Reviewed Preliminary Consolidated Financial Results For The Year Ended 28 February 2019
 
 
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”)
 
 
REVIEWED PRELIMINARY CONSOLIDATED FINANCIAL RESULTS FOR THE YEAR ENDED 28 FEBRUARY 2019
 
 
• Recurring earnings up 9% to R10.86 per share
 
• Sum-of-the-parts value of R329.73 per share as at 18 April 2019
 
• Dividend for the year up 10% to R4.56 per share
 
 
OVERVIEW
 
 
PSG is an investment holding company consisting of underlying investments that operate across a
 
diverse range of industries, which include banking, financial services, education and food and
 
related business, as well as early-stage investments in select growth sectors. PSG’s market
 
capitalisation (net of treasury shares) is approximately R60bn.
 
 
PERFORMANCE
 
 
The two key benchmarks used by PSG to measure performance are sum-of-the-parts (“SOTP”) value
 
and recurring earnings per share, as long-term growth in PSG’s SOTP value and share price should
 
depend on, inter alia, sustained growth in the recurring earnings per share of our underlying
 
investments.
 
 
SOTP
 
 
The calculation of PSG’s SOTP value is simple and requires limited subjectivity as more than 90%
 
of the value is calculated using JSE-listed share prices, while other investments are included
 
at market-related valuations. At 28 February 2019, the SOTP value per PSG share was R311.45
 
(2018: R255.17), representing a 22% increase. At 18 April 2019, it was R329.73 per share. The
 
five-year compound annual growth rate (“CAGR”) of PSG’s SOTP value per share and share price at
 
28 February 2019 was 27% and 24%, respectively.
 
 
28 Feb 28 Feb 28 Feb 18 Apr
 
2017 2018 2019 2019 Share Five-year
 
Asset/(liability) Rm Rm Rm Rm of total CAGR^^
 
 
Capitec* 25 727 29 540 46 351 50 439 67% 48%
 
PSG Konsult* 6 084 7 048 8 700 8 400 11% 16%
 
Curro* (including Stadio
 
until unbundling in
 
Oct 2017) 11 180 7 987 5 714 5 913 8% (2%)
 
PSG Alpha 1 909 5 201 4 712 4 683 6% 21%
 
Stadio* (since unbundling
 
from Curro in Oct 2017) 2 379 1 253 1 239
 
Other investments** 1 909 2 822 3 459 3 444
 
Zeder* 5 398 4 823 3 166 3 255 4% 1%
 
Dipeo** 812 535 n/a
 
Other assets 3 586 2 603 1 702 2 237 4%
 
Cash^ 1 513 1 000 323 369
 
Pref investments and
 
loans receivable^ 2 002 1 558 1 297 1 786
 
Other^ 71 45 82 82
 
Total assets 54 696 57 737 70 345 74 927 100%
 
Perpetual pref funding* (1 350) (1 278) (1 367) (1 446)
 
Other debt^ (949) (949) (1 020) (1 535)
 
Total SOTP value 52 397 55 510 67 958 71 946
 
 
Shares in issue (net of
 
treasury shares) (m) 217.5 217.5 218.2 218.2
 
 
SOTP value per share (R) 240.87 255.17 311.45 329.73 27%
 
 
Share price (R) 251.43 217.50 259.78 272.90 24%
 
 
* Listed on the JSE ** SOTP value
 
^ Carrying value ^^ Based on share price/SOTP value per share as at 28 Feb 2019
 
 
Note: PSG’s live SOTP containing further information is available at www.psggroup.co.za
 
 
Capitec remains PSG’s largest investment comprising 66% of its total SOTP assets as at
 
28 February 2019 (2018: 51%), and the major contributor to PSG’s recurring earnings.
 
 
RECURRING EARNINGS
 
 
PSG’s recurring earnings per share increased by 9% to R10.86 (2018: R9.94) following commendable
 
performance from Capitec, PSG Konsult and Curro, offset by PSG Alpha and Zeder.
 
 
28 Feb 28 Feb 28 Feb
 
2017 2018 Change 2019
 
Rm Rm % Rm
 
 
Capitec 1 164 1 369 1 625
 
PSG Konsult 300 348 361
 
Curro (including Stadio until
 
unbundling in Oct 2017) 96 110 137
 
PSG Alpha (including Stadio since
 
unbundling in Oct 2017) 133 172 216
 
Zeder 275 205 207
 
Dipeo (20) (56) (29)
 
PSG Corporate 29 (7) (45)
 
Other (mainly pref div income) 112 136 84
 
Recurring earnings before funding 2 089 2 277 12 2 556
 
Funding (net of interest income) (104) (135) (199)
 
Recurring earnings 1 985 2 142 10 2 357
 
Non-recurring items 160 (186) (163)
 
Headline earnings 2 145 1 956 12 2 194
 
Non-headline items 17 (42) (268)
 
Attributable earnings 2 162 1 914 1 1 926
 
 
Non-recurring items comprise:
 
- Unrealised fair value gains/(losses) on
 
Dipeo’s investment portfolio 187 (131) (246)
 
- Other (27) (55) 83
 
160 (186) (163)
 
 
Weighted average number of shares in issue
 
(net of treasury shares) (m) 214.2 215.5 1 217.0
 
 
Earnings per share (R)
 
- Recurring 9.27 9.94 9 10.86
 
- Headline 10.01 9.08 11 10.11
 
- Attributable 10.09 8.88 - 8.88
 
 
Dividend per share (R) 3.75 4.15 10 4.56
 
 
PSG’s headline earnings per share increased by 11% mainly due to the aforementioned increase in
 
recurring earnings, whilst attributable earnings per share showed no growth mainly as a result of
 
Zeder’s impairment of its investment in Pioneer Foods following the decline in its share price.
 
 
CAPITEC (30.7%)
 
 
Capitec is a South African retail bank focused on delivering simplified and affordable banking
 
solutions.
 
 
It reported a 19% increase in headline earnings per share for the year under review.
 
 
Capitec is listed on the JSE and its comprehensive results are available at www.capitecbank.co.za.
 
 
PSG KONSULT (60.6%)
 
 
PSG Konsult is a financial services company, focused on providing wealth management, asset
 
management and insurance solutions to clients.
 
 
It reported a 4% increase in recurring headline earnings per share for the year under review.
 
 
PSG Konsult has its primary listing on the JSE, with secondary listings on the Namibian Stock
 
Exchange and the Mauritian Stock Exchange, and its comprehensive results are available
 
at www.psg.co.za.
 
 
CURRO (55.4%)
 
 
Curro is the largest provider of private school education in Southern Africa.
 
 
Its schools-only business (i.e. excluding Stadio’s results prior to its unbundling in October 2017)
 
reported a 23% increase in headline earnings per share for its financial year ended 31 December 2018.
 
 
Curro is listed on the JSE and its comprehensive results are available at www.curro.co.za.
 
 
PSG ALPHA (98.1%)
 
 
PSG Alpha serves as incubator to identify and help build the businesses of tomorrow. Given its
 
nature, this portfolio is likely to yield volatile earnings, while providing optionality. Its major
 
investments include shareholdings in Stadio (private higher education - 44%), CA Sales (FMCG
 
distribution - 47.7%), Evergreen (retirement lifestyle villages - 50%) and Energy Partners
 
(manufacturer, owner and operator of energy assets - 54.1%).
 
 
PSG Alpha reported a 7% decline in recurring earnings per share for the year under review following
 
investments in initially low earnings-yielding start-up businesses such as Stadio and Evergreen.
 
 
ZEDER (43.8%)
 
 
Zeder is an investor in the broad agribusiness industry. Its largest investment is a 27.1% interest
 
in Pioneer Foods, comprising 43% of Zeder’s total SOTP assets.
 
 
It reported no increase in recurring headline earnings per share for the year under review.
 
 
Both Zeder and Pioneer Foods are listed on the JSE and their respective comprehensive results are
 
available at www.zeder.co.za and www.pioneerfoods.co.za.
 
 
DIPEO (49%)
 
 
Dipeo, a BEE investment holding company, is 51%-owned by the Dipeo BEE Education Trust of which all
 
beneficiaries are black individuals. The trust will use its share of the value created in Dipeo to
 
fund black students’ education.
 
 
Dipeo’s most significant investments as at 28 February 2019 included shareholdings in Curro (5.2%),
 
Stadio (3.4%), Pioneer Foods (4.3%), Quantum Foods (4.4%), Kaap Agri (20%) and Energy Partners (15.7%).
 
The investment in Energy Partners remain subject to a BEE lock-in period.
 
 
During the year under review, Dipeo’s SOTP value turned negative (i.e. liabilities exceeded assets)
 
following a continued decline in mainly Pioneer Foods’ share price, with a resultant negative impact
 
on PSG Group’s SOTP value through reducing its investment in Dipeo to zero and impairing PSG Group’s
 
pref investment in Dipeo to the extent required. PSG Group also ceased to account for recurring pref
 
dividend income from 1 September 2018.
 
 
PROSPECTS
 
 
Despite obvious challenges, PSG remains positive about South Africa and the opportunities it
 
presents. We believe PSG’s investment portfolio is suitably positioned to continue yielding
 
above-average returns.
 
 
DIVIDENDS
 
 
Ordinary shares
 
 
PSG’s policy remains to pay up to 100% of available free cash flow as an ordinary dividend, of which
 
approximately one third is payable as an interim and the balance as a final dividend at year-end.
 
The directors have resolved to declare a final gross dividend of 304 cents (2018: 277 cents) per
 
share from income reserves for a total gross dividend of 456 cents (2018: 415 cents) per share in
 
respect of the year ended 28 February 2019.
 
 
The final dividend amount, net of South African dividend tax of 20%, is 243.2 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 232 108 050, and the income tax number of the company is 9950080714.
 
 
The salient dates for this dividend distribution are:
 
Last day to trade cum dividend Tuesday, 14 May 2019
 
Trading ex-dividend commences Wednesday, 15 May 2019
 
Record date Friday, 17 May 2019
 
Payment date Monday, 20 May 2019
 
 
Share certificates may not be dematerialised or rematerialised between Wednesday, 15 May 2019, and
 
Friday, 17 May 2019, both days inclusive.
 
 
Preference shares
 
 
The directors of PSG Financial Services declared a gross dividend of 418.82 cents per share in
 
respect of the cumulative, non-redeemable, non-participating preference shares for the six months
 
ended 28 February 2019, which was paid on Monday, 25 March 2019. The related detailed announcement
 
was disseminated on the JSE’s Stock Exchange News Service.
 
 
A SPECIAL THANK YOU TO JANNIE MOUTON
 
 
We would like to extend a special word of thanks to Jannie Mouton, PSG’s founder and chairman of
 
24 years, who retired from the board during the year under review. Jannie, we are eternally grateful
 
to you and the team for the fantastic company you have built and the positive contribution that you
 
have made to South Africa. The PSG board wishes you only the very best.
 
 
INTRODUCTION TO THE SUMMARY CONSOLIDATED FINANCIAL STATEMENTS
 
for the year ended 28 February 2019
 
 
Basis of presentation and accounting policies
 
 
These summary consolidated financial statements are prepared in accordance with the requirements
 
of the JSE Listings Requirements for preliminary reports and the requirements of the Companies Act
 
of South Africa. The JSE Listings Requirements require preliminary reports to be prepared in
 
accordance with the framework concepts and the measurement and recognition requirements of
 
International Financial Reporting Standards (“IFRS”), SAICA Financial Reporting Guides as issued
 
by the Accounting Practices Committee and Financial Reporting Pronouncements as issued by the
 
Financial Reporting Standards Council and to also, as a minimum, contain the information required
 
by IAS 34 Interim Financial Reporting.
 
 
The accounting policies applied in the preparation of these summary consolidated financial
 
statements are in terms of IFRS and are consistent with those applied in the previous
 
consolidated annual financial statements, as amended for the adoption of the various revisions to
 
IFRS which are effective for the year ended 28 February 2019. Apart from the adoption of IFRS 9
 
Financial Instruments, these revisions have not resulted in material changes to the group’s
 
reported results and disclosures in these summary consolidated financial statements.
 
 
IFRS 9, adopted by the group effective 1 March 2018, is a new standard which replaced IAS 39
 
Financial Instruments: Recognition and Measurement. The standard, inter alia, replaced the
 
multiple classification and measurement models in IAS 39 with a single model that has only two
 
categories: amortised cost and fair value. Furthermore, the standard replaced the incurred credit
 
loss impairment model in IAS 39 with an expected credit loss impairment model.
 
 
The group applied IFRS 9 retrospectively without restating comparative figures and therefore the
 
group’s equity as at 1 March 2018 was adjusted for the differences in the carrying amounts of
 
financial instruments as measured in terms of IFRS 9 and IAS 39, respectively. The resultant
 
impact was an adjustment against ordinary shareholders’ equity and non-controlling interests of
 
R231m and R32m, respectively. The group was most significantly impacted by Capitec’s application
 
of the expected credit loss impairment model to its loan book. The net charge (i.e. debit against
 
retained earnings) to Capitec’s equity was R648m, with the resultant impact on PSG Group’s equity
 
being R199m in respect of its 30.7% investment in Capitec.
 
 
In preparing these summary consolidated financial statements, the significant judgements made by
 
management in applying the group’s accounting policies and the key sources of estimation
 
uncertainty were materially the same as those that applied to the group’s annual financial
 
statements for the year ended 28 February 2018.
 
 
Preparation
 
 
These summary consolidated preliminary financial statements were compiled under the supervision
 
of the group chief financial officer, Mr WL Greeff, CA (SA), and were reviewed by PSG Group’s
 
external auditor, PricewaterhouseCoopers Inc. A copy of their unmodified review conclusion together
 
with these summary consolidated financial statements are 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.
 
 
PSG Financial Services
 
 
PSG Financial Services is a wholly-owned subsidiary of PSG Group, except for the 17 415 770
 
(2018: 17 415 770) perpetual preference shares which are listed on the JSE. These preference
 
shares are included in non-controlling interests in PSG Group’s summary consolidated statement of
 
financial position. No separate financial statements are presented in this announcement for
 
PSG Financial Services as it is the only directly held asset of PSG Group.
 
 
Linked investment contracts, consolidated mutual funds and other client-related balances
 
(“client-related balances”)
 
 
Client-related balances result in assets and liabilities of equal value being recognised in the
 
summary consolidated statement of financial position, although not directly related to
 
PSG Group shareholders. These balances mainly stem from:
 
• PSG Life (an existing subsidiary of PSG Konsult) issuing linked investment contracts to
 
clients in terms of which the value of policy benefits payable (included under “investment
 
contract liabilities”) is directly linked to the fair value of the supporting assets. The
 
group is thus not exposed to the financial risks associated with these assets and liabilities.
 
• The group consolidates mutual funds deemed to be controlled in terms of IFRS 10 Consolidated
 
Financial Statements, with the group’s own investments in these mutual funds having been
 
derecognised and all the funds’ underlying assets having been recognised. Third parties’
 
funds invested in the respective mutual funds are recognised as a payable and included under
 
“third-party liabilities arising on consolidation of mutual funds” and the group is thus not
 
exposed to the financial risks associated with these assets and liabilities.
 
 
Re-presentation of the summary consolidated financial statements
 
 
The consolidated annual financial statements previously differentiated in a note between
 
assets, liabilities, income, expenses and cash flows attributable to i) own balances (i.e. those
 
attributable to the ordinary shareholders of PSG Group and its subsidiaries) and
 
ii) client-related balances. However, for the sake of transparency to assist users in gaining a
 
better understanding of the impact of client-related balances on the reported amounts, the
 
aforementioned split has now been incorporated into the summary consolidated statement of
 
financial position, summary consolidated income statement and summary consolidated statement of
 
cash flows contained in this announcement. Although no previously reported results were
 
restated, the layout thereof was amended to give effect to the aforementioned improved
 
disclosures.
 
 
SUMMARY CONSOLIDATED STATEMENT OF FINANCIAL POSITION
 
as at 28 February 2019
 
 
Reviewed Audited*
 
2019 2018
 
Client- Client-
 
Own related Own related
 
balances balances Total balances balances Total
 
Rm Rm Rm Rm Rm Rm
 
 
Assets
 
Property, plant and
 
equipment 11 149 11 149 9 310 9 310
 
Intangible assets 4 541 4 541 3 825 3 825
 
Investment in ordinary
 
shares of associates 14 578 14 578 13 886 13 886
 
Investment in preference
 
shares of/loans granted
 
to associates 178 178 141 141
 
Investment in ordinary
 
shares of joint ventures 855 855 432 432
 
Loans granted to
 
joint ventures 5 5 8 8
 
Employee benefit assets 43 43 39 39
 
Unit-linked investments 776 45 719 46 495 635 41 565 42 200
 
Equity securities 659 2 337 2 996 2 017 2 304 4 321
 
Debt securities 1 873 4 390 6 263 2 597 3 547 6 144
 
Deferred income tax assets 303 303 245 245
 
Biological assets 593 593 558 558
 
Investment in investment
 
contracts 16 16 15 15
 
Loans and advances 443 443 577 577
 
Trade and other receivables 3 268 1 321 4 589 2 898 1 594 4 492
 
Derivative financial assets 22 11 33 34 9 43
 
Inventory 1 696 1 696 1 723 1 723
 
Current income tax assets 102 102 90 90
 
Reinsurance assets 109 109 86 86
 
Cash and cash equivalents 1 552 280 1 832 1 924 355 2 279
 
Non-current assets
 
held for sale - 7 7
 
Total assets 42 745 54 074 96 819 41 032 49 389 90 421
 
 
Equity
 
Ordinary shareholders’ equity 18 115 18 115 17 143 17 143
 
Non-controlling interests 11 776 11 776 11 729 11 729
 
Total equity 29 891 - 29 891 28 872 - 28 872
 
 
Liabilities
 
Insurance contracts 543 543 543 543
 
Investment contract
 
liabilities 25 932 25 932 24 279 24 279
 
Third-party liabilities
 
arising on consolidation
 
of mutual funds 26 715 26 715 23 600 23 600
 
Deferred income tax
 
liabilities 963 963 997 997
 
Borrowings 7 666 111 7 777 7 231 101 7 332
 
Derivative financial
 
liabilities 64 14 78 92 17 109
 
Employee benefit liabilities 528 528 541 541
 
Trade and other payables 3 046 1 302 4 348 2 698 1 392 4 090
 
Reinsurance liabilities 5 5 3 3
 
Current income tax liabilities 39 39 55 55
 
Total liabilities 12 854 54 074 66 928 12 160 49 389 61 549
 
 
Total equity and liabilities 42 745 54 074 96 819 41 032 49 389 90 421
 
 
Net asset value per share (R) 83.06 79.39
 
Net tangible asset value
 
per share (R) 62.24 61.67
 
 
* Re-presented as detailed in the introduction to the summary consolidated financial statements.
 
 
SUMMARY CONSOLIDATED INCOME STATEMENT
 
for the year ended 28 February 2019
 
 
Reviewed Audited*
 
2019 2018
 
Client- Client-
 
Own related Own related
 
balances balances Total balances balances Total
 
Rm Rm Rm Rm Rm Rm
 
 
Revenue from sale of goods 13 041 13 041 13 956 13 956
 
Cost of goods sold (11 460) (11 460) (11 934) (11 934)
 
Gross profit from sale
 
of goods 1 581 - 1 581 2 022 - 2 022
 
 
Income
 
Changes in fair value of
 
biological assets 194 194 195 195
 
Investment income 492 1 810 2 302 474 1 585 2 059
 
Fair value (losses)/gains (268) 644 376 (279) 2 037 1 758
 
Fair value adjustment to
 
investment contract
 
liabilities (1 073) (1 073) (1 670) (1 670)
 
Fair value adjustment to
 
third-party liabilities
 
arising on consolidation of
 
mutual funds (1 336) (1 336) (1 873) (1 873)
 
Commission, school,
 
net insurance and other
 
fee income 9 329 (90) 9 239 6 983 (184) 6 799
 
Other operating income 216 216 185 92 277
 
9 963 (45) 9 918 7 558 (13) 7 545
 
 
Expenses
 
Insurance claims and loss
 
adjustments, net of
 
recoveries (582) (582) (629) (629)
 
Marketing, administration and
 
other expenses (9 185) 57 (9 128) (7 312) 29 (7 283)
 
(9 767) 57 (9 710) (7 941) 29 (7 912)
 
 
Net income from associates
 
and joint ventures
 
Share of profits of
 
associates and joint
 
ventures 2 360 2 360 1 926 1 926
 
Loss on impairment of
 
associates (676) (676) (8) (8)
 
Net profit/(loss) on
 
sale/dilution of interest
 
in associates 20 20 (14) (14)
 
1 704 - 1 704 1 904 - 1 904
 
 
Profit before finance costs
 
and taxation 3 481 12 3 493 3 543 16 3 559
 
Finance costs (676) (676) (516) (516)
 
Profit before taxation 2 805 12 2 817 3 027 16 3 043
 
Taxation (464) (12) (476) (600) (16) (616)
 
Profit for the year 2 341 - 2 341 2 427 - 2 427
 
 
Attributable to:
 
Owners of the parent 1 926 1 914
 
Non-controlling interests 415 513
 
2 341 2 427
 
 
* Re-presented as detailed in the introduction to the summary consolidated financial statements.
 
 
EARNINGS/DIVIDEND PER SHARE AND NUMBER OF SHARES IN ISSUE
 
for the year ended 28 February 2019
 
 
Change Reviewed Audited
 
% 2019 2018
 
 
Earnings per share (R)
 
- Recurring 9 10.86 9.94
 
- Headline (note 1) 11 10.11 9.08
 
- Attributable - 8.88 8.88
 
- Diluted headline 12 9.99 8.90
 
- Diluted attributable 1 8.76 8.70
 
 
Dividend per share (R) 10 4.56 4.15
 
- Interim 1.52 1.38
 
- Final 3.04 2.77
 
 
Number of shares (m)
 
- In issue 232.1 231.4
 
- In issue (net of treasury shares) 218.1 215.9
 
- Weighted average 217.0 215.5
 
- Diluted weighted average 217.7 217.9
 
 
SUMMARY CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
 
for the year ended 28 February 2019
 
 
Reviewed Audited
 
2019 2018
 
Rm Rm
 
 
Profit for the year 2 341 2 427
 
Other comprehensive loss for the year, net of taxation (50) (92)
 
Items that may be subsequently reclassified to profit or loss
 
Currency translation adjustments (19) (106)
 
Cash flow hedges 7 (13)
 
Share of other comprehensive (losses)/income and equity movements
 
of associates (36) 7
 
Items that may not be subsequently reclassified to profit or loss
 
(Losses)/gains from changes in financial and demographic assumptions
 
of post-employment benefit obligations (2) 20
 
Total comprehensive income for the year 2 291 2 335
 
 
Attributable to:
 
Owners of the parent 1 912 1 847
 
Non-controlling interests 379 488
 
2 291 2 335
 
 
SUMMARY CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
 
for the year ended 28 February 2019
 
 
Reviewed Audited
 
2019 2018
 
Rm Rm
 
 
Ordinary shareholders’ equity at beginning of the year 16 912 15 900
 
Previously reported 17 143
 
Adjustment due to the initial application of new IFRS standards (231)
 
Total comprehensive income 1 912 1 847
 
Issue of shares 157 1
 
Share-based payment costs - employees 73 66
 
Release of treasury shares 111 30
 
Transactions with non-controlling interests (121) 135
 
Dividends paid (929) (836)
 
Ordinary shareholders’ equity at end of the year 18 115 17 143
 
 
Non-controlling interests at beginning of the year 11 697 10 900
 
Previously reported 11 729
 
Adjustment due to the initial application of new IFRS standards (32)
 
Total comprehensive income 379 488
 
Issue of shares 433 1 399
 
Share-based payment costs - employees 39 32
 
Subsidiaries/businesses acquired (note 3.1) 25 47
 
Subsidiaries deconsolidated/sold (note 3.2) (106)
 
Transactions with non-controlling interests (191) (723)
 
Dividends paid (500) (414)
 
Non-controlling interests at end of the year 11 776 11 729
 
 
Total equity 29 891 28 872
 
 
SUMMARY CONSOLIDATED STATEMENT OF CASH FLOWS
 
for the year ended 28 February 2019
 
 
Reviewed Audited*
 
2019 2018
 
Client- Client-
 
Own related Own related
 
balances balances Total balances balances Total
 
Rm Rm Rm Rm Rm Rm
 
 
Net cash flow from
 
operating activities
 
Cash generated from/
 
(utilised by) operations
 
(note 2) 1 714 (1 851) (137) 1 512 (1 253) 259
 
Interest income 439 1 335 1 774 602 1 013 1 615
 
Dividend income 922 476 1 398 781 421 1 202
 
Finance costs (656) (12) (668) (463) (463)
 
Taxation paid (693) (693) (503) (29) (532)
 
Net cash flow from
 
operating activities 1 726 (52) 1 674 1 929 152 2 081
 
 
Net cash flow from
 
investing activities (963) (23) (986) (2 937) - (2 937)
 
Cash flow from
 
subsidiaries/businesses
 
acquired (note 3.1) (852) (852) (428) (428)
 
Cash flow from subsidiaries
 
deconsolidated/sold
 
(note 3.2) (59) (59) 27 27
 
Cash flow from first-time
 
consolidation of
 
mutual fund 10 10 -
 
Cash flow from
 
deconsolidation of
 
mutual funds (33) (33) -
 
Acquisition of ordinary
 
shares in associates and
 
joint ventures (402) (402) (598) (598)
 
Acquisition of property,
 
plant and equipment (1 451) (1 451) (1 641) (1 641)
 
Other investing activities** 1 801 1 801 (297) (297)
 
 
Net cash flow from
 
financing activities (983) - (983) 684 100 784
 
Dividends paid to:
 
PSG Group shareholders (929) (929) (836) (836)
 
Non-controlling interests (500) (500) (414) (414)
 
Capital contributions by
 
non-controlling interests 198 198 804 804
 
Net acquisition from
 
non-controlling interests (124) (124) (429) (429)
 
Borrowings drawn 1 508 1 508 3 306 100 3 406
 
Borrowings repaid (1 274) (1 274) (1 787) (1 787)
 
Proceeds from delivery
 
of holding company’s
 
treasury shares 119 119 39 39
 
Shares issued 19 19 1 1
 
 
Net (decrease)/increase in
 
cash and cash equivalents (220) (75) (295) (324) 252 (72)
 
Exchange gains on cash and
 
cash equivalents 7 7 9 9
 
Cash and cash equivalents at
 
beginning of the year 638 355 993 953 103 1 056
 
Cash and cash equivalents
 
at end of the year*** 425 280 705 638 355 993
 
 
* Re-presented as detailed in the introduction to the summary consolidated financial statements.
 
 
** Cash flow from other investing activities during the year comprised mainly proceeds of R1.2bn
 
from Capespan’s, a subsidiary of Zeder, disposal of its equity security investment in
 
Joy Wing Mau, a fruit distributor in China, as well as withdrawals of R0.7bn from the
 
PSG Money Market Fund (i.e. disposal of debt securities) at a PSG Group-level, as further
 
detailed below.
 
 
*** It is important to note that the treasury functions of PSG Group and each of its subsidiaries
 
operate on a decentralised basis and thus independent from one another. All available cash held
 
at a PSG Group-level is invested in the PSG Money Market Fund, while some of the available cash
 
held at a subsidiary-level is invested in the PSG Money Market Fund. Available cash held at a
 
PSG Group-level and invested in the PSG Money Market Fund amounted to R0.3bn (2018: R1bn) at
 
the reporting date.
 
 
As a result of the group’s consolidation of the PSG Money Market Fund, the cash invested therein
 
is derecognised and all of the fund’s underlying highly liquid debt securities are recognised on
 
the summary consolidated statement of financial position. Third parties’ cash invested in the
 
PSG Money Market Fund is recognised as a payable and included under “third-party liabilities
 
arising on consolidation of mutual funds”.
 
 
The table below reconciles the cash and cash equivalents reported per the summary consolidated
 
statement of financial position to that reported per the summary consolidated statement of
 
cash flows. It furthermore also reconciles such balances to the liquid cash resources at both a
 
PSG Group- and subsidiary-level.
 
 
Reviewed Audited*
 
2019 2018
 
Client- Client-
 
Own related Own related
 
balances balances Total balances balances Total
 
Rm Rm Rm Rm Rm Rm
 
 
Cash and cash equivalents
 
(per the summary
 
consolidated statement
 
of financial position) 1 552 280 1 832 1 924 355 2 279
 
Bank overdrafts (included
 
in “borrowings” per the
 
summary consolidated
 
statement of financial
 
position) (1 127) (1 127) (1 286) (1 286)
 
Cash and cash equivalents
 
(per the summary
 
consolidated statement
 
of cash flows) 425 280 705 638 355 993
 
Debt securities (per the
 
summary consolidated
 
statement of financial
 
position) 1 873 4 390 6 263 2 597 3 547 6 144
 
Liquid cash resources 2 298 4 670 6 968 3 235 3 902 7 137
 
PSG Group-level (invested
 
in the PSG Money Market
 
Fund) 323 1 000
 
Subsidiary-level 1 975 2 235
 
 
NOTES TO THE SUMMARY CONSOLIDATED FINANCIAL STATEMENTS
 
for the year ended 28 February 2019
 
Reviewed Audited
 
2019 2018
 
Rm Rm
 
 
1. Headline earnings
 
 
Profit for the year attributable to owners of the parent 1 926 1 914
 
Non-headline items
 
Gross amounts 659 30
 
Loss on impairment of associates 676 8
 
Net (profit)/loss on sale/dilution of interest in associates (20) 14
 
Profit from subsidiaries deconsolidated/sold (note 3.2) (8) (85)
 
Fair value gain on step-up from associate to subsidiary (2) (11)
 
Net loss on sale/impairment of intangible assets (including goodwill) 120 153
 
Net (profit)/loss on sale/impairment of property, plant and equipment (1) 1
 
Non-headline items of associates (81) (31)
 
Bargain purchase gain (note 3.1) (25) (18)
 
Reversal of impairment of non-current assets held for sale (1)
 
Non-controlling interests (390) (137)
 
Taxation (1) 149
 
Headline earnings 2 194 1 956
 
 
Reviewed Audited*
 
2019 2018
 
Client- Client-
 
Own related Own related
 
balances balances Total balances balances Total
 
Rm Rm Rm Rm Rm Rm
 
 
2. Cash generated from/
 
(utilised by) operations
 
 
Profit before taxation 2 805 12 2 817 3 027 16 3 043
 
Share of profits of
 
associates and joint
 
ventures (2 360) (2 360) (1 926) (1 926)
 
Depreciation and
 
amortisation 582 582 503 503
 
Investment income (492) (1 810) (2 302) (474) (1 585) (2 059)
 
Finance costs 676 676 516 516
 
Working capital changes
 
and other non-cash items 503 (53) 450 (134) 316 182
 
Cash generated from/
 
(utilised by) operations 1 714 (1 851) (137) 1 512 (1 253) 259
 
 
* Re-presented as detailed in the introduction to the summary consolidated financial statements.
 
 
3. Subsidiaries/businesses consolidated and deconsolidated
 
 
3.1 Subsidiaries/businesses acquired
 
 
The group’s subsidiaries/businesses acquired during the year under review included:
 
 
Commercial, industrial and personal short-term insurance brokerage businesses of ABSA
 
Insurance and Financial Advisers (Pty) Ltd (“AIFA businesses”)
 
During June and December 2018, the group, through PSG Konsult, acquired the AIFA businesses
 
for a cash consideration of R52m, as well as still outstanding deferred and contingent
 
consideration of R45m and R7m, respectively. Goodwill of R35m arose in respect of, inter alia,
 
the workforce of the acquired businesses.
 
 
MBS Education Investments (Pty) Ltd and Milpark Education (Pty) Ltd (“Milpark”)
 
During March 2018, the group, through Stadio, being a subsidiary of PSG Alpha, acquired an
 
effective interest of 87.2% in Milpark for a cash consideration of R211m (of which R4m was
 
deferred and subsequently paid) and the issue of Stadio shares worth R51m. Milpark is involved
 
in the private higher education sector in South Africa, offering complementary services to
 
Stadio’s existing operations. Goodwill of R222m arose in respect of, inter alia, the workforce,
 
expected synergies, economies of scale and the business’s growth potential.
 
 
Interactive Tutor (Pty) Ltd (“Media Works”)
 
During May 2018, the group, through FutureLearn, being a subsidiary of PSG Alpha, acquired all
 
the issued share capital of Media Works for a cash consideration of R109m, of which R15m was
 
contingent and remained outstanding. Media Works provides adult education and training services
 
in South Africa. Goodwill of R88m arose in respect of, inter alia, the workforce, expected
 
synergies, economies of scale and the business’s growth potential.
 
 
Cooper College (Pty) Ltd and related entities (“Cooper”)
 
During April 2018, the group, through Curro, acquired an effective interest of 97% in Cooper
 
for a cash consideration of R210m. Cooper operates a private school in Johannesburg,
 
South Africa, being complementary to Curro’s existing operations. Goodwill of R69m arose in
 
respect of, inter alia, the workforce, expected synergies, economies of scale and the
 
business’s growth potential.
 
 
Baobab Primary School operations and properties (“Baobab”)
 
During July 2018, the group, through Curro, acquired the business operations and properties of
 
Baobab for a cash consideration of P65m (R84m). Baobab operates a private school in Gaborone,
 
Botswana, being complementary to Curro’s existing operations. Goodwill of R19m arose in
 
respect of, inter alia, the workforce, expected synergies, economies of scale and the
 
business’s growth potential.
 
 
Sagewood School operations and properties (“Sagewood”)
 
During January 2019, the group, through Curro, acquired the business operations and properties
 
of Sagewood for a cash consideration of R83m. Sagewood operates a private school in
 
Johannesburg, South Africa, being complementary to Curro’s existing operations. Goodwill of
 
R29m arose in respect of, inter alia, the workforce, expected synergies, economies of scale
 
and the business’s growth potential.
 
 
The amounts of identifiable net assets of subsidiaries/businesses acquired, as well as
 
goodwill and non-controlling interests recognised from business combinations during the year
 
under review, can be summarised as follows:
 
 
AIFA
 
busi- Media Sub-
 
nesses Milpark Works Cooper total
 
Reviewed Rm Rm Rm Rm Rm
 
 
Identifiable net assets acquired 69 46 24 149 288
 
Goodwill recognised 35 222 88 69 414
 
Non-controlling interests recognised (6) (3) (8) (17)
 
Total consideration 104 262 109 210 685
 
Ordinary shares issued by a subsidiary (51) (51)
 
Deferred consideration (45) (4) (49)
 
Contingent consideration (7) (15) (22)
 
Cash consideration paid 52 207 94 210 563
 
 
Cash consideration paid (52) (207) (94) (210) (563)
 
Cash and cash equivalents acquired 34 17 2 53
 
Cash flow from subsidiaries/businesses
 
acquired (52) (173) (77) (208) (510)
 
 
Sub- Sage-
 
total Baobab wood Other Total
 
Reviewed Rm Rm Rm Rm Rm
 
 
Identifiable net assets acquired 288 65 54 166 573
 
Goodwill recognised 414 19 29 99 561
 
Bargain purchase gain (25) (25)
 
Non-controlling interests recognised (17) (8) (25)
 
Derecognition of investment in
 
associates (7) (7)
 
Total consideration 685 84 83 225 1 077
 
Ordinary shares issued by subsidiaries (51) (13) (64)
 
Deferred consideration (49) (49)
 
Contingent consideration (22) (34) (56)
 
Cash consideration paid 563 84 83 178 908
 
 
Cash consideration paid (563) (84) (83) (178) (908)
 
Cash and cash equivalents acquired 53 9 1 (7) 56
 
Cash flow from subsidiaries/businesses
 
acquired (510) (75) (82) (185) (852)
 
 
Transaction costs relating to the business combinations were immaterial and expensed in the
 
summary consolidated income statement.
 
 
The aforementioned business combinations’ accounting have been finalised and do not contain
 
any contingent consideration or indemnification asset arrangements, unless otherwise stated.
 
Non-controlling interests were measured with reference to their proportionate share of the
 
identifiable net assets acquired.
 
 
Had the aforementioned business combinations been accounted for with effect from 1 March
 
2018 instead of their respective acquisition dates, the summary consolidated income statement
 
would have reflected additional revenue and after-tax profit for the year of approximately
 
R561m and R41m, respectively.
 
 
Receivables of R125m are included in the identifiable net assets acquired, which are all
 
considered to be recoverable. The fair value of these receivables consequently approximates
 
its carrying value.
 
 
3.2 Subsidiaries deconsolidated/sold
 
 
The subsidiaries deconsolidated/sold during the year under review included:
 
 
Provest Group (Pty) Ltd (“Provest”)
 
During January 2019, the group, through PSG Alpha, had foregone control over Provest when an
 
existing non-controlling shareholder subscribed for further shares in Provest, thereby
 
diluting PSG Alpha’s interest in Provest from 50.5% to 42.3%.
 
 
The amounts of identifiable net assets of the businesses deconsolidated/sold, as well as
 
non-controlling interest derecognised and the remaining interest in associate recognised
 
during the year under review, can be summarised as follows:
 
 
Provest Other Total
 
Reviewed Rm Rm Rm
 
 
Identifiable net assets derecognised (255) (4) (259)
 
Derecognition of non-controlling interest 106 106
 
Recognition of investment in associate 157 157
 
Profit from subsidiaries deconsolidated/sold (8) (8)
 
Total consideration - (4) (4)
 
 
Cash consideration received 4 4
 
Cash and cash equivalents derecognised (63) (63)
 
Cash flow from subsidiaries
 
deconsolidated/sold (63) 4 (59)
 
 
4. Capital commitments and contingencies
 
 
The most significant capital commitments relate to Curro’s continued expansion and development
 
of new campuses. At the reporting date, authorised and contracted capital expenditure amounted
 
to R712m (2018: R516m), while authorised but not yet contracted capital expenditure amounted
 
to R1.8bn (2018: R1.1bn).
 
 
5. Events subsequent to the reporting date
 
 
No material event has occurred between the reporting date and the date of approval of these
 
summary consolidated financial statements.
 
 
6. Financial instruments
 
 
6.1 Financial risk factors
 
 
The group’s activities expose it to a variety of financial risks: market risk (including
 
currency risk, fair value interest rate risk and price risk), credit risk and liquidity risk.
 
 
These summary consolidated financial statements do not include all financial risk management
 
information and disclosures set out in the consolidated annual financial statements, and
 
therefore they should be read in conjunction with the consolidated annual financial
 
statements for the year ended 28 February 2018, as well as those for the year ended
 
28 February 2019 (to be published during May 2019). Risk management continues to be carried
 
out by each entity within the group under policies approved by the respective boards of
 
directors.
 
 
6.2 Fair value estimation
 
 
The information below analysis 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: quoted prices (unadjusted) in active markets.
 
Level 2: input other than quoted prices included within level 1 that is observable for the
 
asset or liability, either directly (that is, as prices) or indirectly (that is,
 
derived from prices).
 
Level 3: input for the asset or liability that is not based on observable market data (that
 
is, unobservable input).
 
 
The carrying value of financial assets and liabilities carried at amortised cost
 
approximates their fair value, while those measured at fair value can be summarised as
 
follows:
 
 
Level 1 Level 2 Level 3 Total
 
28 February 2019 (reviewed) Rm Rm Rm Rm
 
 
Assets
 
Unit-linked investments 46 040 455 46 495
 
Equity securities 2 822 143 31 2 996
 
Debt securities 876 5 320 6 196
 
Investment in investment contracts 16 16
 
Derivative financial assets 33 33
 
Closing balance 3 698 51 552 486 55 736
 
 
Liabilities
 
Investment contract liabilities 25 439 435 25 874
 
Third-party liabilities arising
 
on consolidation of mutual funds 26 715 26 715
 
Derivative financial liabilities 53 25 78
 
Trade and other payables 159 159
 
Closing balance - 52 207 619 52 826
 
 
28 February 2018 (audited)
 
 
Assets
 
Unit-linked investments 41 481 719 42 200
 
Equity securities 2 330 1 312 679 4 321
 
Debt securities 922 1 501 2 423
 
Investment in investment contracts 15 15
 
Derivative financial assets 43 43
 
Closing balance 3 252 44 352 1 398 49 002
 
 
Liabilities
 
Investment contract liabilities 23 421 698 24 119
 
Third-party liabilities arising
 
on consolidation of mutual funds 23 600 23 600
 
Derivative financial liabilities 70 39 109
 
Trade and other payables 45 45
 
Closing balance - 47 091 782 47 873
 
 
The following table presents changes in level 3 financial instruments during the respective
 
years:
 
 
Reviewed Audited
 
2019 2018
 
Assets Liabilities Assets Liabilities
 
Rm Rm Rm Rm
 
 
Opening balance 1 398 782 1 161 1 251
 
Additions 230 312 1 188 542
 
Disposals (1 700) (627) (915) (1 029)
 
Fair value adjustments 504 35 31 18
 
Other movements 54 117 (67)
 
Closing balance 486 619 1 398 782
 
 
Unit-linked investments represent the largest portion of the level 3 financial assets and relate
 
to units 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, which in turn represent the largest portion of level 3 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
 
 
Unit-linked investments Quoted exit price provided Not applicable - daily
 
by the fund manager prices are publicly
 
available
 
Equity securities Valuation model that uses Price-earnings multiples
 
market inputs
 
Debt securities Valuation model that uses Bond interest rate curves,
 
market inputs issuer credit ratings and
 
liquidity spreads
 
Investment in investment Prices are obtained from the Not applicable - prices
 
contracts insurer of the particular provided by registered
 
investment contract long-term insurers
 
Derivative financial assets Exit price on recognised Not applicable
 
and liabilities over-the-counter platforms
 
Investment contract liabilities Current unit price of underlying Not applicable
 
unitised financial asset that
 
is linked to the liability,
 
multiplied by the number of
 
units held
 
Third-party liabilities arising on Quoted exit price provided by Not applicable - daily
 
consolidation of mutual funds the fund manager prices are publicly
 
available
 
 
7. Segment report
 
 
The group’s classification into seven reportable segments, namely Capitec, PSG Konsult, Curro,
 
PSG Alpha, Zeder, Dipeo and PSG Corporate, remains unchanged. These segments represent the major
 
investments of the group and the services rendered by each are set out in the commentary section
 
to this announcement.
 
 
All segments operate predominantly in the Republic of South Africa. However, the group has
 
exposure to operations outside the Republic of South Africa through, inter alia, Curro,
 
PSG Alpha’s investments in Stadio and CA Sales, and Zeder’s investments in Capespan, Zaad and
 
Agrivision Africa.
 
 
Recurring earnings are calculated on a proportional basis, and include the proportional earnings
 
of underlying investments, excluding marked-to-market adjustments and once-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 earnings. Non-recurring earnings include, inter alia, once-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 Group’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 summary consolidated 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:
 
 
Revenue
 
from
 
external Recurring
 
customers earnings Non-
 
(own (segment recurring Headline SOTP
 
balances) profit) earnings earnings value
 
28 February 2019 (reviewed) Rm Rm Rm Rm Rm
 
 
Capitec 1 625 1 625 46 351
 
PSG Konsult 4 480 361 8 369 8 700
 
Curro 2 549 137 137 5 714
 
PSG Alpha 7 958 216 (59) 157 4 712
 
Zeder 7 731 207 130 337 3 166
 
Dipeo 17 (29) (246) (275)
 
PSG Corporate 71 (45) (45)
 
Funding 56 (199) 4 (195) (2 387)
 
Other 84 84 1 702
 
Total 22 862 2 357 (163) 2 194 67 958
 
Revenue from sale of goods 13 041
 
Investment income 492
 
Commission, school, net insurance
 
and other fee income 9 329
 
Non-headline items (268)
 
Earnings attributable to
 
non-controlling interests 415
 
Taxation 476
 
Profit before taxation 2 817
 
 
Revenue
 
from
 
external Recurring
 
customers earnings Non-
 
(own (segment recurring Headline SOTP
 
balances) profit) earnings earnings value
 
28 February 2018 (audited) Rm Rm Rm Rm Rm
 
 
Capitec 1 369 1 369 29 540
 
PSG Konsult 4 166 348 348 7 048
 
Curro 2 139 110 (1) 109 7 987
 
PSG Alpha 6 270 172 (22) 150 5 201
 
Zeder 8 562 205 (21) 184 4 823
 
Dipeo 2 (56) (131) (187) 535
 
PSG Corporate 165 (7) (7)
 
Funding 109 (135) (11) (146) (2 227)
 
Other 136 136 2 603
 
Total 21 413 2 142 (186) 1 956 55 510
 
Revenue from sale of goods 13 956
 
Investment income 474
 
Commission, school, net insurance
 
and other fee income 6 983
 
Non-headline items (42)
 
Earnings attributable to
 
non-controlling interests 513
 
Taxation 616
 
Profit before taxation 3 043
 
 
On behalf of the board
 
 
KK Combi Piet Mouton Wynand Greeff
 
Chairman Chief Executive Officer Chief Financial Officer
 
 
Stellenbosch
 
24 April 2019
 
 
DIRECTORS:
 
ZL Combi (Chairman)^, PE Burton^^, FJ Gouws**, WL Greeff (CFO)*, AM Hlobo^, JA Holtzhausen*,
 
B Mathews^, JJ Mouton**, PJ Mouton (CEO)*, CA Otto^
 
* Executive ** Non-executive ^ Independent non-executive ^^ Lead independent
 
 
The following changes to the board and its sub-committees took effect during the year under review
 
and up to the date of this announcement:
 
• On 20 November 2018, Mr JF Mouton retired as director and chairman;
 
• On 11 January 2019, Mr ZL Combi was appointed as chairman;
 
• On 13 February 2019, Mr PE Burton was appointed as chairman of both the PSG Group Remuneration
 
Committee and the PSG Group Social and Ethics Committee, while Mr CA Otto was appointed as chairman
 
of the PSG Group Nomination Committee; and
 
• On 11 April 2019, Ms AM Hlobo was appointed as director and member of the PSG Group Audit and
 
Risk Committee.
 
 
COMPANY 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, Rosebank Towers, 15 Biermann Avenue,
 
Rosebank, 2196; PO Box 61051, Marshalltown, 2107
 
 
SPONSOR:
 
PSG Capital
 
 
AUDITOR:
 
PricewaterhouseCoopers Inc
 
Date: 24/04/2019 01:34:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
 
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