| Tue 24 Apr 2001, 0:00 | | Servest - Audited Results |
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SERVEST HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1986/000785/06)
("Servest" or "the company")
Audited results for the year ended 28 February 2001
* Fully diluted headline earnings per share up 18,5%
* 8 EBITDA up 61%
* Exceptional cash generation
* Organically driven growth
Group income statement
Restated
Audited Audited
year ended year ended
28 February 29 February
2001 % 2000
R'000 change R'000
Revenue 779 351 79,7 433 594
Operating income before
depreciation and amortisation 74 134 60,8 46 099
Depreciation, trademark and
goodwill amortisation - refer note 2 37 976 25 662
Operating income before net
finance charge 36 158 76,9 20 437
Net finance charge (8 475) (2 247)
Income before taxation 27 683 52,2 18 190
Taxation 12 313 9 088
Income after taxation 15 370 68,9 9 102
Attributable to outside shareholders 2 945 798
Retained earnings 12 425 8 304
Add back goodwill amortised 14 615 12 102
Headline earnings 27 040 32,5 20 406
Fully diluted headline earnings
per share (cents) 14,1 18,5 11,9
Headline earnings per share (cents) 14,2 11,9
Basic earnings per share (cents) 6,5 4,8
Weighted average number of
shares in issue (000) 190 800 171 800
Number of shares in issue 192 061 191 188
Group cash flow statement
Audited Audited
year ended year ended
28 February 29 February
2001 2000
R'000 R'000
Cash generated from operations 64 108 26 872
Net finance charge (8 475) (2 247)
Taxation paid (12 106) (656)
Net cash inflow from operating
activities 43 527 23 969
Net cash outflow from investing
activities (87 911) (185 704)
Net cash inflow from financing
activities 33 350 144 260
Net decrease in cash and cash
equivalents (11 034) (17 475)
Cash and cash equivalents at the
beginning of the period 9 730 27 205
Cash and cash equivalents at
the end of the period (1 304) 9 730
Group balance sheet
Restated
Audited Audited
year ended year ended
28 February 29 February
2001 2000
R'000 R'000
Assets
Non-current assets
Property, plant and equipment 76 899 54 916
Long-term debtors 8 402 -
Goodwill 277 677 218 884
Trademarks 23 255 26 198
Deferred taxation 3 653 2 847
389 886 302 845
Current assets
Inventories 20 097 13 881
Accounts receivable 126 106 117 412
Cash resources 23 089 9 730
169 292 141 023
Total assets 559 178 443 868
Equity and liabilities
Ordinary shareholders' equity 293 865 283 232
Shares due to vendors 24 982 -
318 847 283 232
Outside shareholders' interest (2 491) (4 312)
316 356 278 920
Non-current liabilities
Long-term debt 68 792 40 320
Deferred taxation 11 867 4 375
80 659 44 695
Current liabilities
Interest bearing - bank 24 393 -
Interest bearing - other 17 465 10 758
Non-interest bearing 120 305 109 495
162 163 120 253
Total equity and liabilities 559 178 443 868
Net asset value per share (cents) 166,0 147,6
Net tangible asset value
per share (cents) 9,3 19,9
Shares in issue (000) 192 061 191 888
Statement of changes in equity
Non-
Shares distri-
Share Share due to butable Retained
capital premium vendors reserves income Total
R'000 R'000 R'000 R'000 R'000 R'000
Balance at
29 February
2000 before
restatement 192 24 046 - 5 791 39 412 69 441
Capitalised
goodwill - 234 955 - - - 234 955
Changes in
accounting
policies
- refer note 1 - - - - (21 164) (21 164)
Balance at
29 February 2000
restated 192 259 001 - 5 791 18 24 283 232
Issue of share
capital - 520 - - - 520
Retained
earnings - - - - 12 425 12 425
Shares purchased
on behalf
of vendors (8) (10 165) - - - (10 173)
Shares due to
vendors - - 24 982 - - 24 982
Foreign currency
translation
reserve - - - 7 861 - 7 861
Balance at
28 February
2001 184 249 356 24 982 13 652 30 673 318 847
Segmental analysis
2001 2000
Revenue EBIT Revenue EBIT
Rm Rm Rm Rm
Primary segment
Cleaning Services 361,7 20,9 216,8 12,7
Hygiene & Green Services 174,2 11,4 77,5 5,4
Security Services 166,6 14,9 77,0 10,1
Support Services 76,9 3,5 62,3 4,3
Total 779,4 50,7 433,6 32,5
Less: Goodwill amortised 14,6 12,1
Operating income before
net finance charge 36,1 20,4
Secondary segment
South Africa 452,9 38,6 258,7 24,2
International 326,5 12,1 174,9 8,3
Total 779,4 50,7 433,6 32,5
Less: Goodwill amortised 14,6 12,1
Operating income before
net finance charge 36,1 20,4
Notes to the Financial Information
Note 1
CHANGES IN ACCOUNTING POLICIES
The principal accounting policies in terms of South African Generally Accepted
Accounting Practice as set out in the group's 2000 annual report and interim
financial results have been consistently applied throughout the year under
review except for the following policies:
1.1 Deferred tax In accordance with AC102 (revised) relating to accounting
for taxation, the Group has changed its accounting policy with regard to
deferred tax and now recognises deferred tax assets when the recoverability is
probable.
1.2 Intangible assets
1.2.1 Goodwill
In accordance with AC129 relating to intangible assets and AC131 relating to
business combinations, the Group has changed its accounting policy on goodwill
in that premiums paid in respect of the purchase consideration of businesses
and shares acquired over the fair value of the net assets at date of
acquisition are no longer set off against share premium, but are capitalised as
goodwill. Goodwill is amortised over its useful life, which is considered to be
no more than 20 years.
1.2.2 Trademarks
In accordance with AC129 and AC131, the group has changed its accounting policy
on trademarks and now amortises trademarks over their useful lives, which is
considered to be no more than 10 years.
The effect of these changes has been disclosed in the financial information set
out above. Comparative figures for 29 February 2000 have been restated. The
effect is that retained earnings reduced by R18,1 million for the year ended 29
February 2000. These changes, including prior years, have amounted to R21,2
million as at 29 February 2000.
Note 2
Depreciation and amortisation
Assets have been amortised as follows:
Year ended Year ended
28 February 29 February
2001 2000
R'000 R'000
Depreciation 20 401 11 007
Trademarks 2 960 2 553
Goodwill 14 615 12 102
37 976 25 662
Note 3
CONTINGENT LIABILITIES
Lease receivables to the amount of R23 million have been discounted with
various banking institutions at 50% recourse. Should the debtor default in
future, the company will be liable for any outstanding capital amount.
Consequently the maximum potential liability at 28 February 2001 is R11,5
million
COMMENTS
Group overview
Servest is a support services group focused on global outsourcing
opportunities. The range of services provided through its four divisions are:
Cleaning Services
Industrial and commercial contract cleaning, hi-tech industrial cleaning,
environmental, street sweeping and waste management services.
Hygiene & Green Services
Washroom and janitorial services, pest control, deep cleaning, tropical plant
rental, outdoor landscape installation and maintenance services, golf course
maintenance services, laundry services, linen and garment rental and guest
laundry services.
Security Services
Electronic surveillance systems and services, including CCTV, access control,
fire detection systems and guarding services.
Support Services
Office automation systems and global mail logistics services. Launch and
courier services and vehicle hire services predominantly to the marine industry
RESULTS
The board is pleased to announce the audited financial results for the year
ended 28 February 2001. Strong results were recorded despite particularly tough
trading conditions.
Revenue increased by 79,7% compared to last year with headline earnings
increasing by 32,5% and fully diluted headline earnings per share (HEPS)
increasing by 18,5% to 14,1 cents from 11,9 cents for the prior year.
Significantly, cash flow per share was 21,1 cents after minority interests,
which reflects an unrelenting focus on working capital management in order to
exploit fully the highly cash generative nature of the businesses.
Increased utilisation of debt has resulted in a more suitably balanced capital
structure and commensurately higher financing charges while keeping within our
gearing parameters.
Approximately 87% of HEPS growth was organic with a small contribution from
strategic bolt on acquisitions.
Earnings before interest, tax, depreciation and amortisation (EBITDA) to
revenue of 9,5% and operating margins to revenue of 6,5% are in line with
global industry comparatives.
Divisional and geographical performance
Strong performances were delivered by the Security Services and Hygiene & Green
Services divisions as prime beneficiaries of increased leisure and casino
industry related activity. The Cleaning Services division performed steadily.
Although Marine Services performed well, growth in the Support Services
division was restrained by disappointing performance in the office automation
business.
International operations, primarily the Executive Group in the United Kingdom,
performed steadily proving to be a significant cash generator. Continued
progress was made during the course of the year in broadening the global
business base in order to provide a wider integrated range of related services
such as specialised cleaning, hygiene & janitorial, plant rental and franchised
cleaning services.
The recently acquired Australian business of ATS, although still a small part
of our global growth initiative, produced satisfactory results in difficult
economic conditions.
Prospects
The group is now entering its fourth year of operations having completed three
years of significant growth producing an annual compound HEPS growth rate of
40%. The group has positioned itself as a leading South African integrated
support services provider with promising global growth prospects.
The group strives to be the support services provider of choice and to this end
has initiated a number of key programmes. These include the appointment of
Conan Cole, previously CE of the Cleaning Services division, as the group's
Chief Operating Officer. This appointment will facilitate closer integration of
the operational business units in order to fully exploit the symbiotic nature
of the group businesses.
Other initiatives include skills transfer programmes between divisional and
geographical business units and a policy of deploying project teams to deal
rapidly with opportunities or problem areas.
A continued focus on training, development and empowerment of the group's
people is also viewed as a vital aspect of its growth sustainability.
The group will once again rely on controlled organic growth in the year ahead
whilst continuing to absorb strategic acquisitive opportunities as they arise.
Notwithstanding a conservative view held with regard to increased economic
activity, real growth is anticipated.
BOARD APPOINTMENTS
Oscar Lockwood will be retiring as a director as of 1 May 2001. The board
thanks Oscar for his contribution to the group and wishes him well. The board
is pleased to announce the appointment of Robin Read as a non-executive
director. Robin was previously the group's audit partner with Deloitte & Touche
Dividend
In line with group policy, no dividends will be declared while the group
continues to reinvest cash for growth purposes.
By order of the board
Kenton J Fine
Group Chief Executive
Dennis C Zietsman
Group Finance Director
Johannesburg
24 April 2001
Registered Office 34 Fricker Road, Illovo, 2193 PO Box 3082, Saxonwold, 2132
e-mail: info@servest.co.za website: www.servest.co.za
Transfer Secretaries Mercantile Registrars Limited, 8th Floor, 11 Diagonal
Street, Johannesburg, 2001
PO Box 1054, Johannesburg, 2000
Directors KJ Fine (Group chief executive), DC Zietsman (Group finance
director), C Cole (Chief operating officer), GB Liebmann*, GP Lockwood, RM
Read*, MH Sacks*
*Non-executive directors
Company Secretary JS Botha
SERVEST GROWS HEADLINE EARNINGS PER SHARE BY 18.5%
NEWS RELEASE
TUESDAY 24 APRIL 2001
Servest Holdings Limited (Servest) reported strong results for the financial
year to 28 February 2001 with turnover up by 79.7% to R 779.4 million from last
year's R 433.6 million. Earnings before interest, taxation, depreciation and
amortisation (EBITDA) increased by 61% to R 74.1 million, whilst headline
earnings per share grew by 18.5% to 14.1 cents.
Announcing the results, Kenton Fine, CEO of Servest said, "The group's
performance in tough trading conditions bears testimony to the management skill
and entrepreneurial flair within our businesses. Our focus on working capital
management coupled with the strong cash generative nature of our businesses has
delivered exceptionally strong cash flow. Our success in optimizing the
integration and operating performance from our businesses resulted in 87% of
the growth in earnings being organically derived.
"Our Hygiene & Green Services and Security Services divisions performed
exceptionally well, benefiting from increased activity in South Africa's
Leisure and Gaming sectors. Our UK operations proved to be strong cash
generators, and our recently acquired Australian operation, All Types of
Services (ATS) produced a positive result, notwithstanding depressed local
industry conditions."
Dennis Zietsman, Servest's Group Finance Director reports, "This is the group's
third year of consistent earnings, reflecting compound annual headline earnings
per share growth in excess of 40% over the three-year period." Moving into its
fourth year, the Servest group is regarded as a leading South African
integrated support services provider with sound global prospects.
- ends -
Issued by :
Opportun(at)e
Lance Rothschild (lance@opportunate.co.za)
Tel: (011) 444 0650
Fax (011) 444 0690
Mobile: 082 443 1530
For further information:
Kenton Fine / Dennis Zietsman
Servest Holdings Limited
Tel: (011) 442 7484
Fax: (011) 442 8682
