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PPE
PPE
PPE - Purple Capital Limited - Reviewed results for the six months ended 28
February 2007
Purple Capital Limited
(Incorporated in the Republic of South Africa)
(Registration number 1998/013637/06)
Share code: PPE ISIN: ZAE000071411
("Purple Capital" or "the company")
Reviewed results for the six months ended 28 February 2007
ABRIDGED INCOME STATEMENT
Restated
Reviewed Audited Unaudited
Six months Year Six months
28 February 31 August 28 February
2007 2006 2006
R`000 R`000 R`000
Operating profit before financial
income 10 446 7 960 7 404
Financial income 666 1 588 783
Financial expenses (38) (111) -
Share of profit of associates 1 223 150 110
Profit before taxation 12 297 9 587 8 297
Taxation (2 217) 1 437 (1 695)
Profit for the period 10 080 11 024 6 602
Weighted number of shares in issue
at end of period (`000) 154 643 144 937 144 937
Basic earnings per share (cents) 6,52 7,61 4,56
Diluted earnings per share (cents) 6,44 7,61 4,53
ABRIDGED CASH FLOW STATEMENT
Cash flow utilised in operating
activities (3 232) (5 414) (2 976)
Cash flow (utilised in)/from
investing activities (3 890) 6 738 6 981
Cash flow from financing
activities (4 012) 1 253 2
Net (decrease)/increase in cash
and cash equivalents (11 134) 2 577 4 007
Cash and cash equivalents at
beginning of period 21 645 19 068 19068
Cash and cash equivalents at end
of period 10 511 21 645 23 075
HEADLINE EARNINGS PER SHARE
Headline earnings per share
(cents) 6,52 7,61 4,56
ABRIDGED BALANCE SHEET
Restated
Reviewed Audited Unaudited
Six months Year Six months
28 February 31 August 28 February
2007 2006 2006
R`000 R`000 R`000
ASSETS
Equipment 244 260 296
Interests in associate companies 10 371 7 152 6 525
Other investments 75 583 34 399 30 343
Long-term receivables 500 500 -
Deferred tax 1 261 3 478 334
Total non-current assets 87 959 45 789 37 498
Trade and other receivables 967 2 015 1 306
Cash and cash equivalents 10 511 21 645 23 075
Total current assets 11 478 23 660 24 381
Total assets 99 437 69 449 61 879
EQUITY AND LIABILITIES
Share capital and premium 98 512 82 891 82 891
Accumulated loss (11 824) (20 681) (24 973)
Other reserves 5 827 3565 3 398
Total equity 92 515 65 775 61 316
Short-term liability 6 574 3070 -
Trade and other payables 348 604 563
Total current liabilities 6 922 3 674 563
Total equity and liabilities 99 437 69 449 61 879
Net asset value per ordinary
share (cents) 57,45 45,38 42,31
STATEMENT OF CHANGES IN EQUITY
Balance at beginning of period 65 775 53 186 53 186
Profit for the period 10 080 11 024 6 602
Share based payments 1 039 1 563 1 526
Shares issued 15 621 2 2
92 515 65 775 61 316
COMMENTARY
Financial review
A profit after tax of R10,1 million was recorded for the six months ended 28
February 2007, compared to a restated profit after tax of R6,6 million for the
same period last year and R11,0 million for the financial year ended 31 August
2006. The profit for the period under review arose largely as a result of fair
value adjustments to investments.
Shareholders` funds have increased by 40,6% over the six months from R65,8
million to R92,5 million as at 28 February 2007. The increase is primarily due
to the profit generated during the six months and the fair value adjustment in
respect of the mark-to-market change in the value of the company`s 10%
investment in Cape Empowerment Trust Limited ("CET"). This shareholding arose
as a result of a share swap transaction entered into on 10 November 2006.
Purple Capital`s cash on hand decreased from R21,6 million at 31 August 2006 to
R10,5 million at 28 February 2007. An amount of R8,5 million was utilised for
existing and new investments and the balance for funding operating costs.
Subsequent events
Subsequent to 28 February 2007, the company has made the following acquisition:
Treasury Operation
It has been a stated objective of Purple Capital to develop a Treasury Advisory
business. As a first step, Purple Capital has concluded a transaction to
purchase from First South Risk Solutions ("FSRS"), a member of J&J
Group, a 73,5% interest in a business which provides Treasury management
services to the South African National Roads Agency Limited ("SANRAL"). FSRS
will continue to hold the remaining 26,5% interest. The effective date of the
deal is 1 January 2007.
With a team and operating systems now in place, it is our intention to leverage
and grow this business by securing further contracts for treasury advisory
mandates both in the public and private sector.
Consideration is also being given to launching a small managed bond fund of R25
million into which Purple Capital will invest 20% of total funds raised.
Operational review
Our existing operations and investments have all done well over the last six
months.
acsis
acsis continues to produce excellent results. Profitability is ahead of budget
and funds under advice have grown by over 30% to R16,6 billion over the past
year, benefiting from new net funds flows as well as positive markets.
Considerable progress has been made in acsis` establishment of its own
investment vehicles and a life licence. On 1 March 2007, acsis announced that
it had concluded a number of agreements to broaden its shareholder base to
include a wide range of black individuals, including staff and a broad-based
empowerment trust. As a result 5% of acsis will be owned by a black staff share
trust, 5% by Khanyisa Empowerment Trust and a further 8% by Dr Frene Ginwala,
Nku Nyembezi-Heita, Philip Dexter and Dines Gihwala, thereby increasing acsis`
BEE shareholding to 23%.
Other than in respect of the Khanyisa Empowerment Trust which will result in a
5% dilution in our shareholding, Purple Capital has exercised its right to
restore its interest in acsis to 20%.
Bridge Capital Group
Bridge Capital Group ("BCG") has produced good results with Purple Capital`s
share of equity accounted earnings increasing from R0,1 million in the six
months ended 28 February 2006 to R1,2 million in the six months ended 28
February 2007. The BDO Springbok Fund, an R850 million property fund in which
BCG has a direct investment of 6,75%, is expected to be fully invested this
year.
USA Fund
In August 2006 Purple Capital announced that Lubert-Adler Partners ("LAP") and
Klaff Realty, LP ("KR") and their investors, had entered into an arrangement
with Purple Capital to participate in BEE deals in South Africa by way of
equity investment and/or the provision of finance ("the USA Fund"). LAP and KR,
subject to their investment criteria, are able to invest in excess of $150
million.
Current market valuations, in our view, make structuring BEE transactions with
shared returns challenging to fund at the right risk-return levels.
Nonetheless, we do expect to progress at least one significant funding
transaction which would earn fees and capital appreciation for Purple Capital
over a number of years.
Several proposals for the funding of BEE transactions using an investment
structure developed for the USA Fund have already been submitted to major
listed companies.
Umnombo Investment Holdings ("UIH")
UIH, together with DENOSA, are key BEE shareholders in Purple Capital. With
effect from 20 September 2006, Purple Capital acquired from Bridge Capital
Group its shares in and claims against UIH, bringing Purple Capital`s interest
in UIH to 40%.
UIH continues to generate a number of deal opportunities, the economics of
which are expected to materialise in the near future.
Blackstar Managers
Blackstar Managers continue to indicate significant deal flow. In a recent
announcement, Blackstar part-funded a transaction in which York Limited
acquired 100% of Global Forestry Products for R1,7 billion. Purple Capital
retains a 33% economic interest in Blackstar Managers` performance fees.
Cape Empowerment Trust Limited ("CET")
It was published in the press on 17 November 2006 that, with effect from 1
September 2006, Purple Capital had entered into a strategic share swap
transaction with CET in terms of which a 10% shareholding in CET, a black
controlled investment company listed in the JSE Limited ("JSE"), was acquired
for an issue of 16 104 056 new shares in Purple Capital and a further
subscription of 7 781 230 shares in CET for a cash payment of R6,6 million.
CET, led by Shaun Rai, recently published its annual results showing
significant growth in earnings from R19,1 million for the year ended 31
December 2005 to R92,3 million for the year ended 31 December 2006.
The shareholding in CET has proved to be an excellent investment for Purple
Capital, responsible for most of the mark-to-market in the past six months.
CET, as a black-controlled listed company, is ideally placed as a BEE partner
for deals we may structure together with them.
New investments
During the last six months our attention has been focused on doing deals. The
new investments outlined in this commentary augment our existing operations in
expanding Purple Capital`s reach as a financial services and investment group.
In selecting investments we focus particularly on finding as yet undiscovered
companies that have demonstrated an economic model which is both lucrative and
sustainable, a position in their market which is justified and a management
team with energy, ability and aligned economic interest. Such investments then
either need to fit into our strategic mandate of building a financial services
group or, on a much smaller scale, provide very attractive investment banking
returns.
Specialised asset finance
Purple Capital has entered into an agreement to provide funding to a
specialised asset finance company currently involved in the commercial
equipment rentals and asset- backed consumer finance markets, now expanding
into vehicle finance, specifically for the growth of the vehicle finance
business in the form of an initial loan of R5 million and a further commitment
to mezzanine funding of R55 million - to be drawn down at an expected rate of
R5 million per quarter as the business grows, subject to senior debt funding
being raised on a three-to-one-basis.
The investment provides significant risk adjusted revenue margins to Purple
Capital. We are backing management who have demonstrated they have the
appropriate technology and understanding of risk to secure business in an
under-serviced market segment.
Real People South Africa
Purple Capital has structured and intends to provide the equity funding for a
BEE transaction in respect of Real People Investment Holdings South African
Operations ("RPSA").
RPSA provides personal financial products and services for the low to middle
income market through 150 branches located throughout South Africa. For the
year ended 31 March 2006, RPSA`s audited gross revenue was R477 million and
profit before taxation was R132 million.
New capital of R95,1 million will be injected into RPSA by way of convertible
preference share funding which will be used to fund further growth. On
conversion, the BEE participants will own 9% of the equity of RPSA. On
implementation of this transaction, Purple Capital will invest R14,3 million in
equity with the balance of R80,8 million of funding to be provided by the
Industrial Development Corporation (IDC) (the "debt provider"). Term sheets
governing the deal have been entered into between RPSA and Purple Capital and
agreed between Purple Capital and the debt provider. The deal is subject to
formal agreements being entered into with the BEE consortium members, Purple
Capital and RPSA, the completion of a due diligence and board approval of the
debt provider.
Spanjaard Limited ("Spanjaard")
Shareholders are referred to the joint announcement made by Purple Capital and
Spanjaard today.
Spanjaard manufactures and formulates an extensive range of specialised
lubricants and allied chemical products for the automotive, industrial, marine,
mining and consumer markets, in addition to its metal powder operation which
manufactures friction materials mainly for export. Spanjaard operates both in
Southern Africa and internationally.
Purple Capital is a financial services and investment group which makes equity
investments in established companies where it expects its input of merchant
banking expertise will make a significant difference to the funding, growth
prospects and ultimate shareholder value of the company.
Accordingly, Purple Capital and Spanjaard are pleased to announce that they
have concluded an agreement in terms of which Purple Capital will subscribe for
2 442 850 new ordinary shares in Spanjaard at a subscription price of 260 cents
per share, being an aggregate amount of R6,35 million for an effective 29,99%
equity stake, post-subscription of the new shares.
The Spanjaard subscription is an investment banking opportunity for Purple
Capital. Spanjaard is a company of long standing with well established clients,
products and geographical reach. Together with the existing board and
management of Spanjaard, Purple Capital believes there is an opportunity to
unlock value through acquisitions in the industry, improved cost structures and
operating efficiency.
The cash received by Spanjaard will be used to fund future acquisitions and
other expansion opportunities.
Mark Barnes will be appointed as non-executive director to the board of
Spanjaard.
Fees
Purple Capital, as part of a consortium including Merit Asset Managers and UIH,
has, amongst others, been appointed by the City of Johannesburg Property
Company (Pty) Limited to raise funding for a number of property/ real estate
development projects with an estimated construction value in excess of R20
billion.
Cautionary announcement
Shareholders of Purple Capital are hereby informed that the company is
currently at an advanced stage of negotiations relating to the conclusion of a
significant transaction, not included in the above commentary. If this
transaction is concluded it may have a material impact on Purple Capital`s
share price. Shareholders are accordingly advised to exercise caution in their
dealings in the company`s shares until such time as a further announcement is
made.
Capital raising
Against the background of these and other investment opportunities presented to
us the board of Purple Capital has decided to raise further equity and debt
funding as follows:
Amount
(R`million)
General issue of shares for cash 35,6
Proposed rights offer 47,7
Term loan 35,0
118,3
General issue of shares for cash ("the issue")
Introduction
At the annual general meeting of shareholders held on 23 January 2007, the
requisite majority of shareholders approved an ordinary resolution authorising
the directors to issue up to 15% of the Company`s issued share capital for cash
in accordance with the Listings Requirements of the JSE.
Purple Capital has successfully completed a general issue of shares for cash.
On 11 April 2007, 28 032 400 shares were issued to two major institutional
investors at 127 cents per share, being a 10% discount to the weighted average
traded price of Purple Capital shares for the 30 business days preceding 30
March 2007, the date that the price of the issue was agreed by the directors.
An application has been made to the JSE to grant a listing of the new shares on
16 April 2007.
Rationale for the issue
The purpose of the issue, which will raise an amount of R35,6 million, is to
strengthen the capital reserves of the company so as to provide cash funding
for existing and further investment opportunities.
Financial effects of the issue
The table below sets out the unaudited pro forma financial effects of the issue
on net asset value and net tangible asset value per share. The pro forma
financial effects of the issue on earnings and headline earnings per share have
not been disclosed as it would be misleading to show zero income attributable
to the cash raised. The pro forma financial effects have been calculated on
Purple Capital`s reviewed results for the six months ended 28 February 2007.
The unaudited pro forma financial effects are provided for illustrative
purposes only and because of their nature they may not give a fair reflection
of Purple Capital`s financial position after the issue. The pro forma financial
effects are the responsibility of the company`s directors.
Before the Pro forma
issue1 After the issue Percentage
(cents) (cents) change
Net asset value per share
(cents) 57,45 67,762 17,9
Net tangible asset value per
share (cents) 57,45 67,762 17,9
Notes:
1. Extracted from the reviewed results of Purple Capital for the six months
ended 28 February 2007.
2. Net asset value and net tangible asset value per share in the "After the
issue" column have been based on the following assumptions:
a. the issue was effective 28 February 2007; and
b. the number of shares in issue at 28 February 2007 was 161 040 560
Before the issue and 189 072 960 After the issue.
Proposed rights offer
It has been resolved by the board of Purple Capital to raise approximately
R47,7 million in new equity by way of a rights offer to existing shareholders
on the basis of one new ordinary share for every five shares held, at an issue
price of 120 cents per share. At the date of this announcement irrevocable
undertakings have been received from shareholders holding 73.2% of the total
issued share capital of Purple Capital, after the general issue of shares for
cash referred to above, and including the share incentive scheme shareholders
which are entitled to participate in the rights offer. A circular containing
details of the proposed rights offer will be posted to shareholders in due
course.
Term loan
Purple Capital has entered into agreements with Investec Bank Limited in
respect of a three year secured loan facility for an amount of R35 million.
The funding will be primarily utilised to part fund investments where the
running yield provides an appropriate margin.
Accounting policies
The interim results have been prepared in accordance with International
Financial Reporting Standards ("IFRS"), the interpretations adopted by the
International Accounting Standards Board and the requirements of the South
African Companies Act.
KPMG Inc., the company`s independent auditor, has reviewed the interim
financial statements contained in this interim report and has expressed an
unmodified conclusion on the interim financial statements. Their review report
is available for inspection at the company`s registered office.
On behalf of the board
Mark Barnes Craig Carter Johannesburg
Chairman Director 13 April 2007
Registered office Transfer secretaries
1st Floor, Eastwood Link Market Services South Africa
57 Sixth Road (Pty) Limited
Hyde Park 2196 11 Diagonal Street
(PO Box 411449, Craighall 2024) Johannesburg 2001
(PO Box 4844, Johannesburg 2000)
Independent auditors Sponsor
KPMG Incorporated Bridge Capital Advisors (Pty) Limited
Chartered Accountants (SA) 1st Floor, Building 22A
Registered Accountants and Auditors The Woodlands
KPMG Crescent Woodlands Drive
85 Empire Road, Parktown 2193 Woodmead, Sandton 2196
(Private Bag 9, Parkview 2122) (PO Box 651010, Benmore 2010)
Executive Directors: Mark Barnes (Chairman), Craig Carter
Non-executive Directors: Dennis Alter (American), Thembeka Gwagwa, Ronnie
Lubner (British)
Date: 13/04/2007 08:20:44 Produced by the JSE SENS Department.
