| Wed 5 Nov 2008, 7:40 | | PPE - Purple Capital - Audited Results for the year ended 31 August 2008 |
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PPE
PPE
PPE - Purple Capital - Audited Results for the year ended 31 August 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 group")
AUDITED RESULTS for the year ended 31 August 2008
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Group Company
2008 2008 2007
R`000 R`000 R`000
Revenue 105 749 11 668 7 335
Trading and operating expenses (91 073) (18 498) (12 988)
Net income/(loss) 14 676 (6 830) (5 653)
Fair value adjustments (36 767) (36 767) 55 626
Other income (2 013) 3 972 516
Earnings before interest, (24 104) (39 625) 50 489
depreciation and amortisation
Net interest (expense)/income (11 685) (18 301) 2 608
Depreciation and amortisation (18 421) (13 094) (604)
(Loss)/profit before loss of (54 210) (71 020) 52 493
subsidiary
Loss of control of subsidiary (70 586) (63 980) -
(Loss)/profit before tax (124 796) (135 000) 52 493
Current and deferred tax 15 329 17 833 (6 861)
(Loss)/profit for the period (109 467) (117 167) 45 632
Other comprehensive income (4 979) - -
Total comprehensive income (114 446) (117 167) 45 632
(Loss)/profit attributable to:
Owners of the company (110 388) (117 168) 45 632
Minorities 921 - -
(109 467) (117 168) 45 632
Weighted number of shares in 295 228 295 228 188 921
issue at end of period (`000)
Basic (loss)/earnings per share (37,39) (39,69) 24,15
(cents)
Diluted (loss)/earnings per share (37,39) (39,69) 24,10
(cents)
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
Cash flow utilised in operating (10 805) (22 208) (1 336)
activities
Cash flow utilised in investing (329 703) (336 154) (51 807)
activities
Cash flow from financing 322 513 322 513 76 745
activities
Net (decrease)/increase in cash (17 995) (35 849) 23 602
and cash equivalents
Cash and cash equivalents at the 45 247 45 247 21 645
beginning of the period
Cash and cash equivalents at the 27 252 9 398 45 247
end of the period
HEADLINE EARNINGS PER SHARE
(Loss)/profit for the period (110 388) (117 168) 45 632
Add loss on loss of control of 70 586 63 980 -
subsidiary
Less equity accounted earnings - - (87)
Total tax effect (8 957) (8 957) -
Headline (loss)/profit for the (48 759) (62 145) 45 545
period
Headline (loss)/earnings per (16,52) (21,05) 24,11
share
Diluted (loss)/headline earnings (16,52) (21,05) 24,05
per share
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Group Company
2008 2008 2007
R`000 R`000 R`000
Assets
Equipment 5 700 314 356
Global Trader Intangible assets 264 990 264 990 -
- Intangibles (customers, 60 422 60 422 -
trademark)
- Goodwill 204 568 204 568 -
Other intangible assets 12 624 3 823 4 627
Investments and associates 150 412 150 847 160 859
Long-term receivables 1 204 191 857
Deferred tax asset 3 458 - -
Total non-current assets 438 388 420 165 166 699
Trade and other receivables 7 058 2 937 5 972
Cash and cash equivalents 27 252 9 398 45 247
Total current assets 34 310 12 335 51 219
Total assets 472 698 432 500 217 918
EQUITY AND LIABILITIES
Share capital and premium 337 453 337 453 178 182
Accumulated (loss)/profit (83 633) (90 491) 24 864
Other reserves and minorities 3 222 7 364 5 805
Total equity 257 042 254 326 208 851
Long-term liabilities 111 243 111 243 -
Deferred tax liability 6 375 6 375 3 858
Total non-current liabilities 117 618 117 618 3 858
Loans and borrowings 52 000 52 000 -
Trade and other payables 46 038 8 556 5 290
Total current liabilities 98 038 60 556 5 290
Total equity and liabilities 472 698 432 500 217 918
Net asset value per ordinary 81,37 80,80 92,33
share (cents)
CONDENSED RECONCILIATION OF CAPITAL AND RESERVES
Balance at beginning of period 208 851 208 851 65 775
Shares issued 159 271 159 271 95 291
(Loss)/profit for the period (109 467) (117 168) 45 632
Share based payments 3 372 3 372 2 153
Revaluation reserve (221) - -
Foreign currency translation (4 764) - -
reserve
257 042 254 326 208 851
COMMENTARY
Chairman`s review
Purple Capital had a difficult 2008 financial year during which we suffered
extraordinary and substantial financial loss. The events and circumstances
leading up to these losses have been the subject of a number of detailed press
announcements made to shareholders. We learned some hard lessons and paid a
high price, but the 2008 financial year is behind us.
We are still here, we feel strong and we are determined to build Purple
Capital as the partner of choice for entrepreneurs in financial services. I am
grateful to the management team who have been up to the task in these
difficult times. Everyone stayed and everyone worked hard.
I am grateful also to certain key shareholders and our bankers, whose support
ensured that Purple Capital remains in a sound financial position.
We look forward to next year:
- Global Trader, which traded profitably during 2008 (despite its difficult
circumstances and the amount of management time these consumed), has made a
great start to the year. Contracts For Difference and Spread Trading will take
their place as efficient trading instruments in South Africa, as they have
done in all mature markets worldwide. We recently launched binary options and
our growth going forward will be the compound result of broadening both the
client base and our product offering;
- Integer has become a valuable and competent asset, already established as
an emerging brand in the mortgage loan business;
- acsis continues to do well - conservative management implementing a
consistent approach to financial planning which has stood and will stand its
clients in good stead;
- we are approached often with advisory opportunities, in Corporate Finance
particularly, but also in Treasury - last year our time was devoted to
internal priorities but next year both teams will be expanded to service and
develop this important client base; and
the large negative fair value adjustments are not expected to be repeated next
year.
Tough times stress-test strategy and we will continue to re-evaluate the
appropriateness or otherwise of our existing investments. We recognise the
imperative to generate and grow cash earnings going forward.
I remain convinced that we have both the management experience and the access
to capital necessary to partner the growth strategies of early stage, proven
concept financial services businesses into the future.
Financial review
These results are consistent with the trading update issued on 30 September
2008. The group recorded a loss attributable to shareholders of R110,4 million
(2007: profit R45,6 million) for the 2008 financial year. A significant
proportion of the loss arose as a result of negative fair value adjustments to
listed investments, the write-down in the Global Trader Europe ("GTE")
subsidiary and high interest and amortisation costs.
Shareholders` funds have increased from R208,9 million in 2007 to R257,0
million in 2008.
Purple Capital`s cash on hand decreased from R45,2 million in 2007 to R27,3
million at the 2008 year end. The cash flow utilised in investing activities
includes the acquisition of Global Trader and subsequent write-down of GTE.
The cash flow from financing activities includes cash raised from shares
issued and proceeds from loans and borrowings.
Operational review
An update on Purple Capital`s current subsidiary and investments follows:
Global Trader ("GT")
The operations of GT were acquired by Purple Capital on 21 November 2007. The
GT results have been consolidated for the ten month period ending 31 August
2008. In that period, GT contributed R16,8 million in pre-tax profit on
revenue of R93,2 million, before accounting for the loss of control of GTE of
R70,5 million.
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 Global Trader International
("GTI") operation were impaired. The total of these write-downs was R70,5
million.
The South African operations of Global Trader ("GTSA") continue to grow
profitably despite the impact of the loss of the international operations and
the severe market conditions experienced during the year.
Integer
Purple Capital has a 47% equity interest in Integer, a Cape Town based
residential and mortgage loan business for which it paid R13,1 million and has
advanced further funding of R35,1 million.
Since the launch of Integer on 1 October 2007 staff, systems and processes
have been functioning well and ahead of expectations. 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-August 2008 4 074 applications
for total loans of R3,3 billion have been processed with total loans of R625,0
million having been approved.
The first securitisation is planned for November 2008.
Treasury
The Purple Capital treasury has performed well during the year, providing
treasury management services to the South African National Roads Agency
Limited. It remains Purple Capital`s intention to expand the existing client
base in this Treasury Advisory business.
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. CET announced their unaudited interim results on 30 September
2008, showing a loss of 47 cents per share. The loss was mainly attributable
to the negative fair value adjustments on its listed investments in the
property, gaming and financial services sectors. Net asset value as at 30 June
2008 was 113 cents per share.
The CET share price has decreased significantly since August 2007 resulting in
a large negative fair value adjustment in the current period.
acsis
acsis continues to build on its successful track record with funds under
management of R20,3 billion at the end of September 2008.
Real People South Africa ("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.
RPSA has performed very strongly in the current year, comfortably ahead of
budget and the prior year results.
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.
Spanjaard announced record results on 24 April 2008, generating an after tax
profit of R3,4 million. Revenues increased by 7% to R85,5 million, gross
profit margins improved from 30% to 33% and headline earnings increased by143%
from 18,3 to 44,5 cents per share.
African Independent Retail Finance ("AIRF")
AIRF is a specialist asset finance company currently involved in the
commercial equipment rentals, asset backed consumer finance markets and
vehicle finance. Purple Capital retains its 15% equity stake and R5,4 million
redeemable debenture. The current focus is on conservative business growth and
cost control.
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 Archiving for R1,4 million
(realising a profit of R0,7 million).
Capital raised
A total of R326,4 million capital was raised during the year. R159,4 million
was raised through the issue of equity, R115,0 million through long-term loans
and R52,0 million through short-term loans.
Business combinations
Purple Capital acquired GT on 21 November 2007 for a total consideration of
R317,3 million. The purchase price was split as follows:
Amount
(R`million)
Tangible assets 49,1
Customer relationships 40,8
Trademark 40,3
Goodwill 209,8
Deferred tax (22,7)
317,3
The purchase price was allocated 80/20 between GTSA and GTI.
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 R204,6 million relating
to GTSA is not impaired.
Operating segments
The results by operating segment are as follows:
Purple
GTSA Treasury Capital
R`000 R`000 R`000
Revenue 60 473 8 252 4 319
Operating expenses (40 277) (4 252) (15 126)
Trading expenses (4 462) - -
Net income/(loss) 15 734 4 000 (10 807)
Fair value adjustments - - -
Other income (3 129) - 3 972
Earnings/(loss) before 12 605 4 000 (6 835)
interest, depreciation and
amortisation
Net interest 5 596 - (18 302)
income/(expense)
Depreciation and (1 193) (110) (12 984)
amortisation
Profit/(loss) before loss on 17 008 3 890 (38 121)
subsidiary
Loss of control of - - (12 304)
subsidiary
Profit/(loss) before tax 17 008 3 890 (50 425)
Current and deferred tax (2 140) (1 089) 13 040
Minority - (921) -
Profit/(loss) for the period 14 868 1 880 (37 385)
Fair value
adjust-
ments GTI Total
R`000 R`000 R`000
Revenue - 32 705 105 749
Operating expenses - (19 188) (78 843)
Trading expenses - (7 768) (12 230)
Net income/(loss) - 5 749 14 676
Fair value adjustments (36 767) - (36 767)
Other income - (2 856) (2 013)
Earnings/(loss) before (36 767) 2 893 (24 104)
interest, depreciation and
amortisation
Net interest - 1 021 (11 685)
income/(expense)
Depreciation and - (4 134) (18 421)
amortisation
Profit/(loss) before loss on (36 767) (220) (54 210)
subsidiary
Loss of control of - (58 282) (70 586)
subsidiary
Profit/(loss) before tax (36 767) (58 502) (124 796)
Current and deferred tax 5 882 (364) 15 329
Minority - - (921)
Profit/(loss) for the period (30 885) (58 866) (110 388)
Subsequent events
On 10 October 2008, Purple Capital announced that it had acquired a 5,3% stake
in the Bond Exchange of South Africa for a consideration of R7,5 million.
Purple Capital successfully completed a rights offer to raise approximately
R120,0 million of new equity through the issue of new shares at a price of 30
cents per share on 27 October 2008. The majority of the proceeds from the
rights issue have been used to repay long-term liabilities, loans and
borrowings reducing the aggregate amount outstanding from R163,2 million at
year-end to R68,7 million at the date of this report.
Annual general meeting
The annual general meeting of Purple Capital will be held at 57, 6th Road,
Hyde Park on Thursday, 4 December 2008 at 10h00.
Accounting policies
The abridged consolidated 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 consolidated annual
financial statements for the year ended 31 August 2008 and have been applied
consistently to the periods presented in these condensed financial statements.
Report of the independent auditors
KPMG Inc.`s unmodified auditors` reports included in the annual consolidated
financial statements and on the summarised financial statements contained in
this abridged report are available for inspection at the company`s registered
office.
On behalf of the board
Mark Barnes Mike Wilson
Chairman Financial Director
Johannesburg
4 November 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, Mike Wilson
Non-executive Directors:
Dennis Alter (American), Thembeka Gwagwa, Ronnie Lubner (British), Shaun Rai
Date: 05/11/2008 07:40:10 Produced by the JSE SENS Department.
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