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PGR
PGR
PGR - Peregrine Holdings Limited - Unaudited Results for the six months ended 30
September 2010
PEREGRINE HOLDINGS LIMITED
Registration number 1994/006026/06
Share code: PGR
ISIN: ZAE000078127
www.peregrine.co.za
UNAUDITED RESULTS
For the six months ended 30 September 2010
CONSOLIDATED INCOME STATEMENTS
% change Unaudited for the six
2009 to months ended
2010 30 September
2010
R`000
Operating revenue 15 734,098
Investment and other income 32,118
Investment contract benefits 47,261
Investment contract expenses (47,261)
Operating expenses 11 (561,629)
Profit from operations -9 204,587
Net interest paid (1,263)
Interest received 29,704
Interest paid (30,967)
Income from associate companies 9,646
Profit from ordinary activities 2 212,970
Capital surplus 5,827
Profit before taxation 5 218,797
Taxation (35,406)
Profit for the period 8 183,391
Attributable to:
Equity holders of the company 2 125,721
Non-controlling interests 57,670
183,391
Basic earnings per ordinary share (cents) 1 57.7
Diluted basic earnings per ordinary share (cents) -8 52.9
Number of ordinary shares in issue (`000) 228,129
Treasury shares held (`000) 10,366
Weighted average number of ordinary shares in issue (`000) 217,763
Diluted weighted average number of ordinary
shares in issue (`000) 237,751
Unaudited for the six Audited
months ended year ended
30 September 31 March
2009 2010
R`000 R`000
Operating revenue 640,983 1,383,065
Investment and other income 92,142 161,822
Investment contract benefits 47,503 344,194
Investment contract expenses (47,503) (344,194)
Operating expenses (508,032) (1,048,383)
Profit from operations 225,093 496,504
Net interest paid (20,354) (38,068)
Interest received 22,990 43,854
Interest paid (43,344) (81,922)
Income from associate companies 4,824 12,688
Profit from ordinary activities 209,563 471,124
Capital impairment (1,715) (1,709)
Profit before taxation 207,848 469,415
Taxation (37,742) (75,775)
Profit for the period 170,106 393,640
Attributable to:
Equity holders of the company 123,008 267,298
Non-controlling interests 47,098 126,342
170,106 393,640
Basic earnings per ordinary share (cents) 57.4 124.8
Diluted basic earnings per ordinary share (cents) 57.4 124.8
Number of ordinary shares in issue (`000) 228,129 228,129
Treasury shares held (`000) 13,978 10,736
Weighted average number of ordinary
shares in issue (`000) 214,151 214,195
Diluted weighted average number of
ordinary shares in issue (`000) 214,151 214,195
DETERMINATION OF HEADLINE EARNINGS
%
change Unaudited for the
2009 to six months ended
2010 30 September
2010
R`000
Profit attributable to equity holders - IAS 33 earnings 125,721
Adjustments:
Impairment to loan to associate forming part of
the net investment in associate - IAS 36 -
Impairment to goodwill - IAS 36 -
Surplus on sale of available-for-sale assets - IAS 39 -
Surplus on disposal of controlling interest in
subsidiary - IAS 27 (5,827)
Profit on disposal of property, plant and
equipment - IAS 16 -
Tax effect 237
Non-controlling interest effect -
Headline earnings -3 120,131
Intangible amortisation 8,142
Headline earnings excluding intangible
amortisation 128,273
Headline earnings per ordinary share (cents) -5 55.2
Diluted headline earnings per ordinary share (cents) -13 50.5
Basic earnings per ordinary share excluding
intangible amortisation (cents) -0 61.5
Headline earnings per ordinary share excluding
intangible amortisation (cents) -5 58.9
Dividend paid per ordinary share in respect of
the previous year (cents) 138 31.0
Dividend per ordinary share declared subsequent
to 31 March (cents) -
Unaudited for the Audited
six months ended year ended
30 September 31 March
2009 2010
R`000 R`000
Profit attributable to equity holders -
IAS 33 earnings 123,008 267,298
Adjustments:
Impairment to loan to associate forming part
of the net investment in associate - IAS 36 1,715 1,715
Impairment to goodwill - IAS 36 804 804
Surplus on sale of available-for-sale assets
- IAS 39 (1,615) (2,244)
Surplus on disposal of controlling interest
in subsidiary - IAS 27 - (7)
Profit on disposal of property, plant and
equipment - IAS 16 - (3,424)
Tax effect 239 1,286
Non-controlling interest effect - 1,040
Headline earnings 124,151 266,468
Intangible amortisation 9,172 17,725
Headline earnings excluding intangible
amortisation 133,323 284,193
Headline earnings per ordinary share (cents) 58.0 124.4
Diluted headline earnings per ordinary share (cents) 58.0 124.4
Basic earnings per ordinary share excluding
intangible amortisation (cents) 61.7 133.1
Headline earnings per ordinary share
excluding intangible amortisation (cents) 62.3 132.7
Dividend paid per ordinary share in respect
of the previous year (cents) 13.0 13.0
Dividend per ordinary share declared
subsequent to 31 March (cents) - 31.0
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Unaudited for
the six months Unaudited for the Audited
ended six months ended year ended
30 September 30 September 31 March
2010 2009 2010
R`000 R`000 R`000
Profit for the period 183,391 170,106 393,640
Other comprehensive
income for the period
net of tax: (22,443) (153,640) (261,466)
Forward exchange
contracts entered into
as a cash flow hedge - 9,126 8,787
Transfer out of revaluation
reserve on disposal of
available-for-sale assets - (210) (730)
Currency translation
differences (22,443) (162,556) (269,523)
Total comprehensive
income for the period 160,948 16,466 132,174
Attributable to:
Equity holders of the company 109,745 8,235 78,508
Non-controlling interests 51,203 8,231 53,666
160,948 16,466 132,174
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
Unaudited Unaudited Audited
as at as at as at
30 September 30 September 31 March
2010 2009 2010
R`000 R`000 R`000
Assets
Non-current assets 5,286,697 4,702,667 4,966,801
Property, plant and equipment 28,793 38,864 32,819
Intangible assets 1,251,430 1,307,336 1,207,094
Investment in associate companies 21,292 8,020 11,424
Investments linked to
policyholder investment contracts 3,686,177 3,104,371 3,460,683
Financial investments 211,010 159,702 161,558
Loans and receivables 11,286 10,117 18,086
Deferred taxation 76,709 74,257 75,137
Current assets 7,413,246 7,213,798 6,412,764
Financial investments 502,933 565,758 552,176
Loans and receivables 3,702 4,626 2,399
Trade and other receivables 288,752 281,939 303,929
Amounts receivable in respect of
stockbroking activities 5,942,379 5,553,217 4,862,107
Taxation 6,012 10,625 14,522
Cash and cash equivalents 669,468 797,633 677,631
Non-current assets held for resale 44,290 - -
Total assets 12,744,233 11,916,465 11,379,565
Equity and liabilities
Equity 2,064,766 1,828,741 1,934,590
Equity attributable to equity
holders of the company 1,552,392 1,398,275 1,496,856
Non-controlling interests 512,374 430,466 437,734
Non-current liabilities 4,212,098 3,755,377 4,057,439
Interest- bearing borrowings 390,612 586,874 542,622
Policyholder investment contract
liabilities 3,686,177 3,104,371 3,460,683
Loans and other payables 124,060 52,894 41,894
Deferred taxation 11,249 11,238 12,240
Current liabilities 6,441,939 6,332,347 5,387,536
Financial instrument liability 5,303 5,821 2,898
Current portion of
interest-bearing borrowings 103,238 200,562 94,108
Current portion of loans and payables 714 - -
Trade and other payables 330,854 323,773 391,725
Amounts payable in respect of
stockbroking activities 5,955,763 5,761,492 4,854,909
Taxation 46,067 40,699 43,896
Non-current liabilities held for
resale 25,430 - -
Total equity and liabilities 12,744,233 11,916,465 11,379,565
Net tangible asset value per
ordinary share 254.6 160.3 236.9
Net asset value per ordinary share 712.8 652.9 688.5
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Share Share Treasury Accumulated
capital premium shares profits
R`000 R`000 R`000 R`000
Unaudited - 2010
Balance at 31 March 2010 228 38,024 (26,173) 1,664,954
Non-controlling interest
arising as result of a
business combination - - - -
Non-controlling interest
arising as result of the
disposal of interest in
subsidiary 1 - - - 6,600
Disposal of controlling
interest in subsidiary 2 - - - -
Total comprehensive income
for the period - - - 125,721
Dividends paid - - - (67,506)
Share-based payments - - - -
Goodwill recognised on
additional interest acquired
in subsidiary - - - (6,932)
Disposal of treasury shares - - 673 2,000
Balance at 30 September 2010 228 38,024 (25,500) 1,724,837
Unaudited - 2009
Balance at 31 March 2009 228 38,024 (42,941) 1,414,765
Non-controlling interest
arising on acquisition of
subsidiary - - - -
Acquisition of
non-controlling interest in
subsidiary - - - -
Total comprehensive income
for the period - - - 123,008
Dividends paid - - - (27,840)
Balance at 30 September 2009 228 38,024 (42,941) 1,509,933
Audited - 2010
Balance at 31 March 2009 228 38,024 (42,941) 1,414,765
Non-controlling interest
arising on acquisition of
subsidiary - - - -
Non-controlling interest
arising as result of the sale
by a subsidiary of its
treasury shares - - - (3,090)
Acquisition of
non-controlling interest in
subsidiary - - - -
Disposal of interest in
subsidiary - - - -
Total comprehensive income
for the year - - - 267,298
Dividends paid - - - (27,840)
Disposal of treasury shares - - 16,768 13,821
Balance at 31 March 2010 228 38,024 (26,173) 1,664,954
Non- Share-based
distributable payment Total capital
reserves reserve and reserves
R`000 R`000 R`000
Unaudited - 2010
Balance at 31 March 2010 (180,177) - 1,496,856
Non-controlling interest
arising as result of a
business combination - - -
Non-controlling interest
arising as result of the
disposal of interest in
subsidiary 1 - - 6,600
Disposal of controlling
interest in subsidiary 2 - - -
Total comprehensive income for
the period (15,976) - 109,745
Dividends paid - - (67,506)
Share-based payments - 10,956 10,956
Goodwill recognised on
additional interest acquired
in subsidiary - - (6,932)
Disposal of treasury shares - - 2,673
Balance at 30 September 2010 (196,153) 10,956 1,552,392
Unaudited - 2009
Balance at 31 March 2009 7,804 - 1,417,880
Non-controlling interest
arising on acquisition of subsidiary - - -
Acquisition of non-controlling
interest in subsidiary - - -
Total comprehensive income for
the period (114,773) - 8,235
Dividends paid - - (27,840)
Balance at 30 September 2009 (106,969) - 1,398,275
Audited - 2010
Balance at 31 March 2009 7,804 - 1,417,880
Non-controlling interest
arising on acquisition of
subsidiary - - -
Non-controlling interest
arising as result of the sale
by a subsidiary of its
treasury shares 809 (2,281)
Acquisition of non-controlling
interest in subsidiary - - -
Disposal of interest in subsidiary - - -
Total comprehensive income for
the year (188,790) - 78,508
Dividends paid - - (27,840)
Disposal of treasury shares - - 30,589
Balance at 31 March 2010 (180,177) - 1,496,856
Non-
controlling
interests Total equity
R`000 R`000
Unaudited - 2010
Balance at 31 March 2010 437,734 1,934,590
Non-controlling interest arising as result of a
business combination 60,804 60,804
Non-controlling interest arising as result of the
disposal of interest in subsidiary 1 9,159 15,759
Disposal of controlling interest in subsidiary 2 (1,729) (1,729)
Total comprehensive income for the period 51,203 160,948
Dividends paid (44,797) (112,303)
Share based payments - 10,956
Goodwill recognised on additional interest
acquired in subsidiary - (6,932)
Disposal of treasury shares - 2,673
Balance at 30 September 2010 512,374 2,064,766
Unaudited - 2009
Balance at 31 March 2009 438,988 1,856,868
Non-controlling interest arising on acquisition
of subsidiary 283 283
Acquisition of non-controlling interest in
subsidiary (562) (562)
Total comprehensive income for the period 8,231 16,466
Dividends paid (16,474) (44,314)
Balance at 30 September 2009 430,466 1,828,741
Audited - 2010
Balance at 31 March 2009 438,988 1,856,868
Non-controlling interest arising on acquisition
of subsidiary 283 283
Non-controlling interest arising as result of the
sale by a subsidiary of its treasury shares 15,482 13,201
Acquisition of non-controlling interest in subsidiary (559) (559)
Disposal of interest in subsidiary 4 4
Total comprehensive income for the year 53,666 132,174
Dividends paid (70,130) (97,970)
Disposal of treasury shares - 30,589
Balance at 31 March 2010 437,734 1,934,590
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
Unaudited for
Unaudited for the the six months Audited
six months ended ended year ended
30 September 30 September 31 March
2010 2009 2010
R`000 R`000 R`000
Cash flow from operating activities 41,598 93,276 52,209
Cash generated from
operating activities 198,930 163,133 391,020
Working capital changes (19,614) 19,768 (138,568)
Arising from stockbroking activities 20,582 126,808 (88,665)
Investment into working capital (40,196) (107,040) (49,903)
Interest received 28,041 22,172 43,039
Interest paid (46,287) (48,928) (90,440)
Dividends received -
financial investments 19,191 26,381 27,325
Dividends received - associates 2,118 4,580 8,573
Dividends paid - equity
shareholders (67,506) (27,840) (27,840)
Dividends paid - minority
shareholders (44,797) (16,474) (70,130)
Taxation paid (28,478) (49,516) (90,770)
Cash flow from investing activities 9,788 73,645 153,398
Cash flow from financing activities (63,257) (49,012) (190,723)
Net (decrease)/increase in
cash and cash equivalents (11,871) 117,909 14,884
Cash and cash equivalents
at beginning of the period 677,631 713,615 713,615
Effects of exchange rate changes
on cash and cash equivalents 3,708 (33,891) (50,868)
Cash and cash equivalents
at end of the period 669,468 797,633 677,631
SEGMENTAL ANALYSIS
Unaudited
for the six months ended 30 September 2010
Revenue,
investment and
other income Interest and
(external) associate income
R`000 R`000
Wealth and asset management 239,317 10,222
Wealth management 168,216 9,643
Asset management 71,101 579
Broking and structuring 172,865 13,612
Stenham 317,672 1,105
Profit from operating subsidiaries 729,854 24,939
Group 36,362 (16,556)
Operations 3,621 11,759
Investment returns 32,741 167
Cost of funding (28,482)
766,216 8,383
Pro forma profit
before tax before
intangible
Profit from amortisation and
ordinary activities share-based
as per the payment charge
income adjusted for
statement minorities
R`000 R`000
Wealth and asset management 75,517 67,210
Wealth management 38,963 44,512
Asset management 36,554 22,698
Broking and structuring 54,896 55,144
Stenham 94,527 49,450
Profit from operating subsidiaries 224,940 171,804
Group (11,970) (4,883)
Operations (16,003) (10,339)
Investment returns 32,515 33,938
Cost of funding (28,482) (28,482)
212,970 166,921
Unaudited
for the six months ended 30 September 2009
Revenue,
investment and Interest and
other income associate
(external) income
R`000 R`000
Wealth and asset management 214,477 3,350
Wealth management 153,780 1,608
Asset management 60,697 1,742
Broking and structuring 140,771 11,692
Stenham 285,262 896
Profit from operating subsidiaries 640,510 15,938
Group 92,615 (31,468)
Operations 3,471 8,557
Investment returns 89,144 290
Cost of funding (40,315)
733,125 (15,530)
Pro forma profit
before tax before
intangible
amortisation and
Profit from share-based
ordinary activities payment charge
as per the income adjusted for
statement minorities
R`000 R`000
Wealth and asset management 69,384 60,809
Wealth management 43,573 44,188
Asset management 25,811 16,621
Broking and structuring 45,274 45,274
Stenham 59,951 35,559
Profit from operating subsidiaries 174,609 141,642
Group 34,954 26,182
Operations (13,488) (13,488)
Investment returns 88,757 79,985
Cost of funding (40,315) (40,315)
209,563 167,824
% of profit from
operating % change in
subsidiaries before profit before tax
intangible before intangible
amortisation and amortisation and
share-based % change in share-based
payment charge profit from payment charge
adjusted for operating adjusted for
minorities activities minorities
2010 2009 2009 to 2010 2009 to 2010
Wealth and asset management 39 43 9 11
Wealth management 26 31 -11 1
Asset management 13 12 42 37
Broking and structuring 32 32 21 22
Stenham 29 25 58 39
Profit from operating
subsidiaries 100 100 29 21
Note: Group funding costs are disclosed as part of "group" and have not been
allocated to the appropriate underlying entities.
COMPLIANCE WITH IAS 34
The results for the six months ended 30 September 2010 have been prepared in
accordance with IAS 34 - "Interim Financial Reporting", AC 500 series of
interpretations, 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 2010.
These results have not been audited or reviewed by the company`s auditors, PKF
(Jhb) Inc.
BUSINESS COMBINATIONS
1. On 1 September 2010, a subsidiary of Stenham Limited acquired the business of
Montier Partners, a niche discretionary investment management provider, for a
purchase consideration of R76.6 million (GBP6.8 million). R15.8 million (GBP1.4
million) of the purchase price was settled in cash. The balance, in the amount
of R60.8 million (GBP5.4 million), was settled by the issue of shares in Stenham
Asset Management Holdings Limited ("SAMHL"). As part of the shareholders
agreement SAMHL has an obligation to pay a guaranteed amount of R2.2 million
(GBP200,000) over the next three years to the vendors. The consolidation was
accounted for using the purchase method.
The acquisition had the following effect on the group`s assets and liabilities.
The fair values reflected below represent their carrying values.
R`000
Assets 76,568
Goodwill 32,755
Other intangible assets 41,437
Property, plant and equipment 124
Cash and cash equivalents 2,252
Purchase consideration 76,568
Vendor obligation 2,252
78,820
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.
2. Stenham Property Finance Limited ("SPFL"), a subsidiary of Stenham Limited,
acquired 100% interest in Newholme Properties Limited at the end of September
2010 for a cash consideration of R 24.6 million (GBP2.2m). The net asset value
at the date of the transaction comprised investments, loan assets and cash of
R78.6 million (GBP7.1 million) and associated loan notes of R54 million (GBP4.9
million).
The loan assets and associated loan notes that are to be collaterised into an
independent non-group syndicate within the next three to six months have been
shown separately on the face of the statement of financial position as non-
current assets and liabilities held for resale in terms of IFRS 5.
NOTES
1. With effect from 1 April 2010, a consortium, comprising current management of
Peregrine Securities (Pty) Ltd, purchased a 35% stake in the group`s broking and
structuring subsidiary. The transaction comprised an immediate cash payment,
plus a number of payments over the next three years which are linked to the
financial performance of the business.
2. In order to facilitate the restructure of shareholding in Peregrine iQ (Pty)
Ltd ("PiQ"), Peregrine Financial Services Holdings Limited acquired 15% interest
from the PiQ executives on 1 April 2010 increasing the group`s interest to 80%.
With effect from 1 July 2010, the group disposed of 31% of the total issued
share capital of PiQ to Vunani Limited thus decreasing its shareholding to 49%
and resulting in a loss of control. Henceforth, the group`s investment in PiQ
will be accounted for as an associate.
COMMENTARY
Highlights
- Profit from core businesses increased by 21% to R172 million
- Profit from ordinary activities increased by 2% to R213 million
Environment
The first six months of the financial year saw a leveling off in global economic
activity, after a strong recovery in 2009. Despite lingering fears of an
imminent slowdown, economic activity grew in many countries, and even surprised
by its strength in some select cases. However, as has been the case during many
economic recoveries, the early phase has not led to any meaningful creation of
employment as yet. Uncertainty remains as to the ability of the developed world
to deal with a large burden of government debt, in some cases raising the
possibility of default by some nations. This has led to further actual and
anticipated stimulus packages by authorities.
On the back of this, financial markets experienced sharp moves in equity prices,
currencies, fixed income and commodity prices. Zero-interest rate policies are
being maintained in the major developed economies, gradually forcing more and
more investors to consider other alternatives. Emerging markets, especially
those seen to have some link with China, have been beneficiaries of this search
for yield and growth.
Uncertainty about regulation of hedge funds persisted both in South Africa and
in Europe, two areas in which the group is active. This uncertainty has impacted
more negatively on the local industry than the global industry.
Financial Results
The group produced a solid set of results for the six months. The core trading
businesses performed well, with operating revenue of R 734 million increasing
15% over the same period last year and profit from the group`s core operating
businesses increasing by 21% to R172 million. This was countered by a fall in
income from proprietary investing activities of R32 million (2009: R92 million).
Operating expenses of R562 million were 11% higher than last year, whilst
interest on long term debt was 29% lower at R 31 million. A non-cash accounting
cost of R11 million for the deferred share purchase scheme, which was
implemented at the end of the previous financial year, is reflected for the
first time.
The group generated cash from its operating activities of R199 million, while
long term debt incurred in acquiring Stenham was reduced to R486 million at the
reporting date.
Reward to shareholders of the company was therefore a well-balanced R126
million, at 57.7c/share (2009: R123 million, 57.4c/share), while headline
earnings amounted to R120 million, or 55.2c/share (2009: R124 million,
58c/share).
Segmental Results
Substantial minority interests exist in many of the group`s operations. The
operating results below are therefore presented on a pro forma basis, reflecting
amounts after minorities and before intangible amortisation and share based
payments. This better reflects and aids in the understanding of the specific
economic benefit to the shareholders of the group.
Wealth Management
Profit from ordinary activities in the group`s private client wealth management
division, Citadel, increased marginally to R45 million. Revenue of R168 million
increased by 9% from the prior year, despite the negative effect of a stronger
currency on its offshore income. Negligible performance fees were collected
during the period. Costs increased as the company continued to invest in the
expansion of its advisory and investment teams, while expanding its offering to
clients.
Assets under management at the end of the period amounted to R16.6 billion, with
average monthly gross inflows averaging approximately R200 million for the six
months, despite productivity having been negatively influenced by the soccer
world cup. The company`s client retention ratio, both by number of clients and
by assets, remains in line with its long term retention experience of 98%.
Asset Management
The group`s asset management division comprises a number of different fund
management teams, operating as stand alone investment managers, backed up by a
central administration and capital introduction capacity. The contribution by
the asset management division (excluding Stenham) increased by 37% to R23
million. This reflects mainly higher performance fees, as a number of funds
started the period in performance fee territory, whilst still trading below
their high water marks in the same period last year.
The group`s flagship hedge fund manager, Peregrine Capital, currently manages
R3.1 billion across a range of mandates. Fund performance in the period was
lower than in the same period last year, but very competitive given the subdued
South African equity environment. All mandates are now in performance fee
territory. In an environment where the industry saw the closure of some well
established funds and, in general, experienced outflows of capital, the manager
experienced small net outflows during the period.
The Big Rock team currently manages R 0.7 billion, after receiving inflows
during the period, which leaves the asset base at close to the level at which no
new inflows will be accepted. Fund performance was subdued during the period.
The group`s fixed income hedge fund team, Green Oak Capital, currently manages
R0.3 billion across a number of mandates. The funds generated very good returns
during the period under review and the team has attracted new inflows since
joining the group on 1 April 2010.
The group holds a 49.9% interest in Caveo, a fund of hedge fund joint venture
with Investment Solutions. Assets under management remained constant at R2.9
billion.
Stenham
The group`s 52% held offshore asset management subsidiary, Stenham, houses a
global fund of hedge funds operation, with assets under management of $3.5
billion, and a global property manager, with assets under management of GBP2.1
billion.
Peregrine`s share of the profits for the six months increased by 57% from GBP2.8
million to GBP4.4 million. Measured in rands, the increase was 39% to R49
million, reflecting the effect of the continued appreciation of the South
African currency against the pound over the period.
The Stenham fund of funds division continued to receive strong inflows, adding a
further $256 million of net inflows to its assets under management over the 6
months. In addition, during the period, a transaction was concluded with Montier
Partners, a similar business that provides hedge fund portfolios to a range of
family offices and high net worth individuals. This transaction has enhanced the
investment, client support and management teams of the business. Stenham was
again nominated for a number of industry awards that recognise the length and
consistency of its track record.
The Stenham property division saw base fees stabilise during the period, on the
back of stabilising asset values in the underlying funds. The team completed the
re-financing of underlying funds, where necessary, during the period - a feature
that has become part of the operating environment of global property investors.
The team successfully exited select investment opportunities, which lead to
performance fees being earned in the period. The business model of the property
division has been adjusted to reflect the difficult operating environment.
Broking and Structuring
The environment in which Peregrine Securities operates remains difficult. The
broking industry in particular is under pressure with continued subdued activity
and lower volumes. These conditions are evidenced by competitors slowly leaving
the market.
Despite these adverse industry conditions, the contribution from the broking and
structuring division increased by 22% to R55 million. Client trading volumes
have increased on the private funds and hedge fund side. Subsequent to the
transaction in terms of which the management team bought a 35% share of the
business, the team has started to implement a number of new initiatives to
expand the offering and activities of the business, which are starting to bear
fruit.
(The full income from this business is reflected in the group`s results until
such time as the final payment for the sale of the 35% share has been received,
after which the 35% minority interest will become effective.)
Proprietary Investments
The group`s proprietary investment portfolio showed a positive return for the
period, although somewhat more subdued than the previous year. The net
contribution from these activities, after accounting for group costs, was R24
million. The bulk of the profits were derived from positive performance on our
hedge fund investments, while our investment banking portfolio incurred mark to
market losses during the period.
During the six months under review, a further portion of our proprietary capital
was moved offshore with the specific intent of building out our proprietary
investing activities on a global basis.
Outlook
The fortunes of the group remain linked to those of financial markets. Although
many of our businesses are structured to earn substantial fees in times when
financial markets experience strong positive moves, we continue our focus on
increasing the level of annuity income throughout the group.
As the structure of the group is such that our management and investment teams
operate independently from each other, each team will be implementing a strategy
which is appropriate to their mandates and skills.
Leonard Harris Jan van Niekerk
Non-executive chairman Chief executive officer
Sandton
2 November 2010
4 November 2010
Sponsor
Java Capital
Date: 04/11/2010 08:21:11 Produced by the JSE SENS Department.
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