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ADH
ADH
Advtech Group - Unaudited Results for the six months ended 30 June 2006
Advtech Group Limited
(Incorporated in the Republic of South Africa)
Registration number: 1990/001119/06
JSE code: ADH
ISIN: ZAE000031035
Results announcement for the six months ended 30 June 2006
- Operating profit before interest up 50%
- Headline earnings per share up 44%
- Free operating cashflow per share up 35%
Condensed consolidated income statement
for the six months ended 30 June 2006
Unaudited Unaudited Audited
6 months 6 months 12 months
to to to
(R"000) Note Percentage 30 June 30 June 31 Dec
increase 2006 2005 2005
Revenue 24% 413 349 332 646 661 035
Earnings before
Interest, Taxation,
Depreciation & 41% 68 043 48 261 112 643
Amortisation
(EBITDA)
Operating profit 50% 55 131 36 691 87 015
Net interest 3 171 703 117
received
Interest received 5 116 3 383 5 264
Finance costs (1 945) (2 680) (5 147)
Profit before 56% 58 302 37 394 87 132
taxation
Taxation 18 092 10 899 27 162
Profit for the 52% 40 210 26 495 59 970
period
Attributable to:
Equity holders of 38 646 25 704 57 822
the parent
Minority interest 1 564 791 2 148
40 210 26 495 59 970
Earnings per share
Basic (cents) 48% 10.5 7.1 16.0
Diluted (cents) 44% 9.8 6.8 15.2
Headline earnings
per share
Basic (cents) 3 44% 10.1 7.0 15.7
Diluted (cents) 40% 9.4 6.7 14.9
Number of shares in 393 665 393 665 393 665
issue ("000)
Diluted number of 393 779 380 249 381 287
shares ("000)
Weighted average
number of
shares in issue 368 188 361 948 361 891
("000)
Net asset value per 13% 78.5 69.7 72.5
share (cents)
Net cash position 102 902 37 306 17 702
(R"000)
Free operating cash
flow before
capex per share 35% 41.9 31.1 28.9
(cents)
Condensed consolidated balance sheet
as at 30 June 2006
Unaudited Unaudited Audited
6 months to 6 months to 12 months to
(R"000) Note 30 June 2006 30 June 2005 31 Dec 2005
Assets
Non-current assets 437 451 400 624 407 182
Property, plant and 387 643 355 996 364 988
equipment
Intangible assets 4 7 618 1 1
Investments 495 495 495
Deferred taxation 41 695 44 132 41 698
assets
Current assets 175 010 108 528 73 017
Trade receivables 53 785 48 333 37 048
and other
Cash and cash 121 225 60 195 35 969
equivalents
Total assets 612 461 509 152 480 199
Equity and
liabilities
Equity 290 422 252 982 286 898
Attributable to
equity holders of
the parent 288 858 252 191 285 541
Minority interest 1 564 791 1 357
Non-current 18 322 22 888 18 267
liabilities
Current liabilities 303 717 233 282 175 034
Trade payables and 146 737 112 465 125 080
other
Fees received in 156 980 120 817 49 954
advance
Total equity and 612 461 509 152 480 199
liabilities
Supplementary information
for the six months ended 30 June 2006
Unaudited Unaudited Audited
6 months to 6 months to 12 months to
(R"000) 30 June 2006 30 June 2005 31 Dec 2005
Capital expenditure - 41 958 39 634 68 043
current period
Capital commitments - 56 768 41 895 -
remainder of the year
- future years - 2 200 92 507
Operating lease 124 439 103 216 123 703
commitments in cash -
future years
Condensed segmental report
for the six months ended 30 June 2006
Unaudited Unaudited Audited
Percentage 6 months to 6 months to 12 months to
(R"000) increase 30 June 2006 30 June 2005 31 Dec 2005
Revenue 24% 413 349 332 646 661 035
Education 21% 354 227 292 738 581 193
Resourcing 48% 59 122 39 908 79 842
Profit from 50% 55 131 36 691 87 015
operations
Education 26% 59 234 47 006 100 953
Resourcing 93% 10 278 5 328 12 349
Central 14% (13 879) (12 170) (22 564)
administration
Litigation (501) (3 473) (3 723)
costs
Condensed consolidated cash flow statement
for the six months ended 30 June 2006
Unaudited Unaudited Audited
6 months 6 months 12 months
to to to
(R"000) Note Percentage 30 June 30 June 31 Dec
increase 2006 2005 2005
Cash generated 5 67 180 49 554 114 025
by operations
Generated by 101 963 73 843 17 538
decrease in
working capital
Cash generated 169 143 123 397 131 563
by operating
activities
Net interest 3 171 703 117
received
Taxation (12 253) 4 126 (6 608)
(paid)/refunded
Capital (25 768) (16 332) (16 332)
distribution
Net cash inflow 134 293 111 894 108 740
from operating
activities
Net cash outflow (52 833) (39 610) (61 469)
from investing
activities
Net cash
inflow/(outflow)
from
financing 3 796 (101) (7 881)
activities
Net increase in 85 256 72 183 39 390
cash and cash
equivalents
Cash and cash
equivalents at
beginning
of the period 35 969 (11 988) (3 421)
Cash and cash 121 225 60 195 35 969
equivalents at
end of the
period
Free operating
cashflow before
capex
per share
(cents)
Net operating 40 210 26 495 59 970
profit after
taxation
Adjust for non
cash IFRS and
lease
adjustments 1 172 957 1 729
(after taxation)
Net operating
profit after
taxation -
adjusted
for non cash 41 382 27 452 61 699
IFRS and lease
adjustments
Other non (2 036) (135) (1 181)
cashflow income
statement items
Plus: 12 912 11 570 26 455
depreciation and
amortisation
Operating cash 34% 52 258 38 887 86 973
flow after
taxation
Plus: working 101 963 73 843 17 538
capital changes
Free operating 154 221 112 730 104 511
cash flow before
capex
Weighted average
number of
shares in issue 368 188 361 948 361 891
("000)
Free operating
cash flow before
capex per share 35% 41.9 31.1 28.9
(cents)
Condensed consolidated statement of changes in equity
for the six months ended 30 June 2006
Shares
held by Non-
Ordinary Share Share distri-
share Share option Incentive butable
(R"000) capital premium reserve Trust reserves
Balance at 1 3 937 355 100 1 119 (10 710) 15 944
January 2005
Share-based payment 568
expense
Net profit for the
year
Minority interest
distribution
Transfer from NDR (15 944)
to DR
Share options 1 847
exercised
Total recognised - - 568 1 847 (15 944)
income and expense
for the year
Distribution to (16 329)
shareholders
Balance at 31 3 937 338 771 1 687 (8 863) -
December 2005
Share-based payment 769
expense
Net profit for the
period
Minority interest
distribution
Shares purchased by (11 912)
the Share Incentive
Trust
Share options 1 582
exercised
Total recognised - - 769 (10 330) -
income and expense
for the period
Distribution to (25 768)
shareholders
Balance at 30 June 3 937 313 003 2 456 (19 193) -
2006
Attributable
to equity
holders
Accumulated of the Minority Total
(R"000) loss parent interest equity
Balance at 1 (123 757) 241 633 1 446 243 079
January 2005
Share-based payment 568 568
expense
Net profit for the 57 822 57 822 2 148 59 970
year
Minority interest - (2 237) (2 237)
distribution
Transfer from NDR 15 944 - -
to DR
Share options 1 847 1 847
exercised
Total recognised 73 766 60 237 (89) 60 148
income and expense
for the year
Distribution to (16 329) (16 329)
shareholders
Balance at 31 (49 991) 285 541 1 357 286 898
December 2005
Share-based payment 769 769
expense
Net profit for the 38 646 38 646 1 564 40 210
period
Minority interest - (1 357) (1 357)
distribution
Shares purchased by (11 912) (11 912)
the Share Incentive
Trust
Share options 1 582 1 582
exercised
Total recognised 38 646 29 085 207 29 292
income and expense
for the period
Distribution to (25 768) (25 768)
shareholders
Balance at 30 June (11 345) 288 858 1 564 290 422
2006
Notes to the condensed consolidated financial statements
for the six months ended 30 June 2006
1. Basis of preparation
The condensed financial statements have been prepared in accordance with
International Accounting Standard (IAS) 34, Interim Financial Reporting.
2. Significant accounting policies
The condensed consolidated financial statements have been prepared under
the historical cost convention. The accounting policies adopted are
consistent with those followed in the preparation of the Group"s annual
financial statements for the year ended 31 December 2005.
Unaudited Unaudited Audited
6 months to 6 months to 12 months to
(R"000) 30 June 30 June 31 Dec
2006 2005 2005
3. Determination of headline
earnings
Earnings attributable to
ordinary shareholders per
the
income statement 38 646 25 704 57 822
Profit on disposal of assets (1 446) (135) (1 181)
and businesses
Headline earnings 37 200 25 569 56 641
4. Intangible assets
In line with IFRS, intangible assets of a business acquired on or after 31
March 2004 must be ecognized and amortised over its useful life. The amount
reflected on the balance sheet relates to Vertex-Kapele which was acquired
during the period under review.
5. Notes to the cash flow statement
Unaudited Unaudited Audited
6 months to 6 months to 12 months to
(R"000) 30 June 30 June 31 Dec
2006 2005 2005
Reconciliation of profit
before taxation to cash
generated by operations
Profit before taxation 58 302 37 394 87 132
Adjust for non cash IFRS and 1 173 1 676 3 189
lease adjustments (before
taxation)
Sub total 59 475 39 070 90 321
Add back: 7 705 10 484 23 704
Depreciation on property, 12 912 11 723 25 471
plant and equipment (net of
IAS 16 adjustment)
Net interest received (3 171) (1 046) (117)
Other non cashflow income (2 036) (193) (1 650)
statement items
Cash generated by operations 67 180 49 554 114 025
Directors" comments on results
Overview
The Board of Directors is pleased to report a solid half year performance
for the six months ended 30 June 2006.
Profit for the period increased by 52% from R26,5 million to R40,2 million,
translating into an increase of 44% in headline earnings per share from 7,0
cents to 10,1 cents per share.
The more than satisfactory financial statistics reflect the integrity of
the Group"s business model and its natural propensity for growth.
The driving dynamics of ADvTECH"s business are predicated on two
fundamental imperatives of the new South Africa: education and employment.
The intensifying appeal of ADvTECH"s offering, and consequently the growing
enrolments, increasingly present greater opportunity for South Africa"s
youth seeking the tools and qualifications to control their own destiny.
Given this positive and discernible trend, ADvTECH will continue to
reinvest surpluses in additional infrastructure for broader and more
affordable access to education, training and employment.
Education
The Education division is a leader in the private education sector and
includes the branded institutions of Abbotts, CrawfordSchools College
Campus, Junior College, Rosebank College, Varsity College, Vega - The Brand
Communications School, and the adult education and skills unit, Imfundo.
Pleasing increases in enrolments were achieved across all brands.
The Education division delivered another sound financial performance,
increasing revenues by 21% to R354,2 million and profit from operations by
26% to R59,2 million. The divisional operating margin improved from 16,1%
to 16,7% for the period, illustrating the feasibility of providing
increased capacity and developing new infrastructure.
Resourcing
The Resourcing division"s activities include recruitment, placement,
temporary staffing, response handling and HR contracting. The portfolio
includes such popular brands as Brent Personnel, Cassel & Company,
Communicate Personnel, Insource.ICT, Kapele Appointments, Network
Recruitment, Pro-Rec Recruitment and the recently acquired and renamed
advertising response handling business, Vertex-Kapele.
Revenue for the six months increased by 48% to R59,1 million and divisional
operating profit by 93% to R10,3 million. Demand for skilled staff remains
high and the Group, which has developed a professional and trustworthy
reputation, continues to gain market share.
The enhanced performance has also resulted from the strategic focus on the
information technology, finance and engineering sectors.
Litigation
Litigation expenses applicable to the Group"s damages claims against the
Welihockyjs were R 0,5 million for the period (2005 - R3,5 million). The
Welihockyjs continue with their dilatory conduct and only delivered their
plea under protest on 26 June 2006. Shareholders have been patient over
several years in permitting the Group to pursue these claims and a trial
date will in due course be secured where the long-awaited evidence of the
Welihockyjs will be ventilated in open court. The Board Litigation
Committee remains satisfied with the merits of the claims and that the
Group has no exposure other than for ongoing legal costs.
Balance Sheet and Cash Flow
The Group Balance Sheet has strengthened over the period and the Group
remains ungeared at 30 June 2006. Cash generated from operations of R67,2
million, together with cash flow of R102,0 million generated through
efficient working capital management, enabled the Group to fund capital
expenditure of R42,0 million (2005 - R39,6 million) and pay a capital
distribution of R25,8 million (2005 - R16,3 million) from its own
resources. In addition, 5,7 million Advtech Limited shares were acquired in
June 2006 at a cost of R11,9 million in terms of the authority granted to
the directors. Part of the cash flow accumulation is seasonal and given the
nature of the Group"s business model will be applied within the business
during the second half of the year. It is nevertheless expected that the
Group will remain ungeared at year end.
Capital Distribution
The Board has resolved to declare a maiden interim capital distribution,
out of share premium, of 3,0 cents per share in respect of the period ended
30 June 2006. The authority to make this payment to shareholders was
obtained at the annual general meeting held on 23 May 2006.
Set out in the table below are the pro forma financial effects of the
distribution on the Company"s earnings per share, headline earnings per
share, net asset value per share and net tangible asset value per share
based on the Company"s unaudited financial results for the period ended 30
June 2006. The pro forma financial effects have been prepared for
illustrative effects only and, because of their nature, they may not give a
true reflection of the Company"s financial position or results. The pro
forma financial effects are the responsibility of the Company"s directors.
Before the After the Percentage
Distribution(1) distribution change
Earnings per share 10,5 10,4(2) (1%)
(cents)
Headline earnings per 10,1 10,0(2) (1%)
share (cents)
Weighted average number 368 188 368 188
of shares in issue ("000)
Net asset value per share 78,5 75,5(3) (4%)
(cents)
Net tangible asset value 76,4 73,4(3) (4%)
per share (cents)
Number of shares in issue 393 665 393 665
("000)
Notes:
(1.) Extracted from the unaudited financial results for the period
ended 30 June 2006.
(2.) The earnings and headline earnings per share figures in the
"After the distribution" column have been based on the following
assumptions:
* the distribution was made on 1 January 2006; and
* interest, at an average before tax rate of 7.0% per annum,
was forfeited on the cash distributed.
(3.) The net asset value and net tangible asset value per share
figures in the "After the distribution" column have been based on
the assumption that the distribution was made on 30 June 2006.
Set out in the table below are the salient dates applicable to the
distribution:
2006
Last day to trade in order to participate in Friday, 15 September
the distribution on
Trading commences ex-distribution on Monday, 18 September
Record date on Friday, 22 September
Payment date on Tuesday, 26 September
Share certificates may not be dematerialised or rematerialised between
Monday, 18 September 2006 and Friday, 22 September 2006, both days
inclusive.
Prospects
The success of ADvTECH"s business is measured not only by its financial
results, but also by the academic results of the thousands of students who
pass each grade of instruction and finally graduate in their desired craft
or speciality. The continued increase in enrolments is testament to this
success and a major indicator of future sustainability and growth.
Accordingly, in the absence of any material change in economic conditions,
the Group expects to deliver improved results and cash flow for the full
year.
Michael Sacks Frank Thompson
Chairman Chief Executive Officer
Johannesburg
28 August 2006
Directors: MI Sacks* (Chairman), FR Thompson (CEO), JDR Oesch (Financial),
JNP Booyens, BD Buckham*, JJ Deeb, CN Duff, DK Ferreira*, DL Honey, JD
Jansen*, HR Levin* *Non Executive
Alternate Director: A Isaakidis
Group Company Secretary: SC O"Connor
Registered office:
Inanda Greens, 54 Wierda Road West, Wierda Valley, Sandton
Transfer secretaries:
Link Market Services South Africa (Pty) Ltd, 11 Diagonal Street,
Johannesburg 2001
Sponsor: Bridge Capital Services (Pty) Ltd
www.advtech.co.za
Date: 28/08/2006 11:38:18 AM Produced by the JSE SENS Department
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