To view the PDF file, sign up for a MySharenet subscription.

ADVTECH LIMITED - Preliminary audited results for the year ended 31 December 2018

Release Date: 18/03/2019 08:05
Code(s): ADH     PDF:  
 
Wrap Text
Preliminary audited results for the year ended 31 December 2018

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


Preliminary audited results for the year ended 31 December 2018

Revenue up 11%
Operating profit up 14%
Normalised earnings per share up 8%
Dividends per share for the year 30.0 cents


Summarised consolidated statement of profit or loss
for the year ended 31 December 2018
                                                                                                                                    Restated#
                                                                                                                     Audited         Audited
                                                                                                 Percentage      31 December     31 December
R'm                                                                                 Note           increase             2018            2017

Revenue                                                                                                 11%          4 389.0         3 937.7

Earnings before Interest, Taxation, Depreciation and Amortisation (EBITDA)                              14%            942.1           823.3

Operating profit before interest and non-trading items                                                  14%            762.7           668.0
Non-trading items                                                                     2                                (37.5)          (31.1)
Net finance costs                                                                                                     (132.7)          (99.1)

 Interest earned                                                                                                         3.7             3.9
 Finance costs incurred                                                                                               (136.4)         (103.0)

Profit before taxation                                                                                  10%            592.5           537.8
Taxation                                                                                                              (185.0)         (160.1)

Profit for the year                                                                                      8%            407.5           377.7

Profit for the year attributable to:
Owners of the parent                                                                                     8%            397.4           367.0
Non-controlling interests                                                                                               10.1            10.7

                                                                                                                       407.5           377.7
Earnings per share (cents)
Basic                                                                                                    8%             74.2            68.7
Diluted                                                                                                  8%             74.1            68.6

# The restatement relates to the adoption of IFRS 15. Refer to note 1.4.


Headline and normalised earnings
for the year ended 31 December 2018
                                                                                                                                    Restated#
                                                                                                                   Audited           Audited
                                                                                             Percentage        31 December       31 December
R'm                                                                                            increase               2018              2017

Determination of headline earnings
 Profit for the year attributable to owners of the parent                                                            397.4             367.0
 Items excluded from headline earnings per share                                                                      (3.1)              0.5

  (Profit)/loss on sale of property, plant and equipment                                                              (0.7)              0.7
  Profit on sale of subsidiary                                                                                        (0.9)                -
  Gain on bargain purchase of acquisition                                                                             (4.2)                -
  Impairment of intangible assets                                                                                      3.2                 -
  Taxation effects of adjustments                                                                                     (0.5)             (0.2)

Headline earnings                                                                                    7%              394.3             367.5

Headline earnings per share (cents)
Basic                                                                                                7%               73.6              68.8
Diluted                                                                                              7%               73.5              68.7


Determination of normalised earnings
 Headline earnings                                                                                                   394.3             367.5
 Items excluded from normalised earnings per share                                                                    40.5              35.0

  Corporate action costs                                                                                               2.0              12.3
  Net loss on financial asset at fair value through profit and loss                                                    4.2                 -
  Settlement of contingent consideration                                                                              34.3                 -
  Fraud adjustments
  - Adjustments relating to 2016                                                                                         -              24.4
  - Adjustments relating to 2015                                                                                         -               6.7
  Taxation effects of adjustments                                                                                        -              (8.4)

Normalised earnings                                                                                  8%              434.8             402.5

Normalised earnings per share (cents)
Basic                                                                                                8%               81.1              75.3
Diluted                                                                                              8%               81.1              75.2


Normalised earnings is a non-IFRS measure and excludes the impact of certain non-operational income and expense items from reported
headline earnings. It is included to provide an additional basis on which to measure the group's normalised earnings performance.


Summarised consolidated statement of other comprehensive income
for the year ended 31 December 2018
                                                                                                                                    Restated#
                                                                                                                   Audited           Audited
                                                                                                               31 December       31 December
R'm                                                                                                                   2018              2017

Profit for the year                                                                                                  407.5             377.7
Other comprehensive income, net of income taxation
Items that may be reclassified subsequently to profit or loss
  Exchange differences on translating foreign operations                                                              52.6              (6.4)

Total comprehensive income for the year                                                                              460.1             371.3

Total comprehensive income for the year attributable to:
Owners of the parent                                                                                                 443.5             361.3
Non-controlling interests                                                                                             16.6              10.0

                                                                                                                     460.1             371.3


Summarised consolidated statement of financial position
as at 31 December 2018
                                                                                                                Restated#           Restated#
                                                                                             Audited             Audited             Audited
                                                                                         31 December         31 December         31 December
R'm                                                                                             2018                2017                2016

Assets
Non-current assets                                                                           5 711.8             5 115.0             4 232.5

 Property, plant and equipment                                                               3 943.1             3 512.6             2 788.7
 Proprietary technology systems                                                                 73.3                63.3                45.3
 Goodwill                                                                                    1 465.6             1 305.3             1 170.1
 Intangible assets                                                                             211.0               208.3               206.6
 Deferred taxation assets@                                                                      12.6                13.5                 9.8
 Investment in joint arrangement                                                                 6.2                   -                   -
 Investment                                                                                        -                12.0                12.0

Current assets                                                                                 571.4               438.6               402.6

 Trade and other receivables*                                                                  261.8               288.4               215.5
 Taxation                                                                                       16.6                   -                   -
 Other current assets                                                                           64.1                40.3                58.9
 Bank balances and cash                                                                        228.9               109.9               128.2

Total assets                                                                                 6 283.2             5 553.6             4 635.1

Equity and liabilities
Equity                                                                                       3 171.9             2 866.1             2 665.6
Non-current liabilities                                                                      1 698.2               908.6               857.3

 Long-term bank loans                                                                        1 500.0               751.5               758.0
 Deferred taxation liabilities@                                                                125.3               108.1                99.3
 Acquisition liabilities                                                                        72.9                49.0                   -

Current liabilities                                                                          1 413.1             1 778.9             1 112.2

 Current portion of long-term bank loans                                                         5.7                12.2                31.1
 Short-term bank loan                                                                          590.0               750.0               425.0
 Trade and other payables*                                                                     406.5               365.8               319.8
 Taxation                                                                                          -                 6.3                 8.3
 Fees received in advance and deposits                                                         362.5               431.3               303.8
 Bank overdraft                                                                                 48.4               213.3                24.2

Total liabilities                                                                            3 111.3             2 687.5             1 969.5

Total equity and liabilities                                                                 6 283.2             5 553.6             4 635.1

* Unallocated receipts previously classified as trade and other payables have been classified as trade and other receivables. Comparative
  figures have been restated (2017: R18.7 million and 2016: R20.1 million).
@ Deferred taxation assets disclosed separately from deferred taxation liabilities. Comparative figures have been restated.


Summarised consolidated segmental report
for the year ended 31 December 2018
                                                                                                                                    Restated#
                                                                                       Percentage                Audited             Audited
                                                                                         increase/           31 December         31 December
R'm                                                                                     (decrease)                  2018                2017

Revenue                                                                                       11%                4 389.0             3 937.7

  Schools                                                                                     15%                2 008.8             1 742.1

  - South Africa                                                                              11%                1 877.4             1 685.1
  - Rest of Africa                                                                           131%                  131.4                57.0

  Tertiary                                                                                    10%                1 718.5             1 555.7
  Resourcing                                                                                   4%                  669.5               643.8
  Intra group revenue                                                                                               (7.8)               (3.9)

Operating profit before interest and non-trading items                                        14%                  762.7               668.0

  Schools                                                                                      1%                  331.1               326.8

  - South Africa                                                                               5%                  329.8               315.2
  - Rest of Africa                                                                           (89%)                   1.3                11.6

  Tertiary                                                                                    23%                  394.5               321.4
  Resourcing                                                                                  22%                   39.1                32.1
  Corporate action costs                                                                                            (2.0)              (12.3)

Property, plant and equipment and proprietary technology systems                              12%                4 016.4             3 575.9

  Schools                                                                                     14%                3 097.8             2 727.3

  - South Africa                                                                               7%                2 779.8             2 608.5
  - Rest of Africa                                                                           168%                  318.0               118.8

  Tertiary                                                                                     8%                  911.0               841.0
  Resourcing                                                                                   0%                    7.6                 7.6

The schools division has been split into two categories of disclosure in line with the categories utilised by the chief operating decision
maker.


Summarised consolidated statement of changes in equity
for the year ended 31 December 2018
                                                                                                                                             Restated#
                                                                                                                         Audited              Audited
                                                                                                                     31 December          31 December
R'm                                                                                                                         2018                 2017

Balance at beginning of the year before restatement                                                                      2 880.1              2 677.3
Opening balance adjustment (IFRS 15)                                                                                       (14.0)               (11.7)

Restated opening balance                                                                                                 2 866.1              2 665.6
 Total comprehensive income for the year                                                                                   460.1                371.3
 Dividends declared to shareholders                                                                                       (190.5)              (186.7)
 Share-based payment expense                                                                                                 4.4                  6.3
 Share award expense under the management share incentive scheme (MSI)                                                       2.8                  2.0
 Taxation effect of shares awarded under the management share incentive scheme (MSI)                                        (4.4)                (4.6)
 Shares issued to settle contingent consideration                                                                           32.1                    -
 Share options exercised                                                                                                     8.3                 13.1
 Non-controlling interest on disposal of subsidiary                                                                         (1.0)                   -
 Non-controlling interests arising on acquisitions                                                                          (6.0)                (0.9)

Balance at end of the year                                                                                               3 171.9              2 866.1


Summarised consolidated statement of cash flows
for the year ended 31 December 2018
                                                                                                                                             Restated#
                                                                                                                          Audited             Audited
                                                                                                 Percentage           31 December         31 December
R'm                                                                                   Note         increase                  2018                2017

Cash generated from operations                                                           3              17%                 945.8               805.7
Movement in working capital                                                                                                 (66.8)               39.9

Cash generated by operating activities                                                                   4%                 879.0               845.6
Net finance costs paid (inclusive of capitalised borrowing costs)&                                                         (138.5)              (90.8)
Taxation paid                                                                                                              (202.1)             (174.6)
Dividends paid                                                                                                             (190.8)             (186.1)

Net cash inflow from operating activities                                                                                   347.6               394.1

Net cash outflow from investing activities                                                                                 (657.5)             (913.8)

 Additions to property, plant and equipment&                                                                               (533.2)             (684.2)
 Additions to proprietary technology systems&                                                                               (22.3)              (28.4)
 Business combinations cash flows                                                                                          (114.9)             (215.6)
 Proceeds on disposal of property, plant and equipment                                                                        2.9                14.4
 Disposal of subsidiary                                                                                                       4.0                   -
 Change in ownership of joint arrangement                                                                                     6.0                   -

Net cash inflow from financing activities                                                                                   590.4               312.7

 Increase/(decrease) in non-current bank loans                                                                              748.5                (6.5)
 (Decrease)/increase in current bank loans                                                                                 (166.5)              306.1
 Cash movement in shares held by Share Incentive Trust                                                                        8.4                13.1

Net increase/(decrease) in cash and cash equivalents                                                                        280.5              (207.0)

Cash and cash equivalents (net of bank overdraft) at beginning of the year                                                 (103.4)              104.0
Net foreign exchange differences on cash and cash equivalents                                                                 3.4                (0.4)

Cash and cash equivalents (net of bank overdraft) at end of the year                                                        180.5              (103.4)

& Borrowing costs capitalised previously included in additions to property, plant and equipment and proprietary technology systems was
  reclassified to net finance costs paid. Capital expenditure as disclosed in the supplementary information below was also affected.


Free operating cash flow before capex per share
for the year ended 31 December 2018
                                                                                                                                             Restated#
                                                                                                   Percentage              Audited             Audited
                                                                                                     increase/         31 December         31 December
R'm                                                                                                 (decrease)                2018                2017

Profit for the year                                                                                                          407.5               377.7
Adjusted for non-cash IFRS and lease adjustments (after taxation)                                                              6.9                12.9

Net operating profit after taxation - adjusted for non-cash IFRS and lease adjustments                                       414.4               390.6
Depreciation, amortisation and impairment                                                                                    182.6               155.3
Settlement of contingent consideration                                                                                        34.3                   -
Other non-cash flow items (after taxation)                                                                                    (1.2)                0.5

Operating cash flow after taxation                                                                        15%                630.1               546.4
Movement in working capital                                                                                                  (66.8)               39.9

Free operating cash flow before capex                                                                     (4%)               563.3               586.3


Weighted average number of shares for purposes of basic earnings per share (million)                                         535.9               534.2
Free operating cash flow before capex per share (cents)                                                   (4%)               105.1               109.8


Supplementary information
for the year ended 31 December 2018
                                                                                                                                              Restated#
                                                                                                                           Audited             Audited
                                                                                                                       31 December         31 December
R'm                                                                                                                           2018                2017

Capital expenditure - current year&                                                                                          555.5               712.6

Capital commitments                                                                                                        1 901.1             1 911.0

 Authorised by directors and contracted for                                                                                  819.3               357.5
 Authorised by directors and not yet contracted for                                                                        1 081.8             1 553.5

Anticipated timing of spend                                                                                                1 901.1             1 911.0

 0 - 2 years                                                                                                               1 170.6               627.3
 3 - 5 years                                                                                                                 360.7               572.1
 more than 5 years                                                                                                           369.8               711.6

Operating lease commitments in cash - future years                                                                           453.2               296.2


Notes to the summarised consolidated financial statements
for the year ended 31 December 2018


1.1   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 and methods of computations applied in the preparation of the consolidated financial
      statements, from which the summarised consolidated financial statements were derived, are in terms of IFRS and except as noted
      below in paragraph 1.4 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 statements and the full consolidated financial statements for the
      year ended 31 December 2018 was supervised by Didier Oesch CA(SA), the group's financial director.


      Independent auditor's opinion

      These summarised consolidated financial statements for the year ended 31 December 2018 have been audited by Deloitte &
      Touche, who expressed an unmodified opinion thereon (the auditor also expressed an unmodified opinion on the consolidated
      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 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
      the 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.


1.2   Events after the reporting period

      The acquisition of Monash South Africa which was concluded during 2018 and is subject to conditions precedent will be
      implemented subsequent to year-end once these conditions are fulfilled. The transaction consideration will entail an amount of
      R343 million, plus cash on hand and working capital adjustments at the effective date.

      The directors are not aware of any other 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 2018 or the financial
      position at that date.


1.3   Financial Instruments

      The directors consider that the carrying amount of the financial assets and financial liabilities recognised in the consolidated
      financial statements approximate their fair values. All of the group's financial instruments, except for investments, are carried at
      amortised cost and therefore not classified in terms of the fair value hierarchy. In terms of the investment, in the prior year this was
      classified as a level 3 instrument under the fair value hierarchy, however, the ownership structure of this investment changed (refer
      to note 4.3).


1.4   Adoption of new standards

      IFRS 9: Financial Instruments (IFRS 9) was adopted in the current year. The standard sets out requirements for recognising and
      measuring financial assets, financial liabilities and some contracts to buy or sell non-financial items. This standard replaces IAS 39
      Financial Instruments: Recognition and Measurement.

      The adoption of IFRS 9 resulted in the change of classification of financial assets and financial liabilities. These are now classified and
      measured as financial instruments at amortised cost. The only exception is the investment, previously classified as available for sale
      financial asset, which was changed to a financial asset at fair value through profit or loss. However, there was a change in ownership
      during the year, refer to note 4.3.

      The other significant change to the group's accounting policies with the adoption of IFRS 9 is the measurement of impairment of
      financial assets, specifically trade receivables, which is now measured using an expected credit loss model instead of an incurred
      loss model. The group uses a provision matrix to calculate expected credit losses. This change did not result in a movement in the
      loss allowance compared to the previous impairment model.

      The adoption of IFRS 9 had no impact on the comparative numbers in the consolidated statement of profit or loss, consolidated
      statement of financial position, consolidated statement of changes in equity or the consolidated statement of cash flows.

      IFRS 15: Revenue from Contracts with Customers (IFRS 15) was applied with an effective date of 1 January 2018. The group has
      applied IFRS 15 in accordance with the fully retrospective transitional approach without using the practical expedients for
      completed contracts in IFRS 15.C5 (d), but using the expedient in IFRS 15.C5 (a) and (b).

      The amount of the adjustments for each financial statement line item affected by the application of IFRS 15 for the current and prior
      years are illustrated below.


                                                                                                                                      Restated#
                                                                                                                                       Audited
                                                                                                                                   31 December
      R'm                                                                                                                                 2017

      Impact on profit or loss
      Revenue                                                                                                                           (149.2)

       Bursaries(1)                                                                                                                     (146.0)
       Change in timing of recognition of enrolment fees(2)                                                                               (3.2)

      Other operating expenses(1)                                                                                                        146.0
      Taxation(3)                                                                                                                          0.9

      Decrease in profit for the year                                                                                                     (2.3)

      Decrease in earnings per share
      Basic (cents)                                                                                                                       (0.4)
      Diluted (cents)                                                                                                                     (0.4)


                                                                                        As previously              IFRS 15                  As
                                                                                             reported          adjustments            restated
      Impact on assets, liabilities and equity as at 1 January 2017
      Deferred taxation(3)                                                                       94.1                 (4.6)               89.5
      Fees received in advance and deposits(2)                                                  287.5                 16.3               303.8
      Retained earnings                                                                       1 196.3                (11.7)            1 184.6

      Impact on assets, liabilities and equity as at 31 December 2017
      Deferred taxation(3)                                                                      100.1                 (5.5)               94.6
      Fees received in advance and deposits(2)                                                  411.8                 19.5               431.3
      Retained earnings                                                                       1 383.3                (14.0)            1 369.3

      1 The contract consideration for educational services vary due to bursaries and discounts awarded to students. These amounts are
        set off against revenue as these are price concessions and therefore variable considerations. The amounts have been determined
        based on actual bursaries and discounts awarded.
      2 The enrolment fee income for student registrations was previously recognised when received in compliance with the previous
        accounting standard. As this is an administrative task and the promised service is the delivery of education, the enrolment fees
        have now been deferred to the period over which the education services are performed.
      3 Recognition of the impact on deferred taxation due to the deferral of enrolment fees.

                                                                                                             Restated#
                                                                                           Audited            Audited
                                                                                       31 December        31 December
      R'm                                                                                     2018               2017

2.    Non-trading items
      Impairment of intangible assets                                                         (3.2)                 -
      Settlement of contingent consideration                                                 (34.3)                 -
      Fraud adjustments                                                                          -              (31.1)

      Non-trading items                                                                      (37.5)             (31.1)

      Intangible assets with a carrying value of R3.2 million relating to the brand values of Summit College and
      Kathstan College (in the schools division) were impaired during the year. The reason for the impairment was the
      re-branding of these schools as Pinnacle College Kyalami and Pinnacle College Rynfield.

      In terms of the sale of business agreement entered into between ADvTECH Limited and the previous owners of
      Maramedia Proprietary Limited ("the vendors"), the purchase consideration was to be determined based on the
      earnings for the year ended 31 December 2015. Initially the fair value of the contingent consideration was
      determined to be nil but was nevertheless disclosed as a contingent liability.

      Based on an arbitration award in favour of the vendors, 2.2 million ADvTECH Limited shares and related
      dividends to the value of R34.3 million was awarded in settlement of the contingent liability. As this adjustment
      falls outside the measurement period as defined by IFRS 3, it is recognised in the current year in the summarised
      consolidated statement of profit and loss.

      The previously reported fraud event was accounted for in the second half of 2017 and impacts the comparative
      results. Normalised earnings for the comparative results were adjusted by re-allocating the impact of this event
      to the accounting periods to which it relates. The normalised profit for the year ending 31 December 2017 has
      been adjusted upwards to remove the effect of the 2015 and 2016 charges recognised in the prior year to
      correct the effects of the event.

                                                                                                             Restated#
                                                                                           Audited            Audited
                                                                                       31 December        31 December
      R'm                                                                                     2018               2017

3.    Note to the summarised statement of cash flows
      Reconciliation of profit before taxation to cash generated from operations
      Profit before taxation                                                                 592.5              537.8
      Adjusted for non-cash IFRS and other adjustments (before taxation)                       7.5               12.8

                                                                                             600.0              550.6
      Adjustments:                                                                           345.8              255.1

       Depreciation, amortisation and impairment                                             182.6              155.3
       Shares issued on settlement of contingent consideration                                32.1                  -
       Net finance costs                                                                     132.7               99.1
       Net loss on financial asset at fair value through profit and loss                       4.2                  -
       Gain on bargain purchase of acquisition                                                (4.2)                 -
       (Profit)/loss on disposal of property, plant and equipment                             (0.7)               0.7
       Profit on disposal of subsidiary                                                       (0.9)                 -

      Cash generated from operations                                                         945.8              805.7


4.    Business combinations

4.1   Makini Schools Limited

      A 71% interest resulting in control of Makini Schools Limited (via Schole Mauritius Limited) was acquired on
      1 May 2018 for a consideration of R111.5 million.
                                                                                                                   Audited
                                                                                                               31 December
      R'm                                                                                                             2018

      Fair value assets and liabilities acquired
      Intangible assets                                                                                               15.6
      Goodwill(1)                                                                                                    129.6
      Property, plant and equipment                                                                                   11.1
      Current assets(2)                                                                                               38.0
      Cash and cash equivalents                                                                                       (2.9)
      Non-current liabilities                                                                                         (4.4)
      Current liabilities                                                                                            (82.4)
      Non-controlling interest(3)                                                                                      6.9

                                                                                                                     111.5

      Revenue of R66.5 million and loss after taxation of R2.9 million have been recognised in the summarised consolidated
      statement of profit or loss since acquisition date.

      Revenue of R93.9 million and loss after taxation of R7.9 million would have been recognised in the summarised
      consolidated statement of profit or loss if the acquisition was done at the beginning of the annual reporting period.

      This acquisition was made as an addition to our schools division in line with our expansion strategy and provides
      access to an African market.

      The accounting for this business combination is still within the measurement period.

      1 The consideration paid for the business combination includes amounts which have been recognised as goodwill
        in relation to the benefit of expected synergies and expansion opportunities.
      2 Included in current assets are trade receivables with a fair value of R31.6 million. This equals the gross amount of
        contractual amounts receivable. There were no contractual cash flows at acquisition date that are not expected to
        be collected.
      3 Measured at proportionate share of net asset value.


4.2   Credo Business College Proprietary Limited

      The shareholding in Credo Business College Proprietary Limited was disposed of as at 1 January 2018 for a
      consideration of R4.0 million, resulting in a R0.9 million profit on disposal.


4.3   Investment in joint arrangement

      The group had an option, which was exercised in the current year, to acquire the balance of 85% in the share capital
      of Star Schools Proprietary Limited. The purchase price was determined at the time in accordance with the
      agreement, based on the average annual profit after taxation for the preceding 24 months.

      Subsequent to the transaction, the 50% interest held was classified as a joint arrangement and a gain on bargain
      purchase of R4.2 million was realised.


5.    Share information
                                                                                                                                               Restated#
                                                                                                    Percentage               Audited            Audited
                                                                                                      increase/          31 December        31 December
      R'm                                                                                            (decrease)                 2018               2017

      Number of shares in issue (million)                                                                                      546.6              544.4
      Number of shares in issue net of treasury shares (million)                                                               538.9              535.6
      Weighted average number of shares for purposes of basic earnings per share (million)                                     535.9              534.2
      Weighted average number of shares for purposes of diluted earnings per share (million)                                   536.1              535.2

      Net asset value per share including treasury shares (cents)                                          10%                 580.3              526.5
      Net asset value per share net of treasury shares (cents)                                             10%                 588.6              535.1
      Free operating cash flow before capex per share (cents)                                              (4%)                105.1              109.8
      Gross dividends per share (cents)                                                                   (12%)                 30.0               34.0


Commentary


Overview: positive momentum continues

The directors are pleased to announce ongoing good operational results for the year ending 31 December 2018, with the group continuing its positive 
trajectory. Thetertiary and resourcing divisions once again performed exceptionally well and the schools division increased its scale significantly, 
mainly through acquisitions, despite external pressures.

The resilience of the group is evidenced by the 11% increase in revenue to R4.4 billion (2017: R3.9 billion) and operating profit by 14% to R763 million 
(2017: R668 million). Operating margins improved from 17.0% to 17.4%. While our investments in Kenya increased our revenue in the rest of Africa to 12% 
(2017: 11%) of total revenue, theynegatively impacted our margins in the current year.

Non-trading items includes the settlement of the contingent consideration relating to the Maramedia acquisition. As reported in the interim results, 
the audited financial statements used to determine the additional consideration payable, indicated that the profit target was not achieved and therefore 
the fair value of the contingent consideration was determined to be nil. However, this was successfully disputed by the vendors. The consideration has 
now been settled and as the adjustment to the contingent consideration falls outside the measurement period as defined by IFRS 3, it is required to be 
recognised in the summarised consolidated statement of profit and loss.

The higher average net borrowings, resulting from the significant capital expenditure incurred together with the acquisition of the Makini Schools group 
(Makini), led to an increase in financing costs. The taxation rate increased due to the non-deductibility of the non-trading items. Profit for the year 
increased by 8% with normalised earnings per share also increasing by 8% to 81.1 cents (2017: 75.3 cents).

Cash generated by operating activities increased by 4% to R879 million. This, together with financing inflows of R590 million, enabled investments and 
capex of R658 million and payment of financing costs of R139 million, taxation of R202 million and dividends of R191 million. The debtors' book continues
to be well managed with a strong emphasis on collections.

The decrease in fees received in advance and deposits was due to a greater proportion of parents selecting the monthly payment terms as opposed to the 
upfront payment option as well as parents delaying payment until after year-end, but still within the agreed payment terms. Receipts after year-end have 
been significantly higher than in the previous year as would be expected with the change in the payment options chosen and payment patterns.

The table below illustrates the enrolment growth in the last three years and highlights the continued growth in 2019.


Group enrolments end February:
                                               Feb            Feb           Feb              %            Feb              %
Enrolments:                                   2016           2017          2018       Increase           2019       Increase

Schools                                     24 199         26 713        27 408             3%         30 827            12%
Tertiary: Full qualifications               29 138         33 463        36 136             8%         39 629            10%

Total                                       53 337         60 176        63 544             6%         70 456            11%


ADvTECH operates 132 education sites comprising 103 schools and 29 tertiary campuses.


Schools division: revenue up 15%, strong growth in demand for mid-fee options

The schools divisional revenue increased by 15% to R2 009 million (2017: R1 742 million), representing 46% of group revenue. Operating profit for South African schools
increased by 5% to R330 million (2017: R315 million) while the operating profit from schools in the rest of Africa declined due to the costs incurred ahead of the opening
of Crawford International School in Nairobi, Kenya, and as it moves through the j-curve.

The strong growth in revenue was achieved mainly as a result of acquisitions and good growth in the mid-fee sector. The challenging South African economic climate
and unsettled socio-political environment continue to impact organic growth with increased levels of withdrawals owing to emigration and financial pressures, a trend
that has continued into 2019. The growth in student enrolments for 2019 is largely off the back of our expansion strategy to enter faster growing economies outside of
South Africa.

Our first greenfield development outside South Africa, Crawford International School, opened in September 2018. Focused marketing and advertising, together with
Crawford's established reputation and unique offering, helped to successfully launch the Crawford brand resulting in strong and ongoing interest with 189 students
enrolled to date.

The acquisition of Makini, also in Kenya, added seven schools, three campuses and boarding facilities in Nairobi and Kisumu to our portfolio, boosting student numbers by
3 197. These investments, together with Gaborone International School in Botswana, have contributed significantly to our expansion strategy into the rest of the
continent.

Our focus on academic excellence, which is at the core of our strategy, is our key differentiating factor compared to other private school groups. During 2018 our students
delivered excellent academic results. Overall, 1 644 matric candidates achieved 2 754 distinctions with a 99% pass rate while 87% of our students achieved a bachelor
pass. The Independent Examination Board (IEB) National Senior Certificate (NSC) students achieved a 100% matric pass rate and averaged two distinctions per student.
Our Department of Basic Education (DBE) NSC matric students achieved a 97% pass rate compared to the national pass rate of 78% and averaged one distinction per
student.

Seven new schools were opened in 2018; Crawford International School, (pre-primary, primary and college); The Bridge Assisted Learning School (pre-primary and
primary); and in the mid-fee sector, Maragon Mooikloof High School and Pinnacle College Copperleaf.

The Bridge Assisted Learning School opened in January 2018 with enrolments exceeding expectations. This new product offering addresses a gap in the market by
offering specialised education for students from Grade 0 - 7 who have a range of academic challenges that require specific learning assistance.

The past year has been a time of integration and consolidation following a four-year period of acquisitions in which we acquired 49 schools, increasing our total number
to 103 schools. This significant growth has doubled the division's size. We have used the opportunity to rationalise and restructure the divisional systems and processes
that are better suited to the increased scale of the business and which included the reorganisation of the schools division's management structure and support functions.
The consolidation into the group shared services function is also leading to improved efficiencies, effectiveness and controls. Numerous legacy and inherited systems are
being consolidated into a unified system. Further changes are being implemented in the division to drive operational efficiencies and sharpen market focus, in order to
consistently deliver high levels of performance across the board.

Encouraging signs related to these changes are starting to take effect, particularly in the improved academic results, with marked improvements in the average distinction
rate per matric candidate at Maragon and Centurus schools. During the brand re-evaluation process both Summit College and Kathstan College have been incorporated
into the mid-fee model and are now known as Pinnacle College Kyalami and Pinnacle College Rynfield respectively. A similar analysis led to the relocation of Abbotts
College Centurion. With these changes we have seen an increase in enquiries and enrolments for 2019. Trinityhouse Palm Lakes High School in KwaZulu-Natal was closed
since it was not performing to expectation.

Overall, we remain confident that our school division's strategy is appropriate and, together with the plans in place, the division is expecting continued improvement in
performance in the coming years.


University & tertiary: operating profit up by 23%

The Independent Institute of Education (The IIE), ADvTECH's higher education division, continued its notable performance in the "private university"/private higher
education sector and remains optimally positioned for future growth building on its 14-year legacy of student success. The IIE has continued to meet the stipulated
standards to take its rightful place beside public universities and aligns to international best practice. Although private higher education institutions may not yet call
themselves private universities, a recent court judgment in favour of the IIE's Varsity College confirmed that registered and accredited institutions and qualifications are
equivalent to public university offerings, a landmark development for the country's higher education sector as a whole.

The IIE is the largest, and has the most comprehensive investment in curricular development and academic leadership, of any private higher education provider in South
Africa. The IIE is central to our commitment to academic excellence and is responsible for ensuring that our qualifications remain relevant and bridge the gap between
the curriculum and the constantly evolving workplace.

The tertiary division continued to show excellent growth with revenue increasing by 10% to R1 719 million (2017: R1 556 million), contributing 39% of group revenue. The
operating margin increased from 21% to 23% on the back of operational leverage from strong volume growth, resulting in operating profit increasing by 23% to
R395 million (2017: R321 million).

The tertiary division now offers 201 accredited courses, with a diverse range of offerings including vocational skills training, national certificates and diplomas (N1-N6),
higher certificates, diplomas, advanced diplomas, degrees, honours degrees and masters degrees.

Three new campuses opened during 2018, including two digitally enabled, Rosebank College Connected sites in Pietermaritzburg and Bloemfontein. A new combined
campus in Johannesburg for Capsicum Culinary Studio and The Private Hotel School includes state-of-the-art facilities such as conference facilities and a restaurant
serviced by our students.

The Rosebank College portfolio now consists of mega campuses in Johannesburg, Pretoria and Durban with a mega campus in the pipeline for Cape Town (2020). In
provincial nodes, the successful blended learning digitally enabled Rosebank College Connected campuses, which are producing outstanding academic results, are being
rolled out. They now boast three successful campuses and additional campuses are planned in the near future.

Subject to the completion of the necessary regulatory approvals, the acquisition of Monash South Africa (MSA) is expected to be effective from April 2019. This will bring
the tertiary qualification suite to 233 accredited courses and the higher education student complement to more than 40 000 students, cementing ADvTECH's leadership
position as SA's largest "private university"/private higher education provider.


Resourcing: alternative markets pay off

The resourcing division's outstanding performance is mainly due to the success of the strategy to enter alternative markets outside of South Africa, where we have
experienced significant growth. Notwithstanding the tough market conditions in South Africa, we have increased our market share and successfully placed
4 608 candidates (2017: 3 755). The increase in revenue of 4% to R670 million (2017: R644 million) was impacted by the mix of a greater number of lower value but higher
margin placements which resulted in operating profit increasing by 22% to R39 million (2017: R32 million). The division continues to be highly cash-generative.


Declaration of final dividend no 19

The significant investment opportunities available to the group and the associated capital expenditure requires that the company considers additional cash preserving
measures. This has previously been signalled by the board with a steady increase in dividend cover in recent reporting periods. Capital commitments amount to
R1.9 billion, inclusive of the purchase consideration for the acquisition of Monash South Africa, and will largely be funded by way of additional debt. Taking these
commitments into account, together with the continuing challenging economic environment, the board has decided it would be prudent and responsible to further
preserve cash and have therefore reduced the dividend pay-out during this high capital investment period.

The board is pleased to announce the declaration of a final gross dividend of 15.0 cents (2017: 19.0 cents) per ordinary share in respect of the year ended 31 December
2018. This brings the full year dividend to 30.0 cents (2017: 34.0 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 12.0 cents per share, while it is 15.0 cents per share to those shareholders who are exempt from DT.

There are 546 612 919 million ordinary shares in issue; the total dividend amount payable is R82 million. The salient dates applicable to the dividend referred to above are
as follows:
                                                                                                                      2019

Declaration of dividend                                                                                 Thursday, 14 March
Last day to trade in order to participate in the dividend                                                 Tuesday, 9 April
Trading commences ex-dividend                                                                          Wednesday, 10 April
Record date                                                                                               Friday, 12 April
Payment date                                                                                              Monday, 15 April
AGM                                                                                                       Thursday, 30 May

Share certificates may not be dematerialised and rematerialised between Wednesday, 10 April 2019, and Friday, 12 April 2019, both days inclusive.


Prospects

We continue to see numerous opportunities, both in South Africa and the rest of the continent, and the group remains in a uniquely strong position to pursue its growth
strategy.

Our tertiary and resourcing divisions are well positioned and continue to perform strongly. Having significantly increased the scale of our schools division over the past
four years, we have now entered the integration, consolidation and rationalisation phase, which we are confident will drive operational efficiencies and sharpen market
focus.

On behalf of the board

Chris Boulle              Roy Douglas                       Didier Oesch
Chairman                  Chief executive officer           Group financial director

18 March 2019

Directors:
CH Boulle* (Chairman), RJ Douglas (CEO), JDR Oesch (Financial), JS Chimhanzi*, BM Gourley*, JM Hofmeyr*, JD Jansen*, SC Masie*, KDM Warburton*,
J Zimmermann*, SA Zinn* (*Non-executive)

Group company secretary:
DM Dickson

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, 50 Smits Road, Dunkeld, Randburg, 2196.

Date: 18/03/2019 08:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
 the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct, 
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
 information disseminated through SENS.

Email this JSE Sens Item to a Friend.

Share This Story