To view the PDF file, sign up for a MySharenet subscription.

CDZ - Cadiz Holdings Limited - Interim results for the six months ended 30

Release Date: 07/11/2011 08:00
Code(s): CDZ
Wrap Text

CDZ - Cadiz Holdings Limited - Interim results for the six months ended 30 September 2011 CADIZ HOLDINGS LIMITED (Incorporated in the Republic of South Africa) (Registration number 1997/007258/06) JSE share code: CDZ ISIN: ZAE000017661 ("Cadiz", "the group" or "the company") KEY FEATURES * Diluted HEPS 0.9 cents per share * Formation of BNP Paribas Cadiz Securities * Asset management business refocused * Best derivatives house for 15th consecutive year CONDENSED GROUP INTERIM STATEMENT OF COMPREHENSIVE INCOME Unaudited Unaudited Audited 6 months 6 months 12 months (R thousands) 30-Sep-11 30-Sep-10 31-Mar-11 Continuing operations Gross operating revenue 95 069 103 330 225 382 Interest income 1 260 2 333 585
Net investment income 15 746 10 961 7 287 Net income from 12 337 11 264 investments 14 079 Foreign exchange 3 409 (3 977) gains/(losses) (3 118) Income attributable to linked assets - - - Net fair value 82 246 54 061 gains/(losses) on linked (61 288) financial instruments Linked liability (82 246) (54 061) adjustment 61 288 Operating expenses (102 597) (99 279) (200 665) Operating profit 9 478 15 597 34 337 Finance costs (223) (454) (706) Profit before taxation 9 255 15 143 33 631 Taxation (1 734) (1 530) (5 272) Total comprehensive 7 521 income from continuing 13 613 28 359 operations Discontinued operations (Loss)/Profit from (5 337) 25 234 discontinued operations 13 312 Total comprehensive income 2 184 26 925 53 593 Reconciliation of headline earnings: Profit attributable to 2 184 26 925 53 593 equity holders of the company Surplus on disposal of (8) (56) plant and equipment - Taxation impact 2 - 16 Headline earnings 2 178 26 925 53 553 Note: All headline earning adjustments relate to continuing operations Issued number of shares 252 944 245 138 245 339 (`000) Consolidated number of 232 810 228 702 225 205 shares (`000) Weighted average number 229 572 218 390 222 262 of shares (`000) Diluted weighted average 234 106 222 893 228 276 number of shares (`000) Earnings per share (cents) Basic - from continuing 3.3 6.2 12.8 operations Basic- from discontinued (2.3) operations 6.1 11.3 1.0 12.3 24.1 Diluted - from continuing 3.2 6.1 12.4 operations Diluted - from (2.3) discontinued operations 6.0 11.1 0.9 12.1 23.5
Headline earnings per share (cents) Basic 0.9 12.3 24.1 Diluted 0.9 12.1 23.5 CONDENSED GROUP INTERIM STATEMENT OF FINANCIAL POSITION Unaudited Unaudited Audited (R thousands) 30-Sep-11 30-Sep-10 31-Mar-11 ASSETS Non-current assets 3 333 109 1 744 347 2 608 271 Plant and equipment 6 742 7 279 6 906 Intangible assets 272 462 265 634 269 334 Deferred taxation 16 908 16 055 19 230 Investments backing 2 889 255 1 385 126 2 232 001 linked funds Financial assets 135 135 64 683 76 235 Receivables and prepayments 12 607 5 570 4 565 Current assets 219 837 1 618 458 580 985 Financial assets 49 132 209 686 123 511 Receivables and 36 411 1 224 788 223 270 prepayments Taxation 7 917 1 804 2 406 Cash and cash equivalents 126 377 182 180 231 798 Assets of disposal group 328 409 classified as held for - - sale 548 246 1 618 458 580 985 Total assets 3 881 355 3 362 805 3 189 256
EQUITY Capital and reserves Ordinary share capital and premium 24 965 2 971 3 619 Treasury shares (52 411) (37 043) (52 411) Share-based payment reserve 38 731 53 415 59 888 Retained earnings 628 251 644 030 672 604 Total equity 639 536 663 373 683 700 LIABILITIES Non-current liabilities 2 898 996 1 398 041 2 239 941 Deferred taxation 4 946 5 006 2 912 Linked investment 2 889 255 1 385 126 2 232 001 contract liabilities Trade and other payables 4 795 7 909 5 028 Current liabilities 48 948 1 301 391 265 615 Trade and other payables 1 135 883 41 951 230 412 Taxation 6 997 1 257 6 913 Trading liabilities - 164 251 28 290
Liabilities of disposal group classified as held 293 875 - - for sale 342 823 1 301 391 265 615
Total liabilities 3 241 819 2 699 432 2 505 556 Total equity and 3 881 355 3 362 805 3 189 256 liabilities Net asset value (cents per share) 275 305 304 Net tangible asset value (cents per share) 153 178 177 CONDENSED GROUP INTERIM STATEMENT OF CASH FLOW Unaudited Unaudited Audited
6 months 6 months 12 months (R thousands) 30-Sep-11 30-Sep-10 31-Mar-11 Cash flow from operating activities (74 242) (39 160) (29 118) Cash (utilised by)/generated from (20 848) 21 234 39 375 operations Taxation paid (6 832) (16 835) (24 934) Dividends paid (46 562) (43 559) (43 559) Cash flow from investing activities 10 115 25 459 78 075 Cash flow from financing activities 212 33 061 20 231 Net change in cash and cash equivalents (63 915) 19 360 69 188 Effect of exchange rate adjustment 4 (48) (258) Cash and cash equivalents at beginning of year 231 798 162 868 162 868 Cash and cash equivalents at end of year 167 887 182 180 231 798 The cash flow above includes cash flow from the discontinued operations, more detail of which is given in the commentary below. CONDENSED GROUP INTERIM STATEMENT OF CHANGES IN EQUITY Unaudited Unaudited Audited 6 months 6 months 12 months (R thousands) 30-Sep-11 30-Sep-10 31-Mar-11 Share capital, share premium and treasury shares Opening balance (48 792) (70 642) (70 642) Issue of shares 21 410 69 717 Sale of treasury shares to Makana - 29 980 29 980 Net purchases of treasury shares on exercise of - - (1 775) options Transfer of deferred consideration shares - 7 314 7 314 Repurchases of A ordinary shares (14) - (2) Repurchases of B preference shares (50) - - Purchase of treasury shares - (793) (14 384) (27 446) (34 072) (48 792)
Reserves Opening balance 732 492 710 009 710 009 Net premium on issue of equity settled share 25 282 280 appreciation rights Sale of treasury shares to Makana - 2 730 2 730 Net purchases of treasury shares on exercise of - - 1 908 options Employee scheme - value of services provided (21 157) 7 579 14 052 Transfer of deferred consideration shares - (6 521) (6 521) Total comprehensive income 2 184 26 925 53 593 Dividends paid (46 562) (43 559) (43 559) 666 982 697 445 732 492 Total shareholders` equity 639 536 663 373 683 700 CONDENSED GROUP INTERIM SEGMENT REPORT (R thousands) Asset Securities Investments Total Management and and Capital Structuring
6 months to 30 September 2011 (unaudited) Segment revenue 77 250 43 940 16 338 137 528 Segment costs 71 587 46 027 1 051 118 665 Segment profit 5 663 (2 087) 15 287 18 863 Corporate costs (16 516) Add back: Loss before taxation 6 908 on discontinued operation Profit before 9 255 taxation Gross operating revenue 75 075 41 764 - 116 839 (external) 6 months to 30 September 2010 (unaudited) Segment revenue 88 471 78 582 13 107 180 160 Segment costs 68 980 57 144 3 040 129 164 Segment profit 19 491 21 438 10 067 50 996 Corporate costs (17 365) Less: Profit before taxation (18 488) on discontinued operation Profit before taxation 15 143 Gross operating revenue 83 871 68 619 - 152 490 (external) Year- on- year (13%) (44%) 25% (24%) % segment revenue Year- on- year 4% (19%) (65%) (8%) % segment costs Year- on- year (71%) (110%) 52% (63%) % segment profit 12 months to 31 March 2011 (audited) Segment revenue 196 823 152 435 13 022 362 280 Segment costs 144 314 111 123 6 991 262 428 Segment profit 52 509 41 312 6 031 99 852 Corporate costs (31 831) Less: Profit before taxation (34 390) on discontinued operation Profit before taxation 33 631 Gross operating revenue (external) 187 059 139 004 - 326 063 Included in the Securities and Structuring segment are results from the discontinued Securities operations and the retained Cadiz Corporate advisory business. 60% of the discontinued Securities business has been sold to BNP Paribas SA on 31 October 2011. DISCONTINUED OPERATION AND DISPOSAL GROUP During this financial period, the group announced its decision to sell 60% of its Securities business to BNP Paribas SA. The effective date of this sale is 31 October 2011. The results of this discontinued operation are included in the group`s interim results for the six months ended 30 September 2011. Financial information relating to the Securities business operations for the period is set out below. The statement of comprehensive income distinguishes between continuing operations and the discontinued operation. Comparative figures have been restated. CONDENSED GROUP INTERIM STATEMENT OF COMPREHENSIVE INCOME OF DISCONTINUED OPERATION Unaudtied Undited Audited 6 months 6 months 12 months (R thousands) 30-Sep-11 30-Sep-10 31-Mar-11 Gross operating 21 770 49 160 100 681 revenue Interest income 2 732 5 904 10 048 Operating (31 410) (36 575) (76 339) expenses Profit before (6 908) 18 489 34 390 taxation on discontinued operation Taxation 1 571 (5 177) (9 156) (Loss)/Profit (5 337) 13 312 25 234 from discontinued operation CONDENSED GROUP INTERIM CASHFLOW FROM DISCONTINUED OPERATION Unaudited Unaudited Audited 6 months 6 months 12 months (R thousands) 30-Sep-11 30-Sep-10 31-Mar-11 Cash flow from 2 315 42 112 49 987 operating activities Cash flow from (31 936) (36 714) (40 108) financing activities Effect on cash (29 621) 5 398 9 879 flows DISPOSAL GROUP The assets and liabilities related to the Securities business have been presented in the group`s statement of financial position as held for sale following shareholder approval of the decision to dispose of 60% of this business. The assets and liabilities of this business therefore constitute a disposal group. The major classes of assets and liabilities of this disposal group are as follows: Unaudited 30-Sep-11
Assets classified as held for sale Deferred taxation 5 668 Financial assets 13 966 Receivables and prepayments 2 662 Amounts receivable for stockbroking 264 480 activities Taxation 123 Cash and cash equivalents 41 510 Total assets of the disposal group 328 409 Liabilities directly associated with assets classified as held for sale Trade and other payables 9 688 Amounts payable for stockbroking 263 602 activities Taxation 158 Trading liabilities 20 427 Total liabilities of the disposal group 293 875
Total net assets of the disposal group 34 534 FINANCIAL PERFORMANCE Cadiz Holdings continued to face ongoing challenges in the securities business while difficult market conditions and reduced performance fees impacted the asset management business. These factors contributed to a disappointing operational performance which resulted in a substantial decline in earnings for the period. Management has taken decisive action to address the performance of the group through the introduction of French-based banking group, BNP Paribas SA ("BNPP"), as a majority shareholder in the Cadiz securities business, and the refocusing of the asset management business. Gross operating revenue from continuing operations was 8% lower at R95.1 million. Revenue from the group`s investment and capital portfolio increased by 25% to R16.3 million owing to improved investment performance and Rand weakness. Operating expenses from continuing operations were contained to growth of 3% over the prior period. Stringent cost disciplines have been implemented, including a 10% reduction in headcount, and the benefit of this should be realised in the next financial year. Operating profit from continuing operations for the period declined by 39% to R9.5 million. Total comprehensive income from continuing operations is R7.5 million, with diluted earnings per share from continuing operations 48% lower at 3.2 cents per share. Discontinued operations reported an after tax loss for the period of R5.3 million, which included costs of R2.5 million on the disposal of the 60% stake in the securities businesses. Headline earnings totalled R2.2 million, with diluted headline earnings per share 93% lower at 0.9 cents per share. This performance is in line with the earnings guidance provided in the trading statements on 14 September and 3 November 2011. ASSET MANAGEMENT The Cadiz Asset Management brand continues to gain traction through a focus on its flagship funds, supported by competitive investment performance in its unit trust funds, strong client relationships and a stable investment team. The integration of the wholesale and retail businesses under the Cadiz Asset Management brand is progressing well. This is expected to reduce costs, create economies of scale and enhanced operating efficiencies. Cadiz Asset Management will in future become more independent with its own board and remuneration structure. This is expected to be in place before the end of the financial year. The Cadiz Managed Flexible Fund was named as the balanced fund of the year at the recent Africa Fund Manager awards. Cadiz was recognised by Morningstar as the Best Specialist Fund House in South Africa in the prior period. Investment performance remains competitive across most portfolios, particularly the unit trust funds. Performance highlights include: * The Cadiz Money Market Fund is the top performing fund over 3, 4 and 5 years, and since inception * The Cadiz Absolute Yield Fund is in the top quartile of all flexible fixed interest funds over all periods from 1 year, and is the top performing flexible fixed interest fund over 5 years * The Cadiz Managed Flexible Fund ranked 2nd of 50 prudential variable equity funds for the 3 years ended 30 September 2011 * The Cadiz Equity Ladder Fund ranked 1st over 4 years and 5 years against all general equity, growth and value funds. The asset management performance has been impacted by the difficult investment environment which resulted in a substantial reduction in performance fees. The high fixed cost base for the current level of assets under management also contributed to the reduction in profit. Assets under management are similar to six months ago (30 Sep 2011: R41.0 billion compared to 31 March 2011: R42.0 billion) Revenue for the period was 13% down at R77.3 million and together with higher costs resulted in profit declining 71% to R5.7 million. SECURITIES AND STRUCTURING The performance of the securities segment continued to be impacted by low trading volumes, increased competition and renewed market uncertainty. The BNPP transaction has also impacted day-to-day operations and placed pressure on management resources and reduced focus during the period. These factors contributed to a 44% decline in revenue to R43.9 million, however, costs decreased by 19% through tight expense management leading to a loss of R2.1 million for the period. Cadiz Securities received a Spire Award for the best interest rate derivative broker and was voted as the leading derivative research house in the country for the 15th consecutive year in the Financial Mail analyst rankings. Cadiz also received the transition manager of the year award for the third successive year at the 2011 Principal Officers` Association awards. Cadiz` corporate advisory business, which does not form part of the BNPP transaction reported a profit for the period and continues to do well in the resources sector. Although deals are taking longer than expected to be completed, the strategic partnerships with advisory firms in China and India are leading to increased activity and the pipeline of potential deals remains encouraging. The business has advised on mergers and acquisition transactions totalling R70 billion in the past five years. INVESTMENTS AND CAPITAL At period end the group`s investment and capital portfolio totalled R344.4 million. Returns from this portfolio increased by 52% from R10.1 million to R15.2 million owing to improved investment performance and lower investment costs and Rand weakness. Revenue increased by 25% to R16.3 million and costs declined by 65% to R1.1 million. At the end of the period the capital was invested as follows: * R85.9 million invested in liquid assets for regulatory capital adequacy, and working capital requirements; * R46.9 million in liquid assets for short term commitments including dividends, taxation, incentives and equity scheme repurchases; * R51.7 million invested as seed capital and co-investments in asset management products, * R89.2 million invested in Makana, * R16.4 million in strategic unlisted investments, and * R54.3 million invested mainly in liquid assets. The group no longer has any significant offshore investments. In line with Cadiz` policy of not carrying proprietary risk, the group also holds investments and trading liabilities as hedges against client positions. BNP PARIBAS CADIZ SECURITIES The disposal of the 60% shareholding in Cadiz Securities (Pty) Ltd and Cadiz Stock Broking (Pty) Ltd to BNPP has been completed and the effective date of the transaction is 31 October 2011. The initial proceeds of R118 million have been received, and the new business has been capitalised by BNPP with R80 million. The final payment of the net asset value ("NAV") of the businesses sold is expected to be paid within the next two months after completion of the NAV audit. Shareholders are referred to the circular issued on 28 September 2011 for further details of the transaction. The new entity, branded as BNP Paribas Cadiz Securities, was launched on 1 November 2011 and is owned by BNPP (60%) and Cadiz (40%). Cadiz and BNPP will combine their respective strengths to market and sell South African equity products to institutional investors locally and abroad. The business will capitalise on BNPP`s international network and expertise in cash equities and equity derivatives and Cadiz`s leading position in equity derivatives and research in South Africa. The product and service range includes cash equities, equity derivatives, structured products and structuring, transition management and research. A service level agreement has been concluded for Cadiz to provide services to BNP Paribas Cadiz Securities. These services will be provided to BNP Paribas Cadiz Securities on a cost recovery basis. EMPOWERMENT Cadiz has again been verified as a level three broad-based black economic empowerment (BBBEE) contributor with a score of 81.14, based on the Department of Trade and Industry`s codes of good practice. During the period the group extended the conversion date of the R19.6 million convertible preference shares from April 2011 until April 2016. These preference shares are convertible into a 24.81% shareholding in Makana. This enables Makana to maintain its current BBBEE credentials, as conversion by Cadiz would have diluted Makana`s almost 100% black ownership, which would have also impacted on Cadiz` BEE credentials. BOARD AND GOVERNANCE The board and committee composition is currently being reviewed to ensure that Cadiz has the appropriate governance structures in place following the changes to the group`s structure. SHARE ALLOCATION TO BLACK EMPLOYEES During the period 1.1 million share appreciation rights and voting A ordinary shares were issued to participants in the black employee share ownership scheme. These are subject to a lock-in for seven years from the issue date. This brings the total number of rights issued to 14.2 million of the 24 million originally approved by shareholders. SHARE CAPITAL AND TREASURY SHARES During the period the company issued 4.9 million and 2.7 million shares to management and key staff for the 2010 and 2011 annual incentive awards. No repurchases have been made in the current period to offset the dilutionary impact of the 2011 award. The dilutionary impact of the 2010 issue was covered in the prior financial year by repurchases from the cash retained from the incentive awards. The company intends to continue to repurchase shares to offset any dilutionary impact of the scheme. PROSPECTS Management`s priorities are to ensure the successful launch and integration of BNP Paribas Cadiz Securities and to refocus the asset management business to be sustainably profitable and competitive. The restructuring of Cadiz Asset Management is expected to reduce costs, improve investment performance and increase the asset base. The benefits of the restructuring of Cadiz Asset Management and the establishment of BNP Paribas Cadiz Securities are only expected to be realised from the 2012 financial year onwards. Following the completion of the BNP Paribas Cadiz Securities transaction, the group will now be implementing a decentralised business model which will give business units greater autonomy and accountability. The group`s head office cost structure is being streamlined with the aim of reducing costs by at least 20%. Group management will in future focus on managing the group`s capital and investment portfolio, monitoring business unit performance and providing shared services for the decentralised business units. The directors remain committed to generating superior returns on the capital retained in the group. The board has undertaken to declare a special dividend at the next meeting in early March 2012. The amount of the special dividend will be determined after taking into account the BNPP transaction proceeds and a prudent review of the capital requirements of the individual businesses and the group. BASIS OF PRESENTATION The condensed financial statements have been prepared in terms of International Financial Reporting Standards and comply with IAS 34 - Interim Financial Reporting, the Listings Requirements of the JSE Limited and the Companies Act. The accounting policies are consistent with those applied in the annual financial statements for 31 March 2011, except for IAS 24 - "Related Party Disclosures". On behalf of the board of directors Peter-Paul Ngwenya Ram Barkai Chairman Chief Executive Officer Cape Town 7 November 2011 Registered office Ground Floor, Fernwood House, The Oval, 1 Oakdale Road, Newlands, 7700 P O Box 44547, Claremont, 7735 www.cadiz.co.za Directors S P Ngwenya (Chairman)* R Barkai (Chief Executive Officer) R F G Cadiz* C A Hall* B H Kent* D M Lawrence* A N Matyumza* B J Memela-Khambula* N S Mjoli-Mncube* S J Saunders* F C Shaw A I Brooks* (Alternate) (* Non-executive directors) Transfer secretaries Computershare Investor Services (Pty) Limited, 70 Marshall Street, Johannesburg 2001 P O Box 61051, Marshalltown, 2107 Sponsor Investec Bank Limited Company secretary C Schmahl Date: 07/11/2011 08:00:06 Supplied by www.sharenet.co.za Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct, indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on, information disseminated through SENS.

Share This Story