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Summarised audited consolidated results for the year ended 28 February 2018 and Dividend Declaration No 7
NVEST FINANCIAL HOLDINGS LIMITED AND ITS SUBSIDIARIES
(Incorporated in the Republic of South Africa)
(Registration number 2008/015990/06)
(“NVest”, “the Group” or “the Company”)
ISIN Code: ZAE000199865 JSE Code: NVE
SUMMARISED AUDITED CONSOLIDATED RESULTS FOR THE YEAR ENDED 28 FEBRUARY 2018 AND
DIVIDEND DECLARATION NUMBER 7
HIGHLIGHTS:
- Headline earnings increased by 6.61% to R59.53 million (2017: R55.84 million).
- Headline earnings per share increased to 19.66 cents per share from 18.45 cents per share
in 2017.
- Revenue increased by 3.15% to R290.94 million (2017: R282.07 million).
- Net asset value increased by 7.14% to 139.09 cents per share (2017: 129.82 cents per
share).
- Assets under management and administration increased by 14.42% to R29.7 billion as at
28 February 2018 (2017: R26 billion).
- Declaration of a final dividend of 6.00 cents per share (total dividend for the 2018 financial
year amounts to 11 cents which represents an increase of 6.8% from the prior year).
Statement of Financial Position as at 28 February 2018
Audited Restated Audited
28 February 28 February 28 February
Figures in Rand 2018 2017 2016
ASSETS
Non-Current Assets
Property, plant and equipment 41 099 087 39 087 622 34 307 961
Investment property 308 338 397 326 181 102 297 200 000
Goodwill 87 438 936 82 604 170 82 604 170
Trade and other receivables - 9 686 370 -
Investments in associates 150 100 150 100 150 100
Other financial assets 484 957 467 126 145 000
Operating lease asset 7 654 398 7 579 681 6 265 170
Deferred tax 1 909 073 870 723 602 520
447 074 948 466 626 894 421 274 921
Current Assets
Other financial assets 31 008 508 10 348 526 9 511 790
Loans to shareholders 120 381 589 339 694 991
Operating lease asset 1 153 480 962 330 1 174 062
Current tax receivable 1 088 576 738 989 1 031 886
Trade and other receivables 30 807 328 15 671 400 12 408 060
Cash and cash equivalents 125 818 709 115 451 178 132 368 716
189 996 982 143 761 762 157 189 505
Total assets 637 071 930 610 388 656 578 464 426
Audited Restated Audited
28 February 28 February 28 February
Figures in Rand 2018 2017 2016
EQUITY AND LIABILITIES
EQUITY
Equity Attributable to Equity Holders of
Parent
Share capital 324 779 200 324 779 200 324 779 200
Reserves 4 874 481 3 866 845 1 452 097
Retained earnings 91 437 240 64 360 955 34 925 335
421 090 921 393 007 000 361 156 632
Non-controlling interest 2 053 817 2 310 826 5 055 211
423 144 738 395 317 826 366 211 843
LIABILITIES
Non-Current Liabilities
Deferred tax 15 724 829 16 164 693 11 578 535
Other financial liability 142 233 919 146 296 862 157 141 541
157 958 748 162 461 555 168 720 076
Current Liabilities
Other financial liabilities 11 819 600 26 368 002 15 400 000
Loans from group companies - - 116 667
Current tax payable 158 166 62 101 186 538
Provisions 500 000 - -
Trade and other payables 43 490 678 26 179 172 27 829 302
55 968 444 52 609 275 43 532 507
Total Liabilities 213 927 192 215 070 830 212 252 583
Total Equity and Liabilities 637 071 930 610 388 656 578 464 426
Statement of Profit or Loss and Other Comprehensive Income
Year Year
Audited Restated
28 February 28 February
Figures in Rand 2018 2017
Revenue 290 942 740 282 066 249
Cost of sales (111 187 866) (107 425 200)
Gross profit 179 754 874 174 641 049
Other income 1 866 616 1 651 849
Fair value adjustments (491 867) 7 441 269
Operating expenses (93 731 632) (89 591 468)
Operating profit 87 397 991 94 142 699
Investment revenue 10 142 755 9 548 125
Finance costs (15 453 865) (16 816 225)
Income from associates 942 735 881 100
Profit before taxation 83 029 616 87 755 699
Taxation (22 898 709) (25 687 600)
Profit for the year ended 60 130 907 62 068 099
Other comprehensive income:
Items that will not be reclassified to profit or loss:
Gains and losses on property valuation 829 570 3 111 789
Income tax relating to items that will not be
reclassified (232 279) (697 041)
Total items that will not be reclassified to profit or
loss 597 291 2 414 748
Total comprehensive income for the year 60 728 198 64 482 847
Profit attributable to:
Equity holders of the parent 59 046 896 60 978 197
Non-controlling interest 1 084 011 1 089 902
60 130 907 62 068 099
Total comprehensive income attributable to:
Equity holders of the parent 59 644 187 63 392 945
Non-controlling interest 1 084 011 1 089 902
60 728 198 64 482 847
Statement of Cash Flows
Audited Audited
Figures in Rand 28 February 2018 28 February 2017
Cash flows from operating activities
Cash generated from operations 93 255 170 83 240 719
Interest received 9 618 541 9 201 232
Dividends received 524 214 346 893
Finance costs (15 453 865) (16 816 225)
Tax paid (24 928 841) (21 898 225)
Net cash generated by operating
activities 63 015 219 54 074 394
Cash flows used in investing activities
Purchase of property, plant and
equipment (3 212 602) (3 617 844)
Disposal of property, plant and
equipment 25 343 398 706
Purchase of investment property - (21 663 005)
Sale of investment property 17 442 190 -
Purchase of subsidiary through
business combination (4 500 000) -
Net cash acquired in business
combination 523 011 -
Additional investments in current
subsidiaries (2 309 188) (4 080 000)
Loans advanced to group
companies - (116 667)
Purchase of financial assets (25 000 000) (1 158 863)
Disposal of financial assets 4 342 017 -
Decrease/(increase) in trade and
other receivables (non-current) 9 686 370 (9 686 370)
Other non-cash item (500 000) -
Net cash used in investing activities (3 502 859) (39 924 043)
Cash flows from financing activities
Proceeds from other financial
liabilities - 2 241 138
Repayment of other financial
liabilities (18 611 345) (2 117 815)
Proceeds from shareholders loan 468 958 117 851
Repayment of shareholders loan - (12 199)
Dividends paid (30 274 172) (30 576 914)
Dividends paid to non-controlling
interests (728 270) (719 950)
Net cash used in financing activities (49 144 829) (31 067 889)
Total cash movement for the year 10 367 531 (16 917 538)
Cash at the beginning of the year 115 451 178 132 368 716
Total cash at end of the year 125 818 709 115 451 178
Statement of Changes in Equity
Share Total
based attributable Non-
Revaluation Retained
Share capital payment Total to equity controlling Total equity
reserve income
reserve reserves holders of interest
Figures in Rand the Group
Balance at 1 March 2016 324 779 200 1 452 097 - 1 452 097 34 925 335 361 156 632 5 055 211 366 211 843
Profit for the year - - - - 60 978 197 60 978 197 1 089 902 62 068 099
Other comprehensive income - 2 414 748 - 2 414 748 - 2 414 748 2 414 748
Total comprehensive income for the
year - 14 748 - 2 414 748 60 978 197 63 392 945 1 089 902 64 482 847
Acquisition from non-controlling
interest - - - - (965 663) (965 663) (3 114 337) (4 080 000)
Dividends - - - (30 576 914) (30 576 914) (719 950) (31 296 864)
Total contributions by and distributions
to owners of company recognised
directly in equity - - - (31 542 577) (31 542 577) (3 834 287) (35 376 864)
Balance at 1 March 2017 324 779 200 3 866 845 - 3 866 845 64 360 955 393 007 000 2 310 826 395 317 826
Profit for the year - - - - 59 046 896 59 046 896 904 010 59 950 906
Other comprehensive income - 597 291 - 597 291 - 597 291 - 597 291
Total comprehensive income for the
year - 597 291 - 597 291 59 046 896 59 644 187 904 010 60 548 197
Share option expense - - 410 345 410 345 - 410 345 - 410 345
Acquisition from non-controlling
interest - - - - (1 696 439) (1 696 439) (612 749) (2 309 188)
Other - - - - - - 180 000 180 000
Dividends - - - - (30 274 172) (30 274 172) (728 270) (31 002 442)
Total contributions by and distributions
to owners of company recognised
directly in equity - - 410 345 410 345 (31 970 611) (31 560 266) (1 161 019) (32 721 285)
Balance at 28 February 2018 324 779 200 4 464 136 410 345 4 874 481 91 437 240 421 090 921 2 053 817 423 144 738
SEGMENT ANALYSIS
The following information relates to segment financial information of the group:
2018
Profit
Revenue before tax Assets Liabilities
Segments:
Insurance broking 18 734 067 3 122 351 9 466 754 2 098 653
Wealth management 221 080 433 60 044 057 104 701 466 49 544 393
Administration of estates
and trusts 3 396 941 1 060 710 3 666 243 1 370 390
Property services 55 809 585 8 146 002 372 011 441 287 753 474
Investments 56 724 801 48 797 638 325 648 652 1 837 263
Intercompany eliminations (64 803 087) (38 141 142) (178 422 626) (128 677 101)
290 942 740 83 029 616 637 071 930 213 927 192
2017
Profit
Revenue before tax Assets Liabilities
Segments:
Insurance broking 16 481 791 2 938 385 8 930 913 1 908 533
Wealth management 213 599 772 59 242 686 74 472 774 27 438 614
Administration of estates
and trusts 2 876 360 710 926 2 780 163 1 248 021
Property services 57 084 225 17 020 856 392 836 383 313 546 236
Investments 50 262 838 45 582 447 309 052 404 923 023
Intercompany eliminations (58 238 737) (37 739 601) (177 683 981) (129 993 597)
282 066 249 87 755 699 610 388 656 215 070 830
All the operating segments of the Group operate in South Africa. Operations are integrated
and therefore not shown per geographical area.
Per share information 2018 2017
Earnings per share information:
Earnings per share (cents) 19,50 20,14
Headline earnings per share (cents) 19,66 18,45
Earnings attributable to equity holders of the parent 59 046 896 60 978 205
Fair value loss/(gain) adjustment of investment
property 400 515 (7 318 097)
Loss on disposal of fixed assets 110 117 56 010
Restatement of CGT inclusion rate - 470 498
Impairment loss on fixed assets 44 463 -
Tax effect (70 470) 1 655 190
59 531 521 55 841 806
Weighted average number of shares 302 741 722 302 741 722
Net asset value per share:
Net asset value per share (cents) 139,09 129,82
Net tangible asset value per share (cents) 110.21 102,53
Shares in issue at 28 February 2017 302 741 722 302 741 722
BASIS OF PREPARATION AND ACCOUNTING POLICIES
The accounting policies and method of measurement and recognition applied in the preparation of these summarised audited
consolidated provisional results are in terms of International Financial Reporting Standards (“IFRS”) and are consistent with those applied in
the audited annual financial statements for the previous year ended 28 February 2017. The summarised audited consolidated provisional results
are prepared in accordance with the requirements of the JSE Limited Listings Requirements for provisional reports and the requirements of the
Companies Act, 71 of 2008.
The summarised audited consolidated provisional results are presented in terms of the minimum disclosure requirements set out in
International Accounting Standards (“IAS”) 34 – Interim Financial Reporting, as well the SAICA Financial Reporting Guides as issued by the
Accounting Practices Committee and Financial Reporting Pronouncements as issued by the Financial Reporting Standards Council.
The Group Financial Director, Frank Knox (B.Comm, B Compt (Hons)), was responsible for the preparation of the summarised audited
consolidated provisional results. Any reference to future financial performance included in this announcement has not been reviewed or
reported on by the Group’s external auditors.
The directors of NVest (“the Board”) take full responsibility for the preparation of the provisional report. The financial information
has been correctly extracted from the underlying annual financial statements.
This summarised report is extracted from audited information but is itself not audited.
The annual financial statements for the year ended 28 February 2018 have been audited by BDO Cape Inc. (Note: Grant Thornton Cape
Incorporated merged into the BDO network on the 22nd of February 2018 and changed its name to BDO with effect from that date). A copy
of the auditor’s unmodified opinion is available for inspection at the Company’s registered office.
This announcement does not include the information required pursuant to paragraph 16A(j)of IAS 34. The full (interim, preliminary, provisional or abridged) report is available on the issuer’s
website, at the issuer’s registered offices and upon request www. nvestholdings.co.za.
COMMENTARY
Although NVest listed on the Alternative Exchange in May 2015, the Company has been in operation (through its NFB Financial Advisory business)
for 33 years and continues to grow as a broad-range Financial Services Provider. The Group consists of ten wholly or majority owned
subsidiaries located in Gauteng, East London, Port Elizabeth and Cape Town. The core business operations are Private Wealth Management,
Stockbroking and Asset Management. The Group also includes other complementary business subsidiaries aimed at providing a holistic
financial services proposition, which includes a short-term insurance brokerage, a commercial property investment portfolio and a property
services business and a wills and administration of deceased estates business. This complementary collection of businesses, alongside the
commercial property portfolio, provides a diverse set of income streams. The Group’s long-term strategy is to become a pre-eminent independent,
national financial advisory business providing a holistic and integrated client product and service proposition. This will be achieved
through both organic and acquisitive growth. NVest is well positioned in terms of both capital reserves and human resources to execute against
this strategy.
RESULTS
The Board is pleased to report another year of solid results and steady growth in the context of challenging operating conditions. The results
also reflect continued progress in terms of executing against key strategic objectives of the Group. The year on year growth is highlighted
by an increase in total assets under management and administration, which grew by 14.42% to R29.7 billion (R26 billion: 2017). Revenue also
increased by 3.15% to R290.94 million (R282.07 million in 2017) which is almost exclusively organic growth.
Disciplined cost management remains a priority for the business. Cost of Sales have increased by 3.50% (R3.76 million) which was in line with
expectation and broadly proportionate to the overall growth of the business. The increase in costs is a product of:
- Variable costs growing in line with revenue;
- Continued costs associated with the listing such as Legal, Regulatory and Compliance costs; and
- Operations and IT infrastructure and investment costs.
Headline earnings increased to R59.53 million (2017: R55.84 million). The overall position in terms of revenue growth and the increased cost
of sales translated into a profit before tax and net of fair value adjustments of R 83.52 million (2017: R 80.31 million), which represents
growth of 4%.
Headline earnings per share increased to 19.66 cents per share (2017: 18.45 cents per share), which represents an increase of 6.61% - despite
the tough market and operating environment.
The Company remains highly cash generative. Net cash from operating activities increased by 16.5% from R54.07 million in 2017 to R63.02 million
for the year under review. NVest continues to hold substantial cash reserves (R125.82 million) which will be applied predominantly in acquisitions
going forward to ensure a more attractive yield than what these funds currently earn on call.
RESTATEMENT OF PRIOR YEAR RESULTS
The results for the prior year were restated to address reclassifications within the Statement of Financial Position and Statement of
Comprehensive Income. Certain reclassifications were identified pursuant to a Pro-Active Monitoring Review by the JSE and the Audit and Risk
Committee identified the non-elimination of specific inter-company transactions and balances. These can be summarised as follows:
- In the prior year the deposit paid for the Illovo Point property was reflected as an Investment. The true nature of this transaction is
better reflected as a deposit, which has been included under trade and other receivables.
- Certain inter-company eliminations were not done during 2017 and these affected trade and other receivables, trade and other payables,
revenue, investment revenue and finance costs. They have been restated to reflect the inter-company eliminations.
- In the prior year deferred tax assets and liabilities were netted off. Likewise, tax assets and liabilities were netted off. These have
been restated and reflected separately.
- Other financial liabilities were restated to reflect the short-term portion of two of the commercial notes.
- Straight-line lease assets were restated to distinguish between the current and non-current portions.
- The investment in associate was reflected under financial assets and has been correctly restated to the correct line item.
- Revenue and other income have been restated to better reflect interest and dividend income, which is considered to be revenue at a holding company level.
- Equity accounted income from associates was incorrectly included under other income.
- Cost of sales and operating expenses were restated as certain commissions were included under employee costs. These are now reflected under cost of sales.
None of these restatements affected net profit. There was also no impact on earnings and headline earnings per share as a consequence of the
restatements.
The table below sets out all line items that have been impacted and which have changed as a result of the review and restatement.
Restated Previously published
R R
Statement of Financial Position
Investment - 9 686 370
Trade and other receivables (non-current) 9 686 370 -
Trade and other receivables (current) 15 671 400 17 035 363
Investment in associate 150 100 100
Deferred tax (asset) 870 723 -
Other financial assets 467 126 617 126
Current tax receivable 738 989 676 888
Deferred tax (liability) 16 164 693 15 293 970
Other financial liabilities (non-current) 146 296 862 155 296 862
Straight-line lease asset (non-current) 7 579 681 -
Straight-line lease asset (current) 962 330 8 542 011
Other financial liabilities (current) 26 368 002 17 368 002
Current tax payable 62 101 -
Trade and other payables 26 179 172 26 891 159
Provisions - 651 984
Profit or Loss
Revenue 282 066 249 287 630 210
Cost of sales (107 425 200) (91 004 044)
Other income 1 651 849 4 001 877
Fair value adjustments 7 441 269 7 497 278
Operating expenses (89 591 468) (113 904 054)
Investment revenue 9 548 125 16 169 835
Finance costs (16 816 225) (22 635 395)
Income from associates 881 100 -
PROSPECTS
The Group has performed admirably during the year under review, delivering strong results in the context of particularly challenging operating
conditions. A strong Rand, ongoing political uncertainties, market volatilities and weak investment confidence have all contributed to a
difficult business environment. Despite these prevailing headwinds NVest continues to deliver growth in key areas including top line revenue,
assets under management and administration and headline earnings. This bears testimony to the resilience of NVest’s operating model and
its continued relevance to the market. The Board and Management team are positive about the future prospects for the Group. The business is
optimally placed in terms of capital reserves which provides a meaningful source of funding for acquisitions and the leadership team is
settled, supported by a Board and governance structures that are maturing effectively.
ACQUISITIONS, DISPOSALS, SHARE ISSUES AND REPURCHASES
During the year under review, the Company increased its shareholding in NFB Insurance Brokers (Border) Proprietary Limited from 76.67% to
85.00% and in NFB Finance Brokers Port Elizabeth Proprietary Limited from 65.00% to 100.00%. Accordingly, NFB Finance Brokers Port
Elizabeth Proprietary Limited is now a wholly owned subsidiary. Various other acquisitive opportunities were actively considered during the
year and this remains a key focus within the Group’s long-term strategy and ambition to become a pre-eminent, national financial services
Group.
There were no share issues and repurchases during the year under review.
As at 28 February 2018, the Company had 302 741 722 shares in issue.
BUSINESS COMBINATION
On 01 June 2017 the Group, through NFB Finance Brokers Port Elizabeth Proprietary Limited, acquired 100% of the voting equity interest of
Three Oaks Capital RF Proprietary Limited. Three Oaks Capital RF Proprietary Limited is principally involved in the financial and intermediary
services industry. With effect from 01 December 2017 the businesses of NFB Finance Brokers Port Elizabeth Proprietary Limited and Three Oaks
Capital RF Proprietary Limited were merged and amalgamated under the NFB brand. As a result of the acquisition of Three Oaks Capital RF
Proprietary Limited and the subsequent merger of that business with NFB Finance Brokers Port Elizabeth Proprietary Limited, the Group has
significantly increased its scale and presence in the targeted growth region of Port Elizabeth. The merger presents the opportunity to
capitalise on various cost saving synergies through the business combination.
Goodwill of R 4 834 766 arising from the acquisition consists largely of the synergies and economies of scale benefits expected from combining
the respective operations of the entities, as well as from intangible assets which did not qualify for separate recognition.
Goodwill is not deductible for income tax purposes.
Fair value of assets acquired and liabilities assumed
Property, plant and equipment 97 540
Other financial assets 999
Cash and cash equivalents 523 011
Current tax payable -66 166
Trade and other payables -390200
Total identifiable net assets 165 234
Goodwill 4 834 766
5 000 000
Acquisition date fair value of consideration paid
Cash 4 500 000
Contingent consideration arrangement 500 000
5 000 000
“Contingent consideration arrangement”: Management is of the opinion that the conditions will be met and has raised the provision of R 500 000.
RELATED PARTY INFORMATION
As reported previously, within the prior financial year ending 28 February 2017, NVest Properties Limited (“NVP” a wholly owned subsidiary),
entered into an agreement with the developers of Erf no. 3 Illovo which is being developed into an office park (“Illovo Point”) by
Johannesburg 2 Properties Proprietary Limited to acquire units 16 and 17 of the Illovo Point development.
In 2017 NVest Financial Holdings Limited ceded R27.1 million of its cash held with Investec as a guarantee of the purchase by NVP of the two
office units within Illovo Point and which will only be called upon when transfer is registered, which is expected in September 2018. NVP has
issued a guarantee limited to R14.2 million for the construction of the development.
NFB Finance Brokers Gauteng Proprietary Limited, along with NFB Asset Management Proprietary Limited and the Sandton branch of NVest Securities
Proprietary Limited, will take up one of the office units upon completion. The building development is progressing according to schedule and is
expected to be completed in the last quarter of 2018.
The balance of the related party information is of a historic and repetitive nature and is fully disclosed in the audited financial statements.
CHANGES TO THE BOARD OF DIRECTORS
During the year under review, Mr Andrew Vincent Kent retired as an Executive Director of NVest with effect from 22 November 2017.
Mr Christopher Grant Lemmon was subsequently appointed as an Executive Director of the Company, but with effect from 1 March 2018.
SUBSEQUENT EVENTS
The directors are not aware of any material event which occurred after the reporting date and up to the date of this report.
DIVIDEND DECLARATION
The Board has declared a final gross dividend (Number 7) of 6.00 cents per share for the year ended 28 February 2018. In line with our target
to grow the dividend materially on a year on year basis we are pleased to confirm that the dividends declared for the 2018 financial year
reflect an increase of 6.8% compared against the 2017 financial year.
The dividend is declared out of income reserves. The dividend will be subject to a dividend withholding tax rate of 20% or 1.20 cents per
ordinary share. Shareholders, unless exempt or qualifying for a reduced withholding tax rate, will receive a net dividend of 4.80 cents per
share.
NVest’s tax reference number is 905398110. The number of ordinary shares in issue at the declaration date is 302,741,722.
The salient dates for the dividend will be as follows:
2018
Last date to trade “cum’ dividend Tuesday, 12 June
Shares commence trading ‘ex’ the dividend Wednesday, 13 June
Record date (date shareholders recorded in share register) Friday, 15 June
Payment date Monday, 18 June
Shareholders may not dematerialise or rematerialise their share certificates between Wednesday,13 June 2018 and Friday, 15 June 2018, both
dates inclusive.
For and on behalf of the Board
Anthony Godwin Frank Knox
Chief Executive Officer Financial Director
25 May 2018
Executive Directors: Independent Non-executive Directors:
Anthony Godwin (Chief Executive Officer) Jonathan Goldberg (Chairman)
Frank Knox (Financial Director) Siviwe Kwatsha
Michael Estment Professor Lana Weldon
Christopher Lemmon Non-executive Directors:
Dylan Schemel
Company Secretary and Registered Office: Transfer Secretaries:
Brendan Connellan Computershare Investor Services Proprietary
42 Beach Road Limited
Nahoon 70 Marshall Street
East London Johannesburg, 2001
Eastern Cape (PO Box 61051 Marshalltown, 2107)
(PO Box 8132, Nahoon, 5210)
WEBSITE: Designated Advisor:
http://www.nvestholdings.co.za/ Arbor Capital Sponsors Proprietary Limited
Date: 25/05/2018 09:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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