| Tue 23 Mar 2010, 9:00 | | ADH - ADvTECH Limited - Audited Results for the Year Ended 31 December 2009 |
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ADH
ADH
ADH - ADvTECH Limited - Audited Results for the Year Ended 31 December 2009
ADvTECH Limited
(Incorporated in the Republic of South Africa)
Registration number: 1990/001119/06
JSE code: ADH & ISIN number: ZAE000031035
ADVTECH GROUP
Audited Results for the Year Ended 31 December 2009
- Revenue up 15%
- Operating profit up 9%
- Headline earnings per share no change
- Free operating cash flow per share up 21%
- Distributions per share up 5%
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 31 December 2009
Audited Audited
Percentage 31 Dec 31 Dec
R`000 Note increase 2009 2008
Revenue 15% 1 375 997 1 197 793
Earnings before Interest, 13% 277 682 246 315
Taxation, Depreciation and
Amortisation (EBITDA)
Operating profit before 9% 218 936 200 693
interest
Net interest received 10 849 21 877
Interest received 11 005 22 949
Finance costs (156) (1 072)
Profit before taxation 3% 229 785 222 570
Taxation (69 584) (67 123)
Profit for the year 3% 160 201 155 447
Earnings per share
Basic (cents) 40.1 40.2
Diluted (cents) 40.1 40.0
Headline earnings 2 160 349 155 463
Headline earnings per share
Basic (cents) 40.1 40.2
Diluted (cents) 40.1 40.0
Number of shares in issue 400 838 393 665
(`000)
Weighted average number of 401 002 393 665
shares in issue (`000)
Weighted average number of 399 695 389 053
shares for purposes of diluted
number of shares (`000)
Weighted average number of 399 449 386 469
shares for purposes of basic
earnings per share (`000)
Net asset value per share 18% 152.3 129.3
(cents)
Free operating cash flow before 21% 63.8 52.9
capex per share (cents)
Distributions per share (cents) 5% 21.0 20.0
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
as at 31 December 2009
Audited Audited
31 Dec 31 Dec
R`000 2009 2008
Assets
Non-current assets 787 917 665 258
Property, plant and equipment 636 507 560 127
Goodwill 80 909 38 359
Intangible assets 49 782 48 200
Deferred taxation assets 20 719 18 572
Current assets 140 790 133 734
Trade and other receivables 84 886 72 393
Other current assets 16 294 17 552
Cash and cash equivalents 39 610 43 789
Total assets 928 707 798 992
Equity and liabilities
Equity 610 593 508 895
Non-current liabilities
Vendor claims - 11 981
Current liabilities 318 114 278 116
Trade and other payables 181 873 155 129
Taxation 35 685 39 405
Fees received in advance 100 556 83 582
Total equity and liabilities 928 707 798 992
SUPPLEMENTARY INFORMATION
for the year ended 31 December 2009
Audited Audited
31 Dec 31 Dec
R`000 2009 2008
Capital expenditure - current year 128 943 97 840
Capital commitments - future years 122 614 157 522
Operating lease commitments in cash - future 356 331 362 910
years
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 31 December 2009
Audited Audited
31 Dec 31 Dec
R`000 2009 2008
Balance at beginning of the year 508 895 414 924
Total comprehensive income for the year 159 355 156 263
Profit for the year 160 201 155 447
Other comprehensive (expense)/income (846) 816
Share-based payment expense 1 712 1 496
Shares issued for business acquisition 35 550 -
Share buy-back (7 598) -
Shares purchased by the Share Incentive Trust (12 472) -
Share awards granted 2 098 1 008
Broad-based scheme shares granted 468 221
Share options exercised 2 926 4 456
Capital distributions to shareholders (80 341) (69 473)
Balance at end of the year 610 593 508 895
CONDENSED CONSOLIDATED SEGMENTAL REPORT
for the year ended 31 December 2009
Percentage Audited Audited
increase/ 31 Dec 31 Dec
R`000 (decrease) 2009 2008
Revenue 15% 1 375 997 1 197 793
Education 20% 1 169 938 977 288
Resourcing (7%) 208 310 223 193
Intra Group revenue (2 251) (2 688)
Operating profit before interest 9% 218 936 200 693
Education 21% 231 421 192 013
Resourcing (39%) 28 786 47 322
Central administration 9% (41 202) (37 788)
Litigation expenses (69) (854)
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 31 December 2009
Audited Audited
Percentage 31 Dec 31 Dec
R`000 Note increase 2009 2008
Cash generated by operations 4 13% 284 161 251 492
Movement in working capital 30 630 (982)
Cash generated by operating 26% 314 791 250 510
activities
Net interest received 10 849 21 877
Taxation paid (75 451) (49 042)
Capital distributions paid (80 181) (69 316)
Net cash inflow from operating 170 008 154 029
activities
Net cash outflow from investing (155 713) (234 929)
activities
Net cash (outflow)/inflow from (18 473) 6 623
financing activities
Net decrease in cash and cash (4 178) (74 277)
equivalents
Cash and cash equivalents at 43 789 118 061
beginning of the year
Net foreign exchange differences (1) 5
on cash and cash equivalents
Cash and cash equivalents at end
of the year 39 610 43 789
Free operating cash flow before
capex per share (cents)
Profit for the year 160 201 155 447
Adjusted for non-cash IFRS and 4 996 4 365
lease adjustments (after
taxation)
Net operating profit after 165 197 159 812
taxation - adjusted for non-cash
IFRS and lease adjustments
Depreciation and amortisation 58 746 45 622
Other non-cash flow income 148 16
statement items (after taxation)
Operating cash flow after 9% 224 091 205 450
taxation
Movement in working capital 30 630 (982)
Free operating cash flow before 25% 254 721 204 468
capex
Weighted average number of shares 399 449 386 469
in issue for purposes of basic
earnings per share (`000)
Free operating cash flow before 21% 63.8 52.9
capex per share (cents)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 31 December 2009
1. Statement of compliance
The financial statements have been prepared using accounting policies
that comply with International Financial Reporting Standards and in
the manner required by the Companies Act of South Africa 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 announcement has been
based.
Their report is available for inspection at the Company`s registered
office.
Audited Audited
31 Dec 31 Dec
R`000 2009 2008
2. Determination of headline earnings
Earnings attributable to equity holders 160 201 155 447
Items excluded from headline earnings per 148 16
share
Loss on sale of investment - 5
Loss on sale of property, plant and equipment 205 15
205 20
Taxation effects on adjustments (57) (4)
Headline earnings 160 349 155 463
3. Other comprehensive income
Profit for the year 160 201 155 447
Other comprehensive (expenses)/income
Cash flow hedge revaluation (846) 816
(Loss)/gain arising during the year (30) 816
Reclassification adjustment for amounts (816) -
transferred to the initial carrying amount of
hedged items
Total comprehensive income for the year 159 355 156 263
4. Notes to the cash flow statement
Reconciliation of profit before taxation to
cash generated by operations
Profit before taxation 229 785 222 570
Adjust for non-cash IFRS and lease 6 273 5 161
adjustments (before taxation)
236 058 227 731
Adjust: 48 103 23 761
Depreciation and amortisation 58 746 45 622
Net interest received (10 849) (21 877)
Other non-cash flow income statement items 206 16
Cash generated by operations 284 161 251 492
5. Business combination
Forbes Lever Baker was acquired on 1 January
2009 for consideration amounting to R56,7
million.
Fair value of assets acquired
Property, plant and equipment 2 464
Total net tangible assets acquired 2 464
Intangible assets 7 705
Goodwill 46 534
Purchase price 56 703
COMMENTARY
Overview
ADvTECH achieved steady financial results for the year ended December 2009, a
period characterised by significant financial and economic challenges for
consumers in South Africa. These results were underpinned by continued strong
growth from the Education division, offset by a significant and market related
decline in the contribution from the Resourcing division. The increase in demand
for ADvTECH`s education services throughout this period is testament to the
value placed on the quality of the Group`s education offering. The strength of
the Group`s business model and the annuity nature of the revenue stream are at
the core of ADvTECH`s long-term sustainability.
In 2009 ADvTECH`s students again excelled academically. The 1 169 Matric
candidates achieved a 100% pass rate, with 98% qualifying for entrance into
Higher Education institutions and collectively obtained 2 351 subject
distinctions, an average of two distinctions per candidate. Outstanding results
were achieved by our matric group as a whole in key subjects such as
Mathematics, English, Computer Science and Accounting.
At post-schooling level, 15 graduation ceremonies were held during the year at
which 2 468 (2008: 2 156) students graduated with qualifications accredited by
The Independent Institute of Education (IIE) at certificate, diploma, degree or
honours level. Forbes Lever Baker and Varsity College undergraduate UNISA
students again achieved creditable results with an overall pass rate of 72%.
Their students also occupied 12 of the top 15 places nationally in the UNISA
Certificate in Theory of Accounting (CTA) examinations. Good progress was made
by Imfundo in the Department of Labour Adult Basic Education and Training
contract which saw some 10 500 students tackle the programme with over 50%
having already completed the course. ADvTECH actively measures the subsequent
career success of alumni, and the Group itself employs 322 (2008: 266) alumni.
In the Resourcing division, the Group maintained its resolute focus on key niche
markets, while maintaining a lean and efficient operating model. The economic
climate affected both demand and the length of the staff recruitment cycle. As a
result 3 900 (2008: 4 900) candidates were placed in new careers.
More information about the individual and collective achievements of students,
staff and clients across the programmes, campuses and branches of the Group is
included in the ADvTECH annual report.
Financial
Given the prevailing economic conditions, the directors are pleased to report a
15% increase in revenue to R1.4 billion and a 9% increase in operating profit to
R219 million. Reduced interest earnings and the dilution resulting from the
issue of shares to vendors translated into diluted headline earning per share of
40.1 cents (2008: 40.0 cents). These results together with the strong cash flow
reported on below enabled the declaration of a 5% increase in distribution per
share for the full year.
These results were driven by a sound performance in the Education division
coupled with modest growth in central administration costs which increased by 9%
(2008: 13%). Overall, operating margin declined marginally.
Revenue in the Education division increased by 20% to R1.2 billion and operating
profit by 21% to R231 million. This increase reflects continued real growth in
student numbers and the benefit of economies of scale with the margin increasing
to just under 20%. As a result of the challenging trading environment due to the
economic downturn, the Resourcing division had a difficult year with revenue
declining by 7% overall and 23% in the second 6 months to R208 million for the
year. This impacted heavily on the Division`s operating profit which declined by
39% for the year to R29 million. Notwithstanding this result, the Resourcing
division continued to contribute to the Group`s performance with operating
profit at a level equivalent to that of 2007, strong positive cash flow and
gains in market position.
Free operating cash flow before capex per share increased by 21% to 63.8 cents
per share. A further improvement in working capital management enabled the Group
to generate this result despite the lower rate of operating profit growth. The
12% increase in net trade receivables and other current assets was lower than
the 15% increase in revenue and reflects the result of continued focus on the
management and collection of receivables.
Sound cash generation enabled ADvTECH to fund from its own resources capital
expenditure of R129 million (2008: R98 million), acquisitions of R57 million,
(2008: R143 million), corporate taxation of R75 million (2008: R49 million) and
capital distributions of R80 million (2008: R69 million). This enabled the Group
to maintain its sound financial position with an ungeared balance sheet and an
18% increase in net asset value per share.
The Group`s working capital model in education is based on payments of fees in
advance, compared to the usual models of arrear payments for services rendered.
This model gives rise to circumstances at year end where current liabilities
exceed current assets. This preferred low risk state of affairs resolves itself
in the course of trading during the year.
Investment
In 2009 the Group invested R129 million in capital expenditure. This included a
significant ongoing investment in management information systems and the
creation of new capacity in the education brands, notably Abbotts College and
CrawfordSchoolsTM. The Group also invested R57 million in the already reported
acquisition of Forbes Lever Baker, which gave rise to the increase in goodwill
and intangible assets. In early 2010, ADvTECH acquired The Design School
Southern Africa for a consideration of approximately R25 million, subject to the
fulfillment of certain conditions. Although small in Group terms, this
acquisition brings exciting new capacity and capability into the Vega brand.
The reduction in capital commitments to R123 million (2008: R158 million) is the
result of project planning timetables and the focus on projects already in hand
as noted above.
Education
The Education division under the academic guidance and governance of The
Independent Institute of Education (IIE), houses the Group`s education brands
and institutions including Abbotts College, College Campus, Corporate College
International, CrawfordSchools, Forbes Lever Baker, Imfundo, Junior Colleges,
Rosebank College, The National College of Photography, Trinityhouse, Varsity
College and Vega, The Brand Communications 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 Basic Education and Training. In 2009, these activities
addressed the needs of 60 800 students (2008: 46 500) at the 57 (2008: 52) sites
and campuses across South Africa from which the Group operates. A key element of
this growth was the 7% increase in full-time students to 32 400. A significant
increase in student numbers was achieved in Imfundo as a consequence of the
Adult Basic Education and Training contract referred to above.
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 41 (2008: 35)
education programmes accredited across 24 (2008: 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, IT Edge, Network
Recruitment, Pro Rec Recruitment, Tech-Pro Personnel, Vertex-Kapele and The
Working Earth. The Division`s major activities are permanent, temporary and
other recruitment solutions, recruitment advertising and advertising response
handling.
The Resourcing division maintained a strong focus on the key niche markets of
Finance, Engineering and Information Technology, while also developing the
smaller sectors of Freight and Logistics, Human Resources, Professional Sales
and Supply Chain Management.
Transformation
ADvTECH`s role in education, training and staffing in itself makes a significant
contribution to the transformation of South African society. 73% of students and
over 50% of placements are black. The Group maintained steady progress in its
black staff complement as a whole as well as in its senior management
structures. The Board Transformation Committee continues to guide the Group`s
progress against the relevant Department of Trade and Industry codes and the JSE
Limited`s Socially Responsible Investment index, of which ADvTECH has been a
constituent for the past four years.
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
matter 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 reduction out of share premium of 13.5 cents (2008: 13.0 cents) per
share for the year ended 31 December 2009. This would bring total distributions
for the year to 21.0 cents (2008: 20.0 cents) per share. The authority to make
this payment to shareholders was obtained at the Annual General Meeting held on
19 May 2009.
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 2009 are set out in the table below. The pro-forma
financial effects have been prepared for illustrative purposes only and, because
of their nature, may not provide 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) 40.1 39.3(2) (2%)
Headline earnings per share (cents) 40.1 39.3(2) (2%)
Weighted average number of shares
for purposes of basic
earnings per share (`000) 399 449 399 449 -
Net asset value per share (cents) 152.3 138.9(3) (9%)
Net tangible asset value per share 119.7 106.3(3) (11%)
(cents)
Number of shares in issue (`000) 400 838 400 838 -
Notes:
1. Extracted from the audited financial results for the year ended 31 December
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 8.6% 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 2009.
Set out in the table below are the salient dates and times applicable to the
distribution:
2010
Last day to trade in order to participate in the
distribution Friday, 9 April
Trading commences ex distribution Monday, 12 April
Record date Friday, 16 April
Payment date Monday, 19 April
Share certificates may not be dematerialised or rematerialised between Monday,
12 April 2010 and Friday, 16 April 2010 both days inclusive.
Prospects
The South African economy is likely to show some marginal improvement during
2010 and consequently the Board is hoping for a better business environment than
was the case in 2009. The Education division has demonstrated its resilience
under difficult conditions, and under improved conditions it is anticipated that
the growth trend will continue. The Resourcing division has strengthened its
position in its chosen niche markets, simultaneously renewing its commitment to
service excellence. This Division is therefore well placed to respond to
opportunities presented by a better employment market in 2010.
Accordingly, provided the recovery materialises, student enrolments continue as
expected, and barring unforeseen adverse conditions, the Group expects to be
able to report improved performance for the ensuing year.
On behalf of the Board
Motty Sacks Frank Thompson
Chairman Chief Executive Officer
23 March 2010
Directors: MI Sacks* (Chairman), FR Thompson (CEO), JDR Oesch (Financial), BD
Buckham*, DK Ferreira*, BM Gourley*, JD Jansen*, HR Levin*, JC Livingstone*, LW
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.
www.advtech.co.za
Date: 23/03/2010 09:00:56 Produced by the JSE SENS Department.
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