| Fri 12 Jan 2007, 11:17 | | ADR - Adcorp - Fulfilment of the conditions preced |
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ADR
ADR
ADR - Adcorp - Fulfilment of the conditions precedent to the proposed
acquisition and revision of financial effects previously published
Adcorp Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number 1974/001804/06)
Share Code: JSE ADR & ISIN: ZAE000000139
("Adcorp" or the "the company")
FULFILMENT OF THE CONDITIONS PRECEDENT TO THE PROPOSED ACQUISITION OF FUNERARY
MANAGEMENT SERVICES (PTY) LIMITED ("FMS") BY ADCORP ("THE ACQUISITION") AND
REVISION OF FINANCIAL EFFECTS PREVIOUSLY PUBLISHED
1. FULFILMENT OF THE CONDITIONS PRECEDENT
Adcorp shareholders are referred to the previous announcement published on SENS
on 4 December 2006, regarding the acquisition of FMS and are advised that all
conditions precedent have been fulfilled, namely:
- Adcorp were satisfied with its due diligence investigation into the
business and affairs of FMS;
- approval in general meeting was obtained by shareholders to place 2 788 000
unissued shares of the company under the control of directors;
- approval of the acquisition by the Competition Commission was received; and
- the conclusion of employment agreements between Adcorp and the key
employees of FMS, including appropriate restraint undertakings.
2. REVISED FINANCIAL EFFECTS
The financial effects published on 4 December 2006 reflected transaction costs
as an expense to the Income Statement. In terms of International Financial
Reporting Standards (IFRS) #3 `Business Combinations`, the costs directly
attributable to the acquisition form part of the total purchase consideration
and should therefore be capitalised. Accordingly, the financial effects have
been revised to be in line with IFRS, which requires directly attributable
transaction costs to be part of the purchase consideration and form part of the
capital cost on consolidation.
Interim results to 30 June 2006
Before After change %
(cents)1,4 (cents)(2,5,7)
Per Adcorp share
Earnings 58.3 62.4 7.0
Headline earnings 3 106.5 107.4 0.8
Net asset value 554.1 677.4 22.3
Tangible net asset value 434.5 489.9 12.8
Cash flow per share 8 62.8 77.3 23.1
Number of shares in issue (`000) 43,005 45,793 6.5
Weighted issue number of shares 42,757 45,545 6.5
(`000)
Notes:
1. The earnings and headline earnings per share, as set out in the Before
column, are based on the published interim results of Adcorp for the six months
ended 30 June 2006.
2. The earnings and headline earnings per share, as set out in the After
column, are based on the interim results of Adcorp for the six months ended 30
June 2006 and six months apportioned for FMS (based on audited 28 February 2006
Income Statement, i.e. 12 months` earnings divided by 2).
3. For this calculation, the purchase consideration has been considered in
terms of the requirements of IFRS 3 and R60 million of the purchase price in
excess of the net asset value of FMS has been allocated to Intangible Assets.
The remainder of the purchase consideration is regarded as Goodwill. This
allocation is based on management`s best estimate at this stage. The allocation
of the purchase consideration to tangible and intangible assets, liabilities and
goodwill is a process requiring a detailed identification and valuation
exercise. This will be completed once the acquisition process is confirmed and
the effective date for the transaction identified.
If this results in the allocation being materially different to management`s
estimates, shareholders will be advised thereof. As a result of the allocation
of R60 million of the purchase price to Intangible Assets, we have included an
amortisation charge in the calculation of Earnings and Headline earnings in the
After column. An amortisation period of five years was assumed for the
calculation. The headline earnings of Adcorp would have increased 9.7%, if, for
this calculation, the purchase price in excess of the net asset value of FMS has
been allocated entirely to Goodwill.
4. The net asset value and tangible asset value per share, as set out in the
Before column, is based on the interim balance sheet published by Adcorp as at
30 June 2006.
5. The net asset value and tangible net asset value per share, as set out in
the After column, is based on the published interim balance sheet of Adcorp as
at 30 June 2006 and balance sheet of FMS as at 28 February 2006 and the
assumptions that:
5.1 the vendor placement of 2 788 000 shares took place at 30 June 2006;
5.2 the cash consideration was paid at 30 June 2006.
6. An interest rate of 12.5% (prime) was assumed on the debt raised for
funding the transaction.
7. Transaction costs of R3.5 million were capitalised. (i.e. included in the
purchase consideration)
8. The cash flow per share calculation is based on the cash generated by
operations before any distribution to shareholders. The Before column is based
on the published interim results of Adcorp for the six months ended to 30 June
2006. The After column includes the cash flow from operating activities of FMS
apportioned for six months based on the audited Cash Flow Statement for the year
ended 28 February 2006 and the interest incurred on the debt assumed by Adcorp
for the acquisition of FMS.
Johannesburg
12 January 2007
Corporate advisor Sponsor to Adcorp Attorneys to Adcorp
and transaction
sponsor to Adcorp
Investec Corporate Deloitte & Touche Roodt Inc.
Finance Sponsor Services
Attorneys to Fuman
Moss Cohen
Date: 12/01/2007 11:17:48 Produced by the JSE SENS Department.
