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Unaudited interim results for the six months ended 31 August 2017
NVEST FINANCIAL HOLDINGS LIMITED AND ITS SUBSIDIARIES
(Incorporated in the Republic of South Africa)
(Registration number 2008/015990/06)
(“NVest” or “the Company” or “the Group”)
ISIN Code: ZAE000199865 JSE Code: NVE
UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 AUGUST 2017 AND INTERIM DIVIDEND
DECLARATION (NUMBER 6)
HIGHLIGHTS:
- Assets under Management and Administration increased by 11,9% to R29,1 billion as at
31 August 2017 (compared with R26 billion as at 28 February 2017 year end and R24 billion as at
31 August 2016).
- Strengthening of the balance sheet with net tangible assets increasing by 2,6% to R318,4 million
from R310,4 million in February 2017 (R294,4 million as at 31 August 2016).
- NVest acquired 100% of the issued share capital of Three Oaks Capital (RF) (Pty) Ltd, and 35% of
the share capital of NFB Finance Brokers Port Elizabeth (Pty) Ltd.
- NFB Asset Management (Pty) Ltd was rated 1st out of 93 multi-asset fund management
businesses in the PlexCrown ratings with two of its funds, the NFB Ci Cautious Fund of Funds A
and the NFB Ci Balanced Fund of Funds A being ranked 1st and 5th in their respective
categories.
- The opening of a new branch of NVest Securities (Pty) Ltd in Johannesburg.
- Declaration of an interim dividend (and sixth dividend as a listed company) of 5,00 cents per
share.
Statement of Financial Position
Unaudited Re- Unaudited
presentation
31 August 28 February 31 August
Figures in Rands 2017 2017 2016
ASSETS
Non-Current Assets
Property, plant and equipment 38,997,153 39,087,622 35,072,915
Investment property 308,738,912 326,181,102 322,138,005
Goodwill 86,996,053 82,604,170 82,604,170
Trade and other receivables - 9,686,370 -
Investments in associates 100 100 100
Deferred taxation 1,355,220 990,215 853,500
Other financial assets 617,126 617,126 296,000
436,704,564 459,166,705 440,964,690
Current Assets
Loans to shareholders 200,022 589,339 590,966
Other financial assets 14,750,825 10,348,526 14,263,867
Straight-line leased assets 8,945,962 8,542,011 8,158,061
Current tax receivable 308,822 676,888 908,804
Trade and other receivables 22,904,701 17,035,363 13,386,529
Cash and cash equivalents 137,771,899 115,451,178 132,242,289
184,882,231 152,643,305 169,550,516
Total assets 621,586,795 611,810,010 610,515,206
Unaudited Re- Unaudited
presentation
31 August 28 February 31 August
Figures in Rands 2017 2017 2016
EQUITY AND LIABILITIES
EQUITY
Equity Attributable to Equity Holders of Parent
Share capital 324,779,200 324,779,200 324,779,200
Reserves 4,051,260 3,866,845 1,452,097
Retained income 76,563,574 64,360,947 50,782,185
405,394,034 393,006,992 377,013,482
Non-controlling interest 2,314,534 2,310,826 5,758,665
407,708,568 395,317,818 382,772,147
LIABILITIES
Non-Current Liabilities
Deferred taxation 15,360,234 16,284,185 14,396,204
Other financial liabilities 148,760,012 155,296,862 177,761,662
164,120,246 171,581,047 192,157,866
Current Liabilities
Current tax payable 1,463,901 - 2,313,188
Loans from related parties - - 16,667
Other financial liabilities 11,257,076 17,368,002 -
Bank overdraft - - 28,320
Trade and other payables 37,037,004 27,543,143 33,227,018
49,757,981 44,911,145 35,585,193
Total Liabilities 213,878,227 216,492,192 227,743,059
Total Equity and Liabilities 621,586,795 611,810,010 610,515,206
Share information:
Shares in issue at period end 302,741,722 302,741,722 302,741,722
Net asset value per share (cents) 133,91 129,82 124,53
Net tangible asset value per share (cents) 105,17 102,53 97,25
Statement of Comprehensive Income
Six months Six months
Unaudited Re-presentation
Figures in Rands 31 August 2017 31 August 2016
Revenue 133,798,582 139,294,745
Cost of sales -47,732,578 -48,736,020
Gross profit 86,066,004 90,558,725
Other income 531,963 489,548
Operating expenses -45,103,218 -44,951,952
Operating profit 41,494,749 46,096,321
Investment revenue 6,219,615 5,400,725
Fair value adjustment - 3,532,450
Finance costs -7,967,571 -8,517,313
Profit before taxation 39,746,793 46,512,183
Taxation -10,858,820 -14,700,270
Profit for the period ended 28,887,973 31,811,913
Other comprehensive income - -
Total comprehensive income 28,887,973 31,811,913
Total comprehensive income attributable to:
Owners of the parent 28,369,405 31,108,459
Non-controlling interest 518,568 703,454
28,887,973 31,811,913
Profit attributable to:
Owners of the parent 28,369,405 31,108,459
Non-controlling interest 518,568 703,454
28,887,973 31,811,913
Share information:
Weighted average number of shares 302,741,722 302,741,722
Earnings per share (cents) 9,37 10,28
Statement of Cash Flows
Six months Six months
Unaudited Unaudited
Figures in Rands 31 August 2017 31 August 2016
Cash flows from operating activities
Cash generated from operations 55,231,446 50,478,228
Interest income 5,537,428 5,042,388
Dividends received 682,187 358,337
Finance costs -7,967,571 -8,517,313
Tax paid -10,422,506 -9,883,849
Net cash from operating activities 43,060,984 37,477,791
Cash flows from / (used in) investing activities
Purchase of property, plant and equipment -863,068 -1,476,377
Disposal of property, plant and equipment - 6,704
Purchase of investment property -778,388 -21,663,005
Net cash acquired in business combination paid through share
issue -3,976,989 -
Purchase of other financial assets -4,402,299 -4,472,403
Disposal of investment property 18,220,578
Net movements in loans with related parties - -100,000
Net cash from / (used in) investing activities 8,199,834 -27,705,081
Cash flows used in financing activities
Acquisition of additional shares in subsidiary from non-
controlling interests -1,259,552 -
Dividends paid to non-controlling interests -285,000 -
Proceeds from shareholders loans repaid 389,317 104,025
Dividends paid -15,137,086 -15,251,603
Net movement in other financial liabilities -12,647,776 5,220,121
Net cash used in financing activities -28,940,097 -9,927,457
Total cash movement for the 6 months 22,320,721 -154,747
Cash at the beginning of the 6 months 115,451,178 132,368,716
Total cash at end of the 6 months 137,771,899 132,213,969
Statement of Changes in Equity
Share Total
based attributable
payment to equity Non-
Total stated Revaluation reserve Retained holders of controlling Total
capital reserve income the Group interest equity
Balance at 1 March 2016 324,779,200 1,452,097 - 34,925,319 361,156,616 5,055,211 366,211,827
Total comprehensive income for the 6 -
months - - 31,108,459 31,108,459 703,454 31,811,913
Dividends - - - -15,251,603 -15,251,603 - -15,251,603
Total changes - - - 15,856,856 15,856,856 703,454 16,560,310
Balance at 31 August 2016 324,779,200 1,452,097 - 50,782,175 377,013,472 5,758,665 382,772,137
Other comprehensive income - 2,414,748 - - 2,414,748 - 2,414,748
Acquisition from non-controlling interest - - - -965,663 -965,663 -3,114,337 -4,080,000
Total comprehensive income for the 6 -
months - - 29,869,746 29,869,746 386,448 30,256,194
Dividends - - - -15,325,311 -15,325,311 -719,950 -16,045,261
Total changes - 2,414,748 - 13,578,772 15,993,520 -3,447,839 12,545,681
Balance at 28 February 2017 324,779,200 3,866,845 - 64,360,947 393,006,992 2,310,826 395,317,818
Share option expense - - 184,415 - 184,415 - 184,415
Acquisition from non-controlling interest - - - -1,029,692 -1,029,692 -229,860 -1,259,552
Total comprehensive income for the 6 -
months - - 28,369,405 28,369,405 518,568 28,887,973
Dividends - - - -15,137,086 -15,137,086 -285,000 -15,422,086
Total changes - - 184,415 12,202,627 12,387,042 3,708 12,390,750
Balance at 31 August 2017 324,779,200 3,866,845 184,415 76,563,574 405,394,034 2,314,534 407,708,568
SEGMENT ANALYSIS
The following information relates to segment financial information of the group:
31 August 2017
Profit
Figures in Rand Revenue Before tax Assets Liabilities
Insurance broking 9,564,564 1,404,677 10,005,219 1,964,850
Wealth management 99,675,269 29,015,847 93,543,208 43,450,351
Administration of estates
and trusts 1,161,841 67,031 2,814,728 1,232,206
Property services 27,875,537 3,760,513 387,274,361 306,163,539
Other 1,262,676 24,491,170 317,475,732 1,530,112
Intercompany eliminations -5,741,305 -18,992,445 -189,526,453 -140,462,831
133,798,582 39,746,793 621,586,795 213,878,227
31 August 2016
Profit
Figures in Rand Revenue before tax Assets Liabilities
Insurance broking 8,316,791 1,383,811 7,729,116 1,826,032
Wealth management 101,114,150 31,942,541 78,787,951 34,795,712
Administration of estates
and trusts 1,571,357 473,311 2,720,032 1,358,973
Property services 28,156,316 7,046,258 372,553,887 300,859,639
Other 1,125,475 23,369,001 305,388,487 1,946,481
Intercompany eliminations -989,344 -17,702,739 -156,664,267 -113,043,778
139,294,745 46,512,183 610,515,206 227,743,059
Note: Certain information in the 31 August 2016 segment analysis has been re-presented for
clarification purposes.
COMMENTARY
BASIS OF PREPARATION AND ACCOUNTING POLICIES
The accounting policies and method of measurement and recognition applied in the
preparation of these condensed unaudited consolidated interim results are in terms of
International Financial Reporting Standards (“IFRS”) and are consistent with those applied in the
audited annual financial statements for the previous year ended 28 February 2017. The
unaudited consolidated interim results are prepared in accordance with the requirements of the
JSE Limited Listings Requirements for interim reports and the requirements of the Companies Act,
71 of 2008.
The unaudited consolidated interim results are presented in terms of the minimum disclosure
requirements set out in International Accounting Standards (“IAS”) 34 – Interim Financial
Reporting, as well the SAICA Financial Reporting Guides as issued by the Accounting Practices
Committee and Financial Reporting Pronouncements as issued by the Financial Reporting
Standards Council.
Included in goodwill is the preliminary purchase price allocation (“PPA”) realised on the
acquisition of Three Oaks Capital (RF) (Pty) Ltd (“Three Oaks”) in the current financial year.
An independent identification of the intangible assets of Three Oaks to determine the PPA in
terms of IFRS 3 and to confirm both the valuation and description of the intangible assets relating
to the business combinations will be attended to within the prescribed 12-month period and is
therefore provisionally reflected as goodwill as above. The independent identification and
intangible asset allocation and valuation of Three Oaks will also be reviewed by the Group’s
auditors, Grant Thornton Cape Inc.
The results were prepared by an independent compiler, Professor Sean Weldon (CA(SA), M
Comm (Acc)), in conjunction with the Financial Director, Mr Frank Knox (B Com, B Compt
(Hons)).
Any reference to future financial performance included in this announcement has not been
reviewed nor reported on by the Group’s external auditors.
The directors of NVest (“the Board”) take full responsibility for the preparation of the interim
report.
RECONCILIATION OF HEADLINE EARNINGS PER SHARE
Group
Six months Six months
Unaudited Unaudited
Figures in Rands 31 August 2017 31 August 2016
Earnings attributable to equity holders of the parent 28,369,405 31,108,459
Fair value adjustments of investment property - -2,469,314
Fair value adjustment of other financial assets - -185,364
Increase in CGT inclusion rate - 1,930,766
Loss on disposal of property, plant and equipment 107,694 -
Taxation effect -30,154 -
Headline earnings attributable to equity holders of the
parent 28,446,945 30,384,547
Per share information:
Weighted average number of shares 302,741,722 302,741,722
Headline earnings per share (cents) 9,40 10,04
FINANCIAL COMMENTARY
NVest took further steps on its journey towards becoming the pre-eminent Wealth Management
Group in South Africa during the period under review.
The Board is pleased to report continued growth in Assets under Management and
Administration, which increased by 11,9% (to R29,1 billion as at 31 August 2017 compared with
R26 billion as at 28 February 2017 year-end). This is a key growth indicator for the Group as a
broad based financial services provider and presents an opportunity to integrate those assets
into in-house propositions appropriately over time.
This progress was counter balanced by a period of flat growth in terms of Group revenues which
reduced by 3,95% (R133,8 million compared against R139,3 million in the prior reporting period)
and a decrease of attributable net profit after taxation of R2,7 million (R28,4 million compared to
R31,1 million for the same period in 2016).
These results are a reflection of challenging market conditions, compounded by a relatively
strong rand exchange rate against major currencies, which adversely impacts NVest’s offshore
revenue flows.
Cost of sales have reduced over the current reporting period in real terms but are slightly
higher as a percentage of revenue (cost of sales as a percentage of revenue being 35,67% for
the current reporting period compared with 34,99% for the same reporting period in 2016).
Operating costs remain within budget and continue to be judiciously managed
As a matter of prudence, the Board has decided not to pass a fair value adjustment with
regard to investment property for the interim results due to current market conditions relating
to rental reversions, vacancies and maintenance costs. The stated value of commercial
properties held by NVest Properties Limited approximates with their current carrying value.
The overall position has translated into a profit after tax due to owners of R28,4 million
(compared with R31,1 million for end August 2016).
RE-PRESENTATION OF PRIOR PERIOD RESULTS
There has been a reclassification between “cost of sales” and “operating expenses” for the six
months unaudited results up to 31August 2016 of R18,5 million. This has been done to more
accurately reflect the actual nature of underlying costs. In addition, there was a
reclassification of R1,3 million between “cost of sales” and “other income”. These
reclassifications do not have any impact on either earnings or headline earnings per share.
An amount of R9,7 million, reflected as an “investment” at February 2017, has been reclassified
as ”trade and other receivables”, as in substance it is a deposit which is to be applied on a
property in the coming year.
“Deferred taxation” has been reported separately as an asset and liability, as opposed to
being offset as was the case in the August 2016 and February 2017 financial statements. The
same has been applied to “Current tax payable” and “Current tax receivable”.
ACQUISITIONS, DISPOSALS, SHARE ISSUES AND REPURCHASES
There were no share issues or share repurchases during the period under review.
Effective as of 1 June 2017, NVest (through its subsidiary NFB Finance Brokers Port Elizabeth (Pty)
Ltd) acquired 100% of the issued share capital of Three Oaks, a financial advisory brokerage
based in Port Elizabeth. This acquisition strengthens the Group’s Private Wealth Management
footprint and capabilities in Port Elizabeth, which remains a targeted growth market.
Simultaneously with the acquisition of Three Oaks, NVest also acquired the remaining minority
shareholding (35%) in its existing Private Wealth Management subsidiary in Port Elizabeth – NFB
Finance Brokers Port Elizabeth (Pty) Ltd (“NFB PE”). The intention is to merge and amalgamate
Three Oaks with NFB PE (both now wholly owned subsidiaries of NVest). This restructuring will
allow the Group to capitalise on operational synergies and scale the combined business
optimally.
ORGANIC GROWTH AND AWARDS
During the period under review NVest Securities (Pty) Ltd (stockbroking) successfully opened a
new branch office in Gauteng, located within the current NFB Finance Brokers (Gauteng) (Pty)
Ltd premises. This will allow the Group to replicate the successful model that operates in East
London where the stockbroking and NFB Private Wealth Management businesses operate from
the same building, seamlessly providing clients with complementary product and service
propositions.
Following on from the Raging Bull Awards received in the prior reporting period, NFB Asset
Management (Pty) Ltd (NFB Asset Management) continues to receive external recognition for
its market leading performance. In the latest PlexCrown Fund Ratings for the third quarter of
2017 NFB Asset Management featured prominently, both as a business and in respect of its
funds:
- The NFB Ci Balanced Fund of Funds A class achieved 5 PlexCrowns (the maximum possible)
and has moved up two ranking positions to 5th out of 93 funds.
- The NFB Ci Cautious Fund of Funds A class also achieved 5 PlexCrowns and retained its
ranking as 1st out of 84 funds.
- The NFB Asset Management business itself also achieved 5 PlexCrowns and is ranked 1st out
of 93 multi asset fund management businesses. This includes the larger, well known,
traditional fund management businesses and third-party fund management businesses.
SUBSEQUENT EVENTS
Subsequent to 31 August 2017, NVest acquired a further 8,33% equity interest in NFB Insurance
Brokers (Border) (Pty) Ltd (“NFB Insurance Brokers”), which has resulted in NVest holding 85% of
the issued share capital in NFB Insurance Brokers. The transaction is not categorised in
accordance with the JSE Listings Requirements.
The new, distinctive rebrand of NFB Private Wealth Management has been implemented,
unifying the corporate identity and face to market of the respective NFB Finance Brokers
subsidiaries and divisions in East London, Port Elizabeth, Johannesburg and Cape Town.
Andrew Vincent Kent has resigned from the Board of NVest as an Executive Director with
effect from 20 November 2017 as a result of his retirement after 17 years of association with the
Group. He will, however, remain involved with the business of NVest Securities (Pty) Ltd in a
limited capacity.
PROSPECTS
Despite prevailing market pressures and the turbulent political and economic environment,
both locally and internationally, the Group continues to demonstrate significant resilience in its
ability to attract and manage assets.
The Board and Management remain committed to investing in the organic and acquisitive
growth of the Group to create a sustainable, long-term business which generates meaningful
returns for all its stakeholders.
The acquisitive growth agenda will focus on expanding the Group’s distribution network on a
national scale, whilst continued focus will be on the optimal integration of Group propositions
and operational efficiencies.
NVest’s growing Assets under Management are now at a point of critical mass and this,
coupled with a broadening distribution network and the maturing of the stockbroking and
asset management businesses, uniquely positions the Group for future growth.
CHANGES TO THE BOARD
There have been no changes to the Board during the period under review.
DIVIDEND DECLARATION
The Board has declared an interim dividend (Number 6) of 5,00 cents per share, which
amounts to 53,36% of headline earnings. The dividend is declared out of income reserves of
the Group. The dividend will be subject to a dividend withholding tax rate of 20% or 1,000 cents
per ordinary share. Shareholders, unless exempt or qualifying for a reduced withholding tax
rate, will receive a net dividend of 4,000 cents per share. NVest’s tax reference number is
9053981180.
The number of ordinary shares which will be eligible for the dividend at the declaration date is
302 741 722.
The salient dates for the dividend will be as follows:
2017
Last date to trade “cum? dividend Tuesday, 12 December
Shares commence trading ”ex” dividend Wednesday, 13 December
Record date (date shareholders recorded in share register) Friday, 15 December
Payment date Monday, 18 December
Shareholders may not dematerialise or rematerialise their share certificates between
Wednesday 13 December 2017 and Friday 15 December 2017, both dates inclusive.
For and on behalf of the Board
ANTHONY GODWIN FRANK KNOX
Chief Executive Officer Financial Director
East London
24 November 2017
Executive Directors: Non-executive Directors:
Anthony Godwin (Chief Executive Officer) Jonathan Goldberg# (Chairperson)
Frank Knox (Financial Director) Siviwe Kwatsha#
Andrew Kent (Executive Director) Lana Weldon#
Michael Estment (Executive Director) Dylan Schemel
# - independent
Company Secretary: Designated Advisor:
Brendan Connellan Arbor Capital Sponsors Proprietary Limited
Transfer Secretaries: Registered Office:
Computershare Investor Services Proprietary 42 Beach Road
Limited Nahoon
70 Marshall Street East London, 5241
Johannesburg, 2001 (PO Box 8132, Nahoon, 5210)
(PO Box 61051, Marshalltown, 2107)
Website:
http://www.nvestholdings.co.za
Date: 24/11/2017 11:36:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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