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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