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Cape Town - JSE-listed investment holding company PSG Group [JSE:PSG] is satisfied with its financial results for the year ended February 2018, released on Tuesday.
"There have been good performances by Capitec and PSG Konsult, while it has been a tough year for Zeder because of the lagging impact of the drought," PSG CEO Piet Mouton told Fin24.
"We invested in new ventures for future growth and if 'Ramaphoria' brings a positive impact, we are well positioned for growth.”
According to Mouton, the biggest challenges during the year were the low-growth environment and political uncertainty. He is, however, of the opinion that the political uncertainty has taken a turn for the better with the election of President Cyril Ramaphosa, who is "doing the right things to take the economy forward".
During the financial year, PSG Group’s recurring earnings per share increased by 7% to R9.94 per share compared to R9.27 in 2017.
The group said this was mainly due to resilient performance from the majority of PSG Group’s core investments but was offset by Zeder’s weaker performance.
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 R255.17 per PSG Group share as at 28 February 2018 compared to R240.87 in 2017 and representing a 6% increase. At 20 April 2018, it was R252.81 per share.
A final dividend of 277 cents (2017: 250 cents) per share was declared for a total of 415 cents (2017: 375 cents) per share, representing an increase of 11% for the period under review.
Performances
"I think the low growth environment will still be around for a little bit. The reality is that, although everyone is now positive, it normally lags a little bit. First comes being positive, then investing and only then does growth follow. SA is now on the first of those steps to get the country back on track," said Mouton.
"Our existing core businesses are all well positioned for further growth. Each of our companies, especially the core companies, have their investment plans well thought through and they follow them diligently. We spend a lot of time on smaller, newer investments. They are the ones where if, you are still in the early stage of the investment cycle, you can make a big difference if you get things right. Of course, we are always trying to find the next big thing."
Capitec (up 18%) and PSG Konsult (up 16%) were the star performers having reported strong headline earnings per share growth for the year ended February 2018.
Capitec remains PSG Group’s largest investment comprising 51% (2017: 47%) of the total SOTP assets and is the major contributor to PSG’s recurring earnings.
Mouton regards Capitec as one of the biggest success stories SA has seen the past 15 to 20 years.
"Capitec has reshaped the banking industry in SA. It is a business we can all be proud of. It saved consumers billions of rand in transactional fees. Capitec attracts about 100 000 new clients a month. It is constantly driving to reduce rates and its bad debt experiences are lower than the competition."
Mouton said PSG Konsult had significant inflows into the business for the past 5 years.
"They stuck to their guns to build a fantastic organic growth story. There is still significant runway left in a company like Konsult if they continue to be smarter than the competition. They can grow by gaining market share even if the market itself isn't growing that fast."
Curro’s schools-only business (therefore, excluding Stadio’s results prior to its unbundling) reported a 17% increase in headline earnings per share for its financial year ended 31 December 2017.
The weaker performance by Zeder is cyclical in nature and the group believes that a turnaround in the medium-term is likely. Zeder reported a 35% decrease in recurring earnings per share for the year under review.
"As a whole, we are positive about the future of Zeder and agriculture as an investment," said Mouton.
PSG Alpha acquired a 50% interest in Evergreen, one of South Africa’s leading providers of retirement living, for a total investment of R675m, of which R400m has been paid. This investment marks a significant new focus area for PSG Group and one of its biggest initial cash investments to date.
"There is no national player with a solid brand in SA and no cohesion. So people are never quite sure of the level of service they will get in a retirement village. We want to build a national champion with the highest level of security, assisted living and frail care. We have teamed up with a wonderful partner. We have about 540 units currently and hope to expand it to about 5 000 nationally over the next five years."
By late afternoon trade on Tuesday PSG's share price was up 0.75% at R222.72.
“We remain positive about investing in South Africa. We think it is a land of great opportunity. It is not just lip service on our part. We have not expanded excessively abroad out of blind diversification, but rather stuck to trying to build businesses in SA where we believe there are significant opportunity," concluded Mouton.
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