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PURPLE GROUP LIMITED - Unaudited Condensed Consolidated Results For The Six Months Ended 28 February 2019

Release Date: 17/04/2019 15:16
Code(s): PPE     PDF:  
 
Wrap Text
Unaudited Condensed Consolidated Results For The Six Months Ended 28 February 2019

PURPLE GROUP LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1998/013637/06)
Share code: PPE
ISIN: ZAE000185526
("Purple Group" or "the Company" or "the Group")

UNAUDITED CONDENSED CONSOLIDATED RESULTS
FOR THE SIX MONTHS ENDED 28 FEBRUARY 2019

LETTER FROM THE BOARD

GROUP HIGHLIGHTS

-  Loss per share improved by 63% from a loss per share of 1.89 cents in the prior year
   to a loss of 0.69 cents per share for the six months ended 28 February 2019.
-  Group revenue increased by 41.9%.
-  Group expenses increased by 0.7%.
-  Group net loss from operations decreased by 82.4%.

EASYEQUITIES HIGHLIGHTS

-  EasyEquities revenue increased by 53.9%.
-  Platform assets increased by 34.1% to R3.85 billion.
-  Funded investment accounts increased by 58.5% to 92 731 accounts.
-  RISE has been appointed as the fund administrator and investment manager of five
   retirement funds with assets under management of circa R4.2 billion. The on-boarding
   of these funds commenced on 1 March 2019. This would increase platform assets by
   R4.2 billion.

GT247.COM HIGHLIGHTS

-  GT247.com revenue increased by 43.5%;
-  GT247.com costs decreased by 17.9%; and
-  Net income from operations increased by 485% to R17.3 million.

MESSAGE FROM THE CEO

An admirable set of half year results has set the tempo for an exciting 2019 for the Purple
Group. To the ever-increasing loyal shareholders who support our dreams to democratise
all things investing, these results should come as no surprise.

The resilience of our strategies and the determination of our team to deliver, despite the
difficult economic climate, is commendable and the rising tide of everyday South Africans
taking up investing for the very first time continues to lift the group.

The challenges of scaling a business are a part of every disruptive digital success story
and they are very much a part of our story too. If you look at companies like Facebook
or Amazon, their journeys haven't been without challenges either. Why? Because like us,
they're constantly pushing to drive scale and exponential growth in their business. This
means adding new features, bringing on new partners and supporting a customer base
whose trajectory is anything but horizontal.

Every day is our biggest day, every month new records are broken and each quarter we
climb our very own Everest. There is never a moment to so sit back and relax? and we
are grateful for that. In fact, we love every moment of it. It's what gets us all out of bed
early - knowing that we are increasing participation in investing in the stock market and
making investing fun for everyone is an exciting endeavour.

We are scaling for a future where millions of customers are investing billions of Rands
every single day, and we are getting there faster than we could ever have dreamed. We
take your security of assets, data and the integrity of our systems very, very seriously
whilst balancing the need to deliver faster, easier, cheaper, better financial services.

We are very grateful to all our stakeholders for being a part of this incredible journey
and are extremely proud of the ever increasing role of partners that continue to join us
in our cause.

The next 6 months are full of more challenges and ever greater opportunities, we look
forward to sharing the outcomes with you.

EXECUTING ON OUR STRATEGY

EasyEquities

EasyEquities has continued to leverage its innovative investment platform and technology
stack through its established distribution channels in South Africa, primarily including:

-  EasyEquities Direct: Customers are acquired directly by EasyEquities through various
   marketing initiatives and more importantly through referrals from existing customers
   (40% of clients are acquired through referrals);
-  SatrixNow: EasyEquities has white-labelled its core platform to SatrixNow, who
   utilises the platform to attract customers to invest in Satrix's ETFs and Unit Trusts;
-  Bidvest Bank Grow Account: EasyEquities has provided customers of the recently
   launched Bidvest Bank Grow Account the opportunity to invest seamlessly through
   the Bidvest Bank Grow Account App, into the various investment products offered on
   the EasyEquities platform; and
-  RISE: EasyEquities has been appointed by RISE to provide execution services in
   respect of investment mandates secured by RISE and offer members, of Retirement
   Funds administered by RISE, various savings accounts.

EasyEquities will continue to investigate and assess new partnership opportunities
with institutions that provide significant distribution opportunities for the EasyEquities
product offering.

In addition, EasyEquities is continuously investigating and developing additional products
and services for its existing clients to consume.

As far as international expansion is concerned, EasyEquities plans to launch, on the
ground, in Australia during June 2019.

RISE

Retirement Investments and Savings for Everyone Proprietary Limited ("RISE"), a 50/50
joint venture between EasyEquities and NBC Fund Administration Services ("NBC"):

-  Is an integrated retirement fund administration and investment fund management
   business.
-  Through its administration and investment management system, coupled with a first-
   of-its-kind members savings portal ("RISE System") (which has been developed and
   licensed to RISE by EasyEquities), RISE is equipped to reduce the cost of retirement
   fund administration and provide unparalled efficiency and transparency to all
   stakeholders.
-  Retirement fund members are provided with real-time, online access to view their
   retirement savings and the ability to complement their retirement savings through
   various investment accounts. This includes a Rand-based Investment Account,
   a  US Dollar Investment Account and a Tax-Free-Savings Account with no minimum
   investment amounts or prescribed investment periods.

RISE is targeting the Retirement Fund industry through a dedicated sales force and
through leveraging off the networks that have been established in the retirement fund
space by NBC over the past 20 years.

GT247.com

GT247.com is the trading destination for active derivative traders. GT247.com is an
important complementary service for traders who require market leverage at competitive
rates. The platform provides traders with access to trade equity CFDs (listed on the JSE)
and derivatives in respect of over 60 currency pairs, all major international indices,
commodities and cryptocurrencies using Rands.

GT247.com offers the lowest commission rates in the market for retail investors,
being 10  basis points. This coupled with the Meta Trader 5 trading platform provides
a compelling offering for our clients.

Emperor Asset Management

The strategy for Emperor Asset Management is to broaden its client base through
offering managed portfolios on the EasyEquities platform and securing institutional asset
management and consulting mandates.

CONDENSED GROUP STATEMENT OF PROFIT OR LOSS
for the six months ended 28 February 2019

                                                      Unaudited    Unaudited      Audited
                                                     six months   six months    12 months
                                          Change    28 February  28 February    31 August
                                       2018 to 2019        2019         2018         2018
                                                  %       R'000        R'000        R'000
Continuing operations
Revenue                                          42      48 625       34 264       70 216   
Commissions and research                       (31)     (1 660)      (2 414)      (3 982)   
Operating expenses                                2    (49 951)     (48 828)     (94 045)   
Net loss from operations                       (82)     (2 986)     (16 978)     (27 811)   
Other income                                                 25        3 444        4 069   
Deficit before interest,                                                                    
depreciation and                                                                            
amortisation                                   (78)     (2 961)     (13 534)     (23 742)   
Interest income                                (56)         593        1 339        2 687   
Finance costs                                     7     (4 026)      (3 779)      (7 003)   
Depreciation and amortisation                    40     (4 677)      (3 342)      (8 500)   
Loss before fair value,                                                                     
impairment adjustments                                                                      
and tax                                        (43)    (11 071)     (19 316)     (36 558)   
Fair value, impairments and
guarantee adjustments                          (95)       (396)      (8 113)      (6 540)   
Share of net loss of equity-                                                                
accounted investee                                        (336)        (195)        (483)   
Loss before tax                                (57)    (11 803)     (27 624)     (43 581)   
Income tax benefit                             (72)       2 152        7 784       10 443   
Loss for the period                            (51)     (9 651)     (19 840)     (33 138)   
Loss attributable to:                                                                       
Owners of the company                          (63)     (6 162)     (16 828)     (26 667)   
Non-controlling interest                         16     (3 489)      (3 012)      (6 471)   
                                                        (9 651)     (19 840)     (33 138)   
Weighted number of shares in                                                                
issue at end of period ('000)                           898 089      890 953      905 972   
Loss per share                                                                              
Basic loss per share (cents)                   (63)      (0.69)       (1.89)       (2.94)   
Headline loss per share                                                                     
Loss for the period                            (63)     (6 170)     (16 828)     (26 667)   
Headline loss for the period                   (63)     (6 170)     (16 828)     (27 148)   
Headline loss per share (cents)                (63)      (0.69)       (1.89)       (3.00)   

The Group recorded a loss for the six months ended 28 February 2019 of R6.2 million
compared with a loss of R16.8 million in comparative period in the prior year. The basic
and headline loss of 0.69 cents per share compares with a basic and headline loss of
1.89 cents per share in the prior comparative period.

OPERATING SEGMENT REVIEW
EasyEquities condensed statement of profit or loss

                                                              HY2019     HY2018             
                                                               R'000      R'000    % move   
Revenue                                                       11 928      7 789      53.9   
Commissions and research expenses                              (355)      (557)    (36.3)   
Operating expenses*                                         (24 314)   (21 442)      13.4   
Net loss from operations                                    (12 741)   (14 210)    (10.8)   
Other income                                                      25          -         -   
Profit before interest, depreciation and                                                    
amortisation                                                (12 716)   (14 210)    (15.1)   
Interest income                                                  593      1 339    (55.7)   
Finance costs                                                      -      (195)   (100.0)   
Depreciation and amortisation                                (4 183)    (2 776)      50.7   
Loss before fair value, impairments and                                                     
guaranteed adjustments                                      (16 306)   (15 842)     (1.2)   
Share of net profit of joint ventures
accounted for using the equity method                          (336)      (195)      72.3   
Loss before tax                                             (16 642)   (16 037)     (0.3)   
Current and deferred tax                                       4 230      2 123      99.2   
Loss after tax                                              (12 412)   (13 914)    (15.5)   

-  EasyEquities revenue was up 53.9%.
-  Total expenses increased by 12.1% primarily due to higher employment related costs
   and marketing expenses. The increase in employment costs relates to additional
   resources employed during the second half of FY2018 to support new products
   launched and the increased volumes experienced by the business, as employment
   costs during the last six months remained flat. The higher marketing expense resulted
   from a radio campaign conducted during September/October 2018.
-  Management is focused on containing the cost base currently and working on
   initiatives to decrease costs where possible.

GT247.com condensed statement of profit or loss

                                                              HY2019     HY2018             
                                                               R'000      R'000    % move   
Revenue                                                       34 820     24 273      43.5   
Trading revenue                                               33 127     23 425      41.4   
Asset management execution revenue                             1 673        743     125.2   
Other revenue                                                     20        105    (81.0)   
Commissions and research expenses                            (1 052)    (1 543)    (31.8)   
Operating expenses*                                         (16 447)   (19 771)    (16.8)   
Net income from operations                                    17 321      2 959     485.3   
Profit before interest, depreciation and                                                    
amortisation                                                  17 321      2 959     485.3   
Finance costs                                                      -      (114)   (100.0)   
Depreciation and amortisation                                  (464)      (533)    (12.9)   
Profit before tax                                             16 857      2 312     629.1   
Current and deferred tax                                     (4 334)      (314)   1 280.3   
Profit after tax                                              12 523      1 998     526.7   

-  Trading revenue is up 41.4% compared to the prior comparative period, driven by
   increased market volatility, specifically for the first four months of the financial year.
-  Total expenses are 17.9% lower due to various cost saving initiatives implemented
   over the past 24 months. Compared to the six months ended 28 February 2016, total
   costs in respect of this business have decreased by 31%.

Emperor Asset Management condensed statement of profit or loss

                                                   HY2019          HY2018                   
                                                    R'000           R'000          % move   
Revenue                                             1 822           2 144          (15.0)   
Trading expenses                                    (224)           (314)          (28.7)
Operating expenses*                               (2 052)         (2 952)          (30.5)
Net loss from operations                            (454)         (1 122)          (59.5)   
Other income                                            -               -               -   
Loss before depreciation and amortisation           (454)         (1 122)          (59.5)   
Depreciation and amortisation                        (16)            (10)            60.0   
Loss before fair value, impairments and                                                     
guaranteed adjustments                              (470)         (1 132)          (58.5)   
Fair value adjustments                              (396)               -               -   
Loss before tax                                     (866)         (1 132)          (23.5)   
Current and deferred tax                              497             152           227.0   
Loss after tax                                      (369)           (980)          (62.3)   

-  With lower revenue levels than previous periods, due to a decrease in client funds
   invested in its leveraged strategies, Emperor is focused on building its distribution
   through the EasyEquities platform and targeting institutional asset management
   mandates with its range of new portfolios, which cater to the full risk/reward
   spectrum.
-  Emperor has increased its assets under management on the EasyEquities platform by
   150% (to R35 million) compared to the prior comparative period.

Purple Group head office and investments condensed statement of profit or loss

                                                              HY2019     HY2018             
                                                               R'000      R'000    % move   
Revenue                                                           55         58     (5.2)   
Commissions and research expenses                               (29)          -         -   
Operating expenses                                           (7 137)    (4 663)      53.1   
Net loss from operations                                     (7 111)    (4 605)      54.4   
Other income                                                       -      3 444   (100.0)   
Loss before interest, depreciation and                                                      
amortisation                                                 (7 111)    (1 161)     512.5   
Finance costs                                                (4 026)    (3 470)      16.0   
Depreciation and amortisation                                   (14)       (23)    (39.1)   
Loss before fair value, impairments and                                                     
guaranteed adjustments                                      (11 151)    (4 654)     139.6   
Fair value, impairments and guarantee                                                       
adjustments                                                        -    (8 113)   (100.0)   
Loss before tax                                             (11 151)   (12 767)    (12.7)   
Current and deferred tax                                       1 759      5 823    (69.8)   
Loss after tax                                               (9 392)    (6 944)      35.3   

-  Operating expenses have increased by 53.1% (R2.5 million), which includes capital-raising
   fees and corporate advisory fees totalling R2.9 million, which are of a non-recurring nature.
-  Other income in the prior period includes a profit of R3.4 million realised by Purple Group
   in respect of its investment in Misty Sea Trading.
-  The fair value, impairments and guarantee adjustment in the prior period related to
   Purple Group increasing the estimated value of its liability to the Industrial Development
   Corporation of South Africa ("IDC") by R8.1 million, after final agreement in this regard had
   been agreed with the IDC.

Segmental balance sheets

                                                                         Purple
                                         GT247.com                    Group and      2019
                                           and EAM   EasyEquities   Investments     Total
                                             R'000          R'000         R'000     R'000   
As at 28 February 2019                                                                      
Segment asset                                                                               
Non-current assets                           9 554         53 225       271 607   334 386   
Current assets                              57 397         55 770         1 816   114 983   
Total assets                                66 951        108 995       273 423   449 369   
Segment liabilities                                                                         
Non-current liabilities                          -              -        37 922    37 922   
Current liabilities                         49 617         53 509        21 220   124 346   
Total liabilities                           49 617         53 509        59 142   162 268   

SUBSEQUENT EVENTS

The directors are not aware of any other matter or circumstances arising since
28 February 2019 up to the date of this announcement, not otherwise dealt with in this
announcement.

Basis of preparation of the unaudited results

The unaudited condensed Group interim financial statements are prepared in accordance
with the recognition and measurement requirements of International Financial Reporting
Standards ("IFRS"), the presentation and disclosure requirements of IAS 34 - Interim
Financial Reporting, the SAICA Financial Reporting Guides as issued by the Accounting
Practices Committee and Financial Reporting Pronouncements as issued by the Financial
Reporting Standards Council, the Listings Requirements of the JSE Limited and the
requirements of the South African Companies Act, 71 of 2008.

This announcement does not include the information required pursuant to
paragraph 16A(j) of IAS 34, however, the areas that include significant judgements made
by management in applying the Group's accounting policies and key sources of estimation
uncertainty were the same as those that were identified in the audited consolidated
annual financial statements as at and for the year ended 31 August 2018, and which are
available on the Company's website, at its registered office and upon request.

Accounting policies which comply with IFRS have been applied consistently by all entities
in the Group and are consistent with those applied in the previous financial year except
for the adoption of IFRS 9 and IFRS 15. The preparation of these unaudited condensed
Group interim financial statements for the six months ended 28 February 2019 was
supervised by the Financial Director, Gary van Dyk CA (SA) and have not been reviewed or
reported on by the company's external auditors.

Any forward-looking statements contained in this announcement have not been reviewed
or reported on by the Company's external auditors.

The directors take full responsibility for the preparation of the unaudited consolidated
results for the six months ended 28 February 2019.

On behalf of the board

Happy Ntshingila (Independent Non-executive Chairman)
Charles Savage (Chief Executive Officer)
Gary van Dyk (Chief Financial and Operations Officer)

Johannesburg
17 April 2019

CONDENSED GROUP STATEMENT OF FINANCIAL POSITION
For the six months ended 28 February 2019

                                                      Unaudited     Unaudited     Audited   
                                                     six months    six months   12 months   
                                                    28 February   28 February   31 August   
                                                           2019          2018        2018   
                                                          R'000         R'000       R'000   
ASSETS                                                                                      
Equipment                                                 3 753         2 620       3 944   
Intangible assets and goodwill                          253 947       240 607     248 838   
Other investments                                        13 781        12 208      13 781   
Investment in Joint Venture                               1 154             -         631   
Other financial assets                                    2 867         1 013       2 824   
Deferred tax assets                                      58 884        53 629      56 289   
Total non-current assets                                334 386       310 077     326 307   
Trade and other receivables                              12 451        13 897      23 645   
Tax receivable                                            2 540         2 831       2 983   
Other investments                                         3 546         3 439       3 942   
Other financial assets                                      742         1 919         742   
Cash and cash equivalents                                95 704       205 249     107 333   
Total current assets                                    114 983       227 335     138 645   
Total assets                                            449 369       537 412     464 952   
EQUITY AND LIABILITIES                                                                      
Share capital and premium                               464 023       464 022     464 023   
Accumulated loss                                      (238 879)     (222 931)   (232 717)   
Equity component of compound instrument                   3 496             -       3 496   
Other reserves                                           35 877        30 935      33 614   
Equity attributable to owners                           264 517       272 026     268 416   
Non-controlling interest                                 22 584        29 532      26 073   
Total equity                                            287 101       301 558     294 489   
Financial guarantee                                           -        20 500           -   
Borrowings                                               37 922             -      40 284   
Total non-current liabilities                            37 922        20 500      40 284   
Bank overdraft                                           12 796        14 499       4 080   
Financial guarantee                                           -        16 499           -   
Trade and other payables                                 35 571        40 419      22 061   
Client position liability                                68 004       138 937      79 716   
Borrowings                                                7 975         5 000      24 322   
Total current liabilities                               124 346       215 354     130 179   
Total equity and liabilities                            449 369       537 412     464 952   
Net asset value per ordinary share (cents)                31.97         33.58       32.51   

CONDENSED GROUP STATEMENT OF CASH FLOWS
For the six months ended 28 February 2019

                                                     Unaudited     Unaudited      Audited
                                                    six months    six months    12 months
                                                   28 February   28 February    31 August
                                                          2019         2018          2018  
                                                         R'000        R'000         R'000   
Cash flow generated/(utilised) by operating                                                 
activities                                              12 096        (195)      (77 310)   
Cash flow generated/(utilised) in investing                                                 
activities                                            (10 453)       68 656      (19 846)   
Cash flow generated/(utilised) in financing                                                 
activities                                            (21 954)      (4 889)        73 642   
Net decrease in cash and cash                                                               
equivalents                                           (20 311)       63 572      (23 514)   
Effect of foreign exchange on cash                        (34)            -         (411)   
Cash and cash equivalents at the beginning                                                  
of the period                                          103 253      127 178       127 178   
Cash and cash equivalents at the end                                                        
of the period                                           82 908      190 750       103 253   

CONDENSED GROUP STATEMENT OF CHANGES IN EQUITY
for the six months ended 28 February 2019

                                                      Unaudited     Unaudited     Audited   
                                                     six months    six months   12 months   
                                                    28 February   28 February   31 August   
                                                           2019          2018        2018   
                                                          R'000         R'000       R'000   
Balance at beginning of the period                      268 416       238 312     238 312   
Shares issued                                                 -             -           -   
Profit/(loss) for the period                            (6 162)      (16 828)      40 789   
Share-based payments                                      2 297         2 999       5 528   
Foreign currency translation reserve                       (34)         (562)       (411)   
Own shares purchased                                          -      (19 299)    (19 298)   
Reserve generated from minority share                                                       
of subsidiary                                                 -        67 404           -   
Equity component of compound instrument                       -             -       3 496   
Attributable to owners of the parent                    264 517       272 026     268 416   
Balance at beginning of the period                     (26 073)             -           -   
Loss for the period                                     (3 489)       (3 012)     (6 471)   
Reserve generated from sale of minority                                                     
share of subsidiary                                           -        32 544      32 544   
Non-controlling interest                                 22 584        29 532      26 073   
Total equity                                            287 101       301 558     294 489   

CONDENSED GROUP STATEMENT OF COMPREHENSIVE INCOME
for the six months ended 28 February 2019

                                                     Unaudited     Unaudited      Audited
                                                    six months    six months    12 months
                                                   28 February   28 February    31 August
                                                          2019          2018         2018
                                                         R'000         R'000        R'000   
Loss for the period                                    (9 651)      (19 840)     (33 138)   
Other comprehensive income                                                                  
Items that may be reclassified subsequently                                                 
to profit/loss                                                                              
Foreign currency translation reserve                      (34)         (562)        (411)   
Available-for-sale assets sold                               -             -            -   
Tax effect                                                   -             -            -   
Total other comprehensive loss                            (34)         (562)        (411)   
Total comprehensive loss                               (9 685)      (20 402)     (33 549)   
Total comprehensive loss attributable to:                                                   
Owners of the company                                  (6 196)      (17 390)     (27 078)   
Non-controlling interest                               (3 489)       (3 012)      (6 471)   
                                                       (9 685)      (20 402)     (33 549)   

Registered office
16th Floor, 25 Owl Street, Braamfontein Werf, 2092

Independent auditors
BDO South Africa Incorporated
Chartered Accountants (SA)
Registered Auditors
22 Wellington Road, Parktown, 2193, Private Bag X60500, Houghton, 2041

Group secretary and transfer secretaries
4 Africa Exchange Registry Proprietary Limited
Ballywoods Office Park
33 Ballyclare Dr
Bryanston

Sponsor
Deloitte & Touche Sponsor Services Proprietary Limited
Building 8, Deloitte Place, The Woodlands, 20 Woodlands Drive, Woodmead, 2196
Private Bag X6, Gallo Manor, 2052

Directors
Mark Barnes                     Non-executive Director
Charles Savage                  Chief Executive Officer
Gary van Dyk                    Chief Financial and Operations Officer
Craig Carter                    Independent Non-executive Director
Happy Ntshingila                (Chairman) Independent Non-executive Director (appointed: 7/2/2019)
Bonang Mohale                   Non-executive Director (appointed: 7/2/2019)
Arnold Forman                   Independent Non-executive Director (appointed 7/2/2019)
Ronnie Lubner                   Non-executive Director (deceased: 27/12/2018)
Denise Alter                    Independent Non-executive Director (resigned: 7/2/2019)

These unaudited results are available on the Company's website:
http://www.purplegroup.co.za



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