Wrap Text
Reviewed condensed consolidated and separate provisional results for the year ended 28 February 2015
Adcorp Holdings Limited
(“Adcorp” or “Adcorp Group” or “the Group”) Registration number
1974/001804/06
Share code: ADR
ISIN number: ZAE000000139
Reviewed condensed consolidated and separate provisional results
For the year ended 28 February 2015
Salient features
Revenue for the year increased by 13% to R13,3 billion
Normalised EBITDA for the year increased by 23% to R668,5 million
Normalised earnings per share increased by 14% to 436,8 cents per share
Headline earnings per share increased by 58% to 298,5 cents per share
Normalised EBITDA margin increased from 4,6% to 5,0%
Debtors days at 47 days (2014: 48 days)
Cash conversion ratio increased to 91% (2014: 48%)
Gearing reduced to 28% (2014: 37%)
Final dividend increased by 10% to 88 cents per share
Kelly Group Limited acquired for R248 million
Singapore office established October 2014
Strategic partnership established with APBA (SE Asia)
Dare (Australia) acquired for estimated R280 million (subsequent to
reporting date)
Certainty achieved with regards to SA labour laws
Reviewed condensed consolidated and separate statement of comprehensive
income
For the year ended 28 February 2015
Group Company
Reviewed Audited Reviewed Audited
2015 2014 2015 2014
R’000 R’000 R’000 R’000
Revenue 13 322 398 11 802 415 4 090 5 459
Cost of sales (11 126 945) (9 891 844) (3 677) (5 013)
Gross profit 2 195 453 1 910 571 413 446
Other income 101 895 81 603 – -
Administrative expenses (968 366) (888 352) (21 336) (108 833)
Marketing and selling
expenses (664 791) (616 566) – (50)
Other operating
expenses (209 204) (185 383) – -
Operating profit 454 987 301 873 (20 923) (108 437)
Interest received 12 536 9 881 77 986 96 651
Interest paid (103 352) (78 324) (75 379) (91 407)
Dividend received – – 166 863 185 157
Impairment of intangible
assets and goodwill (65 014) (10 718) – –
Share of profits from
associates 29 778 33 718 – –
Profit on sale of
shares 371 – 371 -
Profit/(loss) on sale
of property and
equipment 1 173 (297) – -
Profit before taxation 330 479 256 133 148 918 81 964
Taxation (86 277) (93 629) 3 191 98
Profit for the year 244 202 162 504 152 109 82 062
Other comprehensive
income*
Exchange differences on
translating foreign
operations (5 488) 6 301 – –
Exchange differences
arising on the net
investment of
a foreign operation (15 122) 2 107 (15 122) 5 659
Fair value adjustment
of derivative financial
instrument (2 366) 545 25 545
Non-controlling
interest 342 2 515 – –
Other comprehensive
(loss)/income for the
year, net of tax (22 634) 11 468 (15 097) 6 204
Total comprehensive
income for the year 221 568 173 972 137 012 88 266
Profit attributable to:
Owners of the parent 244 544 165 019 152 109 82 062
Non-controlling
interest (342) (2 515) – –
Total comprehensive
income attributable to:
Owners of the parent 221 568 173 972 137 012 88 266
Non-controlling
interest (342) (2 515) – –
Earnings per share
Basic (cents) 236,5 176,9 – –
Diluted (cents) 222,7 165,5 – –
Approved dividends to
shareholders 140 140 – –
Interim dividend
(cents) 60 60 – –
Final dividend (cents)
in respect of prior
year 80 80 – –
Calculation of headline
earnings
Profit for the year 244 544 165 019 – –
(Profit)/loss on sale
of property and (1 173) 297 – –
equipment
Taxation 328 (83) – –
Impairment of
intangible assets and
goodwill 65 014 10 718 – –
Headline earnings 308 713 175 951 – –
Headline earnings per
share
Headline earnings per
share – cents 298,5 188,6 – –
Diluted headline earnings
per share – cents 281,2 176,4 – –
Weighted average no of
shares – 000’s 103 415 93 299 – –
Diluted weighted average
no of shares – 000’s 109 788 99 723 – –
* All items below will be reclassified to profit and loss upon derecognition.
Reviewed condensed consolidated and separate statement of financial
position
As at 28 February 2015
Group Company
Reviewed Audited Reviewed Audited
2015 2014 2015 2014
R’000 R’000 R’000 R’000
Assets
Non-current assets 2 326 188 2 164 262 1 579 871 1 574 642
Property and equipment 112 425 80 794 – –
Goodwill 1 304 170 1 335 266 – –
Intangible assets 611 752 559 522 – –
Investments 7 800 3 530 – –
Investment in
subsidiaries – – 1 574 642 1 574 642
Investment – available
for sale 42 288 – – -
Investment in associates 102 171 86 954 – –
Deferred taxation 145 582 98 196 5 229 –
Current assets 3 018 440 2 527 794 1 696 591 1 312 050
Trade, other receivables
and prepayments 2 315 813 2 041 069 3 846 4 622
Amounts due by subsidiary
companies – – 1 691 082 1 307 341
Taxation prepaid 22 526 15 154 1 454 –
Cash resources 680 101 471 571 209 87
Total assets 5 344 628 4 692 056 3 276 462 2 886 692
Equity and liabilities
Capital and reserves 2 465 032 2 097 580 2 035 838 1 747 971
Share capital 2 733 2 502 3 154 2 923
Share premium 1 718 856 1 487 124 1 718 856 1 487 124
Treasury shares (12 990) (12 891) – –
Non-distributable reserve – – 119 918 119 918
Share based payment
reserve 114 581 107 375 114 581 107 375
Foreign currency
translation reserve (3 442) 2 046 – –
Cash flow hedging reserve (2 391) (25) – (25)
Accumulated profit 650 806 513 544 79 329 30 656
Equity attributable to
equity holders of the
parent 2 468 153 2 099 675 2 035 838 1 747 971
Non-controlling interest (4 042) (3 016) – –
BEE shareholders'
interest 921 921 – –
Non-current liabilities 1 150 262 1 013 242 697 373 497 580
Other non-current
liabilities – interest
bearing 570 2 106 – –
Long-term loan – interest
bearing 859 417 723 754 697 373 496 736
Redeemable preference
shares – interest bearing – 40 000 – –
Derivative financial
instruments 3 416 25 – 25
Share based payment
liability 151 672 148 037 – –
Obligation under finance
lease 2 448 1 709 – –
Operating lease liability 640 – – –
Deferred taxation 132 099 97 611 – 819
Current liabilities 1 729 334 1 581 234 543 251 641 141
Non-interest-bearing
current liabilities 1 209 818 1 099 630 252 983 265 236
Trade and other payables 933 123 832 964 1 673 2 404
Amounts due to subsidiary
companies – – 248 453 262 832
Provisions 245 313 213 941 – –
Other vendor payables 12 619 26 801 – –
Taxation 18 763 25 924 2 857 –
Interest-bearing current
liabilities 519 516 481 604 290 268 375 905
Current portion of other
non-current liabilities 12 077 10 635 – –
Short term loans 398 463 231 588 220 269 207 571
Current portion of
redeemable preference
shares – 30 403 – –
Current portion of long – 8 334 – 8 334
term loans
Bank overdraft 108 976 200 644 69 999 160 000
Total equity and
liabilities 5 344 628 4 692 056 3 276 462 2 886 692
Number of ordinary shares
in issue – 000's 109 371 100 092 109 371 100 092
Net asset value per share
– cents 2 254 2 096 1 861 1 746
Reviewed condensed consolidated and separate statement of cash flows
For the year ended 28 February 2015
Group Company
Reviewed Audited Reviewed Audited
2015 2014 2015 2014
R’000 R’000 R’000 R’000
Operating activities
Profit before taxation and
dividends 330 479 256 133 (17 945) (103 193)
Adjusted for:
Dividend received – – 166 863 185 157
Depreciation 32 815 28 596 – –
Impairment of investments,
intangible assets, goodwill
and loans 65 014 10 718 – –
Amortisation of intangibles 80 815 65 630 – –
Amortisation of intangibles
– acquired in a business
combination 61 083 47 795 – –
Amortisation of intangibles
– other than those acquired
in a business combination 19 732 17 835 – –
(Profit)/loss on disposal
of property and equipment (1 173) 297
Share-based payments 80 724 136 969 – –
Share-based payment expense 64 801 57 140 – –
2013 BBBEE deal – IFRS 2
one-off, non cash flow,
share based payment expense – 86 805 – –
Share-based payment –
adjusted to fair value – (6 976) – –
Revaluation of share-based
payment liability 15 923 – – –
Cash settlement of share
options exercised (69 883) (40 884) – (40 884)
Revaluation of foreign
exchange denominated inter
company loan (15 122) 2 926 (15 122) 6 478
Non-cash portion of
operating lease rentals 322 561 – –
Exchange differences on
translating foreign
operations (5 488) 6 301 – –
Foreign currency adjustment
to goodwill 15 389 – – –
Other movement in
distributable reserves (1 404) – – –
Interest received (12 536) (9 881) (77 986) (96 651)
Interest paid 103 352 78 324 75 379 91 407
Cash generated from
operations before working
capital changes 603 304 535 690 131 189 42 316
(Increase)/decrease in
trade and other receivables
and prepayments (6 797) (368 303) 3 091 (842)
(Decrease)/increase in
trade and other payables
and provisions (38 861) 70 135 (3 046) (9 368)
Net movement in holding and
fellow subsidiaries
intercompany accounts – – (390 914) (153 642)
Cash generated/(utilised)
by operations 557 646 237 522 (259 680) (121 536)
Interest received 12 536 9 881 77 986 96 651
Interest paid (103 352) (78 324) (75 379) (91 407)
Taxation paid (90 678) (125 790) (1 454) 3 928
Dividend paid (87 971) (132 868) (88 314) (133 647)
Net cash
generated/(utilised) by
operating activities 288 181 (89 579) (346 841) (246 011)
Investing activities
Additions to property,
equipment and intangible
assets (69 390) (78 119) – –
Proceeds on the sale of
property and equipment 3 852 1 976 – –
Adjustment to goodwill – (5 717) – –
Acquisition of businesses (180 027) (258 681) – (204 030)
Acquisition of investment (4 270) (3 530) – –
Deferred tax on financial
derivatives 1 025 – – –
Investment in associates (29 778) (33 718) – –
Dividends received from
associates 14 561 – – –
Minority interest (684) (40 926) – –
Investment – available for
sale (42 288) – – –
Net cash utilised from
investing activities (306 999) (418 715) – (204 030)
Financing activities
Issue of shares under
employee share option
scheme 19 038 5 274 19 038 5 274
Issue of shares pursuant to
acquisitions 212 925 254 844 212 925 254 844
Equity due to change in
control (2 783) – – –
Long term loans raised 135 662 723 754 200 637 496 736
Long term loans repaid – (38 333) – (8 333)
Short term loan raised 66 130 231 588 4 364 207 571
Short term loan repaid (97 117) (588 999) – (323 432)
Other non-current
liabilities – interest
bearing (657) (3 159) – –
Decrease in other payables – (85 320) – –
(Decrease)/increase in
other payables (14 182) 26 801 – –
Net cash generated by
financing activities 319 016 526 450 436 964 632 660
Net increase in cash and
cash equivalents 300 198 18 156 90 123 182 619
Cash and cash equivalents
at the beginning of year 270 927 252 771 (159 913) (342 532)
Cash and cash equivalents at
the end of the year 571 125 270 927 (69 790) (159 913)
Total consolidated interest bearing liabilities of the Group
As at 28 February 2015
Group
Reviewed Audited
2015 2014
R’000 R’000
Net gearing 28% 37%
Net bank balances (571 125) (270 927)
Other long-term loans 570 2 106
Long-term loan 859 417 723 754
Redeemable preference share – 40 000
Obligations under finance lease 2 448 1 709
Operating lease liability 640 –
Current portion of other non-current liabilities 12 077 10 635
Current portion of long-term loans – 8 334
Current portion of redeemable preference shares – 30 403
Short-term loans 398 463 231 588
Total interest-bearing liabilities (gross of net
cash set off) 1 273 615 1 048 529
Total long-term debt 68% 73%
Total short-term debt 32% 27%
Total 100% 100%
Fair values of financial instruments
Some of the Group’s 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).
Fair value as at
28 February
Fair
value
Financial assets/financial liabilities Reviewed Audited hierarchy
2015 2014
R’000 R’000
Investment – available for sale 42 288 – Level 3
of investment n/a n/a
Trade and other receivables 2 315 813 2 041 069 Level 3
Redeemable preference shares (including
current portion) – 70 403 Level 2
Derivative financial instrument 3 416 25 Level 2
Share based payment liability 151 672 148 037 Level 2
Trade and other payables (excluding
VAT) 793 834 728 918 Level 3
Short-term loans 398 463 231 588 Level 2
Relationship
Financial of
assets/ Significant unobservable
financial Valuation technique(s) unobservable inputs to
liabilities and key inputs input(s) fair value
Investment –
available for
sale of Face value – owing
investment to recency
Trade and other Face value less specific
receivables related provision n/a n/a
Redeemable Discounted cash flow at a
preference coupon rate of 82,5%
shares of prime that reflects the
(including issuer's current borrowing
current rate at the end of the
portion) reporting period n/a n/a
Derivative Discounted cash flow. Future
financial cash flows are estimated based
instrument 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
Share based
payment
liability Black-Scholes pricing model n/a n/a
Trade and
other payables
(excluding VAT) Expected settlement value n/a n/a
Short-term loans Amortised cost plus accrued
interest n/a n/a
Reviewed condensed consolidated and separate statement of changes in
equity
For the year ended 28 February 2015
Share Share Treasury
capital premium shares
R’000 R’000 R’000
Group
Balance as at 1 March 2013 (audited) 2 295 1 227 213 (12 891)
Issue of ordinary shares pursuant to
acquisition 203 255 838 –
Capitalisation of transaction costs – (1 197) –
Issue of ordinary shares under employee
share option plan 4 5 270 –
Dividend distributions – – –
Recognition of BBBEE and staff share-based
payments – – –
Share Options Exercised during the period – – –
Share Options Cash Settled – – –
Revaluation of share based payments – – –
Transfer of share-based payment reserve
to share-based payment liability – – –
Profit for the year – – –
Other comprehensive income for the year – – –
Reserves acquired – – –
Balance as at 28 February 2014 (audited) 2 502 1 487 124 (12 891)
Issue of ordinary shares pursuant to
acquisition 166 213 255 –
Capitalisation of transaction costs – (496) –
Issue of ordinary shares under employee
share option plan 14 19 024 –
Dividend distributions – – –
Scrip distribution 51 (51) –
Recognition of BBBEE and staff share-based
payments – – –
Adcorp Empowerment Share Incentive Trust
shares written off – – (99)
Profit for the year – – –
Other movement in distributable reserves – – –
Other comprehensive losses for the year – – –
Minority interest – – –
Equity due to change in control – – –
Reviewed balance as at 28 February 2015 2 733 1 718 856 (12 990)
Company
Balance as at 1 March 2013 (audited) 2 716 1 227 213 –
Issue of ordinary shares pursuant to
acquisition 203 255 838 –
Capitalisation of transaction costs – (1 197) –
Issue of ordinary shares under employee
share option plan 4 5 270 –
Dividend distributions – – –
Recognition of BBBEE and staff share-based
payments – – –
Share Options Exercised during the period – – –
Share Options Cash Settled – – –
Revaluation of share based payments – – –
Transfer of share-based payment reserve
to share-based payment liability – – –
Profit for the year – – –
Other comprehensive income for the year – – –
Balance as at 28 February 2014 (audited) 2 923 1 487 124 –
Issue of ordinary shares pursuant to
acquisition 166 213 255 –
Capitalisation of transaction costs – (496) –
Issue of ordinary shares under employee
share option plan 14 19 024 –
Dividend distributions – – –
Scrip distribution 51 (51) –
Recognition of BBBEE and staff share-based
payments – – –
Profit for the year – – –
Other comprehensive (loss)/income for
the year – – –
Reviewed balance as at 28 February 2015 3 154 1 718 856 –
Share- Foreign
Non- based currency
distributable payment translation
reserve reserve reserve
R’000 R’000 R’000
Group
Balance as at 1 March 2013 (audited) – 183 914 (4 255)
Issue of ordinary shares pursuant to
acquisition – – –
Capitalisation of transaction costs – – –
Issue of ordinary shares under
employee share option plan – – –
Dividend distributions – – –
Recognition of BBBEE and staff share-
based payments – 136 969 –
Share Options Exercised during the
period – (40 884) –
Share Options Cash Settled – – –
Revaluation of share based payments – (24 587) –
Transfer of share-based payment
to reserve share-based payment liability – (148 037) –
Profit for the year – – –
Other comprehensive income for
the year – – 6 301
Reserves acquired – – –
Balance as at 28 February 2014
(audited) – 107 375 2 046
Issue of ordinary shares pursuant to
acquisition – – –
Capitalisation of transaction costs – – –
Issue of ordinary shares under
employee share option plan – – –
Dividend distributions – – –
Scrip distribution – – –
Recognition of BBBEE and staff share-
based payments – 7 206 –
Adcorp Empowerment Share Incentive
Trust shares written off – – –
Profit for the year – – –
Other movement in distributable
reserves – – –
Other comprehensive losses for the
year – – (5 488)
Minority interest – – –
Equity due to change in control – – –
Reviewed balance as at 28 February
2015 – 114 581 (3 442)
Company
Balance as at 1 March 2013 (audited) 119 918 183 914 –
Issue of ordinary shares pursuant to
acquisition – – –
Capitalisation of transaction costs – – –
Issue of ordinary shares under
employee share option plan – – –
Dividend distributions – – –
Recognition of BBBEE and staff share-
based payments – 136 969 –
Share Options Exercised during the
period – (40 884) –
Share Options Cash Settled – – –
Revaluation of share based payments – (24 587) –
Transfer of share-based payment
to reserve share-based payment liability – (148 037) –
Profit for the year – – –
Other comprehensive income for the
year – – –
Balance as at 28 February 2014
(audited) 119 918 107 375 –
Issue of ordinary shares pursuant to
acquisition – – –
Capitalisation of transaction costs – – –
Issue of ordinary shares under
employee share option plan – – –
Dividend distributions – – –
Scrip distribution – – –
Recognition of BBBEE and staff share-
based payments – 7 206 –
Profit for the year – – –
Other comprehensive (loss)/income for
the year – – –
Reviewed balance as at 28 February 2015 119 918 114 581 –
Cash flow Attributable to
hedging Retained equity holders
reserve earnings of the parent
R’000 R’000 R’000
Group
Balance as at 1 March 2013 (audited) (570) 492 946 1 888 652
Issue of ordinary shares pursuant to
acquisition – – 256 041
Capitalisation of transaction costs – – (1 197)
Issue of ordinary shares under
employee share option plan – – 5 274
Dividend distributions – (132 868) (132 868)
Recognition of BBBEE and staff share-
based payments – – 136 969
Share Options Exercised during the
period – 40 884 –
Share Options Cash Settled – (40 884) (40 884)
Revaluation of share based payments – 20 926 (3 661)
Transfer of share-based payment
reserve share-based payment liability – – (148 037)
Profit for the year – 165 019 165 019
Other comprehensive income for
the year 545 2 107 8 953
Reserves acquired – (34 586) (34 586)
Balance as at 28 February 2014
(audited) (25) 513 544 2 099 675
Issue of ordinary shares pursuant to
acquisition – – 213 421
Capitalisation of transaction costs – – (496)
Issue of ordinary shares under
employee share option plan – – 19 038
Dividend distributions – (87 973) (87 973)
Scrip distribution – – –
Recognition of BBBEE and staff share-
based payments – – 7 206
Adcorp Empowerment Share Incentive
Trust shares written off – – (99)
Profit for the year – 244 544 244 544
Other movement in distributable
reserves – (1 404) (1 404)
Other comprehensive losses for
the year (2 366) (15 122) (22 976)
Minority interest – – –
Equity due to change in control – (2 783) (2 783)
Reviewed balance as at 28 February
2015 (2 391) 650 806 2 468 153
Company
Balance as at 1 March 2013 (audited) (570) 76 582 1 609 773
Issue of ordinary shares pursuant to
acquisition – – 256 041
Capitalisation of transaction costs – – (1 197)
Issue of ordinary shares under
employee share option plan – – 5 274
Dividend distributions – (133 647) (133 647)
Recognition of BBBEE and staff share-
based payments – – 136 969
Share Options Exercised during the
period – 40 884 –
Share Options Cash Settled – (40 884) (40 884)
Revaluation of share based payments – – (24 587)
Transfer of share-based payment
reserve share-based payment liability – – (148 037)
Profit for the year – 82 062 82 062
Other comprehensive income for the
year 545 5 659 6 204
Balance as at 28 February 2014
(audited) (25) 30 656 1 747 971
Issue of ordinary shares pursuant to
acquisition – – 213 421
Capitalisation of transaction costs – – (496)
Issue of ordinary shares under
employee share option plan – – 19 038
Dividend distributions – (88 314) (88 314)
Scrip distribution – – –
Recognition of BBBEE and staff share-
based payments – – 7 206
Profit for the year – 152 109 152 109
Other comprehensive (loss)/income for
the year 25 (15 122) (15 097)
Reviewed balance as at 28 February
2015 – 79 329 2 035 838
Non- BEE
controlling shareholders’
interest interest Total
R’000 R’000 R’000
Group
Balance as at 1 March 2013 (audited) 6 088 921 1 895 661
Issue of ordinary shares pursuant to
acquisition – – 256 041
Capitalisation of transaction costs – – (1 197)
Issue of ordinary shares under
employee share option plan – – 5 274
Dividend distributions – – (132 868)
Recognition of BBBEE and staff share-
based payments – – 136 969
Share Options Exercised during the – – –
period
Share Options Cash Settled – – (40 884)
Revaluation of share based payments – – (3 661)
Transfer of share-based payment
to reserve share-based payment liability – – (148 037)
Profit for the year – – 165 019
Other comprehensive income for the
year (2 515) – 6 438
Reserves acquired (6 589) – (41 175)
Balance as at 28 February 2014
(audited) (3 016) 921 2 097 580
Issue of ordinary shares pursuant to
acquisition – – 213 421
Capitalisation of transaction costs – – (496)
Issue of ordinary shares under
employee share option plan – – 19 038
Dividend distributions – – (87 973)
Scrip distribution – – –
Recognition of BBBEE and staff share-
based payments – – 7 206
Adcorp Empowerment Share Incentive
Trust shares written off – – (99)
Profit for the year – – 244 544
Other movement in distributable
reserves – – (1 404)
Other comprehensive losses for the
year (342) – (23 318)
Minority interest (684) – (684)
Equity due to change in control – – (2 783)
Reviewed balance as at 28 February
2015 (4 042) 921 2 465 032
Company
Balance as at 1 March 2013 (audited) – – 1 609 773
Issue of ordinary shares pursuant to
acquisition – – 256 041
Capitalisation of transaction costs – – (1 197)
Issue of ordinary shares under
employee share option plan – – 5 274
Dividend distributions – – (133 647)
Recognition of BBBEE and staff share-
based payments – – 136 969
Share Options Exercised during the
period – – –
Share Options Cash Settled – – (40 884)
Revaluation of share based payments – – (24 587)
Transfer of share-based payment
to reserve share-based payment liability – – (148 037)
Profit for the year – – 82 062
Other comprehensive income for the
year – – 6 204
Balance as at 28 February 2014 – – 1 747 971
(audited)
Issue of ordinary shares pursuant to
acquisition – – 213 421
Capitalisation of transaction costs – – (496)
Issue of ordinary shares under
employee share option plan – – 19 038
Dividend distributions – – (88 314)
Scrip distribution – – –
Recognition of BBBEE and staff share-
based payments – – 7 206
Profit for the year – – 152 109
Other comprehensive (loss)/income for
the year – – (15 097)
Reviewed balance as at 28 February
2015 – – 2 035 838
Reviewed condensed consolidated segment report
For the year ended 28 February 2015
Staffing Professional
Blue collar White collar services
Revenue
– 2015 (R’000) 7 230 582 1 723 567 4 026 745
– 2014 (R’000) 6 258 270 1 314 015 3 892 860
Internal revenue
– 2015 (R’000) 38 624 38 614 –
– 2014 (R’000) 11 352 40 617 197
Operating profit/(loss)
– 2015 (R’000) 407 156 90 346 102 760
– 2014 (R’000) 326 072 57 268 109 318
Normalised* EBITDA excluding
share-based payments, lease
smoothing, establishment and
transaction costs
– 2015 (R’000) 455 478 99 430 150 493
– 2014 (R’000) 358 233 68 523 154 433
Normalised* EBITDA margin
excluding share-based payments,
lease smoothing, establishment
and transaction costs
– 2015 (%) 6,3% 5,8% 3,7%
– 2014 (%) 5,7% 5,2% 4,0%
Normalised* EBITDA excluding
share-based payments, lease-
smoothing, establishment and
transaction costs, contribution
% to Group Normalised* EBITDA
– 2015 (%) 68,1% 14,9% 22,5%
– 2014 (%) 65,8% 12,6% 28,4%
Depreciation and amortisation
– 2015 (R’000) 41 625 16 391 43 023
– 2014 (R’000) 24 379 10 760 42 556
Interest income
– 2015 (R’000) 15 246 25 398 3 333
– 2014 (R’000) 28 444 10 159 12 586
Interest expense
– 2015 (R’000) (41 815) (22 257) (12 622)
– 2014 (R’000) (29 704) (866) (21 465)
Taxation expense/(income)
– 2015 (R’000) 37 475 2 496 8 626
– 2014 (R’000) 36 494 5 769 27 773
Net asset values
– 2015 (R’000) 1 721 199 387 531 952 499
– 2014 (R’000) 1 549 260 212 910 948 002
Asset carrying value
– 2015 (R’000) 2 286 243 812 812 1 578 078
– 2014 (R’000) 2 125 074 366 947 1 625 317
Liabilities carrying value
– 2015 (R’000) 565 044 425 281 625 579
– 2014 (R’000) 575 814 154 037 677 315
Additions to property,
plant and equipment
– 2015 (R’000) 43 128 2 887 4 571
– 2014 (R’000) 14 140 13 350 252
Tangible assets
– 2015 (R’000) 65 828 19 069 11 310
– 2014 (R’000) 34 800 10 939 14 620
BPO, Training
and Financial Emergent
Services business*** Sub-total
Revenue
– 2015 (R’000) 307 674 29 950 13 318 518
– 2014 (R’000) 317 586 14 173 11 796 904
Internal revenue
– 2015 (R’000) 38 684 3 737 119 659
– 2014 (R’000) 23 747 6 580 82 493
Operating profit/(loss)
– 2015 (R’000) 49 966 (12 374) 637 854
– 2014 (R’000) 42 555 (19 070) 516 143
Normalised* EBITDA excluding
share-based payments, lease
smoothing, establishment and
transaction costs
– 2015 (R’000) 59 324 (8 320) 756 405
– 2014 (R’000) 52 070 (19 130) 614 129
Normalised* EBITDA margin
excluding share-based payments,
lease smoothing, establishment
and transaction costs
– 2015 (%) 19,3% 0,0% 5,7%
– 2014 (%) 16,4% 0,0% 5,2%
Normalised* EBITDA excluding
share-based payments, lease-
smoothing, establishment and
transaction costs, contribution
% to Group Normalised* EBITDA
– 2015 (%) 8,9% (1,2%) 113,2%
– 2014 (%) 9,6% (3,5%) 112,8%
Depreciation and amortisation
– 2015 (R’000) 6 676 3 651 111 366
– 2014 (R’000) 986 1 513 87 194
Interest income
– 2015 (R’000) 13 148 37 57 162
– 2014 (R’000) 12 423 20 63 632
Interest expense
– 2015 (R’000) (6 043) (8 372) (91 109)
– 2014 (R’000) (3 258) (6 498) (61 791)
Taxation expense/(income)
– 2015 (R’000) 9 051 295 57 943
– 2014 (R’000) 3 544 (855) 72 725
Net asset values
– 2015 (R’000) 238 773 8 659 3 308 661
– 2014 (R’000) 256 314 10 548 2 977 034
Asset carrying value
– 2015 (R’000) 282 880 14 934 4 974 947
– 2014 (R’000) 304 049 18 270 4 439 657
Liabilities carrying value
– 2015 (R’000) 44 107 6 275 1 666 286
– 2014 (R’000) 47 735 7 722 1 462 623
Additions to property, plant
and equipment
– 2015 (R’000) 3 858 1 361 55 805
– 2014 (R’000) 1 490 5 478 34 710
Tangible assets
– 2015 (R’000) 5 540 3 775 105 522
– 2014 (R’000) 4 753 4 649 69 761
Group central costs
Central Shared
costs services Total
Revenue
– 2015 (R’000) 4 090 (210) 13 322 398
– 2014 (R’000) 5 459 52 11 802 415
Internal revenue
– 2015 (R’000) – 378 120 037
– 2014 (R’000) – – 82 493
Operating profit/(loss)
– 2015 (R’000) (163 767) (19 100) 454 987
– 2014 (R’000)
(219 056) 4 786 301 873
Normalised* EBITDA excluding
share-based payments, lease
smoothing, establishment and
transaction costs
– 2015 (R’000) (81 386) (6 551) 668 468
– 2014 (R’000) (75 666) 5 918 544 381
Normalised* EBITDA margin excluding
share-based payments, lease smoothing,
establishment and transaction costs
– 2015 (%) 0,0% 0,0% 5,0%
– 2014 (%) 0,0% 0,0% 4,6%
Normalised* EBITDA excluding share-
based payments, lease-smoothing,
establishment and transaction costs,
contribution % to Group Normalised*
EBITDA
– 2015 (%) (12,2%) (1,0%) 100,0%
– 2014 (%) (13,9%) 1,1% 100,0%
Depreciation and amortisation
– 2015 (R’000) 2 264 – 113 630
– 2014 (R’000) 7 032 – 94 226
Interest income
– 2015 (R’000) (44 775) 149 12 536
– 2014 (R’000) (53 926) 175 9 881
Interest expense
– 2015 (R’000) (3 729) (8 514) (103 352)
– 2014 (R’000) (13 471) (3 062) (78 324)
Taxation expense/(income)
– 2015 (R’000) 28 334 – 86 277
– 2014 (R’000) 20 904 – 93 629
Net asset values
– 2015 (R’000) (811 200) (32 429) 2 465 032
– 2014 (R’000) (847 185) (32 269) 2 097 580
Asset carrying value
– 2015 (R’000) 364 092 5 589 5 344 628
– 2014 (R’000) 243 562 8 837 4 692 056
Liabilities carrying value
– 2015 (R’000) 1 175 292 38 018 2 879 596
– 2014 (R’000) 1 090 747 41 106 2 594 476
Additions to property, plant
and equipment
– 2015 (R’000) 760 530 57 095
– 2014 (R’000) 4 478 3 926 43 114
Tangible assets
– 2015 (R’000) 4 545 2 358 112 425
– 2014 (R’000) 5 719 5 314 80 794
South
International** Africa Total
Revenue
– 2015 (R’000) 3 986 797 9 335 601 13 322 398
– 2014 (R’000) 3 470 309 8 332 106 11 802 415
Internal revenue
– 2015 (R’000) – 120 037 120 037
– 2014 (R’000) – 82 493 82 493
Operating profit/(loss)
– 2015 (R’000) 117 265 337 722 454 987
– 2014 (R’000) 111 808 190 065 301 873
Normalised* EBITDA excluding
share-based payments, lease
smoothing, establishment and
transaction costs
– 2015 (R’000) 160 348 508 120 668 468
– 2014 (R’000) 141 746 402 635 544 381
Normalised* EBITDA margin
excluding share-based payments,
lease smoothing, establishment
and transaction costs
– 2015 (%) 4,0% 5,4% 5,0%
– 2014 (%) 4,1% 4,8% 4,6%
Normalised* EBITDA excluding
share-based payments, lease-
smoothing, establishment and
transaction costs, contribution
% to Group Normalised* EBITDA
– 2015 (%) 24,0% 76,0% 100,0%
– 2014 (%) 26,0% 74,0% 100,0%
Depreciation and amortisation
– 2015 (R’000) 43 083 70 547 113 630
– 2014 (R’000) 14 203 80 023 94 226
Interest income
– 2015 (R’000) 2 655 9 881 12 536
– 2014 (R’000) 11 107 (1 226) 9 881
Interest expense
– 2015 (R’000) 17 840 85 512 (103 352)
– 2014 (R’000) (22 584) (55 740) (78 324)
Taxation expense/(income)
– 2015 (R’000) 6 674 79 604 86 277
– 2014 (R’000) (2 730) 96 359 93 629
Net asset values
– 2015 (R’000) 704 235 1 760 797 2 465 032
– 2014 (R’000) (504 469) 2 602 049 2 097 580
Asset carrying value
– 2015 (R’000) 1 631 538 3 713 090 5 344 628
– 2014 (R’000) 1 430 496 3 261 560 4 692 056
Liabilities carrying value
– 2015 (R’000) 927 303 1 952 293 2 879 596
– 2014 (R’000) 1 934 965 659 511 2 594 476
Additions to property, plant
and equipment
– 2015 (R’000) 7 126 49 969 57 095
– 2014 (R’000) 2 678 40 436 43 114
Tangible assets
– 2015 (R’000) 17 532 94 893 112 425
– 2014 (R’000) 7 494 73 300 80 794
* Normalised earnings is defined as operating profit adjusted for
depreciation, amortisation of intangibles, share-based payments, lease
smoothing, business establishment and once-off transaction costs
relating to acquisitions.
** International represents operations in Africa, Australia and Asia
Pacific regions.
*** Relate to businesses being developed in order to address changing
global trends and the Group’s strategic objectives (example: Adfusion).
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 Group’s 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 reviewed consolidated
provisional group results of the Group and Company for the year ended
28 February 2015.
Notwithstanding the events subsequent to the reporting period disclosed
below, no other adjustments have been made to the pro forma financial
information.
The directors are responsible for compiling the pro forma financial
information on the basis of the applicable criteria specified in the JSE
Listings Requirements.
* The pro forma financial information as shown in the statement of
normalised earnings should be read in conjunction with the unmodified
Deloitte & Touche independent reporting accountants’ report thereon, which
is available for inspection at Adcorp’s registered office.
Statement of consolidated normalised earnings
For the year ended 28 February 2015
Year to Year to
28 Feb 28 Feb
2015 2014 %
Note R’000 R’000 change
Revenue 1 13 322 398 11 802 415 13
Cost of sales 1 (11 126 945) (9 891 844) (12)
Gross Profit 1 2 195 452 1 910 571 15
Other income 1 101 895 81 603 25
Administrative marketing,
selling and operating
expenses 1 (1 842 361) (1 690 301) (9)
Operating profit 1 454 986 301 873 51
Adjusted for:
Depreciation 2 32 815 28 596 15
Amortisation of intangible
asset acquired in business
combination 2 61 083 47 795 28
Amortisation of intangibles
other than those acquired
in business combination 19 732 17 835 11
Share-based payments 2 80 724 143 945 (44)
Lease smoothing 2 322 561 (42)
Establishment and
transaction costs 5 18 805 3 776 -
Normalised EBITDA
(excluding share-based
payments, lease smoothing,
establishment and
transaction costs) 668 468 544 381 23
Adjusted for:
Depreciation 2 (32 815) (28 596) (15)
Amortisation of intangibles
other than those acquired
in a business combination 2 (19 732) (17 835) (11)
Normalised operating profit 615 921 497 950 24
Net interest paid (90 816) (68 442) (33)
Normalised profit before
taxation 525 105 429 508 22
Normalised taxation 3 (103 471) (107 169) 3
Normalised profit for the year 421 634 322 339 31
Share of profits from
associates 29 778 33 718 (12)
Non-controlling interests 342 2 515 –
Total normalised profit for
the year 451 754 358 572 26
Normalised earnings per share
– cents 4 436.8 384.3 14
Diluted normalised earnings
per share – cents 4 411.5 359.9 14
Weighted average No of shares
– 000’s 1 103 415 93 299 11
Diluted weighted average No of
shares – 000’s 1 109 788 99 723 10
Notes:
1 As per the reviewed statement of comprehensive income for the year
ended 28 February 2015.
2 As per the reviewed statement of cash flows for the year ended
28 February 2015.
3 The taxation expense has been adjusted for the adjusted items above.
4 Per share calculation is based on normalised earnings.
5 Being once-off establishment and transaction costs incurred pursuant to
the establishment of international corporate offices and the acquisition
of Kelly Group Limited. The prior year costs refer to the acquisition of
Labour Solutions Australia as per the notes to the
audited annual financial statements for the year ended 28 February 2014.
Comments
Overview
The financial year ended February 2015 has been an extremely positive and
rewarding one for the Adcorp Group, both in terms of financial performance
and strategic achievement.
Group revenues increased by 13% to R13,3 billion whilst normalised
earnings before interest, tax, depreciation and amortisation (EBITDA) of
R668,5 million were 23% ahead of the prior year’s comparable figure.
Normalised earnings per share of 436,8 cents were 14% ahead of the prior
year’s figure whilst headline earnings per share of 298,5 cents were up
58%.
The Group’s cash performance has been outstanding and substantially better
than in the previous year. In this regard, the Group’s cash conversion
ratio increased to a creditable 91% compared to the disappointing
conversion ratio of 48% achieved in the prior financial year.
This has had the impact of significantly decreasing gearing from a prior
level of 37% to a more comfortable level of 28%, despite using cash
resources in the funding of certain acquisitions.
Also encouraging is the margin performance whereby the Group’s normalised
EBITDA margin increased to 5,0% (2014: 4,6%). This improved margin is in
part reflective of the enhanced back office efficiencies achieved by the
Group’s shared service centre which is starting to deliver cost,
efficiency and scale advantage.
South Africa
The revised Labour Relations Act (LRA) has now been passed into law. These
long anticipated new labour laws have created an element of ambiguity in
the labour market as employers grapple with their interpretation of these
laws and develop appropriate responses to dealing with their requirements.
In some instances, this has advantaged the Group in that we have been able
to assist clients and gain volumes accordingly whilst, in others,
particularly in the white collar contracting space, volumes have been
negatively impacted as clients have opted to take contract workers on
permanently.
Despite the uncertain environment and generally slow response of clients
to these legislative changes, the Group’s contracting businesses continued
to perform well in the financial year under review, delivering strong
earnings and margin growth.
As has been the trend for some years, the blue collar businesses turned in
a strong result as did the white collar contracting business.
The performance of the professional services businesses was largely in
line with management’s expectations.
The normalised EBITDA contribution from BPO, training and financial
services was higher than in the prior year due largely to an improvement
in training, which was partially offset by a decline in profitability in
FMS as a result of a significant downward price revision of a major
contract as reported last year.
During the year, Adcorp acquired Kelly Group Limited (“Kelly”) for a total
purchase consideration of R248 million. The company was subsequently
delisted from the Johannesburg Stock Exchange and was consolidated with
the Group’s results with effect from 1 December 2014.
Management focus is now on the integration of the operations of Kelly with
those of Adcorp. In this regard, a project team has been established to
ensure that this integration happens systematically, professionally and
delivers the best possible business outcome.
It is anticipated that this integration project will be completed by the
end of August 2015.
International
The Group’s international operations now contribute a significant one
third of normalised profit with a target to increase to 45% in the new
financial year.
The Group’s African operations which focus predominantly in the areas of
mining, oil, gas, exploration and related infrastructure development,
continued to show good operational growth.
Australian independent IT contracting business, Paxus, performed in line
with expectations and is currently benefitting from an improved IT
employment market.
Indian associate IT solutions business, Nihilent, in which the Group owns
a 35% stake, performed exceptionally well although year-on-year profit
growth was negatively affected due to the reversal of a provision in the
prior year that was no longer required. Excluding the effect of this
one-off provision reversal which favoured prior year profits, the business
achieved strong earnings growth at an operational level.
Included in the results for the year are the results of Labour Solutions
Australia (LSA) which was acquired by Adcorp in December 2013.
The business has integrated well into the Group, is performing in line
with expectations and has achieved good growth for the year. LSA is an
important component of the Group’s Asia Pacific portfolio and is
positioned as the launch pad for the Group’s blue collar ambitions in
Australia.
During the year under review, the Group registered a company and
established a physical presence in Singapore which will serve as the hub
for the Group’s international expansion.
A project is currently underway to establish the implications and means by
which, the Group’s non-South African assets could be held via this
Singapore entity. In this way, the Group will be in a better position to
collateralise these assets in order to consolidate its off-shore
treasury function to best advantage in order to seek sources of capital to
fund the Group’s international growth strategy with a planned listing of
these portfolio assets, possibly in Singapore or such other suitable
international exchange in 2018, in order to tap into those capital
markets.
This strategy should advantage Adcorp’s existing shareholders as it has
the potential to unlock value regarding the Group’s non-South African
assets which currently attract a relatively low market rating compared to
their significantly higher rated international peer group, possibly the
result of the rating’s drag associated with the uncertainty created by
recent changes to labour legislation in South Africa.
Raising capital in these markets is also more cost effective and efficient
than tapping into traditional South African sources of funding and has the
added advantage of providing a natural currency hedge.
This strategy is in line with the Group’s intended objective of becoming a
player of consequence, focused on emerging markets and the Southern
Hemisphere and in particular, Africa, the Asia Pacific regions and the
Middle East.
General
As previously reported, the Group has invested in creating a cost
effective and efficient shared service capability with the ability to
service the Group’s operations on the same back office platform anywhere
in the world.
To this end, where practical, transactional processes and procedures have
been optimised in line with global best practices, have been standardised
across the Group and have been automated in conjunction with an upgrade of
the Group’s ERP system to the latest version of Microsoft Dynamics AX.
In addition, the Group has established a shared service centre, much of
which has been outsourced and off-shored to Indian service provider,
Genpact.
After some initial teething challenges, this back office architecture has
settled down well and is starting to deliver with regard to economies of
scale, cost control, operational efficiencies, cash management,
procurement, enhanced corporate governance, better accounting and internal
controls and now offers the Group a compelling strategic advantage.
As recently announced, Adcorp has entered into a strategic partnership
with Singapore based APBA Pte Ltd. Given the recency of the investment, it
has been recorded at face value.
Invested across a number of Asian countries including Singapore, Hong
Kong, China, Taiwan and Japan, APBA offers comprehensive services in
recruitment, human resource consulting, payroll outsourcing, as well as
various outsourced human resource functions.
In terms of this strategic partnership, Adcorp will have a financial
involvement with APBA that will assist in accelerating the growth of its
business in the region and also includes the possible future participation
by Adcorp in the equity of that business.
The strategic tie up with APBA provides cross-selling and information
sharing opportunities and, importantly, also enables Adcorp to offer
clients unique solutions across Africa, the Asia Pacific region and the
Middle East in a number of important industry sectors such as oil and gas,
health care, infrastructure, hospitality, ICT, telecoms and manufacturing.
Financial overview
Headline earnings per share of 298,5 cents are 58% higher than the 188,6
cents per share for the comparative prior year. This is as a consequence
of the first full year inclusion of the contribution from LSA, the three
month inclusion of the contribution from Kelly and as previously reported,
the non-repetition of the International Financial Reporting Standards
(IFRS) requirement that R87 million be expensed as a once-off non cash
flow share based payment charge to the prior year profits arising from the
2013 BBBEE deal.
Given the above accounting treatment and other IFRS non-cash flow charges
to profit and loss, the Group has consistently disclosed that it’s 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 earnings per share of 436,8 cents for the year ended 28
February 2015 were 14% ahead of the 384,3 cents per share for the
comparative year as a result of continued increased contributions from the
blue and white collar businesses and acquisitive effect of the first full
year inclusion of the Australian business LSA and the three month
inclusion of Kelly.
Pleasing to note is that the gross profit margins improved to 16,5% (2014:
16,2%).
The Group’s Normalised EBITDA margin was 5,0% (2014: 4,6%). Improvements
in EBITDA margins are attributable to the traditional blue collar staffing
businesses, the inclusion of LSA and lower expense growth. The Group’s
organic normalised EBITDA margin was 5,5% (2014: 5,1%) for the year under
review, while the year-on-year increase in organic normalised EBITDA was
14%.
The Group’s overall normalised effective tax rate reduced to 20% (2014:
25%) mainly as a result of a reversal of a tax provision no longer
required in Australia coupled to tax deductions claimed in respect of
registered learnerships in compliance with the Income Tax Act albeit at
lower levels than previous years and various other non-taxable items.
Cash management remains a priority for management and, as such, the cash
conversion ratio was 91% (2014: 48%). Total Group days settlement
outstanding (DSO) totalled 47 days which improved from the 48 days
reported for the previous financial year end. Excluding Kelly, Group DSO
would have totalled 46 days. This result was achieved in the context of
the continued challenging collections environment. Given this improved
working capital management, the overall level of gearing improved to 28%
from 37% in the prior year.
During the current year, the Group incurred a 33% increase in respect of
net finance charges, mainly as a result of higher levels of business
activity, higher prevailing interest rates and tighter credit markets.
In light of a strengthened financial position, while remaining fully
compliant with debt covenants, the Board has resolved to declare a final
cash dividend of 88 cents per share (2014: 80 cents per share), the
details of which appear more fully below.
Acquisition of business
As referred to above, the acquisition of Kelly was concluded with effect
from 1 December 2014 and was funded by a combination of shares issued
and cash resources. As such, it has been included in Group profits for
three months of this financial year. In terms of IAS 34 Interim Financial
Reporting requirements, the profit before tax from Kelly
included in Group net profit before tax for the year ended February 2015
is R15,0 million after taking account of non-cash flow IFRS charges and
acquisition-related transactions costs.
Group Company
Reviewed Audited Reviewed Audited
2015 2014 2015 2014
R’000 R’000 R’000 R’000
Total purchase
consideration
for all business
combinations 250 642 268 691 – 204 030
Less: previously held
associate (1 019) – – –
Less: cash and cash
equivalents acquired (69 596) (10 010) – –
Net purchase
consideration for all
business combinations 180 027 258 681 – 204 030
Cash outflow on
acquisition of
businesses
Net proceeds from issue
of shares 180 027 258 681 – 204 030
Issue of ordinary shares (212 925) (254 844) (212 925) (254 844)
Raising of equity on
acquisition (213 421) (256 041) (213 421) (256 041)
Capitalisation of
transaction costs 496 1 197 496 1 197
Cash (inflow)/outflow on
acquisition of businesses (32 898) 3 837 (212 925) (50 814)
The fair value of the assets and liabilities acquired in respect of the
various acquisitions in the year is as follows:
2015 2014
R’000 Kelly Other Total Total
Property and equipment 10 023 10 10 033 3 173
Intangible assets 142 530 – 142 530 78 479
Investment in associate 1 019 – 1 019 –
Deferred tax asset 21 601 953 22 554 1 680
Taxation 414 64 478 –
Trade and other receivables 283 275 4 135 287 410 35 426
Doubtful debts provisions (19 463) – (19 463) –
Cash and cash equivalents 67 800 1 796 69 596 10 010
Non-controlling interest – – – 249
Non-current liabilities – – – (998)
Interest bearing liabilities (120 746) – (120 746) –
Trade and other payables (153 806) (4 587) (158 393) (28 781)
Provisions (12 000) – (12 000) –
Deferred taxation – – – (18 051)
220 647 2 371 223 018 81 187
Resulting goodwill on acquisition 26 924 700 27 624 187 504
Total consideration 247 571 3 071 250 642 268 691
In complying with purchase accounting IFRS 3: Business Combinations, the
Group determined the fair value of the assets and liabilities acquired
on the acquisition of businesses as above.
The resulting difference between the identified tangible assets and
liabilities was attributable to acquired intangibles and goodwill. Details
of the resulting goodwill arising on the business combination are set out
above.
The rationale for the acquisition of Kelly was based on greater
penetration into large corporate clients and the ability to better service
the existing client base.
The Group acquired control of Kelly by way of acceptance of the offer to
acquire the entire issued share capital of Kelly, excluding the Kelly
shares held by subsidiaries of Kelly, by way of scheme of arrangement
between Kelly and Kelly shareholders.
The goodwill in Kelly arose because the cost of the combination included a
control premium. In addition, the consideration paid for the combination
effectively included amounts in relation to the benefit of expected
synergies, revenue growth and future market development.
These benefits are not recognised separately from goodwill because they do
not meet the recognition criteria for identifiable intangible assets.
No goodwill amount will be deductible for tax purposes.
In addition, the Group undertook other minor transactions viz: the
acquisition of the balance of 47,5% in Klatrade 2007 Proprietary Limited
and the acquisition of the balance of 55% in Sizano Staffing Services
Proprietary Limited. These transactions were funded out of working capital
and their contributions to Group revenues and profits is considered
immaterial.
Basis of preparation
The Group’s condensed consolidated and separate financial results are
prepared in accordance with the Listings Requirements for provisional
reports and the requirements of the Companies Act of South Africa. The
Listings Requirements require that the provisional financial statements
are prepared in accordance with the conceptual framework, the measurement
and recognition requirements of International Financial Reporting
Standards (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 as a minimum,
requires that they contain the information required by IAS 34 Interim
Financial Reporting.
The accounting policies were derived in terms of IFRS and are consistent
with the accounting policies applied in the preparation of the Group’s
previous consolidated and separate annual financial statements, even after
the adoption of applicable new standards which had no impact.
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 R8 million (2014: R7,6 million) on behalf of the
Group to creditors. As at the balance sheet date the Group has outstanding
operating lease commitments totalling R186,1 million (2014: R171,7
million) in non-cancellable property leases. The Group has IT capital
commitments contracted for of R2,7 million (2014: R2,9 million) relating
to the Microsoft Dynamix AX 2012 upgrade and other IT related projects.
Changes to the board of Adcorp and the Company Secretary
As reported previously, Mr Campbell Bomela retired as an executive
director on 30 June 2014. The board expresses gratitude to him for his
services to the Group.
As disclosed in a SENS announcement on 8 May 2015, pursuant to the
resignation of Ms L Mojela as alternate director, Ms N Sihlangu was
appointed as an alternate director to Ms NS Ndhlazi and Ms GP Dingaan.
As detailed in a SENS announcement on 16 January 2015, Mr Kevin Fihrer was
appointed to the role of Company Secretary with effect from 1 February 2015.
Declaration of final dividend
Notice is hereby given that a final gross dividend of 88 cents per share
(2014: 80 cents per share) for the year ended 28 February 2015 was
declared on Tuesday, 26 May 2015, 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, 28 August 2015
Date trading commences “ex” dividend Monday, 31 August 2015
Record date Friday, 4 September 2015
Date of payment Monday, 7 September 2015
Ordinary share certificates may not be dematerialised or rematerialised
between Monday, 31 August 2015 and Friday, 4 September 2015, both days
inclusive.
Shareholders who are not exempt from the Dividend Witholding Tax (DWT) of
15% will therefore receive a net dividend of 74,8 cents per share. The
Company has 109 370 800 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 change 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 on Monday,
7 September 2015.
Events after the reporting date
Subsequent to the financial year end, the Group has concluded a
transaction which will bolster Adcorp’s Asia Pacific footprint.
As recently announced, Adcorp has acquired specialist Australian oil and
gas recruiter, Dare Holdings Pty Limited, for an estimated AU$30 million
dependent on the future earnings achieved by that business.
Established in 1988, the business is a provider of qualified and
experienced engineering and technical skills on a contract and permanent
basis to local and international clients in the oil and gas sector,
based in Perth and focusing primarily on the West Australian market.
Dare is extremely well positioned in the Australian market, has exposure
to a fundamental industry sector of the Australian economy, has a well-
established and experienced management team, long standing global customer
relationships, a stable track record of financial growth and strong cash
generative characteristics.
The acquisition has been funded out of increased debt facilities extended
by the Group’s Asia Pacific banking partners, Westpac Banking Corporation,
as well as by the Group’s existing and future cash flows generated in
Australia.
The acquisition provides a platform for expansion of Dare into Africa, the
Asia Pacific region and the Middle East on the back of its established
global customer relationships as well as in collaboration with Adcorp’s
existing African operations and recently established Asian presence. There
are also opportunities to expand the business to the Australian East Coast
market as well as into the blue collar oil and gas skills space in
conjunction with fellow subsidiary, LSA.
The inclusion of Dare as part of the greater Adcorp Group is another big
step forward in realising the strategic objective of becoming a player
of consequence focused primarily on Africa, the Asia Pacific regions and
the Middle East.
Auditor’s report
The results have been reviewed by the independent auditors, Deloitte &
Touche, and a copy of their unmodified review report is available for
inspection at the registered office of the Company, Adcorp Office Park,
corner William Nicol and Wedgewood Link, Bryanston. The review was
performed in accordance with ISRE2410 Review of Interim Financial
Information Performed by the Independent Auditor of the Entity. Any
reference to future financial performance included in this announcement
has not been reviewed or reported on by the Company’s auditors.
The auditor’s report does not necessarily report on all of the information
contained in this announcement. Shareholders are therefore advised that in
order to obtain a full understanding of the nature of the auditor’s
engagement they should obtain a copy of that report together with the
accompanying financial information from the issuer’s registered office.
Outlook and prospects
Generally, employment prospects in South Africa remain relatively stagnant
in line with sluggish economic growth.
Against this background, the recently revised South African labour laws
appear to have resulted in ambiguity as employers grapple with their
interpretation of these laws as well as with appropriately compliant
staffing models.
Despite this, volume gains are possible due to the likely prospect of
market share gains for the bigger, more established and reputable
providers such as Adcorp in what is now, a far more complex labour
environment. Also favouring the Group is the accelerated adoption by
clients of more sophisticated procurement models which strongly favours a
business such as Adcorp.
Overall, however, it is likely that the new laws will impact volumes
negatively in South Africa in the short term, particularly with regard to
the white collar contracting business where certain clients have indicated
their preference away from contract workers in favour of permanent hires.
Accordingly, management is focused on minimising the profit effect of
these anticipated volume declines by reducing related operating costs in
order to right size those operations likely to be affected by reduced
volumes.
With some exceptions, the Group’s South African blue collar, professional
services, BPO, training and financial services businesses are generally
expected to be relatively unaffected by the recent changes to labour laws
and are well positioned for growth.
The Australian operations of LSA, Paxus and recently acquired Dare, are
all positioned to perform well as are the Group’s African operations and
Indian associate company, Nihilent.
The cross selling opportunities that exist in the Group, present
tangible opportunities for growth and position the Group uniquely to
service multi-national clients across Africa, the Asia Pacific regions and
the Middle East. In this regard, management has established Group- wide
Centres of Excellence (“COE’s”) focused in key industry verticals
including oil and gas, health care, infrastructure, hospitality, ICT,
telecoms and manufacturing in order to explore these multi-national
selling opportunities.
The Group’s back office architecture provides a solid platform from
which to reap cost and operational efficiencies and also offers a unique
opportunity to extract efficiencies from future acquisitions.
The International strategy as described, holds significant promise. Much
traction has been gained in a relatively short timeframe. This includes
the establishment of a Singapore office, the acquisition of Dare, the
funding of this acquisition purely from external sources of capital raised
in that jurisdiction, the entering into of a strategic
partnership with Singapore based APBA as well as the progress made to date
in simplifying the holding structure of the Group’s non-South African
assets.
These initiatives and the traction gained to date, all bode well for the
prospect of listing the Group’s non-South African assets possibly in
Singapore in 2018 which would remain a subsidiary of the existing Adcorp
Group. This has the potential for a value uplift in line with
international market ratings of similar such assets and, as such, has
the flow through potential to benefit existing Adcorp shareholders,
accordingly.
Management’s attention remains focused on progressing the Group’s
International strategy, integrating the operations of Kelly, bedding down
the Dare acquisition, promoting inter-Group cross-selling opportunities,
further enhancing cost and operational efficiencies, minimising the
negative volume impact of the revised South African labour laws, ensuring
compliance with the new South African BBBEE Codes of Good Practice,
further enhancing cash collections and optimising margin management.
Whilst the Group certainly faces some challenges in the South African
market related mainly to the recent changes to labour legislation, a
stagnant labour market and sluggish economic growth, the bold strategic
initiatives put in place by management over the past years in response to
these impending challenges and in an effort to mitigate any associated
downside and to capitalise on related opportunities are now paying off as
are the benefits associated with the Group’s now well diversified
geographic spread and service offerings.
This year, the Adcorp Group celebrates 40 years since coming into
existence. The next few years should prove equally as exciting, eventful
and rewarding for the Group as it works towards achieving its ambitious
yet, eminently attainable strategic goals.
This general forecast has not been reviewed or reported on by the
Group’s auditors.
By order of the board
MJN Njeke
Chairman
RL Pike
Chief Executive Officer
AM Sher
Chief Financial Officer
26 May 2015
Corporate information
Executive directors
BE Bulunga, 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, SN Mabaso-Koyana, TDA Ross, MW Spicer
Alternate non-executive directors
C Maswanganyi, N Sihlangu
Physical address
Adcorp Office Park
Nicolway Bryanston
Cnr William Nicol Drive and Wedgewood Link
Bryanston, 2021
PO Box 70635, Bryanston, 2021
Tel: 011 244 5300
Fax: 011 244 5310
Email: cfo@adcorp.co.za
Website: www.adcorp.co.za
Registration number 1974/001804/06
Company secretary
KH Fihrer
Transfer secretaries
Link Market Services SA (Pty) Ltd
Rennie House
13th Floor
19 Ameshoff Street
Braamfontein
Sponsor
Deloitte & Touche Sponsor Services (Pty) Ltd
Building 8, Deloitte Place
The Woodlands
20 Woodlands Drive
Woodmead, Sandton
2146
Date: 26/05/2015 12:45:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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