| Wed 4 Aug 2004, 12:09 | | Results for the Six Months Ended 30 June 2004 |
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ADVTECH GROUP - UNAUDITED RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2004
ADVTECH GROUP
Incorporated in the Republic of South Africa
Registration number 1990/001119/06
Share code ADH
ISIN ZAE000031035
Website www.advtech.co.za
Unaudited Results for the Six Months Ended 30 June 2004
Up 47% headline earnings per share
Up 23% net asset value per share
net gearing down to 4.5%
abridged income statement for the six months ended 30 June 2004
Unaudited Unaudited Audited
six six 12
Percentage months to months to months to
(R`000) Notes change 30 June 2004 30 June 2003 31 Dec 2003
Revenue 284 778 251 621 485 784
Education
- Continuing operations 15 241 860 209 679 404 898
Education
- Discontinuing operations 7 888 7 948 18 810
Resourcing
- Continuing operations 3 35 030 33 994 62 076
Operating profit before
depreciation and
amortisation 37 954 31 713 65 472
Education
- Continuing operations 8 47 633 44 291 83 603
Education
- Discontinuing operations (2 525) (2 955) (2 998)
Resourcing
- Continuing operations 30 4 501 3 459 4 919
Central administration (9 849) (8 854) (11 103)
Litigation costs (1 806) (4 228) (8 949)
Depreciation and
amortisation (10 730) (10 658) (21 032)
Operating profit 29 27 224 21 055 44 440
Net interest paid (80) (955) (4 751) (10 911)
Profit before
exceptional items 61 26 269 16 304 33 529
Exceptional items 2 (5 075) 4 435 17 884
Profit before taxation 21 194 20 739 51 413
Taxation (5 923) (2 149) (140)
Profit after taxation 15 271 18 590 51 273
Attributable to
outside shareholders (584) (696) (823)
Attributable to
ordinary shareholders 14 687 17 894 50 450
Number of shares
in issue (`000) 393 665 393 665 393 665
Weighted average number
of shares in issue (`000) 353 503 364 656 363 465
Diluted number of
ordinary shares (`000) 371 078 364 656 377 041
Earnings per share (cents) (15) 4.2 4.9 13.9
Headline earnings
per share (cents) 3 47 5.2 3.5 8.8
Diluted earnings
per share (cents) (19) 4.0 4.9 13.4
Diluted headline earnings
per share (cents) 40 4.9 3.5 8.4
Dividend per ordinary
share (cents) 1.0 - -
Net asset value per
share (cents) 23 63.5 51.7 58.6
abridged balance sheet as at 30 June 2004
Unaudited Unaudited Audited
as at as at as at
(R`000) Notes 30 June 2004 30 June 2003 31 Dec 2003
ASSETS
Property, plant and equipment 4 317 208 316 934 313 751
Goodwill and trademarks 1 1 1
Deferred taxation asset 41 905 39 447 40 207
Investments 495 1 060 495
Current assets 61 356 39 374 26 467
Inventories 2 765 3 935 4 764
Prepayments 3 343 3 185 2 294
Accounts receivable 48 117 31 554 18 982
Cash resources and
liquid instruments 4 7 131 700 427
Total assets 420 965 396 816 380 921
Equity and liabilities
Ordinary share capital 3 937 3 937 3 937
Ordinary share premium 355 100 355 100 355 100
Shares held by Share
Incentive Trust (12 886) (8 106) (13 026)
Non-distributable reserve 15 944 15 943 15 944
Accumulated loss (137 682) (178 203) (148 837)
Ordinary shareholders` equity 224 413 188 671 213 118
Outside shareholders` interest 584 696 823
Interest bearing debt 17 233 66 159 78 551
- medium-term 4 1 577 21 887 7 554
- short-term 4 15 656 25 505 24 753
- bank overdrafts and
bankers` acceptances 4 - 18 767 46 244
Current liabilities 178 735 141 290 88 429
Vendor claims 9 101 7 668 8 844
Fees in advance 104 556 77 123 32 167
Accounts payable
and provisions 64 548 53 106 46 418
Taxation 530 3 393 1 000
Total equity and liabilities 420 965 396 816 380 921
supplementary information
Capital expenditure
- current period 14 210 16 336 26 151
Capital commitments
- remainder of the year 20 657 10 158 -
- future years 27 143 15 000 50 201
Operating lease commitments
- future years 96 384 107 159 105 222
statement of changes in equity for the six months ended 30 June 2004
Shares
held by Non- Outside
Ordinary Ordinary Incen- distri- Accu- share-
share share tive butable mulated holders`
(R`000) capital premium Trust reserves loss interest Total
Balance at
31 December 2002 3 937 355 100 (8 106) 18 231 (196 766) - 172 396
Accumulated profit
for the year 50 450 823 51 273
AC133 opening
balance adjustment 273 273
Translation reserves (2 287) (2 287)
Shares acquired
- Crawford settlement (8 621) (8 621)
Revaluation of
shares in Share
Incentive Trust 2 794 (2 794) -
Share options
exercised 907 907
Balance at
31 December 2003 3 937 355 100 (13 026) 15 944 (148 837) 823 213 941
Accumulated profit
for the period 14 687 584 15 271
Payment to
outside shareholders (823) (823)
Dividend paid (3 532) (3 532)
Share options
exercised 140 140
Balance at
30 June 2004 3 937 355 100 (12 886) 15 944 (137 682) 584 224 997
abridged cash flow statement for the six months ended 30 June 2004
Unaudited Unaudited Audited
six months to six months to 12 months to
(R`000) 30 June 2004 30 June 2003 31 Dec 2003
Operating profit before
depreciation and
amortisation 37 954 31 713 65 472
Exceptional items
affecting cashflow - 538 2 548
Equity accounted earnings
and translation differences - (846) -
Cash generated by
operations 37 954 31 405 68 020
Net interest paid (955) (4 751) (9 400)
Taxation paid (8 081) (1 145) (2 350)
Dividend paid (3 518) (1) (1)
Working capital changes 57 370 54 456 14 158
Decrease/(Increase)
in inventories 1 999 (93) (2 454)
(Increase)/Decrease
in accounts receivable (30 194) (2 151) 8 597
Increase in accounts
payable
and provisions 13 176 4 323 594
Increase in fees in advance 72 389 52 377 7 421
Cash flows from
operating activities 82 770 79 964 70 427
Cash flows absorbed by
investing activities (15 003) (16 575) (19 871)
Cash flows absorbed by
financing activities (14 819) (9 836) (24 140)
Net increase in cash 52 948 53 553 26 416
Cash at beginning of period (45 817) (71 620) (71 620)
Cash disposed - - (613)
Cash at end of period 7 131 (18 067) (45 817)
notes to financial statements for the six months ended 30 June 2004
Unaudited Unaudited Audited
six months to six months to 12 months to
(R`000) 30 June 2004 30 June 2003 31 Dec 2003
1. The financial statements
have been prepared in
accordance with South African
Statements of Generally Accepted
Accounting Practice and
the accounting policies
are consistent with those
applied in the previous
financial period. The
results for the
six months ended 30 June 2004
have not been reviewed or audited.
2. Exceptional items
(Profit)
- discontinued operations
- Australia - (5 804) (6 988)
(Profit)
- discontinued operations
- other - (650) (4 303)
Loss - discontinuing operation
- closure provision for
Bond South Africa 5 198 - -
(Profit)/Loss on disposal
of divisions or assets (123) 376 385
Graeme Crawford settlement
- recoupment of goodwill
written down - - (8 621)
Development costs written down - 1 643 1 643
Exceptional items before
taxation per income statement 5 075 (4 435) (17 884)
Taxation on exceptional items 1 523 638 721
Exceptional items after taxation 3 553 (5 073) (18 605)
3. Determination of
headline earnings
Profit attributable to ordinary
shareholders per Income Statement 14 687 17 894 50 450
Exceptional items expensed 3 553 (5 073) (18 605)
Headline earnings 18 240 12 821 31 845
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.
5. Discontinuing operations
On 18 June 2004 the board of
directors announced a plan for
the closure of the operations of
Bond South Africa once current
students had had the opportunity
to complete their degrees.
Financial impact of the
discontinuing operation
Operating loss to date of
closure decision (2 525) (5 081) (6 105)
Provision for closure costs (5 198) - -
Loss attributable to
discontinuing operation (7 723) (5 081) (6 105)
Taxation 2 320 1 504 1 810
Net loss attributable to
discontinuing operation (5 403) (3 577) (4 295)
Total assets of the
discontinuing operation 13 361 11 877 5 516
Total liabilities of the
discontinuing operation 24 893 16 965 11 322
Cash inflow from
operating activities 1 852 1 927 105
Cash outflow from
investing activities 143 298 922
Cash (outflow)/inflow from
financing activities (1 719) 443 2 889
commentary
overview
The directors are pleased to report further progress and improvement in the
Group`s results for the six months to 30 June 2004 compared to the same period
in 2003. A strong operating and financial performance saw headline earnings
per share grow by 47%, while net asset value per share increased by 23% and
the balance sheet is almost ungeared.
The 13% increase in revenue reflects both the benefits of a continued increase
in enrolments and the success of the resourcing division returning to a growth
path. Operating profit before depreciation and amortisation (EBITDA) increased
by 20% to R38 million.
A major feature of the six months` results was the announcement by the Group,
together with Bond University, Australia, of the closure of Bond South Africa.
This will take place once all existing students have had an opportunity to
complete their degrees. The international quality and standing of Bond degrees
offered and conferred in South Africa remains unaffected. In addition to the
operating loss of R2,5 million incurred by Bond South Africa up to date of the
announcement, a further provision of R5,2 million has been made to provide for
the costs of running out and closing the operation. These are disclosed
separately as discontinuing operations and an exceptional item respectively
and for the period will reduce the aggregate after tax effect on earnings by
R5,4 million (1,5 cents per share) and on headline earnings R1,9 million (0,5
cents per share).
A 3% reduction in the average cost of borrowing together with an improvement
in working capital management resulted in an 80% decrease in net interest paid
by the Group. The increase in accounts receivable results mainly from the mix
of turnover growth. The tax rate this year, and for the future, is expected to
increase towards the normal tax rate of 30%.
divisional review
education
The education division houses the Group`s education brands and institutions
and provides a full range of educational services from infancy through
schooling to Further and Higher Education bands in the independent education
market.
The division represents the dominant contributor to the Group`s results and
strategic focus, and continuing operations increased revenue by 15% to R242
million and operating profit by 8% to R48 million for the six month period.
Growth in operating profits were negatively affected by approximately R2
million as a result of exceptional uptake of early settlement fee options.
This was an important contributor to the reduction in the interest cost for
the period and to the growth in fees in advance in the balance sheet. In
addition, start-up costs of approximately R2 million were incurred for new
campuses.
A further overall increase in enrolments was achieved at the beginning of 2004
with strong performances in particular at Rosebank College, Varsity College,
Vega and Crawford Schools. The new Abbotts College which opened in Northcliff,
Gauteng, made a steady start and is on track to meet its enrolment target for
the year. Construction has commenced on three new tertiary campuses in Gauteng
and Natal in terms of plans outlined in the annual report.
resourcing
The resourcing division has as its central component the Group`s branded
recruitment operation and also includes a number of smaller businesses. Revenue
for the six month period increased by 3% to R35 million and operating profit
by 30% to R4,5 million.
Recruitment has now delivered 12 months of much improved performance and is
the main contributor to the 30% improvement in EBITDA of the resourcing
division. During the period, consolidation and re-organisation of the
recruitment operation was concluded, which impacted favourably on operating
costs. An increase in consulting resources was also effected during this
period.
litigation and central administration
The reduction in litigation expenses reflects mainly reduced activity in the
period following the satisfactory conclusion of the Graeme Crawford matter
during the latter half of 2003. Every effort is being made to bring
outstanding litigation matters to a speedy and satisfactory conclusion in the
interest of shareholders.
The increase in central administration is the result of strengthening
financial and human resource management at head office.
cash flow and net gearing
Cash generated by operations of R38 million combined with a reduction in net
working capital of R57 million enabled the Group to generate net positive cash
flow from operating activities of R83 million (2003 - R80 million). While part
of this cash flow is a seasonal timing difference which will unwind itself
during the second half of the year, it has enabled the Group to finance
dividend and taxation payments, capital expenditure and the repayment of loans
while still ending the reporting period with significantly reduced net
borrowings of R10 million (2003 - R66 million). As a result of this and
reduced interest rates, the net interest charge declined by 80% to R1 million
(2003 - R4.8 million).
During June the Group concluded long-term loan facilities of R50 million with
Nedbank which include a combination of fixed and variable rate loans designed
to suit the seasonal nature of the Group`s cash flows. The effect of this
facility is to eliminate a funding mismatch which existed between the Group`s
long-term assets and short-term debt and thus strengthen the balance sheet.
ABSA remains the Group`s lead banker and continues to provide asset based,
medium-term and working capital finance as well as most transaction services.
It has not been necessary at this time to increase total borrowing facilities
because of the strong operational cash generation.
directorate
At its meeting on 3 August 2004 the Board confirmed the appointment of John
Deeb as Group Financial Director. Nico Booyens, who was the Group Financial
Director has now been appointed as director responsible for the Group`s
property portfolio and a range of related projects.
prospects
With increased student enrolments in place and the impact of the Bond closure
already provided for, the education division expects to post an improved
contribution to headline earnings per share for the full year. The recruitment
business has established positive momentum in its targeted niches and at the
same time the market is showing signs of improvement The resourcing division
therefore expects to continue to post improved results for the full year.
As a result, in the absence of any material adverse developments, the Group
expects to sustain an encouraging trend of performance during the second half
of the year.
On behalf of the Board
HF Brown FR Thompson
Chairman Chief Executive Officer
Directors: HF Brown* (Chairman), FR Thompson (CEO), JNP Booyens (Financial),
BD Buckham*, CN Duff, DK Ferreira*, DL Honey, HR Levin*, MI Sacks*
Non-executive Director Alternate Directors: A Isaakidis, DS Dowling**
**British Group Secretary: MJ Lammle
Sponsor: Bridge Capital Services (Pty) Ltd
Registered address: 364 Kent Avenue, Ferndale, Randburg 2194
(PO Box 2369, Randburg 2125)
Transfer secretaries: Ultra Registrars (Pty) Ltd,
11 Diagonal Street, Johannesburg 2001
Date: 04/08/2004 12:00:24 PM
Produced by the JSE SENS Department
