Francois Gouws, COE of PSG Konsult.
Pays higher dividend than per-share earnings growth for first time in several years.
PSG Konsult (KST) announced today that it delivered a solid 16% rate of growth in recurring headline earnings per share and a return on equity of 24% for the period ended 28 February 2018. This was achieved during a year of tough operating conditions, in which the country continued to be plagued by low economic growth, low consumer and business confidence and volatile market conditions.
“Against this backdrop the continued upward trajectory of our key operating and financial metrics demonstrates the resilience of our business model,” said CEO Francois Gouws.
However, the recent political party leadership changes that resulted in a strengthening of the Rand have improved the mood of South Africans, resulting in clients being more optimistic and confident about their future financial well-being.
“While we continue to monitor all the actions that stem from these changes, confidence in business prospects has increased and the economic outlook has improved. Given this environment, the board decided to declare a 21% increase in the final gross dividend of 12.3 cents per share (2017: 10.2 cents per share) from income reserves. This brings the full year increase in the total dividend to 18%, which for the first time in several years is more than its per share earnings growth,” Gouws said.
PSG Konsult comprises three operating units: PSG Wealth, which offers a comprehensive wealth management service to individuals and families; PSG Asset Management, which manages local unit trusts, global funds and segregated portfolios for individual and institutional investors; and PSG Insure, which provides personal and commercial insurance solutions.
For the period under review, PSG Konsult’s total assets under management increased by 17% to R205 billion comprising assets managed by PSG Wealth of R162 billion and PSG Asset Management of R43 billion, whilst PSG Insure’s gross written premiums now amount to R3 296 million. Performance fees earned constituted 8.6% of headline earnings in comparison to 8.8% in the previous financial year.
Looking at each operating unit in more detail, PSG Wealth achieved recurring headline earnings growth of 18%. “We are satisfied with this result in the context of the prevailing investment market conditions,” said Gouws. Management and other fees increased by 11% and clients’ assets managed by Wealth’s 539 advisers increased by 14% to R163 billion, which included R11.8 billion of positive net inflows.
PSG Asset Management’s recurring headline earnings grew by 20%. “The commendable results generated by this division are 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 across all asset classes for clients over the appropriate investment horizon remains compelling,” said Gouws.
As mentioned above, client assets under management increased by 29% to R43 billion during the year under review, including R7.9 billion of positive net client inflows predominately into higher margin funds. PSG Asset management continues to gain industry accolades, such as being voted both by Plexcrown and Morningstar as a top two South African fund house.
PSG Insure, which is in an early growth phase, achieved recurring headline earnings growth of 4%. “The group is satisfied with this achievement, against the backdrop of a difficult industry environment.” It achieved gross written premium growth of 15% as it continued to focus its efforts on growing the commercial lines’ side of the business. This combined with quality underwriting practices resulted in a net underwriting margin of 8.3%. PSG Insure was voted overall national winner (best national broker) at the Old Mutual Insure 2017 broker awards ceremony and also won the Santam national broker of the year for commercial lines award.
During the year, PSG Konsult concluded a number of smaller earnings-accretive acquisition transactions. These were funded from existing cash resources, will be seamlessly integrated into PSG Konsult’s existing business operations and will positively contribute to the long-term organic growth of the firm. Notable transactions include PSG Wealth acquiring the clients of 28E Capital, a leading boutique brokerage that offers retail clients a specialist online platform, effective 1 April 2018; and PSG Insure concluding agreements with Absa Insurance and Financial advisers (both commercial and industrial, and personal lines), and firstEquity. The PSG Insure transactions will add a further 152 advisers and over 77 000 new clients. For further details please refer to the full announcement on PSG Konsult’s website at www.psg.co.za.
In conclusion, Gouws said PSG Konsult’s prospects for continued growth are compelling, and the company is well positioned in its respective markets, giving it confidence in its ongoing growth and performance into the future.
“The group will continue to prioritise organic growth in the domestic market, where it has relatively low, but rapidly expanding market shares. Cash flow generation remains strong, and the group will use this to fund growth initiatives that include expanding our adviser base and to pay dividends consistent with its dividend policy.”
Get the latest issue of FAnews