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Sharenet Sites
Trading statement for the year ended 28 February 2017
ADCORP HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 1974/001804/06)
ISIN: ZAE000000139
Share Code: ADC
(“the Group” or “the Company”)
TRADING STATEMENT FOR THE YEAR ENDED 28 FEBRUARY 2017
In terms of the Listings Requirements of the JSE Limited
(“JSE”), companies are required to publish a trading statement
as soon as a reasonable degree of certainty exists that the
financial results for the period to be reported upon next will
differ by at least 20% from the financial results for the
previous corresponding period.
Trading profits were largely impacted as a result of volumes
lost as a consequence of recent changes to South African labour
laws as well as by trading losses incurred in the Group’s
African operations as a result of the cut back in oil and gas
related projects due to the sustained, depressed global oil
price which also impacted on one of the Group’s Australian
subsidiaries, Dare. Consequently, a goodwill impairment of
AUD8 million has been recognised in the current year on Dare
Energy.
Further negative results were experienced on both the foreign
exchange line as well as the revaluation of the Share Based
Payment reserve where 2016 yielded large gains reflected in
the income statement, and consequently earnings per share. The
effective tax rate has increased due to losses in Africa which
are unlikely to provide future tax relief and have therefore
not been recognised.
Given the retreat in earnings, the Group has embarked on a
number of initiatives to ensure a return to sustainable
earnings growth in order to retrace the earnings path of the
past and in this regard, the Group has restructured its
operations resulting in a large number of job cuts which also
negatively impacted the year’s earnings in respect of severance
packages paid to those affected, the benefits of which will
only be realised in the new financial year.
The results for the year ended 28 February 2017 are expected
to be as follows:
• Normalised earnings per share of between 84 cents and
94 cents per share compared to normalised earnings per
share of 365.3 cents in 2016. This equates to a decrease
of between 74% and 77%
• Basic loss per share of between 145 cents and 155 cents
per share compared to basic earnings per share of 192.0
cents in 2016.
• Headline loss per share of between 23 and 33 cents
compared to headline earnings per share of 299.6 cents
in 2016.
Investors are referred to the recent SENS announcement relating
to the Revised Executive Remuneration Policy issued on 24 March
2017.
In light of the depressed earnings, the Group’s Short Term
Incentive (STI) and Long Term Incentive (LTI) targets have
been revised as follows:
The following metrics, weightings and performance ranges will
apply to the short-term incentive scheme for executives for
the financial year ending 28 February 2018.
Threshold Target Maximum
STI Metric Weight 50% x TGP 100% x TGP 150% x TGP
1 EBITDA growth 50% 45% 60% 75%
2 Cash conversion ratio 25% 70% 80% 90%
3 Individual performance 25% Sub-standard Met or Exceeding
performance exceeded all performance
on most individual on all
individual performance individual
performance metrics performance
metrics metrics
EBITDA is defined as Normalised Earnings before Interest, Tax,
Depreciation and Amortisation. Normalised earnings is defined
as headline earnings excluding amortisation of intangible
assets acquired in business combinations and excluding
transaction costs related to business combinations. EBITDA
targets have been calculated according to organic earnings
growth only and exclude any growth associated with the
acquisition of earnings related to business combinations. In
addition, EBITDA growth targets have been calculated on the
assumption that certain “one off” costs included in the base
such as restructuring costs, foreign exchange losses and the
like, will not re-occur.
TGP is defined as total guaranteed package.
For the performance vested portion of the Long Term Incentive
LTI) awards, the following criteria and performance ranges
will apply in respect of LTI awards made during the financial
year ending 28 February 2018.
Threshold Threshold Threshold
LTI Metric Weighting 50% vesting 75% vesting 100% vesting
1 ROIC 50% 14% 17% 20%
2 Normalised EPS growth 50% 48% 54% 60%
. Return on Invested Capital (ROIC)
Return on invested capital (ROIC) is defined as the Earnings
before Interest, Tax, Depreciation and Amortisation (EBITDA)
return on average invested capital (equity capital, reserves
and net debt). This ratio will be computed for each of the
three financial years and the corporate performance target
(CPT) for this element of LTI vesting will be evaluated as the
simple average of ROIC for the three financial years (FY18,
FY19 and FY20) against the vesting scale as defined above.
. Normalised Earnings Per Share (EPS) growth
This CPT will be computed as the three year compound annual
growth rate (CAGR) of Normalised EPS from FY18 to FY20. The
vesting for this proportion will then be determined based on
the vesting scale as defined above.
The current mean targets for the Group are the target column
for STI (this covers the financial year ending 28 February
2018) and the 75% threshold for LTI (the LTI covers the next
three years).
It is anticipated that the results for the year ended 28
February 2017 will be published on or about 23 May 2017.
The targeted financial information and this trading statement
have not been reviewed or reported on by the Company’s
auditors.
Bryanston
5 May 2017
Sponsor
Deloitte & Touche Sponsor Services Proprietary Limited
Date: 05/05/2017 05:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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