Wrap Text
Unaudited interim financial results
for the six months ended 30 September 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
2016
PRIMESERV GROUP LIMITED
UNAUDITED INTERIM FINANCIAL RESULTS
FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2016
Condensed consolidated statement of comprehensive income
For the six months ended 30 September 2016
Unaudited Unaudited Audited
30 September 30 September 31 March
2016 2015 2016
R' 000 R' 000 R' 000
Revenue 297 263 287 632 572388
Cost of sales -249 801 -236 782 -472342
Gross profit 47 462 50 850 100046
Other income 109 1 921 4128
Operating expenses -37 786 -44 460 -89690
Operating profit 9 785 8 311 14484
Interest received 97 118 454
Interest paid -972 -2 222 -3 819
Profit before taxation 8 910 6 207 11 119
Taxation -1 459 -474 105
Total comprehensive income 7 451 5 733 11 224
Total comprehensive income attributable to:
Ordinary shareholders of the Company 7 005 6 032 12 860
Non-controlling shareholders' interest - share of profit / (loss) 446 -299 -1 636
Total comprehensive income 7 451 5 733 11 224
Weighted average number of shares 90 064 93 682 92 787
Diluted weighted average number of shares 90 064 93 682 92 787
Earnings per share and diluted earnings per share 7.78 6.44 13.86
Headline earnings per share and diluted headline earnings per share 7.78 6.44 13.86
Condensed consolidated statement of financial position
As at 30 September 2016
Unaudited Unaudited Audited
30 September 30 September 31 March
2016 2015 2016
R' 000 R' 000 R' 000
ASSETS
Non-current assets 42 465 44 584 44 619
Equipment and vehicles 3 644 3 498 3 693
Investment property 7 645 7 645 7 645
Goodwill 18 170 18 170 18 170
Intangible assets 693 967 882
Long term receivable - 498 -
Deferred tax asset 12 313 13 806 14 229
Current assets 96 314 94 584 97 398
Inventories 93 117 103
Trade receivables 84 574 76 457 79 994
Other receivables 9 939 9 520 8 576
Taxation receivable 634 224 637
Cash and cash equivalents 1 074 8 266 8 088
TOTAL ASSETS 138 779 139 168 142 017
EQUITY AND LIABILITIES
Equity 96 878 86 683 90 643
Capital and reserves 105 423 94 337 99 634
Non-controlling interest -8 545 -7 654 -8 991
Non-current liabilities - 90 -
Current liabilities 41 901 52 395 51 374
Trade and other payables 25 473 11 900 19 388
Current portion of interest bearing liabilities - 36 -
Dividend payable - 927 -
Bank borrowings 16 428 39 532 31 986
TOTAL EQUITY AND LIABILITIES 138 779 139 168 142 017
Number of shares in issue at end of period
(net of treasury shares) ('000) 90 064 92 742 90 064
Net asset value per share (cents) 117 102 110
Condensed consolidated statement of changes in equity
For the six months ended 30 September 2016
Unaudited Unaudited Audited
30 September 30 September 31 March
2016 2015 2016
R' 000 R' 000 R' 000
Balance at beginning of period 90 643 81 877 81 877
Attributable earnings 7 005 6 032 12 860
Acqusition of treasury shares - - -1 531
Dividend declared -1 216 -927 -927
Non-controlling shareholders' interest 446 -299 -1 636
Balance at end of period 96 878 86 683 90 643
Condensed consolidated statement of cash flows
For the six months ended 30 September 2016
Unaudited Unaudited Audited
30 September 30 September 31 March
2016 2015 2016
R' 000 R' 000 R' 000
Profit before taxation 8 910 6 207 11 119
Adjustment for non-cash items 1 610 3 621 4 754
Operating cash flows before working capital changes 10 520 9 828 15 873
Net working capital changes -148 1 220 6 128
Taxation paid 4 -762 -1 019
Cash flows from operating activities 10 376 10 286 20 982
Cash flows from investing activities -616 -642 -1 386
Cash flows from financing activities -1 216 -16 -2 600
Net increase in cash and cash equivalents 8 544 9 628 16 996
Cash and cash equivalents at beginning of period -23 898 -40 894 -40 894
Cash and cash equivalents at end of period -15 354 -31 266 -23 898
Segmental analysis
For the six months ended 30 September 2016
Unaudited Unaudited Audited
30 September 30 September 31 March
2016 2015 2016
R' 000 R' 000 R' 000
Revenue from external customers
Staffing and Recruitment Services 280 451 266 179 532 350
Training and Consulting Services 16 812 21 453 40 038
Total 297 263 287 632 572 388
Revenue - inter-segment
Staffing and Recruitment Services - - -
Training and Consulting Services 6 104 99
Total 6 104 99
Business segment operating profit results
Staffing and Recruitment Services 15 043 14 826 27326
Training and Consulting Services 1 487 2 129 1055
Central Services -6 745 -8 644 -13897
Operating profit 9 785 8 311 14484
Interest received 97 118 454
Interest paid -972 -2 222 -3 819
Profit before taxation 8 910 6 207 11 119
Business segment EBITDA
Staffing and Recruitment Services 15 522 15 521 28 609
Training and Consulting Services 1 627 2 311 1 397
Central Services -5 916 -8 450 -13 816
Total 11 233 9 382 16 190
Business segment total assets
Staffing and Recruitment Services 104 979 102 133 109 656
Training and Consulting Services 18 736 21 340 19 989
Central Services 15 064 15 695 12 372
Total 138 779 139 168 142 017
Business segment net assets
Staffing and Recruitment Services 66 734 59 927 61 564
Training and Consulting Services 19 665 16 393 17 409
Central Services 10 479 10 363 11 670
Total 96 878 86 683 90 643
NOTES TO INTERIM REPORT
30 SEPTEMBER 2016
NOTES
1. BASIS OF PREPARATION
The condensed consolidated interim financial statements are prepared in accordance with
International Financial Reporting Standards (IFRS), IAS34 Interim Financial Reporting, the
SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and the
Financial Pronouncements as issued by the 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 IFRS 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
2016 2015 2016
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 fair value 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. 3 - 498 -
Cash and cash equivalents 1 1 074 8 266 8 088
3. DIVIDEND
No interim dividend is proposed for the period under review. The final dividend in respect of
the financial year ended 31 March 2016 was paid to shareholders on 15 August 2016.
4. EVENTS AFTER THE REPORTING DATE
Other than the acquisition of certain contracts and rights from the Cozens Group,
management is not aware of any material events which have occurred subsequent to the
end of the financial period under review.
Commentary
Primeserv Group is an investment holding company focused on providing market leading
business support services to organisations throughout Southern Africa. Our services are
delivered through our operating pillar, Primeserv Human Capital Services. This incorporates
two main areas of specialisation, namely Staffing and Recruitment Services and Training and
Consulting Services. We offer a client-centric, insight-based, integrated approach to human
capital planning and implementation. For our clients this means increased productivity,
reduced human resources related risk and the freedom to concentrate on their core
business.
Tough trading conditions persisted throughout the six months ended 30 September 2016.
Group revenue for the period increased marginally by 3% from R287,6 million to R297,3
million. Gross profit margins remained under pressure. This was exacerbated during the
review period primarily by changes in the headcounts and hours worked at many of the
clients across the Group's Staffing and Recruitment Services segment. Weaker than
budgeted operating margins in the Training and Consulting Services segment also negatively
impacted overall gross profit. Consequently gross profit decreased by 7% from R50,9 million
to R47,5 million for the period under review. This was offset by lower operating expenses,
mainly as a result of further efficiencies and stronger working capital management.
Interest paid improved from R2,2 million to R1,0 million. Interest cover remains strong.
EBITDA for the six months increased by 20% from R9,4 million to R11,2 million with
operating profit increasing by 18% from R8,3 million to R9,8 million. Total comprehensive
income attributable to shareholders of the Company increased from R6,0 million to R7,0
million for the review period. Earnings per share and headline earnings per share increased
by 21% from 6,44 cents per share to 7,78 cents per share.
The balance sheet continues to strengthen. Trade receivables have increased from R76,5
million to R84,6 million at the end the reporting period. The average days sales outstanding
("DSO") has improved from 42 days to 39 days for the period under review. Trade payables
have increased to R25,5 million. Cash flow from operating activities was sound, improving
slightly from R10,3 million in the comparable period to R10,4 million during the period
under review. Cash and cash equivalents recorded a net inflow of R8,5 million for the 6
months ended September 2016. Overall gearing has improved from 33% at the end of
September 2015 to 15% at the end of September 2016. The Group's net asset value per
share increased by 15% to 117 cents per share at the end of September 2016.
The Group's operations continue to focus on improving operational performance where
possible through stringent cost containment and contract specific margin management. This
has enabled the Group to remain price competitive in a value driven economic environment.
Ongoing investment continued to be made in expanding the Group's national sales force so
as to drive revenue growth. Given the challenging trading environment and long sales cycles
applicable to the Group's current service offerings, anticipated opportunities will take time
to close and consequently this investment may impact profitability in the short term.
Aligned to this growth initiative is the Group's ongoing programme focused on employee
skills assessment and upskilling, as well as youth development and deployment aimed at
reducing youth unemployment and a constant need to enhance workplace productivity.
Revenue in the Staffing and Recruitment Services segment increased by 5% from R266,2
million to R280,5 million. The segment's operating profit remained consistent, improving by
1% from R14,8 million to R15,0 million. EBITDA was flat at R15,5 million. The segment's DSO
improved from 40 days at the end of September 2015 to 36 days at the end of the current
reporting period.
The blue collar staffing unit, specializing in servicing the logistics, warehousing and
distribution market, as well as the wholesale and retail, manufacturing and engineering and
construction sectors, delivered another period of satisfactory results under difficult market
conditions. Headcount remained stable but man-hours worked were under pressure,
particularly across the units servicing the logistics and wholesale and retail sectors. The
white collar professional draughting and engineering staffing unit faced revenue pressure in
some of its markets, whilst continuing to deliver a stable performance.
The Training and Consulting Services segment offers both strategic and growth
opportunities to the Group. Ongoing investment was made in new training products and
initiatives so as to remain relevant to the constantly changing skills gap in the South African
economy. This segment continues to work closely with the Group's staffing units, placing
emphasis on employee development and advancement allied to staff placement and
procurement initiatives directed at the local communities in which the Group's clients are
located. This strategy is a key component of the Group's sustainability plan that aligns its
staffing and training offerings to the national imperative of growing employment in South
Africa.
Revenue from the Training and Consulting operations was negatively affected by
cancellations and delays primarily related to SETA related contracts. This saw revenue
decline by 22% from R21,5 million to R16,8 million for the period under review. Given the
high fixed costs inherent in this segment's operations and the drop in revenue experienced during
this period, operating profit was negatively impacted, resulting in a decrease of 30% from
R2,1 million to R1,5 million, whilst EBITDA decreased by 30% from R2,3 million to R1,6 million.
DSO remained high at 83 days compared to 76 days for the comparable period. Efforts to
change the operating model for this unit to incorporate a more variable cost base are
underway.
Board
CS Shiceka-Ntshingila was appointed as Chairperson on 31 March 2016 and DC Seaton resigned
as a director on 21 April 2016. There were no other changes to the Board during the
period under review.
Outlook
The South African economy remains under pressure and growth prospects in many of the
sectors serviced by the Group continue to be weak. Nevertheless, the Group is targeting
both organic and acquisitive opportunities in line with its well-developed national business
support services capability.
On behalf of the Board
CS Shiceka-Ntshingila M Abel R Sack
Chairperson Chief Executive Officer Financial Director
22 November 2016
Illovo
CORPORATE INFORMATION
www.primeserv.co.za
email: productivity@primeserv.co.za
DIRECTORS: CS Shiceka-Ntshingila* (Chairperson), 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
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
SPONSORS: Grindrod Bank Limited, 4th Floor Grindrod Towers, 8A Protea Place, Sandton, 2196
Date: 22/11/2016 05:25:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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