PSG investee companies performed well in the six months to August in weak economy
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PSG Group’s investee companies put in a resilient performance in the six months to August with a 17 percent increase in the sum-of-the-parts (SOTP) value per share, and they were well positioned for another good second half performance, chief executive Piet Mouton said yesterday.
The figure rose from R94.24 per share as at February 28, 2021 to R110.50 as at August 31. On October 8, the SOTP value per PSG Group share was R112.13. No interim dividend was declared compared with 164 cents declared at the interim stage last year.
The underlying investments operate across a range of industries including financial services, education and food, and early-stage investments in select growth sectors.
Some 80 percent of the SOTP is calculated using exchange-listed share prices, while other investments are included using consistent and conservative valuation methodologies, Mouton said in a telephone interview.
He said despite the challenging economic environment, many investee companies achieved strong results, but some still lagged due to the continued effects of Covid-19 lockdowns.
While there were early signs of an uptick in activity at restaurants, hotels and travelling, it was too early to talk about the start of an economic recovery, he said.
A concern was the possibility of a fourth Covid-19 wave and further lockdowns towards December, and the only way out was to vaccinate as many people as quickly as possible before then.
He said the average discount at which PSG’s shares traded at, some 30 to 35 percent, was also about the average for other listed investment groups, which he said was “unfortunate”, as it detracted from the attractiveness of their shares to investors. Nevertheless, the group would work through “sheer performance” to “close the gap”, he said.
The share price fell 2.83 percent to R79.78 yesterday afternoon.
“We remain focused on creating wealth for shareholders on a per share basis by growing the underlying investments and pursuing value-unlocking initiatives,” he said. A number of acquisitions and other opportunities were also being considered, he added.
“We implore the government to urgently instil policies that are more business-friendly and to reduce red tape. Creating an environment whereby business can grow, more taxes will be collected and more people will be employed - this is the only way to solve our massive unemployment challenges in the long run," he said.
In the period, PSG Financial Services, a wholly owned subsidiary, repurchased all its listed perpetual preference shares for R1.5 billion, leaving the group with no debt, while cash on hand amounted to R2.6bn.
Some 1.6 million shares, or 1.4 percent, in Capitec were disposed of during the period for R2.5bn cash.
PSG Konsult, a company focused on wealth management, asset management and insurance, increased recurring headline earnings a share by 23 percent following strong performance from the Asset Management and Insure divisions. The company comprises about 39 percent of PSG total assets.
Curro, the private school education company, reported a 51 percent drop in recurring headline earnings a share for its six months to June, but Mouton was optimistic that the business would perform better in the second half, particularly with fewer lockdown restrictions in place.
At Zeder, an investor in agribusiness, the majority of its investee businesses achieved acceptable earnings growth from favourable agricultural conditions. Zeder had received an approach for some of its assets.
PSG Alpha, a business incubator, included shareholdings in Stadio (42.9 percent), CA&S (48.3 percent), Evergreen (50 percent), Optimi (96 percent) and Energy Partners (56.7 percent). During the period PSG accounted for a fair value gain of R345m on its investment in PSG Alpha following an increase in its SOTP value since February 28, 2021.
Dipeo, 49 percent held by PSG, is a BEE investment holding company, 51 percent-owned by the Dipeo BEE Education Trust. PSG recognised an impairment reversal of R113m after an increase in the value of Dipeo’s investment portfolio.
BUSINESS REPORT ONLINE