Wrap Text
Audited summarised consolidated provisional results
for the year ended 28 February 2018
Adcorp Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number 1974/001804/06)
Share code: ADR
ISIN: ZAE000000139
(Adcorp or Adcorp Group or the Group)
Audited summarised consolidated provisional results
for the year ended 28 February 2018
Salient features
* Revenue for the year decreased by 3% to R15.3 billion
* Cash generated by operations up 51% to R390 million (2017:
R258 million)
* Underlying EBITDA* for the year increased by 4% to R387 million
* Underlying EBITDA* for Professional Services increased by 15% to
R265 million
* Underlying EBITDA* for Industrial Services Australia increased by 67%
to R58 million
* Underlying EBITDA* for Financial Services increased by 11% to
R58 million
* R1 billion refinance and disposal of Nihilent
* Central costs reduced by R101 million from prior year excluding once
off costs
* Loss per share at 517,0 cents per share compared to 179.1 cents in the
prior year
* Headline loss per share of 146,1 cents per share compared to restated
57,5 cents per share in the prior year
Pro Forma Financial Information
The pro forma financial information below has been prepared for
illustrative purposes only to provide information on how the underlying
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 audited consolidated
provisional results which summarises the consolidated financial
statements for the year ended 28 February 2018.
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 underlying
EBITDA and should be read in conjunction with the unmodified Deloitte &
Touche independent reporting accountants’ report thereon, issued on 17 May
2018, which is available for inspection at Adcorp’s registered office.
R'000 Notes FY2018 FY2017 % var
Revenue 1 15 325 391 15 804 081 (3)%
Cost of Sales 1 (13 097 630) (13 470 873) (3)%
Gross Profit 1 2 227 761 2 333 208 (5)%
Other income 1 58 067 46 436 25%
Operating expenses 1 (1 898 367) (2 006 605) (5)%
Underlying EBITDA* 1 387 461 373 039 4%
Once-off costs 2 (250 842) (26 668) 841%
Earnings before depreciation and
amortisation 1 136 619 346 371 (61)%
Depreciation & amortisation 1 (128 589) (144 494) (11)%
Impairment of intangible assets,
goodwill and bonds 1 (477 797) (132 519) 261%
Profit on disposal of associate 1 184 960 - -
Net cost of funding 1 (124 029) (141 870) (13)%
Share of profits from associates 1 16 476 23 396 (30)%
Loss before taxation 1 (392 360) (49 116) 699%
Taxation 1 (28 350) 5 462 (619%)
Loss - continuing operations 1 (420 710) (43 654) 864%
Loss - discontinued operations 1 (140 322) (148 758) (6%)
Net loss for the year 1 (561 032) (192 412) 192%
Other comprehensive loss 1 (82 785) (128 166) (35%)
Total comprehensive loss for
the year 1 (643 817) (320 578) 101%
Underlying EBITDA* per share –
cents
Basic profit per share – cents 3 355.6 344.2 3%
Diluted profit per share - cents 3 346.8 334.7 2%
Notes:
1. As per the audited statement of comprehensive income for the year ended
28 February 2018.
2. Being once-off transaction costs. These include R115 million that was
written off for non-recoverable accounts receivable; R50 million
retrenchments costs; R50 million restructuring costs and R35 million
relating to accounting correction and change in estimates.
3. Per share calculation is based on underlying EBITDA.
* Underlying EBITDA is defined as EBITDA adjusted for once-off cost.
Once-off cost includes bad debts written off, retrenchment cost,
restructure cost and certain accounting adjustments.
Operational update
Group revenue decreased by 3% in FY2018. Revenue for the Adcorp Industrial
Services business was flat for both South Africa and Australia operations.
Adcorp Professional Services continued its strong trajectory in both South
Africa and Australia, with 11% revenue growth in South Africa. Australian
topline for Professional Services was down by 12%, largely due to the off-
boarding of certain low margin clients, which benefitted the EBITDA for
this division. Adcorp Support Services revenue declined by 9% on the back
of a challenging year for the business. The Financial Services business had
a strong year, with revenue growth of 17% while the Training business had
a tough year which resulted in revenue declining by 29%.
As per the reconciliation on prior year earnings provided under the section
“Restatement of prior period results” below, the EBITDA for 2017 was
restated to R373 million excluding the impact of transaction costs incurred
in 2017. This restatement arose due to the classification of the losses from
the Rest of Africa operations as discontinued operations, in addition to
some prior year adjustments.
The Group underlying EBITDA for the year grew by 4% to R387 million compared
to the above restated 2017 results, excluding once-off costs. This was
argely driven by the following:
* EBITDA for the Professional Services segment grew by 15% from prior year
to R265 million, with Professional Services Australia’s EBITDA increasing
by 6% while Professional Services South Africa EBITDA grew strongly by 21%.
The increased profitability for the Professional Services segment was
driven by continued growth in the traditional resourcing business. The
emerging recruitment process outsourcing (RPO) and managed service provider
(MSP) solutions continue to gain traction with clients and exceeded the
targets for the year. The segment has also benefited from increased volumes
in the higher margin, permanent placements and projects businesses.
* Industrial Services Australia had a strong year, with 67% improvement in
EBITDA. This has been driven by recovery in profitability for DARE, which
has benefited from the strategy of diversifying its exposure from oil and
gas into other heavy engineering sectors.
* Financial Services posted solid results following a good trading year, with
EBITDA growth of 11% to R58 million. This was bolstered by the card payment
business posting a profit for the first time this year.
* Central overheads for South Africa, excluding once-costs, reduced from prior
year by R101 million to R324 million. This is part of the new management
team’s ongoing process to right size the business and ensure that it is
efficient and optimal.
These strong gains were reduced by:
* EBITDA for Industrial Services South Africa was down by 15% on prior year
to R338 million. This was largely as a result of Fortress, which is a
Payroll Bureau business providing upfront funding of client payrolls. This
business has been wound down due to the business being non-core as well as
serious credit control weaknesses that resulted in significant accounts
receivables write-offs in the current year. Management believe that the
core of the Industrial Services South Africa business remains solid, and
are in the process of driving structural and process efficiencies into that
segment.
* The Support Services segment EBITDA declined by 30% to R49 million. Various
strategic options have been tabled for implementation in FY2019, including
aligning back office infrastructure to Industrial Services South Africa in
order to drive economies of scale and reduce the cost base of the business.
* The Training division incurred an EBITDA loss of R33 million for the current
year. There is a significant project underway to completely restructure this
business. The restructure will result in the closure of loss making revenue
streams and align the Training business to the strategic imperative of
the Group.
Once-off costs of R251 million were incurred in the current year. These
include R115 million that was written-off for non-recoverable accounts
receivable (largely from the recently shut-down Fortress business);
R50 million retrenchments costs, resulting in a 260 headcount reduction both
at executive and junior level, R51 million of restructure costs that include
severance costs for exiting the Group’s offshoring contract, new software
implementation as well as debt refinance costs for the exit of the DMTN
programme and R1 billion working capital facility implementation. These
activities position the business well for the future.
Repositioning the Group
The financial period under review has been transformation intensive for
the Group, with a change in leadership at both board and management level
and a clear objective to reposition the Group for sustainable growth and
profitability. The new leadership team’s priorities for the strategic
turnaround are as follows:
1. Building a strong business that is focused on leveraging its core;
2. Ensuring that the business is lean and agile;
3. Strengthening the brand; and
4. Transforming the culture.
These initiatives are being implemented and will be discussed in further
detail during our investor roadshows. A few highlights include:
* Strategic review of all the operating segments, including the Support
Services and Training businesses, has been completed. This review
enabled the leadership team to gain a firm understanding of the key levers
required to facilitate future sustainable growth for the Group. The Group
is now able to identify and dispose of non-core businesses, realign
underperforming businesses and address underperforming revenue streams.
* Robust working capital management practices have been implemented, and,
as reflected by the R115 million write-off above, a clean-up of the
debtors’ book has been undertaken in order to ensure that the Group is not
exposed to further significant write-offs going forward. The Group brought
back in-house the previously offshored order-to-cash cycle. The transition
was completed in November 2017, enabling Adcorp to commence a process to
improve the underlying credit vetting and collections procedures. This
should improve debtors’ collections for the Group as well as result in
operating expense savings going forward.
* An evaluation of historical acquisitions has been performed to ensure
alignment of the costs of acquisition versus the current value derived
from acquired businesses before strategic restructuring. This has resulted
in the write-off of goodwill amounting to R478 million for the current year.
* The review of the medium to long term prospects for the Rest of Africa
operations culminated in a decision to exit these operations. The results
for the year include the related operational losses and impairment
adjustments.
* As previously announced to the shareholders through SENS, the Group
concluded the sale of its associate, Nihilent. The Group obtained net cash
proceeds of R305 million that were applied towards reducing borrowings. The
current year results include pre-tax profit on the disposal of R185 million.
* In December 2017 the Group successfully exited the South Africa Domestic
Medium Term Note (DMTN) program, repaid all outstanding Notes and replaced
this funding with a revolving working capital facility. The facility affords
the Group access to R1 billion plus a seasonal accordion facility of
R150 million. The terms of the new funding facility are more aligned with
Adcorp’s requirements and afford the Group the opportunity to manage its
cost of funding.
The refinance, together with the additional R305 million repayment of
borrowings from the proceeds on disposal of our share in Nihilent,
significantly reduced funding costs in the second half of the year, and
the total annual net interest paid was 14% down from FY2017.
Our focus on cash management is yielding results and the Group generated net
cash from operations of R133 million compared to the net cash utilised by
operations in the prior year of R19 million.
No dividend was declared or paid in the current financial year.
The presentation to investors is available on the Company’s website at
www.adcorpgroup.com.
Restatement of prior period results
There are prior year adjustments that are included in this year’s results,
meaning that current year comparative balances will differ in some respects
to those reported in FY2017. In addition, the financial results relating to
the Rest of Africa have been disclosed retrospectively as discontinued
operations, in line with the requirements of International Financial
Reporting Standards. The reconciliation below provides a high level
overview of the impact:
Loss
Operating After
EBITDA Profit Tax
Reconciliation: (R’000) (R’000) (R’000)
As reported in FY2017 303 786 130 310 (160 326)
Transfer of the Rest of Africa losses to
discontinued operations 94 462 97 717 148 758
FY2017 continuing operations before prior
year adjustments 398 248 228 027 (11 568)
Impact of prior year adjustments (25 209) (26 149) (32 089)
FY2017 continuing operations restated for
impact of prior year adjustments 373 039 201 878 (43 657)
Total restated FY2017 continuing and
discontinued operations 278 577 104 161 (192 415)
Headline
(Loss) (Loss)
Earnings Earnings
Per Per Total
Share Share Assets
Reconciliation: (R’000) (R’000) (R’000)
As reported in FY2017 (149,5c) (28,0c) 5 744 072
Transfer of the Rest of Africa
losses to discontinuing operations 137,3c 137,3c (288 993)
FY2017 continuing operations (12,2c) 109,3c 5 455 079
before prior year adjustments
Impact of prior year adjustments (29,6c) (29,5c) (14 533)
FY2017 continuing operations
restated for impact of prior year
adjustments (41,8c) 79,8c 5 440 546
Total restated FY2017 continuing
and discontinued operations (179,1c) (57,5c) 5 729 539
Changes to the board of Adcorp
The following changes to the directorate took place during the period
under review:
* Appointment of C Maswanganyi as a non-executive director (with
MR Ramaite being his alternate) with effect from 1 March 2017
* Appointment of CJ Kujenga as the Chief Financial Officer with effect
from 1 July 2017
* Appointment of S Sithole and N Nongogo as non-executive directors with
effect from 4 July 2017
* Resignation of BE Bulunga, NS Ndhlazi, MJN Njeke, TDA Ross and PC Swart
with effect from 11 July 2017
* Appointment of GT Serobe as a non-executive director and the Chairman
with effect from 11 July 2017
* Appointment of FS Mufamadi as a non-executive director with effect from
11 July 2017
* Resignation of RL Pike with effect from 31 July 2017
* Appointment of MA Jurgens as the Chief Operating Officer with effect
from 1 August 2017
* Appointment of I Dutiro as the Chief Executive Officer with effect from
1 October 2017
* Resignation of N Nongogo with effect from 13 October 2017
* Appointment of TP Moeketsi as a non-executive director with effect from
5 February 2018
We thank the outgoing board members for their contribution over the years.
By order of the board
GT Serobe I Dutiro
Chairman Chief Executive Officer
18 May 2018
Audited summarised consolidated statement of financial position
as at 28 February 2018
2018 2017 2016
Restated Restated
Notes R’000 R’000 R’000
Assets
Non-current assets 1 719 016 2 396 439 2 569 110
Property and equipment 65 756 80 458 89 797
Intangible assets 275 785 611 369 748 474
Goodwill 1 162 010 1 373 162 1 513 633
Investments 13 244 10 000 10 000
Investment in associate – 140 808 125 249
Other financial assets 10 361 30 930 –
Deferred taxation 191 860 149 712 81 957
Current assets 2 801 348 3 044 107 3 238 675
Trade receivables 2 272 550 2 359 246 2 488 095
Other receivables 77 208 103 377 121 378
Other financial assets 12 191 931 29 728
Taxation prepaid 79 071 41 804 55 520
Cash and cash equivalents 360 328 538 749 543 954
Assets from continuing operations 4 520 364 5 440 546 5 807 785
Assets held for sale 5 10 434 288 993 565 837
Total assets 4 530 798 5 729 539 6 373 622
Equity and liabilities
Capital and reserves 1 602 589 2 215 406 2 630 806
Share capital and share premium 1 740 858 1 740 858 1 740 858
Reserves (138 269) 474 548 889 948
Interest-bearing liabilities 1 218 559 1 809 879 1 991 483
Non-current liabilities 7 978 196 649 229 1 349 256
Long-term loans 7.1 978 196 649 229 1 349 256
Current liabilities 240 363 1 160 650 642 227
Short-term portion of long-term
loans 7.2 228 687 720 603 274 383
Bank overdraft 11 676 440 047 367 844
Non-interest-bearing liabilities 1 680 405 1 600 151 1 587 134
Non-current liabilities 100 074 107 030 152 256
Share-based payment liability – – 38 623
Deferred taxation 100 074 107 030 113 633
Current liabilities 1 580 331 1 493 121 1 434 878
Trade and other payables 1 225 030 1 175 389 1 163 916
Share-based payment liability 8 133 39 067 –
Provisions 287 202 242 528 239 118
Taxation 59 966 36 137 31 844
Liabilities from continuing
operations 4 501 553 5 625 436 6 209 423
Liabilities directly associated
with assets classified as held
for sale 5 29 245 104 103 164 199
Total equity and liabilities 4 530 798 5 729 539 6 373 622
Audited summarised consolidated statement of comprehensive income
for the year ended 28 February 2018
Restated
Notes 2018 2017
Continuing operations R’000 R’000
Revenue 15 325 391 15 804 081
Cost of sales (13 097 630) (13 470 873)
Gross profit 2 227 761 2 333 208
Other income 58 067 46 436
Operating expenses (excluding
depreciation and amortisation) (2 149 209) (2 033 273)
Earnings before depreciation and
amortisation 136 619 346 371
Depreciation and amortisation (128 589) (144 494)
Operating profit 8 030 201 877
Interest income 16 614 9 085
Interest expense (140 643) (150 955)
Impairment of intangible assets,
goodwill and bonds (477 797) (132 519)
Profits from the sale of associate 184 960 –
Share of profits from associates 16 476 23 396
Loss before taxation (392 360) (49 116)
Taxation (28 350) 5 462
Loss for the year from continuing
operations (420 710) (43 654)
Discontinued operations
Loss for the year from discontinued
operations 5 (140 322) (148 758)
Net loss for the year (561 032) (192 412)
Other comprehensive (loss*)/income
Exchange differences on translating
foreign operations (50 677) (86 448)
Exchange differences arising on the net
investment of a foreign operation (30 964) (41 905)
Fair value adjustment of derivative
financial instrument 1 102 1 869
Other comprehensive loss for the year,
net of tax (80 539) (126 484)
Non-controlling interest (2 246) (1 682)
Total comprehensive loss for the year (643 817) (320 578)
Loss attributable to:
Owners of the parent from continuing
operations (422 956) (45 336)
Owners of the parent discontinued
operations (140 322) (148 758)
Non-controlling interest 2 246 1 682
Total comprehensive loss attributable
to:
Owners of the parent continuing
operations (501 249) (170 138)
Owners of the parent discontinued
operations (140 322) (148 758)
Non-controlling interest 2 246 1 682
Continuing operations 6
Basic loss per share – cents (388,2) (41,8)
Diluted loss per share (378,6) (40,7)
Discontinued operations 6
Basic loss per share – cents (128,8) (137,3)
Diluted loss per share (125,6) (133,5)
Total basic loss per share – cents
Basic loss per share – cents 6 (517,0) (179,1)
Diluted loss per share (504,2) (174,1)
* All items included in other comprehensive loss will be reclassified to
profit and loss upon derecognition.
Audited summarised consolidated statement of changes in equity
for the year ended 28 February 2018
Share Share Treasury
capital premium shares
R’000 R’000 R’000
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 –
Treasury shares acquired during the year – – (23 973)
Dividend distributions – – –
Recognition of BBBEE and staff share-
based payments – – –
Profit (loss) for the year (as previously
disclosed) – – –
Restatement – – –
Minority interest – – –
Realised foreign exchange gains through
profit and loss on disposal of business – – –
Other comprehensive income (loss) for
the year – – –
Balance as at 29 February 2016 (restated) 2 749 1 738 109 (36 963)
Dividend distributions – – –
Recognition of BBBEE and staff share-
based payments – – –
(Loss) profit for the year – – –
Other comprehensive (loss) income for
the year – – –
Minority interest – – –
Balance as at 28 February 2017 (restated) 2 749 1 738 109 (36 963)
Issue of treasury shares under employee
share option plan – – 13 961
Dividend distributions – – –
Recognition of BBBEE and staff share-
based payments – – –
(Loss) profit for the year – – –
Non-controlling interest – – –
Equity due to change in control – – –
Other comprehensive loss for the year – – –
Balance as at 28 February 2018 2 749 1 738 109 (23 002)
Share- Foreign
based currency Cash flow
payment translation hedging
reserve reserve reserve
R’000 R’000 R’000
Balance as at 28 February 2015 114 581 (3 442) (2 391)
Issue of ordinary shares under – – –
employee share option plan
Treasury shares acquired during
the year – – –
ividend distributions – – –
Recognition of BBBEE and staff share-
based payments 7 206 – –
Profit (loss) for the year (as
previously disclosed) – – –
Restatement – – –
Minority interest – – –
Realised foreign exchange gains
through profit and loss on disposal
of business – 7 734 –
Other comprehensive income (loss)
for the year – 106 445 (580)
Balance as at 29 February 2016
(restated) 121 787 110 737 (2 971)
Dividend distributions – – –
Recognition of BBBEE and staff share-
based payments 7 206 – –
(Loss) profit for the year – – –
Other comprehensive (loss) income for
the year – (86 448) 1 869
Minority interest – – –
Balance as at 28 February 2017
(restated) 128 993 24 289 (1 102)
Issue of treasury shares under
employee share option plan – – –
Dividend distributions – – –
Recognition of BBBEE and staff share-
based payments 8 317 – –
(Loss) profit for the year – – –
Non-controlling interest –
Equity due to change in control – – –
Other comprehensive loss for the year – (50 677) 1 102
Balance as at 28 February 2018 137 310 (26 388) –
Attributable
to equity
holders Non-
Retained of the controlling
earnings parent interest
R’000 R’000 R’000
Balance as at 28 February 2015 650 806 2 468 153 (4 042)
Issue of ordinary shares under
employee share option plan – 19 269 –
Treasury shares acquired during
the year – (23 973) –
Dividend distributions (164 571) (164 571) –
Recognition of BBBEE and staff
share-based payments – 7 206 –
Profit (loss) for the year (as
previously disclosed) 207 672 207 672 (862)
Restatement (54 495) (54 495) –
Minority interest – – (1 282)
Realised foreign exchange gains
through profit and loss on disposal
of business – 7 734 –
Other comprehensive income (loss)
for the year 63 456 169 321 –
Balance as at 29 February 2016
(restated) 702 868 2 636 316 (6 186)
Dividend distributions (102 965) (102 965) –
Recognition of BBBEE and staff
share-based payments – 7 206 –
(Loss) profit for the year (194 094) (194 094) 1 682
Other comprehensive (loss) income
for the year (41 905) (126 484) –
Minority interest – – (745)
Balance as at 28 February 2017
(restated) 363 904 2 219 979 (5 249)
Issue of treasury shares under
employee share option plan – 13 961 –
Dividend distributions (1 293) (1 293) –
Recognition of BBBEE and staff
share-based payments – 8 317 –
(Loss) profit for the year (563 278) (563 278) 2 246
Non-controlling interest – – 6 911
Equity due to change in control 858 858 –
Other comprehensive loss for
the year (30 964) (80 539) –
Balance as at 28 February 2018 (230 773) 1 598 005 3 908
BEE
share-
holders’
interest Total
R’000 R’000
Balance as at 28 February 2015 921 2 465 032
Issue of ordinary shares under employee share
option plan – 19 269
Treasury shares acquired during the year – (23 973)
Dividend distributions – (164 571)
Recognition of BBBEE and staff share-based
payments (245) 6 961
Profit (loss) for the year (as previously
disclosed) – 206 810
Restatement – (54 495)
Minority interest – (1 282)
Realised foreign exchange gains through profit
and loss on disposal of business – 7 734
Other comprehensive income (loss) for the year – 169 321
Balance as at 29 February 2016 (restated) 676 2 630 806
Dividend distributions – (102 965)
Recognition of BBBEE and staff share-based
payments – 7 206
(Loss) profit for the year – (192 412)
Other comprehensive (loss) income for the year – (126 484)
Minority interest – (745)
Balance as at 28 February 2017 (restated) 676 2 215 406
Issue of treasury shares under employee share
option plan – 13 961
Dividend distributions – (1 293)
Recognition of BBBEE and staff share-based
payments – 8 317
(Loss) profit for the year – (561 032)
Non-controlling interest – 6 911
Equity due to change in control – 858
Other comprehensive loss for the year – (80 539)
Balance as at 28 February 2018 676 1 602 589
Audited summarised consolidated statement of cash flows
for the year ended 28 February 2018
Operating activities
2018 2017
Restated
R’000 R’000
Loss before taxation (473 044) (149 454)
From continuing operations (392 360) (49 116)
From discontinued operations (80 684) (100 337)
Adjusted for:
Depreciation 31 696 37 311
Amortisation of intangibles 96 893 107 183
Impairment of intangible assets, goodwill
and bonds 477 797 132 519
Share of profits from associates (16 476) (23 396)
Loss (profit) on the sale of property and
equipment 839 (1 014)
Share-based payments 8 767 7 647
Share-based payment expense 12 822 7 206
Revaluation of share-based payment liability (4 055) 441
Unrealised foreign exchange loss 451 30 231
Non-cash portion of operating lease rentals (1 361) 2 314
Profit on the sale of associate (184 960) –
Net movement on assets held for sale 203 701 (184 422)
Fair value adjustment (3 298) –
Increase in bad debt provision (21 274) (16 608)
Interest income (16 614) (9 085)
Interest expense 140 643 150 955
Cash generated from operations before working
capital changes 243 760 84 181
Decrease in trade and other receivables 45 930 222 935
Decrease in other financials assets – (8 688)
Increase (decrease) in trade and other payables 56 091 (22 999)
Increase (decrease) in provisions 44 674 (17 601)
Cash generated by operations 390 455 257 828
Interest income 16 614 9 085
Interest expense (140 643) (150 955)
Cash settlement of share options exercised (31 384) –
Taxation paid (100 692) (31 632)
Dividend paid (1 293) (102 965)
Net cash generated (utilised) by operating
activities 133 057 (18 639)
Investing activities
Additions to property, equipment and intangible
assets (27 234) (81 692)
Proceeds from sale of property and equipment 2 133 5 875
Net cash outflow on acquisition of subsidiaries (12 060) (12 152)
Dividends received from associates – 7 837
Net cash inflow on disposal of associate 305 702 –
Net cash inflow from disposal of subsidiary 858 –
Minority interest – (745)
Net cash utilised from investing activities 269 399 (80 877)
Financing activities
Payment from the issue of treasury shares 13 961 –
Repayment of borrowings (1 790 664) (300 853)
Proceeds from borrowings 1 626 468 46 801
Other non-current liabilities – interest-bearing (2 271) 445
Decrease in other payables – (26 078)
Net cash utilised by financing activities (152 506) (279 685)
Net increase (decrease) in cash and cash
equivalents 249 950 (379 201)
Cash and cash equivalents at the beginning of
period/year 98 702 477 903
Cash and cash equivalents at the end of the year 348 652 98 702
Audited summarised consolidated segment report
for the year ended 28 February 2018
Industrial
South Support
Africa Australia Services
Revenue
– 2018 (R’000) 6 278 103 1 696 419 1 471 207
– 2017 (R’000) 6 296 393 1 689 449 1 582 604
Internal revenue
– 2018 (R’000) 39 450 – 6 015
– 2017 (R’000) 117 320 – 83 302
Operating profit/(loss)
– 2018 (R’000) 180 968 26 551 43 436
– 2017 (R’000) 345 954 (2 633) 66 396
EBITDA
– 2018 (R’000) 189 232 58 096 46 474
– 2017 (R’000) 399 749 34 745 70 369
Depreciation and amortisation
– 2018 (R’000) 8 262 31 545 3 030
– 2017 (R’000) 15 146 37 378 8 921
Interest income
– 2018 (R’000) 66 145 202 12 219
– 2017 (R’000) 38 476 298 8 568
Interest expense
– 2018 (R’000) (56 312) – (8 942)
– 2017 (R’000) (22 537) (59) (9 313)
Taxation expense/(income)
– 2018 (R’000) (26 396) (5 698) (3 152)
– 2017 (R’000) (2 451) (25 043) 1 805
Asset carrying value from continuing
operations*
– 2018 (R’000) 1 394 421 (117 682) 271 762
– 2017 (R’000) 1 445 574 411 888 354 309
Liabilities carrying value**
– 2018 (R’000) 535 976 42 777 153 232
– 2017 (R’000) 305 752 257 835 176 066
Professional Services
South
Africa Australia Training
Revenue
– 2018 (R’000) 1 802 508 3 690 385 178 454
– 2017 (R’000) 1 622 620 4 195 907 251 323
Internal revenue
– 2018 (R’000) 2 240 – 11 192
– 2017 (R’000) 4 343 – 40 539
Operating profit/(loss)
– 2018 (R’000) 151 663 99 100 (54 711)
– 2017 (R’000) 105 902 94 514 9 093
EBITDA
– 2018 (R’000) 160 624 104 059 (51 824)
– 2017 (R’000) 133 108 97 865 12 106
Depreciation and amortisation
– 2018 (R’000) 24 821 4 022 2 886
– 2017 (R’000) 25 021 3 350 2 949
Interest income
– 2018 (R’000) 28 812 120 248
– 2017 (R’000) 11 191 233 182
Interest expense
– 2018 (R’000) (6 757) (3 047) (11 964)
– 2017 (R’000) (46 410) (6 007) (10 268)
Taxation expense/(income)
– 2018 (R’000) 67 431 29 250 (12 822)
– 2017 (R’000) 8 434 622 (1 463)
Asset carrying value from continuing
operations*
– 2018 (R’000) 747 752 499 450 94 961
– 2017 (R’000) 1 023 507 475 695 96 860
Liabilities carrying value**
– 2018 (R’000) 271 081 307 809 149 030
– 2017 (R’000) 245 134 256 949 97 255
Financial
Services Subtotal
Revenue
– 2018 (R’000) 192 281 15 309 357
– 2017 (R’000) 163 670 15 801 966
Internal revenue
– 2018 (R’000) – 58 897
– 2017 (R’000) – 245 504
Operating profit/(loss)
– 2018 (R’000) 55 041 502 048
– 2017 (R’000) 47 914 667 140
EBITDA
– 2018 (R’000) 58 218 564 879
– 2017 (R’000) 52 523 800 465
Depreciation and amortisation
– 2018 (R’000) 5 687 80 253
– 2017 (R’000) 2 266 95 031
Interest income
– 2018 (R’000) 8 066 115 812
– 2017 (R’000) 18 661 77 610
Interest expense
– 2018 (R’000) (4 132) (91 154)
– 2017 (R’000) (2 312) (96 906)
Taxation expense/(income)
– 2018 (R’000) 4 758 53 371
– 2017 (R’000) 11 837 (6 259)
Asset carrying value from continuing
operations*
– 2018 (R’000) 202 951 3 093 615
– 2017 (R’000) 220 467 4 028 300
Liabilities carrying value**
– 2018 (R’000) 24 650 1 484 555
– 2017 (R’000) 17 741 1 356 732
Central
South
Africa Australia Total
Revenue
– 2018 (R’000) 16 034 – 15 325 391
– 2017 (R’000) 2 115 – 15 804 081
Internal revenue
– 2018 (R’000) 20 155 – 79 052
– 2017 (R’000) 823 – 246 327
Operating profit/(loss)
– 2018 (R’000) (446 475) (47 543) 8 030
– 2017 (R’000) (462 997) (2 265) 201 877
EBITDA
– 2018 (R’000) (403 264) (24 996) 136 619
– 2017 (R’000) (451 829) (2 265) 346 371
Depreciation and amortisation
– 2018 (R’000) 24 854 23 482 128 589
– 2017 (R’000) 24 822 24 641 144 494
Interest income
– 2018 (R’000) (100 410) 1 212 16 614
– 2017 (R’000) (69 616) 1 092 9 085
Interest expense
– 2018 (R’000) (32 457) (17 031) (140 643)
– 2017 (R’000) (33 169) (20 880) (150 955)
Taxation expense/(income)
– 2018 (R’000) 10 074 (35 095) (28 350)
– 2017 (R’000) (31 011) 31 808 (5 462)
Asset carrying value from
continuing operations*
– 2018 (R’000) 573 757 875 544 4 542 916
– 2017 (R’000) 647 230 765 017 5 440 546
Liabilities carrying value**
– 2018 (R’000) 1 065 596 301 382 2 851 533
– 2017 (R’000) 1 530 427 522 871 3 410 030
South
International Africa Total
Revenue
– 2018 (R’000) 5 386 804 9 938 587 15 325 391
– 2017 (R’000) 5 885 356 9 918 725 15 804 081
Internal revenue
– 2018 (R’000) – 79 052 79 052
– 2017 (R’000) – 246 327 246 327
Operating profit/(loss)
– 2018 (R’000) 78 108 (70 078) 8 030
– 2017 (R’000) 64 975 136 902 201 877
EBITDA
– 2018 (R’000) 137 159 (540) 136 619
– 2017 (R’000) 105 704 240 667 346 371
Depreciation and
amortisation
– 2018 (R’000) 59 049 69 540 128 589
– 2017 (R’000) 65 369 79 125 144 494
Interest income
– 2018 (R’000) 1 534 15 080 16 614
– 2017 (R’000) 1 623 106 765 9 085
Interest expense
– 2018 (R’000) (20 078) (120 564) (140 643)
– 2017 (R’000) (26 945) (124 010) (150 955)
Taxation expense/(income)
– 2018 (R’000) (11 543) 39 893 (28 350)
– 2017 (R’000) 7 387 (12 849) (5 462)
Asset carrying value from
continuing operations*
– 2018 (R’000) 1 247 764 3 295 152 4 542 916
– 2017 (R’000) 1 652 600 3 787 946 5 440 546
Liabilities carrying value**
– 2018 (R’000) 651 968 2 199 565 2 851 533
– 2017 (R’000) 1 037 655 2 372 375 3 410 030
* Reconciliation of assets carrying value to balance sheet.
Assets carrying value per the segment report 4 542 916
Other financial asset – relating to Capital Africa 22 552
Total assets per balance sheet 4 520 364
** Reconciliation of liabilities carrying value to
balance sheet.
Liabilities carrying value per the segment report 2 851 533
Deferred taxation – relating to Capital Africa 47 431
Total liabilities per balance sheet 2 898 964
Notes to the audited summarised consolidated financial statements
1. Basis of preparation and significant accounting policies
The Group’s summary consolidated financial statements are prepared in
accordance with 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
and methods of computation applied in the preparation of the consolidated
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 financial statements.
These financial results and the full set of consolidated financial
statements have been prepared by the Group Financial Manager, A Viljoen
(BCom Honours) and supervised by the Group Chief Financial Officer,
CJ Kujenga (CA(SA).
2. Auditor’s reports
These summary consolidated financial statements for the year ended
28 February 2018 have been audited by Deloitte & Touche, who expressed
an unmodified opinion on the thereon. The auditor also expressed an
unmodified opinion on the consolidated financial statements from which
these summary consolidated financial statements were derived.
A copy of the auditor’s report on the summary consolidated financial
statements and of the auditor’s report on the consolidated financial
statements are available for inspection together with the accompanying
financial statements during office hours 8:00 – 16:00, Monday – Friday
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.
The auditor’s report do not necessarily report on all of the information
contained in this announcement, shareholders are therefore advised that
in order to obtain full understanding of the nature of the auditor’s
engagement they should obtain a copy of that report together with the
accompanying financial information from the Company's registered office.
Any forward looking statement have not been reviewed or reported on by
the Company’s external auditors.
3. Going concern
The directors believe that the Group has adequate resources to continue
in operational existence for the foreseeable future. For this reason,
accounting policies supported by judgements, estimates and assumptions
in compliance with IFRS are applied on the basis that the Group shall
continue as a going concern.
4. Prior period adjustment
During the current financial year errors were identified in the
accounting treatment of certain revenue and expense items in Adcorp
Training services dating back a number of years. This resulted in the
cost of sales and trade and other payables being understated with
R72 million. The underlying systems that resulted in the error have
been corrected.
In FY2017 one of the debtors in Adcorp Industrial Services entered into
business rescue proceedings. At the time, a portion of the related debt
was included in the doubtful debt provision but not the full amount. As
a result trade receivables were overstated with R10 million.
Both errors have been corrected by restating each of the affected
financial statement line items for the prior periods. The effect of the
summarised consolidated Statement of financial position, Statement of
comprehensive income and summarised statement of changes in equity is
set out below:
Summarised consolidated statement of financial position
2017 2016
Intangible assets - 4 535
Trade receivables 10 000 -
Trade and other payables 22 086 49 960
32 086 54 495
Summarised consolidated statement of
comprehensive income
Cost of sales 16 146 -
Provision for bad debts 10 000 -
Interest expense 5 940 -
32 086 -
Summarised consolidated statement of
changes in equity
Opening balance 702 868 650 806
Total comprehensive income as previously reported (306 878) 106 557
Prior period error adjustment (32 086) (54 495)
Closing balance 363 904 702 868
5. Discontinued operations
The Group has taken the decision to dispose of its Rest of Africa
operations during the current financial year, as such its operations is
disclosed as discontinued, the current year comparative balance will differ
in some respects to those reported in 2017.
The board considers the criteria for discontinued operations to have been
met for the following reasons:
- Buyers have been identified, and sale agreements have been finalised
or are at the advanced stage, for the majority of the operations.
- the remaining operations are available for immediate sale.
2018 2017
Profit and loss R'000 R'000
Revenue 117 798 268 869
Cost of sales (91 837) (211 033)
Gross profit 25 961 57 836
Other income 10 915 28 078
Operating expenses (42 260) (179 107)
Operating loss (5 384) (93 193)
Net interest - (7 144)
Impairments (75 300) -
Net loss before tax (80 684) (100 337)
Taxation (59 638) (48 421)
Net loss after tax (140 322) (148 758)
The impairment relates to fixed assets, debtors,
cash, sundry creditors and loans in Africa.
Assets and liabilities
Non-current assets held for sale
Property and equipment - 31 492
Intangible assets - 59
Other financial assets - 6 555
Current assets held for sale
Trade and other receivables 10 077 65 560
Cash - 184 422
Tax prepaid 357 905
Total 10 434 288 993
Non-current liabilities associated with assets
classified as held for sale
Trade and other payables 11 306 64 745
Provisions 4 756 21 057
Tax payable 13 183 18 301
Total 29 245 104 103
6. Earnings per share
The calculation of earnings per share on continuing operations is based
on losses of R422 956 341 (2017: R45 336 278) and a discontinued loss of
R140 322 087 (2017: R148 758 230) ordinary shares of 108 946 470 (2017:
108 382 849), being the weighted average number of shares relative to the
above earnings.
2018 2017
R’000 R’000
Continuing operations
Basic loss per share – cents (388,2) (41,8)
Diluted loss per share - cents (378,6) (40,7)
Discontinued operations
Basic loss per share – cents (128,8) (137,3)
Diluted loss per share - cents (125,6) (133,5)
Total basic loss per share - cents
Basic loss per share – cents (517,0) (179,1)
Diluted loss per share - cents (504,2) (174,1)
113 220 069 (2017: 111 467 949) weighted
diluted number of shares are determinate as
follows: Reconciliation of diluted number
of shares
Ordinary shares 108 946 470 108 382 849
Adcorp employee share schemes – dilution* 4 273 599 3 085 100
Diluted number of shares 113 220 069 111 467 949
Reconciliation of headline (loss) earnings
from continuing operations**
Loss for the year (422 956) (45 336)
Profit on sale of property and equipment (839) (1 014)
Taxation recovered on the sale of property and
equipment 235 284
Impairment of investments, goodwill and loans 477 797 132 519
Profits from the sale of associate (184 960) 0
Taxation charged on sale of associate 36 542 0
Headline (loss) earnings (94 181) 86 453
Headline (loss) earnings per share – cents (86,4) 79,8
Diluted headline (loss) earnings per share –
cents (84,3) 77,6
Reconciliation of headline loss from
discontinued operations **
Loss for the year (140 322) (148 758)
Impairment of investments, goodwill and bonds 75 300 -
Headline loss (65 022) (148 758)
Headline loss per share – cents (59,7) (137,3)
Diluted headline loss per share – cents (58,2) (133,5)
Reconciliation of headline loss from total
operations
Loss for the year (563 278) (194 094)
Impairment of investments, goodwill and bonds 553 097 132 519
Profit on sale of property and equipment (839) (1 014)
Taxation recovered on the sale of property and
equipment 235 284
Profits from the sale of associate (184 960) -
Taxation charged on sale of associate 36 542 -
Headline loss (159 203) (62 305)
Headline loss per share – cents (146,1) (57,5)
Diluted headline loss per share – cents (142,5) (55,9)
* The dilution of shares results from the potential exercise of options
in the employee share scheme.
** Headline (loss)/earnings per share is based on earnings adjusted for
(profit)/loss on sale of assets, impairment of investments, goodwill,
bonds and the sale of associate
7. Interest bearing liabilities
Secured – at amortised cost less amount capitalised
Interest
rate Maturity
7.1 Long-term loans –
non-current portion
Amortising term loan JIBAR +340
Amortising revolving loan JIBAR +340
Six equal instalments on the
last of each of the five
months prior to
30 November 2020
Corporate bond JIBAR +249 8 March 2018
Corporate bond JIBAR +240 31 July 2018
Corporate bond JIBAR +250 4 December 2018
Transaction costs
capitalised
Amortising revolving loan –
Australia 2,9% – 3,15%
7.2 Short-term loans
Commercial paper
Equal semi-annual instalments
Corporate bond JIBAR +260 27 November 2017
Amortising revolving loan – 3,15%
Australia (FY17: 3,85%)
Accrued interest
2018 2017
R’000 R’000
7.1 Long-term loans – non-current portion 978 196 649 229
Amortising term loan 200 000 –
Amortising revolving loan 725 000 –
Corporate bond – 400 000
Corporate bond – 150 000
Corporate bond – 100 000
Transaction costs capitalised – (771)
Amortising revolving loan – Australia 53 196 –
7.2 Short-term loans 228 687 720 603
Commercial paper – 50 000
Corporate bond – 209 000
Amortising revolving loan – Australia 228 687 447 944
Accrued interest – 13 659
On 8 December 2017 the Group successfully redeemed all corporate
bonds under its South African-based domestic medium term note (DMTN)
programme and replaced it with a syndicated loan facility.
As security for the South Africa loan facility granted to the Group,
a shared security agreement was entered into that holds a cession over
the trade receivables by certain operating subsidiaries:
The list of guarantors under current facility is different to those
that formed part of the DMTN programme. A full list of the DMTN
guarantors was provided in the 2017 financial statements.
8. Subsequent events
No material transactions or events subsequent to the end of the financial
year ended 28 February 2018 and prior to the approval of these
consolidated summarised financial statements.
9. 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 financials assets and
financial liabilities are determined (in particular, the valuation
technique(s) and inputs used.)
Financial Fair
assets/financial 2018 2017 value Valuation technique(s)
liabilities R’000 R’000 hierarchy and key inputs
Investment 13 243 10 000 Level 1 Fair value – Market
valuation
Other financial 10 361 31 861 Level 1 Bond – Fair value –
assets Market valuation
Derivative - 1 574 Level 2 Fair value – Discounted
financial cash flow. Future cash
instrument 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
Relationship
Financial Significant of unobservable
assets/financial unobservable inputs to fair
liabilities input(s) value
Investment n/a n/a
Other financial assets n/a n/a
Derivative financial instrument n/a n/a
Corporate information
Executive directors: I Dutiro (Chief Executive Officer), MA Jurgens,
CJ Kujenga
Non-executive directors: GT Serobe (Chairman), GP Dingaan, C Maswanganyi,
TP Moeketsi, S Sithole
Independent non-executive directors: JA Boggenpoel, SN Mabaso-Koyana,
FS Mufamadi, ME Mthunzi, MW Spicer (Lead Independent)
Physical address: Adcorp Office Park, Nicolway Bryanston, corner William
Nicol and Wedgewood Link, Bryanston, 2021
Telephone: 011 244 5300
Website: www.adcorpgroup.com
Secretary: KH Fihrer
Transfer secretaries: Terbium Financial Service (Pty) Ltd, Beacon House,
31 Beacon Road, Florida North, 1709
Sponsor: Deloitte & Touche Sponsor Services (Pty) Ltd, Building 8, Deloitte
Place, The Woodlands, 20 Woodlands Drive, Woodmead, Sandton, 2196
Date: 18/05/2018 02:04:00 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
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