| Mon 14 Mar 2005, 12:31 | | Results For The Year Ended 31 December 2004 |
|
Advtech LIMITED - Audited Results For The Year Ended 31 December 2004
ADvTECH LIMITED
(Incorporated in the Republic of South Africa)
Registration number: 1990/001119/06
Share code: ADH ISIN: ZAE 000031035
www.advtech.co.za
enriching human capital
Audited results for the year ended 31 December 2004
+37% headline earnings per share
4,5c per share distribution to shareholders
14% net gearing
+28% free operating cash flow per share
Abridged income statement
for the year ended 31 December 2004
Percentage Audited Audited
R`000 Notes change 31 Dec 2004 31 Dec 2003
Revenue 569 834 485 784
Education - Continuing
operations 19 486 850 407 741
Education - Discontinuing
operations 14 965 18 810
Resourcing - Continuing
operations 15 68 019 59 233
Operating profit before
depreciation and amortisation 77 517 65 472
Education - Continuing
operations 17 96 576 82 735
Education - Discontinuing
operations (2 604) (2 998)
Resourcing - Continuing
operations 70 9 851 5 787
Central administration 2 32 (21 576) (16 353)
Recoupment of
litigation costs - 5 250
Litigation costs (4 730) (8 949)
Depreciation and
amortisation (21 287) (21 032)
Operating profit 27 56 230 44 440
Net interest paid (97) (376) (10 911)
Profit before
exceptional items 67 55 854 33 529
Exceptional items 3 (5 054) 17 884
Profit before taxation 50 800 51 413
Taxation (10 104) (140)
Profit after taxation 40 696 51 273
Attributable to
outside shareholders (1 446) (823)
Attributable to
ordinary shareholders 39 250 50 450
Number of shares in
issue (`000) 393 665 393 665
Weighted average number
of shares in issue (`000) 355 702 363 465
Diluted number of
ordinary shares (`000) 370 174 377 041
Headline earnings per
share (cents) 37 12,0 8,8
Diluted headline earnings
per share (cents) 37 11,6 8,4
Earnings per share (cents) (21) 11,0 13,9
Diluted earnings per
share (cents) (21) 10,6 13,4
Free operating cashflow
before capex
per share (cents) 5 28 23,8 18,7
Proposed distribution
per ordinary share (cents) 4,5 1,0
Net asset value per
share (cents) 20 70,6 58,6
Abridged cash flow statement
for the year ended 31 December 2004
Audited Audited
R`000 31 Dec 2004 31 Dec 2003
Operating profit before
depreciation and amortisation 77 517 65 472
Exceptional items affecting cashflow 483 2 548
Cash generated by operations 78 000 68 020
Net interest paid (1 709) (9 400)
Taxation paid (8 166) (2 350)
Dividend paid (3 522) (1)
Working capital changes 19 325 14 158
Increase in inventories (462) (2 454)
(Increase)/decrease in accounts receivable (15 560) 8 597
Increase in accounts payable and provisions 26 703 594
Increase in fees in advance 8 644 7 421
Cash flows from operating activities 83 928 70 427
Cash flows absorbed by investing activities (40 765) (19 871)
Cash flows absorbed by financing activities (767) (24 140)
Net increase in cash 42 396 26 416
Cash at beginning of year (45 817) (71 620)
Cash disposed - (613)
Cash at end of year (3 421) (45 817)
Statement of changes in equity
for the year ended 31 December 2004
Shares held
Ordinary Ordinary by Share Accu- Outside Non-
Share share Incentive mulated share- distri-
capital premium Trust loss holders` butable
R`000 interest reserves Total
Balance at
1 January
2003 3 937 355 100 (8 106) (196 766) - 18 231 172 396
Accumulated
profit for
the year 50 450 823 51 273
AC133 opening
balance
adjustment 273 273
Movement in
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) (148 837) 823 15 944 213 941
Accumulated
profit for
the year 39 250 1 446 40 696
Payment to
outside
shareholders (823) (823)
Dividend
declared (3 532) (3 532)
Share
options
exercised 2 316 2 316
Balance at
31 December
2004 3 937 355 100 (10 710) (113 119) 1 446 15 944 252 598
Supplementary information
Audited Audited
R`000 31 Dec 2004 31 Dec 2003
Capital expenditure - current year 42 429 26 151
Capital commitments - future years 82 416 50 201
Operating lease commitments - future years 109 952 105 222
Abridged balance sheet
as at 31 December 2004
Audited Audited
as at as at
R`000 Notes 31 Dec 2004 31 Dec 2003
ASSETS
Property, plant & equipment 6 334 382 313 751
Goodwill and trademarks 1 1
Deferred taxation assets 44 533 40 207
Investment 495 495
Current assets 42 269 26 457
Inventories 5 226 4 764
Prepayments 2 070 2 284
Accounts receivable 7 34 756 18 982
Cash resources 217 427
Total assets 421 680 380 911
EQUITY AND LIABILITIES
Ordinary share capital 3 937 3 937
Ordinary share premium 355 100 355 100
Shares held by Share Incentive Trust (10 710) (13 026)
Non-distributable reserve 15 944 15 944
Accumulated loss (113 119) (148 837)
Ordinary shareholders` equity 251 152 213 118
Outside shareholders` interest 1 446 823
Interest bearing debt 35 181 78 551
- medium-term 6 22 976 7 554
- short-term 6 8 567 24 753
- bank overdrafts
and bankers`
acceptances 6 3 638 46 244
Current liabilities 133 901 88 419
Vendor claims 9 349 8 844
Fees in advance 40 811 32 167
Accounts payable and provisions 8 78 329 46 418
Taxation 5 412 990
Total equity and liabilities 421 680 380 911
Notes to financial statements
for the year ended 31 December 2004
Audited Audited
R`000 31 Dec 2004 31 Dec 2003
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 annual
financial statements for the year ended 31 December 2003. The Group
auditors, Deloitte & Touche, have completed the audit of the Annual
Financial Statements on which this preliminary announcement has been
based. Their unqualified report is available at the registered office
of the company.
The increase of 32% in central administration costs is mainly due to
the strengthening of financial and human resource management at
head office.
3. Exceptional items
Loss - related to discontinuing operation - closure provision for Bond
South Africa 5 198 -
(Profit)/Loss on disposal of divisions or assets (144) 385
(Profit) - discontinued operations - Australia - (6 988)
(Profit) - discontinued operations - other - (4 303)
Graeme Crawford settlement - recoupment of
goodwill written off - (8 621)
Development costs impaired - 1 643
Exceptional items before taxation 5 054 (17 884)
Taxation on exceptional items (1 528) 721
Exceptional items after taxation 3 526 (18 605)
4. Determination of headline earnings
Profit attributable to ordinary shareholders
per income statement 39 250 50 450
Exceptional items after tax (see note 3) 3 526 (18 605)
Headline earnings 42 776 31 845
5. Free operating cashflow before capex per share
Net operating profit after tax 40 696 51 273
Plus: depreciation and amortisation 21 287 21 032
exceptional items 3 526 (18 605)
Operating cash flow 65 509 53 700
Plus: working capital changes 19 325 14 158
Free cash flow 84 834 67 858
Weighted average number of shares in
issue (`000) 355 702 363 465
Free operating cash flow before capex
per share (cents) 23,8 18,7
6. Interest bearing debt comprises amounts owing under a number of loan
agreements. During the current financial year a five year facility of
R50 million was arranged with Nedbank. As at 31 December 2004,
R20 million had been drawn down in terms of this facility.
7. Net accounts receivable
Net accounts receivable have shown a 83% increase over the prior year.
This is due to an increase in turnover of 17% together with an
increase in the debtors in the contracting related businesses. Certain
of these contracts were completed close to the year end and this
resulted in the debtors still being outstanding as at the year end.
8. Accounts payable and provisions
Accounts payable and provisions have increased by 69% over the prior
year. This is mainly due to the closure provision for Bond SA of R5,2
million, an accrual for the work in progress for the capitalisation of
new buildings of R4,8 million and a general increase in accounts
payable in line with the increased activity.
9. Capital commitments
Capital commitments comprise the routine replacement and upgrades,
completion of existing infrastructure projects as well as further
infrastructure developments within Education.
10. Discontinuing operations
On 18 June 2004 the board of directors announced a plan to
discontinue the operations of Bond South Africa once current students
have completed their degrees.
Financial impact of the discontinuing operation
Operating loss to date of closure decision (2 525) (5 190)
Depreciation (483) (915)
Provision for closure costs (5 198) -
Loss attributable to discontinuing operation (8 206) (6 105)
Taxation 2 468 2 085
Net loss attributable to discontinuing
Operation (5 738) (4 021)
Total assets of the discontinuing operation 4 672 5 516
Total liabilities of the discontinuing
Operation 16 246 11 322
Cash (outflow)/inflow from operating
Activities (436) 105
Cash outflow from investing activities 5 922
Cash inflow from financing activities 434 2 889
Commentary
Overview
2004 marks a milestone in ADvTECH`s development. Against a background of
academic achievement, continuing operational progress and growth, improved
financial results and strong cash generation, the Group launched a new wave of
investment in educational infrastructure which creates a secure, quality
platform for continued growth in learner enrolment.
Academic achievement is at the heart of the Group`s goals in education and the
acid test of this is in the performance of its learners. While details of their
achievements will be provided in the annual report, suffice it to say that the
class of 2004 represents a worthy and high quality addition to South Africa`s
pool of well educated and motivated citizens. ADvTECH is committed to
contributing to National transformative goals in education and employment
through its enrolment and graduation successes. In 2004, over 50% of learners in
the Group were previously disadvantaged.
Notable features of the Group`s financial results are the 19% increase in
enrolments to 38 000, the 27% increase in operating profit to R56 million, the
increase of 37% in headline earnings per share to 12,0 cents per share, a 28%
increase in operational cash flow before capex to 24 cents per share, and a
reduction in the debt to equity ratio to 14% compared to 37% reported last year.
Compound annual growth (CAGR) in fully diluted headline earnings per share since
2001 is 48%.
The Group`s cash flow is seasonally weighted such that the Group reports maximum
borrowing at its December year end. Notwithstanding the increasing cash outlay
of R21,4 million on new infrastructure (2003 - R10,9 million), average
borrowings during the year were R15 million compared to R35 million at year end.
As a result of lower borrowings, reduced interest rates and a reimbursement of
interest from SARS, the interest expense decreased to R0,4 million (2003 - R10,9
million).
The effective tax rate for the year was 20%. This is forecast to increase closer
to the normal rate of 29% in future.
It is particularly gratifying to report that during the year a number of
investment projects costing some R42 million came into fruition. In the Tertiary
division four new college sites with a projected capacity growth for the Group
of approximately 3 000 learners were prepared for opening in 2005. In the
Schools division additional teaching accommodation for a total of 400 learners
was prepared for 2005.
Divisional review
Education
The Education division comprises the Group`s well-known brands, such as
Abbott`s, CCI, College Campus, CrawfordSchools, Rosebank College, Varsity
College and Vega, in schooling, tertiary education, adult education and training
and learnerships, encompassing some 50 campuses.
The process announced in mid year for the closure of Bond South Africa, in
cooperation with Bond University Australia, is proceeding according to plan and
the last learners will graduate in 2006. ADvTECH supports National priorities to
improve the standards of education governance, the quality of teaching and
learner assessment. During the year, `The Independent Institute of Education`
was created within the Group with ultimate responsibility for ownership,
academic governance, teaching, assessment and quality.
While a major focus within the division this year has been the roll-out of the
new infrastructure and capacity, the division continued to generate a compelling
record, combining academic excellence and sustained financial performance. The
division improved its continuing EBITDA contribution by 17% to R97 million.
Resourcing
The Resourcing division comprises mainly the Group`s recruitment, placement,
temporary staffing and contracting activities together with other smaller
businesses. The major brands include Brent, Cassel, Communicate, Insource,
Kapele, Mast Bookshop, Mast Publications, Network and Pro-Rec.
The recruitment business continued to build on its mid year progress to deliver
excellent full year results, which are a credit to the new management team who
achieved their operating targets. The low capital requirements of the Resourcing
division, combined with this year`s operational success, have generated sound
cash flow for the Group and an excellent return on funds employed. The division
increased its EBITDA contribution by 70% to R10 million.
Litigation
Legal proceedings in respect of substantial claims against Andry Welihockyj,
Marina Welihockyj et al are still in process. Every effort is being made to
bring these matters to a speedy and satisfactory conclusion in the interest of
shareholders.
ADvTECH`s litigation sub-committee, which consists of non-executive directors,
has advised the Board that legal counsel remains satisfied with the merits of
the Group`s claims and that the Group has no additional exposure other than for
legal costs in these matters. Litigation costs are expensed as incurred and
amounted to R4,7 million in the year (2003 - R8,9 million).
Distribution to shareholders
The Board has resolved, after consideration of various options, to recommend a
distribution to shareholders by way of capital distribution, out of share
premium, of 4,5 cents per share (2003 - dividend of 1,0 cents) in respect of the
year ended 31 December 2004. Shareholders will be asked to consider, and if
deemed fit, to approve the capital distribution at the annual general meeting of
the Company to be held on Tuesday, 17 May 2005.
Subject to this approval and in compliance with STRATE, the following dates will
be applicable to the capital distribution:
2005
Last day to trade Friday, 27 May
Trading commences ex distribution Monday, 30 May
Record date Friday, 3 June
Payment date Monday, 6 June
Share certificates may not be dematerialised or rematerialised between Monday,
30 May 2005 and Friday, 3 June 2005, both days inclusive.
Staff
The Group`s academic, operational and financial results were not achieved
without overcoming numerous challenges, including that of responding to the
changes in regulatory requirements. The skill, energy and enthusiasm of the
people of ADvTECH in overcoming these challenges, at the same time enhancing the
Group`s platform for growth, is greatly appreciated.
ADvTECH increased staff numbers by 4% to 2 346, of whom 66% are professional
educators and over 200 are qualified at Masters or Doctoral level. Capacity and
effectiveness were enhanced by taking on additional skilled resources,
especially in academics and in the Group`s management of its properties.
Prospects
Both the Education and Resourcing divisions are now in a promising growth phase.
The positive performance of the South African economy has increased demand for
well-qualified, and motivated people. This in turn increases new job
opportunities and demand for the quality education offered by the Group.
Provided the current economic environment is maintained and given the
encouraging registrations for 2005 in the Education division, the Board expects
to report improved headline earnings and operating cash flows for the next
reporting period.
HF BROWN FR THOMPSON
Chairman Chief Executive Officer
Johannesburg, 14 March 2005
Directors: HF Brown* (Chairman), FR Thompson (CEO), JNP Booyens, JJ Deeb
(Financial), CN Duff, DL Honey, BD Buckham*, DK Ferreira*, JD Jansen*, HR
Levin*, MI Sacks*, Alternate Directors: A Isaakidis, DS Dowling** *Non
Executive **British Group Secretary: MJ Lammle
Registered office: 364 Kent Avenue, Ferndale, Randburg, 2194 (PO Box 2369,
Randburg, 2125) Transfer secretaries: Ultra Registrars (Pty) Ltd, 11 Diagonal
Street, Johannesburg 2001 Sponsor: Bridge Capital Services (Pty) Ltd
