South Africa-based CSG Holdings (CSG: JSE) reported revenue increased by 7.7% to ZAR 1.13 billion (USD 81.3 million) for the six months ended 31 September 2018, when compared to the same period last year.

CSG Holdings is a provider of outsourced personnel services, industrial and mining services, and contract catering and food services.

CSG said it used the first six months to focus on organic growth and to further consolidate and integrate the acquisitions made during the 2018 financial year, “building a strong base from which all three divisions could be taken to the next level.”

Earlier this year, a Constitutional court in South Africa ruled in a landmark case that labour brokers (Temporary Employment Services) can no longer be entitled to a portion of a recruit’s earnings after their third month in employment. The decision overturned a previous judgement from 2015 which ruled that labour brokers and client companies are dual employers.

CSG’s Staffing Solutions Division revenue decreased by 1%. The group attributed this decrease to a number of factors, such as a project that came to an end earlier than expected, as well as a diminished performance by the group’s specialist recruitment firm ConinghamLee. Changes to the leadership structure and moving the head office of ConinghamLee resulted in an initial decline in revenue contribution; however the group added that benefits from additional synergies, such as improved management and control and enhanced relationships with clients, should flow through to revenue and operational profit over the next twelve months.

The Facility Management Division reported increased revenue of 14% while the group’s Security and Risk Solutions Division reported a revenue increase of 19% during the period.

Looking to the next six months, Pieter Dry, CEO, CSG Holdings, said, “The current business environment and trading conditions are expected to remain tough. Our diversification strategy has been successful, and with the creation of centralised services within the security division and various other solid growth platforms in the group, we are well positioned for strong growth in diverse services covering various industries.”

“Security remains an important aspect of all walks of life with a move towards the use of both the human element and technology to curb new crime tendencies. We expect to sign more technical security and technology contracts in the near to medium term which will improve the outlook for this division,” Dry said.

“CSG’s Staffing Division will continue to diversify away from the traditional labour broking business into businesses focussing more on employee related services,” Dry said. “From the five number of subsidiaries, only BDM management retains labour broking services, while all the other business units have been converted to outsourced services and contracting.”

“We anticipate that overall organic growth is still possible from this solid base and current economic conditions provide opportunities for further lucrative earnings accretive acquisitions at very attractive multiples,” Dry said. “Our strategy remains to expand into service delivery businesses that are more technology based, with a higher barrier to entry than the existing services but being not too capital intensive.”

As of last trade CSG Holdings traded at ZAR 120.00 (USD 8.64), down 5.51% on the day and 11.76% below its 52-week high of ZAR 136.00 (USD 9.79), set on 18 June 2018. Based on its current share price the company has a market value of ZAR 625.54 million (USD 45.0 million).