| Mon 28 Mar 2011, 9:00 | | ADH - Advtech Limited - Condensed consolidated statement of comprehensive income |
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ADH
ADH
ADH - Advtech Limited - Condensed consolidated statement of comprehensive income
for the year ended 31 December 2010
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 2010
ADVTECH GROUP
Revenue up 7%
Headline earnings per share down 7%
Net asset value per share up 11%
Distributions per share 21.5 cents
Condensed consolidated statement of comprehensive income for the year ended 31
December 2010
Percentage Audited Audited
increase/ 31 Dec 31 Dec
R`m Note (decrease) 2010 2009
Revenue 7% 1 470,1 1 376,0
Earnings before Interest, (3%) 269,3 277,7
Taxation, Depreciation and
Amortisation (EBITDA)
Operating profit before (7%) 202,9 218,9
interest
Net interest received 9,2 10,9
Interest received 9,4 11,0
Finance costs (0,2) (0,1)
Profit before taxation (8%) 212,1 229,8
Taxation (63,3) (69,6)
Profit for the year (7%) 148,8 160,2
Earnings per share
Basic (cents) (7%) 37.2 40.1
Diluted (cents) (7%) 37.2 40.1
Headline earnings 2 148,6 160,3
Headline earnings per share
Basic (cents) (7%) 37.2 40.1
Diluted (cents) (7%) 37.1 40.1
Number of shares in issue 400,8 400,8
(million)
Weighted average number of 400,8 401,0
shares in issue (million)
Weighted average number of 400,2 399,7
shares for purposes of
diluted earnings per share
(million)
Weighted average number of 399,9 399,4
shares for purposes of basic
earnings per share (million)
Net asset value per share 11% 169.1 152.3
(cents)
Free operating cash flow
before capex per share
(cents) (15%) 54.1 63.8
Distributions per share 2% 21.5 21.0
(cents)
Condensed consolidated statement of financial position
as at 31 December 2010
Audited Audited
31 Dec 31 Dec
R`m 2010 2009
Assets
Non-current assets 852,6 787,9
Property, plant and equipment 682,3 636,5
Goodwill 95,9 80,9
Intangible assets 47,8 49,8
Deferred taxation assets 26,6 20,7
Current assets 132,0 140,8
Trade and other receivables 78,9 84,9
Other current assets 15,6 16,3
Cash and cash equivalents 37,5 39,6
Total assets 984,6 928,7
Equity and liabilities
Equity 677,8 610,6
Current liabilities 306,8 318,1
Trade and other payables 156,7 181,8
Taxation 26,8 35,7
Fees received in advance 123,3 100,6
Total equity and liabilities 984,6 928,7
Supplementary information
for the year ended 31 December 2010
Audited Audited
31 Dec 31 Dec
R`m 2010 2009
Capital expenditure - current year 105,2 128,6
Capital commitments - future years 94,3 122,6
Operating lease commitments in cash - future 384,7 356,3
years
Condensed consolidated statement of changes in equity
for the year ended 31 December 2010
Audited Audited
31 Dec 31 Dec
R`m 2010 2009
Balance at beginning of the year 610,6 508,8
Total comprehensive income for the year 148,8 159,4
Profit for the year 148,8 160,2
Other comprehensive expenses - (0,8)
Share-based payment expense 1,8 1,7
Shares issued for business acquisition - 35,6
Share buy-back - (7,6)
Shares purchased by the Share Incentive Trust (7,1) (12,5)
Share awards granted 2,0 2,1
Broad-based scheme shares granted 1,8 0,5
Share options exercised 5,2 3,0
Capital distributions to shareholders (85,3) (80,4)
Balance at end of the year 677,8 610,6
Condensed consolidated segmental report
for the year ended 31 December 2010
Percentage Audited Audited
increase/ 31 Dec 31 Dec
R`m (decrease) 2010 2009
Revenue 7% 1 470,1 1 376,0
Education 8% 1 264,3 1 170,0
Resourcing 0% 208,2 208,3
Intra Group revenue (2,4) (2,3)
Operating profit before interest (7%) 202,9 218,9
Education (7%) 216,2 231,4
Resourcing 13% 32,6 28,8
Central administration 9% (44,8) (41,2)
Litigation (1,1) (0,1)
Condensed consolidated statement of cash flows
for the year ended 31 December 2010
Audited Audited
Percentage 31 Dec 31 Dec
R`m Note decrease 2010 2009
Cash generated from operations 3 (3%) 276,1 283,7
Movement in working capital (4,3) 30,6
Cash generated by operating (14%) 271,8 314,3
activities
Net interest received 9,2 10,9
Taxation paid (78,1) (75,4)
Capital distributions paid (84,2) (80,2)
Net cash inflow from operating 118,7 169,6
activities
Net cash outflow from (122,3) (155,3)
investing activities
Net cash inflow/(outflow) from 1,5 (18,5)
financing activities
Net decrease in cash and cash (2,1) (4,2)
equivalents
Cash and cash equivalents at 39,6 43,8
beginning of the year
Cash and cash equivalents at 37,5 39,6
end of the year
Free operating cash flow
before capex per share (cents)
Profit for the year 148,8 160,2
Adjusted for non-cash IFRS and 5,5 5,0
lease adjustments (after
taxation)
Net operating profit after
taxation - adjusted for non-
cash IFRS and lease
adjustments 154,3 165,2
Depreciation and amortisation 66,4 58,8
Other non-cash flow items (0,2) 0,1
(after taxation)
Operating cash flow after (2%) 220,5 224,1
taxation
Movement in working capital (4,3) 30,6
Free operating cash flow (15%) 216,2 254,7
before capex
Weighted average number of 399,9 399,4
shares in issue for purposes
of basic earnings per share
(million)
Free operating cash flow (15%) 54.1 63.8
before capex per share (cents)
Notes to the condensed consolidated financial statements
for the year ended 31 December 2010
1. Statement of compliance
The condensed financial information has been prepared in accordance with the
framework concepts and the measurement and recognition requirements of
International Financial Reporting Standards (IFRS), the AC 500 standards as
issued by the Accounting Practices Board and the information as required by IAS
34: Interim Financial Reporting. The report has been prepared using accounting
policies that comply with IFRS which are consistent with those applied in the
financial statements for the year ended 31 December 2009.
Independent auditors` opinion
The auditors, Deloitte & Touche, have issued their opinion on the Group`s
financial statements for the year ended 31 December 2010. The audit was
conducted in accordance with International Standards on Auditing. They have
issued an unmodified audit opinion. These condensed financial statements have
been derived from the Group financial statements and are consistent in all
material respects with the Group financial statements. A copy of their audit
report is available for inspection at the Company`s registered office.
Any reference to future financial performance included in this announcement, has
not been reviewed or reported on by the Company`s auditors.
Audited Audited
31 Dec 31 Dec
R`m 2010 2009
2. Determination of headline earnings
Profit for the year 148,8 160,2
Items excluded from headline earnings per share (0,2) 0,1
(Profit)/loss on sale of property, plant and
equipment (0,3) 0,2
Taxation effects on adjustments 0,1 (0,1)
Headline earnings 148,6 160,3
3. Note to the statement of cash flows
Reconciliation of profit before taxation to
cash generated from operations
Profit before taxation 212,1 229,8
Adjust for non-cash IFRS and lease adjustments 7,1 5,8
(before taxation)
219,2 235,6
Adjust: 56,9 48,1
Depreciation and amortisation 66,4 58,8
Net interest received (9,2) (10,9)
Other non-cash flow items (0,3) 0,2
Cash generated from operations 276,1 283,7
4. Business combination
The Design School Southern Africa was acquired
on 1 January 2010 for a consideration amounting
to R19,5 million.
Fair value of assets acquired
Intangible assets 4,4
Goodwill 15,0
Property, plant and equipment 0,9
Current assets 0,7
Current liabilities (1,5)
Purchase price 19,5
There have been no material subsequent events since year end.
Commentary
Overview
ADvTECH achieved satisfactory financial results for the year ended December
2010, maintaining a sound return on funds employed and excellent cash conversion
of earnings. These results confirm the resilience of the Education division
which experienced growth in demand, albeit at a reduced rate due to the economic
conditions, and to a lesser extent the lack of progress in the awarding of
contracts by the Department of Higher Education and Training. The Resourcing
division made an encouraging return to profit growth for the full year as well
as returning to revenue growth in the second half. The further improvement in
the Group`s outstanding academic results at both schools and tertiary level
underlines the continuing emphasis on quality education in its operations.
Our 1 213 Matric candidates achieved a 100% pass rate, all of whom qualified for
entrance into higher education institutions. Collectively they achieved 2 729
subject distinctions and even more pleasing were the excellent results achieved
across the entire cohort in key subjects such as Mathematics, Physical Science
and English.
At post-schooling level, 2 931 students (2009: 2 468) graduated with
qualifications at certificate, diploma, degree or honours level at the 15
graduation ceremonies held by the IIE. The Group`s overall pass rate in the
Unisa exams improved to 75% (2009: 72%), significantly ahead of national
averages. Forbes Lever Baker and Varsity College students again achieved
excellent results in the Certificate in the Theory of Accounting (CTA) at Unisa,
occupying eight of the top 15 places nationally.
The Resourcing division provided a valuable component of the Group`s profits
notwithstanding the difficulties experienced by much of the employment services
industry. This was a result of the division`s focus on key niche markets in the
permanent employment category and the strength of its operating model. In 2010,
4 100 (2009: 3 900) candidates were placed in new career positions.
More information about the overall achievements and individual highlights of
students, candidates, clients and staff across the programmes, campuses and
branches of the Group is included in the ADvTECH Annual report.
Financial
The directors reported a 7% increase in revenue to R1,5 billion. Earnings before
interest, taxation, depreciation and amortisation declined by 3% to R269 million
and an increase in depreciation led to a 7% decrease in operating profit to R203
million. Headline earnings declined by 7%, in line with the trend established at
mid-year, to 37.2 cents (2009: 40.1 cents).
As reported at mid-year, these results reflect the increased costs of operation,
primarily occupancy costs and depreciation, flowing from the Group`s long-term
investment strategy. In this period these were not fully matched by revenue
growth for reasons mentioned above. Other operating costs were well contained
with per capita staffing costs increasing by 7% and other operating costs by
less than this. Central administration costs increased by 9% (2009: 9%). This
above inflation increase arose from costs associated with the roll-out of the
Group`s new IT system. This has proceeded well and the system is expected to be
fully operational during 2011, providing benefits in the form of operational
improvements, near real-time information and improved scalability for future
growth. The Group`s operating margin decreased from 16% to 14% although the
Resourcing margin increased by 2% to 16%.
Although operating profit in the Education division declined by 7% to R216
million for reasons noted above, revenue increased by 8% to R1,3 billion.
Operating margin declined to a still satisfactory 17% (2009: 20%). The
Resourcing division maintained revenue of R208 million for the year. The
benefits of the Division`s stringent cost controls were realised in the form of
a 13% increase in operating profit to R33 million.
Free operating cash flow before capex per share decreased by 15% to 54.1 cents
per share. This is a direct result of the significant decrease in the Group`s
capital creditors which in turn arises from the delaying of certain capital
expenditure projects in order to match better the capacity requirements of a
lower rate of revenue growth in the short-term. In a difficult economic climate,
management of debtors remained sound and net debtors declined by 7%
notwithstanding revenue growth of 7%. The cash conversion of earnings, as
reflected by the free operating cash flow before capex per share, amounted to
145% of earnings (2009: 159%).
This strong cash flow enabled the Group to earn almost as much in interest as
last year, despite the very significant drop in interest rates, and fund from
its own resources capital expenditure of R105 million (2009: R129 million),
acquisitions of R20 million (2009: R57 million), company taxation of R78 million
(2009: R75 million) and capital distributions of R84 million (2009: R80
million). Net asset value per share increased by 11% and the Group remains in a
strong financial position with an ungeared balance sheet. A 23% increase in fees
received in advance can be interpreted as a positive signal in regard to cash
flow for 2011.
Investment
In 2010 the Group continued with its consistent and strategic investment in new
capacity, predominately within the Education division. This was tempered by the
recognition of the short-term cost effects of such investments on earnings and
cash flow which need to be taken into account in planning operations. As a
result, capital expenditure in the year slowed to R105 million (2009: R129
million). R20 million was spent on the already reported acquisition of The
Design School Southern Africa.
Capital commitments at the end of the year amounted to R94 million (2009: R123
million) and operating lease commitments, being primarily for the provision of
leasehold educational premises, were R385 million (2009: R356 million). These
commitments include the opening of a new Trinityhouse school in the West Rand
which is the first tangible result of our commitment to building this brand.
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, CrawfordSchoolsTrade Mark, The Design School Southern Africa,
Forbes Lever Baker, Imfundo, Junior Colleges, Rosebank College, The National
College of Photography, Trinityhouse, Varsity College and Vega. 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
2010, these activities addressed the needs of 32 500 full-time students (2009:
32 200) at the 59 (2009: 57) 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 50 (2009: 41) education programmes between NQF levels 5 and 7, offered
across 21 (2009: 19) campuses 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, 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
Engineering, Finance and Information Technology, while also developing the
smaller sectors of Freight and Logistics, Human Resources and Supply Chain
Management.
Transformation
ADvTECH`s role in education, training and staffing makes a significant
contribution to the transformation of South African society. More than two
thirds of the student body 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 Socially Responsible Investment Index, of which
ADvTECH has been a constituent for the past five years.
Over the last three years, the Group has progressed its BEE rating from level 7
to a level 5 contributor.
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 and Dividend
The Board is pleased to announce final distributions to shareholders, to be paid
out of share premium, of 11.0 cents (2009: 13.5 cents) per share, and a dividend
of 2.5 cents per share. This would bring the total distributions and dividend
for the year to 21.5 cents (2009: 21.0 cents) per share. The authority to make
this payment to shareholders was obtained at the Annual General Meeting held on
18 May 2010, and the dividend is in terms of the Company`s articles of
association.
Set out in the table below are the salient dates and times applicable to these
distributions:
2011
Declaration date Monday, 28 March
Last date to trade in order to
participate in the distribution Thursday, 14 April
Trading commences ex-distribution Friday, 15 April
Record date Thursday, 21 April
Payment date Tuesday, 26 April
Directorate
At the meeting on 25 March 2011 Mr Fani Titi announced his resignation from the
Board. Mr Titi was appointed in 2006 and has provided much valuable insight to
the Board.
Company secretary
The company secretary, Stephen O` Connor, has resigned effective 31 March 2011.
Prospects
The South African economy is expected to continue to recover from the effects of
the recession, although doubt remains about the ability of the economy to create
enough new jobs. Education remains a key requirement for securing suitable
employment in a modern economy and the Group`s unrelenting focus on academic
quality and performance will stand it in good stead. The Resourcing division
appears to have made solid gains in market position and expects to continue to
develop its leadership in the niche markets for high demand scarce skills which
it serves.
It is already evident that a positive response to the Group`s commitment to
quality is taking place in the form of growing demand for places at our campuses
and an increase in the job specifications received. Accordingly, the directors
remain committed to the long-term sustainable development strategy of the Group
and continue to plan further investments for growth.
On behalf of the Board
Leslie Maasdorp Frank Thompson
Chairman Chief Executive Officer
28 March 2011
Directors: LW Maasdorp* (Chairman), FR Thompson (CEO), JDR Oesch (Financial), 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.
www.advtech.co.za
Date: 28/03/2011 09:00:02 Produced by the JSE SENS Department.
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