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Audited Preliminary Results for the year ended 31 March 2013
CADIZ HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
("Cadiz", "the group" or "the company")
Registration number: 1997/007258/06
JSE share code: CDZ
ISIN: ZAE000017661
KEY FEATURES
Diluted HEPS up 175% to 2.2 cents
Operating costs down 20.2%
Dividend of 7 cents per share
The integrated report and annual financial statements for Cadiz Holdings Limited,
which are summarised by this report, will be published on the group website,
www.cadiz.co.za on 28 June 2013.
These audited summarised financial statements have been prepared under the
supervision of the chief financial officer, Mr R Jahnig CA (SA).
AUDITED PRELIMINARY RESULTS
For the year ended 31 March 2013
SUMMARISED CONSOLIDATED PRELIMINARY STATEMENT OF COMPREHENSIVE INCOME
(R thousands) Audited Audited
12 months 12 months
31 Mar 13 31 Mar 12
Continuing operations
Gross operating revenue 156 130 180 547
Interest income 14 746 13 353
Net investment income 26 389 35 529
Net income from investments 26 275 32 135
Foreign exchange gains 114 3 394
Income attributable to linked assets - -
Net fair value gains on linked financial instruments 506 234 252 369
Linked liability adjustment (506 234) (252 369)
Fair value adjustment on third-party mutual fund interests (6 776) (6 827)
Operating expenses (170 078) (251 840)
Operating profit/(loss) 20 411 (29 238)
Finance costs (154) (831)
Share of loss of associate (11 345) (5 746)
Profit/(Loss) before taxation 8 912 (35 815)
Taxation (3 803) (571)
Total comprehensive income/(loss) from continuing operations 5 109 (36 386)
Discontinued operation
Profit from discontinued operation - 180 961
Total comprehensive income 5 109 144 575
Earnings/(Loss) per share (cents)
Basic - from continuing operations 2.2 (15.8)
Basic - from discontinued operation - 78.4
2.2 62.6
Diluted - from continuing operations 2.2 (15.5)
Diluted - from discontinued operation - 77.1
2.2 61.6
NOTES TO THE SUMMARISED STATEMENT OF COMPREHENSIVE INCOME
Reconciliation of headline earnings:
Profit attributable to equity holders of the company 5 109 144 575
Surplus on disposal of subsidiary - (191 909)
Taxation impact - 10 495
Goodwill impairment - 38 742
(Surplus)/Loss on disposal of plant and equipment (70) 11
Taxation impact 20 (3)
Headline earnings 5 059 1 911
Headline earnings per share (cents)
Basic 2.2 0.8
Diluted 2.2 0.8
Share information
Issued number of shares ('000) 253 276 253 070
Consolidated number of shares ('000) 232 957 232 751
Weighted average number of shares ('000) 232 878 230 927
Diluted weighted average number of shares ('000) 233 238 234 678
SUMMARISED CONSOLIDATED PRELIMINARY STATEMENT OF FINANCIAL POSITION
(R thousands) Restated Restated
Audited Audited Audited
31 Mar 13 31 Mar 12 1 Apr 11
ASSETS
Intangible assets 238 423 236 011 269 334
Plant and equipment 5 161 4 476 6 906
Investment in associate 64 317 75 662 -
Deferred taxation 24 575 20 846 19 230
Investments backing linked funds 4 846 601 3 337 733 2 232 001
Financial assets - at amortised cost 87 752 83 097 86 432
Financial assets - at fair value 251 158 151 963 113 314
Receivables and prepayments 54 943 67 770 227 835
Taxation 1 888 8 333 2 406
Cash and cash equivalents 66 081 276 834 231 798
Total assets 5 640 899 4 262 725 3 189 256
EQUITY
Capital and reserves
Ordinary share capital and premium 25 644 25 277 3 619
Treasury shares (52 893) (52 869) (52 411)
Share-based payment reserve 36 173 36 430 59 888
Retained earnings 663 985 775 325 672 604
Total equity 672 909 784 163 683 700
LIABILITIES
Deferred taxation 7 694 5 994 2 912
Linked investment contract liabilities 4 846 601 3 337 733 2 232 001
Third-party financial liabilities arising
on consolidation
of mutual funds 50 839 46 333 -
Financial liabilities - at fair value - - 28 290
Provisions 4 759 5 519 17 567
Trade and other payables 51 092 77 375 217 873
Taxation 7 005 5 608 6 913
Total liabilities 4 967 990 3 478 562 2 505 556
Total equity and liabilities 5 640 899 4 262 725 3 189 256
Net asset value (cents per share) 289 337 304
Net tangible asset value (cents per share) 179 229 177
SUMMARISED CONSOLIDATED PRELIMINARY STATEMENT OF CASH FLOWS
(R thousands) Restated
Audited Audited
12 months 12 months
31 Mar 13 31 Mar 12
Cash flow from operating activities 491 654 62 828
Cash generated from operations 605 936 131 076
Taxation paid 2 094 (21 686)
Dividends paid (116 376) (46 562)
Cash flow from investing activities (78 509) 87 112
Cash flow from financing activities 164 2 450
Net change in cash and cash equivalents 413 309 152 390
Effect of exchange rate adjustment - 2
Cash and cash equivalents at beginning of year 751 657 599 265
Cash and cash equivalents at end of year 1 164 966 751 657
Attributable to group 66 081 276 834
Attributable to policyholders 1 098 885 474 823
2012 cash flow includes cash flow from the discontinued operations.
SUMMARISED CONSOLIDATED PRELIMINARY STATEMENT OF CHANGES IN EQUITY
(R thousands) Audited Audited
12 months 12 months
31 Mar 13 31 Mar 12
Share capital, share premium and treasury shares
Opening balance (27 592) (48 792)
Issue of shares 355 21 731
Repurchase of A ordinary shares (12) (19)
Repurchase of B preference shares - (50)
Purchase of treasury shares - (462)
(27 249) (27 592)
Reserves
Opening balance 811 755 732 492
Net premium on (cancellation)/issue of equity-settled
share appreciation rights (73) 2
Employee scheme - value of services provided (257) (18 752)
Total comprehensive income 5 109 144 575
Dividends paid (116 376) (46 562)
700 158 811 755
Total equity 672 909 784 163
SUMMARISED CONSOLIDATED PRELIMINARY SEGMENT REPORT
(R thousands) Securities Investments
Asset and and
management structuring advisory Total
Audited 12 months
to 31 March 2013
Segment revenue 140 219 - 38 054 178 273
Segment costs 134 823 - 14 586 149 409
Segment profit 5 396 - 23 468 28 864
Corporate costs (8 607)
Share of loss of associate (11 345)
Profit before taxation 8 912
Gross operating revenue (external) 129 228 - 26 902 156 130
Audited 12 months
to 31 March 2012 (Restated)
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)
Profit before tax 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
Year-on-year percentage movement
Segment revenue (0%) (100%) (26%) (25%)
Segment costs (4%) (100%) (1%) (26%)
Segment profit 522% (100%) (37%) (19%)
* The goodwill impairment was not allocated to a reportable segment as it is not
included in the information used by the chief operating decision-maker.
The securities and structuring segment in the prior year represents the performance
of the business up to the disposal of 60% of the business to BNP Paribas SA on
31 October 2011. The remaining 40% has been accounted for separately as an associate
from 1 November 2011.
NOTES TO THE SUMMARISED CONSOLIDATED PRELIMINARY FINANCIAL STATEMENTS
BASIS OF PRESENTATION
These results have been prepared in terms of International Financial Reporting
Standards ("IFRS") and comply with IAS 34 - Interim Financial Reporting, the Listings
Requirements of the JSE Limited and the Companies Act No. 71 of 2008. The
summarised 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 2013.
RECLASSIFICATION OF COMPARATIVE FIGURES
The prior year figures were reclassified as follows:
- Due to the nature of the investments backing linked funds and linked investment
contract liabilities, the group has changed its order of presentation of its
statement of financial position from current/non-current classification to a
liquidity-based statement of financial position. This has had no financial impact.
- Cash flows related to the investments backing linked funds and the linked investment
contract liabilities of R107.4 million which were previously excluded from the
group's statement of cash flows, have been included in net cash generated from
operations.
- Provisions of R5.5 million previously included within trade and other payables have
been separated and disclosed in the statement of financial position.
- Financial assets of R235.1 million were split out into "at amortised cost"
(R83.1 million) and "at fair value" (R152.0 million) on the face of the statement
of financial position.
- As indicated in the September 2012 interim results announcement, the March 2012
comparative investment and advisory segment revenue and costs have both been reduced
by R11.3 million relating to the service level agreement with BNP Paribas Cadiz
Securities in line with how the chief operating decision-makers review the group.
All of the above reclassifications were only changes in presentation.
COMMENTARY
Financial performance - The performance for the period was impacted by the start-up
losses in BNP Paribas Cadiz Securities, lower revenue from Cadiz Corporate Solutions
in tough market conditions and fee income remaining static in the asset management
business. The impact of the lower revenue has been partially off-set by cost
reductions across the group.
Gross operating revenue from continuing operations was 13.5% lower at R156.1 million.
Revenue from the group's investments and capital decreased by 15.8% to R41.1 million
off a lower capital base and as foreign exchange gains in the prior year were not
repeated.
The focus on tight cost disciplines has resulted in a 20.2% reduction in operating
costs, excluding the impact of the goodwill impairment in the prior year. Staff head
count was down 6.5% to 115 (2012: 123) following the significant reduction in the
prior year.
The share of associate loss of R11.3 million is higher than expected and reflects the
costs of integrating the securities business into BNP Paribas, the revenue impact of
changing from an agency broker to a price maker and the time delay in generating
revenue following the launch of the new business.
Operating profit from continuing operations of R20.4 million (2012: R29.2 million loss)
is 115% higher than the comparable prior year excluding the goodwill impairment.
Total comprehensive income from continuing operations for the period increased from a
loss of R36.4 million to income of R5.1 million.
Diluted earnings per share from continuing operations is 96.4% lower at 2.2 cents per
share.
Headline earnings totalled R5.1 million, with diluted headline earnings per share
175% higher at 2.2 cents per share.
Cadiz declared a dividend for the 2013 financial year of 7 cents per share.
Asset management - Cadiz has continued to focus on building an independent asset
management company which aims to enrich lives through investment excellence and is
therefore committed to delivering strong investment performance relative to its peers
and benchmarks.
Revenue of R140.2 million was consistent with the previous year while expenses were
R5 million lower. The business generated a profit of R5.4 million compared to
R0.9 million in 2012.
In challenging conditions, total assets under management declined by R7.0 billion from
March 2012 to R34.6 billion (September 2012: R34.8 billion). The net change in asset
base represents a gain from market movement of R2.7 billion off-set by net outflows of
R9.7 billion. As previously advised to shareholders, the asset base was adversely
affected by a single client drawdown of R4.7 billion in 2012. Assets were further
impacted by the termination of a R2.2 billion mandate in March 2013 due to legislative
changes. While net cash flows have been negative, Cadiz Asset Management has benefited
from improving margins resulting from the acquisition of higher yielding mandates
during the period. While assets under management have declined by 16.8%, revenue has
remained flat. At year-end assets under management within Cadiz Collective Investments
were R8.9 billion (25% of total assets under management) and Cadiz Life were
R4.8 billion (up 45% at 14% of total assets under management).
Investment performance remains competitive across most funds with particularly strong
performance in unit trust funds. Highlights include:
- The Cadiz Money Market Fund is either best or second best fund over all measurement
periods.
- The Cadiz Absolute Yield Fund is in the top quartile of all South African - Multi
Asset Income funds over all periods.
- The Cadiz Managed Flexible Fund is in the top quartile of all South African - Multi
Asset Class High Equity funds for all periods of three years and longer.
- The Cadiz Inflation Plus Fund is comfortably ahead of its rolling three-year CPI+5%
benchmark.
Cadiz Asset Management was once again recognised for its investment excellence at the
HedgeNews Africa awards where the Cadiz ZAR Opportunities Fund received the SA Multi-
Strategy Hedge Fund Award for the best risk-adjusted returns in 2012.
Investments and advisory - At year-end the group's investment portfolio totalled
R354.2 million. Revenue from the investment and advisory business declined by 26% to
R38.1 million as a result of lower advisory fees and non-recurring foreign exchange
gains. The revenue on investments was down from the previous year on a lower capital
base following the payment of the R116 million special dividend. Costs were flat at
R14.6 million.
At the end of the period the capital was invested as follows:
- R53.7 million invested in liquid assets for regulatory capital adequacy;
- R49.5 million invested in liquid assets for short-term commitments;
- R50 million committed as seed capital and set aside for working capital
requirements for the asset management business;
- R86.1 million invested in Makana, our strategic empowerment partner;
- R17.6 million invested in strategic unlisted investments; and
- R97.3 million held as a prudent operational buffer.
Cadiz Corporate Solutions ("CCS"), the group's advisory business, continues to focus
on the resources and infrastructure sectors. Through its strategic partnerships with
leading international business advisory firms, The Beijing Axis (China) and Eternus
Capital (India), CCS is well positioned to capitalise on the growing interest from
Chinese and Indian investors in mining, resources and infrastructure in
southern Africa.
The reduction in foreign direct investment and the labour instability in the mining
industry has made the M&A market more challenging. The business has a healthy
transaction pipeline but deals are taking longer to close in the current
market environment.
Corporate costs - Corporate costs have been reduced by 68% to R8.6 million as a
result of reduced personnel costs, reduced IFRS 2 charges on the staff equity scheme
and non-recurrence of prior year restructuring costs.
BNP Paribas Cadiz Securities - The integration of the BNP Paribas Cadiz Securities
business is nearing completion and the implementation of the business plan is well
advanced. The cash equities and structured products offerings are gaining market
traction along with the expanded research capability. The research team comprises
18 analysts, including 12 fundamental analysts covering 51% of the JSE. The
non-fundamental analysts provide economic, political and quantitative research. The
business has also been nominated as the Transition Manager of the Year by the
Principal Officers' Association.
Changes to board of directors - Greg Fury was appointed as an independent non-
executive director following the strategic decision to focus mainly on asset management.
Greg has over 16 years' experience in asset management and investment banking.
Share capital and treasury shares - During the period the company issued 0.2 million
ordinary shares to staff on vesting of awards under the Black Staff Share Ownership
Scheme. Nil (2012: 0.2 million) ordinary shares were repurchased during the year.
Prospects - Management plans to substantially complete the implementation of the
decentralised business model by the end of June 2013. While cost control will remain
a priority the focus will now shift to medium to longer-term revenue growth.
The successful implementation of the senior management share scheme in March 2013 is
a significant strategic step forward in ensuring that our people are aligned with our
stakeholders and are partners in Cadiz, a principle upon which Cadiz will build in the
years ahead. The Assisted by this strategic progress, Cadiz Asset Management team, who
aligned with shareholders following the successful implementation of share scheme in
March, will continue to focus on delivering excellence in investment performance and
client service across its product range, which will benefit all stakeholders and
attract assets in the medium to long term.
The integration of BNP Paribas Cadiz Securities should be completed during the 2013
calendar year which will include providing the South African equity market access to
international institutional investors. The research team expects to expand its
coverage to 70% of the South African equities market by year-end.
Cadiz Corporate Solutions will continue to focus on 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 plans to introduce an
equity participation scheme for the team.
Following the payment of a special dividend to shareholders in May 2012 the group
continues to focus on retaining a prudent capital base and intends to distribute
annual profits, excluding the non-cash impact of the associates, to shareholders.
Audit report - The results for the period have been audited by the group's auditors,
PricewaterhouseCoopers Inc., and they have issued their unqualified audit report on
the 31 March 2013 consolidated annual financial statements and the summary
consolidated financial statements contained herein. The auditor's report does not
necessarily cover all of the information contained in this announcement. Shareholders
are therefore advised that in order to obtain a full understanding of the nature of
the auditor's work they should obtain a copy of that report together with the
accompanying financial information from the registered office of the company. Any
reference to future financial performance included in this announcement, has not been
reviewed or reported on by the company's auditors.
Dividend - Notice is hereby given of a declaration of a gross final dividend of 7 cents
per ordinary share from income reserves for the year ended 31 March 2013.
Secondary Tax on Companies ("STC") credits utilised per ordinary share amount to
2.14580 cents per share. The dividend will be subject to a local dividend tax at a rate
of 15% which will result in a net dividend to those shareholders who are not exempt
from paying dividend tax of 6.27187 cents per share. The company has 253 275 806
ordinary shares in issue on the date of this declaration.
Cadiz Holdings Limited's income tax reference number is 9398/002/71/8.
In compliance with the Listings Requirements of the JSE Limited, the following dates
are applicable:
Last date to trade cum the dividend Friday, 21 June 2013
Trading commences ex dividend Monday, 24 June 2013
Record date Friday, 28 June 2013
Payment date Monday, 1 July 2013
Share certificates may not be dematerialised or rematerialised between Monday,
24 June 2013 and Friday, 28 June 2013, both dates inclusive.
On behalf of the board of directors
Peter-Paul Ngwenya Fraser Shaw
Chairman Chief executive officer
Cape Town
27 May 2013
Registered office: Ground Floor, Fernwood House, The Oval
1 Oakdale Road, Newlands, 7700; PO Box 44547, Claremont, 7735
Directors: S P Ngwenya (Chairman)*, R F G Cadiz*, G W Fury*, B H Kent*,
A N Matyumza*, B J Memela-Khambula*, S J Saunders*, F C Shaw (Chief executive officer)
(*Non-executive directors)
Company secretary: C Schmahl
Transfer secretaries: Computershare Investor Services (Pty) Limited
70 Marshall Street, Johannesburg, 2001; PO Box 61051, Marshalltown, 2107
Sponsor: Investec Bank Limited
www.cadiz.co.za
Date: 27/05/2013 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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