PGFP PSG
 
PSG / PGFP - PSG GROUP / PSG Financial Services - Unaudited results for the six
 
months ended 31 august 2007
 
PSG GROUP LIMITED
 
Incorporated in the Republic of South Africa
 
Registration number 1970/008484/06
 
JSE share code: PSG & ISIN: ZAE000013017
 
("PSG Group")
 
and
 
PSG Financial Services Limited
 
Registration number 1919/000478/06
 
JSE share code: PGFP & ISIN: ZAE000096079
 
UNAUDITED RESULTS FOR THE SIX MONTHS ENDED 31 AUGUST 2007
 
- Recurring headline earnings increased by 71.7% to 78.1 cents per share
 
- Headline earnings decreased by 24.4% to 185.4 cents per share
 
- Interim dividend increased by 25% to 32.5 cents per share
 
- Net asset value increased by 42.2% to 1 832 cents per share
 
CONDENSED GROUP INCOME STATEMENTS
 
31 Aug Change 31 Aug 28 Feb
 
2007 2006 2007
 
Rm % Rm Rm
 
 
Income
 
Investment income and net fair 420.8 37.2 306.8 811.1
 
value gains on financial
 
instruments
 
Commission and other fee 380.5 54.6 246.1 594.7
 
income
 
Sales from non-financial 836.9
 
operations (note 3)
 
Other operating income 38.7 (8.9) 42.5 57.2
 
 
Total income 1,676.9 595.4 1,463.0
 
 
Expenses
 
Operating and other expenses 408.6 222.9 563.7
 
Cost of sales of non-financial 751.7
 
operations (note 3)
 
Total expenses 1,160.3 222.9 563.7
 
 
 
Net income from operating 516.6 38.7 372.5 899.3
 
activities
 
Finance costs (25.2) (8.2) (40.2)
 
Share of profits of associated 97.3 (2.7) 124.8
 
companies
 
 
Net income before taxation 588.7 62.8 361.6 983.9
 
Taxation (113.8) (70.6) (147.6)
 
Net income of the group 474.9 63.2 291.0 836.3
 
 
Attributable to:
 
Minority interests 172.6 38.7 144.3
 
Equity holders of the company 302.3 252.3 692.0
 
474.9 291.0 836.3
 
 
Attributable to equity holders 302.3 19.8 252.3 692.0
 
of the company
 
Non-headline items (note 4) (10.1) 10.5 (40.6)
 
Headline earnings 292.2 11.2 262.8 651.4
 
 
Earnings per share (cents)
 
- attributable 191.8 (18.6) 235.6 551.7
 
- headline 185.4 (24.4) 245.4 519.3
 
- diluted attributable 188.9 (17.4) 228.8 538.8
 
- diluted headline 182.6 (23.4) 238.3 507.1
 
 
Dividend per share (cents)
 
- interim 32.5 26.0 26.0
 
- final 64.0
 
32.5 25.0 26.0 90.0
 
 
Number of shares (million)
 
- in issue (net of treasury 169.4 132.8 149.8
 
shares)
 
- weighted average 157.6 107.1 125.4
 
CONDENSED GROUP BALANCE SHEETS
 
31 Aug 31 Aug 28 Feb
 
2007 2006 2007
 
Rm Rm Rm
 
Assets
 
Property, plant and equipment 44.0 16.7 40.1
 
Intangible assets 667.9 556.6 648.9
 
Investments in associated 2,817.8 918.5 1,104.9
 
companies (note 5)
 
Financial assets 1,547.7 1,472.9 1,756.0
 
Deferred income tax 14.3 21.9 34.1
 
Receivables and inventories 443.2 102.4 493.4
 
Cash and cash equivalents 657.6 76.2 1,340.8
 
 
Total assets 6,192.5 3,165.2 5,418.2
 
 
Equity
 
Ordinary shareholders' equity 3,103.2 1,710.5 2,373.0
 
Minority interests 1,866.2 701.2 1,692.6
 
 
Total equity 4,969.4 2,411.7 4,065.6
 
 
Liabilities
 
Financial liabilities 572.6 353.5 693.6
 
Deferred income tax 130.0 88.0 112.6
 
Payables and provisions 389.0 244.7 457.4
 
Current income tax liabilities 131.5 67.3 89.0
 
 
Total liabilities 1,223.1 753.5 1,352.6
 
 
Total equity and liabilities 6,192.5 3,165.2 5,418.2
 
 
Net asset value per share 1 832 1 288 1 585
 
(cents)
 
Net tangible asset value per share 1 438 869 1 151
 
(cents)
 
CONDENSED STATEMENTS OF CHANGES IN OWNERS' EQUITY
 
31 Aug 31 Aug 28 Feb
 
2007 2006 2007
 
Rm Rm Rm
 
 
 
Ordinary shareholders' equity at 2,373.0 719.3 719.3
 
beginning of period
 
Shares issued 551.2 1,030.2 1,352.3
 
Repurchase of shares (288.6) (289.4)
 
Net movement in treasury shares (28.5) 4.1 (58.9)
 
Movement in non - 3.8 48.1 3.5
 
distributablreserves
 
Revaluation of associated company 46.8
 
Net income for period 302.3 252.3 692.0
 
Ordinary dividend paid (98.6) (54.9) (92.6)
 
 
Ordinary shareholders' equity at 3,103.2 1,710.5 2,373.0
 
end of the period
 
 
Minority interests 1,866.2 701.2 1,692.6
 
 
Beginning of period 1,692.6 548.7 548.7
 
Net income for period 172.6 38.7 144.3
 
Net movement on 18.3 129.7
 
acquisition/disposal of
 
subsidiaries
 
Capital reduction by subsidiary (6.6) (4.2)
 
Additional contributions 32.4 19.9 833.8
 
Other movements 0.3
 
Issue of preference shares by a 94.8 94.8
 
subsidiary
 
Preference dividend paid (24.8) (19.2) (54.8)
 
 
Total equity end of period 4,969.4 2,411.7 4,065.6
 
CONDENSED GROUP CASH FLOW STATEMENTS
 
 
31 Aug 31 Aug 28 Feb
 
2007 2006 2007
 
Rm Rm Rm
 
 
Cash generated by operations 148.1 99.0 302.4
 
Net change in financial (250.1) (6.7) (184.8)
 
instruments
 
Net cash flow from operating (102.0) 92.3 117.6
 
activities
 
Net cash flow from investment (382.6) (319.7) (328.7)
 
activities
 
Net cash flow from financing (157.4) 69.7 1,259.8
 
activities
 
 
Net (decrease)/increase in cash (642.0) (157.7) 1,048.7
 
and cash equivalents
 
Cash and cash equivalents at 967.1 (81.6) (81.6)
 
beginning of period
 
Cash and cash equivalents at end 325.1 (239.3) 967.1
 
of period*
 
 
* Include bank overdrafts and CFD 332.5 315.5 373.7
 
financing facilities of
 
SEGMENT REPORT
 
Primary reporting segment
 
The group is organised in three main business segments :
 
* Private equity and corporate finance
 
* Financial advice and fund management
 
* Financing and banking
 
The private equity and corporate finance segment consists of PSG's
 
investment business and corporate finance services.
 
PSG Konsult, PSG Online and PSG Fund Management make up the financial
 
advice and fund management segment and mainly provide investment support
 
and advice to third parties.
 
The financing and banking segment consists of Capitec Bank Holdings
 
Limited and Quince Capital Holdings Limited. Capitec is a retail bank
 
that provides accessible and affordable banking facilities to clients.
 
Quince Capital is a niche financing joint venture with Reunert.
 
Segment assets and liabilities include all assets and liabilities
 
categories as listed in the balance sheet of the group.
 
For the period ended Segment Segment Segment Segment
 
31 August 2007 revenue result assets liabilities
 
Rm Rm Rm Rm
 
 
 
 
 
Private equity and 1,273.0 406.4 3,515.8 567.4
 
corporate finance
 
Financial advice and 403.9 110.2 1,175.2 524.2
 
fund management
 
Financing and banking1 1,501.5
 
 
1,676.9 516.6 6,192.5 1,091.6
 
 
1 This segment's equity accounted earnings amounted to R38,9 million for
 
the period ended 31 August 2007.
 
 
For the period ended Segment Segment Segment Segment
 
31 August 2006 revenue result assets liabilities
 
Rm Rm Rm Rm
 
 
 
 
 
Private equity and 340.7 305.9 1,883.1 297.3
 
corporate finance
 
Financial advice and 254.7 66.6 710.8 388.9
 
fund management
 
Financing and banking2 571.3
 
 
595.4 372.5 3,165.2 686.2
 
 
2 This segment's equity accounted earnings amounted to R2,0 million for
 
the period ended 31 August 2006.
 
 
For the year ended Segment Segment Segment Segment
 
28 February 2007 revenue result assets liabilities
 
Rm Rm Rm Rm
 
 
 
 
 
Private equity and 826.5 733.8 3,623.2 485.3
 
corporate finance
 
Financial advice and 636.5 165.5 1,187.7 778.3
 
fund management
 
Financing and banking3 607.3
 
 
1,463.0 899.3 5,418.2 1,263.6
 
 
3 This segment's equity accounted earnings amounted to R19,1 million for
 
the year ended 28 February 2007.
 
CONTRIBUTION TO HEADLINE EARNINGS
 
Numb
 
er
 
Headline earnings of Net assets
 
shar
 
es
 
31 Aug 31 Aug 28 Feb 31 31 Aug 31 Aug 28 Feb
 
Aug
 
2007 2006 2007 2007 2007 2006 2007
 
Rm Rm Rm m Rm Rm Rm
 
Recurring 123.2 48.8 147.9 2,601.2 1,070.4 1,926.
 
headline 1
 
earnings
 
Capitec Bank 26.8 2.0 19.1 28.6 1,175.6 571.3 607.3
 
PSG Konsult 29.4 22.4 46.5 531. 283.1 125.6 282.7
 
7
 
PSG Fund 10.5 6.6 15.3 54.8 48.6 43.8
 
Management
 
Channel Life 2.7 0.5 7.0 110. 126.6 73.2 117.7
 
5
 
Quince 9.7 325.9
 
Capital
 
Paladin 23.7 22.3 42.0 197.6 58.1 157.6
 
Capital and
 
other private
 
equity
 
Zeder
 
Investments
 
and agri
 
investments
 
Dividends and 7.5 3.2 10.1 202. 277.5
 
equity 6
 
accounted
 
earnings
 
Management 7.0 4.7
 
fee earned by
 
PSG
 
PSG Corporate 160.1 193.6 717.0
 
Services
 
Dividends 2.4 0.3 3.6
 
from
 
investments
 
BEE funding 16.3 0.4 19.9
 
Net operating (12.8) (8.9) (20.3)
 
costs
 
Non-recurring 195.7 227.6 562.1 1,274.0 1,249.6 1,256.
 
headline 0
 
earnings
 
Marked-to-
 
market
 
profits/(loss
 
es)
 
Quince 2.4
 
Capital
 
Paladin 27.9 20.2 63.2 241.9 166.9 210.1
 
Capital
 
(Thembeka)
 
Zeder 52.6 (17.5) 40.2 244.6 395.2 468.6
 
Investments
 
and agri
 
investments
 
PSG Corporate
 
Services
 
JSE Ltd 2.3 227.9 425.4 416.7 164.1
 
Other 110.5 16.0 52.3 737.4 199.4 363.1
 
investments
 
Other
 
m Cubed (19.0) (19.0) 218. 50.1 71.4 50.1
 
Holdings 0
 
Perpetual (27.4) (22.6) (47.3) (792.3) (647.2) (828.6
 
prefs and )
 
borrowings
 
Interest rate 17.6 10.1 (5.0) 12.7 10.1 (5.0)
 
hedge
 
Secondary tax (16.9) (1.1) (6.3) 7.6 27.6 24.5
 
on companies
 
Total 292.2 262.8 651.4 3,103.2 1,710.5 2,373. Ord
 
headline 0 s/holde
 
earnings rs'
 
equity
 
Statistics
 
Recurring 78.1 45.5 117.9
 
HEPS (cents)
 
Growth in 152.5%
 
recurring
 
headline
 
earnings
 
Growth in 71.7%
 
recurring
 
HEPS
 
NOTES
 
1.Basis of presentation and accounting policies
 
The condensed interim consolidated financial statements are prepared in
 
accordance with IAS 34 - Interim Financial Reporting and the accounting
 
policies conform to IFRS. The accounting policies applied in the
 
preparation of the interim consolidated financial statements are
 
consistent with the policies in the previous year.
 
2.Recurring Headline Earnings
 
We have previously reported on base headline earnings in order to
 
indicate our focus on annuity income. This concept has now been improved
 
and simplified to recurring headline earnings as shown in the
 
Contribution to Headline Earnings table.
 
3. Non-financial operations
 
The sales and cost of sales figures from non-financial operations relates
 
to CIC Holdings Limited, a company which operates in the FMCG sector in
 
Southern Africa. PSG Group Limited, through Paladin Capital Limited,
 
holds a 58.2% interest in this company.
 
4.Non-headline items
 
31 Aug 31 Aug 28 Feb
 
2007 2006 2007
 
Rm Rm Rm
 
 
6.0 (9.3) 13.5
 
 
Impairment of investments (21.2) (21.2)
 
Net profit on sale of subsidiaries and 7.4 28.1
 
minority interests
 
Net profit on sale of associated companies 5.4 4.5 4.6
 
Investment activities 0.6 2.0
 
 
 
 
Non-headline items of associated companies 6.2 24.6
 
 
Profit/(loss) before taxation 12.2 (9.3) 38.1
 
Taxation (0.8) (1.2) 3.7
 
Profit/(loss) after taxation 11.4 (10.5) 41.8
 
Attributable to minorities (1.3) (1.2)
 
10.1 (10.5) 40.6
 
5.Investments in associated companies
 
31 Aug 31 Aug 28 Feb
 
2007 2006 2007
 
Rm Rm Rm
 
Carrying value
 
-listed 1,070.8 408.1 470.8
 
-unlisted 1,747.0 510.4 634.1
 
2,817.8 918.5 1,104.9
 
Market and directors' valuation
 
-listed 1,162.5 488.9 612.2
 
-unlisted 1,915.0 627.7 832.7
 
3,077.5 1,116.6 1,444.9
 
 
6.Commitments
 
31 Aug 31 Aug 28 Feb
 
2007 2006 2007
 
Rm Rm Rm
 
 
Contingent liability in respect of risk 15.0
 
sharing
 
Operating lease commitments 141.5 22.1 24.6
 
7. PSG Financial Services Limited
 
The company is a wholly-owned subsidiary of PSG Group Limited, except for
 
the 5.5 million preference shares which are listed on the JSE Limited. No
 
consolidated interim results are presented for the company as the
 
relevant information for the company and PSG Group Limited is identical,
 
the company being the only asset of PSG Group Limited.
 
COMMENTARY
 
REVIEW OF RESULTS
 
On a comparable basis, headline earnings per share for the six months ended 31
 
August 2007 decreased by 24.4% from 245.4 cents per share to 185.4 cents per
 
share. This decrease was anticipated and communicated and follows the
 
realization of PSG's interest in the JSE Limited. Recurring headline earnings
 
per share (as set out in the Contribution to Headline Earnings table) increased
 
by 71.7% from 45.5 cents per share to 78.1 cents per share.
 
The increase in PSG's recurring headline earnings base is testimony to the
 
success of Project Growth, with the Group becoming less sensitive to volatile
 
equity markets.
 
Our subsidiaries and associated companies are all well established and operate
 
as profitable independent units. They provide the Group with a diversified
 
exposure to the South African economy which we believe will continue to
 
experience strong growth.
 
CORPORATE ACTION
 
Increase of shareholding in Capitec Bank Holdings Limited
 
Effective June 2007, PSG obtained SARB approval to and increased its
 
shareholding in Capitec Bank Holdings from 18,3% to 34,9% through a share swap
 
whereby 1,4545 PSG shares were issued for every Capitec share held. PSG
 
acquired 13.5 million shares in Capitec and issued 19.7 million new PSG shares
 
for a total consideration of R552 million. Capitec is PSG's largest investment.
 
Acquisition of Alternative Channel Limited
 
Subject to approval by the necessary regulatory agencies, PSG has acquired 80%
 
in Alternative Channel, an insurance company that offers linked investment
 
products. Management will own the other 20%. The company will expand the
 
services currently offered by the PSG Wealth Cluster.
 
REVIEW OF OPERATIONS
 
Capitec Bank Holdings Limited (34.9%)
 
Capitec's results for the 6 months ended 31 August 2007 were published on 27
 
September 2007 and are available on the company's website at www.capitec.co.za.
 
Capitec increased its headline earnings per share by 15% and delivered a return
 
on equity of 21%.
 
PSG Konsult Limited (73.6%)
 
Following the integration of businesses acquired during 2006, headline earnings
 
increased by 108,6 % to R39,9 million during the period under review.
 
Funds under administration increased to R50 billion (Aug 2006: R23 billion) and
 
PSG Konsult now has 452 (Aug 2006: 397) financial planners and stock brokers
 
operating from 183 (Aug 2006: 168) offices throughout Southern Africa.
 
PSG Konsult is in the process of establishing an office in London and has
 
recently acquired a small financial services company in the United Kingdom.
 
Together with our recently launched offshore stockbroking capabilities we can
 
now offer an international service to our clients.
 
PSG Konsult's results announcement for the period ended 31 August 2007 is
 
available on its website at www.psgkonsult.co.za.
 
PSG Fund Management Holdings (Pty) Limited (96.9%)
 
PSG Fund Management's assets under administration increased to R19 billion
 
including assets under management of R13,4 billion, a 10,4% and 14,4% increase
 
respectively in the past 6 months. Net fund inflows for the period under review
 
amounted to R1,7 billion.
 
The increase in assets, coupled with contained overhead costs, resulted in the
 
company increasing its headline earnings by 60% to R10,8 million for the 6
 
months ended 31 August 2007.
 
Channel Life Limited (34.4%)
 
Channel Life continued its growth in new business over the 6 months until 30
 
June 2007, with the broker business performing well. Profit after tax for the
 
period to June 2007 was R22,3 million, whilst headline earnings was R8
 
million.
 
Modest profit growth is expected over the shorter term whilst the marketing
 
drive continues.
 
Quince Capital Holdings Limited (39.7%)
 
Quince Capital, the niche financing joint venture with Reunert, was launched on
 
2 May 2007, with PSG equity accounting its results as from that date having
 
obtained a 39.7% interest for R315 million. The Nashua financing book has
 
subsequently grown to R1.6bn and is in the final stages of being securitized.
 
The acquisition of ZS Rational (property bridging finance) is awaiting
 
Competition Commission approval.
 
Paladin Capital Limited (90.3%)
 
The headline earnings of Paladin has increased significantly as the performance
 
of all the investee companies in the portfolio was above expectation with an
 
exceptional performance from Thembeka Capital, a BEE controlled investment
 
holding company, largely due to non-recurring marked-to-market profits. Thembeka
 
Capital raised additional "black" capital through a successful public offering.
 
It remains the single largest black shareholder in the JSE Limited.
 
During the period under review, Paladin acquired a 25.1% stake in Mainfin, a
 
niche property finance house, and invested additional capital in Precrete Nozala
 
for a total consideration of R56 million. Paladin has acquired a 40% interest
 
in GRW Holdings, a specialist tank container manufacturer, subsequent to 31
 
August 2007.
 
Zeder Investments Limited (35.5%)
 
Zeder increased its investment portfolio by 49% to R1 153 million since 28
 
February 2007. It also achieved its stated objective to equity account, inter
 
alia, its investments in Kaap Agri Limited and KWV Limited. The carrying value
 
of Zeder's investments in associated companies amounted to R782,7 million as at
 
31 August 2007. Zeder's net profit after tax of R162,6 million for the
 
reporting period increased by 19% compared to the 6 months ended 28 February
 
2007.
 
Zeder's detailed results announcement for the period ended 31 August 2007 is
 
available on its website at www.zeder.co.za.
 
PSG Corporate Services
 
The appreciation of the Petmin (11.5% stake) and Datapro (now Vox Telecom) (3.7%
 
stake) share prices and the interest rate hedge contributed to the marked-to-
 
market profits in the past financial period. PSG earned market related returns
 
from the remainder of its strategic and non-strategic investments.
 
m Cubed Holdings Limited (30%)
 
This investment is still carried at 23 cents per share. The Board does not
 
consider any impairment necessary.
 
PREFERENCE SHARE FUNDING
 
On 30 July 2007 PSG Financial Services Limited consolidated its cumulative,
 
non-redeemable, variable rate, non-participating preference shares on a 1
 
for 100 basis in order to provide the shareholders with a more meaningful and
 
accurate share price at which to trade.
 
PROSPECTS
 
As a result of current financial market conditions. PSG has decided to put its
 
prospective listing on the London Stock Exchange main board temporarily on hold.
 
The Project Growth initiative has delivered promising results which we shall
 
continue to pursue in order to further grow the Group and strengthen its
 
recurring income base. Marked-to-market profits will always be volatile and
 
dependent on market conditions.
 
Our primary goal remains the creation of shareholders' wealth. We remain
 
confident that we shall continue to deliver on this.
 
DIVIDENDS
 
Ordinary shares
 
The directors of PSG Group Limited have resolved on a 25% increase in the
 
interim dividend and have consequently declared a dividend of 32.5 cents per
 
share (2006: 26 cents) in respect of the six months ended 31 August 2007.
 
The following are the salient dates for the payment of the ordinary dividend:
 
Last day to trade cum dividend Friday, 26 October 2007
 
Trading ex dividend commences Monday, 29 October 2007
 
Record date Friday, 2 November 2007
 
Day of payment Monday, 5 November 2007
 
Share certificates may not be dematerialised or rematerialised between Monday,
 
29 October 2007, and Friday, 2 November 2007, both days inclusive.
 
Preference shares
 
The directors of PSG Financial Services Limited declared a dividend of 482,9
 
cents per share in respect of the cumulative, non-redeemable, variable rate.
 
non-
 
participating preference shares for the six months ended 31 August 2007, which
 
was paid on 1 October 2007.
 
On behalf of the board
 
Jannie Mouton Chris Otto
 
Chairman Director
 
Stellenbosch
 
8 October 2007
 
Directors
 
JF Mouton (chairman)*, L van A Bellingan, PE Burton, J de V du Toit, MJ Jooste,
 
JJ Mouton, CA Otto*, P Malan, BE Steinhoff (German), W Theron, Dr J Van Zyl
 
Smit, Dr CH Wiese
 
*Executive Independent
 
Secretaries and registered office
 
PSG Corporate Services (Pty) Limited
 
1st Floor, Ou Kollege, 35 Kerk Street, Stellenbosch, 7600
 
PO Box 7403, Stellenbosch, 7599
 
Transfer secretaries
 
Link Market Services South Africa (Pty) Limited
 
11 Diagonal Street, Johannesburg, 2001
 
PO Box 4844, Johannesburg, 2000
 
Sponsor
 
PSG Capital (Pty) Limited
 
These results are also available on our website at www.psggroup.co.za
 
Date: 08/10/2007 16:28:33 Produced by the JSE SENS Department.
 
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