Wrap Text
PSG Group Limited
Registration number 1970/008484/06
JSE share code PSG ISIN code ZAE000013017
Audited results for the year ended 28 February 2002
NAV per share increases by 13% to 1 015 cents
Headline earnings per share decrease by 6% to 141 cents
Dividend per share increases by 11% to 50 cents
PSG group has an enviable record of creating shareholders' value and wealth
and shall concentrate on doing so.
Group income statements
2002 Change 2001
Rm % Rm
Income
Net interest income 366,9 344,2
Investment income 159,7 143,6
Other operating income 212,9 233,9
Total income 739,5 2 721,7
Operating expenses 514,1 25 412,7
Net income from normal operations 225,4 (27) 309,0
Financing costs (16,1) (14,7)
Income from associated companies 38,0 50,3
Goodwill amortisation (25,7) (11,0)
Exceptional items 25,8 (3,2)
Net income before taxation 247,4 (25) 330,4
Taxation (83,6) 48,7
Net income of the group 331,0 18 281,7
Attributable to outside shareholders 158,0 92,9
Ordinary operations 155,7 95,7
Non-headline items 2,3 (2,8)
Attributable to ordinary shareholders 173,0 (8) 188,8
Non-headline items (note 4) 2,2 11,4
Headline earnings 175,2 (12) 200,2
Earnings per share (cents)
- attributable 139,3 (2) 141,7
- headline 141,1 (6) 150,3
Distribution per share (cents)
- interim 17,0 14,0
- final 33,0 31,0
Total 50,0 11 45,0
Number of shares (m)
- in issue 120,0 126,9
- weighted average 124,2 133,2
Group balance sheets
2002 2001
Rm Rm
Assets
Fixed assets 156,0 61,0
Net intangible assets 99,2 63,7
Investment in associated companies 268,1 157,2
Investments of long-term insurance subsidiary 371,6 97,8
Other investments and non-current assets 380,3 96,8
Deferred tax asset 270,1 154,5
Accounts receivable 146,0 170,2
Loans and advances 1 073,2 953,9
Investment and trading securities 557,2 455,5
Short-term money market assets 656,4 668,8
Cash and short-term funds 499,0 536,2
4 477,1 3 415,6
Shareholders' funds
Ordinary shareholders' funds 1 218,0 1 140,8
Outside shareholders' funds 910,3 613,5
Total shareholders' funds 2 128,3 1 754,3
Liabilities
Deposits and current accounts 1 339,3 1 139,2
Policyholders' funds 372,1 87,1
Long-term liabilities 75,0 108,5
Deferred tax liability 1,5 4,0
Accounts payable and other liabilities 479,7 287,7
Short-term borrowings 81,2 34,8
2 348,8 1 661,3
Total shareholders' funds and liabilities 4 477,1 3 415,6
Net asset value per share (cents) 1 015 899
Return on ordinary shareholders' funds - ROE (%) 14,9 18,0
Group cash flow statements
2002 2001
Rm Rm
Cash retained from operating activities 72,8 85,8
Cash (utilised)/retained from investment activities (410,5) 123,3
Cash flow attributable to investment in
short-term income earning assets 435,4 (25,1)
Cash flow from financing activities (162,1) 33,8
Net increase/(decrease) in cash and
cash equivalents (64,4) 217,8
Cash and cash equivalents at beginning of period 507,4 289,6
Cash and cash equivalents at end of period 443,0 507,4
Statements of changes in ordinary shareholders' funds
2002 2001
Rm Rm
Ordinary shareholders' funds
at beginning of period 1 140,8 1 085,3
Share buy back (44,6) (106,4)
Movement in non-distributable reserves 8,6 7,0
Adjustment to goodwill (14,4)
Net income for the period 173,0 188,8
Distribution to shareholders (59,8) (19,5)
Ordinary shareholders' funds at end of period 1 218,0 1 140,8
Notes
1. Accounting policies
The accounting policies adopted for the purpose of this report comply 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.
A subsidiary (Fraser Alexander Holdings Ltd) whose business is not related
to that of the rest of the group was not consolidated on the conventional
basis. The assets and liabilities of this company are included in other
assets (R261,8 million) and other liabilities (R171,8 million).
2. Earnings
The earnings for the year is made up as follows:
Non-headline
Attributable items Headline
Rm Rm Rm
First six months* 118,3 83,7 34,6
Second six months 54,7 (85,9) 140,6
173,0 (2,2) 175,2
* Restated to make provision for the PSGIB/RAD reconstruction.
3. Investment in associated companies
The group balance sheet includes an investment in a listed associated
company (Vestacor Ltd) of which the carrying value exceeds the year end
market value by R35 million.
4. Non-headline items
2002 2001
Rm Rm
Negative goodwill 102,5 7,9
Goodwill impairment (52,3)
Investment activities (1,4) 23,5
Impairment charges (23,0) (34,6)
Exceptional items 25,8 (3,2)
Goodwill amortised (25,7) (11,0)
0,1 (14,2)
- attributable to outside shareholders (2,3) 2,8
(2,2) (11,4)
The acquisitions by PSGIB of RAD and TBB resulted in negative goodwill that
was taken to the income statement this year. These items relate to
assessable tax losses within these entities. Included in non-headline items
above is a net amount of R51,4 million attributable to the group which
relates to the position at acquisition. A further R106 million in respect of
RAD only vested post-acquisition and is included in taxation (R63,6 million
attributable to the group).
Segmental analysis
PSG Group is an investment holding company in financial services with the
aim to create wealth for its shareholders through a strategy of ultimate
empowerment of its companies and management.
PSG's principal investments are:
* PSG Investment Bank Holdings Ltd ("PSGIB")
(Direct interest 60%)
PSGIB is a spesialised investment bank concentrating on corporate finance,
proprietary investment, structured products and project finance.
* Capitec Bank Holdings Ltd ("Capitec Bank")
(Direct interest 52,25%)
Capitec Bank engages in full service retail banking for all South
Africans.
* Channel Group Ltd ("Channel")
(Direct interest 86,9%)
Channel is a provider of life assurance and employee benefits products in
Southern Africa.
* PSG Investment Services (Pty) Ltd ("PSGIS")
(Direct interest 95%)
PSGIS provides integrated private wealth management services.
* m Cubed Holdings Ltd ("m Cubed")
(Direct interest 20%)
m Cubed is an independent financial solutions provider to institutions,
corporates and individuals.
Contribution to headline earnings
2002 2001
Rm Rm
PSG Investment Bank Holdings Ltd 141,3 159,7
Capitec Bank Holdings Ltd 24,9 33,1
Channel Group Ltd 12,2 2,1
PSG Investment Services (Pty) Ltd 10,2 10,6
Corporate * (13,4) (5,3)
175,2 200,2
* Including m Cubed and financing costs of R23,3 million (2001: R21,8
million).
Review of annual results
The smaller institutions in the banking and financial services industry
faced a difficult year, influenced by global events coupled with the
collapse of local banking institutions and the calamitous fall of the rand.
PSG still had a decent year with:
* our net asset value per share ("NAV") increasing by 13% from 899 to 1 015
cents per share ("cps");
* headline profit of R175,2 million;
* headline earnings per share ("eps") of 141 cents and total eps of 139
cents, (2001: 150 cps and 142 cps).
* the total distribution to shareholders increasing by 11% to 50 cents per
share.
Review of operations
Channel
* The business model is now well set and profits increased from R2,1 million
to R14,1 million after tax.
* Management effected substantial cost cuts reducing these from R98 million
to R50 million per annum.
* The fair value of the business, which includes embedded value, increased
from R180 million to R198 million at year end.
* The acquisition of the Fedsure insurance business in Namibia and the
establishment of Channel Life (Namibia) proved to be successful.
PSG Investment Services
* At R10,7 million the profits were slightly down from the previous year's
R11,1 million.
* The distribution capacity of this business continues to grow through
- PSG Online (the clicks)
- PSGIS Consulting and PSG Konsult (the bricks)
with a total of 79 distribution outlets.
* The funds under management and administration have increased to R7,2
billion.
* The strategy moving forward includes organic growth coupled with selected
acquisitions or mergers.
m Cubed
* The profits accrued from m Cubed are in line with the pre-listing forecast
of 9,1 cents per share.
* The merger with Escher Group has been successfully concluded and the
enlarged m Cubed is budgeting for further growth.
Capitec Bank
* Capitec's profits, published on 5 April 2002, of R48 million or 80,2 cps
were ahead of the pre-listing statement forecast.
* Capitec was listed on the JSE Securities Exchange South Africa during
February 2002 after having been unbundled by PSG Investment Bank.
* Capitec has a clear business model and will concentrate on uncomplicated
products (including deposits and loans), in its chosen target market.
* Capitec Bank has ongoing development plans in terms of the business model
and whilst expecting a decline in profits over the short term, we are
positive about the company's long-term prospects and success.
PSG Investment Bank
* PSGIB delivered headline earnings of R302 million after tax with total
earnings being R316 million or 22,2 cps and 23,2 cps respectively (2001:
21,5 cps and 20,7 cps).
* Shareholders are referred to the PSG Investment Bank profit announcement
published today for further details.
* As an A2 financial institution PSGIB weathered the banking sector crisis
well because of management's ongoing focus on liquidity protection and
preservation of capital in terms of a conservative business model.
* PSG Investment Bank has a strong and liquid balance sheet and we have
again carefully assessed all assets and liabilities and are satisfied with
the quality of these assets and provisions raised.
* Both boards of PSG and PSG Investment Bank have come to the conclusion
that following the recent banking sector crisis, the traditional model of
commercial banking funding and lending is not sustainable for a bank of our
size and niche market presence.
* In view of the above PSG Investment Bank has resolved to reduce its cash
surpluses by declaring a special dividend of 17 cents per share in addition
to an ordinary dividend of 8 cents, a total of R215 million to be received
by PSG Group.
* PSGIB operates in a volatile market and we expect its earnings to be
fairly volatile as well in future although management shall continue with
its conservative approach to the Bank's affairs.
Corporate governance
PSG Group has always been supportive of proper corporate governance as part
of our culture.
In line with best practices:
* The board of directors is now constituted of two executive directors, one
non-executive director and four independent non-executive directors with the
resignations of group executives Leon de Wit, Andr la Grange, Michiel le
Roux, Hugh Oosthuizen and Charles Turner and the appointment of Kleintjie
Bellingan and Markus Jooste.
* The major sub-committees of the board, i.e. the remuneration committee and
audit committee are both chaired by independent non-executives with a
majority of independent non-executives on both committees.
The PSG Group executives, Jannie Mouton and Chris Otto, do not serve on
these committees.
Dividend
The directors have declared a final dividend of 33 cents per share (2001: 31
cents).
To comply with the requirements of STRATE, the following dates are
applicable:
Last day to trade cum-dividend Wednesday, 19 June 2002
Trading ex-dividend commences Thursday, 20 June 2002
Record date Wednesday, 26 June 2002
Day of payment Thursday, 27 June 2002
Share certificates may not be dematerialised between Wednesday, 12 June 2002
and Wednesday, 26 June 2002, both days inclusive.
The future
Our focus remains to build out the five major businesses in the group, each
of which has a clear strategy and business model.
The PSG model of ultimate empowerment of management and their companies
often leads to the company being listed on the JSE. We are comfortable with
multiple listed companies in the group. However, PSG remains a living
company, adapting itself to changed circumstances and will continue to
research all possibilities.
We still believe that cash is paramount and with the dividends received from
our investments, including the special dividend from PSG Investment Bank,
PSG will eliminate all debt and end up on a cash positive note. At the same
time all group companies are well capitalised and should be able to satisfy
their own funding requirements.
The board will continue to consider share buy-backs especially having regard
to the discount to NAV at which the share trades.
As a financial services holding company operating mostly within the South
African environment our aim remains to create wealth by increasing the NAV
per share and giving shareholders a continuous and proper return on their
investment.
Annual general meeting
This meeting will be held on Friday, 31 May 2002 and the board invites
shareholders to attend.
By order of the board
Jannie Mouton Chris Otto
Chairman Managing director
Stellenbosch
16 April 2002
Secretaries and registered office PSG Corporate Services (Pty) Limited, 1st
Floor Ou Kollege, 35 Kerk Street, Stellenbosch 7600
Registrars Ultra Registrars (Pty) Limited, 11 Diagonal Street, Johannesburg
2001
Directors J F Mouton (Chairman)*, C A Otto (Managing)*, L van A Bellingan, P
E Burton, J de V du Toit, M J Jooste, L M Rouillard (*Executive)
These results are also available on our website: www.psg.co.za
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