PSG chief shrugs off 50% fall in headline earnings
Financial Services Correspondent
PSG Group chairman Jannie Mouton yesterday shrugged off the 50% nosedive in the group's headline earnings for the year to end February.
Mouton said the group was "far better balanced" now that it had shed its 56% interest in PSG Investment Bank.
The steep drop in headline earnings to 70,7c a share from 141c before was, he said, mainly because of a group decision to sell PSG Investment Bank to Absa for R620m in August.
The investment bank had previously contributed 81% of group earnings, dominating its bottom line performance.
However, once the crippling stranglehold in the smaller tier banking sector took root at the beginning of last year, Mouton said it became "almost impossible" for the investment bank to attract deposits.
The result of the sale is the investment bank only contributed R31m to group income for the year, as against the R141m of the previous year.
The contribution by PSG Investment Services to the group's bottom line also fell to R6,6m from a previous R22,9m, due to poor contributions from multimanager mCubed; a robust rand and R100m PSG Investment Services spent to buy Appleton also eroded earnings.
The group also took a R43m below-the-line knock on selling its stake in Vestacor during the year, a decision taken after PSG said it had differences of opinion with Vestacor over its investment model.
Of the R620m obtained from the sale of the bank, PSG paid back over R200m by way of a special 200c dividend to shareholders, while using the remainder to pay back debt and bolster the balance sheet. The new-look PSG will have four main arms; its 95%-held PSG Investment Services, corporate finance and investment specialists PSG Capital, its 88%-held small life company the Channel Group and its 55%-held low-end banking operation Capitec.
The group is pinning much of its future hopes on Capitec, which operates in the relatively underserviced low-end of the banking market.
The PSG share price gained 2,2% to end at R2,73 yesterday.
Apr 24 2003 07:58:31:000AM Rob Rose Business Day 1st Editio
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