Wrap Text
Reviewed condensed consolidated interim financial results for the six months ended 31 December 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")
REVIEWED CONDENSED CONSOLIDATED INTERIM FINANCIAL RESULTS
for the six months ended 31 December 2012
HIGHLIGHTS
Revenue up 10%
to R2,676 million
Operating profit up 33%
to R118 million
EBITDA up 19%
to R196 million
HEPS of 41,8 cents
up 114%*
EPS of 42,5 cents
up 251%*
* Before restatement
Condensed consolidated interim statement of financial position
Restated Restated
Reviewed Reviewed Audited
31 December 31 December 30 June
2012 2011 2012
Notes R'000 R'000 R'000
ASSETS
Non-current assets 1 158 219 1 144 910 1 146 062
Property, plant and equipment 3 441 005 432 920 440 185
Intangible assets 4 625 614 643 773 626 145
Investments in associates 7 995 10 252 8 779
Other investments 15 031 10 287 17 149
Deferred income tax assets 68 574 47 678 53 804
Current assets 1 214 056 1 144 338 1 211 334
Other investments 6 640 11 536 8 373
Other current assets 6.1 976 370 895 740 908 438
Restricted cash 151 379 152 991 151 495
Cash and cash equivalents 79 667 84 071 143 028
Assets in disposal group held-for-sale 102 137
TOTAL ASSETS 2 372 275 2 391 385 2 357 396
EQUITY AND LIABILITIES
Capital and reserves 971 586 874 718 916 595
Owners of the parent 963 750 862 642 906 677
Non-controlling interest 7 836 12 076 9 918
Non-current liabilities 271 812 290 217 295 403
Interest-bearing liabilities 5 222 546 252 621 253 303
Derivative financial instrument 15 355 23 752 19 633
Deferred income tax liabilities 33 911 13 844 22 467
Current liabilities 1 128 877 1 160 881 1 145 398
Interest-bearing liabilities 5 148 244 141 039 159 735
Non-interest-bearing liabilities 2 966 4 592 5 414
Other current liabilities 6.2 977 667 966 553 980 249
Bank overdraft 48 697
Liabilities in disposal group held-for-sale 65 569
TOTAL EQUITY AND LIABILITIES 2 372 275 2 391 385 2 357 396
Condensed consolidated interim statement of profit or loss
and other comprehensive income
Restated Restated
Reviewed Reviewed Audited
Six months Six months Year
ended ended ended
31 December 31 December 30 June
2012 2011 2012
Notes R'000 R'000 R'000
Continued operations
Revenue 2 675 726 2 439 741 4 943 383
Profit from operations 117 832 88 926 193 021
Goodwill impaired (660) (18 554)
Net finance costs (21 810) (24 152) (45 854)
Finance income 3 633 3 990 7 163
Finance costs (25 443) (28 142) (53 017)
Investment income 6 293 5 788 10 577
Share of profit from associates 7.3 2 015 3 317 3 981
Dividend income 7.3 700 700
Fair-value adjustments and net profit from investments 7.2 4 278 1 771 5 896
Profit before taxation 101 655 70 562 139 190
Taxation expense (37 954) (42 476) (71 605)
Normal, deferred, capital gains and foreign taxation (37 954) (35 912) (64 821)
Secondary Tax on Companies (6 564) (6 784)
Profit for the period from continued operations 63 701 28 086 67 585
Profit/(Loss) from discontinued operations (961) 4 662
Total profit for the period 7.5 63 701 27 125 72 247
Other comprehensive income
Items that will be reclassified subsequently to profit
or loss when specific conditions are met:
Currency translation differences 7.2 684 3 263 2 538
Total comprehensive income for the period 7.5 64 385 30 388 74 785
Profit for the period attributable to:
Owners of the parent continued operations 60 118 24 253 63 390
Owners of the parent discontinued operations (961) 4 662
Non-controlling interest 3 583 3 833 4 195
63 701 27 125 72 247
Total comprehensive income for the period
attributable to:
Owners of the parent continued operations 60 802 27 516 65 928
Owners of the parent discontinued operations (961) 4 662
Non-controlling interest 3 583 3 833 4 195
64 385 30 388 74 785
Ordinary share performance
Restated Restated
Reviewed Reviewed Audited
Six months Six months Year
ended ended ended
31 December 31 December 30 June
2012 2011 2012
R'000 R'000 R'000
Weighted average number of ordinary shares
in issue ('000) 141 537 141 562 141 562
Earnings per ordinary share (cents) 7.5 42,5 16,4 48,1
Headline earnings per ordinary share (cents) 7.5 41,8 18,8 65,1
Earnings per ordinary share from
continued operations (cents) 42,5 17,1 44,8
Headline earnings per ordinary share from
continued operations (cents) 41,8 19,5 58,4
Earnings/(Loss) per ordinary share from
discontinued operations (cents) (0,7) 3,3
Headline earnings/(loss) per ordinary share from
discontinued operations (cents) (0,7) 6,7
Number of ordinary shares in issue ('000) 141 097 141 562 141 562
Net asset value per ordinary share (cents) 683,0 609,4 640,5
Net tangible asset value per ordinary share (cents) 191,0 120,9 160,2
Reconciliation between profit attributable to owners of the parent and
headline profit attributable to owners of the parent
Restated Restated
Reviewed Reviewed Audited
Six months Six months Year
ended ended ended
31 December 31 December 30 June
2012 2011 2012
Notes R'000 R'000 R'000
Profit attributable to owners of the parent 60 118 23 292 68 052
IAS 27 Loss on disposal of subsidiaries
and investments 4 806
IAS 16 Profit on sale of property,
plant and equipment (2 168) (1 299) (6 685)
IAS 36 Goodwill impairment 660 18 554
IFRS 5 Impairment of disposal group
held for sale 4 279
IAS 36 Net impairment of long lived assets 5 200
Tax effect of the above transactions 607 364 2 254
Headline profit attributable to owners
of the parent 59 217 26 636 92 181
Condensed consolidated interim statement of cash flows
Restated Restated
Reviewed Reviewed Audited
Six months Six months Year
ended ended ended
31 December 31 December 30 June
2012 2011 2012
R'000 R'000 R'000
Profit from operations^ 117 832 91 636 198 130
Payments under finance leases* (8 360) (4 853)
Non-cash items 91 145 74 302 161 311
Working capital (105 986) 1 876 14 395
Cash generated from operations 94 631 167 814 368 983
Net interest paid (20 090) (23 850) (48 507)
Investment income 2 800 3 014 5 149
Taxation paid (21 877) (48 372) (78 936)
Cash flows from operating activities 55 464 98 606 246 689
Cash flows from investing activities* (64 779) (89 309) (130 991)
Cash flows from financing activities* (49 646) (32 571) (46 088)
Dividends paid owners of the parent (50 962) (50 962)
Dividends paid non-controlling interest (5 665) (10 545) (12 738)
Net movement in cash and cash equivalents
and bank overdrafts (64 626) (84 781) 5 910
Cash and cash equivalents at the beginning of the period 143 028 135 466 126 787
Cash held in disposal group
(10 952) 8 679
Effect of exchange rate fluctuations on cash held 1 265 (4 359) 1 652
Cash and cash equivalents at the end of the period 79 667 35 374 143 028
^ Includes discontinued operations.
* The cash effect of finance leases have been reclassified from financing and investing activities to operating activities.
Condensed consolidated interim segmental information
Restated Restated
Reviewed Reviewed Audited
Six months Six months Year
ended ended ended
31 December 31 December 30 June
2012 2011 2012
R'000 R'000 R'000
NET ASSETS
Facilities management services 416 923 369 789 379 929
Security services 387 756 355 273 384 966
Catering services 61 919 78 015 74 286
Cleaning services 154 578 118 868 136 726
Diversified services# (49 590) (83 795) (59 312)
Discontinued operations 36 568
971 586 874 718 916 595
REVENUE INCLUDING INTERSEGMENT TRADING
Facilities management services 696 931 639 882 1 281 260
Security services 1 186 054 1 111 604 2 267 658
Catering services 322 471 287 850 572 432
Cleaning services 249 727 232 373 484 080
Diversified services# 409 903 351 497 723 100
Discontinued operations 95 996 180 390
2 865 086 2 719 202 5 508 920
REVENUE FROM EXTERNAL CLIENTS
Facilities management services 695 691 637 005 1 278 726
Security services 1 174 027 1 101 829 2 238 467
Catering services 264 091 228 477 456 169
Cleaning services 185 387 165 984 349 318
Diversified services# 356 530 306 446 620 703
Discontinued operations 91 536 173 569
2 675 726 2 531 277 5 116 952
PROFIT/(LOSS) FROM OPERATIONS
Facilities management services 64 023 68 128 121 930
Security services 58 408 66 326 143 943
Catering services 4 478 (8 821) (10 755)
Cleaning services 12 622 (8 075) 3 142
Diversified services# (21 699) (28 632) (65 239)
Discontinued operations 2 710 5 109
117 832 91 636 198 130
EXCEPTIONAL ITEMS (INCLUDED IN
PROFIT/(LOSS) FROM OPERATIONS)
Facilities management services
Security services
Catering services 11 632 11 632
Cleaning services 10 872 10 872
Diversified services#
Discontinued operations
22 504 22 504
NET FINANCE INCOME/(COSTS)
Facilities management services 292 298 5 075
Security services (5 161) (4 972) (9 793)
Catering services (1 221) (980) (1 591)
Cleaning services (115) (291) (464)
Diversified services# (15 605) (18 207) (39 081)
Discontinued operations 454 1 140
(21 810) (23 698) (44 714)
INVESTMENT INCOME
Facilities management services 2 015 3 317 3 981
Security services
Catering services
Cleaning services
Diversified services# 4 278 2 471 6 596
Discontinued operations (4 125) 153
6 293 1 663 10 730
# Includes head office.
Restated Restated
Reviewed Reviewed Audited
Six months Six months Year
ended ended ended
31 December 31 December 30 June
2012 2011 2012
R'000 R'000 R'000
TAXATION
Facilities management services (14 901) (20 741) (34 170)
Security services (10 601) (13 029) (30 989)
Catering services (3 637) 854 6 650
Cleaning services (700) 3 917 4 583
Diversified services# (8 115) (13 477) (17 679)
Discontinued operations 3 065
(37 954) (42 476) (68 540)
TOTAL PROFIT/(LOSS) FOR THE PERIOD
Facilities management services 51 429 51 002 96 743
Security services 42 646 48 325 103 161
Catering services (380) (8 947) (5 696)
Cleaning services 11 807 (4 449) 7 261
Diversified services# (41 801) (57 845) (133 884)
Discontinued operations (961) 4 662
63 701 27 125 72 247
TOTAL COMPREHENSIVE INCOME/(LOSS)
FOR THE PERIOD
Facilities management services 51 429 51 002 96 743
Security services 43 240 51 650 106 962
Catering services (290) (9 071) (6 759)
Cleaning services 11 807 (4 449) 7 261
Diversified services# (41 801) (57 783) (134 084)
Discontinued operations (961) 4 662
64 385 30 388 74 785
# Includes head office.
The presentation of the segmental information has been amended since the prior interim results to disclose catering and cleaning as
separate segments and, as such, the prior period and year information has been restated.
Condensed consolidated interim statement of changes in equity
Foreign Total
currency attributable Non- Capital
Share translation Distributable to owners controlling and
capital reserve reserve of the parent interest reserves
Notes R'000 R'000 R'000 R'000 R'000 R'000
Balance at 30 June 2011 734 288 (10 206) 162 967 887 049 15 288 902 337
Transactions with non-controlling interests:
Acquisition of subsidiaries 3 500 3 500
Dividends paid (10 545) (10 545)
Total comprehensive income for the period 3 263 23 292 26 555 3 833 30 388
Profit for the period 23 292 23 292 3 833 27 125
Other comprehensive income for the period 3 263 3 263 3 263
Transactions with owners:
Dividends paid (50 962) (50 962) (50 962)
Balance at 31 December 2011 734 288 (6 943) 135 297 862 642 12 076 874 718
Transactions with non-controlling interests:
Acquisition from non-controlling interest (327) (327)
Dividends paid (2 193) (2 193)
Total comprehensive income for the period (725) 44 760 44 035 362 44 397
Profit for the period 44 760 44 760 362 45 122
Other comprehensive income for the period (725) (725) (725)
Balance at 30 June 2012 734 288 (7 668) 180 057 906 677 9 918 916 595
Transactions with non-controlling interests:
Dividends paid (5 665) (5 665)
Total comprehensive income for the period 684 60 118 60 802 3 583 64 385
Profit for the period 60 118 60 118 3 583 63 701
Other comprehensive income for the period 684 684 684
Transactions with owners:
Shares repurchased 7 (3 729) (3 729) (3 729)
Balance at the end of the period 730 559 (6 984) 240 175 963 750 7 836 971 586
Notes to the condensed consolidated interim financial statements
1. Accounting policies
The reviewed condensed consolidated interim financial statements for the period ended 31 December 2012 have been
prepared using the measurement and recognition requirements of International Financial Reporting Standards (IFRS) and
the South African Institute of Chartered Accountants (SAICA) Financial Reporting Guides as issued by the Accounting
Practices Committee and Financial Reporting Pronouncements as issued by the Financial Reporting Standards Council
and contains information as required by IAS 34 Interim Financial Reporting. This is in accordance with the JSE Listings
Requirements and the Companies Act, 71 of 2008, as amended.
The accounting policies adopted in these reviewed condensed consolidated interim financial statements are consistent with
the accounting policies applied in the audited annual financial statements for the year ended 30 June 2012.
The reviewed condensed consolidated interim financial statements for the period ended 31 December 2012 were compiled
under the supervision of Mr GE Röth, Chief Financial Officer.
2. Business combinations
Finalisation of purchase price allocation of acquisitions done prior to 30 June 2012
The purchase price allocation for all acquisitions prior to 30 June 2012 was finalised in the current period. With effect from
1 August 2011 Mvelaserve obtained 51,6% of the issued share capital of Velocity, a new start-up company, for a consideration
of R10 000 000. The purchase price allocation finalisation resulted in the recognition of a distribution right intangible asset for
Velocity. The non-controlling interest was measured at cost at acquisition and was included in the purchase price allocation
at Rnil. The distribution right will be amortised over the term for which the right was granted being four years from date
of acquisition of Velocity. Amortisation to the value of R1 276 000 was accounted for in the current period and a further
R1 064 000 and R1 276 000 was retrospectively adjusted for the six months ended 31 December 2011 and 30 June 2012,
respectively. (Refer to restatement note 7.1)
With effect from 1 September 2011, the group obtained the assets and liabilities of a mast and infrastructure business,
for a consideration of R17 500 000. 20% of the shares of a subsidiary, LTP, was issued as part settlement of the purchase
consideration, which resulted in an increase of the non-controlling interest.
"Other" relates to franchises bought back by Khuseti and Protea Coin.
Velocity LTP Other Total
Fair value of assets and liabilities acquired: R'000 R'000 R'000 R'000
Property, plant and equipment 1 688 1 455 3 143
Trademarks and other intangibles 10 000 120 10 120
Deferred taxation 66 66
Inventory 184 184
Trade and other receivables 4 429 26 4 455
Cash and cash equivalents 86 86
Total assets 10 000 6 389 1 665 18 054
Trade and other payables (2 034) (324) (2 358)
Asset-based finance (855) (855)
Total liabilities (2 889) (324) (3 213)
Net assets acquired 10 000 3 500 1 341 14 841
Goodwill 14 000 2 412 16 412
10 000 17 500 3 753 31 253
Satisfied by:
Equity of subsidiary 3 500 3 500
Cash 10 000 11 000 3 753 24 753
Loans 3 000 3 000
10 000 17 500 3 753 31 253
Net cash effect 10 000 10 914 3 753 24 667
The revenue and profit/(loss) after taxation numbers that were consolidated in the prior year have remained unchanged.
The goodwill arising from the acquisition of LTP is attributable to the business being well positioned in the mast maintenance
market with a highly skilled workforce and an established reputation. LTP dovetails well with the group's existing facilities
management company, TFMC. The transaction cost relating to the acquisitions was negligible.
Current period acquisitions
In the current period Khuseti bought back franchises at a total purchase price of R264 000. Property, plant and equipment to
the value of R86 000, other receivables of R11 000 and goodwill of R167 000 were recognised related to these acquisitions.
Reviewed Reviewed Audited
31 December 31 December 30 June
2012 2011 2012
R'000 R'000 R'000
3. Property, plant and equipment
Opening balance 440 185 431 915 431 915
Additions 83 642 75 078 169 685
Acquired through business combinations 86 1 688 3 143
Disposals (5 979) (4 747) (10 486)
Depreciation for the period (74 539) (71 014) (146 798)
Reversal of impairment 1 364
Impairment of assets (6 564)
Reclassification to intangible assets (2 397) (2 199)
Foreign currency translation reserve 7 125
Closing balance 441 005 432 920 440 185
Restated Restated
Reviewed Reviewed Audited
31 December 31 December 30 June
2012 2011 2012
4. Intangible assets R'000 R'000 R'000
Opening balance(1) 626 145 622 547 622 547
Acquired through business combinations1 167 25 077 26 532
Reclassified from property, plant and equipment 2 397 2 199
Additions 1 159 738 2 281
Amortisation(1) (3 594) (4 589) (8 860)
Impairment (660) (18 554)
Closing balance 625 614 643 773 626 145
(1) Prior period balances have been restated as per note 7.1.
5. Interest-bearing liabilities
Reviewed Reviewed Reviewed Reviewed Audited
31 December 31 December 31 December 31 December 30 June
2012 2012 2012 2011 2011
Asset-based
finance Bank loans Total Total Total
R'000 R'000 R'000 R'000 R'000
Opening balance 229 556 183 482 413 038 426 654 426 654
New loans 43 217 43 217 40 115 135 509
Acquired through
business
combinations 855 855
Amounts repaid (60 272) (25 000) (85 272) (73 812) (149 755)
Accrued interest
effect (193) (193) (152) (225)
Closing balance 212 501 158 289 370 790 393 660 413 038
Disclosed as:
Non-current interest-
bearing liabilities 116 308 106 238 222 546 252 621 253 303
Current interest-
bearing liabilities 96 193 52 051 148 244 141 039 159 735
212 501 158 289 370 790 393 660 413 038
6. Working capital
Restated Restated
Reviewed Reviewed Audited
31 December 31 December 30 June
2012 2011 2012
R'000 R'000 R'000
6.1 Other current assets
Inventories 108 431 89 238 91 994
Trade receivables 558 047 522 892 535 842
Other receivables 309 703 283 610 277 965
Taxation assets 189 2 637
976 370 895 740 908 438
6.2 Other current liabilities
Trade payables 117 550 191 782 182 546
Other payables 810 478 746 078 755 635
Provisions 31 910 22 051 42 068
Taxation liabilities 17 729 6 642
977 667 966 553 980 249
7. Restatements
7.1 Intangible assets
The purchase price allocation for Velocity was finalised in the current period. The previously recognised goodwill of
R10 000 000 in respect of Velocity was reclassified to distribution rights and will be amortised over the term for which
the right was granted, being four years from date of acquisition. The prior year numbers were represented to reflect the
amortisation on the distribution right since acquisition.
Restated Restated
Reviewed Audited
Six months Year
ended ended
31 December 30 June
2011 2012
R'000 R'000
Previously stated profit from operations 89 990 195 361
Amortisation of distribution right (1 064) (2 340)
Restated profit from operations 88 926 193 021
As part of the finalisation of the purchase price allocation of LTP additional goodwill of R2 800 000 was recognised.
7.2 Currency translation differences ("FCTR")
At 31 December 2011, the FCTR relating to RoyalMnandi's operations in Mozambique was reversed to the statement of
profit or loss as a result of the termination of the existing contract in that country. Since the incorporated entity still exists
in Mozambique and is currently procuring new work, the FCTR can be utilised in future and has therefore been restated.
Previously
Restated stated
Reviewed Reviewed
Six months Six months
ended ended
31 December 31 December
2011 2011
R'000 R000
Fair-value adjustments and net profit/(loss) from investments 1 771 (5 425)
7.3 Investment income
At 31 December 2011, R2 160 000 income received from associates were
misallocated to dividend income and not reflected as part of share of profit from
associate. This allocation was corrected in the comparatives.
Share of profit from associate 3 317 1 157
Dividend income 700 2 860
7.4 Non-controlling interest
At 31 December 2011, a dividend of R2 795 000 paid to the non-controlling interest was misallocated to owners of the
parent. This was corrected in the current period.
As part of the purchase price allocation of LTP a further R2 800 000 was allocated to non-controlling interest at
31 December 2011. This was corrected in the current period
Restated Restated Restated stated
Reviewed Reviewed Audited Audited
Six months Six months Year Year
ended ended ended ended
31 December 31 December 30 June 30 June
2011 2011 2012 2012
R'000 R000 R'000 R000
7.5 Effect of restatements on profit
or loss for the period and other
comprehensive income earnings
per share, headline earnings per
share and the statement of
financial position
Profit for the period 27 125 20 993 72 247 74 587
Total comprehensive income 30 388 24 318 74 785 77 125
The restatement only affected continued operations attributable to owners of the parent.
Earnings per share and headline
earnings per share
Earnings per ordinary share (cents) 16,4 12,1 48,1 49,7
Headline earnings per ordinary
share (cents) 18,8 19,5 65,1 66,8
Statement of financial position
Non-current assets
Intangible assets 643 773 642 037 626 145 628 485
Capital and reserves 874 718 872 982 916 595 918 935
Owners of the parent 862 642 860 911 906 677 909 017
Non-controlling interest 12 076 12 071 9 918 9 918
Except for the Velocity purchase price allocation all restatements were adjusted for in the 30 June 2012 financial statements.
8. Share repurchase
During the period the group bought back 464 563 of its issued ordinary shares at a cost of R3 729 000. The shares were
bought back for utilisation by the Mvelaserve Executive share scheme and will be held as treasury shares.
Reviewed Reviewed Audited
31 December 31 December 30 June
2012 2011 2012
R'000 R'000 R'000
9. Capital commitments and contingencies
Capital expenditure
Contracted for 7 293 12 127 13 538
Not contracted for 7 248 8 500 4 782
14 541 20 627 18 320
Operating leases
Land and buildings 132 459 143 344 149 789
Plant and equipment 7 284 9 046 9 178
Motor vehicles 62 930 85 374 85 290
202 673 237 764 244 257
Less: Amount accrued as a result of using straight-line basis (10 266) (4 672) (5 439)
192 407 233 092 238 818
Contingent liabilities
As disclosed in the notes to the 30 June 2012 annual financial statements SARS issued a request for information and
explanations relating to one of the group subsidiaries. Additional tax of R2 922 000 and interest of R773 000 was levied
which are incorporated in the results for the current period.
10. Related party disclosure
Security services to the value of R2 600 000 were provided to Mvelaphanda Holdings (Pty) Limited during the period.
At period end a balance of R1 200 000 was still outstanding in this respect.
11. 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 31 December 2012 the group was in breach of its debt service cover ratio covenant in respect to its Nedbank funding.
Nedbank has issued a condonation in respect of the breach on 5 March 2013. 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.
12. Reviewed report
The condensed consolidated interim financial information has been reviewed by the company's independent auditors,
PricewaterhouseCoopers Inc. Their unmodified review conclusion is available for inspection at the company's registered
office.
Commentary
Introduction
The results for the six months ended 31 December 2012 ("the period") reflect the positive impact of successful
restructuring initiatives at RoyalMnandi and Royalserve Cleaning and the introduction of effective measures
in underperforming businesses such as Khuseti, to contain costs and realise future growth potential. These
were supported by improved cost awareness and strict cost controls throughout the organisation. Furthermore,
restructuring measures have commenced at Stamford Sales since period-end. Whilst these have contributed
to increased costs we expect a positive impact in the next 12 months.
Revenue for the period grew in line with expectations, while strong operating profit growth reflects the
results of our efforts described above.
Group profile
Mvelaserve is a leading diversified business support services group spanning 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, provincial and local government departments.
Financial results
Total revenue for the period from continued operations increased 10% to R2 676 million (2011: R2 440 million).
Protea Coin and TFMC accounted for R131 million of the revenue growth, with a further R55 million
contribution from Royalserve Cleaning and RoyalMnandi.
EBITDA grew to R196 million from R164 million, while operating profit increased by 33% to R118 million
from R89 million in the comparative period. The improved results were attributable mainly to the successful
turnaround in RoyalMnandi and Royalserve Cleaning. The group operating margin increased to 4,4% from
3,6%.
The net interest charge for the period decreased to R22 million from the comparative period (December 2011:
R24 million) mainly as a result of reduced debt levels. This, together with the improved operating results,
resulted in an improved interest cover ratio of 4,6 times (December 2011: 3,2 times).
The upswing in investment income was derived from a positive net fair value adjustment of R4 million in
respect of the marked-to-market value of the derivative financial instrument.
Net profit before tax rose by 44% to R102 million (December 2011: R71 million), driven primarily by the
increase in operating profit.
Taxation decreased by 11% to R38 million (2011: R42 million), which represents a decrease in the effective
tax rate to 37% from 50%, excluding STC of R7 million paid in the comparative period.
Attributable earnings per share ("EPS") and headline earnings per share ("HEPS") increased 251% to
42,5 cents (December 2011: 12,1 cents) and 114% to 41,8, cents (December 2011: 19,5 cents), respectively.
Financial position
Total non-current assets increased to R1 158 million (December 2011: R1 145 million). Property, plant and
equipment increased to R441 million (December 2011: R433 million) while intangible assets decreased to
R626 million (December 2011: R644 million). Depreciation of R75 million was provided for in the period
(December 2011: R71 million), while capital expenditure ("capex") increased to R85 million (December 2011:
R75 million), of which R51 million was for expansion (December 2011: R52 million) and R34 million was
for replacement (December 2011: R24 million). The overall capex-to-depreciation remained flat at 1,1 times
which is within the group's capital investment programme targets. R51 million of the capex for the period was
for Protea Coin, R10 million for Royalserve Cleaning, R9 million for Stamford Sales, R5 million for Velocity and
R3 million each for TFMC, RoyalMnandi and Khuseti.
R10 million previously classified as goodwill at Velocity, was reclassified in line with the finalisation of the
IFRS purchase price allocation adjustment, to distribution rights, with effect from the acquisition date of
Velocity, and amortised over the contract period of these acquired distribution rights. Consequently, an
amortisation charge of R1,3 million was debited to the profit or loss statement for the period, R1 million for
the comparative period, and R1,3 million for the six months ended 30 June 2012.
Interest-bearing debt at period-end, including the derivative financial instrument fair valued at R15 million on
that date, reduced to R386 million (December 2011: R417 million), which resulted in the debt:equity ratio
reducing to 40% (December 2011: 48%).
Operating working capital increased to R247 million (December 2011: R124 million) with increases
in receivables to R868 million (December 2011: R807 million), inventory to R108 million (December 2011:
R89 million), cash and cash equivalents to R231 million (December 2011: R188 million) and accounts payable
remained flat at R960 million. Outstanding debtor's days remained flat at 38 days.
The net cash increase includes a decrease in restricted cash to R151 million (December 2011: R153 million).
Net asset value and tangible net asset value increased to 683 cents (December 2011: 609 cents) and
191 cents (December 2011: 121 cents), respectively.
Capital and reserves
The total issued ordinary share capital reduced to 141 097 110 from 141 561 673 ordinary shares following
a share buyback of 464 563 ordinary shares during the period, resulting in a marginal reduction of the
weighted number of ordinary shares for the period to 141 537 463 from 141 561 673 ordinary shares.
Operational review
Protea Coin delivered good growth in revenue of 7%, amounting to R1 186 million (December 2011: R1 112 million).
Operating profit for the period decreased by 12% to R58 million (December 2011: R R66 million), due to
the combination of a number of adverse factors: industrial action in the transport sector in September
and October 2012; higher fuel costs and wage increases, both of which are not immediately passed on to
customers; the loss of parastatal contracts; and start-up costs in respect of operations in Ghana. However,
the mining division and cameo and cash management environment experienced significant growth. Inroads
into the rest of Africa continued successfully, with a second contract win in Ghana effective February 2013.
TFMC's revenue for the period increased 9% to R697 million (December 2011: R640 million), driven by new
non-Telkom contract awards, the incorporation of the results of LTP for the full six months (three months
at December 2011), and the increase in operational spend within the Telkom contract. Total operating profit
remained stable at R64 million (December 2011: R68 million), the slight variance being attributable to a
weaker performance by LTP. The operating margin declined slightly to 9.2% (December 2011: 10.6%) as a
result of operating losses on a contract which has since been terminated effective end February 2013.
RoyalMnandi's revenue increased 12% to R322 million (December 2011: R288 million) on the back of new
contracts secured and organic growth in existing contracts. Profit from operations improved to R4 million
(December 2011: R9 million loss). The company obtained ISO9000 certification as part of an initiative to
improve the quality associated with the brand. Key contracts were also retained during the period with good
prospects for the next six months. Furthermore, material contract wins led to the successful turnaround
of the central production facility in Centurion. Going forward, food price inflation is expected to become
increasingly substantial, with resultant heavier pressure on the producers of commodities to increase costs.
Focus on productivity and minimal wastage remains key to restricting this inflationary pressure on margins
to a minimum.
Royalserve Cleaning revenue increased 8% to R250 million (December 2011: R232 million) which, as
anticipated, generated notable growth in operating profit to R13 million (December 2011: R8 million loss). This
was made possible mainly by improved manpower and consumable controls to reduce inefficiencies as part
of the restructuring process. Material contracts which were out on tender during the period, were retained,
and a new laundry was opened in response to a demand from new as well as existing clients.
Zonke continued to perform strongly. Revenue increased by 30% to R51 million (December 2011: R39 million)
in light of the continued roll-out of new machines, together with an increase in the gross gambling revenue
per machine. Operating profit grew by 51% to R23 million (December 2011: R15 million). Expansion into
the rest of Africa continued, with a new contract to monitor gambling machines outside of South Africa
concluded. Pilot projects are currently underway in Zimbabwe and Swaziland.
Khuseti increased revenue by 22% to R117 million (December 2011: R96 million) mainly due to higher sales to
the retail sector combined with an increase in franchises converted to corporate stores. Operating profit rose
by 10% to R12 million (December 2011: R11 million). The first semi-mobile unit is showing promising results.
The corporate stores strategy taking on corporate stores and making the necessary operational changes
in-store is yielding positive results with an average increase of 15% in sales volumes from these stores.
Sales volumes overall to the local market have shown a small improvement, highlighting the start of a market
recovery in Quick Service Restaurants and brighter prospects.
Revenue at SA Water rose by 158% to R6 million (December 2011: R2 million). The operating loss increased
by 27% to R2,0 million (December 2011: R1,5 million). With the Water Treatment Plants operating at a 99.8%
uptime for the first time in the period, the business was able to generate new annuity-based revenue which
is contractually dependent on efficiency. In addition, services were expanded; specifically waste water
treatment capabilities were added to potable water treatment services, to enable the delivery of a total water
treatment solution. SA Water further introduced two exclusive offerings, namely "SepTimax" a packaged
waste water treatment solution; and "MoBimax" a mobile water treatment plant to target the military
market and the rest of Africa.
Stamford Sales increased turnover by 11% to R221 million (December 2011: R199 million). The increase in the
operating loss was disappointing at R20 million (December 2011: R5 million loss) on the back of a deteriorated
gross profit margin of 13% (December 2011: 20%). Operating losses of R8 million were incurred in the food
service and frozen food divisions, with a further R2 million operating loss incurred at the branches currently
being closed. The key issues impacting the results, were the loss of certain major profitable contracts and the
unsuccessful expansion into the frozen food services business. A decision has been taken to close the food
services and frozen food division and non-profitable branches, and focus in the future on building profitable
divisions, namely packaging and ingredients for the major retail stores.
Velocity's turnover and operating loss remained flat at R2 million and R6 million, respectively. Nine contracts
were completed during the period. Although penetration into the road repair market appears to be slow, the
overall response to the quality of Velocity's process has been encouraging.
Directorate
As previously announced OA Mabandla resigned as director with effect from 23 November 2012. S Masinga
was appointed as lead independent non-executive director in his place, effective 28 November 2012, and as
chairperson of the Remuneration and Nomination Committee effective 29 November 2012. She has served
as independent non-executive director since listing on 29 November 2010. Z Vokwana has been appointed
as an independent non-executive director to the board and as a member of the Audit, Risk and Compliance
Committee of Mvelaserve with effect from 5 March 2013.
Dividend
No interim dividend was declared.
Prospects
The group has laid the foundation for ongoing improvement in a number of operations. RoyalMnandi and
Royalserve Cleaning are continuing to improve operating margins, resulting from the successful restructuring
initiatives in the prior year. New contract wins during the period at SA Water enhance its future potential
to contribute the group earnings. TFMC and Protea Coin, the cornerstones of the group operations, face
challenging trading conditions with fuel and labour increases. Operating performance however, is expected to
maintain its current momentum. Present initiatives at Khuseti should see an improved operating margin. The
restructuring process at Stamford Sales is only likely to improve performance in the next financial year.
Expansion in the rest of Africa is continuing in line with strategy.
MSM Xayiya JMS Ferreira GE Röth
Chairman Chief Executive Officer Chief Financial Officer
7 March 2013
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
S Masinga*
N Mbalula
GD Harlow
* Lead Independent
Registered Office:
28 Eddington Crescent
Highveld Techno Technopark
Centurion, 0169
Sponsor:
Rand Merchant Bank
(A division of FirstRand Bank Limited)
Auditors:
PricewaterhouseCooper 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 at
www.mvelaserve.co.za
Date: 07/03/2013 07:06:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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