Wrap Text
Audited summary consolidated and separate provisional results for the year ended 29 February 2016
Adcorp Holdings Limited
(“Adcorp” or “Adcorp Group” or “the Group”)
Registration number 1974/001804/06
Share code: ADR
ISIN number: ZAE000000139
Audited summary consolidated and separate provisional results
for the year ended 29 February 2016
Salient features
* Revenue for the year increased by 17% to R15,6 billion
* Normalised earnings per share increased by 4% to 365,3 cents per share*
* Operating profit for the year increased by 2% to R464,8 million
* Normalised EBITDA for the year decreased by 7% to R621,5 million
* Earnings per share decreased by 19% to 192 cents per share
* Headline earnings per share increased by 0,4% to 299,6 cents per share
* Debtors days at 47 days (2015: 47 days)
* Cash conversion ratio of 87%
* Gearing ratio at 43% (2015: 28%)
* Kelly Group Limited (Kelly) fully integrated
* Dare (Australia) acquired for R266 million
* Final dividend declared of 75 cents per share (2015: 88 cents per share)
Audited summarised consolidated and separate statement of
comprehensive income
for the year ended 29 February 2016
Group Company
Audited Audited
2016 2015 2016 2015
R’000 R’000 R’000 R’000
Revenue 15 585 751 13 322 398 – 4 090
Cost of sales (13 069 007) (11 126 945) – (3 677)
Gross profit 2 516 744 2 195 453 – 413
Other income 128 325 101 895 644 –
Administration expenses (1 233 713) (968 366) (15 834) (21 336)
Marketing and selling
expenses (685 545) (664 791) (2 303) –
Other operating expenses (261 044) (209 204) – –
Operating profit/(loss) 464 767 454 987 (17 493) (20 923)
Interest received 23 669 12 536 100 783 77 986
Interest paid (133 722) (103 352) (98 653) (75 379)
Dividend received – – 510 000 166 863
Gain on bargain purchase 3 999 – – –
Impairment of intangible
assets and goodwill (34 721) (65 014) – –
Impairment of investment –
available-for-sale (54 922) – – –
Share of profits from
associates 23 078 29 778 – –
Loss on sale of business (30 056) – – –
(Loss)/profit on the sale
of shares (361) 371 – 371
(Loss)/profit on the sale of
property and equipment (991) 1 173 – –
Profit before taxation 260 740 330 479 494 637 148 918
Taxation (53 930) (86 277) (4 099) 3 191
Profit for the year 206 810 244 202 490 538 152 109
Other comprehensive income*
Exchange differences on
translating foreign
operations 106 445 (5 488) – –
Realised foreign exchange
gains realised through
profit and loss on
disposal of business 7 734 – – –
Exchange differences arising
on the net investment of a
foreign operation 63 456 (15 122) 63 456 (15 122)
Fair value adjustment of
derivative financial
instrument (580) (2 366) – 25
Non-controlling interest 862 342 – –
Other comprehensive
income/(loss) for the
year, net of tax 177 917 (22 634) 63 456 (15 097)
Total comprehensive
income for the year 384 727 221 568 553 994 137 012
Profit attributable to:
Owners of the parent 207 672 244 544 490 538 152 109
Non-controlling interest (862) (342) – –
Total comprehensive income
attributable to:
Owners of the parent 384 727 221 568 553 994 137 012
Non-controlling interest (862) (342) – –
Earnings per share
Basic (cents) 192,0 236,5 – –
Diluted (cents) 185,4 222,7 – –
Approved dividends to
shareholders 148 140 – –
Interim dividend (cents) 60 60 – –
Final dividend (cents) in
respect of prior year 88 80 – –
Calculation of headline
earnings
Profit for the year 207 672 244 544 – –
Loss/(profit) on the sale of
property and equipment 991 (1 173) – –
Taxation (278) 328 – –
Impairment of intangible
assets and goodwill 34 721 65 014 – –
Gain on bargaining
purchase (3 999) – – –
Impairment of investments
available-for-sale 54 922 – – –
Loss on sale of business 30 056 – – –
Headline earnings 324 085 308 713 – –
Headline earnings per
share
Headline earnings per
share – cents 299,6 298,5 – –
Diluted headline earnings
per share – cents 289,3 281,2 – –
Weighted average number
of shares – 000’s 108 189 103 415 – –
Diluted weighted average
number of shares – 000’s 112 008 109 788 – –
* All items below will be reclassified to profit and loss upon
derecognition.
Audited summarised consolidated and separate statement of
financial position
as at 29 February 2016
Group Company
Audited Audited
2016 2015 2016 2015
R’000 R’000 R’000 R’000
Assets
Non-current assets 2 636 416 2 326 188 1 213 838 1 579 871
Property and equipment 137 796 112 425 – –
Intangible assets 753 170 611 752 – –
Goodwill 1 513 633 1 304 170 – –
Investments 10 000 7 800 10 000 –
Investment – available-for-
sale – 42 288 – –
Investment in subsidiaries – – 1 203 838 1 574 642
Investment in associates 125 249 102 171 – –
Deferred taxation 96 568 145 582 – 5 229
Current assets 3 741 744 3 018 440 2 875 075 1 696 591
Trade, other receivables and
prepayments 2 795 262 2 315 813 1 591 3 846
Other financial assets 29 728 – – –
Amounts due by subsidiary
companies – – 2 868 245 1 691 082
Taxation prepaid 70 690 22 526 4 745 1 454
Cash resources 846 064 680 101 494 209
Total assets 6 378 160 5 344 628 4 088 913 3 276 462
Equity and liabilities
Capital and reserves 2 685 301 2 465 032 2 450 289 2 035 838
Share capital 2 749 2 733 3 170 3 154
Share premium 1 738 109 1 718 856 1 738 109 1 718 856
Treasury shares (36 963) (12 990) – –
Non-distributable reserve – – 119 918 119 918
Share-based payment reserve 121 787 114 581 121 787 114 581
Foreign currency translation
reserve 110 737 (3 442) – –
Cash flow hedging reserve (2 971) (2 391) – –
Accumulated profit 757 363 650 806 467 305 79 329
Equity attributable to
equity holders of the parent 2 690 811 2 468 153 2 450 289 2 035 838
Non-controlling interest (6 186) (4 042) – –
BEE shareholders interest 676 921 – –
Non-current liabilities 1 507 324 1 150 262 879 407 697 373
Other non-current liabilities
– interest-bearing 650 1 210 – –
Long-term loan – interest-
bearing 1 349 502 859 417 857 322 697 373
Derivative financial
instruments 4 245 3 416 – –
Share-based payment
liability 38 625 151 672 – –
Obligation under finance
lease 668 2 448 – –
Deferred taxation 113 634 132 099 22 085 –
Current liabilities 2 185 535 1 729 334 759 217 543 251
Non-interest-bearing current
liabilities 1 527 822 1 209 818 255 856 252 983
Trade and other payables 1 188 716 933 123 3 111 1 673
Amounts due to subsidiary
companies – – 252 745 248 453
Provisions 281 186 245 313 – –
Other vendor payables 26 078 12 619 – –
Taxation 31 842 18 763 – 2 857
Interest-bearing current
liabilities 657 713 519 516 503 361 290 268
Current portion of other
non-current liabilities 15 170 12 077 – –
Short-term loans 274 382 398 463 223 361 220 269
Bank overdraft 368 161 108 976 280 000 69 999
Total equity and liabilities 6 378 160 5 344 628 4 088 913 3 276 462
Audited summarised consolidated and separate statement of cash flows
for the year ended 29 February 2016
Group Company
Audited Audited
2016 2015 2016 2015
R’000 R’000 R’000 R’000
Operating activities
Profit/(loss) before
taxation and dividends 260 740 330 479 (15 363) (17 945)
Adjusted for:
Dividend received – – 510 000 166 863
Depreciation 35 962 32 815 – –
Gain on bargain purchase (3 999) – – –
Impairment of intangible
assets and goodwill 34 721 65 014 – –
Loss on sale of business 30 056 – – –
Impairment of investment –
available-for-sale 54 922 – – –
Share of profits from
associates* (23 078) (29 778) – –
Loss on repurchase of “A”
shares 361 – – –
Amortisation of intangibles 105 831 80 815 – –
Amortisation of intangibles
– acquired in a business
combination 77 486 61 083 – –
Amortisation of intangibles
– other than those acquired
in a business combination 28 345 19 732 – –
Loss/(profit) on disposal of
property and equipment 991 (1 173) – –
Share-based payments (31 164) 80 724 – –
Share-based payment expense 43 514 64 801 – –
Revaluation of share-based
payment liability (74 678) 15 923 – –
Unrealised foreign exchange
gain (11 859) – – –
Revaluation of foreign
exchange denominated
intercompany loan – (15 122) – (15 122)
Non-cash portion of
operating lease rentals 1 781 322 – –
Exchange differences on
translating foreign
operations – (5 488) – –
Foreign currency adjustment
to goodwill – 15 388 – –
Other movement in
distributable reserves – (1 404) – –
Interest received (23 669) (12 536) (100 783) (77 986)
Interest paid 133 722 103 352 98 653 75 379
Cash generated from operations
before working capital changes 565 318 643 408 492 507 131 189
(Increase)/decrease in trade
and other receivables and
prepayments (343 661) 38 764 2 255 3 091
Increase in bad debt
provision (1 861) (45 561) – –
Increase in other financials
assets (29 728) – – –
Increase/(decrease) in trade
and other payables 126 090 (58 233) 1 438 (3 046)
Increase in provisions 37 148 19 372 – –
Net movement in holding and
fellow subsidiaries'
intercompany accounts – – (709 319) (390 914)
Cash generated/(utilised) by
operations 353 306 597 750 (213 119) (259 680)
Interest received 23 669 12 536 100 783 77 986
Interest paid (133 722) (103 352) (98 653) (75 379)
Cash settlement of share
options exercised (74 678) (69 883) – –
Taxation paid (110 296) (90 678) (5 019) (1 454)
Dividend paid (164 571) (87 973) (166 018) (88 314)
Net cash (utilised)/
generated by
operating activities (106 292) 258 400 (382 026) (346 841)
Investing activities
Additions to property,
equipment and intangible
assets (102 331) (69 390) – –
Proceeds from sale of
property and equipment 13 821 3 855 – –
Acquisition of businesses (267 214) (180 027) – –
Deferred taxation of
financial derivative – 1 025 – –
Net proceeds on the sale of
business 6 953 – – –
Acquisition of investment (10 000) (4 270) (10 000) –
Dividends received from
associates – 14 561 – –
Minority interest (1 282) (684) – –
Investment – available-for-
sale – (42 288) – –
Net cash utilised from
investing activities (360 053) (277 218) (10 000) –
Financing activities
Issue of shares under
employee share option scheme 19 269 19 038 19 269 19 038
Issue of shares pursuant to
acquisitions – 212 925 – 212 925
Treasury shares acquired (23 973) – – –
Net proceeds on repurchase
of “A” shares (607) – – –
Equity due to change in
control – (2 783) – –
Long-term loans raised 490 085 135 662 159 949 200 637
Short-term loan raised – 66 130 3 092 4 364
Short-term loan repaid (122 768) (97 117) – –
Other non-current liabilities –
interest-bearing (2 341) (657) – –
Increase/(decrease) in other
payables 13 458 (14 182) – –
Net cash generated by
financing activities 373 123 319 016 182 310 436 964
Net increase in cash and
cash equivalents (93 222) 300 198 (209 716) 90 123
Cash and cash equivalents at
the beginning of year 571 125 270 927 (69 790) (159 913)
Cash and cash equivalents at
the end of the year 477 903 571 125 (279 506) (69 790)
* Prior year amount has been reclassified from investing activities
to operating activities.
Total interest-bearing liabilities of the Group
for the year ended 29 February 2016
Group
Audited
2016 2015
R’000 R’000
Net gearing 43% 28%
Net bank balances (477 903) (571 125)
Other long-term loans 650 1 210
Long-term loan 1 349 502 859 417
Obligations under finance lease 668 2 448
Current portion of other non-current liabilities 15 170 12 077
Short-term loans 274 382 398 463
Total interest-bearing liabilities 1 640 372 1 273 615
Total net interest-bearing liabilities 1 162 469 702 490
Total long-term debt 82% 68%
Total short-term debt 18% 32%
Total 100% 100%
Financial instruments
Some of the Group’s financial assets and financial liabilities are
measured at fair value at the end of each reporting year.
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).
Group Company
Audited Audited
Financial assets/financial 2016 2015 2016 2015
liabilities R’000 R’000 R’000 R’000
Investment – available-for-
sale – 42 288 – –
Investment 10 000 – 10 000 –
Trade and other receivables 2 795 262 2 315 813 1 591 –
Other financial assets 29 728 – – –
Amounts due by subsidiary
companies – – 2 868 245 1 691 082
Cash resources 846 064 680 101 494 209
Other non-current
liabilities – interest
bearing 650 1 210 – –
Long-term loan – interest
bearing 1 349 502 859 417 857 322 697 373
Derivative financial
instrument 4 245 3 416 – –
Share-based payment
liability 38 625 151 672 – –
Obligation under finance
lease 668 2 448 – –
Trade and other payables
(excluding VAT) 1 037 189 793 833 3 111 1 673
Amounts due to subsidiary
companies – – 252 745 248 453
Other vendor payables 26 078 12 619 – –
Current portion of other
non-current liabilities 15 170 12 077 – –
Short-term loans 274 383 398 463 223 361 220 269
Bank overdraft 368 161 108 976 280 000 69 999
Financial assets/financial Fair value Valuation technique(s)
liabilities hierarchy and key inputs
Investment – available-for-sale Level 3 Fair value – Directors'
valuation
Investment Level 3 Fair value – Directors'
valuation
Trade and other receivables Level 3 Face value less specific-
related provision
Other financial assets Level 3 Fair value – Directors'
valuation
Amounts due by subsidiary
companies Level 3 Face value less specific
related provision
Cash resources Level 3 Face value
Other non-current liabilities
– interest bearing Level 2 Amortised cost plus
accrued interest
Long term loan – interest Level 2 Amortised cost plus
bearing accrued interest
Derivative financial instrument Level 2 Fair value – Discounted
cash 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
Share-based payment liability Level 2 Fair value – Standard
present value model
Obligation under
finance lease Level 2 Amortised cost plus
accrued interest
Trade and other
payables (excluding
VAT) Level 3 Expected settlement
value
Amounts due to
subsidiary Level 3 Face value less
specific-related
provision companies
Other vendor payables Level 3 Fair value – Standard
present value model
Current portion of
other non-current liabilities Level 2 Amortised cost plus
accrued interest
Short-term loans Level 2 Amortised cost plus
accrued interest
Bank overdraft Level 3 Face value
Relationship
of inputs
Significant to
Financial assets/financial unobservable unobservable
liabilities input(s) fair value
Investment – available-for-sale n/a n/a
Investment n/a n/a
Trade and other receivables n/a n/a
Other financial assets n/a n/a
Amounts due by subsidiary companies n/a n/a
Cash resources n/a n/a
Other non-current liabilities –
interest bearing n/a n/a
Long term loan – interest bearing n/a n/a
Derivative financial instrument n/a n/a
Share-based payment liability n/a n/a
Obligation under finance lease n/a n/a
Trade and other payables (excluding
VAT) n/a n/a
Amounts due to subsidiary companies n/a n/a
Other vendor payables n/a n/a
Current portion of other non-current
liabilities n/a n/a
Short-term loans n/a n/a
Bank overdraft n/a n/a
Audited summarised consolidated and separate statement of changes
in equity
for the year ended 29 February 2016
Share Share Treasury
capital premium shares
R’000 R’000 R’000
Group
Balance as at 28 February 2014 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 – – –
Balance as at 28 February 2015 2 733 1 718 856 (12 990)
Issue of ordinary shares under employee
share option plan 16 19 253 –
Dividend distributions – – –
Recognition of BBBEE and staff share-based
payments – – –
Treasury shares acquired during the year – – (23 973)
Movement in BEE shareholders' interest – – –
Profit for the year – – –
Other comprehensive income/(loss) for the
year – – –
Realised foreign exchange gains realised
through profit and loss on disposal of
business – – –
Minority interest – – –
Balance as at 29 February 2016 2 749 1 738 109 (36 963)
Company
Balance as at 28 February 2014 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 income/(loss) for the
year – – –
Balance as at 28 February 2015 3 154 1 718 856 –
Issue of ordinary shares under employee
share option plan 16 19 253 –
Dividend distributions – – –
Recognition of BBBEE and staff share-based
payments – – –
Profit for the year – – –
Other comprehensive income for the year – – –
Balance as at 29 February 2016 3 170 1 738 109 –
Share- Foreign
Non- based currency
distributable payment translation
reserve reserve reserve
R’000 R’000 R’000
Group
Balance as at 28 February 2014 – 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 – – –
Balance as at 28 February 2015 – 114 581 (3 442)
Issue of ordinary shares under
employee share option plan – – –
Dividend distributions – – –
Recognition of BBBEE and staff
share-based payments – 7 206 –
Treasury shares acquired during the
year – – –
Movement in BEE shareholders'
interest – – –
Profit for the year – – –
Other comprehensive income/(loss)
for the year – – 106 445
Realised foreign exchange gains
realised through profit and loss on
disposal of business – – 7 734
Minority interest – – –
Balance as at 29 February 2016 – 121 787 110 737
Company
Balance as at 28 February 2014 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 income/(loss)
for the year – – –
Balance as at 28 February 2015 119 918 114 581 –
Issue of ordinary shares under
employee share option plan – – –
Dividend distributions – – –
Recognition of BBBEE and staff
share-based payments – 7206 –
Profit for the year – – –
Other comprehensive income for the
year – – –
Balance as at 29 February 2016 119 918 121 787 –
Cash flow Attributable to
hedging Retained equity holders
reserve earnings of the parent
R’000 R’000 R’000
Group
Balance as at 28 February 2014 (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)
Balance as at 28 February 2015 (2 391) 650 806 2 468 153
Issue of ordinary shares under
employee share option plan – – 19 269
Dividend distributions – (164 571) (164 571)
Recognition of BBBEE and staff
share-based payments – – 7 206
Treasury shares acquired during the
year – – (23 973)
Movement in BEE shareholders'
interest – – –
Profit for the year – 207 672 207 672
Other comprehensive income/(loss) (580) 63 456 169 321
for the year
Realised foreign exchange gains
realised through profit and loss on
disposal of business – – 7 734
Minority interest – – –
Balance as at 29 February 2016 (2 971) 757 363 2 690 811
Company
Balance as at 28 February 2014 (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 income/(loss)
for the year 25 (15 122) (15 097)
Balance as at 28 February 2015 – 79 329 2 035 838
Issue of ordinary shares under
employee share option plan – – 19 269
Dividend distributions – (166 018) (166 018)
Recognition of BBBEE and staff
share-based payments – – 7 206
Profit for the year – 490 538 490 538
Other comprehensive income for
the year – 63 456 63 456
Balance as at 29 February 2016 – 467 305 2 450 289
Non- BEE
controlling shareholders’
interest interest Total
R’000 R’000 R’000
Group
Balance as at 28 February 2014 (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)
Balance as at 28 February 2015 (4 042) 921 2 465 032
Issue of ordinary shares under
employee share option plan – – 19 269
Dividend distributions – – (164 571)
Recognition of BBBEE and staff
share-based payments – – 7 206
Treasury shares acquired during the
year – – (23 973)
Movement in BEE shareholders'
interest – (245) (245)
Profit for the year (862) – 206 810
Other comprehensive income/(loss)
for the year – – 169 321
Realised foreign exchange gains
realised through profit and loss on
disposal of business – – 7 734
Minority interest (1 282) – (1 282)
Balance as at 29 February 2016 (6 186) 676 2 685 301
Company
Balance as at 28 February 2014 – – 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)
Scrip distribution – – –
Recognition of BBBEE and staff
share-based payments – – 7 206
Profit for the year – – 152 109
Other comprehensive income/(loss)
for the year – – (15 097)
Balance as at 28 February 2015 – – 2 035 838
Issue of ordinary shares under
employee share option plan – – 19 269
Dividend distributions – – (166 018)
Recognition of BBBEE and staff
share-based payments – – 7 206
Profit for the year – – 490 538
Other comprehensive income for
the year – – 63 456
Balance as at 29 February 2016 – – 2 450 289
Audited summarised consolidated segment report
for the year ended 29 February 2016
Admini-
strative
Industrial (White Professional
(Blue collar) collar) services
External revenue
– 2016 (R’000) 8 074 971 2 382 548 4 785 485
– 2015 (R’000) 7 230 582 1 723 567 4 026 745
Internal revenue
– 2016 (R’000) 71 354 90 038 –
– 2015 (R’000) 38 624 38 614 –
Operating profit/(loss)
– 2016 (R’000) 385 618 79 775 113 454
– 2015 (R’000) 407 156 90 346 102 760
Normalised EBITDA,
excluding share-based
payments, lease smoothing,
establishment and
transaction costs
– 2016 (R’000) 407 406 95 142 157 319
– 2015 (R’000) 455 478 99 430 150 493
Normalised EBITDA margin,
excluding share-based
payments, lease smoothing,
establishment and
transaction costs
– 2016 (%) 5,0 4,0 3,3
– 2015 (%) 6,3 5,8 3,7
Normalised EBITDA,
excluding share-based
payments, lease smoothing,
establishment and
transaction costs,
contribution % to
Group normalised EBITDA
– 2016 (%) 65,5 15,3 25,3
– 2015 (%) 68,1 14,9 22,5
Depreciation and
amortisation
– 2016 (R’000) 43 322 27 238 47 381
– 2015 (R’000) 41 625 16 391 43 023
Interest income
– 2016 (R’000) 40 808 8 980 2 486
– 2015 (R’000) 15 246 25 398 3 333
Interest expense
– 2016 (R’000) (53 044) (1 366) (17 795)
– 2015 (R’000) (41 815) (22 257) (12 622)
Taxation
expense/(income)
– 2016 (R’000) 38 292 (8 573) 2 247
– 2015 (R’000) 37 475 2 496 8 626
Net asset values
– 2016 (R’000) 1 719 987 262 379 745 847
– 2015 (R’000) 1 721 199 387 531 952 499
Asset carrying value
– 2016 (R’000) 2 319 393 511 739 1 107 499
– 2015 (R’000) 2 286 243 812 812 1 578 078
Liabilities carrying
value
– 2016 (R’000) 599 406 249 360 361 652
– 2015 (R’000) 565 044 425 281 625 579
Additions to property
and equipment
– 2016 (R’000) 14 119 4 731 14 766
– 2015 (R’000) 43 128 2 738 4 571
Tangible assets
– 2016 (R’000) 76 666 11 065 21 070
– 2015 (R’000) 65 828 19 069 11 310
BPO, training
and candidate Emergent
benefits business*** Sub-total
External revenue
– 2016 (R’000) 340 757 64 15 583 825
– 2015 (R’000) 307 674 29 950 13 318 518
Internal revenue
– 2016 (R’000) 68 459 – 229 851
– 2015 (R’000) 38 684 3 737 119 659
Operating profit/(loss)
– 2016 (R’000) 54 969 (5 031) 628 785
– 2015 (R’000) 49 966 (12 374) 637 854
Normalised EBITDA, excluding
share-based payments, lease
smoothing, establishment and
transaction costs
– 2016 (R’000) 59 394 (5 001) 714 260
– 2015 (R’000) 59 324 (8 320) 756 405
Normalised EBITDA margin,
excluding share-based payments,
lease smoothing, establishment
and transaction costs
– 2016 (%) 17,4 – 4,6
– 2015 (%) 19,3 – 5,7
Normalised EBITDA, excluding
share-based payments, lease
smoothing, establishment and
transaction costs, contribution
% to Group normalised EBITDA
– 2016 (%) 9,6 (0,8) 114,9
– 2015 (%) 8,9 (1,2) 113,2
Depreciation and amortisation
– 2016 (R’000) 8 193 108 126 242
– 2015 (R’000) 6 676 3 651 111 366
Interest income
– 2016 (R’000) 15 791 24 68 089
– 2015 (R’000) 13 148 37 57 162
Interest expense
– 2016 (R’000) (7 946) – (80 151)
– 2015 (R’000) (6 043) (8 372) (91 109)
Taxation expense/(income)
– 2016 (R’000) 9 215 43 41 224
– 2015 (R’000) 9 051 295 57 943
Net asset values
– 2016 (R’000) 236 932 1 341 2 966 486
– 2015 (R’000) 238 773 8 659 3 308 661
Asset carrying value
– 2016 (R’000) 317 044 713 4 256 388
– 2015 (R’000) 282 880 14 934 4 974 947
Liabilities carrying value
– 2016 (R’000) 80 112 (628) 1 289 902
– 2015 (R’000) 44 107 6 275 1 666 286
Additions to property and equipment
– 2016 (R’000) 2 961 – 36 577
– 2015 (R’000) 3 858 1 361 55 656
Tangible assets
– 2016 (R’000) 5 702 62 114 565
– 2015 (R’000) 5 540 3 775 105 522
Central Shared
costs services Total
External revenue
– 2016 (R’000) 1 007 919 15 585 751
– 2015 (R’000) 4 090 (210) 13 322 398
Internal revenue
– 2016 (R’000) – 1 777 231 628
– 2015 (R’000) – 378 120 037
Operating profit/(loss)
– 2016 (R’000) (147 802) (16 216) 464 767
– 2015 (R’000) (163 767) (19 100) 454 987
Normalised EBITDA, excluding share-
based payments, lease smoothing,
establishment and transaction costs
– 2016 (R’000) (97 706) 4 967 621 521
– 2015 (R’000) (81 386) (6 551) 668 468
Normalised EBITDA margin, excluding
share-based payments, lease smoothing,
establishment and transaction costs
– 2016 (%) – – 4,0
– 2015 (%) – – 5,0
Normalised EBITDA, excluding share
based payments, lease-smoothing,
establishment and transaction costs,
contribution % to Group normalised
EBITDA
– 2016 (%) (15,7) 0,8 100,0
– 2015 (%) (12,2) (1,0) 100,0
Depreciation and amortisation
– 2016 (R’000) 15 551 – 141 793
– 2015 (R’000) 2 264 – 113 630
Interest income
– 2016 (R’000) (44 426) 6 23 669
– 2015 (R’000) (44 775) 149 12 536
Interest expense
– 2016 (R’000) (39 977) (13 594) (133 722)
– 2015 (R’000) (3 729) (8 514) (103 352)
Taxation expense/(income)
– 2016 (R’000) 12 706 – 53 930
– 2015 (R’000) 28 334 – 86 277
Net asset values
– 2016 (R’000) (336 817) 42 968 2 672 637
– 2015 (R’000) (811 200) (32 429) 2 465 032
Asset carrying value
– 2016 (R’000) 1 898 139 97 336 6 251 863
– 2015 (R’000) 364 092 5 589 5 344 628
Liabilities carrying value
– 2016 (R’000) 2 234 956 54 368 3 579 226
– 2015 (R’000) 1 175 292 38 018 2 879 596
Additions to property and equipment
– 2016 (R’000) 20 194 6 838 63 609
– 2015 (R’000) 760 530 56 946
Tangible assets
– 2016 (R’000) 18 087 5 144 137 796
– 2015 (R’000) 4 545 2 358 112 425
South
International** Africa Total
External revenue
– 2016 (R’000) 5 778 324 9 807 427 15 585 751
– 2015 (R’000) 3 986 797 9 335 601 13 322 398
Internal revenue
– 2016 (R’000) – 231 628 231 628
– 2015 (R’000) – 120 037 120 037
Operating profit/(loss)
– 2016 (R’000) 90 794 373 973 464 767
– 2015 (R’000) 117 265 337 722 454 987
Normalised EBITDA, excluding
share-based payments, lease
smoothing, establishment and
transaction costs
– 2016 (R’000) 164 313 457 208 621 521
– 2015 (R’000) 160 348 508 120 668 468
Normalised EBITDA margin,
excluding share-based payments,
lease smoothing, establishment
and transaction costs
– 2016 (%) 2,8 4,7 4,0
– 2015 (%) 4,0 5,4 5,0
Normalised EBITDA, excluding
share-based payments, lease
smoothing, establishment and
transaction costs, contribution
% to Group normalised EBITDA
– 2016 (%) 26,4 73,6 100,0
– 2015 (%) 24,0 76,0 100,0
Depreciation and amortisation
– 2016 (R’000) 62 797 78 996 141 793
– 2015 (R’000) 43 083 70 547 113 630
Interest income
– 2016 (R’000) 19 422 4 247 23 669
– 2015 (R’000) 2 655 9 881 12 536
Interest expense
– 2016 (R’000) (25 157) (108 565) (133 722)
– 2015 (R’000) (17 840) (85 512) (103 352)
Taxation expense/(income)
– 2016 (R’000) 41 275 12 655 53 930
– 2015 (R’000) 6 673 79 604 86 277
Net asset values
– 2016 (R’000) 1 187 827 1 484 812 2 672 639
– 2015 (R’000) 704 235 1 760 797 2 465 032
Asset carrying value
– 2016 (R’000) 2 412 658 3 839 206 6 251 864
– 2015 (R’000) 1 631 538 3 713 090 5 344 628
Liabilities carrying value
– 2016 (R’000) 1 224 831 2 354 394 3 579 225
– 2015 (R’000) 927 303 1 952 293 2 879 596
Additions to property and equipment
– 2016 (R’000) 15 303 48 306 63 609
– 2015 (R’000) 7 126 49 820 56 946
Tangible assets
– 2016 (R’000) 42 410 95 386 137 796
– 2015 (R’000) 17 532 94 893 112 425
* Normalised earnings is defined as operating profit adjusted for depreciation,
amortisation of intangibles, lease smoothing and once-off transaction costs
relating to acquisitions. Previously, the Group reported normalised earnings
after adjusting for share-based payments and establishment costs relating,
inter alia, to the establishment of the Group’s international operations.
** 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.
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 29 February 2016.
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, issued on 24 May 2016, which is available
for inspection at Adcorp’s registered office.
Statement of consolidated normalised earnings
for the year ended 29 February 2016
Year to Year to
29 Feb 28 Feb
2016 2015 %
Note R’000 R’000 Change
Revenue 1 15 585 751 13 322 398 17
Cost of sales 1 (13 069 007) (11 126 945) (17)
Gross profit 1 2 516 744 2 195 453 15
Other income 1 128 325 101 895 26
Administrative marketing,
selling and operating
expenses 1 (2 180 302) (1 842 361) (18)
Operating profit 1 464 767 454 987 2
Adjusted for:
Depreciation 2 35 962 32 815 10
Amortisation of intangible
asset acquired in a business
combination 2 77 486 61 083 27
Amortisation of intangibles
other than those acquired in
a business combination 28 345 19 732 44
Share-based payments 2 (31 164) 80 724 (139)
Lease smoothing 2 1 781 322 453
Establishment and transaction
costs 5 44 344 18 806 136
Normalised EBITDA (excluding
share-based payments, lease
smoothing, establishment and
transaction costs) 621 521 668 469 (7)
Adjusted for:
Depreciation 2 (35 962) (32 815) (10)
Amortisation of intangibles
other than those acquired in
a business combination 2 (28 345) (19 732) (44)
Normalised operating profit 557 214 615 922 (10)
Net interest paid (110 053) (90 816) (21)
Normalised profit before
taxation 447 161 525 106 (15)
Normalised taxation 3 (76 125) (103 471) 26
Normalised profit for the
year 371 036 421 635 (12)
Share of profits from
associates 23 078 29 778 (23)
Non-controlling interests 862 342 –
Total normalised profit for
the year 394 976 451 755 (13)
Normalised earnings per share
– cents 4 365.1 436.8 (16)
Diluted normalised earnings
per share – cents 4 352.6 411.5 (14)
Weighted average number of
shares – 000’s 1 108 189 103 415 5
Diluted weighted average
number of shares – 000’s 1 112 008 109 788 2
Calculation of modified
normalised earnings
Total normalised profit for
the year – as above 394 976 451 755
Share-based payments 2 31 164 (80 724)
Establishment costs 5 (30 906) (8 390)
Modified normalised profit
for the year 395 234 362 641
Modified normalised earnings
per share – cents 6 365.3 350.7 4
Modified diluted normalised
earnings per share – cents 6 352.9 330.3 7
Notes:
1 As per the audited statement of comprehensive income for the year
ended 29 February 2016.
2 As per the audited statement of cash flows for the year ended
29 February 2016.
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 the Group’s international operations and the
acquisition of Dare Holdings Proprietary Limited. The prior year costs
refer to the acquisition of Kelly Group Limited as per the notes to the
audited annual financial statements for the year ended 28 February 2015.
6 Modified normalised earnings per share is calculated as normalised
operating profit, as shown above, after eliminating the effect of the
net share-based payment expense and business establishment costs,
which will be the new basis for reporting normalised earnings
going forward.
Statement of consolidated normalised earnings*
for the year ended 29 February 2016
Pro forma Pro forma
year to year to
29 February 28 February
2016 2015 %
R’000 R’000 change
Revenue 15 585 751 13 322 398 17
Cost of sales (13 069 007) (11 126 945) (17)
Gross profit 2 516 744 2 195 453 15
Other income 128 325 101 895 26
Administrative, marketing, selling
and operating expenses (2 180 302) (1 842 361) (18)
Operating profit 464 767 454 987 2
Adjusted for:
Depreciation 35 962 32 815 10
Amortisation of intangible assets 105 831 80 815 31
– acquired in a business combination 77 486 61 083 27
– other than those acquired in a
business combination 28 345 19 732 44
Share-based payments (31 164) 80 724 –
Share-based payment expense 36 308 57 595 (37)
2013 BBBEE deal – IFRS 2 non-cash
flow, share-based payment expense 7 206 7 206 –
Revaluation of share-based payment
liability (74 678) 15 923 –
Lease smoothing 1 781 322 –
Business establishment and
transaction costs* 44 344 18 806 136
Business establishment 30 906 8 390 268
Transaction costs 13 438 10 416 29
Normalised EBITDA (excluding share-
based payments, lease smoothing,
establishment and transaction costs) 621 521 668 469 (7)
Adjusted for:
Depreciation (35 962) (32 815) 10
Amortisation of intangibles other
than those acquired in a business
combination (28 345) (19 732) 44
Normalised operating profit 557 214 615 922 (10)
Net interest paid (110 053) (90 816) (21)
Normalised profit before tax 447 161 525 106 (15)
Normalised taxation (76 125) (103 471) 26
Normalised operating profit for the
year 371 036 421 635 (12)
Share of profits from associates 23 078 29 778 (23)
Non-controlling interest 862 342 –
Total normalised profit for the year
– previously reported basis 394 976 451 755 (13)
Weighted average number of shares –
000’s 108 189 103 415 5
Diluted weighted average number of
shares – 000’s 112 008 109 788 2
Normalised earnings per share –
previously reported basis (cents) 365,1 436,8 (16)
Diluted normalised earnings per share
– previously reported basis (cents) 352,6 411,5 (14)
Calculation of modified normalised
earnings
Total normalised profit for the year
– as above 394 976 451 755 –
Adjusted for:
Share-based payment expense* 31 164 (80 724) –
Establishment costs* (30 906) (8 390) –
Modified normalised profit for the
year 395 234 362 641 9
Modified normalised earnings per 365,3 350,7 4
share – (cents)*
Modified diluted normalised earnings
per share – (cents) 352,9 330,3 7
* Normalised earnings is defined as operating profit adjusted for
depreciation, amortisation of intangibles, lease smoothing and once-off
transaction costs relating to acquisitions. Previously, the Group
reported normalised earnings after adjusting for share-based payments
and establishment costs relating, inter alia, to the establishment of
the Group’s international operations.
** 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 accountant’s report thereon,
issued on 24 May 2016, which is available for inspection at Adcorp’s
registered office.
Comments
Overview
During the financial year ended 29 February 2016, the long awaited, substantial
changes to South African labour legislation were introduced.
These new laws impacted volumes negatively in Adcorp’s core South African market
whereby a significant number of contract staff were either taken on as permanent
employees of the client or simply had their contracts of employment terminated.
Despite these lost volumes, Group revenues increased by 17% to R15,6 billion
in the financial year under review. Part of this revenue growth was due to the
inclusion of acquisitions, the Kelly Group in South Africa and Dare in Australia.
In response to the net loss of volumes referred to, the Group embarked on a major
operational restructure during the year, focused on shedding costs and attracting
new business which offset a significant amount of the negative impact of these
lost volumes.
Consequently, headline earnings per share of 299,6 cents were marginally ahead of
the prior year’s comparable figure of 298,5 cents whilst normalised earnings per
share of 365,3 cents were 4% up on the 350,7 cents in the prior year.
The Group’s cash performance has once again been positive. In this regard, the
Group’s cash conversion ratio was a creditable 87% compared to the Group’s target
conversion ratio of 80%, excluding the impact of foreign exchange translation gains
in working capital levels. This was achieved despite the continued challenging
collections environment.
South Africa
The passing of the new Labour Relations Act (LRA) initially led to a high degree
of uncertainty in the South African market resulting in a knee jerk reaction from
a number of prominent clients.
The resultant negative impact on volumes whereby a significant number of contract
staff were either taken on as permanent employees of the client or simply had their
contracts of employment terminated, was higher than was anticipated due largely to
an element of ambiguity in the interpretation of these laws by employers.
The main source of this ambiguity related to the status of contract workers, earning
below a certain threshold and employed by Temporary Employment Service providers (TES).
In question was the status of these employees after an initial three-month
contracting period.
This was clarified in a milestone Labour Court ruling in September 2015 whereby the
court found that, after this initial three-month contracting period, the TES retains
the employment contract and that the client becomes a concurrent employer with the TES
for the purposes of the LRA. Accordingly, both parties need to ensure compliance with
the LRA in a co-employment relationship.
Subsequent to this ruling, much stability has returned to the TES
market. As a consequence, there has been a relatively strong recovery in volumes, albeit
not yet to the levels achieved prior to the new legislation.
Also, this lower level of business activity affected margins negatively whereby the
EBITDA margin achieved in the South African business was 4,7% compared to the 5,4%
EBITDA margin achieved in the prior year.
Margins should continue to improve and retrace previous levels as volumes continue
to recover.
In this regard, the Group has achieved some important client wins in the MSP (master
service provider) and RPO (recruitment process outsourcing) space which will assist
greatly in the recovery of lost volumes as well as some sizeable market share gains
in an otherwise relatively stagnant South African labour market.
The integration of the operations of the Kelly Group is now complete and, although
Kelly’s white-collar operations were similarly negatively affected by the recent
changes to South African labour laws, the acquisition will benefit the Group
going forward.
Rest of Africa, Asia and Australia
Australian IT specialist, Paxus, produced a solid performance, recording real
earnings growth in its local currency. Specifically, the contracting side of the
business is performing particularly well whilst permanent placements which have
been under pressure for a number of years, have recovered well.
Earnings in respect of Australian blue-collar business, Labour Solutions Australia
(LSA), were lower than in the prior year due in part to an increase in costs incurred
in positioning the business optimally for growth.
Also affecting profits was the slower than expected uptake of a sizeable new
client contract which has now commenced and will position LSA well for growth
in the new financial year.
The Group’s Australian operations were bolstered by the acquisition of oil and
gas focused business, Dare, in May 2015.
The acquisition of Dare coincided with a significant decline in the global oil
price which meant that the business reported a lower than expected profit for
the period being affected by a radical, global scaling back of the industry in
response to this dramatic drop in the price of oil.
Despite this, Dare has integrated well into the Group and has identified a number
of potentially lucrative cross-selling and collaborative opportunities with other
businesses within the Adcorp Group.
Also negatively impacted by the decline in global oil prices was the Group’s
African business beyond South Africa’s borders which has a high dependency on
the oil and gas industry.
The global oil and gas industry remains an important industry sector of focus
for the Group, offering up much potential, even at the current lower energy prices.
Accordingly, the Group has adopted a global approach to acquiring business in this
industry sector given the advantage the Group has in terms of its extended
geographic reach.
Indian associate IT solutions business, Nihilent, in which the Group owns a 34,6%
stake, had a difficult year, being negatively impacted by a reduction in business
emanating from South Africa, as well as the weakened South African Rand which
affected its margins negatively. The share of profits from associates was R23,1
million (2015: R29,8 million).
The business has indicated its desire to pursue an initial public offer (IPO) in India
and, in this regard has registered a prospectus with a view to listing the company
towards the latter part of this year or early in 2017.
As previously reported, the Group has established a physical presence in Singapore
which now serves as the hub for the Group’s international expansion.
The Group has made good progress in terms of raising capital in the international
markets necessary to fund the Group’s international growth strategy with a view to
potentially listing the Group’s international portfolio assets in three to four
years’ time. A separate announcement has been issued by the Group in this regard.
This strategy should advantage Adcorp’s existing shareholders as it has the
potential to unlock meaningful value from the Group’s non-South African assets.
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, Asia, Australia and the Middle East.
General
Over the recent years, the global workforce management and staffing industry
has seen the rapid adoption of innovative, new delivery models, the adoption
of potentially disruptive technologies, as well as a number of innovative approaches
to the client interface. Coupled with this, is the imperative to remain operationally
excellent and cost competitive.
Over the past years, Adcorp has invested extensively in new technologies and
methodologies in expanding its global footprint and in streamlining its
operating model.
This foresight has now been rewarded in the current, relatively tough global
economic environment.
Much progress has been achieved in developing 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.
In addition, the Group has adopted a far more client centric approach to selling
and is particularly well positioned in the industry in its markets of choice.
This is evidenced by some important and sizeable client-wins achieved over the
past year, in multiple jurisdictions, across various industry sectors and against
respected global competition.
Financial overview
Headline earnings per share of 299,6 cents are 0,4% higher than the
298,5 cents per share for the comparative prior year. As reported at half-year,
this is primarily due to the negative revenue impact and
lower headcount volumes emanating from certain South African clients’
reaction to the new legislative landscape.
The first full year inclusion of the contribution from Kelly, the ten-month
inclusion of the contribution from Dare and the extensive restructuring and
cost rationalisation served to partly offset the negative impact of significantly
lower volumes.
Earnings per share of 192,0 cents per share are 19% lower than the 236,5 cents
per share for the comparative year. In addition to the negative revenue impact
referred to earlier, the Group incurred an impairment of its investment held for
sale of R54,9 million (2015: Nil) as discussed below, other goodwill impairments
of R34,7 million (2015: R65,0 million) and a loss on the sale of the Group’s UK
business of R30,1 million (2015: Nil). Additionally as a part offset and as a
direct consequence of the year-end prevailing share price, the revaluation of
the share-based payment liability gave rise to a net credit of R31,2 million
which was recognised in profit and loss.
In order to establish a meaningful footprint in Asia, the Group bought an option
to acquire a stake in the business of APBA Pte Limited (“APBA”) for SGD4.8 million
in 2015. APBA is a business which is well represented across the region. For the
purposes of considering its investment in APBA, Adcorp has been furnished with an
independent valuation of APBA, which has primarily been based on management’s
future financial projections. This independent valuation would imply that Adcorp’s
investment in APBA of R54.9 million is well covered. However, due to the uncertain
nature of financial forecasting, as well as Adcorp’s inability to substantiate or
validate management’s financial projections, the Board currently considers it prudent
to impair this asset fully. Should value be realised on this investment in future,
it will accordingly be recognised as profit at that stage.
Given a number of 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.
In order to enhance disclosure, the Group has modified its methodology of presenting
normalised earnings. In the determination of normalised earnings, the net share-based
payment expense is no longer adjusted for while the amount attributable to transaction
and establishment costs reflects only those direct costs incurred in the pursuit and
implementation of corporate activity.
On the basis where the treatment of the share-based payment expense and transaction
and establishment costs have been modified, NEPS increased from 350,7 cents per share
to 365,3 cents per share. The main contributing factor giving rise to the adjustments
is attributable to the revaluation of the share-based payment liability. This is as a
result of the lower prevailing share price as at the financial year-end. Going forward,
the Group intends to adopt and report using the restated methodology so as to ensure
comparability and consistency.
The previously reported normalised earnings per share (NEPS) of 365,1 cents for the
year ended 29 February 2016 were 16% below the 436,8 cents per share for the comparative
year. These earnings were impacted by challenging business conditions arising from a
strained economic environment and the lower level of volumes described above.
Gross profit margin levels remained relatively stable despite changes in business mix.
The overall expense ratio increased marginally from 13,8% to 14,0% evidencing good cost
containment achieved against the backdrop of an extensive group-wide restructuring
programme of integration and rightsizing. The Group’s normalised EBITDA margin was
4,0% (2015: 5,0%).
The Group’s overall normalised effective tax rate reduced to 17% (2015: 20%) mainly
as a result of the utilisation and recognition of the tax losses of the various entities
within the Group.
Given the working capital intensive nature of the business, the cash to cash cycle
(working capital management) is a key and crucial metric. To this extent, the cash
conversion ratio was 87%. Days settlement outstanding (DSO) totalled 47 days
(2015: 47 days). These statistics were achieved in the context of higher Rand values
attributable to receivables arising from the devaluation of the Rand against foreign
currencies and the inclusion of other financial assets as receivables. If the above-
mentioned items were included, the actual cash conversion ratio in the current year
is 63% (2015: 97%).
Given the utilisation of Australian Dollar-denominated debt to fully finance the
acquisition of Dare, the overall level of gearing increased to 43% from the 28%
previously reported. From a Group perspective, while the gearing ratio is higher
than the average reported in past years, management is confident that returns in
excess of the cost of debt coupled to debt serviceability can be achieved.
Additionally, the Group benefits from the natural hedge whereby operating profits
exceed the associated debt service costs in the international portfolio. For the
reasons stated above, as well as higher prevailing interest rates and tighter credit
markets, the Group incurred a 21% increase in respect of net finance charges.
During the period under review and in compliance with the authority granted by
shareholders at the previous annual general meeting, the Group acquired 1 million
ordinary shares in the open market at an average price of R23,97. The number of
ordinary shares held by a wholly owned subsidiary totals 1 571 826 (2015: 571 826).
The Board may revisit additional share buy-back activity as and when deemed
appropriate.
In light of the financial position while remaining fully compliant with debt
covenants and the solvency and liquidity requirements of the Companies Act,
the Board has resolved to declare a final cash dividend of 75 cents per share
(2015: 88 cents per share), the details of which appear more fully below.
Acquisition of business
As referred to above, the acquisition of Dare was concluded with effect
from 7 May 2015. As such, it has been included in Group profits for ten
months of this financial year. The profit after tax from Dare included in
Group net profit after tax for the year ended February 2016, is R25,7 million
after taking account of non-cash flow IFRS charges and acquisition-related
transaction costs. Had the business combination been effective from 1 March 2015,
the revenue of the Group would have been R15,8 billion and net profit after
tax would have totalled R211,9 million. The directors of the Group consider
these numbers to represent an approximate measure of the performance of the
combined Group on an annualised basis and to provide a reference point for
comparison in future periods.
Group Company
2016 2015 2016 2015
R’000 R’000 R’000 R’000
Total purchase consideration
for all business combinations 284 146 250 642 – –
Less: investment converted into
subsidiary (7 800) – – –
Less: previously held associate – (1 019) – –
Less: cash and cash equivalents
acquired (9 132) (69 596) – –
Net purchase consideration for
all business combinations 267 214 180 027 – –
Cash outflow on acquisition of
businesses 267 214 180 027 – –
Net proceeds from issue of
shares – (212 925) – –
Raising of equity on
acquisition – (213 421) – (213 421)
Capitalisation of transaction
costs – 496 – 496
Cash outflow/(inflow) on
acquisition of businesses 267 214 (32 898) – (212 925)
In complying with the IFRS 3, Business Combinations, the Group determined
the fair value of the assets and liabilities acquired on the acquisition
of the business as follows:
2016 2015
R’000 Dare Other Total Total
Property and equipment 318 82 400 10 033
Intangible assets 154 481 5 911 160 392 142 530
Investment in associate – – – 1 019
Deferred tax asset – 8 809 8 809 22 554
Taxation – – – 478
Trade and other receivables 135 597 1 949 137 546 287 410
Doubtful debts provisions – – – (19 463)
Cash and cash equivalents 8 138 994 9 132 69 596
Interest-bearing liabilities – – – (120 746)
Trade and other payables (130 454) (3 400) (133 854) (158 393)
Provisions (929) (346) (1 275) (12 000)
Taxation owing (562) – (562) –
Deferred taxation (28 635) – (28 635) –
137 954 13 999 151 953 223 018
Gain on bargain purchase – (3 999) (3 999) –
Resulting goodwill on
acquisition 128 092 8 100 136 192 27 624
Total consideration 266 046 18 100 284 146 250 642
In addition, the Group undertook other minor transactions, namely the
acquisition of the balance of 70% in FNDS3000 Proprietary Limited and
the business of VanZyl Pritchard as a going concern. These transactions
were funded out of working capital and their contribution to Group revenues
and profits is considered immaterial.
Basis of preparation
The Group’s summary consolidated and separate financial statements are
prepared in accordance with the requirements of the JSE Limited Listings
Requirements for provisional reports, and the requirements of the
Companies Act of South Africa applicable to summary financial statements.
The Listings Requirements require provisional reports to be prepared in
accordance with the framework concepts and the measurement and recognition
requirements of International Financial Reporting Standards (IFRS), the SAICA
Financial Reporting Guides as issued by the Accounting Practices Committee
and the Financial Pronouncements as issued by the Financial Reporting
Standards Council, and to also, as a minimum, contain the information
required by IAS 34, Interim Financial Reporting. The accounting policies
applied in the preparation of the consolidated and separate financial statements,
from which the summary consolidated financial statements were derived, are in
terms of IFRS and are consistent with the accounting policies applied in the
preparation of the Group’s previous consolidated and separate financial
statements.
The financial results have been prepared by the Group Financial Manager,
A Viljoen (BCom Honours) and supervised by the Group Chief Financial
Officer, AM Sher (CA(SA), CFA).
Contingent liabilities and commitments
The bank has guaranteed R7,5 million (2015: R8,2 million) on behalf of
the Group to creditors. As at the balance sheet date, the Group has outstanding
operating lease commitments totalling R315,6 million (2015: R186,2 million)
in non-cancellable property leases. The Group has no IT capital commitments
contracted for in the current year (2015: R2,7 million) relating to the Microsoft
Dynamix AX 2012 upgrade and other IT-related projects.
As reported previously, a client of the South African blue-collar business
indicated that they believe that they may not have been billed in accordance
with the original client service level agreement over the past years. The Group
and the client have initiated an investigation into the matter which is still ongoing.
In this regard, using the information at its disposal, the Board has made a provision it
believes adequate to cover any financial loss which may result from this claim.
Changes to the board of Adcorp
As detailed in a SENS announcement on 21 October 2015, Mr Amitava
Guharoy was appointed to the board with effect 1 November 2015.
In addition, Ms N Sihlangu resigned as an alternate director with effect
1 February 2016.
Declaration of final dividend
Notice is hereby given that a final gross dividend of 75 cents per share
(2015: 88 cents per share) for the year ended 29 February 2016 was declared on
Tuesday, 24 May 2016 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 Tuesday, 30 August 2016
Date trading commences “ex” dividend Wednesday, 31 August 2016
Record date Friday, 2 September 2016
Date of payment Monday, 5 September 2016
Ordinary share certificates may not be dematerialised or rematerialised between
Wednesday, 31 August 2016 and Friday, 2 September 2016, both days inclusive.
Shareholders who are not exempt from the Dividend Withholding Tax (DWT) of 15%
will, therefore, receive a net dividend of 63,75 cents per share. The Company has
109 954 675 ordinary shares in issue and its income tax reference number
is 9233/68071/0.
The source of the dividend will be from distributable reserves and paid
in cash.
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 at their own risk. Ordinary shareholders who hold
dematerialised shares will have their accounts at their CSDP or broker
credited on Monday, 5 September 2016.
Events after the reporting date
On 10 May 2016, the Group issued a further cautionary announcement as a
follow on from the announcements dated 23 March 2016 and 9 February 2016
respectively, in which shareholders were advised that the Company is
currently engaged in negotiations relating to, inter alia, partnering
with financiers on its international expansion strategy.
Negotiations in this regard are still ongoing and the Company expects to
conclude the deal in the foresee-able future.
Auditor’s report
These summary consolidated and separate financial statements for the year
ended 29 February 2016 have been audited by Deloitte & Touche, who expressed
an unmodified opinion thereon. The auditor also expressed an unmodified
opinion on the annual financial statements from which these summary
consolidated and separate financial statements were derived.
A copy of the auditor’s report on the summary consolidated and separate
financial statements and of the auditor’s report on the consolidated and
separate financial statements are available for inspection at the company’s
registered office, Adcorp Office Park, corner William Nicol and Wedgewood
Link, Bryanston, together with the financial statements identified in the
respective auditor’s reports.
Outlook and prospects
The global outlook for economic growth and consequently, growth in employment
remains relatively muted.
Against this background, the Group is well positioned strategically, has the
advantage of a cost competitive and operationally efficient back office, has
made good progress in terms of raising the funding necessary in order to fulfil
its international expansion aspirations of being recognised as a global industry
player of consequence, specifically focused on Africa, the Middle East, Asia and
Australia.
Following the recent revision of South Africa’s labour laws which initially
affected volumes negatively in the Group’s core South African markets, market
conditions have stabilised and sales volumes are recovering.
The Group’s customer-centric sales approach, ability to cross-sell across its
various operations, its adoption of cutting edge technology, as well as its revised
delivery methods and processes have also stood the Group in good stead and should
continue to contribute positively in the future.
Accordingly, whilst general market conditions are not expected to improve
substantially in the foreseeable future, the Group remains positive about
its prospects in this environment given its relevant strategic positioning,
its extended geographic reach, its efficient operating platform, its potential
access to the capital necessary for international expansion and its globally
relevant sales proposition.
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
24 May 2016
Corporate information
Executive directors
BE Bulunga, A Guharoy, 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 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
2001
Sponsor
Deloitte & Touche Sponsor Services (Pty) Ltd
Building 8, Deloitte Place
The Woodlands
20 Woodlands Drive
Woodmead, Sandton
2196
Date: 24/05/2016 01:26:00 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,
information disseminated through SENS.
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