PSG Group companies show resilience amidst Covid fallout
PSG Group’s investee companies showed resilience amidst trying Covid-19-induced economic conditions. Despite many of the companies having to find new ways to operate, good performances were achieved during demanding times.
This was said today by PSG Group CEO, Piet Mouton, with the release of the group’s financial results to February 2021.
PSG Group is an investment holding company consisting of underlying investments that operate across a diverse range of industries, which include financial services, banking, education, food and related business, as well as early-stage investments in select growth sectors.
Because of the reassessment of PSG Group’s Investment Entity status for International Financial Reporting Standards (lFRS) purposes, the group’s accounting policy has changed whereby the performance of its investment portfolio is measured according to the fair value of each investment (i.e. Sum-Of-The-Parts or SOTP value) rather than the consolidated profitability of PSG Group (i.e. recurring earnings).
Pursuant to the change in investment entity status, PSG Group’s financial statements prepared in accordance with IFRS are not comparable to prior years.
The calculation of PSG’s SOTP value requires limited subjectivity as more than 83% of the value is calculated using exchange-listed share prices, while other investments are included at internal valuations.
The group’s SOTP value per PSG Group share at 28 February 2021 amounted to R94.24, representing a decrease of 0,2% when compared to the R94.44 per share as at 29 February 2020. This is if the unbundled Capitec shares in July 2020 are excluded from PSG Group’s SOTP value for comparative purposes. At 16 April 2021, the SOTP value per PSG Group share was R102.39.
Following the unbundling of Capitec, PSG Group’s policy is to pay ad hoc dividends as and when circumstances allow. No final dividend was declared for the year under review.
“Given the circumstances in which investee companies had to operate, companies like PSG Konsult, Zeder and Stadio showed resilience and produced solid performances during the year. In particular, PSG Konsult’s 10% increase in recurring headline earnings per share for the year under review should be commended.
“Although the economy is hamstrung by the fallout of Covid-19, there are signs of resilience and strength in especially the informal sector. Unfortunately, this sector is not that well recorded with the focus mostly on the formal sector. Of great concern is the constant creep in red tape, which is more appropriate to a developed than a developing economy like in SA,” Mouton said.
Mouton is of the opinion that South Africans will nevertheless have to confront difficult economic conditions before some form of normality will materialise.
“Despite these challenges, PSG Group believes its investment portfolio is suitably positioned to capitalise on an improvement in trading conditions.
“Although PSG Group continues to trade at a sizeable discount to its SOTP value per share, we remain focused on our objective to create wealth for shareholders on a per share basis by growing the underlying investments and pursuing value-unlocking initiatives to the extent possible,” Mouton concluded.
Potential corporate action
PSG Group shareholders are advised to take note of the announcement released on SENS on Tuesday, 20 April 2021 whereby the board of PSG Financial Services Ltd, a wholly-owned subsidiary and PSG Group’s only directly held asset, has resolved to make an offer to repurchase and delist all the JSE-listed cumulative, non-redeemable, non-participating preference shares in issue at a clean (i.e. excluding the accrued preference dividend) price of R81 per share, equating to a total cash consideration of R1,41 billion, in terms of a scheme of arrangement. Subject to shareholder and regulatory approval, it is envisaged that the repurchase will be implemented in the next three months.
