| Wed 29 Jun 2011, 16:57 | | PMV - Primeserv Group Limited - Reviewed results for the fifteen months ended 31 |
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PMV
PMV
PMV - Primeserv Group Limited - Reviewed results for the fifteen months ended 31
March 2011 and further cautionary announcement
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
e-mail: productivity@primeserv.co.za
REVIEWED RESULTS FOR THE FIFTEEN MONTHS ENDED 31 MARCH 2011 AND FURTHER
CAUTIONARY ANNOUNCEMENT
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the 15 months ended 31 March 2011
Reviewed Audited
15 months 12 months
ended ended
31 Mar 31 Dec
2011 2009
R`000 R`000
Revenue (1) 665 281 523 501
Cost of sales (542 947) (421 941)
Gross profit 122 334 101 560
EBITDA 12 937 19 144
Depreciation (2 572) (1 660)
Operating profit 10 365 17 484
Interest received 4 720 4 533
Interest paid (4 756) (6 259)
Share of loss from associate (202) (225)
Profit before taxation 10 127 15 533
Taxation (1 659) (3 745)
Total comprehensive income
for the period 8 468 11 788
Total comprehensive income
attributable to:
Ordinary shareholders of the Company 9 281 11 451
Non-controlling shareholders` interest (813) 337
Total comprehensive income 8 468 11 788
Reconciliation of headline earnings
Net profit attributable to shareholders 9 281 11 451
After-tax effect of profit on sale
of fixed assets - 4
Headline earnings 9 281 11 455
Weighted average number of
shares (`000) 102 174 108 980
Diluted weighted average
number of shares (`000) 103 166 108 980
Earnings per share (cents) 9,08 10,51
Diluted earnings per share (cents) 9,00 10,51
Headline earnings per share (cents) 9,08 10,51
Diluted headline earnings
per share (cents) 9,00 10,51
(1) Revenue note: Excludes revenue of R64,3 million (Dec 2009: R55,7 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 15 months ended 31 March 2011
Reviewed Audited
15 months 12 months
ended ended
31 Mar 31 Dec
2011 2009
R`000 R`000
Revenue from external customers
Human Capital Outsourcing 606 007 478 101
Human Capital Development 59 274 45 400
665 281 523 501
Business segment results
Human Capital Outsourcing 18 084 19 214
Human Capital Development (2 766) 2 036
Central Services (4 953) (3 766)
10 365 17 484
Interest received 4 720 4 533
Interest paid (4 756) (6 259)
Share of loss from associate (202) (225)
Profit before taxation 10 127 15 533
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
as at 31 March 2011
Reviewed Audited
31 Mar 31 Dec
2011 2009
R`000 R`000
Assets
Non-current assets 28 171 24 064
Equipment and vehicles 6 072 4 229
Goodwill 12 012 10 135
Intangible assets 601 642
Long-term receivables 1 214 4 227
Investment and loan in associate 2 874 334
Deferred tax asset 5 398 4 497
Current assets 97 655 110 973
Inventories 1 017 965
Trade receivables 64 922 78 871
Other receivables 6 466 3 362
Cash and cash equivalents 25 250 27 775
Total assets 125 826 135 037
Equity and liabilities
Equity 78 056 74 722
Capital and reserves 78 124 73 977
Non-controlling interest (68) 745
Non-current liabilities 632 184
Long-term vendor obligation 591 -
Interest-bearing financial liabilities 41 184
Current liabilities 47 138 60 131
Trade and other payables 17 914 28 930
Current portion of financial
liabilities 116 181
Taxation payable 1 702 1 473
Short-term vendor obligation 851 -
Bank borrowings 26 555 29 547
Total equity and liabilities 125 826 135 037
Number of shares in issue at
end of period (`000) (net of
treasury and share trust shares) 95 231 105 455
Net asset value per share (cents) 82 71
CONSOLIDATED CONDENSED STATEMENT OF CHANGES IN EQUITY
for the 15 months ended 31 March 2011
Reviewed Audited
15 months 12 months
ended ended
31 Mar 31 Dec
2011 2009
R`000 R`000
Balance at beginning of the period 74 722 68 093
Attributable earnings for the period 9 281 11 451
Dividends paid (2 596) (2 741)
Share movements (2 652) (2 318)
Share-based payment reserve 114 (100)
Non-controlling shareholders` interest (813) 337
Balance at end of the period 78 056 74 722
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
for the 15 months ended 31 March 2011
Reviewed Audited
15 months 12 months
ended ended
31 Mar 31 Dec
2011 2009
R`000 R`000
Cash flows from operating activities 10 300 23 196
Cash flows from investing activities (7 029) (3 101)
Cash flows from financing activities (208) (174)
Returned to shareholders
- dividends paid (2 596) (2 741)
Net increase in cash and
cash equivalents 467 17 180
Cash and cash equivalents at
beginning of period (1 772) (18 952)
Cash and cash equivalents at
end of period (1 305) (1 772)
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 in 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 fifteen months to 31 March 2011 continued to be
challenging. Both business and consumer confidence remained under pressure. This
situation was further exacerbated by the persistent debate relating to the
Temporary Employment Services ("TES") industry. The resulting uncertainty
affected the Group`s operations with businesses curtailing expenditure relating
to skills development, training and employment. Notwithstanding this, the
Group`s overall results were encouraging and it is well positioned for an
anticipated economic upturn.
OVERVIEW OF RESULTS
The Group`s year-end was changed during the review period from the end of
December to the end of March in order to better align the financial reporting
period with the underlying operating activities. As a consequence various
comparisons with the prior period have not been stated in the commentary below.
Sales revenue for the 15 months was R665,3 million realising a gross profit of
R122,3 million but with lower margins compared to the prior period as new
customers were brought on board. Both EBITDA and operating profit have also
shown a decrease compared with the prior reporting period. Working capital
management improved during the review period as evidenced by the significant
reduction in interest paid from R6,3 million to R4,8 million even though the
current period was for 15 months. The effective tax rate has also been reduced
from 24% in the prior year to 16% in the current reporting period as a
consequence of allowances claimed for increased learnership training. Total
comprehensive income attributable to shareholders of the Group declined by 19%
from R11,5 million to R9,3 million. Earnings per share and headline earnings per
share decreased by 14% from 10,51 cents per share to 9,08 cents per share and
diluted earnings per share and diluted headline earnings per share were down
from 10,51 cents per share to 9,00 cents per share.
Cash flows from operating activities have shown a marked improvement compared to
the position at the end of the 12 months to 31 December 2010 with the Group
being cash positive for the 15-month review period. The Group further invested
in the upgrading of its colleges` infrastructure as well as in new computer
equipment and further course development.
The balance sheet has continued to strengthen. A significant portion of the
long-
term receivables balance has been reclassified as other receivables due to the
finalisation of settlement arrangements by a debtor. The investment in trade
receivables reflects an improvement of R14,0 million from R78,9 million to R64,9
million. Cash and cash equivalents were relatively stable at R25,3 million at
the end of March 2011 compared to R27,8 million at the end of December 2009.
Bank borrowings were reduced by R3,0 million from R29,6 million to R26,6
million. The Group`s level of gearing was consistent at 2,7% compared to 2,9% at
the end of the previous financial year. The net asset value per share increased
by 15% from 71 cents per share to 82 cents per share.
HUMAN CAPITAL OUTSOURCING
The division`s revenue increased by 27% from R478,1 million to R606,0 million in
the 15-month review period. Operating profit was R18,1 million compared to R19,2
million, attributable to a mix of customers with lower overall margins. Trading
in the "white collar" professional draughting and engineering unit as well as in
the division`s mega-project wage bureaus remains subdued following the
completion and/or cancellation of a number of major infrastructure projects
nationwide. The "blue collar" flexible staff units involved in the logistics,
warehousing and distribution arena delivered a largely unchanged set of results,
albeit that those in the construction industry were affected by reduced manpower
demand. The division is further investing both internally and in partnership
with outsourced service providers in its information technology platforms and HR
productivity systems so as to provide management information-based solutions and
services focused on improving HR efficiency and economic performance for its
customers.
The unabated political, regulatory and social discourse regarding the future of
the TES industry created a negative trading environment for the division,
however, the recently proposed legislation and ensuing government, NEDLAC and
industry-wide discussions appear to make a redrafting of the proposed
legislation increasingly likely. The Group believes that increased regulation
will be the optimal solution for all parties concerned, particularly in view of
the critical need to ensure job creation throughout South Africa.
HUMAN CAPITAL DEVELOPMENT
The segment improved its revenue from R45,4 million to R59,3 million when
compared to the last financial year. Learner registrations at the computer
training and business colleges were significantly better than at the same time
last year. The technical training unit delivered a weak performance due
primarily to uncertainty relating to the state of the SETAs within which it
operates and the consequent reluctance of businesses to commit to training
expenditure. The division carried out further learnership training in the
transportation and artisan sectors and expects to increase these numbers in the
year ahead. The HR Consulting unit performed well during the review period.
GROUP STRATEGY AND OUTLOOK
Primeserv`s strategy is that of an investment holding company in the services
industry, and whilst the Group focuses on organically and acquisitively
developing its existing staffing, skills development and HR consulting
operations so as to broaden its service and product offerings, it is also
actively seeking to diversify its revenue streams through a series of corporate
activities. This strategy is aimed at enhancing the ongoing sustainability and
growth of the Group.
The pace of the country`s economic recovery is expected to remain constrained in
the short term. The Group is 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 is strongly committed to ongoing transformation and continues to focus
on improving its B-BBEE credentials. The Group was once again highly rated with
regard to its B-BBEE scorecard, receiving a ranking of number 22 in terms of the
2011 Financial Mail/Empowerdex survey.
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
Management is not aware of any material events which have occurred subsequent to
the end of March 2011. There has been no material change in the Group`s
contingent liabilities since the period-end.
ACQUISITIONS AND NEW CONTRACTS
The following acquisitions were made:
- The HR Consulting unit 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 is estimated, as required by IFRS 3, at
R2,1 million. The purchase price is payable in cash in three
instalments. The first payment was in July 2010 with
subsequent payments in April 2011 and April 2012. Assets
valued at R0,2 million have been acquired and attributable
goodwill of R1,9 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 0,59 cents per share.
- At the end of the review period the Group concluded a
transaction that entailed the payment of compensation arising
out of the termination of service agreements for the provision
of temporary employment services with customers of the vendor
and the conclusion of such contracts with the Group instead.
The consideration payable is based upon future sales to
customers in terms of these contracts. There was no impact
flowing from this transaction in the financial review period
as the effective date was 1 May 2011.
ACCOUNTING POLICIES
The results for the fifteen months have been prepared in accordance with the
Group`s accounting policies which are consistent with the previous period and
these comply with International Financial Reporting Standards and the AC 500
standards, as issued by the Accounting Standards Board. This report has been
prepared in accordance with IAS 34 - Interim Financial Reporting, the South
African Companies Act and the JSE Limited Listings Requirements.
REVIEW OPINION
The results for the fifteen months ended 31 March 2011 have been reviewed by the
Company`s auditors, Charles Orbach & Company, and their unmodified review
opinion is available for inspection at the Company`s registered offices.
FURTHER CAUTIONARY ANNOUNCEMENT
Further to the cautionary announcement released on SENS on 20 May 2011 and
published in the press on 23 May 2011, shareholders are advised that
negotiations remain in progress which, if successfully concluded, may have a
material effect on the price of the Company`s securities. Accordingly,
shareholders are advised to continue to exercise caution when dealing in the
Company`s securities until a full announcement is made.
DIVIDEND DECLARATION
Notice is hereby given that Primeserv has declared a final dividend (dividend
declaration number 12) for the 15 months ended 31 March 2011 of 2,50 cents per
share, payable to shareholders recorded in the register of the Company at the
close of business on the record date as set out below. The salient dates
applicable to the dividend are as follows:
Last day to trade "CUM" dividend Friday, 15 July 2011
First day to trade "EX" dividend Monday, 18 July 2011
Record date Friday, 22 July 2011
Payment date Monday, 25 July 2011
No share certificates may be dematerialised or rematerialised between Monday, 18
July 2011 and Friday, 22 July 2011, both days inclusive.
On behalf of the Board
JM Judin M Abel
Independent Non-Executive Chairman Chief Executive Officer
R Sack
Financial Director
29 June 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: 29/06/2011 16:57:22 Produced by the JSE SENS Department.
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