PGFP PSG
 
PSG/PGFP - PSG Group/PSG Financial Services - Unaudited Interim Results for
 
the six months ended 31 August 2011
 
PSG Group Limited
 
(Incorporated in the Republic of South Africa)
 
Registration number: 1970/008484/06
 
JSE share code: PSG
 
ISIN number: ZAE000013017
 
("PSG Group" or "PSG" or "the company" or "the group")
 
PSG Financial Services Limited
 
(Incorporated in the Republic of South Africa)
 
Registration number: 1919/000478/06
 
JSE share code: PGFP
 
ISIN number: ZAE000096079
 
("PSG Financial Services")
 
UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 AUGUST 2011
 
Recurring headline earnings increased by 21,7% to 135,5 cents per share
 
Interim dividend increased by 30,0% to 26,0 cents per share
 
SOTP value increased by 11,8% to R52,34 per share as at 31 August 2011
 
RECURRING HEADLINE EARNINGS
 
Headline earnings Number Net asset value
 
of
 
shares
 
31 Aug 31 Aug 28 Feb 31 Aug 31 Aug 31 Aug 28 Feb
 
2011 2010 2011 2011 2011 2010 2011
 
Rm Rm Rm m Rm Rm Rm
 
Recurring 229,7 186,1 404,1 3 809,9 2 966,0 3 439,9
 
headline
 
earnings
 
Capitec 167,9 99,1 223,0 32,3 2 088,2 1 529,0 1 981,6
 
Bank
 
PSG 42,5 41,7 93,9 764,4 536,6 454,5 480,8
 
Konsult
 
(incl. PSG
 
Asset
 
Management
 
)
 
Paladin 22,7 25,1 44,8 472,3 717,2 803,6 1 019,2
 
Capital
 
Curro (5,1) 1,2 1,9 101,7 303,9 104,1 103,9
 
Holdings
 
Zeder 53,8 50,9 109,4 415,2 1 126,2 972,1 1 073,1
 
Investment
 
s
 
PSG 22,2 28,8 22,9
 
Corporate
 
(incl. PSG
 
Capital)
 
Management 48,9 39,0 92,4
 
and other
 
fee income
 
Operating (34,5) (24,4) (61,9)
 
costs
 
Taxation (6,6) (4,3) (9,5)
 
BEE 10,1 10,1 19,9 214,6 194,8 204,5
 
preference
 
share
 
investment
 
s
 
Funding
 
Perpetual (51,2) (31,7) (72,4) 11,9 (1 057,7) (769,3) (1 058,1)
 
preference
 
share
 
funding
 
Net (19,3) (20,4) (36,7) (151,3) (357,2) (426,1)
 
interest
 
Other 0,5 (0,2) (0,7) 10,0 5,6 38,1
 
Non- (54,7) 43,0 108,3 210,6 166,0 144,9
 
recurring
 
headline
 
earnings
 
PSG 1,4 6,4
 
Konsult
 
(incl. PSG
 
Asset
 
Management
 
)
 
Paladin 3,0 62,4 93,4
 
Capital
 
Zeder (17,5) (13,8) (33,1)
 
Investment
 
s
 
PSG
 
Corporate
 
(net of
 
taxation)
 
Marked-to- (1,4) 8,3 26,2 247,8 139,8 141,6
 
market
 
(loss)/pro
 
fit on
 
liquid
 
investment
 
portfolio
 
Other 0,3 10,5
 
Funding
 
Marked-to- (40,5) (13,9) 4,9 (37,2) (15,5) 3,3
 
market
 
(loss)/pro
 
fit on
 
interest
 
rate hedge
 
mCubed 41,7
 
Holdings
 
Total 175,0 229,1 512,4 4 020,5 3 132,0 3 584,8
 
Statistics
 
Weighted 169,5 167,2 167,1
 
average
 
number of
 
shares in
 
issue
 
(million)
 
Recurring 135,5 111,3 241,9
 
HEPS
 
(cents)
 
HEPS 103,3 137,0 306,7
 
(cents)
 
OVERVIEW
 
PSG is an investment holding company consisting of 33 underlying investments
 
with a combined market capitalisation of R74bn that operate across industries
 
that include financial services, banking, agriculture, education,
 
construction, manufacturing, mining and energy saving.
 
SUM OF THE PARTS ("SOTP")
 
Our key valuation tool used to determine PSG's performance is the growth in
 
its SOTP value per share. The calculation is simple and requires limited
 
subjectivity as 95% of the SOTP value is calculated using quoted market
 
prices, whilst the unlisted investments are valued using market-related
 
multiples. At 31 August 2011, the SOTP value per PSG share was R52,34, which
 
was 11,8% higher than at 28 February 2011. At 30 September 2011, the SOTP
 
value was R53,22 per share.
 
SOTP - Asset/Liability 28 Feb 28 Feb 28 Feb 31 Aug % of
 
2009 2010 2011 2011 total
 
Rm Rm Rm Rm assets
 
Capitec Bank* 857 2 367 5 138 6 090 55,7
 
PSG Konsult** 873 948 1 206 1 177 10,8
 
Paladin Capital* 413 834 1 242 841 7,7
 
Curro Holdings* 580 5,3
 
Zeder Investments* 342 742 1 069 1 013 9,3
 
Management 216 361 350 350 3,2
 
fees/agreements+
 
Other investments 745 400 548 878 8,0
 
(Thembeka prefs, cash,
 
etc)+
 
Total assets 3 446 5 652 9 553 10 929 100,0
 
Perpetual pref funding* (486) (541) (1 028) (1 013)
 
Other debt+ (350) (539) (507) (481)
 
Total SOTP value 2 610 4 572 8 018 9 435
 
Number of shares 170,5 171,8 171,3 180,2
 
(million)
 
SOTP value per share 15,31 26,60 46,81 52,34
 
(rand)
 
 
* Listed on the JSE Ltd
 
** Over the counter
 
+ Valuation
 
RESULTS
 
A continued increase in PSG's SOTP value over the long term will depend on
 
sustained growth in the profitability of our underlying investments. PSG thus
 
continues to use the recurring headline earnings method to provide management
 
and investors with a more realistic and transparent way of evaluating PSG's
 
earnings performance. PSG's consolidated recurring headline earnings
 
represent the sum of PSG's effective interest in the recurring headline
 
earnings of each investment. The result is that investments in which PSG or
 
an underlying company holds less than 20% and are generally not equity
 
accountable in terms of accounting standards, are included in the calculation
 
of our consolidated recurring headline earnings. Marked-to-market
 
fluctuations are excluded.
 
PSG's recurring headline earnings per share increased by 21,7% to 135,5 cents
 
for the period ended 31 August 2011. This was once again primarily as a
 
result of Capitec's exceptional performance. PSG Konsult and Zeder managed to
 
marginally improve on their performance in the prior year, whereas the
 
balance of our investments had mixed fortunes.
 
Headline earnings decreased by 24,6% to 103,3 cents per share, and
 
attributable earnings by 30,1% to 87,4 cents per share. This was mainly as a
 
result of a marked-to-market loss of R40,5m incurred on PSG Financial
 
Services' interest rate hedge during the past six months as opposed to marked-
 
to-market profits of R66,9m achieved in Thembeka's investment portfolio of
 
listed shares during the same period last year.
 
CORPORATE ACTION AND INVESTING
 
- Raised R377m in cash through the issue of 8,2m PSG Group ordinary shares
 
at an average price of R46,09 per share.
 
- We increased our interest in Zeder to 42,4% having invested a further R18m
 
at an average price of R2,48 per share.
 
- Paladin's 77,6% interest in Curro was unbundled to Paladin shareholders
 
with effect from 22 August 2011. PSG as a result now holds a 63,1% direct
 
interest in Curro.
 
- Paladin shareholders have approved the transaction whereby PSG will
 
acquire the entire issued share capital of Paladin not already owned by PSG,
 
being an 18,7% interest, in exchange for PSG Group ordinary shares or cash on
 
24 October 2011, following which Paladin will be delisted from the JSE.
 
CAPITEC BANK (34,2%)
 
Capitec's unique positioning and innovative approach to retail banking gives
 
clients control through transparent pricing and simplified products. This
 
approach has seen the number of active clients banking with Capitec grow to
 
3.2m.
 
Capitec's retail footprint increased by 19 branches to 474 since February
 
2011 and another 36 new branches are planned for the remainder of the
 
financial year. Increases in loan revenue to R2,6bn and net transaction fee
 
income to R361m, along with an improvement in the cost-to-income ratio to
 
46%, resulted in earnings of R488m, a 72% year-on-year increase. Headline
 
earnings per share increased by 53% to 520 cents as a result of the rights
 
issue earlier in the year.
 
Capitec's comprehensive results for the six months ended 31 August 2011 are
 
available at www.capitec.co.za.
 
PSG KONSULT (71,3%)
 
PSG Konsult, now also incorporating the PSG Asset Management group, managed
 
to marginally increase its recurring headline earnings by 7,8% to R59.6m
 
during the period under review. Turnover, consisting of commission and other
 
operating income, increased by 16,5% to R675,3m, while short-term premiums
 
administered amounted to R1,55bn on an annualized basis. Funds under
 
administration and management increased by 18,8% to R121bn.
 
The PSG Konsult group made a number of acquisitions during the six months
 
under review:
 
- Effective 1 March 2011, PSG Asset Management, which previously consisted
 
of PSG Fund Management, PSG Alphen, PSG Tanzanite, PSG Absolute Investments
 
and PSG FutureWealth, was amalgamated with PSG Konsult. In so doing,
 
synergies have been created and PSG Konsult now offers a more comprehensive
 
range of financial services.
 
- Effective 1 May 2011, PSG Konsult acquired Equinox, an online unit trust
 
trading platform. The transaction added approximately 9 000 clients, with
 
assets under management of R1,9bn.
 
- Effective 1 May 2011, PSG Konsult Corporate acquired Pleroma, a short-term
 
insurance broker and administrator. The transaction added approximately R100m
 
in premiums and 5 000 clients.
 
At 31 August 2011, PSG Konsult had 222 offices (28 February 2011: 216) with
 
674 financial planners, short-term insurance brokers, stockbrokers and
 
asset/portfolio managers (28 February 2011: 642).
 
In September 2011, PSG Online won the Business Day Investors Monthly
 
Stockbroker of the Year award. We are proud of this achievement.
 
PSG Konsult's comprehensive results for the six months ended 31 August 2011
 
are available at www.psgkonsult.co.za.
 
PALADIN CAPITAL (81,3%)
 
Paladin is PSG's private equity investment company in sectors other than
 
agriculture, food and beverages. As a wholly owned subsidiary, Paladin will
 
continue to focus on new business opportunities following the aforementioned
 
unbundling of Curro and buy-out of Paladin minority shareholders.
 
Paladin's recurring headline earnings (excluding Curro which is reported on
 
below) decreased by 9,6% to R22,7m, mainly due to losses in its investment in
 
the construction industry. The majority of the remaining investments in
 
Paladin's portfolio, however, showed an improvement in performance compared
 
to the corresponding period last year.
 
Further corporate action at Paladin included:
 
- Invested R262m in Curro's rights issue, prior to its unbundling.
 
- Early-stage investment in Energy Partners which delivers energy savings
 
solutions. Energy Partners has turned profitable and we are excited about the
 
opportunities in this industry.
 
- Sold its 44% interest in IQuad for R2,57 per share.
 
CURRO HOLDINGS (63,1%)
 
Curro is a provider of affordable, quality private school education in South
 
Africa. Curro listed on the JSE Altx on 2 June 2011 to improve its access to
 
capital and funding. The listing furthermore raised the profile of the
 
company and enhanced the credibility of the Curro brand name. The company
 
concluded a one-for-one rights issue during July whereby R322,4m was raised.
 
This has strengthened Curro's balance sheet and, in so doing, created gearing
 
capacity to further expand the school operations in South Africa.
 
Curro now hosts more than 5 500 learners at its 12 campuses and continues to
 
see a range of opportunities in private school education. The market is
 
immense and we anticipate continued growth in this industry. The company's
 
strategic intent is to establish a group of at least 40 campuses with 45 000
 
learners by 2020.
 
Although Curro's turnover increased by 117% to R79,3m, it made a headline
 
loss of R7.7m for the six months ended 30 June 2011. This is as a result of
 
new greenfield schools making losses in the initial years until such time
 
that they have sufficient learners. We are comfortable with Curro's growth
 
profile (J-curve) and remain excited about its prospects.
 
For further information on Curro and their comprehensive interim results,
 
refer to www.curro.co.za.
 
ZEDER INVESTMENTS (42,4%)
 
Zeder invested a further R194,3m to increase its shareholding in existing
 
investments during the period under review. Its investment portfolio now
 
amounts to R2,7bn of which Kaap Agri and Capevin Holdings represent 70,8% (28
 
February 2011: 78,5%).
 
Zeder's two largest indirect investments, namely Distell and Pioneer Foods,
 
have shown little or no earnings growth. Zeder's recurring headline earnings
 
and recurring headline earnings per share consequently increased by a modest
 
2,7% to R127,8m and 13,1 cents respectively.
 
Pioneer Foods' results were also negatively affected as a result of the
 
delayed price increase in the implementation of the gross profit reductions
 
as agreed with the Competition Commission as part of the settlement reached
 
in November 2010. The negative impact of same on Zeder's headline earnings
 
was R20,6m.
 
Zeder's SOTP value per share, calculated using the quoted market prices for
 
all over-the-counter ("OTC") traded unlisted investments, was R2,77 per share
 
at 31 August 2011.
 
During the period under review, Zeder made an offer to acquire the entire
 
issued share capital of Capespan at R2,25 per share in cash. Through the
 
offer and market purchases, Zeder has to date managed to increase its
 
shareholding in Capespan from 22,7% to more than 40%.
 
We believe that the agriculture, food and beverage sectors offer rewarding
 
long term investment opportunities.
 
Zeder's comprehensive results for the six months ended 31 August 2011 are
 
available at www.zeder.co.za.
 
PSG CAPITAL (100%)
 
PSG Capital is the corporate finance arm of PSG Group. It is a JSE-registered
 
sponsor and designated advisor and was ranked third in the category Sponsors
 
Transaction and Deal Flow at the 2010 Deal Makers General Corporate Finance
 
Annual Awards. PSG Capital advises on mergers and acquisitions, listings,
 
restructurings, capital raisings, BEE transactions, and performs valuations
 
and fair and reasonable opinions. It currently has 33 JSE-listed and numerous
 
other unlisted clients. PSG Capital's services are available at
 
www.psgcapital.com.
 
PSG CORPORATE (100%)
 
PSG Corporate acts as PSG Group treasurer, allocates capital and determines
 
and monitors the group's gearing. It is also the appointed manager to both
 
Zeder and Paladin. The management fees earned from these two companies during
 
the period under review amounted to R32,9m (2010: R29,5m). PSG Corporate's
 
recurring headline earnings contribution amounted to R11m (2010: R10m).
 
Cash and facilities available for reinvestment amount to R700m.
 
PROSPECTS
 
Our focus remains to create wealth for our shareholders by increasing both
 
PSG's SOTP value per share and recurring headline earnings. We remain
 
committed to providing superior investment returns.
 
DIVIDENDS
 
Ordinary shares
 
PSG Group'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 consequently resolved to
 
declare an interim dividend of 26 cents (2010: 20 cents) per share.
 
The following are the salient dates for the payment of the interim dividend:
 
Last day to trade cum dividend Friday, 28 October 2011
 
Trading ex dividend commences Monday, 31 October 2011
 
Record date Friday, 4 November 2011
 
Day of payment Monday, 7 November 2011
 
Share certificates may not be dematerialised or rematerialised between
 
Monday, 31 October 2011, and Friday, 4 November 2011, both days inclusive.
 
PSG Financial Services preference shares
 
The directors of PSG Financial Services have declared a dividend of 340,27
 
cents per share in respect of the cumulative, non-redeemable, non-
 
participating preference shares for the six months ended 31 August 2011,
 
which was paid on 26 September 2011.
 
On behalf of the board
 
Jannie Mouton Wynand Greeff
 
Chairman Financial director
 
14 October 2011
 
Stellenbosch
 
Directors:
 
JF Mouton (Chairman), PE Burton, ZL Combi,
 
J de V du Toit, MM du Toit, WL Greeff*, JA Holtzhausen*, MJ Jooste,
 
JJ Mouton, PJ Mouton*, CA Otto, W Theron, CH Wiese
 
(*Executive Independent)
 
Secretaries and registered office:
 
PSG Corporate Services (Pty) Ltd, 1st Floor, Ou Kollege, 35 Kerk Street,
 
Stellenbosch, 7600, PO Box 7403, Stellenbosch, 7599
 
Transfer secretaries:
 
Computershare Investor Services (Pty) Ltd, 70 Marshall Street, Johannesburg,
 
2001, PO Box 61051, Marshalltown, 2107
 
Sponsor:
 
PSG Capital
 
CONDENSED GROUP INCOME STATEMENT
 
Unaudited Change Unaudited Audited
 
31 Aug % 31 Aug 28 Feb
 
2011 2010 2011
 
Rm Rm Rm
 
Income
 
Investment income (note 4) 162,7 172,2 492,2
 
Net fair value gains and losses 116,6 302,6 379,4
 
on financial instruments (note 4)
 
Fair value adjustment to (265,0) (384,6) (650,2)
 
investment contract liabilities
 
(note 4)
 
Commission and other fee income 757,9 30,0 583,2 1 290,2
 
Other operating income 20,2 42,3 380,2
 
Total income 792,4 10,7 715,7 1 891,8
 
 
Expenses
 
Insurance claims and loss (0,5) (2,4) (0,2)
 
adjustments
 
Operating expenses (698,6) (557,9) (1 162,4)
 
Total expenses (699,1) 24,8 (560,3) (1 162,6)
 
Share of profits of associated 249,0 267,3 524,8
 
companies
 
Results of operating activities 342,3 (19,0) 422,7 1 254,0
 
Finance costs (59,5) (46,2) (90,7)
 
Profit before taxation 282,8 (24,9) 376,5 1 163,3
 
Taxation (30,5) (54,0) (131,0)
 
Profit for the period 252,3 (21,8) 322,5 1 032,3
 
 
Attributable to:
 
Owners of the parent 148,1 208,9 708,4
 
Non-controlling interest 104,2 113,6 323,9
 
252,3 322,5 1 032,3
 
Attributable to owners of the 148,1 208,9 708,4
 
parent
 
Non-headline items (note 2) 26,9 20,2 (196,0)
 
Headline earnings 175,0 (23,6) 229,1 512,4
 
 
Earnings per share (cents)
 
- attributable 87,4 (30,1) 125,0 424,1
 
- headline ("HEPS") 103,3 (24,6) 137,0 306,7
 
- diluted attributable 86,4 (30,3) 124,0 420,2
 
- diluted headline 102,2 (24,9) 136,0 303,9
 
- recurring headline 135,5 21,7 111,3 241,9
 
 
Dividend per share (cents)
 
- interim 26,0 20,0 20,0
 
- final 47,0
 
26,0 30,0 20,0 67,0
 
 
Number of shares (million)
 
- in issue (net of treasury 175,2 167,0 166,3
 
shares)
 
- weighted average 169,5 167,2 167,1
 
- diluted weighted average 171,3 168,5 168,6
 
CONDENSED GROUP STATEMENT OF COMPREHENSIVE INCOME
 
Unaudite Unaudite Audited
 
d d 28 Feb
 
31 Aug 31 Aug 2011
 
2011 2010 Rm
 
Rm Rm
 
Profit for the period 252,3 322,5 1 032,3
 
Other comprehensive (loss)/income for (10,7) 25,0 26,2
 
the period
 
Share of other comprehensive income and (7,8) 25,4 17,0
 
equity movements of associated
 
companies
 
Disposal of associated company's share 10,1
 
of other comprehensive income
 
Other (2,9) (0,4) (0,9)
 
Total comprehensive income for the 241,6 347,5 1 058,5
 
period
 
 
Attributable to:
 
Owners of the parent 143,3 239,5 722,5
 
Non-controlling interest 98,3 108,0 336,0
 
241,6 347,5 1 058,5
 
CONDENSED GROUP STATEMENT OF FINANCIAL POSITION
 
Unaudite Unaudite Audited
 
d d 28 Feb
 
31 Aug 31 Aug 2011
 
2011 2010 Rm
 
Rm Rm
 
Assets
 
Property, plant and equipment 507,8 304,9 410,9
 
Intangible assets 1 111,4 919,2 1 025,3
 
Investments in associated companies 5 446,2 4 740,5 5 212,3
 
Deferred income tax 64,3 19,8 48,4
 
Financial assets linked to investment 8 915,9 8 534,9 9 112,4
 
contracts (note 4)
 
Other financial assets 612,8 721,5 605,7
 
Receivables 188,1 217,1 193,7
 
Current income tax assets 4,1 5,4
 
Cash and cash equivalents 698,0 347,9 796,1
 
Non-current assets held for sale 31,0
 
Total assets 17 579,6 15 805,8 17 410,2
 
 
Equity
 
Ordinary shareholders' equity 4 020,5 3 132,0 3 584,8
 
Non-controlling interest 3 117,8 2 519,9 3 025,8
 
Total equity 7 138,3 5 651,9 6 610,6
 
 
Liabilities
 
Insurance liabilities 30,3 31,0 29,9
 
Financial liabilities under investment 8 915,9 8 534,9 9 112,4
 
contracts (note 4)
 
Other financial liabilities 845,0 1 019,5 854,9
 
Deferred income tax 133,5 133,6 126,4
 
Payables and provisions 496,7 428,9 663,6
 
Current income tax liabilities 19,9 6,0 12,4
 
Total liabilities 10 441,3 10 153,9 10 799,6
 
Total equity and liabilities 17 579,6 15 805,8 17 410,2
 
 
Net asset value per share (cents) 2 295 1 875 2 156
 
Net tangible asset value per share 1 660 1 325 1 539
 
(cents)
 
CONDENSED GROUP STATEMENT OF CHANGES IN EQUITY
 
Unaudited Unaudited Audited
 
31 Aug 31 Aug 28 Feb
 
2011 2010 2011
 
Rm Rm Rm
 
Ordinary shareholders' equity at 3 584,8 2 947,0 2 947,0
 
beginning of period
 
Total comprehensive income for the period 143,3 239,5 722,5
 
Shares issued 376,0
 
Share buy-back (20,0) (20,0)
 
Net movement in treasury shares 16,7 4,3 9,6
 
Share-based payment costs 1,6 3,3 6,1
 
Transactions with non-controlling (22,0) 6,4 2,0
 
interest
 
Dividends paid (79,9) (48,5) (82,4)
 
Ordinary shareholders' equity at end of 4 020,5 3 132,0 3 584,8
 
period
 
Non-controlling interest 3 117,8 2 519,9 3 025,8
 
Beginning of period 3 025,8 2 263,5 2 263,5
 
Total comprehensive income for the period 98,3 108,0 336,0
 
Shares issued 71,0
 
Preference shares issued 202,9 501,5
 
Transactions with non-controlling 0,4 (35,4) (5,4)
 
interest
 
Acquisition of subsidiaries 39,7 39,7
 
Dividends and capital distributions paid (36,8) (35,1) (57,7)
 
Preference dividend paid (40,9) (23,7) (51,8)
 
 
Total equity at end of period 7 138,3 5 651,9 6 610,6
 
CONDENSED GROUP STATEMENT OF CASH FLOWS
 
Unaudited Unaudited Audited
 
31 Aug 31 Aug 28 Feb
 
2011 2010 2011
 
Rm Rm Rm
 
Net cash flow from operating activities (316,3) (8,5) 564,3
 
Net cash flow from investment activities (307,4) (267,4) (249,3)
 
Net cash flow from financing activities 278,2 184,3 335,9
 
Net (decrease)/increase in cash and cash (345,5) (91,6) 650,9
 
equivalents
 
Cash and cash equivalents at beginning of 1 127,3 476,4 476,4
 
period
 
Cash and cash equivalents at end of 781,8 384,8 1 127,3
 
period *
 
 
* Include the following:
 
- Bank overdrafts (15,9) (3,4)
 
- Clients' cash linked to investment 83,8 52,8 334,6
 
contracts
 
 
Net cash flow from operating activities, 291,3 207,2 845,0
 
before movement in working capital,
 
policyholder cash and other financial
 
instruments
 
Movement in working capital (206,1) (75,3) 125,4
 
Movement in policyholder cash (note 4) (250,8) (124,0) 157,8
 
Movement in other financial instruments (150,7) (16,4) (563,9)
 
Net cash flow from operating activities (316,3) (8,5) 564,3
 
NOTES TO THE CONDENSED GROUP FINANCIAL STATEMENTS
 
1. Basis of presentation and accounting policies
 
The condensed interim group financial statements have been prepared in
 
accordance with IAS 34 Interim Financial Reporting and should be read in
 
conjunction with the annual financial statements for the year ended 28
 
February 2011, which have been prepared in accordance with International
 
Financial Reporting Standards ("IFRS"), as well as the AC 500 standards, the
 
requirements of the South African Companies Act of 2008, as amended, and the
 
Listings Requirements of the JSE Ltd. The accounting policies applied in the
 
preparation of these condensed interim group financial statements are
 
consistent with those used in the previous financial year. No new standards,
 
interpretations or amendments, which are relevant to the group's operations,
 
became effective during the period.
 
Results of operating activities, as presented in the condensed group income
 
statement, include share of profits of associated companies as a significant
 
part of PSG Group's business activity is performed through associated
 
companies. The comparatives have been presented on a consistent basis.
 
2. Non-headline items
 
Unaudite Unaudite Audited
 
d d 28 Feb
 
31 Aug 31 Aug 2011
 
2011 2010 Rm
 
Rm Rm
 
Impairment of investments in associated (20,2) (13,8) (28,8)
 
companies
 
Net profit on sale/dilution of 3,0 15,0 243,3
 
investments in associated companies
 
Non-headline items of associated (9,9) (22,9) (18,1)
 
companies
 
Other 0,2 1,5 (0,4)
 
(26,9) (20,2) 196,0
 
 
Non-headline items are shown net of
 
taxation and non-controlling interest:
 
Gross amount (33,1) (20,9) 311,8
 
Taxation (1,3) (0,4) (42,4)
 
Non-controlling interest 7,5 1,1 (73,4)
 
Net amount (26,9) (20,2) 196,0
 
3. Commitments and contingent liabilities
 
Operating lease commitments 81,2 74,6 75,6
 
4. Linked investment contracts
 
These represent PSG Asset Management Administration Services (previously PSG
 
FutureWealth) clients' assets held under investment contracts, which are
 
linked to a corresponding liability.
 
The condensed group income statement impact of the returns on investment
 
contract policy holder assets and liabilities was as follows:
 
Investment
 
contract
 
policy Equity
 
holders holders Total
 
31 August 2011 Rm Rm Rm
 
Investment income 107,0 55,7 162,7
 
Net fair value gains and losses 163,9 (47,3) 116,6
 
on financial instruments
 
Fair value adjustment to (265,0) (265,0)
 
investment contract liabilities
 
Net investment return before 5,9 8,4 14,3
 
taxation
 
 
31 August 2010
 
Investment income 110,2 62,0 172,2
 
Net fair value gains and losses 297,2 5,4 302,6
 
on financial instruments
 
Fair value adjustment to (384,6) (384,6)
 
investment contract liabilities
 
Net investment return before 22,8 67,4 90,2
 
taxation
 
 
28 February 2011
 
Investment income 365,1 127,1 492,2
 
Net fair value gains and losses 296,5 82,9 379,4
 
on financial instruments
 
Fair value adjustment to (650,2) (650,2)
 
investment contract liabilities
 
Net investment return before 11,4 210,0 221,4
 
taxation
 
5. Segmental reporting
 
The group is organised into six reportable segments, namely: Capitec, Zeder,
 
Paladin, Curro, PSG Konsult (incl. PSG Asset Management following its
 
amalgamation) and PSG Corporate. These segments represent the major
 
investments of the group. The services offered by PSG Konsult consist of
 
financial advice, stock broking and fund management, while Curro offers
 
private education services. The other segments offer financing, banking,
 
investing and corporate finance services. All segments predominantly operate
 
in the Republic of South Africa.
 
Income and intersegment income comprise total income per the condensed group
 
income statement.
 
Recurring headline earnings are calculated on a see-through basis, and
 
include the proportional headline earnings of underlying investments,
 
excluding marked-to-market adjustments and one-off items.
 
Incom Inter- Recurring Non- Headline Net asset
 
e segment headline recurring earnings value
 
income earnings headline
 
earnings
 
Rm Rm Rm Rm Rm Rm
 
Six months
 
ended 31
 
August 2011
 
Capitec * 4,5 167,9 167,9 2 088,2
 
PSG Konsult 694,2 42,5 1,4 43,9 536,6
 
Paladin 15,4 22,7 3,0 25,7 717,2
 
Curro 79,3 (5,1) (5,1) 303,9
 
Zeder 21,7 53,8 (17,5) 36,3 1 126,2
 
PSG Corporate 6,1 (34,4) 17,9 (1,1) 16,8 484,6
 
Net fee income 7,8 0,3 8,1 22,2
 
**
 
Unit trust, (1,4) (1,4) 247,8
 
hedge fund and
 
share
 
investments
 
BEE 10,1 10,1 214,6
 
investments
 
Funding 6,9 (1,3) (70,5) (40,5) (111,0) (1 246,2)
 
Other *** 0,5 0,5 10,0
 
Total 828,1 (35,7) 229,7 (54,7) 175,0 4 020,5
 
Non-headline (26,9)
 
items
 
Attributable 148,1
 
earnings
 
* Equity accounted
 
** Net fee income is after deduction of salaries, operating expenses and tax
 
*** Consists mainly of the investment in Propell
 
Income Inter- Recurring Non- Headline Net
 
segment headline recurring earnings asset
 
income earnings headline value
 
earnings
 
Rm Rm Rm Rm Rm Rm
 
Six months
 
ended 31
 
August 2010
 
Capitec * 99,1 99,1 1 529,0
 
PSG Konsult 696,9 (32,9) 41,7 41,7 454,5
 
Paladin 28,8 25,1 62,4 87,5 803,6
 
Curro 12,7 1,2 1,2 104,1
 
Zeder 17,7 50,9 (13,8) 37,1 972,1
 
PSG Corporate 17,2 (29,5) 20,4 8,3 28,7 347,9
 
Net fee 10,3 10,3 28,8
 
income **
 
Unit trust, 8,3 8,3 124,3
 
hedge fund
 
and share
 
investments
 
BEE 10,1 10,1 194,8
 
investments
 
Funding 7,7 (2,9) (52,1) (13,9) (66,0) (1
 
126,5)
 
Other *** (0,2) (0,2) 47,3
 
Total 781,0 (65,3) 186,1 43,0 229,1 3 132,0
 
Non-headline (20,2)
 
items
 
Attributable 208,9
 
earnings
 
* Equity accounted
 
** Net fee income is after deduction of salaries, operating expenses and tax
 
*** Consists mainly of the investments in mCubed Holdings and Propell
 
Income Inter- Recurring Non- Headlin Net
 
segment headline recurring e asset
 
income earnings headline Earn- value
 
earnings ings
 
Rm Rm Rm Rm Rm Rm
 
Year ended 28
 
February 2011
 
Capitec * 22,0 223,0 223,0 1 981,6
 
PSG Konsult 1 359,6 (76,0) 93,9 6,4 100,3 480,8
 
Paladin 294,2 44,8 93,4 138,2 1 019,2
 
Curro 38,8 1,9 1,9 103,9
 
Zeder 135,5 109,4 (33,1) 76,3 1 073,1
 
PSG Corporate 168,2 (61,2) 40,2 26,1 66,3 372,3
 
Net fee income 21,0 21,0 22,9
 
**
 
Unit trust, (0,7) 26,1 25,4 144,9
 
hedge fund and
 
share
 
investments
 
BEE 19,9 19,9 204,5
 
investments
 
Funding 17,1 (6,4) (109,1) 4,9 (104,2) (1
 
484,2)
 
Other *** 10,6 10,6 38,1
 
Total 2 035,4 (143,6) 404,1 108,3 512,4 3 584,8
 
Non-headline 196,0
 
items
 
Attributable 708,4
 
earnings
 
* Equity accounted
 
** Net fee income is after deduction of salaries, operating expenses and tax
 
*** Consists mainly of the investments in m Cubed Holdings and Propell
 
6. PSG Financial Services
 
PSG Financial Services is a wholly owned subsidiary of PSG Group, except for
 
the 11 885 206 preference shares which are listed on the JSE Ltd. No separate
 
financial statements are presented for PSG Financial Services as it is the
 
only asset of PSG Group.
 
7. Business combinations
 
7.1 PSG Konsult and PSG Asset Management amalgamation
 
On 1 March 2011, PSG Konsult and PSG Asset Management amalgamated by means of
 
a transaction whereby PSG Konsult acquired 100% of the shares in PSG Asset
 
Management plus the asset managers' shares in their respective businesses,
 
with the exception of the non-controlling interest in PSG Asset Management's
 
hedge fund business, PSG Absolute Investments. This arrangement constituted a
 
common control transaction.
 
7.2 Equinox
 
On 1 May 2011 the group, through PSG Asset Management (being a subsidiary of
 
PSG Konsult), acquired the business of this online unit trust trading
 
platform for R23,9m. Net identifiable assets acquired amounted to R14,1m with
 
goodwill amounting to R9,8m.
 
7.3 Pleroma
 
On 1 May 2011 the group, through PSG Konsult Corporate (being a subsidiary of
 
PSG Konsult), acquired the business of this short-term insurance broker and
 
administrator for R31m. Net identifiable assets acquired amounted to R10m
 
with goodwill amounting to R21m.
 
UNAUDITED CONDENSED GROUP FINANCIAL STATEMENTS
 
These unaudited condensed group financial statements were compiled under the
 
supervision of PSG Group's financial director, Mr WL Greeff, who is a
 
Chartered Accountant (SA).
 
These results are available at www.psggroup.co.za
 
Date: 14/10/2011 17:05:01 Produced by the JSE SENS Department.
 
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