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EFG
EFG
EFG - Efficient Group Limited - Unaudited interim financial results for the six
months ended 28 February 2011
EFFICIENT GROUP LIMITED
(Formerly Efficient Financial Holdings Limited)
Incorporated in the Republic of South Africa
(Registration nr: 2006/036947/06)
Share code: EFG
ISIN: ZAE 000151841
("EFG" or "the Group")
UNAUDITED INTERIM FINANCIAL RESULTS FOR THE SIX MONTHS ENDED 28 FEBRUARY 2011
HIGHLIGHTS
HEPS growth:130%
Revenue growth:32%
Assets Under Management: R3.4 billion
Profit for the period growth:135%
During the six months ended 28 February 2011 ("the reporting period") an 18%
improvement of the JSE All Share Index (ALSI); improvements in fund management
results; advances in sales activity and higher revenue in the financial services
business impacted positively on the Group`s performance. Performance fees
increased by 54% and fixed fees (including fees generated by asset
administration) by 39% compared to the six months ended 28 February 2010
("comparative period").
Financial Results
The Group reported revenue growth of 32% for the period under review. The
increased revenue emanated from good fund performance that converted into
performance fees and higher fixed fees. The 23% increase in financial services
revenue is a result of the successful roll out of our distribution network.
The 15% increase in the fixed cost base reflects the Group`s strategy to
increase its marketing and distribution capacity and the expansion of the
financial services offering. The non-cash flow expense consisted mainly of the
amortisation of intangible assets that resulted from business combinations. The
increase in this expense is related to the acquisition activities.
The operating profit of the Group, for the reporting period, was enhanced by
interest received at the same level as in the comparative period. Income
generated by associates decreased by 127%. The Group reported a profit after tax
(including STC on the dividend paid) of R2.7 million.
1. Business Segmental Results
The Group consist of three divisions namely asset management, asset
administration and financial services.
Asset Management:
The focus of the asset management division, Efficient Select, is to deliver
returns in line with investment objectives whilst complying with investable
benchmarks. The assets are managed through unit trust funds, unit trust funds
of funds (both local and international) and private client portfolios.
The contribution from the asset management division is dependent on the amount
of assets under management, fund performance relative to fund benchmarks and
where applicable, a high watermark.
Product performance varied relative to their respective benchmarks and
objectives, with approximately 60% of funds, funds of funds and private client
portfolios outperforming their benchmarks. Outperformance of product benchmarks
is directly related to fees earned and more specifically performance fees. The
outperformance of the product benchmarks resulted in performance fees earned
where the high watermark was exceeded and in other products, resulted in a
reduction in the high watermark deficit.
As a result of improved financial markets the group`s assets under management
increased by R288 million. The net fund inflow from our distribution network
contributed another R85 million to the Group`s assets under management.
The higher performance fees, countered by a 9.9% increase in fixed expenses,
enhanced the results of Efficient Select and resulted in a rise of profit before
tax.
At the end of the reporting period Efficient Select had approximately R3.4
billion of assets under management.
Asset Administration:
Efficient Collective Investments (ECI) is responsible for the administration of
approximately half of the unit trusts under the Group`s management.
Administration of assets includes liability administration and asset
administration,for example the daily pricing of unit trust funds.
The assets under administration at ECI increased due to the transfer of three
additional portfolios. The profits remained at similar levels to the comparative
period due to the increased fees paid to Efficient Select, the asset manager.
Efficient Collective Investments had approximately R1.6 billion of assets under
administration at 28 February 2011.
Financial Services:
A comprehensive range of financial services is delivered through Efficient
Financial Services trading as Efficient Advise. Financial services includes
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, stock
broking, asset finance and fiduciary services.
Efficient Adviseis focused on establishing a distribution network through-out
the country. A number of Independent Financial Advisers were recruited during
the period and three branches were opened in Port Elizabeth, Bloemfontein and in
the West Rand. Efficient Advise acquired the Port Elizabeth branch while the
other two branches were established as greenfield operations.
A significant part of the investment in establishing the distribution
network,represented by an increase in expenses, was recovered by higher
revenue.
Part of the financial services offering is stockbroking through an associate.
This associate reported a loss for the reporting period contributing to the loss
in this division.
Efficient Advise is expected to report profits in the following financial year.
2. Acquisition Activities
As part of the extension of the financial services distribution network
Efficient Financial Services (Pty) Ltd, with effect from 1 September 2010,
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.Of the purchase
price R1.2 million was settled in cash and the balance by issuing Efficient
Group Ltd shares.The purchase price allocation has not yet been completed.
3. Strategy
The Group`s strategy is focused on:
- Diversifying revenue streams through vertical integration;
- 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.
CONDENSED CONSOLIDATED Unaudited Unaudited Audited
STATEMENTS OF COMPREHENSIVE INCOME Six Six Year
Months Months
ended ended % ended
28-Feb-11 28-Feb-10 Change 31-Aug-10
R`000 R`000 R`000
Revenue 26 092 19 819 32% 43 981
Asset Management fees
- Fixed fees 9 544 6 590 45% 13 064
- Performance fees 7 991 5 174 54% 13 181
Asset Administration fees 4 184 4 573 -9% 10 634
Financial Services fees 4 167 3 378 23% 6 686
Other 206 104 98% 416
Operating expenses (22 412) (20 108) 11% (40 771)
- Variable expenses (3 483) (3 490) 0% (6 899)
- Fixed expenses (16 790) (14 586) 15% (29 700)
- Non-cash flow expenses (2 139) (2 032) 5% (4 172)
(Depreciation and amortisation)
Operating (loss)/profit 3 680 (289) 1373% 3 210
Interest received 791 778 2% 1 622
Interest paid (98) - -
Share of comprehensive (loss) / (203) 742 127% 1 039
income from associates
Profit before taxation 4 170 1 231 239% 5 871
Taxation (1 439) (71) (1 145)
Profit for the period 2 731 1 160 135% 4 726
Other comprehensive income:
Fair value adjustment of available- 49 - 20
for-sale financial assets
Total comprehensive income for the 2 780 1 160 140% 4 746
period
Profit for the year attributable
to:
Equity holders of the parent 2 717 1 176 4 530
Non-controlling interest 14 (16) 196
2 731 1 160 4 726
Total Comprehensive income for the
year attributable to:
Equity holders of the parent 2 764 1176 4549
Non-controlling interest 16 (16) 197
2 780 1 160 4 746
Number of shares in issue (`000) 39 939 39 706 39 706
Weighted average number of shares 39 939 39 684 39 695
(`000)
Earnings per share (cents) 6.80 2.96 130% 11.41
Headline earnings per share (cents) 6.80 2.96 130% 11.40
Dividend per share (cents) 5.00 - -
Reconciliation of earnings to
headline earnings
Profit for the period attributable 2 717 1 176 4 530
to equity holders of the parent
Disposal of PPE - - (6)
Less: Taxation on disposal of PPE - - 2
Headline earnings 2 717 1 176 4 526
CONDENSED CONSOLIDATED
STATEMENTS OF FINANCIAL POSITION
Non-current assets
Property, plant and equipment 1 507 1 407 1 409
Investments 3 063 - 1 020
Investment in associates 10 716 10 620 10 919
Intangible assets 25 302 25 444 23 947
Goodwill 20 259 20 259 20 259
Deferred taxation asset 985 2 633 2 032
61 832 60 363 59 586
Current assets
Trade and other receivables 8 391 4 885 5 835
Cash and cash equivalents 22 639 20 767 24 363
Taxation receivable - - 171
31 030 25 652 30 369
Total assets 92 862 86 015 89 955
Equity
Capital and reserves 80 211 74 792 78 379
Share capital and share premium 55 458 54 189 54 189
Treasury shares (7 200) (7 200) (7 200)
Fair value adjustment for available- 66 - 19
for-sale assets
Non-controlling interest 565 195 672
Accumulated income 31 322 27 608 30 699
Non-current liability
Deferred taxation liability 6 796 6 914 6 619
Current liabilities 5 855 4 309 4 957
Trade and other payables 5 567 4 187 4 868
Taxation payable 288 122 89
Total equity and liabilities 92 862 86 015 89 955
Net asset value per share (cents) 199.42 187.98 195.76
Net tangible asset value per share 85.34 72.81 84.40
(cents)
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
R`000 Share Treasury Fair value Non- Accumulated Total
capital shares adjustment controlling income equity
for interest
available-
for-sale
assets
Balance at 53 839 (7 200) - 81 26 269 72 989
31 August
2009
Issue of 350 - - - -
share 350
capital
Change in - - - 130 163
ownership 293
Total - - - (16) 1 176 1 160
comprehen-
sive income
for the
period
Balance at 54 189 (7 200) - 195 27 608 74 792
28 February
2009
Increase in - - - 294 -
share 294
premium of
subsidiary
Change in - - - (30) (263)
ownership (293)
Total - - 19 213 3 354 3 586
comprehen-
sive income
for the
period
Balance at 54 189 (7 200) 19 672 30 699 78 379
31 August
2010
Issue of 1 269 - - - - 1 269
share
capital
Total - - 47 16 2 717 2 780
comprehen-
sive income
for the
period
Dividend - - - (123) (2 094) (2 217)
paid
Balance at 55 458 (7 200) 66 565 31 322 80 211
28 February
2011
CONDENSED CONSOLIDATED STATEMENTS OF CASH Unaudited Unaudited Audited
FLOWS
Six Six Months Year
Months
ended ended Ended
28-Feb-11 28-Feb-10 31-Aug-10
R`000 R`000 R`000
Cash generated from operations 3 962 1 905 6 986
Finance income received 791 778 1 622
Interest paid (98) -
Dividends received from associates - -
Dividends paid (2 217) -
Tax paid (525) (135) (1 304)
Net cash flow from operating activities 1 913 2 548 7 304
Acquisition of available-for-sale (1 994) - (1 000)
financial asset
Acquisition of intangible asset (1 205) (350) (350)
Purchase of equipment (438) (193) (647)
Net cash outflow from investing activities (3 637) (543) (1 997)
Net cash flow from financing activities - - 294
Movement in cash and cash equivalents for (1 724) 2 005 5 601
the period
Cash and cash equivalents at the beginning 24 363 18 762 18 762
of the period
Cash and Cash equivalents at the end of 22 639 20 767 24 363
the period
- - -
SEGMENTAL ANALYSIS
R`000 Revenue Profit Net
before asset
tax value
Feb-11 Feb-10 Feb-11 Feb-10 Feb-11 Feb-10
Asset Management 17 535 11 992 4 809 841 20 017 25 776
- External 13 702 11 764 - - - -
- Inter-segment 3 833 - - - -
228
Asset Administration 4 184 4 573 11 81 910 1 584
Financial Services 4 167 3 378 (311) 1 726 1 594 953
Unallocated corporate 206 (124) (339) (1 417) 57 690 46 479
revenue/expenses/ net
assets
26 092 19 819 4 170 1 231 80 211 74 792
- - - - - -
Cash 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.
Based on this policy, the directors calculated the interim dividend of R1.138
million (2.85 cents per share). The interim dividend for the six months ended
28 February 2011 was approved by the directors on 15 March 2011, and will be
paid on Monday, 11 April 2011.
The salient dates for this dividend payment
are as follows:
2011
Last day to trade `cum` dividend Friday, 1 April
Share trade `ex` dividend on Monday, 4 April
Record date on Friday, 8 April
Payment of dividend on Monday, 11 April
Shareholders may not dematerialise or rematerialise their shares between
Monday, 4 April 2011 and Friday, 8 April 2011.
Basis of preparation
The interim results are presented on a consolidated basis and are 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 and the AC 500 series of
Interpretation as issued by APB. 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
requires an adjustment to the financial information. These interim results
have not been audited or reviewed by the Group`s auditors, PKF (Jhb) Inc.
Change to the board of directors
On 15 March 2011 the board approved the
appointment of Ms L Taylor as an independent
non-executive director.
Steve Booysen Heiko Weidhase
Chairman Managing Director
16 March 2011
Non-executive directors: S Booysen*, MJ
Giles*,Z Cele*,L Taylor*, L Gadd, M Cassim and
R Paterson.
Alternate non-executive directors: L Whitfield
and RS Mogototoane
* Independent
Executive directors: DD Roodt, H Weidhase, AT
de Klerk
Registration number: 2006/036947/06
Registered address: 81 Dely Road, Hazelwood,
0081
Business address: 81 Dely Road, Hazelwood,
Pretoria, 0081
Company secretary: Adv Rudi Barnard
Transfer secretaries: Link Market Services
South Africa (Pty) Ltd
Sponsor: Java Capital
Date: 16/03/2011 17:16:00 Produced by the JSE SENS Department.
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