| Mon 19 Mar 2012, 9:00 | | ADH - ADvTECH Limited - Audited Results For The Year Ended 31 December 2011 |
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ADH
ADH
ADH - ADvTECH Limited - Audited Results For The Year Ended 31 December 2011
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 2011
Revenue +9%
Operating profit +13%
Education operating profit +17%
Headline earnings per share +9%
Free operating cash flow per share +22%
Number of full-time students 35 300
Condensed consolidated statement of comprehensive income
for the year ended 31 December 2011
R`m Note Percentage Audited Audited
increase 31 Dec 31 Dec
2011 2010
Revenue 9% 1 605,6 1 470,1
Earnings before Interest, 9% 292,3 269,3
Taxation, Depreciation and
Amortisation (EBITDA)
Operating profit before 13% 230,0 202,9
interest and impairment
Impairment of intangible (5,3) -
asset
Net interest received 10,8 9,2
Interest received 11,0 9,4
Finance costs (0,2) (0,2)
Profit before taxation 235,5 212,1
Taxation (79,2) (63,3)
Total comprehensive income 156,3 148,8
for the year
Earnings per share (cents)
Basic 39.0 37.2
Diluted 39.0 37.2
Headline earnings 2 161.8 148.6
Headline earnings per share
(cents)
Basic 9% 40.4 37.2
Diluted 9% 40.4 37.1
Number of shares in issue 420,8 400,8
(million)
Weighted average number of 405,8 400,8
shares in issue (million)
Weighted average number of 400,8 399,9
shares for purposes of basic
earnings per share (million)
Weighted average number of 400,8 400,2
shares for purposes of
diluted earnings per share
(million)
Effective taxation rate 34% 30%
Net asset value per share 6% 178.5 169.1
(cents)
Free operating cash flow 22% 66.0 54.1
before capex per share
(cents)
Condensed consolidated statement of financial position
as at 31 December 2011
R`m Audited Audited
31 Dec 31 Dec
2011 2010
Assets
Non-current assets 975,7 852,6
Property, plant and equipment 812,9 682,3
Goodwill 98,2 95,9
Intangible assets 36,2 47,8
Deferred taxation assets 28,4 26,6
Current assets 179,3 132,0
Trade and other receivables 105,5 78,9
Taxation 9,8 -
Other current assets 17,2 15,6
Bank balances and cash 46,8 37,5
Total assets 1 155,0 984,6
Equity and liabilities
Equity 751,2 677,8
Current liabilities 403,8 306,8
Trade and other payables 194,5 156,7
Taxation - 26,8
Fees received in advance 138,6 123,3
Bank overdraft 70,7 -
Total equity and liabilities 1 155,0 984,6
Supplementary information
for the year ended 31 December 2011
R`m Audited Audited
31 Dec 31 Dec
2011 2010
Capital expenditure - current year 187,8 105,2
Capital commitments - future years 135,9 94,3
Operating lease commitments in cash - future 374,5 384,7
years
Condensed consolidated statement of changes in equity
for the year ended 31 December 2011
R`m Audited Audited
31 Dec 31 Dec
2011 2010
Balance at beginning of the year 677,8 610,6
Total comprehensive income for the year 156,3 148,8
Dividends declared to shareholders (47,9) -
Share-based payment expense 2,3 1,8
Shares to be issued for business acquisition 2,6 -
Shares purchased by the Share Incentive Trust (0,3) (7,1)
Share awards granted 3,3 2,0
Broad-based scheme shares granted 0,9 1,8
Share options exercised 0,1 5,2
Capital distributions to shareholders (43,9) (85,3)
Balance at end of the year 751,2 677,8
Condensed consolidated segmental report
for the year ended 31 December 2011
R`m Percentage Audited Audited
increase/ 31 Dec 31 Dec
(decrease) 2011 2010
Revenue 9% 1 605,6 1 470,1
Education 11% 1 400,2 1 264,3
Resourcing (1%) 206,9 208,2
Intra Group revenue (1,5) (2,4)
Operating profit before interest 13% 230,0 202,9
and impairment
Education 17% 253,8 216,2
Resourcing (19%) 26,3 32,6
Central administration 7% (47,9) (44,8)
Litigation (2,2) (1,1)
Property, plant and equipment 19% 812,9 682,3
Education 19% 809,5 679,1
Resourcing 6% 3,4 3,2
Condensed consolidated statement of cash flows
for the year ended 31 December 2011
R`m Note Percentage Audited Audited
increase 31 Dec 31 Dec
2011 2010
Cash generated from 3 9% 301,9 276,1
operations
Movement in working capital 31,8 (4,3)
Cash generated by operating 23% 333,7 271,8
activities
Net interest received 10,8 9,2
Taxation paid (117,6) (78,1)
Capital distributions paid (44,7) (84,2)
Dividends paid (47,8) -
Net cash inflow from 134,4 118,7
operating activities
Net cash outflow from (187,2) (122,3)
investing activities
Net cash (outflow)/inflow (8,6) 1,5
from financing activities
Net decrease in cash and (61,4) (2,1)
cash equivalents
Cash and cash equivalents at 37,5 39,6
beginning of the year
Cash and cash equivalents at (23,9) 37,5
end of the year
Free operating cash flow before capex per share
for the year ended 31 December 2011
R`m Percentage Audited Audited
increase 31 Dec 31 Dec
2011 2010
Total comprehensive income for the 156.3 148.8
year
Adjusted for non-cash IFRS and 8.5 5.5
lease adjustments (after taxation)
Net operating profit after taxation 164.8 154.3
- adjusted for non-cash IFRS and
lease adjustments
Depreciation and amortisation 62.3 66.4
Other non-cash flow items (after 5.5 (0.2)
taxation)
Operating cash flow after taxation 6% 232.6 220.5
Movement in working capital 31.8 (4.3)
Free operating cash flow before 22% 264.4 216.2
capex
Weighted average number of shares 400,8 399,9
for purposes of basic earnings per
share (million)
Free operating cash flow before 22% 66.0 54.1
capex per share (cents)
Notes to condensed consolidated financial statements
for the year ended 31 December 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 (IFRSs) of the International Accounting Standards
Board, the AC 500 standards as issued by the Accounting
Practices Board and with the Listing Requirements of the JSE
Limited as well as the South African Companies Act, 71 of 2008
and the information as required by IAS 34: Interim Financial
Reporting. The 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. The preparation of the Group`s consolidated
financial results for the year ended 31 December 2011 was
supervised by Didier Oesch CA(SA), the Group`s financial
director.
There have been no material subsequent events since year end.
Independent auditors` opinion
The auditors, Deloitte & Touche, have issued their opinion on
the Group`s financial statements for the year ended 31 December
2011. Their 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.
R`m Audited Audited
31 Dec 31 Dec
2011 2010
2. Determination of headline earnings
Total comprehensive income for 156,3 148,8
the year
Items excluded from headline 5,5 (0,2)
earnings per share
Loss/(profit) on sale of 0,3 (0,3)
property, plant and equipment
Impairment of intangible asset 5,3 -
5,6 (0,3)
Taxation effects of (0,1) 0,1
adjustments
Headline earnings 161,8 148,6
3. Note to the statement of cash flows
Reconciliation of profit before
taxation to cash generated from
operations
Profit before taxation 235,5 212,1
Adjust for non-cash IFRS and 9,3 7,1
lease adjustments (before
taxation)
244,8 219,2
Adjust: 57,1 56,9
Depreciation and amortisation 62,3 66,4
Net interest received (10,8) (9,2)
Impairment of intangible asset 5,3 -
Other non-cash flow items 0,3 (0,3)
Cash generated from operations 301,9 276,1
Commentary
Overview
The ADvTECH Group returned to earnings growth in 2011 and built on the progress
made in the first half to record 9% growth in headline earnings per share (HEPS)
to 40.4 cents. If the effect of Secondary Taxation on Companies (STC) of 1.2
cents per share (2010: nil) is excluded from the current year`s results,
headline earnings per share on a comparable basis would show an increase of 12%.
The hallmark of these results is the strong improvement in revenue and operating
margin in the Education division, which enabled a renewed acceleration in
investment into new education projects. Outstanding academic results at both
schools and tertiary level, reflecting a further improvement on the already high
standard, underline the continuing resolute focus on quality education in the
Group`s operations. This in turn attracts increasing student numbers from all
parts of South African society and further afield.
Our 1 190 Matric candidates achieved a 100% pass rate with all but two
qualifying for entrance into higher education institutions. Collectively they
achieved 2 759 subject distinctions, and even more pleasing were the excellent
overall results achieved in key subjects such as Mathematics, Accounting,
Physical Science and English.
At post-schooling level, 3 233 (2010: 2 931) of our students graduated with
qualifications at certificate, diploma, degree or honours level, which were
conferred at the 17 graduation ceremonies held by The Independent Institute of
Education (IIE). The overall pass rate of our students in Unisa exams at 74% is
significantly ahead of national averages. In an important step in the growth of
our institutions, the IIE gained accreditation of its BCom and BA degrees which
were launched at our Varsity College campuses in the 2012 academic year. These
degrees are recognised internationally by The Open University, United Kingdom,
and have already attracted significant enrolment.
The Resourcing division again contributed to profits and cash flow. The
Division`s focus on key niche markets and the strength of the Group`s operating
model stood it in good stead given the difficulties experienced by much of the
employment services industry. Consequently 3 977 (2010: 4 100) candidates were
placed in new career positions and the Division maintained a sound return on
funds employed.
More information about the 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 Group reported a 9% increase in revenue to R1,6 billion. Operating profit
increased 13% to R230 million and operating margin improved to 14.3% (2010:
13.8%). The effective taxation rate increased to 33.6% (2010: 29.8%) mainly as a
result of STC of R4,8 million (2010: nil). Taking this additional charge into
account resulted in headline earnings per share increasing by 9% to 40.4 cents
(2010: 37.2 cents), whilst on a basis made comparable by excluding STC, headline
earnings per share reflected an increase of 12% over 2010. The impairment of the
intangible asset amounting to R5.3 million has occurred within the Resourcing
division and arises as a result of the underperformance of a small acquisition
as against original expectations.
Revenue in the Education division increased 11% to R1,4 billion and operating
profit increased 17% to R254 million. Thus operating margin improved to 18%
(2010: 17%). The Resourcing division achieved revenue of R207 million (2010:
R208 million) for the year, but due to inflationary cost pressures operating
profit fell by 19% to R26 million.
Free operating cash flow before capex per share increased a pleasing 22% to 66.0
cents (2010: 54.1 cents) per share and represents cash conversion of earnings of
163% (2010: 145%). This was achieved notwithstanding a 34% increase in net
debtors which reflects an increase in the collection period applicable to
certain tertiary fees and the decision to increase in-house collection
procedures. The benefit of this decision is felt in improved operating margin.
This strong cash flow performance enabled the Group to fund from its own
resources capital expenditure of R188 million (2010: R105 million), company
taxation of R118 million (2010: R78 million) and distributions to shareholders
of R93 million (2010: R84 million). The balance sheet also strengthened with net
asset value per share increasing by 6% while net gearing was 3% at year end.
During the year 20?041?909 shares were issued and allotted to the ADvTECH
Limited Share Incentive Trust at R5.60 per share. These shares have been treated
as treasury shares and eliminated on consolidation.
The Group`s strong financial position favours a final distribution to
shareholders. Having regard to the transitional arrangements relating to the
phasing out of Secondary Taxation on Companies (STC) and its replacement with
Dividends Tax, the Board has decided to defer the consideration of a final
distribution until after 1 April 2012, but as soon as practicable thereafter.
Investment
Strengthening demand for education places enabled the Group to accelerate its
strategic investment in new capacity and infrastructure in 2011. As a result,
capital expenditure in the year increased as noted above and capital commitments
at the end of the year amounted to R136 million (2010: R94 million).
At the beginning of 2012 new campuses were opened at Trinityhouse Little Falls,
Varsity College Midrand and College Campus Auckland Park. A number of new or
expanded campuses are planned to open in 2013 and beyond, details of which will
be announced in due course.
Education
The Education division houses the Group`s education brands including The
Independent Institute of Education (IIE), 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, these 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 2011, these activities addressed the needs of 35 300 (2010: 32 500) full-time
students at the 57 (2010: 59) education sites 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 58
(2010: 50) education programmes accredited between NQF levels 4 and 7 offered
across 22 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 in the fields of permanent staffing, recruitment
advertising and advertising response handling.
The Resourcing division maintained its 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 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. The great majority
of students and candidates placed are black. The Group maintained steady
progress in growing the black complement of its senior management as well as its
overall black staff complement, which has reached 40%. 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 six
years.
Litigation
Legal proceedings against Marina and Andry Welihockyj remain in process and are
moving steadily towards trial. 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.
Directorate
Mr DK Ferreira will retire by rotation at the Annual General Meeting to be held
on 22 May 2012 and, although eligible, has indicated that he will not offer
himself for re-election.
Prospects
Tough economic circumstances for many of South Africa`s principal trading
partners have blunted both growth prospects and sentiment in the domestic
economy. Although South Africa remains out of recession, real growth is
insufficient to drive job creation. The value of a good education in securing
decent employment in a modern economy has grown under these circumstances and
the Group`s unrelenting focus on academic quality and performance will stand it
in good stead. The Resourcing division holds a strong market position and will
remain focused on its key niche markets for high demand scarce skills.
The increase in actual and planned investment is propelled by our vision, which
remains to build a long term enterprise that offers increasing access to world
class education and job opportunities through the services of a dedicated team.
On behalf of the Board
Leslie Maasdorp Frank Thompson
Chairman Chief Executive Officer
19 March 2012
Directors: LW Maasdorp* (Chairman), FR Thompson (CEO),
JDR Oesch (Financial), DK Ferreira*, BM Gourley*, JD Jansen*,
HR Levin* (alternate CH Boulle*), 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: 19/03/2012 09:00:05 Produced by the JSE SENS Department.
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