PSG Group deliver robust results
PSG Group, the listed investment holding company with 36 underlying investments in financial services, banking, private equity, agriculture and education, delivered robust financial results for the twelve months to February 2013. This was mainly due to Ca
The total value of these investments at 28 February 2013, as measured by PSG Group’s sum-of-the-parts (SOTP) indicator, increased by a hefty 30% from R55.92 to R72.67 per share, which equated to a 40% compound annual growth rate over the last three years. About 81% of this value is calculated using listed share prices, while the unlisted investments are valued using market-related multiples. At 11 April 2013, the SOTP value was R78.60 per share. The net asset value per share was R32.62 (2012: R26.50).
Recurring headline earnings per share grew by 27,1% from 308.6 cents to 392.3 cents, with total recurring headline earnings amounting to R714.9 million (2012: R536.5 million).
PSG Group focuses less on headline and attributable earnings due to its volatility. Over a 5-year period the group reported a cumulative total recurring headline earnings of R2.3 billion, headline earnings of R2.5 billion and attributable earnings of R3 billion. The fact that both headline and attributable earnings are substantially more than recurring headline earnings indicates that PSG has added value having continuously made significant non-recurring profits.
A final dividend of 78 cents (2012: 56 cents) per share was declared to bring the total dividend for the year to 111 cents (2012: 82 cents) per share. This represents an increase of 35.4%.
Announcing the results, PSG Group CEO, Piet Mouton, said that based on an indexed value of PSG Group’s compound annual growth rate since the group was established 17 years ago, the total return index amounts to 51.4%. “Taking into account the share price appreciation, dividends and other distributions, this is the highest of any JSE-listed company over the same period.”
Regarding Capitec, Mouton said: “There is some negativity regarding the unsecured credit market and the industry may face challenges going forward. We, however, are confident that Capitec is well positioned to react to any challenges.
“Capitec has the most conservative provisioning policy in the industry with its sources of funding secure and diverse. The bank is well capitalised with a capital adequacy ratio of 41% and its banking model continues to attract a vast number of new and sticky, less risky clients. Capitec is becoming less dependent on interest income as it continues to experience a sharp increase in transaction fee income.
“But most important to PSG Group is that Capitec arguably has the best and most focused management team in the industry today.”
Capitec, representing 38.7% of the group’s assets, continues to be PSG’s star performer, contributing 56.6% to recurring headline earnings before funding.
Mouton announced that a new strategy was put in place at group level, to be referred to as Project Internal Focus.
“Some established businesses, such as Capitec, require less attention from PSG Group management. However, companies in the development phase, such as Curro, Impak, Energy Partners and Chayton have the potential to deliver substantial future earnings, but require more active input from PSG Group’s side.
“Then there are those businesses of which the strategy is under review and where PSG Group is playing a more active role. PSG Group’s investment portfolio, with a market capitalisation of about R80 billon, has vast potential. With active involvement the maximum value will be extracted.”
“Project Internal Focus is therefore all about developing strategy within the portfolio and ensuring the successful implementation thereof. PSG Group will assist these companies to grow, both organically and by means of suitable acquisition and/or merger opportunities. Ideally PSG Group wants fewer, but larger investments.”
“Our focus in the year ahead will therefore primarily be directed at the optimisation, refinement and growth of PSG Group’s existing portfolio instead of new acquisitions. However, true to our entrepreneurial spirit, this does not mean that we will ignore an attractive investment opportunity,” Mouton said.
The new strategy mainly consists of increased stakes coupled with increased control, of which Zeder’s controlling interests in both Agricol and Chayton, and its current effort to acquire additional shares in Kaap Agri, are examples.
When an investment does not perform to expectation or does not fit into our defined strategy, it will necessitate a review which may lead to a restructuring or disinvestment. In the light of this, PSG Group has restructured M&S (Topfix) in the past financial year by selling its loss-making scaffolding division.
PSG Group was unable to obtain more substantial influence in Petmin and as a result decided to sell our investment. Zeder was instrumental in driving the Capevin Holdings/Investments merger and in the process created significant value for Capevin Holdings shareholders. Zeder subsequently sold the majority of this investment as it became non-core.
A further element of the new strategy is for PSG Group to play a role where changes to management are necessary. PSG Group appointed or has been part of the process to appoint successor CEO’s at Zeder (Norman Celliers), PSG Konsult (Francois Gouws) and Pioneer Foods (Phil Roux) during the past financial year.
“Curro Holdings epitomises Project Internal Focus. The private schools company is undoubtedly the most successful venture that we have invested in over the last couple of years. The company’s relentless focus on both organic and acquisitive growth is starting to pay off. A plan has been formulated to have 80 schools by 2020 and no longer 40 as originally envisaged,” Mouton said.
Capitec provides PSG Group with a solid base, which enables management to extend their expertise to and focus on existing businesses to achieve their full potential. We remain optimistic and believe that PSG Group will continue to deliver superior returns for shareholders.
