| Mon 10 Oct 2005, 14:00 | | PSG Group Limited/PSG Financial Services Limited |
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PSG Group Limited/PSG Financial Services Limited
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
UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 AUGUST 2005
- Headline earnings increased by 328% to 101 cents per share
- Rolling annualised ROE of 42%
- Interim dividend increased by 100% to 20 cents per share
ABRIDGED GROUP INCOME STATEMENT
Restated
31 Aug Change 31 Aug 28 Feb
2005 2004 2005
Rm % Rm Rm
Income
Net insurance income 106,5 75,9 253,7
Investment income 397,7 57,5 409,0
Operating income 201,4 203,3 393,9
Total income 705,6 109,6 336,7 1 056,6
Expenses
Net insurance claims 59,8 32,7 63,0
Operating expenses 475,3 240,0 872,5
Total expenses 535,1 96,2 272,7 935,5
Net income from operating 170,5 166,4 64,0 121,1
activities
Finance costs (35,2) (36,2) (73,1)
Share of profits of associated
companies 13,4 13,1 46,2
Net income before taxation 148,7 263,6 40,9 94,2
Taxation (42,4) (9,8) 31,0
Net income of the group 106,3 241,8 31,1 125,2
Attributable to:
Ordinary shareholders 86,6 206,0 28,3 106,3
Minority shareholders 19,7 2,8 18,9
106,3 31,1 125,2
Attributable to ordinary 86,6 28,3 106,3
shareholders
Non-headline items (note 2) 17,4 (2,4) (8,7)
Headline earnings 104,0 301,5 25,9 97,6
Earnings per share (cents)
- attributable 84,1 226,0 25,8 97,3
- headline 101,1 328,4 23,6 89,4
Dividend per share (cents)
- interim 20,0 10,0 10,0
- final 35,0
20,0 100,0 10,0 45,0
Number of shares (million)
- in issue 102,9 111,0 102,9
- weighted average 102,9 109,7 109,2
ABRIDGED GROUP BALANCE SHEETS
Restated
31 Aug 31 Aug 28 Feb
2005 2004 2005
Rm Rm Rm
Assets
Fixed assets 20,9 30,7 23,4
Intangible assets 85,8 28,6 28,4
Investments in associates 171,9 90,3 170,5
Deferred income tax 122,5 36,5 151,8
Financial instruments 5 347,3 1 748,2 2 132,0
Receivables and inventories 127,2 118,9 112,3
Cash and cash equivalents 203,2 290,0 242,3
Total assets 6 078,8 2 343,2 2 860,7
Equity
Ordinary shareholders" equity 423,6 351,8 371,0
Minority interests 272,3 48,1 251,4
Total equity 695,9 399,9 622,4
Liabilities
Insurance liabilities 113,9 207,1 140,1
Deferred income tax 70,5 1,5 65,1
Financial liabilities 4 940,0 1 544,3 1 842,2
Payables and provisions 235,1 177,9 176,1
Current income tax liabilities 23,4 12,5 14,8
Total liabilities 5 382,9 1 943,3 2 238,3
Total equity and liabilities 6 078,8 2 343,2 2 860,7
Net asset value per share (cents) 412 317 361
Net tangible asset value per share (cents) 328 291 333
RECONCILIATION OF PREVIOUS SA GAAP TO IFRS
28 Feb 31 Aug 1 Mar
2005 2004 2004
Rm Rm Rm
Balance sheet
Equity
Ordinary shareholders" equity as previously
reported - SA GAAP 404,4 390,4 335,7
Restatements for IFRS (33,4) (38,6) (30,3)
Revaluation of fixed assets 2,5 2,6 2,7
Deferred revenue in respect of investment (25,6) (25,6) (25,6)
contracts
Shares granted to employees in terms of the
share incentive trust (15,0) (12,0)
Movement in non-distributable reserves (0,5) (7,4)
Income statement restatements 4,7 (3,1)
371,0 351,8 305,4
Minority interests 251,4 48,1 21,1
Previously reported outside of equity 58,5 58,8 29,5
Share in restatements for IFRS (9,7) (8,4) (8,4)
Income statement movements 5,8 (2,3)
Preference shares of a subsidiary previously
reported as long-term liabilities 196,8
Restated equity - IFRS 622,4 399,9 326,5
Income statement
Attributable to ordinary shareholders
Net income as previously reported - SA GAAP 101,6 31,4
Restatements for IFRS 4,7 (3,1)
Additional depreciation on revaluations (0,2) (0,1)
Reversal of goodwill amortisation 21,0 12,0
Deferred revenue in respect of investment
contracts (15,3) (14,6)
Share-based payments (0,8) (0,4)
Restated net income attributable to
ordinary shareholders - IFRS 106,3 28,3
Attributable to minority shareholders
Net income as previously reported - SA GAAP 13,1 5,1
Share in restatements for IFRS 1,2 (2,3)
Reallocation of preference dividends 4,6
Restated net income attributable to
minority shareholders - IFRS 18,9 2,8
Restated net income of the group - IFRS 125,2 31,1
ABRIDGED STATEMENTS OF CHANGES IN OWNERS" EQUITY
Restated
31 Aug 31 Aug 28 Feb
2005 2004 2005
Rm Rm Rm
Ordinary shareholders" equity at
beginning of period 371,0 305,4 305,4
Shares issued 19,7
Repurchase of shares (15,5)
Net movement in treasury shares 22,4 (33,8)
Movement in non-distributable reserves 1,5 (4,3) (0,6)
Net income for period 86,6 28,3 106,3
Ordinary dividends (35,5) (10,5)
Ordinary shareholders" equity at end
of period 423,6 351,8 371,0
Minority interests 272,3 48,1 251,4
Beginning of period 48,8 21,1 21,1
Net income for period 19,7 2,8 18,9
Other movements 7,0 24,2 14,6
Preference shares of a subsidiary previously
reported as long-term liabilities 196,8 196,8
Total equity at end of period 695,9 399,9 622,4
ABRIDGED GROUP CASH FLOW STATEMENT
Restated
31 Aug 31 Aug 28 Feb
2005 2004 2005
Rm Rm Rm
Cash retained from operating
activities 273,5 534,0 971,8
Cash utilised in investment activities (205,0) (508,3) (1 061,5)
Cash flow attributable to investment
in short-term income-earning assets (196,6) (14,9) (61,0)
Cash flow from financing activities 35,1 77,5 177,2
Net increase/(decrease) in cash and
cash equivalents (93,0) 88,3 26,5
Cash and cash equivalents at beginning
of period 227,5 201,0 201,0
Cash and cash equivalents at end of
period 134,5 289,3 227,5
CONTRIBUTION TO HEADLINE EARNINGS
Restated
31 Aug 31 Aug 28 Feb
2005 2004 2005
Rm Rm Rm
Investment banking 89,4 15,8 73,6
Channel Life Limited 6,9 (4,9) 15,7
Arch Equity Limited 5,7 4,0 11,2
Corporate Finance 4,2 1,7 2,4
JSE Limited 41,1
Agri companies 10,7
Other 20,8 15,0 44,3
Wealth management 14,6 10,1 24,0
PSG Konsult Limited 5,7 3,8 9,3
PSG Fund Management 4,5 4,3 7,1
PSG Online Holdings Limited 3,6 2,0 5,1
Other 0,8 2,5
104,0 25,9 97,6
NOTES
1. Basis of presentation and accounting policies
The results for the six months ended 31 August 2005 have been prepared in terms
of International Financial Reporting Standards (IFRS) expected to be applicable
at 28 February 2006 and complies with IAS 34 - Interim Financial Reporting.
The disclosures required by IFRS 1 (First-time adoption of International
Financial Reporting Standards) concerning the transition from South African
Statements of Generally Accepted Accounting Practice (SA GAAP) to IFRS and the
required changes in accounting policies are presented under the heading -
"Reconciliation of previous SA GAAP to IFRS".
PSG Group"s transition date is 1 March 2004. At transition date IFRS 1 allows a
number of exemptions to the retrospective application principle on adoption of
IFRS.
The group has taken advantage of the following optional exemptions from full
retrospective application:
- Designation of previously recognised financial instruments. The group
reclassified various available-for-sale investments as financial assets at fair
value through profit and loss. This had no effect on net profit for the current
or prior periods.
- Property, plant and equipment. The group has elected to measure individual
items of property, plant and equipment at fair value at the date of transition
to IFRS, hence fair value is deemed to be cost at that date.
- Share-based payments. The group has elected not to apply the provisions of
IFRS 2 (Share-based payments) to shares granted before 7 November 2002 as well
as those shares granted after that date which had vested before 1 January 2005.
The following new accounting policies were applied for IFRS reporting:
- Goodwill is tested annually for impairment and carried at cost less
accumulated impairment losses.
- Share-based payments are recognised as an expense in the income statement with
a corresponding credit to a share-based payment reserve.
- Fee income relating to investment products are recognised over the period the
services are provided.
Changes to the format of the balance sheet and significant reclassifications
include the following:
- The balance sheet is presented in order of liquidity. Previously the "non-
current/current" classification was used in presenting the balance sheet.
- Cumulative, non-redeemable, non-participating preference shares issued to
external parties by a subsidiary company are reclassified as Minority interests.
These preference shares were previously reported as long-term liabilities.
- Assets relating to assurance subsidiaries are disclosed in the relevant
balance sheet line items. These assets were previously reported in a separate
asset line item.
2. Non-headline items
31 Aug 31 Aug 28 Feb
2005 2004 2005
Rm Rm Rm
(16,6) 3,1 (18,3)
Impairment of investments (18,7)
Loss on sale of subsidiary (21,8)
Other impairment charges (2,3)
Investment activities 2,1 3,1 5,8
Non-headline items of associated (0,8) 23,5
companies
Taxation (0,7) (0,5)
Attributable to minorities 4,0
(17,4) 2,4 8,7
3. Investment in associated companies
Carrying value
- listed 145,3 87,1 150,2
- unlisted 26,6 3,2 20,3
171,9 90,3 170,5
Market and directors" valuation
- listed 205,0 63,4 137,2
- unlisted 27,2 3,2 20,3
232,2 66,6 157,5
4. Commitments
Contingent liability in respect of risk
sharing 20,0 20,0 20,0
Operating lease commitments 65,7 51,5 68,7
5.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 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 2005 increased by 328% from 23,6 cents per share to 101,1 cents per
share. The Group"s rolling annualised return on equity is 42,4%.
The economic environment continued to be favourable for the Group"s operations
and the strong performance of the local equity markets had a positive impact on
the Group"s results. A substantial portion of the headline earnings for the six-
month period emanates from the equity-related businesses. These profits may not
necessarily be of a recurring nature. Most of the operating subsidiaries
performed in line with expectations or better.
It was announced in the press on 12 August 2005 that the Group sold a
controlling interest in Channel Life to Sanlam, retaining a 35% interest.
Regulatory approvals had not been obtained as at 31 August 2005 but are expected
to be finalised by November 2005.
It was also announced that the Group is in the process of raising additional
preference share capital of R190 million by means of a rights issue. The results
of this offer are expected to be announced on 17 October 2005.
REVIEW OF OPERATIONS
Investment banking
Channel Life Limited
In this review we are reporting on the Group"s 76% interest in Channel Life.
This company is currently in a major expansionist phase and posted headline
earnings of R9 million for this interim period. Recurring premiums, the
heartbeat of the business, are up 144% to R155,3 million, whilst the single
premiums are down by 80% - against the backdrop of a strong equity market and
low interest rates.
The focus remains the selling of policies in the company"s identified markets.
Management is confident that the foundation laid during the first half of the
year under review, will bear fruit over the next six to twelve months.
This strong sales performance can be attributed to the success of the multi-
distribution channel strategy, which was launched earlier in the year. The
strong foundation laid in the first half of the year is expected to result in
stronger earnings in the second half.
Arch Equity Limited (20%)
Arch Equity concluded four investments during the first six months of the year
acquiring stakes in BKB Limited (5%), Grainco (Pty) Ltd (25,1%), Indevco
Holdings (Pty) Ltd (29,4%) and Curamelior Health Risk Management (Pty) Ltd
(30%). The company also acquired a 30% stake in Orion Telecom Investment
Holdings (Pty) Ltd on 1 September 2005.
The intrinsic value of Arch Equity increased by 25% since year-end to R432
million, or 301 cents per share, and the company had R57 million (R33 million
after the Orion transaction) cash available to make further investments.
View the full results at www.archequity.co.za
Corporate finance
The Corporate Finance teams in Johannesburg and Stellenbosch performed well and
were involved in a number of significant transactions, investments and capital
raising.
Other
JSE Limited (15%)
PSG increased its investment in the JSE Limited to 15%. The board views this as
a strategic investment in the future of financial systems of South Africa.
- Agri companies
As a part of its investment strategy, PSG increased its investments in various
Agri companies throughout South Africa. We see value in the long-term future of
these Agri businesses.
- m Cubed Holdings Limited (30%)
The board of PSG Group has decided not to include any of the operational results
of m Cubed in its current year results, as the majority of m Cubed"s operating
businesses have been disposed of subject to securing shareholders and regulatory
approvals.
m Cubed is currently trading under a cautionary and shareholders are referred to
future announcements in that regard.
- Private equity
A 60% stake was acquired in Indevco Holdings (Pty) Ltd, which manages Government
imports/exports incentives on behalf of clients. The interest in PSG Trade
Finance (Pty) Ltd was reduced to 33,3% with China Construction Bank Inc.
becoming a shareholder in this company.
Wealth management
PSG Konsult Limited (80%)
PSG Konsult had a successful six months, with headline earnings increasing by
50,0% from R4,7 million to R7,1 million during the period under review.
The company is still expanding its capability and operates, after the successful
incorporation of the short-term Insurance Broking Division of Vleissentraal, via
116 branch offices with 245 financial planners and stockbrokers.
PSG Konsult has approximately 33 000 clients and in excess of R17 billion funds
under administration. PSG Konsult is expanding its recurring income and is
working towards full compliance with the Financial Services Charter.
PSG Fund Management (98%)
PSG Fund Management increased headline earnings during the period under review
by 8,5% from R4,3 million to R4,6 million. The quality of earnings however
improved substantially as 74% of income generated during the period under review
was of an annuity nature, compared to the prior financial period where a
substantial portion of profits was generated by the structured investment
division.
Total assets under administration increased by 41% to R6,5 billion, up from R4,6
billion (28 February 2005). This significant growth was due to favourable market
conditions for the equity-based unit trust funds as well as new inflows of R786
million into these funds during the period, backed by excellent performance by
the relevant asset managers.
Due to the excellent growth performance by the PSG Tanzanite Flexible Fund and
Alphen Asset Managers, both management companies made a significant contribution
to this division"s profits.
PSG Online Holdings Limited (93%)
PSG Online Holdings, which consist of the following two operating divisions, had
an exceptional six months:
- Stockbroking service provider: This business unit settled 86,067 deals during
the period under review which is 30% higher than the equivalent period last
year. This division had 21,873 BDA accounts with either cash or script and R16,5
billion in funds under administration.
- PSG online/investor education: PSG Online has capitalised on the well-known
brand in online stockbroking. Revenue increased by 67%.
PROSPECTS
The Group is actively evaluating a number of growth opportunities. Earnings will
continue to be impacted by the performance and volatility of the local equity
markets. Accordingly, growth in headline earnings per share for the full year is
unlikely to be as high as in the first six months.
DIVIDENDS
Ordinary shares
The directors of PSG Group Limited declared an interim dividend of 20 cents per
share (2004: 10 cents) in respect of the six months ended 31 August 2005.
The following are the salient dates of the payment of the ordinary dividend:
Last day to trade cum dividend Friday, 11 November 2005
Trading ex dividend commences Monday, 14 November 2005
Record date Friday, 18 November 2005
Day of payment Monday, 21 November 2005
Share certificates may not be dematerialised or rematerialised between Monday,
14 November 2005 and Friday, 18 November 2005, both days inclusive.
Preference shares
The directors of PSG Financial Services Limited declared a dividend of 4,016
cents per share in respect of the cumulative, non-redeemable, non-participating
preference shares for the six months ended 31 August 2005, which was paid on 26
September 2005.
On behalf of the board
Jannie Mouton Jaap du Toit Chris Otto
Chairman Director Director
Stellenbosch
10 October 2005
Directors: JF Mouton (chairman)*, L van A Bellingan, PE Burton, J de V du Toit*,
MJ Jooste, D Lockey, JJ Mouton, CA Otto*, BE Steinhoff (German), 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
7600
Transfer secretaries: Ultra Registrars (Pty) Limited, 11 Diagonal Street,
Johannesburg, 2001. PO Box 4844, Johannesburg 2000
Sponsor: PSG Capital Limited
Website: www.psggroup.co.za
"Man cannot discover new oceans until he has courage to lose sight of the
shore."
Anonymous
These results are also available on our website www.psggroup.co.za
Date: 10/10/2005 02:00:33 PM Produced by the JSE SENS Department
