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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').
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