| Tue 9 Nov 2010, 7:05 | | PPE - Purple Capital Limited - Audited results for the year ended 31 August 2010 |
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PPE
PPE
PPE - Purple Capital Limited - Audited results for the year ended 31 August 2010
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 2010
CONDENSED CONSOLIDATED INCOME STATEMENT
Group Company
2010 2009 2010 2009
R`000 R`000 R`000 R`000
Revenue 59 746 96 978 8 573 21 696
Trading and operating expenses (62 057) (74 800) (15 525) (28 804)
Net (loss)/income (2 311) 22 178 (6 952) (7 108)
Fair value adjustments 488 (20 313) 488 (20 313)
Other income (286) (49 716) - (42 559)
Loss before interest, (2 109) (47 851) (6 464) (69 980)
depreciation and amortisation
Net interest expense (7 930) (22 391) (8 287) (25 075)
Depreciation and amortisation (49 694) (26 590) (112) (3 959)
Loss before tax (59 733) (96 832) (14 863) (99 014)
Current and deferred tax 9 225 8 423 (3 712) 6 458
Loss for the period (50 508) (88 409) (18 575) (92 556)
Loss attributable to:
Owners of the Company (50 508) (89 795) (18 575) (92 556)
Non-controlling interests - 1 386 - -
(50 508) (88 409) (18 575) (92 556)
Weighted number of shares in 712 652 652 076 714 502 652 076
issue at end of period (`000)
Basic loss per share (cents) (7,09) (13,77) (2,60) (14,19)
Diluted loss per share (cents) (7,09) (13,77) (2,60) (14,19)
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Loss for the period (50 508) (88 409) (18 575) (92 556)
Other comprehensive income 140 667 - -
Total comprehensive income (50 368) (87 742) (18 575) (92 556)
Loss attributable to:
Owners of the Company (50 368) (89 128) (18 575) (92 556)
Minorities - 1 386 - -
(50 368) (87 742) (18 575) (92 556)
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
Cash flow generated 6 743 19 319 (1 854) 8 022
by/(utilised in) operating
activities
Cash flow from investing 66 16 325 1 564 16 995
activities
Cash flow utilised in (2 369) (33 849) (2 369) (31 262)
financing activities
Net increase/(decrease) in 4 440 1 795 (2 659) (6 245)
cash and cash equivalents
Cash and cash equivalents at 29 047 27 252 3 153 9 398
the beginning of the period
Cash and cash equivalents at 33 487 29 047 494 3 153
the end of the period
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Group Company
2010 2009 2010 2009
R`000 R`000 R`000 R`000
ASSETS
Equipment 2 848 3 856 119 211
Goodwill 204 568 251 168 - -
Other intangible assets 4 874 5 085 - -
Investments, subsidiaries 39 819 45 583 297 548 303 322
and associates
Long-term receivables 4 503 4 418 3 478 3 332
Deferred tax asset 16 569 7 233 13 629 17 340
Total non-current assets 273 181 317 343 314 774 324 205
Trade and other receivables 2 716 3 394 1 235 1 633
Cash and cash equivalents 33 487 29 047 494 3 153
Total current assets 36 203 32 441 1 729 4 786
Total assets 309 384 349 784 316 503 328 991
EQUITY AND LIABILITIES
Share capital and premium 450 123 450 123 450 402 450 402
Accumulated loss (223 935) (173 428) (192 892) (174 316)
Other reserves 10 348 7 037 14 020 11 347
Total equity 236 536 283 732 271 530 287 433
Long-term liabilities 20 270 19 031 20 270 19 031
Deferred tax liability 540 1 258 - -
Total non-current 20 810 20 289 20 270 19 031
liabilities
Trade and other payables 52 038 45 763 24 703 22 527
Total current liabilities 52 038 45 763 24 703 22 527
Total equity and liabilities 309 384 349 784 316 503 328 991
Net asset value per ordinary 33,19 39,81 38,0 40,23
share (cents)
CONDENSED RECONCILIATION OF CAPITAL AND RESERVES
Balance at beginning of 283 732 257 042 287 433 263 058
period
Shares issued - 112 949 - 112 948
Loss for the period (50 508) (88 409) (18 575) (92 556)
Share-based payments 3 172 3 984 2 672 3 983
Revaluation reserve 10 300 - -
Foreign currency translation 130 452 - -
reserve
Distributions to minorities - (2 307) - -
Own shares purchased - (279) - -
236 536 283 732 271 530 287 433
HEADLINE EARNINGS PER SHARE
Loss for the period (50 508) (89 795) (18 575) (92 556)
Headline loss for the period (50 508) (89 795) (18 575) (92 556)
Headline loss per share (7,09) (13,77) (2,60) (14,19)
Diluted headline loss per (7,09) (13,77) (2,60) (14,19)
share
COMMENTARY
Chairman`s review
We will reflect on 2010 as the turnaround year for Purple Capital. Our business
mix is finally defined, we`ve all moved into one office and there is a sense of
common purpose amongst the 80 people who comprise the Purple Capital team.
The only significant non-operating investment (other than cash) is Real People,
which continues to do well having already established itself as one of that
industry`s success stories.
Essentially, the business is now comprised of two operating areas: trading and
advisory. Global Trader and Powerbet cover the retail market in our trading
focus whilst Corporate Finance and Treasury will service the institutional and
corporate client base. Together, these businesses create an economic model which
is a healthy balance between stability and growth.
Across our various client bases confidence has returned to Purple Capital and
the deals are flowing towards us again. I expect that a number of new
partnerships and alliances already underway will manifest in the coming year. I
remain convinced that the trend towards self-investing will continue and the
many new product initiatives within Global Trader will serve that well.
The Powerbet acquisition benefits already from the infrastructure of systems,
risk management and marketing within Global Trader. The acquisition of WIP
Treasury solutions provides new impetus and client reach to Corporate Finance.
All in all, I`m looking forward this year to just the right mixture of
consolidation and growth that we`ve all been waiting for, and worked so hard to
get back to. Purple Capital has never been this well positioned for a return to
prosperity.
Financial review
The Group recorded an attributable loss of R50,5 million (2009: R89,8 million)
for the 2010 financial year. The bulk of these losses were caused by the
accelerated amortisation of intangibles. The Purple Capital directors feel it is
an opportune time to accelerate the amortisation of intangibles in the balance
sheet now, rather than as scheduled over the next two years. This will have no
impact on the operations or cash flow of the Group.
As a result, shareholders` funds have decreased from R283,7 million in 2009 to
R236,6 million in 2010.
The Investec loans were repaid through obtaining additional funding from another
bank. Repayment of the loans meant early payment of fees on the loan which
contributed significantly to the interest costs for the year.
Purple Capital`s cash on hand increased from R29,1 million in 2009 to R33,5
million at the 2010 year-end.
Operational review
Operations
Global Trader
Global Trader is the South African leader in the provision of online financial
derivatives trading to retail investors. We provide these services directly
under our own brands and via a network of partners.
Over the past year, more than 3 200 clients executed in excess of 500 000 trades
in Contracts for Difference ("CFDs") or Spread Trades on a range of over 2 800
equity, equity index, commodity, forex, interest rate and binary contracts,
covering all major financial markets.
Our trading platforms provide clients with easy access to local and global
financial markets and the flexibility to trade in multiple asset classes.
Performance at a glance
Trading revenue for the period was down 26% to R54,5 million (2009: R73,5
million): the downturn in volumes was experienced broadly across the industry.
On the other hand funds on deposit, which is a key driver of future revenue
growth, increased by 63% to R106 million (2009: R65 million).
The client economics are certainly not what they were in 2009, however they are
once again improving and as they do trading revenue will improve markedly.
In 2010 further efficiencies were achieved in the operating costs which were
reduced by 16% to R41,3 million (2009: R49,1 million) as a result of
efficiencies which directly improve EBITDA margins on increased trading revenue.
Market and strategy update
In the retail market the closure, consolidation and rationalisation of competing
retail brokers and the withdrawal of a few of the bank offerings results in a
competitive landscape that is far less crowded going forward.
It is, however, encouraging to welcome international participants and mainstream
bank acceptability as the CFD industry in South Africa has finally won broad
based retail and institutional acceptance.
This year Global Trader overhauled and launched three new trading platforms,
Future Trader, EQ Trader and GT International, extending its platform choice to
cater from local retail investors through to sophisticated international traders
and providing access across more than 30 global exchanges, making us the No 1
South African derivatives broker in terms of product breadth. Our efforts were
well rewarded when Global Trader was ranked 6th overall in the inaugural
Business Day Investors Monthly Stockbrokers Awards, notably well ahead of some
of the market muscle and third overall in the best for active day trader
category.
Investor networking, or community driven social investing, is a new area where
we seek to differentiate, increase market share and deepen our client
relationships in 2011. The benefits to investors are meaningful, actionable
insights and platforms that allow investors to collaborate around investment
topics, trading decisions and portfolio performance metrics that enable you to
follow and learn from fellow traders, rank research posting, and opt into trade
flow on the back of proven investing methodologies.
The year ahead is set to be a ground breaking one for Global Trader, in the
recent acquisition of Powerbet and the partnership it brings with it,
www.Voltbet.com, the premier online sports betting platform in South Africa. We
are confident of synergies that will prove to be strategically significant.
Finally, Global Trader will launch itself into funds management this year, in a
typical Global Trader New World way. Having already secured and launched a
partnership with US based Validea we have established without doubt the best
retail fundamental analysis tool for JSE stocks on offer in SA,
www.validea.co.za. This provides coded fundamental trading strategies of gurus
like Buffett, Graham, Lynch and Greenblatt and then runs them against the JSE
for trade ideas that clients can follow, "Invest in the JSE stocks Buffett would
be buying". A natural extension of this is to a funds management platform that
brings with it choice in manager, strategy, risk approach and importantly cost
efficiencies and transparency that, in our view, will reset the benchmarks for
asset management in South Africa.
The past has served us up a good deal of lessons and forced us to reach further
in achieving more from our business, staff and partners but more than ever we
stand ready to deliver exceptional results into the future.
Corporate finance
The Company has staffed up its corporate finance advisory division in the last
six months in order to leverage off the current corporate finance expertise
already there. We have been actively pursuing advisory mandates over the last
few months and have already secured a number of these. This division is expected
to generate solid earnings in the next 12 months.
Investment holdings
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 continued to perform well during the current year, despite very tough
market conditions.
Disposals
Spanjaard
It was announced on 15 October 2009 that Purple Capital had reached agreement to
dispose of its entire shareholding in Spanjaard. This investment was profitable
(IRR of 21%) but it is not core to the future business of the Group. Mark Barnes
resigned from the board with effect from 14 October 2009.
Operating segments
The results by operating segment are as follows:
Purple Investment
GTSA Capital Holdings Total
R`000 R`000 R`000 R`000
Revenue 54 481 5 265 - 59 746
Operating expenses (41 287) (15 808) - (57 095)
Trading expenses (4 961) - - (4 961)
Net income/(loss) 8 233 (10 543) - (2 310)
Fair value adjustments - - 488 488
Other income (286) - - (286)
Profit/(loss) before 7 947 (10 543) 488 (2 108)
interest, depreciation and
amortisation
Net interest 357 (8 287) - (7 930)
income/(expense)
Depreciation and (2 982) (46 712) - (49 694)
amortisation
Profit/(loss) before tax 5 322 (65 542) 488 (59 732)
Current and deferred tax (111) 9 403 (68) 9 224
Minority - - - -
Profit/(loss) after tax 5 211 (56 139) 420 (50 508)
Subsequent events
The Company announced on 9 September 2010 the acquisition of 75% of the issued
share capital of WIP Treasury Solutions (Pty) Limited ("WTS") a FSB registered,
treasury specialist that provides comprehensive treasury management solutions,
with particular focus on foreign exchange, to a variety of corporate clients.
On 21 September 2010 Purple Capital announced that it had entered into an
agreement to acquire a significant majority stake in Powerbet Gaming (Pty)
Limited ("Powerbet") which operates the well known sports betting website
Voltbet.com. Powerbet does so under a bookmaker`s licence issued by the Western
Cape Gambling and Racing Board.
Annual general meeting
The annual general meeting of Purple Capital will be held at 3rd Floor, 10
Melrose Boulevard, Melrose Arch on Thursday, 9 December 2010 at 10h00.
Accounting policies
The condensed 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 extracted from the audited financial statements and
been prepared in accordance with International Financial Reporting Standards,
the AC 500 series as issued by SAICA, 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 2010 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 condensed report are available for inspection at the Company`s registered
office.
On behalf of the board
Mark Barnes Mike Wilson
Chairman Financial Director
Johannesburg
9 November 2010
Registered office Transfer secretaries
3rd Floor Link Market Services South Africa
10 Melrose Boulevard (Pty) Limited
Melrose Arch 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 Auditors 85 Empire Road, Parktown
KPMG Crescent (Private Bag 9, Parkview 2122)
85 Empire Road, Parktown
(Private Bag 9, Parkview 2122)
Executive Directors:
Mark Barnes (Chairman)
Charles Savage
Mike Wilson
Non-executive Directors:
Dennis Alter (American)
Craig Carter
Thembeka Gwagwa
Ronnie Lubner
Date: 09/11/2010 07:05:01 Produced by the JSE SENS Department.
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