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EFF
EFF
EFF - Efficient Financial Holdings Ltd - Audited consolidated annual financial
statements for the year ended 31 August 2010
EFFICIENT FINANCIAL HOLDINGS LTD
Incorporated in the Republic of South Africa
(Registration number: 2006/036947/06)
Share code: EFF
ISIN: ZAE000133286
("EFH" or "the company")
AUDITED CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 AUGUST
2010
HIGHLIGHTS
- Revenue increased by 8%.
- Assets under management: R 3 billion
- Profit for the year: R 4.7 million.
- Maiden dividend of R 2 million declared.
- Positive cash flow generated from operating activities: R 7 million.
1 COMMENTARY
Our strategy of developing a diversified financial services business gained
impetus with progress made in a number of key focus areas; the roll-out of
our national distribution footprint, the continued development of our asset
management business and the completion of a primary component of our
leading edge information technology solution for financial planners.
The South African economy emerged from the recession during the third
quarter of 2009.Indications are that investors have regained confidence
while an improved risk appetite for emerging markets is well entrenched.
Well-established asset management companies are likely to benefit from this
and Efficient is particularly well positioned to capitalise on these
trends.
Despite our optimism, risks of renewed financial uncertainty and a slowdown
in global economic performance remain. However, we are of the opinion that
the local business environment should continue to improve in the
foreseeable future.
Financial Results
Notwithstanding the improvement in the group`s profitability over the last
two quarters, the group reported HEPS of 11.40 cents for the year ended 31
August 2010 compared to HEPS of 12.82 cents in the comparative period.
A large portion of the groups` revenue is based on the value of assets
under management and administration.
Assets under management consist of investments in our unit trust funds,
unit trust funds of funds and private share portfolios managed by the asset
management division. The group has R 3 040 million (2009: R 2 916 million)
under management.
Assets under administration consist of unit trust funds and unit trust
funds of funds, administrated by the group`s collective investment schemes.
Administration of assets includes liability administration and asset
administration such as daily pricing of unit trust funds. The group
administrates assets to the value of R 1 468 million (2009: R 882
million). This includes three additional funds amounting to R 628 million,
which were amalgamated into the asset administration division near the end
of the financial year.
Revenue for the 12 months ended 31 August 2010, increased by 8% compared to
the same period of the previous financial year.
Both the JSE performance and assets under management affected the revenue
of the asset management division. A consequence of improved financial
market conditions in the period under review (12 months ending 31 August
2010) was the increase of performance fees of 34% compared to the same
period of the previous financial year.
When excluding the funds emanating from the amalgamation process - due to
the timing of the amalgamation close to the financial year-end - the assets
under administration decreased marginally. Consequently, revenue in this
division decreased. The benefits from the additional funds under
administration will only flow to the asset administration division in the
next financial year.
A comprehensive range of financial services is delivered through Efficient
Advise. The success of the roll-out of the financial services distribution
network and product expansion is evident in the increased revenue (38%) in
this division. The financial services division is a fundamental component
of the group`s strategy to improve distribution, diversification and
sustainability.
The groups fixed expenses increased by 14% over the comparative period. The
increase in the cost base reflects the group`s continued investment in
expanding distribution, marketing and the development of the investment
philosophy, process and people in the asset management division. The
increase in revenue was countered by the cost of this investment resulting
in profit after tax of R 4.7 million (2009: R4.9 million).
The group`s operations generated cash of R7 million with a decrease in
working capital of R0.4 million. Interest earned contributed another R1.6
million to the cash flow. The group investment activities included R0.3
million that was invested in new operating systems as part of the roll-out
of the financial services offering and R0.3 million for the acquisition of
the cash management book that was financed partially with cash.
Operational overview:
i) Asset Management
In line with our strategy, Efficient Select was created from the
amalgamation of the asset management businesses of Valugro Capital (Pty)
Ltd, Multigro Capital (Pty) Ltd and Efficient Group (Pty) Ltd.
The investment made in the previous financial year through the appointment
of specialist external investment consultants to assist with the
development of the investment process and, the creation of the various
investment committees to oversee investment performance as well as the hard
work of the investment team, has contributed to delivering improved
performance, for both clients and EFH.
Efficient Select`s international products continue to perform well, from
both a fund performance and profitability viewpoint.
Despite challenging and volatile financial markets, especially in the
second half of the financial year, Efficient Select delivered improved
investment performance to clients invested in our range of funds, funds of
funds and private client portfolios.
Distribution remained challenging with low fund inflows. This is being
addressed by a more focussed sales approach, ongoing training for sales
consultants and the marketing and branding program.
Contributions from the asset management division are dependent on fund
performance relative to fund benchmarks on a high watermark basis, and
assets under management. The improvement in fund performance was rewarded
with an increase in performance fees of 34%. The slight increase in assets
under management to R3 040 million (2009: R 2 916 million), resulted in
fixed asset management fees received remaining at the same levels as in the
previous financial year. Profitability was affected by the expansion of the
marketing capacity.
ii) Asset Administration
Efficient Transact houses the asset administration divisions of the group.
This includes the collective investment scheme business, Efficient
Collective Investments(ECI).
The amalgamation of the Valugro Funds enhanced our fund offering with the
Valugro Property Fund, the Valugro General Equity Fund and the Valugro
Active Allocation Fund.
At the end of the financial year ECI had R 1 468 million under
administration, 66% more than the previous year. The additional assets
under management emanated from the amalgamation of the Valugro unit trusts
in June 2010. Prior to the amalgamation, the value of assets administrated
by the collective investment scheme was less than that of the previous
year, explaining the lower revenue from asset administration. Tight expense
control ensured that the same level of after tax profitability of 14% was
achieved compared to the 2009 financial year.
iii) Financial Services
The focus of Efficient Advise over the last year was the establishment of
the new brand, the development of our product offering, development of
state of the art technological systems and the expansion of our geographic
representation.
The financial services division reported revenue growth of 38% compared to
the previous financial year. The increased activity is the result of the
successful implementation of our strategy to expand the distribution
network and improve the financial services product range. The investment
in this strategy was financed by utilising the increased revenue that
resulted in a lower profit before tax compared to the comparative period.
Iv ) Shared Services
Sharing services is the group`s organisational response to creating more
efficient service delivery, optimising cost structures and increasing
client focus. Efficient Access provides the shared services required for
the effective delivery of the group`s products and services in terms of
economic research and analysis, marketing, distribution, compliance,
financial support, human resources and information technology.
The shared services division`s investment in-group strategy, primarily to
increase the group`s marketing and distribution capacity, resulted in a 22%
increase in expenses.
Acquisition Activities
During the financial year ended 31 August 2010, the group acquired a cash
management book for a total purchase price of R0.7 million. The total
purchase price was settled with 50% cash and 50% by issuing EFH shares to
the vendors.
The business acquired contributed revenues of R 86 thousand and profit
after tax of R 62 thousand to the group from the date of acquisition to 31
August 2010. If the acquisition had occurred on 1 September 2009 the
contribution to the revenue would have been R 107 thousand and contribution
to profit after tax would have been R 77 thousand.
Strategy
In the new financial year the Group strategy will focus on the following
key areas:
- Diversifying revenue streams through our vertical integration strategy.
- Enhancing distribution through the development of the distribution network,
a focused sales approach and brand building.
- Commercialising the client administration system to create an additional
income stream.
Cash Dividend
The company`s dividend policy is to declare dividends biannually 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 cash reserves equal to three
months` operating expenses, capital expenditure and planned acquisitions.
Based on this policy, the directors calculated the company`s maiden
dividend at R2 million (5 cents per share). The dividend was approved by
the directors on 10 November 2010, and will be paid on 6 of December 2010.
The salient dates for this dividend payment are as follows:
Last day to trade `cum` dividend on Friday, 26 November 2010
Shares trade `ex` dividend on Monday, 29 November 2010
Record date on Friday, 3 December 2010
Payment of dividend on Monday, 6 December 2010
Shareholders may not dematerialise or rematerialise their shares between
Monday, 29 November 2010 and Friday, 3 December 2010.
Basis of preparation
The audited consolidated Annual Financial Statements have been presented on
a consolidated basis and have been prepared in accordance with the
International Financial Reporting Standards, the AC 500 Series of
Interpretations, the JSE Listing Requirements and the Companies Act of
South Africa. The accounting policies applied are consistent with those
applied in the previous reporting periods. The Consolidated Annual
Financial Statements have been audited by PKF (JHB) Inc. The 2010
unqualified audit report is available for inspection at the registered
office of the company.
The Condensed Audited Annual Financial Statements are prepared in
accordance with the JSE Listing Requirements with specific reference to IAS
34 "Interim Financial Reporting"
Events after reporting date
As part of the extension of the financial services distribution network
Efficient Financial Services (Pty) Ltd acquired 100% of the issued share
capital of Fisher Hoffmann Financial Planning Services PE (Pty) Ltd for a
total purchase price of R2.4 million with effect from 1 September 2010. An
amount of R1.2 million of the purchase price was settled in cash and the
balance of the purchase price was settled by issuing Efficient Financial
Holdings Ltd shares to the vendors. At 31 August 2010 the effective date
statement of financial position has not been completed and therefore the
fair value of the assets and liabilities assumed is not finalised.
Had the acquisition occurred on 1 September 2009 it would have contributed
one cent to the group`s HEPS.
Changes to the board of directors
The following board changes took place during the year under review. Mr
Matsobane Khwinana resigned as a non-executive director of EFH and was
replaced by Ms Zee Cele as an independent, non-executive director. Mr
Rapulane Mogototoane was appointed as an alternate director and Ms Linda
Whitfield resigned as non-executive director, and accepted the appointment
as an alternate director.
2 CONDENSED AUDITED CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31
AUGUST 2010
2010 2009
R`000 R`000
Assets
Non - Current Assets
Plant and equipment 1,409 1,631
Goodwill 20,259 20,259
Intangible assets 23,947 26,357
Investments 1,020 -
Equity accounted investments 10,919 9,880
Deferred tax 2,032 1,936
59,586 60,063
Current Assets
Trade and other receivables 5,835 4,535
Cash and cash equivalents 24,363 18,762
Tax receivable 171 962
30,369 24,259
Total Assets 89,955 84,322
Equity and Liabilities
Equity
Ordinary shares and share premium 54,189 53,839
Treasury Shares
(7,200) (7,200)
Non-controlling interest 672 81
Accumulated income 30,699 26,269
Fair value adjustment 19 -
Total equity 78,379 72,989
Non - Current Liabilities
Deferred tax 6,619 7,365
6,619 7,365
Current Liabilities
Trade and other payables 4,868 3,968
Tax payable 89 -
4,957 3,968
Total Liabilities 11,576 11,333
Total Equity and Liabilities 89,955 84,322
Net asset value per share (cents) 195.76 194.90
Net tangible asset value per share (cents) 84.40 70.28
3 CONDENSED AUDITED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE
YEAR ENDED 31 AUGUST 2010
Group
2010 2009
R`000 R`000
Continuing operations
Revenue 43,981 40,836
Asset management fees
- Performance fees 13,180 9,820
- Fixed fees 13,064 12,886
Asset administration fee 10,634 12,745
Financial services fees 6,686 4,861
Research and administration fees 417 524
Operating expenses (40,771 (37,496
) )
- Variable expenses (6,899) (7,718)
- Fixed expenses (33,872 (29,778
) )
Operating profit 3,210 3,340
Finance income 1,622 2,283
Finance cost - (43)
Other income - 53
Share of comprehensive income of associates 1,039 947
Profit before taxation 5,871 6,580
Taxation (1,145) (1,714)
Profit for the year 4,726 4,866
Other comprehensive income:
Fair value adjustment of available-for-sale financial 20 -
assets
Total comprehensive income for the year 4,746 4,866
Profit for the year attributable to:
Equity holders of the parent 4,530 4,785
Non - controlling interest 196 81
4,726 4,866
Total comprehensive income for the year attributable
to:
Equity holders of the parent 4,549 4,785
Non - controlling interest 197 81
4,746 4,866
Earnings per share (cents) 11.41 12.79
Headline earnings per share (cents) 11.40 12.82
Headline earnings are calculated as follows
Attributable earnings 4,530 4,785
Add: (Disposal)/Scrapping of PPE (6) 13
Less: Taxation on disposal/(scrapping) of PPE 2 (4)
Headline earnings 4,526 4,794
Number of ordinary shares in issue at the end of the 39,706 39,641
year
Weighted average number of ordinary shares in issue 39,695 37,408
4 CONDENSED AUDITED CONSOLIDATED STATEMENT OF CHANGE IN EQUITY FOR THE YEAR
ENDED 31 AUGUST 2010
Group Share Treasur Share Non- Accumul Fair Total
Capital y base control ated value
& Share payment ling adjustm
ent for
availab
le -
for-
sale -
assets
reserve
Premium Shares Reserve Interes Income Equity
t
R`000 R`000 R`000 R`000 R`000 R`000 R`000
Balance at 37,880 (7,200) 1,477 36 21,538 - 53,731
31 August
2008
Issue of 14,622 - - - - - 14,622
Share
Capital
Repurchase - - - - (62) -
of shares (62)
Amortisatio - - (140) - - - (140)
n of Share
Based
Payments
Transfer of 1,337 - - - - -
Share based (1,337)
payment
reserve
Pre - - - - 8 - 8
acquisition
reserves
acquired
Total - - - 81 4,785 - 4,866
Comprehensi
ve income
for the
year
Dividends - - - (36) - - (36)
paid
Balance at 53,839 (7,200) - 81 26,269 - 72,989
31 August
2009
Issue of 350 - - - - - 350
Share
Capital
Increase in - - - 294 - - 294
share
premium of
subsidiary
Change in - - - 100 (100) - -
ownership
Total - - - 197 4,530 19 4,746
Comprehensi
ve income
for the
year
Balance at 54,189 - 672 30,699 19 78,379
31 August (7,200)
2010
5 CONDENSED AUDITED CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED
31 AUGUST 2010
2010 2009
R`000 R`000
Cash flows from operating activities
Cash generated from operations 6,986 7,858
Finance income 1,622 2,283
Interest paid - (43)
Dividends received from associates - 118
Dividends paid - (36)
Taxation paid (1,304) (11,476)
Net cash inflow/(outflow) from operating activities 7,304 (1,296)
Cash flows from investing activities
Acquisition of subsidiaries - (57)
Acquisition of associates - (8,944)
Acquisition of intangible asset (350) -
Acquisition of available-for-sale financial asset (1,000) -
Purchase of equipment (647) (370)
(1,997) (9,371)
Cash flows from financing activities
Issuing of share capital - 14,622
Increase in share premium of non-controlling interest 294 -
Repurchase of shares - (62)
Decrease in interest free liabilities - (129)
294 14,431
Total cash and cash equivalents movement for the year 5,601 3,764
Total cash and cash equivalents at the beginning of 18,762 14,998
year
Total cash and cash equivalents at the end of year 24,363 18,762
6 SEGMENTAL ANALYSIS FOR THE YEAR ENDED 31 AUGUST 2010
Segmental analysis for the year ended 31 August 2010
2010
Asset Asset Financial Other Total
Management Administra Services
tion
Revenue 27,333 11,011 6,698 (1,061) 43,981
- External 25,930 11,011 6,698 342 43,981
- Inter - 1,403 - - (1,403) -
segment
Expenses 24,196 9,227 5,256 2,092 40,771
Total 2,592 1,569 2,170 (1,605) 4,726
Comprehensive
Income
Assets 43,015 7,037 2,968 36,935 89,955
Liabilities 28,604 3,924 1,193 (22,145 ) 11,576
Acquisition 45 3 400 199 647
of PPE
Depreciation 1,290 16 116 2,748 4,170
and
amortisation
Aggregated - - 1,039 -
share of 1,039
profit from
associates
2009
Asset Asset Financial Other Total
Management Administra Services
tion
Revenue 23,605 12,834 4,861 (464) 40,836
- External 23,141 12,834 4,861 - 40,836
- Inter - 464 - - (464) -
segment
Expenses 19,430 10,964 2,763 4,339 37,496
Total 3,586 1,619 2,992 (3,331) 4,866
Comprehensive
Income
Assets 5,865
2,723 1,530 74,204 84,322
Liabilities (19,240)
1,198 1,050 28,325 11,333
Acquisition
of PPE 217 8 6 139 370
Depreciation, 447 22 57 3,986 4,512
amortisation
and share
based
payments
Aggregated -
share of - 947 - 947
profit from
associates
7 NOTICE OF ANNUAL GENERAL MEETING
Shareholders are advised that the EFH annual report will be dispatched on
26 November 2010 and will contain notice of the Annual General Meeting for
the company which will be held in the Efficient Financial Holdings
Boardroom at 81 Dely Road, Hazelwood, Pretoria on Friday, 21 January 2011
at 10h00.
8 CORPORATE INFORMATION
Non-executive directors
Dr S Booysen (Chairman)*, E Hern*, MJ Giles*, L Gadd,
R Paterson, Z Cele*.
*Independent
Alternate
L Whitfield, R Mogototoane
Executive Directors
DD Roodt, H Weidhase, AT de Klerk
Registered and Business address
81 Dely Road, Hazelwood, 0181
Company Secretary
Ithemba Governance and Statutory Solutions (Pty) Limited
Corporate advisor, legal advisor and sponsor
Java Capital (Proprietary) Limited
Reporting accountants and auditors
PKF (JHB) Inc.
Transfer secretaries
Link Market Services South Africa
11 November 2010
Sponsor
Java Capital
Date: 11/11/2010 16:59:01 Produced by the JSE SENS Department.
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