| Mon 18 Apr 2005, 16:13 | | Year Ended 28 February 2005 |
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PSG Group Limited/ PSG Financial Services Limited - Extracts From The
Audited Financial Statements - Year Ended 28 February 2005
PSG Group Limited
Registration number 1970/008484/06 JSE share code: PSG
ISIN code: ZAE000013017
And
PSG Financial Services Limited
Registration number 1919/000478/06 JSE Share code: PGFP
ISIN code: ZAE000060166
* Base headline earnings increased by 84,7% to 88,1 cents per share
* ROE increased from 12,8% to 31,2%
* Total dividend for the year 45 cents per share
Extracts from the audited financial statements for the year ended 28
February 2005
2005 Change 2004
%
Profitability
Attributable earnings Rm 101,6 176,1 36,8
Headline earnings Rm 115,4 35,4 85,2
Attributable earnings per share Cents 90,7 175,7 32,9
Headline earnings per share Cents 103,0 35,0 76,3
Base headline earnings per share Cents 88,1 84,7 47,7
Dividend per share Cents
Normal 45
Special 100
Return on equity (ROE) % 31,2 12,8
2005 2004
Assets
Total assets Rm 3 402,5 2 384,3
Cash and cash equivalents Rm 203,4 201,0
Equity
Ordinary shareholders` funds Rm 404,4 335,7
Net asset value per share Cents 375 320
Tangible net asset value per share Cents 365 281
Share price at 28 February Cents 700 385
Market capitalisation at 28 February Rm 753,9 404,3
Number of shares - in issue m 107,7 105,0
Number of shares - weighted average m 112,0 111,7
Commentary
Review of results
On a comparable basis, base headline earnings per share for the year ended
28 February 2005 increased by 84,7% from 47,7 cents per share to 88,1
cents per share. Accordingly, the group`s return on equity during the
period under review increased from 12,8% to 31,2%.
These results were achieved in a favourable economic environment, which
provided strong growth opportunities. Local equity markets were buoyant
which had a positive impact on the group`s results.
Contribution to headline earnings
2005 2004 2003
Rm Rm Rm
Channel Life Limited 31,1 17,7 17,6
PSG Capital Limited 30,1 21,0 10,0
PSG Konsult Limited 9,0
PSG Fund Management 6,1
PSG Online Holdings Limited 5,2
Arch Equity Limited 12,6
Corporate 1 21,3 21,5 7,9
PSG Investment Services (Pty) Limited 2 6,9 2,0
Capitec Bank Holdings Limited 18,1 16,2
PSG Investment Bank Holdings limited 31,1
115,4 85,2 84,8
1 Includes contribution from m Cubed Holdings Limited and interest on
surplus cash.
2 PSG Investment Services (Pty) Limited was unbundled with effect from the
beginning of the current financial year, and PSG Konsult, PSG Fund
Management and PSG Online financial results are now reported upon
separately.
Base headline earnings
2005 2004
cps cps
Reported headline earnings 103,0 76,3
Adjusted for:
Loss of interest following payment of 200c
special dividend in March 2003 1 (1,3)
Capitec Bank unbundling 2 (16,1)
Loss of interest following payment of 100c
special dividend in May 2004 1 (1,3) (7,5)
Non-recurring deferred tax credit (13,6) (3,7)
Base headline earnings 88,1 47,7
1 Adjustment for loss of interest previously earned (after-tax rate 7,5%)
2 Adjustment for earnings contribution previously received from Capitec
Bank
Review of operations
Channel Life Limited - 80%
The company reached an important strategic objective, namely to establish
itself as a fast-growing, mid-sized life office. The company`s results may
be summarised as follows:
Headline earnings increased from R19,8 million to R38,9 million for the
year. This includes a non-recurring deferred tax credit of R9,8 million.
Without the deferred tax credit, the earnings grew by 47%. Gross premium
income grew from R822 million in the previous financial year to R1 151
million, an overall increase of 40%. The asset base reached R2,1 billion
for the year - growth of 64%.
With the company`s positioning as `smart business friends`, Channel Life
operates according to the core brand values of trust, responsibility and
freedom. The company believes that its people and brand positioning will
provide a sustainable competitive advantage in the long run.
Channel Life is leading the life industry with its BEE credentials and is
the ideal choice for businesses that seek to build their BEE scorecard
rating in terms of procurement and distribution, or for a company
requiring a BEE-compliant partner for a tender process.
Strongly committed to South Africa, CEO Ren Otto believes that Channel
Life is well on its way towards listing in 2007.
PSG Capital Limited - 100%
PSG Capital`s business consists of private equity and alternative
investments, supported by Corporate Finance teams in both Stellenbosch and
Johannesburg. The past year saw the company increasing its headline
earnings from R23,0 million to R31,8 million. This was mainly due to
favourable economic and market conditions, especially in equities. Also
included is a non-recurring deferred tax credit of R6,6 million.
The Private Equity division is now well established with interests in a
number of performing companies:
* PSG Treasury Outsourcing and PSG Trade Finance (in association with
China Construction Bank) continued to perform profitably.
* Cullinan Industrial Porcelain (manufacturing) remains a reliable source
of earnings.
* Although contributing to profits, Algoa Insurance Company (absenteeism
management and funeral insurance) had a slower than expected start in
2005.
* Axon Exchange (script lending joint venture with SocGen) is a success
story and we expect it to continue with its strong performance.
* Subsequent to year-end, PSG Capital acquired a controlling interest in
Indevco, a group of companies that provide consultancy services relating
to various incentives.
In the Alternative Investments division, the Tanzanite Capital hedge fund
was switched into a unit trust, the PSG Tanzanite Flexible Fund. This
investment once again produced attractive real returns. PSG Absolute
Investments showed positive growth over the past year and much is expected
of this investment going forward. PSG Capital Quantitative trades futures
in equities and gilts and contributed to profits.
PSG Capital`s Corporate Finance has established itself profitably in a
competitive market, executing some major mandates.
PSG Konsult Limited - 82%
Independent financial planning, investments, stockbroking, portfolio
management and short-term insurance
Positive market conditions played an important role in the company`s 57%
growth in earnings per share. Much of this can also be attributed to
strong organic growth as well as the successful integration of the PSG
Investment Services and Appleton Wealth Management businesses into that of
PSG Konsult. PSG Konsult is now one of the largest independent financial
planning and advisory businesses in South Africa, and employs 194
financial planners and stockbrokers through its 103 branch offices located
throughout the country. The company has R13,6 billion of funds under
administration.
In terms of the Financial Advisory and Intermediary Services Act, the
company`s Financial Services Board licence was awarded in December 2004.
With effect from 7 March 2005, PSG Konsult shares are available to the
public on PSG Online`s (www.psg-online.co.za) trading platform for
unlisted shares.
It is our goal to focus on the acquisition of private clients and short-
term portfolios during the year ahead.
PSG Fund Management - 98%
The PSG Fund Management business consists of the following major
components which were the drivers of the business in the past year:
* Local Collective Investments (PSG Collective Investments Limited)
* Offshore Collective Investments (Guernsey and Mauritius)
* Structured Investments
* Asset Management
The strong performance in the local equity market coupled with good
performing funds, had a positive effect on our total assets under
administration totalling R4,6 billion. Despite difficult offshore
conditions due to a strong local currency, the focus to provide solution-
based products to financial advisor channels helped us to double our local
asset base in the past financial year.
In the year ahead, we will focus our efforts in securing strategic
alliances with additional distribution channels and continue to develop
and offer unique solution-based products.
PSG Online Holdings (Pty) Limited - 94%
Stockbroking and investor education
PSG Online, the online brokerage and investor education arm of the PSG
Group, positively contributed to the group`s 2005 results. Online
concluded 147 107 transactions this financial year and grew assets under
administration by 42% to R12,8 billion. This growth increased Online`s
revenue by 20%. Online added Contracts For Differences (CFDs) to its
product range during 2005. It obtained a FASSET accreditation (SETA for
finance, accounting, management consulting and other financial services)
for its educational product. Online has aggressive plans for growth and is
committed to applying its IT expertise and creativity to secure and
elevate its position as a trusted leader in empowering its clients` wealth
creation journey.
m Cubed Holdings Limited - 28%
m Cubed performed satisfactorily during the period under review. In order
to unlock maximum value for shareholders, PSG played a strategic role in
initiating the following corporate activity that took place at m Cubed
during the year under review:
* The merger of m Cubed and Momentum domestic multimanagement asset
management businesses to form a new asset management company, Advantage
Asset Managers (Pty) Limited. In order to equalise m Cubed and Momentum`s
shareholding in the new entity, Momentum, in addition to injecting their
multimanager business into Advantage, paid R72 million in cash to m Cubed.
The conclusion of this transaction also creates a platform for an
empowerment transaction within the new asset management holding company.
* Having concluded the Advantage transaction, m Cubed distributed R100
million (13,33 cents per share) of surplus cash to shareholders.
* m Cubed disposed of its second life licence to Channel Life for R20
million.
Arch Equity Limited - 20%
BEE investments and private equity
At year-end BEE-controlled Arch Equity had investments in the following
companies: PSG Group Limited (22,6%); Capitec Bank Holdings Limited
(15,6%); Unitrans Limited (4,5% indirect); Channel Life Limited (30%, 13%
via Channel Holdco and 17% via PSG Group Limited); Big Box Containers
(Pty) Limited (30%) and comPress Publications Management (Pty) Limited
(75%).
The intrinsic value of Arch Equity increased by 107% to R345 million or
240 cents per share and the company had R66 million cash available to make
further investments. The directors have proposed a dividend of 4 cents per
share.
Another highlight was a successful listing on the JSE`s AltX on 10
December 2004. The R36 million private placement that accompanied the
listing was 70% oversubscribed.
Corporate
Management services, treasury and new ventures
The Corporate division currently consists of three business divisions:
* Management services: Responsible for overseeing and building out the
various PSG Group companies and investments on a non-executive basis.
* Treasury: Responsible for raising capital as well as managing and
allocating the group`s cash resources.
* New ventures and special projects: Development of new business lines
which complement PSG Group`s current core activities.
Prospects
PSG Group will continue to perform well in buoyant markets. Under such
circumstances the growth in base headline earnings should be positive.
Dividends
Ordinary shares
The directors of PSG Group Limited have resolved on an approximate 50% (of
base headline earnings) annual dividend and have consequently declared a
final dividend of 35 cents per share (giving a total dividend of 45 cents
per share) in respect of the year ended 28 February 2005.
The following are the salient dates for the payment of the ordinary
dividend:
Last day to trade cum dividend Friday, 1 July 2005
Trading ex dividend commences Monday, 4 July 2005
Record date Friday, 8 July 2005
Day of payment Monday, 11 July 2005
Share certificates may not be dematerialised between Monday 4 July 2005
and Friday 8 July 2005, both days inclusive.
PSG Financial Services Limited
The company is a wholly-owned subsidiary of PSG Group Limited, except for
the 200 million preference shares which are listed on the JSE Securities
Exchange South Africa. No consolidated annual financial statements 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.
The directors of PSG Financial Services Limited have declared a first
dividend of 2,305 cents per share in respect of the cumulative, non-
redeemable, non-participating preference shares for the period ended 28
February 2005.
The following are the salient dates for the payment of the preference
dividend:
Last day to trade cum dividend Friday, 3 June 2005
Trading ex dividend commences Monday, 6 June 2005
Record date Friday, 10 June 2005
Day of payment Monday, 13 June 2005
Share certificates may not be dematerialised between Monday 6 June 2005
and Friday 10 June 2005, both days inclusive.
On behalf of the board
Jannie Mouton Jaap du Toit Chris Otto
Chairman Director Director
Stellenbosch 18 April 2005
SUMMARISED AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 28 FEBRUARY
2005
Group balance sheets
2005 2004
Rm Rm
Assets
Non-current assets
Fixed assets 19,9 28,3
Net intangible assets 10,9 40,4
Investment in associated companies 168,4 67,5
Investments of assurance subsidiaries (note 4) 1 940,6 1 083,4
Linked-product investments 285,2 549,8
Other investments and non-current assets 39,2 49,1
Deferred tax asset 89,7 42,2
Current assets
Inventories 12,2 13,5
Accounts receivable 100,4 137,5
Loans and advances 20,2 20,8
Linked-product investments 326,1 48,3
Trading securities 179,4 96,7
Cash and short-term funds 210,3 206,8
3 402,5 2 384,3
Shareholders` funds
Ordinary shareholders` funds 404,4 335,7
Outside shareholders` funds 58,5 29,5
Total shareholders` funds 462,9 365,2
Liabilities
Non-current liabilities
Policyholders` contracts 1 935,7 1 082,7
- Insurance contracts 140,1 114,5
- Investment contracts 1 795,6 968,2
Linked-product liabilities 285,2 549,8
Long-term liabilities 198,7 2,5
Deferred tax liability 1,9 0,5
Current liabilities
Accounts payable and other liabilities 184,2 325,4
Linked-product liabilities 326,1 48,3
Short-term borrowings 7,8 9,9
2 939,6 2 019,1
3 402,5 2 384,3
Net asset value per share (cents) 375 320
Net tangible asset value per share (cents) 365 281
Group income statements
2005 2004
Rm Rm
Revenue 1 842,0 1 614,6
- Continuing operations 1 842,0 1 306,3
- Discontinued operations 308,3
Net interest income 11,2 316,3
Investment income 40,6 32,2
Income from assurance activities 2,7 21,5
Commission and other operating income 319,1 274,2
Gross profit from trading operations 16,2 17,9
Operating income 389,8 662,1
Expenses
Operating expenses 300,8 537,8
Goodwill amortisation 12,9 31,4
Total expenses 313,7 569,2
- Continuing operations 313,7 302,1
- Discontinued operations 267,1
Net income from operations 76,1 92,9
Financing costs (5,5) (3,7)
Income from associated companies 40,2 7,3
Exceptional items (27,0) (15,9)
Net income before taxation 83,8 80,6
- Continuing operations 83,8 50,9
- Discontinued operations 29,7
Taxation (30,9) 23,3
- Continuing operations
Attributable to own shareholders (5,7) 8,8
Attributable to policyholders (25,2)
- Discontinued operations 14,5
Net income of the group 114,7 57,3
Attributable to outside shareholders 13,1 20,5
Attributable to ordinary shareholders 101,6 36,8
Attributable to ordinary shareholders 101,6 36,8
Non-headline items (note 3) 13,8 48,4
Headline earnings 115,4 85,2
Earnings per share (cents)
- attributable 90,7 32,9
- headline 103,0 76,3
Distribution per share (cents)
Normal dividend
- interim 10,0
- final 35,0
Special distribution 100,0
Number of shares (million)
- in issue 107,7 105,0
- weighted average 112,0 111,7
Statements of changes in owners`equity
2005 2004
Rm Rm
Ordinary shareholders` funds at beginning of period 335,7 993,1
Shares issued 19,7
Shares bought back and cancelled (15,5) (17,7)
Treasury shares acquired (53,2) (31,2)
Treasury shares sold 31,2
Surplus on realisation of treasury shares 3,2
Capitec unbundling (260,1)
Movement in non-distributable reserves (7,3) (1,7)
Net income for the period 101,6 36,8
Normal dividends (11,0) (23,1)
Distribution to shareholders (355,0)
Adoption of AC 133 (11,4)
Fair value adjustment AC 133 6,0
Ordinary shareholders` funds at end of period 404,4 335,7
Group cash flow statements
2005 2004
Rm Rm
Cash retained from operating activities 971,8 421,3
Cash utilised in investment activities (1085,6 (314,1)
)
Cash flow attributable to investment in short-term
income-earning assets (61,0) (5,9)
Cash flow from financing activities 177,2 (123,6)
Net increase/(decrease) in cash and cash equivalents 2,4 (22,3)
Cash and cash equivalents at beginning of period 201,0 223,3
Cash and cash equivalents at end of period 203,4 201,0
NOTES
1. PSG Financial Services Limited
The company is a wholly-owned subsidiary of PSG Group Limited, except for
the 200 million preference shares which are listed on the JSE Securities
Exchange of South Africa. No consolidated annual financial statements 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.
2. 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 policies are consistent with those
of the previous year, except for the adoption of the new accounting
statement AC 501, Accounting for Secondary Tax on Companies (STC), with
effect from 1 March 2004. As required by this new statement, a deferred
tax asset is recognised for unused STC credits to the extent that it is
probable that the group will utilise the credits to reduce its STC
liability in future. No deferred tax asset was previously recognised on
unused STC credits. The impact of adopting AC 501 is as follows:
2005 2004
Rm Rm
Income statement
Reduction in taxation and increase in earnings 7,4 4,1
Balance sheet
Increase in retained earnings and increase in
deferred tax asset 11,5 4,1
Comparative amounts have been restated accordingly.
Certain comparative figures have also been regrouped to give more
meaningful disclosure. On the balance sheet, components of the linked-
product investments and the linked-product liabilities, amounting to R48,3
million, previously disclosed under non-current are now disclosed as
current. On the income statement income from associates is now disclosed
net of taxation; previously taxation related to income from associates of
R3,8 million was included in the taxation line.
3. Non-headline items
2005 2004
Rm Rm
Exceptional items 27,0 15,9
Loss on discontinuance 8,6
Goodwill impairment 6,8
Other impairment charges 11,0 (0,7)
Loss on sale of subsidiary 21,8
Investment activities (5,8) 1,2
Goodwill amortisation 12,9 31,4
Non-headline items of associated companies (22,0) 1,2
17,9 48,5
Taxation 0,5 0,6
18,4 49,1
Attributable to outside shareholders (4,6) (0,7)
13,8 48,4
4. Investment in associated companies
2005 2004
Rm Rm
Carrying value
-listed 148,1 65,1
-unlisted 20,3 2,4
168,4 67,5
Market and directors` valuation
-listed 137,2 59,4
-unlisted 20,3 4,2
157,5 63,6
5.Discontinued operations
The discontinued operations relate to the unbundling of the investment in
Capitec Bank Holdings Limited to shareholders.
6. Commitments
2005 2004
Rm Rm
Contingent liabilities in respect of risk sharing 20,0 20,0
Operating lease commitments 68,7 59,5
7. Audit of results
The unmodified audit reports from PricewaterhouseCoopers Inc on the annual
financial statements for the year ended 28 February 2005 and the
summarised financial results contained herein are available for inspection
at the registered office of the company.
Directors: JF Mouton (chairman)*, L van A Bellingan, PE Burton,
J de V du Toit*, MJ Jooste, D Lockey, CA Otto*, Dr J van Zyl Smit
* Executive
Secretaries and registered office: PSG Corporate Services (Pty) Limited,
1st Floor, Ou Kollege, 35 Kerk Street, Stellenbosch, 7600
(PO Box 7403, Stellenbosch, 7599)
Registrars: Ultra Registrars (Pty) Limited, 11 Diagonal Street,
Johannesburg, 2001 (PO Box 4844, Johannesburg, 2000)
Sponsor: PSG Capital Limited
Annual general meeting: 24 June 2005
Website: www.psggroup.co.za
