| Wed 16 Nov 2011, 17:02 | | PPE - Purple Capital Limited - Audited results for the year ended 31 August |
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PPE
PPE
PPE - Purple Capital Limited - Audited results for the year ended 31 August
2011
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 group")
Audited results for the year ended 31 August 2011
KEY FEATURES
- operating costs in GT cut by 40% over three years
- first recorded profit in three years (R2,7 million)
- clients, funds, trading volumes, mandates are all up
- debt at year end of R14,3 million (down from R163 million in 2008)
- net positive cash position today
- 2012 starts exceptionally well
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Group Company
2011 2010 2011 2010
R`000 R`000 R`000 R`000
Revenue 59 614 59 746 3 899 8 573
Trading and operating expenses (65 631) (62 057) (8 998) (15 525)
Net loss (6 017) (2 311) (5 099) (6 952)
Fair value adjustments 13 318 488 13 945 488
Other income/(expenses) 1 125 (286) - -
Profit/(loss) before interest, 8 426 (2 109) 8 846 (6 464)
depreciation and amortisation
Net interest expense (442) (7 930) (778) (8 287)
Depreciation and amortisation (5 612) (49 694) (59) (112)
Profit/(loss) before tax 2 372 (59 733) 8 009 (14 863)
Current and deferred tax (250) 9 225 (104) (3 712)
Profit/(loss) for the period 2 122 (50 508) 7 905 (18 575)
Profit/(loss) attributable to:
Owners of the company 2 720 (50 508) 7 905 (18 575)
Non-controlling interests (598) - - -
2 122 (50 508) 7 905 (18 575)
Weighted number of shares in 773 207 712 652 775 057 714 502
issue at end of period (`000)
Basic profit/(loss) per share 0,35 (7,09) 1,02 (2,60)
(cents)
Diluted profit/(loss) per 0,33 (7,09) 0,97 (2,60)
share (cents)
CONDENSED CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME
Group Company
2011 2010 2011 2010
R`000 R`000 R`000 R`000
Profit/(loss) for the period 2 122 (50 508) 7 905 (18 575)
Other comprehensive income 12 140 - -
Total comprehensive 2 134 (50 368) 7 905 (18 575)
income/(loss)
Profit/(loss) attributable to:
Owners of the company 2 732 (50 368) 7 905 (18 575)
Non-controlling interests (598) - - -
2 134 (50 368) 7 905 (18 575)
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
Group Company
2011 2010 2011 2010
R`000 R`000 R`000 R`000
Cash flow (utilised (1 172) 6 743 (4 342) (1 852)
in)/generated by operating
activities
Cash flow (utilised (1 215) 66 (7 793) 1 562
in)/generated by investing
activities
Cash flow generated 19 777 (2 369) 15 260 (2 369)
by/(utilised in) financing
activities
Net increase/(decrease) in 17 390 4 440 3 125 (2 659)
cash and cash equivalents
Cash and cash equivalents at 33 487 29 047 494 3 153
the beginning of the period
Cash and cash equivalents at 50 877 33 487 3 619 494
the end of the period
HEADLINE EARNINGS PER SHARE
Group Company
2011 2010 2011 2010
R`000 R`000 R`000 R`000
Profit/(loss) for the period 2 720 (50 508) 7 905 (18 575)
Headline profit/(loss) for the 2 720 (50 508) 7 905 (18 575)
period
Headline profit/(loss) per 0,35 (7,09) 1,02 (2,60)
share
Diluted headline profit/(loss) 0,33 (7,09) 0,97 (2,60)
per share
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Group Company
2011 2010 2011 2010
R`000 R`000 R`000 R`000
ASSETS
Equipment 1 987 2 848 89 119
Goodwill 208 146 204 568 - -
Other intangible assets 6 366 4 874 - -
Investments subsidiaries and 48 295 39 819 312 716 297 548
associates
Long-term receivables 1 069 4 503 - 3 478
Deferred tax asset 14 402 16 569 13 524 13 629
Total non-current assets 280 265 273 181 326 329 314 774
Trade and other receivables 6 607 2 716 3 093 1 235
Cash and cash equivalents 50 877 33 487 3 619 494
Total current assets 57 484 36 203 6 712 1 729
Total assets 337 749 309 384 333 041 316 503
EQUITY AND LIABILITIES
Share capital and premium 475 356 450 123 475 635 450 402
Accumulated loss (221 (223 935) (184 (192 892)
216) 986)
Other reserves 13 472 10 348 16 496 14 020
Total equity 267 612 236 536 307 145 271 530
Long-term liabilities 14 814 20 270 14 814 20 270
Deferred tax liability - 540 - -
Total non-current liabilities 14 814 20 810 14 814 20 270
Trade and other payables 55 323 52 038 11 082 24 703
Total current liabilities 55 323 52 038 11 082 24 703
Total equity and liabilities 337 749 309 384 333 041 316 503
Net asset value per ordinary 32,70 33,19 37,45 38,00
share (cents)
CONDENSED RECONCILIATION OF CAPITAL AND RESERVES
Group Company
2011 2010 2011 2010
R`000 R`000 R`000 R`000
Balance at beginning of period 236 536 283 732 271 530 287 433
Shares issued 25 233 - 25 233 -
Profit/(loss) for the period 2 720 (50 508) 7 905 (18 575)
Share based payments 3 297 3 172 2 477 2 672
Revaluation reserve (11) 10 - -
Foreign currency translation 23 130 - -
reserve
Non-controlling interests 489 - - -
Shares acquired (675) - - -
267 612 236 536 307 145 271 530
COMMENTARY
Chairman`s review
The turnaround of Purple Capital is complete.
It`s great to be making profits. It`s great to be rid of debt which hung
over our every decision, holding us back. It`s great to see every graph,
every metric of our business moving in the right direction. Client funds are
all up, client numbers are up, daily average profitability and cash flow are
both up, return on market capitalisation is up, share price is up, value at
risk is completely under control and debt is settled.
These are the foundations which underscore the confidence that our whole
team feels in being able to promise all stakeholders in Purple Capital a
brighter future.
Global Trader is still our main business. In my view, Global Trader is the
best derivatives trading house in the country. We are closer to our clients
than anyone else. Our client funds and client numbers have grown by 23% and
73% respectively and we`ve cut costs by 40% over the past three years. This
combination is bound to continue to produce growing cash earnings. The 2012
financial year has started quite exceptionally well.
On 1 October 2010 we acquired a 75% share in Purple Treasury. Outside the
four biggest banks we are one of the major players in the foreign exchange
flows in South Africa with turnover of R47,4 billion last year. This
business has been around for over 10 years but in Purple Capital, we`re
treating it as something of a start-up. Our objectives are to improve
relationships and economic models with clients and banks alike and to
diversify the client base.
We already offer best-price and excellent execution so it is easier to
convince new clients - the quality of our existing client base bears
testimony to what we offer. Treasury will be generating profits and positive
cash flows for shareholders in the year ahead.
Purple Capital invested in the relatively young sports betting industry in
South Africa with our acquisition of Voltbet in October last year. We intend
investing a lot more. Currently sports betting is a relatively small
percentage of total betting in South Africa and we believe that industry
growth estimates of 20% per annum will be exceeded. Approved further
investments in Voltbet comprise mainly the opening of our first sports
betting shop, an exclusive betting partnership with a leading sports
franchise in South Africa and a joint venture in Africa with a world leader
in lottery. I expect Voltbet to be generating significant cash profits from
the 2013 financial year onwards.
With our own house now in order, Corporate Finance is focused on external
mandates. The team size has doubled and I already see evidence to support a
net positive contribution in the year ahead.
Our stake in Real People, where we funded an empowerment structure together
with the IDC in 2007, has certainly surpassed our expected investment
returns. On 30 September 2011 we exercised our right to convert our initial
funding into equity in the Real People Group. Our investment is carried at
R40,2 million which we regard as conservative. We expect that Real People
will be the next major player in emerging market finance in South Africa and
we look forward to the listing of the company in the short term.
I expect the markets into which we provide our clients the opportunity to
transact will remain volatile for some time. This is good for our business.
More clients and more funds inevitably translate into more trading volumes,
more commissions, more spreads income - that`s where we`ll earn the bulk of
our money in the coming year. Treasury and Corporate Finance will also make
positive contributions this year and our increased footprint in Voltbet will
pay dividends in due course, I`ll bet.
I owe a heartfelt debt of gratitude to fellow employees, colleagues,
directors, shareholders and friends who have stood by me and backed Purple
Capital`s determination to succeed. Thank you.
In the coming year I expect the wait will prove to have been worth it.
CFO report
Key features of the 2011 financial year
- The Group made an after-tax profit of R2,7 million (2010: loss of R50,5
million)
- The Group`s cash on hand at 31 August 2011 was R50,9 million, an increase
from R33,5 million at 31 August 2010
- Total debt was R14,8 million (2010: R20,3 million) at the end of the
period
- Shareholders` funds have increased from R236,5 million to R267,6 million
at 31 August 2011
- Positive growth in Global Trader`s EBITDA to R10,8 million.
Global Trader is the largest contributor to the Group and added R7,3 million
to profit for the year (2010: R5,2 million) despite low volumes and
volatility for the bulk of the year. This was on revenue of R49,7 million, a
decrease of R4,7 million over 2010. Overheads were R34,7 million which is
16% lower than 2010, partly due to office costs being shared with other
divisions in the Group for the first time (all divisions now reside in the
Global Trader office in Melrose Arch).
The Purple Capital company made a profit of R3,0 million (2010: loss of
R56,1 million) for the year. This includes the corporate office costs,
investment fair value adjustments (see below) and the Corporate Finance
division. The Corporate Finance division was mainly focused on internal work
during the year but has now been re-focused on external mandates and we
expect it to generate a profit in the next financial year.
Voltbet made a post-acquisition loss of R5,0 million. Voltbet is still in
its start-up phase and will require investment by the Group into the new
financial year. The growth in clients, bets taken and margin are all very
encouraging since the launch of the website in June 2010.
The Treasury business made a post-acquisition loss of R2,6 million. This
business was in a break-even position by the end of the year due to
restructuring of client contracts and new products being introduced. We
expect this business to make a positive contribution to the Group in the
2012 financial year.
The Group raised additional capital of R25 million during January 2011. The
majority of the shares were issued to an international gaming company and
the balance to a private investor.
The company has sold most of its investments over the last few years but
still retains stakes in Real People and Cipla Medpro. Real People performed
exceptionally well again this financial year (fair value gains of R15,3
million) and has forward projections showing very aggressive growth through
to 2015. We expect further gains in the Real People investment in 2012.
CEO report
Charles Savage has been appointed as CEO of the Group.
The consolidation of all of the operating business units in the Group into a
single presence in Melrose Arch has transformed the Group significantly.
Centralising the core functions of finance, IT, regulatory compliance,
operations and risk management has allowed the Group to benefit from a
greater degree of operational efficiency with each business being capable of
drawing on the human capital, systems and processes employed by each
operating unit.
The move has allowed us to restructure the leadership to ensure a greater
degree of accountability and focus on the sales side of the business. A
pivotal change has been the consolidation of our sales and marketing
resources under a single Group structure to ensure maximum business benefit
from our extensive sales network, systems and disciplines.
The Group is now structured to meet our client needs across trading,
investing and advisory services and has the capacity and infrastructure to
service retail, professional and corporate clients alike.
Global Trader
Global Trader`s results for the 2011 financial year highlight the benefits
of being able to draw on a strong mix of resilient market making revenue
coupled with more typical stock broking commission income.
In addition our efforts to create a more efficient operating cost structure
have helped in delivering stronger returns to shareholders despite lower
trading revenue. Operating costs have been reduced by 40% over the past
three years.
Most encouraging is that the primary drivers of future revenue are all
showing strong growth having benefited from a greater degree of sales
discipline, innovation and marketing focus.
Trading revenue recovered strongly in the second half of the year. This was
driven by an increase in client acquisition and trading activity fuelled by
a marked increase in market volatility towards year-end.
Spread trading clients can trade across local and international asset
classes in Rand from a single account which is a unique competitive
advantage over more traditional online equity trading. Spread trading
clients are presented with more opportunities to trade wherever market
volatility increases which in the result makes this source of revenue more
resilient in uncertain market conditions. Market volatility drove a
substantial increase in activity and revenue over the last quarter and into
the new financial year.
Global Trader, until very recently, only offered CFDs on the most liquid JSE
listed shares, the concentration of trading activity is heavily biased
towards just 15 stocks which translates to a very limited universe of
trading opportunities for these clients. This coupled with weakening equity
markets for the better part of the financial year resulted in depressed
trading activity and ultimately revenue.
Client equity grew strongly over the reporting period. The increase in
client funds held with Global Trader is a leading indicator for future
revenue as well as a vote of confidence from our clients. Given the economic
conditions that South Africans have faced over the period, the strong growth
in cash deposits is a very encouraging result. Over the last two years our
substantial investment in improving our sales and marketing incentives,
systems and disciplines has been rewarded with significant client equity
growth.
Voltbet
Voltbet.com, South Africa`s premier online sports betting platform, allows
you to bet on sports online or directly from your mobile phone.
Unlocking value in the sports betting industry in South Africa will be
driven by changing perceptions and educating the market that sports betting
is a fun, engaging way to enhance your sporting experiences.
Voltbet has achieved a fantastic balance of growth and stability across all
of its economic drivers and is proving to be a very rewarding investment for
the Group.
Our focus in the year ahead is to extend on these achievements as well as
venture into new market opportunities both locally and in partnership in
Africa.
We recently concluded deals to take over 100% ownership of the Voltbet brand
and sports betting software, including the related economics. We hold a
significant advantage over our competitors in being able to strategically
direct and respond to opportunities much faster.
Purple Capital Treasury
Purple Capital Treasury is the largest independent outsource treasury
solutions service provider by volume operating in South Africa.
The core of our treasury service is to provide corporates with a fully
integrated, professionally managed, low-cost and incentive-aligned treasury
solution.
Managing forex flows is a business-critical function for a large portion of
South African corporates and when done effectively, can provide your
business with a competitive edge. It`s our business to ensure you get an
error-free professional solution that saves you money so that you can focus
on other aspects of your business in the knowledge that your treasury
function is taken care of.
Purple Capital Treasury has been through a year of consolidation where we
focused on integrating the business into the Group with no negative effects
on clients. During the year we considered the competitive landscape and
current business model in order to better shape the future strategy of the
business.
Our focus in the year ahead is to further entrench our key account
relationships and leverage off our extensive forex volume advantage, service
levels, systems capacity and group sales force to aggressively grow the
client mix across all sectors of the corporate landscape.
Purple Capital Corporate Finance
Purple Capital Corporate Finance is a specialist team of individuals with
excellent experience in the small- to medium-sized sector of corporate
finance transaction activities in South Africa.
The business has been through an inwardly focused year, delivering internal
deal value to the Group whilst at the same time building the team for an
increase in external corporate finance activity in the year ahead.
With proven ability to source capital and a strong mix of skillsets from
well-diversified experience across industry sectors, the team is capable of
delivering extraordinary value in the corporate finance transaction value
chain.
Understanding a business`s economic truths and translating these to a
thorough understanding of its real value is what corporate finance is all
about. Whether it`s matching a business with the right sources of capital
for expansion or exiting one set of shareholders for another, the principles
of understanding value and knowing the cost of capital, sets the framework
for a successful transaction.
Our corporate finance team has the right mix of industry experience, access
to networks and professional backgrounds to ensure you get the right deal.
The team`s focus is on the small- to medium-sized sector of the market where
deals have shorter lead times and lower execution risk.
Investments
Real People South Africa ("RPSA")
RPSA provides credit management services to the South African market through
branches located throughout South Africa. Its divisions include retail
financial services, affordable housing, acquired debt and collections,
education and Africa.
RPSA has continued to perform exceptionally well. Over the last six months
total assets increased by 41% and net advances by 43%, yielding an increase
in profit before tax of 66%.
Operating segments
The results by operating segment are as follows:
Purple Global Purple
Capital Trader Voltbet Treasury Total
R`000 R`000 R`000 R`000 R`000
Revenue 16 764 49 684 2 512 5 097 74 057
Trading and operating (11 014) (38 904) (7 937) (7 776) (65 631)
expenses
Earnings before 5 750 10 780 (5 425) (2 679) 8 426
interest depreciation
and amortisation
Net interest expense (312) (130) - - (442)
Depreciation and (1 102) (4 462) (10) (38) (5 612)
amortisation
Profit/(loss) before 4 336 6 188 (5 435) (2 717) 2 372
tax
Current and deferred (1 352) 1 102 - - (250)
tax
Profit/(loss) for the 2 984 7 290 (5 435) (2 717) 2 122
period
Non-controlling - - 438 160 598
interests
2 984 7 290 (4 997) (2 557) 2 720
Business combination
Purple Capital acquired 85% of Powerbet Gaming (Pty) Limited and 75% of WIP
Treasury Solutions (Pty) Limited for R4,65 million and R1,5 million
respectively, with effect from 1 October 2010. See operating segments table
above for thieir contributions to the Group. The purchase prices were split
as follows:
Amount
R`000
Tangible assets 465
Workforce in place 3 833
Customers 1 180
Software 270
Goodwill 2 822
Deferred tax (1 479)
Non-controlling interest (941)
Total consideration 6 150
Subsequent events
Voltbet entered into agreements with third parties to terminate services
they were providing to the company and to purchase the Voltbet brand and the
software powering the business.
WIP Treasury Solutions (Pty) Limited changed its name to Purple Capital
Treasury (Pty) Limited.
Annual general meeting
The annual general meeting of Purple Capital will be held at 3rd Floor, 10
Melrose Boulevard, Melrose Arch on Monday, 12 December 2011 at 10h00.
Accounting policies
The financial results have been prepared in accordance with International
Financial Reporting Standards ("IFRS"), the interpretations adopted by the
International Accounting Standards Board and the requirements of the South
African Companies Act. The financial results were prepared under the
supervision of Mike Wilson CA (SA).
The accounting policies are those presented in the consolidated annual
financial statements for the year ended 31 August 2011 and have been applied
consistently to the periods presented in these condensed financial
statements.
Report of the independent auditors
BDO South Africa Incorporated`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
7 November 2011
Executive Directors:
Mark Barnes (Chairman)
Charles Savage
Mike Wilson
Non-executive Directors:
Dennis Alter (American)
Craig Carter
Thembeka Gwagwa
Ronnie Lubner (British)
Registered office
3rd Floor
10 Melrose Boulevard
Melrose Arch, 2076
(PO Box 411449 Craighall, 2024)
Independent auditors
BDO South Africa Incorporated
Registered Auditors
13 Wellington Road
Parktown, 2193
Private Bag X60500
Houghton, 2041
Transfer secretaries
Link Market Services (Pty) Limited
11 Diagonal Street
Johannesburg, 2001
(PO Box 4844, Johannesburg, 2000)
Sponsor
BDO Corporate Finance (Pty) Limited
7 West Street, Houghton, 2198
PO Box 1574, Houghton, 2041
www.purplecapital.com
Date: 16/11/2011 17:02:01 Produced by the JSE SENS Department.
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