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PSG Group Limited - Unaudited interim results for the six months ended 31 August
2004
PSG Group Limited
Registration number 1970/008484/06
JSE Share code: PSG
ISIN code: ZAE000013017
* Base headline earnings per share increased by 90,2% to 36,9 cents
* ROE increased from 10,9% to 21,0%
* Project growth gains momentum
* Interim dividend of 10 cents per share declared
Unaudited interim results for the six months ended 31 August 2004
Group income statements
31 Aug 31 Aug 29 Feb
2004 2003 2004
Rm Rm Rm
Revenue
- Continuing operations 933,5 650,3 1 306,3
- Discontinued operations 232,3 308,3
933,5 882,6 1 614,6
Net interest income 4,6 203,0 316,3
Investment income 10,1 4,0 32,2
Operating income 189,6 162,7 313,6
Total operating income 204,3 369,7 662,1
Expenses
Operating expenses 155,4 302,9 537,8
Goodwill amortisation 12,6 19,0 31,4
Total expenses 168,0 321,9 569,2
- Continuing operations 168,0 115,5 302,1
- Discontinued operations 206,4 267,1
Net income from operations 36,3 47,8 92,9
Financing costs (1,5) (4,4) (3,7)
Income from associated companies 8,5 2,2 11,1
Exceptional items 3,1 (4,6) (15,9)
Net income before taxation 46,4 41,0 84,4
- Continuing operations 46,4 15,8 54,7
- Discontinued operations 25,2 29,7
Taxation 9,9 16,4 31,2
- Continuing operations 9,9 8,5 16,7
- Discontinued operations 7,9 14,5
Net income of the group 36,5 24,6 53,2
Attributable to outside shareholders 5,1 9,1 20,5
Attributable to ordinary shareholders 31,4 15,5 32,7
Attributable to ordinary shareholders 31,4 15,5 32,7
Non-headline items (note 2) 9,5 22,8 48,4
Headline earnings 40,9 38,3 81,1
Earnings per share (cents)
- attributable 28,3 13,4 29,3
- headline 36,9 33,1 72,6
Distribution per share (cents)
Normal dividend
- interim 10,0 - -
Special distribution - - 100,0
Number of shares (million)
- in issue 115,0 109,7 105,0
- weighted average 110,8 115,8 111,7
Group balance sheets
31 Aug 31 Aug 29 Feb
2004 2003 2004
Rm Rm Rm
Assets
Non-current assets
Fixed assets 26,7 180,4 28,3
Net intangible assets 22,3 92,3 40,4
Investment in associated companies 90,1 64,3 67,5
Investments of assurance subsidiaries 1 714,9 815,3 1 083,4
Linked-product investments 605,0 591,4 598,2
Other investments and non-current assets 55,8 50,8 49,1
Deferred tax asset 36,8 95,2 38,1
Current assets
Inventories 12,5 17,8 13,5
Accounts receivable 106,7 182,0 137,5
Loans and advances 16,2 198,4 20,8
Trading securities 107,2 53,9 96,7
Cash and short-term funds 154,7 245,4 206,8
2 948,9 2 587,2 2 380,3
Shareholders" funds
Ordinary shareholders" funds 390,4 703,5 331,6
Outside shareholders" funds 58,8 202,8 29,5
449,2 906,3 361,1
Liabilities
Non-current liabilities
Policyholders" contracts 1 698,1 807,0 1 082,7
- Insurance contracts 126,0 215,5 114,5
- Investment contracts 1 572,1 591,5 968,2
Linked-product liabilities 605,0 591,4 598,2
Long-term liabilities 1,9 3,3 2,5
Deferred tax liability 0,7 0,9 0,5
Current liabilities
Accounts payable and other liabilities 171,4 249,7 325,4
Short-term borrowings 22,6 28,6 9,9
2 499,7 1 680,9 2 019,2
2 948,9 2 587,2 2 380,3
Net asset value per share (cents) 339 641 316
Net tangible asset value per share 320 557 277
(cents)
Base headline earnings
31 Aug 31 Aug 29 Feb
2004 2003 2004
Cps Cps Cps
Reported headline earnings 36,9 33,1 72,6
Adjusted for:
Loss of interest following payment of
200c special dividend in March 2003 1 (1,3) (1,3)
Capitec Bank unbundling 2 (8,6) (16,1)
Loss of interest following payment of
100c special dividend in May 2004 1 (3,8) (7,5)
Base headline earnings 36,9 19,4 47,7
1 Adjustment for loss of interest previously earned (after-tax rate 7,5%)
2 Adjustment for earnings contribution previously received from Capitec
Bank
Contribution to headline earnings
31 Aug 31 Aug 29 Feb
2004 2003 2004
Rm Rm Rm
Channel Life Ltd 9,7 6,3 17,7
PSG Capital Ltd 8,8 7,1 21,0
PSG Konsult Ltd 3,9
PSG Fund Management 4,3
PSG Online Holdings Ltd 2,1
m Cubed Holdings Ltd 4,8 3,5 8,5
Arch Equity Ltd 4,0
Corporate 3,3 15,41 13,01
PSG Investment Services (Pty) Ltd2 (3,9) 2,8
Capitec Bank Holdings Ltd 9,9 18,1
40,9 38,3 81,1
1 Including interest on excess cash.
2 Since the beginning of the financial year PSG Konsult, PSG Fund
Management and PSG Online are operating independently.
Group cash flow statements
31 Aug 31 Aug 29 Feb
2004 2003 2004
Rm Rm Rm
Cash retained from/(used in) operating 534,0 (145,4) 421,3
activities
Cash retained from/(used in) investment (643,1) 250,8 (314,1)
activities
Cash flow attributable to investment in
short-term income-earning assets (14,9) 14,4 (5,9)
Cash flow from financing activities 77,5 (104,7) (123,6)
Net increase/(decrease) in cash and cash (46,5) 15,1 (22,3)
equivalents
Cash and cash equivalents at
beginning of period 201,0 223,3 223,3
Cash and cash equivalents at end of 154,5 238,4 201,0
period
Statements of changes in owners" equity
31 Aug 31 Aug
2004 2003
Rm Rm
Ordinary shareholders" funds at beginning of 331,6 993,1
period
Shares bought back and cancelled (17,7)
Treasury shares sold/(acquired) 31,2 (20,5)
Surplus on realisation of treasury shares 3,2
Movement in non-distributable reserves (7,0) (2,7)
Net income for period 31,4 15,5
Distribution to shareholders (263,1)
Adoption of AC 133 (1,1)
Ordinary shareholders" funds at end of period 390,4 703,5
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.
2. Non-headline items 31 Aug 31 Aug 29 Feb
2004 2003 2004
Rm Rm Rm
Exceptional items (3,1) 4,6 15,9
Loss on discontinuance 8,6
Goodwill impairment 6,8
Other impairment charges (0,7)
Investment activities (3,1) 4,6 1,2
Goodwill amortised 12,6 19,0 31,4
Non-headline items of associated 1,2
companies
Profit before taxation 9,5 23,6 48,5
Taxation 0,7 (0,1) 0,6
Profit after taxation 10,2 23,5 49,1
Attributable to outside shareholders (0,7) (0,7) (0,7)
9,5 22,8 48,4
3. Investment in associated companies
Carrying value
- listed 86,9 62,5 65,1
- unlisted 3,2 1,8 2,4
90,1 64,3 67,5
Market and directors" valuation
- listed 63,4 43,5 59,4
- unlisted 3,2 6,4 7,2
66,6 49,9 66,6
4. Discontinued operations
The discontinued operations relate to
the unbundling of the investment in
Capitec Bank Holdings Ltd to
shareholders with effect from 1 December
2003.
The following information pertains to
the unbundling of Capitec: Rm
Assets and liabilities at 31 August 2003
Total assets 459,8
Total liabilities 57,6
Net assets 402,2
5. Commitments 31 Aug 31 Aug 29 Feb
2004 2003 2004
Rm Rm Rm
Contingent liability in respect of risk 20,0 20,0 20,0
sharing
Operating lease commitments 51,5 129,3 59,5
Commentary
Review of results
On a comparable basis, base headline earnings per share for the six-month period
ended 31 August 2004 increased by 90,2% from 19,4 cents per share to 36,9 cents
per share. Accordingly, the Group"s return on equity during the period under
review increased from 10,9% to 21,0% as the current period"s earnings were
generated on shareholder funds of R390,4 million compared to R703,5 million in
the corresponding financial period.
The net asset value per share increased since the year end from 316 to 339 cents
per share.
Review of operations
CHANNEL LIFE LIMITED (76%)
Channel Life had a satisfactory first six months with headline earnings of R12,3
million (up 75% compared to the same period last year), operating income of R766
million (up 68%), and total assets of R1 886 million (up 82%).
Rene Otto was appointed CEO and Leon de Wit, the former CEO of Channel Life, was
appointed chairman with effect from 1 September 2004.
The company is positioning itself for growth in South Africa and has disposed of
the non-core Channel Consulting. Shareholders are referred to the press
announcement dated 28 September 2004 regarding discussions between Channel Life
Namibia and Metropolitan Life Namibia.
PSG CAPITAL LIMITED (91%)
This business consists of Private Equity investments, the management of
Alternative Investment funds supported by dedicated Corporate Finance teams in
Johannesburg and Stellenbosch.
* Headline earnings per share increased by 19,6% over the 2003 interim stage.
* PSG Group acquired the minority shares to constitute PSG Capital as a wholly
owned subsidiary with effect from 1 September 2004.
* The Private Equity businesses include the following investments:
- Cullinan Industrial Porcelain - PSG Treasury Outsourcing
- Algoa Insurance Company - PSG Trade Finance
- Axon Financial Services - PSG Capital Quants
PSG KONSULT LIMITED (82%)
Financial planning, investment advice, stockbroking and short-term insurance
broking
PSG Konsult, following the successful merger and integration of Appleton and PSG
Investment Services, had a successful six months and is now one of the largest
independent financial planning and advisory businesses in South Africa. It
operates throughout the country via its 97 branch offices and employs 170
financial planners and stockbrokers. PSG Konsult has approximately 30 000
clients and in excess of R5bn funds under management and R10,3bn under
administration.
PSG Konsult has adapted to the new FAIS Bill coming into effect 1 October 2004
and its financial planners are fully compliant and trained to service its
clients accordingly.
PSG FUND MANAGEMENT (100%)
PSG Fund Management"s core business components include:
- Asset management (local and offshore)
- Management companies (local and offshore unit trusts)
- Product development (specialised investment products)
PSG Fund Management had an excellent first six months with strong inflows
locally due to the excellent performance of the local asset management team and
distribution relationships that are currently in place. During the period under
review funds under management increased by 13% to R4,2bn.
PSG ONLINE HOLDINGS LIMITED (94%)
PSG Online Holdings, which consists of the following three operating divisions,
had a satisfactory six months:
- Stock Broking Service Provider: This business unit provides the stock
broking community with execution, settlement, finance, corporate actions
and reporting at affordable rates. This business has 21 300 active client
accounts and funds under administration of R9,2bn.
- PSG Online: PSG Online remains a strong brand in online stockbroking and
intends to improve further on its superior electronic offering.
- Investor education: The investor education division sold 1 299 courses
during the six-month period under review. In addition, this business unit
recently launched an electronic offering that can be subscribed to on a
monthly basis. It is in the process of obtaining FASSET accreditation for
its course.
m CUBED HOLDINGS LIMITED (26%)
Multi-manager and provider of risk-targeted investment solutions
- Headline earnings increased by 8% to R18,6 million (2003: R17,3 million).
- Assets under management increased by 7% to R48bn (2003: R45bn)
The last six months were dominated by the recently announced establishment of a
new multi-manager asset management business together with Momentum and is
complemented by solid steps forward in the rest of the business. On conclusion
of the Momentum transaction m Cubed will have approximately R200 million cash
funds.
ARCH EQUITY LIMITED (16%)
Arch Equity was launched on 17 May 2004 by Desmond Lockey as a BEE company
focusing on private equity investments and black empowerment transactions. To
date Arch Equity has acquired significant stakes in PSG Group Limited (17%),
Capitec Bank Holdings Limited (14%), Channel Life Limited (effective 13%), Big
Box Containers (Pty) Ltd (30%) and comPress Publications Management (Pty) Ltd
(75%).
Arch Equity increased its net asset value per share from 99c to 132c, a 33%
increase, during the period to end of August 2004. Prospects for the next six
months are favourable as the underlying investments are performing well. It is
in the process of increasing its stake in both PSG Group (to 20%) and Capitec
(to 15,3%) as well as acquiring an effective 4,5% stake in Unitrans Limited.
Arch Equity has commenced the process to list the company by the end of 2004.
Preference share funding
To enable PSG Group to obtain cost-effective permanent share capital to fund BEE
and other attractive growth opportunities, we are considering raising up to R150
million of preference share capital funding.
Related-party transactions
As mentioned above, PSG Group acquired the minority shareholders interest in PSG
Capital from management of PSG Capital. The total consideration payable for the
minority interest is R6,4 million. The consideration will be settled R960 000 in
cash and through the issue of 1 820 000 new PSG Group shares at the 30-day
weighted average price of R2,99 cents per share up to 31 July 2004. In addition
the directors resolved to increase PSG Group"s stake in Arch Equity, its black
economic empowerment partner. The total consideration payable for the increase
of the stake in Arch Equity amounts to R11,5 million. In terms of the JSE
Listings Requirements, both transactions constitute small related-party
transactions and require fair and reasonable opinions by an independent expert.
Newfound Capital (Pty) Ltd has provided the board of directors of PSG Group with
such opinions.
Financial effects of related-party transactions
The financial effects of both related-party transactions are insignificant on
the results of PSG Group.
Prospects
Project growth is gaining momentum and the Group is confident that the
underlying strength of its businesses will deliver real growth in headline
earnings albeit off a substantially lower capital base.
Dividends
The board has resolved on an annual 40% dividend pay-out ratio, with
approximately one-third payable at the interim stage, and has consequently
declared an interim dividend of 10 cents per share in respect of the six months
ended 31 August 2004. The following are the salient dates for the payment of the
interim dividend:
Last day to trade cum dividend Friday, 12 November 2004
Trading ex dividend commences Monday, 15 November 2004
Record date Friday, 19 November 2004
Day of payment Monday, 22 November 2004
Share certificates may not be dematerialised between Monday, 15 November 2004,
and Friday, 19 November 2004, both days inclusive.
By order of the board
Jannie Mouton Chris Otto Jaap du Toit
Chairman Director Director
Stellenbosch
11 October 2004
Secretaries and registered office: PSG Corporate Services (Pty) Limited, 1st
Floor, Ou Kollege, 35 Kerk Street, Stellenbosch, 7600. PO Box 7403, Stellenbosch
7599
Registrars: Ultra Registrars (Pty) Limited, 11 Diagonal Street, Johannesburg,
2001. PO Box 4844, Johannesburg 2000
Directors: JF Mouton (chairman)*, L van A Bellingan, PE Burton, J de V du Toit*,
MJ Jooste, D Lockey, CA Otto*, Dr J van Zyl Smit * Executive
Sponsor: PSG Capital Limited (Registration number: 2000/017362/06)
Website: www.psggroup.co.za
Date: 11/10/2004 03:00:31 PM Supplied by www.sharenet.co.za
Produced by the JSE SENS Department
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