Wrap Text
PSG/PGFP - PSG Group /PSG Financial Services - Reviewed Results For The Year
Ended 29 February 2008
PSG Group Limited
Incorporated in the Republic of South Africa
Registration number 1970/008484/06
JSE share code: PSG & ISIN: ZAE000013017
PSG Financial Services Limited
Incorporated in the Republic of South Africa
Registration number 1919/000478/06
JSE share code: PGFP & ISIN code: ZAE000096079
Reviewed results for the year ended 29 February 2008
- Recurring headline earnings increased by 57,5% to 185,7 cents per share
- Headline earnings decreased by 43,2% to 295,1 cents per share
- Dividend for the year increased by 25% to 112,5 cents per share
- Net asset value increased by 22,9% to 1 948 cents per share
Condensed group income statements
Restated
29 Feb 28 Feb
2008 Change 2007
Rm % Rm
Income
Sales from non-financial operations 1 316,8
Insurance income 15,6 14,4
Investment income 200,1 119,3
Net fair value gains and losses on 351,4 678,4
financial instruments
Fair value adjustments to investment 22,3
contract liabilities
Commission and other fee income 861,8 594,7
Other operating income 91,3 42,8
Total income 2 859,3 1 449,6
Expenses
Insurance claims 7,0 2,8
Cost of sales of non-financial 1 181,6
operations
Operating expenses 887,0 560,9
Total expenses 2 075,6 563,7
Net income from operating activities 783,7 (11,5) 885,9
Finance costs (57,8) (40,2)
Share of profits of associated 235,6 124,8
companies
Net income before taxation 961,5 (0,9) 970,5
Taxation (151,9) (147,6)
Net income of the group 809,6 (1,6) 822,9
Attributable to:
Minority interests 255,4 130,9
Equity holders of the company 554,2 (19,9) 692,0
809,6 822,9
Attributable to equity holders of 554,2 692,0
the company
Non-headline items (note 2) (71,7) (40,6)
Headline earnings 482,5 (25,9) 651,4
Earnings per share (cents)
- attributable 338,9 (38,6) 551,7
- headline 295,1 (43,2) 519,3
- diluted attributable 334,4 (37,9) 538,8
- diluted headline 291,1 (42,6) 507,1
Dividend per share (cents)
- interim 32,5 26,0
- final 80,0 64,0
112,5 25,0 90,0
Number of shares (million)
- in issue (net of treasury shares) 169,2 149,8
- weighted average 163,5 125,4
- diluted weighted average 165,7 128,4
Condensed group balance sheets
Restated
29 Feb 28 Feb
2008 2007
Rm Rm
Assets
Property, plant and equipment 26,5 40,1
Intangible assets 676,3 648,9
Investments in associated companies (note 3) 3 533,9 1 104,9
Financial assets linked to investment contracts 7 535,7
Other financial assets 1 808,7 1 838,5
Deferred income tax 13,8 34,1
Receivables and inventories 193,7 493,4
Cash and cash equivalents 417,5 1 340,8
Total assets 14 206,1 5 500,7
Equity
Ordinary shareholders` equity 3 295,4 2 373,0
Minority interests 1 773,6 1 574,5
Total equity 5 069,0 3 947,5
Liabilities
Insurance liabilities 1,7 1,6
Financial liabilities under investment contracts 7 535,7
Other financial liabilities 894,7 894,2
Deferred income tax 141,2 112,6
Payables and provisions 493,2 455,8
Current income tax liabilities 70,6 89,0
Total liabilities 9 137,1 1 553,2
Total equity and liabilities 14 206,1 5 500,7
Net asset value per share (cents) 1 948 1 585
Net tangible asset value per share (cents) 1 548 1 151
Condensed group cash flow statements
Restated
29 Feb 28 Feb
2008 2007
Rm Rm
Cash generated by operations 252.2 302,2
Net change in financial instruments (311.9) (208,7)
Net cash flow from operating activities (59,7) 93,5
Net cash flow from investment activities (502,0) (328,7)
Net cash flow from financing activities (335,4) 1 201,3
Net (decrease)/increase in cash and cash (897,1) 966,1
equivalents
Cash and cash equivalents at beginning of period 884,5 (81,6)
Cash and cash equivalents at end of period* (12,6) 884,5
* Include bank overdrafts and CFD financing
facilities of 430,1 456,3
Condensed statements of changes in equity
Restated
29 Feb 28 Feb
2008 2007
Rm Rm
Ordinary shareholders` equity at beginning of 2 373,0 719,3
period
Shares issued 552,0 1 352,2
Repurchase of shares (289,4)
Net movement in treasury shares (36,4) (59,0)
Movement in other reserves 7,6 3,6
Net income for the period 554,2 692,0
Dividends paid (155,0) (92,6)
Revaluation of associated company 46,9
Ordinary shareholders` equity at end of period 3 295,4 2 373,0
Minority interests 1 773,6 1 574,5
Beginning of period 1 574,5 502,6
Net income for the period 255,4 130,9
Dividends and capital distributions paid (87,5) (59,0)
Capital contributions by minority shareholders 142,6 775,3
(Disposal)/acquisition of subsidiaries (105,0) 129,7
Transferred to liabilities (6,3)
Other movements (0,1) 0,2
Preference shares issued by subsidiary 94,8
Total equity at end of period 5 069,0 3 947,5
Notes
1. Basis of presentation and accounting policies
The condensed financial statements have been prepared in terms of International
Financial Reporting Standards (IFRS) IAS 34 - Interim Financial Reporting and in
compliance with the Listings Requirements of the JSE Ltd. The accounting
policies used in the preparation of the condensed financial statements are
consistent with those used in the annual financial statements for the year ended
28 February 2007.
2. Non-headline items
29 Feb 28 Feb
2008 2007
Rm Rm
After taxation and minorities
60,8 16,6
Impairment of investment in associated company (21,2)
Net profit on sale/dilution of investments in 46,6 31,9
subsidiaries
Net profit on sale of associated companies 4,0 4,6
Negative goodwill on acquisition of subsidiaries 9,6
Other investment activities 0,6 1,3
Non-headline items of associated companies 10,9 24,0
71,7 40,6
3. Investments in associated companies
Carrying value
- listed 1 260,4 470,8
- unlisted 2 273,5 634,1
3 533,9 1 104,9
Market and directors` valuation
- listed 1 397,9 612,2
- unlisted 2 470,4 832,7
3 868,3 1 444,9
4. Commitments
Operating lease commitments 17,6 24,6
5. Segment report
Primary reporting segment
The group is organised in three main business segments:
* Private equity and corporate finance
* Financial advice and fund management
* Financing and banking
The private equity and corporate finance segment consists of PSG`s investment
business and corporate finance services.
The financial advice and fund management segment consists of PSG Konsult and PSG
Fund Management which mainly provide investment support and advice to third
parties, and PSG FutureWealth, a pure linked life insurer focusing on investment
business.
The financing and banking segment consists of Capitec Bank Holdings and Quince
Capital Holdings. Capitec is a retail bank that provides accessible and
affordable banking facilities to clients. Quince Capital is a niche financing
joint venture with Reunert.
Segment assets and liabilities include all assets and liabilities categories as
listed in the balance sheet of the group.
For the year ended 29 February 2008
Total Segment Segment Segment
Revenue result Assets Liabilities
Rm Rm Rm Rm
Private equity and corporate 1 944,8 552,5 3 418,7 350,0
finance
Financial advice and fund 914,5 231,2 9 236,6 8 716,5
management
Financing and banking (1) 1 550,8
2 859,3 783,7 14 206,1 9 066,5
(1) This segment`s equity accounted earnings amounted to R88,2 million for the
year ended 29 February 2008.
For the year ended 28 February 2007
Total Segment Segment Segment
Revenue result Assets Liabilities
Rm Rm Rm Rm
Private equity and 826,5 733,8 3 623,2 485,3
corporate finance
Financial advice and fund 623,1 152,1 1 270,2 978,9
management
Financing and banking (2) 607,3
1 449,6 885,9 5 500,7 1 464,2
(2) This segment`s equity accounted earnings amounted to R19,1 million for the
year ended 28 February 2007.
6. Reclassification of prior year figures
The prior year figures were reclassified as follows:
- Equities relating to Contracts for Difference ("CFD") of R82,5 million were
previously netted off against the related overdraft facilities and are now
disclosed gross.
- Third-party liabilities of R118,1 million in mutual funds consolidated by the
group, previously included in minority interests, have been reclassified to
financial liabilities.
The effect on specific line items is reflected below:
Balance sheet As Reclassification Gross up of Restated
previously of minority CFD assets
stated interest in and
funds to liabilities
financial
liabilities
Rm Rm Rm Rm
Assets
Other Financial 1 756,0 82,5 1 838,5
assets
Equity
Minority interests 1 692, 6 (118,1) 1 574,5
Liabilities
Other Financial 693,6 118,1 82,5 894,2
liabilities
Income statement
Net fair value gains 691,8 (13,4) 678,4
and losses on
financial instruments
Attributable to:
- minority interests 144,3 (13,4) 130,9
Statements of changes in equity
Minority interests
Balance at 1 March 548,7 (46,1) 502,6
2006
Capital contributions 833,9 (58,6) 775,3
by minority
shareholders
Net income for the 144,3 (13,4) 130,9
period
Balance at 28 1 692, 6 (118,1) 1 574,5
February 2007
Cash flow statements
Net change in (184,8) 58,6 (82,5) (208,7)
financial instruments
Net cash flow from 1 259,8 (58,6) 1 201,3
financing activities
Net increase in cash 1 048,6 (82,5) 966,1
and cash equivalents
Cash and cash 967,0 (82,5) 884,5
equivalents at end of
period
These reclassifications had no taxation impact or effect on the net income
attributable to the equity holders of the group or earnings per share.
7. PSG Financial Services Ltd
The company is a wholly owned subsidiary of PSG Group Ltd, except for the 6 079
738 preference shares which are listed on the JSE Ltd (2007: 550,0 million). The
preference shares were consolidated on a 1 for 100 basis during the year under
review. The separate condensed financial statements of the company are not
presented as it is the only asset of PSG Group Ltd.
8. Review by auditors
The company`s external auditors, PricewaterhouseCoopers Inc., have reviewed the
condensed financial statements. A copy of their unqualified review opinion is
available on request at the company`s registered office.
Contribution to headline earnings
Headline Number Net asset value
earnings of
shares
29 Feb 28 Feb 29 Feb 29 Feb 28 Feb
2008 2007 2008 2008 2007
Rm Rm m Rm Rm
Recurring headline 303,7 147,9 3 009,2 1 244,1
earnings (before funding
and STC)
Capitec Bank 66,8 19,1 28,6 1 208,4 607,3
PSG Konsult 63,9 46,5 536,3 247,1 183,9
PSG Fund Management 24,0 15,3 56,0 43,8
Channel Life 1,5 7,0 110,5 128,5 117,7
Quince Capital 21,3 342,4
Paladin Capital and other 63,1 41,9 372,3 141,3
private equity
PSG FutureWealth 8,9 59,9
Zeder Investments and
agri investments
Dividends and equity 31,2 10,1 212,8 476,5
accounted earnings
Management fee earned by 14,0 2,1
PSG after costs
PSG Corporate Services 118,1 150,1
Dividends from 7,2 3,6
investments
BEE funding 30,8 19,9
Net operating costs (29,0) (17,6)
Non-recurring headline 244,1 562,1 1 089,8 1 256,0
earnings
Marked-to-market
profits/(losses)
Paladin Capital 20,3 63,2 242,3 210,1
(Thembeka)
Zeder Investments and 49,8 40,2 74,5 468,6
agri investments
PSG Corporate Services
JSE Ltd 2,3 425,4 164,1
Petmin Ltd 134,3 8,3 51,1 199,7 63,6
Other investments 19,7 44,0 523,2 299,5
Other
Zeder performance fee 7,7
BEE funding (early 10,0
redemption premium)
m Cubed Holdings (19,0) 218,0 50,1 50,1
Perpetual prefs (55,7) (47,2) (558,9) (555,7)
Net interest after tax (13,4) (0,1) (259,9) 419,0
(borrowings and cash)
Interest rate hedge 23,2 (5,0) 17,9 (5,0)
Secondary tax on (19,4) (6,3) (2,7) 14,6
companies
Total headline earnings 482,5 651,4 3 295,4 2 373,0 Ord
s/holde
rs`
equity
Statistics
Recurring HEPS (cents) 185,7 117,9
Growth in recurring 105,3%
headline earnings
Growth in recurring HEPS 57,5%
Commentary
Review of results
Management continues to use recurring headline earnings (refer to the
Contribution to headline earnings table) as the key performance indicator. We
believe that during the past year we again saw PSG improving the quality of its
earnings. Recurring headline earnings increased by 105,3% from R147,9 million to
R303,7 million. Recurring headline earnings per share increased by 57,5% to
185,7 cents.
Headline earnings decreased by 25,9% to R482,5 million for the year ended 29
February 2008, with headline earnings per share down by 43,2% to 295,1 cents.
This decrease is mainly as a result of the non-occurrence of 2007`s
extraordinary R425 million profit on PSG`s then 15% interest in JSE Ltd, which
accounted for 339 cents of last year`s 519,3 cents per share headline earnings.
Corporate actions
- PSG increased its investment in Capitec Bank Holdings Ltd from 18,3% to 34,9%
during June 2007. Capitec shareholders were offered 1,4545 PSG shares for every
Capitec share held. In so doing, 19,7 million PSG shares were issued with a
value of R552 million.
- Effective 1 December 2007, PSG acquired an 80% interest in Alternative Channel
Ltd (now PSG FutureWealth Ltd) for a total cash consideration of R50 million.
Management owns the remaining 20%. Assets of R4,555 billion and liabilities of
R4,495 billion were recognised on acquisition. Strategically, PSG FutureWealth
and PSG Fund Management will in future operate closer in the PSG Wealth Cluster
to expand its product offerings.
- Effective 1 August 2007, Zeder Investments Ltd exchanged its 5,8% interest in
Pioneer Food Group Ltd for a 16,8% interest in Kaap Agri Ltd, leaving Zeder with
a 33,6% interest in Kaap Agri which now has a 32,7% economic interest in
Pioneer.
- The successful launch of MiWay Finance (Pty) Ltd in February 2008, in which
PSG invested R20 million.
- The unbundling of Quince Capital Holdings Ltd, the asset-backed finance joint
venture with Reunert. PSG`s entire investment of R320 million will be returned
together with accumulated profits in dividends. ZS Rational (property bridging
finance) and Scripfin (funding against scrip collateral), previously sold to
Quince Capital, will be repurchased by PSG and its original partners at the
original selling prices. The unbundling transaction awaits Competition
Commission approval, and is expected to be finalised in May 2008.
- Paladin Capital Ltd`s R37 million additional investment in Thembeka Capital
Ltd, following the latter`s successful capital offer to qualifying black
individuals through which R75 million was raised in total.
Review of operations
Capitec Bank Holdings Ltd (34,9%)
Capitec`s headline earnings for the year increased by 32% from R160 million to
R212 million, with headline earnings per share increasing by 16% to 259 cents.
Dividend per share increased by 25% to 100 cents. Return on equity amounted to
22%. Capitec continues to roll out its business strategy of growth whilst
revolutionising the way to bank in South Africa. The company has a loan book of
R2 billion (2007: R803 million) and deposits of R1,5 billion (2007: R897
million), and now serves more than 1,3 million clients from 331 branches.
The company`s comprehensive results are available on www.capitec.co.za.
PSG Konsult Ltd (73,3%)
The company`s turnover increased by 32,4% to R726 million as a result of organic
and acquisitive growth. Headline earnings increased by 56% to R87,1 million, and
headline earnings per share increased by 37,2% to 11,98 cents.
- Funds under administration and management increased to R52,7 billion (2007:
R42,8 billion) and short-term premiums collected (on an annualised basis) to
R970 million (2007: R802 million).
- PSG Konsult expanded its footprint to the United Kingdom by acquiring an
office in London, PSG Konsult Brokers (UK) Ltd.
- Effective 1 March 2008, PSG Konsult acquired Brosist, a short-term insurance
administrator with R320 million annualised premiums, and Multifund, a short-term
insurance broker and underwriting company with R110 million annualised premiums.
- At year-end, PSG Konsult had 189 offices (2007: 179) and 491 (2007: 433)
financial planners, stockbrokers and short-term insurance brokers.
Paladin Capital Ltd (90%)
Paladin Capital is a private equity investment company that invests in listed
and unlisted companies where it can acquire a significant influence. Paladin
currently has 12 companies in its investment portfolio with a fair value close
to R1 billion.
Paladin`s headline earnings increased to R75,4 million during the year under
review with all the investee companies having performed well, with an
exceptional performance by Thembeka Capital, a qualifying BEE investment
company. Thembeka remains the largest black shareholder in the JSE Ltd.
During the year under review, Paladin acquired a 25,1% stake in Mainfin, a niche
property finance house, 25,1% in Lesotho Milling, 29,2% in Erbacon Investments,
an Altx listed civil construction and tool hire company, a 49,9% stake in Protea
Castings, a non-ferrous casting business, and a 40% interest in GRW Holdings, a
specialist tank container manufacturer. In addition, Paladin invested further
capital in CIC (fast-moving consumer goods), Thembeka and Precrete (mining
support services). Paladin`s interest in CIC reduced to below 50% with its
listing on Altx at the end of November 2007. As a result, CIC`s results were
consolidated in PSG Group`s income statement for nine months, explaining the
inconsistencies when comparing income and expenses year-on-year.
PSG Fund Management (Pty) Ltd (96,9%)
PSG Fund Management`s business consists of local collective investments,
offshore collective investments, asset management, hedge funds and prime
broking.
Headline earnings increased by 61% from R15,3 million to R24,7 million. The
company diversified its income stream, with 27% (2006: 9%) of headline earnings
now emanating from offshore operations. Total assets under management increased
by 51% from R11,3 billion to R17,1 billion.
PSG Futurewealth Ltd (80%)
The company is a pure linked life insurer focusing on investment business. It
transformed from a small company with 10 people, balance sheet assets of R4
billion and profit before tax of R2 million, to a company now employing 55
people, balance sheet assets of R7,7 billion and profit after tax of R12
million. The growth is largely the result of the takeover of m Cubed Life`s
assets. PSG FutureWealth concluded a reinsurance arrangement with m Cubed Life
during the financial year under review, in terms of which m Cubed Life
investment policies of approximately R5 billion were reinsured with PSG
FutureWealth. This transaction has to date resulted in an increase of R3,9
billion in the financial assets of PSG FutureWealth, with a corresponding
liability to m Cubed Life.
Channel Life Ltd (34,4%)
Channel Life had a disappointing year with headline earnings having decreased by
78% to R4,5 million. Embedded value increased by 3% to R442 million. Channel
Life`s relatively new call centre initiative accounted for considerable losses
as a result of high policy lapse ratios and unforeseen costs. Management has
made a concerted effort to ensure that it is not repeated in future.
The broker and group benefits businesses, including the group`s funeral
insurance subsidiary Safrican, experienced strong and profitable growth.
A new executive team, headed by Lennie Louw as CEO, was introduced during the
second half of 2007. This team`s agreed strategy is to focus exclusively on
Channel Life`s core recurring premium risk business. PSG and senior partner,
Sanlam, remain confident that Channel Life`s performance will improve
significantly going forward.
Zeder Investments Ltd (35,2%)
Zeder performed positively, with headline earnings having increased by 51,2% to
R206,4 million, and headline earnings per share by 27% to 35,4 cents. Zeder`s
net asset value per share increased by 15% from R2,25 to R2,59. The company`s
investment portfolio increased by 76% to R1 366,5 million, with its investments
in Kaap Agri Ltd and KWV Ltd representing more than 75% of the portfolio.
PSG, as manager of Zeder, earns a 2% management fee based on the total assets of
the company. The past year saw PSG also earning a performance fee based on
Zeder`s outperformance of the benchmark indices. The 2008 management and
performance fees before tax amounted to R22,5 million and R18,1 million
respectively.
For comprehensive results and commentary refer to www.zeder.co.za.
Miway Finance (Pty) Ltd (19%)
MiWay commenced business on 25 February 2008. Based on volumes and gross
premiums written, management is pleased with the initial results. The
shareholders, namely Sanlam (56%), Santam (25%), PSG (19%) and management (low
voting N shares) invested just over R200 million.
MiWay is a direct financial services business, using in-bound call centres and
soon the internet to distribute its products. The launch involved four products:
short-term insurance, credit life insurance, extended motor warranties and home
loans.
PSG Corporate Services (100%)
PSG`s investments in especially Petmin (10% stake) contributed substantially to
the marked-to-market profits in the past financial year. PSG also has a 3% stake
in Vox Telecom and minor stakes in other listed investments. The investments in
PSG managed unit trusts, with a foreign currency exposure bias, and the seed
capital investments in the South Easter Fixed Interest and Black Swan hedge
funds, yielded market-related returns.
Prospects
PSG and all its subsidiaries are well capitalised. We are suitably positioned to
take advantage of opportunities that may arise in these uncertain times.
PSG remains committed to improving the recurring income emanating from its core
investments. The performance of these companies is interlinked with the South
African economy which in turn is dependent on international markets.
Management is continuously striving to add value for shareholders. We shall
persist in this quest.
Dividends
Ordinary shares
The directors of PSG Group Ltd have resolved on a 25% increase in the annual
dividend and have consequently declared a final dividend of 80 cents per share
(2007: 62,5 cents) for a total dividend of 112,5 cents per share (2007: 90
cents) in respect of the year ended 29 February 2008.
The following are the salient dates for the payment of the ordinary dividend:
Last day to trade cum dividend Friday, 9 May 2008
Trading ex dividend commences Monday, 12 May 2008
Record date Friday, 16 May 2008
Day of payment Monday, 19 May 2008
Share certificates may not be dematerialised or rematerialised between Monday,
12 May 2008, and Friday, 16 May 2008, both days inclusive.
Preference shares
The directors of PSG Financial Services Ltd declared a dividend of 525,1 cents
per share in respect of the cumulative, non-redeemable, non-participating
preference shares for the six months ended 29 February 2008, which was paid on
31 March 2008.
Annual general meetings
Shareholders are invited to PSG Financial Services Ltd and PSG Group Ltd`s
annual general meetings which will be held at Lanzerac, Stellenbosch on Friday,
20 June 2008 at 12:00 and 12:05 respectively.
On behalf of the board
Jannie Mouton Chris Otto
Chairman Director
Stellenbosch
21 April 2008
PSG Group Limited
Registration number 1970/008484/06
JSE share code: PSG
ISIN code: ZAE000013017
PSG Financial Services Limited
Registration number 1919/00478/06
JSE share code: PGFP
ISIN code: 000096079
Directors
JF Mouton (chairman)*, L van A Bellingan+, PE Burton+, J de V du Toit, MJ
Jooste+, P Malan, JJ Mouton, CA Otto*, BE Steinhoff (German)+,
W Theron, J van Zyl Smit+, CH Wiese+
* Executive
+ Independent
Resigned with effect from 21 April 2008
Secretaries and registered office
PSG Corporate Services (Pty) Ltd
1st Floor, Ou Kollege, 35 Kerk Street, Stellenbosch, 7600
PO Box 7403, Stellenbosch, 7599
Transfer secretaries
Link Market Services South Africa (Pty) Ltd
11 Diagonal Street, Johannesburg, 2001
PO Box 4844, Johannesburg, 2000
Sponsor
PSG Capital (Pty) Ltd
These results will also be available on our website at www.psggroup.co.za
Date: 21/04/2008 14:56:03 Supplied by www.sharenet.co.za
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