Wrap Text
Preliminary audited results for the year ended 31 December 2016
ADvTECH Limited (“ADvTECH” or “the group”)
(Incorporated in the Republic of South Africa)
Registration number: 1990/001119/06
JSE code: ADH
ISIN number: ZAE 0000 31035
Income taxation number: 9550/190/71/5
www.advtech.co.za
Preliminary audited results for the year ended 31 December 2016
Revenue up 24%
Trading operating profit up 30%
Normalised earnings per share up 24%
Dividend per share for the year 32.5 cents
Summarised consolidated statement of profit or loss
for the year ended 31 December 2016
Audited Audited
Percentage 31 December 31 December
R'm Notes increase 2016 2015
Revenue 24% 3 353.1 2 707.7
Earnings before Interest, Taxation, Depreciation and Amortisation (EBITDA) 33% 740.6 557.9
Operating profit before interest 36% 608.1 448.3
Net finance costs paid (81.7) (119.7)
Interest received 12.6 7.1
Finance costs (94.3) (126.8)
Profit before taxation 60% 526.4 328.6
Taxation (148.5) (102.5)
Profit for the year 67% 377.9 226.1
Profit for the year attributable to:
Owners of the parent 66% 372.4 224.9
Non-controlling interests 5.5 1.2
377.9 226.1
Earnings per share (cents)
Basic 41% 70.9 50.2
Diluted 41% 70.8 50.2
Headline earnings 2 373.5 228.4
Headline earnings per share (cents)
Basic 39% 71.1 51.0
Diluted 39% 71.0 51.0
Normalised earnings 3 350.1 241.5
Normalised earnings per share (cents)
Basic 24% 66.7 53.9
Diluted 24% 66.6 53.9
Number of shares in issue (million) 544.4 530.8
Number of shares in issue net of treasury shares (million) 534.0 519.2
Weighted average number of shares for purposes of basic earnings per share (million) 525.2 447.8
Weighted average number of shares for purposes of diluted earnings per share (million) 525.7 447.8
Net asset value per share including treasury shares (cents) 16% 491.8 424.7
Net asset value per share net of treasury shares (cents) 15% 501.4 434.2
Free operating cash flow before capex per share (cents) 20% 90.9 75.5
Gross dividends per share (cents) 10% 32.5 29.5
Summarised consolidated statement of other comprehensive income
for the year ended 31 December 2016
Audited Audited
31 December 31 December
R'm 2016 2015
Profit for the year 377.9 226.1
Other comprehensive income, net of income tax
Items that may be reclassified subsequently to profit or loss
Exchange differences on translating foreign operations (6.3) 11.9
Total comprehensive income for the year 371.6 238.0
Total comprehensive income for the period attributable to:
Owners of the parent 366.1 237.1
Non-controlling interests 5.5 0.9
371.6 238.0
Summarised consolidated statement of financial position
as at 31 December 2016
Audited Audited
31 December 31 December
R'm 2016 2015
Assets
Non-current assets 4 222.7 3 894.2
Property, plant and equipment 2 788.7 2 538.6
Proprietary technology systems 45.3 54.8
Goodwill 1 170.1 1 085.3
Intangible assets 206.6 203.5
Investment 12.0 12.0
Current assets 422.7 408.5
Trade and other receivables 235.6 193.0
Other current assets 58.9 39.3
Bank balances and cash 128.2 176.2
Total assets 4 645.4 4 302.7
Equity and liabilities
Equity 2 677.3 2 254.5
Non-current liabilities 852.1 899.1
Long-term bank loans 758.0 801.1
Deferred taxation liabilities 94.1 98.0
Current liabilities 1 116.0 1 149.1
Current portion of long-term bank loans 31.1 16.8
Short-term bank loan 425.0 515.2
Trade and other payables 339.9 329.1
Taxation 8.3 11.7
Fees received in advance and deposits 287.5 276.3
Bank overdraft 24.2 -
Total liabilities 1 968.1 2 048.2
Total equity and liabilities 4 645.4 4 302.7
Supplementary information
for the year ended 31 December 2016
Audited Audited
31 December 31 December
R'm 2016 2015
Capital expenditure - current year 361.8 406.1
Capital commitments 1 255.3 1 566.7
Authorised by directors and contracted for 144.3 256.4
Authorised by directors and not yet contracted for 1 111.0 1 310.3
Anticipated timing of spend 1 255.3 1 566.7
0 - 2 years 555.9 598.9
3 - 5 years 202.2 419.2
more than 5 years 497.2 548.6
Operating lease commitments in cash - future years 355.7 383.9
Summarised consolidated statement of changes in equity
for the year ended 31 December 2016
Audited Audited
31 December 31 December
R'm 2016 2015
Balance at beginning of the year 2 254.5 928.8
Total comprehensive income for the year 371.6 238.0
Dividends declared to shareholders (164.7) (117.1)
Share-based payment expense 5.8 3.8
Shares issued 190.7 336.4
Rights issue - 850.0
Share issue costs (1.5) (15.2)
Share options exercised 8.0 19.5
Non-controlling interests arising on acquisition 12.9 10.3
Balance at end of the year 2 677.3 2 254.5
Summarised consolidated segmental report
for the year ended 31 December 2016
Percentage Audited Audited
increase/ 31 December 31 December
R'm (decrease) 2016 2015
Revenue 24% 3 353.1 2 707.7
Schools 15% 1 643.7 1 432.0
Tertiary 28% 1 252.5 981.5
Resourcing 55% 460.9 296.9
Intra group revenue (4.0) (2.7)
Operating profit before interest 36% 608.1 448.3
Schools 16% 345.4 298.8
Tertiary 67% 223.3 134.0
Resourcing (31%) 20.2 29.1
Litigation settlement 23.5 -
Corporate and financing costs (2.0) (12.2)
Litigation (2.3) (1.4)
Property, plant and equipment and proprietary technology systems 9% 2 834.0 2 593.4
Schools 8% 2 193.6 2 032.8
Tertiary 14% 632.8 552.7
Resourcing (4%) 7.6 7.9
Summarised consolidated statement of cash flows
for the year ended 31 December 2016
Audited Audited
Percentage 31 December 31 December
R'm Note increase 2016 2015
Cash generated from operations 4 35% 748.9 555.8
Movement in working capital (40.4) 1.7
Cash generated by operating activities 27% 708.5 557.5
Net finance costs paid (81.7) (119.7)
Taxation paid (160.0) (98.3)
Dividends paid (164.5) (116.9)
Net cash inflow from operating activities 302.3 222.6
Net cash outflow from investing activities (441.0) (1 340.4)
Net cash inflow from financing activities 67.2 1 180.2
Net (decrease)/increase in cash and cash equivalents (71.5) 62.4
Cash and cash equivalents at beginning of the year 176.2 113.8
Net foreign exchange differences on cash and cash equivalents (0.7) -
Cash and cash equivalents at end of the year 104.0 176.2
Free operating cash flow before capex per share
for the year ended 31 December 2016
Percentage 31 December 31 December
R'm increase 2016 2015
Profit for the year 377.9 226.1
Adjusted for non-cash IFRS and lease adjustments (after taxation) 6.5 (2.8)
Net operating profit after taxation - adjusted for non-cash IFRS and lease adjustments 384.4 223.3
Depreciation and amortisation 132.5 109.6
Other non-cash flow items (after taxation) 1.1 3.5
Operating cash flow after taxation 54% 518.0 336.4
Movement in working capital (40.4) 1.7
Free operating cash flow before capex 41% 477.6 338.1
Weighted average number of shares for purposes of basic earnings per share (million) 525.2 447.8
Free operating cash flow before capex per share (cents) 20% 90.9 75.5
Notes to the summarised consolidated financial statements
for the year ended 31 December 2016
1. Statement of compliance
The summarised consolidated financial statements are prepared in accordance with the requirements of the JSE Limited Listings Requirements for preliminary reports,
and the requirements of the Companies Act of South Africa applicable to summarised financial statements. The Listings Requirements require preliminary 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 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 financial statements, from which the summarised consolidated financial statements were derived, are in terms of IFRS and are consistent with the
accounting policies applied in the preparation of the previous consolidated financial statements.
The preparation of the group's summarised consolidated financial results for the year ended 31 December 2016 was supervised by Didier Oesch CA(SA), the group's
financial director.
Post-balance sheet events
The directors are not aware of any matter or circumstance occurring between the date of the statement of financial position and the date of this report that
materially affects the results of the group for the year ended 31 December 2016 or the financial position at that date.
Independent auditor's opinion
These summarised consolidated financial statements for the year ended 31 December 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 summarised consolidated financial
statements were derived). A copy of the auditor's report on the summarised consolidated financial statements and of the auditor's report on the annual consolidated
financial statements are available for inspection at the company's registered office, together with the financial statements identified in the respective auditor's reports.
The auditor's report does not necessarily cover all the information contained in this announcement. Shareholders are therefore advised that in order to obtain a full
understanding of the nature of the auditor's work, they should obtain a copy of their report together with the accompanying financial information from the
company's registered office.
Any reference to future financial performance included in this announcement, has not been reviewed or reported on by the company's auditors.
Audited Audited
31 December 31 December
R'm 2016 2015
2. Determination of headline earnings
Profit for the year attributable to owners of the parent 372.4 224.9
Items excluded from headline earnings per share 1.1 3.5
Loss on sale of property, plant and equipment 1.5 4.9
Taxation effects of adjustments (0.4) (1.4)
Headline earnings 373.5 228.4
3. Determination of normalised earnings
Headline earnings 373.5 228.4
Items excluded from normalised earnings per share (23.4) 13.1
Litigation costs 2.3 1.4
Corporate and financing costs 2.0 12.2
Litigation settlement
- Settlement received (18.0) -
- Reversal of provision for counterclaim (5.5) -
- Reversal of interest on provision for counterclaim (5.5) -
Taxation effects of adjustments 1.3 (0.5)
Normalised earnings 350.1 241.5
4. Note to the summarised statement of cash flows
Reconciliation of profit before taxation to cash generated from operations
Profit before taxation 526.4 328.6
Adjusted for non-cash IFRS and other adjustments (before taxation) 6.8 (7.0)
533.2 321.6
Adjust: 215.7 234.2
Depreciation and amortisation 132.5 109.6
Net finance costs paid 81.7 119.7
Other non-cash flow items 1.5 4.9
Cash generated from operations 748.9 555.8
Audited
31 December
R'm 2016
5. Business combinations(1)
5.1 Capsicum Culinary Studio(2)
A 100% interest in Capsicum Culinary Studio (Pty) Ltd was acquired on 1 July 2016 for a consideration of R57.8 million.
Fair value assets and liabilities acquired
Intangible assets 9.7
Goodwill 59.3
Property, plant and equipment 2.8
Other non-current assets 3.6
Current assets 27.1
Cash and cash equivalents 14.9
Non-current liabilities (2.7)
Current liabilities (56.9)
57.8
Revenue of R34.2 million and profit after taxation of R5.7 million has been included in the summarised consolidated statement of profit or loss.
Revenue of R67.5 million and profit after taxation of R12.6 million would have been included in the summarised consolidated statement of
profit or loss had the acquisition been done at the beginning of the annual reporting period.
This acquisition was made as an addition to our tertiary division and provides expansion opportunities.
5.2 The Oxbridge group(2)
A 51% interest in the Oxbridge group was acquired on 1 July 2016 for a consideration of R40.7 million.
Fair value assets and liabilities acquired
Intangible assets 8.3 8.3
Goodwill 28.0
Property, plant and equipment 2.3
Current assets 23.0
Cash and cash equivalents 2.2
Non-current liabilities (2.4)
Current liabilities (7.8)
Non-controlling interest(3) 12.9)
40.7
Revenue of R46.1 million and profit after taxation of R5.0 million has been included in the summarised consolidated statement of profit or loss.
Revenue of R96.3 million and profit after taxation of R10.3 million would have been included in the summarised consolidated statement of profit or loss had the
acquisition been done at the beginning of the annual reporting period.
This acquisition was made as an addition to our tertiary division and provides expansion opportunities.
1 The consideration paid for the business combinations includes amounts which has been recognised as goodwill in relation to the benefit of expected synergies and
expansion opportunities.
2 The accounting for these business combinations are still within the measurement period.
3 Measured at proportionate share of net asset value.
Commentary
Overview
The directors are pleased to announce excellent results for 2016, continuing the trend of strong performance from the business as it pursues its growth strategy. Both the
schools and tertiary divisions performed well with revenue growth and operating profit up. The resourcing division's profit declined due to the uncertain economy,
though revenue has increased as a result of the recent acquisitions.
Highlights of the year include a number of strategic acquisitions, expanding our footprint outside of South Africa, increasing our schools presence in the Western Cape,
successfully introducing blended learning models and growing our position in the distance education sector. The investment of the International Finance Corporation
(IFC), a member of the World Bank Group, was an important milestone for the group and supports our growth strategy with a particular focus on sub-Saharan Africa.
The summary consolidated statement of profit and loss, excluding the benefit of the settlement of the long standing litigation matter with the Welihockyj's, presented
below reflects the excellent trading results.
Percentage 31 December 31 December
R'm increase 2016 2015
Revenue 24% 3 353.1 2 707.7
Earnings before Interest, Taxation, Depreciation and Amortisation (EBITDA) 29% 717.1 557.9
Operating profit before interest 30% 584.6 448.3
Net finance costs paid (87.2) (119.7)
Interest received 12.6 7.1
Finance costs (99.8) (126.8)
Profit before taxation 51% 497.4 328.6
Taxation (147.0) (102.5)
Profit for the year 55% 350.4 226.1
Group revenue increased by 24% while trading operating profit grew by 30% indicating continued operating margin improvement.
Finance costs decreased as a result of a reduction in the group debt following the rights issue in 2015 and the issue of shares to the IFC. This, together with a decrease in
the taxation rate, resulted in trading profit for the year increasing by an impressive 55%. The normalised earnings per share increase of 24% to 66.7 cents (2015: 53.9 cents)
reflects the increase in the weighted average number of shares in issue, as a result of the rights issue and the issue of shares to the IFC.
Cash generated by operating activities, including the benefit of the litigation settlement, increased by 27% to R709 million. Together with financing inflows of R67 million,
this has enabled the payment of investments and capex of R441 million, financing costs of R82 million, taxation of R160 million and dividends of R165 million. The
debtors' book continues to be well managed with trade receivables only increasing by 22% compared to growth in revenue of 24%.
The table below illustrates the significant growth in enrolments in the last three years, and highlights the continued growth in 2017.
February February February February
Enrolments 2014 2015 2016 % increase 2017 % increase
Schools* 13 541 22 877 24 199 6% 26 713 10%
Tertiary full qualifications 20 113 24 332 29 138 20% 33 463 15%
Total 33 654 47 209 53 337 13% 60 176 13%
* Schools: 2015 - 2017 excludes Maragon Edendale (management contract discontinued).
** The February 2017 Schools enrolments includes Elkanah House, an acquisition which is still subject to due diligence and competition commission approval.
Schools division
The schools division maintained its leading position in the premium sector and is now establishing itself in the mid-fee sector. Enrolment growth in the schools division
was 6% as existing and newly created capacity is filled. This resulted in a revenue increase of 15% to R1.6 billion and a 16% growth in operating profit to R345 million.
Operating margins remained consistent at 21%. The division contributed 49% to group revenue.
Our Independent Examination Board (IEB) students achieved a 100% matric pass rate and averaged 1.8 distinctions per student. Our NSC matric students achieved a 99%
pass rate compared to the national pass rate of 73% and averaged 1.0 distinction per student. Combined, 98% of our school students qualified for entrance into higher
education institutions.
As at the end of December 2016, the division consisted of 78 schools (2015: 73) across 42 campuses under the brands: Abbotts College, ADvTECH Academies, Centurus
Colleges, CrawfordSchools(TM), Junior Colleges, Maravest Group and Trinityhouse.
Two greenfield schools were developed under the ADvTECH Academies umbrella in the mid-fee sector, Founders Hill College in Modderfontein opened in 2016 and
Copperleaf College in Centurion opened in January 2017. The Summit College acquisition, which was concluded in 2016, will be included in the results from 2017. The
strategic acquisitions of Glenwood House in George and Elkanah House in Cape Town, subject to due diligence and competition commission approval, strengthens our
position in the Western Cape.
Tertiary division
The tertiary division achieved excellent growth with revenue up 28% to R1.3 billion contributing 37% to group revenue. Operating profit increased by 67% to R223 million
with operating margins up from 14% to 18% demonstrating operational leverage from strong volume growth.
The tertiary division includes The Independent Institute of Education (IIE) which operates Varsity College (including The Business School at Varsity College), Rosebank
College, Vega, The Design School Southern Africa (DSSA), and also includes the tertiary brands of Capsicum Culinary Studio and the Oxbridge group. The division had a
national urban footprint of 27 campuses at year end.
Varsity College continues to attract students and fill up capacity at its existing sites. The Rosebank College Braamfontein mega campus and the Connected Campus in
Polokwane contributed positively to the performance of Rosebank College. These two campuses provide a model for the continued expansion of the brand into new
markets. Vega and DSSA continue to reap the benefits of the move into more suitable campuses in 2015.
The tertiary division has focused on expansion into new and growing market segments creating a platform for strong organic growth. The 51% acquisition of the
Oxbridge group in 2016 added 21 000 registered distance learning students to the division. Additionally the acquisition of the University of Africa in Zambia, effective in
2017, signifies our move further into the continental distance education sector. We aim to make quality tertiary education available to the broader public, not only in
South Africa, but in the greater part of Africa as well.
Another noteworthy acquisition was that of Capsicum Culinary Studio, which spearheads our development of the hotel, hospitality and tourism education offering. There
are indications of unmet demand for various industry-specific institutions in sectors that are growing in sub-Saharan Africa. We are investigating these in order to identify
further growth opportunities.
Resourcing division
The resourcing division had a challenging year with the tough economic conditions compounded by a number of external shocks, which adversely affected business
confidence resulting in a significant delay in the completion of appointments. Notwithstanding the drop in operating profit, the division is a strong cash generator and
continues to contribute positively to the group. Important to note is that there was a visible improvement in the second half of 2016, a positive trend that has continued
into the first quarter of 2017.
In addition to specialist permanent recruitment focus, in which we have a leading market share, in order to drive more predictable earnings, the division has embarked on
a strategy to increase contracting revenues in our key markets which is gaining momentum both locally and in the rest of Africa. The division comprises permanent and
temporary staffing solutions as well as recruitment advertising, e-Recruitment, payroll solutions and advertising response handling. Its portfolio of brands include: Brent
Personnel, Cassel & Company, CA Global, Africa HR Solutions, CA Financial Appointments, Communicate Personnel, Insource. ICT/IT Edge, Network Recruitment, Tech-Pro
Personnel and The Working Earth.
Declaration of final dividend no 15
The board is pleased to announce the declaration of a final gross dividend of 19.0 cents (2015: 17.0 cents) per ordinary share in respect of the year ended 31 December
2016. This brings the full year dividend to 32.5 cents (2015: 29.5 cents) per share.
This is a dividend as defined in the Income Tax Act, 1962, and is payable from income reserves. The South African dividend taxation (DT) rate is 20%. The net amount per
share payable to shareholders who are not exempt from DT is 15.2 cents per share, while it is 19.0 cents per share to those shareholders who are exempt from DT.
There are 544 368 530 ordinary shares in issue; the total dividend amount payable is R103 million.
The salient dates and times applicable to the dividend referred to above are as follows:
2017
Publication of declaration and finalisation information Wednesday, 22 March
Last day to trade in order to participate in the dividend Monday, 10 April
Trading commences ex-dividend Tuesday, 11 April
Record date Thursday, 13 April
Payment date Tuesday, 18 April
Share certificates may not be dematerialised and rematerialised between Tuesday, 11 April 2017 and Thursday, 13 April 2017, both days inclusive.
Directorate
Dr Jacqueline Chimhanzi and Dr Jane Hofmeyr were appointed as independent non-executive directors effective from 1 January 2017. The company secretary, Carmen
Koopman, has resigned with effect from 28 April 2017.
Prospects
We continue to see numerous opportunities both at home and abroad. In our core markets we expect organic and greenfield growth to continue despite the fact that
competition has increased and difficult economic conditions remain. We are also excited by opportunities available in new market segments and through new product
offerings. In addition, our investigations into new regions is providing us with even more opportunities and this, we believe, will enhance our business performance and
diversify our portfolio.
On behalf of the board
Chris Boulle Roy Douglas Didier Oesch
Chairman Chief executive officer Group financial director
22 March 2017
Directors: CH Boulle* (Chairman), RJ Douglas (CEO), JDR Oesch (Financial), JS Chimhanzi*, BM Gourley*, JM Hofmeyr*, JD Jansen*, SC Masie*, KDM Warburton*, SA Zinn*
*Non-executive
Group company secretary: CC Koopman.
Registered office: ADvTECH House, Inanda Greens, 54 Wierda Road West, Wierda Valley, Sandton 2196.
Transfer secretaries: Link Market Services South Africa (Pty) Ltd, Rennie House, 19 Ameshoff Street, Braamfontein 2017.
Sponsor and corporate advisors: Bridge Capital Advisors (Pty) Ltd, 27 Fricker Road, Illovo 2196.
Date: 22/03/2017 08:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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