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Trading Statement
EFFICIENT GROUP LIMITED
Incorporated in the Republic of South Africa
(Registration number: 2006/036947/06)
Share code: EFG ISIN: ZAE000151841
(“Efficient” or “the Company” or “the Group”)
TRADING STATEMENT
In terms of the Listings Requirements of the JSE Limited, companies are required to publish a trading
statement as soon as they become reasonably certain that the financial results for the period to be
reported on will differ by more than 20% from that of the previous corresponding period.
Accordingly, a review of the financial results for the year ended 31 August 2018 by management has
indicated that the:
- loss for the 12 months ended 31 August 2018 is expected to be between R272 million and
R301 million;
- headline loss is expected to be between R273 million and R301million;
- loss per share is expected to be between 302.95 cents and 334.84 cents compared to the
earnings per share (“EPS”) of 52.95 cents for the year ended 31 August 2017; and
- headline loss per share is expected to be between 303.09 cents and 335.00 cents compared
to the headline earnings per share (“HEPS”) of 69.01 cents for the year ended 31 August 2017.
The decrease in EPS and HEPS relates to the fees payable in respect of the cancellation of a profit
share agreement, as summarised below and detailed in the announcements released on SENS on
5 July 2018 and 3 August 2018, and in the circular distributed to Shareholders on 3 August 2018.
On 12 August 2013, Efficient entered into the Joint Management and Profit Incentive Agreement with
Robert Henry Walton (“RW”), as amended from time to time (“Main Agreement”), in terms of which, inter
alia, it was agreed that RW would establish, contribute to and manage the businesses of the “Efficient
Invest Companies” comprising Efficient’s wholly-owned subsidiaries, Boutique Collective Investments
(RF) Proprietary Limited (“BCI”), Boutique Investment Partners Proprietary Limited (“BIP”) and Instit
Proprietary Limited (“Instit”), in return for a share of the profits thereof, including Instit’s equity
investment in an associate company (“Business”).
In terms of the provisions of the Main Agreement, RW is entitled to 66% of the net profit before tax
(before payment of any profit share) of the Business (“NPBT”) (“Efficient Invest Profit Share”), and the
Company is entitled to 34% of the NPBT in the Business (“EFG Profit Share”). Additionally, BCI and
RW entered into arrangements with certain employees of the Efficient Invest Companies nominated by
RW (“Nominees”) to participate in the Efficient Invest Profit Share, and with certain initial partners of
BCI (“Participating Partners”) who participate in the Efficient Invest Profit Share attributable to the profits
of BCI.
In the five years since its establishment in August 2013, BCI has grown into the leading and largest co-
branded collective investment scheme provider in South Africa with assets under administration
exceeding R100 billion. BIP has become one of the largest independent retail multi-management
companies in the country with assets under management and consulting of more than R35 billion.
In terms of its right to cancel the Main Agreement at 31 August 2018, Efficient elected to terminate, and
RW and the Nominees accepted termination thereof in return for the payment of the Cancellation Fee.
Accordingly, on 3 July 2018, Efficient, RW, BCI and BIP entered into an agreement to, inter alia,
terminate the Efficient Invest Profit Share (“Cancellation Agreement”) on the terms and conditions set
out therein (“the Transaction”). Contemporaneously with the Cancellation Agreement, Efficient, RW,
BCI and BIP entered into an agreement (“Incentive Agreement”) to incentivise RW, the Nominees and
certain employees of the Efficient Invest Companies to remain in the employ of the Group, and the
Participating Partners to remain partners of BCI, for a certain period of time, on the terms and conditions
set out therein.
The total fees payable in terms of cost of the Cancellation Agreement and Incentive Agreement being
an amount of R480 million, comprise:
1. the Cancellation Fee in the amount of R378.5 million;
2. the Restraint Payment in the amount of R19.7 million; and
3. the Incentive Payment in the amount of R81.8 million.
In the announcement released on SENS on 3 September 2018, Shareholders were advised that, at the
General Meeting, convened in terms of the notice of General Meeting to Shareholders dated 3 August
2018, which was held on Friday, 31 August 2018, all the resolutions, including the resolution to approve
the Transaction, were passed by the requisite majority of Shareholders.
It is important to note that the cancellation of the Efficient Invest Profit Share is a tax-deductible
transaction and the after-tax cost is R346 million.
In the financial year ended 31 August 2018, Efficient expensed R430 million, of the aforementioned
R480 million, resulting in the decrease in EPS and HEPS.
Excluding the costs pertaining to the Cancellation Agreement and the Incentive Agreement from the
headline earnings calculation, recurring headline earnings would be between R31 million and
R38 million
Efficient is expected to report recurring earnings before interest, tax, depreciation and amortisation
(“EBITDA”) before taking into account the cost of the transaction for the 2018 financial year of between
R56 million and R69 million (R2017: R65 million).
Efficient Invest expensed profit share payments to the amount of R79 million during the 2018 financial
year.
Based on the after-tax cost of the Transaction (R346 million) and the after-tax profit of the 66% profit
sharing for the financial year ended 31 August 2018, the transaction valuation multiple paid for the profit
sharing cancellation is 6.07 times.
At 31 August 2018 Efficient had:
- 466 employees (2017: 449)
- 233 financial advisors (2017: 229)
- More than 65 000 (2017: 60 000) clients across all sectors
- Assets under administration of R109.8 billion (2017: R 117.3billion)
- Assets under consulting of R30.1billion (2017: R26.8billion)
- Assets under management of R19.5 billion (2017: R19.5 billion)
- Assets under advice of R20.1 billion (2017: R18.3 billion)
The financial information on which this trading statement is based has not been reviewed or reported
on by the Company’s auditors. Efficient’s financial results are expected to be released on SENS on or
about 30 November 2018.
Pretoria
3 October 2018
Sponsor
Merchantec Capital
Date: 03/10/2018 09:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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