| Mon 26 Mar 2007, 9:02 | | ADH - ADvTECH Limited - Audited Results for the ye |
|
ADH
ADH
ADH - ADvTECH Limited - Audited Results for the year ended 31 December 2006
ADvTECH LIMITED
(Incorporated in the Republic of South Africa)
Registration number: 1990/001119/06
JSE code: ADH
ISIN: ZAE000031035
AUDITED RESULTS for the year ended 31 December 2006
Revenue up 26%
Operating profit up 41%
Headline earnings per share
up 45%
Distribution per share up 57%
Free operating cashflow per
share up 39%
Condensed Consolidated Income Statement for the year ended 31 December 2006
Audited Audited
Percentage 31 Dec 31 Dec
R`000 Note increase 2006 2005
Revenue 26% 830 129 661 035
Earnings before Interest,
Taxation,
Depreciation & Amortisation 32% 149 038 112 643
(EBITDA)
Operating profit 41% 122 284 87 015
Net interest received 5 539 117
Interest received 9 399 5 264
Finance costs (3 860) (5 147)
Profit before taxation 47% 127 823 87 132
Taxation (38 545) (27 162)
Profit for the year 49% 89 278 59 970
Attributable to:
Equity holders of the parent 86 332 57 822
Minority interest 2 946 2 148
89 278 59 970
Earnings per share
Basic (cents) 47% 23.5 16.0
Diluted (cents) 48% 22.5 15.2
Headline earnings per share
Headline earnings 2 83 526 56 641
Basic (cents) 45% 22.7 15.7
Diluted (cents) 46% 21.8 14.9
Number of shares in issue 393 665 393 665
(`000)
Diluted number of shares 382 887 381 287
(`000)
Weighted average number of 367 996 361 891
shares in issue (`000)
Net asset value per share 15% 83.1 72.5
(cents)
Net cash position R`000 48 462 17 702
Free operating cash flow
before capex per
share (cents) 39% 40.1 28.9
Distribution per share 57% 11.0 7.0
(cents)
Condensed Consolidated Balance Sheet as at 31 December 2006
Audited Audited
31 Dec 31 Dec
R`000 Note 2006 2005
Assets
Non-current assets 438 696 407 182
Property, plant and equipment 395 859 364 988
Intangible assets 3 7 227 1
Investments 200 495
Deferred taxation assets 35 410 41 698
Current assets 90 327 73 017
Trade receivables and other 30 865 37 048
Cash and cash equivalents 59 462 35 969
Total assets 529 023 480 199
Equity and liabilities
Equity 328 628 286 898
Attributable to equity holders of the 327 246 285 541
parent
Minority interest 1 382 1 357
Non-current interest bearing liabilities 11 000 18 267
Current liabilities 189 395 175 034
Trade payables and other 141 981 125 080
Fees received in advance 47 414 49 954
Total equity and liabilities 529 023 480 199
Condensed Segmental Report for the year ended 31 December 2006
Audited Audited
Percentage 31 Dec 31 Dec
R`000 increase 2006 2005
Revenue 26% 830 129 661 035
Education 22% 710 961 581 193
Resourcing 49% 119 168 79 842
Operating profit 41% 122 284 87 015
Education 34% 135 142 100 953
Resourcing 65% 20 393 12 349
Central administration 43% (32 192) (22 564)
Litigation expenses (1 059) (3 723)
Supplementary Information for the year ended 31 December 2006
Audited Audited
31 Dec 31 Dec
R`000 2006 2005
Capital expenditure - current year 65 497 68 043
Capital commitments - future years 131 694 92 507
Operating lease commitments in cash - future 150 563 123 703
years
Condensed Consolidated Cash Flow Statement for the year ended 31 December 2006
Audited Audited
Percentage 31 Dec 31 Dec
R`000 Note increase 2006 2005
Cash generated by operations 4 30% 148 188 114 035
Generated by decrease in 32 040 17 538
working capital
Cash generated by operating 37% 180 228 131 573
activities
Net interest received 5 539 117
Taxation paid (46 767) (6 608)
Capital distribution (37 573) (16 332)
Net cash inflow from 101 427 108 750
operating activities
Net cash outflow from (72 860) (61 469)
investing activities
Net cash outflow from (5 056) (7 881)
financing activities
Net increase in cash and cash 23 511 39 400
equivalents
Cash and cash equivalents at 35 969 (3 421)
beginning of the year
Net foreign exchange (18) (10)
differences on cash and cash
equivalents
Cash and cash equivalents at 59 462 35 969
end of the year
Free operating cash flow
before capex per share
(cents)
Net operating profit after 89 278 59 970
taxation
Adjust for non-cash IFRS and
lease adjustments
(after taxation) 2 154 2 715
Net operating profit after 91 432 62 685
taxation - adjusted for non-
cash IFRS and lease
adjustments
Other non-cash flow income
statement items
(after taxation) (2 806) (1 181)
Plus: depreciation and 27 001 25 471
amortisation
Operating cash flow after 33% 115 627 86 975
taxation
Plus: working capital changes 32 040 17 538
Free operating cash flow 147 667 104 513
before capex
Weighted average number of 367 996 361 891
shares in issue (`000)
Free operating cash flow 39% 40.1 28.9
before capex per share
(cents)
Condensed Consolidated Statement of Changes in Equity for the year ended 31
December 2006
Audited Shares
held by
Ordinary Share Share
share Share option Incentive
R`000 capital premium reserve Trust
Balance at 1 January 2005 3 937 355 100 1 119 (10 710)
Share-based payment 568
expense
Profit for the year
Minority interest
distribution
Transfer from NDR to DR
Share options exercised 1 847
Total recognised income 568 1 847
and expense for the year
Capital distribution to (16 329)
shareholders
Balance at 31 December 3 937 338 771 1 687 (8 863)
2005
Share-based payment 1 586
expense
Profit for the year
Minority interest
distribution
Share options exercised 3 275
Total recognised income 1 586 3 275
and expense for the year
Shares purchased by the (11 912)
Share Incentive Trust
Capital distributions to (37 576)
shareholders
Balance at 31 December 3 937 301 195 3 273 (17 500)
2006
Attribu-
table
Retained to equity
Non- earnings/ holders
Distri- (accumu- of the Minority Total
butable lated
R`000 reserve loss) parent interest equity
Balance at 1 15 944 (123 757) 241 633 1 446
January 2005 243 079
Share-based payment 568 568
expense
Profit for the year 57 822 57 822 2 148 59 970
Minority interest - (2 237)
distribution (2 237)
Transfer from NDR (15 944) 15 944 - -
to DR
Share options 1 847 1 847
exercised
Total recognised (15 944) 73 766 60 237 (89) 60 148
income and expense
for the year
Capital (16 329) (16 329)
distributions to
shareholders
Balance at 31 - (49 991) 285 541 1 357 286 898
December 2005
Share-based payment 1 586 1 586
expense
Profit for the year 86 332 86 332 2 946 89 278
- (2 921)
Minority interest (2 921)
distribution
Share options 3 275 3 275
exercised
Total recognised - 86 332 91 193 25 91 218
income and expense
for the year
Shares purchased by (11 912) (11 912)
the Share Incentive
Trust
Capital (37 576) (37 576)
distribution to
shareholders
Balance at 31 - 36 341 327 246 1 382 328 628
December 2006
Notes to Financial Statements for the year ended 31 December 2006
1. Significant accounting policies
1.1 Statement of compliance
The financial statements have been prepared using accounting policies that
comply with International Financial Reporting Standards and are presented
in compliance with IAS 34 ("Interim Financial Reporting"). The accounting
policies and methods of computation are consistent with those applied in
the previous year.
The Group auditors, Deloitte & Touche, have completed the audit of the
Annual Financial Statements on which this preliminary announcement has
been based. Their unmodified report is available at the registered office
of the Company.
Audited Audited
31 Dec 31 Dec
R`000 2006 2005
2. Determination of headline
earnings
Earnings attributable to equity
holders of the parent per the 86 332 57 822
income statement
Items excluded from headline (2 806) (1 181)
earnings
Impairment of investment 295 -
Profit on disposal of assets and
businesses (4 357) (1 650)
Taxation applicable thereto 1 256 469
Headline earnings 83 526 56 641
3. Intangible assets
In line with IFRS3, intangible assets of a business acquired must be
recognised in line with the underlying assets and liabilities and
amortised over its finite useful life. The amount reflected on the balance
sheet comprises the customer relationships, candidate data base and
operational processes acquired through the acquisition of Vertex-Kapele.
4. Notes to the cash flow statement
Audited Audited
31 Dec 31 Dec
R`000 2006 2005
Reconciliation of profit before
taxation to cash generated
by operations
Profit before taxation 127 823 87 132
Adjust for non-cash IFRS and
lease
adjustments (before taxation) 2 386 3 189
130 209 90 321
Add back: 17 979 23 714
Depreciation and amortisation 27 001 25 471
(net of IAS 16 adjustment)
Net interest received (5 539) (117)
Other non-cash flow income (3 483) (1 640)
statement items
Cash generated by operations 148 188 114 035
Directors` comment on results
Overview
In a South Africa where the twin demands for skills and jobs continue to have a
crucial and deepening impact in almost every field of endeavour, ADvTECH
has once again delivered excellent academic and financial results for the
year ended 31 December 2006. The strategy of significant ongoing
investment in human capital and physical infrastructure, coupled with
continued attention to governance, processes and systems, has enabled the
Group to make a growing and sustainable contribution to the education,
training and placement priorities of South Africa.
One of the most visible measures of the success of the Group`s educational
programmes is the 100% pass rate achieved by our 2006 class of
Matriculants. An analysis of the performance of our 1 132 candidates shows
that 61% passed Mathematics on Higher Grade, a further 29% passed
Mathematics on Standard Grade, while 74% achieved A or B aggregates.
Collectively, they attained 2 200 distinctions. Additional information
regarding the outstanding achievements of students throughout the
programmes and campuses of the Group is contained in the ADvTECH annual
report.
Unemployment continues to be one of South Africa`s greatest challenges. Against
this background, the Resourcing division increased output during the year
to obtain new career opportunities for over 3 000 candidates. In addition,
1 500 candidates were secured temporary or contracting positions.
ADvTECH has operated in a positive economic environment where the growing
demand for quality education and effective placement in an increasingly
competitive employment market has continued unabated. The Group has been
well placed to participate fully in the current positive economic and
business environment and the directors are pleased to report a 26%
increase in revenue to R830 million, a 41% increase in operating profit
before interest to R122 million, a 45% increase in headline earnings per
share to 22,7 cents and a 57% increase in distributions per share to
shareholders to 11 cents.
The results are underpinned by strong operational performances and the
operating margin was 15% (2005: 13%). Buoyed by growth in enrolments, the
Education division increased revenue by 22% to R711 million, while profit
from operations grew by 34% to R135 million, reflecting improved capacity
utilisation. The Resourcing division increased revenue by 49% to R119
million as a result both of growth in the volume of placements during the
year and the Vertex-Kapele acquisition. Profit from operations in the
division grew by 65% to R20 million.
Free cash flow before capex grew by 39% to 40,1 cents, due to the strong
operational performance and ongoing focus on working capital management.
This enabled the Group to remain in a net cash position throughout the
year in spite of capital expenditure of R65 million (2005: R68 million)
and significant increases in corporate taxation paid of R47 million (2005:
R7 million), and capital distributions of R38 million (2005: R16 million).
The inherent nature of ADvTECH`s working capital is based on payments for
educational fees received in advance compared to arrear payments for
services rendered to the Group. This gives rise to a structure in which
current liabilities usually exceed current assets, a phenomenon
particularly apparent at year end. This situation resolves itself in the
normal course of trading on an ongoing basis.
ADvTECH has continued to make progress in transformation and sustainability
under the guidance of the Board Transformation Committee and the Academic
Advisory Council. Two thirds of all students and 55% of placements are
historically disadvantaged individuals (HDI). Further transformation
appointments have been made across the Group from director level downwards
and our management is now 23% transformed (2005: 11%). Total HDI staff
increased by 26% compared to an overall increase in staff of 13%. ADvTECH
continues to benchmark itself in these areas by reference to the JSE SRI
index and EmpowerDEX.
Education
The Education division houses the Group`s educational brands and institutions
including well-known brands Abbotts College, College Campus,
CrawfordSchools, Imfundo, Junior College, Rosebank College, Varsity
College and Vega, as well as the Group`s academic body, the Independent
Institute of Education (IIE). Collectively, they provide a full range of
educational services from pre-school through to Matriculation, Diploma,
Degree and Post-graduate levels, as well as adult basic education,
training and learnership programmes. These activities are undertaken at 53
sites and campuses across South Africa.
The Education division, under the academic leadership of the IIE, completed the
re-accreditation process of its Higher Education programmes and campuses
during 2006. The Academic Advisory Council was established in 2006 to
advise the Board, the Senate and the IIE on all academic matters and
commenced its work in the first quarter of 2007. With 33 programmes
accredited across 19 campuses between NQF levels 5 and 7, the Group holds
the largest base of accredited higher education programmes in the
independent sector. The interaction with regulatory structures will
continue in 2007, with particular emphasis on Further Education and
Training programmes and the institutional audit.
The significant growth of our Education division to 39 000 students (2005: 35
000) is clear evidence of the potential of this market and our consistent
approach to quality education. Results across the spectrum of Matric,
final tertiary qualifications, year end examinations and benchmarking
evaluation were once again excellent and the Group has been acknowledged
for the excellence of its top scholars as well as the achievements and
improvements in results achieved by the student body as a whole.
Resourcing
The Resourcing division includes well-known brands Brent Personnel, Cassel &
Company, Communicate Personnel, Insource.ICT, Kapele, Network Recruitment
and ProRec Recruitment. During the year the division acquired Vertex, the
advertising response handling business, which has been integrated
successfully into Kapele and renamed Vertex-Kapele. The division`s major
activities are recruitment, placement, temporary staffing, contracting and
advertising response handling.
The Resourcing division maintained a strong focus on the key niche markets of
IT, Finance and Engineering. With further development of human capital and
physical assets, the division was able to strengthen and grow its brands
markedly during the year, increasing consultant numbers by 12%. The newly
acquired Vertex-Kapele made a solid contribution to revenue and profit.
Litigation
Legal proceedings against Marina and Andry Welihockyj remain in process. A
decrease in court appearances during the year led to a reduction in
litigation costs to R1,1 million (2005: R3,7 million). Various pending
applications were favourably disposed of and it is anticipated that there
will be a recoupment of certain legal expenses arising from a series of
costs orders obtained against the Welihockyj`s. Pleadings in the main
action have closed and the trial has entered the discovery phase.
The Board Litigation Committee has advised the Board that the Group`s legal
counsel remains satisfied with the merits of the claims against the
Welihockyj`s and that there is no exposure other than for legal costs.
Distribution to shareholders
The Board has resolved to declare a final distribution to shareholders by way
of capital distribution out of share premium of 8 cents per share (2005: 7
cents) for the year ended 31 December 2006. This would bring total
distributions for the year to 11 cents per share (2005: 7 cents). 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 Group`s earnings per share, headline earnings per
share, net asset value per share and net tangible asset value per share
based on the Group`s audited financial results for the year ended 31
December 2006. The pro-forma financial effects have been prepared for
illustrative purposes only and, because of their nature, they may not give
a true reflection of the Group`s financial position or results. The pro-
forma financial information is the responsibility of the directors of
ADvTECH and has not been audited.
Before the After the Percentage
distribution distribution change
(1)
Earnings per share (cents) 23.5 23.0(2) (2%)
Headline earnings per share 22.7 22.3(2) (2%)
(cents)
Weighted average number of
shares
in issue (`000) 367 996 367 996
Net asset value per share 83.1 75.6(3) (9%)
(cents)
Tangible net asset value per 81.3 73.8(3) (9%)
share (cents)
Number of shares in issue 393 665 393 665
(`000)
Notes:
1. Extracted from the audited financial results for the year ended 31
December 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 7.5% per annum, was forfeited
on the cash distribution.
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 31 December 2006.
Set out in the table below are the salient dates and times applicable to
the distribution:
2007
Last day to trade in order to participate in
the distribution Friday, 13 April
Trading commences ex distribution Monday, 16 April
Record date Friday, 20 April
Payment date Monday, 23 April
Share certificates may not be dematerialised or rematerialised between
Monday, 16 April 2007 and Friday, 20 April 2007, both days inclusive.
Staff
ADvTECH`s growth has enabled the creation of new job opportunities and
employment within the Group increased from 2 560 to 2 888. ADvTECH
personnel at all levels have once again proved their mettle, which is
demonstrated in the Group`s achievements recorded in the academic,
operational and financial results.
Their continuing expertise, enthusiasm and loyalty is much appreciated by all
stakeholders.
Prospects
Education, training and jobs have for some time now been identified as critical
national priorities. Nationally motivated projects such as AsgiSA, Jipsa
and the 2010 World Cup have heightened awareness and focus on these
priorities. It is pleasing to note a groundswell of opinion which supports
official indications that the involvement and dedication of all civil
society, including the private sector, is required urgently to address
these priorities.
These developments offer further exciting opportunities for the Group and in
the absence of any material adverse circumstances; the Board would expect
to report improved earnings and cash flow for the next reporting period.
MICHAEL SACKS FRANK THOMPSON
Chairman Chief Executive Officer
Johannesburg
23 March 2007
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*, F Titi*
*Non Executive
Alternate Director: A Isaakidis
Group Company Secretary: SC O`Connor
Registered office: Advtech House, Inanda Greens, 54 Wierda Road West, Wierda
Valley, Sandton, 2196
Transfer secretaries: Link Market Services SA (Pty) Ltd, 11 Diagonal Street,
Johannesburg, 2001
Sponsor: Bridge Capital Services (Pty) Ltd
www.advtech.co.za
Date: 26/03/2007 09:02:51 Produced by the JSE SENS Department.
