think efficient. realise potential. · services value chain. + the group’s national distribution...

UNAUDITED INTERIM FINANCIAL RESULTS For the six months ended 28 February 2019

Think Efficient. Realise potential.

Profit share cancellation transactionCreated Efficient Med and Efficient Insure

Acquired Vital Wealth and Vital Consult

Created Efficient Benefit Consulting

Acquired Secure Capital Investments and W-Allen White

Efficient Advise renamed to Efficient Wealth

Created Efficient Private Clients

Acquired interest in ARX (now Select Manager)

Sold interest in Marion

Created Efficient Board of Executors

Acquired Verso Investment Services

Acquired interest in A S Sure

Created Boutique Collective Investments and

Boutique Investment Partners

Acquired interest in Marion

Acquired Efficient Advise Port Elizabeth

Established Legal and Compliance division

Increased distribution network through Efficient Advise

Invested in building distribution

Listed on the JSE2009

2015

2012

2018

2010

2016

2013

2011

2017

2014

EFFICIENT GROUP TIMELINE

01INTRODUCTION TO EFFICIENT GROUP

KEY FACTS 4

KEY PERFORMANCE INDICATORS 4

INVESTMENT CASE 5

02ABOUT EFFICIENT GROUP

GROUP OPERATING STRUCTURE 6

EFFICIENT FOOTPRINT 7

BUSINESS STRATEGY 8

THE REPORTING PERIOD AT A GLANCE 9

03PERFORMANCE REVIEW

FINANCIAL COMMENTARY 10

BUSINESS SEGMENTAL RESULTS 12

DIVIDENDS 15

04GOVERNANCE

CHANGES TO THE BOARD OF DIRECTORS 15

05UNAUDITED INTERIM FINANCIAL RESULTS 16

06COMPANY INFORMATION Back

CONTENTS

4 EFFICIENT GROUP INTERIM RESULTS 2019

KEY FACTS

+ Established in 2003 and listed on JSE in 2009 (EFG)

+Market capitalisation R407 million (28 February 2019)

+ >69 000 clients across all sectors

+ 230 financial advisors

+ 456 full-time employees

+National footprint

+ Three-cluster structure to meet client needs, across the full financial services value chain

KEY PERFORMANCE INDICATORS

REVENUE:

(5%) 2018: R549 million

RECURRING* HEADLINE EARNINGS PER SHARE:

94% 2018: 22.79 cents

ASSETS UNDER ADMINISTRATION:

5% 2018: R103.9 billion

ASSETS UNDER MANAGEMENT:

(13%)2018: R19.6 billion

NUMBER OF ADVISORS:

(4%) 2018: 240

R524 million R39 million

44.18 cents R19.5 billion

R6 million

R109.6 billion

R17.0 billion

230

R28.0 billion

RECURRING* HEADLINE EARNINGS:

91% 2018: R21 million

ASSETS UNDER ADVICE:

5% 2018: R18.6 billion

ASSETS UNDER CONSULTING:

3% 2018: R27.2 billion

CASH GENERATED BY OPERATIONS:

(75%) 2018: R23 million

*Excluding the impact of the cancellation of the profit share agreement in the Investments cluster and other once-off adjustments

(Compared to the six months ended 28 February 2018)

5EFFICIENT GROUP INTERIM RESULTS 2019

Market leader

Annuity-based earnings

Acquisitive growth strategy

Attractive return on equity

Strong brand reputation

Well-positioned for regulatory reform

Intrapreneurial culture

Diversified/multi-disciplinary

Full financial services value chain

Liquidity in process of improving

“Intrapreneur” – the opportunity to act like an entrepreneur within a formal, regulated organisation.

INV

ES

TM

EN

T C

AS

E

EFFICIENT GROUPThink Efficient. Realise potential.

Our visionTo be a leading financial services business that creates value for our clients through a comprehensive financial services offering.

Our missionTo be open to our stakeholders’ needs through a client-centred and intrapreneurial business model attuned to sustainable growth and profitability.


Efficient Group was established in 2003, primarily as an asset management company. In 2009 we listed on the JSE in order to raise capital to build an in-house retail distribution network. Today, we are a leading diversified financial services group focused on professional advice, quality solutions and tailor-made investment products across the full financial services value chain. Operating through three clusters — Financial Services, Solutions, Investments — we service over 69 000 clients across South Africa and employ 448 people including 230 registered financial advisors.

GROUP OPERATING STRUCTURE

* The entire issued share capital in the Efficient IDS entity has been sold with effect from 1 March 2019.

Naviga Solutions

Boutique Collective Investments

Efficient Board of Executors

Efficient Benefit Consulting

Secure Capital Investments

*


+ Financial advice, services and solutions needs

CLIENTS

+ Financial advisors providing professional financial planning and services to clients

+ Financial advisors recommending suitable financial solutions

FINANCIAL SERVICES

+ Providing value-added financial services to clients via financial planners

+ Supporting financial planners in providing professional services to clients

SOLUTIONS

+ Competitively positioned financial services solutions

INVESTMENTS

Financial Services Value Chain

Efficient Group Financial Services Cluster

Efficient Group Solutions Cluster

Efficient GroupInvestments Cluster

EFFICIENT FOOTPRINT

= EFFICIENT WEALTH OFFICES

Naviga Solutions



Efficient Wealth HO

Efficient Group HO

Efficient Private Clients




Collective Investments

Select Manager


Boutique

Efficient Benefit Consulting

W-Allen White Brokers

GAUTENG

LIMPOPO

MPUMALANGA

KWAZULU-NATAL

NORTH WEST

NORTHERN CAPE

WESTERN CAPE

EASTERN CAPE

FREE STATE


The business strategy of Efficient Group is to be a diversified financial services provider offering customised products, professional services and added value throughout the financial services value chain. In order to be optimally positioned to do this, the Group adopted its Vision 2020 strategy in 2015.

Since then, we have focused on implementing this strategy in order to ensure that the business remains relevant, competitive and sustainable within a constrained economic environment. While our focus is appropriately strategic, we recognise the need to be responsive to changes in the operating environment, as well as flexible in the implementation of our strategy. It was for this reason that we initiated an extensive restructuring of the Financial Services cluster during the course of the 2017 financial year with, amongst other objectives, consolidating various brands and entities within this cluster. This process was successfully concluded in the 2018 financial year.

We also continue to align our strategy, structure, solutions and services with developing megatrends that are redefining the financial services sector worldwide. With this in mind, we continue to emphasise the value of intrapreneurship, being able to act like an entrepreneur within a larger organisation, both to our clients and to our business. This approach enables each of the three clusters to function independently and to be responsive to client and market needs. In a rapidly changing environment, a strong reputation and integration throughout the value chain will remain the most important determinants of success. Our strategy, therefore, focuses not only on consolidating the acquisitions and operational changes we have made over the years, but also on continuing to secure the kind of strong corporate culture on which sustainable reputations are built.

In order to achieve our goals, we will continue to focus on the core aspects of our business: delivering client-centred and customised solutions; maintaining a solid yet flexible operational structure; extending our national footprint; expanding into new sectors; and growing both organically as well as through merger and acquisition.

BUSINESS STRATEGY


STRATEGY

+ Efficient Group’s strategic objective remains to be a leading diversified financial services provider with a national footprint.

+ The Group’s short- and medium-term objectives, as defined in its Vision 2020 strategy of 2015 remain applicable.

+ All aspects of the strategy are being implemented on an ongoing basis.

BUSINESS DEVELOPMENT

+ The consolidation in the Financial Services cluster has been completed.

+ In line with the expected outcomes of the Retail Distribution Review we have rebranded the cluster under one primary brand, Efficient Wealth, which we expect to be classified under the Retail Distribution Review as a Registered Financial Advisor (RFA) model.

+ In addition to Efficient Med which was launched on 1 January 2018 in the newly-established Financial Planning Centre, Efficient Insure was launched in the reporting period to provide services to the clients of Efficient Wealth.

+ Boutique Business Development, consisting of the highly-rated and successful sales and distribution team of Boutique Collective Investments, expanded their services to growing distribution and sales of selected Group services to the national network of Efficient Wealth financial planners.

OPERATIONS

+ We are continuing with our Vision 2020 strategy in order to align the business’s structure with its strategic objectives and the financial services value chain.

+ The Group’s national distribution footprint was strengthened and expanded.

+ The development of Efficient Group’s proprietary software, FutureSight, is ongoing.

COMMUNICATION

+ The Group has a well-established internal and external communication programme, and has a special focus on soliciting and responding to client feedback.

+ Strong focus on integrating and consolidating corporate culture to align with values.

GOVERNANCE

+ The Group commenced training and commissioned a gap analysis of the King IV requirements. The gap analysis included testing the relevant policies and statutory documents against the principles and recommended practices of King IV.

+ Treating Customers Fairly (TCF) is a natural extension to our vision of becoming a leading financial services business through a client-centred and entrepreneurial business model, attuned to sustainable growth and profitability. In this regard, a roll-out plan for the implementation of TCF and reinforcement of a TCF culture was designed and approved.

THE REPORTING PERIOD AT A GLANCE


OVERVIEW

Profit for the six months ended 28 February 2019 (“the reporting period”) is 14% higher compared to the six months ended 28 February 2018 (”the comparative period”) and operating profit doubled to R54 million. Group revenue reduced by 5% during the reporting period and the Group was able to achieve slightly higher margins of 28.2% compared to 27.8% for the comparative period. Net tangible assets per share decreased from 33.21 cents per share at 31 August 2018 to a net tangible liability of 133.12 cents per share at the end of the reporting period.

Feb 2019 Feb 2018 Aug 2018

Assets under Advice R19.5 billion R18.6 billion R20.1 billion

Assets under Management R17.0 billion R19.6 billion R19.5 billion

Assets under Administration R109.6 billion R103.9 billion R109.8 billion

Assets under Consulting R28.0 billion R27.2 billion R30.1 billion

Total Assets R174.1 billion R169.3 billion R179.5 billion

Total assets were up 3% from February 2018 and down 6% compared to total assets as at 31 August 2018. The retraction of the JSE All Share Index of 3% over the comparative period and 4% since 31 August 2018, impacted the growth in the Group’s assets.

FINANCIAL RESULTS

STATEMENT OF COMPREHENSIVE INCOME

The Group generated a net profit after tax of R22 million for the reporting period, compared to a net profit after tax of R19 million for the comparative period.

The Group reported headline earnings of R22 million for the reporting period (February 2018: R19 million). Headline earnings per share was calculated at 24.90 cents per share (February 2018: 22.31 cents per share).

As explained in our 2018 integrated report, the Group exercised its right to cancel the profit share arrangement with Efficient Invest by entering into a profit share cancellation agreement (“PSA”). Operating profit doubled as a result of the PSA. After adding back the cost (cancellation fee and finance cost) associated with the PSA, the Group reported recurring headline earnings of 44.18 cents per share (February 2018: 22.79 cents per share).

Revenue of R524 million was 5% lower than revenue reported for the comparative period. The Financial Services cluster achieved revenue growth of 2%, while aggregated revenue from the Solutions and Investment clusters decreased due to lower assets under management. Operating expenses consist of:

Unaudited six monthsended 28-Feb-19

R’000

Unaudited six monthsended 28-Feb-18

R’000

%Change

Audited yearended 31-Aug-18

R’000

Fixed expenses 79 047 70 355 12% 149 450Profit share 529 43 035 (99%) 76 844Staff incentives 5 836 4 960 18% 18 352Non-cash flow expenses 8 738 8 331 5% 17 182Operating expenses 94 150 126 681 (26%) 261 828

Fixed expenses increased by 12% mainly due to the changes in the Financial Services cluster, ensuring sufficient and appropriate resources after the consolidation of the different financial services providers (FSP’s).

Staff incentives are provided for based on the business unit performance against its target and the outperformance of its targets. It is expected that business units will achieve their year-end targets. The increase in the provision for incentives is in line with higher profits generated by the business units.

The profit share provision in the reporting period is linked to the performance of the registered financial advisors (RFA’s) in the branch model in the Financial Services cluster, whilst the profit share payments for Efficient Invest was included in the comparative period.

Non-cash flow expenses consist of amortisation costs and depreciation.

FINANCIAL COMMENTARY


STATEMENT OF CASH FLOWS

The Group generated cash of R62 million from operating activities during the six months under review and paid net finance costs of R11 million and tax of R3 million. Cash generated from operating activities was reduced by R56 million due to the increase in working capital as a result of the payment of the final profit share to Efficient Invest, after August 2018.

Cash of R16 million was used as follows: + Investment activities that mainly consisted of the acquisitions of independent financial advisor client bases, decrease of

loans receivable and acquisition of property plant and equipment.

+ Financing activities that mainly consisted of share repurchases, the repayment of long-term liabilities and payment of a dividend.

+ The repayment of the profit share cancellation liabilities was partially financed by a loan from Standard Bank.

STATEMENT OF FINANCIAL POSITION

Debt increased by R273 million to fund the PSA and resulted in a net tangible liability of 133.12 cents per share at the end of the reporting period.

At 28 February 2019 current liabilities exceeded current assets by R19 million. Included in the current liabilities is an amount related to the convertible loan that is payable at the end of August 2019 and in the event that it is not paid, it will convert into ordinary shares per agreement. Management also assessed the Group’s cash flow forecast and is of the opinion that the Group will be able to settle its short-term commitments as and when they become due.


FINANCIAL SERVICES

Nature of Business

Delivers comprehensive financial planning and management solutions. Distributes proprietary and third party financial products to identified target markets through a national network of financial advisors.

Business Units (Majority Shareholding)

+ Efficient Wealth + W-Allen White + Secure Capital Investments

Services

+ Cash management + Employee benefits + Estate planning + Financial planning + Healthcare + Investment management + Life and business assurance + Retirement planning + Short-term insurance + Stockbroking + Trust and executorship

Strategy

+ Consolidate existing FSP’s + Adopt a single brand (“Efficient Wealth”) + Grow retail distribution footprint + Entrench the Efficient Experience culture + Increase profitability

Clients

Private, institutional, SME and corporate clients

Financial Performance

The cluster managed to maintain the same level of revenue and gross contribution compared to the six months ended 28 February 2018, despite tough market conditions. As the cluster’s focus was on the consolidation of its various FSP’s in the period thereafter, including the current reporting period, additional costs were incurred to ensure that the cluster has sufficient and appropriate resources. In addition to this, during the comparative period, the cluster’s performance included gains from once-off transactions, including the sale of a financial advisory client base.

Six months ended

Feb 2019

Six months ended

Feb 2018

% Change 12 months ended

Aug 2018

Number of employees 367 365 1% 364

Assets under Advice (AUA) R’000

19 464 000 18 553 000 5% 20 086 000

Revenue R’000 115 522 112 820 2% 226 857

Profit for the period R’000

446 7 215 (94%) 5 382

BUSINESS SEGMENTAL RESULTS


SOLUTIONS

Nature of Business

Delivers customised, value-added financial services and solutions to retail, corporate and institutional clients.


+ Naviga Solutions + Select Manager + Efficient Benefit Consulting + Efficient Board of Executors + Efficient Private Clients + Efficient Med (Division of Efficient Wealth) + Efficient Insure (Division of Efficient Wealth)

Services

+ Model portfolios (wrap funds) + Multi-managed funds + Share portfolios + Trusts and wills + Deceased estates + Employee benefit consulting services

Strategy

+ Create and package quality value propositions for the retail market + Market and distribute the value propositions through the Group’s distribution

businesses and through independent financial advisors + Secure vertical integration through proprietary solutions and services + Diversify revenue streams

Clients

Financial advisors and private, institutional and corporate clients


The transfer of Select Manager from the Investments cluster to the Solutions cluster is the main contributor to the increase in this cluster’s AUM, revenue and profit for the period, compared to that for the six months ended 28 February 2018.

Six months ended

Feb 2019

Six months ended

Feb 2018


Aug 2018

Number of employees 23 21 10% 22

Assets under Management (AUM) R’000

8 052 000 6 650 000 21% 8 927 000

Assets under Consulting (AUC) R’000

134 000 - > 100% 130 000

Revenue R’000 28 357 17 157 65% 54 238

Profit/(loss) for the period R’000

3 228 (270) > 100% 3 690


INVESTMENTS

Nature of Business

Executes administration, consulting, management and distribution of co-branded collective investments to both retail and institutional investors.


+ Boutique Collective Investments + Boutique Investment Partners + Efficient Select

Services

+ Fund administration + Fund management + Investment consulting + Multi-management

Clients

Financial advisors and private, institutional and corporate clients

Strategy

+ Grow assets under administration, management and consulting + Facilitate and identify consolidation opportunities in the asset management space


The cluster’s AUM, revenue and profit for the period decreased compared to 28 February 2018 due to Select Manager being transferred from the Investments cluster to the Solutions cluster, in addition to tough market conditions which negatively impacted the performance.

Six months ended

Feb 2019

Six months ended

Feb 2018


Aug 2018

Number of employees 36 38 (5%) 37

Assets under Management (AUM) R’000

8 920 000 12 965 000 (31%) 10 609 000

Assets under Administration (AUAdmin) R’000

109 610 000 103 912 000 5% 109 848 000

Assets under Consulting (AUC) R’000

27 846 000 27 158 000 3% 29 980 000

Revenue R’000

414 762 456 877 (9%) 879 900

Profit/(loss) for the period R’000

15 881 18 385 (14%) (287 159)

BUSINESS SEGMENTAL RESULTS (continued)


DIVIDENDSThe Group’s dividend policy is to pay a dividend equal to 80% of free cash flow. Free cash flow is calculated after making provision for cash reserves, planned capital expenditure, acquisitions and debt repayments.

Based on this guideline, the directors determined that no interim dividend be paid to allow the company to repay debt.

CHANGES TO THE BOARD OF DIRECTORSMr Stephen Rushton resigned as a non-executive director with effect from 6 December 2018, following the disposal by Thebe Investment Corporation Proprietary Limited of its entire beneficial interest in the securities of the Company. The Board would like to thank Mr Stephen Rushton for his valued contribution to the Group.

The Board welcomes Mr Erol Zeki as newly appointed non-executive director and Ms Bongiwe Momoza as alternate director to non-executive director, Mr Erol Zeki. Both were appointed on 13 February 2019.

The unaudited interim results for the six months ended 28 February 2019 were approved by the board of directors on 30 April 2019 and are signed on their behalf by:

Steve Booysen Heiko Weidhase

Chair Chief Executive Officer

30 April 2019 30 April 2019


UNAUDITED INTERIM FINANCIAL RESULTSFor the six months ended 28 February 2019

SUMMARISED STATEMENT OF COMPREHENSIVE INCOME

R’000

Notes

UnauditedSix months

ended28-Feb-19

UnauditedSix months

ended28-Feb-18

%Change

AuditedYear

ended31-Aug-18

Revenue 523 776 548 512 (5%) 1 083 506 Asset management and consultation fees 18 448 30 495 45 069 Asset administration fees 364 526 389 820 762 310 Financial services income 112 589 110 620 221 579 Income from solutions 26 307 15 965 50 595

Other revenue 1 906 1 612 3 953

Variable expenses (376 066) (395 983) (778 561)Gross profit 147 710 152 529 (3%) 304 945 Operating expenses (94 150) (126 681) (261 828)Fixed expenses (79 047) (70 355) (149 450)Profit share (529) (43 035) (76 844)Staff incentives (5 836) (4 960) (18 352)Non-cash flow expenses (8 738) (8 331) (17 182)Share of (losses)/profits from investments in equity-accounted associates, net of taxation (20) 540 913 Operating profit 53 540 26 388 >100% 44 030 Non-operating items (8 293) 261 (445 299)Dividend income on other investments 61 38 25 Profit on disposal of equipment 21 214 - Profit on disposal of customer contracts and customer relationships

- 1 342 1 342

Commission-agreement cancellation expense - - (1 710)Realised fair value adjustments on available-for-sale investments - (6) - Fair value adjustments on investments at fair value through profit or loss

(1) (190) (97)

Re-measurement of loans and borrowings at fair value through profit or loss

- (1 471) 1 486

Gain on settlement of loans and borrowings at amortised cost - - 562 Bad debts expense - - (5 665)

BASIS OF PREPARATIONThe interim results for the six months ended 28 February 2019 are presented on a consolidated basis and are prepared in accordance with the recognition and measurement requirements of International Financial Reporting Standards and presentation and disclosure requirements of IAS 34 (Interim Financial Reporting), the JSE Listings Requirements, the Companies Act of South Africa and the SAICA Financial Reporting Guides as issued by the Accounting Practices Board. The accounting policies applied are consistent with those applied in the previous interim period and previous financial year-end, except where indicated differently. 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, KPMG Inc. The summarised unaudited interim financial results are prepared by Yazeed Patel CA(SA), the Group Financial Manager of Efficient Group.


SUMMARISED STATEMENT OF COMPREHENSIVE INCOME

R’000

Notes

UnauditedSix months

ended28-Feb-19

UnauditedSix months

ended28-Feb-18

%Change

AuditedYear

ended31-Aug-18

Non-operating items

Other (expenses)/ income (6) 334 2 158 Impairment of goodwill - - (350)Impairment of investments in equity-accounted associates - - (320)Profit-share cancellation expense 1 (8 333) - (430 000)

Transaction costs on profit-share cancellation (35) - (12 730)

Profit/(loss) before net finance income 45 247 26 649 >100% (401 269)Net finance (costs)/income (16 185) 1 030 1 558 Finance income 3 379 2 358 7 123 Finance costs (19 564) (1 328) (5 565)

Profit/(loss) before taxation 29 062 27 679 5% (399 711)Taxation (7 441) (8 760) 111 638 Profit/(loss) for the period 21 621 18 919 14% (288 073)

Other comprehensive income

Items that may subsequently be reclassified to profit or loss - - (186)Unrealised fair value adjustments on available-for-sale investments

- - (256)

Related taxation - - 70 Items that may not be subsequently reclassified to profit or loss - - 5 093 Revaluation of property - - 7 073 Related taxation - - (1 980)Other comprehensive income, net of taxation for the period - - 4 907

Total comprehensive income/(loss) for the period 21 621 18 919 (283 166)

Profit/(loss) for the period attributable to:

Equity holders of the parent 22 131 20 097 (285 946)Non-controlling interests (510) (1 178) (2 127)

21 621 18 919 (288 073)

Total comprehensive income/(loss) for the period attribut-able to:

Equity holders of the parent 22 131 20 097 (281 039)Non-controlling interests (510) (1 178) (2 127)

21 621 18 919 (283 166)

Basic earnings/(loss) per share (cents) 2 24.90 22.31 12% (317.91)Diluted earnings/(loss) per share (cents) 2 19.47 22.31 (13%) (317.91)Headline earnings/(loss) per share (cents) 2 24.88 21.15 18% (318.18)

Diluted headline earnings/(loss) per share (cents) 2 19.46 21.15 (8%) (318.18)



SUMMARISED STATEMENT OF FINANCIAL POSITION

R’000 Notes UnauditedSix months

ended28-Feb-19

UnauditedSix months

ended28-Feb-18

%Change

AuditedYear

ended31-Aug-18

Assets

Non-current assets

Property and equipment 3 62 486 54 164 62 596 Goodwill 4 155 611 154 076 154 981 Intangible assets 5 117 841 126 105 123 202

Unit-linked and other investments 2 380 328 2 393

Investments in equity-accounted associates 6 402 7 177 6 422 Loans receivable 1 312 3 087 1 448 Deferred tax assets 6 132 174 24 994 138 933

478 206 369 932 29% 489 975 Current assets

Unit-linked and other investments 2 017 1 157 1 092 Trade and other receivables 88 204 90 542 97 780 Cash and cash equivalents 59 528 90 066 82 900 Short-term portion of loans receivable 1 009 2 030 1 539 Current tax receivable 105 318 592

150 863 184 113 183 903

Total assets 629 069 554 045 14% 673 878

Equity and liabilities

Equity

Share capital and share premium 7 144 434 148 645 145 809 Treasury share reserve (532) (532) (532)Fair-value adjustment reserve (185) 1 (185)Revaluation reserve 6 218 1 125 6 218 Convertible loan 8 138 981 - 138 981 Accumulated (loss)/income (166 513) 125 785 (182 042)Equity attributable to equity holders of the parent 122 403 275 024 108 249 Non-controlling interests 1 995 4 071 2 848 Total equity 124 398 279 095 (55%) 111 097

Non-current liabilities

Loans and borrowings 9 304 220 38 380 88 979 Provisions for onerous contracts - 19 - Deferred tax liabilities 6 30 573 31 178 31 438

334 793 69 577 >100% 120 417

Current liabilities

Convertible loan 20 578 - 19 202 Short-term portion of loans and borrowings 9 53 254 44 734 260 039 Provisions for onerous contracts 100 210 114 Trade and other payables 95 723 141 081 161 856 Current tax payable 115 11 217 998 Cash and cash equivalents 108 8 131 155

169 878 205 373 (17%) 442 364

Total liabilities 504 671 274 950 84% 562 781

Total equity and liabilities 629 069 554 045 14% 673 878

Net asset value per share (cents) 137.77 306.07 (55%) 121.39 Net tangible (liability)/asset value per share (cents) (133.12) 33.21 (>100%) (152.19)




SUMMARISED STATEMENT OF CHANGES IN EQUITY

Share capital

and share premium

Treasury share

reserve

Fair-value adjustment

reserve

Reva- luation

reserve

Convertible loan

Accumula-ted income

(loss)

Total at-tributable to equity

holders of the parent

Non-con-trolling

interests

Total equity

R'000 R'000 R'000 R'000 R'000 R'000 R'000 R'000 R'000

Balance at 31 August 2017

150 325 (532) 1 1 125 - 111 487 262 406 5 592 267 998

Transactions with owners (1 680) - - - - (5 799) (7 479) (343) (7 822)Dividends declared - - - - - (5 799) (5 799) (343) (6 142)Repurchase of shares (1 680) - - - - - (1 680) - (1 680)Total comprehensive income/(loss) for the period

- - - - - 20 097 20 097 (1 178) 18 919

+ Profit/(loss) - - - - - 20 097 20 097 (1 178) 18 919 + Other comprehensive income

- - - - - - - - -

Balance at 28 February 2018

148 645 (532) 1 1 125 - 125 785 275 024 4 071 279 095

Transactions with owners (2 836) - - - 138 981 (1 784) 134 361 (274) 134 087 Dividends declared - - - - - (1 784) (1 784) (274) (2 058)Repurchase of shares (2 836) - - - - - (2 836) - (2 836)Issue of convertible loan - - - - 138 981 - 138 981 - 138 981 Total comprehensive (loss) /income for the period

- - (186) 5 093 - (306 043) (301 136) (949) (302 085)

+ Loss - - - - - (306 043) (306 043) (949) (306 992) + Other comprehensive (loss)/income

- - (186) 5 093 - - 4 907 - 4 907

Balance at 31 August 2018

145 809 (532) (185) 6 218 138 981 (182 042) 108 249 2 848 111 097

Transactions with owners (1 375) - - - - (6 602) (7 977) (343) (8 320)Dividends declared - - - - - (6 602) (6 602) (343) (6 945)Repurchase of shares (1 375) - - - - - (1 375) - (1 375)Total comprehensive income/(loss) for the period

- - - - - 22 131 22 131 (510) 21 621

+ Profit/(loss) - - - - - 22 131 22 131 (510) 21 621 + Other comprehensive income

- - - - - - - - -

Balance at 28 February 2019

144 434 (532) (185) 6 218 138 981 (166 513) 122 403 1 995 124 398


SUMMARISED STATEMENT OF CASH FLOWS

R’000

Notes

UnauditedSix months

ended28-Feb-19

UnauditedSix months

ended28-Feb-18

%Change

AuditedYear

ended31-Aug-18

Cash flows from operating activities

Cash generated from operations 11 5 689 22 975 44 359 Finance income received 3 225 2 358 7 123 Finance costs paid (14 251) (1 328) (5 426)Dividends received from unit-linked and other investments 61 38 25 Dividends received from investments in equity-accounted associates

- - 809

Taxation paid (2 574) (10 183) (17 131)Net cash (outflow)/inflow from operating activities (7 850) 13 860 (157%) 29 759

Cash flows from investing activities

Acquisition of businesses, net of cash acquired (1 118) (3 471) (5 804)Proceeds on disposal of business - 1 495 2 030 Additional payment for business previously acquired - - (148)Proceeds from loans receivable 1 387 115 (1 903)Loans receivable advanced (576) (3 403) - Acquisition and development of intangible assets (5) (137) (238)Acquisition of unit-linked and other investments (913) 3 329 787 Acquisition and development of property (141) (2 085) (3 420)Acquisition of equipment (869) (988) (2 359)Proceeds on disposal of equipment 21 249 25 Net cash outflow from investing activities (2 214) (4 897) (55%) (11 030)

Cash flows from financing activities

Repurchase of shares (1 375) (1 680) (4 516)Proceeds from long-term liabilities 242 500 185 36 400 Repayment of long-term liabilities (5 863) (11 058) (24 692)Repayment of forward purchase and dividend liabilities (69) (4 488) (31 069)Repayment of contingent consideration liabilities - (572) (2 447)Repayment of profit-share cancellation liabilities (240 000) - - (Repayment of)/proceeds from other vendor finance liabilities (1 509) (1 314) 499 Dividends paid (6 945) (6 142) (8 200)Net cash outflow from financing activities (13 261) (25 069) (47%) (34 025)

Cash and cash equivalents movement for the period (23 325) (16 106) (15 296)Cash and cash equivalents at the beginning of the period 82 745 98 041 98 041 Cash and cash equivalents at the end of the period 59 420 81 935 (27%) 82 745

Cash and cash equivalents in current assets 59 528 90 066 82 900 Cash and cash equivalents in current liabilities (108) (8 131) (155)Cash and cash equivalents at the end of the period 59 420 81 935 (27%) 82 745




SEGMENTAL ANALYSIS

Unaudited - for the six months ended 28 February 2019

Financial Services

Solutions Investments Other Total

R'000 R'000 R'000 R'000 R'000

Revenue 115 522 28 357 414 762 (34 865) 523 776 External 111 917 10 887 399 581 1 390 523 776 Inter-group 3 605 17 469 15 181 (36 255) - Profit for the period 446 3 228 15 881 2 066 21 621 Assets 62 594 40 698 246 347 279 430 629 069

Liabilities (63 044) (24 461) (515 781) 98 615 (504 671)

Unaudited - for the six months ended 28 February 2018

Financial Services


R'000 R'000 R'000 R'000 R'000

Revenue 112 820 17 157 456 877 (38 342) 548 512 External 112 478 17 157 429 335 (10 458) 548 512 Inter-group 342 - 27 542 (27 884) - Profit/(loss) for the period 7 215 (270) 18 385 (6 411) 18 919 Assets 63 871 31 473 214 749 244 526 554 619 Liabilities (28 040) (9 972) (139 465) (98 047) (275 524)

Audited - for the year ended 31 August 2018

Financial Services


R'000 R'000 R'000 R'000 R'000

Revenue 226 857 54 238 879 900 (77 489) 1 083 506 External 219 146 17 419 843 064 3 877 1 083 506 Inter-group 7 711 36 819 36 836 (81 366) - Profit/(loss) for the period 5 382 3 690 (287 159) (9 986) (288 073)Assets 63 178 71 770 283 852 255 078 673 878 Liabilities (61 405) (27 721) (570 240) 96 585 (562 781)

Other consists of intergroup eliminations and consolidation entries, Efficient Group Limited, Efficient Capital Proprietary Limited, Efficient Group Central Services Proprietary Limited, AS Sure Investment Services Proprietary Limited, Efficient Equity Proprietary Limited, the Efficient Group Share Trust and the Efficient Ulwazi Educational Trust. All operations take place in Southern Africa.

None of the Group’s segments relies on concentrated or major clients.


NOTES TO THE UNAUDITED INTERIM FINANCIAL RESULTS

1. Profit-share cancellation

The profit-share cancellation expense relates to the cancellation of the “Joint Management and Profit Incentive Agreement” (the PS agreement) with the profit-share nominees which included a related party. The cancellation became effective on 31 August 2018. Based on the structure of the cancellation agreement, some of the payments due for cancellation were recognised immediately on 31 August 2018, whereas others were deferred. The composition of the profit-share cancellation in the Group’s financial statements are as follows:

Unaudited at 28-Feb-19


Audited at 31-Aug-18

R'000 R'000 R'000

Cancellation fee - - 366 203 Initial general employee incentive - - 12 250 Restraint fee - - 19 730 Further general employee incentive - - 12 250 Participating partner incentive - - 19 567

Nominee incentives 8 333 - -

8 333 - 430 000

2. Earnings/(loss) per share




R'000 R'000 R'000

Headline and diluted headline earnings

Attributable earnings/(loss) for equity holders of the parent 22 131 20 097 (285 946)Basic earnings 22 131 20 097 (285 946)Profit on disposal of equipment (21) (214) -

Taxation on profit on disposal of equipment 6 60 -

Profit on disposal of customer contracts and customer relationships - (1 342) (1 342)

Taxation on profit on disposal of customer contracts and customer relationships - 455 431

Impairment of goodwill - - 350

Impairment of investments in equity-accounted associates - - 320

Headline earnings/(loss) 22 116 19 056 (286 187)

Basic earnings 22 131 20 097 (285 946)

Interest on convertible loan 1 376 - -

Taxation on interest on convertible loan (385) - -

Diluted earnings 23 122 20 097 (285 946)

Profit on disposal of equipment (21) (214) -

Taxation on profit on disposal of equipment 6 60 -

Profit on disposal of customer contracts and customer relationships - (1 342) (1 342)

Taxation on profit on disposal of customer contracts and customer relationships - 455 431

Impairment of goodwill - - 350

Impairment of investments in equity-accounted associates - - 320

Diluted headline earnings/(loss) 23 107 19 056 (286 187)



NOTES TO THE UNAUDITED INTERIM FINANCIAL RESULTS




R'000 R'000 R'000

Weighted average number of ordinary shares

Ordinary shares in issue at the beginning of the period 89 495 90 593 90 593 Effect of shares repurchased during the period (280) (191) (326)Effect of treasury shares held from the beginning of the period (321) (321) (321)

Weighted average number of ordinary shares for basic earnings/(loss) and headline earnings/(loss) 88 894 90 081 89 946

Potential ordinary shares to be issued 29 846 - - Weighted average number of ordinary shares for diluted earnings/(loss) and diluted headline earnings/(loss)

118 740 90 081 89 946




Cents Cents Cents

Basic earnings/(loss) per share 24.90 22.31 (317.91)

Diluted earnings/(loss) per share 19.47 22.31 (317.91)

Headline earnings/(loss) per share 24.88 21.15 (318.18)

Diluted headline earnings/(loss) per share 19.46 21.15 (318.18)

3. Property and equipment

Land Buildings (including assets under construction)

Furniture, computers and leasehold improvements

Total

Unaudited - for the six months ended 28 February 2019 R'000 R'000 R'000 R’000

Opening balance 11 800 45 900 4 896 62 596 Additions - 141 869 1 010 Depreciation - - (1 120) (1 120)Disposals - - - -

Closing balance 11 800 46 041 4 645 62 486



Total


Opening balance 10 560 36 255 5 383 52 198 Additions - 2 085 988 3 073 Depreciation - - (1 072) (1 072)Disposals - - (35) (35)

Closing balance 10 560 38 340 5 264 54 164



Total

Audited - for the year ended 31 August 2018 R'000 R'000 R'000 R’000

Opening balance 10 560 36 255 5 383 52 198 Additions - 3 420 2 359 5 779 Transfers - 519 (519) - Depreciation - (127) (2 302) (2 429)

Disposals - - (25) (25)

Revaluations 1 240 5 833 - 7 073

Closing balance 11 800 45 900 4 896 62 596

The Group’s properties are revalued annually during August each year.



4. Goodwill




R'000 R'000 R'000

Opening balance 154 981 153 056 153 056 Acquired through business combinations 630 1 020 2 275 Disposals - - - Impairments - - (350)Closing balance 155 611 154 076 154 981

Goodwill is allocated to the following cash-generating units:

Efficient Financial Services Proprietary Limited trading as Efficient Wealth 48 131 13 882 36 837

Efficient Wealth Proprietary Limited - 22 148 -

Efficient Select Proprietary Limited 8 369 8 369 8 369

Naviga Solutions Proprietary Limited 25 404 25 118 25 404

Select Manager Proprietary Limited 66 954 66 954 66 954

Stead Wealth Management Proprietary Limited - 4 127 4 575

Exceed Asset Management Proprietary Limited - 6 088 6 088

W Allen-White Brokers Proprietary Limited 666 1 016 666

Secure Capital Investments Proprietary Limited 4 236 4 237 4 237

Efficient Private Clients Proprietary Limited 1 851 1 851 1 851

Efficient Institutional Investment Managers Proprietary Limited - 286 -

155 611 154 076 154 981

The goodwill previously allocated to Stead Wealth Management Proprietary Limited and Exceed Asset Management Proprietary Limited was transferred to Efficient Financial Services Proprietary Limited on 1 September 2018, as the businesses of these companies were consolidated into Efficient Financial Services Proprietary Limited from this date.

The business combinations concluded by the Group for the period, related to interests in various financial advisory client bases which were acquired.Goodwill is tested annually for impairment at cash-generating unit level between July and August each year.

5. Intangible assets

Trade names

Customer contracts and

customer relationships

Computer software Total


Opening balance 1 255 118 595 3 352 123 202 Additions - - 5 5 Amortisation (53) (6 685) (880) (7 618)Acquired through business combinations - 2 252 - 2 252

Closing balance 1 202 114 162 2 477 117 841

Trade names





Opening balance 1 361 124 283 4 921 130 565 Additions - - 137 137 Amortisation (139) (6 195) (925) (7 259)Disposals - (956) - (956)

Acquired through business combinations - 3 618 - 3 618

Closing balance 1 222 120 750 4 133 126 105



Trade names




Audited - for the year ended 31 August 2018 R'000 R'000 R'000 R’000

Opening balance 1 361 124 283 4 921 130 565 Additions - - 238 238 Amortisation (106) (12 840) (1 807) (14 753)Disposals - (956) - (956)

Acquired through business combinations - 8 108 - 8 108

Closing balance 1 255 118 595 3 352 123 202

6. Deferred tax




R'000 R'000 R'000

Deferred tax assets 132 174 24 994 138 933 Deferred tax liabilities (30 573) (31 178) (31 438)Net deferred tax 101 601 (6 184) 107 495

Opening balance 107 495 (18 004) (18 004)

Acquired through business combinations (630) (1 010) (2 274)

Disposal of businesses - 268 268

Charge recognised in profit or loss (5 264) 12 562 129 415

Charge recognised in other comprehensive income - - (1 910)

Closing balance 101 601 (6 184) 107 495

Deferred tax comprises the following temporary differences:

Accruals and provisions 6 100 12 050 13 219

Income received in advance 511 - 394

Fair value adjustments on investments 186 174 177

Profit-share cancellation liabilities 9 255 - 120 400

Calculated tax losses 122 890 18 502 11 588

Prepaid expenses (1 904) (1 506) (1 406)

Intangible assets (32 782) (35 002) (34 222)

Property and equipment (2 655) (402) (2 655)

101 601 (6 184) 107 495

A significant portion of amounts due in respect of the profit-share cancellation transaction was settled during the period, thus explaining theincrease in deferred tax attributable to calculated tax losses and the decrease in deferred tax attributable to the profit-share cancellation liabilities.



7. Share capital and share premium




R'000 R'000 R'000

Share capital

Authorised

361 350 000 ordinary shares of R0.00000277 each 1 1 1 Issued

89 165 353 (28 February 2018: 90 176 422 and 31 August 2018: 89 494 783) ordinary shares of R0.00000277 each

- - -

Share premium on shares issued

Opening balance 145 809 150 325 150 325

Repurchase of shares (1 375) (1 680) (4 516)

Closing balance 144 434 148 645 145 809




R'000 R'000 R'000

Reconciliation of number of shares in issue

Opening balance 89 495 90 593 90 593 Repurchase of shares (329) (417) (1 098)Closing balance 89 165 90 176 89 495

8. Convertible loan




R'000 R'000 R'000

Equity component 138 981 - 138 981 Current liability 20 578 - 19 202

159 559 - 158 183

The loan was advanced to the Group by the profit-share cancellation nominees on 31 August 2018 as part of the profit-share cancellation transaction. The loan will either be settled in cash or in ordinary shares to be issued in Efficient Group Limited to the parties. The loan will be settled or converted to issued shares by no later than 30 August 2019.

Should the loan be settled by conversion to issued share capital, such shares will be issued at a price of 530 cents and the maximum number of shares to be issued will amount to 29 845 849 to the nominees.

Due to the mandatory interest being charged on the loan, the loan is considered to be a compound financial instrument and has an equity and debt portion as indicated above.




9. Loans and borrowings




R'000 R'000 R'000

Forward purchase liabilities 7 352 32 113 6 916 Dividend liability - 2 359 - Contingent consideration liabilities 1 590 5 636 1 599 Vendor liabilities for book acquisitions 3 181 325 3 554 Working capital loans 272 800 12 263 35 367 Mortgage loans 27 518 29 038 28 314 Loans from non-controlling interests 1 525 1 380 1 451 Profit-share cancellation liabilities 43 508 - 271 817

357 474 83 114 349 018

Non-current liabilities 304 220 38 380 88 979 Current liabilities 53 254 44 734 260 039

357 474 83 114 349 018

The forward purchase liabilities and dividend liability relate to the acquisition of Select Manager Proprietary Limited and its subsidiaries, which took effect on 1 March 2018. The liabilities are due to be settled by 4 June 2019. The contingent consideration liabilities relate to the acquisition of W-Allen White Brokers Proprietary Limited and Secure Capital Investments Proprietary Limited.

The working capital loans and mortgage loans are payable to Standard Bank of South Africa Limited. Included in the working capital loans payable is an amount of R240 million which was borrowed to finance a portion of the profit-share cancellation expense which became payable on 31 August 2018. The profit-share cancellation expense which was due, was settled during September 2018.

10. Analysis of financial assets and financial liabilities

The fair values of financial assets and liabilities measured at fair value in the statement of financial position can be summarised as follows:

Fair value hierarchy level

Level 1 Level 2 Level 3 Total Unaudited at 28 February 2019 R'000 R'000 R'000 R’000

Financial assets

Inyosi enterprise development portfolio investment - - 1 013 1 013 Unit-linked investments 3 384 - - 3 384

3 384 - 1 013 4 397

Financial liabilities

Business acquisition liabilities - - (1 590) (1 590) - - (1 590) (1 590)


Level 1 Level 2 Level 3 Total Unaudited at 28 February 2018 R'000 R'000 R'000 R’000

Financial assets

Unit-linked investments 1 485 - - 1 485 1 485 - - 1 485


Business acquisition liabilities - - (40 108) (40 108)

- - (40 108) (40 108)



Level 1 Level 2 Level 3 Total

Audited at 31 August 2018 R'000 R'000 R'000 R’000

Financial assets

Inyosi enterprise development portfolio investment - - 1 004 1 004 Unit-linked investments 2 481 - - 2 481

2 481 - 1 004 3 485


Business acquisition liabilities - - (8 515) (8 515)

- - (8 515) (8 515)

There were no transfers of any financial instruments between fair value hierarchy Levels 1, 2 and 3 during any of the reporting periods.

The carrying values of all financial instruments not presented at fair value on the statement of financial position are reasonable approximations of their fair values.

Business acquisition liabilities are included in the “Loans and borrowings” line on the statement of financial position. These include forward purchase liabilities, committed dividend liabilities to legal non-controlling interest shareholders as well as contingent consideration liabilities.

Valuation techniques and inputs used in the fair value measurement of Level 3 financial instruments

Business acquisition liabilities

Business acquisition liabilities are valued at the present value of the expected payments set out in the contracts. The effect of discounting these liabilities was not considered to be material.

The unobservable inputs used for calculating the fair value of the forward purchase liabilities, contingent consideration liabilities and dividend liabilities for contractual dividends include budgets and forecasts with estimated annual profit growth rates, planned independent financial advisor book buys and free cash flows.

As there is a contractual maximum purchase price that was used in calculating the business acquisition liabilities, or the liabilities are directly linked to the performance of the related entity, the Group’s profit is not materially sensitive to the inputs of the models applied when calculating fair value.

Inyosi enterprise development portfolio investment

The significant unobservable inputs for determining the fair value of the Inyosi enterprise development portfolio investment include the number of units allocated in the investment, the price per unit as derived from the reporting date asset management valuation statement, the value of the initial investment relative to the market value of the underlying securities which the investment comprises of as well as the composition of the underlying securities. At 28 Feb 2019, the Group held 1 009 206 units (31 Aug 2018: 997 399 units) in the investment portfolio at a price per unit of 100.36 cents (31 Aug 2018: 100.64 cents). The fair value of the investment would increase (decrease) with a change in any of the inputs.




R'000 R'000 R'000

Opening balance (8 515) (43 697) (43 697)Fair value adjustments for the period recognised in profit or loss - (1 471) 1 666 Liabilities now measured at amortised cost 6 916 - - Payments and settlements during the period - 5 060 33 516 Closing balance (1 599) (40 108) (8 515)




11. Cash generated from operations




R'000 R'000 R'000

Profit/(loss) before taxation 29 063 27 679 (399 711)Adjustments for:

Depreciation on property and equipment 1 120 1 072 2 429 Amortisation on intangible assets 7 618 7 259 14 753 Dividend income from other investments (61) (38) (25)Profit on disposal of equipment (21) (214) - Profit on disposal of customer contracts and customer relationships - (1 342) (1 342)Re-measurement of loans and borrowings at fair value through profit or loss - 1 618 (1 486)Gain on settlement of loans and borrowing at amortised cost - - (562)Fair value adjustments on investments at fair value through profit or loss 1 190 97 Realised fair value adjustments on available-for-sale investments - 6 - Finance income (3 379) (2 358) (7 123)Finance costs 19 564 1 328 5 565 Bad debts expense - - 5 665 Impairment of goodwill - - 350 Profit-share cancellation expense funded through loans and borrowings 8 333 - 430 000 Impairment of investments in equity-accounted associates - - 320 Share of losses/(profits) from investments in equity-accounted associates, net of taxation 20 (540) (913)Operating profit before changes in working capital 62 258 34 660 48 017 Changes in working capital:

Trade and other receivables 9 577 19 661 6 693 Trade and other payables (66 132) (31 100) (9 990)Provisions (14) (246) (361)

5 689 22 975 44 359

12. Adoption of new accounting standards

The Group has adopted the following new accounting standards as issued by the IASB, which were effective for the Group from 1 September 2018:

+ IFRS 15 (Revenue from Contracts with Customers) + IFRS 9 (Financial Instruments)

Upon adoption of IFRS 9, the Group no longer has any financial instruments that will be measured at fair value through other comprehensive income.

The changes were applied retrospectively without restating comparative figures. If any differences were identified they would have been taken to opening retained earnings, however the impact of the adoption of IFRS 15 and IFRS 9 was immaterial and no adjustments were processed in these results presented.

13. Events after the reporting period

On 1 March 2019, the Group disposed of its entire interest in Efficient IDS Proprietary Limited.

On 1 April 2019, the Group acquired a controlling interest in Dinamika Fonds Bestuurders Proprietary Limited.

No other events material to the understanding of these results has occurred between the end of the reporting period and the date of approval of these results.

GROUP COMPANY SECRETARYAcorimt: +27 (0)11 325 6363e: [email protected] FloorIllovo Point68 Melville RoadIllovoSandton2196

LEGAL ADVISORAdams and Adams Attorneys4 Daventry StreetLynnwood ManorPretoria0081

AUDITORSKPMG Incorporated(Registration number 1999/021543/21) KPMG Crescent85 Empire RoadParktown2193

TRANSFER SECRETARIESLink Market Services South Africa (Pty) Ltd(Registration number 2000/007239/07)13th Floor, Rennie House19 Ameshoff StreetBraamfontein(PO Box 4844, Johannesburg, 2000)

SPONSORMerchantec Capital(Registration number: 2008/027362/07)13th FloorIllovo Point68 Melville RoadIllovoSandton2196(PO Box 41480, Craighall, 2024)

REGISTRATION AND CONTACT DETAIL Incorporated in the Republic of South Africa(Registration number 2006/036947/06)JSE share code: EFGISIN: ZAE000151841Telephone: +27 (0)87 944 7999

REGISTERED OFFICE AND POSTAL ADDRESS81 Dely RoadHazelwoodPretoria0081 South Africa

t: +27 (0)87 944 7999 | e: [email protected] | www.efgroup.co.za

COMPANY INFORMATION

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