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PGR - Peregrine Holdings Limited - Unaudited results for the six months ended 30
September 2011
Peregrine Holdings Limited
(Registration number 1994/006026/06)
JSE code: PGR ISIN code: ZAE000015152
("Peregrine")
UNAUDITED RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2011
- Basic earnings of 49.1 cents per share, down 15%
- Headline earnings of 50.2 cents per share, down 9%
- Cash from operating activities of R164 million
Condensed consolidated income statements
Unaudited
% change for the six
2010 to months ended
2011 30 September 2011
R`000
Operating revenue -4 704 679
Investment income 25 40 115
Total revenue -3 744 794
Fair value (loss)/gain on linked financial
investments (58 250)
Fair value gain/(loss) on policyholder contract
liabilities 58 250
Operating expenses 1 (569 135)
Profit from operations -14 175 659
Net interest received/(paid) >100 1 604
Interest received 27 177
Interest paid (25 573)
Income from associate companies 12 10 808
Profit from ordinary activities -12 188 071
Capital items (2 350)
Profit before taxation -15 185 721
Taxation (32 600)
Profit for the period -17 153 121
Attributable to:
Equity holders of the company -15 106 847
Non-controlling interests 46 274
153 121
Basic earnings per ordinary share (cents) -15 49.1
Diluted basic earnings per share (cents) -16 48.6
Number of ordinary shares in issue (`000) 228 129
Treasury shares held (`000) 10 553
Weighted average number of ordinary shares in
issue (`000) 217 733
Diluted weighted average number of shares in
issue (`000) 219 801
Unaudited for Audited
the six months for the
ended year ended
30 September 2010 31 March 2011
R`000 R`000
Operating revenue 734 098 1 499 127
Investment income 32 118 164 832
Total revenue 766 216 1 663 959
Fair value (loss)/gain on linked financial
investments 47 261 268 895
Fair value gain/(loss) on policyholder
contract liabilities (47 261) (268 895)
Operating expenses (561 629) (1 183 484)
Profit from operations 204 587 480 475
Net interest received/(paid) (1 263) 181
Interest received 29 704 58 276
Interest paid (30 967) (58 095)
Income from associate companies 9 646 25 623
Profit from ordinary activities 212 970 506 279
Capital items 5 827 29 773
Profit before taxation 218 797 536 052
Taxation (35 406) (55 957)
Profit for the period 183 391 480 095
Attributable to:
Equity holders of the company 125 721 307 952
Non-controlling interests 57 670 172 143
183 391 480 095
Basic earnings per ordinary share (cents) 57.7 141.4
Diluted basic earnings per share (cents) 57.7 140.2
Number of ordinary shares in issue (`000) 228 129 228 129
Treasury shares held (`000) 10 366 10 366
Weighted average number of ordinary shares
in issue (`000) 217 763 217 763
Diluted weighted average number of shares
in issue (`000) 217 763 219 648
Determination of headline earnings
Unaudited
% for the six
change months ended
2010 to 30 September
2011 2011
R`000
Profit attributable to equity holders 106 847
Adjustments:
Reversal of impairment of loan to associate
forming part of the net investment in associate (7 154)
Impairment to goodwill -
Loss on disposal of interest in associates 9 504
Surplus on disposal of interest in subsidiaries -
Tax effect -
Non-controlling interest effect -
Headline earnings -9 109 197
Amortisation of intangibles 8 160
Headline earnings excluding amortisation of
intangibles -9 117 357
Headline earnings per ordinary share (cents) -9 50.2
Diluted headline earnings per share (cents) -10 49.7
Headline earnings per ordinary share excluding
intangible amortisation (cents) -8 53.9
Basic earnings per ordinary share excluding
intangible amortisation (cents) -14 52.8
Dividend paid per ordinary share in respect of
the previous year (cents) 13 35.0
Dividend per ordinary share declared subsequent
to 31 March (cents)
Unaudited
for the six Audited
months ended for the year
30 September ended 31
2010 March 2011
R`000 R`000
Profit attributable to equity holders 125 721 307 952
Adjustments:
Reversal of impairment of loan to associate
forming part of the net investment in associate - (8 287)
Impairment to goodwill - 3 233
Loss on disposal of interest in associates - -
Surplus on disposal of interest in subsidiaries (5 827) (21 485)
Tax effect 237 -
Non-controlling interest effect - 5 836
Headline earnings 120 131 287 249
Amortisation of intangibles 8 142 16 522
Headline earnings excluding amortisation of
intangibles 128 273 303 771
Headline earnings per ordinary share (cents) 55.2 131.9
Diluted headline earnings per share (cents) 55.2 130.8
Headline earnings per ordinary share excluding
intangible amortisation (cents) 58.9 139.5
Basic earnings per ordinary share excluding
intangible amortisation (cents) 61.5 149.0
Dividend paid per ordinary share in respect of
the previous year (cents) 31.0 31.0
Dividend per ordinary share declared subsequent
to 31 March (cents) 35.0
Condensed consolidated statements of comprehensive income
Unaudited Unaudited
for the six for the six Audited
months ended months ended for the year
30 September 30 September ended 31 March
2011 2010 2011
R`000 R`000 R`000
Profit for the period 153 121 183 391 480 095
Other comprehensive
income/(loss) for the period
net of tax:
Currency translation differences 223 622 (22 443) (44 546)
Total comprehensive income
for the period 376 743 160 948 435 549
Attributable to:
Equity holders of the company 262 679 109 745 279 821
Non-controlling interests 114 064 51 203 155 728
376 743 160 948 435 549
Condensed consolidated statements of financial position
Unaudited
Unaudited as at 30 Audited
as at 30 September September as at 31 March
2011 2010 2011
R`000 R`000 R`000
Assets
Non-current assets 6 319 256 5 286 697 5 833 410
Property, plant and equipment 21 387 28 793 24 575
Intangible assets 1 332 719 1 251 430 1 199 963
Investment in associate companies 33 410 21 292 33 723
Investments linked to
policyholder investment contracts 4 128 176 3 686 177 4 053 764
Financial investments 570 344 211 010 415 586
Loans and receivables 145 272 11 286 18 263
Deferred taxation 87 948 76 709 87 536
Current assets 7 293 932 7 413 246 6 730 279
Financial investments 407 970 502 933 462 977
Loans and receivables 4 584 3 702 7 554
Trade and other
receivables 219 008 288 752 200 171
Amounts receivable in respect
of stockbroking activities 5 809 966 5 942 379 4 803 706
Taxation 10 239 6 012 8 111
Cash and cash equivalents 842 165 669 468 1 247 760
Non-current assets held
for resale - 44 290 -
Total assets 13 613 188 12 744 233 12 563 689
Equity and liabilities
Equity 2 480 563 2 064 766 2 245 722
Equity attributable to
holders of the company 1 933 149 1 552 392 1 732 023
Non-controlling interests 547 414 512 374 513 699
Non-current liabilities 4 760 934 4 212 098 4 594 191
Interest- bearing borrowings 423 068 390 612 332 848
Policyholder investment
contract liabilities 4 128 176 3 686 177 4 053 764
Loans and other payables 190 909 124 060 183 006
Deferred taxation 18 781 11 249 24 573
Current liabilities 6 371 691 6 441 939 5 723 776
Financial instrument liability 2 876 5 303 -
Current portion of
interest-bearing borrowings 48 108 103 238 88 365
Current portion of loans
and other payables 18 703 714 18 594
Trade and other payables 412 457 330 854 429 657
Amounts payable in respect
of stockbroking activities 5 856 317 5 955 763 5 087 977
Taxation 33 230 46 067 29 526
Bank overdraft - - 69 657
Non-current liabilities
held for resale - 25 430 -
Total equity and liabilities 13 613 188 12 744 233 12 563 689
Net tangible asset value
per ordinary share 393.8 254.6 350.0
Net asset value per ordinary share 888.5 712.8 795.4
Condensed consolidated statements of changes in equity
Total capital Non-controlling
and reserves interests Total equity
R`000 R`000 R`000
Unaudited - 2011
Balance at 31 March 2011 1 732 023 513 699 2 245 722
Total comprehensive income
for the period 262 679 114 064 376 743
Dividends paid (76 217) (24 546) (100 763)
Share-based payments 11 034 - 11 034
Contingent consideration
received as a result of the
disposal of interest in
subsidiary 1 5 407 - 5 407
Non-controlling interest
disposal as a result of the
share buy back by a
subsidiary of its
treasury shares 2 - (55 803) (55 803)
Repurchase of treasury
shares 3 (1 777) - (1 777)
Balance at 30 September 2011 1 933 149 547 414 2 480 563
Unaudited - 2010
Balance at 31 March 2010 1 496 856 437 734 1 934 590
Total comprehensive income
for the period 109 745 51 203 160 948
Dividends paid (67 506) (44 797) (112 303)
Share-based payments 10 956 - 10 956
Goodwill recognised on
additional interest
acquired in subsidiary (6 932) - (6 932)
Non-controlling interest
arising as result of a
business combination - 60 804 60 804
Non-controlling interest
arising as result of the
disposal of interest in subsidiary 6 600 9 159 15 759
Disposal of controlling
interest in subsidiary - (1 729) (1 729)
Disposal of treasury shares 2 673 - 2 673
Balance at 30 September 2010 1 552 392 512 374 2 064 766
Audited - 2011
Balance at 31 March 2010 1 496 856 437 734 1 934 590
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)
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 subsidiary 12 759 9 159 21 918
Non-controlling interest
disposal as result of the
share buy back by a subsidiary of
its treasury shares 228 (9 752) (9 524)
Acquisition of
non-controlling interest in
subsidiary - (1 277) (1 277)
Disposal of controlling
interest in subsidiary - (1 729) (1 729)
Disposal of interest in
subsidiary - (1 588) (1 588)
Disposal of treasury shares 2 999 - 2 999
Balance at 31 March 2011 1 732 023 513 699 2 245 722
Condensed consolidated cash flow statements
Unaudited Unaudited
for the six months for the six months Audited
ended 30 ended 30 for the year ended
September 2011 September 2010 31 March 2011
R`000 R`000 R`000
Cash flow from
operating activities 19 664 21 016 310 525
Cash flow from
stockbroking
activities (237 920) 20 582 328 173
Cash flow from
investing activities (64 376) 9 788 19 772
Cash flow from
financing activities (129 961) (63 257) (139 667)
Net (decrease)/
increase in cash and
cash equivalents (412 593) (11 871) 518 803
Cash and cash
equivalents at
beginning
of the period 1 178 103 677 631 677 631
Effects of exchange
rate changes on cash
and cash equivalents 76 655 3 708 (18 331)
Cash and cash
equivalents at end
of the period 842 165 669 468 1 178 103
Segmental analysis
Revenue, Profit from
investment and ordinary activities
other income Interest and as per the income
(external) associate income statement
R`000 R`000 R`000
Unaudited for the
six months ended
30 September 2011
Wealth and asset
management 234 982 11 720 73 927
Wealth management 186 526 10 277 50 535
Asset management 48 456 1 443 23 392
Broking and
structuring 176 547 11 911 54 788
Stenham 289 274 (436) 62 772
Total from operating
subsidiaries 700 803 23 195 191 487
Group 43 991 (10 783) (3 416)
Operations 4 539 11 332 (19 899)
Investment returns 39 452 109 38 707
Cost of funding - (22 224) (22 224)
744 794 12 412 188 071
Unaudited for the
six months ended
30 September 2010
Wealth and asset
management 239 317 10 222 75 517
Wealth management 168 216 9 643 38 963
Asset management 71 101 579 36 554
Broking and
structuring 172 865 13 612 54 896
Stenham 317 672 1 105 94 527
Total from operating
subsidiaries 729 854 24 939 224 940
Group 36 362 (16 556) (11 970)
Operations 3 620 11 759 (16 004)
Investment returns 32 742 167 32 516
Cost of funding - (28 482) (28 482)
766 216 8 383 212 970
% change in pro
Pro forma profit from forma profit from
ordinary activities ordinary activities
before intangible before intangible
amortisation and amortisation and
share-based share-based
payment cost payment cost
adjusted for adjusted for
minorities minorities
R`000 2010 to 2011
Unaudited for the six months
ended 30 September 2011
Wealth and asset management 67 957 1
Wealth management 55 409 24
Asset management 12 548 -45
Broking and structuring 55 003 0
Stenham 34 551 -30
Total from operating subsidiaries 157 511 -8
Group (2 315) -53
Operations (13 679) 32
Investment returns 33 588 -1
Cost of funding (22 224) -22
155 196 -7
Unaudited for the six months
ended 30 September 2010
Wealth and asset management 67 210
Wealth management 44 512
Asset management 22 698
Broking and structuring 55 144
Stenham 49 450
Total from operating subsidiaries 171 804
Group (4 883)
Operations (10 339)
Investment returns 33 938
Cost of funding (28 482)
166 921
Note: Group funding costs are disclosed as part of "group" and have not been
allocated to the appropriate underlying entities.
Notes
Compliance with IAS 34
The results for the six months ended 30 September 2011 have been prepared in
accordance with IAS 34 - "Interim Financial Reporting", AC 500 series of
interpretations, the Companies Act 71 of 2008 and the JSE Listings requirements.
The accounting policies and methods of computation are consistent with those
applied in the annual financial statements for March 2011.These results have not
been audited or reviewed by the company`s auditors, KPMG Inc. The preparation of
the results have been supervised by R E Katz, the group CFO.
Business combination
With effect from 1 September 2011, Citadel Holdings Ltd ("Citadel") acquired a
100% interest in Orthogonal Investments (Pty) Ltd ("Orthogonal") from Peregrine
Financial Services Holdings Ltd ("PFS") and the management consortium of
Orthogonal. The consolidation was accounted for using the acquisition method.
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
Assets 1 119
Property, plant and equipment 52
Trade and other receivables 227
Cash and cash equivalents 840
Liabilities (7 208)
Loans payable (7 154)
Trade and other payables (54)
Carrying value of identifiable net liabilities (6 089)
Goodwill 6 089
Cash consideration -
Other acquisitions
1. With effect from 1 April 2011, Peregrine Securities (Pty) Ltd acquired 47.5%
of Legae Securities (Pty) Ltd. The investment has been accounted for as an
associate in terms of IAS 28.
2. With effect from 1 April 2011, PFS acquired at par a 30% interest in Nala
Empowerment Investment Company (Pty) Ltd ("Nala"), with the balance of 70% being
held by three trusts benefiting education in SA, community development and our
own staff. Nala is the entity which, through two wholly-owned subsidiaries,
holds 30 054 719 Peregrine shares. The investment has been accounted for as an
associate in terms of IAS 28. The carrying value of the investment as at 30
September 2011 was R15 million.
Disposals
1. With effect from 1 September 2011, PFS disposed of its associated interest in
Orthogonal to Citadel. The loss on disposal of R2.2 million has been reflected
in the income statement.
2. With effect from 1 August 2011, PFS disposed of its associated interest in
Vunani Fund Managers (Pty) Ltd to Vunani Capital (Pty) Ltd. The loss on disposal
of R150 204 has been reflected in the income statement.
Explanatory notes to the statements 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 period of three years from 1 April 2010 which
are linked to the financial performance of the business.
2. Stenham Ltd purchased 49 180 shares from its shareholders with effect from 31
August 2011 and subsequently cancelled such shares. The effect of this
transaction has been to increase the group`s effective interest in Stenham Ltd
as at 1 September 2011 from 52.75% to 55.4%.
3. With effect from 1 September 2011, 187 066 Peregrine shares were returned to
the group resulting from a reduction of R1.7 million in the original purchase
price payable by PFS to the management consortium of Orthogonal.
Commentary to the financial results for the six month period ended 30 September
2011
Environment
During the reporting period, global financial markets were dominated by the
fiscal debt crises in Europe, whilst fears of a recession in the US and a slow-
down in the Chinese economy escalated. A notable reduction in the activity of
multi-national banks in credit markets and the forced exit of financial
institutions from proprietary trading activities continued ahead of new
prohibiting legislation in many countries. Investors` preference for liquid
exchange traded funds meant that liquidity in stock markets shifted to index-
level instruments. Commodity prices swung around significantly and capital
flowed from emerging markets. These factors combined to produce extraordinary
volatility in financial markets, which turned out to be a tough environment for
financial services companies - not only in South Africa, but globally.
Financial Results
Against this backdrop, the Peregrine group produced reasonable results, with
profits attributable to shareholders of R107 million (2010: R126 million), 15%
lower than the previous year. Headline earnings reduced by 9% to R109 million
(2010: R120 million).
Operating revenue reduced by 4% to R705 million (2010: R734 million) as the
business maintained activity levels through the period. Total operating expenses
increased by 1% to R569 million (2010: R562 million). Income from proprietary
investing activities amounted to R34 million (2010: R34 million). Interest
paid, primarily on long-term debt, reduced by 17% to R26 million and the group
maintained its post year end net interest received position.
Cash generated from operating activities amounted to R164 million (2010: R199
million), again outstripping attributable earnings to a significant extent,
highlighting the group`s cash generative nature. Long-term debt outstanding as
at the end of the reporting period amounted to R423 million, including utilised
revolving credit facilities of R283 million. Available cash after allowing for
working capital needs amounted to R345 million, of which the bulk was held
offshore.
Basic earnings reduced by 15% to 49.1 cents per share (2010: 57.7 cents per
share), while headline earnings reduced by 9% to 50.2 cents per share (2010:
55.2 cents per share).
Segmental results
Substantial minority interests exist in many of the group`s operations. The
operating results below are therefore presented on a pro forma basis, reflecting
amounts after minorities, before intangible amortisation and share based
payment. This better reflects and aids in the understanding of the specific
economic benefit of each segment to the shareholders of the group.
Wealth Management
Profit from ordinary activities in the group`s private client wealth management
division, Citadel, increased by 24% to R55 million. Revenue of R187 million was
11% higher than the prior year, with a small negative currency effect on
offshore income. Operating costs increased marginally.
Assets under management at the end of the period amounted to R19.7 billion.
Monthly gross inflows averaged approximately R230 million for the six months,
driven by the expanded advisory team. The company`s client retention ratio, both
by number of clients and by assets, remains in line with its long term retention
experience of 98%. Investor anxiety, resulting from volatile markets, is
placing a heavier demand on the advisory team and may potentially adversely
affect new inflows in the second half of the year.
Asset Management
The group`s asset management division comprises a number of fund management
teams, operating as stand alone investment managers, backed up by a central
administration and capital raising capacity. The contribution by this division
decreased by 45% to R13 million. This reflects a lower asset base in aggregate,
reduced performance fees and the cost of continued investment into the capital
raising capacity of the group.
The group`s flagship hedge fund manager, Peregrine Capital, currently manages
R2.8 billion across a range of mandates. Fund performance in the period was
acceptable and similar to that in the same period last year, but highly
competitive given the South African equity environment. All mandates are at
their high water marks. Outflows, related to limits introduced by Regulation
28, which commenced at the start of the calendar year and continued into the
first part of this period, appear to have come to an end.
Stenham
Stenham houses a global fund of hedge funds operation, a global property
manager, and a trust and administration business. During the period, Stenham
undertook a share buy-back, which resulted in Peregrine`s effective shareholding
increasing from 52.75% to 54.4%.
Peregrine`s share of the profits for the six months decreased by 30% to R35
million from R49 million. The reduction in profitability reflects the loss of
earnings after the sale of non-core components of the Stenham business, an
increased cost base in the fund of hedge funds division after the Montier
acquisition, a reduced asset base and the negative effect of cross currency
movements on revenue.
The Stenham fund of funds division experienced net outflows of $303 million,
leaving assets under management at the end of the period at $3 billion. Further
outflows are expected in the second half of the year. Portfolio returns were
muted during the strong run up in equity markets in the previous two years, but
have been relatively resilient during the recent turbulence in markets. The
team remains focused on delivering returns to investors, while also managing
costs in the business.
The Stenham property division completed two acquisitions, amounting to GBP68
million, during the period, while concluding realisations of GBP230 million,
reflecting an increased opportunity set in the property market, mainly in high
quality properties in specific areas in the UK and Germany. A number of re-
financing transactions were concluded successfully. No performance fees were
earned in this period.
Broking and Structuring
The transactional environment within which Peregrine Securities operates,
remains very difficult, particularly in the traditional stock broking and prime
services arena, while some activity has returned to the derivatives consulting
and dealing market.
The contribution from the broking and structuring division of R55 million was in
line with the previous year. This was helped by a number of ad hoc structuring
and derivative transactions executed during the period. The management team
continues to expand the business`s operations into further areas to broaden and
diversify the profit stream.
Proprietary Investments
In an environment where most of the major asset classes experienced negative
returns, the group`s proprietary investment portfolio was profitable,
contributing R34 million (2010: R34 million) to the overall result. Profits
were derived from hedge fund investments, the private equity portfolio as well
as from the offshore balance sheet. A portion of available capital was invested
in global equity and property opportunities that presented during market
turbulence.
Focus
Throughout the group, the focus remains on delivering top class client service
and investor returns, whilst keeping operating costs under control.
Jan van Niekerk Leonard Harris
Group CEO Non-executive Chairman
Sandton
14 November 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: 14/11/2011 11:31:53 Supplied by www.sharenet.co.za
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