Wrap Text
Reviewed Condensed Consolidated Preliminary Financial Results
Mvelaserve Limited
(Incorporated in the Republic of South Africa)
(Registration number 1999/003610/06)
JSE share code: MVS ISIN: ZAE000151353
("Mvelaserve" or "the group")
REVIEWED CONDENSED CONSOLIDATED
PRELIMINARY FINANCIAL RESULTS
for the year ended 30 June 2012
HIGHLIGHTS
- Revenue up 12% to R5 117 million
- Cash flow from operations up 26% to R369 million
- Operating profit for H2 2012 up 17% on H1 2012
- HEPS for H2 2012 of 47,3 cents up from 19,5 cents in H1 2012 and
up from 10,3 cents in H2 2011
- Successful turnaround of RoyalMnandi and RoyalServe Cleaning
- Operating profit down 41%
but, on a comparable basis,
up 26% from 2011
Condensed consolidated preliminary statement of financial position
Restated Restated
Reviewed Audited Audited
30 June 2012 30 June 2011 30 June 2010
Note* R'000 R'000 R'000
ASSETS
Non-current assets 1 148 402 1 109 260 975 105
Property, plant and equipment 3 440 185 431 915 387 619
Intangible assets 4 628 485 622 547 545 335
Investments in associates 8 779 9 095 8 269
Other investments 17 149 11 518 16 362
Deferred income tax assets 53 804 34 185 17 520
Current assets 1 211 334 1 071 425 1 753 501
Other investments 8 373 11 921 15 553
Other current assets 908 438 816 259 1 363 139
Restricted cash 5.1 151 495 116 458 115 029
Cash and cash equivalents 5.1 143 028 126 787 259 780
Assets in disposal group held-for-sale 79 800 5 045
TOTAL ASSETS 2 359 736 2 260 485 2 733 651
EQUITY AND LIABILITIES
Capital and reserves 918 935 902 337 233 300
Owners of the parent 909 017 887 049 227 817
Non-controlling interest 9 918 15 288 5 483
Non-current liabilities 295 403 323 036 1 367 158
Interest-bearing liabilities 6 253 303 288 845 605 470
Non-interest-bearing liabilities 722 117
Derivative financial instrument 19 633 25 523 36 900
Deferred income tax liabilities 22 467 8 668 2 671
Current liabilities 1 145 398 980 312 1 133 193
Interest-bearing liabilities 6 159 735 137 809 178 500
Non-interest-bearing liabilities 5 414 3 467 18 136
Other current liabilities 980 249 839 036 936 557
Liabilities in disposal group held-for-sale 54 800
TOTAL EQUITY AND LIABILITIES 2 359 736 2 260 485 2 733 651
* The notes form an integral part of the condensed consolidated financial statements and should be read in conjunction
with the financial information.
Condensed consolidated preliminary statement of profit or loss and other comprehensive income
Reviewed Audited
30 June 2012 30 June 2011
R'000 R'000
Continued operations
Revenue 4 943 383 4 400 888
Profit from operations 195 361 296 358
Goodwill impaired (18 554) (121 550)
Net finance costs (45 854) (57 098)
Finance income 7 163 14 640
Finance costs (53 017) (71 738)
Investment income 10 577 71 422
Share of profit from associates 3 981 826
Dividend income 700 3 800
Fair value adjustments and net profit from investments 5 896 66 796
Profit before taxation 141 530 189 132
Taxation expense (71 605) (77 227)
South African (current, deferred, capital gain) and foreign taxation (64 821) (73 069)
Secondary Tax on Companies (6 784) (4 158)
Profit for the year from continued operations 69 925 111 905
Profit from discontinued operations 4 662 16 038
Total profit for the year 74 587 127 943
Other comprehensive income
Item that will be reclassified subsequently to profit or loss when specific
conditions are met: 2 538 (10 206)
Currency translation differences 2 538 (10 206)
Total comprehensive income for the year 77 125 117 737
Profit for the year attributable to:
Owners of the parent continued operations 65 730 106 600
Owners of the parent discontinued operations 4 662 16 038
Non-controlling interest 4 195 5 305
74 587 127 943
Total comprehensive income attributable to:
Owners of the parent continued operations 68 268 96 394
Owners of the parent discontinued operations 4 662 16 038
Non-controlling interest 4 195 5 305
77 125 117 737
Ordinary share performance
Reviewed Audited
30 June 2012 30 June 2011
Weighted average number of ordinary shares in issue ('000) 141 562 139 703
Earnings per ordinary share (cents) 49,7 87,8
Headline earnings per ordinary share (cents) 66,8 159,8
Earnings per ordinary share from continued operations (cents) 46,4 76,3
Headline earnings per ordinary share from continued operations (cents) 60,1 155,1
Earnings per ordinary share from discontinued operations (cents) 3,3 11,5
Headline earnings per ordinary share from discontinued operations (cents) 6,7 4,7
Number of ordinary shares in issue ('000) 141 562 141 562
Net asset value per ordinary share (cents) 642,1 626,6
Net tangible asset value per ordinary share (cents) 160,2 162,7
Reconciliation between profit attributable to owners of the parent and
headline profit attributable to owners of the parent:
Reviewed Audited
30 June 2012 30 June 2011
R'000 R'000
Profit attributable to owners of the parent 70 392 122 638
IAS 27 loss/(profit) on disposal of subsidiaries and investments 4 806 (44 288)
IAS 36 net impairment of long lived assets 5 200
IAS 16 profit on sale of property, plant and equipment (6 685) (3 156)
IFRS 3 profit on deemed disposal of associate (10 667)
IAS 36 goodwill impairment 18 554 121 550
IFRS 5 impairment of disposal group held-for-sale 28 631
Tax effect of the above transactions 2 254 8 577
Headline profit attributable to owners of the parent 94 521 223 285
Condensed consolidated preliminary statement of cash flows
Restated Restated
Reviewed Audited Audited
30 June 2012 30 June 2011 30 June 2010
Note* R'000 R'000 R'000
Profit from operations^ 200 470 340 322 292 442
Payments under finance leases (4 853)
Non-cash items 158 971 (29 944) 108 572
Working capital 14 395 (16 418) (37 008)
Cash generated from operations 368 983 293 960 364 006
Net interest paid (48 507) (47 392) (60 494)
Dividend income from investments
and associates 5 149 3 820 4 108
Taxation paid (78 936) (102 487) (58 659)
Cash flows from operating activities 246 689 147 901 248 961
Cash flows from investing activities 5.3 (130 991) (133 706) (175 879)
Cash flows from financing activities 5.3 (46 088) 42 585 75 866
Dividends paid owners of the parent (50 962) (187 488)
Dividends paid non-controlling interest (12 738) (2 401) (613)
Net movement in cash and cash equivalents
and bank overdrafts 5 910 (133 109) 148 335
Cash and cash equivalents
at the beginning of the year 126 787 259 780 111 445
Cash held in disposal group held-for-sale 8 679# (8 679)
Effect of exchange rate fluctuations on cash held 1 652 8 795
Cash and cash equivalents
at the end of the year 143 028 126 787 259 780
* The notes form an integral part of the condensed consolidated financial statements and should be read in conjunction with the
financial information.
^ Includes discontinued operations.
# Cash held in disposal group held-for-sale as at 30 June 2011.
Condensed consolidated preliminary segmental information
The presentation of the segment information has been amended since the prior year to disclose catering and cleaning
as separate segments and, as such, the prior year information has been restated to be in line with the current year's
presentation.
Restated
Reviewed Audited
30 June 2012 30 June 2011
Note* R'000 R'000
NET ASSETS
Facilities management services 379 929 359 256
Security services 384 966 356 862
Catering services 74 286 90 104
Cleaning services 136 726 125 764
Diversified services# (56 972) (54 649)
Net assets from discontinued operations 25 000
918 935 902 337
REVENUE INCLUDING INTER-SEGMENT TRADING
Facilities management services 1 281 260 1 149 200
Security services 2 267 658 1 977 502
Catering services 572 432 711 991
Cleaning services 484 080 450 209
Diversified services# 723 100 273 957
Revenue from discontinued operations 180 390 180 448
5 508 920 4 743 307
REVENUE FROM EXTERNAL CLIENTS
Facilities management services 1 278 726 1 145 634
Security services 2 238 467 1 966 538
Catering services 456 169 656 372
Cleaning services 349 318 380 897
Diversified services# 620 703 251 447
Revenue from discontinued operations 173 569 164 133
5 116 952 4 565 021
PROFIT/(LOSS) FROM OPERATIONS 5.2
Facilities management services 121 930 111 905
Security services 143 943 142 966
Catering services (10 755) (39 352)
Cleaning services 3 142 12 702
Diversified services# (62 899) 68 137
Profit from discontinued operations 5 109 43 964
200 470 340 322
NET FINANCE INCOME/(COSTS)
Facilities management services 5 075 (4 184)
Security services (9 793) (9 781)
Catering services (1 591) (1 032)
Cleaning services ( 464) (1 886)
Diversified services# (39 081) (40 215)
Net finance income from discontinued operations 1 140 684
(44 714) (56 414)
INVESTMENT INCOME
Facilities management services 3 981 4 311
Security services 49 367
Catering services
Cleaning services
Diversified services# 6 596 17 744
Investment income from discontinued operations 153 20
10 730 71 442
TAXATION
Facilities management services (34 170) (36 885)
Security services (30 989) (24 416)
Catering services 6 650 3 733
Cleaning services 4 583 (2 462)
Diversified services# (17 679) (17 197)
Taxation from discontinued operations 3 065
(68 540) (77 227)
TOTAL PROFIT/(LOSS) FOR THE YEAR 5.2
Facilities management services 96 743 75 147
Security services 103 161 155 736
Catering services (5 696) (36 651)
Cleaning services 7 261 8 354
Diversified services# (131 544) (90 681)
Total profit from discontinued operations 4 662 16 038
74 587 127 943
TOTAL COMPREHENSIVE INCOME/(LOSS) FOR THE YEAR 5.2
Facilities management services 96 743 75 147
Security services 106 962 154 179
Catering services (6 759) (45 300)
Cleaning services 7 261 8 354
Diversified services# (131 744) (90 681)
Total comprehensive income from discontinued operations 4 662 16 038
77 125 117 737
* The notes form an integral part of the condensed consolidated financial statements and should be read in conjunction with the
financial information.
# Includes head office.
Condensed consolidated preliminary statement of changes in equity
Foreign currency Total attributable Non-
Share translation Distributable to owners controlling Capital and
capital reserve reserve of the parent interest reserves
R'000 R'000 R'000 R'000 R'000 R'000
Audited balance at 30 June 2010 227 817 227 817 5 483 233 300
Transactions with non-controlling interests:
Acquistion of subsidiaries 6 901 6 901
Dividends paid (2 401) (2 401)
Total comprehensive income for the year (10 206) 122 638 112 432 5 305 117 737
Profit for the year 122 638 122 638 5 305 127 943
Other comprehensive income for the year (10 206) (10 206) (10 206)
Transactions with owners:
Shares issued 734 288 734 288 734 288
Dividends paid (187 488) (187 488) (187 488)
Audited balance at 30 June 2011 734 288 (10 206) 162 967 887 049 15 288 902 337
Transactions with non-controlling interests:
Acquistion of subsidiaries 3 173 3 173
Dividends paid (12 738) (12 738)
Total comprehensive income for the year 2 538 70 392 72 930 4 195 77 125
Profit for the year 70 392 70 392 4 195 74 587
Other comprehensive income for the year 2 538 2 538 2 538
Transactions with owners:
Dividends paid (50 962) (50 962) (50 962)
Reviewed balance at 30 June 2012 734 288 (7 668) 182 397 909 017 9 918 918 935
Notes to the condensed consolidated preliminary financial statements
1. Accounting policies
The reviewed condensed consolidated preliminary financial statements for the year ended 30 June 2012 have been
prepared using the measurement and recognition requirements of International Financial Reporting Standards (IFRS)
and AC 500 standards as issued by the Accounting Practices Board or its successor, and contains information as required
by IAS 34 Interim Financial Reporting. This is in accordance with the JSE Limited Listings Requirements and the
Companies Act, 71 of 2008, as amended.
The accounting policies adopted in these reviewed condensed consolidated preliminary financial statements are
consistent with the accounting policies applied in the audited annual financial statements for the year ended 30 June 2011.
The amendments to IAS 1 Presentation of Financial Statements issued in June 2011, effective for periods beginning on
or after 1 July 2012, has been early adopted.
The reviewed condensed consolidated preliminary financial statements for the year ended 30 June 2012 were compiled
under the supervision of Mr GE Röth, Chief Financial Officer.
2. Business combinations
With effect from 1 August 2011, Mvelaserve obtained 51,6% of the issued share capital of Velocity Road Rehabilitation
(Pty) Limited ("Velocity"), a new start-up company for a consideration of R10 million.
With effect from 1 September 2011, the group obtained the assets and liabilities of a mast and infrastructure business,
for a consideration of R17,5 million. 20% of the share of a subsidiary, LTP, was issued as part settlement of the purchase
consideration, which resulted in an increase of the non-controlling interest.
Velocity LTP Other Total
R'000 R'000 R'000 R'000
Property, plant and equipment 1 688 1 455 3 143
Intangible assets 120 120
Deferred taxation 66 66
Inventory 184 184
Trade and other receivables 4 429 26 4 455
Net cash and cash equivalents 86 86
Total assets 6 389 1 665 8 054
Asset-based finance (855) (855)
Trade and other payables (2 034) (324) (2 358)
Total liabilities (2 889) (324) (3 213)
Net assets acquired 3 500 1 341 4 841
Non-controlling interest 327 327
Goodwill 10 000 14 000 2 412 26 412
Total purchase price 10 000# 17 500# 4 080 31 580
Satisfied by:
Equity of subsidiary LTP 3 500 3 500
Cash 10 000 11 000 4 080 25 080
Loans 3 000 3 000
10 000 17 500 4 080 31 580
# The purchase price allocation of the acquisitions during the year has not been finalised at the date of these financial
statements. The excess of the consideration over the net asset value of the businesses acquired has been disclosed as goodwill.
The group is in the process of separately identifying assets and liabilities acquired as part of the business combinations.
'Other' relates to franchises bought back by the Khuseti and Protea Coin business units.
The following revenue and profit/(loss) after taxation numbers have been consolidated into the group results relating to
business combinations effected during the year:
Results that would
have been consolidated
Actual results had the business combination
consolidated for the been effective on
current year 1 July 2011
Profit/(loss) Profit/(loss)
after after
Revenue taxation Revenue taxation
R'000 R'000 R'000 R'000
LTP 34 249 394 39 023 451
Velocity 3 554 (9 810) 3 554 (9 810)
Disposal of subsidiary
The group disposed of its 100% interest in Contract Forwarding (Pty) Limited ("Contract Forwarding") with effect from
31 May 2012 for a consideration of R2,00. Contract Forwarding repaid R25 million of its shareholders' loan, with an
additional R10 million being payable in three years' time. Cash advances from the group, to the value of R8,3 million,
between the effective date and the implementation date, were repaid.
Contract
Forwarding
R'000
Property, plant and equipment (609)
Deferred tax asset (3 065)
Trade and other receivables (78 118)
Net cash and cash equivalents 10 805
Total assets (70 987)
Interest-bearing liabilities 6 813
Trade and other payables 59 368
Total liabilities 66 181
Net assets disposed (4 806)
Loss on disposal 4 806
Total purchase price
Reviewed Audited
30 June 2012 30 June 2011
R'000 R'000
3. Property, plant and equipment
Balance at the beginning of the year 431 915 387 619
Additions 169 685 168 703
Acquired through business combinations 3 143 15 298
Disposals (10 486) (11 634)
Depreciation for the year (146 798) (125 964)
Reversal of impairment 1 364
Impairment of assets (6 564) (1 364)
Reclassification to intangible assets (2 199)
Reclassified to disposal group held-for-sale (743)
Foreign currency translation reserve 125
Balance at the end of the year 440 185 431 915
4. Intangible assets
Balance at the beginning of the year 622 547 545 335
Acquired through business combinations 26 532 201 295
Goodwill reclassified to disposal group in prior year 1 460
Reclassified from property, plant and equipment 2 199
Additions 2 281 1 858
Amortisation (6 520) (5 851)
Impairment (18 554) (121 550)
Balance at the end of the year 628 485 622 547
Restated Restated
Audited Audited
30 June 2011 30 June 2010
R'000 R'000
5. Restatements
5.1 Cash and cash equivalents
A classification change on cash and cash equivalents was corrected in
the current period. As a result, restricted cash has been separately
disclosed. This change had the following effect on the statement
of financial position:
Previously stated
Cash and cash equivalents 243 245 374 809
Restated 243 245 374 809
Restricted cash 116 458 115 029
Cash and cash equivalents 126 787 259 780
5.2 Segmental information
The segmental information for 30 June 2011 was adjusted to exclude head office management fees in accordance with
the manner reviewed by the chief operating decision-maker in the current period. This correction had the following effect
on the presented segmental information:
Previously
Restated stated
Audited Audited
30 June 2011 30 June 2011
R'000 R'000
Profit/(loss) from operations
Facilities management services 111 905 105 428
Security services 142 966 136 487
Cleaning and catering services (26 650) (31 871)
Diversified services# 68 137 86 314
Profit from discontinued operations 43 964 43 964
340 322 340 322
Previously
Restated stated
Audited Audited
30 June 2011 30 June 2011
R'000 R'000
TOTAL PROFIT/(LOSS) FOR THE YEAR
Facilities management services 75 147 68 670
Security services 155 736 149 257
Cleaning and catering services (28 297) (33 518)
Diversified services# (90 681) (72 504)
Total profit for the year from discontinued operations 16 038 16 038
127 943 127 943
TOTAL COMPREHENSIVE INCOME/(LOSS) FOR THE YEAR
Facilities management services 75 147 68 670
Security services 154 179 147 700
Cleaning and catering services (36 946) (42 167)
Diversified services# (90 681) (72 504)
Total comprehensive income for the year from discontinued operations 16 038 16 038
117 737 117 737
# Includes head office.
Due to growth in the businesses the cleaning and catering divisions were reported in separate segments in the current year.
No other periods were affected by this correction.
5.3 Statement of cash flows
Certain reclassifications will be made to the statement of cash flows that are not evident from the condensed consolidated
statement of cash flows due to the aggregation of numbers.
6. Interest-bearing liabilities
Reviewed Reviewed
30 June 2012 30 June 2012 Reviewed Audited
Asset-based Bank 30 June 2012 30 June 2011
finance loans Total Total
R'000 R'000 R'000 R'000
Balance at the beginning of the year 198 434 228 220 426 654 783 970
New loans 130 009 5 500 135 509 400 505
Acquired through business combinations 855 855 127 543
Amounts repaid (99 755) (50 000) (149 755) (723 619)
Loans forgiven (164 971)
Accrued interest effect 13 (238) (225) 3 226
Balance at the end of the year 229 556 183 482 413 038 426 654
Disclosed as:
Non-current interest-bearing liabilities 253 303 288 845
Current interest-bearing liabilities 159 735 137 809
413 038 426 654
Reviewed Audited
30 June 2012 30 June 2011
R'000 R'000
7. Capital commitments and contingencies
Capital expenditure
Contracted for 13 538 19 688
Not contracted for 4 782 11 478
18 320 31 166
Operating leases
Land and buildings 149 789 154 257
Plant and equipment 9 178 6 555
Motor vehicles 85 290 2 418
244 257 163 230
Contingent liabilities
SARS has issued a request for information and explanations relating to one of the group subsidiaries to which a revised
assessment was received. The matter is still pending and the financial impact, if any, cannot be quantified at this stage. The
contingent liability disclosed in the financial statements in the prior year in respect of the alleged robbery which took place at
Johannesburg International Airport was resolved in the current year with no financial impact to the group.
8. Related party disclosure
Security services to the value of R5,9 million were provided to Mvelaphanda Holdings (Pty) Limited during the period.
At year-end a balance of R3,2 million was still outstanding in this respect. A doubtful debt provision to the value of R1,7 million
was raised against this debtor.
At year-end an amount of R9,2 million was receivable by Mvelaserve from Mvelaphanda Holdings (Pty) Limited which resulted
from previous period transactions.This balance was fully provided for.
Events subsequent to balance sheet date
The directors are not aware of any other matters or circumstances arising after the reporting period up to the date of this
report not otherwise dealt with in this report that requires an adjustment to the financial results at reporting date.
On 30 June 2012, the group was in breach of its net interest debt to shareholders' funds, excluding intangible assets but
including trademarks, covenant in respect to its Nedbank funding. Nedbank has issued a condonation in respect of the breach
on 5 September 2012. A breach of the debt covenant, giving Nedbank the right to demand repayment at a future compliance
date within one year of the reporting date, is not likely and therefore amounts not expected to be paid within one year have
been classified as non-current.
Reviewed report
The condensed consolidated preliminary financial statements has been reviewed by Mvelaserve's independent auditors,
PricewaterhouseCoopers Inc. Their unmodified review conclusion is available for inspection at the group's registered
office.
Commentary
Introduction
The board presents the results for the year ended 30 June 2012 ("the year"). Operating results for the second half
of the year showed a significant strengthening, despite challenging economic conditions in a continually decelerating
domestic economy. The successful turnaround of RoyalMnandi and RoyalServe Cleaning contributed strongly to the
improved performance.
During the year, the group acquired a controlling interest in Velocity and the assets and liabilities of a mast and
infrastructure business through LTP. The group disposed of its interest in Contract Forwarding at the end of May 2012.
Group profile
Mvelaserve is a leading diversified business support services group with operations in Southern Africa, Ghana,
Nigeria and the UAE, employing approximately 32 000 people. The group offers a wide range of integrated services
which include, amongst others: facilities management, security, catering and cleaning.
Mvelaserve's blue-chip customer base ranges across the public and private sectors encompassing leading banks,
mining houses and retailers as well as parastatals and provincial and local governments.
Financial review
Revenue for the year increased 12% to R5 117 million (2011: R4 565 million), driven mainly by increases in revenue
at Protea Coin and TFMC, as well as the inclusion of Stamford Sales for the full year under review.
Operating expenses (excluding depreciation, impairment and amortisation charges) increased by 13% to R4 796 million
from R4 263 million.
The 41% decrease in operating profit to R200 million (2011: R340 million) is a result of an anticipated contraction
in the TFMC profit margin during the year, and net once-off exceptional income of R87 million included in operating
profit for the previous year. The operating margin for the year decreased to 4% from 7% as a result of, inter alia,
the margin contraction at TFMC and at Protea Coin as well as the inclusion of an operating loss for Stamford Sales
for the full year. However, H2 2012 showed robust growth in operating profit of 17% following the successful
turnaround of RoyalMnandi and RoyalServe Cleaning, amongst other positive operational achievements.
Net interest paid declined to R45 million (2011: R56 million) as a result of reduced debt. Interest cover increased
to 6,1 times from 4,3 times on a comparable basis, which is above the group benchmark of 5 times.
Net income from investments of R11 million (2011: R71 million) comprised dividend income of R1 million, share of
profit from associates of R4 million, and a favourable fair value adjustment of R6 million in respect of a derivative
financial instrument.
The group's taxation charge for the year amounted to R69 million (2011: R77 million), consisting of current tax of
R71 million, Secondary Tax on Companies ("STC") of R7 million and a deferred tax credit of R9 million, resulting
in an effective tax rate (excluding the effect of STC) of 43% (2011: 36%). The effective tax rate was negatively
affected by, inter alia, impairments of goodwill of R19 million, impairments of assets of R5 million, a prior year net
underprovision of R7 million and R49 million in assessed losses for which no deferred tax asset has been raised,
which were all offset to an extent by profit from associates of R4 million. These adjustments amount to effective tax
of R21 million, which represents 15% of the 43% effective tax rate.
Attributable earnings per share ("EPS") and headline earnings per share ("HEPS") decreased to 49,7 cents
(2011: 87,8 cents) and 66,8 cents (2011: 159,8 cents), respectively. Although HEPS showed a marked decline from
the previous year, the prior year HEPS was improved by the exclusion of R150 million impairment charges in terms
of SAICA's Circular 3/2009 read with IAS 33 Earnings per Share while the forgiveness of R165 million loans was
included, which resulted in a net positive effect of 117,6 cents on HEPS for the previous year. In a similar way the
profit of R44 million realised on the sale of a non-strategic division of Protea Coin and a deemed profit of R10 million
with the change in shareholding in Stamford Sales, both in the previous year, had a positive effect of 39,3 cents on
EPS for the prior year.
Financial position
Property, plant and equipment ("PPE") increased by R8 million to R440 million from R432 million, on the back of
net acquisitions of R119 million (2011: R171 million), depreciation and impairment for the year of R152 million
(2011: R126 million) and the reversal of accumulated depreciation of R41 million in respect of PPE disposed of.
Capital expenditure ("CAPEX") of R170 million, excluding R3 million assets acquired through business combinations,
comprised R127 million in respect of expansion to meet current growth initiatives (2011: R145 million) and replacements
of R43 million (2011: R24 million). The overall CAPEX-to-depreciation reduced to 1,2 times (2011: 1,3 times) indicating
a slowdown in the group's capital investment programme.
Intangible assets increased by R24 million, mainly from the preliminary acquisition accounting for the business
combination of Velocity and LTP. Impairments of goodwill at Stamford Sales and SA Water amounted to R19 million.
Cash generated from operations increased 26% to R369 million (2011: R294 million) on the back of increased cash
operating profits as well as a reduction in working capital. Cash EPS increased to 174,3 cents (2011:105,9 cents) for
the year, while free cash flow-to-equity increased to R70 million (2011: R57 million).
Cash utilised in respect of investing activities of R131 million, comprises inter alia, net CAPEX of R136 million
(excluding R34 million acquisitions in terms of capitalised lease agreements), investments in Velocity and LTP of
R10 million and R11 million, respectively, and the repayment of loans by Contract Forwarding of R33 million. New
loans raised during the year, excluding capitalised leases, amounted to R102 million while loans repaid amounted to
R149 million.
Total dividends of R64 million were paid during the year, of which R51 million was paid to owners of the parent
company. This equates to a cash dividend cover, based on the cash earnings per share, of 4,8 times. The related
STC amounting to R7 million has been recognised in the profit or loss for the year.
Interest-bearing debt, excluding the derivative financial instrument fair valued at R20 million on 30 June 2012
(2011: R26 million), amounted to R413 million (2011: R427 million) resulting in a debt: equity ratio of 47% (2011: 50%).
Asset-based finance liabilities directly associated with the financing of PPE increased by R31 million to R230 million
(2011: R198 million).
Net asset value per share increased to 642,1 cents (2011: 626,6 cents) while net tangible asset value per share
decreased to 160,2 cents from 162,7 cents.
Capital and reserves
The total issued share capital remained unchanged at 141 561 673 shares. The weighted average number of shares
in issue increased by 1% to 141 561 673 from 139 703 474 shares at 30 June 2011 following the issue of 6 850 937
shares on 7 October 2010 for the acquisition of Zonke.
Operational review
Protea Coin posted good results with revenue up 14,7% to R2 268 million (2011: R1 978 million) and operating profit
of R144 million (2011: R140 million) in line with expectations. Operating margins were eroded by general economic
conditions and inflationary increases in the cost base. Notably the Mining division and cameo cash management
environment within the Assets-In-Transit division demonstrated strong growth, despite the cost-sensitive and volatile
sectors. The Technical division is on the uptick after suffering the effects of deferred spending in this area. Protea Coin
continued to expand its range of services and successfully achieved market penetration into Ghana, opening an office
and commencing with a large mining contract in August 2012.
TFMC achieved revenue growth of 8,5% to R1 247 million (2011: R1 149 million). As anticipated operating profit was
up by 8% to R121 million (2011: R112 million) as a result of the revised Telkom agreement. The contribution from
non-Telkom contracts in the Customised Solutions division increased significantly during the year from 12% to 20%
reflecting the success of organic expansion initiatives and aggressive marketing. TFMC will continue to improve its
risk profile by diversifying its contract base and identifying niche services as possible stand-alone offerings.
RoyalServe Cleaning achieved strong revenue growth of 7,6% to R484 million (2011: R450 million). Hygiene and
laundry sector clients grew substantially, with retention of commercial contracts receiving considerable focus.
Restructuring of the operation has successfully enhanced operational efficiencies including debtors' controls. This
process of optimising efficiencies is ongoing and will focus in the year ahead on wage control, amongst other areas.
Targeted marketing will continue to grow the brand locally and in neighbouring countries.
RoyalMnandi performed exceptionally well in the second half of the year, reporting total revenue of R572 million.
Three new contracts were secured with the bulk in the Commercial division. The Mining and Healthcare divisions are
addressing strategy to overcome underperformance during the year. Significant revenue growth for FY2013 is not
expected in light of the overall reduction in the customer base following termination of all loss-making contracts and
the loss of a major healthcare contract. The focus going forward will be strict cost control measures.
Zonke posted 27% growth in revenue to R81 million (2011: R64 million) and operating profit increased 36% to
R34 million (2011: R25 million). The number of limited pay-out machines being monitored increased by 16% to
7 439 from 6 424, with average gaming revenue up 14% to R3 598 per machine. Zonke will continue to grow
existing businesses, especially in the Northern Cape and KwaZulu-Natal, and is developing new technology that will
enable diversification into the provision of management solutions to individual operators. In line with group strategy,
Zonke is pursuing expansion into selected African markets.
SA Water raised revenue by 15% to R6 million despite a tough trading environment. Management changes saw
immediate benefits for the company with three new major contracts secured. Focus going forward is aggressive
client expansion and developing an operations and maintenance service solution for increased annuity revenues.
Select African countries will be targeted in the year ahead.
Mvelaserve through LTP acquired assets and liabilities of a mast and infrastructure business in September 2011 in
light of strong integration opportunity with TFMC. While overall the business underperformed in terms of operating
profit and margin, it strengthened considerably in the last quarter of the year. Growth is expected from further roll-out
of additional masts and co-opportunities with TFMC.
In light of underperformance at Circle ICT, which has not significantly expanded outside of the group as originally
planned, Mvelaserve management has decided to collapse the company back into various subsidiaries.
Khuseti was impacted by depressed consumer spending leading to intensified pricing pressure and competition.
Operating profit fell from R24 million to R18 million and margins contracted due to rising input costs. Overall pie sales
volumes increased by only 2% to just under 31 million pies, with strong growth in the export (49%), and retail and
wholesale (74%) markets being offset by disappointing sales volumes to local franchises, which fell by 3 million pies
year-on-year. The outlook remains subdued. The company will concentrate on continued improvement of operating
efficiencies at manufacturing and franchise levels.
Stamford Sales posted satisfactory results with revenue increasing by 21% to R407 million, albeit offset by a
disappointing operating loss of R20 million. During the year the company rolled-out a new fleet of delivery vehicles to
increase efficiencies and improve service delivery. The primary objective for the year ahead is to return the company
to sustainable profitability. This will be achieved by growing sales volumes and reducing operating and inventory
costs, which will be supported by the recent introduction of improved efficiencies and systems.
Velocity is in a start-up phase. The company took delivery of its first seven vehicles during the year and operating
crews were trained. Operations were limited to some minor pilot projects.
Dividend
The directors of Mvelaserve have resolved not to declare a dividend for the year.
Prospects
Economic conditions in the medium term are expected to remain challenging, with escalating input costs such as
fuel and ongoing pricing pressure across a number of operations. Nonetheless, Mvelaserve is positive of the group's
ability to continue improving performance, given the stronger performance in H2 at most group operations. In order
to achieve this objective and ensure appropriate management focus, the executive have reviewed the diversity of
the group's structure and is currently revising the business strategy going forward. Management is confident in the
group's key operations and Mvelaserve's vision of becoming a leading business process outsource provider.
Focus remains on improving margins through vigilant cost management and controlled capital expenditure. The group
will continue to assess expansion opportunities in new growth markets within South Africa as well as the rest of
Africa, where its strategy is to follow existing clients.
MSM Xayiya JMS Ferreira GE Röth
Chairman Chief Executive Officer Chief Financial Officer
5 September 2012
Mvelaserve Limited
(Incorporated in the Republic of South Africa)
(Registration number 1999/003610/06)
JSE share code: MVS ISIN: ZAE000151353
("Mvelaserve" or "the group")
Executive Directors:
MSM Xayiya (Executive Chairman), JMS Ferreira (Chief Executive Officer), GE Röth (Chief Financial Officer)
Independent Non-Executive Directors:
FN Mantashe, OA Mabandla*, S Masinga, N Mbalula, GD Harlow
* Lead Independent
Registered Office:
28 Eddington Crescent, Highveld Technopark, Centurion, 0169
Sponsor:
Investec Bank Limited
Auditors:
PricewaterhouseCoopers Inc.
Transfer Secretaries:
Computershare Investor Services (Proprietary) Limited
70 Marshall Street, Johannesburg, 2001
A copy of these results is available on the Mvelaserve Limited website: www.mvelaserve.co.za
Date: 06/09/2012 07:30:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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