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ADR - Adcorp Holdings Limited - Unaudited group results for the six months ended

Release Date: 12/10/2011 12:46
Code(s): ADR
Wrap Text

ADR - Adcorp Holdings Limited - Unaudited group results for the six months ended 31 August 2011 Adcorp Holdings Limited ("Adcorp" or "Adcorp Group" or "the Group") Registration number 1974/001804/06 Share code: ADR ISIN number: ZAE000000139 Unaudited Group Results for the six months ended 31 August 2011 Revenue up 10% Normalised EBITDA for the period up 6% Normalised earnings per share up by 5% Headline earnings per share up by 18% Cash conversion ratio 152% Debtors days at 34 days Financial gearing down to 9% Interim dividend declared of 57 cents per share Abridged statement of comprehensive income for the six months ended 31 August 2011 Unaudited Unaudited Audited six months six months 12 months
August August February 2011 2010 2011 R`000 R`000 R`000 Revenue 2 846 026 2 581 466 5 384 566 Cost of sales (2 290 948) (2 046 590) (4 264 774) Gross profit 555 078 534 876 1 119 792 Other income 29 602 24 840 51 967 Administrative expenses (178 409) (171 874) (378 852) Marketing and selling expenses (243 306) (233 317) (477 445) Other operating expenses (69 716) (78 423) (157 791) Operating profit 93 249 76 102 157 671 Interest received 1 947 735 3 182 Interest paid (18 801) (15 414) (31 855) Impairment of investments in - - (1 796) associates and goodwill Profit/(loss) on sale of property 100 236 (194) and equipment Profit before taxation 76 495 61 659 127 008 Taxation (7 411) (5 626) (11 313) Profit for the period/year 69 084 56 033 115 695 Other comprehensive income Exchange differences on (699) 2 123 (877) translating foreign operations Other comprehensive (loss)/income (699) 2 123 (877) for the period/year, net of tax Total comprehensive income for 68 385 58 156 114 818 the period/year Profit attributable to: Owners of the parent 69 084 56 033 115 695 Total comprehensive income attributable to: Owners of the parent 68 385 58 156 114 818 Earnings per share Basic (cents) 112,4 95,2 192,5 Diluted (cents) 110,3 92,5 188,1 Approved dividends to shareholders Interim dividend (cents) 57 54 54 Final dividend (cents) in respect 121 115 115 of prior year Calculation of headline earnings Profit for the period/year 69 084 56 033 115 695 (Loss)/profit on sale of (72) (170) 140 property, plant and equipment Impairment of investments in - - 1 796 associates and goodwill Headline earnings 69 012 55 863 117 631 Headline earnings per share Headline earnings per share - 112,3 94,9 195,7 cents Diluted headline earnings per 110,2 92,2 191,2 share - cents Weighted average number of shares 61 456 58 864 60 110 - 000`s Diluted weighted average number 62 621 60 566 61 520 of shares - 000`s Abridged statement of cash flows for the six months ended 31 August 2011 Unaudited Unaudited Audited six months six months 12 months
August August February 2011 2010 2011 R`000 R`000 R`000 Operating activities Cash generated by operations before working capital changes 139 758 131 400 259 503 Decrease in working capital 46 579 93 801 28 351 Cash generated by operations 186 337 225 201 287 854 Net interest paid (16 854) (14 679) (28 673) Taxation paid (24 927) (7 927) (32 632) Free cash generated by operations 144 556 202 595 226 549 Net dividend paid (74 683) (9 123) (42 216) Cash inflows from operating activities 69 873 193 472 184 333 Investing and financing activities Cash outflows from investing activities (45 716) (12 132) (23 565) Cash inflows/(outflows) from financing activities 76 901 (7 369) (15 220) Net increase in cash and cash equivalents 101 058 173 971 145 548 Net cash and cash equivalents at the beginning of the period/year 95 302 (50 246) (50 246) Net cash and cash equivalents at the end of the period/year 196 360 123 725 95 302 Free cash generated by operations per share - cents 235,2 344,2 376,9 Abridged statement of financial position as at 31 August 2011 Unaudited Unaudited Audited six months six months 12 months August August February
2011 2010 2011 R`000 R`000 R`000 Assets Non-current assets 815 516 776 741 791 091 Property and equipment 47 258 49 511 43 921 Goodwill 575 716 556 170 554 398 Intangible assets 133 926 155 118 143 019 Derivative financial instruments and other financial assets - 780 - Investment in associates 2 625 - - Deferred taxation 55 991 15 162 49 753 Current assets 1 197 554 1 023 947 1 135 582 Trade and other receivables and prepayments 784 273 680 381 740 207 Assets classified as held-for-sale - 845 - Taxation prepaid 16 239 28 551 14 153 Cash resources 397 042 314 170 381 222 Total assets 2 013 070 1 800 688 1 926 673 Equity and liabilities Equity attributable to owners of the parent 1 024 343 974 243 1 013 311 Share capital 1 563 1 546 1 546 Share premium 498 692 498 696 498 696 Treasury shares (12 891) (13 293) (13 227) Retained earnings 363 853 329 625 362 200 Share based payment reserve 177 200 156 249 165 676 Fair value on financial instruments (1 795) - - Foreign currency translation reserve (2 700) 999 (2 001) BEE shareholders` interest 421 421 421 Non-current liabilities 275 094 197 016 215 097 Other non-current liabilities - interest bearing 4 150 5 462 4 462 Long-term loan - interest bearing 135 000 48 988 60 000 Redeemable preference shares - interest bearing 116 000 130 000 130 000 Derivative financial instruments and other financial liabilities 1 795 - - Obligation under finance lease 280 1 773 249 Deferred tax 17 869 10 793 20 386 Current liabilities 713 633 629 429 698 265 Non-interest-bearing current liabilities 475 249 399 729 389 085 Trade and other payables 354 605 276 985 275 731 Provisions 114 538 102 554 102 835 Shareholders for dividends - 424 - Taxation 6 106 19 766 10 519 Interest-bearing current liabilities 238 384 229 700 309 180 Current portion of other non-current liabilities 4 406 6 040 6 061 Current portion of long-term loan 24 167 30 916 15 000 Current portion of redeemable preference shares 9 129 2 299 2 199 Bank overdraft 200 682 190 445 285 920 Total equity and liabilities 2 013 070 1 800 688 1 926 673 Number of ordinary shares in issue (000`s) 62 519 61 821 61 850 Net asset value per share (cents) 1 638 1 576 1 638 Total interest-bearing liabilities of the group as at 31 August 2011 Unaudited Unaudited Audited
six months six months 12 months August August February 2011 2010 2011 R`000 R`000 R`000
Net (bank balances)/overdraft (196 360) (123 725) (95 302) Other long-term loan 4 150 5 462 4 462 Long-term loan 135 000 48 988 60 000 Redeemable preference share 116 000 130 000 130 000 Obligations under finance lease 280 1 773 249 Current portion of other non-current liabilities 4 406 6 040 6 061 Current portion of long-term loan 24 167 30 916 15 000 Current portion of redeemable preference shares 9 129 2 299 2 199 Total interest-bearing liabilities 96 772 101 753 122 669 Abridged statement of changes in equity for the six months ended 31 August 2011 Share Share Treasury Foreign capital premium shares currency R`000 R`000 R`000 translation
reserve R`000 Balance as at 1 March 2010 1 483 497 (13 293) (1 124) 968
Issue of ordinary shares under employee share option plan 3 788 - - Capitalisation of share premium - (65 - - 172)
Ordinary shares issued pursuant to scrip distribution 60 65 112 - - Treasury shares sold - - 66 - Recognition of BBBEE and staff share-based payments - - - - Share options exercised during the year - - - - Dividend distributions - - - - Profit for the year - - - - Other comprehensive income for the year - - - (877) Balance as at 28 February 2011 1 546 498 696 (13 227) (2 001) Issue of ordinary shares under employee share option plan 17 (4) - - Treasury shares sold - - 336 - Recognition of BBBEE and staff share-based payments - - - - Share options exercised during the period - - - - Fair value adjustment on financial instrument - - - - Dividend distributions - - - - Profit for the period - - - - Other comprehensive income for the period - - - (699) Balance as at 31 August 2011 1 563 498 692 (12 891) (2 700) Share Fair value Retained based on earnings
payment financial R`000 reserve instruments R`000 R`000 Balance as at 1 March 2010 141 492 - 280 996 Issue of ordinary shares under employee share option plan - - - Capitalisation of share premium - - - Ordinary shares issued pursuant to scrip distribution - - - Treasury shares sold - - 9 Recognition of BBBEE and staff share- based payments 31 900 - - Share options exercised during the (7 716) - 7 716 year Dividend distributions - - (42 216) Profit for the year - - 115 695 Other comprehensive income for the - - - year Balance as at 28 February 2011 165 676 - 362 200 Issue of ordinary shares under - - - employee share option plan Treasury shares sold - - - Recognition of BBBEE and staff share- based payments 18 776 - - Share options exercised during the period (7 252) - 7 252 Fair value adjustment on financial instrument - (1 795) - Dividend distributions - - (74 683) Profit for the period - - 69 084 Other comprehensive income for the period - - - Balance as at 31 August 2011 177 200 (1 795) 363 853 Attributable BEE Total to equity shareholders` R`000 holders of interest
the parent R`000 R`000 Balance as at 1 March 2010 907 522 421 907 943 Issue of ordinary shares under employee share option plan 791 - 791 Capitalisation of share premium (65 172) - (65 172) Ordinary shares issued pursuant to scrip distribution 65 172 - 65 172 Treasury shares sold 75 - 75 Recognition of BBBEE and staff share-based payments 31 900 - 31 900 Share options exercised during the year - - - Dividend distributions (42 216) - (42 216)
Profit for the year 115 695 - 115 695 Other comprehensive income for the year (877) - (877) Balance as at 28 February 2011 1 012 890 421 1 013 311 Issue of ordinary shares under employee share option plan 13 - 13 Treasury shares sold 336 - 336 Recognition of BBBEE and staff share-based payments 18 776 - 18 776 Share options exercised during the period - - - Fair value adjustment on financial instrument (1 795) - (1 795) Dividend distributions (74 683) - (74 683)
Profit for the period 69 084 - 69 084 Other comprehensive income for the period (699) - (699) Balance as at 31 August 2011 1 023 922 421 1 024 343 Abridged segment report for the six months ended 31 August 2011 Revenue Internal revenue
Aug Aug Feb Aug Aug Feb 2011 2010 2011 2011 2010 2011 R`000 R`000 R`000 R`000 R`000 R`000 Central costs Central costs - - - - - - Group recoveries 81 066 7 942 22 366 - - - Staffing Blue collar 2 108 1 782 3 861 15 4 433 14 448 838 945 897 812 White collar 559 707 1 329 90 5 826 31 004 579 000 187 526 BPO, Training and Financial Services BPO 94 655 81 997 168 702 19 18 38 016 661 833 Emerging businesses 2 852 1 110 2 553 - - - TOTAL 2 846 2 581 5 384 125 28 85 026 466 566 100 920 171 Operating profit EBITDA excluding share based payments and
lease smoothing Aug Aug Feb Aug Aug Feb 2011 2010 2011 2011 2010 2011 R`000 R`000 R`000 R`000 R`000 R`000
Central costs Central costs (25 (21 (48 (17 (15 (36 268) 941) 873) 578) 624) 111) Group recoveries 2 496 392 57 3 871 1 724 2 736 Staffing Blue collar 77 674 60 572 141 444 94 254 83 181 776 370 White collar 19 941 14 527 26 125 28 229 26 46 487 590 BPO, Training and Financial Services BPO 24 739 25 159 43 941 36 945 37 68 509 959 Emerging businesses (6 (2 (5 024) (5 (2 (4 334) 607) 963) 604) 951) TOTAL 93 249 76 102 157 671 139 131 258 758 268 593 EBITDA margin EBITDA excluding excluding share share based payments based payments and and lease smoothing
lease smoothing Contribution % to Group profit Aug Aug Feb Aug Aug Feb 2011 2010 2011 2011 2010 2011
% % % % % % Central costs Central costs - - - (12,6) (11,9) (14, 0)
Group recoveries - - - 2,9 1,3 1,1 Staffing Blue collar 4,5 4,7 4,7 67,4 63,8 70,1 White collar 5,0 3,7 3,5 20,2 20,2 18,0 BPO, Training and Financial Services BPO 39,0 45,7 40,9 26,4 28,6 26,7 Emerging businesses - - - (4,3) (2,0) (1,9 ) TOTAL 4,9 5,1 4,8 100,0 100,0 100, 0 Net asset values Asset carrying value
Aug Aug Feb Aug Aug Feb 2011 2010 2011 2011 2010 2011 R`000 R`000 R`000 R`000 R`000 R`000 Central costs Central costs (357 (165 (204 5 849 7 232 65 285 397) 558) 079) Group recoveries 11 712 7 419 (3 461) 37 946 24 855 30 708 Staffing Blue collar 1 060 946 1 024 1 384 1 161 1 218 631 180 241 756 294 479 White collar 80 859 83 86 682 321 558 342 333 281 067 388
BPO, Training and Financial Services BPO 224 876 102 104 814 257 361 263 272 983 726 982
Emerging businesses 3 662 409 5 114 5 600 937 5 937 TOTAL 1 024 974 1 013 2 013 1 800 1 926 343 243 311 070 688 673 Liability carrying Depreciation and
value amortisation of intangibles Aug Aug Feb Aug Aug Feb 2011 2010 2011 2011 2010 2011
R`000 R`000 R`000 R`000 R`000 R`000 Central costs Central costs 363 172 269 559 551 1 097 245 790 364
Group recoveries 26 17 34 169 - - - 234 436 Staffing Blue collar 324 215 194 7 138 13 21 027 125 114 238 918 White collar 240 259 246 11 425 13 24 560 699 321 599 144 BPO, Training and Financial Services BPO 32 161 168 9 982 10 21 518 485 256 169 693 Emerging businesses 1 939 528 823 20 3 20 TOTAL 988 826 913 29 124 38 68 222 727 445 362 309 Interest income Interest expense Aug Aug Feb Aug Aug Feb
2011 2010 2011 2011 2010 2011 R`000 R`000 R`000 R`000 R`000 R`000 Central costs Central costs (5 (7 (13 4 672 12 269 21 719 819) 965) 686) Group recoveries 317 217 806 (68) - (6) Staffing Blue collar 2 3 6 669 (17 (21 (41 324 818 332) 179) 228) White collar 2 1 4 427 (501) (1 (1 472 979 185) 771) BPO, Training and Financial Services BPO 2 2 4 966 (5 (5 (10 650 686 097) 262) 150) Emerging businesses 2 - - (474) (56) (419) TOTAL 1 735 3 182 (18 (15 (31 947 801) 414) 855) Taxation expense/(income) Aug Aug Feb
2011 2010 2011 R`000 R`000 R`000 Central costs Central costs 7 098 1 127 6 185 Group recoveries 2 718 337 5 650 Staffing Blue collar 3 386 (15 3 180 315)
White collar (6 19 788 (2 067) 891) BPO, Training and Financial Services BPO 2 084 (311) 699 Emerging businesses (1 - (1 807) 510) TOTAL 7 411 5 626 11 313 Normalised earnings for the six months ended 31 August 2011 Normalised earnings exclude the amortisation of intangibles arising on business combinations as well as share based payments and lease smoothing adjustments. The table below sets out the normalised earnings for the period ended 31 August 2011, the prior period comparative as well as the prior year comparative. Six months Six months Year to to to 31 August 31 August 28 February %
R`000 2011 2010 2011 change Revenue 2 846 026 2 581 466 5 384 566 10% Cost of Sales (2 290 948) (2 046 590) (4 264 774) 12% Gross Profit 555 078 534 876 1 119 792 4% Other income 29 602 24 840 51 967 19% Administrative, marketing, selling and operating expenses (491 431) (483 614) (1 014 088) 2% Operating profit 93 249 76 102 157 671 23% Adjusted for: Depreciation 11 227 13 039 24 079 (14%) Amortisation of intangible assets 17 897 25 270 44 143 (29%) Share-based payments 18 776 16 476 31 900 14% Lease smoothing (1 391) 381 800 Normalised EBITDA (excluding share based payments and lease smoothing) 139 758 131 268 258 593 6% Adjusted for: Depreciation (11 227) (13 039) (24 079) (14%) Amortisation of intangibles other than those acquired in a (5 548) (5 228) (10 459) 6% business combination Normalised operating 122 983 113 001 224 055 9% profit Net interest paid (16 854) (14 679) (28 673) 15% Normalised profit before taxation 106 129 98 322 195 382 8% Taxation (10 480) (11 345) (20 968) (8%) Normalised profit for the period/year 95 649 86 977 174 414 10% Normalised effective tax rate 10% 12% 11% Normalised earnings per share - cents 155,6 147,8 290,2 5% Diluted normalised earnings per share - 152,7 143,6 283,5 6% cents Weighted average number of shares - 000`s 61 456 58 864 60 110 Diluted weighted average number of shares - 000`s 62 621 60 566 61 520 Comments Overview Despite a relatively difficult trading environment characterised by economic uncertainty and a general reticence to commit to hiring decisions, the Group was able to generate modest profit growth for the six-month interim trading period ended 31 August 2011 whereby, normalised earnings per share of 155,6 cents per share (2010: 147,8 cents per share) were some 5% ahead of normalised earnings per share for the same period last year. Revenue for the period under review of R2 846 million (2010: R2 581 million) was some 10% ahead of the prior year whilst normalised earnings before interest, tax and depreciation ("EBITDA") of R139,8 million (2010: R131,3 million) grew by 6,4%. Headline earnings per share of 112,3 cents per share (2010: 94,9 cents per share) were some 18% ahead of prior year earnings per share. Various prevailing staffing industry trends have contributed positively to this growth trend and Adcorp`s overall performance. A persistent shortage with respect to certain scarce skills has resulted in relatively robust profit growth within the permanent recruitment operations of the Group whilst the Group`s contract staffing operations which comprise the largest constituent component of the Group have seen centralised procurement departments playing a far greater role in the acquisition of people skills with many clients significantly rationalising the number of vendors they currently use and requiring the adoption of more sophistication and technology in the procurement process. Whilst this trend has put margins under pressure as reflected in the slight decline in gross margins from 20,7% in 2010 to the current 19,5% margin for the period under review, it has also resulted in market share gains for the Group due to our unique positioning and ability to meet these more onerous and sophisticated procurement requirements. The Group`s commitment to the adoption of technology as an enabler and value added offering to clients is also starting to pay dividends although its contribution is still relatively modest at this stage but should increase in line with the widespread international adoption of these technologies. The introduction of greater sophistication with regard to the procurement of people skills together with the adoption of technology as an enabler have already contributed to a consolidation within what, up to now, has been a highly fragmented market. These trends are very encouraging for the future growth prospects of the Group. Also contributing to a further consolidation in the industry has been the ongoing debate regarding further regulation of the temporary employment services (labour broking) industry. As much of the debate has been centred on reputed exploitative practices of temporary workers by some rogue operators in the industry, procurers of these services have tended now to favour the well-established, reputable operators within the industry. In terms of progress with regard to the resolution of this debate around labour broking, negotiations are ongoing at Nedlac between Government, business and organised labour. Whilst some progress has been made in terms of finding common ground with regard to developing an appropriate regulatory framework for the industry, the process is still inconclusive and will, in all likelihood, spill over into next year. The training operations of the Group continue to perform well, growing the number of internal and external candidates registered on learnerships. In addition, the training operations have extended their capacity with regard to artisan training whereby the Group now has the capacity to train up to 2 500 artisans annually. Given the country`s imperative to rapidly increase the skills base of the workforce, the Group`s training operations are particularly well positioned for the future. The fulfilment component of the business process outsourcing (BPO) operations of the Group showed a decline in earnings reflecting lacklustre trading conditions. Over the past years, the Group has rolled out certain relevant and affordable financial, wellness and lifestyle offerings to its considerable contract work force. These offerings have proved to be of benefit to the workforce and have also started to make a meaningful contribution to the overall performance of BPO. It is anticipated that the range of these niche products which are of particular application to contract workers will continue to be expanded and will also now be offered to external contract workers. The cash performance of the Group during the period under review was once again commendable with cash generated by operations for the period of R186,3 million resulting in a cash conversion ratio of cash generated by operations to operating profit of 152% versus an internal target ratio of 90%. Debtors` days outstanding were 34 days (31 August 2010: 33 days) whilst gearing levels were contained to 9% (31 August 2010: 10%). During the period, the Group embarked on an upgrade of its Microsoft Dynamics AX ERP system which will be implemented over the next year. The upgrade provides an opportunity to further optimise, standardise and automate back office processes such that the Group is better able to achieve economies of scale and cost containment. Financial overview Normalised EBITDA of R139,8 million for the six months ended 31 August 2011 is 6% higher the R131,3 million for the comparative prior period. The Group`s normalised EBITDA margin was 4,9% as opposed to the 5,1% in the prior comparative period. Margins continue to be affected by pricing pressure in the BPO training and financial services segment as well in the typically lower margin blue collar businesses. The Group`s overall normalised effective tax rate has been reduced to 10% (2010: 12%) due to the tax benefits received arising from the facilitation of registered learnerships in compliance with the Income Tax Act and reduced adjustments to normalised earnings. With effect from 1 July 2011, the Group acquired LearnSys (Pty) Limited ("LearnSys") for an amount of R10 million, which was funded out of the group`s cash resources. In terms of IAS 34 requirements, the after tax profit from LearnSys included in Group after tax profits for the interim period ended August 2011 is R0,2 million. Since the purchase price exceeded the net asset value as at the effective date, the excess purchase consideration has been allocated to goodwill and intangibles. Had the effective date of inclusion been 1 March 2011, a profit of R0,7 million would have been included in Group after tax profits. Basis of preparation Adcorp prepares its accounts in accordance with International Financial Reporting Standards, South African Companies Act and the JSE Listings Requirements. The accounting policies are consistent with the prior period annual financial statements and deal with new disclosure requirements by IFRS, specifically IAS 1 (Presentation of Financial Statements) and IFRS 8 (Operating Segments). This report is prepared in accordance with IAS 34 (Interim Financial Reporting) as well as the AC500 Standards as issued by the Accounting Practices Board or its successor. The financial information has been prepared under the supervision of AM Sher CA(SA). Contingent liabilities and commitments The bank has guaranteed R11,9 million (2010: R11,6 million) on behalf of the Group to creditors. As at the balance sheet date, the Group has outstanding operating lease commitments totalling R80 million (2010: R46,2 million) in non cancellable property leases. Changes to the board and company secretary of adcorp During the period under review, MMT Ramano resigned as a non-executive director on 20 June 2011 and NS Ndhlazi was appointed as a non-executive director on 16 August 2011. On the 30 September AM Sher assumed the responsibilities of acting company secretary until a suitable replacement is found, following the resignation of D Mthimunye. On 1 July 2011 D Mthimunye was appointed as company secretary to replace L Sudbury who retired on 1 July 2011. Declaration of interim dividend Notice is hereby given that an interim dividend of 57 cents per share (2010: 54 cents per share) was declared on 12 October 2011 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: Last day to trade in order to be eligible for the dividend (CUM dividend) Friday, 4 November 2011 Shares trade EX the dividend Monday, 7 November 2011 Record date Friday, 11 November 2011 Payment date Monday, 14 November 2011
Ordinary share certificates may not be dematerialised or rematerialised between Monday, 7 November 2011 and Friday, 11 November 2011, both days inclusive. All times provided in this announcement are South African local times. The above dates and times are subject to change. Any changes will be released on SENS and published in the South African press. Where applicable, dividends in respect of certificated shares will be transferred electronically to shareholders` bank accounts on the payment date. In the absence of specific mandates, dividend cheques will be posted to shareholders. Ordinary shareholders who hold dematerialised shares will have their accounts at their CSDP or broker credited/updated on Monday, 14 November 2011. Post balance sheet event On 6 September 2011, the Group announced that it had submitted a firm offer to acquire leading, listed, specialist information and communications technology (ICT) resourcing and solution business, Paracon Holdings Limited, by way of a scheme of arrangement. The success of the offer is still subject to approval by the shareholders of both Adcorp and Paracon as well as approval by the relevant competition authorities. In terms of the offer, Paracon shareholders have been offered one Adcorp share in respect of every 13,812 Paracon shares held. The offer also makes allowance for a cash alternative to the share offer of R1,97 per share at the election of Paracon shareholders save that, the cash alternative is limited to a maximum of R265 million which approximates 40% of the purchase price. The purchase price offered approximates R662 million. Should the transaction be successful, it will significantly strengthen the Group`s offerings with regard to the resourcing and placement of professional ICT skills. The transaction will also add critical mass to the Adcorp Group and will further diversify Group risk whilst also providing greater career prospects for staff as well as better opportunities to incentivise and retain top talent. It is also likely that shareholders will enjoy greater liquidity in the tradability of the shares of the combined entity. Outlook Whilst overall employment trends in the South African economy are generally weak, the Adcorp Group is well placed due to its unique position in the market. The greater introduction of sophistication, adoption of technology and centralisation of the procurement of staffing services by clients, all favour Adcorp because of this positioning. Should the acquisition of Paracon succeed, this will strengthen the Group`s positioning even further. The national imperative to rapidly address the acute backlog in skills development should also favour the Group`s training operations. Strategically, the Group is focused on managing its costs, driving economies of scale, delivering value for its clients and increasing the level of sophistication and technological advancement it applies in its day to day operations. In addition, the Group has a strong and robust balance sheet. As such, the Group is well positioned for the future. By order of the board MJN Njeke RL Pike AM Sher Chairman Chief Executive Officer Chief Financial Officer 12 October 2011' Executive directors: C Bomela, RL Pike (Chief Executive Officer), AM Sher (Chief Financial Officer), PC Swart (Chief Operating Officer) Non-executive directors: GP Dingaan, MR Ramaite, NS Ndhlazi
Independent non-executive MJN Njeke (Chairman), AT Alback, ME Mthunzi, directors: TDA Ross Alternate director: LM Mojela Acting company secretary: AM Sher Transfer secretaries: Link Market Services SA (Pty) Ltd, 11 Diagonal Street, Johannesburg, 2001 Sponsor: Deloitte & Touche Sponsor Services (Pty) Ltd Date: 12/10/2011 12:46:01 Supplied by www.sharenet.co.za Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct, indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on, information disseminated through SENS.

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