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ADR
ADR
ADR - Adcorp Holdings Limited - Unaudited group results for the six months ended
31 August 2011
Adcorp Holdings Limited
("Adcorp" or "Adcorp Group" or "the Group")
Registration number 1974/001804/06
Share code: ADR
ISIN number: ZAE000000139
Unaudited Group Results for the six months ended 31 August 2011
Revenue up 10%
Normalised EBITDA for the period up 6%
Normalised earnings per share up by 5%
Headline earnings per share up by 18%
Cash conversion ratio 152%
Debtors days at 34 days
Financial gearing down to 9%
Interim dividend declared of 57 cents per share
Abridged statement of comprehensive income
for the six months ended 31 August 2011
Unaudited Unaudited Audited
six months six months 12 months
August August February
2011 2010 2011
R`000 R`000 R`000
Revenue 2 846 026 2 581 466 5 384 566
Cost of sales (2 290 948) (2 046 590) (4 264 774)
Gross profit 555 078 534 876 1 119 792
Other income 29 602 24 840 51 967
Administrative expenses (178 409) (171 874) (378 852)
Marketing and selling expenses (243 306) (233 317) (477 445)
Other operating expenses (69 716) (78 423) (157 791)
Operating profit 93 249 76 102 157 671
Interest received 1 947 735 3 182
Interest paid (18 801) (15 414) (31 855)
Impairment of investments in - - (1 796)
associates and goodwill
Profit/(loss) on sale of property 100 236 (194)
and equipment
Profit before taxation 76 495 61 659 127 008
Taxation (7 411) (5 626) (11 313)
Profit for the period/year 69 084 56 033 115 695
Other comprehensive income
Exchange differences on (699) 2 123 (877)
translating foreign operations
Other comprehensive (loss)/income (699) 2 123 (877)
for the period/year, net of tax
Total comprehensive income for 68 385 58 156 114 818
the period/year
Profit attributable to:
Owners of the parent 69 084 56 033 115 695
Total comprehensive income
attributable to:
Owners of the parent 68 385 58 156 114 818
Earnings per share
Basic (cents) 112,4 95,2 192,5
Diluted (cents) 110,3 92,5 188,1
Approved dividends to
shareholders
Interim dividend (cents) 57 54 54
Final dividend (cents) in respect 121 115 115
of prior year
Calculation of headline earnings
Profit for the period/year 69 084 56 033 115 695
(Loss)/profit on sale of (72) (170) 140
property, plant and equipment
Impairment of investments in - - 1 796
associates and goodwill
Headline earnings 69 012 55 863 117 631
Headline earnings per share
Headline earnings per share - 112,3 94,9 195,7
cents
Diluted headline earnings per 110,2 92,2 191,2
share - cents
Weighted average number of shares 61 456 58 864 60 110
- 000`s
Diluted weighted average number 62 621 60 566 61 520
of shares - 000`s
Abridged statement of cash flows
for the six months ended 31 August 2011
Unaudited Unaudited Audited
six months six months 12 months
August August February
2011 2010 2011
R`000 R`000 R`000
Operating activities
Cash generated by operations before
working capital changes 139 758 131 400 259 503
Decrease in working capital 46 579 93 801 28 351
Cash generated by operations 186 337 225 201 287 854
Net interest paid (16 854) (14 679) (28 673)
Taxation paid (24 927) (7 927) (32 632)
Free cash generated by operations 144 556 202 595 226 549
Net dividend paid (74 683) (9 123) (42 216)
Cash inflows from operating activities
69 873 193 472 184 333
Investing and financing activities
Cash outflows from investing
activities (45 716) (12 132) (23 565)
Cash inflows/(outflows) from financing
activities 76 901 (7 369) (15 220)
Net increase in cash and cash
equivalents 101 058 173 971 145 548
Net cash and cash equivalents at the
beginning of the period/year 95 302 (50 246) (50 246)
Net cash and cash equivalents at the
end of the period/year 196 360 123 725 95 302
Free cash generated by operations per
share - cents 235,2 344,2 376,9
Abridged statement of financial position
as at 31 August 2011
Unaudited Unaudited Audited
six months six months 12 months
August August February
2011 2010 2011
R`000 R`000 R`000
Assets
Non-current assets 815 516 776 741 791 091
Property and equipment 47 258 49 511 43 921
Goodwill 575 716 556 170 554 398
Intangible assets 133 926 155 118 143 019
Derivative financial instruments and
other financial assets - 780 -
Investment in associates 2 625 - -
Deferred taxation 55 991 15 162 49 753
Current assets 1 197 554 1 023 947 1 135 582
Trade and other receivables and
prepayments 784 273 680 381 740 207
Assets classified as held-for-sale - 845 -
Taxation prepaid 16 239 28 551 14 153
Cash resources 397 042 314 170 381 222
Total assets 2 013 070 1 800 688 1 926 673
Equity and liabilities
Equity attributable to owners of the
parent 1 024 343 974 243 1 013 311
Share capital 1 563 1 546 1 546
Share premium 498 692 498 696 498 696
Treasury shares (12 891) (13 293) (13 227)
Retained earnings 363 853 329 625 362 200
Share based payment reserve 177 200 156 249 165 676
Fair value on financial instruments (1 795) - -
Foreign currency translation reserve (2 700) 999 (2 001)
BEE shareholders` interest 421 421 421
Non-current liabilities 275 094 197 016 215 097
Other non-current liabilities -
interest bearing 4 150 5 462 4 462
Long-term loan - interest bearing 135 000 48 988 60 000
Redeemable preference shares -
interest bearing 116 000 130 000 130 000
Derivative financial instruments and
other financial liabilities 1 795 - -
Obligation under finance lease 280 1 773 249
Deferred tax 17 869 10 793 20 386
Current liabilities 713 633 629 429 698 265
Non-interest-bearing current
liabilities 475 249 399 729 389 085
Trade and other payables 354 605 276 985 275 731
Provisions 114 538 102 554 102 835
Shareholders for dividends - 424 -
Taxation 6 106 19 766 10 519
Interest-bearing current liabilities 238 384 229 700 309 180
Current portion of other non-current
liabilities 4 406 6 040 6 061
Current portion of long-term loan 24 167 30 916 15 000
Current portion of redeemable
preference shares 9 129 2 299 2 199
Bank overdraft 200 682 190 445 285 920
Total equity and liabilities 2 013 070 1 800 688 1 926 673
Number of ordinary shares in issue
(000`s) 62 519 61 821 61 850
Net asset value per share (cents) 1 638 1 576 1 638
Total interest-bearing liabilities of the group
as at 31 August 2011
Unaudited Unaudited Audited
six months six months 12 months
August August February
2011 2010 2011
R`000 R`000 R`000
Net (bank balances)/overdraft (196 360) (123 725) (95 302)
Other long-term loan 4 150 5 462 4 462
Long-term loan 135 000 48 988 60 000
Redeemable preference share 116 000 130 000 130 000
Obligations under finance lease 280 1 773 249
Current portion of other non-current
liabilities 4 406 6 040 6 061
Current portion of long-term loan 24 167 30 916 15 000
Current portion of redeemable
preference shares 9 129 2 299 2 199
Total interest-bearing liabilities 96 772 101 753 122 669
Abridged statement of changes in equity
for the six months ended 31 August 2011
Share Share Treasury Foreign
capital premium shares currency
R`000 R`000 R`000 translation
reserve
R`000
Balance as at 1 March 2010 1 483 497 (13 293) (1 124)
968
Issue of ordinary shares under
employee share option plan 3 788 - -
Capitalisation of share premium - (65 - -
172)
Ordinary shares issued pursuant
to scrip distribution 60 65 112 - -
Treasury shares sold - - 66 -
Recognition of BBBEE and staff
share-based payments - - - -
Share options exercised during
the year - - - -
Dividend distributions - - - -
Profit for the year - - - -
Other comprehensive income for
the year - - - (877)
Balance as at 28 February 2011 1 546 498 696 (13 227) (2 001)
Issue of ordinary shares under
employee share option plan 17 (4) - -
Treasury shares sold - - 336 -
Recognition of BBBEE and staff
share-based payments - - - -
Share options exercised during
the period - - - -
Fair value adjustment on
financial instrument - - - -
Dividend distributions - - - -
Profit for the period - - - -
Other comprehensive income for
the period - - - (699)
Balance as at 31 August 2011 1 563 498 692 (12 891) (2 700)
Share Fair value Retained
based on earnings
payment financial R`000
reserve instruments
R`000 R`000
Balance as at 1 March 2010 141 492 - 280 996
Issue of ordinary shares under
employee share option plan - - -
Capitalisation of share premium - - -
Ordinary shares issued pursuant to
scrip distribution - - -
Treasury shares sold - - 9
Recognition of BBBEE and staff share-
based payments 31 900 - -
Share options exercised during the (7 716) - 7 716
year
Dividend distributions - - (42 216)
Profit for the year - - 115 695
Other comprehensive income for the - - -
year
Balance as at 28 February 2011 165 676 - 362 200
Issue of ordinary shares under - - -
employee share option plan
Treasury shares sold - - -
Recognition of BBBEE and staff share-
based payments 18 776 - -
Share options exercised during the
period (7 252) - 7 252
Fair value adjustment on financial
instrument - (1 795) -
Dividend distributions - - (74 683)
Profit for the period - - 69 084
Other comprehensive income for the
period - - -
Balance as at 31 August 2011 177 200 (1 795) 363 853
Attributable BEE Total
to equity shareholders` R`000
holders of interest
the parent R`000
R`000
Balance as at 1 March 2010 907 522 421 907 943
Issue of ordinary shares under
employee share option plan 791 - 791
Capitalisation of share premium (65 172) - (65
172)
Ordinary shares issued pursuant to
scrip distribution 65 172 - 65 172
Treasury shares sold 75 - 75
Recognition of BBBEE and staff
share-based payments 31 900 - 31 900
Share options exercised during the
year - - -
Dividend distributions (42 216) - (42
216)
Profit for the year 115 695 - 115 695
Other comprehensive income for the
year (877) - (877)
Balance as at 28 February 2011 1 012 890 421 1 013
311
Issue of ordinary shares under
employee share option plan 13 - 13
Treasury shares sold 336 - 336
Recognition of BBBEE and staff
share-based payments 18 776 - 18 776
Share options exercised during the
period - - -
Fair value adjustment on financial
instrument (1 795) - (1 795)
Dividend distributions (74 683) - (74
683)
Profit for the period 69 084 - 69 084
Other comprehensive income for the
period (699) - (699)
Balance as at 31 August 2011 1 023 922 421 1 024
343
Abridged segment report
for the six months ended 31 August 2011
Revenue Internal revenue
Aug Aug Feb Aug Aug Feb
2011 2010 2011 2011 2010 2011
R`000 R`000 R`000 R`000 R`000 R`000
Central costs
Central costs - - - - - -
Group recoveries 81 066 7 942 22 366 - - -
Staffing
Blue collar 2 108 1 782 3 861 15 4 433 14
448 838 945 897 812
White collar 559 707 1 329 90 5 826 31
004 579 000 187 526
BPO, Training and
Financial Services
BPO 94 655 81 997 168 702 19 18 38
016 661 833
Emerging businesses 2 852 1 110 2 553 - - -
TOTAL 2 846 2 581 5 384 125 28 85
026 466 566 100 920 171
Operating profit EBITDA excluding share
based payments and
lease smoothing
Aug Aug Feb Aug Aug Feb
2011 2010 2011 2011 2010 2011
R`000 R`000 R`000 R`000 R`000 R`000
Central costs
Central costs (25 (21 (48 (17 (15 (36
268) 941) 873) 578) 624) 111)
Group recoveries 2 496 392 57 3 871 1 724 2 736
Staffing
Blue collar 77 674 60 572 141 444 94 254 83 181
776 370
White collar 19 941 14 527 26 125 28 229 26 46
487 590
BPO, Training and
Financial Services
BPO 24 739 25 159 43 941 36 945 37 68
509 959
Emerging businesses (6 (2 (5 024) (5 (2 (4
334) 607) 963) 604) 951)
TOTAL 93 249 76 102 157 671 139 131 258
758 268 593
EBITDA margin EBITDA excluding
excluding share share based payments
based payments and and lease smoothing
lease smoothing Contribution % to
Group profit
Aug Aug Feb Aug Aug Feb
2011 2010 2011 2011 2010 2011
% % % % % %
Central costs
Central costs - - - (12,6) (11,9) (14,
0)
Group recoveries - - - 2,9 1,3 1,1
Staffing
Blue collar 4,5 4,7 4,7 67,4 63,8 70,1
White collar 5,0 3,7 3,5 20,2 20,2 18,0
BPO, Training and Financial
Services
BPO 39,0 45,7 40,9 26,4 28,6 26,7
Emerging businesses - - - (4,3) (2,0) (1,9
)
TOTAL 4,9 5,1 4,8 100,0 100,0 100,
0
Net asset values Asset carrying value
Aug Aug Feb Aug Aug Feb
2011 2010 2011 2011 2010 2011
R`000 R`000 R`000 R`000 R`000 R`000
Central costs
Central costs (357 (165 (204 5 849 7 232 65 285
397) 558) 079)
Group recoveries 11 712 7 419 (3 461) 37 946 24 855 30 708
Staffing
Blue collar 1 060 946 1 024 1 384 1 161 1 218
631 180 241 756 294 479
White collar 80 859 83 86 682 321 558 342 333 281
067 388
BPO, Training and
Financial Services
BPO 224 876 102 104 814 257 361 263 272 983
726 982
Emerging businesses 3 662 409 5 114 5 600 937 5 937
TOTAL 1 024 974 1 013 2 013 1 800 1 926
343 243 311 070 688 673
Liability carrying Depreciation and
value amortisation of
intangibles
Aug Aug Feb Aug Aug Feb
2011 2010 2011 2011 2010 2011
R`000 R`000 R`000 R`000 R`000 R`000
Central costs
Central costs 363 172 269 559 551 1 097
245 790 364
Group recoveries 26 17 34 169 - - -
234 436
Staffing
Blue collar 324 215 194 7 138 13 21 027
125 114 238 918
White collar 240 259 246 11 425 13 24 560
699 321 599 144
BPO, Training and
Financial Services
BPO 32 161 168 9 982 10 21 518
485 256 169 693
Emerging businesses 1 939 528 823 20 3 20
TOTAL 988 826 913 29 124 38 68 222
727 445 362 309
Interest income Interest expense
Aug Aug Feb Aug Aug Feb
2011 2010 2011 2011 2010 2011
R`000 R`000 R`000 R`000 R`000 R`000
Central costs
Central costs (5 (7 (13 4 672 12 269 21 719
819) 965) 686)
Group recoveries 317 217 806 (68) - (6)
Staffing
Blue collar 2 3 6 669 (17 (21 (41
324 818 332) 179) 228)
White collar 2 1 4 427 (501) (1 (1
472 979 185) 771)
BPO, Training and
Financial Services
BPO 2 2 4 966 (5 (5 (10
650 686 097) 262) 150)
Emerging businesses 2 - - (474) (56) (419)
TOTAL 1 735 3 182 (18 (15 (31
947 801) 414) 855)
Taxation expense/(income)
Aug Aug Feb
2011 2010 2011
R`000 R`000 R`000
Central costs
Central costs 7 098 1 127 6 185
Group recoveries 2 718 337 5 650
Staffing
Blue collar 3 386 (15 3 180
315)
White collar (6 19 788 (2
067) 891)
BPO, Training and Financial Services
BPO 2 084 (311) 699
Emerging businesses (1 - (1
807) 510)
TOTAL 7 411 5 626 11 313
Normalised earnings
for the six months ended 31 August 2011
Normalised earnings exclude the amortisation of intangibles arising on business
combinations as well as share based payments and lease smoothing adjustments.
The table below sets out the normalised earnings for the period ended 31 August
2011, the prior period comparative as well as the prior year comparative.
Six months Six months Year
to to to
31 August 31 August 28 February %
R`000 2011 2010 2011 change
Revenue 2 846 026 2 581 466 5 384 566 10%
Cost of Sales (2 290 948) (2 046 590) (4 264 774) 12%
Gross Profit 555 078 534 876 1 119 792 4%
Other income 29 602 24 840 51 967 19%
Administrative,
marketing, selling and
operating expenses (491 431) (483 614) (1 014 088) 2%
Operating profit 93 249 76 102 157 671 23%
Adjusted for:
Depreciation 11 227 13 039 24 079 (14%)
Amortisation of
intangible assets 17 897 25 270 44 143 (29%)
Share-based payments 18 776 16 476 31 900 14%
Lease smoothing (1 391) 381 800
Normalised EBITDA
(excluding share based
payments and lease
smoothing) 139 758 131 268 258 593 6%
Adjusted for:
Depreciation (11 227) (13 039) (24 079) (14%)
Amortisation of
intangibles other than
those acquired in a (5 548) (5 228) (10 459) 6%
business combination
Normalised operating 122 983 113 001 224 055 9%
profit
Net interest paid (16 854) (14 679) (28 673) 15%
Normalised profit before
taxation 106 129 98 322 195 382 8%
Taxation (10 480) (11 345) (20 968) (8%)
Normalised profit for the
period/year 95 649 86 977 174 414 10%
Normalised effective tax
rate 10% 12% 11%
Normalised earnings per
share - cents 155,6 147,8 290,2 5%
Diluted normalised
earnings per share - 152,7 143,6 283,5 6%
cents
Weighted average number
of shares - 000`s 61 456 58 864 60 110
Diluted weighted average
number of shares - 000`s 62 621 60 566 61 520
Comments
Overview
Despite a relatively difficult trading environment characterised by economic
uncertainty and a general reticence to commit to hiring decisions, the Group was
able to generate modest profit growth for the six-month interim trading period
ended 31 August 2011 whereby, normalised earnings per share of 155,6 cents per
share (2010: 147,8 cents per share) were some 5% ahead of normalised earnings
per share for the same period last year.
Revenue for the period under review of R2 846 million (2010: R2 581 million) was
some 10% ahead of the prior year whilst normalised earnings before interest, tax
and depreciation ("EBITDA") of R139,8 million (2010:
R131,3 million) grew by 6,4%. Headline earnings per share of 112,3 cents per
share (2010: 94,9 cents per share) were some 18% ahead of prior year earnings
per share.
Various prevailing staffing industry trends have contributed positively to this
growth trend and Adcorp`s overall performance.
A persistent shortage with respect to certain scarce skills has resulted in
relatively robust profit growth within the permanent recruitment operations of
the Group whilst the Group`s contract staffing operations which comprise the
largest constituent component of the Group have seen centralised procurement
departments playing a far greater role in the acquisition of people skills with
many clients significantly rationalising the number of vendors they currently
use and requiring the adoption of more sophistication and technology in the
procurement process.
Whilst this trend has put margins under pressure as reflected in the slight
decline in gross margins from 20,7% in 2010 to the current 19,5% margin for the
period under review, it has also resulted in market share gains for the Group
due to our unique positioning and ability to meet these more onerous and
sophisticated procurement requirements.
The Group`s commitment to the adoption of technology as an enabler and value
added offering to clients is also starting to pay dividends although its
contribution is still relatively modest at this stage but should increase in
line with the widespread international adoption of these technologies.
The introduction of greater sophistication with regard to the procurement of
people skills together with the adoption of technology as an enabler have
already contributed to a consolidation within what, up to now, has been a highly
fragmented market. These trends are very encouraging for the future growth
prospects of the Group.
Also contributing to a further consolidation in the industry has been the
ongoing debate regarding further regulation of the temporary employment services
(labour broking) industry.
As much of the debate has been centred on reputed exploitative practices of
temporary workers by some rogue operators in the industry, procurers of these
services have tended now to favour the well-established, reputable operators
within the industry.
In terms of progress with regard to the resolution of this debate around labour
broking, negotiations are ongoing at Nedlac between Government, business and
organised labour. Whilst some progress has been made in terms of finding common
ground with regard to developing an appropriate regulatory framework for the
industry, the process is still inconclusive and will, in all likelihood, spill
over into next year.
The training operations of the Group continue to perform well, growing the
number of internal and external candidates registered on learnerships. In
addition, the training operations have extended their capacity with regard to
artisan training whereby the Group now has the capacity to train up to 2 500
artisans annually. Given the country`s imperative to rapidly increase the skills
base of the workforce, the Group`s training operations are particularly well
positioned for the future.
The fulfilment component of the business process outsourcing (BPO) operations of
the Group showed a decline in earnings reflecting lacklustre trading conditions.
Over the past years, the Group has rolled out certain relevant and affordable
financial, wellness and lifestyle offerings to its considerable contract work
force. These offerings have proved to be of benefit to the workforce and have
also started to make a meaningful contribution to the overall performance of
BPO.
It is anticipated that the range of these niche products which are of particular
application to contract workers will continue to be expanded and will also now
be offered to external contract workers.
The cash performance of the Group during the period under review was once again
commendable with cash generated by operations for the period of
R186,3 million resulting in a cash conversion ratio of cash generated by
operations to operating profit of 152% versus an internal target ratio of 90%.
Debtors` days outstanding were 34 days (31 August 2010: 33 days) whilst gearing
levels were contained to 9% (31 August 2010: 10%).
During the period, the Group embarked on an upgrade of its Microsoft Dynamics AX
ERP system which will be implemented over the next year. The upgrade provides an
opportunity to further optimise, standardise and automate back office processes
such that the Group is better able to achieve economies of scale and cost
containment.
Financial overview
Normalised EBITDA of R139,8 million for the six months ended 31 August 2011 is
6% higher the R131,3 million for the comparative prior period.
The Group`s normalised EBITDA margin was 4,9% as opposed to the 5,1% in the
prior comparative period. Margins continue to be affected by pricing pressure in
the BPO training and financial services segment as well in the typically lower
margin blue collar businesses.
The Group`s overall normalised effective tax rate has been reduced to 10% (2010:
12%) due to the tax benefits received arising from the facilitation of
registered learnerships in compliance with the Income Tax Act and reduced
adjustments to normalised earnings.
With effect from 1 July 2011, the Group acquired LearnSys (Pty) Limited
("LearnSys") for an amount of R10 million, which was funded out of the group`s
cash resources. In terms of IAS 34 requirements, the after tax profit from
LearnSys included in Group after tax profits for the interim period ended August
2011 is R0,2 million. Since the purchase price exceeded the net asset value as
at the effective date, the excess purchase consideration has been allocated to
goodwill and intangibles. Had the effective date of inclusion been 1 March 2011,
a profit of R0,7 million would have been included in Group after tax profits.
Basis of preparation
Adcorp prepares its accounts in accordance with International Financial
Reporting Standards, South African Companies Act and the JSE Listings
Requirements.
The accounting policies are consistent with the prior period annual financial
statements and deal with new disclosure requirements by IFRS, specifically IAS 1
(Presentation of Financial Statements) and IFRS 8 (Operating Segments). This
report is prepared in accordance with IAS 34 (Interim Financial Reporting) as
well as the AC500 Standards as issued by the Accounting Practices Board or its
successor.
The financial information has been prepared under the supervision of AM Sher
CA(SA).
Contingent liabilities and commitments
The bank has guaranteed R11,9 million (2010: R11,6 million) on behalf of the
Group to creditors. As at the balance sheet date, the Group has outstanding
operating lease commitments totalling R80 million (2010: R46,2 million) in non
cancellable property leases.
Changes to the board and company secretary of adcorp
During the period under review, MMT Ramano resigned as a non-executive director
on 20 June 2011 and NS Ndhlazi was appointed as a non-executive director on 16
August 2011.
On the 30 September AM Sher assumed the responsibilities of acting company
secretary until a suitable replacement is found, following the resignation of D
Mthimunye. On 1 July 2011 D Mthimunye was appointed as company secretary to
replace L Sudbury who retired on 1 July 2011.
Declaration of interim dividend
Notice is hereby given that an interim dividend of 57 cents per share (2010: 54
cents per share) was declared on 12 October 2011 payable to shareholders
recorded in the register of the company at the close of business on the record
date appearing below. The salient dates pertaining to the interim dividend are
as follows:
Last day to trade in order to be eligible for
the dividend (CUM dividend) Friday, 4 November 2011
Shares trade EX the dividend Monday, 7 November 2011
Record date Friday, 11 November
2011
Payment date Monday, 14 November
2011
Ordinary share certificates may not be dematerialised or rematerialised between
Monday, 7 November 2011 and Friday, 11 November 2011, both days inclusive.
All times provided in this announcement are South African local times. The above
dates and times are subject to change. Any changes will be released on SENS and
published in the South African press.
Where applicable, dividends in respect of certificated shares will be
transferred electronically to shareholders` bank accounts on the payment date.
In the absence of specific mandates, dividend cheques will be posted to
shareholders.
Ordinary shareholders who hold dematerialised shares will have their accounts at
their CSDP or broker credited/updated on Monday, 14 November 2011.
Post balance sheet event
On 6 September 2011, the Group announced that it had submitted a firm offer to
acquire leading, listed, specialist information and communications technology
(ICT) resourcing and solution business, Paracon Holdings Limited, by way of a
scheme of arrangement.
The success of the offer is still subject to approval by the shareholders of
both Adcorp and Paracon as well as approval by the relevant competition
authorities.
In terms of the offer, Paracon shareholders have been offered one Adcorp share
in respect of every 13,812 Paracon shares held. The offer also makes allowance
for a cash alternative to the share offer of R1,97 per share at the election of
Paracon shareholders save that, the cash alternative is limited to a maximum of
R265 million which approximates 40% of the purchase price.
The purchase price offered approximates R662 million.
Should the transaction be successful, it will significantly strengthen the
Group`s offerings with regard to the resourcing and placement of professional
ICT skills. The transaction will also add critical mass to the Adcorp Group and
will further diversify Group risk whilst also providing greater career prospects
for staff as well as better opportunities to incentivise and retain top talent.
It is also likely that shareholders will enjoy greater liquidity in the
tradability of the shares of the combined entity.
Outlook
Whilst overall employment trends in the South African economy are generally
weak, the Adcorp Group is well placed due to its unique position in the market.
The greater introduction of sophistication, adoption of technology and
centralisation of the procurement of staffing services by clients, all favour
Adcorp because of this positioning.
Should the acquisition of Paracon succeed, this will strengthen the Group`s
positioning even further.
The national imperative to rapidly address the acute backlog in skills
development should also favour the Group`s training operations.
Strategically, the Group is focused on managing its costs, driving economies of
scale, delivering value for its clients and increasing the level of
sophistication and technological advancement it applies in its day to day
operations. In addition, the Group has a strong and robust balance sheet.
As such, the Group is well positioned for the future.
By order of the board
MJN Njeke RL Pike AM Sher
Chairman Chief Executive Officer Chief Financial Officer
12 October 2011?
Executive directors: C Bomela, RL Pike (Chief Executive Officer),
AM Sher (Chief Financial Officer), PC Swart
(Chief Operating Officer)
Non-executive directors: GP Dingaan, MR Ramaite, NS Ndhlazi
Independent non-executive MJN Njeke (Chairman), AT Alback, ME Mthunzi,
directors: TDA Ross
Alternate director: LM Mojela
Acting company secretary: AM Sher
Transfer secretaries: Link Market Services SA (Pty) Ltd, 11 Diagonal
Street, Johannesburg, 2001
Sponsor: Deloitte & Touche Sponsor Services (Pty) Ltd
Date: 12/10/2011 12:46:01 Produced by the JSE SENS Department.
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