| Tue 6 Nov 2007, 15:50 | | PPE - Purple Capital Limited - Audited abridged fi |
|
PPE
PPE
PPE - Purple Capital Limited - Audited abridged financial results
for the year ended 31 august 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")
Audited abridged financial results
for the year ended 31 August 2007
ABRIDGED INCOME STATEMENT
For the year ended 31 August 2007 2006
R`000 R`000
Revenue 7 335 1 071
Other income 56 055 14 374
Operating expenses (13 592) (7 485)
Operating profit before net interest 49 798 7 960
income
Interest income 2 670 1 588
Interest expense (62) (111)
Share of profit of associate 87 150
Profit before taxation 52 493 9 587
Taxation (6 861) 1 437
Profit for the period 45 632 11 024
Weighted number of shares in issue at 188 921 250 156 959 723
31 August
Basic earnings per share (cents) 24,15 7,02
Diluted earnings per share (cents) 24,10 7,02
ABRIDGED CASH FLOW STATEMENT
Cash flow utilised in operating (1 336) (5 414)
activities
Cash flow (utilised in)/from investing (51 807) 6 738
activities
Cash flow from financing activities 76 745 1 253
Net increase in cash and cash 23 602 2 577
equivalents
Cash and cash equivalents at beginning 21 645 19 068
of year
Cash and cash equivalents at end of year 45 247 21 645
HEADLINE EARNINGS PER SHARE
Profit for the period 45 632 11 024
Less equity accounted earnings (87) (150)
Headline profit for the period 45 545 10 874
Headline earnings per share (cents) 24,11 6,93
Diluted headline earnings per share 24,05 6,93
(cents)
ABRIDGED BALANCE SHEET
As at 31 August 2007 2006
R`000 R`000
Assets
Equipment 356 260
Intangible asset and goodwill 4 627 -
Interests in associate companies 9 934 7 152
Other investments 150 925 34 399
Long-term receivables 857 500
Deferred tax asset - 3 478
Total non-current assets 166 699 45 789
Trade and other receivables 5 972 2 015
Cash and cash equivalents 45 247 21 645
Total current assets 51 219 23 660
Total assets 217 918 69 449
Equity and liabilities
Share capital and premium 178 182 82 891
Accumulated profit/(loss) 24 864 (20 681)
Other reserves 5 805 3 565
Total equity 208 851 65 775
Deferred tax liability 3 858 -
Total non-current liabilities 3 858 -
Short-term liability - 3 070
Trade and other payables 5 209 604
Total current liabilities 5 209 3 674
Total equity and liabilities 217 918 69 449
Net asset value per ordinary share 92,33 45,38
(cents)
STATEMENT OF CHANGES IN EQUITY
For the year ended 31 August
Balance at beginning of year 65 775 53 186
Profit for the period 45 632 11 024
Share based payments 2 153 1 563
Shares issued 95 291 2
208 851 65 775
COMMENTARY
Chairman`s review
Over the past year our company has made the transition from an investment
holding company to an early stage financial services group with capital
traction and a significantly improved earnings mix outlook.
Our business model for growth has become clearly defined. Business
relationships and capital allocation are changing in South Africa with a
number of new ideas, relationships, business models and approaches being
adopted by young professionals in financial services operations. The gap
between entrepreneurial flair and mainstream institutional capital defines our
opportunity set.
Purple Capital is well positioned to partner these early stage, proven concept
businesses by providing the capital and experience they require to transform
into meaningful market players.
We are able to make informed investment decisions relatively quickly at Purple
Capital, applying our years of experience to an intense evaluation of business
opportunities within the financial services arena. Our capital goes in first,
our experience is there to stay and these factors together provide the impetus
for attracting institutional capital partners.
Purple Capital ends up with varying stakes in the business operations we
partner as a result of a composite measure of the risk we take, the capital we
invest and the experience we bring to bear.
Our equity capital base has increased significantly from R7,9 million prior to
the initial rights issue and placement of shares at the time of the effective
beginning of Purple Capital in February 2005, to what will be a net asset
value of at least R370 million after the issue of the new shares to provide
the equity funding for the proposed Global Trader acquisition.
Our investment banking stakes in areas other than financial services have
separately contributed to the strengthening of our shareholders` funds. Having
established a measure of balance sheet strength, the focus is now on improving
the earnings mix.
On 1 October 2007 Integer launched its new home loan product offering to the
market. Purple Capital has a 47% equity interest in Integer which has an
initial capital market funding facility of R500 million. The first market
response has been very encouraging with 242 applications being received in the
first month of operations for home loans totalling R197 million in respect of
property values in aggregate estimated at R310 million. This represents a
63,5% loan-to-value ratio. Although the loans finally granted will clearly be
only a conservative percentage of those sought, we do feel that the early
demand validates the product offering.
The sources of loan applications are predominantly switches from other
providers (70%), with the balance (30%) being split equally between new
property acquisitions and properties that are bond free.
On 25 October 2007, a detailed circular was posted to shareholders, primarily
relating to the proposed acquisition of Global Trader and incorporating
revised listing particulars.
Global Trader is a high growth, proven concept trading business within the
financial markets with a relatively mature, highly profitable and cash
generating business in South Africa and established, regulated operations in a
number of jurisdictions and geographies internationally. The economics of this
mix of future growth and current stability presented an attractive investment
opportunity within Purple Capital`s strategic mandate.
The Global Trader acquisition in particular is expected to materially change
the earnings mix, providing an immediate and growing cash earnings base both
in local and foreign currency.
In line with this change in earnings profile and the significant moves made
towards building an independent financial services group, Purple Capital`s
listing will be moved from the "Financials - Equity Investment Instruments"
sector to the "Financials - General Financial" sector of the JSE lists on
Wednesday, 2 January 2008, once FTSE approval has been obtained.
For the first time both our economic interest in Blackstar Managers` carried
interest in the funds it manages and income from our Treasury operation have
made a contribution to earnings in the 2007 financial year. In the 2008
calendar year we plan to roll-out a significant expansion of our Treasury
through new client acquisitions - thereby increasing our fee income which is
both annuity based and performance linked.
Our deal flow in private equity investment opportunities for industries other
than financial services has grown to the extent that this now warrants the
establishment of a separately managed private equity fund. We intend to launch
a relatively small initial fund of R350 - R500 million in the first quarter of
calendar 2008 to focus on established, privately held businesses which are not
listed.
The outlook for Purple Capital is very encouraging, in terms of both the
growth prospects of our existing investments and, where appropriate, further
acquisitions and investments.
Financial performance
The company recorded a profit of R45,6 million for the 2007 financial year,
compared to a profit of R11,0 million in 2006. In 2007 a significant
proportion of income again arose as a result of fair value adjustments to
investments. The earnings mix changes significantly going forward, as a result
of the Treasury operation and Global Trader investments.
Shareholders` funds have increased from R65,8 million in 2006 to R208,9
million in 2007.
Purple Capital`s cash on hand increased from R21,6 million in 2006 to R45,2
million at the 2007 year end.
Operational update
Purple Capital made the following investments during the financial year:
Cape Empowerment Trust ("CET")
CET is a black-controlled, JSE listed company with significant interests in
the property, security and gaming industries. With effect from 10 November
2006, Purple Capital entered into a strategic share swap transaction with CET
in terms of which a 10% shareholding in CET 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. The mark-to-market impact of
this strategic share swap has already had a positive impact on reserves and
income.
African Independent Retail Finance ("AIRF")
AIRF is a specialist asset finance company currently involved in the
commercial equipment rentals and asset-backed consumer finance markets, now
expanding into vehicle finance. Purple Capital has purchased a 15% equity
stake in this business for R2,0 million - structured as R0,5 million in equity
and R1,5 million as a shareholder`s loan. R5,0 million in the form of a
redeemable debenture has also been advanced to AIRF.
In addition, Purple Capital has entered into an agreement to provide funding
specifically for the growth of the vehicle finance business in the form of a
further commitment to mezzanine funding of R55 million over a period of five
years, subject to senior debt funding being raised on a three to one basis.
The growth of this business has to date been held back only by the lack of
funding and we are confident of steady growth now that initial bank funding
lines have been obtained.
Real People South Africa
Purple Capital has structured and provided the equity funding for a BEE
transaction in respect of Real People Investment Holdings` South African
Operations ("RPSA"). RPSA provides credit management services to the South
African market through 140 branches located throughout South Africa. Its
divisions include credit management solutions for third party clients, retail
financial services, merchant funding and acquired debt. In its retail
activities, RPSA provides consumer credit, insurance and cellular phone
products to the South African market as well as selected markets elsewhere in
sub-Saharan Africa. For the year ended 31 March 2007, RPSA`s audited gross
revenue was R643 million and profit before taxation was R144 million. Profit
before taxation of R71,9 million has been generated in the first five months
of the 2008 financial year.
New capital of R95,1 million has been 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. Purple
Capital has invested R4,8 million in preference share funding with the balance
of the funding provided by the Industrial Development Corporation.
Spanjaard Limited ("Spanjaard")
Spanjaard, a JSE listed company, 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.
On 5 April 2007 Purple Capital and Spanjaard concluded an agreement in terms
of which Purple Capital subscribed 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 equity stake of 29,99% post
subscription of the new shares.
Purple Capital believes there is an opportunity to unlock value by cost
restructuring, improved operating efficiency and growth by acquisition.
Although it is early days for this investment we have already seen marked
changes in the results and management, both of which are encouraging.
Treasury operation
Purple Capital purchased from First South Risk Solutions ("FSRS"), a
subsidiary of the J&J Group, a 73,5% interest in a business that provides
treasury management services to the South African National Roads Agency
Limited, for a consideration of R5 million. FSRS continues to hold the
remaining 26,5% interest. The effective date of the deal is 1 March 2007. The
treasury management functions have been incorporated into Purple Capital.
Treasury has performed well ahead of expectations. It is our intention to
leverage off the established systems, people skills and market knowledge in
this field to expand our client base significantly.
Integer
Purple Capital acquired a 47% equity interest in Integer, a Cape Town-based
residential mortgage loan business, for R13,1 million and has advanced
shareholder loans of R4,7 million. Integer will require initial funding as the
business grows until the first margin and securitisation profits come through.
Our existing investments:
Acsis
Acsis continues to build on its successful track record with current
profitability ahead of budget. Funds under management increased by 44% to
R19,5 billion at the year end whilst the staff complement increased by 20%.
During the year the FSB approved the issue of a Life Assurance Company licence
within the Acsis group, which will enhance its investment advice capability.
On 1 March 2007 Acsis announced that it had concluded a number of transactions
to include in its shareholder base a wide range of black individuals,
including staff and a broad-based empowerment trust. Purple Capital`s interest
remains at 20%.
Bridge Capital Group ("BCG")
BCG has benefited from a buoyant market for corporate finance, however, after
expenses their earnings for the year were disappointing.
Umnombo Investment Holdings ("UIH")
UIH and DENOSA remain key BEE shareholders in our company. Beyond its stake in
Purple Capital UIH is a partner in the Real People transaction and has further
investments in Enaleni Pharmaceuticals Limited, as well as property and other
current business transactions.
Capital raised
A total of R80,2 million of new equity capital was raised during the year -
R35,6 million by way of a general issue of shares for cash in April and a
further R44,6 million by way of a rights issue in June 2007.
Subsequent events
Purple Capital has entered into an agreement dated 25 July 2007, with the
current shareholders of New World Trader Limited (t/a "Global Trader"), to
acquire the entire issued share capital of Global Trader at a net valuation of
Euro31,4 million. A circular was posted to shareholders on 25 October 2007
providing details of the acquisition. The transaction is subject to
shareholders` approval, which approval is expected to be obtained on 16
November 2007.
As at 6 November 2007, favourable proxies had been received from sufficient of
those shareholders entitled to vote to ensure that the ordinary and special
resolutions would be passed by the requisite majorities.
Accounting policies
The abridged financial results have been presented in terms of IAS 34 -
Interim Financial Reporting, and the South African Companies Act. The
financial 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.
The accounting policies are those presented in the annual financial statements
for the year ended 31 August 2007 and have been applied consistently to the
periods presented in these abridged financial statements.
Business combinations
IFRS 3 requires us to disclose all business combinations during the year. As
discussed above, Purple Capital acquired a treasury operation for a
consideration of R5 million. Of this, R1 765 000 was paid for an intangible
asset and the balance for goodwill.
Report of the independent auditors
KPMG Inc.`s unmodified auditors` reports included in the annual financial
statements and on the summarised financial statements contained in this
abridged report are available for inspection at the company`s registered
office.
Segmental reporting
At the year-end Purple Capital had one business/geographic segment and
therefore no detailed segmental reporting is required.
Related party transactions
Certain directors of the company and their immediate relatives control 40%
(2006: 51,4%) of the voting rights of the company and therefore it has, by
definition, related party relationships with these directors. There were no
loans to directors at year end.
Annual general meeting
The annual general meeting of shareholders will be held at the registered
office of the company, Ground Floor, 57 Sixth Road, Hyde Park, at 10h00 on
Tuesday, 11 December 2007.
On behalf of the board
Mark Barnes Craig Carter Johannesburg
Chairman Director 6 November 2007
Registered office Transfer secretaries
Ground Floor, Eastwood Link Market Services South Africa
(Pty) Limited
57 Sixth Road 11 Diagonal Street
Hyde Park 2196 Johannesburg 2001
(PO Box 411449, Craighall 2024) (PO Box 4844, Johannesburg 2000)
Independent auditors Sponsor
KPMG Incorporated Bridge Capital Advisors (Pty)
Limited
Chartered Accountants (SA) 2nd Floor, 27 Fricker Road
Registered Accountants and Illovo Boulevard
Auditors
KPMG Crescent Illovo, 2196
85 Empire Road, Parktown 2193 (PO Box 651010, Benmore 2010)
(Private Bag 9, Parkview 2122)
Executive Directors: Mark Barnes (Chairman), Craig Carter
Non-executive Directors: Dennis Alter (American), Thembeka Gwagwa, Ronnie
Lubner (British), Shaun Rai
Date: 06/11/2007 15:50:01 Produced by the JSE SENS Department.
The SENS service is an information dissemination service administered by the
JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or
implicitly, represent, warrant or in any way guarantee the truth, accuracy or
completeness of the information published on SENS. The JSE, their officers,
employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature,
howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
