Unaudited Results For The Six Months Ended 31 August 2015
 
 
PSG Group Limited
 
Incorporated in the Republic of South Africa
 
Registration number: 1970/008484/06
 
JSE Ltd (“JSE”) share code: PSG
 
ISIN code: 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 code: ZAE000096079
 
(“PSG Financial Services”)
 
 
UNAUDITED RESULTS FOR THE SIX MONTHS ENDED 31 AUGUST 2015
 
 
• Recurring headline earnings increased by 42% to 355 cents per share
 
• Interim dividend increased by 82% to 100 cents per share
 
• Sum-of-the-parts value of R209.35 per share as at 7 October 2015
 
• Strong operational performance from all investments
 
 
OVERVIEW
 
 
PSG is an investment holding company consisting of underlying investments that operate across a
 
diverse range of industries which include banking, education, financial services, food and related
 
business, and private equity. PSG’s market capitalisation (net of treasury shares) is
 
approximately R50bn.
 
 
RESULTS
 
 
The two key benchmarks which PSG believes to measure performance by are sum-of-the-parts (“SOTP”)
 
value and recurring headline earnings per share.
 
 
SOTP
 
 
The calculation of the SOTP value is simple and requires limited subjectivity as 83% of the value
 
is calculated using JSE-listed share prices, while other investments are included at market-related
 
valuations. At 31 August 2015, the SOTP value per PSG share was R196.85 (28 February 2015: R163.28).
 
At 7 October 2015, the SOTP value was R209.35 per share.
 
 
28 Feb 28 Feb 31 Aug 7 Oct
 
2014 2015 2015 2015 % of
 
Asset/Liability Rm Rm Rm Rm total
 
 
Capitec* 5 989 14 549 17 134 19 694 43
 
Curro* 4 660 6 236 7 515 8 120 18
 
PSG Konsult* 4 004 5 710 6 635 6 168 14
 
Zeder* 1 698 3 712 3 797 3 719 8
 
PSG Private Equity** 949 1 246 1 394 1 380 3
 
Dipeo (previously Thembeka)** 1 243 603 789 821 2
 
PSG Corporate
 
(including PSG Capital)*** 383 1 398 3 312 3 312 7
 
Other assets (including cash and
 
pref investments)^ 1 122 2 031 2 392 2 373 5
 
Total assets 20 048 35 485 42 968 45 587 100
 
Perpetual pref funding* (1 393) (1 411) (1 363) (1 398)
 
Other debt^ (615) (679) (1 053) (1 062)
 
Total SOTP value 18 040 33 395 40 552 43 127
 
 
Shares in issue
 
(net of treasury shares) (m) 189.9 204.5 206.0 206.0
 
 
SOTP value per share (R) 95.01 163.28 196.85 209.35
 
 
* Listed on the JSE ** SOTP value *** Valuation ^ Book value
 
 
Capitec is PSG’s largest investment and at 31 August 2015 comprised 40% (28 February 2015: 41%) of
 
the SOTP value’s total assets. Capitec continues to be the major contributor to PSG’s recurring
 
headline earnings.
 
 
RECURRING HEADLINE EARNINGS
 
 
Year
 
ended Six months ended
 
Feb-15 Aug-14 Change Aug-15
 
Rm Rm % Rm
 
 
Capitec 729 332 36 451
 
Curro 31 15 93 29
 
PSG Konsult 214 92 26 116
 
Zeder* 152 62 21 75
 
PSG Private Equity 59 16 194 47
 
Dipeo (previously Thembeka) 45 16 n/a
 
PSG Corporate (including PSG Capital) 38 1 >1 000 41
 
Other 51 20 130 46
 
Recurring headline earnings before funding 1 319 554 45 805
 
Funding (177) (85) (84)
 
Recurring headline earnings 1 142 469 54 721
 
Non-recurring items 432 113 139
 
Headline earnings 1 574 582 48 860
 
Non-headline items (14) (13) 2
 
Attributable earnings 1 560 569 51 862
 
 
Weighted average number of shares in
 
issue (net of treasury shares) (m) 192.3 187.9 8 203.4
 
 
Earnings per share (cents)
 
­ Recurring headline 593.6 249.4 42 354.5
 
­ Headline 818.6 309.7 37 422.8
 
­ Attributable/basic 811.3 302.7 40 423.7
 
 
Dividend per share (cents) 200.0 55.0 82 100.0
 
 
* Restated as set out in note 13 to the condensed interim group financial statements.
 
 
Recurring headline earnings for the six months ended 31 August 2015 increased by 42% to 354.5 cents
 
per share, following strong recurring headline earnings per share growth from Capitec (25%) and
 
PSG Konsult (26%) in particular. Although Curro reported a 68% increase in recurring headline
 
earnings per share for the six months ended 30 June 2015, its earnings contribution to the larger
 
PSG Group remains relatively small. However, we remain confident that this investment will make a
 
significant contribution to PSG’s earnings in years to come. PSG Private Equity reported a 144%
 
increase in recurring headline earnings per share, albeit from a low base, following challenging
 
trading conditions at select investments during the comparative period in the prior year.
 
 
Headline earnings increased by 37% to 422.8 cents per share. The non-recurring headline gains
 
achieved during the period under review mainly comprised marked-to-market profits achieved on
 
Dipeo’s portfolio of listed shares.
 
 
Attributable earnings increased by 40% to 423.7 cents per share.
 
 
SIGNIFICANT TRANSACTIONS
 
 
The following significant transactions were undertaken during the period under review:
 
 
• PSG raised R267m in cash through the issue of 1.4m ordinary shares by means of a private
 
placement.
 
• PSG invested R438m in cash in the Curro rights offer to fund further expansion.
 
• Zeder successfully concluded the Capespan scheme of arrangement valued in excess of R500m
 
by acquiring the remaining 25% interest held by minority shareholders other than management.
 
• PSG Private Equity disposed of its manufacturing-related investments in GRW Holdings and
 
Protea Foundry for cash proceeds of R72m and R30m, respectively.
 
 
CAPITEC (30.7%)
 
 
Capitec is a South African retail bank focused on providing easy and affordable banking services
 
to its clients via the use of innovative technology. Everything Capitec does is based on simplicity,
 
affordability, accessibility and personal service.
 
 
Capitec is listed on the JSE and its comprehensive results for the six months ended 31 August 2015
 
are available at www.capitecbank.co.za.
 
 
PSG KONSULT (62%)
 
 
PSG Konsult is a leading financial services company, delivering a broad range of financial services
 
and products. It focuses on providing wealth management, asset management and insurance solutions
 
to clients.
 
 
PSG Konsult is listed on the JSE and Namibian Stock Exchange and its comprehensive results for the
 
six months ended 31 August 2015 are available at www.psg.co.za.
 
 
CURRO (58.5%)
 
 
Curro is a provider of private school education.
 
 
Curro is listed on the JSE and its comprehensive results for the six months ended 30 June 2015
 
are available at www.curro.co.za.
 
 
ZEDER (32%)
 
 
Zeder is an investor in the broad agribusiness industry with a specific focus on the food and
 
beverage sectors. Its largest investment is a 27.1% interest in Pioneer Foods, which comprises 71%
 
of Zeder’s SOTP value.
 
 
Both Zeder and Pioneer Foods are listed on the JSE and their respective comprehensive results for
 
the six months ended 31 August 2015 and 31 March 2015 are available at www.zeder.co.za
 
and www.pioneerfoods.co.za.
 
 
PSG PRIVATE EQUITY (100%)
 
 
PSG Private Equity serves as incubator to find the businesses of tomorrow. Management is continuously
 
refining the existing portfolio and actively searching for exciting new investment opportunities.
 
Given its nature, this portfolio is likely to yield volatile earnings, while providing significant
 
optionality.
 
 
DIPEO (49%)
 
 
Dipeo, a BEE investment holding company, is 51%-owned by the Stellenbosch BEE Education Trust of
 
which all beneficiaries are black individuals. Dipeo’s most significant investments include
 
shareholdings in Curro (6%), Pioneer Foods (4.4%), Quantum Foods (4%) and Kaap Agri (20%). These are
 
all subject to BEE lock-in periods. The Stellenbosch BEE Education Trust will use their share of the
 
value created from these investments to fund gifted but needy black students’ education.
 
 
PROSPECTS
 
 
We believe PSG’s investment portfolio should continue yielding above average returns in future.
 
 
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 an interim gross dividend of 100 cents (2014: 55 cents) in respect of the six months ended
 
31 August 2015, representing an 82% increase.
 
 
The interim dividend amount, net of South African dividend tax, is 85 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 221 778 549, and the income tax number of the company is 9950080714.
 
 
The salient dates for this dividend distribution are:
 
 
Last day to trade cum dividend Friday, 30 October 2015
 
Trading ex dividend commences Monday, 2 November 2015
 
Record date Friday, 6 November 2015
 
Payment date Monday, 9 November 2015
 
 
Share certificates may not be dematerialised or rematerialised between Monday, 2 November 2015 and
 
Friday, 6 November 2015, both days inclusive.
 
 
Preference shares
 
The directors of PSG Financial Services have declared a gross dividend of 390.79 cents per share
 
in respect of the cumulative, non-redeemable, non-participating preference shares for the six months
 
ended 31 August 2015, which was paid on Monday, 28 September 2015. The detailed announcement in
 
respect hereof was disseminated on the Stock Exchange News Services on 31 August 2015.
 
 
UNAUDITED CONDENSED INTERIM GROUP FINANCIAL STATEMENTS
 
 
Unaudited Audited
 
Aug-15 Aug-14 Feb-15
 
6 months 6 months 12 months
 
Restated
 
Condensed group income statement Rm Rm Rm
 
 
Revenue from sale of goods 6 677 5 370 10 981
 
Cost of goods sold (5 709) (4 513) (9 532)
 
Gross profit from sale of goods 968 857 1 449
 
 
Income
 
Changes in fair value of biological assets 61 21 144
 
Investment income (note 7) 464 305 764
 
Fair value gains and losses (note 7) 740 1 010 1 400
 
Fair value adjustment to investment contract
 
liabilities (note 7) (639) (1 066) (1 483)
 
Commission, insurance and other fee income 2 320 1 836 4 309
 
Other operating income 52 28 95
 
2 998 2 134 5 229
 
 
Expenses
 
Insurance claims and loss adjustments, net of recoveries (261) (217) (424)
 
Marketing, administration and other expenses (2 712) (2 300) (4 778)
 
(2 973) (2 517) (5 202)
 
 
Income from associates and joint ventures
 
Share of profits of associates and joint ventures 720 655 1 448
 
Loss on impairment of associates and joint ventures (2) (3) (4)
 
718 652 1 444
 
 
Profit before finance costs and taxation 1 711 1 126 2 920
 
Finance costs (230) (164) (337)
 
Profit before taxation 1 481 962 2 583
 
Taxation (274) (142) (392)
 
Profit for the period 1 207 820 2 191
 
 
Attributable to:
 
Owners of the parent 862 569 1 560
 
Non-controlling interests 345 251 631
 
1 207 820 2 191
 
 
Unaudited Audited
 
Aug-15 Aug-14 Feb-15
 
Earnings per share and 6 months 6 months 12 months
 
number of shares in issue Change % Restated
 
 
Earnings per share (cents)
 
- recurring headline 42 354.5 249.4 593.6
 
- headline (note 4) 37 422.8 309.7 818.6
 
- attributable/basic 40 423.7 302.7 811.3
 
- diluted headline 34 409.7 306.3 807.4
 
- diluted attributable/basic 37 410.5 299.3 800.2
 
 
Number of shares (m)
 
- in issue 221.8 218.9 220.4
 
- in issue (net of treasury shares) 203.9 195.3 202.4
 
- weighted average 203.4 187.9 192.3
 
- diluted weighted average 207.4 190.0 195.0
 
 
Unaudited Audited
 
Aug-15 Aug-14 Feb-15
 
6 months 6 months 12 months
 
Restated
 
Condensed group statement of comprehensive income Rm Rm Rm
 
 
Profit for the period 1 207 820 2 191
 
Other comprehensive loss for the period, net of taxation (97) (53) (79)
 
Items that may be subsequently reclassified to profit
 
or loss
 
Currency translation adjustments (105) (71) (18)
 
Reclassification of currency translation adjustments (1)
 
Cash flow hedges 2 (7) (8)
 
Reclassification of cash flow hedges 1 24 25
 
Share of other comprehensive income/(loss) and equity
 
movements of associates 6 5 (59)
 
Items that will not be reclassified to profit or loss
 
Remeasurement of post-employment benefit obligations (1) (4) (18)
 
Total comprehensive income for the period 1 110 767 2 112
 
 
Attributable to:
 
Owners of the parent 859 544 1 496
 
Non-controlling interests 251 223 616
 
1 110 767 2 112
 
 
Unaudited Audited
 
Aug-15 Aug-14 Feb-15
 
Restated
 
Condensed group statement of financial position Rm Rm Rm
 
 
Assets
 
Property, plant and equipment 5 299 3 783 4 869
 
Intangible assets 2 681 2 658 2 647
 
Biological assets 340 212 274
 
Investment in ordinary shares of associates and
 
joint ventures 11 266 6 761 10 755
 
Investment in preference shares of/loans granted
 
to associates and joint ventures 312 388 309
 
Deferred income tax assets 208 190 179
 
Financial assets linked to investment contracts (note 7) 17 229 12 761 14 223
 
Cash and cash equivalents 22 15 27
 
Other financial assets 17 207 12 746 14 196
 
Other financial assets 6 506 5 407 5 311
 
Inventory 1 141 917 1 181
 
Trade and other receivables (note 8) 5 331 3 929 4 085
 
Current income tax assets 55 64 49
 
Cash and cash equivalents 2 336 1 399 1 619
 
Non-current assets held for sale (note 10) 1 106
 
Total assets 52 704 38 470 45 607
 
 
Equity
 
Ordinary shareholders’ equity 10 952 8 438 9 999
 
Non-controlling interests 9 919 6 061 9 097
 
Total equity 20 871 14 499 19 096
 
 
Liabilities
 
Insurance contracts 578 503 574
 
Financial liabilities under investment contracts (note 7) 17 229 12 761 14 223
 
Borrowings 5 809 3 972 4 756
 
Other financial liabilities 101 118 137
 
Third-party liabilities arising on consolidation
 
of mutual funds 2 447 2 611 2 057
 
Deferred income tax liabilities 701 453 631
 
Trade and other payables and employee benefit
 
liabilities (note 8) 4 884 3 488 4 078
 
Current income tax liabilities 84 65 55
 
Total liabilities 31 833 23 971 26 511
 
 
Total equity and liabilities 52 704 38 470 45 607
 
 
Net asset value per share (R) 53.71 43.21 49.39
 
Net tangible asset value per share (R) 40.56 29.60 36.32
 
 
Unaudited Audited
 
Aug-15 Aug-14 Feb-15
 
6 months 6 months 12 months
 
Condensed group statement Restated
 
of changes in equity Change % Rm Rm Rm
 
 
Ordinary shareholders’ equity at beginning
 
of the period 9 999 6 862 6 862
 
Total comprehensive income 859 544 1 496
 
Issue of shares 264 1 073 2 881
 
Share buy-back (1 140)
 
Share-based payment costs - employees 26 21 46
 
Net movement in treasury shares 5 39 138
 
Transactions with non-controlling interests 93 65 (11)
 
Dividends paid (294) (166) (273)
 
Ordinary shareholders’ equity at end
 
of the period 10 952 8 438 9 999
 
 
Non-controlling interests at beginning of
 
the period 9 097 5 607 5 607
 
Total comprehensive income 251 223 616
 
Issue of shares 773 459 2 852
 
Share-based payment costs - employees 8 3 15
 
Business combinations (2) 12 346
 
Transactions with non-controlling interests (18) (104) (105)
 
Dividends paid (190) (139) (234)
 
Non-controlling interests at end of the period 9 919 6 061 9 097
 
 
Total equity 20 871 14 499 19 096
 
 
Dividend per share (cents)
 
- interim 82 100.0 55.0 55.0
 
- final 145.0
 
100.0 55.0 200.0
 
 
Unaudited Audited
 
Aug-15 Aug-14 Feb-15
 
6 months 6 months 12 months
 
Condensed group statement of cash flows Rm Rm Rm
 
 
Net cash flow from operating activities
 
Cash generated from/(utilised by) operations (note 5.1) 65 (364) 661
 
Interest income 296 236 596
 
Dividend income 371 289 530
 
Finance costs (205) (135) (327)
 
Taxation paid (201) (142) (384)
 
Net cash flow from operating activities before cash
 
movement in policyholder funds 326 (116) 1 076
 
Cash movement in policyholder funds (5) (37) (24)
 
Net cash flow from operating activities 321 (153) 1 052
 
 
Net cash flow from investing activities (1 031) (2 311) (3 502)
 
Net cash flow from business combinations (note 5.2) (242) (438) (584)
 
Net cash flow from consolidation of mutual fund (1 175) (1 175)
 
Acquisition of ordinary shares in associates (68) (238) (350)
 
Proceeds from disposal of ordinary shares in associates 80 5 20
 
Acquisition of property, plant and equipment (447) (356) (1 425)
 
Other investing activities (354) (109) 12
 
 
Net cash flow from financing activities 1 275 1 222 1 669
 
Dividends paid to group shareholders (294) (166) (273)
 
Dividends paid to non-controlling interests (187) (139) (234)
 
Capital contributions by non-controlling interests 725 259 293
 
Net disposal to/(acquisition from) non-controlling
 
interests 18 (29) (508)
 
Net borrowings drawn 746 193 931
 
Proceeds from disposal of holding company’s treasury
 
shares 3 31 64
 
Shares issued 264 1 073 1 396
 
 
Net increase/(decrease) in cash and cash equivalents 565 (1 242) (781)
 
Exchange (losses)/gains on cash and cash equivalents (7) (1) 26
 
Cash and cash equivalents at beginning of the period 826 1 581 1 581
 
Cash and cash equivalents at end of the period* 1 384 338 826
 
 
Cash and cash equivalents consists of:
 
Cash and cash equivalents attributable to equity holders 2 231 1 392 1 480
 
Cash and cash equivalents linked to investment contracts 22 15 27
 
Other clients’ cash and cash equivalents 105 7 139
 
Cash and cash equivalents attributable to equity holders
 
and included in non-current assets held for sale 3
 
Bank overdrafts attributable to equity holders
 
(included in borrowings) (974) (1 076) (823)
 
1 384 338 826
 
 
* In addition to cash and cash equivalents presented as at the latest reporting date, the group
 
holds R1.3bn (31 August 2014: R1.3bn; 28 February 2015: R860m) in highly liquid debt securities
 
that form part of the group’s resources for meeting short-term cash requirements.
 
 
Notes to the condensed interim group financial statements
 
 
1. Basis of presentation and accounting policies
 
 
These condensed interim 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
 
JSE Ltd Listings Requirements.
 
 
The accounting policies applied in the preparation of these condensed interim group financial
 
statements are consistent in all material respects with those used in the prior year’s annual
 
financial statements. The group also adopted the various other revisions to IFRS which are
 
effective for its financial year ending 29 February 2016. These revisions have not resulted in
 
material changes to the group’s reported results and disclosures in these condensed interim group
 
financial statements.
 
 
In preparing these condensed interim group financial statements, the significant judgements made
 
by management in applying the group’s accounting policies and the key sources of estimation
 
uncertainty were the same as those that applied to the group’s annual financial statements for
 
the year ended 28 February 2015.
 
 
2. Preparation
 
 
These condensed interim group financial statements were compiled under the supervision of the group
 
financial director, Mr WL Greeff, CA(SA), and were not reviewed or audited by PSG Group’s external
 
auditor, PricewaterhouseCoopers Inc. Any reference to future financial performance included in this
 
announcement, has not been reviewed or reported on by the PSG Group’s auditor.
 
 
3. PSG Financial Services
 
 
PSG Financial Services is a wholly-owned subsidiary of PSG Group, except for the 17 415 770
 
(31 August 2014: 17 415 770; 28 February 2015: 17 415 770) 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.
 
 
Unaudited Audited
 
Aug-15 Aug-14 Feb-15
 
6 months 6 months 12 months
 
Restated
 
Rm Rm Rm
 
4. Headline earnings
 
 
Profit for the period attributable to owners
 
of the parent 862 569 1 560
 
Non-headline items
 
Gross amounts 8 11 11
 
Impairment of investments in associates 2 2 4
 
Net profit on sale/dilution of investments
 
in associates (20) (9) (11)
 
Fair value gain on step-up from associate
 
to subsidiary (17) (45)
 
Net (profit)/loss on sale/impairment of intangible
 
assets (including goodwill) (3) 8 38
 
Non-headline items of associates 33 28 44
 
Reversal of impairment on property,
 
plant and equipment (12)
 
Other (4) (1) (7)
 
Non-controlling interests (15) 1 6
 
Taxation 5 1 (3)
 
Headline earnings 860 582 1 574
 
 
5. Notes to the condensed group statement of cash flows
 
 
5.1 Cash generated from/(utilised by) operations
 
 
Profit before taxation 1 481 962 2 583
 
Share of profits of associates and joint ventures (720) (655) (1 448)
 
Depreciation and amortisation 176 134 295
 
Investment income (464) (305) (764)
 
Finance costs 230 164 337
 
Working capital changes and other non-cash items (638) (664) (342)
 
65 (364) 661
 
 
5.2 Net cash flow from business combinations
 
 
The group’s most significant business combinations concluded during the year under review included:
 
 
Aspen Logistics (Pty) Ltd (“Aspen Logistics”)
 
During March 2015, the group, through Capespan Group Ltd (“Capespan”), acquired 75% of the issued
 
share capital of Aspen Logistics for a cash consideration of R5m. Capespan South Africa’s fruit
 
logistical operations were integrated with Aspen Logistics and subsequently rebranded as Contour
 
Logistics. Contour Logistics is a logistical solutions service provider supporting Capespan’s
 
operations. Goodwill arose in respect of, inter alia, synergies pertaining to the integration
 
of the logistical activities.
 
 
Novo Packhouse business operations (“Novo Packhouse”)
 
During March 2015, the group, through Capespan, acquired the business operations of Novo Packhouse,
 
including its coldstores, equipment and inventory, for a cash consideration of R120m. Novo Packhouse
 
complements the group’s existing coldstore operations in South Africa. No goodwill arose in respect
 
of this business combination.
 
 
Theewaterskloof farming operations (“Theewaterskloof”)
 
During March 2015, the group, through Capespan, acquired the farming operations of Theewaterskloof,
 
a pome fruit farm, for a cash consideration of R120m. Theewaterskloof complements the group’s
 
existing farming operations in South Africa. No goodwill arose in respect of this business
 
combination.
 
 
The amounts of identifiable net assets acquired, as well as goodwill and non-controlling interests
 
recognised from business combinations, can be summarised as follows:
 
 
Aspen Novo Theewaters-
 
Logistics Packhouse kloof Other Total
 
Rm Rm Rm Rm Rm
 
 
 
 
Identifiable net (liabilities)/
 
assets acquired (7) 120 120 233
 
Goodwill recognised 10 3 13
 
Non-controlling interests recognised 2 2
 
5 120 120 3 248
 
Deferred purchase consideration (3) (3)
 
Cash consideration paid 5 120 120 - 245
 
 
Cash consideration paid (5) (120) (120) (245)
 
Cash and cash equivalents acquired 1 2 3
 
Net cash outflow from subsidiaries
 
acquired (4) (120) (120) 2 (242)
 
 
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.
 
 
The aforementioned business combinations have been provisionally accounted for and do not contain
 
any contingent consideration or indemnification asset arrangements.
 
 
6. Corporate action
 
 
Apart from the transactions set out in note 5.2, the group’s most significant corporate actions
 
included the following:
 
 
• The group raised R267m in cash through the issue of 1.4m ordinary shares by means of a
 
private placement.
 
• The group invested R438m in cash in the Curro rights offer to fund further expansion.
 
• The group, through Zeder, successfully concluded the Capespan scheme of arrangement valued
 
in excess of R500m by acquiring the remaining 25% interest held by minority shareholders
 
other than management.
 
• The group, through PSG Private Equity, disposed of its manufacturing-related investments in
 
GRW Holdings (Pty) Ltd (“GRW”) and Friedshelf 903 (Pty) Ltd t/a Protea Foundry (both
 
associated companies) for cash proceeds of R72m and R30m, respectively.
 
 
7. Linked investment contracts
 
 
These represent PSG Life Ltd clients’ assets held under investment contracts, which are linked to
 
a corresponding liability. Accordingly, the value of policy benefits payable is directly linked to
 
the fair value of the supporting assets and therefore the group is not exposed to the financial
 
risks associated with these assets and liabilities. 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
 
Rm Rm Rm
 
Six months ended 31 August 2015 (unaudited)
 
Investment income 200 264 464
 
Fair value gains and losses 441 299 740
 
Fair value adjustment to investment contract liabilities (639) (639)
 
2 563 565
 
 
Six months ended 31 August 2014 (unaudited)
 
Investment income 142 163 305
 
Fair value gains and losses 925 85 1 010
 
Fair value adjustment to investment contract liabilities (1 066) (1 066)
 
1 248 249
 
 
Year ended 28 February 2015 (audited)
 
Investment income 302 462 764
 
Fair value gains and losses 1 184 216 1 400
 
Fair value adjustment to investment contract liabilities (1 483) (1 483)
 
3 678 681
 
 
8. Trade and other receivables and payables
 
 
Included under trade and other receivables are PSG Online broker and clearing accounts of which
 
R2.5bn (31 August 2014: R1.6bn; 28 February 2015: R1.9bn) represents amounts owing by the JSE
 
for trades conducted during the last few days before the reporting date. 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.
 
 
9. Capital commitments and contingencies
 
 
The group’s most significant capital commitments in respect of the current financial year relate
 
to Curro’s development of eight new schools (six campuses) to the value of R400m, the improvement
 
of existing campuses to the value of R600m and investment in land banking for future growth to the
 
value of R300m.
 
 
10. Non-current assets and liabilities held for sale
 
 
The non-current assets and liabilities held for sale as at 28 February 2015 comprised mainly
 
PSG Private Equity’s interest in GRW (an associate), and Zeder’s interest, through Capespan,
 
in Addo Cold Storage (Pty) Ltd (a subsidiary). These assets were disposed of during the period
 
under review.
 
 
11. Financial instruments
 
 
11.1 Financial risk factors
 
 
The group’s activities expose it to a variety of financial risks: market risk (including currency
 
risk, fair value risk, fair value interest rate risk, and price risk), credit risk and liquidity risk.
 
 
These condensed interim 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 2015. Risk management continues to be carried out by each major entity within the group
 
under policies approved by the respective boards of directors.
 
 
11.2 Fair value estimation
 
 
The group, through PSG Life Ltd, issues linked investment contracts 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 carrying 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
 
Rm Rm Rm Rm
 
As at 31 August 2015 (unaudited)
 
Assets
 
Derivative financial assets 88 88
 
Equity securities 887 1 630 79 2 596
 
Debt securities 466 427 90 983
 
Unit-linked investments 14 642 946 15 588
 
Investment in investment contracts 384 384
 
Closing balance 1 353 17 171 1 115 19 639
 
 
Liabilities
 
Derivative financial liabilities 31 66 97
 
Investment contracts 15 563 1 026 16 589
 
Trade and other payables 15 15
 
Third-party liabilities arising on consolidation
 
of mutual funds 2 447 2 447
 
Closing balance - 18 041 1 107 19 148
 
 
As at 31 August 2014 (unaudited)
 
Assets
 
Derivative financial assets 41 41
 
Equity securities 1 137 106 47 1 290
 
Debt securities 24 662 686
 
Unit-linked investments 9 796 1 345 11 141
 
Investment in investment contracts 227 1 228
 
Closing balance 1 161 10 832 1 393 13 386
 
 
Liabilities
 
Derivative financial liabilities 69 47 116
 
Investment contracts 10 413 1 344 11 757
 
Trade and other payables 14 14
 
Third-party liabilities arising on consolidation
 
of mutual funds 2 611 2 611
 
Closing balance - 13 093 1 405 14 498
 
 
As at 28 February 2015 (audited)
 
Assets
 
Derivative financial assets 78 78
 
Equity securities 1 025 1 305 82 2 412
 
Debt securities 477 154 631
 
Unit-linked investments 11 333 1 117 12 450
 
Investment in investment contracts 226 1 227
 
Closing balance 1 502 13 096 1 200 15 798
 
 
Liabilities
 
Derivative financial liabilities 69 64 133
 
Investment contracts 12 283 1 107 13 390
 
Trade and other payables 13 13
 
Third-party liabilities arising on consolidation
 
of mutual funds 2 057 2 057
 
Closing balance - 14 409 1 184 15 593
 
 
The following table presents changes in level 3 financial instruments during the respective periods:
 
 
Unaudited Audited
 
Aug-15 Aug-14 Feb-15
 
Assets Liabilities Assets Liabilities Assets Liabilities
 
Rm Rm Rm Rm Rm Rm
 
 
Opening balance 1 200 1 184 2 532 2 545 2 532 2 545
 
Additions 1 850 1 852 3 111 3 114 3 337 3 304
 
Disposals (2 034) (2 038) (4 387) (4 392) (4 764) (4 763)
 
Fair value adjustments 99 106 137 138 95 96
 
Other movements 3 2
 
Closing balance 1 115 1 107 1 393 1 405 1 200 1 184
 
 
Unit-linked investments and debt securities represent the largest portion of the level 3 financial
 
assets and relate to units and debentures held in hedge funds that are priced monthly. The prices
 
are obtained from the asset managers of the particular hedge funds. These are held to match investment
 
contract liabilities, and as such any change in measurement would result in a similar adjustment to
 
investment contract liabilities.
 
 
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 “other financial
 
liabilities” comprises mainly derivative financial liabilities.
 
 
There have been no significant transfers between level 1, 2 or 3 during the period 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 Exit price on recognised Not applicable
 
and liabilities over-the-counter platforms
 
Debt securities Valuation model that uses the market Bond interest rate
 
inputs (yield of benchmark bonds) curves
 
Issuer credit ratings
 
Liquidity spreads
 
Unit-linked investments Quoted put (exit) price provided by Not applicable - prices
 
the fund manager available publicly
 
Investment in investment Prices are obtained from the insurer Not applicable - prices
 
contracts of the 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 Quoted put (exit) price provided by the Not applicable - prices
 
arising on consolidation of fund manager available publicly
 
mutual funds
 
 
13. Restatement of prior period figures
 
 
The prior period figures of Capespan, a subsidiary of the group through Zeder, have been restated
 
to account for the following:
 
 
Agriculture: Bearer plants
 
Amendments were made to IAS 41 Agriculture and IAS 16 Property, plant and equipment that allow
 
companies to account for bearer plants at cost less accumulated depreciation and impairment losses.
 
Long-term biological assets consist of bearer plants used in the production of agricultural produce
 
and are expected to bear produce for more than one period. Management’s intention is to recover the
 
economic benefit of these assets through continued use. During the previous year, management
 
revised its accounting policy to account for bearer plants in accordance with the cost model
 
under IAS 16; however, the results for the period ended 31 August 2014 did not fully incorporate
 
these amendments, while the audited results for the year ended 28 February 2015 did previously
 
incorporate these amendments.
 
 
Accounting for the sales and cost of sales of product sold
 
During the previous year, management reassessed an existing management agreement which was
 
accounted for as management fee income, but concluded it to rather fall within IFRIC 4 Determining
 
whether an Arrangement contains a Lease and therefore applied IAS 17 Leases retrospectively. This
 
resulted in Capespan accounting for this agreement and the related farming operations as principal;
 
however, the results for the period ended 31 August 2014 did not incorporate these amendments, while
 
the audited results for the year ended 28 February 2015 did previously incorporate these amendments.
 
 
The effect of these restatements on the group’s results are as follows:
 
 
Previously Now
 
reported reported Change
 
Rm Rm Rm
 
Income statement for the six months ended
 
31 August 2014
 
 
Revenue from sale of goods 5 369 5 370 1
 
Cost of goods sold (4 436) (4 513) (77)
 
Changes in fair value of biological assets 15 21 6
 
Marketing, administration and other expenses (2 325) (2 300) 25
 
Finance costs (165) (164) 1
 
Taxation (157) (142) 15
 
Profit for the period (29)
 
 
Attributable to:
 
Owners of the parent 575 569 (6)
 
Non-controlling interests 274 251 (23)
 
(29)
 
 
Earnings per share for the six months
 
ended 31 August 2014 (cents)
 
Recurring headline 252.7 249.4 (3.3)
 
Headline 312.9 309.7 (3.2)
 
Attributable/basic 305.8 302.7 3.1
 
 
Statement of financial position as at 31 August 2014
 
Biological assets 203 212 9
 
Trade and other receivables 3 895 3 929 34
 
43
 
 
Ordinary shareholders’ equity 8 439 8 438 (1)
 
Non-controlling interests 6 068 6 061 (7)
 
Deferred income tax liabilities 452 453 1
 
Trade and other payables and employee benefit
 
liabilities 3 438 3 488 50
 
43
 
 
14. Segment report
 
 
The group’s classification into seven reportable segments, namely: Capitec, Curro, PSG Konsult,
 
Zeder, PSG Private Equity, Dipeo (previously Thembeka), 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, asset management and insurance, while Curro offers
 
private education services. The other segments offer financing, banking, investing and advisory
 
services. All segments operate predominantly in the Republic of South Africa. However, the group
 
has exposure to offshore operations through Zeder’s investments in Capespan, Zaad Holdings Ltd and
 
Agrivision Africa, and PSG Private Equity’s investments in CA Sales Holdings (Pty) Ltd and
 
Entrepo Holdings (Pty) Ltd.
 
 
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. 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 SOTP
 
Six months ended ** ** profit) earnings earnings value^
 
31 August 2015 (unaudited) Rm Rm Rm Rm Rm Rm
 
 
Capitec* 451 451 17 134
 
Curro 716 29 29 7 515
 
PSG Konsult 1 708 116 116 6 635
 
Zeder 4 878 75 (46) 29 3 797
 
PSG Private Equity 1 912 47 47 1 394
 
Dipeo 343 112 112 789
 
PSG Corporate
 
(including PSG Capital) 243 (178) 41 57 98 3 312
 
Funding 104 (51) (84) 16 (68) (2 416)
 
Other 46 46 2 392
 
Total 9 904 (229) 721 139 860 40 552
 
Non-headline items 2
 
Earnings attributable to non-controlling interests 345
 
Taxation 274
 
Profit before taxation 1 481
 
 
Recurring
 
Inter- headline Non-
 
segment earnings recurring
 
Income income (segment headline Headline SOTP
 
Six months ended ** ** profit) earnings earnings value^
 
31 August 2014 (unaudited) Rm Rm Rm Rm Rm Rm
 
 
Capitec* 332 332 6 912
 
Curro 491 15 15 4 795
 
PSG Konsult 1 488 92 (1) 91 5 219
 
Zeder 4 367 62 14 76 2 435
 
PSG Private Equity 1 133 16 (1) 15 1 078
 
Thembeka* 16 126 142 1 415
 
PSG Corporate
 
(including PSG Capital)^^ 62 (55) 1 (2) (1) 2 316
 
Funding^^ 28 (10) (85) (23) (108) (2 071)
 
Other^^ 20 20 51
 
Total 7 562 (65) 469 113 582 22 150
 
Non-headline items (13)
 
Earnings attributable to non-controlling interests 251
 
Taxation 142
 
Profit before taxation 962
 
 
Recurring
 
Inter- headline Non-
 
segment earnings recurring
 
Income income (segment headline Headline SOTP
 
Year ended ** ** profit) earnings earnings value^
 
28 February 2015 (audited) Rm Rm Rm Rm Rm Rm
 
 
Capitec* 729 729 14 549
 
Curro 1 013 31 31 6 236
 
PSG Konsult 2 939 214 (1) 213 5 710
 
Zeder 8 993 152 (52) 100 3 712
 
PSG Private Equity 2 919 59 (9) 50 1 246
 
Dipeo and Thembeka 242 45 432 477 603
 
PSG Corporate
 
(including PSG Capital)^^ 331 (260) 38 87 125 3 190
 
Funding^^ 65 (32) (177) (25) (202) (2 090)
 
Other^^ 51 51 239
 
Total 16 502 (292) 1 142 432 1 574 33 395
 
Non-headline items (14)
 
Earnings attributable to non-controlling interests 631
 
Taxation 392
 
Profit before taxation 2 583
 
 
Unaudited Audited
 
Aug-15 Aug-14 Feb-15
 
6 months 6 months 12 months
 
Restated
 
Rm Rm Rm
 
Reconciliation of segment revenue to IFRS revenue:
 
Segment revenue as stated above:
 
Income 9 904 7 569 16 502
 
Intersegment income (229) (65) (292)
 
Less:
 
Changes in fair value of biological assets (61) (21) (144)
 
Fair value gains and losses (740) (1 010) (1 400)
 
Fair value adjustment to investment
 
contract liabilities 639 1 066 1 483
 
Other operating income (52) (28) (95)
 
IFRS revenue 9 461 7 511 16 054
 
 
Non-recurring headline earnings comprised
 
the following:
 
Non-recurring items from investments 66 137 370
 
Net fair value (losses)/gains on
 
liquid investment portfolio (2) 2
 
Other gains/(losses) 73 (22) 60
 
139 113 432
 
 
* 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.
 
^^ Reallocations in respect of recurring headline earnings have been made between “PSG Corporate”,
 
“Funding” and “Other” in order to ensure consistent presentation between all periods presented.
 
 
15. Related-party transactions
 
 
Related-party transactions similar to those disclosed in the group’s annual financial statements
 
for the year ended 28 February 2015 took place during the period under review.
 
 
16. Events subsequent to the reporting period
 
 
No material event has occurred between the end of the reporting period and the date of approval of
 
these condensed interim group financial statements, apart from PSG Konsult’s acquisition of a 70%
 
shareholding in DMH Associates, which is a leading independent wealth advisory firm located in
 
Mauritius.
 
 
On behalf of the board
 
 
Jannie Mouton Piet Mouton Wynand Greeff
 
Chairman Chief executive officer Financial director
 
 
Stellenbosch
 
12 October 2015
 
 
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: 12/10/2015 01:01:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
 
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