| Wed 17 Oct 2007, 11:32 | | ADR - Adcorp - Unaudited group results for the eig |
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ADR
ADR
ADR - Adcorp - Unaudited group results for the eight months ended 31 August
2007 and dividend declaration
Adcorp Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number 1974/001804/06)
("Adcorp" or "the company")
Share code: ADR & ISIN: ZAE000000139
Processes. Services. Solved.
Unaudited group results for the eight months ended 31 August 2007
Salient features
- Core headline earnings per share up by 26%
- EBITDA excluding non-cash flow IFRS charges up by 61%
- Cash conversion ratio 114%
- Free cash generated by operations per share up 99%
- Debtors days at 33 days
- EBITDA margin excluding non-cash flow IFRS charges up to 6,6%
- Interim dividend of 55 cents per share up 31%
Abridged income statement
for the eight months ended 31 August 2007
Unaudited Unaudited Audited
8 months 8 months 12 months
31 August 31 August 31 December
2007 2006 2006
R`000 R`000 R`000
CONTINUING OPERATIONS
REVENUE 2 280 889 1 665 796 2 586 280
Cost of sales (1 707 051) (1 242 522) (1 938 874)
GROSS PROFIT 573 838 423 274 647 406
Other income 9 847 7 177 31 100
Administrative expenses (172 510) (132 826) (205 404)
Marketing and selling
expenses (230 081) (185 051) (290 689)
Other operating expenses (162 038) (40 704) (64 690)
OPERATING PROFIT 19 056 71 870 117 723
Interest received 3 318 7 264 4 073
Interest paid (16 154) (7 974) (4 932)
Share of profits from
associates 812 1 225 2 278
Impairments (145) - (1 155)
Loss/(profit) on sale of
property and equipment (54) 2 (109)
Profit on disposal of
operations and
subsidiaries 49 275 - 7 568
Profit before taxation 56 108 72 387 125 446
Taxation 24 354 19 536 27 730
Profit for the period from
continuing operations 31 754 52 851 97 716
DISCONTINUED OPERATIONS
Profit/(loss) from
discontinued operations 30 596 (11 081) 7 904
PROFIT FOR THE PERIOD 62 350 41 770 105 620
Profit for the period
attributable to:
Ordinary shareholders 62 353 42 583 107 994
Minority shareholders (3) (813) (2 374)
Profit for the PERIOD 62 350 41 770 105 620
Earnings per share
Basic (cents) 127,1 99,4 251,8
Diluted (cents) 124,9 98,0 248,6
Distribution to ordinary
shareholders
Interim dividend (cents) 55 42 42
Final dividend (cents) in
respect of the prior year 126 105 105
CALCULATION OF HEADLINE
EARNINGS
AND CORE HEADLINE EARNINGS
Profit for the period 62 350 41 770 105 620
Adjusted for:
Impairments 11 645 - 1 256
Minority shareholders`
share of profit 3 813 2 374
Loss/(profit) on sale of
property and equipment 39 (364) (254)
(Profit)/loss on disposal
of discontinued operations (42 146) 20 703 (7 568)
HEADLINE EARNINGS 31 891 62 922 101 428
Adjusted for:
Amortisation of intangible
assets 22 176 - 337
Share-based payments and
transaction costs 94 942 1 614 5 928
Lease smoothing 413 509 679
(Profit) on disposal of
part of continuing
operations (49 275) - -
Tax effects on above (6 551) (148) (295)
CORE HEADLINE EARNINGS 93 596 64 897 108 077
HEADLINE EARNINGS PER
SHARE
Headline earnings per
share - cents 65,0 146,8 236,5
Diluted headline earnings
per share - cents 63,9 144,8 233,5
CORE HEADLINE EARNINGS PER
SHARE
Core headline earnings per
share - cents 190,7 151,4 252,0
Diluted core headline
earnings per share - cents 187,5 149,4 248,8
Weighted average shares -
000`s 49 076 42 860 42 882
Diluted weighted average
shares - 000`s 49 911 43 451 43 444
Abridged balance sheet
as at 31 August 2007
Unaudited Unaudited Audited
31 August 31 August 31 December
2007 2006 2006
R`000 R`000 R`000
Assets
Non-current assets 681 832 109 025 138 372
Property and equipment 58 455 27 972 32 775
Goodwill 400 394 31 296 41 525
Intangible assets 199 811 24 273 44 218
IInvestment in associates 43 2 251 3 189
Deferred taxation 23 129 23 233 16 665
Current assets 617 886 535 482 511 496
Trade, other receivables 487 379 351 952 402 404
and prepayments
Amounts due from vendor 750 - -
Assets classified as held
for sale - 57 232 30 408
Taxation prepaid 4 593 10 596 3 755
Cash resources 125 164 115 702 74 929
Total assets 1 299 718 644 507 649 868
EQUITY AND LIABILITIES
Capital and reserves 623 579 256 361 310 785
Share capital 1 270 1 074 1 085
Share premium 282 929 52 693 57 630
Treasury shares (821) (1 463) (1 010)
Retained earnings 339 780 202 415 252 998
Minority shareholders`
interest 421 1 565 5
BEE shareholders` interest - 77 77
Non-current liabilities 246 753 2 931 5 010
Non-interest-bearing non-
current liabilities 3 203 - 1 586
Redeemable preference
shares 190 000 - -
Obligation under finance
lease 6 922 - -
Deferred tax 46 628 2 931 3 424
Current liabilities 429 386 385 215 334 073
Non-interest-bearing
current liabilities 279 220 256 545 238 211
Trade and other payables 176 912 145 953 144 328
Amounts due to vendor - 787 709
Provisions 87 024 49 911 51 944
Liabilities classified as
held for sale - 40 996 35 119
Taxation 15 284 18 898 6 111
Interest-bearing current
liabilities 150 166 128 670 95 862
Current portion of
interest-bearing
non-current liabilities 1 334 - -
Bank overdrafts 148 832 128 670 95 862
Total equity and
liabilities 1 299 718 644 507 649 868
Number of ordinary shares
in issue (000`s) 50 795 43 241 43 382
Net asset value per share
(cents) 1 228 593 716
Abridged cash flow statement
for the eight months ended 31 August 2007
Unaudited Unaudited Audited
8 months 8 months 12 months
31 August 31 August 31 December
2007 2006 2006
R`000 R`000 R`000
Operating activities
Cash generated by
operations before working
capital changes 150 386 93 891 151 062
Decrease/(increase) in
working capital 5 697 (22 550) (57 300)
Cash generated by 156 083 71 341 93 762
operations
Net interest paid (12 425) (131) (852)
Taxation paid (31 257) (21 960) (34 670)
Free cash generated by
operations 112 401 49,250 58,240
Net dividend paid (63 778) (43 296) (58 717)
Cash inflow/(outflow) from
operations 48 623 5 954 (477)
Cash outflow from investing
activities (472 360) (28 490) (46 464)
Cash inflow/(outflow) from
financing activities 418 570 (998) 9 710
Net decrease in cash and
cash equivalents (5 167) (23 534) (37 231)
Net cash and cash
equivalents at the
beginning of the period (18 501) 18 730 18 730
Net cash and cash
equivalents at the end of
the period (23 668) (4 804) (18 501)
Free cash generated by
operations per share - 229,0 114,9 135,8
cents
Abridged statement of changes in equity
for the eight months ended 31 August 2007
Non-
Share Share Treasury distributable
capital premium shares reserve
R`000 R`000 R`000 R`000
Balance as at 31 December
2006 1 085 57 630 (1 010) -
Issue of ordinary shares
for acquisitions 185 225 299 - -
Issue of "A" ordinary
shares - - (168) -
Treasury shares sold 357
Recognition of share-based
payments for BEE
transaction and other - - - -
Dividend distributions
Acquisition of BEE
shareholders` and minority
interest - - - -
Profit for the period - - - -
Balance as at 31 August
2007 1 270 282 929 (821) -
Minority BEE
shareholders` shareholders` Retained
interest interest earnings Total
R`000 R`000 R`000 R`000
Balance as at 31 5 77 252 998 310 785
December 2006
Issue of ordinary
shares for
acquisitions - - - 225 484
Issue of "A" (168)
ordinary shares - - -
Treasury shares sold - - 45 402
Recognition of share-
based payments for
BEE transaction and
other - - 88 262 88 262
Dividend
distributions - - (63 878) (63 878)
Acquisition of BEE
shareholders` and
minority interest 416 (77) 3 342
Profit for the
period - - 62 350 62 350
Balance as at 31
August 2007 421 - 339 780 623 579
SEGMENT REPORT
for the eight months ended 31 August 2007
Operating
Revenue profit
2007 2006 2007 2006
R`000 R`000 R`000 R`000
Central costs - - (104 323) (14 733)
Staffing 2 138 008 1 577 599 112 762 86 945
Business process
outsourcing 142 881 88 197 10 617 (342)
Sub-total 2 280 889 1 665 796 19 056 71 870
Discontinued - 79 488 (81) 8 969
TOTAL 2 280 889 1 745 284 18 975 80 839
EBITDA excluding
EBITDA excluding IFRS IFRS share-based
share-based payments payments and
and lease smoothing lease smoothing
2007 2006 2007 2006
R`000 R`000 % %
Central costs (13 993) (13 896) 0,0 0,0
Staffing 134 611 93 191 6,3 5,9
Business process
outsourcing 29 392 3 212 20,6 3,6
Sub-total 150 010 82 507 6,6 5,0
Discontinued (81) 10 752 0,0 13,5
TOTAL 149 929 93 259 6,6 5,3
EBITDA excluding IFRS
share-based payments
and lease smoothing
Contribution % to
Group profit Net asset value
2007 2006 2007 2006
% % R`000 R`000
Central costs (9,3) (14,9) 142 884 104 932
Staffing 89,8 99,9 246 278 67 502
Business process
outsourcing 19,6 3,4 240 702 76 747
Sub-total 100,1 88,5 629 864 249 181
Discontinued (0,1) 11,5 (6 706) 5 538
TOTAL 100,0 100,0 623 158 254 719
Assets Liabilities
carrying value carrying value
2007 2006 2007 2006
R`000 R`000 R`000 R`000
Central costs 277 467 277 930 134 583 172 998
Staffing 718 755 231 468 472 477 163 966
Business process
outsourcing 310 216 88 573 69 514 11 826
Sub-total 1 306 438 597 971 676 574 348 790
Discontinued (6 720) 46 536 (14) 40 998
TOTAL 1 299 718 644 507 676 560 389 788
Depreciation and
amortisation Additions to
of intangibles PPE
2007 2006 2007 2006
R`000 R`000 R`000 R`000
Central costs 263 265 215 -
Staffing 17 820 5 186 15 782 5 477
Business process
outsourcing 17 516 3 374 8 893 3 350
Sub-total 35 599 8 825 24 890 8 827
Discontinued - 1 471 - 876
TOTAL 35 599 10 296 24 890 9 703
COMMENTS
OVERVIEW
Shareholders are reminded, as announced in March 2007, that the company has
changed its financial year-end from December to February.
In order to facilitate this change, the financial results presented herewith
are for the eight-month period ended 31 August 2007. Also published for
comparative purposes are the pro forma financial results for the eight-month
period ended 31 August 2006.
As previously reported, a number of non-core assets were disposed of over the
past 18 months whilst FMS Marketing Solution, Capital Outsourcing Group and
Employrite were recently acquired. Given these significant structural changes
to the Group, the operating performance for the period under review has been
most satisfactory.
In this regard, core headline earnings per share for the eight-month period
ended 31 August 2007 of 190,7 cents (2006: 151,4 cents) were some 26% ahead
of earnings per share for the same period last year.
Pleasing to note is that the integration and performance of the three newly
acquired businesses has been relatively seamless. All three businesses are
performing well and are ahead of budget.
The recruitment environment in South Africa continues to perform well in line
with strong growth in the South African economy. In particular, the demand
for staff in the financial services, retail, engineering, telecommunications
and public sectors continues to be strong.
Controversy and debate surrounding the exact extent and impact of the skills
shortage in the South African labour market, continues. Based on Adcorp Group
experiences, the skills shortage is acute and is expected to escalate as a
number of major infrastructural projects in South Africa gain momentum. As
such, talent acquisition remains a key focus area of Group operations.
Earlier in the year, the Group announced a broad based black economic
empowerment (BBBEE) transaction that significantly bolstered the empowerment
credentials of the Group whilst also creating an opportunity for all Adcorp
employees to share in the Group`s financial fortunes.
So far, the structure has settled down well and the contribution of the
various empowerment partners has been meaningful.
The implementation of the new Microsoft Dynamics AX ERP system has fallen
behind schedule as it was originally anticipated that the system would go
live during the second half of 2007. It is now anticipated that the system
will go live towards the end of the first quarter of 2008.
In terms of cash management which remains one of the Group`s key focus areas,
a recent and renewed focus on outstanding receivables has been most
effective. In this regard, the conversion ratio of cash generated by
operating activities to operating profit was 114% for the year to date (2006:
97%).
EBITDA (earnings before interest, tax, depreciation and amortisation) margin
also improved to an average 6,6% compared to the prior year average of 5,3%.
This has resulted from both a focus on improving margins as well as the
improved mix of business emanating from the restructured Group.
FINANCIAL OVERVIEW
The financial figures presented have been impacted by a number of non-cash
flow and mostly non recurring IFRS charges which were substantial. Included
is an amount of R94,9 million arising from share based payments mainly as a
result of the BBBEE deal concluded in May of this year. Amortisation of
intangible assets from the new acquisitions further increased the non-cash
flow amounts charged against the income statement by R22,2 million before
allowing for deferred tax. If these IFRS charges are excluded, operating
profit increases from R19,1 million to R136,6 million.
As previously reported Adcorp purchased FMS Marketing Solutions and Capital
Outsourcing Group and disposed of Research Surveys, Knovation, Adcorp
Communication Solutions and the 25% share held in Career Junction. To fund
the shortfall in the cash portion required for the purchase of these
acquisitions Adcorp issued R225 million of redeemable preference shares which
has resulted in the high dividend payments reflected under interest in the
current period. R35 million of these preference shares were redeemed prior to
31 August 2007 with a further R40 million having been subsequently redeemed.
Core headline earnings eliminates the effects of the non-cash flow IFRS
adjustments as well as the impact of acquisitions and disposals and, at
190,7cents per share, shows an increase of 26% compared to the previous
period. Headline earnings per share have been determined in accordance with
Circular 8/2007 issued by The South African Institute of Chartered
Accountants. In compliance with this requirement, profits on the disposal of
Career Junction and Knovation have been included in the calculation of
headline earnings per share whilst the profits on the disposal of Research
Surveys and the loss on the disposal of Adcorp Communication Solutions have
been excluded.
The balance sheet demonstrates the new size and structure of the group with
net asset value having increased from R311 million as at 31 December 2006 to
R624 million as at 31 August 2007. The segment report includes EBITDA from
which non-cash IFRS charges have been excluded. From this it can be seen that
the EBITDA margin has increased from 5,3% in the prior period to 6,6% in the
current period primarily as a result of the continuing focus in this area
aided to some extent by a favourable business mix.
Cash flow has been extremely pleasing with cash produced by the operations
resulting in a cash conversion ratio equivalent to 114% while free cash flow
generated by operations is up 99% per share. This was primarily the result of
the drive on debtor collections with debtors days currently at 33 days as
well as good cash generation from the new acquisitions.
Organic growth contributed 20% of the 26% increase in core headline earnings
per share whilst acquisitions accounted for the balance.
In terms of IAS 34 the following additional disclosures are made:
FMS Marketing Solutions was purchased with effect from 1 January 2007. The
profit from this entity included in group profit for the eight months to
August 2007 is R0,7 million. This profit has been arrived at after deduction
of the interest attributable to the borrowings required to fund the cash
portion of the purchase price as well as the amortisation charges arising
from the valuation of the intangible assets acquired.
Capital Outsourcing was purchased with effect from 1 June 2007. The profit
from this entity included in group profit for the three months to August 2007
is R3,9 million. This profit has been arrived at after deduction of the
interest attributable to the borrowings required to fund the cash portion of
the purchase price as well as the amortization charges arising from the
valuation of the intangible assets acquired. Had Capital Outsourcing been
acquired with effect from 1 January 2007 on the same basis as above, the
amount of profit that would have been included in group profits would have
been R3,4 million. The reason that the profit for the full eight-month period
is lower than the profit for the last three months is that profits have
increased since June to the extent that they are now able to offset the
intangible asset amortisation charge whereas prior to acquisition this was
not the case.
ACCOUNTING POLICIES
The financial report is prepared in accordance with IAS 34 Interim Financial
Reporting. Adcorp prepares its accounts in accordance with International
Financial Reporting Standards. The accounting policies applied are consistent
with the prior year annual financial statements.
Shareholders attention is drawn to the fact that headline earnings per share
is determined in accordance with Circular 8/2007 issued by The South African
Institute of Chartered Accountants which is effective for financial periods
ending on or after 31 August 2007.
SUBSEQUENT EVENTS
There have been no material subsequent events since 31 August 2007.
OUTLOOK
The positive core earnings growth trend of the interim period is expected to
continue for the remainder of the financial year.
DECLARATION OF DIVIDEND
Notice is hereby given that an interim dividend of 55 cents per share (2006:
42 cents per share) was declared on
17 October 2007 payable to shareholders recorded in the register of the
company at the close of business on the record date appearing below. The
salient dates pertaining to the final dividend are as follows:
Last day to trade cum interim dividend Friday, 30 November 2007
First day to trade ex final dividend Monday, 3 December 2007
Record date Friday, 7 December 2007
Payment date Monday, 10 December 2007
No share certificates may be dematerialised or rematerialised between Monday,
3 December 2007 and Friday, 7 December 2007, both days inclusive.
Dividend cheques will be posted and electronic payments made, where
applicable, to certificated shareholders on the payment date. Dematerialised
shareholders will have their account with Central Securities Depository
Participant or broker credited on the payment date.
By order of the board
Dr F van Zyl Slabbert RL Pike FD Burd
Chairman Chief Executive Officer Chief Financial Officer
17 October 2007
Executive directors RL Pike, C Bomela, FD Burd, PC Swart
Independent non-
executive directors F Khanyile, Dr F van Zyl Slabbert, PK Ward
Non-executive directors LM Mojela, MR Ramaite, T Ramono,
Alternate director GP Dudu
Company secretary L Sudbury
Transfer secretaries Link Market Services SA (Pty) Limited, 11
Diagonal Street, Johannesburg, 2001
Sponsor Deloitte & Touche Sponsor Services
(Proprietary) Limited
Date: 17/10/2007 11:32:01 Produced by the JSE SENS Department.
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