Wrap Text
Reviewed provisional condensed consolidated results for the year ended 31 March 2016 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 2016 and dividend declaration
Highlights
– Gross profit margin increased to 20%. (2015: 18%)
– Headline earnings increased by 16% to R84,41 million. (2015:
R72,77 million)
– HEPS increased by 14% to 20,22 cents per share. (2015: R17,76 cents
per share)
– Dividend declared increased by 12% to 5 cents per share. (2015:
4,48 cents per share)
– 5 new acquisitions in the facility management division
Provisional condensed consolidated statement of comprehensive income
Reviewed Audited
31 March 31 March
2016 2015
Notes R’000 R’000
Revenue 1 272 063 1 286 659
Cost of sales (1 012 003) (1 051 829)
Gross profit 260 060 234 830
Net operating expenses (153 467) (122 384)
Operating profit 106 593 112 446
Profit on sale of property, plant
and equipment 368 1 308
Gain on bargain purchase 7.3 61 278
Re-measurement of contingent
consideration relating to
business acquisition 3 10 088 –
Investment income 3 237 3 549
Finance cost (6 562) (3 086)
Income from equity accounted
investments – 508
Profit before taxation 113 785 115 003
Taxation (28 208) (31 237)
Profit for the period 85 577 83 766
Other comprehensive income (4 184) 41
Total comprehensive income 81 393 83 807
Profit for the period attributable to:
Owners of the parent 83 540 73 549
Non-controlling interest 2 037 10 217
85 577 83 766
Total comprehensive income attributable to:
Owners of the parent 79 356 73 252
Non-controlling interest 2 037 10 555
81 393 83 807
Weighted average shares in issue (’000) 417 420 409 746
Diluted weighted average shares in
issue (’000) 420 181 415 029
Earnings per share
Basic earnings per share (cents) 20,01 17,95
Diluted earnings per share (cents) 19,88 17,72
Dividend per share (cents) 5,00 4,48
Headline earnings reconciliation
Attributable earnings 83 540 73 549
Loss/(profit) on sale of property,
plant and equipment (after taxation) 400 (942)
Impairment on property, plant and
equipment (after taxation) 527 –
Goodwill impairment – 440
Gain on bargain purchase (61) (278)
Headline earnings 84 406 72 769
Headline earnings per share
Basic headline earnings per share (cents) 20,22 17,76
Diluted headline earnings per share(cents) 20,09 17,53
Provisional condensed consolidated statement of cash flows
Reviewed Audited
31 March 31 March
2016 2015
Notes R’000 R’000
Cash flow from operations 41 795 88 829
Cash generated by operations 72 119 127 976
Investment income 3 237 3 549
Finance cost (4 511) (3 086)
Taxation paid (29 050) (39 610)
Cash flow from investing activities (121 414) (35 017)
Net investment in property, plant
and equipment (15 927) (10 062)
Net investment in intangible assets (15) (876)
Cash purchase consideration made
relating to SSS acquisition – (4 000)
Cash purchase consideration made
relating to Ukweza acquisition 7.1 (7 000) –
Business combination
transaction costs (1 104) –
Acquisition of businesses 7 (97 368) (20 079)
Cash flow from financing activities 42 106 1 024
Dividends paid (20 648) (22 965)
Net purchase of treasury shares 4.1 (283) (1 395)
Issue of ordinary shares 4.2 1 103 –
Movement in interest bearing
liabilities and related party loans 61 934 25 384
(Decrease)/increase in cash resources (37 513) 54 836
Cash resources at beginning of yea 81 863 27 027
Cash resources at end of year 44 350 81 863
Cash resources 44 350 81 863
Bank and call deposits 44 824 88 109
Bank overdraft and invoice discounting (474) (6 246)
Provisional condensed consolidated statement of financial position
Reviewed Audited
31 March 31 March
2016 2015
Notes R’000 R’000
Assets
Non-current assets 339 479 162 093
Property, plant and equipment 42 444 28 912
Intangible assets 70 072 803
Goodwill 221 700 127 462
Deferred taxation 4 953 4 619
Loans to related parties 310 297
Current assets 314 371 304 477
Inventories 9 016 6 343
Current income tax receivable 1 224 1 429
Current portion of loans to
related parties 981 352
Trade and other receivables 258 326 208 244
Bank and call deposits 44 824 88 109
Total assets 653 850 466 570
Equity and liabilities
Capital and reserves 345 993 317 313
Stated capital 188 694 187 591
Treasury shares 4 (1 678) (1 395)
Share based payment reserve 591 385
Retained earnings 162 263 117 979
Foreign currency translation reserve (4 762) (579)
Non-controlling interest 885 13 332
Non-current liabilities 103 600 25 044
Interest bearing liabilities 82 534 24 992
Contingent consideration 5 169 –
Deferred taxation 15 897 52
Current liabilities 204 257 124 213
Current portion of interest
bearing liabilities 24 475 11 210
Current portion of loans from
related parties 636 676
Bank overdrafts and invoice 474 6 246
discounting
Trade and other payables 172 574 99 940
Trade payables and accruals 103 903 88 940
Current portion of contingent
consideration 68 671 11 000
Current income tax payable 6 098 6 141
Total equity and liabilities 653 850 466 570
Shares in issue (’000) 418 322 417 010
Net asset value per share (cents) 82,7 76,1
Net tangible asset value per share (cents) 13,0 45,3
Provisional condensed consolidated statement of changes in equity
Total
attributable
to equity Non-
holders of controlling Total
the parent interest equity
Notes R’000 R’000 R’000
Equity at 1 April 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)
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
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 year 79 356 2 037 81 393
Dividend paid (18 682) (1 966) (20 648)
Sale of shares to non-
controlling interest 6 (264) 264 –
Additional Ukweza
acquisition 7.1 (20 693) (12 783) (33 476)
Share based payment
reserve 591 – 591
Treasury shares 4.1 (283) – (283)
Ordinary shares issued 4.2 1 103 – 1 103
Equity at 31 March 2016
(Reviewed) 345 109 884 345 993
Segment reporting
Reviewed Audited
31 March 31 March
2016 2015
R’000 R’000
Revenue
Staffing solutions 598 940 741 475
Facility management 546 452 451 846
Industrial and mining support services 126 671 93 338
Total Group 1 272 063 1 286 659
Operating profit 106 593 112 446
Staffing solutions 57 456 66 880
Facility management 45 959 41 413
Industrial and mining support services 24 836 20 782
Head office (21 658) (16 629)
Profit before taxation 113 785 115 003
Staffing solutions 65 941 68 494
Facility management 46 062 41 770
Industrial and mining support services 24 481 20 399
Head office (22 699) (15 660)
Financial performance
CSG Holdings provides staffing solutions, facility management,
including contract catering, cleaning and security as well as
industrial and mining services to an array of clients, which include
chemical and petro-chemical plants, mines, industrial businesses,
manufacturing businesses, transport businesses, retail outlets,
hospitals, schools and various other clients.
The Group’s mission is to become the leading strategic outsource
partner of choice for staffing solutions, facility management and
security in Southern Africa and will continue to consolidate and
increase the basket of services offered to clients in all three
divisions. The current economic constraints are expected to continue
for the rest of 2016. The Group will consolidate the recent
acquisitions and continue to look for further growth opportunities
and believe that the performance in the next financial year will show
an improvement on the current set of results.
The Company realised an increase in headline earnings for the year
ended 31 March 2016. Earnings were negatively impacted as a result of
the pressure on commodity prices which resulted in cost cutting
measures from clients and to a lesser extent, the reaction of clients
to the changes in labour legislation on temporary employment.
Notwithstanding this, headline earnings per share and earnings per
share increased by 14% and 11% respectively in comparison to that
reported for the year ended 31 March 2015. This increase was
primarily due to organic growth achieved in sectors not affected by
the pressure on commodity prices and more specifically the excellent
performance of Ukweza Holdings Proprietary Limited (“Ukweza”)
together with the benefit of the additional interest acquired in
October 2015, the additional earnings from the new security
acquisitions and cleaning acquisition and the positive impact of the
once-off re-measurement of the contingent consideration relating to
the ConinghamLee Proprietary Limited (“ConinghamLee”) acquisition of
R10,09 million (see note 3).
Divisional review
Staffing Solutions Division (previously Workforce Management
Division)
Revenue decreased by 20% to R598,94 million contributing R57,46 million
to the operating profit of the Group. Revenue and operating
profit were negatively impacted by the slowdown in the South African
economy together with the pressure on commodity prices, which
resulted in a lower demand for temporary employees. The impact of the
changes in labour legislation on temporary employment impacted the
first half, but stability returned to the temporary employment
industry as companies adapted to the changes in the legislation
during the second half of the year.
Facility Management Division
Revenue increased by 21% to R546,45 million contributing R45,96 million
to the operating profit of the Group. Acquiring the minority
shares of Ukweza (see note 7.1) effective 1 October 2015, together
with the acquisition of Afriboom Proprietary Limited (“Afriboom”)
(see note 7.2) and the Hi-Tech security group (see note 7.3) resulted
in an increase in revenue and operating profits in the second half of
the year. These increases were unfortunately offset by the slowdown
in infrastructure development on the African continent mainly due to
the pressure on commodity prices which impacted the demand for remote
site services by Significant Site Services Proprietary Limited (“SSS”)
in various countries.
Industrial and Mining Support Services Division (previously Mining,
Plant and Construction Site Support Services Division)
Revenue amounted to R126,67 million which represents an increase of
36% compared to the comparative period and contributed R24,84 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
outsourced service contracts.
Notice of final cash dividend
The Board of directors has approved a gross final cash dividend of
5,00 cents per share on the ordinary shares from profits accrued
during the year ended 31 March 2016. 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 4,25 cents per share.
The issued share capital at the declaration date is 418 322 088
ordinary shares.
The Company’s tax reference number is 9159246165
The salient dates are as follows:
- Date of declaration Wednesday, 1 June 2016
- Last day for trading to qualify and participate in the final
dividend (and change of address or dividend instructions) Friday,
24 June 2016
- Trading ex-dividend commences Monday, 27 June 2016
- Record date Friday, 1 July 2016
- Dividend payment date Monday, 4 July 2016
Share certificates may not be dematerialised or rematerialised
between Monday, 27 June 2016 and Friday, 1 July 2016, both days
inclusive.
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 solutions,
facilities management which includes contract catering, food,
cleaning services and security, as well as outsourced industrial
and mining support services to a range of clients.
2. Basis of preparation
These condensed consolidated results for the year ended 31 March
2016 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).
3. ConinghamLee contingent consideration
At the date of acquisition, based on the projected profits for
ConinginghamLee, an accrual for the full expected additional
consideration payable in November 2015 was raised. 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
guarantee period. A portion of the contingent consideration was
therefore reversed during this year. The re-measurement was an
impairment indicator of goodwill assigned and management performed a
detailed impairment test which did not result in an impairment.
4. Ordinary shares
4.1 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.
4.2 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.
5. Capital commitments and contingencies
The Group had no significant outstanding capital commitments or
contingencies as at 31 March 2016.
6. 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 were 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 against retained
earnings.
7. Business combinations
7.1 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 has been increased by an amount of R26,48 million
(“performance guarantee amount”) based on the financial performance
of Ukweza for the year ended 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 VWAP of CSG for the
30 business days after the effective date which was R1,58.
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 was accounted for against retained
earnings.
7.2 Afriboom
Recognised amounts of identifiable net assets
at 1 October 2015 R’000
Non-current assets 4 004
Property, plant and equipment 3 333
Deferred tax assets 671
Current assets 8 180
Loans to related parties 206
Trade and other receivables 5 544
Inventories 262
Bank and cash 2 168
Non-current liabilities (881)
Finance lease liabilities (881)
Current liabilities (9 963)
Taxation payable (125)
Trade and other payables (9 838)
Identifiable net assets 1 340
Intangible assets identified 17 015
Deferred tax liability on the above intangible asset (3 811)
Goodwill on acquisition 20 456
Purchase consideration* 35 000
Cash flow information
Bank balance acquired 2 168
*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.
As communicated to shareholders in the SENS announcement dated
7 September 2015, the Company had entered into a sale of shares
agreement with Pieter van 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, which was also
the effective date of the transaction.
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 twelve 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 CSG’s VWAP for the
30 business days prior to the effective date, which was R1,74. The
remaining 70% will be settled in cash on the same day that the shares
are issued.
The transaction has been accounted for in terms of IFRS 3 Business
Combinations.
The company was acquired for the brand name, to gain access to their
customer list, diversification of the cleaning business and to gain
access to a specific market in the cleaning industry. Both the brand
name and current customer list have been identified as intangible
assets. The remaining excess on the purchase price relates to
synergies and has therefore been accounted for as goodwill.
Since the acquisition date, Afriboom has contributed R71,80
million to Group revenue and R4,46 million to Group profit. If the
acquisition had occurred on 1 April 2015, the Group revenue would
have been R1,34 billion and Group profit for the period would have
been R89,26 million.
7.3 Hi-tech Laeveld, Hi-tech Nelspruit and Hi-tech White River
As detailed in the SENS announcement dated 4 November 2015, CSG:
- through its wholly owned subsidiary Hitech Security Services
Proprietary Limited (“HTSS”), entered into an agreement with Hi- Tech
Sekuriteit Laeveld Proprietary Limited (“Hi-Tech Laeveld”), in terms
of which HTSS had acquired the franchising security business owned,
managed and operated by Hi-Tech Laeveld as a going concern (“Laeveld”).
The Laeveld 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;
- entered into an agreement with The Future Kerswill Trust
(represented by Mr JR Kerswill), in terms of which CSG acquired a
100% interest in the issued share capital of Hi-Tech Nelspruit
(“Nelspruit”); and
- entered into an agreement with Mr JR Kerswill and Mr JP Kerswill
in terms of which CSG acquired a 100% interest in the issued share
capital of White River Hi-Tech Security (“White River”). 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 of 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, and was settled in cash as follows: R5 million paid
on 5 November 2015; R37,5 million paid on 23 November 2015; and
R10 million paid into a trust account on 23 November 2015. This final
amount is payable to the sellers upon confirmation that, inter alia,
the operating contracts and licences have been transferred to CSG.
Nelspruit acquisition
R26,6 million was paid in four tranches of varying amounts,
with the first R5 million paid on 4 November 2015, and the final
tranche paid on 18 February 2016. The performance guarantee amount
will be based on the financial performance of Hi-Tech Nelspruit
for the twelve months immediately following the effective date, 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
when this amount becomes due in terms of a separate agreement. The
performance guarantee amount will be based on the financial
performance of White River for months thirteen to twenty four
after the effective date. 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 transactions have been accounted for in terms of IFRS 3
Business Combinations.
Recognised amounts of Hi-Tech Hi-Tech Hi-Tech
identifiable net assets Laeveld Nelspruit White River
at 1 November 2015 R’000 R’000 R’000
Non-current assets – 7 356 181
Property, plant and equipment – 4 938 181
Loans to related parties – 2 287 –
Deferred tax assets – 131 –
Current assets 1 544 426 142
Loans to related parties – – 62
Trade and other receivables
(prepaid) 1 254 363 65
Inventories 290 – –
Bank and cash – 63 15
Non-current liabilities – (4 825) –
Finance lease liabilities – (4 825) –
Current liabilities – (4 679) (262)
Taxation payable – (1 609) –
Trade and other payables – (3 070) (262)
Identifiable net assets 1 544 (1 722) 61
Intangible assets identified 52 551 – –
Deferred tax liability on the
above intangible asset (11 771) – –
Goodwill on acquisition 10 176 40 515 5 169
Gain on bargain purchase – – (61)
Purchase consideration* 52 500 38 793 5 169
Cash flow information
Bank balance acquired – 63 15
*Based on the projected profits for the performance guarantee period
an accrual for the contingent consideration has been taken into
account in calculating goodwill on date of acquisition.
The companies were acquired for the brand name, to gain access to
their customer lists, diversification and to expand the basket of
services in the Group’s facility management division. Both the brand
name and current customer lists have been identified as intangible
assets. The remaining excess on the purchase price relates to
synergies and diversification and has therefore been accounted for
as goodwill.
Since the acquisition date, Hi-Tech has contributed R27,36 million to
Group revenue and R2,79 million to Group profit. If the acquisition
had occurred on 1 April 2015, the Group revenue would have been
R1,29 billion and Group profit for the period would have been
R85,45 million.
7.4 7 Arrows and Cubed Systems
The information provided below is based on provisional results of
the entity as at 1 March 2016.
Recognised amounts of identifiable net assets
at 1 March 2016 R’000
Non-current assets 2 312
Property, plant and equipment 2 312
Current assets 5 206
Trade and other receivables 3 315
Inventories 427
Bank and cash 1 464
Non-current liabilities (702)
Finance lease liabilities (702)
Current liabilities (5 473)
Trade and other payables (5 473)
Identifiable net assets 1 343
Goodwill 14 657
Purchase consideration 16 000
Cash flow information
Bank balance acquired 1 464
As detailed in the SENS announcement dated 29 February 2016,
shareholders were advised that CSG, through its 70% owned subsidiary,
Security Operations Group Proprietary Limited, (“the purchaser”) has
entered into an agreement with 7 Arrows Proprietary Limited and
Cubed Systems Proprietary Limited in terms of which the purchaser
will acquire:
- the monitoring and guarding business owned, managed and operated
by 7 Arrows as a going concern (“7 Arrows acquisition”); and
- the security products installation and maintenance business
provided to 7 Arrows as a going concern (“Cubed Systems
acquisition”).
The 7 Arrows acquisition and the Cubed Systems acquisition are
indivisible and occurred simultaneously. The acquisitions include the
purchase of all client contracts, operating contracts, licences and
supplier contracts together with assets, debtors, goodwill,
intellectual property and stock used in the conduct of the
businesses.
The effective date for the transaction was 1 March 2016.
The purchase consideration payable by CSG in terms of the acquisition
was an initial amount of R16 million (“initial amount”), which may be
increased by a maximum amount of R9,14 million (“performance
guarantee amount”) based on the financial performance of the
businesses for the twelve-month period immediately following the
effective date of the acquisition (“performance guarantee period”).
Payment of the initial amount was made on 1 March 2016.
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 twelve months as allowed by this standard.
Since the acquisition date, 7 Arrows and Cubed Systems has
contributed R9,04 million to Group revenue and R321,757 to Group
profit. If the acquisition had occurred on 1 April 2015, the Group
revenue would have been R1,35 billion and Group profit for the period
would have been R85,83 million.
7.5 Hi-Tech Nelspruit Guards
The information provided below is based on provisional results of
the entity as at 1 March 2016.
Recognised amounts of identifiable net assets
at 1 March 2016 R’000
Current assets 485
Loans to related parties 485
Identifiable net assets 485
Goodwill 3 265
Purchase consideration 3 750
Cash flow information
Bank balance acquired –
CSG, through its wholly owned subsidiary, Invictus Risk
Proprietary Limited (“Invictus Risk”), acquired the guarding
business of BFJ Personnel Agency CC as a going concern.
The effective date for the transaction was 1 March 2016.
The total consideration for the acquisition is R3,75 million,
and will be settled in cash as follows: R1,88 million paid on
23 February 2016; R1,34 million paid on 15 March 2016; and the
remaining balance to be paid by September 2016.
All subsequent payments will be made from own treasury funds
available.
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.
Since the acquisition date, Nelspruit Guards has contributed
R2,45 million to Group revenue and R126,486 to Group profit. If the
acquisition had occurred on 1 April 2015, the Group revenue would
have been R1,30 billion and Group profit for the period would have
been R86,68 million.
8. 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.
8.1 Recall Africa
CSG, through Invictus Risk, acquired 100% of the shares and credit
loans of Recall Africa Proprietary Limited, Recall Security Alphen
Hotel Proprietary Limited, Recall Security Woodbridge Island
Proprietary Limited, Recall Security Corral Grove Proprietary
Limited, Recall Security Big Bay Beach Club Proprietary Limited
and Recall Risk Services Proprietary Limited for a maximum amount of
R15,840 million.
The acquisitions include the purchase of all client contracts,
operating contracts, licences and supplier contracts together with
assets, debtors, goodwill, intellectual property and stock used in
the conduct of the businesses.
The effective date for the transaction was 1 May 2016.
The total consideration is to be settled in four quarterly payments.
The quarterly payments will be determined based on the profits after
tax earned by the companies for each quarter at a price earnings
ratio of 4.
It is expected that the various payments will be made from own
treasury funds available.
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.
Due to the fact that the release of the year-end 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.
9. Going concern
The financial information has been prepared on a going concern
basis.
10. 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
Chairman Chief executive
Wednesday
1 June 2016
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)
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