| Tue 29 May 2007, 14:04 | | PGR - Peregrine - Audited Results for the Year End |
|
PGR
PGR
PGR - Peregrine - Audited Results for the Year Ended 31 March 2007 and dividend
declaration
Peregrine Holdings Limited
Registration number 1994/006026/06
Share code: PGR
ISIN code: ZAE000078127
AUDITED RESULTS FOR THE YEAR ENDED 31 MARCH 2007
HIGHLIGHTS
* Normalised earnings:
* Profit before tax up 71% to R608 million
* Basic EPS up 64% to 214.0 cents
* Headline EPS up 67% to 186.7 cents
* Return on average equity of 45.1%
Taking the cost of acquiring BEE credentials into account:
* Profit before tax up 60% to R568 million
* Basic EPS up 48% to 193.6 cents
* Headline EPS up 49% to 166.3 cents
* Return on average equity of 40.8%
Revenue exceeds R1 billion for first time
Assets under management up 46% to R33.7 billion
Dividend increased by 50% to 45 cents per share
INCOME STATEMENT
Audited Audited
Year ended Year ended
% change 31 March 31 March
2006 to 2007 2006
2007 R`000 R`000
Operating revenue 51 911,193 604,592
Investment income 128 201,330 88,153
Total revenue 61 1,112,523 692,745
Investment contract benefits 354,931 360,020
Investment contract expenses (354,931) (360,020)
Operating expenses 51 (573,363) (379,838)
Profit from operations 72 539,160 312,907
Net interest received/(paid) 16,005 4,130
Interest received 32,347 19,919
Interest paid (16,342) (15,789)
Income from associate companies 7,645 2,947
Profit from ordinary activities 76 562,810 319,984
Capital surplus 5,455 36,016
Profit before taxation 60 568,265 356,000
Taxation (148,777) (80,432)
Profit for the year 52 419,488 275,568
Attributable to:
Equity holders of the company 49 374,663 251,811
Minority interest 44,825 23,757
419,488 275,568
Determination of headline earnings
Profit attributable to equity holders of
the company 374,663 251,811
Adjustments for capital items:
Reversal of impairment to loan
receivable (5,455) -
Surplus on sale of
available-for-sale investment (47,340) -
Surplus on sale of subsidiaries - (36,016)
Headline earnings 49 321,868 215,795
Headline earnings per ordinary share
(cents) 49 166.3 111.7
Basic earnings per ordinary share (cents) 48 193.6 130.4
Diluted headline earnings per share (cents) 47 153.8 104.3
Diluted basic earnings per share (cents) 47 179.1 121.8
Dividend paid per ordinary share - in
respect of the previous year (cents) 150 30.0 12.0
Dividend per ordinary share declared
subsequent to 31 March (cents) 50 45.0 30.0
Number of ordinary shares in issue (`000) 228,129 229,971
Treasury shares held (`000) 32,440 37,300
Weighted average number of ordinary shares
in issue (`000) 193,556 193,128
Diluted weighted average number of
ordinary shares in issue (`000) 209,243 206,801
BALANCE SHEET
As at ended As at ended
31 March 31 March
2007 2006
R`000 R`000
Assets
Non-current assets 2,920,084 2,493,659
Property, plant and equipment 88,553 85,301
Intangible assets 269,694 245,591
Investment in associate companies 4,805 1,449
Investments linked to policyholder investment
contracts 2,403,454 2,055,472
Financial investments 137,517 77,567
Loans and receivables 4,421 17,608
Deferred taxation 11,640 10,671
Current assets 8,316,502 3,909,728
Financial investments 587,838 332,614
Trade and other receivables 171,305 118,463
Amounts receivable in respect of stockbroking
activities 6,899,391 3,037,915
Taxation 2,862 988
Cash and cash equivalents 655,106 419,748
Total assets 11,236,586 6,403,387
Equity and liabilities
Equity 1,128,190 759,592
Share capital, retained earnings and reserves 1,090,353 747,986
Minority interest 37,837 11,606
Non-current liabilities 2,564,137 2,181,803
Interest-bearing borrowings 65,472 78,836
Policyholder investment contract liabilities 2,403,454 2,055,472
Loans and payables 52,998 22,705
Deferred taxation 42,213 24,790
Current liabilities 7,544,259 3,461,992
Trade and other payables 246,268 174,851
Amounts payable in respect of stockbroking
activities 7,175,641 3,248,724
Current portion of interest-bearing borrowings 39,881 2,708
Taxation 82,469 35,709
Total equity and liabilities 11,236,586 6,403,387
Net asset value per share (cents) 557.2 388.2
STATEMENT OF CHANGES IN EQUITY
Share Treasury
2007 Share capital premium shares
R`000 R`000 R`000
Balance at 31 March 2006 229 52,379 (86,220)
Net gains and losses not recognised
in the income statement: - - 9,644
Write-down in value of treasury
shares on vesting - - 2,364
Disposal of treasury shares - - 7,280
Currency translation differences - - -
Revaluation of available-for-sale
assets - - -
Deferred tax on revaluation of
available-for-sale assets - - -
Transfer from revaluation reserve on
disposal of available-for-sale
assets - - -
Deferred tax in respect of
available-for-sale assets disposed of - - -
Profit for the year - - -
Dividends paid - - -
Share repurchases (1) (14,355) -
Balance at 31 March 2007 228 38,024 (76,576)
2006
Balance at 31 March 2005 230 52,437 (83,693)
Net gains and losses not recognised
in the income statement: - - 14,378
Write-down in value of treasury
shares on vesting - - 14,378
Currency translation differences - - -
Revaluation of available-for-sale
assets - - -
Deferred tax on revaluation of
available-for-sale assets - - -
Profit for the year - -
Dividends paid - -
Share repurchases (1) (58) -
Treasury shares acquired - - (16,905)
Balance at 31 March 2006 229 52,379 (86,220)
Non -
Accumulated distributable Obligation to
2007 profits reserves issue shares
R`000 R`000 R`000
Balance at 31 March 2006 684,321 62,130 35,147
Net gains and losses not
recognised in the income
statement: 31,824 (1,935) -
Write-down in value of
treasury shares on vesting (296) - -
Disposal of treasury shares 32,120 - -
Currency translation
differences - 22,694 -
Revaluation of
available-for-sale assets - 765 -
Deferred tax on revaluation
of available-for-sale
assets - (112) -
Transfer from revaluation
Reserve on disposal of
available-for-sale assets - (29,144) -
Deferred tax in respect of
available-for-sale assets
disposed of - 3,862 -
Profit for the year 374,663 - -
Dividends paid (57,473) - -
Share repurchases - - -
Balance at 31 March 2007 1,033,335 60,195 35,147
2006
Balance at 31 March 2005 461,378 38,907 35,147
Net gains and losses not
recognised in the income
statement: (5,437) 23,223 -
Write-down in value of
treasury shares on vesting (5,437) - -
Currency translation
differences - (2,510) -
Revaluation of
available-for-sale assets - 29,648 -
Deferred tax on revaluation
of available-for-sale
assets - (3,915) -
Profit for the year 251,811 - -
Dividends paid (23,431) - -
Share repurchases - - -
Treasury shares acquired - - -
Balance at 31 March 2006 684,321 62,130 35,147
Total capital Minority
2007 and reserves interest Total equity
R`000 R`000 R`000
Balance at 31 March 2006 747,986 11,606 759,592
Net gains and losses not
recognised in the income
statement: 39,533 186 39,719
Write-down in value of treasury
shares on vesting 2,068 - 2,068
Disposal of treasury shares 39,400 - 39,400
Currency translation differences 22,694 8 22,702
Revaluation of
available-for-sale assets 765 207 972
Deferred tax on revaluation of
available-for-sale assets (112) (29) (141)
Transfer from revaluation reserve on
disposal of available-for-sale
assets (29,144) - (29,144)
Deferred tax in respect of
available-for-sale assets
disposed of 3,862 - 3,862
Profit for the year 374,663 44,825 419,488
Dividends paid (57,473) (18,780) (76,253)
Share repurchases (14,356) - (14,356)
Balance at 31 March 2007 1,090,353 37,837 1,128,190
2006
Balance at 31 March 2005 504,406 6,573 510,979
Net gains and losses not
recognised in the income
statement: 32,164 - 32,164
Write-down in value of treasury
shares on vesting 8,941 - 8,941
Currency translation differences (2,510) - (2,510)
Revaluation of
available-for-sale assets 29,648 - 29,648
Deferred tax on revaluation of
available-for-sale assets (3,915) - (3,915)
Profit for the year 251,811 23,757 275,568
Dividends paid (23,431) (18,724) (42,155)
Share repurchases (59) - (59)
Treasury shares acquired (16,905) - (16,905)
Balance at 31 March 2006 747,986 11,606 759,592
CASH FLOW STATEMENT
Audited Audited
31 March 31 March
2007 2006
R`000 R`000
Cash flow from operating activities 339,572 325,592
Cash generated from operating activities 476,218 418,041
Net interest received 15,677 2,461
Dividends received - financial investments 3,210 5,875
Dividends received - associates 4,576 9,641
Dividends paid - equity shareholders (57,473) (23,431)
Dividends paid - minority shareholders (18,780) (18,724)
Taxation paid (83,856) (68,271)
Cash flow from investing activities (132,944) (88,193)
Cash flow from financing activities 25,939 20,886
Share repurchases (14,356) (16,964)
Proceeds on vesting of shares held by staff
share trust 2,068 8,941
Proceeds on sale of treasury shares 4 -
Share incentive scheme payments received - 16,905
Increase in loans payable 32,457 12,986
Decrease in loans receivable 8,474 -
Decrease in interest-bearing borrowings (2,708) (982)
Net increase in cash and cash equivalents 232,567 258,285
Cash and cash equivalents at beginning of
the year 419,748 161,700
Effects of exchange rate changes on cash
and cash equivalents 2,791 (237)
Cash and cash equivalents at end of the year 655,106 419,748
SEGMENTAL ANALYSIS
Audited
Year ended 31 March 2007
Interest and Profit from
Revenue associate income ordinary activities
R`000 R`000 R`000
Wealth and asset
management 562,067 12,582 279,946
Wealth management 333,609 8,999 146,446
Asset management 228,458 3,583 133,500
Broking and
structuring 346,688 11,067 149,489
Group investments
(net of group costs) 203,768 1 133,375
1,112,523 23,650 562,810
Audited
Year ended 31 March 2006
Interest and Profit from
Revenue associate income ordinary activities
R`000 R`000 R`000
Wealth and asset
management 412,828 6,040 182,813
Wealth management 221,461 5,200 73,441
Asset management 191,367 840 109,372
Broking and structuring 188,246 8,388 82,326
Group investments (net
of group costs) 91,671 (7,351) 54,845
692,745 7,077 319,984
% change
in profit
from % of profit
ordinary from ordinary
activities activities
2006 to
2007 2007 2006
Wealth and asset management 53 50 57
Wealth management 99 26 23
Asset management 22 24 34
Broking and structuring 82 27 26
Group investments (net of group costs) 143 23 17
76 100 100
BASIS OF PREPARATION
The results for the year ended 31 March 2007 have been prepared in accordance
with, and comply with IFRS and the South African Companies Act of 1973.
RECLASSIFICATION OF COMPARATIVES
Comparative figures presented for the year ended 31 March 2006 have been
restated as a result of the following reclassifications:
1. Net interest received from broking activities has been reclassified
as operating revenue, having been previously disclosed as part of net
interest received. The restatement more appropriately reflects the fact that
interest is derived as part of revenue generating activities, rather than as
part of the group`s financing activities.
2. Interest earned as part of the group`s investing activities, comprising
interest received on loans made as part of private equity investments and
interest paid on hedge fund gearing has been reclassified as part of
investment income, having been previously disclosed as part of net interest
received.
3. The group`s hedge fund investments are classified as current assets having
regard to the fact that these investments may be converted to cash
(drawndown) within any three month period. In line with this classification,
in preparation of the cash flow statement, the movement in these investments
has previously been shown as part of cash generated from operations (as part
of working capital changes). The hedge funds form part of the group`s
investing activities and, as such, the movement, comprising realised profit
reinvested into the funds plus net capital contributions has been
reclassified as part of investing activities.
4. The translation difference relating to offshore cash balances has been
shown separately on the face of the cash flow statement, having been
previously adjusted in the cash generated from operations reconciliation.
AUDIT REPORT
The results for the year ended 31 March 2007 have been audited by PKF (JHB) Inc.
and their unqualified audit report is available for inspection at the Group`s
registered office.
COMMENTARY
The Peregrine group has produced another very satisfying set of results for the
year under review. Attributable earnings increased by 49% to R374.7 million
reflecting a return on average equity of 40.8%.
During the course of the year the group successfully implemented its BEE
transaction. As part of the transaction 4 million treasury shares were sold to
a BEE consortium at par, giving rise to a charge of R39.5 million included in
operating expenses as a cost of BEE credentials. The impact of the charge is a
once-off reduction in headline and basic earnings per share of 20.4 cents per
share.
Excluding the cost of acquiring BEE credentials:
- earnings attributable to ordinary shareholders increased by 64% to
R414.2 million headline earnings per share increased by 67% to 186.7 cents per
share.
A lower than assumed effective tax rate coupled with a slight improvement in
trading conditions were responsible for earnings per share and headline earnings
per share exceeding, by between 4% and 9%, the upper end of the range announced
in the trading update released on 23 March 2007.
Features for the year include:
- A highly satisfactory performance from the group`s private client wealth
management business, Citadel, which resulted in substantial performance
fees being earned for the year on top of a significant increase in new
business inflows;
- Meaningful organic growth within the group`s core hedge fund business,
growth in funds on the hedge fund platform and the related prime-broking
operations, all contributing to enhance Peregrine`s dominant position in
the South African hedge fund industry;
- Peregrine Derivatives remains a top rated SA derivative house and for
the 12 months under review was the number one independent broker on the
local futures exchange (Safex) by volume;
- A very encouraging contribution from the group`s investment banking
activities reflecting the well reported strength of the underlying
economy;
- Caveo Fund Solutions, the group`s joint venture with Investment
Solutions, the country`s largest multimanager, produced a profitable set
of maiden results. Caveo operates as a hedge fund-of-funds aimed
particularly at the institutional market;
- The disposal of the vast majority of its shareholding in the JSE Limited;
- Strong cash generation by the group resulting in the annual dividend
being increased by 50% to 45 cents per share.
Results
Total revenue, comprising operating revenue and investment income, increased by
61% to R1.113 billion from R692.7 million, as a result of good investment
performances across the group off a materially larger asset base.
Investment income, which includes the group`s proprietary returns on hedge fund
investments, profit on the sale of shares in the JSE Limited and returns on the
group`s investment banking portfolio increased to 18% of total revenue compared
to 13% in the prior period.
Core operating expenses of the group increased by 34% after stripping out the
costs of BEE credentials and the effects of direct staff profit participation
in the increased profitability of each of the underlying businesses. The major
contributors to this were Peregrine Securities and Citadel. Peregrine
Securities experienced an increase in costs of 69% (excluding bonuses) of which
70% is attributable to an increase in variable costs (directly related to
increased revenues) and 30% to an increase in administrative costs.
The increased investment in staff and infrastructure should be seen in the
context of a growing business which produced an overall profit increase of 82%.
Similarly, while Citadel`s costs increased by 23% due largely to salary and
office rental related increases, the business grew core profit (i.e. excluding
performance fees) by 32% and overall profits by 99%.
Net interest received increased to R16.0 million from R4.1 million largely as a
result of increased cash resources. Net interest earned from the group`s
broking activities, previously disclosed as part of interest received has been
reclassified as part of operating revenue. The change more appropriately
classifies the interest as part of revenue generating activities rather than as
part of the group`s financing activities.
With a slightly increased effective rate of taxation and a very similar number
of shares in issue, basic earnings per share increased by 48% to 193.6 cents
per share and headline earnings per share increased by 49% to 166.3 cents per
share.
Diluted basic earnings per share increased by 47% to 179.1 cents per share and
diluted headline earnings per share increased by 47% to 153.8 cents per share.
These fully diluted earnings per share measures are pertinent in light of the
anticipated issue of 18 million shares in terms of the staff deferred
purchase scheme during the course of the year ending 31 March 2008.
Operating highlights
Private-client wealth management firm, Citadel, produced a 99% increase in
profit from ordinary activities to R146.4 million, contributing 26% to group
profitability. Continued gross inflows of approximately R135 million on average
per month, together with positive investment performance for the year, saw
Citadel`s asset base rise above R12 billion, with the business consistently
accruing performance fees throughout the year. Citadel, whose annuity earnings
base now exceeds R60 million per annum before performance fees, currently has
more than two-thirds of its client base in a position to pay performance fees,
with a substantial portion of the balance on the threshold of paying
performance fees.
The businesses within the asset management division collectively increased
their contribution to group profitability by 22% to R133.5 million, or 24% of
group profitability.
The group`s hedge fund management operations, comprising Peregrine Capital,
Peregrine Investment Managers (PIM) and Caveo Fund Solutions (Caveo)
contributed R120,5 million (90%) of this amount. PeregrineQuant (PQ), whose
assets under management now exceed R16 billion, contributed R13 million (10%)
for the year.
Peregrine remains South Africa`s largest single strategy hedge fund manager,
managing 4.3 billion of single strategy hedge funds. The group`s hedge-fund
flagship, Peregrine Capital, which has an outstanding (and the country`s oldest
hedge fund) track record, currently manages R3.2 billion. The group`s newer
ranges of hedge funds, housed within PIM, manage an additional R1.1 billion (a
39% increase over the prior year). PIM`s growth in asset base reflects the
successful addition of four new funds to the PIM platform despite closing its
fixed income fund, as a result of unsatisfactory performance relative to
benchmarks. There are currently 14 funds on the PIM platform.
Hedge fund returns were satisfactory across the group`s suite of hedge funds
with meaningful performance fees being earned in the second half of the year.
Whilst it is difficult to predict returns in any single year, we envisage that
the growth in the hedge fund industry (and consequentially in our funds) will
continue at a significant pace and that returns will continue to be attractive
on a risk-adjusted basis over the medium to long term.
The group`s hedge fund-of-fund business, Caveo which is a joint venture with
Investment Solutions, earned a profit in its maiden year with assets
under management exceeding R1bn at year-end. Prospects for the business are
very encouraging. Caveo is well positioned to benefit from flows of
institutional funds to this asset class.
PeregrineQuant, besides being a respected participant in the niche of
quantitative asset management, augmented its strategy during the course of the
year and now provides a "hub" of integrated services to boutique asset
managers. This strategy has been very well received by the market.
The broking and structuring activities housed within Peregrine Securities
produced an 82% increase in profitability to R149.5 million, contributing 27%
to group profit from ordinary activities. The current year`s profitability,
whilst the beneficiary of increased market activity generally, reflects many
years of investment and effort and it is particularly pleasing that this set of
results reflects record performances for Peregrine Securities as a whole and
for each of the division`s underlying business units (Equities, Derivative
broking and Derivative structuring).
Peregrine Securities houses one of the country`s largest local prime-broking
operations and offers a fully integrated hedge fund solution to the market. The
business continues to grow both through the introduction of new funds and fund
managers, as well as a result of strong organic growth from existing managers.
The prime-broker currently has in excess of R8bn in client assets across all
asset classes.
Growth in Peregrine Equities has slowed from the previous year, due mainly to a
maturing business cycle and tighter selection criteria for new managers. At the
same time, the cost base has increased as the business has focused internally
on new staffing, technology and on client risk management processes that are
becoming more of a focus in the SA hedge fund industry. Peregrine Equities has
become a top ten JSE broker by volume.
Peregrine Derivatives remains a top rated SA derivative house and for the 12
months under review was the number one independent broker on the local futures
exchange (Safex) by volume. The business continues to enjoy good growth and
penetration into the derivative structuring and consulting environment,
servicing the asset management and pension fund industry and remains a dominant
agency broker in the Safex interbank derivative market. The expanding use of
derivatives by the hedge fund environment has become a solid revenue source for
the business and offers good growth potential.
Return on group investments (net of group costs) increased by 143% to R133.4
million, contributing 23% to group profitability. Returns comprise investment
returns achieved on the group`s proprietary hedge fund investments and
investment banking portfolio as well as realised profits on the sale of JSE
Limited shares in the amount of R54.9 million. Over the course of the year
investments were made into several new hedge funds and no withdrawals of group
capital were made from any of the group`s existing hedge fund investments. As at
balance sheet date the group had R672 million invested in hedge funds, an
increase of 81% over the prior period. Sound returns were achieved across this
increased hedge fund base. Particularly pleasing returns were achieved within
the group`s investment banking portfolio, which comprises 11% of the group`s
proprietary investments, reflecting the well reported strength of the
underlying economy.
Notwithstanding an increase in management bonuses which are commensurate with
the increase in the group`s profitability, head office costs have remained
constant. Management changes made in the latter part of the financial year are
expected to reflect an increase in the cost base in the forthcoming year.
Prospects
We are encouraged by what the group can achieve by continuing to build on its
well- established positions in the local private client wealth management,
securities broking and hedge fund niches. We remain, however, fully aware that
the group`s overall financial performance will continue to be closely linked to
the investment performance of its underlying businesses and investment markets
generally and, as such, any short-term forecasts would be imprudent.
Appointment of director
In line with the requirements of the Corporate Laws Amendment Act, Mr S Stein,
who has served as the Chairman of the group audit committee for the past three
years has been appointed to the board of Peregrine as an independent non-
executive director.
Dividend
The directors have resolved to declare a dividend of 45 cents per share for
the year, an increase of 50% on the previous year.
The following dates are applicable to the dividend payment:
Last date to trade cum dividend Friday, 27 July 2007
Trading ex dividend commences Monday, 30 July 2007
Record date Friday, 3 August 2007
Payment date Monday, 6 August 2007
Shares may not be dematerialised or rematerialised between Monday, 30 July
2007 and Friday, 3 August 2007, both dates inclusive.
By order of the board
Sean Melnick Keith Betty
Executive Chairman Chief Executive Officer
Sandton
29 May 2007
Date: 29/05/2007 14:04:01 Produced by the JSE SENS Department.
