| Mon 4 Jun 2012, 8:00 | | CDZ - Cadiz Holdings Limited - Reviewed preliminary results for the year ended |
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CDZ
CDZ
CDZ - Cadiz Holdings Limited - Reviewed preliminary results for the year ended
31 March 2012
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")
KEY FEATURES
* Diluted HEPS 0.8 cps
* Refocused business model
* Sale of 60% of securities business
* Unit trust funds under management up 29%
* Special dividend of 50 cps paid to shareholders
CONDENSED GROUP PRELIMINARY STATEMENT Reviewed Audited
OF COMPREHENSIVE INCOME 12 months 12 months
31-Mar-12 31-Mar-11
R `000 R `000
Continuing operations
Gross operating revenue 180 547 225 382
Interest income 13 353 2 333
Net investment income 35 529 7 287
Net income from investments 32 135 11 264
Foreign exchange gains/(losses) 3 394 (3 977)
Income attributable to linked assets - -
Net fair value gains on linked financial 252 369 54 061
instruments
Linked liability adjustment (252 369) (54 061)
Fair value adjustment on third party (6 827) -
mutual fund interests
Operating expenses (213 098) (200 665)
Operating profit 9 504 34 337
Finance costs (831) (706)
Share of loss of associate (5 746) -
Profit before taxation 2 927 33 631
Taxation (571) (5 272)
Total comprehensive income from continuing 2 356 28 359
operations
Discontinued operation
Profit from discontinued operation 180 961 25 234
Total comprehensive income 183 317 53 593
Earnings per share (cents)
Basic-from continuing operations 1.0 12.8
-from discontinued operation 78.4 11.3
79.4 24.1
Diluted-from continuing operations 1.0 12.4
-from discontinued operation 77.1 11.1
78.1 23.5
Notes to the condensed statement of
comprehensive income
Reconciliation of headline earnings:
Profit attributable to equity holders of 183 317 53 593
the company
Surplus on disposal of subsidiary (191 909) -
Taxation impact 10 495 -
Loss/(Surplus) on disposal of plant and 11 (56)
equipment
Taxation impact (3) 16
Headline earnings 1 911 53 553
Headline earnings per share (cents)
Basic 0.8 24.1
Diluted 0.8 23.5
Share information
Issued number of shares (`000) 253 070 245 339
Consolidated number of shares (`000) 232 751 225 205
Weighted average number of shares (`000) 230 927 222 262
Diluted weighted average number of shares 234 678 228 276
(`000)
CONDENSED GROUP PRELIMINARY STATEMENT Reviewed Audited
OF FINANCIAL POSITION 31-Mar-12 31-Mar-11
R `000 R `000
ASSETS
Non-current assets 3 820 237 2 608 271
Investment in associate 75 662 -
Plant and equipment 4 476 6 906
Intangible assets 274 753 269 334
Deferred taxation 20 846 19 230
Investments backing linked funds 3 337 733 2 232 001
Financial assets 96 154 76 235
Receivables and prepayments 10 613 4 565
Current assets 481 230 580 985
Financial assets 138 906 123 511
Receivables and prepayments 57 157 223 270
Taxation 8 333 2 406
Cash and cash equivalents 276 834 231 798
Total assets 4 301 467 3 189 256
EQUITY
Capital and reserves
Ordinary share capital and premium 25 277 3 619
Treasury shares (52 869) (52 411)
Share-based payment reserve 36 430 59 888
Retained earnings 814 067 672 604
Total equity 822 905 683 700
LIABILITIES
Non-current liabilities 3 351 810 2 239 941
Deferred taxation 5 994 2 912
Linked investment contract liabilities 3 337 733 2 232 001
Trade and other payables 8 083 5 028
Current liabilities 126 752 265 615
Trade and other payables 74 811 230 412
Third party financial liabilities arising 46 333 -
on consolidation of mutual funds
Taxation 5 608 6 913
Trading liabilities - 28 290
Total liabilities 3 478 562 2 505 556
Total equity and liabilities 4 301 467 3 189 256
Net asset value (cents per share) 354 304
Net tangible asset value (cents per share) 229 177
CONDENSED GROUP PRELIMINARY STATEMENT Reviewed Audited
OF CASH FLOWS 12 months 12 months
31-Mar-12 31-Mar-11
R `000 R `000
Cash flow from operating activities (44 528) (29 118)
Cash generated from operations 23 720 39 375
Taxation paid (21 686) (24 934)
Dividends paid (46 562) (43 559)
Cash flow from investing activities 87 112 78 075
Cash flow from financing activities 2 450 20 231
Net change in cash and cash 45 034 69 188
equivalents
Effect of exchange rate adjustment 2 (258)
Cash and cash equivalents at 231 798 162 868
beginning of year
Cash and cash equivalents at end of 276 834 231 798
year
The cash flow includes cash flow from
the discontinued operation, more
detail of which is given in the
notes.
CONDENSED GROUP PRELIMINARY STATEMENT Reviewed Audited
OF CHANGES IN EQUITY 12 months 12 months
31-Mar-12 31-Mar-11
R `000 R `000
Share capital, share premium and
treasury shares
Opening balance (48 792) (70 642)
Issue of shares 21 731 717
Sale of treasury shares to Makana - 29 980
Net purchase of treasury shares on - (1 775)
exercise of options
Transfer of deferred consideration - 7 314
shares
Repurchase of A ordinary shares (19) (2)
Repurchase of B preference shares (50) -
Purchase of treasury shares (462) (14 384)
(27 592) (48 792)
Reserves
Opening balance 732 492 710 009
Net premium on issue of equity 2 280
settled share appreciation rights
Sale of treasury shares to Makana - 2 730
Net purchase of treasury shares on - 1 908
exercise of options
Employee scheme - value of services (18 752) 14 052
provided
Transfer of deferred consideration - (6 521)
shares
Total comprehensive income 183 317 53 593
Dividends paid (46 562) (43 559)
850 497 732 492
Total equity 822 905 683 700
CONDENSED GROUP PRELIMINARY SEGMENT REPORT
Reviewed Asset management Securities Investments Total
12 months to and and Advisory
31-March-2012 Structuring
R`000
Segment revenue 140 764 45 463 62 801 249 028
Segment costs 139 896 47 716 25 679 213 291
Segment profit 868 (2 253) 37 122 35 737
Corporate costs (26 906)
Profit before tax (158)
on discontinued
operation
Share of loss of (5 746)
associate
Profit before 2 927
taxation
Gross operating 139 096 44 492 29 278 212 866
revenue (external)
Audited Asset management Securities Investments Total
12 months to 31- and and Advisory
March-2011 Structuring
R`000 (Restated)
Segment revenue 196 823 134 449 31 008 362 280
Segment costs 144 314 98 942 19 172 262 428
Segment profit 52 509 35 507 11 836 99 852
Corporate costs (31 831)
Profit before tax (34 390)
on discontinued
operation
Profit before 33 631
taxation
Gross operating 187 059 132 952 6 052 326 063
revenue (external)
Year-on-year % (28%) (66%) 103% (31%)
segment revenue
Year-on-year % (3%) (52%) 34% (19%)
segment costs
Year-on-year % (98%) (106%) 214% (64%)
segment profit
The securities and structuring segment represents the performance of the
business up to the disposal of 60% to BNP Paribas SA on 31 October 2011 compared
to a full year for the period ending 31 March 2011. The remaining 40% has been
accounted separately as an associate from 1 November 2011.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
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 No. 71 of 2008. The
condensed financial statements do not include all of the information required
for full annual financial statements.
The accounting policies applied are in terms of IFRS and consistent with those
applied in the annual financial statements for 31 March 2011.
These reviewed condensed financial statements have been prepared under the
supervision of chief financial officer Mr R Jahnig CA(SA).
Reclassification of comparative figures
The discontinued operation has been disclosed separately and the comparatives
reclassified.
Following the sale of 60% of the securities business the remaining advisory
business previously included in securities and structuring was reclassified to
form part of the investments and advisory segment and comparatives reclassified.
These reclassifications had no impact on the group`s reported results.
Discontinued operation
During this financial period, the group sold 60% of its securities business to
BNP Paribas SA. The
effective date of this sale was 31 October 2011. The results of this
discontinued operation are included in the group`s results for the 12 months
ended 31 March 2012. Financial information relating to the securities business
operation for the period is set out below. The statement of comprehensive income
distinguishes between continuing operations and the discontinued operation.
Comparative figures have been restated.
CONDENSED GROUP PRELIMINARY STATEMENT OF COMPREHENSIVE INCOME OF DISCONTINUED
OPERATION
Reviewed Audited
12 months 12 months
(R `000) 31-Mar-12 31-Mar-11
Gross operating 32 319 100 681
revenue
Interest income 3 100 10 048
Operating expenses (35 261) (76 339)
Profit before 158 34 390
taxation on
discontinued
operation
Taxation (611) (9 156)
(Loss)/profit from (453) 25 234
discontinued
operation
Surplus before tax on 191 909 -
disposal of
subsidiary
Taxation (10 495) -
Surplus after 181 414 -
taxation on disposal
of subsidiary
Profit from 180 961 25 234
discontinued
operation
CONDENSED GROUP PRELIMINARY CASH FLOW FROM DISCONTINUED OPERATION
Reviewed Audited
12 months 12 months
(R `000) 31-Mar-12 31-Mar-11
Cash flow from operating (69 405) 9 703
activities
Cash flow from investing (1 726) -
activities
Cash flow from financing - 176
activities
Effect on cash flows (71 131) 9 879
FINANCIAL PERFORMANCE
Cadiz Holdings` results for the period were impacted by the underperformance of
the securities business ahead of the disposal of a 60% stake to BNP Paribas SA,
while difficult market conditions reduced performance fees in the asset
management business. These factors, together with restructuring costs,
contributed to a disappointing performance for the year.
Gross operating revenue from continuing operations was 20% lower at R180.5
million. Revenue from the group`s investments and capital increased from R9.6
million to R42.1 million on improved investment returns and Rand weakness.
Operating costs from continuing operations grew by 6.2%. This includes
restructuring costs related to the implementation of the decentralised operating
model. Staff head count has reduced year-on-year from 183 to 123 with 38
employees having been taken over by BNP Paribas Cadiz Securities.
The share of associate loss of R5.7 million for the last five months relates to
the costs of integrating the securities business into BNP Paribas Cadiz and the
initial impact on revenue of changing from an agency broker prior to the launch
of the new business.
Operating profit from continuing operations for the period declined by 72% to
R9.5 million.
Diluted earnings per share from continuing operations is 92% lower at 1.0 cents
per share.
The discontinued operation reported a profit after taxation of R181.0 million.
This includes the R181.4 million surplus on disposal of the 60% of the
securities business and recognition of the intangibles on the retained 40%
shareholding.
Headline earnings totalled R1.9 million, with diluted headline earnings per
share 97% lower at 0.8 cents per share.
This performance is in line with the earnings guidance provided in the trading
statements on 3 April and 30 May 2012.
ASSET MANAGEMENT
The restructuring of Cadiz Asset Management has included the integration of the
wholesale and retail businesses, increased autonomy and a focus on cost
management.
The past 12 months have been challenging for asset management with revenue down
28% to R140.8 million. The decline in revenue was due to lower performance fees.
While costs reduced by 3% to R139.9 million for the period, they remain high for
the current asset base and contributed to net profit declining by 98%.
Assets under management are similar to 12 months ago at R41.6 billion (March
2011: R 42.0 billion). The net change represents a gain from market movements of
R1.3 billion offset by net outflows of R1.7 billion. Cadiz Collective
Investments` assets under management grew by 29% to R8.5 billion.
Cadiz was recognised for its investment excellence and received awards for the
Top South African Balanced Fund of 2011 from Africa FM and Best Domestic Asset
Allocation Prudential Fund at the 2012 Raging Bull Awards for the Cadiz Managed
Flexible Fund.
Unit trust performance remains impressive:
* The Cadiz Managed Flexible Fund ranked first out of 55 funds in its
category over three years;
* The Cadiz Equity Ladder Fund ranked first over five years against all
general equity, growth and value funds;
* The Cadiz Absolute Yield Fund is the top performing flexible fixed interest
fund over five years; and
* The Cadiz Money Market Fund is the top performing fund in its category over
all periods longer than three years.
Consistent long-term performance in the institutional fund range continues to
improve, led by the Cadiz Absolute Return Range.
INVESTMENTS AND ADVISORY
At year end the group`s investment portfolio totalled R448 million which
included the proceeds of R118 million from the sale of the securities business.
Revenue from the investments and advisory business increased by 103% to R62.8
million mainly as a result of improved returns on investments and the inclusion
of fees earned from the BNP Paribas Securities service level agreement (SLA).
Advisory fees were steady.
Costs increased by 34% to R25.7 million mainly due to the costs of providing the
SLA services to BNP Paribas Cadiz Securities.
At the end of the period the capital was invested as follows:
* R58.1 million invested in liquid assets for regulatory capital adequacy;
* R140.2 million invested in liquid assets for short-term commitments
including the 50 cents special dividend paid on 7 May 2012, incentives and
equity scheme repurchases;
* R60.0 million committed as seed capital and set aside for working capital
requirements for the asset management business;
* R88.3 million invested in Makana;
* R17.2 million invested in strategic unlisted investments; and
* R84.2 million held as a prudent operational buffer.
Cadiz` corporate advisory business, which was profitable for the year, continues
to do well in the resources sector and is expanding into the infrastructure
sector. The strategic partnerships with advisory firms in China and India are
leading to increased activity and a healthy pipeline of potential deals.
CHANGES TO BOARD OF DIRECTORS
Following the restructuring and adoption of the decentralised operating model,
Fraser Shaw was appointed chief executive officer to succeed Ram Barkai
who as a director with effect from 21 February 2012. Three long-serving
non-executive directors resigned from the board during the period, namely
Colin Hall, David Lawrence and Nonhlanhla Mjoli-Mncube. Gando Matyumza was
appointed as lead independent director. allHall
SHARE CAPITAL AND TREASURY SHARES
During the period the company issued 7.6 million shares to management and key
staff for the 2010 and 2011 annual incentive awards. 0.2 million of the required
2.7 million shares were repurchased with the cash retained at an average share
price of 2.51 cents per share to offset the 2011 allocation.
PROSPECTS
Cadiz will build on the progress made to date on implementing a decentralised
business model with more autonomous and accountable business units. The cost
savings from implementing the new business model are expected to be realised in
the coming year.
The restructured Cadiz Asset Management will remain focused on delivering
excellence in investment performance and client service, which will benefit all
stakeholders in the medium to long term. Cadiz` positioning at the forefront of
sustainable investing means the business is well placed to benefit from
regulatory changes. Cadiz plans to introduce an employee ownership structure for
asset management to align management and shareholders. This will be presented to
shareholders for approval during the year.
Cadiz and BNP Paribas SA will continue to focus on the integration, launch and
success of the BNP Paribas Cadiz Securities business in which Cadiz holds a 40%
stake. The new business is progressing well and the research offering is being
expanded to cover 80% of the South African Equities market. The relocation of
the securities team to Cape Town has been completed. This business will focus on
marketing and selling South African equity products to institutional investors
locally and abroad and offering local institutional investors international
research and market access.
Within investments and advisory, Cadiz Corporate Solutions has a healthy deal
pipeline in the resources and infrastructure sectors and is well positioned to
capitalise on the growing interest from Chinese and Indian investors through its
strategic partnerships.
Cadiz remains committed to returning excess funds to shareholders in future and
plans to reduce the annual dividend cover ratio.
Cadiz has not declared a final dividend for the 2012 financial year, as
indicated to shareholders in the announcement of the 50 cents per share special
dividend in April 2012.
REVIEW REPORT
The condensed consolidated preliminary results for the year ended 31 March 2012
have been reviewed by PricewaterhouseCoopers Inc. The external auditors`
unqualified review opinion is available on request for inspection at the
company`s registered office.
On behalf of the board of directors
Peter-Paul Ngwenya Fraser Shaw
Chairman Chief executive officer
Cape Town
4 June 2012
Registered office
Ground Floor, Fernwood House, The Oval, 1 Oakdale Road, Newlands, 7700
P O Box 44547, Claremont, 7735
www.cadiz.co.za
Directors
S P Ngwenya (Chairman)*
R F G Cadiz*
B H Kent*
A N Matyumza*
B J Memela-Khambula*
S J Saunders*
F C Shaw (Chief executive officer)
A I Brooks* (Alternate)
(* Non-executive directors)
Transfer secretaries
Computershare Investor Services (Pty) Limited, 70 Marshall Street, Johannesburg,
2001
P O Box 61051, Marshalltown, 2107
Sponsor
Investec Bank Limited
Company secretary
C Schmahl
Date: 04/06/2012 08:00:02 Produced by the JSE SENS Department.
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