Peregrine Holdings achieves 43% HEPS for six months

Posted On Wednesday, 12 November 2014 11:03 Published by
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Peregrine Holdings Ltd has continued the good performance achieved during the 2014 financial year.

Jonathan Hertz

For the six months to 30 September 2014, headline earnings were up 44% to R217 million, headline earnings per share were 43% higher at 111.8 cents (2013: 78 cents per share) and headline earnings per share on a normalised basis rose 41% to 108.1 cents (2013: 76.6 cents per share).

"We are pleased that we have been able to maintain the positive momentum established in the latter part of 2013 and early 2014," comments Group CEO Jonathan Hertz. "Our local operations are performing well, particularly SA's flagship wealth manager Citadel and hedge fund manager Peregrine Capital, which comfortably offset a slightly weaker offshore performance."

"Once again highlighting the cash generative nature of the group, normalised cash generated from operating activities amounted to R276 million, up 16% from the R237 million at the interim stage last year," adds Mr. Hertz. "In total, group cash equalled R575 million at the half-year stage, of which R14 million was available at the centre, R445 million held offshore and R116 million held by local subsidiaries."

SA divisions continue to perform well while offshore entities hold steady Peregrine's 100%-owned subsidiary Citadel – South Africa's leading private client wealth manager continues to display healthy results, with assets under management rising to R33.4 billion (from R30.8 billion at 31 March 2014) and gross inflows of R1.4 billion, up from R1.1 billion for the six months to September 2014.

In spite of a challenging environment, the wealth management arm saw profit rise by 15% to R116 million. Particularly pleasing is the fact that annuity revenue streams have grown strongly. Already at a high level, Citadel's client retention rate edged up to 98% (97%).

Hedge fund manager Peregrine Capital is the largest contributor to the asset management division, which saw a substantial 74% rise in profit to R44 million (2013: R25 million). Other asset management holdings include Stenham Asset Management, Cannon Asset Managers and Caveo Fund Solutions.

Stenham's earnings attributable to Peregrine dipped by 5% to R32 million (2013: R33 million). Net outflows experienced by the asset management company were substantially lower than earlier levels and investment performance was able to compensate for net withdrawals, leaving the entity's total assets under management unchanged at $2 billion.

There was decreased activity in Stenham Property due to the focus by management on the sale of the business to GoGlobal Properties (renamed Stenprop), which became effective on 2 October 2014. Once again, Stenham Trustees performed well and has continued its trend of becoming a more significant contributor to Stenham Group profits.

Stenham Trustees acquired 100% of Guernsey-based trust and fiduciary company Cannon Asset Management ("Cannon Trustees") on 1 April 2014. After a solid six months in which results exceeded expectations, Cannon Trustees is expected to further augment Stenham Trustees' operations and client base.

All-in-all, Stenham continues to generate strong positive cash-flows, while holding no long-term debt. A healthy cash balance is available to enhance future growth.

As one of the few substantial, independent structuring and broking entities in South Africa, Peregrine Securities was able to extend its good performance, increasing its contribution to Peregrine Holdings profits by 5% to R45 million (2013: R43 million). Having built several of the industry's leading franchises in the areas of prime broking and derivative broking and structuring, the entity has benefited from increased financial market trading volumes and volatility.

Peregrine acquired 50% of Java Capital, a leading independent corporate finance, advisory and investment business with effect from 1 July 2014. Java's contribution for the three months (before tax and after non-controlling interests), excluding a significant pipeline of business at the end of the reporting period, amounted to R8 million.

Proprietary investment returns were particularly strong, generating investment income of R77 million (2013: R33 million).

It is anticipated that 6.359 million shares will be allotted and issued at a price of R7.37 per share in November 2014 being the third (and last) tranche of shares relating to the share scheme which was implemented in 2010. Following the issue of these shares, together with the 3.835 million shares issued to partly fund the Java Capital acquisition, the group's shares in issue will amount to 203.023 million.

"Although Peregrine's fortunes remain linked to those of financial markets and many of our businesses are structured to earn substantial fees in times when financial markets experience strong positive moves, we continue to focus on increasing the level of annuity income and looking at revenue synergies and cost cutting initiatives," concludes Mr. Hertz. "We have a solid base of profitable, cash-generative operating businesses and are well-positioned to grow both organically and through appropriate transactions."

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