For the six months ended 31 August 2017 PSG Konsult grew recurring headline earnings per share by a satisfactory 10% and return on equity by 21%.
“The continued upward trajectory of our key operating and financial metrics demonstrates the resilience of our business model despite the current challenging market and economic conditions,” said CEO Francois Gouws.
The group’s total assets under management increased by 16% to R193 billion. An interim dividend of 5.7 cents per share (2016: 5.1 cents per share) has been declared from income reserves.
PSG Wealth achieved recurring headline earnings growth of 7%. “We are satisfied with this result in the context of the current investment market conditions,” Gouws said.
Management and other fees increased by 8% as the business continued to focus on recurring income and reduce its reliance on cyclical transactional brokerage fees. Both the investment research teams and information technology (IT) were strengthened, resulting in an increase of 18% of the division’s cost base.
“We are particularly pleased with the division’s formidable financial adviser network that grew by 2%, through selective adviser acquisitions, to 527 advisers,” said Gouws.
Client assets managed by Wealth advisers increased by 10% to R157 billion during the period under review; this included R5.1 billion of positive net inflows.
PSG Asset Management’s recurring headline earnings grew by 20% on the back of the team’s excellent long-term track record of delivering top-quartile risk adjusted investment returns for clients. “The team’s consistent ability to generate alpha across all asset classes for clients over the appropriate investment horizon remains compelling,” Gouws said.
Client assets under management increased by 10% to R36 billion during the six-months under review. This included R2.8 billion of positive net inflows predominately into higher margin multi-asset funds and mainly from the firm’s selected retail target market. The strong increase in annuity earnings on the large asset base more than offset the 29% decline in variable performance fees that were earned during the current period. Gouws remains confident and optimistic about the long-term growth prospects of this business.
PSG Insure achieved recurring headline earnings growth of 23%. “The group is especially pleased with this achievement, against the backdrop of a particularly difficult industry environment,” Gouws said.
This division, which is in an early growth phase, continues to make inroads into the highly competitive short-term insurance market and gain further benefits from economies of scale. It achieved gross written premium growth of 19% compared to the prior period as it continued to focus its efforts on the commercial lines side of the business, which requires specialised adviser expertise.
The comprehensive reinsurance programme in place reduced the adverse impact of catastrophic events that occurred during this period such as the Knysna fires. This, when combined with quality underwriting practices, produced a commendable net underwriting margin of 7.4%. The insurance advisers, who now total 226, continue to gain market share.
On Tuesday, 26 September 2017, PSG Konsult concluded an agreement to acquire the commercial and industrial insurance brokerage business of Absa Insurance and Financial Advisers Proprietary Limited (AIFA), as announced on the Stock Exchange News Service (SENS) of the JSE Limited (JSE). This business is made up of 102 advisers and in excess of 32 000 clients that will integrate into the PSG Konsult distribution network of PSG Insure advisers.
This transaction, which is subject to conditions typical for a transaction of this nature including regulatory approvals, will be funded from existing cash resources. The implementation of this transaction will enhance PSG Insure’s footprint across South Africa.
Gouws said that looking forward, the group’s aim remains to service existing clients well, and gain new clients. A number of initiatives are in place to ensure that this happens. The group is confident that it remains well positioned to continue to build its adviser network and client base despite the current uncertain and challenging operating circumstances.
Source: Claire Densham Communications