PSG Konsult looks at note plan
• Corporate-debt market has frozen due to downgrades
PSG Konsult is considering launching a domestic medium-term note programme in the light of downgrades of debt in the financial services sector.
PSG Konsult is considering launching a domestic mediumterm note (DMTN) programme in the light of downgrades of debt in the financial-services sector after S&P’s and Fitch’s decisions to cut SA’s foreign de nominated debt to junk.
The corporate-debt market has “frozen” as a result, says Ashburton portfolio manager WayneMc Currie, with telecommunications company MTN and industrial conglomerate Barloworld both cancelling planned debt issues.
The PSG-controlled wealth manager said at the release of its results for the year to February that the note programme would give it a flexible cost-effective structure to fund its ScriptFin loan book internally.
ScriptFin lends money to subsidiary PSG Wealth’s customers to continue buying securities, with loans secured against their investment portfolios. “We are concerned by the recent sovereign-rating downgrade,” said CEO Francois Gouws.
“It was not ideal and does create headwinds for our initial DMTN funding programme. While we intend finding a suitable time to launch this programme, PSG always focuses on the longer term. We will be discussing the same with select investors.”
However, PSG Konsult’s results showed it had more than R1.7bn in spare capital.
Gouws said the company was growing at a rapid rate, and the note programme, the size of which has not yet been determined, would give it additional muscle to fund this growth.
The company’s results were resilient in what it called a challenging business environment characterised by periods of poor investment market conditions.
Recurring headline earnings, its main profit measure, rose 19% to R486.4m as PSG Asset Management, its second-largest revenue contributor, grew earnings 57%, thanks to higher performance fees earned from beating benchmarks across all asset classes. The unit’s assets under management increased 19% to R33.1bn, with R2.6bn of this a result of client inflows into higher-margin funds.
Overall, PSG Konsult saw group assets under management, including PSG Wealth, growing 14% to R175.3bn during the year.
Growth rates have slowed from the previous year, when recurring headline earnings rose 20% and assets 16%.
“The current growth rate in recurring [headline earnings] is consistent with the longer-term track record of the firm,” said Gouws.
“Recent events have created some uncertainty and they will spill over into the real economy and have an impact on markets. Nevertheless, the mindset of the firm is to deal with challenges and identify opportunities and always to remain optimistic.”