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PMV
PMV
PMV - Primeserv - Reviewed Interim Results for the twelve months ended 31
December 2010 Consolidated Condensed Statement of Comprehensive Income
PRIMESERV GROUP LIMITED
("Primeserv" or "the Group" or "the Company")
Incorporated in the Republic of South Africa
Registration number: 1997/013448/06
Share code: PMV
ISIN: ZAE000039277
www.primeserv.co.za
productivity@primeserv.co.za
REVIEWED INTERIM RESULTS FOR THE TWELVE MONTHS ENDED 31 DECEMBER 2010
CONSOLIDATED CONDENSED STATEMENT OF COMPREHENSIVE INCOME
for the 12 months ended 31 December 2010
Reviewed Audited
12 months 12 months
ended ended
31 Dec 31 Dec
2010 2009
R`000 R`000
Revenue (1) 529 036 523 501
EBITDA 11 496 19 144
Depreciation (1 939) (1 660)
Operating profit 9 557 17 484
Interest received 4 788 4 533
Interest paid (4 498) (6 259)
Share of profit/(loss) from associate 208 (225)
Profit before taxation 10 055 15 533
Taxation (2 698) (3 745)
Total comprehensive income
for the period 7 357 11 788
Total comprehensive income
attributable to:
Ordinary shareholders of the Company 7 222 11 451
Non-controlling interest 135 337
Total comprehensive income
for the period 7 357 11 788
Reconciliation of headline earnings
Net profit attributable to shareholders 7 222 11 451
After-tax effect of profit on sale of
fixed assets - 4
Headline earnings 7 222 11 455
Weighted average number of
shares (`000) 102 881 108 980
Diluted weighted average number
of shares (`000) 102 881 108 980
Earnings per share (cents) 7,02 10,51
Diluted earnings per share (cents) 7,02 10,51
Headline earnings per share (cents) 7,02 10,51
Diluted headline earnings
per share (cents) 7,02 10,51
(1) Revenue note: Excludes revenue of R53,3 million (Dec 2009: R5,7 million)
from Bathusi Staffing Services (Proprietary) Limited, which was deconsolidated
as a result of a B-BBEE transaction and has since been accounted for as an
associate.
SEGMENTAL ANALYSIS
for the 12 months ended 31 December 2010
Reviewed Audited
12 months 12 months
ended ended
31 Dec 31 Dec
2010 2009
R`000 R`000
Revenue
Human Capital Outsourcing 492 737 478 101
Human Capital Development 36 299 45 400
529 036 523 501
Operating profit/(loss)
Human Capital Outsourcing 16 478 19 214
Human Capital Development (3 607) 2 036
Central Services (3 314) (3 766)
9 557 17 484
CONSOLIDATED CONDENSED STATEMENT OF FINANCIAL POSITION
as at 31 December 2010
Reviewed Audited
31 Dec 31 Dec
2010 2009
R`000 R`000
Assets
Non-current assets 29 566 24 064
Equipment and vehicles 5 371 4 229
Goodwill 12 312 10 135
Intangible assets 609 642
Long-term receivables 4 927 4 227
Investments and loan in associate 3 188 334
Deferred tax asset 3 159 4 497
Current assets 105 858 110 973
Inventories 1 356 965
Trade receivables 75 189 78 871
Other receivables 2 954 3 362
Cash and cash equivalents 26 359 27 775
Total assets 135 424 135 037
Equity and liabilities
Equity 76 329 74 722
Capital and reserves 75 449 73 977
Non-controlling interest 880 745
Non-current liabilities 541 184
Long-term vendor obligation 435 -
Interest-bearing financial liabilities 106 184
Current liabilities 58 554 60 131
Trade and other payables 16 954 28 930
Current portion of financial liabilities 71 181
Taxation payable 1 055 1 473
Short-term vendor obligation 1 639 -
Bank borrowings 38 835 29 547
Total equity and liabilities 135 424 135 037
Number of shares in issue at end
of period (`000) (net of treasury and
share trust shares) 99 395 105 455
Net asset value per share (cents) 77 71
CONSOLIDATED CONDENSED STATEMENT OF CHANGES IN EQUITY
for the 12 months ended 31 December 2010
Reviewed Audited
12 months 12 months
ended ended
31 Dec 31 Dec
2010 2009
R`000 R`000
Balance at beginning of the period 74 722 68 093
Share purchases (2 751) (2 318)
Attributable earnings for the period 7 222 11 451
Dividends paid (2 988) (2 741)
Share-based payment reserve (11) (100)
Non-controlling interest 135 337
Balance at end of the period 76 329 74 722
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
for the 12 months ended 31 December 2010
Reviewed Audited
12 months 12 months
ended ended
31 Dec 31 Dec
2010 2009
R`000 R`000
Cash flows from operating activities 1 958 23 196
Cash flows from investing activities (8 704) (3 101)
Cash flows from financing activities (970) (174)
Returned to shareholders - dividends paid (2 988) (2 741)
Net (decrease)/increase in cash and
cash equivalents (10 704) 17 180
Cash and cash equivalents at
beginning of period (1 772) (18 952)
Cash and cash equivalents at
end of period (12 476) (1 772)
COMMENTARY
Commentary
Profile
Primeserv Group Limited is an investment holding company focusing on delivering
human resources (HR) products, services and solutions through its operating
pillar, Primeserv HR Services. This incorporates two main areas of
specialisation: Human Capital Development operating through two divisions,
Primeserv HR Solutions and Primeserv Colleges; and Human Capital Outsourcing
operating through the Group`s largest division, Primeserv Outsourcing.
These divisions provide a comprehensive HR value chain that can be applied
through Primeserv`s IntHRgrateTrade Mark Model in its entirety or modular form.
These divisions encompass an extensive range of HR consulting solutions and
services, corporate and vocational training programmes, technical skills
training centres, computer training colleges, as well as resourcing and flexible
staffing services, supported by wage bureaus and HR logistics outsourcing
operations.
Operating environment
The economic environment for the twelve months to 31 December 2010 remained
challenging. Both business and consumer confidence are still under pressure.
This affected the Group`s operations with businesses curtailing expenditure
relating to skills development, training and employment. Notwithstanding this,
the Group grew its revenue by 1% and is well placed to benefit as and when an
expected economic upturn occurs.
Overview of results
Consolidated Group revenue increased by R6 million from R523,5 million to R529,0
million. Operating margins experienced downward pressure with EBITDA declining
from R19,1 million to R11,5 million and operating profit decreasing from R17,5
million to R9,6 million. The Group`s effective tax rate of 27% is higher than
the 24% applicable to the previous financial year. This is due to certain tax
allowances having been fully utilised in the prior period as well as the effect
of Secondary Tax on Companies on dividends paid. Total comprehensive income
decreased from R11,8 million to R7,4 million with headline earnings per share
declining by 33% from 10,51 cents per share to 7,02 cents per share for the
period under review.
Cash flows from operating activities were positive during the twelve months
under review. Further investment was made in capital expenditure, especially in
the upgrading of the colleges` infrastructure as well as in new computer
equipment and course development. Effective working capital management during
the review period resulted in net interest income of R0,3 million compared to a
net interest cost of R1,7 million for the prior period notwithstanding that
there was a net outflow of cash relating to investing and financing activities.
Bank borrowings increased due primarily to earlier than usual release of
creditor payments and accruals. The statement of financial position has
continued to strengthen, with an overall improvement in debtors days resulting
in trade receivables reducing by R3,7 million from R78,9 million to R75,2
million. Cash and cash equivalents were stable at R26,4 million compared to
R27,8 million at the comparable period-end. Net asset value increased by 8% from
71 cents per share to 77 cents per share.
Change of year-end
The Group has changed its financial year from the end of December to the end of
March to better align the financial reporting with its underlying trading and
operating activities. Consequently the Group will be reporting audited results
for the fifteen months ending 31 March 2011.
Human Capital Outsourcing
The division`s revenue increased by 3% from R478,1 million to R492,7 million.
Operating profit decreased by 14% from R19,2 million to R16,5 million due to a
lower margin mix of business obtained. Trading in the "white collar"
professional draughting and engineering unit and the division`s mega-project
wage bureau unit was negatively impacted by the completion of and the
cancellation and/or delay of certain major projects.
The logistics and warehousing units experienced stable job numbers. The
industrial and construction units were affected by reduced manpower demand.
Certain of these units are now starting to see a slight improvement in demand
across multiple job categories.
The division has invested in increasing its service delivery capability and
capacity in anticipation of improving market conditions.
The ongoing debate pertaining to the future of the temporary employment services
industry within South Africa is still unresolved. This prevailing uncertainty
has negatively affected flexible staffing levels.
Human Capital Development
Revenue decreased by 20% from R45,4 million to R36,3 million. The combination of
lower learner registrations, cancelled or curtailed training, together with the
generally stagnant economic conditions contributed to a poor overall result for
the segment which operates with a high fixed cost base. Corrective actions have
already been implemented albeit that the effects thereof are not expected to be
felt until the new financial year. The HR Consulting unit delivered a good
performance.
Group strategy and outlook
The Group strategy is that of an investment holding company in the services
industry, however, it will now be seeking to diversify its revenue streams
through a series of corporate activities alongside its existing staffing, skills
development and HR consulting operations. This strategy is expected to enhance
the future sustainability of the Group, and the funding thereof will result in
an increase in the Group`s overall level of gearing. The Group will continue to
seek further acquisitions within its existing spheres of activity so as to
expand its value offering to clients.
The pace of the country`s economic recovery remains uncertain and therefore it
is anticipated that trading conditions will be restrictive and somewhat
volatile. The Group remains cautiously optimistic regarding performance in the
year ahead. This general forecast has not been reviewed nor reported on by the
Company`s auditors.
B-BBEE
The Group has continued to focus on maintaining and improving its B-BBEE
credentials, with individual Group entities achieving ratings of between Level 2
and Level 6. Many of these entities are value added suppliers.
The Group is committed to ongoing transformation as an operational imperative.
Corporate governance
The Board and the individual directors are committed to the values of integrity,
transparency, responsibility and accountability in enforcing the highest
standards of corporate governance. King III became effective on 1 March 2010 and
accordingly the Group is in the process of reviewing and evaluating its
compliance with King III and a detailed programme will be adopted to ensure
optimal compliance on an apply or explain basis within the timeline required by
the JSE.
Events after the reporting date
Save in regard to the negotiations giving rise to the cautionary announcement
made by the Company on 2 March 2011, management is not aware of any material
events which have occurred subsequent to the end of December 2010. There has
been no material change in the Group`s contingent liabilities since the period-
end.
Acquisitions
The HR Consulting unit has acquired, as a going concern, the business of
Sincedisa Consulting cc with effect from 1 March 2010. The business is an HR
consulting business allied to the Group`s existing business. The acquisition
price is determined based upon future earnings and will not exceed R3,5 million.
The purchase price, as required by IFRS 3, is estimated at R2,4 million. The
purchase price is payable in cash in three instalments. The first payment was in
July 2010 with subsequent payments to be made in April 2011 and April 2012.
Assets valued at R0,2 million have been acquired. Attributable goodwill of R2,2
million has been calculated.
Included in the results for the period are net profits before tax of R0,8
million attributable to this business, resulting in an increase in earnings of
0,57 cents per share. It is anticipated that the transaction will enhance the
earnings and results of the Group.
Change of auditors
Shareholders are advised that the firm of Charles Orbach & Company, which is
accredited by the JSE Limited, has been appointed as the Group`s auditors with
effect from 24 March 2011 following the resignation of the previous auditors.
Accounting policies
The results for the twelve months have been prepared in accordance with the
Group`s accounting policies which are consistent with the previous period. These
comply with International Financial Reporting Standards and the AC 500
standards, as issued by the Accounting Standards Board, IAS 34 - Interim
Financial Reporting, the South African Companies Act and the JSE Limited
Listings Requirements.
Review opinion
The results for the twelve months ended 31 December 2010 have been reviewed by
the Company`s auditors and their unmodified review opinion is available for
inspection at the Company`s registered offices.
Dividend
Further to the change of year-end the Company has not declared a second interim
dividend but will consider a final dividend in respect of the fifteen month
financial period ending 31 March 2011.
On behalf of the Board
JM Judin
Independent Non-Executive Chairman
M Abel
Chief Executive Officer
R Sack
Financial Director
25 March 2011
Bryanston
Directors: JM Judin (Chairman)#, M Abel (Chief Executive Officer), Prof S Klein#
(American), LM Maisela#, AT McMillan (British), DL Rose#, R Sack (Financial
Director), DC Seaton*, CS Shiceka#
# Independent Non-Executive
* Non-Executive
Company secretary: ER Goodman Secretarial Services cc (represented by E Goodman)
Registered address: Venture House, Peter Place Park, 54 Peter Place, Bryanston,
2021
(PO Box 3008, Saxonwold, 2132)
Transfer secretaries: Computershare Investor Services (Pty) Limited, 70 Marshall
Street, Johannesburg, 2001
(PO Box 61051, Marshalltown, 2107)
Auditors: Charles Orbach & Company, Third Floor, 3 Melrose Boulevard, Melrose
Arch, 2076
(PO Box 355, Melrose Arch, 2076)
Sponsor: Deloitte & Touche Sponsor Services (Pty) Limited, The Woodlands,
Woodlands Drive, Woodmead, 2196
(Private Bag X6, Gallo Manor, 2052)
Date: 25/03/2011 17:30:01 Produced by the JSE SENS Department.
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