| Fri 27 Jul 2001, 0:00 | | Cadiz Holdings Ltd - Interim Results For The Six M |
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CADIZ HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1997/007258/06)
GROUP INCOME STATEMENT
Unaudited Unaudited Audited
six months six months twelve
months
30 June 01 30-Jun-00 31-Dec-00
R'000 R'000 R'000
Net contribution 57,935 55,024 106,196
Operating expenses (18,813) (16,892) (33,364)
Net income before
discontinued operations 39,122 38,132 72,832
Discontinued operations and
disposals (4,648) 10 (3,650)
Net income before tax 34,474 38,142 69,182
Taxation (5,341) (6,096) (10,900)
Net income after tax 29,133 32,046 58,282
Preference dividends (2,321) (2,364) (4,732)
Attributable income 26,812 29,682 53,550
Headline earnings per share 13.70 13.58 25.08
Headline earnings per share
after discontinuance 16.07 13.57 26.79
Weighted numbers of shares
in issue 195,708 218,580 213,517
Reconciliation between headline
earnings per share and
headline earnings per share
after discontinuance
Net profit attributable to
ordinary shareholders 26,812
Add back amounts included in
discontinuted operations 4,648
Add back profit on the sale of
the private clients business (715)
Less the provision for
retrenchment costs 710
Headline earnings per share
after discontinuance 31,455
CONSOLIDATED BALANCE SHEET
Unaudited Unaudited Audited
six months six months twelve
months
30 June 01 30-Jun-00 31-Dec-00
R'000 R'000 R'000
Assets
Cash and cash equivalents 13,880 233,811 227,653
Advances and other accounts 51,780 53,786 95,517
Investment and trading
securities 308,872 480,405 385,453
Other assets 4,037 16,030 16,524
Fixed assets 4,319 3,392 3,996
Deferred taxation 5,379 4,795 4,903
388,267 792,219 734,046
Shareholders' equity and
liabilities
Equity 241,920 234,593 228,123
Ordinary share capital and
premium 96,248 123,317 93,065
Reserves 95,672 61,276 85,058
Ordinary shareholders' funds 191,920 184,593 178,123
Preference share capital in
subsidiary 50,000 50,000 50,000
Liabilities 146,347 557,626 505,923
Compulsory convertible
Debentures 88,063 73,202 80,336
Deposits and repurchase
agreements 18,338 454,636 367,016
Deferred taxation 3,191 7,923 11,687
Creditors and provisions 36,755 21,865 46,884
388,267 792,219 734,046
STATEMENT OF CHANGES IN EQUITY
Share capital Reserves Total
& Premium
R'000 R'000 R'000
Balance as at 31 Dec 2000 93,065 85,058 178,123
Issue of shares -
Net profit attributable to
ordinary shareholders - 26,812 26,812
Dividends declared and
distributed - (16,365) (16,365)
Movement in foreign currency
translation reserve - 167 167
Adjustment resulting from
consolidation of CHEST 3,183 - 3,183
Balance as at 30 June 2001 96,248 95,672 191,920
ABRIDGED CONSOLIDATED CASHFLOW STATEMENT
Unaudited Unaudited Audited
six months six months twelve
months
30-Jun-01 30-Jun-00 31-Dec-00
R'000 R'000 R'000
Cash retained from operating
Activities 12,527 14,095 64,573
Cash flows from banking
activities (228,360) 101,389 76,561
Cash utilised in investing
activities (1,123) (10,794) (12,350)
Cash flows from financing
activities 3,183 (2,787) (33,039)
(213,773) 101,903 95,745
Net change in cash and
cash equivalents
Cash and cash equivalents
At the beginning of the year 227,653 131,908 131,908
At the end of the year 13,880 233,811 227,653
(213,773) 101,903 95,745
REVIEW OF RESULTS
The period under review was notable for the significant decisions made to re-
position the group in response to the challenges faced by the financial
services sector. One of the decisions made was to de-register the banking
license. Comments were made in the annual report of the previous financial
year that the A2 banks have been subject to severe funding constraints and a
reduction of trading lines. This limited the scope for development of both
our money market trading and investment banking activities. We have
therefore taken steps to focus the group's activities on research and
distribution, derivative structuring and specialised asset management, a
move that realigns our business around clearly defined core competencies.
The private equity, risk management, private client, wrap fund and
information technology initiatives, which were seen as ancillary operations
have been discontinued.
In reporting the results for this six-month period we have separately
identified the costs and revenues of the discontinued operations amounting
to a net R4.6 million loss. This includes R0,7 million in respect of net
revenue, R6 million attributable to operating costs and a R0,7 million
profit arising on the sale of the private client business. As a
consequence, headline earnings after discontinuance more accurately reflect
the results of our continuing core businesses. While the period under review
has been demanding, activity levels in the institutional market have seen
some improvement, despite subdued corporate activity. Given the prevailing
market conditions and the efforts we have made in consolidating the business
towards its core competencies, we are more than satisfied with having
achieved a 18.4% growth in headline earnings per share after discontinuance.
The net revenue contribution of R58 million reflects a 5.3% increase against
the comparable period last year. This increase is very pleasing, given that
the numbers include a significant negative effect of having consolidated the
employee share trust. This resulted in a lower level of capital relative to
the prior year together with a lower level of investment returns.
Operating costs, of which staffing costs comprise the largest portion,
increased by some 11.4% over the previous corresponding period. However, in
response to the competitive trading environment, we have rationalised the
business as discussed. This has led to a reduced head-count from 85 to 70.
These benefits will become apparent in the next reporting period.
The taxation charge at 15.5% of net income before tax simply reflects the
investment of the group's base capital in after tax products. The group has
not participated in any structured finance transactions entailing the
utilisation of its own tax base.
The balance sheet shows a significant decline in assets from R734 million
at 31 December 2000 to R388 million at 30 June 2001 which is purely
reflective of the de-registration of the Bank and closure of our money
market trading activities. The assets on balance sheet now substantially
comprise the investment of the group's primary and secondary capital.
In line with previous years no dividend has been declared at the interim
stage. The dividend paid reflected in these accounts relates to the dividend
declared on 1 February 2001 and paid to shareholders on 9 March 2001.
Operational review
Net revenue contributions by area of activity for continuing operations
comprises:
June 2001 June 2000
% %
Stockbroking 4.7 4.5
Fixed income 5.3 6.5
Equity derivatives 21.3 16.5
Structured solutions 37.2 30.1
Corporate solutions 1.0 0.0
Specialised asset management 16.0 10.5
Treasury and investments 14.5 31.9
100.0 100.0
The research and distribution arm of the group, which includes the
activities of stockbroking, fixed income and equity derivatives, continues
to make a meaningful contribution to net revenue. Emphasis is placed on
providing a one-stop value added service which includes a pro-active
approach to devising strategies for clients and offering niched quantitative
research. The equity derivatives team was ranked first for the fifth
consecutive year in the Financial Mail's annual broker survey in the
derivative research and dealing categories. This contributed to an effective
increase of 29% in net revenue from this business compared to the previous
period.
The performance of the specialised asset management team now excludes
revenue from the servicing of private clients, which business was sold in
the first quarter of the year. While total funds under management have
increased marginally to R4.3 billion, the team's elevated marketing and
business development efforts, together with the favourable climate for
structured investments, is beginning to have a beneficial impact. In
particular the team's comparatively new initiative in the retail structured
investment market has been well received, with a number of innovative
products having been launched to date.
Income from the Group's structuring activities has once again contributed
significantly to total earnings. All of the structures concerned have a
strong derivative flavour and diversification of these structures has been
achieved across the equity and fixed income asset classes. The structured
solutions have been marketed to the institutional, corporate, pension fund
and retail customer segments. The main traditional client base of Cadiz has
been and remains the institutional investment community. The performance of
the group's investment banking portfolio, which comprises minority stakes in
selected unlisted companies, did not contribute to earnings in this period.
Income from the group's treasury and investment activities arises largely
from the management and investment of the group's capital base. The decline
in the contribution is attributable to the full effect of having
consolidated the employee share trust and the consequent lower level of
capital relative to the prior year together with a lower level of investment
returns given the decline in interest rates. Further, no meaningful revenue
contribution was made by the money market trading activities, which in the
previous comparable period were significant.
The accomplishments of Cadiz are due to the caliber and diversity of its
people and their skills, and we thank them for their commitment, tenacity
and investment of energy over the past six months. In addition, we wish all
employees that have been affected by our restructuring activities well in
their new endeavours.
Relationship-building is fundamental to the continued success of our
organization. We thank our clients for their continued support and look
forward to opportunities to exceed expectations in the future.
PROSPECTS
We are now a much leaner and more focused business. We have proven skills
and a significant track record in researching and advising clients on the
usage of derivative instruments, which are specifically designed to take
advantage of volatile and uncertain market conditions. These should underpin
our ability to grow and prosper in the future. Furthermore, the
restructuring that we have undergone does not preclude us from continuously
assessing strategic growth opportunities while striving to maintain our
position of strength in our chosen activity areas and markets.
On behalf of the Board of Directors
Colin Hall Ray Cadiz
Chairman Group CEO
Registered address
1st Floor, Fernwood House
Fedsure Oval
1 Oakdale Road
Newlands
7700
P O Box 44547
Claremont
7735
Directors
C A Hall (Chairman) *
R F G Cadiz (CEO)
W V G Scotcher
B H Kent *
S J Saunders *
C Okeahalam *
(* Non-executive directors)
Transfer secretaries
Mercantile Registrars Limited
Reg No 1987/003382/06
10th Floor Diagonal Street
Johannesburg
Company Secretary
I Kilian
