ANNUAL RESULTS PRESENTATION FOR THE FINANCIAL YEAR ENDED 31 AUGUST - PowerPoint PPT Presentation

ANNUAL RESULTS PRESENTATION FOR THE FINANCIAL YEAR ENDED 31 AUGUST 2018 1

AGENDA  INTRODUCTION - Christopher Gilmour  GROUP OVERVIEW - Heiko Weidhase  YEAR IN REVIEW - Heiko Weidhase  FINANCIAL REVIEW - Anton de Klerk  FINANCIAL SERVICES CLUSTER - Rudi Barnard  SOLUTIONS CLUSTER - Heiko Weidhase  INVESTMENT CLUSTER - Robert Walton - Pierre de Klerk  RISKS - Heiko Weidhase  PROSPECTS - Heiko Weidhase 2

GROUP OVERVIEW 3

GROUP OPERATING STRUCTURE 4

NATIONAL FOOTPRINT 5

EFFICIENT GROUP TIMELINE 6

EFFICIENT EXPERIENCE Our employees are critical to building and maintaining a sustainable business and to achieving the objectives expressed in our tagline - “Think Efficient. Realise potential.” We recognise that long-term, trust-based relationships are key to our success and that client satisfaction is fundamental to the Efficient Experience. 7

YEAR IN REVIEW  Financial Services cluster  The consolidation of vario ious brands in into Effic icient Wealth  Established the Fin inancial l Pla lanning Centre, , comprising: − The Para-Planner Hub for the training and development − of trainee RFAs; − Effic icie ient Med, specialising in health services; and − Effic icie ient In Insure, specialising in short-term insurance.  Solutions cluster  The establi lishment of both Effic icient In Insure and Effic icient Med  First full year for Effic icient Benefit Consulting  Efficient Private Clients’ operational excell llence  Naviga value proposition development progressing  Investment cluster  The conclusion of phase 2 of the Sele lect Manager transaction  The cancell llation of the profit share agreement wit ith Boutique Coll llectiv ive In Investments (BCI) and Boutique In Investment Partners (BIP)  Consolidation of value propositions, BIP IP, Naviga and Sele lect Manager has started 8

PROFIT SHARE AGREEMENT (PSA) PSA TIM IMELINE 12 Aug 2013 31 Aug 2018 31 Aug 2014 Establishment of BCI and BIP Cancellation of PSA becomes effective First full year of operations EFG and RW and others enter into Cancellation expensed in FY2018 Assets under Administration – R4 R41bn bn PSA FY2019 onward – all earnings of BCI and BIP Assets under Management and EFG attains 5-year call option on PSA retained within the Group Consulting – R2 R25bn bn Assets under Administration – R2 R2bn bn Assets under Administration – R1 R109,8 ,8bn Assets under Management and Assets under Management and Consulting Consulting – R0 R0bn bn – R3 R36,5 ,5bn PSA STRUCTURE Pos ost – PSA Ac Acqui quisiti ition on (FY2 (FY2019 on onwar ward) d) Pre re – PSA Ac Acqu quis isiti ition n (FY2 (FY2014 to to FY FY2018) Efficient Group RW and Efficient Group Limited Nominees Limited 100% 100% Boutique Collective 66% Boutique Collective Investments (RF) (Pty) Ltd Investments (RF) (Pty) Ltd 100% 100% Boutique Investment Partners 66% Boutique Investment Partners (Pty) Ltd (Pty) Ltd Ordinary shareholding 9 Profit share of Net Profit Before Tax

PROFIT SHARE AGREEMENT (PSA) The growth in profit reported by the Efficient Group specifically underpinned by the BCI and BIP collaboration is evident. 10

CANCELLATION OF PSA  Included in the original profit share agreement was a provision that grants Efficient Group the right to cancel the profit share agreement after a period of 5 years which expired on 31 August 2018  Efficient Group duly announced its intention to cancel the agreement on SENS on 15 June 2018  The terms of the cancellation agreement followed in an announcement on SENS on 5 July 2018  On 3 August 2018, the distribution of the circular and notice of general meeting was announced on SENS. All (100%) of shareholders, present and by proxy, voted in favour of approving this transaction during the Efficient Group general meeting held on 31 August 2018 COST  The total cancellation cost amounted to R480 million  R430 million was expensed resulting in R288 million loss for the year  The after-tax cost of the transaction is calculated at R346 million  We obtained a SARS ruling to confirm this expense as a normal income deductible expense with the subsequent tax benefit 11

FINANCIAL PERFORMANCE 12

KEY PERFORMANCE INDICATORS: ASSETS Assets under Advice (AUA): + The 10% growth is a result of organic growth Assets under Management (AUM): + Restructuring of Efficient Select (2017) and the improved performance resulted in net inflows + Efficient Private Clients achieved positive net flows + The multi-managers reported net outflows Assets under Consulting (AUC): + The growth in AUC was driven mainly by the transfer of AUM mandates to AUC mandates, at the same margins Assets under Adminis istration (AUAdmin): ): + The lower AUAdmin is attributable to the expiry of a short-term mandate 13

KEY PERFORMANCE INDICATORS: ASSETS (CONTINUED) ASSETS 200 000 180 000 160 000 140 000 120 000 100 000 80 000 60 000 40 000 20 000 - 2014 2015 2016 2017 2018 Assets under Advice Assets under Management Assets under Consultation Assets under Administration R'M 'Million R'M 'Million R'M 'Million R'M 'Million R'M 'Million 2014 2015 2016 2017 2018 Assets under Advice 8 945 12 707 14 766 18 288 20 086 Assets under Management 13 888 18 183 22 330 19 504 19 536 Assets under Consultation 19 691 23 978 26 440 26 879 30 110 Assets under Administration 41 041 63 173 101 096 117 331 109 848 83 565 118 041 164 632 182 002 179 580 14

OPERATING PERFORMANCE 2018 2018 2017 R’000 R’000 Revenue (Note 1) 1 083 506 1 002 096 8% Variable expenses (778 561) (702 054) Gross contribution (Note 2) 304 945 300 042 2% Gross contribution % (Note 2) 28% 30% 30% Operating expenses (Note 3) (261 828) (255 568) 2% Share of profits from investments in equity-accounted 913 1 037 associates Operatin ing profit (Note 4) 44 030 45 511 (3%) Operating margin 4% 5% Net finance income 1 558 1 850 Profit before non-operational items 45 588 47 361 (4%) Recurring HEPS (cents) (Note 5) 39.85 41.22 (3%) Operating EBITDA (Note 6) 61 204 64 905 (6%) 15

NOTE 1: REVENUE Fin inancia ial Services: 1 200 000 + The 20% increase in revenue was achieved through organic growth 1 000 000 Solu lutio ions: 800 000 Select Manager was transferred from the + 600 000 Investment cluster to Solutions + Fee restructuring at Naviga Solutions 400 000 negatively impacted revenue growth 200 000 Asset Management and Consulting: - + Reduction in revenue mainly due to the R'000 R'000 R'000 R'000 R'000 transfer of Select Manager to Solutions 2014 2015 2016 2017 2018 Asset Administration: + Mainly organic growth 2014 2014 2015 2015 2016 2016 2017 2017 2018 2018 R'000 R'000 R'000 R'000 R'000 Financial Services Income 87 639 154 336 176 382 183 522 221 579 Solutions 20 238 35 540 30 120 31 461 50 595 Asset Management and Consulting fees 20 541 26 923 67 353 75 011 45 069 Asset Administration fees 104 776 498 926 600 130 708 947 762 310 Other 166 454 5 993 3 155 3 953 233 360 716 179 879 978 1 002 096 1 083 506

NOTE 2: GROSS CONTRIBUTION Gross Contribition % 50,00% 45,00% 40,00% 35,00% 30,00% 25,00% 20,00% 15,00% 10,00% 5,00% 0,00% 2014 2015 2016 2017 2018 Fin inancia ial Services:  RFA model (80/20) has the lowest gross contribution % (GC%)  The revenue growth can be credited to this model explaining the lower GC% Solu lutio ions:  Naviga Solutions: Ongoing fee restructuring negatively impacted GC%  Change to an outsourced model at Efficient Select reduced the GC% but also reduced fixed expenses 17

NOTE 3: OPERATING EXPENSES 160 000 149 458 143 960 140 000 120 000 100 000 78 972 76 844 80 000 60 000 40 000 19 394 18 352 17 174 20 000 13 242 - Fixed Expenses Profit share payments Staff incentives Non-cash flow expenses (depreciation and amortisation) 2018 2017 Fix ixed Exp xpenses:  Include the full year operations for Efficient Private Clients and Efficient Benefit Consulting  For Efficient Select decreased because of the change to the outsourced asset management model 18

NOTE 4: OPERATING PROFIT 19

NOTE 5: RECURRING HEPS 2018 2018 2017 R’000 R’000 Headline earnings (28 (286 187) 62 301 Re-measurement of loans and borrowings at fair value through profit or (1 486) (22 558) loss Gain on settlement of loans and borrowings at amortised cost (562) - Commission-agreement cancellation expense 1 710 - Taxation on commission-agreement cancellation expense (479) - Bad debt expense 5 665 - Taxation on bad debt expense (1 586) - Gain on derecognition of loan payable to non-controlling interest - (1 577) Taxation on gain on derecognition of loan payable to non-controlling - 442 interest Claw-back on equity-accounted investment in associate, included in other - (1 397) income Profit share cancellation expense 430 000 - Transaction costs on profit share cancellation 12 730 - Taxation on profit share cancellation items (123 964) - Recurr rring headline ea earnings 35 841 37 211 Weighted average number of shares 89 946 90 272 20 Recurr rring headline ea earnings per r share (c (cents) ) 39.8 .85 41.2 .22

NOTE 5: RECURRING HEPS (CENTS) (CONTINUED) 21