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PSG Konsult produces results 30% above pre-Covid results

07 October 2021 PSG Konsult

Leading financial services group PSG Konsult Limited (JSE:KST) today announced its interim results for the six months ended 31 August 2021.

PSG Konsult (the group) delivered a robust performance over the period on the back of steady improvement in its competitive market positioning. It increased recurring headline earnings per share by 23% over the prior year, generating a 22% return on equity. This result is circa 30% above pre-COVID levels. (H1 2019)

Despite the prevailing trading environment, all three operating divisions – PSG Wealth, PSG Asset Management and PSG Insure – achieved market leading growth in top-line revenue and recurring headline earnings.

Results at a glance

 

CEO Francois Gouws attributes the group’s performance to its core business strengths and strong focus on enabling technology adoption saying:

These results confirm the benefits of being an advice-led firm with the ability to maintain excellent relationships through integrity, trust and transparency. In addition, our sustained investment in digital capabilities to enhance the client experience enables us to operate seamlessly in the current environment and continue to generate returns for our shareholders.

PSG Wealth recorded net inflows of R10.8 billion in managed assets, up 40% over the prior period. The division was recognised as the Wealth Manager of the Year: Large Institutions at the Intellidex 2021 Wealth Manager of the Year Awards, for the third consecutive year. The division was also awarded as Top Online Broker at the recent Intellidex Top Securities Brokers Awards.

PSG Insure achieved sustained strong performance with R2.82 billion of gross written premium. The division also received the Santam National Intermediary of the Year award for performance excellence, in both the commercial and personal lines categories.

PSG Asset Management delivered significantly improved results, growing assets under administration to R161.5 billion, up 13% over February 2021. Pleasingly the majority of our funds’ performance ranked in the top quartile over a one-year period.

Capital management and credit rating

PSG Konsult remains well capitalised, with a capital cover ratio of 233% (2020: 208%), based on the latest insurance group return. This comfortably exceeds the 100% minimum regulatory requirement.

Gouws notes that the group’s solid financial position and conservative investment approach, ensure a strong balance sheet, which in turn allows for flexibility in terms of capital management:

Our strong financial performance and prudent approach to investing shareholder assets, ensure that PSG Konsult retains excellent liquidity and remains resilient. The group also generates strong cash flows, providing us with optionality in terms of our capital structure.

This is reflected by the fact that, during the reported period, PSG Konsult repurchased and cancelled 7.2 million shares at a cost of R80.4 million.

In July, the group’s long-term credit rating was upgraded by Global Credit Rating Company to A+ (ZA), while its short-term credit rating was affirmed at A1(ZA), with a stable outlook.

Interim dividend

In light of the group’s strong financial position and confidence in its prospects, it declared an interim dividend of 10.0 cents per share, a 25% increase over the previous period.

PSG Konsult’s dividend pay-out ratio remains between 40% to 50% of full year earnings. It has, however, changed the basis of the pay-out ratio to recurring headline earnings excluding intangible asset amortisation, a metric that Gouws says is better aligned to its cash generated earnings.

Investment – technology and people

The group continues to invest in, and make improvements to, its IT infrastructure and digital platforms which enhance the adviser and client experience.

Gouws says that the necessary acceleration of these investments, and continued innovation in this space, enabled the group to connect more regularly with more advisers, clients and employees.

In May we hosted our first online annual conference. The virtual nature of the event meant that the conference included all our advisers and employees, and we were able to host drawcard international speakers.

Gouws also maintains that a key competitive advantage for PSG Konsult is the quality of the group’s employees:

Our people and associated intellectual capital are what differentiates us as an organisation. We therefore are focused on maintaining a strong talent pipeline, by developing young South Africans through significant investment in newly qualified graduates

Looking ahead

Looking ahead, Gouws says that the group will continue to enhance its client offering and the client experience, which will ultimately result in value creation for shareholders.

We remain confident in PSG Konsult’s prospects and our ability to sustain growth going forward. Our strong balance sheet and motivated people enable us to focus on organic growth and optimising shareholder returns.

Quick Polls

QUESTION

The second draft amendments to Regulation 28 will allow retirement funds to allocate up to 45% of their assets to SA infrastructure, with a further 10% for rest of Africa; but the equity & offshore caps remain unchanged. What are your thoughts on the proposal?

ANSWER

Infrastructure? You mean cash returns with higher risk!?!
Infrastructure cap is way too high
Offshore limit still needs to be raised
Who cares… Reg 28 does not apply to discretionary savings
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