| Mon 9 Oct 2006, 16:19 | | PSG - Unaudited interim results for the six months |
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PSG PGFP
PSG PGFP
PSG - Unaudited interim results for the six months ended 31 August 2006
PSG Group Limited
Registration number 1970/008484/06
JSE share code: PSG
ISIN code: ZAE000013017
and
PSG Financial Services
Registration number 1919/000478/06
JSE share code: PGFP
ISIN code: ZAE000060166
Unaudited interim results for the six months ended 31 August 2006
Headline earnings increased by 142,7% to 245,4 cents per share
Base headline earnings increased by 140% to 98,2 cents per share
Net asset value increased by 212,6% to 1288 cents per share
Interim dividend increased by 30% to 26 cents per share
Condensed group income statements
31 Aug Change 31 Aug 28 Feb
2006 2005 2006
Rm % Rm Rm
Income
Net insurance income 6,5 106,5 272,8
Investment income 28,2 115,1 51,3
Fair value gains and losses on financial 278,6 282,6 904,3
instruments
Commission and other fee income 246,1 167,4 494,0
Other operating income 36,0 34,0 140,8
Total income 595,4 (15,6) 705,6 1 863,2
Expenses
Net insurance claims 2,4 59,8 152,3
Fair value adjustments to investment 175,6 499,7
contract liabilities
Operating expenses 220,5 299,7 700,6
Total expenses 222,9 (58,3) 535,1 1 352,6
Net income from operating activities 372,5 118,5 170,5 510,6
Finance costs (8,2) (35,2) (11,0)
Share of profits of associated companies (2,7) 13,4 57,5
Net income before taxation 361,6 143,2 148,7 557,1
Taxation (70,6) (42,4) (87,6)
Net income of the group 291,0 173,8 106,3 469,5
Attributable to:
Minority interests 38,7 96,4 19,7 60,4
Equity holders of the company 252,3 86,6 409,1
291,0 173,8 106,3 469,5
Attributable to equity holders of the 252,3 86,6 409,1
company
Non-headline items (note 2) 10,5 17,4 (50,7)
Headline earnings 262,8 152,7 104,0 358,4
Earnings per share (cents)
- attributable 235,6 180,1 84,1 401,5
- headline 245,4 142,7 101,1 351,8
Dividend per share (cents)
- interim 26,0 20,0 20,0
- final 47,5
26,0 30,0 20,0 67,5
Number of shares (million)
- in issue (net of treasury shares) 132,8 102,9 102,2
- weighted average 107,1 102,9 101,9
Condensed group balance sheets
31 Aug 31 Aug 28 Feb
2006 2005 2006
Rm Rm Rm
Assets
Property, plant and equipment 16,7 20,9 18,6
Intangible assets 556,6 85,8 116,9
Investments in associated companies (note 918,5 171,9 323,2
3)
Financial assets 1 472,9 5 347,3 1 035,3
Deferred income tax 21,9 122,5
Receivables and inventories 102,4 127,2 117,1
Cash and cash equivalents 76,2 203,2 222,2
Total assets 3 165,2 6 078,8 1 833,3
Equity
Ordinary shareholders" equity 1 710,5 423,6 719,3
Minority interests 701,2 272,3 548,7
Preference shares 550,0 200,0 455,2
Other 151,2 72,3 93,5
Total equity 2 411,7 695,9 1 268,0
Liabilities
Insurance liabilities 4,1 113,9 4,4
Financial liabilities 353,5 4 940,0 328,5
Deferred income tax 88,0 70,5 19,5
Payables and provisions 240,6 235,1 182,8
Current income tax liabilities 67,3 23,4 30,1
Total liabilities 753,5 5 382,9 565,3
Total equity and liabilities 3 165,2 6 078,8 1 833,3
Net asset value per share (cents) 1 288 412 704
Net tangible asset value per share 869 328 589
(cents)
Condensed statement of changes in owners" equity
31 Aug 31 Aug 28 Feb
2006 2005 2006
Rm Rm Rm
Ordinary shareholders" equity at 719,3 361,6 361,6
beginning of period
Shares issued 1 030,2
Repurchase of shares (288,6)
Net movement in treasury shares 4,1
1,3
Movement in other reserves 48,1 10,9 3,3
Net income for period 252,3 86,6 409,1
Ordinary dividend paid (54,9) (35,5) (56,0)
Ordinary shareholders" equity at end of 1 710,5 423,6 719,3
the period
Minority interests 701,2 272,3 548,7
Beginning of period 548,7 246,6 246,6
Net income for period 38,7 19,7 60,4
Net movement on acquisition/disposal of 18,3
subsidiaries
Additional contributions 19,9
Other movements 6,0 14,7
Issue of preference shares by a 94,8 244,7
subsidiary
Preference dividend paid (19,2) (17,7)
Total equity at end of period
2 411,7 695,9 1 268,0
Condensed group cash flow statements
31 Aug 31 Aug 28 Feb
2006 2005 2006
Rm Rm Rm
Cash generated by operations 99,0 309,0 304,8
Net change in financial instruments (6,7) (222,0) (601,8)
Net cash flow from operating activities 92,3 87,0 (297,0)
Net cash flow from investment activities (319,7) (205,0) (222,4)
Net cash flow from financing activities 69,7 (0,4) 184,9
Net decrease in cash and cash equivalents (157,7) (118,4) (334,5)
Cash and cash equivalents at beginning of (81,6) 252,9 252,9
period*
Cash and cash equivalents at end of (239,3) 134,5 (81,6)
period*
*Include bank overdrafts and CFD (315,5) (68,7) (303,8)
financing of
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. Non-headline items
31 Aug 31 Aug 28 Feb
2006 2005 2006
Rm Rm Rm
(9,3) (16,6) 49,0
Impairment of investment in associated (21,2) (18,7) (12,6)
company
Net profit on sale of subsidiaries 7,4 59,8
Net profit on sale of associated 4,5
companies
Investment activities 2,1 1,8
Non-headline items of associated (0,8) 4,6
companies
Profit/(loss) before taxation (9,3) (17,4) 53,6
Taxation (1,2) (1,5)
Profit/(loss) after taxation (10,5) (17,4) 52,1
Attributable to minorities (1,4)
(10,5) (17,4) 50,7
3. Investment in associated companies
Carrying value
- listed 408,1 145,3 204,2
- unlisted 510,4 26,6 119,0
918,5 171,9 323,2
Market and directors" valuation
- listed 488,9 205,0 372,8
- unlisted 627,7 27,2 184,0
1 116,6 232,2 556,8
4. Commitments
Contingent liability in respect of risk 15,0 20,0 20,0
sharing
Operating lease commitments 22,1 65,7 54,1
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.
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.
Contribution to headline earnings
31 Aug 31 Aug 28 Feb
2006 2005 2006
Rm Rm Rm
Arch Equity Ltd and BEE financing 29,4 14,6 60,6
Capitec Bank Holdings Ltd 2,0
Channel Life Ltd 0,5 6,9 16,6
PSG Capital 8,9 7,3 12,9
JSE Ltd 227,9 44,6 118,0
Agri companies and Pioneer Food Group Ltd (14,3) 14,4 98,1
Petmin Ltd 2,7 6,1 24,8
m Cubed Holdings Ltd (19,0)
PSG Konsult Ltd 14,6 5,7 13,3
PSG Fund Management Holdings (Pty) Ltd 6,6 4,5 10,6
PSG Online Holdings (Pty) Ltd 6,7 3,6 7,1
Crest SA Holdings (Pty) Ltd 1,1 0,8 3,3
PSG corporate office 18,2 3,5 14,9
Perpetual preference dividends (22,5) (8,0) (21,8)
Total headline earnings 262,8 104,0 358,4
Base headline earnings (cps)
Six months
31 Aug 31 Aug 28 Feb
2006 2005 2006 Notes
Headline earnings per share (cents) 245,4 101,1 351,8
Adjusted for:
m Cubed loss 17,7 A
Strategic investments (164,9) (60,2) (223,5)
Dividends (4,6) (1,4) (4,8) B
Unrealised/Realised surplus on (197,3) (61,9) (231,6) C
investments
Long-term investment return 37,0 3,1 12,9 D
Base headline earnings per share (cents) 98,2 40,9 128,3
Notes
A m Cubed"s equity accounted loss for the financial year ended 28 February 2006
B All dividends received from strategic investments
C All unrealised/realised surplus on strategic investments
D The aforementioned surplus is substituted by a deemed 15% return on strategic
investments
Commentary
Review of results
On a comparable basis, headline earnings per share for the six months ended 31
August 2006 increased by 142,7% from 101,1 cents per share to 245,4 cents per
share. Base headline earnings per share equated to 98,2 cents per share which is
140% higher than the 40,9 cents per share for the six months ended 31 August
2005. Attributable earnings per share increased by 180,1% to 235,6 cents per
share.
PSG/ARCH Equity merger
The merger between PSG Group and Arch Equity Limited ("Arch Equity") was
successfully implemented in August 2006 through a net share swap of 24 million
PSG shares. Arch Equity is now a wholly owned subsidiary of PSG with a 20%
interest in Capitec Bank Holdings Limited ("Capitec") and a 49,9% interest in
BEE company, Arch Equity Investment Holdings (Pty) Ltd. Intangible assets in the
amount of R287 million were recognised with the acquisition of Arch Equity.
Rights issue
PSG has decided to raise additional permanent capital as part of its overall
capital management programme in the form of a partially underwritten rights
offer in respect of 12 696 447 PSG ordinary shares at an issue price of 1700
cents per share in the ratio of 1 rights offer share for every 12 ordinary
shares held as at the close of business on 6 October 2006. A circular containing
full detail in this respect will be posted to shareholders on 9 October 2006.
Zeder Investments Limited ("Zeder")
Zeder is PSG"s recently established agri-related services and investment
company. PSG transferred most of its various agricultural investments, including
KWV and Pioneer Food Group, to Zeder subsequent to 31 August 2006 with a view to
listing it on the JSE in early December 2006. Zeder recently undertook a private
placing raising new capital of R700 million, reducing PSG"s interest to 35,1%.
Added to the initial investments the asset base now exceeds R1,1 billion.
Niche financing initiative
As was recently announced in the press, PSG Group is joining forces with Reunert
Limited ("Reunert") in the establishment of a niche financing company. Initially
the major asset of the new initiative would be the growing R1,3 billion Nashua
financing book of Reunert. PSG Group will invest R308 million in the new company
equating to a shareholding of 40%.
Review of operations
Arch Equity Investment Holdings (Pty) Limited ("BEE Company") (49,9%)
The BEE Company is a black-owned and controlled investment company. Its BEE
status has been verified by the DTI, Empowerdex and an independent law firm.
Following the merger of Arch Equity and PSG Group in August 2006, PSG Group now
holds a direct interest of 49,9% in the BEE Company.
Operationally most of the BEE Company"s underlying investments, including the
JSE and Orion Telecom, performed well. During this period the BEE Company
purchased a 25,1% stake in GRW Engineering (Pty) Ltd and was awarded an option
to acquire 230 614 JSE Limited shares at R4,81 per share in terms of the JSE
BBBEE Initiative.
Capitec Bank Holdings Limited (20%)
PSG acquired a 20% stake in Capitec through its merger with Arch Equity in
August 2006. Capitec recently reported a 78% increase in headline earnings for
the six months ended 31 August 2006. Its results are now equity accounted by
PSG.
Channel Life Limited (36%)
Channel Life"s six-month period to 30 June 2006 in terms of new business
written, has been excellent, showing 117% growth in recurring premiums, 228%
growth in single premiums and a 264% increase in group premiums. The asset base
increased by 45% to R6,2 billion.
Because of a change in Channel Life"s year-end from February to December, only
four of the months - March 2006 to June 2006 - are being reported on in this PSG
Group announcement. Channel Life"s reported earnings for this shortened period
(R1,5 million) is therefore, as a result of timing differences coupled with the
company"s year-end change, not a fair reflection of the results expected for the
full year. Earnings growth in excess of 20% is expected for the full year to
December 2006.
PSG Capital (100%)
PSG Capital houses our private equity portfolio and corporate finance team.
During the past six months a number of strategic investments, including 30% in
Dynarc Properties and 39% in Precrete Nozala, a supplier to the platinum mines,
were made.
JSE Limited (15%)
The main board listing of this company in June 2006 has seen an improvement in
the liquidity of its share and a significant surge in the share price. PSG
remains the single largest shareholder in the JSE.
Petmin Limited (11,5%)
Petmin is a listed BEE mining company which owns and manages the largest silica
mining company as well as two anthracite mining companies in South Africa. The
company continued to contribute positively to PSG"s earnings during the period
under review.
m Cubed Holdings Limited (30%)
As m Cubed was trading under cautionary during the time of PSG"s audited 28
February 2006 results announcement and because of the dispute with a Regulatory
authority at the time, PSG was prudent not to include any of its operational
results for that period. However, m Cubed"s results have subsequently been
published, reflecting a headline loss of R64,3 million for the year ended 28
February 2006. Consequently PSG has now accounted for its 30% interest in same
during the six months ended 31 August 2006. In addition, PSG has impaired its
investment in m Cubed to reflect the current market value.
PSG Konsult Limited (75%)
Over the past six months PSG Konsult has continued to concentrate its efforts on
those areas which it believes to be critical in building a profitable and
sustainable business. Following the successful merger and integration of
Multinet and Topexec, headline earnings increased by 169% to R19,1 million
during the period under review. Intangible assets of R199 million were
recognised on acquisition of these companies.
Funds under administration increased to R23 billion (Aug 2005: R17 billion) and
PSG Konsult now has 397 (Aug 2005: 245) financial planners and stock brokers
operating from 168 (Aug 2005: 116) offices throughout Southern Africa.
PSG Konsult has acquired Advance Wealth Management for R96,8 million with effect
from 1 October 2006, pending the approval by the Competition Commission.
PSG Fund Management Holdings (Pty) Limited (97%)
The company had a profitable six months with headline earnings of R6,8 million
(up by 46%), backed by positive market sentiment and continued consistent fund
performance.
PSG Fund Management now manages and administers R13,3 billion assets, up from
R10,8 billion, a 24% increase since 1 March 2006.
The focused marketing and sales efforts backed by strategic asset managers
(Alphen Asset Management, PSG Tanzanite and PSG Absolute Investments) ensured
continued good inflows.
PSG Online Holdings (Pty) Limited (92%)
PSG Online had a profitable six months. Funds under administration increased by
57% to R23,9 billion. Deals settled increased by 35% to 116 304. Revenue
increased by 74%. PSG Online is and remains a strong brand in stockbroking.
PSG corporate office
PSG corporate office manages the group. The profit represents fees and
investment income generated less all running and administration costs. Included
is an interest rate hedge of R440 million for 10 years as protection against the
group"s variable rate funding structure.
Preference share funding
PSG Financial Services Limited has raised an additional R94,8 million through
the issue of 91,1 million cumulative, non-redeemable, variable rate, non-
participating preference shares ("perpetual preference shares") to fund
opportunities in the six months since year-end. The total perpetual preference
share capital in issue amounts to R550 million.
Prospects
The Group remains committed to its Project Growth strategy and is consistently
evaluating opportunities to strengthen its annuity earnings base. As PSG"s
earnings will continue to be impacted by the performance of the local equity
markets, it is unlikely that the growth in headline earnings for the first six
months will be repeated in the second half of the financial year.
Dividends
Ordinary shares
The directors of PSG Group Limited have declared an interim dividend of 26 cents
per share (2005: 20 cents) in respect of the six months ended 31 August 2006.
The following are the salient dates for the payment of the ordinary dividend:
Last day to trade cum dividend Friday, 10 November 2006
Trading ex dividend commences Monday, 13 November 2006
Record date Friday, 17 November 2006
Day of payment Monday, 20 November 2006
Share certificates may not be dematerialised or rematerialised between Monday 13
November 2006 and Friday 17 November 2006, both days inclusive.
Preference shares
The directors of PSG Financial Services Limited declared a dividend of 4,085
cents per share in respect of the cumulative, non-redeemable, non-participating
preference shares for the six months ended 31 August 2006, which was paid on 2
October 2006.
On behalf of the board
Jannie Mouton
Chairman
Jaap du Toit
Director
Chris Otto
Director
Stellenbosch
9 October 2006
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
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 Limited
These results are available on our website www.psggroup.co.za
Date: 09/10/2006 04:19:13 PM Produced by the JSE SENS Department
