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JSE PSG PGFP
PGFP PSG
PSG / PGFP - PSG GROUP / PSG Financial Services - Unaudited results for the six
months ended 31 august 2007
PSG GROUP LIMITED
Incorporated in the Republic of South Africa
Registration number 1970/008484/06
JSE share code: PSG & ISIN: ZAE000013017
("PSG Group")
and
PSG Financial Services Limited
Registration number 1919/000478/06
JSE share code: PGFP & ISIN: ZAE000096079
UNAUDITED RESULTS FOR THE SIX MONTHS ENDED 31 AUGUST 2007
- Recurring headline earnings increased by 71.7% to 78.1 cents per share
- Headline earnings decreased by 24.4% to 185.4 cents per share
- Interim dividend increased by 25% to 32.5 cents per share
- Net asset value increased by 42.2% to 1 832 cents per share
CONDENSED GROUP INCOME STATEMENTS
31 Aug Change 31 Aug 28 Feb
2007 2006 2007
Rm % Rm Rm
Income
Investment income and net fair 420.8 37.2 306.8 811.1
value gains on financial
instruments
Commission and other fee 380.5 54.6 246.1 594.7
income
Sales from non-financial 836.9
operations (note 3)
Other operating income 38.7 (8.9) 42.5 57.2
Total income 1,676.9 595.4 1,463.0
Expenses
Operating and other expenses 408.6 222.9 563.7
Cost of sales of non-financial 751.7
operations (note 3)
Total expenses 1,160.3 222.9 563.7
Net income from operating 516.6 38.7 372.5 899.3
activities
Finance costs (25.2) (8.2) (40.2)
Share of profits of associated 97.3 (2.7) 124.8
companies
Net income before taxation 588.7 62.8 361.6 983.9
Taxation (113.8) (70.6) (147.6)
Net income of the group 474.9 63.2 291.0 836.3
Attributable to:
Minority interests 172.6 38.7 144.3
Equity holders of the company 302.3 252.3 692.0
474.9 291.0 836.3
Attributable to equity holders 302.3 19.8 252.3 692.0
of the company
Non-headline items (note 4) (10.1) 10.5 (40.6)
Headline earnings 292.2 11.2 262.8 651.4
Earnings per share (cents)
- attributable 191.8 (18.6) 235.6 551.7
- headline 185.4 (24.4) 245.4 519.3
- diluted attributable 188.9 (17.4) 228.8 538.8
- diluted headline 182.6 (23.4) 238.3 507.1
Dividend per share (cents)
- interim 32.5 26.0 26.0
- final 64.0
32.5 25.0 26.0 90.0
Number of shares (million)
- in issue (net of treasury 169.4 132.8 149.8
shares)
- weighted average 157.6 107.1 125.4
CONDENSED GROUP BALANCE SHEETS
31 Aug 31 Aug 28 Feb
2007 2006 2007
Rm Rm Rm
Assets
Property, plant and equipment 44.0 16.7 40.1
Intangible assets 667.9 556.6 648.9
Investments in associated 2,817.8 918.5 1,104.9
companies (note 5)
Financial assets 1,547.7 1,472.9 1,756.0
Deferred income tax 14.3 21.9 34.1
Receivables and inventories 443.2 102.4 493.4
Cash and cash equivalents 657.6 76.2 1,340.8
Total assets 6,192.5 3,165.2 5,418.2
Equity
Ordinary shareholders` equity 3,103.2 1,710.5 2,373.0
Minority interests 1,866.2 701.2 1,692.6
Total equity 4,969.4 2,411.7 4,065.6
Liabilities
Financial liabilities 572.6 353.5 693.6
Deferred income tax 130.0 88.0 112.6
Payables and provisions 389.0 244.7 457.4
Current income tax liabilities 131.5 67.3 89.0
Total liabilities 1,223.1 753.5 1,352.6
Total equity and liabilities 6,192.5 3,165.2 5,418.2
Net asset value per share 1 832 1 288 1 585
(cents)
Net tangible asset value per share 1 438 869 1 151
(cents)
CONDENSED STATEMENTS OF CHANGES IN OWNERS` EQUITY
31 Aug 31 Aug 28 Feb
2007 2006 2007
Rm Rm Rm
Ordinary shareholders` equity at 2,373.0 719.3 719.3
beginning of period
Shares issued 551.2 1,030.2 1,352.3
Repurchase of shares (288.6) (289.4)
Net movement in treasury shares (28.5) 4.1 (58.9)
Movement in non - 3.8 48.1 3.5
distributablreserves
Revaluation of associated company 46.8
Net income for period 302.3 252.3 692.0
Ordinary dividend paid (98.6) (54.9) (92.6)
Ordinary shareholders` equity at 3,103.2 1,710.5 2,373.0
end of the period
Minority interests 1,866.2 701.2 1,692.6
Beginning of period 1,692.6 548.7 548.7
Net income for period 172.6 38.7 144.3
Net movement on 18.3 129.7
acquisition/disposal of
subsidiaries
Capital reduction by subsidiary (6.6) (4.2)
Additional contributions 32.4 19.9 833.8
Other movements 0.3
Issue of preference shares by a 94.8 94.8
subsidiary
Preference dividend paid (24.8) (19.2) (54.8)
Total equity end of period 4,969.4 2,411.7 4,065.6
CONDENSED GROUP CASH FLOW STATEMENTS
31 Aug 31 Aug 28 Feb
2007 2006 2007
Rm Rm Rm
Cash generated by operations 148.1 99.0 302.4
Net change in financial (250.1) (6.7) (184.8)
instruments
Net cash flow from operating (102.0) 92.3 117.6
activities
Net cash flow from investment (382.6) (319.7) (328.7)
activities
Net cash flow from financing (157.4) 69.7 1,259.8
activities
Net (decrease)/increase in cash (642.0) (157.7) 1,048.7
and cash equivalents
Cash and cash equivalents at 967.1 (81.6) (81.6)
beginning of period
Cash and cash equivalents at end 325.1 (239.3) 967.1
of period*
* Include bank overdrafts and CFD 332.5 315.5 373.7
financing facilities of
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.
PSG Konsult, PSG Online and PSG Fund Management make up the financial
advice and fund management segment and mainly provide investment support
and advice to third parties.
The financing and banking segment consists of Capitec Bank Holdings
Limited and Quince Capital Holdings Limited. 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 period ended Segment Segment Segment Segment
31 August 2007 revenue result assets liabilities
Rm Rm Rm Rm
Private equity and 1,273.0 406.4 3,515.8 567.4
corporate finance
Financial advice and 403.9 110.2 1,175.2 524.2
fund management
Financing and banking1 1,501.5
1,676.9 516.6 6,192.5 1,091.6
1 This segment`s equity accounted earnings amounted to R38,9 million for
the period ended 31 August 2007.
For the period ended Segment Segment Segment Segment
31 August 2006 revenue result assets liabilities
Rm Rm Rm Rm
Private equity and 340.7 305.9 1,883.1 297.3
corporate finance
Financial advice and 254.7 66.6 710.8 388.9
fund management
Financing and banking2 571.3
595.4 372.5 3,165.2 686.2
2 This segment`s equity accounted earnings amounted to R2,0 million for
the period ended 31 August 2006.
For the year ended Segment Segment Segment Segment
28 February 2007 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 636.5 165.5 1,187.7 778.3
fund management
Financing and banking3 607.3
1,463.0 899.3 5,418.2 1,263.6
3 This segment`s equity accounted earnings amounted to R19,1 million for
the year ended 28 February 2007.
CONTRIBUTION TO HEADLINE EARNINGS
Numb
er
Headline earnings of Net assets
shar
es
31 Aug 31 Aug 28 Feb 31 31 Aug 31 Aug 28 Feb
Aug
2007 2006 2007 2007 2007 2006 2007
Rm Rm Rm m Rm Rm Rm
Recurring 123.2 48.8 147.9 2,601.2 1,070.4 1,926.
headline 1
earnings
Capitec Bank 26.8 2.0 19.1 28.6 1,175.6 571.3 607.3
PSG Konsult 29.4 22.4 46.5 531. 283.1 125.6 282.7
7
PSG Fund 10.5 6.6 15.3 54.8 48.6 43.8
Management
Channel Life 2.7 0.5 7.0 110. 126.6 73.2 117.7
5
Quince 9.7 325.9
Capital
Paladin 23.7 22.3 42.0 197.6 58.1 157.6
Capital and
other private
equity
Zeder
Investments
and agri
investments
Dividends and 7.5 3.2 10.1 202. 277.5
equity 6
accounted
earnings
Management 7.0 4.7
fee earned by
PSG
PSG Corporate 160.1 193.6 717.0
Services
Dividends 2.4 0.3 3.6
from
investments
BEE funding 16.3 0.4 19.9
Net operating (12.8) (8.9) (20.3)
costs
Non-recurring 195.7 227.6 562.1 1,274.0 1,249.6 1,256.
headline 0
earnings
Marked-to-
market
profits/(loss
es)
Quince 2.4
Capital
Paladin 27.9 20.2 63.2 241.9 166.9 210.1
Capital
(Thembeka)
Zeder 52.6 (17.5) 40.2 244.6 395.2 468.6
Investments
and agri
investments
PSG Corporate
Services
JSE Ltd 2.3 227.9 425.4 416.7 164.1
Other 110.5 16.0 52.3 737.4 199.4 363.1
investments
Other
m Cubed (19.0) (19.0) 218. 50.1 71.4 50.1
Holdings 0
Perpetual (27.4) (22.6) (47.3) (792.3) (647.2) (828.6
prefs and )
borrowings
Interest rate 17.6 10.1 (5.0) 12.7 10.1 (5.0)
hedge
Secondary tax (16.9) (1.1) (6.3) 7.6 27.6 24.5
on companies
Total 292.2 262.8 651.4 3,103.2 1,710.5 2,373. Ord
headline 0 s/holde
earnings rs`
equity
Statistics
Recurring 78.1 45.5 117.9
HEPS (cents)
Growth in 152.5%
recurring
headline
earnings
Growth in 71.7%
recurring
HEPS
NOTES
1.Basis of presentation and accounting policies
The condensed interim consolidated financial statements are prepared in
accordance with IAS 34 - Interim Financial Reporting and the accounting
policies conform to IFRS. The accounting policies applied in the
preparation of the interim consolidated financial statements are
consistent with the policies in the previous year.
2.Recurring Headline Earnings
We have previously reported on base headline earnings in order to
indicate our focus on annuity income. This concept has now been improved
and simplified to recurring headline earnings as shown in the
Contribution to Headline Earnings table.
3. Non-financial operations
The sales and cost of sales figures from non-financial operations relates
to CIC Holdings Limited, a company which operates in the FMCG sector in
Southern Africa. PSG Group Limited, through Paladin Capital Limited,
holds a 58.2% interest in this company.
4.Non-headline items
31 Aug 31 Aug 28 Feb
2007 2006 2007
Rm Rm Rm
6.0 (9.3) 13.5
Impairment of investments (21.2) (21.2)
Net profit on sale of subsidiaries and 7.4 28.1
minority interests
Net profit on sale of associated companies 5.4 4.5 4.6
Investment activities 0.6 2.0
Non-headline items of associated companies 6.2 24.6
Profit/(loss) before taxation 12.2 (9.3) 38.1
Taxation (0.8) (1.2) 3.7
Profit/(loss) after taxation 11.4 (10.5) 41.8
Attributable to minorities (1.3) (1.2)
10.1 (10.5) 40.6
5.Investments in associated companies
31 Aug 31 Aug 28 Feb
2007 2006 2007
Rm Rm Rm
Carrying value
-listed 1,070.8 408.1 470.8
-unlisted 1,747.0 510.4 634.1
2,817.8 918.5 1,104.9
Market and directors` valuation
-listed 1,162.5 488.9 612.2
-unlisted 1,915.0 627.7 832.7
3,077.5 1,116.6 1,444.9
6.Commitments
31 Aug 31 Aug 28 Feb
2007 2006 2007
Rm Rm Rm
Contingent liability in respect of risk 15.0
sharing
Operating lease commitments 141.5 22.1 24.6
7. PSG Financial Services Limited
The company is a wholly-owned subsidiary of PSG Group Limited, except for
the 5.5 million preference shares which are listed on the JSE Limited. No
consolidated interim results are presented for the company as the
relevant information for the company and PSG Group Limited is identical,
the company being the only asset of PSG Group Limited.
COMMENTARY
REVIEW OF RESULTS
On a comparable basis, headline earnings per share for the six months ended 31
August 2007 decreased by 24.4% from 245.4 cents per share to 185.4 cents per
share. This decrease was anticipated and communicated and follows the
realization of PSG`s interest in the JSE Limited. Recurring headline earnings
per share (as set out in the Contribution to Headline Earnings table) increased
by 71.7% from 45.5 cents per share to 78.1 cents per share.
The increase in PSG`s recurring headline earnings base is testimony to the
success of Project Growth, with the Group becoming less sensitive to volatile
equity markets.
Our subsidiaries and associated companies are all well established and operate
as profitable independent units. They provide the Group with a diversified
exposure to the South African economy which we believe will continue to
experience strong growth.
CORPORATE ACTION
Increase of shareholding in Capitec Bank Holdings Limited
Effective June 2007, PSG obtained SARB approval to and increased its
shareholding in Capitec Bank Holdings from 18,3% to 34,9% through a share swap
whereby 1,4545 PSG shares were issued for every Capitec share held. PSG
acquired 13.5 million shares in Capitec and issued 19.7 million new PSG shares
for a total consideration of R552 million. Capitec is PSG`s largest investment.
Acquisition of Alternative Channel Limited
Subject to approval by the necessary regulatory agencies, PSG has acquired 80%
in Alternative Channel, an insurance company that offers linked investment
products. Management will own the other 20%. The company will expand the
services currently offered by the PSG Wealth Cluster.
REVIEW OF OPERATIONS
Capitec Bank Holdings Limited (34.9%)
Capitec`s results for the 6 months ended 31 August 2007 were published on 27
September 2007 and are available on the company`s website at www.capitec.co.za.
Capitec increased its headline earnings per share by 15% and delivered a return
on equity of 21%.
PSG Konsult Limited (73.6%)
Following the integration of businesses acquired during 2006, headline earnings
increased by 108,6 % to R39,9 million during the period under review.
Funds under administration increased to R50 billion (Aug 2006: R23 billion) and
PSG Konsult now has 452 (Aug 2006: 397) financial planners and stock brokers
operating from 183 (Aug 2006: 168) offices throughout Southern Africa.
PSG Konsult is in the process of establishing an office in London and has
recently acquired a small financial services company in the United Kingdom.
Together with our recently launched offshore stockbroking capabilities we can
now offer an international service to our clients.
PSG Konsult`s results announcement for the period ended 31 August 2007 is
available on its website at www.psgkonsult.co.za.
PSG Fund Management Holdings (Pty) Limited (96.9%)
PSG Fund Management`s assets under administration increased to R19 billion
including assets under management of R13,4 billion, a 10,4% and 14,4% increase
respectively in the past 6 months. Net fund inflows for the period under review
amounted to R1,7 billion.
The increase in assets, coupled with contained overhead costs, resulted in the
company increasing its headline earnings by 60% to R10,8 million for the 6
months ended 31 August 2007.
Channel Life Limited (34.4%)
Channel Life continued its growth in new business over the 6 months until 30
June 2007, with the broker business performing well. Profit after tax for the
period to June 2007 was R22,3 million, whilst headline earnings was R8
million.
Modest profit growth is expected over the shorter term whilst the marketing
drive continues.
Quince Capital Holdings Limited (39.7%)
Quince Capital, the niche financing joint venture with Reunert, was launched on
2 May 2007, with PSG equity accounting its results as from that date having
obtained a 39.7% interest for R315 million. The Nashua financing book has
subsequently grown to R1.6bn and is in the final stages of being securitized.
The acquisition of ZS Rational (property bridging finance) is awaiting
Competition Commission approval.
Paladin Capital Limited (90.3%)
The headline earnings of Paladin has increased significantly as the performance
of all the investee companies in the portfolio was above expectation with an
exceptional performance from Thembeka Capital, a BEE controlled investment
holding company, largely due to non-recurring marked-to-market profits. Thembeka
Capital raised additional "black" capital through a successful public offering.
It remains the single largest black shareholder in the JSE Limited.
During the period under review, Paladin acquired a 25.1% stake in Mainfin, a
niche property finance house, and invested additional capital in Precrete Nozala
for a total consideration of R56 million. Paladin has acquired a 40% interest
in GRW Holdings, a specialist tank container manufacturer, subsequent to 31
August 2007.
Zeder Investments Limited (35.5%)
Zeder increased its investment portfolio by 49% to R1 153 million since 28
February 2007. It also achieved its stated objective to equity account, inter
alia, its investments in Kaap Agri Limited and KWV Limited. The carrying value
of Zeder`s investments in associated companies amounted to R782,7 million as at
31 August 2007. Zeder`s net profit after tax of R162,6 million for the
reporting period increased by 19% compared to the 6 months ended 28 February
2007.
Zeder`s detailed results announcement for the period ended 31 August 2007 is
available on its website at www.zeder.co.za.
PSG Corporate Services
The appreciation of the Petmin (11.5% stake) and Datapro (now Vox Telecom) (3.7%
stake) share prices and the interest rate hedge contributed to the marked-to-
market profits in the past financial period. PSG earned market related returns
from the remainder of its strategic and non-strategic investments.
m Cubed Holdings Limited (30%)
This investment is still carried at 23 cents per share. The Board does not
consider any impairment necessary.
PREFERENCE SHARE FUNDING
On 30 July 2007 PSG Financial Services Limited consolidated its cumulative,
non-redeemable, variable rate, non-participating preference shares on a 1
for 100 basis in order to provide the shareholders with a more meaningful and
accurate share price at which to trade.
PROSPECTS
As a result of current financial market conditions. PSG has decided to put its
prospective listing on the London Stock Exchange main board temporarily on hold.
The Project Growth initiative has delivered promising results which we shall
continue to pursue in order to further grow the Group and strengthen its
recurring income base. Marked-to-market profits will always be volatile and
dependent on market conditions.
Our primary goal remains the creation of shareholders` wealth. We remain
confident that we shall continue to deliver on this.
DIVIDENDS
Ordinary shares
The directors of PSG Group Limited have resolved on a 25% increase in the
interim dividend and have consequently declared a dividend of 32.5 cents per
share (2006: 26 cents) in respect of the six months ended 31 August 2007.
The following are the salient dates for the payment of the ordinary dividend:
Last day to trade cum dividend Friday, 26 October 2007
Trading ex dividend commences Monday, 29 October 2007
Record date Friday, 2 November 2007
Day of payment Monday, 5 November 2007
Share certificates may not be dematerialised or rematerialised between Monday,
29 October 2007, and Friday, 2 November 2007, both days inclusive.
Preference shares
The directors of PSG Financial Services Limited declared a dividend of 482,9
cents per share in respect of the cumulative, non-redeemable, variable rate.
non-
participating preference shares for the six months ended 31 August 2007, which
was paid on 1 October 2007.
On behalf of the board
Jannie Mouton Chris Otto
Chairman Director
Stellenbosch
8 October 2007
Directors
JF Mouton (chairman)*, L van A Bellingan, PE Burton, J de V du Toit, MJ Jooste,
JJ Mouton, CA Otto*, P Malan, BE Steinhoff (German), W Theron, Dr J Van Zyl
Smit, Dr CH Wiese
*Executive Independent
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 are also available on our website at www.psggroup.co.za
Date: 08/10/2007 16:28:33 Produced by the JSE SENS Department.
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