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PRIMESERV GROUP LIMITED - Reviewed provisional results for the 12 months ended 31 March 2016

Release Date: 27/06/2016 11:17
Code(s): PMV     PDF:  
Wrap Text
Reviewed provisional results for the 12 months ended 31 March 2016

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

PRIMESERV GROUP LIMITED
REVIEWED PROVISIONAL RESULTS
FOR THE 12 MONTHS ENDED 31 MARCH 2016

- Revenue for the period decreased by 12% to R572.4 million
- Operating profit increased by 25% to R14.5 million
- Earnings per share increased by 9% from 12.73 cents per share to 13.86 cents per share
- Headline earnings per share increased by 9% from 12.73 cents per share to 13.86 cents per share
- Net asset value per share increased by 16% from 95 cents per share to 110 cents per share
- Dividend increased by 35% from 1 cent per share to 1.35 cents per share
- Gearing improved from 46% to 24% 

CONDENSED CONSOLIDATED
STATEMENT OF COMPREHENSIVE INCOME
FOR THE 12 MONTHS ENDED 31 MARCH 2016

                                                                              Reviewed     Audited
                                                                                  2016        2015
                                                                                 R'000       R'000
Revenue                                                                        572 388     650 960
Cost of sales                                                                (472 342)   (541 641)
Gross profit                                                                   100 046     109 319
EBITDA                                                                          16 190      13 701
Depreciation and amortisation                                                  (1 706)     (2 110)
Operating profit                                                                14 484      11 591
Interest received                                                                  454         272
Interest paid                                                                  (3 819)     (4 862)
Profit before taxation                                                          11 119       7 001
Taxation                                                                           105       4 134
Total comprehensive income                                                      11 224      11 135
Total comprehensive income attributable to:         
Ordinary shareholders of the Company                                            12 860      11 923
Non-controlling shareholders' interest – share of loss                         (1 636)       (788)
Total comprehensive income                                                      11 224      11 135
Reconciliation of headline earnings         
Net profit attributable to shareholders                                         12 860      11 923
Headline earnings                                                               12 860      11 923
Weighted average number of shares                                    ('000)     92 787      93 682
Diluted weighted average number of shares                            ('000)     92 787      93 682
Earnings per share and diluted earnings per share                   (cents)      13.86       12.73
Headline earnings and diluted headline earnings per share           (cents)      13.86       12.73
         
CONDENSED CONSOLIDATED
STATEMENT OF FINANCIAL POSITION
AS AT 31 MARCH 2016
 
                                                                                Reviewed   Audited
                                                                                    2016      2015
                                                                                   R'000     R'000
ASSETS 
Non-current assets                                                               44 619     47 788
Equipment and vehicles                                                            3 693      3 534
Investment property                                                               7 645      7 645
Goodwill                                                                         18 170     18 170
Intangible assets                                                                   882      1 360
Long-term receivables                                                                 –      3 048
Deferred tax asset                                                               14 229     14 031
Current assets                                                                   97 398     92 485
Inventories                                                                         103        119
Trade receivables                                                                79 994     85 218
Other receivables                                                                 8 576      5 836
Taxation receivable                                                                 637          –
Cash and cash equivalents                                                         8 088      1 312
Total assets                                                                    142 017    140 273
EQUITY AND LIABILITIES 
Equity                                                                           90 643     81 877
Capital and reserves                                                             99 634     89 232
Non-controlling interest                                                        (8 991)    (7 355)
Non-current liabilities                                                               –        110
Current liabilities                                                              51 374     58 286
Trade and other payables                                                         19 388     15 759
Financial liabilities                                                                 –         32
Taxation payable                                                                      –        289
Bank borrowings                                                                  31 986     42 206
Total equity and liabilities                                                    142 017    140 273
Number of shares in issue at end of year (net of treasury shares)      ('000)    90 064     93 682
Net asset value per share                                             (cents)       110         95

CONDENSED CONSOLIDATED
STATEMENT OF CHANGES IN EQUITY
FOR THE 12 MONTHS ENDED 31 MARCH 2016
 
                                                                                Reviewed   Audited
                                                                                    2016      2015
                                                                                   R'000     R'000
Balance at beginning of year                                                      81 877    70 742
Attributable earnings                                                             12 860    11 923
Acquisition of treasury shares                                                   (1 531)         –
Dividend declared                                                                  (927)         –
Non-controlling shareholders' interest                                           (1 636)     (788)
Balance at end of year                                                            90 643    81 877

CONDENSED CONSOLIDATED
STATEMENT OF CASH FLOWS
FOR THE 12 MONTHS ENDED 31 MARCH 2016

                                                                              Reviewed     Audited
                                                                                  2016        2015
                                                                                 R'000       R'000
Profit before taxation                                                          11 119       7 001
Adjustment for non-cash items                                                    4 754       5 918
Operating cash flows before working capital changes                             15 873      12 919
Net working capital changes                                                      6 128     (4 454)
Taxation paid                                                                  (1 019)       (717)
Cash flows from operating activities                                            20 982       7 748
Cash flows from investing activities                                           (1 386)       (804)
Cash flows from financing activities                                           (2 600)         142
Net increase in cash and cash equivalents                                       16 996       7 086
Cash and cash equivalents at beginning of year                                (40 894)    (47 980)
Cash and cash equivalents at end of year                                      (23 898)    (40 894)

SEGMENTAL ANALYSIS
FOR THE 12 MONTHS ENDED 31 MARCH 2016

                                                                               Reviewed    Audited
                                                                                   2016       2015
                                                                                  R'000      R'000
Revenue from external customers                                   
Staffing and Recruitment Services                                               532 350    612 275
Training and Consulting Services                                                 40 038     38 685
Total                                                                           572 388    650 960
Revenue – inter-segment                                   
Staffing and Recruitment Services                                                     –          –
Training and Consulting Services                                                     99        116
Total                                                                                99        116
Business segment operating profit results                                   
Staffing and Recruitment Services                                                27 326     27 690
Training and Consulting Services                                                  1 055      1 007
Central Services                                                               (13 897)   (17 106)
Operating profit                                                                 14 484     11 591
Interest received                                                                   454        272
Interest paid                                                                   (3 819)    (4 862)
Profit before taxation                                                           11 119      7 001
Business segment EBITDA                                   
Staffing and Recruitment Services                                                28 609     29 180
Training and Consulting Services                                                  1 397      1 443
Central Services                                                               (13 816)   (16 922)
Total                                                                            16 190     13 701
Business segment total assets                                   
Staffing and Recruitment Services                                               109 656    107 875
Training and Consulting Services                                                 19 989     20 728
Central Services                                                                 12 372     11 670
Total                                                                           142 017    140 273
Business segment net assets                                    
Staffing and Recruitment Services                                                61 564     57 377
Training and Consulting Services                                                 17 409     14 691
Central Services                                                                 11 670      9 809
Total                                                                            90 643     81 877

NOTES

1. BASIS OF PREPARATION
   The condensed consolidated financial statements are prepared in accordance with the 
   requirements of the JSE Limited Listings Requirements for provisional reports and the 
   requirements of the Companies Act of South Africa. The Listings Requirements require 
   provisional reports to be prepared in accordance with the framework concepts and the 
   measurement and recognition requirements of International Financial Reporting Standards 
   (IFRS) and the SAICA Financial Reporting Guides as issued by the Accounting Practices 
   Committee and Financial Pronouncements as issued by Financial Reporting Standards Council 
   and to also, as a minimum, contain the information required by IAS 34 Interim Financial 
   Reporting. The accounting policies applied in the preparation of the condensed consolidated 
   financial statements are in terms of IFRS and are consistent with those applied in the previous 
   consolidated annual financial statements. The results were prepared by the Group 
   Financial Director, Mr. R Sack CA (SA).

2. REVIEW OPINION
   The Group's auditors, Baker Tilly SVG, have reviewed the financial results for the year ended 
   31 March 2016. A copy of their unmodified review report is available for inspection at the Company's 
   registered office. Any reference to future financial performance included in this announcement 
   has not been reviewed nor reported on by the auditors.

3. FINANCIAL INSTRUMENTS
   At the reporting date, the group's financial assets and financial liabilities are all current. 
   The carrying value of all financial assets and financial liabilities is a reasonable approximation 
   of fair value.

4. WEIGHTED AVERAGE NUMBER OF SHARES
   The Primeserv Group Limited Share Trust purchased 3 617 972 shares which have reduced the weighted 
   average number of shares in issue during the year under review.

5. DIVIDEND
   Notice is hereby given that a final gross cash dividend of 1.35 cents per share (2015: 1 cent per share) 
   for the year ended 31 March 2016 was declared on Monday, 27 June 2016, payable to shareholders recorded 
   in the share register of the Company at the close of business on the record date appearing below. The salient 
   dates pertaining to the final dividend are as follows:

   Last date to trade "cum" dividend                                                       Monday, 8 August 2016
   Date trading commences "ex" dividend                                                Wednesday, 10 August 2016
   Record date                                                                            Friday, 12 August 2016
   Date of payment                                                                        Monday, 15 August 2016

   Ordinary share certificates may not be dematerialised or rematerialised between Wednesday, 10 August 2016 and 
   Friday, 12 August 2016, both days inclusive. 
   Shareholders who are not exempt from the Dividend Withholding Tax of 15% will therefore receive a net dividend 
   of 1.1475 cents per share. The Company has 132 062 743 ordinary shares in issue and its income tax reference number 
   is 9408/002/71/6. The dividend is being paid out of income reserves.

   All times provided in this announcement are South African local times.

   Where applicable, dividends in respect of certificated shares will be transferred electronically to shareholders' 
   bank accounts on the payment date. In the absence of specific mandates, dividend cheques will be posted to shareholders 
   at their risk. Ordinary shareholders who hold dematerialised shares will have their accounts at their CSDP or broker 
   credited on Monday, 15 August 2016.

6. EVENTS AFTER THE REPORTING DATE
   Management is not aware of any material events which have occurred subsequent to the end of March 2016. There has been 
   no material change in the Group's contingent liabilities since year-end.

7. TRANSFORMATION
   The Company has initiated a programme in terms of which qualifying B-BBEE staff are encouraged to acquire shares in the 
   capital of the Company. The acquisitions are supported by the provision of financial assistance by the Primeserv Group 
   Limited Share Trust. Following on from the approval by shareholders of resolutions related to the provision of financial 
   assistance to B-BBEE staff in January of this year, the Share Trust is now in the process of finalising the first round
   of transactions disposing of shares acquired, for the purpose, to qualifying B-BBEE employees supported by loans from 
   the Share Trust.

8. BOARD
   The following changes to the directorate took place:
   - CS Shiceka, an independent non-executive director, was appointed as Chairman on 31 March 2016, replacing M Abel who 
   had been Acting Chairman.
   - DC Seaton resigned as an executive director on 21 April 2016.

COMMENTARY

Primeserv Group Limited is an investment holding company with subsidiary
operations focused on providing 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 and Recruitment Services, and Training and Consulting
Services.

Primeserv's results for the 12 months ended 31 March 2016 were
satisfactory given the difficult economic trading conditions experienced
across most of the business sectors serviced by the Group. The performance
of the Group's largest business segment providing Temporary Employment
Services (TES) was negatively impacted by a combination of a poorly
performing economy and the initial reaction from certain industry specific
clients to the introduction of South Africa's new labour legislation. This
resulted in a higher than anticipated reduction in volumes across the
TES industry and consequently had a negative effect on revenue in the
flexible staffing component of the Group's business. This was primarily
attributable to some client uncertainty in relation to the implementation
of the employment relationship encompassed in the new Labour Relations
Act (LRA).

Through a process of client consultation and workplace forums, aligned to
Primeserv's overriding commitment to ensuring a clear understanding of
and compliance with the new labour laws (particularly in light of the Labour
Court ruling in September 2015 that clarified the employment relationship
between the TES, client and contractor) volumes across the TES market
have started to stabilise, however, at lower levels currently than had been
experienced prior to the amendments coming into effect.

As a consequence of lower staffing volumes, but taking cognisance of the
need to maintain the Group's strategic national footprint and client centric
service delivery capacity, stringent efficiency initiatives were implemented
whilst rightsizing was kept to a minimum. This has positioned the Group
to meet any uptake in demand for its services and deliver on new contract
awards. The Group continued to invest in the growth of its expanded
national infrastructure and systems based operations so as to remain price
competitive whilst entrenching its ethos of client service excellence.

As referred to at the interim reporting stage, attention has been directed
toward improving operating performance where possible, through contract
specific margin management. Allied to this is an ongoing programme focused
on employee skills assessment and training, youth development
and deployment in conjunction with Government's aim to alleviate
youth unemployment, and a need to improve workplace productivity.
Underperforming contracts across all of the Human Capital Services business
units were reassessed and some were brought to a close. To address the
revenue decline experienced in the financial year under review, investment
in an expanded national sales force has been undertaken which may have
a short term impact on future profit performance. This has led to the award
of some meaningful new contracts which once rolled out should result in
revenue growth.

As a result of the weak and uncertain operating environment and lower
staffing volumes, Group revenue for the year ended 31 March 2016
decreased by 12 percent from R651.0 million to R572.4 million.
Consequently earnings per share and headline earnings per share showed
muted growth increasing by 9 percent from 12.73 cents per share
to 13.86 cents per share. Earnings before tax and depreciation and
amortisation (EBITDA) increased by 18 percent from R13.7 million to
R16.2 million. Operating profit increased by 25 percent from R11.6 million
to R14.5 million. The net interest cost incurred by the Group decreased from
R4.6 million to R3.4 million with interest cover improving from a ratio of 2.5
to a ratio of 4.3 for the year under review. Profit before taxation increased by
59 percent from R7.0  million to R11.1 million, whilst total comprehensive
income increased by 1 percent from R11.1 million to R11.2 million on the
back of increased taxation. Overall the Group's headline earnings increased
by 8 percent from R11.9 million to R12.9 million.

The Group's balance sheet continued to reflect an improvement. Long term
and other receivables reduced year on year from an aggregate R8.9 million
to R8.6 million, with the long term component having reduced to nil.
Trade receivables have decreased from R85.2 million to R80.0 million
at year end, with Days Sales Outstanding (DSO) weakening from 42 days to 45 days.
This is indicative of the tighter trading environment. The Group improved its cash
and borrowings positions, with net bank borrowings decreasing from
R40.9 million to R23.9 million at the end of the financial year under
review. This resulted in gearing improving from 46 percent to 24 percent.
The Group's net asset value increased by 16 percent year on year from
95 cents per share to 110 cents per share.

As indicated previously, reduced headcount resulted in lower revenue in the
Staffing and Recruitment Services segment of the Group. Despite reduced
volumes, profitability was positively affected by a proactive and constructive
approach to dealing with the impact of the new LRA, ensuring stringent
compliance capability, aligned to the effective implementation of this
legislation in conjunction with improved workplace productivity initiatives.
Revenue declined by 13 percent from R612.2 million to R532.4 million.
A major loss of revenue was experienced in the business unit servicing the
petrochemical sector. This was a direct consequence of ongoing weakness
in the oil price, resulting in certain labour intensive projects being delayed
and planned maintenance shutdowns being minimised. The unit also
brought to an end a substantial but underperforming contract, which has
to date not been replaced. Whilst this business unit is expected to remain
under pressure for some time, its efforts are being redirected to develop
alternative revenue streams within the heavy industrial, engineering and
power generation sectors. The blue collar staffing unit which specialises
in servicing the logistics, warehousing and distribution market, as well as
the wholesale and retail, manufacturing and engineering and construction
sectors, delivered a satisfactory performance under trying conditions.
Lower than anticipated peak season volumes were experienced across
the logistics environment, whilst the engineering and construction
sector was severely depressed. The white collar professional draughting
and engineering staffing unit delivered a stable trading performance.
The Group has, in line with Government's programmes aimed at seeking to
create employment and upskilling opportunities particularly for the youth
and poorly skilled employees, directed its efforts and resources towards
driving these key national imperatives. This has been achieved through
the alignment of the Group's operational activities to benefits linked to
youth employment, learnerships and skills development grants. Given that
some of these programmes are coming to an end, the Group is focusing
on developing organic growth opportunities and diversifying its revenue
streams. Acquisitions within the outsourced business support services sector
are also being actively pursued. A change in client mix across the segment
combined with cost containment measures and the ongoing vigorous
management of working capital, as well as the benefits of efficiencies from
the Group's Central Services unit assisted in stabilising operating profit which
was marginally weaker at R27.3 million compared to R27.7 million for the comparable
period. The segment's DSO increased to 42 days from 40 days due in part
to the change in client mix and to the tougher collections environment.

The Training and Consulting Services segment offers both strategic and
growth opportunities to the Group as a whole. Investment was made in
developing new training product lines and also in furthering training and
upskilling at Primeserv's TES clients. In working closely with the Group's
staffing units emphasis was placed on employee development and
advancement allied to staff placement and procurement initiatives focused
on the local communities in which the Group's clients are located. Revenue
for the segment increased from R38.7 million to R40.0 million, with
operating profit increasing by 5 percent from R1.0 million to R1.1 million
for the 12 months ended 31 March 2016. Operating performance in the
latter part of the financial year was again affected by contract delays and
late cancellations, whilst fixed costs increased in anticipation of contract
starts. The segment's DSO deteriorated year on year from 75 days
to 82 days, due in the main to delayed payment from the SETAS. The
training unit has developed a dedicated Wholesale and Retail Academy
which specialises in delivering employee skills upliftment and workplace
sustainability programmes for the wholesale and retail sector. Emphasis has
been placed on developing this segment of the Group so as to expand its
value proposition from its inherently strategic impact to that of a meaningful
profit generator.

The South African economic outlook is weak. Growth prospects in many
of the industries serviced by the Group are under pressure. Consequently,
employment opportunities remain depressed. Nevertheless, the Group is
optimistic regarding its growth prospects. Primeserv's emphasis on a market
centric approach that delivers customised services for clients through its
national infrastructure, in ways that meet their constantly changing human
capital and productivity requirements, positions it to benefit from improved
trading conditions. The Group, as referred to earlier, is seeking acquisitions
and exploring other opportunities that will enable it to leverage its inherent
scalability whilst also diversifying its revenue base.

By order of the Board

Merrick Abel                       Raphael Sack
Chief Executive Officer            Financial Director

Primeserv Group Limited
27 June 2016

CORPORATE INFORMATION

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

www.primeserv.co.za
email: productivity@primeserv.co.za

DIRECTORS
CS Shiceka(#) (Chairman), M Abel (Chief Executive Officer), JM Judin(#), LM Maisela(*), 
DL Rose(#), R Sack (Financial Director) 
(#)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, 35 Ferguson Road, Illovo, 2196
(PO Box 821, Northlands, 2116)

SPONSOR
Deloitte & Touche Sponsor Services (Pty) Ltd, The Woodlands, 20 Woodlands Drive, Woodmead, 2196
(Private Bag X6, Gallo Manor, 2052)



Date: 27/06/2016 11:17:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
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