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PSG GROUP
EARNINGS INCREASED BY 28% TO R97,9 MILLION
HEADLINE EARNINGS PER SHARE INCREASED BY 7,2% TO 61,2 CENTS
NET ASSET VALUE INCREASED BY 10% TO 852 CENTS PER SHARE
DISTRIBUTION TO SHAREHOLDERS INCREASED BY 16,7% TO 14 CENTS PER SHARE
GROUP INCOME STATEMENTS
31 AUG 31 AUG 29 FEB
2000 CHANGE 1999 2000
R'M % R'M R'M
INCOME
NET INTEREST INCOME 163,2 109,9 216,5
INVESTMENT INCOME 82,9 33,2 136,2
OTHER OPERATING INCOME 123,8 119,3 267,2
TOTAL INCOME 369,9 262,4 619,9
EXPENSES
OPERATING EXPENSES 210,7 119,9 315,5
NET INCOME FROM NORMAL OPERATIONS 159,2 12 142,5 304,4
FINANCING COSTS (9,1) (6,4) (18,1)
INCOME FROM ASSOCIATED COMPANIES 6,8 12, 18,7
EXCEPTIONAL ITEMS 16,4
NET INCOME BEFORE TAXATION 173,3 17 148,1 305,0
TAXATION 22,4 30,2 51,2
NET INCOME OF THE GROUP 150,9 28 117,9 253,8
ATTRIBUTABLE TO OUTSIDE SHAREHOLDERS 53,0 41,5 89,1
ATTRIBUTABLE TO ORDINARY
SHAREHOLDERS 97,9 28 76,4 164,7
EARNINGS PER SHARE (CENTS)
- HEADLINE EARNINGS 61,2 7 57,1 120,6
- ATTRIBUTABLE TO ORDINARY SHAREHOLDERS 70,2 23 57,1 120,6
DISTRIBUTION PER SHARE (CENTS)
- DIVIDEND - - 12,0
- CAPITAL 14,0 17 12,0 24,0
TOTAL 14,0 12,0 36,0
NUMBER OF SHARES (MILLION)
- IN ISSUE 139,5 133,7 139,5
- WEIGHTED AVERAGE 139,5 133,7 136,6
DETERMINATION OF HEADLINE EARNINGS
- ATTRIBUTABLE TO ORDINARY SHAREHOLDERS 97,9 76,4 164,7
- EXCEPTIONAL ITEMS (NET OF OUTSIDE
SHAREHOLDERS AND TAXATION) 12,5
85,4 12 76,4 164,7
GROUP BALANCE SHEETS
31 AUG 29 FEB
2000 2000
R'M R'M
ASSETS
FIXED ASSETS 49,2 48,4
GOODWILL 53,3
DEFERRED TAXATION 5,6
INVESTMENT IN ASSOCIATED COMPANIES 130,0 12,5
OTHER INVESTMENTS 17,8 100,7
OTHER ASSETS 318,2 258,1
ACCOUNTS RECEIVABLE 187,3 274,9
LOANS AND ADVANCES 741,2 658,8
INVESTMENT AND TRADING SECURITIES 538,5 891,2
SHORT-TERM NEGOTIABLE SECURITIES 590,4 651,6
CASH AND SHORT TERM FUNDS 390,5 378,3
3 022,0 3 274,5
INVESTMENTS OF ASSURANCE SUBSIDIARIES 146,6 10 932,0
3 168,6 14 206,5
LIABILITIES
LONG-TERM LIABILITIES 25,9 25,6
DEFERRED TAXATION 3,6 1,7
ACCOUNTS PAYABLE AND OTHER LIABILITIES 235,9 447,9
LOANS AND DEPOSITS 813,1 849,8
SHORT-TERM BORROWINGS 14,8 94,3
1 093,3 1 419,3
SHAREHOLDERS' AND POLICYHOLDERS' FUNDS
ORDINARY SHAREHOLDERS' FUNDS 1 188,8 1 085,3
OUTSIDE SHAREHOLDERS' FUNDS 725,2 770,7
TOTAL SHAREHOLDERS' FUNDS 1 914,0 1 856,0
POLICYHOLDERS' FUNDS 161,3 10 931,2
2 075,3 12 787,2
3 168,6 14 206,5
NET ASSET VALUE PER SHARE (CENTS) 852 778
GROUP CASH FLOW STATEMENTS
31 AUG 31 AUG 29 FEB
2000 1999 2000
R'M R'M R'M
CASH RETAINED FROM/(UTILISED IN)
OPERATING ACTIVITIES (12,5) 1 514,2 10 537,4
CASH UTILISED IN INVESTING ACTIVITIES (179,4) (848,0) (9 723,0)
CASH FLOW ATTRIBUTABLE TO INVESTMENT
IN SHORT-TERM INCOME EARNING ASSETS 282,9 (804,9) (966,2)
CASH FLOW FROM FINANCING ACTIVITIES 29,9 153,4
NET INCREASE/(DECREASE) IN CASH
AND CASH EQUIVALENTS 91,0 (108,8) 1,6
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 289,6 951,2 288,0
CASH AND CASH EQUIVALENTS AT
END OF PERIOD 380,6 842,4 289,6
STATEMENT OF CHANGES IN OWNERS' EQUITY
31 AUG CENTS 29 FEB
2000 PER 2000
R'M SHARE R'M
ORDINARY SHAREHOLDERS' FUNDS
AT BEGINNING OF PERIOD 1 085,3 778 638,4
NET PROCEEDS OF SHARES ISSUED 523,9
GOODWILL ON ACQUISITION (177,5)
DISTRIBUTION TO SHAREHOLDERS (19,5) (14) (49,7)
MOVEMENT IN NON-DISTRIBUTABLE RESERVES 14,8 11 136,3
NET INCOME FOR THE PERIOD 97,9 70 164,7
GOODWILL REALISED ON DISPOSAL OF INVESTMENTS 10,3 7
CHANGE IN SHAREHOLDING OF SUBSIDIARY (150,8)
ORDINARY SHAREHOLDERS' FUNDS AT END OF PERIOD 1 188,8 852 1 085,3
NOTES - UNAUDITED RESULTS FOR THE SIX MONTHS ENDED 31 AUGUST
1. ACCOUNTING POLICIES
THE ACCOUNTING POLICIES ADOPTED FOR THE PURPOSES OF THIS INTERIM REPORT COMPLY
IN ALL MATERIAL RESPECTS, WITH SOUTH AFRICAN STATEMENTS OF GENERALLY ACCEPTED
ACCOUNTING PRACTICE AS WELL AS WITH APPLICABLE LEGISLATION. THESE ACCOUNTING
POLICIES ARE ALSO CONSISTENT WITH THOSE OF THE PREVIOUS YEAR, WITH THE
EXCEPTION OF THE TREATMENT OF GOODWILL AND DEFERRED TAXATION, WHICH IS TREATED
IN ACCORDANCE WITH THE CURRENT ACCOUNTING STATEMENTS.
THE COMPARATIVE FIGURES IN RESPECT OF THE DEFERRED TAXATION HAVE NOT BEEN
RESTATED, THESE BEING IMMATERIAL.
2. FINANCIAL
* THE GROUP BALANCE SHEET INCLUDES INVESTMENTS IN LISTED SHARES WITH A BOOK
VALUE OF R110 MILLION AND MARKET VALUE OF R152 MILLION AS AT 31 AUGUST 2000.
* THE EXCEPTIONAL ITEMS OF R16,4 MILLION REFLECT THE PROFIT ON THE SALE OF PSG
ANCHOR FINANCE (PTY) LIMITED (PAYROLL LENDER) AS WELL AS THE POSITIVE EFFECT OF
THE CHANGES IN THE COMPANY'S SHAREHOLDINGS IN SUBSIDIARIES.
* PSG GROUP LIMITED REGULARLY REVIEWS ITS EXPOSURE TO ITS SHARE INCENTIVE
TRUST WHICH IS IN THE NATURE OF A SHARE PURCHASE SCHEME. THERE IS NO MATERIAL
DIFFERENCE BETWEEN THE COST OF THE SCHEME'S PSG GROUP SHARES AND THE STATED NET
ASSET VALUE OF THE SHARES.
* THE DECLINE IN THE TOTAL CONSOLIDATED ASSETS OF PSG GROUP IS A RESULT OF THE
DECONSOLIDATION OF ESCHER GROUP LIMITED, WHICH IS NOW TREATED AS AN ASSOCIATED
COMPANY.
CONTRIBUTION TO HEADLINE EARNINGS
31 AUG 31 AUG 29 FEB
2000 1999 2000
R'M R'M R'M
PSG INVESTMENT BANK HOLDINGS 64,9 57,9 125,1
KEYNES RATIONAL 16,4 10,9 16,1
PSG CHANNEL HOLDINGS 5,3 0,7 8,6
PSG INVESTMENT SERVICES 4,8 5,1 9,0
CORPORATE (6,0) 1,8 5,9
85,4 76,4 164,7
31 AUGUST 2000 1999 2000 1999 2000 1999 2000 1999
HEADLINE ATTRIBUTABLE
EARNINGS (RM) 105,3 97,7 22,4 12,4 5,1 5,4 5,3 0,9
HEADLINE EARNINGS PER
SHARE (CENTS) 8,1 7,5 5,0 4,5 5,3 15,5 14,3 2,3
SHARES IN ISSUE
(MILLION) 1 304,5 1 302,6 446,5 276,1 95 35 37 37
NET ASSET VALUE PER
SHARE (CENTS) 127 116 56 36 66 101 143 59
RETURN ON EQUITY (%)
(ANNUALISED) 13,8 13,4 19,1 26,7 17,6 34,5 23,0 7,8
GROUP REVIEW
THE BOARD IS SATISFIED WITH THE FINANCIAL PERFORMANCE OF PSG GROUP FOR THE SIX
MONTHS TO 31 AUGUST 2000 WHICH SAW THE PROFITS ATTRIBUTABLE TO SHAREHOLDERS
INCREASE BY 28% TO R97,9 MILLION.
EARNINGS PER SHARE WERE 70,2 CENTS WHILST HEADLINE EARNINGS PER SHARE INCREASED
BY 7,2% TO 61,2 CENTS.
THE NET ASSET VALUE PER SHARE OF THE COMPANY INCREASED BY 10% TO R8,52.
IN ORDER TO IMPROVE THE FINANCIAL REPORTING BY PSG GROUP, WE ALSO PROVIDE THE
SALIENT FINANCIAL STATISTICS OF THE FOUR MAIN OPERATING SUBSIDIARIES ABOVE AS
WELL AS RELEVANT COMMENTS:
DIVISIONAL
PSG INVESTMENT BANK HOLDINGS LIMITED
A NUMBER OF FACTORS INFLUENCED THE SA FINANCIAL MARKETS DURING THE FIRST HALF
OF THE FINANCIAL YEAR, WHICH MADE BUSINESS, TRADING AND TREASURY CONDITIONS
UNPREDICTABLE AND DIFFICULT.
THE INCREASE IN EARNINGS OF 8% TO 8,1 CENTS PER SHARE IS SATISFACTORY RESULT
UNDER THESE CONDITIONS. THE TOTAL PROFITS INCREASED TO R104 MILLION (1999:
R97,7 MILLION) WITH THE SHAREHOLDERS' FUNDS TOTALING R1683 MILLION.
THE BANK MAINTAINED ITS CREDIT RATING OF A2 FROM FITCH IBCA.
STRUCTURED AND PROJECT FINANCE OPERATIONS CONTINUED TO SUCCESSFULLY PENETRATE
THE MARKET. CORPORATE FINANCE AND PROPRIETARY INVESTMENT ACTIVITIES PERFORMED
EXCEEDINGLY WELL.
THE BUSINESS WAS REFOCUSED BY THE DISPOSAL OR RESTRUCTURING OF CERTAIN
BUSINESSES THAT WERE NOT ACHIEVING ACCEPTABLE RETURNS OR WHICH WERE CONSIDERED
TO HAVE RISK PROFILES THAT WERE UNACCEPTABLY HIGH.
NEW INITIATIVES INCLUDED THE ACQUISITION OF A 43% INTEREST IN VESTACOR, THE
ACQUISITION OF THE BUSINESS BANK LIMITED AND AN INTEREST IN A 'SMART CARD'
BUSINESS. THE INTEGRATION OF TBB INTO THE GROUP IS ACTIVELY BEING MANAGED BY
THE EXECUTIVE TEAM AND IS CONTINUING AS PLANNED. THIS VENTURE IS EXPECTED TO
CONTRIBUTE SIGNIFICANTLY TO THE RESULTS OF THE BANKING GROUP IN FUTURE PERIODS.
THE OTHER INITIATIVES ARE ALSO PERFORMING IN LINE WITH EXPECTATIONS.
THE RISK MANAGEMENT OF THE BUSINESS CONTINUES TO PLAY A CRUCIAL ROLE. THE
EXCELLENT PERFORMANCE OF HIGHLY SOPHISTICATED PROCEDURES HAS ENABLED THE GROUP
TO EFFECTIVELY MONITOR AND PLAN ITS STRATEGY. THE BANK'S DEPOSIT BASE REMAINED
STABLE OVER THE PERIOD.
THE BANK IS WELL POSITIONED AND FOCUSED TO SUCCESSFULLY CONDUCT ITS OPERATIONS
AND TO TAKE ADVANTAGE OF OPPORTUNITIES. EARNINGS FOR THE NEXT SIX MONTHS WILL
REFLECT THE BANK'S STRATEGY AND ARE EXPECTED TO BE BETTER THAN THE MARKET.
KEYNES RATIONAL LIMITED
HEADLINE EARNINGS FOR THE SIX MONTHS AMOUNTED TO R22,4 MILLION (1999: R12,4
MILLION). INCLUDED IN ATTRIBUTABLE EARNINGS OF R38,7 MILLION IS A CAPITAL
PROFIT OF R18,3 MILLION THAT WAS REALISED WITH THE DISPOSAL OF PSG ANCHOR
FINANCE (TERM-LOANS) WHEN IT WAS SOLD FOR A CASH CONSIDERATION OF R26 MILLION
AND TOTAL LOANS OF R106 MILLION WERE REPAID.
KEYMATRIX (SHORT-TERM LOANS) HAS ACHIEVED ITS BUDGET AND WAS THE BIGGEST
CONTRIBUTOR TO HEADLINE EARNINGS WITH R11,8 MILLION DURING THE PAST SIX MONTHS.
THE BUSINESS HAS ALMOST DOUBLED IN SIZE WITH LOANS AND ADVANCES NOW AT R56,9
MILLION COMPARED TO R33,9 MILLION AT YEAR-END. THE NEXT GOAL IS TO BECOME A
DEPOSIT TAKING INSTITUTION AND THIS PROCESS IS WELL UNDER WAY. WITH THE
ADDITION OF A TEAM OF EXPERIENCED SENIOR EXECUTIVES THE COMPANY'S MANAGEMENT IS
OF SUFFICIENT STRENGTH TO COPE WITH BOTH THE GROWTH AT KEYMATRIX AS WELL AS
ESTABLISHING AND MANAGING A COMPANY THAT PROVIDES A RANGE OF FINANCIAL SERVICES
KEYNES RATIONAL HAS FURTHER DECIDED TO FOCUS ON THE OPPORTUNITIES WITHIN THE
BANKING INDUSTRY ONLY, OF WHICH PSG ANCHOR LIFE DOES NOT FORM A PART. PSG
CHANNEL HOLDINGS HAS OBTAINED THE LIFE ASSURANCE COMPANY AND AGREEMENT HAS BEEN
REACHED TO TRANSFER CONTROL OF PSG ANCHOR LIFE TO CHANNEL WITH EFFECT FROM 1
SEPTEMBER 2000 (SUBJECT TO REGULATORY AND OTHER FORMALITIES).
WE ARE SATISFIED WITH OUR PROGRESS AND BUDGET FOR SUBSTANTIAL GROWTH IN PROFITS
FOR THE FORESEEABLE FUTURE.
PSG INVESTMENT SERVICES (PTY) LIMITED
THIS FINANCIAL YEAR HAS SEEN PSG INVESTMENT SERVICES TAKING SIGNIFICANT STRIDES
TOWARDS REALIZING ITS STRATEGY OF BEING A LEADER IN THE SOUTH AFRICAN MARKET IN
THE PROVISION OF PRIVATE CLIENT WEALTH MANAGEMENT SOLUTIONS.
AS A RESULT OF DIFFICULT TRADING CONDITIONS IN THIS COMPANY'S MARKETS, THE
HEADLINE EARNINGS FOR THE PERIOD UNDER REVIEW DECLINED FROM R5,4 MILLION TO
R5,1 MILLION, WHICH PERFORMANCE WAS ALSO BELOW BUDGET.
THE COMPANY INCREASED ITS SHARE CAPITAL BY AN ADDITIONAL R40 MILLION SINCE THE
PREVIOUS FINANCIAL YEAR-END IN ORDER TO FINANCE EXPANSION, NOTABLY THE
INVESTMENTS IN THE INFORMATION TECHNOLOGY DIVISION, REPRESENTED BY THE
INITIATIVES IN PSG ONLINE AND E-NABLING SOLUTIONS.
TOTAL ASSETS UNDER MANAGEMENT HAS REACHED THE LEVEL OF R5,3 BILLION WITH
POSITIVE INFLOWS BEING ACHIEVED BY THE UNIT TRUST DIVISION AS A RESULT OF A
STRONG SALES AND MARKETING FOCUS.
THE COMPANY CONTINUES TO MAKE INROADS INTO THE ESTABLISHMENT OF A HIGHLY
EFFECTIVE AND PROFITABLE NATIONAL DISTRIBUTION NETWORK OF FINANCIAL ADVISERS,
OPERATING OUT OF 63 BRANCHES COUNTRYWIDE.
THE COMPANY HAS POSITIONED ITSELF TO IMPROVE ON ITS EARNINGS DURING THE SECOND
HALF OF THIS FINANCIAL YEAR, BUT THIS WOULD STILL BE BELOW THE BUDGETED FIGURE
FOR THE FULL FINANCIAL YEAR.
PSG CHANNEL HOLDINGS LIMITED
PSG'S INVESTMENT IN THE INSTITUTIONAL MARKET PROVED SUCCESSFUL, WITH A
SIGNIFICANT IMPROVEMENT IN THE PERFORMANCE AND CONTRIBUTION OF PSG CHANNEL
HOLDINGS.
HIGHLIGHTS INCLUDE:
* THE SUCCESSFUL LISTING OF ESCHER GROUP ON THE JSE IN JUNE 2000, RAISING
R41,85 MILLION IN THE PROCESS.
* CONTINUED GROWTH IN ASSETS UNDER MANAGEMENT BY ESCHER GROUP TO R13,6
BILLION, WITH FURTHER GROWTH EXPECTED IN THE NEXT 6 MONTHS. ESCHER COMMENCED
OPERATIONS IN THE UK FOLLOWING APPROVAL FROM THE RELEVANT AUTHORITIES.
* AS A RESULT OF THE UNBUNDLING OF ESCHER OUT OF THE CHANNEL GROUP, CHANNEL
RE-FOCUSED ITS OPERATIONS ON WORKPLACE SOLUTIONS. CHANNEL SWICON WAS FORMED AS
A PROVIDER OF HUMAN RESOURCES ADMINISTRATION, INFORMATION AND COMMUNICATION
SERVICES. A JOINT VENTURE ALFINANZ WAS ESTABLISHED TO UNDERTAKE ALL BACK OFFICE
ADMINISTRATION FUNCTIONS.
* ON 1 SEPTEMBER 2000, THE BUSINESS OF PSG ANCHOR LIFE WAS TRANSFERRED FROM
KEYNES RATIONAL TO PSG CHANNEL HOLDINGS. ANCHOR'S BUSINESS IS BEING
RE-ENGINEERED AND WE EXPECT SIGNIFICANTLY IMPROVED RESULTS FROM NEXT YEAR
ONWARDS.
WE ARE EXCITED ABOUT THE PROSPECTS OF PSG CHANNEL HOLDINGS AND EXPECT MAJOR
GROWTH IN THIS DIVISION FOR THE FORSEEABLE FUTURE.
DISTRIBUTION TO SHAREHOLDERS
THE COMPANY'S POLICY IS TO DISTRIBUTE APPROXIMATELY 30% OF ANNUAL PROFITS TO
SHAREHOLDERS. THE DIRECTORS HAVE RESOLVED TO MAKE AN INTERIM DISTRIBUTION OF 14
CENTS PER SHARE (1999: 12 CENTS) TO SHAREHOLDERS REGISTERED IN THE BOOKS OF THE
COMPANY ON 3 NOVEMBER 2000, PAYABLE ON 13 NOVEMBER 2000.
PROSPECTS
PSG GROUP IS BUDGETING FOR FURTHER GROWTH DURING THE NEXT SIX MONTHS TO 28
FEBRUARY 2001, SUBJECT TO CURRENT MARKET CONDITIONS AND BARRING UNFORESEEN
CIRCUMSTANCES.
BY ORDER
JANNIE MOUTON CHRIS OTTO
CHAIRMAN DIRECTOR
STELLENBOSCH
4 OCTOBER 2000
THESE RESULTS ARE ALSO AVAILABLE ON OUR WEBSITE WWW.PSG.CO.ZA
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