Leading financial services group PSG Financial Services Limited (JSE:KST) (the group) today released its full-year results for the period ended 29 February 2024, delivering another year of impressive performance.

The group attributes its continued growth, delivered despite continued tough market conditions, to its ability to sustain a healthy new business pipeline, attracting inflows from current and new clients. This resulted in a 23.4% return on equity and an 11% increase in recurring headline earnings per share for the period, following net client inflows of R23 billion. The group also increased core income by 11% over the prior year.

Chief Executive Officer Francois Gouws believes that this ability to consistently secure new business in a challenging operating environment is a marker of a healthy business with a clear strategy.

"The group's proud track record of delivering consecutive earnings growth demonstrate the success of our advice-led business model and strong network of advisers – which is continuing to expand. This network, and its commitment to excellent client service, has helped the business gain market share and has generated significant value for shareholders over the years. This is evidenced in our total assets under management growing by 15% to R406.9bn during the year under review. It is a strong performance in a tepid environment where the Johannesburg Stock Exchange lost 6% of its value over the period.”

“We also continue to invest in our people and the technology and infrastructure required to help them succeed. Our technology and infrastructure spending increased by 13% from the previous year (these costs continue to be fully expensed), and fixed remuneration costs grew by 12%. We are also making strides in developing talent, welcoming 152 new qualified graduates this year."

The 15% increase in assets under management comprised of assets managed by PSG Wealth increasing by 16% to R355.1 billion, PSG Asset Management by 7% to R51.8 billion, while PSG Insure’s gross written premium amounted to R7 billion (a 13% increase over prior year). Performance fees earned constituted 2.8% (2023: 6.5%) of headline earnings.

Referring to the increase in AUM achieved by PSG Wealth, Gouws highlighted that “The firm remains confident about the fundamentals and prospects of the Wealth division and believes that our commitment to long-term relationships with clients will continue to differentiate us in the markets in which we compete.”

PSG Asset Management’s strong fund performance across the fund range was recognised at the 2023 Raging Bull Awards. The division received five fund-specific awards and a second place in the South African Manager of the Year award category.

From a cost perspective, the group’s Insure division was adversely impacted by several catastrophe events during the year, including two severe flooding events in the Western Cape and a hailstorm in Gauteng. However, Western National’s comprehensive reinsurance programme cushioned the effect on underwriting results. Western National also won the non-life insurer of the year: commercial award, for the second year running at the 2023 FIA Intermediary Experience Awards.

Capital management

PSG Financial Services continued to generate strong cash flows, enabling the group to optimise its capital structure and shareholder risk-adjusted returns. Reflecting this optimisation, the group repurchased 15.8 million shares, at a cost of R207.2 million, during the year under review.

The group also remains well capitalised. Its capital cover ratio, based on the latest insurance group return, is at 240% (28 February 2023: 240%), which surpasses the regulatory minimum of 100% by a significant margin.

During August 2023, Global Credit Rating Company affirmed the group’s long-term and short-term credit ratings at A+ _(ZA) and A1_(ZA) respectively, with a Stable Outlook.

Dividend declaration

Considering the group’s strong cash position, the board declared a final gross dividend of 28.5 cents per share from income reserves for the year ended 29 February 2024 (2023: 25.0 cents per share). This brings the total dividend distribution to shareholders to 42.0 cents per share (2023: 36.0 cents per share) for the full year, reflecting the group’s sound financial position and the board’s confidence in its prospects. The group’s dividend pay-out ratio is expected to remain between 40% to 60% of recurring headline earnings excluding intangible asset amortisation.

Looking ahead

Looking ahead, Gouws says the group remains confident about its strategy and will continue to invest in the business to secure its prospects for long-term growth.

“We have always been confident that resourceful South Africans will build a better future for themselves and their children. Nevertheless, current economic activity remains depressed, and expectations have continued to plummet to new lows As a business we will continue to monitor local and global events and the associated impact on the group’s clients and other stakeholders, and adjust our approach if required.”

“Irrespective of the short-term challenges, we remain confident in our long-term strategy and will continue to invest in our businesses, thereby securing prospects for growth. Moreover, the firm has aimed to actively stimulate debate around improving South Africa’s economic prospects by launching the Think Big SA competition in collaboration with Economic Research South Africa. We look forward to sharing the insights generated from the winning discussion paper more broadly in the interest of helping to create a more supportive local growth environment.” says Gouws.