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CDZ
CDZ
CDZ - Cadiz- Unaudited interim results for the six months ended 30 June 2007
CADIZ HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 1997/007258/06)
JSE share code: CDZ
ISIN: ZAE000017661
("Cadiz", "the group" or "the company")
Unaudited Interim Results For The Six Months Ended 30 June 2007
HIGHLIGHTS
- Gross operating revenue up 58% to R197 million
- Asset management revenue up 222% to R100 million
- Assets under management total R52.5 billion
- Diluted earnings per share up 3.7% to 28.1 cents
- Rated SA`s leading derivatives house for 11th consecutive year
- Ranked 7th most empowered company in SA
GROUP INCOME STATEMENT Unaudited Unaudited Audited
6 months 6 months 12 months
30-Jun-07 30-Jun-06 31-Dec-06
R `000 R `000 R `000
Gross operating revenue 197 204 125 178
256 343
Interest income 5 946 7 702 14 531
Net investment income 16 999 27 765 61 876
Net income from 14 465 9 148 40 242
investments
Foreign exchange gains 2 534 18 617 21 634
Operating expenses (134 346) (79 041) (180 184)
Operating profit 85 803 81 604 152 566
Finance costs (2 638) (695) (2 505)
Profit before taxation 83 165 80 909 150 061
Taxation (19 494) (18 961) (33 015)
Profit for the period 63 671 61 948 117 046
Reconciliation of
headline earnings:
Profit for the period 63 671 61 948 117 046
Goodwill impairment 1 393 1 493 2 603
Loss on disposal of - -
equipment 57
Headline earnings 65 064 63 441 119 706
Issued number of shares 245 138 239 810
(`000) 239 810
Consolidated number of 217 592 209 229
shares (`000) 209 812
Weighted average number
of shares (`000) 213 908 209 905 209 659
Diluted weighted 226 342 228 505
average number of
shares (`000) 225 670
Earnings per share
(cents)
Basic 29.8 29.5 55.8
Diluted 28.1 27.1 51.9
Headline earnings per
share (cents)
Basic 30.4 30.2 57.1
Diluted 28.7 27.8 53.0
GROUP BALANCE SHEET Unaudited Unaudited Audited
30-Jun-07 30-Jun-06 31-Dec-06
R `000 R `000 R `000
ASSETS
Non - current assets 487 646 227 171 478 657
Plant and equipment 8 506 6 928 7 609
Intangible assets 305 121 23 396 312 451
Deferred taxation 17 830 17 196 19 851
Financial assets 152 878 174 069 134 185
Receivables and 3 311 5 582
prepayments 4 561
Current assets 842 129 340 896 1 191 146
Financial assets 81 589 155 861 38 287
Receivables and 676 581 95 096
prepayments 1 062 247
Taxation 200 314 545
Cash and cash 83 759 89 625 90 067
equivalents
Total assets 1 329 775 568 067 1 669 803
EQUITY
Capital and reserves
Ordinary share capital 34 678 53 438
and premium 53 438
Treasury shares (80 844) (77 054) (75 908)
Share-based payment 14 916 7 128
reserve 11 073
Retained earnings 491 649 390 481 444 521
Total equity 460 399 373 993 433 124
LIABILITIES
Non - current 54 762 22 908 54 729
liabilities
Deferred taxation 17 944 5 175 14 787
Trade and other 36 818 17 733
payables 39 942
Current liabilities 814 614 171 166 1 181 950
Trade and other 727 124 147 269 1 135 345
payables
Taxation 11 328 15 727 20 469
Borrowings 68 539 - 26 136
Trading liabilities 7 623 8 170 -
Total liabilities 869 376 194 074 1 236 679
Total equity and 1 329 775 568 067
liabilities 1,669 803
Net asset value (cents 212 179 206
per share)
Net tangible asset 72 162
value (cents per share) 55
ABRIDGED GROUP CASH Unaudited Unaudited Audited
FLOW STATEMENT
6 months 6 months 12 months
30-Jun-07 30-Jun-06 31-Dec-06
R `000 R `000 R `000
Cash flow from 20 564 (12 223)
operating activities 20 925
Cash generated from 50 674 34 961 78 142
operations
Taxation paid (23 429) (30 224) (40 257)
Dividends paid (6 681) (16 960) (16 960)
Cash flow from (36 728) 51 281
investing activities (5 949)
Cash flow from (33 557) (63 000)
financing activities (62 912)
Net change in cash and (49 721) (23 942)
cash equivalents (47 936)
Effect of exchange rate 1 010 394
adjustment (1 306)
Cash and cash 63 931 113 173
equivalents at
beginning of period 113 173
Cash and cash 15 220 89 625
equivalents at end of
period 63 931
ABRIDGED GROUP Unaudited Unaudited Audited
STATEMENT OF CHANGES IN
EQUITY
6 months 6 months 12 months
30-Jun-07 30-Jun-06 31-Dec-06
R `000 R `000 R `000
Share capital, share
premium and treasury
shares
Opening balance (22 470) 33 074 33 074
Share issue 22 914 - -
Issued shares held as (22 914) -
treasury shares -
Capital reduction (37 858) (25 439) (25 439)
Sale of treasury shares 14 162 7 243
on exercise of options 8 389
Purchase of treasury - (38 494)
shares (38 494)
(46 166) (23 616) (22 470)
Reserves
Opening balance 455 594 356 168 356 168
Sale of treasury shares (9 861) (6 310)
on exercise of options (7 368)
Employee share option
scheme - value of 3 842 2 763
services provided 6 708
Profit for the period 63 671 61 948 117 046
Dividends paid (6 681) (16 960) (16 960)
506 565 397 609 455 594
Total shareholders` 460 399 373 993
funds 433 124
FINANCIAL PERFORMANCE
Cadiz showed strong operational
growth in the six months to 30
June 2007 ("the period"),
reflected in a 58% increase in
gross operating revenue to R197.2
million (2006: R125.2 million).
Continuous innovation and delivery
from new businesses has benefited
the asset management, securities
and corporate solutions
businesses, while the group`s
performance was lifted by the
incorporation of the African
Harvest Fund Managers ("AH")
business for the period.
In 2006 Cadiz took a strategic
decision to deploy its growing
capital base more efficiently to
generate operational earnings. The
acquisition of AH in November last
year created an opportunity for
the group to implement this
strategy. This acquisition has
contributed significantly to the
increase in operating revenue.
Investment returns (interest
income plus net income from
investments) increased by 21% to
R20.4 million on the back of
strong performances from the
group`s strategic investments.
This was achieved despite the
reduced capital base following the
R296.1 million acquisition of AH.
Net investment income for the
corresponding period last year
included gains of R5.4 million on
JSE Limited shares and R18.6
million foreign exchange gains,
and this revenue has predictably
not been repeated.
Net income from operations (gross
operating revenue less operating
expenses) increased by 36% to
R62.9 million.
Operating expenses rose by R55.3
million or 70% to R134.3 million.
The components of the increase
are:
* R38 million (48%) of costs
relating to the acquisition of AH
and the investment in systems
integration, premises and people
for Cadiz African Harvest Asset
Management, including the
amortisation of intangibles of
R4.5 million;
* R8 million (10%) of variable
costs for profit share payments
linked to the strong performance
of the hedge funds; and
* R9 million (12%) relating to
ongoing operating activities.
Headline earnings increased by
2.6% to R65.1 million (2006: R63.4
million), with diluted earnings
per share growing 3.7% to 28.1
(2006: 27.1) cents per share.
OPERATIONAL REVIEW
Operating activities generated 90%
(2006: 78%) of the group`s total
revenue of R217.5 million (2006:
R160.0 million).
REVENUE ANALYSIS June 2007 June 2006 Change
R`000 % of R`000 % of R`000 %
total total
Securities 67 575 31 56 605 35 10 970 19
Structuring 29 210 13 37 352 23 (8 142) (22)
Asset management 100 419 46 31 221 20 69 198 222
Gross operating 197 204 90 125 78 72 026 57
revenue 178
Net return on 17 773 9 16 155 10 1 618 10
investments
Foreign exchange 2 534 1 18 617 12 (16 083) (86)
gains
Net investment 20 307 10 34 772 22 (14 465) (42)
portfolio returns
Gross revenue 217 511 100 159 100 57 561 36
950
SECURITIES
Cadiz Securities revenue grew by
19.4% to R67.6 million (2006:
R56.6 million), with stock broking
and equity derivatives continuing
to generate the bulk of the
revenue.
New businesses such as transition
management (portfolio balancing
activity) and prime broking (full
service offering to hedge funds)
are starting to make a meaningful
contribution to revenue and
profitability. Cadiz Prime Broking
has expanded its client base and
assets under administration and
has become established as a
credible player in this growing
industry. Transition management,
the youngest business in the Cadiz
Securities stable, has also
expanded its client base and shown
encouraging revenue growth. Both
these businesses also provide an
opportunity for Cadiz Securities
to cross-sell other financial
solutions to new clients.
Cadiz Securities continued its
unbroken 11 year record of being
rated the country`s leading
derivatives research and dealing
house in the annual Financial Mail
analyst rankings. Cadiz was also
rated first in Risk Management
Research and Innovative Research
for the sixth consecutive year, as
well as being highly placed in the
Quantitative Analysis category.
Cadiz Securities, together with
the JSE, developed the South
African Volatility Index ("SAVI"),
a forecast of equity market risk
in the country which is published
daily by the South African Futures
Exchange.
STRUCTURING
Structuring revenue remains less
predictable in nature. Revenue
declined by 22% (R8.2 million)
over the corresponding period,
which represents 4% of the group`s
gross operating revenue. Within
structuring both Cadiz Corporate
Solutions and Cadiz Investment
Products continue to generate
strong revenue growth, with Cadiz
Investment Products building an
annuity earnings base.
ASSET MANAGEMENT
Asset management revenue increased
by 222% to R100.4 million (2006:
R31.2 million), boosted by stellar
returns in the equity market,
strong hedge fund performance and
the incorporation of AH for the
full six month period. The asset
management business is now the
largest revenue contributor,
accounting for 46% of group
revenue.
Total assets under management at
30 June 2007 increased to R52.5
billion (Dec 2006: R49.8 billion)
after net fund outflows of R2.1
billion and market growth of R4.8
billion for the period. Following
the integration of AH, Cadiz
African Harvest Asset Management
is well positioned to grow its
client base.
Asset management remains a
strategic growth vector in Cadiz`s
future. The contribution of asset
management to the group will be
further enhanced as economies of
scale start to be realised and
investment performance continues
to improve.
Cadiz continues to focus on
growing its hedge fund operation
and has refined the business model
to attract quality fund managers
and to ensure the long-term
sustainability of the business.
Cadiz currently manages the
Sapphire, Emerald and Titanium
funds, with the intention of
launching two or three new funds
by year end.
INVESTMENTS AND CAPITAL
The group`s capital totalled
R287.1 million at the end of the
period and has been applied as
follows:
* R150.7 million for regulatory
capital adequacy and working
capital requirements;
* R55.5 million invested as seed
capital in new asset management
products and co-invested in in-
house hedge funds; and
* R80.9 million strategic
investments in empowerment partner
Makana.
R65.8 million (23%) of the above
group capital is invested offshore
as part of the strategy of
currency diversification.
The group has a further R37.0
million of short-term investments
and R7.6 million of trading
liabilities as hedges against
contracts for difference written
by Cadiz Stockbroking.
STRATEGY AND PROSPECTS
Cadiz has undergone major change
over the past nine months. The
nature and size of the AH
acquisition has had a significant
impact on the group in the short
term. The acquisition has been a
success and over time the quality
of the mandates and skills
acquired in the merger will show
strong growth. The investment
style and philosophy of Cadiz
African Harvest Asset Management
has proven itself historically and
is expected to do so in the
future.
The securities business has been
transformed from an established,
mature business into a growth area
through the application of new
technologies and establishment of
new businesses such as prime
broking and transition management.
The income stream from Cadiz
Corporate Solutions is irregular
in nature with long lead times for
the realisation of revenue, The
business has established itself as
a BEE advisor and structurer of
choice and deal flow remains
strong
Cadiz Investment Products
continues to grow, with inflows
for the first six months exceeding
the inflows for the entire
previous 12 months. Significant
opportunities have been created in
the retail market following the AH
acquisition with its unit trust
and pooled assets platform.
Cadiz`s focus on non-linear growth
is starting to bear fruit and the
group is committed to a long-term
strategic growth plan. The
majority of the group`s capital
has been redeployed from
unpredictable and unsustainable
investments into solid operational
activities. Cadiz is very well
positioned for continued and
sustainable growth over time.
SHARE CAPITAL AND TREASURY SHARES
During the period R22.9 million of
the deferred consideration payable
to AH staff over three years was
settled through the issue of 5.3
million shares. These shares are
held as treasury shares until
their release.
STAFF SHARE OPTIONS
During the period Cadiz awarded
11.2 million share appreciation
rights to current and newly-
appointed staff. The effective
dates of issue were between 1
February 2007 and 1 June 2007.
These options vest at 20% per
annum from years three to seven
and the weighted average strike
price is 495 cents per share,
increasing by a notional interest
amount equivalent to the fringe
benefits tax interest rate less
distributions per share made by
the company.
CHANGE IN YEAR END
Shareholders are advised that the
directors of Cadiz have resolved
to change the year end of the
company from 31 December to 31
March. As a result the company
will publish reviewed second
interim results for the period
ending 31 December 2007 and
audited results for the 15 months
ended 31 March 2008. The final
distribution will be based on the
15 month period to 31 March 2008.
BASIS OF PRESENTATION
The abridged financial statements
have been prepared in terms of
International Financial Reporting
Standards and comply with IAS34 -
`Interim Financial Reporting`. The
accounting policies are consistent
with those applied in the annual
financial statements for 31
December 2006. The group will
apply IFRS7 - "Financial
Instruments: Disclosures" in its
financial statements for the
period ending 31 March 2008.
On behalf of the board of
directors
Ray Cadiz Ram
Barkai
Chairman
Chief Executive Officer
Cape Town
6 August 2007
Registered office:
Ground Floor
Fernwood House
The Oval
1 Oakdale Road
Newlands
7700
P O Box 44547
Claremont
7735
www.cadiz.co.za
Directors:
R F G Cadiz (Chairman)*
R Barkai (Chief Executive Officer)
C A Hall*
B H Kent*
D M Lawrence*
N S Mjoli-Mncube*
S P Ngwenya*
S J Saunders*
N S Buthelezi* (alternate)
(* Non-executive directors)
Transfer secretaries:
Computershare Investor Services
2004 (Pty) Limited
70 Marshall Street
Johannesburg
P O Box 61051
Marshalltown 2107
Sponsor:
Investec Bank Limited
Company secretary:
F C Shaw
E-mail: fraser.shaw@cadiz.co.za
Date: 06/08/2007 08:00:11 Produced by the JSE SENS Department.
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