Wrap Text
Interim results for the 6 months ended 30 September 2014
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 30 SEPTEMBER 2014
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
13 months
Six months ended ended
30 Sep 31 Dec 31 March
2014 2013 2014
Unaudited Unaudited Audited
R'000 R'000 R'000
Revenue 672 761 424 528 1 059 876
Cost of sales (553 569) (358 273) (853 163)
Gross profit 119 192 66 255 206 713
Net operating expenses (60 686) (26 244) (119 324)
Operating profit 58 506 40 011 87 389
Profit/(loss) on sale of property,
plant and equipment 405 (136) (378)
Gain on bargain purchase – – 468
Fair value adjustment on
contingent payment – – (3 360)
Interest received 1 248 85 676
Interest paid (977) (1 436) (2 579)
Income from equity accounted investments 177 – –
Profit before taxation 59 359 38 524 82 216
Taxation (16 166) (11 201) (24 291)
Profit for the period 43 193 27 323 57 925
Other comprehensive income (107) – (681)
Total comprehensive income 43 086 27 323 57 244
Profit for the period attributable to:
Owners of the parent 35 399 15 854 38 548
Non-controlling interest 7 794 11 470 19 377
43 193 27 323 57 925
Other comprehensive income
attributable to:
Owners of the parent 52 – (281)
Non-controlling interest (159) – (400)
(107) – (681)
Weighted average shares in issue ('000) 402 482 200 605 238 427
Diluted weighted average
shares in issue ('000) 407 840 200 605 240 963
Earnings per share
Basic earnings per share (cents) 8,80 7,90 16,17
Diluted earnings per share (cents) 8,68 7,90 16,00
Headline earnings reconciliation
Attributable earnings 35 399 15 854 38 548
Profit)/loss on sale of property,
plant and equipment (after taxation) (291) 83 127
Gain on bargain purchase – – (468)
Headline earnings 35 107 15 937 38 207
Headline earnings per share
Basic headline earnings per share (cents) 8,72 7,94 16,02
Diluted headline earnings per share (cents) 8,61 7,94 15,86
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
30 Sep 31 Dec 31 March
2014 2013 2014
Unaudited Unaudited Audited
R'000 R'000 R'000
ASSETS
Non-current assets 128 677 133 237 129 365
Property, plant and equipment 22 326 22 070 22 516
Goodwill 93 597 98 073 93 597
Investment in and loans to joint ventures 7 920 13 095 9 644
Deferred taxation 4 020 – 3 608
Loans to related parties 814 – –
Current assets 310 074 246 678 248 966
Inventories 9 138 6 005 6 709
Current income tax receivable 353 – 119
Trade and other receivables 220 473 233 855 206 890
Bank and call deposits 80 110 6 818 35 248
Total assets 438 750 379 915 378 331
EQUITY AND LIABILITIES
Capital and reserves 277 602 246 548 261 481
Stated capital 130 353 130 353 130 353
Vendor shares 57 238 – –
Retained earnings 79 827 97 955 108 140
Foreign currency translation reserve (229) – (281)
Non-controlling interest 10 413 18 240 23 269
Non-current liabilities 7 343 6 368 8 860
Interest-bearing liabilities 6 007 5 885 7 337
Loans from related parties 1 314 – 1 523
Deferred taxation 23 483 –
Current liabilities 153 805 126 999 107 990
Current portion of interest-bearing
liabilities 6 140 4 386 5 011
Other financial liabilities – 13 845 –
Bank overdrafts and invoice discounting 17 015 – 8 221
Trade and other payables 115 168 101 488 84 160
Current income tax payable 15 481 7 280 10 598
Total equity and liabilities 438 750 379 915 378 331
Shares in issue ('000) 417 010 387 954 387 954
Net asset value per share (cents) 66,6 63,6 67,4
Net tangible asset value per share (cents) 44,1 38,3 43,3
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
13 months
Six months ended ended
30 Sept 31 Dec 31 March
2014 2013 2014
Unaudited Unaudited Audited
R'000 R'000 R'000
Cash flow from operations 50 588 (6 723) 43 600
Cash generated by operations 62 223 8 568 68 823
Interest received 1 248 85 676
Interest paid (977) (1 436) (2 579)
Taxation paid (11 906) (13 939) (23 320)
Cash flow from investing activities (7 771) (5 358) (17 750)
Cash purchase consideration
made relating to SSS acquisition (4 000) – –
Net investment in property,
plant and equipment (3 771) (3 436) (10 924)
Cash flow from business combination – (1 922) (1 113)
Business combination transaction costs – – (2 353)
Contingent consideration paid – – (3 360)
Cash flow from financing activities (6 749) (10 925) (17 564)
Dividends paid (7 427) (10 700) (11 390)
Movement in loans 678 (225) (6 174)
Increase in cash resources 36 068 (23 006) 8 286
Cash resources at beginning of period 27 027 29 824 18 741
Cash resources at end of period 63 095 6 818 27 027
Cash resources 63 095 6 818 27 027
Bank and call deposits 80 110 6 818 35 248
Bank overdraft and invoice discounting (17 015) – (8 221)
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Total
attributable
to equity Non-
holders of controlling
the parent interest Total equity
R'000 R'000 R'000
Equity at 1 March 2013 (Audited) 59 473 25 640 85 113
Total comprehensive income for the year 28 363 13 948 42 311
Shares purchased from
non-controlling interest 19 445 (19 283) 162
Shares issued as part of
business combination 130 353 – 130 353
Dividend paid (9 326) (2 065) (11 391)
Equity at 31 December 2013 (Unaudited) 228 308 18 240 246 548
Total comprehensive income
for the period 9 904 5 029 14 933
Equity at 31 March 2014 (Audited) 238 212 23 269 261 481
Total comprehensive income
for the period 35 450 7 636 43 086
Dividend paid (15 518) (7 447) (22 965)
Additional SSS acquisition 9 045 (13 045) (4 000)
Shares purchased from
non-controlling interest (48 193) (13 045) (61 238)
Vendor shares to be issued 57 238 – 57 238
Equity at 30 September 2014
(Unaudited) 267 189 10 413 277 602
SEGMENT REPORTING
13 months
Six months ended ended
30 Sep 31 Dec 31 March
2014 2013 2014
Unaudited Unaudited Audited
R'000 R'000 R'000
Revenue
Workforce management 400 295 205 836 585 551
Total revenue 400 295 206 138 589 508
Internal – (302) (3 957)
Facility management 225 963 173 631 372 043
Mining, plant and construction support 46 463 45 060 98 325
Head office 40 – –
Total Group 672 761 424 528 1 059 876
Operating profit 58 506 40 011 87 389
Workforce management 29 204 10 022 23 944
Facility management 25 320 24 176 48 111
Mining, plant and construction support 10 778 5 881 16 343
Head office (6 796) (67) (1 009)
Profit before taxation 59 359 38 524 82 216
Workforce management 29 734 9 446 21 404
Facility management 25 561 23 511 45 229
Mining, plant and construction support 10 510 5 633 16 121
Head office (6 446) (67) (538)
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL RESULTS
INTRODUCTION
As previously communicated the merger with BDM Holdings Proprietary Limited ("BDM")
was concluded on 27 November 2013, which resulted in a reverse listing of BDM via the
acquisition by CSG as the shareholders of BDM became the majority shareholders.
As such the comparative information represents the continuation of the BDM group 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).
BASIS OF PREPARATION
These condensed consolidated results for the six months ended 30 September 2014 have
been presented in accordance with the framework concepts and the measurement and
recognition requirements of International Financial Reporting Standards ("IFRS"), the information
required by IAS 34 – Interim Financial Reporting, the SAICA Financial Reporting Guides as
issued by the Accounting Practises Committee and Financial Reporting Pronouncements as
issued by the Financial Reporting Standards Council, the requirements of the South African
Companies Act No 71 of 2008, and the JSE Limited Listings Requirements.
The results have been prepared in accordance with the accounting policies of the
Company that are in terms of IFRS and that are consistent with the accounting policies
of the previous financial period. These results were prepared under the supervision of
Mr WE Scott CA(SA).
ADDITIONAL 49% INTEREST ACQUIRED IN SIGNIFICANT SITE SERVICES
As detailed in the SENS announcements dated 23 June 2014 and 25 July 2014 respectively,
the Group acquired a further 49% interest in Significant Site Services Proprietary Limited
("SSS (SA)") and Significant Site Services Mozambique Limitada ("SSS Mozambique"),
effective 1 July 2014. The aggregate purchase consideration for the acquisition amounts to
R61,24 million being R48,29 million for a further 49% interest in SSS (SA) and R12,95 million
for a further 49% in SSS Mozambique. The purchase consideration has been settled through a
cash payment of R4 million and the remainder will be settled by the issue of 29 055 042 new
CSG shares at a VWAP of 197 cents (currently disclosed as vendor shares).
As control already existed at date of acquisition the transaction for the additional 49% interest
is not accounted for as a business combination in terms of IFRS 3 and the excess above SSS's
additional net asset value of R13,05 million, being R48,19 million, was accounted for against
retained earnings.
FINANCIAL PERFORMANCE
The Group realised steady growth in revenues and earnings during the six months ended
30 September 2014. Earnings per share is 8,80 cents per share, representing an
increase of 11,39% compared to the earnings per share of the comparative period
ending 31 December 2013 and compares favourable to the earnings per share for the
13 months ended 31 March 2014 of 16,17 cents per share when annualised.
WORKFORCE MANAGEMENT
The Workforce Management division's revenue was R400,30 million for the six months
ended 30 September 2014 contributing R29,20 million to the operating profit of the
Group. The increase in revenue is mainly due to the inclusion of M&S Projects for the full
six months compared to only one month included in the comparative period ending
31 December 2013. The slowdown in the South Arican economy resulting in staff reductions in
various industries, continuing strikes experienced in the mining, metal and engineering industry
and uncertainties surrounding the potential effect of changes to labour legislation on temporary
employment remains high risk areas directly impacting the growth of this division and a main
reason for the lower than expected growth for the six month period.
FACILITY MANAGEMENT
The Facility Management division's revenue was R225,96 million for the six months ended
30 September 2014 with a contribution of R25,32 million to operating profit of the Group.
The growing demand for facility management services in various African countries contribute
significantly to this divisions profit, as margins in these remote areas are significantly higher
than margins obtained in the South African market. Revenue in the South African catering
and cleaning services has also seen a healthy growth trend with a number of new contracts
commencing during the six month period. The full potential of these new contracts were
unfortunately masked by the initial opening costs during the current period.The additional 49%
interest acquired in SSS was only effective as of July 2014 and therefore only resulted in an
increase in earnings attributable to equity shareholders of the Company for the three months
July 2014 to September 2014.
MINING, PLANT AND CONSTRUCTION SUPPORT SERVICES
This division's revenue was R46,46 million for the six months ended 30 September 2014
contributing R10,78 million to operating profit. Management continues to actively look to
further expand services within this division, with the focus on providing non capital intensive
services. However due to the mining industry being capital intensive rapid growth in certain
instances was not experienced as expected.
DIVIDEND DECLARATION
A dividend of 4 cents per share was declared to the shareholders for the period ended
31 March 2014 on 17 October 2014.
The current practice is for the Board to consider annually whether to return excess cash to
shareholders by way of a dividend. The Board will consider and align its future dividend policy
to coincide with the new financial year-end.
CAPITAL COMMITMENTS AND CONTINGENCIES
The Group had no significant outstanding capital commitments or contingencies as at
30 September 2014.
EVENTS AFTER THE REPORTING PERIOD
As communicated to shareholders in the SENS announcement dated 27 October 2014, the
Company has entered into a sale of shares agreement with Tamin Coningham, sole member
of ConinghamLee and Associates CC ("ConinghamLee"). In terms of the agreement, CSG
acquired 100% of the issued ordinary share capital of ConinghamLee on 1 November 2014.
ConinghamLee was successfully converted from a close corporation to a private company
on 31 October 2014 and all conditions precedent to the acquisition were fulfilled on
31 October 2014 making the effective date of the transaction 1 November 2014.
The purchase consideration payable by CSG in terms of the acquisition will be an initial amount
of R24 million (Initial Amount), which may be increased by a maximum amount of R11 million
(Performance Guarantee Amount) based on the financial performance of ConinghamLee for
the 12-month period immediately following the effective date of the acquisition (Performance
Guarantee Period).
Payment of the initial amount was made on 4 November 2014 utilising a term funding facility
with Nedbank bearing interest at prime rate and repayable over five years.
The transaction will be accounted for in terms of IFRS 3 Business Combinations.
The information provided below is based on provisional results of ConinghamLee as at
30 September 2014.
RECOGNISED AMOUNTS OF IDENTIFIABLE NET ASSETS
at 30 September 2014 R'000
Non-current assets 356
Property, plant and equipment 356
Current assets 7 164
Bank and cash 4 245
Trade and other receivables 2 919
Non-current liabilities 22
Deferred tax liabilities 22
Current liabilities 7 140
Taxation payable 3 130
Trade and other payables 4 011
Identifiable net assets 357
Purchase consideration* 35 000
Intangible asset on acquisition 34 643
CASH FLOW INFORMATION
Bank balance acquired 4 245
*Maximum purchase consideration
A full purchase price allocation will be performed within twelve months as allowed by IFRS 3.
The pro forma financial effects of this acquisition on CSG's basic earnings per share ("EPS"),
headline earnings per share ("HEPS"), fully diluted EPS, fully diluted HEPS, net asset value per share
("NAVPS") and net tangible asset value per share ("NTAVPS") was set out in detail in the SENS
announcement dated 27 October 2014.
GOING CONCERN
The financial information has been prepared on a going-concern basis.
Any reference to the Group's financial performance contained in this announcement has not
been reviewed or reported on by the Group's auditors.
For and on behalf of the Board
BT Ngcuka PJJ Dry
Chairman Chief Executive
18 November 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, Lyttelton Manor, Centurion 0157
TRANSFER SECRETARIES
Link Market Services South Africa Proprietary Limited
11 Diagonal Street, Johannesburg 2000; (PO Box 4844, Johannesburg 2001)
DESIGNATED ADVISOR
Sasfin Capital (a division of Sasfin Bank Limited)
Date: 18/11/2014 08:27:00 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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