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Peregrine - Interim Results
Peregrine Holdings Limited
(Registration number 1994/006026/06)
JSE code: PGR ISIN code: ZAE000015152
("Peregrine")
GROUP INCOME
STATEMENT
Proform Proforma Change Unaudite 2001 Audited
a six 2001 d six year
change months to 2002 months ended
2001 to ended 30 ended 30 31 March
2002 September Sep 2002 2002
2002
% R`000 % R`000 R`000 R`000
Revenue 65% 196,259 -8% 109,283 118,792 230,93
Operating 189% (133,076) 39% (64,149) (46,111) (100,0
expenses
Profit from -13% 63,183 -38% 45,134 72,681 130,90
operations
Amortisation of (7,898) (7,898) (3,125) (8,077
goodwill
Net interest 7,212 2,615 2,871 4,289
received
Income from 2,497 5,122 (886) 1,830
associate
companies
Profit before -9% 64,994 -37% 44,973 71,541 128,94
taxation
Taxation (15,602) (7,779) (13,807) (24,43
Profit after -14% 49,392 -36% 37,194 57,734 104,51
taxation
Minority interest (2,705) (3,785) (3,087) (4,349
Attributable -15% 46,687 -39% 33,409 54,647 100,16
earnings
Headline earnings 7,898 7,898 3,125 8,077
adjustment
Headline earnings -6% 54,585 -29% 41,307 57,772 108,23
Headline -24% 22.7 -37% 18.8 29.7 52.2
earnings1 per
share (cents)
Earnings per -31% 19.4 -46% 15.2 28.1 48.3
share (cents)
Number of shares 231,104 231,104 215,825 215,82
in issue (`000)
Weighted average 240,947 219,854 194,243 207,215
Number of shares in
Issue2 (`000)
1 Adjusted for
amortisation of goodwill
2 Adjusted for treasury
shares
GROUP BALANCE SHEET
Audited as
at
Unaudited as at 31 March
30 September 2002
2002 2001
R`000
R`000 R`000
ASSETS
357,109
Non - current assets 455,336 383,276
10,169
Property, plant and 10,039 10,758 88,958
equipment
Intangible assets 161,228 45,376
-
Deferred taxation 48,222
10,025 -
Investment in associate 43,686 40,286 197,065
companies
Investments 211,422 251,341
-
Long-term assurance fund
- - -
Investments 433,432
- -
Policy benefits 12,695
(433,432) -
Employee share incentive 18,936 35,515
scheme
347,485
Current assets 470,044 212,242
18,358
Trading assets 12,677 26,941 58,670
Accounts receivable 59,926 28,704 195,150
Amounts receivable in 242,812 46,216 75,307
respect of stockbroking
activities
Cash and cash 154,629 110,381
equivalents
704,594
Total assets 925,380 595,518
EQUITY AND LIABILITIES
371,543
Capital and reserves 487,253 417,988
216
Share capital 231 222 9,995
Share premium 48,800 24,189 329,890
Accumulated profits 363,299 284,382
(34,607)
Treasury shares 42,346
(34,607) (48,776)
Non distributable 42,346 42,340 23,703
reserves
Amounts due to vendors 67,184 112,976
-
Deferred income reserve 2,655
-
11,585
Minority interest 43,776 13,822
4,605
Non- current liabilities 12,707
-
-
Interest bearing 10,500 4,605
borrowings -
Deferred taxation 2,207
-
316,861
Current liabilities 394,351 151,001
119,675
Accounts payable 110,934 92,909 185,316
Amounts payable in 264,466 45,177 11,870
respect of stockbroking
activities
Taxation 18,951 12,915
Total equity and 925,380 595,518 704,594
liabilities
Basis of accounting
The results have been prepared on the historical cost basis in accordance with
the South African statements of
Generally Accepted Accounting Practice. The accounting policies as set out in
the financial statements for the six months
ended 30 September 2002 have been consistently applied in producing these
results.
GROUP CASH FLOW STATEMENT
Unaudited six months ended
30 September
2002 2001
R`000 R`000
Cash flow from operating
activities 56,008 95,524
Cash generated from operations
58,652 126,182
Net interest received
2,615 2,871
Dividends paid
- (21,367)
Taxation paid
(5,259) (12,162)
Cash flow from investing
activities 39,237 17,396
Acquisition of property, plant
and equipment (1,792) (2,460)
Development costs incurred
(1,000) -
Acquisition of subsidiary
61,843 (2,812)
Acquisition of investments
(29,189) (56,204)
Increase in loans to associate
companies (1,642) (4,759)
Disposal of subsidiaries
(3,797) -
Proceeds on sale of property,
plant and equipment 57 49
Proceeds on sale of
investments 14,757 49,167
Capital distribution from
associate - 34,415
Cash flow from financing
activities (15,923) (81,450)
Acquisition of treasury shares
- (48,776)
Decrease/(increase) in loan to
employee share incentive 1,179 (21,735)
scheme
Payments to vendors and
minorities (17,102) (5,640)
Decrease in interest bearing
borrowings - (5,299)
Net increase in cash and cash
equivalents 79,322 31,470
Cash and cash equivalents at
beginning of the period 75,307 78,911
Cash and cash equivalents at
end of the period 154,629 110,381
STATEMENT OF
CHANGES IN EQUITY
Unaudited six months ended 30
September
2002 2001
R`000 R`000
Equity at beginning 371,543 395,953
of the period
Changes in share
capital and share 38,820 (48,776)
premium
Shares issued
during the period 38,820 -
Acquisition of
treasury shares - (48,776)
Changes in retained
earnings 33,409 33,280
Attributable
earnings 33,409 54,647
Dividends
- (21,367)
Changes in reserves
- 37,255
Increase in non
distributable - 39,910
reserves
Decrease in
deferred income - (2,655)
reserve
Changes in amounts
due to vendors 43,481 276
Increase in amounts
due to vendors 43,481 276
Equity at end of
the period 487,253 417,988
SEGMENTAL ANALYSIS
Six months ended 30 September
2002 2001
Profit from % Profit from %
operations contribution operations contribution
R`000 R`000
Wealth and asset 79% 62%
management and 35,843 45,157
related services
Financial and 21% 17%
corporate advisory 9,299 12,705
Investment banking -4% 19%
(1,601) 14,081
Financial software 4% 1%
development 1,593 738
100% 100%
45,134 72,681
Highlights
- Citadel becomes a subsidiary of the group
- Asset under management exceed R13,5 billion
Introduction
Peregrine has produced subdued results for the six months to 30 September 2002.
As indicated in the group`s 2002 annual report and in the circular to
shareholders dated 6 September 2002, a dilution of the group`s earnings in the
short term was anticipated as a result of the non-recurrence of substantial
investment banking profits from disposals during the course of the previous
period. The proceeds of these disposals were utilised to fund the Citadel
transactions.
A further negative influence on the numbers emanated from Citadel being
accounted for as an associate for the first five months of the period and as a
subsidiary for the final month only. Subsequent to the period under review a
successful offer to Citadel minority shareholders boosted Peregrine`s ownership
of the ordinary shares in Citadel to 98.74%. Peregrine will be invoking Section
440K, which will result in Citadel becoming a wholly owned subsidiary by January
2003.
A set of pro-forma results has been included on the assumption that Citadel was
a wholly owned subsidiary for the full interim period. These results provide a
more meaningful indication of the group`s sustainable earnings base going
forward.
Results
The group`s revenue for the period under review declined by 8% to R109,3 million
from R118,8 million, chiefly as a result of the sharp decline in investment
banking revenue compared to the previous period. Whilst operating expenses on
the income statement increased by 39%, operating expenses excluding Citadel were
up only 15% on last year`s interim expenses and reflect a slight decrease over
the group`s expense figure for the second half of last financial year.
The dilutive effect of the timing of the Citadel deal and subsequent Competition
Commission approval, from an accounting perspective, is well illustrated by
comparing the decline in headline earnings of 29% over the previous interim
period, with the pro-forma decline in headline earnings over the same period of
only 6%. Headline earnings per share declined by 37% over the comparable period,
as a result of a greater number of shares being in issue, whilst on a pro-forma
basis the decline was limited to 24%.
Operating highlights
The group`s core focus of wealth and asset management and related services now
comprises four well-defined, independent businesses.
Citadel, with its focus on private-client wealth management, managed to maintain
its asset base at close to R9 billion in the period under review, despite
difficult market conditions. The business continues to attract new inflows
exceeding R100 million per month and maintains a client retention rate in excess
of 98%. Almost a third of the group`s assets are managed offshore with
approximately 40% of the Citadel`s annual profit being earned in hard currency.
With an incentive fee in place that is linked to each client`s real returns
(after tax and costs), Citadel is highly geared to the upside in international
capital markets as well as to any depreciation in the local currency. Whilst
current conditions are not conducive to substantial incentive fees, any
improvement will provide a meaningful increase to the group`s bottom line.
PeregrineQuant continues to win new mandates across its suite of quantitatively
managed funds. It is fast gaining recognition as a highly innovative and
dominant player in the burgeoning quantitative asset management industry. Funds
under management currently exceed R4 billion and the client base now includes
most of the country`s multi-managers, several assurers, insurers and wealth
managers and, as of recently, parastatal and union funds. Further growth in
assets under management is expected during the second half of the financial
year, with a contribution to group profitability only expected in the 2004
financial year.
Peregrine Capital, the group`s absolute return fund manager had a satisfactory
six months despite difficult market conditions. Coming off a very high base
however, the contribution from this area showed a decline compared to the same
period last year, both in terms of proprietary returns and fees earned. The
business currently manages under R500 million with scope to increase assets
under management by up to 50% over the next year. The launch of an offshore fund
is planned for the second half of the current year.
Peregrine Securities, with its stockbroking, derivative broking, commodity
broking and structuring activities, continues to generate risk-free profits in
an exceptionally difficult environment for smaller brokers. Despite these
difficult conditions, the business made a meaningful contribution to the
division`s bottom line in the period under review but failed to match the
profitability of the previous comparable period. Taking a long-term view, the
current consolidation and fall-out in the broking industry is viewed as positive
for this idea generation and specialist execution business.
The businesses in the division produced a combined profit from operations of
R35,8 million compared to the previous period`s R45,2 million. Citadel`s
contribution was only included for the last month of the period with the first
five months coming through the associate line. Going forward, the group expects
the wealth and asset management division to be a source of strong annuity flows,
even in poor markets, as well as a generator of substantial performance fees in
years where investment performance is good.
A hedge fund incubator, which is mandated to create and provide infrastructure
for a suite of diversified absolute return funds, is in the process of being
established, with operations commencing in the second half of the financial
year.
The financial and corporate advisory division produced profit from operations of
R9,3 million for the period under review compared to R12,7 million in the
previous comparable period. Reduced corporate activity played a role in the
earnings decline, as did the conclusion of a formal alliance with an offshore
counterparty, which, whilst substantially boosting the division`s capability as
a specialised finance arranger, also resulted in a narrowing of margins in
respect of existing business.
As part of the exercise of focussing the group`s activities, the businesses of
asset finance and treasury solutions were sold to their respective management
teams during the period under review.
TW Ferguson once again produced a solid contribution to the division`s earnings.
The securitisation business concluded several small deals and won several
meaningful mandates towards the end of the period. Peregrine Corporate Advisory
Services continued to make a positive contribution. New skills within the
business are expected to facilitate opportunities across the axis.
The bulk of the group`s investment banking assets were disposed of during the
course of the previous financial year and the proceeds applied as a primary
source of funding for the purchase of Citadel shares. The result is that the
investment banking division made a small loss of R1,6 million in the period
under review compared to a profit of R14,1 million in the previous period. With
only a small number of investments still left in the portfolio, it is
anticipated that the contribution from this division will be negligible for the
foreseeable future, interspersed with occasional profits as assets are disposed
of.
Peregrine Systems (PereSys), the group`s financial software development firm,
lifted its contribution to group profit from operations to R1,6 million from
R0,8 million in the previous period, despite the difficult environment
experienced by a large portion of its clientele, namely, the stockbroking
community. Offshore expansion is currently underway and the business continues
to build a strong brand.
Prospects
Despite the decline in earnings for the period under review, the directors are
confident that the positioning of the group, the growth in assets within its
core wealth and asset management division as well as the strength of its
individual businesses will provide a platform for meaningful and sustainable
growth in coming years.
By order of the board
Louis Fourie Sean Melnick
Chairman Chief Executive Officer
Sandton
7 November 2002
Directors: L J D Fourie (Chairman), S A Melnick (CEO), A P Faure*, P Goetsch,
L N Harris*, J Hertz, R Stumpf* * Non-executive
Transfer Secs: Computershare Investor Services Limited, 41 Fox Street,
Johannesburg, 2001
Registered Address: 6A Sandown Valley Crescent, Sandown, 2196, Sandton
Website: www.peregrine.co.za
Date: 07/11/2002 05:57:07 PM Produced by the JSE SENS Department
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