| Wed 30 Jul 2003, 8:41 | | CADIZ - INTERIM RESULTS |
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CADIZ - INTERIM RESULTS
CADIZ HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1997/007258/06)
ISIN ZAE000017661
Share code CDZ
("CADIZ")
INTERIM RESULTS TO 30 JUNE 2003
FINANCIAL HIGHLIGHTS
* Gross operating revenue up by 24% to R97.7m
* Diluted headline earnings per share up 5% to 18.6 cents
* NAV per share 158 cents, 15% up from June 2002
ABRIDGED GROUP BALANCE SHEET Unaudited Unaudited Audited
as at as at as at
30 June 30 June 31 Dec 2002
2003 2002
R "000s R "000s R "000s
Assets 528,243 480,690 485,436
Fixed assets 5,736 3,584 5,539
Deferred taxation 23,469 27,299 22,670
Goodwill 26,839 - -
Investments and trading 315,503 333,399 311,829
securities
Other assets 2,011 2,026 2,016
Receivables and prepayments 74,033 50,457 68,202
Cash and cash equivalents 80,652 63,925 75,180
Equity and reserves 295,758 262,213 286,845
Ordinary share capital and 81,445 90,786 87,679
premium
Reserves 214,313 171,427 199,166
Liabilities 232,485 218,477 198,591
Preference share capital in - 50,000 -
subsidiary
Deferred taxation 3,917 4,008 3,074
Compulsory convertible 128,052 105,940 116,265
debentures
Trade and other payables 93,417 58,529 75,040
Trading account liabilities 7,099 - 4,212
Total equity and liabilities 528,243 480,690 485,436
Net asset value (cents per 158 137 150
share)
Net tangible asset value 133 125 140
(cents per share)
ABRIDGED GROUP INCOME Unaudited Unaudited Audited
STATEMENT
six six twelve
months months months
ended ended ended
30 June 30 June 31 Dec 2002
2003 2002
R "000s R "000s R "000s
Gross operating revenue 97,707 79,072 153,275
Operating expenses (55,985) (42,152) (86,146)
Operating profit 41,722 36,920 67,129
Net investment income 7,888 5,692 9,171
Net income from investments 15,492 11,027 23,754
Unrealised foreign exchange (7,604) (5,335) (14,583)
loss
Goodwill amortised (687) - -
Net income before taxation 48,923 42,612 76,300
Taxation (12,705) (6,853) (13,378)
Net income after taxation 36,218 35,759 62,922
Reconciliation of headline
earnings
Net income after taxation 36,218 35,759 62,922
Goodwill amortised 687 - -
Headline earnings 36,905 35,759 62,922
Weighted average number of 189,553 191,407 191,453
shares ("000s)
Diluted weighted average 198,115 200,742 201,176
number of shares ("000s)
Earnings per share (cents)
Basic 19.1 18.7 32.9
Diluted 18.3 17.8 31.3
Headline earnings per share
(cents)
Basic 19.5 18.7 32.9
Diluted 18.6 17.8 31.3
Dividends per share (cents) - - 11.0
ABRIDGED GROUP CASH FLOW Unaudited Unaudited Audited
STATEMENT
six six twelve
months months months
ended ended ended
30 June 30 June 31 Dec 2002
2003 2002
R "000s R "000s R "000s
Cash flow from operating 23,313 7,018 43,288
activities
Cash generated from 44,384 26,686 62,906
operating activities
Dividends paid (21,071) (19,668) (19,618)
Cash flow from investing (8,876) (9,107) (29,139)
activities
Cash flow from financing (6,234) 17 (3,090)
activities
Net change in cash and cash 8,203 (2,072) 11,059
equivalents
Exchange movement on cash (2,731) (449) (2,325)
balances
Cash and cash equivalents at 75,180 66,446 66,446
beginning of period
Cash and cash equivalents at 80,652 63,925 75,180
end of period
ABRIDGED STATEMENT OF Unaudited Unaudited Audited
CHANGES IN EQUITY
six six twelve
months months months
ended ended ended
30 June 30 June 31 Dec 2002
2003 2002
R "000s R "000s R "000s
Share capital and premium
Opening balance 87,679 90,769 90,769
Consolidation of Cadiz - 17 (3,671)
Holdings Employee Share
Trust
Treasury shares (6,234) - 581
81,445 90,786 87,679
Reserves
Opening balance 199,166 159,541 159,541
Income after taxation 36,218 35,759 62,922
Dividends paid (19,668) (19,618)
(21,071)
Consolidation of Cadiz - (526) -
Holdings Employee Share
Trust
Correction of initial - (3,679) (3,679)
recognition of deferred tax
on trademark
214,313 171,427 199,166
Total shareholders" funds 295,758 262,213 286,845
Less than More than
ABRIDGED LIQUIDITY PROFILE 1 year 1 year Total
As at 30 June 2003 R"000s R"000s R"000s
Investments and trading 136,174 179,329 315,503
securities
Other assets - 2,011 2,011
Receivables and prepayments 57,035 16,998 74,033
Cash and cash equivalents 80,652 - 80,652
Compulsory convertible (128,052) - (128,052)
debentures
Trade and other payables (56,151) (37,266) (93,417)
Trading account liabilities (7,099) - (7,099)
Net current assets 82,559
REVIEW OF RESULTS
The Board of Cadiz Holdings Limited ("Cadiz") is pleased to announce the results
for the six months to June 2003.
The core activities of Cadiz have once again proven to be resilient in the face
of extremely harsh market conditions and have delivered another period of strong
growth.
Gross operating revenue for the group was up 24% on last year - a very pleasing
performance, given the state of the sector. Operating expenses were also up a
significant 33% on last year. The principal components of this R13.8m period-on-
period increase in costs are salaries, technology costs and other variable costs
including performance bonuses. These include the operating costs of Prodigy-
Coris Asset Management (Pty) Ltd ("PC"), which has been accounted for since 1
April. At 30 June 2003, permanent employees of Cadiz numbered 84, compared to 71
people a year previously.
Operating profit of R41.7m reflects a 13% increase over the corresponding period
last year.
The investment portfolio of the group yielded some R15.5m, 40% higher than the
first six months of 2002. This was partly offset by unrealised foreign exchange
losses of R7.6m in the non-Rand components of the portfolio. Despite this loss,
we remain committed to an ongoing strategy of diversification of the currency
exposure of the group"s capital. Net investment income of R7.9m was 39% higher
than for the equivalent period in 2002.
Net income before taxation was 15% higher at R48.9m. The tax charge for the
period was 85% higher than the amount to June 2002, owing to the fact that some
of the losses incurred in the investment portfolio were of a capital nature,
while operating income was taxable at the full 30% rate. In addition, a prior
period under-provision of R2.8m was booked relating to the non-deductibility of
foreign exchange losses.
The above items translate into a 3.2% increase in headline earnings from R35.8m
to R36.9m. This equates to an increase in diluted headline earnings per share of
5% to 18.6 cents.
Net asset value per share as at 30 June 2003 was 158 cents, 15% up from June
2002 and 5% up from December 2002.
PC ACQUISITION
On 1 April 2003, Cadiz acquired the entire share capital of and shareholder"s
claims against PC. The estimated present value of the cost of the acquisition is
R26.6m. The net tangible asset value of the group decreased by R27.5m,
reflecting the goodwill attributable to the acquisition. The goodwill will be
amortised on a straight-line basis over a period of ten years. Shareholders are
referred to the SENS announcement of 1 April 2003 for further details of the
transaction.
OPERATIONAL REVIEW
The table below shows that the operating activities of the group generated
R97.7m in the six months to June 2003 - 92% of the total revenue. This high
percentage contribution is partly a reflection once again of the disappointing
performance of the investment portfolio due to unrealised foreign exchange
losses.
REVENUE ANALYSIS
June 2003 June 2002 %
Increase
R"000s % R"000s % 2003/2002
Securities 45,705 43% 34,171 40% 34%
Equity Derivatives 22,200 21% 19,887 23% 12%
Fixed Income 13,043 12% 9,005 11% 45%
Stockbroking 10% 5,279 6% 98%
10,462
Structuring 30,710 29% 24,399 29% 26%
Asset Management 21,292 20% 20,502 24% 4%
Gross operating 97,707 92% 79,072 93% 24%
revenue
Net income from 15,492 15% 11,027 13% 40%
investments
Unrealised foreign (7,604) (7%) (5,335) (6%) (43%)
exchange losses
Net investment 7,888 8% 5,692 7% 39%
income
Total 105,595 100% 84,764 100% 25%
SECURITIES
The securities activities of Cadiz generated R45.7m, 43% of the gross income of
the group. The aggregate contribution of the securities activities grew by 34%
period-on-period, which is extremely gratifying considering market conditions.
Notably, the stockbroking activities contributed 98% more revenue than last
year. This is recognition for the team"s research efforts, strong relationships
between Cadiz dealers and their clients and a highly rated administration
service. The contribution of the fixed income team is 45% higher than for 2002,
another sterling effort. The equity derivative operation, which is the original
business of Cadiz, managed to increase revenue by 12% over last year in very
tough markets.
The strong financial performance of the securities activities and its components
is mirrored and underpinned by another compelling showing in the Financial Mail
Survey of research and analysts. Cadiz was rated the best research and dealing
house in derivatives in South Africa for an unparalleled seventh successive
year. In addition, the firm was rated first in Quantitative Analysis, Risk
Management Research and Innovative Research (the latter two categories for the
second year in a row) and third in Fixed Income Research. Cadiz entered only
seven categories in the survey and received five first places and one third
place.
STRUCTURING
The structuring activities of Cadiz grew by 26% over last year - another strong
showing. This growth is largely a result of the increasing popularity of
derivative-based solutions for managing risk in investment portfolios. As
predicted in previous commentary, the financial markets continue to show
significant volatility and as a result, more and more investors, trustees and
portfolio managers are paying attention to capital preservation and containment
of risk as a point of departure in investment strategy.
We expect this trend to continue and therefore see structuring as a key growth
vector in the future of Cadiz.
ASSET MANAGEMENT
In terms of gross revenue, the specialised asset management activities of Cadiz
showed only a modest 4% period-on-period increase, contributing R21.3m to June
2003. Over the past year, Cadiz Specialised Asset Management ("CSAM") lost some
R800m in funds under management due to the expiry of fixed-term mandates. This
loss in income was offset by additional fees earned on management of the assets
acquired with the acquisition of PC.
The PC acquisition added a number of non-financial benefits to CSAM, including
significant reduction of client dependency, and realisation of economies of
scale. CSAM now manages some R12.5 billion in assets, placing the business in
the category of a medium-sized asset manager.
The performance track record of CSAM portfolios continues to shine as the
philosophy of capital preservation systematically locks in and ratchets up
positive returns and avoids capital losses in volatile markets. This
methodology, backed by a solid 7-year track record, is gaining credibility and
recognition with trustees and advisors in the domain of management of core
investment portfolios.
PROSPECTS
The proven ability of Cadiz to survive, perform and grow in incredibly tough
market conditions gives us confidence for the future. Our relative strength, in
a sector that has experienced protracted trauma, positions us well to evaluate
and take advantage of opportunities if and when they arise.
On 1 August 2003 we will celebrate our tenth anniversary. We have re-affirmed
our core organisational values, have a clear business model and have set
ourselves ambitious goals for the future. We will strive to deliver on the core
purpose of Cadiz - "Our Family, Innovating For Yours" - and in so-doing, exceed
the expectations of all of our stakeholders.
TREASURY SHARES
In terms of the approval granted at the Company"s Annual General Meeting a
subsidiary of Cadiz purchased 4,000,000 Cadiz shares at an average price of
155.8 cents per share.
BASIS OF PRESENTATION
ACCOUNTING POLICIES
The interim report has been prepared in accordance with AC 127 (Interim
financial reporting). The accounting policies are consistent with those applied
in the annual financial statements for the year ended 31 December 2002 except
for the adoption of AC 133 (Financial instruments - Recognition and measurement)
which has been applied from 1 January 2003. This has resulted in the re-
classification of Investments and Trading Securities into three classes: assets
that are Available for Sale, assets that are to be Held to Maturity and Trading
assets. This classification has had no effect on opening reserves as the
investments were measured on a similar basis.
An accounting policy that was applied at December 2002 was not disclosed,
notably that foreign currency transactions are accounted for at the exchange
rates prevailing at the date of the transaction. Gains and losses resulting from
the settlement of such transactions and from the translation of monetary assets
and liabilities denominated in foreign currencies are recognised in the income
statement. Such balances are translated at period-end rates.
RESTATEMENT OF COMPARATIVES AND ADDITIONAL DISCLOSURES
The Listings Division of the JSE Securities Exchange SA reviewed the group"s
2002 annual report and after consultation with the GAAP Monitoring Panel (GMP)
considered that the changes to the 2001 comparatives should have been disclosed
more fully in terms of GAAP and that certain additional disclosures were
required. These additional disclosures are provided below. It should be noted
that none of the adjustments had any impact on the earnings of the group.
The June 2002 comparatives (contained in this interim report) and the December
2001 comparatives (contained in the December 2002 annual report) were restated
for the adoption of AC 412 (Consolidation - Special purpose entities). This had
no effect on current or prior year earnings or net asset value. However it
resulted in the increase in June 2002 comparatives for Investments and Trading
Securities of R5.3m (Dec 2001: R5.3m), in Cash and Cash Equivalents of R13.6m
(Dec 2001: R14.1m) and in Trade and Other Payables of R18.9m (Dec 2001: R19.4m).
The group de-registered its banking operation during 2001 and the June 2002 and
December 2001 comparatives have been reclassified as follows:
* June 2002 gross revenue of R8.0m (Dec 2001: R31.7m) and exchange gains of
R0 (Dec 2001: R1.5m) included in Operating Expenses have been reclassified as
Net Investment Income on the face of the income statement;
* June 2002 Other Assets totalling R10.5m (Dec 2001: R17.0m) have been
reclassified as Receivables and Prepayments; and
* The Preference Share Capital which was originally part of the secondary
capital of the banking operation has been reclassified as a liability and the
June 2002 dividend paid of R2.3m (Dec 2001: R4.5m) reclassified as a reduction
in Net Investment Income.
The June 2002 comparative Reserves and Trade and Other Payables have been
adjusted by R3.7m to correct the amount credited to Reserves in 2001 when
initially recognising the deferred tax asset on trademarks. The disclosure in
the above statement of changes in equity should have been used in the 31
December 2002 annual report.
The cash outflow recorded as Change in Investments of R24.9m in the December
2002 cash flow statement represents proceeds on disposal of R84.1m less
investments acquired of R109.0m.
SEGMENTAL REPORTING
The services provided by the group are not subject to materially different risks
and are regarded as a single business activity, operating only in South Africa
for financial statement reporting purposes.
On behalf of the board of directors.
Colin Hall Ray Cadiz
Chairman Chief Executive Officer
Cape Town
30 July 2003
Registered office
Ground Floor
Fernwood House
The Oval
1 Oakdale Road
Newlands
7700
P O Box 44547
Claremont
7735
www.cadiz.co.za
Directors
C A Hall (Chairman)*
R F G Cadiz (CEO)(Irish)
B H Kent*
S J Saunders*
D M Lawrence*
(* Non - executive directors)
Transfer secretaries
Computershare Investor Services Limited
70 Marshall Street
Johannesburg
2001
P O Box 1053
Johannesburg
Company Secretary
F Shaw, E.mail: fraser.shaw@cadiz.co.za
