Wrap Text
Provisional Reviewed Condensed Consolidated Results For The Year Ended 31 March 2017 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”)
Provisional reviewed condensed consolidated results
for the year ended 31 March 2017 and dividend declaration
- Revenue increased by 37% to R1,7 billion (2016: R1,3 billion)
- Profit after tax increased by 7% to R91 million (2016: R86 million)
- Operating profit increased by 20% to R128 million (2016: R107 million)
- Normalised EPS increased by 10% to 19,29 cents per share
(2016: 17,60 cents per share)
- EPS decreased by 3% to 19,37 cents per share (2016: 20,01 cents per share)
- HEPS decreased by 4% to 19,42 cents per share (2016: 20,22 cents per share)
- Dividend declared maintained at 5 cents per share
- Net asset value increased by 24% to 102,90 cents per share
(2016: 82,7 cents per share)
Provisional condensed consolidated statement of profit and loss and other
comprehensive income
Reviewed Audited
31 March 31 March
2017 2016
Notes R’000 R’000
Revenue 1 746 629 1 272 063
Cost of sales (1 375 205) (1 012 003)
Gross profit 371 424 260 060
Net operating expenses (243 908) (153 467)
Operating profit 127 516 106 593
Profit on sale of property,
plant and equipment 240 368
Gain on bargain purchase – 61
Re-measurement of contingent
consideration relating to
business acquisition 3 355 10 088
Investment income 6 920 3 237
Finance cost (11 358) (6 562)
Profit before taxation 123 673 113 785
Taxation (32 231) (28 208)
Profit for the period 91 442 85 577
Other comprehensive income (9 059) (4 184)
Total comprehensive income 82 383 81 393
Profit for the period attributable to:
Owners of the parent 86 787 83 540
Non-controlling interest 4 655 2 037
91 442 85 577
Total comprehensive income attributable to:
Owners of the parent 77 728 79 356
Non-controlling interest 4 655 2 037
82 383 81 393
Weighted average shares in
issue (’000) 448 136 417 420
Diluted weighted average shares in
issue (’000) 449 789 420 181
Earnings per share
Basic earnings per share (cents) 19,37 20,01
Diluted earnings per share (cents) 19,30 19,88
Dividend per share (cents) 5,00 5,00
Headline earnings reconciliation
Attributable earnings 86 787 83 540
(Loss)/profit on sale of property,
plant and equipment (after taxation) (172) 400
Impairment on property, plant and
equipment (after taxation) – 527
Impairment on other
financial assets 410 –
Gain on bargain purchase – (61)
Headline earnings 87 025 84 406
Headline earnings per share
Basic headline earnings per share (cents) 19,42 20,22
Diluted headline earnings
per share (cents) 19,35 20,09
Provisional condensed consolidated statement of financial position
Audited
Reviewed restated
31 March 31 March
2017 2016
Notes R’000 R’000
Assets
Non-current assets 444 966 343 117
Property, plant and equipment 55 094 42 824
Intangible assets 7 78 731 79 374
Goodwill 264 522 215 656
Deferred taxation 6 601 4 953
Other financial assets 40 018 310
Current assets 398 024 313 520
Inventories 8 608 9 016
Current income tax receivable 3 149 1 224
Current portion of other
financial assets 5 520 981
Trade and other receivables 327 647 257 475
Bank and call deposits 53 100 44 824
Total assets 842 990 656 637
Equity and liabilities
Capital and reserves 528 082 345 993
Stated capital 4.1 284 658 188 694
Treasury shares 4.2 (1 247) (1 678)
Share based payment reserve 102 591
Retained earnings 242 125 162 263
Foreign currency translation
reserve (13 821) (4 762)
Non-controlling interest 16 265 885
Non-current liabilities 82 275 104 929
Interest bearing liabilities 65 143 82 534
Contingent consideration – 5 169
Deferred taxation 17 132 17 226
Current liabilities 232 633 205 715
Current portion of interest
bearing liabilities 26 700 24 475
Current portion of loans 8 636
from related parties
Bank overdrafts and invoice
discounting 31 208 474
Trade and other payables 170 417 174 032
Trade payables and accruals 143 421 105 361
Current portion of
contingent consideration 3 26 996 68 671
Current income tax payable 4 300 6 098
Total equity and liabilities 842 990 656 637
Shares in issue (’000) 497 416 418 322
Net asset value per share (cents) 102,90 82,7
Net tangible asset value per
share (cents) 33,89 12,0
Segment reporting
Reviewed Audited
31 March 31 March
2017 2016
Revenue
Staffing solutions 761 918 598 940
Facility management 822 013 546 453
Industrial and mining support services 162 698 126 671
Total Group 1 746 629 1 272 063
Operating profit 127 516 106 593
Staffing solutions 64 509 57 456
Facility management 54 631 45 959
Industrial and mining support services 28 777 24 836
Head office (20 401) (21 658)
Profit before taxation 123 673 113 785
Staffing solutions 62 651 65 941
Facility management 53 497 46 061
Industrial and mining support services 28 278 24 481
Head office (20 753) (22 699)
Provisional condensed consolidated statement of cash flows
Reviewed Audited
31 March 31 March
2017 2016
Notes R’000 R’000
Cash flow from operations 58 901 41 795
Cash generated by operations 101 636 72 119
Investment income 3 639 3 237
Finance cost (9 307) (4 511)
Taxation paid (37 067) (29 050)
Cash flow from investing activities (106 264) (114 414)
Net investment in property, plant
and equipment (28 615) (15 927)
Net investment in intangible assets (28) (15)
Cash purchase consideration made
relating to Afriboom and Hi-Tech
acquisitions (30 929) –
Business combination transaction costs (410) (1 104)
Acquisition of businesses 7 (46 282) (97 368)
Cash flow from financing activities 24 905 35 106
Dividends paid (21 186) (20 648)
Net purchase of treasury shares 431 (283)
Cash purchase consideration made
relating to Ukweza acquisition (2 951) (7 000)
Issue of ordinary shares 4.1 83 356 1 103
Movement in interest bearing
liabilities and other financial
assets 4.2 (34 745) 61 934
Decrease in cash resources (22 458) (37 513)
Cash resources at beginning of
period 44 350 81 863
Cash resources at end of period 21 892 44 350
Cash resources 21 892 44 350
Bank and call deposits 53 100 44 824
Bank overdraft and invoice discounting (31 208) (474)
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 31 March
2015 (Audited) 303 981 13 332 317 313
Total comprehensive income
for the period 79 356 2 037 81 393
Dividend paid (18 682) (1 966) (20 648)
Sale of shares to
non-controlling interest (264) 264 –
Additional Ukweza acquisition (20 693) (12 783) (33 476)
Share based payment reserve 591 – 591
Treasury shares (283) – (283)
Ordinary shares issued 1 103 – 1 103
Equity at 31 March
2016 (Audited) 345 109 884 345 993
Total comprehensive income
for the period 77 728 4 655 82 383
Dividend paid (20 916) (270) (21 186)
Sale of shares to
non-controlling interest 6 13 399 10 996 24 395
Share based payment reserve 102 – 102
Treasury shares 4.1 431 – 431
Ordinary shares issued 4.2 95 964 – 95 964
Equity at 31 March
2017 (Reviewed) 511 816 16 265 528 082
Financial performance
The CSG Group provides staffing solutions, facilities management, including
security as well as industrial and mining support services. The Group
delivers services across a wide range of industries, which include chemical
and petro-chemical, manufacturing, logistics, retail, healthcare, education,
mining and industrial industries.
CSG’s mission remains to be a leading strategic outsourced partner of choice
for staffing solutions, facilities management and security in Southern Africa.
The Company continued to consolidate and increase the basket of services
offered to clients in these divisions for the year ended 31 March 2017.
With effect from 1 December 2016 CSG transferred its listing to the main board
of the JSE to capitalise on the benefits such a listing offers.
CSG made two material acquisitions during the financial year. In November 2016
the Group announced the acquisition of the armed response and monitoring
business of Stallion Reaction for R50 million effective 1 March 2017. The
purchase of Revert Risk Management Solutions Proprietary Limited for
R100 million was announced in March 2017 and became effective 1 May 2017.
Both acquisitions are in alignment with CSG’s strategy to expand the Company’s
security operations and to diversify into other services. The focus has been
on expanding into service delivery businesses that are more technology based,
with a higher barrier to entry.
CSG believes that the inclusion of Stallion Reaction and Revert Risk Management
will not only enhance the Group’s performance in the next financial year but
also provide a more balanced contribution to operating profit from all three
divisions. It remains CSG’s strategy to invest in relatively low capital
intensive businesses.
On 13 January 2017 CSG announced that AfriGem Investments (“AfriGem”), a wholly
owned subsidiary of African Rainbow Capital, subscribed for 8,3% or 41 million
of CSG’s shares. This specific issue introduced a new strategic black investor
to the Group that has improved CSG’s BEE shareholding to approximately 30%.
The Group realised a 37% increase in revenue and a 20% increase in operating
profit for the year ended 31 March 2017.
The improvement in revenue and operating profit was achieved through both
organic and acquisitive growth, which includes the additional earnings from
the security and cleaning acquisitions included for the full year.
The previous year, ended 31 March 2016, included the positive impact of the
non-cash once-off re-measurement of the contingent consideration of
R10,09 million relating to the ConinghamLee Proprietary Limited
(“ConinghamLee”) acquisition whereas the impact for the current period is
R0,4 million (see note 3).
The normalised earnings per share, excluding the above-mentioned re-
measurement, increased from 17,60 to 19,29, a 10% increase; however,
earnings per share decreased by 3% compared to the 2016 financial year.
The 2017 earnings per share were diluted by the following: the private
placement of 29,2 million shares issued on 18 July 2016 which raised
R35 million; the subscription of 41 million shares by AfriGem on
1 February 2017, which raised another R48 million; and the sale of a
35% shareholding in M&S Projects Proprietary Limited on 1 June 2016 to
non-controlling shareholders as part of a BEE scheme to improve their
black shareholding. Part of the proceeds from these placements was used
for the two security acquisitions.
Divisional review
Staffing Solutions Division
Revenue increased by 27% to R761,92 million contributing R64,51 million
(representing 44%) 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. A further contributor was the diversification
in this division towards services other than temporary employment.
Facility Management Division
This is now the largest division of the Group and its growth is in line
with CSG’s strategy to diversify further by continued acquisitions in this
segment. Revenue increased by 50% to R822,01 million, contributing
R54,63 million (representing 37%) to the operating profit of the Group.
The increase is as a result of acquiring Afriboom Proprietary Limited
(“Afriboom”), the Hi-Tech security group of companies, and 7Arrows, which
are now included for the full year. Only one month of profits relating to
the business of Stallion Reaction was included.
Industrial and Mining Services Division
Revenue was R162,70 million, an increase of 28% compared to the comparative
period, and contributed R28,78 million (representing 19%) to the operating
profit of the Group. The increase is mainly as 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.
Notice of final cash dividend
The Board of directors has approved a gross final cash dividend of 5 cents
per share on the ordinary shares from profits accrued during the year
ended 31 March 2017. The dividend has been declared from income reserves.
The dividend will be subject to a dividend withholding tax of 20% 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 20% amounts to 4 cents per share.
The issued share capital at the declaration date is 497 416 063 ordinary
shares.
The Company’s tax reference number is 9159246165.
The salient dates are as follows:
- Date of declaration Thursday, 1 June 2017
- Last day for trading to qualify and participate in the final dividend
(and change of address or dividend instructions) Tuesday, 27 June 2017
- Trading ex-dividend commences Wednesday, 28 June 2017
- Record date Friday, 30 June 2017
- Dividend payment date Monday, 3 July 2017
Share certificates may not be dematerialised or rematerialised between
Wednesday, 28 June 2017 and Friday, 30 June 2017, 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, cleaning, food services and security,
as well as outsourced industrial and mining support services to a range
of clients.
2. 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.
These results were prepared under the supervision of the Group CFO,
Mr WE Scott CA(SA).
3. Contingent considerations
The amount of R10,09 million represents the portion of the re- measurement
of the contingent consideration relating to the ConinghamLee acquisition
which was reversed in profit and loss during 2016.
In 2016 contingent considerations were raised for the 38.1% interest acquired
in Ukweza, the Afriboom acquisition as well as the Hi-Tech acquisitions. The
final purchase consideration for Ukweza is R35,96 million and the remaining
balance of R26m will be settled through the issue of CSG shares in June 2017.
The final purchase consideration for Afriboom was R33,69 million and Hi-Tech
Nelspruit was R42,73 million and was settled in a combination of cash and
shares (refer note 4) before year-end. The revised performance guarantee
amount for Hi-Tech White River is R0,9 million. The net portion of the
contingent considerations that did not realise and the revised re-measurement
being R0,4 million was therefore reversed in profit and loss in 2017.
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.
On 1 December 2016, 5 800 613 shares were issued to Pieter van der Westhuizen
as part of an agreement (see note 3) and on 1 February 2017, 41 000 000 shares
were issued to AfriGem as part of a private placement to improve CSG’s BEE
shareholding, as well as 1 834 741 shares to Mr JR Kerswill as part of an
agreement (see note 3).
5. Capital commitments and contingencies
The Group had no significant outstanding capital commitments or contingencies
as at 31 March 2017.
6. Sale of 35% interest in M&S Projects
On 1 June 2016, CSG sold 35% of its shareholding in M&S Projects to non-
controlling shareholders to improve its black shareholding for an amount
of R24,4 million. 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 7 Arrows and Cubed Systems
The acquisition of 7 Arrows and Cubed Systems on 1 March 2017 qualified
as a business combination under IFRS 3: Business combinations. Comparative
figures as at 31 March 2016 were determined based on all information available
at the reporting date (“provisional accounting”). This provisional accounting
was adjusted for new information obtained within the timeframe of 12 months
after the acquisition date. These amounts were adjusted against comparative
information as required by IFRS 3. The effects of the revised acquisition
accounting are as follows:
Recognised amounts of identifiable net assets
Restated Provisional
At 1 March 2017 R’000 R’000
Non-current assets 2 312 2 312
Property, plant and equipment 2 312 2 312
Current assets 4 355 5 206
Trade and other receivables 2 464 3 315
Inventories 427 427
Bank and cash 1 464 1 464
Non-current liabilities (702) (702)
Finance lease liabilities (702) (702)
Current liabilities (7 144) (5 473)
Trade and other payables (7 144) (5 473)
Identifiable net assets (1 179) 1 343
Intangible assets identified 9 302 –
Deferred tax liability on the above
intangible asset (1 329) –
Goodwill on acquisition 9 206 14 657
Purchase consideration 16 000 16 000
The performance guarantee amount was not achieved and the initial amount paid
was the final purchase consideration payable by CSG.
The company was acquired for the brand name, to gain access to its customer
list, diversification and to expand the basket of services in its facility
management division. 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.
7.2 Hi-Tech Nelspruit Guards
The acquisition of Hi-Tech Nelspruit Guards on 1 March 2017 qualified as a
business combination under IFRS 3: Business combinations. Comparative figures
as at 31 March 2016 were determined based on all information available at the
reporting date (“provisional accounting”). This provisional accounting was
adjusted for new information obtained within the timeframe of 12 months after
the acquisition date. These amounts were adjusted against comparative
information as required by IFRS 3. The effects of the revised acquisition
accounting are as follows:
Recognised amounts of identifiable net assets
Restated Provisional
At 1 March 2017 R’000 R’000
Non-current assets 380 –
Property, plant and equipment 380 –
Current assets 2 085 485
Other financial assets 2 085 (1 387)
Current liabilities (1 387) –
Trade and other payables (1 387) –
Identifiable net assets 1 078 –
Goodwill on acquisition 2 672 3 365
Purchase consideration 3 750 3 750
7.3 Stallion Reaction
As detailed in the SENS announcement dated 19 December 2016, CSG shareholders
were advised that CSG and Invictus Risk Proprietary Limited, a wholly owned
subsidiary of CSG, had entered into an agreement of sale with Stallion Reaction
Proprietary Limited (“seller”), dated 16 December 2016 (“agreement”), in terms
of which CSG would purchase from the seller the armed response and monitoring
division of the seller, as a going concern, which includes both individual
client and commercial contracts, as well as specific assets and employees
(“the business”), but specifically excluding the domestic guarding and CCTV
monitoring divisions of the seller (“the acquisition”). The business includes
the armed response and monitoring services provided by the seller on an
outsourced basis on behalf of two other security companies (“outsourcing
arrangement”).
The effective date for the transaction was 1 March 2017.
The purchase consideration payable by CSG to the seller in respect of the
acquisition has been amended to R50 million (“purchase consideration”) and the
purchase consideration of R46,28 million (net of liabilities) was paid by CSG
on 27 February 2017.
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.
The information provided below is based on provisional results of the entity
as at 1 March 2017.
Recognised amounts of identifiable net assets
At 1 March 2017 R’000
Non-current assets 1 134
Property, plant and equipment 505
Deferred tax 629
Current liabilities (3 718)
Trade and other payables (3 718)
Identifiable net assets (2 584)
Goodwill 48 866
Purchase consideration 46 282
Cash flow information
Bank balance acquired –
Since the acquisition date, Stallion has contributed R4,49 million to Group
revenue and R1,80 million to Group profit. If the acquisition had occurred
on 1 April 2016, the Group revenue would have been R1,79 billion and Group
profit for the period would have been R96,6 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 Revert Risk Management
On 30 March 2017, CSG announced that it had concluded a sale of shares
agreement (“agreement”) with RTT Group Proprietary Limited (“seller”) and
Revert Risk Management Solutions Proprietary Limited (“Revert”), in terms
of which it would purchase from the seller 100% of the issued share capital
of Revert and certain moveable assets(“acquisition”) for R100 million. On
25 April 2017 CSG announced that all conditions had been fulfilled.
The effective date was 1 May 2017 and the acquisition was funded through a
medium-term loan.
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. Changes in directors
During the current reporting period Ms Rojie Kisten was appointed as an
independent non-executive director with effect from 12 October 2016.
Mr Nico de Waal has stepped down from his position as a non–executive Director
with effect from 17 March 2017 and Mr Alex Volkwyn has been appointed as a
non-executive Director with effect from 17 March 2017.
10. Going concern
The financial information has been prepared on a going concern basis.
11. 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 Dry
Chairman Chief Executive Officer
Wednesday, 31 May 2017
Directors
BT Ngcuka* (Chairman), PJJ Dry (CEO), JG Nieuwoudt (COO), WE Scott (CFO),
NG Thiart, NN Sonjani*#, R Kisten *#, AF Volkwyn*, 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)
Sponsor
PSG Capital
Date: 31/05/2017 12:00:00 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
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