PSG GROUP INVESTMENT PHILOSOPHIES PSG KONSULT LANGEBAAN Piet Mouton 12 May 2014 1
PSG Group Market Cap: R20bn 28.3% 62.9% 57.1% 42.4% 100% 49% 100% Banking Unsecured loans 5.4m clients Market Cap: R25.9bn Financial Services 618 financial planners AUM: R112bn Market Cap: R8.3bn Private Education Marker leader >27,000 learners Market Cap: R7.6bn Agri Private Equity 5 core investments Market Cap: R4.4bn Private Equity Incubator for next big thing? 13 investments Value: R1.0bn BEE SA specific Opportunistic Value: R2.7bn Other Cash and equivalents (R340m) Loans to investments Valuation of holding company PAT R6.7bn (30%) R5.5bn (25%) R4.5bn (20%) R1.8bn (8%) R1.0bn (5%) R1.3bn (6%) R1.4bn (6%) PSG has influence over companies with a combined market cap of R74bn 2
PSG Group PSG Sum-of-the-parts Rm Feb-12 Feb-13 Feb-14 Capitec 5 978 50% 6 128 39% 5 989 30% Curro 1 118 9% 2 607 16% 4 660 23% PSG Konsult 1 483 12% 2 237 14% 4 004 20% Zeder 1 067 9% 1 412 9% 1 698 8% PSG Private Equity 728 6% 681 4% 949 5% Thembeka Capital 570 5% 899 6% 1 243 6% PSG Corporate 338 3% 383 2% 383 2% Other 684 6% 1 505 10% 1 122 6% TOTAL ASSETS 11 966 100% 15 852 100% 20 048 100% Perpetual prefs (1 188) (1 163) (1 393) Other (463) (845) (615) SOTP 10 315 13 844 18 040 Shares in issue (m) 185 191 190 SOTP per share (rand) 55.92 72.67 95.01 3
ZAR per share PSG Group 120.00 PSG Share price vs SOTP value per share (7 May 2014) 109.86 100.00 107.98 80.00 60.00 40.00 SOTP value (R) Share price (R) 20.00 - Feb-06 Feb-07 Feb-08 Feb-09 Feb-10 Feb-11 Feb-12 Feb-13 Feb-14 Since 28 Feb 2014, PSG s share price has increased by 22% 4
South Africa: Land of opportunity But with difficult times 5
Difficult political times WHERE GOVERNMENT FAILS Service delivery Eskom and municipalities Crime According to the 2013 SA Crime Stats Survey, South Africa s murder rate is about 4.5 times higher than the global average of 6.9 murders per 100 000 people. Education South Africa s maths and science education has been ranked 2nd last in the world according to a World Economic Forum report. Wasting of public funds E-tolls; Nkandla Tenderpreneurs and corruption Labour unions becoming more aggressive strikes costing taxpayers Rbillions! 6
Difficult economic times Are markets set for a correction? JSE ALSI RETURN IN 2013 Dividend Yield: 2.7% Earnings growth: (6.4%) Rerating: 25.1% Total Return: 21.4% Source: Investec Asset Management As at 2 May 2014 7
Living in the age of opportunity A pessimist sees the difficulty in every opportunity; an optimist sees the opportunity in every difficulty. - Winston Churchill 8
South Africa alive with possibility THE GOOD IN OUR COUNTRY Mandela and the peaceful transition to democracy Stable economy introduction to the BRICS economies A constitution embodying true democracy Leading economy in Africa World class financial institutions SA Reserve Bank and Receiver of Revenue In the 16 years before democracy, GDP Growth was 1.55% p.a.; in the 16 years thereafter, it was 3.3% p.a. We have grown per capita income by a third since democracy, despite the 1998 global crisis and the 2009 recession. Source: The long view PJ Landman 2013 9
South Africa alive with possibility The largest number of people in the adult (16 years and older) population is now in the middle income category (LSM 5 6) 10
PSG Global Flexible fund It is wise to hedge oneself through diversification Invest a portion of your clients assets abroad PSG Global Flexible Fund is ideal: 1-year performance: 13% (vs. benchmark return of 8%) Based in Malta Easy to invest in 11
PSG strategy Investment holding company We choose to hold onto great companies with no exit strategy (Buffett) We are better at building companies from early stage investing and growing the business, rather than utilising leverage as is the case with the more classic private equity model 12
PSG Group Through its investments, PSG Group has built a good reputation based on TRUST INTEGRITY DELIVERY OF SHAREHOLDER VALUE CAGR of 50.4% from 1995-2014 R100 000 invested in PSG Group upon establishment 18 years ago would have grown to R169m, compared to R1.5m had one invested in the JSE ALSI as at 28 February 2014 MV of R100 000 PSG investment (i.e. 300 000 PSGs @ 35cps) PSG Group 1.32m shares at R89.02 per share = R118m Capitec Bank 0.278m shares at R183.75 per share = R51m Since 28 Feb 2014, PSG s share price has increased by 22% 13
PSG Group An investment philosophy is particularly important in the turbulent times in which we find ourselves A man without a goal is like a ship without a rudder. Thomas Carlyle 14
. OUR INVESTMENT PHILOSOPHIES 15
PSG Investment philosophies Grounded on good investment principles Investments must be simple to understand 16
PSG Investment philosophies Grounded on good investment principles Investments must have significant growth potential 17
PSG Investment philosophies Grounded on good investment principles Focus, focus, focus "The shorter way to do many things is to do only one thing at a time ~ Mozart "The successful warrior is the average man, with laser-like focus" ~ Bruce Lee 18
PSG Investment philosophies Grounded on good investment principles High barriers to entry important: easier to survive higher margins Curro skills to run the best schools in the country capital to build schools Capitec banking license branch network 19
PSG Investment philosophies Grounded on good investment principles Great corporate governance not negotiable Integrity Transparency Good, timely information Trust 20
PSG Group PSG PSG invests in growing and revolutionary industries These companies present good investment opportunities for any discerning investor 21
PSG Capitec Bank Increasing market share in the banking sector 640 branches 5.4m clients 9 070 employees 2 918 ATMs Attracting new markets Urban Young: 20-35 yrs Higher income More electronic transacting 22
PSG Capitec Bank PSG - Capitec 40% CAGR for 2003-2014 BIGGEST LESSON = FOCUS 99% CAGR for 2005-2014 23
PSG Capitec Bank AWARDS 24
PSG Capitec Bank Core advantages Simple products, easy to understand pricing Great management Audited results published less than 1 month after year-end that speaks of a brilliantly run company! Conservative provisioning and write-off policy Diverse funding base Well capitalised with a conservative CAR 25
PSG Konsult Planning Trading & Custody Investments Insurance PSG Advisor PSG Trust PSG Online PSG Asset Management Western All the experts under one roof 26
PSG Konsult - Trusts Increased stickiness of clients Offshore trust capabilities Seamless financial and fiduciary planning 18 offices in 2014 Drafting of wills: 1137 in 2014 Estate value of wills: > R23bn Corporate trustee on 785 trusts Next generation wealth management Critical to proper wealth All the experts under one roof planning 27
PSG Konsult Online trading Stockbroker of the year 3 years running Market access Local Major international markets Custody and safekeeping All the experts under one roof Extensive product range 28
PSG Konsult Asset Management Track record speaks for itself Single manager funds Performance 3-month rank 6-month rank 1-year rank 3-year rank 5-year rank 10-year rank PSG Flexible Rank 10 7 6 14 4 1 Return 5.2% 13.5% 28.5% 17.9% 25.2% 18.6% PSG Equity A Rank 5 4 2 4 1 8 Return 8.4% 19.1% 34.9% 21.8% 28.6% 20.6% PSG Balanced A Rank 25 10 9 18 3 10 Return 4.1% 10.8% 21.4% 15.7% 19.4% 15.6% All the experts under one roof 1 st Quartile 2 nd Quartile 3 rd Quartile 4 th Quartile 29
PSG Konsult Asset Management Top 3 PlexCrown overall ranking Total Overall PlexCrown Rank Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Score Rank Score Rank Score Rank Score Rank Score Rank Coronation 4.906 1 4.657 1 4.499 2 4.576 1 4.544 1 Allan Gray 4.613 2 4.523 2 4.528 1 4.147 2 4.293 2 PSG 3.577 5 3.698 4 4.058 3 3.923 4 4.128 3 Nedgroup Investments 3.837 3 4.152 3 3.964 4 4.026 3 3.979 4 Prudential 3.362 8 3.508 7 3.294 7 3.552 5 3.726 5 Investment Solutions 3.438 7 3.618 5 3.414 6 3.388 6 3.419 6 Oasis 2.492 16 2.520 16 2.517 15 3.232 9 3.281 7 Investec 2.941 12 2.956 12 2.890 14 2.863 15 3.158 8 All the experts under one roof SIM 3.308 9 3.212 9 3.185 9 3.257 9 3.147 9 Old Mutual 3.031 10 3.200 10 3.036 10 3.136 11 2.993 10 30
PSG Konsult Asset Management Equity team awards 2004: S&P Sector award: Flexible sector (3 years). 2004: S&P Sector award: Growth sector (1 year). 2005: Raging bull Sector award: General Equity (3 years). 2006: S&P Sector award: General Equity (3 years). 2010: Raging bull Sector award: Flexible (3 years). 2010: Raging bull: Best domestic AA Flexible fund (5 years). 2011: Raging bull Sector award: General Equity (3 years). All the experts under one roof 2011: Raging bull: Best broad-based domestic Equity fund (3 years). 2011: Raging bull: Best domestic AA Flexible fund (5 years). 31
PSG Konsult Advisors PSG Konsult advisors the experts 192 offices 618 advisors +150,000 clients R165bn AUA R1.9bn in premiums Top Wealth Manager for Successful Entrepreneurs Business Day Investors Monthly survey for 2014 No. 2 Overall Top Wealth Manager Business Day Investors Monthly survey for 2014 Santam s Top Personal Lines Broker of the year - 2013 (3 rd year running) PSG PHILOSOPHY: ULTIMATE EMPOWERMENT AT PSG Employ smart, competent individuals and empower them through TRUST 32
PSG - Thembeka PSG Thembeka Capital CREATING SHAREHOLDER VALUE NAV at inception in 2006 = R1 NAV today = R2.7bn Value created for BEE investors (51%) ~ R1.4bn 33
PSG - Curro PSG - CURRO Education in SA 4% of kids in private schools in SA vs 13% globally Limited public school capacity Few new schools built 4 markets Affordable private schools High-fee schools Low-fee schools Crèches Huge opportunity! 34
PSG - Curro PSG - CURRO HIGHLIGHTS Year ended December 2013 Largest private school group in South Africa 31 campuses; 27 263 learners (year 2020 target 80 campuses; 90 000 learners) Significant capital invested: Invested more than R1bn in 2013 To invest ~R1.4bn in 2014 Planned rights issue in June 2014 to raise approximately R590m Investment grade bond rating (BBB-); Secured credit rating (A-) 35
PSG - Curro PSG - CURRO 2013 ACADEMIC RESULTS Curro IEB Curro National NSC No of learners 310 631 654 723 Pass rate 100% 92% 78% University exemption 79% 52% 24% Northern Academy school Curro Durbanville Northern Academy Polokwane 4 500 learners Around 50-70 learners per class Tough conditions 99% matric pass rate 36
PSG Private Equity investments 37 37
PSG Private Equity investments Market leader in home and support centre education 7 700 learners, with target of ~90 000 learners by 2020 Afrikaans and English, Gr 0 12 Accredited matric 120 support centres nationally 38
PSG Zeder Investments Project Internal Focus at Zeder Rationalized portfolio to 5 core investments valued at R4.9bn at year-end A story of focused investments 39
PSG Zeder Investments Well known and loved consumer brands Very good investment to date Capital invested ~ R890m Market value of investment ~ R2.4bn Performing assets Leading brands Good management Growth potential Market cap R22bn Through AVB, we control 30.4% 40
PSG Zeder Investments Through an improved strategy and motivated execution, Kaap Agri continues to deliver strong results and has additional growth plans. 101 st year of existence 167 operating points Good results Management has positive energy Focus is to grow organically and through M&A - Geographic expansion - Range extension 41
PSG Zeder Investments Over 70 years, Capespan has developed two large and complimentary divisions which are increasingly less interdependent. FRUIT LOGISTICS The fruit division produces, procures, markets and distributes fresh produce from more than 12 countries to more than 60 countries. Through FPT and MCT, Capespan offers a broad range of landside and port logistic services in South Africa and Mozambique. A true global company with an exciting opportunity in China Golden Wing Mau 42
PSG Zeder Investments A seed business consisting of Agricol and Klein Karoo Seed Marketing (KKSB) Agricol and KKSB have: - Trusted brands - A broad product range - A strong geographic footprint ZAAD is a sizeable and profitable company ZAAD 43
PSG Zeder Investments Irrigated hectares Commercial farming in Zambia 6,000 4,769 5,369 5,969 Target 10,000 ha under irrigation Africa/Zambia many opportunities 4,000 4,169 Somawhe 2,597 Somawhe 3,197 Somawhe 3,797 Somawhe 4,397 4169 Poultry consumption 2.5kg per capita in Zambia vs. 31.8kg in SA 40% of fresh water in Southern Africa 2,000 0 420 Mkushi 420 2011 Mkushi 1,572 2012 Mkushi 1,572 2013 Mkushi 1,572 2014 Mkushi 1,572 2015 8 bordering countries all net importers of food Great opportunities in agriculture Recently acquired Mpongwe Milling Leading milling business complimentary to production activities 44
PSG Thembeka Capital PSG Capital Strategic services for a range of clients Approved sponsor and designated advisor to 32 companies listed on the JSE main board and AltX Full spectrum of advisory services from M&A to regulatory advisory 45
PSG Group one large family business PSG philosophy is based on management as co-investors Management as owners are generally focused and dedicated to business growth We employ smart and competent individuals and empower them through trust MORE THAN 70% OF PSG GROUP SHARES ARE HELD BY DIRECTORS, FAMILY AND FRIENDS 46
PSG Themes for business success Themes that have been established over the life of PSG Group Creating shareholder wealth Ultimate empowerment Focusing on clients Project Internal Focus Giving back to society Trust and integrity 47
PSG Themes for business success A successful company: Employs Trains Educates Pays taxes Gives back HAVING A POSITIVE IMPACT ON YOUR ENVIRONMENT You cannot sleep in peace if your neighbour is hungry Anton Rupert For the period ended February 2013 48
Giving at PSG Group PSG Themes for business success Akkerdoppies Early childhood development High-quality affordable preschool services to children from Idas Valley, Cloetesville and Khayamandi Beneficiaries: 160 children aged under 7 years 49
Giving at PSG Group PSG Themes for business success Think and plan what you want to do in life Discuss your plans with your loved ones Your plans will come to life Focus on executing your plans with enthusiasm and you will prosper in the years ahead BELIEVE IN YOURSELF 50
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