| Tue 9 Mar 2004, 8:26 | | AUDITED RESULTS |
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CADIZ HOLDINGS LIMITED - AUDITED RESULTS
CADIZ HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1997/007258/06)
ISIN ZAE000017661
Share code CDZ
("CADIZ")
AUDITED RESULTS FOR THE YEAR ENDED 31 DECEMBER 2003
HIGHLIGHTS
* Gross operating revenue up by 26.2% to R194.3 million
* Diluted headline earnings per share up by 9.6% to 34.3 cents
* Net asset value per share up 15.3% to 173 cents
* Five year compounded diluted headline earnings per share
growth of 37.8%
* Rated the best research and dealing house in derivatives for
the seventh successive year
GROUP INCOME STATEMENT Audited Audited
twelve twelve
months months
31-Dec-03 31-Dec-02
R "000 R "000
Gross operating revenue
194,336 154,031
Operating expenses (115,795) (86,146)
Operating profit 78,541 67,885
Net investment income 11,578 8,415
Net income from investments 24,382 22,998
Unrealised foreign exchange losses (12,804) (14,583)
Goodwill amortised (2,080) -
Net income before taxation 88,039 76,300
Taxation (21,895) (13,378)
Net income after taxation 66,144 62,922
Reconciliation of headline earnings
Net income after taxation 66,144 62,922
Goodwill amortised 2,080 -
Headline earnings 68,224 62,922
Issued number of shares ("000) 239,810 239,810
Consolidated number of shares (`000) 188,069 191,553
Weighted average number of shares 188,689 191,453
("000)
Diluted weighted average number of 198,811 201,176
shares ("000)
Earnings per share (cents)
Basic 35.1 32.9
Diluted 33.3 31.3
Headline earnings per share (cents)
Basic 36.2 32.9
Diluted 34.3 31.3
Dividends per share (cents) 12.0 11.0
GROUP BALANCE SHEET Audited Audited
31-Dec-03 31-Dec-02
R"000 R"000
Assets 590,067 485,436
Fixed assets 4,907 5,539
Deferred taxation 21,840 22,670
Goodwill 25,779 -
Investments and trading securities 356,879 313,845
Receivables and prepayments 70,499 60,170
Taxation 4,542 8,032
Cash and cash equivalents 105,621 75,180
Equity and reserves 325,684 286,845
Ordinary share capital and premium 81,445 87,679
Reserves 244,239 199,166
Liabilities 264,383 198,591
Deferred taxation 7,805 3,074
Trade and other payables 108,910 75,040
Compulsory convertible debentures 139,839 116,265
Trading liabilities 7,829 4,212
Total equity and liabilities 590,067 485,436
Net asset value (cents per share) 173 150
Net tangible asset value (cents per 152 140
share)
ABRIDGED GROUP CASH FLOW STATEMENT Audited Audited
twelve twelve
months months
31-Dec-03 31-Dec-02
R"000 R"000
Cash flow from operating activities 74,368 43,288
Cash generated from operations 95,439 62,906
Dividends paid (21,071) (19,618)
Cash flow from investing activities (31,616) (29,139)
Cash flow from financing activities (6,234) (3,090)
Net change in cash and cash equivalents 36,518 11,059
Effect of exchange rate adjustment (6,077) (2,325)
Cash and cash equivalents at beginning 75,180 66,446
of year
Cash and cash equivalents at end of 105,621 75,180
year
ABRIDGED GROUP STATEMENT OF CHANGES IN Audited Audited
EQUITY
twelve twelve
months months
31-Dec-03 31-Dec-02
R"000 R"000
Share capital and premium
Opening balance 87,679 90,769
Consolidation of Cadiz Holdings Limited - (3,671)
Employee Share Trust
Treasury shares (6,234) 581
81,445 87,679
Reserves
Opening balance 199,166 159,541
Net income after taxation 66,144 62,922
Dividends paid (21,071) (19,618)
Correction of initial recognition of - (3,679)
deferred tax on trademark
244,239 199,166
Total shareholders" funds 325,684 286,845
REVIEW OF RESULTS
The Board of Cadiz Holdings Limited ("Cadiz") is pleased to
announce the results for the 2003 financial year. All component
businesses of Cadiz once again proved their abilities by
generating impressive growth.
Gross operating revenue totalled R194.3 million for the full year,
an increase of 26.2% (R40.3 million)over 2002. Operating expenses
for the year were 34.4% (R29.6 million) higher at R115.8 million.
Four items account for some 80% (R92.3 million) of operating
expenses: staff performance bonuses (30%), staff costs (29%),
facilities and administration (12%) and technology (9%). Staff
performance bonuses are variable expenses.
Of the R29.6 million increase in expenses, some R9.5 million is
attributable to the acquisition and integration of Prodigy-Coris
Asset Management (Pty) Ltd ("PC") which has been accounted for
since 1 April 2003.
Principal components of the R29.6 million increase in expenses
year-on-year are staff costs (R8.1 million), bonuses (R7.1
million), technology (R4.6 million) and facilities and
administration (R3.9 million). The average employee head-count for
2003 was 92 compared to 75 for 2002 and the average cost per staff
member increased by 7.7% year-on-year.
Operating profit of R78.5 million reflects a 15.7% increase over
last year.
The investment portfolio generated a return of R24.4 million for
the year before deduction of unrealised foreign exchange losses,
which is 6.0% higher than the returns for 2002. As at 31 December
2003, the non-Rand component of our primary capital was R89.4
million (2002: R59.5 million). Net investment income of R11.6
million after deduction of unrealised foreign exchange losses was
37.6% higher than for 2002.
Net income before taxation for 2003 was 15.4% higher than 2002 at
R88.0 million. The tax charge of R21.9 million for the period was
63.7% higher than for 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 standard 30%
rate. In addition, a prior period under-provision of R2.8 million
was booked relating to the non-deductibility of foreign exchange
losses.
The above items translate into an 8.4% increase in headline
earnings from R62.9 million to R68.2 million. This equates to an
increase in diluted headline earnings per share of 9.6% to 34.3
cents.
Net asset value per share as at 31 December 2003 was 173 cents,
15.3% up from December 2002. Net tangible asset value per share as
at 31 December 2003 was 152 cents, up 8.6% from December 2002,
despite the negative impact of the PC acquisition mentioned below.
PRODIGY-CORIS 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 R26.8 million. The acquisition had
a negative impact of R27.9 million on the net tangible asset value
of the group, reflecting the goodwill attributable to the
acquisition. This 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.
Staff and systems of PC have been successfully integrated into the
Cadiz group. Funds managed by PC are performing favourably
relative to their benchmarks.
OPERATIONAL REVIEW
The table below shows that the operating activities of the group
generated R194.3 million for 2003 - 94% 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
2003 2002 %
Increase
R"000 % of R"000 % of 2003/2002
total total
Securities 87,858 42% 66,871 41% 31%
Structuring 71,935 35% 57,428 36% 25%
Asset management 34,543 17% 29,732 18% 16%
Gross operating 194,336 94% 154,031 95% 26%
revenue
Net income from 24,382 12% 22,998 14% 6%
investments
Unrealised foreign (12,804) (6%) (14,583) (9%) 12%
exchange losses
Net investment 11,578 6% 8,415 5% 38%
income
Total 205,914 100% 162,446 100% 27%
SECURITIES
The securities businesses of Cadiz which were merged into one
business in 2002 are now reported on a combined basis. The
securities businesses in aggregate maintained their contribution
to total revenue at 42%. This contribution represents an
impressive 31% increase from 2002.
As reported in the interim announcement, the strong financial
performance of the securities activities and its components was
mirrored and underpinned by another compelling showing in the
Financial Mail Analysts Survey. Cadiz Financial Strategists
("CFS") 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. CFS entered six categories in the survey
and received five first places and one third place.
STRUCTURING
The structuring activities of Cadiz maintained their 35%
contribution to total revenue - a year-on-year growth rate of some
25%. Cadiz has a track record of delivery from derivative
structuring that extends over some seven years and we remain
confident that this business will continue to be a growth vector
in the long term. The appetite for derivative-based risk solutions
in the asset management and pension fund environments has really
only begun to take hold. The opportunity for Cadiz to roll out
these concepts into the life product, corporate and retail
investment markets offers significant potential.
ASSET MANAGEMENT
The asset management activities of Cadiz contributed some R34.5
million in revenue to the group in 2003 - an increase of 16% year-
on-year. Assets under management post the PC acquisition were
R12.19 billion, and were R13.03 billion at 31 December 2003. The
demand from consultants and trustees for funds managed on a
capital preservation basis has grown markedly in the past few
years. This represents the core focus of the asset management
activities of Cadiz. Our ability to deliver returns in this area
is borne out by a very convincing performance track record since
1997.
Other notable successes include our retail investment product and
our hedge fund operations. The retail investment product team has
now been in existence for over three years and has successfully
marketed in excess of R500 million of investments, including over
R180 million during 2003. This has been a remarkable achievement
by a start-up business in difficult markets. The hedge fund
commenced in mid 2002 and has delivered very attractive and
consistent returns in its first 16 months of operations. This has
led to the funds under management growing from R30 million at
inception to R110 million presently. Given the extensive interest
in our hedge fund offering and the power of compound growth of the
portfolios themselves, this business is expected to show strong
profitability going forward.
INVESTMENTS
Net investment income grew by 38% on a year-on-year basis to R11.6
million. This includes a R7.5 million write-down in the residual
value of the private equity portfolio, which is now valued at R9.9
million. In addition unrealised foreign exchange losses on the
investment portfolio were R12.8 million for the year. These were
due to the strength of the Rand. In line with our strategy of
foreign currency diversification of our capital base, we will
continue to assess hard-currency investment opportunities. Cadiz
is on a mission to build wealth on a global basis. Our earnings
are all Rand-based and 27.4% of our capital is invested in foreign
currency. In periods when the Rand is a top-performing currency,
the component of our capital that is invested in foreign currency
will report a loss. However, in reality, reporting earnings in
Rand in a year of Rand strength will naturally reflect an
understatement of our success in building international wealth.
BLACK ECONOMIC EMPOWERMENT
Cadiz adopted an inclusive black economic empowerment ("BEE")
strategy during 2002 and steady progress has been made over the
past year in implementing this programme. Following the release
of the Financial Sector Charter, the plan has been reviewed to
align goals with the requirements of the Charter. BEE is being
addressed in terms of human resources development, ownership and
control, procurement and corporate social investment.
PROSPECTS
We see South Africa as a land of great opportunity with
significant growth potential in our specific focused offerings,
skills and businesses. As a result of corporate activity and
attrition over the past few years, our financial services
landscape is now predominantly populated by entrepreneurial start-
ups and mature established players. Cadiz is neither. We are
recognised leaders in our core businesses. We take no proprietary
market risk. Our professional staff complement is stable. We have
R325 million in capital. Yet we are not big or mature or
inflexible.
We are excited by the opportunity that this platform gives us to
grow from strength to strength in financial services in South
Africa.
TREASURY SHARES
In terms of the approval granted at the Company"s Annual General
Meeting, a subsidiary of Cadiz purchased 4 million Cadiz shares at
an average price of 155.8 cents per share.
BASIS OF PRESENTATION
ACCOUNTING POLICIES
The results have been prepared in accordance with South African
Statements of Generally Accepted Accounting Practice and on a
basis 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. The
adoption of AC133 has had no effect on opening reserves of the
group as the investments and trading securities were measured on a
similar basis last year.
RESTATEMENT OF COMPARATIVES AND ADDITIONAL DISCLOSURES
The December 2002 comparatives have been reclassified as follows:
* Net losses included in Gross operating revenue of R0.8
million relating to the Private Equity portfolio have been
reclassified to Net investment income.
* Other assets of R2.0 million have been reclassified to
Available for Sale investments.
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.
AUDIT REPORT
The results for the year have been audited by
PricewaterhouseCoopers Inc. and their unqualified audit report on
the 31 December 2003 annual financial statements and the abridged
financial statements contained herein, are available for
inspection at the company"s registered office.
DIVIDEND ANNOUNCEMENT
Notice is hereby given of the dividend of 12 cents per ordinary
share for the financial year ending 31 December 2003 (2002: 11
cents). The dividend is covered three times by earnings per share.
Last date to trade cum-dividend Friday, 26 March 2004
Trading commences ex-dividend Monday, 29 March 2004
Record date Friday, 2 April 2004
Payment date Monday, 5 April 2004
Share certificates may not be de-materialised or re-materialised
between Monday, 29 March 2004 and Friday, 2 April 2004, both dates
inclusive.
On behalf of the board of directors.
Colin Hall Ray Cadiz
Chairman Chief Executive Officer
Cape Town
8 March 2004
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)
B H Kent*
S J Saunders*
D M Lawrence*
(* Non - executive directors)
Transfer secretaries
Computershare Limited
70 Marshall Street
Johannesburg
P O Box 61051
Marshalltown 2107
Sponsor
Investec Bank Limited
100 Grayston Drive
Sandown Sandton
P O Box 785700
Sandton 2146
Company secretary
FC Shaw, E.mail: fraser.shaw@cadiz.co.za
Date: 09/03/2004 08:00:11 AM Produced by the JSE SENS Department
