| Mon 31 May 2010, 8:00 | | CDZ - Cadiz Holdings Limited - Audited results for the year ended 31 March 2010 |
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CDZ
CDZ
CDZ - Cadiz Holdings Limited - Audited results for the year ended 31 March 2010
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")
HIGHLIGHTS
* Diluted earnings per share up 45.1%
* Diluted HEPS up 36.9%
* Operating profit up 28.9%
* Ranked number 1 in derivatives for 14th consecutive year
* Voted Best Company to Work For in financial services
* Dividend up 73.9% to 20 cps
CONDENSED GROUP STATEMENT OF Audited Audited
COMPREHENSIVE INCOME 12 months 12 months
31-Mar-10 31-Mar-09
R `000 R `000
Gross operating revenue 390 722 334 616
Interest income 12 597 17 655
Net investment income 12 023 14 788
Net income from investments 15 092 12 889
Foreign exchange (losses)/gains (3 069) 1 899
Income attributable to linked assets - -
Net fair value gains on linked 85 447 3 504
financial instruments
Linked liability adjustment (85 447) (3 504)
Operating expenses (298 058) (276 055)
Operating profit 117 284 91 004
Finance costs (311) (4 076)
Profit before taxation 116 973 86 928
Taxation (26 651) (24 370)
Total comprehensive income 90 322 62 558
Reconciliation of headline earnings:
Profit attributable to equity holders 90 322 62 558
of the company
Goodwill impairment 9 151 2 436
Intangible assets derecognition and - 11 173
impairment
Taxation impact - (3 128)
Profit on disposal of plant and - (21)
equipment
Taxation impact - 3
Headline earnings 99 473 73 021
Issued number of shares (`000) 245 138 245 138
Consolidated number of shares (`000) 217 794 218 126
Weighted average number of shares 218 155 220 195
(`000)
Diluted weighted average number of 219 471 220 453
shares (`000)
Earnings per share (cents)
Basic 41.4 28.4
Diluted 41.2 28.4
Headline earnings per share (cents)
Basic 45.6 33.2
Diluted 45.3 33.1
CONDENSED GROUP STATEMENT OF Audited Audited
FINANCIAL POSITION 31-Mar-10 31-Mar-09
R `000 R `000
ASSETS
Non - current assets 1 394 592 1 152 668
Plant and equipment 7 667 5 690
Intangible assets 266 140 277 334
Deferred taxation 24 159 16 965
Investments backing linked funds 1 012 529 747 704
Other financial assets 81 144 100 398
Receivables and prepayments 2 953 4 577
Current assets 981 885 855 022
Other financial assets 200 427 190 688
Receivables and prepayments 617 386 578 589
Taxation 1 204 2 825
Cash and cash equivalents 162 868 82 920
Total assets 2 376 477 2 007 690
EQUITY
Capital and reserves
Ordinary share capital and premium 2 902 2 869
Treasury shares (73 544) (70 639)
Share-based payment reserve 45 836 30 712
Retained earnings 664 173 596 996
Total equity 639 367 559 938
LIABILITIES
Non - current liabilities 1 030 064 762 367
Deferred taxation 7 918 7 324
Linked investment contract 1 012 529 747 704
liabilities
Trade and other payables 9 617 7 339
Current liabilities 707 046 685 385
Trade and other payables 665 459 656 548
Taxation 16 021 13 424
Trading liabilities 25 566 15 413
Total liabilities 1 737 110 1 447 752
Total equity and liabilities 2 376 477 2 007 690
Net asset value (cents per share) 294 257
Net tangible asset value (cents per 164 125
share)
CONDENSED GROUP STATEMENT OF CASH Audited Audited
FLOWS
12 months 12 months
31-Mar-10 31-Mar-09
R `000 R `000
Cash flow from operating activities 82 593 102 888
Cash generated from operations 136 530 150 865
Taxation paid (28 668) (32 242)
Dividends paid (25 269) (15 735)
Cash flow from investing activities 2 976 (110 109)
Cash flow from financing activities (5 530) (36 773)
Net change in cash and cash 80 039 (43 994)
equivalents
Effect of exchange rate adjustment (91) 2 358
Cash and cash equivalents at 82 920 124 556
beginning of year
Cash and cash equivalents at end of 162 868 82 920
year
CONDENSED GROUP STATEMENT OF CHANGES Audited Audited
IN EQUITY 12 months 12 months
31-Mar-10 31-Mar-09
R `000 R `000
Share capital, share premium and
treasury shares
Opening balance (67 770) (37 117)
Issue of shares 33 59
Capital reduction - (29 223)
Sale of treasury shares on exercise (1 760) 3 722
of options
Delivery of treasury shares on 4 782 3 318
settlement of deferred consideration
Purchase of treasury shares (5 927) (8 529)
(70 642) (67 770)
Reserves
Opening balance 627 708 574 229
Premium on issue of equity settled 340 569
share appreciation rights
Sale of treasury shares on exercise 1 784 (3 371)
of options
Employee share option scheme - value
of services provided 15 124 9 458
Total comprehensive income 90 322 62 558
Dividends paid (25 269) (15 735)
710 009 627 708
Total shareholders` funds 639 367 559 938
CONDENSED GROUP SEGMENTAL REPORT
Audited Asset & Securities Investmen Total
31-March-2010 Wealth & ts &
R`000 management Structuring Capital
Segment revenue 199 148 200 994 19 839 419 981
Segment costs 132 146 126 874 5 168 264 188
Segment profit 67 002 74 120 14 671 155 793
Corporate costs 38 820
Profit before 116 973
taxation
Gross operating 190 821 199 901 390 722
revenue
(external)
Audited Asset & Securities Investmen Total
31-March-2009 Wealth & ts &
R`000 management Structuring Capital
Segment revenue 148 664 188 693 23 761 361 118
Segment costs 113 274 115 857 5 890 235 021
Segment profit 35 390 72 836 17 871 126 097
Corporate costs 39 169
Profit before 86 928
taxation
Gross operating 146 547 188 069 334 616
revenue
(external)
Year on year % 89% 2% -18% 24%
segment profit
FINANCIAL PERFORMANCE
Cadiz Holdings has shown a sustained improvement in operating and financial
performance for the 12 months to 31 March 2010 ("the period").
Gross operating revenue increased by 16.8% to R390.7 million. The asset and
wealth management unit reported strong growth owing to continued net inflows
into the retail business and significantly improved investment performance which
resulted in higher performance fees.
Revenue from the group`s investment capital was 14% lower mainly as a result of
the mark down of the investment in Makana due to market conditions and R3
million currency losses on offshore investments of R10.2 million. The majority
of the portfolio was held in conservative, liquid and lower yielding investments
in the unstable market environment following the global financial crisis.
Growth in operating expenses was contained to 8.0%, with most of the increase
attributable to variable costs linked to the group`s improved performance. This
includes an interim salary increase to realign salaries with market benchmarks
following the salary freeze imposed in the previous financial year.
The cost-to-income ratio, after excluding direct costs related to the group
investments and goodwill impairment charges, improved to 73% compared to 76% in
the previous year. Tight cost control measures were introduced during the
downturn in 2008 and as market conditions have started to improve, the group has
resumed its programme of investing in people, systems and the Cadiz brand.
The group`s improved performance is reflected in the 28.9% increase in operating
profit to R117.3 million.
Headline earnings rose 36.2% to R99.5 million, with diluted headline earnings
per share increasing 36.9% to 45.3 cents per share. This performance is in line
with the earnings guidance provided in the group`s trading statement of 10 May
2010.
ASSET AND WEALTH MANAGEMENT
The wholesale and retail businesses in the asset and wealth management unit
collectively increased profit by 89% to R67.0 million. This strong growth was
driven by consistently improving investment performance, higher performance fees
and the growing retail asset base.
The quality of the assets under management has been enhanced by attracting
higher yielding assets, while an increasing proportion of assets are exposed to
performance fees.
Four of the six Cadiz funds were ranked in the top ten out of 496 unit trusts
for performance in the three year period to March 2010. The Cadiz Equity Ladder
Fund was ranked first with a return of 70.3%, more than 30% higher than the
second placed fund. The Cadiz Money Market Fund is in the top three money market
unit trust funds over all measurement periods and is number one over three years
to 31 March 2010. In addition, the Cadiz Mastermind Fund ranked second out of 95
general equity, value and growth unit trust funds for one year to March 2010
with a return of 59.1% (source: Morningstar).
Cadiz received a FM Morningstar Fund Award when the Cadiz Absolute Yield Fund
was ranked first in the cautious balanced category over three years.
Total assets under management increased by 14% to R52.2 billion (March 2009:
R45.6 billion; September 2009: R55.1 billion). Retail funds grew by 29% to R9.8
billion (2009: R7.6 billion) which includes unit trust assets under management
which more than doubled during the period to R5.1 billion (2009: R2.5 billion).
Cadiz was named the SRI Manager of the Year for 2009 in the Principal Officers`
Association awards.
SECURITIES AND STRUCTURING
The securities business posted a resilient performance in the face of the
slowdown in market activity over the past year. Trading volumes on both the JSE
(-15%) and SAFEX Futures (-67%) showed marked declines while hedge fund activity
also contracted following the global financial crisis. Profit at R74.1 million
increased by 2% over the previous year.
The Cadiz equity derivatives team has maintained its position as the leading
independent broker based on volumes traded on SAFEX.
The broadening of the research offering across quantitative, fundamental,
investment and economics research has increased the market share of the
stockbroking business, which made a strong contribution to the securities
performance.
Cadiz was last week rated as the country`s leading Derivatives Research and
Dealing house for the 14th consecutive year in the authoritative Financial Mail
ranking of analysts. Cadiz was also ranked number one for Innovative research
and Risk Management research and was placed second in Quantitative research and
Corporate governance research.
The industry-leading capability in transition management was recognised when
Cadiz was voted as the 2009 Transition Manager of the Year by the Principal
Officers` Association.
While opportunities in the corporate advisory market diminished owing to the
slowdown in M&A transactions, particularly BEE deals, Cadiz grew revenue through
its increased focus on the resources sector.
Cadiz has concluded strategic partnerships with advisory firms in China and
India which provide the business with an international footprint and these
relationships are already resulting in improved deal flow.
INVESTMENTS AND CAPITAL
At year end the group`s investment and capital portfolio had increased to R383.5
million. Profit from this portfolio declined by 18% to R14.7 million.
All the group`s operating businesses continue to generate cash.
The group continues to deploy its capital to grow the business. At the end of
the period the capital was invested as follows:
* R85.0 million invested in liquid assets for regulatory capital adequacy,
stockbroking and working capital requirements;
* R47.2 million in liquid assets for future commitments;
* R89.5 million invested as seed capital and co-investments in asset management
products. This includes R10.2 million which is invested in offshore asset
management products;
* R58.6 million investment in empowerment partner Makana; and
* R103.2 million invested in liquid assets for future strategic opportunities.
The group also holds R60.9 million investments and R25.6 million trading
liabilities as a hedge against Cadiz Prime Broking activities.
The investment in Makana was marked down owing to a slow down in the performance
of its investments in the current market conditions.
BOARD APPOINTMENTS
During the year the following appointments were made to the board:
* Gando Matyumza and Totsie Memela-Khambula were appointed as independent non-
executive directors
* Fraser Shaw was appointed as an executive director and to the position of
financial director
* As the chairman of the board, Ray Cadiz, is not an independent director, the
board created the position of lead independent non-executive director. Colin
Hall was appointed to this position in November 2009.
The transformation profile of the board has been enhanced with the new board
appointments and 44% of the non-executive directors are now black and 33% are
female.
SHARE ALLOCATION TO BLACK EMPLOYEES
During the period 5.2 million share appreciation rights and voting A ordinary
shares were issued to participants in the black employee share ownership scheme.
These are subject to a lock-in for seven years from the issue date. This brings
the total number of rights issued to 11 million of the 24 million originally
approved by shareholders.
SHARE CAPITAL AND TREASURY SHARES
During the year a subsidiary of Cadiz purchased 2.2 million shares for an
average price of 266.8 cents per share. In addition 1.6 million of the deferred
consideration shares vested and were released to staff formerly employed by
African Harvest.
EXECUTIVE EQUITY SCHEME
As previously advised to shareholders, an equity-based remuneration scheme has
been implemented to replace the existing share option scheme. The scheme is
aimed at aligning the risk and return profile of management and key staff with
that of shareholders. The proposed incentive scheme will result in management
and senior employees receiving a significant portion of their annual incentive
bonus in unprotected equity with appropriate vesting and sale restrictions. This
will limit shareholder exposure to the dilution created by the option scheme and
reduce the IFRS charges resulting from the current share option scheme. The
scheme will be proposed for shareholder approval at the forthcoming annual
general meeting.
SUSTAINABILITY
Cadiz continues to focus on sustainability. The major areas being addressed are
the use of environmentally friendly products, waste management and energy and
water monitoring. Cadiz has expanded its contribution to sport and open water
swimming in the Western Cape as part of its social impact investment programme.
Cadiz Foundation continues to grow through its social impact investments in
association with GreaterGood SA. Management has invested significant time and
energy on restructuring the business and the remuneration process to cater for
sustained stakeholders needs. Cadiz was ranked first in the financial services
category in the annual Deloitte Best Company to Work For survey for the second
consecutive year.
PROSPECTS
As conditions in the domestic and global financial markets remain unclear, the
group will exercise caution in the months ahead.
The asset management business continues to focus on quality performance, a
robust investment process and building a higher yielding asset base. Management
is confident that this uncompromising approach will yield long-term sustainable
results. The growth in the retail asset management business should continue as
it increases market share.
The securities business faces challenges in an environment of lower volumes and
prolonged uncertainty in the market. A healthy deal pipeline has been created in
the corporate advisory market and this business can benefit if M&A activity
increases as economic conditions improve.
Cadiz will continue to invest in growing its brand to increase market
penetration in the retail business.
All Cadiz`s businesses occupy market-leading positions in their respective areas
of specialisation, providing a strong foundation to long term growth.
The group will continue to strengthen its cash resources and assess strategic
acquisition opportunities to expand its core businesses or unlock synergies.
BASIS OF PRESENTATION
These results have been prepared in terms of International Financial Reporting
Standards and comply with IAS 34 - `Interim Financial Reporting`, the Listings
Requirements of the JSE Limited and the Companies Act of South Africa. The
accounting policies are consistent with those applied in the annual financial
statements for 31 March 2009 except for the adoption of IAS 1 (revised) -
Presentation of Financial Statements and IFRS 8 - Operating Segments, the impact
of both of which is on the presentation of the information rather than the
measurement.
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
2010 group annual financial statements and the condensed group financial
statements contained herein, is available for inspection at the company`s
registered office.
DIVIDEND
Notice is hereby given of a dividend of 20 cents per ordinary share.
In compliance with the Listings Requirements of the JSE Limited, the following
dates are applicable:
Last date to trade: Friday 2 July 2010
Trading commences ex dividend: Monday 5 July 2010
Record date: Friday 9 July 2010
Payment date: Monday 12 July 2010
Share certificates may not be dematerialised or rematerialised between Monday,5
July 2010 and Friday, 9 July 2010, both dates inclusive.
On behalf of the board of directors
Ray Cadiz Ram Barkai
Chairman Chief Executive Officer
Cape Town
31 May 2010
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*
A N Matyumza*
B J Memela-Khambula*
N S Mjoli-Mncube*
S P Ngwenya*
S J Saunders*
F C Shaw
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: 31/05/2010 08:00:01 Produced by the JSE SENS Department.
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