| Mon 1 Jun 2009, 8:00 | | CDZ - Cadiz - Audited Results For The Year Ended 31 March 2009 |
|
CDZ
CDZ
CDZ - Cadiz - Audited Results For The Year Ended 31 March 2009
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 YEAR ENDED 31 MARCH 2009
KEY FEATURES
* Diluted HEPS declined 27.8% to 33.1 cps
* H2 diluted HEPS increased by 189%
* Gross operating revenue declined 7% to R335 million
* Dividend 11.5 cents per share
* No 1 in derivatives dealing and research for 13th consecutive year
* Rated Best Company to Work For in financial services
CHANGE IN FINANCIAL YEAR END
In the previous reporting period the group changed its year end and the
comparative information reflects the performance for 15 months. All percentage
changes for the period are shown on an annualised basis with the results for the
previous 15 month period being converted to 12 months to allow for comparison.
Audited Audited
GROUP INCOME STATEMENT 12 months 15 months
31-Mar-09 31-Mar-08
R `000 R `000
Gross operating revenue 334 616 451 407
Interest income 17 655 17 173
Net investment income - 14 788 40 778
shareholders
Net income from investments 12 889 22 875
Foreign exchange gains 1 899 17 903
Income attributable to
policyholder linked assets - -
Net fair value gains on 3 504
policyholder financial -
instruments
Policyholder liability (3 504)
adjustment -
Operating expenses (276 055) (340 693)
Operating profit 91 004 168 665
Finance costs (4 076) (4 720)
Profit before taxation 86 928 163 945
Taxation (24 370) (38 038)
Profit for the period 62 558 125 907
Reconciliation of headline
earnings:
Profit for the period 62 558 125 907
Goodwill impairment 2 436 2 820
Intangible assets derecognition 11 173 -
and impairment
Taxation impact (3 128) -
Profit on disposal of equipment (21) (7)
Taxation impact 3 2
Headline earnings 73 021 128 722
Issued number of shares (`000) 245 138 245 138
Consolidated number of shares 218 126 220 853
(`000)
Weighted average number of shares 220 195 217 043
(`000)
Diluted weighted average number 220 453 224 616
of shares (`000)
Earnings per share (cents)
Basic 28.4 58.0
Diluted 28.4 56.1
Headline earnings per share
(cents)
Basic 33.2 59.3
Diluted 33.1 57.3
Audited Audited
GROUP BALANCE SHEET 31-Mar-09 31-Mar-08
R `000 R `000
ASSETS
Non - current assets 1 152 668 439 457
Plant and equipment 5 690 7 030
Intangible assets 277 334 296 456
Deferred taxation 16 965 17 409
Investments backing policyholder 747 704 -
funds
Other financial assets 100 398 110 283
Receivables and prepayments 4 577 8 279
Current assets 855 022 1 426 499
Other financial assets 190 688 77 971
Receivables and prepayments 578 589 1 197 503
Taxation 2 825 1 396
Cash and cash equivalents 82 920 149 629
Total assets 2 007 690 1 865 956
EQUITY
Capital and reserves
Ordinary share capital and 2 869 34 678
premium
Treasury shares (70 639) (71 795)
Share-based payment reserve 30 712 21 254
Retained earnings 596 996 552 975
Total equity 559 938 537 112
LIABILITIES
Non - current liabilities 762 367 34 526
Deferred taxation 7 324 13 034
Policyholder investment contract 747 704 -
liabilities
Trade and other payables 7 339 21 492
Current liabilities 685 385 1 294 318
Trade and other payables 656 548 1 236 138
Taxation 13 424 14 696
Borrowings 25 073
-
Trading liabilities 15 413 18 411
Total liabilities 1 447 752 1 328 844
Total equity and liabilities 2 007 690 1 865 956
Net asset value (cents per share) 257 243
Net tangible asset value (cents 125 107
per share)
Audited Audited
ABRIDGED GROUP CASH FLOW 12 months 15 months
STATEMENT
31-Mar-09 31-Mar-08
R `000 R `000
Cash flow from operating 102 890 83 034
activities
Cash generated from operations 150 867 133 987
Taxation paid (32 242) (44 272)
Dividends paid (15 735) (6 681)
Cash flow from investing (110 110) (4 259)
activities
Cash flow from financing (36 774) (32 898)
activities
Net change in cash and cash (43 994) 45 877
equivalents
Effect of exchange rate 2 358 14 748
adjustment
Cash and cash equivalents at 124 556 63 931
beginning of period
Cash and cash equivalents at end 82 920 124 556
of period
Audited Audited
ABRIDGED GROUP STATEMENT OF 12 months 15 months
CHANGES IN EQUITY
31-Mar-09 31-Mar-08
R `000 R `000
Share capital, share premium and
treasury shares
Opening balance (37 117) (22 470)
Issue of shares 59 22 914
Issued shares held as treasury (15 435)
shares -
Capital reduction (29 223) (37 858)
Sale of treasury shares on 3 722 15 732
exercise of options
Delivery of treasury shares in 3 318
settlement of deferred -
consideration
Purchase of treasury shares (8 529)
-
(67 770) (37 117)
Reserves
Opening balance 574 229 455 594
Premium on issue of equity 569 -
settled share appreciation rights
Sale of treasury shares on (3 371) (10 772)
exercise of options
Employee share option scheme - 9 458 10 181
value of services provided
Profit for the period 62 558 125 907
Dividends paid (15 735) (6 681)
627 708 574 229
Total shareholders` funds 559 938 537 112
FINANCIAL PERFORMANCE
Cadiz Holdings produced a stronger second half performance as a result of
management`s decisive action to minimise risk and focus on the core businesses
in the current market downturn, although the results for the financial year
reflect the impact of the significant slowdown in global and local financial
markets.
Gross operating revenue declined by 7% to R334.6 million. Securities performed
strongly and increased revenue by 23%, with structuring up 5% despite the
challenging trading environment. Asset management revenues were 35% lower owing
to weaker market conditions (Alsi down 28.5% in the financial year) and lower
contributions from the hedge fund business. However, the business has stabilised
in the second half.
Cadiz`s operating businesses are all profitable and continue to generate strong
annuity income and cash flows.
Revenue from the group`s investment capital (comprising interest income and net
income from investments) was negatively impacted by the downturn in financial
markets and declined by 6%. Foreign exchange gains for the year were
significantly lower at R1.9 million compared to an annualised R14.3 million in
the previous reporting period.
However, active steps taken in the management of the group`s capital resulted in
significantly improved returns in the second half. This follows the strategic
decision implemented in October 2008 to repatriate all foreign currency
investments which totalled R68 million. This bolstered liquidity and eliminated
all leverage from the Cadiz balance sheet. The funds were invested locally which
generated higher returns and were applied to operating activities.
Tight cost management resulted in the growth in operating expenses being limited
to 1%. Operating costs of R276 million included write-downs in goodwill and
intangibles derecognition and impairment of R13.6 million (2008: R2.8 million).
Following the decision to adopt a single brand strategy across Cadiz and no
longer use the African Harvest brand in the asset management business, the
African Harvest trademark of R9.0 million was derecognised.
The cost-to-income ratio, after excluding R3.3 million (2008: R7.1 million)
direct costs related to the group investments and funding facility, and R18.4
million (2008: R12.9 million) intangibles and goodwill write-downs, increased
from 71.1% in 2008 to 76.0%. This increase is partly due to the decline in gross
revenue but mostly due to continuous investment in the business to position the
group for the eventual market turn and to ensure sustainable growth.
Cadiz has adopted stringent measures to contain costs, including freezing
salaries for board, management and senior staff, limiting new staff
appointments, reducing entertainment spend and cutting travel costs.
Diluted headline earnings per share (HEPS) were impacted by the lower returns on
investment capital and declined by 27.8% to 33.1 cents per share (2008: 57.3
cents). Diluted HEPS for the second half reflect the improved performance and
were 189% higher than the first half. These results are in line with the trading
statement issued on SENS on 28 April 2009.
Earnings per share at 28.4 cents were lower than HEPS, mainly as a result of the
derecognition of the African Harvest trademark referred to above.
Cadiz has maintained its dividend cover at a similar level to previous years and
declared a dividend of 11.5 cents per share (2008: 20 cents per share)
OPERATIONAL REVIEW
March 2009 March 2008
12 months 15 months Change
annualised
R`000 % of R`000 % of %
total total
Securities 164 911 45% 134 502 33% 23%
Asset Management 110 296 31% 169 973 42% (35%)
Structuring 59 409 16% 56 650 14% 5%
Gross operating 334 616 92% 361 125 89% (7%)
revenue
Net income from 26 468 7% 28 262 7% (6%)
investments
Foreign exchange gain 1 899 1% 14 322 4% (87%)
Net investment 28 367 8% 42 584 11% (33%)
portfolio returns
Gross revenue 362 983 100% 403 709 100% (10%)
SECURITIES
In an environment of extreme volatility in equity markets, declining trading
volumes on the JSE and the reduced risk appetite of the banks, Cadiz Securities
increased revenue by 23% to R164.9 million. This follows growth of 22% in the
previous financial year.
The business has further increased its market penetration over the past year by
successfully broadening its offering to attract new client segments.
Cadiz Securities expanded its industry-leading research offering with the launch
of an equity analysis and economic research unit. A team of experienced analysts
was recruited and current coverage includes equities in the consumer retail and
platinum mining sectors, as well as corporate governance and macro-economic
strategy.
In the annual Financial Mail ranking of analysts announced last week, Cadiz was
ranked first in derivatives research and dealing for the 13th consecutive year.
Cadiz was also ranked number one in risk management research, quantitative
analysis and innovative research. Cadiz was also rated in three new research
categories which it entered for the first time this year.
Securities continues to increase its market share and leverage on growth in its
new businesses while positioning the business for the anticipated increase in
activity in the medium to long term.
ASSET MANAGEMENT
The impact of the global economic crisis over the past year has been
particularly severe on the fund management industry. However, Cadiz African
Harvest Asset Management (CAHAM) has shown its resilience, with significant
continued client support, a stable and experienced investment team and
significantly enhanced and robust operational processes.
As reported at the half-year, asset management revenues have been impacted by
the declining equity market as well as negative hedge fund performance in the
first half of the year. These factors contributed to a 35% decline in revenue to
R110.3 million.
Total assets under management were R45.6 billion at year end (excluding new
equity mandates won with effect from April 2009 of some R4 billion).
Equity and balanced fund performance has improved substantially in the second
half of the year, while absolute return and fixed income funds continued to
perform in the top quartile of their peer groups over one and three year
periods. Exceptional investment performance was particularly evident in the
Cadiz unit trust funds.
The business will be rebranded as Cadiz Asset Management from July 2009.
STRUCTURING
Structuring revenue increased 5% to R59.4 million despite an increasingly
challenging trading environment, reflecting the strength of Cadiz in the
corporate and retail markets.
Corporate Solutions
Cadiz Corporate Solutions (CCS) produced its best performance since its
inception despite the slowdown in M & A activity resulting from global economic
conditions. In the annual Ernst & Young Mergers & Acquisitions review of
investment advisers, CCS improved its ranking from 17th in 2007 to 7th in 2008
with transactions valued at R28.7 billion.
CCS was placed 4th in the Dealmakers annual 2008 rankings by transaction value
with transactions of R49.2 billion and 7th in the rankings by deal value with
transactions totaling R25.2 billion.
A healthy deal pipeline has been established for the year ahead. Current market
conditions have created opportunities for corporate activity while BEE
transactions will continue to be a major driver of deal flow.
Wealth management
The range of risk-profiled investments offered by Cadiz Wealth proved popular in
uncertain market conditions and contributed to strong inflows, with funds under
management increasing 105% to more than R7.6 billion.
Net inflows into Cadiz Collective Investments almost trebled over the previous
reporting period to R1.5 billion with total unit trust fund assets under
management of R2.5 billion (2008: R0.9 billion) at year end.
The Cadiz Money Market Fund was the top performing money market unit trust fund
over two and three years and ranked second over one year. The Cadiz Absolute
Yield Fund, a flexible fixed interest fund, was the top performing Cadiz fund
with returns of 14.26% over one year, 11.29% over two years and 10.27% over
three years to 31 March 2009. The Equity Ladder Fund, a protected equity
offering, is currently the leading equity fund in the market over one, two and
three year periods. (Source of performance data: Morningstar).
The Cadiz hedge fund business has been integrated into Cadiz Wealth and the team
now offers a range of multi-strategy funds. Despite a difficult first half the
restructuring of the offering and the integration of the team has resulted in a
more robust process and significant increase in performance.
The launch of Cadiz Life at the start of the financial year has created the
platform to offer pooled investment funds and retail retirement funds and is
expected to be a growth vector in the year ahead.
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:
* R187.6 million invested in liquid assets for regulatory capital adequacy and
working capital requirements;
* R13.9 million investment net of trading liabilities held as a hedge against
Cadiz Prime Broking activities;
* R91.5 million invested as seed capital in asset management products; and
* R65.6 million strategic investment in empowerment partner Makana.
OUTLOOK
Market conditions remain tough and uncertain in the short to medium term and the
prospects for financial markets remain unclear. The events of the past two years
have yet to manifest themselves fully and we expect structural changes in the
market and continuous tightening of the regulatory environment. We continue to
manage the group activities cautiously while maintaining liquidity and a strong
balance sheet, at the same time looking for possible opportunities that may
arise from these market conditions.
In these tough times we continue to focus on the well-being of our staff,
clients and suppliers as they are critical to our future.
All operating businesses are well positioned in their market segments and we
will continue to invest for long-term sustainability. The Cadiz brand is strong
and our culture resilient to these challenging times.
BEST COMPANY TO WORK FOR AWARD
Cadiz was ranked first in the financial services category in the Deloitte Best
Company to Work For survey 2008, improving from second place in the previous
year. Cadiz was also rated as the best managed company in the financial services
(investment) category in CRF`s Leading Managers 2008/09 survey.
SHARE CAPITAL AND TREASURY SHARES
During the year a subsidiary of Cadiz purchased 5.3 million shares for an
average price of 159.4 cents per share. In addition 1.7 million of the deferred
consideration shares vested and were released to staff formerly employed by
African Harvest. The remaining 1.8 million shares are held as treasury shares
until their release in October 2009.
BEE SHARE SCHEME AND STAFF SHARE OPTIONS
During the period Cadiz awarded 5.9 million of the 24 million `A` ordinary
shares and share appreciation rights set aside at the AGM for issue to existing
and newly appointed black staff over the next three years. The effective dates
of issues were between August 2008 and March 2009. These vest at 20% per annum
from years three to seven and are subject to a lock-in for seven years from the
issue date. Staff paid a 5% deposit and the weighted average issue price was 213
cents per share, increasing by a notional interest amount equivalent to 75% of
the prime interest rate less distributions per share made by the company.
A further 1.0 million share appreciation rights were issued to newly appointed
staff with an average strike price of 388 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 March 2008.
Short positions of R166.6 million (2008: R465.2 million) entered into on behalf
of clients that were previously presented on a net basis have been reclassified
to trade and other receivables/payables to better reflect the risks and rewards
associated with these transactions.
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
2009 group annual financial statements and the abridged group financial
statements contained herein, is available for inspection at the company`s
registered office.
DIVIDEND
Notice is hereby given of a dividend of 11.5 cents per ordinary share.
In compliance with the Listings Requirements of the JSE Limited, the following
dates are applicable:
Last date to trade: Friday 3 July 2009
Trading commences ex dividend: Monday 6 July 2009
Record date: Friday 10 July 2009
Payment date: Monday 13 July 2009
Share certificates may not be dematerialised or rematerialised between Monday, 6
July 2009 and Friday, 10 July 2009, both dates inclusive.
On behalf of the board of directors
Ray Cadiz Ram Barkai
Chairman Chief Executive Officer
Cape Town
1 June 2009
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
Date: 01/06/2009 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.
