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CADIZ HOLDINGS LIMITED - Condensed Consolidated Interim Results for the six months ended 30 September 2014

Release Date: 14/11/2014 07:30
Code(s): CDZ     PDF:  
Wrap Text
Condensed Consolidated Interim Results for the six months ended 30 September 2014

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 headline loss per share of 10.0 cents
Assets under management of R26.4 billion
Net asset value per share of 197 cents


CONDENSED CONSOLIDATED INTERIM RESULTS
FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2014


CONDENSED CONSOLIDATED INTERIM STATEMENT OF COMPREHENSIVE INCOME
                                                      Unaudited  Unaudited    Audited
                                            %          6 months   6 months  12 months
(R thousands)                          Change  Notes  30 Sep 14  30 Sep 13  31 Mar 14
Continuing operations
Gross operating revenue                   (11)           65 607     73 312    138 593 
Interest income                            (1)           13 899     13 989     27 138 
Net investment income                                   (14 435)    19 657     47 223 
Net (loss)/income from investments                      (14 388)    19 785     47 171 
Foreign exchange (loss)/gain                                (47)      (128)        52 
Income attributable to linked assets       32             4 283      3 257      4 486 
Net fair value gains on linked 
  financial instruments                                 190 964    259 063    532 108 
Linked liability adjustment                            (186 681)  (255 806)  (527 622)
Fair value adjustment on third-party 
  mutual funds                                            4 803    (15 332)   (37 955)
Operating expenses                         (3)          (83 504)   (86 015)  (165 386)
Impairment of financial assets at 
  amortised cost                                   2    (17 353)         -          -
Impairment of goodwill                             3   (160 000)         -          -
Operating (loss)/profit                                (186 700)     8 868     14 099 
Finance costs                                                (9)      (105)      (124)
Share of profit/(loss) of associate                       1 434     (4 017)    (3 843)
Impairment of investment in associate              4    (18 000)         -          -
(Loss)/profit before taxation                          (203 275)     4 746     10 132 
Taxation                                                  2 783     (1 304)    (2 332)
Total comprehensive income from continuing 
  operations                                           (200 492)     3 442      7 800 
Discontinued operation
Loss from discontinued operation                              -     (1 904)    (1 904)
Total comprehensive (loss)/income                      (200 492)     1 538      5 896 
                                                  
Earnings/(Loss) per share (cents)
Basic - from continuing operations                        (88.9)       1.5        3.3 
Basic - from discontinued operation                           -       (0.8)      (0.8)
                                                          (88.9)       0.7        2.5 
Diluted - from continuing operations                      (88.9)       1.5        3.3 
Diluted - from discontinued operation                         -       (0.8)      (0.8)
                                                          (88.9)       0.7        2.5 
                                                  
Notes to the condensed consolidated interim 
  statement of comprehensive income
Reconciliation of headline earnings:
(Loss)/Profit attributable to equity holders 
  of the company                                       (200 492)     1 538      5 896 
Remeasurements included in equity-accounted earnings          -          -        102 
Taxation impact                                               -          -        (28)
Loss on disposal of plant and equipment                       -        285        284 
Taxation impact                                               -        (80)       (80)
Impairment of goodwill                                  160 000          -          -
Impairment of investment in associate                    18 000          -          -
Headline (loss)/earnings                                (22 492)     1 743      6 174 
                                                  
Headline (loss)/earnings per share (cents)
Basic                                                     (10.0)       0.7        2.7
Diluted                                                   (10.0)       0.7        2.7

Share information:
Issued number of shares ('000)                          245 823    252 911    245 823 
Consolidated number of shares ('000)                    225 505    232 593    225 505 
Weighted average number of shares ('000)                225 505    232 945    231 409 
Diluted weighted average number of shares ('000)        225 517    233 006    231 479


CONDENSED CONSOLIDATED INTERIM STATEMENT OF FINANCIAL POSITION
                                                              Unaudited       Audited
(R thousands)                                        Note     30 Sep 14     31 Mar 14
ASSETS
Intangible assets                                                80 033       239 285 
Plant and equipment                                               6 508         5 086 
Interests in associates - equity accounted              4        43 908        60 474 
Deferred taxation                                                28 350        22 843 
Investments backing linked funds                              6 129 026     5 616 688 
Financial assets - at fair value                              4 106 321     3 856 625 
Interest in associates - at fair value                          439 738       471 813 
Loans and receivables                                           146 710        94 720 
Investment property                                             337 773       336 689 
Cash and cash equivalents                                     1 098 484       856 841 
Financial assets - at amortised cost                             82 469        97 745 
Financial assets - at fair value                                365 639       416 232 
Interests in associates - at fair value                          20 356        14 795 
Receivables and prepayments                                      54 603        61 180 
Taxation                                                            930         2 679 
Cash and cash equivalents                                        86 896       126 906 
Total assets                                                  6 898 718     6 663 913
                              
EQUITY                              
Capital and reserves                               
Ordinary share capital and premium                               16 989        16 991 
Treasury shares                                                 (52 880)      (52 880)
Share-based payment reserve                                      36 854        37 610 
Retained earnings                                               443 241       653 656 
Total equity                                                    444 204       655 377 
                              
LIABILITIES                              
Deferred taxation                                                 3 822         6 590 
Linked investment contract liabilities                        5 963 305     5 410 476 
Third-party financial liabilities arising on 
  consolidation of mutual funds                                 434 296       555 287 
Provisions                                                        3 734         5 288 
Trade and other payables                                         49 254        30 874 
Taxation                                                            103            21 
Total liabilities                                             6 454 514     6 008 536 
Total equity and liabilities                                  6 898 718     6 663 913 
                              
Net asset value (cents per share)                                   197           291
Net tangible asset value (cents per share)                          151           177


CONDENSED CONSOLIDATED INTERIM STATEMENT OF CASH FLOW
                                                                             Restated
                                                              Unaudited     Unaudited
                                                               6 months      6 months
(R thousands)                                                 30 Sep 14     30 Sep 13
Cash flow from operating activities
Cash flow from operations                                       204 779       839 997 
Taxation refunded/(paid)                                           (893)       (1 303)
Interest received                                                13 022         8 510 
Interest paid                                                        (9)         (105) 
Dividends received                                                3 544             -
Cash generated from operations                                  220 443       847 099 
Ordinary dividends paid                                          (9 922)      (16 307)
Net cash flow from operating activities                         210 521       830 792 

Cash flow from investing activities
Proceeds on disposal of financial assets                            124        42 025 
Purchase of financial assets                                     (4 954)      (11 870)
Additions to intangible assets                                   (1 713)       (1 018)
Additions to plant and equipment                                 (2 341)       (2 058)
Proceeds on disposal of plant and equipment                           -           746 
Net cash flow from investing activities                          (8 884)       27 825 
                    
Cash flow from financing activities                     
Cancellation/(Issue) of A ordinary shares                            (4)           96 
Repurchase of treasury shares                                         -          (446)
Net cash flow from financing activities                              (4)         (350)
                    
Net change in cash and cash equivalents                         201 633       858 267 
Cash and cash equivalents at beginning of year                  983 747     1 336 448 
Cash and cash equivalents at end of year                      1 185 380     2 194 715 
                    
Attributable to the group                                        86 896       137 690 
Attributable to policyholders                                 1 098 484     2 057 025 
                    
The cash flow includes a cash outflow from discontinued operations of R1.9 million in 
cash flow from operating activities for 30 September 2013.


CONDENSED CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITY
                                                              Unaudited     Unaudited
                                                               6 months      6 months
(R thousands)                                                 30 Sep 14     30 Sep 13
Share capital, share premium and treasury shares
Opening balance                                                 (35 889)      (27 249)
(Cancellation)/Issue of shares                                        -          (446)
Issues/(Repurchases) of A ordinary shares                            (4)           13 
                                                                (35 893)      (27 682)
Reserves                    
Opening balance                                                 691 266       700 158 
Premium on issue/(cancellation) of equity-settled share 
  appreciation rights                                                 -            83 
Employee scheme - value of services provided                       (755)          973 
Total comprehensive (loss)/income                              (200 492)        1 538 
Dividends paid                                                   (9 922)      (16 307)
                                                                480 097       686 445 
Total shareholders' equity                                      444 204       658 763


CONDENSED CONSOLIDATED INTERIM SEGMENT REPORT
                                        Asset
(R thousands)                      Management    Advisory   Investments         Total
Unaudited 6 months to 
  30 September 2014
Segment revenue                        65 918      12 165           (87)       77 996 
Segment costs                          72 725       9 508             -        82 233 
Segment (loss)/profit                  (6 807)      2 657           (87)       (4 237)
Corporate costs                                                                (3 408)
Share-based payment expense - Advisory                                         (1 711)
Impairment of financial assets 
  at amortised cost                                                           (17 353)
Impairment of goodwill                                                       (160 000)
Impairment of investment in associate                                         (18 000)
Share of profit of associate                                                    1 434 
Loss before taxation                                                         (203 275)
Gross operating revenue (external)     53 442      12 165             -        65 607 
                                        
Unaudited 6 months to 
  30 September 2013 (restated)                                        
Segment revenue                        70 439       7 153        10 482        88 074 
Segment costs                          72 490       6 206             -        78 696 
Segment profit/(loss)                  (2 051)        947        10 482         9 378 
Corporate costs                                                                (2 956)
Share before taxation on 
  discontinued operation                                                        2 341 
Share of loss of associate                                                     (4 017)
Profit before taxation                                                          4 746 
Gross operating revenue (external)     61 292       6 362         5 658        73 312 
Year-on-year % segment revenue            (6%)        70%                        (11%)
Year-on-year % segment costs               0%         53%                          4%
Year-on-year % segment profit           (232%)       181%
                                        
Audited 12 months to 
  31 March 2014
Segment revenue                       137 222      18 209        20 107       175 538 
Segment costs                         143 812      13 808             -       157 620 
Segment profit/(loss)                  (6 590)      4 401        20 107        17 918 
Corporate costs                                                                (6 284)
Loss before taxation on 
  discontinued operation                                                        2 341 
Share of loss of associate                                                     (3 843)
Profit before taxation                                                         10 132 
Gross operating revenue (external)    112 887      17 411         8 295       138 593 
                                        
Investments and Advisory have been shown as separate segments as the chief operating 
decision-maker of the group, the executive committee, has started reviewing the 
segments' results separately since the publication of the prior period interim results. 
The prior year Investment and Advisory segment has been split out into two segments. 
This has had no effect on the previously reported segment's totals.


NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
1  Basis of presentation
   The condensed consolidated interim financial statements are prepared in accordance 
   with International Financial Reporting Standards, IAS 34 - Interim Financial Reporting, 
   the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee 
   and Financial Pronouncements as issued by the Financial Reporting Standards Council 
   and the requirements of the Companies Act of South Africa. The accounting policies 
   applied in the preparation of these interim financial statements are in terms of 
   International Financial Reporting Standards and are consistent with those applied 
   in the previous consolidated annual financial statements.

   The condensed consolidated interim financial results have been prepared under the 
   supervision of the finance director, Mr F C Shaw (CA) SA.

   Accounting policies
   The accounting policies applied are in terms of IFRS and consistent with those 
   applied in the annual financial statements for 31 March 2014.

2  Impairment of financial assets at amortised cost
   Makana funded the acquisition of 34.4 million Cadiz shares through the issue of 
   preference shares now redeemable in February 2017. Makana is a fully functioning 
   investment company and the Cadiz shares and other assets support this liability. 
   Following the decrease in the Cadiz share price management has considered the 
   recoverability of the preference shares and provided R17.4 million against the 
   R65.5 million Makana preference shares.

3  Impairment of goodwill
   The assets under management in the asset management cash-generating unit have 
   declined over the period and as a result management expects the turnaround to take 
   longer than originally envisaged. This has resulted in an impairment of the carrying 
   value of the goodwill by R160.0 million to R66.9 million based on a value-in-use 
   valuation. The estimates used to test goodwill were as follows:

   Starting assets under management of R26.4 billion (March 2014: R28.5 billion), 
   annual average asset growth in assets of 13.2% (March 2013: 16.7%) applied over a 
   ten-year cash projection period, average total fees of 0.46% (March 2014: 0.50%), 
   an average cost-to-income ratio of 88% (March 2014: 75%), a weighted average cost 
   of capital of 22% (March 2014: 22%) and a long-term growth rate of 6% (March 2014: 6%).

4  Impairment of investments in associates
   The recoverable amount of the investment in associates has been determined based on 
   value-in-use calculations. 

   During the period BNP Paribas Cadiz Securities' in which Cadiz holds 40%, has 
   started making profits. However, based on the current revenue mix and the previous 
   delays experienced, management has revised revenue and cost growth estimates and 
   impaired the carrying value of the associates by R18.0 million to R43.9 million. 
   The estimates used to test for impairment in investment in associates were as follows:

   Annual average growth in revenue and costs over a five-year period of 20.6% and 12.1% 
   respectively (2013: 22.2% and 9.3%), a weighted average cost of capital of 20% 
   (March 2014: 20%) and a long-term growth rate of 6% (March 2014: 6%). This has been 
   tested against the estimated call option price receivable should BNP Paribas exercise 
   their call option in October 2016.

5  Reclassification of comparative figures
   For the year ended 31 March 2014 cash flows from consolidated collective investment 
   schemes have been reclassified from cash flows from investing activities to cash flows 
   from operating activities. The comparative interim balances as at 30 September 2013 
   have been restated to align the presentation with that of 31 March 2014.

                                                       As
                                               previously     
   (R thousands)                                 reported   Adjustments      Restated
   30 September 2013
   Statement of cash flows                               
   Cash flow from operating activities                               
   Cash flow from operations                    1 006 007      (166 010)      839 997 
   Cash generated from operations               1 013 109      (166 010)      847 099 
   Net cash flow from operating activities        996 802      (166 010)      830 792 
   Cash flow from investing activities                              
   Proceeds on disposal of financial assets       (76 085)      118 110        42 025 
   Purchase of financial assets                   (59 770)       47 900       (11 870)
   Net cash flow from investing activities       (138 185)      166 010        27 825

6  Financial risk management
   The group is exposed to a variety of financial risks which include credit risk, 
   market risk (including currency, price and interest rate risk) and liquidity risk. 
   The group's risk management programme focuses on the unpredictability of financial 
   markets and seeks to limit potential adverse effects on the group, while operating 
   within a framework that ensures alignment with the group's overall strategy and 
   risk appetite.

   The condensed interim financial statements do not include all financial risk 
   management information and disclosures required in the annual financial statements; 
   they should be read in conjunction with the group's annual financial statements as 
   at 31 March 2014. There have been no change in the risk mangement department or in 
   any risk management policies since the year-end.

   Fair values
   The carrying amounts and the fair values of the group's financial assets and 
   liabilities are the same. Where assets are held at amortised cost, the fair values 
   approximate the carrying values as these have floating rates.

   Fair value measurements recognised in the statements of financial position
   The table below provides an analysis of the financial instruments that are 
   measured subsequent to initial recognition at fair value, grouped into levels 1 to 3 
   based on the degree to which the fair value is observable:

   -  level 1 fair value measurements are those derived from quoted prices (unadjusted) 
      in active markets for identifiable assets or liabilities;
   -  level 2 fair value measurements are those derived from inputs other than quoted 
      prices included within level 1 that are observable for the asset or liability, 
      either directly or indirectly; and
   -  level 3 fair value measurements are those derived from valuation techniques that 
      include inputs for the asset or liability that are not based on observable market data.

   Valuation techniques and assumptions applied for the purposes of measuring fair value
   The fair values of financial assets and financial liabilities are determined as follows:

   For level 1:
   -  The fair values of financial assets and financial liabilities with standard terms 
      and conditions and traded on active liquid markets are determined with reference to 
      quoted market prices.

   For level 2:
   -  The fair values of other financial assets and financial liabilities (excluding 
      derivative instruments) are determined in accordance with generally accepted 
      pricing models based on discounted cash flow analysis using prices from observable 
      current market transactions and dealer quotes for similar instruments.
   -  Observable inputs generally used to measure the fair value of securities classified 
      as level 2 include benchmark yields, reported secondary trades, broker-dealer quotes, 
      issuer spreads, benchmark securities, bids, offers and reference data.
   -  The fair values of derivative instruments are calculated using quoted prices. Where 
      such prices are not available, discounted cash flow analysis is performed using the 
      applicable yield curve for the duration of the instruments for non-optional 
      derivatives and option pricing models for optional derivatives. Foreign currency 
      forward contracts are measured using quoted forward exchange rates and yield curves 
      derived from quoted interest rates matching maturities of the contracts. Interest 
      rate swaps are measured at the present value of future cash flows estimated and 
      discounted based on the applicable yield curves derived from quoted interest rates.
   -  The fair value of financial guarantee contracts is determined using option pricing 
      models where the main assumptions are the probability of default by the specified 
      counterparty extrapolated from the market-based credit information and the amount 
      of loss, given the default.

   For level 3
   -  Determinations to classify fair value measures within level 3 of the valuation 
      hierarchy are generally based on the significance of the unobservable factors when 
      compared to the overall fair value measurement. The group applies various due 
      diligence procedures, as considered appropriate, to validate the underlying 
      information used in the valuations.

   Group                              
   (R thousands)                          Level 1     Level 2     Level 3       Total
   30 September 2014                                        
   Investments backing linked funds
   Financial assets - designated at 
     fair value through profit or loss
   - Collective investment schemes              -     703 338           -     703 338 
   - debentures - listed                  164 158           -           -     164 158 
   - debentures - unlisted                      -   1 765 789      21 503   1 787 292 
   - domestic equities - listed           571 531           -           2     571 533 
   - domestic equities - unlisted               -           -           -           - 
   - fixed interest securities - listed   446 833                   4 674     451 507 
   - international equities - listed       41 549           -           -      41 549 
   - international equities - unlisted          -     386 944           -     386 944 
   Investment property                          -           -     337 773     337 773 
                                        
   Financial assets - designated at 
     fair value through profit or loss
   Private equity investments                   -            -      8 448       8 448 
   Collective investment schemes                -      143 510        788     144 298 
   - fixed interest securities - unlisted       -       32 756      6 302      39 058 
   - investment-linked policies                 -        9 256          -       9 256 
   Other investments                            -       14 596          -      14 596 
   Financial assets - at fair value 
     through profit or loss
   Conversion option
   - related conversion option 
       at fair value                            -            -        525         525 
   Listed investments                     149 457            -          -     149 457 
   Interests in associates - measured 
     at fair value
   Collective investment schemes                -      430 088     30 006     460 094 
                                        1 373 528    3 486 277    410 021   5 269 826 
                                        
                                                                Financial
                                                                 assets -
                                                    Investment    at fair
   Level 3 reconciliations                            property      value       Total
   Balance at beginning of period                      336 689     11 988     348 677 
   Additions                                                 -         22          22 
   Transfer from level 2 to level 3                          -     63 275      63 275 
   Profit/(Loss) recognised in profit or loss            1 084     (3 037)     (1 953)
   Balance at end of period                            337 773     72 248     410 021

   Group                              
   (R thousands)                          Level 1      Level 2     Level 3       Total
   31 March 2014
   Investments backing linked funds
   Financial assets - designated at 
     fair value through profit or loss
   - Collective investment schemes              -       12 914          -      12 914 
   - debentures - listed                  170 186            -          -     170 186 
   - debentures - unlisted                      -    1 795 269          -   1 795 269 
   - domestic equities - listed           613 558            -          -     613 558 
   - domestic equities - unlisted               -       17 541          -      17 541 
   - fixed interest securities - listed   330 908            -          -     330 908 
   - international equities - listed       47 149            -          -      47 149 
   - international equities - unlisted          -      869 099          -     869 099 
   Investment property                          -            -    336 689     336 689 
                                        
   Financial assets - designated at 
     fair value through profit or loss
   Private equity investments                   -            -      7 963       7 963 
   Collective investment schemes                -      175 855          -     175 855 
   - fixed interest securities - unlisted       -       54 373          -      54 373 
   - investment-linked policies                 -        4 078          -       4 078 
   Other investments                            -          608          -         608 
   Financial assets - at fair value 
     through profit or loss
   Conversion option
   - related conversion option 
       at fair value                            -            -      4 025       4 025 
   Listed investments                     169 330            -          -     169 330 
   Interests in associates - measured 
     at fair value
   Collective investment schemes                -      486 608          -     486 608 
                                        1 331 131    3 416 345    348 677   5 096 153 
                                        
                                                                Financial
                                                                 assets -
                                                    Investment    at fair
   Level 3 reconciliations                            property      value       Total
   Balance at beginning of year                        153 372     15 953     169 325 
   Additions                                           184 944          -     184 944 
   Losses recognised in profit or loss                  (1 627)      (965)     (2 592)
   Capital repayment                                         -     (3 000)     (3 000)
   Balance at end of year                              336 689     11 988     348 677

   As at 30 September 2014 the group transferred R63.3 million of investments in African 
   Bank Limited from level 2 to level 3. This amount consists of R7.5 million held directly 
   by the group and R55.8 million held by policyholders. The investments in African Bank 
   Limited have been valued using guidance provided by the curator of African Bank Limited, 
   senior debt being valued at 90% of the face value and subordinated debt valued at nil. 
   African Bank Limited Preference shares are valued at 1 cent per share.

   All investment properties are valued by an independent valuator on a three-year rolling 
   cycle and are sensitive to the property market.

   The financial assets at fair value consist of the investment in Makana of R0.5 million 
   (March 2014: R4.0 million), the investment in Rotimode of R0.9 million (March 2014: 
   R0.9 million), the investment in KayaGas of R7.6 million (March 2014: R7.1 million) and
   the investment in African Bank Limited of R63.3 million.

   In determining the fair value of the Makana option included in the financial assets at 
   fair value the Vandermark valuation model was used. Significant inputs into the model 
   were the exercise price, current market price of Makana based on a valuation of the 
   underlying investments, standard deviation of expected returns of 16.8% (March 2014: 
   16.8%), risk-free rate of 7.5% (March 2014: 7.1%) and a dividend yield of 0% 
   (March 2014: 0%). 

   The investment in Rotimode represents the consideration settled. The investment in 
   KayaGas is secured and therefore no sensitivities were deemed necessary.

   The only fair value liabilities in the group are the linked investment contract 
   liabilities which are all grouped into level 2.

   Post-balance sheet events
   The directors are not aware of any post-balance sheet events that materially affect 
   the financial results or the financial position of the group as presented in the 
   condensed consolidated interim results.


COMMENTARY
Financial performance - Profitability for the period was impacted by the group's core 
business, Cadiz Asset Management, experiencing a R2.1 billion decline in assets under 
management. Cadiz Corporate Solutions and BNP Paribas Cadiz Securities both posted 
improved performances for the period. 

Cadiz has provided R17.4 million against its loan funding to empowerment partner, 
Makana Investment Corporation (Makana), and written down the carrying value of its 
investment in Makana, primarily as a result of the 27% decline in the Cadiz share price. 

Owing to the performance of Cadiz Asset Management the group has impaired the goodwill 
by R160.0 million to R66.9 million and the carrying value of the investment in the 
BNP Paribas Cadiz Securities associates has been written down by R18.0 million to 
R43.9 million. 

These factors have contributed to a headline loss of R22.5 million. The diluted losses 
per share are 88.9 cents with headline losses per share being 10.0 cents. These results 
are in line with the trading statement released on SENS on 12 November 2014.

Operational performance - Gross segment revenue is 11% lower at R78.0 million mainly 
as a result of losses from the Investments segment.

Gross segment expenses continued to be tightly managed and were 4% higher at 
R82.2 million mainly as a result of increased costs in the Advisory business on higher 
revenue. The group's staff head count was 7% lower at 90 (March 2014: 97). 

Group segment losses were R4.2 million (2013: profit of R9.4 million). 

Asset management - Cadiz Asset Management revenue decreased by 6% to R65.9 million 
while expenses of R72.7 million were marginally higher, contributing to a loss for 
the period of R6.8 million.

Total assets under management declined by R2.1 billion from March 2014 to R26.4 billion 
at period-end mainly as a result of net outflows. 

At 30 September 2014 assets under management within Cadiz Collective Investments were 
R8.0 billion (30% of total assets under management) and Cadiz Life were R6.0 billion 
(23% of total assets under management).

Long-term investment performance remains compelling across most funds. In the short to 
medium term, however, performance in some funds, in particular equity and multi-asset 
class funds with a significant allocation to equities, has been lagging. The reasons 
for this performance are not new. In line with the valuation-focused investment philosophy 
we have had significant exposure to out-of-favour resource shares while not holding some 
large industrial shares which have performed exceptionally well. Importantly, our core 
equity thesis remains unchanged and we continue to hold exposure to resource shares. 
While focused on delivering exceptional performance to our clients we are also cognisant 
of our responsibility to preserve our investors' capital and believe clients will be 
well rewarded for supporting us in the long term. 

Performance in fixed income, while affected by the demise of African Bank in August, 
continues to be strong, as does performance in structured products.

The turnaround in Cadiz Asset Management is taking longer than expected to bear fruit. 
Assets under management are not expected to increase in the short term, and consequently 
neither will the financial performance. However, the group remains committed to its 
investment philosophy and process which management believes is in the best long-term 
interests of clients. 

Advisory - Cadiz Corporate Solutions, the group's advisory business, advised on several 
local and an increasing number of cross-border M&A transactions. The loss of revenue due 
to the adverse M&A conditions in the resources sector was supplanted by revenue streams 
from other sectors. Revenue increased by 70% to R12.2 million while costs were 53% higher 
at R9.5 million due in part to fees paid to strategic partners on deals completed. The 
business made a profit of R2.7 million compared to R0.9 million in the corresponding 
period last year.

Cadiz Corporate Solutions has a healthy deal pipeline and will continue to focus on 
the resource and infrastructure sectors, at the same time being alive to any other 
opportunities. Management now owns 24% of the business.

Investments - The group continues to retain a prudent capital base to support it 
businesses and plans to distribute annual profits, adjusted for the non-cash impact of 
the associates, to shareholders.

At the end of the period the group's investment portfolio totalled R263.2 million 
(March 2014: R306.2 million). Net losses from investments were R0.1 million after a 
R3.5 million mark-to-market loss on the Makana conversion option and a R2.6 million 
loss due to exposure to African Bank in underlying investment portfolios.

At the end of the period the capital was invested as follows:
-  R50.3 million invested mainly in liquid money market assets for regulatory capital 
   adequacy;
-  R3.6 million invested in liquid assets for short-term commitments;
-  R1.1 million invested as seed capital for the asset management products;
-  R8.2 million loan to BNP Paribas Cadiz Securities for capital adequacy purposes;
-  R48.2 million funding after a provision of R17.4 million to Makana, secured by the 
   Cadiz shares. Makana holds various unlisted investments which cover the value of the 
   funding, however management considered it appropriate to provide against the loan 
   funding as a result of the lower Cadiz share price.
-  R18.5 million option to acquire 24.8% of Makana which holds a majority stake in 
   Sebenza Forwarding and Shipping, and empowerment stakes in Hulamin, Foskor, Tellumat, 
   KayaGas and various mining rights. The value of conversion rights was reduced in the 
   six months primarily due to the value of Makana's investment in Cadiz reducing in 
   line with the share price.
-  R17.0 million invested in strategic unlisted investments which are unlikely to be 
   realised in the short to medium term; and
-  R116.3 million held as a prudent operational buffer held in liquid assets with market 
   exposure.

Net asset value of R444.2 million (197.0 cents per share) comprises R202.9 million 
(90.0 cents per share) liquid assets, R17.0 million (7.5 cents per share) unlisted 
investments, R52.1 million (23.1 cents per share) invested in BNP Paribas Cadiz 
Securities, R66.7 million (29.6 cents per share) invested in Makana and R6.5 million 
(2.9 cents per share) fixed assets and R99.0 million (43.9 cents per share) in 
intangible assets. 

BNP Paribas Cadiz Securities - Cadiz has a 40% interest in BNP Paribas Cadiz Securities 
which provides the South African equity market access to domestic and international 
institutional investors. Cadiz' share of associate profits was R1.4 million (2013: loss 
of R4.0 million). BNP Paribas has a call option to purchase the stake from Cadiz from 
October 2016 and the period to be used to determine the strike price for that option 
commences on 1 January 2015. Management has undertaken a valuation of the BNP Paribas 
Cadiz Securities investment and considered it prudent to impair the investment by 
R18.0 million. The carrying value of the investment in the securities associate is 
therefore R43.9 million. 

Share capital and treasury shares - During the period the company acquired 560 816 shares 
for an average price of 106.6 cents per share and allocated them to staff in terms of 
the Restricted Share Plan. 

On behalf of the board of directors

Peter-Paul Ngwenya                Fraser Shaw
Chairman                          Chief executive officer

Cape Town
14 November 2014


Registered office: The Terraces, 4th Floor, 25 Protea Road, Claremont, 7700
PO Box 44547, Claremont, 7735
Company secretary: C Schmahl
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)
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

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