PSG Group delivers strong interim results

Piet Mouton, PSG Group CEO.

PSG Group, the JSE-listed investment holding company with underlying investments in financial services, banking, private equity, agriculture and education, posted solid financial results for the six months to August with strong earnings from its key portfolio investments.

The group’s sum-of-the-parts (SOTP) value per share amounted to R109.52 as at 31 August 2014, against R95.01 as at 28 February 2014. At 10 October 2014 the SOTP value was R118.49 per share. In calculating the SOTP value, 81% of the value stems from JSE-listed share prices, while other investments are included at market-related valuations.

Recurring headline earnings per share grew by 30% to 252.7 cents and headline earnings per share by 31% to 312.9 cents. An interim dividend of 55 cents (2013: 43 cents) per share was declared, representing an increase of 28%.

Announcing the results, PSG Group CEO, Piet Mouton, said that this performance is the result of solid earnings from key investments, being Capitec, PSG Konsult, Curro and Zeder.

“These are all top quality companies with outstanding management teams and with business strategies delivering longer-term growth. PSG Group’s market capitalisation (net of treasury shares) is about R20 billion, with its largest investment a 28.3% interest in Capitec,” Mouton said.

Capitec, having produced a 21% increase in headline earnings in the six months to August 2014, has proved to be in a different class than the other companies in its sector.

Capitec, believed by PSG Group to have the best management team in its industry, has been conservatively managed ever since its establishment some 13 years ago. This is bearing fruit and we are confident that it will continue to produce strong growth going forward.

PSG Konsult, the financial services provider in which PSG Group has an interest of 62.7%, delivered strong performances from all its divisions - PSG Wealth, PSG Asset Management and PSG Insure. Recurring headline earnings per share increased by 32% in the six months to August 2014.

PSG Konsult attracted significant additional assets in the last year in both its Wealth and Asset Management businesses, building on an already great platform for future growth.

Curro, the independent schools company in which PSG Group has an interest of 57.1%, is exceeding on all its targets with strong growth in both its number of schools in operation and learner numbers. The company posted a 76% increase in headline earnings per share in the six months to June 2014, and is expected to make a substantial contribution to PSG Group’s profitability in the medium to long term.

Zeder delivered a 79% increase in recurring headline earnings in the period under review. The Agri Voedsel transaction, involving about 4 900 Agri Voedsel shareholders and amounting to R2.7 billion, is a major milestone for the company, increasing its investment portfolio to R10 billion. It was the largest single transaction in PSG Group’s history.

These key investments are all gaining traction and provide PSG Group with a platform for lasting and stable earnings growth going forward. It will also afford us the opportunity to look at other investments, particularly those currently in PSG Private Equity’s portfolio.

PSG Private Equity, a fully owned subsidiary of PSG Group, serves as incubator for the businesses of tomorrow. Given its nature, this portfolio will inevitably yield volatile earnings, while providing significant optionality. Recurring headline earnings decreased by 38% to R16 million during the period under review following tougher trading conditions as a result of, inter alia, the labour strikes.

Thembeka Capital, the black owned investment holding company and an associate of PSG Group, reported a 43% increase in recurring headline earnings per share for the period under review.

PSG Group has made a formal offer to acquire the 51% shareholding it does not already own in Thembeka. The objective of this transaction, amounting to about R1.14 billion, is to provide the 51% black-owned Thembeka shareholders with a mechanism to realise the underlying value that has been created since establishment in 2006.

“PSG Group is fortunate to have a quality asset portfolio with significant investment opportunities that should continue yielding above average returns in future,” Mouton said.