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ADH
ADH
ADH - ADvTECH - Condensed consolidated income statement for the six months ended
30 June 2009
ADvTECH LIMITED
(Incorporated in the Republic of South Africa)
Registration number: 1990/001119/06
JSE code: ADH
ISIN number: ZAE000031035
("ADvTECH" or "Group")
Interim Results for the six months ended 30 June 2009
Revenue Up 23%
Operating profit Up 17%
Diluted HEPS Up 7%
Distribution per share Up 7%
CONDENSED CONSOLIDATED INCOME STATEMENT
for the six months ended 30 June 2009
Un- Un- Audited
audited audited
6 months 6 months 12 months
Percen- to to to
tage
increase/ 30 June 30 June 31 Dec
R`000 Note (de- 2009 2008 2008
crease)
Revenue 23% 693 225 562 839 1 197 793
Earnings before
Interest,
Taxation,
Depreciation &
Amortisation
(EBITDA) 20% 131 316 109 770 246 315
Operating 17% 103 306 87 950 200 693
profit
Net interest 8 388 13 917 21 877
received
Interest 8 908 14 983 22 949
received
Finance costs (520) (1 066) (1 072)
Profit before 10% 111 694 101 867 222 570
taxation
Taxation (33 033) (30 232) (67 123)
Profit for the 10% 78 661 71 635 155 447
period
Earnings per
share
Basic (cents) 5% 19.6 18.7 40.2
Diluted (cents) 8% 19.6 18.2 40.0
Headline 2 78 632 71 647 155 463
earnings
Headline
earnings per
share
Basic (cents) 5% 19.6 18.7 40.2
Diluted (cents) 7% 19.6 18.3 40.0
Number of 400 838 393 665 393 665
shares in
issue (`000)
Diluted number 400 930 392 544 389 053
of shares
(`000)
Weighted 400 930 384 042 386 469
average number
of shares in
issue (`000)
Net asset value 22% 138.4 113.6 129.3
per share
(cents)
Free operating (2%) 56.2 57.5 52.9
cash flow
before capex
per share
(cents)
Distribution 7% 7.5 7.0 20.0
per share
(cents)
CONDENSED CONSOLIDATED BALANCE SHEET
as at 30 June 2009
Unaudited Unaudited Audited
30 June 30 June 31 Dec
R`000 2009 2008 2008
Assets
Non-current assets 776 749 527 361 665 258
Property, plant and equipment 590 035 457 631 560 127
Goodwill 84 641 - 38 359
Intangible assets 53 199 34 573 48 200
Deferred taxation assets 48 874 35 157 18 572
Current assets 248 902 334 060 133 734
Trade and other receivables 132 172 94 334 89 945
Cash and cash equivalents 116 730 239 726 43 789
Total assets 1 025 651 861 421 798 992
Equity and liabilities
Equity 554 842 447 367 508 895
Non-current liabilities 11 855 4 680 11 981
Current liabilities 458 954 409 374 278 116
Trade and other payables 165 167 155 488 155 129
Taxation 65 060 43 768 39 405
Fees received in advance 228 727 210 118 83 582
Total equity and liabilities 1 025 651 861 421 798 992
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the six months ended 30 June 2009
Unaudited Unaudited Audited
6 months 6 months 12 months
to to to
30 June 30 June 31 Dec
R`000 2009 2008 2008
Balance at beginning of 508 895 414 924 414 924
period
Total recognised income and 96 794 74 589 163 444
expense for the period
Share-based payment expense 856 503 1 496
Profit for the period 78 661 71 635 155 447
Shares issued for business 35 550 - -
acquisition
Shares purchased by the Share (12 472) - -
Incentive Trust
Share buy-back (7 579) - -
Share options exercised 2 896 2 451 4 456
Share awards granted - - 1 008
Broad based shares granted - - 221
Foreign exchange contract (1 118) - 816
reserve
Capital distributions to (50 847) (42 146) (69 473)
shareholders
Balance at end of the period 554 842 447 367 508 895
CONDENSED SEGMENTAL REPORT
for the six months ended 30 June 2009
Unaudited Audited
Unaudited
6 months 6 months 12 months
Percentage to to to
increase/ 30 June 30 June 31 Dec
R`000 (decrease) 2009 2008 2008
Revenue 23% 693 225 562 839 1 197 793
Education 25% 583 211 465 897 977 288
Resourcing 14% 111 162 97 920 223 193
Intra Group (1 148) (978) (2 688)
revenue
Operating profit 17% 103 306 87 950 200 693
Education 25% 107 442 86 151 192 013
Resourcing (22%) 15 980 20 478 47 322
Central 9% (20 059) (18 400) (37 788)
administration
Litigation (57) (279) (854)
expenses
SUPPLEMENTARY INFORMATION
for the six months ended 30 June 2009
Unaudited Unaudited Audited
6 months 6 months 12 months
to to to
30 June 30 June 31 Dec
R`000 2009 2008 2008
Capital expenditure - current 55 255 37 471 97 840
period
Capital commitments 103 243 101 826 -
- remainder of the year
- future years - - 195 087
Operating lease commitments 304 977 192 294 362 910
in cash - future years
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
for the six months ended 30 June 2009
Un- Un- Audited
audited audited
6 months 6 months 12 months
Percen- to to to
tage
In- 30 June 30 June 31 Dec
crease/
R`000 Note (de- 2009 2008 2008
crease)
Cash generated by 3 20% 134 854 112 189 251 492
operations
Generated by 115 826 125 370 (982)
decrease
in/(utilised to
increase) working
capital
Cash generated by 6% 250 680 237 559 250 510
operating
activities
Net interest 8 388 13 917 21 877
received
Taxation paid (37 679) (24 376) (49 042)
Capital (49 245) (42 146) (69 316)
distributions
Net cash inflow 172 144 184 954 154 029
from operating
activities
Net cash outflow (118 969) (59 872) (234 929)
from investing
activities
Net cash 19 769 (3 419) 6 623
inflow/(outflow)
from financing
activities
Net increase/ 72 944 121 663 (74 277)
(decrease) in
cash and cash
equivalents
Cash and cash 43 789 118 061 118 061
equivalents at
beginning of the
period
Net foreign (3) 2 5
exchange
differences on
cash and cash
equivalents
Cash and cash 116 730 239 726 43 789
equivalents at
end of the period
Free operating
cash flow before
capex per share
(cents)
Net operating 78 661 71 635 155 447
profit after
taxation
Adjust for non- 2 787 1 854 4 365
cash IFRS and
lease adjustments
(after taxation)
Net operating 81 448 73 489 159 812
profit after
taxation -
adjusted for non-
cash IFRS and
lease adjustments
Depreciation and 28 010 21 820 45 622
amortisation
Other non-cashflow (40) 14 16
income statement
items (after
taxation)
Operating cash 15% 109 418 95 323 205 450
flow after
taxation
Working capital 115 826 125 370 (982)
changes
Free operating 2% 225 244 220 693 204 468
cash flow before
capex
Weighted average
number of shares
in issue (`000) 400 930 384 042 386 469
Free operating (2%) 56.2 57.5 52.9
cash flow before
capex per share
(cents)
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
for the six months ended 30 June 2009
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 interim results have not been audited by the Group`s
auditors.
Un- Un- Audited
audited audited
6 months 6 months 12 months
to 30 to 30 to
June June 31 Dec
R`000 2009 2008 2008
2. Determination of headline
earnings
Earnings attributable to 78 661 71 635 155 447
equity holders per the income
statement
Items excluded from headline (29) 12 16
earnings per share
(Profit)/loss on sale of (40) 16 15
assets
Loss on sale of investment - - 5
(40) 16 20
Taxation effects on 11 (4) (4)
adjustments
Headline earnings 78 632 71 647 155 463
3. Note to the cash flow
statement
Reconciliation of profit
before taxation to cash
generated by operations
Profit before taxation 111 694 101 867 222 570
Non-cash IFRS and lease 3 578 2 405 5 161
adjustments (before taxation)
115 272 104 272 227 731
Add back: 19 582 7 917 23 761
Depreciation and 28 010 21 820 45 622
amortisation
Net interest received (8 388) (13 917) (21 877)
Other non-cashflow income (40) 14 16
statement items
Cash generated by operations 134 854 112 189 251 492
Business combinations
4.
Forbes Lever baker was
acquired on 1 January 2009 for
consideration amounting to
R56.7 million. The purchase
consideration has been
allocated as indicated below.
Non-current assets acquired
Intangible assets 7 705
Goodwill 46 534
Plant and equipment 2 464
Consideration paid 56 703
DIRECTORS` COMMENT ON RESULTS
Overview
The directors are pleased to report healthy results for the six month period to
30 June 2009. The larger Education division has once again displayed its
defensive nature and the Group achieved improvements in both revenue and
earnings in a challenging global and local economic climate which has severely
affected consumer spending and employment.
The strength of ADvTECH`s performance demonstrates its capacity to deliver
excellent value during times of prosperity and economic challenge alike.
Notwithstanding the stringent market conditions, the Group is growing student
numbers across the board and maintaining its proven focus on specialised niche
areas of the recruitment industry. ADvTECH`s priorities remain centered on
sustained excellence and growth and the Group continues prudently to invest in
infrastructure and academic resources.
Revenue increased by 23% (2008: 19%) with both divisions contributing to growth.
Organic growth of 15% and 2% in the Education and Resourcing divisions
respectively ensured overall organic growth of 13%. The balance of the increase
in revenue arose from the financial effects of acquisitions reported over the
last 18 months.
Earnings before interest, taxation, depreciation and amortisation (EBITDA)
increased by 20% to R131 million (2008: R110 million). Operating profit
increased by 17% to R103 million (2008: R88 million) after taking into
account increased amortisation of intangible assets arising from recent
acquisitions. Profit for the period increased by 10% to R79 million (2008: R72
million) despite the reduction in interest earned. The weighted average number
of shares increased by 4%, due mainly to the issue of 9 million shares as part
of the purchase consideration for Forbes Lever Baker (FLB). Basic headline
earnings per share increased by 5% to 19.6 cents (2008: 18.7 cents) and
diluted headline earnings per share increased by 7% also to 19.6 cents (2008:
18.3 cents). The distribution per share in this period has been increased by 7%
from 7.0 cents to 7.5 cents.
Education
The Education division is a leader in the independent education sector and
operates under the academic direction and guidance of the Independent Institute
of Education (IIE), which encompasses
20 registered Higher Education campuses as well as 31 school sites. The
education brands include Abbotts College, CrawfordSchoolsTrade Mark, College
Campus, Junior Colleges, Rosebank College, Trinityhouse, Varsity College, Vega,
incorporating The National College of Photography, Imfundo, incorporating
Corporate College International and the recently acquired FLB, a specialist
school of accounting and finance at undergraduate and postgraduate levels.
The Education division contributed 84% (2008: 83%) to Group revenue, with
revenue increasing by 25% to R583 million (2008: R466 million) and operating
profit by 25% to R107 million (2008: R86 million). Operating margin was
unchanged as the value and quality of the Group`s offerings enabled the
education brands to respond effectively to pressures on consumer and other
spending.
Resourcing
The Resourcing division`s activities include recruitment, placement, temporary
staffing, response handling and HR contracting. Its portfolio of brands includes
Brent Personnel, Cassel & Company, Communicate Personnel, Insource.ICT,
Inkokheli HR Appointments, IT Edge, Network Recruitment, Pro Rec
Recruitment, Tech-Pro Personnel, Vertex-Kapele and The Working Earth.
The Resourcing division contributed 16% (2008: 17%) to Group revenue, with
revenue increasing by 14% to R111 million (2008:
R98 million. Whilst market conditions have placed the recruitment industry under
significant pressure, ADvTECH`s Resourcing division was protected from this
trend by the niche vocational specialities for which the Group`s brands are well
known. Operating profit declined to R16 million (2008: R20 million), a
creditable performance in relative terms.
Central administration and litigation
Central administration costs increased by 9% to R20 million (2008: R18 million).
This increase is largely in line with inflation and escalations demanded by
third party providers.
Legal proceedings against Marina and Andry Welihockyj remain in process with
preparation for trial continuing. ADvTECH has been awarded a number of
procedural and costs orders against the Welihockyj`s, and these cost recoveries
have contributed to the modest level of net litigation expenditure.
The Group`s legal counsel remains satisfied with the merits of the claims in
this matter and that, save for legal costs, the Group has no further exposure.
Balance sheet and cash flow
ADvTECH`s quality of earnings is underpinned by further improvement in free
operating cash flow before capex to R225 million (2008: R221 million). This has
accompanied a further strengthening of the Group`s balance sheet with the net
asset value increasing by 24% to R555 million (2008: R447 million), while cash
on hand amounted to R117 million (2008: R240 million). The value of goodwill and
intangible assets has increased by R85 million and R19 million respectively
as a result of acquisitions over the last 18 months, including FLB and
Trinityhouse.
Cash generated by operating activities of R251 million (2008: R238 million)
enabled the Group to fund capital expenditure of
R55 million (2008: R37 million), the acquisition of FLB and pay a capital
distribution of R49 million (2008: R42 million) from its own resources. In
addition, 4.8 million ADvTECH Limited shares were acquired at a cost of R20
million in terms of the authority granted to the directors. Given these
appropriations of the Group`s cash resources and the reduced interest rate
yields on cash balances during the period, interest earnings reduced to R9
million (2008: R15 million).
Capital reduction out of share premium ("distribution")
The Board has resolved to declare an interim distribution to shareholders by way
of capital distribution out of share premium ("distribution") of 7.5 cents per
share (2008: 7.0 cents) for the period ended 30 June 2009. The authority to
make this payment to shareholders was obtained at the Annual General Meeting
held on 19 May 2009.
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 unaudited financial results as at and for the period ended 30 June 2009.
The pro-forma financial information is the responsibility of the Company`s
directors.
Before the After the Percentage
distribution1 distribution change
Earnings per share 19.6 19.42 (1%)
(cents)
Headline earnings per 19.6 19.42 (1%)
share (cents)
Weighted average number
of shares in issue
(`000) 400 930 400 930 -
Net asset value per 138.4 131.03 (5%)
share (cents)
Tangible net asset 104.0 96.63 (7%)
value per share
(cents)
Number of shares in 400 838 400 838 -
issue (`000)
Notes:
1. Extracted from the unaudited financial results for the
period ended 30 June 2009.
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 2009; and
interest, at an average before taxation rate of 9% 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
30 June 2009.
Set out in the table below are the salient dates and times applicable to the
distribution:
2009
Last day to trade in order to Friday, 11 September
participate in the distribution
Trading commences ex Monday, 14 September
distribution
Record date Friday, 18 September
Payment date Monday, 21 September
Share certificates may not be dematerialised or rematerialised between Monday,
14 September 2009 and Friday, 18 September 2009, both days inclusive.
Directorate
On 17 July 2009 Mr. Leslie Maasdorp was appointed as an independent non-
executive director.
Mr. Michael Sacks, who retired as Chairman in 2008, has continued to act as
Chairman but has retired from all Board Committees. New appointments have been
made to these Committees from incumbent non-executive board members.
Prospects
High academic standards, quality of instruction and the graduation statistics
and subsequent career achievements by students at all levels of ADvTECH`s
education offerings remain the most compelling factors for optimism going
forward. The Resourcing division`s performance is likely to track economic
indices more closely, but the division`s reputation for service and delivery, as
well as its niche sector focus, are likely to count in its favour in striving to
achieve greater market share in the period ahead.
The Group is confident of its strategic strength and financial health, and will
continue to build on its tested business model. Management will prudently
control resources and expenditure without compromising the provision of services
and education quality.
Given the forward momentum and favourable positioning of the Group, the
directors remain positive regarding the Group`s prospects for the full year.
Michael Sacks Frank Thompson
Chairman Chief Executive Officer
Johannesburg
24 August 2009
Directors: MI Sacks* (Chairman), FR Thompson (CEO), JDR Oesch (Financial), BD
Buckham*, DK Ferreira*, BM Gourley*, JD Jansen*, HR Levin*, JC Livingstone*, L
Maasdorp*, 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: 24/08/2009 09:05:01 Produced by the JSE SENS Department.
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