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Cadiz Holdings annual results: Ram Barkai – CEO, Cadiz Holdings

Share up 37% for the year, and the dividend almost doubled.

ALEC HOGG: Ram Barkai is the chief executive of Cadiz Holdings, one of the best performing shares of 2009. Wouldn’t David and I have loved to have had that as our tip last year! It was up 85%. Ram, the results you released today for the year to the end of March, if we break them down into half-years, it seems as though you are continuing to gather momentum. In the first half you had 17c results, by my calculation by the second half you had 28c earnings, so that’s almost double. Is it continuing to roll in April and may?

RAM BARKAI: Rather talk about last year than next year – we’ve just started it.

ALEC HOGG: But April, May – it’s a pretty simple question. Is it still going? Are you still doing well in April/May or have you fallen off the bus?

RAM BARKAI: We definitely haven’t fallen of the bus. I think one of the interesting things that you see is that we are starting to see the fruits of the acquisition of African Harvest, the fact that our asset management has performed well in the last couple of years and specifically in the last year, and we are starting to get rewarded for that.

ALEC HOGG: How long ago did you buy African Harvest?

RAM BARKAI: About 3.5 years.

ALEC HOGG: Does it take that long, then, to settle a big acquisition like that down?

RAM BARKAI: I’d hoped it was going to be shorter, but no-one was kind enough to warn six months before the acquisition that the world’s going to fall apart. So we had a small crisis to deal with, in between and coming out of that. I think part of the cyclicality is the fact that most performance fees have been paid last hear at the second half, so it did create some cyclicality with this year some of the performance fee. Hopefully we’ve taken if out of the system in terms of cyclicality.

ALEC HOGG: In other words, it’s more weighted towards the …

RAM BARKAI: It’s more even across the year, assuming that our performance is going to be good. It’s not going to be a lump sum in that sense.

ALEC HOGG: This is interesting on asset management, because we heard Investec saying that its big focus for the future is to build an asset-management team even bigger. And you know they have been spectacularly successful going overseas. At the end of 2008, you were the 15th biggest asset manager from nowhere in the year 2005. You had R48bn at that Stage.  Where do you lie now? Where are you on the list?

RAM BARKAI: We are probably so, somewhere, it depends. If you take into consideration what’s happening with Metropolitan, whether they count, or not any more. But we are somewhere around that. Some other asset managements have done fairly well last year, benefited from the market…

ALEC HOGG: You did get a lot of money from the Public Investment Commissioners when they switched money away. So that might have benefited you.

RAM BARKAI: Yes, we definitely got a nice mandate. We are not the only one. But I think the important thing is we performed on that mandate.

RAM BARKAI: And you had a good performance from asset management in this past financial year. Just looking overall, what are some of the smart moves you have made in the past, bringing back that money from overseas. The R70m in capital that you had there, at 20, 22 – I guess you are enjoying the benefit of it now. But I was surprised to read in the comments to your results that you’ve still got R10m overseas, which you took a bit of a knock on. Did you switch that back over recently?

RAM BARKAI: No, we started a Pan-African fund a couple of years ago. We had to … investors of R10m, and part of the commitment was that we put about R1m in ourselves. So interestingly enough, I think most our top funds – we have our own money, and so we had to ride that in terms of volatility. But very possibly we might get it back this year.

ALEC HOGG: You spoke when we were chatting this time last year about having lots of call options on the business, that you’d won some big mandates in asset management, that you were getting good inflows in the retail sector, that you had no leverage – in other words, that you had no debt and you were positioned for growth. Those call options – are some of them still outstanding?

RAM BARKAI: I think some of them are starting to get in the money. I think we have much more operational leverage than we used to have. Remember, we spoke just after the acquisition of African Harvest and you asked me about turning the company upside down. We had a lot of money at the bottom and nothing really on the operation and it took awhile. So the operational leverage is starting to use from fruits. I think on the asset management, just the fact that we are starting to get benefit from the performance and recognition in the market, the call option is getting in the money. On the retail side as well – we are still very small on the retail side. We have about R5bn in unit trusts, compared to some of the other players there, and out of the 400 or 500 unit trusts four of our six unit trusts are in the top ten.

ALEC HOGG: That’s good performance indeed. Ram, in 2007 your share price was R6. As I mentioned earlier, you are one of the top performing share price last year when you went to R3.14. You were up a little today, R3.40. That R6 – is that a target you’ve got in mind for the next year or so? 

RAM BARKAI: You know, we used to get paid R6 by investors when we delivered very similar results 2.5 years ago, 3 years ago. I think the market is probably still underrating Cadiz, waiting to see consistency in what we’ve done well.

ALEC HOGG: R1.70 at the beginning of last year – that was just ridiculous!

RAM BARKAI: I think any financial services company under these circumstances either is going to make it or going to get broken. Some of them got broken, as we know. We bought some shares, the management bought some shares at R1.60.

ALEC HOGG: And your bank managers, whoever they might be, are smiling all the way when they have a look at your bank accounts.

ALEC HOGG: Ram Barkai is the chief executive of Cadiz. And just to recap on those numbers – accelerated in the second half of the financial year. Headline earnings went 17c in the first half, 28c in the second half. They are up 37% for the year as a whole, and the dividend was raised from11.5c last year to 20c this year. Happy shareholders.

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