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Adcorp -
Adcorp Holdings Limited
One company, many strengths
("Adcorp" or "the Group")
Registration number 1974/001804/06
Share code: ADR ISIN number: ZAE00000139
2nd Floor, The Atrium
Cnr Rustenburg Road and 7th Avenue, Melville
UNAUDITED INTERIM RESULTS for the period ended 30 June 2003
Salient features
- Operating profit from continuing operations up by 13,1%
- Cash generated by operating activities R59,8 million
- Headline earnings - continuing operations up by 9,1%
- Debtors" days down by 10 days
- Proposed interim capital distribution 10 cents per share
INCOME STATEMENT
Continuing Discontinuing
operations operations
2003 2002 2003 2002
R"000 R"000 R"000 R"000
Turnover 788 888 652 715 10 017 59 953
Cost of sales 541 065 454 506 8 111 26 186
Operating costs 205 225 159 642 6 179 29 521
EBITDA 42 598 38 567 (4 273) 4 246
Depreciation 6 581 5 823 179 2 485
OPERATING PROFIT BEFORE 36 017 32 744 (4 453) 1 761
GOODWILL
Amortisation of 2 510 3 118 - 345
goodwill
OPERATING PROFIT 33 507 29 626 (4 453) 1 416
Interest received 6 072 4 544 57 263
Interest paid (10 086) (6 937) (436) (370)
Share of (398) 1 164 (1 825) -
(losses)/profits from
associates
Impairment to UK (7 245) - - -
investment, investment
property and share
trust
(Loss)/Profit on sale 6 - (439) -
of assets
(Loss)/Profit on - - 28 407 (16 112)
disposal of operations
and subsidiaries
(Loss)/Profit before 21 856 28 397 (35 503) (14 803)
taxation
Taxation (9 273) (10 710) - (36)
(Loss)/Profit after 12 583 17 687 (35 503) (14 839)
taxation
Minority shareholders" 344 (114) (43)
share of profits
(Losses)/Earnings 12 927 17 573 (35 503) (14 882)
attributable to
ordinary shareholders
Reconciliation of
headline earnings
(Losses)/Attributable 12 927 17 573 (35 503) (14 882)
earnings
Impairment to 7 245 - - -
investment property and
share trust
Loss/(Profit) on sale (6) - 439 -
of assets
Loss/(Profit) on - - 28 407 16 112
disposal of operations
and subsidiaries
Amortisation of 2 510 3 118 - 345
goodwill
Headline earnings 22 676 20 691 (6 656) 1 575
Number of shares in 40 294 40 126 40 294 40 126
issue - weighted
(000"s)
Headline 56,3 51,6 (16,5) 3,9
earnings/(loss) per
share - cents
Diluted headline 56,2 51,5 (16,5) 3,9
earnings per share
Earnings/(loss) per 32,1 43,8 (88,1) (37,1)
share - cents
Diluted earnings per 32,0 43,7 (88,0) (37,0)
share
Capital distribution - - - -
cents
Audited
12 months
to
Total December
operations
2002
2003 2002 Total
R"000 R"000 operations
798 905 712 668 1 523 381
549 176 480 692 1 025 156
211 404 189 163 416 552
38 325 42 813 81 673
6 761 8 308 14 965
31 564 34 505 66 708
2 510 3 463 5 159
29 054 31 042 61 549
6 129 4 807 12 543
(10 522) (7 307) (17 794)
(2 223) 1 164 1 665
(7 245) - (1 483)
(433) - (83)
28 407 (16 112) (74 706)
(13 647) 13 594 (18 309)
(9 273) (10 746) (18 803)
(22 920) 2 848 (37 112)
344 (157) (190)
(22 576) 2 691 (37 302)
(22 576) 2 691 (37 302)
7 245 - 1 483
433 - 83
28 407 16 112 74 706
2 510 3 463 5 159
16 019 22 266 44 129
40 294 40 126 40 200
39,8 55,5 110
39,7 55,4 110
(56,0) 6,7 (93)
55,9 6,7 (93)
10* - 37
*Subject to approval by shareholders
SEGMENTAL REPORT
6 months to June 2003
Operating profit
before goodwill
Turnover
2003 2002 2003 2002
R"000 R"000 R"000 R"000
Central - - (8 871) (4 741)
costs
Permanent 123 80 938 8 239 6 353
recruitment 604
Flexible 533 461 456 22 943 21 099
staffing 767
Education 20 407 12 178 532 (1 837)
and
training
Corporate 66 906 66 147 5 200 5 070
communicati
ons
Research 44 204 31 996 7 974 6 800
Total 788 652 715 36 017 32 744
continuing 888
operations
Total 10 017 59 953 (4 453) 1 761
discontinui
ng
operations
Total 798 712 668 31 564 34 505
905
2003 2002 2003 2002 2003 2002
% % % % R"000 R"000
- - (28,1) (13,7) 56 896 156 184
6,7 7,8 26,1 18,4 25 847 28 295
4,3 4,6 72,7 61,1 101 931 94 871
2,6 (15,1) 1,7 (5,3) (17 377) (54 078)
7,8 7,7 16,5 14,7 20 959 19 624
18,0 21,3 25,3 19,7 7 403 10 942
4,7 5,0 114,1 94,9 195 660 255 839
(44,5) 2,9 (14,1) 5,1 (8 469) 15 141
4,0 4,8 100,0 100,0 187 191 270 980
Note: The group"s operations are situated mainly in South Africa with only
international operations situated in the UK and Africa. It is therefore not
considered meaningful to disclose information on geographic segments.
GROUP ABRIDGED STATEMENT OF CHANGES IN EQUITY
for the 6 months ended 30 June 2003
Share Share Treasury
capital premium shares
R"000 R"000 R"000
Balance as at 31 December 1 064 106 930 (31 316)
2002
Treasury shares delisted (57) (31 261) 31 316
Capital distribution - (14 908) -
approved - payable 14 July
2003
Transfer from non- - - -
distributable reserves
Net profit for the 6
months to June 2003
Balance as at 30 June 2003 1 007 60 761 -
Non-distri- Distri-
butable butable
reserves reserves Total
R"000 R"000 R"000
971 147 027 224 676
- - -
- - (14 908)
(971) 971 -
(22 576) (22 576)
- 125 423 187 191
BALANCE SHEET
as at 30 June 2003
Audited
30 June 30 June 31 December
2003 2002 2002
R"000 R"000 R"000
ASSETS
Non-current assets 140 574 191 952 173 139
Property, plant and 40 200 60 208 40 432
equipment
Intangibles 68 849 109 111 88 968
Investments and loans 9 595 4 294 20 199
Other financial assets 2 109 2 381 2 109
Deferred taxation 19 821 15 958 21 431
Current assets 285 442 288 052 264 496
Other current assets 198 384 210 138 200 216
Vendors for sale of 4 816 - 5 884
business
Cash at bank 72 972 74 632 54 523
Taxation prepaid 9 270 3 282 3 873
Total assets 426 016 480 004 437 635
EQUITY AND LIABILITIES
Capital and reserves 187 191 270 980 224 676
Share capital 1 007 1 061 1 064
Share premium 60 761 105 417 106 930
Treasury shares - (31 316) (31 316)
Non-distributable reserve - - 971
Distributable reserves 125 423 195 818 147 027
Minority interest 919 1 438 394
Non-current liabilities
Interest-bearing long- 15 944 1 002
term liabilities
Current liabilities 237 891 206 642 211 563
Cash due to vendors - 1 885 -
Shareholders for capital 14 908 - -
distribution
Non-interest-bearing 91 793 76 759 76 803
current liabilities
Provisions 36 556 23 846 25 038
Bank overdraft 94 331 98 166 104 173
Taxation 303 5 986 5 549
Total equity and 426 016 480 004 437 635
liabilities
Number of ordinary shares 40 294 40 176 40 294
in issue
Net asset value per share 465 674 558
- cents
GROUP ABRIDGED CONSOLIDATED CASH FLOW
for the 6 months to June 2003
Audited
6 months 6 months 12 months
to June 2003 to June 2002 to Dec 2002
R"000 R"000 R"000
Cash generated by 36 793 44 113 81 673
operations
Decrease/(increase) 22 989 (15 882) (18 722)
in working capital
Cash generated by 59 782 28 231 62 951
operating
activities
Net interest paid (4 393) (2 500) (5 251)
Dividend paid - (11 233) (11 233)
Taxation paid (19 265) (23 921) (39 752)
Cash available from 36 124 (9 423) 6 715
operating
activities
Cash effects from (7 009) (2 400) (44 866)
investment
activities
Cash effects from (824) (193) 19
financing
activities
Net cash movement 28 291 (12 016) (38 132)
Cash and cash (49 650) (11 518) (11 518)
equivalents at the
beginning of the
period
Cash and cash (21 359) (23 534) (49 650)
equivalents at the
end of the period
COMMENTS
TRADING OVERVIEW
Trading overview
Following the restructuring initiatives begun in the prior financial year, the
Group continued its process of repositioning its operations by focusing on the
disposal of non-performing assets, simplifying the Group structure and cash
generation.
Whilst the process has taken longer than originally anticipated, the actions are
beginning to bear fruit. Operating profit from continuing operations increased
by 13% compared to the prior year whilst headline earnings per share from these
continuing operations was 9% higher than for the same period in the prior year.
Debtors days of 37 days were reduced from the prior year level of 47 days which
contributed to the Group generating cash from operating activities of R59,8
million for the first six months of the financial year (2002: R28,2 million).
In terms of continuing operations, the permanent recruitment and training
operations which experienced particularly difficult trading conditions in the
prior year appear to have turned around with all operations in these divisions
having now been restored to profitability.
The flexible staffing, corporate communications and marketing research divisions
all performed well in the first six months of the financial year.
Headline earnings per share of 39,8 cents were some 28,3% below the earnings for
the same period last year due to losses incurred in discontinued operations as
well the Group"s United Kingdom operations. These developments were communicated
by way of a trading statement issued on 27 July 2003.
As indicated in this trading statement, United Kingdom-based recruitment
company, Astbury Jones Limited, for which Adcorp paid GBP 420 000 for its 51%
stake, was placed in voluntary liquidation due to cash flow problems as well as
possible fraud at senior management level, which is still being investigated.
Sandton Group Limited, the other 51% owned United Kingdom-based recruitment
business, also experienced difficult trading conditions as a result of the
depressed state of the financial and investment sectors in that market.
The Group will commit no further funds to the United Kingdom operations.
Further to the Group"s restructuring activities, the operations of the Warwick
Institute (Pty) Limited and D@bility (Pty) Limited were disposed of, both of
which were loss-making and cash-consuming operations. These operations were
disposed of after sustained efforts to restore them to profitability were
unsuccessful.
As a result of these disposal activities and the write-off of Astbury Jones
Limited, investments, goodwill and loan accounts of R28,4 million have been
written off. In addition, the investment in Sandton Group has been impaired to
the extent of R7 million.
Adcorp and Dimension Data (SA) (Pty) Limited combined certain of their training
businesses during the period under review, to create a significant business-to-
business training organisation which is bedding down well.
Black economic empowerment
The issue of black economic empowerment is a critical one for the Group. To this
end, the Group recently announced a significant empowerment transaction that
will greatly enhance the empowerment credentials of Adcorp.
The deal, which is subject to Adcorp shareholder and regulatory approval,
involves the introduction of an empowerment consortium as 25% shareholders in
the Group"s flexible staffing division, which is the largest division of Adcorp
contributing some 65% of operating profits. Its brands include Quest, Emmanuels,
Capacity, Charisma and Ikhwezi.
The empowerment consortium comprises the Black Management Forum Investments
Company, the investment arm of the Black Management Forum and Zungu Investments
Company, a black-owned investment holding company.
The transaction has been made possible by way of an innovative structure
enabling the empowerment partners to participate in the fruits of their
endeavours right from inception of the deal with an option to convert their
investment in the flexible staffing division directly into the Adcorp listed
entity after a five-year period.
Financial overview
The Group"s cash generation was pleasing with the net positive movement for the
period being R28,3 million compared with a negative R12,0 million for the same
period last year. This had the effect of reducing gearing from 22,1% at the end
of the last financial year to the current level of 11,4%.
There is a strong focus on recovering taxation where the R9 million represents
amounts which are both prepaid and owing by South African Revenue Services.
Operating profit margins continued to come under pressure and realised a level
of 4,0% for the trading period under review compared to 4,8% for the same period
last year.
This is an area of continued focus and has shown some improvement when compared
with the 3,5% margin achieved in the second half of last year.
Central costs compare unfavourably with those reported in the prior year due
mainly to the reversal of a R2 million legal provision in the prior year
following negotiated settlements.
Distribution of capital
The board has proposed an interim capital distribution of 10 cents per share
subject to shareholder approval. A circular will be sent to shareholders shortly
requesting the necessary approval.
Outlook
With the major restructuring of the Group complete, the focus is now on
consolidation and performance enhancement.
The positive foundations that have now been laid, together with the emergence of
certain promising trends should bode well for the second half of the financial
year.
Accounting policies and presentation
The report has been prepared in accordance with South African 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 2002 including the adoption of AC133 -
Recognition and Measurement of Financial Instruments.
By order of the board
Dr F van Zyl Slabbert
Chairman
RL Pike
Chief Executive Officer
FD Burd
Group Financial Director
20 August 2003
Executive directors RL Pike, FD Burd, VC Baker, M Liphosa
Non-executive directors HW Barenblatt, RB McGregor, NF Lilford, B Sibiya, PC
Swart
Non-executive directors Dr F van Zyl Slabbert, SO Shonhiwa, F Khanyile,
(independent) S Sebotsa
Alternate director SE Zungu
Company secretary MC Millar
Transfer secretaries Computershare Limited
70 Marshall Street
Johannesburg, 2001
Sponsor Deloitte & Touche Sponsor Services (Pty) Limited
Visit our website at http://www.adcorp.co.za
Date: 20/08/2003 05:15:46 PM Supplied by www.sharenet.co.za
Produced by the JSE SENS Department
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