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PSG pleased with results despite demanding conditions

JSE-listed investment holding company PSG Group [JSE:PSG] said on Tuesday it has weathered demanding economic conditions during the six months to August 2018, with recurring earnings per share increasing by 22% to R5.03 compared to R4.12 in 2017.

With its diverse range of underlying investments across a range of industries, including banking, financial services, education and food and related business, as well as early-stage investments in select growth sectors, the majority of the group’s core investment companies contributed double-digit earnings growth during the period under review.

Headline earnings per share increased by 40% to R5.07 (compared to R3.63 in 2017) and attributable earnings per share by 34% to R5.16 (2017: R3.86).

This was mainly due to the increase in recurring earnings, as well as a fair value gain recognised by Zeder on Capespan’s investment in Joy Wing Mau (previously known as Golden Wing Mau), which is in process of being disposed of.

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 R272.94 at 31 August 2018, representing a 7% increase. This is compared to 28 February 2018 when it was R255.17 and 12 October 2018 when it was R262.80 per share.

The five-year compound annual growth rate (CAGR) of PSG Group’s SOTP value per share and share price at 31 August 2018 was 28% and 27%, respectively.

An interim dividend of R1.52 per share was declared compared to R1.38 per share in the same period in 2017.

PSG Group CEO Piet Mouton said in a statement that the results reflect the sound operating models and the strength and focus of the management teams of the underlying companies.

“This provides the group with the opportunity to gain further market share and continue to grow even in a low-growth environment," he added.

Capitec remains PSG Group’s largest investment, comprising 58% of its total SOTP assets as at 31 August 2018 and is the major contributor to PSG Group’s recurring earnings. It reported a 20% increase in headline earnings per share for the period under review.

PSG Konsult, with its focus to provide wealth management, asset management and insurance solutions to clients, reported an 18% increase in recurring earnings per share during the period under review.

Curro’s schools-only business (excluding Stadio’s results prior to its unbundling in October 2017) reported a 22% increase in headline earnings per share for its six months ended 30 June 2018.

Zeder, with its largest investment a 27% interest in Pioneer Foods which comprise 49% of Zeder’s total SOTP assets, reported a 158% increase in recurring earnings per share for the period under review.

Mouton made special mention of Zeder’s investment companies that reported a strong recovery in results amidst a difficult environment, overshadowed by negative general sentiment.
 
PSG Alpha, which serves as incubator to identify and help build the businesses of tomorrow, reported a 24% decline in recurring earnings per share for the period under review.

This followed further investments in initially low earnings-yielding start-up businesses, such as Stadio and Evergreen. Its major investments include shareholdings in Stadio (44.1%), CA Sales (47.7%), Evergreen (50%) and Energy Partners (54.1%).

Dipeo, a BEE investment holding company with its most significant investments in Curro (5.2%), Stadio (3.4%), Pioneer Foods (4.3%), Quantum Foods (4.2%), Kaap Agri (20%) and Energy Partners (15.7%), reported a decrease in SOTP value to R521m as at 31 August 2018. This was mainly due to the decline in Pioneer Foods’ share price during the reporting period.

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