PSG KONSULT LIMITED - Reviewed Preliminary Results For The Year Ended 28 February 2019
17 April, 2019 - Posted at - 11:45:00
KST 201904170023A<BR>
Reviewed Preliminary Results For The Year Ended 28 February 2019<BR>
<BR>
PSG Konsult Limited<BR>
(Incorporated in the Republic of South Africa)<BR>
('PSG Konsult' or 'the company' or 'the group')<BR>
Registration number: 1993/003941/06<BR>
JSE share code: KST<BR>
NSX share code: KFS<BR>
SEM share code: PSGK.N0000<BR>
ISIN code: ZAE000191417<BR>
<BR>
REVIEWED PRELIMINARY RESULTS FOR THE YEAR ENDED 28 FEBRUARY 2019<BR>
<BR>
SALIENT FEATURES<BR>
<BR>
Recurring headline earnings per share up 4% to 44.6 cents<BR>
Gross written premium (1) up 36% to R4 498m<BR>
Number of advisers up 19% to 932<BR>
Total assets under management up 8% to R222bn<BR>
Dividend per share up 14% to 20.5 cents<BR>
Total assets under administration (2) up 5% to R422bn<BR>
<BR>
(1) Includes gross written premiums on policies administered by the Insure distribution advisers, which are placed with third-party <BR>
insurers. The group earns commission and administration fees on this. It excludes the short-term administration platform gross <BR>
written premium.<BR>
(2) Includes assets administered by PSG Asset Management of R118bn.<BR>
<BR>
COMMENTARY<BR>
<BR>
Overview<BR>
<BR>
PSG Konsult increased recurring headline earnings per share by 4% and achieved a commendable return on equity of 21.5%.<BR>
<BR>
The group achieved these results against a backdrop of challenging operating conditions, which included a weak economy, subdued consumer<BR>
sentiment and negative returns on local equity markets and currency volatility. The performance of our key operating and financial metrics <BR>
under these conditions demonstrates our competitive advantage and the resilience of our business model. Total assets under management <BR>
increased by 8% to R222 billion, comprising assets managed by PSG Wealth of R175 billion (7% increase) and PSG Asset Management of <BR>
R47 billion (11% increase), while PSG Insure's gross written premium amounted to R4.5 billion (36% increase). The decline of 4% in the <BR>
current year of the JSE/FTSE All Share Index, compared to a positive return of 14% in the previous financial year, had a pronounced impact<BR>
on performance fees, investment income earned on shareholder assets and overall fee income growth. Performance fees earned constituted <BR>
only 2.9% of headline earnings in comparison to 8.6% in the previous financial year.<BR>
<BR>
We continue to invest in our business given our confidence in its long-term growth prospects. Specifically, investment in technology <BR>
resulted in a 29% increase in related costs, while personnel costs also increased markedly from the previous year mainly due to an <BR>
increase in technology staff hires and 68 newly qualified graduates (88% of which are ACI candidates). The graduates we hired are part <BR>
of our continued strategy to build our own talent. PSG Insure fully expensed upfront costs incurred in setting up the required office <BR>
infrastructure to facilitate the acquisition of the Absa Insurance and Financial Advisers (AIFA) businesses, and also expensed initial<BR>
costs incurred in setting up a new business operation in Botswana, which is expected to break even during the new financial year.<BR>
<BR>
PSG Konsult's key financial performance indicators for the financial year ended 28 February 2019 are shown below:<BR>
<BR>
28 Feb 19 Change 28 Feb 18<BR>
R000 % R000<BR>
<BR>
Core income 4 603 577 10 4 200 308<BR>
<BR>
Recurring headline earnings 591 099 4 566 396<BR>
Non-recurring items (1) 12 789 -<BR>
Headline earnings 603 888 7 566 396<BR>
Non-headline items (1 714) 80<BR>
Earnings attributable to ordinary shareholders 602 174 6 566 476<BR>
<BR>
Divisional recurring headline earnings<BR>
PSG Wealth 338 594 0 339 129<BR>
PSG Asset Management 167 279 7 155 825<BR>
PSG Insure 85 226 19 71 442<BR>
591 099 4 566 396<BR>
<BR>
Weighted average number of shares in issue (net of treasury shares) (millions) 1 325.1 1 1 317.6<BR>
<BR>
Earnings per share (basic) (cents)<BR>
- Recurring headline 44.6 4 43.0<BR>
- Headline 45.6 6 43.0<BR>
- Attributable 45.4 6 43.0<BR>
- Recurring headline - excluding intangible asset amortisation cost 48.4 5 46.4<BR>
<BR>
Dividend per share (cents) 20.5 14 18.0<BR>
<BR>
Return on equity (ROE) (%) 21.5 24.3<BR>
<BR>
(1) The non-recurring items relate mainly to a profit that was recognised by PSG Wealth in the current year following the maturity of <BR>
certain financial instruments linked to legacy investment contracts which, due to credit risk uncertainty, was not previously recognised.<BR>
In addition, PSG Insure recognised an impairment loss on a premium debt exposure to a third-party premium-collection agency.<BR>
<BR>
PSG Wealth<BR>
<BR>
PSG Wealth's recurring headline earnings were flat. We are satisfied with this result in the context of poor market conditions. Overall <BR>
revenue was up 5%, which included a 9% increase in management and other recurring fee income, but an 18% decrease in brokerage fees during <BR>
the year under review. Cost increases were greater than revenue growth due to our continued investment in enhancing our IT systems and <BR>
platforms, aligned with our aim of providing competitive products and seamless client service. Clients' assets managed by our Wealth <BR>
advisers increased by 7% to R175 billion during the year under review, which included R10 billion of positive net inflows.<BR>
<BR>
We remain confident about the fundamentals and prospects of this division and believe that our commitment to securing long-term relationships<BR>
with clients will continue to differentiate us in the markets in which we compete. The division's formidable financial adviser network <BR>
consisted of 546 wealth advisers as at 28 February 2019 and continues to add credibility to the growing brand equity. We continue to focus <BR>
on client engagement, including via digital platforms, and gaining market share.<BR>
<BR>
PSG Asset Management<BR>
<BR>
PSG Asset Management's recurring headline earnings increased by 7%, despite a 64% decline in performance fees earned in the current year.<BR>
The division's excellent long-term track record of delivering top-quartile risk-adjusted investment returns for our clients continues to <BR>
deliver high-quality recurring earnings, even under difficult market conditions. The team's ability to consistently generate alpha across <BR>
asset classes for clients over the appropriate investment horizon remains intact. Client assets under management increased by 11% to <BR>
R47 billion, during the year under review. This included R6 billion of single-manager positive net client inflows, predominantly into our<BR>
higher margin funds, with the majority coming from our retail target market. PSG Asset Management continues to be recognised as an <BR>
industry leader and was again voted by Morningstar as one of the top two South African fund houses. Assets administered by the management<BR>
company (manco) increased by 14% to R118 billion, having been further bolstered by R6 billion of multi-managed net inflows. Margins in this<BR>
area of the business continue to improve, as we are starting to benefit from economies of scale.<BR>
<BR>
PSG Insure<BR>
<BR>
PSG Insure's recurring headline earnings grew by a commendable 19%. The group is satisfied with the division's performance and believes <BR>
that the costs incurred in the current year to fund growth initiatives will ensure continued growth. This division continues to gain <BR>
market share in the highly competitive short-term insurance market and is starting to achieve economies of scale benefits. The division<BR>
achieved gross written premium growth of 36% as we continue to focus our efforts on growing the commercial lines' side of the business <BR>
which requires specialist adviser expertise. Western Group's comprehensive reinsurance programme reduced the adverse impact of certain <BR>
catastrophe events that occurred during the second half of the year. This, when combined with our quality underwriting practices, <BR>
allowed us to achieve an improved net underwriting margin of 8.9% compared to the 8.3% achieved in the prior year.<BR>
<BR>
The insurance advisers increased by 58% to 386, mainly due to the acquisition of the Absa Insurance and Financial Advisers businesses. <BR>
Following the completion of the commercial and industrial brokerage business acquisition effective 1 June 2018, the division acquired <BR>
the remaining short-term face-to-face advisory insurance brokerage business, effective 1 December 2018. These two transactions <BR>
enhanced PSG Insure's footprint across South Africa and is already contributing to the group's profitability.<BR>
<BR>
The Western Group's short- and long-term insurance licenses in Botswana were approved during July 2018 and the business is performing <BR>
in line with expectations. PSG Insure received top honours at the 2019 Old Mutual Insure Awards and was named overall winner as Top <BR>
National Broker.<BR>
<BR>
Strategy<BR>
<BR>
PSG Wealth's overall strategy offers an innovative and holistic end-to-end client proposition. Uncertain markets trigger emotional decisions,<BR>
so lasting solutions require expert guidance from advisers who understand the big picture. Advisers play a key role in providing us with <BR>
client feedback to enhance our platform capabilities and product suite. Management is proud of the experience and stature of the advisers <BR>
in the business. PSG Wealth continues to invest in enhancing the strength and depth of our technology capabilities and in-house investment<BR>
research team. This fully-fledged team has both fund and security investment research analysis capabilities. The focus continues to be on <BR>
digital initiatives, enhancing client experience and transactional processing capabilities. Our Wealth business is well placed to meet all <BR>
the investment needs of our clients and consistently strives to improve both our client and service offerings.<BR>
<BR>
PSG Asset Management's strategy consists of delivering investment excellence, operational efficiency, and effective sales and marketing <BR>
initiatives. Generating the best long-term, risk-adjusted returns for investors is the division's primary focus. The division will continue<BR>
to prioritise the investment team's performance, while managing operational risks and processes, and talent management. Increasing brand <BR>
awareness and regular client communication continues to be a key focus area for the marketing team, allowing the division to benefit from<BR>
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 <BR>
and exceed clients' expectations. The division continues to invest in its administration platform and staff to optimise claims administration,<BR>
product underwriting and client services. This allows the division to unlock operational efficiencies while freeing up valuable time for our <BR>
top-calibre advisers to focus on client relationships. The entrepreneurial best-of-breed partnership model in place with our advisers allows<BR>
our advisers to manage their own businesses 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, sustainable and scalable business is a key priority for the board. As such, management pays careful attention to<BR>
the group's cost to income metrics as each division expands. The management team is committed to continue to invest in technology as a key<BR>
enabler to achieve operational efficiencies, automation, enhanced client experience and, ultimately, sustainable growth.<BR>
<BR>
Recognition, awards and achievements<BR>
<BR>
The group is proud of the following notable milestones, achievements and industry awards:<BR>
<BR>
PSG Wealth<BR>
- Ranked third in the 2018 Intellidex Wealth Manager of the Year awards; up from fourth in 2017. PSG Wealth won the category for Successful <BR>
Entrepreneur<BR>
<BR>
PSG Asset Management<BR>
- Raging Bull Awards<BR>
- South African Management Company of the Year: second place<BR>
- Best South African Multi-Asset Flexible Fund on a Risk-Adjusted Basis (measuring risk-adjusted performance over five years): <BR>
third place (PSG Flexible Fund)<BR>
- Morningstar Awards<BR>
- Finalist, Best Fund House: Larger Fund Range<BR>
- Finalist, Best Flexible Allocation Fund (PSG Flexible Fund)<BR>
<BR>
PSG Insure<BR>
- Received top honours at the 2019 Old Mutual Insure Awards and was named overall winner as Top National Broker<BR>
- PSG Insure Meesterplan won Diamond Broker of the Year for a second time at the CIB Broker Awards in November 2018<BR>
<BR>
Corporate activity<BR>
<BR>
PSG Insure concluded an agreement to acquire the remaining 40% shareholding in the Western Group's Namibian entities, held by Santam,<BR>
effective 1 November 2018. Post this transaction, Western Namibia and Western Botswana are wholly owned.<BR>
<BR>
We again concluded a few smaller earnings accretive acquisitions to strengthen our organic growth strategy. These transactions were funded <BR>
from existing cash resources and will be seamlessly integrated into PSG Konsult's existing business operations to positively contribute to<BR>
the organic growth of the firm.<BR>
<BR>
PSG Konsult also completed a secondary listing on the Stock Exchange of Mauritius (SEM) on 27 November 2018. The SEM is regarded as one of <BR>
the foremost exchanges in Africa and is a fully-fledged member of the World Federation of Exchanges. PSG Konsult will retain its primary<BR>
listing on the Main Board of the JSE Limited, as well as its existing secondary listing on the Namibian Stock Exchange.<BR>
<BR>
Capital management<BR>
<BR>
PSG Konsult is strongly capitalised and complies with the capital requirements of Solvency Assessment and Management (SAM). We have minimal <BR>
interest-bearing debt and a Solvency Capital Requirement (SCR) ratio of 1.82 based on the latest insurance group return. Our strong <BR>
financial position was also affirmed in the long- and short-term investment grade national scale ratings assigned to PSG Konsult by rating<BR>
agency Global Credit Rating Co. (GCR) of A-(ZA) and A1-(ZA), respectively, with a stable outlook.<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 254 adviser offices and 2 886 employees as at 28 February 2019, which included 932 wealth and insure advisers. A further 417<BR>
were professional associates (accountants and attorneys). During the year under review, the number of PSG advisers increased by 148 through <BR>
a combination of organic growth and selected acquisitions, including the AIFA acquisition by PSG Insure. We believe strongly in building our <BR>
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 management<BR>
<BR>
PSG Konsult, which has 24 regulatory licences (17 in South Africa and 7 in foreign jurisdictions), continues to foster good relationships <BR>
with our regulators.<BR>
<BR>
Marketing<BR>
<BR>
Marketing initiatives are important to the group's goal of becoming a leader in the financial services industry. During the period under <BR>
review, the specialist marketing team embarked on its strategy of cost-efficient brand building through online advertising and search <BR>
campaigns. This was supported by increased activity on select social media platforms. The combined result has meant an increase in lead <BR>
generation, traffic to the website and our social media following. Enhancing the quality of our media presence through public relations <BR>
remains a constant focus. Through times of political and economic uncertainty we have also continued to focus our efforts on client <BR>
interaction through tailored events. PSG has steadily increased both the quality and quantity of communications from world-class industry<BR>
research for the savvy client to investor education for young savers. Clients can now choose which communications they wish to receive <BR>
through the introduction of a subscription management tool.<BR>
<BR>
Information technology<BR>
<BR>
As a group we focus on enhancing our digital capability and bringing best-of-breed technology platforms and services to our clients. We <BR>
strive to delight our clients by approaching everything we do with great client experience and ideal journeys at the forefront of our <BR>
development. We will continue to drive excellence through simple, scalable, stable and secure solutions.<BR>
<BR>
Looking forward<BR>
<BR>
We continue to monitor the corporate, political and economic situation, both locally and globally, and the associated impact on our clients<BR>
and other stakeholders.<BR>
<BR>
The cash-generative nature of the business gives PSG Konsult several options for funding business growth initiatives and optimising <BR>
risk-adjusted returns for our shareholders. As such, the group remains confident about the prospects for continued growth. The group will<BR>
continue to prioritise organic growth in our selected markets where we have a relatively low, but rapidly expanding market share.<BR>
<BR>
The group will continue to focus on initiatives that enable us to service clients in an integrated manner that is seamless and market-leading.<BR>
The group's focus on products, platforms, client service excellence and the quality of its advice process remains a key initiative.<BR>
<BR>
Events after reporting date<BR>
<BR>
No material events have taken place since the reporting date.<BR>
<BR>
Dividend<BR>
<BR>
Given the solid performance of the group, the board decided to approve and declare a 10% increase in the final gross dividend of 13.5 cents<BR>
per share (2018: 12.3 cents per share) from income reserves for the year ended 28 February 2019. This brings the full-year increase in the <BR>
total dividend to 14%. The group's strong cash flow generation supports the current dividend increase, with this year's dividend payout <BR>
ratio of 45% at the midpoint of the 40% to 50% dividend policy range that was announced at the time of 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 10.8 cents <BR>
per share. The number of issued ordinary shares is 1 364 885 118 at the date of this declaration. PSG Konsult's income tax reference number<BR>
is 9550/644/07/5.<BR>
<BR>
The following are the salient dates for payment of the dividend:<BR>
<BR>
Last day to trade (cum dividend) Monday, 6 May 2019<BR>
Trading ex dividend commences Tuesday, 7 May 2019<BR>
Record date Friday, 10 May 2019<BR>
Date of payment Monday, 13 May 2019<BR>
<BR>
Share certificates may not be dematerialised or rematerialised between Tuesday, 7 May 2019, and Friday, 10 May 2019, 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 year.<BR>
<BR>
On behalf of the board<BR>
<BR>
Willem Theron Francois Gouws<BR>
Chairman Chief executive officer<BR>
<BR>
Tyger Valley<BR>
17 April 2019<BR>
<BR>
FINANCIAL RESULTS<BR>
<BR>
Condensed consolidated statement of financial position<BR>
as at 28 February 2019<BR>
Reviewed Audited<BR>
as at as at<BR>
28 Feb 19 28 Feb 18<BR>
Notes R000 R000<BR>
<BR>
ASSETS<BR>
Intangible assets 1 178 249 1 027 805<BR>
Property and equipment 67 244 74 286<BR>
Investment in joint ventures 1 525 1 094<BR>
Deferred income tax assets 101 091 102 091<BR>
Equity securities 2 353 387 2 321 482<BR>
Debt securities 6 262 071 2 582 815<BR>
Unit-linked investments 46 488 080 42 196 090<BR>
Investment in investment contracts 16 048 14 798<BR>
Loans and advances 128 995 134 202<BR>
Derivative financial instruments 10 592 8 854<BR>
Reinsurance assets 103 758 80 544<BR>
Deferred acquisition costs 5 685 4 820<BR>
Receivables including insurance receivables 1 690 828 1 904 775<BR>
Current income tax assets 21 167 39 089<BR>
Cash and cash equivalents (including money market funds) (1) 945 442 1 920 626<BR>
Total assets 59 374 162 52 413 371<BR>
<BR>
EQUITY<BR>
Equity attributable to owners of the parent<BR>
Stated capital 2 129 572 1 908 804<BR>
Treasury shares (230 723) (192 247)<BR>
Other reserves (360 826) (386 722)<BR>
Retained earnings 1 451 251 1 175 226<BR>
2 989 274 2 505 061<BR>
Non-controlling interest 225 308 235 654<BR>
Total equity 3 214 582 2 740 715<BR>
<BR>
LIABILITIES<BR>
Insurance contracts 542 086 542 709<BR>
Deferred income tax liabilities 47 702 18 894<BR>
Borrowings 112 314 103 695<BR>
Derivative financial instruments 13 973 16 857<BR>
Investment contracts 7 25 932 120 24 278 949<BR>
Third-party liabilities arising on consolidation of mutual funds 27 350 796 22 585 256<BR>
Deferred reinsurance acquisition revenue 4 904 3 681<BR>
Trade and other payables 2 153 524 2 116 527<BR>
Current income tax liabilities 2 161 6 088<BR>
Total liabilities 56 159 580 49 672 656<BR>
<BR>
Total equity and liabilities 59 374 162 52 413 371<BR>
<BR>
Net asset value per share (cents) 223.6 190.1<BR>
<BR>
(1) The decrease in cash and cash equivalents is attributable to the consolidation of the PSG Money Market Fund. Refer to notes 6.5 and <BR>
9.1 for further details.<BR>
<BR>
Condensed consolidated income statement<BR>
for the year ended 28 February 2019<BR>
Reviewed Audited<BR>
Year ended Year ended<BR>
28 Feb 19 28 Feb 18<BR>
R000 R000<BR>
<BR>
Gross written premium 1 256 763 1 181 333<BR>
Less: Reinsurance written premium (355 297) (296 740)<BR>
Net written premium 901 466 884 593<BR>
Change in unearned premium<BR>
- Gross 32 436 28 477<BR>
- Reinsurers' share 2 859 (4 033)<BR>
Net insurance premium revenue 936 761 909 037<BR>
Revenue from contracts with customers (1) 3 350 590 -<BR>
Commission and other fee income (1) - 2 880 635<BR>
Interest income on amortised cost financial instruments (2) 147 696 197 328<BR>
Interest income on fair value through profit or loss financial instruments (2) 1 256 793 1 006 048<BR>
Dividend income (2) 479 981 423 476<BR>
Net fair value gains and losses on financial instruments 646 786 2 053 793<BR>
Fair value adjustment to investment contract liabilities (1 061 253) (1 654 563)<BR>
Fair value adjustment to third-party liabilities (1 196 594) (1 722 789)<BR>
Other operating income (1) 10 573 110 675<BR>
Total income 4 571 333 4 203 640<BR>
<BR>
Insurance claims and loss adjustment expenses (803 746) (816 429)<BR>
Insurance claims and loss adjustment expenses recovered from reinsurers 221 752 187 368<BR>
Net insurance benefits and claims (581 994) (629 061)<BR>
Commission paid (1 367 697) (1 199 447)<BR>
Depreciation and amortisation (3) (81 799) (69 725)<BR>
Employee benefit expenses (950 471) (825 668)<BR>
Marketing, administration and other expenses (643 783) (571 842)<BR>
Total expenses (3 625 744) (3 295 743)<BR>
<BR>
Total profit/(loss) from joint ventures 431 (84)<BR>
<BR>
Profit before finance costs and taxation 946 020 907 813<BR>
Finance costs (34 297) (38 941)<BR>
Profit before taxation 911 723 868 872<BR>
Taxation (269 179) (256 221)<BR>
Profit for the year 642 544 612 651<BR>
<BR>
Attributable to:<BR>
Owners of the parent 602 174 566 476<BR>
Non-controlling interest 40 370 46 175<BR>
642 544 612 651<BR>
<BR>
Earnings per share (cents)<BR>
Attributable (basic) 45.4 43.0<BR>
Attributable (diluted) 45.0 42.6<BR>
Headline (basic) 45.6 43.0<BR>
Headline (diluted) 45.2 42.6<BR>
Recurring headline (basic) 44.6 43.0<BR>
Recurring headline (diluted) 44.4 42.6<BR>
<BR>
(1) Due to the adoption of IFRS 15 - Revenue from contracts with customers, income included within commission and other fee income and <BR>
other operating income in the 2018 financial year has now been included within revenue from contracts with customers in the 2019 <BR>
financial year.<BR>
(2) Interest income on amortised cost financial instruments, interest income on fair value through profit or loss financial instruments <BR>
and dividend income have been separately presented as a result of the amendment to IAS 1.<BR>
(3) Includes amortisation cost of R52.4 million (2018: R45.6 million).<BR>
<BR>
Condensed consolidated statement of comprehensive income<BR>
for the year ended 28 February 2019<BR>
Reviewed Audited<BR>
Year ended Year ended<BR>
28 Feb 19 28 Feb 18<BR>
R000 R000<BR>
<BR>
Profit for the year 642 544 612 651<BR>
<BR>
Other comprehensive income for the year, net of taxation 11 524 (1 851)<BR>
Items that are or may be reclassified to profit or loss:<BR>
Currency translation adjustments 11 663 (1 851)<BR>
Recycling adjustment on foreign subsidiaries sold (139) -<BR>
<BR>
Total comprehensive income for the year 654 068 610 800<BR>
<BR>
Attributable to:<BR>
Owners of the parent 613 698 564 625<BR>
Non-controlling interest 40 370 46 175<BR>
654 068 610 800<BR>
<BR>
Earnings and headline earnings per share<BR>
for the year ended 28 February 2019<BR>
Reviewed Audited<BR>
Year ended Year ended<BR>
28 Feb 19 28 Feb 18<BR>
R000 R000<BR>
<BR>
Headline earnings 603 888 566 396<BR>
Recurring 591 099 566 396<BR>
Non-recurring 12 789 -<BR>
<BR>
Non-headline items (net of non-controlling interest and related tax effect)<BR>
Loss on disposal of intangible assets (including goodwill) (2 626) (148)<BR>
Other 912 228<BR>
Profit attributable to ordinary shareholders 602 174 566 476<BR>
<BR>
Earnings per share (cents)<BR>
Attributable (basic) 45.4 43.0<BR>
Attributable (diluted) 45.0 42.6<BR>
Headline (basic) 45.6 43.0<BR>
Headline (diluted) 45.2 42.6<BR>
Recurring headline (basic) 44.6 43.0<BR>
Recurring headline (diluted) 44.4 42.6<BR>
<BR>
Number of shares (millions)<BR>
In issue (net of treasury shares) 1 336.7 1 317.5<BR>
Weighted average (net of treasury shares) 1 325.1 1 317.6<BR>
<BR>
Condensed consolidated statement of changes in equity<BR>
for the year ended 28 February 2019<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 year - - - 566 476 46 175 612 651<BR>
Other comprehensive income for the year - - (1 851) - - (1 851)<BR>
Total comprehensive income for the year - - (1 851) 566 476 46 175 610 800<BR>
Transactions with owners 159 299 (133 041) 14 829 (253 939) (7 733) (220 585)<BR>
Issue of ordinary shares 159 299 - - - - 159 299<BR>
Share-based payment costs - - 36 079 - - 36 079<BR>
Capital contribution by non-controlling interest - - - - 432 432<BR>
Net movement in treasury shares - (126 788) - - - (126 788)<BR>
Current tax on equity-settled share-based payments - - 16 404 - - 16 404<BR>
Deferred tax on equity-settled share-based payments - - (5 089) - - (5 089)<BR>
Loss on issue of shares in terms of share scheme - - (83 673) - - (83 673)<BR>
Release of share-based payment reserve to retained earnings <BR>
on vested share options - - 51 108 (51 108) - -<BR>
Release of profits from treasury shares to retained earnings - (6 253) - 6 253 - -<BR>
Dividends paid - - - (209 084) (8 165) (217 249)<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 year - - - 602 174 40 370 642 544<BR>
Other comprehensive income for the year - - 11 524 - - 11 524<BR>
Total comprehensive income for the year - - 11 524 602 174 40 370 654 068<BR>
Transactions with owners 220 768 (38 476) 14 372 (326 149) (50 716) (180 201)<BR>
Issue of ordinary shares 220 768 - - - - 220 768<BR>
Share-based payment costs - - 39 538 - - 39 538<BR>
Transactions with non-controlling interest - - - (13 315) (43 548) (56 863)<BR>
Net movement in treasury shares - (36 023) - - - (36 023)<BR>
Current tax on equity-settled share-based payments - - 20 845 - - 20 845<BR>
Deferred tax on equity-settled share-based payments - - 3 372 - - 3 372<BR>
Loss on issue of shares in terms of share scheme - - (108 849) - - (108 849)<BR>
Release of share-based payment reserve to retained earnings <BR>
on vested share options - - 59 466 (59 466) - -<BR>
Release of profits from treasury shares to retained earnings - (2 453) - 2 453 - -<BR>
Dividends paid - - - (255 821) (7 168) (262 989)<BR>
<BR>
Balance at 28 February 2019 (Reviewed) 2 129 572 (230 723) (360 826) 1 451 251 225 308 3 214 582<BR>
<BR>
Condensed consolidated statement of cash flows<BR>
for the year ended 28 February 2019<BR>
Reviewed Audited<BR>
Year ended Year ended<BR>
28 Feb 19 28 Feb 18<BR>
R000 R000<BR>
<BR>
Cash flows from operating activities<BR>
Cash utilised in operations (1 016 172) (487 401)<BR>
Interest income 1 404 489 1 203 376<BR>
Dividend income 479 981 423 476<BR>
Finance costs (34 297) (23 105)<BR>
Taxation paid (222 391) (276 860)<BR>
Operating cash flows before policyholder cash movement 611 610 839 486<BR>
Policyholder cash movement 7 111 (13 238)<BR>
Net cash flow from operating activities 618 721 826 248<BR>
<BR>
Cash flows from investing activities<BR>
Acquisition of subsidiaries (including collective investment schemes) (1 226 304) -<BR>
Acquisition of intangible assets (94 672) (68 497)<BR>
Purchases of property and equipment (23 527) (45 321)<BR>
Disposal of subsidiaries (including collective investment schemes) (32 100) -<BR>
Proceeds from disposal of assets and liabilities held for sale 7 169 -<BR>
Proceeds from disposal of intangible assets 9 322 929<BR>
Other 41 (69)<BR>
Net cash flow from investing activities (1 360 071) (112 958)<BR>
<BR>
Cash flows from financing activities<BR>
Dividends paid (262 989) (217 249)<BR>
(Acquisition from)/contribution by non-controlling interest (54 011) 432<BR>
Increase in borrowings - 100 000<BR>
Repayment of borrowings (742) (3 612)<BR>
Shares issued 111 920 70 339<BR>
Holding company's treasury shares sold by subsidiary 198 245 172 170<BR>
Purchase of holding company's treasury shares (234 268) (298 958)<BR>
Net cash flow from financing activities (241 845) (176 878)<BR>
<BR>
Net (decrease)/increase in cash and cash equivalents (983 195) 536 412<BR>
Cash and cash equivalents at beginning of the year 1 920 626 1 385 542<BR>
Exchange gains/(losses) on cash and cash equivalents 8 011 (1 328)<BR>
Cash and cash equivalents at end of the year (1) 945 442 1 920 626<BR>
<BR>
(1) Includes the following:<BR>
Clients' cash linked to investment contracts 8 085 974<BR>
Other client-related balances (911 483) 353 759<BR>
(903 398) 354 733<BR>
<BR>
Notes to the statement of cash flows:<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 <BR>
clients on their share portfolios at PSG Securities Limited. PSG Life Limited, the group's linked insurance company, issues linked policies <BR>
to policyholders (where the value of policy benefits is directly linked to the fair value of the supporting assets). When these policies <BR>
mature, the company raises a debtor for the money receivable from the third-party investment provider, and raises a creditor for the amount <BR>
owing to the client. Timing difference occurs at month-end where the money was received from the third-party investment provider, but only <BR>
paid out by the company after month-end, resulting in significant fluctuations in the working capital of the company. Similar working <BR>
capital fluctuations occur at PSG Securities Limited, the group's stockbroking business, mainly due to the timing of the close of the JSE <BR>
in terms of client settlements. Refer to note 6.7 for the impact of the client-related balances on the cash flows from operating activities.<BR>
<BR>
Notes to the condensed consolidated financial statements<BR>
for the year ended 28 February 2019<BR>
<BR>
1. Reporting entity<BR>
<BR>
PSG Konsult Limited is a public company domiciled in the Republic of South Africa. The condensed consolidated financial statements of the <BR>
company as at and for the year ended 28 February 2019 comprise the company and its subsidiaries (together referred to as the 'group') and <BR>
the group's interest in joint ventures.<BR>
<BR>
2. Basis of preparation<BR>
<BR>
The condensed consolidated financial statements are prepared in accordance with the JSE Limited Listings Requirements for preliminary <BR>
reports and the requirements of the Companies Act of South Africa. The Listings Requirements require preliminary reports to be prepared in <BR>
accordance with the framework concepts and the measurement and recognition requirements of International Financial Reporting Standards (IFRS),<BR>
the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Reporting Pronouncements as issued by the<BR>
Financial Reporting Standards Council and to also, as a minimum, contain the information required by IAS 34 - Interim financial reporting.<BR>
<BR>
3. Preparation<BR>
<BR>
The condensed consolidated preliminary financial statements are the responsibility of the board of directors of the company and were <BR>
prepared under the supervision of the chief financial officer, Mike Smith, CA(SA). These condensed consolidated preliminary financial <BR>
statements for the year ended 28 February 2019 have been reviewed by PricewaterhouseCoopers Inc., who expressed an unmodified review <BR>
conclusion. A copy of the auditor's review report is available for inspection at PSG Konsult's registered office together with the <BR>
financial statements identified in the auditor's report. The auditor's report does not necessarily report on all of the information <BR>
contained in this announcement. Shareholders are therefore advised that in order to obtain a full understanding of the nature of the <BR>
auditor's engagement they should obtain a copy of the auditor's report together with the accompanying financial information from <BR>
PSG Konsult's registered office. Any reference to future financial performance included in these condensed consolidated preliminary <BR>
financial statements has not been reviewed by or reported on by the company's auditor.<BR>
<BR>
4. Accounting policies<BR>
<BR>
The accounting policies applied in the preparation of these condensed consolidated financial statements are in terms of IFRS and are <BR>
consistent with those accounting policies applied in the preparation of the previous consolidated annual financial statements as at and <BR>
for the year ended 28 February 2018, except for the mandatory adoption of IFRS 9 - Financial instruments and IFRS 15 - Revenue from <BR>
contracts with customers. The group has applied both standards retrospectively without restating comparative figures. Refer to note 14 <BR>
for further detail.<BR>
<BR>
5. Use of estimates and judgements<BR>
<BR>
In preparing these condensed consolidated financial statements, the significant judgements made by management in applying the group's <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>
6. Segment information<BR>
<BR>
The composition of the reportable segments represents the internal reporting structure and the monthly reporting to the chief operating <BR>
decision-maker (CODM). The CODM, for the purpose of IFRS 8 - Operating segments, has been identified as the chief executive officer, <BR>
supported by the group management committee (Manco). The group's internal reporting structure is reviewed in order to assess performance <BR>
and allocate 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 <BR>
each business segment, as well as housing the group's executive office. Besides the traditional accounting and secretarial services <BR>
provided to group divisions and subsidiaries, the corporate office also provides legal, risk, IT, marketing, HR, payroll, internal audit<BR>
and corporate finance services. The strategic elements of IT, in terms of both services and infrastructure, are also centralised in the <BR>
corporate office. The corporate costs are allocated to the three reportable segments.<BR>
<BR>
6.1 Description of business segments<BR>
<BR>
PSG Wealth, which consists of five business units - Distribution, Securities, LISP and Life Platform, Multi Management and Employee <BR>
Benefits - is designed to meet the needs of individuals, families and businesses. Through its highly skilled wealth managers, PSG Wealth <BR>
offers a wide range of personalised services (including portfolio management, stockbroking, local and offshore investments, estate <BR>
planning, financial planning, local and offshore fiduciary services, multi-managed solutions and retirement products). The Wealth offices <BR>
are fully equipped to 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<BR>
yet comprehensive range of local and global investment products. The division's products include both local and international unit trust <BR>
funds.<BR>
<BR>
PSG Insure, through its registered insurance brokers and PSG's short-term insurance company, Western National Insurance Company Limited, <BR>
offers a full range of tailor-made short-term insurance products and services from personal (home, car and household insurance) to <BR>
commercial (business and agri-insurance) requirements. To harness the insurance solutions available to customers effectively, the <BR>
division's expert insurance specialists, through a strict due diligence process, will simplify the selection process of the most <BR>
appropriate solution for its clients. In addition to the intermediary services which PSG Insure offers, PSG Short-Term Administration <BR>
supports clients through the claim process, administrative issues and general policy maintenance, including an annual reappraisal of <BR>
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 <BR>
measure of profitability. In order to evaluate the core results of the group, the CODM segregates the income statement by eliminating <BR>
the impact of the linked investment policies issued and the consolidation of the collective investment schemes from the core operations <BR>
in the group.<BR>
<BR>
A subsidiary of the group, PSG Life Limited, is a linked insurance company that issues linked policies to policyholders (where the value<BR>
of policy benefits is directly linked to the fair value of the supporting assets), and as such does not expose the group to the market <BR>
risk of fair value adjustments on the financial assets as this risk is assumed by the policyholder.<BR>
<BR>
The group consolidates collective investment schemes, in terms of IFRS 10 - Consolidated financial statements, over which the group has <BR>
control. The consolidation of these funds does not impact total earnings, comprehensive income, shareholders' funds or the net asset <BR>
value of the group; however, it requires the group to recognise the income statement impact as part of that of the group.<BR>
<BR>
6.2 Headline earnings per reportable segment<BR>
Asset<BR>
Wealth Management Insure Total<BR>
For the year ended 28 February 2019 (Reviewed) R000 R000 R000 R000<BR>
<BR>
Headline earnings (1) 355 228 167 279 81 381 603 888<BR>
- recurring 338 594 167 279 85 226 591 099<BR>
- non-recurring 16 634 - (3 845) 12 789<BR>
<BR>
Recurring headline earnings - excluding intangible asset amortisation cost (2) 370 172 167 786 103 370 641 328<BR>
<BR>
Asset<BR>
Wealth Management Insure Total<BR>
For the year ended 28 February 2018 (Audited) R000 R000 R000 R000<BR>
<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>
Recurring headline earnings - excluding intangible asset amortisation cost (2) 367 500 156 332 86 197 610 029<BR>
<BR>
(1) Headline earnings, calculated in terms of the requirements stipulated in Circular 4/2018 as issued by SAICA, comprise recurring and <BR>
non-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 <BR>
losses and the resulting tax charge on these items.<BR>
(2) The intangible amortisation cost includes the amortisation on customer relationships. It excludes the amortisation on computer <BR>
software and other intangible assets.<BR>
<BR>
6.3 Income per reportable segment<BR>
Asset <BR>
Wealth Management Insure Total<BR>
For the year ended 28 February 2019 (Reviewed) R000 R000 R000 R000<BR>
<BR>
Total IFRS reported income 2 245 411 562 264 1 763 658 4 571 333<BR>
Linked investment business and other income 32 244 - - 32 244<BR>
Total core income 2 277 655 562 264 1 763 658 4 603 577<BR>
<BR>
Total segment income 3 013 329 850 375 1 818 958 5 682 662<BR>
Intersegment income (735 674) (288 111) (55 300) (1 079 085)<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>
Linked investment business and other income (3 332) - - (3 332)<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>
6.4 Divisional income statement<BR>
<BR>
The profit or loss information follows a similar format to the consolidated income statement. The divisional income statement reflects the <BR>
core business operations of the group.<BR>
<BR>
Asset <BR>
Wealth Management Insure Total <BR>
For the year ended 28 February 2019 (Reviewed) R000 R000 R000 R000<BR>
<BR>
Total income 2 277 655 562 264 1 763 658 4 603 577<BR>
Total expenses (1 742 373) (338 509) (1 601 460) (3 682 342)<BR>
535 282 223 755 162 198 921 235<BR>
Total profit from joint ventures - - 431 431<BR>
Profit before finance costs and taxation 535 282 223 755 162 629 921 666<BR>
Finance costs (1) (22 132) (300) (12) (22 444)<BR>
Profit before taxation 513 150 223 455 162 617 899 222<BR>
Taxation (151 651) (56 197) (48 830) (256 678)<BR>
Profit for the year 361 499 167 258 113 787 642 544<BR>
<BR>
Attributable to:<BR>
Owners of the parent 355 360 167 258 79 556 602 174<BR>
Non-controlling interest 6 139 - 34 231 40 370<BR>
361 499 167 258 113 787 642 544<BR>
<BR>
Headline earnings 355 228 167 279 81 381 603 888<BR>
Recurring headline earnings 338 594 167 279 85 226 591 099<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 earnings 339 129 155 825 71 442 566 396<BR>
Recurring headline earnings 339 129 155 825 71 442 566 396<BR>
<BR>
(1) Finance costs in the PSG Wealth division consist mainly of the finance charge on the funding utilised to provide loan facilities to <BR>
clients on their share portfolios at PSG Securities (secured by the underlying JSE Top 100 equity securities held in excess of four <BR>
times the value of the loan facilities) on which PSG Wealth receives a margin. The finance costs of R22.1 million (2018: R22.5 million)<BR>
consist of R9.8 million (2018: R8.0 million) on the loan funding, with the remaining portion of the finance charge on the CFD margin <BR>
and the bank overdrafts.<BR>
<BR>
6.5 Statement of financial position (client vs own)<BR>
<BR>
In order to evaluate the consolidated financial position of the group, the CODM segregates the statement of financial position of the <BR>
group between own balances and client-related balances.<BR>
<BR>
Client-related balances represent the investment contract liabilities and related linked client assets of PSG Life Limited, the broker and <BR>
clearing accounts, and the settlement control accounts of the stockbroking business, the collective investment schemes consolidated under<BR>
IFRS 10 - Consolidated financial statements and corresponding third-party liabilities, the short-term claim control accounts and related<BR>
bank accounts, as well as the contracts for difference assets and related liabilities.<BR>
<BR>
Total Client-<BR>
IFRS Own related<BR>
reported balances balances<BR>
As at 28 February 2019 (Reviewed) R000 R000 R000<BR>
<BR>
ASSETS<BR>
Equity securities 2 353 387 16 444 2 336 943<BR>
Debt securities (4) 6 262 071 52 207 6 209 864<BR>
Unit-linked investments 46 488 080 769 414 45 718 666<BR>
Investment in investment contracts 16 048 - 16 048<BR>
Receivables including insurance receivables (4) 1 690 828 369 874 1 320 954<BR>
Derivative financial instruments 10 592 - 10 592<BR>
Cash and cash equivalents (including money market funds) (4) 945 442 1 848 840 (903 398)<BR>
Other assets (1) 1 607 714 1 607 714 -<BR>
Total assets 59 374 162 4 664 493 54 709 669<BR>
<BR>
EQUITY<BR>
Equity attributable to owners of the parent 2 989 274 2 989 274 -<BR>
Non-controlling interest 225 308 225 308 -<BR>
Total equity 3 214 582 3 214 582 -<BR>
<BR>
LIABILITIES<BR>
Borrowings (2) 112 314 1 725 110 589<BR>
Investment contracts 25 932 120 - 25 932 120<BR>
Third-party liabilities arising on consolidation of mutual funds (4) 27 350 796 - 27 350 796<BR>
Derivative financial instruments 13 973 - 13 973<BR>
Trade and other payables (4) 2 153 524 851 333 1 302 191<BR>
Other liabilities (3) 596 853 596 853 -<BR>
Total liabilities 56 159 580 1 449 911 54 709 669<BR>
<BR>
Total equity and liabilities 59 374 162 4 664 493 54 709 669<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 <BR>
balances.<BR>
(3) Other liabilities consist of deferred reinsurance acquisition revenue, current and deferred income tax liabilities and insurance contracts.<BR>
(4) The client-related balances include the impact of the consolidation of the PSG Money Market Fund. The cash invested therein was <BR>
derecognised and all of the fund's underlying highly liquid debt securities, receivables and trade and other payables were recognised.<BR>
Third-party cash invested in the PSG Money Market Fund is included under third-party liabilities arising on consolidation of mutual funds.<BR>
<BR>
Total Client-<BR>
IFRS Own related<BR>
reported balances balances<BR>
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 investments) 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<BR>
balances.<BR>
(3) Other liabilities consist of deferred reinsurance acquisition revenue, current and deferred income tax liabilities and insurance <BR>
contracts.<BR>
<BR>
6.6 Income statement (client vs own)<BR>
<BR>
In order to evaluate the consolidated income statement of the group, the CODM segregates the income statement by eliminating the impact <BR>
of the 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 year ended 28 February 2019 (Reviewed) R000 R000 R000 <BR>
<BR>
Revenue from contracts with customers (3) 3 350 590 3 440 312 (89 722)<BR>
Investment income (4) 1 884 470 213 587 1 670 883<BR>
Net fair value gains and losses on financial instruments 646 786 2 344 644 442<BR>
Fair value adjustment to investment contract liabilities (1 061 253) - (1 061 253)<BR>
Fair value adjustment to third-party liabilities (1 196 594) - (1 196 594)<BR>
Other (1) 947 334 947 334 -<BR>
Total income 4 571 333 4 603 577 (32 244)<BR>
<BR>
Insurance claims and loss adjustment expenses (803 746) (803 746) -<BR>
Other (2), (3) (2 821 998) (2 878 596) 56 598<BR>
Total expenses (3 625 744) (3 682 342) 56 598<BR>
<BR>
Total profit from joint ventures 431 431 -<BR>
Profit before finance costs and taxation 946 020 921 666 24 354<BR>
Finance costs (34 297) (22 444) (11 853)<BR>
Profit before taxation 911 723 899 222 12 501<BR>
Taxation (269 179) (256 678) (12 501)<BR>
Profit for the year 642 544 642 544 -<BR>
<BR>
Attributable to:<BR>
Owners of the parent 602 174 602 174 -<BR>
Non-controlling interest 40 370 40 370 -<BR>
642 544 642 544 -<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 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 <BR>
amortisation, 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>
<BR>
6.7 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 <BR>
between 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 year ended 28 February 2019 (Reviewed) R000 R000 R000<BR>
<BR>
Cash flows from operating activities 618 721 670 490 (51 769)<BR>
Cash (utilised in)/generated by operations (1 016 172) 701 845 (1 718 017)<BR>
Interest income 1 404 489 209 819 1 194 670<BR>
Dividend income 479 981 3 768 476 213<BR>
Finance costs (34 297) (22 444) (11 853)<BR>
Taxation (paid)/refunded (222 391) (222 498) 107<BR>
Policyholder cash movement 7 111 - 7 111<BR>
<BR>
Cash flows from investing activities (1 360 071) (153 709) (1 206 362)<BR>
Acquisition of subsidiaries (including collective investment schemes) (1 226 304) (52 042) (1 174 262)<BR>
Disposal of subsidiaries (including collective investment schemes) (32 100) - (32 100)<BR>
Other (1) (101 667) (101 667) -<BR>
<BR>
Cash flows from financing activities (241 845) (241 845) -<BR>
<BR>
Net (decrease)/increase in cash and cash equivalents (983 195) 274 936 (1 258 131)<BR>
Cash and cash equivalents at beginning of the year 1 920 626 1 565 893 354 733<BR>
Exchange gains on cash and cash equivalents 8 011 8 011 -<BR>
Cash and cash equivalents at end of the year 945 442 1 848 840 (903 398)<BR>
<BR>
(1) Other consists of cash flows relating to the acquisition of intangible assets, purchases of property and equipment, proceeds from <BR>
disposal of assets and liabilities held for sale, proceeds from disposal of intangible assets and other.<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 <BR>
balances.<BR>
<BR>
7. Investment contracts<BR>
<BR>
Investment contracts are represented by the following financial assets:<BR>
<BR>
Reviewed Audited<BR>
as at as at<BR>
28 Feb 19 28 Feb 18<BR>
R000 R000<BR>
<BR>
Equity securities 2 176 799 2 192 586<BR>
Debt securities 368 466 483 551<BR>
Unit-linked investments 23 362 722 21 587 040<BR>
Investments in investment contracts 16 048 14 798<BR>
Cash and cash equivalents 8 085 974<BR>
25 932 120 24 278 949<BR>
<BR>
8. 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 278.0 million (2018: R1 372.6 million)<BR>
represents amounts owing by the JSE for trades conducted during the last few days before the end of the financial year. These balances<BR>
fluctuate on a daily basis depending on the activity in the market.<BR>
<BR>
The control account for the settlement of these transactions is included under the trade and other payables, with the settlement to the <BR>
clients taking place within three days after the transaction date.<BR>
<BR>
9. Notes to the statement of cash flows<BR>
<BR>
9.1 Acquisition of subsidiaries and businesses<BR>
<BR>
For the year ended 28 February 2019<BR>
Collective investment schemes<BR>
<BR>
The group obtained control of the PSG Wealth Global Preserver Feeder Fund and the PSG Money Market Fund during the 2019 financial year. <BR>
These funds were consolidated in accordance with IFRS 10 - Consolidated financial statements and are collective investment schemes managed<BR>
by entities within the group.<BR>
<BR>
PSG Wealth <BR>
Global Preserver PSG Money <BR>
Fund consolidated Feeder Fund Market Fund<BR>
<BR>
% interest in fund on effective date 31 49<BR>
Date of acquisition 31 August 28 February <BR>
2018 2019<BR>
<BR>
Details of the net assets acquired are as follows: R000 R000<BR>
<BR>
Debt securities - 3 391 088<BR>
Unit-linked investments 992 065 -<BR>
Receivables including insurance receivables 553 759<BR>
Cash and cash equivalents (including money market funds) 9 542 61 821<BR>
Third-party liabilities arising on consolidation of mutual funds (689 002) (1 779 206)<BR>
Trade and other payables (382) (1 245)<BR>
Net asset value 312 776 1 673 217<BR>
Fair value of interest held before the business combination (312 776) (1 673 217)<BR>
Cash consideration paid - -<BR>
Cash and cash equivalents derecognised - (1 245 625)<BR>
Cash and cash equivalents acquired 9 542 61 821<BR>
Net cash inflow/(outflow) for the year ended 28 February 2019 9 542 (1 183 804)<BR>
<BR>
Had the PSG Wealth Global Preserver Feeder Fund been consolidated from 1 March 2018, total income of R3.4 million and profit of Rnil <BR>
would have been recognised in the consolidated income statement.<BR>
<BR>
Had the PSG Money Market Fund been consolidated from 1 March 2018, total income of R13.4 million and profit of Rnil would have been <BR>
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<BR>
short-term insurance and the personal lines short-term insurance brokerage business of AIFA. The effective dates of these transactions <BR>
were 1 June 2018 and 1 December 2018 respectively following the fulfilment of suspensive conditions.<BR>
<BR>
Commercial Personal<BR>
and industrial lines<BR>
Details of the net assets acquired are as follows: R000 R000<BR>
<BR>
Cash paid 32 766 18 526<BR>
Cash due 32 765 18 526<BR>
Total purchase consideration 65 531 37 052<BR>
Less: Fair value of net assets acquired (42 597) (25 338)<BR>
Goodwill recognised on acquisition 22 934 11 714<BR>
<BR>
The remaining purchase consideration for these transactions will be paid in two 25% tranches over the next two years.<BR>
<BR>
Cash consideration paid (32 766) (18 526)<BR>
Cash and cash equivalents acquired - -<BR>
Net cash outflow for the year ended 28 February 2019 (32 766) (18 526)<BR>
<BR>
The goodwill is mainly attributable to the workforce of the acquired business.<BR>
<BR>
Commercial Personal<BR>
and industrial lines<BR>
The fair value of the assets and liabilities arising from the acquisition are as follows: R000 R000<BR>
<BR>
Intangible assets - Customer relationships 59 162 35 191<BR>
Deferred income tax (16 565) (9 853)<BR>
Total identifiable net assets 42 597 25 338<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 R105.2 million. The book of business also contributed a profit after taxation of R12.3 million <BR>
over the same period. Had the AIFA commercial and industrial short-term insurance brokerage business been consolidated from 1 March 2018, <BR>
the consolidated income statement would have shown income of R140.2 million and profit after taxation of R16.4 million for the year ended <BR>
28 February 2019.<BR>
<BR>
The income, included in the consolidated income statement, contributed by the AIFA personal lines short-term insurance brokerage business <BR>
since the acquisition date, was R19.0 million. The book of business also contributed a profit after taxation of R2.5 million over the same <BR>
period. Had the AIFA personal lines short-term insurance brokerage business been consolidated from 1 March 2018, the consolidated income <BR>
statement would have shown income of R76.2 million and profit after taxation of R10.1 million for the year ended 28 February 2019.<BR>
<BR>
9.2 Disposal of subsidiaries and businesses<BR>
<BR>
For the year ended 28 February 2019<BR>
Collective investment schemes<BR>
<BR>
The group deconsolidated the PSG Multi-Management Foreign Flexible Fund of Funds and the PSG Wealth Income Fund of Funds during the 2019<BR>
financial year as the group lost control of these funds, due to a decrease in the effective interest in the funds.<BR>
<BR>
PSG Multi PSG Wealth<BR>
Management Income <BR>
Foreign Flexible Fund <BR>
Fund of Funds of Funds<BR>
Details of the net assets disposed of are as follows: R000 R000<BR>
<BR>
Unit-linked investments 133 049 2 797 522<BR>
Receivables including insurance receivables 186 008 1 228<BR>
Cash and cash equivalents (including money market funds) 17 182 14 918<BR>
Third-party liabilities arising on consolidation of mutual funds (228 106) (1 772 309)<BR>
Trade and other payables (2 511) (1 611)<BR>
Net asset value 105 622 1 039 748<BR>
Transfer to unit-linked investments (105 622) (1 039 748)<BR>
Cash consideration received - -<BR>
Cash and cash equivalents given up (17 182) (14 918)<BR>
Net cash outflow for the year ended 28 February 2019 (17 182) (14 918)<BR>
<BR>
Assets and liabilities held for sale<BR>
<BR>
PSG Konsult Limited, through its subsidiary PSG Konsult (Mauritius) Limited, entered into an agreement to sell its 70% interest held in the <BR>
PSG Wealth Limited (Mauritius) and PSG Securities Limited (Mauritius) businesses. The transaction was subject to suspensive conditions and <BR>
was treated as held for sale on 31 August 2018.<BR>
<BR>
The businesses were sold for R7.2 million, effective 1 November 2018, after the fulfilment of the suspensive conditions.<BR>
<BR>
9.3 Other acquisitions - standardising of revenue sharing model<BR>
<BR>
For the year ended 28 February 2019<BR>
<BR>
The group, through its subsidiary PSG Wealth Financial Planning Proprietary Limited, concluded further revenue sharing arrangements with a <BR>
number of its advisers during the financial year. The purpose of these transactions was to standardise the revenue sharing arrangements <BR>
between the advisers and PSG Konsult.<BR>
<BR>
A total cash consideration of R38.9 million was paid on the effective dates. These transactions did not qualify for accounting in terms of <BR>
IFRS 3 - Business combinations, as the assets acquired (the right to an increased share in the income stream of the adviser) did not <BR>
constitute a business acquired.<BR>
<BR>
These transactions contributed R3.3 million to our headline earnings during the 2019 financial year, net of amortisation cost of R1.5 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>
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 financial statements do not include all risk management information and disclosure required in the annual financial <BR>
statements and should be read in conjunction with the group's annual financial statements as at 28 February 2019.<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>
Market risk is the risk of adverse financial impact due to changes in fair values or future cash flows of financial instruments from <BR>
fluctuations in interest rates, equity prices and foreign currency exchange rates.<BR>
<BR>
A portion of the policyholders' and shareholders' investments are valued at fair value and are therefore susceptible to market fluctuations.<BR>
<BR>
With regard to the subsidiary, PSG Life Limited, this company only invests assets into portfolios that are exposed to market price risk that <BR>
matches linked policies to policyholders (where the value of policy benefits is directly linked to the fair value of the supporting assets), <BR>
and as such does not expose the business to the market risk of fair value adjustments on the financial asset as this risk is assumed by the <BR>
policyholder. Fees charged on this business are determined as a percentage of the fair value of the underlying assets held in the linked funds,<BR>
which are subject to 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 R2 353.4 million (2018: R2 321.5 million) are quoted equity securities of R2 353.1 million (2018: <BR>
R2 321.2 million), of which R2 176.8 million (2018: R2 192.6 million) relates to investments in linked investment contracts. The price risk of <BR>
these instruments is carried by the policyholders of the linked investment contracts.<BR>
<BR>
Unit-linked investments of R23 362.7 million (2018: R21 587.0 million) are linked to investment contracts and do not directly expose the group <BR>
to price or interest rate risk.<BR>
<BR>
Debt securities linked to policyholder investments amounted to R368.5 million (2018: R483.6 million) and do not expose the group to interest <BR>
rate risk. Cash and cash equivalents linked to policyholder investments amounted to R8.1 million (2018: R1.0 million) and do not expose the <BR>
group to interest rate risk.<BR>
<BR>
Fair value estimation<BR>
The information below analyses financial instruments, carried at fair value, by level of hierarchy as required by IFRS 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 financial year under review.<BR>
<BR>
The table below analyses financial assets and liabilities, which are carried at fair value, by valuation method. There were no significant <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 <BR>
can be summarised as follows:<BR>
<BR>
Instruments Valuation techniques Main assumptions<BR>
<BR>
Derivative financial instruments Exit price on recognised over-the-counter (OTC) platforms Not applicable<BR>
<BR>
Debt securities Valuation model that uses the market input (yield of Bond interest rate curves<BR>
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 particular Not applicable - prices provided<BR>
investment contract by registered long-term insurers<BR>
<BR>
Investment contract liabilities - unit linked Current unit price of underlying unitised financial asset Not applicable<BR>
that is linked to the liability, multiplied by the<BR>
number of units held <BR>
<BR>
Third-party liabilities arising on the Quoted put (exit) price provided by the fund manager Not applicable - prices are<BR>
consolidation of mutual funds 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 28 February 2019 (Reviewed) R000 R000 R000 R000<BR>
<BR>
Financial assets<BR>
Derivative financial instruments - 10 592 - 10 592<BR>
Equity securities 2 353 147 - 240 2 353 387<BR>
Debt securities 876 023 5 319 500 - 6 195 523<BR>
Unit-linked investments - 46 033 221 454 859 46 488 080<BR>
Investment in investment contracts - 16 048 - 16 048<BR>
3 229 170 51 379 361 455 099 55 063 630<BR>
<BR>
Financial liabilities<BR>
Derivative financial instruments - 13 973 - 13 973<BR>
Investment contracts - 25 438 584 435 129 25 873 713<BR>
Trade and other payables - - 91 655 91 655<BR>
Third-party liabilities arising on consolidation of mutual funds - 27 350 796 - 27 350 796<BR>
- 52 803 353 526 784 53 330 137<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 financial years under review:<BR>
<BR>
Reviewed Audited<BR>
28 Feb 19 28 Feb 18<BR>
R000 R000<BR>
<BR>
Assets<BR>
Opening carrying value 717 377 1 109 600<BR>
Additions 229 809 487 832<BR>
Disposals (523 353) (903 023)<BR>
Gains recognised in profit or loss (1) 31 266 22 968<BR>
Closing carrying value 455 099 717 377<BR>
<BR>
Liabilities<BR>
Opening carrying value 743 490 1 137 380<BR>
Additions 311 940 541 839<BR>
Disposals (611 564) (962 005)<BR>
Subsidiaries acquired 51 931 -<BR>
Losses recognised in profit or loss (2) 30 987 26 276<BR>
Closing carrying value 526 784 743 490<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 recognised in profit or loss were recognised 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 <BR>
at fair value, for which their carrying values do not approximate their fair values:<BR>
<BR>
Reviewed Audited<BR>
28 Feb 19 28 Feb 18<BR>
R000 R000<BR>
<BR>
Assets<BR>
Debt securities<BR>
- Carrying value 66 548 159 928<BR>
- Fair value 65 540 159 038<BR>
<BR>
Liabilities<BR>
Investment contracts<BR>
- Carrying value 58 407 159 928<BR>
- Fair value 57 523 159 038<BR>
<BR>
The fair value of the financial assets and liabilities in the table above is categorised as 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 <BR>
place during the financial year.<BR>
<BR>
12. Capital commitments and contingencies<BR>
Reviewed Audited<BR>
28 Feb 19 28 Feb 18<BR>
R000 R000<BR>
<BR>
Operating lease commitments 236 727 142 975<BR>
Capital commitments - -<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 <BR>
the condensed consolidated financial statements.<BR>
<BR>
14. 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 <BR>
they would have been taken to opening retained earnings, however the impact of the adoption of IFRS 9 and IFRS 15 was immaterial and no <BR>
adjustment is therefore presented.<BR>
<BR>
Adoption of IFRS 15<BR>
This new standard provides a single, principles-based five-step model to be applied to all contracts with customers. Guidance is provided <BR>
on topics such as the point at which revenue is recognised, accounting for variable consideration, costs of fulfilling and obtaining a <BR>
contract and 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,<BR>
which are all scoped out of IFRS 15.<BR>
<BR>
There were no material changes to the revenue recognition for commission and other fee income, which is recognised in terms of IFRS 15. <BR>
Consequently, there was no financial impact to the consolidated group on 1 March 2018 upon adoption of IFRS 15.<BR>
<BR>
IFRS 15 required revenue from contracts with customers to be separately presented on the face of the income statement. Refer to the <BR>
condensed consolidated income statement where this amendment has been made.<BR>
<BR>
Adoption of IFRS 9<BR>
This new standard represents a package of reform to financial instrument accounting to replace IAS 39 - Financial instruments: Recognition <BR>
and measurement.<BR>
<BR>
Financial assets<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 was as follows for the group:<BR>
- Financial instruments and derivative assets, which are held to back client assets or for risk management purposes, previously measured at <BR>
fair value through profit or loss under IAS 39, are also measured at fair value through profit or loss under IFRS 9.<BR>
- Loans and receivables that were classified as loans and receivables and measured at amortised cost under IAS 39 are 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 <BR>
new ECL model. In assessing the impairment that should be raised under the ECL model on these financial assets, credit enhancements such as <BR>
security held against loans and receivables are taken into account in the ECL model. It was noted that the impact of the ECL provision was<BR>
substantially impacted by the credit enhancements, and the increase in the impairment provision from the incurred loss model to the ECL<BR>
model was found to be immaterial.<BR>
<BR>
Financial liabilities<BR>
The requirement for the classification and measurement under IFRS 9 has not changed significantly from IAS 39. The group under IAS 39 <BR>
classified the majority of the investment contract liabilities and third-party liabilities arising on consolidation of mutual funds at fair<BR>
value through profit or loss, so as to eliminate an accounting mismatch as the linked policyholder assets and the assets relating to the <BR>
consolidated mutual funds are carried at fair value through profit or loss. The group has as part of its IFRS 9 implementation process <BR>
considered the classification of its linked policyholder assets and consolidated mutual fund assets, and the direct impact these financial <BR>
assets would have on the measurement on the related financial liabilities. It was found that the measurement of financial assets at fair <BR>
value through profit or loss was appropriate and therefore to avoid an accounting mismatch, the corresponding financial liabilities were <BR>
retained at fair value through profit or loss. Therefore, no impact upon adoption of IFRS 9 was identified.<BR>
<BR>
Impact on adoption of IFRS 9<BR>
The net financial impact of the changes in classification and measurement after tax had a Rnil impact on opening retained earnings on <BR>
1 March 2018. Upon adoption of IFRS 9, the group had no financial instruments 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 <BR>
been made.<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>
Z 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>
Stock Exchange of Mauritius (SEM)<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>
SEM authorised representative and SEM sponsor: Perigeum Capital Ltd<BR>
<BR>
Auditor<BR>
PricewaterhouseCoopers Inc.<BR>
Cape Town<BR>
<BR>
Website address<BR>
www.psg.co.za<BR>
<BR>
<BR>
Date: 17/04/2019 11:45:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). <BR>
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of<BR>
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct, <BR>
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,<BR>
information disseminated through SENS.<BR>