| Thu 4 Jun 2009, 10:56 | | 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
2009
PEREGRINE HOLDINGS LIMITED
Registration number 1994/006026/06
Share code: PGR
ISIN code: ZAE000078127
("Peregrine" or "the company" or "the group")
REVIEWED RESULTS FOR THE YEAR ENDED 31 MARCH 2009
INCOME STATEMENT
% change Audited
2008 to Reviewed Year ended 31
2009 Year ended 31 March March
2009 2008
R`000 R`000
Operating revenue 41 1,541,508 1,095,438
Investment income and
other income -138 (89,495) 234,344
Investment contract
(liabilities)/benefits (193,772) 274,121
Investment contract
income/(expenses) 193,772 (274,121)
Operating expenses 72 (1,144,528) (665,901)
Profit from operations -54 307,485 663,881
Net interest
received/(paid) (49,147) 64,541
Interest received 88,716 87,895
Interest paid (137,863) (23,354)
Income from associate companies 9,541 7,101
Profit from ordinary
activities -64 267,879 735,523
Capital
(impairment)/surplus (11,043) 5,500
Profit before taxation -65 256,836 741,023
Taxation (40,881) (160,313)
Profit for the year -63 215,955 580,710
Attributable to :
Equity holders of the
company -75 118,041 467,754
Minority interest 97,914 112,956
215,955 580,710
Determination of
headline earnings
Profit attributable to
equity holders - IAS 33
earnings 118,041 467,754
Adjustments:
Impairment to loan to
associate forming part
of the net investment in
associate - IAS 36 11,043 -
Surplus on sale of
property - IAS 16 (56,017) -
Surplus on sale of
subsidiary shares - IAS 27 - (5,500)
Headline earnings -84 73,067 462,254
Headline earnings per
ordinary share (cents) -85 33.9 222.7
Basic earnings per
ordinary share (cents) -76 54.8 225.4
Headline earnings per
share excluding
intangible amortisation
(cents) -80 43.7 223.4
Basic earnings per share
excluding intangible
amortisation (cents) -71 64.6 226.1
Dividend paid per
ordinary share - in
respect of the previous
year (cents) 24 56.0 45.0
Dividend per ordinary
share declared
subsequent to 31 March
(cents) -77 13.0 56.0
Number of ordinary
shares in issue (`000) 228,129 228,129
Treasury shares held (`000) 13,978 12,853
Weighted average number
of ordinary shares in
issue (`000) 215,239 207,548
Surplus on sale of property
comprises:
Gross income 115,364
Tax (14,370)
Minority interest (44,977)
Net income 56,017
BALANCE SHEET
Audited
Reviewed As at 31 March
As at 31 March 2009 2008
R`000 R`000
Assets
Non - current assets 4,508,958 3,408,341
Property, plant and equipment 40,369 91,677
Intangible assets 1,455,064 268,157
Investment in associate companies 8,992 16,969
Investments linked to policyholder investment
contracts 2,725,372 2,657,024
Financial investments 193,960 337,528
Loans and receivables 11,729 22,142
Deferred taxation 73,472 14,844
Current assets 5,468,696 9,173,946
Financial investments 550,066 899,054
Loans and receivables 5,917 -
Trade and other receivables 281,305 103,234
Amounts receivable in respect of stockbroking
activities 3,898,488 7,111,094
Taxation 19,305 6,918
Cash and cash equivalents 713,615 1,053,646
Total assets 9,977,654 12,582,287
Equity and liabilities
Equity 1,856,868 1,722,093
Total equity attributable to equity holders of
the company 1,417,880 1,602,313
Minority interests 438,988 119,780
Non - current liabilities 3,476,147 2,851,444
Interest- bearing borrowings 674,135 57,784
Policyholder investment contract liabilities 2,725,372 2,657,024
Loans and other payables 64,904 88,012
Deferred taxation 11,736 48,624
Current liabilities 4,644,639 8,008,750
Financial instrument liability 4,206 -
Current portion of interest-bearing borrowings 169,585 7,688
Trade and other payables 429,735 317,122
Amounts payable in respect of stockbroking
activities 3,979,955 7,566,154
Taxation 61,158 117,786
Total equity and liabilities 9,977,654 12,582,287
Net tangible asset value per share (cents) 119.8 619.7
Net asset value per share (cents) 662.1 744.3
STATEMENT OF CHANGES IN EQUITY
Share Share Treasury Accumulated
capital premium shares profits
R`000 R`000 R`000 R`000
Reviewed - 2009
Balance at 31 March 2008 228 38,024 (37,091) 1,417,860
Minorities arising on
acquisition of
subsidiaries - - - -
Acquisition of minority
interest in subsidiary
within the Stenham group - - - -
Net gains and losses not
recognised in the income
statement - - - (582)
Profit for the year - - - 118,041
Dividends paid - - - (120,554)
Share repurchases - - (5,850) -
Balance at 31 March 2009 228 38,024 (42,941) 1,414,765
Audited - 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
Non-
distributable Obligation to Total capital
reserves issue shares and reserves
R`000 R`000 R`000
Reviewed - 2009
Balance at 31 March 2008 183,292 - 1,602,313
Minorities arising on
acquisition of
subsidiaries - - -
Acquisition of minority
interest in subsidiary
within the Stenham group - - -
Net gains and losses not
recognised in the income
statement (175,488) - (176,070)
Profit for the year - - 118,041
Dividends paid - - (120,554)
Share repurchases - - (5,850)
Balance at 31 March 2009 7,804 - 1,417,880
Audited - 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
interest Total equity
R`000 R`000
Reviewed - 2009
Balance at 31 March 2008 119,780 1,722,093
Minorities arising on acquisition of subsidiaries 397,783 397,783
Acquisition of minority interest in subsidiary
within the Stenham group (931) (931)
Net gains and losses not recognised in the
income statement (56,780) (232,850)
Profit for the year 97,914 215,955
Dividends paid (118,778) (239,332)
Share repurchases - (5,850)
Balance at 31 March 2009 438,988 1,856,868
Audited - 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 Reviewed Audited
Year ended 31 Year ended 31
2009 2008
R`000 R`000
Cash flow from operating activities (551,399) 549,577
Cash generated from operating activities 429,793 422,761
Working capital changes (521,546) 302,470
(Arising)/released from stockbroking
activities (373,593) 178,810
(Investment into)/released from
working capital (147,953) 123,660
Interest received 88,142 86,507
Interest paid (114,024) (23,354)
Dividends received - financial investments 2,491 12,420
Dividends received - associates 37,141 10,044
Dividends paid - equity shareholders (120,554) (88,661)
Dividends paid - minority shareholders (118,778) (31,126)
Taxation paid (234,064) (141,484)
Cash flow from investing activities (376,803) (134,322)
Cash flow from financing activities 619,827 (25,656)
Net (decrease)/increase in cash
and cash equivalents (308,375) 389,599
Cash and cash equivalents at
beginning of the year 1,053,646 655,106
Effects of exchange rate changes on cash
and cash equivalents (31,656) 8,941
Cash and cash equivalents at end of the year 713,615 1,053,646
SEGMENTAL ANALYSIS
Reviewed
For the year
ended 31 March 2009
Revenue, Interest and
Investment associate income
and other
income
R`000 R`000
Wealth and asset management 404,806 10,051
Wealth management 299,788 7,695
Asset management 105,018 2,356
Broking and structuring 370,170 53,767
Stenham 758,631 6,840
Profit from operating subsidiaries 1,533,607 70,658
Group (81,594) (110,264)
Operations 5,590 9,963
Investment returns (87,184) (525)
Cost of funding (119,702)
1,452,013 (39,606)
Reviewed
For the year
ended 31 March 2009
Profit from
ordinary
activities as per
the income
statement
R`000
Wealth and asset management 115,201
Wealth management 82,810
Asset management 32,391
Broking and structuring 152,594
Stenham 215,098
Profit from operating subsidiaries 482,893
Group (215,014)
Operations (16,735)
Investment returns (78,577)
Cost of funding (119,702)
267,879
Reviewed Audited
For the year For the year
ended 31 March 2009 ended 31 March 2008
Proforma profit
from ordinary
activities before
intangible Revenue,
amortisation investment Interest and
adjusted for and other associate
minorities income income
R`000 R`000 R`000
Wealth and asset management 102,676 621,004 13,735
Wealth management 84,294 373,239 10,151
Asset management 18,382 247,765 3,584
Broking and structuring 152,594 464,343 48,667
Stenham 117,347
Profit from operating subsidiaries 372,617 1,085,347 62,402
Group (205,798) 244,435 9,240
Operations (16,735) 8,517 8,546
Investment returns (69,361) 235,918 694
Cost of funding (119,702)
166,819 1,329,782 71,642
Audited
For the year ended 31 March 2008
Proforma profit
from ordinary
activities before
Profit from intangibles
ordinary activities amortisation
as per the income adjusted for
statement minorities
R`000 R`000
Wealth and asset management 317,460 265,638
Wealth management 165,251 166,735
Asset management 152,209 98,903
Broking and structuring 216,020 216,020
Stenham
Profit from operating subsidiaries 533,480 481,658
Group 202,043 127,390
Operations (23,497) (23,497)
Investment returns 225,540 150,887
Cost of funding - -
735,523 609,048
% of profit from
operating subsidiaries
2009 2008
Wealth and asset management 24 60
Wealth management 17 31
Asset management 7 29
Broking and structuring 32 40
Stenham 44 -
Profit from operating subsidiaries 100 100
% of profit from
operating subsidiaries
before intangible % change in
amortisation profit from
adjusted for operating
minorities activities
2008 to
2009 2008 2009
Wealth and asset management 28 55 -64
Wealth management 23 35 -50
Asset management 5 20 -79
Broking and structuring 41 45 -29
Stenham 31 -
Profit from operating subsidiaries 100 100 -9
% change in profit
from operating
activities
before intangible
amortisation
adjusted for
minorities
2008 to 2009
Wealth and asset management -61
Wealth management -49
Asset management -81
Broking and structuring -29
Profit from operating subsidiaries -23
Note: Group funding costs are disclosed as part of "group" and have not been
allocated to the appropriate underlying entities.
BASIS OF PREPARATION
The results for the year ended 31 March 2009 have been prepared in accordance
with, and comply with IFRS, IAS34, the South African Companies Act of 1973, as
amended and the JSE listing requirements. The accounting policies and methods of
computation are consistent with those applied in the annual financial statements
for March 2008, except for IFRS8 which has been early adopted.
REVIEW REPORT
The results for the year ended 31 March 2009 have been reviewed by PKF (Jhb)
Inc., and their unqualified review report is available for inspection at the
group`s registered office.
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 R1,158 billion (GBP75,705 million).
Taking account of the shares held by the SL employee share trust, which is
consolidated at balance sheet date, Peregrine acquired an effective stake of
52.84%. R1,047 billion (GBP68,532 million) of the purchase price was settled in
cash via transfer of funds from PFS. The balance, in the amount of R111 million
(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 order to comply with SA Exchange Control Regulations, the shares in Stenham
SA (Pty) Ltd, a South African subsidiary within the Stenham group, were
transferred via dividend in specie to the shareholders of SL with effect from 1
October 2008. Following on the transfer, PFS holds directly 52.84% of the shares
in Stenham SA.
In the 12 months to 31 March 2009 the Stenham group contributed revenue of R758,
631 million (GBP50,677 million) and net profit after tax and minorities of R84,
290 million (GBP5,631 million) to the consolidated group attributable earnings.
The contribution, after adding back the amortisation of intangibles is R103,787
million (GBP6,933 million).
The acquisition had the following effect on the group`s assets and liabilities.
The fair values reflected below represent their carrying values. The analysis is
presented net of the SL dividend.
R`000
Assets 2,079,462
Intangible assets 1,394,414
Property, plant and equipment 21,274
Investment in associate companies 27,772
Financial investments 51,416
Loans receivable 69,140
Deferred taxation 169
Trade and other receivables 259,338
Cash and cash equivalents 255,939
Liabilities 634,282
Interest bearing borrowings 202,974
Deferred taxation 764
Trade and other payables 391,789
Loans and payables 5,212
Provision for taxation 33,543
Net assets and liabilities acquired 1,445,180
Less: Minority interest (397,783)
Purchase consideration 1,047,397
Comprising:
Cost of acquisition (including costs capitalised) 1,158,586
Less: the SL dividend (111,189)
2009 2008
COMMITMENTS R`000 R`000
Operating lease commitments 258,451 50,555
Due in one year 48,368 6,713
Due in two to five years 153,533 26,669
Thereafter 56,550 17,173
Capital expenditure 10,533 6,415
Contracted 1,465 2,400
Authorised but not yet contracted 9,068 4,015
COMMENTARY
The Peregrine group has produced an acceptable set of results, under very
difficult market conditions, for the year under review. Notwithstanding the
highly uncertain environment, all of the group`s operating divisions remained
comfortably profitable for the period, producing, in aggregate, in excess of
R350 million of operating profit (before interest and amortisation of
intangibles and after minority interests).
It is worth noting that this level of operating profit includes almost no
performance fees for the year under review, in contrast to the previous year in
which record performance fees were earned. The absence of performance fees is
the principle reason why profit from the group`s existing South African
operations was 47% lower than the previous year.
The group`s earnings were further dampened by negative returns on its
proprietary investment portfolio as well as a swing from net interest received
to interest paid for the year.
A feature of the year was the acquisition of a controlling interest in
international wealth and asset manager Stenham Limited, effective 4 April 2008.
This helped boost the annuity component of the group`s earnings as well as
increase its assets under management by 87% to R80 billion at year end.
Results
Whilst operating revenue increased by 41% (boosted by the acquisition of
Stenham), total income of R1,45 billion was only 9% higher than the previous
year as a result of the negative returns earned on the group`s proprietary
investments.
The 72% increase in operating expenses is primarily as a result of consolidating
the Stenham operations for the first time. If the Stenham expenses are excluded,
operating expenses (including profit participation) declined by 11%.
Interest costs on external funding raised at the beginning of the year resulted
in the group moving into a net interest paid position for the year of R49.1
million from net interest received of R64.5 million in the previous year.
Attributable earnings decreased by 75% to R118.0 million and a slight increase
in the weighted average number of shares in issue, resulted in basic earnings
per share decreasing by 76% to 54.8 cents per share.
Attributable earnings have been reduced by the amortisation of intangible assets
resulting from the Stenham transaction in the amount of R19.5 million. By
excluding the effect of this amortisation, basic earnings per share decreased by
71% to 64.6 cents per share.
Headline earnings per share decreased by 85%, the principle adjustment between
basic and headline earnings being the deduction of the surplus on sale of the
group`s Sandton head office property as required by Circular 8/2007 "headline
earnings."
Operating highlights
Due to the substantial minority interests which exist in both the asset
management and group investments results, the operating highlights are presented
on a pro forma `after minorities` basis as set out in the segmental analysis.
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. In addition, these pro-forma earnings are shown before the amortisation
of intangible assets in order to most closely represent the cash generation of
the underlying subsidiaries. Minority interests in the income statement are
accounted for on an after tax basis.
Profit from ordinary activities of private-client wealth management firm,
Citadel, decreased 49% to R84.3 million, contributing 23% to profit from the
group`s operating subsidiaries for the year. Performance fees dwindled to almost
zero during the course of the year as a result of the difficult market
conditions coupled with a high inflation rate. In spite of gross inflows of
approximately R130 million per month and a solid relative performance
manifesting in a client retention ratio exceeding 98%, assets under management
ended the year 10% lower at R13,6 billion. The business remains well placed as a
leader in the private client wealth management market but is unlikely to earn
meaningful performance fees within the ensuing financial year.
The contribution from the asset management division fell by 81% to R18.3 million
as a result of minimal performance fees generated. This constituted 5% of the
group`s profit from operating subsidiaries. The bulk of this contribution came
from the group`s hedge-fund flagship Peregrine Capital, which saw assets under
management decline from R3,6 billion to R2.9 billion after experiencing its
first year of negative returns 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 R600 million as a result of closure of some of the
funds. The top performing fund, Big Rock (which also has a ten year track
record) won the AfricaHedge Fund of the Year Award with a return of 19.8% for
2008. Peregrine remains the country`s largest single strategy hedge fund
manager, managing R3.5 billion in single strategy hedge funds.
Caveo, the group`s fund of hedge funds joint venture with Investment Solutions,
made no material contribution to group earnings for the period. Investment
performance for the funds managed by Caveo, which are aimed at institutional
investors, was positive for the period and ranked very competitively in its
market space. The business achieved net inflows for the year with assets under
management growing by 30% to R2.2 billion.
PeregrineQuant, the group`s institutional asset manager with a quantitative
focus, made a small contribution to profitability. The business experienced a
32% reduction in its assets under management to R14.9 billion at year-end.
Peregrine Securities was the largest contributor to group earnings for the year.
The broking and structuring activities housed within this division contributed
R152.6 million or 41% of profit from the group`s operating subsidiaries. The
focus on growing the division`s operations and on maintaining profitability
momentum quickly switched to a focus on risk management and risk mitigation in
the wake of the fallout precipitated by the international banking crisis from
September 2008 onwards. The business did extremely well to weather the ensuing
precarious market conditions without suffering any losses on its contract-for-
difference or prime broking book.
The deliberate downsizing of the business combined with a meaningful reduction
of market trading volumes in the second half of the year resulted in the
division`s earnings being 29% lower than the previous year. Earnings pressure is
expected to continue in the ensuing year as trading volumes continue to decline
and the business continues to feel the full impact of last year`s shake-out
across the inter-bank, hedge fund and asset management industries.
Stenham, the group`s offshore wealth and asset management subsidiary, included
in the group`s results for the first time, has produced a level of profitability
in line with expectations, notwithstanding the difficult market conditions.
Profit from ordinary activities of R117.3 million which excludes the
amortisation of intangible assets in the amount of R19.5 million, constitutes
31% of profit from the group`s operating subsidiaries.
The asset management division of Stenham which houses its fund-of-hedge fund
business produced a record level of profitability for the year. Current assets
under management of $2.1 billion, however, represent a decline of one third from
its peak level reached in August 2008 as a combination of negative investment
performance, adverse currency movements as well as redemptions took their toll
during the course of the latter half of the financial year. The business remains
extremely well placed relative to competitors and is anticipating healthy growth
in assets under management in the foreseeable future.
The property division, with GBP2 billion under management continues to face the
challenge of reduced valuations on existing property funds and investments,
together with very tight conditions in the financing and re-financing market. At
the same time, this presents tremendous opportunity to invest into distressed or
`value` opportunities at very attractive yields and valuations. New funds are
being rolled out to take advantage of these opportunities in the current
climate.
We believe that the acquisition of a controlling interest in Stenham will
materially impact the nature and composition of the Peregrine group going
forward. We are particularly pleased with Stenham`s long term 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 at least one third of the Peregrine group`s net income being earned
offshore in ensuing years.
As a result of the negative return earned on the group`s proprietary
investments, group investments yielded a loss of R69.4 million compared to a
positive return of R150.9 million in the previous year. Whilst mark-to-market
losses on the group`s hedge fund and investment banking portfolios had no direct
impact on the group`s cashflow, they served to substantially diminish the
group`s reported earnings for the period.
Core costs at the group level decreased by 29% year on year largely as a result
of lower executive bonuses reflective of the decline in reported earnings.
In the interests of presenting more meaningful disclosure, interest costs
incurred on external funding of R119.7 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 R205.8 million for the period.
Prospects
The Peregrine board has always maintained that the group`s overall financial
performance will 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.
The group has proved its ability to generate an acceptable level of
profitability and cash flow even under the most arduous conditions of the last
year. In contrast, the group generated exceptional profits under favourable
conditions in the previous year. Given prevailing market conditions and the low
likelihood of material performance fees being earned within the group, the year
ahead is likely to be another one of subdued earnings for the group.
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 cash dividend of
13 cents per share for the year.
The following dates are applicable to the dividend payment:
Last date to trade cum dividend Friday, 24 July 2009
Trading ex dividend commences Monday, 27 July 2009
Record date Friday, 31 July 2009
Payment date Monday, 3 August 2009
Shares may not be dematerialised or rematerialised between Monday, 27 July 2009
and Friday, 31 July 2009, both dates inclusive.
Sean Melnick Leonard Harris
Group Chief Executive Non Executive Chairman
3 June 2009 3 June 2009
Sponsor
Java Capital (Proprietary) Limited
www.peregrine.co.za
Date: 04/06/2009 10:56:44 Produced by the JSE SENS Department.
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