Wrap Text
Reviewed Condensed Consolidated Preliminary Financial Results for the year ended 30 June 2013
Mvelaserve
(Incorporated in the Republic of South Africa)
(Registration number 1999/003610/06)
JSE share code: MVS ISIN: ZAE000151315
(Mvelaserve or the group)
Reviewed Condensed Consolidated Preliminary Financial Results
for the year ended 30 June 2013
Condensed consolidated preliminary statement of financial position
Restated
Reviewed Audited
As at 30 June 2013 2012(2)
Notes(1) R000 R000
ASSETS
Non-current assets 1 143 741 1 146 062
Property, plant and equipment 3 428 767 440 185
Intangible assets 4 554 865 626 145
Investments in associates 9 351 8 779
Other investments 16 685 17 149
Deferred income tax asset 134 073 53 804
Current assets 1 504 956 1 211 334
Other investments 4 986 8 373
Other current assets 6.1 1 108 045 908 438
Restricted cash 167 478 151 495
Cash and cash equivalents 224 447 143 028
Total assets 2 648 697 2 357 396
EQUITY AND LIABILITIES
Capital and reserves 1 025 603 916 595
Owners of the parent 1 029 308 906 677
Non-controlling interest (3 705) 9 918
Non-current liabilities 244 632 295 403
Interest bearing liabilities 5 214 512 253 303
Derivative financial instrument 9 552 19 633
Deferred income tax liability 20 568 22 467
Current liabilities 1 378 462 1 145 398
Interest bearing liabilities 5 159 973 159 735
Non-interest bearing liabilities - 5 414
Other current liabilities 6.2 1 218 489 980 249
Total equity and liabilities 2 648 697 2 357 396
(1) The notes form an integral part of the condensed consolidated preliminary
financial statements and should be read in conjunction with the financial
information.
(2) Refer to note 7 for details of restatement.
Condensed consolidated preliminary statement of profit or loss
and other comprehensive income
Restated
Reviewed Audited
For the year ended 30 June 2013 2012(2)
R000 R000
Continued operations
Revenue 5 408 067 4 943 383
Profit from operations 205 402 193 021
Goodwill impaired (66 909) (18 554)
Net finance costs (40 427) (45 854)
Finance income 7 608 7 163
Finance costs (48 035) (53 017)
Investment income 15 570 10 577
Share of profit from associates 4 571 3 981
Dividend income 910 700
Fair value adjustments and net
profit from investments 10 089 5 896
Profit before taxation 113 636 139 190
Taxation expense 3 903 (71 605)
Normal, deferred, capital gains
and foreign taxation 3 903 (64 821)
Secondary tax on companies - (6 784)
Profit for the year from
continued operations 117 539 67 585
Profit from discontinued
operations - 4 662
Total profit for the year 117 539 72 247
Other comprehensive income 6 808 2 538
Items that will be reclassified
subsequently to profit or loss
when specific conditions are met:
Currency translation differences 6 808 2 538
Total comprehensive income for
the year 124 347 74 785
Profit for the year
attributable to:
Owners of the parent - continued
operations 123 450 63 390
Owners of the parent - discontinued
operations - 4 662
Non-controlling interest (5 911) 4 195
117 539 72 247
Total comprehensive income
attributable to:
Owners of the parent - continued
operations 130 258 65 928
Owners of the parent - discontinued
operations - 4 662
Non-controlling interest (5 911) 4 195
124 347 74 785
(2)Refer to note 7 for details of restatement.
Ordinary share performance
Restated
For the year ended 30 June Reviewed Audited
2013 2012(2)
Weighted average number of
ordinary shares in issue ('000) 141 012 141 562
Diluted number of ordinary
shares (000) 141 562 141 562
Earnings per ordinary share (cents)
Basic 87,5 48,1
Diluted 87,2 48,1
Headline earnings per ordinary
share (cents)
Basic 142,4 65,1
Diluted 141,8 65,1
Earnings per ordinary share from
continued operations (cents)
Basic 87,5 44,8
Diluted 87,2 44,8
Headline earnings per ordinary
share from continued operations (cents)
Basic 142,4 58,4
Diluted 141,8 58,4
Earnings per ordinary share from
discontinued operations (cents)
Basic - 3,3
Diluted - 3,3
Headline earnings per ordinary share
from discontinued operations (cents)
Basic - 6,7
Diluted - 6,7
Number of ordinary shares in issue ('000) 139 979 141 562
Net asset value per ordinary share (cents) 735,3 640,5
Net tangible asset value per ordinary
share (cents) 243,2 160,2
(2)Refer to note 7 for details of restatement.
The diluted effect is caused by the treasury shares being designated
for utilisation in the executive share scheme.
Reconciliation between profit attributable to owners of the parent
and headline profit attributable to owners of the parent
Restated
Reviewed Audited
2013 2012(2)
R000 R000
Profit attributable to owners
of the parent 123 450 68 052
IAS 27 - Profit on disposal
of subsidiaries and investments - 4 806
IAS 16 - Net profit on sale of
property, plant and equipment (6 523) (6 685)
IAS 36 - Impairment of property,
plant and equipment 10 008 5 200
IAS 36 - Impairment of intangible
assets 5 106 -
IAS 36 - Goodwill impairment 66 909 18 554
Tax effect of the above
transactions 1 826 2 254
Headline profit attributable
to owners of the parent 200 776 92 181
Condensed consolidated preliminary statement of cash flows
Restated
Reviewed Audited
For the year ended 30 June 2013 2012(2)
R000 R000
Profit from operations(3) 205 402 198 130
Payments under finance leases(4) (16 062) (4 853)
Non-cash items 188 494 161 314
Working capital 6 529 14 392
Cash generated from operations 384 363 368 983
Net interest paid (41 989) (48 508)
Dividend income from investments
and associates 4 910 5 151
Taxation paid (74 452) (78 937)
Cash flows from operating
activities 272 832 246 689
Cash flows from investing
activities (133 057) (130 991)
Cash flows from financing
activities (61 003) (109 788)
Net movement in cash and
cash equivalents and bank
overdrafts 78 772 5 910
Cash and cash equivalents
and bank overdraft at the
beginning of the year 143 028 126 787
Cash held in disposal group - 8 679
Effect of exchange rate
fluctuations on cash held 2 647 1 652
Cash and cash equivalents
and bank overdraft at the
end of the year 224 447 143 028
(2) Refer to note 7 for details of restatement.
(3) Includes discontinued operations.
(4) The cash effect of finance leases have been reclassified from financing
and investing activities to operating activities.
Condensed consolidated preliminary segmental information
Restated
Reviewed Audited
As at 30 June 2013 2012(2)
R000 R000
NET ASSETS
Facilities management services 366 870 379 929
Security services 436 969 384 966
Catering services 78 916 74 286
Cleaning services 88 899 136 726
Packaging and distribution services 47 427 61 604
Gambling monitoring services 88 593 84 709
Diversified services(5) (82 071) (205 625)
1 025 603 916 595
REVENUE INCLUDING INTER SEGMENT TRADING
Facilities management services 1 414 225 1 281 260
Security services 2 445 224 2 267 658
Catering services 674 356 572 432
Cleaning services 492 681 484 080
Packaging and distribution services 376 621 406 815
Gambling monitoring services 102 137 81 291
Diversified services(5) 252 124 234 994
Discontinued operations - 180 390
5 757 368 5 508 920
REVENUE FROM EXTERNAL CLIENTS
Facilities management services 1 411 385 1 278 726
Security services 2 416 190 2 238 467
Catering services 572 153 456 169
Cleaning services 356 613 349 318
Packaging and distribution services 313 001 326 383
Gambling monitoring services 102 137 81 291
Diversified services(5) 236 588 213 029
Discontinued operations - 173 569
5 408 067 5 116 952
PROFIT/(LOSS) FROM OPERATIONS
Facilities management services 130 597 121 930
Security services 128 828 143 943
Catering services 20 845 (10 755)
Cleaning services 12 057 3 142
Packaging and distribution services (60 767) (20 333)
Gambling monitoring services 41 923 33 691
Diversified services(5) (68 081) (78 597)
Discontinued operations - 5 109
205 402 198 130
GOODWILL IMPAIRMENT
Facilities management services (14 000) (73)
Cleaning services (45 000) -
Packaging and distribution services (200) (11 280)
Gambling monitoring services (7 250) -
Diversified services(5) (459) (7 201)
(66 909) (18 554)
NET FINANCE INCOME/(COSTS)
Facilities management services 385 5 075
Security services (10 375) (9 793)
Catering services (1 454) (1 591)
Cleaning services (535) (464)
Packaging and distribution services (1 916) (1 431)
Gambling monitoring services 1 214 755
Diversified services(5) (27 746) (38 405)
Discontinued operations - 1 140
(40 427) (44 714)
INVESTMENT INCOME
Facilities management services 5 481 3 981
Diversified services(5) 10 089 6 596
Discontinued operations - 153
15 570 10 730
TAXATION
Facilities management services (28 894) (34 170)
Security services (21 809) (30 989)
Catering services (8 719) 6 650
Cleaning services 2 320 4 583
Packaging and distribution services 679 735
Gambling monitoring services (12 397) (12 954)
Diversified services(5) 72 723 (5 460)
Discontinued operations - 3 065
3 903 (68 540)
TOTAL PROFIT/(LOSS) FOR THE YEAR
Facilities management services 93 569 96 743
Security services 96 644 103 161
Catering services 10 672 (5 696)
Cleaning services (31 158) 7 261
Packaging and distribution services (62 204) (32 309)
Gambling monitoring services 23 490 21 492
Diversified services(5) (13 474) (123 067)
Discontinued operations - 4 662
117 539 72 247
TOTAL COMPREHENSIVE INCOME/(LOSS) FOR THE YEAR
Facilities management services 93 569 96 743
Security services 103 716 106 962
Catering services 10 408 (6 759)
Cleaning services (31 158) 7 261
Packaging and distribution services (62 204) (32 309)
Gambling monitoring services 23 490 21 492
Diversified services(5) (13 474) (123 267)
Discontinued operations - 4 662
124 347 74 785
(2)Refer to note 7 for details of restatement.
(5)Includes head office.
The presentation of the segmental information has been amended since the prior
year to disclose the packaging and distribution and gambling monitoring services
businesses separately and, as such, the prior year information has been restated.
Condensed consolidated preliminary statement of changes in equity
Foreign
currency Share-based
Share translation compensation Distributable
capital reserve (FCTR) reserve reserve
R000 R000 R000 R000
Balance at 30 June 2011 734 288 (10 206) - 162 967
Transactions with non-controlling interests:
Acquisition of subsidiaries - - - -
Acquisition from non-controlling interest - - - -
Dividends paid - - - -
Total comprehensive income for the year - 2 538 - 68 052
Profit for the year - - - 68 052
Other comprehensive income for the year - 2 538 - -
Transactions with owners:
Dividends paid - - - (50 962)
Balance at 30 June 2012 734 288 (7 668) - 180 057
Transactions with non-controlling interests:
Acquisition of subsidiaries - - - -
Acquisition from non-controlling interest - - - (674)
Disposal of non-controlling interest - - - (991)
Dividends paid - - - -
Total comprehensive income for the year - 6 808 - 123 450
Profit for the year - - - 123 450
Other comprehensive income for the year - 6 808 - -
Share-based payments - - 6 820 -
Transactions with owners:
Shares repurchased (12 782) - - -
Balance at 30 June 2013 721 506 (860) 6 820 301 842
Condensed consolidated preliminary statement of changes in equity continued
Total
attributable
to owners of Non-controlling Capital and
the parent interest reserves
R000 R000 R000
Balance at 30 June 2011 887 049 15 288 902 337
Transactions with non-controlling interests:
Acquisition of subsidiaries - 3 500 3 500
Acquisition from non-controlling interest - (327) (327)
Dividends paid - (12 738) (12 738)
Total comprehensive income for the year 70 590 4 195 74 785
Profit for the year 68 052 4 195 72 247
Other comprehensive income for the year 2 538 - 2 538
Transactions with owners:
Dividends paid (50 962) - (50 962)
Balance at 30 June 2012 906 677 9 918 916 595
Transactions with non-controlling interests:
Acquisition of subsidiaries - 481 481
Acquisition from non-controlling interest (674) (1 567) (2 241)
Disposal of non-controlling interest (991) - (991)
Dividends paid - (6 626) (6 626)
Total comprehensive income for the year 130 258 (5 911) 124 347
Profit for the year 123 450 (5 911) 117 539
Other comprehensive income for the year 6 808 - 6 808
Share-based payments 6 820 - 6 820
Transactions with owners:
Shares repurchased (12 782) - (12 782)
Balance at 30 June 2013 1 029 308 (3 705) 1 025 603
Notes to the condensed consolidated preliminary financial statements
For the year ended 30 June
1. Accounting policies
The reviewed condensed consolidated preliminary financial statements for the year ended
30 June 2013 have been prepared using the measurement and recognition requirements of
International Financial Reporting Standards (IFRS) and the 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 preliminary
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 preliminary financial statements for the year ended
30 June 2013 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 the acquisitions prior to 30 June 2012 were 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 was to 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 R2 553 000 was accounted for in the current period and
a further R2 340 000 was retrospectively adjusted for the year ended 30 June 2012 (refer to
restatement note 7). The remaining value of the distribution right of R5 106 000 was impaired
in the current year.
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. The goodwill arising from the acquisition was fully impaired
in the current year.
Other business combinations relate to franchises bought back by Khuseti and Protea Coin. Mast and
Velocity Infrastructure Other Total
R000 R000 R000 R000
Fair value of assets and
liabilities acquired:
Property, plant and equipment - 1 688 1 455 3 143
Intangible assets 10 000 120 - 10 120
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 10 000 6 389 1 665 18 054
Asset-based finance - (855) - (855)
Trade and other payables - (2 034) (324) (2 358)
Total liabilities - (2 889) (324) (3 213)
Net assets acquired 10 000 3 500 1 341 14 842
Goodwill - 14 000 2 412 16 412
Total purchase price 10 000 17 500 3 753 31 254
Satisfied by:
Equity of wholly owned
subsidiary (LTP) - 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 transaction cost relating to the acquisitions were negligible.
Current period acquisitions
With effect from 1 March 2013 Protea Coin obtained the assets and liabilities of a fencing
business, for a consideration of R882 000. The business was purchased in anticipation of
expected synergies of this business with the security services as provided by Protea Coin.
Khuseti bought back a number of loss making King Pie franchises throughout the year, for
a total consideration of R2 486 000, in order to turn the businesses around and sell them
in the future. This was done to protect the King Pie brand.
Fencing King Pie
Business Franchises Total
Fair value of assets and liabilities acquired: R000 R000 R000
Property, plant and equipment 321 1 949 2 270
Intangible assets 636 - 636
Deferred taxation 330 - 330
Inventory 1 089 - 1 089
Trade and other receivables 330 12 342
Net cash and cash equivalents 4 - 4
Total assets 2 710 1 961 4 671
Trade and other payables (3 431) - (3 431)
Bank overdraft (12) - (12)
Total liabilities (3 443) - (3 443)
Net assets acquired (733) 1 961 1 228
Goodwill 1 615 525 2 140
Total purchase price 882 2 486 3 368
Satisfied by:
Cash - 2 486 2 486
Loans 882 - 882
882 2 486 3 368
Net cash effect (8) (2 486) (2 494)
The following revenue and profit/(loss) after taxation numbers have been consolidated into the
group results relating to business combinations effected during the year:
Fencing King Pie
Business Franchises
R000 R000
Actual results consolidated
for the current year:
Revenue 5 230 11 748
Profit after taxation 457 2 895
Results that would have been
consolidated had the business
combination been effective
on 1 July 2012:
Revenue 14 887 18 019
Profit/(loss) after taxation (311) 4 509
Restated
Reviewed Audited
2013 2012(2)
R000 R000
3. Property, plant and equipment
Opening balance 440 185 431 915
Additions 163 352 169 685
Acquired through business combinations 2 270 3 143
Disposals (17 043) (10 486)
Depreciation for the year (147 655) (146 798)
Reversal of impairment - 1 364
Impairment of assets (10 008) (6 564)
Reclassification to intangible assets (2 397) (2 199)
FCTR 63 125
Closing balance 428 767 440 185
4. Intangible assets
Opening balance 626 145 622 547
Acquired through business
combinations 2 776 26 532
Reclassified from property,
plant and equipment 2 397 2 199
Additions 3 300 2 281
Amortisation (7 684) (8 860)
Impairment (72 069) (18 554)
Closing balance 554 865 626 145
(2)Refer to note 7 for details of restatement.
Reviewed Reviewed Reviewed Audited
2013 2013 2013 2012
Asset-based
finance Other loans Total Total
R000 R000 R000 R000
5. Interest bearing liabilities
Opening balance 229 556 183 482 413 038 426 654
New loans 144 322 1 744 146 066 135 509
Acquired through business combinations - - - 855
Amounts repaid (134 336) (50 000) (184 336) (149 755)
Accrued interest effect (3) (280) (283) (225)
Closing balance 239 539 134 946 374 485 413 038
Disclosed as:
Non-current interest bearing
liabilities 131 929 82 583 214 512 253 303
Current interest bearing liabilities 107 610 52 363 159 973 159 735
239 539 134 946 374 485 413 038
Reviewed Audited
2013 2012
R000 R000
6. Working capital
6.1 Other current assets
Inventories 91 850 91 994
Trade receivables 571 710 535 842
Other receivables 438 288 277 965
Taxation receivable 6 197 2 637
1 108 045 908 438
6.2 Other current liabilities
Trade payables 198 696 182 546
Other payables 955 253 755 635
Provisions 57 496 42 068
Taxation liabilities 7 044 -
1 218 489 980 249
7. Restatements
Intangible assets
The purchase price allocation for Velocity was finalised in the current year. The previously
recognised goodwill of R10 000 000 in respect of Velocity was reclassified to distribution
rights and was to 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 include amortisation
of R2 340 000 in respect of the distribution right.
Previously
Restated stated
Audited Audited
2012 2012
R000 R000
Intangible assets 626 145 628 485
Profit for the year attributable to:
Owners of the parent - continued operations 63 390 65 730
Total comprehensive income attributable to:
Owners of the parent - continued operations 65 928 68 268
Earnings per ordinary share (cents) 48,1 49,7
Headline earnings per ordinary share (cents) 65,1 66,8
No statement of financial position as at 30 June 2011 and statement of profit or loss and
other comprehensive income for the year ended 30 June 2011 was presented as the restatement
had no effect on this period.
Reviewed Audited
2013 2012
R000 R000
8. Capital commitments and contingencies
Capital expenditure
Contracted for 7 539 13 538
Not contracted for 21 835 4 782
29 374 18 320
Operating leases
Land and buildings 134 209 149 789
Plant and equipment 5 534 9 178
Motor vehicles 60 324 85 290
200 067 244 257
Less: Amount accrued as a result of using
straight-line basis (10 070) (5 439)
189 997 238 818
9. Related party disclosure
Security services to the value of R983 000 were provided to Mvelaphanda Holdings (Pty) Ltd
(Mvelaphanda Holdings) during the year of which a balance of R99 000 was still
outstanding at year-end.
A further R9 240 000 was receivable at year-end from Mvelaphanda Holdings which was fully
provided for in 2012 and written off in the current year.
A total of R1 333 000 was paid to Palanca in respect of conferences and accommodation
during the current financial year. Palanca is owned by a Mvelaserve director.
10. 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.
11. Reviewed report
The condensed consolidated preliminary financial information has been reviewed by the
companys independent auditors, PricewaterhouseCoopers Inc. Their unmodified review
conclusion is available for inspection at the companys registered office.
Our vision
To be the business support service provider of choice, known and respected for our ability to
consistently deliver exceptional value through service excellence.
To become a partner to all our customers by devising and executing a distinctly effective offering
of integrated business solutions, in a culture of integrity and enthusiasm.
Commentary
Introduction
The board presents the results for the year ended 30 June 2013 (FY13). Mvelaserve has countered
the tough economic and political challenges of the year under review with a robust financial
performance. The groups results also reflect the success of the restructuring initiatives undertaken
at RoyalMnandi during the 2012 financial year, and the focus on improving operating margins.
During the year, the alignment of business interests between LTP and TFMC led to LTP being
incorporated into TFMC and the Circle ICT operations were unbundled into the groups subsidiary
companies.
Structural changes were also undertaken at Stamford Sales, including the closure of the loss making
divisions.
In FY13, Mvelaserve announced the Bidvest Groups interest in acquiring the groups entire issued
ordinary share capital not already held by Bidvest. The process is currently under way and further
announcements will be made in due course.
Attributable earnings per share (EPS) and headline earnings per share (HEPS) for the year
increased to 87,5 cents (FY12: 48,1 cents) and 142,4 cents (FY12: 65,1 cents) respectively. The
increase in earnings was attributable primarily to the recognition of previously unrecognised
deferred tax assets indicated above, and an improved operational performance. These increases were
partly offset by the goodwill impairment charges, as well as tangible and intangible asset impairment
charges detailed above, which impacted EPS but are excluded for the purpose of calculating HEPS.
Group profile
Mvelaserve is a leading diversified business support services group with operations in Southern
Africa, Ghana, Nigeria and the UAE. The group employs approximately 31 000 people, and earned
R5 408 million in revenue during the 2013 financial year. The group was listed on the JSE Limited in
November 2010 and is a Level 2 BEE contributor.
The groups range of integrated services access multiple industries and sectors, including,
amongst others, security, facilities management, cleaning and catering. The companies under
Mvelaserves control, cater for a wide customer base encompassing leading financial institutions, mining
houses and retailers, as well as parastatals and government departments.
Financial results
Revenue from continued operations for the year under review increased by 9% to R5 408 million from
R4 943 million on a like-for-like basis, driven mainly by increased revenue posted by Protea Coin,
TFMC and RoyalMnandi.
Operating expenses, excluding depreciation, amortisation and impairments, increased by 9% to R5
062 million (FY12: R4 626 million), resulting in an increase in earnings before interest, tax,
depreciation and amortisation (EBITDA) of 6% to R376 million (FY12: R354 million. The EBITDA margin
remained flat at 7% for the year, mainly as a result of operating losses at Stamford Sales and Velocity.
Depreciation, amortisation and impairment charges, excluding impairment charges in respect of
goodwill, increased to R171 million (FY12: R155 million on a comparable basis), mainly as a result of
R15 million impairment charges at Velocity in respect of vehicles (R10 million) as well as distribution
rights (R5 million).
The operating profit for the year increased to R205 million from R198 million. This modest growth,
apart from the abovementioned impairment charges, was mainly attributable to operating losses of
R61 million at Stamford Sales (FY12: R20 million loss) and R27 million at Velocity (FY12: R11 million
loss). The low growth in operating profit was also impacted by a share-based payment charge of R7
million (FY12: Rnil) to the income statement in respect of an executive share scheme approved during
February 2012 and R6 million additional costs incurred in respect of corporate action activities.
Combined, these factors resulted in the operating margin remaining flat at 4%.
During the year goodwill of R67 million was impaired, comprising R45 million at RoyalServe
Cleaning, R14 million at LTP and R7 million at Zonke. The impairments at RoyalServe Cleaning and LTP
are a result of lower-than-expected results affecting the value-in-use calculations for these
subsidiaries. The impairment at Zonke was based on a conservative approach regarding the likelihood
of the renewal of the companys contract with the National Gambling Board due in 2015.
Net interest cost declined to R40 million (FY12: R46 million) due to reduced interest bearing debt
levels, as well as increased treasury efficiency at group level. Consequently, interest cover based
on EBITDA improved to 7,8 times from 6,7 times.
Net income from investments of R16 million (FY12: R11 million) comprised mainly the share of
profits from associates of R5 million and a favourable fair value adjustment of R10 million (FY12:
R6 million) in respect of a derivative financial instrument.
The groups taxation charge for the year amounted to a R4 million credit (FY12: R72 million debit
charge) due to a net debit deferred tax provision of R82 million. This was a result of the
recognition of a deferred tax asset of R75 million in respect of previously unrecognised tax losses at
head office level. Excluding the deferred tax asset raised, as well as permanent differences in respect
of intangible impairment charges of R72 million, the comparable effective tax rate amounted to 37% for
FY13 compared to 42% in FY12 (excluding STC). The major portion of the tax rate leakage (28% to
37%) was due to the losses incurred at Stamford Sales and Velocity for which deferred tax assets were
not recognised.
Financial position
Property, plant and equipment (PPE) decreased by R11 million to R429 million from R440 million
on the back of net disposals and write downs at cost of R32 million (FY12: R118 million),
depreciation and impairments of R158 million (FY12: R152 million), and the reversal of accumulated
depreciation of R178 million in respect of the disposals.
Capital expenditure of R163 million (FY12: R170 million) comprised R110 million (FY12: R127
million) for expansion to meet current growth initiatives and replacements of R53 million (FY12:
R43 million). The overall capital expenditure to depreciation reduced to 1,1 times (FY12: 1,2 times)
indicating a continued slowdown in the groups capital investment phase as reported for the previous
year.
Interest bearing debt, excluding the derivative financial instrument fair valued at R10 million on
30 June 2013 (FY12: R20 million), decreased to R374 million (FY12: R413 million), implying a
debt:equity ratio of 36% (FY12: 46%). Asset-based finance liabilities directly associated with the
financing of PPE increased by R10 million to R240 million (FY12: R230 million), which comprised new
finance acquired of R144 million and finance repaid of R134 million.
Cash flow
Cash generated from operations improved by 4% to R384 million (FY12: R369 million). The increase
was partly achieved by decreasing the relative working capital level in relation to turnover,
resulting in R7 million cash generated from working capital (FY12: R14 million). This, together
with reductions of R7 million in respect of net interest paid and R4 million in respect of tax
payments, resulted in an 11% improvement in cash generated from operating activities to R273 million
(FY12: R247 million). This translates into cash earnings per share of 193 cents (FY12: 174 cents).
Cash utilised in investments increased by R2 million to R133 million in FY13 mainly as a result of
PPE acquisitions of R163 million, including finance leased acquisitions of R10 million. Of the R163
million spent on PPE acquisitions, R19 million was met by cash resources, with the balance of R144
million funded by asset-based finance. Proceeds from the sale of assets amounted to R24 million.
Cash utilised in financing activities amounted to R61 million (FY12: R110 million). The reduction
is mainly as a result of the R51 million dividend paid to shareholders during the 2012 financial
year. Of the total R146 million debt raised during the year, R134 million relate to instalment sale
agreements and R10 million to finance leases. Total debt of R184 million was repaid, consisting of
R134 million in respect of asset-based finance, of which R16 million was in respect of finance leases
and R50 million in respect of the long-term loan facility. A further R13 million was spent on the
repurchase of shares for the executive share scheme.
The net result of the above cash flows amounted to an increase in cash and cash equivalents of R79
million and a cash conversion margin of 78% (FY12: 76%). The cash conversion margin was based on
free cash flow to equity as a percentage of net headline profit after tax, adjusted for the
non-current utilisation of the deferred tax asset created in the current year.
Capital and reserves
During FY13, the total issued ordinary share capital decreased by 1 582 492 ordinary shares to 139
979 181 shares (FY12: 141 561 673 ordinary shares), following share buybacks during the year at an
average R8,037 per share. The weighted average net number of ordinary shares in issue decreased
marginally to 141 011 954 from 141 561 673.
Operational review
Protea Coin delivered a solid set of results with revenue increasing by 8% to R2 445 million
(FY12: R2 268 million). Despite difficult market conditions, contracts were gained in both the mining
and guarding divisions, which compensated for parastatal contract losses in the first half of FY13.
However, operating margins decreased from 6,3% to 5,3% due to higher operational costs that have been
absorbed. The company was also affected by industrial action in the transport sector in September and
October 2012. Protea Coin has continued with its strategy to increase its foothold in the rest of
Africa and successfully secured a second contract in Ghana in February 2013.
TFMCs revenue increased by 10% to R1 414 million (FY12: R1 281 million), although the companys
operating profit remained flat. This is indicative of the difficult market conditions in the
facilities management industry as well as the economic pressures TFMCs customers are currently facing.
TFMCs operating margin remains comparable with the rest of the industry. The company secured
significant inroads into the financial services sector during the year, delivering maintenance
engineering, call centre and project-related services. The mast services division is performing well
and continued growth is expected.
RoyalServe Cleaning delivered below expected results during FY13, in spite of the operating margin
improving from 0,6% to 2,4%. The results, however, come off a low base in FY12 and systems are
being implemented to ensure that the operating margin increases to the average levels achieved in the
cleaning industry. The companys commercial division revenue was negatively impacted by the loss of
high-revenue clients. Fortunately, this was negated by the retention of contracts with higher margins.
The expansion in the laundry facility and strong growth in the hygiene division should, further add
to improved margins in the future.
RoyalMnandis revenue increased by 18% during the year, up from R572 million in FY12 to R674
million in FY13. The companys EBITDA increased 480% to R29 million (FY12: R5 million). Debtor days and
stock days both decreased by 15% and 22% respectively. The company has seen significant growth in new
blue chip clients in the financial, industrial, telecommunications, retail and educational sectors.
Zonkes revenue increased by 26% to R102 million (FY12: R81 million), with operating profit
increasing by 24% to R42 million. The company has also implemented monitoring services in Swaziland and
Zimbabwe, so expanding the groups African footprint and has added the monitoring of an additional 681
limited pay-out machines to its portfolio in South Africa.
SA Waters revenue for FY13 increased 83% to R11 million in FY13, from R6 million in FY12.
Although operating losses remained, positive results are expected for FY14 with an order cover of R18
million as at 30 June 2013. The company secured 13 contracts during the year, including two South African
National Defence Force waste water projects.
Khusetis turnover increased by 15% to R222 million in FY13 from R193 million in FY12 and
operating profit of R23 million was 28% higher than the R18 million achieved in FY12. The companys
operating margin was higher at 10.4%, compared to 9,5% in FY12.
Stamford Saless revenue of R377 million in FY13 (FY12: R407 million) was lower as a result of the
restructuring during the year. The FY13 operating loss of R61 million (FY12: R20 million) included
R2,5 million for retrenchments, R600 000 for the settlement of vehicle leases and R2,5 million for
the accelerated depreciation of freezers that are no longer in use. The gross profit margin of 16%
was also considerably lower than the 23% reported in the previous year. This was negatively affected
by low gross profit margins in the frozen and food services divisions that have been closed. Other
factors affecting profitability in FY13 included a R9,4 million provision for bad debts and higher
than expected distribution costs, which were influenced by the high and continuously increasing fuel
price.
Velocitys revenue decreased by 8% during the year to R3 million (FY12: R4 million). While
operating profit decreased by 142%, EBITDA decreased by only 33% as a result of a R10 million impairment of
its vehicles due to weak prospects. Velocity, as a start-up operation, is not gaining the traction
originally envisaged and the board will have to evaluate its future as a subsidiary within the
group.
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 was
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
The directors of Mvelaserve have resolved not to declare a dividend for the year.
Prospects
Current trading conditions are not expected to abate in the year ahead. In particular, the
challenges facing Protea Coin and TFMC, the cornerstones of the groups operations, are likely to
continue going forward, with the pressure placed on fuel prices and wages showing no signs of
dissipating.
The current labour relations situation in South Africa also remains a concern, especially as the
country readies itself for a general election in 2014.
That said, management remains confident in its ability to weather these times, and to continue to
manage and control costs vigilantly and to assess expansion opportunities in new growth markets
both within South Africa and beyond its borders.
MSM Xayiya Chairman
JMS Ferreira Chief Executive Officer
GE Röth Chief Financial Officer
6 September 2013
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
Z Vokwana
* Lead Independent
Registered Office:
28 Eddington Crescent
Highveld Technopark
Centurion, 0169
Sponsor:
Rand Merchant Bank
(A division of FirstRand 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 at www.mvelaserve.co.za
Date: 06/09/2013 04:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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