| Mon 23 Mar 2009, 9:01 | | ADH - ADvTECH Limited - Audited Results For The Year Ended 31 December 2008 |
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ADH
ADH
ADH - ADvTECH Limited - Audited Results For The Year Ended 31 December 2008
And Dividend Declaration
ADvTECH LIMITED
(Incorporated in the Republic of South Africa)
Registration number: 1990/001119/06
JSE Code: ADH & ISIN Number: ZAE000031035
Audited Results for the Year Ended 31 December 2008 and dividend declaration
- Revenue Up 25%
- Operating profit Up 27%
- Headline earnings per share Up 26%
- Free operating cash flow per share Up 30%
- Distributions per share Up 25%
CONDENSED CONSOLIDATED INCOME STATEMENT
for the year ended 31 December 2008
Audited Audited
Percentage 31 Dec 31 Dec
R`000 Note increase 2008 2007
Revenue 25% 1 197 793 960 364
Earnings before 29% 246 315 191 239
Interest, Taxation,
Depreciation &
Amortisation (EBITDA)
Operating profit 27% 200 693 157 757
Net interest received 21 877 14 321
Interest received 22 949 17 452
Finance costs (1 072) (3 131)
Profit before taxation 29% 222 570 172 078
Taxation (67 123) (52 851)
Profit for the year 30% 155 447 119 227
Earnings per share
Basic (cents) 25% 40.2 32.1
Diluted (cents) 29% 40.0 31.1
Headline earnings 2 155 463 118 846
Headline earnings per
share
Basic (cents) 26% 40.2 32.0
Diluted (cents) 29% 40.0 31.0
Number of shares in 393 665 393 665
issue (`000)
Diluted number of 389 053 382 979
shares (`000)
Weighted average 386 469 371 970
number of shares in
issue (`000)
Net asset value per 23% 129.3 105.4
share (cents)
Free operating cash 30% 52.9 40.8
flow before capex per
share (cents)
Distributions per 25% 20.0 16.0
share (cents)
CONDENSED CONSOLIDATED BALANCE SHEET
as at 31 December 2008
Audited Audited
31 Dec 31 Dec
R`000 2008 2007
Assets
Non-current assets 665 258 478 839
Property, plant and equipment 560 127 441 347
Goodwill 38 359 -
Intangible assets 48 200 10 659
Deferred taxation assets 18 572 26 833
Current assets 133 734 180 178
Trade and other receivables 89 945 62 117
Cash and cash equivalents 43 789 118 061
Total assets 798 992 659 017
Equity and liabilities
Equity 508 895 414 924
Non-current liabilities 11 981 3 852
Bank loans - interest bearing - 3 852
Vendor claims 11 981 -
Current liabilities 278 116 240 241
Trade and other payables 155 129 145 607
Taxation 39 405 29 585
Fees received in advance 83 582 65 049
798 992 659 017
Total equity and liabilities
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 31 December 2008
Audited Audited
31 Dec 31 Dec
R`000 2008 2007
Balance at beginning of the year 414 924 327 246
Total recognised income and expense for 163 444 135 109
the year
Share-based payment expense 1 496 1 986
Profit for the year 155 447 119 227
Share options exercised 4 456 11 697
Share awards granted 1 008 2 199
Foreign exchange contract reserve 816 -
Broad based shares granted 221 -
Capital distributions to shareholders (69 473) (47 431)
Balance at end of the year 508 895 414 924
CONDENSED SEGMENTAL REPORT
for the year ended 31 December 2008
Audited Audited
Percentage 31 Dec 31 Dec
R`000 increase 2008 2007
Revenue 25% 1 197 793 960 364
?Education 20% 977 288 812 543
?Resourcing 49% 223 193 150 168
?Intra Group revenue (2 688) (2 347)
Operating profit 27% 200 693 157 757
?Education 20% 192 013 160 438
?Resourcing 51% 47 322 31 278
?Central administration 13% (37 788) (33 537)
?Litigation expenses (854) (422)
SUPPLEMENTARY INFORMATION
for the year ended 31 December 2008
Audited Audited
31 Dec 31 Dec
R`000 2008 2007
Capital expenditure - current year 97 840 78 406
Capital commitments - future years 195 087 170 013
Operating lease commitments in cash - 362 910 184 003
future years
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
for the year ended 31 December 2008
Audited Audited
Percentage 31 Dec 31 Dec
R`000 Note increase 2008 2007
Cash generated by 3 30% 251 492 193 514
operations
Utilised to increase (982) (3 098)
working capital
Cash generated by 32% 250 510 190 416
operating activities
Net interest received 21 877 14 321
Taxation paid (49 042) (21 657)
Capital distributions (69 316) (47 294)
Net cash inflow from 154 029 135 786
operating activities
Net cash outflow from (234 929) (71 763)
investing activities
Net cash 6 623 (5 397)
inflow/(outflow) from
financing activities
Net (decrease)/increase (74 277) 58 626
in cash and cash
equivalents
Cash and cash
equivalents at
beginning of the year 118 061 59 462
Net foreign exchange 5 (27)
differences on cash and
cash equivalents
Cash and cash 43 789 118 061
equivalents at end of
the year
Free operating cash
flow before capex per
share (cents)
Net operating profit 155 447 119 227
after taxation
Adjust for non-cash 4 365 2 558
IFRS and lease
adjustments (after
taxation)
Net operating profit 159 812 121 785
after taxation -
adjusted for non-cash
IFRS and lease
adjustments
Depreciation and 45 622 33 482
amortisation
Other non-cash flow 16 (381)
income statement items
(after taxation)
Operating cash flow 33% 205 450 154 886
after taxation
Working capital changes (982) (3 098)
Free operating cash 204 468 151 788
flow before capex
Weighted average number 386 469 371 970
of shares in issue
(`000)
Free operating cash 30% 52.9 40.8
flow before capex per
share (cents)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 31 December 2008
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. 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
announcement has been based.
Their unmodified report is available at the registered
office of the Company.
Audited Audited
31 Dec 31 Dec
R`000 2008 2007
2. Determination of headline earnings
Earnings attributable to equity 155 447 119 227
holders per the income statement
Items excluded from headline 16 (381)
earnings per share
Loss/(profit) on sale of assets 15 (561)
Loss on sale and impairment of 5 18
investment
20 (543)
Taxation effects on adjustments (4) 162
Headline earnings 155 463 118 846
3. Notes to the cash flow statement
Reconciliation of profit before
taxation to cash generated by
operations
Profit before taxation 222 570 172 078
Non-cash IFRS and lease adjustments 5 161 2 789
(before taxation)
227 731 174 867
Add back: 23 761 18 647
Depreciation and amortisation 45 622 33 482
Net interest received (21 877) (14 321)
Other non-cash flow income 16 (514)
statement items
Cash generated by operations 251 492 193 514
Trinityhouse Other Total
4. Business combinations
Date acquired 1 Aug 08 Various
Fair value of assets
Plant and equipment 1 487 618 2 105
Land and buildings 61 513 - 61 513
Total net assets acquired 63 000 618 63 618
Intangible assets 20 540 20 374 40 914
Goodwill 20 285 18 074 38 359
Purchase price 103 825 39 066 142 891
DIRECTORS` COMMENT ON RESULTS
Overview
ADvTECH achieved excellent academic, operational and financial results for the
year ended December 2008, in line with the trend reported at mid-year. A
reflection of the value and quality offered by the Group is the continued
strong growth in demand.
The enduring worth of the Group`s core operations and the annuity nature of
much of the revenue continues to underpin the sustainability of the Group`s
business model.
One of the more visible measures of the success of the Group`s education
offering is the 100% pass rate achieved by the 1 043 matric candidates in the
new Outcomes Based Education curriculum. The class of 2008 obtained
distinctions in a third of all subjects written, 2 332 A`s in total, and
average scores of 75% in Mathematics, 66% in Physical Science and 70% in
English.
At tertiary level, 12 graduation ceremonies were held during the year at which
2 156 (2007: 2 049) students graduated with accredited Higher Education
qualifications, at certificate, diploma, degree or honours level, conferred by
The Independent Institute of Education (IIE). Our Varsity College final year
UNISA students once again achieved excellent results with an overall pass rate
of above 80%, including a 95% pass rate in English. In the UNISA CTA
examinations, five Varsity College students were placed in the top 20 overall.
At Imfundo, over 5 000 candidates wrote the Insurance Industry FAIS
examinations, with a 65% success rate.
These statistics provide an indication of the quality of education offered
across the Education division and exemplify the continuing contribution to the
personal development and empowerment of the student body each year. Tens of
thousands of ADvTECH graduates are active in the South African economy,
including 266 alumni employed within the Group itself.
Resolute focus on selected key market niches, where high demand for skills has
persisted, helped to drive demand and activity at our recruitment businesses.
This, coupled with an increased branch network and staff numbers, generated
excellent real growth during the year. New career placements were obtained for
approximately 4 900 candidates (2007: 4 300).
More information about the individual and collective achievements of students,
staff and clients across the programmes, campuses and branches of the Group is
contained in the ADvTECH annual report.
Financial
The directors are pleased to report a 25% increase in revenue to R1,2 billion,
a 27% increase in operating profit to R201 million, a 26% increase in headline
earnings per share to 40.2 cents and a 25% increase in distributions per share
for the full year to
20.0 cents.
These results flow from good performances in both operating divisions, with
growth being enhanced by successful contributions from new investments,
whether organic capital expenditure or through acquisition. Operating margin
increased marginally to 17% (2007: 16%) as a result of improved economies of
scale arising from continued real growth.
Both revenue and operating profit in the Education division increased by 20%
to R977 million and R192 million respectively. These results reflect continued
enrolment growth and efficiency improvements in the division. The Resourcing
division, comprising the recruitment businesses, had an outstanding year of
growth with revenue growing by 49% to R223 million and operating profit by 51%
to R47 million. Central administration costs increased by 13% (2007: 23%)
reflecting mainly an inflation linked increase after the completion of the
increase in resources and capacity referred to last year.
Free operating cash flow before capex per share increased by 30% to 52.9 cents
per share. This increase matches closely the growth in operating profits and
EBITDA and reflects continued good cash flow conversion of profits at 132% of
headline earnings per share.
As a result of the challenging economic and financial environment, management
kept focus on debt collections throughout the year and are satisfied that the
strength of the outstanding book remains adequate, notwithstanding the
increase in net trade and other receivables to R90 million from R62 million
last year. The increase in debtors was driven by organic growth, acquisitions
and the longer term contract nature of certain new business.
Strong cash generation enabled the Group to remain in a net cash position
throughout the year after funding capital expenditure of R98 million (2007:
R78 million), acquisitions of R143 million, corporate taxation of R49 million
(2007: R22 million), and capital distributions of R69 million (2007: R47
million). This achievement enabled the Group to maintain its sound financial
position with more than adequate capital capacity for planned investments and
also resulted in a significant increase in net interest received.
The inherent nature of the Group`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.
Investment
As referred to above, during 2008 the Group invested R98 million in capital
expenditure, mainly to increase student capacity in the school and tertiary
businesses. The Group also invested R143 million in acquisitions already
reported, of which Trinityhouse was the largest at R104 million. These
acquisitions resulted in the increase in goodwill and intangible assets.
The operating lease commitments have increased significantly due to the
renewal of several existing leases and the entering into of new agreements for
additional premises in order to accommodate the growing capacity needs of the
Group.
Transformation
The Group`s business in education, training and placement in careers is itself
inherently transformational. 67% of students and over 50% of placements are
historically disadvantaged individuals (HDI). The Group`s total HDI staff
complement increased by 21% (total staff: 17%), resulting in an increased HDI
staff component of 39%. Restructuring of senior management structures led to a
slight reduction in the HDI component of management to 23% (2007: 25%),
notwithstanding continued progress in real HDI appointments at management
level. With the guidance of the Board Transformation Committee, the Group
continues to benchmark itself against the relevant DTI codes and the JSE SRI
index, of which it is a member.
Education
The Education division under the academic guidance and governance of The
Independent Institute of Education (IIE), houses the Group`s educational
brands and institutions including Abbotts College, College Campus, Corporate
College International, CrawfordSchools, Imfundo, Junior Colleges, Rosebank
College, The National College of Photography, Trinityhouse, Varsity College
and Vega, The Brand Communication School. Collectively, they provide a full
range of educational services from pre-school to matric, certificates,
diplomas, undergraduate and postgraduate degrees, as well as skills
development, learnerships and Adult Based Education and Training. These
activities addressed the needs of 46 500 students (2007: 45 000) at the 52
sites and campuses across South Africa from which the Group operates.
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 35 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.
Resourcing
The Resourcing division includes Brent Personnel, Cassel & Company,
Communicate Personnel, Inkokheli HR Appointments, Insource.ICT, Network
Recruitment, Pro Rec Recruitment, Vertex-Kapele, IT Edge, Tech-Pro Personnel
and The Working Earth. The division`s major activities are recruitment,
permanent, temporary and contract staffing solutions, 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 in 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 20%.
Litigation
Legal proceedings against Marina and Andry Welihockyj remain in process.
The Group`s legal counsel remains satisfied with the merits of the claims in
this manner and that, 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 capital distribution out of share premium of 13.0 cents per share (2007:
11.0 cents) for the year ended
31 December 2008. This would bring total distributions for the year to 20.0
cents per share (2007: 16.0 cents). The authority to make this payment to
shareholders was obtained at the Annual General Meeting held on 20 May 2008.
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 tangible net asset value per share based on the
Group`s audited financial results for the year ended 31 December 2008. 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 40.2 39.1 (2) (3%)
(cents)
Headline earnings per 40.2 39.1 (2) (3%)
share (cents)
Weighted average number 386 469 386 469
of shares in issue (`000)
-
Net asset value per share 129.3 116.4 (3) (10%)
(cents)
Tangible net asset value 107.3 94.4 (3) (12%)
per share (cents)
Number of shares in issue 393 665 393 665 -
(`000)
Notes:
1. Extracted from the audited financial results for the year
ended 31 December 2008.
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 2008; and
- interest, at an average before taxation rate of 11.5% per
annum, was forfeited on the cash distributed.
3. The net asset value and tangible net 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 2008.
Set out in the table below are the salient dates and times applicable to the
distribution:
2009
Last day to trade in order to participate in Wednesday, 8 April
the distribution
Trading commences ex-distribution Thursday, 9 April
Record date Friday, 17 April
Payment date Monday, 20 April
Share certificates may not be dematerialised or rematerialised between
Thursday, 9 April 2009 and Friday, 17 April 2009, both days inclusive.
Prospects
Given the Group`s robust and resilient business model and its ability to
contribute to the vital needs and aspirations of our society, the Group has
budgeted for continued real growth in 2009. As a result of a more testing
operating environment as well as the continued broadening of the base off
which increases are measured, it is anticipated that rates of growth will
reduce but remain substantial and positive in real terms. Activity levels in
recruitment and student enrolment, both in terms of returning students and new
registrations, provide a level of confidence in setting operational and
infrastructural growth objectives.
Accordingly, barring unforeseen developments or a significant further
deterioration in the economy, the Group expects to report real growth in
earnings and positive cash flows in 2009.
Michael Sacks Frank Thompson
Chairman Chief Executive Officer
Johannesburg
23 March 2009
Directors: MI Sacks* (Acting Chairman), FR Thompson (CEO),
JDR Oesch (Financial), BD Buckham*, DK Ferreira*, BM Gourley*, JD Jansen*, HR
Levin*, JC Livingstone*, F Titi*
*Non-Executive
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, 27 Fricker Road, Illovo, 2196.
Date: 23/03/2009 09:01:03 Produced by the JSE SENS Department.
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