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CSG HOLDINGS LIMITED - Reviewed Provisional Condensed Consolidated Results for the year ended 31 March 2015 and Dividend Declaration

Release Date: 01/06/2015 08:30
Code(s): CSG     PDF:  
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Reviewed Provisional Condensed Consolidated Results for the year ended 31 March 2015 and Dividend Declaration

CSG 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")

REVIEWED PROVISIONAL CONDENSED CONSOLIDATED RESULTS
FOR THE YEAR ENDED 31 MARCH 2015 AND DIVIDEND DECLARATION

HIGHLIGHTS

- Revenue increased by 21% to R1,29 billion, compared to R1,06 billion
  for the thirteen months ended March 2014 
- Profit after tax increased by 45% to R83,77 million
- HEPS increased by 11% to 17,76 cents
- Increase in cash resources of R54,84 million
- Dividend declared increased by 12% to 4,48 cents per share

FINANCIAL PERFORMANCE
The Group, comprising workforce management,
facility management and mining, plant and
construction and support services, realised steady
growth in revenues and earnings during the year
ended 31 March 2015. Headline earnings per
share of 17,76 cents per share, represents an
increase of 11% compared to the comparative
period in 2014.

Workforce Management
The Workforce Management division's revenue
increased by 26% to R741,48 million contributing
R66,88 million to the operating profit of the
Group. The increase is due to the inclusion of M&S
Projects for the full year compared to only four
months in 2014, the inclusion of ConinghamLee
for five months and increased trading in the BDM
companies from new clients. The uncertainties
surrounding the potential effect of changes to
labour legislation on temporary employment
remain a risk area. Management has adapted its
business model to accommodate the changes.

Facility Management
The Facility Management division's revenue
increased by 21% to R451,85 million contributing
R41,41 million to operating profit of the Group.
The growing demand for facility management
services in various African countries added
significantly to this division's profit in the first part
of the year, as margins in these remotes areas are
significantly higher than those in the South African
market. Two significant contracts came to a close
during the second half of the year. Revenue from
our South African catering and cleaning services
has seen healthy growth with a number of new
contracts commencing during the latter part of the
year, the full impact which was diluted by the start-
up costs. The additional 49% interest acquired
in SSS (refer note 4.1) resulted in an increase in
earnings attributable to equity shareholders of the
Company.

Mining, Plant and Construction Support Services
Operating profit increased to R20,78 million,
despite a decrease in revenue. The increase in
operating profit is due to the inclusion of Safety
Adherence Technology for the full year compared
to only four months in 2014, and the effect of cost
cutting measures. Management continues to look
actively to further expand this division, with the
focus on non capital intensive services.

PROVISIONAL CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
                                                                                Year        Thirteen
                                                                               ended    months ended
                                                                            31 March        31 March
                                                                                2015            2014
                                                                            Reviewed         Audited
                                                                  Notes        R'000           R'000
Revenue                                                                    1 286 659       1 059 876
Cost of sales                                                            (1 051 829)       (853 163)
Gross profit                                                                 234 830         206 713
Net operating expenses                                                     (122 384)       (119 324)
Operating profit                                                             112 446          87 389
Profit/(loss) on sale of property, plant and equipment                         1 308           (378)
Gain on bargain purchase                                            4.3          278             468
Contingent payment relating to business acquisition                                –         (3 360)
Investment income                                                              3 549             676
Finance cost                                                                 (3 086)         (2 579)
Income from equity accounted investments                                         508               –
Profit before taxation                                                       115 003          82 216
Taxation                                                                    (31 237)        (24 291)
Profit for the period                                                         83 766          57 925
Other comprehensive income                                                        41           (681)
Total comprehensive income                                                    83 807          57 244
Profit for the period attributable to:
Owners of the parent                                                          73 549          38 548
Non-controlling interest                                                      10 217          19 377
                                                                              83 766          57 925
Other comprehensive income attributable to:
Owners of the parent                                                           (297)           (281)
Non-controlling interest                                                         338           (400)
                                                                                  41           (681)
Weighted average shares in issue                         ('000)              409 746         238 427
Diluted weighted average shares in issue                 ('000)              415 029         240 963
Earnings per share
Basic earnings per share                                 (cents)               17,95           16,17
Diluted earnings per share                               (cents)               17,72           16,00
Dividend per share                                       (cents)                4,48            4,00
Headline earnings reconciliation
Attributable earnings                                                         73 549          38 548
(Profit)/loss on sale of property,
   plant and equipment (after taxation)                                        (942)             127
Goodwill impairment                                                4.3           440               –
Gain on bargain purchase                                           4.3         (278)           (468)
Headline earnings                                                             72 769          38 207
Headline earnings per share
Basic headline earnings per share                        (cents)               17,76           16,02
Diluted headline earnings per share                      (cents)               17,53           15,86

PROVISIONAL CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
                                                                            31 March        31 March
                                                                                2015            2014
                                                                            Reviewed         Audited
                                                                    Notes      R'000           R'000
ASSETS
Non-current assets                                                           162 093         129 365
Property, plant and equipment                                                 28 912          22 516
Intangible assets                                                                803               –
Goodwill                                                              4.2    127 462          93 597
Investment in and loans to joint ventures                             4.3          –           9 644
Deferred taxation                                                              4 619           3 608
Loans to related parties                                                         297               –
Current assets                                                               304 477         248 966
Inventories                                                                    6 343           6 709
Current income tax receivable                                                  1 429             119
Loans to related parties                                                         352               –
Trade and other receivables                                                  208 244         206 890
Bank and call deposits                                                        88 109          35 248

Total assets                                                                 466 570         378 331
EQUITY AND LIABILITIES
Capital and reserves                                                         317 313         261 481
Stated capital                                                        4.1    187 591         130 353
Treasury shares                                                         5    (1 395)               –
Share-based payment reserve                                                      385               –
Retained earnings                                                            117 979         108 140
Foreign currency translation reserve                                           (579)           (281)
Non-controlling interest                                              4.1     13 332          23 269
Non-current liabilities                                                       25 044           8 860
Interest-bearing liabilities                                          4.2     24 992           7 337
Loans from related parties                                                         –           1 523
Deferred taxation                                                                 52               –
Current liabilities                                                          124 213         107 990
Current portion of interest-bearing liabilities                               11 210           5 011
Current portion of loans from related parties                                    676               –
Bank overdrafts and invoice discounting                                        6 246           8 221
Trade and other payables                                                      99 940          84 160
Current income tax payable                                                     6 141          10 598

Total equity and liabilities                                                 466 570         378 331
Shares in issue                                            ('000)            417 010         387 954
Net asset value per share                                  (cents)              76,1            67,4
Net tangible asset value per share                         (cents)              45,3            43,3

PROVISIONAL CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
                                                                                Year        Thirteen
                                                                               ended    months ended
                                                                            31 March        31 March
                                                                                2015            2014
                                                                            Reviewed         Audited
                                                                   Notes       R'000           R'000
Cash flow from operations                                                     87 563          43 600
Cash generated by operations                                                 126 709          68 823
Investment income                                                              3 549             676
Finance cost                                                                 (3 086)         (2 579)
Taxation paid                                                               (39 609)        (23 320)
Cash flow from investing activities                                         (34 185)        (17 750)
Net investment in property, plant and equipment                              (9 230)        (10 924)
Net investment in intangible assets                                            (876)               –
Cash purchase consideration made relating to SSS acquisition         4.1     (4 000)               –
Acquisition of subsidiaries                                     4.2, 4.3    (24 500)               –
Net cash acquired through business combinations                 4.2, 4.3       4 421         (1 113)
Business combination transaction costs                                             –         (2 353)
Contingent consideration paid                                                      –         (3 360)
Cash flow from financing activities                                            1 458        (17 564)
Dividends paid                                                              (22 965)        (11 390)
Movement in interest-bearing liabilities and related party loans              24 423         (6 174)
Increase in cash resources                                                    54 836           8 286
Cash resources at beginning of period                                         27 027          18 741
Cash resources at end of period                                               81 863          27 027
Cash resources                                                                81 863          27 027
Bank and call deposits                                                        88 109          35 248
Bank overdraft and invoice discounting                                       (6 246)         (8 221)

PROVISIONAL CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
                                                                  Total
                                                        attributable to          Non-
                                                         equity holders   controlling
                                                          of the parent      interest   Total equity
                                                 Notes            R'000         R'000          R'000
Equity at 1 March 2013 (Audited)                                 59 473        25 640         85 113
Total comprehensive income
  for the thirteen months                                        38 267        18 977         57 244
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 March 2014 (Audited)                               238 212        23 269        261 481
Total comprehensive income for the year                          73 252        10 555         83 807
Dividend paid                                                  (15 518)       (7 447)       (22 965)
Share-based payment reserve                                         385             –            385
Treasury shares                                                 (1 395)             –        (1 395)
Additional SSS acquisition                                        9 045      (13 045)        (4 000)
Shares purchased from non-controlling interest     4.1         (48 193)      (13 045)       (61 238)
Shares issued as part of business combination      4.1           57 238             –         57 238
Equity at 31 March 2015 (Reviewed)                              303 981        13 332        317 313

SEGMENT REPORTING
                                                                                 Year       Thirteen
                                                                                ended   months ended
                                                                             31 March       31 March
                                                                                 2015           2014
                                                                             Reviewed        Audited
                                                                                R'000          R'000
Revenue
Workforce management                                                          741 475        589 508
Facility management                                                           451 846        372 043
Mining, plant and construction support services                                93 338         98 325
Total Group                                                                 1 286 659      1 059 876
Operating profit                                                              112 446         87 389
Workforce management                                                           66 880         23 944
Facility management                                                            41 413         48 111
Mining, plant and construction support services                                20 782         16 343
Head office                                                                  (16 629)        (1 009)
Profit before taxation                                                        115 003         82 216
Workforce management                                                           68 494         21 404
Facility management                                                            41 770         45 229
Mining, plant and construction support services                                20 399         16 121
Head office                                                                  (15 660)          (538)

NOTES TO THE PROVISIONAL CONDENSED CONSOLIDATED FINANCIAL RESULTS

1.  NATURE OF OPERATIONS
    CSG is a holding company incorporated and domiciled in South Africa. The main business is
    to provide outsourced personnel services, including recruitment and specialised staffing, facilities
    management which includes contract catering, cleaning and food services, and outsources
    industrial and mining support services to a range of clients.

2.  COMPARATIVE INFORMATION
    As previously communicated, the merger with BDM Holdings (Pty) Ltd ("BDM") concluded on
    27 November 2013, resulted in a reverse listing of BDM via the acquisition by CSG as the
    shareholders of BDM became the majority shareholders.

    As a result the comparative information represents the continuation of the BDM group and therefore
    the condensed consolidated statement of comprehensive income and statement of cash flows
    for the year ended 31 March 2014 represent nine months of BDM trading (March 2013 to
    November 2013) and four months of the combined Group trading (December 2013 to March
    2014).

3.  BASIS OF PREPARATION
    These condensed consolidated results for the year ended 31 March 2015 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
    Practices 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 the Group CFO,
    Mr WE Scott CA(SA).

4.  BUSINESS COMBINATIONS
4.1 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 amounted to R61,24 million being R48,29 million for 49%
    interest in SSS (SA) and R12,95 million for 49% in SSS Mozambique. The purchase consideration
    was settled through a cash payment of R4 million and the balance on 5 December 2014 by the
    issue of 29 055 042 new CSG shares at a VWAP of 197 cents.

    As CSG already controlled SSS at the date of acquiring the additional interest, the transaction for
    the 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.

4.2 ConinghamLee
    As communicated to shareholders in the SENS announcement dated 27 October 2014, the
    Company acquired 100% of the issued ordinary share capital of ConinghamLee, effective
    1 November 2014. 

    The purchase consideration payable by CSG in terms of the acquisition was an initial amount of
    R24 million, which may be increased by a maximum amount of R11 million based on the financial
    performance of ConinghamLee for the 12-month period immediately following the effective date
    of the acquisition (Performance Guarantee Period).

    The initial amount due of R24 million was settled on 4 November 2014 utilising a Nedbank term
    funding facility bearing interest at prime rate and repayable over five years.

    This company is included in the Workforce Management Division.

    The transaction was accounted for in terms of IFRS 3 Business Combinations.
    
                                                  at 31 October
                                                           2014
    Recognised amounts of identifiable net assets         R'000
    Non-current assets                                      124
    Property, plant and equipment                           124
    Current assets                                        4 962
    Bank and Cash                                         2 001
    Trade and other receivables                           2 961
    Non-current liabilities                                  31
    Deferred tax liabilities                                 31
    Current liabilities                                   3 919
    Taxation payable                                      1 001
    Trade and other payables                              2 918
    
    Identifiable net assets                               1 136
    Purchase consideration*                              35 000
    Goodwill on acquisition                              33 864
    Cash flow information
    Bank balance acquired                                 2 001

   *Based on the projected profits for the Performance Guarantee Period an accrual for the full
    contingent consideration has been taken into account in calculating goodwill on date of
    acquisition.

    The company was acquired for diversification and to gain access to a specific market in the labour
    segment. The Board is of the view that for this reason the excess on the purchase price relates to
    synergies and has therefore been accounted for as goodwill.

    Since the acquisition date, ConinghamLee has contributed R8,08 million to Group revenue and
    R2,92 million to Group profit. If the acquisition had occured on 1 April 2014, the group revenue
    would have been R1,30 billion and Group profit for the period would have been R88,93 million.

4.3 Umdeni Safety Solutions, Umdeni Maintenance Services and Africa Sun Procurement
    Based on the respective sale of shares agreements, a further equity interest was purchased in the
    following joint ventures resulting in these entities becoming subsidiaries of CSG during the year:

    Umdeni Safety Solutions (previously a 49% joint venture)

    On 30 September 2014 the Group acquired an additional 46% equity interest for an initial
    amount of R400 000. On 31 March 2015 the remaining 5% was obtained for no consideration.

    The company holds an investment property in Rustenburg. The company has an insignificant net
    asset value and therefore the goodwill that arose on acquisition date was immediately impaired.
    This company is included in the Head Office Division.

    Umdeni Maintenance Services (previously a 49% joint venture)

    On 31 March 2015 the Group acquired an additional 51% equity interest for an initial amount
    of R100 000. This company is included in the Workforce Management Division.

    Africa Sun Procurement (Pty) Ltd (previously a 50% joint venture)

    On 31 March 2015 the Group acquired an additional 50% equity interest for R100.

    The company has an insignificant net asset value and therefore the goodwill that arose on
    acquisition date was immediately impaired. This company is included in the Workforce
    Management Division.

    The transactions was accounted for in terms of IFRS 3 Business Combinations and the fair value of
    the investments in joint ventures was considered part of the cost of acquisition.
    
                                                        Umdeni         Umdeni
                                                        Safety    Maintenance      Africa Sun
                                                     Solutions       Services     Procurement
                                               at 30 September    at 31 March     at 31 March
                                                          2014           2015            2015
    Recognised amounts of identifiable net assets        R'000          R'000           R'000
    Non-current assets                                   3 043            111              40
    Property, plant and equipment                        3 043              –               –
    Loans to related parties                                 –              –              40
    Deferred tax assets                                      –            111               –
    Current assets                                         278          5 671              15
    Bank and cash                                          276          2 129              15
    Taxation receivable                                      –              3               –
    Trade and other receivables                              2          3 539               –
    Non-current liabilities                              2 590          4 158               –
    Loans from related parties                           2 590          4 158               –
    Current liabilities                                    731            883              41
    Taxation payable                                       731              –               –
    Trade and other payables                                 –            883              41
    
    Identifiable net assets                                  –            741              14
    Purchase consideration                                 400            100               –
    Fair value of investment in joint ventures               –            363              54
    Goodwill on acquisition/
    (gain on bargain purchase)                             400          (278)              40
    The impairment on goodwill has been
    accounted for in operating expenses
    Cash flow information
    Bank balance acquired                                  276          2 129              15

    If the acquisition had occurred on 1 April 2014, the group revenue would have been R1,30 billion
    and group profit for the period would have been R84,22 million.

5.  TREASURY SHARES
    Treasury shares relate to the purchase of shares by the CSG Share Incentive Trust ("Trust") to fulfil
    its obligation in terms of share option schemes.

6.  DIVIDEND POLICY AND DECLARATION
    The Board, after specifically looking at the capital structuring level, approved the company's
    dividend policy. This policy is based on a dividend cover range of between three and four and
    accordingly a dividend of 4,48 cents per share is declared.

    The Board will continue to review the dividend cover at each declaration date.

7.  CAPITAL COMMITMENTS AND CONTINGENCIES
    The Group had no significant outstanding capital commitments or contingencies as at 31 March
    2015.

8.  CHANGES TO THE BOARD OF DIRECTORS
    On 13 March 2015 Willie Scott was appoined as CFO effective 31 March 2015 after
    the resignation of Liezel Grobler. On 25 May 2015 Mathukana Mokoka was appointed as
    independent, non-executive director after the resignation of Judy Malan on 12 March 2015.

9.  EVENTS AFTER THE REPORTING PERIOD
    The directors are not aware of any material event which occurred after the reporting date and up
    to the date of this report.

10. GOING CONCERN
    The financial information has been prepared on a going-concern basis.

11. REVIEW OPINION
    The provisional financial results have been reviewed by the Company's auditors, Grant Thornton,
    who have expressed an unmodified review conclusion on the results. A copy of their review report
    is available for inspection at the Company's registered office.

For and on behalf of the Board

BT Ngcuka                 PJJ Dry
(Chairman)                (Chief Executive)

1 June 2015

NOTICE OF FINAL CASH DIVIDEND
At its Board meeting on 28 May 2015, the
directors approved a gross final cash dividend of
4,48 cents per share on the ordinary shares from
profits accrued during the year ended 31 March
2015. The dividend has been declared from
income reserves.

The dividend will be subject to a dividend
withholding tax of 15% for all shareholders
who are not exempt from or do not qualify
for a reduced rate of withholding tax. The net
dividend payable to shareholders subject to
withholding tax at a rate of 15% amounts to
3,808 cents per share.

The issued share capital at the declaration date is
417 009 586 ordinary shares.

The Company's tax reference number is
9159246165.

The salient dates are as follows:

- Date of declaration Monday, 1 June 2015
- Last day for trading to qualify and participate
  in the final dividend (and change of address
  or dividend instructions) Friday, 19 June 2015
- Trading ex dividend commences Monday,
  22 June 2015
- Record date Friday, 26 June 2015
- Dividend payment date Monday,
  29 June 2015

Share certificates may not be dematerialised or
rematerialised between Monday, 22 June 2015
and Friday, 26 June 2015, both days inclusive.

By order of the Board

MN Hattingh
Company Secretary
1 June 2015

DIRECTORS
BT Ngcuka* (Chairman);
PJJ Dry (CEO); JG Nieuwoudt (COO);
SL Grobler (CFO) – resigned 31 March 2015;
WE Scott (CFO) – appointed 31 March 2015;
NG Thiart; J Malan – resigned 12 March 2015*#;
M Mokoka – appointed 25 May 2015*#;
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 (Pty) Ltd
13th Floor, Rennie House
19 Ameshoff Street, Braamfontein
(PO Box 4844, Johannesburg 2001)

DESIGNATED ADVISOR
Sasfin Capital (a division of Sasfin Bank Limited)

Date: 01/06/2015 08:30:00 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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