| Thu 17 Oct 2002, 17:43 | | PSG Group Limited - Interim Results for the six mo |
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PSG Group Limited
Unaudited interim results for the six months
ended 31 August 2002
Registration number 1970/008484/06)
JSE Share code: PSG
ISIN code: ZAE000013017
Special distribution of R2 per share
After the sale of PSG Investment Bank, the group will be well capitalised
without any debt
Headline earnings per share down by 8%
Net tangible asset value per share now 778 cents
Group income statements
31 Aug 31 Aug 28 Feb
2002 2001 2002
Rm Rm Rm
Income
Revenue 349,9 394,2
Cost of sales 303,5 320,2
Gross profit (Note 2) 46,4 - 74,0
Net interest income 191,6 163,6 364,1
Investment income 7,1 51,7 159,7
Other operating income 120,7 87,6 182,6
Total income 365,8 302,9 780,4
Expenses
Operating expenses 283,7 234,9 551,0
Net income from operations 82,1 68,0 229,4
Financing costs (15,5) (17,6) (20,1)
Income from associated companies 16,7 15,6 38,0
Non-headline items (Note 3) (15,7) 92,2 0,1
Net income before taxation 67,6 158,2 247,4
Taxation 25,6 9,7 (83,6)
Net income of the group 42,0 148,5 331,0
Attributable to outside 24,5 78,7 158,0
shareholders
Attributable to ordinary 17,5 69,8 173,0
shareholders
Non-headline items (Note 3) 13,1 (35,2) 2,2
Headline earnings 30,6 34,6 175,2
Earnings per share (cents)
- attributable 14,6 55,8 139,3
- headline 25,5 27,7 141,1
Dividends per share (cents)
- interim 17,0 17,0
- final 33,0
Total 17,0 50,0
Number of shares (million)
- in issue 120,0 125,0 120,0
- weighted average 120,0 125,0 124,1
Group balance sheets
31 Aug 31 Aug 28 Feb
2002 2001 2002
Rm Rm Rm
Assets
Fixed assets 313,2 96,5 293,0
Net intangible assets 102,3 98,9 100,2
Investment in associated 277,3 208,0 276,1
companies
Investments of long-term 396,5 166,9 371,6
insurance subsidiary
Other investments and non-current 139,3 155,3 130,9
assets
Deferred tax asset 268,9 121,6 271,1
Accounts receivable 257,2 153,6 248,4
Loans and advances 1 208,1 1 420,7 1 073,2
Investment and trading securities 184,4 741,5 557,2
Short-term money market assets 185,5 1 089,7 656,4
Cash and short-term funds 370,0 540,1 499,0
3 702,7 4 792,8 4 477,1
Shareholders' funds
Ordinary shareholders' funds 1 194,5 1 164,0 1 218,0
Outside shareholders' funds 773,0 816,5 910,3
1 967,5 1 980,5 2 128,3
Liabilities
Deposits and current accounts 801,6 2 210,2 1 339,3
Policyholders' funds 418,2 103,5 372,1
Long-term liabilities 75,0 100,0 119,0
Deferred tax liability 15,5 5,3 16,0
Accounts payable and other 389,5 388,1 421,2
liabilities
Short-term borrowings 35,4 5,2 81,2
1 735,2 2 812,3 2 348,8
Total shareholders' funds and 3 702,7 4 792,8 4 477,1
liabilities
Net asset value per share (cents) 995 931 1 015
Net tangible asset value per 778 793 800
share (cents)
Group cash flow statements
31 Aug 31 Aug 28 Feb
2002 2001 2002
Rm Rm Rm
Cash retained from/(used in) (55,8) (77,9) 72,8
operating activities
Cash retained from/(used in) (41,4) (194,5) (410,5)
investment activities
Cash flow attributable to 154,8 321,5 435,4
investment in short-term income
earning assets
Cash flow from financing (141,0) (21,5) (162,1)
activities
Net increase/(decrease) in cash (83,4) 27,6 (64,4)
and cash equivalents
Cash and cash equivalents at 443,0 507,4 507,4
beginning of period
Cash and cash equivalents at end 359,6 535,0 443,0
of period
Statements of changes in owners' equity
31 Aug 31 Aug 28 Feb
2002 2001 2002
Rm Rm Rm
Ordinary shareholders' funds at 1 218,0 1 140,8 1 140,8
beginning of period
Share buy back (13,0) (44,6)
Movement in non-distributabIe (1,4) 5,2 8,6
reserves
Net income for period 17,5 69,8 173,0
Distribution to shareholders (39,6) (38,8) (59,8)
Ordinary shareholders' funds at 1 194,5 1 164,0 1 218,0
end of period
Commentary
Group review
PSG Group is an investment holding company in the financial services industry
with holdings in investment banking, retail banking, life assurance, wealth and
asset management and securities trading.
During the period under review the headline earnings decreased by 12% to R30,6
million and headline earnings per share by 8% to 25,5 cents. The net asset value
per share is 995 cents per share with a net tangible asset value of 778 cents
per share.
These results were negatively influenced by the secondary banking crisis which
impacted severely on the profits of PSGIB. As announced in the press on 6 August
2002, PSG Group has entered into a disposal agreement with Absa in terms of
which PSGIB will become a wholly owned subsidiary of Absa. More details are
contained in a circular to be forwarded to shareholders shortly.
Divisional review
PSG Investment Bank Holdings Limited (60%)
The contribution to headline earnings decreased to R26,5 million which is
indicative of the difficult six months experienced by PSGIB, not only as a
result of the eroding of its business strategy but also due to the difficult
investment banking environment experienced throughout the world.
Management and the board managed to preserve and protect PSGIB's capital and the
quality of its assets.
Capitec Bank Holdings Limited (52%)
Capitec Bank published its results separately and shareholders are referred to
the profit announcement published on 18 September 2002. The contribution to
headline earnings decreased to R2,6 million. This is in line with Capitec's
budgets which provide for substantial investment at this point in its
development cycle.
Capitec is now operating as a retail bank and is still confident of the company
not only achieving its budgets but also realising its long-term growth and
profit potential.
PSG Investment Services (Pty) Limited (95%)
The increased contribution by PSGIS of some 9% to R4,7 million is in line with
its budgets. Assets under management and administration increased to R9,6
billion.
PSGIS has enjoyed significant success with the development and distribution of
its own products whilst the Online services have made significant inroads into
the market. We are confident of this company achieving its stated objectives and
budgets. Plans are afoot for PSGIS to play a leading role in the further
consolidation in this industry.
As part of the PSG Group rationalisation it was proposed to group the following
investments together which should lead to the greater exploitation of
opportunities with PSGIS, both these companies being directly involved in wealth
and asset management:
m Cubed Holdings Limited (20%)
m Cubed did not perform up to expectations during the period under review and
experienced tough trading conditions. Although the company indicated that its
profit expectations for the full financial year would be below those of the
previous year, we are satisfied with this investment for the longer term.
Appleton Limited (28%)
The position of the investment in Appleton is currently under consideration and
we hope to make an announcement in the near future regarding the future of this
investment.
Channel Life Limited (88%)
The contribution by Channel Life increased to R7,1 million which is in line with
its projections. The acquisition and further development of Channel Life Namibia
have proved to be successful whilst a significant increase in premiums has been
experienced in South Africa. The employee benefits division also achieved
critical mass and management is confident of not only achieving its budgets
during the current year but also realising its long-term objectives.
PSG Capital Limited (100%)
PSG Capital is the continued investment banking arm of PSG Group with the focus
on investment and merchant banking, proprietary investments and corporate
finance.
The sale of PSGIB to Absa has further enhanced PSG Capital's position through
the acquisition of certain identified and some other assets. These assets
include PSG's interests in Vestacor Limited, Appleton Limited, PSG Treasury
Outsourcing (Pty) Limited, PSG Trade Finance (Pty) Ltd, PSG Capital Quantitative
(Pty) Limited as well as the Corporate Finance and Investment Banking teams of
PSGIB and PSG Group.
Special dividend
In view of the sale of PSGIB, the board has resolved to proceed with a special
distribution of R2 per share payable in the next financial year. This
distribution is subject to the finalisation and final implementation of the
transaction with Absa.
In view of the special distribution no interim nor final dividend will be
declared for the year to 28 February 2003.
PSG Group expects to resume with the payment of normal interim and final
dividends in the 2003/04 financial year.
The future
With the sale of PSG lnvestment Bank, PSG Group is now less dependent on one
company and future profits should be more evenly spread over the remaining
businesses. These businesses are sufficiently diversified to provide steady
growth in the future.
Following the sale of PSGIB and the special distribution, PSG Group will be well
capitalised without any debt.
Contribution to headline earnings (Rm)
31 Aug 02 31 Aug 01
PSG Investment Bank Holdings Ltd 26,5 28,4
Capitec Bank Holdings Ltd 2,6 9,2
Channel Life Ltd 7,1 1,0
PSG Investment Services (Pty) Ltd 4,7 4,3
m Cubed Holdings Ltd 3,1 4,6
Corporate* (13,4) (12,9)
30,6 34,6
*Including financing costs of R11,5 million (2001: R12,5 million)
Notes
1. Accounting policies
The accounting policies adopted for the purpose of this report comply with South
African Statements of Generally Accepted Accounting Practice as well as with
applicable legislation. These accounting policies are also consistent with those
of the previous year.
2. Comparative figures
The amount for non-headline items in the comparative figures had been restated
from R83,7 million as published in the interim financial statements for 31
August 2001, to R35,2 million, to bring it in line with the accounting treatment
that was accepted for the year ended 28 February 2002. The adjustment which
resulted from a dilution of the group's interest in PSG Investment Bank
following the RAD transaction, was previously shown as a reduction in reserves,
but at year-end treated as an adjustment to negative goodwill on the
transaction, hence reducing the non-headline items. The comparative figures for
the year ended 28 February 2002 had also been restated to reflect the
consolidation of the investment in Fraser Alexander Holdings Limited on a line
by line basis. Gross profit in the income statements relates to this operation.
3. Non-headline items (Rm)
31 Aug 02 31 Aug 01 28 Feb 02
Negative goodwill 107,6 102,5
Goodwill amortised (22,0) (12,5) (25,7)
Goodwill impairment (52,3)
Impairment charges (23,0)
Investment activities 6,3 (2,9) (1,4)
Profit before taxation (15,7) 92,2 0,1
Outside shareholders 2,6 (57,0) (2,3)
(13,1) 35,2 (2,2)
4. Investment in associated companies (Rm)
31 Aug 02 31 Aug 01 28 Feb 02
Carrying value
- listed 260,5 194,0 243,6
- unlisted 16,8 14,0 32,5
277,3 208,0 276,1
Market and directors' valuation
- listed 156,8 212,0 198,5
- unlisted 28,0 15,2 39,2
184,8 227,2 237,7
5. Sale of PSG Investment Bank
It was announced in the press on 6 August 2002 that PSG Group would, subject to
conditions precedent, dispose of its 60% interest in PSG Investment Bank
Holdings Limited to Absa. In terms of the transaction PSGIB shareholders will
receive a distribution of 4 cents per share in cash and 87,8 million Vestacor
Limited shares (equivalent to 5,8 cents per share) as well as a cash payment by
Absa of 60 cents per share. PSG Group will acquire from PSGIB certain assets and
liabilities for R212,1 million payable in cash.
The following information pertains to the sale of PSGIB:
Assets and liabilities at 31 August 2002 Rm
Total assets 2 375,6
Total liabilities (1 029,1)
Assets to be acquired by PSG Group (212,1)
Net assets distributed and disposed of 1 134,4
Income for the six months ended 31 August 2002
Headline earnings 26,5
Non-headline earnings 3,5
Attributable earnings included in PSG Group 30,0
results
Expected loss on disposal 166,7
By order of the board
Jannie Mouton Chris Otto
Chairman Director
Stellenbosch
17 October 2002
Secretaries and registered office
PSG Corporate Services (Pty) Limited
1st Floor, Ou Kollege, 35 Kerk Street, Stellenbosch 7600
Registrars
Ultra Registrars (Pty) Limited
11 Diagonal Street, Johannesburg 2001
Directors
J F Mouton (chairman)*, C A Otto*, L van A Bellingan, P E Burton, J de V du
Toit, M J Jooste, L M Rouillard
(*Executive)
Sponsor
PSG Investment Bank
Date: 17/10/2002 05:01:00 PM Produced by the JSE SENS Department
