GCR upgrades PSG Konsult Limited’s rating on continued strong performance

14 July 2016 Eyal Shevel, GCR
Eyal Shevel, Head of Corporate Ratings at GCR.

Eyal Shevel, Head of Corporate Ratings at GCR.

Global Credit Ratings (GCR) has upgraded the national scale issuer ratings assigned to PSG Konsult Limited (PSGK) to A-(ZA) and A1-(ZA), in the long term and short term respectively; with the outlook accorded as Stable.

Eyal Shevel, Head of Corporate Ratings at GCR, says the upgrade reflects the company’s conservative balance sheet, risk profile and sound earnings capacity. PSGK has been successful in executing its business plan, which has seen its business profile continue to strengthen, supported by robust growth in revenue and earnings over recent years.

“PSGK’s strength lies in its ability to generate strong and consistent financial results despite weak economic periods. This has largely been supported by the fact that the overwhelming majority of fee income is more of an annuity type than performance related. Overall, the company has achieved a strong compound annual growth rate (CAGR) of 33% in recurring headline earnings over the past three years,” adds Shevel.

PSGK continued to reflect minimal financial leverage on its standalone balance sheet at FYE16, owing to the redemption of all term facilities over the prior two years. Accordingly, funding flexibility is considered strong, further supported by stable cash generation capabilities and access to undrawn debt facilities and the equity markets. Nonetheless, rating constraints include the sensitivity of the company to intense competition in all its operating segments and the highly volatile investment market conditions. This could potentially see large fluctuations in fee income, both in respect of performance and demand for financial products. Furthermore, compared with other large financial service groups, PSGK has a relatively small market share in its chosen markets.

“An upward rating movement over the medium to longer term could be driven by consistent market share gains in all the operating units, increased revenue diversity, and sustained strong credit metrics. A sustained downturn in the domestic economy could negatively impact fee and commission income, while severe market volatility could result in liquidity constraints. Any exposures that increase PSGK’s risk profile may lead to negative rating action,” concludes Shevel.

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