Wrap Text
Unaudited Condensed Consolidated Interim Results For The Period Ended 30 September 2017
CSG Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number 2006/011359/06)
JSE code: CSG
ISIN: ZAE000184438
("CSG" or "the company" or "the group")
www.csgholdings.co.za
Unaudited condensed consolidated interim results for the
period ended 30 September 2017
Staffing Solutions
Facility Management
Security and Risk Solutions
- Revenue increased by 26% to R1,1 billion
(2016: R832,8 million
- Operating profit increased by 38% to R84,4 million
(2016: R61,3 million)
- Profit after tax increased by 37% to R59,6 million
(2016: R43,5 million)
- EPS increased by 18% to 11,33 cents per share
(2016: 9,61 cents per share)
- EBITDA increased by 41% to R93,9 million
(2016: R66,5 million)
- HEPS increased by 19% to 11,37 cents per share
(2016: 9,59 cents per share)
- Net asset value increased by 16% to 111,0 cents per share
(2016: 95,6 cents per share)
Financial performance
CSG is a contract services group offering a wide range of services, including
staffing solutions, facilities management, and security and risk solutions in
Southern Africa, to an array of mostly blue-chip clients. From 1 April 2017
CSG broadened its strategy and restated its current divisions, creating security
services as a free-standing third division in line with the reporting structure.
CSG's mission remains to become a leading strategic outsourced partner
of choice for staffing solutions, facility management, and security and risk
solutions in Southern Africa. The Company continued to consolidate and
increase the basket of services offered to clients in these divisions for
the half-year ended 30 September 2017. The strategic focus has been on
expanding into service delivery businesses that are more technology based,
with a higher barrier to entry than the existing services but remaining not
too capital intensive. All the recent security acquisitions within the
Group are in alignment with CSG's strategy to expand the
Company's divisions.
During the six months ended 30 September 2017, CSG made another material
security acquisition, namely Revert Risk Management Solutions Proprietary
Limited ("Revert") for R100 million. The purchase was announced on 30 March
2017 and became effective 1 May 2017. Following the successful conclusion of
the Revert transaction, which added substance to our specialised security and
risk services, CSG introduced security services as a free-standing third
division and restated its reporting segments accordingly from this date. CSG
also acquired the issued share capital of Golden Dividend 401 Proprietary
Limited ("Industroserve"), a cleaning company, and Siyaya Hygiene and Cleaning
Skills Institute Proprietary Limited ("Siyaya"), a training company, with effect
from 1 May 2017 and 1 June 2017 respectively (note 8). In addition, a smaller
bolt-on acquisition was made in September 2017, being the alarm and monitoring
business of Cortac Proprietary Limited in Essexwold, Bryanston and the greater
Hyde Park.
The CSG Holdings Group realised a 26% increase in revenue, 38% higher
operating profit and a 39% rise in headline earnings for the six months ended
30 September 2017. EBITDA increased by 41% to R93,73 million. These improvements
were achieved through both organic and acquisitive growth, as the additional
earnings from the recent security and cleaning acquisitions were included in
the results for the period under review.
Earnings per share and headline earnings per share increased by 18% and
19% respectively in comparison to that reported for the six months ended
30 September 2016. This increase was due to both organic growth and new
acquisitions, but diluted by the additional shares issued, relating to the
Ukweza acquisition (note 5.2).
Divisional review
Staffing Solutions Division
Revenue increased by 25% to R492,33 million contributing R41,63 million
(representing 44%) to the operating profit of the Group, due to greater
stability in the temporary employment industry as well as diversification
towards services other than temporary employment.
Facility Management Division
Revenue rose by 11% to R361,58 million contributing R30,68 million
(representing 32%) to the operating profit of the Group. The increase is due
to both organic growth and acquisitions, such as Industroserve.
Security and Risk Solutions Division
Revenue was R196,41 million, an improvement of 77% compared to the same period
last year, and contributed R23,06 million (representing 24%) to the operating
profit of the Group. The increase is as a result of the recent security
acquisitions made and is evidence of the successful strategy to introduce
security services as our third division.
Outlook
The current business environment and trading conditions are expected to
remain tough with only a small number of new infrastructure developments
in the near future. CSG's diversification strategy has been successful and
the group is well positioned with a strong foundation of diverse services
covering various industries. We anticipate that overall organic growth is
still possible from this solid base and current economic conditions provide
opportunities for further lucrative earnings accretive acquisitions at very
attractive multiples. CSG expects the growth experienced during the half year
to 30 September 2017 to continue for the next six months.
Condensed consolidated statement of profit and loss and
other comprehensive income
Six months Six months
ended ended Year ended
Unaudited Unaudited Audited
30 Sept 30 Sept 31 March
2017 2016 2017
Notes R'000 R'000 R'000
Revenue 1 050 317 832 792 1 746 629
Cost of sales (814 299) (652 755) (1 375 205)
Gross profit 236 018 180 037 371 424
Net operating expenses (151 589) (118 718) (243 908)
Operating profit 84 429 61 319 127 516
Profit on sale of
property,plant and
equipment 114 98 240
Re-measurement of
contingent consideration
relating to business
acquisition - - 355
Investment income 3 232 2 111 6 920
Finance cost (10 252) (5 315) (11 358)
Profit before taxation 77 523 58 213 123 673
Taxation (17 969) (14 714) (32 231)
Profit for the period 59 554 43 499 91 442
Other comprehensive income 1 547 422 (9 059)
Total comprehensive income 61 101 43 921 82 383
Profit for the period
attributable to:
Owners of the parent 57 455 41 574 86 787
Non-controlling interest 2 099 1 925 4 655
59 554 43 499 91 442
Total comprehensive income
attributable to:
Owners of the parent 59 002 41 996 77 728
Non-controlling interest 2 099 1 925 4 655
61 101 43 921 82 383
Weighted average shares in
issue (’000) 507 105 432 827 448 136
Diluted weighted average
shares in issue (’000) 507 761 434 577 449 789
Earnings per share
Basic earnings per share
(cents) 11,33 9,61 19,37
Diluted earnings per share
(cents) 11,32 9,57 19,30
Dividend per share (cents) - - 5,00
Headline earnings
reconciliation
Attributable earnings 57 455 41 574 86 787
(Loss)/profit on sale of
property, plant and
equipment (after taxation) (82) (71) (172)
Impairment on intangible
assets 288 - -
Impairment on other
financial assets - - 410
Headline earnings 57 661 41 503 87 025
Headline earnings per
share
Basic headline earnings per
share (cents) 11,37 9,59 19,42
Diluted headline earnings
per share (cents) 11,36 9,55 19,35
Condensed consolidated statement of financial position
Unaudited Unaudited Audited
30 Sept 30 Sept 31 March
2017 2016 2017
Notes R'000 R'000 R'000
ASSETS
Non-current assets 576 576 366 386 444 966
Property, plant and
equipment 71 545 43 335 55 094
Intangible assets 8 123 145 69 939 78 731
Goodwill 8 335 515 221 700 264 522
Deferred taxation 9 683 5 288 6 601
Other financial assets 36 686 26 123 40 018
Current assets 440 543 409 570 398 024
Inventories 10 338 9 427 8 608
Current income tax
receivable 1 034 1 575 3 149
Current portion of
other financial assets 4 574 434 5 520
Trade and other
receivables 388 383 299 811 327 647
Bank and call deposits 35 908 98 322 53 100
Total assets 1 017 118 775 956 842 990
EQUITY AND LIABILITIES
Capital and reserves 584 864 429 119 528 082
Stated capital 5.1 311 770 223 921 284 658
Treasury shares 5.2 (1 033) (1 247) (1 247)
Share based payment
reserve 26 934 102
Retained earnings 273 109 196 320 242 125
Foreign currency
translation reserve (12 273) (4 339) (13 821)
Non-controlling
interest 13 264 13 530 16 265
Non-current
liabilities 164 000 92 549 82 275
Interest bearing
liabilities 135 107 71 483 65 143
Contingent
consideration - 5 169 -
Deferred taxation 28 892 15 897 17 132
Current liabilities 268 254 254 287 232 633
Current portion of
interest bearing
liabilities 46 972 24 538 26 700
Loans from related
parties 2 916 200 8
Bank overdrafts and
invoice discounting 21 625 7 439 31 208
Trade and other
payables 189 574 212 917 170 417
Trade payables and
accruals 176 297 144 247 143 421
Current portion of
contingent
consideration 4 and 8 13 277 68 671 26 996
Current income
tax payable 7 167 9 193 4 300
Total equity and
liabilities 1 017 118 775 956 842 990
Shares in issue ('000) 515 150 448 781 497 416
Net asset value per
share (cents) 110,96 95,6 102,90
Net tangible asset value
per share (cents) 21,92 30,6 33,89
Condensed consolidated statement of cash flows
Six months Six months
ended ended Year ended
Unaudited Unaudited Audited
30 Sept 30 Sept 31 March
2017 2016 2017
Notes R'000 R'000 R'000
Cash flow from
operations 52 325 53 776 58 901
Cash generated by
operations 73 728 65 839 101 636
Investment income 1 270 2 111 3 639
Finance cost (10 252) (1 869) (9 307)
Taxation paid (12 421) (12 305) (37 067)
Cash flow from
investing
activities (126 160) (5 975) (106 264)
Net investment in
property, plant and
equipment (17 687) (5 975) (28 615)
Sale/(purchase) of
intangible assets 189 - (28)
Cash purchase
consideration made
relating to Afriboom
and Hi-Tech acquisitions - - (30 929)
Business combination
transaction costs - - (410)
Acquisition of
businesses 8 (108 662) - (46 282)
Cash flow from
financing
activities 66 225 (1 268) 24 905
Dividends paid (31 171) (21 191) (21 186)
Net purchase of
treasury shares 214 431 431
Cash purchase
consideration
made relating to
Ukweza acquisition - - (2 951)
Issue of ordinary
shares 5.1 1 103 35 228 83 356
Movement in
interest bearing
liabilities and
other financial
assets 96 080 (15 736) (34 745)
Movement in cash
resources (7 609) 46 533 (22 458)
Cash resources at
beginning
of period 21 892 44 350 44 350
Cash resources at end of
period 14 283 90 883 21 892
Cash resources 14 283 90 883 21 892
Bank and call deposits 35 908 98 322 53 100
Bank overdraft and
invoice discounting (21 625) (7 439) (31 208)
Segment reporting
Six months
Six months ended year ended
ended Restated Resated
Unaudited Unaudited Audited
30 Sept 30 Sept 31 March
2017 2016 2017
R'000 R'000 R'000
Revenue
Staffing solutions 492 334 394 963 834 560
Facility management 361 576 326 607 672 443
Security and risk
solutions 196 407 111 222 239 626
Total Group 1 050 317 832 792 1 746 629
Operating profit 84 429 61 319 127 516
Staffing solutions 41 627 29 818 70 591
Facility management 30 675 27 510 50 884
Security and risk
solutions 23 062 13 463 26 442
Head office (10 935) (9 472) (20 401)
Profit before taxation 77 523 58 213 123 672
Staffing solutions 39 508 28 479 68 726
Facility management 30 330 27 259 50 368
Security and risk
solutions 22 646 13 172 25 331
Head office (14 961) (10 697) (20 753)
Condensed consolidated statement of changes in equity
Total
attributable
to equity Non-
holders of controlling Total
the parent intrest equity
Notes R'000 R'000 R'000
Equity at 1 April
2016 (Audited) 345 108 884 345 993
Total comprehensive
income for the
period 41 996 1 925 43 921
Dividend paid (20 916) (270) (21 186)
Sale of shares to
non-controlling
interest 13 399 10 996 24 395
Share-based payment
reserve 343 - 343
Treasury shares 431 - 431
Ordinary shares
issued 35 228 - 35 228
Equity at
30 September 2016
(Unaudited) 415 590 13 535 429 125
Total comprehensive
income for the period 35 732 2 730 38 462
Share-based payment
reserve (241) - (241)
Ordinary shares
issued 60 736 - 60 736
Equity at 31 March
2017 (Audited) 511 817 16 265 528 082
Total comprehensive
income for the period 59 002 2 099 61 101
Dividend paid (25 692) (5 479) (31 171)
Purchase of shares
from non-controlling
interest 7 (880) 380 (500)
Share-based payment
reserve 26 - 26
Treasury shares 5.1 214 - 214
Ordinary shares
issued 5.2 27 113 - 27 113
Equity at
30 September 2017
(Unaudited) 571 600 13 264 584 864
Notes to the condensed consolidated financial results
1. Nature of operations
CSG is a holding company incorporated and domiciled in South Africa. The
main business is to provide outsourced personnel services, including
recruitment and specialised staffing solutions, facilities management
which includes contract catering, cleaning and food services, as well as
security and risk solutions to a range of clients.
2. Basis of preparation
These condensed consolidated interim results for the period ended
30 September 2017 have been prepared in accordance with the framework
concepts and the measurement and recognition requirements of
International Financial Reporting Standards ("IFRS"), the information
required by IAS 34 - Interim Financial Reporting, the SAICA Financial
Reporting Guides as issued by the Accounting Practices Committee and
Financial Reporting Pronouncements as issued by the Financial Reporting
Standards Council, the requirements of the South African Companies Act no
71 of 2008, and the JSE Limited Listings Requirements.
The results have been prepared in accordance with the accounting policies
of the Company that are in terms of IFRS and that are consistent with the
accounting policies of the previous annual financial statements. These
results were prepared under the supervision of the group Chief Financial
Officer, Mr WE Scott CA(SA) and were not reviewed or audited by CSG's
external auditor, Grant Thornton.
3. Segment reporting
From 1 April 2017 we broadened our strategy and restated our current
divisions and as a result created the security division as a free-
standing third division in line with the reporting structure. The result
is that the segment report provided has been restated for previous periods
to show comparable results.
4. Contingent consideration
Additional contingent considerations have been raised for both the
Industroserve and Siyaya acquisitions (see note 8) which will only
be settled during the 2019 financial year. The outstanding contingent
consideration relating to the Ukweza acquisition, being R26,01 million
was settled through the issue of 16 421 519 CSG shares on 15 June 2017.
The performance guarantee amount for Hi-Tech White River has not been
adjusted.
5. Ordinary shares
5.1 Treasury shares
Treasury shares relate to the purchase of shares by the CSG Share
Incentive Trust ("Trust") to fulfil its obligation in terms of share
option schemes.
5.2 Ordinary shares issued
On 15 June 2017, 16 421 519 shares were issued to the previous non-
controlling interest in Ukweza as part of an agreement.
During July 2017, an additional 1 312 502 shares were issued to
predetermined participants resulting from an exercise of options pursuant
to a specific issue of options by CSG.
6. Capital commitments and contingencies
The Group had no significant outstanding capital commitments or
contingencies as at 30 September 2017.
7. Acquisition OF 30% interest in 7Arrrows Security Proprietary Limited
(previously known as Security Operations Group Proprietary Limited)
On 1 May 2017, CSG purchased the 30% non-controlling shareholding of
7Arrows Security. The purchase has not resulted in a change of control
and as such the full 30% of net asset value has been accounted for against
retained earnings.
8. Business combinations
8.1 Revert Risk Management
On 30 March 2017, CSG announced that it has concluded a sale of shares
agreement with RTT Group Proprietary Limited, in terms of which it
purchases from the seller 100% of the issued share capital of Revert
and certain moveable assets for R100 million. Revert conducts the business
of risk and security management solutions.
The effective date is 1 May 2017 and the transaction was funded through a
five-year medium-term loan with Nedbank.
The company was acquired to align with CSG's strategy to diversify the
Company's divisions, both organically and through acquisitions. The
acquisition resulted in CSG becoming a national, well-recognised security
and risk service provider. Revert added substance to CSG's "specialised
security and risk services" and supported CSG's strategy to introduce
security services as a third division from 1 April 2017.
The transaction will be accounted for in terms of IFRS 3 Business
Combinations and a full purchase price allocation will be performed within
twelve months as allowed by this standard. Currently the Revert brand name
and current customer list have been identified as intangible assets. The
remaining excess on the purchase price relates to synergies and has
therefore been accounted for as goodwill.
The information provided below is based on provisional results of the
entity as at 1 May 2017.
Recognised amounts of identifiable net assets
R'000
Non-current assets 3 389
Property, plant and equipment 2 100
Deferred tax asset 1 289
Current assets 25 092
Trade and other receivables 19 906
Current tax receivable 1 312
Inventories 635
Bank and cash 3 239
Current liabilities (11 322)
Trade and other payables (11 322)
Identifiable net assets 17 159
Intangible assets identified 43 527
Deferred tax liability on the above intangible asset (12 188)
Goodwill on acquisition 51 502
Purchase consideration 100 000
Cash flow information
Bank balance acquired 3 239
Since the acquisition date, Revert has contributed R70,08 million to
Group revenue and R4,79 million to Group profit. If the acquisition had
occurred on 1 April 2017, the Group revenue would have been R1,13 billion
and Group profit for the period would have been R65,11 million.
8.2 Industroserve
CSG via its wholly owned subsidiary, Afriboom Proprietary Limited
("Afriboom"), acquired 100% of the issued shares in Golden Dividend 401
Proprietary Limited, trading as IndustroServe, a cleaning company, with
effect from 1 May 2017 for a maximum amount of R22,5 million. An initial
amount of R7,5 million was paid in cash, while the balance will be paid
partly through a further cash payment and the issue of CSG shares after
the twelve-month earn-out period has been reached.
The company was acquired to expand the current footprint and to boost
the commercial cleaning division of Afriboom by gaining access to their
customer list.
The transaction will be accounted for in terms of IFRS 3 Business
Combinations and a full purchase price allocation will be performed
within twelve months as allowed by this standard. The current customer
list has been identified as an intangible asset. The contracts will be
merged with Afriboom and no value was placed on the brand name. The
remaining excess on the purchase price relates to synergies and has
therefore been accounted for as goodwill.
The information provided below is based on provisional results of
the entity as at 1 May 2017.
Recognised amounts of identifiable net assets
R'000
Non-current assets 3 533
Property, plant and equipment 3 533
Current assets 3 700
Trade and other receivables 2 718
Bank and cash 982
Non-current liabilities (2 576)
Finance lease liabilities (2 576)
Current liabilities (4 446)
Other financial liabilities (221)
Trade and other payables (4 225)
Identifiable net assets 211
Intangible assets identified 1 413
Deferred tax liability on the above intangible asset (396)
Goodwill on acquisition 16 939
Purchase consideration* 18 167
Cash flow information
Bank balance acquired 982
* Based on the projected profits for the performance guarantee period on
accrual for the contingent consideration has been taken into account in
calculating goodwill on date of acquisition.
Since the acquisition date, IndustroServe has contributed R19,90 million to
Group revenue and R1,96 million to Group profit. If the acquisition had
occurred on 1 April 2017, the Group revenue would have been R1,07 billion and
Group profit for the period would have been R59,84 million.
8.3 CSG Skills Institute (previously known as Siyaya)
CSG acquired 100% of the issued shares in Siyaya Hygiene and Cleaning
Skills Institute Proprietary Limited, a training company, together with
the shareholder's loan account held by the previous shareholder with
effect from 1 June 2017 for a maximum amount of R5,25 million. An initial
amount of R3 million was paid in cash, while the balance will be settled in
cash after the twelve-month earn-out period.
The company was acquired for the brand name, to gain access to their
customer list, to expand the basket of services in its Staffing Solutions
division and to provide synergies in the Group by offering training and
consulting services.
The transaction will be accounted for in terms of IFRS 3 Business
Combinations and a full purchase price allocation will be performed
within twelve months as allowed by this standard. The brand name
originally acquired has subsequently been sold for R400 000 and the
full brand value was impaired to zero during the current period. The
company will be known as CSG Skills Institute going forward. The customer
list has been identified as an intangible asset. The remaining excess on
the purchase price relates to synergies and has therefore been accounted
for as goodwill.
The information provided below is based on provisional results of the
entity as at 1 June 2017.
Recognised amounts of identifiable net assets
R’000
Non-current assets 1 903
Property, plant and equipment 33
Deferred tax asset 1 870
Current assets 2 286
Trade and other receivables 2 046
Bank and cash 240
Current liabilities (1 563)
Bank overdraft (60)
Other financial liabilities (200)
Trade and other payables (1 303)
Identifiable net assets 2 626
Intangible assets identified 2 556
Deferred tax liability on the above intangible asset (559)
Purchase consideration* 4 623
Cash flow information
Bank balance acquired 180
* Based on the projected profits for the performance guarantee period on
accrual for the contingent consideration has been taken into account in
calculating goodwill on date of acquisition.
Since the acquisition date, CSG Skills Institute has contributed
R4,25 million to Group revenue and R552 000 to Group profit. If the
acquisition had occurred on 1 April 2017, the Group revenue would have been
R1,06 billion and Group profit for the period would have been
R58,06 million.
8.4 Cortac
CSG, through wholly owned subsidiary 7Arrows Security purchased certain
of the monitoring, armed response and guarding contracts of Cortac
Proprietary Limited ("Cortac"). The contracts were acquired to expand the
current geographical footprint in the security division.
The effective date is 1 September 2017 and an initial amount of
R1,71 million was paid in cash on the same date.
Due to the fact that the release of the interim results is so close to
the effective date, it is not possible to make the full IFRS3 disclosures.
As the initial accounting is still incomplete, the full excess over
purchase price have provisionally been allocated to goodwill.
The transaction will be accounted for in terms of IFRS 3 Business
Combinations and a full purchase price allocation will be performed
within twelve months as allowed by this standard.
The information provided below is based on provisional results of the
entity as at 1 September 2017.
Recognised amounts of identifiable net assets
R’000
Current liabilities (839)
Trade and other payables (839)
Identifiable net assets (839)
Goodwill on acquisition 2 552
Purchase consideration* 1 713
Cash flow information
Bank balance acquired -
* Based on the projected profits for the performance guarantee period on
accrual for the contingent consideration has been taken into account in
calculating goodwill on date of acquisition.
9. Events after the reporting period
The directors are not aware of any material events, other than events
noted below, which occurred after the reporting date and up to the date
of this report.
9.1 InCity
On 27 September 2017, CSG signed an agreement with Intercity Alarms and
Security Systems Proprietary Limited, trading as InCity, in terms of
which it purchases the monitoring, armed response and guarding business
of InCity for a maximum amount of R11,08 million. An upfront amount of
R6 million will be paid in cash and the balance in tranches throughout
the earn-out period.
The effective date is expected to be 1 December 2017.
10. Changes in directors
Mr NG Thiart will step down as an executive director of the Company with
effect from 31 December 2017 due to medical reasons. Godfried remains a
material shareholder of CSG and will remain available to the Company as a
consultant post 31 December 2017.
11. Going concern
The financial information has been prepared on a going concern basis.
For and on behalf of the Board
BT Ngcuka PJJ Dry
(Chairman) (Chief Executive)
Thursday, 23 November 2017
Directors
BT Ngcuka* (Chairman), PJJ Dry (CEO), JG Nieuwoudt (COO), WE Scott (CFO)
NG Thiart, NN Sonjani*#, R Kisten *#, AF Volkwyn* ,M Mokoka*#
(* non-executive) (# independent)
Secretary and registered office
MN Hattingh, 6 Topaz Street, Lyttelton Manor, Centurion 0157
Transfer Secretaries
Link Market Services South Africa Proprietary Limited
13th Floor, Rennie House, 19 Ameshoff Street, Braamfontein
(PO Box 4844, Johannesburg 2001)
Sponsor
PSG Capital
Date: 23/11/2017 09:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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