| Tue 17 Apr 2007, 16:07 | | PGFP / PSG - PSG Group Limited / PSG Financial Ser |
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JSE PSG PGFP
PGFP PSG
PGFP / PSG - PSG Group Limited / PSG Financial Services - Reviewed Results For
The Year Ended 28 February 2007 and dividend declaration
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: ZAE000060166
REVIEWED RESULTS FOR THE YEAR ENDED 28 FEBRUARY 2007
- Headline earnings increased by 47,6% to 519,3 cents per share
- Base headline earnings increased by 49,7% to 192 cents per share
- Net asset value increased by 125,1% to 1585 cents per share
- Dividend for the year increased by 33,3% to 90 cents per share
Condensed Group Income Statements
28 Feb Change 28 Feb
2007 2006
Rm % Rm
Income
Net insurance income 14,4 272,8
Investment income 119,3 51,3
Fair value gains and losses on financial
instruments 691,8 904,3
Commission and other fee income 594,7 494,0
Other operating income 42,8 140,8
Total income 1 463,0 (21,5) 1 863,2
Expenses
Net insurance claims 2,8 152,3
Fair value adjustments to investment
contract liabilities 499,7
Operating expenses 560,9 700,6
Total expenses 563,7 (58,3) 1 352,6
Net income from operating activities 899,3 76,1 510,6
Finance costs (40,2) (11,0)
Share of profits of associated
companies 124,8 57,5
Net income before taxation 983,9 76,6 557,1
Taxation (147,6) (87,6)
Net income of the group 836,3 78,1 469,5
Attributable to:
Minority interests 144,3 60,4
Equity holders of the company 692,0 69,2 409,1
836,3 469,5
Attributable to equity holders of the
company 692,0 409,1
Non-headline items (note 2) (40,6) (50,7)
Headline earnings 651,4 81,7 358,4
Earnings per share (cents)
- attributable 551,7 37,4 401,5
- headline 519,3 47,6 351,8
- diluted attributable 538,8 38,5 388,9
- diluted headline 507,1 48,8 340,7
Dividend per share (cents)
- interim 26,0 20,0
- final 64,0 47,5
90,0 33,3 67,5
Number of shares (million)
- in issue (net of treasury shares) 149,8 102,2
- weighted average 125,4 101,9
- diluted weighted average 128,4 105,2
Condensed Group Balance Sheets
28 Feb 28 Feb
2007 2006
Rm Rm
Assets
Property, plant and equipment 40,1 18,6
Intangible assets 648,9 116,9
Investments in associated companies (note 3) 1 104,9 323,2
Financial assets 1 756,0 1 035,3
Deferred income tax 34,1
Receivables and inventories 493,4 117,1
Cash and cash equivalents 1 340,8 222,2
Total assets 5 418,2 1 833,3
Equity
Ordinary shareholders` equity 2 373,0 719,3
Minority interests 1 692,6 548,7
Total equity 4 065,6 1 268,0
Liabilities
Insurance liabilities 1,6 4,4
Financial liabilities 693,6 328,5
Deferred income tax 112,6 19,5
Payables and provisions 455,8 182,8
Current income tax liabilities 89,0 30,1
Total liabilities 1 352,6 565,3
Total equity and liabilities 5 418,2 1 833,3
Net asset value per share (cents) 1 585 704
Net tangible asset value per share (cents) 1 151 589
Condensed Group Cash Flow Statements
28 Feb 28 Feb
2007 2006
Rm Rm
Cash generated by operations 299,6 304,8
Net change in financial instruments (203,7) (601,8)
Net cash flow from operating activities 95,9 (297,0)
Net cash flow from investment activities (328,7) (222,4)
Net cash flow from financing activities 1 259,8 184,9
Net increase/(decrease) in cash and cash 1 027,0 (334,5)
equivalents
Cash and cash equivalents at beginning of (81,6) 252,9
period
Cash and cash equivalents at end of period* 945,4 (81,6)
*
Include bank overdrafts and CFD financing
facilities of 395,4 303,8
Condensed Statements of changes in equity
28 Feb 28 Feb
2007 2006
Rm Rm
Ordinary shareholders` equity at beginning
of period 719,3 361,6
Shares issued (*) 1 352,2
Repurchase of shares (289,4)
Net movement in treasury shares (59,0) 1,3
Movement in other reserves 3,6 3,3
Net income for period 692,0 409,1
Dividends paid (92,6) (56,0)
Revaluation of associated company 46,9
Ordinary shareholders` equity at end of 2 373,0 719,3
period
Minority interests 1 692,6 548,7
Beginning of period 548,7 246,6
Net income for the period 144,3 60,4
Dividends and capital distributions paid (59,0) (17,7)
Capital contributions by minority 833,9
shareholders
Acquisition/disposal of subsidiaries 129,7
Other movements 0,2 14,7
Preference shares issued by a subsidiary 94,8 244,7
Total equity at end of period 4 065,6 1 268,0
(*) Arch Equity share swap, rights issue and other specific issues
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 Limited. The accounting policies used in
the preparation of the condensed financial statements are
consistent with those used in the annual financial statements.
2. Non-headline items
28 Feb 28 Feb
2007 2006
Rm Rm
13,5 49,0
Impairment of investment in associated
company (21,2) (12,6)
Net profit on sale of subsidiaries and
minority interests 28,1 59,8
Net profit on sale of associated companies 4,6
Investment activities 2,0 1,8
Non-headline items of associated companies 24,6 4,6
Profit before taxation 38,1 53,6
Taxation 3,7 (1,5)
Profit after taxation 41,8 52,1
Attributable to minorities (1,2) (1,4)
40,6 50,7
3. Investments in associated companies
Carrying value
- listed 470,8 204,2
- unlisted 634,1 119,0
1 104,9 323,2
Market and directors` valuation
- listed 612,2 372,8
- unlisted 832,7 184,0
1 444,9 556,8
4. Commitments
Contingent liability in respect of risk 20,0
sharing
Operating lease commitments 24,6 54,1
Capital 227,0
5. PSG Financial Services Limited
The company is a wholly owned subsidiary of PSG Group Limited,
except for the 550 million preference shares which are listed on
the JSE Limited (2006: 458,9 million). The separate condensed
financial statements of the company are not presented as it is the
only asset of PSG Group Limited.
6. 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
28 Feb 28 Feb
2007 2006
Rm Rm
Thembeka Capital, private equity and Capitec
Bank Holdings Limited 142,9 77,2
PSG Konsult Limited 46,5 23,7
PSG Fund Management Holdings (Pty) Limited 15,3 10,6
Channel Life Limited 7,0 16,6
Agri investments 50,3 98,1
m Cubed Holdings Limited (19,0)
JSE Limited 425,4 118,0
PSG Corporate Services 30,2 36,0
Perpetual preference dividends (47,2) (21,8)
Total headline earnings 651,4 358,4
Commentary
Review of results
PSG achieved its highest profit ever with headline earnings of R651,4 million
and attributable profit of R692 million. Headline earnings per share for the
year ended 28 February 2007 increased by 47,6% from 351,8 cents per share to
519,3 cents per share. Attributable earnings increased by 37,4% to 551,7 cents
per share. Our internally calculated base headline earnings increased by 49,7%
from 128,3 cents per share to 192 cents per share.
The positive economic climate continued to be favourable for the Group`s
business, and the strong performance of the local equity markets once again had
a positive impact on the Group`s results. A substantial portion of the headline
earnings for the year emanated from investments, predominantly from PSG`s
investment in JSE Limited ("JSE"). The majority of the operating subsidiary and
associated companies exceeded expectations.
The past year saw a hive of corporate activity, including the following:
- The merger with Arch Equity Limited, with PSG obtaining a 20% direct
interest in Capitec Bank Holdings Limited. We retain a 49,9% in BEE company,
Thembeka Capital (Pty) Limited, formerly known as Arch Equity Investment
Holdings. This transaction was effected by means of a share swap;
- PSG Group Limited successfully raising R269 million through a rights issue
and private placement;
- The establishment and subsequent listing of Zeder Investments Limited
through the transfer of PSG`s agri investments;
- The formation of Paladin Capital Limited, the Group`s private equity
company; and
- The merger of PSG Konsult and PSG Online together with the acquisition of
Multinet, Topexec and Advance Wealth.
Investments
PSG Konsult Limited - 74%
The Company`s turnover increased by 92% to R466,3 million. Headline earnings
increased by 182% to R46,3 million whereas headline earnings per share increased
by 86% to 8,2 cents.
- Funds under administration and management increased to R42 billion and
short-term premiums collected to R820 million on an annualised basis.
- The PSG Konsult academy was established in association with the Business
School of the University of Stellenbosch. The initiative is recognised across
the industry and in its first year the academy trained 583 students.
- In addition, PSG Konsult Trust was established in March 2007, to provide
trust and fiduciary services to our client base.
- At year-end PSG Konsult had 179 (2006: 122) offices with 431 (2006: 274)
financial planners, stockbrokers and short-term insurance brokers. Our
professional associates (accountants and attorneys) have increased to 306 (2006:
286).
- PSG Online was the first online stockbroker in South Africa and currently
has assets in custody of more than R25 billion.
PSG Fund Management Holdings (Pty) Limited - 97,3%
Headline earnings increased by 46% to R15,7 million. Total assets under
management increased by 40% to R11,3 billion and assets under administration
increased to R17,3 billion, up from R10,7 billion, a 62% increase.
The various asset managers performed well with the PSG Alphen Growth Fund
maintaining its five-year top performance. PSG Tanzanite Flexible Fund also
achieved the second highest Sharpe Ratio (out of 347 funds) over the past
calendar year. The hedge funds initiative is gaining momentum with the Black
Swan Fund delivering outstanding returns in its first year.
The funds are well supported by PSG Group with over R400 million invested.
Capitec Bank Holdings Limited - 18,3%
Capitec`s headline earnings increased by 28% to R160 million. Its headline
earnings per share increased by 35% to 222 cents. Capitec also concluded a
specific issue of 10 million ordinary shares to a BEE consortium in February
2007, which saw PSG`s shareholding being diluted to 18,3%.
Capitec focuses on accessible and affordable banking and increased its client
base in excess of 1 million persons. The number of savings accounts increased by
43% to 583 000.
The company currently has 280 branches, 2 129 employees and more than 400 ATMs.
Capitec intends to increase its distribution network to 345 branches and 700
ATMs in the coming year.
Channel Life Limited - 34,4%
Channel Life changed its year-end to 31 December to coincide with that of
majority shareholder Sanlam. As a result, PSG equity accounted Channel Life`s
results for the 10-month period 1 March to 31 December 2006.
Channel Life`s comparable year-on-year headline earnings as at 31 December 2006
increased by 44% to R36 million.
The growth that commenced in 2005, continued in 2006 - with the annual premium
equivalent increasing by 104% to R265 million, new business embedded value
growing by 95% to R37 million, whilst embedded value increased by 132% to R466
million.
Zeder Investments Limited - 35,8%
PSG transferred its agricultural investments to Zeder on 1 September 2006 in
exchange for shares in Zeder. Thereafter, Zeder completed a private placement,
raising R698 million. It also exchanged Zeder shares for investments in various
agri companies. Zeder listed on the JSE Main Board on 1 December 2006.
Its investment portfolio increased by 122% to R776,3 million since 1 September
2006. The company reported headline earnings of R136,5 million for the six
months to 28 February 2007.
Zeder`s profitability depends on dividend income emanating from its investments
as well as the positive market movements in this portfolio. Having regard to the
quality of the portfolio and depending on the markets, this portfolio should
experience modest growth.
Paladin Capital Limited - 97,5%
Paladin is PSG`s private equity investment company with an unlisted bias. On 1
November 2006 the private equity investments previously held by PSG Group were
transferred to Paladin. As at 28 February 2007, the portfolio consisted of the
following investments: Thembeka (49,9%), Algoa Insurance (54%), CIC (46,8%),
Axon (35,7%), Dynarc Properties (30,1%), Iquad (47,3%), Precrete (39,1%) and PSG
Corporate Finance (60%).
- The performance of the investee companies in the portfolio was above
expectation, with an exceptional performance by Thembeka Capital (Pty) Limited,
our BEE investment. Paladin`s headline earnings for the four months amounted to
R51,8 million.
- Thembeka changed its management during the period under review.
Mr KK Combi was appointed as executive chairman and has since added significant
impetus to the company. As a fully compliant broad-based BEE company (with 50,1%
in BEE hands) we are seeing a number of transactions being offered to Thembeka.
With the Codes now being legislated, we see Thembeka as a major participant in
future empowerment transactions.
Thembeka`s investment portfolio consists, inter alia, of: Capitec (4%), Datapro
(2,5%), PSG Group (2,5%), Grainco (25,1%), Unitrans (4,5%), GRW (25,1%), JSE
(4,2%), Compress (75%), Master Currency (11%), and Value Furnishers (85%).
m Cubed Holdings Limited - 30%
Due to the uncertainty of the outcome of a dispute arising from the settlement
with a Regulator, as well as additional tax assessments issued by SARS, we have
again assessed the value of our investment in m Cubed (currently 23 cents per
share). With the information at our disposal, we have decided not to impair the
investment any further.
As a result of the executive malfeasance at m Cubed, PSG, with the m Cubed
board, remains committed to resolve the outstanding matters to the benefit of
all m Cubed`s shareholders. PSG took the initiative to support the appointment
of experienced actuary Leon de Wit as acting Managing Director of m Cubed Life
Limited. In addition, PSG directors, staff members and independent legal
advisors continue to devote a significant amount of time and resources to sort
out the problems and challenges faced by m Cubed.
Equity investments
Petmin Limited (11%)
Petmin remains our only direct exposure to natural resources. The company
continues to render solid results from its silica and anthracite mining
operations. Its recent increase in mining capacity should contribute to earnings
growth.
Datapro Group Limited (4%)
In February 2007, PSG acquired its interest at 112 cents per share in Datapro.
The company acquired Orion Telecom, a leading least-cost service provider in
which Thembeka had a 30% interest. It is also an established first-tier internet
service provider that focuses on the corporate market where its profitability is
largely derived from annuity-based income that generates positive cash flows.
The group also provides Voice-Over-Internet-Protocol ("VOIP") services.
JSE Limited
The investment in JSE contributed significantly to PSG`s earnings over the past
years.
The strategic objective was always to increase PSG`s direct interest in JSE to
20% and obtain JSE board representation. This would have offered us significant
influence in JSE. It would also have enabled PSG to equity account JSE`s
earnings, which would have strengthened PSG`s annuity income base. The Financial
Services Board, however, turned down our application to increase our
shareholding beyond 15% and we were unsuccessful in obtaining a position of
significant influence and appoint a PSG representative as a director. With no
likelihood of this situation changing in future, we decided to realise our 15%
(4% post year-end) interest in JSE Limited at best to pursue other strategic
investment options.
PROSPECTS
A result of Project Growth is that our operating entities (producing a larger
measure of annuity income) are now well established: wealth management cluster
(PSG Konsult, PSG Online, PSG Fund Management); retail banking (Capitec Bank);
life insurance (Channel Life, with Sanlam); unlisted agri companies (Zeder
Investments); private equity and corporate finance (Paladin Capital) and the
newly formed asset-based financing company, Quince Capital.
Depending on a growing South African economy, these businesses all expect real
growth for this financial year.
PSG Corporate Services allocates and invests the Group`s capital. The direct
longer-term listed equity investments have been scaled down with a fair amount
of liquidity being part of current strategy. The past year`s earnings are not
expected to be repeated.
Dividends
Ordinary shares
The directors of PSG Group Limited have resolved on a 33,3% increase in the
annual dividend and have consequently declared a final dividend of 64 cents per
share, being a total dividend of 90 cents per share in respect of the year ended
28 February 2007.
The following are the salient dates for the payment of the ordinary dividend:
Last day to trade cum dividend Friday, 4 May 2007
Trading ex dividend commences Monday, 7 May 2007
Record date Friday, 11 May 2007
Day of payment Monday, 14 May 2007
Share certificates may not be dematerialised or rematerialised between Monday, 7
May 2007, and Friday, 11 May 2007, both days inclusive.
Preference shares
The directors of PSG Financial Services Limited have declared a dividend of
4,505 cents per share in respect of the cumulative, non-redeemable, variable
rate, non-participating preference shares for the six months ended 28 February
2007, which was paid on 26 March 2007.
Changes in secondary tax on companies and taxation of dividends
The management of PSG Financial Services Limited shall study the impact of the
proposed changes to legislation once available. A decision on the effect on the
preference dividend rate will only be taken once clarity and a tax opinion by
the auditors of the company on the impact thereof has been obtained. An
announcement will be made to preference shareholders once this determination has
been finalised after consultation with the board of directors.
On behalf of the board.
Jannie Mouton Chris Otto
Chairman Director
Stellenbosch 17 April 2007
Directors: JF Mouton (chairman)*, L van A Bellingan^, PE Burton^, J de V du
Toit**, MJ Jooste^, JJ Mouton, CA Otto* (alternate: P Malan), BE Steinhoff^
(German), W Theron, Dr J van Zyl Smit^
* Executive; ^ Independent; ** Executive until 28 February 2007; non-executive
as from 1 March 2007
Secretaries and registered office: PSG Corporate Services (Pty) Limited
1st Floor, Ou Kollege, 35 Kerk Street, Stellenbosch, 7600
PO Box 7403, Stellenbosch, 7599
Transfer secretaries: Link Market Services South Africa (Pty) Limited
11 Diagonal Street, Johannesburg, 2001
PO Box 4844, Johannesburg, 2000
Sponsor: PSG Capital (Pty) Limited
These results will also be available on our website at
www.psggroup.co.za
Date: 17/04/2007 16:07:23 Produced by the JSE SENS Department.
