PSG KONSULT LIMITED - Unaudited Results For The Six Months Ended 31 August 2018
11 October, 2018 - Posted at - 10:56:00
KST 201810110022A<BR>
Unaudited Results For The Six Months Ended 31 August 2018<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>
UNAUDITED RESULTS FOR THE SIX MONTHS ENDED 31 AUGUST 2018<BR>
<BR>
SALIENT FEATURES<BR>
<BR>
Recurring headline earnings per share up 18% to 21.5 cents<BR>
Gross written premium (1) up 25% to R2 012m<BR>
Number of advisers up 14% to 862<BR>
Total assets under management up 19% to R230bn<BR>
Dividend per share up 23% to 7.0 cents<BR>
Total assets under administration (2) up 7% to R426bn<BR>
<BR>
(1) Includes gross written premiums on policies administered by the Insure distribution advisers, which are placed with third-party insurers. <BR>
The group earns commission and administration fees on this. It excludes the short-term administration platform gross written premium.<BR>
(2) Includes assets administered by PSG Asset Management of R119bn.<BR>
<BR>
COMMENTARY<BR>
<BR>
Overview<BR>
<BR>
PSG Konsult delivered a commendable 18% growth in recurring headline earnings per share and a return on equity of 22%. <BR>
<BR>
The continued upward trajectory of our key operating and financial metrics demonstrates the resilience of our business model and ability to <BR>
gain market share, even in periods during which we experience economic headwinds. Total assets under management increased to R230 billion, <BR>
comprising assets managed by PSG Wealth of R182 billion and PSG Asset Management of R48 billion, while PSG Insure's gross written premium <BR>
increased by 25% to R2 billion. Performance fees earned constituted 4.6% of headline earnings in comparison to 4.4% in the comparative period.<BR>
<BR>
PSG Wealth<BR>
<BR>
PSG Wealth achieved recurring headline earnings growth of 7%. We are satisfied with this result in the context of the prevailing investment <BR>
market conditions. Management and other fees increased by 10% as the business continues to focus on recurring income and reduce its reliance <BR>
on cyclical transactional brokerage fees, which decreased by 15% during the period under review due to lower transactional volumes. We continue<BR>
to enhance our information technology (IT) systems and develop both the adviser and client online platforms, and all related costs continue to<BR>
be fully expensed. Clients' assets managed by our Wealth advisers increased by 12% to R182.1 billion during the period under review, which <BR>
included R7.0 billion of positive net inflows.<BR>
<BR>
We remain confident about the fundamentals and prospects of this division. We believe that our advisers and clients will gain, over the long <BR>
term, from our client-centric digital projects. We are particularly proud of the division's formidable financial adviser network, which <BR>
consists of 546 advisers as at 31 August 2018. The experience and stature of the advisers that joined the firm during the period under review<BR>
continue to add credibility to our growing brand equity. We remain focused on increasing client engagement and growing our market share.<BR>
<BR>
PSG Asset Management<BR>
<BR>
PSG Asset Management's recurring headline earnings grew by 53%. The strong results achieved by this division is testimony to the team's <BR>
excellent long-term track record of delivering top-quartile risk-adjusted investment returns for our clients. The team's ability to consistently<BR>
generate alpha for clients across all asset classes over the appropriate investment horizon remained intact during difficult market conditions.<BR>
Client assets under management increased by 13% to R48.1 billion during the six-month period. This included R4.1 billion of positive net client<BR>
inflows, predominately into our higher-margin funds, with the bulk coming from our retail-orientated target market. We continue to add <BR>
high-quality annuity earnings from our growing retail client base.<BR>
<BR>
PSG Insure<BR>
<BR>
PSG Insure achieved recurring headline earnings growth of 11%. The group is pleased with this achievement, which has been driven by improved <BR>
underwriting results. This division is in an early growth phase and continues to make inroads into the highly competitive short-term insurance <BR>
market through organic growth and select acquisitions. It achieved gross written premium growth of 25% as we continue to focus our efforts on <BR>
growing the commercial lines side of the business, which requires specialist adviser expertise. No significant catastrophe or other related <BR>
events occurred during this period. When combined with our quality underwriting practices, this allowed us to achieve an improved net underwriting <BR>
margin of 10.5% compared to the 7.4% we achieved in the prior period. The insurance advisers increased by 29% to 316 during the six-month <BR>
period, following the acquisition of the commercial and industrial insurance brokerage business of Absa Insurance and Financial Advisers (AIFA)<BR>
and continue to increase our market share on the commercial lines side.<BR>
<BR>
PSG Konsult's key financial performance indicators for the six months ended 31 August 2018 are shown below:<BR>
<BR>
31 Aug 18 Change 31 Aug 17<BR>
R000 % R000<BR>
<BR>
Core income 2 277 976 10 2 062 016<BR>
<BR>
Headline and recurring headline earnings 283 146 18 239 275<BR>
Non-headline items (1 297) 91<BR>
Earnings attributable to ordinary shareholders 281 849 18 239 366<BR>
<BR>
Divisional recurring headline earnings<BR>
PSG Wealth 159 787 7 149 923<BR>
PSG Asset Management 87 212 53 56 829<BR>
PSG Insure 36 147 11 32 523<BR>
283 146 18 239 275<BR>
<BR>
Weighted average number of shares in issue (net of treasury shares) (millions) 1 318.0 - 1 314.5<BR>
<BR>
Earnings per share (basic) (cents)<BR>
- Headline and recurring headline 21.5 18 18.2<BR>
- Attributable 21.4 17 18.2<BR>
- Headline (excluding intangible amortisation cost) 23.3 17 19.9<BR>
<BR>
Dividend per share (cents) 7.0 23 5.7<BR>
<BR>
Return on equity (ROE) (%) 21.9 21.4<BR>
<BR>
Strategy<BR>
<BR>
PSG Wealth's overall strategy offers an innovative and holistic end-to-end client proposition. We continue to invest in people (including the <BR>
recruitment of experienced specialists) and in technology with the aim of enhancing user functionality to improve our client experience and <BR>
product offering. Advisers play a key role in providing us with client feedback in order to enhance our platform and product capabilities.<BR>
Management is proud of the experience and stature of the advisers in the business. PSG Wealth continues to invest in enhancing the strength and<BR>
depth of our technology capabilities and in-house investment research team. This fully-fledged team has both fund and security investment <BR>
research analysis capabilities. The focus continues to be on digital marketing and initiatives to best determine client needs in this regard. <BR>
Our Wealth business is therefore well placed to meet all the investment needs of our clients. We nevertheless consistently strive to improve <BR>
both our client and service offerings.<BR>
<BR>
PSG Asset Management's strategy consists of three parts, namely investment excellence, operational efficiency, and effective sales and <BR>
marketing initiatives. Generating the best long-term, risk-adjusted returns for investors is the division's primary focus. To this end, the <BR>
division will continue to prioritise the investment team's performance while managing operational risks and processes. Increasing brand <BR>
awareness, particularly in the retail investor market, continues to be a key focus area for the marketing team, which allows the division to<BR>
benefit from a growing investor base.<BR>
<BR>
PSG Insure provides simple and cost-effective short-term insurance solutions to clients, protecting them from unforeseen events. Building <BR>
critical expertise across underwriting, administration and adviser teams underpins the focus on providing value-added products that meet and <BR>
exceed 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 our top-calibre advisers to focus on client relationships, especially on the <BR>
commercial lines side of the business. The entrepreneurial best-of-breed partnership model in place with our advisers allows our advisers to <BR>
operate their own businesses independently under the PSG brand and benefit from the central services provided. Key central services include <BR>
compliance, finance, human resources (HR), IT, marketing and risk management.<BR>
<BR>
Building a cost-efficient and scalable business is a key priority for the board. As such, management pays careful attention to the group's cost <BR>
structure as each division expands. The management team is committed to continuously invest in technology as a key enabler to achieve <BR>
efficiency, automation and, ultimately, our growth objectives.<BR>
<BR>
Corporate activity<BR>
<BR>
During the period under review, the company entered into negotiations regarding a potential acquisition. If it had been successfully concluded,<BR>
based on the indicative transaction value, it would have qualified as a Category 2 transaction under the JSE Listings Requirements. <BR>
Shareholders were advised, on 7 September 2018, that following a detailed due diligence investigation of this opportunity and lengthy <BR>
negotiations, the parties were not able to agree on terms which would, in the view of the board, be in the long-term best interests of <BR>
PSG Konsult's various stakeholders.<BR>
<BR>
PSG Konsult's focus remains on organic growth, although it will consider acquisitions that meet its investment criteria, which require, inter<BR>
alia, acceptable pricing, a compelling strategic rationale, clearly definable synergies and ease of integration. <BR>
<BR>
In line with our organic growth strategy, we concluded a few smaller earnings-accretive adviser acquisition transactions. The transactions were<BR>
funded from existing cash resources and are aligned with our aim of identifying opportunities that will either expand our adviser footprint or<BR>
enhance our overall client service offering. The transactions were seamlessly integrated into PSG Konsult's existing business operations and <BR>
management believes these will contribute positively to the long-term organic growth of the firm.<BR>
<BR>
PSG Insure<BR>
<BR>
The acquisition of AIFA's commercial and industrial insurance brokerage business was completed effective 1 June 2018. The acquired business is <BR>
made up of 82 advisers and in excess of 31 000 clients, which was integrated into the group's distribution network of PSG Insure advisers. This <BR>
transaction enhances PSG Insure's footprint across South Africa and is already contributing to the group's profitability. All costs incurred in<BR>
setting up the required office infrastructure to implement this transaction have been fully expensed. <BR>
<BR>
The effective date of the acquisition of the remainder of the personal lines short-term insurance face-to-face advisory insurance brokerage <BR>
business from AIFA is still expected to be concluded during the latter part of the 2019 financial year.<BR>
<BR>
The Western Group's short- and long-term insurance licences in Botswana were approved during July 2018. The business is expected to become <BR>
profitable in the medium term.<BR>
<BR>
Capital management<BR>
<BR>
PSG Konsult is strongly capitalised and complies with the more stringent capital requirements of Solvency Assessment and Management (SAM), which <BR>
became effective 1 July 2018. On 23 July 2018, our strong financial position was again affirmed in the long- and short-term investment grade <BR>
national scale ratings assigned to PSG Konsult by rating agency Global Credit Rating Co. (GCR) of A-(ZA) and A1-(ZA) respectively, with a stable <BR>
outlook. Other than the R100 million notes currently issued under the Domestic Medium Term Note (DMTN) programme, the group has no material <BR>
interest-bearing debt and always maintains solid capital buffers. Our strong cash flow and low debt position allow us to use several levers to<BR>
optimise risk-adjusted returns for our shareholders.<BR>
<BR>
Shareholders<BR>
<BR>
The company's demonstrable track record on executing and delivering on our strategic goals has enabled us to further expand our institutional <BR>
shareholder base.<BR>
<BR>
People<BR>
<BR>
PSG Konsult had 239 offices and 2 734 employees as at 31 August 2018, which included 862 wealth and insure advisers. In addition, we also have<BR>
418 professional associates (accountants and attorneys). During the six month period under review, the number of PSG advisers increased by 78 <BR>
through a combination of organic growth and selected acquisitions, including the AIFA acquisition by PSG Insure. We believe strongly in building<BR>
our own future talent and are confident that the investment in our people will allow us to continue to prosper.<BR>
<BR>
Regulatory landscape and risk managment<BR>
<BR>
PSG Konsult, which has 24 regulatory licences (15 in South Africa and 9 in foreign jurisdictions), continues to foster good relationships with<BR>
the regulators in the markets in which it operates.<BR>
<BR>
Awards and industry accolades<BR>
<BR>
The group is proud of the following milestones, achievements and industry awards:<BR>
<BR>
PSG Wealth<BR>
<BR>
- Ranked third overall in the 2018 Intellidex Wealth Manager of the Year competition. The division was further awarded first place in the <BR>
successful entrepreneur archetype, and second place in the international wealthy family archetype.<BR>
- Ranked among the top five asset managers in the Morningstar South African Ratings Analysis and was the top-ranked multi-manager in the <BR>
June 2018 quarterly survey.<BR>
<BR>
PSG Asset Management<BR>
<BR>
- Runner-up in the 2018 Raging Bull awards for South African Management Company of the Year.<BR>
- Top two manager in the Plexcrown Survey and among the top five in the Morningstar South African Ratings Analysis.<BR>
<BR>
PSG Insure<BR>
<BR>
- National Broker of the Year for Agricultural Business and Agricultural Award for Performance Excellence (Asset and Crop Combined) at the <BR>
2018 Santam National Broker Awards.<BR>
<BR>
Marketing<BR>
<BR>
Marketing initiatives are important to the group's goal of becoming a leader in the financial services industry.<BR>
<BR>
During the period under review, the specialist marketing team embarked on its strategy of cost-efficient brand building through online <BR>
advertising and search campaigns. This was supported by increased activity on select social media platforms. The combined result has meant an<BR>
increase in lead generation, traffic to the website and our social media following.<BR>
<BR>
Enhancing the quality of our media presence through public relations remains a constant focus. Through times of political and economic <BR>
uncertainty we have also continued to focus our efforts on client interaction through tailored events.<BR>
<BR>
PSG has steadily increased both the quality and quantity of communications from world-class industry research for the savvy client to <BR>
investor education for young savers. Clients can now choose which communications they wish to receive through the introduction of a <BR>
subscription management tool.<BR>
<BR>
Information technology<BR>
<BR>
As a group we are dedicated to providing outstanding outcomes for our clients. By focusing on simple-to-use, stable, client-centric solutions <BR>
we are committed to delivering a great digital experience.<BR>
<BR>
We continue to explore new and better ways to improve all our services based on objective data and feedback to make it easy for clients to <BR>
access products in a way that best suits them.<BR>
<BR>
Looking forward<BR>
<BR>
We continue to monitor all actions that stem from the current corporate, political and economic climate, and the associated impact on our <BR>
clients and other stakeholders.<BR>
<BR>
The group's aim remains to service existing clients in an integrated manner that is seamless and market leading, as well as to gain new <BR>
clients. Several initiatives are in place to ensure this continues. The group's focus on products, platforms and client service excellence,<BR>
through the quality of its advice process, works. As such, the prospects for continued growth remain compelling.<BR>
<BR>
The cash-generative nature of the business gives PSG Konsult several options for funding business growth initiatives. These are ultimately <BR>
aimed at enhancing our overall client experience.<BR>
<BR>
The group will continue to prioritise organic growth in our current selected markets where we have relatively low, but rapidly expanding, <BR>
market shares. The group's capital position adequately considers our current growth plans.<BR>
<BR>
Events after reporting date<BR>
<BR>
No event material to the understanding of these results has occurred between 31 August 2018 and the date of approval of the condensed <BR>
consolidated interim financial statements.<BR>
<BR>
Dividend<BR>
<BR>
Given our continued confidence in business prospects, the board decided to approve and declare an interim gross dividend of 7.0 cents per <BR>
share from income reserves for the six months ended 31 August 2018 (2017: 5.7 cents per share), which represents a 23% increase from the <BR>
previous interim period. The group's dividend payout ratio remains at the low end of the dividend payout policy range announced at the time of<BR>
listing.<BR>
<BR>
The dividend is subject to a South African dividend withholding tax (DWT) rate of 20%, unless the shareholder is exempt from paying dividends <BR>
tax or is entitled to a reduced rate in terms of the applicable double-tax agreement. Including DWT results in a net dividend of 5.6 cents per <BR>
share. The number of issued ordinary shares is 1 342 242 208 at the date of this declaration. PSG Konsult's income tax reference number is <BR>
9550/644/07/5.<BR>
<BR>
The following are the salient dates in relation to the dividend:<BR>
<BR>
Last day to trade (cum dividend) Tuesday, 30 October 2018<BR>
Trading ex dividend commences Wednesday, 31 October 2018<BR>
Record date Friday, 2 November 2018<BR>
Date of payment Monday, 5 November 2018<BR>
<BR>
Share certificates may not be dematerialised or rematerialised between Wednesday, 31 October 2018, and Friday, 2 November 2018, both days included.<BR>
<BR>
The board would like to extend its gratitude to stakeholders, including shareholders, advisers, clients, business partners, management and <BR>
employees, for their efforts and contributions during the past six months. <BR>
<BR>
On behalf of the board<BR>
<BR>
Willem Theron Francois Gouws<BR>
Chairman Chief executive officer<BR>
<BR>
Tyger Valley<BR>
11 October 2018<BR>
<BR>
<BR>
FINANCIAL RESULTS<BR>
<BR>
Condensed consolidated statement of financial position<BR>
as at 31 August and 28 February 2018<BR>
<BR>
Unaudited Unaudited Audited<BR>
as at as at as at<BR>
31 Aug 18 31 Aug 17 28 Feb 18<BR>
Notes R000 R000 R000<BR>
<BR>
ASSETS<BR>
Intangible assets 1 125 274 1 006 595 1 027 805<BR>
Property and equipment 71 552 48 620 74 286<BR>
Investment in joint ventures 1 238 1 133 1 094<BR>
Deferred income tax assets 86 305 80 435 102 091<BR>
Equity securities 2 520 607 2 104 693 2 321 482<BR>
Debt securities 2 878 932 3 943 613 2 582 815<BR>
Unit-linked investments 48 718 417 40 849 291 42 196 090<BR>
Investment in investment contracts 17 414 16 323 14 798<BR>
Loans and advances 111 404 125 099 134 202<BR>
Derivative financial instruments 17 105 13 005 8 854<BR>
Reinsurance assets 70 241 80 283 80 544<BR>
Deferred acquisition costs 5 671 4 393 4 820<BR>
Receivables including insurance receivables 1 807 997 1 700 815 1 904 775<BR>
Current income tax assets 21 602 19 621 39 089<BR>
Cash and cash equivalents (including money market funds) 1 769 571 1 455 880 1 920 626<BR>
Assets held for sale 8 16 980 - -<BR>
Total assets 59 240 310 51 449 799 52 413 371<BR>
<BR>
EQUITY<BR>
Equity attributable to owners of the parent<BR>
Stated capital 1 908 804 1 903 517 1 908 804<BR>
Treasury shares (177 196) (176 612) (192 247)<BR>
Other reserves (361 177) (383 160) (386 722)<BR>
Retained earnings 1 294 829 968 177 1 175 226<BR>
2 665 260 2 311 922 2 505 061<BR>
Non-controlling interest 256 272 212 875 235 654<BR>
Total equity 2 921 532 2 524 797 2 740 715<BR>
<BR>
LIABILITIES<BR>
Insurance contracts 489 480 524 572 542 709<BR>
Deferred income tax liabilities 30 153 21 196 18 894<BR>
Borrowings 102 960 109 101 103 695<BR>
Derivative financial instruments 20 056 14 854 16 857<BR>
Investment contracts 6 26 219 315 24 767 685 24 278 949<BR>
Third-party liabilities arising on consolidation of mutual funds 27 311 201 21 603 419 22 585 256<BR>
Deferred reinsurance acquisition revenue 4 993 3 663 3 681<BR>
Trade and other payables 2 123 249 1 873 675 2 116 527<BR>
Current income tax liabilities 10 466 6 837 6 088<BR>
Liabilities held for sale 8 6 905 - -<BR>
Total liabilities 56 318 778 48 925 002 49 672 656<BR>
<BR>
Total equity and liabilities 59 240 310 51 449 799 52 413 371<BR>
<BR>
Net asset value per share (cents) 202.0 175.3 190.1<BR>
<BR>
<BR>
Condensed consolidated income statement<BR>
for the six months ended 31 August and the year ended 28 February 2018<BR>
<BR>
Unaudited Unaudited <BR>
Six months Six months Audited<BR>
ended ended Year ended <BR>
31 Aug 18 31 Aug 17 28 Feb 18 <BR>
R000 R000 R000<BR>
<BR>
Gross written premium 604 427 596 679 1 181 333<BR>
Less: Reinsurance written premium (163 945) (146 555) (296 740)<BR>
Net written premium 440 482 450 124 884 593<BR>
Change in unearned premium<BR>
- Gross 32 156 23 324 28 477<BR>
- Reinsurers' share 2 696 (2 617) (4 033)<BR>
Net insurance premium revenue 475 334 470 831 909 037<BR>
Commission and other fee income 1 577 267 1 398 828 2 880 635<BR>
Interest income on amortised cost financial instruments 92 975 81 760 197 328<BR>
Interest income on fair value through profit or loss financial instruments 598 219 507 049 1 006 048<BR>
Dividend income 107 451 174 653 423 476<BR>
Net fair value gains and losses on financial instruments 3 067 585 1 746 493 2 053 793<BR>
Fair value adjustment to investment contract liabilities (1 778 571) (1 185 456) (1 654 563)<BR>
Fair value adjustment to third-party liabilities (1 943 853) (1 176 449) (1 722 789)<BR>
Other operating income 109 832 89 027 110 675<BR>
Total income 2 306 239 2 106 756 4 203 640<BR>
<BR>
Insurance claims and loss adjustment expenses (376 842) (431 306) (816 429)<BR>
Insurance claims and loss adjustment expenses recovered from reinsurers 75 056 95 448 187 368<BR>
Net insurance benefits and claims (301 786) (335 858) (629 061)<BR>
Commission paid (716 188) (631 698) (1 199 447)<BR>
Depreciation and amortisation (1) (40 099) (34 591) (69 725)<BR>
Employee benefit expenses (461 047) (393 477) (825 668)<BR>
Marketing, administration and other expenses (332 499) (307 537) (571 842)<BR>
Total expenses (1 851 619) (1 703 161) (3 295 743)<BR>
<BR>
Share of profits/(losses) of joint ventures 144 (45) (84)<BR>
Total profit/(loss) from joint ventures 144 (45) (84)<BR>
<BR>
Profit before finance costs and taxation 454 764 403 550 907 813<BR>
Finance costs (21 498) (24 151) (38 941)<BR>
Profit before taxation 433 266 379 399 868 872<BR>
Taxation (127 009) (119 273) (256 221)<BR>
Profit for the period 306 257 260 126 612 651<BR>
<BR>
Attributable to:<BR>
Owners of the parent 281 849 239 366 566 476<BR>
Non-controlling interest 24 408 20 760 46 175<BR>
306 257 260 126 612 651<BR>
<BR>
Earnings per share (cents)<BR>
Attributable (basic) 21.4 18.2 43.0<BR>
Attributable (diluted) 21.2 18.1 42.6<BR>
Headline and recurring headline (basic) 21.5 18.2 43.0<BR>
Headline and recurring headline (diluted) 21.3 18.1 42.6<BR>
<BR>
(1) Includes amortisation cost of R25.3 million (31 Aug 2017: R22.7 million; 28 Feb 2018: R45.6 million).<BR>
<BR>
<BR>
Condensed consolidated statement of comprehensive income<BR>
for the six months ended 31 August and the year ended 28 February 2018<BR>
<BR>
Unaudited Unaudited <BR>
Six months Six months Audited<BR>
ended ended Year ended<BR>
31 Aug 18 31 Aug 17 28 Feb 18 <BR>
R000 R000 R000<BR>
<BR>
Profit for the period 306 257 260 126 612 651<BR>
<BR>
Other comprehensive income for the period, net of taxation 5 855 (1 494) (1 851)<BR>
To be reclassified to profit or loss:<BR>
Currency translation adjustments 5 855 (1 494) (1 851)<BR>
<BR>
Total comprehensive income for the period 312 112 258 632 610 800<BR>
<BR>
Attributable to:<BR>
Owners of the parent 287 704 237 872 564 625<BR>
Non-controlling interest 24 408 20 760 46 175<BR>
312 112 258 632 610 800<BR>
<BR>
<BR>
Earnings and headline earnings per share<BR>
for the six months ended 31 August and the year ended 28 February 2018<BR>
<BR>
Unaudited Unaudited <BR>
Six months Six months Audited <BR>
ended ended Year ended <BR>
31 Aug 18 31 Aug 17 28 Feb 18 <BR>
R000 R000 R000<BR>
<BR>
Headline earnings 283 146 239 275 566 396<BR>
Recurring 283 146 239 275 566 396<BR>
Non-recurring - - -<BR>
<BR>
Non-headline items (net of non-controlling interest and related tax effect)<BR>
(Loss)/profit on disposal of intangible assets (including goodwill) (1 437) 18 (148)<BR>
Other 140 73 228<BR>
Profit attributable to ordinary shareholders 281 849 239 366 566 476<BR>
<BR>
Earnings per share (cents)<BR>
Attributable (basic) 21.4 18.2 43.0<BR>
Attributable (diluted) 21.2 18.1 42.6<BR>
Headline and recurring headline (basic) 21.5 18.2 43.0<BR>
Headline and recurring headline (diluted) 21.3 18.1 42.6<BR>
<BR>
Number of shares (millions)<BR>
In issue (net of treasury shares) 1 319.3 1 318.6 1 317.5<BR>
Weighted average (net of treasury shares) 1 318.0 1 314.5 1 317.6<BR>
<BR>
<BR>
Condensed consolidated statement of changes in equity<BR>
for the six months ended 31 August and the year ended 28 February 2018<BR>
<BR>
Attributable to equity holders of the group<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 2017 (Audited) 1 749 505 (59 206) (399 700) 862 689 197 212 2 350 500<BR>
<BR>
Comprehensive income<BR>
Profit for the period - - - 239 366 20 760 260 126<BR>
Other comprehensive income for the period - - (1 494) - - (1 494)<BR>
Total comprehensive income for the period - - (1 494) 239 366 20 760 258 632<BR>
Transactions with owners 154 012 (117 406) 18 034 (133 878) (5 097) (84 335)<BR>
Issue of ordinary shares 154 012 - - - - 154 012<BR>
Share-based payment costs - - 18 034 - - 18 034<BR>
Net movement in treasury shares - (117 406) - - - (117 406)<BR>
Dividends paid - - - (133 878) (5 097) (138 975)<BR>
<BR>
Balance at 31 August 2017 (Unaudited) 1 903 517 (176 612) (383 160) 968 177 212 875 2 524 797<BR>
<BR>
Comprehensive income<BR>
Profit for the period - - - 327 110 25 415 352 525<BR>
Other comprehensive income for the period - - (357) - - (357)<BR>
Total comprehensive income for the period - - (357) 327 110 25 415 352 168<BR>
Transactions with owners 5 287 (15 635) (3 205) (120 061) (2 636) (136 250)<BR>
Issue of ordinary shares 5 287 - - - - 5 287<BR>
Share-based payment costs - - 18 045 - - 18 045<BR>
Capital contribution by non-controlling interest - - - - 432 432<BR>
Net movement in treasury shares - (9 382) - - - (9 382)<BR>
Equity-settled share-based payments - - (21 250) (51 108) - (72 358)<BR>
Release of profits from treasury shares to retained earnings - (6 253) - 6 253 - -<BR>
Dividends paid - - - (75 206) (3 068) (78 274)<BR>
<BR>
Balance at 28 February 2018 (Audited) 1 908 804 (192 247) (386 722) 1 175 226 235 654 2 740 715<BR>
<BR>
Comprehensive income<BR>
Profit for the period - - - 281 849 24 408 306 257<BR>
Other comprehensive income for the period - - 5 855 - - 5 855<BR>
Total comprehensive income for the period - - 5 855 281 849 24 408 312 112<BR>
Transactions with owners - 15 051 19 690 (162 246) (3 790) (131 295)<BR>
Share-based payment costs - - 19 690 - - 19 690<BR>
Net movement in treasury shares (1) - 15 051 - - - 15 051<BR>
Dividends paid - - - (162 246) (3 790) (166 036)<BR>
<BR>
Balance at 31 August 2018 (Unaudited) 1 908 804 (177 196) (361 177) 1 294 829 256 272 2 921 532<BR>
<BR>
(1) The net movement in treasury shares relates to the release of shares to staff by the share trust in order to fulfil the deferred bonus <BR>
obligations.<BR>
<BR>
<BR>
Condensed consolidated statement of cash flows<BR>
for the six months ended 31 August and the year ended 28 February 2018<BR>
<BR>
Restated <BR>
Unaudited Unaudited <BR>
Six months Six months Audited<BR>
ended ended Year ended <BR>
31 Aug 18 31 Aug 17 28 Feb 18<BR>
Notes R000 R000 R000<BR>
<BR>
Cash flows from operating activities<BR>
Cash utilised in operations (583 350) (489 097) (487 401)<BR>
Interest income 691 194 588 809 1 203 376<BR>
Dividend income 107 451 174 653 423 476<BR>
Finance costs (13 566) (15 370) (23 105)<BR>
Taxation paid (87 075) (99 081) (276 860)<BR>
Operating cash flows before policyholder cash movement 114 654 159 914 839 486<BR>
Policyholder cash movement 5 363 41 231 (13 238)<BR>
Net cash flow from operating activities 120 017 201 145 826 248<BR>
<BR>
Cash flows from investing activities<BR>
Acquisition of subsidiaries and businesses 9.1 (23 224) - -<BR>
Disposal of subsidiaries and businesses 9.2 (17 182) - -<BR>
Acquisition of intangible assets (75 381) (33 657) (68 497)<BR>
Purchases of property and equipment (13 021) (7 166) (45 321)<BR>
Other 2 721 726 860<BR>
Net cash flow from investing activities (126 087) (40 097) (112 958)<BR>
<BR>
Cash flows from financing activities<BR>
Dividends paid (166 036) (138 975) (217 249)<BR>
Advance of borrowings - 100 000 100 000<BR>
Shares issued - 66 623 70 339<BR>
Holding company's treasury shares sold by subsidiary 15 051 144 976 172 170<BR>
Purchase of holding company's treasury shares - (262 382) (298 958)<BR>
Other (784) (1 678) (3 180)<BR>
Net cash flow from financing activities (151 769) (91 436) (176 878)<BR>
<BR>
Net (decrease)/increase in cash and cash equivalents (157 839) 69 612 536 412<BR>
Cash and cash equivalents at beginning of the period 1 920 626 1 385 542 1 385 542<BR>
Exchange gains/(losses) on cash and cash equivalents 9 212 726 (1 328)<BR>
Cash and cash equivalents at end of the period (1) 9.4 1 771 999 1 455 880 1 920 626<BR>
<BR>
(1) Includes the following:<BR>
Clients' cash linked to investment contracts 6 337 55 443 974<BR>
Other client-related balances 309 491 242 984 353 759<BR>
315 828 298 427 354 733<BR>
<BR>
Notes to the statement of cash flow:<BR>
The movement in cash utilised in operations 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 the group on the loan facilities provided to clients<BR>
on their share portfolios at PSG Securities Limited. PSG Life Limited, the group's linked insurance company, issues linked policies to <BR>
policyholders (where the value of policy benefits is directly linked to the fair value of the supporting assets). When these policies mature,<BR>
the company raises a debtor for the money receivable from the third-party investment provider, and raises a creditor for the amount owing to <BR>
the client. Timing difference occurs at month-end when the money was received from the third-party investment provider, but only paid out by <BR>
the company after month-end, resulting in significant fluctuations in the working capital of the company. Similar working capital fluctuations <BR>
occur at PSG Securities Limited, the group's stockbroking business, mainly due to the timing of the close of the JSE in terms of client <BR>
settlements. Refer to note 5.7 for the impact of the client-related balances on the cash flows from operating activities.<BR>
<BR>
<BR>
Notes to the condensed consolidated interim financial statements<BR>
for the six months ended 31 August 2018<BR>
<BR>
1. Reporting entity<BR>
<BR>
PSG Konsult Limited is a public company domiciled in the Republic of South Africa. The condensed consolidated interim financial statements as <BR>
at and for the six months ended 31 August 2018, comprise the company and its subsidiaries (together referred to as 'the group') and the group's<BR>
interest in joint ventures.<BR>
<BR>
2. Basis of preparation<BR>
<BR>
Statement of compliance<BR>
The condensed consolidated interim financial statements as at and for the six months ended 31 August 2018 have been prepared in accordance with <BR>
the requirements of the JSE Limited (JSE) and the requirements of the Companies Act, No. 71 of 2008, as amended, applicable to condensed financial<BR>
statements. The JSE requires condensed financial statements to be prepared in accordance with the framework concepts and the measurement and <BR>
recognition requirements of International Financial Reporting Standards (IFRS), 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 minimum, contain the<BR>
information required by IAS 34 - Interim financial reporting. The condensed consolidated interim financial statements do not include all of the<BR>
information required for full annual financial statements and should be read in conjunction with the consolidated financial statements of the<BR>
group as at and for the year ended 28 February 2018. Any forecast financial information is the responsibility of the board of PSG Konsult Limited<BR>
and has not been reviewed or reported on by the auditors. The comparative consolidated statement of cash flows and related segment information <BR>
was restated, refer to note 14 for further details.<BR>
<BR>
These condensed consolidated interim financial statements were prepared under the supervision of the chief financial officer, Mike Smith, CA(SA).<BR>
<BR>
Estimates and judgements<BR>
In preparing these condensed consolidated interim financial statements, the significant judgements made by management in applying the group's<BR>
accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated annual financial <BR>
statements for the year ended 28 February 2018.<BR>
<BR>
3. Independent review<BR>
<BR>
The condensed consolidated interim financial statements are the responsibility of the board of directors of the company.<BR>
<BR>
Neither these condensed consolidated interim financial statements, nor any reference to future financial performance included in this results <BR>
announcement, have been reviewed or reported on by the company's external auditor, PricewaterhouseCoopers Inc.<BR>
<BR>
4. Accounting policies<BR>
<BR>
The accounting policies applied in the preparation of these condensed consolidated interim financial statements are in terms of IFRS and are <BR>
consistent with those accounting policies applied in the preparation of the previous consolidated annual financial statements as at and for the<BR>
year ended 28 February 2018, except for the mandatory adoption of IFRS 9 - Financial instruments and IFRS 15 - Revenue from contracts with <BR>
customers. The group has applied both standards retrospectively without restating comparative figures. Refer to note 15 for further detail.<BR>
<BR>
5. 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 for the purpose of IFRS 8 - Operating segments has been identified as the chief executive officer, supported <BR>
by the group management committee (Manco). The group's internal reporting structure is reviewed in order to assess performance and allocate<BR>
resources. The group is organised into three reportable segments, namely:<BR>
- PSG Wealth - deriving income mainly from total managed assets and total platform assets<BR>
- PSG Asset Management - deriving income mainly from total assets under management and administration<BR>
- PSG Insure - deriving income mainly from written premiums and underwriting<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, as well as housing the group's executive office. Besides the traditional accounting and secretarial services provided to <BR>
group divisions and subsidiaries, the corporate office also provides legal, risk, IT, marketing, 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 corporate office. <BR>
The corporate costs are allocated to the three reportable segments.<BR>
<BR>
5.1 Description of business segments<BR>
<BR>
PSG Wealth, which consists of five business units - Distribution, Securities, LISP and Life Platform, Multi Management and Employee Benefits -<BR>
is designed to meet the needs of individuals, families and businesses. Through its highly skilled wealth managers, PSG Wealth offers a wide <BR>
range of personalised services (including portfolio management, stockbroking, local and offshore investments, estate planning, financial <BR>
planning, local and offshore fiduciary services, multi-managed solutions and retirement products). The Wealth offices are fully equipped to <BR>
deliver a high-quality personal service to customers.<BR>
<BR>
PSG Asset Management is an established investment management company with a proven investment track record. It offers investors a simple, but<BR>
comprehensive range of local and global investment products. The division's products include both local and international unit trust funds.<BR>
<BR>
PSG Insure, through its 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 <BR>
(business and agri-insurance) requirements. To harness the insurance solutions available to customers effectively, the division's expert <BR>
insurance specialists, through a strict due diligence process, will simplify the selection process for the most appropriate solution for its <BR>
clients. In addition to the intermediary services which PSG Insure offers; PSG Short-Term Administration supports clients through the claim <BR>
process, administrative issues and general policy maintenance, including an annual reappraisal of their portfolio.<BR>
<BR>
The CODM considers the performance of reportable segments based on total core income as a measure of growth and headline earnings as a measure <BR>
of profitability. In order to evaluate the core results of the group, the CODM segregates the income statement by eliminating the impact of the <BR>
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 of fair<BR>
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 control.<BR>
The consolidation of these funds does not impact total earnings, comprehensive income, shareholders' funds or the net asset value of the group;<BR>
however, it requires the group to recognise the income statement impact as part of that of the group.<BR>
<BR>
5.2 Headline earnings per reportable segment<BR>
<BR>
Asset <BR>
Wealth Management Insure Total<BR>
Headline earnings R000 R000 R000 R000<BR>
<BR>
For the six months ended 31 August 2018 (Unaudited)<BR>
Headline earnings (1) 159 787 87 212 36 147 283 146<BR>
- recurring 159 787 87 212 36 147 283 146<BR>
- non-recurring - - - -<BR>
<BR>
For the six months ended 31 August 2017 (Unaudited)<BR>
Headline earnings (1) 149 923 56 829 32 523 239 275<BR>
- recurring 149 923 56 829 32 523 239 275<BR>
- non-recurring - - - -<BR>
<BR>
For the year ended 28 February 2018 (Audited)<BR>
Headline earnings (1) 339 129 155 825 71 442 566 396<BR>
- recurring 339 129 155 825 71 442 566 396<BR>
- non-recurring - - - -<BR>
<BR>
(1) Headline earnings, calculated in terms of the requirements stipulated in Circular 4/2018 as issued by SAICA, comprise recurring and non-<BR>
recurring headline earnings. Recurring headline earnings are calculated by excluding non-recurring headline earnings to increase <BR>
comparability of the performance of the group from one year to another. Non-recurring headline earnings include one-off gains and losses <BR>
and the resulting tax charge on these items.<BR>
<BR>
5.3 Income per reportable segment<BR>
<BR>
Asset<BR>
Wealth Management Insure Total<BR>
For the six months ended 31 August 2018 (Unaudited) R000 R000 R000 R000<BR>
<BR>
Total IFRS reported income 1 149 492 290 090 866 657 2 306 239<BR>
<BR>
Linked investment business and other income (28 263) - - (28 263)<BR>
<BR>
Total core income 1 121 229 290 090 866 657 2 277 976<BR>
<BR>
Total segment income 1 406 531 438 929 881 587 2 727 047<BR>
Intersegment income (285 302) (148 839) (14 930) (449 071)<BR>
<BR>
Asset <BR>
Wealth Management Insure Total<BR>
For the six months ended 31 August 2017 (Unaudited) R000 R000 R000 R000<BR>
<BR>
Total IFRS reported income 1 100 874 219 452 786 430 2 106 756<BR>
<BR>
Linked investment business and other income (44 740) - - (44 740)<BR>
<BR>
Total core income 1 056 134 219 452 786 430 2 062 016<BR>
<BR>
Total segment income 1 358 226 371 025 800 513 2 529 764<BR>
Intersegment income (302 092) (151 573) (14 083) (467 748)<BR>
<BR>
Asset <BR>
Wealth Management Insure Total<BR>
For the year ended 28 February 2018 (Audited) R000 R000 R000 R000<BR>
<BR>
Total IFRS reported income 2 133 530 527 188 1 542 922 4 203 640<BR>
<BR>
Linked investment business and other income (3 332) - - (3 332)<BR>
<BR>
Total core income 2 130 198 527 188 1 542 922 4 200 308<BR>
<BR>
Total segment income 2 931 355 825 512 1 593 439 5 350 306<BR>
Intersegment income (801 157) (298 324) (50 517) (1 149 998)<BR>
<BR>
Other information provided to the CODM is measured in a manner consistent with that of the financial statements.<BR>
<BR>
5.4 Divisional income statements<BR>
<BR>
The profit or loss information follows a similar format to the consolidated income statement. The divisional income statements reflect the core<BR>
business operations of the group.<BR>
<BR>
Asset<BR>
Wealth Management Insure Total<BR>
For the six months ended 31 August 2018 (Unaudited) R000 R000 R000 R000<BR>
<BR>
Total income 1 121 229 290 090 866 657 2 277 976<BR>
Total expenses (877 102) (174 710) (787 487) (1 839 299)<BR>
244 127 115 380 79 170 438 677<BR>
Total profit from joint ventures - - 144 144<BR>
Profit before finance costs and taxation 244 127 115 380 79 314 438 821<BR>
Finance costs (1) (13 364) (167) (35) (13 566)<BR>
Profit before taxation 230 763 115 213 79 279 425 255<BR>
Taxation (67 778) (28 001) (23 219) (118 998)<BR>
Profit for the period 162 985 87 212 56 060 306 257<BR>
<BR>
Attributable to:<BR>
Owners of the parent 159 841 87 212 34 796 281 849<BR>
Non-controlling interest 3 144 - 21 264 24 408<BR>
162 985 87 212 56 060 306 257<BR>
<BR>
Headline and recurring headline earnings 159 787 87 212 36 147 283 146<BR>
<BR>
Asset<BR>
Wealth Management Insure Total<BR>
For the six months ended 31 August 2017 (Unaudited) R000 R000 R000 R000<BR>
<BR>
Total income 1 056 134 219 452 786 430 2 062 016<BR>
Total expenses (826 917) (143 538) (719 135) (1 689 590)<BR>
229 217 75 914 67 295 372 426<BR>
Total loss from joint ventures - - (45) (45)<BR>
Profit before finance costs and taxation 229 217 75 914 67 250 372 381<BR>
Finance costs (1) (14 967) (368) (35) (15 370)<BR>
Profit before taxation 214 250 75 546 67 215 357 011<BR>
Taxation (61 188) (18 717) (16 980) (96 885)<BR>
Profit for the period 153 062 56 829 50 235 260 126<BR>
<BR>
Attributable to:<BR>
Owners of the parent 149 981 56 829 32 556 239 366<BR>
Non-controlling interest 3 081 - 17 679 20 760<BR>
153 062 56 829 50 235 260 126<BR>
<BR>
Headline and recurring headline earnings 149 923 56 829 32 523 239 275<BR>
<BR>
(1) Finance costs in the PSG Wealth division include the finance charge on the funding utilised to provide loan facilities to clients on their <BR>
share portfolios at PSG Securities (secured by the underlying JSE Top 100 equity securities held in excess of four times the value of the <BR>
loan facilities) for which PSG Wealth receives a margin. The finance costs of R13.4 million (31 Aug 2017: R15.0 million) consist of <BR>
R4.6 million (31 Aug 2017: R5.5 million) on the loan funding, with the remaining portion of the finance charge on the CFD margin and the <BR>
bank overdrafts.<BR>
<BR>
Asset<BR>
Wealth Management Insure Total<BR>
For the year ended 28 February 2018 (Audited) R000 R000 R000 R000<BR>
<BR>
Total income 2 130 198 527 188 1 542 922 4 200 308<BR>
Total expenses (1 618 621) (314 333) (1 391 731) (3 324 685)<BR>
511 577 212 855 151 191 875 623<BR>
Total loss from joint ventures - - (84) (84)<BR>
Profit before finance costs and taxation 511 577 212 855 151 107 875 539<BR>
Finance costs (1) (22 504) (540) (61) (23 105)<BR>
Profit before taxation 489 073 212 315 151 046 852 434<BR>
Taxation (142 496) (56 460) (40 827) (239 783)<BR>
Profit for the year 346 577 155 855 110 219 612 651<BR>
<BR>
Attributable to:<BR>
Owners of the parent 339 031 155 855 71 590 566 476<BR>
Non-controlling interest 7 546 - 38 629 46 175<BR>
346 577 155 855 110 219 612 651<BR>
<BR>
Headline and recurring headline earnings 339 129 155 825 71 442 566 396<BR>
<BR>
(1) Finance costs in the PSG Wealth division include the finance charge on the funding utilised to provide loan facilities to clients on their<BR>
share portfolios at PSG Securities (secured by the underlying JSE Top 100 equity securities held in excess of four times the value of the<BR>
loan facilities) on which PSG Wealth receives a margin. The finance costs of R22.5 million consist of R8.0 million on the loan funding, <BR>
with the remaining portion of the finance charge on the CFD margin and the bank overdrafts.<BR>
<BR>
5.5 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 bank<BR>
accounts, as well as the contracts for difference assets and related liabilities.<BR>
<BR>
Total Client-<BR>
IFRS Own related<BR>
reported balances balances<BR>
As at 31 August 2018 (Unaudited) R000 R000 R000<BR>
<BR>
ASSETS<BR>
Equity securities 2 520 607 17 689 2 502 918<BR>
Debt securities 2 878 932 38 828 2 840 104<BR>
Unit-linked investments 48 718 417 780 448 47 937 969<BR>
Investment in investment contracts 17 414 - 17 414<BR>
Receivables including insurance receivables 1 807 997 347 765 1 460 232<BR>
Derivative financial instruments 17 105 - 17 105<BR>
Cash and cash equivalents (including money market funds) 1 769 571 1 453 743 315 828<BR>
Other assets (1) 1 510 267 1 510 267 -<BR>
Total assets 59 240 310 4 148 740 55 091 570<BR>
<BR>
EQUITY<BR>
Equity attributable to owners of the parent 2 665 260 2 665 260 -<BR>
Non-controlling interest 256 272 256 272 -<BR>
Total equity 2 921 532 2 921 532 -<BR>
<BR>
LIABILITIES<BR>
Borrowings (2) 102 960 1 683 101 277<BR>
Investment contracts 26 219 315 - 26 219 315<BR>
Third-party liabilities arising on consolidation of mutual funds 27 311 201 - 27 311 201<BR>
Derivative financial instruments 20 056 - 20 056<BR>
Trade and other payables 2 123 249 683 528 1 439 721<BR>
Other liabilities (3) 541 997 541 997 -<BR>
Total liabilities 56 318 778 1 227 208 55 091 570<BR>
<BR>
Total equity and liabilities 59 240 310 4 148 740 55 091 570<BR>
<BR>
(1) Other assets consist of property and equipment, intangible assets, investment in joint ventures, current and deferred income tax assets,<BR>
loans and advances, reinsurance assets, deferred acquisition costs and assets held for sale.<BR>
(2) The DMTN programme funding raised in order to internally fund the clients' Scriptfin loans has been reflected under client-related balances.<BR>
(3) Other liabilities consist of deferred reinsurance acquisition revenue, current and deferred income tax liabilities, insurance contracts and<BR>
liabilities held for sale.<BR>
<BR>
Total Client-<BR>
IFRS Own related<BR>
reported balances balances<BR>
As at 31 August 2017 (Unaudited) R000 R000 R000<BR>
<BR>
ASSETS<BR>
Equity securities 2 104 693 16 631 2 088 062<BR>
Debt securities 3 943 613 90 943 3 852 670<BR>
Unit-linked investments 40 849 291 642 133 40 207 158<BR>
Investment in investment contracts 16 323 - 16 323<BR>
Receivables including insurance receivables 1 700 815 334 464 1 366 351<BR>
Derivative financial instruments 13 005 - 13 005<BR>
Cash and cash equivalents (including money market funds) 1 455 880 1 157 453 298 427<BR>
Other assets (1) 1 366 179 1 366 179 -<BR>
Total assets 51 449 799 3 607 803 47 841 996<BR>
<BR>
EQUITY<BR>
Equity attributable to owners of the parent 2 311 922 2 311 922 -<BR>
Non-controlling interest 212 875 212 875 -<BR>
Total equity 2 524 797 2 524 797 -<BR>
<BR>
LIABILITIES<BR>
Borrowings (2) 109 101 4 239 104 862<BR>
Investment contracts 24 767 685 - 24 767 685<BR>
Third-party liabilities arising on consolidation of mutual funds 21 603 419 - 21 603 419<BR>
Derivative financial instruments 14 854 - 14 854<BR>
Trade and other payables 1 873 675 522 499 1 351 176<BR>
Other liabilities (3) 556 268 556 268 -<BR>
Total liabilities 48 925 002 1 083 006 47 841 996<BR>
<BR>
Total equity and liabilities 51 449 799 3 607 803 47 841 996<BR>
<BR>
(1) Other assets consist of property and equipment, intangible assets, investment in joint ventures, current and deferred income tax assets,<BR>
loans and advances, reinsurance assets and deferred acquisition costs.<BR>
(2) The DMTN programme funding raised in order to internally fund the clients' Scriptfin loans has been reflected under client-related balances.<BR>
(3) Other liabilities consist of deferred reinsurance acquisition revenue, current and deferred income tax liabilities and insurance contracts.<BR>
<BR>
Total Client-<BR>
IFRS Own related<BR>
reported balances balances<BR>
As at 28 February 2018 (Audited) R000 R000 R000<BR>
<BR>
ASSETS<BR>
Equity securities 2 321 482 17 279 2 304 203<BR>
Debt securities 2 582 815 50 974 2 531 841<BR>
Unit-linked investments 42 196 090 629 630 41 566 460<BR>
Investment in investment contracts 14 798 - 14 798<BR>
Receivables including insurance receivables 1 904 775 310 491 1 594 284<BR>
Derivative financial instruments 8 854 - 8 854<BR>
Cash and cash equivalents (including money market funds) 1 920 626 1 565 893 354 733<BR>
Other assets (1) 1 463 931 1 463 931 -<BR>
Total assets 52 413 371 4 038 198 48 375 173<BR>
<BR>
EQUITY<BR>
Equity attributable to owners of the parent 2 505 061 2 505 061 -<BR>
Non-controlling interest 235 654 235 654 -<BR>
Total equity 2 740 715 2 740 715 -<BR>
<BR>
LIABILITIES<BR>
Borrowings (2) 103 695 2 467 101 228<BR>
Investment contracts 24 278 949 - 24 278 949<BR>
Third-party liabilities arising on consolidation of mutual funds 22 585 256 - 22 585 256<BR>
Derivative financial instruments 16 857 - 16 857<BR>
Trade and other payables 2 116 527 723 644 1 392 883<BR>
Other liabilities (3) 571 372 571 372 -<BR>
Total liabilities 49 672 656 1 297 483 48 375 173<BR>
<BR>
Total equity and liabilities 52 413 371 4 038 198 48 375 173<BR>
<BR>
(1) Other assets consist of property and equipment, intangible assets, investment in joint ventures, current and deferred income tax assets, <BR>
loans and advances, reinsurance assets and deferred acquisition costs.<BR>
(2) The DMTN programme funding raised in order to internally fund the clients' Scriptfin loans has been reflected under client-related balances.<BR>
(3) Other liabilities consist of deferred reinsurance acquisition revenue, current and deferred income tax liabilities and insurance contracts.<BR>
<BR>
5.6 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 the <BR>
linked investment policies issued and the consolidation of the collective investment schemes from the core operations in the group.<BR>
<BR>
Linked<BR>
Total investment<BR>
IFRS Core business<BR>
reported business and other<BR>
For the six months ended 31 August 2018 (Unaudited) R000 R000 R000<BR>
<BR>
Commission and other fee income (3) 1 577 267 1 674 797 (97 530)<BR>
Investment income (4) 798 645 99 467 699 178<BR>
Net fair value gains and losses on financial instruments 3 067 585 9 133 3 058 452<BR>
Fair value adjustment to investment contract liabilities (1 778 571) - (1 778 571)<BR>
Fair value adjustment to third-party liabilities (1 943 853) - (1 943 853)<BR>
Other (1),(3) 585 166 494 579 90 587<BR>
Total income 2 306 239 2 277 976 28 263<BR>
<BR>
Insurance claims and loss adjustment expenses (376 842) (376 842) -<BR>
Other (2),(3) (1 474 777) (1 462 457) (12 320)<BR>
Total expenses (1 851 619) (1 839 299) (12 320)<BR>
<BR>
Total profit from joint ventures 144 144 -<BR>
Profit before finance costs and taxation 454 764 438 821 15 943<BR>
Finance costs (21 498) (13 566) (7 932)<BR>
Profit before taxation 433 266 425 255 8 011<BR>
Taxation (127 009) (118 998) (8 011)<BR>
Profit for the period 306 257 306 257 -<BR>
<BR>
Attributable to:<BR>
Owners of the parent 281 849 281 849 -<BR>
Non-controlling interest 24 408 24 408 -<BR>
306 257 306 257 -<BR>
<BR>
(1) Other consists of net insurance premium revenue and other operating income.<BR>
(2) Other consists of insurance claims and loss adjustment expenses recovered from reinsurers, commission paid, depreciation and amortisation, <BR>
employee benefit expenses, marketing, administration and other expenses.<BR>
(3) The linked investment business and other income statement includes the impact of the fees eliminated between the collective investment <BR>
schemes (consolidated under IFRS 10 - Consolidated financial statements) and the collective investment scheme management company,<BR>
PSG Collective Investments (RF) Limited.<BR>
(4) Investment income consists of interest income on amortised cost financial instruments, interest income on fair value through profit or loss<BR>
financial instruments and dividend income.<BR>
<BR>
Linked<BR>
Total investment <BR>
IFRS Core business<BR>
reported business and other<BR>
For the six months ended 31 August 2017 (Unaudited) R000 R000 R000 <BR>
<BR>
Commission and other fee income (3) 1 398 828 1 472 949 (74 121)<BR>
Investment income (4) 763 482 93 450 670 032<BR>
Net fair value gains and losses on financial instruments 1 746 493 8 075 1 738 418<BR>
Fair value adjustment to investment contract liabilities (1 185 456) - (1 185 456)<BR>
Fair value adjustment to third-party liabilities (1 176 449) - (1 176 449)<BR>
Other (1),(3) 559 858 487 542 72 316<BR>
Total income 2 106 756 2 062 016 44 740<BR>
<BR>
Insurance claims and loss adjustment expenses (431 306) (430 080) (1 226)<BR>
Other (2),(3) (1 271 855) (1 259 510) (12 345)<BR>
Total expenses (1 703 161) (1 689 590) (13 571)<BR>
<BR>
Total loss from joint ventures (45) (45) -<BR>
Profit before finance costs and taxation 403 550 372 381 31 169<BR>
Finance costs (24 151) (15 370) (8 781)<BR>
Profit before taxation 379 399 357 011 22 388<BR>
Taxation (119 273) (96 885) (22 388)<BR>
Profit for the period 260 126 260 126 -<BR>
<BR>
Attributable to:<BR>
Owners of the parent 239 366 239 366 -<BR>
Non-controlling interest 20 760 20 760 -<BR>
260 126 260 126 -<BR>
<BR>
(1) Other consists of net insurance premium revenue and other operating income.<BR>
(2) Other consists of insurance claims and loss adjustment expenses recovered from reinsurers, commission paid, depreciation and amortisation, <BR>
employee benefit expenses, marketing, administration and other expenses.<BR>
(3) The linked investment business and other income statement includes the impact of the fees eliminated between the collective investment <BR>
schemes (consolidated under IFRS 10 - Consolidated financial statements) and the collective investment scheme management company, <BR>
PSG Collective Investments (RF) Limited.<BR>
(4) Investment income consists of interest income on amortised cost financial instruments, interest income on fair value through profit or loss<BR>
financial instruments and dividend income.<BR>
<BR>
Linked<BR>
Total investment<BR>
IFRS Core business<BR>
reported business and other<BR>
For the year ended 28 February 2018 (Audited) R000 R000 R000<BR>
<BR>
Commission and other fee income (3) 2 880 635 3 064 790 (184 155)<BR>
Investment income (4) 1 626 852 191 200 1 435 652<BR>
Net fair value gains and losses on financial instruments 2 053 793 16 972 2 036 821<BR>
Fair value adjustment to investment contract liabilities (1 654 563) - (1 654 563)<BR>
Fair value adjustment to third-party liabilities (1 722 789) - (1 722 789)<BR>
Other (1) 1 019 712 927 346 92 366<BR>
Total income 4 203 640 4 200 308 3 332<BR>
<BR>
Insurance claims and loss adjustment expenses (816 429) (816 429) -<BR>
Other (2),(3) (2 479 314) (2 508 256) 28 942<BR>
Total expenses (3 295 743) (3 324 685) 28 942<BR>
<BR>
Total loss from joint ventures (84) (84) -<BR>
Profit before finance costs and taxation 907 813 875 539 32 274<BR>
Finance costs (38 941) (23 105) (15 836)<BR>
Profit before taxation 868 872 852 434 16 438<BR>
Taxation (256 221) (239 783) (16 438)<BR>
Profit for the year 612 651 612 651 -<BR>
<BR>
Attributable to:<BR>
Owners of the parent 566 476 566 476 -<BR>
Non-controlling interest 46 175 46 175 -<BR>
612 651 612 651 -<BR>
<BR>
(1) Other consists of net insurance premium revenue and other operating income.<BR>
(2) Other consists of insurance claims and loss adjustment expenses recovered from reinsurers, commission paid, depreciation and amortisation,<BR>
employee benefit expenses, marketing, administration and other expenses.<BR>
(3) The linked investment business and other income statement includes the impact of the fees eliminated between the collective investment <BR>
schemes (consolidated under IFRS 10 - Consolidated financial statements) and the collective investment scheme management company,<BR>
PSG Collective Investments (RF) Limited.<BR>
(4) Investment income consists of interest income on amortised cost financial instruments, interest income on fair value through profit or loss<BR>
financial instruments and dividend income.<BR>
<BR>
5.7 Statement of cash flows (client vs own)<BR>
<BR>
In order to assist the CODM to evaluate the consolidated statement of cash flows of the group, the statement of cash flows is segregated between <BR>
cash flows relating to own balances and client-related balances.<BR>
<BR>
Total Client-<BR>
IFRS Own related<BR>
reported balances balances<BR>
For the six months ended 31 August 2018 (Unaudited) Notes R000 R000 R000<BR>
<BR>
Cash flows from operating activities 120 017 151 282 (31 265)<BR>
Cash (utilised in)/generated by operations (583 350) 171 615 (754 965)<BR>
Interest income 691 194 97 868 593 326<BR>
Dividend income 107 451 1 599 105 852<BR>
Finance costs (13 566) (13 566) -<BR>
Taxation paid (87 075) (106 234) 19 159<BR>
Policyholder cash movement 5 363 - 5 363<BR>
<BR>
Cash flows from investing activities (126 087) (118 447) (7 640)<BR>
Acquisition of subsidiaries and businesses 9.1 (23 224) (32 766) 9 542<BR>
Disposal of subsidiaries and businesses 9.2 (17 182) - (17 182)<BR>
Acquisition of intangible assets (75 381) (75 381) -<BR>
Other (10 300) (10 300) -<BR>
<BR>
Cash flows from financing activities (151 769) (151 769) -<BR>
<BR>
Net decrease in cash and cash equivalents (157 839) (118 934) (38 905)<BR>
Cash and cash equivalents at beginning of the period 1 920 626 1 565 893 354 733<BR>
Exchange gains on cash and cash equivalents 9 212 9 212 -<BR>
Cash and cash equivalents at end of the period 9.4 1 771 999 1 456 171 315 828<BR>
<BR>
Total Client-<BR>
IFRS Own related<BR>
reported balances balances<BR>
For the six months ended 31 August 2017 (Unaudited) (Restated) R000 R000 R000<BR>
<BR>
Cash flows from operating activities (2) 201 145 106 141 95 004<BR>
Cash (utilised in)/generated by operations (2) (489 097) 121 189 (610 286)<BR>
Interest income 588 809 92 446 496 363<BR>
Dividend income 174 653 983 173 670<BR>
Finance costs (15 370) (15 370) -<BR>
Taxation paid (99 081) (93 107) (5 974)<BR>
Policyholder cash movement 41 231 - 41 231<BR>
<BR>
Cash flows from investing activities (40 097) (40 097) -<BR>
<BR>
Cash flows from financing activities (1),(2) (91 436) (191 436) 100 000<BR>
<BR>
Net increase/(decrease) in cash and cash equivalents 69 612 (125 392) 195 004<BR>
Cash and cash equivalents at beginning of the period 1 385 542 1 282 119 103 423<BR>
Exchange gains on cash and cash equivalents 726 726 -<BR>
Cash and cash equivalents at end of the period 1 455 880 1 157 453 298 427<BR>
<BR>
Total Client-<BR>
IFRS Own related<BR>
reported balances balances<BR>
For the year ended 28 February 2018 (Audited) R000 R000 R000<BR>
<BR>
Cash flows from operating activities 826 248 674 938 151 310<BR>
Cash (utilised in)/generated by operations (487 401) 754 527 (1 241 928)<BR>
Interest income 1 203 376 188 355 1 015 021<BR>
Dividend income 423 476 2 846 420 630<BR>
Finance costs (23 105) (23 105) -<BR>
Taxation paid (276 860) (247 685) (29 175)<BR>
Policyholder cash movement (13 238) - (13 238)<BR>
<BR>
Cash flows from investing activities (112 958) (112 958) -<BR>
<BR>
Cash flows from financing activities (1) (176 878) (276 878) 100 000<BR>
<BR>
Net increase in cash and cash equivalents 536 412 285 102 251 310<BR>
Cash and cash equivalents at beginning of the year 1 385 542 1 282 119 103 423<BR>
Exchange losses on cash and cash equivalents (1 328) (1 328) -<BR>
Cash and cash equivalents at end of the year 1 920 626 1 565 893 354 733<BR>
<BR>
(1) The DMTN programme funding raised in order to internally fund the clients' Scriptfin loans has been reflected under client-related balances.<BR>
(2) The funding raised by the DMTN programme, which was previously disclosed as a cash flow from operating activities, has now been shown as a<BR>
cash flow from financing activities. Refer to note 14 for the details of the restatement.<BR>
<BR>
6. Investment contracts<BR>
<BR>
Investment contracts are represented by the following financial assets:<BR>
<BR>
Unaudited Unaudited Audited<BR>
as at as at as at<BR>
31 Aug 18 31 Aug 17 28 Feb 18<BR>
R000 R000 R000<BR>
<BR>
Equity securities 2 346 478 1 983 801 2 192 586<BR>
Debt securities 457 343 1 659 508 483 551<BR>
Unit-linked investments 23 391 743 21 052 610 21 587 040<BR>
Investments in investment contracts 17 414 16 323 14 798<BR>
Cash and cash equivalents 6 337 55 443 974<BR>
26 219 315 24 767 685 24 278 949<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 R1 419.3 million (31 Aug 2017: R1 317.3 million;<BR>
28 Feb 2018: R1 372.6 million) represents amounts owing by the JSE for trades conducted during the last few days before the end of the period. <BR>
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 to the clients <BR>
taking place within three days after the transaction date.<BR>
<BR>
8. Assets and liabilities held for sale<BR>
<BR>
For the six months ended 31 August 2018<BR>
<BR>
The assets and liabilities classified as held for sale relate to the PSG Wealth Limited (Mauritius) and PSG Securities Limited (Mauritius)<BR>
businesses, which have been presented as held for sale following the approval by the group's management to sell these businesses.<BR>
<BR>
PSG <BR>
PSG Wealth Securities <BR>
Limited Limited<BR>
(Mauritius) (Mauritius) Total<BR>
R000 R000 R000<BR>
<BR>
Assets classified as held for sale<BR>
Intangible assets - Goodwill 3 053 1 381 4 434<BR>
Intangible assets - Customer relationships 2 561 561 3 122<BR>
Receivables including insurance receivables 2 438 3 774 6 212<BR>
Property and equipment 606 - 606<BR>
Other assets 152 26 178<BR>
Cash and cash equivalents (including money market funds) 505 1 923 2 428<BR>
9 315 7 665 16 980<BR>
<BR>
Liabilities classified as held for sale<BR>
Trade and other payables 1 819 4 056 5 875<BR>
Other liabilities 773 257 1 030<BR>
2 592 4 313 6 905<BR>
<BR>
The group expects to complete the sale of these businesses within 12 months of 31 August 2018.<BR>
<BR>
9. Notes to the statement of cash flows<BR>
<BR>
9.1 Acquisition of subsidiaries and businesses<BR>
<BR>
For the six months ended 31 August 2018<BR>
<BR>
Collective investment schemes<BR>
<BR>
The group obtained control of the PSG Wealth Global Preserver Feeder Fund during the six months ended 31 August 2018. This fund was consolidated<BR>
in accordance with IFRS 10 - Consolidated financial statements and is a collective investment scheme managed by an entity within the group.<BR>
<BR>
PSG Wealth<BR>
Global Preserver<BR>
Feeder<BR>
Fund consolidated Fund<BR>
<BR>
% interest in fund on effective date 31<BR>
Date of acquisition 31 August 2018<BR>
<BR>
Details of the net assets acquired are as follows: R000<BR>
<BR>
Unit-linked investments 992 065<BR>
Receivables including insurance receivables 553<BR>
Cash and cash equivalents (including money market funds) 9 542<BR>
Third-party liabilities arising on consolidation of mutual funds (689 002)<BR>
Trade and other payables (382)<BR>
Net asset value 312 776<BR>
Fair value of interest held before the business combination (312 776)<BR>
Cash consideration paid -<BR>
Cash and cash equivalents acquired 9 542<BR>
Net cash inflow in the six months ended 31 August 2018 9 542<BR>
<BR>
Had the PSG Wealth Global Preserver Feeder Fund been consolidated from 1 March 2018, total income of R11.4 million and profit of Rnil would have <BR>
been recognised in the consolidated income statement.<BR>
<BR>
Other business combinations<BR>
<BR>
PSG Konsult Limited, through its subsidiary PSG Wealth Financial Planning Proprietary Limited, acquired the commercial and industrial short-term<BR>
insurance brokerage business of Absa Insurance and Financial Advisers Proprietary Limited (AIFA). The effective date of the transaction was<BR>
1 June 2018 following the fulfilment of suspensive conditions.<BR>
<BR>
Details of the net assets acquired and goodwill are as follows: R000<BR>
<BR>
Cash paid 32 766<BR>
Cash due 32 765<BR>
Total purchase consideration 65 531<BR>
Less: Fair value of net assets acquired (42 597)<BR>
Goodwill recognised on acquisition 22 934<BR>
<BR>
The remaining purchase consideration will be paid in two 25% tranches over the next two years.<BR>
<BR>
Cash consideration paid (32 766)<BR>
Cash and cash equivalents acquired -<BR>
Net cash outflow in the six months ended 31 August 2018 (32 766)<BR>
<BR>
The goodwill is mainly attributable to the workforce of the acquired business.<BR>
<BR>
Acquiree's<BR>
carrying<BR>
Fair value amount<BR>
The assets and liabilities arising from the acquisition are as follows: R000 R000<BR>
<BR>
Intangible assets - Customer relationships 59 162 -<BR>
Deferred income tax (16 565) -<BR>
Total identifiable net assets 42 597 -<BR>
<BR>
The income, included in the consolidated income statement, contributed by the AIFA commercial and industrial short-term insurance brokerage<BR>
business since the acquisition date was R36.3 million. The book of business also contributed a profit after taxation of R2.4 million over the <BR>
same period.<BR>
<BR>
Had the AIFA commercial and industrial short-term insurance brokerage business been consolidated from 1 March 2018, the consolidated income <BR>
statement would have shown income of R72.6 million and profit after taxation of R4.8 million for the six months ended 31 August 2018.<BR>
<BR>
9.2 Disposal of subsidiaries and businesses<BR>
<BR>
For the six months ended 31 August 2018<BR>
<BR>
Collective investment schemes<BR>
<BR>
The group deconsolidated the PSG Multi-Management Foreign Flexible Fund of Funds during the six months ended 31 August 2018 as the group lost <BR>
control of this fund, when it merged with the PSG Wealth Global Flexible Feeder Fund, due to a decrease in the effective interest in the fund.<BR>
<BR>
Details of the net assets disposed of are as follows: R000<BR>
<BR>
Unit-linked investments 133 049<BR>
Receivables including insurance receivables 186 008<BR>
Cash and cash equivalents (including money market funds) 17 182<BR>
Third-party liabilities arising on consolidation of mutual funds (228 106)<BR>
Trade and other payables (2 511)<BR>
Net asset value 105 622<BR>
Transfer to unit-linked investments (105 622)<BR>
Cash consideration received -<BR>
Cash and cash equivalents given up (17 182)<BR>
Net cash outflow in the six months ended 31 August 2018 (17 182)<BR>
<BR>
9.3 Other acquisitions - standardising of revenue sharing model<BR>
<BR>
For the six months ended 31 August 2018<BR>
<BR>
The group (through its subsidiary PSG Wealth Financial Planning Proprietary Limited) concluded further revenue-sharing arrangements with a large<BR>
number of its advisers. The purpose of these transactions were to standardise the revenue sharing arrangements between the advisers and PSG Konsult.<BR>
<BR>
A cash consideration of R24.4 million was paid on the effective dates. These transactions did not qualify for accounting in terms of IFRS 3 - <BR>
Business combinations as the assets acquired (the right to an increased share in the income stream of the adviser) did not constitute a business <BR>
acquired.<BR>
<BR>
These transactions contributed R1.2 million to our headline earnings during the six months ended 31 August 2018, net of amortisation cost of <BR>
R0.6 million.<BR>
<BR>
For the year ended 28 February 2018<BR>
<BR>
The group (through its subsidiary PSG Wealth Financial Planning Proprietary Limited) concluded various asset-for-share transactions (utilising <BR>
section 42 of the Income Tax Act, No. 58 of 1962) as well as further revenue sharing arrangements with a number of its advisers during the <BR>
financial year. The purpose of these transactions was to standardise the revenue sharing arrangements between the advisers and PSG Konsult.<BR>
<BR>
The consideration was paid with the issue of PSG Konsult shares (0.6 million shares at an average of R8.97 per share) and a cash consideration <BR>
of R17.3 million on the effective dates. These transactions did not qualify for accounting in terms of IFRS 3 - Business combinations as the <BR>
assets acquired (the right to an increased share in the income stream of the adviser) did not constitute a business acquired.<BR>
<BR>
These transactions contributed R1.1 million to our headline earnings during the 2018 financial year, net of amortisation cost of R0.5 million.<BR>
<BR>
9.4 Cash and cash equivalents at end of the period<BR>
<BR>
For the six months ended 31 August 2018<BR>
<BR>
31 Aug 18<BR>
R000<BR>
<BR>
Cash and cash equivalents (including money market funds) 1 769 571<BR>
Cash and cash equivalents classified as assets held for sale 2 428<BR>
1 771 999<BR>
<BR>
10. 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 and fair <BR>
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 interim financial statements do not include all risk management information and disclosure required in the annual <BR>
financial statements and should be read in conjunction with the group's annual financial statements as at 28 February 2018.<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 risk)<BR>
<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), and<BR>
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 price 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 R 2 520.6 million (31 Aug 2017: R2 104.7 million; 28 Feb 2018: R2 321.5 million) are quoted equity <BR>
securities of R 2 520.4 million (31 Aug 2017: R2 104.3 million; 28 Feb 2018: R2 321.2 million), of which R 2 346.5 million (31 Aug 2017: <BR>
R1 983.8 million; 28 Feb 2018: R2 192.6 million) relates to investments in linked investment contracts. The price risk of these instruments is <BR>
carried by the policyholders of the linked investment contracts.<BR>
<BR>
Unit-linked investments of R 23 391.7 million (31 Aug 2017: R21 052.6 million; 28 Feb 2018: R21 587.0 million) are linked to investment contracts<BR>
and do not expose the group to price or interest rate risk.<BR>
<BR>
Debt securities linked to policyholder investments amounted to R 457.3 million (31 Aug 2017: R1 659.5 million; 28 Feb 2018: R483.6 million) and <BR>
do not expose the group to interest rate risk. Cash and cash equivalents linked to policyholder investments amounted to R 6.3 million <BR>
(31 Aug 2017: R55.4 million; 28 Feb 2018: R1.0 million) and do not expose the group to interest rate risk.<BR>
<BR>
Fair value estimation<BR>
<BR>
The information below analyses financial instruments, carried at fair value, by level of hierarchy as required by IFRS 7 - Financial instruments <BR>
and IFRS 13 - Fair value measurement. The different levels have been defined as follows:<BR>
- Level 1 - quoted prices (unadjusted) in active markets for identical assets or liabilities;<BR>
- Level 2 - input other than quoted prices included within level 1 that is observable for the asset or liability, either directly (that is, as <BR>
prices) or indirectly (that is, derived from prices); and<BR>
- Level 3 - input for the asset or liability that is not based on observable market data (that is, unobservable input).<BR>
<BR>
There have been no significant transfers between level 1, 2 or 3 during the period 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 <BR>
changes in the valuation techniques and assumptions applied since 28 February 2018.<BR>
<BR>
Valuation techniques and main assumptions used in determining the fair value of financial assets and liabilities classified within level 2 can<BR>
be summarised as follows:<BR>
<BR>
Instruments Valuation techniques Main assumptions<BR>
<BR>
Derivative financial instruments Exit price on recognised over-the-counter (OTC) Not applicable<BR>
platforms <BR>
<BR>
Debt securities Valuation model that uses the market input (yield Bond interest rate curves<BR>
of benchmark bonds) Issuer credit ratings<BR>
Liquidity spreads<BR>
<BR>
Unit-linked investments Quoted put (exit) price provided by the fund manager Not applicable - daily prices <BR>
are publicly available<BR>
<BR>
Investment in investment contracts Prices are obtained from the insurer of the Not applicable - prices <BR>
particular investment contract provided by registered <BR>
long-term insurers<BR>
<BR>
Investment contract liabilities - Current unit price of underlying unitised financial Not applicable<BR>
unit-linked asset that is linked to the liability, multiplied by<BR>
the number of units held<BR>
<BR>
Third-party financial liabilities arising Quoted put (exit) price provided by the fund manager Not applicable - daily<BR>
on consolidation of mutual funds prices are publicly available<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>
As at 31 August 2018 (Unaudited) R000 R000 R000 R000<BR>
<BR>
Financial assets<BR>
Derivative financial instruments - 17 105 - 17 105<BR>
Equity securities 2 520 367 - 240 2 520 607<BR>
Debt securities 869 161 1 889 646 - 2 758 807<BR>
Unit-linked investments - 48 195 372 523 045 48 718 417<BR>
Investment in investment contracts - 17 414 - 17 414<BR>
3 389 528 50 119 537 523 285 54 032 350<BR>
<BR>
Financial liabilities<BR>
Derivative financial instruments - 20 056 - 20 056<BR>
Investment contracts - 25 595 168 504 022 26 099 190<BR>
Trade and other payables - - 70 264 70 264<BR>
Third-party liabilities arising on consolidation of mutual funds - 27 311 201 - 27 311 201<BR>
- 52 926 425 574 286 53 500 711<BR>
<BR>
Level 1 Level 2 Level 3 Total<BR>
As at 31 August 2017 (Unaudited) R000 R000 R000 R000<BR>
<BR>
Financial assets<BR>
Derivative financial instruments - 13 005 - 13 005<BR>
Equity securities 2 104 311 7 375 2 104 693<BR>
Debt securities 805 203 2 985 537 - 3 790 740<BR>
Unit-linked investments - 39 904 228 945 063 40 849 291<BR>
Investment in investment contracts - 16 323 - 16 323<BR>
2 909 514 42 919 100 945 438 46 774 052<BR>
<BR>
Financial liabilities<BR>
Derivative financial instruments - 14 854 - 14 854<BR>
Investment contracts - 23 679 749 935 063 24 614 812<BR>
Trade and other payables - - 43 358 43 358<BR>
Third-party liabilities arising on consolidation of mutual funds - 21 603 419 - 21 603 419<BR>
- 45 298 022 978 421 46 276 443<BR>
<BR>
Level 1 Level 2 Level 3 Total<BR>
As at 28 February 2018 (Audited) R000 R000 R000 R000<BR>
<BR>
Financial assets<BR>
Derivative financial instruments - 8 854 - 8 854<BR>
Equity securities 2 321 235 7 240 2 321 482<BR>
Debt securities 922 377 1 500 509 - 2 422 886<BR>
Unit-linked investments - 41 478 953 717 137 42 196 090<BR>
Investment in investment contracts - 14 798 - 14 798<BR>
3 243 612 43 003 121 717 377 46 964 110<BR>
<BR>
Financial liabilities<BR>
Derivative financial instruments - 16 857 - 16 857<BR>
Investment contracts - 23 420 874 698 146 24 119 020<BR>
Trade and other payables - - 45 344 45 344<BR>
Third-party liabilities arising on consolidation of mutual funds - 22 585 256 - 22 585 256<BR>
- 46 022 987 743 490 46 766 477<BR>
<BR>
The following table presents the changes in level 3 financial instruments during the reporting periods under review:<BR>
<BR>
Unaudited Unaudited Audited<BR>
31 Aug 18 31 Aug 17 28 Feb 18<BR>
R000 R000 R000<BR>
<BR>
Assets<BR>
Opening carrying value 717 377 1 109 600 1 109 600<BR>
Additions 124 895 254 646 487 832<BR>
Disposals (348 349) (441 401) (903 023)<BR>
Gains recognised in profit or loss (1) 29 362 22 593 22 968<BR>
Closing carrying value 523 285 945 438 717 377<BR>
<BR>
Liabilities<BR>
Opening carrying value 743 490 1 137 380 1 137 380<BR>
Additions 248 719 277 129 541 839<BR>
Disposals (446 862) (458 681) (962 005)<BR>
Losses recognised in profit or loss (2) 29 324 22 593 26 276<BR>
Reclassified to held for sale (385) - -<BR>
Closing carrying value 574 286 978 421 743 490<BR>
<BR>
(1) Gains on these items were recognised in profit or loss under 'net fair value gains and losses on financial instruments'.<BR>
(2) Losses on these items were recognised in profit or loss under 'fair value adjustment to investment contract liabilities'.<BR>
<BR>
Unit-linked investments represent the largest portion of the level 3 financial assets and relate to units held in hedge funds and are priced <BR>
monthly. The prices are obtained from the asset managers of the particular hedge funds. These are held to match investment contract liabilities, <BR>
and as such any change in measurement would result in a similar adjustment to investment contract liabilities. Therefore, the group's overall <BR>
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 inputs, 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 <BR>
in the business agreement.<BR>
<BR>
The table below summarises the carrying values 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>
Unaudited Unaudited Audited<BR>
31 Aug 18 31 Aug 17 28 Feb 18<BR>
R000 R000 R000<BR>
<BR>
Assets<BR>
Debt securities<BR>
- Carrying value 120 125 152 873 159 929<BR>
- Fair value 118 204 150 103 159 038<BR>
<BR>
Liabilities<BR>
Investment contracts<BR>
- Carrying value 120 125 152 873 159 929<BR>
- Fair value 118 204 150 103 159 038<BR>
<BR>
The fair value of the financial assets and liabilities in the table above is categorised in terms of level 3.<BR>
<BR>
11. 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 2018 took place <BR>
during the period under review.<BR>
<BR>
12. Capital commitments and contingencies <BR>
<BR>
Unaudited Unaudited Audited<BR>
31 Aug 18 31 Aug 17 28 Feb 18<BR>
R000 R000 R000<BR>
<BR>
Operating lease commitments 147 042 135 162 142 975<BR>
<BR>
13. 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 interim financial statements.<BR>
<BR>
14. Restatement of prior year figures <BR>
<BR>
The following restatement was applied to the 31 August 2017 consolidated statement of cash flows and related segment information:<BR>
<BR>
PSG Konsult Limited, through its subsidiary PSG Konsult Treasury Limited, established a DMTN programme during the 2018 financial year and issued<BR>
a R100 million senior unsecured floating rate note on 12 July 2017. The DMTN funding was raised to internally fund clients' Scriptfin loans, and <BR>
was consequently classified under cash flows from operating activities in the interim financial statements for the six months ended 31 August 2017.<BR>
The group has subsequently decided to restate the classification of this cash inflow to cash flows from financing activities to more correctly<BR>
reflect the nature of this cash flow in terms of IAS 7 - Statement of cash flows.<BR>
<BR>
This restatement had no impact on the current or prior year reported earnings, diluted earnings or headline earnings per share, or on the net <BR>
asset value or net cash flow. This cash flow was shown under client-related balances therefore there was no impact on the cash flows relating <BR>
to own balances.<BR>
<BR>
As previously Restatement <BR>
stated - DMTN Restated <BR>
R000 R000 R000<BR>
<BR>
Consolidated statement of cash flows<BR>
<BR>
Cash flows from operating activities<BR>
Cash utilised in operations (389 097) (100 000) (489 097)<BR>
<BR>
Cash flows from financing activities<BR>
Advance of borrowings - 100 000 100 000<BR>
<BR>
15. Adoption of new accounting standards <BR>
<BR>
The group has adopted the following new accounting standards as issued by the IASB, which were effective for the group from 1 March 2018:<BR>
- IFRS 15 - Revenue from contracts with customers<BR>
- IFRS 9 - Financial instruments<BR>
<BR>
The changes in accounting policies were applied retrospectively without restating comparative figures. If any differences were identified they <BR>
would have been taken to opening retained earnings, however the impact of the adoption of IFRS 9 and IFRS 15 was immaterial and no adjustment <BR>
is therefore presented.<BR>
<BR>
Adoption of IFRS 15<BR>
<BR>
This new standard provides a single, principles-based five-step model to be applied to all contracts with customers. Guidance is provided on <BR>
topics such as the point at which revenue is recognised, accounting for variable consideration, costs of fulfilling and obtaining a contract and<BR>
various related matters. New disclosures about revenue are also introduced.<BR>
<BR>
A significant portion of the group's revenue is accounted for in terms of IFRS 4 - Insurance contracts and IFRS 9 - Financial instruments, which <BR>
are all scoped out of IFRS 15.<BR>
<BR>
There are no material changes to the revenue recognition for commission and other fee income which are recognised under IFRS 15. Consequently,<BR>
there was no financial impact to the consolidated group on 1 March 2018 upon adoption of IFRS 15.<BR>
<BR>
Adoption of IFRS 9<BR>
<BR>
This new standard represents a package of reform to financial instrument accounting to replace IAS 39 - Financial instruments: Recognition and<BR>
measurement.<BR>
<BR>
Financial assets<BR>
<BR>
In assessing how financial assets should be classified and measured, IFRS 9 requires the assessment of:<BR>
- the business model applied to manage the financial assets; and<BR>
- the nature of contractual cash flows relating to the specific instrument, whether they solely represent payments of principal and interest.<BR>
<BR>
The impact on the classification and measurement of financial assets will be as follows for the group:<BR>
- Financial instruments and derivative assets, which are held to back client assets or for risk management purposes, currently measured at fair <BR>
value through profit or loss, will also be measured at fair value through profit or loss under IFRS 9.<BR>
- Loans and receivables that are classified as loans and receivables and measured at amortised cost under IAS 39 will be measured at amortised <BR>
cost under IFRS 9.<BR>
<BR>
IFRS 9 replaces the 'incurred loss' model in IAS 39 with a forward-looking 'expected credit loss' (ECL) model to calculate impairments of <BR>
financial assets. The new impairment model did not have a significant impact on the group as:<BR>
- The majority of financial assets in the group are measured at fair value through profit or loss.<BR>
- All insurance and reinsurance receivables are recognised in terms of IFRS 4 and will be included in the IFRS 17 assessment.<BR>
<BR>
Only debt instruments classified as financial assets at amortised cost or fair value through other comprehensive income are subject to the new <BR>
ECL model. In assessing the impairment that should be raised under the ECL model on these financial assets, credit enhancements such as security <BR>
held against loans and receivables are taken into account in the ECL model. It was noted that the impact of the ECL provision was substantially <BR>
impacted by the credit enhancements, and the increase in the impairment provision from the incurred loss model to the ECL model was found to be <BR>
immaterial.<BR>
<BR>
Financial liabilities<BR>
<BR>
The requirement for the classification and measurement under IFRS 9 has not changed significantly from IAS 39. The group under IAS 39 classified <BR>
the majority of the investment contract liabilities and third-party liabilities arising on consolidation of mutual funds at fair value through <BR>
profit or loss, so as to eliminate an accounting mismatch as the linked policyholder assets and the assets relating to the consolidated mutual <BR>
funds are carried at fair value through profit or loss. The group has as part of its IFRS 9 implementation process considered the classification <BR>
of its linked policyholder assets and consolidated mutual fund assets, and the direct impact these financial assets would have on the measurement<BR>
on the related financial liabilities. It was found that the measurement of financial assets at fair value through profit or loss was appropriate <BR>
and therefore to avoid an accounting mismatch, the corresponding financial liabilities were retained at fair value through profit or loss. <BR>
Therefore, no impact upon adoption of IFRS 9 was identified.<BR>
<BR>
Impact on adoption of IFRS 9<BR>
<BR>
The net financial impact of the changes in classification and measurement after tax had a Rnil impact on opening retained earnings on 1 March 2018.<BR>
Upon adoption of IFRS 9, the group has no financial instruments that will be measured at fair value through other comprehensive income.<BR>
<BR>
IFRS 9 introduced a consequential amendment to IAS 1, requiring interest income calculated using the effective interest rate method to be <BR>
separately presented on the face of the income statement. Refer to the condensed consolidated income statement where this amendment has been made.<BR>
<BR>
<BR>
CORPORATE INFORMATION<BR>
<BR>
Non-executive directors<BR>
W Theron (Chairman)<BR>
PJ Mouton<BR>
J de V du Toit^<BR>
PE Burton*<BR>
ZL Combi*<BR>
R Stassen*<BR>
ZRP Matsau*<BR>
(^ Lead independent; * Independent)<BR>
<BR>
Executive directors<BR>
FJ Gouws (Chief executive officer)<BR>
MIF Smith (Chief financial officer)<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<BR>
Tyger Waterfront<BR>
Tyger Valley<BR>
Bellville<BR>
7530<BR>
<BR>
Postal address<BR>
PO Box 3335<BR>
Tyger Valley<BR>
Bellville<BR>
7536<BR>
<BR>
Listings<BR>
Johannesburg Stock Exchange (JSE)<BR>
Namibian Stock Exchange (NSX)<BR>
<BR>
Transfer secretary<BR>
Computershare Investor Services Proprietary Limited<BR>
Rosebank Towers<BR>
15 Biermann Avenue<BR>
Rosebank<BR>
2196<BR>
<BR>
PO Box 61051<BR>
Marshalltown<BR>
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>
www.psg.co.za<BR>
<BR>
<BR>
Date: 11/10/2018 10:56:00 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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