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CSG HOLDINGS LIMITED - Abridged Consolidated Annual Results for the year ended 31 March 2019

Release Date: 01/07/2019 07:06
Code(s): CSG     PDF:  
 
Wrap Text
Abridged Consolidated Annual Results for the year ended 31 March 2019

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")


Abridged consolidated annual results for the year ended 31 March 2019

The highlights below refer to continuing operations

- Revenue up R2,16 billion (2018: R2,12 billion)
- (Loss)/profit after tax down (R140,80) million
  (2018: R115,75 million)
- Operating profit down R62,10 million (2018: R165,30 million)
- EBITDA down R97,60 million (2018: R186,96 million)
- (Loss)/earnings per share down (28,01) cents per share
  (2018: 21,75 cents per share)
- Headline earnings per share down 5,58 cents per share
  (2018: 21,75 cents per share)
- Net asset value per share down 87,02 cents per share
  (2018: 121,50 cents per share)
- Cash conversion rate up 154% (2018: 123%)


Commentary
CSG Holdings Limited (CSG) is a multi-disciplinary support services group offering 
a wide range of services in facilities, security and risk solutions, and staffing 
services in Southern Africa to an array of clients across a multitude of 
sectors/industries.

CSG's mission to be a leading strategic outsourced partner of choice for staffing 
solutions, facilities management and security in South Africa remains unchanged. 
We have consolidated and increased our basket of services offered to clients. 
Our strategy continues to focus on growing into service delivery that is more 
technology based, and has successfully resulted in CSG providing a full suite of 
integrated security services to both residential and commercial clients as part 
of our integrated facilities management service.

Our strategic partnership with our BEE partners continues to add valuable access 
to the expertise and experience, and ensures that our 30% BEE shareholding 
is maintained.

Financial performance
The CSG group had a satisfactory year, despite the challenging business 
environment and trading conditions. A few negative once-off events during 
the year impacted our performance, although we feel comfortable with our 
normalised EBITDA as base for the 2020 financial year.

The group's revenue of R2,16 billion increased by 1%, operating profit of 
R62,10 million was 63% lower and headline earnings decreased 74% to 
R28,90 million.

Earnings per share declined by 229% and headline earnings per share 
declined by 74% in comparison to that reported for the year ended
31 March 2018. This decline was due to the once-off negative adjustments, 
impairments relating to the security division and overall performance of 
the group.

Divisional review
CSG Facilities
(Facility Management division)
Revenue rose by 2% to R773,39 million contributing R58,14 million to the 
operating profit of the group.

Both CSG Foods (which now includes the remote sites business) and Afriboom 
Cleaning continued to perform well as a result of a combination of organic 
growth, cost savings initiatives and effective procurement.

Afriboom's greenfield project, CSG Hygiene, had a minor negative impact 
on earnings.

Global Industrial Projects' earnings declined significantly from the previous 
year, due to a substantial mining contract that could not be retained as a 
result of the mining charter's focus on local procurement. This contract was 
awarded to a local BEE start-up company, following the 8 years of service 
from Global Industrial Projects. The effect on Global Industrial Project was 
approximately R13 million.

CSG Security
(Security and Risk Solutions division)
Revenue of R457,55 million improved by 7% compared to the same period last year 
and negatively contributed R15,04 million to the operating profit of the group. 
The decrease is as a result of various reasons.

Integration and consolidation of security acquisitions made during
2018 took longer than anticipated. Pressure on consumer spending and the increase 
in fuel prices had a significant impact on this sector.

In addition, the set-up costs and initial operational losses of approximately 
R5,5 million were incurred as a result of the new centralised control room in 
Pretoria, which contributed to the decrease in operating profit. CSG expects to 
realise the benefit of these investments in infrastructure and operational 
capacity over the longer term.

The loss-making business of Hi-Tech White River was sold after year end, effective 
1 May 2019 and contributed a loss of operating profit of approximately R4,2 million 
for the 2019 financial year and is disclosed under discontinued operations. The 
Hi-Tech guarding division realised some losses, but management have been successful
in turning this business around and it is back on track and performing as budgeted. 
The remainder of the Hi-Tech Group performed in line with the previous year.

CSG established a centralised security structure, which included the bolstering of 
our operational infrastructure (to open new branches in Port Elizabeth, Durban, 
etc) in Revert Risk Management to the cost of approximately R3,8 million.

As previously communicated the group used this year to consolidate and integrate 
the acquisitions made during the 2018 financial year, building a strong base to 
take the security and risk solution division to the next level. Unfortunately an 
amount of approximately R25,93 million has been written off in 7 Arrows in relation 
to the recoverability of bad debt that accrued during the integration period of 
this business from Stallion and other bolt-on acquisitions. As a result of the 
current performance of the security division, the goodwill raised on acquisitions 
had to be impaired.

CSG People
(Staffing Solution division)
Revenue decreased by 3% to R926,14 million contributing R42,36 million to the 
operating profit of the group.

The performance of the staffing division during the 2019 year was substantially 
down from the previous year due to a number of reasons. Some of the most important 
being fraudulent activities and malpractices, of approximately R9 million over 
a period of time, by a senior manager in BDM Staffing (corrective action has 
been taken), a sizable BDM Staffing contract coming to an end, bad debts mostly 
from the construction industry written off in both BDM and M&S Projects, as well 
as the initial adverse effect of management changes in ConinghamLee and 
CSG Skills Institute.

Outlook
Security remains an important aspect of all walks of life with a move towards 
the use of a combination of human resources and technology to curb new crime 
tendencies.

The design, planning and operational issues relating to the centralised control 
room in Pretoria have now been resolved and management believes that this will 
improve the outlook for this division in the coming years. The centralised 
control room currently has a promising pipeline, the benefit of which is expected 
to flow through in the 2020/2021 financial years.

CSG Foods now has a centralised kitchen strategy and is looking to expand 
its client base.

Afriboom is diversifying successfully into the commercial and health markets. 
CSG Hygiene, is being well received in the market, is growing exceptionally and 
should be profitable by the end of the next financial year.

ConinghamLee and CSG Skills Institute position the businesses for growth. 
M&S Project is excited about the opportunities in the petrochemical and oil 
sector. BDM Staffing expecting improved financial performance in line with 
previous years.

We recently appointed a Group Business Development Manager to head-up our 
aggressive organic growth strategy, ensuring marketing and sales synergies 
between the various group companies are unlocked as well as offering clients 
a total integrated solution.

The CSG group is well positioned for growth as a result of its successful 
diversification strategy, the creation of the centralised services within 
the security division, various other solid growth platforms created and new 
greenfield projects commenced.

Dividend
The board decided to retain cash, reduce debt and therefore no dividend will 
be paid for the year, and the Board will re-assess the six months results ending 
30 September 2019 to consider whether an interim dividend can be paid.

Abridged consolidated statement of financial position as at 31 March 2019
                                                                     Restated*
                                                         Audited      Audited
                                                            2019         2018
                                              Notes        R'000        R'000
Assets
Non-current assets                                       396 030      593 495
Property, plant and equipment                             80 442       82 780
Intangible assets                                 7       18 957      135 370
Goodwill                                          8      244 601      331 114
Trade and other receivables                                3 006            - 
Loans to subsidiaries, joint ventures
and associates                                               916            -
Loans receivable                                          36 493       38 716
Deferred taxation                                         11 615        5 515
Current assets                                           473 584      421 265
Inventories                                               11 921       12 298
Current income tax receivable                             10 728        4 370
Current portion of loans receivable                       26 830        8 889
Current portion of loans to subsidiaries 
and joint ventures                                             -            - 
Trade and other receivables                              366 922      342 174
Bank and call deposits                                    57 183       53 534
Assets in disposal group
classified as held-for-sale                                  310            - 
Total assets                                             869 924    1 014 760
Equity and liabilities
Capital and reserves                                     466 655      641 457
Stated capital                                   4.2     318 883      311 770
Treasury shares                                  4.1      (1 216)        (824) 
Share-based payment reserve                                    -           53
Foreign currency translation reserve                      (9 726)     (12 531) 
Retained earnings                                        145 700      327 197
Equity attributable to owners of the parent              453 641      625 665
Non-controlling interest                                  13 014       15 792
Non-current liabilities                                  163 857      151 762
Interest-bearing liabilities                             133 466      122 186
Borrowings                                                26 668            - 
Deferred taxation                                          3 723       29 576
Current liabilities                                      239 412      221 541
Current portion of interest-bearing liabilities           34 744       54 032
Current portion of loans from subsidiaries                     -            -
Bank overdrafts and invoice discounting                   39 910       12 386
Trade and other payables                                 161 589      150 229
Trade payables and accruals                              161 128      144 457
Contingent consideration                                     461        5 772
Current income tax payable                                 3 169        4 894
Total equity and liabilities                             869 924    1 014 760
Shares in issue ('000)                                   521 288      515 150
Net asset value per share (cents)                          87,02       121,50
Net tangible asset value per share (cents)                 37,29        33,20

*Figures have been restated as allowed by IFRS 3 Business Combinations 
(refer to note 6).

Abridged consolidated statement of profit and loss and other comprehensive income
for the year ended 31 March 2019
                                                                     Restated*
                                                         Audited      Audited
                                                            2019         2018
                                              Notes        R'000        R'000

Continuing operations
Revenue                                                2 157 074    2 116 003
Cost of sales                                         (1 717 450)  (1 656 132) 
Gross profit                                             439 624      459 871
Operating expenses                                      (377 523)    (294 576)
Operating profit/(loss)                                   62 101      165 295
Profit/(loss) on sale of property, plant 
and equipment                                              1 248           38
Impairment of non-financial assets                7     (200 179)           - 
Share of profits in joint ventures                           916            -
Contingent payment relating to
business acquisition                              3       (1 304)         808
Net financing (costs)/income                             (13 781)     (14 786) 
Investment income                                          8 591        5 758
Finance cost                                             (22 372)     (20 544)
(Loss)/profit before taxation                           (150 999)     151 356
Taxation                                                  10 196      (35 606) 
(Loss)/profit from continuing operations                (140 803)     115 749
Discontinued operations                                   (3 070)         422 
(Loss)/profit for the year                              (143 873)     116 171
Other comprehensive income
Subsequently reclassified to profit and loss
- Foreign currency translation reserve                     2 806        1 289
Total comprehensive (loss)/income                       (141 067)     117 460
(Loss)/profit for the year attributable to:
Owners of the parent                                    (147 990)     111 545
Non-controlling interest                                   4 117        4 626 
                                                        (143 873)     116 171
Total comprehensive (loss)/income 
attributable to:
Owners of the parent                                    (145 184)     112 834
Non-controlling interest                                   4 117        4 626
                                                        (141 067)     117 460
Weighted average shares in issue ('000)                  517 297      510 858
Diluted weighted average shares in issue ('000)          517 297      511 514
Earnings per share attributable to the 
owners of the parent
(Loss)/profit for the year
Basic (loss)/earnings per share (cents)                   (28,61)       21,83
Diluted (loss)/earnings per share (cents)                 (28,61)       21,81
Dividend per share (cents)                                     -            - 
(Loss)/profit for the year from 
continuing operations
Basic (loss)/earnings per share (cents)                   (28,01)       21,75
Diluted (loss)/earnings per share (cents)                 (28,01)       21,72
(Loss)/profit for the year from 
discontinued operations
Basic (loss)/earnings per share (cents)                    (0,60)        0,08
Diluted (loss)/earnings per share (cents)                  (0,60)        0,09

* Restated as allowed by IFRS 5 Non-current Assets Held For Sale


Abridged consolidated statement of cash flows for the year ended 31 March 2019
                                                         Audited      Audited
                                                            2019         2018
                                              Notes        R'000        R'000
Cash flow from operations                                 47 773      139 759
Cash generated by operations                              78 420      185 172
Interest received                                          2 787        4 030
Finance cost                                              (3 754)     (18 533) 
Taxation paid                                            (26 578)     (32 263)
Cash flow from discontinued operations                    (3 102)       1 353
Cash flow from investing activities                      (19 023)    (169 743)
Additions to property, plant and equipment               (19 342)     (56 115)
Proceeds on disposal of property,
plant and equipment                                       13 282        6 618
Additions to intangible assets                              (284)        (350)
Proceeds on disposal of intangible assets                      -          588
Businesses acquired                                6      (1 848)    (120 484)
Loans advanced to loans receivable and loans
to subsidiaries and associates                           (22 152)           -
Loan repayment from loans receivable and loans
to subsidiaries and associates                            11 321            -
Discontinued operation                                         -            -
Cash flow from financing activities                      (52 625)      49 240     
Dividends paid                                           (32 560)     (31 171)
Net purchase of treasury shares                             (392)         422
Issue of ordinary shares                         4.2       1 102        1 102
Proceeds from interest-bearing liabilities
and borrowings                                            26 668       81 599
Repayment of interest-bearing liabilities
and borrowings                                           (47 443)           -
Loans advanced to loans receivable and 
loans to subsidiaries and associates                           -       (3 626)
Loan repayments from loans receivable
and loans to subsidiaries and associates                       -          914
Discontinued operations                                        -            -
(Decrease)/increase in cash resources                    (23 875)      19 256
Cash resources at beginning of year                       41 148       21 892
Cash resources at end of year                             17 273       41 148


Abridged consolidated statement of changes in equity 
for the year ended 31 March 2019
                                               Total
                                        attributable
                                           to equity
                                             holders         Non-    
                                              of the  controlling       Total
                                              parent     interest      equity
                                   Notes       R'000        R'000       R'000
Equity at 1 April 2017 (Audited)             511 817       16 264     528 082
Total comprehensive income for 
the year                                     112 834        4 626     117 460
Dividend paid                                (25 692)      (5 479)    (31 171) 
Acquisition of shares from 
non-controlling interest                        (880)         380        (500)
Share based payment reserve                       53            -          53
Treasury shares                                  422            -         422
Ordinary shares issued                        27 112            -      27 112
Equity at 31 March 2018 (Audited)            625 665       15 792     641 457
Change in accounting policy IFRS 9            (7 894)           -      (7 894)
Total comprehensive (loss)/income 
for the year                                (145 184)       4 117    (141 060) 
Dividend paid                                (25 758)      (6 803)    (32 560)
Acquisition of shares from 
non-controlling interest                          93          (93)          - 
Treasury shares                      4.1        (392)           -        (392) 
Ordinary shares issued               4.2       7 113            -       7 113
Equity at 31 March 2019 (Audited)            453 641       13 013     466 655



Segmental reporting
for the year ended 31 March 2019
                                                                     Restated
                                                         Audited      Audited
                                                            2019         2018
                                              Notes        R'000        R'000
Revenue
CSG Facilities                                           773 389      756 743
CSG Security                                             457 548      425 982
CSG People                                               926 137      951 873
Total group                                            2 157 074    2 134 598
Operating profit                                          62 101      166 358
CSG Facilities                                            58 135       69 216
CSG Security                                             (15 042)      43 123
CSG People                                                42 358       74 869
Head office                                              (23 350)     (20 850)
Profit before taxation                                  (150 999)     151 941
CSG Facilities                                            57 638       75 398
CSG Security                                            (217 087)      35 488
CSG People                                                41 162       71 310
Head office                                              (32 712)     (30 255)



Notes to the abridged consolidated financial results
for the year ended 31 March 2019

1. Nature of operations
CSG is a holding company incorporated and domiciled in South Africa. The main 
business is to provide facilities management which includes contract catering, 
cleaning and food services, security and risk solutions, as well as outsourced 
personnel services, including recruitment and specialised staffing solutions to 
a range of clients.

2. Responsibility for annual results
The preparation of these annual results has been supervised by the chief 
financial officer, Willie Scott CA(SA), in terms of section 29(1)(e) of the 
Companies Act 2008, as amended (the Companies Act). This report is extracted 
from the audited information, but is not itself audited. The directors take full 
responsibility for the preparation of this report and warrant that the financial 
information has been correctly extracted from the underlying audited annual 
financial statements.

The summarised annual results is prepared in accordance with IFRS, IAS 34 Interim 
Reporting, the SAICA Financial Reporting Guides as issued by the Accounting 
Practices Committee and the Financial Reporting Pronouncement as issued by the 
Financial Reporting Accountants Council.

Accounting policies are in terms of IFRS and consistent with those in previous 
annual financial statements except for the adoption of IFRS 9 Financial 
Instruments and IFRS 15 Revenue from contract customers.

3. Contingent consideration
                                                            2019         2018
                                                           R'000        R'000
Remeasurement of contingent consideration
relating to business acquisitions                         (1 304)         808

Additional contingent considerations have been raised for both the Pinnacle and 
SOS Protec acquisitions (refer to note 6). These were settled during the 2020 
financial year. The adjustments were accounted for as fair value adjustments 
(Level 3) on the consolidated statements of profit and loss and other comprehensive 
income and calculations were based on year to date actual results. The outstanding 
contingent considerations relating to the Industroserve and Siyaya acquisitions 
were settled in a combination of shares and cash during the 2019 year and the 
difference was accounted for as a remeasurement adjustment in the consolidated 
statements of profit and loss and other comprehensive income.

The above balance represents the net fair value adjustments on these three 
acquisitions.

4. Ordinary shares
4.1 Treasury share
Treasury shares relate to the purchase of shares by the CSG Share Incentive 
Trust ("Trust") to fulfill its obligation in terms of share option schemes and 
subsidiary Hi-Tech Asset Protection Proprietary Limited.

4.2 Ordinary shares issued
During July 2018, 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 12 November 2018, 2 146 579 shares were issued relating to the 
sale of shares agreement of Hi-Tech White River and on 18 November 2018, 2 679 331 
shares were issued relating to the Industroserve acquisition.

5. Capital commitments and contingencies
The group had no significant outstanding capital commitments or contingencies as 
at 31 March 2019.

6. Business combinations
6.1 Acquisition of White River Hi-Tech Security Services in 2016

On 1 November 2018, CSG acquired 100% of the issued ordinary share capital of 
White River Hi-Tech Security Services Proprietary Limited (Hi-Tech White River), 
thereby obtaining control. Hi-Tech White River is incorporated in South Africa 
and is a well-known armed response company in the White River and Hazyview area. 
The company is included within CSG Security.

The purchase consideration was payable based on the financial performance of 
Hi-Tech White River for the 12-month period immediately following the first 
12 months after performance of the Hi-Tech acquisition date. Based on the 
projected profits for the performance guarantee period, a liability was raised.

In 2018, the final purchase consideration for Hi-Tech White River was calculated 
as R6,5 million. Of this, R4 million was settled in cash before year-end. The 
remainder was settled in CSG shares in the current financial year.

In November 2018, 2 146 579 CSG shares were issued at R1,14 per share (agreed 
VWAP). The difference between the accrual and the final purchase price was 
accounted for as a remeasurement in the consolidated statements of profit and 
loss and other comprehensive income (refer note 3).

6.2 Acquisition of Golden Dividend 402 Proprietary Limited (trading as 
Industroserve) in 2018
On 1 May 2017, CSG acquired 100% of the issued shares in Golden Dividend 402 
Proprietary Limited, trading as Industroserve, a cleaning company in the 
Mpumalanga area, for a maximum amount of R22,5 million. The company is included 
within CSG Facilities.

The company was acquired to expand the current footprint and to boost the 
commercial cleaning component of the CSG Facilities division by gaining access 
to its customer list.

The purchase consideration was payable based on the financial performance of 
Industroserve for the 12-month period immediately following the effective date 
of the acquisition. Based on the projected profits for the performance guarantee
period, an accrual was raised in the prior year.

In 2019, the final purchase consideration for Industroserve was calculated as 
R12,62 million. Of this, R7,5 million was settled in cash in the prior year. An 
additional cash payment of R1,56 million was made in the current financial year 
and in November 2018, 2 679 331 CSG shares were issued at R1,33 per share (agreed 
VWAP). The difference between the accrual previously raised and the final purchase 
price was accounted for as a remeasurement in the consolidated statements of 
profit and loss and other comprehensive income (refer note 3).

6.3 Acquisition of CSG Skills Institute Proprietary Limited (previously known 
as Siyaya Hygiene and Cleaning Skills Institute) in 2018
On 1 June 2017, CSG acquired 100% of the issued shares in Siyaya Hygiene and 
Cleaning Skills Institute Proprietary Limited, a training company, together 
with the shareholder's loan account held by the previous shareholder for a 
maximum amount of R5,25 million. The company is included within CSG People.

The company was acquired primarily to gain access to its customer list.

The purchase consideration was payable based on the financial performance of 
CSG Skills Institute for the 12-month period immediately following the effective 
date of the acquisition. Based on the projected profits for the performance 
guarantee period, an accrual was raised in the prior year.

In 2019, the final purchase consideration for CSG Skills Institute was 
calculated as R4,4 million. Of this, R3 million was settled in cash in the 
prior year. An additional cash payment of R1,4 million was made in the 
current financial year. The difference between the accrual previously raised 
and the final purchase price was accounted for as a remeasurement in the 
consolidated statements of profit and loss and other comprehensive income 
(refer note 3).

6.4 Acquisition of Intercity Alarms and Security Systems Proprietary
Limited (trading as Incity) in 2018
On 27 September 2017, CSG signed an agreement with Intercity Alarms and 
Security Systems Proprietary Limited, trading as Incity, in terms of which 
it purchased the monitoring, armed response and guarding business of Incity 
for a maximum amount of R11,08 million. An initial amount of R6 million was 
paid in cash in 2018 with the balance to be paid in tranches throughout the 
earn-out period. The effective date was 1 January 2018. The company is 
included within CSG Security.

The acquisition of Incity on 1 January 2018 qualified as a business 
combination under IFRS 3 Business Combinations. Comparative figures as at 
31 March 2018 were determined based on all information available at the 
acquisition date (provisional accounting). This provisional accounting was 
adjusted for new information obtained within the timeframe of 12 months after 
the acquisition date. These adjustments to the fair values determined in the 
provisional purchase price allocation are not treated as movements in the 
current financial year, but as an adjustment to the comparative figures as 
at 31 March 2018. The effect relates only to a reclassification between 
assets and liabilities and does not affect the statement of profit and loss 
and other comprehensive income.

Details of the business combination are as follows:
                                                           As at        As at
                                                       1 January    1 January
                                                            2019         2018
                                                        Restated  Provisional
                                                           R'000        R'000
Fair value of consideration transferred
Amount settled in cash                                     6 000        6 000
Fair value of contingent consideration                         -        5 080
                                                           6 000       11 080
Recognised amounts of identifiable net assets
Non-current assets                                           225          225
Deferred tax assets                                          225          225
Current liabilities                                         (803)        (803) 
Trade and other payables                                    (803)        (803)
Identifiable net assets                                     (578)        (578)
- Goodwill                                                     -       11 658
- Intangible assets identified                             9 136            -
- Deferred tax liability on the above intangible assets   (2 558)           -
Purchase consideration                                     6 000       11 080

Consideration transferred
The full purchase consideration was paid in cash. The final payment will not 
be made due to non-compliance to the contract guarantees.

Intangible assets
The contracts were acquired to expand the current geographical footprint of 
CSG Security by gaining access to the customer lists. The customer list was 
recognised as an intangible asset.

6.5 Acquisition of Pinnacle Risk Management Proprietary Limited in 2019
On 22 February 2018, Revert Risk Management Solutions Proprietary Limited 
(Revert), a wholly-owned subsidiary of CSG, acquired 100% of the issued shares 
in Pinnacle Risk Management CC (Pinnacle), with effect from 1 April 2018 for 
a maximum amount of R1,47 million. An initial amount of R1,32 million was
paid in cash.

The effective date was 1 April 2018.

The purchase consideration is payable based on the financial performance of 
Pinnacle for the 12-month period immediately following the effective date.

                                                                        As at
                                                                      1 April
                                                                         2018
                                                                        R'000
Fair value of consideration transferred
Amount settled in cash                                                  1 321
Fair value of contingent consideration                                    144
                                                                        1 465
Recognised amounts of identifiable net assets
Non-current assets                                                         55
Property, plant and equipment                                              55
Current assets                                                            279
Trade and other receivables                                               172
Cash and cash equivalents                                                 107
Current liabilities                                                      (334) 
Trade and other payables                                                 (271) 
Current tax liability                                                     (68)
Identifiable net assets                                                     -
- Intangible assets identified                                          2 035
- Deferred tax liability on the above intangible asset                   (570) 
Purchase consideration*                                                 1 465
Cash flow information
Bank accounts acquired                                                    107

* Based on the projected profits for the performance guarantee period, an 
accrual for the contingent consideration has been taken into account in 
calculating goodwill on the date of acquisition. This is based on Level 3 
in the fair value hierarchy.

Consideration transferred
An initial amount of R1,32 million was paid in cash, while the balance will 
be settled after the 12-month earn-out period. Based on the projected profits 
for the performance guarantee period, an accrual was raised for the full 
amount. 

Since the acquisition date, Pinnacle has contributed R5,8 million to 
group revenue and a loss of R259 164 to group loss. The loss is due to the 
inclusion of certain Revert contracts during the year that operate in the 
same segment as Pinnacle.

Identifiable net assets
The fair value of the trade and other receivables acquired as part of the 
business combination is deemed to approximate the carrying amount.

Intangible assets
The company was acquired to gain access to its customer lists particularly in 
the freight protection industry.

6.6 Acquisition of SOS Protec Secure CC in 2019
On 22 May 2018, CSG signed an agreement with SOS Protec Secure CC, in terms 
of which it agreed with 7Arrows Security Proprietary Limited to sell to each 
other a portion of their respective businesses at a price of earnings multiple 
of 18 times the revenue attributable to the contracts.

The effective date was 1 June 2018.

The purchase consideration is payable based on the financial performance of 
the acquired contracts for the 12-month period immediately following the 
effective date.

                                                                        As at
                                                                       1 June
                                                                         2018
                                                                        R'000

Fair value of consideration transferred
Amount settled in cash                                                    633
Contingent consideration                                                  317
                                                                          950
Identifiable net assets
Intangible assets identified                                            1 319
Deferred tax liability on the above intangible asset                     (369) 
Purchase consideration*                                                   950
Cash flow information
Bank accounts acquired                                                      -

* Based on the projected profits for the performance guarantee period, an 
accrual for the contingent consideration has been taken into account in 
calculating goodwill on the date of acquisition. This is based on Level 3 
in the fair value hierarchy.

Consideration transferred
An initial amount of R633 420 was paid in cash, while the balance will be 
settled after the 12-month earn out period. Based on the projected profits 
for the performance guarantee period, an accrual was raised for the full 
amount.

Intangible assets
The company was acquired to gain access to its customer list.

6.7 Cash flow information - Acquisition of businesses
                                                            2019         2018
                                                           R'000        R'000
Acquisitions paid for in cash                              1 955       24 665
Pinnacle Risk Solutions Proprietary Limited                1 321            - 
SOS Protec Secure CC                                         634            - 
Hi-Tech Nelspruit Proprietary Limited                          -          161
White River Hi-Tech Security Services Proprietary Limited      -        4 089
Golden Dividend 402 Proprietary Limited (Industroserve)        -        7 500
CSG Skills Institute Proprietary Limited                       -        3 000
Cortac Proprietary Limited                                     -        3 415
Intercity Alarms and Security Systems 
Proprietary Limited                                            -        6 000
7Arrows Security Proprietary Limited                           -          500
Acquisition settled with Nedbank funding facility              -      100 000
Revert Risk Management Solutions Proprietary Limited           -      100 000
Cash acquired in business combination                       (107)      (4 181) 
Pinnacle Risk Solutions Proprietary Limited                 (107)           -
Revert Risk Management Solutions Proprietary Limited           -       (3 239)
Golden Dividend 402 Proprietary Limited (Industroserve)        -         (761)
CSG Skills Institute Proprietary Limited                       -         (181)
                                                           1 848      120 484

7. Intangible assets
                                                             2019
                                                         Accumu-
                                                           lated    
                                                    amortisation
                                                             and     Carrying
                                              Cost    impairment       amount
                                             R'000         R'000        R'000
Group
Franchise rights                               552             -          552
Brand names                                108 565       (93 185)      15 380
Customer lists                              35 023       (31 998)       3 025
                                           144 140      (125 183)      18 957


                                                      2018 restated*
                                                         Accumu-
                                                           lated     Carrying
                                              Cost  amortisation       amount
                                             R'000         R'000        R'000
Group
Franchise rights                               552             -          552
Brand names                                108 565             -      108 565
Customer lists                              31 383        (5 130)      26 253
                                            140 501       (5 130)     135 371

* Figures have been restated as allowed by IFRS 3 Business Combinations 
(refer to note 6).


Reconciliation of intangible assets - Group
                                                       Additions
                                                         through
                                                        business
                                                        combina-
                                                           tions
                              Opening                  (refer to  
                              balance    Additions       note 6)     Disposal
                                R'000        R'000         R'000        R'000
2019
Franchise rights                  552            -             -            - 
Brand names                   108 565            -             -            - 
Customer lists                 26 253          284         3 354            -
                              135 371          284         3 354            -
2018 restated
Catering/franchise rights         765            -             -         (189)
Brand names                    72 722            -        36 243         (400) 
Customer lists                 10 415          350        19 716            -
                               83 902          350        55 959         (589)


                                                       Amortisa-
                                        Impairment         ation        Total
                                             R'000         R'000        R'000
2019
Franchise rights                                 -             -          552
Brand names                                (93 185)            -       15 380
Customer lists                             (20 304)       (6 563)       3 025 
                                          (113 489)       (6 563)      18 957
2018 restated
Catering/franchise rights                        -           (24)         552
Brand names                                      -             -      108 565
Customer lists                                   -        (4 228)      26 253
                                                 -        (4 252)     135 371

The catering rights relate to catering and events at Kenilworth race course 
for a period of three years starting January 2015 and the annual catering 
rights at both Emirates Airline Park (Ellis Park Stadium) and Wanderers 
Stadium starting February 2015 and November 2015 respectively. These were 
held by CSG Food Solutions Proprietary Limited (previously Ukweza Holdings 
Proprietary Limited) and were sold during the 2018 financial year.

The franchise rights relate to the Maid Right franchise held by
Afriboom Botswana Proprietary Limited.

All amortisation charges are included within depreciation and amortisation 
of non-financial assets (disclosed within operating expenses).

The remaining useful life of the customer lists is between three and four 
years. The franchise rights and brand names have an indefinite useful life. 
This is due to the fact that these are well known brand names that have been 
operating for a number of years and will continue into the foreseeable future.

There were no material contractual commitments to acquire intangible assets 
as at 31 March 2019 (2018: Rnil)

Impairment testing
For the purpose of annual impairment testing, brand names and franchise 
rights are allocated as follows:
                                                            2019         2018
                                                           R'000        R'000
CSG Security Supplies and Services Proprietary Limited         -       50 328
Afriboom Proprietary Limited                              15 380       15 380
7Arrows Security Proprietary Limited                           -        7 014
Afriboom Botswana Proprietary Limited                        552          552
Revert Risk Management Solutions Proprietary Limited           -       35 843
                                                          15 932      109 117

The recoverable amount of each company was determined based on value-in-use 
calculations, covering a detailed three-year forecast, followed by an 
extrapolation of expected cash flows for the remaining useful life using a 
growth rate determined by management.

The present value of the expected cash flows of each segment is determined 
by applying a suitable discount rate reflecting current market assessments 
of the time value of money and risks specific to the segment.

                                      Growth rates         Discount rates*
                                   2019         2018        2019         2018
                                      %            %           %            %
CSG Security Supplies and
Services Proprietary Limited        4,5          3,1       23,78        20,53
Afriboom Proprietary Limited        4,5          3,1       23,34        24,97
7Arrows Security Proprietary 
Limited (previously: 
Security Operations Group
Proprietary Limited)                4,5          3,1       23,78        20,53
Afriboom Botswana
Proprietary Limited                 4,5          3,1       23,34        24,97
Revert Risk Management
Solutions Proprietary Limited       4,5          3,1       23,78        20,53

* Prior year updated to disclose pre-tax discount rates. Previously post-tax 
rates were disclosed.

Growth rates
The growth rates reflect the long-term average growth rates for
South Africa (publicly available).

Discount rates
The discount rates reflect appropriate adjustments relating to market risk 
and specific risk factors of each segment.

Cash flow assumptions
Management calculated future profits based on historical achievement and the 
approved budgets for the 2020/2021 period. Costs have been calculated to grow 
in line with expansion and expected inflation. Cash flows have been extended 
into perpetuity at the growth rates noted above as management have no reason 
to believe the group will not continue past the budget period. Apart from the 
considerations in determining the value-in-use of the segments as described 
above, management is not currently aware of any other probable changes that 
would necessitate changes in its key estimates.

The security companies have experienced cash flow difficulties due to weak 
operational performance. This has also been reflected in the budgets used to 
calculate the recoverable amount. As a result of the above the full brand 
name and customer list relating to this was impaired.

The impairment is included as a separate line item on the statement of 
profit and loss and other comprehensive income together with impairments on 
other non-financial assets.

Management applied a sensitivity analysis on both discount rates and growth 
rates for the remaining assets and no additional impairments would have been 
recognised had these increased or decreased by 5%.

8. Goodwill

                          2019                        2018 restated*
                         Accumu-                          Accumu-
                           lated   Carrying                 lated    Carrying
                Cost  impairment     amount      Cost  impairment      amount
               R'000       R'000      R'000     R'000       R'000       R'000
Group
Goodwill     331 554     (86 953)   244 601   331 554        (440)    331 114
             331 554     (86 953)   244 601   331 554        (440)    331 114

* Figures have been restated as allowed by IFRS 3 Business Combinations 
(refer to note 6).


Reconciliation of goodwill - Group
                                             Additions
                                               through
                                              business
                                                combi-
                                               nations
                         Opening     Addi-   (refer to    Impair-
                         balance     tions     note 6)       ment       Total
                           R'000     R'000       R'000      R'000       R'000
Goodwill - 2019          331 114         -           -    (86 513)    244 601
Goodwill - 2018          260 799       650      69 665          -     331 114

Impairment testing
For the purpose of annual impairment testing, goodwill is allocated to the 
operating segments expected to benefit from the synergies of the business 
combinations in which the goodwill arises as follows:

                                                            2019         2018
                                                           R'000        R'000
CSG Facilities                                            50 656       50 656
CSG Security                                              79 993      166 506
CSG People                                               113 952      113 952
                                                         244 601      331 114

The recoverable amount of each segment was determined based on value-in-use 
calculations, covering a detailed three-year forecast, followed by an 
extrapolation of expected cash flows for the remaining useful life using a 
growth rate determined by management.

The present value of the expected cash flows of each segment is determined by 
applying a suitable discount rate reflecting current market assessments of 
the time value of money and risks specific to the segment.

                                      Growth rates         Discount rates*
                                   2019         2018        2019         2018
                                      %            %           %            %
CSG Facilities                      4,5          3,1       23,34        24,97
CSG Security                        4,5          3,1       23,78        20,53
CSG People                          4,5          3,1       29,28        23,37

* Prior year updated to disclose pre-tax discount rates. Previously post-tax 
rates were disclosed.

Growth rates
The growth rates reflect the long-term average growth rates for South Africa 
(publicly available).

Discount rates
The discount rates reflect appropriate adjustments relating to market risk 
and specific risk factors of each segment.

Cash flow assumptions
Management calculated future profits based on historical achievement and the 
approved budgets for the 2020/2021 period. Costs have been calculated to grow 
in line with expansion and expected inflation. Cash flows have been extended 
into perpetuity at the growth rates noted above as management have no reason 
to believe the group will not continue past the budget period.

Apart from the considerations in determining the value-in-use of the segments 
as described above, management is not currently aware of any other probable 
changes that would necessitate changes in its key estimates.

The security companies have experienced cash flow difficulties due to the 
weak operational performance. This has also been reflected in the budgets 
used to calculate the recoverable amount.

The impairment test resulted in a partial goodwill impairment for the security
division.

The impairment is included as separate line item on the statement of profit 
and loss and other comprehensive income together with impairments on other 
non-financial assets.

Management applied a sensitivity analysis on both discount rates and growth 
rates of the Facilities and People divisions and no additional impairments 
would have been recognised had these increased or decreased by 3%.

The security division remains sensitive to changes, in both discount and 
growth rates.

9. Earnings and dividends per share
9.1 Earnings per share
Both the earnings and diluted earnings per share have been calculated using 
the profit attributable to shareholders of the parent company as the numerator 
i.e. no adjustments to profit were necessary in 2019 or 2018.

The reconciliation of the weighted average number of shares for the purposes 
of diluted earnings per share to the weighted average number of ordinary shares 
used in the calculation of basic earnings per share is as follows:

                                                            2019         2018
                                                           R'000        R'000
Amounts in thousand shares:
Weighted average number of shares used for
basic earnings per share                                 517 297       510 858
Adjustment for:
Share options                                                  -           656
Diluted weighted average shares in issue                 517 297       511 514
Headline earnings per share
Attributable (loss)/earnings                            (147 991)      111 545
Adjustments for:
Loss/(profit) on sale of property, plant
and equipment (after taxation)                              (898)           61
Impairment on goodwill                                    86 513             - 
Impairment on property, plant and equipment
and intangible assets (after taxation)                    88 195             -
Headline earnings                                         25 818       111 606
Basic headline earnings per share (cents)                   4,99         21,85
Diluted headline earnings per share (cents)                 4,99         21,82
Headline earnings per share from continuing operations
Attributable (loss)/earnings                            (144 921)      111 123
Adjustments for:
Loss/(profit) on sale of property, plant
and equipment (after taxation)                              (898)          (26) 
Impairment on goodwill                                    86 513             -
Impairment on property, plant and equipment
and intangible assets (after taxation)                    88 195             -
Headline earnings                                         28 889       111 097
Basic headline earnings per share (cents)                   5,58         21,75
Diluted headline earnings per share (cents)                 5,58         21,72
Headline earnings per share from discontinued operations
Attributable (loss)/earnings                              (3 070)          422
Adjustments for:
Loss/(profit) on sale of property, plant
and equipment (after taxation)                                 -            87
Impairment on non-financial assets                             -             - 
Headline earnings                                         (3 070)          509
Basic headline earnings per share (cents)                  (0,59)         0,10
Diluted headline earnings per share (cents)                (0,59)         0,10

9.2 Dividends
During 2019, the company paid dividends of R25,8 million (2018: R25,7 million) 
to its equity shareholders. This represents a payment of 5 cents per share 
(2018: 5 cents per share).

The dividend was subject to dividend withholding tax of 20% for all shareholders 
who are not exempt from or who do not qualify for a reduced rate of withholding 
tax.

The board decided to retain cash and reduce debt and therefore no dividend 
will be paid for the year.

10. 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.

A decision was taken to sell the armed response and monitoring business of 
Hi-Tech White River (Hi-Tech Risk Solutions Proprietary Limited). On 18 April 
2019 Hi-Tech Nelspruit Proprietary Limited, together with the franchisor, 
CSG Security Supplies and Services Proprietary Limited, entered into a sale of 
business agreement with International Sales and Services Proprietary Limited 
to sell the business of the company for an amount of R358 000. The effective 
date for this transaction was 1 May 2019. The decision was made by the 
directors to discontinue these operations due the lack of return on investment 
however the company will remain on as a franchisee in the Hi-Tech group and 
continued royalties will be received on this.

On 29 March 2019, CSG Food Solutions signed an agreement with Film and TV 
Chefs Proprietary Limited t/a Shesha Film and Event, in terms of which 
CSG Foods agrees to buy the business of Shesha for an amount of 
R8 million. The effective date was 1 April 2019.

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 initial accounting is still incomplete.

11. Changes in directors
Mr N Ramages was appointed as non-executive director with effect from 
4 July 2018 after Mr AF Volkwyn stepped down as non-executive director 
on the same date.

12. Going concern
The financial information has been prepared on a going concern basis.

13. Audit opinion
BDO South Africa Inc, the group's independent auditor, has audited the 
consolidated annual financial statements of the group from which the 
abridged consolidated results contained in this report have been derived, 
and has expressed an unmodified audit opinion on the consolidated annual
financial statements. The abridged consolidated financial results comprise 
the statements of financial position at 31 March 2019 and the statements of 
comprehensive income, changes in equity and cash flows for the year then 
ended, and selected explanatory notes. A copy of the auditor's report is 
available for inspection at CSG's registered office.

The auditor's report does not necessarily report on all of the information 
contained in the abridged consolidated annual results. Shareholders are 
therefore advised to obtain a copy of the auditor's report together with 
the accompanying financial information from CSG's registered office.

For and on behalf of the Board

BT Ngcuka                 PJJ Dry
Chairman                  Chief Executive Officer

28 June 2019

Contact details
Registered office
6 Topaz Street, Lyttelton Manor, Centurion, 0157 
(Postal address as above)

Date and place of incorporation
12 April 2006
Johannesburg, South Africa

Directors
BT Ngcuka* (Chairman); PJJ Dry (CEO); JG Nieuwoudt (COO);
WE Scott (CFO); NN Sonjani*#; R Kisten *#; N Ramages*; M Mokoka*#
(* non-executive) (# independent)

Company secretary
MN Hattingh, BCom, LLB
6 Topaz Street, Lyttelton Manor, Centurion, 0157
(Postal address as above)

Sponsor
PSG Capital Proprietary Limited
(Registration number: 2006/015817/07)
1st Floor, Ou Kollege, 35 Kerk Street, Stellenbosch, 7600 
(PO Box 7403, Stellenbosch, 7599)

2nd Floor, Building 11, Alice Lane, Sandhurst, Sandton, 2196 
(PO Box 650957, Benmore, 2010)

Auditor
BDO South Africa Inc
52 Corlett Drive, Wanderers Office Park, Illovo, 2196 
(Private Bag X5, Northlands, 2116)

Transfer secretaries
Link Market Services South Africa Proprietary Limited
(Registration number: 2000/007239/07)
13th Floor, Rennie House, 19 Ameshoff Street, Braamfontein

Commercial bankers
Nedbank Limited
(Registration number: 1951/0000091/06) Business Banking Pretoria
4th Floor Menlyn Maine, Cnr Aramist and Constellation Streets
Waterkloof Glen
(PO Box 46, Menlyn, 0063)

Any queries regarding this integrated annual report or its 
contents should be addressed to:
Mark Hattingh
Company secretary

CSG Holdings Limited 
Email: mark@hnlaw.co.za 
Tel: +27 (0)12 664 7080

Any queries regarding CSG's investor relations should 
be addressed to:
Anne Dunn
Investor relations consultant 
Anne Dunn Communications 
Email: anne@annedunn.co.za 
Tel: +27 (0)82 448 2684

Announcement date
1 July 2019

www.csgholdings.co.za

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