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PSG Konsult announced interim results to 31 August 2018

12 October 2018PSG Konsult

Double digit growth for PSG Konsult

Despite South Africa’s challenging economic environment, PSG Konsult (KST) delivered double digit growth of 18% in recurring headline earnings per share for the six months to 31 August 2018. Return on equity came in at a healthy 22%.

“The continued upward trajectory of our key operating and financial metrics demonstrates the resilience of our business model and ability to gain market share even during periods where we experience economic headwinds,” said CEO Francois Gouws.

“Given our continued confidence in business prospects, the board decided to declare an interim gross dividend of 7.0 cents per share from income reserves (2017: 5.7 cents per share), representing a 23% increase from the previous interim period” Gouws said.

The firm’s total assets under management increased to R230 billion, comprising assets managed by PSG Wealth of R182 billion and PSG Asset Management of R48 billion, while PSG Insure’s gross written premium increased by 25% to R2 billion. Performance fees earned constituted 4.6% of headline earnings in comparison to 4.4% in the comparative period.

PSG Wealth
This division, which is home to the company’s wealth advisers, achieved recurring headline earnings growth of 7%. “We are satisfied with this result in the context of the prevailing investment market conditions,” Gouws said.

Management and other fees increased by 10% as the business continued to focus on recurring income and reduce its reliance on cyclical transactional brokerage fees, which decreased by 15% during the period under review due to lower transactional volumes.

Clients’ assets managed by advisers increased by 12% to R182 billion, which included R7 billion of positive net inflows.

“We’re confident about the fundamentals and prospects of the Wealth division, and that advisers and clients will gain, over the long term, from the division’s digital projects.”

“We are particularly proud of the division’s formidable financial adviser network, which consists of 546 advisers as at 31 August 2018. The experience and stature of the advisers that joined the firm continue to add credibility to our growing brand equity.”

PSG Asset Management
Recurring headline earnings for PSG Asset Management grew by 53%.

“The strong results achieved by this division is testimony to the team’s excellent long-term track record of delivering top-quartile risk-adjusted investment returns for our clients. The team’s ability to consistently generate alpha for clients across all asset classes over the appropriate investment horizon remained intact during difficult market conditions,” Gouws said.

Client assets under management increased by 13% to R48 billion during the six-months. This included R4.1 billion of positive net client inflows, predominately into the manager's’ higher-margin funds, with the bulk coming from its retail-orientated target market.

“We continue to add high-quality annuity earnings from our growing retail client base.”

PSG Insure
PSG Insure achieved recurring headline earnings growth of 11%.

“The group is pleased with this achievement,” Gouws said, “an achievement that was driven by improved underwriting results. This division continues to make inroads into the highly competitive short-term insurance market through organic growth and select acquisitions.”

It achieved gross written premium growth of 25% as it continued to focus its efforts on growing the commercial lines side of the business, which requires specialist adviser expertise. Fortunately, no significant catastrophe or other related events occurred during this period which, when combined with PSG Insure’s quality underwriting practices, allowed it to achieve an improved net underwriting margin of 10.5%, compared to the 7.4% achieved in the prior period.

The number of insurance advisers increased by 29% to 316 during the six-month period, following the acquisition of the commercial and industrial insurance brokerage business of Absa Insurance and Financial Advisers (AIFA) effective 1 June 2018, and the division continues to increase its market share on the commercial lines side. All costs incurred in setting up the required office infrastructure to implement this transaction have been fully expensed.

The Western Group’s short- and long-term insurance licenses in Botswana were approved during July 2018. The business is expected to become profitable in the medium term.

Looking forward
Gouws said the group’s aim remains to service existing clients in an integrated manner that is seamless and market-leading, as well as to gain new clients. Several initiatives are in place to ensure this continues.

“Our focus on products, platforms and client service excellence, through the quality of our advice process, works. As such, the prospects for continued growth remain compelling.”

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