Wrap Text
Unaudited condensed consolidated results for the six months ended 30 September 2013
Peregrine Holdings Limited
(Registration number 1994/006026/06)
JSE share code: PGR ISIN: ZAE000078127
("Peregrine" or the group)
UNAUDITED CONDENSED CONSOLIDATED RESULTS FOR THE SIX MONTHS
ENDED 30 SEPTEMBER 2013
- Basic earnings and Headline earnings of 78 cents per share, up 54%
- Basic earnings attributable to shareholders of R150 million, up 37%
- Cash generated from operating activities of R245 million
COMMENTARY
The Peregrine group produced strong results under improved trading conditions during the
six months ended 30 September 2013. All subsidiaries performed well in environments which
generally suited their businesses. Local operating subsidiaries performed exceptionally led by
Citadel and Peregrine Securities while offshore operations generated improved results. In line
with the revised group strategy, the quality of earnings improved with returns on proprietary
investments and investment banking activities comprising less than half the percentage
contribution of the comparable period.
Financial results
Basic earnings and headline earnings attributable to shareholders increased by 37% to R150
million (2012: R110 million), with IFRS disclosed basic earnings per share increasing by
54% to 78.0 cents per share (2012: 50.6 cents per share).
Group operating revenue increased by 29% to R887 million (2012: R687 million). Total
operating expenses increased by 10% to R677 million (2012: R613 million). Income from
proprietary investing activities decreased by 36% to R38 million (2012: R59 million). Net
interest earned increased by R26 million to R30 million, with the group having no long term
debt during the period. Income from associate companies increased by 21% to R18 million
(2012: R15 million).
The results for the first six months include the 14% effective non-controlling interest for the
Nala empowerment entity in Peregrine SA Holdings of R22 million, which was excluded for
the comparative period due to the transaction being concluded in September 2012.
Cash generated from operating activities amounted to R245 million (2012: R120 million),
once again outstripping attributable earnings by a significant amount and highlighting the
cash generative nature of the group. A good indication of the cash profits of the underlying
businesses is that total profit before tax, intangible amortisation and share based payments
cost, adjusted for minorities, amounted to R215 million (2012: R150 million).
Segmental results
Substantial non-controlling interests exist in many of the group`s operations. Operating
results are therefore presented before tax, reflecting amounts after minorities, before
intangible amortisation and share-based payment costs. This better and more accurately
reflects and aids in the understanding of each division`s specific economic benefit to the
shareholders of the group.
Wealth Management
The group's Wealth Management division is comprised primarily of private client wealth
management company Citadel.
Citadel continued to take advantage of its positioning as a leading private client wealth
manager in South Africa. Assets under management increased to R24.4 billion (March 2013:
R23.5 billion). Gross inflows for the six months amounted to R1.1 billion, which was a R200
million improvement over the comparable period in 2012, whilst its client retention rate
remained in excess of 97%, with clients experiencing improved investment returns. Initiatives
to increase efficiencies helped increase core profit margins. The positive real returns earned
by clients over the period resulted in meaningful performance fees for the business. Profits
for the period increased by 101% to R101 million (2012: R50 million).
Asset Management
The group's Asset Management division comprises a number of fund management businesses
of which flagship hedge fund manager Peregrine Capital is by far the largest. Profit
decreased, from a high base, to R25 million (2012: R32 million) notwithstanding another
strong performance by Peregrine Capital. Peregrine Capital's assets under management and
advice increased to R3.5 billion (March 2013: R3.4 billion) while assets in the smaller hedge
funds also grew. Positive regulatory changes in the industry auger well for asset growth in an
industry which has not experienced net inflows for many years. All mandates are at their
respective high water marks and should continue to earn performance fees on positive
returns.
Stenham
During the period, a further share-repurchase transaction took place in UK and Guernsey
based trust and asset management business, Stenham. As a result, Peregrine's share in
Stenham increased from 60.4% to 63.9% with a further increase expected prior to year end.
Whilst core earnings of Stenham increased by 8%, the currency weakness of the Rand and the
increased shareholding assisted in Peregrine's share of Stenham's earnings increasing by 19%
to R33 million (2012: R28 million).
The difficult trading conditions that Stenham Asset Management experienced over the past
several years have begun to improve with returns generated by underlying single-manager
hedge funds recovering. Net outflows, which have been a significant feature of the business,
had significantly reduced by the end of the reporting period, although average assets under
management, at $1.9 billion, were 9% lower than at year end. Good investment performance,
particularly in the multi strategy, specialist and equity centric mandates, has resulted in some
inflows into these funds. Operating costs decreased by 14% against the prior year following
the favourable impact of the prior year rationalisations.
Stenham Property delivered a stronger trading performance for the period under review.
Revenue growth of 14% together with a decrease of 9% in operating costs resulted in a
turnaround in profitability. Activity centred around realisations and restructurings in the
European portfolios and assets under management at the end of the period amounted to GBP1.7
billion (March 2013: GPB1.8 billion). The majority of these property assets are located in the
UK and Germany.
The trust division produced a 24% increase in earnings for the period. The division is now
subject to Guernsey corporate tax at a rate of 10%.
Notwithstanding the improved results within the Stenham business, this subsidiary will need
to build significantly on this initial recovery before it can be restored to previous levels of
profitability.
Broking and Structuring
Peregrine Securities experienced a substantial improvement in trading conditions as a result
of increased market volumes and volatility. The business was able to capitalise on past
investments made in technology and infrastructure. The equities business is now consistently
one of the top 3 brokers on the JSE in terms of volume of trades and the derivatives division
has been named by the Financial Mail as the leading derivative broking business in South
Africa for the third year in a row.
Peregrine Securities grew profits by 46% to R43 million (2012: R30 million) and as a result
of its positioning as the leading independent securities house in South Africa, it is well
positioned to take advantage of opportunities that lie ahead.
Proprietary Investments
Group investments achieved income net of non-controlling interests of R33 million (2012:
R39 million). As at the reporting period, the total value of group proprietary investments
(excluding cash) amounted to R516 million (March 2013: R567 million). This declining trend
is expected to continue as the group continues with its strategy to divest itself of its
proprietary investments and to concentrate on and invest in financial services operating
businesses.
Change of Chairman
With effect from 1 April 2014, Leonard Harris who has been Chairman of Peregrine since
1 April 2009 and who has served on the board since May 2001, will step down as Chairman
but will continue to serve as a non-executive director. The Peregrine board would like to take
this opportunity to publicly thank Leonard for his contribution to the group during his tenure
as Chairman and for the role that he has played in helping to establish the Peregrine group as
one of South Africa's leading wealth and asset management operations.
Sean Melnick, who is a founder of the Peregrine group and currently serves as deputy
Chairman of Peregrine and Chairman of the group`s offshore subsidiary, Stenham Limited,
will relinquish his executive responsibilities and take on the role of non-executive Chairman
of the Peregrine Group, effective 1 April 2014.
In accordance with the Listing Requirements of the JSE Limited, as a result of the appointment
of Sean Melnick as Chairman, the board will, prior to 1 April 2014, appoint one of the
independent non-executive directors as a lead independent director.
Conclusion
The group is progressing well with the implementation of its strategy of owning, building and
managing a diversified portfolio of specialised financial services businesses which are leaders
in the areas in which they operate. The group remains on course to grow earnings and deliver
higher dividend payments to shareholders.
Jonathan Hertz Leonard Harris Sean Melnick
Group CEO Non-executive Chairman Deputy Chairman
Sandton
6 November 2013
Directors: LN Harris* (Chairman); SA Melnick (Deputy Chairman); J Hertz (CEO); RE
Katz (CFO); BC Beaver*; P Goetsch^; S Sithole*; SI Stein*; M Yachad
^ Non-executive *Independent non-executive
Company secretary and registered office: Peregrine Management Services Proprietary
Limited, 6A Sandown Valley Crescent, Sandown, Sandton, 2196 (PO Box 650361, Benmore,
2010), Telephone: +27 11 722 7400 Fax: +27 11 722 7410
Transfer Secretaries: Computershare Investor Services Proprietary Limited, 70 Marshall
Street, Johannesburg, 2001, (PO Box 61051, Marshalltown, 2107)
Sponsor: Java Capital Trustees and Sponsors Proprietary Limited
Further detail and a print-friendly version of these results are available from the company's
website at www.peregrine.co.za
Condensed unaudited consolidated interim results
As at and for the six months ended 30 September 2013
Condensed consolidated statement of profit or loss and other comprehensive income
Unaudited for the Unaudited for the
% change six months ended six months ended Audited for the
2012 to 30 September 30 September year ended 31
2013 2013 2012 March 2013
R'000 R'000 R'000
Operating revenue 29 887,213 686,651 1,690,333
Investment income -57 37,932 87,959 46,972
Total revenue 19 925,145 774,610 1,737,305
Fair value gain on linked financial investments 213,388 110,008 580,690
Fair value loss on policyholder contract liabilities (213,388) (110,008) (580,690)
Operating expenses 10 (676,597) (612,739) (1,317,847)
Profit from operations 54 248,548 161,871 419,458
Net interest received >100 30,416 4,449 47,050
Interest received 31,443 21,776 47,543
Interest paid (1,027) (17,327) (493)
Share of profits of associate companies 21 18,177 14,994 57,395
Profit before intangibles impairment 64 297,141 181,314 523,903
Intangibles impairment - - (892,820)
Profit/(loss) before taxation 297,141 181,314 (368,917)
Taxation (71,258) (28,832) (92,595)
Profit/(loss) for the period 49 225,883 152,482 (461,512)
Other comprehensive income for the period net of taxation
Items that will not be reclassified subsequently to profit or loss:
Currency translation differences 156,108 145,043 286,102
Total comprehensive income/(loss) for the period 381,991 297,525 (175,410)
Profit/(loss) for the period attributable to:
Equity holders of the company 37 150,284 110,058 (466,669)
Non-controlling interests 75,599 42,424 5,157
49 225,883 152,482 (461,512)
Total comprehensive income/(loss) for the period attributable to:
Equity holders of the company 257,251 217,772 (232,880)
Non-controlling interests 124,740 79,753 57,470
381,991 297,525 (175,410)
Basic earnings/(loss) per ordinary share (cents) 54 78.0 50.6 (226.4)
Diluted basic earnings/(loss) per ordinary share (cents) 54 76.4 49.6 (222.7)
Number of ordinary shares in issue ('000) 206,791 228,129 206,791
Treasury shares held ('000) 20,484 10,463 10,484
Weighted average number of ordinary shares in issue ('000) 192,700 217,666 206,099
Diluted weighted average number of shares in issue ('000) 196,773 222,004 209,588
Determination of headline earnings
Unaudited for
% Unaudited for the the six months Audited
change six months ended ended 30 for the year
2012 to 30 September September ended 31 March
2013 2013 2012 2013
R'000 R'000 R'000
Profit/(loss) for the period attributable to equity holders 37 150,284 110,058 (466,669)
Adjustments: 1
Impairment to intangible assets - - 892,820
Non-controlling interest effect on impairment to intangible assets - - (139,780)
Headline earnings 37 150,284 110,058 286,371
Headline earnings per ordinary share (cents) 54 78.0 50.6 138.9
Diluted headline earnings per ordinary share (cents) 54 76.4 49.7 136.6
Cash dividend paid per ordinary share in respect of the previous year (cents) 72.0 72.0 72.0
Cash dividend per ordinary share declared subsequent to 31 March (cents) 72.0 - 72.0
Special cash dividend per ordinary share declared subsequent to 31 March (cents) 28.0 - 28.0
1 - None of the adjustments had an effect on tax.
Condensed consolidated statement of changes in equity
Total capital and Non-controlling
reserves interests Total equity
R'000 R'000 R'000
Unaudited - 2013
Balance at 31 March 2013 1,706,938 522,804 2,229,742
Total comprehensive income for the period 257,251 124,740 381,991
Dividends paid (196,306) (50,853) (247,159)
Share-based payment cost 5,299 - 5,299
Reversal of put option cost arising on buy-back and subsequent cancellation of put option shares 8,271 7,408 15,679
Repurchase and cancellation of shares of a subsidiary - (22,420) (22,420)
Contingent consideration received as a result of an agreement to dispose of interest in subsidiary 498 - 498
Non-controlling interest disposal as a result of the purchase of additional interest in a subsidiary company (20,490) (28,380) (48,870)
Acquisition of treasury shares (107,070) - (107,070)
Balance at 30 September 2013 1,654,391 553,299 2,207,690
Unaudited - 2012
Balance at 31 March 2012 2,184,309 594,419 2,778,728
Total comprehensive income for the period 217,772 79,753 297,525
Dividends paid (216,177) (135,665) (351,842)
Share-based payment cost 9,513 - 9,513
Contingent consideration received as a result of an agreement to dispose of interest in subsidiary (60,655) 60,655 -
Non-controlling interest disposal as a result of the share buy back by a subsidiary company of its treasury
shares - (50,090) (50,090)
Non-controlling interest disposal as a result of the purchase of additional interest in a subsidiary company 9,210 (19,605) (10,395)
Non-controlling interest arising as a result of subscription for shares in subsidiary company - 655 655
Disposal of treasury shares 464 - 464
Balance at 30 September 2012 2,144,436 530,122 2,674,558
Audited - 2013
Balance at 31 March 2012 2,184,309 594,419 2,778,728
Total comprehensive (loss)/income for the year (232,880) 57,470 (175,410)
Dividends paid (216,177) (232,116) (448,293)
Share-based payment cost 19,011 - 19,011
Subscription of shares in a new subsidiaries - 595 595
Contingent consideration received as a result of the disposal of interest in subsidiary (51,166) 60,655 9,489
Purchase of shares in subsidiary from the non-controlling shareholder 9,559 (20,346) (10,787)
Repurchase of treasury shares (242) - (242)
Disposal of treasury shares 949 - 949
Repurchase and cancellation of shares of holding company (294,701) - (294,701)
Issue of additional shares of holding company 55,409 - 55,409
Disposal of 20% of Peregrine SA Holdings to Nala 236,600 143,400 380,000
Repurchase and cancellation of shares of a subsidiary - (85,006) (85,006)
Non-controlling interest share of capital contribution made to subsidiary (3,733) 3,733 -
Balance at 31 March 2013 1,706,938 522,804 2,229,742
Condensed consolidated cash flow statement
Unaudited for the
six months ended Unaudited for the Audited for the
30 September six months ended year ended 31
2013 30 September 2012 March 2013
R'000 R'000 R'000
Cash flow from operating activities 218,747 274,368 594,908
Cash dividends paid (247,159) (187,037) (283,299)
Cash flow from stockbroking activities 439,791 (155,679) (469,743)
Cash flow from investing activities 181,577 (49,308) (378,460)
Cash flow from financing activities (80,190) (189,704) 336,877
Net increase/(decrease) in cash and cash equivalents 512,766 (307,360) (199,717)
Cash and cash equivalents at beginning of the period 659,131 799,045 799,045
Effects of exchange rate changes on cash and cash equivalents 62,666 34,511 59,803
Cash and cash equivalents at end of the period 1,234,563 526,196 659,131
Segmental analysis
% change in
Profit/(loss) from profit/(loss) from
ordinary activities ordinary activities
before intangible before intangible
amortisation and amortisation and
share-based share-based
Revenue and payment cost payment cost
investment Interest and Profit/(loss) from adjusted for adjusted for
income associate income ordinary activities 1 minorities minorities
R'000 R'000 R'000 R'000 2012 to 2013
Unaudited for the six months ended 30 September 2013
Wealth and Asset Management 376,631 14,866 149,759 119,720 55
Wealth Management - local 306,003 11,022 113,781 101,081 101
Wealth Management - offshore 1,778 1 (6,636) (6,636) -31
Asset Management 68,850 3,843 42,614 25,275 -21
Broking and Structuring 264,557 11,134 80,048 43,277 46
Stenham 231,748 9,105 48,807 33,131 19
Total from operating reportable segments 872,936 35,105 278,614 196,128 45
Group 39,847 12,004 18,527 18,792 28
Operations 90 10,298 (18,838) (14,154) 43
Investment returns (net of the cost of funding) 39,757 1,706 37,365 32,946 -16
912,783 47,109 297,141 214,920 44
Unaudited for the six months ended 30 September 2012
Wealth and Asset Management 293,526 16,408 88,582 77,369
Wealth Management - local 210,597 11,326 45,299 50,414
Wealth Management - offshore 619 2 (8,227) (5,062)
Asset Management 82,310 5,080 51,510 32,017
Broking and Structuring 175,280 9,419 45,223 29,609
Stenham 230,956 4,596 34,556 27,932
Total from operating reportable segments 699,762 30,423 168,361 134,910
Group 67,140 (11,004) 12,953 14,695
Operations 2,033 10,198 (30,132) (24,711)
Investment returns (net of cost of funding) 65,107 (21,202) 43,085 39,406
766,902 19,419 181,314 149,605
Note: Group funding costs are disclosed as part of "group" and have not been allocated to the appropriate underlying entities.
1 Profit/(loss) from ordinary activities is synonymous with profit/(loss) before taxation.
2 There were no significant changes to the total assets per segment from the amounts disclosed in the 2013 financial statements.
Reconciliation of segmental analysis to income statement
Total from
Wealth and operating
Asset Broking and reportable Non-reportable
Management Structuring Stenham segments Group segment 1 Total
R'000 R'000 R'000 R'000 R'000 R'000 R'000
For six months ended 30 September 2013
Revenue and investment income per segmental analysis 376,631 264,557 231,748 872,936 39,847 - 912,783
Reconciling items: (21,127) 32,268 - 11,141 (40,663) 41,884 12,362
Operating revenue - internal (21,127) 34,688 - 13,561 - (13,561) -
Investment income - internal - (2,420) - (2,420) (40,663) 43,083 -
Investment income of non-reportable segment - external - - - - - 12,362 12,362
Revenue and investment income per income statement 355,504 296,825 231,748 884,077 (816) 41,884 925,145
Profit before taxation per segmental analysis 149,759 80,048 48,807 278,614 18,527 - 297,141
Reconciling revenue and investment income items (21,127) 32,268 - 11,141 (40,663) 41,884 12,362
Operating expenses of non-reportable segment - external - - - - - (13,845) (13,845)
Interest received - internal - - - - 1,483 1,483
Profit before taxation per income statement 128,632 112,316 48,807 289,755 (22,136) 29,522 297,141
For six months ended 30 September 2012
Revenue and investment income per segmental analysis 293,526 175,280 230,956 699,762 67,140 - 766,902
Reconciling items: (10,826) (1,708) - (12,534) (38,781) 59,023 7,708
Operating revenue - internal (10,826) (1,209) - (12,035) - 12,035 -
Investment income - internal - (499) - (499) (38,781) 39,280 -
Investment income of non-reportable segment - external - - - - - 7,708 7,708
Revenue and investment income per income statement 282,700 173,572 230,956 687,228 28,359 59,023 774,610
Profit before taxation per segmental analysis 88,582 45,223 34,556 168,361 12,953 - 181,314
Reconciling revenue and investment income items (10,826) (1,708) - (12,534) (38,781) 59,023 7,708
Operating expenses of non-reportable segment - external - - - - - (7,732) (7,732)
Interest received - internal - - - - 24 - 24
Profit before taxation per income statement 77,756 43,515 34,556 155,827 (25,804) 51,291 181,314
1 - Refers to the group's consolidated proprietary hedge fund investments which do not meet the quantitative thresholds for determining reportable segments.
Condensed consolidated statement of financial position
Unaudited as at 30 Unaudited as at 30 Audited as at
September September 31 March
2013 2012 2013
R'000 R'000 R'000
Assets
Non-current assets 5,976,128 6,431,985 5,790,092
Property, plant and equipment 35,530 17,595 35,750
Intangible assets 583,052 1,361,267 545,796
Investment in associate companies 102,703 54,200 101,945
Investments linked to policyholder investment contracts 4,894,301 4,433,295 4,728,289
Financial investments 300,935 420,266 306,889
Loans and receivables 2,076 85,244 1,987
Deferred taxation 57,531 60,118 69,436
Current assets 13,919,130 8,250,985 12,867,002
Financial investments 2,293,175 1,358,796 2,588,026
Loans and receivables 525,847 13,655 310,897
Trade and other receivables 590,586 404,788 697,215
Amounts receivable in respect of stockbroking activities 9,261,873 5,906,514 8,291,269
Taxation 13,086 9,177 4,111
Cash and cash equivalents 1,234,563 558,055 975,484
Total assets 19,895,258 14,682,970 18,657,094
Equity and liabilities
Equity 2,207,690 2,674,558 2,229,742
Equity attributable to holders of the company 1,654,391 2,144,436 1,706,938
Non-controlling interests 553,299 530,122 522,804
Non-current liabilities 4,904,078 4,512,074 4,752,244
Policyholder investment contract liabilities 4,894,301 4,433,295 4,728,289
Loans and other payables 4,252 62,990 19,014
Financial instrument liability - 6,954 -
Deferred taxation 5,525 8,835 4,941
Current liabilities 12,783,490 7,496,338 11,675,108
Loans and other payables 1,846,610 17,392 1,593,899
Financial instrument liabilities 739,953 638,522 919,662
Trade and other payables 875,077 975,735 946,330
Amounts payable in respect of stockbroking activities 9,271,655 5,790,568 7,861,260
Taxation 50,195 42,262 37,604
Bank overdraft - 31,859 316,353
Total equity and liabilities 19,895,258 14,682,970 18,657,094
Net tangible asset value per ordinary share 613.2 458.5 628.3
Net asset value per ordinary share 888.0 985.2 869.5
Analysis of assets and liabilities by financial instrument classification
Non-financial
instruments and
Financial instruments at fair value Financial liabilities financial instruments Fair value of financial
through profit or loss Loans and receivables at amortised cost beyond the scope of Total instrument
IFRS 7
Designated at
Held-for-trading Inception
R'000 R'000 R'000 R'000 R'000 R'000 R'000
Unaudited as at 30 September 2013
Non-current assets - 5,195,236 2,076 - 778,816 5,976,128 5,197,312
Property, plant and equipment - - - - 35,530 35,530 -
Intangible assets - - - - 583,052 583,052 -
Investment in associate companies - - - - 102,703 102,703 -
Investments linked to policyholder investment contracts - 4,894,301 - - - 4,894,301 4,894,301
Financial investments - 300,935 - - - 300,935 300,935
Loans and receivables - - 2,076 - - 2,076 2,076
Deferred taxation - - - - 57,531 57,531 -
Current assets 9,501,802 62,671 4,323,782 - 30,875 13,919,130 13,888,255
Financial investments 2,230,504 62,671 - - - 2,293,175 2,293,175
Loans and receivables - - 525,847 - - 525,847 525,847
Trade and other receivables - - 572,797 - 17,789 590,586 572,797
Amounts receivable in respect of stockbroking activities 7,271,298 - 1,990,575 - - 9,261,873 9,261,873
Taxation - - - - 13,086 13,086 -
Cash and cash equivalents - - 1,234,563 - - 1,234,563 1,234,563
Total assets 9,501,802 5,257,907 4,325,858 - 809,691 19,895,258 19,085,567
Non-current liabilities - 4,848,929 - - 55,149 4,904,078 4,848,929
Policyholder investment contract liabilities - 4,848,929 - - 45,372 4,894,301 4,848,929
Loans and payables - - - - 4,252 4,252 -
Deferred taxation - - - - 5,525 5,525 -
Current liabilities 7,846,924 478,184 - 4,157,628 300,754 12,783,490 12,482,736
Loans and payables - - - 1,846,610 - 1,846,610 1,846,610
Financial instrument liabilities 261,769 478,184 - - - 739,953 739,953
Trade and other payables - - - 624,518 250,559 875,077 624,518
Amounts payable in respect of stockbroking activities 7,585,155 - - 1,686,500 - 9,271,655 9,271,655
Taxation - - - - 50,195 50,195 -
Total liabilities 7,846,924 5,327,113 - 4,157,628 355,903 17,687,568 17,331,665
Fair value hierarchy
The fair value of a financial instrument is the price that would be received for the sale of an asset or paid for the transfer of a liability in an orderly transaction between market participants at
the measurement date. Underlying the definition of fair value is a presumption that an entity is a going concern without any intention or need to liquidate, to curtail materially the scale of its
operations or to undertake a transaction on adverse terms. Fair value is not, therefore, the amount that an entity would receive or pay in a forced transaction, involuntary liquidation or
distressed sale.
The fair values of financial instruments traded in active markets is based on quoted market prices at reporting date. A market is regarded as active if quoted prices are readily available from
an exchange, dealer, broker, industry group, pricing service, or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm's length basis.
The quoted market price used for financial assets held by the group is the current bid price. These instruments are included in level 1.
The fair value of financial instruments that are not traded in an active market is determined using valuation techniques. These valuation techniques maximise the use of observable data
where it is available and rely as little as possible on entity specific estimates. If all significant inputs required to fair value the instrument are observable, the instruments are included in level 2.
If one or more significant input is not based on observable market data, the instrument is included in level 3.
Specific valuation techniques used to value financial instruments include:
- Quoted market prices or dealer quotes for similar instruments;
- The fair value of the unlisted property fund investments classified as level 2 are based on recognised quoted prices for a monthly trading asset. The fair value of the unlisted property fund
investments classified as level 3 are based on internal and external professional advice in respect of the underlying property values (market value benchmarking);
- Payables in respect of put options, settled during the period ended 30 September 2013, were classified as level 3 as at 31 March 2013 and were based on internal assessments of the
value of the Asset Management division within Stenham Asset Management Proprietary Limited and an assessment of the non-controlling interest discount on that value, and
- Other techniques such as discounted cash flow analysis are used to determine the fair value of the remaining financial instruments.
The following table presents the group's assets and liabilities that are measured at fair value as at 30 September 2013:
Unaudited as at
30 September
2013
Level 1 Level 2 Level 3 Total
R'000 R'000 R'000 R'000
Financial assets at fair value though profit or loss
Held-for-trading: 8,242,298 1,259,504 - 9,501,802
Unit trusts - unlisted 17,728 - - 17,728
Unit trusts- listed 6,194 - - 6,194
Variable rate debenture - 4,953 - 4,953
Amounts receivable in respect of stock broking activities : Equities 7,271,298 - - 7,271,298
Money market instruments 3,194 1,254,551 - 1,257,745
Equities and bonds held by Hedge funds 943,884 - - 943,884
Designated at inception: 37,398 5,086,153 134,356 5,257,907
Investments linked to policyholder investment contracts - 4,894,301 - 4,894,301
Share portfolio investments - unlisted - 236 - 236
Private equity investments listed 33,757 - - 33,757
Private equity investments unlisted - 28,251 - 28,251
Property fund investments - unlisted - 100,692 134,356 235,048
Hedge fund investments - unlisted - 62,671 - 62,671
Unit trusts - unlisted 3,641 2 - 3,643
Total financial assets carried at fair value 8,279,696 6,345,657 134,356 14,759,709
Financial liabilities at fair value though profit or loss
Held-for-trading: (7,846,924) - - (7,846,924)
Amounts payable in respect of stock broking activities: Equities (7,585,155) - - (7,585,155)
Instruments held by Hedge Funds- short equity positions, options and bonds (261,769) - - (261,769)
Designated at inception: (45,570) (5,281,543) - (5,327,113)
Net assets attributable to outside investors in the Hedge Funds - (432,614) - (432,614)
Policyholder investment contract liabilities - (4,848,929) - (4,848,929)
Financial instrument liability (45,570) - - (45,570)
Total financial liabilities carried at fair value (7,892,494) (5,281,543) - (13,174,037)
Level 3 reconciliation
Unaudited as at 30 September 2013
Financial instruments at fair value through profit or loss
Designated at inception
Assets Liabilities
R'000 R'000
Opening balance 129,548 (16,716)
Total gains/ (losses) recognised in:
Profit or loss1 (4,169) 2,069
Investment and other income (4,169) -
Finance costs - 2,069
Other comprehensive income: Currency translation differences 20,846 (1,308)
Purchases 6,666 -
Issues - -
Settlements and disposals (18,535) 15,955
Transfer from level 2 into level 3 - -
Closing balance 134,356 -
1 The amount of gains/(losses) for the period that are attributable to gains/(losses) relating to those assets and liabilities held at the end of the reporting period pertain to movements in the
fair value of the property fund investments of R4.2 million and payables in respect of put options of R2.1 million. These gains/(losses) have been presented in the statement of
comprehensive income within the line items investment and other income and net interest received.
At 30 September 2013 a change of one or more of the inputs used in the fair value measurement calculation of the level 3 instruments did not result in a significant change to the fair values
of these instruments.
Basis of preparation
The condensed consolidated interim financial results of the group as at and for the six months ended 30 September 2013 comprise the company and its subsidiaries ("the
group") results and the group's interests in associates. The group's results are prepared in accordance with the recognition and measurement principles of International
Financial Reporting Standards (IFRS) and presented in accordance with the minimum content, including disclosures, prescribed by International Accounting Standards IAS 34
Interim Financial Reporting, the South African Institute of Chartered Accountants (SAICA) Financial Reporting Guides as issued by the Accounting Practices Committee and
the requirements of the Companies Act of South Africa.
The preparation of these interim financial statements in accordance with IFRS requires the use of certain critical accounting estimates. It also requires management to
exercise judgement in the process of applying the group's accounting policies. The significant judgements made by management in applying the group's accounting policies
and the key sources of estimation uncertainty were the same as those applied to the consolidated financial statements as at and for the year ended 31 March 2013.
The preparation of the group's results have been under the supervision of R E Katz CA (SA), the Group Chief Financial Officer.
These financial results have not been reviewed or reported on by the Company's auditor KPMG Inc.
Auditor's report for the year ended 31 March 2013
The consolidated and separate financial statements of Peregrine Holdings Limited ("Peregrine") for the year ended 31 March 2013 have been audited by the company's
auditor, KPMG Inc. In their audit report dated 23 August 2013, which is available for inspection at the Company's Registered Office, KPMG Inc. state that their audit was
conducted in accordance with the International Standards on Auditing and have expressed an unmodified conclusion on the consolidated and separate financial statements of
Peregrine.
Accounting policies
The group's principal accounting policies have been prepared in terms of IFRS of the International Accounting Standards Board (IASB). The accounting policies and
methods of computation are consistent with those applied to the consolidated financial statements as at and for the year ended 31 March 2013, with the exception of
the changes mentioned below.
The following standards in particular have been newly adopted or amended with effect from 1 January 2013:
1. IFRS 10: Consolidated Financial Statements and IFRS 12: Disclosure of Interests in Other Entities, as well as the consequential amendments to IAS 27: Consolidated and
Separate Financial Statements and IAS 28: Investments in Associates.
As a result of adopting IFRS 10 the group has changed its accounting policy with respect to determining whether it has control over and consequently whether it is required to
consolidate an investee. IFRS 10 introduces a new set of criteria for assessing control by referring to the investor's exposure or rights to variable returns from its involvement
with the investee and the ability to affect those returns through its power over the investee.
The group reassessed the control conclusion for its investees at 1 January 2013. As a consequence, the group has changed its control conclusion in respect of its investment
in the Peregrine High Growth Fund en Commandite Partnership ("The Fund"), which was previously accounted for as a financial asset at fair value through profit or loss. The
group has a 42% aggregate economic interest in The Fund together with low/weak kick-out rights and as a consequence is considered, in terms of IFRS 10, to be acting as a
principal and therefore The Fund is required to be consolidated.
Whilst having no net earnings impact, there are consolidation adjustments and disclosures which have effected line item classifications in the Income Statement and
Statement of Financial Position. Current assets have increased by R669 million and current liabilities by R669 million.
2. IFRS 13 : Fair Value Measurement
IFRS 13 establishes a single framework for measuring fair value and making disclosures about fair value measurements, when such measurements are required or permitted
by other IFRSs. IFRS 13 also provides for a revised definition of fair value - being the price at which an orderly transaction to sell an asset or transfer a liability would take
place between market participants at the measurement date. It also replaces and expands the disclosure requirements about fair value measurements on other IFRSs,
including IFRS 7: Financial Instruments - Disclosures. Some of these disclosures are specifically required in interim financial statements for financial instruments; accordingly,
the group has included additional disclosures in this regard (refer heading Fair value hierarchy).
Events subsequent to reporting period
The directors are not aware of any other matters or circumstances arising since the end of the reporting period, not otherwise dealt with in the interim financial statements,
which significantly affect the financial position of the company or the results of its operations.
Applicable exchange rates
Average rates Closing rates
USD:ZAR
30 September 2013 9.73 10.06
31 March 2013 8.50 9.17
30 September 2012 8.19 8.25
GBP:ZAR
30 September 2013 15.02 16.30
31 March 2013 13.44 13.93
30 September 2012 12.95 13.32
Date: 06/11/2013 01:24:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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