Peregrine sees more acquisition opportunities for Citadel

Financial services group Peregrine is looking to make more acquisitions for its wealth management division following the purchase of Pretoria-based Purpose Wealth.

Peregrine said poor market returns have lowered expected prices for the wealth management business and more similar companies are becoming available for acquisitions because of emigration.

Commenting on the company's latest acquisition of the wealth management company, Peregrine CEO Rob Katz said “Purpose Wealth, which has assets of just over R1bn, is exactly the kind of business we should be buying and integrating into Citadel.”

While remaining cautious, he thinks there will be lots of opportunities to augment this transaction in the current market, including as a result of businesses being sold by entrepreneurs that are emigrating, as was the case with Purpose Wealth.

The group, which comprises divisions such as Peregrine Capital, Stenham Asset Management and Java Capital, announced a decline in headline earnings per share (HEPS) of 40% to 77.8c per share for the six months ending September.

Citadel was the star performer, with gross inflows of R5.4bn taking its overall assets under management (AUM) to R56.8bn. Headline earnings for the division increased by 18% to R135m during the period.

“Everything is working well. The weak Rand boosted assets under management, the business enjoyed strong client retention and controlled expenses well, and redemptions were lower than expected,” Katz said.

The asset management arm had a tougher time. Stenham kept AUM constant at $4bn but saw headline earnings decline to R23m largely due to a loss on a derivative contract, while Peregrine Capital generated lower earnings due to a decline in assets to R6.6bn.

The business also undertook a “right-sizing” programme to lower costs at head office, which saw the group opting not to replace departing senior executives. This included the role of CFO, which Katz has now assumed.

He called on the president to make some decisive interventions to revive the economy.

“I know the president is playing the long game, but we also need some short-term wins to create a positive psyche. But if the economy carries on the way it has for the moment, this might just be the new norm and will mean we are in for some tough times ahead.”

thompsonw@businesslive.co.za