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Adcorp - Unaudited Group Interim Results for the period ended 30 June 2005
Adcorp Holdings Limited
(`Adcorp` or `the Group`)
Registration number 1974/001804/06
Share code: ADR
ISIN number: ZAE000000139
Unaudited Group Interim Results for the period ended 30 June 2005
Leaders in human capital management and marketing advisory services
Salient features
* Earnings per share up by 28%
* Operating profit up by 30%
* Cash conversion ratio 100%
* Debtors days down by 2 days
* Interim dividend of 35 cents per share up 40%
* Operating profit margin up to 4,9%
INCOME STATEMENT
for the six months ended 30 June 2005 restated for the adoption of IFRS
Restated Restated
Unaudited for IFRS for IFRS
30 June 30 June 31 December
2005 2004 2004
R`000 R`000 R`000
Turnover 1 102 668 933 780 2 005 659
Cost of sales (778 861) (653 143) (1 398 519)
Gross profit 323 807 280 637 607 140
Other income 8 995 9 311 25 532
Operating expenses (271 058) (241 060) (529 036)
Administrative expenses (99 100) (93 146) (197 544)
Marketing and selling (140 037) (118 859) (254 877)
expenses
Other operating expenses (31 921) (29 055) (76 615)
OPERATING PROFIT BEFORE NON-
CASH
ITEMS AND SALE OF ASSETS 61 744 48 888 103 636
Lease rental timing (285) (777) (1 254)
adjustments
IFRS share-based payments (707) (263) (1 023)
Depreciation (7 323) (6 393) (13 382)
Profit/(loss) on sale of 201 (109) (94)
property and equipment
Operating Profit 53 630 41 346 87 883
Interest received - banks 8 260 8 836 18 155
- fair value adjustments - - 82
Interest paid - banks (9 365) (11 017) (20 604)
Share of profits from 1 719 1 883 2 222
associates
Impairment of investment and - - (1 224)
property
Profit/(loss) on disposal of - 59 (5 829)
operations and subsidiaries
Profit before taxation 54 244 41 107 80 685
Taxation - current (16 901) (11 712) (19 792)
PROFIT AFTER TAXATION 37 343 29 395 60 893
Minority shareholders` share (196) (509) (898)
of profits
BEE share of super profits (852) (1 400) (2 274)
PROFIT ATTRIBUTABLE TO
ORDINARY
SHAREHOLDERS 36 295 27 486 57 721
RECONCILIATION OF HEADLINE
EARNINGS
Profit attributable to 36 295 27 486 57 721
ordinary shareholders
Impairment of investment and - - 1 224
property
(Profit)/loss on sale of (143) 76 66
property and equipment
(Profit)/loss on disposal of - (59) 5 829
operations and subsidiaries
HEADLINE EARNINGS 36 152 27 503 64 840
Earnings per share - cents 87,8 68,7 143,2
Headline earnings per share - 87,5 68,7 160,9
cents
Diluted earnings per share - 85,7 68,5 141,8
cents
Diluted headline earnings per 85,3 68,5 159,3
share - cents
Distribution to shareholders
- interim prior year capital - 25 25
distribution - cents
- final prior year dividend - - - 80
cents
-interim dividend - cents 35 - -
Weighted average shares in 41 327 40 035 40 302
issue
Total shares for diluted 42 373 40 130 40 711
earnings calculation
BALANCE SHEET
at 30 June 2005 restated for the adoption of IFRS
Restated Restated
Unaudited for IFRS for IFRS
30 June 30 June 31 December
2005 2004 2004
R`000 R`000 R`000
ASSETS
Non-current assets 127 253 121 225 126 440
Property and equipment 50 039 44 990 49 502
Goodwill 45 703 47 725 44 815
Intangible assets 3 140 - 3 140
Investment in associates 5 905 6 483 3 550
Other financial assets 2 268 2 268 2 268
Deferred taxation 20 198 19 759 23 165
Current assets 395 551 367 635 349 035
Trade receivables 248 940 216 391 230 881
Other receivables 40 351 23 152 27 332
Vendor for sale of business - 89 -
Cash resources 100 117 121 616 84 001
Taxation prepaid 6 143 6 387 6 821
522 804 488 860 475 475
EQUITY AND LIABILITIES
Capital and reserves 248 981 175 570 206 721
Share capital 1 043 1 007 1 031
Share premium 39 115 34 805 34 694
Treasury shares (3 379) (4 454) (4 205)
Share-based payments reserve 2 122 1 047 1 415
Accumulated profit 210 080 143 165 173 786
Minority shareholders` 1 218 927 1 367
interest
BEE shareholders` interest 757 1 585 2 459
Non-current liabilities
Non-current interest-bearing 2 532 640 2 025
liabilities
Current liabilities 269 316 310 138 262 903
Current non-interest-bearing 200 551 203 251 177 535
liabilities
Current non-interest-bearing 175 135 170 525 149 660
liabilities
Shareholders for capital - 21 942 -
distribution
Amounts due to vendor 2 500 - 3 500
Provisions 20 883 9 789 22 330
Taxation 2 033 995 2 045
Interest-bearing current 68 765 106 887 85 368
liabilities
Current portion of interest- 67 66 23
bearing non-current
liabilities
Bank overdraft 68 698 106 821 85 345
TOTAL EQUITY AND LIABILITIES 522 804 488 860 475 475
Number of ordinary shares in 41 704 40 369 41 258
issue
Net asset value per share 597 435 501
ABRIDGED CASH FLOW STATEMENT
Unaudited Unaudited Audited
30 June 30 June 31 December
2005 2004 2004
R`000 R`000 R`000
CASH FLOWS FROM OPERATING
ACTIVITIES
Cash generated from 61 743 48 888 103 636
operations
(Increase)/decrease in (8 393) 10 693 (14 810)
working capital
Cash generated by operating 53 350 59 581 88 826
activities
Net interest paid (1 105) (2 181) (2 449)
Taxation paid (13 363) (14 513) (24 764)
Dividend/capital distribution (2 330) - (31 964)
paid
Net cash inflow (outflow) 36 552 42 887 29 649
from operating activities
Cash flows from investing (9 493) (6 666) (19 676)
activities
Cash flows from financing 5 704 706 10 815
activities
Net cash movement 32 763 36 927 20 788
Cash and cash equivalents at (1 344) (22 132) (22 132)
the beginning of the period
Cash and cash equivalents at 31 419 14 795 (1 344)
the end of the period
SEGMENT REPORT
for the six months ended 30 June 2005 restated for the adoption of IFRS
Turnover Operating
profit
2005 2004 2005 2004
R`000 R`000 R`000 R`000
Central costs 4 513 2 276 (8 511) (6 745)
Permanent recruitment 156 595 119 351 11 361 9 717
Flexible staffing 861 820 703 418 48 178 29 560
Corporate communications 32 810 65 316 (4 130) 3 725
Research 46 930 43 419 6 732 5 089
TOTAL 1 102 668 933 780 53 630 41 346
for the six months ended 30 June 2005 restated for the adoption of IFRS
Operating Contribution to
profit group operating
margin profit
2005 2004 2005 2004
% % % %
Central costs - - (15,9) (16,4)
Permanent recruitment 7,3 8,1 21,2 23,5
Flexible staffing 5,6 4,2 89,8 71,5
Corporate communications (12,6) 5,7 (7,7) 9,1
Research 14,3 11,7 12,6 12,3
TOTAL 4,9 4,4 100,0 100,0
for the six months ended 30 June 2005 restated for the adoption of IFRS
Net
asset
value
2005 2004
R`000 R`000
Central costs 83 211 59 878
Permanent recruitment 25 806 13 325
Flexible staffing 130 362 86 127
Corporate communications 1 228 7 115
Research 8 374 9 125
TOTAL 248 981 175 570
STATEMENT OF CHANGES IN EQUITY
for the six months ended 30 June 2005 restated for the adoption of IFRS
Share Share Treasury
capital premium shares
R`000 R`000 R`000
Balance as at 31 December 2004 1 031 34 694 (4 205)
IFRS restatements to December 2004 - - -
IFRS balance as at 31 December 2004 1 031 34 694 (4 205)
Shares issued 12 4 421 -
Nominal share-based payment value - - -
Treasury shares sold - - 697
Capital distributions - - 129
Net profit for the six months to June - - -
2005
Balance as at 30 June 2005 1 043 39 115 (3 379)
Share-based
Accumulated payments
profit reserve Total
R`000 R`000 R`000
Balance as at 31 December 2004 188 446 - 219 966
IFRS restatements to December 2004 (14 661) 1 415 (13 246)
IFRS balance as at 31 December 2004 173 785 1 415 206 720
Shares issued - - 4 433
Nominal share-based payment value - 707 707
Treasury shares sold - - 697
Capital distributions - - 129
Net profit for the six months to June 36 295 - 36 295
2005
Balance as at 30 June 2005 210 080 2 122 248 981
FIRST TIME ADOPTION OF INTERNATIONAL FINANCIAL REPORTING STANDARDS (`IFRS`)
The group is reporting for the first time under the IFRS standard for the year
ending 31 December 2005 and accordingly, comparative figures have been restated.
The unaudited results for the half-year ended 30 June 2005 have been prepared in
accordance with the group`s accounting policies, which comply with International
Financial Reporting Standards (`IFRS`). The disclosures required in terms of
IFRS1 (First Time Adoption of International Financial Reporting Standards)
concerning the transition from South African Statements of Generally Accepted
Accounting Practice (`SA GAAP`) and the requisite changes in accounting policies
are set out below.
The following IFRS standards have impacted on group accounting policies and the
disclosure of group results:
IFRS2 - Share-based payment
The notional values of share-based payments are charged in the income statement
and the reciprocal credit is shown as a `Share-based payments reserve` in the
balance sheet.
IFRS3 - Business combinations
Goodwill is no longer amortised over its expected useful life, but is tested for
impairment on an annual basis and any impairment is charged in the income
statement.
IAS16 - Property, plant and equipment
The residual values and useful lives of major fixed assets have been assessed
and where applicable depreciation has been adjusted.
IAS17 - Leases
In addition to the above changes, the accounting treatment of lease rentals has
been modified to accord with the international interpretation of the
requirements of IAS17, namely, escalations in operating lease rentals are no
longer recognised in the periods they are actually incurred, but are now charged
in the income statement on a straight-line basis over the term of the leases.
RECONCILIATION OF PREVIOUS SA GAAP TO IFRS
Restated Restated IFRS
transition
for IFRS for IFRS date
31 December 30 June 1 January
2004 2004 2004
R`000 R`000 R`000
BALANCE SHEET
Changes in equity:
Accumulated profit:
As previously reported - SA GAAP 188 446 159 507 133 406
Operating lease rental timing (5 200) (4 723) (3 945)
adjustments
Net effect of above adjustments on 1 561 1 425 1 191
deferred taxation
Restated accumulated profit - SA GAAP 184 807 156 209 130 652
Impairment of goodwill (18 585) (18 585) (18 585)
Reversal of goodwill amortisation 4 134 1 967 -
Adjustment of fixed property residual 4 845 4 621 4 396
values
Share-based payments (1 415) (1 047) (392)
Restated accumulated profit - IFRS 173 786 143 165 116 071
Share-based payments reserve:
As previously reported - SA GAAP - - -
Charges against accumulated profit 1 415 1 047 392
Restated share-based payments reserve - 1 415 1 047 392
IFRS
INCOME STATEMENT
Net profit attributable to ordinary 55 040 26 100
shareholders - as previously reported -
SA GAAP
Operating lease rental timing (1 254) (777)
adjustments
Adjustment in respect of the above to 375 234
taxation
54 161 25 557
Share-based payments charge (1 023) (263)
Reversal of fixed property depreciation 449 225
Reversal of goodwill amortisation 4 134 1 967
Restated net profit attributable to 57 721 27 486
ordinary shareholders - IFRS
COMMENTS
OVERVIEW
Following on the financial successes of the prior year, the Group continued to
deliver a strong financial performance for the first six months of the 2005
financial year.
Operating profit increased by 29,7% to R53,6 million (2004: R41,3 million)
compared to the prior year while earnings per share were 27,8% higher than the
same period last year.
The Group`s primary focus on cash management and margin management contributed
positively to the performance of the Group. In this regard, the operating margin
of the Group increased from 4,4% in the comparative prior period to a level of
4,9% for the period under review while the conversion ratio of cash generated by
operating activities to operating profit before goodwill of 100% was ahead of
target levels. R53,4 million cash was generated by operating activities.
Both the Permanent Recruitment and Flexible Staffing divisions recorded
outstanding results reflecting positive growth in the South African economy and
specifically, high demand in the financial services, retail, telecommunications,
engineering and public sectors as well as reaping the benefits of the Group`s
positioning as South Africa`s leading staffing provider.
In addition, the Flexible Staffing division has also benefited from growth in
the call centre industry, the trend to outsourcing and growth in SETA
administered learnerships.
The Marketing Research division also had an outstanding start to the year
benefiting from the growth in the South African economy, particularly in the
retail and FMCG sectors.
The Corporate Communications division, which is a relatively minor contributor
to overall Group profitability, had a difficult start to the year. Having
reported a loss for the half of the year, the division is expected to return to
profitability for the full year.
The positive trends experienced by the Group in the first six months of the
financial year are expected to continue for the remainder of the year.
FINANCIAL OVERVIEW
The Group is reporting under International Financial Reporting Standards
(`IFRS`) for the first time. A reconciliation between the figures previously
reported under South African Statements of Generally Accepted Accounting
Practice (`GAAP`) and IFRS is tabled above.
Profit attributable to ordinary shareholders at R36,3 million increased by 32,1%
compared with the first six months of last year largely as a result of an 18,1%
increase in turnover coupled with a 0,5% increase in operating profit margin.
Net cash generated during the period 1 January to 30 June, 2005 amounted to
R32,8 million with a two day reduction in debtors days contributing positively
to cash flow. The shareholder dividend of 80 cents per share declared in March
2005 totalling R37 million (including STC) as well as the interim dividend of 35
cents per share in August 2005, will be paid in the second half of 2005.
SUBSEQUENT EVENTS
Subsequent to 30 June, 2005 Adcorp sold its premises in Melville for a net price
consideration of approximately R20 million in line with the Group policy to rent
rather than own buildings. In addition Adcorp entered into an agreement giving
rise to a R21 million commitment for the supply and installation of a new IT
system in support of the Flexible Staffing businesses.
DECLARATION OF INTERIM DIVIDEND
Notice is hereby given that an interim dividend of 35 cents per share (2004:
capital distribution 25 cents per share) was declared on 17 August, 2005 payable
to shareholders recorded in the register of the company at the close of business
on the record date appearing below. The salient dates pertaining to the interim
dividend are as follows:
2005
Last day to trade cum interim dividend Friday, 30 September
First day to trade ex interim dividend Monday, 3 October
Record date Friday, 7 October
Payment date Monday, 10 October
No share certificates may be dematerialised or rematerialised between Monday, 3
October and Friday, 7 October, 2005, both days inclusive.
Dividend cheques will be posted and electronic payments made, where applicable,
to certificated shareholders on the payment date. Dematerialised shareholders
will have their account with Central Securities Depository Participant or broker
credited on the payment date.
ACCOUNTING POLICIES AND PRESENTATION
This report has been prepared in accordance with International Financial
Reporting Standards. The transition date to IFRS was 1 January 2004 and the
figures for the six months ended 30 June 2004 and 12 months ended 31 December
2004 have been restated accordingly.
By order of the board
Dr F van Zyl Slabbert RL Pike FD Burd
Chairman Chief Executive Officer Group Financial Director
17 August 2005
Executive directors
RL Pike, HW Barenblatt, FD Burd, M Liphosa, RB McGregor, PC Swart
Independent non-executive directors
Dr F van Zyl Slabbert, SO Shonhiwa, C Bomela, F Khanyile,
GM Negota, S Sebotsa
Alternate directors
TEM Ratshitanga, SE Zungu
Company secretary
A Warwick
Transfer secretaries
Ultra Registrars (Pty) Limited, 11 Diagonal Street, Johannesburg, 2001
Sponsor
Deloitte & Touche Sponsor Services (Pty) Limited
Date: 17/08/2005 10:39:24 AM
Produced by the JSE SENS Department
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