| Mon 10 Nov 2008, 8:00 | | CDZ - Cadiz - Interim Results For The Six Months Ended 30 September 2008 |
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CDZ
CDZ
CDZ - Cadiz - Interim Results For The Six Months Ended 30 September 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")
INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2008
KEY FEATURES
* Headline earnings decreased by 67% to R18.8 million
* Gross operating revenue decreased by 18% to R157.6 million
* Assets under management at R47.7 billion
* Rated No.1 derivatives house for the 12th consecutive year
* Rated Best Financial Services Company to Work For
GROUP INCOME STATEMENT Unaudited Unaudited Audited
6 months 6 months 15 months
30-Sep-08 30-Sep-07 31-Mar-08
R `000 R `000 R `000
Gross operating revenue 157,592 191,354 451,407
Interest income 8,239 6,671 17,173
Net investment income - (9,863) 13,374 40,778
shareholders
Net income from investments (4,605) 14,902 22,875
Foreign exchange (losses)/gains (5,258) (1,528) 17,903
Income attributable to 35 - -
policyholder linked assets
Net fair value gains on 1,617 - -
policyholder financial
instruments
Administration expenses borne by (1,582) - -
policyholders
Operating expenses (131,048) (135,211) (340,693)
Operating profit 24,955 76,188 168,665
Finance costs (2,985) (2,729) (4,720)
Profit before taxation 21,970 73,459 163,945
Taxation (5,762) (16,993) (38,038)
Taxation on shareholder profits (5,727) (16,993) (38,038)
Taxation on policyholder (35) - -
investment contracts
Profit for the period 16,208 56,466 125,907
Reconciliation of headline
earnings:
Profit for the period 16,208 56,466 125,907
Goodwill impairment 1,072 1,393 2,820
Intangible assets impairment 2,144 - -
Profit on disposal of equipment - - (7)
Taxation impact (600) - 2
Headline earnings 18,824 57,859 128,722
Issued number of shares (`000) 245,138 245,138 245,138
Consolidated number of shares 221,367 217,733 220,853
(`000)
Weighted average number of 221,193 213,607 217,043
shares (`000)
Diluted weighted average number 221,766 224,703 224,616
of shares (`000)
Earnings per share (cents)
Basic 7.3 26.4 58.0
Diluted 7.3 25.1 56.1
Headline earnings per share
(cents)
Basic 8.5 27.1 59.3
Diluted 8.5 25.7 57.3
GROUP BALANCE SHEET Unaudited Unaudited Audited
30-Sep-08 30-Sep-07 31-Mar-08
R `000 R `000 R `000
ASSETS
Non - current assets 915,570 451,657 439,457
Plant and equipment 6,369 7,756 7,030
Intangible assets 289,883 301,997 296,456
Deferred taxation 16,551 17,625 17,409
Investments backing policy 486,299 - -
holder funds
Other financial assets 108,984 117,404 110,283
Receivables and prepayments 7,484 6,875 8,279
Current assets 890,694 1,015,208 961,342
Other financial assets 74,680 124,087 77,971
Receivables and prepayments 649,787 794,618 732,346
Taxation 380 199 1,396
Cash and cash equivalents 165,847 96,304 149,629
Total assets 1,806,264 1,466,865 1,400,799
EQUITY
Capital and reserves
Ordinary share capital and 2,861 34,680 34,678
premium
Treasury shares (66,679) (78,903) (71,795)
Share-based payment reserve 26,152 16,162 21,254
Retained earnings 551,473 510,571 552,975
Total equity 513,807 482,510 537,112
LIABILITIES
Non - current liabilities 518,446 50,798 34,526
Deferred taxation 12,168 17,555 13,034
Policyholder investment contract 486,299 - -
liabilities
Trade and other payables 19,979 33,243 21,492
Current liabilities 774,011 933,557 829,161
Trade and other payables 744,232 884,355 770,981
Taxation 3,648 13,488 14,696
Borrowings - 18,146 25,073
Trading liabilities 26,131 17,568 18,411
Total liabilities 1,292,457 984,355 863,687
Total equity and liabilities 1,806,264 1,466,865 1,400,799
Net asset value (cents per 232 222 243
share)
Net tangible asset value (cents 101 83 107
per share)
ABRIDGED GROUP CASH FLOW Unaudited Unaudited Audited
STATEMENT
6 months 6 months 15 months
30-Sep-08 30-Sep-07 31-Mar-08
R `000 R `000 R `000
Cash flow from operating 58,101 (2,587) 83,034
activities
Cash generated from operations 89,510 24,714 133,987
Taxation paid (15,674) (20,620) (44,272)
Dividends paid (15,735) (6,681) (6,681)
Cash flow from investing 15,954 47,327 (4,259)
activities
Cash flow from financing (28,675) (37,282) (32,898)
activities
Net change in cash and cash 45,380 7,458 45,877
equivalents
Effect of exchange rate (4,089) 296 14,748
adjustment
Cash and cash equivalents at 124,556 70,404 63,931
beginning of period
Cash and cash equivalents at end 165,847 78,158 124,556
of period
ABRIDGED GROUP STATEMENT OF Unaudited Unaudited Audited
CHANGES IN EQUITY
6 months 6 months 15 months
30-Sep-08 30-Sep-07 31-Mar-08
R `000 R `000 R `000
Share capital, share premium and
treasury shares
Opening balance (37,117) (46,837) (22,470)
Issue of shares 51 - 22,914
Issued shares held as treasury - 120 (15,435)
shares
Capital reduction (29,244) - (37,858)
Sale of treasury shares on 2,492
exercise of options 2,494 15,732
(63,818) (44,223) (37,117)
Reserves
Opening balance
574,229 469,828 455,594
Premium on issue of equity - -
settled share appreciation 518
rights
Sale of treasury shares on (2,492) (10,772)
exercise of options (2,286)
Employee share option scheme -
value of services provided 4,897 2,725 10,181
Profit for the period
16,208 56,466 125,907
Dividends paid (15,735) - (6,681)
577,625 526,733 574,229
Total shareholders` funds
513,807 482,510 537,112
FINANCIAL PERFORMANCE
The recent market turmoil has impacted the group`s trading and investment
activities. This is reflected in a 18% decline in gross operating revenue to
R157.6 million (2007: R191.4 million). Cadiz`s operating businesses continue
to trade profitably and generate cash flows and annuity income.
The downturn in financial markets also negatively impacted the returns on the
group`s investment capital (comprising interest income and net income from
investments) which declined 97%. This was compounded by foreign exchange
losses on the group`s offshore investments which totalled R5.3 million (2007:
R1.5 million) owing to the relative strength of the Rand in the period to 30
September 2008.
Operating expenses were 3% lower at R131.0 million owing to lower variable
costs and an ongoing prudent approach to cost management. The cost-to-income
ratio, after excluding R1.9 million (2007: R2.3 million) direct costs related
to the group investments and funding facility, and R6.3 million (2007: R5.9
million) intangibles and goodwill amortisation/impairment charges, increased
from 66.4% in 2007 to 78.1%. This increase is due to the slowdown in revenue
growth as a result of tougher market conditions described above.
The financial performance has translated into a 67% decline in headline
earnings to R18.8 million (2007: R57.9 million), with diluted headline
earnings per share decreasing 67% to 8.5 cents per share (2007: 25.7 cents
per share). These results are in line with the group`s trading statement
issued on 21 October 2008.
OPERATIONAL REVIEW
Sep 2008 Sep 2007
% of % of %
R`000 total R`000 total change
Securities 71 219 47% 69 808 33% 2%
Asset management 57 109 37% 88 551 43% (36)%
Structuring 29 264 19% 32 995 16% (11)%
Gross operating
revenue 157 592 103% 191 354 92% (18)%
Net income from
Investments 649 0% 18 844 9% (97)%
Foreign exchange
loss (5 258) (3)% (1 528) (1)% (244)%
Net investment
portfolio returns (4 609) (3)% 17 316 8% (127)%
Gross revenue 152 983 100% 208 670 100% (27)%
SECURITIES
The securities businesses posted a pleasing performance in the current
climate, and despite being impacted by declining institutional volumes,
showed a slight increase in revenue to R71.2 million.
In response to client demand and a move to increase its market share, Cadiz
Securities expanded its industry-leading research offering during the period
with the launch of an equity market and economic research unit. Research has
been a catalyst for growth in the securities business and this new research
offering will enable the business to further increase its market penetration.
Cadiz Securities was 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.
Despite the tough environment, securities continues to strengthen its
positioning for the next market growth phase.
ASSET MANAGEMENT
Asset management has felt the impact of the market decline and revenues fell
by 36% to R57.1 million over the corresponding period in 2007. In addition to
the market decline the business has been impacted by the significant shift
from equity investments into the money market over the past six months which
has reduced fee income. This, together with lower hedge fund performance
fees, has contributed to the earnings decline.
Investment performance in absolute return and fixed income mandates continues
to be in the top quartile relative to peer managers. Investment performance
in equity mandates continues to improve as the resource cycle has finally
turned. Total assets under management were R47.7 billion at the end of the
period. Fixed income and absolute return mandates have increased relative to
equity mandates as a result of market movements over the past six months.
STRUCTURING
Structuring revenue for the period is 11% lower at R29.3 million owing to a
slowdown in market activities.
Corporate Solutions
M&A activity has been impacted by both the volatility in equity markets and
the availability of debt. The volume of transactions has increased but the
size of the deals has reduced and the time to close transactions has
extended. Despite this the team continues to deliver profitably.
Entities with strong balance sheets are able to capitalise on existing market
conditions and this is particularly so in South Africa where corporates have
relatively low debt levels. Cadiz has increased its focus on the resources
sector in anticipation of more resilient M&A activity. The need for BEE
transactions to be restructured should create further opportunities.
Cadiz Wealth
The strength of the Cadiz Wealth brand in the private wealth management
market has led to a 120% increase in inflows and funds under management now
exceed R5.5 billion. Unit trust assets increased by 133% to R1.8 billion for
the period (2007: R0.7 billion). As at 30 September 2008 the Cadiz Equity
Ladder Fund was the top performing absolute return fund in South Africa over
one year, two years and three years. The Cadiz Money Market Fund was the top
performing money market unit trust over almost every measurement period since
inception of the fund (Source: Morningstar).
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:
R167.1 million invested in liquid assets for regulatory capital adequacy and
working capital requirements;
R20.6 million investment net of trading liabilities held as a hedge against
Cadiz Prime Broking activities;
R69.6 million invested as seed capital in new asset management products; and
R66.1 million strategic investments in empowerment partner Makana.
R78.5 million (24%) of the group`s capital was invested in conservative US
Dollar, Euro and Sterling investments. However, R68 million of this capital
has been repatriated since the period end to increase the group`s liquidity.
OUTLOOK
Market conditions are increasingly challenging and the operating environment
is expected to remain tough in the short- to medium term. Cadiz has a
platform of robust businesses and will continue to strengthen its base and
position the business for the market turnaround.
Costs are continuing to be prudently managed as the business adapts to
operating in a lower revenue environment.
The group has no exposure to sub-prime or low credit instruments and has no
proprietary trading risk. The group`s capital is exposed to the market
through its investment in Makana and its seed capital investments. However,
management monitors the group`s investments and exposure limits and reports
to the group risk committee.
Cadiz is a resilient business and has proved this in tough market conditions
in the past.
EMPLOYER OF CHOICE
Cadiz was ranked first in the financial services category in the annual
Deloitte Best Company to Work For survey in 2008, improving from second place
in the previous year. Cadiz`s culture and people continue to be its pillars
of strength in these extraordinary times.
SHARE ALLOCATION TO BLACK STAFF
During the period 5.1 million share appreciation rights and voting A ordinary
shares were issued to participants in the black employee share ownership
scheme as approved by shareholders at the annual general meeting on 18 August
2008. These vest at 20% per annum from years three to seven and staff are
locked in until 28 February 2015. The allocation was made at an initial price
of 210 cents per share and participating staff were required to pay a deposit
of 5% of the initial price.
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`and the Listings Requirements of the JSE Limited. The
accounting policies are consistent with those applied in the annual financial
statements for the period ended 31 March 2008.
On behalf of the board of directors
Ray Cadiz Ram Barkai
Chairman Chief Executive Officer
Cape Town
10 November 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: 10/11/2008 08:00:01 Produced by the JSE SENS Department.
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