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PSG Konsult keeps growing

Paid nearly R1.5bn in salaries and commission in the last six months.
It has maintained its decades-long record of growing earnings per share at 15-20% per annum. Image: Shutterstock

Financial planning and asset management firm PSG Konsult reported that headline earnings increased by 23% in the six months to end-August 2021 compared with the first half of the previous financial year.

More importantly, management points out that earnings per share (EPS) were 30% higher compared with 2019, before Covid-19 struck.

Thus, PSG Konsult maintained its decades-long record of growing EPS at between 15% and 20% per annum.

Chief executive Francois Gouws says all three operating divisions – PSG Wealth, PSG Asset Management and PSG Insure – achieved growth in revenue and earnings despite the difficult operating environment during the period.

The disclosure of earnings by each division shows that asset management was the star performer, with an increase in earnings of 95% to R96.5 million compared with R49.5 million a year ago.

The insurance operations increased earnings by 17%.

The income statement shows that the insurance leg was able to grow gross premium revenue by some 6% to R818 million, which delivered net insurance premium revenue of nearly R550 million. This represents an increase of R10 million compared to the same period a year ago.

Although PSG Wealth reported lower growth (7%), it still delivered the lion’s share of the profits.

The division – which offers financial planning, investments, unit trusts, stockbroking, estate and trust services, multi-managed funds, healthcare products, life insurance, asset management and managed share portfolios – produced more than R234 million of the total recurring headline earnings of close to R405 million.

PSG Wealth recorded net inflows of R10.8 billion in managed assets, representing growth in assets of 40% since end February 2021.

PSG Asset Management, offering local unit trusts, global funds and segregated portfolios for individual and institutional investors, was able to grow assets under administration to more than R161 billion, an increase of 13% over the last six months.

Business model credited for growth

Gouws attributes the growth to the success of the business model that is based on a large team of advisors and professionals, building long-term relationships with clients, backed by the expansion of digital capabilities.

Management notes that PSG Konsult won several service awards over the last month and its funds maintained their positions as top-quartile performers.

Not surprisingly, the income statement shows that the largest expense during the last six months was staff remuneration. PSG Konsult paid more than R610 million towards salaries and more than R857 million in sales commissions – a grand total of more than R1.47 billion.

Gouws says these numbers should not be seen in isolation, noting that PSG Konsult continues to grow its business and employ more people.

“This year, we employed an additional 95 new graduates,” says Gouws, adding that the focus continues to fall on stable, sustainable, organic growth.

PSG Konsult declared an interim dividend of 10 cents per share, a 25% increase over the previous period.

Gouws says the group will continue to enhance its client offering as well as the client experience, which will ultimately result in value creation for shareholders.

“We remain confident in PSG Konsult’s prospects and our ability to sustain growth going forward. Our strong balance sheet and motivated people enable us to focus on organic growth and optimising shareholder return,” says Gouws.

PSG Konsult is one of the smaller subsidiaries within the PSG Group, which holds an interest of just less than 61% in the company. However, it is a big business in its chosen fields, as indicated by total revenue of nearly R2.9 billion in the past six months.

Capitec Bank, one of PSG’s larger businesses, also published good results (last week).

PSG’s results will follow soon, and will probably make for good reading too.

Listen to Simon Brown’s interview with Schalk Louw from PSG Wealth Old Oak (or read the transcript here):

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I have always been less than impressed with my client experience with PSG

I have already moved some of my business away. I will be moving the rest in due course.

Surely the more profit wealth managers make, the less return the investors make? The high fees that prop up their profits come out of my future return.

Agreed – and then it become unsustainable as the “Managers” become comfortable and dependent on those mega salaries and bonus’s. So when the business takes a turn – Who is going to fund those salaries???

Imagine paying a 26 year old to fill out a form and take 1% fees. It gets better – they invest your money with old mutual or coronation who basically seek out companies that will go bust.

The best thing you can do for your child is open an investment account for them when they are 12 and buy them a few shares. Watch how they will be interested in those few companies and naturally at 18 will he well on their way.

We simply don’t have access to fund managers at companies like Capital Group or Blackrock. Instead we get bishops old boys with CFA’s. I know a few of those. Couldn’t perform at work and left at 4pm for drinks, and studied at work for those 3 letters.

People like Simon Brown really don’t get enough credit for educating people. His ETF Schtick may seem outdated but it’s probably improved many peoples financial situation.

End of comments.

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