Reviewed results for the year ended 28 February 2014
 
 
PSG Group Limited
 
Incorporated in the Republic of South Africa
 
Registration number: 1970/008484/06
 
JSE Ltd (“JSE”) share code: PSG
 
ISIN number: ZAE000013017
 
(“PSG Group” or “PSG” or “the company” or “the group”)
 
 
PSG Financial Services Limited
 
Incorporated in the Republic of South Africa
 
Registration number: 1919/000478/06
 
JSE share code: PGFP
 
ISIN number: ZAE000096079
 
(“PSG Financial Services”)
 
 
REVIEWED RESULTS FOR THE YEAR ENDED 28 FEBRUARY 2014
 
 
• Sum-of-the-parts value per share increased by 31% year-on-year
 
• Recurring headline earnings increased by 14% to 446,9 cents per share
 
• Dividend for the year increased by 20% to 133 cents per share
 
• Sum-of-the-parts value of R106,42 per share as at 11 April 2014
 
 
COMMENTARY
 
 
OUR BUSINESS
 
 
PSG is an investment holding company consisting of underlying investments that operate across a diverse range of industries
 
including financial services, banking, private equity, agriculture and education. PSG’s market capitalisation (net of
 
treasury shares) is approximately R18,6bn, with its largest investment a 28,3% interest in Capitec.
 
 
OUR OBJECTIVE
 
 
Our objective remains to continuously create wealth for all shareholders through share price appreciation and the payment of
 
dividends.
 
 
STRATEGY ­ PROJECT INTERNAL FOCUS
 
 
In April last year, PSG introduced its latest strategy, Project Internal Focus, to the market. PSG’s investment portfolio
 
contains a healthy balance between established and start-up businesses, all of which offer attractive growth potential. The
 
majority of PSG’s most significant successes has been businesses that were either started by, or in conjunction with, PSG.
 
Capitec, PSG Konsult and Zeder are all examples of same. In order to extract maximum value, we formalised Project Internal
 
Focus, a strategy whereby our focus is primarily directed at the optimisation, refinement and growth of PSG’s existing
 
investment portfolio.
 
 
Capitec is a good example of an established business that requires limited attention from PSG management. It has achieved
 
much success to date with exponential growth in headline earnings per share since establishment in 2001. Capitec continues to
 
provide PSG with a solid earnings base to leverage. Investments in the development phase on the other hand, such as Curro and
 
Chayton, require more active strategic input from PSG. These companies are likely to experience new business strain while
 
expanding, and are anticipated to only start making a meaningful contribution to PSG’s earnings in later years. This has a
 
negative impact on PSG’s earnings and dividend growth in the short to medium term as the cost of funding associated with the
 
investment exceeds the investment yield achieved from an earnings and cash flow perspective.
 
 
Project Internal Focus in action
 
 
The drive to revisit and, if necessary, reformulate the business strategy of each investment throughout the group, is showing
 
promise. Every underlying business has now compiled a revised strategic plan for the next few years, and the appointed
 
successor CEOs at some of our larger investments have already made a positive contribution towards the future success of
 
those businesses.
 
 
PERFORMANCE
 
 
We believe that performance should be measured on the return that an investor receives over time, with a specific focus on per
 
share wealth creation.
 
 
When evaluating PSG’s performance over the long term, one should focus on the total return index (“TRI”) as measurement tool.
 
The TRI is the compound annual growth rate (“CAGR”) of an investment, and is calculated by taking cognisance of share price
 
appreciation, dividend and other distributions. This is a sound measure of wealth creation and a reliable method to benchmark
 
different companies. PSG’s TRI as at 28 February 2014 was 50,1% per annum, measured over the 18-year period since PSG's
 
establishment in November 1995. We are proud of this achievement.
 
 
When evaluating PSG’s performance over the short to medium term, we focus on the growth in PSG’s sum-of-the-parts (“SOTP”)
 
value per share and recurring headline earnings per share. History confirms that PSG’s share price tracks its SOTP value per
 
share. Positive growth in PSG’s SOTP value per share thus inevitably results in share price appreciation. However, an increase
 
in PSG’s SOTP value per share over time will ultimately depend on sustained growth in the profitability of its underlying
 
investments. PSG consequently introduced the recurring headline earnings per share concept to provide management and
 
investors with a more realistic and transparent way of evaluating PSG’s performance from an earnings perspective.
 
 
RESULTS
 
 
PSG had a satisfactory year to 28 February 2014, both from a growth in SOTP value and recurring headline earnings per share
 
perspective.
 
 
SOTP
 
 
The calculation of the SOTP value is simple and requires limited subjectivity as 83% of the value is calculated using listed
 
and over-the-counter traded share prices, while other investments are included at market-related valuations. At 28 February
 
2014, the SOTP value per PSG share was R95,01 (2013: R72,67) ­ a 27% CAGR over the last three years. At 11 April 2014, the
 
SOTP value was R106,42 per share.
 
 
28 Feb 29 Feb 28 Feb 28 Feb
 
2011 2012 2013 2014 % of
 
Asset/Liability Rm Rm Rm Rm total
 
 
Capitec* 5 138 5 978 6 128 5 989 30
 
Curro* 1 118 2 607 4 660 23
 
PSG Konsult** 1 206 1 483 2 237 4 004 20
 
Zeder* 1 069 1 067 1 412 1 698 8
 
PSG Private Equity*** 1 242 728 681 949 5
 
Thembeka Capital*** 570 899 1 243 6
 
PSG Corporate (including PSG Capital)**** 350 338 383 383 2
 
Other investments (including cash)**** 548 684 1 505 1 122 6
 
Total assets 9 553 11 966 15 852 20 048 100
 
Perpetual pref funding* (1 028) (1 188) (1 163) (1 393)
 
Other debt**** (507) (463) (845) (615)
 
Total SOTP value 8 018 10 315 13 844 18 040
 
 
Shares in issue (net of treasury shares) (m) 171,3 184,5 190,5 189,9
 
 
SOTP value per share (rand) 46,81 55,92 72,67 95,01
 
 
Net asset value per share (rand) 21,56 26,50 32,62 37,48
 
 
* Listed on the JSE Ltd ** Over-the-counter *** SOTP value **** Valuation
 
 
Capitec remains PSG’s largest investment and represented 30% (2013: 39%) of the SOTP value’s total assets as at 28 February
 
2014. Its share price has virtually remained unchanged over the past three years following continuous negative publicity
 
regarding the unsecured lending market and despite strong earnings growth. Its price earnings (“PE”) ratio has as a result
 
decreased from 21x to 11x over this period. Curro and PSG Konsult now respectively represent 23% (2013: 16%) and 20% (2013: 14%)
 
of PSG’s total assets following an increase in share price and the aforementioned Capitec PE-rerating. However, Capitec
 
continues to be the major contributor to PSG’s recurring headline earnings.
 
 
RECURRING HEADLINE EARNINGS
 
 
29 Feb 28 Feb 28 Feb
 
2012 Change 2013 Change 2014
 
Rm % Rm % Rm
 
 
Capitec 362,4 38 499,9 14 570,7
 
Curro (5,2) n/a 8,1 154 20,6
 
PSG Konsult 107,9 10 118,8 37 162,7
 
Zeder 115,4 (8) 106,6 17 124,5
 
PSG Private Equity 32,0 134 75,0 (31) 51,4
 
Thembeka Capital 18,7 50 28,0 (17) 23,2
 
PSG Corporate (including PSG Capital) 20,4 (22) 15,9 (56) 7,0
 
Other 19,3 60 30,8 26 38,9
 
Recurring headline earnings before funding 670,9 32 883,1 13 999,0
 
Funding (134,4) 25 (168,2) 8 (181,2)
 
Recurring headline earnings 536,5 33 714,9 14 817,8
 
Non-recurring items 30,6 423 160,1 19 191,0
 
Headline earnings 567,1 54 875,0 15 1 008,8
 
Non-headline items 135,9 95 264,8 (84) 43,2
 
Attributable earnings 703,0 62 1 139,8 (8) 1 052,0
 
 
Weighted average number of shares in issue (net of
 
treasury shares) (m) 173,9 182,2 183,0
 
 
Earnings per share (cents)
 
­ Recurring headline 308,6 27 392,3 14 446,9
 
­ Headline 326,2 47 480,2 15 551,3
 
­ Attributable/basic 404,4 55 625,5 (8) 574,9
 
 
Dividend per share (cents) 82,0 35 111,0 20 133,0
 
 
Recurring headline earnings for the year ended 28 February 2014 increased by 14% to 446,9 cents per share, following
 
exceptional earnings growth from PSG Konsult together with strong growth from Capitec and Zeder.
 
 
Headline earnings increased by 15% to 551,3 cents per share. Headline earnings included non-recurring gains of R191m
 
(2013: R160m), resulting in headline earnings per share being 23% higher than recurring headline earnings per share.
 
The non-recurring headline gains mainly consisted of marked-to-market profits achieved on PSG’s interest rate hedge and
 
Thembeka’s portfolio of listed shares, as well as a performance fee earned from PSG’s management of Zeder.
 
 
Attributable earnings decreased by 8% to 574,9 cents per share mainly as a result of the non-headline profits achieved on
 
the disposal of PSG’s Capitec rights offer shares and Zeder’s disposal of a 15,1% interest in Capevin Holdings in the prior
 
year.
 
 
CAPITEC (28,3%)
 
 
Capitec continued to deliver attractive results amidst challenging conditions in the unsecured credit market with a 15%
 
increase in headline earnings per share for the year ended 28 February 2014. It continues to become less dependent on lending
 
income with a 43% increase in net transaction fee income, which now covers 59% (2013: 45%) of operating expenses.
 
 
In our opinion, Capitec is an exceptional business managed by talented people. The company is well capitalised with a 39%
 
capital adequacy ratio, has further tightened its credit criteria and maintains a conservative provisioning policy. PSG remains
 
excited about this investment.
 
 
Capitec’s comprehensive results for the year ended 28 February 2014 are available at www.capitecbank.co.za.
 
 
CURRO (57,1%)
 
 
Curro continues to assert its leading position in the South African private school market, albeit a small percentage of same.
 
 
It currently operates 31 (2013: 26) campuses accommodating 27 263 (2013: 20 840) learners from three months to grade 12, and
 
continues to make private schooling more accessible to South Africans offering fees that range between R1 000 and R6 500 per
 
month.
 
 
Curro reported an 80% increase in revenue and an 87% increase in headline earnings per share for its financial year ended
 
31 December 2013. It is well underway to achieve its target of 80 campuses by 2020 and plans to develop 10 new campuses in the
 
year ahead.
 
 
Curro will undertake a R589m rights issue, underwritten by PSG, to help fund its capital expansion during the year ahead.
 
 
Curro’s comprehensive results for the year ended 31 December 2013 are available at www.curro.co.za.
 
 
PSG KONSULT (64,7%)
 
 
PSG Konsult recently reported its first set of full year financial results under its refocused business model and Francois
 
Gouws’s leadership as new CEO. PSG Konsult’s recurring headline earnings per share increased by 34% for the year ended
 
28 February 2014. Each of the three divisions, namely Wealth, Asset Management and Insure, produced commendable results.
 
 
PSG Wealth has maintained its upward revenue trend benefiting from positive client inflows, increased trading activity and
 
favourable market conditions. PSG Asset Management is a high growth area and increased brand awareness has facilitated strong
 
client inflows from both retail and institutional investors. PSG Insure has shown subdued revenue growth amidst a fiercely
 
competitive market, particularly on the personal lines business. However, inward reinsurance income has shown significant growth.
 
 
Funds under management increased by 38% to R112bn, while funds under administration increased by 31% to R235bn during the year
 
under review.
 
 
PSG Konsult’s strategic focus for the year ahead is top line revenue growth, which will enable it to unlock operational leverage
 
scale benefits now that it has successfully bedded down its repositioning.
 
 
PSG Konsult intends listing on the JSE during June 2014.
 
 
PSG Konsult’s comprehensive results for the year ended 28 February 2014 are available at www.psg.co.za.
 
 
ZEDER (42,4%)
 
 
Zeder is an investor in the broad agribusiness industry with a specific focus on the food and beverage sectors. The value of its
 
underlying investment portfolio amounted to R4,9bn as at 28 February 2014. Agri Voedsel (with its 30,4% interest in Pioneer
 
Foods) remains a large strategic investment representing 39,8% of the portfolio. During the year under review, Zeder continued
 
rebalancing its portfolio in line with its amended strategy. It disposed of investments valued at R529m and invested R879m
 
primarily to acquire additional stakes in its existing core portfolio (including Agri Voedsel, Capespan, Chayton, Kaap Agri and
 
Zaad).
 
 
Zeder reported a 26% increase in its SOTP value per share and a 16% increase in recurring headline earnings per share for the
 
year ended 28 February 2014, with all its core portfolio investments contributing positively.
 
 
Zeder’s comprehensive results for the year ended 28 February 2014 are available at www.zeder.co.za.
 
 
PSG PRIVATE EQUITY (100%)
 
 
PSG Private Equity’s portfolio contains a range of businesses across various industries and in different stages of maturity.
 
The portfolio delivered weaker than expected results for the year ended 28 February 2014 with a 31% decrease in recurring
 
headline earnings. However, management remains optimistic about the earnings growth potential of this investment portfolio.
 
 
Corporate action at PSG Private Equity (and its underlying investments) during the year under review included:
 
 
• Acquired a stake of 26% in Alt-X listed Poynting, a provider of antenna related products;
 
• Acquired a stake of 50% in IT Schools Innovation, a provider of e-learning solutions to schools;
 
• M&S Holdings concluded its merger with BDM Holdings to form Alt-X listed CSG Holdings, a diversified outsourced services
 
group; and
 
• CA Sales Holdings acquired a stake of 49% in SMC Brands, a distributor of liquor products.
 
 
THEMBEKA CAPITAL (49%)
 
 
Thembeka is a black-owned and controlled investment company. Its portfolio of R3,1bn includes investments in Capitec, Curro,
 
Kaap Agri, MTN Zakhele, Pioneer Foods and PSG.
 
 
Thembeka has, under the leadership of KK Combi, grown its intrinsic value (net of CGT) by 52% per year over the past eight
 
years and as such remains an extraordinary BEE success story. During the year ended 28 February 2014, Thembeka’s net intrinsic
 
value (after CGT) increased by 37% to R2,1bn.
 
 
Thembeka continues to support growth initiatives in its underlying investments with a view to enhancing portfolio returns.
 
 
Thembeka’s comprehensive results for the year ended 28 February 2014 are available at www.thembekacapital.co.za.
 
 
PROSPECTS
 
 
PSG operates in a number of diverse industries, the performance of which is not always correlated. Although it is difficult to
 
predict the future, we remain optimistic and believe our strategy will continue to deliver superior returns for shareholders.
 
 
DIVIDENDS
 
 
Ordinary shares
 
 
PSG’s policy remains to pay up to 100% of free cash flow as an ordinary dividend, of which one third is payable as an interim
 
and the balance as a final dividend at year-end. The directors have resolved to declare a gross final dividend of 90 cents
 
(2013: 78 cents) per share for a total gross dividend of 133 cents (2013: 111 cents) for the year ended 28 February 2014.
 
 
The company will be utilising secondary tax on companies credits amounting to 16,1 cents per ordinary share and, as a result,
 
the taxable final dividend per share will amount to 73,9 cents per share. The final dividend amount, net of South African
 
dividend tax of 15% equating to 11.085 cents per share, is therefore 78,915 cents per share for those shareholders that are
 
not exempt from dividend tax. The number of ordinary shares in issue at the declaration date is 207 589 426, and the income
 
tax number of the company is 9950080714.
 
 
The salient dates of this dividend distribution are:
 
Last day to trade cum dividend Friday, 9 May 2014
 
Trading ex dividend commences Monday, 12 May 2014
 
Record date Friday, 16 May 2014
 
Date of payment Monday, 19 May 2014
 
 
Share certificates may not be dematerialised or rematerialised between Monday, 12 May 2014, and Friday, 16 May 2014, both days
 
inclusive.
 
 
Preference shares
 
 
The directors of PSG Financial Services have declared a dividend of 354,67 cents per share in respect of the cumulative,
 
non-redeemable, non-participating preference shares for the six months ended 28 February 2014, which was paid on 31 March 2014.
 
The detailed announcement in respect hereof was disseminated on Stock Exchange News Services (“SENS”).
 
 
On behalf of the board
 
 
Jannie Mouton Piet Mouton Wynand Greeff
 
Chairman Chief Executive Officer Financial Director
 
 
16 April 2014
 
Stellenbosch
 
 
The reviewed preliminary condensed financial information of PSG Group is presented below:
 
 
Condensed group income statement
 
for the year ended 28 February 2014
 
Reviewed Audited
 
Feb-14 Feb-13
 
Rm Rm
 
 
Revenue from sale of goods 7 568,6 2 001,8
 
Cost of goods sold (6 684,6) (1 682,9)
 
Gross profit from sale of goods 884,0 318,9
 
 
Income
 
Changes in fair value of biological assets 90,5 28,7
 
Investment income (note 6) 507,0 418,3
 
Fair value gains and losses (note 6) 1 453,6 1 023,9
 
Fair value adjustment to investment contract liabilities (note 6) (1 342,7) (1 186,6)
 
Commission, insurance and other fee income 3 540,1 1 941,1
 
Other operating income and expenses 99,3 830,1
 
4 347,8 3 055,5
 
 
Expenses
 
Insurance claims and loss adjustments, net of recoveries (353,4) (60,0)
 
Marketing, administration and other expenses (3 737,6) (2 276,6)
 
(4 091,0) (2 336,6)
 
 
Income from associates and joint ventures
 
Share of profits of associates and joint ventures 943,1 1 036,6
 
Loss on impairment of associates (24,5) (104,2)
 
918,6 932,4
 
 
Profit before finance costs and taxation 2 059,4 1 970,2
 
Finance costs (263,3) (206,0)
 
Profit before taxation 1 796,1 1 764,2
 
Taxation (287,9) (248,1)
 
Profit for the year 1 508,2 1 516,1
 
 
Attributable to:
 
Owners of the parent 1 052,0 1 139,8
 
Non-controlling interests 456,2 376,3
 
1 508,2 1 516,1
 
 
Earnings per share and number of shares in issue
 
Reviewed Audited
 
Change Feb-14 Feb-13
 
% cents cents
 
 
Earnings per share
 
- recurring headline 13,9 446,9 392,3
 
- headline (note 4) 14,8 551,3 480,2
 
- attributable/basic (8,1) 574,9 625,5
 
- diluted headline 14,8 546,8 476,3
 
- diluted attributable/basic (8,1) 570,2 620,5
 
 
Number of shares (million)
 
- in issue 207,6 208,1
 
- in issue (net of treasury shares) 182,9 183,6
 
- weighted average 183,0 182,2
 
- diluted weighted average 184,5 183,7
 
 
Condensed group statement of comprehensive income
 
for the year ended 28 February 2014
 
Reviewed Audited
 
Feb-14 Feb-13
 
Rm Rm
 
 
Profit for the year 1 508,2 1 516,1
 
Other comprehensive income for the year, net of taxation 152,8 20,7
 
Items that may be subsequently reclassified to profit or loss
 
Currency translation adjustments 161,6 15,6
 
Cash flow hedges (15,9)
 
Fair value gains and losses on investments and the reversal
 
thereof upon disposal (0,3) (0,1)
 
Share of other comprehensive income of associates 62,2 6,4
 
Reversal of share of associates’ other comprehensive
 
income upon disposal (55,9) (1,2)
 
Items that will not be reclassified to profit or loss
 
Remeasurement of post-employment benefit obligations 1,1
 
Total comprehensive income for the year 1 661,0 1 536,8
 
 
Attributable to:
 
Owners of the parent 1 115,1 1 132,4
 
Non-controlling interests 545,9 404,4
 
1 661,0 1 536,8
 
 
Condensed group statement of financial position
 
as at 28 February 2014
 
Reviewed Audited
 
Feb-14 Feb-13
 
Rm Rm
 
Assets
 
 
Property, plant and equipment 3 326,8 1 799,7
 
Intangible assets 2 094,5 1 666,5
 
Biological assets 201,4 31,3
 
Investment in ordinary shares of associates and joint ventures 6 312,1 5 961,3
 
Investment in preference shares of/loans granted
 
to associates and joint ventures 321,3 312,7
 
Deferred income tax assets 125,9 59,5
 
Financial assets linked to investment contracts (note 6) 12 692,8 10 272,4
 
Cash and cash equivalents (including money market funds) 51,3 65,1
 
Other financial assets 12 641,5 10 207,3
 
Other financial and employee benefit assets 1 536,0 734,0
 
Inventory 913,7 320,8
 
Trade and other receivables (note 7) 3 718,8 2 243,6
 
Current income tax assets 42,9 14,6
 
Cash and cash equivalents (including money market funds) 2 098,6 2 153,2
 
Non-current assets held for sale (note 9) 182,0 287,7
 
Total assets 33 566,8 25 857,3
 
 
Equity
 
 
Ordinary shareholders’ equity 6 855,2 5 989,7
 
Non-controlling interests 5 591,6 4 159,8
 
Total equity 12 446,8 10 149,5
 
 
Liabilities
 
Insurance contracts 493,2 378,0
 
Financial liabilities under investment contracts (note 6) 12 692,8 10 272,4
 
Borrowings and other financial liabilities 3 740,9 2 373,4
 
Deferred income tax liabilities 331,6 243,5
 
Trade and other payables and employee benefit liabilities (note 7) 3 823,2 2 434,2
 
Current income tax liabilities 38,3 6,3
 
Total liabilities 21 120,0 15 707,8
 
 
Total equity and liabilities 33 566,8 25 857,3
 
 
Net asset value per share (cents) 3 747,6 3 261,6
 
Net tangible asset value per share (cents) 2 602,6 2 354,1
 
 
Condensed group statement of changes in equity
 
for the year ended 28 February 2014
 
Reviewed Audited
 
Feb-14 Feb-13
 
Rm Rm
 
 
Ordinary shareholders’ equity at beginning of the year 5 989,7 4 759,9
 
Total comprehensive income 1 115,1 1 132,4
 
Issue of shares 361,0
 
Share buy-back (33,1)
 
Share-based payment costs - employees 26,2 14,2
 
Net movement in treasury shares (41,0) (123,4)
 
Transactions with non-controlling interests 20,1 7,6
 
Dividends paid (221,8) (162,0)
 
Ordinary shareholders’ equity at end of the year 6 855,2 5 989,7
 
 
Non-controlling interests at beginning of the year 4 159,8 3 187,7
 
Total comprehensive income 545,9 404,4
 
Issue of shares 737,3 551,5
 
Share-based payment costs - employees 9,5 3,3
 
Acquisition of subsidiaries (note 5) 366,4 202,0
 
Transactions with non-controlling interests (33,3) (32,2)
 
Dividends paid (194,0) (156,9)
 
Non-controlling interests at end of the year 5 591,6 4 159,8
 
 
Total equity 12 446,8 10 149,5
 
 
Dividend per share (cents)
 
- interim 43,0 33,0
 
- final 90,0 78,0
 
133,0 111,0
 
 
Condensed group statement of cash flows
 
for the year ended 28 February 2014
 
Reviewed Audited
 
Feb-14 Feb-13
 
Rm Rm
 
 
Cash generated by operations 1 532,8 623,9
 
Cash movement in policyholder funds (note 6) (13,8) (32,1)
 
Finance costs and taxation paid (512,4) (467,2)
 
Net cash flow from operating activities 1 006,6 124,6
 
Net cash flow from investing activities (1 235,8) (12,0)
 
Net cash flow from financing activities (164,6) 1 183,0
 
Net (decrease)/increase in cash and cash equivalents (393,8) 1 295,6
 
Exchange gains on cash and cash equivalents 46,7 1,5
 
Cash and cash equivalents at beginning of the year 1 927,7 630,6
 
Cash and cash equivalents at end of the year 1 580,6 1 927,7
 
 
Cash and cash equivalents consists of:
 
Cash and cash equivalents linked to investment contracts 51,3 65,1
 
Cash and cash equivalents attributable to equity holders 2 098,6 2 153,2
 
Bank overdrafts attributable to equity holders (included in borrowings) (569,3) (290,6)
 
1 580,6 1 927,7
 
 
Notes to the condensed group financial statements
 
 
1. Basis of presentation and accounting policies
 
 
These condensed group financial statements have been prepared in accordance with the recognition and
 
measurement principles of International Financial Reporting Standards (“IFRS”) as issued by the International
 
Accounting Standards Board, including IAS 34 Interim Financial Reporting; the SAICA Financial Reporting Guides,
 
as issued by the Accounting Practices Committee; the Financial Reporting Pronouncements, as issued by the Financial
 
Reporting Standards Council; the requirements of the South African Companies Act, 71 of 2008, as amended; and the
 
Listings Requirements of the JSE.
 
 
The accounting policies applied in the preparation of these condensed group financial statements are consistent
 
in all material respects with those used in the prior financial year, apart from the following new accounting standards
 
and amendments to IFRSs which were relevant to the group’s operations from 1 March 2013:
 
 
- IFRS 10 Consolidated Financial Statements, IFRS 11 Joint Arrangements and amendments to IAS 28 Investments
 
in Associates
 
The group has adopted aforementioned suite of IFRSs and amendments which deal with the accounting treatment for
 
the group’s interests in its investees. The group has reviewed its accounting policies and concluded that the
 
adoption of same did not result in any material changes to the group’s accounting for its investees.
 
 
- IFRS 13 Fair Value Measurement
 
The group has adopted the new standard on how to measure fair value and enhance fair value disclosures. The
 
adoption did not result in any material impact on the financial statements, apart from additional disclosures
 
(note 10).
 
 
- Amendments to IAS 19 Employee Benefits
 
The amendments became relevant to the group following its acquisition of a controlling interest in Capespan
 
Group Ltd (“Capespan”) (note 5), which operates defined benefit plans. Capespan previously elected to follow a
 
policy of recognising remeasurements to employee benefit assets and liabilities in other comprehensive income,
 
which has now become mandatory.
 
 
- Amendments to IAS 34 Interim Financial Reporting
 
The amendments relate to the introduction of IFRS 13 Fair Value Measurement and changes to IFRS 7 Financial
 
Instruments: Disclosures. The group has complied with these additional disclosure requirements.
 
 
The group also adopted the various other revisions to IFRS which were effective for its financial year ended
 
28 February 2014. These revisions have not resulted in material changes to the group’s reported results and disclosures
 
in these condensed group financial statements.
 
 
Enhanced disclosures, as required by IFRS 12 Disclosures of Interests in Other Entities, will be provided in the
 
annual financial statements for the year ended 28 February 2014.
 
 
2. Preparation
 
 
These preliminary condensed group financial statements were compiled under the supervision of the group financial
 
director, Mr WL Greeff, CA (SA), and were reviewed by PSG Group’s external auditor, PricewaterhouseCoopers Inc.
 
A copy of their unmodified review opinion is available from PSG Group’s registered office. Any reference to future
 
financial performance included in this announcement, has not been reviewed or reported on by the company’s auditor.
 
 
The auditor’s report does not necessarily report on all the information contained in this announcement. Users are
 
therefore advised that in order to get a full understanding of the nature of the auditor’s engagement, they should
 
obtain a copy of the auditor’s report together with the accompanying financial information from the company’s
 
registered office.
 
 
3. PSG Financial Services
 
 
PSG Financial Services is a wholly-owned subsidiary of PSG Group, except for the 17 415 770 (2013: 13 419 479)
 
perpetual preference shares which are listed on the JSE. These preference shares are included in non-controlling
 
interests in the statement of financial position. No separate financial statements are presented in this announcement
 
for PSG Financial Services as it is the only asset of PSG Group.
 
 
Reviewed Audited
 
Feb-14 Feb-13
 
Rm Rm
 
 
4. Reconciliation to headline earnings
 
 
Profit for the year attributable to owners of the parent 1 052,0 1 139,8
 
Non-headline items (43,2) (264,8)
 
Gross amounts
 
Impairment of investments in associates 24,5 104,1
 
Net profit on sale/dilution of investments in associates (24,4) (728,6)
 
Fair value gain on step-up from associate to subsidiary (79,5) (21,2)
 
Net loss on sale/impairment of intangible assets (including goodwill) 9,2 167,9
 
Non-headline items of associates (16,7) (23,2)
 
Other 3,6 6,9
 
Non-controlling interests 32,9 106,6
 
Taxation 7,2 122,7
 
Headline earnings 1 008,8 875,0
 
 
5. Business combinations
 
 
The group’s most significant business combinations entered into during the year under review included:
 
 
Capespan Group Ltd (“Capespan”)
 
 
Effective April 2013, the group, through Zeder, acquired a further 25,3% shareholding in Capespan and thereby
 
increased its interest to 71,1%. Subsequently, the group further increased its interest to 72,1% in Capespan.
 
Capespan is a global fruit procurement company and South Africa’s largest fruit exporter. Remeasurement to fair
 
value of the associate interest previously held resulted in a non-headline gain of R40,7m being recognised in “fair
 
value gains and losses” in the income statement. Non-controlling interest was recognised at its fair value based on
 
Capespan’s over-the-counter traded share price.
 
 
Klein Karoo Seed Marketing (Pty) Ltd (“Klein Karoo”)
 
 
Effective October 2013, the group, through Zeder, acquired the remaining 51% shareholding in Klein Karoo not already
 
held. Klein Karoo develops and distributes vegetable, pasture and agronomic seed in mainly Africa, the Middle East
 
and Asia. The remeasurement of the previously held associate interest resulted in a non-headline gain of R1,1m being
 
recognised in “fair value gains and losses” in the income statement. Non-controlling interests in a subsidiary of
 
Klein Karoo were valued at its fair value.
 
 
Precrete Holdings (Pty) Ltd (“Precrete”)
 
 
Effective August 2013, the group, through PSG Private Equity, acquired a further 7,2% shareholding in Precrete and
 
thereby increased its interest to 55,2%. At year-end, the group’s effective interest in Precrete was 52,8%. Precrete
 
is involved in providing mine safety and support services. The previously held associate interest approximated fair
 
value and therefore no remeasurement gain or loss arose upon gaining control. Non-controlling interests were recognised
 
at its proportionate share of net assets.
 
 
Embury Institute for Teacher Education (Pty) Ltd (“Embury”)
 
 
Effective April 2013, the group, through Curro, acquired the entire issued shareholding in Embury, a Durban-based
 
teachers training college.
 
 
Northern Academy
 
 
Effective April 2013, the group, through Curro, acquired the entire business operations and properties of Northern
 
Academy, a private education campus in Polokwane.
 
 
PSG Optimal Income Fund
 
 
During the year under review, the group, through PSG Konsult, increased its interest in the PSG Optimal Income Fund,
 
resulting in the consolidation of same. At year-end, the group’s interest in this fund amounted to 34,1%.
 
 
The amounts of identifiable net assets acquired, goodwill and non-controlling interests recognised from aforementioned
 
business combinations can be summarised as follows:
 
 
Sub-total
 
carried
 
Capespan Klein Karoo Precrete Embury forward
 
Rm Rm Rm Rm Rm
 
 
Identifiable net assets acquired 929,5 196,2 152,7 20,9 1 299,3
 
Goodwill recognised 69,1 77,0 37,7 183,8
 
Non-controlling interests recognised (268,6) (34,2) (63,6) (366,4)
 
660,9 231,1 166,1 58,6 1 116,7
 
Derecognition of previously held
 
associate interest or unit-linked
 
investment at fair value (403,0) (101,0) (146,4) (650,4)
 
Cash consideration 257,9 130,1 19,7 58,6 466,3
 
 
PSG
 
Sub-total Optimal
 
brought Northern Income
 
forward Academy Fund Other Total
 
Rm Rm Rm Rm Rm
 
 
Identifiable net assets acquired 1 299,3 64,7 97,0 26,1 1 487,1
 
Goodwill recognised 183,8 85,2 269,0
 
Non-controlling interests recognised (366,4) (366,4)
 
1 116,7 149,9 97,0 26,1 1 389,7
 
Derecognition of previously held
 
associate interest or unit-linked
 
investment at fair value (650,4) (97,0) (747,4)
 
Cash consideration 466,3 149,9 - 26,1 642,3
 
 
Goodwill recognised from these business combinations can be attributed to the employee corps, expected synergies, economies
 
of scale and the businesses’ growth potential. Transaction costs relating to aforementioned business combinations were
 
insignificant and expensed in the income statement.
 
 
6. Linked investment contracts
 
 
These represent PSG Life Ltd clients’ assets held under investment contracts, which are linked to a corresponding liability.
 
The impact on the income statement from the returns on investment contract policy holder assets and liabilities, as well as
 
the investment income earned by the ordinary shareholders of the group, were as follows:
 
 
Investment
 
contract
 
policy Equity
 
holders holders Total
 
28 February 2014 - Reviewed Rm Rm Rm
 
 
Investment income 263,6 243,4 507,0
 
Fair value gains and losses 1 087,7 365,9 1 453,6
 
Fair value adjustment to investment contract liabilities (1 342,7) (1 342,7)
 
8,6 609,3 617,9
 
 
28 February 2013 - Audited
 
 
Investment income 272,0 146,3 418,3
 
Fair value gains and losses 937,1 86,8 1 023,9
 
Fair value adjustment to investment contract liabilities (1 186,6) (1 186,6)
 
22,5 233,1 255,6
 
 
7. Trade and other receivables and payables
 
 
Included under trade and other receivables are PSG Online broker- and clearing accounts of which R1,9bn (2013: R1,6bn)
 
represents amounts owing by the JSE for trades conducted during the last few days before year-end. These balances
 
fluctuate on a daily basis depending on the activity in the markets.
 
 
The control account for the settlement of these transactions is included under trade and other payables, with the
 
settlement to clients taking place within three days after the transaction date.
 
 
8. Corporate actions
 
 
Apart from the transactions set out in note 5, the group’s most significant corporate actions included the following:
 
 
- Repurchase of 492 471 PSG Group ordinary shares for R33,1m cash at R67,19 per share.
 
- Issue of 3 996 291 PSG Financial Services preference shares for cash proceeds of R300m at an effective dividend
 
yield of 9,44% and partial utilisation thereof to redeem promissory notes upon maturity of R269,8m.
 
- Curro conducted a rights offer during May 2013, which was partially underwritten by the group. The group followed
 
its rights and the additional investment amounted to R350,6m.
 
- Effective June 2013, the group, through PSG Konsult, increased its shareholding in Western Group Holdings Ltd
 
(“Western”), being a short-term insurer, from 75% to 90%. Following approval from the Financial Services Board
 
during September 2013, the group acquired the remaining 10% minority shareholding in Western and then subsequently
 
sold 40% of its shareholding to Santam.
 
 
9. Non-current assets held for sale
 
 
Non-current assets held for sale consists mainly of JSE-listed equity securities to the amount of R177m (2013:
 
R287,7m), held by the group, through Zeder, in Capevin Holdings Ltd. These equity securities are expected to be
 
realised through sale in the coming months.
 
 
10. Financial instruments
 
 
10.1 Financial risk factors
 
 
The group’s activities expose it to a variety of financial risks: market risk (including currency risk, cash flow and
 
fair value interest rate risk and price risk), credit risk and liquidity risk.
 
 
These condensed group financial statements do not include all financial risk management information and disclosures
 
set out in the annual financial statements, and therefore they should be read in conjunction with the group’s annual
 
financial statements for the year ended 28 February 2014. Risk management continues to be carried out by each major
 
entity within the group under policies approved by the respective boards of directors.
 
 
10.2 Fair value estimation
 
 
The group, through PSG Life Ltd, issues linked investment contracts (note 6) where the value of the policy benefits
 
(i.e. liability) is directly linked to the fair value of the supporting assets, and as such does not expose
 
the group to the market risk relating to fair value movements.
 
 
The information below analyses financial assets and liabilities, which are carried at fair value, by level of hierarchy
 
as required by IFRS 13. The different levels in the hierarchy are defined below:
 
 
Level 1
 
 
The fair value of financial instruments traded in active markets is based on quoted market prices at the reporting
 
date. A market is regarded as active if quoted prices are readily and regularly available from an exchange, dealer,
 
broker, industry group, pricing service, or regulatory agency, and those prices represent actual and regularly occurring
 
market transactions on an arm’s length basis. The quoted market price used for financial assets held by the group is
 
the current bid price.
 
 
Level 2
 
 
Financial instruments that trade in markets that are not considered to be active but are valued (using valuation
 
techniques) based on quoted market prices, dealer quotations or alternative pricing sources supported by observable
 
inputs are classified within level 2. These include over-the-counter traded derivatives. As level 2 investments include
 
positions that are not traded in active markets and/or are subject to transfer restrictions, valuations may be adjusted
 
to reflect illiquidity and/or non-transferability, which are generally based on available market information. If all
 
significant inputs in determining an instrument’s fair value are observable, the instrument is included in level 2.
 
 
Level 3
 
 
If one or more of the significant inputs is not based on observable market data, the instrument is included in
 
level 3. Investments classified within level 3 have significant unobservable inputs, as they trade infrequently.
 
 
The fair value of financial assets and liabilities carried at amortised cost approximates their fair value, while
 
those measured at fair value in the statement of financial position can be summarised as follows:
 
 
Level 1 Level 2 Level 3 Total
 
28 February 2014 - Reviewed Rm Rm Rm Rm
 
 
Assets
 
Derivative financial assets 1,0 29,1 30,1
 
Equity securities 767,8 1,0 42,6 811,4
 
Debt securities 32,9 804,8 237,3 1 075,0
 
Unit-linked investments 8 058,4 2 250,5 10 308,9
 
Investment in investment contracts 260,4 1,4 261,8
 
Non-current assets held for sale 177,0 177,0
 
Closing carrying value 978,7 9 153,7 2 531,8 12 664,2
 
 
Liabilities
 
Derivative financial liabilities 15,2 38,6 45,7 99,5
 
Investment contracts 9 056,9 2 487,8 11 544,7
 
Trade and other payables 10,6 10,6
 
Third party liabilities arising on
 
consolidation of mutual funds 372,2 372,2
 
Closing carrying value 15,2 9 467,7 2 544,1 12 027,0
 
 
Level 1 Level 2 Level 3 Total
 
28 February 2013 - Audited Rm Rm Rm Rm
 
 
Assets
 
Derivative financial assets 16,0 16,0
 
Equity securities 1 015,0 97,5 0,8 1 113,3
 
Debt securities 338,5 250,1 588,6
 
Unit-linked investments 4 832,6 1 958,1 6 790,7
 
Investment in investment contracts 264,8 61,7 326,5
 
Non-current assets held for sale 287,7 287,7
 
Closing carrying value 1 302,7 5 549,4 2 270,7 9 122,8
 
 
Liabilities
 
Derivative financial liabilities 94,4 45,7 140,1
 
Investment contracts 6 152,5 2 266,5 8 419,0
 
Trade and other payables 6,3 6,3
 
Third party liabilities arising on
 
consolidation of mutual funds 25,1 25,1
 
Closing carrying value - 6 272,0 2 318,5 8 590,5
 
 
The following table presents changes in level 3 financial instruments during the respective years:
 
 
Feb-14 Feb-13
 
Assets Liabilities Assets Liabilities
 
Rm Rm Rm Rm
 
 
Opening balance 2 270,7 2 318,5 1 983,9 2 048,3
 
Additions 1 602,0 1 562,9 1 028,0 702,4
 
Disposals (1 506,2) (1 504,1) (969,8) (707,8)
 
Subsidiaries sold (3,7)
 
Fair value adjustments 165,3 166,6 232,3 230,6
 
Other movements 0,2 45,0
 
2 531,8 2 544,1 2 270,7 2 318,5
 
 
Derivative financial assets, equity securities, debt securities and unit-linked investments are all included in
 
“other financial assets” in the statement of financial position, while derivative financial liabilities and third
 
party liabilities arising on consolidation of mutual funds are included in “other financial liabilities”.
 
 
There have been no significant transfers between level 1, 2 or 3 during the year under review, nor were there any
 
significant changes to the valuation techniques and inputs used to determine fair values. Valuation techniques and
 
main inputs used to determine fair value for financial instruments classified as level 2 can be summarised as follows:
 
 
Instrument Valuation technique Main inputs
 
 
Derivative financial assets and Exit price on recognised over-the-counter Not applicable
 
liabilities platforms
 
Debt securities Valuation model that uses the market inputs Bond interest rate curves
 
(yield of benchmark bonds) Issuer credit ratings
 
Liquidity spreads
 
Unit-linked investments Quoted put (exit) price provided by the fund Not applicable - prices
 
manager available publicly
 
Investment in investment Prices are obtained from the insurer of the Not applicable - prices
 
contracts particular investment contract provided by registered
 
long-term insurers
 
Investment contracts Current unit price of underlying unitised Not applicable
 
financial asset that is linked to the liability,
 
multiplied by the number of units held
 
Third party liabilities arising on Quoted put (exit) price provided by the fund Not applicable - prices
 
consolidation of mutual funds manager available publicly
 
 
11. Capital commitments and contingencies
 
 
Zeder has previously announced the acquisition of Mpongwe Milling in its SENS announcement dated 13 November 2013,
 
which became effective after the reporting date and is currently being implemented.
 
 
Curro announced in its recently released financial results that during the year ahead it intends to develop 10 new
 
schools and embark on expansion projects at approximately seven existing campuses across the group.
 
 
Capitec has reported receiving a notice from the National Credit Regulator alleging contraventions of the National
 
Credit Act. It furthermore reported that it had taken legal advice and believed the matter would be resolved
 
satisfactorily through due process.The matter was heard by the National Consumer Tribunal on 13 March 2014 and judgement
 
was reserved. Due to uncertainties that currently exist, Capitec is unable to estimate the financial effect of any
 
possible outcome.
 
 
12. Segment report
 
 
The group’s classification into seven reportable segments, namely: Capitec, Curro, PSG Konsult, PSG Private Equity,
 
Thembeka Capital, Zeder and PSG Corporate, remains unchanged. These segments represent the major investments of the
 
group. The services offered by PSG Konsult consist of financial advice, stock broking, fund management and insurance, while
 
Curro offers private education services. The other segments offer financing, banking, investing and corporate finance services.
 
All segments operate predominantly in the Republic of South Africa, however, Zeder has further expanded its offshore operations
 
through the acquisition of Capespan and Klein Karoo (note 5).
 
 
Intersegment income represents income derived from other segments within the group which is recorded at the fair value of the
 
consideration received or receivable for services rendered in the ordinary course of the group’s activities. Intersegment
 
income mainly comprises intergroup management fees charged in terms of the respective management agreements.
 
 
Headline earnings comprise recurring and non-recurring headline earnings. Recurring headline earnings are calculated on a
 
proportional basis, and include the proportional headline earnings of underlying investments, excluding marked-to-market
 
adjustments and one-off items. The result is that investments in which the group holds less than 20% and which are generally
 
not equity accountable in terms of accounting standards, are equity accounted for the purpose of calculating the consolidated
 
recurring headline earnings. Non-recurring headline earnings include one-off gains and losses and marked-to-market fluctuations,
 
as well as the resulting taxation charge on these items. Sum-of-the-parts (“SOTP”) is a key valuation tool used to measure PSG’s
 
performance. In determining SOTP, listed assets and liabilities are valued using quoted market prices, whereas unlisted assets
 
and liabilities are valued using appropriate valuation methods. These values will not necessarily correspond with the values per
 
the statement of financial position since the latter are measured using the relevant accounting standards which include
 
historical cost and the equity method of accounting.
 
 
The chief operating decision-maker (the PSG Group Executive Committee) evaluates the following information to assess the
 
segments’ performance:
 
 
Recurring
 
Inter- headline Non-
 
segment earnings recurring
 
Income income (segment headline Headline
 
** ** profit) earnings earnings SOTP^
 
Year ended 28 February 2014 - Reviewed Rm Rm Rm Rm Rm Rm
 
 
Capitec* 570,7 570,7 5 989,1
 
Curro 662,9 20,6 20,6 4 659,7
 
PSG Konsult 2 488,8 162,7 (4,3) 158,4 4 003,8
 
PSG Private Equity 2 189,1 51,4 5,7 57,1 948,7
 
Thembeka Capital* 23,2 100,2 123,4 1 242,8
 
Zeder 6 374,3 124,5 (16,9) 107,6 1 698,1
 
PSG Corporate (including PSG Capital) 301,1 (123,5) 48,4 51,9 100,3 1 370,5
 
Reconciling items
 
Funding 42,2 (18,5) (181,2) 54,2 (127,0) (2 008,3)
 
Other (2,3) (2,3) 135,0
 
Total 12 058,4 (142,0) 818,0 190,8 1 008,8 18 039,4
 
Non-headline items 43,2
 
Earnings attributable to non-controlling interests 456,2
 
Taxation 287,9
 
Profit before taxation 1 796,1
 
 
Recurring
 
Inter- headline Non-
 
segment earnings recurring
 
Income income (segment headline Headline
 
** ** profit) earnings earnings SOTP^
 
Year ended 28 February 2013 - Audited Rm Rm Rm Rm Rm Rm
 
 
Capitec* 410,1 499,9 499,9 6 127,6
 
Curro 367,3 8,1 8,1 2 606,6
 
PSG Konsult 1 673,0 118,8 (0,1) 118,7 2 236,8
 
PSG Private Equity 1 690,9 75,0 (9,2) 65,8 680,7
 
Thembeka Capital* 28,0 140,0 168,0 898,8
 
Zeder 755,5 106,6 (23,2) 83,4 1 411,6
 
PSG Corporate (including PSG Capital)++ 190,7 (61,0) 48,3 85,9 134,2 1 855,2
 
Reconciling items
 
Funding++ 39,0 (8,2) (168,2) (33,3) (201,5) (2 008,2)
 
Other (1,6) (1,6) 34,4
 
Total 5 126,5 (69,2) 714,9 160,1 875,0 13 843,5
 
Non-headline items 264,8
 
Earnings attributable to non-controlling interests 376,3
 
Taxation 248,1
 
Profit before taxation 1 764,2
 
 
 
Reviewed Audited
 
Feb-14 Feb-13
 
Reconciliation of segment revenue to IFRS revenue: Rm Rm
 
 
Segment revenue as stated above
 
Income 12 058,4 5 126,5
 
Inter-segment income (142,0) (69,2)
 
Less:
 
Changes in fair value of biological assets (90,5) (28,7)
 
Fair value gains and losses (1 453,6) (1 023,9)
 
Fair value adjustment to investment contract liabilities 1 342,7 1 186,6
 
Other operating income and expenses (99,3) (830,1)
 
IFRS revenue 11 615,7 4 361,2
 
 
Non-recurring headline earnings comprised the following:
 
 
Non-recurring items from investments 84,7 107,5
 
Net fair value gains on unit trust and share investments 9,5 72,0
 
Other+ 96,7 (19,4)
 
190,9 160,1
 
 
* Equity method of accounting applied.
 
** The total of “income” and “intersegment income” comprises the total of “revenue from sale of goods” and “income” per the
 
income statement.
 
^ SOTP is a key valuation tool used to measure the group’s performance, but does not necessarily correspond to net asset value.
 
+ Current year consists mainly of marked-to-market gains on the group’s interest rate hedge.
 
++ Non-recurring headline losses of R29,1m pertaining to the group’s interest rate hedge has been reclassified from PSG
 
Corporate to Funding.
 
 
DIRECTORS:
 
JF Mouton (Chairman)+, PE Burton^, ZL Combi^, J de V du Toit^, MM du Toit^, FJ Gouws+, WL Greeff (FD)*,
 
JA Holtzhausen*, MJ Jooste^ (Alt: AB la Grange), JJ Mouton+, PJ Mouton (CEO)*, CA Otto^, W Theron+
 
* Executive + Non-executive ^ Independent non-executive
 
 
SECRETARY AND REGISTERED OFFICE:
 
PSG Corporate Services (Pty) Ltd, 1st Floor, Ou Kollege, 35 Kerk Street, Stellenbosch, 7600; PO Box 7403,
 
Stellenbosch, 7599
 
 
TRANSFER SECRETARY:
 
Computershare Investor Services (Pty) Ltd, 70 Marshall Street, Johannesburg, 2001; PO Box 61051, Marshalltown, 2107
 
 
SPONSOR:
 
PSG Capital
 
 
AUDITOR:
 
PricewaterhouseCoopers Inc.
 
Date: 16/04/2014 02:16:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
 
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
 
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
 
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
 
information disseminated through SENS.