| Wed 28 May 2008, 10:00 | | PGR - Peregrine Holdings Limited - Reviewed results for the year ended 31 March |
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PGR
PGR
PGR - Peregrine Holdings Limited - Reviewed results for the year ended 31 March
2008
PEREGRINE HOLDINGS LIMITED
Registration number 1994/006026/06
Share code: PGR
ISIN code: ZAE000078127
REVIEWED RESULTS FOR THE YEAR ENDED 31 MARCH 2008
HIGHLIGHTS
Headline earnings up 44% to R462 million
Headline EPS up 34% to 222.7 cents
Basic earnings up 25% to R468 million
Basic EPS up 16% to 225.4 cents
Revenue up 20% to R1.33 billion
Assets under management up 29% to R43.3 billion
Dividend increased by 24% to 56 cents per share
INCOME STATEMENT
% change Reviewed
2007 to Year ended 31 Audited
2008 March Year ended 31 March
2008 2007
R`000 R`000
Operating revenue 20 1,095,438 911,193
Investment income 16 234,344 201,330
Total revenue 20 1,329,782 1,112,523
Investment contract
benefits 274,121 354,931
Investment contract
expenses (274,121) (354,931)
Operating expenses 16 (665,901) (573,363)
Profit from operations 23 663,881 539,160
Net interest
received/(paid) 64,541 16,005
Interest received 87,895 32,347
Interest paid (23,354) (16,342)
Income from
associate companies 7,101 7,645
Profit from ordinary
activities 31 735,523 562,810
Capital surplus 5,500 5,455
Profit before taxation 30 741,023 568,265
Taxation (160,313) (148,777)
Profit for the year 38 580,710 419,488
Attributable to :
Equity holders of the
company 25 467,754 374,663
Minority interest 112,956 44,825
580,710 419,488
Determination of
headline earnings
Profit attributable to
equity holders of the
company 467,754 374,663
Adjustments:
Capital profit on
reversal of impairment
to loan receivable - (5,455)
Capital profit on sale
of available-for-sale
investment - (47,340)
Capital surplus on sale
of subsidiary (5,500) -
Headline earnings 44 462,254 321,868
Headline earnings per
ordinary share (cents) 34 222.7 166.3
Basic earnings per
ordinary share (cents) 16 225.4 193.6
Diluted headline
earnings per share
(cents) 45 222.7 153.8
Diluted basic earnings
per share (cents) 26 225.4 179.1
Dividend paid per
ordinary share - in
respect of the previous
year (cents) 50 45.0 30.0
Dividend per ordinary
share declared
subsequent to 31 March
(cents) 24 56.0 45.0
Number of ordinary
shares in issue (`000) 228,129 228,129
Treasury shares held
(`000) 12,853 32,440
Weighted average number
of ordinary shares in
issue (`000) 207,548 193,556
Diluted weighted average
number of ordinary
shares in issue (`000) 207,548 209,243
BALANCE SHEET
Reviewed Audited
As at 31 March As at 31 March
2008 2007
R`000 R`000
Assets
Non-current assets 3,408,341 2,920,084
Property, plant and equipment 91,677 88,553
Intangible assets 268,157 269,694
Investment in associate companies 16,969 4,805
Investments linked to policyholder
investment contracts 2,657,024 2,403,454
Financial investments 337,528 137,517
Loans and receivables 22,142 4,421
Deferred taxation 14,844 11,640
Current assets 9,173,946 8,316,502
Financial investments 899,054 587,838
Trade and other receivables 103,234 171,305
Amounts receivable in respect of
stockbroking activities 7,111,094 6,899,391
Taxation 6,918 2,862
Cash and cash equivalents 1,053,646 655,106
Total assets 12,582,287 11,236,586
Equity and liabilities
Equity 1,722,093 1,128,190
Share capital, retained earnings and
reserves 1,602,313 1,090,353
Minority interest 119,780 37,837
Non-current liabilities 2,851,444 2,564,137
Interest-bearing borrowings 57,784 65,472
Policyholder investment contract
liabilities 2,657,024 2,403,454
Loans and payables 88,012 52,998
Deferred taxation 48,624 42,213
Current liabilities 8,008,750 7,544,259
Trade and other payables 317,122 246,268
Amounts payable in respect of
stockbroking activities 7,566,154 7,175,641
Current portion of interest-bearing
borrowings 7,688 39,881
Taxation 117,786 82,469
Total equity and liabilities 12,582,287 11,236,586
Net asset value per share (cents) 744.3 557.2
STATEMENT OF CHANGES IN EQUITY
Share Share Treasury Accumulated
capital premium shares profits
R`000 R`000 R`000 R`000
2008
Balance at 31 March 2007 228 38,024 (76,576) 1,033,335
Net gains and losses not
recognised in the income
statement - - 39,485 5,432
Profit for the year - - - 467,754
Dividends paid - - - (88,661)
Balance at 31 March 2008 228 38,024 (37,091) 1,417,860
2007
Balance at 31 March 2006 229 52,379 (86,220) 684,321
Net gains and losses not
recognised in the income
statement - - 9,644 31,824
Profit for the year - - - 374,663
Dividends paid - - - (57,473)
Share repurchases (1) (14,355) - -
Balance at 31 March 2007 228 38,024 (76,576) 1,033,335
Non-
distributable Obligation to Total capital
reserves issue shares and reserves
R`000 R`000 R`000
2008
Balance at 31 March 2007 60,195 35,147 1,090,353
Net gains and losses not
recognised in the income
statement 123,097 (35,147) 132,867
Profit for the year - - 467,754
Dividends paid - - (88,661)
Balance at 31 March 2008 183,292 - 1,602,313
2007
Balance at 31 March 2006 62,130 35,147 747,986
Net gains and losses not
recognised in the income
statement (1,935) - 39,533
Profit for the year - - 374,663
Dividends paid - - (57,473)
Share repurchases - - (14,356)
Balance at 31 March 2007 60,195 35,147 1,090,353
Minority
interest Total equity
R`000 R`000
2008
Balance at 31 March 2007 37,837 1,128,190
Net gains and losses not recognised in the income
Statement 113 132,980
Profit for the year 112,956 580,710
Dividends paid (31,126) (119,787)
Balance at 31 March 2008 119,780 1,722,093
2007
Balance at 31 March 2006 11,606 759,592
Net gains and losses not recognised in the income
Statement 186 39,719
Profit for the year 44,825 419,488
Dividends paid (18,780) (76,253)
Share repurchases - (14,356)
Balance at 31 March 2007 37,837 1,128,190
CASH FLOW STATEMENT
Reviewed Audited
Year ended 31 Year ended 31
March March
2008 2007
R`000 R`000
Cash flow from operating activities 549,577 339,572
Cash generated from operating activities 725,231 476,218
Interest received 86,507 31,089
Interest paid (23,354) (15,412)
Dividends received-financial investments 12,420 3,210
Dividends received-associates 10,044 4,576
Dividends paid to equity shareholders (88,661) (57,473)
Dividends paid to minority shareholders (31,126) (18,780)
Taxation paid (141,484) (83,856)
Cash flow from investing activities (134,322) (132,944)
Cash flow from financing activities (25,656) 25,939
Share repurchases - (14,356)
Proceeds on vesting of shares held by staff
share trust 2,978 2,068
Proceeds on sale of treasury shares - 4
Share incentive scheme payments received 13,996 -
Decrease in liability for share based payments (4,127) -
Increase in loans and payables 515 32,457
Decrease in loan receivable 810 8,474
Decrease in interest bearing borrowings (39,828) (2,708)
Net increase in cash and cash equivalents 389,599 232,567
Cash and cash equivalents at beginning of
the year 655,106 419,748
Effects of exchange rate changes on cash
and cash equivalents 8,941 2,791
Cash and cash equivalents at end of the year 1,053,646 655,106
SEGMENTAL ANALYSIS
Reviewed
Year ended 31 March 2008
Interest and Profit from
Revenue associate income ordinary activities
R`000 R`000 R`000
Wealth and asset
management 621,004 13,735 317,460
Wealth management 373,239 10,151 165,251
Asset management 247,765 3,584 152,209
Broking and
structuring 464,343 48,667 216,020
Group investments
(net of group costs) 244,435 9,240 202,043
1,329,782 71,642 735,523
Audited
Year ended 31 March 2007
Interest and
associate Profit from
Revenue 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
% of profit from
% change ordinary
2007 to activities
2008 2008 2007
Wealth and asset management 13 44 50
Wealth management 13 23 26
Asset management 14 21 24
Broking and structuring 45 29 27
Group investments (net of group costs) 51 27 23
31 100 100
BASIS OF PREPARATION
The results for the year ended 31 March 2008 have been prepared in accordance
with, and comply with IFRS, IAS34 and the South African Companies Act of 1973,
as amended.
REVIEW REPORT
The results for the year ended 31 March 2008 have been reviewed by PKF (Jhb)
Inc. and their unqualified review report is available for inspection at the
group`s registered office.
EVENTS SUBSEQUENT TO BALANCE SHEET DATE
With effect from 4 April 2008, Peregrine Financial Services Holdings Limited
acquired 51% of the shares in Stenham Limited, the holding company of the
Stenham group of companies, an independent privately owned wealth and asset
management group providing financial solutions and products to high net worth
private clients and institutions.
Full details of the acquisition were set out in a circular sent to shareholders
on 20 March 2008.
CAPITAL COMMITMENTS
The minimum undiscounted commitment in respect of operating leases is R50 555
million (2007: R13 449 million). The increase is as a result of a new lease
entered into respect of premises in Cape Town.
The minimum commitment in respect of capital expenditure is R6 415 million
(2007: R10 685 million).
COMMENTARY
The Peregrine group has produced a highly satisfactory set of results for the
year under review, notwithstanding the range of business conditions, market
fluctuations and changes in political and economic sentiment experienced over
the period. The year was characterised by two distinctly different halves, with
the macro environment deteriorating markedly during the second half and more
particularly during the latter part thereof.
Peregrine has evolved into a diversified group of focused underlying
subsidiaries, resulting in compensating and complimentary performances at
different times during the year. Headline earnings increased by 44% to
R462.3 million, with earnings attributable to ordinary shareholders increasing
by 25% to R467.7 million.
Features for the year include:
The record performance delivered by Peregrine Securities in market conditions
underpinned by high levels of volatility and large volumes traded;
A successful period of activity for the group`s investment banking
activities;
A highly satisfactory performance from the group`s private client wealth
management business, Citadel with annual new business inflows exceeding R2.4
billion for the first time and the business posting record levels of
profitability;
A 29% increase in group assets under management to R43.3 billion;
The annual dividend being increased by 24% to 56 cents per share.
A further milestone was the acquisition, on 4 April 2008, of a controlling
interest in the Stenham group, an offshore wealth and asset manager
specialising in managing fund-of-hedge funds as well as closed-end property
funds. Stenham has primary offices in London and the Channel Islands. As the
transaction only became effective subsequent to the group`s financial year end
it did not impact earnings for the year under review.
Results
Total revenue, comprising operating revenue and investment income, increased by
20% to R1. 330 billion from R1.113 billion, with every division registering an
increase in turnover.
Core operating expenses of the group increased by 21% after stripping out the
effects of direct staff profit participation in the increased profitability of
each of the underlying businesses.
Net interest received increased to R64.5 million from R16.0 million as a result
of increased cash resources held during the period.
Last year`s report anticipated the issue of 18 million shares on maturity of
the group`s deferred purchase share scheme during August 2007. Thus, whilst
attributable and headline earnings increased by 25% and 44% respectively, the
resulting 7.2% increase in the weighted average number of shares in issue, to
207. 5 million, resulted in basic earnings per share increasing by 16% to
225.4 cents per share and headline earnings per share increasing by 34% to
222.7 cents per share.
Operating highlights
Due to the substantial minority interests which now exist in both the asset
management and group investments results, the operating highlights below are
presented on a proforma `after minorities` basis. The results are reflected at
the operating profit level, on a pre-tax basis. Minority interest in the income
statement is accounted for on an after tax basis. This is considered to be the
most appropriate basis on which to assess the results. It is also an
appropriate time to make this change in anticipation of including Stenham, in
which the group`s interest is currently 51%, in next year`s figures.
Proforma profit
Profit from Profit from from ordinary
ordinary ordinary activities adjusted
Segmental description activities activities for minorities
2008 2007 2008
R`000 R`000 R`000
Wealth and asset
management 317,460 279,946 264,154
Wealth management 165,251 146,446 165,251
Asset management 152,209 133,500 98,903
Broking and structuring 216,020 149,489 216,020
Group investments 202,043 133,375 127,390
735,523 562,810 607,564
Proforma profit
from ordinary % of profit
activities adjusted from ordinary
Segmental description for minorities activities
2007 2008 2007
R`000
Wealth and asset management 243,505 44 50
Wealth management 146,446 23 26
Asset management 97,059 21 24
Broking and structuring 149,489 29 27
Group investments 113,382 27 23
506,376 100 100
% of profit from
ordinary
activities
adjusted for
Segmental description minorities
2008 2007
Wealth and asset management 43 48
Wealth management 27 29
Asset management 16 19
Broking and structuring 36 30
Group investments 21 22
100 100
Private-client wealth management firm, Citadel, produced a 13% increase in
profit from ordinary activities to R165.3 million, contributing 27% to group
profitability. Record gross inflows, in excess of R200 million on average per
month, coupled with positive investment performance, saw Citadel`s asset base
rise above R15 billion. Whilst the business accrued performance fees throughout
the year, the second half of the year saw a notable reduction in such fees as
market returns flattened and local CPI, which is an important constituent of
the benchmark against which Citadel earns its performance fees, increased
meaningfully.
Citadel`s competitive positioning and brand profile in the local private client
wealth management industry has increased its access to substantially wealthy
families from all demographic sectors of South African society. As a
consequence, the group is well positioned to benefit from the significant
wealth being created by the growth in the country`s underlying economy.
The businesses within the asset management division increased their
contribution to group profitability by 2% to R98.9 million, or 16% of group
profitability. This is a satisfactory all round performance considering the
high base set in the 2007 financial year and the adverse market conditions
experienced in the final quarter of the year under review.
The group`s hedge fund management operations, comprising Peregrine Capital,
Peregrine Investment Managers (PIM) and Caveo Fund Solutions (Caveo)
contributed R90.7 million (92%) of this amount with PeregrineQuant (PQ)
contributing the remainder.
The year under review can best be described as a `mixed` one for the South
African hedge fund industry. Whilst the first half was supportive of some
superb returns , the second half proved difficult for many managers. It was a
year in which managers were given the opportunity to respond to changing market
conditions and to demonstrate their ability to hedge against downside
volatility and protect capital. As expected, the weaknesses in certain manager
strategies were exposed whilst others performed admirably.
Whilst it is difficult to predict returns in any single year, we envisage that
the hedge fund industry in general will recover from the bruising received in
the first 3 months of 2008 and that growth in the industry (and consequentially
in our funds) will continue. We anticipate that fund performances will remain
attractive on a risk-adjusted basis over the medium to long-term.
Peregrine remains South Africa`s largest single strategy hedge fund manager,
managing R4.7 billion of single strategy funds. The group`s hedge-fund
flagship, Peregrine Capital, which has an outstanding (and the country`s oldest
hedge fund) track record, currently manages R3.6 billion. The group`s newer
range of hedge funds, housed within PIM, manage an additional
R1.1 billion.
The investment returns generated within the Peregrine Capital suite of funds
once again proved to be meaningfully positive in the midst of a turbulent
environment. The annual returns generated by the team resulted in a year of
record profitability. Returns on the funds within the PIM suite of funds ,
whilst largely inline with their mandates, were lower, on average, than in
previous years. The last quarter was particularly challenging in some cases
while allowing other funds the opportunity to outperform.
The group`s hedge fund-of-fund business, Caveo which is a joint venture with
Investment Solutions, continues to increase profitability with assets under
management exceeding R1.7 billion at year-end. As mentioned previously,
prospects for the business are encouraging with Caveo being well positioned to
benefit from institutional flows into this asset class.
PeregrineQuant whose assets under management now exceed R21.8 billion, has
built a reputation as one of the most respected participants in quantitative
asset management in South Africa.
The broking and structuring activities housed within Peregrine Securities
produced a 45% increase in profitability to R216 million, contributing 36% to
group profit from ordinary activities. Whilst increased market volatility and
volume growth contributed to the current year`s profitability, the success of
the division reflects many years of focus and it is particularly gratifying
that this set of results reflects another record performance for the division
as a whole.
Within the Securities division, Peregrine Equities houses the country`s largest
prime-broking operation and offers a fully integrated hedge fund solution to
the market. The difficult market conditions for the local hedge fund industry
resulted in an increased focus on risk management systems, the quality of the
client base and preserving market share over the period. Thus, whilst still
positive, growth within the Equities business has slowed from the previous
year. 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.
Equities has become a consistent top five JSE broker by volume. At year end
the prime-broker had in excess of R8.5bn in client assets across all asset
classes.
Peregrine Derivatives remains a top rated SA derivative house and for the 12
months under review was, by volume, the number one independent broker on the
local futures exchange (SAFEX). 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 within the hedge fund environment has become a solid revenue source
for the business and offers good growth potential.
The return from group investments (net of group costs) increased by 12% to
R127.4 million, contributing 21% to group profitability. Returns comprise
investment returns achieved on the group`s proprietary hedge fund and
investment banking portfolios. As at balance sheet date the group had R915
million invested (an increase of 39% over the prior period) with an 80:20
ratio of hedge funds to investment banking assets. Satisfactory returns were
achieved across the hedge fund base, while particularly good returns were
achieved within the group`s investment banking portfolio.
Prospects
Given the set of economic and political conditions in play locally and taking
account of market conditions and investor sentiment globally , the immediate
outlook on a macro basis is neutral to negative. We anticipate that the first
six months of the new financial year are going to be difficult and, when
compared to the strong comparable period in the year under review, our
expectations are that earnings could come under pressure at the interim stage.
We remain committed to and encouraged by what the group can achieve in the
medium term by continuing to build on its well-established positions in the
local private client wealth management, securities broking and hedge fund
industries.
We believe that the conclusion of the Stenham acquisition on 4 April 2008 will
materially impact the nature and composition of the Peregrine group going
forward. We are particularly pleased with Stenham`s growth prospects, its
annuity flows and its diversification benefits to the group both in
geographical terms and from a currency perspective. The Stenham acquisition
combined with existing offshore income already earned by the group should
result in approximately one third of the Peregrine group`s earnings being
earned offshore in ensuing years.
The group`s overall financial performance will continue to be closely linked to
the investment performance of the underlying businesses, investment markets
generally and the ability of the group to continue to attract and retain key
members of staff.
Dividend
In keeping with the stated dividend policy of paying out a minimum of 25% of
each year`s earnings, the directors have resolved to declare a dividend of 56
cents per share for the year, an increase of 24% on the previous year.
In compliance with the requirements of Strate, the following dates are
applicable to the dividend payment:
Last date to trade cum dividend Friday, 18 July 2008
Trading ex dividend commences Monday, 21 July 2008
Record date Friday, 25 July 2008
Payment date Monday, 28 July 2008
Shares may not be dematerialised or rematerialised between Monday, 21 July 2008
and Friday, 25 July 2008, both dates inclusive.
Keith Betty Sean Melnick
Group Chief Executive Executive Chairman
28 May 2008 28 May 2008
www.peregrine.co.za
Date: 28/05/2008 10:00:01 Produced by the JSE SENS Department.
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