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PGR - Peregrine Holdings - Reviewed results for the year ended 31 march 2011
Peregrine Holdings Limited
(Registration number 1994/006026/06)
JSE code: ISIN Code: ZAE000078127
("Peregrine")
PEREGRINE HOLDINGS LIMITED
REVIEWED RESULTS For the year ended 31 March 2011
CONDENSED CONSOLIDATED INCOME STATEMENTS
% change
2010 to Reviewed Audited
2011 2011 2010
R`000 R`000
Operating revenue 8 1 499 127 1 383 065
Investment income 2 164 832 161 822
Total revenue 8 1 663 959 1 544 887
Investment contract benefits 268 895 344 194
Investment contract expenses (268 895) (344 194)
Operating expenses 13 (1 183 484) (1 048 383)
Profit from operations (3) 480 475 496 504
Net interest received/(paid) >100 181 (38 068)
Interest received 58 276 43 854
Interest paid (58 095) (81 922)
Income from associate companies >100 25 623 12 688
Profit from ordinary activities 7 506 279 471 124
Capital items 29 773 (1 709)
Profit before taxation 14 536 052 469 415
Taxation (55 957) (75 775)
Profit for the year 22 480 095 393 640
Attributable to:
Equity holders of the company 15 307 952 267 298
Non-controlling interests 172 143 126 342
480 095 393 640
Basic earnings per ordinary share (cents) 13 141.4 124.8
Diluted basic earnings per share (cents) 12 140.2 124.8
Number of ordinary shares in issue (`000) 228 129 228 129
Treasury shares held (`000) 10 366 10 736
Weighted average number of ordinary
shares in issue (`000) 217 763 214 195
Diluted weighted average number of
shares in issue (`000) 219 648 214 195
DETERMINATION OF HEADLINE EARNINGS
%
change
2010 to Reviewed Audited
2011 2011 2010
R`000 R`000
Profit attributable to equity holders 307 952 267 298
Adjustments:
Impairment of loan to associate forming part
of the net investment in associate (8 287) 1 715
Impairment to goodwill 3 233 804
Surplus on sale of available-for-sale assets - (2 244)
Surplus on disposal of interest in
subsidiaries (21 485) (7)
Profit on disposal of property, plant and equipment - (3 424)
Tax effect - 1 286
Non-controlling interest effect 5 836 1 040
Headline earnings 8 287 249 266 468
Amortisation of intangibles 16 522 17 725
Headline earnings excluding amortisation of
intangibles 7 303 771 284 193
Headline earnings per ordinary share (cents) 6 131.9 124.4
Diluted headline earnings per share (cents) 5 130.8 124.4
Headline earnings per ordinary share
excluding intangible amortisation (cents) 5 139.5 132.7
Basic earnings per ordinary share excluding
intangible amortisation (cents) 12 149.0 133.1
Dividend paid per ordinary share in respect
of the previous year (cents) 138 31.0 13.0
Dividend per ordinary share declared
subsequent to 31 March (cents) 13 35.0 31.0
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Reviewed Audited
2011 2010
R`000 R`000
Profit for the year 480 095 393 640
Other comprehensive loss for the year net of tax: (44 546) (261 466)
Forward exchange contracts entered into as a cash flow
hedge - 8 787
Transfer out of revaluation reserve on disposal of
available-for-sale assets - (843)
Deferred tax on revaluation of available-for-sale assets - 113
Currency translation differences (44 546) (269 523)
Total comprehensive income for the year 435 549 132 174
Attributable to:
Equity holders of the company 279 821 78 508
Non-controlling interests 155 728 53 666
435 549 132 174
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
Reviewed Audited
2011 2010
R`000 R`000
Assets
Non-current assets 5 833 410 4 976 801
Property, plant and equipment 24 575 32 819
Intangible assets 1 199 963 1 207 094
Investment in associate companies 33 723 11 424
Investments linked to policyholder investment
contracts 4 053 764 3 460 683
Financial investments 415 586 171 558
Loans and receivables 18 263 18 086
Deferred taxation 87 536 75 137
Current assets 6 730 279 6 402 764
Financial investments 462 977 542 176
Loans and receivables 7 554 2 399
Trade and other receivables 200 171 267 225
Amounts receivable in respect of stockbroking
activities 4 803 706 4 898 811
Taxation 8 111 14 522
Cash and cash equivalents 1 247 760 677 631
Total assets 12 563 689 11 379 565
Equity and liabilities
Equity 2 245 722 1 934 590
Equity attributable to holders of the company 1 732 023 1 496 856
Non-controlling interests 513 699 437 734
Non-current liabilities 4 594 191 4 057 439
Interest-bearing borrowings 332 848 542 622
Policyholder investment contract liabilities 4 053 764 3 460 683
Loans and other payables 183 006 41 894
Deferred taxation 24 573 12 240
Current liabilities 5 723 776 5 387 536
Financial instrument liability - 2 898
Current portion of interest-bearing borrowings 88 365 94 108
Current portion of loans and other payables 18 594 -
Trade and other payables 429 657 391 725
Amounts payable in respect of stockbroking activities 5 087 977 4 854 909
Taxation 29 526 43 896
Bank overdraft 69 657 -
Total equity and liabilities 12 563 689 11 379 565
Net tangible asset value per ordinary share 350.0 236.9
Net asset value per ordinary share 795.4 688.5
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Non-
Total capital controlling
and reserves interests Total equity
R`000 R`000 R`000
Reviewed - 2011
Balance at 31 March 2010 1 496 856 437 734 1 934 590
Non-controlling interest
arising as result of a business
combination - 15 201 15 201
Non-controlling interest
arising as result of the
disposal of interest in subsidiary1 12 759 9 159 21 918
Non-controlling interest
disposal as result of the share
buy back by a subsidiary of its
treasury shares2 228 (9 752) (9 524)
Acquisition of non-controlling
interest in subsidiary3 - (1 277) (1 277)
Disposal of controlling
interest in subsidiary3 - (1 729) (1 729)
Disposal of interest in subsidiary - (1 588) (1 588)
Total comprehensive income for
the year 279 821 155 728 435 549
Dividends paid (67 506) (82 369) (149 875)
Share-based payments 22 069 - 22 069
Put option reserve (8 271) (7 408) (15 679)
Goodwill recognised on
additional interest acquired in
subsidiary (6 932) - (6 932)
Disposal of treasury shares 2 999 - 2 999
Balance at 31 March 2011 1 732 023 513 699 2 245 722
Audited - 2010
Balance at 31 March 2009 1 417 880 438 988 1 856 868
Non-controlling interest
arising on acquisition of subsidiary - 283 283
Non-controlling interest
arising as result of the sale
by a subsidiary of its treasury
shares (2 281) 15 482 13 201
Acquisition of non-controlling
interest in subsidiary - (559) (559)
Disposal of interest in subsidiary - 4 4
Total comprehensive income for
the year 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 1 496 856 437 734 1 934 590
CONDENSED CONSOLIDATED CASH FLOW STATEMENTS
Reviewed Audited
2011 2010
R`000 R`000
Cash flow from operating activities 638 698 52 209
Cash flow from investing activities 19 772 153 398
Cash flow from financing activities (139 667) (190 723)
Net increase in cash and cash equivalents 518 803 14 884
Cash and cash equivalents at beginning of the year 677 631 713 615
Effects of exchange rate changes on cash and cash
equivalents (18 331) (50 868)
Cash and cash equivalents at end of the year 1 178 103 677 631
SEGMENTAL ANALYSIS
Reviewed for the year ended 31 March 2011
Revenue,
investment and
other income Interest and
(external) associate income
R`000 R`000
Wealth and asset management 488 607 24 526
Wealth management 371 505 19 285
Asset management 117 102 5 241
Broking and structuring 346 030 31 125
Stenham 659 956 (371)
Total from operating subsidiaries 1 494 593 55 280
Group 169 366 (29 476)
Operations 6 454 20 365
Investment returns 162 912 381
Cost of funding - (50 222)
1 663 959 25 804
Pro forma
profit from
ordinary activities
before intangible
Profit from amortisation &
ordinary share-based
activities as per payment cost
the income adjusted for
statement minorities
R`000 R`000
Wealth and asset management 152 541 139 797
Wealth management 94 358 104 485
Asset management 58 183 35 312
Broking and structuring 108 698 109 129
Stenham 186 746 97 675
Total from operating subsidiaries 447 985 346 601
Group 58 294 17 988
Operations (47 367) (35 347)
Investment returns 155 883 103 557
Cost of funding (50 222) (50 222)
506 279 364 589
Audited for the year ended 31 March 2010
Revenue,
investment and Interest and
other income associate
(external) 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
Total 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
from ordinary
activities before
Profit from intangible
ordinary activities amortisation
as per the income adjusted for
statement minorities
R`000 R`000
Wealth and asset management 163 431 137 381
Wealth management 87 337 88 816
Asset management 76 094 48 565
Broking and structuring 90 318 90 318
Stenham 169 512 92 353
Total from operating subsidiaries 423 261 320 052
Group 47 863 29 924
Operations (34 441) (34 283)
Investment returns 156 638 138 541
Cost of funding (74 334) (74 334)
471 124 349 976
Note: Group funding costs are disclosed as part of "group" and have not been
allocated to the appropriate underlying entities.
BASIS OF PREPARATION
The results for the year ended 31 March 2011 have been prepared in accordance
with, and comply with IFRS, IAS34, AC 500 series of Interpretations, the South
African Companies Act, 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 2010.
REVIEW REPORT
The results for the year ended 31 March 2011 have been reviewed by PKF (Jhb)
Inc. and their unqualified review report is available for inspection at the
group`s registered office.
BUSINESS ACQUISITIONS AND DISPOSALS
1. On 1 September 2010, a subsidiary of Stenham Limited acquired the business of
Montier Partners, a niche discretionary investment management provider, for a
purchase consideration of R79.9 million (GBP7.1 million). R13.5 million (GBP1.2
million) of the purchase price was settled in cash and R60.8 million (GBP5.4
million) was settled by the issue of shares in Stenham Asset Management Holdings
Limited ("SAMHL"). R3.3 million (GBP0.3 million) represents an estimation of the
contingent consideration payable if average profits of SAMHL over the three
years to 31 March 2013 exceed GBP11.1 million.
Under the terms of the shareholders agreement SAMHL has an obligation to pay a
guaranteed amount of R2.2 million (GBP200,000) over the next three years
to the vendors. The consolidation was accounted for using the acquisition
method.
The value attributed to goodwill relates to the value placed on the Montier
Partners reputation and brand name and the value of the asset management team
joining the Stenham group.
In the 7 months to 31 March 2011, Montier Partners contributed revenue of R8.1
million (GBP0.7 million) and net losses after tax and minorities of R1.1 million
(GBP0.1 million) to the consolidated group attributable earnings. The net loss,
after adding back the amortisation of intangibles is R468 606 (GBP41 915). If
Montier Partners had been consolidated into the group`s attributable earnings
for the 12 months ended 31 March 2011, the revenue contributed would have been
R1.9 million (GBP21 million) and the net profit after tax and after minorities
R652 575 (GBP58 370).
The acquisition had the following effect on the group`s assets and liabilities.
The fair values reflected below represent their carrying values at the date of
acquisition.
R`000
Property, plant and equipment 124
Identifiable intangible assets 41 437
Identifiable net assets 41 561
Goodwill 38 385
Purchase consideration 79 946
2. Stenham Property Finance Limited ("SPFL"), a subsidiary of Stenham Limited,
acquired a 100% interest in Newholme Properties Limited at the end of September
2010 for a cash consideration of R24.6 million (GBP2.2 million). The net asset
value at the date of the transaction comprised financial assets of R64.4 million
(GBP5.9 million), cash and cash equivalents of R11.4 million (GBP1 million),
goodwill of R3.2 million (GBP0.2 million) and financial liabilities of R54.4
million (GBP4.9 million). Goodwill arising at the time of the acquisition has
subsequently been written off as management do not believe this to be
recoverable. The consolidation was accounted for using the acquisition method.
3. With effect from 28 February 2011, a subsidiary of Stenham Limited disposed
of its Business Finance division to a management consortium for a purchase
consideration of R52.5 million (GBP4.7 million), comprising cash of R36.9
million (GBP3.3 million) and a vendor loan of R15.6 million (GBP1.4 million)
repayable over the next two years. The gain on disposal of R15.9 million (GBP1.4
million) has been reflected in the income statement.
CONTINGENT LIABILITIES
Contingent liabilities at reporting period end amounted to R69.6 million (2010:
R172 million).
COMMITMENTS
Operating lease and capital commitments at reporting period end amounted to R218
million (2010: R227 million).
EVENTS SUBSEQUENT REPORTING PERIOD END
There were no significant events subsequent to the reporting period end that
would require adjustment to the financial results as currently reported.
NOTES TO THE STATEMENT OF CHANGES IN EQUITY
1. With effect from 1 April 2010, a consortium, comprising current management of
Peregrine Securities (Pty) Ltd, purchased a 35% stake in the group`s broking and
structuring subsidiary. The transaction comprised an immediate cash payment,
plus a number of payments over the next three years which are linked to the
financial performance of the business.
2. Stenham Limited purchased 5 674 shares from its employees, who had previously
been issued shares, who ceased to be employed by the company effective 31 March
2010. The effect of this transaction has been to increase
the group`s effective interest as at 31 March 2011 from 52.45% to 52.75%.
3. In order to facilitate the restructure of shareholding in Peregrine iQ (Pty)
Ltd ("PiQ"), Peregrine Financial Services Holdings Limited ("PFS") acquired a
15% interest from the PiQ executives on 1 April 2010 increasing the group`s
interest to 80%. With effect from 1 July 2010, the group disposed of 31% of the
total issued share capital of PiQ to Vunani Limited thus decreasing its
shareholding to 49%, resulting in a loss of control and a change of name to
Vunani Fund Managers (Pty) Ltd ("VFM"). Henceforth, the group`s investment in
VFM will be accounted for as an associate.
COMMENTARY TO THE FINANCIAL RESULTS FOR THE PERIOD ENDING 31 MARCH 2011
Highlights
- Basic earnings per share increase by 13% to 141.4 cents
- Cash generated from operations of R310 million
- Dividend per share increased by 13% to 35 cents
Environment
During the financial year, global economic activity improved, notwithstanding
widespread investor scepticism. Towards the end of the financial year, support
from monetary authorities dwindled and provided reduced impetus to the West,
whilst growth in Eastern economies and emerging markets continued apace.
Economic activity and markets were disrupted by fears of sovereign bankruptcy in
smaller European countries, which served to cast doubt over the future of the
Euro as a single currency. Volatility in currencies, commodity and fixed income
markets persisted. Equity markets in general tended higher and credit markets
sustained their rally.
In South Africa, the long-awaited amendments to Regulation 28 of the Pensions
Fund Act brought clarity on the ability of pension funds to invest in hedge
funds. The initial effect of the changes has been negative for the industry and
our hedge fund businesses, as some pension funds, whose existing allocations to
hedge funds were over the prescribed limits, had to redeem, while those funds
with zero allocations have not started making allocations. Balancing inflows are
only expected over the next 18 to 24 months.
Against this backdrop, the group produced an acceptable level of profitability,
strong cash flows, strengthened its balance sheet and focused on the
consolidation of its existing businesses.
Financial results
The group produced earnings attributable to shareholders of R308 million, 15%
ahead of the previous year. Headline earnings amounted to R287 million, 8% ahead
of the previous year.
Basic earnings per share increased by 13% to 141.4 cents, after allowing for a
slight reduction in treasury shares, while headline earnings per share increased
by 6% to 131.9 cents.
On a constant currency basis, profits to shareholders increased by 20% and
headline earnings increased by 13%.
The group generated cash from operations of R310 million and released net cash
from investing activities of R20 million. This provided the ability to reduce
interest-bearing borrowings by R197 million to R421 million whilst boosting
available cash at the centre.
Segmental Results
Substantial minority interests exist in many of the group`s operations.
Operating results are therefore presented on a pro forma before tax basis,
reflecting amounts after minorities, before intangible amortisation and share
based payments. This better reflects and aids in the understanding of each
division`s specific economic benefit to the shareholders of the group.
Wealth Management
The group`s private client wealth management division, Citadel, contributed R104
million from operations, 18% higher than the previous period. Assets under
management increased to R18.6 billion. The team secured new inflows of R2.7
billion for the year, an all- time record, while client retention, both in terms
of number of clients and value of assets, remained above 98%. The investment
into growing the advisory team as well as establishing a number of aligned
business initiatives has mostly been completed. The team is now focused on
growing the business on the back of this investment of the last few years as
well as driving efficiencies.
Asset Management
The group`s asset management division comprises a number of fund management
teams, operating as stand alone investment managers, supported by central
administration and capital introduction capacity. The contribution by this
division reduced by 27% to R35.3 million. This reflects mainly lower performance
fees from the hedge fund businesses.
The group`s flagship hedge fund manager, Peregrine Capital, experienced muted
returns in the second half of the year, stemming from a cautious approach to
markets. Returns in this period were competitive, but lower than during the
previous period. The team at year-end managed R2.9 billion of assets and all
mandates are above their high water marks.
Stenham
The group`s 52% held offshore subsidiary, Stenham, has been focused into three
divisions: Stenham Asset Management, a global hedge fund of funds business, with
assets under management of $3.3 billion; Stenham Property, a global
property manager with assets of GBP2 billion and Stenham Trustees, which
provide trust and corporate administration services.
Peregrine`s share of Stenham`s profits for the year increased by 6% to R98
million. In sterling terms, profits increased by 18%.
Stenham Asset Management secured net new inflows of $153 million for the year,
of which the bulk was achieved in the first half. Inflows have slowed down and
the business experienced an increase in redemptions towards the end of the year,
as returns came under pressure. The investment management team`s approach
remains cautious as a result of uncertainties in the world economy. The expanded
team has settled and continues to focus on investment returns. The business was
again nominated for a number of industry awards during the year.
During the year Stenham Property concluded a number of successful transactions
which were positively received and well supported by investors. Its performance
was further enhanced by the decision to retain cash in the business, which has
facilitated its ability to pursue new opportunities.
Broking and Structuring
Despite a difficult operating environment, Peregrine Securities increased its
operating profit by 21% to R109 million. The business experienced increased
activity from its hedge fund and ultra high net worth client base in the Prime
Services division. Despite the positive changes in pension fund regulation as it
relates to the use of hedge funds and derivatives, both areas remain muted in
terms of new inflows and large transactions. This, together with lower activity
in the inter-bank markets resulted in subdued activity for the Derivatives
division. It is therefore particularly gratifying that the business achieved the
top ranking in the Financial Mail survey for derivatives dealing and was rated
"Number One South African broker in equity derivative products" by Risk magazine
for 2010.
The Securities` management team has implemented a number of new initiatives,
including a transaction after year-end, in terms of which the business acquired
a minority stake in Legae Securities, the oldest empowerment stockbroker in SA.
Peregrine will provide infrastructure, technology and capital to Legae, while
both entities operate entirely independently of each other. This transaction
leads to a further diversification of earnings and improved economies of scale
in the business.
Proprietary Investments
The group`s proprietary investment portfolio contributed R103 million to overall
profitability, down 25% from the previous period. The contribution was evenly
split between the SA hedge fund portfolio and the SA private equity portfolio,
with a small positive contribution from the offshore portfolio. During the year,
the capital allocated to the hedge fund portfolio was reduced, in order to seed
the offshore proprietary portfolio.
Cash
The group has substantial cash resources of which the bulk has purposefully been
accumulated on the offshore balance sheet. Local cash resources at year-end
amounted to R136 million, while offshore cash resources amounted to R472
million.
Conclusion
The financial performance of the Peregrine group over the past three years has
served to highlight the group`s cash generative ability in a period which has
been extremely challenging for any business that is immersed in the financial
markets. Over that period the group has repaid over R500 million of debt,
declared total dividends of R172 million and now sits with several hundred
million rand of available cash resources.
The group remains confident of the ability of its various operations to navigate
their way through the current investment environment and, from a position of
financial strength, will seek to pro-actively expand its range of activities
both locally and offshore.
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 35
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, 15 July 2011
Trading ex dividend commences Monday, 18 July 2011
Record date Friday, 22 July 2011
Payment date Monday, 25 July 2011
Shares may not be materialised or rematerialised between Monday, 18 July 2011
and Friday, 22 July 2011, both dates inclusive.
Change to Board of Directors
Notice is hereby given that Ms M Y (Khosi) Sibisi, who has served as an
independent non-executive director of the company since October 2006, has
resigned as a director with effect from 31 May 2011.
The board thanks Khosi for her contribution over the years.
The board has commenced a process to identify a suitable candidate to fill the
vacancy on the board.
Jan van Niekerk Leonard Harris
Group CEO Non-executive Chairman
Sandton
1 June 2011
Sponsor
Java Capital
Further detail and a print-friendly version of these results are available from
the company`s website at www.peregrine.co.za
Date: 01/06/2011 16:37:03 Supplied by www.sharenet.co.za
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