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CADIZ HOLDINGS LIMITED - Unaudited Interim Results for the six months ended 30 September 2012

Release Date: 12/11/2012 08:00
Code(s): CDZ     PDF:  
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Unaudited Interim Results for the six months ended 30 September 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”)

UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 30
SEPTEMBER 2012

KEY FEATURES
# Diluted headline earnings per share up 33%
# Special dividend of 50 cents per share paid to shareholders
# Realising initial benefits of restructuring
# Operating costs reduced by 14%
# BNP Paribas Cadiz Securities integration on track

CONDENSED GROUP INTERIM STATEMENT OF COMPREHENSIVE   INCOME
                                         Restated
                             Unaudited  unaudited       Audited
                              6 months   6 months     12 months
 (R thousands)               30-Sep-12  30-Sep-11     31-Mar-12
 Continuing operations
 Gross operating revenue        80 481     95 069       180 547
 Interest income                 8 929      2 548        13 353
 Net investment income          15 615     18 703        35 529
 Net income from
 investments                    15 559     15 294        32 135
 Foreign exchange gains             56      3 409         3 394
 Income attributable to
 linked assets                       -          -             -
 Net fair value gains on
 linked financial
 instruments                    255 054     82 246      252 369
 Linked liability
 adjustment                    (255 054)   (82 246)    (252 369)
 Fair value adjustment on
 third party mutual fund
 interests                       (4 280)    (2 720)      (6 827)
 Operating expenses             (89 085)  (104 023)    (251 840)

Operating profit /(loss)          11 660      9 577     (29 238)
Finance costs                      (276)      (322)        (831)
Share of loss of
associate                        (7 026)          -      (5 746)
Profit / (Loss) before
taxation                           4 358      9 255     (35 815)
Taxation                          (1 469)    (1 734)       (571)
Total comprehensive
income from continuing
operations                         2 889      7 521     (36 386)
Discontinued operations
                              
(Loss)/Profit from                     -
discontinued operations                       (5 337)    180 961
Total comprehensive
income                             2 889       2 184     144 575

Earnings/ (Loss) per
share (cents)
Basic - from continuing
operations                            1.2        3.3       (15.8)
Basic- from discontinued
operations                              -       (2.3)       78.4
                                      1.2        1.0        62.6
Diluted - from continuing
operations                            1.2        3.2       (15.5)
Diluted - from
discontinued operations                 -       (2.3)       77.1

                                      1.2        0.9        61.6


NOTES TO THE CONDENSED GROUP INTERIM STATEMENT OF
COMPREHENSIVE INCOME
Reconciliation of headline earnings:
Profit attributable to
equity holders of the
company                            2 889        2 184     144 575
Surplus on disposal of
subsidiary                             -            -    (191 909)
Taxation impact                        -            -      10 495
Goodwill impairment                    -            -      38 742
(Surplus)/Deficit on
disposal of plant and
equipment                            (70)          (8)         11

Taxation impact                       20            2          (3)
Headline earnings                  2 839        2 178       1 911
Headline earnings per
share (cents)
Basic                                1.2          0.9         0.8
Diluted                              1.2          0.9         0.8
Share information
Issued number of shares
('000)                           253 228      252 944      253 070
Consolidated number of
shares ('000)                    232 909      232 810      232 751
Weighted average number
of shares ('000)                 232 834      229 572      230 927
Diluted weighted
average number of shares
('000)                           233 546      234 106      234 678


                             
CONDENSED GROUP INTERIM STATEMENT OF FINANCIAL POSITION
                                         Restated
                              Unaudited unaudited     Audited
(R thousands)                 30-Sep-12 30-Sep-11   31-Mar-12
ASSETS
Non-current assets            4 491 687  3 333 109   3 781 495
Investment in associates         68 636          -      75 662
Plant and equipment               4 606      6 742       4 476
Intangible assets               237 220    272 462     236 011
Deferred taxation                16 783     16 908      20 846
Investments backing
linked funds                  4 056 889  2 889 255   3 337 733
Financial assets                 98 605    135 135      96 154
Receivables and
prepayments                       8 948     12 607      10 613

Current assets                  358 157    267 239     481 230
Financial assets                122 892     64 632     138 906
Receivables and
prepayments                      37 081     36 757      57 157
Taxation                          9 001      7 917       8 333
Cash and cash equivalents       189 183    157 933     276 834

Assets of disposal group
classified as held for
sale                                  -    328 409           -

Total assets                  4 849 844  3 928 757    4 262 725

EQUITY
Capital and reserves
Ordinary share capital
and premium                     25 562      24 965       25 277

Treasury shares                (52 875)     (52 411)     (52 869)
Share-based payment
reserve                         36 245       38 731       36 430
Retained earnings              661 793      628 251      775 325
Total equity                   670 725      639 536      784 163

LIABILITIES
Non-current liabilities      4 064 781    2 898 996    3 351 810
Deferred taxation                3 321        4 946        5 994
Linked investment
contract liabilities         4 056 889    2 889 255    3 337 733

Trade and other payables         4 571        4 795        8 083

Current liabilities            114 338       96 350      126 752                             
Trade and other payables        58 929       43 732       74 811
Third party financial
liabilities arising on
consolidation of mutual
funds                           51 544       45 621       46 333
Taxation                         3 865        6 997        5 608
Liabilities of disposal
group classified as held
for sale                             -       293 875           -

Total liabilities            4 179 119      3 289 221   3 478 562
Total equity and
liabilities                  4 849 844      3 928 757   4 262 725

Net asset value (cents
per share)                         288            275         337
Net tangible asset value
(cents per share)                  180            153         229


CONDENSED GROUP INTERIM STATEMENT OF CASH FLOWS
                                          Restated
                            Unaudited    unaudited       Audited
                             6 months     6 months     12 months
(R thousands)               30-Sep-12     30-Sep-11    31-Mar-12

Cash flow from operating
activities                   (119 937)      (74 242)     (44 528)
Cash (utilised
by)/generated from
operations                     (1 131)      (20 848)      23 720
Taxation paid                  (2 430)       (6 832)     (21 686)

Dividends paid               (116 376)      (46 562)     (46 562)
Cash flow from investing
activities                      32 237       41 671       87 112
Cash flow from financing
activities                          49          212        2 450
Net change in cash and
cash equivalents              (87 651)      (32 359)      45 034
Effect of exchange rate
adjustment                           -            4            2
Cash and cash equivalents
at beginning of year           276 834      231 798      231 798
Cash and cash equivalents
at end of year                 189 183      199 443      276 834


CONDENSED GROUP INTERIM STATEMENT OF CHANGES IN EQUITY
                             Unaudited    Unaudited      Audited
                              6 months     6 months    12 months
(R thousands)                30-Sep-12    30-Sep-11    31-Mar-12
                              
Share capital, share
premium and treasury
shares
Opening balance                (27 592)     (48 792)     (48 792)

Issue of shares                    285       21 410       21 731
Repurchases of A ordinary
shares                             (6)          (14)         (19)
Repurchases of B
preference shares                   -           (50)         (50)
Purchase of treasury
shares                              -             -         (462)
                              (27 313)      (27 446)     (27 592)
Reserves
Opening balance               811 755       732 492      732 492
Net premium on issue of
equity settled share
appreciation rights               (45)           25            2
Employee scheme - value
of services provided             (185)      (21 157)     (18 752)
Total comprehensive
income                          2 889         2 184      144 575

Dividends paid               (116 376)      (46 562)     (46 562)

                              698 038       666 982      811 755
Total shareholders'
equity                        670 725       639 536      784 163


CONDENSED GROUP INTERIM SEGMENT REPORT
                                    Securities  Investments
                           Asset           and          and
(R thousands)          Management  Structuring     Advisory       Total
6 months to 30
September 2012
(unaudited)
Segment revenue           68 950           -         20 836       89 786
Segment costs            (67 318)          -         (6 254)      73 572
Segment profit             1 632           -         14 582       16 214
Corporate costs                                                   (4 830)
Share of loss of associate                                        (7 026)
Profit before taxation                                             4 358
Gross operating
revenue
(external)                67 216           -         13 265       80 481


Restated 6
months to 30
September 2011
                              
(unaudited)
Segment revenue           77 250       36 602         23 676     137 528
Segment costs            (71 587)     (40 091)        (6 987)    118 665
Segment profit             5 663       (3 489)        16 689      18 863
Corporate costs                                                  (16 516)
Add: Loss before taxation on
discontinued operation                                             6 908
Profit before taxation                                             9 255
Gross operating
revenue
(external)                 75 075       35 773          5 991    116 839

Year- on-   year
% segment
revenue                      (11%)       (100%)          (12%)      (35%)
Year- on-   year
% segment   costs             (6%)       (100%)          (10%)      (38%)
Year- on-   year
% segment
profit                       (71%)       (100%)          (13%)      (14%)

Restated 12
months to 31
March 2012
(audited)
Segment revenue            140 764        45 463        51 543    237 770

Segment costs             (139 896)      (47 716)      (14 421)  (202 033)
Segment profit                 868        (2 253)       37 122     35 737
Corporate costs                                                   (26 906)
Goodwill impairment                                               (38 742)
Less: Profit before taxation on
discontinued operation                                               (158)
Share of loss of associate                                         (5 746)
Loss before taxation                                              (35 815)
Gross operating
revenue
(external)                  139 096        44 492        29 278    212 866


The securities and structuring segment in September 2011 and
March 2012 represent the performance of the business up to the
disposal of 60% to BNP Paribas SA on 31 October 2011. The
remaining 40% has been accounted for as an associate from 1
November 2011.

FINANCIAL PERFORMANCE
Cadiz continued to face tough conditions in the asset
management and securities markets in the past six months.



                               
However, the group is starting to realise the initial cost
benefits of implementing its decentralised business model,
despite still incurring restructuring costs. In addition, BNP
Paribas Cadiz Securities, where the group has a 40% interest,
incurred costs relating to the integration of the two
businesses and the implementation of its business plan.

Despite these challenges the group has reported improved
headline earnings of R2.8 million compared to the two previous
six month reporting periods (Sept 2011: R2.2 million and March
2012 (R0.3 million)).

Gross operating revenue from continuing operations was 15%
lower at R80.5 million. Revenue from the group’s investment
and capital portfolio increased by 9% to R20.3 million.

Tight cost disciplines have been implemented across the
business which has resulted in a 14% reduction in operating
costs to R89.1 million.

Operating profit from continuing operations was 22% higher at
R11.7 million.

Total comprehensive income from continuing operations for the
period declined by 62% to R2.9 million primarily as a result
of the securities business being treated as a discontinued
operation in the prior period and being accounted for as an
associate in the current period.

Diluted earnings per share from continuing operations was 62%
lower at 1.2 cents per share.

Headline earnings totalled R2.8 million, with diluted headline
earnings per share 33% higher at 1.2 cents. This performance
is in line with the earnings guidance provided in the trading
statement released on SENS on 2 November 2012.

ASSET MANAGEMENT
The past six months have been challenging for the asset
management business as revenue declined 11% to R69.0 million.
The decline in revenue was due to lower assets under
management over the period and limited performance fees being
earned. Costs have been reduced by 6% to R67.3 million for the
period, contributing to net profit declining by 71%.

Assets under management are R34.8 billion (September 2011:
R41.0 billion and March 2012: R41.6 billion). The net change
in the asset base represents a gain from market movements of
R1.5 billion offset by net outflows of R8.3 billion. As
announced on SENS on 31 July assets under management in this
period were adversely impacted by a single client drawdown of

                              
R4.7 billion. Cadiz Collective Investments’ assets under
management represented R7.7 billion of total assets at 30
September 2012.

While net cash flows have been negative, Cadiz Asset
Management has benefited from improving margins resulting from
the acquisition of better quality mandates in the period.

Investment performance remains competitive across most funds,
with particularly strong performance in the unit trust funds.
Performance highlights include:
# The Cadiz Money Market Fund is in the top three performing
money market unit trust funds over all periods.
# The Cadiz Absolute Yield Fund is in the top quartile of all
flexible fixed interest funds over all periods longer than 12
months.
# The Cadiz Managed Flexible Fund is in the top quartile of
all Prudential Variable Equity funds for all periods longer
than 12 months.
# The Cadiz Inflation Plus Fund is comfortably ahead of its
rolling three year CPI+5% benchmark and is performing
exceptionally well relative to its peer group.

INVESTMENTS AND ADVISORY
The group’s investment and capital portfolio totalled R334.9
million after the payment of a special dividend of R116.4
million in May 2012. Revenue from the investment and advisory
business declined by R2.8 million mainly as a result of the
foreign exchange gains in the prior period. Costs decreased by
10% to R6.3 million on lower investment costs resulting in a
decline of R2.1 million in net segment profit to R14.6
million.

At the end of the period the capital was invested as follows:
# R53.3 million invested in liquid assets for regulatory
capital adequacy,
# R6.6 million in liquid assets for short-term commitments
including taxation and incentives,
# R60.0 million set aside for seed capital and working capital
requirements for the asset management business;
# R85.5 million invested in Makana,
# R16.4 million in strategic unlisted investments, and
# R113.1 million held as a prudent operational buffer.

Cadiz Corporate Solutions, the group’s advisory business,
continues to focus on the resources and infrastructure
sectors. The reduction in foreign direct investment and the
labour issues facing the mining industry have resulted in
tough conditions for M&A activity and longer lead times to
close deals. The business has a healthy deal pipeline and


                              
continues to distinguish itself through its strategic
partnerships in China and India.

CORPORATE   COSTS
Corporate   costs have been reduced by 71% to R4.8 million. This
reduction   has resulted from savings in personnel costs and a
reduction   in group IFRS2 charges for the staff equity scheme.

BNP PARIBAS CADIZ SECURITIES
Cadiz sold a 60% stake in its securities business to BNP
Paribas SA in October 2011. The main focus of the new business
over the past year has been on the integration of the business
and the implementation of the business plan which is now well
advanced. The domestic equity research offering is now in
place to market and sell South African equity products to
local and international investors.

Cadiz’s share of associate losses after tax is R7.0 million,
which includes significant integration costs.

PROSPECTS
Management continues to focus on finalising the implementation
of the decentralised business model while ensuring the
operating businesses are positioned to deliver growth. Cost
control remains a priority and further cost reductions are
expected in the next six months as the decentralisation and
restructuring processes are completed.

The restructured Cadiz Asset Management will focus on
delivering excellence in investment performance and client
service across its product range. This is expected to
contribute to the attraction of assets in medium to long-term.
Cadiz plans to introduce a performance-based equity scheme in
the asset management business to align management and
shareholder interests. This scheme will be presented to
shareholders for approval in the second half of the financial
year.

BNP Paribas Cadiz Securities will continue to invest in
integrating and building its client offerings in the next 12
months. The group expects to start realising benefits as the
new business extends its offering to provide research and
market access to international investors.

Cadiz’s corporate advisory business will focus on generating
revenue by converting its healthy deal pipeline.

BASIS OF PRESENTATION
The condensed interim 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 2012.

These unaudited condensed interim results have been prepared
under the supervision of chief financial officer Mr R Jähnig
CA(SA).

Restatement of comparative information
During the six months ended 30 September 2011, Cadiz acquired
effective control of one of its mutual fund investments. In
accordance with IAS 27, the Statement of Financial Position
and Statement of Comprehensive Income should have been
consolidated and the non-controlling interest recognised. This
was correctly recognised in the 31 March 2012 annual financial
statements.
The 30 September 2011 unaudited interim Statement of Financial
Position, Statement of Comprehensive Income and Statement of
Cash flows have been restated. The restatement did not result
in a change to earnings or headline earnings per share.

The effect of this change on the previously reported unaudited
interim results for 30 September 2011 is summarised below.
                              Previously
(R thousands)                   reported   Adjustment  Restated
Statement of
comprehensive income

Interest Income                    1 260        1 288     2 548
Net income from
investments                       12 337        2 957    15 294
Fair value adjustment on
third party mutual fund
interests                              -       (2 720)   (2 720)

Operating expenses              (102 597)      (1 426)  (104 023)

Finance costs                       (223)         (99)      (322)
Statement of financial
position
Current assets

Financial assets                   49 132      15 500     64 632
Trade receivables and
prepayments                        36 411         346     36 757

Cash and cash equivalents         126 377      31 556    157 933
Current liabilities

Trade and other payables           41 951       1 781     43 732
Third party financial

                              
liabilities arising on                  -      45 621     45 621
consolidation of mutual
funds
Statement of cash flows
Cash flow from investing
activities                          10 115     31 556     41 671


Reclassification of comparative information
Following the sale of 60% of the Securities business to BNP
Paribas SA on 31 October 2011, the remaining advisory,
business previously included in securities and structuring was
reclassified to form part of the investment and advisory
segment. The September 2011 comparatives have been
reclassified to reflect this change. The March 2012
comparative investment and advisory segment revenue has been
reduced by R11.3 million and segment costs reduced by R11.3
relating to the service level agreement with BNP Paribas Cadiz
Securities in line with how the chief operating decision-
makers review the group results.

On behalf of the board of directors

Peter-Paul Ngwenya                 Fraser Shaw
Chairman                           Chief Executive Officer
Cape Town
12 November 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: 12/11/2012 08:00:00 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
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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,
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