| Tue 23 Sep 2003, 17:43 | | Reviewed results for the year ended 30 June 2003 |
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Primeserv Group Limited - Reviewed results for the year ended 30 June 2003
Primeserv Group Limited
("Primeserv" or "the Group")
Incorporated in the Republic of South Africa
(Registration number 1997/013448/06)
Reviewed results for the year ended 30 June 2003
Income statement
2003 2002 %
R"000 R"000 change
Revenue 464 046 532 924 (12,9)
Operating profit 11 027 18 896 (41,6)
Exceptional items 707 869
Depreciation 2 979 4 111 (27,5)
Goodwill amortisation 169 132
Net income before interest 7 172 13 784 (48,0)
Interest received* 4 453 1 762 152,7
Interest paid (5 815) (7 698) (24,5)
Net income before taxation 5 810 7 848 (26,0)
Taxation 2 143 2 137
Income attributable to outside
shareholders 5 -
Net income attributable to
shareholders 3 662 5 711 (35,9)
Reconciliation of headline
earnings
Net income attributable to
shareholders 3 662 5 711 (35,9)
After tax effect of (profit)/loss
on sale of fixed assets (5) 23
Goodwill amortisation 169 132
Headline earnings 3 826 5 866 (34,8)
Weighted average number of shares
in issue ("000) 127 255 138 289
Earnings per share (cents) 2,88 4,13 (30,3)
Headline earnings per
share (cents) 3,01 4,24 (29,0)
*Included in interest received is R3,3 million relating to the adoption of
AC133.
Balance sheet
2003 2002
R"000 R"000
Assets
Non-current assets 20 762 54 850
Equipment and vehicles 4 749 6 431
Intangibles 657 1 278
Long-term receivables 5 932 8 761
Proceeds due from disposal of business 1 523 2 411
Deferred tax asset 7 564 34 513
Share incentive scheme 337 1 456
Current assets 78 131 91 439
Inventories 690 437
Trade receivables 55 779 70 021
Other receivables 12 124 14 008
Taxation - 171
Cash at bank 9 538 6 802
Total assets 98 893 146 289
Equity and liabilities
Capital and reserves 47 232 77 463
Non-current liabilities 1 246 1 421
Current liabilities 50 415 67 405
Trade and other payables 32 809 35 547
Short-term borrowings 2 219 301
Taxation 642 -
Bank borrowings 14 745 31 557
Total equity and liabilities 98 893 146 289
Number of shares in issue at
year-end ("000) 124 986 130 523
Net asset value per share (cents) 38 59
Cash flow statement
2003 2002
R"000 R"000
Operating activities 17 470 15 249
Investing activities (242) (4 629)
Financing activities 402 (513)
Net increase in cash at bank and
borrowings 17 630 10 107
Cash at bank and borrowings at beginning
of the year (25 056) (35 163)
Cash at bank and borrowings at end
of the year (7 426) (25 056)
Weighted average number of shares
in issue(`000) 127 255 138 289
Cash flow per share (cents) 13,9 7,3
Segmental analysis
2003 2002
R"000 R"000
Revenue
Staffing services 406 455 482 944
Corporate and organisational services 57 591 49 980
464 046 532 924
Net income/(loss) before taxation
Staffing services 13 347 9 806
Corporate and organisational services (3 581) 1 380
Head office (3 956) (3 338)
5 810 7 848
Statements of changes in equity
2003 2002
R"000 R"000
Balance at beginning of year - as
previously stated 79 214 75 132
Prior year adjustment (6 915) (1 751)
Balance at beginning of year
- restated 72 299 73 381
Deferred taxation irrecoverable (27 616) -
Repurchase of securities (1 113) (1 629)
Net income for the year 3 662 5 711
Balance at end of the year 47 232 77 463
Comments
Introduction
Primeserv is an investment holding company with specialised operations in the
human resources (HR) arena. The Group"s products and services are provided
through two business segments: Staffing Services, comprising the Outsourcing and
Recruitment divisions; and Corporate and Organisational Services incorporating
the Training and Solutions divisions.
Operational review
Since listing in 1998, the Group has focused on bringing together its various
operations under a single brand, providing specialised HR services. This
strategy is now complete. Further investment in the brand positioning of the
Group"s integrated HR model is planned.
The Outsourcing division performed well in line with the continued strategy of
streamlining sales to improve margins and cash flows. The division concentrated
on growing market share in its South African niche markets. Strong performances
were achieved in the specialised areas of flexible white collar, industrial and
logistics staffing and mega project wage bureau management.
The Recruitment division specialising in financial staffing continued to
experience particularly severe trading conditions with revenue under pressure.
Corrective action was taken, which included the disposal of the Pretoria-based
recruitment operation.
The Training division produced a mixed performance with Technical Training
achieving pleasing results from its large projects and learnership programmes,
whilst the Corporate Training unit"s lack of critical mass resulted in revenue
pressure. The Colleges operation was hindered by delays in the implementation of
a major national training contract and weaker than anticipated student intakes
at its colleges, due in part to delays in government legislation relating to
registrations.
The Solutions division remained burdened with high fixed cost human capital
infrastructure and continued to perform poorly.
Strenuous cost containment remains a focus and management has taken steps to
return all under-performing units to profitability.
Financial review
The Group"s focus on continued strengthening of the balance sheet and improved
working capital management resulted in strong cash generation. The R17,6 million
cash generated for the year translated into cash flow per share increasing by
90% to 13,9 cents per share (2002: 7,3 cents per share). Net borrowings
consequently improved to R7,4 million compared to R25 million the previous year.
This had the effect of reducing the Group"s gearing from 34,2% at the end of the
previous financial year to its current level of 18,4%.
Despite revenue being 12,9% lower at R464 million (2002: R532,9 million) as part
of the Group"s management of sales, gross margins improved by 10,6% to 21,9%
(2002: 19,8%). Notwithstanding higher interest rates during the year, interest
paid reduced by 24,5% to R5,8 million (2002: R7,7 million). Net finance costs
reduced by R4,6 million after the inclusion of R3,3 million of interest received
through the adoption of AC133.
The exceptional item of R0,7 million relates to the impairment of the loan to
the Group"s share trust.
The impact of the Group"s operations outside South Africa increased the
effective tax rate to 37%. This should normalise in the coming year.
Headline earnings per share was down by 29% from 4,24 cents in 2002 to 3,01
cents for the current year.
Empowerment
Primeserv is currently engaged in finalising negotiations with its empowerment
partners to enhance the BEE profile of the Group. Operationally the Group
actively participates in joint ventures and partnerships with various BEE
entities throughout South Africa.
A further announcement relating to the Group"s primary BEE initiative, Bathusi
HR Services, will be made shortly. Black management is being fast-tracked at
operational level and the Group intends to establish an employee share trust,
which will hold equity stakes in Bathusi, its underlying operations and the
Group. This trust aims to benefit employees other than management and
shareholders participating in the Group"s transformation process.
Accounting policies and review
The accounting policies used in preparing the year-end financial results are in
accordance with South African Statements of Generally Accepted Accounting
Practice and have been prepared on a basis consistent with the prior year except
for the adoption of AC133 - Financial Instruments: Recognition and Measurement
and AC166 - Employee Benefits.
The results have been reviewed in terms of Rule 3.23 of the Listings
Requirements of the JSE Securities Exchange South Africa and by Deloitte &
Touche. The unqualified report of their review is available for inspection at
Primeserv"s registered office.
Changes in directorate
JA Sparke resigned as an executive director on 11 August 2003 to pursue family
interests. DC Seaton was appointed to the Board on 11 August 2003 as an
independent non-executive director.
Prospects
As Primeserv continues to evolve its business model in line with its strategy of
providing market leading integrated HR Services, its future performance will be
affected by local market conditions. The growing need for HR solutions that
enhance individual and organisational performance should enable the Group to
generate organic growth. This will be complemented where possible, by value-
adding acquisitions that can be merged with and integrated into the current
business operations.
Dividend declaration
The Board is pleased to announce the declaration of a dividend. Notice is hereby
given that a dividend of 0,5 cents per ordinary share has been declared for the
year ended 30 June 2003, which is expected to be paid in January 2004.
An announcement relating to the salient dates of the dividend will follow in due
course.
For and on behalf of the board
M Abel PL Gray Johannesburg
Executive chairman Chief operating officer 23 September 2003
Directors
M Abel (Executive chairman), PL Gray (Chief executive officer), JM Judin*,
Professor S Klein* (American), G Magomola*, CS Seabrooke*, DC Seaton*
(*non-executive)
Registered address
Venture House, Peter Place Park, 54 Peter Place, Bryanston 2021
(PO Box 3008, Saxonwold 2132)
Transfer secretaries
Computershare Limited, 70 Marshall Street, Marshalltown, Johannesburg 2001 (PO
Box 61051, Marshalltown 2107)
e-mail: productivity@primeserv.co.za
Share code: PMV
ISIN: ZAE000039277
www.primeserv.co.za
Date: 23/09/2003 05:15:19 PM Produced by the JSE SENS Department
