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PSG Financial Services’ interim earnings up 21% despite economic headwinds

11 October 2023 PSG

PSG Financial Services Limited (JSE:KST) today announced its interim results for the six months ended 31 August 2023.

PSG Financial Services (the group) delivered an impressive performance over the six month period on the back of its ability to generate new business in a challenging trading environment. This resulted in a 22.5% return on equity and a 21% increase in recurring headline earnings per share for the period, following net inflows into managed assets of R9.5bn. The group also increased core income by 15% over the comparable period.

According to CEO Francois Gouws, the group’s performance in a challenging economic environment showcases the competitive advantage of its advice-led business model, and management’s strength in executing on its strategic plans consistently over multiple years, which has repeatedly paid off for shareholders.

“We remain confident of the group’s long-term growth prospects, and therefore continued to invest in both technology and our people. Compared to the prior six-month period, our technology and infrastructure spend increased by 12% (these costs continue to be fully expensed), while our fixed remuneration costs grew by 12%. We are proud of the progress made in growing our own talent, with 32 newly qualified graduates having joined during the six-month period.  

“The group’s success is testament to our advice-led business model and robust network of advisers, which continues to expand and provide excellent client service, which, in turn, has generated  outstanding value for our shareholders.Total assets under management increased by 19% to R375.9bn over the prior period, a considerable performance considering the challenging operating environment, with some industry players facing considerable client outflows.”

The 19% increase comprised of assets managed by PSG Wealth increasing by 18% to R325.6 billion, PSG Asset Management by 20% to R50.3 billion, while PSG Insure’s gross written premium amounted to R3.4 billion (a 12% increase). Performance fees earned constituted 2.5% (2022: 3.7%) of headline earnings.

From a cost perspective, the group’s Insure division was adversely impacted by the Boksburg earthquake and Western Cape storms during June 2023. However, Western National’s comprehensive reinsurance programme cushioned the effect on underwriting results.

Results at a glance

 

Recurring headline earnings per share

 

21%

 

2023

2022

2021

Cents

37.6

31.0

30.6

Dividend

per share

 

23%

 

2023

2022

2021

Cents

13.5

11.0

10.0

Total assets under management

19%

 

2023

2022

2021

Rbn

375.9

317.0

295.6

Gross written premium

12%

 

2023

2022

2021

Rbn

3.40

3.04

2.82

 

Capital management

PSG Financial Services continues to generate strong cash flows, which provides the group with options to optimise its capital structure and risk adjusted returns to shareholders. In line with this strategy, the group repurchased 9.7 million shares at a cost of R120.6 million.

The group remains well capitalised with its capital cover ratio increasing to 240% (2022: 238%) based on the latest insurance group return, and exceeds the minimum regulatory requirement of 100% by a substantial margin.

During August 2023, Global Credit Rating Company affirmed the group’s long-term and short-term credit ratings at A+ (ZA) and A1(ZA) respectively, with a Stable Outlook.

Dividend declaration

The PSG Financial Services board declared an interim gross dividend of 13.5 cents per share from income reserves for the period ended 31 August 2023 (2022: 11.0 cents per share), which reflects the group’s sound financial position and confidence in its future prospects. The group’s dividend pay-out ratio is expected to remain between 40% to 60% of recurring headline earnings excluding intangible asset amortisation.

Looking ahead

Looking ahead, Gouws says the group remains confident about its strategy and it will continue to invest in the business to secure its prospects for long-term growth.

“We have always been confident that resourceful South Africans will build a better future for themselves and future generations. The recent collaborative efforts between the government and the private sector to alleviate energy supply issues, improve the country’s logistics performance and address the high crime and corruption levels are welcomed by the group. Urgent action in resolving these three core challenges needs to remain a priority to support a recovery in South Africa’s economic growth rate that will ultimately lead to much-needed job creation.

“Irrespective of the short-term challenges, we remain confident in our long-term strategy and will continue to invest in our businesses, thereby securing prospects for growth. We will, however, continue to monitor local and global events and the associated impact on the group’s clients and other stakeholders,” he concludes.

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