Wrap Text
Reviewed provisional results for the twelve months ended 31 March 2014
PRIMESERV GROUP LIMITED
(“Primeserv” or “the Group” or “the Company”)
Incorporated in the Republic of South Africa
Registration number: 1997/013448/06
Share code: PMV
ISIN: ZAE000039277
www.primeserv.co.za
e-mail: productivity@primeserv.co.za
REVIEWED PROVISIONAL RESULTS FOR THE TWELVE MONTHS ENDED 31 MARCH
2014
FINANCIAL HIGHLIGHTS
Gross profit up 8%
EBITDA up 61%
Operating profit up 87%
Profit before tax up 164%
Headline earnings per share (HEPS) from continuing operations up
64%
Net asset value (NAV) up 9%
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 31 March
Adoption Previously
Restated* of reported
Reviewed Reviewed IFRS10* Audited
2014 2013 2013 2013
R’000 R’000 R’000 R’000
Revenue 638 791 672 789 49 781 623 008
Cost of sales (540 670) (582 205) (43 459) (538 746)
Gross profit 98 121 90 584 6 322 84 262
EBITDA 14 454 8 964 2 314 6 650
Depreciation and
amortisation (1 863) (2 232) (22) (2 210)
Operating profit 12 591 6 732 2 292 4 440
Interest received 983 1 723 – 1 723
Interest paid (5 766) (5 493) (2 195) (3 298)
Share of profit from
associate – – (31) 31
Profit before
taxation 7 808 2 962 66 2 896
Taxation (1 366) 1 769 – 1 769
Total comprehensive
income 6 442 4 731 66 4 665
Loss from discontinued
operation (net of tax)
(Note 1) (2 002) (9 005) – (9 005)
Total comprehensive
income/(loss) 4 440 (4 274) 66 (4 340)
Total comprehensive
income/(loss)
attributable to:
Ordinary shareholders
of the Company 6 096 (3 991) – (3 991)
Non-controlling
shareholders’
interest (1 656) (283) 66 (349)
Total comprehensive
income/(loss) 4 440 (4 274) 66 (4 340)
Reconciliation of
headline earnings
Net profit/(loss)
attributable to
ordinary shareholders 6 096 (3 991) – (3 991)
After tax effect of
profit on sale of fixed
assets – continuing
operations – (65) – (65)
Impairment of assets
– discontinued operations – 1 203 – 1 203
Headline earnings/(loss) 6 096 (2 853) – (2 853)
– Continuing operations 8 098 4 949 – 4 949
– Discontinued
operations (2 002) (7 802) – (7 802)
Weighted average number
of shares in
issue (’000) 93 682 93 682 – 93 682
Diluted weighted average
number of shares
in issue(’000) 93 682 93 682 – 93 682
Earnings per share and
diluted earnings per
share (cents) 6,51 (4,26) – (4,26)
– Continuing operations 8,65 5,35 – 5,35
– Discontinued
operations (2,14) (9,61) – (9,61)
Headline earnings and
diluted headline
earnings per
share (cents) 6,51 (3,05) – (3,05)
– Continuing operations 8,65 5,28 – 5,28
– Discontinued
operations (2,14) (8,33) – (8,33)
* Bathusi Staffing Services Proprietary Limited, previously an
associate, now consolidated in terms of IFRS10 Consolidated
Financial Statements as adopted in the current year.
NOTE 1: DISCONTINUED OPERATION
2014 2013
1 month 12 months
R’000 R’000
Revenue 1 460 31 885
Cost of sales (158) (10 159)
Gross profit 1 302 21 726
Operating loss (2 002) (5 763)
Interest paid – (374)
Impairment of assets – (1 203)
Loss before taxation (2 002) (7 340)
Taxation – (1 665)
Loss for the year (2 002) (9 005)
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
as at 31 March
Adoption Previously
Restated* of reported
Reviewed Reviewed IFRS10* Audited
2014 2013 2013 2013
R’000 R’000 R’000 R’000
ASSETS
Non-current assets 50 567 44 701 (971) 45 672
Equipment and vehicles 3 930 4 086 64 4 022
Investment property 7 645 7 645 – 7 645
Goodwill 18 170 18 170 4 877 13 293
Intangible assets 2 269 2 775 – 2 775
Long-term receivables 6 860 1 050 – 1 050
Investment and loan
in associate – – (7 321) 7 321
Deferred tax asset 11 693 10 975 1 409 9 566
Current assets 102 595 120 532 15 582 104 950
Inventories 200 857 10 847
Trade receivables 94 555 106 624 14 401 92 223
Other receivables 6 748 5 227 1 145 4 082
Cash and cash
equivalents 1 092 7 824 26 7 798
Non-current assets held
for sale – 1 639 – 1 639
Total assets 153 162 166 872 14 611 152 261
EQUITY AND LIABILITIES
Equity 70 742 66 263 (3 754) 70 017
Capital and reserves 77 309 71 213 – 71 213
Non-controlling
interest (6 567) (4 950) (3 754) (1 196)
Current liabilities 82 420 100 609 18 365 82 244
Trade and other
payables 30 545 43 823 9 551 34 272
Financial liabilities – 5 031 – 5 031
Taxation payable 2 803 1 180 14 1 166
Bank borrowings 49 072 50 575 8 800 41 775
Total equity and
liabilities 153 162 166 872 14 611 152 261
Number of shares in
issue at end of
year (’000) (net of
treasury and share
trust shares) 93 682 93 682 – 93 682
Net asset value per
share (cents) 83 76 – 76
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 31 March
Adoption Previously
Restated* of reported
Reviewed Reviewed IFRS10* Audited
2014 2013 2013 2013
R’000 R’000 R’000 R’000
Profit before taxation 7 808 2 993 97 2 896
Loss before tax from
discontinued
operations (2 002) (7 340) – (7 340)
Adjusted for non-cash
items – continuing and
discontinued
operations 1 863 3 340 23 3 317
Operating cash flows
before working capital
changes 7 669 (1 007) 120 (1 127)
Net working capital
changes (5 462) (6 878) (6 190) (688)
Taxation paid (459) (36) – (36)
Cash flows from
operating activities 1 748 (7 921) (6 070) (1 851)
Cash flows from
investing activities (1 946) (1 207) 1 191 (2 398)
Cash flows from
financing activities (5 031) (678) – (678)
Net decrease in cash and
cash equivalents (5 229) (9 806) (4 879) (4 927)
Cash and cash
equivalents at
beginning of year (42 751) (32 945) (3 895) (29 050)
Cash and cash
equivalents at
end of year (47 980) (42 751) (8 774) (33 977)
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 31 March
Adoption Previously
Restated* of reported
Reviewed Reviewed IFRS10* Audited
2014 2013 2013 2013
R’000 R’000 R’000 R’000
Balance at beginning
of the year 66 263 73 530 – 73 530
Restatement for
adoption of IFRS10 – (3 820) (3 820) –
Restated balance at
beginning of the year 66 263 69 710 (3 820) 73 530
Attributable earnings 6 096 (3 991) – (3 991)
Disposal of interest
to minority 39 – – –
Shares disposed – 827 – 827
Non-controlling
shareholders’
interest (1 656) (283) 66 (349)
Balance at end of
the year 70 742 66 263 (3 754) 70 017
SEGMENTAL ANALYSIS
year ended 31 March
Adoption Previously
Restated* of reported
Reviewed Reviewed IFRS10* Audited
2014 2013 2013 2013
R’000 R’000 R’000 R’000
Revenue from external
customers (continuing
and discontinued
operations)
Human Capital
Outsourcing 605 932 642 622 49 781 592 841
Human Capital
Development 34 319 62 052 – 62 052
Total 640 251 704 674 49 781 654 893
Revenue – inter-segment
Human Capital
Outsourcing – – – –
Human Capital
Development 493 4 089 – 4 089
Total 493 4 089 – 4 089
Business segment operating
profit results
(continuing and
discontinued operations)
Human Capital
Outsourcing 25 347 22 463 2 292 20 171
Human Capital
Development (1 428) (7 870) – (7 870)
– Continuing operations 574 (2 107) – (2 107)
– Discontinued
operations (2 002) (5 763) – (5 763)
Central Services (13 330) (13 624) – (13 624)
Operating profit/(loss) 10 589 969 2 292 (1 323)
Interest received 983 1 723 – 1 723
Interest paid (5 766) (5 867) (2 195) (3 672)
Impairment of assets
– discontinued
operations – (1 203) – (1 203)
Share of profit from
associate – – (31) 31
Profit/(loss) before
taxation 5 806 (4 378) 66 (4 444)
– Continuing operations 7 808 2 962 66 2 896
– Discontinued
operations (2 002) (7 340) – (7 340)
Business segment EBITDA
(continuing and
discontinued operations)
Human Capital
Outsourcing 27 056 23 648 2 314 21 334
Human Capital
Development (865) (5 654) – (5 654)
– Continuing operations 1 137 (1 219) – (1 219)
– Discontinued
operations (2 002) (4 435) – (4 435)
Central Services (13 739) (13 465) – (13 465)
Total 12 452 4 529 2 314 2 215
Business segment
total assets
Human Capital
Outsourcing 116 789 132 100 11 529 120 571
Human Capital
Development 26 617 26 036 – 26 036
Central Services 9 756 8 736 3 082 5 654
Total 153 162 166 872 14 611 152 261
COMMENTARY
PROFILE
Primeserv Group Limited is an investment holding company focusing
on the delivery of human resources (HR) products, services and
solutions through its operating pillar, Primeserv HR Services.
This incorporates two main areas of specialisation: Human Capital
Development operating as Primeserv HR Solutions, and Human Capital
Outsourcing operating as Primeserv Outsourcing.
These divisions provide a comprehensive HR value chain that can be
applied through Primeserv’s IntHRgrate™ Model in its entirety or
in modular form. They encompass an extensive range of HR and IR
consulting solutions and services, corporate and vocational
training programmes, technical skills assessment and training
centres, as well as permanent and temporary staffing services,
wage bureaus and staff wellness and benefit programmes.
OVERVIEW
The year under review has seen a return to overall profitability
across the Group. This is apparent in the improvement in most
performance metrics with EBITDA up by 61%, operating profit up by
87%, net profit before tax up by 164% and headline earnings per
share up by 314%. The overall improvement is attributable to an
increase in earnings from continuing operations of 64% and a
reduction in the loss attributable to the discontinued colleges
business.
The Human Capital Outsourcing segment saw blue collar outsourcing
perform particularly well, despite the impact of extensive
industrial action experienced throughout the year, while white
collar outsourcing delivered a relatively flat year-on-year
performance and continues to operate in a low-growth environment
given the lack of new large infrastructure projects.
The Human Capital Development segment delivered an improved
performance. The persistent problems at the SETA’s has led to some
extended delays in both the onset of training and the settlement
of accounts by some clients awaiting disbursements from the SETA’s
for work already undertaken.
The second half of the year under review was affected by reduced
gross profit and extraordinary costs relating to industrial
action, particularly within the motor industry. There was a
further impact on the latter part of the year’s earnings due to
costs being incurred for the implementation-phase of SETA-funded
projects which only commenced post year end.
FINANCIAL OVERVIEW
Revenue for the year under review decreased by 5% from R672,8
million to R638,8 million. Gross profit increased by 8% from R90,6
million to R98,1 million with the overall gross profit percentage
improving from 13,5% in the prior year to 15,4% for the year under
review. This increase in the overall gross profit percentage was,
in the main, attributable to a change in the mix of clients in the
Outsourcing division.
EBITDA has increased by 61% from R9,0 million to R14,5 million.
Operating profit for the year improved by 87% from R6,7 million to
R12,6 million. Interest paid increased from R5,5 million to R5,8
million. Headline earnings showed a strong turn-around from a loss
of R2,9 million to a profit of R6,1 million for the year under
review. Cost containment measures were effective, with the Group’s
Central Services unit reducing costs by 2% from R13,6 million to
R13,3 million despite inflationary pressures. The Group incurred a
tax charge for the year as opposed to a credit in the prior year.
Headline earnings per share improved by 9,56 cents per share from
a loss of 3,05 cents per share to a profit of 6,51 cents per
share.
The Group’s long-term receivables have increased due, in part, to
the inclusion of amounts due from the disposed colleges business,
and the funding of the roll-out of products and services that
support the wellness and benefits programmes offered to the
Group’s contractors. The Group’s trade receivables decreased by
R12,0 million from R106,6 million to R94,6 million with Days Sales
Outstanding (“DSO”) reducing from 51 days to 47 days. Trade
payables decreased by R13,3 million from R43,8 million to R30,5
million. Financial liabilities and bank borrowings have, in
aggregate, decreased from R55,6 million to R49,1 million. Cash
flows from operating activities showed a positive turnaround of
R9,7 million. Net asset value improved by 9% from 76 cents per
share to 83 cents per share.
HUMAN CAPITAL OUTSOURCING
Revenue for the segment decreased by 6% from R642,6 million to
R605,9 million, with operating profit increasing by 13% from R22,5
million to R25,3 million. EBITDA increased by 14% from R23,6
million to R27,1 million. The DSO showed an improvement from 46
days to 42 days. The division continues to focus on working
capital management, margin improvement and operating efficiencies.
Further investment in systems is being made so as to ensure that
the Group’s staff outsourcing businesses are optimally aligned to
impending labour law changes. This will enhance Primeserv’s
position as a provider of integrated HR services within South
Africa.
HUMAN CAPITAL DEVELOPMENT
The segment’s revenue increased by 9% from R30,2 million to R32,9
million, excluding the discontinued operations. The segment
recorded a decrease in its overall operating loss from R7,9
million to R1,4 million. The discontinued colleges business
incurred a loss of R2,0 million compared to a loss of R5,8 million
in the prior year. Continuing operations within the segment
recorded a better performance delivering an operating profit of
R0,6 million compared to an operating loss of R2,1 million in the
comparable period. EBITDA improved by R2,5 million from a loss of
R1,2 million to a profit of R1,1 million. The DSO has moved out
from 65 days to 143 days, largely due to delays in receipts from
SETA-funded projects, however significant collections were banked
subsequent to the year-end.
TRANSFORMATION/B-BBEE
As part of its ongoing transformation process and in line with B-
BBEE best practice, further initiatives are planned for the year
ahead, particularly, in regard to additional requirements arising
out of proposed amendments to the B-BBEE codes of good practice.
EVENTS AFTER THE REPORTING DATE
Management is not aware of any material events which have occurred
subsequent to the end of March 2014. There has been no material
change in the Group’s contingent liabilities since the year-end.
BASIS OF PREPARATION
The condensed consolidated financial statements are prepared in
accordance with the requirements of the JSE Limited Listings
Requirements for provisional reports and the requirements of the
Companies Act of South Africa. The Listings Requirements require
provisional reports to be prepared in accordance with the
framework concepts and 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 Pronouncements as
issued by Financial Reporting Standards Council and to also, as a
minimum, contain the information required by IAS 34 Interim
Financial Reporting. The accounting policies applied in the
preparation of the condensed consolidated financial statements are
in terms of IFRS and are consistent with those applied in the
previous consolidated annual financial statements. All accounting
standards effective for the 2014 financial year onwards were
applied and did not have a material impact on the Group’s results.
The results were prepared by the Group Financial Director, Mr R
Sack CA(SA).
ADOPTION OF NEW STANDARD – IFRS10: CONSOLIDATED FINANCIAL
STATEMENTS
IFRS 10: Consolidated Financial Statements, was issued in August
2012 and replaces the guidance on control and consolidation in IAS
27: Consolidated and Separate Financial Statements, and SIC 12:
Consolidation – Special Purpose Entities. The Group concluded a B-
BBEE transaction in January 2005 whereby Bathusi Staffing Services
Proprietary Limited ("Bathusi") was deconsolidated and thereafter
accounted for as an associate company, in which the Group held 45%
of the equity with the balance held by a number of B-BBEE
shareholders. The Group has determined that while it did not have
control over the Company in terms of the principles of IAS 27, it
does have control over the entity in terms of IFRS 10 given that
the Group is able to control the activities of the Company and to
earn variable returns. Consequently, Bathusi has been consolidated
in the financial results of the Group.
REVIEW OPINION
These condensed consolidated financial statements for the year
ended 31 March 2014 have been reviewed by Baker Tilly SVG, who
expressed an unmodified review conclusion. A copy of the auditor’s
review report is available for inspection at the Company’s
registered office together with the financial statements
identified in the auditor’s report. Any reference to future
financial performance included in this announcement, has not been
reviewed nor reported on by the auditors.
Dividend
No final dividend is proposed for the year under review. The Group
will consider the resumption of dividend payments at the close of
its next reporting period.
OUTLOOK
The outlook for economic growth in South Africa remains weak.
Industrial action and high unemployment levels continue to be of
concern. Nevertheless, the Group continues to pursue further
growth opportunities, both in regard to scaling up its existing
operations by virtue of organic growth and acquisition, as well as
through its diversification into other areas of synergistic
business.
On behalf of the Board
JM Judin M Abel
Independent Non-Executive Chairman Chief Executive Officer
R Sack
Financial Director
20 June 2014
Johannesburg
(“Primeserv” or “the Group” or “the Company”)
Incorporated in the Republic of South Africa
Registration number: 1997/013448/06
Share code: PMV
ISIN: ZAE000039277
www.primeserv.co.za
e-mail: productivity@primeserv.co.za
Directors: JM Judin# (Chairman), M Abel (Chief Executive Officer),
Prof S Klein# (American), LM Maisela*,
DL Rose#, R Sack (Financial Director), DC Seaton, CS Shiceka#
# Independent Non-Executive * Non-Executive
Company secretary: ER Goodman Secretarial Services cc (represented
by E Goodman)
Registered address: 25 Rudd Road, Illovo, 2196
(PO Box 3008, Saxonwold, 2132)
Transfer secretaries: Computershare Investor Services (Pty) Ltd,
70 Marshall Street, Johannesburg, 2001
(PO Box 61051, Marshalltown, 2107)
Auditors: Baker Tilly SVG, Third Floor, 3 Melrose Boulevard,
Melrose Arch, 2076 (PO Box 355, Melrose Arch, 2076)
Sponsor: Deloitte & Touche Sponsor Services (Pty) Ltd, The
Woodlands, Woodlands Drive, Woodmead, 2196
(Private Bag X6, Gallo Manor, 2052)
www.primeserv.co.za
Date: 20/06/2014 04:40:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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