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Strong financial position, digital investment a successful formula for PSG Konsult (KST)

08 October 2020 PSG Konsult

Firm announces interim results for the six months ending 31 August 2020

The first six months of PSG Konsult’s 2021 financial year saw a ratings downgrade for South Africa and an economic shutdown in response to the global COVID-19 pandemic.

Fortunately, PSG Konsult’s strong balance sheet and excellent liquidity stood it in good stead in the face of these challenges. “Our strong financial position and cash flow, together with years of investing in our systems and enhancing our digital capabilities enabled us to operate successfully in very difficult times, and still generate a solid return for our shareholders,” said CEO Francois Gouws.

The company achieved a solid 7% growth in recurring headline earnings to 24.8 cents per share (2019: 23.2 cents per share) and generated a return on equity (ROE) of 19.6%. Given the group’s strong financial position and the board’s confidence in the group’s prospects, the board declared an interim gross dividend of 8.0 cents per share from income reserves (2019: 7.5 cents per share), which is in line with the dividend policy communicated at the time of listing.

Other salient features of the interim results were a 7% growth in total assets under management to R245 billion (2019: R228 billion), and the fact that the firm’s gross written premium remained steady at R2.7 billion.

Adverse impacts on the results were the sharp decline in interest rates, which reduced net investment income, and the support the group provided clients through premium relief, interim business interruption relief payments and other measures.

Gouws said the firm continued to further automate and streamline its platforms and processes, in support of its strategic goal of enhancing overall client experience. Its digital strength enabled it to remain in close contact with clients over the period, despite various levels of lockdown, and bring an added element of engagement in the form of a series of high value webinars – called the Think Big series - featuring South African luminaries dispelling both anxiety and fake news.

During the period PSG Wealth, one of three divisions in PSG Konsult, took top honours in Intellidex’s Top Private Banks and Wealth Manager Awards, claiming the title of Wealth Manager of the Year: Large Institutions, for the second consecutive time.
The group’s Insure division was also recognised this period, winning the Santam National Broker of the Year award for performance excellence in commercial lines, personal lines, specialist business and portfolio administration. In total, PSG Insure took four of five awards on offer this year – a clear indicator of the business’ strength.

PSG Konsult complies with the Prudential Authority’s Financial Soundness Standards, with a capital cover ratio of 208% (2019: 182%) based on the latest insurance group return. “Our prudent approach to investing shareholder assets, that support our regulatory capital requirements, continues to ensure that the group has a strong balance sheet and excellent liquidity. Shareholder assets invested in cash, money market and related instruments continue to comprise around 90% of total investable shareholder assets.”

Gouws said the group continues to monitor the macroeconomic environment, both locally and globally, and the associated impact on its clients and other stakeholders.

“Our strong financial position and cash flow enables us to continue to invest in long-term growth opportunities, systems and processes, while optimising risk-adjusted returns for our shareholders. As such, we remain confident about the prospects for continued growth.”

In conclusion, Gouws extended his gratitude to the board and all the group’s stakeholders including shareholders, advisers, clients, business partners, management and employees for their support and contributions during the past six months.

Quick Polls

QUESTION

Covid-19 may accelerate certain industry trends. What are we likely to see?

ANSWER

Adoption of contactless technologies and digital experiences will likely be accelerating emerging technologies further
The consumer will expect safety and precautionary measures, driving the need for enhanced surveillance policies and technologies, which may pose potential privacy concerns
Rising activism among consumers and employees could drive an increased focus on corporate purpose
Value chain disruption is likely to lead to an increase in creative partnerships, which may in turn cause organisations to further invest in developing the mindset and agility to collaborate across sectors in the ecosystem
Cost management will be a critical priority to ensure business continuity based on cash flow requirements, to manage lower margins and revenues during a downturn
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