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ADH
ADH
ADH - ADvTECH Limited - Interim results for the six months ended 30 June
2011
ADvTECH Limited
(Incorporated in the Republic of South Africa)
(Registration number 1990/001119/06)
Share code: ADH ISIN: ZAE000031035
("Advtech" or "the Company")
Interim results for the six months ended 30 June 2011
Revenue up 7%
Operating profit up 10%
Headline earnings per share up 10%
Free operating cash flow per share up 20%
Distributions per share up 19%
Condensed consolidated statement of comprehensive income
for the six months ended 30 June 2011
Unaudited Unaudited Audited
6 months 6 months 12 months
to to to
Percentage 30 June 30 June 31 December
R`m Note increase 2011 2010 2010
Revenue 7% 791,0 740,2 1 470,1
Earnings before
Interest,
Taxation,
Depreciation
and
Amortisation
(EBITDA) 7% 143,3 133,9 269,3
Operating 10% 110,2 100,5 202,9
profit before
interest
Net interest 7,1 6,1 9,2
received
Interest 7,5 6,4 9,4
received
Finance costs (0,4) (0,3) (0,2)
Profit before 10% 117,3 106,6 212,1
taxation
Taxation (37,3) (33,6) (63,3)
Profit for the 10% 80,0 73,0 148,8
period
Earnings per
share
Basic (cents) 9% 20.0 18.3 37.2
Diluted (cents) 9% 19.9 18.2 37.2
Headline 2 80,1 72,9 148,6
earnings
Headline
earnings per
share
Basic (cents) 10% 20.0 18.2 37.2
Diluted (cents) 10% 20.0 18.2 37.1
Number of 400,8 400,8 400,8
shares in issue
(million)
Weighted
average number
of shares in
issue
(million) 400,8 399,7 400,8
Weighted
average number
of shares
for purposes of 400,8 399,7 399,9
basic earnings
per share
(million)
Weighted
average number
of shares
for purposes of 401,1 401,2 400,2
diluted
earnings per
share (million)
Net asset value 12% 176.0 157.1 169.1
per share
(cents)
Free operating
cash flow
before capex
per share 20% 70.3 58.7 54.1
(cents)
Distributions 19% 9.5 8.0 21.5
per share
(cents)
Condensed consolidated statement of financial position
as at 30 June 2011
Unaudited Unaudited Audited
30 June 30 June 31 December
R`m 2011 2010 2010
Assets
Non-current assets 902,9 848,0 852,6
Property, plant and equipment 701,0 646,7 682,3
Goodwill 95,9 97,6 95,9
Intangible assets 44,7 53,5 47,8
Deferred taxation assets 61,3 50,2 26,6
Current assets 322,9 250,9 132,0
Trade and other receivables 126,0 120,1 78,9
Other current assets 15,5 12,9 15,6
Cash and cash equivalents 181,4 117,9 37,5
Total assets 1 225,8 1 098,9 984,6
Equity and liabilities
Equity 705,5 629,6 677,8
Current liabilities 520,3 469,3 306,8
Trade and other payables 192,8 177,0 156,7
Taxation 28,3 19,8 26,8
Fees received in advance 299,2 272,5 123,3
Total equity and liabilities 1 225,8 1 098,9 984,6
Supplementary information
for the six months ended 30 June 2011
Unaudited Unaudited Audited
6 months to 6 months to 12 months to
30 June 30 June 31 December
R`m 2011 2010 2010
Capital expenditure - 49,0 40,0 105,2
current period
Capital commitments - 108,2 108,6 -
remainder of the year
Capital commitments - - - 94,3
future years
Operating lease 313,6 295,1 384,7
commitments in cash -
future years
Condensed consolidated statement of changes in equity
for the six months ended 30 June 2011
Unaudited Unaudited Audited
6 months to 6 months to 12 months to
30 June 30 June 31 December
R`m 2011 2010 2010
Balance at beginning of 677,8 610,6 610,6
the period
Total comprehensive 80,0 73,0 148,8
income for the period
Dividends paid to (10,0) - -
shareholders
Share-based payment 1,1 0,7 1,8
expense
Shares purchased by the - (2,1) (7,1)
Share Incentive Trust
Share awards granted (0,1) - 2,0
Broad-based scheme shares 0,4 1,0 1,8
granted
Share options exercised 0,2 - 5,2
Capital distributions to (43,9) (53,6) (85,3)
shareholders
Balance at end of the 705,5 629,6 677,8
period
Condensed consolidated segmental report
for the six months ended 30 June 2011
Unaudited Unaudited Audited
Percentage 6 months to 6 months to 12 months to
increase/ 30 June 30 June 31 December
R`m (decrease) 2011 2010 2010
Revenue 7% 791,0 740,2 1 470,1
Education 9% 689,8 635,2 1 264,3
Resourcing (4%) 102,0 105,9 208,2
Intra Group (0,8) (0,9) (2,4)
revenue
Operating 10% 110,2 100,5 202,9
profit before
interest
Education 14% 120,1 105,1 216,2
Resourcing (20%) 14,0 17,6 32,6
Central 7% (23,2) (21,7) (44,8)
administration
?Litigation (0,7) (0,5) (1,1)
Condensed consolidated statement of cash flows
for the six months ended 30 June 2011
Unaudited Unaudited Audited
Per- 6 months 6 months 12 months
centage to to to
in- 30 June 30 June 31 December
R`m Note crease 2011 2010 2010
Cash generated from 3 7% 147,3 137,2 276,1
operations
Movement in working 165,7 125,9 (4,3)
capital
Cash generated by 19% 313,0 263,1 271,8
operating activities
Net interest 7,1 6,1 9,2
received
Taxation paid (70,5) (78,9) (78,1)
Dividends paid (10,0) - -
Capital (44,7) (53,0) (84,2)
distributions paid
Net cash inflow from
operating
activities 194,9 137,3 118,7
Net cash outflow
from investing
activities (48,2) (65,2) (122,3)
Net cash
(outflow)/inflow
from
financing activities (2,8) 6,2 1,5
Net
increase/(decrease)
in cash and
cash equivalents 143,9 78,3 (2,1)
Cash and cash
equivalents at
beginning of
the period 37,5 39,6 39,6
Cash and cash
equivalents at end
of
the period 181,4 117,9 37,5
Free operating cash
flow before capex
per
share (cents)
Profit for the 80.0 73.0 148.8
period
Adjusted for non-
cash IFRS and lease
adjustments
(after taxation) 3,0 2,5 5,5
Net operating profit
after taxation -
adjusted for
non-cash IFRS and 83,0 75,5 154,3
lease adjustments
Depreciation and 33,1 33,4 66,4
amortisation
Other non-cash flow 0,1 (0,1) (0,2)
items (after
taxation)
Operating cash flow 7% 116,2 108,8 220,5
after taxation
Movement in working 165,7 125,9 (4,3)
capital
Free operating cash 20% 281,9 234,7 216,2
flow before capex
Weighted average
number of shares for
purposes
of basic earnings 400,8 399,7 399,9
per share (million)
Free operating cash
flow before capex
per share
(cents) 20% 70.3 58.7 54.1
Notes to the condensed consolidated financial statements
for the six months ended 30 June 2011
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. This report
has been prepared using accounting policies that comply with
IFRS and which are consistent with those applied in the
financial statements for the year ended 31 December 2010.
These interim results have not been audited.
Unaudited Unaudited Audited
6 months to 6 months to 12 months to
30 June 30 June 31 December
R`m 2011 2010 2010
2. Determination of
headline earnings
Profit for the period 80,0 73,0 148,8
Items excluded from 0,1 (0,1) (0,2)
headline earnings per
share
Loss/(profit) on sale 0,2 (0,1) (0,3)
of property, plant
and equipment
Taxation effects on (0,1) - 0,1
adjustments
Headline earnings 80,1 72,9 148,6
3. Note to the statement of cash flows
Reconciliation of profit before taxation to cash generated
from operations
Profit before 117,3 106,6 212,1
taxation
Adjust for non-cash 3,8 3,3 7,1
IFRS and lease
adjustments (before
taxation)
121,1 109,9 219,2
Adjust: 26,2 27,3 56,9
Depreciation and 33,1 33,4 66,4
amortisation
Net interest received (7,1) (6,1) (9,2)
Other non-cash flow 0,2 - (0,3)
items
Cash generated from 147,3 137,2 276,1
operations
Commentary
Overview
The directors are pleased to report strongly improved results for the six
months ended 30 June 2011. All key group indicators were positive. These
results reflect effective management action in a continuing difficult
economy, especially on the employment front, where job losses continue. The
Education division returned to solid growth while the Resourcing division
struggled under the impact of a difficult jobs market.
Organic growth of 9% in education revenue fuelled a 7% increase in Group
revenue to R791 million. Operating profit grew by 10% to R110 million and
operating margin improved slightly to 14% (2010: 13.5%), with a strong
improvement in education being partially offset by the decline in
resourcing.
Net interest earned has grown by 16% mainly as a result of the strong
improvement in cash flow. The effective taxation rate increased marginally
to 31.8% compared to the previous period`s 31.5% and the normal tax rate of
28%. This increase is mainly the result of STC of R1 million (2010: nil)
and a decline in the learnership allowance received. The high overall rate
is also the result of non-deductible expenses, mainly non-cash accounting
adjustments relating to lease adjustments, depreciation and amortisation.
Profit for the period increased by 10% to R80 million and both basic and
diluted headline earnings per share increased by 10% to 20.0 cents.
Improved earnings and cash flow, together with the very strong financial
position, have enabled the directors to declare an increased distribution
by way of a dividend of 9.5 cents per share.
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
21 registered Higher Education campuses as well as 32 school sites. The
education brands include Abbotts College, CrawfordSchoolsTrade Mark,
College Campus, The Design School Southern Africa, Forbes Lever Baker,
Imfundo (incorporating Corporate College International), Junior Colleges,
Rosebank College, Trinityhouse, Varsity College and Vega (incorporating The
National College of Photography).
The Division increased revenue by 9% (2010: 9%) and contributed 87% (2010:
86%) to Group revenue. This represents a satisfactory mix of fee and
student growth in the Group`s core education offering. There has been
little progress in the tender arena as a result of the disruption in
functioning of the SETA system. Operating profit increased by 14% to R120
million and operating margin improved as a result of improved capacity
utilisation. This has enabled the Division to absorb increased operating
costs associated with bringing the new IT system into use.
Resourcing
The Resourcing division`s activities include permanent and temporary
staffing solutions as well as recruitment advertising, e-recruitment and
advertising response handling. The portfolio of brands includes Brent
Personnel, Cassel & Company, Communicate Personnel, Insource.ICT, IT Edge,
Network Recruitment, Tech-Pro Personnel, Inkokheli HR Appointments, Vertex-
Kapele and The Working Earth.
Early signs of market improvement in the second half of last year have not
been sustained in the current year and revenue declined in the period. This
led to a drop in margins and a decline in operating profit to R14 million.
The operational structure of the Division lends itself to rapid adjustment
and the necessary steps are being taken to rebalance operations. The
Division contributed 13% (2010: 14%) to Group revenue with revenue
declining by 4% to R102 million.
Central administration and litigation
Central administration costs increased in line with inflation by 7% to R23
million (2010: R22 million). Legal proceedings against Marina and Andry
Welihockyj remain in progress with the discovery and trial preparation
phases well under way. Increased activity in this regard is expected to
result in a modest increase in the level of litigation expenditure. The
efforts of the Welihockyj parties to delay the matter coming to trial have
resulted in the matter being placed under the case management supervision
of a judge. The Group`s legal counsel remain satisfied with the merits of
the claims in this matter and that, save for legal costs, the Group has no
further exposure.
Financial
Free operating cash flow of R282 million has increased by 20% from last
year`s R235 million, reflecting both effective financial controls and a
small increase in the proportion of upfront fee payments received. The
balance sheet also strengthened with net asset value increasing by 12% to
R706 million and cash on hand increasing by 54% to R181 million. It is also
pleasing to note that debtors have increased by less than 5% compared to
revenue growth of 7%. Fees in advance have increased by 10% to R299
million. This increase, which is greater than the rate of increase in
revenue itself, can be considered a positive indicator in regard to cash
flows and, to some extent, revenues.
Cash generated by operating activities of R313 million has enabled the
Group to fund investments of R48 million, taxation payments of R71 million
and distributions of R55 million from its own resources.
Dividend
The Board has resolved to declare an interim dividend of 9.5 cents (2010:
capital distribution of 8.0 cents) per share for the period ended 30 June
2011.
Set out in the table below are the salient dates and times applicable to
the dividend:
2011
Last day to trade in order to participate in Friday, 9 September
the dividend
Trading commences ex dividend Monday, 12 September
Record date Friday, 16 September
Payment date Monday, 19 September
Share certificates may not be dematerialised or rematerialised between
Monday, 12 September 2011 and Friday, 16 September 2011, both days
inclusive.
Directorate
Mr CH Boulle has been appointed as an alternate director to Mr HR Levin
effective 1 September 2011.
Company secretary
Mrs SK Saunders has been appointed as the company secretary effective 1
July 2011.
Prospects
The return to growth in the Group`s education business, including
particularly organic growth in its core operations, has justified the
Board`s faith in ADvTECH`s well-proven business model. The Group has
therefore sustained its programme of long-term investment planning with a
22% increase in capital expenditure in this period and capital commitments
for the remainder of the year of over R100 million. These include the
building of the new Trinityhouse school in Little Falls which will be open
for the first intake of students in January 2012. The strength of the
Group`s cash flow and balance sheet together with a satisfactory increase
in student enrolments underpin this confidence in the future of the
business, particularly its core Education division.
Steps are being taken to rebalance the Resourcing division to ensure that
capability and capacity are correctly aligned to the needs of the market.
The Board is confident that the combination of the Group`s sound strategic
position and the steps outlined above will drive performance for the
remainder of the year.
On behalf of the Board
Leslie Maasdorp Frank Thompson
Chairman Chief Executive Officer
22 August 2011
Directors: LW Maasdorp* (Chairman), FR Thompson (CEO), JDR Oesch
(Financial), DK Ferreira*, BM Gourley*, JD Jansen*, HR Levin*,
JC Livingstone* *Non-Executive
Group Company Secretary: SK Saunders
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: 22/08/2011 09:00:01 Produced by the JSE SENS Department.
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