Double digit growth for PSG Konsult at interims

By Janice Roberts

psg-konsult-logo-e1394440370524For the six months ended 31 August 2016, PSG Konsult (KST) delivered a commendable 13% growth in recurring headline earnings per share to 16.6 cents (2015: 14.7 cents per share) over the previous interim period, and declared a gross interim dividend of 5.1 cents per share, a 16% improvement over 2015’s 4.4 cents per share.

Total assets under management grew by 18% to R167 billion (2015: R142 billion) and the total number of advisers, including insurance advisers, increased 11% to 738 (2015: 667).

“The board of directors is pleased with this set of results, taking into account the current challenging business environment and overall sluggish economic growth conditions in South Africa. The group’s focus on client service excellence through the quality of its advice, products and platforms is proving resilient,” said CEO Francois Gouws.

PSG Wealth achieved headline earnings growth of 17%. Management fee income increased by 20% as the business continued to focus on recurring income and reduce the reliance on transactional brokerage, which has remained flat during the period under review. The division’s formidable financial adviser network increased by 14% to 505 advisers since the prior comparable period through both organic and selective adviser acquisition growth.

“The experience and stature of the advisers joining the firm continues to add credibility to the growing brand equity,” said Gouws.

Wealth managed assets of R139.1 billion are up 21% since the prior comparable period, which includes record net flows of R8.2 billion in the past six months. Wealth’s platform assets of R37.5 billion are up by 29% since the previous interim period as the division continues to gain market share. Multi-managed assets now surpass R52 billion and are up 24% since the previous interim period.

PSG Asset Management’s headline earnings grew by 2%, impacted by the decision previously communicated to exit white labels to reduce operational risk and lower performance fees as a consequence of market conditions. During the past six months the investment team delivered sound top-quartile investment performance across its fund range, which further augmented its excellent long-term investment track record. The division did experience a small net outflow of funds partially due to difficult market conditions.

“We remain confident and optimistic over the long-term growth prospects for this business,” Gouws said.

PSG Insure’s headline earnings grew by 29%, which is an achievement that the group is especially pleased with against the backdrop of a particularly difficult industry environment. This division, which is in an early growth phase continues to make inroads into the highly competitive short-term insurance market and gains further benefits from economies of scale. It achieved revenue growth of 16% compared to the prior comparable period and continued with its shift away from the commoditised personal lines to the commercial lines side of the business, which requires specialised adviser expertise.

“No significant catastrophe or other related events occurred during this period, which when combined with our continuous demanding underwriting practices, enabled us to achieve an excellent net underwriting margin of 7.8%. The insurance advisers, which now total 233, continue to gain market share,” said Gouws.

Credit rating

Rating agency Global Credit Rating (GCR) upgraded PSG Konsult’s long-term and short-term ratings during July 2016, to A-(ZA) and A1-(ZA) respectively. GCR stated the following rationale for the rating:

“The upgrade reflects our conservative balance sheet fundamentals, risk profile and sound earnings capacity. The company 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. This has followed the well-defined strategy to refocus on core operations, which has allowed for the capturing of additional margin in the asset management and insurance businesses, albeit still anchored by its traditional, uniquely positioned advisory network.”

Looking forward

In conclusion, Gouws said that the company’s aim remains to service existing clients well, and gain new clients. Current economic circumstances are uncertain and volatility in investment markets remains. However, the group is confident that it will continue to build its client franchise despite this market outlook. A number of initiatives are in place to ensure this happens. The group’s focus on products, platforms and client service excellence through the quality of its advice is proving to be a resilient strategy.

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