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ADR
ADR
ADR - Adcorp Holdings Limited - Audited Abridged Group results for the year
ended 29 February 2012
Adcorp Holdings Limited
("Adcorp" or "Adcorp Group" or "the Group" or "the Company")
Registration number 1974/001804/06
Share code: ADR ISIN number: ZAE000000139
Audited Abridged Group results
for the year ended 29 February 2012
Salient features
Revenue up by 19%
Normalised profit for the year up 12%
Headline earnings per share up 7%
Normalised earnings per share up 4%
Final dividend of 80 cents per share declared
Cash generated by operations R215 million
Cash conversion ratio 79%
Debtors` days flat at 36 days
Gearing up from 12% to 28%
Normalised EBITDA margin flat at 4,8%
Paracon acquired for R637 million
Audited statement of financial position
as at 29 February 2012
Group Company
2012 2011 2012 2011
R`000 R`000 R`000 R`000
Assets
Non-current assets 1 440 639 791 091 1 289 768 653 863
Property and equipment 58 399 43 921 - -
Intangible assets 363 188 143 019 - -
Goodwill 911 570 554 398 - -
Investment in subsidiaries - - 1 289 768 653 069
Investment in associates 49 708 - - -
Other financial assets - - - 794
Deferred taxation 57 774 49 753 - -
Current assets 1 399 800 1 135 582 847 665 757 170
Trade and other receivables 1 079 508 740 207 825 780
and prepayments
Amounts due by subsidiary - - 846 340 756 390
companies
Taxation prepaid 9 827 14 153 319 -
Cash resources 310 465 381 222 181 -
Total assets 2 840 439 1 926 673 2 137 433 1 411 033
Equity and liabilities
Capital and reserves 1 440 987 1 013 311 1 156 234 862 928
Share capital 1 934 1 546 2 355 1 967
Share premium 865 942 498 696 865 942 498 696
Treasury shares (12 891) (13 227) - -
Non-distributable reserve - - 119 918 119 918
Share-based payments reserve 189 534 165 676 189 534 165 676
Foreign currency translation (1 587) (2 001) - -
reserve
Cash flow hedging reserve (955) - (955) -
Accumulated profit/(loss) 396 787 362 200 (20 560) 76 671
Equity attributable to 1 438 764 1 012 890 1 156 234 862 928
equity holders of the parent
Non-controlling interest 1 302 - - -
BEE shareholders` interest 921 421 - -
Non-current liabilities 269 833 201 097 87 659 60 000
Other non-current 2 582 4 462 - -
liabilities
Long-term loan - interest 86 667 60 000 86 667 60 000
bearing
Redeemable preference shares 96 000 116 000 - -
- interest bearing
Derivative financial 955 - 955 -
instrument
Obligations under finance 4 957 249 - -
lease
Operating lease liability 1 233 - - -
Deferred taxation 77 439 20 386 37 -
Current liabilities 1 129 619 712 265 893 540 488 105
Non-interest-bearing current 600 624 389 085 407 341 218 616
liabilities
Trade and other payables 461 779 275 731 935 3 327
Amounts due to subsidiary - - 406 406 214 886
companies
Provisions 133 696 102 835 - -
Taxation 5 149 10 519 - 403
Interest-bearing current 528 995 323 180 486 199 269 489
liabilities
Current portion of other non- 8 838 6 061 - -
current liabilities
Current portion of long-term 323 747 15 000 323 747 15 000
loan
Current portion of 22 182 16 199 - -
redeemable preference shares
Bank overdrafts 174 228 285 920 162 452 254 489
Total equity and liabilities 2 840 439 1 926 673 2 137 433 1 411 033
Audited statement of comprehensive income
for the year ended 29 February 2012
GROUP COMPANY
2012 2011 2012 2011
Notes R`000 R`000 R`000 R`000
Revenue 6 423 229 5 384 566 - -
Cost of sales (5 188 742) (4 264 774) - -
Gross profit 1 234 487 1 119 792 - -
Other income 56 113 51 967 209 -
Administration expenses (423 483) (378 852) (10 476) (4 524)
Marketing and selling (506 674) (477 445) - -
expenses
Other operating expenses (156 121) (157 791) - -
Operating profit/(loss) 204 322 157 671 (10 267) (4 524)
Interest received 3 677 3 182 43 726 40 058
Interest paid (43 554) (31 855) (51 899) (32 093)
Dividends received - - 33 000 270 000
Share of profits from 681 - - -
associates
Impairment of investments (1 197) (1 796) - -
and goodwill
Impairment of loans - - (459) -
Profit on disposal of a 160 - - -
business
Profit/(loss) on disposal 673 (194) - -
of property and equipment
Profit before taxation 164 762 127 008 14 101 273 441
Taxation (29 060) (11 313) (10 844) (6 185)
Profit for the year 135 702 115 695 3 257 267 256
Other comprehensive
income/(loss)
Exchange differences on 414 (877) - -
translating foreign
operations
Fair value adjustment of (955) - (955) -
derivative financial
instrument
Non-controlling interest (1 302) - - -
Other comprehensive loss (1 843) (877) (955) -
for the year, net of tax
Total comprehensive income 133 859 114 818 2 302 267 256
for the year
Profit attributable to:
Owners of the parent 134 400 115 695 3 257 267 256
Non-controlling interest 1 302 - - -
Total comprehensive income
attributable to:
Owners of the parent 133 859 114 818 2 302 267 256
Non-controlling interest 1 302 - - -
Earnings per share
Basic (cents) 208,0 192,5 - -
Diluted (cents) 203,7 188,1 - -
Distribution to
shareholders during the
year 178 169 - -
Interim dividend (cents) 57 54 - -
Final dividend (cents) in 121 115 - -
respect of prior year
Reconciliation of headline earnings
GROUP COMPANY
2012 2011 2012 2011
R`000 R`000 R`000 R`000
Profit for the year 135 702 115 695 - -
(Profit)/loss on sale of property and
equipment (673) 194 - -
Taxation 188 (54) - -
Impairment of goodwill and investments 1 197 1 796 - -
Headline earnings 136 414 117 631 - -
Headline earnings per share - cents 209,1 195,7 - -
Diluted headline earnings per share -
cents 204,7 191,2 - -
Audited statement of changes in equity
for the year ended 29 February 2012
Share Share Treasury
capital premium shares
R`000 R`000 R`000
Group
Balance as at 28 February 2010 1 483 497 968 (13 293)
Issue of ordinary shares under employee share 3 788 -
option plan
Capitalisation of share premium - (65 172) -
Ordinary shares issued pursuant to scrip 60 65 112 -
distribution
Treasury shares sold - - 66
Dividend distributions - - -
Recognition of BBBEE and staff share-based - - -
payments
Share options exercised during the year - - -
Profit for the year - - -
Other comprehensive loss for the year - - -
Balance as at 28 February 2011 1 546 498 696 (13 227)
Issue of ordinary shares - Paracon acquisition 365 371 334 -
Capitalisation of transaction cost - Paracon - (4 100) -
acquisition
Issue of ordinary shares under employee share 23 12 -
option plan
Treasury shares sold - - 336
Dividend distributions - - -
Recognition of BBBEE and staff share-based - - -
payments
Share options exercised during the year - - -
Profit for the year - - -
Other comprehensive income/(loss) for the year - - -
Balance as at 29 February 2012 1 934 865 942 (12 891)
Company
Balance as at 28 February 2010 1 904 497 968 -
Issue of ordinary shares under employee share 3 788 -
option plan
Capitalisation of share premium - (65 172) -
Ordinary shares issued pursuant to scrip 60 65 112 -
distribution
Dividend distributions - - -
Recognition of BBBEE and staff share-based - - -
payments
Share options exercised during the year
Total comprehensive income for the year - - -
Balance as at 28 February 2011 1 967 498 696 -
Issue of ordinary shares - Paracon acquisition 365 371 334 -
Capitalisation of transaction cost - Paracon - (4 100) -
acquisition
Issue of ordinary shares under employee share 23 12 -
option plan
Dividend distributions - - -
Recognition of BBBEE and staff share-based - - -
payments
Share options exercised during the year - - -
Other comprehensive loss for the year - - -
Total comprehensive income for the year - - -
Balance as at 29 February 2012 2 355 865 942 -
Share- Foreign
Non- based currency
distributabl payment translation
e
reserve reserve reserve
R`000 R`000 R`000
Group
Balance as at 28 February 2010 - 141 492 (1 124)
Issue of ordinary shares under employee - - -
share option plan
Capitalisation of share premium - - -
Ordinary shares issued pursuant to scrip - - -
distribution
Treasury shares sold - - -
Dividend distributions - - -
Recognition of BBBEE and staff share- - 31 900 -
based payments
Share options exercised during the year (7 716) -
Profit for the year - - -
Other comprehensive loss for the year - - (877)
Balance as at 28 February 2011 - 165 676 (2 001)
Issue of ordinary shares - Paracon - - -
acquisition
Capitalisation of transaction cost - - - -
Paracon acquisition
Issue of ordinary shares under employee - - -
share option plan
Treasury shares sold - - -
Dividend distributions - - -
Recognition of BBBEE and staff share-
based payments - 34 655 -
Share options exercised during the year - (10 797) -
Profit for the year - - -
Other comprehensive income/(loss) for
the year - - 414
Balance as at 29 February 2012 - 189 534 (1 587)
Company
Balance as at 28 February 2010 119 918 141 492 -
Issue of ordinary shares under employee - - -
share option plan
Capitalisation of share premium - - -
Ordinary shares issued pursuant to scrip - - -
distribution
Dividend distributions - - -
Recognition of BBBEE and staff share-
based payments - 31 900 -
Share options exercised during the year (7 716)
Total comprehensive income for the year - - -
Balance as at 28 February 2011 119 918 165 676 -
Issue of ordinary shares - Paracon
acquisition - - -
Capitalisation of transaction cost -
Paracon acquisition - - -
Issue of ordinary shares under employee
share option plan - - -
Dividend distributions - - -
Recognition of BBBEE and staff share-
based payments - 34 655 -
Share options exercised during the year - (10 797) -
Other comprehensive loss for the year - - -
Total comprehensive income for the year - - -
Balance as at 29 February 2012 119 918 189 534 -
Cash
flow
hedging Accumulate
d
reserve profit
R`000 R`000
Group
Balance as at 28 February 2010 - 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
Dividend distributions - (42 216)
Recognition of BBBEE and staff share-based payments - -
Share options exercised during the year - 7 716
Profit for the year - 115 695
Other comprehensive loss for the year - -
Balance as at 28 February 2011 - 362 200
Issue of ordinary shares - Paracon acquisition - -
Capitalisation of transaction cost - Paracon - -
acquisition
Issue of ordinary shares under employee share option - -
plan
Treasury shares sold - -
Dividend distributions - (110 610)
Recognition of BBBEE and staff share-based payments - -
Share options exercised during the year - 10 797
Profit for the year - 134 400
Other comprehensive income/(loss) for the year (955) -
Balance as at 29 February 2012 (955) 396 787
Company
Balance as at 28 February 2010 - (155 780)
Issue of ordinary shares under employee share option - -
plan
Capitalisation of share premium - -
Ordinary shares issued pursuant to scrip distribution - -
Dividend distributions - (42 521)
Recognition of BBBEE and staff share-based payments - -
Share options exercised during the year 7 716
Total comprehensive income for the year - 267 256
Balance as at 28 February 2011 - 76 671
Issue of ordinary shares - Paracon acquisition - -
Capitalisation of transaction cost - Paracon - -
acquisition
Issue of ordinary shares under employee share option - -
plan
Dividend distributions - (111 285)
Recognition of BBBEE and staff share-based payments - -
Share options exercised during the year - 10 797
Other comprehensive loss for the year (955) -
Total comprehensive income for the year - 3 257
Balance as at 29 February 2012 (955) (20 560)
Attributabl
e
to equity
holders Non-
of the controllin
g
parent interest
R`000 R`000
Group
Balance as at 28 February 2010 907 522 -
Issue of ordinary shares under employee share option 791 -
plan
Capitalisation of share premium (65 172) -
Ordinary shares issued pursuant to scrip 65 172 -
distribution
Treasury shares sold 75 -
Dividend distributions (42 216) -
Recognition of BBBEE and staff share-based payments 31 900 -
Share options exercised during the year - -
Profit for the year 115 695 -
Other comprehensive loss for the year (877) -
Balance as at 28 February 2011 1 012 890 -
Issue of ordinary shares - Paracon acquisition 371 699 -
Capitalisation of transaction cost - Paracon (4 100) -
acquisition
Issue of ordinary shares under employee share option 35 -
plan
Treasury shares sold 336 -
Dividend distributions (110 610) -
Recognition of BBBEE and staff share-based payments 34 655 -
Share options exercised during the year - -
Profit for the year 134 400 -
Other comprehensive income/(loss) for the year (541) 1 302
Balance as at 29 February 2012 1 438 764 1 302
Company
Balance as at 28 February 2010 605 502 -
Issue of ordinary shares under employee share option 791 -
plan
Capitalisation of share premium (65 172) -
Ordinary shares issued pursuant to scrip 65 172 -
distribution
Dividend distributions (42 521) -
Recognition of BBBEE and staff share-based payments 31 900 -
Share options exercised during the year - -
Total comprehensive income for the year 267 256 -
Balance as at 28 February 2011 862 928 -
Issue of ordinary shares - Paracon acquisition 371 699 -
Capitalisation of transaction cost - Paracon (4 100) -
acquisition
Issue of ordinary shares under employee share option 35 -
plan
Dividend distributions (111 285) -
Recognition of BBBEE and staff share-based payments 34 655 -
Share options exercised during the year - -
Other comprehensive loss for the year (955) -
Total comprehensive income for the year 3 257 -
Balance as at 29 February 2012 1 156 234 -
BEE
share-
holders`
interest Total
R`000 R`000
Group
Balance as at 28 February 2010 421 907 943
Issue of ordinary shares under employee share option - 791
plan
Capitalisation of share premium - (65 172)
Ordinary shares issued pursuant to scrip distribution - 65 172
Treasury shares sold - 75
Dividend distributions - (42 216)
Recognition of BBBEE and staff share-based payments - 31 900
Share options exercised during the year - -
Profit for the year - 115 695
Other comprehensive loss for the year - (877)
Balance as at 28 February 2011 421 1 013 311
Issue of ordinary shares - Paracon acquisition - 371 699
Capitalisation of transaction cost - Paracon acquisition - (4 100)
Issue of ordinary shares under employee share option - 35
plan
Treasury shares sold - 336
Dividend distributions - (110 610)
Recognition of BBBEE and staff share-based payments 500 35 155
Share options exercised during the year - -
Profit for the year - 134 400
Other comprehensive income/(loss) for the year - 761
Balance as at 29 February 2012 921 1 440 987
Company
Balance as at 28 February 2010 - 605 502
Issue of ordinary shares under employee share option - 791
plan
Capitalisation of share premium - (65 172)
Ordinary shares issued pursuant to scrip distribution - 65 172
Dividend distributions - (42 521)
Recognition of BBBEE and staff share-based payments - 31 900
Share options exercised during the year - -
Total comprehensive income for the year - 267 256
Balance as at 28 February 2011 - 862 928
Issue of ordinary shares - Paracon acquisition - 371 699
Capitalisation of transaction cost - Paracon acquisition - (4 100)
Issue of ordinary shares under employee share option - 35
plan
Dividend distributions - (111 285)
Recognition of BBBEE and staff share-based payments - 34 655
Share options exercised during the year - -
Other comprehensive loss for the year - (955)
Total comprehensive income for the year - 3 257
Balance as at 29 February 2012 - 1 156 234
Audited statement of cash flows
for the year ended 29 February 2012
GROUP COMPANY
2012 2011 2012 2011
R`000 R`000 R`000 R`000
Operating activities
Profit/(loss) before
taxation and dividends 164 762 127 008 (18 899) 3 441
Adjusted for:
Dividends received - - 33 000 270 000
Depreciation 22 692 24 079 - -
Impairment of investments,
goodwill and loans 1 197 1 796 459 -
Amortisation of intangible
assets 42 480 44 143 - -
Amortisation of financial
assets - 910 - -
(Profit)/loss on disposal of
property and equipment (673) 194 - -
Profit on sale of business (160) - - -
Share-based payments expense 34 655 31 900 - -
Non-cash portion of
operating lease rentals (696) 800 - -
Interest received (3 677) (3 182) (43 726) (40 058)
Interest paid 43 554 31 855 51 899 32 093
Cash generated by operating 304 134 259 503 22 733 265 476
activities before working
capital changes
Increase in trade and other (204 195) (13 512) (45) (389)
receivables and prepayments
Increase/(decrease) in trade 115 250 41 863 (2 392) 1 627
and other payables and
provisions
Net movement in holding and - - 136 225 (301 804)
fellow subsidiaries`
intercompany accounts
Cash generated/(utilised) by 215 189 287 854 156 521 (35 090)
operations
Interest received 3 677 3 182 43 726 40 058
Interest paid (43 554) (31 855) (51 899) (32 093)
Taxation paid (48 955) (32 632) (11 530) (6 092)
Dividend paid (110 610) (42 216) (111 285) (42 216)
Net cash 15 747 184 333 25 533 (75 433)
generated/(utilised) by
operating activities
Investing activities
Additions to property, (46 355) (24 014) - -
equipment and intangible
assets
Proceeds from sale of 160 - - -
business
Proceeds from sale of 1 478 3 323 - -
property and equipment
Acquisition of businesses (254 966) (2 874) (269 100) -
Investment in associates (4 929) - - -
Net cash utilised by (304 612) (23 565) (269 100) -
investing activities
Financing activities
Issue of shares 371 866 371 866
Issue of `A` ordinary shares 500 - - -
Loans raised 375 414 75 000 375 414 75 000
Long-term loan repaid (54 000) (91 139) (40 000) (91 139)
Decrease in non-current 7 515 53 - -
interest-bearing liabilities
Net cash 329 800 (15 220) 335 785 (15 273)
generated/(utilised) by
financing activities
Net increase/(decrease) in 40 935 145 548 92 218 (90 706)
cash and cash equivalents
Net cash and cash 95 302 (50 246) (254 489) (163 783)
equivalents at the beginning
of the period
Net cash and cash 136 237 95 302 162 271 (254 489)
equivalents at the end of
the period
Audited segment report
for the year ended 29 February 2012
Group central costs
Central Group
costs recoverie
s*
Revenue
- 2012 (R`000) - -
- 2011 (R`000) - 22 366
Internal revenue
- 2012 (R`000) - -
- 2011 (R`000) - -
Operating profit/(loss)
- 2012 (R`000) (62 907) (2 890)
- 2011 (R`000) (48 873) 57
Normalised EBITDA excluding share-based
payments, lease-smoothing and Paracon
transaction costs
- 2012 (R`000) (41 885) (184)
- 2011 (R`000) (36 111) 2 736
Normalised EBITDA margin excluding share-based
payments and lease-smoothing and Paracon
transaction costs
- 2012 (%) - -
- 2011 (%) - -
Normalised EBITDA excluding share-based payments
and lease-smoothing and Paracon transaction
costs contribution % to Group EBITDA
- 2012 (%) (13,4) (0,1)
- 2011 (%) (14,0) 1,1
Depreciation and amortisation
- 2012 (R`000) 1 094 -
- 2011 (R`000) 1 097 -
Interest income
- 2012 (R`000) (17 033) 739
- 2011 (R`000) (13 686) 806
Interest expense
- 2012 (R`000) 15 107 (363)
- 2011 (R`000) 21 719 (6)
Taxation expense/(income)
- 2012 (R`000) 10 844 7 018
- 2011 (R`000) 6 185 5 650
Asset carrying value
- 2012 (R`000) 3 270 16 946
- 2011 (R`000) 65 285 30 708
Liabilities carrying value
- 2012 (R`000) 259 609 28 953
- 2011 (R`000)** 269 364 34 169
Additions to property, plant and equipment
- 2012 (R`000) 59 7 591
- 2011 (R`000) 167 2 521
Staffing
Blue White
collar collar
Revenue
- 2012 (R`000) 4 622 1 602
841 385
- 2011 (R`000) 3 861 1 329
945 000
Internal revenue
- 2012 (R`000) 30 691 97 694
- 2011 (R`000) 14 812 31 526
Operating profit/(loss)
- 2012 (R`000) 193 369 51 249
- 2011 (R`000) 141 445 26 125
Normalised EBITDA excluding share-based payments,
lease-smoothing and Paracon transaction costs
- 2012 (R`000) 226 497 73 732
- 2011 (R`000) 181 370 46 590
Normalised EBITDA margin excluding share-based
payments and lease-smoothing and Paracon transaction
costs
- 2012 (%) 4,9 4,6
- 2011 (%) 4,7 3,5
Normalised EBITDA excluding share-based payments and
lease-smoothing and Paracon transaction costs
contribution % to Group EBITDA
- 2012 (%) 73,2 23,8
- 2011 (%) 70,1 18,0
Depreciation and amortisation
- 2012 (R`000) 16 920 27 038
- 2011 (R`000) 21 027 24 560
Interest income
- 2012 (R`000) 5 652 8 267
- 2011 (R`000) 6 669 4 427
Interest expense
- 2012 (R`000) (44 518) (10 720)
- 2011 (R`000) (41 228) (1 771)
Taxation expense/(income)
- 2012 (R`000) 4 551 2 861
- 2011 (R`000) 3 180 (2 891)
Asset carrying value
- 2012 (R`000) 1 845 573 704 942
- 2011 (R`000) 1 218 333 281
479
Liabilities carrying value
- 2012 (R`000) 529 011 553 435
- 2011 (R`000)** 454 238 116 599
Additions to property, plant and equipment
- 2012 (R`000) 9 292 10 033
- 2011 (R`000) 8 134 1 659
New generation business
BPO, Emergent Total
training business
and
financial
services
Revenue
- 2012 (R`000) 193 613 4 390 6 423 229
- 2011 (R`000) 168 702 2 553 5 384
566
Internal revenue
- 2012 (R`000) 44 191 - 172 576
- 2011 (R`000) 38 833 - 85 171
Operating profit/(loss)
- 2012 (R`000) 40 821 (15 320) 204 322
- 2011 (R`000) 43 941 (5 024) 157 671
Normalised EBITDA excluding share-based
payments, lease-smoothing and Paracon
transaction costs
- 2012 (R`000) 65 675 (14 568) 309 267
- 2011 (R`000) 68 959 (4 951) 258 593
Normalised EBITDA margin excluding
share-based payments and lease-
smoothing and Paracon transaction costs
- 2012 (%) 33,9 - 4,8
- 2011 (%) 40,9 - 4,8
Normalised EBITDA excluding share-based
payments and lease-smoothing and
Paracon transaction costs contribution
% to Group Normalised EBITDA
- 2012 (%) 21,2 (4,7) 100,0
- 2011 (%) 26,7 (1,9) 100,0
Depreciation and amortisation
- 2012 (R`000) 20 075 45 65 172
- 2011 (R`000) 21 518 20 68 222
Interest income
- 2012 (R`000) 6 047 5 3 677
- 2011 (R`000) 4 966 - 3 182
Interest expense
- 2012 (R`000) (1 622) (1 438) (43 554)
- 2011 (R`000) (10 150) (419) (31 855)
Taxation expense/(income)
- 2012 (R`000) 2 862 924 29 060
- 2011 (R`000) 699 (1 510) 11 313
Asset carrying value
- 2012 (R`000) 266 166 3 542 2 840 439
- 2011 (R`000) 272 983 5 937 1 926
673
Liabilities carrying value
- 2012 (R`000) 25 152 3 292 1 399 452
- 2011 (R`000)** 38 169 823 913 362
Additions to property, plant and
equipment
- 2012 (R`000) 4 234 - 31 209
- 2011 (R`000) 3 563 118 16 162
Note
No segmental information is provided in respect of geographical
analysis as the Group operates mainly in South Africa.
Pro Forma Financial Information
The unaudited pro forma financial information below has been
prepared for illustrative purposes only to provide information on
how the normalised earnings adjustments might have impacted on the
financial results of the Group. Because of its nature, the
unaudited pro forma financial information may not be a fair
reflection of the Group`s results of operation, financial
position, changes in equity or cash flows.
The underlying information used in the preparation of the
unaudited pro forma financial information has been prepared using
the accounting policies that comply with International Financial
Reporting Standards. These are consistent with those applied in
the published unaudited interim consolidated results of the Group
for the period ended 31 August 2011.
Since there are no significant subsequent post balance sheet
events, no adjustments have been made to the pro forma financial
information.
The directors of the Group are responsible for the compilation,
contents and preparation of the unaudited pro forma financial
information contained in the announcement. Their responsibility
includes determining that: the unaudited pro forma financial
information has been properly compiled on the basis stated; the
basis is consistent with the accounting policies of the Group; and
the pro forma adjustments are appropriate for the purposes of the
unaudited pro forma financial information disclosed in terms of
the JSE Limited (JSE) Listings Requirements.
The unaudited pro forma financial information should be read in
conjunction with the Deloitte & Touche independent reporting
accountants` report thereon, which is available for inspection at
Adcorp`s registered office.
Statement of normalised earnings*
for the year ended 29 February 2012
Year to Year to
Note 29 Feb 28 Feb %
2012 2011 change
R`000 R`000
Revenue 1 6 423 229 5 384 566 19
Cost of sales 1 (5 188 742) (4 264 774) 22
Gross profit 1 1 234 487 1 119 792 10
Other income 1 56 113 51 967 8
Administrative marketing, selling and (1 086 278) (1 014 088) 7
operating expenses
Operating profit 1 204 322 157 671 30
Adjusted for:
Depreciation 2 22 692 24 079 (6)
Amortisation of intangible assets 2 42 480 44 143 (4)
Share-based payments 2 34 655 31 900 9
Lease-smoothing 3 (696) 800
Transaction costs - Acquisition of 6 5 814
Paracon Holdings Limited
Normalised EBITDA (excluding share- 309 267 258 593 20
based payments and lease-smoothing)
Adjusted for:
Depreciation 2 (22 692) (24 079) (6)
Amortisation of intangibles other than 3 (13 834) (10 459) 32
those acquired in a business
combination
Normalised operating profit 272 741 224 054 22
Net interest paid 2 (39 877) (28 673) 39
Normalised profit before taxation 232 864 195 381 19
Normalised taxation 4 (36 887) (20 968) 76
Normalised profit for the year 195 977 174 413 12
Normalised effective tax rate 16% 11%
Normalised earnings per share - cents 5 300,4 290,2 4
Diluted normalised earnings per share 5 294,1 283,5 4
- cents
Weighted average No of shares - 000`s 3 65 236 60 110 9
Diluted weighted average No of shares 3 66 631 61 520 8
- 000`s
Notes:
1 As per the audited statement of comprehensive income for the
year ended 29 February 2012.
2 As per the notes to the audited statement of comprehensive
income included in the annual financial statements for the year
ended 29 February 2012.
3 As per the notes to the audited annual financial statements for
the year ended 29 February 2012.
4 The taxation expense has been adjusted for the adjusted items
above.
5 Per share calculation is based on normalised earnings.
6 Being once-off transaction costs incurred pursuant the
acquisition of Paracon. As per the notes to the audited annual
financial statements for the year ended 29 February 2012.
Overview
The Adcorp Group has achieved much over the past financial year,
although the year was not without its challenges. In particular,
an economic environment struggling to re-energise and regain
confidence following the global financial crisis as well as the
sustained political and regulatory pressure on the temporary
employment services industry made for a difficult operating
environment. Considered in this context, the Group`s performance
and successes over the past year are most pleasing.
Group revenues of R6,4 billion (FY2011: R5,4 billion) were 19%
ahead of the prior year whilst headline earnings per share of
209,1 cents (FY2011: 195,7 cents) were 7% higher.
Normalised earnings per share of 300.4 cents (FY2011: 290,2
cents) which excludes non-trading IFRS accounting adjustments for
the amortisation of intangible assets arising on business
combinations, share-based payments, lease-smoothing and the once
off transaction costs incurred pursuant to the acquisition of
Paracon, were 4% up on last year`s earnings.
Normalised after tax profits for the year of R196 million (FY2011:
R174 million) were 12% ahead of the prior year.
The Group converted 79% (FY2011: 128%) of operating profit into
cash compared to a Group target of 90% despite maintaining
outstanding debtors` days at 36 days (FY2011: 36 days).
Borrowings have increased significantly due to the inclusion of
additional loan funding raised in order to execute the Paracon
transaction resulting in a higher year on year interest charge.
Free cash generated by operations per share of 193,7 cents
(FY2011: 376,9 cents) reflected a 49% decrease compared to the
prior year figure reflecting the effects of R89 million consumed
by working capital (FY2011: R28 million released) and higher cash
payments in respect of interest, taxation and dividends. The total
dividend declared of 137cps (FY2011: 175cps) represents a 22% year-
on-year decrease as the Board deems it appropriate to take
advantage of strategic opportunities.
The blue-collar flexible-staffing businesses which are the largest
contributors to Group profitability performed exceptionally well,
recording solid growth for the year. Predominantly this growth was
achieved by way of market share gains in both Capital Outsourcing
Group and Capacity as well as by way of an increased demand for
highly skilled artisans and technicians in Staff-U-Need.
Included as part of the blue collar operations, the nursing
staffing operations of the Group returned to modest operating
profitability during the year under review following losses
recorded in the previous two financial years.
During the year, the white-collar contracting businesses of Quest
and Emmanuels were merged under the single brand of Quest. The
strategic rationale for merging the two businesses was to
consolidate back office functions, eradicate duplicated
infrastructural costs and to combine the marketing efforts of both
businesses.
Market conditions remained difficult for the new merged entity,
particularly in the financial services sector, where volumes
remain under pressure. As a consequence, operating profit from
this business declined year on year.
The white collar permanent placement business of DAV recorded
strong profit growth buoyed by a shortage of skills, particularly
in the engineering and information technology sectors where DAV
have a particular expertise. Our other permanent placement
business, Premier Personnel, being focused in the financial
services sector, performed largely in line with the prior year.
Included in the white collar staffing segment is the first time
inclusion of Paracon with effect 1 December 2011. As such, there
is no comparative figure included in reported profits. The
contribution to Group profits for the initial three months, was in
line with expectations.
A disappointing operating performance was produced by FMS
Marketing Solutions (FMS). This was due to the non-renewal of one
of their major contracts. The training business, Production
Management Institute of SA (PMI), having concluded a small
acquisition during the year, delivered a credible contribution.
The financial services operations of the Group whereby relevant
financial, wellness and lifestyle products and services are
offered to the sizeable contract workforce of the Group, performed
particularly well.
Head office costs were kept roughly in line with inflationary
trends despite continuing upward cost pressure.
Industry developments
The debate surrounding the future of labour broking has moved into
its third year of negotiations, deliberations and discussions.
Negotiations have been on-going at the National Economic
Development and Labour Council (Nedlac) whereby, Government,
business and labour have sought to find common ground in an
attempt to negotiate a new labour dispensation for South Africa.
Following this process, the Department of Labour (DoL) published
various draft bills in March 2012 dealing with labour broking as
well as proposing other amendments to labour legislation. These
bills have received cabinet approval and it is believed that the
DoL intends submitting these bills to Parliament for final
approval and proclamation.
The Group is still busy assessing, understanding and analysing the
impact of the proposed bills but the anticipated impact on Group
profitability is expected to be minimal.
Financial overview
Normalised EBITDA of R309 million for the year ended 29 February
2012 was 20% ahead of the R259 million for the comparative period
as a result of the increased contribution from blue collar segment
and the first time inclusion of Paracon.
Normalised EBITDA margins remained stable at 4,8% (FY2011: 4,8% )
reflecting the continued challenging economic environment.
Operating cost control remained robust evidenced by an improvement
in the expense ratio to 16,9% (FY2011: 18,8%) despite an increase
in the absolute Rand value of 7% year on year.
Debt collection remains a critical part of the business and an
ongoing focus area for management. The cash-to-cash cycle remains
a high priority and in this regard, days settlement outstanding
(DSO) totalled 36 days (FY2011: 36 days). This result was achieved
despite the continued challenging collections environment.
The R215 million of cash generated by operations was 25% lower
compared to the R288 million generated for the prior year. Cash
generated from operations before working capital increased by 17%
(FY2011: decrease of 7%) given the higher level of profitability
year on year, but strain in the management of working capital and
the inclusion of Paracon resulted in R89 million being consumed by
working capital when compared to the R28 million released in the
prior year.
During the current year, the Group incurred increased charges in
respect of interest, taxation and dividends. This was a result of
the inclusion of the interest arising on the Paracon acquisition
debt, a higher normalised effective tax rate of 16% (FY2011: 11%)
and the reversion back to a full cash dividend pay-out.
Acquisition of business
As referred above, the acquisition of Paracon was concluded with
effect 1 December 2011.As such, it has been included in Group
profits for three months of this financial year. In terms of IAS
34 requirements, the profit before tax from Paracon included in
Group net profit before tax for the year ended February 2012 is
R8,3 million. Had the business combination been effective from 1
March 2011, the revenue of the Group would have been R7 258
million and net profit after tax would have totalled R140 million.
The directors of the Group consider these numbers to represent an
approximate measure of the performance of the combined Group on an
annualised basis and to provide a reference point for comparison
in future periods. In addition, the Group undertook the
acquisitions of LearnSys Proprietary Limited (LearnSys) and Top
Temps Proprietary Limited (UK) being relatively small in size.
Both LearnSys and Top Temps were funded out of working capital.
Their contribution to Group revenue and profits is considered
immaterial.
R`000
2012 2011
Total Total
Total purchase consideration 667 406 5 000
Less: Cash and cash equivalents acquired (44 841) (2 126)
Cash outflow on acquisition of business 622 565 2 874
Net purchase consideration for all business
combinations 622 565 2 874
Issue of shares- Paracon acquisition (371 699) -
Capitalisation of transaction costs - Paracon
acquisition 4 100 -
Cash outflow on acquisition of business 254 966 2 874
In complying with the IFRS statement on purchase accounting (IFRS
3),the Group determined the fair value of the assets and
liabilities acquired on the acquisition of the business as
follows:
2011
R`000 Paracon Other Total Total
Property, plant and equipment 5 868 900 6 768 1 106
Intangible assets 236 817 10 686 247 503 -
Investment in associate 44 777 - 44 777 -
Trade and other receivables 118 629 16 060 134 689 10 524
Cash and cash equivalents 43 121 1 720 44 841 2 126
Trade and other payables (76 463) (13 755) (90 218) (7 656)
Provisions (11 440) - (11 440) (2 126)
Taxation (3 125) (5 235) (8 360) (898)
Deferred taxation (56 470) (3 053) (59 523) 43
301 714 7 323 309 037 3 119
Resulting goodwill on
acquisition 334 985 23 384 358 369 1 881
Total consideration 636 699 30 707 667 406 5 000
The Group has declared a final dividend of 80 cents per share
(FY2011: 121 cents per share). When considered with the interim
dividend declared of 57 cents per share (FY2011: 54 cents per
share), the total dividends for the year under review totalled 137
cents per share (FY2011: 175 cents per share).
Changes to the board of Adcorp
Ms NS Ndhlazi was appointed as a non-executive director on
Tuesday, 16 August 2011. Ms MMT Ramano and Ms AT Alback resigned
as a non-executive director and an independent non-executive
director on Monday 20 June 2011 and Tuesday, 6 March 2012
respectively.
On Monday, 14 May 2012, Ms AT Alback was re-appointed as an
independent non-executive director to assist with the constitution
of the Audit and Risk Committee to approve the financial results
for the year ended 29 February 2012 and the Integrated Annual
Report. Ms Alback will then resign on Wednesday 23 May 2012 to
continue her permanent position.
Following the resignation of Ms Duduzile Mthimunye as company
secretary on Friday 30 September 2011, Mr AM Sher assumed the
responsibilities as company secretary in addition to his
responsibilities as Chief Financial Officer.
On Tuesday, 22 February 2012, Mr AM Sher resigned as company
secretary and Premium Corporate Consulting Services (Pty) Ltd was
appointed as the company secretary in his stead.
Outlook and prospects
Given the potential opportunities arising from the changing face
of the South African labour market, proposed impending changes to
labour legislation, the Group`s strong and continued commitment to
Black Economic Empowerment, technological advances in the industry
as well as our unique market positioning, the Adcorp Group is well
positioned for the future.
Basis of preparation
Adcorp prepares its accounts in accordance with International
Financial Reporting Standards (IFRS) of the International
Accounting Standards Board, South African Companies Act 71 of 2008
(as amended) and the JSE Listings Requirements. The accounting
policies are consistent with the prior year annual financial
statements. This SENS announcement contains the information as
required by IAS34 (Interim Financial Reporting) as well as the AC
500 standards as issued by the Accounting Practices Board or its
successor.
Contingent liabilities and commitments
The bank has guaranteed R11,7 million (FY2011: R11,6 million) on
behalf of the Group to creditors. As at the balance sheet date the
Group has outstanding operating lease commitments totalling R100,3
million (FY2011: R73,8 million) in non cancellable property
leases.
The Group has IT capital commitments contracted for of R7,9
million (FY2011: nil) relating to the Microsoft Dynamix AX 2012
upgrade.
Subsequent events
There are no significant events after the reporting date, being 29
February 2012, to the date of approval of the audited annual
financial statements, namely
22 May 2012.
Declaration of Final Dividend
Notice is hereby given that a final gross dividend of 80 cents per
share (FY2011: 121 cents per share) was declared on Tuesday, 22
May 2012 payable to shareholders recorded in the share register of
the Company at the close of business on the record date appearing
below. The salient dates pertaining to the final dividend are as
follows:
Last date to trade "cum" dividend Friday, 10 August 2012
Date trading commences "ex" dividend Monday, 13 August 2012
Record date Friday, 17 August 2012
Date of payment Monday, 20 August 2012
Ordinary share certificates may not be dematerialised or
rematerialised between Monday, 13 August 2012 and Friday, 17
August 2012, both days inclusive.
In determining the dividends tax (DT) of 15% to withhold in terms
of the Income Tax Act for those shareholders who are not exempt
from the DT, no secondary tax on companies (STC) credits have been
utilized. Shareholders who are not exempt from the DT will
therefore receive a net dividend of 68 cents per share net of DT.
The Company has 77 373 934 ordinary shares in issue and its income
tax reference number is 9233/68071/0
The above dates 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, 20 August 2012.
Preparation
The financial results have been prepared by A Viljoen, assisted by
H Farndell, W Manthe and T Mhlungu and supervised by AM Sher.
Auditor`s Opinion
The results have been audited by the independent auditors,
Deloitte & Touche in compliance with the requirements of the
Companies Act, 71 of 2008. A copy of their unmodified audit report
is available for inspection at the registered office of the
Company, 28 Sloane Street, Bryanston. Any reference to future
financial performance included in this announcement, has not been
reviewed or reported on by the Company`s auditors.
By order of the board
MJN Njeke RL Pike AM Sher
Chairman Chief Executive Officer Chief Financial Officer
22 May 2012
Executive directors C Bomela, RL Pike, AM Sher, PC Swart
Independent non- MJN Njeke (Chairman), ME Mthunzi, TDA Ross;
executive directors AT Alback
Non-executive directors G Dingaan, MR Ramaite, N Ndhlazi
Company secretary Premium Corporate Consulting Services (Pty)
Ltd
Transfer secretaries Link Market Services SA (Pty) Ltd,
13th Floor, 19 Ameshoff Street, Braamfontein
Sponsor Deloitte & Touche Sponsor Services (Pty) Ltd
Date: 22/05/2012 11:40:05 Produced by the JSE SENS Department.
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JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or
implicitly, represent, warrant or in any way guarantee the truth, accuracy or
completeness of the information published on SENS. The JSE, their officers,
employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature,
howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
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