| Thu 8 May 2008, 17:00 | | PPE - Purple Capital Limited - Reviewed results fo |
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PPE
PPE
PPE - Purple Capital Limited - Reviewed results for the six months ended 29
February 2008
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 29 February 2008
CONDENSED CONSOLIDATED INCOME STATEMENT
Reviewed Audited Reviewed
6 months 12 months 6 months
29 February 31 August 28 February
2008 2007 2007
R`000 R`000 R`000
Revenue 64 022 7 335 -
Other income (8 216) 58 725 15 962
Total income 55 806 66 060 15 962
Trading expenses (12 099) - -
Operating expenses (42 553) (13 088) (4 792)
Share of profits of associates - 87 1 223
Earnings before interest, 1 154 53 059 12 393
depreciation and amortisation
Interest expense (8 305) (62) (38)
Depreciation and amortisation (7 845) (504) (58)
(Loss)/profit before loss on (14 996) 52 493 12 297
subsidiary
Loss on loss of control of (21 107) - -
subsidiary
(Loss)/profit before tax (36 103) 52 493 12 297
Taxation 2 119 (6 861) (2 217)
(Loss)/profit for the period (33 984) 45 632 10 080
Weighted number of shares in 275 697 188 921 154 643
issue at end of period (`000)
Basic (loss)/earnings per share (12,33) 24,15 6,52
(cents)
Diluted (loss)/earnings per (12,28) 24,10 6,44
share (cents)
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
Cash flow utilised in operating (304 456) (1 336) (3 232)
activities
Cash flow from/(utilised in) 164 955 (51 807) (3 890)
investing activities
Cash flow from/(utilised in) 267 069 76 745 (4 012)
financing activities
Net increase/(decrease) in cash 127 568 23 602 (11 134)
and cash equivalents
Cash and cash equivalents at 45 247 21 645 21 645
the beginning of the period
Cash and cash equivalents at 172 815 45 247 10 511
the end of the period
HEADLINE EARNINGS PER SHARE
Headline (loss)/earnings per
share
(Loss)/profit for the period (33 984) 45 632 10 080
Add loss on loss of control of 21 107 - -
subsidiary
Less equity accounted earnings - (87) (1 223)
Total tax effect (2 955) - -
Headline (loss)/profit for the (15 832) 45 545 8 857
period
Headline (loss)/earnings per (5,74) 24,11 5,73
share
Diluted (loss)/headline (5,72) 24,05 5,66
earnings per share
CONDENSED CONSOLIDATED BALANCE SHEET
Reviewed Audited Reviewed
6 months 12 months 6 months
29 February 31 August 28 February
2008 2007 2007
R`000 R`000 R`000
Assets
Equipment 10 561 356 244
Global Trader 264 030 - -
- Intangibles (customers, 67 332 - -
trademark)
- Goodwill 196 698 - -
Other intangibles 4 216 4 627 -
Interests in associate 5 190 9 934 10 371
companies
Other investments 150 388 150 925 75 583
Long-term receivables 796 857 500
Deferred tax asset - - 1 261
Total non-current assets 435 181 166 699 87 959
Trade and other receivables 56 064 5 972 967
Cash and cash equivalents 172 815 45 247 10 511
Total current assets 228 879 51 219 11 478
Total assets 664 060 217 918 99 437
Equity and liabilities
Share capital and premium 337 629 178 182 98 512
Accumulated (loss)/profit (8 770) 24 864 (11 824)
Other reserves 3 230 5 805 5 827
Total equity 332 089 208 851 92 515
Long-term liabilities 114 886 - -
Deferred tax liability 18 923 3 858 -
Total non-current liabilities 133 809 3 858 -
Short-term liability - - 6 574
Trade and other payables 198 162 5 209 348
Total current liabilities 198 162 5 209 6 922
Total equity and liabilities 664 060 217 918 99 437
Net asset value per ordinary 105,51 92,33 57,45
share (cents)
STATEMENT OF CHANGES IN EQUITY
Balance at beginning of period 208 851 65 775 65 775
Shares issued 159 447 95 291 15 621
(Loss)/profit for the period (33 984) 45 632 10 080
Share based payments 1 561 2 153 1 039
Revaluation reserve 60 - -
Foreign currency translation (3 846) - -
reserve
332 089 208 851 92 515
COMMENTARY
Chairman`s review
It has been a very disappointing six month period in the history of Purple
Capital`s development, marred as it was by the collapse of Global Trader`s
European and Asian businesses. Our results were further impaired by negative
mark-to-market adjustments on other investments which declined in line with
equity markets locally and worldwide.
It has been a tough time and we have learned much. We have been encouraged by
and I am sincerely grateful for the support, advice and continued enthusiasm
given to us by shareholders big and small, our bankers, fellow directors and
colleagues.
The future is about focus. We have sold our interests in Blackstar, Athema and
Bridge Capital and the anticipated launch of a small private equity fund has
been put on hold for the time being.
By the end of our financial year we expect to have expanded our treasury
operation to include debt origination, money and capital market advice and
strategy implementation and a foreign exchange advisory capability. These
operations will be housed adjacent to the Global Trader dealing room so as to
benefit from shared systems and a live market environment.
We are building on our own corporate finance advisory ability, having already
secured a number of mandates.
Our full attention going forward will be financial services, developing or
acquiring businesses where we can marry mainstream institutional capital with
entrepreneurs and bring our experience to bear - a case could even be made for
some consolidation amongst smaller players in our industry.
Financial review
The Purple Capital Group recorded a net loss of R34,0 million for the six months
to 29 February 2008, compared to profits of R10,1 million for the same period
last year and R45,6 million for the financial year ended 31 August 2007. The
loss in the current period arose from the write down of the Global Trader
investment and related costs as well as negative mark-to-market adjustments on
other investments.
Shareholder funds have nevertheless increased from R208,9 million to R332,1
million. This is mainly as a result of a share issue for cash that was completed
in November 2007 to fund the majority of the Global Trader purchase price.
The Purple Capital Group`s cash on hand at 29 February 2008 was R172,8 million,
including the Global Trader client cash held on deposit against which there is a
client liability included in the balance sheet.
Operational review
Global Trader
The global operations of Global Trader were acquired by Purple Capital on 21
November 2007. Global Trader`s results have been consolidated for the four month
period ending 29 February 2008. In that period, Global Trader contributed R12,3
million in pre-tax profit (before accounting for the loss of control of Global
Trader Europe ("GTE")) on gross revenue of R59,9 million. 80% of these profits
were generated by Global Trader`s South African ("GTSA") operations.
GTE was placed into Administration on 15 February 2008, due to capital adequacy
concerns related to a client not meeting margin calls. From that date the
company was no longer consolidated, the net assets were written down to zero and
the intangible assets allocated to the international operation were impaired.
The total of these write-downs was R66,5 million. Against this a receivable of
R45,4 million has been raised for the expected inflow of money from the Escrow
account created on the date of acquisition. Based on legal correspondence to
date, management believe there is a reasonable prospect of receiving these
funds.
GTSA continues to trade well above expectations generating cash profits every
month within exceptionally low value at risk limits.
Integer
Since the launch of Integer on 1 October 2007 its staff, systems and processes
have been functioning better than could have been expected. Volumes of
applications since launch have been good, but originally relied solely on
Integer`s call centre and relationships with mortgage originators. The
implementation of a mobile sales force early this year has seen a marked
improvement in both the volume and quality of applications. As at end-April 2008
1 850 applications for total loans of R1,5 billion have been processed with
loans of R230,0 million having been approved.
Treasury
The Purple Capital treasury has performed well during the six month period
providing treasury management services to the South African National Roads
Agency Limited. It has always been our intention to expand the existing client
base using the people, systems and market knowledge already in place, this
strategy is now being implemented.
Cape Empowerment Trust ("CET")
CET is a black-controlled, JSE listed company with significant interests in the
property, security, financial services, communication and gaming industries. In
the year to December 2007, CET increased total assets by 293% to R1,26 billion,
attributable profit by 67% to R143,1 million and shareholders` equity by 160% to
R525,5 million. It has also declared its maiden dividend of 3 cents per share.
CET intends focusing on unlocking value and cash flow from its existing
businesses and assets while still pursuing other value opportunities.
The market price of CET moved from R2,39 per share on 31 August 2007 to R1,68
per share on 29 February 2008 resulting in a negative fair value adjustment of
R17,0 million in Purple Capital`s results. CET`s results however provide a
strong base for the future which, in our view, is very positive.
Acsis
Acsis continues to build on its successful track record with profitability for
the year to date again significantly ahead of budget and the previous financial
year. Funds under management have increased by 16% to R20,6 billion in the year
to end March 2008.
Real People South Africa ("RPSA")
RPSA provides credit management services to the South African market through 130
branches located throughout South Africa.
RPSA has performed very strongly in the current year and is comfortably
achieving budget and exceeding prior year results. For the 10 months to 31
January 2008, RPSA had unaudited gross revenue of R709,4 million and net profit
before tax of R138,2 million.
Spanjaard
On 5 April 2007 Purple Capital acquired a 30% stake in Spanjaard, who announced
record results on 24 April 2008, generating pre-tax profit of R5,0 million.
Revenues increased by 7% to R85,5 million, net profit margins improved from 1%
to 4% and headline earnings per share more than doubled from 18,3 cents to 44,5
cents. The increase in headline earnings is the result of increased operating
efficiencies and working capital management. The future focus of Spanjaard is on
growth, both organic and by way of appropriate acquisitions, whilst maintaining
the operating efficiencies already achieved.
African Independent Retail Finance ("AIRF")
AIRF is a specialist asset finance company currently involved in commercial
equipment rentals, asset backed consumer finance markets and vehicle finance.
Purple Capital retains its 15% equity stake and R5,0 million redeemable
debenture investment.
AIRF has not performed up to expectations and we are looking to improve the
structure of the business.
Umnombo Investment Holdings ("UIH")
UIH and DENOSA remain key BEE shareholders in Purple Capital. 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 investments.
Disposals
Purple Capital disposed of its interest in the Bridge Capital Group during
December 2007 for R7,0 million (realising a profit of R1,6 million), its
economic interest in Blackstar Managers for R5,5 million in December 2007
(realising a profit of R5,3 million against the original cost of the investment)
and its shareholding in Athema for R1,4 million (realising a profit of R0,6
million).
Capital raised
A total of R274,4 million capital was raised during the six month period. R159,4
million was raised through the issue of equity and R115,0 million through long-
term loans.
Business combinations
Purple Capital acquired Global Trader on 21 November 2007 for a total
consideration of R316,9 million. The purchase price was split as follows:
Amount
(R` million)
Tangible assets 59,6
Customer relationships 40,8
Trademark 40,3
Goodwill 198,9
Deferred tax (22,7)
316,9
The purchase price was split 80/20 between GTSA and GTE.
Goodwill arises out of the prospect of future expected earnings resulting from
the business combination. Notwithstanding the administration of GTE, management
is confident that the remaining goodwill of R196,7 million relating to GTSA is
not impaired.
Withdrawal of cautionary
Purple Capital issued a cautionary announcement to shareholders on 15 February
2008 related to GTE being placed under administration. Further updates were
issued to shareholders on 19 March 2008 and 3 April 2008.
With the release of these interim results, the cautionary announcement is
withdrawn.
Accounting policies
The condensed consolidated interim financial report for the six months ended 29
February 2008 has been prepared in compliance with International Financial
Reporting Standards ("IFRS") (in particular IAS 34 Interim Financial Reporting)
and the South African Companies Act.
The accounting policies applied by the group in these condensed consolidated
financial statements are the same as those applied in the financial statements
as at and for the year ended 31 August 2007, except for the adoption of IFRS 7
Financial Instruments: Disclosures which does not have a financial impact but
will result in enhanced risk disclosures at year end.
KPMG Inc., the company`s auditor, has reviewed the accompanying results for the
six months ended 29 February 2008, which comprise the attached balance sheet,
income statement, cash flow statement and statement of changes in equity. These
results are the company`s condensed consolidated interim financial statements.
KPMG Inc. has expressed an unmodified conclusion on these results and the review
report is available for inspection at the company`s registered office.
On behalf of the board
Mark Barnes Craig Carter Johannesburg
Chairman COO 8 May 2008
Registered office Transfer secretaries
Ground Floor, Eastwood Link Market Services South Africa
57 Sixth Road (Pty) Limited
Hyde Park 2196 11 Diagonal Street
(PO Box 411449 Johannesburg 2001
Craighall 2024) (PO Box 4844, Johannesburg 2000)
Independent auditors Sponsor
KPMG Incorporated KPMG Services (Pty) Limited
Chartered Accountants (SA) KPMG Crescent
Registered Accountants and 85 Empire Road, Parktown 2193
Auditors
KPMG Crescent (Private Bag 9, Parkview, 2122)
85 Empire Road, Parktown 2193
(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: 08/05/2008 17:00:02 Produced by the JSE SENS Department.
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