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ADVTECH LIMITED -
UNAUDITED RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2003
ADVTECH LIMITED
REGISTRATION NUMBER: 1990/001119/06
ISIN NUMBER : ZAE000013819
JSE CODE : ADH
HEADLINE EARNINGS PER SHARE +43%
OPERATING PROFIT +27%
CASH FLOWS FROM OPERATING ACTIVITIES +39%
ABRIDGED INCOME STATEMENT FOR THE 6 MONTHS ENDED 30 JUNE 2003
RESTATED
UNAUDITED UNAUDITED AUDITED
6 MONTHS 6 MONTHS 12 MONTHS
% TO 30 JUNE TO 30 JUNE TO 31 DEC
NOTES CHANGE 2003 2002 2002
(R"000) (R"000) (R"000)
REVENUE 244 121 240 234 470 078
-EDUCATION 15 210 127 182 888 368 690
-RESOURCING-
CONTINUING
OPERATIONS 1 33 994 33 811 64 823
-RESOURCING-
DISCONTINUED
OPERATIONS - 23 535 36 565
OPERATING
PROFIT BEFORE
DEPRECIATION
AND
AMORTISATION 30 049 24 870 55 292
-EDUCATION 21 39 672 32 699 69 680
-RESOURCING-
CONTINUING
OPERATIONS -44 3 459 6 132 12 981
-RESOURCING-
DICONTINUED
OPERATIONS - (2 646) (6 619)
-CENTRAL
ADMINISTRATION (8 854) (8 057) (12 719)
-LITIGATION
COSTS (4 228) (3 258) (8 031)
DEPRECIATION
AND
AMORTISATION (10 543) (9 466) (19 835)
OPERATING
PROFIT 27 19 506 15 404 35 457
NET INTEREST
PAID -4 (4 951) (5 167) (13 891)
EQUITY
ACCOUNTED
EARNINGS 669 557 1 129
PROFIT BEFORE
EXCEPTIONAL
ITEMS 41 15 224 10 794 22 695
EXCEPTIONAL
ITEMS 2 4 435 (245 979) (258 806)
PROFIT/(LOSS)
BEFORE
TAXATION 19 659 (235 185) (236 111)
TAXATION (1 765) (1 319) (7 148)
PROFIT/(LOSS)
AFTER
TAXATION 17 894 (236 504) (243 259)
ATTRIBUTABLE TO
OUTSIDE
SHAREHOLDERS - (2) 77
ATTRIBUTABLE TO
ORDINARY
SHAREHOLDERS 17 894 (236 506) (243 182)
NUMBER OF
SHARES IN
ISSUE (`000) 393 665 393 665 393 665
WEIGHTED AVERAGE
NUMBER OF SHARES
IN ISSUE (`000) 393 665 393 665 393 665
EARNINGS PER
SHARE (CENTS) 4.5 (60.1) (61.8)
HEADLINE EARNINGS
PER SHARE (CENTS) 43 3.3 2.3 5.3
FULLY DILUTED
NUMBER OF
SHARES (`000) 393 665 393 665 393 665
FULLY DILUTED
EARNINGS PER SHARE
(CENTS) 4.5 (60.1) (61.8)
FULLY DILUTED
HEADLINE EARNINGS
PER SHARE (CENTS) 3.3 2.3 5.3
NET ASSET VALUE
PER SHARE (CENTS) 49.8 49.0 45.9
ABRIDGED BALANCE SHEET AS AT 30 JUNE 2003
RESTATED
UNAUDITED UNAUDITED AUDITED
6 MONTHS 6 MONTHS 12 MONTHS
TO 30 JUNE TO 30 JUNE TO 31 DEC
NOTES 2003 2002 2002
(R"000) (R"000) (R"000)
ASSETS
PROPERTY, PLANT
AND EQUIPMENT 4 315 384 305 815 310 632
GOODWILL AND
TRADEMARKS 1 1 1
DEVELOPMENT COSTS - 2 402 2 168
LOAN TO SHARE
INCENTIVE TRUST 8 106 12 686 8 106
DEFERRED TAXATION
ASSET 39 447 38 435 38 188
INVESTMENTS 1 759 1 361 1 933
CURRENT ASSETS 38 176 74 668 44 147
INVENTORIES 3 635 3 916 3 842
PREPAYMENTS 3 119 9 980 3 109
TAXATION 66 3 253 2 779
ACCOUNTS
RECEIVABLE-GROSS 37 396 54 544 33 883
-PROVISIONS (6 740) (6 395) (4 470)
CASH RESOURCES AND
LIQUID INSTRUMENTS 700 9 370 5 004
TOTAL ASSETS 402 873 435 368 405 175
EQUITY AND LIABILITIES
ORDINARY SHARE
CAPITAL 3 937 3 937 3 937
ORDINARY SHARE
PREMIUM 355 100 355 100 355 100
NON-DISTRIBUTABLE
RESERVES 15 943 17 090 18 231
ACCUMULATED LOSS (178 872) (183 365) (196 766)
ORDINARY SHAREHOLDERS
EQUITY 196 108 192 762 180 502
OUTSIDE SHAREHOLDERS
INTEREST - 1 830 -
INTEREST BEARING
DEBT 66 159 94 121 134 163
-MEDIUM-TERM 4 21 887 30 820 20 624
-SHORT-TERM 4 25 505 33 711 36 915
-BANK OVERDRAFTS
AND BANKERS"
ACCEPTANCES 4 18 767 29 590 76 624
VENDOR CLAIMS 7 668 10 734 7 333
FEES IN ADVANCE 76 823 69 941 24 746
ACCOUNTS PAYABLE 53 106 64 760 54 588
TAXATION 3 009 1 220 3 843
TOTAL EQUITY AND
LIABILITIES 402 873 435 368 405 175
STATEMENT OF CHANGES IN EQUITY FOR THE 6 MONTHS ENDED 30 JUNE 2003
NON- (ACCUMULATED
DISTRIBU- LOSS)/
SHARE SHARE TABLE RETAINED
CAPITAL PREMIUM RESERVES EARNINGS TOTAL
(R"000) (R"000) (R"000) (R"000) (R"000)
BALANCE AT THE
BEGINNING OF
THE YEAR 3 937 355 100 18 231 (196 766) 180 502
ACCUMULATED
PROFIT FOR THE
PERIOD 17 894 17 894
MOVEMENT IN
TRANSLATION
RESERVES (2 288) (2 288)
BALANCE AT THE
END OF THE
PERIOD 3 937 355 100 15 943 (178 872) 196 108
NOTES TO THE FINANCIAL STATEMENTS FOR THE 6 MONTHS ENDED 30 JUNE 2003
RESTATED
UNAUDITED UNAUDITED AUDITED
6 MONTHS 6 MONTHS 12 MONTHS
TO 30 JUNE TO 30 JUNE TO 31 DEC
2003 2002 2002
(R"000) (R"000) (R"000)
1. THE FINANCIAL STATEMENTS HAVE BEEN PREPARED IN ACCORDANCE WITH SA GAAP AND
THE ACCOUNTING POLICIES ARE CONSISTENT WITH THOSE APPLIED IN THE PREVIOUS
FINANCIAL PERIOD. CONSEQUENTLY THE EFFECTS OF AC 133 HAVE NOT BEEN INCORPORATED
INTO THE PRESS RELEASE. THE EFFECTS, NOT ANTICIPATED TO BE SIGNIFICANT, WILL BE
INCORPORATED AT YEAR END. COMPARITIVES FOR THE 6 MONTHS TO JUNE HAVE BEEN
RESTATED FOR THE CHANGE IN ACCOUNTING TREATMENT OF PREPAYMENTS AND THE EFFECTS
OF CIRCULAR 7 ADOPTED AS PER OUR PREVIOUS AUDITED FINANCIAL RESULTS.
2.EXCEPTIONAL ITEMS (5 073) 245 753 264 181
EXCEPTIONAL ITEMS
BEFORE TAXATION (4 435) 245 979 258 806
(PROFIT)/LOSSES
-DISCONTINUED
OPERATIONS-AUSTRALIA (5 804) - 5 860
(PROFIT)/LOSSES
-DISCONTINUED
OPERATIONS-OTHER (650) 272 1 126
LOSS ON DISPOSAL OF
DIVISIONS OR ASSETS 376 730 6 897
GOODWILL WRITTEN DOWN - 238 153 238 099
GOODWILL AMORTISATION - 6 824 6 824
DEVELOPMENT COSTS
IMPAIRED 1 643 - -
TAXATION ON EXCEPTIONAL
ITEMS 638 226 (5 375)
3.DETERMINATION OF
HEADLINE EARNINGS
PROFIT/(LOSS)
ATTRIBUTABLE TO
SHAREHOLDERS PER
INCOME STATEMENT 17 894 (236 506) (243 182)
EXCEPTIONAL ITEMS
EXPENSED (5 073) 245 753 264 181
HEADLINE EARNINGS 12 821 9 247 20 999
4. INTEREST BEARING DEBT COMPRISES A NUMBER OF LOAN AGREEMENTS SUBSTANTIALLY
SHORT TERM IN NATURE.
NOTWITHSTANDING THIS CLASSIFICATION, THE LOANS HAVE BEEN SECURED BY COLLATERAL
BONDS TO FACILITATE THE REGISTRATION OF MORTGAGE BONDS OVER THE GROUP"S FIXED
PROPERTY.
ABRIDGED CASH FLOW STATEMENT FOR THE SIX MONTHS ENDED 30 JUNE 2003
RESTATED
UNAUDITED UNAUDITED AUDITED
6 MONTHS 6 MONTHS 12 MONTHS
TO 30 JUNE TO 30 JUNE TO 31 DEC
2003 2002 2002
(R"000) (R"000) (R"000)
OPERATING PROFIT BEFORE
DEPRECIATION AND
AMORTISATION 30 049 24 870 55 292
EXCEPTIONAL ITEMS
AFFECTING CASHFLOW 538 (272) (13 112)
EQUITY ACCOUNTED
EARNINGS AND
TRANSLATION DIFFERENCES (1 403) 571 (2 973)
CASH GENERATED BY
OPERATIONS 29 184 25 169 39 207
NET INTEREST PAID (4 951) (5 167) (13 891)
TAXATION PAID (1 145) (2 422) (1 689)
DIVIDEND PAID (1) (6) (30)
WORKING CAPITAL CHANGES 55 354 38 983 1 200
DECREASE IN INVENTORIES 207 334 408
(INCREASE)/DECREASE IN
ACCOUNTS RECEIVABLE (1 253) (12 302) 8 376
INCREASE/(DECREASE) IN
ACCOUNTS PAYABLE 4 323 4 034 (9 306)
INCREASE IN FEES IN
ADVANCE 50 077 46 917 1 722
CASH FLOWS FROM
OPERATING ACTIVITIES 78 441 56 557 24 797
CASH FLOWS ABSORBED BY
INVESTING ACTIVITIES (15 075) (14 511) (30 413)
CASH FLOWS ABSORBED BY
FINANCING ACTIVITIES (9 813) (5 658) (11 639)
NET INCREASE/(DECREASE)
IN CASH AND CASH
EQUIVALENTS 53 553 36 388 (17 255)
CASH AND CASH EQUIVALENTS
AT BEGINNING OF YEAR (71 620) (56 608) (56 608)
CASH DISPOSED - - 2 243
CASH AND CASH EQUIVALENTS
AT END OF PERIOD (18 067) (20 220) (71 620)
SUPPLEMENTARY INFORMATION
CAPITAL EXPENDITURE
-CURRENT YEAR 16 336 15 630 33 337
CAPITAL COMMITMENTS
-REMAINDER OF THE YEAR 10 158 7 800 -
-FUTURE YEARS 15 000 - 40 494
OPERATING LEASE COMMITMENTS
FUTURE YEARS 107 159 95 137 109 024
CONTINGENT LIABILITIES - 4 685 -
COMMENTS
GENERAL REVIEW
THE BOARD OF DIRECTORS IS DELIGHTED TO REPORT MUCH IMPROVED RESULTS FOR THE SIX
MONTHS TO 30 JUNE 2003. THE RESULTS ARE PARTICULARLY PLEASING GIVEN THE
EXACTING CHALLENGES FACING THE GROUP PRIOR TO ITS SUCCESSFUL RESTRUCTURING LAST
YEAR.
THE GROWTH IN REVENUES, EBITDA AND OPERATING PROFIT ALREADY BEGIN TO REFLECT THE
CONSEQUENCES OF MANAGEMENT"S FOCUS ON OPERATIONAL AND STRATEGIC MATTERS, WHERE
AN INCREASE OF 12.7% IN COMPARABLE TURNOVER HAS YIELDED A SIGNIFICANT INCREASE
IN OPERATING PROFIT OF 27% TO R19.5 MILLION.
NOTWITHSTANDING AN INCREASE IN THE COST OF BORROWINGS BY SOME 3 PERCENTAGE
POINTS, IMPROVED ASSET MANAGEMENT, AS WELL AS CERTAIN BUSINESS CLOSURES AND
DISPOSALS, RESULTED IN A 4% DECLINE IN NET INTEREST PAID. NET PROFIT BEFORE
EXCEPTIONAL ITEMS INCREASED BY 41% TO R15.2 MILLION AND HEADLINE EARNINGS PER
SHARE INCREASED TO 3.3 CENTS FROM 2.3 CENTS FOR 2002 AS RE-STATED TO REFLECT THE
REQUIREMENTS OF CIRCULAR 7 OF THE JSE.
THE AUSTRALIAN RECRUITMENT OPERATIONS WERE EXITED EFFICIENTLY AND PROVISIONS OF
R5.8 MILLION INITIALLY EXPECTED TO BE REQUIRED FOR CLOSURE COSTS HAVE
FORTUNATELY PROVED UNNECESSARY. THE EXCESS PROVISIONS HAVE BEEN REVERSED AND
FORM PART OF THE NET EXCEPTIONAL GAINS MORE FULLY SET OUT IN NOTE 2.
DIVISIONAL REVIEW
THE DIVISIONAL CONTRIBUTIONS HAVE BEEN ANALYSED IN THE INCOME STATEMENT IN SOME
DETAIL AND ARE REVIEWED BELOW.
EDUCATION
SATISFACTORY GROWTH WAS ACHIEVED IN STUDENT ENROLMENT FOR 2003, WITH THE
CONSEQUENT BENEFITS OF A MORE RAPID RECOVERY OF FIXED COSTS BEING ATTAINED.
COMPLETION OF THE DIVISIONAL RE-ENGINEERING LAST YEAR ENABLED MANAGEMENT TO
IDENTIFY AND SELECT CERTAIN EXPANSION OPPORTUNITIES AND COMMENCE THE ROLL OUT OF
THIS NEW CAPACITY. FOUR NEW SCHOOL SITES AND CAMPUS UPGRADES ARE NOW IN THE
PIPELINE, THE FIRST OF WHICH IS PLANNED TO OPEN IN JANUARY 2004.
STRONG PERFORMANCES WERE RECORDED IN ALMOST ALL EDUCATION UNITS, PARTICULARLY IN
CRAWFORD, VARSITY COLLEGE, ROSEBANK COLLEGE, COLLEGE CAMPUS AND VEGA. ABBOTTS
OPENED ITS NEW SCHOOL IN DURBANVILLE, INCREASING TOTAL ENROLMENT BY 17%. WHILE
STILL A RELATIVELY SMALL PART OF THE GROUP IN FINANCIAL TERMS, BOND UNIVERSITY
REMAINS A KEY COMPONENT OF THE GROUP"S ACADEMIC PRODUCT OFFERINGS.
RESOURCING
DIFFICULT TRADING CONDITIONS IN THE EMPLOYMENT AND RECRUITMENT MARKETS
CONTINUED, PLACING PRESSURE ON VOLUMES AND MARGINS, AND REVENUE SHOWED NO
GROWTH. OPERATING PROFIT BEFORE DEPRECIATION AND AMORTISATION DECLINED BY A
DISAPPOINTING 44%.
THE RECRUITMENT BUSINESS CONTINUES TO BE THE FOCUS OF STRENUOUS COST CONTAINMENT
EFFORTS WHICH HAVE SEEN A FURTHER REDUCTION OF HEADCOUNT AND OFFICES. AT THE
SAME TIME THE EXPERTISE AND TENURE OF CONSULTANTS HAVE BEEN IMPROVED
SIGNIFICANTLY AND SEVERAL PROMISING MARKETING VENTURES LAUNCHED.
THE DIVISION"S BEE ARM, KAPELE APPOINTMENTS, HAS INCREASED ITS PRESENCE
SIGNIFICANTLY AND MADE INROADS IN A NUMBER OF NEW MARKETS. THIS IS A RESULT OF
BOTH THE DEVELOPMENT PROGRAMME TO BUILD RESOURCES AND ORGANIC GROWTH.
LITIGATION
THE GROUP CONTINUES TO ENGAGE IN ITS PREVIOUSLY REPORTED LITIGATION PROCESSES.
LEGAL AND RELATED COSTS AMOUNTED TO R4.2 MILLION (2002 R3.3 MILLION) DURING
THIS PERIOD AS A RESULT OF MORE INTENSE ACTIVITY IN THESE MATTERS, IN PARTICULAR
THE CRAWFORD MATTER, WHERE THE ARBITRATION PROCEEDINGS WERE RECOMMENCED AND ARE
SET DOWN TO CONTINUE TO OCTOBER. THE BOARD REMAINS COMMITTED TO THE RESOLUTION
OF THESE MATTERS AT THE EARLIEST POSSIBLE TIME.
CASH FLOW AND NET GEARING
A 16% INCREASE IN CASH GENERATED FROM OPERATIONS COUPLED WITH A R55 MILLION
(2002 R39 MILLION) NET WORKING CAPITAL IMPROVEMENT CAUSED OPERATING CASH FLOW TO
INCREASE BY 39% TO R78 MILLION. THIS REFLECTS THE POSITIVE EFFECTS OF MANAGING
A MORE DEFINED BUSINESS MODEL AS WELL AS AN IMPROVEMENT IN CASH MANAGEMENT. IT
ALSO ENABLED THE GROUP TO REDUCE INTEREST COSTS, DESPITE THE HIGHER RATES OF
INTEREST APPLICABLE DURING THIS PERIOD. THE GROUP"S DEBT EQUITY RATIO ALSO
IMPROVED BY 25% AND IS NOW COMFORTABLY WITHIN THE GROUP"S SELF IMPOSED LIMIT OF
50%.
ACCREDITATION OF ACADEMIC INSTITUTIONS
THERE HAS BEEN MUCH COMMENT IN THE MEDIA RECENTLY ON THIS ISSUE. ADVTECH FIRMLY
BELIEVES IN PROPER ACCREDITATION AND MONITORING OF ALL EDUCATIONAL INSTITUTIONS
AS PART OF THE PROCESS OF PROVIDING QUALITY EDUCATION. THIS PROCESS IS
SOMETIMES ONEROUS, ESPECIALLY DURING ITS PRESENT EARLY STAGE OF DEVELOPMENT.
NEVERTHELESS, ADVTECH WELCOMES IT AND HAS ADOPTED A POSITIVE AND PROACTIVE
STANCE OF COMPLIANCE.
A SENIOR ACADEMIC TEAM, DRAWN FROM ACROSS THE GROUP, HAS BEEN APPOINTED TO
MANAGE THE ACCREDITATION PROCESS IN ACCORDANCE WITH BEST EDUCATIONAL PRACTICE
AND QUALITY GUIDELINES. IN THE INITIAL ACCREDITATION ROUND, ADVTECH"S TERTIARY
EDUCATION INSTITUTIONS ALL OBTAINED THE REQUISITE PROVISIONAL ACCREDITATION,
INCLUDING THE RIGHT TO CONFER HIGHER DEGREES IN THE CASE OF BOND UNIVERSITY.
THE DIRECTORS ARE PLEASED TO ANNOUNCE THE CONSTITUTION OF AN INDEPENDENT
ACADEMIC ADVISORY BOARD (AAB), COMPRISING PROF. S.P. SEEPE (CHAIRMAN), PROF.
H.P. AFRICA, DR M. KGAPHOLA AND MR M.K. HOLLAND, TOGETHER WITH TWO MEMBERS OF
MANAGEMENT. THE PRIMARY ROLE OF THE AAB WILL BE TO ADVISE THE GROUP REGARDING
MATTERS OF ACADEMIC GOVERNANCE, PROGRAMME OFFERINGS AND EDUCATIONAL POLICY.
PROSPECTS
HAVING REGARD TO THE INCREASED STUDENT ENROLMENTS ALREADY IN PLACE FOR THE YEAR,
THE EDUCATION DIVISION EXPECTS TO POST AN IMPROVEMENT IN ITS COMPARABLE FULL
YEAR EARNINGS AS WELL AS STRENGTHEN ITS CONTRIBUTION TO GROUP CASH FLOW.
WHILE THE PERFORMANCE OF THE RECRUITMENT DIVISION HAS BEEN DISAPPOINTING IN THIS
PERIOD, MANAGEMENT HAS RENEWED ITS FOCUS ON KEY MARKET NICHES, DEVELOPED A RANGE
OF NEW PRODUCTS AND HAS IMPLEMENTED SEVERAL NEW MARKETING INITIATIVES. BETTER
RESULTS IN THE RECRUITMENT BUSINESS WILL FLOW FROM AN IMPROVED ECONOMIC
ENVIRONMENT, THE SUCCESS OF THE DIVISION"S BEE INITIATIVES AND OTHER MARKETING
PROJECTS.
CONSEQUENTLY, IN THE ABSENCE OF ANY MATERIAL ADVERSE ECONOMIC CONDITIONS, THE
GROUP IS EXPECTED TO CONTINUE ITS ENCOURAGING TREND OF PERFORMANCE FOR THE
ENSUING PERIOD.
ON BEHALF OF THE BOARD
HF BROWN, CHAIRMAN
FR THOMPSON, CHIEF EXECUTIVE OFFICER
15 AUGUST 2003
DIRECTORATE:
HF BROWN* (CHAIRMAN) CA(SA); FR THOMPSON (CEO) B COM, B ACC, CA(SA); JNP BOOYENS
(FINANCIAL) B COM (HONS), CA(SA); BD BUCKHAM*; CN DUFF; DK FERREIRA BA, LLB,
MA(OXON), MSC(LONDON)); DL HONEY B COM (HONS), MBA; HR LEVIN* B COM, LLB, LLM, H
DIP TAX LAW, H DIP CO LAW; MI SACKS* CTA, CA(SA), AICPA (ISR).
* NON-EXECUTIVE
COMPANY SECRETARY : L GOMES (ACIS)
TRANSFER SECRETARIES : COMPUTERSHARE LTD, 70 MARSHALL STREET, JHB 2001
SPONSOR : BRIDGE CAPITAL SERVICES (PTY) LIMITED
Date: 18/08/2003 01:14:01 PM Supplied by www.sharenet.co.za
Produced by the JSE SENS Department
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