| Thu 26 Mar 2009, 16:38 | | PPE - Purple Capital - Reviewed results for the six months ended 28 February |
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PPE
PPE
PPE - Purple Capital - Reviewed results for the six months ended 28 February
2009
PURPLE CAPITAL LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1998/013637/06)
Share code: PPE ISIN: ZAE 000071411
("Purple Capital" or "the company")
REVIEWED RESULTS
for the six months ended 28 February 2009
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Reviewed Audited Reviewed
6 months 12 months 6 months
28 February 31 August 29 February
2009 2008 2008
R`000 R`000 R`000
Revenue 53 826 105 749 64 022
Trading and operating (38 316) (91 073) (54 652)
expenses
Total income 15 510 14 676 9 370
Fair value adjustments (55 972) (36 767) (12 173)
Other income 134 (2 013) (4 246)
Earnings before interest, (40 328) (24 104) (7 049)
depreciation and
amortisation
Net interest expense (12 417) (11 685) (102)
Depreciation and (13 787) (18 421) (7 845)
amortisation
Loss before loss on (66 532) (54 210) (14 996)
subsidiary
Loss of control of - (70 586) (21 107)
subsidiary
Loss before tax (66 532) (124 796) (36 103)
Current and deferred tax 6 705 15 329 2 119
Loss for the period (59 827) (109 467) (33 984)
Other comprehensive loss (569) (4 979) (3 785)
Total comprehensive loss (60 396) (114 446) (37 769)
Loss attributable to:
Owners of the company (60 662) (110 388) (33 984)
Minorities 835 921 -
(59 827) (109 467) (33 984)
Weighted number of shares in 586 365 295 228 275 697
issue at end of period
(`000)
Basic loss per share (cents) (10,35) (37,39) (12,33)
Diluted loss per share (10,35) (37,39) (12,28)
(cents)
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
Cash flow (utilised (8 295) (10 805) 14 489
in)/generated by operating
activities
Cash flow utilised in (27 168) (329 703) (307 646)
investing activities
Cash flow from financing 24 032 322 513 267 068
activities
Net decrease in cash and cash (11 431) (17 995) (26 089)
equivalents
Cash and cash equivalents at 27 252 45 247 45 247
the beginning of the period
Cash and cash equivalents at 15 821 27 252 19 158
the end of the period
HEADLINE LOSS PER SHARE
Loss for the period (60 662) (110 388) (33 984)
Add loss of control of - 70 586 21 107
subsidiary
Total tax effect of - (8 957) (2 955)
adjustment
Headline loss for the period (60 662) (48 759) (15 832)
Headline loss per share (10,35) (16,52) (5,74)
Diluted loss per share (10,35) (16,52) (5,72)
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Reviewed Audited Reviewed
6 months 12 months 6 months
28 February 31 August 29 February
2009 2008 2008
R`000 R`000 R`000
Assets
Equipment 4 512 5 700 10 561
Global Trader intangible 258 078 264 990 264 030
assets
- Intangibles (customers, 53 510 60 422 67 332
trademark)
- Goodwill 204 568 204 568 196 698
Other intangibles 7 899 12 624 4 216
Investments and associates 90 153 150 412 155 578
Long-term receivables 1 259 1 204 796
Deferred tax asset 7 076 3 458 -
Total non-current assets 368 977 438 388 435 181
Trade and other receivables 40 433 7 058 56 064
Cash and cash equivalents 15 821 27 252 19 158
Total current assets 56 254 34 310 75 222
Total assets 425 231 472 698 510 403
Equity and liabilities
Share capital and premium 450 402 337 453 337 629
Accumulated loss (144 296) (83 633) (8 770)
Other reserves 3 669 2 301 3 230
Minorities 1 276 921 -
Total equity 311 051 257 042 332 089
Long-term liabilities 61 940 111 243 114 886
Deferred tax liability - 6 375 18 923
Total non-current 61 940 117 618 133 809
liabilities
Loans and borrowings 12 386 52 000 -
Trade and other payables 39 854 46 038 44 505
Total current liabilities 52 240 98 038 44 505
Total equity and liabilities 425 231 472 698 510 403
Net asset value per ordinary 43,36 81,37 105,51
share (cents)
CONDENSED RECONCILIATION OF CAPITAL AND RESERVES
Balance at beginning of 257 042 208 851 208 851
period
Shares issued 112 949 159 271 159 447
Loss for the period (59 827) (109 467) (33 984)
Share based payments 1 937 3 372 1 561
Revaluation reserve (397) (221) 60
Foreign currency translation (171) (4 764) (3 846)
reserve
Minorities (482) - -
311 051 257 042 332 089
COMMENTARY
Chairman`s review
Over the last six months the imperative within Purple Capital has been to
reduce debt.
To that end:
- R119,6 million of new capital was raised in October 2008;
- operating costs have been cut back significantly;
- our investment in acsis has been sold; and
- funding further growth in Integer was held back significantly.
There is more still being done.
Each of our investments continues to be assessed and tested against our
stated objective of investing only in financial services businesses where we
have high level of shareholder control and oversight and are able to access
operational cash flows. Where further action is required amongst our
existing investments, this will be implemented within the realities of
current market liquidity and pricing.
Ultimately shareholder value is only created when a business yields a return
which exceeds the weighted average cost of its capital - that is our test
for future commitments.
Global Trader South Africa ("GTSA") is a debt-free, disciplined business
with a valid, sustainable economic model which has once again regained the
confidence of its clients and is growing its market share. Risk management
and intense client focus sets GTSA apart from its competitors in a market
that is still in a very early stage of its growth potential in South Africa.
These results, on the one hand, bear testimony to it having been a difficult
time. I could not have coped without the resolve and energy of the
management team and the support of the providers of capital. In particular,
I wish to thank Ronnie Lubner on behalf of all of Purple Capital`s
stakeholders, and on a personal level, for his support and encouragement.
On the other hand, bear markets define winners and we have survived. We have
learned a lot from our own mistakes and the extreme market volatility in
which we have operated and we are growing from strength to strength. We feel
confident in what we are doing and we very much enjoy the challenge and
opportunities this market offers.
We expect the remainder of the year to realise a steady increase in
operating profits and further debt reduction.
Financial review
The Purple Capital Group recorded a net loss of R59,8 million for the six
months to 28 February 2009, compared to a loss of R34,0 million for the same
period last year and R109,5 million for financial year ended 30 August 2008.
The loss in the current period arose mainly from negative mark-to-market
adjustments on certain investments and funding and amortisation costs
related to the Global Trader investment.
Shareholder funds increased from R257,0 million to R311,1 million as a
result of a rights offer completed in October 2008 where R119,9 million was
raised, the majority of which was used to reduce borrowings.
Borrowings have been reduced from R163,0 million at 31 August 2008 down to
R74,3 million at 28 February 2009, with an anticipated further reduction
down to R11,3 million by 30 June 2009 after the disposals referred to below.
The high debt levels reached in the Group drove an intense focus on cash
management, and a discipline that is now entrenched and will remain with us
even in the better times ahead.
Core operations
Global Trader
GTSA has been strengthened by the knowledge gained from the events that
caused the closure of its international operations and tested the Group`s
management resolve and business model over the last 12 months - it`s back to
business as usual.
The decision to rationalise and reorganise the operating cost base whilst at
the same time hiring key skills to supplement the management team has
certainly paid off. Focus has transferred back to the front end of the
business and whilst our competitors find themselves facing inwards in
dealing with the effects of volatile market conditions, inadequate risk
management and credit policies, we have managed to further entrench our
retail leadership position and grow our market share.
The financial highlights for the period are:
- Headline trading income increased from R33,3 million to R43,0 million
compared to the last six months of the 2008 financial year,
representing a 29,1% increase
- Expenses for the same period reduced from R34,2 million to R25,6
million, representing a 25,1% reduction in operating costs. This was
the result of four key drivers:
- shut down of operations supporting the international companies over the
period
- review of all core operating costs
- transfer of suppliers to South African cost base
- lower level of extraordinary once off costs resulting from failure of
international operations.
During this period of difficult market conditions:
- GTSA has suffered no client default over the last 12 months; a result
we attribute to our greatly improved and simplified risk management
policies and procedures and a thorough understanding of our business
- GTSA`s headline income over the six month period ended 28 February 2009
versus the same six month period ended 29 February 2008 is only down
8%. JSE volumes have reportedly dropped over the same period upwards of
30%.
GTSA`s strategic focus remains to emerge as the number one full service
broker operating in South Africa, continuing to lead through innovation in
products and services. Over the last six months we have extended our
products and services to include:
- Binary options
- Equities
- Internationally acclaimed technical research
- Global Trader University
- Risk Management advisory.
Corporate Finance
Purple Capital has placed an increased focus on advisory and corporate
finance during these times of financial and economic uncertainty as we
believe there are various opportunities in the forms of acquisitions,
balance sheet and funding restructurings and the like. The team has been
expanded to deal with the significant deal-flow from Purple Capital`s
network that also provides us with several opportunities for advisory and
investment.
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 ("SANRAL"). SANRAL has decided to no longer outsource their
treasury function and therefore the contract will not be renewed. Other
treasury opportunities are however still being planned.
Other investments
Integer
Integer continues to trade steadily, with the home loan portfolio now
approaching R1 billion. In the light of uncertainty in capital markets,
management`s focus is redirected from origination and growth in the book to
servicing and the exploration of alternative funding and distribution
models. Given the conservative underwriting, the portfolio continues to
perform well despite increased consumer stress.
Advanced discussions are underway as to the future structure of this
investment. We have a very limited appetite for any future funding of the
operations and although our investment in the mortgage loan book is
valuable, the capital investment in the company has been fully provided for
in these results.
Real People South Africa ("RPSA")
RPSA has continued to grow productive assets under management for the March
2009 financial year to date. Most of this year`s growth is sourced in the
South African unsecured personal loans, incremental housing loans and
educational finance portfolios, with investment property, distressed debt
books and personal loan portfolios in other African countries remaining
stable year-on-year. Over R800 million of new funding has been secured this
year. RPSA is thus well positioned to continue improving operating
efficiencies. Although bad debt charge as a percentage of gross advances has
increased materially year-on-year in adverse economic conditions, the
portfolio is well within acceptable group risk limits and full year group
earnings before interest and tax are expected to grow significantly.
Spanjaard
Purple Capital continues to hold its 30% in Spanjaard Limited ("Spanjaard"),
a lubricants and allied chemical products company listed on the JSE.
Despite tougher global trading conditions, Spanjaard has shown exceptional
growth in earnings. In its trading statement released on 27 February 2009,
Spanjaard expects headline earnings per share to increase by between 50% and
60% compared to the preceding financial year. Management of Purple Capital
and Spanjaard continue to work closely on both the Spanjaard executive
committee and Board.
Spanjaard declared a final dividend of 70 cents per share (2008 - 10 cents
per share) which is expected to be received on 18 May 2009. The carrying
value of Spanjaard is R7,0 million.
Cape Empowerment Trust ("CET")
CET has concentrated its recent efforts on de-leveraging its balance sheet
and applying the proceeds from the sale of certain assets, including its
stake in Ambit Properties Limited, to repaying borrowings. CET`s future
focus will be on generating operational cash flows in Dynamic Cables and
Security whilst continuing to grow its property interest. CET expects to
release its results for the year ended 31 December 2008 in the near future.
The share price since August 2008 has, however, decreased significantly
resulting in a large negative fair value adjustment in the current period,
resulting in the current carrying value of R5,7 million.
African Independent Retail Finance ("AIRF")
AIRF is a specialist asset finance company involved in the commercial
equipment rentals, asset backed consumer finance markets and vehicle
finance. No further growth in the book will be supported as the focus moves
to collect the book and realise value. Purple Capital retains its 15% equity
stake and R5,0 million secured redeemable debenture.
Disposals
acsis Limited
Purple Capital recently announced that it is to sell its 20% stake in
financial planning company, acsis Limited ("acsis"), to Old Mutual South
Africa for R32 million (subject to the fulfilment of certain conditions
precedent) realising a R15,1 million profit on the cost of the original
investment. A circular to shareholders regarding the disposal of acsis and
incorporating a notice to convene a general meeting of ordinary shareholders
will be posted in the near future.
Bond Exchange of South Africa Limited
Purple Capital acquired its 5,3% shareholding in the Bond Exchange of South
Africa Limited ("BESA") during BESA`s capital raising programme in October
2008. Subsequently, the JSE Limited ("JSE") launched a public bid to acquire
100% of BESA. On 6 February 2009, BESA shareholders approved a Scheme of
Arrangement in terms of which the JSE would acquire the entire share capital
of BESA. Purple Capital will dispose of its stake for R12,9 million,
realising a profit of R5,3 million.
The transaction is subject to certain conditions precedent, including
sanctioning by the Courts, and is expected to be concluded by 18 May 2009.
Proceeds from disposals will be used exclusively to repay borrowings.
Dividends from investments (excluding subsidiaries)
A dividend of R6,0 million was received from acsis in March 2009 and a
dividend of R1,7 million is expected from Spanjaard on 18 May 2009.
Appointment of Executive Director
Charles Savage, CEO of GTSA, has been invited to join the board of Purple
Capital with effect from 25 March 2009. We congratulate Charles on this
appointment and look forward to his input going forward.
Operating segments
The results by operating segments are as follows:
Fair
value
Purple adjust-
GTSA Treasury Capital ments Total
R`000 R`000 R`000 R`000 R`000
Revenue 45 048 6 290 6 481 (55 972) 1 847
Trading (2 783) - - - (2 783)
expenses
Operating (25 585) (3 139) (8 830) - (37 554)
expenses
Earnings 16 680 3 151 (2 349) (55 972) (38 490)
before
interest,
depreciation
and
amortisation
Net interest - - (14 256) - (14 256)
expense
Depreciation (3 239) - (10 549) - (13 788)
and
amortisation
Profit/(loss) 13 441 3 151 (27 154) (55 972) (66 534)
before tax
Current and (3 288) (882) 3 040 7 836 6 706
deferred tax
Minority - (835) - - (835)
Profit/(loss) 10 153 1 434 (24 114) (48 136) (60 663)
for the
period
Accounting policies
The interim results have been presented in terms of IAS34 - Interim
Financial Reporting, and the Companies Act of South Africa. The financial
results have been prepared in terms of International Financial Reporting
Standards ("IFRS"), the interpretations adopted by the International
Accounting Standards Board and the requirements of the Companies Act of
South Africa.
KPMG Inc., the company`s auditors, has reviewed the interim financial
statements contained in this 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 Mike Wilson
Chairman Financial Director
Johannesburg
26 March 2009
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,
Auditors Parktown 2193
KPMG Crescent (Private Bag 9, Parkview 2122)
85 Empire Road, Parktown 2193
(Private Bag 9, Parkview 2122)
Executive Directors:
Mark Barnes (Chairman), Craig Carter, Charles Savage, Mike Wilson
Non-executive Directors:
Dennis Alter (American), Thembeka Gwagwa, Ronnie Lubner (British), Shaun Rai
Date: 26/03/2009 16:38:02 Produced by the JSE SENS Department.
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