Wrap Text
Interim results
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”)
Unaudited condensed consolidated interim results for the six
months ended 30 September 2015
Financial performance
The CSG Holdings Group, comprising workforce management,
facility management and mining, plant and construction site
support services, realised a decrease in revenue and operating
profit for the six months ended 30 September 2015.
Headline earnings per share and earnings per share for the six
months ended 30 September 2015 are 9,83 cents and 9,85 cents
respectively, representing a 13% and 12% increase respectively
in comparison to that reported for the six months ended
30 September 2014. This increase is primarily due to the
benefit of the additional 49% interest acquired in Significant
Site Services Proprietary Limited (“SSS”) in July 2014 and the
positive impact of the once-off re-measurement of the
contingent consideration relating to the ConinghamLee
Proprietary Limited (“ConinghamLee”) acquisition of
R10,389 million (see note 4). Notwithstanding this, earnings
were negatively impacted by the changes in legislation on
temporary employment and pressure on commodity prices which
resulted in cost cutting measures from clients during the
period under review.
Divisional review
Workforce Management Division
Revenue decreased by 15% to R311,10 million contributing
R31,75 million to the operating profit of the Group. This
division’s revenue was negatively impacted by the slowdown in
the South African economy together with the pressure in
commodity prices, which resulted in a lesser demand for
temporary employees. The change in the labour legislation on
temporary labour also had an adverse impact but we are
expecting stability to return to the workforce industry as
companies adapt to the changes in the legislation.Operating
profit increased by 9% due to the inclusion of six months of
profits from ConinghamLee for the period ended
30 September 2015 which is not included in the comparative
period. ConinghamLee is a specialist recruitment and
placement business focusing on the banking and financial
services and engineering industries and has higher margins
than the temporary employment services.
Facility Management Division
Revenue decreased by 8% to R207,83 million contributing
R11,21 million to the operating profit of the Group. The
slowdown in infrastructure development on the African
continent mainly due to the pressure on commodity prices
impacted the demand for remote site services in various
African countries. This was the main reason for the decreased
profit when compared to the previous six months, as margins in
2014 achieved in these remote areas were materially higher than
those in the domestic market. Acquiring the minority
shares of Ukweza Holdings Proprietary Limited (“Ukweza”)
effective 1 October 2015, together with the acquisition of
Afriboom Proprietary Limited (“Afriboom”) and the Hi-Tech group
(see note 9) will only result in an increase in earnings
attributable to equity shareholders of the Company in the
second half of the year.
Mining, Plant and Construction Site Support Services Division
This division’s revenue was R64,32 million which represents an
increase of 38% compared to the comparative period and
contributing R13,18 million to the operating profit of the
Group. The increase is mainly due to the performance of Umdeni
Maintenance which provides outsourced services to clients on a
contracting basis. This is in line with the trend in the market
of changing temporary employment contracts to outsource
contracts.
Condensed consolidated statement of comprehensive income
Six months ended
30 Sept Year ended
30 Sept 2014 31 Mar
2015 Unaudited 2015
Unaudited Restated Audited
Notes R’000 R’000 R’000
Revenue 583 246 637 256 1 286 659
Cost of sales (471 478) (518 064) (1 051 829)
Gross profit 111 768 119 192 234 830
Net operating expenses (65 178) (60 686) (122 384)
Operating profit 46 590 58 506 112 446
Profit on sale of
property, plant and
equipment 132 405 1 308
Gain on bargain
purchase – – 278
Re-measurement of
contingent
consideration relating
to business
acquisition 4 10 389 – –
Investment income 1 719 1 248 3 549
Finance cost (1 781) (977) (3 086)
Income from equity
accounted investments – 177 508
Profit before taxation 57 049 59 359 115 003
Taxation (13 267) (16 166) (31 237)
Profit for the period 43 782 43 193 83 766
Other comprehensive
income (416) (107) 41
Total comprehensive
income 43 366 43 086 83 807
Profit for the period
attributable to:
Owners of the parent 41 105 35 399 73 549
Non-controlling
interest 2 677 7 794 10 217
43 782 43 193 83 766
Other comprehensive
income attributable
to:
Owners of the parent (376) 52 (297)
Non-controlling
interest (40) (159) 338
(416) (107) 41
Weighted average
shares in issue (’000) 417 338 402 482 409 746
Diluted weighted
average shares in
issue (’000) 421 232 407 840 415 029
Earnings per share
Basic earnings per
share (cents) 9,85 8,80 17,95
Diluted earnings per
share (cents) 9,76 8,68 17,72
Dividend per share
(cents) – – 4,48
Headline earnings
reconciliation
Attributable earnings 41 105 35 399 73 549
Profit on sale of
property, plant and
equipment (after
taxation) (95) (291) (942)
Goodwill impairment – – 440
Gain on bargain
purchase – – (278)
Headline earnings 41 009 35 107 72 769
Headline earnings
per share
Basic headline
earnings per
share (cents) 9,83 8,72 17,76
Diluted headline
earnings per share
(cents) 9,74 8,61 17,53
Condensed consolidated statement of financial position
30 Sept 30 Sept 31 Mar
2015 2014 2015
Unaudited Unaudited Audited
Notes R’000 R’000 R’000
Assets
Non-current assets 164 762 128 677 162 093
Property, plant and 31 403 22 326 28 912
equipment
Intangible assets 648 – 803
Goodwill 127 462 93 597 127 462
Investment in and
loans to joint
ventures – 7 920 –
Deferred taxation 4 939 4 020 4 619
Loans to related
parties 310 814 297
Current assets 314 640 310 074 304 477
Inventories 8 137 9 138 6 343
Current income tax
receivable 684 353 1 429
Current portion of
loans to related
parties – – 352
Trade and other
receivables 237 613 220 473 208 244
Bank and call deposits 68 206 80 110 88 109
Total assets 479 402 438 750 466 570
Equity and liabilities
Capital and reserves 341 540 277 602 317 313
Stated capital 188 694 130 353 187 591
Vendor shares – 57 238 –
Treasury shares 5 (1 571) – (1 395)
Share based payment
reserve 582 – 385
Retained earnings 140 522 79 827 117 979
Foreign currency
translation reserve (954) (229) (579)
Non-controlling
interest 14 267 10 413 13 332
Non-current
liabilities 22 180 7 344 25 044
Interest bearing
liabilities 22 128 6 007 24 992
Loans from related
parties – 1 314 –
Deferred taxation 52 23 52
Current liabilities 115 682 153 804 124 213
Current portion of
interest bearing
liabilities 9 829 6 140 11 210
Current portion of
loans from related
parties 138 – 676
Bank overdrafts and
invoice discounting 7 770 17 015 6 246
Trade and other
payables 91 934 115 168 99 940
Current income tax
payable 6 011 15 481 6 141
Total equity and
liabilities 479 402 438 750 466 570
Shares in issue (’000) 418 322 417 010 417 010
Net asset value per
share (cents) 81,6 66,6 76,1
Net tangible asset
value per share
(cents) 51,2 44,1 45,3
Condensed consolidated statement of cash flows
Six months ended Year ended
30 Sept 30 Sept 31 Mar
2015 2014 2015
Unaudited Unaudited Audited
Notes R’000 R’000 R’000
Cash flow from
operations 9 373 50 588 88 829
Cash generated by
operations 22 406 62 223 127 976
Investment income 1 719 1 248 3 549
Finance cost (1 781) (977) (3 086)
Taxation paid (12 971) (11 906) (39 610)
Cash flow from
investing activities (6 636) (7 771) (35 017)
Net investment in
property, plant and
equipment (6 636) (3 771) (10 062)
Net investment in
intangible assets – – (876)
Cash purchase
consideration made
relating to SSS
acquisition – (4 000) (4 000)
Net cash acquired
through business
combinations – – (20 079)
Cash flow from
financing activities (24 164) (6 749) 1 024
Dividends paid (20 648) (7 427) (22 965)
Net purchase of
treasury shares 5.1 (176) – (1 395)
Issue of ordinary 5.2 1 103 – –
shares
Movement in interest
bearing liabilities
and related party
loans (4 443) 678 25 384
(Decrease)/increase
in cash resources (21 427) 36 068 54 836
Cash resources at
beginning of period 81 863 27 027 27 027
Cash resources at end
of period 60 436 63 095 81 863
Cash resources 60 436 63 095 81 863
Bank and call deposits 68 206 80 110 88 109
Bank overdraft and
invoice discounting (7 770) (17 015) (6 246)
Condensed consolidated statement of changes in equity
Total attri-
Total
attri-
butable Non-
to equity controlling Total
holders of interest equity
Notes the parent R’000 R’000
Equity at 1 April 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)
Shares issued as part
of business
combination 57 238 – 57 238
Equity at 30 September
2014 (Unaudited) 267 189 10 413 277 602
Total comprehensive
income for the period 37 802 2 919 40 721
Share based payment
reserve 385 – 385
Treasury shares (1 395) – (1 395)
Equity at 31 March
2015 (Audited) 303 981 13 332 317 313
Total comprehensive
income for the period 40 729 2 637 43 366
Dividend paid (18 682) (1 966) (20 648)
Share based payment
reserve 582 – 582
Treasury shares 5.1 (176) – (176)
Ordinary shares issued 5.2 1 103 – 1 103
Sale of shares to non-
controlling interest 8 (264) 264 –
Equity at 30 September
2015 (Unaudited) 327 273 14 267 341 540
Segment reporting
Six months ended
30 Sept Year ended
30 Sept 2014 31 Mar
2015 Unaudited 2015
Unaudited Restated Audited
R’000 R’000 R’000
Revenue
Workforce management 311 097 364 790 741 475
Facility management 207 825 225 963 451 846
Mining, plant and
construction site support
services 64 324 46 463 93 338
Head office – 40 –
Total Group 583 246 637 256 1 286 659
Operating profit 46 590 58 506 112 446
Workforce management 31 748 29 204 66 880
Facility management 11 206 25 320 41 413
Mining, plant and
construction site support
services 13 183 10 778 20 782
Head office (9 547) (6 796) (16 629)
Profit before taxation 57 049 59 359 115 003
Workforce management 41 328 29 734 68 494
Facility management 11 257 25 561 41 770
Mining, plant and
construction site support
services 13 007 10 510 20 399
Head office (8 543) (6 446) (15 660)
Notes to the condensed consolidated interim 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 security,
contract catering, cleaning and food services, and outsourced
industrial and mining support services to a range of clients.
2. Comparative information
An amount of R35,51 million has been reclassified between
sales and cost of sales in the comparative period ended
30 September 2014. This was as a result of an intercompany
journal that was not eliminated. The journal was correctly
eliminated for the year ended 31 March 2015.
3. Basis of preparation
These condensed consolidated interim results for the six
months ended 30 September 2015 have been prepared 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 annual financial
statements. These results were prepared under the supervision
of the Group CFO, Mr WE Scott CA(SA).
4. ConinghamLee contingent consideration
At the date of acquisition, based on the projected profits for
ConinghamLee, an accrual for the full expected additional
consideration payable in November 2015 was raised.
Unfortunately the performance of ConinghamLee’s mining and
engineering desks during the last few months was negatively
impacted by the pressure on commodity prices and cost cutting
measures implemented by their clients, which directly impacted
the expected profits during the performance guaranteed period.
A portion of the contingent consideration was therefore
re-measured during the interim period. The declining results
are an indicator of impairment of goodwill and management
performed a detailed impairment test which did not result in
an impairment.
5. Ordinary shares
5.1 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.
5.2 Ordinary shares issued
During July 2015 1 312 502 shares were issued to
predetermined participants resulting from an exercise of
options pursuant to a specific issue of options by CSG.
6. Dividend payment
A dividend of 4,48 cents per share was declared to the
shareholders for the period ended 31 March 2015 on
1 June 2015.
7. Capital commitments and contingencies
The Group had no significant outstanding capital
commitments or contingencies as at 30 September 2015.
8. Sale of 35% interest in Umdeni Maintenance and Africa
Sun
On 1 April 2015, 35% of the equity interest of both Umdeni
Maintenance Services Proprietary Limited and Africa Sun
Procurement Proprietary Limited was sold to the CSG Black
Women Trust in terms of a sale of shares agreement. The sale
has not resulted in a loss of control. The full 35% of net
asset value has been accounted for as a sale in retained
earnings.
9. Events after the reporting period
The directors are not aware of any material events, other
than events noted below, which occurred after the reporting
date and up to the date of this report.
9.1 Additional 38,1% interest acquired in Ukweza
As communicated to shareholders in the SENS announcement
dated 1 September 2015, shareholders were informed that
Thyme 2 Proprietary Limited and Mr Gary Davis had accepted an
offer from CSG to acquire their respective shareholdings in
Ukweza. CSG had a 61,9% interest in Ukweza while Ukweza had a
55% interest in Phakamani Solutions Proprietary Limited
(“Phakamani”) and a 25,5% interest in SSS. CSG held a further
74,5% direct interest in SSS. Following the acquisition, CSG
now holds 100% of Ukweza, 100% of SSS and 55% of Phakamani.
The purchase consideration payable by CSG in terms of the
acquisition was an initial amount of R7 million (“initial
amount”), which may be increased by a maximum amount of
R33 million (“performance guarantee amount”) based on the
financial performance of Ukweza for the year ending
31 March 2016. Payment of the initial amount was made on
1 October 2015, which was also the effective date
of the transaction. The performance guarantee amount will be
settled through the issue of CSG shares. The shares will be
issued at a volume weighted average price (“VWAP”) of CSG for
the 30 business days after the effective date. The new CSG
shares will be issued ex any dividend declared by CSG for the
year ending 31 March 2016. As control already existed at date
of acquisition the transaction for the additional 38,1% interest
is not accounted for as a business combination in terms of IFRS
3 and the excess above Ukweza’s additional net asset value will
be accounted for against retained earnings.
9.2 Afriboom
As communicated to shareholders in the SENS announcement dated
7 September 2015, the Company had entered into a sale of shares
agreement with Pietervan der Westhuizen, sole shareholder of
Afriboom. In terms of the agreement, CSG acquired 100% of the
issued ordinary share capital of Afriboom on 1 October 2015.
The effective date for the transaction was 1 October 2015. The
purchase consideration payable by CSG in terms of the
acquisition was an initial amount of R5 million (“initial
amount”), which may be increased by a maximum amount of
R30 million (“performance guarantee amount”) based on the
financial performance of Afriboom for the 12-month period
immediately following the effective date of the acquisition
(“performance guarantee period”). Payment of the initial amount
was made on 21 October 2015.
30% of the performance guarantee amount will be settled through
the issue of CSG shares. The shares will be issued at a VWAP of
CSG for the 30 business days prior to the effective date. The
remaining 70% will be settled in cash on the same day that the
shares are issued. The transaction will be accounted for in
terms of IFRS 3 – Business Combinations and a full purchase
price allocation will be performed within twelve months as
allowed by this standard. The information provided below is
based on provisional results of Afriboom as at
30 September 2015.
Recognised amounts of identifiable net assets
30 Sept Year ended
At 30 September 2015 R’000
Non-current assets 4 004
Property, plant and equipment 3 333
Deferred tax assets 671
Current assets 7 173
Loans to related parties 162
Trade and other receivables 4 582
Inventories 262
Bank and cash 2 168
Non-current liabilities 881
Finance lease liabilities 881
Current liabilities 8 998
Taxation payable 70
Trade and other payables 8 928
Identifiable net assets 1 298
Cash flow information
Bank balance acquired 2 168
The profits and net asset value attributable to Afriboom was
set out in detail in the SENS announcement dated
7 September 2015.
9.3 Hi-Tech Laeveld, Hi-Tech Nelspruit and Hi-Tech White River
As detailed in the SENS announcement dated 4 November 2015,
CSG made the following acquisitions:
– CSG, through its wholly owned subsidiary Global Resources
Education Proprietary Limited (“GRE”), had entered into an
agreement with Hi-Tech Sekuriteit Laeveld Proprietary Limited
(“Hi-Tech Laeveld”), in terms of which GRE had acquired the
franchising security business owned, managed and operated by
Hi-Tech as a going concern. The acquisition includes the
purchase of all franchise contracts together
with the operating contracts and ICASA licences, supplier
contracts, debtors, goodwill, intellectual property and stock
used in the conduct of the business (“Laeveld acquisition”);
– CSG had entered into an agreement with The Future Kerswill
Trust(represented by Mr JR Kerswill), in terms of which CSG
has acquired a 100% interest in the issued share capital of
Hi-Tech Nelspruit Proprietary Limited (“Nelspruit acquisition”);
and
– CSG had entered into an agreement with Mr JR Kerswill and
Mr JP Kerswill in terms of which CSG has acquired a 100%
interest in the issued share capital of White River Hi-Tech
Security Proprietary Limited (“White River acquisition”). The
White River monitoring business, including contracts, customers
and related assets of the White River franchisee of Hi-Tech
Laeveld, was transferred to White River Hi-Tech Security prior
to the effective date.The effective date for the transactions
was 1 November 2015.The purchase consideration payable by CSG in
terms of the acquisitions was an initial amount payable in cash
(“initial amount”), which may be increased by a maximum amount
(“performance guarantee amount”) based on the financial
performance of the companies over a certain period of time
(“performance guarantee period”), set out in more detail below:
Laeveld acquisition
The total consideration for the Laeveld acquisition is
R52,5 million, to be settled in cash as follows: R5 million
already
paid on 5 November 2015; R37,5 million to be paid 21 calendar
days after the effective date; and R10 million to be paid into a
trust account 21 calendar days after the effective date and paid
to the sellers upon confirmation that, inter alia, the operating
contracts and licences have been transferred to CSG.
Nelspruit acquisition
R26,6 million to be paid in four tranches of varying amounts,
with the first R5 million already paid on 4 November 2015, and
the final tranche being paid on or before 10 December 2015. The
performance guarantee amount will be based on the financial
performance of Hi-Tech Nelspruit for the 12 months immediately
following the
effective date (at a price earnings multiple of four times),
which amount will be payable within seven days on the
finalisation and acceptance by both parties of the management
accounts relating to that period. The maximum consideration for
the Nelspruit acquisition will be R55 million.
White River acquisition
R200 000 to be paid directly to the White River franchisee as
and whenthis amount becomes due in terms of a separate agreement.
The performance guarantee amount will be based on the financial
performance of Hi-Tech White River for months 13 to 24 after the
effective date (at a price earnings multiple of four times). 50%
of the final amount will be settled in cash by no later than
31 December 2017 and the remaining 50% will be settled through
the issue of CSG shares. The shares will be issued within 60 days
of the finalisation and acceptance by both parties of the
management accounts relating to that period at the VWAP of CSG for
the 30 business days prior to the last day of the 24th month after
the effective date. The maximum consideration for the White River
acquisition will be R25 million. All subsequent payments will be
funded using a medium-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 and a full purchase price allocation will be
performed within 12 months as allowed by this standard.
Due to the fact that the release of the interim results is so
close to the effective date, it is not possible to make the
required IFRS 3 disclosures as the initial accounting is still
incomplete. Profits and net asset value attributable to Hi-Tech
was set out in detail in the SENS announcement dated
4 November 2015.
10. Going concern
The financial information has been prepared on a going concern
basis.
For and on behalf of the board
BT Ngcuka (Chairman)
PJJ Dry (Chief executive) Wednesday, 25 November 2015
Directors
BT Ngcuka* (Chairman); PJJ Dry (CEO); JG Nieuwoudt (COO);
WE Scott (CFO); NG Thiart; NN Sonjani*#; PN de Waal*; M Mokoka*#
(* 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,
13th Floor,
Rennie House, 19 Ameshoff Street, Braamfontein
(PO Box 4844, Johannesburg, 2001)
Designated Advisor
Sasfin Capital (a division of Sasfin Bank Limited)
Date: 25/11/2015 07:05:00 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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