INVESTMENT holding company PSG Group posted another significant increase in payouts to shareholders in its full-year results, after an exceptional performance from the bulk of its underlying investments.
The Stellenbosch-based group declared a final gross dividend of 200c per share, bringing the total dividend for the year to end-February 2016 to 300c. This represents a 50% increase in the payout.
Anchor Capital equity analyst Liam Hechter said that PSGs dividend policy remained unchanged, allowing directors to declare up to 100% of free cash flows generated by the group.
"We will seek more clarity from management as to their reasoning behind the slightly larger-than-expected dividend," Mr Hechter said.
PSG Group CEO Piet Mouton said that growth had been achieved with little gearing, and that the group delivered mostly unlevered returns to shareholders. "Where there is gearing in the group, it is in most cases at fixed interest rates. Having low or no gearing gives our underlying investments the ability to react quickly to new opportunities," he said.
Mr Mouton said the companys portfolio should continue yielding above-average returns in the future. He said PSG had R2.9bn in cash available at head office for further investments.
PSGs sum-of-the-parts (SOTP) value regarded as the major gauge for performance increased to R186.67 per share at the end of February, from R163.28 in the year-earlier period. The company also offered a more contemporary SOTP valuation of R208.21 per share as of April 13. About 83% of PSGs SOTP value stems from listed share price.
Group recurring headline earnings per share increased 33% to 788c per share.
36ONE Asset Management analyst Nico Smuts said there were no surprises in the groups results. "You can see the share price moved very little. Most of their underlying investments have already reported, so most of the information was already known. The results were hurt quite a bit by the PSG Konsult tax settlement," said Mr Smuts.
The PSG Konsult tax matter dates back to 2009. The South African Revenue Service (SARS) said PSG Konsults wholly owned subsidiary PSG Life had a tax payment shortfall of R113m, plus interest of R86m. PSG Konsult said it had settled and paid R115m to SARS, as well as the related legal costs.
In terms of the dividend, Mr Smuts said growth of 50% per annum was not sustainable.
"But their underlying business units have shown exceptional growth. That should start tapering off, but the big question is when. Curro, PSG Konsult, Capitec their earnings growth trajectories all remain strong," Mr Smuts said.
Capitec reported a 26% increase in headline earnings per share for the year to end-February. PSG has a 30.7% holding in the bank.
PSG Konsult has a market share of less than 5% in wealth management, about 2% in asset management, and about 1% in short-term insurance.
The companys recurring headline earnings per share increased 19% in the year under review. PSG Group has a majority holding of 61.9%.
The group owns 58.3% of Curro, the largest provider of private school education in the country. The independent school group reported an increase of 67% in headline earnings per share for its financial year ended-December 31.
"All the companies are positioned for further growth," Mr Mouton said.