Peregrine delivers strong FY earnings

Peregrine, a leading financial services group, recently announced its financial results for the year ending March 2017. The company reported stronger annuity earnings, which were partially offset by reduced variable performance fees and proprietary returns. Normalised basic earnings were down by 13% to R514 million, while headline earnings decreased by 16% to R499 million. Jonathan Hertz, the CEO of Peregrine, joined CNBC Africa to discuss the company's performance. He highlighted the challenges faced by the business, including market volatility and currency fluctuations. Hertz noted that annuity earnings, which account for 90% of Peregrine's revenue and 75% of earnings, had increased by 5%. Despite the challenging market environment with limited volatility, the core part of the business performed well. Hertz acknowledged that the lack of market volatility had a negative impact on certain investments, especially when marked to market. The appreciation of the rand against foreign currencies affected offshore investments, leading to overall weaker returns. One of Peregrine's significant investments, Stenprop, a European and UK listed property business, experienced a 30% decline in share value due to factors like Brexit and currency movements. Similarly, Consolidated Infrastructure, a local listed business, also faced challenges, resulting in a substantial decrease in investment returns. Hertz emphasized the importance of balancing investment performance with the operational strength of the business. In response to the investment challenges, Peregrine is undergoing reorganization to unlock value for shareholders. The company plans to list a separate business in the second half of the year, allowing investors to directly participate in the investment side of Peregrine's activities. This strategic move aims to provide shareholders with the opportunity to benefit from the more volatile aspects of the business while also enjoying higher dividends from the core operations. Despite the economic uncertainties and low business confidence in South Africa, Peregrine remains optimistic about the future. Hertz highlighted the demand for offshore investments and diversification among high net worth clients, driving the company's private client and trading businesses. The increasing interest in global markets and assets reflects a growing trend towards securing assets against domestic uncertainties. In conclusion, Hertz emphasized the importance of adapting to market conditions and positioning Peregrine for future growth. The company's focus on delivering strong annuity earnings, coupled with strategic initiatives to unlock shareholder value, demonstrates Peregrine's commitment to long-term success in a challenging economic environment.