| Mon 17 Mar 2008, 10:48 | | ADH - Advtech Limited - Audited results for the year ended 31 December 2007 |
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ADH
ADH
ADH - Advtech Limited - Audited results for the year ended 31 December 2007
Advtech Limited (Incorporated in the Republic of South Africa)
Registration number: 1990/001119/06
JSE code: ADH & ISIN: ZAE000031035
"ADvTECH" or "the Group"
AUDITED RESULTS for the year ended 31 December 2007
Revenue up 16%
Operating profit up 31%
Headline earnings per share up 41%
Distribution per share up 45%
CONDENSED CONSOLIDATED INCOME STATEMENT
for the year ended 31 December 2007
Audited Audited
Percentage 31 Dec 31 Dec
R`000 Note increase 2007 2006
Revenue 16% 962 711 830 129
Earnings before Interest,
Taxation, Depreciation &
Amortisation (EBITDA)
30% 194 030 149 038
Operating profit 31% 160 548 122 284
Net interest received 14 321 5 539
Interest received 17 452 9 399
Finance costs (3 131) (3 860)
Profit before taxation
37% 174 869 127 823
Taxation (52 851) (38 545)
Profit for the year 37% 122 018 89 278
Attributable to:
Equity holders of the
parent 119 227 86 332
Minority interest 2 791 2 946
122 018 89 278
Earnings per share
Basic (cents) 37% 32.1 23.5
Diluted (cents) 38% 31.1 22.5
Headline earnings per share
Headline earnings 2 118 846 83 526
Basic (cents) 41% 32.0 22.7
Diluted (cents) 42% 31.0 21.8
Number of shares in
issue (`000) 393 665 393 665
Diluted number of shares
(`000) 382 979 382 887
Weighted average number of
shares in issue (`000)
371 970 367 996
Net asset value per
share (cents) 27% 105.4 83.1
Free operating cash
flow before capex per
share (cents) 5% 42.1 40.1
Distribution per share
(cents) 45% 16.0 11.0
CONDENSED CONSOLIDATED BALANCE SHEET
as at 31 December 2007
Audited Audited
31 Dec 31 Dec
R`000 2007 2006
Assets
Non-current assets 478 839 438 696
Property, plant and equipment 441 347 395 859
Intangible asset 10 659 7 227
Investment - 200
Deferred taxation assets 26 833 35 410
Current assets 180 178 90 327
Trade and other receivables 62 117 30 865
Cash and cash equivalents 118 061 59 462
Total assets 659 017 529 023
Equity and liabilities
Equity 416 180 328 628
Attributable to equity holders of the parent 414 924 327 246
Minority interest 1 256 1 382
Non-current interest bearing liabilities 3 852 11 000
Current liabilities 238 985 189 395
Trade and other payables 144 351 135 013
Taxation 29 585 6 968
Fees received in advance 65 049 47 414
Total equity and liabilities 659 017 529 023
CONDENSED SEGMENTAL REPORT
for the year ended 31 December 2007
Audited Audited
Percentage 31 Dec 31 Dec
R`000 increase 2007 2006
Revenue 16% 962 711 830 129
Education 14% 812 543 710 961
Resourcing 26% 150 168 119 168
Operating profit 31% 160 548 122 284
Education 25% 163 229 130 244
Resourcing 53% 31 239 20 393
Central administration 23% (33 498) (27 294)
Litigation expenses (422) (1 059)
SUPPLEMENTARY INFORMATION
for the year ended 31 December 2007
Audited Audited
31 Dec 31 Dec
R`000 2007 2006
Capital expenditure - current year 78 406 65 497
Capital commitments - future years 170 013 131 694
Operating lease commitments in cash - future
years 184 003 150
563
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
for the year ended 31 December 2007
Audited Audited
Per-
centage 31 Dec 31 Dec
R`000 Note increase 2007 2006
Cash generated by operations 3 32% 196 303 148 188
(Utilised to increase)/generated by
decrease in working capital
(984) 32 040
Cash generated by operating activities
8% 195 319 180 228
Net interest received 14 321 5 539
Taxation paid (21 657) (46 767)
Capital distribution (47 431) (37 573)
Net cash inflow from operating
activities 140 552 101 427
Net cash outflow from investing
activities (74 678) (72 860)
Net cash outflow from financing
activities (7 248) (5 056)
Net increase in cash and
cash equivalents 58 626 23 511
Cash and cash equivalents
at beginning of the year 59 462 35 969
Net foreign exchange differences on
cash and cash equivalents
(27) (18)
Cash and cash equivalents
at end of the year 118 061 59 462
Free operating cash flow before
capex per share (cents)
Net operating profit after taxation
122 018 89 278
Adjust for non-cash IFRS
and lease adjustments (after
taxation) 2 558 2 154
Net operating profit after taxation -
adjusted for
non-cash IFRS and lease adjustments
124 576 91 432
Other non-cash flow income statement
items (after taxation)
(381) (2 806)
Plus: depreciation and amortisation
33 482 27 001
Operating cash flow after taxation
36% 157 677 115 627
(Less)/plus:
working capital changes (984) 32 040
Free operating cash flow before
capex 156 693 147 667
Weighted average number of shares in
issue (`000) 371 970 367 996
Free operating cash flow before
capex per share (cents)
5% 42.1 40.1
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 31 December 2007
Retained
Shares earnings/
held by (accumu-
Share Share lated
Share Share option Incentive loss)
R`000 capital premium reserve Trust
Balance at 1 January
2006 3 937 338 771 1 687 (8 863) (49 991)
Share-based payment
expense 1 586
Profit for the year
86 332
Minority
interest
distribution
Share options exercised
3 275
Total recognised
income and expense for
the year
1 586 3 275 86 332
Shares purchased by
the Share Incentive
Trust
(11 912)
Capital distribution
to shareholders
(37 576)
Balance at 31 December
2006 3 937 301 195 3 273 (17 500) 36 341
Share-based payment
expense
1 986
Profit for the year
119 227
Minority interest
distribution
Share awards 2 199
Share options exercised
11 697
Total recognised
income and expense for
the year
1 986 13 896 119 227
Capital distribution
to shareholders
(47 431)
Balance at 31 December
2007 3 937 253 764 5 259 (3 604) 155 568
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (continued)
for the year ended 31 December 2007
Attributable
to equity
holders of Minority Total
R`000 the parent interest equity
Balance at 1 January 2006 285 541 1 357 286 898
Share-based payment expense 1 586 1 586
Profit for the year 86 332 2 946 89 278
Minority interest distribution - (2 921) (2 921)
Share options exercised 3 275 3 275
Total recognised income and
expense for the year 91 193 25 91 218
Shares purchased by the Share
Incentive Trust (11 912) (11 912)
Capital distribution to
shareholders (37 576) (37 576)
Balance at 31 December 2006 327 246 1 382 328 628
Share-based payment expense 1 986 1 986
Profit for the year 119 227 2 791 122 018
Minority interest distribution - (2 917) (2 917)
Share awards 2 199 2 199
Share options exercised 11 697 11 697
Total recognised income and
expense for the year 135 109 (126) 134 983
Capital distribution to
shareholders (47 431) (47 431)
Balance at 31 December 2007 414 924 1 256 416 180
NOTES TO FINANCIAL STATEMENTS
for the year ended 31 December 2007
1. Significant accounting policies
1.1 Statement of compliance
The financial statements have been prepared using accounting policies that
comply with International Financial Reporting Standards and are presented in
accordance with IAS 34 ("Interim Financial Reporting"). The accounting policies
and methods of computation are consistent with those applied in the previous
year.
The Group auditors, Deloitte & Touche, have completed the audit of the Annual
Financial Statements on which this preliminary announcement has been based.
Their unmodified report is available at the registered office of the Company.
1.2 Adoption of new Standards
IFRS 7, Financial Instruments: Disclosures ("IFRS 7") was adopted with effect
from 1 January 2007. The adoption of this Standard had no effect on the
financial results and financial position of the Group.
Audited Audited
R`000
31 Dec 31 Dec
2007 2006
2. Determination of headline earnings
Earnings attributable to equity holders of the
parent per the income statement 119 227 86 332
Items excluded from headline earnings per share
Loss on disposal of investment
Profit on disposal of assets and businesses
Taxation effects on adjustments
Minority interest of adjustments
Headline earnings
(381) (2 806)
18 295
(561) (4 357)
(543) (4 062)
162 1 256
- -
118 846 83 526
3. Notes to the cash flow statement
Reconciliation of profit before taxation to cash
generated by operations
Profit before taxation
Adjust for non-cash IFRS and lease adjustments
(before taxation)
Add back:
Depreciation and amortisation
Net interest received
Other non-cash flow income statement items
Cash generated by operations
174 869 127 823
2 789 2 386
177 658 130 209
18 645 17 979
33 482 27 001
(14 321) (5 539)
(516) (3 483)
196 303 148 188
DIRECTORS` COMMENT ON RESULTS
Overview
ADvTECH has once again delivered excellent academic, operational and financial
results for the year ended 31 December 2007. These results flow from the growing
demand for our education and resourcing services and the repetitive substance of
our revenue model once again reveals the substantially defensive nature of our
business.
On the academic front ADvTECH`s 967 matric candidates for 2007 achieved a 100%
pass rate, a third of these achieved an "A" aggregate and collectively our
matrics attained 1 814 distinctions. In similar vein, the Group`s tertiary
students achieved a pass rate of almost 80% across some 75 000 final
examinations. The KwaZulu-Natal Varsity College graduating
class of 2007 achieved a 100% pass rate in the BEd Degree for all registered
subjects and 4 of our students were placed in the top 20 UNISA CTA examinations
nationally. These results are an indication of the quality of teaching and
learning that is taking place within our institutions. These positive indicators
are generally applicable to the entire Education division and the Board,
management and staff can feel immensely proud, not only of the progressive
contribution to the intellectual capacity and empowerment of the student body
enrolling each year, but also to the tens of thousands of past graduates who are
now active in the South African economy. A small but growing number of these
graduates are employed by the Group, with present alumni staff numbering 112.
Additional information regarding the outstanding achievements of students
throughout the programmes and campuses of the Group is contained in the ADvTECH
annual report.
The growing demand for infrastructural development and the associated demand for
skilled staff contributed to our Resourcing division success. Our continued
investment in growing our branch network and staffing capacity enabled us to
increase output during the year and obtain new career opportunities for over 4
300 candidates.
Financial
The directors are pleased to report a 16% increase in revenue to R963 million, a
31% increase in operating profit to R161 million, a 41% increase in headline
earnings per share to 32.0 cents and a 45% increase in distributions per share
to 16.0 cents.
The results are underpinned by sound operational performances. The Education
division increased revenue by 14% to R813 million (18% if adjusted for the
effect of Crawford Glenmore, which was closed in 2006) and operating profit by
25% to R163 million, reflecting further management efficiency, growth and
improved capacity utilisation. In a buoyant market, the Resourcing division
increased revenue by 26% to R150 million and operating profit by 53% to R31
million. Central administration costs increased by 23% due to the additional
resources and management capacity put in place to facilitate the rapid growth of
the Group.
As reported at the interim stage, free cash generation will move steadily closer
to matching earnings as the rate of increase in cash generation slows once the
main opportunities for balance sheet enhancement are realised. Working capital
reported at year end increased due to accounts receivable including contract
amounts that only fall due in the new year. Payment has since been received for
most of these. Accordingly, free cash flow per share before capex grew by 5% to
42.1 cents. This strong cash generation enabled the Group to remain in a net
cash position throughout the year after funding capital expenditure of R78
million (2006:
R65 million), corporate taxation of R22 million (2006:
R47 million) and capital distributions of R47 million (2006:
R38 million). The reduction in taxation paid is due to the timing of actual
payments made. The inherent nature of ADvTECH`s working capital is based on
payments for educational fees received in advance compared to arrear payments
for services rendered to the Group. This gives rise to a structure in which
current liabilities usually exceed current assets. This situation resolves
itself in the normal course of trading on an ongoing basis.
Transformation and sustainability
ADvTECH has continued to make progress in transformation and sustainability
under the guidance of the Board Transformation Committee and the Academic
Advisory Council. 70% of all students and over 50% of placements are
historically disadvantaged individuals (HDI). Further transformation
appointments have been made across the Group up to director level and management
is now 25% HDI (2006: 23%). Total HDI staff increased by 18% compared to an
overall increase in staff of 8%. ADvTECH continues to benchmark itself in these
areas by reference to the relevant DTI codes and the JSE SRI index.
Education
The Education division houses the Group`s educational brands and institutions
including the well-known brands Abbotts College, College Campus,
CrawfordSchoolsTrade Mark, Imfundo, Junior College, Rosebank College, Varsity
College and Vega, as well as the Group`s overarching academic body, the
Independent Institute of Education (IIE). Collectively, they provide a full
range of educational services from pre-school through to matriculation, diploma,
degree and post-graduate levels, as well as short learning programmes (SLPs),
adult basic education, training and learnership programmes. These activities are
undertaken at 50 sites and campuses across South Africa.
The IIE, guided and supported by the Academic Advisory Council, Senate and
various specialist advisory committees, provides the Education division with
academic governance, leadership and quality assurance. With 30 higher education
programmes accredited across 19 campuses between NQF levels 5 and 7, the Group
holds the largest base of accredited higher education programmes in the
independent sector.
The significant growth of our Education division to 45 000 students (2006: 39
000) is clear evidence of the potential of this market and our consistent
approach to quality education. An important driver of the growth in student
numbers has been the success of the School of Business and Technology in
delivering SLPs across the 19 tertiary campuses. Results over the spectrum of
Matric, final tertiary qualifications, year end examinations and benchmarking
evaluation were once again excellent and the Group has been acknowledged for the
excellence of its top scholars as well as the achievements and improvements in
results achieved by the student body as a whole.
Resourcing
The Resourcing division includes well-known brands Brent Personnel, Cassel &
Company, Communicate Personnel, Inkokheli, Insource.ICT, Network Recruitment,
ProRec Recruitment and Vertex-Kapele. The division`s major activities are
recruitment, placement, temporary staffing, contracting and advertising response
handling.
The Resourcing division maintained a strong focus on the key niche markets of
IT, finance and engineering, while also growing new sectors of sales, freight
and HR. With further development of human capital and physical assets, the
division was able to strengthen and grow its brands markedly during the year,
increasing consultant numbers by 15%.
Litigation
Legal proceedings against Marina and Andry Welihockyj remain in process. The
discovery phase of this litigation has continued and this year the costs have
been R0,4 million (2006: R1,1 million).
The Group`s legal counsel remains satisfied with the merits of the claims in
this matter and, save for legal costs, the Group has no further exposure.
Capital reduction out of share premium ("distribution")
The Board has resolved to declare a final distribution to shareholders by way of
distribution out of share premium of 11.0 cents per share (2006: 8.0 cents) for
the year ended 31 December 2007. This would bring total distributions for the
year to 16.0 cents per share (2006: 11.0 cents). The authority to make this
payment to shareholders was obtained at the Annual General Meeting held on 22
May 2007.
Set out in the table below are the pro-forma financial effects of the
distribution on the Group`s earnings per share, headline earnings per share, net
asset value per share and net tangible asset value per share based on the
Group`s audited financial results for the year ended 31 December 2007. The pro-
forma financial effects have been prepared for illustrative purposes only and,
because of their nature, they may not give a true reflection of the Group`s
financial position or results. The pro-forma financial information is the
responsibility of the Company`s directors and has not been audited.
Before the After the Percentage
Distribution(1) distribution change
Earnings per share (cents) 32.1 31.3(2) (3%)
Headline earnings per share
(cents) 32.0 31.2(2) (3%)
Weighted average number of
shares in issue (`000) 371 970 371 970 -
Net asset value per share
(cents) 105.4 94.7(3) (10%)
Tangible net asset value
per share (cents) 102.7 92.0(3) (10%)
Number of shares in issue
(`000) 393 665 393 665 -
Notes:
1. Extracted from the audited financial results for the year ended 31
December 2007.
2. The earnings and headline earnings per share figures in the "After the
distribution" column have been based on the following assumptions:
- the distribution was made on 1 January 2007; and
- interest, at an average before tax rate of 9.5% per annum, was
forfeited on the cash distributed.
3. The net asset value and net tangible asset value per share figures in the
"After the distribution" column have been based on the assumption that the
distribution was made on 31 December 2007.
Set out in the table below are the salient dates and times applicable to the
distribution:
2008
Last day to trade in order to participate in Friday, 11 April
the distribution on
Trading commences ex distribution on Monday, 14 April
Record date on Friday, 18 April
Payment date on Monday, 21 April
Share certificates may not be dematerialised or rematerialised between Monday,
14 April 2008 and Friday, 18 April 2008, both days inclusive.
Prospects
There is no doubt that we enter 2008 in a less robust economy than that which
prevailed during 2007 and disposable incomes are likely to be affected by higher
interest rates and growing inflation. Notwithstanding these factors, and the
perceived decline in business confidence, there is a growing appreciation by an
increasing number of students and parents that quality education and instruction
remains an essential factor for human development, economic capacity and
independence. This trend of recognition is already revealed in the Group`s 2008
student applications and admissions and given this pattern, barring any
unforseen or adverse economic developments during the year, the Group expects to
report further growth in earnings and positive cash flows during the next
period.
Michael Sacks Frank Thompson
Chairman Chief Executive Officer
Johannesburg
17 March 2008
Directors: MI Sacks* (Chairman), FR Thompson (CEO), JDR Oesch (Financial), JNP
Booyens, BD Buckham*, JJ Deeb, CN Duff, DK Ferreira*, DL Honey, JD Jansen*, HR
Levin*, ER Shipalana, F Titi*
*Non Executive
Alternate Directors: FJ Coughlan, A Isaakidis
Group Company Secretary: SC O`Connor Registered office: ADvTECH House, Inanda
Greens, 54 Wierda Road West, Wierda Valley, Sandton, 2196 Transfer secretaries:
Link Market Services SA (Pty) Ltd, 11 Diagonal Street, Johannesburg,
2001 Sponsor: Bridge Capital Advisors (Pty) Ltd
Date: 17/03/2008 10:48:10 Produced by the JSE SENS Department.
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