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PRIMESERV GROUP LIMITED - Unaudited interim results for the six months ended 30 September 2018

Release Date: 23/11/2018 07:55
Code(s): PMV     PDF:  
 
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Unaudited interim results for the six months ended 30 September 2018

Primeserv Group Limited
("Primeserv" or "the Group" or "the Company")
Incorporated in the Republic of South Africa
Registration number: 1997/013448/06
Share code: PMV ISIN: ZAE000039277

Unaudited interim financial results 
For the six months ended 30 September 2018 
 
Condensed consolidated statement of comprehensive income 
For the six months ended 30 September 2018 
                                                           Unaudited    Unaudited      Audited    
                                                           September    September        March    
                                                                2018         2017         2018    
                                                               R'000        R'000        R'000    
Revenue                                                      386 982      347 906      725 289    
Cost of sales                                              (333 639)    (293 229)    (618 287)    
Gross profit                                                  53 343       54 677      107 002    
Other income                                                       6           86        1 069    
Operating expenses                                          (42 347)     (44 669)     (85 817)    
Operating profit                                              11 002       10 094       22 254    
Interest received                                                102          135          268    
Interest paid                                                  (311)      (1 195)      (2 249)    
Profit before taxation                                        10 793        9 034       20 273    
Taxation                                                     (1 474)      (1 101)        (586)    
Profit and total comprehensive income                          9 319        7 933       19 687    
Profit and total comprehensive income attributable to:                                            
Ordinary shareholders of the Company                           9 212        7 791       19 544    
Non-controlling interest                                         107          142          143    
Profit and total comprehensive income                          9 319        7 933       19 687    
Basic and diluted earnings per shares (cents)                  10.23         8.65        21.70    

Condensed consolidated statement of financial position 
As at 30 September 2018 
                                                           Unaudited    Unaudited      Audited    
                                                           September    September        March    
                                                                2018         2017         2018    
                                                               R'000        R'000        R'000    
ASSETS                                                                                            
Non-current assets                                            42 669       44 213       44 936    
Equipment and vehicles                                         4 745        5 535        5 514    
Investment property                                            6 445        7 045        6 445    
Goodwill                                                      21 178       21 178       21 178    
Intangible assets                                                538            -          646    
Deferred tax asset                                             9 763       10 455       11 153    
Current assets                                               148 229      114 618      127 311    
Inventories                                                      113          159          162    
Trade and other receivables                                  142 414      111 371      122 707    
Taxation receivable                                                -          216            -    
Cash and cash equivalents                                      5 702        2 872        4 442    
TOTAL ASSETS                                                 190 898      158 831      172 247    
EQUITY AND LIABILITIES                                                                            
Capital and reserves                                         130 556      112 291      122 686    
Ordinary share capital and share premium                       2 672        2 672        2 672    
Retained earnings                                            152 169      134 012      144 406    
Treasury shares                                             (16 279)     (16 279)     (16 279)    
Equity attributable to equity holders of the Company         138 562      120 405      130 799    
Non-controlling interests                                    (8 006)      (8 114)      (8 113)    
Current liabilities                                           60 342       46 540       49 561    
Trade and other payables                                      49 577       32 810       36 498    
Bank borrowings                                               10 765       13 730       13 063    
TOTAL EQUITY AND LIABILITIES                                 190 898      158 831      172 247    
 
Condensed consolidated statement of changes in equity 
For the six months ended 30 September 2018 
                                                           Unaudited    Unaudited      Audited    
                                                           September    September        March    
                                                                2018         2017         2018    
                                                               R'000        R'000        R'000    
Balance at beginning of period                               122 686      106 170      106 170    
Total comprehensive income - profit                            9 212        7 791       19 544    
Dividends paid                                               (1 449)      (1 812)      (3 171)    
Non-controlling interest                                         107          142          143    
Balance at end of period                                     130 556      112 291      122 686    
 
Condensed consolidated statement of cash flows 
For the six months ended 30 September 2018 
                                                           Unaudited    Unaudited      Audited    
                                                           September    September        March    
                                                                2018         2017         2018    
                                                               R'000        R'000        R'000    
Profit before taxation                                        10 793        9 034       20 273    
Adjustment for non-cash items                                    891          790        1 927    
Operating cash flows before working capital changes           11 684        9 824       22 200    
Net working capital changes                                  (6 579)       19 554       11 903    
Taxation (paid) / refunded                                      (84)          418          451    
Cash flows generated from operating activities                 5 021       29 796       34 554    
Cash flows utilised in investing activities                     (13)      (2 812)      (3 974)    
Cash flows utilised in financing activities                  (1 450)      (1 812)      (3 171)    
Net increase in cash and cash and cash equivalents             3 558       25 172       27 409    
Cash and cash equivalents at beginning of period             (8 621)     (36 030)     (36 030)    
Cash and cash equivalents at end of period                   (5 063)     (10 858)      (8 621)    
 
Segmental analysis 
For the six months ended 30 September 2018 
                                                           Unaudited    Unaudited      Audited    
                                                           September    September        March    
                                                                2018         2017         2018    
                                                               R'000        R'000        R'000    
Revenue: sales to external customers                                                              
Staffing Services                                            376 587      332 740      700 243    
Training and Consulting Services                              10 395       15 166       25 046    
Total                                                        386 982      347 906      725 289    
Revenue: inter-segment revenue                                                                    
Staffing Services                                                  -            -            -    
Training and Consulting Services                                  90            -           30    
Total                                                             90            -           30    
Business segment operating profit results                                                         
Staffing Services                                             16 844       18 323       38 182    
Training and Consulting Services                             (1 286)      (1 927)      (5 901)    
Shared Services                                              (4 556)      (6 302)     (10 027)    
Operating profit                                              11 002       10 094       22 254    
Interest received                                                102          135          268    
Interest paid                                                  (311)      (1 195)      (2 249)    
Profit before taxation                                        10 793        9 034       20 273    
Business segment EBITDA                                                                           
Staffing Services                                             17 131       19 879       39 295    
Training and Consulting Services                             (1 008)      (1 580)      (5 362)    
Shared Services                                              (4 368)      (5 237)      (9 084)    
Total                                                         11 755       13 062       24 849    
 
Notes 

1. Basis of preparation 
   The condensed consolidated interim financial statements are prepared in accordance with 
   IAS 34 Interim Financial Reporting, the Financial Reporting Pronouncements as issued by the 
   Financial Reporting Standards Council and the requirements of the Companies Act of 
   South Africa. The accounting policies applied in the preparation of these interim financial 
   statements are in terms of International Financial Reporting Standards ("IFRS") and are 
   consistent with those applied in the previous annual financial statements. IFRS 9 and 
   IFRS 15 had no material effect on the Group's results. The results were prepared by the 
   Group Financial Director, Mr. R Sack CA (SA).  
        
2. Headline earnings per share 
                                                           Unaudited    Unaudited      Audited 
                                                           September    September        March 
                                                                2018         2017         2018 
                                                               R'000        R'000        R'000 
   Attributable earnings                                       9 212        7 791       19 544 
   Headline earnings adjustments                                                               
        - Loss on disposal of equipment and vehicles               4           10           67 
        - Impairment of investment in property                     -            -          600 
        - Impairment of intangible assets                        108            -            - 
   Attributable headline earnings before tax impact            9 324        7 801       20 211 
   Tax impact of adjustments                                    (30)          (3)        (273) 
   Attributable headline earnings                              9 294        7 798       19 938 
   Headline earnings and diluted headline earnings per         10.32         8.66        22.14 
   share (cents) 
    
3. Net asset value per share 
                                                           Unaudited    Unaudited      Audited    
                                                           September    September        March    
                                                                2018         2017         2018    
                                                               R'000        R'000        R'000    
   Number of shares in issue at end of period (net of         90 064       90 064       90 064    
   treasury shares) ('000)                                                                        
   Net asset value per share (cents)                             154          134          144    
   Tangible net asset value per share (cents)                    119           99          109    

4. Dividend 
   Notice is hereby given that a gross cash dividend of 1.50 cents per share for the interim 
   period was declared on Friday, 23 November 2018, payable to shareholders recorded in the 
   share register of the Company at the close of business on the record date appearing below. 
   The salient dates pertaining to the interim dividend are as follows: 
    
   Last date to trade "cum" dividend                          Tuesday, 15 January 2019 
   Date trading commences "ex" dividend                       Wednesday, 16 January 2019 
   Record date                                                Friday, 18 January 2019 
   Date of payment                                            Monday, 21 January 2019 

   Ordinary share certificates may not be dematerialised or rematerialised between Wednesday, 
   16 January 2019 and Friday, 18 January 2019, both days inclusive. 
    
   Shareholders who are not exempt from the Dividend Withholding Tax of 20% will therefore 
   receive a net dividend of 1.20 cents per share. The Company has 132 062 743 ordinary shares 
   in issue and its income tax reference number is 9408/002/71/6. The dividend is being paid 
   out of income reserves. 
    
   All times provided in this announcement are South African local times. 
    
   Where applicable, dividends in respect of certificated shares will be transferred electronically 
   to shareholders' bank accounts on the payment date. In the absence of specific mandates, 
   dividend cheques will be posted to shareholders at their risk. Ordinary shareholders who hold 
   dematerialised shares will have their accounts credited at their CSDP or broker on Monday, 
   21 January 2019. 
    
5. Events after the reporting date 
   Management is not aware of any material events that occurred subsequent to the end of the 
   financial period under review. 
    
6. Auditors responsibility 
   The results have not been reviewed or audited by the Group's external auditors, Mazars 
    
7. Forward-looking statements 
   Certain statements contained in the report are forward-looking statements which Primeserv 
   believes are reasonable and which consider information up to the date of publication. 
   These statements could differ materially due to various factors such as changes in economic 
   and market conditions or changes in the regulatory environment. As a result, these forward-
   looking statements are not guarantees of future performance. Forward-looking statements 
   have not been reviewed nor audited by the Group's external auditors, Mazars. 
    
Commentary 
For the six months ended 30 September 2018 
 
Primeserv is an investment holding company and a leading provider of integrated business support 
services focused on client-centric human capital services, spanning staffing and recruitment 
services, productivity and functional outsourcing services as well as training and consulting services. 
We align our customised services to our clients' needs, optimising their required human capital 
base to enhance the capabilities of their organisations. Our innovative solutions deliver economically 
measurable value-added services that directly impact on productivity and performance. This allows our 
clients to prioritise business objectives, so as to achieve their strategic goals. Primeserv has a 
strong focus on workplace flexibility solutions which are aligned to government initiatives aimed 
at enhancing youth employment opportunities, and on the development of labour force skills through 
its training and learnership programmes, with a particular emphasis on the up-skilling of youth in 
South Africa. 

Group revenue for the 6 month review period has increased by 11% from R347.9 million to R387 million 
with operating profit increasing by 9% from R10.1 million to R11 million. A slight decrease in 
gross profit has been offset by stringent cost containment, whilst strong cash flows have seen 
overall finance costs decreasing by nearly 80% from an aggregate R1.1 million to R0.2 million. 
The Group's profit before taxation has increased by 20% from R9 million to R10.8 million. Earnings 
per share has increased by 18% from 8.65 cents per share for the 6 months ended 30 September 2017 to 
10.23 cents per share for the six months under review. Headline earnings per share have improved by 
19% from 8.66 cents per share to 10.32 cents per share. Cash flows from operating activities are lower 
than when compared with the comparable period. This is attributable to the collection of significant 
overdue amounts last year, rather than to any intrinsic issue this year, albeit that there has been a 
large increase in trade receivables given timing differences as a result of payment terms granted to 
certain clients who make payment after the period end. The Group's Days Sales Outstanding ("DSO") 
has increased from 49 days at the end of the comparable period to 57 days at the end of the 
current reporting period, however, all significant amounts due were collected after the reporting 
period. Gearing has decreased from 6.6% at the end of March 2018 to 3.7% at the end of September 
2018, and interest cover has improved from 11 times at the end of March 2018 to 53 times at the 
end of the six months under review. The overall improved performance is reflected in the tangible 
net asset value per share increasing by 20% from 99 cents per share to 119 cents per share, with the 
overall net asset value per share increasing by 15% from 134 cents per share to 154 cents per share. 

The Staffing Services segment increased its revenue by 13% from R332.7 million to R376.6 million with 
its operating profit lower by 8% from R18.3 million to R16.8 million. The segment's DSO has increased 
from 52 days at the end of March 2018 to 56 days at the end of September 2018, for reasons as 
described above. The blue-collar staffing unit, which specialises in servicing the logistics, 
warehousing and distribution centre market, as well as the wholesale and retail, manufacturing and 
construction sectors, delivered a reasonable performance given the recessionary economy. 
The white-collar professional draughting and engineering staffing unit delivered a solid 
performance. The staffing unit servicing the power generation sector experienced extreme margin 
pressure, whilst the unit servicing the financial services industry was subject to erratic volumes. 

The Training and Consulting Services segment has gone some way to reversing the prior year's 
performance and consequently produced a  reduced loss for the period. As indicated in the commentary 
to the results for the year ended March 2018, it is anticipated that the business will return to profitability 
in the medium term. Revenue in the segment has decreased by 31% from R15.2 million in the comparable period to 
R10.4 million during the current review period, primarily due to the introduction of new products 
and services being phased in only towards the end of the reporting period. The segment's DSO, which 
remain a function of SETA-related payment cycles, has improved slightly from 78 days at the end of 
September 2017 to 77 days at the end of the current reporting period. 

Board and Transformation 

After having served on the Board for many years, Michael Judin decided not to stand for re-election 
and will be replaced by a suitably qualified candidate. The Group thanks him for his 
commitment and long service to the Group. 

Transformation at Board and operating staff levels remains a Group imperative with all new 
appointments favouring candidates with B-BBEE transformation credentials. The Group also remains 
committed to strengthening its B-BBEE scorecards through preferential procurement and skills 
development programmes aimed at the advancement of South Africa's youth and the unemployed. 

Outlook 

Whilst market conditions remain tough, the Group continues to seek out those opportunities that can 
add meaningful and sustainable value to the Group's strategy of growing its integrated business 
support services throughout southern Africa. 

Directors 

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

On behalf of the Board 
 
CS Ntshingila          M Abel            R Sack 
Chairperson            CEO               FD 
 
23 November 2018, Illovo 

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

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

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

Auditors
Mazars, 54 Glenhove Road, Melrose Estate, 2196

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

www.primeserv.co.za

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