PRIMESERV GROUP LIMITED - Condensed consolidated statement of profit and loss and other comprehensive income for the year ended 31 march 2018

Release Date: 15/06/2018 17:13
Code(s): PMV
 
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Condensed consolidated statement of profit and loss and other comprehensive income for the year ended 31 march 2018

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

Reviewed results for the year ended 31 March 2018

Condensed consolidated statement of profit and loss and other comprehensive income
for the year ended 31 march 2018

                                                                                                  Reviewed     Audited   
                                                                                                     March       March   
                                                                                                      2018        2017   
                                                                                                    R' 000      R' 000   
Revenue                                                                                            725 289     642 122   
Cost of sales                                                                                    (618 287)   (540 905)   
Gross profit                                                                                       107 002     101 217   
Other income                                                                                         1 069       1 139   
Operating expenses                                                                                (85 817)    (80 749)   
Operating profit                                                                                    22 254      21 607   
Interest received                                                                                      268         291   
Interest paid                                                                                      (2 249)     (2 385)   
Profit before taxation                                                                              20 273      19 513   
Taxation                                                                                             (586)     (2 770)   
Profit and total comprehensive income                                                               19 687      16 743   
Profit and total comprehensive income attributable to:                                                                   
Ordinary shareholders of the Company                                                                19 544      16 008   
Non-controlling interest                                                                               143         735   
Profit and total comprehensive income                                                               19 687      16 743   
Basic earnings per share and diluted earnings per share (cents)                                      21.70       17.77   
                               
                               
Condensed consolidated statement of financial position                               
as at 31 march 2018                               
                               
                                                                                                  Reviewed     Audited   
                                                                                                     March       March   
                                                                                                      2018        2017   
                                                                                                    R' 000      R' 000   
ASSETS                                                                                                                   
Non-current assets                                                                                  44 936      43 292   
Equipment and vehicles                                                                               5 514       3 513   
Investment property                                                                                  6 445       7 045   
Goodwill                                                                                            21 178      21 178   
Intangible assets                                                                                      646           -   
Deferred tax asset                                                                                  11 153      11 556   
Current assets                                                                                     129 965     132 781   
Inventories                                                                                            162         177   
Trade and other receivables                                                                        125 361     129 907   
Taxation receivable                                                                                      -         634   
Cash and cash equivalents                                                                            4 442       2 063   
Total assets                                                                                       174 901     176 073   
EQUITY AND LIABILITIES                                                                                                   
Capital and reserves                                                                               122 686     106 170   
Ordinary share capital and share premium                                                             2 672       2 672   
Retained earnings                                                                                  144 406     128 033   
Treasury shares                                                                                   (16 279)    (16 279)   
Equity attributable to equity holders of the Company                                               130 799     114 426   
Non-controlling interests                                                                          (8 113)     (8 256)   
Current liabilities                                                                                 52 215      69 903   
Trade and other payables                                                                            39 152      31 810   
Bank borrowings                                                                                     13 063      38 093   
Total equity and liabilities                                                                       174 901     176 073   


Condensed consolidated statement of changes in equity
as at 31 march 2018

                                                                                        Equity                           
                                                                                  attributable                           
                                                                                     to equity                           
                                                                                       holders          Non-             
                                          Share     Share   Retained   Treasury         of the   controlling     Total   
                                        Capital   premium   earnings     shares        company     interests    equity   
                                         R '000    R '000     R '000     R '000         R '000        R '000    R '000   
Audited: Opening balances at                                                                                             
1 April 2016                              1 321     1 351    113 241   (16 279)         99 634       (8 991)    90 643   
Audited: Total comprehensive income -                                                                                    
profit                                        -         -     16 008          -         16 008           735    16 743   
Audited: Dividends paid (1.35 cents                                                                                      
per share)                                    -         -    (1 216)          -        (1 216)             -   (1 216)   
Audited: Balances at 1 April 2017         1 321     1 351    128 033   (16 279)        114 426       (8 256)   106 170   
Reviewed: Total comprehensive income                                                                                     
- profit                                      -         -     19 544          -         19 544           143    19 687   
Reviewed: Dividends paid (3.50 cents                                                                                     
per share)                                    -         -    (3 171)          -        (3 171)             -   (3 171)   
Reviewed: Closing balances at                                                                                            
31 March 2018                             1 321     1 351    144 406   (16 279)        130 799       (8 113)   122 686   


Condensed consolidated statement of cash flows
for the year ended 31 march 2018

                                                                                                   Reviewed    Audited   
                                                                                                      March      March   
                                                                                                       2018       2017   
                                                                                                     R' 000     R' 000   
Profit before taxation                                                                               20 273     19 513   
Adjustment for non-cash items                                                                         1 927      3 017   
Operating cash flows before working capital changes                                                  22 200     22 530   
Net working capital changes                                                                          11 903   (28 989)   
Taxation refunded                                                                                       451          -   
Cash flows from operating activities                                                                 34 554    (6 459)   
Cash flows from investing activities                                                                (3 974)    (4 457)   
Cash flows from financing activities                                                                (3 171)    (1 216)   
Net increase/(decrease) in cash and cash equivalents                                                 27 409   (12 132)   
Cash and cash equivalents at beginning of year                                                     (36 030)   (23 898)   
Cash and cash equivalents at end of year                                                            (8 621)   (36 030)   


Segmental analysis
for the year ended 31 march 2018

                                                                                                   Reviewed    Audited   
                                                                                                      March      March   
                                                                                                       2018       2017   
                                                                                                     R' 000     R' 000   
Revenue from external customers                                                                                          
Staffing Services                                                                                   700 243    609 891   
Training and Consulting Services                                                                     25 046     32 231   
Total                                                                                               725 289    642 122   
Revenue - inter-segment                                                                                                  
Staffing Services                                                                                         -          -   
Training and Consulting Services                                                                         30        153   
Total                                                                                                    30        153   
Business segment operating profit results                                                                                
Staffing Services                                                                                    38 182     33 639   
Training and Consulting Services                                                                    (5 901)    (1 297)   
Shared Services                                                                                    (10 027)   (10 735)   
Operating profit                                                                                     22 254     21 607   
Interest received                                                                                       268        291   
Interest paid                                                                                       (2 249)    (2 385)   
Profit before taxation                                                                               20 273     19 513   
Business segment EBITDA                                                                                                  
Staffing Services                                                                                    39 295     35 195   
Training and Consulting Services                                                                    (5 362)      (950)   
Shared Services                                                                                     (9 084)    (9 670)   
Total                                                                                                24 849     24 575   
Business segment total assets                                                                                            
Staffing Services                                                                                   137 521    126 143   
Training and Consulting Services                                                                     13 244     21 173   
Shared Services                                                                                      24 136     28 757   
Total                                                                                               174 901    176 073   
Business segment total liabilities                                                                                       
Staffing Services                                                                                    38 485     46 944   
Training and Consulting Services                                                                      1 397      5 035   
Shared Services                                                                                      12 333     17 924   
Total                                                                                                52 215     69 903   
Business segment net assets                                                                                              
Staffing Services                                                                                    99 036     79 199   
Training and Consulting Services                                                                     11 847     16 138   
Shared Services                                                                                      11 803     10 833   
Total                                                                                               122 686    106 170   


Notes

COMMENTARY
Reviewed results for the year ended 31 March 2018

Primeserv is an investment holding company and a leading provider of integrated business
support services focused on providing client-centric human capital services, spanning staffing
and recruitment services, productivity and functional outsourcing services and training and
consulting services. We align our customised services to our clients' needs, optimising their
required human capital base to enhance the capabilities of their organisations. Our innovative
solutions deliver economically measurable value-added services that directly impact on
productivity and performance. This allows our clients to prioritise business objectives, so as
to achieve their strategic goals. Primeserv has a strong focus on workplace flexibility solutions
which are aligned to government initiatives aimed at enhancing youth employment
opportunities, and on the development of labour force skills through its training and
learnership programmes with a particular emphasis on the up-skilling of youth in South Africa.

Primeserv's results for the year ended 31 March 2018 maintained the positive trend of the
past few years, despite the difficult economic trading conditions experienced across most of
the business sectors serviced by the Group. The Staffing Services segment, the Group's largest
business component, which provides Temporary Employment Services, continued to show
organic growth whilst the Training and Consulting segment delivered a sub-par performance. 
The uncertainty regarding changes to labour legislation and, in particular, the
referral of the so-called deeming provision to the Constitutional Court has in a number of
instances curtailed growth opportunities while clients await the final result, anticipated in
August 2018. The Group is, however, well positioned to meet its clients' needs, whatever the
legal outcome, and has developed a range of specialised products and services which will
allow clients continued access to the Group's various staffing and productivity solutions.

Group revenue for the year rose by 13% from R642.2 million to R725.3 million whilst gross
profit increased by 6% from R101.2m to R107.0 million. Operating profit was up by 3% from
R21.6 million to R22.3 million with profit before taxation increasing by 4% from R19.5 million
to R20.3 million. Earnings per share were consequently boosted by 22% from 17.77 cents per
share to 21.70 cents per share while headline earnings per share improved by 18% from 
18.74 cents per share to 22.14 cents per share. Cash flows from operating activities improved from
a net outflow of R6.5 million for the 2017 financial year to a net inflow of R34.6 million for
the year under review whilst the overall cash position turned around from an outflow of 
R12.1 million in the prior year to an inflow of R27.4 million in the current year. This was 
after both the payment of dividends, which went up from R1.2 million in the prior year to
R3.2 million in the current year, and further investment in fixed assets of R3.4 million. 
Better collections have led to the Group's gearing lessening from 31% at the end of March 2017 
to 7% at the end of the current financial year. This is further evidenced by the reduction in 
overall Days Sales Outstanding ("DSO") from 63 days to 53 days and interest cover improving from 
9 times for the prior year to 10 times for the current financial year. Trade receivables have decreased
from R125.7m at the end of the prior year to R121.2 million at the end of the current review
period. A stand-out feature of the decrease is that the portion of trade receivables that is past
due reduced by 73% from R21.5 million to R5.9 million at year end. The Group's statement of
financial position is reflective of a strong overall performance. The net asset value per share
increased by 14% from 127 cents per share to 145 cents per share and the tangible net asset
value per share by 20% from 91 cents per share to 109 cents per share.

Revenue for the Staffing Services segment improved by 15% from R609.9 million last financial
year to R700.2 million for the current year with the segment's EBITDA increasing by 12% from
R35.2 million to R39.3 million and its operating profit going up by 14% from R33.6 million to
R38.2 million. The DSO reduced from 61 days at the end of March 2017 to 52 days at the end
of March 2018 as a significant portion of the overdue debts at the end of the prior year were
collected. The blue collar staffing unit, which specialises in servicing the logistics, warehousing
and distribution market, as well as the wholesale and retail, manufacturing and construction
sectors, delivered a satisfactory performance. The staffing unit servicing the financial and
related service industries had a satisfactory year. The large project engineering and
construction sector continues to contend with the lack of new infrastructure developments
and this dampened growth in the white collar professional draughting and engineering
staffing unit. The staffing unit servicing the power generation sector was beset by erratic
headcount volumes and extreme margin erosion.

The Training and Consulting Services segment had a torrid year. Sales decreased by 22% from
R32.2 million to R25.0 million and the unexpected operating loss rose from R1.3 million for
the 2017 financial year to R5.9 million for the review period. The business is intended to
provide both strategic and growth opportunities to the Group as a whole, but, in view of the
performance, has required an intensive reassessment and restructuring. This has included the
closure of non-performing components and a review of the products and services offered as
well as substantial changes in key personnel. Operating costs were significantly affected by
material but unbudgeted expenditure relating to the close-out of a number of legacy projects,
as well as by the investment in senior staff who were employed to develop new business but
who failed to build the requisite sales pipeline or to deliver the expected revenue.
Performance was further affected by the undertaking of some new business at inferior
margins with a view to improving sales volumes. This operation remains key to the Group's
integrated service offering, and is anticipated to return to profitability in the medium-term.

The Group has, notwithstanding the negative performance of the Training and Consulting
Services segment, delivered a solid set of results for the year. 

BASIS OF PREPARATION

The reviewed condensed consolidated results for the year ended 31 March 2018 have been
prepared in accordance with the framework concepts and the measurement and recognition
requirements of International Financial Reporting Standards (IFRS), the SAICA Financial
Reporting Guides as issued by the Accounting Practices Committee and Financial
Pronouncements as issued by the Financial Reporting Standards Council. The report contains
the information required by International Accounting Standard (IAS) 34: Interim Financial
Reporting, and, are in compliance with the Listings Requirements of the JSE Limited. The
accounting policies as well as the methods of computation used in the preparation of the
results for the year ended 31 March 2018 are in terms of IFRS and are consistent with those
applied in the audited annual financial statements for the year ended 31 March 2017. There
is no significant difference between the carrying amounts of financial assets and liabilities and
their fair values. The results are presented in Rand, which is Primeserv Group Limited's
reporting currency.

The company's directors are responsible for the preparation and fair presentation of the
reviewed condensed consolidated results. These results have been prepared by the Group
Financial Director, Mr R Sack, CA(SA).

AUDITOR'S REVIEW

The results have been reviewed by the Group's auditors, Mazars. Their unqualified review
opinion is available for inspection at the company's registered office. Their review was
conducted in accordance with ISRE 2410 "Review of interim financial information performed
by the independent auditor of the entity."


HEADLINE EARNINGS PER SHARE

                                                                               2018     2017   
                                                                             R '000   R '000  
              
Attributable earnings                                                        19 544   16 008   
Headline earnings adjustments (net of tax effect)                                              
-   Loss on disposal of equipment and vehicles                                   48      171   
-   Impairment of investment in property                                        346      466   
-   Impairment of intangible assets                                               -      234   
Attributable headline earnings                                               19 938   16 879   
Earnings and diluted headline earnings per share (cents)                      22.14    18.74   
Weighted average number of shares at year end ('000)                         90 064   90 064  
 
There have been no changes in the issued share capital during                     
the year. There are no potentially dilutive shares.                               


FINAL DIVIDEND

Notice is hereby given that a final gross cash dividend of 1.60 cents per share for the year
ended 31 March 2018 was declared on Friday, 15 June 2018, payable to shareholders
recorded in the 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                                      Tuesday, 17 July 2018
Date trading commences "ex" dividend                                 Wednesday, 18 July 2018
Record date                                                             Friday, 20 July 2018
Payment date                                                            Monday, 23 July 2018

Ordinary share certificates may not be dematerialised or rematerialised between
Wednesday, 18 July 2018 and Friday, 20 July 2018, both days inclusive.

Shareholders who are not exempt from Dividend Withholding Tax of 20% will therefore
receive a net dividend of 1.28 cents per share. The Company has 132 062 743 ordinary
shares in issue and the income tax reference number is 9408/002/71/06. The dividend is
being paid out of income reserves.

All times provided in this pronouncement 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 credited at their
CSDP or broker on Monday, 23 July 2018.

TRANSFORMATION

The Group is continuing to assess ways to enhance its transformation and B-BBEE credentials.
This review encompasses all categories of staff, including, but not limited to senior executives
and non-executive directors. Other empowerment initiatives have already been established
and are being effected in the forthcoming year, such as a preferential procurement scheme
whereby services and products required by the Group are channeled to small black-owned
enterprises, and preferably those owned by women.

EVENTS AFTER THE REPORTING DATE

Management is not aware of any material events which have occurred subsequent to the end
of March 2018. There has been no material change in the Group's contingent liabilities since
year-end.

OUTLOOK

The uncertain and weak trading and macro-economic environment combined with the socio-economic 
challenges facing the country, make it difficult to assess the short to medium-term outlook, 
however, the Group remains well poised to respond to opportunities as they present themselves.

The Group continues to target both organic growth, and acquisitive opportunities aimed at
furthering its national business support services capability.

DIRECTORS

CS Ntshingila(#) (Chairperson), M Abel (CEO), JM Judin(#), LM Maisela(*), DL Rose(#^), R Sack 
(Financial Director)
(#) Independent non-executive   (*) Non-executive   (^) Lead Independent non-executive


On behalf of the Board


CS Ntshingila                     M Abel                          R Sack
Chairperson                       CEO                             Financial Director
15 June 2018, Illovo

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 Ntshingila* (Chairperson), M Abel (CEO), JM Judin*,
LM Maisela#, DL Rose* (Lead Independent), R Sack (Financial Director)
* Independent non-executive # Non-executive

Company secretary
ER Goodman Secretarial Services (Pty) Ltd (represented by M Janse van Rensburg)

Registered address
25 Rudd Road, Illovo, 2196
(PO Box 3008, Saxonwold, 2132)

Transfer secretaries
Computershare Investor Services (Pty) Ltd, Rosebank Towers, 15 Biermann Avenue, Rosebank, 2196
(PO Box 61051, Marshalltown, 2107)

Auditors
Mazars, 54 Glenhove Road, Melrose Estate, 2196

Sponsor
Grindrod Bank Limited, 4th Floor Grindrod Towers, 8A Protea Place, Sandton, 2196

www.primeserv.co.za



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