PSG results pleasing despite uncertain market - CEO

Piet Mouton, CEO of PSG (Picture supplied.)
Piet Mouton, CEO of PSG (Picture supplied.)

Cape Town - The results of PSG Group [JSE:PSG] for the financial year ended February 2017 are very pleasing considering prevailing uncertain market conditions, CEO Piet Mouton said on Wednesday.

The JSE-listed investment holding company consists of underlying investments that operate across a diverse range of industries. These include banking, education, financial services and food and related businesses. It also has early-stage investments in growth sectors.

The group's key performance benchmarks, namely the sum-of-the-parts (SOTP) value per share and recurring headline earnings per share increased by 29% and 18% respectively.

The SOTP value, whereby 90% of the value is calculated using JSE-listed share prices and other investments are included at market-related valuations, amounted to R240.87 per PSG Group share at 28 February 2017 compared to R186.67 in 2016. At 11 April 2017, the SOTP value was R240.53 per share.

PSG Group’s consolidated recurring headline earnings, reflecting the sum of its effective interest in that of each of its underlying investments, increased to R9.27 per share compared to R7.88 in 2016.

A final dividend of R2.50 per share was declared for a total dividend of R3.75 per share for the year, representing an increase of 25%. The final dividend per share declared in 2016 was R2.

According to Mouton, PSG Group was well positioned with low gearing at all of its companies and a significant portion of the interest rate exposure fixed. This is against the backdrop of SA's recent credit downgrade which could see debt becoming more expensive and with a rise in interest rates.
“The historic growth achieved by group companies stems largely from business growth as we have generally not relied on gearing to enhance returns. Furthermore, PSG Group, as well as its underlying investments, all have strong balance sheets to weather any potential economic decline," said Mouton.

"With R1.3bn in cash at PSG Group level, we rather look to new investment opportunities that might present itself.”

READ: Cyclicality, drought cause sideways movement at Zeder

Companies' performance

Capitec reported an 18% increase in headline earnings per share for the year under review. The bank remains PSG Group's largest investment, comprising 47% of the total SOTP assets, and also the major contributor to the group’s recurring headline earnings.

PSG Konsult reported a 16% increase in recurring headline earnings per share for the year under review.

Curro reported a 55% increase in headline earnings per share for its financial year ended 31 December 2016.

Zeder reported a 0.5% increase in recurring headline earnings per share for the year under review following tough trading conditions experienced at select investments.

PSG Alpha, formerly known as PSG Private Equity, serves as incubator to find the businesses of tomorrow and has no exit strategy. It reported a 25% increase in recurring headline earnings per share for the year under review.

PSG Group invested a further R134m in PSG Alpha’s portfolio of early-stage investments during the year under review.

Dipeo, a BEE investment holding company, is 51%-owned by the Dipeo BEE Education Trust of which all beneficiaries are black individuals.

Dipeo’s most signi?cant investments include shareholdings in Curro (5.3%), Pioneer Foods (4.3%), Quantum Foods (4%) and Kaap Agri (20%). The Dipeo BEE Education Trust will use its share of the value created from these investments to fund black students’ education.

“PSG Group’s core investments are all leaders in their respective niche markets and we believe our investment portfolio should continue yielding above-average returns,” Mouton concluded.

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