Wrap Text
Unaudited interim financial results for the six months ended 30 September 2015
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
2015
PRIMESERV GROUP LIMITED
UNAUDITED INTERIM FINANCIAL RESULTS
FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2015
CONDENSED CONSOLIDATED
STATEMENT OF COMPREHENSIVE INCOME
FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2015
Unaudited Unaudited Audited
30 September 30 September 31 March
2015 2014 2015
R'000 R'000 R'000
Revenue 287 632 329 160 650 960
Cost of sales (236 782) (281 249) (541 641)
Gross profit 50 850 47 911 109 319
EBITDA 9 382 6 527 13 701
Depreciation and amortisation (1 071) (1 319) (2 110)
Operating profit 8 311 5 208 11 591
Interest received 118 171 272
Interest paid (2 222) (2 881) (4 862)
Profit before taxation 6 207 2 498 7 001
Taxation (474) 317 4 134
Total comprehensive income 5 733 2 815 11 135
Total comprehensive income attributable to:
Ordinary shareholders of the Company 6 032 4 016 11 923
Non-controlling shareholders' interest – share of loss (299) (1 201) (788)
Total comprehensive income 5 733 2 815 11 135
Reconciliation of headline earnings
Net profit attributable to shareholders 6 032 4 016 11 923
Headline earnings 6 032 4 016 11 923
Weighted average number of shares ('000) 93 682 93 682 93 682
Diluted weighted average number of shares ('000) 93 682 93 682 93 682
Earnings per share and diluted earnings per share (cents) 6,44 4,29 12,73
Headline earnings and diluted headline earnings per share (cents) 6,44 4,29 12,73
CONDENSED CONSOLIDATED
STATEMENT OF FINANCIAL POSITION
AS AT 30 SEPTEMBER 2015
Unaudited Unaudited Audited
six months to six months to year to
30 September 30 September 31 March
2015 2014 2015
R'000 R'000 R'000
ASSETS
Non-current assets 44 584 48 908 47 788
Equipment and vehicles 3 498 3 814 3 534
Investment property 7 645 7 645 7 645
Goodwill 18 170 18 170 18 170
Intangible assets 967 1 751 1 360
Long-term receivables 498 5 940 3 048
Deferred tax asset 13 806 11 588 14 031
Current assets 94 584 108 768 92 485
Inventories 117 222 119
Trade receivables 76 457 100 151 85 218
Other receivables 9 520 7 207 5 836
Taxation receivable 224 – –
Cash and cash equivalents 8 266 1 188 1 312
Total assets 139 168 157 676 140 273
EQUITY AND LIABILITIES
Equity 86 683 73 557 81 877
Capital and reserves 94 337 81 325 89 232
Non-controlling interest (7 654) (7 768) (7 355)
Non-current liabilities
Financial liabilities 90 - 110
Current liabilities 52 395 84 119 58 286
Trade and other payables 11 900 25 571 15 759
Financial liabilities 36 – 32
Dividend payable 927 – –
Taxation payable – 2 317 289
Bank borrowings 39 532 56 231 42 206
Total equity and liabilities 139 168 157 676 140 273
Number of shares in issue at end of year (net of treasury shares) ('000) 92 742 93 682 93 682
Net asset value per share (cents) 102 87 95
CONDENSED CONSOLIDATED
STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2015
Unaudited Unaudited Audited
six months to six months to year to
30 September 30 September 31 March
2015 2014 2015
R'000 R'000 R'000
Balance at beginning of period 81 877 70 742 70 742
Attributable earnings 6 032 4 016 11 923
Dividend declared (927) – –
Non-controlling shareholders' interest (299) (1 201) (788)
Balance at end of period 86 683 73 557 81 877
CONDENSED CONSOLIDATED
STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2015
Unaudited Unaudited Audited
six months to six months to year to
30 September 30 September 31 March
2015 2014 2015
R'000 R'000 R'000
Profit before taxation 6 207 2 498 7 001
Adjustment for non-cash items 3 621 1 319 6 029
Operating cash flows before working capital changes, including interest 9 828 3 817 13 030
Net working capital changes 1 220 (11 290) (4 564)
Taxation paid (762) (63) (718)
Cash flows from operating activities 10 286 (7 536) 7 748
Cash flows from investing activities (642) 473 (804)
Cash flows from financing activities (16) – 142
Net increase/(decrease) in cash and cash equivalents 9 628 (7 063) 7 086
Cash and cash equivalents at beginning of period (40 894) (47 980) (47 980)
Cash and cash equivalents at end of period (31 266) (55 043) (40 894)
SEGMENTAL ANALYSIS
FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2015
Unaudited Unaudited Audited
six months to six months to year to
30 September 30 September 31 March
2015 2014 2015
R'000 R'000 R'000
Revenue from external customers
Staffing and Recruitment Services 266 179 308 022 612 275
Training and Consulting Services 21 453 21 138 38 685
Total 287 632 329 160 650 960
Revenue – inter-segment
Staffing and Recruitment Services – – –
Training and Consulting Services 104 196 116
Total 104 196 116
Business segment operating profit results
Staffing and Recruitment Services 14 826 10 505 27 690
Training and Consulting Services 2 129 1 869 1 007
Central Services (8 644) (7 166) (17 106)
Operating profit 8 311 5 208 11 591
Interest received 118 171 272
Interest paid (2 222) (2 881) (4 862)
Profit before taxation 6 207 2 498 7 001
Business segment EBITDA
Staffing and Recruitment Services 15 521 11 456 29 180
Training and Consulting Services 2 311 2 106 1 443
Central Services (8 450) (7 035) (16 922)
Total 9 382 6 527 13 701
Business segment total assets
Staffing and Recruitment Services 102 133 124 023 107 875
Training and Consulting Services 21 340 26 902 20 728
Central Services 15 695 6 751 11 670
Total 139 168 157 676 140 273
NOTES
1. BASIS OF PREPARATION
The condensed consolidated interim financial statements are prepared in accordance with International Financial Reporting Standard,
(IAS) 34 Interim Financial Reporting, the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial
Pronouncements as issued by Financial Reporting Standards Council and the requirements of the Companies Act of South Africa. The
accounting policies applied in the preparation of these interim financial statements are in terms of International Financial Reporting
Standards and are consistent with those applied in the previous annual financial statements. The results were prepared by the Group
Financial Director, Mr R Sack CA (SA). The results have not been reviewed or audited by the Group' s external auditors.
2. FAIR VALUE MEASUREMENT OF FINANCIAL INSTRUMENTS
Unaudited Unaudited Audited
30 September 30 September 31 March
2015 2014 2015
Financial asset Level R'000 R'000 R'000
Investment properties
Valuations for the properties were obtained at the end
of March 2015 which indicated no changes in the fair
value. There have been no indicators of any changes in
the fair values during the period under review 2 7 645 7 645 7 645
Long-term receivables
The fair value of loans are estimated using estimated
cash flow forecasts. The fair value of the loans
reduced by R2 550 000 during the period 3 498 5 940 3 048
Cash and cash equivalents 1 8 266 1 188 1 312
3. WEIGHTED AVERAGE NUMBER OF SHARES
940 000 shares were purchased by the Primeserv Group Limited Share Trust on 30 September 2015 an consequently had no effect on the weighted average
number of shares in issue for the period.
4. DIVIDEND
No interim dividend is proposed for the period under review. The final dividend in respect of the financial year ended 31 March 2015 was paid to
shareholders on 12 October 2015.
5. EVENTS AFTER REPORTING DATE
Management is not aware of any material events which have occurred subsequent to the end.
COMMENTARY
Primeserv focuses on delivering market leading business support services to organisations throughout
Southern Africa. The Group's specialised products, services and solutions are delivered through its
operating pillar Primeserv Human Capital Services. This incorporates two main areas of specialisation:
namely Staffing & Recruitment Services, and Training & Consulting Services.
The six month period ended 30 September 2015 was characterised by weak economic activity across
most business sectors as well as the implementation of the long-awaited amendments to South Africa' s
labour legislation. The impact of this tough trading environment was exacerbated by the initial negative
reaction from some industry specific clients to the new labour laws, resulting in reduced volumes across
the flexible staffing component of the Group's operations.
Notwithstanding this, Primeserv delivered an improved period-on-period set of results. Both Earnings
and Headline Earnings Per Share increased by 50% from 4,29 cents per share to 6,44 cents per share for
the period under review. As indicated earlier this year when announcing the Group' s results for the year
ended 31 March 2015, lower volumes were anticipated in certain sectors of the Group' s Temporary
Employment Services ("TES") operating units, primarily due to the uncertainty emanating from the
introduction of the new labour legislation.
Through a process of in-depth client consultation and workplace management forums, aligned
to the Group's overriding commitment to ensuring a clear understanding of and compliance with the
new labour legislation (especially given the recent Labour Court decision that clarified
the employment relationship between the TES, client and contractor), volumes are expected to increase and then stabilize,
albeit possibly at lower levels than previously experienced.
As a precursor to anticipated lower volumes, management implemented key rightsizing initiatives and
adjusted infrastructure costs so as to partially offset the impact of lower sales on the Group' s overall
profitability.
Attention has been focussed on improving gross operating margins through contract specific margin
management. This combined with a programme of staff skills' assessment and training, youth
development and deployment line with Government' s aim to increase employment, as well as
ongoing productivity enhancement initiatives, has realized better gross operating margins.
Underperforming TES contracts were re-evaluated and some brought to a close, whilst at the same
time investment has been made in developing an expanded sales force to drive future growth.
EBITDA for the six months increased by 44% from R6,5 million to R9,4 million, with operating profit
increasing by 60% from R5,2 million to R8,3 million. Total comprehensive income attributable to
ordinary shareholders of the Company increased by 50% from R4,0 million to R6,0 million for the review
period.
The constant attention given to optimising working capital management resulted in improved cash
conversion. Trade receivables decreased from R100,2 million to R76,5 million at the end of the reporting
period. The average days sales outstanding ("DSO") has improved from 49 days to 43 days for the period
under review. Cash flows from operating activities improved strongly by R17,8 million from a net
outflow of R7,5 million in the comparable period to a net inflow of R10,3 million during the period under
review. Cash and cash equivalents recorded a net inflow of R9,6 million for the six months ended 30
September 2015 compared to an outflow of R7,1 million for the comparable period. As a consequence
overall gearing has improved from 68% at the end of September 2014 to 33% at the end of September 2015.
Over the comparative period the Group's net asset value per share has increased by 17% to 102
cents per share.
As referred to earlier, volumes, and hence, revenue were negatively impacted in the Staffing &
Recruitment Services segment of the Group. However, management' s proactive and constructive
approach to dealing with the impact of the new labour legislation, ensuring full compliance capability,
and the effective implementation of current legislation and workplace productivity programmes, allied
to stringent cost alignment initiatives resulted in an improvement of the segment' s operating profit by
41% from R10,5 million to R14,8 million. EBITDA increased by 35% from R11,5 million to R15,5 million.
DSO improved from 47 days at the end of September 2014 to 40 days at the end of the current
reporting period.
The blue collar flexible staffing business, which specialises in servicing the logistics, warehousing and
distribution market, as well as the wholesale and retail, and industrial manufacturing, engineering and
construction sectors delivered a muted performance. Weak trading across the country resulted in lower
volumes in the logistics environment. The engineering and construction sector was extremely
depressed, and industrial manufacturing output was below that of the comparative reporting period.
The business unit servicing the petrochemical industry remains under pressure, with labour intensive
projects being shelved and maintenance shuts being minimised. This component of the flexible staffing
operations is expected to remain under pressure. The white collar professional draughting and
engineering staffing operations delivered a solid performance.
Despite the unpredictable trading environment Primeserv has continued to invest in its service offerings
and has developed alternative outsourced human capital, productivity and business process solutions
for its clients so as to match market needs to the new labour legislation in ways that achieve optimal
outcomes for all stakeholders.
The Training & Consulting Services segment continues to offer both strategic and growth
opportunities. Investment was made in new training product lines and also in furthering training and
upskilling activities at Primeserv's TES clients. Youth development and employment advancement
remains a key element in the activities of the business. Revenue was stable at R21,5 million compared to
revenue of R21,1 million for the comparative six months. Efforts aimed at improving both margin and
cost management resulted in a 14% increase in operating profit from R1,9 million to R2,1 million for the
current six months under review.
Outlook and Prospects
Given the economic conditions facing South Africa, particularly affected by the current drought, weakened Rand,
depressed commodities cycle, electricity and water supply constraints, and compounded by onerous labour
regulations, we anticipate the difficult trading environment to continue for some time.
Despite these challenges, there remain opportunities. The Group' s proactive and innovative approach to
developing new and fully legislatively compliant "TES" services for its clients that meet their constantly
changing staffing and productivity requirements whilst effectively managing inherent risks, positions
Primeserv to deliver positive growth. The Group is also currently considering a number of acquisitive
opportunities that form part of its strategy to scale up the business and to diversify its revenue streams
across the business support services environment.
On behalf of the Board
M Abel R Sack
Acting Chairman and Chief Executive Officer Financial Director
24 November 2015
Johannesburg
CORPORATE INFORMATION
www.primeserv.co.za
email: productivity@primeserv.co.za
DIRECTORS
M Abel (Acting Chairman and Chief Executive Officer), JM Judin#, 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, Sandton, 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, 20 Woodlands Drive, Woodmead, 2196
(Private Bag X6, Gallo Manor, 2052)
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').
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