460 9580
Fax: +27(0)12 346 6135
info@efgroup.co.za
www.efgroup.co.za
Date: 11/11/2016 02:03:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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