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Peregrine Holdings Limited - Unaudited Interim Results For The Six Months Ended
30 September 2004
Peregrine Holdings Limited
(Registration number 1994/006026/06)
(`Peregrine` or `the company`)
JSE code: PGR ISIN code: ZAE000015152
UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2004
Income Statement
Unaudited 6 months ended 30
September
Change 2004 2003
% R`000 R`000
Revenue -5.2% 161,318 170,145
Operating expenses -9.4% (107,024) (118,152)
Profit from operations 4.4% 54,294 51,993
Net interest received/(paid) 2,092 (4,430)
Realised and unrealised net changes in
fair value of long-term assurance fund
investments 42,279 29,805
(Loss)/gain on revaluation of long-term
assurance fund liability (42,279) (29,805)
Income from associate companies 2,242 1,278
Amortisation of goodwill (12,467) (12,838)
Profit from ordinary activities 28.2% 46,161 36,003
Net capital profits/(impairments) 1,580 -
Profit before taxation 32.6% 47,741 36,003
Taxation (15,961) (9,752)
Profit after taxation 21.1% 31,780 26,251
Minority interest (6,371) (3,944)
Attributable earnings 13.9% 25,409 22,307
Reconciliation between earnings and
headline earnings
Attributable earnings 25,409 22,307
Adjustments:
Net capital (profits)/impairments (1,580) -
Amortisation of goodwill 12,467 12,838
3.3% 36,296 35,145
Headline earnings per share (cents) 8.0% 18.3 17.0
Earnings per share (cents) 19.1% 12.8 10.8
Diluted headline earnings per share
(cents) 7.9% 18.0 16.7
Diluted earnings per share (cents) 19.0% 12.6 10.6
Number of ordinary shares in issue (`000) 232,808 245,116
Treasury shares held (`000) 39,490 41,323
Weighted average number of ordinary
shares in issue (`000) 198,181 207,252
Diluted weighted average number of
ordinary shares in issue (`000) 201,606 210,558
As previously Audited year
reported(1) ended 31 March
2004
R`000 R`000
Revenue 347,496
Operating expenses (241,841)
Profit from operations 105,655
Net interest received/(paid) (1,629)
Realised and unrealised net changes in
fair value of long-term assurance fund
investments 76,218
(Loss)/gain on revaluation of long-term
assurance fund liability (76,218)
Income from associate companies 3,474
Amortisation of goodwill (25,305)
Profit from ordinary activities 82,195
Net capital profits/(impairments) (654)
Profit before taxation 81,541
Taxation (29,219)
Profit after taxation 52,322
Minority interest (9,821)
Attributable earnings 42,501
Reconciliation between earnings and
headline earnings
Attributable earnings 17,820 42,501
Adjustments:
Net capital profits/(impairments) 2,641 654
Amortisation of goodwill 14,685 25,305
35,146 68,460
Headline earnings per share (cents) 15.6 33.2
Earnings per share (cents) 7.9 20.6
Diluted headline earnings per share (cents) 15.4 32.7
Diluted earnings per share (cents) 7.8 20.3
Number of ordinary shares in issue (`000) 245,116 245,116
Treasury shares held (`000) 24,013 42,023
Weighted average number of ordinary shares
in issue (`000) 225,598 206,307
Diluted weighted average number of
ordinary shares in issue (`000) 228,904 209,647
1 - Refer to note on restatement of comparatives
Segmental analysis
Revenue
Unaudited 6 months ended 30 Audited year
September ended 31 March
2004 2003 2004
R`000 R`000 R`000
Wealth and asset management 113,298 87,093 197,797
Structuring, broking and distribution 26,744 30,405 71,367
Group investments (net of group costs) 21,276 40,881 66,465
Peresys2 - 11,766 11,867
161,318 170,145 347,496
Profit from operations
Unaudited 6 months ended Audited year
30 September ended 31 March
2004 2003 2004
R`000 R`000 R`000
Wealth and asset management 41,413 17,239 58,803
Structuring, broking and
distribution 4,319 8,649 17,172
Group investments (net of group
costs) 8,562 25,528 29,547
Peresys2 - 577 133
54,294 51,993 105,655
2 The business was disposed of with effect from 1 October 2003.
Balance sheet
Unaudited as at 30 September Audited as at 31
March
2004 2003 2004
R`000 R`000 R`000
ASSETS
Non - current assets 1,331,070 1,105,662 1,252,336
Property, plant and
equipment 6,788 7,712 5,859
Intangible assets 174,570 206,562 187,562
Investment in
associate companies 17,834 23,818 17,265
Financial investments 36,494 22,261 38,025
Long-term assurance
fund investments 1,041,635 821,064 975,222
Loans receivable 35,347 6,515 6,069
Deferred taxation 18,402 17,730 22,334
Current assets 564,964 741,764 645,129
Trading securities 140,337 109,325 104,879
Trade and other
receivables 53,690 41,839 53,568
Amounts receivable in
respect of
stockbroking
activities 262,622 482,209 365,397
Cash and cash
equivalents 108,315 108,391 121,285
Total assets 1,896,034 1,847,426 1,897,465
EQUITY AND LIABILITIES
Capital and reserves 444,607 395,078 416,586
Share capital 233 245 245
Share premium 59,903 87,188 87,188
Treasury shares (84,329) (88,904) (90,476)
Accumulated profits 397,344 363,313 385,221
Non-distributable
reserves 34,175 33,236 34,408
Obligation to issue
shares 37,281 - -
Minority interest 7,020 6,974 4,849
Non- current
liabilities 1,055,329 828,519 991,335
Long-term assurance
fund 1,041,635 821,064 975,222
Deferred taxation 13,694 7,455 16,113
Current liabilities 389,078 616,855 484,695
Trade and other
payables 88,770 51,423 84,039
Amounts payable in
respect of
stockbroking
activities 278,999 506,382 387,221
Interest-bearing
borrowings - 39,919 -
Taxation 21,309 19,131 13,435
Total equity and
liabilities 1,896,034 1,847,426 1,897,465
Net asset vale per share
(cents) 229.9 193.9 205.1
Statement of changes in equity
Unaudited 6 months ended 30 September
Share capital
and share Accumulated Treasury
2004 premium profits shares
R`000 R`000 R`000
Balance at 31 March 2004 87,433 385,221 (90,476)
Shares repurchased and cancelled (27,297) 292 1,933
Write-down in value of treasury
shares on vesting - (3,774) 4,214
Currency translation differences - - -
Revaluation of
available-for-sale assets - - -
Obligation to issue shares - - -
Attributable earnings - 25,409 -
Dividends paid - (9,804) -
Balance at 30 September 2004 60,136 397,344 (84,329)
2003
Balance at 31 March 2003 restated 87,433 344,780 (69,921)
Treasury shares acquired - - (22,784)
Write-down in value of treasury
shares on vesting - (3,774) 3,801
Currency translation differences - - -
Attributable earnings - 22,307
Vendor liabilities settled - - -
Balance at 30 September 2003 87,433 363,313 (88,904)
Obligation in
Non respect of
distributable shares to be
2004 reserves issued Total
R`000 R`000 R`000
Balance at 31 March 2004 34,408 - 416,586
Shares repurchased and
cancelled - - (25,072)
Write-down in value of
treasury shares on vesting - - 440
Currency translation
differences 1,078 - 1,078
Revaluation of
available-for-sale assets (1,311) - (1,311)
Obligation to issue shares - 37,281 37,281
Attributable earnings - - 25,409
Dividends paid - - (9,804)
Balance at 30 September 2004 34,175 37,281 444,607
2003
Balance at 31 March 2003
restated 37,105 31,500 430,897
Treasury shares acquired - - (22,784)
Write-down in value of
treasury shares on vesting - - 27
Currency translation
differences (3,869) - (3,869)
Attributable earnings - - 22,307
Vendor liabilities settled - (31,500) (31,500)
Balance at 30 September 2003 33,236 - 395,078
Cash flow statement
Audited year
Unaudited 6 months ended 30 September ended 31 March
2,004 2,003 2,004
R`000 R`000 R`000
Cash flow from
operating
activities 5,422 46,221 105,958
Cash generated
from
operations 53,318 53,165 112,851
Working capital
changes (33,610) 2,941 22,592
Net interest
received/(paid) 2,092 (4,430) (1,629)
Dividends paid (9,804) - -
Taxation paid (6,574) (5,455) (27,856)
Cash flow from
investing
activities 5,937 (8,916) (9,158)
Cash flow from
financing
activities (24,329) (58,207) (104,808)
Share
repurchases (25,072) (19,224) (20,796)
Proceeds on
exercise of
share options 440 27 27
Payments to
minorities and
vendors (4,200) (33,996) (39,552)
Share scheme
payment
received 4,503 - -
Increase in
interest
bearing
receivables - (446) -
Increase in
interest
bearing
borrowings - (4,568) (44,487)
Net decrease
in cash and
cash
equivalents (12,970) (20,902) (8,008)
Cash and cash
equivalents at
beginning of
the period 121,285 129,293 129,293
Cash and cash
equivalents at
end of the
period 108,315 108,391 121,285
Notes:
1. Accounting policies
The results are prepared in accordance with South African Statements of
Generally Accepted Accounting Practice and the South African Companies Act of
1973. The accounting policies applied in the preparation of the results are
consistent with those of the previous financial year.
2. Restatement of comparatives
Due to the consolidation of the group`s share trusts, which resulted from a
change in accounting policy in respect of the financial year ended 31 March
2004, the comparative figures have been restated as follows:
Loan
Intangibles receivable Cash
R`000 R`000 R`000
Difference arising from change in
accounting policy to
31 March 2003 (34,779) (12,381) 232
Difference arising from change in
accounting policy for
the 6 months ended 30 September 2003 1,847 2,641 26
(32,932) (9,740) 258
Balance as at 30 September 2003 239,494 16,255 108,133
Restated balance 206,562 6,515 108,391
Accumulated Treasury
Payables profits shares
R`000 R`000 R`000
Difference arising from change in
accounting policy to
31 March 2003 36 6,557 53,521
Difference arising from change in
accounting policy for
the 6 months ended 30 September 2003 - 1,475 (3,039)
36 8,032 50,482
Balance as at 30 September 2003 51,387 355,281 38,422
Restated balance 51,423 363,313 88,904
The difference arising from the change in accounting policy is detailed in full
in the financial results for the year ended 31 March 2004.
Highlights
Group assets under management top R17 billion
Earnings per share up 19,1%
Headline earnings per share up 8,0%
Introduction
The Peregrine group has produced a solid increase in earnings for the interim
period with the operating profit from the core wealth and asset management
businesses being substantially higher than that of the previous period.
Results
Profit from operations of the wealth and asset management businesses increased
by 140% to R41,4 million from R17,2 million. This increase was partially offset
by lower contributions from the structuring, broking and distribution businesses
where operating profit fell from R8,6 million to R4,3 million and by a lower
return on group investments (net of group costs) of R8,6 million from R25,5
million previously. This resulted in an overall increase of 4,4% in the group`s
profit from operations to R54,3 million.
Strong cash generation over the past year, enabled the group to earn net
interest of R2,1 million compared to interest paid of R4,4 million in the
previous comparable period.
Notwithstanding a full rate of taxation and an increase in the amount
attributable to minorities, attributable earnings increased by 13,9% to R25,4
million. With a lower number of shares in issue, due to on-going share re-
purchases, earnings per share increased by 19,1% to 12,8 cents per share.
Similarly, headline earnings increased by 3,3% to R36,3 million with headline
earnings per share being 8,0% higher at 18,3 cents per share.
Operating highlights
All of the businesses within the wealth and asset management division registered
improved performances.
Private-client wealth manager, Citadel produced a meaningful increase in
operating profit whilst continuing to attract substantial new inflows and
maintaining its excellent client retention ratio. The recently announced joint-
venture with Sanlam Life, which is set for launch early in the new year, is
expected to augment group inflows above the current level of R100 million per
month.
PeregrineQuant has increased assets under management to the R7 billion mark. As
such, the business is now profitable, reflecting a meaningful turnaround from
the losses sustained over the same period last year.
Peregrine Capital, the group`s fundamental equity hedge-fund manager, had an
outstanding six months, doubling its profit from operations for the period under
review. Growth in assets under management, coupled with continued good returns,
resulted in a significantly improved financial performance for the business over
the period. Assets under management increased to R1,29 billion from R965 million
at the beginning of the financial year. Despite the significant increase in
assets under management, investment returns have continued to be excellent as
evidenced by the various hedge-fund performance surveys.
Peregrine has evolved its hedge fund incubator funds into stand-alone single
strategy funds. This area, whilst still not yet profitable, produced an improved
financial performance for the period under review.
The structuring, broking and distribution activities, chiefly housed within
Peregrine Securities, produced an acceptable performance in subdued conditions.
Earnings were, however, substantially lower than the previous period`s
exceptional earnings. A meaningful investment has been made over the period in
seeking to expand the business` client and product base, the benefit of which is
expected in the next financial year.
Return on group investments, net of group costs, fell substantially from the
comparable period. This was as a result of both a lower net amount invested over
the period and returns, whilst excellent in absolute terms, being below last
year`s levels.
Prospects
The group currently manages in excess of R17 billion across its various wealth
and asset management businesses. This asset base now provides the group with a
modest ongoing annuity cashflow.
A substantial portion of the assets are, however, subject to performance fee
participations and, as such, Peregrine`s financial performance is and will be
closely linked to the investment performance of its underlying businesses.
Similarly, the transactional side of the business will continue to rely on
market activity to generate its profitability.
Whilst this makes forecasting earnings for the group in the short to medium term
difficult, the directors are confident of the long-term prospects for the
Peregrine group from the platform created to date.
By order of the board
Louis Fourie Sean Melnick
Chairman Chief Executive Officer
Sandton
1 November 2004
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