Tough out there, but PSG ready for SA recovery - CEO

JSE-listed investment holding company PSG Group said on Wednesday that it managed to achieve "pleasing results amid challenging conditions" during the financial year to February 2019.

PSG has a diverse range of underlying investments in banking, financial services, education and food and related business, as well as early-stage investments in select growth sectors.

The group's recurring earnings per share increased by 9% to R10.86, following strong recurring earnings per share performance by Capitec and Curro.

PSG Konsult performed marginally better, while Zeder was flat and PSG Alpha's earnings per share declined slightly.

The group's sum-of-the-parts (SOTP) value - of which more than 90% is calculated using JSE-listed share prices, while other investments are included at market-related valuations - amounted to R311.45 per PSG Group share as at 28 February 2019, representing a 22% increase.

As at April 18, 2019, it was R329.73 per share.

A final dividend of R3.04 cents per share was declared for a total of R4.56 cents per share, representing an increase of 10% for the financial year under review.

'Positioned for recovery'

PSG Group CEO Piet Mouton told Fin24 the environment in SA has been challenging the past couple of years, with consumers increasingly under pressure.

Given this background, PSG Group is generally satisfied with the performance of its underlying investments.

"It is tough out there, but PSG Group remains well positioned for any recovery in the economy," said Mouton.

"We will continue to invest in SA and hope that the government will make better decisions following the election. We invested quite a lot throughout the organisation, so if SA goes in a positive direction, we are well placed to take advantage of it."


Capitec remains the group's largest investment, comprising 66% of its total SOTP assets as at 28 February 2019 and the major contributor to PSG Group's recurring earnings.

Capitec reported a 19% increase in headline earnings per share for the year under review.

Asked about potential challenges to Capitec from new banks entering the market in SA, Mouton said one would of course have to keep one's eye on them.

"It is highly expensive to run a bank. You must have a business model to make money. The Capitec guys are keeping a very close eye on the new entrants and we will be pro-active on how we go about dealing with any challenges," said Mouton.

PSG Konsult, with its focus on providing wealth management, asset management and insurance solutions to clients, reported a 4% increase in recurring earnings per share for the year under review.

Stadio exceeded expectations

With Curro as the largest provider of private school education in Southern Africa, its schools-only business - that is excluding Stadio's results prior to its unbundling in October 2017 - reported a 23% increase in headline earnings per share for its financial year ended 31 December 2018.

Mouton said Stadio has so far done everything it the group said it would achieve since listing and even a little bit more.

PSG Alpha reported a 7% decline in recurring earnings per share for the year under review following the dilutionary effect of investments in initially low earnings-yielding start-up businesses such as Stadio and Evergreen.

As for Evergreen, it is one of the most exciting investments of PSG Alpha, in Mouton's view. It currently has about 600 units completed and will add another 500 by February 2020. Furthermore, the aim is to have close to 5 000 units completed in 5 years' time.

Mouton lauded its partner in Evergreen, Amdec, and said it understands the development game very well.

Drought recovery

With its investments in the broad agribusiness industry, Zeder reported no increase in recurring earnings per share for the year under review. Its largest investment is a 27.1% interest in Pioneer Foods, comprising 43% of Zeder’s total SOTP assets.

According to Mouton, the normal rainfall experienced in the country since the drought is expected to bring a sustainable period in which more recovery could be seen in Zeder.

Dipeo, a BEE investment holding company, is 51%-owned by the Dipeo BEE Education Trust of which all beneficiaries are black individuals. The trust will use its share of value created in Dipeo to fund black students' education.

During the year under review, Dipeo's SOTP value turned negative following a continued decline in mainly Pioneer Foods' share price.

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