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PSG / PGFP - PSG Group / PSG Financial Services - Reviewed results for the year

Release Date: 16/04/2012 15:28
Code(s): JSE PGFP PSG
Wrap Text

PSG / PGFP - PSG Group / PSG Financial Services - Reviewed results for the year ended 29 February 2012 PSG Group Limited Incorporated in the Republic of South Africa Registration number: 1970/008484/06 JSE share code: PSG ISIN number: ZAE000013017 ("PSG Group" or "PSG" or "the company" or "the group") PSG Financial Services Limited Incorporated in the Republic of South Africa Registration number: 1919/000478/06 JSE share code: PGFP ISIN number: ZAE000096079 ("PSG Financial Services") Reviewed results for the year ended 29 February 2012 Recurring headline earnings per share increased by 27.6% to 308.6 cents per share Sum-of-the-parts value per share increased by 19.5% to R55.92 per share as at 29 February 2012 Dividend for the year increased by 22.4% to 82 cents per share OVERVIEW PSG Group Ltd ("PSG") is an investment holding company consisting of 39 underlying investments that operate across industries which include financial services, banking, private equity, agriculture and education. PSG`s market capitalisation is approximately R9.5bn, with its largest investment being a 32.5% interest in Capitec Bank. SUM-OF-THE-PARTS ("SOTP") A key valuation tool to measure PSG`s performance by is the growth in its SOTP value per share. The calculation is simple and requires limited subjectivity as 82% of the SOTP value is calculated using quoted market prices, whilst the unlisted investments are valued using market-related multiples. At 29 February 2012, the SOTP value per PSG share was R55.92, which equated to a 54% compounded annual growth rate over the last three years. At 5 April 2012, the SOTP value was R61.66 per share. Asset/Liability 28 Feb 28 Feb 28 Feb 29 Feb % of 2009 2010 2011 2012 total
Rm Rm Rm Rm assets Capitec Bank* 857 2 367 5 138 5 978 50,0 PSG Konsult** 873 948 1 206 1 483 12,4 PSG Private Equity 413 834 1 242 728 6,1 (previously Paladin Capital)+ Curro Holdings* 1 118 9,3 Thembeka Capital+ 570 4,8 Zeder Investments* 342 742 1 069 1 067 8,9 PSG Corporate (incl PSG 216 361 350 338 2,8 Capital)+ Other investments (EOH, 745 400 548 684 5,7 pref share investments, cash, etc)+ Total assets 3 446 5 652 9 553 11 966 100,0 Perpetual pref funding* (486) (541) (1 028) (1 188) Other debt+ (350) (539) (507) (463) Total SOTP value 2 610 4 572 8 018 10 315 Number of shares 170,5 171,8 171,3 184,5 (million) SOTP value per share 15,31 26,60 46,81 55,92 (rand)
* Listed on the JSE ** Over-the-counter + Valuation RESULTS A continued increase in PSG`s SOTP value over the long term will depend on sustained growth in the profitability of our underlying investments. PSG continues to use the recurring headline earnings method to provide management and investors with a more realistic and transparent way of evaluating PSG`s earnings performance. Consolidated recurring headline earnings represent the sum of PSG`s effective interest in that of each strategic investment, regardless of our percentage shareholding. The result is that investments in which PSG or an underlying company holds less than 20% and are generally not equity accountable in terms of accounting standards, are included in the calculation of our consolidated recurring headline earnings. Marked-to-market fluctuations and one- off items are excluded. Recurring headline 28 Feb % change 28 Feb % change 29 Feb earnings (Rm) 2010 2011 2012 Capitec Bank 151,7 47 223,0 63 362,4 PSG Konsult 91,9 2 93,9 15 107,9 PSG Private Equity 74,8 (51) 36,5 (12) 32,0 (previously Paladin Capital) Curro Holdings 1,1 73 1,9 n/a (5,2) Thembeka Capital 1,5 467 8,5 120 18,7 Zeder Investments 83,6 31 109,4 5 115,4 PSG Corporate (incl PSG 15,3 37 21,0 (3) 20,4 Capital) Other 19,8 (4) 19,0 2 19,3 Recurring headline 439,7 17 513,2 31 670,9 earnings before funding Funding (80,7) 35 (109,1) 23 (134,4) Recurring headline 359,0 13 404,1 33 536,5 earnings Non-recurring items 72,4 50 108,3 (72) 30,6 Headline earnings 431,4 19 512,4 11 567,1 Non-headline items (40,5) n/a 196,0 (31) 135,9 Attributable earnings 390,9 81 708,4 (1) 703,0 Earnings per share (cents) Recurring headline 207,4 17 241,9 28 308,6 Headline 249,2 23 306,7 6 326,2 Attributable 225,8 88 424,1 (5) 404,4 Dividend per share 42,0 60 67,0 22 82,0 (cents) Recurring headline earnings per share increased by 27.6% to 308.6 cents during the year under review. Capitec again accounted for most of the growth with its continued exceptional performance, whilst the majority of the remaining investments reported moderate earnings growth. Paladin`s performance was negatively impacted by the losses that were suffered by its investments in the construction sector. Curro reported a loss as a result of its infrastructure spend to cater for future growth, as well as its investment in startup schools which will only turn profitable once they have a sufficient number of learners. Headline earnings increased by 6.4% to 326.2 cents per share, whereas attributable earnings decreased by 4.6% to 404.4 cents per share. The lower increase in headline earnings as opposed to recurring headline earnings per share was predominantly as a result of a marked-to-market loss of R29.8m incurred on PSG Financial Services` interest rate hedge as opposed to a marked- to-market profit of R4.9m in the prior year, and less marked-to-market profits achieved in Thembeka`s investment portfolio of listed shares during the current financial year. The decrease in attributable earnings per share was mainly as a result of the non-headline profits achieved on the disposal of Paladin`s investment in CIC Holdings and Zeder`s investment in KWV Holdings in the prior year. MATERIAL CORPORATE ACTION AND INVESTING Raised R377m in cash through the issue of 8.2m PSG ordinary shares at an average price of R46.09 per share; Raised R132m in cash through the issue of 1.5m PSG Financial Services perpetual preference shares. We now have a nominal total of R1.34bn in perpetual preference share funding, of which the majority of the cost has been fixed by means of an interest rate hedge - R440m at 8.87% per annum until 31 August 2016, and R780m at 8.56% per annum until 31 August 2020; Paladin`s 77.6% interest in Curro was unbundled to Paladin shareholders with effect from August 2011. PSG, as a result, now holds a 63.1% direct interest in Curro; Effective October 2011, PSG acquired the remaining 18.7% minorities shareholding for a 100% interest in Paladin, following which Paladin was delisted from the JSE (Altx). The purchase consideration was settled through the issue of 4.3m PSG ordinary shares at a price of R47.27 per share, and R2m in cash; and Subsequent to year end, PSG acquired a 60% interest in CA Sales Holdings (Pty) Ltd (a Botswana based FMCG distributor) for R202m. CAPITEC BANK (32.5%) PSG is proud of its investment in Capitec. It has grown into a sizeable business with over 7 000 employees, 507 branches and a market capitalisation in excess of R20bn. During the past year, Capitec appointed 2 694 employees and created 1 863 jobs. Capitec focuses on making banking easier and more cost effective for its clients. It acquires new clients and encourages existing clients to use more of its products and services. Capitec added 877 000 new clients during the past year to bring the total number of active clients to 3.7m. In November 2011, Capitec raised R787m in cash by means of a private placement of ordinary shares, which resulted in PSG`s interest in Capitec diluting from 34.2% to 32.5%. Despite the increased capital in the business, they still managed to deliver a return on ordinary shareholders` equity of 29% (2011: 34%). Capitec reported headline earnings of R1.08bn for the financial year ended 29 February 2012, with headline earnings per share having increased by 49% to R11.25. Capitec has changed banking in South Africa with its simplicity and innovation, and is attracting more and more high income clients. The core management team has been with the bank since its inception and remains confident that they will be able to continue to grow Capitec`s client base. Capitec`s comprehensive results are available at www.capitec.co.za. PSG KONSULT (71.3%) PSG Konsult, now also incorporating the PSG Asset Management group, reported positive results for the financial year ended 29 February 2012. Recurring headline earnings per share increased by 15.6% to 14.1 cents, and headline earnings per share by 21.6% to 15.2 cents. Turnover, consisting of commission and other operating income, increased by 40% to R1.4bn (largely as a result of the acquisition of the PSG Asset Management group), while short term premiums administered amounted to R1.6bn on an annualised basis. Funds under management and administration increased to R139bn. The PSG Konsult group received a number of accolades during the past year: The PSG Equity Fund and PSG Flexible Fund won Raging Bull awards; PSG Konsult Moderate Fund of Funds won the Morningstar award for Moderate Allocations; PSG Online was voted Stockbroker of the Year by Business Day Investors Monthly; and PSG Konsult was voted National Broker of the Year: Commercial lines and Agriculture by Santam. At year-end, PSG Konsult had 224 (2011: 216) offices with 694 (2011: 642) financial planners, portfolio managers, stockbrokers and asset managers. PSG Konsult`s comprehensive results are available at www.psgkonsult.co.za. PSG PRIVATE EQUITY (PREVIOUSLY PALADIN CAPITAL) (100%) Paladin will in future be branded as PSG Private Equity. At 29 February 2012, Paladin had 13 investments across the economic spectrum. Paladin invests in sectors other than agriculture, food and beverages. Paladin was delisted from the JSE (Altx) in the year under review following its unbundling of Curro and the subsequent buy-out of the Paladin minority shareholders by PSG. Paladin minority shareholders realised a compounded annual return of 43% since listing in 2009. As a wholly-owned subsidiary of PSG, Paladin continues to focus on new business opportunities. Recurring headline earnings decreased by 17% to R37m, mainly due to losses suffered by its investments in the construction industry. African Unity Insurance experienced strong earnings growth and GRW has returned to profitability, while the remainder of Paladin`s investments performed in line with or better than in the prior year. Paladin management invested a significant amount of time in the past year to restructure or turn investments around that have previously disappointed, and we look forward to improved earnings from these investments going forward. Further corporate action at Paladin included: Invested R262m in Curro, prior to its unbundling; Acquired a 50% interest in Impak Onderwysdiens (provider of alternative and distance education services aimed at the school level) for R35m; Sold its 44% interest in IQuad for R30m; Early stage investments in Energy Partners (provider of energy saving solutions) and Stellenbosch Nanofibre Company (provider of nanofibre technology solutions), the latter in partnership with the University of Stellenbosch; and Subsequent to year end, Top Fix (in which Paladin holds a 29% stake) reached an agreement to sell its scaffolding business which has traditionally been loss making. The transaction is subject to shareholder approval. Paladin`s overall internal rate of return (IRR) across its portfolio (excluding the unbundled Curro) is currently 15%. Management`s target remains an IRR in excess of 25%. CURRO (63.1%) Curro was listed on the JSE (Altx) on 2 June 2011. Its business model revolves around the development, acquisition and management of private schools in South Africa. Curro has decided to expand its original affordable schools model to include three additional market segments, being: The high-end/elite private school market; A private community school initiative market known as Meridian Private Schools, focusing on the lower end of the market; and The baby care/creche market that will be known as Curro Junior Academy. Since 2009, Curro has expanded its country-wide network of private schools from 3 to 16. The number of learners has increased fivefold from 2 000 in 2009 to more than 10 500 at present. During the year under review, Curro invested R142m in the establishment of four new main campuses, and R80m to expand capacity and to upgrade facilities at the existing campuses. Curro also acquired and expanded four schools with established campuses. On a comparative basis, Curro`s turnover has increased by 125% to R166.3m for the financial year ended 31 December 2011. Curro made a headline loss of R7.5m for the year ended 31 December 2011, compared to a R5.2m profit in the previous year due to the high initial costs associated with new schools. We expect Curro to continue to yield low returns whilst expanding rapidly. The potential of the private schools market and the rapidly increasing demand for private education bode well for Curro`s growth strategy. Curro will therefore, in addition to adding capacity to existing schools, continue to aggressively expand its network of schools across South Africa. We are confident that this strategy will yield attractive returns in the long term, albeit that it will be capital intensive and costly over the short to medium term. In order to provide Curro with additional capital to finance the rapid expansion of its network of schools and to take advantage of new opportunities that the market currently presents, Curro has announced a renounceable rights offer whereby it will raise R348m at R6 per share during April 2012. Curro`s comprehensive results are available at www.curro.co.za. THEMBEKA CAPITAL (49%) Thembeka Capital, a BEE investment company, was previously held by Paladin Capital and is now separately reported on under PSG Group. At year end, Thembeka`s portfolio of R1.6bn consisted of investments in Capitec Bank, PSG Group, Kaap Agri, Overberg Agri, MTN Zakhele and several other unlisted investments. Thembeka`s recurring headline earnings increased by 57% to R72m for the year under review, whereas its intrinsic value (post CGT) increased by 5% to R72.92 per share since 28 February 2011. Corporate action at Thembeka included: Sold its entire interest in the JSE Ltd, realizing a profit of R261m, representing an IRR of 44%; Sold its smaller investments in IQuad, MGK and BKB, realising IRR`s of between 17% and 51%; Increased its interest in Kaap Agri from 15% to 20%; and The Thembeka Agri Fund acquired an 11% interest in NWK. Subsequent to year end, Thembeka, as the lead BEE partner in the Pioneer BEE deal, acquired a 4.4% interest in Pioneer Food Group Ltd for R514m. Thembeka`s cash contribution to this transaction was R52m, with the balance being funded by a third party. Thembeka is confident that its portfolio of investments will continue to deliver good returns over the long term. ZEDER INVESTMENTS (42.4%) Zeder is an investor in the agriculture, food, beverages and related sectors. The current value of its portfolio amounts to R3.1bn, of which its investments in Agri Voedsel Beleggings (with its interest of 31.1% in Pioneer Foods) and Capevin Holdings (with its effective interest of 14.8% in Distell) represent 62.4%. During the year under review, Zeder invested R338m to increase its interest in existing investments. Recurring headline earnings per share increased by 3.1% to 27.9 cents, and headline earnings per share by 62.3% to 30.7 cents. The significant increase in headline earnings mainly relates to the prior year impact of Pioneer Foods` Competition Commission settlement. During the year under review, Zeder`s SOTP value per share (calculated using quoted market prices) increased by 15% to R3.15. Corporate action at Zeder included: Zeder made an offer to acquire the entire issued share capital of Capespan at R2.25 per share in cash. Through the offer and market purchases, Zeder managed to increase its shareholding in Capespan from 22.7% to 40.9%; Subsequent to year-end, Zeder acquired the remaining 74.9% shareholding in Agricol for a purchase consideration of R150.4m. Zeder views its acquisition of Agricol as an important phase in its investment strategy and plans to use this vehicle to drive a South African and African expansion in the seed business; and Subsequent to year-end, Zeder acquired an interest of 81% in Chayton, a large scale commercial farming operation in Zambia. The initial investment is USD9.7m, with a further USD37m to be invested as and when acquisition opportunities have been identified by Chayton. The investment in Chayton will further contribute to Zeder`s reach and will create new opportunities for its current SA-based investments. Zeder has historically only taken non-controlling strategic stakes in businesses in its chosen sector. The acquisition of controlling interests in both Agricol and Chayton will allow Zeder to play a more active role in determining strategy and to help expand the respective businesses. Zeder is positive about the role that Africa, with its vast agricultural potential and resources, could play in addressing the growing global demand for food. Zeder`s comprehensive results are available at www.zeder.co.za. PSG CAPITAL (100%) PSG Capital is the corporate finance arm of PSG Group and provides a complete range of corporate finance and advisory services to a broad spectrum of clients. PSG Capital is a JSE-registered sponsor and designated advisor. They advise on mergers and acquisitions, fairness opinions and valuations, capital raisings and listings, JSE and regulatory advisory, private equity, BEE, management and leveraged transactions, corporate recovery & restructuring as well as debt & strategic advice. PSG Capital is the sponsor and designated advisor to 33 JSE- listed companies, and has an extensive list of unlisted clients. Since establishment in 1998, PSG Capital has advised on publicly announced transactions in excess of R73bn. PSG Capital`s services are available at www.psgcapital.com. PSG CORPORATE (100%) PSG Corporate is a profit centre. It acts as PSG Group treasurer, allocates capital and determines and monitors the group`s gearing. PSG Corporate made a recurring headline earnings contribution of R20.4m (2011: R21m) during the year under review. PROSPECTS Our focus remains on the creation of wealth for our shareholders by increasing both PSG`s SOTP value per share and recurring headline earnings. We remain committed to providing superior investment returns. REVIEWED FINANCIAL RESULTS PSG`s reviewed financial results have been released on the Securities Exchange News Services (SENS) and are also available at www.psggroup.co.za. DIVIDENDS Ordinary shares PSG Group`s policy remains to pay up to 100% of free cash flow as an ordinary dividend, of which one third is payable as an interim and the balance as a final dividend at year-end. On 1 March 2012, the directors declared a final dividend of 56 cents (2011: 47 cents) per share, which brings the total dividend for the financial year ended 29 February 2012 to 82 cents (2011: 67 cents). The final dividend was paid to shareholders on 2 April 2012. Preference shares The directors of PSG Financial Services have declared a dividend of 334.73 cents per share in respect of the cumulative, non-redeemable, non-participating preference shares ("perpetual preference shares") for the six months ended 29 February 2012, which was paid on 26 March 2012. Following the finalisation of the amendments to the Income Tax Act regarding the taxation of dividends, the directors of PSG Financial Services on 4 April 2012 announced that the dividend rate of the perpetual preference shares will be increased from 75% to 83.33% of the prime interest rate with effect from 1 April 2012. On behalf of the board Jannie Mouton Wynand Greeff Chairman Financial Director 16 April 2012 Stellenbosch Directors: JF Mouton (chairman)+, PE Burton, ZL Combi, J de V du Toit, MM du Toit, WL Greeff*, JA Holtzhausen*, MJ Jooste+, JJ Mouton+, PJ Mouton*, CA Otto, W Theron+ *Executive +Non-executive Independent non-executive Secretary: PSG Corporate Services (Pty) Ltd Registered office: 1st Floor, Ou Kollege, 35 Kerk Street, Stellenbosch, 7600; PO Box 7403, Stellenbosch, 7599 Transfer secretaries: Computershare Investor Services (Pty) Ltd 70 Marshall Street, Johannesburg, 2001; PO Box 61051, Marshalltown, 2107 Sponsor: PSG Capital Auditor: PricewaterhouseCoopers Inc. Condensed group income statement 2012 2011 R`m R`m Income Investment income (note 4) 387,9 492,2 Net fair value gains and losses on 533,7 379,4 financial instruments (note 4) Fair value adjustment to investment (624,1) (650,2) contract liabilities (note 4) Commission and other fee income 1 527,6 1 290,2 Other operating income 226,8 380,2 Total income 2 051,9 1 891,8
Expenses Insurance claims 0,3 (0,2) Operating expenses (1 456,3) (1 162,4) Total expenses (1 456,0) (1 162,6) Associated companies Share of profits of associated companies 684,1 560,9 Loss on impairment of associated companies (41,0) (36,1) Total profit related to associated 643,1 524,8 companies Results of operating activities 1 239,0 1 254,0 Finance costs (109,6) (90,7) Profit before taxation 1 129,4 1 163,3 Taxation (104,1) (131,0) Profit for the year 1 025,3 1 032,3 Attributable to: - Owners of the parent 703,0 708,4 - Non-controlling interest 322,3 323,9 1 025,3 1 032,3 Headline earnings - Attributable to owners of the parent 703,0 708,4 - Non-headline items (note 2) (135,9) (196,0) 567,1 512,4 Earnings per share (cents) - Attributable 404,4 424,1 - Headline 326,2 306,7 - Diluted attributable 400,3 420,2 - Diluted headline 322,9 303,9 - Recurring headline 308,6 241,9 Number of shares in issue (million) - In issue (net of treasury shares) 179,6 166,3 - Weighted average 173,9 167,1 - Diluted weighted average 175,6 168,6 Condensed group statement of comprehensive income 2012 2011 R`m R`m
Net income of the group 1 025,3 1 032,3 Currency translation adjustments and fair value 0,9 (0,9) gains/(losses) Share of other comprehensive income of associated (18,5) 17,0 companies Disposal of associated company`s share of other 10,1 comprehensive income Total comprehensive income 1 007,7 1 058,5 Attributable to: - Owners of the parent 685,4 722,5 - Non-controlling interest 322,3 336,0 1 007,7 1 058,5 Condensed group statement of financial position 2012 2011 R`m R`m
Assets Property, plant and equipment 654,7 410,9 Intangible assets 1 114,3 1 025,3 Investments in associated companies 6 117,6 5 212,3 Financial assets linked to investment contracts (note 9 144,7 9 112,4 4) Cash and cash equivalents linked to investment 97,2 334,6 contracts Other financial assets linked to investment contracts 9 047,5 8 777,8 Other financial assets 751,7 605,7 Deferred income tax 51,3 48,4 Receivables (note 5) 2 491,5 193,7 Current income tax 6,5 5,4 Cash and cash equivalents 628,5 796,2 Total assets 20 960,8 17 410,3 Equity Ordinary shareholders` equity 4 760,0 3 584,8 Non-controlling interest 3 187,6 3 025,8 Total equity 7 947,6 6 610,6 Liabilities Insurance liabilities 29,9 29,9 Financial liabilities under investment contracts 9 144,7 9 112,4 (note 4) Other financial liabilities 952,2 854,9 Deferred income tax 139,9 126,5 Payables and provisions (note 5) 2 729,5 663,6 Current income tax 17,0 12,4 Total liabilities 13 013,2 10 799,7
Total equity and liabilities 20 960,8 17 410,3 Net asset value per share (cents) 2 650 2 156 Net tangible asset value per share (cents) 2 030 1 539 Condensed group statement of changes in owners` 2012 2011 equity R`m R`m Ordinary shareholders` equity at beginning of year 3 584,8 2 947,0 Shares issued 576,6 Share buy-back (20,0) Net movement in treasury shares (3,4) 9,6 Share based payment costs 9,5 6,1 Transactions with non-controlling interest 33,8 2,0 Total comprehensive income 685,4 722,5 Dividends paid (126,7) (82,4) Ordinary shareholders` equity at end of year 4 760,0 3 584,8 Non-controlling interest at beginning of year 3 025,8 2 263,4 Transactions with non-controlling interests (240,3) (5,4) Acquisition of subsidiaries 4,8 39,7 Total comprehensive income 322,3 336,0 Dividends and capital distributions paid (126,5) (109,4) Shares issued 201,5 501,5 Non-controlling interest at end of year 3 187,6 3 025,8 Total equity at end of year 7 947,6 6 610,6 Dividend per share (cents) - Interim 26,0 20,0 - Final 56,0 47,0 82,0 67,0 Condensed group statement of cash flows 2012 Restated R`m 2011 R`m Cash generated by operations 576,3 569,1 Cash movement in policyholder funds (237,4) 157,8 Finance costs & taxation paid (216,0) (198,7) Net cash flow from operating activities 122,9 528,2 Net cash flow from investment activities (911,5) (213,2) Net cash flow from financing activities 291,9 335,9 Net (decrease)/increase in cash and cash equivalents (496,7) 650,9 Cash and cash equivalents at beginning of year 1 127,3 476,4 Cash and cash equivalents at end of year * 630,6 1 127,3 * Include the following: Bank overdrafts and CFD financing (95,1) (3,4) Clients` cash linked to investment contracts 97,2 334,6 Notes to the condensed financial statements 1. Basis of presentation and accounting policies The abridged financial statements have been prepared in accordance with the recognition and measurement principles of International Financial Reporting Standards ("IFRS"), including IAS 34 - Interim Financial Reporting and the AC 500 standards; the requirements of the South African Companies Act of 2008, as amended; and the Listings Requirements of the JSE Limited. The accounting policies applied in the preparation of these abridged financial statements are consistent with those used in the previous financial year and no new accounting standards, interpretations or amendments to IFRS were relevant to the group`s operations. 2. Non-headline items Net of taxation and non-controlling interest 2012 2011 R`m R`m Impairment of investments in associated companies (36,3) (28,8) Net loss on sale/dilution of investments in 0,2 subsidiaries Net profit on sale/dilution of investments in 176,5 243,3 associated companies (Loss)/Profit on sale of available-for-sale assets (1,0) 0,9 Impairment of intangible assets (incl. goodwill) (4,3) (1,4) Non-headline items of associated companies 0,7 (18,1) Other investment activities 0,1 0,1 135,9 196,0
3. Business combinations The group`s significant business combinations during the year under review were: Effective 1 May 2011 the group, through PSG Konsult, acquired the business of Pleroma Insurance Brokers at a purchase consideration of R30.7m. Goodwill of R20.7m arose on the acquisition. Profits since acquisition amounted to R3m. Effective 1 May 2011 the group, through PSG Konsult, acquired all the shares in EFS Investment Solutions at a purchase consideration of R26.9m. Goodwill of R10.9m arose on the acquisition. Profits since acquisition amounted to R7.3m. 4. Linked investment contracts These represent PSG Asset Management Administration Services (previously PSG FutureWealth) clients` assets held under investment contracts, which are linked to a corresponding liability. The condensed group income statement impact of the returns on investment contract policy holder assets and liabilities, as well as the investment income earned by the ordinary shareholders of PSG Group and its subsidiaries, were as follows: Investmen
t contract policy Equity holders holders Total
29 February 2012 Rm Rm Rm Investment income 224,0 163,9 387,9 Net fair value gains and losses on 422,9 110,8 533,7 financial instruments Fair value adjustment to investment (624,1) (624,1) contract liabilities Net investment return before taxation 22,8 274,7 297,5
28 February 2011 Investment income 365,1 127,1 492,2 Net fair value gains and losses on 296,5 82,9 379,4 financial instruments Fair value adjustment to investment (650,2) (650,2) contract liabilities Net investment return before taxation 11,4 210,0 221,4 5. Broker-and clearing accounts Included under receivables are PSG Online broker-and clearing accounts of which R2.3bn represents amounts owing by the JSE for trades in the last few days before year end. These balances fluctuate on a daily basis depending on the activity in the markets. The control account for the settlement of these transactions is included under trade and other payables, with the settlement to the clients taking place within 3 days after the transaction date. 6. Segmental reporting The group is organised into seven reportable segments, namely: Capitec, Zeder, Paladin, Thembeka Capital, Curro, PSG Konsult (including PSG Asset Management, following its amalgamation) and PSG Corporate. These segments represent the major investments of the group. The services offered by PSG Konsult consist of financial advice, stock broking and fund management, while Curro offers private education services. The other segments offer financing, banking, investing and corporate finance services. All segments predominantly operate in the Republic of South Africa. Income and intersegment income comprise total income per the condensed group income statement. Headline earnings comprise recurring and non-recurring headline earnings. Consolidated recurring headline earnings are calculated on a proportional basis, and include the proportional headline earnings of underlying investments, excluding marked-to-market adjustments and one-off items. Non- Inter- Recurri recurri Sum-of-
ng ng segme headlin headlin Headli the- nt e e ne parts Incom incom earning earning earnin value
e e s s gs 29 February 2012 Rm Rm Rm Rm Rm Rm Capitec * 182,4 362,4 362,4 5 978,3 Zeder 55,9 115,4 11,6 127,0 1 067,0 Paladin 17,2 32,0 (32,4) (0,4) 727,7 Thembeka Capital * 18,7 4,4 23,1 570,3 Curro 170,3 (5,2) (5,2) 1 118,0 PSG Konsult (incl. PSG 1 107,9 7,8 115,7 1 482,9 Asset Management) 461,3 PSG Corporate 212,4 (60,4 41,0 68,6 109,6 1 071,0 ) Net fee income ** 20,4 20,4 338,3 Unit trust, hedge fund 68,6 68,6 507,6 and share investments BEE investments 20,6 20,6 225,1 Funding 14,3 (1,5) (134,4) (29,8) (164,2 (1 ) 650,2) Other (1,3) 0,4 (0,9) (49,3) Total 2 (61,9 536,5 30,6 567,1 10 113,8 ) 315,7
Non-headline 135,9 Earnings attributable 322,3 to non-controlling interest Taxation 104,1 Profit before taxation 1 129,4
* Equity accounted ** Net fee income is after deduction of salaries, operating expenses and taxation
Non- Inter- Recurri recurri Sum-of- ng ng segme headlin headlin Headli the-
nt e e ne parts Incom incom earning earning earnin value e e s s gs 28 February 2011 Rm Rm Rm Rm Rm Rm Capitec * 22,0 223,0 223,0 5 138,4 Zeder 135,5 109,4 (33,1) 76,3 1 068,7 Paladin 332,9 36,5 (0,2) 36,3 1 242,1 Thembeka Capital * 8,5 93,6 102,1 Curro 1,9 1,9 PSG Konsult 1 93,9 6,4 100,3 1 205,5 283,7 PSG Corporate 168,1 (61,3 40,0 24,3 64,3 703,9 ) Net fee income ** 21,0 21,0 350,0 Unit trust, hedge fund (0,9) 24,3 23,4 149,4 and share investments BEE investments 19,9 19,9 204,5 Funding 17,3 (6,4) (109,1) 6,8 (102,3 (1 ) 535,4) Other 10,5 10,5 194,6 Total 1 (67,7 404,1 108,3 512,4 8 017,8 959,5 ) Non-headline 196,0 Earnings attributable 323,9 to non-controlling interest Taxation 131,0 Profit before taxation 1 163,3 * Equity accounted ** Net fee income is after deduction of salaries, operating expenses and taxation 7. Commitments and contingent liabilities 2012 2011 Rm Rm
Operating lease commitments 70,8 75,6 Other capital commitments 109,0 28,9 179,8 104,5 8. Restatement of prior year figures The net cash flows from investments in equity securities (other than those that are linked to investment contracts) have been reclassified from cash flows from operating activities in prior reporting periods to cash flows from investment activities. PSG believes that this is the more appropriate way to view such investments from a cash flow perspective and has consequently resolved to restate the prior year figures in the group statement of cash flows. The effect of the reclassification was as follows: Reported Reclassificatio Restate
n d previousl y Rm Rm Rm
Net cash flow from operating activities 564,3 (36,1) 528,2 Net cash flow from investment activities (249,3) 36,1 (213,2) 9. PSG Financial Services Ltd The company is a wholly owned subsidiary of PSG Group, except for the 13,419,479 preference shares which are listed on the JSE Limited. No separate financial statements are presented for the company as it is the only asset of PSG Group. 10. Review by auditors The company`s external auditors, PricewaterhouseCoopers Inc., have reviewed the condensed financial statements. A copy of their unmodified review opinion is available on request at the company`s registered office. Date: 16/04/2012 15:28:00 Supplied by www.sharenet.co.za Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct, indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on, information disseminated through SENS.

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