PSG Konsult announces growth despite a challenging operational backdrop

Cape Town - Financial services group PSG Konsult Limited has today announced another year of growth with its full-year results for the period ended 28 February 2023.  

PSG Konsult (the group) said it achieved these results, against a challenging operational backdrop, with a 5% increase in recurring headline earnings per share and a return on equity of 22.7% for the current year.

According to CEO Francois Gouws, the group's performance over the period is the result of its advice-led business model.

"The performance of our key financial metrics under these conditions highlights the competitive advantage of our advice-led business model. Total assets under management increased by 13% to R354.1bn, comprising assets managed by PSG Wealth of R305.5bn (12% increase) and PSG Asset Management of R48.6bn (16% increase), while PSG Insure's gross written premium amounted to R6.2 billion (9% increase). This should be viewed in the context of the performance of the JSE/FTSE All Share index, which only increased by 2% over the period, compared to 15% in the previous financial year. This impacted performance fees, which constituted 6.5% of headline earnings in comparison to 10.6% for the previous financial year."

"From a cost perspective, our Insure division was adversely impacted by the KZN floods during April 2022, but Western National's comprehensive reinsurance programme cushioned the effect on underwriting results."

"We remain confident about our long-term growth prospects, and we therefore continued to invest in both technology and people. Compared to the prior year, our technology and infrastructure spend increased by 13% (these costs continue to be fully expensed), while our fixed remuneration cost grew by 10%. We are also proud of the progress made in growing our own talent, with 141 newly qualified graduates (96% of whom are ACI candidates) having joined during the financial year."

Capital management

PSG Konsult's capital cover ratio remains strong and increased to 263% (2022: 240%) based on the latest insurance group return. This comfortably exceeds the minimum regulatory requirement of 100%. During July 2022, 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.

Gouws notes that the increase in the group's capital cover ratio and the credit rating affirmation is testament to the group's strong financial position and excellent liquidity.

"We continue to generate strong cash flows, which gives us various options to optimise our capital structure and risk-adjusted returns to the benefit of shareholders. This is reflected by the repurchase and cancellation of 35.7 million shares at a cost of R415.9m during the period. Our Board also decided to increase the upper limit of the group's dividend policy pay-out ratio to 60% (50% previously) of recurring headline earnings, excluding intangible asset amortisation."

Gouws also explains that the value at risk of the group's shareholder investable assets marginally increased to 6% equity exposure (previously below 5%).

"Our primary objective remains to grow organically, and to fund that growth prudently."

Final dividend declaration

Considering both the strong cash position and the change in dividend policy pay-out ratio, the PSG Konsult board declared a final gross dividend of 25.0 cents per share (2022: 22.0 cents per share). This brings the total dividend distribution to shareholders to 36.0 cents per share (2022: 32.0 cents per share) for the full year, reflecting the group's sound financial position and confidence in its prospects.

Looking forward

Gouws says that the group has always been confident that resourceful South Africans will build a better future for themselves and their children. Nevertheless, current economic activity remains depressed, and expectations have plummeted to new lows.

"Irrespective of the short-term challenges, we believe that conditions are ripe for change. Ordinary hardworking and honest South Africans have had enough and significant job losses have further created an alignment of interests for labour and the private sector to work together. The reality is that the private sector still has a significant pool of skilled resources and capital, which can be used to create forward momentum and uplift the public mood through a credible package of measures aimed at remediating South Africa's networked industries."

"Despite the challenges, we will continue investing in our businesses, in line with our long-term strategy, thereby securing prospects for growth," says Gouws.

He concludes that the group will, however, continue to monitor local and global events and manage the associated impact on the group's clients and other stakeholders.