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CDZ - Cadiz Holdings Limited - Reviewed preliminary results for the year ended

Release Date: 04/06/2012 08:00
Code(s): CDZ
Wrap Text

CDZ - Cadiz Holdings Limited - Reviewed preliminary results for the year ended 31 March 2012 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 0.8 cps * Refocused business model * Sale of 60% of securities business * Unit trust funds under management up 29% * Special dividend of 50 cps paid to shareholders CONDENSED GROUP PRELIMINARY STATEMENT Reviewed Audited OF COMPREHENSIVE INCOME 12 months 12 months 31-Mar-12 31-Mar-11
R `000 R `000 Continuing operations Gross operating revenue 180 547 225 382 Interest income 13 353 2 333 Net investment income 35 529 7 287 Net income from investments 32 135 11 264 Foreign exchange gains/(losses) 3 394 (3 977) Income attributable to linked assets - - Net fair value gains on linked financial 252 369 54 061 instruments Linked liability adjustment (252 369) (54 061) Fair value adjustment on third party (6 827) - mutual fund interests Operating expenses (213 098) (200 665) Operating profit 9 504 34 337 Finance costs (831) (706) Share of loss of associate (5 746) - Profit before taxation 2 927 33 631 Taxation (571) (5 272) Total comprehensive income from continuing 2 356 28 359 operations Discontinued operation Profit from discontinued operation 180 961 25 234 Total comprehensive income 183 317 53 593 Earnings per share (cents) Basic-from continuing operations 1.0 12.8 -from discontinued operation 78.4 11.3 79.4 24.1 Diluted-from continuing operations 1.0 12.4 -from discontinued operation 77.1 11.1 78.1 23.5
Notes to the condensed statement of comprehensive income Reconciliation of headline earnings: Profit attributable to equity holders of 183 317 53 593 the company Surplus on disposal of subsidiary (191 909) - Taxation impact 10 495 - Loss/(Surplus) on disposal of plant and 11 (56) equipment Taxation impact (3) 16 Headline earnings 1 911 53 553 Headline earnings per share (cents) Basic 0.8 24.1 Diluted 0.8 23.5 Share information Issued number of shares (`000) 253 070 245 339 Consolidated number of shares (`000) 232 751 225 205 Weighted average number of shares (`000) 230 927 222 262 Diluted weighted average number of shares 234 678 228 276 (`000) CONDENSED GROUP PRELIMINARY STATEMENT Reviewed Audited OF FINANCIAL POSITION 31-Mar-12 31-Mar-11 R `000 R `000
ASSETS Non-current assets 3 820 237 2 608 271 Investment in associate 75 662 - Plant and equipment 4 476 6 906 Intangible assets 274 753 269 334 Deferred taxation 20 846 19 230 Investments backing linked funds 3 337 733 2 232 001 Financial assets 96 154 76 235 Receivables and prepayments 10 613 4 565 Current assets 481 230 580 985 Financial assets 138 906 123 511 Receivables and prepayments 57 157 223 270 Taxation 8 333 2 406 Cash and cash equivalents 276 834 231 798 Total assets 4 301 467 3 189 256 EQUITY Capital and reserves Ordinary share capital and premium 25 277 3 619 Treasury shares (52 869) (52 411) Share-based payment reserve 36 430 59 888 Retained earnings 814 067 672 604 Total equity 822 905 683 700 LIABILITIES Non-current liabilities 3 351 810 2 239 941 Deferred taxation 5 994 2 912 Linked investment contract liabilities 3 337 733 2 232 001 Trade and other payables 8 083 5 028 Current liabilities 126 752 265 615 Trade and other payables 74 811 230 412 Third party financial liabilities arising 46 333 - on consolidation of mutual funds Taxation 5 608 6 913 Trading liabilities - 28 290 Total liabilities 3 478 562 2 505 556 Total equity and liabilities 4 301 467 3 189 256 Net asset value (cents per share) 354 304 Net tangible asset value (cents per share) 229 177 CONDENSED GROUP PRELIMINARY STATEMENT Reviewed Audited OF CASH FLOWS 12 months 12 months 31-Mar-12 31-Mar-11 R `000 R `000 Cash flow from operating activities (44 528) (29 118) Cash generated from operations 23 720 39 375 Taxation paid (21 686) (24 934) Dividends paid (46 562) (43 559) Cash flow from investing activities 87 112 78 075 Cash flow from financing activities 2 450 20 231 Net change in cash and cash 45 034 69 188 equivalents Effect of exchange rate adjustment 2 (258) Cash and cash equivalents at 231 798 162 868 beginning of year Cash and cash equivalents at end of 276 834 231 798 year The cash flow includes cash flow from the discontinued operation, more detail of which is given in the notes.
CONDENSED GROUP PRELIMINARY STATEMENT Reviewed Audited OF CHANGES IN EQUITY 12 months 12 months 31-Mar-12 31-Mar-11 R `000 R `000
Share capital, share premium and treasury shares Opening balance (48 792) (70 642) Issue of shares 21 731 717 Sale of treasury shares to Makana - 29 980 Net purchase of treasury shares on - (1 775) exercise of options Transfer of deferred consideration - 7 314 shares Repurchase of A ordinary shares (19) (2) Repurchase of B preference shares (50) - Purchase of treasury shares (462) (14 384) (27 592) (48 792) Reserves Opening balance 732 492 710 009 Net premium on issue of equity 2 280 settled share appreciation rights Sale of treasury shares to Makana - 2 730 Net purchase of treasury shares on - 1 908 exercise of options Employee scheme - value of services (18 752) 14 052 provided Transfer of deferred consideration - (6 521) shares Total comprehensive income 183 317 53 593 Dividends paid (46 562) (43 559) 850 497 732 492 Total equity 822 905 683 700 CONDENSED GROUP PRELIMINARY SEGMENT REPORT Reviewed Asset management Securities Investments Total 12 months to and and Advisory 31-March-2012 Structuring R`000 Segment revenue 140 764 45 463 62 801 249 028 Segment costs 139 896 47 716 25 679 213 291 Segment profit 868 (2 253) 37 122 35 737 Corporate costs (26 906) Profit before tax (158) on discontinued operation Share of loss of (5 746) associate Profit before 2 927 taxation Gross operating 139 096 44 492 29 278 212 866 revenue (external) Audited Asset management Securities Investments Total 12 months to 31- and and Advisory March-2011 Structuring R`000 (Restated) Segment revenue 196 823 134 449 31 008 362 280 Segment costs 144 314 98 942 19 172 262 428 Segment profit 52 509 35 507 11 836 99 852 Corporate costs (31 831) Profit before tax (34 390) on discontinued operation Profit before 33 631 taxation Gross operating 187 059 132 952 6 052 326 063 revenue (external) Year-on-year % (28%) (66%) 103% (31%) segment revenue Year-on-year % (3%) (52%) 34% (19%) segment costs Year-on-year % (98%) (106%) 214% (64%) segment profit The securities and structuring segment represents the performance of the business up to the disposal of 60% to BNP Paribas SA on 31 October 2011 compared to a full year for the period ending 31 March 2011. The remaining 40% has been accounted separately as an associate from 1 November 2011. NOTES TO THE CONDENSED FINANCIAL STATEMENTS Basis of presentation These results 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 No. 71 of 2008. The condensed financial statements do not include all of the information required for full annual financial statements. The accounting policies applied are in terms of IFRS and consistent with those applied in the annual financial statements for 31 March 2011. These reviewed condensed financial statements have been prepared under the supervision of chief financial officer Mr R Jahnig CA(SA). Reclassification of comparative figures The discontinued operation has been disclosed separately and the comparatives reclassified. Following the sale of 60% of the securities business the remaining advisory business previously included in securities and structuring was reclassified to form part of the investments and advisory segment and comparatives reclassified. These reclassifications had no impact on the group`s reported results. Discontinued operation During this financial period, the group sold 60% of its securities business to BNP Paribas SA. The effective date of this sale was 31 October 2011. The results of this discontinued operation are included in the group`s results for the 12 months ended 31 March 2012. Financial information relating to the securities business operation 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 PRELIMINARY STATEMENT OF COMPREHENSIVE INCOME OF DISCONTINUED OPERATION Reviewed Audited 12 months 12 months (R `000) 31-Mar-12 31-Mar-11 Gross operating 32 319 100 681 revenue Interest income 3 100 10 048 Operating expenses (35 261) (76 339) Profit before 158 34 390 taxation on discontinued operation Taxation (611) (9 156) (Loss)/profit from (453) 25 234 discontinued operation Surplus before tax on 191 909 - disposal of subsidiary Taxation (10 495) - Surplus after 181 414 - taxation on disposal of subsidiary Profit from 180 961 25 234 discontinued operation CONDENSED GROUP PRELIMINARY CASH FLOW FROM DISCONTINUED OPERATION Reviewed Audited 12 months 12 months
(R `000) 31-Mar-12 31-Mar-11 Cash flow from operating (69 405) 9 703 activities Cash flow from investing (1 726) - activities Cash flow from financing - 176 activities Effect on cash flows (71 131) 9 879 FINANCIAL PERFORMANCE Cadiz Holdings` results for the period were impacted by the underperformance of the securities business ahead of the disposal of a 60% stake to BNP Paribas SA, while difficult market conditions reduced performance fees in the asset management business. These factors, together with restructuring costs, contributed to a disappointing performance for the year. Gross operating revenue from continuing operations was 20% lower at R180.5 million. Revenue from the group`s investments and capital increased from R9.6 million to R42.1 million on improved investment returns and Rand weakness. Operating costs from continuing operations grew by 6.2%. This includes restructuring costs related to the implementation of the decentralised operating model. Staff head count has reduced year-on-year from 183 to 123 with 38 employees having been taken over by BNP Paribas Cadiz Securities. The share of associate loss of R5.7 million for the last five months relates to the costs of integrating the securities business into BNP Paribas Cadiz and the initial impact on revenue of changing from an agency broker prior to the launch of the new business. Operating profit from continuing operations for the period declined by 72% to R9.5 million. Diluted earnings per share from continuing operations is 92% lower at 1.0 cents per share. The discontinued operation reported a profit after taxation of R181.0 million. This includes the R181.4 million surplus on disposal of the 60% of the securities business and recognition of the intangibles on the retained 40% shareholding. Headline earnings totalled R1.9 million, with diluted headline earnings per share 97% lower at 0.8 cents per share. This performance is in line with the earnings guidance provided in the trading statements on 3 April and 30 May 2012. ASSET MANAGEMENT The restructuring of Cadiz Asset Management has included the integration of the wholesale and retail businesses, increased autonomy and a focus on cost management. The past 12 months have been challenging for asset management with revenue down 28% to R140.8 million. The decline in revenue was due to lower performance fees. While costs reduced by 3% to R139.9 million for the period, they remain high for the current asset base and contributed to net profit declining by 98%. Assets under management are similar to 12 months ago at R41.6 billion (March 2011: R 42.0 billion). The net change represents a gain from market movements of R1.3 billion offset by net outflows of R1.7 billion. Cadiz Collective Investments` assets under management grew by 29% to R8.5 billion. Cadiz was recognised for its investment excellence and received awards for the Top South African Balanced Fund of 2011 from Africa FM and Best Domestic Asset Allocation Prudential Fund at the 2012 Raging Bull Awards for the Cadiz Managed Flexible Fund. Unit trust performance remains impressive: * The Cadiz Managed Flexible Fund ranked first out of 55 funds in its category over three years; * The Cadiz Equity Ladder Fund ranked first over five years against all general equity, growth and value funds; * The Cadiz Absolute Yield Fund is the top performing flexible fixed interest fund over five years; and * The Cadiz Money Market Fund is the top performing fund in its category over all periods longer than three years. Consistent long-term performance in the institutional fund range continues to improve, led by the Cadiz Absolute Return Range. INVESTMENTS AND ADVISORY At year end the group`s investment portfolio totalled R448 million which included the proceeds of R118 million from the sale of the securities business. Revenue from the investments and advisory business increased by 103% to R62.8 million mainly as a result of improved returns on investments and the inclusion of fees earned from the BNP Paribas Securities service level agreement (SLA). Advisory fees were steady. Costs increased by 34% to R25.7 million mainly due to the costs of providing the SLA services to BNP Paribas Cadiz Securities. At the end of the period the capital was invested as follows: * R58.1 million invested in liquid assets for regulatory capital adequacy; * R140.2 million invested in liquid assets for short-term commitments including the 50 cents special dividend paid on 7 May 2012, incentives and equity scheme repurchases; * R60.0 million committed as seed capital and set aside for working capital requirements for the asset management business; * R88.3 million invested in Makana; * R17.2 million invested in strategic unlisted investments; and * R84.2 million held as a prudent operational buffer. Cadiz` corporate advisory business, which was profitable for the year, continues to do well in the resources sector and is expanding into the infrastructure sector. The strategic partnerships with advisory firms in China and India are leading to increased activity and a healthy pipeline of potential deals. CHANGES TO BOARD OF DIRECTORS Following the restructuring and adoption of the decentralised operating model, Fraser Shaw was appointed chief executive officer to succeed Ram Barkai who as a director with effect from 21 February 2012. Three long-serving non-executive directors resigned from the board during the period, namely Colin Hall, David Lawrence and Nonhlanhla Mjoli-Mncube. Gando Matyumza was appointed as lead independent director. allHall SHARE CAPITAL AND TREASURY SHARES During the period the company issued 7.6 million shares to management and key staff for the 2010 and 2011 annual incentive awards. 0.2 million of the required 2.7 million shares were repurchased with the cash retained at an average share price of 2.51 cents per share to offset the 2011 allocation. PROSPECTS Cadiz will build on the progress made to date on implementing a decentralised business model with more autonomous and accountable business units. The cost savings from implementing the new business model are expected to be realised in the coming year. The restructured Cadiz Asset Management will remain focused on delivering excellence in investment performance and client service, which will benefit all stakeholders in the medium to long term. Cadiz` positioning at the forefront of sustainable investing means the business is well placed to benefit from regulatory changes. Cadiz plans to introduce an employee ownership structure for asset management to align management and shareholders. This will be presented to shareholders for approval during the year. Cadiz and BNP Paribas SA will continue to focus on the integration, launch and success of the BNP Paribas Cadiz Securities business in which Cadiz holds a 40% stake. The new business is progressing well and the research offering is being expanded to cover 80% of the South African Equities market. The relocation of the securities team to Cape Town has been completed. This business will focus on marketing and selling South African equity products to institutional investors locally and abroad and offering local institutional investors international research and market access. Within investments and advisory, Cadiz Corporate Solutions has a healthy deal pipeline in the resources and infrastructure sectors and is well positioned to capitalise on the growing interest from Chinese and Indian investors through its strategic partnerships. Cadiz remains committed to returning excess funds to shareholders in future and plans to reduce the annual dividend cover ratio. Cadiz has not declared a final dividend for the 2012 financial year, as indicated to shareholders in the announcement of the 50 cents per share special dividend in April 2012. REVIEW REPORT The condensed consolidated preliminary results for the year ended 31 March 2012 have been reviewed by PricewaterhouseCoopers Inc. The external auditors` unqualified review opinion is available on request for inspection at the company`s registered office. On behalf of the board of directors Peter-Paul Ngwenya Fraser Shaw Chairman Chief executive officer Cape Town 4 June 2012 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 F G Cadiz* B H Kent* A N Matyumza* B J Memela-Khambula* S J Saunders* F C Shaw (Chief executive officer) 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: 04/06/2012 08:00:02 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`). 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