Adviser earns on uncertainty

• Group posts solid gains as clients seek face-to-face advice in troubled times and insurance business gains

PSG Konsult is battle ready when challenges in the local economy and investment markets hit, enabling it to devote time to fretful clients and attract fund flows to its business, according to CEO Francois Gouws.

PSG Konsult is battle-ready when challenges in the local economy and investment markets hit, allowing it to devote time to fretful clients and attract fund flows to its business, according to CEO Francois Gouws.

“Clients have needed advice more than ever. When you really need an adviser is when you are uncertain about the future. We were able to spend time in our wealth and insurance business helping clients, which underpinned the flows,” Gouws said on Thursday.

He was speaking after the release of a set of strong interim results from the financial services group, which owns a wealth, asset management and insurance business.

The group had restructured its business, settling debt and selling business units so that it was “solid heading into what has effectively become a storm”.

PSG Konsult has benefited from increasingly onerous regulation of independent financial advisers, which has led many independent advisers to seek homes at established financial services firms.

Over the past four years, PSG Konsult has grown the number of advisers in its wealth unit by 136 to 527, bringing total adviser numbers across the wealth and insurance businesses to 753.

Advisers with larger books of business were starting to join, due to rising regulatory costs, said Gouws. PSG Konsult’s competitive advantage has been its ability to provide face-to-face service to clients, from Phalaborwa to Gansbaai. Its 753 advisers are spread across 126 towns, causing one analyst to joke that the country’s smallest towns are sure to have two things: a petrol station and a PSG Konsult office.

Despite weak investment markets and a tough economic environment, the group grew recurring headline earnings per share for the six months to August by 10%, to 18.2c. Headline earnings grew 12% year on year to R239.3m, with earnings rising across divisions.

Assets under management rose 16%, to R193bn, with assets under administration (client assets on which its wealth managers advise) up 12% to R398bn.

The only rated analyst who covers PSG Konsult, Harry Botha of Avior Capital Markets, has a “sell” recommendation on the stock. “It’s expensive relative to the firm’s growth prospects,” said Botha, who has a 12-month target price of R9.40, 7.4% above Thursday’s closing level.

Premium growth in its shortterm insurance business was surprisingly strong, said Botha.

PSG Insure grew gross written premiums 19% to R2bn amid a focus on commercial lines. The acquisition of Absa’s brokerage for commercial and industrial short-term insurance would support this, Gouws said.

The group declared a dividend of 5.7c, 12% ahead of the prior period. It closed 2.67% weaker on Thursday at R8.75, but is up 18.4% in 2017.