| Tue 23 Mar 2004, 13:23 | | FINANCIAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2 |
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ADVTECH LIMITED - FINANCIAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2003
ADvTECH Limited
Registration Number: 1990/001119/06
ISIN Number: ZAE 0000 31035
JSE Code: ADH
HEPS up 54%
Gearing down 51%
NAV per share up 25%
Abridged income statement
Financial results for the year ended 31 December 2003for the year ended 31
December 2003
% Audited Audited
(R"000) Notes change 31 Dec 2003 31 Dec 2002
Revenue 3 485 784 470 078
Operating profit before
depreciation and
amortisation 18 65 472 55 292
Depreciation and
amortisation 21 032 19 835
Operating profit 25 44 440 35 457
Net finance costs (21) (10 911) (13 891)
Equity accounted earnings - 1 129
Profit before exceptional
items 48 33 529 22 695
Exceptional items 2 17 884 (258 806)
Profit/(loss) before
taxation 51 413 (236 111)
Taxation 4 140 7 148
Profit/(loss) after
taxation 51 273 (243 259)
Attributable to outside
shareholders 823 (77)
Attributable to ordinary
shareholders 50 450 (243 182)
Number of shares in
issue ("000) 393 665 393 665
Less: Shares held by the
Share Incentive Trust (40 463) (29 009)
Net shares in issue after
consolidation of the
Share Incentive Trust 353 202 364 656
Weighted average number
of shares in issue ("000) -
for EPS calculation 363 465 366 168
Earnings/(loss) per
share (cents) 13,9 (66,4)
Headline earnings per
share (cents) 54 8,8 5,7
Diluted number of shares
("000) - for diluted EPS
calculation 377 041 367 140
Diluted earnings/(loss)
per share (cents) 13,4 (66,2)
Diluted headline earnings
per share (cents) 47 8,4 5,7
Net asset value per
share (cents) 25 57,5 45,9
Gearing (51) 36,7 74,9
Statement of changes in equity
for the year ended 31 December 2003
Shares held
in the Share
Share Share Incentive
(R"000) capital premium Trust
Balance at the beginning of the
year as originally reported 3 937 355 100 -
Consolidation of Share
Incentive Trust (8 106)
Balance at the beginning of the
year restated 3 937 355 100 (8 106)
AC133 opening balance adjustment
Net profit for the year
Shares acquired - Crawford
settlement (8 622)
Loss on sale of shares to
Share Incentive Trust 2 794
Share options exercised 907
Movement in translation reserves
Balance at the end of the year 3 937 355 100 (13 027)
Statement of changes in equity (continued)
for the year ended 31 December 2003
Non-
distri-
butable Accumulated
(R"000) reserves loss Total
Balance at the beginning of the
year as originally reported 18 231 (196 766) 180 502
Consolidation of Share
Incentive Trust (8 106)
Balance at the beginning of the
year restated 18 231 (196 766) 172 396
AC133 opening balance adjustment 273 273
Net profit for the year 50 450 50 450
Shares acquired - Crawford
settlement (8 622)
Loss on sale of shares to
Share Incentive Trust (2 794) -
Share options exercised 907
Movement in translation reserves (2 287) (2 287)
Balance at the end of the year 15 944 (148 837) 213 117
Abridged balance sheet
as at 31 December 2003
Audited Restated
(R"000) Notes 31 Dec 2003 31 Dec 2002
ASSETS
Property, plant and equipment 5 313 751 310 632
Goodwill and trademarks 1 1
Development costs - 2 168
Deferred taxation asset 40 207 38 188
Investments 495 1 933
Current assets 26 467 44 147
Inventories 4 764 3 842
Prepayments 2 284 3 109
Taxation 10 2 779
Accounts receivable 18 982 29 413
Cash resources and liquid
instruments 427 5 004
TOTAL ASSETS 380 921 397 069
EQUITY AND LIABILITIES
Share capital 3 937 3 937
Share premium 355 100 355 100
Shares held by the
Share Incentive Trust (13 026) (8 106)
Non-distributable reserves 15 944 18 231
Accumulated loss (148 837) (196 766)
Ordinary shareholders" equity 213 118 172 396
Outside shareholders" interest 823 -
Interest bearing debt 78 551 134 163
- medium term 5 7 554 20 624
- short term 5 24 753 36 915
- bank overdrafts and bankers"
acceptances 5 46 244 76 624
Vendor claims 8 844 7 333
Fees in advance 32 167 24 746
Accounts payable and provisions 46 418 54 588
Taxation 1 000 3 843
TOTAL EQUITY AND LIABILITIES 380 921 397 069
Abridged cash flow statement
for the year ended 31 December 2003
Audited Audited
(R"000) 31 Dec 2003 31 Dec 2002
Operating profit before depreciation
and amortisation 65 472 55 292
Exceptional items affecting cash flow 4 303 (13 112)
Other items of income and expenditure
affecting cash flow (1 755) (2 973)
Cash generated by operations 68 020 39 207
Net interest paid (9 400) (13 891)
Taxation paid (2 350) (1 690)
Working capital changes 14 158 1 170
(Increase)/decrease in inventories (2 454) 408
Decrease) in accounts receivable
and prepayments 8 597 8 376
Increase/(decrease) in accounts payable 594 (9 336)
Increase in fees in advance 7 421 1 722
Cash flows from operating activities 70 428 24 796
Cash flows absorbed by investing
activities (19 871) (30 413)
Cash flows absorbed by financing
activities (24 141) (11 639)
Net increase/(decrease) in cash 26 416 (17 256)
Cash at beginning of year (71 620) (56 607)
Cash disposed (613) 2 243
CASH AT END OF YEAR (45 817) (71 620)
Notes to the financial statements
for the year ended 31 December 2003
Audited Audited
(R"000) 31 Dec 2003 31 Dec 2002
1. The preliminary announcement has been prepared in accordance with SA GAAP
applicable to interim financial reporting and the accounting policies are
consistent with those applied in the previous financial year, with the following
exceptions: the Group has adopted AC133, with no material impact on the Group"s
results; the Share Incentive Trust has been consolidated in accordance with the
interpretation of the GAAP Monitoring Panel and Varsity College campus in
Pietermaritzburg previously shown under equity accounted earnings has now been
consolidated.
2. Exceptional items
Exceptional items after taxation 18 605 (264 181)
Exceptional items before taxation 17 884 (258 806)
Profit/(losses) - discontinued
operations - Australia 6 988 (5 860)
Profit/(losses) - discontinued
operations - other 4 303 (1 126)
Loss on disposal of divisions or assets (385) (6 897)
Development costs impaired (1 643) -
Crawford settlement - Recoupment of
goodwill written off 8 621 -
Goodwill written off - (238 099)
Goodwill amortisation - (6 824)
Taxation on exceptional items 721 (5 375)
3. Determination of headline earnings
Profit/(loss) attributable to ordinary
shareholders per income statement 50 450 (243 182)
Exceptional items after taxation 18 605 (264 181)
Headline earnings 31 845 20 999
4. Taxation
Current year taxation - SA normal 6 019 5 220
- Foreign - (2 807)
Prior year taxation (3 860) 3 210
Deferred taxation - Current (2 329) 1 525
- Prior 310 -
Total taxation per the income statement 140 7 148
5. 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.
6. The Group auditors, Deloitte & Touche, have completed an audit of the annual
financial statements on which this preliminary announcement is based and a copy
of their unqualified audit report is available at the Group"s registered office.
Abridged segmental reporting
for the year ended 31 December 2003
Central
admini-
Education Resourcing stration Total
(R"000) 2003 2003 2003 2003
Revenue 423 708 62 076 - 485 784
Continuing operations 421 212 62 076 - 483 288
Discontinuing operations
and disposal of businesses 2 496 - - 2 496
EBITDA 80 605 4 806 (19 939) 65 472
Continuing operations 79 963 4 919 (16 353) 68 529
Discontinuing operations
and disposal of businesses 642 - - 642
Crawford settlement -
recoupment of litigation
costs - - 5 250 5 250
Litigation costs - (113) (8 836) (8 949)
(R"000) 2002 2002 2002 2002
Revenue 368 689 101 389 - 470 078
Continuing operations 353 200 64 824 - 418 024
Discontinuing operations 15 489 36 565 - 52 054
EBITDA 67 341 1 720 (13 769) 55 292
Continuing operations 67 028 12 981 (12 719) 67 290
Discontinuing operations 2 652 (6 619) - (3 967)
Litigation costs (2 339) (4 642) (1 050) (8 031)
Supplementary information
for the year ended 31 December 2003
Audited Audited
(R"000) 31 Dec 2003 31 Dec 2002
Capital expenditure - current year 26 031 33 336
Capital commitments
- contracted for 2 597 2 442
- approved by the Board but not
contracted for 47 604 38 052
Operating lease commitments future years 105 222 109 025
Chairman and CEO"s report
GENERAL REVIEW
ADvTECH"s financial results for the 2003 year present clear and gratifying
evidence of the Group"s successful reconstruction, particularly revealed in the
Group"s cleansed continuing operations which are now soundly anchored by the
expanding and rewarding Education Division. At the same time, of necessity, they
remain cluttered with detail on discontinued operations.
Rational and robust management interventions during the year also brought a
conclusion to several legacy issues, yielding a mixture of extraordinary
recoupments and recoveries collectively and positively enhancing the Group"s
annual performance. The more compelling features of the Group"s overall results
are an increase of 54% in headline earnings per share to 8,8 cents, a 25%
increase in the tangible net asset value per share to 57,5 cents and, as a
result of the Group"s improved asset and cash flow management, a 51% reduction
in the debt-equity ratio to 37%.
The cycle of the Group"s cash flow is weighted such that the Group reports
maximum borrowings at year-end. However, the average funds employed during the
year were R25,6 million lower than at year-end which implies that average
gearing is of the order of 25% compared to the 37% reported at year-end.
REVIEW OF OPERATIONS
Education
ADvTECH management has competently and creatively developed a range of vibrant,
stimulating and caring learning environments where learners within their own
academic aspirations and capacity can excel, grow and prepare to compete in
South Africa"s dynamic and transforming society. Students at each level are now
exposed to a full spectrum of instruction and human experiences designed to
enrich their cultural appreciation and to expand their physical, intellectual
and cultural horizons.
The Group"s well known and established brands in the Education Division include
Crawford Schools, Abbotts College, Junior College, Varsity College, College
Campus, Rosebank College, Vega the Brand Communication School and Bond South
Africa. Together these brands form the Group"s composite education business
which is a leader in the field of independent education in South Africa.
ADvTECH has consistently promoted and supported the deliberate drive by the
Department of Education (DoE), Council on Higher Education (CHE) and South
African Qualifications Authority (SAQA) to improve the general standards of
education governance, the quality of teaching and the learners assessment. In
order to fulfil these objectives and standards ADvTECH embraces and co-operates
fully on all regulatory processes and willingly engages with all representatives
when called upon to do so.
Furthermore, in order to keep conversant with regulatory guidelines and achieve
best teaching practice, the ADvTECH Academic Advisory Board was constituted this
year. It has specific responsibility for monitoring developments in the field of
education and advising the Group on all requirements for the enhancement of
academic standards and instruction techniques. Its members comprise of
independent and distinguished academics.
The most encouraging feature of this year"s results was the performance of the
Education Division. Excluding the effect of Bond South Africa, which incurred a
loss of R5,2 million, the Education Division improved its continuing EBITDA
contribution by 29,5% to R85,2 million. The Group"s relationship with Bond
Australia has for various reasons been extremely demanding and is presently
receiving close management attention.
Resourcing
The Resourcing Division comprises mainly the Group"s recruitment businesses
together with other smaller businesses. The Recruiting Division has
unfortunately been unable to sustain the improvement indicated in the second
half of last year and accordingly produced disappointing results. However, when
compared with its peers in the recruitment industry, the performance could be
regarded as satisfactory. Fortunately, the nature of the resourcing business is
non-capital intensive and notwithstanding the sub-optimal progress, the division
did contribute a favourable return on funds employed with a positive cash flow
impact. In a more conducive environment for recruitment services, this division
has the propensity for premium earnings.
Accounting adjustments
Changes in accounting and disclosure requirements prescribed by the JSE resulted
in the need to consolidate the Group"s Share Incentive Trust with the financial
statements of the company.
The effect of these new requirements are set out in the table below:
Unit 2003 2002 Growth
Number of shares in issue
at year end 000 393 665 393 665
Less: Shares held by
Share Incentive Trust 000 40 463 29 009
Net shares in issue after
consolidation of the
Share Incentive Trust 000 353 202 364 656
Headline earnings R"000 31 845 20 999 52%
Weighted average number of shares
in issue - for EPS calculation
purposes 000 363 465 366 168
Headline earnings per share -
excluding Share Incentive Trust cents 8,1 5,3 53%
Headline earnings per share - 2003 cents 8,8 5,7 54%
Diluted number of shares in
issue - for diluted EPS
calculation purposes 000 377 041 367 140
Diluted HEPS - 2003 cents 8,4 5,7 47%
Fully diluted number of shares
in issue 000 393 665 393 665
Fully diluted HEPS - 2003 cents 8,1 5,3 53%
Net asset value R"000 213 118 172 396 23%
Plus: Shares held by the
Share Incentive Trust R"000 13 026 8 106
Net asset value excluding
Share Incentive Trust R"000 226 144 180 502 25%
Number of shares in issue
at year-end per share register 000 393 665 393 665
Net asset value per share cents 57,5 45,9 25%
Litigation
Shareholders were informed in September 2003 of the terms of the settlement of
the litigation against Graeme Crawford which included, inter alia, the surrender
to ADvTECH of 15,4 milion ADvTECH shares to the then value of R8,9 million and a
cash payment, including interest, of R5,5 million. Having regard to the
complexities in this matter, the Board considered the settlement terms to be
most satisfactory.
The legal proceedings and the principal issues for determination in respect of
the claims against Andry and Marina Welihockyj et al, are unambiguous and
definitive and continue in process. The Board Litigation Sub-Committee and the
Group"s legal advisors are confident of the merits of this matter and
aggressively pursue the Group"s claims despite the obstructive strategies by the
defendants to deliberately procrastinate and delay.
The Group has no additional exposure other than for legal costs in this matter.
Legal and related costs of R3,7 million net of recoveries (2002: R8 million),
were incurred during the year.
Distribution to shareholders
The Board has resolved to institute in future a policy of distributing between
30% and 40% of attributable profits available in each year.
Notice is hereby given of the declaration of a nominal dividend of 1 cent per
share, in respect of the year ended 31 December 2003. The last day to trade cum
dividend will be Thursday, 1 April 2004 and the shares will commence trading ex
dividend from Friday, 2 April 2004, with the record date being Thursday, 8 April
2004. Payment will be effected on Tuesday, 13 April 2004. Share certificates may
not be dematerialised or rematerialised from Friday 2 April 2004 to Thursday, 8
April 2004, both days inclusive.
Board
During the year Campbell Bomela retired by rotation at the annual general
meeting, and did not stand for re-election, following changes in the structure
of the Black Management"s Forum shareholdings. We thank him for his efforts and
his contribution to the ADvTECH Group since his appointment in July 2000.
Professor Dolina Dowling and Alex Isaakidis were appointed alternate directors
to Craig Duff and Frank Thompson respectively.
Staff
ADvTECH staff has grown to 2263 employees, the majority of which are academic
and teaching staff. ADvTECH is a "people" business and its success is dependent
on the quality of its people and the value of the services they provide. The
high proportion of professionally qualified employees is indicative of the
intellectual character attracted to and retained by the Group. The excellent
results attained by ADvTECH students this year are a tribute to the commitment
and dedication of these and indeed all our personnel. We appreciate their
loyalty, we are proud of their contribution and we thank them for their devoted
efforts this year.
The ADvTECH Group continues to subscribe to the national priorities in skills
development and employment equity and remains in good standing as to formal
compliance with all legal requirements. The main thrust of our activities has
been in the development of our own staff, a majority of whom benefited directly
from initiatives in human development. The strategy of growing through people
has resulted, for example, in six of the Crawford Schools being awarded the
international "Investors in People" award. Crawford Schools are the only schools
in South Africa to receive this prestigious award. In addition, bursaries and
other Corporate Social Responsibility initiatives directly benefited 859
learners on our campuses and members of the broader community.
Prospects
ADvTECH has concluded its restructuring and now has a defined model and
operating strategy for continued growth and expansion. The intention is to
build on the Group"s education brands, as it is clear that significant demand
exists for the provision of independent education. The fourth Abbotts College
opened its doors in January 2004 and it is planned to develop further the
broader network as opportunities present themselves.
In the absence of any material changes to the operating environment and economy
and having regard to the encouraging registrations already secured for 2004 in
the Education Division, the Board expects to report improved headline earnings
and operating cash flows for the next reporting period.
On behalf of the Board
HF Brown FR Thompson
Chairman Chief Executive Officer
19 March 2004
Directorate:
Hugh Brown (Non-Executive Chairman); Frank Thompson (Chief Executive
Officer);Nico Booyens (Group Financial Director); Brian Buckham (Non-Executive
Director); Dolina Dowling (Alternate Director); Craig Duff (Executive
Director); David Ferreira (Independent Non-Executive Director); Hymie Levin
(Non-Executive Director); Lenn Honey (Executive Director); Alex Isaakidis
(Alternate Director); Michael Sacks (Independent Non-Executive Director).
Sponsors: Bridge Capital Services (Pty) Ltd.
Date: 23/03/2004 01:00:13 PM Produced by the JSE SENS Department
