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ADCORP HOLDINGS LIMITED
Registration number 1974/001804/06
Share code: ADR ISIN number: ZAE00000139
One company, many strengths
REVIEWED RESULTS for the year ended 31 December 2002
Salient features
- Headline earnings 111 cents per share
- Capital distribution of 37 cents per share
- Cash generated by trading activities to operating profit is 102%
- Debtors` days down from 49 to 44
Group income statement
For the year ended 31 December
Reviewed Audited
2002 2001
R`000 R`000
Total turnover 1 478 059 1 211 287
Cost of sales 1 025 156 747 517
Operating costs 371 230 366 779
EBITDA 81 673 96 991
Depreciation 14 965 16 026
Amortisation 5 159 6 997
Total operating 61 549 73 968
profit
Interest received 12 543 8 556
Interest paid (17 795) (9 882)
Share of profits from 1 665 1 766
associates
Impairment of (1 483) -
investment property
and share trust
(Loss)/profit on sale (83) 394
of assets
(Loss)/profit on sale (75 085) 1 526
of investments
(Loss)/profit before (18 689) 76 328
taxation
Taxation (18 803) (23 358)
(Loss)/profit after (37 492) 52 970
taxation
Minority 190 (1 281)
shareholders` share
of profits
(Losses)/earnings (37 302) 51 689
attributable to
ordinary shareholders
Reconciliation of
headline earnings
(Losses)/attributable (37 302) 51 689
earnings
Impairments to 1 483 -
investment property
and share trust
Profit/(loss) on sale 83 (394)
of assets
(Loss)/profit on 75 085 (1 526)
disposals of
investments
Add: goodwill 5 159 6 997
amortised
Headline earnings 44 508 56 766
Number of shares in 40 200 40 481
issue - weighted
(000s)
Headline earnings per 111 140
share - cents
Diluted headline 111
earnings per share
Earnings per share (93) 128
- cents
Diluted earnings per (93)
share
Dividend per share 37 28
- cents
Group balance sheet
As at 31 December
Reviewed Audited
2002 2001
R`000 R`000
ASSETS
Non-current assets 173 321 208 930
Fixed assets 40 432 58 874
Investments and 20 399 3 837
loans
Other financial 2 090 2 381
assets
Intangibles 88 969 130 323
Deferred taxation 21 431 13 515
Current assets 264 296 258 893
Cash at bank 54 523 63 979
Other current 200 016 191 632
assets
Vendor for sale of 5 884
business
Taxation prepaid 3 873 3 282
Total assets 437 616 467 823
EQUITY AND
LIABILITIES
Capital and 225 048 270 535
reserves
Share capital 1 064 1 059
Share premium 106 930 105 230
Cost price of (31 316) (31 316)
shares held by
subsidiary
Non-distributable 971 -
reserves
Distributable 147 399 195 562
reserves
Minority interest 394 1 281
Non-current
liabilities
Interest-bearing 1 002 1 137
long-term
liabilities
Current liabilities 211 172 194 870
Cash due to vendors - 1 885
Bank overdraft 104 173 75 497
Non-interest- 76 412 89 355
bearing current
liabilities
Provisions 25 038 12 184
Taxation 5 549 15 949
Total equity and 437 616 467 823
liabilities
Number of ordinary 40 294 40 117
shares in issue
- R`000
Net asset value per 582 671
share - cents
Operating lease 17 549
commitments
Group abridged
Consolidated cash flow
For the year ended 31 December
Reviewed Audited
2002 2001
R`000 R`000
Cash generated by 81 648 97 099
operations
Increase in working (18 620) (25 549)
capital
Cash generated by 63 028 71 550
operating
activities
Net (interest (5 252) (1 326)
paid)/investment
income
Taxation paid (39 752) (19 274)
Dividend paid net (10 973) (11 312)
Cash available from 7 051 39 638
operating
activities
Cash effects from (45 202) (53 130)
investment
activities
Cash effects from 19 (673)
financing
activities
Net cash movement (38 132) (14 165)
Cash on hand at the
beginning
of the year (11 518) 2 647
Net
(borrowings)/cash
on hand at
the end of the (49 650) (11 518)
year
Segment report
Turnover Operating
profit
Year to 2002 2001 2002 2001
December
2002/2001 R`000 R`000 R`000 R`000
Central costs - - (12 161) (3 510)
Permanent 181 361 149 886 3 954 18 510
Recruitment
Flexible 992 831 746 450 54 719 48 191
Staffing
Education and 76 720 104 871 (10 718) (10 585)
Training
Corporate 155 669 144 340 13 868 11 335
Communication
s
Marketing 71 478 65 740 11 887 10 027
Research
Total 1 478 059 1 211 287 61 549 73 968
operating
profit
Operating profit Contribution to Net
margin group profit asset
value
2002 2001 2002 2001 2002 2001
% % % % R`000 R`000
- - (20,3) (4,7) 127 870 162 426
2,3 12,3 6,5 25,0 12 781 7 657
5,5 6,5 89,3 65,2 84 451 86 125
(13,8) (10,1) (17,5) (14,3) (28 864) (7 934)
9,0 7,9 22,6 15,3 21 313 15 241
16,6 15,3 19,4 13,6 7 497 7 020
4,2 6,1 100,0 100,0 225 048 270 535
Note: The group`s operations are situated mostly in South Africa with only
immaterial operations situated in the UK and Africa. It is therefore not
considered meaningful to disclose information on geographical segments.
GROUP Statement of changes in equity
For the year ended 31 December 2002
Treasury Share Share
shares premium capital
R`000 R`000 R`000l
Balance 31 (31 316) 105 230 1 059
December 2001
Share capital - - 5
Share premium - 1 700 -
Dividend paid
Non-
distributable
reserve
raised
Net loss for - - -
the year per
income
statement
Balance 31 (31 316) 106 930 1 064
December 2002
Non-distri- Distri-
butable butable
reserves reserves
R`000 R`000 Total
- 195 562 270 535
- - 5
- - 1 700
(10 861) (10 861)
971 971
- (37 302) (37 302)
971 147 399 225 048
Comments
Overview
Following a difficult 2001, the 2002 financial year continued to be a difficult
one for the Group and was characterised by a need to reposition the Group for
the future, necessitating significant restructuring and rationalisation in those
divisions experiencing difficulty and depressed trading conditions.
Hardest hit were the Education and Training and Permanent Recruitment divisions,
which experienced a continuation and worsening of the poor trading conditions
that were experienced in the second half of the prior year.
The Flexible Staffing division continued its good run whilst the Corporate
Communications and Market Research divisions also produced strong performances.
Headline earnings per share of 111 cents (2001: 140 cents) were 21% below those
achieved in the prior year. This decline in earnings is largely the result of
the tough trading conditions referred to in the Education and Training and
Permanent Recruitment divisions as well as significant restructuring and
retrenchment costs of R9,3 million incurred in repositioning these divisions.
The group has placed a strong emphasis on cash management during the past year.
Being a low capital intensity, service related business, the major asset the
Group funds is its debtors` book. As such, the cash management emphasis is on
debtors` management.
To this extent, the Group has been successful in reducing its outstanding
debtors` days from 49 days (F2001) to 44 days in the current year. In addition,
one of the other key cash management measures, cash generated by trading
activities to operating profit, the Group converted 102% of its operating profit
into cash versus 97% in the prior year.
This better performance in terms of cash management has enabled the Group to
recommend a capital distribution of 37 cents per share.
It is anticipated that this improved level of dividend cover will continue into
the future.
In terms of management`s strong focus and commitment to profitability, cash
generation and strategic fit, the Group has undertaken a number of restructures,
disposals and closures during the year. These actions, whilst having a
significant impact on profitability in the year under review by way of the write
off of goodwill, investments, intercompany loans, retrenchment costs and other
related restructuring and closure costs, will position the Group exceptionally
well for the future. All cash consuming or non-profitable businesses within the
Group have now been fixed, closed or disposed of.
During the year, the Group disposed of the operations of Boston City Campus and
Business College, Atcor, Ambassador Training, the Academy of Financial Markets
and Equal Access. In addition, the operations of Devtrain were closed and the
minority shareholding in Ikhwezi was acquired. Significant restructuring took
place in the Education and Training division as well as the Permanent
Recruitment division.
As a result of these activities, the Group incurred goodwill, investment and
loan write-offs of R75 million and incurred restructuring costs of R9,3 million.
These actions have resulted in the Education and Training division now being
totally focused on the business-to-business market with lower overheads, limited
infrastructure and cash generative operations whilst the restructuring within
the Permanent Recruitment division has resulted in a more appropriately sized
infrastructure given the shrinkage in this market.
In addition, the Permanent Recruitment division has been extremely successful in
redesigning and repackaging its offerings drawing on the entire spectrum of
divisional offerings coupled with the candidate assessment and job profiling
capabilities of Ethoz of which, a 60% shareholding was acquired during the year
for an amount of R885 000.
The Group also acquired stakes in two niche, European placement agencies, namely
Astbury Jones Limited and the Sandton Group Limited for amounts of 420 000 and
500 000 respectively. In addition to enabling the Permanent Recruitment
division to better service their South African-based clients that have
international operations, these acquisitions also facilitate knowledge
exchanges, candidate exchanges and client exchanges.
FINANCIAL OVERVIEW
Turnover for the year was 22% ahead of turnover achieved for the same period
last year whilst operating profit of R61,5 million was 17% below prior year`s
operating profit of R74 million. The cost of disposals of non-performing cash
absorbing entities amounted to R75 million which resulted in the loss of R37
million. Whilst this is disappointing it has been necessary in order to prevent
further losses from those companies.
ACCOUNTING POLICIES
Consistent accounting policies and methods of computation have been used in the
preparation of these financial statements as were used in the annual financial
statements to 31 December 2001, except that owner-occupied properties are now
depreciated and leave pay accruals are based on total cost of employment. The
accounting policies adopted are now in compliance with South African Statements
of Generally Accepted Accounting Practice.
DISTRIBUTION OF CAPITAL
The board has proposed a capital distribution of 37 cents per share subject to
shareholders` approval.
CORPORATE GOVERNANCE
The board of directors is fully committed and places a strong emphasis on
effective corporate governance. Adcorp fully supports the Code of Corporate
Practices and Conduct and endorses the need to conduct its business with the
highest standards of corporate practice.
During the year, the board of directors was restructured to ensure a more
effective and compliant board with the right balance of directors in terms of
roles, ethnic and gender diversity, mix of executive to non-executive directors
as well as skills diversity.
As a result of these changes, the Audit and Remuneration committees were also
reconstituted.
These changes to the board have settled down and appear to have been well
received from both within as well as externally to the organisation.
In addition to the changes to the board, in further promoting good corporate
governance within the organisation, the need to appoint a reputable,
international auditing firm is deemed appropriate. As such, Deloitte & Touche
were appointed as joint auditors to the Group during the year.
REVIEW OF RESULTS
The results have been reviewed by the joint independent auditors. A copy of
their review report, which is not qualified, is available for inspection at the
registered office of the company, The Atrium, corner Rustenburg Road and 7th
Avenue, Melville.
BLACK ECONOMIC EMPOWERMENT
Black economic empowerment and transformation in the workplace is an issue of
critical importance to the Group`s success and one that receives prominence in
management deliberations.
To this extent, the Group has adopted a six-tiered approach to uplifting and
empowering those from previously disadvantaged communities.
The policy focuses on shareholding, board representation, procurement,
affirmative action, capacity building and social investment.
Significant progress has been made in each of these areas with a major
initiative under way to introduce representative shareholding into the Group.
THE YEAR AHEAD
Given the refocus of the Group, the restructuring, reorganisation and resultant
positioning for the future, management is determined that 2003 will see a
significant improvement in performance for the year.
The emphasis continues to be on growing the business both locally and in new
markets with a particular emphasis on the African continent, cash management,
black economic empowerment, simplifying the business, sound corporate governance
and delivering outstanding service to our clients.
Whist management believe that the majority of the restructuring required to
reposition the Group correctly for the future has been done, management will
remain vigilant in identifying any need to adjust to changing market conditions.
By order of the board
Dr F van Zyl Slabbert RL Pike FD Burd
Chairman Chief Executive Officer Financial Director
5 March 2003
Executive directors: RL Pike (Chief Executive Officer),
FD Burd (Financial Director), VC Baker, M Liphosa
Non-executive directors: HW Barenblatt, RB McGregor, PC Swart
Independent directors: Dr F van Zyl Slabbert (Chairman), SO Shonhiwa (Deputy
Chairman), FN Khanyile-Nkosi, S Sebotsa
Visit our website at http://www.adcorp.co.za
Date: 06/03/2003 07:44:00 AM Supplied by www.sharenet.co.za
Produced by the JSE SENS Department
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