| Mon 28 Feb 2005, 8:55 | | Results For The Year |
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Cadiz Holdings Limited - Audited Results For The Year Ended 31 December 2004
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 2004
HIGHLIGHTS
* Headline earnings up by 18.5% to R80.9 million
* Diluted headline earnings per share up by 10.2% to 37.8 cents
* Dividend cover reduced from three to two times earnings
* Dividend per share up 45.8% to 17.5 cents
* Gross operating revenue exceeds R200 million
* Black Economic Empowerment shareholding at 26%
GROUP INCOME STATEMENT Audited Audited
twelve twelve
months months
31-Dec-04 31-Dec-03
R `000 R `000
Gross operating revenue 202,223 194,336
Operating expenses (120,159) (115,795)
Goodwill amortised (2,786) (2,080)
Operating profit 79,278 76,461
Net investment income 27,138 11,578
Net income from investments 35,382 24,382
Foreign exchange losses (8,244) (12,804)
Net income before taxation 106,416 88,039
Taxation (27,831) (21,895)
Profit from ordinary activities 78,585 66,144
Reconciliation of headline earnings:
Profit from ordinary activities 78,585 66,144
Release of foreign currency -
translation reserve on deregistration (516)
of foreign subsidiary
Goodwill amortised 2,786 2,080
Headline earnings 80,855 68,224
Issued number of shares (`000) 239,810 239,810
Consolidated number of shares (`000) 208,456 188,069
Weighted average number of shares 197,208 188,689
(`000)
Diluted weighted average number of 214,045 198,811
shares (`000)
Earnings per share (cents)
Basic 39.8 35.1
Diluted 36.7 33.3
Headline earnings per share (cents)
Basic 41.0 36.2
Diluted 37.8 34.3
GROUP BALANCE SHEET Audited Audited
31-Dec-04 31-Dec-03
R `000 R `000
Assets
Property, plant and equipment 5,398 4,907
Deferred taxation 20,077 21,840
Goodwill 22,993 25,779
Investments and trading securities 308,283 356,879
Receivables and prepayments 127,136 70,499
Taxation 6,741 9,697
Cash and cash equivalents 37,001 105,621
Total assets 527,629 595,222
Equity and reserves 339,641 325,684
Ordinary share capital and premium 39,815 81,445
Reserves 299,826 244,239
Liabilities 187,988 269,538
Deferred taxation 2,591 7,805
Taxation 15,749 5,155
Trade and other payables 165,763 108,910
Compulsory convertible debentures - 139,839
Trading liabilities 3,885 7,829
Total equity and liabilities 527,629 595,222
Net asset value (cents per share) 163 173
Net tangible asset value (cents per 144 152
share)
ABRIDGED GROUP CASH FLOW STATEMENT Audited Audited
twelve twelve
months months
31-Dec-04 31-Dec-03
R `000 R `000
Cash flow from operating activities 86,308 74,368
Cash generated from operations 109,046 95,439
Dividends paid (22,738) (21,071)
Cash flow from investing activities 37,754 (31,616)
Cash flow from financing activities (192,475) (6,234)
Net change in cash and cash (68,413) 36,518
equivalents
Effect of exchange rate adjustment (207) (6,077)
Cash and cash equivalents at 105,621 75,180
beginning of year
Cash and cash equivalents at end of 37,001 105,621
year
ABRIDGED GROUP STATEMENT OF CHANGES Audited Audited
IN EQUITY
twelve twelve
months months
31-Dec-04 31-Dec-03
R `000 R `000
Share capital and premium
Opening balance 81,445 87,679
Capital reduction (66,417) -
Sale of treasury shares to Makana 38,813 -
Sale of treasury shares on exercise 5,958 -
of options
Purchase of treasury shares (19,984) (6,234)
39,815 81,445
Reserves
Opening balance 244,239 199,166
Sale of treasury shares to Makana 2,327 -
Sale of treasury shares on exercise (2,071) -
of options
Release of foreign currency (516) -
translation reserve on deregistration
of foreign subsidiary
Profit from ordinary activities 78,585 66,144
Dividends paid (22,738) (21,071)
299,826 244,239
Total shareholders` funds 339,641 325,684
ABRIDGED GROUP LIQUIDITY Less than More than Total
PROFILE
1 year 1 year
R `000 R `000 R `000
As at 31 December 2004
Investments and trading 120,526 187,757 308,283
securities
Receivables and 116,358 10,778 127,136
prepayments
Taxation (9,008) - (9,008)
Cash and cash equivalents 37,001 - 37,001
Trade and other payables (143,740) (22,023) (165,763)
Trading liabilities (3,885) - (3,885)
117,252 176,512 293,764
REVIEW OF RESULTS
The Board of Cadiz Holdings Limited (`Cadiz`) is pleased to announce the results
for the 2004 financial year.
Gross operating revenue totalled R202.2 million for the full year, up 4.1% on
last year. Operating expenses for the year were 3.8% higher at R120.2 million.
These expenses have been contained due to the removal of once-off costs
associated with the acquisition of Prodigy-Coris Asset Management (Pty) Ltd in
the previous year and a general focus on cost containment.
Operating profit of R79.3 million, after the deduction of R2.8 million for
goodwill amortisation, is up 3.7% over last year.
The investment portfolio generated a return of R27.1 million (2003: R11.6
million) for the year after the deduction of foreign exchange losses of R8.2
million (2003: R12.8 million). At 31 December 2004, the non-Rand exposure of the
balance sheet was R79.2 million which represents 23.3% of our primary capital.
During the year certain investments were realised and the proceeds utilised to
redeem convertible debentures.
Net income before taxation of R106.4 million is 20.9% higher than 2003. The tax
charge of R27.8 million reflects an effective tax rate of 26.2%.
Headline earnings increased by 18.5% to R80.9 million and diluted headline
earnings by 10.2% to 37.8 cents per share after taking into account the impact
of the sale of 23.5 million shares to Makana Financial Services (Pty) Ltd
(`Makana`).
The group continued to generate solid operational cash flows. Cash and cash
equivalents on hand at 31 December 2004 were R37.0 million, a decrease of R68.6
million from December 2003 after the payment of dividends of R22.7 million in
April 2004 and a specific payment to shareholders of R66.4 million in October
2004.
OPERATIONAL REVIEW
The table below shows that the operating activities of the group generated 88%
(2003: 94%) of the total revenue of R229.4 million. The reduction is a
reflection of the improved performance of the investment portfolio net of
foreign exchange losses.
REVENUE ANALYSIS
2004 2003 % Change
R`000 % of R`000 % of 2004/2003
total total
Securities 87,654 38% 87,858 42% -%
Structuring 66,137 29% 71,935 35% (8%)
Asset management 48,432 21% 34,543 17% 40%
Gross operating 202,223 88% 94% 4%
revenue 194,336
Net income from 35,382 15% 24,382 12% 45%
investments
Foreign exchange (8,244) (3%) (12,804) (6%) 36%
losses
Net investment 27,138 12% 11,578 6% 134%
income
Total 229,361 100% 205,914 100% 11%
SECURITIES
The securities businesses in aggregate contributed 38% of total revenue for the
year, down from 42% for the previous year. In Rand terms, the contribution of
securities was in line with the previous year. This is considered to be an
impressive performance in tough markets where volumes were lower and margins
under pressure.
The strong financial performance of the securities activities is again mirrored
and underpinned by another compelling showing in the Financial Mail survey of
research and analysts. Cadiz Financial Strategists was rated the best research
and dealing house in derivatives in South Africa for an unparalleled eighth
successive year. In addition, the firm was rated first in Risk Management
Research and Innovative Research each for the third successive year, first in
Quantitative Research for the second successive year and fourth year in total,
and fifth in Fixed Income Research. Cadiz again earned five first places out of
seven categories entered in the survey in the face of stiff competition from
some of the largest local and global financial market players.
STRUCTURING
The contribution of the structuring activities to the total revenue of Cadiz
decreased from 35% to 29% year-on-year. In Rand terms, this reflects an 8% year-
on-year decrease from R71.9 million to R66.1 million and reflects the reduced
activity of the second half of 2004. Although the revenue stream can be
unpredictable at times, the team has an established loyal client base and
reputation which contributes to the income stability and longevity.
ASSET MANAGEMENT
The asset management activities of Cadiz contributed some 21% of total revenue,
up from 17% for 2003. In Rand terms this represents a 40% year-on-year increase.
The main reasons for this increase are the inclusion of the Prodigy-Coris Asset
Management (Pty) Ltd acquisition for the full year in 2004 compared to nine
months in 2003, and the strong performance of the hedge fund team on a growing
asset base.
Total assets under management at year-end were R14.3 billion. Investment returns
for the period were solid, building on our impressive seven year performance
track record. We expect the margins on our wholesale asset base to remain under
pressure. However, due to efforts to restructure the basis of our fees, we are
optimistic about the potential for our wholesale asset portfolios to generate
performance-based fees in the future for the first time.
The hedge fund operation has built a very solid track record and funds under
management stood at R225.6 million as at 31 December 2004. We expect this team
to continue to show strong revenue growth in the years ahead.
INVESTMENTS & CAPITAL
Year-on-year net investment income increased by 134% to R27.1 million from R11.6
million due to:
* Higher yields from funds invested in our hedge fund (R3.2 million);
* Decreased foreign exchange losses (R4.6 million), and
* Non-recurrence of the 2003 write-down in the private equity portfolio (R7.5
million).
On 4 October 2004, a specific payment of 32 cents per share was made to ordinary
shareholders of Cadiz. This reflected the view of management and the Board that
primary capital at the time was surplus to the requirements of the group. In
line with that decision, the Board has decided to reduce the dividend cover from
three-times to two-times earnings as an ongoing reflection of the Board`s
confidence in the cash-generating abilities of Cadiz.
After the specific payment of 32 cents Cadiz has accumulated capital of R339.6
million and continues to invest its surplus funds in an effort to achieve the
best risk-adjusted returns taking into account the possible future needs of the
group. In line with our strategy of currency diversification, our foreign
currency investments represent 23.3% of group capital.
BLACK ECONOMIC EMPOWERMENT (`BEE`)
On 28 May 2004 the shareholders approved the:
* Sale of 23.5 million shares held by the group to Makana which is owned by a
consortium led by the Makana Investment Corporation (Pty) Ltd (60%). The other
members of the consortium are Autshumatu Investments (Pty) Ltd (25%) and Wild
Orchard (Pty) Ltd (15%). This was transacted at an average price of 175 cents
per share;
* Appointment of Peter-Paul Ngwenya and Sfiso Buthelezi to the Cadiz Board as
non-executive and alternate non-executive director respectively; and
* Establishment of the Cadiz Black Economic Empowerment Trust which will
facilitate the planned transfer of 10% of the group`s equity to current and
future black employees over the next five years.
On 16 April 2004, founder management shareholders and Investec facilitated a
further boost to the BEE credentials of the group by making 21.5 million shares
available for a transaction with Worldwide Capital Limited.
On 27 October 2004, Nonhlanhla Mjoli-Mncube was appointed to the Cadiz Board as
an independent non-executive director.
Shareholders are referred to the circular dated 29 April 2004 and SENS
announcements dated 23 March 2004 and 19 April 2004 for further details of the
transactions.
The above transactions, together with the shares held by black staff and the
indirect BEE shareholding held by Investec, resulted in 26% of the shares in
Cadiz being held by BEE stakeholders.
Cadiz is committed to meaningful transformation at all levels in the business
and to adopting all aspects of the Financial Sector Charter as minimum
guidelines.
PROSPECTS
These are the sixth annual results since our listing on the JSE in April 1999.
We are very pleased to have managed to grow our performance in each period to-
date. Yet these results are mere numbers.
During the 2004 financial year, a number of pivotal changes to the group were
implemented, including material enhancement of our BEE credentials and a number
of internal changes to our management structure.
We believe that our BEE transaction with Makana will prove itself as a much-
needed example of sustainability in the broader arena of BEE transactions. We
are confident of this due to the significant time and effort that was invested
by the parties in finding each other in the first place and in the way that the
transaction was structured.
Given the nature and diversity of the individuals concerned, we expect that the
contributions of our new non-executive directors, Peter-Paul Ngwenya, Sfiso
Buthelezi and Nonhlanhla Mjoli-Mncube will be direct, candid and extremely
valuable in the years ahead.
A number of internal promotions were made in 2004:
* Ram Barkai to group deputy CEO;
* Frank Cadiz to MD of Cadiz Specialised Asset Management;
* Kevin Morley and Dan Ahern to Joint MD`s of Cadiz Financial Strategists;
* Kevin Morley joined the group Executive Decision Forum;
* Thabo Tembo to Head of Equity Derivatives;
* Darren Simpson to MD of Cadiz Stockbroking; and
* Rick Kerwin to Head of Fixed Income.
Cadiz has always believed in growing young individuals with potential and
endeavour. The internal changes above have given the needed space and
opportunity for the younger professionals in Cadiz, many of them of previously-
disadvantaged background, to prove themselves and to stake their claims as
leaders of tomorrow. Our 2005 graduate trainee programme facilitated the
recruitment of three previously disadvantaged trainees, who will circulate
within the group for 12 months before finding a permanent home. Three out of
four of the 2004 graduate trainees have already been integrated into the
permanent staff of Cadiz.
We are confident that these changes will underpin our aspirations to grow Cadiz
into a business of serious substance in the long term. Nevertheless, we remain
humble and cautiously aware of the challenges of remaining at the cutting edge
of a very competitive and rapidly changing environment.
TREASURY SHARES
In terms of the approvals granted at the Company`s Annual General Meetings on 16
May 2003 and 28 May 2004, subsidiary entities of Cadiz purchased 8.4 million
Cadiz shares at an average price of 238.7 cents per share between 19 April 2004
and 9 November 2004.
SPECIFIC PAYMENT TO SHAREHOLDERS
On 7 September 2004 the shareholders approved a specific payment of 32 cents per
share (R66.4 million) to shareholders registered on 23 September 2004, payable
on 4 October 2004.
BASIS OF PRESENTATION
ACCOUNTING POLICIES
The results have been prepared in accordance with South African Statements of
Generally Accepted Accounting Practice on a basis consistent with those applied
in the annual financial statements for the year ended 31 December 2003 except
for the adoption of AC501 (Accounting for `Secondary Tax on Companies (STC)`)
which has been applied from 1 January 2004. The adoption of AC501 has not
resulted in a restatement of the prior year results as the impact is not
considered significant.
RESTATEMENT OF COMPARATIVES AND ADDITIONAL DISCLOSURES
The December 2003 comparatives have been reclassified as follows:
* Goodwill amortisation of R2.1 million has been reclassified to be included
in operations.
* The taxation asset of R4.5 million has been split to show the gross
taxation asset of R9.7 million and taxation liability of R5.2 million.
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 2004 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 17.5 cents per ordinary share for the
financial year ending 31 December 2004 (2003: 12 cents). The dividend is covered
two times by earnings.
Last date to trade cum dividend Wednesday, 16 March 2005
Trading commences ex-dividend Thursday, 17 March 2005
Record date Thursday, 24 March 2005
Payment date Tuesday, 29 March 2005
Share certificates may not be de-materialised or re-materialised between
Thursday, 17 March 2005 and Thursday 24 March 2005, both dates inclusive.
On behalf of the Board of Directors
Colin Hall Ray Cadiz
Chairman Chief Executive Officer
Cape Town
28 February 2005
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*
D M Lawrence*
N S Mjoli-Mncube*
S P Ngwenya*
S J Saunders*
N S Buthelezi* (alternate)
(* Non - executive directors)
Transfer secretaries
Computershare Investor Services 2004 (Proprietary) 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
F C Shaw, e-mail: fraser.shaw@cadiz.co.za
