| Mon 2 Jun 2008, 8:00 | | CDZ - Cadiz Holdings Limited - Audited results for the 15 months ended 31 March |
|
CDZ
CDZ
CDZ - Cadiz Holdings Limited - Audited results for the 15 months ended 31 March
2008
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")
Audited Results For The 15 Months Ended 31 March 2008
KEY FEATURES
- Gross operating revenue up 41%* to R451 million
- Asset management revenue up 83%* to R212 million
- Securities revenue up 22%* to R168 million
- Diluted headline EPS down 13.5%* to 57.3 cps (45.8 cps*)
- Received an "A" rating from Empowerdex
- Top rated derivatives house in SA for 12th consecutive year
* annualised for 15 months
CHANGE IN FINANCIAL YEAR END
The group has changed its financial year end from 31 December to 31 March and
these results reflect the performance for the 15 months to 31 March 2008 ("the
period"). All percentage changes for the period are shown on an annualised basis
with the results for the 15 months being arithmetically converted to 12 months
to allow for a comparison with the 12 months to 31 December 2006.
GROUP INCOME STATEMENT Audited Audited
15 months 12 months
31-Mar-08 31-Dec-06
R `000 R `000
Gross operating revenue 451 407 256 343
Interest income 17 173 14 531
Net investment income 40 778 61 876
Net income from investments 22 875 40 242
Foreign exchange gains 17 903 21 634
Operating expenses (340 693) (180 184)
Operating profit 168 665 152 566
Finance costs (4 720) (2 505)
Profit before taxation 163 945 150 061
Taxation (38 038) (33 015)
Profit for the period 125 907 117 046
Reconciliation of headline
earnings:
Profit for the period 125 907 117 046
Goodwill impairment 2 820 2 603
(Profit)/Loss on disposal of (7) 80
equipment
Taxation impact 2 (23)
Headline earnings 128 722 119 706
Issued number of shares (`000) 245 138 239 810
Consolidated number of shares 220 853 209 812
(`000)
Weighted average number of shares 217 043 209 659
(`000)
Diluted weighted average number of 224 616 225 670
shares (`000)
Earnings per share (cents)
Basic 58.0 55.8
Diluted 56.1 51.9
Headline earnings per share (cents)
Basic 59.3 57.1
Diluted 57.3 53.0
GROUP BALANCE SHEET Audited Audited
31-Mar-08 31-Dec-06
R `000 R `000
ASSETS
Non - current assets 439 457 473 230
Plant and equipment 7 030 7 609
Intangible assets 296 456 312 451
Deferred taxation 17 409 19 851
Financial assets 110 283 128 758
Receivables and prepayments 8 279 4 561
Current assets 961 342 1 196 573
Financial assets 77 971 43 714
Receivables and prepayments 732 346 1 062 247
Taxation 1 396 545
Cash and cash equivalents 149 629 90 067
Total assets 1 400 799 1 669 803
EQUITY
Capital and reserves
Ordinary share capital and premium 34 678 53 438
Treasury shares (71 795) (75 908)
Share-based payment reserve 21 254 11 073
Retained earnings 552 975 444 521
Total equity 537 112 433 124
LIABILITIES
Non - current liabilities 34 526 54 729
Deferred taxation 13 034 14 787
Trade and other payables 21 492 39 942
Current liabilities 829 161 1 181 950
Trade and other payables 770 981 1 135 345
Taxation 14 696 20 469
Borrowings 25 073 26 136
Trading liabilities 18 411 -
Total liabilities 863 687 1 236 679
Total equity and liabilities 1 400 799 1 669 803
Net asset value (cents per share) 243 206
Net tangible asset value (cents per 107 55
share)
ABRIDGED GROUP CASH FLOW STATEMENT Audited Audited
15 months 12 months
31-Mar-08 31-Dec-06
R `000 R `000
Cash flow from operating activities 83 034 20 925
Cash generated from operations 133 987 78 142
Taxation paid (44 272) (40 257)
Dividends paid (6 681) (16 960)
Cash flow from investing activities (4 259) (5 949)
Cash flow from financing activities (32 898) (62 912)
Net change in cash and cash 45 877 (47 936)
equivalents
Effect of exchange rate adjustment 14 748 (1 306)
Cash and cash equivalents at 63 931 113 173
beginning of period
Cash and cash equivalents at end of 124 556 63 931
period
ABRIDGED GROUP STATEMENT OF CHANGES IN EQUITY
Audited Audited
15 months 12 months
31-Mar-08 31-Dec-06
R `000 R `000
Share capital, share premium and
treasury shares
Opening balance (22 470) 33 074
Issue of ordinary shares 22 914 -
Issued shares held as treasury (15 435) -
shares
Capital reduction (37 858) (25 439)
Sale of treasury shares on exercise 15 732 8 389
of options
-
Purchase of treasury shares (38 494)
(37 117) (22 470)
Reserves
Opening balance 455 594 356 168
Sale of treasury shares on exercise (10 772) (7 368)
of options
Employee share option scheme - 10 181 6 708
value of services provided
Profit for the period 125 907 117 046
Dividends paid (6 681) (16 960)
574 229 455 594
Total shareholders` funds 537 112 433 124
FINANCIAL PERFORMANCE
The performance trends reported for the 12 months to end December 2007 have
continued for the full reporting period. The strong operational performance is
reflected in an increase of 41% in gross operating revenue to R451 million
(2006: R256 million), driven by the securities and asset management businesses.
Asset management revenue increased 83% to R212 million, lifted by the
incorporation of African Harvest for the full reporting period compared to only
two months in the previous financial year.
Revenue from securities increased by 22% to R168 million with equity
derivatives, stockbroking and transition management all performing well.
Consistent deal flow from Cadiz Corporate Solutions and increased market
penetration from the retail business, Cadiz Wealth, contributed to an overall 7%
increase in structuring revenue to R71 million.
Operating expenses rose by 51.3% to R341 million. The major components of the
increase are:
- R72.3 million (31.0%) increase in operating costs related to the inclusion of
African Harvest in the results for 15 months compared to two months for 2006,
including an R8.6 million increase in intangible assets amortisation;
- R10.8 million (4.1%) of variable costs for profit share payments linked to the
performance of the hedge funds;
- R3.9 million (1.4%) increase in direct costs related to the strategic
investment portfolio and funding facility in respect of the African Harvest
acquisition; and
- R73.4 million (14.8%) increase in ongoing operating costs, including the
investment in new businesses referred to below.
The cost-to-income ratio, after excluding R7.1 million (2006: R3.2 million)
direct costs related to the group investments and funding facility, and R12.9
million (2006: R4.1 million) intangibles amortisation and goodwill impairment
charges, increased from 67.4% in 2006 to 71.1%. This increase is partly due to
the slowdown in revenue growth as a result of tougher market conditions while
the group continues to invest to position itself for long-term growth by
building new businesses and revenue streams.
Cadiz`s strong operational performance was negatively impacted by the returns on
group investments (comprising interest income and net income from investments)
which declined 46%. This reflects the impact of the outflow of R296 million paid
for the African Harvest acquisition and one-off gains from group investments in
2006, which included a profit of R18.7 million on the sale of JSE Limited shares
which was not repeated in the current period. Foreign exchange gains were also
down 34% due to the lower offshore investment holdings despite recent Rand
weakness.
Headline earnings declined 14.0% to R128.7 million, with diluted headline
earnings per share decreasing by an annualised 13.5% to 57.3 cps (annualised
45.8 cps) for the 15 month period.
OPERATIONAL REVIEW
15 months
March 2008 December 2006 annualised
(15 months) (12 months)
% of % of % change
R`000 total R`000 total
Asset management 212 466 42% 92 753 28% 83%
Securities 168 128 33% 110 470 34% 22%
Structuring 70 813 14% 53 120 16% 7%
Gross operating 451 407 89% 256 343 78% 41%
revenue
Net income from
Investments 35 328 7% 52 268 16% (46%)
Foreign exchange 17 903 4% 21 634 6% (34%)
gains
Net investment 53 231 11% 73 902 22% (42%)
portfolio
returns
Gross revenue 504 638 100% 330 245 100% 22%
ASSET MANAGEMENT
The integration of African Harvest Fund Managers was successfully completed
during the first half of 2007, with all key investment professionals being
retained and the majority of clients showing continued commitment to the
business.
The teams are fully integrated with a single investment process and robust
strategy. The combined entity, Cadiz African Harvest Asset Management (CAHAM),
is one of the largest independent fund managers in the country with an enhanced
fund offering, greater depth of resources and access to a broader potential
client base.
Total assets under management were R48.2 billion at 31 March 2008.
SECURITIES
Equity derivatives and stockbroking, the largest revenue generating units within
Cadiz Securities, continued to gain market share on the back of industry-leading
research and dealing.
The transition management team, which facilitates the transfer and restructuring
of investment portfolios between asset managers, further entrenched its
leadership position and executed several large transitions during the period.
Prime broking continues to capitalise on the growth in the local hedge fund
industry and attracted new clients onto its administrative and portfolio
management platform.
Cadiz Securities was last week voted as the country`s leading Derivatives and
Research team for the 12th successive year in the annual Financial Mail analyst
rankings. Cadiz was also rated number one in Quantitative Research and Risk
Management Research and second in Innovative Research.
STRUCTURING
Consistent deal flow in Cadiz Corporate Solutions (CCS) and the repositioning of
the retail business, Cadiz Wealth, has resulted in an improved performance from
the structuring businesses.
CCS was ranked 17th in the annual Ernst & Young Review of Mergers & Acquisitions
Activity for 2007, with transactions totaling more than R15 billion. This is a
particularly pleasing achievement considering that CCS did not participate in
any mega cross-border deals or any private equity deals and also that the
business does not have a balance sheet.
BEE transactions were the major driver of deal flow in the corporate structuring
market following the finalisation of the Codes of Good Practice on BEE in
February 2007 and CCS has a healthy transaction pipeline.
The retail arm of Cadiz was repositioned over the past year and rebranded as
Cadiz Wealth to reflect the broader product offering to individual investors and
smaller pension funds. Cadiz Green, the specialist hedge fund business, has been
incorporated into Cadiz Wealth from the start of the new financial year, and
will leverage off the latter`s distribution, systems and marketing platform.
Cadiz Wealth now comprises Cadiz Investment Products (capital protected
investments and structured products), Cadiz Collective Investments (unit
trusts), Cadiz Green and Cadiz Life (pooled investment products).
Cadiz Wealth has continued to build a strong annuity income base as the business
experienced its most successful period since inception, with fund inflows
increasing by an annualised 167%. Funds managed on behalf of retail clients are
R3.7 billion.
Total unit trust funds under management at 31 March 2008 were R888 million. The
Cadiz Equity Ladder Fund was the top performing absolute return fund in South
Africa over three years and the Cadiz Money Market Fund was the top performing
money market unit trust over both one and two year periods to 31 March 2008.
GROUP CAPITAL
The group has continued to deploy its capital to grow the business and at the
end of the period the capital had been invested as follows:
- R144.0 million invested in liquid assets for regulatory capital adequacy
and working capital requirements;
- R17.4 million investment net of trading liabilities held as a hedge against
products written by Cadiz Prime Broking;
- R72.4 million invested as seed capital in new asset management products and
co-invested in in-house hedge funds; and
- R85.7 million strategic investments in empowerment partner Makana.
R81.6 million (26%) of the group`s capital is invested in conservative US
Dollar, Euro and Sterling investments.
STRATEGY AND PROSPECTS
The operating environment has changed significantly over the past six to nine
months as the effects of the global slowdown, lack of market liquidity and
tougher domestic environment start to impact growth. Local economic conditions
have been severely impacted by continually rising interest rates, while
spiraling food and fuel costs have contributed to CPIX exceeding the Reserve
Bank`s inflation targets. Political uncertainty and erratic power supplies have
further dented consumer confidence.
Current market conditions may not be conducive to growth in the short term.
However, Cadiz has operated successfully in turbulent markets before and plans
to capitalise on opportunities that may arise in this environment. The group
will continue to follow a prudent approach to growth in the year ahead and
invest to position the business for the next market growth phase.
The group has built a robust platform for sustainable long-term earnings growth
and annuity income now accounts for some 50% of Cadiz`s total revenue. The board
is confident that the leadership team will deliver on its strategy in these more
challenging times.
SHARE CAPITAL AND TREASURY SHARES
During the period R22.9 million of the deferred consideration payable to African
Harvest staff over three years was settled through the issue of 5.3 million
shares. In October 2007 1.7 million of these vested and the remaining shares are
held as treasury shares until their release.
STAFF SHARE OPTIONS
During the period Cadiz awarded 23.6 million share appreciation rights to
current and newly appointed staff. The effective dates of issue were between 1
February 2007 and 14 March 2008. These options vest at 20% per annum from years
three to seven and the weighted average strike price is 423 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.
BASIS OF PRESENTATION
The abridged financial statements have been prepared in terms of International
Financial Reporting Standards and comply with IAS 34 - `Interim Financial
Reporting`. The accounting policies are consistent with those applied in the
annual financial statements for 31 December 2006 except for the adoption of IFRS
7 - `Financial Instruments: Disclosures` which has had no impact on the reported
results except for the reclassification of R5.4 million of financial assets from
non-current to current in the 2006 balance sheet.
AUDIT REPORT
The results for the period have been audited by the group`s auditors,
PricewaterhouseCoopers Inc., and their unqualified audit report on the 31 March
2008 group annual financial statements and the abridged group financial
statements contained herein, is available for inspection at the company`s
registered office.
DIVIDEND AND CAPITAL REDUCTION
Notice is hereby given of a distribution of 20 cents per ordinary share
comprising a dividend of 7 cents per ordinary share, and a capital distribution
of 13 cents per ordinary share payable out of share premium for the period ended
31 March 2008, in terms of the resolution approved by the shareholders at the
annual general meeting held on Wednesday, 16 May 2007.
Last date to trade cum distribution: Friday 20 June 2008
Trading commences ex distribution: Monday 23 June 2008
Record date: Friday 27 June 2008
Payment date: Monday 30 June 2008
Share certificates may not be dematerialised or rematerialised between Monday,
23 June 2008 and Friday, 27 June 2008, both dates inclusive. In terms of the
requirements of the Companies Act, the directors confirm that after the payment
of the distribution, the company will be able to pay its debts as they become
due in the ordinary course of business, and the company and the group`s assets
fairly valued exceed its liabilities.
On behalf of the board of directors
Ray Cadiz Ram Barkai
Chairman Chief Executive Officer
Cape Town
2 June 2008
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 (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: 02/06/2008 08:00:01 Produced by the JSE SENS Department.
The SENS service is an information dissemination service administered by the
JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or
implicitly, represent, warrant or in any way guarantee the truth, accuracy or
completeness of the information published on SENS. The JSE, their officers,
employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature,
howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
