PSG KONSULT LIMITED - Results for the year ended 28 February 2015
9 April, 2015 - Posted at - 13:32:00
KST 201504090020A<BR>
Results for the year ended 28 February 2015<BR>
<BR>
PSG Konsult Limited <BR>
(Incorporated in the Republic of South Africa) <BR>
Registration number: 1993/003941/06 <BR>
JSE share code: KST<BR>
NSX share code: KFS<BR>
ISIN code: ZAE000191417<BR>
(‘PSG Konsult' or ‘the company' or ‘the group')<BR>
<BR>
<BR>
RESULTS FOR THE YEAR ENDED 28 FEBRUARY 2015<BR>
<BR>
SALIENT FEATURES<BR>
<BR>
- Revenue +18% <BR>
<BR>
- Recurring headline earnings +36%<BR>
<BR>
- Recurring headline earnings per share +31% <BR>
<BR>
- Assets under management +27%<BR>
<BR>
- Dividend 12.0 cents<BR>
<BR>
- Long-term credit rating upgrade by Global Credit Rating Company to BBB+ with Stable outlook<BR>
<BR>
<BR>
COMMENTARY<BR>
<BR>
PSG Konsult is proud to present the first set of full-year financial results following its successful listing on the <BR>
Johannesburg Stock Exchange (JSE) and the Namibian Stock Exchange (NSX) in June and July 2014, respectively. The group's <BR>
positive growth momentum has continued and enabled it to once again produce commendable results. PSG Wealth and PSG <BR>
Asset Management have shown particularly pleasing results with notable headline earnings growth. Results within <BR>
PSG Insure were lower than expected, due to higher claims ratios than forecasted. Overall, each division has shown positive <BR>
revenue growth, which was a key focus for this financial year. PSG Konsult has shown a combined revenue increase of 18% <BR>
compared to last year.<BR>
<BR>
The board of directors is especially pleased with this set of results, taking into account the current sluggish economic <BR>
growth and softer markets. The economic outlook notwithstanding, management has once again proven themselves to be <BR>
capable trustees of shareholder and client finances. The focus on client service excellence through the quality of the <BR>
group's advice, products and platforms is proving resilient in these trying times.<BR>
<BR>
PSG Wealth continues to be a key revenue driver for the group, contributing approximately 56% towards combined revenue. <BR>
It maintains an upward revenue trajectory, benefiting from both organic and selected adviser acquisition growth. The 13% <BR>
increase in the FTSE/JSE All Share Index relative to this time last year, positive client inflows and favourable market <BR>
conditions benefited the division. Brokerage income showed strong growth of 23% and management fees income increased by <BR>
a pleasing 30% compared to the 2014 financial year. Managed assets increased by 30% to R110.2 billion (2014: R84.7 billion) <BR>
and assets under administration by 39% to R162.7 billion (2014: R117.0 billion).<BR>
<BR>
PSG Asset Management remains a high-growth area and a key focus for the group. Its marketing campaign is proving effective <BR>
in raising awareness of the PSG Asset Management brand, leading to strong client inflows from both retail and institutional <BR>
investors. PSG Asset Management attracted net inflows of R5.9 billion for the financial year, including a new R1.1 billion <BR>
institutional asset management mandate. Over this period, total assets under management increased by 51% to R23.8 billion <BR>
(2014: R15.8 billion) and assets under administration by 32% to R64.7 billion (2014: R49.0 billion). The focus on <BR>
generating recurring earnings placed less reliance on performance fees, with these fees contributing only 7.2% of group <BR>
headline earnings, compared to 10.7% last year.<BR>
<BR>
PSG Insure continues to make inroads in the highly competitive short-term insurance market, having achieved revenue growth <BR>
of 22% compared to the prior financial year. While operating costs remained in line with expectations, the underwriting <BR>
margin at Western Group Holdings Limited (Western) declined to 5.4% from 7.8% last year. This was due to increased weather<BR>
-related and commercial motor claims, although no significant catastrophe or other related events occurred during the <BR>
financial year. The corporate transaction concluded with Santam Limited effective 19 September 2013, resulted in PSG <BR>
Konsult's shareholding in Western being diluted from 90% to 60%. This had a R5.6 million adverse impact on the overall <BR>
headline earnings contribution of PSG Insure. The insure advisers increased revenue of the division, which against the <BR>
backdrop of a particularly difficult industry environment is an achievement that the group is especially pleased with.<BR>
<BR>
PSG Konsult's key financial performance indicators for the financial year ended 28 February 2015 are shown below:<BR>
<BR>
28 Feb 15 Change 28 Feb 14<BR>
R000 % R000<BR>
<BR>
Earnings attributable to ordinary shareholders 340 401 37 249 258<BR>
Non-headline items (1 140) (76) (4 773)<BR>
Headline earnings 339 261 39 244 485<BR>
Non-recurring headline earnings 1 914 (71) 6 660<BR>
Recurring headline earnings 341 175 36 251 145<BR>
<BR>
Weighted average number of shares in issue <BR>
(net of treasury shares) (million) 1 261.4 3 1 220.5<BR>
<BR>
Earnings per share (cents)<BR>
- Recurring headline* 27.0 31 20.6<BR>
- Headline* 26.9 35 20.0<BR>
- Attributable* 27.0 32 20.4<BR>
<BR>
Dividend per share (cents) 12.0 6 11.3<BR>
<BR>
Assets under management (Rbn) 141.9 27 112.1<BR>
Assets under administration (Rbn) 308.1 31 234.5<BR>
<BR>
Divisional headline earnings<BR>
PSG Wealth 227 478 40 162 279<BR>
PSG Asset Management 81 915 51 54 334<BR>
PSG Insure 29 868 7 27 872<BR>
339 261 39 244 485<BR>
<BR>
* Dilution is a function of the 35.8 million shares issued on 1 March 2014 for the adviser buy-back transaction.<BR>
<BR>
Debt funding and cash flow management<BR>
<BR>
The continual focus on optimising cash flow management and debt funding positions led to the establishment of PSG Konsult <BR>
Treasury, which centralises the management of the group's liquidity and solvency positions. After successfully negotiating the <BR>
accelerated repayment of funding facilities, the group is pleased to announce that, with the exception of a R11.1 million <BR>
finance lease, it has no third-party debt outstanding as at year-end (2014: R110.6 million).<BR>
<BR>
By virtue of the range of its business operations, PSG Konsult has material regulatory capital adequacy requirements. As part <BR>
of the PSG Konsult Treasury function, careful attention is paid to maintaining sufficient liquid capital in each of the <BR>
regulatory licences, while ensuring that capital is utilised appropriately to maximise shareholder returns. The financial <BR>
soundness of each business is closely monitored, so that the group can take advantage of opportunities when they arise.<BR>
<BR>
Credit rating<BR>
<BR>
PSG Konsult's strong performance over the last three years, together with its enhanced financial position, has resulted in <BR>
Global Credit Rating Company (GCR) upgrading the group's long-term rating to BBB+ from BBB. It also affirmed the short-term <BR>
rating of A2, with a Stable outlook. This is particularly pleasing when contrasted with the Standard & Poor's downgrade of <BR>
the South African government during 2014.<BR>
<BR>
PSG Konsult's successful JSE and NSX listings had a positive impact on the group's funding profile, improving access to and <BR>
reducing the cost of acquiring additional capital. Combined with negligible third-party debt, this provides significant <BR>
flexibility to raise additional funding should the need arise.<BR>
<BR>
The group is confident of further rating upgrades as management continues to demonstrate its ability to unlock sustained <BR>
long-term growth in income and operating profit, regardless of market cycles.<BR>
<BR>
Achievements<BR>
<BR>
The group is proud of the following notable milestones, achievements and industry awards:<BR>
<BR>
PSG Wealth <BR>
<BR>
– Runner up in the 2014 Business Day Investors Monthly “Top Private Bank and Wealth Manager” award and also voted the top <BR>
“Wealth Manager for Successful Entrepreneurs”. <BR>
<BR>
– Consistently ranked as one of South Africa's Top 3 stockbrokers in the Business Day Investors Monthly “Stockbroker of the <BR>
Year” award for the past four years, winning joint third place in 2014. <BR>
<BR>
PSG Asset Management <BR>
<BR>
– Top quartile investment returns were recorded across the entire domestic flagship range over one year, three years and five <BR>
years up to 28 February 2015, in the respective Morningstar categories. <BR>
<BR>
– The December 2014 Towers Watson watchlist ranked the PSG Balanced Fund as having the lowest absolute risk. <BR>
<BR>
– Runner-up for the South African Collective Investment Schemes Management Company of the Year Award at the 2014 Raging Bull <BR>
awards held in January 2015 (2013: fourth). The PSG Balanced Fund was also named the best South African Multi-Asset High <BR>
Equity Fund. <BR>
<BR>
PSG Insure <BR>
<BR>
– Broker of the Year for Commercial Lines 2014 in Santam's National Broker Awards. <BR>
<BR>
People<BR>
<BR>
As at 28 February 2015, PSG Konsult had 193 offices and 1 985 employees, of which 659 were financial planners, portfolio <BR>
managers, stockbrokers and asset managers. A further 404 were professional associates (accountants and attorneys). During the <BR>
financial year, 34 new advisers were appointed through a combination of organic growth and selective adviser book acquisitions. <BR>
In addition, a number of strategic hires were concluded, which have provided the group with a strong operational platform to <BR>
take the business into the future. Key appointments include a chief technology officer, group internal auditor and chief <BR>
executive officer for distribution at PSG Insure.<BR>
<BR>
The effectiveness of the group's succession planning strategy was demonstrated when Wayne Waldeck retired at the end of 2014 <BR>
from his position as chief executive officer of PSG Wealth. Corrie de Bruyn, who was previously chief executive officer of <BR>
PSG Life and PSG Securities, was identified as the suitable replacement for this position, and worked closely with Wayne until <BR>
the end of 2014. Corrie is supported by a strong and stable management team and has been a member of the PSG Konsult management <BR>
committee and executive committee for a number of years. This has assisted in ensuring a smooth leadership transition. The <BR>
board would like to thank Wayne for the valuable contribution he has made in helping to build PSG Konsult over the years, and <BR>
wish Corrie all the best in his new role.<BR>
<BR>
Transformation<BR>
<BR>
PSG Konsult has undergone its first broad-based black economic empowerment (BBBEE) rating. The group has been rated as a level <BR>
8 BBBEE contributor and approved as a value-adding supplier. This initial rating is viewed by management as a benchmark and <BR>
PSG Konsult is committed to improving its BBBEE score.<BR>
<BR>
Having established this benchmark, the group has implemented a number of initiatives to drive its transformation strategy. <BR>
While significant progress has been made regarding the group's employment equity profile, transformation remains a key focus<BR>
area. PSG Konsult employed a new learning and development manager whose role is to drive its recently launched bursary and <BR>
internship programmes.<BR>
<BR>
Strategy<BR>
<BR>
PSG Wealth's overall strategy remains to offer an innovative and holistic end-to-end client proposition. Despite an <BR>
unpredictable economic outlook, the division will continue to invest in people and technology, believing these to be key <BR>
factors with which to grow its share of the market. The strategy to further expand and equip the adviser network will continue <BR>
to receive attention, relying on advisers for client feedback in the development and creation of new products and services for <BR>
clients. In the new financial year, the division is aiming to improve its offshore offering and also to launch a direct <BR>
marketing strategy.<BR>
<BR>
PSG Asset Management's strategy consists of three parts, namely investment excellence, operational efficiency, effective <BR>
sales and marketing initiatives. Generating the best long-term, risk-adjusted returns for investors is the division's primary <BR>
focus. To this end, it will continue to prioritise the investment team's performance, while managing operational risks and <BR>
processes. Increasing brand awareness is a key focus area for the marketing team, allowing the division to benefit from a <BR>
growing investor base.<BR>
<BR>
PSG Insure provide simple and cost-effective short-term insurance solutions to chosen clients, protecting them from <BR>
unforeseen events. Vertical integration across underwriting, administration and adviser teams, underpins the focus to provide <BR>
value-added products that both meet and exceed clients' expectations. In the coming financial year, the division will invest <BR>
further in its claims and administration departments. This is to build scale and unlock operational efficiencies, while freeing <BR>
up valuable time for top calibre advisers to focus on sales.<BR>
<BR>
As each division grows, careful attention is paid to the group's cost structure and in particular to the cost-to-income ratio. <BR>
Building a cost-efficient and scalable business is a key priority for the board. The management team is committed to continuously <BR>
investigate new ways in which to manage and reduce costs.<BR>
<BR>
Marketing<BR>
<BR>
Marketing initiatives are critical to the group's goal of becoming a leader in the financial services industry. In the 2015 <BR>
financial year, renewed focus and attention was given to build the PSG brand within the South African market. A dedicated team <BR>
of specialists is in place to take the group's marketing efforts to new heights as it seeks to support the network of financial <BR>
advisers and cement PSG Konsult's product offering in the minds of target clients.<BR>
<BR>
Information technology (IT)<BR>
<BR>
The integral role that technology plays in the daily operations of PSG Konsult cannot be understated. The scalability and <BR>
efficiency of the business functions are dependent on the state of its IT systems. It is for this reason that the group <BR>
continues to invest in new and innovative technologies as it seeks to incorporate further business process automation to reduce <BR>
operational risk and provide real-time reporting for enhanced management decision-making. The group is confident that its IT <BR>
strategy will create a solid foundation for future growth.<BR>
<BR>
Risk and legal<BR>
<BR>
The effective management of risks assumed by the business is what allows it to benefit from opportunities. The risk management <BR>
team is moving from strength to strength as it identifies and assists in mitigating the risks the group faces relative to revenue <BR>
contributions. The group's risk appetite is constantly reviewed as the level of risk that is taken on, particularly in the <BR>
insurance environment, can pose a threat to its capital position. Here, the cost of reinsurance and other mechanisms are reviewed <BR>
to ensure that risks remain within acceptable levels.<BR>
<BR>
In line with the risk management plan and as reported in the group's interim results, PSG Asset Management made the decision <BR>
to terminate all of its current white-label client administration and related activities to reduce its overall operational and <BR>
reputational risk exposures. This process is on track and the group expects this measure to have only a negligible impact on its <BR>
profitability.<BR>
<BR>
Effective engagement with regulators is a priority for PSG Konsult. The recent and forthcoming regulatory changes are expected <BR>
to lead to a significant change in the way financial services companies in South Africa operate in general. The group endeavours <BR>
to always be on the forefront of the implementation of these changes. It fully supports the regulators' stance on improving the <BR>
transparency, cost-effectiveness and conduct of the industry.<BR>
<BR>
Business combinations<BR>
<BR>
As previously announced, the group concluded, with effect from 1 March 2014, an asset-for-share transaction utilising section 42 <BR>
of the Income Tax Act with a large number of its advisers. This has allowed the group to standardise the revenue sharing model <BR>
with advisers and has also given them the opportunity to invest in the future of PSG Konsult. The transaction was settled through <BR>
the issue of 35 794 660 PSG Konsult shares and a R12.5 million cash payment. This contributed R10.1 million to headline earnings <BR>
during the financial year.<BR>
<BR>
Changes to the board of directors<BR>
<BR>
The following changes were made to the board of directors during the year under review: Patrick Burton and KK Combi were <BR>
appointed to the board as independent non-executive directors with effect from 2 March 2014 and 16 April 2014, respectively.<BR>
<BR>
Both Patrick and KK have also been appointed to the audit and risk, remuneration and social and ethics committees. Patrick is <BR>
the chairman of the social and ethics committee, which oversees employment equity and BBBEE initiatives.<BR>
<BR>
Looking forward<BR>
<BR>
Focusing on client service excellence through the quality of its advice, products and platforms is proving a resilient strategy <BR>
for PSG Konsult.<BR>
<BR>
The group is cautious about investment markets and, in particular, world bond markets. Rates across these markets – and around <BR>
the world – are at historic lows, and have the potential to quickly revert to more normalised levels. Given how low rates are, <BR>
the size of these moves are likely to be profound, and ultimately disruptive. It is for this reason that PSG Konsult has repaid <BR>
all its debt (excluding finance leases) and invested most of its assets in short-duration assets. The group has also adopted a <BR>
more conservative stance on behalf of clients.<BR>
<BR>
Over the past three years, PSG Konsult has re-engineered and refocused its business. Unprofitable or non-core activities were <BR>
closed, integrated or sold. At the same time, the group invested – and continues to invest – in streamlining and automating <BR>
processes. This is all with the aim of creating scalable capacity throughout the business. Now that these efforts are at an <BR>
advanced stage, the group feels sufficiently confident to make enhanced brand promises. To that end, it informs investors that <BR>
it may spend an additional and incremental amount of up to 5% of current after tax earnings on marketing and advertising in <BR>
the 2016 financial year.<BR>
<BR>
Events after the reporting date<BR>
<BR>
A key part of PSG Konsult's strategy is to continuously assess the operational risk versus return of each part of the business. <BR>
As a result, the following businesses were disposed of:<BR>
<BR>
– Nhluvuko Risk Administration: Despite the expected finalisation of the National Treasury's healthcare demarcation regulations, <BR>
health insurance administration is not a core focus for the group. The business will continue operating as before with <BR>
existing products, services and issued insurance cover remaining in place. <BR>
<BR>
– PSG Academy: The Academy is an accredited private higher education institution that provides training to advisers within the <BR>
financial services industry. The sale has no impact on current enrolled students or courses offered. <BR>
<BR>
These transactions allow the group to further simplify its business structure and direct greater focus to its core operations. <BR>
The group also believes that the transactions are in the best interest of all stakeholders and that neither transaction will <BR>
have an impact on the clients or employees of PSG Academy or Nhluvuko Risk Administration. The sale of both businesses is <BR>
effective 1 March 2015.<BR>
<BR>
Dividend<BR>
<BR>
In line with the revised dividend policy at time of listing between 40% and 50% of recurring headline earnings, the board <BR>
approved and declared a final gross dividend of 8.0 cents per share (2014: 7.3 cents per share) from income. This follows <BR>
the interim dividend of 4.0 cents per share (2014: 4.0 cents per share) declared in October 2014, which brings the total <BR>
gross dividend declared for the 2015 financial year to 12.0 cents per share (2014: 11.3 cents per share).<BR>
<BR>
The dividend is subject to a local dividends tax rate of 15%, resulting in a net dividend of 6.8 cents per share, unless the <BR>
shareholder is exempt from paying dividends tax or is entitled to a reduced rate in terms of the applicable double-tax agreement. <BR>
The number of issued ordinary shares is 1 262 484 423 at the date of this declaration. PSG Konsult's income tax reference <BR>
number is 9550/644/07/05.<BR>
<BR>
The following are the salient dates for payment of the dividend: <BR>
<BR>
Last day to trade (cum dividend) Thursday, 30 April 2015<BR>
Trading ex dividend commences Monday, 4 May 2015<BR>
Record date Friday, 8 May 2015<BR>
Date of payment Monday, 11 May 2015<BR>
<BR>
Share certificates may not be dematerialised or rematerialised between Monday, 4 May 2015 and Friday, 8 May 2015, both days <BR>
included.<BR>
<BR>
The board would like to extend its gratitude to all our stakeholders, including clients, business partners, management and <BR>
employees for their efforts and contributions during the past year.<BR>
<BR>
On behalf of the board<BR>
<BR>
Willem Theron Francois Gouws<BR>
Chairman Chief executive officer<BR>
<BR>
Tyger Valley<BR>
<BR>
9 April 2015<BR>
<BR>
<BR>
Condensed consolidated statement of financial position <BR>
at 28 February 2015<BR>
<BR>
Reviewed Audited<BR>
as at as at<BR>
28 Feb 15 28 Feb 14<BR>
R000 R000<BR>
ASSETS<BR>
Intangible assets 859 536 721 936<BR>
Property and equipment 42 273 47 590<BR>
Investment property 2 245 2 245<BR>
Investment in associated companies 39 562 39 548<BR>
Investment in joint ventures 12 971 12 057<BR>
Deferred income tax 87 674 52 101<BR>
Equity securities (note 6) 1 025 518 604 880<BR>
Debt securities (note 6) 1 605 418 2 121 432<BR>
Unit-linked investments (note 6) 12 345 648 10 218 629<BR>
Investment in investment contracts (note 6) 338 208 505 444<BR>
Loans and advances 116 393 109 995<BR>
Derivative financial instruments 23 324 21 190<BR>
Reinsurance assets 77 413 66 248<BR>
Deferred acquisition costs 1 714 1 025<BR>
Receivables including insurance receivables 2 133 136 2 129 358<BR>
Current income tax assets 18 954 12 878<BR>
Cash and cash equivalents (including money market investments) (note 6) 972 243 709 184<BR>
Assets held for sale 17 751 -<BR>
Total assets 19 719 981 17 375 740<BR>
<BR>
EQUITY<BR>
Equity attributable to owners of the parent<BR>
Stated capital 1 325 111 1 134 746<BR>
Treasury shares (546) (546)<BR>
Other reserves (404 471) (445 146)<BR>
Retained earnings 573 065 399 487<BR>
1 493 159 1 088 541 <BR>
Non-controlling interest 132 491 86 222<BR>
Total equity 1 625 650 1 174 763<BR>
<BR>
LIABILITIES<BR>
Insurance contracts 574 331 493 163<BR>
Deferred income tax 53 610 53 423<BR>
Borrowings 427 843 412 188<BR>
Derivative financial instruments 30 749 28 406<BR>
Investment contracts (note 6) 14 222 603 12 692 768<BR>
Third-party liabilities arising on consolidation of mutual funds 699 202 372 169<BR>
Deferred reinsurance acquisition revenue 3 563 2 842<BR>
Trade and other payables 2 068 400 2 129 914<BR>
Current income tax liabilities 10 618 16 104<BR>
Liabilities held for sale 3 412 -<BR>
Total liabilities 18 094 331 16 200 977<BR>
<BR>
Total equity and liabilities 19 719 981 17 375 740<BR>
<BR>
Net asset value per share (cents) 118.3 89.1<BR>
<BR>
<BR>
Condensed consolidated income statement <BR>
for the year ended 28 February 2015<BR>
<BR>
Reviewed Audited<BR>
Year ended Year ended<BR>
28 Feb 15 28 Feb 14<BR>
R000 R000<BR>
<BR>
Gross written premium 795 237 618 217<BR>
Less: Reinsurance written premium (225 293) (185 881)<BR>
Net premium 569 944 432 336<BR>
Change in unearned premium<BR>
- Gross (34 905) (36 204)<BR>
- Reinsurers' share 3 119 2 116<BR>
Net insurance premium revenue 538 158 398 248<BR>
Commission and other fee income 2 138 855 1 805 142<BR>
Investment income 499 554 380 034<BR>
Net fair value gains and losses on financial instruments 1 209 661 1 171 564<BR>
Fair value adjustment to investment contract liabilities (1 406 791) (1 239 669)<BR>
Other operating income 35 163 42 117<BR>
Total income 3 014 600 2 557 436<BR>
<BR>
Insurance claims and loss adjustment expenses (561 548) (440 401)<BR>
Insurance claims and loss adjustment expenses recovered from reinsurers 137 173 121 404<BR>
Net insurance benefits and claims (424 375) (318 997)<BR>
Commission paid (910 226) (824 757)<BR>
Depreciation and amortisation* (55 422) (40 596)<BR>
Employee benefit expenses (511 612) (451 887)<BR>
Fair value adjustment to third-party liabilities (41 525) (79 387)<BR>
Marketing, administration and other expenses (427 457) (325 555)<BR>
Total expenses (2 370 617) (2 041 179)<BR>
<BR>
Share of profits of associated companies 40 3 118<BR>
Loss on impairment of associated companies - (342)<BR>
Share of profits of joint ventures 914 3 375<BR>
Total profit from associated companies and joint ventures 954 6 151<BR>
<BR>
Profit before finance costs and taxation 644 937 522 408<BR>
Finance costs (119 905) (138 771)<BR>
Profit before taxation 525 032 383 637<BR>
Taxation (163 234) (117 677)<BR>
Profit for the year 361 798 265 960<BR>
<BR>
Attributable to:<BR>
Owners of the parent 340 401 249 258<BR>
Non-controlling interest 21 397 16 702<BR>
361 798 265 960<BR>
<BR>
Earnings per share (cents)<BR>
Attributable (basic) 27.0 20.4<BR>
Attributable (diluted) 26.1 20.0<BR>
Headline (basic) 26.9 20.0<BR>
Headline (diluted) 26.0 19.6<BR>
Recurring headline (basic) 27.0 20.6<BR>
Recurring headline (diluted) 26.1 20.2<BR>
<BR>
* Includes amortisation cost of R37.5 milion (2014: R27.1 million)<BR>
<BR>
<BR>
Condensed consolidated statement of comprehensive income <BR>
for the year ended 28 February 2015<BR>
<BR>
Reviewed Audited<BR>
Year ended Year ended<BR>
28 Feb 15 28 Feb 14<BR>
R000 R000<BR>
<BR>
Profit for the year 361 798 265 960<BR>
Other comprehensive income for the year, net of taxation 224 985<BR>
To be reclassified to profit and loss:<BR>
Currency translation adjustments 224 985<BR>
Total comprehensive income for the year 362 022 266 945<BR>
<BR>
Attributable to:<BR>
Owners of the parent 340 625 250 243<BR>
Non-controlling interest 21 397 16 702 <BR>
362 022 266 945<BR>
<BR>
Earnings and headline earnings per share<BR>
<BR>
Reviewed Audited <BR>
Year ended Year ended<BR>
28 Feb 15 28 Feb 14<BR>
R000 R000<BR>
<BR>
Profit attributable to ordinary shareholders 340 401 249 258<BR>
Non-headline items (net of tax and non-controlling interest)<BR>
- Profit on disposal of associated companies - (3 499)<BR>
- Loss on remeasurement of previous equity interest - 128<BR>
- (Profit)/loss on disposal of intangible assets (including goodwill) (757) 1 622<BR>
- Profit on disposal of books of business - (382)<BR>
- Profit on disposal of investment in subsidiaries - (643)<BR>
- Non-headline items of associated companies (251) (2 457)<BR>
- Other (132) 458<BR>
<BR>
Headline earnings 339 261 244 485<BR>
- Recurring 341 175 251 145<BR>
- Non-recurring (1 914) (6 660)<BR>
<BR>
Earnings per share (cents)<BR>
- Attributable (basic) 27.0 20.4<BR>
- Attributable (diluted) 26.1 20.0<BR>
- Headline (basic) 26.9 20.0<BR>
- Headline (diluted) 26.0 19.6<BR>
- Recurring headline (basic) 27.0 20.6<BR>
- Recurring headline (diluted) 26.1 20.2<BR>
<BR>
Number of shares (million)<BR>
- in issue (net of treasury shares) 1 262.1 1 221.6<BR>
- weighted average 1 261.4 1 220.5<BR>
<BR>
<BR>
Condensed consolidated statement of changes in equity <BR>
for the year ended 28 February 2015<BR>
<BR>
Attributable to equity holders of the group<BR>
Non-<BR>
Treasury Other Retained controlling<BR>
Stated capital shares reserves earnings interest Total<BR>
R000 R000 R000 R000 R000 R000<BR>
<BR>
Balance at 1 March 2013 - Audited 1 105 927 (620) (463 262) 276 968 34 190 953 203<BR>
Comprehensive income<BR>
Profit for the year - - - 249 258 16 702 265 960<BR>
Other comprehensive income - - 985 - - 985<BR>
Total comprehensive income - - 985 249 258 16 702 266 945<BR>
Transactions with owners 28 819 74 17 131 (126 739) 35 330 (45 385)<BR>
Issue of ordinary shares 28 819 - - - - 28 819<BR>
Share-based payments costs - employees - - 5 941 - - 5 941<BR>
Treasury shares sold - 74 - - - 74<BR>
Non-controlling interest arising on <BR>
business combination - - - - (42) (42)<BR>
Capital contribution by non-controlling <BR>
interest - - - - 16 735 16 735<BR>
Transactions with non-controlling <BR>
interest - - - 11 197 20 099 31 290<BR>
Disposal of subsidiary - - - - (424) (424)<BR>
Deferred tax on equity-settled <BR>
share-based payments - - 11 190 - - 11 190<BR>
Dividend paid - - - (137 936) (1 038) (138 974)<BR>
<BR>
Balance at 28 February 2014 - Audited 1 134 746 (546) (445 146) 399 487 86 222 1 174 763<BR>
<BR>
Comprehensive income<BR>
Profit for the year - - - 340 401 21 397 361 798<BR>
Other comprehensive income - - 224 - - 224<BR>
Total comprehensive income - - 224 340 401 21 397 362 022<BR>
Transactions with owners 190 365 - 40 451 (166 823) 24 872 88 865<BR>
Issue of ordinary shares 190 365 - - - - 190 365<BR>
Share-based payment costs <BR>
- employees - - 11 562 - - 11 562<BR>
Transactions with non-controlling <BR>
interest - - - (1 320) (206) (1 526)<BR>
Capital contribution by non-controlling <BR>
interest - - - - 28 000 28 000<BR>
Deferred tax on equity-settled share-based <BR>
payments - - 32 516 - - 32 516<BR>
Current tax on equity-settled share-based <BR>
payments - - 5 084 - - 5 084<BR>
Loss on issue of shares in terms of <BR>
share scheme - - (31 636) - - (31 636)<BR>
Release of share-based payment reserve to <BR>
retained earnings on vested share options - - 22 925 (22 925) - -<BR>
Dividend paid - - - (142 578) (2 922) (145 500)<BR>
<BR>
Balance at 28 February 2015 - Reviewed 1 325 111 (546) (404 471) 573 065 132 491 1 625 650<BR>
<BR>
<BR>
Condensed consolidated statement of cash flows <BR>
for the year ended 28 February 2015<BR>
<BR>
Reviewed Audited<BR>
Year ended Year ended<BR>
28 Feb 15 28 Feb 14<BR>
R000 R000<BR>
<BR>
Cash flows from operating activities<BR>
Cash generated by operating activities 232 202 153 725<BR>
Interest income 372 278 299 998<BR>
Dividend income 126 900 79 651<BR>
Finance costs (44 118) (35 728)<BR>
Taxation paid (172 853) (124 953)<BR>
Operating cash flows before policyholder cash movement 514 409 372 693<BR>
Policyholder cash movement (24 380) (13 762)<BR>
Net cash flow from operating activities 490 029 358 931<BR>
<BR>
Cash flows from investing activities<BR>
Acquisition of intangible assets (30 473) (24 756)<BR>
Purchases of property and equipment (13 241) (20 144)<BR>
Other 4 120 22 753<BR>
Net cash flow from investing activities (39 594) (22 147)<BR>
<BR>
Cash flows from financing activities<BR>
Dividends paid (145 500) (138 974)<BR>
Capital contributions by non-controlling interest (ordinary shares) 28 000 16 735<BR>
Transactions with non-controlling interest (1 526) 31 295<BR>
Repayment of borrowings (73 344) (35 297)<BR>
Shares issued 7 476 28 819<BR>
Other 209 (1 452)<BR>
Net cash flow from financing activities (184 685) (98 874)<BR>
<BR>
Net increase in cash and cash equivalents 265 750 237 910<BR>
Cash and cash equivalents at beginning of year 709 173 470 621<BR>
Exchange gains on cash and cash equivalents 95 642<BR>
Cash and cash equivalents at end of year* 975 018 709 173<BR>
<BR>
Current, cheque and money market investments accounts 972 243 709 184<BR>
Cash and cash equivalents classified as assets held for sale 2 775 -<BR>
Bank overdrafts - (11)<BR>
<BR>
* Includes the following: <BR>
Clients' cash linked to investment contracts 26 954 51 337<BR>
<BR>
<BR>
Notes to the statement of cash flow:<BR>
The movement in cash generated by operating activities can vary significantly as a result of daily fluctuations in cash linked to <BR>
investment contracts and cash held by the stockbroking business. PSG Life Limited, the group's linked insurance company, issues <BR>
linked policies to policyholders (where the value of policy benefits is directly linked to the fair value of the supporting assets). <BR>
When these policies mature, the company raises a debtor for the money receivable from the third-party investment provider, and raises <BR>
a creditor for the amount owing to the client. Timing difference occurs at month-end where the money was received from the third-party <BR>
investment provider, but only paid out by the company after month-end, resulting in significant fluctuations in the working capital <BR>
of the company. Similar working capital fluctuations occur at PSG Securities Limited (previously Online Securities Limited), the <BR>
group's stockbroking business, mainly due to the timing of the close of the JSE in terms of client settlements.<BR>
<BR>
Notes to the condensed consolidated financial statements for the year ended 28 February 2015<BR>
<BR>
1. Reporting entity <BR>
<BR>
PSG Konsult is a company domiciled in the Republic of South Africa. The condensed consolidated financial statements of the <BR>
company as at and for the year ended 28 February 2015 comprise the company and its subsidiaries (together referred to as <BR>
the “group”) and the group's interests in associated companies and joint ventures. <BR>
<BR>
2. Basis of presentation <BR>
<BR>
The condensed consolidated financial statements are prepared in accordance with the requirements of the JSE Limited (JSE) <BR>
and the requirements of the Companies Act, as amended applicable to condensed financial statements. The JSE requires condensed <BR>
financial statements to be prepared in accordance with the framework concepts and the measurement and recognition requirements <BR>
of International Financial Reporting Standards (IFRS) and the SAICA Financial Reporting Guides as issued by the Accounting <BR>
Practices Committee and Financial Pronouncements as issued by the Financial Reporting Standards Council and to also, as a <BR>
minimum, contain the information required by IAS 34 – Interim Financial Reporting. The accounting policies applied in the <BR>
preparation of the consolidated financial statements, from which the condensed consolidated financial statements were derived, <BR>
are in terms of IFRS and are consistent with those accounting policies applied in the preparation of the previous consolidated <BR>
annual financial statements. <BR>
<BR>
3. Preparation <BR>
<BR>
These condensed preliminary consolidated financial statements were prepared by JSE van der Merwe, CA(SA), under the <BR>
supervision of the chief financial officer, MIF Smith, CA(SA), and were reviewed by PSG Konsult's external auditor, <BR>
PricewaterhouseCoopers Inc. A copy of their unmodified review opinion is available from PSG Konsult's registered office. <BR>
Any reference to future financial performance included in this announcement, has not been reviewed or reported on by the <BR>
company's auditor. <BR>
<BR>
4. Accounting policies <BR>
<BR>
The accounting policies applied in the preparation of these condensed consolidated financial statements conform to IFRS and <BR>
are consistent with those accounting policies applied in the preparation of the previous consolidated annual financial <BR>
statements. <BR>
<BR>
The following new accounting standards and amendments to IFRSs, which were relevant to the group's operations, were effective <BR>
for the first time from 1 March 2014: <BR>
<BR>
- Amendments to IFRS 10, IFRS 12 and IAS 27 – Investment entities <BR>
<BR>
- Amendment to IAS 32 – Offsetting Financial Assets and Financial Liabilities <BR>
<BR>
- Amendment to IAS 36 – Recoverable amount disclosures for non-financial assets <BR>
<BR>
- Amendment to IAS 39 – Novation of derivatives and continuation of hedge accounting <BR>
<BR>
- IFRIC 21 Levies <BR>
<BR>
- Annual Improvements 2010-12 cycle <BR>
<BR>
These revisions have not resulted in material changes to the group's reported results and disclosures in these condensed <BR>
consolidated financial statements.<BR>
<BR>
5. Use of estimates and judgements <BR>
<BR>
In preparing these condensed consolidated financial statements, the significant judgements made by management in applying the <BR>
group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the <BR>
consolidated annual financial statements for the year ended 28 February 2014. <BR>
<BR>
6. Segment information <BR>
<BR>
The composition of the reportable segments represents the internal reporting structure and the monthly reporting to the chief <BR>
operating decision-maker (CODM). The CODM for the purpose of IFRS 8 – Operating Segments, has been identified as the chief <BR>
executive officer, supported by the group management committee (Manco). The group's internal reporting structure is reviewed <BR>
in order to assess performance and allocate resources. The group is organised into three reportable segments, namely: <BR>
<BR>
- PSG Wealth <BR>
<BR>
- PSG Asset Management <BR>
<BR>
- PSG Insure <BR>
<BR>
The comparative figures have been adjusted to reflect a new refined basis of apportioning central support costs that the group<BR>
implemented this financial year. Corporate support costs refer to a variety of services and functions that are performed <BR>
centrally for the individual business units within each business segment, as well as housing the group's executive office. <BR>
Besides the traditional accounting and secretarial services provided to group divisions and subsidiaries, the corporate office <BR>
also provides legal, risk, information technology (IT), marketing, human resources (HR), payroll, internal audit and corporate <BR>
finance services. The strategic elements of IT, in terms of both services and infrastructure, are also centralised in the <BR>
corporate office. The corporate costs were previously apportioned to the three reportable segments on a fixed percentage method. <BR>
From 1 March 2014, in order to enhance its accuracy, the corporate costs were apportioned taking into account specific facts <BR>
and circumstances applicable to each of the reportable segments, and comparative segment figures have been restated applying <BR>
this new methodology.<BR>
<BR>
6.1. Description of business segments <BR>
<BR>
PSG Wealth, which consists of five business units – Distribution, PSG Securities, LISP and Life Platform, Multi Management and <BR>
Employee Benefits – is designed to meet the needs of individuals, families and businesses. Through our highly skilled wealth <BR>
managers, PSG Wealth offers a wide range of personalised services (including portfolio management, stockbroking, local and <BR>
offshore investments, estate planning, financial planning, local and offshore fiduciary services, multi-managed solutions and <BR>
retirement products). Our Wealth offices are fully equipped to deliver a high-quality personal service to our customers. <BR>
<BR>
PSG Asset Management is an established investment management company with a proven investment track record. We offer investors <BR>
a simple, but comprehensive range of local and global investment products. Our products include both local and international <BR>
unit trust funds.<BR>
<BR>
PSG Insure, through our registered insurance brokers and PSG's short-term insurance company Western National Insurance Company <BR>
Limited, offers a full range of tailor-made short-term insurance products and services from personal (home, car and household <BR>
insurance) to commercial (business and Agri-insurance) requirements. To harness the insurance solutions available to our <BR>
customers effectively, our expert insurance specialists, through our strict due diligence process, will simplify the selection <BR>
process for the most appropriate solution for our clients. In addition to the intermediary services we offer, PSG Short-Term <BR>
Administration supports clients through the claim process, administrative issues and general policy maintenance, including <BR>
an annual reappraisal of their portfolio.<BR>
<BR>
The Manco considers the performance of reportable segments based on total income as a measure of growth and headline earnings <BR>
as a measure of profitability. The segment information provided to Manco for the reportable segments for the year ended <BR>
28 February 2015 is set out in notes 6.2 and 6.3.<BR>
<BR>
6.2 Headline earnings per reportable segments<BR>
<BR>
Asset<BR>
Wealth Management Insure Total<BR>
Headline earnings R000 R000 R000 R000<BR>
<BR>
For the year ended 28 February 2015 - Reviewed<BR>
Headline earnings 227 478 81 915 29 868 339 261<BR>
- recurring 228 320 82 336 30 519 341 175<BR>
- non-recurring (842) (421) (651) (1 914)<BR>
<BR>
For the year ended 28 February 2014 - Restated<BR>
Headline earnings 162 279 54 334 27 872 244 485<BR>
- recurring 162 279 54 334 34 532 251 145<BR>
- non-recurring - - (6 660) (6 660)<BR>
<BR>
6.3 Income per reportable segment<BR>
Asset<BR>
Wealth Management Insure Total<BR>
Total income R000 R000 R000 R000<BR>
<BR>
For the year ended 28 February 2015 - Reviewed<BR>
Total segment income 2 146 463 587 111 979 622 3 713 196<BR>
Intersegment income (461 848) (219 347) (17 401) (698 596)<BR>
Income from external customers 1 684 615 367 764 962 221 3 014 600<BR>
<BR>
For the year ended 28 February 2014 - Audited<BR>
Total segment income 1 793 011 475 099 789 891 3 058 001<BR>
Intersegment income (316 846) (181 300) (2 419) (500 565)<BR>
Income from external customers 1 476 165 293 799 787 472 2 557 436<BR>
<BR>
Other information provided to the Manco is measured in a manner consistent with that of the financial statements.<BR>
<BR>
<BR>
6.4 Statement of financial position (client vs own)<BR>
<BR>
In order to evaluate the consolidated financial position of the group, the Manco segregates the statement of financial <BR>
position of the group between own balances and client-related balances.<BR>
<BR>
Client-related balances represent the investment contract liabilities and related linked client assets of PSG Life Limited, <BR>
the broker and clearing accounts, and the settlement control accounts of the stockbroking business, the collective investment <BR>
schemes consolidated under IFRS 10 and corresponding third-party liabilities, the short-term claim control accounts and <BR>
related bank accounts as well as the contracts for difference assets and related liabilities.<BR>
<BR>
Reviewed - as at 28 February 2015<BR>
Client-<BR>
Own related<BR>
Total balances balances<BR>
R000 R000 R000<BR>
<BR>
ASSETS<BR>
Equity securities 1 025 518 2 259 1 023 259<BR>
Debt securities 1 605 418 99 614 1 505 804<BR>
Unit-linked investments 12 345 648 378 015 11 967 633 <BR>
Investment in investment contracts 338 208 - 338 208<BR>
Receivables including insurance receivables 2 133 136 228 588 1 904 548<BR>
Derivative financial instruments 23 324 - 23 324<BR>
Cash and cash equivalents (including money market investments) 972 243 805 908 166 335<BR>
Other assets* 1 276 486 1 276 486 -<BR>
Total assets 19 719 981 2 790 870 16 929 111<BR>
<BR>
EQUITY<BR>
Equity attributable to owners of the parent 1 493 159 1 493 159 -<BR>
Non-controlling interest 132 491 132 491 -<BR>
Total equity 1 625 650 1 625 650 -<BR>
<BR>
LIABILITIES<BR>
Borrowings 427 843 14 273 413 570<BR>
Investment contracts 14 222 603 - 14 222 603<BR>
Third-party liabilities arising on consolidation of mutual funds 699 202 - 699 202<BR>
Derivative financial instruments 30 749 - 30 749<BR>
Trade and other payables 2 068 400 505 413 1 562 987<BR>
Other liabilities** 645 534 645 534 -<BR>
Total liabilities 18 094 331 1 165 220 16 929 111<BR>
<BR>
Total equity and liabilities 19 719 981 2 790 870 16 929 111<BR>
<BR>
<BR>
Audited - as at 28 February 2014<BR>
Client-<BR>
Own related<BR>
Total balances balances<BR>
R000 R000 R000<BR>
<BR>
ASSETS<BR>
Equity securities 604 880 4 630 600 250<BR>
Debt securities 2 121 432 107 297 2 014 135<BR>
Unit-linked investments 10 218 629 346 833 9 871 796<BR>
Investment in investment contracts 505 444 - 505 444<BR>
Receivables including insurance receivables 2 129 358 162 451 1 966 907<BR>
Derivative financial instruments 21 190 - 21 190<BR>
Cash and cash equivalents (including money market investments) 709 184 663 500 45 684<BR>
Other assets* 1 065 623 1 065 623 -<BR>
Total assets 17 375 740 2 350 334 15 025 406<BR>
<BR>
EQUITY<BR>
Equity attributable to owners of the parent 1 088 541 1 088 541 -<BR>
Non-controlling interest 86 222 86 222 -<BR>
Total equity 1 174 763 1 174 763 -<BR>
<BR>
LIABILITIES<BR>
Borrowings 412 188 110 618 301 570<BR>
Investment contracts 12 692 768 - 12 692 768<BR>
Third-party liabilities arising on consolidation of mutual funds 372 169 - 372 169<BR>
Derivative financial instruments 28 406 - 28 406<BR>
Trade and other payables 2 129 914 499 421 1 630 493<BR>
Other liabilities** 565 532 565 532 -<BR>
Total liabilities 16 200 977 1 175 571 15 025 406<BR>
<BR>
Total equity and liabilities 17 375 740 2 350 334 15 025 406<BR>
<BR>
* Other assets consist of property and equipment, investment property, intangible assets, investment in associated companies, <BR>
investment in joint ventures, current and deferred income tax assets, loans and advances, reinsurance assets, deferred <BR>
acquisition costs and assets held for sale.<BR>
<BR>
** Other liabilities consist of deferred reinsurance acquisition revenue, current and deferred income tax liabilities, <BR>
insurance contracts and liabilities held for sale.<BR>
<BR>
6.5 Income statement (client vs own)<BR>
<BR>
In order to evaluate the consolidated income statement of the group, the Manco segregates the income statement by eliminating <BR>
the impact of the linked investment policies issued and the consolidation of the collective investment schemes from the core <BR>
operations in the group.<BR>
<BR>
A subsidiary of the group, PSG Life Limited, is a linked insurance company and issues linked policies to policyholders (where <BR>
the value of policy benefits is directly linked to the fair value of the supporting assets), and as such does not expose the <BR>
group to the market risk of fair value adjustments on the financial asset as this risk is assumed by the policyholder.<BR>
<BR>
The group consolidate collective investment schemes in terms of IFRS 10 - Consolidated Financial Statements, over which the <BR>
group has control. The consolidation of these funds does not impact total earnings, comprehensive income, shareholders' funds <BR>
or the net asset value of the group; however, it requires the group to recognise the income statement impact as part of that <BR>
of the group.<BR>
<BR>
Reviewed - Year ended<BR>
28 February 2015<BR>
Linked<BR>
investment<BR>
Core business<BR>
Total business and other<BR>
R000 R000 R000<BR>
<BR>
Commission and other fee income 2 138 855 2 114 106 24 749 <BR>
Investment income 499 554 158 201 341 353<BR>
Net fair value gains and losses on financial instruments 1 209 661 12 817 1 196 844<BR>
Fair value adjustment to investment contract liabilities (1 406 791) - (1 406 791)<BR>
Other* 573 321 572 946 375<BR>
Total income 3 014 600 2 858 070 156 530<BR>
<BR>
Insurance claims and loss adjustment expenses (561 548) (561 293) (255)<BR>
Fair value adjustment to third-party liabilities (41 525) - (41 525)<BR>
Other** (1 767 544) (1 755 855) (11 689)<BR>
Total expenses (2 370 617) (2 317 148) (53 469)<BR>
<BR>
Total profit from associated companies and joint ventures 954 954 -<BR>
Profit before finance costs and taxation 644 937 541 876 103 061<BR>
Finance costs*** (119 905) (44 118) (75 787)<BR>
Profit before taxation 525 032 497 758 27 274<BR>
Taxation (163 234) (135 960) (27 274)<BR>
Profit for the year 361 798 361 798 -<BR>
<BR>
Attributable to:<BR>
Owners of the parent 340 401 340 401 -<BR>
Non-controlling interest 21 397 21 397 -<BR>
361 798 361 798 -<BR>
<BR>
<BR>
Audited - Year ended<BR>
28 February 2014<BR>
Linked<BR>
investment<BR>
Core business<BR>
Total business and other<BR>
R000 R000 R000<BR>
<BR>
Commission and other fee income 1 805 142 1 787 617 17 525<BR>
Investment income 380 034 116 484 263 550<BR>
Net fair value gains and losses on financial instruments 1 171 564 4 498 1 167 066<BR>
Fair value adjustment to investment contract liabilities (1 239 669) - (1 239 669)<BR>
Other* 440 365 440 365 -<BR>
Total income 2 557 436 2 348 964 208 472<BR>
<BR>
Insurance claims and loss adjustment expenses (440 401) (437 053) (3 348)<BR>
Fair value adjustment to third-party liabilities (79 387) - (79 387)<BR>
Other** (1 521 391) (1 521 391) -<BR>
Total expenses (2 041 179) (1 958 444) (82 735)<BR>
<BR>
Total profit from associated companies and joint ventures 6 151 6 151 -<BR>
Profit before finance costs and taxation 522 408 396 671 125 737<BR>
Finance costs*** (138 771) (35 728) (103 043)<BR>
Profit before taxation 383 637 360 943 22 694<BR>
Taxation (117 677) (94 983) (22 694)<BR>
Profit for the year 265 960 265 960 -<BR>
<BR>
Attributable to:<BR>
Owners of the parent 249 258 249 258 -<BR>
Non-controlling interest 16 702 16 702 -<BR>
265 960 265 960 -<BR>
<BR>
* Other consists of net insurance premium revenue and other operating income.<BR>
<BR>
** Other consists of insurance claims and loss adjustment expenses recovered from reinsurers, commission paid, depreciation <BR>
and amortisation, employee benefit expenses, marketing, administration and other expenses.<BR>
<BR>
*** Finance cost on core business increased from 2014 largely due to the increase in the loan facilities provided to clients <BR>
on their share portfolios at PSG Securities (secured by the underlying JSE Top 100 equity securities held in excess of four <BR>
times the value of the loan facilities). This increase was countered by the decrease in finance cost paid on external debt <BR>
(excluding the finance lease) as these were repaid in full during the 2015 financial year.<BR>
<BR>
Investment contracts are represented by the following financial assets:<BR>
<BR>
Reviewed Audited <BR>
28 Feb 15 28 Feb 14<BR>
R000 R000<BR>
<BR>
Equity securities 955 147 600 249<BR>
Debt securities 800 198 1 676 726<BR>
Unit-linked investments 12 102 096 9 859 012<BR>
Investment in investment contracts 338 208 505 444<BR>
Cash and cash equivalents 26 954 51 337<BR>
14 222 603 12 692 768<BR>
<BR>
<BR>
<BR>
7. Receivables including insurance receivables and trade and other payables<BR>
<BR>
Included under receivables are broker and clearing accounts of our stockbroking business of which R1 871.9 million (2014: <BR>
R1 925.9 million) represents amounts owing by the JSE for trades conducted during the last few days before the end of the <BR>
financial year. These balances fluctuate on a daily basis depending on the activity in the market.<BR>
<BR>
The control account for the settlement of these transactions is included under trade and other payables, with the settlement <BR>
to the clients taking place within three days after the transaction date.<BR>
<BR>
8. Transactions with non-controlling interest<BR>
<BR>
For the year ended 28 February 2015<BR>
<BR>
i) Acquisition of an additional interest in PSG Namibia Proprietary Limited<BR>
With effect from 1 March 2014, PSG Konsult (through its subsidiary PSG Distribution Holdings Proprietary Limited) acquired <BR>
an additional 3% interest in PSG Namibia Proprietary Limited, a company incorporated in Namibia, for a consideration of <BR>
R1.5 million. The 3% stake was bought from a minority shareholder and the consideration was paid in full on 28 February 2014. <BR>
The group now holds 54% of the issued share capital of PSG Namibia Proprietary Limited.<BR>
<BR>
For the year ended 28 February 2014<BR>
<BR>
i) Acquisition of an additional interest in Western Group Holdings Limited<BR>
With effect from 1 March 2013, PSG Konsult acquired an additional 15% interest in Western Group Holdings Limited for a <BR>
consideration of R33.0 million. This Namibia-based holding company has two short-term insurance licences, one in Namibia <BR>
and the other in South Africa. The 15% stake was bought from SAAD Financial Holdings Proprietary Limited, an investment <BR>
holding company. This transaction was subject to regulatory approval, which was obtained in May 2013. The group now held <BR>
90% of the issued share capital of Western Group Holdings Limited.<BR>
<BR>
Group<BR>
R000<BR>
Carrying amount of non-controlling interest acquired 14 428<BR>
Consideration paid to non-controlling interest (33 000)<BR>
Excess of consideration paid recognised in equity (18 572)<BR>
<BR>
ii) Acquisition of the remaining interest in PSG Nylstroom Proprietary Limited<BR>
Effective 1 August 2013, PSG Konsult (through its subsidiary PSG Optimum Proprietary Limited) acquired the remaining 49% <BR>
interest in PSG Nylstroom Proprietary Limited, a company incorporated in South Africa, for a consideration of R1.3 million. <BR>
On 1 August 2013, 80% of the purchase consideration was paid and the remaining 20% (subject to a profit guarantee) was <BR>
paid on 1 August 2014.<BR>
<BR>
iii) Acquisition of a further interest in Western Group Holdings Limited<BR>
Effective 1 September 2013, PSG Konsult acquired the remaining 10% interest in Western Group Holdings Limited for a <BR>
consideration of R22.0 million. The 10% stake was bought from the management group of Western Group Holdings Limited.<BR>
<BR>
The parties entered into an agreement on 3 June 2013 (following the approval by the FSB and Namfisa of the 15% interest <BR>
acquired at the end of May 2013) in which it was agreed that PSG Konsult would like to increase its stake in Western Group <BR>
Holdings Limited from 90% to 100%, subject to approval by the FSB in South Africa and Namfisa in Namibia. The transaction <BR>
was approved by the regulatory authorities in the beginning of September 2013, resulting in Western Group Holdings Limited <BR>
being a wholly-owned subsidiary of PSG Konsult.<BR>
<BR>
Group<BR>
R000<BR>
Carrying amount of non-controlling interest acquired 11 292<BR>
Consideration paid to non-controlling interest (22 000)<BR>
Excess of consideration paid recognised in equity (10 708)<BR>
<BR>
iv) Disposal of interest held in Western Group Holding Limited<BR>
PSG Konsult entered into an agreement on 2 July 2013 to dispose of 40% held by it in Western Group Holdings Limited <BR>
(following the approval by the regulatory authorities of PSG Konsult's acquisition of management's remaining 10% interest) <BR>
to Swanvest 120 Proprietary Limited (Swanvest), a wholly-owned subsidiary of Santam Limited, for R88.0 million. The <BR>
transaction was approved by the regulatory authorities on 16 September 2013. Following the implementation of this<BR>
transaction, PSG Konsult holds 60% of the issued share capital of Western Group Holdings Limited, with the remaining <BR>
40% being held by Swanvest.<BR>
<BR>
Group<BR>
R000<BR>
Cash consideration received 88 000<BR>
Carrying amount of non-controlling interest disposed of (45 855)<BR>
Excess of consideration received recognised in equity 42 145<BR>
<BR>
9. Acquisition of subsidiaries<BR>
<BR>
For the year ended 28 February 2014<BR>
<BR>
i) Acquisition of collective investment scheme<BR>
The group obtained control of the PSG Diversified Income Fund (previously PSG Optimal Income Fund) towards the end of <BR>
the 2014 financial year. As at 28 February 2014, the group held an interest of 34% in this fund and the fund was <BR>
consolidated in accordance with IFRS 10 Consolidated Financial Statements. The PSG Diversified Income Fund is a <BR>
collective investment scheme managed by PSG Asset Management.<BR>
<BR>
Group<BR>
Details of the net assets acquired are as follows: R000<BR>
Debt securities 243 563<BR>
Unit-linked investments 26 590<BR>
Receivables including insurance receivables 15 771<BR>
Third-party liabilities arising on consolidation of mutual funds (187 652)<BR>
Trade and other payables (1 296)<BR>
Net asset value 96 976<BR>
Fair value of equity interest held before the business combination (96 976)<BR>
Total consideration paid -<BR>
<BR>
10. Disposal of subsidiaries<BR>
<BR>
For the year ended 28 February 2014<BR>
<BR>
i) Disposal of collective investment scheme<BR>
The group deconsolidated the PSG Stable Fund during the year ended 28 February 2014 as the group lost control of this<BR>
fund due to a decrease in the direct interest in the fund.<BR>
<BR>
Group<BR>
Net assets of subsidiary sold: R000<BR>
Equity securities 16 876 <BR>
Debt securities 23 422<BR>
Unit-linked investments 5 439<BR>
Receivables including insurance receivables 558<BR>
Cash and cash equivalents 2 401<BR>
Third-party liabilities arising on consolidation of mutual funds (23 667)<BR>
Trade and other payables (106)<BR>
Net asset value 24 923<BR>
Transfer to unit-linked investments (24 923)<BR>
Total cash consideration received -<BR>
Cash and cash equivalents given up (2 401)<BR>
Net cash flow on disposal of subsidiary (2 401)<BR>
<BR>
11. Other acquisitions and disposals<BR>
<BR>
For the year ended 28 February 2015<BR>
<BR>
i) Standardising of revenue sharing model<BR>
Effective 1 March 2014, the group (through its subsidiary PSG Wealth Financial Planning Proprietary Limited) concluded <BR>
an asset-for-share transaction (utilising Section 42 of the Income Tax Act) with a large number of its advisers. The <BR>
purpose of this transaction was to standardise the revenue sharing arrangements between the advisers and PSG Konsult. <BR>
This provided the opportunity for the advisers to become shareholders in the business and be part of our loyal <BR>
shareholder base of individuals.<BR>
<BR>
The consideration was paid with the issue of PSG Konsult shares (35.8 million shares at R4.50 per share) and the <BR>
remaining R12.5 million paid in cash on the effective date. The transaction did not qualify for accounting in terms of <BR>
IFRS 3R - Business Combinations as the assets acquired (the right to an increased share in the income stream of the <BR>
adviser) did not constitute a business acquired.<BR>
<BR>
This transaction contributed R10.1 million to our headline earnings during the year under review.<BR>
<BR>
For the year ended 28 February 2014<BR>
<BR>
i) Disposal of associated companies<BR>
The group disposed of various non-core investments in associated companies during the 2014 financial year. The group <BR>
disposed of its interest in Axon Xchange Proprietary Limited, Purple Line Plastics Proprietary Limited, JWR Holdings <BR>
Proprietary Limited and Excluwin Traders Proprietary Limited for a total consideration of R11.1 million, resulting in <BR>
total non-headline profits (net of tax and non-controlling interest) of R3.9 million.<BR>
<BR>
12. Financial risk management<BR>
<BR>
The group's activities expose it to a variety of financial risks: market risk (including price risk, foreign currency risk, <BR>
cash flow risk and fair value interest rate risks), credit risk and liquidity risk. Insurance activities expose the group to <BR>
insurance risk (including pricing risk, reserving risk, underwriting risk and reinsurance risk). The group is also exposed <BR>
to operational risk and legal risk.<BR>
<BR>
The capital risk management philosophy is to maximise the return on shareholders' capital within an appropriate risk framework.<BR>
<BR>
The condensed consolidated financial statements do not include all risk management information and disclosure required in <BR>
the annual financial statements and should be read in conjunction with the group's annual financial statements as at <BR>
28 February 2015.<BR>
<BR>
There have been no changes in the group's financial risk management objectives and policies since the previous financial year.<BR>
<BR>
Market risk (price risk, foreign currency risk and interest rate risks)<BR>
Market risk is the risk of adverse financial impact due to changes in fair values or future cash flows of financial <BR>
instruments from fluctuations in interest rates, equity prices and foreign currency exchange rates.<BR>
<BR>
A portion of the policyholders' and shareholders' investments is valued at fair value and is therefore susceptible to market <BR>
fluctuations.<BR>
<BR>
With regard to the subsidiary, PSG Life Limited, this company only invests assets into portfolios that are exposed to market <BR>
price risk that matches linked policies to policyholders (where the value of policy benefits is directly linked to the fair <BR>
value of the supporting assets) and as such does not expose the business to the market risk of fair value adjustments on the <BR>
financial asset as this risk is assumed by the policyholder. Fees charged on this business are determined as a percentage of <BR>
the fair value of the underlying assets held in the linked funds, which are subject to equity and interest rate risk. As a<BR>
result, the management fees fluctuate, but cannot be less than nil.<BR>
<BR>
Included in the equity securities of R1 025.5 million (2014: R604.9 million) are quoted equity securities of R1 024.7 million <BR>
(2014: R604.0 million), of which R955.1 million (2014: R600.3 million) relates to investments in linked investment contracts. <BR>
The price risk of these instruments is carried by the policyholders of the linked investment contracts.<BR>
<BR>
Debt securities linked to policyholder investments amounted to R800.2 million (2014: R1 676.7 million) and do not expose the <BR>
group to interest rate risk; cash and cash equivalents linked to policyholder investments amounted to R27.0 million (2014: <BR>
R51.3 million) and do not expose the group to interest rate risk.<BR>
<BR>
Fair value estimation<BR>
The information below analyses financial instruments, carried at fair value, by level of hierarchy as required by IFRS 13. <BR>
The different levels have been defined as follows:<BR>
<BR>
- Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1).<BR>
- Input other than quoted prices included within level 1 that is observable for the asset or liability, either directly <BR>
(that is, as prices) or indirectly (that is, derived from prices) (level 2).<BR>
- Input for the asset or liability that is not based on observable market data (that is, unobservable input) (level 3).<BR>
<BR>
There have been no significant transfers between levels 1, 2 or 3 during the financial year under review.<BR>
<BR>
The table below analyses financial assets and liabilities, which are carried at fair value, by valuation method. There were <BR>
no significant changes in the valuation techniques and assumptions applied since 28 February 2014.<BR>
<BR>
Valuation techniques and main assumptions used in determining the fair value of financial assets and liabilities classified <BR>
within level 2 can be summarised as follows:<BR>
<BR>
Instrument Valuation techniques Main assumptions<BR>
<BR>
Derivative financial instruments Exit price on recognised over-the-counter Not applicable<BR>
(OTC) platforms<BR>
<BR>
<BR>
Debt securities Valuation model that uses the market Bond interest rate curves <BR>
input (yield of benchmark bonds) Issuer credit ratings <BR>
Liquidity spreads<BR>
<BR>
Unit-linked investments Quoted put (exit) price provided by the Not applicable - prices are publicly<BR>
fund manager available<BR>
<BR>
Investment in investment contracts Prices are obtained from the insurer of Not applicable - prices provided by<BR>
the particular investment contract registered long-term insurers<BR>
<BR>
<BR>
Policyholder investment contract Current unit price of underlying unitised Not applicable<BR>
liabilities - unit linked financial asset that is linked to the <BR>
liability, multiplied by the number of <BR>
units held <BR>
<BR>
<BR>
Third-party financial liabilities Quoted put (exit) price provided by the Not applicable - prices are publicly<BR>
arising on the consolidation of fund manager available<BR>
mutual funds<BR>
<BR>
<BR>
The fair value of financial assets and liabilities measured at fair value in the statement of financial position can be <BR>
summarised as follows:<BR>
<BR>
Reviewed Level 1 Level 2 Level 3 Total<BR>
Financial assets R000 R000 R000 R000<BR>
<BR>
At 28 February 2015<BR>
Financial assets at fair value through profit or loss<BR>
Derivative financial assets - 23 324 - 23 324<BR>
Equity securities 1 024 673 - - 1 024 673<BR>
Debt securities 476 539 373 071 - 849 610<BR>
Unit-linked investments - 11 228 992 1 116 656 12 345 648<BR>
Investment in investment contracts - 226 305 - 226 305<BR>
Available-for-sale<BR>
Equity securities - - 845 845<BR>
1 501 212 11 851 692 1 117 501 14 470 405<BR>
Financial liabilities<BR>
<BR>
At 28 February 2015<BR>
Financial liabilities at fair value through profit <BR>
or loss<BR>
Derivative financial liabilities - 30 749 - 30 749<BR>
Investment contracts - 12 282 705 1 106 656 13 389 361<BR>
Trade and other payables - - 13 453 13 453<BR>
Third-party liabilities arising on consolidation of <BR>
mutual funds - 699 202 - 699 202<BR>
- 13 012 656 1 120 109 14 132 765<BR>
<BR>
Audited Level 1 Level 2 Level 3 Total<BR>
Financial assets R000 R000 R000 R000<BR>
<BR>
At 28 February 2014<BR>
Financial assets at fair value through profit or loss<BR>
Derivative financial assets - 21 190 - 21 190 <BR>
Equity securities 604 035 - - 604 035<BR>
Debt securities 35 897 960 015 237 347 1 233 259<BR>
Unit-linked investments - 7 968 164 2 250 465 10 218 629<BR>
Investment in investment contracts - 260 397 - 260 397<BR>
Available-for-sale<BR>
Equity securities - - 845 845<BR>
639 932 9 209 766 2 488 657 12 338 355<BR>
Financial liabilities<BR>
<BR>
At 28 February 2014<BR>
Financial liabilities at fair value through profit or loss<BR>
Derivative financial liabilities - 28 406 - 28 406<BR>
Investment contracts - 9 056 872 2 487 811 11 544 683<BR>
Trade and other payables - - 10 640 10 640<BR>
Third-party liabilities arising on consolidation of <BR>
mutual funds - 372 169 - 372 169<BR>
- 9 457 447 2 498 451 11 955 898<BR>
<BR>
<BR>
The following table presents the changes in level 3 financial instruments during the reporting periods under review:<BR>
<BR>
Reviewed Audited<BR>
28 Feb 15 28 Feb 14<BR>
R000 R000<BR>
Assets <BR>
Opening carrying value 2 488 657 2 270 795<BR>
Additions 3 294 440 1 556 279<BR>
Disposals (4 762 552) (1 503 664)<BR>
Gains recognised in profit and loss 96 956 165 258<BR>
Other movements not through profit and loss - (11)<BR>
1 117 501 2 488 657<BR>
Liabilities<BR>
Opening carrying value 2 498 451 2 272 810<BR>
Additions 3 293 979 1 562 938<BR>
Disposals (4 769 442) (1 504 071)<BR>
Losses recognised in profit and loss 97 121 166 774<BR>
1 120 109 2 498 451<BR>
<BR>
<BR>
Level 3 - significant fair value model assumptions and sensitivities<BR>
Financial assets and liabilities<BR>
Unit-linked investments and debt securities represent the largest portion of the level 3 financial assets and relate to <BR>
units and debentures held in hedge funds and are priced monthly. The prices are obtained from the asset managers of the <BR>
particular hedge funds. These are held to match investment contract liabilities, and as such any change in measurement <BR>
would result in a similar adjustment to investment contract liabilities. The group's overall profit or loss is therefore not <BR>
materially sensitive to the input of the models applied to derive fair value.<BR>
<BR>
Trade and other payables classified within level 3 have significant unobservable input, as the valuation technique used to <BR>
determine the fair values takes into account the probability (at each reporting period) that the contracted party will <BR>
achieve the profit guarantee as stipulated in the business agreement.<BR>
<BR>
The table below summarises the carrying amounts and fair values of financial instruments not presented on the statement <BR>
of financial position at fair value, for which their carrying values do not approximate their fair values:<BR>
<BR>
Reviewed Audited<BR>
28 Feb 15 28 Feb 14<BR>
R000 R000<BR>
<BR>
Debt securities - held-to-maturity<BR>
- Carrying value 721 341 888 173<BR>
- Fair value 736 883 889 020<BR>
<BR>
Investment in investment contracts<BR>
- Carrying value 111 904 245 047<BR>
- Fair value 112 736 255 382<BR>
<BR>
Total<BR>
- Carrying value 833 245 1 133 220<BR>
- Fair value 849 619 1 144 402<BR>
<BR>
The fair value of the financial assets in the table above is categorised in terms of level 2.<BR>
<BR>
13. Related-party transactions<BR>
<BR>
Related-party transactions similar to those disclosed in the group's annual financial statements for the year ended <BR>
28 February 2014 took place during the financial year.<BR>
<BR>
14. Capital commitments and contingencies<BR>
<BR>
Reviewed Audited<BR>
28 Feb 15 28 Feb 14<BR>
R000 R000<BR>
<BR>
Operating lease commitments 82 843 77 926<BR>
Capital commitments 16 971 950<BR>
<BR>
<BR>
15. Events after the reporting date <BR>
<BR>
No event material to the understanding of these results has occurred between the end of the reporting period and the date <BR>
of approval of the condensed consolidated financial statements, other than the disposal of two of its non-core businesses, <BR>
PSG Academy and Nhluvuko Risk Administration, effective 1 March 2015. Refer to the commentary for more detail on these <BR>
transactions.<BR>
<BR>
<BR>
DIRECTORATE<BR>
<BR>
Non-executive directors<BR>
W Theron (Chairman), JF Mouton, PJ Mouton, J de V du Toit^, PE Burton*, ZL Combi*<BR>
(^ Lead independent;* Independent)<BR>
<BR>
Executive directors<BR>
FJ Gouws (Chief executive officer), MIF Smith (Chief financial officer)<BR>
<BR>
COMPANY INFORMATION<BR>
<BR>
Company secretary<BR>
PSG Management Services Proprietary Limited<BR>
<BR>
PSG Konsult head office and registered office<BR>
Building A, Pro Sano Park South Gate, Carl Cronje Drive, Tyger Waterfront, Tyger Valley, Bellville, 7530 <BR>
PO Box 3335, Tyger Valley, Bellville, 7536<BR>
<BR>
Listing<BR>
Johannesburg Stock Exchange (JSE)<BR>
Namibian Stock Exchange (NSX)<BR>
<BR>
Transfer secretary<BR>
Computershare Investor Services Proprietary Limited, 70 Marshall Street, Johannesburg, 2001 <BR>
PO Box 61051, Marshalltown, 2107<BR>
<BR>
Sponsors<BR>
JSE sponsor: PSG Capital Proprietary Limited<BR>
NSX sponsor: PSG Wealth Management (Namibia) Proprietary Limited, member of the Namibian Stock Exchange<BR>
<BR>
Auditor<BR>
PricewaterhouseCoopers Inc.<BR>
Cape Town<BR>
<BR>
Website: www.psg.co.za<BR>
Date: 09/04/2015 01:32:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). <BR>
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