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PSG Group Limited - Audited results for the year ended 29 February 2004
PSG Group Limited
(Registration number 1970/008484/06)
JSE share code: PSG ISIN code: ZAE000013017
Audited results for the year ended 29 February 2004
Project unlock value completed with Capitec Bank unbundling and special
distributions of 300 cents per share
Headline earnings per share increased by 2,7% to 72,6 cents despite
substantially lower capital base
Group income statements
2004 2003
Rm Rm
Revenue 1 614,6 1 658,0
- Continuing operations 1 306,3 648,0
- Discontinued operations 308,3 1 010,0
Net interest income 316,3 377,7
Investment income 32,2 20,8
Other operating income 313,6 317,6
Operating income 662,1 716,1
Expenses
Operating expenses 537,8 525,9
Goodwill amortisation 31,4 27,6
Total expenses 569,2 553,5
- Continuing operations 302,1 177,1
- Discontinued operations 267,1 376,4
Net income from operations 92,9 162,6
Financing costs (3,7) (27,2)
Income from associated companies 11,1 5,6
Exceptional items (15,9) (236,8)
Net income before taxation 84,4 (95,8)
- Continuing operations 54,7 (21,6)
- Discontinued operations 29,7 (74,2)
Taxation 31,2 42,5
- Continuing operations 16,7 8,8
- Discontinued operations 14,5 33,7
Net income of the group 53,2 (138,3)
Attributable to outside shareholders 20,5 47,6
Attributable to ordinary shareholders 32,7 (185,9)
Attributable to ordinary shareholders 32,7 (185,9)
Non-headline items (note 3) 48,4 270,7
Headline earnings 81,1 84,8
Earnings per share (cents)
- attributable 29,3 (154,9)
- headline 72,6 70,7
Distribution per share (cents)
Normal dividend
- interim
- final 20,0
Special distribution
- dividend 100,0* 100,0
- capital 100,0
Total 100,0 220,0
* Declared on 4 February 2004
Number of shares (million)
- in issue 105,0 120,0
- weighted average 111,7 120,0
Group balance sheets
2004 2003
Rm Rm
Assets
Non-current assets
Fixed assets 28,3 165,4
Net intangible assets 40,4 65,6
Investment in associated companies 67,5 80,1
Investments of assurance subsidiaries 1 083,4 557,6
Linked-product investments 598,2 283,3
Other investments and non-current assets 49,1 56,6
Deferred tax asset 38,1 105,0
Current assets
Inventories 13,5 14,1
Accounts receivable 137,5 774,1
Loans and advances 20,8 191,2
Trading securities 96,7 72,7
Cash and short-term funds 206,8 228,4
2 380,3 2 594,1
Shareholders" funds
Ordinary shareholders" funds 331,6 993,1
Outside shareholders" funds 29,5 190,4
361,1 1 183,5
Liabilities
Non-current liabilities
Policyholders" contracts
- Insurance contracts 114,5
- Investment contracts 968,2
1 082,7 556,9
Linked-product liabilities 598,2 283,3
Long-term liabilities 2,5 3,7
Deferred tax liability 0,5 0,4
Current liabilities
Deposits and current accounts 25,8
Accounts payable and other liabilities 325,4 455,8
Short-term borrowings 9,9 84,7
2 019,2 1 410,6
2 380,3 2 594,1
Statements of changes in equity
2004 2003
Rm Rm
Ordinary shareholders" funds at beginning of period 993,1 1 218,0
Shares bought back and cancelled (5 million) (17,7)
Treasury shares acquired (10 million) (31,2)
Capitec unbundling (260,1)
Movement in non-distributable reserves (1,7) 0,6
Net income for the period 32,7 (185,9)
Normal dividends (23,1) (39,6)
Special distribution (200 cents per share) (240,0)
Special distribution (100 cents per share) (115,0)
Adoption of AC 133 (note 2) (11,4)
Fair value adjustment AC 133 6,0
Ordinary shareholders" funds at end of period 331,6 993,1
Net asset value per share (cents) 316 828
Net tangible asset value per share (cents) 244 712
Group cash flow statements
2004 2003
Rm Rm
Cash retained from operating activities 421,3 120,0
Cash utilised in investment activities (314,1) (275,4)
Cash flow attributable to investment in short-term
income-earning assets (5,9) 176,2
Cash flow from financing activities (123,6) (240,5)
Net decrease in cash and cash equivalents (22,3) (219,7)
Cash and cash equivalents at beginning of period 223,3 443,0
Cash and cash equivalents at end of period 201,0 223,3
Contribution to headline earnings
2004 2003
Rm Rm
PSG Capital Ltd 21,0 10,0
Channel Life Ltd 17,7 17,6
PSG Investment Services (Pty) Ltd * 11,3 6,6
Corporate 13,0 3,3
Capitec Bank Holdings Ltd 18,1 16,2
PSG Investment Bank Holdings Ltd 31,1
81,1 84,8
* Including m Cubed Holdings Ltd.
Commentary
Review of annual results
The results for the year to 29 February 2004 are not strictly comparable to
those of the previous corresponding period:
- PSG Investment Bank Holdings Limited was sold with effect from 1 November
2002;
- A special distribution of 200 cents per share was made to shareholders on 31
March 2003; and
- Capitec Bank Holdings Limited was unbundled with effect from 1 December 2003.
Despite substantially reduced ordinary shareholders" funds (from R993 million to
R332 million), PSG Group increased its headline earnings by 2,7% to 72,6 (2003:
70,7) cents per share.
The net asset value accordingly decreased to 316 cents per share.
Dividends
The PSG Group has now completed the payment of special dividends with the 100
cents per share payable on 3 May 2004. Going forward, it is our intention to
declare an interim and final dividend in aggregate approximately 30% of headline
earnings.
Black economic empowerment
An empowerment consortium led by Mr Desmond Lockey recently acquired a
significant holding in Channel Life Limited.
PSG Group also announced an issue for cash of 10 million shares (using its
treasury stock) to Arch Equity (Pty) Limited, a BEE company, of which Mr Lockey
is the controlling shareholder. Full details of this transaction were mailed to
shareholders recently for approval at a shareholders meeting on 22 April 2004.
Mr Lockey has been appointed to the PSG Group Board.
Review of operations
PSG Capital Limited (91%)
The business of PSG Capital consists of Private Equity and Alternative
Investments supported by a dedicated Corporate Finance team in Johannesburg and
Stellenbosch. PSG Capital had a successful year significantly increasing
headline earnings from R10 million to R23 million.
The Private Equity division is now well established with the interests in PSG
Treasury Outsourcing and PSG Trade Finance (in association with China
Construction Bank) poised for further growth. Cullinan Industrial Porcelain
continues to perform well. The new investment in Axon (script lending joint
venture with SocGen) has exciting potential. Since year-end PSG Capital acquired
a majority interest in Algoa Insurance Company Limited, a niche assurance
company providing absenteeism management services and funeral insurance.
In the Alternative Investment field, the Tanzanite Capital Limited fund has
achieved significant real returns. In both the PSG Quants and dollar-based
Diamond Fund, we are building acceptable track records.
Channel Life Limited (89%)
South Africa"s life insurance industry experienced a decline in premium income
of 6% during the 2003 calendar year compared to the previous year.
Against this background it is a pleasure to report that Channel Life managed to:
- Increase premium income by 94% from R424 million to R823 million;
- Increase assets under management from R739 million to R1 286 million; and
- Maintain headline earnings at R20 million.
The recently concluded BEE transaction should help Channel Life realise its
strategy of increasing recurring income and improving the quality of its book
without an increase in cost.
PSG Investment Services (Pty) Limited (98%)
Although the past financial year has been a challenging one for PSGIS
management, as they had to integrate the various Appleton businesses into PSGIS,
the company was profitable under difficult conditions. Highlights were:
- The original Appleton institutional asset management business was sold in a
BEE transaction. PSGIS retains a 10% interest in this business. The non-core
asset management businesses in both London and Dublin were sold.
- The PSGIS operations have been streamlined with the integration of the
businesses of PSG Konsult with Wealth Management.
- PSG Konsult and the other two divisions of PSGIS, PSG Online and PSG Fund
Management, are now operating independently, each with its own board of
directors and strategy.
m Cubed Holdings Limited (20%)
The challenging local and international investment market conditions that
impacted negatively on m Cubed"s results followed them into the early part of
2004, necessitating remedial action, mainly at wealth management. By year-end
the positive impact of the restructure, together with improved market
conditions, resulted in a meaningful turnaround in this division.
The company has returned to its prior stated objective of implementing an
empowerment strategy, whereby a BEE shareholder will be introduced.
Corporate (100%)
This profit contribution consists mainly of interest received on cash funds held
available for distribution to shareholders.
Capitec Bank Holdings Limited
Capitec Bank which specialises in micro-finance and mass-market retail banking
has continued to contribute excellent results until the unbundling during
November 2003 which results have been consolidated up to 30 November 2003. The
formation and establishment of Capitec Bank was a greenfields initiative by PSG
Group, and the eventual unbundling of this investment is in line with PSG"s
strategy of building and unlocking value for and to shareholders.
Prospects
Following the unbundling of Capitec Bank and the special distributions to
shareholders, next year"s results will not be comparable with the results for
the year ended 29 February 2004. The new focus of the PSG Group, with project
growth, is the growth of its businesses, both organically and, where
appropriate, by investment.
Annual general meeting
This meeting will be held on Friday, 18 June 2004.
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 consistent with those of
the previous year, with the exception of the adoption of AC 133 (Financial
instruments: recognition and measurement) and the consolidation of the PSG Group
Share Incentive Trust in compliance with AC 132 (Consolidated financial
statements).
In terms of AC 133 comparative figures are not restated and adjustments for the
change in valuation are accounted for directly to opening retained income as
disclosed in the statement of changes in equity. These changes mainly relate to
different bases of valuation adopted for valuing credit derivatives. The effect
of the change in accounting policy on the earnings for the period under review
is an increase in earnings of R4,8 million.
The consolidation of the share incentive trust had no effect on earnings or
opening retained income as all scheme shares had already been allocated to
participants.
Certain comparative figures have been regrouped and reclassified to provide more
meaningful comparison. In compliance with AC101 gross revenue is now disclosed
separate on the face of the income statement, whilst operating income represents
the net revenue from each of the main revenue sources. To accomplish this,
interest income of R11 million and a corresponding finance charge in 2003 were
reclassified to other operating income and employee compensation of R30 million
in respect of assurance subsidiaries, previously disclosed under operating
expenses, was set off against assurance income which is included under other
operating income. On the balance sheet, components of the linked product
investments amounting to R11 million previously disclosed under accounts
receivable in 2003 was reclassified to the linked product investment line.
3. Non-headline items
2004 2003
Rm Rm
Exceptional items 15,9 236,8
Loss on discontinuance 8,6 183,3
Restructuring costs 20,6
Goodwill impairment 6,8 21,3
Other impairment charges (0,7) 16,6
Investment activities 1,2 (5,0)
Goodwill amortisation 31,4 27,6
Non-headline items of associated companies 1,2 6,2
48,5 270,6
Taxation 0,6 (1,4)
49,1 269,2
Attributable to outside shareholders (0,7) 1,5
48,4 270,7
4. Investment in associated companies
2004 2003
Rm Rm
Carrying value
- listed 65,1 78,5
- unlisted 2,4 1,6
67,5 80,1
Market and directors" valuation
- listed 59,4 53,5
- unlisted 7,2 2,7
66,6 56,2
5. Effect of unbundling
The discontinued operations relate to the unbundling of the investment in
Capitec Bank Holdings Ltd to shareholders and the sale of PSG Investment Bank
Holdings Ltd.
The following information pertains to the unbundling of Capitec Bank:
30 Nov 28 Feb
2003 2003
Rm Rm
Assets and liabilities
Total assets 466,3 444,4
Total liabilities (46,6) (51,7)
Net intangible assets 35,6 44,7
Outside shareholders" funds (186,6) (173,2)
268,7 264,2
6. Commitments
2004 2003
Rm Rm
Contingent liability in respect of risk sharing 20,0 22,5
Operating lease commitments 59,5 125,5
7. Audit of results
The unmodified audit reports from PricewaterhouseCoopers Inc. on the annual
financial statements for the year ended 29 February 2004 and the summarised
financial results contained herein are available for inspection at the
registered office of the company.
By order of the board
Jannie Mouton Chris Otto
Chairman Director
Stellenbosch
19 April 2004
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
JF Mouton (chairman)*, CA Otto*, L van A Bellingan, PE Burton, J de V du Toit*,
MJ Jooste, D Lockey, Dr J van Zyl Smit.
(*Executive)
Sponsor
PSG Capital Limited
These results are also available on our website www.psg.co.za
Date: 19/04/2004 02:34:01 PM Supplied by www.sharenet.co.za
Produced by the JSE SENS Department
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