Wrap Text
Unaudited Results For The Six Months Ended 30 September 2015
Peregrine Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number 1994/006026/06)
JSE share code: PGR ISIN: ZAE000078127
("Peregrine" or �the Group�)
UNAUDITED RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2015
- Normalised headline earnings up 12% to R246 million
- Normalised headline and basic earnings per share up 7%
- Normalised cash generated from operating activities R306 million
COMMENTARY
The Group continued to build on its strategy of delivering higher quality, diversified earnings
during the six month period ended 30 September 2015. Significant growth in earnings from
the trading and structuring businesses housed within Peregrine Securities offset slightly
weaker returns within the hedge fund and wealth management sectors on the back of global
and local market weakness. Annuity earnings grew meaningfully across all business segments
and now account for the majority of Group earnings with the contribution from offshore
playing a more meaningful role in diversifying Group income in the context of a weaker
Rand.
Financial results
Basic profit attributable to shareholders increased by 5% to R240 million (2014: R228
million) with basic earnings per share amounting to 112.6 cents per share (2014: 111.8 cents
per share). Headline earnings increased by 5% to R228 million (2014: R217 million) with
headline earnings per share increasing by 1% to 112.5 cents per share (2014: 111.8 cents per
share). The above IFRS earnings contain distortions relating to the accounting treatment of
share based payments which artificially increased IFRS earnings in prior years. Therefore,
consistent with the prior year, normalised earnings (which more accurately reflect the true
economic results) are disclosed as follows:
- normalised headline earnings increased by 12% to R246 million (2014: R220
million);
- normalised headline earnings per share increased by 7% to 115.4 cents (2014:
108.1 cents per share).
Group normalised operating revenue increased by 7% to R1.13 billion (2014: R1.06 billion).
Income from proprietary investing activities decreased by 30% to R45 million (2014: R65
million). Net interest earned increased by 40% to R45 million (2014: R32 million) with
income from equity accounted investees increasing by 8% to R49 million (2014: R46
million).
As a result of the consolidation of various hedge funds managed by the Group, certain
balance sheet items are restated to more accurately reflect the normalised position.
Normalised cash generated from operating activities amounted to R306 million (2014: R276
million), once again highlighting the cash generative nature of the Group.
Aggregate normalised cash in the Group amounted to R767 million at half year-end, of which
R15 million was available at the centre, R353 million held offshore and the balance of R399
million held by local subsidiaries. The tangible net asset value in the Group, excluding the
carrying value of associates, amounted to R2.0 billion.
Segmental results
Substantial non-controlling interests, including Nala's shareholding in Peregrine SA
Holdings, exist in many of the Group`s operations. Management believes that headline
earnings per reportable segment (which is the basis for the commentary below) better reflects
and aids in the understanding of each division`s specific economic benefit to the shareholders
of the Group. In addition, operating results are presented before tax and before non-
controlling interests in the financial table below.
Wealth Management
In a difficult investment environment, Citadel continued to capitalise on its positioning as a
leading private client wealth manager in South Africa. Assets under management as at half-year-end
were R36.0 billion with gross inflows for the six months amounting to R1.7 billion.
The client retention rate is in excess of 95%.
Headline earnings for the six months decreased by 8% to R82 million (2014: R89 million)
with very pleasing annuity earnings growth and healthy inflows offset by lower performance
fees earned.
Asset Management
The Group's Asset Management division comprises a number of fund management
businesses. The largest contributor to the division is the Group's flagship hedge fund
manager, Peregrine Capital. Headline earnings decreased to R23 million (2014:
R33 million) primarily as a result of reduced, but nevertheless meaningfully positive, fund returns in
the context of negative markets. Peregrine Capital's asset base grew to R5.9 billion by half
year-end (March 2015: R4.8 billion) largely as a result of strong inflows.
Stenham
Post year-end, further share purchase and repurchase transactions took place in the UK and
Guernsey based asset management and trust businesses, of Stenham. As a result, Peregrine's
share in Stenham increased from 80.9% to 84.9%.
Peregrine's share of Stenham's profit increased by 111% to R44 million (2014: R21 million).
Stenham Asset Management performed reasonably against a backdrop of negative global
market returns. Core revenues in Sterling terms have increased primarily due to the increase
in assets under advisory. Reversing the trend of net outflows experienced in the recent past,
net inflows amounted to $314 million during the period under review. Including an advisory
mandate of $1.2 billion which was procured in the final quarter of the previous year, total
assets under management and advice amount to $3.45 billion (March 2015: $3.18 billion).
There was a strong performance from the Stenham property portfolio including significant
dividends received from Stenham's investment in Stenprop Limited. With effect from 1
October 2014, the Stenham Property business was sold to Stenprop in exchange for Stenprop
Limited shares. As part of the transaction, certain properties were retained by Stenham with
the intention being to realise these over time. These realisations are progressing in accordance
with such plan.
Stenham Trustees continue to perform well and the integration of Cannon Trustees (the
Guernsey based trust and fiduciary company, which was acquired in the prior year) is
progressing according to plan. Annuity revenue flows continue to grow strongly.
Stenham remains strongly cash-flow generative, with no long-term debt and cash available to
augment future growth.
Broking and Structuring
The positioning of Peregrine Securities as one of the few substantial, independent structuring
and broking entities in South Africa enabled the business to once again perform exceptionally
well. It has built several of the industry's leading franchises in the areas of prime broking and
derivative broking and structuring, which have benefited from increased financial market
trading volumes. Peregrine Securities increased its headline earnings contribution by 56% to
R51 million (2014: R33 million) for the half year.
Advisory
The acquisition of 50% of Java Capital was concluded with effect from 1 July 2014. Java
Capital is widely regarded as the premier independent corporate advisory house in South
Africa competing directly, and successfully, for mandates against local and international
banks. It is also the industry leader in the provision of corporate finance services in the listed
property sector.
Java Capital's headline earnings contribution for the six months amounted to R12 million
(2014: R6 million) with Java Capital having a significant amount of unbilled work in
progress and pipeline of new business as at the end of the reporting period.
Group
Group investment returns net of costs amounted to R33 million (2014: R38 million) primarily
due to lower returns generated on the Groups' proprietary investments in hedge funds.
Issued share capital
The Group's issued shares amount to 223.505 million and, net of treasury shares of 20.484
million (which includes the 10 million Peregrine shares which were purchased by the Citadel
Share Trust in the 2013 financial year), amount to 203.021 million.
An extension of the executive incentive scheme was implemented in 2013, in terms of which
2.561 million shares will be allotted and issued during November 2015 at a price of R11.02
per share. No further extension to the executive incentive scheme has been implemented.
Directorate
There have been no changes to the board of directors during the year period under review.
Conclusion
In difficult and challenging global market conditions, Peregrine has managed to deliver a set
of results which has once again capitalised on its strong base of profitable, cash generative
operating businesses and which highlight the diversified nature of the earnings streams.
Whilst proprietary returns and performance fees have decreased in an environment
characterised by weak markets, levels of annuity income have, in accordance with the
Group's strategy, increased substantially. Our new acquisitions continue to exceed
expectations and the Group, which is well positioned to capitalise on further growth
opportunities, continues to focus on growing its businesses organically and driving cross
business revenue synergies.
Jonathan Hertz Sean Melnick
Group CEO Non-executive Chairman
Sandton
11 November 2015
Directors: SA Melnick^ (Chairman); J Hertz (CEO); RE Katz (CFO); M Yachad; BC
Beaver*; P Goetsch^; LN Harris#; S Sithole*; SI Stein*
^ Non-executive *Independent non-executive #Lead 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)
Joint Sponsor:��Java Capital��
Joint Independent Sponsor:��Deloitte & Touche Sponsor Services Proprietary Limited�
Further detail and a print-friendly version of these results are available from the company's
website at http://www.peregrine.co.za on Thursday, 12 November 2015.
Condensed consolidated statement of comprehensive income
Unaudited for
Unaudited for the six months
% change the six months ended 30 Audited for the
2014 to ended 30 September year ended 31
2015 September 2015 2014 March 2015
R'000 R'000 R'000
Operating revenue 3 1,091,125 1,062,574 2,410,756
Investment and other income 32 111,791 84,904 227,596
Total revenue 5 1,202,916 1,147,478 2,638,352
Fair value (loss)/gain on linked financial investments (295,374) (39,085) 521,337
Fair value gain/(loss) on policyholder contract liabilities 295,374 39,085 (521,337)
Operating expenses 9 (889,369) (818,632) (1,786,412)
Profit from operations -5 313,547 328,846 851,940
Net interest received 38 47,571 34,507 72,196
Interest received 49,173 36,608 75,874
Interest paid (1,602) (2,101) (3,678)
Share of profits from equity accounted investees 9 49,483 45,516 70,568
Profit before taxation and capital items 410,601 408,869 994,704
Capital items 502 - 148,086
Profit before taxation 1 411,103 408,869 1,142,790
Taxation (86,019) (101,869) (221,024)
Profit for the period 6 325,084 307,000 921,766
Other comprehensive income for the period net of taxation
Items that may be reclassified subsequently to profit or loss:
Currency translation differences 215,541 61,598 43,200
Total comprehensive income for the period 540,625 368,598 964,966
Profit for the period attributable to:
Equity holders of the company 5 239,854 227,640 676,951
Non-controlling interests 7 85,230 79,360 244,815
6 325,084 307,000 921,766
Total comprehensive income for the period attributable to:
Equity holders of the company 421,962 276,756 714,265
Non-controlling interests 118,663 91,842 250,701
540,625 368,598 964,966
Basic earnings per ordinary share (cents) 1 112.6 111.8 327.0
Diluted earnings per ordinary share (cents) 3 111.8 109.0 318.0
Number of ordinary shares in issue ('000) 223,505 217,147 223,505
Treasury shares held ('000) 20,484 20,484 20,484
Weighted average number of ordinary shares in issue ('000) 203,021 193,698 197,284
Diluted weighted average number of ordinary shares in issue ('000) 204,514 198,769 202,898
Reconciliation of headline earnings
Unaudited for Unaudited for
% the six the six months
change months ended ended 30 Audited for the
2014 to 30 September September year ended 31
2015 2015 2014 March 2015
R'000 R'000 R'000
Profit for the period attributable to equity holders 5 239,854 227,640 676,951
Adjustment relating to earnings attributable to participating treasury shares (11,260) (11,015) (31,779)
Profit attributable to ordinary shareholders 6 228,594 216,625 645,172
Gross effect of net gain on disposal of investment in equity accounted investee (478) - -
Tax effect of net gain on disposal of investment in equity accounted investee 90 - -
Non-controlling interest effect of net gain on disposal of investment in equity accounted investee 171 - -
Gross effect of net gain on disposal of interest in subsidiaries (1) - - (142,626)
Non-controlling interest effect of net gain on disposal of interest in subsidiaries - - 31,799
Headline earnings 5 228,377 216,625 534,345
Headline earnings per ordinary share (cents) 1 112.5 111.8 270.9
Diluted headline earnings per ordinary share (cents) 2 111.7 109.0 263.4
Cash dividend paid per ordinary share in respect of the previous year (cents) 39 100.0 72.0 100.0
Cash dividend per ordinary share declared subsequent to 31 March (cents) 50 150.0 100.0 150.0
(1) No tax effect
Condensed consolidated statement of financial position
Unaudited as at 30 Audited as at March
September 2015 2015
R'000 R'000
Assets
Non - current assets 7,875,537 7,647,773
Property, plant and equipment 73,237 63,228
Intangible assets 622,592 590,262
Investment in equity accounted investees 313,560 313,350
Investments linked to policyholder investment contracts 5,859,329 5,932,805
Financial investments 900,939 648,840
Loans and receivables 6,858 -
Deferred taxation 99,022 99,288
Current assets 21,998,278 22,719,601
Financial investments 2,063,653 1,470,999
Loans and receivables 145,443 146,299
Trade and other receivables 1,118,009 743,919
Amounts receivable in respect of stockbroking activities 16,828,292 17,892,958
Taxation 12,745 6,089
Cash and cash equivalents 1,830,136 2,459,337
Total assets 29,873,815 30,367,374
Equity and liabilities
Equity 3,303,266 3,230,283
Equity attributable to equity holders of the company 2,796,683 2,660,901
Non-controlling interests 506,583 569,382
Non - current liabilities 6,116,448 5,971,189
Policyholder investment contract liabilities 5,859,329 5,932,805
Interest-bearing borrowings 151,840 10,234
Loans and other payables 80,354 8,390
Deferred taxation 24,925 19,760
Current liabilities 20,454,101 21,165,902
Loans and other payables 102,922 134,359
Financial instrument liabilities 2,078,301 1,505,297
Trade and other payables 888,931 1,173,399
Amounts payable in respect of stockbroking activities 17,337,385 18,303,172
Taxation 46,562 49,675
Total equity and liabilities 29,873,815 30,367,374
Net tangible asset value per ordinary share (cents) 1,036.0 986.8
Net asset value per ordinary share (cents) 1,312.9 1,249.1
Condensed consolidated statement of changes in equity
Total capital and Non-controlling
reserves interests Total equity
R'000 R'000 R'000
Unaudited - 2015
Balance at 31 March 2015 2,660,901 569,382 3,230,283
Profit for the period 239,854 85,230 325,084
Other comprehensive income for the period 182,108 33,433 215,541
Transactions with owners recorded directly in equity: (286,180) (181,462) (467,642)
Dividends paid (304,531) (143,846) (448,377)
Share-based payments 8,021 - 8,021
Disposal of shares in subsidiary to non-controlling shareholders 10,330 5,371 15,701
Repurchase and cancellation of shares of subsidiary - (42,987) (42,987)
Balance at 30 September 2015 2,796,683 506,583 3,303,266
Unaudited - 2014
Balance at 31 March 2014 2,063,521 629,882 2,693,403
Profit for the period 227,640 79,360 307,000
Other comprehensive income for the period 49,116 12,482 61,598
Transactions with owners recorded directly in equity: (93,401) (60,905) (154,306)
Dividends paid (192,828) (66,442) (259,270)
Share-based payments 11,918 - 11,918
Subscription of shares in subsidiary - 7,377 7,377
Purchase of shares in subsidiary from the non-controlling shareholders - (1,431) (1,431)
Repurchase and cancellation of shares of a subsidiary - (409) (409)
Issue of additional shares of holding company 87,509 - 87,509
Balance at 30 September 2014 2,246,876 660,819 2,907,695
Condensed consolidated statement of cash flow
Unaudited for the Unaudited for the
six months ended six months ended
30 September 30 September
2015 2014
R'000 R'000
Cash flow from operating activities (948,214) (70,235)
Cash flow from operating activities excluding stockbroking activities (145,095) 323,313
Cash dividends paid (438,045) (259,270)
Cash flow from stockbroking activities (365,074) (134,278)
Cash flow from investing activities (158,317) (166,910)
Cash flow from financing activities 425,354 105,262
Net decrease in cash and cash equivalents (681,177) (131,883)
Cash and cash equivalents at beginning of the year 2,459,337 1,811,895
Effects of exchange rate changes on cash and cash equivalents 51,976 21,936
Cash and cash equivalents at end of the period 1,830,136 1,701,948
Segmental analysis
Interest and share
of profits from
equity accounted Profit from ordinary % change in headline
Total revenue investees activities(1) Headline earnings earnings
R'000 R'000 R'000 R'000 2014 to 2015
Unaudited for the six months ended 30 September 2015
Wealth and Asset Management 447,100 22,266 177,427 105,178 -14
Wealth Management - local 370,266 15,893 114,911 82,001 -8
Asset Management 76,834 6,373 62,516 23,177 -30
Broking and Structuring 415,386 25,016 127,438 51,410 56
Stenham 276,258 361 57,632 43,902 >100
Advisory - 13,768 13,768(2) 11,841 >100
Total from operating reportable segments 1,138,744 61,411 376,265 212,331 17
Group 38,060 33,458 44,219 33,414 -12
1,176,804 94,869 420,484 245,745 12
Unaudited for the six months ended 30 September 2014
Wealth and Asset Management 484,996 18,421 203,532 122,767
Wealth Management - local 368,300 11,357 130,656 89,456
Asset Management 116,696 7,064 72,876 33,311
Broking and Structuring 294,704 13,968 81,178 32,865
Stenham 264,196 5,510 32,621 20,856
Advisory - 6,676 6,676(2) 5,742
Total from operating reportable segments 1,043,896 44,575 324,007 182,230
Group 77,072 33,841 68,951 38,053
1,120,968 78,416 392,958 220,283
Note : Group funding costs are disclosed as part of "group" and have not been allocated to the underlying operating reportable segments
(1)� Profit from ordinary activities is synonymous with profit before taxation and capital items
(2)� Represents 50% of profit after taxation
Reconciliation of segmental analysis to statement of comprehensive income
Total from
Wealth and operating
Asset Broking and reportable Non-reportable
Management Structuring Stenham Advisory segments Group segments (1) Total
R'000 R'000 R'000 R'000 R'000 R'000 R'000 R'000
For the six months ended 30 September 2015
Total revenue per segmental analysis 447,100 415,386 276,258 - 1,138,744 38,060 - 1,176,804
Reconciling items: (28,163) (15,199) - - (43,362) (28,543) 98,017 26,112
Operating revenue - internal (27,748) (12,709) - - (40,457) - - (40,457)
Investment income - internal (415) (2,490) - - (2,905) (28,543) 31,448 -
Investment income of non-reportable segment - external - - - - - - 66,569 66,569
Total revenue per statement of comprehensive income 418,937 400,187 276,258 - 1,095,382 9,517 98,017 1,202,916
Profit before taxation and capital items per segmental analysis 177,427 127,438 57,632 13,768 376,265 44,219 - 420,484
Reconciling total revenue items per above (28,163) (15,199) - - (43,362) (28,543) 98,017 26,112
Operating expenses of non-reportable segment - external - - - - - - (30,159) (30,159)
Share based payment charge (2) (8,021) - - - (8,021) - - (8,021)
Interest paid - internal - 2,185 - - 2,185 - - 2,185
Profit before taxation and capital items per statement of comprehensive income 141,243 114,424 57,632 13,768 327,067 15,676 67,858 410,601
For the six months ended 30 September 2014
Total revenue per segmental analysis 484,996 294,704 264,196 - 1,043,896 77,072 - 1,120,968
Reconciling items: (35,307) 38,920 - - 3,613 (83,687) 106,584 26,510
Operating revenue - internal (33,988) 38,805 - - 4,817 - - 4,817
Operating revenue of non-reportable segment - external - - - - - - 1,697 1,697
Investment income - internal (1,319) 115 - - (1,204) (83,687) 84,891 -
Investment income of non-reportable segment - external - - - - - 19,996 19,996
Total revenue per statement of comprehensive income 449,689 333,624 264,196 - 1,047,509 (6,615) 106,584 1,147,478
Profit before taxation and capital items per segmental analysis 203,532 81,178 32,621 6,676 324,007 68,951 - 392,958
Reconciling total revenue items per above (35,307) 38,920 - - 3,613 (83,687) 106,584 26,510
Operating expenses of non-reportable segment - external - - - - - - (23,856) (23,856)
Deferred profit participation (2) 19,671 - - - 19,671 - - 19,671
Share based payment charge (2) (8,021) - - - (8,021) - - (8,021)
Interest paid - internal - 1,995 - - 1,995 56 - 2,051
Interest paid - external - - - - - - (1) (1)
Share of profits from equity accounted investees - internal - - (443) - (443) - - (443)
Profit before taxation and capital items per statement of comprehensive income 179,875 122,093 32,178 6,676 340,822 (14,680) 82,727 408,869
(1) Refers to the group's consolidated proprietary hedge and property fund investments which do not meet the quantitative thresholds for determining reportable segments
(2) Management treats the deferred profit scheme (which is settled in PGR shares) as an expense as profits are earned, but for IFRS purposes, it is a share-based payment arrangement, in which the
grant date fair value is recognised over the vesting period.
Notes & Compliance
The condensed consolidated interim financial statements of the Peregrine Group as at and for the six months ended 30 September 2015 comprise the company and its
subsidiaries ("the Group") results and the Group's interests in equity accounted investees.
Basis of preparation
The condensed consolidated unaudited interim financial statements are prepared in accordance with International Financial Reporting Standards (IFRS),
(IAS) 34 Interim Financial Reporting, except for the fair value measurement disclosures required by IAS34.16A(j), the SAICA Financial Reporting Guides
as issued by the Accounting Practices Committee and Financial Pronouncements as issued by Financial Reporting Standards Council and the requirements of
the Companies Act of South Africa. The accounting policies applied in the preparation of the condensed consolidated financial statements are in terms of
International Financial Reporting Standards and are consistent with those applied in the consolidated financial statements as at and for the year ended 31 March 2015.
In preparing these condensed consolidated unaudited interim financial statements, management made judgements, estimates and assumptions that affect the application
of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates. 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 2015.
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 statements have not been reviewed or reported on by the company's auditors, KPMG Inc.
The prior year audited results are a summary of the consolidated financial statements as at and for the year ended 31 March 2015, which were prepared under the
supervision of R E Katz CA (SA), the Group Chief Financial Officer. A copy of these financial statements can be obtained from the issuer's registered office.
Auditor's report for the year ended 31 March 2015
The consolidated and separate financial statements of Peregrine Holdings Limited ("Peregrine") for the year ended 31 March 2015 have been audited by the company's
auditor, KPMG Inc. In their report dated 14 August 2015, 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.
Acquisitions
1. Peregrine's shareholding in Stenham increased from 80.91% to 84.89% in August 2015 following the repurchase and subsequent cancellation of 34 665 Stenham
shares.
Disposals
1. With effect from 1 April 2015, Stenham Trust Limited disposed of a 6% interest for a cash consideration of �1.1 million (R18.9 million), thereby reducing their interest to
94% from 100% and resulting in a profit of �899 304 (R15.9 million), which has been accounted for directly through equity as a transaction with owners.
2. With effect from 1 April 2015, Peregrine Securities Proprietary Limited disposed of a 15% interest in Legae Securities Proprietary Limited for a cash consideration of
R2.5 million, thereby reducing their equity accounted interest from 47.5% to 32.5%, resulting in a capital profit of R501 748.
Events subsequent to reporting date
There have been no material events subsequent to reporting date.
Applicable exchange rates
Average rates Closing rates
USD:ZAR
30 September 2015 12,55 13,83
31 March 2015 11,07 12,12
30 September 2014 10,66 11,30
GBP:ZAR
30 September 2015 19,33 20,94
31 March 2015 17,82 17,99
30 September 2014 17,86 18,32
Date: 11/11/2015 09:45:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.