The share price of financial services group PSG Group jumped as high as 14,2% or 57 cents in afternoon trade on Monday after the group reported a 19,6% rise in its headline earnings per share for the six months to the end of August 2004, to 36,9 cents from 33,1 cents a year earlier.
The group also said it is considering raising up to R150-million in preference share capital to obtain cost-effective permanent share capital to fund black economic empowerment (BEE) and other attractive growth opportunities.
After trading around the R4 level over the morning, the same as Friday’s close, soon after the release of its interim results the share price jumped to R4,57 before falling back to trade at R4,48, still a rise of 12% so far on the day, with 235 188 shares changing hands in 32 transactions.
PSG also revealed it has adopted an annual 40% dividend payout ratio, with approximately one-third payable at the interim stage; thus, it had declared an interim dividend of 10 cents per share. This compares with nil at the interim stage in 2003 but a special dividend of 100 cents per share at the end of that year.
PSG has undergone substantial restructuring and downsizing over the past two years, unbundling many of its major assets and returning capital to shareholders.
For the six months to the end of August 2004, revenues rose to R933,5-million from R882,6-million a year earlier. Total operating income stood at R204,3-million versus R369,7-million previously, thanks to a sharp fall in interest income to only R4,6-million versus R203-million the previous year.
With a decline in total expenses to R168-million from R321,9-million the previous year, higher income from associated companies, lower financing costs and improved exceptional items, the group reported an improved net income of R36,5-million versus R24,6-million previously.
Income attributable to ordinary shareholders was R31,4-million, double the R15,5-million recorded at the interim stage in 2003.
Following the unbundling of the group’s interests in niche retail banking group Capitec Bank and the payout of special dividends, PSG Group’s net tangible net asset value per share fell to 320 cents from 557 cents a year earlier.
PSG’s overall return on equity improved to 21% from only 10,9% a year earlier, with earnings generated on shareholder funds totalling R390,4-million compared with R703,5-million the previous year.
Also in its interim results, the group revealed it has acquired the minority shareholders’ interest in PSG Capital from the management for a total consideration of R6,4-million, as well as increasing its stake in BEE group Arch Equity for R11,5-million.
The consideration for PSG Capital will be settled by R960 000 in cash and through the issue of 1,82-million new PSG Group shares at the weighted average price of R2,99 up to July 31 2004.
Looking ahead, group chairperson Jannie Mouton said: “The group’s project growth strategy is gaining momentum and we are confident that the underlying strength of its businesses will deliver real growth in headline earnings, albeit off a substantially lower capital base.” — I-Net Bridge