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Cadiz takes decisive steps to turn around performance
7 November 2011
Media Release
Low trading volumes and increased competition in securities,
together with reduced performance fees in asset management,
contributed to Cadiz Holdings' diluted headline earnings per share
declining by 93% to 0.9 cents in the six months to September 2011.
Diluted EPS from continuing operations declined by 48%.
The group has taken decisive action to address performance by
joining forces with French-based banking group,BNPParibas SA (BNPP)
and to refocus the asset management business.
The new securities business, branded asBNPParibas Cadiz
Securities, was launched on 1 November and is 60% owned by BNPP and
40% byCadiz.
Chief executive,Ram Barkai, saidCadizand BNPP will combine their
respective strengths to market and sell South African equity
products to institutional investors locally and abroad.
"The business will capitalise on BNPP's international network
and expertise in cash equities and equity derivatives as well
asCadiz's leading position in equity derivatives and research
inSouth Africa," he said.
During the reporting period, securities continued to face
ongoing challenges and renewed market uncertainty. The BNPP
transaction also impacted day-to-day operations and reduced focus
during the period. These factors led to a 44% decline in revenue to
R43.9 million.
Asset management performance was impacted by the difficult
investment environment which resulted in a substantial decline in
performance fees. Revenue for the period was 13% down at R77.3
million.
Revenue from the group's investment and capital portfolio
increased by 25% to R16.3 million owing to improved investment
returns.
These factors contributed to an 8% decline in gross operating
revenue from continuing operations to R95.1 million.
Operating expenses from continuing operations were contained to
growth of only 3%. Stringent cost disciplines have been
implemented, including a 10% reduction in the staff complement.
Head office costs are being streamlined with the aim of reducing
costs by at least 20%. The full benefit of this should be realised
in the next financial year.
Operating profit from continuing operations declined by 39% to
R9.5 million.
Barkai said the Cadiz Asset Management brand continues to gain
traction through a focus on its flagship funds, supported by
competitive investment performance in its unit trust funds, strong
client relationships and a stable investment team.
"The refocusing of the asset management business is expected to
reduce costs, improve investment performance and increase the asset
base. Cadiz Asset Management will in future become more independent
with its own board and remuneration structure," he said.
Cadiz' capability has recently been recognised in several
industry awards. Cadiz Securities was voted as the leading
derivative research house in the country for the 15th consecutive
year in the Financial Mail analyst rankings.Cadizreceived a Spire
Award for the best interest rate derivative broker and was named as
the transition manager of the year for the third successive time at
the 2011 Principal Officers' Association awards.
The Cadiz Managed Flexible Fund was rated as the balanced fund
of the year at the recent Africa Fund Manager awards.
On the group's prospects, Barkai said the priorities are to
ensure the successful launch and integration ofBNPParibas Cadiz
Securities and to refocus the asset management business to be
sustainably profitable and competitive.
The benefits of the new securities business and asset management
restructuring will only be realised from the 2012 financial year
onwards, he said.
The group remains committed to generating superior returns on
its capital portfolio. The board has undertaken to declare a
special dividend in March 2012 after receiving the final proceeds
from the BNPP transaction and reviewing the capital requirements of
the individual businesses and the group closer to its year end.