Wrap Text
Unaudited condensed consolidated interim results for the period ended 30 September 2016
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")
www.csgholdings.co.za
Unaudited condensed consolidated interim results
for the period ended 30 September 2016
Highlights
- Revenue increased by 43% to R832,79 million
(2015: R583,25 million)
- Operating profit increased by 32% to R61,32 million
(2015: R46,59 million)
- Net asset value increased by 26% to R429,12 million
(2015: R341,54 million)
- Profit before tax increased by 2% to R58,21 million
(2015: R57,05 million)
- EPS decreased by 2% to 9,61 cents per share
- HEPS decreased by 2% to 9,59 cents per share
Financial performance
The CSG group provides staffing solutions, facilities management,
including contract catering, cleaning and security as well as
industrial and mining support services to an array of clients, which
include chemical and petro-chemical plants, mines, industrial
businesses, manufacturing businesses, logistics businesses, retail
outlets, hospitals, schools and various other clients. The group
realised a 43% increase in revenue and a 32% increase in operating
profit for the six months ended 30 September 2016.
The improvement in revenue and operating profit was achieved through
both organic and acquisitive growth, which includes the benefit of
the additional shareholding in Ukweza Holdings Proprietary Limited
("Ukweza") since October 2015 and additional earnings from the
security and cleaning acquisitions included for the full six months
ended 30 September 2016.
The six months ended 30 September 2015 included the positive impact
of the non-cash once-off re-measurement of the contingent
consideration of R10,39 million relating to the ConinghamLee
Proprietary Limited ("ConinghamLee") acquisition (see note 3). As a
result of this once-off re-measurement, headline earnings per share
and earnings per share decreased by 2% compared to the six months
ended 30 September 2015. They were further diluted by the private
placement of 29,2 million shares issued on 18 July 2016 which
raised R35 million as well as the sale of 35% shareholding in
M&S Projects Proprietary Limited ("M&S Projects") on 1 June 2016
to non-controlling shareholders to improve their black shareholding.
Divisional review
Staffing Solutions Division
Revenue increased by 14% to R355,95 million contributing
R26,85 million (representing 38%) to the operating profit of the
group due to greater stability in the temporary employment industry
as companies adapted to the changes in labour legislation.
Facilities Management Division
The Facilities Management Division is now the largest division of
the group and its growth is in line with CSG’s strategy to diversify
further into this division by continued acquisitions in catering,
cleaning and security. Revenue increased by 88% to R391,66 million
contributing R28,71 million (representing 40%) to the operating
profit of the group. The increase is as a result of acquiring the
minority shares of Ukweza effective 1 October 2015, together with the
acquisition of Afriboom Proprietary Limited ("Afriboom"), the Hi-Tech
security group of companies and 7Arrows and Cubed Systems, which are
now included for the full six months.
Industrial and Mining services Division
Revenue was R85,18 million, an increase of 32% compared to the
comparative period and contributing R15,24 million (representing
22%) to the operating profit of the group. The increase is mainly
a result of 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.
Condensed consolidated statement of profit and loss and other
comprehensive income
Six months ended Audited
Unaudited Unaudited Year ended
30 Sept 30 Sept 31 March
2016 2015 2016
Notes R'000 R'000 R'000
Revenue 832 792 583 246 1 272 063
Cost of sales (652 755) (471 478) (1 012 003)
Gross profit 180 037 111 768 260 060
Net operating
expenses (118 718) (65 178) (153 467)
Operating profit 61 319 46 590 106 593
Profit on sale of property,
plant and equipment 98 132 368
Gain on bargain
purchase - - 61
Re-measurement of contingent
consideration relating to
business acquisition 3 - 10 389 10 088
Investment income 2 111 1 719 3 237
Finance cost (5 315) (1 781) (6 562)
Profit before taxation 58 213 57 049 113 785
Taxation (14 714) (13 267) (28 208)
Profit for the period 43 499 43 782 85 577
Other comprehensive income 422 (416) (4 184)
Total comprehensive
income 43 921 43 366 81 393
Profit for the period
attributable to:
Owners of the parent 41 574 41 105 83 540
Non-controlling interest 1 925 2 677 2 037
43 499 43 782 85 577
Total comprehensive income
attributable to:
Owners of the parent 41 996 40 729 79 356
Non-controlling interest 1 925 2 637 2 037
43 921 43 366 81 393
Weighted average shares in
issue ('000) 432 827 417 338 417 420
Diluted weighted average
shares in issue ('000) 434 577 421 232 420 181
Earnings per share
Basic earnings per
share (cents) 9,61 9,85 20,01
Diluted earnings per
share (cents) 9,57 9,76 19,88
Dividend per share
(cents) - - 5,00
Headline earnings reconciliation
Attributable earnings 41 574 41 105 83 540
(Profit)/loss on sale of
property, plant and equipment
(after taxation) (71) (95) 400
Impairment on property, plant
and equipment (after taxation) - - 527
Gain on bargain purchase - - (61)
Headline earnings 41 503 41 009 84 406
Headline earnings per share
Basic headline earnings per
share (cents) 9,59 9,83 20,22
Diluted headline earnings
per share (cents) 9,55 9,74 20,09
Segment reporting
Six months ended Audited
Unaudited Unaudited Year ended
30 Sept 30 Sept 31 March
2016 2015 2016
R'000 R'000 R'000
Revenue
Staffing Solutions 355 952 311 097 598 940
Facilities Management 391 661 207 825 546 452
Industrial and Mining
Support Services 85 178 64 324 126 671
Total group 832 792 583 246 1 272 063
Operating profit 61 319 46 590 106 593
Staffing Solutions 26 846 31 748 57 454
Facilities Management 28 710 11 206 45 959
Industrial and Mining
Support Services 15 235 13 183 24 838
Head office (9 472) (9 547) (21 658)
Profit before taxation 58 213 57 049 113 785
Staffing Solutions 24 313 41 328 65 940
Facilities Management 29 718 11 257 46 062
Industrial and Mining
Support Services 14 878 13 007 24 483
Head office (10 697) (8 543) (22 699)
Condensed consolidated statement of financial position
Six months ended Audited
Unaudited Unaudited Year ended
30 Sept 30 Sept 31 March
2016 2015 2016
Notes R'000 R'000 R'000
Assets
Non-current assets 366 385 164 762 339 479
Property, plant and
equipment 43 335 31 403 42 444
Intangible assets 69 939 648 70 072
Goodwill 221 700 127 462 221 700
Deferred taxation 5 288 4 939 4 953
Interest-bearing
loans 26 123 310 310
Current assets 409 570 314 640 314 371
Inventories 9 427 8 137 9 016
Current income tax
receivable 1 575 684 1 224
Current portion of loans
to related parties 434 - 981
Trade and other
receivables 299 811 237 613 258 326
Bank and call deposits 98 322 68 206 44 824
Total assets 775 956 479 402 653 850
Equity and liabilities
Capital and reserves 429 120 341 540 345 993
Stated capital 4.2 223 921 188 694 188 694
Treasury shares 4.1 (1 247) (1 571) (1 678)
Share-based payment
reserve 934 582 591
Retained earnings 196 320 140 522 162 263
Foreign currency
translation reserve (4 339) (954) (4 762)
Non-controlling interest 13 530 14 267 885
Non-current liabilities 92 548 22 180 103 600
Interest-bearing liabilities 71 483 22 128 82 534
Contingent consideration 5 169 - 5 169
Deferred taxation 15 897 52 15 897
Current liabilities 254 287 115 682 204 257
Current portion of interest-
bearing liabilities 24 538 9 829 24 475
Current portion of loans
from related parties 200 138 636
Bank overdrafts and invoice
discounting 7 439 7 770 474
Trade and other payables 212 917 91 934 172 574
Trade payables and accruals 144 247 91 323 103 903
Current portion of
contingent consideration 68 671 611 68 671
Current income tax payable 9 193 6 011 6 098
Total equity and liabilities 775 956 479 402 653 850
Shares in issue ('000) 448 781 418 322 418 322
Net asset value per
share (cents) 95,6 81,6 82,7
Net tangible asset value
per share (cents) 30,6 51,2 13,0
Condensed consolidated statement of cash flows
Six months ended Audited
Unaudited Unaudited Year ended
30 Sept 30 Sept 31 March
2016 2015 2016
Notes R'000 R'000 R'000
Cash flow from
operations 53 776 9 373 41 795
Cash generated by
operations 65 839 22 406 72 119
Investment income 2 111 1 719 3 237
Finance cost (1 869) (1 781) (4 511)
Taxation paid (12 305) (12 971) (29 050)
Cash flow from (5 975) (6 636) (121 414)
investing activities
Net investment in property,
plant and equipment (5 975) (6 636) (15 927)
Net investment in
intangible assets - - (15)
Cash purchase consideration
made relating to Ukweza
acquisition - - (7 000)
Business combination
transaction costs - - (1 104)
Acquisition of subsidiaries - - (97 368)
Cash flow from
financing activities (1 268) (24 164) 42 106
Dividends paid (21 191) (20 648) (20 648)
Net purchase of
treasury shares 4.1 431 (176) (283)
Issue of ordinary
shares 4.2 35 228 1 103 1 103
Movement in interest-
bearing liabilities and
related party loans (15 736) (4 443) 61 934
Increase/(decrease)
in cash resources 46 533 (21 427) (37 513)
Cash resources at
beginning of period 44 350 81 863 81 863
Cash resources at
end of period 90 883 60 436 44 350
Cash resources 90 883 60 436 44 350
Bank and call deposits 98 322 68 206 44 824
Bank overdraft and invoice
discounting (7 439) (7 770) (474)
Condensed consolidated statement of changes in equity
Total
attributable
to equity Non-
holders control-
of the ling Total
parent interest equity
Notes R'000 R'000 R'000
Equity at 1 April 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 591 - 591
Treasury shares (176) - (176)
Ordinary shares issued 1 103 - 1 103
Sale of shares to non-
controlling interest (265) 265 -
Equity at 30 September
2015 (Unaudited) 327 281 14 268 341 549
Total comprehensive
income for the period 38 627 (600) 38 027
Treasury shares (107) - (107)
Additional Ukweza
acquisition (20 693) (12 783) (33 476)
Equity at 31 March 2016
(Audited) 345 108 885 345 993
Total comprehensive
income for the period 41 996 1 925 43 921
Dividend paid (20 916) (275) (21 191)
Share-based payment
reserve 343 - 343
Treasury shares 4.1 431 - 431
Sale of shares to non-
controlling interest 5 13 399 10 996 24 395
Ordinary shares issued 4.2 35 228 - 35 228
Equity at 30 September
2016 (Unaudited) 415 590 13 530 429 120
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 solutions, facilities
management which includes contract catering, cleaning, food services
and security, as well as outsourced industrial and mining support
services to a range of clients.
2. Basis of preparation
These condensed consolidated interim results for the period ended
30 September 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 Chief Financial Officer, Mr WE Scott CA(SA).
3. Coninghamlee contingent consideration prior year
In terms of the acquisition of ConinghamLee an initial cash amount
of R24 million was paid through a Nedbank term funding facility on
4 November 2014. The purchase consideration also included an
additional amount of R11 million payable based on the financial
performance of ConinghamLee for the 12-month period following the
acquisition date. On the date of the acquisition, based on the
projected profits, 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 of the performance guaranteed period were negatively impacted
by the pressure on commodity prices and cost cutting measures
implemented by its clients, which directly impacted the expected
profits during the performance guarantee period. A portion of the
contingent consideration was, therefore, reversed in profit and loss
for the six months ended 30 September 2015. The final re-measurement
was performed during the year ended 31 March 2016. The re-measurement
was an impairment indicator of goodwill assigned and management had
to perform a detailed 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 2016, 29 146 119 shares were issued in terms of a private
placement and an additional 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. Sale of M&S Projects shares
On 1 June 2016, CSG sold 35% of their shareholding in M&S Projects to
non-controlling shareholders to improve its black shareholding for an
amount of R24,4 million.
6. Capital commitments and contingencies
The group had no significant outstanding capital commitments or
contingencies as at 30 September 2016.
7. Events after the reporting period
The directors are not aware of any material events which occurred
after the reporting date and up to the date of this report.
Shareholders should, however, note that the following occurred
subsequent to the period end:
7.1 Recall Africa
As disclosed in the integrated annual report for the year ended
31 March 2016, CSG, through its wholly owned subsidiary, 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
effective date was 1 May 2016 and the total consideration would have
been settled in four quarterly payments. Unfortunately these
companies did not perform as anticipated and the parties mutually
agreed to terminate the agreement. No payments were made towards
this transaction.
7.2 Transfer of CSG's listing to the main board of the JSE and change
in sponsor
On 14 November 2016, the company applied to the Issuer Regulation
Division of the JSE approved the transfer of CSG's listing from the
Alternative Exchange of the JSE, to the main board of the JSE
effective 21 November 2016. The Board of directors of CSG ("the
Board") is of view that the transfer of listing will be in the best
interest of stakeholders as it will allow CSG to capitalise on the
benefits of being listed on the main board of the JSE. The company
has also appointed PSG Capital Proprietary Limited as its sponsor
with effect from 1 December 2016.
7.3 Addendum to the Hi-Tech Security sale of shares agreement
On 4 November 2015 CSG had entered into an agreement with The Future
Kerswill Trust (represented by Mr J Kerswill), in terms of which
CSG acquired a 100% interest in the issued share capital of
Hi-Tech Nelspruit Proprietary Limited ("Hi-Tech Nelspruit"). On
7 November 2016 the parties subsequently concluded an addendum to the
agreement in terms of which a portion of the final amount, to the
value of R2,5 million, will be settled by the issue of CSG shares
while the balance will be settled in cash. The number of
CSG shares to be issued will be calculated according to the
volume weighted average share price of the shares of CSG for the
30 trading days immediately preceding 27 October 2016, being
R1,36259 per share.
7.4 Changes to the Board
As announced on SENS on 12 October 2016, Ms Rojie Kisten was
appointed as an independent non-executive director of the company and
as member of the company's Audit and Risk Committee, Social and
Ethics Committee and Remuneration and Nomination Committee of CSG
with effect from 12 October 2016.
7.5 Specific issue of shares for cash
As detailed in the SENS announcement dated 22 November 2016,
CSG has entered into an irrevocable undertaking with AfriGem
Investments Proprietary Limited ("AfriGem"), in terms of
which AfriGem has agreed to subscribe for 41 million CSG shares
for cash at an issue price of R1,18 per share and for a total
consideration of R48,3 million, subject to shareholders approval.
8. Going concern
The financial information has been prepared on a going concern
basis.
For and on behalf of the Board
BT Ngcuka PJJ Dry
Chairman Chief Executive
23 November 2016
Directors
BT Ngcuka* (Chairman)
PJJ Dry (CEO)
JG Nieuwoudt (COO)
WE Scott (CFO)
NG Thiart
NN Sonjani*#
PN de Waal*
M Mokoka*#
R Kisten*# (appointed 12 October 2016)
(* 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: 23/11/2016 08:00:00 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.
Sharenet Sites 
