| Mon 19 Aug 2002, 0:00 | | Adcorp Holdings Limited - Interim Results |
|
ADCORP HOLDINGS LIMITED - INTERIM RESULTS
Registration number 1974/001804/06
Share code: ADR ISIN number: ZAE00000139
INTERIM RESULTS
for the period ended 30 June 2002
Consolidated income statement
Audited
Unaudited Unaudited 12 months
Six months Six months to
to 30 June to 30 June 31 December
2002 Change 2001 2001
R`000 % R`000 R`000
Turnover 712 668 +23,3 578 167** 1 211 287
Operating profit 32 810 -39,5 54 234 74 470
Net interest paid (2 500) -404,0 (496) (1 326)
Investment income - - 1 532 1 526
Profit on sale of assets - - - 394
Loss on sale/closure
of subsidiaries (16 568) - - -
Share of profit from
associated companies 1 164 +289,3 299 1 264
Profit before taxation 14 906 -73,2 55 569 76 328
Taxation including STC (10 746) +36,1 (16 816) (23 358)
Profit after taxation 4 160 -89,3 38 753 52 970
Portion of profit
attributable to
minorities (157) +61,2 (405) (1 281)
Earnings attributable to
ordinary shareholders 4 003 -89,6 38 348 51 689
Reconciliation of
headline earnings
Earnings attributable
to ordinary
shareholders 4 003 -89,6 38 348 51 689
Profit on sale of assets (526) - - (383)
Loss on sale/closure
of subsidiaries 16 568 - - -
Investment income - - (1 532) (1 526)
Goodwill amortised 3 463 +49,6 2 315 6 997
Restructure costs - - - 6 234
Headline earnings 23 508 -39,9 39 131 63 011
Number of weighted shares
in issue (000) 40 126* -1,1 40 567 40 481
Earnings per share
- cents 10,0 -89,4 94,5 127,7
Headline earnings
per share - cents 58,5 -39,4 96,5 155,7
Diluted earnings per
share - cents 9,9 -89,4 93,6 126,9
Diluted headline earnings
per share - cents 58,3 -39,0 95,5 154,7
*Excluding 2,256 million treasury shares.
**Turnover to June 2001 was understated by R28,5 million, profits were not
affected.
Consolidated balance sheet
Unaudited Unaudited Audited
30 June 30 June 31 December
2002 2001 2001
R`000 R`000 R`000
Assets
Non-current assets 189 571 209 258 210 467
Fixed assets 60 208 64 583 62 336
Investments 4 294 15 809 6 218
Goodwill 109 111 123 353 130 573
Deferred taxation 15 958 5 513 11 340
Current assets 217 113 204 353 194 914
Taxation 3 282 642 3 282
Other current assets 213 831 203 711 191 632
Total assets 406 684 413 611 405 381
Equity and liabilities
Capital and reserves 272 292 271 164 279 323
Share capital and reserves 303 608 290 022 310 639
Vendor shares - 6 664 -
Cost price of shares held
by subsidiary (31 316) (25 522) (31 316)
Non-current liabilities 2 382 6 580 2 418
Minority shareholders` interest 1 438 405 1 281
Interest bearing long-term
liabilities 944 2 813 1 137
Deferred taxation - 3 362 -
Current liabilities 132 010 135 867 123 640
Interest bearing current
liabilities 23 534 19 259 11 518
Cash due to vendors 1 885 6 046 1 885
Non-interest bearing
current liabilities 100 605 98 921 94 288
Taxation 5 986 11 641 15 949
Total equity and liabilities 406 684 413 611 405 381
Number of ordinary
shares in issue (000) 40 176* 40 460 40 117
Net asset value per share - cents 678 670 696
Return on net assets (%) 11,0 18,5 27,3
*Excluding 2,256 million treasury shares.
Consolidated cash flow statement
Unaudited Unaudited Audited
Six months Six months 12 months
to to to
30 June 30 June 31 December
2002 2001 2001
R`000 R`000 R`000
Cash generated by operations 44 113 64 740 97 099
Increase in working capital (15 882) (40 175) (25 549)
Cash generated by
operating activities 28 231 24 565 71 550
Net interest paid (2 500) (496) (2 852)
Investment income - 1 532 1 526
Taxation paid (23 921) (10 976) (19 274)
Dividend paid (11 233) (11 312) (11 312)
Cash available from
operating activities (9 423) 3 313 39 638
Cash effects from investment
and financing activities (2 593) (25 219) (53 803)
Net cash movement (12 016) (21 906) (14 165)
Cash on hand at the
beginning of the period (11 518) 2 647 2 647
Net cash on hand at the
end of the period (23 534) (19 259) (11 518)
Cash generated by operating
activities to operating
profit (%) 86,0 45,3 96,1
Statement of changes in equity
Non-
distri- Distri-
Treasury Share Share butable butable
shares premium capital reserves reserves Total
R`000 R`000 R`000 R`000 R`000 R`000
Group
Balance as at
31 December 2000 (14 183) 97 244 1 035 - 152 661 236 757
Share capital - - 24 - - 24
Share premium - 7 986 - - - 7 986
Net profit for the
year per income
statement - - - - 51 689 51 689
Cost price of shares
purchased by
subsidiary (17 133) - - - - (17 133)
Balance as at
31 December 2001 (31 316) 105 230 1 059 - 204 350 279 323
Balance as at
1 January 2002 (31 316) 105 230 1 059 - 204 350 279 323
Share capital - - 14 - - 14
Share premium - 185 - - - 185
Net profit for the
year per income
statement - - - - 4 003 4 003
Ordinary dividend - - - - (11 233) (11 233)
Balance as at
30 June 2002 (31 316) 105 415 1 073 - 197 120 272 292
SEGMENT REPORT
Annual Operating Operating Contribution
turnover profit profit to group profit
2002 2001 2002 2001 2002 2001 2002 2001
R`000 R`000 R`000 R`000 % % % %
Central costs - - (4 741) 1 130 - - (14,4) 2,1
Permanent
Recruitment 88 092 85 165 3 231 12 384 3,7 14,5 9,8 22,8
Flexible
Staffing 464 463 339 578 21 388 23 173 4,6 6,8 65,2 42,7
Education and
Training 60 356 52 869 1 336 5 295 2,2 10,0 4,1 9,8
Corporate
Communications 66 147 66 700 4 096 5 987 6,2 9,0 12,5 11,0
Market
Research 31 996 28 532 6 767 5 520 21,1 19,3 20,6 10,2
Disposed/closed
operations 1 614 5 323 733 745 - - 2,2 1,4
Total operating
profit 712 668 578 167 32 810 54 234 4,6 9,4 100,0 100,0
COMMENTS
TRADING OVERVIEW
After a difficult 2001 financial year that was adversely affected by a downturn
in the Permanent Recruitment Division as well as by substantial losses in the
Training Division, the focus of the Group in 2002 has been to rebuild these
operations and to capitalise on the solid performance of the Group`s other three
divisions achieved in the prior year.
In terms of turning around the performance of the Training Division, the Group
set the objective for the division to break even by the half-year stage, which
it has achieved.
Further restructuring of this division has positioned it well to return to
profitability and cash generation in the second half of the year. This further
restructuring has cost approximately R1 million in the period under review.
The Training Division has also been successful in disposing of and closing its
non-core, cash absorbing and loss-making operations during the period. These
disposals include Atcor that was disposed of and Devtrain that was closed during
the financial period under review while Ambassador Training has been disposed of
subsequent to 30 June 2002.
These operations have resulted in a significant cash drain on the resources of
the Group over the past year, which will now be stemmed.
These disposals will result in the division being totally focused on the
corporate market with far lower overheads, limited infrastructure and cash
generative operations. While the Group no longer owns the information technology
offerings of Ambassador, these offerings will be bought in on an outsourced
basis as and when required.
The disposal of Atcor together with the closure of Devtrain has necessitated a
significant write off of goodwill and loan accounts of R16,6 million in the
period under review equating to 41 cents per ordinary share. An additional
amount of approximately R31 million is expected to be written off in the second
half of the financial year relating to further restructuring currently in
progress. This equates to 77 cents per ordinary share.
The Permanent Recruitment Division, which showed signs of recovery in the first
quarter, has remained depressed. This has particularly been the case in the
financial services and information technology sectors, which have been
retrenching staff as opposed to recruiting staff.
The Permanent Recruitment Division has embarked on a repositioning whereby its
offerings to clients are distinctly differentiated from those of its
competitors. The division has been recently bolstered by the acquisition of a
60% stake in Ethoz, a company specialising in job profiling and candidate
assessment.
The focus of the division is to increase its success rate in the placement of
the right candidate in the right job, which should have a positive impact on
their performance.
The Flexible Staffing Division continues to perform well and is the biggest
profit contributor to the Group. Despite the division reporting slightly lower
earnings compared to the same period for the prior year, the division will show
real earnings growth for the full year. The division is focused on innovating
cost-effective, outsourced staffing solutions to its clients and continues to
grow from strength to strength despite coming off a high base following an
outstanding set of results in the prior year.
The Corporate Communications Division also comes off a high base but continues
to perform well. The financial communications and information technology
communications areas both had a difficult second half in the prior year but have
recovered well despite a relatively soft market.
The Market Research Division has had a good start to the year having reported
real growth and is reaping the benefits of its organisational renewal programme
started last year aimed at re-energising the business, which has been most
successful.
Operationally the Group continues to place a strong emphasis on cash generation
and working capital management.
The segment report shows a decrease in margins with the exception of Market
Research which has increased its margin by 1,8%. The drop in the Permanent
Recruitment margin is due to lower volumes on a fixed cost base together with
losses posted by two of the permanent recruitment companies. These losses will
not recur in the second half. A higher proportion of lower margin recruitment
advertising sales had a further negative impact on the margin.
The decrease in the Flexible Staffing margin is mainly due to an increase in
payrolling business as well as significant growth in lower margin blue collar
business. Margins are expected to improve during the second half of the year.
Education and Training margins are down as a result of low throughput while the
Corporate Communications margin has been adversely affected by a change in
public sector sales mix during the period under review.
While reported headline earnings for the period under review are below the level
of earnings reported for the same period last year, this is largely the result
of the Group having generated most of its 2001 profits in the first six-month
period of that year. Given a far lower level of profitability in the second half
of the prior year compared to the buoyant first half, the Group has recovered
well.
FINANCIAL OVERVIEW
Whilst turnover for the six-month period under review increased by 23,3%,
operating profit reflected a 39,5% decrease compared to the prior year profit
for the same period. This was due mainly to lower levels of trading activity
particularly in the Permanent Recruitment and Training Divisions.
Cash generated by operations during the six-month period under review amounted
to R44,1 million of which R15,9 million was required to fund working capital.
The Group`s continued focus on working capital management resulted in a
reduction of debtors days outstanding from 49 days reported at the end of the
prior year to 47 days at the interim stage.
Certain restructuring costs of approximately R1 million were incurred which
related to costs of restructuring the Training Division. In addition, due to the
sale and closure of certain training operations, goodwill and irrecoverable loan
accounts amounting to R16,6 million related to these operations have been
written off. The latter has been excluded for the purposes of calculating
headline earnings per share. The effective tax rate of 72,1% is due to the
disposal of non-performing capital assets, but for which the rate would have
been 34,5%. This is made up of 30,0% company tax plus 4,5% being STC on
dividends paid.
CORPORATE GOVERNANCE
Deloitte & Touche have been appointed as joint auditors to the Adcorp Group.
Deloitte & Touche have also been requested to investigate the structure of the
Adcorp board relevant to the recommendations of the King II draft report and
their proposals are currently being considered.
ACQUISITIONS
During the period, the Group acquired a 60% stake in Ethoz (Proprietary) Limited
for an amount of R850 000. The acquisition supplements the offerings of the
Permanent Recruitment Division.
Subsequent to the balance sheet date, the Group has recently acquired
controlling stakes in two niche, European placement agencies, namely Astbury
Jones Limited and Sandton Group Limited for amounts of
GBP420 000 and GBP500 000 respectively. The holding in each of these operations
is equal to 51% of the equity. These acquisitions will enable the Permanent
Recruitment Division to better service their South African based clients that
have international operations as well as to facilitate knowledge exchanges,
candidate exchanges and client exchanges.
OUTLOOK
The major challenges facing the Group over the past six months have been to turn
around the Training Division and to reposition the Permanent Recruitment
Division in a depressed market.
In terms of both these initiatives, good progress has been made although at a
slower pace than was initially anticipated.
The training operations are expected to revert to modest profitability in the
second half of the year. Permanent Recruitment is expected to perform better in
the second half of the year based on taking advantage of niche opportunities
rather than as the result of a recovery in the recruitment industry, which is
only expected towards the latter part of the year, or early in the new year.
Flexible Staffing, Corporate Communications and Market Research are expected to
continue performing well.
ACCOUNTING POLICIES AND PRESENTATION
This report has been prepared in accordance with Statements of Generally
Accepted Accounting Practice. The accounting policies and methods of computation
are consistent with those applied in the annual financial statements for the
year ended 31 December 2001.
DIVINDED
No interim dividend has been declared.
By order of the board
Dr F van Zyl Slabbert RL Pike FD Burd
Chairman Chief Executive Officer Financial Director
19 August 2002
Directors: RL Pike (Chief Executive Officer), VC Baker,
HW Barenblatt, FD Burd, M Liphosa, Dr RD Marcus, RB McGregor,
A Rubinstein, PC Swart
Non-executive Directors: Dr F van Zyl Slabbert (Chairman),
S Shonhiwa (Deputy Chairman), Dr DE Baloyi, Dr FP Jacobsz,
MH Lekota, Dr P Ngwenya, LM Rouillard
Date: 19/08/2002 05:30:00 PM Produced by the JSE SENS Department
