PSG Konsult HEPS up 26%: Francois Gouws

SIKI MGABADELI: For the six months ended 31 August 2015 independent financial services firm PSG Konsult said recurring headline earnings increased by 27% to R186.8m – that’s for that period under review – while recurring headline earnings per share were up by 26% to 14.7c. Assets under management up by 17% and assets under administration increased by 21%.

CEO Francois Gouws joins us now. Francois, thanks so much for your time today. Double-digit growth in earnings – what gave you a boost?

FRANCOIS GOUWS: We are very happy with the results. I think the biggest factor underpinning the growth is gains in net new assets, and that was despite very difficult market conditions that we’ve seen over the last year or so. So to deliver new clients, new assets is something that we are very proud of and obviously it underpinned our results.

SIKI MGABADELI: How are you able to do that? What are you doing differently in your business?

FRANCOIS GOUWS: The key is really to get your existing advisers to operate as efficiently as they possibly can. So during the last year we spent a lot of time helping them with risk, with systems and infrastructure, and various processes.

But in addition to that we grew our adviser base by almost 7% during the last year. So we’ve got about 670 advisers in South Africa across 200 offices. We’ve been consistently growing that and I think a combination of those two factors has obviously contributed to growth.

And then I guess the only other factor to consider is when you are in a volatile market people physically invested need to be comforted to some degree and they obviously want to speak to people they trust, and I think that’s what we provide. Our advisers are highly experienced, they understand the needs of our clients and they can contextualise the very difficult market conditions that existed over the last year, and explain that to clients. And I think that gives clients comfort and obviously leads them to talk to their friends about us – and that’s resulted in growth. I think it’s a nice story.

SIKI MGABADELI: You are exposed to both high-net-worth individuals through PSG Wealth, as well as the retail client base with PSG Asset Management. Have you seen any difference between those two client bases when it comes to just how they react to these types of markets?

FRANCOIS GOUWS: I think markets are more volatile and when markets are volatile it introduces uncertainty, and then investors obviously become concerned about their own position clearly in terms of their wealth. So it’s very important in these conditions to talk to clients and remind them about their long-term objectives. South Africa is a country with inflation, much like other emerging markets, and if you’ve got inflation you have to be invested in equities. That’s the way you can protect yourself against inflation.

Unfortunately if you are invested in equities you have to encounter volatility. And so I think the key is to really talk to clients about their long-term objectives and to remind them that short-term mistakes can cost them very dearly over the long term in terms of what they want to achieve. So that’s the balance you have to draw. And if you’ve got highly experienced advisers like we have, then I think you are in a position to give them those kinds of explanations and contextualise market movements.

SIKI MGABADELI: And PSG Insure, your short-term insurance business – how has that been performing?

FRANCOIS GOUWS: We are very happy with the performance of our short-term insurance business. The total premiums in that business for the period were about R450m, which is a massive increase over the last three or so years. I think it’s a very solid business. We try to be very conservative in how we manage underwriting risk and investment risk, and we want to grow our franchise. We want to get more clients into the firm and we want to deliver value. So, again, a good performing business which is based on meeting clients’ needs.

SIKI MGABADELI: All right, we’ll leave it there. Thanks to Francois Gouws of PSG Konsult.