PSG Konsult’s recurring headline earnings rose 31% to R920.6 million in the year to the end of February 2022, as the financial services group continued its growth trajectory.
Recurring headline earnings have grown at a compound annual rate of 13% since 2018, and earnings in the 2022 financial year were 43% higher than in the pre-Covid year to February 2020, according to its latest financial results.
As the table below shows, PSG Konsult has performed consistently well on key metrics over the past five financial years – although this solid performance goes back even further.
Its market capitalisation topped R18 billion, double what it was when PSG Konsult listed on the JSE in 2014.
The group had 952 advisers at the end of February 2022, up from 932 in 2021, operating from 263 offices (unchanged since 2021) in South Africa, Lesotho and Namibia. Adviser growth occurred solely in PSG Wealth, from 563 to 584, whereas PSG Insure saw a net loss of one intermediary to 368.
The group declared a final gross dividend of 22 cents per share, bringing the overall dividend for the year to 32c per share, 31% higher than in 2021.
Turnaround at PSG Asset Management
The Wealth business contributed 55% to the group’s profits, followed by Asset Management (26%) and PSG Insure.
However, PSG Asset Management was the out-performer among the three business segments, with recurring headline earnings increasing 133% to R244.2m. The segment’s profits slumped by 12% in 2020, from R167m to R146m, and by 28% in 2021, to R105m.
Its core income jumped 73%, to R799.2m, recovering from the declines of 6% in 2020 and of 12% last year, when revenue fell to R462m.
The segment’s 19% increase in assets under management (AUM) to R41.9bn was solely the result of the rebound in local and offshore equity markets, as it recorded net outflows of R539m, predominately from money market portfolios (-R510m).
Administered assets grew 22% to R173.6bn as a result of net inflows of R16.5bn into multi-managed portfolios, which also gained R7.5bn from market movements.
Inflows boost PSG Wealth
PSG Wealth’s recurring headline earnings increased 14% to R510.4m, as did its core income, rising to R3bn.
Client assets managed by advisers grew 17% to R272.7bn, due largely to positive inflows of R20.5bn. Including stockbroking custody assets (R142bn) and third-party administration (R11.2bn), PSG Wealth’s total assets grew 19% to R425bn. This was despite net outflows from stockbroking portfolios (-R530m) and of stockbroking custody assets (-R3.9bn).
Muted earnings growth at PSG Insure
PSG Insure’s recurring headline earnings grew 10% to R165.9m, which is low compared with the 24% and 43% achieved in 2021 and 2020, respectively.
However, the segment has made a significant contribution to the growth in the group’s profits since 2018, with recurring headline earnings CAGR of 23%.
Core income rose only 2.6%, to R2.2bn.
PSG Insure’s short-term insurer, Western National, saw gross underwritten premiums increase 4.4% to R1.6bn.
Western National’s net underwriting margin was 18.5% compared to 15.3% in 2021.
It finalised all pandemic-related business interruption claims in the 2022 financial year, which resulted in a R30.1m provision release.
Insurance claims and loss-adjustment expenses decreased from more than R1bn in 2021 to R877m, offset by recoveries from reinsurers of R281m.
Where the money came from
Core revenues increased by 15%, from R5.267bn to R6.038bn, of which R4.496bn was derived from contracts with customers.
The jump in management and performance fees made a significant difference to the revenue stream, with good strong growth from commissions and administration fees. Revenue from brokerage, however, declined.
‘Unbundling won’t have any affect’
PSG Group, which owns 60.8% of PSG Konsult, announced earlier this year that it intended to delist from the JSE and unbundle its stakes in PSG Konsult, Curro, Kaap Agri, CA&S and 25.1% of Stadio.
Chief executive Francois Gouws said PSG Konsult operated independently of the PSG Group, and it therefore believed the proposed unbundling and change in shareholder structure will not affect its business model, operations or financial position.