Wrap Text
Provisional Summarised Consolidated financial statements for the year ended 28 February 2019
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)
Provisional Summarised Consolidated financial statements for the year ended 28 February 2019
These summarised consolidated financial statements were prepared under the supervision of Ms Cheryl-Jane Kujenga,
in her capacity as CFO and have been audited by the company's auditors.
Salient features
- Underlying* earnings before interest, tax, depreciation and amortisation (EBITDA) for the year increased
by 34% to R518 million
- Reported EBITDA for the year increased by 242% to R467 million
- Net profit after tax increased by 147% to R262 million
- The cost savings target of R200 million that was set 18 months ago has been exceeded resulting in an improvement
in the underlying EBITDA margin to 3.4% from 2.5%
- Earnings per share increased by 757 cents to 240 cents from a loss per share of 517 cents in the prior year
- Headline earnings per share from continuing operations increased by 320 cents to 234 cents compared to a
loss of 86 cents in the prior year
- DSO improved to 50 days from 53 days in FY2018
- The gearing ratio improved to 27% from 55%
- Cash generated by operations is up 28% to R500 million (2018: R390 million)
- Revenue for the year decreased by 2% to R15 billion
- Dividend declared of 96,10 cents per share (2018: Nil)
* Underlying EBITDA is defined as EBITDA adjusted for once-off cost such as bad debts written off, retrenchment cost,
restructure cost and certain accounting adjustments in FY2018 and strategic transformation costs in FY2019.
Proforma Financial Information
The proforma 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 proforma 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 proforma 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 2019.
No other adjustments have been made to the proforma financial information.
The directors are responsible for compiling the proforma financial information on the basis of the applicable criteria
specified in the JSE Listings Requirements.
The proforma financial information as shown in the statement of underlying EBITDA should be read in conjunction
with the unmodified Deloitte & Touche independent reporting accountants' report thereon, issued on 18 May 2019, which
is available for inspection at Adcorp's registered office.
Statement of underlying EBITDA
2019 2018 Variance
R'000 R'000 %
Revenue 15 065 369 15 325 391 (1,7)
Cost of sales (13 032 499) (13 097 630) (0,5)
Gross profit 2 032 870 2 227 761 (8,7)
Other income 45 461 58 067 (21,7)
Operating expenses (1 560 676) (1 898 367) 17,8
Underlying EBITDA 517 655 387 461 33,6
Once off/transformation costs (50 498) (250 842)
EBITDA 467 157 136 619 241,9
Depreciation and amortisation (79 416) (128 589) 38,2
Net cost of funding from continuing operations (83 593) (124 029) 32,6
Impairment of intangible assets, goodwill and bonds (6 821) (477 797) 98,6
Profit from the sale of subsidiary and associate 574 184 960 (98,7)
Share of profits from associates 0 16 476 (100,0)
Profit/(loss) before taxation 297 901 (392 360) 175,9
Taxation (35 578) (28 350) 25,5
Profit/(loss) for the year from continuing operations 262 323 (420 710) 162,4
Loss for the year from discontinuing operations (178) (140 322) (99,9)
Net profit/(loss) for the year 262 145 (561 032) 146,7
The Financial Overview is as per the audited statement of comprehensive income for the year ended 28 February 2019.
Overview
Our continued focus on fixing and stabilising the business in the past year have been guided by the four strategic
priorities identified at the onset by the new leadership team: defining and focusing on our core business, reducing costs
through the deployment of lean and agile business processes, strengthening our brand and transforming our culture. This
has enabled delivery of financial performance that reflects the early successes of our transformation journey with the
Group posting a net profit after tax of R262 million and positive EPS and HEPS of 240 cents and 234 cents respectively.
The drive to right-size the business and ensure an efficient operating structure and processes is yielding positive
outcomes evidenced in a reduction in our operating expenses and EBITDA growth, whilst a disciplined approach to working
capital management has resulted in increased cash generation and a reduction in the net debt and improved gearing.
The Phase One cost reduction target of R200 million was exceeded during the financial year, as work on Phase Two
commenced. Opportunities to unlock further efficiencies exist, and the focus of Phase Two will be optimisation through
organisational restructuring, process improvements and investing in appropriate technology enablement.
Macroeconomic challenges and rising unemployment in a highly regulated environment in our core market South Africa and
persistently low GDP growth rates in Australia, continue to put pressure on the revenue and gross profit margin
performance of the Group. This resulted in a 2% reduction in revenue and a reduction in gross profit margin to 13,5%
(2018: 14,5%). Our ability to provide flexibility and enhance labour productivity means that we continue to be a key
contributor to our clients efforts to weather these economic challenges.
Adcorp has defined itself as a workplace solutions company with operating segments in the areas of Resourcing,
Training, Consulting and Outsourcing. This four-pillar operating model will enable adequate strategic focus to each of
these areas and enable us to provide our clients with a holistic workplace, human capital and talent management value
proposition.
Operational update
Adcorp Professional Services continued its strong trajectory in both South Africa and Australia, with 7% revenue
growth in South Africa and 4% in Australia. Adcorp Support Services revenue declined by 7% on the back of another challenging
year for the business regarding top line growth. The Training segment revenue also declined by 7% as a result of
decisions to cancel non-performing contracts. The Financial Services revenue declined by 22% due to the sale of the pay-card
subsidiary, FNDS 3000. Revenue for the Adcorp Industrial Services business decreased marginally for both South Africa and
Australia operations. The net impact was a decrease of 2% to overall Group revenues.
The Group EBITDA for the year grew by 242% to R467 million compared to the 2018 results of R137 million. This was
largely driven by:
- EBITDA improvements from prior year of 82% in Industrial Services South Africa and 6% in Support Services. Both these
segments benefited from a proactive approach to drive cost reduction and efficiencies to enable an agile response to
the outcomes of the Labour Relations Act (LRA) amendments.
- Professional Services South Africa EBITDA grew by 17%, whilst the Australia Segment EBITDA increased by 12%.
- The disposal of the low margin pay-card business had a positive impact on our Financial Services business which
had a 12% improvement in EBITDA as a result of this as well as continued fiscal discipline in that segment.
- The interventions to stem losses in the Training business yielded positive results and the business posted a
positive EBITDA of R6 million compared to the loss of R52 million in the prior period.
- There was an 18% reduction in Central Costs over and above the solid growth from the Segments.
- The once off/transformation costs decreased by 80% to R50 million compared to the 2018 costs of R250 million.
- Underlying EBITDA grew by 34% to R518 million compared to R387 million in the prior year.
Capital allocation strategy and dividend payment
The Group's capital allocation strategy supports sustainable value creation by:
- Ensuring an improvement in underlying operational performance while the business transformation takes place and
- Driving the implementation of a disciplined approach to capital allocation.
Capital allocation decisions will be underpinned by the need to balance growth and return the value generated by this
growth to our shareholders through distributions.
We have significantly strengthened our capital allocation policies to ensure that our teams are focused on high
quality growth, which we define as growth that yields returns in excess of our cost of capital. We are driving a focus on
the quality of business written and strong alignment of reward, remuneration and performance especially at senior levels in
our business.
We have set our target capital structure at 1.5x Debt: EBITDA and closed the financial year on 1.1x Debt: EBITDA.
The headroom created in the statement of financial position by the reduced gearing has strengthened the statement
of financial position and enables the Management team to pursue attractive growth opportunities and review its
ability to provide sustainable shareholder distributions.
As a result, the Board has made the decision to resume the payment of dividends by declaring 96.10 cents per share as
a full and final dividend for the year ended 28th February 2019. Going forward, the Board will be targeting a dividend
cover ratio of 1.5x, but this will be confirmed at the interim results for the 2020 financial year.
The dividend will be payable to shareholders recorded in the share register of the Company at the close of business on
the record date appearing below. The salient dates pertaining to the final dividend are as follows:
Last date to trade "cum" dividend: Tuesday 13 August 2019
Date trading commences "ex" dividend: Wednesday 14 August 2019
Record date: Friday 16 August 2019
Date of payment: Monday 19 August 2019
Ordinary share certificates may not be dematerialised or rematerialized between Wednesday, 14 August 2019 and
Friday, 16 August 2019, both days inclusive.
Shareholders who are not exempt from the dividend withholding tax of 20% will therefore receive a net dividend of
76,88 cents per share. The Company has 109 043 442 ordinary shares in issue and its income tax reference number is
9233/68071/0. The source of the dividend shall be from distributable reserves and shall be paid in cash.
All times provided in this announcement are South African local times. Any changes will be released on SENS and
published in the South African press. Where applicable, dividends in respect of certificated shares will be transferred
electronically to shareholders' bank accounts on the payment date. In the absence of specific mandates, dividend cheques
will be posted to shareholders at their risk. Ordinary shareholders who hold dematerialised shares will have their
accounts at their CSDP or broker credited on Monday, 19 August 2019.
Changes to the board of Adcorp
Directors names
GP Dingaan
I Dutiro
CJ Kujenga
SN Mabaso-Koyana
C Maswanganyi
P Mnganga Appointed 6 September 2018
TP Moeketsi
ME Mthunzi
FS Mufamadi
GT Serobe
H Singh Appointed 6 September 2018
S Sithole
MW Spicer
Alternate directors
MM Nkosi Appointed 19 October 2018
Resigned
JA Boggenpoel Resigned 20 July 2018
MA Jurgens Resigned 6 September 2018
RM Ramaite Resigned January 2019
Kevin Fihrer Resigned 31 May 2019
Outlook and prospects
In the new financial year, we will turn our attention to the implementation of our new operating model and growth
strategy in South Africa and provide greater focus on the prospects for our Australia business.
The Group is committed to achieving its transformation, ensuring future revenue growth and sustained EBITDA margin
improvement, while continuing to deliver strong free cash flow.
We remain enthusiastic about our value proposition and are proud to be part of an organisation that is committed to
using its capabilities and market position to improve socio-economic matters in our communities by increasing
employability and connecting people with opportunities.
By order of the board
GT Serobe I Dutiro CJ Kujenga
Chairman Chief Executive Officer Chief Financial Officer
17 May 2019
Audited summarised consolidated statement of financial position
as at 28 February 2019
2019 2018
Notes R'000 R'000
Assets
Non-current assets 1 711 896 1 719 016
Property and equipment 57 647 65 756
Intangible assets 231 601 275 785
Goodwill 1 188 811 1 162 010
Investment 15 247 13 244
Investment - amortised cost - 10 361
Deferred taxation 218 590 191 860
Current assets 2 647 253 2 801 348
Trade receivables 2 086 490 2 272 550
Other receivables 103 712 77 208
Investment - amortised cost 2 992 12 191
Taxation prepaid 87 202 79 071
Cash and cash equivalents 366 857 360 328
Assets from continuing operations 4 359 149 4 520 364
Assets held for sale 4 - 10 434
Total assets 4 359 149 4 530 798
Equity and liabilities
Capital and reserves 1 905 474 1 602 589
Share capital and share premium 1 740 858 1 740 858
Treasury shares (38 233) (23 002)
Reserves 202 849 (115 267)
Interest-bearing liabilities 6 892 189 1 218 559
Non-current liabilities 697 126 978 196
Long-term loans 690 466 978 196
Provisions 6 660 -
Current liabilities 195 063 240 363
Short-term portion of long-term loans 194 836 228 687
Bank overdraft 227 11 676
Non-interest-bearing liabilities 1 561 486 1 680 405
Non-current liabilities 104 077 100 074
Deferred taxation 104 077 100 074
Current liabilities 1 457 409 1 580 331
Trade and other payables 1 111 233 1 225 030
Share-based payment liability - 8 133
Provisions 286 663 287 202
Taxation 59 513 59 966
Equity and liabilities from continuing operations 4 359 149 4 501 553
Liabilities directly associated with assets
classified as held for sale 4 - 29 245
Total equity and liabilities 4 359 149 4 530 798
Audited summarised consolidated statement of profit or loss
for the year ended 28 February 2019
2019 2018
Continuing operations Note R'000 R'000
Revenue 15 065 369 15 325 391
Cost of sales (13 032 499) (13 097 630)
Gross profit 2 032 870 2 227 761
Other income 45 461 58 067
Operating expenses (excluding depreciation and amortisation) (1 611 174) (2 149 209)
Earnings before depreciation and amortisation 467 157 136 619
Depreciation and amortisation (79 416) (128 589)
Operating profit 387 741 8 030
Interest income 21 031 16 614
Interest expense (104 624) (140 643)
Impairment of intangible assets, goodwill and bonds (6 821) (477 797)
Profits from the sale of subsidairy and associate 574 184 960
Share of profits from associates - 16 476
Profit/(loss) before taxation 297 901 (392 360)
Taxation expense (35 578) (28 350)
Profit/(loss) for the year from continuing operations 262 323 (420 710)
Discontinued operations
Loss for the year from discontinued operations 4 (178) (140 322)
Profit/(loss) for the year 262 145 (561 032)
Profit/(loss) attributable to:
Owners of the parent from continuing operations 261 850 (422 956)
Owners of the parent discontinued operations (178) (140 322)
Non-controlling interest 473 2 246
Continuing operations
Basic earnings/(loss) per share (cents) 240,1 (388,2)
Diluted earnings/(loss) per share (cents)* 234,3 (388,2)
Discontinued operations
Basic loss per share (cents) (0,16) (128,8)
Diluted loss per share (cents) (0,16) (128,8)
Total basic earnings/(loss) per share
Basic earnings/(loss) per share (cents) 240,0 (517,0)
Diluted earnings/(loss) per share (cents) 234,1 (517,0)
* The 2018 diluted loss per share have been restated to exclude the impact of performance award that have
an anti-dilutive impact. The adjustment is not quantitatively material. The anti-dilutive impact of the
performance awards was identified during the Johannesburg Securities Exchange's proactive monitoring
process carried out on the 2018 financial statements. Diluted loss share were previously reported as:
? Continuing operations (378.6)
? Discontinued operations (125.6)
? Total diluted loss per share (504.2)
Audited summarised consolidated statement of other comprehensive income
for the year ended 28 February 2019
2019 2018
R'000 R'000
Profit/(loss) for the year 262 145 (561 032)
Other comprehensive income/(loss)*
Exchange differences on translating foreign operations 9 734 (50 677)
Exchange differences arising on the net investment of a foreign operation 23 527 (30 964)
Fair value adjustment of derivative financial instrument 1 040 1 102
Other comprehensive income/(loss) for the year, net of tax 34 301 (80 539)
Non-controlling interest (473) (2 246)
Total comprehensive income/(loss) for the year 295 973 (643 817)
Total comprehensive income/(loss) attributable to:
Owners of the parent continuing operations 295 678 (501 249)
Owners of the parent discontinued operations (178) (140 322)
Non-controlling interest 473 2 246
* All items included in other comprehensive income/(loss) will be reclassified to profit or loss upon
derecognition.
Audited summarised consolidated statement of cash flows
for the year ended 28 February 2019
2019 2018
Note R'000 R'000
Operating activities
Profit/(loss) before taxation 297 723 (473 044)
From continuing operations 297 901 (392 360)
From discontinued operations 4 (178) (80 684)
Adjusted for:
Foreign currency exchange gains - discontinued operations (25 236) -
Fair value adjustments - discontinued operations 25 407 -
Interest income - discontinued operations (3 752) -
Depreciation 25 845 31 696
Amortisation of intangibles 53 571 96 893
Impairment of intangible assets, goodwill and bonds 6 821 477 797
Share of profits from associates - (16 476)
(Profit)lloss on the sale of property and equipment (803) 839
Share-based payments 24 464 8 767
Share-based payment expense 24 464 12 822
Revaluation of share-based payment liability - (4 055)
Unrealised foreign exchange loss (gain) (1 514) 451
Non-cash portion of operating lease rentals (3 417) (1 361)
Profit on the sale of associate (574) (184 960)
Net movement on assets held for sale (18 811) 203 701
Fair value adjustment (2 003) (3 298)
Non-cash adjustments (4 639) -
Increase in bad debt provision (14 127) (21 274)
Interest income (21 031) (16 614)
Interest expense 104 624 140 643
Cash generated from operations before working capital changes 442 548 243 760
Decrease in trade and other receivables 173 683 45 930
(Decrease)/Increase in trade and other payables (113 797) 56 091
Increase in provisions 6 121 44 674
Other non cash items (8 541) -
Cash generated by operations 500 014 390 455
Interest income 24 783 16 614
Interest expense (104 624) (140 643)
Cash settlement of share options exercised (8 133) (31 384)
Taxation paid (59 550) (100 692)
Dividend paid (2 234) (1 293)
Net cash generated by operating activities 350 256 133 057
Investing activities
Additions to property, equipment and intangible assets (32 138) (27 234)
Proceeds from sale of property and equipment 5 083 2 133
Proceeds from other financial assets 32 508 -
Net cash outflow on acquisition of subsidiaries - (12 060)
Net cash inflow on disposal of associate 1 000 305 702
Net cash inflow from disposal of subsidiary 10 250 858
Net cash generated from investing activities 16 703 269 399
Financing activities
Payment from the issue of treasury shares (15 231) 13 961
Repayment of borrowings (1 366 966) (1 790 664)
Proceeds from borrowings 1 033 216 1 626 468
Other non-current liabilities - interest-bearing - (2 271)
Net cash utilised by financing activities (348 981) (152 506)
Net increase in cash and cash equivalents 17 978 249 950
Cash and cash equivalents at the beginning of the year 348 652 98 702
Cash and cash equivalents at the end of the year* 366 630 348 652
* Immaterial impact of change of foreign exchange rates.
Audited summarised consolidated statement of changes in equity
for the year ended 28 February 2019
Share- Foreign
based currency Cash flow
Share Share Treasury payment translation hedging
capital premium shares reserve reserve reserve
R'000 R'000 R'000 R'000 R'000 R'000
Balance as at
28 February 2017 2 749 1 738 109 (36 963) 128 993 24 289 (1 102)
Issue of treasury shares
under employee share
option scheme - - 13 961 - - -
Dividend distributions - - - - - -
Recognition of BBBEE and
staff share-based payments - - - 8 317 - -
Loss for the year - - - - - -
Non-controlling interest - - - - - -
Equity due to change
in control - - - - - -
Other comprehensive/(loss)
income for the year - - - - (50 677) 1 102
Balance as at
28 February 2018 2 749 1 738 109 (23 002) 137 310 (26 388) -
Recognition of BBBEE and
staff share-based payments - - - 24 464 - -
Treasury shares acquired - - (15 231) - - -
Dividend distributions - - - - - -
Profit for the year - - - - - -
Other comprehensive
income - - - - 10 774 -
Equity due to change
in control - - - - - -
Balance as at
28 February 2019 2 749 1 738 109 (38 233) 161 774 (15 614) -
Audited summarised consolidated statement of changes in equity (continued)
for the year ended 28 February 2019
Employees'
Attributable share
to equity Non- option
Retained holders of controlling scheme
earnings the parent interest reserve Total
R'000 R'000 R'000 R'000 R'000
Balance as at
28 February 2017 363 904 2 219 979 (5 249) 676 2 215 406
Issue of treasury shares
under employee share
option scheme - 13 961 - - 13 961
Dividend distributions (1 293) (1 293) - - (1 293)
Recognition of BBBEE and
staff share-based payments - 8 317 - - 8 317
Loss for the year (563 278) (563 278) 2 246 - (561 032)
Non-controlling interest - - 6 911 - 6 911
Equity due to change
in control 858 858 - - 858
Other comprehensive/(loss)
income for the year (30 964) (80 539) - - (80 539)
Balance as at
28 February 2018 (230 773) 1 598 005 3 908 676 1 602 589
Recognition of BBBEE and
staff share-based payments - 24 464 - - 24 464
Treasury shares acquired - (15 231) - - (15 231)
Dividend distributions (2 234) (2 234) - - (2 234)
Profit for the year 261 672 261 672 473 - 262 145
Other comprehensive
income 23 527 34 301 - - 34 301
Equity due to change
in control - - (560) - (560)
Balance as at
28 February 2019 52 192 1 900 977 3 821 676 1 905 474
Segment report
for the year ended 28 February 2019
Industrial Professional Services
South Support South Financial
Africa Australia Services Africa Australia Training Services Subtotal
R'000 R'000 R'000 R'000 R'000 R'000 R'000 R'000
Revenue
- 2019 5 980 971 1 622 869 1 371 072 1 935 706 3 839 095 166 005 149 336 15 065 054
- 2018 6 278 103 1 696 419 1 471 207 1 802 508 3 690 385 178 454 192 281 15 309 357
Internal revenue
- 2019 199 250 - 434 476 1 560 - 8 077 - 643 363
- 2018 39 450 - 6 015 2 240 - 11 192 - 58 897
Operating
profit/(loss)
- 2019 339 768 49 116 46 513 180 632 110 967 3 836 63 389 794 221
- 2018 180 968 26 551 43 436 151 663 99 100 (54 711) 55 041 502 048
EBITDA
- 2019 344 005 51 123 49 387 188 552 116 142 5 806 65 189 820 204
- 2018 189 232 58 096 46 474 160 624 104 059 (51 824) 58 218 564 879
Depreciation
and amortisation
- 2019 4 243 2 007 2 877 23 707 5 175 1 970 1 518 41 497
- 2018 8 262 31 545 3 030 24 821 4 022 2 886 5 687 80 253
Interest
income
- 2019 76 191 110 13 281 27 217 7 190 10 245 127 241
- 2018 66 145 202 12 219 28 812 120 248 8 066 115 812
Interest expense
- 2019 (48 406) - (9 988) (4 755) - (4 401) (4 578) (72 128)
- 2018 (56 312) - (8 942) (6 757) (3 047) (11 964) (4 132) (91 154)
Taxation
expense/(income)
- 2019 (68 452) 15 165 (17 461) 22 384 26 797 (11 621) 16 459 (16 729)
- 2018 (26 396) (5 698) (3 152) 67 431 29 250 (12 822) 4 758 53 371
Asset carrying
value from
continuing
operations*
- 2019 1 305 993 198 897 243 865 704 299 584 444 60 177 184 585 3 282 260
- 2018 1 394 421 (127 230) 271 762 747 752 499 450 94 961 202 951 3 084 067
Liabilities
carrying value**
- 2019 529 172 49 978 74 402 320 427 338 215 130 760 17 470 1 460 424
- 2018 535 976 42 777 153 232 271 081 307 809 149 030 24 650 1 484 555
Segment report continued (continued)
for the year ended 28 February 2019
Central
South Interna- South
Africa Australia Total tional Africa Total
R'000 R'000 R'000 R'000 R'000 R'000
Revenue
- 2019 315 - 15 065 369 5 461 964 9 603 405 15 065 369
- 2018 16 034 - 15 325 391 5 386 804 9 938 587 15 325 391
Internal revenue
- 2019 13 609 - 656 973 - 656 972 656 972
- 2018 20 155 - 79 052 - 79 052 79 052
Operating
profit/(loss)
- 2019 (360 117) (46 363) 387 741 113 720 274 021 387 741
- 2018 (446 475) (47 543) 8 030 78 108 (70 078) 8 030
EBITDA
- 2019 (329 762) (23 284) 467 158 143 981 323 176 467 157
- 2018 (403 264) (24 996) 136 619 137 159 (540) 136 619
Depreciation
and amortisation
- 2019 14 738 23 181 79 416 30 363 49 053 79 416
- 2018 24 854 23 482 128 589 59 049 69 540 128 589
Interest
income
- 2019 (107 553) 1 343 21 031 1 460 19 571 21 031
- 2018 (100 410) 1 212 16 614 1 534 15 080 16 614
Interest expense
- 2019 (16 676) (15 820) (104 624) (15 820) (88 804) (104 624)
- 2018 (32 457) (17 031) (140 642) (20 078) (120 564) (140 642)
Taxation
expense/(income)
- 2019 63 727 (11 420) 35 578 30 542 5 036 35 578
- 2018 10 074 (35 095) 28 350 (11 543) 39 893 28 350
Asset carrying
value from
continuing
operations*
- 2019 558 052 518 836 4 359 148 1 302 177 3 056 971 4 359 148
- 2018 517 608 875 544 4 477 219 1 247 764 3 229 455 4 477 219
Liabilities
carrying value**
- 2019 789 835 203 416 2 453 675 591 609 1 862 066 2 453 675
- 2018 1 065 596 301 382 2 851 533 651 968 2 199 565 2 851 533
2018
* Reconciliation of assets carrying value to balance sheet. R'000
Assets carrying value per the segment report 4 477 219
Other financial asset - relating to Capital Africa 43 145
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
***Determination of segments is disclosed above.
Notes to the audited summarised consolidated financial statements
for the year ended 28 February 2019
1. Basis of preparation
The summarised consolidated financial statements are prepared in accordance with the JSE Listings Requirements and the
requirements of the Companies Act, 71 of 2008 of South Africa. The summarised consolidated financial statements are
prepared in accordance with the framework concepts and the measurement and recognition requirements of IFRS and the SAICA
Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Pronouncements as issued by
Financial Reporting Standards Council, and must also, as a minimum contain the information required by IAS 34:Interim
Financial Reporting. The accounting policies applied in the preparation of the summarised consolidated financial statements
are in accordance with International Financial Reporting Standards (IFRS) and, with the exception of the adoption of
IFRS 9 - Financial instruments and IFRS 15 - revenue from contracts, are consistent with those applied in the preparation
of the previous consolidated audited financial statements for the year ended 28 February 2018. The group has adopted
IFRS 9 - Financial instruments and IFRS 15 - Revenue from contracts with customers and the adoption thereof did not have
any material impact on the results for the period. These results have been prepared under the historical cost convention.
These financial results and the full set of consolidated financial statements have been prepared by the Group
Financial Manager Technical & Reporting Lebohang Storom (CA(SA))and supervised by the Group Finance Executive Thabiso
Hermanus (CA(SA))and Group Chief Financial Officer, CJ Kujenga (CA(SA)).
2. Auditor's reports
These summary consolidated financial statements for the year ended 28 February 2019 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 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 08:00 to 16:00, Monday to Friday at the Company's registered office, Adcorp
Office Park, corner William Nicol Drive and Wedgewood Link, Bryanston, together with the financial statements
identified in the respective auditor's reports.
The auditor's reports 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. Discontinued operations
2019 2018
R'000 R'000
Profit or loss
Revenue 73 117 798
Cost of sales (296) (91 837)
Gross profit/(loss) (223) 25 961
Other income 7 420 10 915
Foreign currency exchange gains 25 236 -
Operating expenses (10 956) (42 260)
Operating profit/(loss) 21 477 (5 384)
Interest income 3 752 -
Impairments (25 407) (75 300)
Net loss before tax (178) (80 684)
Taxation - (59 638)
Net loss after tax (178) (140 322)
The impairment relates to other financial
assets, cash and trade receivables in Africa.
Assets and liabilities
Current assets held for sale
Trade and other receivables - 10 077
Tax prepaid - 357
Total - 10 434
Non-current liabilities associated with
assets classified as held for sale
Trade and other payables - 11 306
Provisions - 4 756
Tax payable - 13 183
Total - 29 245
5. Earnings per share
The calculation of earnings per share on continuing operations attributable to the ordinary equity holders
of the parent is based on earnings of R261 849 887 (2018: R422 956 341) and discontinued loss of R178 826
(2018: R140 322 087 ordinary shares of 108 946 470 (2018: 108 946 470), being the weighted average number
of shares relative to the above earnings.
2019 2018
R'000 R'000
Continuing operations
Basic earnings/(loss) per share (cents) 240,1 (388,2)
Diluted earnings/(loss) per share 234,3 (388,2)
Discontinuing operations
Basic loss per share (cents) (0,16) (128,8)
Diluted loss per share (0,16) (128,8)
Total basic loss per share (cents)
Basic earnings/(loss) per share (cents) 240,0 (517,0)
Diluted earnings/(loss) per share 234,1 (517,0)
112 168 839 (2017: 108 946 470)
weighted diluted number of shares
are determined as follows:
Reconciliation of diluted number
of shares
Ordinary shares 109 043 442 108 946 470
Adcorp employee share schemes - dilution* 2 711 331 4 273 599
Adcorp employee share schemes -
anti-dilutive shares excluded*** (4 273 599)
Diluted number of shares 111 754 773 108 946 470
Reconciliation of headline earnings/(loss)
from continuing operations**
Profit/loss for the year 261 850 (422 956)
Profit on sale of property and equipment (803) (839)
Taxation recovered on the sale of - 235
property and equipment
Impairment of intangible assets,
goodwill and bonds (6 821) 477 797
Profits from the sale of businesses 574 (184 960)
Taxation charged on sale of associate - 36 452
Headline earnings/(loss) 254 800 (94 271)
Headline earnings/(loss) per share (cents) 234 (86)
Diluted headline earnings/(loss)
earnings per share (cents) 228 (86)
Reconciliation of headline earnings/(loss)
from discontinued operations**
Profit/(loss) for the year (178) (140 322)
Impairment of investments, goodwill
and loans - 75 300
Headline earnings/(loss) (178) (65 022)
Headline earnings/(loss) per share (cents) - (60)
Diluted headline earnings/(loss) per
share (cents) - (60)
Reconciliation of headline earnings/(loss)
from total operations
Profit/(loss) for the year 261 672 (563 278)
Impairment of investments, goodwill and loans (6 821) 553 097
Profit on sale of property and equipment (803) (839)
Taxation recovered on the sale of property
and equipment - 235
Profits from the sale of businesses 574 (184 960)
Taxation charged on sale of associate - 36 542
Headline earnings/(loss) 254 622 (159 203)
Headline earnings/(loss) per share (cents) 233,5 (146,1)
Diluted headline earnings/(loss) per share (cents) 227,8 (146,1)
* 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.
*** The 2018 shares have been adjusted to exclude the impact of anti-dilutive shares.
6. Interest-bearing liabilities
6.1 Long-term portion
2019 2018
Interest rate Maturity R'000 R'000
Long-term loans - Six equal instalments
non-current portion on the last of each of 690 466 978 196
Amortising term loan JIBAR +340 the five months prior 200 000 200 000
Amortising revolving to 30 November 2020
loan JIBAR +340 450 000 725 000
Equal semi-annual
instalments due
Amortising revolving 2,9% - 3,15% August 2020 and
loan February 2021 40 466 53 196
6.2 Short-term portion
2019 2018
Interest rate Maturity R'000 R'000
Long-term loans -
current portion 194 836 228 687
Equal semi-annual
3,15% instalments due
Amortising revolving (FY18: 3,15%) August 2019 and
loan February 2020 194 836 228 687
Trade receivables are used as security to secure funding relating to the revolving loan facilities.
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 between the following operating subsidiaries of
the Adcorp Group:
- All About Project Management Proprietary Limited
- Adcorp Staffing Solutions Proprietary Limited
- Adcorp Fulfilment Services Proprietary Limited
- Adcorp Management Services Proprietary Limited
- Adcorp Support Services Proprietary Limited
- Quest Staffing Solutions Proprietary Limited
- Paracon SA Proprietary Limited
- Mondial IT Solutions Proprietary Limited
- Production Management Institute of Southern Africa Proprietary Limited
- Adcorp Workforce Solutions Proprietary Limited
- Adcorp Workforce Management Solutions Proprietary Limited
- Comsel Eighteen Proprietary Limited
- Talentcru Proprietary Limited
- Tiger Tail Digital Proprietary Limited
- Torque Technical Computer Training Proprietary Limited
- Adcorp Contracting Proprietary Limited
- Adcorp Technical Training Proprietary Limited
- Adfusion Contract Management Services Proprietary Limited
- Adcorp Advantage Proprietary Limited
- M Squared Consulting MSP Proprietary Limited
- FNDS3000 Proprietary Limited
- Zest Hospitality Proprietary Limited
- Fortress Administration Proprietary Limited
- Kelly Corporate Finance Proprietary Limited
- AllAboutXpert Proprietary Limited
- Innstaff Proprietary Limited
- Capital Outsourcing Group Proprietary Limited
7. Subsequent events
No material transactions or events subsequent to the end of the financial year ended 28 February 2019 and
prior to the approval of these consolidated financial statements.
8. Financial instruments
The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while
maximising the return to stakeholders through the optimisation of the debt and equity balance. The capital structure of
the Group consists of debt, cash and cash equivalents and equity attributable to equity holders of the parent,
comprising issued capital, reserves and retained earnings as disclosed in the statement of changes in equity.
An Investment Committee was constituted during FY2019. This committee has considered the cost of capital and the
risks associated with each class of capital. The current gearing ratio is 27% (FY2018: 55%). The committee is working on
the determination of an appropriate capital framework and target gearing for the Group. The Group historically had a
target gearing ratio of 37%.
Details of the significant accounting policies and methods adopted, including the criteria for recognition, the
basis of measurement and the basis on which income and expenses are recognised, in respect of each class of financial
asset, financial liability and equity instrument, are disclosed in the accounting policies in the Annual Financial
Statements.
8.1 Categories for financial instruments
2019 2018
R'000 R'000
Financial assets
Investments - fair value through profit or loss 15 247 13 244
Receivables (excluding cash resources) -
amortised cost 2 086 490 2 272 550
Cash 366 857 360 328
Investment - amortised cost 2 992 22 552
Financial liabilities
Amortised cost (excluding bank overdraft) 1 775 987 2 431 913
Bank overdraft 227 11 676
The following table details the Group's
remaining contractual maturity for its
financial liabilities:
Within one year 1 306 069 1 236 553
Later than one year and not later than five years 690 466 1 053 196
8.2 Financial risk management objectives
The Group's executive and head office treasury function provides services to the business, coordinates
access to domestic financial markets, and monitors and manages the financial risks relating to the
operations of the Group. These risks include market risk, credit risk, liquidity risk and cash flow
interest rate risk. The Group does not enter into or trade financial instruments, including derivative
financial instruments, for speculative purposes.
The head office treasury function reports quarterly to the Board, which monitors risks and policies
implemented to mitigate risk exposures.
8.3 Interest risk management
The Group is exposed to interest rate risk because it has borrowings that attract interest at floating rate.
The sensitivity analyses below have been determined based on the exposure to interest rates for both
derivative and non-derivative instruments at the end of the reporting year. For floating rate liabilities,
the analysis is prepared assuming the amount of the liability outstanding at the end of the reporting
period was outstanding for the whole year.
If interest rates had been 1% higher/lower and all other variables were held constant, the Group's loss
for the year after tax would increase/decrease by R11,7 million (2018: decrease/increase by R14 million).
8.4 Financial risk management
Liquidity risk
Liquidity risk is the risk that the Group will not be able to repay its financial obligations as they fall
due. The Group manages liquidity risk by monitoring forecast cash flows and ensuring that adequate
unutilised borrowing facilities are maintained.
Credit risk
Credit risk with respect to trade accounts receivable is limited due to the blue-chip nature of the Group's
client base. Credit assessments are done and continually updated on all the Group's clients.
On Less than 3 - 12 1 - 5 More than
demand 3 months months years 5 years Total
R'000 R'000 R'000 R'000 R'000 R'000
Interest-bearing loans
- South Africa - - - 650 000 - 650 000
Interest-bearing loans
- Australia - - 194 836 40 466 - 235 302
Trade and other
payables - 890 685 - - - 890 685
Foreign currency
The Company undertakes transactions denominated in foreign currencies, consequently, exposures to
exchange rate fluctuations arise.
The sensitivity analysis below represents the extent to which the Company has monetary assets and
liabilities other than the Company's functional currency. Based on the net exposure below it is
estimated that a 10% change in the Australian dollar foreign exchange rate against the functional
currency will impact the fair value of the net asset value as well as the Group's profit to the extent
of R24 million (2018: R11 million).
8.5 Financial instruments
Some of the Group's financial assets and financial liabilities are measured at fair value at the end of
each reporting period. The following table gives information about how the fair values of these financial
assets and financial liabilities are determined (in particular, the valuation technique(s) and inputs used):
Valuation Relationship
Financial technique(s) Significant of unobservable
assets/financial 2019 2018 and key Fair value observable inputs
liabilities R'000 R'000 inputs hierarchy input(s) to fair value
Investment 15 247 13 244 Fair value Level 2 Aggregated A significant
- market publicly increase in
valuation traded unit the fair value
trusts at fair of invested unit
market value trusts would
result in a
significant
increase
in fair value
Investment 2 992 22 552 Bond - fair Level 2 Foreign A significant
- amortised value - currency change in the
cost market valuation exchange foreign currency
rates exchange rate
will lead to
a significant
change in the
fair value of
the investment
Administration
Corporate information
Executive directors: I Dutiro (Chief Executive Officer), CJ Kujenga (Chief Financial Officer)
Non-executive directors: GT Serobe (Chairman), GP Dingaan, C Maswanganyi, TP Moeketsi,
S Sithole, SN Mabaso-Koyana, FS Mufamadi, ME Mthunzi, MW Spicer (Lead Independent),
H Singh, P Mnganga
Physical address: Adcorp Office Park, Nicolway Bryanston, corner William Nicol and
Wedgewood Link, Bryanston, 2021
Telephone: 011 244 5300
Website: http://www.adcorpgroup.com
Secretary: KH Fihrer
Transfer secretaries:
4 Africa Exchange Registry (Pty) Ltd
Cedar Woods House
Ballywoods Office Park
33 Ballyclare Drive
Bryanston, 2191
Sponsor: Deloitte & Touche Sponsor Services (Pty) Ltd,
Building 8, Deloitte Place, The Woodlands,
20 Woodlands Drive, Woodmead, Sandton, 2196.
Date: 20/05/2019 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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