| Thu 6 Nov 2003, 16:50 | | Interim Financial Results |
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Peregrine Holdings Limited - Interim Financial Results
Peregrine Holdings Limited
(Registration number 1994/006026/06)
("Peregrine" or "the group")
JSE code: PGR ISIN code: ZAE000015152
Income Statement
Change Unaudited six months Audited year
2002 to ended 30 September ended 31 March
2003 2003 2002 2003
% R"000 R"000 R"000
Revenue 55.7% 170,145 109,283 255,649
Operating expenses 84.2% (118,151) (64,149) (186,255)
Profit from operations 15.2% 51,994 45,134 69,394
Net interest
(paid)/received (4,430) 2,615 4,144
Unrealised gain/(loss) on
long-term assurance
fund investment 29,805 - (151,312)
(Loss)/gain on revaluation
of long-term assurance
fund liability (29,805) - 151,312
Income from associate
Companies 1,278 5,122 (5,542)
Capital impairments and losses (2,641) - (14,303)
Capital profit on sale
of subsidiaries - - -
Amortisation of goodwill (14,685) (7,898) (23,482)
Profit before taxation -29.9% 31,516 44,973 30,211
Taxation (9,752) (7,779) (11,885)
Profit after taxation -41.5% 21,764 37,194 18,326
Minority interest (3,944) (3,785) (4,915)
Attributable earnings -46.7% 17,820 33,409 13,411
HEADLINE EARNINGS RECONCILIATION
Attributable earnings 17,820 33,409 13,411
Adjustments:
Amortisation of goodwill 14,685 7,898 23,482
Capital profit on sale of
subsidiaries - - -
Capital impairments 2,641 - 23,170
Headline earnings -14.9% 35,146 41,307 60,063
Headline earnings per
share (cents) -17.1% 15.6 18.8 25.8
Earnings per share (cents) -48.0% 7.9 15.2 5.8
Number of shares
in issue ("000) 245,116 231,104 245,116
Treasury shares ("000) (24,013) (14,467) (9,110)
Weighted average number of
shares in issue ("000) 225,598 219,854 232,429
Segmental Analysis
Profit from operations
Change Six months Six months Year ended
2002 to ended 30 ended 30 31 March
2003 September September 2003
2003 2002
% R"000 % R"000 % R"000 %
Wealth and asset 42% 50,867 98% 35,843 79% 54,651 7
management
Peregrine Investments -88% 1,127 2% 9,291 21% 14,743 2
15% 51,994 100% 45,134 100% 69,394 1
Balance Sheet
Unaudited Audited
as at 30 September as at 31 March
2003 2002 2003
R"000 R"000 R"000
ASSETS
Non - current assets 1,148,334 766,220 989,296
Property, plant and
equipment 7,712 10,039 9,333
Intangible assets 239,494 161,228 256,279
Investment in
associate companies 23,818 43,686 18,679
Financial investments 22,261 81,532 20,465
Long-term assurance fund 821,064 433,432 649,269
Loans receivable 16,255 18,936 18,450
Deferred taxation 17,730 17,367 16,821
Current assets 741,506 599,934 551,997
Trading securities 109,325 142,567 100,996
Trade and other receivables 41,839 59,926 75,317
Amounts receivable
- stockbroking activities 482,209 242,812 246,623
Cash and cash equivalents 108,133 154,629 129,061
Total assets 1,889,840 1,366,154 1,541,293
EQUITY AND LIABILITIES
Capital and reserves 437,528 487,253 477,861
Share capital 245 231 245
Share premium 87,188 48,800 87,188
Accumulated profits 355,281 363,299 338,223
Treasury shares (38,422) (34,607) (16,400)
Non distributable reserves 33,236 42,346 37,105
Amounts due to vendors - 67,184 31,500
Minority interests 6,974 43,776 5,526
Non- current liabilities 828,519 440,774 657,118
Long-term assurance fund 821,064 433,432 649,269
Deferred taxation 7,455 7,342 7,849
Current liabilities 616,819 394,351 400,788
Trade and other payables 51,387 110,934 90,577
Amounts payable -
stockbroking activities 506,382 264,466 252,179
Interest bearing borrowings 39,919 - 44,487
Taxation 19,131 18,951 13,545
Total equity and
liabilities 1,889,840 1,366,154 1,541,293
Statement of Changes in Equity
Unaudited six months Audited year
ended 30 September ended 31 March
2003 2002 2003
R"000 R"000 R"000
Equity at beginning of the 477,861 371,543 371,543
period
Changes in share capital and 38,820 77,222
share premium
Changes in accumulated profits 17,058 33,409 8,333
Attributable earnings 17,820 33,409 13,411
Treasury shares - impairment (762) - (5,078)
Movement in treasury shares (22,022) - 18,207
Shares (acquired)/utilised - (22,784) 13,129
net
Impairment 762 5,078
Changes in non-distributable (3,869) - (5,241)
reserves
Changes in amounts due to (31,500) 43,481 7,797
vendors
Equity at end of the period 437,528 487,253 477,861
Cash Flow Statement
Unaudited six months ended Audited year
30 September
ended 31 March
2003 2002 2003
R"000 R"000 R"000
Cash flow from 46,222 56,008 80,429
operating
activities
Cash generated 56,107 58,652 90,004
from operations
Net interest (4,430) 2,615 4,144
(paid)/received
Dividends paid - - -
Taxation paid (5,455) (5,259) (13,719)
Cash flow from (8,916) 39,237 (119,372)
investing
activities
Cash flow from (58,234) (15,923) 92,697
financing
activities
Proceeds from - - 77,222
share issue
Acquisition of (19,224) - (4,689)
treasury shares
Payments to (33,996) (17,102) (26,582)
vendors and
minorities
(Increase)/ (446) 1,179 2,259
decrease in loans
receivable
(Decrease)/increa (4,568) - 44,487
se in interest
bearing
borrowings
Net (20,928) 79,322 53,754
(decrease)/increa
se in cash and
cash equivalents
Cash and cash 129,061 75,307 75,307
equivalents at
beginning of the
period
Cash and cash 108,133 154,629 129,061
equivalents at
end of the period
Basis of accounting
The results have been prepared in accordance with South African statements of
Generally Accepted Accounting Practice. The accounting policies as set out in
the financial statements for the year ended 31 March 2003 have been consistently
applied in producing these results.
Notes
1 Proceeds arising from the sale of certain non-core businesses are not
accounted for in the interim results. The amounts payable to Peregrine over the
next five years will only become certain after 31 March of each year, at which
time the proceeds will be brought to account.
2 In order to comply with the application of AC 133 in respect of the year
ended 31 March 2003, comparative figures as at 30 September 2002 have been
restated by the reclassification of R129,890 million from financial investments
to trading securities.
3 In order to comply with changes in presentation, the net deferred tax asset
of R10,025 as at 30 September 2002, has been presented as follows:
R"000
Deffered tax asset 17,367
Deferred tax liability (7,342)
Introduction
The process of refocusing the Peregrine group over the past 18 months into a
wealth and asset management firm has, in line with managements expectations,
resulted in 98% of the group"s profit from operations emanating from the core
wealth and asset management businesses in the period under review.
These businesses produced a positive performance for the six months to 30
September 2003, in difficult market conditions, increasing profit from
operations by 42% to R50,9 million. Organic growth accounted for approximately
two thirds of the increase, with the additional growth resulting from the
acquisition of private-client wealth manager, Citadel in the previous financial
year.
Results
The disposal of the group"s non-core businesses has had the effect of
permanently diminishing the percentage contribution that non-asset management
businesses will make to the group"s bottom line. In this regard, the negligible
contribution from the group"s non-core businesses in the period under review
resulted in the group"s total profit from operations increasing by only 15% to
R52,0 million from R45,1 million, notwithstanding the 42% increase in the profit
from operations of the wealth and asset management businesses. Cash generated
from operations was a healthy R56,1 million for the period.
The acquisition of Citadel necessitated the group assuming a moderate level of
gearing which resulted in an interest bill of R4,4 million for the period under
review compared to interest received of R2,6 million in the previous period.
This and a lower contribution from associates, were responsible for translating
the 15% increase at the profit from operations level into a 15% decline at the
headline earnings level of R35,1 million from R41,3 million in the previous
period. Similarly, with a slightly higher weighted average number of shares in
issue, headline earnings per share declined by 17% from 18,8 cents per share to
15,6 cents per share.
Operations
The substantial increase in the profitability of the wealth and asset management
division resulted from:
an outstanding performance from Peregrine Capital, the group"s fundamental
equity hedge fund management arm,
a notable performance, in subdued markets, from Peregrine Securities, the
group"s broking and structuring arm and
the attainment of budget by Citadel, despite a strong local currency.
Peregrine Capital increased its funds under management by 61% over the period to
over R 700 million. This increase, coupled with excellent performance across its
suite of hedge funds, resulted in the company increasing its profit contribution
to double that of the previous period. In addition, the group"s proprietary
funds invested with Peregrine Capital produced highly satisfactory returns.
It is anticipated that funds under management within Peregrine Capital will
increase to in excess of R1 billion by year-end, including for the first time,
an international fund which was launched on 1 October 2003. Sufficient inflows
have already been pre-committed by investors, such that the funds managed by
Peregrine Capital have been closed to new investors.
Growth in the market share of Peregrine Securities" traditional broking
business, the expansion of the company"s range of innovative products into the
hedge fund and arbitrage markets, as well as the execution, during the period,
of several substantial structured derivative trades, saw the profitability of
this business increase by more than 50% over the previous period. Whilst market
conditions continue to remain subdued for the broking and structuring industry
as a whole, it is anticipated that Peregrine Securities will comfortably exceed
last year"s profitability for the current full year.
With a substantial portion of Citadel"s assets under management managed
offshore, the strong local currency proved to be a negative factor for the
business. Nonetheless, Citadel achieved growth in assets under management of 6%
from R7,5 billion to R7,9 billion over the six months. Despite not earning
meaningful incentive fees during the period, Citadel managed to attain its
budgeted level of profitability, with good positive cashflow generation. The
business remains highly geared to the upside in international and local capital
markets as well as to any depreciation in the local currency. New client inflows
continued to average approximately R 100 million per month.
The profitability of the wealth and asset division was dampened somewhat by
losses from the three businesses listed below, which losses were anticipated and
budgeted for at the start of the period. Strategically, the group believes that
all three businesses have the potential to be meaningful contributors to
Peregrine"s bottom line within the next two financial years.
PeregrineQuant (PQ), the group"s quantitative asset management arm, made good
progress in approaching the critical mass of funds under management required to
produce profitability on an annuity basis. Funds under management increased by
64% over the period, from R3,2 billion to R5,3 billion.
Peregrine Incubator Management (PINC), which was set up during the second half
of the previous financial year to create and provide infrastructure for the
establishment of a diverse suite of absolute return funds, grew assets under
management to approximately R50 million at the end of the period, invested
amongst three active funds. Assets under management within PINC are expected to
double by year end.
Peregrine Financial Solutions was also set up during the latter half of the
previous financial year. This business currently spearheads the group"s
marketing initiative with regard to its specialised range of investment-related
products and services.
The group"s other activities, contributed only 2% of the group"s profit from
operations for the period under review. With the group"s focus now firmly on
wealth and asset management, the remaining non-core activities, including
advisory and Peresys will be housed under the single umbrella of group
investments and managed by a team headed by the CEO from a Holdings level as
part of the group"s overall investment banking / proprietary portfolio.
Balance Sheet
During the period the group expunged vendor liabilities totalling R31,5 million,
thus rendering the group free of any outstanding vendor obligations (whether in
cash or shares) for the first time since its listing. Cash generated from
operations was applied in settlement of these liabilities as well as for the
purchase of R19,2 million of treasury shares.
Prospects
The group"s cash generative ability, even in the context of difficult markets,
was highlighted during the period under review. Whilst market conditions make it
imprudent to forecast earnings for the period ahead, it is expected that the
group will continue to be positively cash generative.
The directors of Peregrine are confident that the group has built a sustainable
platform from which to assert itself as a highly profitable wealth and asset
management firm.
Dividend
No dividend is payable at the interim stage. Shareholders can, however,
anticipate a dividend payment post year end.
By order of the board
Louis Fourie Sean Melnick
Chairman Chief Executive Officer
Sandton
6 November 2002
Directors
L J D Fourie (Chairman)
S A Melnick (Chief Executive Officer)
A P Faure*
P Goetsch
J Hertz
L N Harris*
R Stumpf*
* Non-executive
Transfer Secretaries
Computershare Investor Services Limited
(Registration number 1958/003546/06)
70 Marshall Street
Johannesburg 2001
(PO Box 61051, Marshalltown, 2107)
Secretary and Registered Office
Peregrine Management Services (Pty) Limited
(Registration number 1994/006026/06)
6A Sandown Valley Crescent
Sandown
Sandton, 2196
(PO Box 650361, Benmore, 2010)
Website www.peregrine.co.za
Date: 06/11/2003 04:37:02 PM Supplied by www.sharenet.co.za
Produced by the JSE SENS Department
