Wrap Text
Unaudited results for the six months ended 30 September 2012
PRIMESERV GROUP LIMITED
(“Primeserv” or “the Group” or “the Company”)
Incorporated in the Republic of South Africa
Registration number: 1997/013448/06
Share code: PMV
ISIN: ZAE000039277
E-mail: productivity@primeserv.co.za
www.primeserv.co.za
UNAUDITED RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2012
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Restated
Unaudited Unaudited Unaudited Audited
6 months 6 months 6 months 12 months
ended ended ended ended
30 Sep 30 Sep 30 Sep 31 Mar
2012 2011 2011 2012
R’000 R’000 R’000 R’000
Revenue 340 428 307 357 307 357 613 145
Revenue from
continuing
operations 321 760 290 225 290 225 579 344
Revenue from
discontinued
operations 18 668 17 132 17 132 33 801
Cost of sales (279 184) (251 120) (249 513) (499 352)
Gross profit 61 244 56 237 57 844 113 793
Gross profit from
continuing
operations 44 400 42 731 44 338 91 075
Gross profit from
discontinued
operations 16 844 13 506 13 506 22 718
EBITDA 6 425 6 743 8 350 7 058
Depreciation and
amortisation (1 457) (1 344) (1 344) (1 439)
Operating profit 4 968 5 399 7 006 5 619
Operating profit from
continuing
operations 5 476 5 130 6 737 8 720
Operating (loss)/profit
from discontinued
operations (508) 269 269 (3 101)
Interest received 904 2 990 2 990 6 255
Interest paid (2 572) (2 687) (2 687) (4 990)
Share of loss
from associate (186) (847) (847) (1 355)
Profit before
taxation 3 114 4 855 6 462 5 529
Profit before
taxation from
continuing
operations 4 330 4 969 6 576 6 858
Loss before taxation
from discontinued
operations (1 216) (114) (114) (1 329)
Taxation 1 218 (903) (1 353) 1 249
Total comprehensive
income for the
period 4 332 3 952 5 109 6 778
Profit from
continuing
operations 5 207 4 034 5 191 7 735
Loss from discontinued
operations (875) (82) (82) (957)
Total comprehensive
income attributable
to:
Ordinary shareholders
of the Company 4 340 4 161 5 271 7 359
Non-controlling
shareholders’
interest (8) (209) (162) (581)
Total comprehensive
income 4 332 3 952 5 109 6 778
Reconciliation of
headline earnings
Net profit
attributable to
shareholders 4 340 4 161 5 271 7 359
Headline earnings 4 340 4 161 5 271 7 359
Weighted average
number of
shares (’000) 93 682 95 037 95 037 93 377
Diluted weighted
average number of
shares (’000) 93 682 96 046 96 046 93 377
Earnings per
share (cents) 4,63 4,38 5,55 7,88
From continuing
operations 5,56 4,47 5,64 8,90
From discontinued
operations (0,93) (0,09) (0,09) (1,02)
Diluted earnings per
share (cents) 4,63 4,33 5,49 7,88
From continuing
operations 5,56 4,42 5,58 8,90
From discontinued
operations (0,93) (0,09) (0,09) (1,02)
Headline earnings per
share (cents) 4,63 4,38 5,55 7,88
From continuing
operations 5,56 4,47 5,64 8,90
From discontinued
operations (0,93) (0,09) (0,09) (1,02)
Diluted headline
earnings per
share (cents) 4,63 4,33 5,49 7,88
From continuing
operations 5,56 4,42 5,58 8,90
From discontinued
operations (0,93) (0,09) (0,09) (1,02)
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Restated
Unaudited Unaudited Unaudited Audited
6 months 6 months 6 months 12 months
ended ended ended ended
30 Sep 30 Sep 30 Sep 31 Mar
2012 2011 2011 2012
R’000 R’000 R’000 R’000
Profit before
taxation 3 114 4 855 6 462 5 529
Adjusted for
non-cash items 1 457 2 221 2 221 3 202
Operating cash flows
before working
capital changes 4 571 7 076 8 683 8 731
Net working capital
changes (10 275) (4 867) (6 474) (14 867)
Taxation refunded/
(paid) 59 (2 152) (2 152) (1 308)
Cash flows
(utilised in)/ from
operating
activities (5 645) 57 57 (7 444)
Cash flows utilised
in investing
activities (2 395) (9 395) (9 395) (16 976)
Cash flows
(utilised in)/from
financing
activities (40) (16) (16) 2 829
Returned to
shareholders – (3 745) (3 745) (6 154)
Net decrease in
cash and cash
equivalents (8 080) (13 099) (13 099) (27 745)
Cash and cash
equivalents at
beginning of
period (29 050) (1 305) (1 305) (1 305)
Cash and cash
equivalents at
end of period (37 130) (14 404) (14 404) (29 050)
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Restated
Unaudited Unaudited Unaudited Audited
30 Sep 30 Sep 30 Sep 31 Mar
2012 2011 2011 2012
R’000 R’000 R’000 R’000
Assets
Non-current assets 50 000 42 623 42 173 47 299
Equipment and
vehicles 6 294 9 998 9 998 6 878
Investment property 7 645 3 257 3 257 7 645
Goodwill 13 293 12 012 12 012 13 293
Intangible assets 3 962 1 348 1 348 2 992
Long-term
receivables 1 214 1 214 1 214 1 214
Investment in and
loan to associate 6 912 5 704 5 704 5 815
Deferred tax asset 10 680 9 090 8 640 9 462
Current assets 119 335 109 826 109 826 104 087
Inventories 741 1 497 1 497 532
Trade receivables 106 814 82 352 82 352 86 641
Other receivables 4 551 3 596 3 596 5 419
Cash and cash
equivalents 7 229 22 381 22 381 11 495
Total assets 169 335 152 449 151 999 151 386
Equity and liabilities
Equity 78 706 73 202 74 359 73 530
Capital and
reserves 79 561 73 677 74 787 74 377
Non-controlling
interest (855) (475) (428) (847)
Non-current
liabilities – 4 066 4 066 –
Interest-bearing
financial
liabilities – 4 066 4 066 –
Current
liabilities 90 629 75 181 73 574 77 856
Trade and other
payables 38 115 35 253 33 646 30 400
Current portion of
financial
liabilities – 101 101 40
Taxation payable 1 261 2 139 2 139 1 202
Short-term vendor
obligation 981 903 903 1 281
Short-term loan 4 388 – – 4 388
Bank borrowings 45 884 36 785 36 785 40 545
Total equity and
liabilities 169 335 152 449 151 999 151 386
Number of shares
in issue at
end of period (’000)
(net of treasury
and share trust
shares) 93 682 92 152 92 152 93 682
Net asset value
per share (cents) 84 79 81 78
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Restated
Unaudited Unaudited Unaudited Audited
6 months 6 months 6 months 12 months
ended ended ended ended
30 Sep 30 Sep 30 Sep 31 Mar
2012 2011 2011 2012
R’000 R’000 R’000 R’000
Balance at beginning
of the period 73 530 72 896 72 896 72 896
Attributable
earnings for the
period 4 340 4 161 5 271 7 359
Dividends paid – (2 381) (2 381) (3 124)
Treasury share
movements 844 (1 276) (1 276) (3 030)
Share-based payment – 11 11 10
Non-controlling
shareholders’
interest (8) (209) (162) (581)
Balance at end of
the period 78 706 73 202 74 359 73 530
SEGMENTAL ANALYSIS
Restated
Unaudited Unaudited Unaudited Audited
6 months 6 months 6 months 12 months
ended ended ended ended
30 Sep 30 Sep 30 Sep 31 Mar
2012 2011 2011 2012
R’000 R’000 R’000 R’000
Revenue from
external customers
Human Capital
Outsourcing 307 581 275 667 275 667 552 309
Human Capital
Development 32 847 31 690 31 690 60 836
Total 340 428 307 357 307 357 613 145
Revenue –
inter-segment
Human Capital
Outsourcing – – – –
Human Capital
Development 3 757 1 031 1 031 5 424
Total 3 757 1 031 1 031 5 424
Business segment
results
Human Capital
Outsourcing 6 236 7 294 8 901 10 369
Human Capital
Development 1 655 1 397 1 397 (1 206)
Central Services (2 923) (3 292) (3 292) (3 544)
Operating profit 4 968 5 399 7 006 5 619
Interest received 904 2 990 2 990 6 255
Interest paid (2 572) (2 687) (2 687) (4 990)
Share of loss from
associate (186) (847) (847) (1 355)
Profit before
taxation 3 114 4 855 6 462 5 529
Business segment
total assets
Human Capital
Outsourcing 126 084 99 268 98 818 111 278
Human Capital
Development 29 443 33 888 33 888 32 346
Central Services 13 808 19 293 19 293 7 762
Total 169 335 152 449 151 999 151 386
COMMENTARY
REVIEW OF RESULTS
Operating results for the six-month interim period ended 30
September 2012 were encouraging, given the volatile legislative
and economic environment facing the temporary employment services
industry.
To facilitate ease of comparison, the comparable six-month period
ended 30 September 2011 has been updated for the residual effects
of the prior year error, which was fully accounted for and
disclosed in the preliminary and integrated reports for the year
ended 31 March 2012.
The error was detected by management after the March 2012 year
end, and after the publication of the September 2011 interim
results. The comparative results have also been restated to
separately disclose the trading results of the computer training
colleges business which is in the process of being discontinued,
and is accounted for as a discontinued operation in terms of IFRS
5, Non-current Assets Held for Sale and Discontinued Operations.
Consequently the comparisons in the commentary are made in
relation to the restated numbers as presented.
Revenue for the six months increased by 11% to R340,4 million.
Gross profit increased by 9% from R56,2 million to R61,2 million,
while the gross profit percentage decreased from 18,3% to 18,0%,
which is indicative of ongoing margin pressures across the
sectors which the Group services. EBITDA was negatively affected
by the substantial expenditure on learnerships during the current
review period and has decreased marginally from R6,7 million to
R6,4 million. The operating profit, including the costs of these
learnerships, was R5,0 million compared to R5,4 million for the
comparable period.
The learnership programme benefits the Group and its clients
through the development of workplace skills and also positively
impacts the Group’s tax line.
Actions taken to turn around the associate company have proved
positive, with the Group’s share of the associate’s loss
decreasing from R0,9 million to R0,2 million. The increase in the
investment in and loan to associate relates not only to the
aforementioned loss but also to the associate’s working capital
needs arising from improved sales and increased trade
receivables.
Total comprehensive income increased by 10% compared to the
corresponding period, with earnings per share and headline
earnings per share both improving by 6% from 4,38 cents per share
to 4,63 cents share. Earnings per share and headline earnings per
share from continuing operations increased by 24% from 4,47 cents
per share to 5,56 cents per share.
The material increase in trade debtors is attributable to a
combination of sales growth, particularly in the Outsourcing
division, compounded by a few significant clients having settled
their accounts immediately after the due date of the end of
September. The delay also negatively affected the cash generated
from operations as well as gearing measured at 30 September. But
for these delayed payments the overall gearing would have
decreased from 46% at the end of March 2012 to 40% at the end of
September. The Group’s focus on cash generation is expected to
improve liquidity which will position it to take advantage of new
opportunities.
In order to reduce risk in the Group, the decision to discontinue
the Colleges unit was made during the interim reporting period
and the effects of this decision are evident in the financial
statements. The unit’s performance over the last few years has
been negatively affected by the economic segment in which it
operated. The operation, whilst trading at a loss, is not
anticipated to utilise significant cash during the remainder of
the year. The Group will meet its responsibility to complete the
education of learners who are currently enrolled.
As part of its ongoing cost management and efficiency focus, the
Group has implemented a programme of reorganisation and
centralisation, particularly in its back-office environment, so
as to enhance its competitive position. This will incur some
costs in the short-term, but should deliver benefits in the
forthcoming financial year. As part of this reorganisation D
Seaton, previously a non-executive director and consultant to the
Group, was appointed as an executive director responsible for
Legal and Risk and associated commercial activities.
HUMAN CAPITAL OUTSOURCING
The Outsourcing division’s revenue increased by 12% from R275,7
million to R307,6 million for the review period. Operating profit
was R6,2 million compared to R7,3 million in the comparable
period with the reduction being attributable to the high level of
expenditure in regard to learnerships delivered. The shortage of
large infrastructure projects continues to impede the performance
of the “white collar” professional draughting and engineering
unit as well as the performance of the mega-project wage bureau
unit. The performance of the “blue collar” flexible staffing
unit, which has specialist expertise in the logistics,
warehousing and distribution industries as well as in the
manufacturing, construction and engineering sectors, has been
solid. While revenue has improved, margins have remained under
pressure. Operationally, the reorganisation of the Outsourcing
division has focused on strengthening client relationships and on
driving a customer-centric outlook across the division.
The issue relating to the further regulation rather than the
banning of labour brokers seems to be reaching conclusion. The
proposed amendments to the Labour Relations Act and Basic
Conditions of Employment Act will compound the complexity and
administrative burdens within the existing labour environment. As
a result of the impending legislation organisations will require
specialised expertise and infrastructure to manage their staffing
requirements. Consequently, the larger more reputable temporary
employment services providers such as Primeserv stand to benefit
from these changes.
The Outsourcing division experienced significant disruption due
to the lengthy absence through illness and subsequent resignation
of its long-serving and valued MD, Allan McMillan. In order to
minimise that disruption and prioritise key client relationships,
the Group CEO formally assumed operational control as MD of the
division. This dual role has proved successful both operationally
and as a key cost-saving initiative.
HUMAN CAPITAL DEVELOPMENT
The segment’s operating profit increased despite the R0,5 million
operating loss from the discontinued Colleges business. The
improvement in performance is attributable to the improved
results from the HR consulting and training units.
A key differentiator for the Group is its integrated HR services
offering which draws from the various operating units to deliver
a complete HR services solution to Primeserv’s clients.
EMPOWERMENT AND TRANSFORMATION
As previously announced, and as part of Primeserv’s ongoing
transformation process, the Group is finalising the first phase
of a new and enhanced B-BBEE ownership participation structure.
EVENTS AFTER THE REPORTING DATE
Management is not aware of any material events which have
occurred subsequent to the end of September 2012.
ACCOUNTING POLICIES
The results for the six months have been prepared in accordance
with the Group’s accounting policies which are consistent with
those at 31 March 2012 and these comply with International
Financial Reporting Standards and the AC 500 standards, as issued
by the Accounting Practices Board. This report has been prepared
in accordance with IAS 34 – Interim Financial Reporting, the
South African Companies Act and the JSE Limited Listings
Requirements. The results were prepared by the Group Financial
Director, Mr R Sack.
DIVIDEND DECLARATION
No dividend has been proposed for the period under review. The
resumption of dividend payments will be assessed at the
conclusion of each reporting period.
OUTLOOK
Operationally, the Group continues to focus on managing its costs
and working capital, implementing its reorganisation plan,
driving efficiencies and delivering an integrated HR value
offering to its clients.
Strategically, the Group is actively working to increase the
realisable value creation opportunities inherent in its operating
subsidiaries.
On behalf of the Board
JM Judin M Abel
Independent Non-Executive Chairman Chief Executive Officer
R Sack
Financial Director
29 November 2012
Bryanston
Directors: JM Judin# (Chairman), M Abel (Chief Executive
Officer), Prof S Klein# (American), LM Maisela*, DL Rose#, R Sack
(Financial Director), DC Seaton, CS Shiceka#
# Independent Non-Executive * Non-Executive
Company secretary: ER Goodman Secretarial Services cc
(represented by E Goodman)
Registered address: Venture House, Peter Place Park, 54 Peter
Place, Bryanston, 2021 (PO Box 3008, Saxonwold, 2132)
Transfer secretaries: Computershare Investor Services (Pty) Ltd,
70 Marshall Street, Johannesburg, 2001 (PO Box 61051,
Marshalltown, 2107)
Auditors: Charles Orbach & Company, Third Floor, 3 Melrose
Boulevard, Melrose Arch, 2076 (PO Box 355, Melrose Arch, 2076)
Sponsor: Deloitte & Touche Sponsor Services (Pty) Ltd, The
Woodlands, Woodlands Drive, Woodmead, 2196 (Private Bag X6, Gallo
Manor, 2052)
Date: 29/11/2012 05:10:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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