PSG headline earnings per share by a hefty 281,6%

PSG Group managed to boost its headline earnings per share by a hefty 281,6% to 249,2 cent per share for the year ended February 2010. This was mainly as a result of the marked-to-market movements, which are usually responsible for these kinds of volatilities.

This was said by PSG Group executive chairman, Jannie Mouton, at the announcement of the group’s financial results today. “However, for a more realistic measure of PSG’s performance one should refer to recurring headline earnings per share. Recurring headline earnings per share eliminates once-off items and takes into account the headline earnings per share of all underlying companies regardless the percentage shareholding in the company therefore, eliminating the volatility that fair value accounting brings to the reportable headline earnings.

On a recurring headline earnings per share basis the increase was 19% to 207,4 cents. This was mainly attributable to a stellar performance by Capitec, which increased headline earnings by 45% to R437 million. PSG Group has a 34,8% interest in Capitec. “Capitec is a company that emanated from the PSG stable about ten years ago and we are proud of its continuous exceptional growth and performance.” Mouton said.

The economic downturn had a more profound effect on the performances of the other PSG investments. However, there were no major casualties and we have already seen a recovery in operations. Consequently we expect an improvement in performance going forward, Mouton said.

PSG Konsult, in which PSG has a 73,5% interest, managed to increase its turnover by 10,3% to R834 million and operating profit by 2% to R134 million. Unfortunately that could not be carried through to the bottom line with a 7,7% decrease to R89,4 million. It was however pleasing to see the second half performance rendering headline earnings of almost R50 million compared to just under R40 million for the first half of the year. Mouton said that PSG Konsult remains operationally strong with 197 offices, 572 client serving advisors and assets under management and administration of R72,3 billion compared to R43,6 billion twelve months ago.

The 4,5% decrease to R27,8 million in headline earnings for PSG Fund Management was attributable to a very challenging first six months. However, with net inflows of R2,1 billion and stronger equity markets, assets under management and administration increased by 14% to R23,4 billion, which will aid the earnings in the new financial year. “Throughout the year we have spent time on the structure and strategy of PSG Fund Management going forward. Research and analyst functions are now pooled together creating a single asset management brand offering, simplified in a holistic range of funds going forward. In addition, PSG FutureWealth, the linked life insurer, is now a wholly owned subsidiary with all licenses consolidated under a “PSG Wealth” umbrella.”

Paladin and Zeder are companies which PSG manages in terms of management agreements and also has stakes in of 80,6% and 40,6% respectively.

As a result of significant rise in share prices of the BEE company, Thembeka Capital’s investments in the JSE Limited, Capitec Bank and PSG Group, Paladin Capital’s headline earnings increased from a R18 million loss to a R217 million profit. The 22% increase in recurring headline earnings was however mainly as a result of corporate action with the first time inclusion of Petmin’s results, as well as the R150 million rights issue which followed Paladin’s listing on 1 September 2009. Paladin has 13 investments in sectors other than financial services, agriculture, food and beverages. Apart from the investment in Petmin, in the current year it also acquired stakes in Curro Private Schools, Spirit Capital and increased its interest in Top-Fix while disposing of the stakes in Mainfin and Axon.

In the past year Zeder raised R495 million through a right issue. Its current portfolio of some R2,2 billion comprises agri, food and beverage related investments in 13 companies, of which Kaap Agri, Capevin and KWV represent more than 80%. Although recurring headline earnings increased to 6,2% to R208 million on a per share basis, the results were down by 26,7% to 23,6 cents mainly as a result of the increased number of shares, lower return from KWV and MGK and a lower effective interest in Distell. In addition, a non-recurring provision of R350 million for a potential fine was made by Pioneer, Zeder’s effective portion thereof is R43,9 million.

Mouton said that Zeder has R120 million in cash and R300 million in facilities which will be invested at attractive valuation multiples in an industry which still offers good potential for value creation.

Overall, PSG Group is a financial services group consisting of some forty investments across a diverse range of industries. We continuously provide input where appropriate in order to assist the companies in growing their businesses. Furthermore we allocate capital to opportunities with attractive growth prospects and returns, Mouton said.