PSG KONSULT LIMITED - Reviewed Preliminary Financial Results For The Year Ended 29 February 2016
14 April, 2016 - Posted at - 13:00:00
KST 201604140027A<BR>
Reviewed Preliminary Financial Results For The Year Ended 29 February 2016<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>
REVIEWED PRELIMINARY FINANCIAL RESULTS FOR THE YEAR ENDED 29 FEBRUARY 2016<BR>
<BR>
SALIENT FEATURES:<BR>
<BR>
- Core revenue up 17%<BR>
- Recurring headline earnings up 20%<BR>
- Recurring headline earnings per share up 19%<BR>
- Assets under management up 16%<BR>
- Gross written premium up 17%<BR>
- Dividend up 10%<BR>
<BR>
COMMENTARY<BR>
<BR>
PSG Konsult delivered a commendable 20% growth in recurring headline earnings. This is consistent with the group's long-term growth track record.<BR>
This year's earnings growth was achieved despite substantially less earnings from performance fees, having done away with white labels to reduce<BR>
operational risk and having increased marketing spend with the launch of a television advertising campaign, as investors were previously advised.<BR>
All divisions achieved good organic topline revenue growth, with PSG Wealth remaining the strongest and most stable revenue driver for the group.<BR>
This division increasingly benefits from economies of scale, as both the wealth platform business and adviser network grow. PSG Asset Management<BR>
weathered a tough year in equity markets and consequently earned less in performance fees. The division nevertheless experienced encouraging net<BR>
inflows and gained market share, mainly due to its competitive long-term investment track record and support from its marketing and sales team<BR>
initiatives. Results from PSG Insure, which is still in an early growth phase, are also gaining strong positive momentum due to efficiencies<BR>
gained from benefits of scale and improved focus on optimising and balancing profitable new business growth.<BR>
<BR>
Overall, the board is pleased with this set of results, since the volatile equity market, sharp devaluation of the rand and overall challenging<BR>
economic environment that the group experienced this financial year were not conducive to growth. The FTSE/JSE All Share Index recorded a<BR>
negative total return of 7.4% for the period until 29 February 2016, compared to a positive return of 12.7% in the comparable period of 2015. <BR>
The group's focus on client service excellence through the quality of its advice, products and platforms is proving resilient in these trying <BR>
times. PSG Konsult also continued to increase its marketing and technology spend during the year under review. This included the successful <BR>
launch of a new television advertisement during January 2016, which is enhancing brand recognition.<BR>
<BR>
PSG Konsult retained a stable credit rating and is adequately capitalised to meet regulatory requirements. As a cash-generative business, it<BR>
remains in a position to make acquisitions, such as the entry into Mauritius. This was the first international acquisition for PSG Konsult since<BR>
listing on the Johannesburg Stock Exchange (JSE). On 1 November 2015, the group acquired a 70% shareholding in Mauritian-based DMH Associates<BR>
(DMH) (now PSG Wealth (Mauritius)), the leading independent private wealth advisory firm in Mauritius. DMH was established in 2003 as an<BR>
investment advisory firm providing independent expert advice to entrepreneurs, high-net-worth individuals and their families. DMH is licensed and<BR>
regulated by the Mauritius Financial Services Commission and also offers corporate finance, wealth management and family office services. The<BR>
company, as well as the individuals involved in the company, is regarded as a good fit for PSG Konsult.<BR>
<BR>
The PSG Konsult adviser network, which is the bedrock of the business and one of its key strengths, continues to expand. The group takes pride <BR>
in the calibre and quality of the advisers that it attracts and their profitable contribution to the business. The second phase of the adviser<BR>
buyback transaction was completed in July 2015, and a further phase was concluded in March 2016. The buyback initiative supports the further<BR>
entrenchment of the group's relationships with advisers and assists in streamlining and standardising the revenue-sharing model and contract<BR>
terms with them.<BR>
<BR>
PSG Wealth remains a key revenue driver for the group through its formidable adviser base and expanding product and platform business offering.<BR>
Continued positive client inflows resulted from strengthening the division's competitive position by expanding its adviser network through both<BR>
organic growth and selected adviser acquisitions. PSG Wealth attracted net managed asset inflows of R12.1 billion during the year under review.<BR>
<BR>
PSG Asset Management remains a high-growth area and a key focus for the group. The division's retail sales efforts and marketing campaigns are<BR>
proving effective in raising awareness of the PSG Asset Management brand, leading to strong retail client inflows. PSG Asset Management attracted<BR>
net inflows of R4.1 billion during the year under review. The focus on generating recurring earnings placed less reliance on performance fees,<BR>
with these fees contributing only 3.8% of group recurring headline earnings compared to 7.7% during the previous financial year.<BR>
<BR>
PSG Insure continues to make inroads in the highly competitive short-term insurance market, having achieved 17% growth in gross written premium<BR>
compared to the prior financial year, with a focus on the quality of new business to achieve profitable growth. No significant catastrophe or<BR>
other related events occurred during the year under review. The division's insurance advisers, with an ongoing focus on growing the commercial<BR>
lines side of the business, managed to gain market share without compromising their overall client-loss claim ratios. Against the backdrop of a<BR>
particularly difficult industry environment, this is an achievement that the group is especially pleased with.<BR>
<BR>
PSG Konsult's key financial performance indicators for the financial year ended 29 February 2016 are shown below:<BR>
<BR>
29 Feb 16 Change 28 Feb 15<BR>
R000 % R000<BR>
<BR>
Earnings attributable to ordinary shareholders 292 924 (14) 340 401<BR>
Non-headline items (622) (1 140)<BR>
Headline earnings 292 302 (14) 339 261<BR>
Non-recurring headline earnings 116 446 1 914<BR>
Recurring headline earnings 408 748 20 341 175<BR>
<BR>
Divisional recurring headline earnings<BR>
PSG Wealth 285 505 25 228 320<BR>
PSG Asset Management 82 707 - 82 336<BR>
PSG Insure 40 536 33 30 519<BR>
408 748 20 341 175<BR>
<BR>
Weighted average number of shares in issue<BR>
(net of treasury shares) (million) 1 274.2 1 1 261.4<BR>
<BR>
Earnings per share (cents)<BR>
- Recurring headline 32.1 19 27.0<BR>
- Headline 22.9 (15) 26.9<BR>
- Attributable 23.0 (15) 27.0<BR>
<BR>
Dividend per share (cents) 13.2 10 12.0<BR>
<BR>
Assets under management (Rbn) 154.1 16 132.5<BR>
Assets under administration (Rbn) 327.1 6 308.7<BR>
Gross written premium (Rbn) 2.5 17 2.1<BR>
<BR>
Number of advisers 711 8 659<BR>
<BR>
<BR>
Strategy<BR>
<BR>
The group continues to invest in technology to enhance the overall client experience and to improve the technical capabilities of the business to<BR>
unlock greater operational scale. During the past financial year, all user interfaces were consolidated into a single integrated platform. The<BR>
new myPSG platform provides clients with consolidated reporting and the ability to transact across an extensive range of products and services<BR>
via a single log-in. This includes investments, trading instruments, short-term insurance, wills and more. The transactional functionality<BR>
facilitates online trading in local shares, derivatives, margin-traded instruments, local unit trusts, offshore shares and will shortly also<BR>
include offshore unit trust funds.<BR>
<BR>
PSG Wealth's overall strategy remains to offer an innovative and holistic end-to-end client proposition. Despite an unpredictable economic<BR>
outlook, the division will continue to invest in people and technology, believing these to be key factors with which to grow its share of the<BR>
market. The strategy to further expand and equip its adviser network will receive ongoing attention, relying on advisers for client feedback <BR>
in the development and creation of new products and services. The division also improved its offshore stockbroking offering to include <BR>
additional foreign markets and is on track to further expand this offering with the inclusion of offshore unit trust funds in the next few <BR>
months. Improved user functionality, coupled with the group's television marketing campaign and enhanced investor tools, should further aid <BR>
the client growth strategy.<BR>
<BR>
PSG Asset Management's strategy consists of three parts, namely investment excellence, operational efficiency and effective sales and marketing<BR>
initiatives. Generating the best long-term, risk-adjusted returns for investors is the division's primary focus. To this end, the division <BR>
will continue to prioritise the investment team's performance while managing operational risks and processes. Increasing brand awareness -<BR>
particularly in the retail investor market - is a key focus area for the marketing team, allowing the division to benefit from a growing <BR>
investor base.<BR>
<BR>
PSG Insure provides simple and cost-effective short-term insurance solutions to clients, protecting them from unforeseen events. Vertical<BR>
integration across underwriting, administration and adviser teams underpins the focus on providing value-added products which meet and exceed<BR>
clients' expectations. The division continues to invest in its claims and administration departments. This is to build scale and unlock<BR>
operational efficiencies while freeing 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, in particular to the cost-to-income ratio. Building a cost-<BR>
efficient and scalable business is a key priority for the board. The management team is committed to continuously investigate new ways in which<BR>
to manage and reduce costs.<BR>
<BR>
Recognition, awards and achievements<BR>
<BR>
The group is proud of the following notable milestones, achievements and industry awards:<BR>
<BR>
- PSG Wealth was a finalist for the 2015 Morningstar South Africa Fund Awards in the Best Short-term Bond Funds investment category (PSG Wealth<BR>
Income Fund of Funds).<BR>
- PSG Wealth was the overall runner-up in the Private Banks and Wealth Managers Survey conducted by the research house Intellidex for 2015:<BR>
- Top wealth manager for up-and-coming professionals (tied)<BR>
- Top wealth manager for successful entrepreneurs (tied)<BR>
- 'People's Choice' award as one of the top three wealth managers preferred by clients<BR>
- At the annual SA's Top Stockbrokers Awards in September 2015, PSG Wealth was placed third overall. PSG Wealth was also recognised as one of the<BR>
top three online brokers and received special recognition for the availability of its instruments and trading tools, its client support<BR>
(including research and tools) and the overall quality of its online and offline services.<BR>
- The PlexCrown survey results for 31 December 2015 confirmed that the PSG funds remain solid performers. The PSG Management Company maintained its<BR>
Top 10 ranking.<BR>
- PSG Asset Management was placed third in the category Best Fund House: Larger Fund Range in the 2016 Morningstar South Africa Fund Awards.<BR>
- Various PSG Insure offices received Santam awards, ranging from bronze to diamond.<BR>
<BR>
People<BR>
<BR>
As at 29 February 2016, PSG Konsult had 206 offices and 2 169 employees, of which 711 were financial planners, portfolio managers, stockbrokers<BR>
and asset managers. A further 414 were professional associates (accountants and attorneys). During the year under review, 108 new advisers were<BR>
appointed through a combination of organic growth and selective adviser book acquisitions. In addition, a number of strategic hires were<BR>
concluded, which have provided the group with a strong operational platform to take the business into the future.<BR>
<BR>
The effectiveness of the group's succession planning strategy is demonstrated by Corrie de Bruyn, current chief executive officer of PSG Wealth,<BR>
advising that he will return to his roots to take up a financial adviser position within the Pretoria East office, our largest office, from <BR>
May 2016. Marilize Lansdell, who is head of PSG Wealth investment and trading platform, has proved herself as the ideal successor and has worked<BR>
closely with Corrie. Marilize is supported by a strong and capable management team and has been a member of the PSG Wealth executive committee<BR>
for a number of years. This will assist in ensuring a smooth leadership transition to enable PSG Wealth to continue the current strong growth<BR>
trajectory of the Wealth business. The board would like to thank Corrie for the valuable contribution he has made in helping to build PSG Konsult<BR>
over the years, and wishes Marilize all the best in her new role.<BR>
<BR>
Changes to the board of directors<BR>
<BR>
Jannie Mouton, the founder of PSG Group, has decided to step down as a non-executive director of PSG Konsult. Jannie's decision is based on his<BR>
belief in the solid strategy and performance of PSG Konsult. Although the board regrets his departure, it respects his decision and wishes him<BR>
well. The board is pleased to announce that Riaan Stassen, the former chief executive officer of Capitec Bank, will be joining PSG Konsult as <BR>
an independent non-executive director. These two board changes take effect on 14 April 2016.<BR>
<BR>
Regulatory landscape and risk management<BR>
<BR>
The group seeks to manage risk exposures within acceptable levels, sustain profit margins and maintain an efficient capital structure while<BR>
embedding good corporate conduct, regulatory compliance, the highest ethical behaviour and excellent client service.<BR>
<BR>
PSG Konsult is geared to adapt to regulatory change on a continuous basis and has positioned itself as an early adopter. Regulation in other<BR>
territories is proactively monitored. This is part of the group's risk management approach and ensures that the board and management are prepared<BR>
for and informed about potential consequences and opportunities created by new legislation. The Retail Distribution Review (RDR), for example, is<BR>
expected to significantly change the adviser market and the way financial products are distributed in South Africa. Elsewhere the introduction of<BR>
similar legislation increased the barriers to entry, increased the potential revenue per adviser and resulted in industry consolidation. This is<BR>
an opportunity for PSG Konsult as the group has the necessary platforms, systems and practices to take on advisers seamlessly and provide support<BR>
that meets all regulatory requirements.<BR>
<BR>
One of the significant regulatory events for the business was piloting its first Own Risk and Solvency Assessment (ORSA) report. This enabled <BR>
PSG Konsult to benchmark the extent to which ORSA principles are embedded across the group and to identify areas of improvement in preparation <BR>
for the full ORSA report to be submitted in 2017.<BR>
<BR>
Tax dispute settled<BR>
<BR>
Shareholders are referred to PSG Konsult's announcement made on 11 December 2015. The board subsequently decided to settle this legacy matter,<BR>
which dates back to 2009, for an amount of R115 million. This amount and the related legal costs incurred were fully provided for in the year-end<BR>
results and have been treated as non-recurring headline earnings.<BR>
<BR>
Marketing<BR>
<BR>
Marketing initiatives are critical to the group's goal of becoming a leader in the financial services industry. During the year under review, the<BR>
specialist marketing team focused its efforts on a new advertising campaign and on enhancing the group's website, digital platforms, client<BR>
communication and client and adviser events. This is with the objective of building the PSG brand within the South African market. The launch of<BR>
the television advertisement was the highlight of the year and communicates PSG Konsult's unique competitive advantage as bigger-picture<BR>
thinkers. It has resulted in increased web traffic and interest from the public and will hopefully take the group's marketing efforts to new<BR>
heights as PSG Konsult seeks to further support its network of financial advisers and cement its 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 overstated. The scalability and efficiency of business<BR>
functions are dependent on the state of its IT systems. It is for this reason that the group continues to invest in new and innovative<BR>
technologies as it seeks to incorporate further business process automation, reduce operational risk and provide real-time reporting for enhanced<BR>
management decision-making. The group is confident that the IT strategy, which also includes robust disaster recovery and business continuity<BR>
plans, will create a solid foundation for future growth.<BR>
<BR>
Looking forward<BR>
<BR>
The group's aim remains to service existing clients well and gain new clients. Current economic circumstances are uncertain and volatility<BR>
remains in investment markets. However, the group is confident that it will continue to build its client franchise despite this market outlook. <BR>
A number of initiatives are in place to ensure this happens. The group's focus on products, platforms and client service excellence through the<BR>
quality of its advice is proving to be a resilient strategy.<BR>
<BR>
Over the past three years, PSG Konsult re-engineered and refocused its business. Unprofitable or non-core activities were closed, integrated or<BR>
sold. At the same time, the group invested - and continues to invest - in streamlining and automating processes. This is all with the aim of<BR>
creating scalable capacity throughout the business.<BR>
<BR>
PSG Konsult will continue to focus on topline revenue while still paying due care to its operating margin. The group will also continue to<BR>
prioritise organic growth in the domestic market, where it has a relatively low, but rapidly expanding market share.<BR>
<BR>
Risk management systems are set to be further enhanced while the risk universe and quantification methods in the group are further standardised.<BR>
<BR>
The cash flow generation by the business remains strong, and the group will use this to fund current growth initiatives and to pay dividends<BR>
consistent with its dividend policy.<BR>
<BR>
As always, PSG Konsult continues to focus on providing quality client advice and service to attract new business inflows. This is supported by<BR>
the establishment of an outbound direct sales initiative to grow its client base. In terms of products, the group continues to expand the range<BR>
of products and services on offer while embedding the principles of National Treasury's Treating Customers Fairly (TCF) framework.<BR>
<BR>
Events after the reporting date<BR>
<BR>
To further standardise the revenue-sharing model and provide advisers with the opportunity to invest in the future of the group, PSG Konsult is<BR>
pleased to advise that the group concluded further asset-for-share transactions in March 2016 with a number of its advisers through its subsidiary, <BR>
PSG Wealth Financial Planning Proprietary Limited, in terms of section 42 of the Income Tax Act, 58 of 1962. These transactions, which were settled <BR>
largely through the issue of 14 298 161 PSG Konsult shares, will lead to a win-win situation for the group's financial advisers and shareholders.<BR>
<BR>
Dividend<BR>
<BR>
The board approved and declared a final gross dividend of 8.8 cents per share (2015: 8.0 cents per share) from income. This follows the interim<BR>
dividend of 4.4 cents per share (2015: 4.0 cents per share) declared in October 2015, which brings the total gross dividend declared for the <BR>
2016 financial year to 13.2 cents per share (2015: 12.0 cents per share).<BR>
<BR>
The dividend is subject to a local dividend tax rate of 15%, resulting in a net dividend of 7.48 cents per share, unless the shareholder is<BR>
exempt from paying dividends tax or is entitled to a reduced rate in terms of the applicable double-tax agreement. The number of issued ordinary<BR>
shares is 1 293 421 882 at the date of this declaration. PSG Konsult's income tax reference 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 Friday, 6 May 2016<BR>
Trading ex dividend commences Monday, 9 May 2016<BR>
Record date Friday, 13 May 2016<BR>
Date of payment Monday, 16 May 2016<BR>
<BR>
Share certificates may not be dematerialised or rematerialised between Monday, 9 May 2016 and Friday, 13 May 2016, both days included.<BR>
<BR>
The board would like to extend its gratitude to all the group's stakeholders, including shareholders, clients, business partners, management and employees, for<BR>
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>
14 April 2016<BR>
<BR>
<BR>
Condensed consolidated statement of financial position<BR>
at 29 February 2016 and 28 February 2015<BR>
<BR>
Reviewed Audited<BR>
as at as at<BR>
29 Feb 16 28 Feb 15<BR>
R000 R000<BR>
<BR>
ASSETS<BR>
Intangible assets 882 615 859 536<BR>
Property and equipment 54 179 42 273<BR>
Investment property 7 349 2 245<BR>
Investment in associated companies 129 39 562<BR>
Investment in joint ventures 16 223 12 971<BR>
Deferred income tax 90 245 87 674<BR>
Equity securities (note 6.7) 1 747 701 1 025 518<BR>
Debt securities (note 6.7) 2 588 565 1 605 418<BR>
Unit-linked investments (note 6.7) 29 695 283 12 345 648<BR>
Investment in investment contracts (note 6.7) 116 477 338 208<BR>
Loans and advances 129 114 116 393<BR>
Derivative financial instruments 17 864 23 324<BR>
Reinsurance assets 76 184 77 413<BR>
Deferred acquisition costs 3 011 1 714<BR>
Receivables including insurance receivables 2 816 578 2 133 136<BR>
Current income tax assets 7 249 18 954<BR>
Cash and cash equivalents (including money market investments) (note 6.7) 1 395 952 972 243<BR>
Non-current assets held for sale 38 948 17 751<BR>
Total assets 39 683 666 19 719 981<BR>
<BR>
EQUITY<BR>
Equity attributable to owners of the parent<BR>
Stated capital 1 446 604 1 325 111<BR>
Treasury shares (13 462) (546)<BR>
Other reserves (394 755) (404 471)<BR>
Retained earnings 650 059 573 065<BR>
1 688 446 1 493 159<BR>
Non-controlling interest 157 212 132 491<BR>
Total equity 1 845 658 1 625 650<BR>
<BR>
LIABILITIES<BR>
Insurance contracts 607 310 574 331<BR>
Deferred income tax 44 925 53 610<BR>
Borrowings 274 114 427 843<BR>
Derivative financial instruments 17 910 30 749<BR>
Investment contracts (note 6.7) 19 836 250 14 222 603<BR>
Third-party liabilities arising on consolidation of mutual funds 14 023 726 699 202<BR>
Deferred reinsurance acquisition revenue 4 524 3 563<BR>
Trade and other payables 2 894 051 2 068 400<BR>
Current income tax liabilities 135 198 10 618<BR>
Non-current liabilities held for sale - 3 412<BR>
Total liabilities 37 838 008 18 094 331<BR>
<BR>
Total equity and liabilities 39 683 666 19 719 981<BR>
<BR>
Net asset value per share (cents) 132.2 118.3<BR>
<BR>
<BR>
Condensed consolidated income statement<BR>
for the year ended 29 February 2016<BR>
<BR>
Reviewed Audited<BR>
Year ended Year ended<BR>
29 Feb 16 28 Feb 15<BR>
R000 R000<BR>
<BR>
Gross written premium 940 903 795 237<BR>
Less: Reinsurance written premium (242 720) (225 293)<BR>
Net premium 698 183 569 944<BR>
Change in unearned premium<BR>
- Gross (20 986) (34 905)<BR>
- Reinsurers' share 434 3 119<BR>
Net insurance premium revenue 677 631 538 158<BR>
Commission and other fee income 2 461 393 2 138 855<BR>
Investment income 612 988 499 554<BR>
Net fair value gains and losses on financial instruments 1 104 789 1 209 661<BR>
Fair value adjustment to investment contract liabilities (1 389 130) (1 406 791)<BR>
Other operating income 34 005 35 163<BR>
Total income 3 501 676 3 014 600<BR>
<BR>
Insurance claims and loss adjustment expenses (670 197) (561 548)<BR>
Insurance claims and loss adjustment expenses recovered from reinsurers 151 335 137 173<BR>
Net insurance benefits and claims (518 862) (424 375)<BR>
Commission paid (1 061 309) (910 226)<BR>
Depreciation and amortisation (57 308) (55 422)<BR>
Employee benefit expenses (590 976) (511 612)<BR>
Fair value adjustment to third-party liabilities (67 080) (41 525)<BR>
Marketing, administration and other expenses (485 365) (427 457)<BR>
Total expenses (2 780 900) (2 370 617)<BR>
<BR>
Share of profits of associated companies 1 496 40<BR>
Loss on impairment of associated companies (1 981) -<BR>
Share of profits of joint ventures 3 252 914<BR>
Total profit from associated companies and joint ventures 2 767 954<BR>
<BR>
Profit before finance costs and taxation 723 543 644 937<BR>
Finance costs (91 881) (119 905)<BR>
Profit before taxation 631 662 525 032<BR>
Taxation (309 838) (163 234)<BR>
Profit for the year 321 824 361 798<BR>
<BR>
Attributable to:<BR>
Owners of the parent 292 924 340 401<BR>
Non-controlling interest 28 900 21 397<BR>
321 824 361 798<BR>
<BR>
Earnings per share (cents)<BR>
Attributable (basic) 23.0 27.0<BR>
Attributable (diluted) 22.4 26.1<BR>
Headline (basic) 22.9 26.9<BR>
Headline (diluted) 22.3 26.0<BR>
Recurring headline (basic) 32.1 27.0<BR>
Recurring headline (diluted) 31.2 26.1<BR>
<BR>
<BR>
Condensed consolidated statement of comprehensive income<BR>
for the year ended 29 February 2016 <BR>
<BR>
Reviewed Audited<BR>
Year ended Year ended<BR>
29 Feb 16 28 Feb 15<BR>
R000 R000<BR>
<BR>
Profit for the year 321 824 361 798<BR>
Other comprehensive income for the year, net of taxation 9 647 224<BR>
To be reclassified to profit and loss:<BR>
Currency translation adjustments 8 478 224<BR>
Not to be reclassified to profit and loss: <BR>
Gain on revaluation of property and equipment 1 169 -<BR>
Total comprehensive income for the year 331 471 362 022<BR>
<BR>
Attributable to:<BR>
Owners of the parent 302 104 340 625<BR>
Non-controlling interest 29 367 21 397<BR>
331 471 362 022<BR>
<BR>
<BR>
Earnings and headline earnings per share<BR>
<BR>
Reviewed Audited<BR>
Year ended Year ended<BR>
29 Feb 16 28 Feb 15<BR>
R000 R000<BR>
<BR>
Profit attributable to ordinary shareholders 292 924 340 401<BR>
Non-headline items (net of non-controlling interest and related tax effect)<BR>
Profit on disposal of intangible assets (including goodwill) (190) (757)<BR>
Impairment of associated companies 1 189 -<BR>
Non-headline items of associated companies and joint ventures (2 151) (251)<BR>
Other 530 (132)<BR>
<BR>
Headline earnings 292 302 339 261<BR>
Recurring 408 748 341 175<BR>
Non-recurring (116 446) (1 914)<BR>
<BR>
Earnings per share (cents)<BR>
Attributable (basic) 23.0 27.0<BR>
Attributable (diluted) 22.4 26.1<BR>
Headline (basic) 22.9 26.9<BR>
Headline (diluted) 22.3 26.0<BR>
Recurring headline (basic) 32.1 27.0<BR>
Recurring headline (diluted) 31.2 26.1<BR>
<BR>
Number of shares (million)<BR>
In issue (net of treasury shares) 1 276.8 1 262.1<BR>
Weighted average 1 274.2 1 261.4<BR>
<BR>
<BR>
Condensed consolidated statement of changes in equity<BR>
for the year ended 29 February 2016<BR>
<BR>
Attributable to equity holders of the group<BR>
<BR>
Non-<BR>
Stated Treasury Other Retained controlling <BR>
capital shares reserves earnings interest Total<BR>
R000 R000 R000 R000 R000 R000<BR>
<BR>
Balance at 1 March 2014 - Audited 1 134 746 (546) (445 146) 399 487 86 222 1 174 763<BR>
Comprehensive income<BR>
Profit for the year - - - 340 401 21 397 361 798<BR>
Other comprehensive income - - 224 - - 224<BR>
Currency translation adjustments - - 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 - employees - - 11 562 - - 11 562<BR>
Transactions with non-controlling interest - - - (1 320) (206) (1 526)<BR>
Capital contribution by non-controlling interest - - - - 28 000 28 000<BR>
Current tax on equity-settled share-based payments - - 5 084 - - 5 084<BR>
Deferred tax on equity-settled share-based payments - - 32 516 - - 32 516<BR>
Loss on issue of shares in terms of share scheme - - (31 636) - - (31 636)<BR>
Release of share-based payment reserve to retained earnings<BR>
on vested share options - - 22 925 (22 925) - -<BR>
Dividend paid - - - (142 578) (2 922) (145 500)<BR>
<BR>
Balance at 28 February 2015 - Audited 325 111 (546) (404 471) 573 065 132 491 1 625 650<BR>
<BR>
Comprehensive income<BR>
Profit for the year - - - 292 924 28 900 321 824<BR>
Other comprehensive income - - 9 180 - 467 9 647<BR>
Currency translation adjustments - - 8 478 - - 8 478<BR>
Gain on revaluation of property and equipment - - 702 - 467 1 169<BR>
Total comprehensive income - - 9 180 292 924 29 367 331 471<BR>
Transactions with owners 121 493 (12 916) 536 (215 930) (4 646) (111 463)<BR>
Issue of ordinary shares 121 493 - - - - 121 493<BR>
Share-based payment costs - employees - - 16 608 - - 16 608<BR>
Transactions with non-controlling interest - - - (3 098) (360) (3 458)<BR>
Acquisition of subsidiary - - - - 921 921<BR>
Net movement in treasury shares - (8 515) - - - (8 515)<BR>
Current tax on equity-settled share-based payments - - 20 153 - - 20 153<BR>
Deferred tax on equity-settled share-based payments - - (10 024) - - (10 024)<BR>
Loss on issue of shares in terms of share scheme - - (84 974) - - (84 974)<BR>
Release of share-based payment reserve to retained earnings<BR>
on vested share options - - 58 773 (58 773) - -<BR>
Release of profits from treasury shares to <BR>
retained earnings - (4 401) - 4 401 - -<BR>
Dividend paid - - - (158 460) (5 207) (163 667)<BR>
<BR>
Balance at 29 February 2016 - Reviewed 1 446 604 (13 462) (394 755) 650 059 157 212 1 845 658<BR>
<BR>
<BR>
Condensed consolidated statement of cash flows<BR>
for the year ended 29 February 2016<BR>
<BR>
Reviewed Audited<BR>
Year ended Year ended<BR>
29 Feb 16 28 Feb 15<BR>
R000 R000<BR>
<BR>
Cash flows from operating activities <BR>
Cash generated by operating activities 57 599 232 202<BR>
Interest income 529 692 372 278<BR>
Dividend income 82 872 126 900<BR>
Finance costs (41 939) (44 118)<BR>
Taxation paid (172 284) (172 853)<BR>
Operating cash flows before policyholder cash movement 455 940 514 409<BR>
Policyholder cash movement 87 910 (24 380)<BR>
Net cash flow from operating activities 543 850 490 029<BR>
<BR>
Cash flows from investing activities<BR>
Acquisition of subsidiaries (including collective investment schemes) 93 516 -<BR>
Acquisition of intangible assets (56 826) (30 473)<BR>
Purchases of property and equipment (35 059) (13 241)<BR>
Proceeds from sale of assets held for sale 12 646 -<BR>
Other 1 864 4 120<BR>
Net cash flow from investing activities 16 141 (39 594)<BR>
<BR>
Cash flows from financing activities<BR>
Dividends paid (163 667) (145 500)<BR>
Capital contributions by non-controlling interest (ordinary shares) - 28 000<BR>
Transactions with non-controlling interest (3 458) (1 526)<BR>
Repayment of borrowings (3 737) (73 344)<BR>
Shares issued 36 519 7 476<BR>
Net movement in treasury shares (8 515) -<BR>
Other 608 209<BR>
Net cash flow from financing activities (142 250) (184 685)<BR>
<BR>
Net increase in cash and cash equivalents 417 741 265 750<BR>
Cash and cash equivalents at beginning of year 975 018 709 173<BR>
Exchange gains on cash and cash equivalents 3 193 95<BR>
Cash and cash equivalents at end of year* 1 395 952 975 018<BR>
<BR>
Current, cheque and money market investment accounts 1 395 952 972 243<BR>
Cash and cash equivalents classified as assets held for sale - 2 775<BR>
<BR>
* Includes the following:<BR>
Clients' cash linked to investment contracts 114 864 26 954<BR>
Other client-related balances 165 970 139 381<BR>
280 834 166 335<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 investment contracts, <BR>
cash held by the stockbroking business and cash utilised for the loan facility obtained by PSG Wealth on the loan facilities provided to clients on <BR>
their share portfolios at PSG Securities Limited. PSG Life Limited, the group's linked insurance company, issues linked policies to policyholders <BR>
(where the value of policy benefits is directly linked to the fair value of the supporting assets). When these policies mature, the company raises <BR>
a debtor for the money receivable from the third-party investment provider, and raises a creditor for the amount owing to the client. Timing difference <BR>
occurs at month-end where the money was received from the third-party investment provider, but only paid out by the company after month-end, resulting <BR>
in significant fluctuations in the working capital of the company. Similar working capital fluctuations occur at PSG Securities Limited, the group's <BR>
stockbroking business, mainly due to the timing of the close of the JSE in terms of client settlements. During the 2016 financial year, R150.1 million <BR>
was repaid on the loans obtained for providing loan facilities to clients on their share portfolio compared to R89.6 million funding obtained in the <BR>
2015 financial year.<BR>
<BR>
<BR>
Notes to the condensed consolidated financial statements for the year ended 29 February 2016<BR>
<BR>
1. Reporting entity<BR>
<BR>
PSG Konsult Limited is a company domiciled in the Republic of South Africa. The condensed consolidated financial statements of the company as at<BR>
and for the year ended 29 February 2016 comprise the company and its subsidiaries (together referred to as the 'group') and the group's interests<BR>
in associated companies and joint ventures.<BR>
<BR>
2. Basis of presentation<BR>
<BR>
The condensed consolidated preliminary financial statements are prepared in accordance with the Listings Requirements of the JSE Limited (JSE) <BR>
and the requirements of the Companies Act, No. 71 of 2008, 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 of International <BR>
Financial Reporting Standards (IFRS), the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial <BR>
Pronouncements as issued by the Financial Reporting Standards Council and to also, as a minimum, contain the information required by <BR>
IAS 34 - Interim Financial Reporting. The accounting policies applied in the preparation of the consolidated financial statements, from which <BR>
the condensed consolidated financial statements were derived, are in terms of IFRS and are consistent with those accounting policies applied in <BR>
the preparation of the previous consolidated annual financial statements.<BR>
<BR>
3. Preparation<BR>
<BR>
The condensed consolidated preliminary financial statements is the responsibility of the board of directors of the company. These condensed <BR>
consolidated preliminary financial statements were prepared by Stephan van der Merwe, CA(SA), under the supervision of the chief financial officer, <BR>
Mike Smith, CA(SA), and were reviewed by PSG Konsult's external auditor, PricewaterhouseCoopers Inc. A copy of their unmodified review opinion is <BR>
available from PSG Konsult's registered office. Any reference to future financial performance included in this announcement has not been<BR>
reviewed by or reported on by the company's auditor.<BR>
<BR>
4. Accounting policies<BR>
<BR>
The accounting policies applied in the preparation of these condensed consolidated financial statements are in terms of IFRS and are consistent<BR>
with those accounting policies applied in the preparation of the previous consolidated annual financial statements as at and for the year ended<BR>
28 February 2015.<BR>
<BR>
The following new accounting standards and amendments to IFRSs, which were relevant to the group's operations, were effective for the first time<BR>
from 1 March 2015:<BR>
<BR>
- Amendment to IAS 19 - Employee benefits<BR>
- Annual Improvements 2010 - 12 cycle<BR>
- Annual Improvements 2011 - 13 cycle<BR>
<BR>
These revisions have not resulted in material changes to the group's reported results and disclosures in these condensed consolidated <BR>
financial statements.<BR>
<BR>
The following new or revised IFRSs and interpretations that are applicable to the group have effective dates applicable to future financial years<BR>
and have not been early adopted:<BR>
<BR>
- IFRS 9 - Financial Instruments (effective 1 January 2018)<BR>
- IFRS 15 - Revenue from Contracts with Customers (effective 1 January 2018)<BR>
- IFRS 16 - Leases (effective 1 January 2019)<BR>
<BR>
The impact of the application of these revised standards and interpretations in future financial reporting periods on the group's reported<BR>
results, financial position and cash flows is still being assessed.<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 group's accounting<BR>
policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated annual financial statements for<BR>
the year ended 28 February 2015.<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 operating<BR>
decision-maker (CODM). The CODM was identified as the chief executive officer for the purpose of IFRS 8 - Operating Segments, supported by the<BR>
group management committee (Manco). The group's internal reporting structure is reviewed in order to assess performance and allocated resources.<BR>
The group is organised into three reportable segments, namely:<BR>
<BR>
- PSG Wealth<BR>
- PSG Asset Management<BR>
- PSG Insure<BR>
<BR>
Corporate support costs refer to a variety of services and functions that are performed centrally for the individual business units within each<BR>
business segment and also include the group's executive office. Besides the traditional accounting and secretarial services provided to group<BR>
divisions and subsidiaries, the corporate office also provides legal, risk, information technology (IT), marketing, human resources (HR),<BR>
payroll, internal audit and corporate finance services. The strategic elements of IT, in terms of both services and infrastructure, are also<BR>
centralised in the corporate office. The corporate costs are allocated to the three reportable segments.<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 Employee <BR>
Benefits - is designed to meet the needs of individuals, families and businesses. Through our highly skilled wealth managers, PSG Wealth <BR>
offers a wide range of personalised services (including portfolio management, stockbroking, local and offshore investments, estate planning, <BR>
financial planning, local and offshore fiduciary services, multi-managed solutions and retirement products). Our Wealth offices are fully <BR>
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 a simple, but<BR>
comprehensive range of local and global investment products. Our products include both local and international unit trust funds.<BR>
<BR>
PSG Insure, through our registered insurance brokers and PSG's short-term insurance company Western National Insurance Company Limited, offers <BR>
a full range of tailor-made short-term insurance products and services from personal (home, car and household insurance) to commercial (business<BR>
and agri-insurance) requirements. To harness the insurance solutions available to our customers effectively, our expert insurance specialists,<BR>
through our strict due diligence process, will simplify the selection process for the most appropriate solution for our clients. In addition to<BR>
the intermediary services we offer, PSG Short-Term Administration supports clients through the claim process, administrative issues and general<BR>
policy maintenance, including an annual reappraisal of their portfolio.<BR>
<BR>
The CODM considers the performance of reportable segments based on total income as a measure of growth and headline earnings as a measure of<BR>
profitability. The segment information provided to the CODM for the reportable segments for the year ended 29 February 2016 is set out below:<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 29 February 2016 (Reviewed)<BR>
Headline earnings 169 059 82 707 40 536 292 302<BR>
- recurring 285 505 82 707 40 536 408 748<BR>
- non-recurring (116 446) - - (116 446)<BR>
<BR>
For the year ended 28 February 2015 (Audited)<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>
6.3 Income per reportable segment<BR>
<BR>
Asset <BR>
Wealth Management Insure Total<BR>
Total income R000 R000 R000 R000<BR>
<BR>
For the year ended 29 February 2016 (Reviewed)<BR>
Total segment income 2 595 694 635 148 1 195 809 4 426 651<BR>
Intersegment income (622 393) (265 799) (36 783) (924 975)<BR>
Income from external customers 1 973 301 369 349 1 159 026 3 501 676<BR>
<BR>
For the year ended 28 February 2015 (Audited)<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>
Other information provided to the CODM is measured in a manner consistent with that of the financial statements.<BR>
<BR>
6.4 Divisional income statements<BR>
<BR>
The profit or loss information follows a similar format to the consolidated income statement.<BR>
<BR>
Asset <BR>
Wealth Management Insure Total<BR>
R000 R000 R000 R000<BR>
<BR>
For the year ended 29 February 2016 (Reviewed)<BR>
Total income 1 973 301 369 349 1 159 026 3 501 676<BR>
Total expenses (1 450 023) (257 299) (1 073 578) (2 780 900)<BR>
523 278 112 050 85 448 720 776<BR>
Total profit from associated companies and joint ventures - - 2 767 2 767<BR>
Profit before finance cost and taxation 523 278 112 050 88 215 723 543<BR>
Finance costs* (88 278) (359) (3 244) (91 881)<BR>
Profit before taxation 435 000 111 691 84 971 631 662<BR>
Taxation (258 611) (29 131) (22 096) (309 838)<BR>
Profit for the year 176 389 82 560 62 875 321 824<BR>
<BR>
Attributable to:<BR>
Owners of the parent 169 488 82 560 40 876 292 924<BR>
Non-controlling interest 6 901 - 21 999 28 900<BR>
176 389 82 560 62 875 321 824<BR>
<BR>
Headline earnings 169 059 82 707 40 536 292 302<BR>
Recurring headline earnings 285 505 82 707 40 536 408 748<BR>
<BR>
For the year ended 28 February 2015 (Audited)<BR>
Total income 1 684 614 367 764 962 222 3 014 600<BR>
Total expenses (1 219 987) (257 541) (893 089) (2 370 617)<BR>
464 627 110 223 69 133 643 983<BR>
Total profit from associated companies and joint ventures - - 954 954<BR>
Profit before finance cost and taxation 464 627 110 223 70 087 644 937<BR>
Finance costs* (115 606) (396) (3 903) (119 905)<BR>
Profit before taxation 349 021 109 827 66 184 525 032<BR>
Taxation (115 019) (27 905) (20 310) (163 234)<BR>
Profit for the year 234 002 81 922 45 874 361 798<BR>
<BR>
Attributable to:<BR>
Owners of the parent 228 177 81 922 30 302 340 401<BR>
Non-controlling interest 5 825 - 15 572 21 397<BR>
234 002 81 922 45 874 361 798<BR>
<BR>
Headline earnings 227 478 81 915 29 868 339 261<BR>
Recurring headline earnings 228 320 82 336 30 519 341 175<BR>
<BR>
* Finance cost in the PSG Wealth division consists mainly of the finance charge on the held-to-maturity policyholder financial assets <BR>
(linked investment business). The finance cost of R88.3 million (2015: R115.6 million) consists of R49.9 million (2015: R75.8 million)<BR>
on the client-related linked investment business, R29.2 million (2015: R25.8 million) on the loan facilities provided to clients on <BR>
their share portfolios at PSG Securities (secured by the underlying JSE Top 100 equity securities held in excess of four times the <BR>
value of the loan facilities) on which PSG Wealth receives a margin, with the remaining portion of the finance charge on the CFD margin <BR>
and the bank overdrafts.<BR>
<BR>
6.5 Statement of financial position (client vs own)<BR>
<BR>
In order to evaluate the consolidated financial position of the group, the CODM segregates the statement of financial position of the group <BR>
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, the broker and<BR>
clearing accounts, and the settlement control accounts of the stockbroking business, the collective investment schemes consolidated under <BR>
IFRS 10 - Consolidated Financial Statements and corresponding third-party liabilities, the short-term claim control accounts and related <BR>
bank accounts, as well as the contracts for difference assets and related liabilities.<BR>
<BR>
Reviewed - as at 29 February 2016<BR>
Client-<BR>
Own related<BR>
Total balances balances<BR>
R000 R000 R000<BR>
ASSETS<BR>
Equity securities 1 747 701 6 023 1 741 678<BR>
Debt securities 2 588 565 100 789 2 487 776<BR>
Unit-linked investments 29 695 283 443 737 29 251 546<BR>
Investment in investment contracts 116 477 - 116 477<BR>
Receivables including insurance receivables 2 812 759 225 780 2 586 979<BR>
Derivative financial instruments 17 864 - 17 864<BR>
Cash and cash equivalents (including money market investments) 1 395 952 1 115 118 280 834<BR>
Other assets* 1 309 065 1 309 065 -<BR>
Total assets 39 683 666 3 200 512 36 483 154<BR>
<BR>
EQUITY<BR>
Equity attributable to owners of the parent 1 688 446 1 688 446 -<BR>
Non-controlling interest 157 212 157 212 -<BR>
Total equity 1 845 658 1 845 658 -<BR>
<BR>
LIABILITIES<BR>
Borrowings 274 114 10 674 263 440<BR>
Investment contracts 19 836 250 - 19 836 250<BR>
Third-party liabilities arising on consolidation of mutual funds 14 023 726 - 14 023 726<BR>
Derivative financial instruments 17 910 - 17 910<BR>
Trade and other payables 2 894 051 552 223 2 341 828<BR>
Other liabilities** 791 957 791 957 -<BR>
Total liabilities 37 838 008 1 354 854 36 483 154<BR>
<BR>
Total equity and liabilities 39 683 666 3 200 512 36 483 154<BR>
<BR>
Audited - as at 28 February 2015<BR>
Client-<BR>
Own related<BR>
Total balances balances<BR>
R000 R000 R000<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>
* Other assets consist of property and equipment, investment property, intangible assets, investment in associated companies, investment in<BR>
joint ventures, current and deferred income tax assets, loans and advances, reinsurance assets, deferred acquisition costs and non-current <BR>
assets held for sale.<BR>
<BR>
** Other liabilities consist of deferred reinsurance acquisition revenue, current and deferred income tax liabilities, insurance contracts <BR>
and non-current liabilities held for sale.<BR>
<BR>
6.6 Income statement (client vs own)<BR>
<BR>
In order to evaluate the consolidated income statement of the group, the CODM segregates the income statement by eliminating the impact of <BR>
the linked investment policies issued and the consolidation of the collective investment schemes from the core 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 the value of <BR>
policy benefits is directly linked to the fair value of the supporting assets), and as such does not expose the group to the market risk <BR>
of fair value adjustments on the financial asset as this risk is assumed by the policyholder.<BR>
<BR>
The group consolidates collective investment schemes in terms of IFRS 10 - Consolidated Financial Statements over which the group has <BR>
control. The consolidation of these funds do not impact total earnings, comprehensive income, shareholders' funds or the net asset value <BR>
of the group; however, it requires the group to recognise the income statement impact as part of that of the group.<BR>
<BR>
Reviewed - Year ended 29 February 2016<BR>
Linked<BR>
investment<BR>
Core business<BR>
Total business and other<BR>
R000 R000 R000<BR>
<BR>
Commission and other fee income 2 461 393 2 438 177 23 216<BR>
Investment income 612 988 190 893 422 095<BR>
Net fair value gains and losses on financial instruments 1 104 789 12 848 1 091 941<BR>
Fair value adjustment to investment contract liabilities (1 389 130) - (1 389 130)<BR>
Other* 711 636 704 396 7 240<BR>
Total income 3 501 676 3 346 314 155 362<BR>
<BR>
Insurance claims and loss adjustment expenses (670 197) (668 808) (1 389)<BR>
Fair value adjustment to third-party liabilities (67 080) - (67 080)<BR>
Other** (2 043 623) (2 028 274) (15 349)<BR>
Total expenses (2 780 900) (2 697 082) (83 818)<BR>
<BR>
Total profit from associated companies and joint ventures 2 767 2 767 -<BR>
Profit before finance cost and taxation 723 543 651 999 71 544<BR>
Finance costs (91 881) (41 939) (49 942)<BR>
Profit before taxation 631 662 610 060 21 602<BR>
Taxation (309 838) (288 236) (21 602)<BR>
Profit for the year 321 824 321 824 -<BR>
<BR>
Attributable to:<BR>
Owners of the parent 292 924 292 924 -<BR>
Non-controlling interest 28 900 28 900 -<BR>
321 824 321 824 -<BR>
<BR>
Audited - Year ended 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 cost 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>
* 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 and <BR>
amortisation, employee benefit expenses, marketing, administration and other expenses.<BR>
<BR>
*** Finance cost on core business decreased from 2015 largely due to the increase in the loan facilities provided to clients<BR>
in their share portfolios at PSG Securities (secured by the underlying JSE Top 100 equity securities held in excess of four times <BR>
the value of the loan facilities) which was countered by the decrease in finance cost paid to external debt (excluding the finance <BR>
lease) as these were repaid in full during the 2015 financial year.<BR>
<BR>
<BR>
6.7 Investment contracts are represented by the following financial assets:<BR>
<BR>
Reviewed Audited<BR>
as at as at<BR>
29 Feb 16 28 Feb 15<BR>
R000 R000<BR>
<BR>
Equity securities 1 661 713 955 147<BR>
Debt securities 783 225 800 198<BR>
Unit-linked investments 17 159 971 12 102 096<BR>
Investments in investment contracts 116 477 338 208<BR>
Cash and cash equivalents 114 864 26 954<BR>
19 836 250 4 222 603<BR>
<BR>
7. Receivables including insurance receivables and trade and other payables<BR>
<BR>
Included under receivables are broker and clearing accounts at our stockbroking business of which R2 513.5 million <BR>
(2015: R1 871.9 million) represents amounts owing by the JSE for trades conducted during the last few days before the end <BR>
of the period. 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 the 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 years ended 29 February 2016 and 28 February 2015<BR>
<BR>
Acquisition of a further interest in PSG Namibia Proprietary Limited<BR>
With effect from 1 March 2015, PSG Konsult Limited (through its subsidiary PSG Distribution Holdings Proprietary Limited) acquired an additional<BR>
4% stake from a minority shareholder. The group now holds 58% of the issued share capital of PSG Namibia Proprietary Limited. This transaction<BR>
follows the acquisition of an additional 3% interest on 1 March 2014.<BR>
<BR>
9. Non-current assets (or disposal groups) held for sale<BR>
<BR>
For the year ended 29 February 2016 and 28 February 2015<BR>
<BR>
PSG Konsult Limited (through its subsidiary Western Group Holdings Limited) sold its 23% interest in Xinergistix Limited on 1 November 2015 <BR>
for R38.9 million. The transaction is subject to suspensive conditions and was treated as a non-current asset held for sale on 29 February 2016.<BR>
<BR>
PSG Konsult Limited sold 100% of its shareholding in PSG Academy Proprietary Limited, the group's private higher education institute, to<BR>
Moonstone Information Refinery Proprietary Limited and its health insurance administration business (through its subsidiary Nhluvuko Risk<BR>
Administration Proprietary Limited) to African Unity Health Proprietary Limited.<BR>
<BR>
The effective date for both of these transactions was 1 March 2015, subject to suspensive conditions, and was treated as non-current assets and<BR>
liabilities held for sale on 28 February 2015.<BR>
<BR>
10. Acquisition of subsidiaries<BR>
<BR>
For the year ended 29 February 2016<BR>
<BR>
i) PSG Wealth Limited (Mauritius) (previously DMH Associates Limited (Mauritius))<BR>
PSG Konsult Limited, through its wholly-owned subsidiary PSG Konsult (Mauritius) Limited, acquired a 70% interest in DMH Holding Limited, a<BR>
holding company incorporated in Mauritius. DMH Holding Limited has a wholly-owned subsidiary, PSG Wealth Limited (Mauritius) (previously DMH<BR>
Associates Limited (Mauritius)), a financial services provider in Mauritius. The effective date of the transaction was 1 November 2015 <BR>
following the fulfilment of suspensive conditions.<BR>
<BR>
ii) Acquisition of collective investment schemes<BR>
<BR>
The group obtained control of the following collective investment schemes during the second half of the 2016 financial year: PSG Wealth <BR>
Enhanced Interest Fund, PSG Wealth Creator Fund of Funds and the PSG Wealth Moderate Fund of Funds. These funds were consolidated <BR>
in accordance with IFRS 10 - Consolidated Financial Statements and are collective investment schemes managed by PSG Asset Management.<BR>
<BR>
PSG Wealth PSG Wealth PSG Wealth<BR>
Enhanced Creator Moderate<BR>
Interest Fund of Fund of<BR>
Fund consolidated Fund Funds Funds<BR>
<BR>
% Interest in fund on effective date 31% 31% 30%<BR>
<BR>
1 September 29 February 29 February<BR>
Date of acquisition 2015 2016 2016<BR>
<BR>
Group Group Group<BR>
Details of the net assets acquired are as follows: R000 R000 R000<BR>
<BR>
Debt securities 610 369 - -<BR>
Unit-linked investments 419 456 3 361 218 14 168 287<BR>
Receivables including insurance receivables 13 181 715 -<BR>
Cash and cash equivalents (including money market funds) 43 345 20 529 32 415<BR>
Third-party liabilities arising on consolidation of mutual funds (748 930) (2 344 629) (9 947 685)<BR>
Trade and other payables (544) - -<BR>
Net asset value 336 877 1 037 833 4 253 017<BR>
Fair value of interest held before the business combination (336 877) (1 037 833) (4 253 017)<BR>
Total consideration paid - - -<BR>
<BR>
11. Other acquisitions<BR>
<BR>
For the year ended 28 February 2015<BR>
<BR>
Standardising of revenue-sharing model<BR>
Effective 1 March 2014, the group (through its subsidiary PSG Wealth Financial Planning Proprietary Limited) concluded an asset-for-share<BR>
transaction (utilising section 42 of the Income Tax Act) with a large number of its advisers. The purpose of this transaction was to standardise<BR>
the revenue-sharing arrangements between the advisers and PSG Konsult. This provided the opportunity for the advisers to become shareholders in<BR>
the business and be part of our loyal 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 remaining R12.5 million paid <BR>
in cash on the effective date. The transaction did not qualify for accounting in terms of IFRS 3R - Business Combinations as the assets acquired<BR>
(the right to an increased share in the income stream of the adviser) did not constitute a business acquired.<BR>
<BR>
This transaction contributed R10.1 million to our headline earnings during the 2015 financial year.<BR>
<BR>
For the year ended 29 February 2016<BR>
<BR>
Standardising of revenue-sharing model<BR>
During the year under review, the group, through its subsidiaries PSG Wealth Financial Planning Proprietary Limited and PSG Corporate Financial<BR>
Planning Proprietary Limited, concluded further revenue-sharing arrangements (on the same basis as in the 2015 financial year) with a number of<BR>
its advisers for a cash consideration of R17.6 million.<BR>
<BR>
These transactions contributed R1.5 million to our headline earnings during the 2016 financial year.<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, cash flow risk and<BR>
fair value interest rate risks), credit risk and liquidity risk. Insurance activities expose the group to insurance risk (including pricing risk,<BR>
reserving risk, underwriting risk and reinsurance risk). The group is also exposed 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 the annual financial<BR>
statements and should be read in conjunction with the group's annual financial statements as at 29 February 2016.<BR>
<BR>
There have been no changes in the group's financial risk management objectives and policies since the previous financial year-end.<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 instruments from fluctuations<BR>
in interest rates, equity prices and foreign currency exchange rates.<BR>
<BR>
A portion of the policyholders' and shareholders' investments are valued at fair value and are therefore susceptible to market fluctuations.<BR>
<BR>
With regard to the subsidiary, PSG Life Limited, this company only invests assets into portfolios that are exposed to market price risk that<BR>
matches linked policies to policyholders (where the value of policy benefits is directly linked to the fair value of the supporting assets), <BR>
and as such does not expose the business to the market risk of fair value adjustments on the financial asset as this risk is assumed by the<BR>
policyholder. Fees charged on this business are determined as a percentage of the fair value of the underlying assets held in the linked funds<BR>
which are subject to equity and interest rate risk. As a result, the management fees fluctuate, but cannot be less than nil.<BR>
<BR>
Included in the equity securities of R1 747.7 million (2015: R1 025.5 million) are quoted equity securities of R1 747.5 million <BR>
(2015: R1 024.7 million), of which R1 661.7 million (2015: R955.1 million) relates to investments in linked investment contracts. The price <BR>
risk of these instruments is carried by the policyholders of the linked investment contracts.<BR>
<BR>
Debt securities linked to policyholder investments amounted to R783.2 million (2015: R800.2 million) and do not expose the group to interest rate<BR>
risk; cash and cash equivalents linked to policyholder investments amounted to R114.9 million (2015: R27.0 million) and do not expose the group<BR>
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. The different levels<BR>
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 (that is, as prices) or<BR>
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 level 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 no significant changes<BR>
in the valuation techniques and assumptions applied since 28 February 2015.<BR>
<BR>
Valuation techniques and main assumptions used in determining the fair value of financial assets and liabilities classified within level 2 can be<BR>
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>
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<BR>
fund manager publicly available<BR>
<BR>
Investment in investment contracts Prices are obtained from the insurer of Not applicable - prices provided <BR>
the particular investment contract by registered long-term insurers <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>
Third-party financial liabilities Quoted put (exit) price provided by Not applicable - prices are <BR>
arising on the consolidation of the fund manager publicly available <BR>
mutual funds <BR>
<BR>
The fair value of financial assets and liabilities measured at fair value in the statement of financial position can be summarised as follows:<BR>
<BR>
Level 1 Level 2 Level 3 Total<BR>
Reviewed R000 R000 R000 R000<BR>
<BR>
Financial assets<BR>
At 29 February 2016<BR>
Financial assets at fair value through profit or loss<BR>
Derivative financial assets - 17 864 - 17 864<BR>
Equity securities 1 747 453 8 - 1 747 461<BR>
Debt securities 846 266 1 420 858 - 2 267 124<BR>
Unit-linked investments - 28 386 299 1 308 984 29 695 283<BR>
Investment in investment contracts - 73 815 - 73 815<BR>
Available-for-sale<BR>
Equity securities - - 240 240<BR>
2 593 719 29 898 844 1 309 224 33 801 787<BR>
<BR>
Financial liabilities<BR>
At 29 February 2016<BR>
Financial liabilities at fair value through profit or loss<BR>
Derivative financial liabilities - 17 910 - 17 910<BR>
Investment contracts - 18 173 163 1 298 984 19 472 147<BR>
Trade and other payables - - 5 297 5 297<BR>
Third-party liabilities arising on consolidation of mutual funds - 14 023 726 - 14 023 726<BR>
- 32 214 799 1 304 281 33 519 080<BR>
<BR>
<BR>
Level 1 Level 2 Level 3 Total<BR>
Audited R000 R000 R000 R000<BR>
<BR>
Financial assets<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>
<BR>
Financial liabilities<BR>
At 28 February 2015<BR>
Financial liabilities at fair value through profit 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 mutual funds - 699 202 - 699 202<BR>
- 13 012 656 1 120 109 14 132 765<BR>
<BR>
The following tables presents the changes in level 3 financial instruments during the reporting periods under review:<BR>
<BR>
Reviewed Audited<BR>
29 Feb 16 28 Feb 15<BR>
R000 R000<BR>
<BR>
Assets<BR>
Carrying value at 1 March 1 117 501 2 488 657<BR>
Additions 392 791 3 294 440<BR>
Disposals (761 413) (4 762 552)<BR>
Gains recognised in profit and loss 560 345 96 956<BR>
Carrying value at 29/28 February 1 309 224 1 117 501<BR>
<BR>
Liabilities<BR>
Carrying value at 1 March 1 120 109 2 498 451<BR>
Additions 406 434 3 293 979<BR>
Disposals (784 529) (4 769 442)<BR>
Losses recognised in profit and loss 562 267 97 121<BR>
Carrying value at 29/28 February 1 304 281 1 120 109<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 units and debentures held<BR>
in hedge funds and are priced monthly. The prices are obtained from the asset managers of the particular hedge funds. These are held to match<BR>
investment contract liabilities, and as such any change in measurement would result in a similar adjustment to investment contract liabilities.<BR>
Therefore, the group's overall profit or loss is not 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 determine the fair<BR>
values takes into account the probability (at each reporting period) that the contracted party will achieve the profit guarantee as stipulated in<BR>
the business agreement.<BR>
<BR>
The table below summarises the carrying amounts and fair values of financial instruments not presented on the statement of financial position at<BR>
fair value, for which their carrying values do not approximate their fair values:<BR>
<BR>
Reviewed Audited<BR>
29 Feb 16 28 Feb 15<BR>
R000 R000<BR>
<BR>
Debt securities - held-to-maturity<BR>
- Carrying value 321 441 721 341<BR>
- Fair value 333 175 736 883<BR>
<BR>
Investment in investment contracts<BR>
- Carrying value 42 662 111 904<BR>
- Fair value 42 707 112 736<BR>
<BR>
Total<BR>
- Carrying value 364 103 833 245<BR>
- Fair value 375 882 849 619<BR>
<BR>
The fair value of the financial assets in the table above is categorised in terms of level 2 (2016: R265.3 million; 2015: R815.1 million) and<BR>
level 3 (2016: R110.6 million; 2015: R34.5 million) respectively.<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 28 February 2015 took place<BR>
during the financial year.<BR>
<BR>
14. Capital commitments and contingencies<BR>
<BR>
Reviewed Audited<BR>
as at as at<BR>
29 Feb 16 28 Feb 15<BR>
R000 R000<BR>
<BR>
Operating lease commitments 149 620 82 843<BR>
Capital commitments 1 200 16 971<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 of approval of the <BR>
condensed consolidated financial statements other than the following:<BR>
- Shareholders are referred to PSG Konsult's announcement made on 11 December 2015 regarding a potential tax matter at PSG Life Limited. <BR>
The board subsequently decided to settle this legacy matter, which dates back to 2009, for an amount of R115 million. This amount and the <BR>
related legal costs incurred were fully provided for in the year-end results and have been treated as non-recurring headline earnings.<BR>
- The group concluded further revenue-sharing arrangements (on the same basis as in the 2015 and 2016 financial year) with a number of its <BR>
advisers during March 2016 (refer to the commentary for the details of these 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>
4th Floor, The Edge, 3 Howick Close, 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<BR>
<BR>
Auditor<BR>
PricewaterhouseCoopers Inc.<BR>
Cape Town<BR>
<BR>
psg.co.za<BR>
<BR>
<BR>
Date: 14/04/2016 01:00:00 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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