| Tue 3 Sep 2002, 0:00 | | Adcorp Holdings Limited - Disposal Announcement |
|
Adcorp Holdings Limited - Disposal Announcement
Adcorp Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number 1974/001804/06)
(Share code: ADR ISIN: ZAE00000139)
("Adcorp")Disposal of the following subsidiaries in the Training Division:
- The issued share capital of and loan account claims against Boston City
Campus and Business College (Pty) Limited, BBC Franchising (Pty) Limited, Boston
Business College (Pty) Limited and SA Education Loans (Pty) Limited ("Boston").
- The issued share capital of and loan account claims in the Boston`s
property companies Sebroms (Pty) Limited (which owns a property situated at the
corner of Louis Botha Avenue and Short Road, Orchards, Johannesburg) and
Altraine Investments (Pty) Limited ( which owns a property situated at 716 and
718 Schoeman Street, Arcadia, Pretoria) ("the Boston properties").
- The disposal of the fixed assets and closure of Ambassador Training
("Ambassador"), a division of Knovation at Adcorp (Pty) Limited ("Knovation").
Introduction
Adcorp has disposed of the entire issued share capital of and loans against
Boston and the Boston properties to a consortium led by management with effect
from 30 April 2002.
Knovation, a wholly owned subsidiary of Adcorp, has disposed of the fixed assets
of Ambassador, to Torque Technical Computer Training (Pty) Limited ("Torque").
Knovation closed this division with effect from 1 August 2002.
Rationale
Adcorp has further advanced its restructuring plans with the disposal of its
training operations, Boston and Ambassador. These operations have resulted in a
significant drain on the cash resources of the Adcorp Group, which has now been
stemmed. In addition, Boston, being predominantly focused in the retail training
market, has fallen outside of the Adcorp Group`s strategy of focusing
exclusively on the business-to-business or corporate market.
These disposals, together with the sale of Atcor (a division of Knovation) and
closure of DevTrain (Pty) Limited announced earlier this year, will result in
the Training Division now being totally focused on the corporate market with
lower overheads, limited infrastructure and cash generative operations. The
rationale behind the individual disposals is summarised below:
Boston - This group of companies specialises in retail training which is outside
of the scope of Adcorp`s business-to-business focus. Training material is
delivered primarily through electronic media, making the business capital
intensive and, in addition, the business carries a high exposure to bad debts.
Boston has also been adversely affected by government subsidies to public
institutions which compete directly with private providers resulting in a
pricing disadvantage which continues to negatively impact enrolment numbers.
Ambassador - This company specialises primarily in Microsoft training which is
very competitive and produces low margins. Cisco training is the other main
offering of the business which requires continuous, significant capital
expenditure in order to facilitate the cutting edge, technology training. The
company produced losses and absorbed R2,5 million in cash during 2001 and has
continued to do so in 2002 although at a slower rate. Ambassador has been sold
to Torque which is highly regarded in the market as a Cisco trainer. While the
Adcorp Group no longer owns the information technology offerings of Ambassador,
these will be bought in from Torque on an outsourced basis as and when required.
Disposal consideration and terms of the disposals
Boston and the Boston properties have been disposed of for R7,7 million of which
R1,7 million was payable on signature with a further R500 000 to be paid each
year for four years with a bullet payment of R1,5 million in the fifth year. In
addition, Boston has agreed to pay a monthly royalty to Adcorp of 35% of
turnover accruing from business referred by Adcorp until the aggregate royalty
paid equates to R2,5 million.
The Ambassador fixed assets were disposed of for an amount of R1,2 million while
Torque assumed training commitments undertaken by Ambassador to the value of
R1,6 million. In addition, a royalty is payable to Adcorp on all Torque turnover
at the rate of 2,5% for the first year, 2% for the second year and 1,5% in the
third year. The royalty is subject to a minimum of R2,3 million and a maximum
of R3,8 million over the three year period.
Monies received from the disposals will be absorbed into Adcorp Group funds.
Financial Effects
The financial effects of the disposal of Boston and the Boston properties and
the disposal and closure of Ambassador, using the six-month interim results of
Adcorp to 30 June 2002 as a base, are shown below:
- The "Before" column reflects the figures as per the published interim results
for the six months ended
30 June 2002.
- The "After" column reflects the pro forma figures for the six-month period to
June 2002 from which all figures for Ambassador, Boston and the Boston
properties have been eliminated. Interest at 12% per annum on the proceeds of
the disposals has been added to these results.
Six months to 30 June 2002
Increase/
Before After (Decrease)
Notes (cents) (cents) %
Earnings per share 1 10,0 2,2 (78,0)
Headline earnings
per share 1 58,5 50,8 (13,2)
Net asset value
per share 2 677,7 599,5 (11,5)
Net tangible asset
value per share 406,2 342,0 (15,8)
Note 1 - Due to the higher profitability normally achieved by Boston in the
first half of the year, the impact on earnings and headline earnings per share
is greater when expressed over the first six months than it would be if
expressed over a full 12-month period.
Note 2 - The decrease in net asset value in Rand terms amounts to R31,4 million
comprising mainly the write off of loan accounts, goodwill and loss on sale of
assets and properties.
3 September 2002
Sponsor
Corporate and legal advisor
Date: 03/09/2002 05:24:00 PM Produced by the JSE SENS Department
