| Thu 7 Jun 2012, 10:54 | | PGR - Peregrine - Reviewed Preliminary Results - Year Ended 31 March 2012 |
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PGR
PGR
PGR - Peregrine - Reviewed Preliminary Results - Year Ended 31 March 2012,
Group Restructure And Refined Strategy
Peregrine Holdings Limited
(Registration number 1994/006026/06)
JSE code: PGR ISIN: ZAE000078127
("Peregrine" or "the group")
REVIEWED PRELIMINARY RESULTS - YEAR ENDED 31 MARCH 2012, GROUP RESTRUCTURE
AND REFINED STRATEGY
* Basic earnings attributable to shareholders up 2% to R314 million
* Headline earnings per share up 12% to 147,7 cents
* Outstanding debt reduced from R421 million to R179 million
* Final dividend increased by 106% to 72 cents per share
* Special dividend distribution of 3,5 CIL shares for every 100 Peregrine
shares held
Reviewed results for the year ended 31 March 2012
Condensed consolidated income statements
% change Audited
2011 to Reviewed restated
2012 2012 2011
R`000 R`000
Operating revenue 4 1 533 597 1 477 687
Investment income 13 233 492 206 278
Total revenue 5 1 767 089 1 683 965
Fair value gain on linked financial
investments 244 985 268 895
Fair value loss on policyholder
contract liabilities (244 985) (268 895)
Operating expenses 4 (1 249 280) (1 203 490)
Profit from operations 8 517 809 480 475
Net interest received >100 21 719 181
Interest received 50 899 58 276
Interest paid (29 180) (58 095)
Income from associate companies 56 40 081 25 623
Profit from ordinary activities 14 579 609 506 279
Capital items (6 936) 29 773
Profit before taxation 7 572 673 536 052
Taxation (106 379) (55 957)
Profit for the year -3 466 294 480 095
Attributable to:
Equity holders of the company 2 313 860 307 952
Non-controlling interests 152 434 172 143
466 294 480 095
Basic earnings per ordinary share (cents) 2 144.2 141.4
Diluted basic earnings per share (cents) 2 142.9 140.2
Number of ordinary shares in issue (`000) 228 129 228 129
Treasury shares held (`000) 10 553 10 366
Weighted average number of ordinary
shares in issue (`000) 217 655 217 763
Diluted weighted average number of
shares in issue (`000) 219 659 219 648
Determination of headline earnings
%
change Audited
2011 to Reviewed restated
2012 2012 2011
R`000 R`000
Profit attributable to equity holders 2 313 860 307 952
Adjustments:
Reversal of impairment of loan to associate
forming part of the net investment in associate - (8 287)
Impairment to intangible assets 2 946 3 233
Loss on disposal of interest in associates 6 936 -
Surplus on disposal of interest in subsidiaries - (21 485)
Bargain purchase on acquisition of
controlling interest in subsidiary (2 292) -
Tax effect - -
Non-controlling interest effect - 5 836
Headline earnings 12 321 450 287 249
Amortisation of intangibles 18 730 16 522
Headline earnings excluding amortisation of
intangibles 12 340 180 303 771
Headline earnings per ordinary share (cents) 12 147.7 131.9
Diluted headline earnings per share (cents) 12 146.3 130.8
Headline earnings per ordinary share
excluding intangible amortisation (cents) 12 156.3 139.5
Basic earnings per ordinary share excluding
intangible amortisation (cents) 3 152.8 149.0
Cash dividend paid per ordinary share in
respect of the previous year (cents) 13 35.0 31.0
Cash dividend per ordinary share declared
subsequent to 31 March (cents) 106 72.0 35.0
Condensed consolidated statements of comprehensive income
Audited
Reviewed restated
2012 2011
R`000 R`000
Profit for the year 466 294 480 095
Other comprehensive income/(loss) for the year net of tax:
Currency translation differences 195 702 (44 546)
Total comprehensive income for the year 661 996 435 549
Attributable to:
Equity holders of the company 441 158 279 821
Non-controlling interests 220 838 155 728
661 996 435 549
Condensed consolidated statements of financial position
Audited
Reviewed restated
2012 2011
R`000 R`000
Assets
Non-current assets 6 493 000 5 833 410
Property, plant and equipment 19 077 24 575
Intangible assets 1 293 027 1 199 963
Investment in associate companies 55 440 33 723
Investments linked to policyholder investment
contracts 4 432 561 4 053 764
Financial investments 527 111 415 586
Loans and receivables 100 550 18 263
Deferred taxation 65 234 87 536
Current assets 7 862 242 7 295 299
Financial investments * 1 093 587 865 638
Loans and receivables 29 911 7 554
Trade and other receivables * 529 361 236 190
Amounts receivable in respect of stockbroking
activities * 5 391 069 4 782 849
Taxation 19 269 8 111
Cash and cash equivalents * 799 045 1 394 957
Total assets 14 355 242 13 128 709
Equity and liabilities
Equity 2 778 728 2 245 722
Equity attributable to holders of the company 2 184 309 1 732 023
Non-controlling interests 594 419 513 699
Non-current liabilities 4 680 592 4 594 191
Interest-bearing borrowings 157 548 332 848
Policyholder investment contract liabilities 4 432 561 4 053 764
Loans and other payables 60 543 183 006
Financial instrument liability 3 653 -
Deferred taxation 26 287 24 573
Current liabilities 6 895 922 6 288 796
Current portion of interest-bearing borrowings 21 688 88 365
Current portion of loans and other payables 21 670 18 594
Trade and other payables * 798 031 604 542
Amounts payable in respect of stockbroking
activities * 5 430 803 5 028 996
Financial instrument liabilities * 583 415 449 116
Taxation 40 315 29 526
Bank overdraft - 69 657
Total equity and liabilities 14 355 242 13 128 709
Net tangible asset value per ordinary share 598.7 350.0
Net asset value per ordinary share 1 003.9 795.4
Note : Items marked with (*) are referenced to the note on restatement of
comparative information
Condensed consolidated statements of changes in equity
Total capital Non-controlling
and reserves interests Total equity
R`000 R`000 R`000
Reviewed - 2012
Balance at 31 March 2011 1 732 023 513 699 2 245 722
Total comprehensive
income for the year 441 158 220 838 661 996
Dividends paid (76 217) (50 644) (126 861)
Share-based payments 22 069 - 22 069
Non-controlling interest
arising on formation of
subsidiary company - 51 51
Contingent consideration
received as a result of the
disposal of interest
in subsidiary 1 71 096 - 71 096
Non-controlling interest
disposal as a result of the
share buy back by a
subsidiary of its
treasury shares 2 (4 043) (89 525) (93 568)
Repurchase of treasury shares 3 (1 777) - (1 777)
Balance at 31 March 2012 2 184 309 594 419 2 778 728
Note: Footnotes 1 to 3 are
referenced under
Explanatory notes to the
statement of changes in equity.
Audited restated - 2011
Balance at 31 March 2010 1 496 856 437 734 1 934 590
Total comprehensive income
for the year 279 821 155 728 435 549
Dividends paid (67 506) (82 369) (149 875)
Share-based payments 22 069 - 22 069
Put option reserve (8 271) (7 408) (15 679)
Goodwill recognised on
additional interest
acquired in subsidiary (6 932) - (6 932)
Non-controlling interest
arising as result of a
business combination - 15 201 15 201
Contingent consideration
received as a result of the
disposal of interest in subsidiary 12 759 9 159 21 918
Non-controlling interest
disposal as result of the
share buy back by a
subsidiary of its treasury shares 228 (9 752) (9 524)
Acquisition of non-controlling
interest in subsidiary - (1 277) (1 277)
Disposal of controlling
interest in subsidiary - (1 729) (1 729)
Disposal of interest in subsidiary - (1 588) (1 588)
Disposal of treasury shares 2 999 - 2 999
Balance at 31 March 2011 1 732 023 513 699 2 245 722
Condensed consolidated cash flow statements
Audited
Reviewed restated
2012 2011
R`000 R`000
Cash flow from operating activities 188 480 416 068
Cash flow from stockbroking activities (216 190) 294 012
Cash flow from investing activities (84 605) 41 126
Cash flow from financing activities (486 446) (205 459)
Net (decrease)/increase in cash and cash equivalents (598 761) 545 747
Cash and cash equivalents at beginning of the year 1 325 300 797 884
Effects of exchange rate changes on cash and cash
equivalents 72 506 (18 331)
Cash and cash equivalents at end of the year 799 045 1 325 300
Segmental analysis
Revenue and
investment Interest and Profit from
income associate income ordinary activities
R`000 R`000 R`000
Reviewed - 2012
Wealth and Asset
Management 552 444 27 833 177 582
Wealth Management 401 748 20 964 81 249
Asset Management 150 696 6 869 96 333
Broking and
Structuring 332 424 21 872 95 746
Stenham 664 391 18 481 186 923
Total from operating
reportable segments 1 549 259 68 186 460 251
Group 205 318 (6 386) 119 358
Operations 6 448 22 777 (44 048)
Investment returns 198 870 12 144 206 030
Cost of funding (41 307) (42 624)
1 754 577 61 800 579 609
Audited - 2011
Wealth and Asset
Management 488 607 24 526 152 541
Wealth Management 371 505 19 285 94 358
Asset Management 117 102 5 241 58 183
Broking and
Structuring 346 030 31 125 108 698
Stenham 659 956 (371) 186 746
Total from operating
reportable segments 1 494 593 55 280 447 985
Group 169 366 (29 476) 58 294
Operations 6 454 20 365 (47 367)
Investment returns 162 912 381 155 883
Cost of funding (50 222) (50 222)
1 663 959 25 804 506 279
Pro forma profit % change in pro
from ordinary forma profit from
activities before ordinary activities
intangible before intangible
amortisation and amortisation and
share-based share-based
payment cost payment cost
adjusted for adjusted for
minorities minorities
R`000 2011 to 2012
Reviewed - 2012
Wealth and Asset Management 157 701 13
Wealth Management 98 181 -6
Asset Management 59 520 69
Broking and Structuring 96 177 -12
Stenham 102 645 5
Total from operating reportable
segments 356 523 3
Group 88 380 >100
Operations (31 455) -11
Investment returns 162 459 57
Cost of funding (42 624) -15
444 903 22
Audited - 2011
Wealth and Asset Management 139 797
Wealth Management 104 485
Asset Management 35 312
Broking and Structuring 109 129
Stenham 97 675
Total from operating reportable
segments 346 601
Group 17 988
Operations (35 347)
Investment returns 103 557
Cost of funding (50 222)
364 589
Note: Group funding costs are disclosed as part of "group" and have not been
allocated to the appropriate underlying entities.
Reconciliation of segmental analysis to income statement
Total from
Wealth and operating
Asset Broking and reportable
Management Structuring Stenham segments
R`000 R`000 R`000 R`000
For year ended 31 March 2012
Revenue and investment
income per segmental
analysis 552 444 332 424 664 391 1 549 259
Reconciling items: (17 005) (5 265) - (22 270)
Operating revenue -
internal (17 005) (3 737) - (20 742)
Investment income - internal - (1 528) - (1 528)
Investment income of
non-reportable segment -
external - - - -
Revenue and investment
income per income
statement 535 439 327 159 664 391 1 526 989
Profit from ordinary
activities per segmental
analysis 177 582 95 746 186 923 460 251
Reconciling revenue and
investment income items (17 005) (5 265) - (22 270)
Operating expenses of
non-reportable segment -
external - - - -
Profit from ordinary
activities per income
statement 160 577 90 481 186 923 437 981
For year ended 31 March 2011
Revenue and investment
income per segmental
analysis 488 607 346 030 659 956 1 494 593
Reconciling items: (18 675) (3 140) - (21 815)
Operating revenue -
internal (18 675) (2 765) - (21 440)
Investment income -
internal - (375) - (375)
Investment income of
non-reportable segment -
external - - - -
Revenue and investment
income per income statement 469 932 342 890 659 956 1 472 778
Profit from ordinary
activities per segmental
analysis 152 541 108 698 186 746 447 985
Reconciling revenue and
investment income items (18 675) (3 140) - (21 815)
Operating expenses of
non-reportable segment -
external - - - -
Profit from ordinary
activities per income
statement 133 866 105 558 186 746 426 170
Non-reportable
Group segment 1 Total
R`000 R`000 R`000
For year ended 31 March 2012
Revenue and investment income per
segmental analysis 205 318 - 1 754 577
Reconciling items: (52 065) 86 847 12 512
Operating revenue - internal - - (20 742)
Investment income - internal (52 065) 53 593 -
Investment income of non-reportable
segment - external - 33 254 33 254
Revenue and investment income per
income statement 153 253 86 847 1 767 089
Profit from ordinary activities per
segmental analysis 119 358 - 579 609
Reconciling revenue and investment
income items (52 065) 86 847 12 512
Operating expenses of non-reportable
segment - external - (12 512) (12 512)
Profit from ordinary activities per
income statement 67 293 74 335 579 609
For year ended 31 March 2011
Revenue and investment income per
segmental analysis 169 366 - 1 663 959
Reconciling items: (54 337) 96 158 20 006
Operating revenue - internal - - (21 440)
Investment income - internal (54 337) 54 712 -
Investment income of non-reportable
segment - external - 41 446 41 446
Revenue and investment income per
income statement 115 029 96 158 1 683 965
Profit from ordinary activities
per segmental analysis 58 294 - 506 279
Reconciling revenue and investment
income items (54 337) 96 158 20 006
Operating expenses of non-reportable
segment - external - (20 006) (20 006)
Profit from ordinary activities per
income statement 3 957 76 152 506 279
1 - Refers to the group`s consolidated proprietary hedge fund investments
(refer to note on restatement of comparative information)
Basis of preparation
The condensed group preliminary financial statements are prepared in
accordance with the recognition and measurement principles of International
Financial Reporting Standards and presented in accordance with the minimum
content, including disclosures, prescribed by IAS 34: Interim Financial
Reporting applied to year-end reporting, South African Statements and
Interpretations of Statements of Generally Accepted Accounting Practice (AC
500 Series), the JSE Limited`s Listings Requirements and the requirements of
the Companies Act of South Africa. The accounting policies and methods of
computation are consistent with those applied in the annual financial
statements for March 2011, except for the restatement referred to below. The
preparation of the results have been under the supervision of R E Katz CA(SA),
the Group Chief Financial Officer.
Review report
The condensed group financial statements of Peregrine for the year ended 31
March 2012 have been reviewed by the company`s auditor, KPMG Inc. In their
review report dated 7 June 2012, which is available for inspection at the
Company`s Registered Office, KPMG Inc. state that their review was conducted
in accordance with the International Standard on Review Engagements 2410,
Review of Interim Information Performed by the Independent Auditor of the
Entity, which applies to a review of group preliminary financial information,
and have expressed an unmodified conclusion on the condensed group preliminary
financial statements.
Restatement of comparative information
In terms of current International Financial Reporting Standards certain of the
group`s proprietary hedge fund investments are required to be consolidated due
to the fact that the group has effective control both in terms of kick-out
rights and with direct and indirect holdings being close to 100%. These
investments were previously accounted for in terms of IAS 39. The comparative
information has therefore been restated in accordance with IAS 1. This has
resulted in an increase in current assets of R565 million and increased
current liabilities of R565 million. The line items affected by the
restatement have been marked with an asterisk ("*").
Business combinations
1. With effect from 1 December 2011, Citadel Holdings Proprietary Limited
acquired a 100% interest in Global Treasury Solutions Proprietary Limited. The
acquisition did not have a material effect on the group`s assets and
liabilities.
2. With effect from 1 September 2011, the group acquired, through Citadel
Holdings Proprietary Limited, an additional 50% interest in Orthogonal
Investments Proprietary Limited ("Orthogonal"), which was subsequently renamed
to Citadel Asset Management Proprietary Limited, from the management
consortium of Orthogonal. The acquisition did not have a material effect on
the group`s assets and liabilities.
Other material acquisitions
1. With effect from 1 April 2011, Peregrine Financial Services Holdings
Limited ("PFS") acquired at par a 30% interest in Nala Empowerment Investment
Company Proprietary Limited ("Nala"), with the balance of 70% being held by
three trusts benefiting education in SA, community development and our own
staff. Nala is the entity which, through two wholly-owned subsidiaries, holds
30 054 719 Peregrine shares. The investment has been accounted for as an
associate in terms of IAS 28. The carrying value of the investment as at 31
March 2012 is R13 million.
2. With effect from 29 February 2012, Citadel Holdings Proprietary Limited
acquired a 50% interest in The Wealth Corporation Proprietary Limited. The
investment has been accounted for as an associate in terms of IAS 28. The
carrying value of the investment as at 31 March 2012 is R15 million.
3. With effect from 1 December 2011, the group acquired a 49,9% interest in SA
Alpha Capital Management Limited. The investment has been accounted for as an
associate in terms of IAS 28. The carrying value of the investment as at 31
March 2012 is R11 million.
Contingent liabilities
Contingent liabilities as at 31 March 2012 amounted to R13.7 million (2011:
R69.6 million).
Commitments
Operating lease and capital commitments as at 31 March 2012 amounted to R181
million (2011: R218 million).
Events subsequent to year-end
The proposed restructure of the BEE shareholding in Peregrine (in terms of
which Nala Empowerment Investment Company Proprietary Limited will exchange
its shares in the listed company for a 20% share in the South African
operating companies) was published in a cautionary announcement on 30 March
2012. The transaction, which is subject to a number of conditions, has not
been finalised at the time of reporting.
Explanatory notes to the statement of changes in equity
1. With effect from 1 April 2010, a consortium, comprising management of
Peregrine Securities Proprietary Limited, 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 a period of three years from 1
April 2010 which are linked to the financial performance of the business ("the
outstanding payments"). During the year, loan funding from the consortium of
R60 million (and Peregrine of R112 million) was capitalised into shares, which
amount from the consortium is reflected as a non-distributable reserve.
Following the payment of the last of the outstanding payments (which is
anticipated to be during the financial year ending 31 March 2013), the amount
reflected as a non-distributable reserve will be reflected as a non-
controlling interest with Peregrine`s rights to the share of the profits of
Peregrine Securities thereafter being 65%.
2. During the course of the year Stenham Limited purchased 86 661 shares from
its shareholders and subsequently cancelled such shares. The effect of these
transactions has been to increase the group`s effective interest in Stenham
Limited from 52.75% to 57.62%.
3. With effect from 1 September 2011, 187 066 Peregrine shares were returned
to the group resulting from a reduction of R1.8 million in the original
purchase price payable by PFS to the management consortium of Orthogonal.
Applicable exchange rates
Average rates Closing rates
USD:ZAR
31 March 2012 7.45 7.67
31 March 2011 7.19 6.76
GBP:ZAR
31 March 2012 11.87 12.26
31 March 2011 11.18 10.84
COMMENTARY
Notwithstanding the group experiencing challenging trading conditions, Citadel
maintained modest growth, while Peregrine Capital, Stenham Property and group
investments all performed well. Stenham Asset Management and Peregrine
Securities both saw a decline in earnings. This resulted in a steady
performance for the group as a whole, characterised by increased
profitability, strong cash flows and a significant reduction in debt at the
centre.
Financial results
The group achieved solid results. Basic earnings attributable to shareholders
increased by 2% to R314 million (2011: R308 million), with basic earnings per
share 2% higher at 144,2 cents (2011: 141,4 cents per share). Headline
earnings increased by 12% to R321 million (2011: R287 million), with headline
earnings per share similarly up 12% to 147,7 cents (2011: 131,9 cents).
The rand was weaker against the major currencies, but this did not have a
significant translation impact on profits. On a constant currency basis,
attributable profits remained flat for the year at R307 million.
The group continues to be highly cash-generative. The best measure of the cash
profits from operations is total profit from ordinary activities before
intangible amortisation and share-based payment cost, adjusted for minorities.
This number improved by 22% from R365 million to R445 million. Excluding group
costs, group investments (which include mark-to-market profits) and cost of
funding, the cash profits from the underlying operating businesses increased
by 3% from R347 million to R357 million.
Restatement of comparative information
In terms of current International Financial Reporting Standards certain of the
group`s proprietary hedge fund investments are required to be consolidated due
to the fact that the group has effective control both in terms of kick-out
rights and with direct and indirect holdings being close to 100% (IAS 27).
These investments were previously accounted for in terms of IAS 39. The
comparative information has therefore been restated in accordance with IAS 1.
This has resulted in an increase in current assets of R565 million and in
current liabilities of R565 million.
Segmental results
Substantial minority interests exist in many of the group`s operations.
Operating results are therefore presented on a pro forma before tax basis,
reflecting amounts after minorities, before intangible amortisation and share-
based payment costs. This better reflects, and aids in the understanding of,
each division`s specific economic benefit to the shareholders of the group.
Wealth Management
The group`s Wealth Management division comprises South African private client
wealth management company Citadel, and recently established Guernsey based
Beauclerc.
Competition in South Africa remained tough and conditions remained challenging
but Citadel`s focus on delivering value to its clients while being
opportunistic and carefully expanding its services and solutions has
positioned the business well to grow and continue being successful on a
sustainable basis. Citadel increased profit by 4% to R109 million (2011: R104
million) with assets under management increasing to R20,5 billion (2011: R18,6
billion). Gross inflows amounted to R2,6 billion, which included record local
inflows amounting to R2,5 billion. Citadel maintained its client retention
rate in excess of 97%.
Asset Management
The group`s Asset Management division comprises a number of fund management
businesses, of which flagship hedge fund manager Peregrine Capital is the
largest. Peregrine`s share of profit increased to R60 million (2011: R35
million) due to strong investment performance on both an absolute as well as a
relative basis by Peregrine Capital, particularly in the second half of the
financial year. The hedge fund industry in South Africa is experiencing net
outflows from investors, and, despite its good returns, Peregrine Capital also
experienced investment outflows. At year-end assets under management for
Peregrine Capital amounted to R2,9 billion, a level similar to the previous
year. At year-end all mandates remain at their respective high water marks.
Stenham
As a result of two share-repurchase transactions during the year, Peregrine`s
share in Stenham increased from 52,8% to 57,6%. Accordingly, although Stenham
experienced a slight reduction in earnings as a result of having sold non-core
businesses in the previous year and on the back of reduced profitability in
the Asset Management division, Peregrine`s share of profit in Stenham
increased by 5% to R103 million (2011: R98 million).
Stenham Asset Management experienced a trying environment. The international
Hedge Fund of Funds industry continues to face headwinds in the form of margin
pressure, particularly from institutional investors, whilst returns generated
by underlying single-manager hedge funds were disappointing over the period.
Returns generated on the various Stenham funds remain strong measured on a
medium to long-term basis, and whilst this track record attracted several
hundred million dollars of new flows it was not sufficient to attract capital
on a net basis, with assets under management declining to $2,7 billion at year-
end (2011: $3,4 billion).
Stenham Property experienced a good year with investment activity being
particularly strong. The team concluded a number of transactions, including
sales of existing assets, acquisitions of new properties and the refinancing
of a number of existing investments. Stenham Property`s assets under
management amounted to GBP1,8 billion (2011: GBP2,0 billion). The majority of
these property assets are located in the UK and Germany.
Broking and Structuring
Peregrine Securities experienced difficult trading conditions. The equities
and prime-broking business saw continued contraction in trading volumes,
subdued hedge fund activity and increased costs associated with new JSE
trading systems, as well as headcount costs associated with a changing
regulation and compliance environment.
Peregrine Securities confirmed its position as the leading independent
derivative structuring and broking business in South Africa. The derivatives
and structuring side of the business experienced increased activity as a
result of an uptick in volumes.
Peregrine Securities generated profits of R96 million (2011: R109 million),
12% lower than the previous year.
On 1 April 2010, a management consortium purchased 35% of Peregrine Securities
from the group. Final payment for this transaction is expected during the
first half of the 2013 financial year, and accordingly the group will report
an outside minority interest of 35% in Peregrine Securities in future.
Proprietary Investments
Group investments contributed R162 million (2011: R104 million) to group
profits, comprising primarily profits of R79 million (2011: R55 million) on
the proprietary investment in hedge funds, net gains of R19 million (2011: R4
million) on offshore proprietary investments and investment banking profit of
R52 million (2011: R45 million). At year-end the total value of group
proprietary investments amounted to R664 million (2011: R628 million).
Cash
The group maintains significant cash resources. Aggregate cash in the group
amounted to R519 million at year-end, of which R102 million was available at
the centre. The majority of the remaining R417 million is held offshore.
Outstanding debt at the centre was reduced during the financial year from R421
million to R179 million.
Restructuring of the group
The Peregrine group has produced R1,5 billion of after-tax profits over the
past 5 years under particularly difficult market conditions. These earnings
consisted of a combination of profits from operating divisions and investment
returns driven off the group`s balance sheet. A strong feature over this
period has been that the cash component of these earnings has been
exceptionally high.
The dividend policy of the group to date has been to pay out 25% of annual
attributable profits, with 75% being retained to augment both the group`s
operating activities and balance sheet activities.
After careful review, the board has resolved to restructure the group so as to
focus the group`s activities on the existing portfolio of adequately
capitalised, cash generative operating subsidiaries and to grow such
portfolio. The board will no longer build excess capital at the centre, and
will look to return to shareholders such capital over and above that which is
optimally required from an operating perspective.
Going forward, Peregrine will focus exclusively on operating in financial
services businesses in South Africa and internationally, with an appropriate
and sustainable BEE shareholding directly into the South African businesses.
The group will actively seek to make acquisitions where appropriate, with a
view to taking advantage of its status as a listed entity.
Resulting from the refined group strategy, the board has resolved to pay out a
minimum of 50% of the group`s earnings each year. The requirement for
additional capital in the underlying subsidiaries will be reviewed
periodically and, to the extent that the underlying subsidiaries remain
adequately capitalised, excess capital will be returned to shareholders.
Accordingly, a group reorganisation is in process in terms of which:
* the South African operating subsidiaries, namely Citadel, Peregrine
Capital, Peregrine Securities and other smaller South African subsidiaries
will be transferred to and held, directly or indirectly, by a wholly owned
subsidiary ("SA OpsCo"). SA OpsCo will, in addition to holding such
shareholdings, support the underlying operating businesses through making
capital investments, the bulk of which will initially constitute investment
into hedge funds managed by the group`s fund managers;
* the internationally based operations, predominantly Stenham, will be held
by a wholly owned subsidiary, Peregrine International Holdings (Proprietary)
Limited. The intention is, subject to the obtaining of the necessary
approvals, to ultimately hold such interests directly through Peregrine
International Holdings Limited, a company incorporated in Guernsey;
* all remaining non-financial services investments presently held by the
group will be held by Sandown Capital (Proprietary) Limited, a wholly owned
subsidiary, and its associates. This portfolio of assets will be managed to
optimise value to Peregrine shareholders and the proceeds on disposal will be
returned to shareholders from time to time.
Restructuring of BEE shareholding
Further to the cautionary announcement published on 30 March 2012, and subject
to the fulfilment of the conditions referred to below:
* Peregrine will repurchase from Nala Empowerment Investment Company
(Proprietary) Limited ("Nala") and its subsidiaries 28 584 059 Peregrine
shares for an aggregate purchase price of R294 701 648 ("the repurchase
price"), following which such shares will be cancelled, reducing the total
number of shares in issue to 199 544 705, of which 10 552 646 will still be
held as treasury shares by subsidiaries and share trusts of the group. Net of
treasury shares, the group`s shares in issue will decrease to 188 992 059.
These 28 584 059 Peregrine shares will be purchased cum the ordinary and
special dividends declared in terms of this results announcement, on the basis
that, should the transaction (as defined below) not be implemented for
whatever reason, Nala will be entitled to receive such dividends;
* Nala will acquire, by way of subscription, a 20% shareholding in SA OpsCo
(the entity which will house the restructured South African operating
subsidiaries as more fully referred to above) for a subscription price of R380
million ("the subscription price"), which implies a value of R1,9 billion for
SA OpsCo. In this regard preliminary feedback has been received from
PricewaterhouseCoopers Corporate Finance (Proprietary) Limited, the
independent experts appointed for such purpose, that such price is fair to the
shareholders of Peregrine. Their final opinion will be contained in the
circular to shareholders that will be sent during the course of July 2012. As
Nala is a related party under the JSE Listings Requirements, this transaction
will be treated as a related party transaction for the purposes of the JSE
Listings Requirements. Nala has entered into negotiations with funding
institutions in order to raise the funding required, inter alia, to fund the
difference between the subscription price and the repurchase price. In order
to facilitate such funding, members of the Peregrine group may furnish the
funders with appropriate guarantees.
The repurchase by Peregrine of the Peregrine shares and the subscription by
Nala for a 20% interest in SA OpsCo (collectively "the transaction") are
subject to the fulfilment of a number of conditions, including the
shareholders of Nala and the shareholders of Peregrine, in separate general
meetings, approving the transaction as well as securing all necessary
regulatory approvals required to implement the transaction.
The financial effects of the transaction are in the process of being finalised
and a further announcement in this regard will be published in due course.
Shareholders are advised to continue to exercise caution when trading in
Peregrine shares until the publication of a further announcement in this
regard. A circular incorporating a notice of general meeting and containing
more details in relation to the transaction will be sent to Peregrine
shareholders during July 2012. It is envisaged that a general meeting to
consider the resolutions required to implement the transaction will be held
during August 2012.
This transaction will conclude the restructuring of the BEE shareholding in
Peregrine, with Nala, a broad-based black investment company, emerging with a
substantial and sustainable shareholding in Peregrine`s South African
operations.
Ordinary Cash Dividend and Special In Specie Dividend
In adopting the new dividend policy of paying out a minimum of 50% of
earnings, the directors have resolved to declare an ordinary dividend of 72
cents per share for the year.
In order to reduce surplus capital and facilitate the reduction in the balance
sheet investments of Peregrine, the directors have further resolved to declare
a distribution of 6 984 065 shares in Consolidated Infrastructure Group
Limited ("CIL"), held by Peregrine, on a pro-rata basis to all Peregrine
shareholders, in a ratio of 3,5 CIL shares for every 100 Peregrine shares
owned. The closing market price of a CIL share as at 6 June 2012 was 1 295
cents per share.
Shareholders are advised that the group has total STC credits amounting to
R300 million, which is sufficient to offset all dividends tax relating to both
the ordinary and special dividends.
In compliance with the requirements of STRATE, the following dates are
applicable to the ordinary and special dividends:
Last date to trade cum dividend Friday, 20 July 2012
Trading ex dividend commences Monday, 23 July 2012
Record date Friday, 27 July 2012
Payment date Monday, 30 July 2012
In terms of the Listings Requirements of the JSE Limited regarding the new
Dividends Tax effective 1 April 2012, the following additional information is
disclosed:
1. The ordinary cash and special in specie dividends have been declared out
of income reserves;
2. The local dividend tax rate is 15%;
3. Secondary tax on companies credits utilised for the ordinary cash
dividend is 72 cents per share;
4. Secondary tax on companies credits utilised for the special in specie
dividend is 45,325 cents per share;
5. The gross local dividend amount for the ordinary cash dividend is 72
cents per share for shareholders exempt from paying the new Dividends
Tax;
6. The net local dividend amount for the ordinary cash dividend is 72 cents
per share for shareholders liable to pay the new Dividends Tax;
7. The gross local dividend amount for the special in specie dividend is
45,325 cents per share for shareholders exempt from paying the new
Dividends Tax;
8. The net local dividend amount for the special in specie dividend is
45,325 cents per share for shareholders liable to pay the new Dividends
Tax;
9. The issued share capital of Peregrine is 228 128 764 shares of 0,1 cent
each but, as mentioned and explained above, the ordinary cash and special
in specie dividends will not be paid in respect of the 28 584 059
Peregrine shares purchased from Nala;
10. Peregrine`s tax reference number is 9181924847.
Shares may not be dematerialised or rematerialised between Monday, 23 July
2012 and Friday, 27 July 2012, both dates inclusive.
Directorate
Khosi Sibisi and Ethan Dube retired from office with effect from 31 May 2011
and 18 October 2011 respectively. The board thanks Khosi and Ethan for their
contributions over the years.
Nomfanelo Magwentshu was appointed as an independent, non-executive director
and a member of the Audit Committee, and Lungile Ndlovu as an independent, non-
executive director, both with effect from 1 July 2011, with Lungile
subsequently being appointed to the Social and Ethics Committee on its
formation.
Conclusion
The results of the past financial year once again highlight the benefit to the
group, particularly in difficult conditions, of holding a portfolio of
investment related businesses. The group`s culture of aligning the interests
of the management teams of the underlying businesses with the shareholders of
Peregrine through direct participation in their respective businesses
continues to have a positive bearing on its ability to navigate these
uncertain times.
Nonetheless, the macro environment remains difficult. The group`s refined
strategy of returning excess capital to shareholders, growing its cash-
generating businesses organically, whilst at the same time diversifying and
expanding the group through appropriate, sizable transactions, should provide
shareholders with an income yielding investment which has ample scope for good
long term growth in earnings.
Jan van Niekerk Leonard Harris Sean Melnick
Group CEO Non-executive Chairman Deputy Chairman
Sandton
7 June 2012
Directors: LN Harris* (Chairman); SA Melnick (Deputy Chairman);
JC van Niekerk (CEO); RE Katz (CFO); BC Beaver*; P Goetsch; VN Magwentshu*;
LM Ndlovu*; SI Stein*; M Yachad Non-executive *Independent non-executive
Company secretary and registered office:
Peregrine Management Services (Proprietary) Limited 6A Sandown Valley
Crescent, Sandown, Sandton, 2196 (PO Box 650361, Benmore, 2010),
Telephone: +27 11 722 7400 Fax: +27 11 722 7410
Transfer Secretaries: Computershare Investor Services (Proprietary) Limited,
70 Marshall Street, Johannesburg, 2001, (PO Box 61051, Marshalltown, 2107)
Sponsor: Java Capital
Further detail and a print-friendly version of these results are available
from the company`s website at www.peregrine.co.za
Date: 07/06/2012 10:54:00 Produced by the JSE SENS Department.
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