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CSG HOLDINGS LIMITED - Financial Results - Interims

Release Date: 24/03/2014 14:29
Code(s): CSG     PDF:  
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Financial Results - Interims

CSG HOLDINGS LIMITED
(Formerly M&S Holdings Limited)
(Incorporated in the Republic of South Africa)
(Registration number 2006/011359/06)
JSE code: CSG ISIN: ZAE000184438
("CSG" or "the Company" or "the Group")

UNAUDITED CONDENSED CONSOLIDATED INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2013

CONDENSED GROUP STATEMENT OF COMPREHENSIVE INCOME
                                                                         6 months ended 31 December      Year ended
                                                                               2013            2012     28 February
                                                                                       Re-presented            2013
                                                                          Unaudited       Unaudited         Audited
                                                                              R'000           R'000           R'000

Revenue                                                                     424 528         336 268         737 919
Cost of sales                                                             (358 273)       (282 850)       (617 037)
Gross profit                                                                 66 255          53 418         120 883
Net operating expenses                                                     (26 244)        (26 344)        (67 238)
Operating profit                                                             40 011          27 074          53 645
(Loss)/profit on sale of property, plant and equipment                        (136)             355             425
Interest received                                                                85              37             558
Income from equity accounted investments                                          -               -              92
Interest paid                                                               (1 436)           (739)         (2 428)
Profit before taxation                                                       38 524          26 727          52 292
Taxation                                                                   (11 201)         (7 615)        (14 102)
Profit for the year                                                          27 323          19 112          38 190
Other comprehensive income                                                        -               -               -
Total comprehensive income                                                   27 323          19 112          38 190

Total comprehensive income attributable to:
Owners of the parent                                                         15 854          11 935          25 328
Non-controlling interest                                                     11 470           7 178          12 862
                                                                             27 323          19 112          38 190

Weighted average shares in issue ('000)                                     200 605         183 015         183 015

Headline earnings reconciliation
Attributable earnings                                                        15 854          11 935          25 328
Profit/(loss) on sale of property, plant and equipment (after taxation)          83            (54)           (104)
Headline earnings                                                            15 937          11 881          25 224

Basic and diluted earnings per share (cents)
Basic and diluted earnings per share                                           7.90            6.52           13.84

Headline earnings per share                                                    7.94            6.49           13.78

CONDENSED GROUP STATEMENT OF FINANCIAL POSITION
                                                             31 December       28 February
                                                         2013           2012          2013
                                                                Re-presented
                                                    Unaudited      Unaudited       Audited
                                                        R'000          R'000         R'000
ASSETS
Non-current assets                                    133 237         46 849        39 189
Property, plant and equipment                          22 070         15 928        14 487
Intangible assets                                      98 073         21 466        21 466
Investment in and loans to joint ventures              13 095          9 454         1 681
Other financial assets                                    -              -           1 556
Current assets                                        246 678        126 968       136 412
Inventories                                             6 005          4 647         4 397
Current income tax receivable                             -              -              26
Trade and other receivables                           233 855        122 321       113 248
Bank and call deposits                                  6 818            -          18 741

TOTAL ASSETS                                          379 915        173 817       175 601

EQUITY AND LIABILITIES
Capital and reserves                                  246 548         80 385        85 113
Non-current liabilities                                 6 368          5 127         4 741
Interest bearing liabilities                            5 885          4 548         4 258
Deferred taxation                                         483            579           483
Current liabilities                                   126 999         88 305        85 747
Current portion of interest bearing liabilities         4 386          3 962         3 743
Other financial liabilities                            13 845         10 362        14 891
Bank overdrafts and invoice discounting                   -            2 942           -
Trade and other payables                              101 488         61 618        63 711
Taxation payable                                        7 280          9 421         3 402

TOTAL EQUITY AND LIABILITIES                          379 915        173 817       175 601

Shares in issue ('000)                                387 954        183 015       183 015
Net asset value per share (cents)                        63.6           43.9          46.5
Net tangible asset value per share (cents)               38.3           32.2          34.8

CONDENSED GROUP STATEMENT OF CASH FLOWS
                                                         6 months ended 31 December      Year ended
                                                               2013            2012     28 February
                                                                       Re-presented            2013
                                                          Unaudited       Unaudited         Audited
                                                              R'000           R'000           R'000

Cash flow from operations                                   (6 723)           6 143          20 138
Cash generated by operations                                  8 568          12 920          35 233
Interest received                                                85              37             558
Interest paid                                               (1 436)           (739)         (2 428)
Taxation paid                                              (13 939)         (6 075)        (13 225)

Cash flow from investing activities                         (5 358)         (3 337)         (1 216)
Cash flow from business combination                         (1 922)               -               -
Net investment in property, plant and equipment             (3 436)         (3 337)         (1 216)

Cash flow from financing activities                        (10 925)        (16 112)        (12 467)
Dividends paid                                             (10 700)         (1 314)         (1 332)
Movement in loans payable                                     (225)        (14 798)        (11 135)

(Decrease)/increase in cash resources                      (23 006)        (13 306)           6 455
Cash resources at beginning of period                        29 824          10 364          12 286
Cash resources at end of period                               6 818         (2 942)          18 741

Cash resources                                                6 818         (2 942)          18 741
Bank and call deposits                                        6 818               -          18 741
Bank overdraft and invoice discounting                            -         (2 942)               -

CONDENSED GROUP STATEMENT OF CHANGES IN EQUITY
                                                              Total
                                                    attributable to            Non-
                                                     equity holders     controlling
                                                      of the parent        interest    Total equity
                                                              R'000           R'000           R'000

Equity at 1 July 2012                                        46 814          15 773          62 587
Total comprehensive income for the period                    11 935           7 178          19 112
Dividend paid                                                               (1 314)         (1 314)
Equity at 31 December 2012 (Unaudited)                       58 749          21 636          80 385
Total comprehensive income for the period                       724           4 004           4 728
Equity at 28 February 2013 (Audited)                         59 473          25 640          85 113
Total comprehensive income for the period                    11 523           4 298          15 821
Dividend paid                                                               (1 362)         (1 362)
Equity at 1 July 2013                                        70 996          28 576          99 572
Total comprehensive income for the period                    15 854          11 470          27 323
Dividend paid                                              (10 700)                        (10 700)
Shares purchased from non-controlling shareholders           21 805        (21 805)               -
Shares issued as part of business combination               130 353                         130 353
Equity at 31 December 2013 (Unaudited)                      228 308          18 240         246 548

SEGMENT REPORTING
                                        6 months ended 31 December    Year ended
                                               2013           2012   28 February
                                                      Re-presented          2013
                                          Unaudited      Unaudited       Audited
                                              R'000          R'000         R'000
Revenue
Workforce management                        205 836        197 057       459 620
 Total revenue                              206 138        197 057       459 620
 Internal                                     (302)              -             -
Facility management                         173 631        102 481       204 632
Mining, plant & construction support         45 060         36 731        73 668
Total Group                                 424 528        336 268       737 919

Operating profit                             40 011         27 074        53 645
Workforce management                         10 022         14 092        30 398
Facility management                          24 176          8 739        13 017
Mining, plant & construction support          5 881          4 244        10 261
Head office                                    (67)              -          (31)
Net interest paid                           (1 351)          (702)       (1 870)
Workforce management                          (575)          (334)       (1 050)
Facility management                           (648)          (183)         (416)
Mining, plant & construction support          (128)          (185)         (404)
Profit before taxation                       38 524         26 727        52 292
Workforce management                          9 446         13 758        29 400
Facility management                          23 511          8 911        13 046
Mining, plant & construction support          5 633          4 059         9 857
Head office                                    (67)              -          (11)

UNAUDITED CONDENSED CONSOLIDATED INTERIM RESULTS FOR THE SIX MONTHS ENDED 
31 DECEMBER 2013

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

INTRODUCTION
The merger of BDM Holdings (Pty) Ltd ("BDM") and M&S Holdings Ltd ("M&S") and the effective
reverse listing of BDM via the acquisition by M&S of the entire issued share capital of BDM through
the issue of ordinary M&S shares ("consideration shares") to the shareholders of BDM was
concluded on 27 November 2013.

In terms of IFRS 3 Business Combinations, the transaction constitutes a reverse acquisition as the
shareholders of BDM became the majority shareholders of M&S. Accordingly M&S is deemed to be
acquired by BDM, even though M&S is the legal acquirer and remains the listed entity.

These results represent the continuation of the BDM group as the accounting acquirer and therefore
the condensed consolidated statement of comprehensive income and cash flow statement for the six
months ended 31 December 2013 represent five months of BDM trading (July 2013 to November
2013) and one month of the combined group trading (December 2013). The comparative
information for the prior period represents the unaudited consolidated results of BDM for the six
months ended 31 December 2012 as well as the audited consolidated results of BDM for the year
ended 28 February 2013.

Management chose to present the audited BDM results for the year ended 28 February 2013, which
were included in the circular to shareholders in October 2013, as comparatives (instead of unaudited
BDM figures for the year ended 30 June 2013 to correspond with M&S' year-end), because we are of
the opinion that previously published, audited results would provide the most relevant and reliable
information to the shareholders of CSG.

Due to the reverse acquisition accounting as detailed above, the comparative information for the
prior period in these results differs from the interim results for the six months ended 31 December
2012 as published on 14 February 2013.

For ease of reference, the following information is provided:

        -   earnings and headline earnings per share for the prior comparative period (as published
            on 14 February 2013), amounted to 7.7 cents per share;
        -   compared to the above, earnings per share has increased by 2.6% from 7.7 cents to 7.9
            cents per share for the current period; and
        -   headline earnings per share has increased by 3.1% from 7.7 cents to 7.94 cents per share
            for the current period.

BASIS OF PREPARATION
These results have been prepared in terms of International Financial Reporting Standards ("IFRS")
and comply with IAS 34 – Interim Financial Reporting, the Listings Requirements of the JSE Limited,
the Companies Act No. 71 of 2008, as amended and the SAICA Financial Reporting Guides as issued
by the Accounting Practices Committee. The condensed financial statements do not include all of
the information required for a full set of annual financial statements.

The accounting policies applied are consistent with those applied in the annual financial statements
for 30 June 2013 and are in terms of IFRS.

The condensed financial statements have been prepared under the supervision of Ms. SL Grobler CA
(SA), Acting Financial Director.

BUSINESS COMBINATIONS
As detailed in the SENS announcement dated 2 October 2013, the group planned to acquire an
effective 100% control over BDM Holdings (Pty) Ltd via a reverse acquisition, which acquisition was
effective on 27 November 2013. The transaction has been accounted for in terms of IFRS 3 Business
Combinations. According to the agreements, 232 772 727 ordinary M&S shares were issued to the
BDM shareholders at 84 cents per share, which comprised the total purchase consideration.

The acquired business, being M&S, contributed incremental revenues of R24.6 million and earnings
of R1.4 million to the group from the period from date of control to 31 December 2013. If the
acquisition had occurred on 1 July 2013, group income would have increased by R201.4 million and
earnings by R10.5 million, excluding earnings already accounted for. These amounts have been
calculated using the group's accounting policies.

RECOGNISED AMOUNTS OF IDENTIFIABLE NET ASSETS AT 27 NOVEMBER 2013
                                                                        R'000

Non-current assets                                                     15 358
Property, plant and equipment                                           4 696
Investments                                                             8 869
Deferred tax asset                                                      1 793

Current assets                                                         68 053
Inventories                                                               208
Trade and other receivables                                            67 845

Non-current liabilities                                               (1 558)
Interest bearing liabilities                                          (1 558)

Current liabilities                                                  (28 107)
Taxation payable                                                      (4 189)
Trade and other payables                                             (21 996)
Bank overdraft and invoice discounting                                (1 922)

IDENTIFIABLE NET ASSETS                                                53 746

GOODWILL ON ACQUISITION                                                76 607

CASH FLOW INFORMATION
Bank overdraft and invoice discounting acquired                       (1 922)

The goodwill that arose on the combination can be attributed to the synergies expected to be
derived from the combination. The fair values above have been provisionally determined, because
the acquisition was completed late in the period. The group is currently obtaining the information
necessary to finalise its valuation within 12 months of the acquisition date.

CHANGE OF NAME
The name of the company was changed to CSG Holdings Ltd (Contract Services Group) on 
27 November 2013. The change of name was registered at the CIPC on 20 January 2014.

FINANCIAL PERFORMANCE
Notwithstanding continued uncertainties surrounding the temporary labour industry, the group saw
steady growth in revenues and earnings during the six months under review.

Revenue increased by 26.3% from R336.3 million to R424.5 million in the current period, with a slight
decrease in gross profit percentage from 15.9% to 15.6%. Current headline earnings per share of
7.94 cents reflect a 22.4% increase from the 6.49 cents for the previous period.
Operating profit of R40 million was 47.8% above the prior period, assisted by the inclusion of 
R1.4 million M&S group earnings.

Net interest charges incurred in the current period increased to R1.4 million as compared to 
R702 000 in the comparative period.

WORKFORCE MANAGEMENT
The Workforce Management division achieved an operating profit for the period of R10 million,
representing a decrease of 28.9% on that achieved for the period ended 31 December 2012. The
decrease is mainly due to ongoing strikes, especially in the mining industry, uncertainties as to the
potential effect of the proposed changes to labour legislation on temporary employment and the
general trend to outsource certain functions previously performed by temporary employees to a
managed outsourced service provider.

FACILITY MANAGEMENT
Facility Management revenue increased substantially from R102.5 million to R173.6 million, resulting
in a higher operating profit of R24.2 million (2012 – R8.7 million) for the six months. The division's
contribution to group operating profit increased from 32.3% in 2012 to 60.4% in the six months
ended 31 December 2013, mainly because of the growing demand for facility management services
in various African countries.

MINING, PLANT AND CONSTRUCTION SUPPORT SERVICES
This division remains small in comparison to other divisions but saw a 38.6% growth in operating
profit from R4.2 million to R5.9 million in the current period. Management is actively looking to
further expand services within this division.

FUTURE PROSPECTS
The merger has resulted in a more substantial business and increased capital raising facilities, which
are expected to facilitate the accelerated growth of the combined group through active perusal of
acquisition opportunities of opposition companies as well as other facility management companies.
Other synergies which are expected to be captured include cross-selling of services to the larger
client base, the leveraging of expertise across the combined group as well as capitalising on potential
cost synergies.

CHANGES TO THE BOARD
The following changes to the board took place on 27 November 2013:

     -   Mr FF Goosen resigned and his position of Group Chief Executive has been assumed by CEO
         of BDM, Mr PJJ Dry;
     -   Mr JG Nieuwoudt was appointed as Chief Operating Officer;
     -   Mr NG Thiart was appointed as Executive Director;
     -   Mr JJ Senekal resigned as Lead Independent Director and Ms J Malan has been appointed
         as an Independent Non-executive Director. Ms Malan was appointed as Lead Independent
         Director on 26 February 2014.

DIVIDEND DECLARATION
No dividend has been declared for the period under review.

CAPITAL COMMITMENTS AND CONTINGENCIES
The group had no significant outstanding capital commitments or contingencies as at 31 December
2013.

For and on behalf of the Board

BT Ngcuka (Chairman)                      PJJ Dry (Chief Executive)

Date: 24 March 2014

Directors:
BT Ngcuka* (Chairman)
PJJ Dry (CEO); JG Nieuwoudt (COO); SL Grobler (CFO); NG Thiart
J Malan*#; NN Sonjani*#; PN de Waal*
(* - non-executive) (# - independent)

Secretary and Registered Office:
MN Hattingh, 6 Topaz Street, Littleton Manor, Centurion 0157

Transfer Secretaries:
Link Market Services South Africa (Pty) Ltd, 11 Diagonal Street, Johannesburg 2000 (PO Box 4844,
Johannesburg 2001)

Designated Advisor:
Sasfin Capital, a division of Sasfin Bank Ltd

Website:
www.csgholdings.co.za
Date: 24/03/2014 02:29:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
 the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct, 
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
 information disseminated through SENS.

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