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PGR - Peregrine Holdings - Reviewed results For the year ended 31 March 2010
PEREGRINE HOLDINGS LIMITED
Registration number 1994/006026/06
Share code: PGR
ISIN code: ZAE000078127
("Peregrine" or the "group")
REVIEWED RESULTS
For the year ended 31 March 2010
CONSOLIDATED INCOME STATEMENTS
% change
2009 to Reviewed year Audited year
2010 ended 31 March ended 31 March
2010 2009
R`000 R`000
Operating revenue (10) 1,383,065 1,541,508
Investment and other income 161,822 (89,495)
Investment contract
benefits/ (liabilities) 344,194 (193,772)
Investment contract
(expenses)/income (344,194) 193,772
Operating expenses (8) (1,048,383) (1,144,528)
Profit from operations 61 496,504 307,485
Net interest paid (38,068) (49,147)
Interest received 43,854 88,716
Interest paid (81,922) (137,863)
Income from associate companies 12,688 9,541
Profit from ordinary
activities 76 471,124 267,879
Capital impairment (1,709) (11,043)
Profit before taxation 83 469,415 256,836
Taxation (75,775) (40,881)
Profit for the year 82 393,640 215,955
Attributable to:
Equity holders of the
company 126 267,298 118,041
Non-controlling interests 126,342 97,914
393,640 215,955
Basic earnings per
ordinary share (cents) 128 124.8 54.8
Number of ordinary
shares in issue (`000) 228,129 228,129
Treasury shares held (`000) 10,736 13,978
Weighted average number
of ordinary shares in issue (`000) 214,195 215,239
DETERMINATION OF HEADLINE EARNINGS
% change Reviewed Audited
2009 to year ended year ended
2010 31 March 31 March
2010 2009
R`000 R`000
Profit attributable to equity
holders - IAS 33 earnings 267,298 118,041
Adjustments:
Impairment to loan to associate
forming part of the net
investment in associate - IAS 36 1,715 11,043
Impairment to goodwill - IAS 36 804 -
Surplus on sale of
available-for-sale assets - IAS 39 (2,244) -
Surplus on sale of property - IAS 16 - (115,364)
Surplus on disposal of interest in subsidiary (7) -
Profit on disposal of property,
plant and equipment - IAS 16 (3,424) -
Tax effect 1,286 14,370
Non-controlling interest effect 1,040 44,977
Headline earnings 265 266,468 73,067
Intangible amortisation 17,725 20,981
Headline earnings excluding intangible
amortisation 284,193 94,048
Headline earnings per ordinary
share (cents) 267 124.4 33.9
Headline earnings per ordinary
share excluding intangible
amortisation (cents) 204 132.7 43.7
Basic earnings per ordinary share
excluding intangible amortisation
(cents) 106 133.1 64.6
Dividend paid per ordinary share
in respect of the previous year (cents)-77 13.0 56.0
Dividend per ordinary share
declared subsequent to 31 March (cents)138 31.0 13.0
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Reviewed Audited
year ended year ended
31 March 31 March
2010 2009
R`000 R`000
Profit for the year 393,640 215,955
Other comprehensive income for the
year net of tax: (261,466) (231,749)
Forward exchange contracts entered
into as a cash flow hedge 8,787 (100,433)
Transfer out of revaluation reserve on
disposal of available-for-sale assets (730) (354)
Currency translation differences (269,523) (130,962)
Total comprehensive income for the year 132,174 (15,794)
Attributable to:
Equity holders of the company 78,508 (57,447)
Non-controlling interests 53,666 41,653
132,174 (15,794)
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
Reviewed Audited
as at 31 March as at 31 March
2010 2009
R`000 R`000
Assets
Non-current assets 4,966,801 4,508,958
Property, plant and equipment 32,819 40,369
Intangible assets 1,207,094 1,455,064
Investment in associate companies 11,424 8,992
Investments linked to policyholder
investment contracts 3,460,683 2,725,372
Financial investments 161,558 193,960
Loans and receivables 18,086 11,729
Deferred taxation 75,137 73,472
Current assets 6,412,764 5,468,696
Financial investments 552,176 550,066
Loans and receivables 2,399 5,917
Trade and other receivables 303,929 281,305
Amounts receivable in respect of
stockbroking activities 4,862,107 3,898,488
Taxation 14,522 19,305
Cash and cash equivalents 677,631 713,615
Total assets 11,379,565 9,977,654
Equity and liabilities
Equity 1,934,590 1,856,868
Equity attributable to holders of the company 1,496,856 1,417,880
Non-controlling interests 437,734 438,988
Non-current liabilities 4,057,439 3,476,147
Interest-bearing borrowings 542,622 674,135
Policyholder investment contract liabilities 3,460,683 2,725,372
Loans and other payables 41,894 64,904
Deferred taxation 12,240 11,736
Current liabilities 5,387,536 4,644,639
Financial instrument liability 2,898 4,206
Current portion of interest-bearing borrowings 94,108 169,585
Trade and other payables 391,725 429,735
Amounts payable in respect of
stockbroking activities 4,854,909 3,979,955
Taxation 43,896 61,158
Total equity and liabilities 11,379,565 9,977,654
Net tangible asset value per ordinary share 236.9 119.8
Net asset value per ordinary share 688.5 662.1
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Share Share Treasury Accumulated
capital premium shares profits
R`000 R`000 R`000 R`000
Reviewed - 2010
Balance at 31 March 2009 228 38,024 (42,941) 1,414,765
Non-controlling interest
arising on acquisition of
subsidiary 1 - - - -
Non-controlling interest
arising as result of the
sale by a subsidiary of
its treasury shares 2 - - - (3,090)
Acquisition of
non-controlling interest
in subsidiary 3 - - - -
Disposal of interest in
subsidiary - - - -
Total comprehensive income
for the year - - - 267,298
Dividends paid - - - (27,840)
Disposal of treasury shares - - 16,768 13,821
Balance at 31 March 2010 228 38,024 (26,173) 1,664,954
Audited - 2009
Balance at 31 March 2008 228 38,024 (37,091) 1,417,860
Non-controlling interest
arising on acquisition of
subsidiaries - - - -
Acquisition of
non-controlling interest
in subsidiary - - - -
Total comprehensive income
for the year - - - 118,041
Dividends paid - - - (120,554)
Share-based payments - - - (582)
Share repurchases - - (5,850) -
Balance at 31 March 2009 228 38,024 (42,941) 1,414,765
Non- Non-
distributable Total capital controlling
reserves and reserves interests Total equity
R`000 R`000 R`000 R`000
Reviewed - 2010
Balance at 31 March 2009 7,804 1,417,880 438,988 1,856,868
Non-controlling interest
arising on acquisition
of subsidiary 1 - - 283 283
Non-controlling interest
arising as result of the
sale by a subsidiary of
its treasury shares 2 809 (2,281) 15,482 13,201
Acquisition of
non-controlling interest
in subsidiary 3 - - (559) (559)
Disposal of interest
in subsidiary - - 4 4
Total comprehensive
income for the year (188,790) 78,508 53,666 132,174
Dividends paid - (27,840) (70,130) (97,970)
Disposal of treasury shares - 30,589 - 30,589
Balance at 31 March 2010 (180,177) 1,496,856 437,734 1,934,590
Audited - 2009
Balance at 31 March 2008 183,292 1,602,313 119,780 1,722,093
Non-controlling interest
arising on acquisition
of subsidiaries - - 397,783 397,783
Acquisition of
non-controlling
interest in subsidiary - - (931) (931)
Total comprehensive
income for the year (175,488) (57,447) 41,653 (15,794)
Dividends paid - (120,554) (118,778) (239,332)
Share-based payments - (582) (519) (1,101)
Share repurchases - (5,850) - (5,850)
Balance at 31 March 2009 7,804 1,417,880 438,988 1,856,868
CONDENSED CONSOLIDATED CASH FLOW STATEMENTS
Reviewed year Audited
ended year ended
31 March 31 March
2010 2009
R`000 R`000
Cash flow from operating activities 52,209 (551,399)
Cash generated from operating activities 391,020 429,793
Working capital changes (138,568) (521,546)
Arising from stockbroking activities (88,665) (373,593)
Investment into working capital (49,903) (147,953)
Interest received 43,039 88,142
Interest paid (90,440) (114,024)
Dividends received - financial investments 27,325 2,491
Dividends received - associates 8,573 37,141
Dividends paid - equity shareholders (27,840) (120,554)
Dividends paid - minority shareholders (70,130) (118,778)
Taxation paid (90,770) (234,064)
Cash flow from investing activities 153,398 (376,803)
Cash flow from financing activities (190,723) 619,827
Net increase/(decrease) in cash and
cash equivalents 14,884 (308,375)
Cash and cash equivalents at beginning
of the year 713,615 1,053,646
Effects of exchange rate changes on
cash and cash equivalents (50,868) (31,656)
Cash and cash equivalents at end of the year 677,631 713,615
SEGMENTAL ANALYSIS
Reviewed
for the year ended 31 March 2010
Revenue,
investment and
other income Interest and
(external) associate income
R`000 R`000
Wealth and asset management 478,056 9,156
Wealth management 325,874 4,773
Asset management 152,182 4,383
Broking and structuring 282,796 18,299
Stenham 619,263 4,628
Profit from operating subsidiaries 1,380,115 32,083
Group 164,772 (57,463)
Operations 6,959 16,431
Investment returns 157,813 440
Cost of funding (74,334)
1,544,887 (25,380)
Pro forma profit
Profit from before tax before
ordinary intangible
activities as per amortisation
the income adjusted for
statement minorities
R`000 R`000
Wealth and asset management 161,409 135,359
Wealth management 85,315 86,794
Asset management 76,094 48,565
Broking and structuring 90,318 90,318
Stenham 169,512 92,353
Profit from operating subsidiaries 421,239 318,030
Group 49,885 31,946
Operations (32,419) (32,261)
Investment returns 156,638 138,541
Cost of funding (74,334) (74,334)
471,124 349,976
Audited
for the year ended 31 March 2009
Revenue,
investment and Interest and
other income associate
(external) income
R`000 R`000
Wealth and asset management 404,806 10,051
Wealth management 299,788 7,695
Asset management 105,018 2,356
Broking and structuring 370,170 53,767
Stenham 758,631 6,840
Profit from operating subsidiaries 1,533,607 70,658
Group (81,594) (110,264)
Operations 5,590 9,963
Investment returns (87,184) (525)
Cost of funding - (119,702)
1,452,013 (39,606)
Pro forma profit
before tax before
Profit from intangible
ordinary activities amortisation
as per the income adjusted for
statement minorities
R`000 R`000
Wealth and asset management 115,201 102,676
Wealth management 82,810 84,294
Asset management 32,391 18,382
Broking and structuring 152,594 152,594
Stenham 215,098 117,347
Profit from operating subsidiaries 482,893 372,617
Group (215,014) (205,798)
Operations (16,735) (16,735)
Investment returns (78,577) (69,361)
Cost of funding (119,702) (119,702)
267,879 166,819
% of profit from
operating
subsidiaries before
intangible
amortisation
adjusted for
minorities
2010 2009
Wealth and asset management 42 28
Wealth management 27 23
Asset management 15 5
Broking and structuring 29 41
Stenham 29 31
Profit from operating subsidiaries 100 100
% change in
profit before
tax before
% change in intangible
profit from amortisation
operating adjusted for
activities minorities
2009 to 2010 2009 to 2010
Wealth and asset management 40 32
Wealth management 3 3
Asset management 135 164
Broking and structuring (41) (41)
Stenham (21) (21)
Profit from operating subsidiaries (13) (15)
NOTES
1. Acquisition of a controlling interest in Citadel Trust Limited, increasing
the group`s interest as at 31 March 2010 to 66.67%.
2. Stenham Limited sold 7 574 shares to its employees at an average price of
GBP112.44 per share, effective 31 March 2010. The effect of this transaction has
been to reduce the group`s effective interest as at 31 March 2010 from 52.84 %
to 52.45%.
3. Acquisition of an additional 5% interest in PeregrineQuant (Pty) Limited,
increasing the group`s interest as at 31 March 2010 to 65%.
4. At the end of March 2010 the group implemented a five year deferred purchase
scheme, in terms of which employees contracted with the Peregrine Share Trust
to acquire 20.4 million shares by putting up an equivalent quantity of matching
shares as collateral. Given the timing of the implementation of the scheme, the
effect thereof on the financial statements was not material in the year under
review. Recognition and disclosure of the scheme in terms of IFRS 2 will only
be reflected in the 2011 financial statements.
BASIS OF PREPARATION
The results for the year ended 31 March 2010 have been prepared in accordance
with, and comply with IFRS, IAS 34, AC 500 series of Interpretations, the South
African Companies Act of 1973, as amended, and the JSE Listing Requirements.
The accounting policies and methods of computation are consistent with those
applied in the annual financial statements for March 2009.
REVIEW REPORT
The results for the year ended 31 March 2010 have been reviewed by PKF (Jhb)
Inc. and their unqualified review report is available for inspection at the
group`s registered office.
CONTINGENT LIABILITIES
There are no material contingent liabilities at balance sheet date.
2010 2009
COMMITMENTS R`000 R`000
Operating lease commitments 220,076 258,451
Due in one year 48,960 48,368
Due in two to five years 143,630 153,533
Thereafter 27,486 56,550
Capital expenditure 6,799 10,533
Contracted 35 1,465
Authorised but not yet contracted 6,764 9,068
Commentary on Peregrine Holdings Financial Results for Financial Year ending
31 March 2010
Highlights
- Basic earnings increase by 126% to R267.3 million
- Headline earnings increase by 265% to R266.5 million
- Basic earnings per share increase by 128% to 124.8 cents per share
- Headline earnings per share increase by 267% to 124.4 cents per share
Introduction
The financial results of the Peregrine Group for the year reflect a substantial
improvement in the South African asset management division, on the back of a
strong performance by Peregrine Capital, as well as a strong contribution from
the group`s proprietary investments. Citadel marginally increased its level of
profitability, while Stenham saw profits in its base currency reduce slightly
from the previous year. Broking and structuring experienced a tougher trading
environment than the previous reporting period. The strength of the rand
impacted the results negatively, whilst lower interest rates together with
reduced outstanding debt resulted in a substantial decrease in interest costs.
Financial Results
Operating revenue of R1.4 billion decreased by 10% from the previous year,
reflecting a combination of the negative effect of the stronger rand on
offshore revenues and the ongoing difficult trading environment experienced
both in the broking and structuring divisions and the global property
investment division housed within Stenham.
Investment and other income of R161.8 million showed a large improvement from a
loss of R89.5 million in the previous year, driven by strong returns on
proprietary capital invested into the group`s hedge funds.
Total operating expenses of R1.05 billion were 8% lower than the previous year,
with net interest paid 23% lower at R38.1 million. The effective tax rate of
the group remained at 17%, reflecting the lower tax rate of the group`s
offshore subsidiary, Stenham. Overall profit attributable to shareholders
increased by 126% to R267.3 million.
Segmental results
Substantial minority interests exist in many of the group`s asset management
and group investment operations. The operating results below are therefore
presented on a pro forma, `after minorities` basis, to better reflect and aid
in the understanding of the specific economic benefit to the shareholders of
the group. The results are reflected at the operating profit level, on a
pre-tax basis. In addition, these pro-forma earnings are shown before the
amortisation of intangible assets in order to most closely represent the cash
generation of the underlying subsidiaries. This is considered the most
appropriate basis on which to assess the results and is consistent with the way
in which results were presented in the previous year.
Wealth and asset management
Private-client wealth manager, Citadel, saw profit from ordinary activities
increase by 3% to R86.8 million. Total assets under management ended the period
at R16.2 billion. Gross inflows continued to average almost R200 million per
month. The company`s client retention ratio, both by number of clients and by
assets, remains comfortably in line with its long-term retention experience of
98%. This, together with positive performance on client portfolios, led to
higher average assets under management, when compared to the previous financial
period. The company`s growth initiatives during the period included expanding
the advisory team as well as establishing a presence in London. Whilst client
portfolios have been positioned to be substantially sheltered from a strong
rand, a significant portion of the company`s earnings are generated offshore
and are therefore negatively affected by the stronger rand.
The contribution from the group`s asset management division, excluding Stenham,
increased by 164% to R48.6 million. This reflects a return to performance fees
for a number of mandates.
The group`s flagship hedge-fund manager, Peregrine Capital, currently manages
over R3.2 billion across a range of mandates. The team has a highly successful
track record spanning almost 12 years. Performance in all the mandates was
substantially positive during this reporting period, which meant that at the
reporting date, almost the entire asset base was in performance fee territory.
This positive performance was achieved despite the portfolios having low net
market exposure across the various mandates, on the back of concerns over
market valuations.
The Big Rock team currently manages assets in excess of R500 million and
continued to perform well during the reporting period, building on their track
record of more than 11 years. The team operated off a stable and increased
asset base.
The group holds a 49.9% interest in Caveo, a South African hedge fund of funds
joint venture with Investment Solutions. Caveo produced a marginal contribution
to group profitability for the period and saw assets under management increase
to just over R2.8 billion. Performance of the funds continued to be positive,
building on the stable track record established over several years.
Peregrine iQ, the group`s institutional asset manager with a quantitative
focus, experienced a reduction in assets under management to R11.6 billion, but
remained profitable during the period. Initiatives are under way to
meaningfully increase the assets under management after an extensive
re-focusing of the business.
Stenham, the group`s 52% held offshore asset management subsidiary, houses the
group`s global hedge fund of funds operation, with assets under management of
$2.7 billion and a global property manager with assets under management of
GBP2.0 billion. Stenham`s contribution to the group, measured in rand, fell by
21% from R117.3 million to R92.3 million, reflecting primarily the appreciation
of the rand, as Peregrine`s effective share of the profit for the year dropped
by 5% from GBP7.8 million to GBP7.4 million in Sterling terms.
Stenham`s fund of funds continued to generate attractive risk-adjusted returns
to investors and was nominated for a number of industry awards during the year.
The business achieved net inflows of over $400 million during the financial
year, a period during which many similar businesses experienced significant
outflows. Income for this business is mostly of an annuity nature, with a small
portion arising from performance fees earned during the year. The business
continues to focus on delivering consistent returns to investors, while
improving its administrative capacity.
Stenham`s property division experienced reduced income during the period
primarily as a result of lower asset values as well as a reduced volume of
transactions. Off the back of stable cash flows from underlying properties, the
team successfully completed debt restructuring for a number of property
investments through a combination of renegotiated bank finance and rights
issues. Further restructurings are expected within the property portfolios this
year as the process of deleveraging continues. At the same time a few
attractive investment opportunities arose leading to performance fees being
earned notwithstanding a very difficult environment. Current conditions are
producing good opportunities for the business and its investors in selected
markets. The extent to which these can be exploited will depend on the team`s
ability to raise capital for these transactions.
Broking and structuring
The group`s broking and structuring activities are housed within Peregrine
Securities. This business experienced a challenging environment during the
period under review, with conditions stabalising towards the end of the period.
The Securities business is a significant participant in trading on the JSE and
SAFEX, and did not escape the effects of lower activity in these markets.
Profits from ordinary activities reduced by 41% to R90.3 million. As market
volumes and risk appetite have begun to improve again, flows and client
participation have improved from the lows experienced during the first half of
the year. Subsequent to year-end a transaction has been concluded with a
management consortium of Peregrine Securities, which entrenches the well
established, and successful management team and facilitates staff retention as
well as succession planning. (See below for further details)
Proprietary investments and balance sheet
The group`s proprietary investment portfolio showed a substantial swing to
positive returns in this period, with a contribution of R138.5 million to
overall profitability. The bulk of the profits were derived from the positive
performance of the group`s hedge fund portfolio, with the remainder resulting
from an uplift in the group`s small private equity portfolio.
The debt position of the group improved markedly during the year. Opening debt
of R850 million at the beginning of the year was reduced to just over R600
million by year-end. Against this the group held R170 million of free cash at
the centre as well as a portfolio of proprietary investments amounting to a
further R600 million.
Staff incentive scheme
Prior to year-end an executive incentive scheme was implemented, which resulted
in senior staff members purchasing in excess of 20 million shares at R8.10 per
share on a deferred basis. These shares will vest in three equal tranches in
November 2012, 2013 and 2014. Each participant is obliged to pledge an equal
number of Peregrine shares as security for payment of the deferred purchase
consideration. All of the management teams in the group are incentivised either
through direct participation in the profit of their business, through
shareholding at a subsidiary level or through this scheme. In addition, a share
option scheme for other members of staff was implemented. As these schemes were
only introduced during the last week of the year, the effect of the schemes is
immaterial on the current year`s results.
Transaction with Peregrine Securities management consortium
Subsequent to year-end, a consortium, comprising current management of
Peregrine Securities, has purchased a 35% stake in the group`s broking and
structuring business. The net effect of the transaction is that the
capitalisation of the business will be enhanced, while Peregrine Holdings will
receive cash out of the transaction immediately as well as on a deferred basis,
the quantum of which will depend on the profitability of the business over the
next 3 years.
Outlook
While sentiment has improved and trading activity has picked up in global
financial markets, uncertainty about the outcome of recent major government and
central bank interventions remain. With many of Peregrine`s funds in
performance fee earning territory and asset levels at or around all-time highs,
the group is well positioned to operate in what remains a difficult and
volatile environment.
Dividend
In keeping with the stated dividend policy of paying out a minimum of 25% of
each year`s earnings, the directors have resolved to declare a dividend of
31 cents per share for the year.
In compliance with the requirements of STRATE, the following dates are
applicable to the dividend payment:
Last date to trade cum dividend Friday, 16 July 2010
Trading ex dividend commences Monday, 19 July 2010
Record date Friday, 23 July 2010
Payment date Monday, 26 July 2010
Shares may not be dematerialised or rematerialised between Monday, 19 July 2010
and Friday, 23 July 2010, both dates inclusive.
Jan van Niekerk Sean Melnick Leonard Harris
Deputy Group CEO Group CEO Non Executive Chairman
2 June 2010
Java Capital
Date: 02/06/2010 09:54:06 Supplied by www.sharenet.co.za
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