Johannesburg - Investment holding company PSG Group would prefer to have bigger stakes in its existing investments instead of looking for new ones because it “likes” all its remaining investments.
A couple of years ago, PSG had over 35 investments, holding less than a 20 percent stake in most of them. Today, in all six underlying investments, it holds stakes of more than 20 percent and PSG chief executive Piet Mouton hinted that it would like to hold more.
“In the companies we [have], we are always looking for opportunities. On a weekly basis, we look at our entire portfolio – look if it’s a hold or buy. And we’ve often tended to be buyers, not sellers,” he said.
PSG currently has 28.3 percent in Capitec, 57.1 percent in private schools group Curro Holdings, 64.8 percent in PSG Konsult, 42.6 percent in Zeder Investments, 100 percent in PSG Private Equity and 49 percent in black-owned investment company Thembeka Capital.
Mouton said raising shareholdings in the companies it invested in gave PSG a bit of a voice but emphasised that it was not after control.
“We don’t determine what their strategies should be, but we want a better understanding of where they are going… When we had all those investments in the past, when we engaged with the management, we were ignored slightly in some instances and that’s when we decided we wanted fewer but bigger stakes,” he said.
His sentiments came after the group announced, during its interim financial results yesterday, that its drive to revisit and, if necessary, reformulate the business strategy of each of the group’s investments was gathering momentum.
In April PSG introduced its latest strategy, Project Internal Focus, through which it hoped to extract maximum value from its investments.
All its underlying businesses compiled a revised strategic plan coupled with budgeted profits for the next few years.
While PSG said that established businesses like Capitec did not need its intervention, investments in the development phase, such as Curro and Chayton, required more active strategic input from PSG.
“These companies are likely to experience new business strain while expanding and will only start making a contribution to PSG’s earnings in later years. As anticipated, it will initially have a negative impact on PSG’s earnings and dividend growth,” the company said.
PSG said the positive financial performance it achieved in the six months to August was underpinned by Project Internal Focus.
PSG’s sum-of-the-parts (SOTP) value – the value that drives the share price – increased to R79.20 a share as of August 31, from R72.67 at the end of February, which equated to a 29 percent compound annual growth rate over the past three years. The company’s SOTP value as of October 4 amounted to R85.03 a share.
PSG’s recurring headline earnings a share grew by 19.6 percent to R1.943 in the six months to August.
The group declared an interim dividend of 43c a share for the six-month period.
Shares rose 1.57 percent to close at R79.60 yesterday. - Business Report