PGFP PSG
 
PSG / PGFP - PSG Group / PSG Financial Services - Reviewed results for the year
 
ended 29 February 2012
 
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")
 
Reviewed results for the year ended 29 February 2012
 
Recurring headline earnings per share increased by 27.6% to 308.6 cents per
 
share
 
Sum-of-the-parts value per share increased by 19.5% to R55.92 per share as at 29
 
February 2012
 
Dividend for the year increased by 22.4% to 82 cents per share
 
OVERVIEW
 
PSG Group Ltd ("PSG") is an investment holding company consisting of 39
 
underlying investments that operate across industries which include financial
 
services, banking, private equity, agriculture and education. PSG's market
 
capitalisation is approximately R9.5bn, with its largest investment being a
 
32.5% interest in Capitec Bank.
 
SUM-OF-THE-PARTS ("SOTP")
 
A key valuation tool to measure PSG's performance by is the growth in its SOTP
 
value per share. The calculation is simple and requires limited subjectivity as
 
82% of the SOTP value is calculated using quoted market prices, whilst the
 
unlisted investments are valued using market-related multiples. At 29 February
 
2012, the SOTP value per PSG share was R55.92, which equated to a 54% compounded
 
annual growth rate over the last three years. At 5 April 2012, the SOTP value
 
was R61.66 per share.
 
Asset/Liability 28 Feb 28 Feb 28 Feb 29 Feb % of
 
2009 2010 2011 2012 total
 
Rm Rm Rm Rm assets
 
 
Capitec Bank* 857 2 367 5 138 5 978 50,0
 
PSG Konsult** 873 948 1 206 1 483 12,4
 
PSG Private Equity 413 834 1 242 728 6,1
 
(previously Paladin
 
Capital)+
 
Curro Holdings* 1 118 9,3
 
Thembeka Capital+ 570 4,8
 
Zeder Investments* 342 742 1 069 1 067 8,9
 
PSG Corporate (incl PSG 216 361 350 338 2,8
 
Capital)+
 
Other investments (EOH, 745 400 548 684 5,7
 
pref share investments,
 
cash, etc)+
 
Total assets 3 446 5 652 9 553 11 966 100,0
 
Perpetual pref funding* (486) (541) (1 028) (1 188)
 
Other debt+ (350) (539) (507) (463)
 
Total SOTP value 2 610 4 572 8 018 10 315
 
Number of shares 170,5 171,8 171,3 184,5
 
(million)
 
SOTP value per share 15,31 26,60 46,81 55,92
 
(rand)
 
* Listed on the JSE
 
** 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
 
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. Consolidated recurring headline earnings represent the sum
 
of PSG's effective interest in that of each strategic investment, regardless of
 
our percentage shareholding. 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 and one-
 
off items are excluded.
 
Recurring headline 28 Feb % change 28 Feb % change 29 Feb
 
earnings (Rm) 2010 2011 2012
 
 
Capitec Bank 151,7 47 223,0 63 362,4
 
PSG Konsult 91,9 2 93,9 15 107,9
 
PSG Private Equity 74,8 (51) 36,5 (12) 32,0
 
(previously Paladin
 
Capital)
 
Curro Holdings 1,1 73 1,9 n/a (5,2)
 
Thembeka Capital 1,5 467 8,5 120 18,7
 
Zeder Investments 83,6 31 109,4 5 115,4
 
PSG Corporate (incl PSG 15,3 37 21,0 (3) 20,4
 
Capital)
 
Other 19,8 (4) 19,0 2 19,3
 
Recurring headline 439,7 17 513,2 31 670,9
 
earnings before funding
 
Funding (80,7) 35 (109,1) 23 (134,4)
 
Recurring headline 359,0 13 404,1 33 536,5
 
earnings
 
Non-recurring items 72,4 50 108,3 (72) 30,6
 
Headline earnings 431,4 19 512,4 11 567,1
 
Non-headline items (40,5) n/a 196,0 (31) 135,9
 
Attributable earnings 390,9 81 708,4 (1) 703,0
 
Earnings per share
 
(cents)
 
Recurring headline 207,4 17 241,9 28 308,6
 
Headline 249,2 23 306,7 6 326,2
 
Attributable 225,8 88 424,1 (5) 404,4
 
 
Dividend per share 42,0 60 67,0 22 82,0
 
(cents)
 
Recurring headline earnings per share increased by 27.6% to 308.6 cents during
 
the year under review. Capitec again accounted for most of the growth with its
 
continued exceptional performance, whilst the majority of the remaining
 
investments reported moderate earnings growth. Paladin's performance was
 
negatively impacted by the losses that were suffered by its investments in the
 
construction sector. Curro reported a loss as a result of its infrastructure
 
spend to cater for future growth, as well as its investment in startup schools
 
which will only turn profitable once they have a sufficient number of learners.
 
Headline earnings increased by 6.4% to 326.2 cents per share, whereas
 
attributable earnings decreased by 4.6% to 404.4 cents per share. The lower
 
increase in headline earnings as opposed to recurring headline earnings per
 
share was predominantly as a result of a marked-to-market loss of R29.8m
 
incurred on PSG Financial Services' interest rate hedge as opposed to a marked-
 
to-market profit of R4.9m in the prior year, and less marked-to-market profits
 
achieved in Thembeka's investment portfolio of listed shares during the current
 
financial year.
 
The decrease in attributable earnings per share was mainly as a result of the
 
non-headline profits achieved on the disposal of Paladin's investment in CIC
 
Holdings and Zeder's investment in KWV Holdings in the prior year.
 
MATERIAL CORPORATE ACTION AND INVESTING
 
Raised R377m in cash through the issue of 8.2m PSG ordinary shares at an average
 
price of R46.09 per share;
 
Raised R132m in cash through the issue of 1.5m PSG Financial Services perpetual
 
preference shares. We now have a nominal total of R1.34bn in perpetual
 
preference share funding, of which the majority of the cost has been fixed by
 
means of an interest rate hedge - R440m at 8.87% per annum until 31 August 2016,
 
and R780m at 8.56% per annum until 31 August 2020;
 
Paladin's 77.6% interest in Curro was unbundled to Paladin shareholders with
 
effect from August 2011. PSG, as a result, now holds a 63.1% direct interest in
 
Curro;
 
Effective October 2011, PSG acquired the remaining 18.7% minorities shareholding
 
for a 100% interest in Paladin, following which Paladin was delisted from the
 
JSE (Altx). The purchase consideration was settled through the issue of 4.3m
 
PSG ordinary shares at a price of R47.27 per share, and R2m in cash; and
 
Subsequent to year end, PSG acquired a 60% interest in CA Sales Holdings (Pty)
 
Ltd (a Botswana based FMCG distributor) for R202m.
 
CAPITEC BANK (32.5%)
 
PSG is proud of its investment in Capitec. It has grown into a sizeable
 
business with over 7 000 employees, 507 branches and a market capitalisation in
 
excess of R20bn. During the past year, Capitec appointed 2 694 employees and
 
created 1 863 jobs.
 
Capitec focuses on making banking easier and more cost effective for its
 
clients. It acquires new clients and encourages existing clients to use more of
 
its products and services. Capitec added 877 000 new clients during the past
 
year to bring the total number of active clients to 3.7m.
 
In November 2011, Capitec raised R787m in cash by means of a private placement
 
of ordinary shares, which resulted in PSG's interest in Capitec diluting from
 
34.2% to 32.5%. Despite the increased capital in the business, they still
 
managed to deliver a return on ordinary shareholders' equity of 29% (2011: 34%).
 
Capitec reported headline earnings of R1.08bn for the financial year ended 29
 
February 2012, with headline earnings per share having increased by 49% to
 
R11.25.
 
Capitec has changed banking in South Africa with its simplicity and innovation,
 
and is attracting more and more high income clients. The core management team
 
has been with the bank since its inception and remains confident that they will
 
be able to continue to grow Capitec's client base.
 
Capitec's comprehensive results are available at www.capitec.co.za.
 
PSG KONSULT (71.3%)
 
PSG Konsult, now also incorporating the PSG Asset Management group, reported
 
positive results for the financial year ended 29 February 2012. Recurring
 
headline earnings per share increased by 15.6% to 14.1 cents, and headline
 
earnings per share by 21.6% to 15.2 cents. Turnover, consisting of commission
 
and other operating income, increased by 40% to R1.4bn (largely as a result of
 
the acquisition of the PSG Asset Management group), while short term premiums
 
administered amounted to R1.6bn on an annualised basis. Funds under management
 
and administration increased to R139bn.
 
The PSG Konsult group received a number of accolades during the past year:
 
The PSG Equity Fund and PSG Flexible Fund won Raging Bull awards;
 
PSG Konsult Moderate Fund of Funds won the Morningstar award for Moderate
 
Allocations;
 
PSG Online was voted Stockbroker of the Year by Business Day Investors Monthly;
 
and
 
PSG Konsult was voted National Broker of the Year: Commercial lines and
 
Agriculture by Santam.
 
At year-end, PSG Konsult had 224 (2011: 216) offices with 694 (2011: 642)
 
financial planners, portfolio managers, stockbrokers and asset managers.
 
PSG Konsult's comprehensive results are available at www.psgkonsult.co.za.
 
PSG PRIVATE EQUITY (PREVIOUSLY PALADIN CAPITAL) (100%)
 
Paladin will in future be branded as PSG Private Equity.
 
At 29 February 2012, Paladin had 13 investments across the economic spectrum.
 
Paladin invests in sectors other than agriculture, food and beverages.
 
Paladin was delisted from the JSE (Altx) in the year under review following its
 
unbundling of Curro and the subsequent buy-out of the Paladin minority
 
shareholders by PSG. Paladin minority shareholders realised a compounded annual
 
return of 43% since listing in 2009. As a wholly-owned subsidiary of PSG,
 
Paladin continues to focus on new business opportunities.
 
Recurring headline earnings decreased by 17% to R37m, mainly due to losses
 
suffered by its investments in the construction industry. African Unity
 
Insurance experienced strong earnings growth and GRW has returned to
 
profitability, while the remainder of Paladin's investments performed in line
 
with or better than in the prior year. Paladin management invested a
 
significant amount of time in the past year to restructure or turn investments
 
around that have previously disappointed, and we look forward to improved
 
earnings from these investments going forward.
 
Further corporate action at Paladin included:
 
Invested R262m in Curro, prior to its unbundling;
 
Acquired a 50% interest in Impak Onderwysdiens (provider of alternative and
 
distance education services aimed at the school level) for R35m;
 
Sold its 44% interest in IQuad for R30m;
 
Early stage investments in Energy Partners (provider of energy saving solutions)
 
and Stellenbosch Nanofibre Company (provider of nanofibre technology solutions),
 
the latter in partnership with the University of Stellenbosch; and
 
Subsequent to year end, Top Fix (in which Paladin holds a 29% stake) reached an
 
agreement to sell its scaffolding business which has traditionally been loss
 
making. The transaction is subject to shareholder approval.
 
Paladin's overall internal rate of return (IRR) across its portfolio (excluding
 
the unbundled Curro) is currently 15%. Management's target remains an IRR in
 
excess of 25%.
 
CURRO (63.1%)
 
Curro was listed on the JSE (Altx) on 2 June 2011. Its business model revolves
 
around the development, acquisition and management of private schools in South
 
Africa. Curro has decided to expand its original affordable schools model to
 
include three additional market segments, being:
 
The high-end/elite private school market;
 
A private community school initiative market known as Meridian Private Schools,
 
focusing on the lower end of the market; and
 
The baby care/creche market that will be known as Curro Junior Academy.
 
Since 2009, Curro has expanded its country-wide network of private schools from
 
3 to 16. The number of learners has increased fivefold from 2 000 in 2009 to
 
more than 10 500 at present.
 
During the year under review, Curro invested R142m in the establishment of four
 
new main campuses, and R80m to expand capacity and to upgrade facilities at the
 
existing campuses. Curro also acquired and expanded four schools with
 
established campuses.
 
On a comparative basis, Curro's turnover has increased by 125% to R166.3m for
 
the financial year ended 31 December 2011. Curro made a headline loss of R7.5m
 
for the year ended 31 December 2011, compared to a R5.2m profit in the previous
 
year due to the high initial costs associated with new schools. We expect Curro
 
to continue to yield low returns whilst expanding rapidly.
 
The potential of the private schools market and the rapidly increasing demand
 
for private education bode well for Curro's growth strategy. Curro will
 
therefore, in addition to adding capacity to existing schools, continue to
 
aggressively expand its network of schools across South Africa. We are
 
confident that this strategy will yield attractive returns in the long term,
 
albeit that it will be capital intensive and costly over the short to medium
 
term.
 
In order to provide Curro with additional capital to finance the rapid expansion
 
of its network of schools and to take advantage of new opportunities that the
 
market currently presents, Curro has announced a renounceable rights offer
 
whereby it will raise R348m at R6 per share during April 2012.
 
Curro's comprehensive results are available at www.curro.co.za.
 
THEMBEKA CAPITAL (49%)
 
Thembeka Capital, a BEE investment company, was previously held by Paladin
 
Capital and is now separately reported on under PSG Group. At year end,
 
Thembeka's portfolio of R1.6bn consisted of investments in Capitec Bank, PSG
 
Group, Kaap Agri, Overberg Agri, MTN Zakhele and several other unlisted
 
investments. Thembeka's recurring headline earnings increased by 57% to R72m
 
for the year under review, whereas its intrinsic value (post CGT) increased by
 
5% to R72.92 per share since 28 February 2011.
 
Corporate action at Thembeka included:
 
Sold its entire interest in the JSE Ltd, realizing a profit of R261m,
 
representing an IRR of 44%;
 
Sold its smaller investments in IQuad, MGK and BKB, realising IRR's of between
 
17% and 51%;
 
Increased its interest in Kaap Agri from 15% to 20%; and
 
The Thembeka Agri Fund acquired an 11% interest in NWK.
 
Subsequent to year end, Thembeka, as the lead BEE partner in the Pioneer BEE
 
deal, acquired a 4.4% interest in Pioneer Food Group Ltd for R514m. Thembeka's
 
cash contribution to this transaction was R52m, with the balance being funded by
 
a third party.
 
Thembeka is confident that its portfolio of investments will continue to deliver
 
good returns over the long term.
 
ZEDER INVESTMENTS (42.4%)
 
Zeder is an investor in the agriculture, food, beverages and related sectors.
 
The current value of its portfolio amounts to R3.1bn, of which its investments
 
in Agri Voedsel Beleggings (with its interest of 31.1% in Pioneer Foods) and
 
Capevin Holdings (with its effective interest of 14.8% in Distell) represent
 
62.4%. During the year under review, Zeder invested R338m to increase its
 
interest in existing investments.
 
Recurring headline earnings per share increased by 3.1% to 27.9 cents, and
 
headline earnings per share by 62.3% to 30.7 cents. The significant increase in
 
headline earnings mainly relates to the prior year impact of Pioneer Foods'
 
Competition Commission settlement. During the year under review, Zeder's SOTP
 
value per share (calculated using quoted market prices) increased by 15% to
 
R3.15.
 
Corporate action at Zeder included:
 
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 managed
 
to increase its shareholding in Capespan from 22.7% to 40.9%;
 
Subsequent to year-end, Zeder acquired the remaining 74.9% shareholding in
 
Agricol for a purchase consideration of R150.4m. Zeder views its acquisition of
 
Agricol as an important phase in its investment strategy and plans to use this
 
vehicle to drive a South African and African expansion in the seed business; and
 
Subsequent to year-end, Zeder acquired an interest of 81% in Chayton, a large
 
scale commercial farming operation in Zambia. The initial investment is
 
USD9.7m, with a further USD37m to be invested as and when acquisition
 
opportunities have been identified by Chayton. The investment in Chayton will
 
further contribute to Zeder's reach and will create new opportunities for its
 
current SA-based investments.
 
Zeder has historically only taken non-controlling strategic stakes in businesses
 
in its chosen sector. The acquisition of controlling interests in both Agricol
 
and Chayton will allow Zeder to play a more active role in determining strategy
 
and to help expand the respective businesses.
 
Zeder is positive about the role that Africa, with its vast agricultural
 
potential and resources, could play in addressing the growing global demand for
 
food.
 
Zeder's comprehensive results are available at www.zeder.co.za.
 
PSG CAPITAL (100%)
 
PSG Capital is the corporate finance arm of PSG Group and provides a complete
 
range of corporate finance and advisory services to a broad spectrum of clients.
 
PSG Capital is a JSE-registered sponsor and designated advisor. They advise on
 
mergers and acquisitions, fairness opinions and valuations, capital raisings and
 
listings, JSE and regulatory advisory, private equity, BEE, management and
 
leveraged transactions, corporate recovery & restructuring as well as debt &
 
strategic advice. PSG Capital is the sponsor and designated advisor to 33 JSE-
 
listed companies, and has an extensive list of unlisted clients. Since
 
establishment in 1998, PSG Capital has advised on publicly announced
 
transactions in excess of R73bn.
 
PSG Capital's services are available at www.psgcapital.com.
 
PSG CORPORATE (100%)
 
PSG Corporate is a profit centre. It acts as PSG Group treasurer, allocates
 
capital and determines and monitors the group's gearing. PSG Corporate made a
 
recurring headline earnings contribution of R20.4m (2011: R21m) during the year
 
under review.
 
PROSPECTS
 
Our focus remains on the creation of 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.
 
REVIEWED FINANCIAL RESULTS
 
PSG's reviewed financial results have been released on the Securities Exchange
 
News Services (SENS) and are also available at www.psggroup.co.za.
 
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. On 1 March 2012, the directors declared a final dividend
 
of 56 cents (2011: 47 cents) per share, which brings the total dividend for the
 
financial year ended 29 February 2012 to 82 cents (2011: 67 cents). The final
 
dividend was paid to shareholders on 2 April 2012.
 
Preference shares
 
The directors of PSG Financial Services have declared a dividend of 334.73 cents
 
per share in respect of the cumulative, non-redeemable, non-participating
 
preference shares ("perpetual preference shares") for the six months ended 29
 
February 2012, which was paid on 26 March 2012.
 
Following the finalisation of the amendments to the Income Tax Act regarding the
 
taxation of dividends, the directors of PSG Financial Services on 4 April 2012
 
announced that the dividend rate of the perpetual preference shares will be
 
increased from 75% to 83.33% of the prime interest rate with effect from 1 April
 
2012.
 
On behalf of the board
 
Jannie Mouton Wynand Greeff
 
Chairman Financial Director
 
16 April 2012
 
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+
 
*Executive +Non-executive Independent non-executive
 
Secretary:
 
PSG Corporate Services (Pty) Ltd
 
Registered office:
 
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
 
Auditor:
 
PricewaterhouseCoopers Inc.
 
Condensed group income statement 2012 2011
 
R'm R'm
 
 
Income
 
Investment income (note 4) 387,9 492,2
 
Net fair value gains and losses on 533,7 379,4
 
financial instruments (note 4)
 
Fair value adjustment to investment (624,1) (650,2)
 
contract liabilities (note 4)
 
Commission and other fee income 1 527,6 1 290,2
 
Other operating income 226,8 380,2
 
Total income 2 051,9 1 891,8
 
Expenses
 
Insurance claims 0,3 (0,2)
 
Operating expenses (1 456,3) (1 162,4)
 
Total expenses (1 456,0) (1 162,6)
 
 
Associated companies
 
Share of profits of associated companies 684,1 560,9
 
Loss on impairment of associated companies (41,0) (36,1)
 
Total profit related to associated 643,1 524,8
 
companies
 
Results of operating activities 1 239,0 1 254,0
 
Finance costs (109,6) (90,7)
 
Profit before taxation 1 129,4 1 163,3
 
Taxation (104,1) (131,0)
 
Profit for the year 1 025,3 1 032,3
 
 
Attributable to:
 
- Owners of the parent 703,0 708,4
 
- Non-controlling interest 322,3 323,9
 
1 025,3 1 032,3
 
 
Headline earnings
 
- Attributable to owners of the parent 703,0 708,4
 
- Non-headline items (note 2) (135,9) (196,0)
 
567,1 512,4
 
Earnings per share (cents)
 
- Attributable 404,4 424,1
 
- Headline 326,2 306,7
 
- Diluted attributable 400,3 420,2
 
- Diluted headline 322,9 303,9
 
- Recurring headline 308,6 241,9
 
 
Number of shares in issue (million)
 
- In issue (net of treasury shares) 179,6 166,3
 
- Weighted average 173,9 167,1
 
- Diluted weighted average 175,6 168,6
 
Condensed group statement of comprehensive income 2012 2011
 
R'm R'm
 
 
Net income of the group 1 025,3 1 032,3
 
Currency translation adjustments and fair value 0,9 (0,9)
 
gains/(losses)
 
Share of other comprehensive income of associated (18,5) 17,0
 
companies
 
Disposal of associated company's share of other 10,1
 
comprehensive income
 
Total comprehensive income 1 007,7 1 058,5
 
 
Attributable to:
 
- Owners of the parent 685,4 722,5
 
- Non-controlling interest 322,3 336,0
 
1 007,7 1 058,5
 
Condensed group statement of financial position 2012 2011
 
R'm R'm
 
 
Assets
 
Property, plant and equipment 654,7 410,9
 
Intangible assets 1 114,3 1 025,3
 
Investments in associated companies 6 117,6 5 212,3
 
Financial assets linked to investment contracts (note 9 144,7 9 112,4
 
4)
 
Cash and cash equivalents linked to investment 97,2 334,6
 
contracts
 
Other financial assets linked to investment contracts 9 047,5 8 777,8
 
Other financial assets 751,7 605,7
 
Deferred income tax 51,3 48,4
 
Receivables (note 5) 2 491,5 193,7
 
Current income tax 6,5 5,4
 
Cash and cash equivalents 628,5 796,2
 
Total assets 20 960,8 17 410,3
 
 
Equity
 
Ordinary shareholders' equity 4 760,0 3 584,8
 
Non-controlling interest 3 187,6 3 025,8
 
Total equity 7 947,6 6 610,6
 
 
Liabilities
 
Insurance liabilities 29,9 29,9
 
Financial liabilities under investment contracts 9 144,7 9 112,4
 
(note 4)
 
Other financial liabilities 952,2 854,9
 
Deferred income tax 139,9 126,5
 
Payables and provisions (note 5) 2 729,5 663,6
 
Current income tax 17,0 12,4
 
Total liabilities 13 013,2 10 799,7
 
Total equity and liabilities 20 960,8 17 410,3
 
 
Net asset value per share (cents) 2 650 2 156
 
Net tangible asset value per share (cents) 2 030 1 539
 
Condensed group statement of changes in owners' 2012 2011
 
equity R'm R'm
 
Ordinary shareholders' equity at beginning of year 3 584,8 2 947,0
 
Shares issued 576,6
 
Share buy-back (20,0)
 
Net movement in treasury shares (3,4) 9,6
 
Share based payment costs 9,5 6,1
 
Transactions with non-controlling interest 33,8 2,0
 
Total comprehensive income 685,4 722,5
 
Dividends paid (126,7) (82,4)
 
Ordinary shareholders' equity at end of year 4 760,0 3 584,8
 
 
Non-controlling interest at beginning of year 3 025,8 2 263,4
 
Transactions with non-controlling interests (240,3) (5,4)
 
Acquisition of subsidiaries 4,8 39,7
 
Total comprehensive income 322,3 336,0
 
Dividends and capital distributions paid (126,5) (109,4)
 
Shares issued 201,5 501,5
 
Non-controlling interest at end of year 3 187,6 3 025,8
 
 
Total equity at end of year 7 947,6 6 610,6
 
Dividend per share (cents)
 
- Interim 26,0 20,0
 
- Final 56,0 47,0
 
82,0 67,0
 
Condensed group statement of cash flows 2012 Restated
 
R'm 2011
 
R'm
 
Cash generated by operations 576,3 569,1
 
Cash movement in policyholder funds (237,4) 157,8
 
Finance costs & taxation paid (216,0) (198,7)
 
Net cash flow from operating activities 122,9 528,2
 
Net cash flow from investment activities (911,5) (213,2)
 
Net cash flow from financing activities 291,9 335,9
 
Net (decrease)/increase in cash and cash equivalents (496,7) 650,9
 
Cash and cash equivalents at beginning of year 1 127,3 476,4
 
Cash and cash equivalents at end of year * 630,6 1 127,3
 
 
* Include the following:
 
Bank overdrafts and CFD financing (95,1) (3,4)
 
Clients' cash linked to investment contracts 97,2 334,6
 
Notes to the condensed financial statements
 
1. Basis of presentation and accounting policies
 
The abridged financial statements have been prepared in accordance with the
 
recognition and measurement principles of International Financial Reporting
 
Standards ("IFRS"), including IAS 34 - Interim Financial Reporting and the AC
 
500 standards; the requirements of the South African Companies Act of 2008, as
 
amended; and the Listings Requirements of the JSE Limited. The accounting
 
policies applied in the preparation of these abridged financial statements are
 
consistent with those used in the previous financial year and no new accounting
 
standards, interpretations or amendments to IFRS were relevant to the group's
 
operations.
 
2. Non-headline items
 
Net of taxation and non-controlling interest 2012 2011
 
R'm R'm
 
Impairment of investments in associated companies (36,3) (28,8)
 
Net loss on sale/dilution of investments in 0,2
 
subsidiaries
 
Net profit on sale/dilution of investments in 176,5 243,3
 
associated companies
 
(Loss)/Profit on sale of available-for-sale assets (1,0) 0,9
 
Impairment of intangible assets (incl. goodwill) (4,3) (1,4)
 
Non-headline items of associated companies 0,7 (18,1)
 
Other investment activities 0,1 0,1
 
135,9 196,0
 
3. Business combinations
 
The group's significant business combinations during the year under review were:
 
Effective 1 May 2011 the group, through PSG Konsult, acquired the business of
 
Pleroma Insurance Brokers at a purchase consideration of R30.7m. Goodwill of
 
R20.7m arose on the acquisition. Profits since acquisition amounted to R3m.
 
Effective 1 May 2011 the group, through PSG Konsult, acquired all the shares in
 
EFS Investment Solutions at a purchase consideration of R26.9m. Goodwill of
 
R10.9m arose on the acquisition. Profits since acquisition amounted to R7.3m.
 
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, as well as
 
the investment income earned by the ordinary shareholders of PSG Group and its
 
subsidiaries, were as follows:
 
Investmen
 
t
 
contract
 
policy Equity
 
holders holders Total
 
29 February 2012 Rm Rm Rm
 
Investment income 224,0 163,9 387,9
 
Net fair value gains and losses on 422,9 110,8 533,7
 
financial instruments
 
Fair value adjustment to investment (624,1) (624,1)
 
contract liabilities
 
Net investment return before taxation 22,8 274,7 297,5
 
28 February 2011
 
Investment income 365,1 127,1 492,2
 
Net fair value gains and losses on 296,5 82,9 379,4
 
financial instruments
 
Fair value adjustment to investment (650,2) (650,2)
 
contract liabilities
 
Net investment return before taxation 11,4 210,0 221,4
 
5. Broker-and clearing accounts
 
Included under receivables are PSG Online broker-and clearing accounts of which
 
R2.3bn represents amounts owing by the JSE for trades in the last few days
 
before year end. These balances fluctuate on a daily basis depending on the
 
activity in the markets.
 
The control account for the settlement of these transactions is included under
 
trade and other payables, with the settlement to the clients taking place within
 
3 days after the transaction date.
 
6. Segmental reporting
 
The group is organised into seven reportable segments, namely: Capitec, Zeder,
 
Paladin, Thembeka Capital, Curro, PSG Konsult (including 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.
 
Headline earnings comprise recurring and non-recurring headline earnings.
 
Consolidated recurring headline earnings are calculated on a proportional basis,
 
and include the proportional headline earnings of underlying investments,
 
excluding marked-to-market adjustments and one-off items.
 
Non-
 
Inter- Recurri recurri Sum-of-
 
ng ng
 
segme headlin headlin Headli the-
 
nt e e ne parts
 
Incom incom earning earning earnin value
 
e e s s gs
 
29 February 2012 Rm Rm Rm Rm Rm Rm
 
Capitec * 182,4 362,4 362,4 5 978,3
 
Zeder 55,9 115,4 11,6 127,0 1 067,0
 
Paladin 17,2 32,0 (32,4) (0,4) 727,7
 
Thembeka Capital * 18,7 4,4 23,1 570,3
 
Curro 170,3 (5,2) (5,2) 1 118,0
 
PSG Konsult (incl. PSG 1 107,9 7,8 115,7 1 482,9
 
Asset Management) 461,3
 
PSG Corporate 212,4 (60,4 41,0 68,6 109,6 1 071,0
 
)
 
Net fee income ** 20,4 20,4 338,3
 
Unit trust, hedge fund 68,6 68,6 507,6
 
and share investments
 
BEE investments 20,6 20,6 225,1
 
Funding 14,3 (1,5) (134,4) (29,8) (164,2 (1
 
) 650,2)
 
Other (1,3) 0,4 (0,9) (49,3)
 
Total 2 (61,9 536,5 30,6 567,1 10
 
113,8 ) 315,7
 
Non-headline 135,9
 
Earnings attributable 322,3
 
to non-controlling
 
interest
 
Taxation 104,1
 
Profit before taxation 1
 
129,4
 
* Equity accounted
 
** Net fee income is after deduction of salaries, operating expenses and
 
taxation
 
Non-
 
Inter- Recurri recurri Sum-of-
 
ng ng
 
segme headlin headlin Headli the-
 
nt e e ne parts
 
Incom incom earning earning earnin value
 
e e s s gs
 
28 February 2011 Rm Rm Rm Rm Rm Rm
 
Capitec * 22,0 223,0 223,0 5 138,4
 
Zeder 135,5 109,4 (33,1) 76,3 1 068,7
 
Paladin 332,9 36,5 (0,2) 36,3 1 242,1
 
Thembeka Capital * 8,5 93,6 102,1
 
Curro 1,9 1,9
 
PSG Konsult 1 93,9 6,4 100,3 1 205,5
 
283,7
 
PSG Corporate 168,1 (61,3 40,0 24,3 64,3 703,9
 
)
 
Net fee income ** 21,0 21,0 350,0
 
Unit trust, hedge fund (0,9) 24,3 23,4 149,4
 
and share investments
 
BEE investments 19,9 19,9 204,5
 
Funding 17,3 (6,4) (109,1) 6,8 (102,3 (1
 
) 535,4)
 
Other 10,5 10,5 194,6
 
Total 1 (67,7 404,1 108,3 512,4 8 017,8
 
959,5 )
 
Non-headline 196,0
 
Earnings attributable 323,9
 
to non-controlling
 
interest
 
Taxation 131,0
 
Profit before taxation 1
 
163,3
 
 
* Equity accounted
 
** Net fee income is after deduction of salaries, operating expenses and
 
taxation
 
7. Commitments and contingent liabilities
 
2012 2011
 
Rm Rm
 
Operating lease commitments 70,8 75,6
 
Other capital commitments 109,0 28,9
 
179,8 104,5
 
8. Restatement of prior year figures
 
The net cash flows from investments in equity securities (other than those that
 
are linked to investment contracts) have been reclassified from cash flows from
 
operating activities in prior reporting periods to cash flows from investment
 
activities. PSG believes that this is the more appropriate way to view such
 
investments from a cash flow perspective and has consequently resolved to
 
restate the prior year figures in the group statement of cash flows. The effect
 
of the reclassification was as follows:
 
Reported Reclassificatio Restate
 
n d
 
previousl
 
y
 
Rm Rm Rm
 
Net cash flow from operating activities 564,3 (36,1) 528,2
 
Net cash flow from investment activities (249,3) 36,1 (213,2)
 
9. PSG Financial Services Ltd
 
The company is a wholly owned subsidiary of PSG Group, except for the 13,419,479
 
preference shares which are listed on the JSE Limited. No separate financial
 
statements are presented for the company as it is the only asset of PSG Group.
 
10. Review by auditors
 
The company's external auditors, PricewaterhouseCoopers Inc., have reviewed the
 
condensed financial statements. A copy of their unmodified review opinion is
 
available on request at the company's registered office.
 
Date: 16/04/2012 15:28:00 Produced by the JSE SENS Department.
 
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