| Tue 4 Nov 2008, 14:44 | | PGR - Peregrine Holdings Limited - Unaudited results For the six months ended 30 |
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PGR
PGR
PGR - Peregrine Holdings Limited - Unaudited results For the six months ended 30
September 2008
PEREGRINE HOLDINGS LIMITED
Registration number 1994/006026/06
Share code: PGR
ISIN code: ZAE000078127
www.peregrine.co.za
UNAUDITED RESULTS
For the six months ended 30 September 2008
INCOME STATEMENT
% change For the
2007 to six months ended
2008 30 September 2008
R`000
Operating revenue 37 825,482
Investment income -166 (91,732)
Total revenue -1 733,750
Investment contract benefits (146,730)
Investment contract expenses 146,730
Operating expenses 72 (595,216)
Profit from operations -65 138,534
Net interest received -194 (18,707)
Interest received 53,057
Interest paid (71,764)
Income from associate companies 5,489
Profit from ordinary activities -70 125,316
Capital surplus -
Profit before taxation -70 125,316
Taxation (23,121)
Profit for the period -67 102,195
Attributable to:
Equity holders of the company -79 54,500
Minority interest 47,695
102,195
Determination of headline earnings
Profit attributable to equity holders
of the company - IAS 33 earnings 54,500
Adjustment :
Capital surplus on sale of subsidiary shares
- IAS 27 -
Headline earnings -79 54,500
Headline earnings per ordinary share (cents) -80 25.3
Basic earnings per ordinary share (cents) -80 25.3
Diluted headline earnings per share (cents) -80 25.3
Diluted basic earnings per share (cents) -80 25.3
Dividend paid per ordinary share
- in respect of the previous year (cents) 56.0
Dividend per ordinary share declared
subsequent to 31 March (cents) -
Number of ordinary shares in issue (`000) 228,129
Treasury shares held (`000) 12,853
Weighted average number of ordinary shares
in issue (`000) 215,276
Diluted weighted average number of ordinary
shares in issue (`000) 215,276
For the
six months ended Audited year ended
30 September 2007 31 March 2008
R`000 R`000
Operating revenue 600,733 1,095,438
Investment income 138,491 234,344
Total revenue 739,224 1,329,782
Investment contract benefits 57,226 274,121
Investment contract expenses (57,226) (274,121)
Operating expenses (345,934) (665,901)
Profit from operations 393,290 663,881
Net interest received 19,800 64,541
Interest received 31,934 87,895
Interest paid (12,134) (23,354)
Income from associate companies 5,227 7,101
Profit from ordinary activities 418,317 735,523
Capital surplus 5,500 5,500
Profit before taxation 423,817 741,023
Taxation (112,184) (160,313)
Profit for the period 311,633 580,710
Attributable to:
Equity holders of the company 259,210 467,754
Minority interest 52,423 112,956
311,633 580,710
Determination of headline earnings
Profit attributable to equity holders
of the company - IAS 33 earnings 259,210 467,754
Adjustment:
Capital surplus on sale of subsidiary
shares - IAS 27 (5,500) (5,500)
Headline earnings 253,710 462,254
Headline earnings per ordinary
share (cents) 127.0 222.7
Basic earnings per ordinary share
(cents) 129.7 225.4
Diluted headline earnings per share
(cents) 127.0 222.7
Diluted basic earnings per share
(cents) 129.7 225.4
Dividend paid per ordinary share
- in respect of the previous year
(cents) 45.0 45.0
Dividend per ordinary share declared
subsequent to 31 March (cents) - 56.0
Number of ordinary shares in
issue (`000) 228,129 228,129
Treasury shares held (`000) 12,869 12,853
Weighted average number of ordinary
shares in issue (`000) 199,819 207,548
Diluted weighted average number of
ordinary shares in issue (`000) 199,819 207,548
SEGMENTAL ANALYSIS
For the six months ended 30 September 2008
Interest and
Revenue associate income
R`000 R`000
Wealth and asset management 622,153 10,872
Wealth management 156,284 4,348
Asset management 465,869 6,524
Operations as previously reported 57,028 1,184
Acquired during the period - Stenham 408,841 5,340
Broking and structuring 199,966 27,981
Group investments (net of group and
funding costs) (88,369) (52,071)
733,750 (13,218)
Profit from
ordinary
Profit from activities
ordinary adjusted for
activities minorities
R`000 R`000
Wealth and asset management 186,372 110,964
Wealth management 47,972 47,972
Asset management 138,400 62,992
Operations as previously reported 15,708 8,907
Acquired during the period - Stenham 122,692 54,085
Broking and structuring 86,306 86,306
Group investments (net of group and
funding costs) (147,362) (129,552)
125,316 67,718
For the six months ended 30 September 2007
Interest and
associate
Revenue income
R`000 R`000
Wealth and asset management 375,136 9,490
Wealth management 209,620 8,408
Asset management 165,516 1,082
Operations as previously reported 165,516 1,082
Acquired during the period - Stenham - -
Broking and structuring 222,809 16,942
Group investments (net of group and
funding costs) 141,279 (1,405)
739,224 25,027
Profit from
ordinary activities
Profit from adjusted for
ordinary activities minorities
R`000 R`000
Wealth and asset management 201,402 171,290
Wealth management 101,216 101,216
Asset management 100,186 70,074
Operations as previously reported 100,186 70,074
Acquired during the period - Stenham - -
Broking and structuring 101,838 101,838
Group investments (net of group and
funding costs) 115,077 83,323
418,317 356,451
% of profit from
ordinary
% of profit from activities
ordinary adjusted for
activities minorities
2008 2007 2008 2007
Wealth and asset management 149 48 164 48
Wealth management 38 24 71 28
Asset management 111 93
Operations as previously reported 13 24 13 20
Acquired during the period - Stenham 98 80
Broking and structuring 69 24 127 29
Group investments (net of group and
funding costs) 118 28 -191 23
100 100 100 100
% change in
% change profit from
in profit ordinary
from activities
ordinary adjusted for
activities minorities
2007 to 2008 2007 to 2008
Wealth and asset management -7 -35
Wealth management -53 -53
Asset management
Operations as previously reported -84 -87
Acquired during the period
- Stenham Broking and structuring -15 -15
Group investments (net of group and
funding costs) -228 -255
-70 -81
Note: Group funding costs are disclosed as part of "group" and have not been
allocated to the appropriate underlying entities.
BALANCE SHEET
As at As at Audited as at
30 September 2008 30 September 2007 31 March 2008
R`000 R`000 R`000
Assets
Non - current
assets 4,770,808 3,063,852 3,408,341
Property, plant
and equipment 114,047 89,787 91,677
Intangible assets 1,532,467 268,899 268,157
Investment in
Associate
companies 47,914 16,477 16,969
Investments linked
to policyholder
investment
contracts 2,656,836 2,419,061 2,657,024
Financial
investments 316,269 243,826 337,528
Loans and
receivables 55,456 9,971 22,142
Deferred taxation 47,819 15,831 14,844
Current assets 9,671,339 10,621,964 9,173,946
Financial
investments 564,329 700,359 899,054
Loans and
receivables 15,793 - -
Bills of exchange
receivable 69,024 - -
Trade and other
receivables 328,004 131,505 103,234
Amounts receivable
in respect of
stockbroking
activities 7,982,590 9,123,792 7,111,094
Taxation 12,650 1,149 6,918
Cash and cash
equivalents 698,949 665,159 1,053,646
Total assets 14,442,147 13,685,816 12,582,287
Equity and
liabilities
Equity 2,043,353 1,331,076 1,722,093
Share capital,
retained earnings
and reserves 1,398,627 1,259,296 1,602,313
Minority interest 644,726 71,780 119,780
Non - current
liabilities 3,548,807 2,603,340 2,851,444
Interest bearing
borrowings 778,757 62,183 57,784
Policyholder
investment contract
liabilities 2,656,836 2,419,061 2,657,024
Loans and payables 83,892 68,244 88,012
Deferred taxation 29,322 53,852 48,624
Current
liabilities 8,849,987 9,751,400 8,008,750
Trade and other
payables 457,419 234,608 317,122
Amounts payable in
respect of
stockbroking
activities 8,092,438 9,427,757 7,566,154
Current portion of
interest bearing
borrowings 201,210 6,176 7,688
Loans and payables 11,608 -
Taxation 87,312 82,859 117,786
Total equity and
liabilities 14,442,147 13,685,816 12,582,287
Net tangible asset
value per share 95.5 460.1 619.7
Net asset value
per share 649.7 585.0 744.3
STATEMENT OF CHANGES IN EQUITY
Treasury Accumulated
2009 Share capital shares profits
R`000 R`000 R`000
Balance at 31 March 2008 38,252 (37,091) 1,417,860
Minorities arising on acquisition
of subsidiary - - -
Net gains and losses not recognised
in the income statement - - 187
Profit for the period - - 54,500
Dividends paid - - (120,554)
Balance at 30 September 2008 38,252 (37,091) 1,351,993
2008
Balance at 31 March 2007 38,252 (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 38,252 (37,091) 1,417,860
Non - Share-based
distributable payments Total capital
2009 reserves reserve and reserves
R`000 R`000 R`000
Balance at 31 March 2008 183,292 - 1,602,313
Minorities arising on
acquisition of subsidiary - - -
Net gains and losses not
recognised in the income
statement (140,335) 2,516 (137,632)
Profit for the period - - 54,500
Dividends paid - - (120,554)
Balance at 30 September 2008 42,957 2,516 1,398,627
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
Minority
2009 interest Total equity
R`000 R`000
Balance at 31 March 2008 119,780 1,722,093
Minorities arising on acquisition of
subsidiary 527,151 527,151
Net gains and losses not recognised in
the income statement (27,149) (164,781)
Profit for the period 47,695 102,195
Dividends paid (22,751) (143,305)
Balance at 30 September 2008 644,726 2,043,353
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
CASH FLOW STATEMENT
For the six months For the six months Audited
ended 30 September ended 30 September year ended 31
2008 2007 March 2008
R`000 R`000 R`000
Cash flow from operating
activities (484,373) 117,989 549,577
Cash generated from
operating activities 257,314 255,596 422,761
Working capital
changes (483,814) 47,499 302,470
(Arising)/released
from stockbroking
activities (345,212) 27,715 178,810
(Investment into)/
released from
working capital (138,602) 19,784 123,660
Interest received 52,389 31,120 86,507
Interest paid (42,418) (12,086) (23,354)
Dividends received
- financial investments 2,150 242 12,420
Dividends received
- associates 3,496 5,325 10,044
Dividends paid to equity
shareholders (120,554) (88,661) (88,661)
Dividends paid to
minority shareholders (22,751) (18,472) (31,126)
Taxation paid (130,185) (102,574) (141,484)
Cash flow from investing
activities (653,823) (100,549) (134,322)
Cash flow from
Financing activities 796 ,513 (8,546) (25,656)
Proceeds on vesting of
shares held by staff
share trust - 2,978 2,978
Share incentive scheme
payments received - - 13,996
Decrease in liability for
share based payments - - (4,127)
Increase/(decrease)
in loans and payables 15,575 (23,976) 515
Decrease in loans
receivable 40,938 14,446 810
Increase/(decrease) in
interest bearing
borrowings 740,000 (1,994) (39,828)
Net (decrease)/increase
in cash and cash
equivalents (341,683) 8,894 389,599
Cash and cash
equivalents at
beginning of the year 1,053,646 655,106 655,106
Effects of exchange
rate changes on cash
and cash equivalents (13,014) 1,159 8,941
Cash and cash
equivalents at end of
the period 698,949 665,159 1,053,646
BASIS OF PREPARATION
The results for the six months ended 30 September 2008 have been prepared in
accordance with IFRS and comply with IAS 34 - "Interim Financial Reporting" and
the South African Companies Act of 1973, as amended. The accounting policies and
methods of computation are consistent with those applied in the annual financial
statements for March 2008.These results have not been audited or reviewed by the
company`s auditors, PKF (Jhb) Inc.
BUSINESS COMBINATION
On 4 April 2008, Peregrine Financial Services Holdings Limited ("PFS") acquired
51% of the shares in Stenham Limited ("SL"), the holding company of the Stenham
group of companies, for a purchase price of GBP75,705 million (R1,110 billion).
GBP68,532 million of the purchase price was settled in cash via transfer of
funds from PFS. The balance, in the amount of GBP7,173 million, was settled via
a dividend declared by SL at the time of the transaction, out of preacquisition
reserves of the company ("the SL dividend"). Costs in the amount of R12,927
million have been capitalised to the cost of the acquisition. The consolidation
was accounted for using the purchase method. In the 6 months to 30 September
2008 the Stenham group contributed net profit after tax and minorities of
GBP3,145 million (R47,218 million) to the consolidated group attributable
earnings. The contribution, after adding back the amortisation of intangibles is
GBP3,726 million (R56,652 million).
The acquisition had the folllowing effect on the group`s assets and
liabilities. The analysis is presented net of the SL dividend.
R`000
Assets 2,023,208
Intangible assets 1,349,108
Property, plant and equipment 21,274
Investment in associate companies 27,772
Loans receivable 105,807
Financial investments 51,416
Trade and other receivables 259,827
Cash and cash equivalents 208,004
Liabilities 484,168
Interest bearing borrowings 151,849
Deferred taxation 595
Trade and other payables 291,550
Loans and payables 5,212
Provision for taxation 34,962
Net assets and liabilities acquired 1,539,040
Less : Minority interest (527,151)
Purchase consideration 1,011,889
Comprising:
Cost of acquisition (including costs capitalised) 1,123,078
Less: the SL dividend (111,189)
Contingent liabilities and commitments:
Irrevocable letters of credit 7,651
Loan guarantees 102,737
Operating lease commitments 143,343
Due in one year 19,216
Due in two to five years 71,191
Thereafter 52,936
Capital expenditure 8,168
Contracted 1,846
Authorised but not yet contracted 6,322
In accordance with IFRS3 paragraph 62, provisional values have been used for the
determination of intangible assets. Any adjustments to the provisional values
will be determined by financial year end. The contingent liabilities have not
been provided for as they arise on behalf of clients and will not materialise
unless the clients fail to meet their obligations and the underlying security is
inadequate. The probability is considered remote.
COMMENTARY
Introduction
In a set of results, which incorporates Peregrine`s 51% holding in Stenham
Limited for the first time, the group produced an acceptable set of numbers for
the six months under review. Notwithstanding the very difficult business
conditions and equity market performance experienced over the period, the group
has remained both profitable and materially cashflow positive.
Results
Whilst operating revenue increased by 37% (boosted by the acquisition of Stenham
effective from 4 April 2008), total revenue of R733.8 million was 1% lower than
the comparable period which resulted primarily from lower performance fees and
negative returns earned on the group`s proprietary capital.
The 72% increase in operating expenses is primarily as a result of consolidating
the Stenham operations for the first time. If Stenham is excluded, operating
expenses (including profit participation) declined by 12%.
The net interest position has reversed from being net received of R19.8 million
to net paid of R18.7 million. While more cash, on average, was held across the
group, the interest costs incurred in funding the Stenham acquisition, interest
costs incurred within Stenham itself and interest paid by certain of the local
subsidiaries have resulted in the group moving into a net interest paid position
for the period.
Headline earnings decreased by 79% to R54.5 million which, combined with a 4%
increase in the weighted average number of shares in issue (as a result of the
issue, in August last year, of shares under the group`s deferred purchase
scheme), has resulted in earnings per share decreasing by 80% to 25.3 cents per
share.
Operating highlights
Due to the substantial minority interests which now exist in both the asset
management and group investments results and as a result of the 51% acquisition
of Stenham, the operating highlights below are presented on a pro forma `after
minorities` basis. The results are reflected at the operating profit level, on a
pre-tax basis. This is considered to be the most appropriate basis on which to
assess the results. Minority interest in the income statement is accounted for
on an after tax basis.
For the current period, the Stenham results are separately identifiable in the
segmental analysis and will be treated as such until such time as comparative
figures are available, at which point Stenham will be appropriately included in
the "wealth and asset management" segmental results.
Profit from ordinary activities generated by private-client wealth manager,
Citadel, decreased 53% to R48.0 million due to the substantial reduction in
performance fee earnings for the period arising from a combination of difficult
global market conditions and a rapidly rising local inflation rate. Whilst the
asset base has increased by 5.6% to R14.7 billion over the comparable period it
has, in spite of very pleasing average inflows of R175 million per month,
declined by 2.7% since 31 March 2008. Client retention remains above 99% by
value and client number for the period.
The contribution from the asset management division (excluding Stenham) fell by
87% to R8.9 million as a result of significantly lower performance fee earnings
being generated for the period compared to a record level of performance fees
earned in the comparable period.
Peregrine remains the country`s largest single strategy hedge fund manager,
managing just over R4.5 billion in single strategy hedge funds. The group`s
hedge-fund flagship, Peregrine Capital, which currently manages R3.5 billion,
has had its first negative 6 month return period in 10 years. Assets under
management in the group`s range of hedge funds housed within Peregrine
Investment Managers (PIM) declined from R1.1 billion to R1.0 billion. We
anticipate that fund performances will remain attractive on a risk-adjusted
basis over the medium to long term.
Caveo, the group`s fund of hedge funds joint venture with Investment Solutions,
generated a profit for the period, with assets under management of just over
R2.1 billion.
PeregrineQuant, the group`s institutional asset manager with a quantitative
focus, has experienced a 15.3% reduction in its assets under management since
March 2008 to R18.5 billion at 30 September 2008, resulting in a lower
contribution to group earnings. As a beta manager, the investment performance of
PQ is closely linked to that of the market.
The broking and structuring activities housed within Peregrine Securities
experienced a 15% reduction in profitability to R86.3 million. This satisfactory
performance in current market conditions is largely as a result of increased
volatility and large volumes traded across both the equity and derivative
broking and structuring divisions. The outlook for this business is neutral to
negative as the full impact of current market conditions is felt across the
inter-bank, hedge fund and asset management industries.
Stenham, the group`s 51% held offshore wealth and asset management subsidiary,
included in the group`s results for the first time, has produced a level of
profitability (in base currency) in line with expectations across all its
operating divisions, resulting from a combination of revenue growth and cost
control. Notwithstanding the difficult market conditions, profit from ordinary
activities was R54.1 million. As at the reporting date, Stenham had $5.9 billion
under management made up of $2.9 billion within the funds-of-hedge-funds and
$3.0 billion in the property division.
As a result of the negative return earned on the group`s proprietary investments
held on balance sheet for the period, group investments (net of group costs)
yielded a loss of R71.5 million, a decrease of 186% compared to a substantially
positive return for the same period last year. Whilst this had no direct impact
on the group`s cashflow, it served to substantially diminish the group`s
reported earnings for the period. Core costs at the centre decreased by 72.1%
largely as a result of a much lower executive bonus accrual reflective of the
decline in reported earnings.
In the interests of presenting more useful disclosure, interest costs incurred
on external funding of R58.1 million have not been allocated to the divisions
carrying the interest but have been aggregated at a group level. Accordingly
return on group investments (net of group costs and external funding) reduced
earnings by R129.6 million for the period.
Recent Developments
Change in board of directors
As mentioned in an announcement released on 5 September 2008, Keith Betty, who
has been employed by the group since 1998 and has held office as Chief Executive
Officer of Peregrine since 1 November 2006, has advised the board that, for
personal reasons, he and his family will be relocating to Australia in January.
Keith will however be available to the group until 31 March 2009.
The board is currently giving its attention to the matter of succession and an
announcement in this regard will be made by the end of November 2008.
Expression of Interest
In the announcement released on 5 September, shareholders were also advised that
a consortium led by the company`s chairman, Sean Melnick, had submitted to the
company a non-binding expression of interest for the acquisition of the entire
issued share capital of Peregrine.
The board remains engaged in discussions with the consortium and has agreed with
the consortium that unless an indicative offer is made by close of business on
24 November 2008, the expression of interest will be withdrawn and the
cautionary announcement lifted. The board will update shareholders as and when
appropriate.
Staff Incentive Scheme
During the period under review a staff incentive scheme was implemented, the
maximum size of which is 15 million shares. The salient terms of the scheme are
that the options have been granted at a price of R13 per share and that vesting
takes place in years 3, 4 and 5 on a 40:30:30 basis. Certain of the options are
subject to performance criteria having to be met prior to vesting taking place.
Prospects
Given the dramatic decline in investor sentiment globally, the political
conditions in play locally and the, as yet, uncertain knock-on ramifications of
the global credit crisis there is little certainty as to when `normalised`
market conditions will return. Accordingly, we anticipate that the results for
the second half of the year are likely to be lower than for the comparable
period last year. The information on which this statement has been based has not
been reviewed by the group`s auditors.
The encouraging aspect of this set of results is that it demonstrates that in
extremely trying conditions the Peregrine group is able to remain profitable and
strongly cash generative.
We remain committed to and encouraged by what the group can achieve in the
medium term by continuing to build on our well-established positions in the
local private client wealth management, the securities broking and hedge fund
industries and by focussing on the potential which Stenham presents in the
global wealth and alternate asset management arenas.
By order of the board
Sean Melnick Keith Betty
Executive Chairman Chief Executive Officer
Sandton
4 November 2008
Sponsor
Java Capital (Proprietary) Limited
Date: 04/11/2008 14:44:02 Produced by the JSE SENS Department.
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