Wrap Text
Unaudited Group results for the six months ended 31 August 2013
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 2013
Salient features
Revenue increased by 41% to R5,7 billion
Normalised EBITDA for the period increased by 26% to R247 million
Normalised EBITDA margin exclusive of Paxus increased from 4,9% to 5,0%
Normalised earnings per share increased by 6% to 176,5 cents per share
Cash conversion ratio up from 68% to 93%
Debtors days at 42 days
Net asset value per share increased by 11% to 2 130 cents per share
Gearing down from 28% to 25%
Interim dividend of 60 cents per share declared
Strong performance from Blue-collar and white-collar staffing business
Paxus acquisition bedded down
Clarity with regards to labour legislation
Significant staffing assignment secured with a large blue chip company
New BBBEE shareholding deal finalised and implemented
BBBEE level 2 contributor status maintained
Abridged statement of comprehensive income
For the six months ended 31 August 2013
Unaudited
Unaudited Six Audited
Six months to months to 12 months
31 August 31 August 28 February
2013 2012 2013
R000 R000 R000
Revenue 5 671 074 4 022 523 8 616 842
Cost of sales (4 782 663) (3 285 023) (7 056 563)
Gross profit 888 411 737 500 1 560 279
Other income 40 555 26 858 65 472
Administrative expenses (467 344) (251 499) (620 525)
Marketing and selling expenses (286 819) (285 469) (532 298)
Other operating expenses (97 980) (87 548) (186 954)
Operating profit 76 823 139 842 285 974
Interest received 5 079 1 629 2 890
Interest paid (41 387) (29 914) (59 491)
Impairment of investments in
associates and goodwill (12 078)
Share of profits from associates 13 339 7 161 14 762
Profit on sale of shares 195
Profit on sale of property and
equipment (170) 150 178
Profit before taxation 53 684 118 868 232 430
Taxation (35 483) (18 414) (53 069)
Profit for the period/year 18 201 100 454 179 361
Other comprehensive income
Exchange differences on translating
foreign operations 10 723 2 736 (2 668)
Exchange differences arising on the
net investment of a foreign operation (5 540)
Fair value adjustment of derivative
financial instrument 373 (182) 385
Non-controlling interest 2 131 (2 494) (4 350)
Other comprehensive income for the
period/year, net of tax 7 687 60 (6 633)
Total comprehensive income for the
period/year 25 888 100 514 172 728
Profit attributable to:
Owners of the parent 20 332 97 960 175 011
Non-controlling interest (2 131) 2 494 4 350
Total comprehensive income
attributable to:
Owners of the parent 25 888 100 514 172 728
Non-controlling interest (2 131) 2 494 4 350
Earnings per share
Basic (cents) 22,3 127,3 221,6
Diluted (cents) 21,3 126,3 207,0
Approved dividends to shareholders
Interim dividend (cents) 60 60 60
Final dividend (cents) in respect of
prior year 80 80 80
Calculation of headline earnings
Profit for the period/year 20 332 97 960 175 011
Profit/(loss) on sale of property,
plant and equipment 122 (108) (128)
Impairment of investments in
associates and goodwill 12 078
Headline earnings 20 454 97 852 186 961
Headline earnings per share
Headline earnings per share cents 22,4 127,1 236,7
Diluted headline earnings per share
cents 21,4 126,1 221,1
Weighted average number of shares
000s 91 279 76 978 78 989
Diluted weighted average number of
shares 000s 95 659 77 587 84 558
Abridged statement of financial position
As at 31 August 2013
Unaudited Unaudited
Six Six Audited
months to months to 12 months
31 August 31 August 28 February
2013 2012 2013
R000 R000 R000
Assets
Non-current assets 1 871 352 1 446 286 1 860 470
Property and equipment 71 794 58 116 65 376
Goodwill 1 152 762 915 862 1 152 762
Intangible assets 486 428 340 573 511 669
Investment in associates 66 575 54 044 53 236
Deferred taxation 93 793 77 691 77 427
Current assets 2 235 909 1 555 921 2 267 426
Trade, other receivables and
prepayments 1 678 741 1 203 013 1 638 810
Taxation prepaid 13 209 10 031 7 848
Cash resources 543 959 342 877 620 768
Total assets 4 107 261 3 002 207 4 127 896
Equity and liabilities
Equity attributable to owners of the
parent 1 959 563 1 498 479 1 895 661
Share capital 2 299 1 953 2 295
Share premium 1 232 483 866 326 1 227 213
Treasury shares (12 891) (12 891) (12 891)
Retained earnings 474 735 449 314 492 946
Share based payment reserve 258 128 188 612 183 914
Cash flow hedging reserve (197) (1 137) (570)
Foreign currency translation reserve 6 468 1 149 (4 255)
Non controlling interest (2 383) 4 232 6 088
BEE shareholders' interest 921 921 921
Non-current liabilities 882 375 231 871 169 575
Other non-current liabilities
interest bearing 2 408 2 268 2 575
Long-term loan interest bearing 740 347 62 500 8 334
Redeemable preference shares
interest bearing 55 000 83 000 70 000
Derivative financial instruments and
other financial liabilities 197 1 137 570
Obligation under finance lease 3 126 4 842 4 292
Operating lease liability 379 1 883 108
Deferred tax 80 918 76 241 83 696
Current liabilities 1 265 323 1 271 857 2 062 660
Non-interest-bearing current
liabilities 1 036 370 656 792 1 056 854
Trade and other payables 735 653 464 313 765 031
Provisions 244 091 167 987 183 429
Other payables 36 836 85 320
Taxation 19 790 24 492 23 074
Interest-bearing current liabilities 228 953 615 065 1 005 806
Current portion of other non-current
liabilities 13 011 8 358 9 477
Short term loans 101 229 522 311
Current portion of long-term loans 25 000 331 992 78 333
Current portion of redeemable
preference shares 29 508 24 988 27 688
Bank overdraft 60 205 249 727 367 997
Total equity and liabilities 4 107 261 3 002 207 4 127 896
Number of ordinary shares in issue
000's 91 992 78 139 91 812
Net asset value per share cents 2 130 1 918 2 065
Abridged statement of cash flows
For the six months ended 31 August 2013
Unaudited Unaudited
Six Six Audited
months to months to 12 months
31 August 31 August 28 February
2013 2012 2013
R000 R000 R000
Operating activities
Profit before taxation 53 683 118 868 232 430
Adjusted for:
Depreciation 13 494 11 733 23 436
Impairment of investments, goodwill,
loans and intangibles 12 078
Amortisation of intangibles- acquired
in a business combination 25 652 20 243 42 178
Amortisation of intangibles- other than
those acquired in a business combination 8 911 8 340 18 337
Non-cash portion of operating lease
rentals 149 (7) 838
Other non cashflow items 79 566 16 343 21 384
Net interest paid 36 308 28 285 56 601
Cash generated by operations before
working capital changes 217 763 203 805 407 282
Increase in working capital (8 647) (83 944) (27 963)
Cash generated by operations 209 116 119 861 379 319
Net interest paid (36 308) (28 285) (56 601)
Taxation paid (63 273) (20 391) (55 698)
Free cash generated by operations 109 535 71 185 267 020
Net dividend paid (62 413) (108 702)
Cash inflows from operating activities 109 535 8 772 158 318
Investing and financing activities
Cash outflows from investing activities (82 082) (25 896) (664 813)
Cash inflows/(outflows) from
financing activities 203 530 (25 963) 623 029
Net increase/(decrease) in cash and
cash equivalents 230 983 (43 087) 116 534
Net cash and cash equivalents at the
beginning of the period/year 252 771 136 237 136 237
Net cash and cash equivalents at the
end of the period/year 483 754 93 150 252 771
Free cash generated by operations per
share cents 120,0 92,5 338,0
Total interest bearing liabilities of the group
Unaudited Unaudited
Six Six Audited
months to months to 12 months
31 August 31 August 28 February
2013 2012 2013
R000 R000 R000
Net gearing 25% 28% 25%
Net bank balances (483 754) (93 150) (252 771)
Other long term loans 2 408 2 268 2 575
Long term loan 740 347 62 500 8 334
Redeemable preference share 55 000 83 000 70 000
Obligations under finance lease 3 126 4 842 4 292
Operating lease liability 379 1 883 108
Current portion of other non-current
liabilities 13 011 8 358 9 477
Current portion of long term loans 25 000 331 992 78 333
Current portion of redeemable
preference shares 29 508 24 988 27 688
Short term loans 101 229 522 311
Total interest bearing liabilities 486 254 426 681 470 348
Total long term debt 100% 36% 18%
Total short term debt 64% 82%
Total 100% 100% 100%
Fair values of financial instruments
Some of the Groups financial assets and financial liabilities are
measured at fair value at the end of each reporting period. The following
table gives information about how the fair values of these financial
assets and financial liabilities are determined (in particular, the
valuation technique(s) and inputs used).
Financial assets/financial liabilities
Fair value as at
31 August 31 August 28 February
2013 2012 2013
R000 R000 R000
Trade, other receivables and prepayments 1 678 741 1 203 013 1 638 810
Redeemable preference shares (including
current portion) 84 508 107 988 97 688
Derivative financial instrument 197 1 137 570
Trade and other payables (excluding VAT) 632 688 373 941 677 221
Short term loans 101 229 331 992 522 311
Financial assets/financial liabilities
Valuation Relationship
Fair technique(s) Significant of unobservable
value and unobservable inputs to
hierarchy key inputs input(s) fair value
Trade, other receivables Level 3 Face value
and prepayments less specific
related
provision N/A N/A
Redeemable preference Level 2 Discounted cash
shares (including current flow at a coupon
portion) rate of 82.5% of
prime (2012: 75%)
that reflects the
issuers current
borrowing rate at
the end of the
reporting period. N/A N/A
Derivative financial Level 2 Discounted cash
instrument flow. Future
cash flows
are estimated
based on forward
interest rates
(from observable
yield curves at
the end of the
reporting period)
and contract
interest rates,
discounted at a
rate that reflects
the credit
risk of the
counterparty N/A N/A
Trade and other payables Level 3 Expected
(excluding VAT) settlement value. N/A N/A
Short term loans Level 2 Amortised cost plus
accrued interest. N/A N/A
The abovementioned measurements are all recurring in nature. There have
been no transfers between levels in the current and preceding periods. The
above table is unaudited.
Abridged statement of changes in equity
For the six months ended 31 August 2013
Share Share Treasury
capital premium shares
R000 R000 R000
Balance as at 1 March 2012 (audited) 1 934 865 942 (12 891)
Issue of ordinary shares Paxus acquisition 325 366 015
Capitalisation of transaction costs Paxus
acquisition (5 128)
Issue of ordinary shares under employee share
option plan 36 384
Dividend distributions
Recognition of BBBEE and staff
share-based payments
Share options exercised during the year
Share options cash settled
Total comprehensive income for the year
Other comprehensive income/(loss) for the year
Balance as at 28 February 2013 (audited) 2 295 1 227 213 (12 891)
Issue of ordinary shares under employee share
option plan 4 5 270
Recognition of BBBEE and staff
share-based payments
Share options exercised during the year
Share options cash settled
Acquisition of minority interest
Total comprehensive income for the period
Other comprehensive income/(loss) for
the period
Balance as at 31 August 2013 (unaudited) 2 299 1 232 483 (12 891)
Share Foreign Cash
based currency flow
payment translation hedging
reserve reserve reserve
R000 R000 R000
Balance as at 1 March 2012 (audited) 189 534 (1 587) (955)
Issue of ordinary shares Paxus
acquisition
Capitalisation of transaction costs
Paxus acquisition
Issue of ordinary shares under employee
share option plan
Dividend distributions
Recognition of BBBEE and staff share-
based payments 36 550
Share options exercised during the year (42 170)
Share options cash settled
Total comprehensive income for the year
Other comprehensive income/(loss) for the
year (2 668) 385
Balance as at 28 February 2013 (audited) 183 914 (4 255) (570)
Issue of ordinary shares under employee
share option plan
Recognition of BBBEE and staff share-
based payments 115 098
Share options exercised during the year (40 884)
Share options cash settled
Acquisition of minority interest
Total comprehensive income for the period
Other comprehensive income/(loss) for the
period 10 723 373
Balance as at 31 August 2013 (unaudited) 258 128 6 468 (197)
Attributable
to
equity
holders Non-
Retained of the controlling
earnings parent interest
R000 R000 R000
Balance as at 1 March 2012 (audited) 396 787 1 438 764 1 302
Issue of ordinary shares Paxus
acquisition 366 340
Capitalisation of transaction costs
Paxus acquisition (5 128)
Issue of ordinary shares under
employee share option plan 420
Dividend distributions (108 702) (108 702)
Recognition of BBBEE and staff share-
based payments 36 550
Share options exercised during the
year 42 170
Share options cash settled (12 320) (12 320)
Total comprehensive income for the
year 175 011 175 011
Other comprehensive income/(loss) for
the year (2 283) 4 786
Balance as at 28 February 2013
(audited) 492 946 1 888 652 6 088
Issue of ordinary shares under
employee share option plan 5 274
Recognition of BBBEE and staff share-
based payments 115 098
Share options exercised during the
year 40 884
Share options cash settled (40 884) (40 884)
Acquisition of minority interest (33 003) (33 003) (6 340)
Total comprehensive income for the
period 20 332 20 332
Other comprehensive income/(loss) for
the period (5 540) 5 556 (2 131)
Balance as at 31 August 2013
(unaudited) 474 735 1 961 025 (2 383)
BEE
shareholders
interest Total
R000 R000
Balance as at 1 March 2012 (audited) 921 1 440 987
Issue of ordinary shares Paxus acquisition 366 340
Capitalisation of transaction costs Paxus
acquisition (5 128)
Issue of ordinary shares under employee share
option plan 420
Dividend distributions (108 702)
Recognition of BBBEE and staff share-based
payments 36 550
Share options exercised during the year
Share options cash settled (12 320)
Total comprehensive income for the year 175 011
Other comprehensive income/(loss) for the year 2 503
Balance as at 28 February 2013 (audited) 921 1 895 661
Issue of ordinary shares under employee share
option plan 5 274
Recognition of BBBEE and staff share-based
payments 115 098
Share options exercised during the year
Share options cash settled (40 884)
Acquisition of minority interest (39 343)
Total comprehensive income for the period 20 332
Other comprehensive income/(loss) for the period 3 425
Balance as at 31 August 2013 (unaudited) 921 1 959 563
Abridged segment report (Unaudited)
For the six months ended 31 August 2013
Revenue
Aug Aug Feb
2013 2012 2013
R000 R000 R000
Staffing
Blue collar 2 906 186 2 598 063 5 501 998
White collar* 670 647 691 572 1 377 417
Independent contracting 1 949 030 620 470 1 501 570
BPO, Training and Financial Services 138 762 108 368 220 389
Emergent business 6 497 4 050 13 106
Sub total 5 671 122 4 022 523 8 614 480
Group central
Central costs (48) 2 362
Shared services
Total 5 671 074 4 022 523 8 616 842
Geographic segment report
Rest of world 1 650 987 154 464 652 332
South Africa** 4 020 087 3 868 059 7 964 510
Total 5 671 074 4 022 523 8 616 842
Internal Revenue
Aug Aug Feb
2013 2012 2013
R000 R000 R000
Staffing
Blue collar 6 221 15 167 21 419
White collar* 5 290 1 228 4 386
Independent contracting
BPO, Training and Financial Services 7 917 20 275 38 962
Emergent business 4 863
Sub total 19 432 36 670 65 630
Group central
Central costs
Shared services
Total 19 432 36 670 65 630
Geographic segment report
Rest of world
South Africa** 19 432 36 670 65 630
Total 19 432 36 670 65 630
Operating Profit
Aug Aug Feb
2013 2012 2013
R000 R000 R000
Staffing
Blue collar 123 079 103 947 253 423
White collar* 18 195 7 287 18 713
Independent contracting 69 003 49 195 95 014
BPO, Training and Financial Services 21 916 17 232 34 385
Emergent business (13 336) (10 307) (17 996)
Sub total 218 857 167 354 383 539
Group central
Central costs (137 235) (25 167) (81 775)
Shared services (4 799) (2 345) (15 790)
Total 76 823 139 842 285 974
Geographic segment report
Rest of world 38 582 2 612 26 461
South Africa** 38 241 137 230 259 513
Total 76 823 139 842 285 974
Normalised EBITDA excluding
share based payments, lease
smoothing and Paracon
transaction costs
Aug Aug Feb
2013 2012 2013
R000 R000 R000
Staffing
Blue collar 140 750 122 497 291 744
White collar* 24 771 15 306 42 526
Independent contracting 91 433 58 519 114 056
BPO, Training and Financial Services 28 685 29 496 58 405
Emergent business (12 215) (9 620) (16 605)
Sub total 273 424 216 198 490 127
Group central
Central costs (21 274) (18 493) (53 638)
Shared services (5 048) (1 496) (13 947)
Total 247 102 196 209 422 541
Geographic segment report
Rest of world 50 974 5 308 34 328
South Africa** 196 128 190 901 388 213
Total 247 102 196 209 422 541
Normalised EBITDA margin
excluding share based
payments, lease smoothing
and transaction costs
Aug Aug Feb
2013 2012 2013
% % %
Staffing
Blue collar 4,8% 4,7% 5,3%
White collar* 4,7% 2,2% 3,1%
Independent contracting 4,3% 9,4% 7,6%
BPO, Training and Financial Services 20,7% 27,2% 26,5%
Emergent business 0,0% 0,0% 0,0%
Sub total 4,8% 5,4% 5,7%
Group central
Central costs
Shared services
Total 4,4% 4,9% 4,9%
Geographic segment report
Rest of world 8,9% 3,4% 7,7%
South Africa** 4,9% 4,9% 4,9%
Total 4,4% 4,9% 4,9%
Normalised EBITDA
excluding share based
payments, lease smoothing
and transaction costs
Contribution % to Group
Normalised EBITDA
Aug Aug Feb
2013 2012 2013
% % %
Staffing
Blue collar 57,0% 62,4% 69,0%
White collar* 12,8% 7,8% 10,1%
Independent contracting 34,1% 29,9% 27,0%
BPO, Training and Financial Services 11,6% 15,0% 13,8%
Emergent business (4,9%) (4,9%) (3,9%)
Sub total 110,6% 110,2% 116,0%
Group central
Central costs (8,6%) (9,4%) (12,7%)
Shared services (2,0%) (0,8%) (3,3%)
Total 100% 100% 100%
Geographic segment report
Rest of world 20,6% 2,7% 8,1%
South Africa** 79,4% 97,3% 91,9%
Total 100,0% 100,0% 100,0%
Net asset values
Aug Aug Feb
2013 2012 2013
R000 R000 R000
Staffing
Blue collar 998 668 1 570 176 1 639 022
White collar* 316 841 (212 304) (103 698)
Independent contracting 1 035 753 199 809 573 305
BPO, Training and Financial Services 236 990 246 031 212 132
Emergent business 15 411 4 151 4 341
Sub total 2 603 663 1 807 863 2 325 102
Group central
Central costs (642 186) (298 516) (407 445)
Shared services (1 915) (10 868) (21 996)
Total 1 959 562 1 498 479 1 895 661
Geographic segment report
Rest of world 434 952 72 444 492 016
South Africa** 1 524 610 1 426 035 1 403 645
Total 1 959 562 1 498 479 1 895 661
Asset carrying value
Aug Aug Feb
2013 2012 2013
R000 R000 R000
Staffing
Blue collar 1 576 049 1 912 295 2 212 887
White collar* 532 520 416 686 369 146
Independent contracting 1 637 384 373 669 1 255 254
BPO, Training and Financial Services 254 611 266 206 240 479
Emergent business 19 155 6 820 8 308
Sub total 4 019 719 2 975 676 4 086 074
Group central
Central costs 51 513 6 579 20 136
Shared services 36 029 19 952 21 686
Total 4 107 261 3 002 207 4 127 896
Geographic segment report
Rest of world 1 113 311 104 190 1 117 970
South Africa** 2 993 950 2 898 017 3 009 926
Total 4 107 261 3 002 207 4 127 896
Liability carrying value
Aug Aug Feb
2013 2012 2013
R000 R000 R000
Staffing
Blue collar 577 381 342 119 573 865
White collar* 215 680 628 990 472 844
Independent contracting 601 630 173 860 681 949
BPO, Training and Financial Services 17 621 20 175 28 347
Emergent business 3 744 2 669 3 967
Sub total 1 416 056 1 167 813 1 760 972
Group central
Central costs 693 699 305 095 427 581
Shared services 37 943 30 820 43 682
Total 2 147 698 1 503 728 2 232 235
Geographic segment report
Rest of world 678 358 31 746 625 953
South Africa** 1 469 340 1 471 982 1 606 282
Total 2 147 698 1 503 728 2 232 235
Depreciation and amortisation
Aug Aug Feb
2013 2012 2013
R000 R000 R000
Staffing
Blue collar 9 909 9 687 20 279
White collar* 10 510 10 905 23 585
Independent contracting 21 181 9 324 19 042
BPO, Training and Financial Services 5 201 9 815 19 496
Emergent business 505 50 76
Sub total 47 306 39 781 82 478
Group central
Central costs 751 535 1 473
Shared services
Total 48 057 40 316 83 951
Geographic segment report
Rest of world 14 212 2 695 6 435
South Africa** 33 845 37 621 77 516
Total 48 057 40 316 83 951
Interest income
Aug Aug Feb
2013 2012 2013
R000 R000 R000
Staffing
Blue collar 12 195 5 394 13 524
White collar* 28 263 5 408 15 812
Independent contracting 4 569 1 782 4 769
BPO, Training and Financial Services 6 493 4 749 10 297
Emergent business 7 11 14
Sub total 51 527 17 344 44 416
Group central
Central costs (47 442) (16 090) (42 093)
Shared services 994 375 567
Total 5 079 1 629 2 890
Geographic segment report
Rest of world 1 649 7 11
South Africa** 3 429 1 622 2 879
Total 5 079 1 629 2 890
Interest expense
Aug Aug Feb
2013 2012 2013
R000 R000 R000
Staffing
Blue collar (16 812) (41 511) (18 768)
White collar* (44 186) 8 578 (52 542)
Independent contracting (8 251) - (1 630)
BPO, Training and Financial Services (430) (819) (1 294)
Emergent business (2 671) (1 511) (3 427)
Sub total (72 350) (35 263) (77 661)
Group central
Central costs 34 006 5 349 21 363
Shared services (3 043) - (3 193)
Total (41 387) (29 914) (59 491)
Geographic segment report
Rest of world (4 198) 2 2 151
South Africa** (37 189) (29 916) (61 642)
Total (41 387) (29 914) (59 491)
Taxation expense/(income)
Aug Aug Feb
2013 2012 2013
R000 R000 R000
Staffing
Blue collar 13 363 7 375 23 521
White collar* 13 789 (1 523) 2 158
Independent contracting 16 562 13 138 19 817
BPO, Training and Financial Services 848 684 (1 511)
Emergent business (4 164) (3 593) 184
Sub total 40 398 16 081 44 169
Group central
Central costs (952) (13) (261)
Shared services (3 963) 2 346 9 161
Total 35 483 18 414 53 069
Geographic segment report
Rest of world 4 645 233 983
South Africa** 30 838 18 181 52 086
Total 35 483 18 414 53 069
Additions to Property and
Equipment
Aug Aug Feb
2013 2012 2013
R000 R000 R000
Staffing
Blue collar 6 484 6 738 13 499
White collar* 3 281 1 335 1 636
Independent contracting 1 453 208 2 275
BPO, Training and Financial Services 649 1 575 2 772
Emergent business 2 620 93 103
Sub total 14 487 9 949 20 285
Group central
Central costs 1 439 26 3 781
Shared services 3 422 1 616 2 352
Total 19 348 11 591 26 418
Geographic segment report
Rest of world 2 189 3 259 6 632
South Africa** 17 159 8 332 19 786
Total 19 348 11 591 26 418
Tangible assets
Aug Aug Feb
2013 2012 2013
R000 R000 R000
Staffing
Blue collar 33 726 27 796 30 723
White collar* 10 699 10 837 9 270
Independent contracting 8 222 4 488 9 772
BPO, Training and Financial Services 5 493 6 646 6 331
Emergent business 2 502 112 96
Sub total 60 642 49 879 56 192
Group central
Central costs 3 970 466 3 283
Shared services 7 182 7 771 5 901
Total 71 794 58 116 65 376
Geographic segment report
Rest of world 13 529 9 407 12 742
South Africa** 58 265 48 709 52 634
Total 71 794 58 116 65 376
* IT contracting has been split out from White collar.
** All costs associated with group central have been allocated to the
South African segment.
Pro Forma Financial Information
The pro forma financial information below has been prepared for
illustrative purposes only to provide information on how the normalised
earnings adjustments might have impacted on the financial results of the
Group. Because of its nature, the pro forma financial information may not
be a fair reflection of the Groups results of operation, financial
position, changes in equity or cash flows.
The underlying information used in the preparation of the pro forma
financial information has been prepared using the accounting policies that
comply with International Financial Reporting Standards. These are
consistent with those applied in the published interim consolidated
results of the Group for the period ended 31 August 2013.
Notwithstanding the events subsequent to the reporting period disclosed
below, no adjustments have been made to the pro forma financial
information.
The directors of the Group are responsible for the compilation, contents
and preparation of the pro forma financial information contained in the
announcement. Their responsibility includes determining that: the pro
forma financial information has been properly compiled on the basis
stated; the basis is consistent with the accounting policies of the Group;
and the pro forma adjustments are appropriate for the purposes of the pro
forma financial information disclosed in terms of the JSE Limited (JSE)
Listings Requirements.
Unaudited statement of consolidated normalised earnings
For the six months ended 31 August 2013
Six Six
months to months to
31 August 31 August
Note 2013 2012 %
R000 R000 Change
Revenue 1 5 671 074 4 022 523 41
Cost of sales 1 (4 782 663) (3 285 023) 46
Gross Profit 1 888 411 737 500 21
Other income 1 40 555 26 858 51
Administrative marketing,
selling and operating expenses 1 (852 143) (624 516) 36
Operating profit 1 76 823 139 842 (45)
Adjusted for:
Depreciation 2 13 494 11 733 15
Amortisation of intangible
asset acquired in business
combination 2 25 652 20 243 27
Amortisation of intangibles
other than those acquired in
business combination 2 8 911 8 340 7
Share-based payments 122 074 16 058 >100
Lease smoothing 2 149 (7) -
Normalised EBITDA (excluding
share-based payments, and
lease smoothing) 247 103 196 209 26
Adjusted for:
Depreciation 2 (13 494) (11 733) 15
Amortisation of intangibles
other than those acquired in a
business combination 2 (8 911) (8 340) 7
Normalised operating profit 224 698 176 136 28
Net interest paid (36 308) (28 285) 28
Normalised profit before
taxation 188 390 147 851 27
Normalised taxation 3 (42 707) (24 081) 77
Normalised profit for the year 145 683 123 770 18
Share of profits from
associates 13 339 7 161 86
Non-controlling interests 2 131 (2 494) -
Total normalised profit for
the year 161 153 128 437 25
Normalised effective tax rate 23% 16%
Normalised earnings per share
cents 4 176.5 166.8 6
Diluted normalised earnings
per share cents 4 168.5 165.5 2
Weighted average No of shares
000s 1 91 279 76 978 19
Diluted weighted average No of
shares 000s 1 95 659 77 587 23
Notes:
1 As per the statement of comprehensive income for the six months ended
31 August 2013.
2 As per the statement of cash flows for the six months ended 31 August
2013.
3 The taxation expense has been adjusted for the adjusted items above.
4 Per share calculation is based on total normalised profit.
Comments
Overview
Much of the momentum achieved by the business in the past financial year
has been carried through to the current reporting period despite less than
buoyant underlying trading conditions.
Group revenues increased by 41% to R5,7 billion whilst normalised earnings
before interest, tax and depreciation (Normalised EBITDA) of R247,1
million were 26% ahead of the prior periods comparable figure. Normalised
earnings per share of 176,5 cents were 6% ahead of the prior years
figure.
The result reflects a slight half-year dilution effect arising from the
inclusion of Australian IT contracting business, Paxus, due to its
earnings being seasonally biased to the second half of the year.
Also affecting the half year results is a once-off share based payment
charge relating to the implementation of the new, 10-year Broad Based
Black Economic Empowerment (BBBEE) transaction which was approved by
shareholders at a general meeting held on 20 May 2013. This charge does
not affect the Groups cash flows nor does it affect its normalised
earnings but has the effect of reducing reported headline earnings per
share (HEPS).
The blue collar operations of the Group continued to perform well as did
the IT contracting business of Paracon, its associate investment,
Nihilent,the white collar business of Quest as well as the permanent recruitment
business. The business process outsourcing (BPO) business of FMS continues
to experience difficult trading conditions whilst the training operations
are still being adversely affected by an inability to register
learnerships due to problems experienced with the administration of the
relevant Seta. The training business has, however, gained renewed momentum
in other parts of Africa which holds much promise.
A global trend which is starting to gain a strong foothold in the South
African labour market is that of large employers appointing a master
service provider (MSP) to administer and control contract workforces
which, historically, tended to go largely unmanaged in many organisations.
In this regard, Adcorp was recently appointed to partner a large South
African bank in the establishment of an MSP portal to manage the banks
sizeable contract workforce.
This appointment represents a vote of confidence in Adcorps ability to
offer world class staffing solutions and will serve as an important
reference site as other large employers embrace the MSP concept.
The long awaited amendments to the Labour Relations Act as it applies to
temporary employment service providers (labour brokers) has finally been
passed by the National Assembly in Parliament. It has now been sent to the
National Council of Provinces for their consent following which, it will
be sent to the Presidency for final sign off.
It is anticipated that the effect of the legislative amendments will be
neutral to potentially positive for larger, sophisticated and compliant
providers such as Adcorp.
The South African labour market continues to be characterised by unrest,
strikes, above inflationary wage demands and trade union infighting.
Whilst these trends are negative for overall employment prospects in a
country already burdened by alarmingly high levels of unemployment, it
does potentially favour contracting and outsourcing as alternatives to
direct employment.
Recently acquired Australian IT contracting business, Paxus, has settled
well in to the Group although trading conditions in the Australian IT
jobs market remain somewhat challenging. As a result, the business is
performing slightly below original expectations. The business is extremely
well positioned in that market and certain of the originally anticipated
acquisition synergies have already been achieved whereby Indian associate
company, Nihilent, has already won business in Australia through Paxus
whilst there are also good prospects in Australia for Paracon subsidiary,
allaboutXpert.
The Groups Africa business continues to show good growth and to perform
well. The business is focused primarily in the areas of oil, gas, mining
and infrastructure and is now a major contributor to Group profits.
The creation of a shared service centre which is predominantly outsourced
to Genpact in India has now been in operation for a year. In addition, the
Group is currently in the process of upgrading its ERP system, Microsoft
Dynamics AX, which is likely to go live in a month or so. The anticipated
savings and operational efficiencies from these initiatives are only
likely to be achieved once the upgraded ERP system goes live.
Financial overview
As a consequence of the 2013 BBBEE deal being finalised and implemented
with effect 27 August 2013 the International Financial Reporting Standards
(IFRS) required that R87 million be expensed as a once-off non cash flow
share based payment charge to profits. This caused headline earnings per
share of 22,4 cents to be some 82% lower than the 127,1 cents per share
for the comparative prior period.
Given the above accounting treatment and other IFRS non cash flow charges
to profit and loss, the Group has consistently disclosed that its primary
measure of performance is normalised earnings. In this regard,
shareholders are referred to the statement of consolidated normalised
earnings contained in this announcement.
Normalised EBITDA of R247,1 million for the six months ended 31 August
2013 is 26% higher than the R196,2 million for the comparative prior period
partly do to the inclusion of the Australian business Paxus, which was,
for the first time, included for the full period under review. Organic
normalised EBITDA year-on-year growth was 10%.
The Groups Normalised EBITDA margin was 4,4% (2012: 4,9%). Improvements
in margins attributable to the traditional staffing businesses and Paracon
were adversely affected by the inclusion of Paxus which operates in a substantially
lower margin environment and continued margin pressure in the BPO training
and financial services segment. The Groups normalised EBITDA margin
exclusive of Paxus was 5% for the period under review.
The Groups overall normalised effective tax rate has increased to 23%
(2012: 16%). This is in line with managements expectations and was mainly
due to lower tax deductions claimed in respect of registered learnerships
in compliance with the Income Tax Act, the inclusion of Paxus related tax
which has been provided for at a higher rate than the South Africa
corporate tax rate of 28% and other adjustments made in the computation of
taxable income. Cash management remains a high priority for management. As
such the cash conversion ratio was 93% (2012: 68%). Days settlement
outstanding (DSO) totalled 42 days (FY2012: 37 days). This result was
achieved in the context of the continued challenging collections
environment.
Cash generated from operations before working capital increased by 7%
mainly due to the higher level of normalised profitability year on year.
Management of working capital resulted in R9 million being consumed when
compared to the R84 million being consumed in the prior year. This
contributed to R209 million of net cash being generated by operations
being 74% higher when compared to the R120 million generated for the prior year.
The Groups overall net gearing percentage reduced to 25% (2012: 28%).
During the current year, the Group incurred a 28% increase in net interest
paid given the inclusion of the Paxus related acquisition debt. On a
comparative basis, exclusive of Paxus, net interest paid increased by 4%
due to the higher levels of business activity. The total weighted average
cost of the Groups South African related debt was significantly reduced
due to the implementation, in March 2013, of the Companys registered
domestic medium-term note (DMTN) programme.
Basis of preparation
The Groups unaudited summary consolidated interim financial statements
(financial results) are prepared in accordance with the requirements of
the JSE Limited Listings Requirements for provisional reports, the
requirements of the Companies Act applicable to summary financial
statements, the framework, measurement and recognition requirements of
IFRS, the SAICA Financial Reporting Guides as issued by the Accounting
Practices Committee, the Financial Reporting Pronouncements as issued by
the Financial Reporting Standards Council and the requirements of IAS 34
Interim Financial Reporting. The accounting policies applied in the
preparation of the financial results are in terms of IFRS and are
consistent with the accounting policies applied in the preparation of the
groups previous consolidated interim financial statements.
The financial results have been prepared by the Group Financial Manager,
A Viljoen (B.Comm Honours) and supervised by the Group Chief Financial
Officer, AM Sher (CA(SA), CFA).
Contingent liabilities and commitments
The bank has guaranteed R4,9 million (FY2012: R11,9 million) on behalf of
the Group to creditors. As at the balance sheet date the Group has
outstanding operating lease commitments totalling R66,9 million (FY2012:
R75,6 million) in non-cancellable property leases. The Group has IT
capital commitments contracted for of R18,5 million (FY2012: R10,1
million) relating to the Microsoft Dynamix AX 2012 upgrade. Changes to the board
Mr M Spicer was appointed as a non-executive independent director on
Wednesday, 21 August 2013.
Declaration of interim dividend
Notice is hereby given that a final gross dividend of 60 cents per share
(FY2012: 60 cents per share) for the interim period ended 31 August 2013
was declared on Thursday, 17 October 2013 payable to shareholders recorded
in the share register of the Company at the close of business on the
record date appearing below. The salient dates pertaining to the final
dividend
are as follows:
Last date to trade cum dividend Friday, 29 November 2013
Date trading commences ex dividend Monday, 2 December 2013
Record date Friday, 6 December 2013
Date of payment Monday, 9 December 2013
Ordinary share certificates may not be dematerialised or rematerialised
between Monday, 2 December 2013 and Friday, 6 December 2013, both days
inclusive.
In determining the dividends tax (DT) of 15% to withhold in terms of the
Income Tax Act for those shareholders who are not exempt from the DT, no
secondary tax on companies (STC) credits have been utilized. Shareholders
who are not exempt from the DT will therefore receive a net dividend of 51
cents per share. The Company has 91 991 776 ordinary shares in issue and
its income tax reference number is 9233/68071/0.
All times provided in this announcement are South African local times. The
above dates 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, 9
December 2013.
Subsequent event
Subsequent to the closure of the interim financial period ended 31 August
2013 and the date of approval of these unaudited interim financial
statements, namely 17 October 2013, the Group undertook the below mentioned
transaction. As disclosed in the Groups 2013 Integrated Annual Report and
under the Groups DMTN programme, the issuance of the Groups commercial
paper instrument (ADCP02) expired on 10 September 2013 and was rolled over
by the issuance of a new instrument (ADCP03) for an additional three
months with expiry 10 December 2013 at JIBAR plus 24 (twenty four) basis
points.
Outlook
The staffing industry has seen various substantial changes and evolving
macro trends over the recent past. These include generally increasing
tensions between employers and employees, the introduction of more
restrictive and complex legislation as well as the move of large employers
to more cost effectively manage the efficiency of their workforce by
appointing large, sophisticated service providers with the skill,
geographic reach and financial strength to provide an all-encompassing
staffing solution.
Given these relatively fast evolving industry developments, Adcorp has
positioned itself uniquely and competitively in order to capitalise on
these emerging trends.
In this regard, the Group is regarded for its innovative solutions,
financial stability, access to technology, BBBEE credentials, governance
and compliance standards as well as its international alliances and
extended geographic reach.
Adcorp is well positioned to become a Southern Hemisphere and an emerging
market, independent player of consequence.
Given the favourable macro environment and the Groups strong strategic
response to these emerging, global industry trends, Adcorp is particularly
well positioned for the future.
This general forecast has not been reviewed or reported on by the Groups
auditors.
By order of the board
MJN Njeke RL Pike AM Sher
Chairman Chief Executive Officer Chief Financial Officer
17 October 2013
Executive directors: C Bomela, RL Pike (Chief Executive Officer), AM Sher,
PC Swart
Non-executive directors: GP Dingaan, MR Ramaite, NS Ndhlazi
Independent non-executive directors: MJN Njeke (Chairman), ME Mthunzi,
TDA Ross, SN Mabaso-Koyana, M Spicer
Alternate non-executive directors: C Maswanganyi, L Mojela
Acting company secretary: AM Sher
Transfer secretaries: Link Market Services SA (Pty) Ltd
Sponsor: Deloitte & Touche Sponsor Services (Pty) Ltd
Date: 17/10/2013 01:27:00 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,
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