Wrap Text
Unaudited Group results for the six months ended 31 August 2016
Adcorp Holdings Limited
(Adcorp or Adcorp Group or the Group)
Registration number 1974/001804/06
Share code: ADR
ISIN number: ZAE000000139
Unaudited Group results
For the six months ended 31 August 2016
Salient features
Revenue increased by 3% to R8,1 billion
Gearing decreased to 38% from previous level of 43%
Normalised EBITDA decreased by 12% to R246,8 million
Normalised EBITDA increased by 3% Excluding unrealised foreign
exchange gains and losses (constant currency)
Normalised EPS decreased by 19% to 128,1 cents per share
Normalised EPS increased by 6% Excluding unrealised foreign
exchange gains and losses (constant currency)
Cash conversion ratio a creditable 117%
Interim dividend of 20 cents declared
Stability largely returned to SA market
Awarded primary outsourced customer experience centres contract
by multinational telecommunications group
Abridged statement of comprehensive income
for the six months ended 31 August 2016
Unaudited Unaudited Audited
Six months to Six months to Year to
31 August 31 August 29 February
2016 2015 2016
R’000 R’000 R’000
Revenue 8 065 534 7 802 561 15 585 751
Cost of sales (6 861 899) (6 586 178) (13 069 007)
Gross profit 1 203 635 1 216 383 2 516 744
Other income 51 920 45 604 128 325
Administration expenses (612 689) (561 912) (1 233 713)
Marketing and selling
expenses (355 041) (354 656) (685 545)
Other operating expenses (137 087) (136 952) (261 044)
Operating profit 150 738 208 467 464 767
Interest received 8 560 12 025 23 669
Interest paid (71 386) (70 150) (133 722)
Gain on bargain purchase – 3 999 3 999
Impairment of intangible
assets and goodwill (139) (16 253) (34 721)
Impairment of loans – (300) –
Impairment of investment –
available-for-sale – – (54 922)
Share of profits from
associates 8 670 12 740 23 078
Loss on sale of business – (28 690) (30 056)
Loss on the sale of shares – – (361)
Profit/(loss) on the sale of
property and equipment 1 480 129 (991)
Profit before taxation 97 923 121 967 260 740
Taxation (12 082) (27 481) (53 930)
Profit for the year 85 841 94 486 206 810
Other comprehensive income*
Exchange differences on
translating foreign
operations (55 796) 25 990 106 445
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 (9 461) 14 539 63 456
Fair value adjustment of
derivative financial
instrument 81 (107) (580)
Non-controlling interest (870) 715 862
Other comprehensive
(loss)/income for the
period/year, net of tax (66 046) 41 137 177 917
Total comprehensive income
for the period/year 19 795 135 623 384 727
Profit attributable to:
Owners of the parent 84 971 95 201 207 672
Non-controlling interest 870 (715) (862)
Total comprehensive income
attributable to:
Owners of the parent 19 795 135 623 384 727
Non-controlling interest 870 (715) (862)
Earnings per share
Basic (cents) 78,4 87,4 192,0
Diluted (cents) 75,7 84,3 185,4
Approved dividends to
shareholders 95 148 135
Interim dividend (cents) 20 60 60
Final dividend (cents) in
respect of prior year 75 88 75
* All items below will be
reclassified to profit and
loss upon derecognition.
Calculation of headline earnings
Profit for the year 84 971 95 201 207 672
(Profit)/loss on the sale of
property and equipment (1 480) (129) 991
Taxation 414 36 (277)
Impairment of intangible
assets and goodwill 139 16 253 34 721
Impairment of loans – 300 –
Gain on bargaining purchase – (3 999) (3 999)
Impairment of investments
available-for-sale – – 54 922
Loss on sale of business – 28 690 30 056
Headline earnings 84 044 136 352 324 086
Headline earnings per share
Headline earnings per share
– cents 77,5 125,2 299,6
Diluted headline earnings per
share – cents 74,9 120,7 289,3
Weighted average number of
shares – 000’s 108 383 108 905 108 189
Diluted weighted average
number of shares – 000’s 112 201 112 933 112 008
Abridged statement of financial position
as at 31 August 2016
Unaudited Unaudited Audited
Six months to Six months to Year to
31 August 31 August 29 February
2016 2015 2016
R’000 R’000 R’000
Assets
Non-current assets 2 620 957 2 638 660 2 636 416
Property and equipment 130 055 120 924 137 796
Intangible assets 705 762 748 588 753 170
Goodwill 1 513 191 1 452 469 1 513 633
Investments 10 000 – 10 000
Other financial assets – 45 292 –
Investment in associates 133 918 114 911 125 249
Deferred taxation 128 031 156 476 96 568
Current assets 3 637 744 3 492 707 3 741 744
Trade, other receivables and
prepayments 2 766 300 2 578 878 2 795 262
Other financial assets 16 922 – 29 728
Taxation prepaid 36 077 43 952 70 690
Cash resources 818 445 869 877 846 064
Total assets 6 258 701 6 131 367 6 378 160
Equity and liabilities
Capital and reserves 2 708 943 2 621 760 2 685 301
Share capital 2 749 2 749 2 749
Share premium 1 738 109 1 738 109 1 738 109
Treasury shares (36 963) (12 990) (36 963)
Share-based payment reserve 125 390 118 184 121 787
Foreign currency translation
reserve 54 941 22 548 110 737
Cash flow hedging reserve (2 890) (2 498) (2 971)
Accumulated profit 832 873 760 546 757 363
Equity attributable to
equity holders of the parent 2 714 209 2 626 648 2 690 811
Non-controlling interest (5 942) (5 809) (6 186)
BEE shareholders’ interest 676 921 676
Non-current liabilities 1 482 994 1 394 251 1 507 324
Other non-current liabilities
– interest-bearing – 791 650
Long-term loan – interest-
bearing 1 319 829 1 138 773 1 349 502
Derivative financial
instruments 4 129 3 569 4 245
Share-based payment
liability 44 221 92 147 38 625
Obligation under finance
lease 4 388 4 107 668
Deferred taxation 110 427 154 864 113 634
Current liabilities 2 066 764 2 115 356 2 185 535
Non-interest-bearing current
liabilities 1 535 508 1 574 189 1 527 822
Trade and other payables 1 250 227 1 207 589 1 188 716
Provisions 238 571 280 876 281 186
Other vendor payables 14 292 51 828 26 078
Taxation 32 418 33 896 31 842
Interest-bearing current
liabilities 531 256 541 167 657 713
Current portion of other
non-current liabilities 15 392 8 756 15 170
Short-term loans 49 635 353 977 274 382
Bank overdraft 466 229 178 434 368 161
Total equity and liabilities 6 258 701 6 131 367 6 378 160
Number of ordinary shares in
issue (R’000) 109 955 109 955 109 371
Net asset value per share
(cents) 2 464 2 384 2 455
Abridged statement of cash flows
for the six months ended 31 August 2016
Unaudited Unaudited Audited
Six months to Six months to Year to
31 August 31 August 29 February
2016 2015 2016
R’000 R’000 R’000
Operating activities
Profit before taxation 97 923 121 967 260 740
Adjusted for:
Depreciation 18 228 16 766 35 962
Gain on bargain purchase – – (3 999)
Impairment of intangible
assets and goodwill 139 16 553 34 721
Loss on sale of business – – 30 056
Impairment of investment –
available-for-sale – – 54 922
Share of profits from
associates* (8 670) (12 740) (23 078)
Loss on repurchase of 'A'
shares – – 361
Amortisation of intangibles 53 433 46 945 105 831
Amortisation of intangibles –
acquired in a business
combination 43 226 37 664 77 486
Amortisation of intangibles –
other than those acquired in
a business combination 10 207 9 281 28 345
(Profit)/loss on disposal of
property and equipment (1 480) (129) 991
Share-based payments 9 199 18 755 (31 164)
Share-based payment expense 22 002 13 495 43 514
Revaluation of share-based
payment liability (12 803) 5 260 (74 678)
Unrealised foreign exchange
loss/(gain) 18 036 – (11 859)
Revaluation of foreign exchange
denominated intercompany loan – 14 539 –
Non-cash portion of operating
lease rentals 1 325 (627) 1 781
Exchange differences on
translating foreign operations – 25 990 –
Foreign currency adjustment
to goodwill – (9 410) –
Interest received (8 560) (12 025) (23 669)
Interest paid 71 386 70 150 133 722
Cash generated from operations
before working capital changes 250 959 296 734 565 318
Increase in trade and other
receivables and prepayments (23 007) (115 121) (343 661)
Decrease/(increase) in bad
debt provision 216 (10 398) (1 861)
Decrease/(increase) in other
financials assets 12 806 – (29 728)
Increase in trade and other
payables 58 340 140 607 126 090
(Decrease)/increase in
provisions (43 098) 34 288 37 148
Cash generated by operations 256 216 346 110 353 306
Interest received 8 560 12 025 23 669
Interest paid (71 386) (70 150) (133 722)
Cash settlement of share
options exercised – (74 678) (74 678)
Taxation paid (11 564) (39 770) (110 296)
Dividend paid – – (164 571)
Net cash generated/(utilised)
by operating activities 181 826 173 537 (106 292)
Investing activities
Additions to property, equipment
and intangible assets (32 239) (54 253) (102 331)
Proceeds from sale of
property and equipment 1 787 3 362 13 821
Acquisition of businesses (12 198) (297 964) (267 214)
Net proceeds on the sale of
business – – 6 953
Acquisition of investment – – (10 000)
Conversion of investment to
subsidiary – 7 800 –
Minority interest (626) (1 052) (1 282)
Foreign currency adjustment
to investment available for
sale – (3 004) –
Net cash utilised from
investing activities (43 276) (345 111) (360 053)
Financing activities
Issue of shares under
employee share option scheme – 19 269 19 269
Treasury shares acquired – – (23 973)
Net proceeds on repurchase of
“A” shares – – (607)
Long-term loans raised – 279 356 490 085
Long-term loans repaid (29 673) – –
Short-term loan repaid (225 850) (47 184) (122 768)
Other non-current liabilities
– interest-bearing 3 071 1 242 (2 341)
(Decrease)/increase in other
payables (11 785) 39 209 13 458
Net cash (utilised)/generated
by financing activities (264 237) 291 892 373 123
Net (decrease)/increase in
cash and cash equivalents (125 687) 120 318 (93 222)
Cash and cash equivalents at
the beginning of period/year 477 903 571 125 571 125
Cash and cash equivalents at
the end of the period/year 352 216 691 443 477 903
* Prior period/year amount has been reclassified from investing
activities to operating activities.
Total interest-bearing liabilities of the Group as at 31 August 2016
Unaudited Unaudited Audited
Six months to Six months to Year to
31 August 31 August 28 February
2016 2015 2016
R’000 R’000 R’000
Net gearing (%) 38% 31% 43%
Net bank balances (352 216) (691 443) (477 903)
Other non-current liabilities – 791 650
Long-term loans 1 319 829 1 138 773 1 349 502
Long-term loans – South
Africa 870 653 706 860 857 322
Long-term loans – Australia 449 176 431 913 492 180
Obligations under finance
lease 4 388 4 107 668
Current portion of other non-
current liabilities 15 392 8 756 15 170
Short loans 49 635 353 977 274 382
Short-term loans – South
Africa 10 311 082 223 361
Short-term loans – Australia 49 625 42 895 51 021
Total interest-bearing
liabilities 1 389 246 1 506 404 1 640 372
Total net interest-bearing 1 037 028 814 961 1 162 469
liabilities
Total long-term debt (%) 95% 76% 82%
Total short-term debt (%) 5% 24% 18%
Total 100% 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 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).
Unaudited Unaudited Audited
Six months to Six months to Year to
31 August 31 August 28 February
Financial assets/ 2016 2015 2016
financial liabilities R’000 R’000 R’000
Investment – available-for-
sale – 45 292 –
Investment 10 000 – 10 000
Trade and other receivables 2 766 300 2 578 878 2 795 262
Other financial assets 16 922 45 292 29 728
Cash resources 818 445 869 877 846 064
Other non-current liabilities
– interest bearing – 791 650
Long term loan – interest
bearing 1 319 829 1 138 773 1 349 502
Derivative financial
instrument 4 129 3 569 4 245
Share-based payment liability 44 221 92 147 38 625
Obligation under finance
lease 4 388 4 107 668
Trade and other payables
(excluding VAT) 1 139 600 974 896 1 037 189
Other vendor payables 14 292 51 828 26 078
Current portion of other non-
current liabilities 15 392 8 756 15 170
Short-term loans 49 635 353 977 274 382
Bank overdraft 466 229 178 434 368 161
Fair
Financial assets/ value Valuation technique(s) and
financial liabilities hierarchy key inputs
Investment - available- Level 3 Fair value – Directors’
for-sale 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
Cash resources Level 2 Face value
Other non-current Level 2 Amortised cost plus
liabilities – interest accrued interest
bearing
Long term loan – interest Level 2 Amortised cost plus
bearing accrued interest
Derivative financial Level 2 Fair value – Discounted cash
instrument flow. Future cash flows are
estimated based on forward
interest rates (from
observable yield curves at
the end of the reporting
period) and contract interest
rates, discounted at a rate
that reflects the credit risk
of the counterparty
Share-based payment liability Level 2 Fair value – Standard present
value model
Obligation under finance lease Level 3 Amortised cost plus accrued
interest
Trade and other payables Level 3 Expected settlement value
(excluding VAT)
Other vendor payables Level 2 Fair value – Standard present
value model
Current portion of other non- Level 2 Amortised cost plus accrued
current liabilities interest
Short-term loans Level 3 Amortised cost plus accrued
interest
Bank overdraft Level 3 Face value
Financial assets/financial liabilities
Relationship
of
unobservable
Significant inputs
unobservable to fair
input(s) 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
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
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
Abridged statement of changes in equity
for the six months ended 31 August 2016
Share Share
capital premium
R’000 R’000
Balance as at 1 March 2015 (audited) 2 733 1 718 856
Issue of ordinary shares under employee share
option plan 16 19 253
Recognition of BBBEE and staff share-based payments – –
Profit for the year – –
Other comprehensive income/(loss) for the period – –
Minority interest – –
Balance as at 31 August 2015 (unaudited) 2 749 1 738 109
Dividend distributions – –
Recognition of BBBEE and staff share-based payments – –
Treasury shares acquired during the year – –
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 (audited) 2 749 1 738 109
Movement in BEE shareholders’ interest – –
Profit for the period – –
Other comprehensive (loss)/income for the period – –
Minority interest – –
Balance as at 31 August 2016 (unaudited) 2 749 1 738 109
Share-
based
Treasury payment
shares reserve
R’000 R’000
Balance as at 1 March 2015 (audited) (12 990) 114 581
Issue of ordinary shares under employee share option
plan – –
Recognition of BBBEE and staff share-based payments – 3 603
Profit for the year – –
Other comprehensive income/(loss) for the period – –
Minority interest – –
Balance as at 31 August 2015 (unaudited) (12 990) 118 184
Dividend distributions – –
Recognition of BBBEE and staff share-based payments – 3 603
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 (audited) (36 963) 121 787
Movement in BEE shareholders’ interest – 3 603
Profit for the period – –
Other comprehensive (loss)/income for the period – –
Minority interest – –
Balance as at 31 August 2016 (unaudited) (36 963) 125 390
Foreign
currency Cash flow
translation hedging
reserve reserve
R’000 R’000
Balance as at 1 March 2015 (audited) (3 442) (2 391)
Issue of ordinary shares under employee share
option plan – –
Recognition of BBBEE and staff share-based
payments – –
Profit for the year – –
Other comprehensive income/(loss) for the
period 25 990 (107)
Minority interest – –
Balance as at 31 August 2015 (unaudited) 22 548 (2 498)
Dividend distributions – –
Recognition of BBBEE and staff share-based
payments – –
Treasury shares acquired during the year – –
Movement in BEE shareholders’ interest – –
Profit for the year – –
Other comprehensive income/(loss) for the year 80 455 (473)
Realised foreign exchange gains realised
through profit and loss on disposal of business 7 734 –
Minority interest – –
Balance as at 29 February 2016 (audited) 110 737 (2 971)
Movement in BEE shareholders’ interest – –
Profit for the period – –
Other comprehensive (loss)/income for the
period (55 796) 81
Minority interest – –
Balance as at 31 August 2016 (unaudited) 54 941 (2 890)
Attributable to
Retained equity holders
earnings of the parent
R’000 R’000
Balance as at 1 March 2015 (audited) 650 806 2 468 153
Issue of ordinary shares under employee
share option plan – 19 269
Recognition of BBBEE and staff share-based
payments – 3 603
Profit for the year 95 201 95 201
Other comprehensive income/(loss) for the
period 14 539 40 422
Minority interest – –
Balance as at 31 August 2015 (unaudited) 760 546 2 626 648
Dividend distributions (164 571) (164 571)
Recognition of BBBEE and staff share-based
payments – 3 603
Treasury shares acquired during the year – (23 973)
Movement in BEE shareholders’ interest – –
Profit for the year 112 471 112 471
Other comprehensive income/(loss) for the
year 48 917 128 899
Realised foreign exchange gains realised
through profit and loss on disposal of
business – 7 734
Minority interest – –
Balance as at 29 February 2016 (audited) 757 363 2 690 811
Movement in BEE shareholders’ interest – 3 603
Profit for the period 84 971 84 971
Other comprehensive (loss)/income for the
period (9 461) (65 176)
Minority interest – –
Balance as at 31 August 2016 (unaudited) 832 873 2 714 209
Non- BEE
controlling shareholders’
interest interest Total
R’000 R’000 R’000
Balance as at 1 March 2015
(audited) (4 042) 921 2 465 032
Issue of ordinary shares under
employee share option plan – – 19 269
Recognition of BBBEE and staff
share-based payments – – 3 603
Profit for the year – – 95 201
Other comprehensive income/(loss)
for the period (715) – 39 707
Minority interest (1 052) – (1 052)
Balance as at 31 August 2015
(unaudited) (5 809) 921 2 621 760
Dividend distributions – – (164 571)
Recognition of BBBEE and staff
share-based payments – – 3 603
Treasury shares acquired during
the year – – (23 973)
Movement in BEE shareholders’
interest – (245) (245)
Profit for the year (147) – 112 324
Other comprehensive income/(loss)
for the year – – 128 899
Realised foreign exchange gains
realised through profit and loss
on disposal of business – – 7 734
Minority interest (230) – (230)
Balance as at 29 February 2016
(audited) (6 186) 676 2 685 301
Movement in BEE shareholders’
interest – – 3 603
Profit for the period 870 – 85 841
Other comprehensive (loss)/income
for the period – – (65 176)
Minority interest (626) – (626)
Balance as at 31 August 2016
(unaudited) (5 942) 676 2 708 943
Abridged segment report (unaudited)
for the six months ended 31 August 2016
Support
Industrial Services
(Blue (White
collar) collar)
Revenue
31 August 2016 3 727 689 1 202 006
31 August 2015**** 3 641 704 1 813 797
29 February 2016 8 074 971 2 382 548
Internal revenue
31 August 2016 31 308 48 401
31 August 2015**** 29 854 16 433
29 February 2016 71 354 90 038
Operating profit/(loss)
31 August 2016 124 752 18 494
31 August 2015**** 170 255 80 907
29 February 2016 385 618 79 775
Normalised* EBITDA excluding lease-
smoothing and transaction costs
31 August 2016 152 442 35 162
31 August 2015**** 181 093 94 045
29 February 2016 416 839 98 177
Normalised* EBITDA margin excluding lease-
smoothing and transaction costs
31 August 2016 4,1 2,9
31 August 2015**** 5,0 5,2
29 February 2016 5,2 4,1
Normalised* EBITDA excluding lease-
smoothing and transaction costs,
contribution % to Group normalised* EBITDA
31 August 2016 61,8 14,2
31 August 2015**** 64,7 33,6
29 February 2016 67,0 15,8
Depreciation and amortisation
31 August 2016 22 419 17 650
31 August 2015**** 18 574 19 786
29 February 2016 43 322 27 238
Interest income
31 August 2016 19 267 8 137
31 August 2015**** 10 912 21 748
29 February 2016 40 808 8 980
Interest expense
31 August 2016 (24 000) (4 640)
31 August 2015**** (24 569) (23 685)
29 February 2016 (53 044) (1 366)
Taxation expense/(income)
31 August 2016 20 497 (221)
31 August 2015**** 8 036 14 795
29 February 2016 38 292 (8 573)
Net asset values
31 August 2016 1 974 851 229 048
31 August 2015**** 1 763 162 761 111
29 February 2016 1 763 959 246 797
Asset carrying value
31 August 2016 2 191 306 430 660
31 August 2015**** 2 438 766 1 188 567
29 February 2016 2 371 555 512 595
Liabilities carrying value
31 August 2016 216 455 201 612
31 August 2015**** 675 604 427 456
29 February 2016 607 596 265 798
Additions to property and equipment
31 August 2016 5 961 99
31 August 2015**** 8 665 3 988
29 February 2016 26 688 4 731
Property and equipment
31 August 2016 65 054 9 554
31 August 2015**** 68 696 22 035
29 February 2016 76 666 11 065
BPO, training
Professional and candidate
services benefits
Revenue
31 August 2016 2 938 442 197 388
31 August 2015**** 2 143 355 183 014
29 February 2016 4 785 485 340 757
Internal revenue
31 August 2016 30 12 554
31 August 2015**** – 17 933
29 February 2016 – 68 459
Operating profit/(loss)
31 August 2016 71 604 26 656
31 August 2015**** 46 538 8 428
29 February 2016 113 454 54 969
Normalised* EBITDA excluding lease-
smoothing and transaction costs
31 August 2016 98 193 30 366
31 August 2015**** 80 658 12 302
29 February 2016 160 834 61 470
Normalised* EBITDA margin excluding lease-
smoothing and transaction costs
31 August 2016 3,3 15,4
31 August 2015**** 3,8 6,7
29 February 2016 3,4 18,0
Normalised* EBITDA excluding lease-
smoothing and transaction costs,
contribution % to Group normalised* EBITDA
31 August 2016 39,8 12,3
31 August 2015**** 28,8 4,4
29 February 2016 25,9 9,9
Depreciation and amortisation
31 August 2016 25 766 3 380
31 August 2015**** 20 653 3 474
29 February 2016 47 381 8 193
Interest income
31 August 2016 2 364 9 066
31 August 2015**** 1 264 7 504
29 February 2016 2 486 15 791
Interest expense
31 August 2016 (27 865) (3 805)
31 August 2015**** (5 236) (3 623)
29 February 2016 (17 795) (7 946)
Taxation expense/(income)
31 August 2016 5 740 2 718
31 August 2015**** 2 127 6 640
29 February 2016 2 247 9 215
Net asset values
31 August 2016 325 067 280 031
31 August 2015**** 1 450 690 262 026
29 February 2016 701 166 251 003
Asset carrying value
31 August 2016 1 027 743 359 248
31 August 2015**** 1 858 236 334 340
29 February 2016 1 123 355 331 116
Liabilities carrying value
31 August 2016 702 676 79 217
31 August 2015**** 407 546 72 314
29 February 2016 422 189 80 113
Additions to property and equipment
31 August 2016 2 485 1 363
31 August 2015**** 4 391 1 924
29 February 2016 14 766 2 961
Property and equipment
31 August 2016 25 202 9 808
31 August 2015**** 10 228 9 681
29 February 2016 21 070 5 702
Emergent
business*** Sub-total
Revenue
31 August 2016 – 8 065 525
31 August 2015**** 19 421 7 801 291
29 February 2016 64 15 583 825
Internal revenue
31 August 2016 – 92 293
31 August 2015**** – 64 220
29 February 2016 – 229 851
Operating profit/(loss)
31 August 2016 (249) 241 257
31 August 2015**** (4 315) 301 813
29 February 2016 (5 031) 628 785
Normalised* EBITDA excluding lease-
smoothing and transaction costs
31 August 2016 (234) 315 929
31 August 2015**** (4 147) 363 951
29 February 2016 (5 000) 732 320
Normalised* EBITDA margin excluding lease-
smoothing and transaction costs
31 August 2016 – 3,9
31 August 2015**** – 4,7
29 February 2016 – 4,7
Normalised* EBITDA excluding lease-
smoothing and transaction costs,
contribution % to Group normalised* EBITDA
31 August 2016 (0,1) 128,0
31 August 2015**** (1,5) 130,0
29 February 2016 (0,8) 117,8
Depreciation and amortisation
31 August 2016 235 69 450
31 August 2015**** 167 62 654
29 February 2016 108 126 242
Interest income
31 August 2016 14 38 848
31 August 2015**** 20 41 448
29 February 2016 24 68 089
Interest expense
31 August 2016 – (60 310)
31 August 2015**** (4 472) (61 585)
29 February 2016 – (80 151)
Taxation expense/(income)
31 August 2016 (50) 28 684
31 August 2015**** (51) 31 547
29 February 2016 43 41 224
Net asset values
31 August 2016 1 655 2 810 652
31 August 2015**** 2 521 4 239 510
29 February 2016 1 456 2 964 381
Asset carrying value
31 August 2016 816 4 009 773
31 August 2015**** 10 808 5 830 717
29 February 2016 828 4 339 449
Liabilities carrying value
31 August 2016 (839) 1 199 121
31 August 2015**** 8 287 1 591 207
29 February 2016 (628) 1 375 068
Additions to property and equipment
31 August 2016 – 9 908
31 August 2015**** 5 18 973
29 February 2016 – 49 146
Property and equipment
31 August 2016 47 109 665
31 August 2015**** 642 111 282
29 February 2016 62 114 565
Central Shared
costs services
Revenue
31 August 2016 – 9
31 August 2015**** – 1 270
29 February 2016 1 007 919
Internal revenue
31 August 2016 – –
31 August 2015**** – –
29 February 2016 – 1 777
Operating profit/(loss)
31 August 2016 (54 946) (35 573)
31 August 2015**** (75 735) (17 611)
29 February 2016 (147 802) (16 216)
Normalised* EBITDA excluding lease-smoothing
and transaction costs
31 August 2016 (44 365) (24 748)
31 August 2015**** (66 069) (18 014)
29 February 2016 (118 303) 7 762
Normalised* EBITDA margin excluding lease-
smoothing and transaction costs
31 August 2016 – –
31 August 2015**** – –
29 February 2016 – –
Normalised* EBITDA excluding lease-smoothing
and transaction costs, contribution % to Group
normalised* EBITDA
31 August 2016 (18,0) (10,0)
31 August 2015**** (23,6) (6,4)
29 February 2016 (19,0) 1,2
Depreciation and amortisation
31 August 2016 2 211 –
31 August 2015**** 1 057 –
29 February 2016 15 551 –
Interest income
31 August 2016 (30 292) 4
31 August 2015**** (29 426) 3
29 February 2016 (44 426) 6
Interest expense
31 August 2016 (3 006) (8 070)
31 August 2015**** (1 669) (6 896)
29 February 2016 (39 977) (13 594)
Taxation expense/(income)
31 August 2016 (16 602) –
31 August 2015**** (4 066) –
29 February 2016 12 706 –
Net asset values
31 August 2016 (147 136) 45 427
31 August 2015**** (1 580 360) (37 390)
29 February 2016 (322 048) 42 968
Asset carrying value
31 August 2016 2 121 802 127 126
31 August 2015**** 280 479 20 171
29 February 2016 1 941 375 97 336
Liabilities carrying value
31 August 2016 2 268 938 81 699
31 August 2015**** 1 860 839 57 561
29 February 2016 2 263 423 54 368
Additions to property and equipment
31 August 2016 122 –
31 August 2015**** – 5 682
29 February 2016 20 194 6 838
Property and equipment
31 August 2016 16 640 3 750
31 August 2015**** 3 593 6 049
29 February 2016 18 087 5 144
Total International**
Revenue
31 August 2016 8 065 534 3 342 461
31 August 2015**** 7 802 561 2 494 005
29 February 2016 15 585 751 5 778 324
Internal revenue
31 August 2016 92 293 –
31 August 2015**** 64 220 –
29 February 2016 231 628 –
Operating profit/(loss)
31 August 2016 150 738 3 116
31 August 2015**** 208 467 43 658
29 February 2016 464 767 90 794
Normalised* EBITDA excluding lease-
smoothing and transaction costs
31 August 2016 246 816 45 309
31 August 2015**** 279 868 69 691
29 February 2016 621 779 153 591
Normalised* EBITDA margin excluding lease-
smoothing and transaction costs
31 August 2016 3,1 1,4
31 August 2015**** 3,6 2,8
29 February 2016 4,0 2,7
Normalised* EBITDA excluding lease-
smoothing and transaction costs,
contribution % to Group normalised* EBITDA
31 August 2016 100,0 18,4
31 August 2015**** 100,0 24,9
29 February 2016 100,0 24,7
Depreciation and amortisation
31 August 2016 71 661 36 211
31 August 2015**** 63 711 26 033
29 February 2016 141 793 62 797
Interest income
31 August 2016 8 560 1 814
31 August 2015**** 12 025 1 504
29 February 2016 23 669 19 422
Interest expense
31 August 2016 (71 386) (24 777)
31 August 2015**** (70 150) (10 954)
29 February 2016 (133 722) (25 157)
Taxation expense/(income)
31 August 2016 12 082 21 876
31 August 2015**** 27 481 9 449
29 February 2016 53 930 41 275
Net asset values
31 August 2016 2 708 943 1 374 981
31 August 2015**** 2 621 760 921 843
29 February 2016 2 685 301 1 137 044
Asset carrying value
31 August 2016 6 258 701 2 593 590
31 August 2015**** 6 131 367 2 154 068
29 February 2016 6 378 160 2 412 658
Liabilities carrying value
31 August 2016 3 549 758 1 218 609
31 August 2015**** 3 509 607 1 232 225
29 February 2016 3 692 859 1 275 614
Additions to property and equipment
31 August 2016 10 030 4 635
31 August 2015**** 24 655 2 827
29 February 2016 76 178 27 872
Property and equipment
31 August 2016 130 055 53 491
31 August 2015**** 120 924 30 120
29 February 2016 137 796 42 410
South
Africa Total
Revenue
31 August 2016 4 723 073 8 065 534
31 August 2015**** 5 308 556 7 802 561
29 February 2016 9 807 427 15 585 751
Internal revenue
31 August 2016 92 293 92 293
31 August 2015**** 64 220 64 220
29 February 2016 231 628 231 628
Operating profit/(loss)
31 August 2016 147 622 150 738
31 August 2015**** 164 809 208 467
29 February 2016 373 973 464 767
Normalised* EBITDA excluding lease-
smoothing and transaction costs
31 August 2016 201 507 246 816
31 August 2015**** 210 177 279 868
29 February 2016 468 188 621 779
Normalised* EBITDA margin excluding lease-
smoothing and transaction costs
31 August 2016 4,3 3,1
31 August 2015**** 4,0 3,6
29 February 2016 4,8 4,0
Normalised* EBITDA excluding lease-
smoothing and transaction costs,
contribution % to Group normalised* EBITDA
31 August 2016 81,6 100,0
31 August 2015**** 75,1 100,0
29 February 2016 75,3 100,0
Depreciation and amortisation
31 August 2016 35 450 71 661
31 August 2015**** 37 678 63 711
29 February 2016 78 996 141 793
Interest income
31 August 2016 6 746 8 560
31 August 2015**** 10 521 12 025
29 February 2016 4 247 23 669
Interest expense
31 August 2016 (46 609) (71 386)
31 August 2015**** (59 196) (70 150)
29 February 2016 (108 565) (133 722)
Taxation expense/(income)
31 August 2016 (9 794) 12 082
31 August 2015**** 18 032 27 481
29 February 2016 12 655 53 930
Net asset values
31 August 2016 1 333 962 2 708 943
31 August 2015**** 1 699 917 2 621 760
29 February 2016 1 548 257 2 685 301
Asset carrying value
31 August 2016 3 665 111 6 258 701
31 August 2015**** 3 977 299 6 131 367
29 February 2016 3 965 502 6 378 160
Liabilities carrying value
31 August 2016 2 331 149 3 549 758
31 August 2015**** 2 277 382 3 509 607
29 February 2016 2 417 245 3 692 859
Additions to property and equipment
31 August 2016 5 394 10 030
31 August 2015**** 21 828 24 655
29 February 2016 48 306 76 178
Property and equipment
31 August 2016 76 564 130 055
31 August 2015**** 90 804 120 924
29 February 2016 95 386 137 796
* Normalised earnings is defined as operating profit adjusted for depreciation,
amortisation of intangibles, lease-smoothing, and one-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.
**** 31 August 2015 values for Kelly Group Limited (KGL) was included in
support services (white collar) in totality as the business was managed
in that segment. After 31 August 2015, KGL was split up and allocated
to the various other segments.
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 interim consolidated results of the Group for the
period ended 31 August 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.
For the year six months ended 31 August 2016
Six Six
months to months to
31 August 31 August
2016 2015 %
Note R’000 R’000 change
Revenue 1 8 065 534 7 802 561 3%
Cost of sales 1 (6 861 899) (6 586 178) (4%)
Gross profit 1 1 203 635 1 216 383 (1%)
Other income 1 51 920 45 604 14%
Administrative, marketing,
selling and operating expenses 1 (1 104 817) (1 053 520) (5%)
Operating profit 1 150 738 208 467 (28%)
Adjusted for:
Depreciation 2 18 228 16 766 9%
Amortisation of intangible
assets 53 433 46 945 14%
– acquired in business
combination 2 43 226 37 664 15%
– other than those acquired in
a business combination 2 10 207 9 281 10%
Lease smoothing 2 1 325 (627)
Transaction costs 5 23 092 8 317
Normalised EBITDA (excluding
lease smoothing and transaction
costs) 246 816 279 868 (12%)
Adjusted for:
Depreciation 2 (18 228) (16 766) (9%)
Amortisation of intangibles
other than those acquired in a 2 (10 207) (9 281) (10%)
business combination
Normalised operating profit 218 381 253 821 (14%)
Net interest paid (62 826) (58 125) (8%)
Normalised profit before tax 155 555 195 696 (21%)
Normalised taxation 3 (24 556) (37 852) (35%)
Normalised operating profit for
the period/year 130 999 157 844 (17%)
Share of profits from
associates 8 670 12 740 (32%)
Non-controlling interest (870) 715
Total normalised profit for the
period/year 138 799 171 299 (19%)
Normalised earnings per share
(cents) 4 128,1 157,3 (19%)
Diluted normalised earnings per
share (cents) 4 123,7 151,7 (18%)
Weighted average number of
shares – 000’s 1 108 383 108 905
Diluted weighted average number
of shares – 000’s 1 112 201 112 933
Notes:
1 As per the statement of comprehensive income for the six months ended
31 August 2016.
2 As per the statement of cash flows for the six months ended
31 August 2016.
3 The taxation expense has been adjusted for the adjusted items above.
4 Per share calculation is based on total normalised profit.
5 Being once-off transaction costs incurred pursuant to pursuit of
various transactions.
Comments
Overview
As reported in the prior financial year, trading volumes in the core
South African market were negatively affected following the introduction
of substantial changes to South African labour legislation.
In contrast to last year, sales volumes in the South African market have
stabilised and have begun to recover during the interim trading period
under review. Comparisons with the prior first half trading period are,
however, skewed given that the majority of volume lost in the prior
financial year impacted revenues and profits mostly in the second
half of that year.
Accordingly, Group revenues of R8,1 billion (August 2015: R7,8 billion)
increased by a modest 3% compared to the prior period.
Normalised earnings per share of 128.1 cents decreased by 19% compared
to the comparative figure of 157,3 cents in the prior period.
The major cause of this decline in earnings is due to a material swing
from the prior period’s unrealised foreign exchange gain included in
earnings of R21,1 million to a loss of R18,9 million included in this
year’s earnings representing a year-on-year swing of R40 million.
These unrealised foreign exchange gains and losses emanate primarily
from the Group’s African operations whereby the Group’s South African
Rand reporting currency has strengthened against many of the underlying
currencies of those African countries where the Group has operations.
In the absence of these respective unrealised foreign exchange gains and
losses, comparable period on period normalised earnings per share growth of
6% would have been achieved on a constant currency basis which is a better
indication and barometer of actual trading conditions.
Normalised earnings before interest, tax, depreciation and amortisation
(EBITDA) of R246,8 million were 12% below the prior year’s comparable
figure of R279,9 million. Excluding unrealised foreign exchange translation
gains and losses, normalised EBITDA would have increased by 3% period
on period.
Given the distortion of unrealised foreign exchange gains and losses,
a detailed analysis of the financial results has been included in the
Financial Overview below which provides a realistic overview of the Group’s
true trading trends.
The Group’s cash performance has once again been extremely positive. In
this regard, the Group’s cash conversion ratio was a creditable 117%
compared to the Group’s target conversion ratio of 80%.
South Africa
As previously reported, the passing of the new Labour Relations Act (LRA) in
2015 initially led to a high degree of uncertainty in the South African
market resulting in volumes being negatively impacted. Hardest hit was
the support services or white collar segment of the business.
The impact of these lost volumes predominantly impacted earnings in the
second half of the prior financial year. It is pleasing to see a recovery
in the profitability of this business in the first half of financial
year 2017.
The ambiguity in the new labour laws was clarified in a milestone Labour
Court ruling in September 2015 subsequent to which, stability has returned
to the Temporary Employment Services (TES) market resulting in a recovery
in volumes, albeit not yet to the levels achieved prior to the
new legislation.
This ruling is the subject of an appeal process which is likely to be heard
early in 2017.
The EBITDA margin achieved in the South African business was 4,3% compared to
the 4,0% EBITDA margin achieved in the prior year.
Margins should continue to improve and retrace previous levels as volumes
continue to recover.
The integration of the operations of the Kelly Group is 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, performed particularly well showing strong
earnings growth. Australian blue-collar business, Labour Solutions Australia
(LSA) performed satisfactorily and continues to gain new volumes and is well
positioned in its market.
Australian oil and gas business, Dare, which was acquired by the Group in
May 2015 lost volume due to a sustained, low global oil price. Consequently,
whilst still modestly profitable, earnings from this business have declined
substantially.
Similarly impacted by a decline in global oil prices has been the Group’s
African business beyond South Africa’s borders which has a high dependency
on the oil and gas industry.
This business was also negatively impacted by unrealised foreign exchange
losses compared to a sizeable unrealised foreign exchange gain in the prior
year which pushed this operation into a loss for the period under review.
The global oil and gas industry remains an important area 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 businesses
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
35% stake, also experienced a difficult trading period, being negatively
impacted by a reduction in business emanating from South Africa and negative
currency fluctuations.
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 middle of 2017 depending on prevailing market conditions
at that time.
The Group has been active over the past year in trying to raise capital through
its Singapore office in order to fund the Group’s international growth strategy
focused on emerging markets and the Southern Hemisphere and, in particular, Africa,
Asia, Australia and the Middle East.
Negotiations regarding a possible deal in this regard were recently halted given
that the proposed funding terms were not considered optimal.
Further consideration will be given to funding the Group’s international expansion
plans when market conditions are considered more conducive to achieving this objective.
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.
In response to these trends, Adcorp has reviewed and revised its strategy to
ensure that the business is able to take full advantage of these trends and
remains relevant in the markets it serves.
The Group also continues to focus on improving margins, driving efficiencies,
reducing costs and freeing up cash.
Financial overview
Earnings per share and headline earnings per share of 78,4 cents and
77,5 cents are 10% and 38% lower respectively than the 87,4 cents and
125,2 cents per share respectively for the comparative prior period. As described,
this is primarily due to the negative impact of the unrealised foreign
exchange movement of R40 million as well as the impact of one-off transaction costs.
The first full period inclusion of the lower than expected contribution from Dare
and the underperformance from the group’s African operations contributed further
to the lower year on year performance.
Given the accounting treatment of 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 128,1 cents for the period ended 31 August 2016
were 19% lower than the 157,3 cents per share for the comparative period. As above,
in the absence of the year on year swing in unrealised foreign accounting exchange
gains and losses, the comparable period on period growth in normalised earnings
per share growth would have been 6%.
Gross profit margins declined marginally due mainly to changes in business mix.
The Group’s Normalised EBITDA margin was 3,1% (August 2015: 4,0%). EBITDA margins
in the traditional industrial (blue collar) and support services (white-collar)
staffing businesses were affected by the lower volumes while the disappointing
performance from the African business placed downward pressure on overall margins.
Pleasing to note was the improved performance from the business processing,
candidate benefit and training businesses.
The Group’s overall normalised effective tax rate reduced to 16% (August 2015: 19%)
mainly as a result of increased utilisation of assessed losses emanating from
Kelly and other entities within the Group.
Cash management remains a continuous high priority for management. The Group’s
cash conversion ratio was a creditable 117% (August 2015: 136%). Days settlement
outstanding (DSO) totalled 47 days which remained in line with that reported
for the previous financial year end. This result was achieved in the context of
the continued challenging collections’ environment. Despite this, the overall
level of gearing of 38% is considered to be manageable and within
management’s expectations.
During the period under review, the Group incurred an 8% increase in respect of
net finance charges, mainly as a result of higher prevailing interest rates and
tighter debt collection markets.
While remaining fully compliant with debt covenants, the Board has resolved to
declare an interim cash dividend of 20 cents per share (August 2015: 60 cents
per share), the details of which appear more fully below.
Analysis
As described, the introduction of the major changes to South African labour laws
in 2015 resulted in initial volume losses in the prior financial year. A substantial
portion of this lost volume has subsequently been recovered, a trend that has
continued into the current financial year. Following this loss of volume, mostly
in the latter part of FY 2016, the Group embarked on a major cost reduction
programme in order to mitigate the negative profit effect of these lost volumes.
Given these sizeable volume and cost shifts, the Group’s revenues, costs, profits
and margins have effectively rebased over the past 18 months.
Also, given significant currency volatility in emerging markets over the past
12 months, the Group has accounted for sizeable, unrealised foreign exchange
gains in FY2016 and losses in the first six months of FY2017. These gains and
losses effectively distort the true trading trends within the Group.
As such, the following analysis of Revenue, Normalised EBITDA and Normalised
EBITDA margins is useful in understanding the actual trading trajectory
of the Group.
Support
Analysis of Revenue, Normalised EBITDA and Industrial services
Normalised EBITDA margins (Blue collar) (White collar)
Revenue (R000’s)
31 August 2016 3 727 689 1 202 006
31 August 2015 3 641 704 1 813 797
% change 2% (34%)
Normalised EBITDA as reported (R000’s)
31 August 2016 152 442 35 162
31 August 2015 181 093 94 045
% change (16%) (63%)
Normalised EBITDA – adjusted for unrealised
foreign exchange gains and losses (R000’s)
31 August 2016 171 377 35 162
31 August 2015 159 976 94 045
% change 7% (63%)
Normalised EBITDA margin (as reported)
31 August 2016 4,1% 2,9%
31 August 2015 5,0% 5,2%
Normalised EBITDA margin – adjusted for
unrealised foreign exchange gains and losses
31 August 2016 4,6% 2,9%
31 August 2015 4,4% 5,2%
Analysis of Revenue, Normalised
EBITDA and Professional South
Normalised EBITDA margins services Africa International
Revenue (R000’s)
31 August 2016 2 938 442 4 723 073 3 342 461
31 August 2015 2 143 355 5 308 556 2 494 005
% change 37% (11%) 34%
Normalised EBITDA as reported
(R000’s)
31 August 2016 98 193 201 507 45 309
31 August 2015 80 658 210 177 69 691
% change 22% (4%) (35%)
Normalised EBITDA – adjusted for
unrealised foreign exchange gains
and losses (R000’s)
31 August 2016 98 193 201 507 64 244
31 August 2015 80 658 210 177 48 574
% change 22% (4%) 32%
Normalised EBITDA margin (as
reported)
31 August 2016 3,3% 4,3% 1,4%
31 August 2015 3,8% 4,0% 2,8%
Normalised EBITDA margin –adjusted
for unrealised foreign exchange
gains and losses
31 August 2016 3,3% 4,3% 1,9%
31 August 2015 3,8% 4,0% 1,9%
Observations and comments:
* Excluding the impact of unrealised foreign exchange gains and losses, the
Industrial (blue collar) segment of the Group grew by 7% despite a poor
performance from the rest of Africa.
* Excluding the impact of unrealised foreign exchange gains and losses,
Industrial (blue collar) margins increased from 4,4% to 4,6% compared to the
prior comparative period.
* Support services (white collar) profits were materially impacted by last year’s
lost volumes in South Africa when compared to the prior comparative period but
have recovered well when compared to the last financial year’s second half
performance as shown in the table below:
Analysis of Support Services
six months six months six months
(White collar) 31 Aug 2015 29 Feb 2016 31 Aug 2016
Normalised EBITDA as reported
(R000’s) 94 045 4 132 35 162
* Support services (white collar) margins have been negatively impacted by
lower trading volumes.
* Professional services turned in a solid performance due largely to the
excellent performance of Australian subsidiary, Paxus.
* Professional services margins are lower than the prior year due mainly to
the strong performance of Paxus which grew faster than the rest of
the Professional Services segment but achieves lower margins in
Australia.
* South Africa’s performance reflects the drag of last year’s lost volumes
in White Collar.
* Excluding the impact of unrealised foreign exchange gains and losses,
International grew by 32% despite poor performances from Dare and the rest
of Africa.
* International’s growth was bolstered by excellent results from Australian
subsidiary Paxus.
Acquisition of business
With effect 30 June 2016, the Group’s Australian subsidiary acquired the
recruitment processing outsourcing business of WHR Solutions (WHR) for
R12,2 million. As such, it has been included in Group profits for two
months of this financial period. In terms of IAS 34 Interim Financial
Reporting requirements, the profit before tax from WHR Solutions
included in Group net profit before tax for the period ended 31 August
2016 is R0,4 million after taking account of non-cash flow IFRS charges
and acquisition related transaction costs. Had the business combination
been effective from 1 March 2016, the revenue of the Group would have
been R8,1 billion and net profit after tax would have totalled R88 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.
Unaudited Unaudited
31 August 2016 31 August 2015
R’000 R’000
Total purchase consideration for all
business combinations 12 198 307 096
Less: cash and cash equivalents acquired – (9 132)
Net purchase consideration for all
business combinations 12 198 297 964
Cash outflow on acquisition of
businesses 12 198 297 964
The fair value of the assets and liabilities acquired in respect of the
acquisition of the WHR Solutions business in the period is as follows:
August August
2016 2015
Total Total
R’000 R’000
Property and equipment – 3 842
Intangible assets – 154 481
Deferred tax asset – 11 283
Trade and other receivables – 137 546
Cash and cash equivalents – 9 132
Trade and other payables (3 170) (133 859)
Provisions (484) (1 275)
Deferred tax liability – (28 635)
Taxation – (562)
(3 654) 151 953
Resulting goodwill on acquisition 15 852 155 143
Total consideration 12 198 307 096
Basis of preparation
The Group’s unaudited summary consolidated interim financial statements
(financial results) are prepared in accordance with the requirements of
the JSE Limited Listings Requirements for provisional reports, the
requirements of the Companies Act applicable to summary financial
statements, the framework, measurement and recognition requirements of
IFRS, the SAICA Financial Reporting Guides as issued by the Accounting
Practices Committee, the Financial Reporting Pronouncements as issued by
the Financial Reporting Standards Council and the requirements of IAS 34
Interim Financial Reporting. The accounting policies applied in the
preparation of the financial results are in terms of IFRS and are
consistent with the accounting policies applied in the preparation
of the group’s previous consolidated interim financial statements.
The financial results have been prepared by the Group Financial Manager,
A Viljoen (B.Comm Honours) and supervised by the Group Chief Financial
Officer, AM Sher (CA(SA), CFA).
Contingent liabilities and commitments
The bank has guaranteed R7,5 million (August 2015: R8,1 million) on behalf
of the Group to creditors. As at the balance sheet date the Group has
outstanding operating lease commitments totalling R162,1 million
(August 2015: R145,3 million) in non-cancellable property leases.
The Group has IT capital commitments contracted for of R14,3 million
(August 2015: R2,3 million) relating to the Microsoft Dynamix AX 2012
upgrade and other IT related projects.
As previously reported, a client of the South African blue collar business
indicated that they believe they may not have been billed in accordance
with the original client Service Level Agreement. Adcorp disputes this
contention. Accordingly the resolution of this matter is still ongoing.
The Board considers the provision made to be adeqate to cover any
financial loss which may result from this claim.
Changes to the board of Adcorp
As announced on SENS on 23 September 2016, Mr Amitava Guharoy, the
CEO of Adcorp International, resigned as an executive director of
Adcorp with effect 1 October 2016.
Declaration of interim dividend
Notice is hereby given that an interim gross dividend of 20 cents per share
(August 2015: 60 cents per share) for the interim period ended 31 August
2016 was declared on Thursday, 20 October 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, 29 November 2016
Date trading commences “ex” dividend Wednesday, 30 November 2016
Record date Friday, 2 December 2016
Date of payment Monday, 5 December 2016
Ordinary share certificates may not be dematerialised or rematerialised
between Wednesday, 30 November 2016 and Friday, 2 December 2016, both
days inclusive.
Shareholders who are not exempt from the dividend withholding tax of 15%
will therefore receive a net dividend of 17 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 shall be from distributable
reserves and shall be 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 risk.
Ordinary shareholders who hold dematerialised shares will have their accounts at
their CSDP or broker credited on Monday, 5 December 2016.
Events after the reporting date
Subsequent to the closure of the interim financial period ended 31 August 2016
and the date of the approval of these unaudited interim financial statements,
namely 20 October 2016, the following events or transactions took place subsequent
to the reporting date.
* The payment of the final dividend in respect of the year ended 29 February 2016
took place on 5 September 2016.
* Adcorp has been named as the preferred partner to manage a multi-national
telecommunications Group’s outsourced customer experience centres. This follows an
announcement made last month that the client will be adopting a hybrid call
centre model which entails retaining some of its call centre facilities in-house,
while it outsources some of them to an experienced third party vendor.
Outlook and prospects
Stability has largely returned to the South African market following the significant
changes to labour laws in 2015 as described in what has been a challenging and
turbulent time for the Group over the past 18 months.
Whilst the sales base was negatively impacted by these laws, the South
African business continues to grow and recover off this lower base.
Australian business Paxus has performed well in the period under review and is
expected to continue on this positive trajectory.
The good sales performance of LSA in the period under review is expected to
continue into the second half of the year. While the growth in profitability
was not commensurate, it is expected to track the growth of sales in the second
half of the year.
Operationally, the primary trading challenge currently faced by the Group relates
to depressed global oil and gas prices which have negatively affected the
business of Dare and those businesses operating in the rest of Africa outside
of the core South Africa market.
Whilst considerable effort has been focused on cutting costs and recovering lost
volumes in those businesses, their future fortunes are largely dependent on a
recovery in the oil price.
A further impact on earnings has been the swing in the sizeable unrealised foreign
exchange gains of the previous year which compare with a sizeable unrealised
foreign exchange loss in the current year due to currency volatility and
fluctuations.
The general trends described above are largely expected to continue for the
remainder of the financial year.
This financial year is the year in which the full impact of lost volumes
relating to the changes in South African labour laws will be felt. However,
a significant portion of the resultant downside impact on earnings has been
offset by way of substantial cost cutting exercises as well as by increased
sales volumes off this lower base.
As described, the Group has focused on refining its strategy to ensure that the
business is able to take full advantage of changing market and technological trends
and that it remains relevant in the markets it serves.
Whilst the performances of the oil price dependent African businesses and the
Australian subsidiary Dare, are far from optimal, the rest of the Group has
recovered well and is likely to continue its upward march, retracing lost ground.
This general forecast has not been reviewed or reported on by the Group’s auditors.
By order of the board
MJN Njeke RL Pike AM Sher
Chairman Chief Executive Officer Chief Financial Officer
20 October 2016
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
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
2196
Date: 20/10/2016 03:45:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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