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EFF
EFF
EFF - Efficient Financial Holdings Unaudited interim financial results for
the six months ended 28 February 2010
Efficient Financial Holdings Limited
Incorporated in the Republic of South Africa
(Registration number 2006/036947/06)
Share code: EFF ISIN: ZAE000133286
("EFH" or "the Group")
UNAUDITED INTERIM FINANCIAL RESULTS FOR THE SIX MONTHS ENDED 28 FEBRUARY 2010
HIGHLIGHTS
- Assets Under Management: R3 billion
- Total comprehensive income attributable to equity holders of the parent:
R1.2
million
- Positive cash flow generated from operating activities: R2.5 million
The continued improvement in the performance of the JSE in recent months has
impacted positively on EFH`s results. Although HEPS for the six months ended
28 February 2010 ("the reporting period") is lower than that of the six
months ended 28 February 2009 ("the comparative period"), it is 1.88 cents
per share higher than the HEPS achieved for the six months ended 31 August
2009.
1. Financial Results
For the comparative period, revenue decreased from R24.3 million to R19.8
million, mainly due to a decline in both performance fees and fixed fees from
asset administration services. Revenue is largely linked to the performance
of equity markets. Fixed fee income generated by Asset Management was 5%
higher than that of the comparative period. Financial Services revenue
increased with 35%.
Fixed expenses increased by 12% from the comparative period. The increase in
the cost base is in line with the Group`s strategy to increase its marketing
and distribution capacity and the roll-out of the Financial Services
offering.
The Group reported an after tax profit of R1.2 million and generated net cash
flow from operating activities of R2.5 million. The Group maintains a cash
reserve of at least three months` operating expenses. The Group has no long-
term debt.
2. Business Segmental Results
The Group constitutes three divisions namely Asset Management, Asset
Administration and Financial Services.
Asset Management:
Asset Management consists of the following subsidiaries: Efficient Group,
Efficient International Investments, Multigro Capital and Valugro.
The focus of the Asset Management division is to deliver returns in line with
investment objectives whilst complying with investable benchmarks through the
management of Unit Trust Funds, Unit Trust Funds of Funds and Private Share
portfolios, both local and international.
The revenue of this division is largely linked to the JSE performance and the
amount of assets under management. Some of the positive effects of improved
financial market conditions in recent months will only reflect within the
next six to twelve months as a result of the "rolling period" and "high
watermark" nature of the performance fee calculations of a number of the
Group`s Unit Trust funds. Although Efficient Group`s revenue declined as a
result of the lower performance fees, the Unit Trust products have
considerable earnings potential.
In response to volatile equity markets and the need of many investors for
manager diversification, EFH launched a new portfolio management product
called Naviga. This product was well received by the market and is expected
to contribute positively to Efficient Group`s earnings going forward.
An excellent performance was seen from Efficient International Investment,
which increased its profit from the comparative period. Multigro Capital saw
an increase in revenue of 9% with profits at the same level as the
comparative six-month period. Valugro`s revenue which consists of fixed and
performance fees, decreased as performance fees declined and assets under
management decreased.
At the end of the reporting period EFH had approximately R3 billion of assets
under management.
Asset Administration:
Efficient Collective Investments is responsible for the administration of
approximately one-third of the Unit Trusts under the Group`s management.
Administration of assets includes liability administration and asset
administration such as daily pricing of Unit Trust funds. Assets under
Administration decreased, resulting in lower profits.
Efficient Collective Investments had approximately R900 million of assets
under administration as at 28 February 2010.
Financial Services:
A comprehensive range of financial services is delivered through Efficient
Financial Services trading as Efficient Advise. The financial services were
previously offered through Efficient Financial Services and FH Financial
Service (EB). The two companies were merged during the period under review to
form Efficient Financial Services trading as Efficient Advise. Financial
Services include financial planning, investment advice and risk cover. A full
range of employee benefits is offered and the current product offering has
recently been extended to include short-term insurance, medical insurance,
cash management, stockbroking, asset finance and fiduciary services. The
development of a market-leading Financial Needs Analysis and Client
Relationship Management System has also been completed. The strategy to
establish a national footprint and increase the distribution network of the
Financial Services division, resulted in increased fixed expenses.
3. Acquisition Activities
During the reporting period, EFH acquired a cash management book for a total
purchase price of R700 000. 50% of the purchase price was settled in cash and
the balance of the purchase price was settled by issuing EFH shares to the
vendors.
4. Strategy
The Group`s strategy will be focused on the following key areas:
- the further roll-out of Financial Services through the development of the
relationships with professional service providers;
- continuous product innovation;
- enhancing our information technology integration and capabilities;
- consolidating the Asset Management division;
- increasing the marketing and distribution capabilities across all areas;
and
- diversifying our income base to improve earnings stability.
5. Dividends
The Group`s dividend policy is to declare dividends bi-annually at the
discretion of the board of directors, determined by the financial position of
the Group and equal to 80% of the free cash flow of the Group. Free cash flow
is calculated after making provision for a cash reserve equal to three
months` operating expenses, capital expenditure and budgeted acquisitions.
Listing proceeds are excluded from free cash flow in this period. The
directors continue to follow a prudent approach by not declaring a dividend
based on company performance over the reporting period.
6. Basis of Preparation
The interim results have been presented on a consolidated basis and have been
prepared in accordance with the International Financial Reporting Standards,
the requirements of IAS 34 (Interim Financial Reporting), the JSE Listings
Requirements, and the Companies Act of South Africa. The accounting policies
applied are consistent with those applied in the previous interim period and
previous financial year-end. No material events occurred after the interim
period, which require an adjustment to the financial information. These
interim results have not been audited or reviewed by the Group`s auditors,
PKF (Jhb) Inc.
7. Change to the Board of Directors
At the time of the listing of EFH on the JSE in April 2009, Mr Khwinana was
nominated to the board of EFH by Thebe Investment Corporation (Proprietary)
Limited, a major shareholder of EFH. Mr Khwinana has resigned from the
employment of Thebe Investment Corporation (Proprietary) Limited, resulting
in his resignation from the board of EFH. Mr Khwinana will be replaced by an
independent non-executive director in due course.
Mrs L. Whitfield will act as alternate director to Mr R. Paterson and Mr R.S.
Mogototoane, the legal officer at Thebe Investment Corporation, was appointed
as alternate director to Mrs L.N. Gadd.
_____________ ______________
Steve Booysen Heiko Weidhase
Chairman Managing Director
31 March 2010
Non-Executive Directors:
S Booysen*, EA Hern*, MJ Giles*, LN Gadd, M Cassim and R Paterson
*Independent
Alternate Non-Executive Directors:
L Whitfield and RS Mogototoane
Executive Directors:
DD Roodt, H Weidhase and AT de Klerk
Registration Number:
2006/036947/06
Registered Address:
81 Dely Road, Hazelwood, 0181
Business Address:
81 Dely Road, Hazelwood, Pretoria, 0181
Company Secretary:
iThemba Governance and Statutory Solutions (Pty) Ltd
Transfer Secretaries:
Link Market Services South Africa (Pty) Ltd
Sponsor:
Java Capital (Pty) Ltd
CONDENSED CONSOLIDATED Unaudited Unaudit %Chan Audited
STATEMENTS OF COMPREHENSIVE Six ed Six ge Year
INCOME Months Months ended
ended 28- ended 31-Aug-
Feb-10 28-Feb- 09
R`000 09 R`000
R`000
Revenue 19,819 24,290 (18%) 40,836
Asset Management fees
- Fixed fees 6,590 6,285 5% 12,886
- Performance fees 5,174 7,734 (33%) 9,820
Asset Administration fees 4,573 7,559 (40%) 12,745
Financial Services fees 3,378 2,503 35% 4,861
Other 104 209 (50%) 524
Operating expenses (20,108) (19,710 (2%) (37,496
) )
- Variable expenses (3,490) (4,201) 17% (7,718)
- Fixed expenses (14,586) (12,938 (13%) (25,404
) )
- Non-cash flow expenses (2,032) (2,571) 21% (4,374)
Operating (loss)/profit (289) 4,580 (106% 3,340
)
Interest received 778 1,174 (34%) 2,283
Other income - - - 53
Interest paid - - (43)
Income from associates 742 188 295% 947
Profit before taxation 1,231 5,942 (79%) 6,580
Taxation (71) (1,714)
(1,651)
Total comprehensive income 1,160 4,291 (73%) 4,866
for the period
Attributable to:
Equity holders of the parent 1,176 4,232 4,785
Minority interest (16) 59 81
1,160 4,291 4,866
Number of shares in issue 39,706 36,135 39,641
Weighted average number of 39,684 36,135 37,408
shares
Earnings per share (cents) 2.96 11.71 (75%) 12.79
Headline earnings per share 2.96 11.71 (75%) 12.82
(cents)
Reconciliation of earnings to
headline earnings
Total comprehensive income 1,176 4,232 4,785
for the period attributable
to equity holders of the
parent
Scrapping of PPE - - 13
Less: Taxation on scrapping - - (4)
of PPE
Headline earnings 1,176 4,232 4,794
CONDENSED CONSOLIDATED Unaudited Unaudited Audited
STATEMENTS OF FINANCIAL as at as at as at
POSITION 28-Feb-10 28-Feb-09 31-Aug-
R`000 R`000 09
R`000
Non-current assets
Property, plant and equipment 1,407 1,953 1,631
Investment in associates 10,620 9,348 9,880
Other intangible assets 25,444 27,986 26,357
Goodwill 20,259 20,259 20,259
Deferred taxation asset 2,633 1,778 1,936
60,363 61,324 60,063
Current assets
Trade and other receivables 4,885 5,166 4,535
Cash and cash equivalents 20,767 4,780 18,762
Taxation receivable - - 962
25,652 9,946 24,259
Total assets 86,015 71,270 84,322
Equity
Capital and reserves 74,792 58,530 72,989
Share capital and share 54,189 37,880 53,839
premium
Treasury shares (7,200) (7,200)
(7,200)
Share-based payment reserve - 1,984 -
Minority interest 195 96 81
Retained earnings 27,608 25,770 26,269
Non-current liability
Deferred taxation liability 6,914 7,835 7,365
Current liabilities 4,309 4,905 3,968
Trade and other payables 4,187 4,219 3,968
Taxation payable 122 686 -
Total equity and liabilities 86,015 71,270 84,322
Net asset value per share 187.98 161.71 194.90
(cents)
Net tangible asset value per 72.81 28.20 70.28
share (cents)
CONDENSED Shar Treas Share- Minori Retai
CONSOLIDATED e ury based ty ned Total
STATEMENTS OF capi share paymen intere earni equit
CHANGES IN tal s t st ngs y
EQUITY & reserv
shar e
e
prem
ium
R`00
0
Balance at 31 37,8 (7,20 1,477 37
August 2008 80 0) 21,53 53,73
8 2
Amortisation of - - 507 - - 507
share-based
payments
Total - - - 59
comprehensive 4,232 4,291
income for the
period
Balance at 28 37,8 (7,20 1,984 96
February 2009 80 0) 25,77 58,53
0 0
Issue of share 14,6 - - - -
capital 22 14,62
2
Repurchase of - - - - (62) (62)
shares
Amortisation of - - (647) - -
share-based (647)
payments
Transfer of 1,33 - (1,337 - - -
share-based 7 )
payment reserve
Pre-acquisition - - - - 8 8
reserves
acquired
Total - - - 21 553 574
comprehensive
income for the
period
Dividends paid - - - (36) (36)
Balance at 31 53,8 (7,20 - 81
August 2009 39 0) 26,26 72,98
9 9
Issue of share 350 - - - - 350
capital
Change in - - - 130 163 293
ownership
Total - - - (16)
comprehensive 1,176 1,160
income for the
period
Balance at 28 54,1 (7,20 - 195
February 2010 89 0) 27,60 74,79
8 2
CONDENSED CONSOLIDATED STATEMENTS Unaudite Unaudit Audit
OF CASH FLOWS d Six ed Six ed
Months Months Year
ended ended ended
28-Feb- 28-Feb- 31-
10 09 Aug-
R`000 R`000 09
R`000
Cash generated from operations 1,905 6,861 7,858
Finance income received 778 1,174 2,283
Interest paid - - (43)
Dividends received from associates - 69 118
Dividends paid - - (36)
Tax paid (135) (8,975) (11,4
76)
Net cash flow from operating 2,548 (871) (1,29
activities 6)
Acquisition of - (9,124) (9,00
subsidiaries/associates 1)
Acquisition of intangible asset (350) - -
Purchase of equipment (193) (223)
(370)
Net cash from investing activities (543) (9,347) (9,37
1)
Net cash flow from financing - - 14,43
activities 1
Movement in cash and cash 2,005 (10,218 3,764
equivalents for the period )
Cash and cash equivalents at the 18,762 14,998 14,99
beginning of the period 8
Cash and cash equivalents at the 20,767 4,780 18,76
end of the period 2
Segmental Revenue Profit before Net asset value
analysis tax
R`000 28 Feb- 28 Feb- 28 Feb- 28 Feb- 28 Feb- 28 Feb-
10 09 10 09 10 09
Asset 11,992 14,245 841 3,818
Management 25,776 23,567
- External 11,764 14,019 - - - -
- Inter- 228 226 - - - -
segment
Asset 4,573 7,559 82 1,706 1,584 1,913
Administration
Financial 3,378 2,503 1,726 1,682 953 3,795
Services
Unallocated (124) (17) (1,417 (1,264 46,479 29,255
corporate ) )
revenue/expens
es/ net assets
19,819 24,290 1,231 5,942 74,792 58,530
Date: 26/03/2010 07:05:04 Produced by the JSE SENS Department.
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