Peregrine seeks targets with war chest
Group pays maiden interim dividend
Peregrine Holdings’ disposal of its structuring and broking businesses has left it with a war chest of nearly R1bn to fund its expansion, CEO Rob Katz said.
The transaction became effective on October 1, leaving Peregrine with as much as R800m to deploy into its remaining businesses.
“We won’t buy for the sake of buying,” Katz said after the publication of financial results for the six months ending September. “We are always looking to acquire businesses that would add bulk to our existing businesses at the right price, but it is a tough market in which to do acquisitions.”
Peregrine declared a first interim dividend of 85c a share.
The remaining businesses comprise local “wealthcare” manager Citadel, and UK-based wealth and fiduciary firm, Stenham, both of which Peregrine owns outright. It also has stakes of about 50% in Peregrine Capital , which runs a portfolio of hedge funds, and corporate finance advisor Java Capital.
While there are no obvious candidates to acquire, Katz said the group plans to extract synergies from its remaining businesses.
“Specifically, Stenham and Citadel which operate along similar lines. There are cost and revenue synergies we can extract by moving the businesses closer together, especially in the areas of asset management and back-office integrations, to name a few.”
The group reported normalised headline earnings of R283m, up 4% from the corresponding period in 2017. Similarly, headline earnings per share rose to R1.31.
Citadel reported gross inflows of R2.2bn, taking total assets under management to R50.8bn. Stenham was also able to increase assets, raising them 10% to $4.1bn. Peregrine Capital’s assets declined to R6.7bn due to weaker domestic equity markets, which also caused its management and performance fees to drop. Java Capital also suffered from weaker markets.
“Overall we are satisfied. We are very pleased with Citadel’s growth, while Stenham’s performance was satisfying. Stenham did benefit from the rand weakening against the British pound. Peregrine Capital is in a tough spot. Local equity markets have performed poorly and there have been significant redemptions in the industry. So we are realistic about what we can achieve in a very tough market.”
Peregrine’s share price closed nearly 2.5% stronger on Wednesday, at R20.96 per share.
“The refined strategy has seen the unbundling of the structuring and property businesses which has made the group strongly cash generative, with reduced exposure to volatile assets,” said Devin Shutte, head of investments at the Robert Group.
Shutte was impressed with the increase in the contribution of annuity earnings as a proportional of total earnings, to 91% from 75% in the prior year.