The Power of Potential - ShareData · group strategy and vision 16 strategic priorities 17 what our...
Transcript of The Power of Potential - ShareData · group strategy and vision 16 strategic priorities 17 what our...
T H E P O W E R O F P O T E N T I A L
The Power of Potential
ANNUAL REPORT 2008
TOTAL TRANSPARENCY IN THE CONDUCT OFTHE AFFAIRS OF THE BUSINESS
SOUND CORPORATE GOVERNANCE
A PRIMARY FOCUS ON CASH GENERATION(AS PRIORITY OVER REPORTED PROFIT)
A FOCUS ON ORGANIC GROWTH CENTREDAROUND MARGIN MANAGEMENT AS WELL ASGROWTH ACHIEVED THROUGH STRATEGICACQUISITION
A RETURN OF EXCESS CASH RESOURCES TOSHAREHOLDERS WITHIN THE CONFINES OFMAINTAINING AN ACCEPTABLE LEVEL OFGEARING
A COMMITMENT TO BROAD-BASED BLACKECONOMIC EMPOWERMENT (BBBEE) ANDTRANSFORMATION
Group achievements
EBITDA UP BY 61%
CORE HEADLINE EARNINGS PER SHARE UP 30%
CASH CONVERSION RATIO 102%
DIVIDENDS DECLARED IN RESPECT OF 2007/08 FINANCIAL PERIOD TOTAL 215CENTS PER SHARE – UP 28%
DEBTORS DAYS REDUCED TO 30 DAYS
EBITDA MARGIN UP TO 6,4%
25,1% BBBEE TRANSACTION CONCLUDED
WINNER OF THE 2008 FINANCIAL MAIL/EMPOWERDEX TOP EMPOWERMENTCOMPANIES AWARD
HIGH GROWTH CORE BUSINESSESACQUIRED
QUALITY AND QUANTITY OF GROUPEARNINGS GREATLY ENHANCED
What shareholders can expect
CONTENTS
GROUP ACHIEVEMENTS IFC
WHAT SHAREHOLDERS CANEXPECT IFC
WHERE WE HAVE COME FROM 2
PERFORMANCE AGAINST STATED TARGETS 4
OUR FOOTPRINT 5
GROUP AT A GLANCE 7
OUR ROLE IN THE WHOLE 8
WHAT MAKES US WHO WE ARE 9
OUR PEOPLE 10
CASE STUDIES 12
GROUP STRATEGY AND VISION 16
STRATEGIC PRIORITIES 17
WHAT OUR LEADERS SAY 18
CHAIRMAN’S REPORT 20
CHIEF EXECUTIVE’S REPORT 22
BOARD OF DIRECTORS 30
CORPORATE GOVERNANCE 32
CORPORATE SOCIAL RESPONSIBILITY 35
EMPLOYMENT EQUITY – PERMANENT STAFF 38
SIX-YEAR REVIEW 40
APPROVAL OF THE ANNUALFINANCIAL STATEMENTS 42
CERTIFICATION BY COMPANY SECRETARY 43
REPORT OF THE INDEPENDENT AUDITORS 44
DIRECTORS’ REPORT 45
BALANCE SHEETS 52
INCOME STATEMENTS 53
STATEMENTS OF CHANGESIN EQUITY 54
CASH FLOW STATEMENTS 55
SEGMENT REPORT 56
NOTES TO THE ANNUALFINANCIAL STATEMENTS 57
ANNEXURE A 90
ADMINISTRATION 92
ANALYSIS OF SHAREHOLDING 94
SHAREHOLDERS DIARY 94
SHARE STATISTICS 95
NOTICE OF ANNUAL GENERAL MEETING 96
FORM OF PROXY ATTACHED
Adcorp Cover REPRO 7/21/08 3:44 PM Page 2
Company overview
Where we have come from...
2 | ADCORP Annual Report 2008 | The Power of Potential
STRA
TEGI
C M
OVEM
ENTS
ACHI
EVEM
ENTS
BUSI
NESS
AP
PROA
CH
2001199919871978
• Acquisition of Acumen concluded
• Turnaround strategy commencesfocusing on cash and marginmanagement
Acquisitive Adcorp grows to 38 companies
Initialpublicofferingon theJSE
Adcorp is ‘born’
Entrepreneurial Adcorp with informal leadership style.
Acquisitive; disfocused; product-centric and EPS driven.
Sunday Times Top100 Award for theBest PerformingCompany on theJSE
The Power of Potential | ADCORP Annual Report 2008 | 3
2004 2006 2007
Top listedEmpowermentCompany
30th year ofsuccessful trading
Consolidate nineunderlyingbusinesses toestablish AdcorpTalent Resourcingand JobVest asEmployer Brandingand RecruitmentProcessOutsourcing (RPO)specialists
• Strategy agreed to simplify theGroup and focus on core business
• Enterprise Development initiativeestablished through amanagement buy-out of Simeka TWS and Graphicor
• Acquired Employ-Rite
Continuedstrong focus onorganic growthand strategicacquisitions
• BBBEE transaction concludedwith consortium comprisingWiphold, Simeka and EmployeeShare Option Plan (ESOP)
• Acquired FMS MarketingSolutions
• Acquired Capital OutsourcingGroup
• Sale of Research Surveys toTNS (London)
• Sale of Career Junction
2008
BBBEE firstin ServicesSector
• Third year of strong organicgrowth
• BBBEE– rated first in Services Sector
• 128% of profitconverted to
Back to basics; still product focused!
Leveraging the core; focus on innovation;integrating into the client environment.
Performance against stated targets
Return on assets managed*
Perce
nt (%
)
Target0605040305
1015202530354045
08
Return on sales*
Perce
nt (%
)
Target060504030
1
2
3
4
5
6
08
Asset turnover*
Times
Target060504030
1
2
3
4
5
6
7
8
08
Cash generated to operating profit
Perce
nt (%
)
Target060504030
20
40
60
80
100
120
140
08
Debtors days
Days
Target060504030
5
10
15
20
25
30
35
40
08
Gearing
Perce
nt (%
)
Target0605040305
1015202530354045
08
4 | ADCORP Annual Report 2008 | The Power of Potential
* 2008 annualised.
Our footprint
Free StateKwa-Zulu Natal
Eastern Cape
Northern Cape
North West
Limpopo
Mpumalanga
AngolaMalawi
South Africa
Gauteng
Western Cape
Adcorp Accountability
Adcorp Talent Resourcing
Adcorp Talent Search Partners
Capacity
Capital Outsourcing
Charisma
DAV
Emmanuels
Employ-Rite
FMS
Grey Consulting
JobVest
PMI
Premier Personnel
Quest
Mozambique
The Power of Potential | ADCORP Annual Report 2008 | 5
6 | ADCORP Annual Report 2008 | The Power of Potential
K E Y A C C O U N T S
PERMANENT• Contingent database selection
• Talent search
• Executive search
• Internet recruitment
• Candidate assessment and selection
• Turnkey managed staffing solutions
FLEXIBLE• Temporary staffing assignments
• Contract staffing solutions
• Workforce optimisation
• Learnership implementation and administration
• Leadership and management development
• Customised, strategically aligned, corporate training solutions
• Comprehensive offering of business relevant, accredited education and
training programmes
• Brand development
• Strategic staffing advisory services
• Recruitment advertising
• Employer branding
• Role profiling
• Candidate response management
• Psychometric assessment and selection
• Talent management
• Recruitment process outsourcing (RPO)
• Tender management
• Business process outsourcing
• Payroll outsourcing
• Mass recruitment and respone handling for large scale projects
• Added value services to policy holders of insurance companies and
members of affinity groups
STAF
FING
MARKETING SOLUTIONSFMS
GREY_CONSULTING
ensuring returns on human capital
g
BUSI
NESS
PRO
CESS
OUT
SOUR
CING
SERVICE OFFERINGSBRANDS
Variety of staffing services and solutions in a number of job types and
industries, including:
• Growth in outsourcing of non-core
functions by clients
• Desire by organisations to match
labour input costs to variable
market demand
• Rapid expansion of call centres in
South Africa
• Growth in learnerships established
in terms of the Skills Development
Act
• Growth in the South African
economy, particularly the
construction and infrastructure
sectors
• Critical shortage of key skills
categories
• Demand for exclusive single
supplier, managed staffing solutions
• Growth in high volume, fast turn-around recruitment projects
• Employer branding achieves betterresults for less cost
• Growth in the employee benefit
industry
• Roll out of new products and
services to existing client base and
temporary workforce
Group at a glance
The Power of Potential | ADCORP Annual Report 2008 | 7
• Productivity enhancing service offerings
• Market leaders in differentiated recruitment practices
• Learning as an integrated part of a flexible workforce management solution
• Sophisticated workforce optimisation technology to unlock optimum client
benefits
• Database in excess of 250 000 candidates over all levels, skills sets and various
industries
• Measurable performance against defined service level agreements
• Employment equity record of 68% PDI (previously disadvantaged individuals)
placements
• Credible black economic empowerment profile
• Action-based training approach: learn – apply – measure
• Fully accredited training offerings
• Ability to measure efficiency of training in the working environment
• Sustainability of benefits for clients
• Ability to customise offerings
• Candidate sourcing spanning numerous leading, branded consultancies
combining unrivalled knowledge, experience, databases and advertising reach
• Intimate client relationships facilitating the development of unique human
capital strategies and resource planning
• Uniquely broad range of recruitment services enabling fully outsourced
recruitment offerings
KEY DRIVERS FOR GROWTHDIFFERENTIATORS
STAF
FING
BUSI
NESS
PRO
CESS
OUT
SOUR
CING
• Diverse talent pool uniquely positioned to match the demands of the market
• Dominant market position
• Unique, market leading product and service offerings
• A people-centred organisation with a culture of deliberate curiosity staffed by
talented professionals
• Extraordinary relationships with clients
• Cutting-edge thinking supported by technical and process excellence
• Equipped to handle high volumes and select the best candidates in quick
turn-around times
• Brands the employer thereby creating an identity which will attract employees
who will relate to the skill and culture requirements
• Unique subcontracted provider network
• Role profiling, candidate assessment and selection profiling within a
quantifiable, consistent, scientifically verified and legally compliant framework
Given these prevailingcircumstances, theAdcorp Group is wellpositioned to takeadvantage of theseconditions due to theGroup’s unrivalledability to search fortalent, our ability to traintalent and to navigatethe skills developmentand learnershiplegislative and structuralenvironments, the abilityof the Group, bolsteredby recent acquisitions,to import talent as wellas our ability to impactpositively on our clients’talent retentionstrategies.
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Where we are now...Our role in the whole
R3 billionR23 billion
South Africa’s staffing industry is a highly
competitive industry with relatively low
barriers to entry and very low levels of
industry cooperation. It is a R23 billion pa
industry with an estimated 2 500 – 3 000
registered and a further 2 000 unregistered
businesses. Of the nearly 5 000 businesses
approximately 3 600 work in the temporary
employment services (“TES”) arena. The
TES is a substantial industry employing
800 000 people annually at a turnover of
about 80% of the stated R23 billion and, in
terms of contribution to GDP, bigger than
the agriculture, hunting and fisheries and
electricity, water and gas sectors. Seven of
these companies are listed on the JSE
Limited (JSE) – Main Board and AltX –
with a joint market cap of just over
R6,1 billion (as on 3 July 2008).
The current macro-level debate in the
country centres around, among other things,
the current skills shortage; particularly in
light of the unprecedented financial
commitment already made to infrastructure
development and capital projects.
The Adcorp Group currently deploys a
contract labour workforce of around
70 000 and facilitates in excess of 200 000
man-hours of training per annum to deploy
productive people into the formal sector.
These training programmes are accredited
and highly respected across a range of
industries. Adcorp has to date taken well in
excess of 2 000 people through accredited
learnership and Recognition of Prior
Learning (RPL) programmes and is
represented in various SETAs and within
Steel, Engineering and Iron Federation of
SA (SEIFSA).
US$60 billionUS$190 billion
South African staffing market size
Source: Staffing Industry Analyst Inc., 2007
Flex/Temp
International staffing market size
Permanent
What makes us who we are
The Power of Potential | ADCORP Annual Report 2008 | 9
REAL EMPOWERMENT. REAL CHANGE . . . REAL GROWTH
At Adcorp we believe in the power of changeand in the value of true empowerment.This is why we’ve committed ourselves to black economic empowerment – and set tangible goalsto make this a reality throughout our group.
Because BEE is a real part of who we are and what we do, we’ve incorporated it into thefollowing aspects of our business: ownership; management; employment equity; skillsdevelopment; preferential procurement; enterprise development and CSI.
We’re proud to announce that we have already made a real difference. Through our strategicapproach to transformation and empowerment, we have managed to improve our empowermentposition year-on-year (as reflected in the FM Empowerment Index) and leverage this status as anenabler for sustainable business improvement and exceptional financial results. Voted the “mostempowered listed company in South Africa” by Financial Mail for 2008, Adcorp Holdings iscommitted to building on this phenomenal achievement. Empowering our employees.Empowering our country. Enabling your company.
AWARDS• Adcorp Holdings was awarded the most empowered listed entity in South Africa in the
Financial Mail/Empowerdex Top Empowerment Companies Award 2008.
• Adcorp Holdings won the 2007 Investment Analysts Society Award for the Best
Financial Results Presentation – Companies with a market capitalisation below
R5 billion.
• Adcorp Holdings was recently awarded Microsoft gold implementation partner status
with regard to Microsoft Dynamics AX.
• Adcorp Talent Resourcing (ATR) and JobVest won 7 of the 15 categories in the Sunday
Times Business Times Careers Awards for Recruitment Advertising.
• Capacity Outsourcing recently won the Zululand Chamber of Commerce Business
Excellence Awards in the category for Best Service.
Because BEE is a real partof who we are and what wedo, we’ve incorporated it intoevery part of our business.
TRANSFORMATIONThe Group announced a broad-based black
economic empowerment (BBBEE)
transaction early in 2007 that has
significantly bolstered the empowerment
credentials of the Group, while also creating
an opportunity for all Adcorp employees to
share in the Group’s financial fortunes.
In terms of this BBBEE transaction, a
consortium comprising women’s grouping,
Women Investment Portfolio Holdings
(Wiphold), Simeka Group (Pty) Limited and
an Adcorp employee share incentive trust
now have an effective 25,1% shareholding
in Adcorp Holdings Limited.
10 | ADCORP Annual Report 2008 | The Power of Potential
Globalisation, new technologies, the skills
shortages and generation changes in the
labour market has resulted in Adcorp
developing a human resources strategy
based on innovation and performance.
The actual strategy focuses on talent
attraction, development, optimisation and
retention that is underpinned by life-work
values alignment.
This is facilitated by engaging in group-
wide talent forecasting, giving
consideration to the external and internal
environment in which Adcorp and its
clients operate. The Adcorp Group believes
that the currency of human capital is
competence – the sum of knowledge,
skills and values. Hence, we believe that
talent audits both internally and within the
labour market should drive talent
management strategies.
Career and succession planning is
operationalised through detailed talent
management plans comprising employment
equity and workplace skills plans.
Given the fact that the Adcorp Group is
represented either directly or indirectly on
forums such as the National Economic
Development and Labour Advisory Council
(NEDLAC), Business Unity South Africa
(BUSA), the Millennium Labour Council,
the Confederation of Associations in the
Private Employment Sector (CAPES) and
the like, the Group both influences labour
market policy and takes the lead in
developing new strategies in business and
the management of human capital.
Education, training and development takes
a central role in ensuring that business
strategy is realised, with a strong emphasis
on the alignment of values given the fact
that values drive decisions which
determines workplace conduct and the
application of knowledge and skills.
The actualstrategy focuses ontalent attraction,development,optimisation andretention that isunderpinned bylife-work valuesalignment.
PEOPLE STRATEGY
Adcorp remains committed to upholding abest practice human resource managementapproach by ensuring that the managementof human resources is effective, efficient andthat there is fair treatment of all employees.
Our people – the core of our business!
The Power of Potential | ADCORP Annual Report 2008 | 11
STAFFAs employers the world over grapple with
the challenge of how to engage with their
employee base, thereby strengthening the
bond between employer and employee and
increasing retention and productivity as a
result of a shared vested interest, Adcorp
has introduced Adlife to its employee base,
a brand new communications channel which
looks to raise the bar in terms of internal
stakeholder engagement within the Adcorp
Group. The format has been designed with
user ‘ease of use’ in mind, providing high
value, relevant and interesting content that
is both easy to use and fresh to look at. The
use of an electronic format enables us to
pass ‘sound-bites’ of up-to-date information
to staff regularly, thereby increasing the
flow of information and building brand
collateral among our employee base; the
lifeblood of our business!
Another important stakeholder group for
Adcorp is our clients. Where we have
managed to build strong relationships
between employees (consultants) and
clients, we are able to more effectively
partner with particular clients and their
company to deliver optimal people
solutions. The Adcorp Pro-Am has grown
in each of its six years of existence and is
an opportunity for us to thank valued
clients for their support over the
preceding year and engage with them in
a more informal and social setting.
A bad day on the golfcourse is better than areally good day in the
office.
CHAIRMAN’S AWARDSDedicated employees deserve honour and recognition for their hard work and commitment.
Annually, individual Adcorp Group employees and companies are honoured for their
exceptional achievements and contributions.
Adcorp Holdings prides itself on the phenomenal performance and sustained growth
it has experienced over the past years, which would not have been possible without the
outstanding performances of both employees and Group companies alike.
Such achievements should be celebrated, and the annual Adcorp Chairman’s Awards is
where our individual and collective ‘heroes’ are recognised and honoured.
Case studies
12 | ADCORP Annual Report 2008 | The Power of Potential
• Cost per compliantcall reduced by81,9%.
• Calls handledincreased by 40%with the samenumber of staffmembers.
• Cost saving of R14,3 million duringproject period.
The “100-DayAction Project” was
deployed withinMTN with the aim
of increasing theproductivity of existingemployees rather than
deploying additionalresources.
100-DAY ACTION PROJECTAlthough the primary intervention
introduced during the project was
comparatively straightforward, it amounted
to performance-based scheduling. Various
supportive interventions were required to
achieve this comparatively simple outcome.
A series of upskilling workshops were
conducted with the workforce management
team to introduce the skills necessary for
best-practice scheduling on a sustainable
basis. Moreover, a series of change
management and quantitative reporting
workshops were held with preselected
team leaders and agents to acquire
their buy-in and also the project’s
long-term sustainability.
In terms of workforce scheduling, the best
5% of performers were identified each
month and, during the subsequent month,
these employees were given a R4 per hour
wage increase and free choice of shifts,
including as many weekends off as they
chose, as many working hours as they
preferred. At the same time, the worst 5%
of performers were identified each month
and, during the subsequent month, these
employees were given mandatory shifts
that were less convenient or earned them
less money than the more desirable shifts,
including the undesirable 4,5-hour night-
time shifts.
As a result, the difference between monthly
earnings of top and bottom performers
increased from less than R100 (which
provided no material incentive for high
performance) to as much as R3 500 (which
provided an aggressive performance
incentive).
Supportive interventions introduced during
the project included:
• an intense change management process,
in which top-performing agents were
identified and selected as “change
champions;
• best-practice workforce design,
including upskilling of the client’s
workforce management team; and
• a new set of performance metrics,
including the Q-ratio, which measures
the cost (including indirect costs of staff
turnover, absenteeism and so forth) per
compliant call. This metric provided the
call centre managers, team leaders and
agents with the correct performance
incentives, to enhance performance by
increasing compliance with the call
centre’s financial and customer
service objectives.
During the course of the project, a
substantial increase in productivity was
achieved, while at the same time employee
turnover was significantly reduced.
The most remarkable achievement of the
project was that the network’s in-sourced
call centre became more cost-effective,
on a per-call basis, than the outsourced call
centre. As a result of the project’s success,
it is being rolled out into the network’s
various call centres around the country.
The Power of Potential | ADCORP Annual Report 2008 | 13
To date approximately 1 800 Toyota employeeshave gone through the PMI education andtraining progression oflearning.
IN THE WORDS OF TOYOTAThe Production Management Institute of
Southern Africa (Pty) Limited (PMI) and
Toyota South Africa developed a formal
training relationship in 1999. To date
approximately 1 800 Toyota employees
have gone through the PMI education and
training progression of learning. The PMI
qualifications form an integral part of
Toyota’s first-line management
programmes, namely the team leader,
group leader and study assistance
development programmes.
Significantly, the learning progression caters
for the development of appropriate literacy
and numeracy, through foundational
learning and finally into the higher
education band, to an honour’s degree level.
To their credit, the commitment to
development of the Toyota employees is so
high that they attend classes after hours at
no additional remuneration.
The partnership between PMI and Toyota
ensures that a key emphasis of the
programme is an effective transfer of
learning with a resultant quantifiable
business impact.
PMI is regarded as a keypartner in Toyota’s strategy ofdeveloping its human resources.Toyota views the integratedapplication project as the meansof promoting the transfer oflearning in the workplace. This process has yieldedsignificant benefits on the shopfloor in terms of continuousimprovement, which hascontributed largely to return oninvestment. Selvan Pillay
Manager: Toyota Academy (2007)
Case studies (continued)
14 | ADCORP Annual Report 2008 | The Power of Potential
In summary, the failurerate dropped radically
and the quality of work improved, onaverage we have
a 95% and moresuccess rate!
FABRICATORS SUPPLIED TO BELLEQUIPMENT, RICHARDS BAYIn November 2007 Capacity noted that Bell
was concerned regarding the quality of
work, the number of rejections and the
amount of re-work that had to be done as a
result of the calibre of fabricators that we
had supplied. Further to this it was also
noted that on average the failure rate of
each fabricator supplied by Capacity
(trained, screened and with papers) had a
failure rate on the line of 70% and more.
It was also noted that there was a skills
shortage in the market and that the current
industry training and assessments were
not suitable to the Bell standards and
work requirements.
Under the banner of the Richards Bay
Capacity People Development Academy,
our technical academy manager along with
a company, known as Arc Engineering
(suppliers of welding machines to Bell) and
the Bell’s Assessor had a meeting to
determine what needed to be in place
for the fabricators to be deemed competent
before being placed at Bell. Hence a process
flow chart covering revised training,
assessment and evaluation was developed
via the People Development Academy in
Richards Bay with the result of the
recruitment process flow being re-
engineered. In summary, the failure rate
dropped radically and the quality of work
improved, on average we have a 95% and
more success rate!
Further to this development another big
achievement and a mindshift for some of
the line managers at Bell was that female
fabricators had been supplied for the first
time ever as a result of the re-engineered
recruitment process via the People
Development Academy. Bell reported that
their attention to detail and neatness was
better than that of some of the male
fabricators. The results were much better
than had been expected and the line
managers were particularly impressed with
the female fabricators. Overall the stitching
was much neater, setting of the machines
was accurate and they had the ability to use
the cutting torch and read drawings.
Capacity has also been able to establish a
pool of accredited fabricators for Bell,
which in turn have addressed the skills
shortage in terms of critical skills needed at
Bell. The net effect has been a big win win
for both Capacity and Bell.
Capacity has also been able to establish
a pool of accreditedfabricators for Bell.
The Power of Potential | ADCORP Annual Report 2008 | 15
This progressivepartnership andresourcing strategywill ensure that thispublic sector entitysatisfies their strategicobjectives in sourcingand selecting theright skills, timely andcost effectively inorder to deliver ontheir challengingmandate.
A unique staffingmodel with severalinterfaces was designed to fulfil therecruitment strategy inorder to meet theirstaffing requirements.
A unique staffing model with several
interfaces was designed to fulfil the client
recruitment strategy in order to meet their
staffing requirements. The challenge has
been to integrate human resources and
financial information, optimise planning
and transactional processing, and automate
paper intensive human resource processes.
A phased-in approach has been adopted
that aligns infrastructure and technology
platforms with a slow release employer
branding campaign, supported by a multi-
channel response handling capability,
critical to their ability to access the broadest
cross-section of the population, differentiate
themselves in a congested marketplace and
attract the right people.
Vacancy requests have also been
streamlined and response handling is
managed by an off-site response
management team of approximately
40 professional staff members which has
the capacity and flexibility to manage peaks
and fluctuations in resourcing demand.
In addressing the ongoing challenges to the
HR community where business constantly
demands that more time is spent client facing
in value-adding activities it was decided to
move the ‘non-value adding’ administrative
tasks including copy writing, CV screening,
pre-employment and reference checks and
creating shortlists into the most efficient
administrative processing unit.
Standardising role profiles, behavioural and
competency-based interview guides with
evaluation scorecards have been developed
to reduce subjectivity in interviewing and
decision-making and ensure valid, reliable
and consistently fair results are achieved.
Part of the plan is to implement a
technology hub, populated over time, that
will form the basis of a talent community
for candidate searching and from which a
number of tactical staffing initiatives can be
derived:
• Candidate Relationship Management
(CRM) programmes to build brand
ambassadors.
• Communication programmes to targeted
discrete segments and inform them of
organisational successes and happenings.
• A talent chat room for like-minded
professionals to share knowledge.
• A centralised hub for value-adding
content to professional individuals.
• Events and other face-to-face activities
to further entrench their brand share with
candidates.
This progressive partnership and resourcing
strategy will ensure that this public sector
entity satisfies their strategic objectives
in sourcing and selecting the right skills,
timely and cost effectively in order to
deliver on their challenging mandate.
Critical to the success of this partnership
is the ability to reduce time-to-hire and
recruitment costs, while increasing the
accuracy of decision-making resulting from
data and predictive technology, with a
robust management reporting capability
across the full recruitment value chain that
supports the management team.
16 | ADCORP Annual Report 2008 | The Power of Potential
Group strategy and visionThe design and implications of this strategy are to position the Adcorp Group as:
• a major player in the global staffing industry and dominant in South Africa;
• a recognised provider of scarce skills in a globally skills-short market;
• offering significant cost and service level advantage in the Business ProcessOutsourcing space with the ability to attract a sizeable client base;
• having access to significant employees’ disposable income offeringrevolutionary, appropriate and affordable employee benefit, wellness, credit,airtime and lifestyle products to this vast employee base;
• a business able to benefit from economies of scale; and
• a business positioned superbly in a high growth sector of the market.
Where we are heading...
The Power of Potential | ADCORP Annual Report 2008 | 17
In order forAdcorp to obtain
operationalefficiencies werequire a new
operating system.
Whilst operational priorities remain
focused on:
• cash management;
• margin management; and
• targeted, strategic acquisitions.
The Microsoft Dynamics ERP
implementation and the Adcorp operational
efficiency initiative go hand in hand. In
order for Adcorp to obtain operational
efficiencies we require a new operating
system that will offer:
• the latest technology and technical
infrastructure;
• a single standardised operating platform;
• a shared database structure to avoid
duplicated candidate expenditure; and
• longevity and systems innovation as
development and maintenance are
in-house.
The above will allow for:
• a true shared services environment;
• standardised re-engineered processes to
optimise operational efficiencies;
• scalability and economies of scale; and
• greater control and reduced risk.
and to further extend the range and scope ofbusiness process outsourcing activities, to buildan effective shared services capability with theability to deliver economies of scale advantagesand to build an a-typical employee focusedfinancial services capability providing relevantemployee benefit, financial, wellness and lifestyle products and services to the Group’s vastcontract labour workforce which currentlynumbers between 65 000 to 70 000 contractors.
Strategic priorities
“leverage the core”
The focus of the management team is now to
18 | ADCORP Annual Report 2008 | The Power of Potential
What our leaders say
As such, I believe that the Adcorp Group iswell positioned to continue on its impressivegrowth trajectory in this environment.Dr F van Zyl Slabbert
Chairman
All of these factors coupledwith the Group’s strong
BBBEE credentials positionthe Group well to take
advantage of current marketconditions and opportunities. As
such, the 2008/09 financialyear should once again be a good
one for the Adcorp Group.Richard Pike
Chief Executive Officer
Executive reports
Chairman’s report
20 | ADCORP Annual Report 2008 | The Power of Potential
The Adcorp Group has once again produced
an outstanding financial performance – core
headline earnings per share were 30% up
for the 14-month reporting period ended
29 February 2008 compared with the
14 months ended 28 February 2007.
Adcorp’s consistent strategy of focusing on
cash generation and margin management
has once again been rewarded with all
Group financial targets either being met
or exceeded.
At the beginning of 2006, the Adcorp Group
took the decision to focus the Group solely
in the areas of human capital management
and business process outsourcing. In
pursuing this strategy, a number of non-core
businesses were disposed of, whilst a
number of sizeable and strategic core
acquisitions have been made during the
period under review. This has had the effect
of significantly bulking the business and
positioning Adcorp as the leading staffing
provider in the South African market and a
major player in the rapidly expanding
business process outsourcing market.
Over the past 18 months, there has been
much debate in the South African context
regarding the existence or otherwise of a
skills shortage. As the debate has raged on,
it has become increasingly evident that the
country does indeed face a critical skills
shortage with regard to many scarce skills,
particularly of a technical nature which, if
not suitably addressed, could effectively
constrain economic growth, infrastructure
development and service delivery.
Ironically, this acute skills shortage exists
in an environment where there are also
massive levels of unemployment.
Clearly, there is a need in this country to
mobilise all possible means and resources to
urgently address both staggering problems
by way of intensifying the upskilling and
training of people on an unprecedented scale.
The countrydoes indeed facea critical skills
shortage.
The Power of Potential | ADCORP Annual Report 2008 | 21
In this regard, the Adcorp Group has played
a significant role in introducing tens of
thousands of first-time job seekers into the
formal job market whilst also providing
them with the necessary tangible skills and
workplace preparedness. In this way, the
Adcorp Group continues to play a
significant and meaningful role in the
development and deployment of South
Africa’s vast untapped human potential.
Black economic empowerment remains
one of the major challenges facing the
Group and one which Adcorp has taken
extremely seriously over the past years.
In this regard, a 25,1% empowerment
shareholding was announced by the Group
in February 2007 involving Wiphold,
Simeka and a share trust created for the
benefit of Adcorp’s staff. This, together with
the many other empowerment initiatives of
the Group, in compliance with the Codes of
Good Practice, resulted in Adcorp winning
the Financial Mail/Empowerdex Top
Empowerment Companies 2008 Award as
the most empowered company listed on
the JSE.
The recent string of global economic shocks
such as the United States’ subprime crisis,
rapidly increasing oil and food prices, rising
interest rates and weakening equity markets
will, no doubt, have a knock-on effect on
the South African economic and political
landscape.
After an extraordinary transition from
authoritarian to democratic rule, the
government is increasingly being confronted
with problems of delivery in housing,
power, community development, health, etc.
Fortunately, in the absence of a politicised
security system, there is great scope for civil
society initiatives to address some of these
problems. Also from the corporate sector
and Adcorp’s involvement in this regard,
which has been referred to.
However, despite the negative impact that
some of these events may have on the
economy and business environment in
which we operate, it is important to note
that certain areas of the economy have
never had it better.
Given the substantial infrastructure
development currently taking place in the
South African economy, industries such as
construction and engineering will continue
to be major beneficiaries of these projects.
Also, with the trend of rising international
commodity prices, mining, agriculture and
other commodity producers should benefit
greatly.
As such, whilst portions of the South
African economy may be experiencing a
downturn, other parts of the economy are
set to boom providing further opportunities
for job creation and skills development.
As such, I believe that the Adcorp Group
is well positioned to continue on its
impressive growth trajectory in this
environment.
The management team is stable, there is
clarity of purpose and the Group is
positioned better than ever to take
advantage of the numerous and exciting
opportunities that currently present
themselves.
Dr F van Zyl Slabbert
Chairman
As such, whilstportions of the South
African economy maybe experiencing a
downturn, other partsof the economy are set
to boom providingfurther opportunitiesfor job creation andskills development.
Chief Executive’s report
22 | ADCORP Annual Report 2008 | The Power of Potential
The philosophyof the Group
has been toplace major
emphasis on thecash generatingpotential of the
operations.
OVERVIEWOperationally, the 2007/08 financial period
once again saw strong profit growth
recorded for the Adcorp Group.
Shareholders are reminded, as announced in
March 2007, that the company has changed
its financial year-end from December to
February.
As such, the financial results presented
herewith, are for the 14-month period ended
29 February 2008.
Core headline earnings per share for the
14-month period ended 29 February 2008
of 372,7 cents (2007: 287,6 cents) were
some 29,6% ahead of core headline
earnings per share for the equivalent prior
14-month period whilst earnings before
interest, tax, depreciation and amortisation
(EBITDA) of R284,5 million were 60,7%
ahead of the R177,1 million EBITDA
reported for the prior 14-month period.
The staffing operations of the Group
performed well during the period under
review and ahead of expectation. In
particular, the permanent recruitment
businesses turned in a stellar performance on
the back of a buoyant recruitment market.
The business process outsourcing operations
of the Group also performed ahead of
expectation and contribute a high quality of
earnings to the Group.
FINANCIAL TARGETINGStrategically, the Group adopted a
philosophy of financial targeting in the
2002 financial year.
The key financial return criteria focused on
by the Group’s management team is return
on assets managed (ROAM) which is
benchmarked against a target to ensure the
achievement of superior financial returns to
shareholders well in excess of the firm’s
weighted average cost of capital (WACC).
The WACC, in turn, is calculated with
reference to an optimal capital structure
introducing an ideal mix of debt and equity
as reflected by the Group’s gearing target.
In this regard, the Group once again exceeded
its targets delivering a return on assets
managed of 42,0% against a target of 33,0%.
The Power of Potential | ADCORP Annual Report 2008 | 23
The staffing operationsof the Group
performed well duringthe period under
review and ahead ofexpectation.
In summary, the performance of the Group against stated financial targets was as follows:
14 months 14 months 12 months Financial to Feb to Feb to Dec
Performance criteria target 2008 2007 2006
Return on assets managed (ROAM) (%) 33,0 42,0 25,6 32,0
Return on sales (ROS) (%) 5,5 5,8 4,9 4,9
Asset turnover (ATO) (times) 6,0 6,6 5,3 6,6
Cash conversion ratio (%) 90 102 20 75
Debtors days 33 30 38 36
Interim gearing target* (%) 43 30 52 6
*Long-term gearing target set at 30%.
A summary of dividends declared in respect of the trading period under review is as
follows:
14 months 12 months to Feb to Dec %
Dividends declared 2008 2006 change
Interim dividends (cents) 55 42 31
Final dividend (cents) 160 126 27
Total dividends (cents) 215 168 28
ACQUISITIONS AND DISPOSALSThe restructuring process which
commenced in 2006 to focus the business
activities of the Group solely in the areas
of staffing and BPO has not only been
achieved in a relatively short time frame
but, the quality of the acquisitions and
the ease of integration of these businesses
into the Adcorp Group coupled with the
advantageous disposal of certain non-core
assets, has greatly added to the strong profit
growth for the year.
During the period under review, the disposal
of non-core assets, Research Surveys,
Knovation and the 25% stake in Career
Junction were concluded.
During the same period, the Group’s core
assets were bolstered by the recent
acquisitions of blue-collar staffing
businesses, Capital Outsourcing Group
and Employ-Rite as well as value added
employee benefit solutions business,
FMS Marketing Solutions.
All of these acquisitions performed in line
or ahead of expectation and are expected
to continue to make a major contribution
to Group operations in the future.
In achieving this result, the return on sales
(ROS) or operating margin achieved was
5,8% versus a target of 5,5% whilst the
asset turnover (ATO) ratio was 7,2 times
versus a target of 6,0 times.
The philosophy of the Group has been
to place major emphasis on the cash
generating potential of the operations.
As such, a cash conversion target of 90%
is the stated objective of management
whereby, the Group strives to convert 90%
of its operating profit into cash. In this
regard, the target was exceeded whereby,
102% of operating profit was converted
into cash.
This stellar cash generation performance
was achieved by reducing the number of
days’ accounts receivable or debtors’ days
outstanding to 30 days against a target of
33 days which is the lowest receivables
level ever in Adcorp’s history.
As a result of this cash performance and,
whilst remaining within the confines of the
Group’s financial period end targeted
gearing level of 43% versus an actual
gearing level of 30%, the Group was able
to declare a final dividend of 160 cents per
share (2006 final dividend: 126 cents per
share) which represented a 27% increase in
the final dividend.
Combined with the interim dividend
declared of 55 cents per share, this brought
the total dividends declared for the period
under review to 215 cents per share
(2006: 168 cents per share) which
represents a 28% increase in dividends.
Chief Executive’s report (continued)
24 | ADCORP Annual Report 2008 | The Power of Potential
Subsequent to the end of the financial
trading period under review, Adcorp
announced the acquisition of the combined
business of Staff U Need (Pty) Limited and
Dithomo (Pty) Limited, a business operating
under two brands which specialises in
providing labour solutions to the metals and
engineering industries. The business has a
specific focus on providing both skilled and
semi-skilled labour to the power generating
industry including Eskom and its subsidiary
operations.
These acquisitions strengthen the Group’s
position as leader in the South African
staffing and BPO industries and add to the
quality and spread of operational earnings.
In addition, they introduce new skills and
intellectual capital into the Group.
MACRO-ENVIRONMENTThe macro-environment in the staffing
industry is currently dominated by the
debate surrounding the prevailing South
African skills shortage.
Whilst the debate initially focused on the
existence or otherwise of a skills shortage,
what has become clearly apparent of late is
that there is a significant shortage of talent
across a wide spectrum of skills disciplines
ranging from a shortage of engineers,
artisans and technicians to health care
professionals, information technology (IT)
specialists and senior general managers.
The Department of Labour estimates in
terms of their National Master Scarce SkillsList published in April 2008 that the country
is currently short of one million skilled
workers.
Similarly, local financial publication,
Finweek, estimated in February 2008 that
the country was currently short of 68 000
engineers, artisans and technicians whilst an
article carried in an April 2008 edition of
the Sunday Times estimates that South
Africa will be short between 40 000 and
60 000 registered engineers by 2010.
A consequence of the prevailing skills
shortage is that the search for talent has
gone international with a number of South
African businesses in the construction, IT
and engineering sectors currently importing
scarce skills.
In her Joint Initiative on Priority Skills
Acquisition (JIPSA) briefing in respect
of that body’s 2007 activities, South African
Deputy President, Phumzile Mlambo-Ngcuka,
said that “the scale of the problem has
become bigger in the interim . . . urgentattention has to be given to foreign skillsrecruitment, because the country does not have the luxury of time for all thenecessary training”.
The problem has become exasperated due to
the significant Gross Domestic Fixed
Investment (“GDFI”) spend currently on the
go as well as being planned for South Africa
over the next years.
Old Mutual Investment Group estimates that
the extent of GDFI spend in South Africa
could top R611 billion by 2011 as Eskom
spend an estimated R200 billion on new
power stations and transmission network
upgrades, Transnet spend an estimated
R78 billion on ports, pipelines, locomotives
and rail infrastructure, the combined 2010
Soccer World Cup and Gautrain initiatives
are expected to cost in the region of
R40 billion and government is expected to
spend around R216 billion on dams, roads,
schools, hospitals and low-cost housing.
These estimated figures exclude the
significant forecast expenditure in the
mining and petro-chemicals industries
which takes the total forecast of capital and
infrastructural project expenditure planned
in the South African economy up to
R1 trillion, all of which consumes skills,
further compounding the problem.
Whilst the skills shortage is an acute
problem in the South African context, the
problem is in fact a global problem.
Accenture estimates that companies and
countries will need more than 3,5 billion
people by 2010 to fill knowledge worker
positions. By 2020 they estimate that the
number will grow to 4 billion. Other
projections indicate that by then, there will
be shortages of 32 to 39 million people to
fill such positions. The United States will
have the biggest shortfall needing as many
as an additional 14 million people.
Two recent characteristics that are evident
in the South African human capital
environment as a result of the major
infrastructural and capital projects currently
on the go, coupled with the prevalent
massive skills shortage are unprecedented
local talent searches and a resurgence in
efforts on a large scale to train local talent,
particularly with regard to technical skills.
Taken in the context of excessively high
levels of unemployment, both of these trends
bode well for skills development, job creation
and poverty alleviation in South Africa.
Given these prevailing circumstances, the
Adcorp Group is well positioned to take
advantage of these conditions due to the
Group’s unrivalled ability to search for
talent, our ability to train talent and to
navigate the skills development and
learnership legislative and structural
environments, the ability of the Group,
bolstered by recent acquisitions, to import
talent as well as our ability to impact
positively on our clients’ talent retention
strategies.
For the first time since the inception of the
staffing industry, the demand for talent
exceeds the supply thereof in a number of
disciplines.
As such, the frontiers for competition in
certain segments of the industry have shifted
away from securing job vacancies to the
identification of scarce talent in those areas
where skills are in short supply. This
arguably represents the most fundamental
shift this industry has experienced in its
history and tends to favour larger providers
such as Adcorp.
Whilst certain sectors of the South African
economy are booming such as the
construction, mining and agricultural
sectors, other sectors are in decline such as
the retail and financial services sectors due
largely to inflationary pressures triggering a
recent, marked increase in domestic interest
rates.
This phenomenon of divergent economic
and sector trends within the same economic
environment, is unusual but should bode
reasonably well for the overall economic
performance of the South African economy
despite an anticipated global economic
downturn.
Looking at the positioning of the Adcorp
portfolio, the Group should be relatively
well positioned to weather whatever
economic storm may lie ahead.
Historically, the flexible staffing or contract
labour operations of the Group have
performed well in difficult economic times
and have never failed to deliver real growth
in an economic downturn.
In times of economic downturn, there tends
to be greater reticence on the part of
employers to employ permanent workers
due to uncertainty with regard to optimal
staffing levels. As such, there is a tendency
to favour temporary or contract workers
until such time as relative economic
certainty returns.
The Power of Potential | ADCORP Annual Report 2008 | 25
In particular, economic downturns tend
to favour the blue-collar contracting
environment which Adcorp has strategically
positioned as the single biggest profit
contributor to the Group by way of recent
acquisitions which is now starting to pay off.
Coupled with the large scale infrastructural
and capital projects previously mentioned
which will consume large concentrations of
skilled and semi-skilled blue-collar workers
in the South African environment, this part
of the Group which contributed 45% to
Group EBITDA in the trading period under
review, should continue to perform well.
Whilst the white collar flexible staffing
operations do have a sizeable exposure to
the financial services sector which will
experience difficult market conditions,
certain other marketing initiatives and
market share gains in these operations
should mitigate against these anticipated
tough market conditions although it is
unlikely that profit growth from these
operations will be comparable with that
of the blue-collar operations.
Although the permanent recruitment
operations have historically proved
somewhat vulnerable to the economic cycle,
the acute skills shortage, affirmative action
and public sector employment should see
the continued growth of employment
opportunities in this part of the business.
In addition, given the development by the
Group of certain new channels to market,
there is significant opportunity to gain
market share in this segment of the
business.
The Group’s BPO activities should also
continue to perform well in line with global
trends where the BPO industry is now
estimated to be a US$144,2 billion industry
as estimated by Gartner Inc. in a November
2007 report. Of this, outsourced human
capital activities represent almost 20%
of all BPO activity being worth some
US$26,1 billion globally.
In summary, therefore, the Group is well
positioned given current South African
economic and environmental conditions
due to:
• the anticipated rapid growth in the blue-
collar sector;
• the prevailing skills shortage;
• recent market share gains;
• the significant GDFI and infrastructural
spend in the South African economy;
• the current existence of a number of
mass recruitment projects;
• growth in business process outsourcing;
and
• learnership and training opportunities.
GROUP STRATEGYThe strategy of the Group has evolved over
its 30-year history from being somewhat
disfocused and informal in its formative
years to being more recently focused on
building a solid core to the business with
the ability to generate strong cash flows.
This strategy has been successful to the
extent that the Group is now well
established as the leading human capital
and business process outsourcing operation
in South Africa.
The focus of the management team is now
to “leverage the core” to further extend the
range and scope of business process
outsourcing activities, to build an effective
shared services capability with the ability to
deliver economies of scale advantages and to
build an a-typical employee focused financial
services capability providing relevant
employee benefit, financial, wellness and
lifestyle products and services to the Group’s
vast contract labour workforce, which
currently numbers between 65 000 to 70 000
contractors whilst operational priorities
remain focused on:
• cash management;
• margin management; and
• targeted, strategic acquisitions.
The design and implications of this strategy
are to position the Adcorp Group as:
• a major player in the global staffing
industry and dominant in South Africa;
• a recognised provider of scarce skills in
a globally skills-short market;
• a group that offers significant cost and
service level advantages in the BPO
space with the ability to attract a
sizeable client base;
• a company which has access to
significant employees’ disposable
income offering revolutionary,
appropriate and affordable employee
benefit, wellness, credit, airtime and
lifestyle products to this vast employee
base;
• a business able to benefit from
economies of scale; and
• a business positioned superbly in a high
growth sector of the market.
Although thepermanent recruitment
operations havehistorically proved
somewhat vulnerable tothe economic cycle, the
acute skills shortage,affirmative action and
public sector employmentshould see the continued
growth of employmentopportunities in this part
of the business.
Chief Executive’s report (continued)
26 | ADCORP Annual Report 2008 | The Power of Potential
NORMALISED EARNINGSThe financial figures presented for the 14-month financial period ended 29 February 2008
have been significantly impacted by certain non-cash and mostly non-recurring adjustments
required in compliance with International Financial Reporting Standards (IFRS). These
adjustments are substantial and misrepresent the true commercial and economic reality of
the Group’s trading performance for the period under review.
The impact of these adjustments on HEPS (headline earnings per share) is as follows:
14 months 14 months to Feb to Feb2008 2007
Impact of IFRS – non-cash flow items R’000 R’000
Amortisation of intangible assets (46 808) (4 281)
Share-based payments (101 966) (6 929)
Lease smoothing (1 399) (763)
Profit on disposal of part of continuing
operations 48 633 –
Tax effects on above 14 550 1 463
Impact on headline earnings (86 990) (10 510)
Impairments (11 645) (6 256)
Profit on disposal of discontinued
operations 42 233 58 330
Impact on all earnings (56 402) 41 564
Impact on HEPS (cents) (177,1) (24,3)
Impact on EPS (cents) (114,8) 95,9
Impact on HEPS (%) (48) (8)
Excluding the impact of these IFRS adjustments, the normalised, abridged income statement
for the 14-month period ended 29 February 2008 is as follows:
14 months 14 months Normalised abridged income statement to Feb to Feb for the 14-month period ended 2008 2007 %29 February 2008 R’000 R’000 change
Revenue 4 430 105 3 077 504 44
Cost of sales (3 349 604) (2 301 903) 46
Gross profit 1 080 501 775 601 39
Other income 31 620 35 021 (10)
Admin, marketing and operating expenses (853 143) (661 268) 29
Operating profit 258 978 149 354 73
Net interest paid (21 705) (3 223)
Share of profits from associates 1 512 2 915
Profit/(loss) on sale of property and equipment 119 (114)
Profit before taxation 238 904 148 932 61
Taxation (55 405) (34 347) 61
Profit for the period from continuing operations 183 499 114 585 60
(Loss)/profit for the period from
discontinued operations (419) 7 904
Profit for the period 183 080 122 489 50
Weighted average shares (000’s) 49 122 43 330
Core headline earnings per share 372,7 287,6 30
The Power of Potential | ADCORP Annual Report 2008 | 27
ERP SYSTEM IMPLEMENTATIONThe Group is currently implementing a
new Microsoft Dynamics AX ERP system.
The upgrade was necessitated by the rapid
growth and changing nature of the flexible
staffing businesses, the age and complexity
of the legacy systems as well as the need
for timely, relevant operational information
given the strong focus on margin
management and the untapped potential
that can be achieved by focusing on
operational excellence.
It is anticipated that the final cost of the
project will be R64 million.
The system is now developed and roll out
of the implementation plan has commenced
in certain Group operations with positive
results. It is anticipated that the system will
be fully implemented across the Group
within the next 6 to 12 months.
BROAD-BASED BLACK ECONOMICEMPOWERMENTThe Group announced a broad-based black
economic empowerment (BBBEE)
transaction early in 2007 that has
significantly bolstered the empowerment
credentials of the Group whilst also
creating an opportunity for all Adcorp
employees to share in the Group’s financial
fortunes.
In terms of this transaction, the Adcorp
Group now has an effective 25,1%
empowerment shareholding structure in
compliance with the Department of Trade
and Industry’s BBBEE Codes of Good
Practices and Conduct.
In terms of this BBBEE transaction, a
consortium comprising women’s
grouping, Women Investment Portfolio
Holdings Limited (“Wiphold”), holds
8,75% of the shareholding in Adcorp
whilst, a 6,25% share is held by Simeka
Group (Pty) Limited and a 10% share is
held by an Adcorp employee share
incentive trust.
In order to facilitate this transaction, the
original empowerment shareholding
structures of the flexible staffing operations
and the disposed communications division
were unwound thus consolidating all of the
Group’s empowerment shareholding in the
new structure.
The BBBEE transaction has bedded down
well and has added a new and beneficial
aspect to the profile of the Group.
Combined with the Group’s many other
BBBEE initiatives in compliance with the
Codes of Good Practice and commitment
to the imperative of black economic
empowerment and transformation, the
Adcorp Group recently won the Financial
Mail/Empowerdex Top Empowerment
Companies 2008 Award as the most
empowered company listed on the JSE.
HUMAN RESOURCESBeing a people intensive business, the
need for sound human resource policies
and procedures is of paramount
importance.
The key focus of this function is around the
attraction and retention of top talent in the
Group.
In this regard, the Group remains committed
to upholding a best practice human resource
management approach ensuring that the
management of human resources is
effective, efficient and that there is fair
treatment of all employees.
In terms of this best practice approach,
particular emphasis is given to the
following areas:
• recruitment practices;
• retention policies and programmes;
• succession planning;
• performance management;
• training and development;
• employment equity and affirmative
action; and
• labour relations.
In addition, the Group human resources
function is the custodian of the Group’s
social investment activities which are
primarily focused on the development of
human potential by way of extending a
bursary scheme to disadvantaged
individuals and communities as well as
on the support of vegetable garden projects
in disadvantaged communities.
The broad-basedblack economicempowerment
transaction has beenbedded down well
and has added a newand beneficial aspect
to the profile of the Group.
Chief Executive’s report (continued)
28 | ADCORP Annual Report 2008 | The Power of Potential
OUTLOOKCurrent market conditions should see
the Group continue on its recent growth
trajectory with Adcorp’s overweight
exposure to the blue-collar flexible staffing
sector now paying off.
The Group’s innovative recruitment, talent
acquisition, workplace optimisation,
training and learnership strategies and
methodologies continue to gain acceptance
in a skills short environment with
commensurate market share gains.
The recent acquisitions are all making a
positive contribution whilst the business
process outsourcing space continues to look
attractive in terms of both its size and
growth potential.
Implementation of the Group’s new
Microsoft Dynamics AX ERP system should
offer a number of operational benefits and
should also provide economies of scale
advantage for the Group.
All of these factors coupled with the
Group’s strong BBBEE credentials position
the Group well to take advantage of current
market conditions and opportunities. As
such, the 2008/09 financial year should once
again be a good one for the Adcorp Group.
APPRECIATIONAs Adcorp’s strength has always been its
outstanding people, I would like to thank
the directors, management and staff of the
Adcorp Group for their valued contribution
over the past financial period and look
forward to their continued support in the
future.
RL Pike
Chief Executive Officer
The recentacquisitions are allmaking a positivecontribution whilstthe business processoutsourcing spacecontinues to lookattractive in termsof both its size andgrowth potential.
Corporategovernance
Corp
orat
e go
vern
ance
30 | ADCORP Annual Report 2008 | The Power of Potential
DR VAN ZYL SLABBERT (67)ChairmanNon-Executive Director – IndependentMA, DPhilAppointed 16 September 1994
Outside directorships heldCTP Caxton – ChairmanFirstRand; Hollard Foundation
Van Zyl graduated from StellenboschUniversity. He lectured at Stellenbosch,Rhodes, UCT and Wits from 1964 to 1974.From 1974 to 1986 he was a member ofParliament and leader of the opposition party.In 1986 he formed IDASA with A Boraine topromote internal/external dialogue. Van Zylreceived honorary doctorates from SimonFraser University in Vancouver, Canada,University of Natal and University of FreeState. He is currently involved with SorosPhilanthropy in southern Africa and nineSADC countries. Van Zyl was recently electedChancellor of the University of Stellenbosch.
RICHARD PIKE (46)Chief Executive OfficerExecutive DirectorBCom (Hons), CA(SA)Appointed 18 October 2000
No outside directorships held
After completing articles at Deloitte Haskins &Sells, he joined the Hunt Leuchars & HepburnGroup as group Financial Manager, later beingappointed as Financial Director of HL&HMining Timber. In 1995 he co-founded MorganUniversity Alliance, a private education andbusiness consulting initiative offering degree anddiploma programmes in business managementfrom the University of Warwick in the UK. In 1999, he listed Acumen Holdings Limited,a staffing and training group of companies.Acumen was acquired by Adcorp HoldingsLimited in the year 2000 when Richard assumedthe position of Deputy Chief Executive Officer.In 2001 he was appointed as Chief ExecutiveOfficer of Adcorp Holdings Limited.
CAMPBELL BOMELA (59)Executive Director – Group ServicesBCom, MBAAppointed as a Non-Executive Director 11 March 2004Appointed as an Executive Director 1 March 2006
Outside directorships heldMatlapeng Resources – Non-ExecutiveDirectorMega Afrika – Non-Executive DirectorMasana Employee Share Trust
Campbell Bomela was the MD ofBlack Management Forum InvestmentsCompany (BMFI) until he joined Adcorpon 1 March 2006. He has been a seniorbusiness professional for over 15 years andas part of his experience, he was seconded tostart up the Department of Economic Affairsfor the Eastern Cape Government afterthe 1994 general elections. Later he wasseconded to assist with the amalgamation and rationalisation of the different economicdevelopment corporations which operated in the Eastern Cape prior to 1994. Oncompletion, he started and ran hisown businesses in this area.
FAUNCE BURD (60)Chief Financial OfficerExecutive DirectorAppointed 9 September 2002
No outside directorships held
Faunce first joined the Adcorp Groupin 1990 in the capacity of Managing Directorof Adcorp Graphics. She then left the Group in1991 to take up the position of FinancialDirector of Mono Pumps (part of Murray &Roberts) for a period of five years. Faunce re-joined Adcorp in 1997, heading upthe subsidiary Adcorp Management Servicesand was later appointed as Chief FinancialOfficer of Adcorp Holdings Limited.
NELIS SWART (45)Chief Operations OfficerExecutive Director MComAppointed 9 September 2002
Outside directorships heldDreamworld Investments – Director Magnolia Ridge Properties 360 – DirectorCilente Property Investments
Nelis lectured on the subjects of Strategic andFinancial Management at the University ofPretoria. During the same period he was also aco-founder of a consulting and marketingresearch company. Thereafter he was involvedwith Deloitte & Touche and Byrne Fleming ina management consulting capacity duringwhich period he gained significant consultingexperience in a variety of industries. Prior tohis appointment as Managing Director ofQuest Flexible Staffing Solutions, he was thecommercial director of Beier Industries inKwaZulu-Natal.
RESIGNATIONSH Barenblatt – 21 February 2007
G Negota – 21 February 2007
M Liphosa – 28 February 2007
R McGregor – 28 February 2007
S Sebotsa – 28 February 2007
S Shoniwa – 28 February 2007
F Khanyile – 21 February 2008
Board of directors
The Power of Potential | ADCORP Annual Report 2008 | 31
LOUISA MOJELA (54)Non-Executive DirectorBComAppointed 1 June 2007
Outside directorships heldWiphold, Distell Group, Sun International,ABB SA, ABB Powertech Transformers,African People Industrial Corporation, AfrisunGauteng, Afrisun Leisure, Ahanang Holdings,Emfuleni Resorts, Futuregrowth AssetManagement, National Casino Resort Manco,Phaphama Holdings, SA Corporate Real EstateFund Manager Limited, Skyprops 142, SAAirways, USB-ED Limited, Wiphold FinancialServices No. 1 Limited, WIP Investments andWIP Three Investments.
Louisa is one of the founders and Group CEOof Women Investment Portfolio HoldingsLimited (Wiphold). Louisa has held positionsat Standard Corporate and Merchant Bank(SCMB), The Development Bank of SouthernAfrica (during which time she was seconded tothe World Bank in Washington DC), and theLesotho National Development Corporation.Louisa has completed an Executive LeadershipProgramme at Wharton School of Business atthe University of Pennsylvania. In 2000 Louisawas selected as one of the 40 women fromdifferent continents and countries as “TheLeading Women Entrepreneur of the World”.
TRYPHOSA RAMANO (36)Non-Executive Director BCom, CA(SA)Appointed 1 June 2007
Outside directorships heldSasria, Women Investment Portfolio Holdings,Afrisun Leisure, Emfuleni Resorts, NationalCasino Resort Manco, Legae Securities,Wipcapital, USB Executive Development and DBSA.
Prior to joining Wiphold in November 2006,Tryphosa was the Chief Financial Officer andExecutive Vice-President of SAA and hasacted as President of SAA. She previouslyheaded the Asset and Liability Division of theNational Treasury where her focus was on the
restructuring of state-owned assets, ensuringlegislative compliance by public entities andmonitoring contingent liabilities ofgovernment. Tryphosa was instrumental in thelisting of Telkom on the JSE and NYSE andenforcing the payment of R10 billion individends by public entities to government.Before joining government, Tryphosa was aportfolio manager and Head of the Institute ofExcellence at RMB Asset Management.
GUGU PRIDE DUDA (31)Alternate DirectorBCom, CA(SA)Appointed 1 June 2007
Outside directorshipsABB South Africa and ABB Powertech.
Gugu recently joined Wipcapital as part of theInfrastructure Finance team. Prior to joiningWipcapital, she was Chief Financial Officerfor Internet and Telephone Banking division atFNB. Her prior experience includes positionsin finance, credit and risk at RMB andFirstRand.
PETER WARD (55)Independent DirectorBCom, CA(SA)Appointed 1 June 2007
Outside directorships held:Aveng and Hollard Holdings and The HollardInsurance Company – Independent Non-Executive Director of all these companies.
Peter joined Deloitte in January 1973 afterstudying for a Bachelor of Commerce degreein which he obtained distinctions in twomajors. He then completed his CA in 1975.In 1978 Peter was seconded to Philadelphia,USA, for 18 months. He was appointed anAudit Partner in March 1983 and GroupLeader Audit in 1993. He was responsible formany large accounts including CG Smith,Dow Chemicals, Marsh, First Link and Spar.In 1999 Peter became Business Unit Leader ofDeloitte’s Forensic & Dispute ServicesDivision. During Peter’s seven-year leadershipof this division it experienced compound
annual growth in earnings in excess of 42%.Since the early 1980s Peter has played a rolein the Deloitte Transformation Programme.He chaired the initial steering committeeleading to the formation of the Deloitte Multi-Cultural Development ProgrammeBoard, the predecessor to the current DeloitteTransformation Board. Peter retired fromDeloitte at the end of May 2007.
MUTHANYI ROBINSON RAMAITE (39)Non-Executive DirectorMasters degreeAppointed 1 June 2007
Outside directorships heldSimeka Group, Vusani Property Investments,Khullela, Verge Management Services, Fintech,Gobodo Forensic & Investigative Accounting,Majestic Silver Trading, Newshelf 669, CarbonReductions SA, Golden Pond Trading 350,MRR Management, Ramaite Brothers FamilyTrust, Ramaite Properties, Simeka BSG, SimekaManagement Services, Simeka Properties andWescoal Holdings.
Robinson studied at the University of theWitwatersrand and graduated with a mastersdegree in Public and DevelopmentManagement. He then obtained a BIuris at theUniversity of the North.
Through his directorships and interest in thedifferent areas of business, Robinson has beeninvolved in a number of investment initiativesin the property, mining, aviation and ICTsectors, to mention a few. He has also madevaluable contributions in varioustransformation and empowerment initiatives.In his term of office as Director-General forthe Department of Public Service andAdministration (1999 to 2003) he served invarious positions including Chairperson of theDirectors-General Governance andAdministration cluster of government, Boardmember of the State Information TechnologyAgency (SITA) and the Centre for PublicService Innovation (CPSI).
Corporate governance
32 | ADCORP Annual Report 2008 | The Power of Potential
COMPLIANCE WITH THE CODE OFCORPORATE PRACTICES ANDCONDUCTThe board of directors is fully committed to
effective corporate governance and the need
for integrity and high ethical standards in
the conduct of its business. Adcorp fully
supports the Code of Corporate Practices
and Conduct and endorses the need to
conduct its business in accordance with the
highest standards of corporate practice.
The directors have applied the
recommendations as contained in the Code
of Corporate Practices and Conduct set out
in the King II report.
The commencement date of the
Amendments to the Companies Act of 2006
was gazetted on 14 December 2007. These
amendments apply to the financial year
commencing after 14 December 2007 (year
commencing 1 March 2008 for Adcorp).
Adcorp has already taken steps to comply
with the additional governance requirements
introduced by the Amendments to the
Companies Act of 2006.
BOARD OF DIRECTORSThe board of directors as set out on
pages 30 and 31 of the annual report
consists of four executive directors and
five non-executive directors. There is
one alternate director who is black.
The non-executive directors provide the
board with independent judgement based on
their significant range of skills and
commercial experience. Four board
members are black of which three are
women. The functions of Chairman and
CEO are not performed by the same person.
The board meets quarterly and on an ad
hoc basis if considered necessary. The main
function of the board is to determine
strategy and direction and to lead the Group
in this direction with integrity and
judgement. In addition, it is responsible
for the overall sustainability of the Group
including areas such as risk management,
protection of Group assets, monitoring key
performance indicators as well as the
adequacy of policies and systems. It is
further required to ensure compliance with
all legal and statutory requirements.
Certain functions have been delegated to
subcommittees, which currently consist of
the audit committee and risk committee,
transformation committee and the
remuneration and nominations committee.
The functions of these committees are
described more fully under each of the
relevant subheadings in this report.
All new directors are given a presentation
on the Group’s strategy as well as a
document outlining the duties and
responsibilities of directors. Presentations
covering director responsibilities and
fiduciary duties are also arranged for board
directors from time to time.
Executive directors do not have service
contracts, and employment is subject to
a maximum of three months’ notice with
the exception of the CEO where the notice
period is six months. Restraint agreements
have been signed and all executive directors
hold either shares or share options or both.
A declaration of interests is submitted by all
directors annually in order to determine any
conflict of interests. No conflicts of interest
exist at present but if this were to occur it
would be resolved by the board. All board
directors have access to the advice of the
company secretary and are at liberty to
obtain external advice at the company’s cost
if necessary.
BOARD MEETINGSBoard meetings were held quarterly and all
board members attended these meetings
with the following exceptions. Apologies
were received from:
1st quarter 2007: None
2nd quarter 2007: F Khanyile
3rd quarter 2007: None
4th quarter 2007: F Khanyile
L Mojela
January 2008: None
An extraordinary board meeting was called
to consider two possible acquisitions one of
which was Staff U Need. The board
approved the acquisition of Staff U Need,
however, it was decided not to proceed with
the second acquisition. This meeting was
not attended by F Burd and T Ramano.
The board ofdirectors is fullycommitted to effective corporategovernance.
The Power of Potential | ADCORP Annual Report 2008 | 33
EXECUTIVE COMMITTEEThe Adcorp executive committee is the
most senior executive decision-making body
in the Group. The committee is chaired by
the Chief Executive Officer and comprises
the Chief Financial Officer, the Chief
Operations Officer and the Executive
Director – Group Services. In addition, the
Group Chairman, while not directly
involved in the day-to-day operational
issues of the Group, also attends the
executive committee meetings which are
held on a monthly basis.
The executive committee is responsible for
inter alia the following:
• Strategic planning, monitoring of market
trends and competitive activity.
• Structuring of the Group’s portfolio
of assets.
• Shaping and approving operational
strategies, budgets and forecasts.
• Measuring, monitoring and taking
proactive action on company
performances.
• Monitoring and managing cash,
cash collections and margins.
• Shaping and approving succession plans
and senior management appointments.
• Group BEE structures, initiatives and
transformation.
• Group reporting and reporting to
shareholders.
AUDIT AND RISK COMMITTEEThe audit and risk committee consists of the
following independent non-executive
directors:
Independent non-executiveP Ward (Chairperson)Appointed: 1 June 2007
Dr F van Zyl Slabbert
Appointed: 9 May 2006
(Resigned as Chairperson 1 June 2007)
F Khanyile
Appointed: 2 October 2002
(Resigned 21 January 2008)
Non-executiveT Ramano
Appointed: 5 May 2008
(ex officio)
In addition the audit committee is attended
by the following:
Executive (by invitation)P Bierman (Managing Director: Adcorp Accountability)Appointed: 18 July 2007
F Burd (Group Chief Financial Officer)Appointed: 9 September 2002
R Pike (Group Chief Executive Officer)
R Tayob (Group Financial Manager)Appointed: 2 March 2007
L Warwick (Group Financial Manager)Appointed: 25 November 2004
Resigned: 6 August 2007
Internal auditors (by invitation)Sizwe Ntsaluba vspAppointed: 28 October 2005
External auditors (by invitation)Deloitte & Touche
Appointed: 2002
Charter Financial & Auditing Inc
Appointed 1987
The membership of the audit and risk
committee was revised during the year to
comply with the Companies Act
Amendment 2006.
Executive management together with both
the external and internal auditors are in
attendance at each meeting. Other members
of staff attend as required. Executive
attendees are not present during periodic
discussions on executive openness and
co-operation.
The committee met seven times during the
period 1 January 2007 to 10 July 2008.
Apologies were received from the following
committee members in respect of meetings
listed below. The remaining members
attended all meetings.
March 2007 – None
May 2007 – F Khanyile
July 2007 – F Khanyile
October 2007 – F Khanyile
January 2008 – None
May 2008 – None
July 2008 – None
Corporate governance (continued)
34 | ADCORP Annual Report 2008 | The Power of Potential
The group’s audit and risk committee
charter was updated during the course of the
financial period to ensure both early
compliance with the Companies Act
Amendment 2006 and compliance with
sound corporate governance practices.
In response to the Companies Act
Amendment 2006 the charter was amended
to cater for the following:
• The appointment of the audit and risk
committee members for a financial period.
• The agreement on the nomination of the
auditors to the shareholders.
• The determination of the auditor’s
remuneration, terms of engagement and
scope of services.
• The nature and extent of non-audit
services that may be provided by the
auditors.
• The pre-approval of contracts by the
auditors to provide for non-audit services.
• To receive and deal with any complaints
relating to:
– accounting practices;
– external audit;
– internal audit; and
– the content or auditing of the financial
statements or any related matter.
The amended audit and risk committee
charter will be tabled for approval by the
board on 16 July 2008.
The committee’s main responsibility is to
provide the board with additional assurance
regarding the integrity and effectiveness of
the group’s risk management framework
and related internal controls, reporting and
compliance systems applied within the
group and the operational implementation of
corporate governance. Other duties include
a review of the accounting policies, a
recommendation to the board for the
approval of the financial statements, a
review of information systems and the
review of the level and competency of
financial management.
The external auditors have confirmed their
independence and the audit committee is
satisfied that the audit has been carried
out by independent auditors, free of any
scope restrictions.
The committee considers that it has carried
out its designated function as required by
the Code of Corporate Practice and the
Amendment to the Companies Act of 2006.
The group’s risk management framework is
still a work in progress and requires further
refinement.
PK Ward – Chairman
TRANSFORMATION COMMITTEEThe transformation committee was
established in 2004 and consists of:
Non-executiveR Ramaite (Chairman)Appointed: 22 May 2008
C Bomela
Appointed: 1 April 2004
Resigned as chairman: 21 May 2008
G Duda
Appointed: 22 May 2008
D Marsden
Appointed: 22 May 2008
M Liphosa
Appointed: 1 April 2004
Resigned: 1 March 2007
Dr F van Zyl Slabbert
Appointed: 1 April 2004
Resigned: 22 May 2008
Executive (by invitation)A Ramsden
Appointed: 1 April 2004
W Smith
Appointed: 1 June 2006
J Boonzaaier
Appointed: 1 June 2006
This committee met twice during the period
ended 29 February 2008 and all committee
members attended these meetings.
Transformation is an ongoing Group focus
and is discussed at all Adcorp board
meetings as well as at all executive
committee meetings.
The transformation committee is responsible
for monitoring transformation at all levels
within the Group as well as assisting with
formulation of Group transformation policy
and reviewing the implementation of these
policies. In addition the committee reviews
progress on employment equity and skills
development as well as corporate social
investment. Adcorp has recently been
awarded first place overall in the “Financial
Mail/Empowerdex Top Most Empowered
Companies on the JSE Limited.
REMUNERATION AND NOMINATIONSCOMMITTEEThis committee met twice during the period
and consists of:
Non-executiveR Ramaite (Chairman)Appointed: 5 March 2008
S Shonhiwa
Appointed: 2 October 2002
Resigned:1 March 2007
Dr F van Zyl Slabbert (acted as Chairmanfrom 2 March 2007 to 4 March 2008)Appointed: 20 November 1995
ExecutiveF Burd (ex officio)R Pike (ex officio)
The remuneration committee is responsible
for approving the remuneration of all board
directors as well as the allocation of share
options to employees. The committee
is also responsible for reviewing senior
management salary increases and bonuses.
Independent external consultants and market
comparisons are used to ensure that
remuneration is market related and is
linked to both individual and company
performance. Directors’ remuneration is
fully disclosed on page 84.
The Power of Potential | ADCORP Annual Report 2008 | 35
The Group placessignificant importance
on the use ofempowered suppliers.
INTERNAL CONTROLThe directors report that the company’s
internal controls and systems are designed
to provide reasonable assurance as to the
integrity and reliability of the financial
statements and to adequately safeguard,
verify and maintain accountability of its
assets. Such controls are based on
established written policies and procedures
and are implemented by trained personnel
with an appropriate segregation of duties.
These policies and procedures are reviewed
continually and updated as necessary. The
internal audit division conducts ongoing
audits on all Group companies and written
reports are compiled. All items raised
in these reports are addressed promptly.
The audit and risk committee evaluates
external risks to the businesses and matters
of concern are addressed on an ongoing
basis by management. The Group has a
documented and tested business continuity
plan which should enable it to recover from
a disastrous incident. Nothing has come to
the attention of the directors to indicate that
any material breakdown in the functioning
of these controls, procedures and systems
has occurred during the year under review.
GOING CONCERNThe directors are of the opinion that the
business will be a going concern for the
foreseeable future and accordingly, the
financial statements have been prepared
on the going concern basis.
SOCIAL INVESTMENTAdcorp established a formal Social
Investment Programme in January 2001.
The achievements of this programme as
well as its purpose and future direction
are covered more fully under the section on
“Corporate Social Responsibility” on
page 37.
NON-FINANCIAL MATTERSAll directors and employees are required
to maintain the highest ethical standards
in ensuring that the Group’s business
practices are conducted in a manner which
in all reasonable circumstances is beyond
reproach. There is a documented code of
conduct which is signed by all employees.
Adcorp is committed to educating and
supporting employees in the fight against
HIV/Aids and has produced a booklet and
posters on HIV/Aids awareness. The Group
has a formal HIV/Aids policy and has done
assessments on the effect HIV/Aids could
have in the workplace.
Adcorp is concerned about employee safety
and all reasonable steps are taken to ensure
their safety.
Adcorp is environmentally responsible and
aware and ensures that at all times the
Group in no way negatively impacts the
environment.
STAKEHOLDER COMMUNICATIONThe board strives to present a balanced and
understandable assessment of the Group’s
position, addressing material matters of
significant interest and concern to
stakeholders. At all times, a balance is
sought in presenting the positive and
negative aspects of activities of the Group.
The Group reports under International
Financial Reporting Standards (“IFRS”) and
accordingly, the results for the period ended
29 February 2008 have been prepared in
accordance with the Group’s accounting
policies, which comply with IFRS. Details
of the Group’s accounting policies are set
out more fully in the financial statements.
YEAR-ENDAs advised in March 2007, Adcorp changed
its year-end from December to February.
In order to facilitate this the reporting
period covers a 14-month period being
1 January 2007 to 29 February 2008.
USE OF EMPOWERED SUPPLIERSThe Group places significant importance
on the use of empowered suppliers and
sourcing of services and supplies from
empowered companies is encouraged and
monitored.
CLOSED TRADING PERIODDirectors and managerial staff are precluded
from trading in Adcorp shares from end
February until the announcement of the
annual results and again from 31 August
until the announcement of the interim
results.
Corporate governance (continued)
36 | ADCORP Annual Report 2008 | The Power of Potential
HUMAN RESOURCESThe board of directors has formalised a
transformation programme whereby
measurable objectives for the Adcorp Group
have been set in four areas:
• best practices in human resources;
• affirmative action;
• organisational culture; and
• black economic empowerment.
The transformation framework has followed
the strategic business plan of the Group and
its operating companies and is focused
primarily on building capacity through
focused development and skills transfer.
This is aimed at achieving sustained growth
and profitability both now and in the future.
In order to achieve strategic business
objectives, the above transformation process
is supported with a performance
measurement system focused on measuring
key objectives at all levels throughout the
Group. The system facilitates effective
planning, implementation and monitoring at
board level and reflects the individual and
collective commitment of all directors and
senior managers to the process. A table
setting out the number of employees and
the employment equity status of the Group
appears on page 38. In addition to
1 755 permanent employees the Group
will have approximately 70 000 contract
and temporary employees including Staff U
Need which is still subject to Competition
Commission approval. These temporary
employees are placed in employment across
a wide spectrum of businesses. Adcorp has
a significant number of learnership
contracts which also form part of the
Group’s training initiatives and contributes
significantly to the process of upskilling the
country’s workforce. The group’s “people
strategy” is set out on page 10.
Corporate social responsibility
The Power of Potential | ADCORP Annual Report 2008 | 37
Adcorp’s Corporate Social Investment (CSI)
initiatives have evolved over the years and
are currently, mainly focused in the areas of
vegetable garden projects, bursaries and
scholarships as well as supporting
educational institutions. Adcorp annually
commits an amount equivalent to 1% of its
annual profits to CSI projects.
VEGETABLE GARDEN PROJECTSThe vegetable garden projects are
predominantly situated at disadvantaged
schools and community centres. These
projects support certain school-feeding
schemes, but are also used for educational
purposes. The vegetable garden projects
also feed disabled people and people
affected by HIV/Aids.
Currently there are 13 such vegetable
garden projects in Gauteng, the Western
Cape and KwaZulu-Natal that Adcorp has
established and funded. The projects cover
some 11 700 square meters of all-weather
hydroponic tunnels which ensure
continuous year-round vegetable production
as well as a number of larger, additional
adjacent shade netting and fenced-in areas.
Also, Adcorp provides the necessary
infrastructure, equipment, training, seeds
and fertilisers to establish these projects
which in turn provide employment
opportunities for a large number of
unskilled and semi-skilled, previously
unemployed people whilst also upskilling
them with the necessary agricultural skills
to sustain these gardens.
BURSARIES/SCHOLARSHIPSAdcorp currently provides bursaries to
learners from rural areas commencing at
grade 11 and 12 levels.
Six learners from the Nourivier District in
the Northern Cape are the first beneficiaries
of this scheme which has enabled them to
study at boarding school facilities in
Springbok in the Northern Cape. The
bursaries cover tuition, accommodation as
well as sporting and academic excursions.
Selection processes and plans are currently
under way to extend this scheme to other
disadvantaged areas in other parts of the
country specifically, Gauteng, the Free
State, KwaZulu-Natal and the Eastern Cape.
OTHER PROJECTSA number of Adcorp’s subsidiaries also
participate in social upliftment projects such
as Emmanuels Advance, which provides
financial support to the Eldorado Park and
Lenasia Life Colleges, Capacity which
supports one of the Group vegetable garden
projects in Tembisa as well as supporting a
disadvantaged crèche in Richards Bay. On
the other hand, Premier Personnel supports
a brick-making project in Limpopo.
Up to now, 13 vegetable gardens
covering 11 700square metres, on
hydroponics systemsin 30 metre by
10 metre all-weathertunnels, to ensure
continuous productionthroughout the year,have been provided.
Employment equity – permanent stafffor the 12 months ended 31 March 2007*
38 | ADCORP Annual Report 2008 | The Power of Potential
2007 2006R’000 R’000
Total workforce 1 755 1 810
Total employees with disabilities 18 22
Workforce profile
Race and gender profile
Non-designated Group 180 187
White females 618 643
Black males 274 270
Black females 683 710
Occupational level profile
Management (top, senior, middle and junior) 1 195 1 218
Non-management 560 592
Management profile by gender (top management, senior management,
middle management, junior management)
Females 945 957
Males 250 261
Management profile by race
Black 535 538
White 660 680
Non-management profile by gender
Females 379 420
Males 181 172
Non-management profile by race
Black 422 467
White 138 125
Disability profile
Management 9 14
Non-management 9 8
People with disabilities by gender
Females 8 14
Males 10 8
Total employees before reporting cycle 1 810 1 568
Add: Recruits 1 441 693
Less: Resignations (103) (218)
(project staff) Non-renewal of contracts (contract employees) (1 022) (109)
Dismissals (10) (33)
Retirements – –
(disposal of Career Junction, Knovation) Other (348) (83
Retrenchments (13) (8)
1 755 1 810
* The skills development reporting period runs from 1 April 2006 to 31 March 2007 and the equity reporting period has been aligned to this.
Financial statements
40 | ADCORP Annual Report 2008 | The Power of Potential
Proof 13 - 18 July
Six-year review
IFRS* SA GAAP*2008** 2006 2005 2004 2003 2002
Income statementRevenue (R’000) 4 430 105 2 700 216 2 359 652 1 980 116 1 667 235 1 523 381
Operating profit before IFRS adjustments, depreciation and
amortisation (R’000) 284 499 149 603 131 655 99 323 85 735 79 466
Operating profit (R’000) 108 723 125 165 116 407 85 493 67 942 59 258
Profit/(loss) before taxation (R’000) 168 171 136 460 102 139 78 465 17 016 (20 246)
Effective tax rate (%) 18,3 23,5 30,5 23,0 39,2 32,4
Profit/(loss) for the period (R’000) 126 968 105 620 67 129 59 333 (9 089) (38 387)
Profit/(loss) attributable to ordinary shareholders (R’000) 126 968 107 994 65 185 56 917 (8 802) (38 577)
Core headline earnings (R’000) 183 080 108 077 65 185 56 917 (8 802) (38 577)
Balance sheetFixed and other non-current assets (R’000) 675 449 138 372 119 723 141 541 132 791 175 871
Current assets (R’000) 714 485 511 496 438 307 349 035 294 081 262 035
Total assets (R’000) 1 389 934 649 868 558 030 490 576 426 872 437 906
Ordinary shareholders’ interest (R’000) 667 750 310 703 249 706 215 945 186 707 214 309
Minority and BEE shareholders’ interest (R’000) 421 82 2 456 3 070 788 394
Interest and non-interest bearing non-current liabilities (R’000) 156 694 1 586 5 541 6 887 – 1 002
Deferred taxation (R’000) 38 540 3 424 1 777 – – –
Current liabilities (R’000) 526 529 334 073 298 550 264 674 239 377 222 201
Total equity and liabilities (R’000) 1 389 934 649 868 558 030 490 576 426 872 437 906
ProfitabilityReturn on assets managed (%) 42,0 32,0 33,4 30,7 29,6 26,3
Return on equity (%) 22,2 37,5 28,5 29,2 (4,5) (16,1)
Return on sales (operating margin) (%) 5,8 4,9 4,9 4,3 4,3 4,2
EBITDA/revenue (%) 6,4 5,5 5,6 5,0 5,1 5,2
Number of employees 1 755 1 810 1 569 1 658 1 611 1 594
LiquidityCash generated by operations to operating profit (%) 101,7 74,9 79,4 102,9 131,9 97,6
Current ratio 1,5 1,5 1,5 1,3 1,2 1,2
Gearing (%) 30,4 6,0 – 0,6 11,9 23,2
Debtors days 30 36 33 36 38 44
StatisticsWeighted average number of shares in issue (‘000) 49 122 42 882 41 730 40 302 40 031 39 936
Core headline earnings per share (cents) 372,7 252,0 195,1 158,2 96,4 106,6
Earnings/(loss) per share (cents) 258,5 251,8 156,2 141,2 (22,0) (96,6)
Total capital distribution/annual dividend per share (cents) 215 168 140 105 64 37
Dividend/capital distribution cover (times) based on core HEPS 1,7 1,4 1,4 1,5 1,5 2,9
Net asset value per share (cents) 1 315 716 592 531 466 535
* The 2005 and 2006 year results have been prepared in accordance with International Financial Reporting Standards (IFRS). The transition date to IFRS was 1 January 2004 resultingin the 2004 figures being restated to reflect IFRS adjustments. Figures prior to 2004 have been prepared in accordance with South African statements of General Accepted AccountingPractice (SA GAAP, which was effective at 31 December 2004).
** The 2008 year represents 14 months and not 12 months due to the fact that Adcorp changed its year-end from December to February.
The Power of Potential | ADCORP Annual Report 2008 | 41
Proof 13 - 18 July
Definitions
Cash generated by operating activities to operating profit Cash generated by operations as a percentage of operating profit.
Core headline earningsHeadline earnings excluding non-cash flow IFRS adjustments and profit on disposal of continuing business.
Current ratioTotal current assets divided by total current liabilities.
Debtors daysDebtors days are calculated using the peel back method, whereby the trade debtors balance is reduced by monthly sales (including VAT),
until the balance is exhausted.
Dividend/capital distribution coverHeadline earnings divided by the annual dividend/capital distribution.
EBITDA/turnoverOperating profit before IFRS adjustments, depreciation and amortisation as a percentage of revenue.
Earnings per shareProfit attributable to ordinary shareholders, divided by the weighted average number of shares in issue.
GearingTotal interest-bearing debt divided by total ordinary shareholders’ interest.
International Financial Reporting Standards (IFRS) adjustmentsIFRS adjustments include non-cash flow items such as share-based payments, amortisation of intangibles and lease smoothing.
Net asset value per shareOrdinary shareholders’ interest, divided by the number of shares in issue at the year-end.
Return on assets managedOperating profit (before goodwill amortisation prior to 2004) divided by the total of property and equipment, trade and other receivables.
Return on equityProfit for the year after IFRS adjustments divided by average equity of shareholders.
Return on sales (operating margin)Operating profit (before goodwill amortisation prior to 2004) divided by revenue.
Approval of the annual financialstatements
42 | ADCORP Annual Report 2008 | The Power of Potential
Proof 13 - 18 July
To the members of Adcorp Holdings LimitedThe directors of the company are responsible for the preparation, integrity, objectivity and fair presentation of the annual financial statements and
related financial information presented in this report.
The directors are also responsible for the systems of internal control. These are designed to provide reasonable but not absolute assurance as to the
reliability of the financial statements, and to adequately safeguard, verify and maintain accountability for assets and to prevent and detect material
misstatement and loss. The systems are implemented and monitored by suitably trained personnel with appropriate segregation of authority and duties.
Nothing has come to the attention of the directors to indicate that any material breakdown in the functioning of these controls, procedures and systems
has occurred during the period under review.
The company and Group financial statements are prepared in accordance with the provisions of the South African Companies Act and comply with
International Financial Reporting Standards and incorporate full and reasonable disclosure in line with the accounting policies of the Group.
The directors are of the opinion that the business will be a going concern for the foreseeable future, and accordingly the financial statements continue
to be prepared on the going concern basis.
It is the responsibility of the independent auditors to report on the annual financial statements. Their response to the members is set out on page 44.
The annual financial statements for the 14-month period ended 29 February 2008 set out on pages 45 to 91 were approved by the board of directors on
16 July 2008 and are signed on its behalf by:
RL Pike FD Burd
Chief Executive Officer Chief Financial Officer
Johannesburg
16 July 2008
Certification by company secretary
The Power of Potential | ADCORP Annual Report 2008 | 43
In accordance with section 268G(d) of the Companies Act, 61 of 1973 as amended, I certify that the company has lodged with the Registrar all such
returns as are required by a public company in terms of the Act and that all such returns are true, correct and up to date.
LJ Sudbury
Company secretaryAppointed 8 March 2006
Johannesburg
16 July 2008
28 Sloane Street
Bryanston
2021
Proof 13 - 18 July
Report of the independent auditors
44 | ADCORP Annual Report 2008 | The Power of Potential
Proof 13 - 18 July
Independent auditor’s report to the members of Adcorp Holdings LimitedWe have audited the annual financial statements and Group annual financial statements of Adcorp Holdings Limited, which comprise the directors’
report, the balance sheet and the consolidated balance sheet as at 29 February 2008, the income statement and the consolidated income statement, the
statement of changes in equity and the consolidated statement of changes in equity and cash flow statement and the consolidated cash flow statement
for the 14-month period then ended, a summary of significant accounting policies and other explanatory notes, as set out on pages 45 to 91.
Directors’ responsibility for the financial statementsThe company’s directors are responsible for the preparation and fair presentation of these financial statements in accordance with International
Financial Reporting Standards and in the manner required by the Companies Act of South Africa. This responsibility includes designing, implementing
and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement,
whether due to fraud or error; selecting and applying appropriate accounting policies, and making accounting estimates that are reasonable in the
circumstances.
Auditor’s responsibilityOur responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International
Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance
whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures
selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to
fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the
financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on
the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting principles used and the
reasonableness of accounting estimates made by the directors, as well as evaluating the overall financial statement presentation.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
OpinionIn our opinion, the financial statements present fairly, in all material respects, the financial position of the company and of the Group as at
29 February 2008, and of their financial performance and their cash flows for the 14-month period then ended in accordance with International
Financial Reporting Standards and in the manner required by the Companies Act of South Africa.
Deloitte & Touche
Registered Auditors
R Campbell
Partner
21 July 2008
Buildings 1 and 2
Deloitte Place
The Woodlands
20 Woodlands Drive
Woodmead
Sandton
2146
National executive: GG Gelink – Chief Executive, AE Swiegers – Chief Operating Officer, GM Pinnock – Audit, DL Kennedy – Tax & Legal and
Financial Advisory, L Geeringh – Consulting, L Bam – Corporate Finance and Strategy, CR Beukman – Finance, TJ Brown – Clients & Markets,
NT Mtoba – Chairman of the Board, CR Qually – Deputy Chairman of the Board.
A full list of partners and directors is available on request.
Directors’ reportfor the 14 months ended 29 February 2008
The Power of Potential | ADCORP Annual Report 2008 | 45
The directors have pleasure in submitting their report and financial statements for the 14 months ended 29 February 2008.
Nature of businessAdcorp Holdings Limited is an investment holding company whose subsidiaries and associates carry on business mainly in South Africa, in the
permanent recruitment and flexible staffing sectors as well as business process outsourcing.
OverviewShareholders are reminded, as announced in March 2007, that the company has changed its financial year-end from December to February.
As such, the financial results presented herewith, are for the 14-month period ended 29 February 2008.
Operationally, the 2007/08 financial period saw strong profit growth recorded for the Adcorp Group.
Core headline earnings per share for the 14-month period ended 29 February 2008 of 372,7 cents – refer page 26 (2007: 287,6 cents) were some 29,6%
ahead of core headline earnings per share for the same period last year while earnings before interest, tax, depreciation and amortisation (EBITDA) of
R284,5 million were 60,7% ahead of the R177,1 million EBITDA reported for the prior 14-month period.
The restructuring process which commenced in 2006 to focus the business activities of the Group solely in the areas of staffing and business process
outsourcing (BPO) has not only been achieved in a relatively short time frame, but the quality of the acquisitions and the ease of integration of these
businesses into the Adcorp Group, coupled with the advantageous disposal of certain non-core assets, has greatly added to the strong profit growth for
the year.
In terms of recent acquisitions, the acquisition of Capital Outsourcing Group and FMS Marketing Services were concluded in the period under review
as previously advised to shareholders.
Also pleasing to note is that there were, once again, strong performances with regard to the Group’s two key financial imperatives, namely margin
management and cash generation.
With regard to margin management, the EBITDA margin for the period increased, compared to the prior year level of 5,5%, to the current level of
6,4%, while the conversion ratio of cash generated by operating activities to operating profit, excluding International Financial Reporting Standards
(IFRS) adjustments, was 102% (2007: 20%). R263 million cash was generated by operating activities.
Earlier in the year, the Group announced a broad-based black economic empowerment (BBBEE) transaction that significantly bolstered the
empowerment credentials of the Group while also creating an opportunity for all Adcorp employees to share in the Group’s financial fortunes.
The BEE transaction has bedded down well and has added a new and beneficial aspect to the profile of the Group.
In this regard, the Adcorp Group recently won the 2008 Financial Mail’s/Empowerdex Top Empowerment Companies Award.
The BEE shareholders hold 16,8 million Adcorp “A” ordinary shares of which a percentage will vest in 2017 depending on the amount of notional debt
that has been repaid at that date. Based on the amount of the notional debt that had been paid down as at 29 February 2008 and using the share price
on that date, the theoretical number of shares that would have vested is 1,7 million. This translates into 3,3% dilution which, if included in the diluted
core headline earnings per share, would reduce this figure to 353,4 cents per share.
The implementation of the new Microsoft Dynamics AX ERP system is expected to “go live” in June 2008 with the first site being Capacity.
Implementation into other Group operations will continue according to the project roll-out plan over the next months.
It is anticipated that the new ERP system will contribute positively to the extent, relevance and quality of management information as well as to
operating productivity.
While there have been a number of economic and infrastructural shocks to the South African economy recently, demand for our products and services
remains relatively strong.
The staffing operations of the Group performed well and ahead of expectation. In particular, the permanent recruitment businesses turned in a stellar
performance on the back of a buoyant recruitment market.
Although the permanent recruitment operations have historically proved somewhat vulnerable to the economic cycle, the acute skills shortage,
affirmative action and public sector employment should see the continued growth of employment opportunities in this part of the business.
In addition, given the development by the Group of certain new channels to market, there is significant opportunity to gain market share in this segment
of the business.
Proof 13 - 18 July
Directors’ report (continued)for the 14 months ended 29 February 2008
46 | ADCORP Annual Report 2008 | The Power of Potential
Proof 13 - 18 July
The flexible staffing operations have traditionally shown a resilience in the past to perform well in uncertain economic times and it is expected that
this trend will continue in the current economic climate.
The Business Process Outsourcing (BPO) operations of the Group performed ahead of expectation and contribute a high quality of earnings to the Group.
Accounting policiesAdcorp prepares its accounts in accordance with International Financial Reporting Standards (IFRS). The accounting policies are consistent with the
prior year annual financial statements, except for the adoption of IFRS 7 relating to disclosure of financial instruments.
Financial overviewIFRS non-cash flow adjustments have had a significant impact on the figures presented for the 14 months ended February 2008 and are mainly the
result of share-based payments arising from the BBBEE transaction concluded in May 2007 as well as the amortisation of intangibles from the new
acquisitions.
The apparent decrease in headline earnings per share from 263,3 cents per share to 195,6 cents per share is the direct result of these IFRS adjustments
and is not reflective of the performance of the Group. In order to give a true reflection of how the Group actually performed, non-cash flow IFRS
adjustments have been eliminated from core headline earnings per share. Core headline earnings for the 14 months to February 2008 amounted to 372,7
cents per share which is a 29,6% increase over the core headline earnings for the comparative period of 287,6 cents per share.
The increases in goodwill, intangible assets and share premium in the balance sheet compared with the previous period result from the acquisitions of
FMS Marketing Services and Capital Outsourcing Group both of which are performing very well.
Free cash flow amounted to 357,7 cents per share for the 14-month period under review compared with a negative 30,7 cents per share for the prior
comparative period. This significant improvement is mainly the result of an eight-day reduction in debtors days at the end of February 2008 compared
with February 2007.
The impact of major acquisitions was as follows:
• FMS Marketing Solutions was purchased with effect from 1 January 2007. The loss from this entity included in group profit for the 14 months to
February 2008 is R2,5 million. This loss has been arrived at after the deduction of the interest attributable to the borrowings required to fund the
cash portion of the purchase price as well as the amortisation charges arising from the valuation of the intangible assets acquired.
• Capital Outsourcing was purchased with effect from 1 June 2007. The profit from this entity included the Group profit for the nine months to
February 2008 is R16,1 million. This profit has been arrived at after the deduction of the interest attributable to the borrowings required to fund the
cash portion of the purchase price as well as the amortisation charges arising from the valuation of the intangible assets acquired. Had Capital
Outsourcing been acquired with effect from 1 January 2007 on the same basis as above, the amount of profit that would have been included in Group
profits would have been R15,5 million.
Broad-based black economic empowerment (BBBEE)Adcorp recognises the importance of positive transformation not only for the Group but for the country as a whole. Accordingly in May 2007 Adcorp
concluded a BBBEE deal in terms of which Adcorp issued a total of 16 822 849 “A” shares, equal to 25% plus one share of its issued share capital, to
a consortium consisting of Women Investment Portfolio Holdings Limited (Wiphold), Simeka Group (Pty) Limited and the employees of Adcorp. This
transaction will result in a meaningful percentage of Adcorp being owned by previously disadvantaged individuals.
The deal involves 25% of Adcorp’s issued share capital being owned by the BBBEE consortium in exchange for an amount referred to as the “notional
debt” which is the difference between the par value and the market value of the “A” shares. The “A” shares have full voting rights and are entitled to
dividends which will be used to reduce the notional debt. In some instances, provided certain growth hurdle rates have been met, a portion of the
dividends will be paid to the BBBEE shareholders upfront. The notional debt attracts notional interest. In 2017 the “A” shares will convert to Adcorp
ordinary shares based on the value of Adcorp shares at the time and the extent to which the notional debt has been paid down.
A circular dated 12 April 2007 was sent to shareholders giving full details of the BBBEE scheme including the rationale, structure and mechanics of
transaction. Copies of the circular are still available from Adcorp’s head office in Sloane Street, if required.
Post-balance sheets eventsAdcorp recently announced the acquisition of the business of Staff U Need (Pty) Limited and Dithomo (Pty) Limited which specialises in providing
labour solutions to the metal and engineering industries. The business has a specific focus in providing both skilled and semi-skilled labour to the power
generating industry including Eskom. This acquisition is still subject to Competition Commission approval.
OutlookGiven the resilient nature of the flexible staffing business, the unique opportunities that exist in the permanent recruitment space and the annuity base
and high quality prospects for the BPO operations, the Group expects to continue to deliver positive organic earnings growth in the financial year ahead.
The Power of Potential | ADCORP Annual Report 2008 | 47
Share capitalMovements in share capital during the period are shown below:
Number000’s R’000
Opening balance 1 January 2006
Issued shares 42 614 1 065
Employee share scheme (ordinary shares created) 767 720 shares at 2,5 cents 768 20
Opening balance 1 January 2007
Issued shares 43 382 1 085
Acquisitions of subsidiaries (ordinary shares created) 7 009 448 shares at 2,5 cents 7 009 175
Employee share scheme (ordinary shares created) 439 896 shares at 2,5 cents 440 11
Closing balance 29 February 2008 50 831 1 271
Share premiumMovements in share premium during the period are shown below:
2008 2006R’000 R’000
Opening balance 1 January 57 630 48 679
3 200 (2006: 1 400 shares) created at a premium of R3,225 per share 10 4
– Employee combined option/deferred payment scheme
(2006: 85 000) ordinary shares created at a premium of R6,325 per share – 537
– Employee combined option/deferred payment scheme
40 000 (2006: 65 000) ordinary shares created at a premium of R8,825 per share 353 574
– Employee combined option/deferred payment scheme
10 611 (2006: 36 837) ordinary shares created at a premium of R11,875 per share 126 437
– Employee combined option/deferred payment scheme
93 000 (2006: 142 733) ordinary shares created at a premium of R11,975 per share 1 114 1 709
– Employee combined option/deferred payment scheme
78 000 (2006: 40 670) ordinary shares created at a premium of R12,975 per share 1 012 5 278
– Employee combined option/deferred payment scheme
(2006: 30 000) ordinary shares created at a premium of R13,725 per share – 412
2 790 697 ordinary shares created at a premium of R25,7750 per share to purchase FMS Marketing Solutions 71 930 –
4 000 000 ordinary shares created at a premium of R35,9750 per share to purchase Capital Outsourcing Group 143 900 –
218 750 ordinary shares created at a premium of R31,9750 per share to purchase Capital Outsourcing Group 6 995 –
Closing balance 29 February 2008/31 December 2006 283 070 57 630
DividendOn 7 May 2008, the board declared a dividend of 160 cents (2006: 126 cents) per share which, together with the interim dividend of 55 cents per share,
results in a total distribution in respect of the financial year ending 29 February 2008 of 215 cents per share.
The dividend of 160 cents per share will be paid on 1 September 2008.
STRATEAdcorp dematerialised its issued shares with effect from 9 July 2001 since time settlement of any trade on or outside of the JSE can only be done in
electronic format. All shareholders were circulated with a brochure at the time giving details of how to go about dematerialising their shares. Despite
this, a number of shares remain in certificate format and will have to be dematerialised before they can be traded. Adcorp’s company secretary may be
contacted should a shareholder require advice on the dematerialisation of their share certificates.
Proof 13 - 18 July
Directors’ report (continued)for the 14 months ended 29 February 2008
48 | ADCORP Annual Report 2008 | The Power of Potential
Proof 13 - 18 July
Adcorp Employee Share Option SchemeThe old Adcorp Employee Share Option Scheme was introduced in 1987 and expanded during 1989 to include a share purchase scheme and again in
1994 to allow for the creation of a combined option/deferred payment scheme.
Under this scheme options to purchase shares have been granted on 419 994 shares as at 29 February 2008. These options have already vested and may
therefore be paid for and converted into shares at any time at the option of the relevant employees.
As this share scheme has become expensive when considering the cost to shareholders versus the benefit to employees, Adcorp introduced a new share
scheme which was approved by shareholders in 2006.
Movements for the year in the Adcorp Employee Share Option Scheme appear below:
Opening balance 1 January 2007 Option granted/(cancelled)/(exercised) 2007/08 Closing balance 29 February 2008Date Quantity
Price Value option Quantity Quantity exer- Price Value Price ValueQuantity (R) (R) granted granted Forfeited cancelled cised (R) (R) Quantity (R) (R)
3 200 3,25 10 400 31/05/96 – – – (3 200) 3,25 (10 400) – 3,25 –
33 000 6,35 209 550 31/05/03 – – – – 6,35 – 33 000 6,35 209 550
50 000 8,85 442 500 31/05/02 – 10 000 – (40 000) 8,85 (354 000) 20 000 8,85 177 000
1 500 10,40 15 600 31/05/98 – (750) – – 10,40 – 750 10,40 7 800
39 855 11,90 474 275 31/05/01 – – – (10 611) 11,90 (126 271) 29 244 11,90 348 004
307 500 12,00 3 690 000 31/05/00 – (2 500) – (93 000) 12,00 (1 146 000) 212 000 12,00 2 544 000
201 000 13,00 2 613 000 31/05/04 – 2 000 – (78 000) 13,00 (988 000) 125 000 13,00 1 625 000
636 055 7 455 325 – 8 750 – (224 811) 13,75 (2 624 671) 419 994 4 911 354
New Adcorp Employee Share SchemeUnder the new Adcorp Employee Share Scheme eligible employees received conditional allocations of Share Appreciation Rights (SARs). The scheme
also makes provision for the allocation of performance shares (PFs).
The SARs provide employees, at the date the rights vest, with the right to receive shares equal to the appreciation in the share price since grant date.
The SARs as well as the PFs vest two years after the grant date. The vesting of the shares is subject to various non-market related performance criteria.
Such performance criteria vary between option holders. All SARs and PFs expire after six years from grant date.
The Power of Potential | ADCORP Annual Report 2008 | 49
Movements for the year in the Adcorp Share Appreciation Rights Scheme appear below:
Opening balance 1 January 2007 Option granted/(cancelled)/(exercised) 2007/08 Closing balance 29 February 2008Date Quantity
Price Value option Quantity Quantity exer- Price Value Price ValueQuantity (R) (R) granted granted Forfeited cancelled cised (R) (R) Quantity (R) (R)
680 500 18,15 12 351 075 22/11/05 (109 500) (198 154) (410 000) 18,15 (7 441 500) 161 000 18,15 2 922 150
1 900 000 26,31 49 989 000 30/04/06 1 900 000 26,31 49 989 000
32,31 – 01/03/07 2 850 000 2 850 000 32,31 92 083 500
37,80 – 30/11/07 100 000 100 000 37,80 3 780 000
2 580 500 62 340 075 2 950 000 (109 500) (198 154) (410 000) (7 441 500) 5 011 000 148 774 650
There is no amount payable by participants on exercise. They will receive shares equal in value to the increase in the share price between the grant date
and the exercise date.
Adcorp Empowerment Share TrustThe trust owns 42 802 Adcorp shares of which 30 302 shares were unallocated as at 29 February 2008 as a result of employees leaving the Group.
These will be reallocated during 2008 and no further shares will be available under this scheme. These options have vested and can be paid for and the
shares transferred into the employee’s name are as follows:
2004 12 500
Unallocated 30 302
Total 42 802
Proof 13 - 18 July
Directors’ report (continued)for the 14 months ended 29 February 2008
50 | ADCORP Annual Report 2008 | The Power of Potential
Proof 13 - 18 July
Movements for the year in the Adcorp Empowerment Share Trust:
PDI opening balance 1 January 2007 Option granted/(cancelled)/(exercised) 2007/08 PDI closing balance 29 February 2008Date Quantity
Price Value option Quantity Quantity exer- Price Value Price ValueQuantity (R) (R) granted granted Forfeited cancelled cised (R) (R) Quantity (R) (R)
5 000 6,35 31 750 – – – – (5 000) 6,35 – – 6,35 –
20 700 8,85 183 195 – – (2 000) – (6 200) 8,85 – 12 500 8,85 110 625
10 000 18,00 180 000 – – – – (10 000) 18,00 – – 18,00 –
10 000 18,15 181 500 – – – – (10 000) 18,15 – – 18,15 –
45 700 576 445 – – (2 000) – (31 200) – 12 500 110 625
28 302 2 000 30 302
74 002 576 445 – – – – (31 200) – – 42 802 110 625
Adcorp Employee Share Trust established 2007As advised in the circular to shareholders dated 12 April 2007, Adcorp concluded a BBBEE transaction which allows for up to 10% of Adcorp shares
to be owned by Adcorp employees the majority of whom are previously disadvantaged individuals.
The Employee Share Trust owns 6 729 140 Adcorp “A” shares on behalf of the employees of Adcorp. These shares are represented by units which
were allocated to all Adcorp employees in the Group at the time of the initial allocation, which was August 2007. Units which are forfeited due to
employees leaving early will be reallocated to new employees, however the total number of “A” shares will not change. In 2017 a percentage of the
“A” shares will convert to Adcorp ordinary shares depending on the amount of the notional debt that has been repaid at that time. Based on the amount
of the notional debt that has been paid down as at 29 February 2008 and using the same share price at that date, the theoretical number of shares that
would have vested is 1,7 million.
Subsidiaries and associatesDetails of the company’s operating subsidiaries and associates are set out in Annexure A on pages 90 and 91.
The summarised attributable interest of the company in the profits and losses of its subsidiary companies is as follows:
2008 2006R’000 R’000
Total profit after taxation 206 903 138 657
Total losses after taxation (5 946) (30 919)
200 957 107 738
The Power of Potential | ADCORP Annual Report 2008 | 51
Significant shareholdersDetails of significant shareholders are included on page 94.
Special resolutionsTwo special resolutions were passed during 2007/08 both in connection with the broad-based black economic empowerment transaction concluded by
Adcorp in May 2007. A summary of these resolutions appear below:
1. The authorised share capital of the company, now consisting of 100 000 000 (one hundred million) ordinary shares of R0,025 (two comma five
cents) each, be altered to consist of:
1.1 83 177 151 (eighty three million one hundred and seventy seven thousand one hundred and fifty one) ordinary shares of R0,025 (two
comma five cents) each; and
1.2 16 822 849 (sixteen million eight hundred and twenty two thousand eight hundred and forty nine) “A” ordinary shares of R0,025 (two
comma five cents) each; and
2. The articles of association of the company be and are hereby amended by the insertion of articles 70 to 74, which detail the rights attaching to the
Adcorp “A” ordinary shares which were issued in terms of the BBBEE transaction. Full details of these rights were communicated to shareholders
in the circular to shareholders dated 12 April 2007.
Statutory informationThe company was incorporated in the Republic of South Africa on 16 July 1974. The registration number is 1974/001804/06. For details of the
registered office, company secretary and auditors refer to inside back cover.
Directors’ remuneration and interestDetails of directors’ remuneration and interests appear in notes 46 and 47 on pages 84 and 85 of the annual financial statements.
Directorate and secretaryThe names of the directors and company secretary are set out on pages 30, 31 and 43 respectively. Changes to the directorate during 2007/08 are
detailed on pages 30 and 31.
Proof 13 - 18 July
as at 29 February 2008 and 31 December 2006
52 | ADCORP Annual Report 2008 | The Power of Potential
AssetsNon-current assets 675 449 138 372 657 310 408 679
Property, plant and equipment 4 57 549 32 775 910 1 004
Intangible assets 5 182 270 44 218 – –
Goodwill 6 402 980 41 525 – –
Investment in subsidiaries 7 – – 653 072 404 507
Investment in associates 8 270 3 189 – 1 528
Other financial assets 9 – – 1 103 1 640
Derivative financial instrument 10 3 141 – – –
Deferred taxation 11 29 239 16 665 2 225 –
Current assets 714 485 511 496 293 225 123 890
Trade and other receivables and prepayments 12 565 002 402 404 5 912 11 725
Amounts due from vendor 13 250 – 250 –
Amounts due by subsidiary companies 14 – – 286 763 106 714
Assets classified as held-for-sale 15 845 30 408 – –
Taxation prepaid 564 3 755 – 514
Cash resources 147 824 74 929 300 4 937
Total assets 1 389 934 649 868 950 535 532 569
Equity and liabilitiesCapital and reserves 668 171 310 785 533 324 177 154
Share capital 16 1 271 1 085 1 692 1 085
Share premium 17 283 070 57 630 283 070 57 630
Treasury shares 18 (701) (1 010) – –
Non-distributable reserve 19 – – 119 918 119 918
Foreign currency translation reserve 20 (688) – – –
Accumulated profit 384 798 252 998 128 644 (1 479)
Equity attributable to equity holders of the parent 667 750 310 703 533 324 177 154
Minority shareholders’ interest – 5 – –
BEE shareholders’ interest 21 421 77 – –
Non-current liabilities 195 234 5 010 – –
Other non-current liabilities 22 4 230 1 586 – –
Redeemable preference shares – interest-bearing 23 150 000 – – –
Obligations under finance lease 24 2 464 – – –
Deferred taxation 11 38 540 3 424 – –
Current liabilities 526 529 334 073 417 211 355 415
Non-interest-bearing current liabilities 322 135 238 211 235 728 259 553
Trade and other payables 25 239 369 144 328 11 557 22 317
Amounts due to subsidiary companies 14 – – 215 263 233 481
Amounts due to vendor 26 – 709 – –
Provisions 27 74 785 51 944 7 151 3 755
Taxation 7 633 6 111 1 757 –
Liabilities classified as held-for-sale 15 348 35 119 – –
Interest-bearing current liabilities 204 394 95 862 181 483 95 862
Current portion of other – non-current liabilities 22/24 2 260 – – –
Current portion of redeemable preference shares 23 3 805 – – –
Bank overdrafts 198 329 95 862 181 483 95 862
Total equity and liabilities 1 389 934 649 868 950 535 532 569
GROUP COMPANY2008 2006 2008 2006
Notes R’000 R’000 R’000 R’000
Proof 13 - 18 July
Balance sheets
for the 14 months ended 29 February 2008 and 12 months ended 31 December 2006
The Power of Potential | ADCORP Annual Report 2008 | 53
GROUP COMPANY2008 2006 2008 2006
Notes R’000 R’000 R’000 R’000
Continuing operationsRevenue 28 4 430 105 2 586 280 285 78
Cost of sales 30 (3 349 604) (1 938 874) (78) –
Gross profit 1 080 501 647 406 207 78
Other income 31 31 620 31 100 47 754 28 019
Administration expenses (401 595) (205 404) (127 802) (27 164)
Marketing and selling expenses (448 173) (290 689) (4 108) (2 459)
Other operating expenses (153 548) (64 690) (3 422) (2 808)
Operating profit/(loss) 32 108 805 117 723 (87 371) (4 334)
Interest received 33 7 869 4 073 10 529 8 695
Interest paid 34 (29 574) (4 932) (19 202) (6 431)
Dividends received – – 209 988 70 659
Share of profits from associates 1 512 2 278 – –
Impairment of intangible assets – (1 155) – –
Impairment of investment – – (6 726) (3 015)
Impairment of loans (145) – (12 961) (32 887)
Profit/(loss) on disposal of property and equipment 409 (109) – (85)
Profit/(loss) on disposal of operations and subsidiaries 48 633 7 568 43 495 (17 639)
Profit before taxation 137 509 125 446 137 752 14 963
Taxation 35 (40 855) (27 730) (11 066) (8 113)
Profit for the period from continuing operations 96 654 97 716 126 686 6 850
Discontinued operationsProfit for the period from discontinued operations 36 30 314 7 904 – –
Profit for the period 126 968 105 620 126 686 6 850
Profit for the period
Attributable to:
Ordinary shareholders 126 968 107 994 126 686 6 850
Minority shareholders – (2 374) –
Profit for the period 126 968 105 620 126 686 6 850
Earnings per shareBasic (cents) 37 258,5 251,8 – –
Diluted (cents) 37 253,4 248,6 – –
Distribution to shareholders during the year 181 147 – –
Interim dividend (cents) 55 42 – –
Final dividend (cents) in respect of prior year 126 105 – –
Proof 13 - 18 July
Income statements
Statements of changes in equityfor the 14 months ended 29 February 2008 and 12 months ended 31 December 2006
54 | ADCORP Annual Report 2008 | The Power of Potential
GroupBalance at 31 December 2005 1 065 48 679 (2 127) – – 202 089 249 706 2 379 77 252 162
Issue of ordinary shares under
employee share option scheme 20 8 951 – – – – 8 971 – – 8 971
Treasury shares sold – – 927 – – (188) 739 – – 739
Dividend distributions – – 190 – – (62 976) (62 786) – – (62 786)
Minority shareholders’ share of profits – – – – – 2 374 2 374 (2 374) – –
Recognition of staff share-
based payments – – – – – 6 079 6 079 – – 6 079
Profit for the period – – – – – 105 620 105 620 – – 105 620
Balance as at 31 December 2006 1 085 57 630 (1 010) – – 252 998 310 703 5 77 310 785
Issue of ordinary shares under
employee share option scheme 11 2 615 – – – – 2 626 – – 2 626
Acquisition of BEE shareholders’
and minority interest – – – – – 3 3 (5) (77) (79)
Issue of ordinary shares for the
acquisition of subsidiaries 175 222 825 – – – – 223 000 – – 223 000
Issue of “A” ordinary shares in
terms of BBBEE transaction – – (168) – – – (168) – 421 253
Foreign currency translation reserve – – – (688) – – (688) – – (688)
Fair value adjustment of derivative
financial instrument – interest rate cap – – – – – 1 332 1 332 – – 1 332
Treasury shares sold – – 388 – – 60 448 – – 448
Recognition of BBBEE
and staff share-based payments – – – – – 95 268 95 268 – – 95 268
Dividend distributions – – 89 – – (91 831) (91 742) – – (91 742)
Profit for the period – – – – – 126 968 126 968 – – 126 968
Balance as at 29 February 2008 1 271 283 070 (701) (688) – 384 798 667 750 – 421 668 171
CompanyBalance at 31 December 2005 1 065 48 679 – – 119 918 48 568 218 230 – – 218 230
Issue of ordinary shares under
employee share option scheme 20 8 951 – – – – 8 971 – – 8 971
Recognition of staff share-
based payments – – – – – 6 079 6 079 – – 6 079
Dividend distributions – – – – – (62 976) (62 976) – – (62 976)
Profit for the period – – – – – 6 850 6 850 – – 6 850
Balance as at 31 December 2006 1 085 57 630 – – 119 918 (1 479) 177 154 – – 177 154
Issue of ordinary shares under
employee share option scheme 11 2 615 – – – – 2 626 – – 2 626
Issue of “A” ordinary shares in
terms of BBBEE transaction 421 – – – – – 421 – – 421
Issue of ordinary shares for the
acquisition of subsidiaries 175 222 825 – – – – 223 000 – – 223 000
Recognition of BBBEE and staff
share-based payments – – – – – 95 268 95 268 – – 95 268
Dividend distributions – – – – – (91 831) (91 831) – – (91 831)
Profit for the period – – – – – 126 686 126 686 – – 126 686
Balance as at 29 February 2008 1 692 283 070 – – 119 918 128 644 533 324 – – 533 324
AttributableForeign Non- to equity Minority BEE
currency distri- Accumu- holders share- share-Share Share Treasury translation butable lated of the holders’ holders’
capital premium shares reserve reserve profit parent interest interest TotalR’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000
Proof 13 - 18 July
Cash flow statementsfor the 14 months ended 29 February 2008 and 12 months ended 31 December 2006
The Power of Potential | ADCORP Annual Report 2008 | 55
GROUP COMPANY2008 2006 2008 2006
Notes R’000 R’000 R’000 R’000
Operating activitiesProfit before taxation and dividends 168 170 136 460 137 752 14 963
Adjusted for:
Dividends received – – (209 988) (70 659)
Depreciation 25 603 17 492 528 462
Impairment of assets, loans and goodwill 11 645 1 256 19 687 35 902
Amortisation of intangible assets 47 738 1 724 – –
(Profit)/loss on disposal of businesses (90 866) (7 568) (43 495) 17 639
(Profit)/loss on disposal of property and equipment (409) (357) – 85
Fair value adjustments 77 (78) – –
Share of profits from associates (1 511) (5 478) – –
Share-based payments expense 101 966 6 080 92 478 3 076
Non-cash portion of operating lease rentals 1 399 679 308 391
Interest paid 29 497 4 940 19 202 6 431
Interest received (7 880) (4 088) (10 529) (8 695)
Cash generated/(utilised) by operating
activities before working capital changes 285 429 151 062 5 943 (405)
Increase in trade and other receivables and prepayments (75 540) (53 351) (538) (6 997)
Increase/(decrease) in trade and other payables and provisions 58 892 (6 891) (7 671) 942
Net movement in holding and fellow subsidiaries intercompany accounts (5 510) 2 942 (193 035) (4 322)
Cash generated/(utilised) by operations 263 271 93 762 (195 301) (10 782)
Interest paid (29 497) (4 940) (19 202) (6 431)
Interest received 7 880 4 088 10 529 8 695
Taxation paid 48 (65 956) (34 670) (11 020) (5 872)
Dividend paid 49 (91 441) (58 717) 118 247 7 683
Net cash generated/(utilised) by operating activities 84 257 (477) (96 747) (6 707)
Investing activitiesAdditions to property, equipment and intangible assets 50 (62 458) (40 940) (434) (101)
Proceeds from sale of property and equipment 6 552 1 545 – 5
Inflow/(outflow) on disposal of businesses 51 96 943 22 752 49 919 –
Acquisition of businesses 52 (447 931) (28 153) (184 365) (38 442)
BEE transactional costs (6 875) – (6 875) –
Paid to BEE shareholders (79 100) – – –
Purchase/increase in investments – (651) – –
Vendor loan repayments (36) (1 400) 750 –
Net movement in loans and advances – 383 – –
Net cash utilised by investing activities (492 905) (46 464) (141 005) (38 538)
Financing activitiesIssue of shares 226 074 9 710 147 494 9 900
Net proceeds from issue of “A” ordinary shares 252 – – –
Payment for financial instrument purchased (941) – – –
Long-term loan raised 225 000 – – –
Long-term loan repaid (75 000) – – –
Decrease in non-current interest-bearing liabilities 1 259 – – –
Net cash generated by financing activities 376 644 9 710 147 494 9 900
Net decrease in cash and cash equivalents (32 004) (37 231) (90 258) (35 345)
Net cash and cash equivalents at the beginning of the period (18 501) 18 730 (90 925) (55 580)
Net cash and cash equivalents at the end of the period 53 (50 505) (18 501) (181 183) (90 925)
Proof 13 - 18 July
Segment reportfor the 14 months ended 29 February 2008 and 12 months ended 31 December 2006
56 | ADCORP Annual Report 2008 | The Power of Potential
Revenue– 2008 (R’000) – 4 191 683 238 422 – 4 430 105
– 2006 (R’000) – 2 468 510 117 770 113 936 2 700 216
Operating profit/(loss)– 2008 (R’000) (118 188) 205 112 21 881 (82) 108 723
– 2006 (R’000) (18 621) 135 470 874 7 442 125 165
EBITDA– 2008 (R’000) (24 935) 253 734 55 782 (82) 284 499
– 2006 (R’000) (14 762) 147 701 6 889 9 775 149 603
EBITDA profit margin– 2008 (%) – 6,1 23,4 6,4 6,4
– 2006 (%) – 6,0 5,8 8,6 5,5
EBITDA contribution to group profit– 2008 (%) (8,8) 89,2 19,6 – 100
– 2006 (%) (9,9) 98,7 4,6 6,5 100
Asset carrying value– 2008 (R’000) 9 345 1 075 825 298 038 6 726 1 389 934
– 2006 (R’000) 22 611 545 881 43 178 38 198 649 868
Liabilities carrying value– 2008 (R’000) 201 947 291 539 227 929 348 721 763
– 2006 (R’000) 122 788 161 329 19 847 35 119 339 083
Depreciation and amortisation– 2008 (R’000) 469 40 632 31 310 – 72 411
– 2006 (R’000) 396 9 796 5 476 2 162 17 830
Additions to property and equipment– 2008 (R’000) 362 23 675 13 452 – 37 489
– 2006 (R’000) – 10 255 4 630 1 706 16 591
NoteNo segmental information is provided in respect of geographical analysis as the Group operates mainly in South Africa. Refer note 29 for further details regarding business segments.Revenue shown above is external revenue.During the year the Group identified a new business segment business process outsourcing. As a result of the new business segment the prior year figures were reclassified.
Centralcosts Staffing BPO Discontinued Total
Proof 13 - 18 July
Notes to the annual financial statementsfor the 14 months ended 29 February 2008 and 12 months ended 31 December 2006
The Power of Potential | ADCORP Annual Report 2008 | 57
1. Accounting frameworkThe Group applies all applicable International Financial Reporting Standards (IFRS) in preparation of the financial statements. Consequently, all
IFRS statements that were effective at 29 February 2008 and are relevant to its operations have been applied.
At the date of authorisation of these financial statements, the following standards and interpretations which have not been applied in these
financial statements, were in issue but not yet effective:
New and revised standardsIFRS 3: Business Combinations – certain revisions to accounting for business combinations applicable to the Group’s financial year commencing
March 2009
IFRS 8: Operating Segments – new standard dealing with segment reporting applicable to the Group’s financial year commencing March 2009
In May 2008 the IASB released a number of improvements to a whole range of existing accounting standards. These improvements will be
applicable to the Group financial year commencing March 2009
New interpretationsIFRIC 12: Service Concession Arrangements – applicable to the Group’s financial year commencing March 2008
IFRIC 13: Customer Loyalty Programmes – applicable to the Group’s financial year commencing March 2009
IFRIC 14: The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction – applicable to the Group’s financial
year commencing March 2008
The impact of the adoption of the above standards and interpretations still needs to be considered, but is not expected to have a material impact
on the financial results.
2. Significant accounting policiesThe financial statements have been prepared on the historical cost basis, except for the revaluation of certain financial instruments and
incorporate the following principal accounting policies. In all material respects, these policies have been followed by all companies in the Group.
The accounting policies are consistent with the prior year. The adoption of IFRS 7: Financial Instruments requires additional disclosures and this
has been dealt with in the financial statements.
Basis of consolidationThe consolidated financial statements incorporate the financial statements of the company and entities controlled by the company (its
subsidiaries). Control is achieved where the company has the power to govern the financial and operating policies of an entity so as to obtain
benefits from its activities.
All intergroup transactions, balances, income and expenses have been eliminated upon consolidation.
All shares and investments are held at cost and are reviewed annually to determine any impairment.
The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement from the effective date of
acquisition or up to the effective date of disposal, as is appropriate.
Business combinationsThe acquisition of subsidiaries is accounted for using the purchase method. The cost of the acquisition is measured at the aggregate of the fair
values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for
control of the acquiree, plus any costs directly attributable to the business combination. The acquiree’s assets, liabilities and contingent liabilities
that meet the conditions for recognition under IFRS 3 are recognised at their fair values at the acquisition date.
Goodwill arising on acquisition is recognised as an asset and initially measured at cost, being the excess of the cost of the business combination
over the Group’s interest in the fair value of identifiable assets, liabilities and contingent liabilities recognised. If, after reassessment, the Group’s
interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities exceeds the cost of the business combination,
the excess is recognised immediately in profit or loss.
The interest of minority shareholders in the acquiree is initially measured at the minority’s portion of the net fair value of the assets, liabilities
and contingent liabilities recognised.
Proof 13 - 18 July
Notes to the annual financial statements (continued)for the 14 months ended 29 February 2008 and 12 months ended 31 December 2006
58 | ADCORP Annual Report 2008 | The Power of Potential
Investment in associatesAn associate is an entity over which the Group has significant influence and that is neither a subsidiary nor an interest in a joint venture.
Significant influence is defined as the ability to participate in the financial and operating policy decisions of the investee.
The results and assets and liabilities of associates are incorporated in these financial statements using the equity method of accounting. The carrying
amounts of such investments are reduced to recognise any decline, other than a temporary decline, in the value of individual investments.
Where a Group enterprise transacts with an associate of the Group, unrealised profits and losses are eliminated to the extent of the Group’s
interest in the relevant associate, except where unrealised losses provide evidence of an impairment of the asset transferred.
TaxationIncome tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the period. Taxable profit differs from profit as reported in the income statement because
it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or
deductible. The Group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet
date.
Deferred tax is recognised on the differences between the carrying amounts of assets and liabilities in the financial statements and the
corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax
liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that
taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if
the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of the other assets and
liabilities in a transaction that affects neither the taxable profit nor the accounting profit.
The carrying amount of the deferred tax asset is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that
sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset realised. Deferred tax
is charged or credited to profit or loss, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also
dealt with in equity.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and
when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a
net basis.
Property and equipmentProperty and equipment is stated at cost less accumulated depreciation and any recognised impairment losses.
Depreciation is charged so as to write off the cost or valuation of the asset over their estimated useful lives to its residual value, using the straight-
line method, on the following basis:
Computers and office equipment 20% – 33%
Furniture and fittings 10% – 16,7%
Buildings owned and occupied 2,86%
Land is not depreciated
Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets or, where shorter, over the
term of the relevant lease. Useful lives and residual values are reassessed on an annual basis.
The gain or loss arising on the disposal or retirement of an asset is determined as the difference between the sale proceeds and the carrying
amount of the asset and is recognised in income.
Intangible assetsIntangible assets acquired separatelyIntangible assets acquired separately are reported at cost less accumulated amortisation and accumulated impairment losses. Amortisation is
charged on a straight-line basis over their estimated useful lives. The estimated useful life and amortisation method are reviewed at the end of
each annual reporting period, with the effect of any changes in estimate being accounted for on a prospective basis.
Internally generated intangible assets – research and development expenditureExpenditure on research activities is recognised as an expense in the period in which it is incurred.
Proof 13 - 18 July
The Power of Potential | ADCORP Annual Report 2008 | 59
An internally generated intangible asset arising from development (or from the development phase of an internal project) is recognised if, and
only if, all of the following have been demonstrated:
• the technical feasibility of completing the intangible asset so that it will be available for use or sale;
• the intention to complete the intangible asset and use or sell it;
• the ability to use or sell the intangible asset;
• how the intangible asset will generate probable future economic benefits;
• the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and
• the ability to measure reliably the expenditure attributable to the intangible asset during its development.
The amount initially recognised for internally generated intangible assets is the sum of the expenditure incurred from the date when the intangible
asset first meets the recognition criteria listed above. Where no internally generated intangible asset can be recognised, development expenditure
is charged to profit or loss in the period in which it is incurred.
Subsequent to initial recognition, internally generated intangible assets are reported at cost less accumulated amortisation and accumulated
impairment losses, on the same basis as intangible assets acquired separately.
Intangible assets acquired in a business combinationIntangible assets acquired in a business combination are identified and recognised separately from goodwill where they satisfy the definition of
an intangible asset and their fair values can be measured reliably. The cost of such intangible assets is their fair value at the acquisition date.
Subsequent to initial recognition, intangible assets acquired in a business combination are reported at a cost less accumulated amortisation and
accumulated impairment losses, on the same basis as intangible assets acquired separately.
GoodwillGoodwill arising on consolidation represents the excess of the cost of acquisition over the Group’s interest in the fair value of the identifiable
assets, liabilities and contingent liabilities of a subsidiary, associate or jointly controlled entity at the date of acquisition.
Goodwill is recognised as an asset and tested for impairment on an annual basis. The valuation of goodwill is done on a discounted cash flow
basis and compared to the carrying value on an annual basis. Any impairment is recognised immediately in profit or loss and is not subsequently
reversed.
On disposal of a subsidiary, associate or jointly controlled entity, the attributable amount of goodwill is included in the determination of the profit
or loss on disposal.
Non-current assets held-for-saleNon-current assets and disposal groups are classified as held-for-sale if their carrying amount will be recovered principally through a sale
transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the asset (or disposal
group) is available for immediate sale in its present condition. Management must be committed to the sale, which should be expected to qualify
for recognition as a completed sale within one year from the date of classification.
Non-current assets (and disposal groups) classified as held-for-sale are measured at the lower of their previous carrying amount and fair value
less costs to sell.
Impairment of assets (excluding goodwill)The carrying amounts of the Group’s assets are reviewed at each balance sheet date to determine whether there is any indication of impairment.
If there is any indication that an asset may be impaired, its recoverable amount is estimated.
The recoverable amount is the higher of its net selling price and its value in use. An impairment loss is recognised whenever the carrying amount
of the asset exceeds its recoverable amount.
Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount,
to the extent that the carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been
recognised for the asset in the prior years.
Revenue recognitionRevenue comprises mainly the invoice value of services rendered to customers, as well as commission received and training course income.
Revenue excludes value-added tax.
Revenue is recognised at the date the services are rendered.
Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for goods and services
provided in the normal course of business, net of discounts and sales-related taxes.
Proof 13 - 18 July
Notes to the annual financial statements (continued)for the 14 months ended 29 February 2008 and 12 months ended 31 December 2006
60 | ADCORP Annual Report 2008 | The Power of Potential
Dividend incomeDividend revenue from investment is recognised when the shareholder’s right to receive payment has been established.
Investment incomeInvestment income is recognised on the accrual basis by reference to the principal outstanding and the effective interest rates applicable.
Cost of salesCost of sales consists of direct costs of temporary assignees, advertising costs incurred in recruitment and direct expenditure in respect of public
relations, research and training courses.
LeasesLeases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee.
All other leases are classified as operating leases.
Assets held under finance leases are recognised as assets of the Group at their fair value at the inception of the lease or, if lower, at the present
value of the minimum lease payments. The corresponding liability to the lessor is included in the balance sheet as a finance lease obligation.
Lease payments are apportioned between finance charges and reduction of the lease obligation so as to achieve a constant rate of interest on the
remaining balance of the liability. Finance charges are charged to profit or loss, unless they are directly attributable to qualifying assets, in which
case they are capitalised in accordance with the Group’s general policy on borrowing costs.
Rentals payable under operating leases are charged to profit or loss on a straight-line basis over the term of the relevant lease.
Foreign currency transactionsTransactions in foreign currencies are accounted for at the rates of exchange ruling on the date of the transactions. Gains and losses arising from
the settlement of such transactions are recognised in the income statement.
Borrowing costsBorrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a
substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are
substantially ready for their intended use or sale. Investment income earned on the temporary investment of specific borrowings pending their
expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.
All other borrowing costs are recognised in profit or loss in the period in which they are incurred.
Government grantsGovernment grants towards staff training costs are recognised in profit or loss over the periods necessary to match them with the related costs
and are deducted in reporting the related expense.
Employee benefitsThe company’s contributions to defined contribution plans (either provident or pension funds) in a particular period are recognised as an expense
in that period.
Contributions to medical aid are recognised as an expense in the period during which the related services are rendered.
All employee benefits cease on termination of employment.
ProvisionsProvisions are recognised when the Group has a present obligation as a result of a past event and it is probable that this will result in an outflow
of economic benefits that can be reliably estimated.
Share-based paymentsThe Group has complied with the requirements of IFRS 2: Share-based Payments. In accordance with the transitional provisions, IFRS 2 has
been applied retrospectively to all grants of equity instruments after 7 November 2002 that were unvested as of 1 January 2005 and to all
liabilities for share-based transactions existing at 1 January 2005. The standard therefore applies to share options granted in 2004, 2005, 2006 as
well as those granted in 2008.
The Group has issued equity-settled share-based payments to certain employees. Equity-settled share-based payments are measured at fair value
at the date of grant. The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis
over the vesting period, based on the Group’s estimate of shares that will eventually vest.
Fair value is measured by use of the Black-Scholes model. The expected life used in this model has been adjusted, based on management’s best
estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations.
Proof 13 - 18 July
The Power of Potential | ADCORP Annual Report 2008 | 61
Financial instrumentsFinancial assets and financial liabilities are recognised in the Group’s balance sheet when the Group has become party to contractual provisions
of the instrument.
Proceeds from disposals which are not due within one year have been discounted to net present value.
Trade and other receivablesTrade and other receivables do not carry any interest and are stated at their nominal value. Trade and other receivables are reduced by appropriate
allowances for estimated irrecoverable amounts.
Trade and other payablesTrade and other payables do not carry any interest and are stated at their nominal value.
InvestmentsInvestments in securities are recognised on a trade date basis and are initially measured at cost. Investments are classified as either held for
trading or available-for-sale, and are measured at subsequent reporting dates at fair value, based on quoted market prices at the balance sheet
date. Where securities are held for trading purposes, unrealised gains and losses are included in net profit or loss for the period. For available-
for-sale investments, unrealised gains or losses are recognised directly in equity, until the security is disposed of or is determined to be impaired,
at which time the cumulative gain or loss previously recognised in equity is included in the net profit or loss for the period. Proceeds from
disposals which are not due within one year have been discounted to net present value.
Cash and cash equivalentsCash and cash equivalents comprise cash on hand and demand deposits, and other short-term highly liquid investments that are readily
convertible to a known amount of cash and are subject to an insignificant risk of changes in value.
Bank borrowingsInterest-bearing bank loans and overdrafts are recorded as the proceeds received, net of direct issue costs. Finance charges, including premiums
payable on settlement or redemption, are accounted for on an accrual basis and are added to the carrying amount of the instrument to the extent
that they are not settled in the period in which they arise.
Equity instrumentsEquity instruments are recorded at the proceeds received, net of direct issue costs.
Derivative financial instruments and hedge accountingDerivative financial instruments are initially recorded at cost and are remeasured to fair value at subsequent reporting dates. Changes in the fair
value of derivative financial instruments that are designated and effective as cash flow hedges are recognised directly in equity. Amounts deferred
in equity are recognised in the income statement in the same period in which the hedged firm commitment or forecast transaction affects net
profit or loss.
Changes in the fair value of derivative financial instruments that do not qualify for hedge accounting are recognised in the income statement as
they arise.
Hedge accountingThe Group designates certain hedging instruments, which includes derivatives, as either fair value hedges, cash flow hedges, or net hedges of
net investments in foreign operations. Hedges of foreign exchange risk on firm commitments are accounted for as cash flow hedges. At the
inception of the hedging relationship, the entity documents the relationship between the hedging instrument and the hedged item, along with its
risk management objectives and its strategy for undertaking various hedge transactions. Furthermore, at the inception of the hedge and ongoing
basis, the Group documents whether the hedging instrument that is used in a hedging relationship is highly effective in offsetting changes in fair
values or cash flows of the hedged item.
Cash flow hedgesThe effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges are deferred in equity. The
gain or loss relating to the ineffective portion is recognised immediately in profit or loss, and is included in the “other gains and losses” line of
the income statement.
Amounts deferred in equity are recycled in profit or loss in the periods when the hedged item is recognised in profit or loss, in the same line of
the income statement as the recognised hedged item. However, when the forecast transaction that is hedged results in the recognition of a non-
financial asset or non-financial liability, the gains and losses previously deferred in equity are transferred from equity and included in the initial
measurement of the cost of the asset or liability.
Hedge accounting is discontinued when the Group revokes the hedging relationship, the hedging instrument expires or is sold, terminated, or
exercised, or no longer qualifies for hedge accounting. Any cumulative gain or loss deferred in equity at that time remains equity and is
recognised when the forecast transaction is ultimately recognised in profit or loss. When a forecast transaction is no longer expected to occur,
the cumulative gain or loss that was deferred in equity is recognised immediately in profit or loss.
Proof 13 - 18 July
Notes to the annual financial statements (continued)for the 14 months ended 29 February 2008 and 12 months ended 31 December 2006
62 | ADCORP Annual Report 2008 | The Power of Potential
3. Critical accounting judgements and key sources of estimation uncertaintyCritical judgements in applying the Group’s accounting policiesIn the process of applying the Group’s accounting policies, which are described in note 2, management has made the following judgements that
have a significant effect on the amounts recognised in the financial statements:
Provision for credit lossesThe provision was measured at the Group’s best estimate of future unrecoverable trade receivables, taking into account circumstances prevailing
at year-end. Details of the provision are provided in note 12.
Provision for leave payIn making its judgement, the provision for leave pay was measured at the Group’s best estimate of the expenditure required to settle the obligation
at balance sheet date in accordance with the Basic Conditions of Employment Act. Details of the provision for leave pay are provided in note 27.
Revenue recognitionJudgement is involved in determining an appropriate revenue recognition policy and ensuring that this is compliant with IAS 18: Revenue.
Recoverable amounts from governmentThe Group exercised judgement in determining whether these amounts are recoverable from government as well as when these amounts are
recoverable. Details of these learnerships are detailed in note 12.
Purchase price allocation relating to acquisitionsThe Group has exercised judgement in determining the purchase price allocation, intangible assets and resulting goodwill relating to the
acquisition of FMS Marketing Solutions (Pty) Limited and Capital Outsourcing Group (Pty) Limited. The free cash flow method was used and
the key estimates involved were growth rates, discount rate, as well as return on the contracts or key customer relationships.
Recognition of deferred tax assetsThe Group has exercised judgement in determining whether deferred tax assets should be recognised. Judgement is involved in determining the
extent to which it is probable that taxable profit in the various subsidiaries will be available against which the deferred tax assets will be utilised.
Details of these deferred tax assets are provided in note 11.
Key sources of estimation uncertaintyImpairment of goodwillDetermining whether goodwill is impaired requires an estimation of the value in use of the cash-generating units to which goodwill is allocated.
The value-in-use calculation requires the entity to estimate future cash flows expected to arise from the cash-generating unit and to determine a
suitable discount rate in order to calculate present value. Details of the impairment of goodwill are provided in note 6.
Share-based paymentsDetermining the value of share-based payments to be expensed requires an estimation using the Black-Scholes pricing model. The model has
been adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions and behavioural consideration.
Details of share-based payments and assumptions used are provided in note 44.
Residual values and useful lives of assetsThe Group exercised judgement in determining the useful lives of all assets and determining the residual values of these assets.
Proof 13 - 18 July
The Power of Potential | ADCORP Annual Report 2008 | 63
Land, Computerbuildings and and office
leasehold equipment, Capitalisedimprove- furniture and leased
ments fittings assets Total Total2008 2008 2008 2008 2006R’000 R’000 R’000 R’000 R’000
4. Property, plant and equipmentGROUPBalance at the beginning of the period 5 426 27 349 – 32 775 34 667
Assets at cost 8 012 79 637 – 87 649 89 217
Accumulated depreciation (2 586) (52 288) – (54 874) (54 550)
Current year movements
Additions 9 840 25 445 2 204 37 489 20 851
Acquisitions through business combinations 6 140 6 822 2 833 15 795 1 323
Disposal – sale of business – (52) – (52) –
Cost – (200) – (200) –
Accumulated depreciation – 148 – 148 –
Reclassified as held-for-sale (845) – – (845) (4 081)
Cost (845) – – (845) (11 937)
Accumulated depreciation – – – – 7 856
Disposals – (1 683) (327) (2 010) (2 493)
Cost (677) (5 217) (734) (6 628) (14 206)
Accumulated depreciation 677 3 534 407 4 618 11 713
Depreciation (4 641) (20 152) (810) (25 603) (17 492)
Net book value at the end of the period 15 920 37 729 3 900 57 549 32 775
Represented by:
Assets at cost 22 470 106 487 4 303 133 260 86 975
Accumulated depreciation (6 550) (68 758) (403) (75 711) (54 200)
Net book value at the end of the period 15 920 37 729 3 900 57 549 32 775
COMPANYBalance at the beginning of the period 310 694 – 1 004 1 455
Assets at cost 422 3 609 – 4 031 4 173
Accumulated depreciation (112) (2 915) – (3 027) (2 718)
Additions – 434 – 434 101
Depreciation (81) (447) – (528) (462)
Disposals – – – – (90)
Cost – – – – (243)
Accumulated depreciation – – – – 153
Net book value at the end of the period 229 681 – 910 1 004
Represented by:
Assets at cost 422 4 043 – 4 465 4 031
Accumulated depreciation (193) (3 362) – (3 555) (3 027)
Net book value at the end of the period 229 681 – 910 1 004
The registers of land and buildings are open for inspection at the registered office of the company and its subsidiaries.
The Group’s obligations under finance lease (refer note 24) are secured by the lessor’s title to the leased assets, which have a carrying amount
of R3,9 million.
Proof 13 - 18 July
Notes to the annual financial statements (continued)for the 14 months ended 29 February 2008 and 12 months ended 31 December 2006
64 | ADCORP Annual Report 2008 | The Power of Potential
5. Intangible assetsGROUPBalance at the beginning of the period 24 906 5 000 463 11 965 1 884 44 218 13 708
Assets at cost 24 906 5 000 549 12 347 3 140 45 942 13 708
Accumulated amortisation – – (86) (382) (1 256) (1 724) –
Additions – – 773 – – 773 5 556
Additions from internal developments 20 193 – – – – 20 193 14 533
Acquisitions through business combinations – 5 178 – 164 914 – 170 092 12 145
Cost – 5 178 – 164 914 – 170 092 12 145
Accumulated amortisation – – – – – – –
Disposals – – (268) – – (268) –
Cost – – (354) – – (354) –
Accumulated amortisation – – 86 – – 86 –
Amortisation expense – (1 030) (93) (45 935) (680) (47 738) (1 724)
Impairment – (5 000) – – – (5 000) –
Net book value at the end of the period 45 099 4 148 875 130 944 1 204 182 270 44 218
Represented by:
Assets at cost 45 099 10 178 968 177 261 3 140 236 646 45 942
Accumulated amortisation – (6 030) (93) (46 317) (1 936) (54 376) (1 724)
Net book value at the end of the period 45 099 4 148 875 130 944 1 204 182 270 44 218
The capitalised development represents costs incurred to date on the development of the Dynamix AX ERP System. The system is currently in
the process of development and is not available for use. No amortisation has been recorded for the current year. Once the asset is available for
use, it is intended to amortise the software over its estimated useful life of 10 years. R2,3 million interest was capitalised on this project during
the 14 months to February 2008.
The trademark in respect of Simeka and Graphicor which was purchased in 2006 has been impaired as the recoverable amount is less than the
carrying value (R5 million). In the current year, trademarks were acquired in the purchase of FMS Marketing Solutions (Pty) Limited and Capital
Outsourcing Group (Pty) Limited. These new trademarks are amortised over their estimated useful lives which are from three to seven years.
Accreditation of programmes represent costs incurred to date on accrediting training programmes with the relevant training authorities. Once the
asset is available for use, it is amortised over its estimated useful life of four years.
Customer base represents the customer bases purchased on acquisition of businesses. The various customer bases acquired are amortised over
their estimated useful life which ranges from three to seven years.
Other intangible assets are recognised on the acquisition of Margie Middleton and Associates being learning programmes, NQF accreditations,
methodologies and tool development. The asset is amortised over its estimated useful life of five years.
Amortisation of intangible assets is disclosed in operating profit (refer note 32).
Capitalised Accredi-develop- Trade- tation of Customer
ment marks programmes base Other Total Total2008 2008 2008 2008 2008 2008 2006R’000 R’000 R’000 R’000 R’000 R’000 R’000
Proof 13 - 18 July
The Power of Potential | ADCORP Annual Report 2008 | 65
GROUP COMPANY2008 2006 2008 2006R’000 R’000 R’000 R’000
6. GoodwillCost
Opening balance 67 606 66 941 – –
Additional amounts recognised from business combinations
during the period 362 518 13 749 – –
Derecognised on disposal of subsidiaries (1 063) (13 084) – –
Closing balance 429 061 67 606 – –
Impairment
Opening balance (26 081) (24 926) – –
Impairment of goodwill during the period – (1 155) – –
Closing balance (26 081) (26 081) – –
Carrying amount
At the end of the period 402 980 41 525 – –
Goodwill acquired in a business combination is allocated, at acquisition, to the cash-generating units (CGUs) that are expected to benefit from
that business combination. After recognition of impairment losses, the carrying amount of goodwill is attributable to the following material
CGUs:
GROUP2008 2006R’000 R’000
Staffing 240 341 39 833
Business Process Outsourcing 162 639 629
Marketing Research – 1 063
402 980 41 525
The Group tests goodwill annually for impairment.
The recoverable amounts of the CGUs are determined based on the value-in-use calculation which uses the cash flow projections based on
financial budgets approved by management covering a five-year period assuming a growth of 10% per annum. The key assumptions for the
discounted cash flow valuation method are those regarding the discount rate, growth rate and expected changes to selling prices and direct costs
during the period.
The Group prepares cash flow forecasts derived from the most recent financial budgets approved by management. The rate used to discount the
forecast cash flows is 13,02% (2006: 12,57%).
During the year Adcorp acquired its interests in FMS Marketing Solutions (Pty) Limited and Capital Outsourcing Group (Pty) Limited. Adcorp
also acquired the 25% empowerment shareholding in Adcorp Flexible Staffing Solutions (Pty) Limited from the minority shareholders. As a
result of these acquisitions an amount of R362,518 million was recognised as goodwill. This goodwill was allocated to the Staffing CGU
(R200,507 million) and Business Process Outsourcing CGU (R162,011 million).
During the year the company disposed of its Marketing Research CGU. As a result of this, the goodwill relating to this CGU, amounted to
R1 063 million was also disposed.
Proof 13 - 18 July
Notes to the annual financial statements (continued)for the 14 months ended 29 February 2008 and 12 months ended 31 December 2006
66 | ADCORP Annual Report 2008 | The Power of Potential
7. Investment in subsidiaries(for details refer Annexure A)
Shares at cost less amounts written off – – 653 072 404 507
Shares at cost – – 659 798 404 507
Less: Provision for impairment of investment – – (6 726) –
Directors’ valuation – – 1 807 042 1 301 460
The investment in Research Surveys has been impaired as the
business was sold and the company is now dormant.
The directors’ valuation is determined by reference to the market
capitalisation of the Group at the financial reporting date.
8. Investment in associates(for details of the Group refer Annexure A)
Carrying values at the beginning of the period 3 189 4 092 1 528 1 528
Increase in investment 368 – – –
Impairment – (101) – –
Included in non-current assets classified as held-for-sale – 51 – –
Share of current period earnings (net of dividends received) 1 212 1 409 – –
Investment disposed (4 499) (1 879) (1 528) –
270 3 572 – 1 528
Decrease in loans from associates – (383) – –
Total investment in associates 270 3 189 – 1 528
Directors’ valuation 270 3 189 – 1 528
9. Other financial assetsPDI (previously disadvantaged individuals) Share Trust – – 1 103 1 640
Adcorp shares
42 802 shares at R7 965 (2006: 74 002 shares at R7 965) – – 341 589
Loan to PDI Share Trust – – 762 3 388
Impairment provision – – – (2 337)
10. Derivative financial instrumentDerivatives designated and effective as hedging
instruments carried at fair value
Interest rate cap 3 141 – – –
Details are shown below:
Inception date: 25 May 2007
Termination date: 31 May 2010
Nominal cost of cap: R941 351
The financial instrument is a designated hedge, which was purchased to cover R100 million of the redeemable preference shares. The current
effective interest rate on the cap is 13%. The fair value of the financial instrument was determined by an independent party using market data
and the effective interest rate method.
GROUP COMPANY2008 2006 2008 2006R’000 R’000 R’000 R’000
Proof 13 - 18 July
The Power of Potential | ADCORP Annual Report 2008 | 67
As at Allocation of Charged to Arising on As at31 Dec deferred tax the income business 29 Feb
2006 disposed of Total statement combination 2008R’000 R’000 R’000 R’000 R’000 R’000
11. Deferred taxationGROUPTax effect of:
Deferred tax raised on provisions 12 509 (1 325) 11 184 9 381 4 873 25 438
Excess tax allowances and depreciation charge (46) – (46) 40 187 181
Expenditure incurred but not allowable for tax
purposes in the period in which it is incurred (3 424) – (3 424) 13 272 (48 645) (38 797)
Rate change adjustment (19) 13 (6) 2 180 – 2 174
Operating lease timing adjustments 896 (179) 717 180 – 897
Computed losses 5 483 (865) 4 618 (3 303) – 1 315
Other (64) 186 122 (631) – (509)
15 335 (2 170) 13 165 21 119 (43 585) (9 301)
Deferred tax disposed of – 2 170 2 170 – – –
15 335 – 15 335 21 119 (43 585) (9 301)
29 February 31 December2008 2006R’000 R’000
Analysed as:
Deferred tax assets 29 239 16 665
Deferred tax liabilities (38 540) (3 424)
Deferred tax asset held-for-sale – 2 094
(9 301) 15 335
As at Allocation of Charged to Arising on As at31 Dec deferred tax the income business 29 Feb
2006 disposed of Total statement combination 2008R’000 R’000 R’000 R’000 R’000 R’000
COMPANYTax effect of:
Deferred tax raised on provisions – – – 2 074 – 2 074
Rate change adjustment – – – (79) – (79)
Operating lease timing adjustments – – – 236 – 236
Other – – – (6) – (6)
– – – 2 225 – 2 225
29 February 31 December2008 2006R’000 R’000
Analysed as:
Deferred tax assets 2 225 –
Deferred tax liabilities – –
2 225 –
Proof 13 - 18 July
Notes to the annual financial statements (continued)for the 14 months ended 29 February 2008 and 12 months ended 31 December 2006
68 | ADCORP Annual Report 2008 | The Power of Potential
12. Trade and other receivables and prepayments 565 002 402 404 5 912 11 725
Trade debtors 498 732 352 411 – –
Provision for credit losses (12 822) (3 763) – –
Deposits and staff loans 3 327 1 867 72 47
Other 75 765 51 889 5 840 11 678
The Group partakes in learnerships that are registered with the
Services Seta and receives government grants in order to develop
its employees.
During the current period the Group incurred training expenses of
R5 799 198 (2006: R1 245 028) that have been claimed from the
Services Seta.
Included in other receivables are amounts due from the Services Seta
in respect of learnerships that the group has engaged in: 5 896 9 797 – –
Opening balance 9 797 14 735 – –
Acquired through business combination 598 – – –
Claims submitted 5 799 1 245 – –
Grants received (10 298) (6 183) – –
The maximum exposure to credit risk for trade receivables at the
reporting date by geographic region was: 498 732 352 411 – –
Domestic 475 711 352 080 – –
Foreign 23 021 331 – –
The maximum exposure to credit risk for trade receivables at
the reporting date by type of customer was:
498 732 352 411 – –
Agriculture, hunting, forestry and fishing 7 830 5 533 – –
Community, social and personal services 89 223 63 046 – –
Construction 2 992 2 114 – –
Manufacturing 143 884 101 671 – –
Financial intermediation, insurance, real estate
and business services 134 408 94 975 – –
Electricity, gas and water supply 9 675 6 837 – –
Transport, storage and communication 41 495 29 321 – –
Mining and quarrying 9 675 6 837 – –
Wholesale and retail, repair of motor vehicles, motor
cycles and personal and household goods and
hotels and restaurants 59 549 42 078 – –
Debtors days outstanding at end February 2008 was 30 days. No interest is charged on the trade receivables for the first 60 days from the date
of the invoice, thereafter interest may be charged on the outstanding balance. The Group has provided for all receivables that are considered to
be doubtful.
Before accepting any new customer, the Group uses an external credit bureau to assess the potential customers credit quality and defines credit
limit by customer.
Trade receivables are provided as security for the redeemable preference share loan.
GROUP COMPANY2008 2006 2008 2006R’000 R’000 R’000 R’000
Proof 13 - 18 July
The Power of Potential | ADCORP Annual Report 2008 | 69
GROUP COMPANYGross Impairment Gross Impairment Gross Impairment Gross Impairment
2008 2006 2008 2006R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000
12. Trade and other receivables and prepayments continuedThe ageing of trade receivables at
the reporting date was: 498 732 12 822 352 411 3 763 – – – –
Not past due 392 119 633 229 996 – – – – –
Past due 0 – 30 days 72 204 924 93 107 85 – – – –
Past due 31 – 60 days 15 058 967 18 941 693 – – – –
Past due 61 – 120 days 13 136 4 781 9 952 2 827 – – – –
Past due 121 – 365 days 6 038 5 340 415 158 – – – –
More than one year 177 177 – – – – – –
Movement in the provision for
credit losses during the period
under review was as follows:
Closing balance 12 822 3 763 – –
Balance at beginning of period 3 763 5 094 – –
Acquisition through
business combination 2 523 – – –
Impairment loss/(gain) recognised 6 536 (1 331) – –
GROUP COMPANYFair value of
Maximum maximum payments payments
2008 2006 2008 2006R’000 R’000 R’000 R’000
13. Amounts due from vendorGROUPAmounts receivable
Within one year 250 – 250 –
In the second to fifth year inclusive – – – –
250 – 250 –
Fair value adjustments – – – –
Fair value of maximum payments 250 – 250 –
The above represents the payments that are to be received from LR Resources in respect of the sale of Knovation (Pty) Limited.
Proof 13 - 18 July
Notes to the annual financial statements (continued)for the 14 months ended 29 February 2008 and 12 months ended 31 December 2006
70 | ADCORP Annual Report 2008 | The Power of Potential
14. Amounts due to/(by) subsidiary companies 71 500 (126 767)
(for details refer Annexure A)
286 763 106 714
Amounts due by subsidiary companies 323 751 139 601
Less: Provision for impairment of loans (36 988) (32 887)
Amounts due to subsidiary companies (215 263) (233 481)
Included in the above is a provision for the impairment of inter-
company loans amounting R36 988 (2006: R32 887).
15. Assets/liabilities classified as held-for-saleAssets 845 30 408 – –
Liabilities (348) (35 119) – –
15.1 Property held-for-saleThe Group intends to dispose of one of its properties situated
at 22 Swart Street, Kempton Park. The property was
previously used in the Group’s staffing operations.
Property, plant and equipment 845 – – –
15.2 Marketing businessThe Group disposed of Research Surveys
marketing business in January 2007.
Assets held-for-sale – 30 408 – –
Property, plant and equipment – 4 081 – –
Loan to associate – (51) – –
Deferred taxation – 2 094 – –
Trade and other receivables and prepayments – 16 465 – –
Taxation – 5 387 – –
Cash resources – 2 432 – –
Liabilities held-for-sale: (348) (35 119) – –
Trade and other payables – (31 160) – –
Taxation (348) – – –
Provisions – (3 959) – –
Net assets/(liabilities) classified as
held-for-sale 497 (4 711) – –
GROUP COMPANY2008 2006 2008 2006R’000 R’000 R’000 R’000
Proof 13 - 18 July
The Power of Potential | ADCORP Annual Report 2008 | 71
GROUP COMPANY2008 2006 2008 2006R’000 R’000 R’000 R’000
16. Share capitalAuthorised83 177 151 ordinary shares of 2,5 cents each (2006: 100 000 000) 2 079 2 500 2 079 2 500
16 822 849 “A” ordinary shares of 2,5 cents each (2006: Nil) 421 – 421 –
2 500 2 500 2 500 2 500
Issued50 831 439 ordinary shares of 2,5 cents each (2006: 43 382 095) 1 271 1 085 1 271 1 085
16 822 849 “A” ordinary shares of 2,5 cents each (2006: Nil) – – 421 –
1 271 1 085 1 692 1 085
The unissued shares are under the control of the directors until
the next annual general meeting subject to limitations.
Number of shares (’000) 50 788 43 308 50 831 43 382
Opening balance 43 382 42 614 43 382 42 614
Issue of ordinary shares under employee share option plan 440 768 440 768
Issue of ordinary shares for the acquisition of subsidiaries 7 009 – 7 009 –
Shares in issue 50 831 43 382 50 831 43 382
Share Trust consolidated (43) (74) – –
17. Share premium 283 070 57 630 283 070 57 630
Balance at 1 January 2007 57 630 48 679 57 630 48 679
Arising from the issue of 439 896 ordinary shares under
employee share option plan (2006: 767 220) 2 615 8 951 2 615 8 951
Arising from the issue of 7 009 448 ordinary shares for
the acquisition of subsidiaries (2006: Nil) 222 825 – 222 825 –
18. Treasury shares (701) (1 010) – –
Adcorp Empowerment Share Trust consolidated 42 803 shares
(2006: 74 002 shares) (1 010) (2 127) – –
Dividends on treasury shares 89 190 – –
31 200 shares redeemed (2006: 67 918) 388 927 – –
(533) (1 010) – –
Adcorp Employee Benefit Trust consolidated 6 729 140
shares (2006: Nil) (168) – – –
Proof 13 - 18 July
Proof 13 - 18 July
Notes to the annual financial statements (continued)for the 14 months ended 29 February 2008 and 12 months ended 31 December 2006
72 | ADCORP Annual Report 2008 | The Power of Potential
19. Non-distributable reserve – – 119 918 119 918
Unrealised profit arising on sale of BEE companies into new
entity during 2004 – – 119 918 119 918
20. Foreign currency translation reserve (688) –
Balance at 1 January 2007 – –
Arising from business combination 30 –
Arising on translation of foreign operation (718) –
Exchange differences relating to the translation from the functional
currencies of the Group’s foreign subsidiaries into rand amounts are
brought to account by entries made directly to the foreign currency
translation reserve.
21. BEE shareholders’ interestAdcorp previously had two empowerment shareholding structures at operational level in its Adcorp Communication Solutions (Pty) Limited
(ACS) subsidiary and its Adcorp Flexible Staffing Solutions (Pty) Limited (AFSS) subsidiary. The operations of ACS were disposed of in March
2006. The 25% empowerment shareholding in AFSS previously owned by a consortium comprising the Black Management Forum Investment
Company Limited, Zungu Investments Company (Pty) Limited and Vunani Capital Holdings (Pty) Limited was reacquired by Adcorp in January
2007 for an amount or R22,8 million. As such, the direct empowerment shareholding in AFSS is no longer in existence.
In terms of the new BEE transaction, Adcorp will have created and issued a total of 16 822 849 “A” ordinary shares to its new empowerment
shareholders at a par value of 2,5 cents per share, of which 6 729 140 are owned by a company called Moody Blue Trade and Investment
93 (Pty) Limited (Moody Blue) which, in turn, is wholly owned by the Adcorp Employee Benefit Trust. The remaining “A” ordinary shares are
held by BBBEE enterprises.
These shares carry full voting rights and have been funded by a notional debt based on the 90-day VWAP at the time of issue plus interest and
reduced by dividends.
In terms of this structure, a 10% shareholding has been made available for the benefit of all full-time Adcorp Group employees, an 8,25% stake
has been allocated to women’s empowerment grouping, Wiphold, and 6,25% has been allocated to empowerment business, Simeka Group.
At the end of 10 years the “A” shares will convert to Adcorp ordinary shares based on the value of the national debt that will have been paid out
at that date.
GROUP COMPANY2008 2006 2008 2006R’000 R’000 R’000 R’000
The Power of Potential | ADCORP Annual Report 2008 | 73
GROUP COMPANY2008 2006 2008 2006R’000 R’000 R’000 R’000
21. BEE shareholders’ interest continuedIssued16 822 849 “A” ordinary shares of 2,5 cents each (2006: Nil) 421 77 – –
The fair value of the option in terms of the new BBBEE deal was
calculated using the Black-Scholes option pricing model. The inputs
into the model are set out below:
The total value of the option is R133 million. Details of amounts
to be expensed over the 10-year period are as follows:
R’000
Current year 84 233
Year 2 – year 9 47 880 (Expense of R5,985 million per annum)
Year 10 887
Basis of option valuation
Weighted average share price (R) 38,10 –
Weighted average exercise price (R) 29,91 –
Expected volatility (%) 31,98 –
Expected life (years) 9,83 –
Risk-free rate (%) 8,15 –
Expected dividend yield (%) 6,22 –
WeightedNumber average
of exerciseshares price
2008 2008Adcorp Employee Benefit Trust R
Outstanding at the beginning of the period – –
Issued during the period 6 729 140 29,91
Exercised during the period – –
Outstanding at the end of the period 6 729 140 29,91
Exercisable at the end of the period – –
GROUP COMPANY2008 2006 2008 2006R’000 R’000 R’000 R’000
22. Other non-current liabilitiesOperating lease timing adjustment 4 875 1 586 – –
Current portion 645 – – –
Non-current-portion 4 230 1 586 – –
Proof 13 - 18 July
Notes to the annual financial statements (continued)for the 14 months ended 29 February 2008 and 12 months ended 31 December 2006
74 | ADCORP Annual Report 2008 | The Power of Potential
23. Redeemable preference shares – interest-bearingRedeemable preference shares issued 225 000 – – –
Redeemable preference shares redeemed (75 000) – – –
150 000 – – –
Interest accrued – current 3 805 – – –
153 805 – – –
225 000 redeemable cumulative variable rate preference shares were issued on 10 July 2007. The shares are redeemable on 30 June 2012 or
earlier at Adcorp’s option.
The Group has designated its redeemable cumulative preference shares as financial liabilities as required by IAS 39: Financial Instruments:
Recognition and Measurement. The preference shares have a fixed interest payment and mature on 30 June 2012. To reduce the fair value risk
of changing interest rates, the Group has entered into an interest rate cap. An interest rate cap economically hedges the fair value interest rate
risk of redeemable cumulative preference shares. The cap’s notional cost is R941 351 and fixes the interest cost on R100 million of the
cumulative redeemable preference shares. The cap matures on 31 May 2010.
24. Obligations under finance leasesFinance leases relate to equipment and vehicles with a lease term of five years. The Group has options to purchase the equipment for a nominal
amount at the conclusion of the lease agreements. The Group’s obligations under finance leases are secured by the lessor’s title to the leased
assets.
Minimum lease Present value of minimumpayments lease payments
2008 2006 2008 2006R’000 R’000 R’000 R’000
Within one year 2 012 – 1 615 –
Later than one year and not later than five years 2 789 – 2 464 –
4 801 – 4 079 –
Less: Future finance charges (722) – – –
Present value of finance lease obligations 4 079 – 4 079 –
Current portion 1 615 – 1 615 –
Non-current-portion 2 464 – 2 464 –
4 079 – 4 079 –
GROUP COMPANY2008 2006 2008 2006R’000 R’000 R’000 R’000
Proof 13 - 18 July
The Power of Potential | ADCORP Annual Report 2008 | 75
GROUP COMPANY2008 2006 2008 2006R’000 R’000 R’000 R’000
25. Trade and other payables 239 369 144 328 11 557 22 317
Trade creditors 42 623 20 722 – 15 062
VAT 45 049 29 586 5 728 2 510
Accruals 88 652 41 804 2 849 2 143
Other 63 045 52 216 2 980 2 602
The average credit period on trade and other payables is 30 days. No interest is incurred on trade and other payables unless payment is
effected timeously. The Group has financial risk management policies in place to ensure that all payables are paid within the credit time frame.
Maximum Fair value of payments maximum payments
R’000 R’000 R’000 R’000
26. Amounts due to/from vendorGROUPAmounts receivable/payable:
Within one year – 850 – 850
In the second to fifth year inclusive – – – –
– 850 – 850
Fair value adjustments – – – (141)
Fair value of maximum payments – 850 – 709
As at Provisions Provisions Provisions Provisions As at31 Dec acquired raised utilised disposed 29 Feb
2006 2008 2008 2008 2008 2008R’000 R’000 R’000 R’000 R’000 R’000
27. ProvisionsGROUPLeave pay 30 776 7 080 115 769 (109 550) (97) 43 978
Bonuses 18 743 13 274 67 703 (70 687) – 29 033
Other 2 425 (796) 49 318 (49 173) – 1 774
Total 51 944 19 558 232 790 (229 410) (97) 74 785
COMPANYLeave pay 226 – 58 – – 284
Bonuses 3 529 – 6 867 (3 529) – 6 867
Total 3 755 – 6 925 (3 529) – 7 151
Leave payLeave pay is provided based on leave days due to employees at balance sheet date, at rates prevailing at that date.
BonusesBonuses are provided to employees based on operating entity performance management criteria and are in respect of the current year earnings.
GROUP COMPANY2008 2006 2008 2006R’000 R’000 R’000 R’000
28. RevenueContinuing operations
Revenue from the rendering of services 4 430 105 2 586 280 285 78
Discontinued operations
Revenue from the rendering of services – 113 936 – –
4 430 105 2 700 216 285 78
Proof 13 - 18 July
Proof 13 - 18 July
Notes to the annual financial statements (continued)for the 14 months ended 29 February 2008 and 12 months ended 31 December 2006
76 | ADCORP Annual Report 2008 | The Power of Potential
29. Business and geographical segmentsFor management purposes, the Group is currently organised into three operating divisions – central costs, staffing and business process
outsourcing. These divisions are the basis on which the Group reports its primary segment information.
The principal activities are as follows:
• Central costs – Holding company and head office function including Group research and tendering services, as well as human resources.
• Staffing – Permanent recruitment, flexible staffing both temporary and contract work, advertising and response handling.
• Business process outsourcing – Outsourcing of certain non-core specialised business functions.
• Discontinued operations consists of the communication and marketing businesses.
• No segmental information is provided in respect of geographical analysis as the Group operates primarily in South Africa.
GROUP COMPANY2008 2006 2008 2006R’000 R’000 R’000 R’000
30. Cost of salesThe analysis of cost of sales is as follows: (3 349 604) (1 973 819) (78) –
Cost of buyouts – (2 440) – –
Course material (1 753) (1 281) – –
Lecturing (5 047) (6 091) – –
Criminal and credit checks (9 350) (6 606) – –
Media (108 445) (92 637) – –
Placements (6 912) (1 713) – –
Production (1 737) (2 213) – –
Project costs (39 478) (15 857) – –
Protective clothing (9 887) (5 488) – –
Royalties – (3 030) – –
Temporary employee costs (3 104 269) (1 826 798) – –
Transportation costs (24 936) – – –
Other (37 790) (9 665) (78) –
Attributable to: (3 349 604) (1 973 819) (78) –
Continuing operations (3 349 604) (1 938 874) (78) –
Discontinued operations – (34 945) – –
31. Other income 31 622 31 390 47 754 28 019
Corporate management fee – – 45 000 21 000
Bad debts recovered 52 437 – 435
Media rebates and commissions received – 3 154 – 3 154
Royalties received – 3 199 – –
Training levies recorded – 10 380 – 161
Other 31 570 14 220 2 754 3 269
Attributable to: 31 622 31 390 47 754 28 019
Continuing operations 31 620 31 100 47 754 28 019
Discontinued operations 2 290 – –
Proof 13 - 18 July
The Power of Potential | ADCORP Annual Report 2008 | 77
GROUP COMPANY2008 2006 2008 2006R’000 R’000 R’000 R’000
32. Operating profit/(loss)Operating profit/(loss) is determined after allowing for the following
items requiring separate disclosure:
Amortisation (refer note 5) (47 738) (1 724) – –
Auditors’ remuneration (5 599) (5 513) (2 270) (2 204)
– fee for audit (3 972) (3 416) (1 045) (800)
– fee for audit (prior year underprovision) (725) (1 161) (323) (567)
– fee for other services (902) (936) (902) (837)
Consulting fees (25 094) (26 514) (647) (818)
Depreciation (refer note 4) (25 603) (17 492) (528) (462)
Foreign exchange gains 4 056 791 – –
Government grants in respect of learnerships 5 799 1 245 – –
Directors’ emoluments – executive directors (18 380) (15 618) (11 603) (8 610)
– non-executive directors (2 402) (1 981) (2 402) (1 981)
Leasing and rentals – properties and premises (38 446) (27 397) (2 290) (2 170)
– office furniture and equipment (12 535) (7 930) (137) (126)
– motor vehicles (569) (298) – –
Staff costs (546 133) (406 566) (12 508) (6 200)
Share-based payments expense* (101 966) (6 080) (92 478) (3 076)
33. Interest received 7 880 4 088 10 529 8 695
Group loans – – 10 529 8 419
Bank deposits 5 856 2 816 – –
Other 2 024 1 195 – 276
Fair value adjustments – 77 – –
Attributable to: 7 880 4 088 10 529 8 695
Continuing operations 7 869 4 073 10 529 8 695
Discontinued operations 11 15 – –
34. Interest paid (29 574) (4 940) (19 202) (6 431)
Group loans – – – –
Bank overdrafts (12 450) (4 940) (11 027) (6 431)
Interest on preference share loan (10 224) – – –
Other (6 823) – (8 175) –
Fair value adjustments (77) – – –
Attributable to: (29 574) (4 940) (19 202) (6 431)
Continuing operations (29 574) (4 932) (19 202) (6 431)
Discontinued operations – (8) – –
* The share-based payments expense recorded in the company is net of amounts charged to subsidiaries.
Notes to the annual financial statements (continued)for the 14 months ended 29 February 2008 and 12 months ended 31 December 2006
78 | ADCORP Annual Report 2008 | The Power of Potential
35. TaxationSA normal tax – current 50 779 18 161 3 369 –
– (over)/underprovision prior year (4 484) (228) (858) 5
Deferred taxation (18 939) 4 610 (2 304) 239
Rate change 2 180 – 79 –
Secondary tax on companies 11 451 7 869 10 780 7 869
Capital gains tax 216 428 – –
41 203 30 840 11 066 8 113
Attributable to:
Continuing operations 40 855 27 730 11 066 8 113
Discontinued operation 348 3 110 – –
41 203 30 840 11 066 8 113
Standard tax rate (%) 29 29 29 29
Normal tax at standard rate 48 961 39 574 39 948 4 339
Adjustment for the tax effect at the standard
rate of the following items:
Exempt income:
– Dividends received – – (60 897) (20 491)
– Capital profit on disposal of businesses (27 467) (6 896) (12 612) –
– Associated company profit already subject to tax (438) (940) – –
Non-deductible items charged against income:
– Capital losses/(profits) 1 607 (8 286) – 1 251
– Dividend on preference share loan 2 908 – – –
– Interest on bridging loan 2 371 – 2 371 –
– Impairment of assets and investments 3 377 4 232 5 709 4 738
– Share-based payments 29 570 1 763 26 819 892
Special allowances claimed:
– Learnerships (21 738) (14 534) – –
Tax losses not recognised 671 39 (1 244) (393)
Capital gains tax 216 428 – –
Other permanent differences (12 466) 7 591 113 9 908
Rate change adjustment 2 180 – 79 –
Secondary tax on companies 11 451 7 869 10 780 7 869
Actual tax charge for the period 41 203 30 840 11 066 8 113
Reconciliation of estimated tax losses
available in the Group:
Estimated losses at beginning of period 46 762 62 307 – –
Tax losses raised – current period 702 358 – –
– prior period – 5 673 – –
Net tax losses utilised (27 217) (14 059) – –
Tax loss disposed (1 685) (4 807) – –
Tax loss revised on assessment (2 121) (2 710) – –
16 441 46 762 – –
Which consists of:
Losses recognised 12 511 8 897 – –
Losses not recognised 3 930 37 865 – –
16 441 46 762 – –
GROUP COMPANY2008 2006 2008 2006R’000 R’000 R’000 R’000
Proof 13 - 18 July
The Power of Potential | ADCORP Annual Report 2008 | 79
GROUP COMPANY2008 2006 2008 2006R’000 R’000 R’000 R’000
36. Discontinued operationsThe Group disposed of its marketing research business at the
beginning of the current period, as was disclosed in the previous
year’s annual report.
Revenue – 113 936 – –
Cost of sales – (34 945) – –
Gross profit – 78 991 – –
Other income 42 235 290 – –
Expenses (11 573) (68 267) – –
Profit before taxation 30 662 11 014 – –
Taxation (348) (3 110) – –
Profit for the period from discontinued operations 30 314 7 904 – –
Cash flows from discontinued operations
Net cash flows from operating activities (48 708) (7 799) – –
Net cash flows from investing activities 46 275 5 424 – –
Net cash flows from financing activities – – – –
Net cash flows (2 433) (2 375) – –
37. Earnings per shareThe calculation of earnings per share is based on earnings of
R126 967 830 (2006: R107 993 969) and ordinary shares of
49 122 217 (2006: 42 882 085) being the weighted average
number of shares relative to the above earnings.
Profit per share 258,5 251,8 – –
Continuing operations 196,8 233,4 – –
Discontinued operations 61,7 18,4 – –
Diluted earnings per share is based on 50 108 585
(2006: 43 444 179) weighted diluted number of shares
Profit per share 253,4 248,6 – –
Continuing operations 192,9 230,4 – –
Discontinued operations 60,5 18,2 – –
Reconciliation of diluted number of sharesOrdinary shares 49 122 217 42 882 085 – –
Adcorp Employee Share Scheme – shares matured 986 368 562 094 – –
Diluted number of shares 50 108 585 43 444 179 – –
Proof 13 - 18 July
Proof 13 - 18 July
Notes to the annual financial statements (continued)for the 14 months ended 29 February 2008 and 12 months ended 31 December 2006
80 | ADCORP Annual Report 2008 | The Power of Potential
37. Earnings per share continued
Reconciliation of headline earningsContinuing operationsProfit for the period 96 654 97 716 – –
Impairment of goodwill and investments 145 1 155 – –
Minority shareholders’ share of profits – 2 374 – –
Loss/(profit) on sale of property, plant and equipment (net of taxation) (290) 78 – –
(Profit)/loss on disposal of operations and subsidiaries – (7 568) – –
Discontinued operationsProfit for the period 30 314 7 904 – –
Impairment of investments, intangible assets and loans 11 500 101 – –
Profit on sale of property and equipment (net of taxation) (42 233) (332) – –
Headline earnings 96 090 101 428 – –
Reconciliation of core headline earningsAdjusted for:
Amortisation of intangible assets 46 808 337 – –
Share-based payments and transaction costs 101 966 5 928 – –
Lease smoothing 1 399 679 – –
Profit on disposal of continuing operations (48 633) – – –
Tax effects on above (14 550) (295) – –
Core headline earnings 183 080 108 077 – –
Headline earnings per share – cents 195,6 236,5 – –
Diluted headline earnings per share – cents 191,8 233,5 – –
Core headline earnings per share – cents 372,7 252,0 – –
Diluted core headline earnings per share – cents 365,4 248,8 – –
Note:– The dilution of shares results from the exercise of options in the Employee Share Scheme and Empowerment Share Trust which are below the year-end market price.– Headline earnings per share is based on earnings adjusted for impairment costs, loss on sale of asset, and loss on disposal of operations.
38. Contingent liabilities – Group and Company38.1 The bank has guaranteed payment to creditors on behalf of the Company amounting to R3,827 million (2006: R0,992 million).
38.2 The bank has guaranteed payments to creditors on behalf of the Group amounting to R8,977 million (2006: R2,177 million).
GROUP COMPANY2008 2006 2008 2006R’000 R’000 R’000 R’000
39. CommitmentsComputer software (refer note 5) 15 225 16 000 – –
Property 1 939 – – –
Total commitments 17 164 16 000 – –
The commitment in respect of the software will be funded out of Group resources. Capital Outsourcing Group (Pty) Limited signed a purchase
and sale agreement to acquire Suite E202, Hampden Court on 6 September 2007. The property was only transferred on 13 May 2008.
GROUP COMPANY2008 2006 2008 2006R’000 R’000 R’000 R’000
The Power of Potential | ADCORP Annual Report 2008 | 81
GROUP COMPANY2008 2006 2008 2006R’000 R’000 R’000 R’000
40. Retirement benefitsThe Group makes contributions on behalf of all permanent
employees to defined contribution schemes which are governed
by the Pension Funds Act of 1956 on behalf of its employees.
These costs are charged to the income statement as they occur.
Total contribution by the Group for the period 33 337 23 203 2 390 1 776
41. Operating lease arrangementsThe Group as lesseeMinimum lease payments under operating leases recognised as an
expense in the year 23 717 30 834 2 596 2 023
At the balance sheet date, the Group has outstanding commitments
under non-cancellable operating leases which fall due as follows: 106 015 94 574 12 845 13 213
Within one year 36 243 29 032 2 287 2 263
In the second to fifth years inclusive 69 772 63 858 10 558 9 266
After five years – 1 684 – 1 684
Average lease terms (months) 58 68 54 68
42. Financial risk managementLiquidity riskThis is the risk of not being able to generate sufficient cash to meet
commitments to borrowers, depositors and other creditors at any
point in time.
The Group manages liquidity risk by monitoring forecast cash flows
and ensuring that adequate unutilised borrowing facilities are
maintained. Borrowing facilities are reflected in note 55.
Credit riskThe Group maintains cash, cash equivalents and short-term
investments with various financial institutions. The Group’s policy
is designed to limit exposure with any one institution and ensure a
high credit standing for the financial institution with which such
transactions are executed.
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.
Other financial assets/liabilitiesThe directors consider that the carrying amount of trade and other
receivables and payables approximates their fair value.
43. Dividend paidAn interim dividend of 42 cents per share was declared on
16 August 2006 and was paid to shareholders on 16 October 2006 – 18 341 – 18 341
A final dividend of 126 cents per share was declared on
7 March 2007 and will be paid to shareholders on 16 July 2007 – 58 275 – 58 275
An interim dividend of 55 cents per share was declared on
17 October 2007 and was paid to shareholders on 10 December 2007 27 953 – 27 953 –
A final dividend of 160 cents per share was declared on 7 May 2008
and will be paid to shareholders on 1 September 2008 81 346 – 81 346 –
(Dividend paid based on 50 841 439 shares in issue
at 30 May 2008)
Proof 13 - 18 July
Notes to the annual financial statements (continued)for the 14 months ended 29 February 2008 and 12 months ended 31 December 2006
82 | ADCORP Annual Report 2008 | The Power of Potential
44. Share-based paymentsEmployee share option planThe Group operates three employee share option plans of which two have been discontinued and are in the process of winding down.
The original employee share schemes were replaced by a new share scheme in 2006 as changes in tax, accounting and regulatory treatment of
share-based payments has rendered the old schemes suboptimal.
1. Adcorp original employee share option scheme and Adcorp empowerment trustThe Group has two equity-settled share option schemes for employees of the Group. Options are exercisable at a price equal to the average
quoted market price of the company’s shares on the date of grant. The vesting period is two years. If the options remain unexercised after a
period of 10 years from the date of grant, the options will expire. Options are forfeited if the employee leaves the Group before the options
vest.
2. New Adcorp employee share schemeUnder the new scheme, eligible employees receive conditional allocations of share appreciation rights (SARs) or performances shares (PFs).
The SARs provide employees, at the date the right vests, with the right to receive shares equal to the appreciation in the share price since
grant date while the PFs vest depending on performance.
Both SARs and PFs vest two years after the grant date. The vesting of the shares is subject to various non-market-related performance criteria
and may vary between option holders. All SARs and PFs expire after six years from grant date.
The following share-based payment arrangements were in existence during the current and comparative reporting periods:
Grant Expiry Exercise Fair value atNumber date date price (R) grant date
Issued 31 May 2003 128 000 20/01/03 31/05/13 6,35 1,89
Issued 31 May 2004 699 500 24/06/04 31/05/14 13,00 3,28
Issued 31 May 2005 760 000* 22/11/05 31/05/11 18,15 6,78
Issued 31 May 2005 10 000 22/11/05 31/05/15 18,00 6,78
Issued 31 May 2005 10 000 22/11/05 31/05/15 18,15 6,78
Issued 31 May 2006 1 900 000* 30/04/06 31/05/12 26,31 4,30
Issued 01 March 2007 2 850 000* 01/04/07 31/03/13 32,31 4,04
Issued 01 December 2007 100 000* 01/12/07 30/11/13 37,80 5,98
* Share appreciation rights.
This fair value was calculated using the Black-Scholes option pricing model. The inputs into the model were as follows:
2008 2006
Weighted average share price (R) 32,50 26,70
Weighted average exercise price (R) 32,31 26,31
Expected volatility (%) 21,15 25,06
Expected life (years) 2 000 3 005
Risk-free rate (%) 8,02 7,16
Expected dividend yield (%) 6,00 6,00
Expected volatility was determined by calculating the historical volatility of the company’s share price on the expected life of the option.
The following reconciles the outstanding share options granted under the employee share schemes at the beginning and end of the financial
period:
Number Weighted Number Weightedof average of average
share exercise share exerciseoptions price options price
2008 2008 2006 2006Adcorp Employee Share Option scheme (R) (R)
Outstanding at the beginning of the period 234 000 12,10 770 750 11,98
Forfeited during the period 2 000 13,00 (35 000) 13,00
Exercised during the period (118 000) 11,31 (491 750) 11,85
Adjustment prior period – – (10 000) 13,00
Outstanding at the end of the period 118 000 12,14 234 000 12,10
Exercisable at the end of the period 118 000 12,14 234 000 12,10
Proof 13 - 18 July
The Power of Potential | ADCORP Annual Report 2008 | 83
Number Weighted Number Weightedof average of average
share exercise share exerciseoptions price options price
2008 2008 2006 2006Adcorp Employee Share Option scheme (R) (R)
44. Share-based payments continued
2. New Adcorp employee share scheme continuedOutstanding at the beginning of the period 25 000 15,73 81 750 13,02
Forfeited during the period – – (7 500) 13,00
Exercised during the period (25 000) 15,73 (49 250) 11,65
Granted during the period – – – –
Outstanding at the end of the period – – 25 000 15,73
Exercisable at the end of the period – – 5 000 6,35
Adcorp Share Appreciation Rights Share TrustOutstanding balance at the beginning of the period 2 580 500 24,16 760 000 18,15
Forfeited during the period (30 000) 18,15 (79 500) 18,15
Granted during the period 2 950 000 32,31 1 900 000 26,31
Exercised during the period (41 000) 18,15 – –
Outstanding at the end of the period 5 459 500 21,21 2 580 500 24,16
Exercisable at the end of the period 2 509 500 21,21 – –
3. Adcorp Employee Benefit Trust (arising from the BBBEE – refer note 21)Outstanding balance at the beginning of the period – – – –
Granted during the period 6 729 140 29,91 – –
Outstanding at the end of the period 6 729 140 29,91 – –
Exercisable at the end of the period – – – –
The following share options granted under the employee
share option plans were exercised during the financial year:
Option series Number exercised
2008Issued 31 May 1996 3 200
Issued 31 May 2000 93 000
Issued 31 May 2001 10 611
Issued 31 May 2002 40 000
Issued 31 May 2004 78 000
Issued 31 May 2005 410 000
634 811
2006Issued 31 May 2003 95 000
Issued 31 May 2004 446 000
541 000
Staff members were permitted to exercise their shares at the end of January, April, July, October and January of this financial year and the
average share price for the period was R36,73 (2006: R24,37).
The Group recognised a total expense of R101 965 545 (including the BBBEE transaction (refer note 21) during the year)) (2006: R6 079 271)
related to equity-settled share-based payment transactions.
Proof 13 - 18 July
Proof 13 - 18 July
Notes to the annual financial statements (continued)for the 14 months ended 29 February 2008 and 12 months ended 31 December 2006
84 | ADCORP Annual Report 2008 | The Power of Potential
Holding company Accounting andSale of services management fees marketing fees Rental2008 2006 2008 2006 2008 2006 2008 2006R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000
45. Related partiesThe Group did not enter into any
transactions with Group parties other
than those with subsidiaries which
were eliminated on consolidation.
45.1 Trading transactionsDuring the period, Group entities
entered into the following
transactions:
Adcorp Holdings Limited – – (45 000) (21 000) 976 86 – 68
Subsidiaries of Adcorp
Holdings Limited 47 348 49 010 45 000 21 000 60 824 36 793 – (68)
GROUP2008 2006R’000 R’000
45.2 Compensation paid to key management (which excludes payments to directors set
out in note 46 below)
Short-term employment benefits 18 679 9 441
Share-based payments 552 194
Total 19 231 9 635
Medical Total Total Profit on Profit on Total TotalBonus/ aid/ Direc- cost to cost to share share remu- remu-
profit provident Allow- tors’ company company options options neration nerationSalary share fund ances Sundry fees 2008 2006 2008 2006 2008 2006R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000
46. Directors’ emolumentsExecutiveH Barenblatt* – 2 500 – – – – 2 500 2 676 565 310 3 065 2 986
F Burd 1 497 1 483 338 5 – – 3 323 2 852 – 830 3 323 3 682
M Liphosa* 527 630 118 29 – – 1 304 2 084 566 291 1 870 2 375
R McGregor* 1 172 2 556 288 96 – – 4 112 2 813 572 877 4 684 3 690
R Pike 1 946 2 205 500 307 – – 4 958 4 278 – 525 4 958 4 803
T Ratshitanga – – – – – – – 1 266 – 231 – 1 497
PC Swart 1 483 2 000 333 148 – – 3 964 3 361 148 – 4 112 3 361
C Bomela 1 264 499 235 – – – 1 998 1 000 – – 1 998 1 000
S Zungu –
(alternate) – – – – – – – 894 – – – 894
7 889 11 873 1 812 585 – – 22 159 21 224 1 851 3 064 24 010 24 288
Non-executive directorsF Khanyile* – – – – – 102 102 88 172 – 274 88
G Negota* – – – – – 16 16 49 – – 16 49
S Sebotsa* – – – – – 16 16 78 – 99 16 177
S Shonhiwa* – – – – – 11 11 90 – 201 11 291
MR Ramaite – – – – – 51 51 – – – 51 –
PK Ward – – – – 40 94 134 – – – 134 –
T Ramano – – – – – 51 51 – – – 51 –
GP Dudu – – – – – 17 17 – – – 17 –
LM Mojela – – – – – 41 41 – – – 41 –
F van Zyl Slabbert 1 060 559 200 134 – – 1 953 1 900 566 310 2 519 2 210
1 060 559 200 134 40 399 2 264 2 205 738 610 3 130 2 815
*Resigned: S Sebotsa resigned 28 February 2007. R McGregor resigned 28 February 2007.H Barenblatt resigned 21 February 2007. S Shonhiwa resigned 28 February 2007. F Khanyile resigned 21 February 2008.G Negota resigned 28 February 2007. M Liphosa resigned 28 February 2007.
The Power of Potential | ADCORP Annual Report 2008 | 85
Number Number Numberof un- of of Number
exercised options options of Dateoptions granted exercised options Option from
Directors’ shareholding as at in during as at price whichat 29 February 2008 31/12/06 2008 2008 29/02/08 (R) exercisable
47. Directors’ shareholdingHW Barenblatt** 30 000 – (30 000) – 18,15 31/05/07
C Bomela 250 000 – – 250 000* 26,31 31/05/08
– 150 000 – 150 000* 32,31 28/02/09
FD Burd 30 000 – – 30 000* 18,15 31/05/07
250 000 – – 250 000* 26,31 31/05/08
300 000 – 300 000* 32,31 28/02/08
F Khanyile** 15 000 – (7 500) 7 500 13,00 31/05/06
RB McGregor** 30 000 – (30 000) – 18,15 31/05/05
250 000 – – 250 000* 26,31 31/05/08
– 200 000 – 200 000* 32,31 31/05/06
RL Pike 50 000 – – 50 000* 18,15 31/05/07
350 000 – – 350 000* 26,31 31/05/08
– 350 000 – 350 000* 32.31 28/02/08
T Ratshitanga (alternate)** 7 000 – (7 000) – 13,00 31/05/06
30 000 – (30 000) – 18,15 31/05/07
PC Swart 55 000 – (55 000) – 12,00 31/05/02
30 000 – (30 000) – 8,85 31/05/04
30 000 – – 30 000 6,35 31/05/05
30 000 – – 30 000 13,00 31/05/06
30 000 – – 30 000* 18,15 31/05/07
250 000 – – 250 000* 26,31 31/05/08
– 300 000 – 300 000* 32,31 28/02/09
F van Zyl Slabbert 30 000 – (30 000) – 18,15 31/05/07
200 000 – – 200 000* 26,31 31/05/08
– 200 000 – 200 000* 32,31 28/02/08
Number of Number ofshares shares
held as at held as atBeneficially Non- Beneficially Non-
held beneficially held beneficiallyDirectors’ interest in shares 31/12/06 held 29/02/08 held
FD Burd – – 100 –
M Liphosa** 26 – – –
RL Pike 249 630 – 249 630 –
MR Ramaite – – 15 000 –
S Sebotsa** 3 050 – – –
* Share appreciation rights (SARs).** Resigned during the period.
Proof 13 - 18 July
Notes to the annual financial statements (continued)for the 14 months ended 29 February 2008 and 12 months ended 31 December 2006
86 | ADCORP Annual Report 2008 | The Power of Potential
48. Taxation paid Amount (unpaid)/prepaid at the beginning of the period 3 032 (3 312) 514 2 516
Amount charged to income statement (41 203) (30 840) (11 066) (8 113)
Adjustment for deferred tax charged to income statement (19 893) 4 610 (2 225) 239
Taxation liability disposed (3 860) (2 519) – –
Taxation acquired (11 449) 423 – –
Amount (prepaid)/unpaid at the end of the period 7 417 (3 032) 1 757 (514)
Net cash payment (65 956) (34 670) (11 020) (5 872)
49. Dividend paidAmounts declared and paid (91 831) (62 976) (91 831) (62 976)
Received on treasury shares 89 190 90 –
Received from subsidiaries – – 209 988 70 659
Net cash (payments)/receipts before cash from associates (91 742) (62 786) 118 247 7 683
Received from associates 301 4 069 – –
Net cash (payments)/receipts (91 441) (58 717) 118 247 7 683
50. Additions to property, equipment and intangible assetsLand and buildings – replacement (9 840) (6 114) – (19)
Furniture and computer equipment – replacement (31 772) (14 737) (434) (82)
Trademark – (5 000) – –
Accreditation of programmes (653) (549) – –
Customer lists – (202) – –
Computer software (in progress) – expansion (20 193) (14 338) – –
(62 458) (40 940) (434) (101)
51. Net cash flow on disposal of businessesGoodwill 1 063 13 084 – –
Property and equipment 4 133 1 304 – –
Intangibles 268 – – –
Trade, other receivables and prepayments 20 081 6 444 – –
Investment in associate 4 536 1 879 – –
Trade and other payables (26 933) (8 297) – –
Provisions (2 908) (1 749) – –
Long-term liabilities (7) – – –
Loans 13 441 – – –
Deferred taxation 76 507 – –
Taxation 3 860 2 012 – –
Cash and cash equivalents 2 774 5 447 – –
Book value of net assets sold 20 384 20 631 – –
Profit on disposal of operations and subsidiaries 90 866 7 568 – –
Consideration 99 717 28 199 – –
Less: Cash and cash equivalents disposed of (2 774) (5 447) – –
Net cash inflow on disposal 96 943 22 752 – –
GROUP COMPANY2008 2006 2008 2006R’000 R’000 R’000 R’000
Proof 13 - 18 July
The Power of Potential | ADCORP Annual Report 2008 | 87
Proportionof shares Cost of
Principal Date of acquired acquisitionSubsidiary acquired activity acquisition (%) R’000
52. Acquisition of businesses2008Employ-Rite (Pty) Limited – final transaction costs Flexible staffing 01/12/06 – 95
Adcorp Flexible Staffing Solutions (Pty) Limited Flexible staffing 01/01/07 25 24 729
JobVest (Pty) Limited Permanent staffing various 5 2
FMS Marketing Solutions (Pty) Limited Business process outsourcing 01/01/07 100 231 363
Capital Outsourcing Group (Pty) Limited Flexible staffing 01/06/07 100 258 699
514 888
2006Employ-Rite (Pty) Limited Flexible staffing 01/12/06 100 41 383
GROUP COMPANY2008 2006 2008 2006R’000 R’000 R’000 R’000
Total purchase consideration for all businesses combinations 514 888 41 383 256 365 41 383
Less: Non-cash consideration for Employ-Rite (Pty) Limited – – – (2 941)
Less: Shares issued in respect of FMS Marketing Solutions
(Pty) Limited and Capital Outsourcing Group (Pty) Limited (79 000) – (72 000) –
Less: Cash and cash equivalents acquired 12 043 (13 230) – –
Cash outflow on acquisition of businesses 447 931 28 153 184 365 38 442
Adcorp FMS Capital Flexible
Marketing Outsourcing Staffing Employ-Solutions Group Solutions JobVest Rite
(Pty) Limited (Pty) Limited (Pty) Limited (Pty) Limited (Pty) Limited TotalR’000 R’000 R’000 R’000 R’000 R’000
The fair value of the assets and
liabilities acquired in respect of
the various acquisitions in the
period are as follows:
Property, plant and equipment 3 016 12 779 – – – 15 795
Goodwill – 33 543 – – – 33 543
Investment in associate – 368 – – – 368
Trade and other receivables 5 224 92 792 – – – 98 016
Cash and cash equivalents 7 590 (19 633) – – – (12 043)
Trade and other payables (4 785) (53 905) – – – (58 690)
Deferred taxation (242) 5 216 – – – 4 974
Taxation (7 688) (3 761) – – – (11 449)
Non-current liabilities – (6 117) – – – (6 117)
3 115 61 282 – – – 64 397
Identified intangibles arising on
acquisition through valuation 93 292 76 800 – – – 170 092
Deferred taxation arising on
intangibles required (27 055) (21 504) – – – (48 559)
Resulting goodwill arising
on acquisition 162 011 142 121 24 729 2 95 328 958
Total consideration 231 363 258 699 24 729 2 95 514 888
Proof 13 - 18 July
Notes to the annual financial statements (continued)for the 14 months ended 29 February 2008 and 12 months ended 31 December 2006
88 | ADCORP Annual Report 2008 | The Power of Potential
52. Acquisition of businesses continued
In complying with purchase accounting IFRS 3, the Group determined the fair value of the assets and liabilities acquired on the acquisition of
businesses. Valuations were performed, using the excess earning method and relief from royalty method to determine the value of the intangibles.
The resulting difference between the identified tangible assets, intangible assets and liabilities was attributable to goodwill. Details of the amount
of intangible assets and resulting goodwill arising on each business combination is set out in the table on page 87.
The cost of the acquisition of FMS Marketing Solutions Limited was paid in cash and through the issue of shares. In the acquisition of FMS
(Pty) Limited the Group has paid a premium for the acquisition as it believes the acquisition will create synergistic benefits to its existing
operations. Included in net profit for the period is R28 194 million attributable to the additional business generated by FMS Marketing Solutions
Limited.
The cost of the acquisition of Capital Outsourcing Group (Pty) Limited was paid in cash and through the issue of shares. In the acquisition of
Capital Outsourcing Group (Pty) Limited the Group has paid a premium for the acquisition as it believes the acquisition will create synergistic
benefits to its existing operations. Included in net profit for the period is R28 029 million attributable to the additional business generated by
Capital Outsourcing Group (Pty) Limited. Had this business combination been effected 1 January 2007, the revenue of the Group would be
R4 709 million and net profit of R175 million. The directors of the Group consider these pro forma numbers to represent an approximate measure
of the performance of the combined Group on annualised basis and to provide a reference point for comparison in future periods.
GROUP COMPANY2008 2006 2008 2006R’000 R’000 R’000 R’000
53. Cash and cash equivalentsCash and cash equivalents included in the cash flow statement
comprise the following balance sheet amounts:
Cash resources 147 824 74 929 300 4 937
Included in non-current assets classified as held-for-sale – 2 432 – –
Bank overdrafts (198 329) (95 862) (181 483) (95 862)
(50 505) (18 501) (181 183) (90 925)
Bank overdrafts are considered as part of cash and cash equivalents as they form part of the cash management system.
54. Financial instrumentsThe 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 Group’s overall strategy remains unchanged from 2006. The capital
structure of the Group consists of debt, which includes the borrowings disclosed in notes 22 to 24, cash and cash equivalents and equity
attributable to equity holders of the parent, comprising issued capital, reserves and retained earnings as disclosed in the notes. The Group’s
Executive management committee reviews the capital structure on an annual basis. As part of this review, the committee considers the cost of
capital and the risks associated with each class of capital. The Group has a target gearing ratio of 30 % determined as the proportion of net debt
to equity. The current higher gearing ratio target of 43% results from the acquisitions made in the financial period.
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 on page 57 to 62.
Proof 13 - 18 July
The Power of Potential | ADCORP Annual Report 2008 | 89
GROUP COMPANY2008 2006 2008 2006R’000 R’000 R’000 R’000
54. Financial instruments continued
54.1 Categories of financial instruments
Financial assets
Derivative instruments in designated hedge
accounting relationships 3 141 – – –
Loans and receivables (including cash resources) 713 076 477 333 293 225 123 376
Financial liabilities
Amortised cost (including bank overdraft) 600 457 242 485 408 303 351 660
54.2 Financial risk management objectivesThe Group’s executive and head office treasury function provides services to the business, coordinates access to domestic financial
markets, monitors and manages the financial risks relating to the operations of the Group through internal risk reports, which analyse
exposures by degree and magnitude of risks. These risks include market risk (including fair value interest rate risk and price risk), credit
risk, liquidity risk and cash flow interest rate risk. The Group seeks to minimise the effects of these risks by using derivative financial
instruments to hedge these risk exposures. The use of financial derivatives is governed by the Group’s policies approved by the board of
directors. The Group does not enter into or trade financial instruments, including derivative financial instruments, for speculative
purposes. The head office treasury function reports regularly to the executive, which monitors risks and policies implemented to mitigate
risk exposures.
54.3 Interest rate risk managementThe Group is exposed to interest rate risk as entities in the Group borrow funds at both fixed and floating interest rates. The risk is
managed by the Group by maintaining an appropriate mix between fixed and floating rate borrowings and by the use of interest rate cap
contracts. Hedging activities are evaluated to align with interest rate views and defined risk appetite; ensuring optimal hedging strategies
are applied, by either positioning the balance sheet or protecting interest expense through different interest rate cycles.
The sensitivity analyses below have been determined based on the exposure to interest rates for both derivatives and non-derivative
instruments at the balance sheet date. For floating rate liabilities, the analysis is prepared assuming the amount of liability outstanding at
the balance sheet date was outstanding for the whole year.
A 100 basis point increase or decrease is used when reporting interest rate risk internally to key management personnel and represents
management’s assessment of the reasonably possible change in interest rates. If interest rates had been 100 basis points higher/lower and
all other variables were held constant, the Group’s profit for a year would decrease/increase by R885 000 after tax.
The Group has used an interest rate cap contract for fixing the interest cost on R100 million of the redeemable preference share loan of
R150 million, which was owing at 29 February 2008. This contract enabled the Group to mitigate the risk of cash flow exposures on the
issued variable rate debt. The fair value of the interest rate cap at the reporting date was determined by discounting the future cash flows
at the applicable market rates.
55. Group overdraft facilitiesThe Group had the following overdraft facilities as at 29 February 2008:
ABSA R130 million
First National Bank R100 million
Total overdraft facility R230 million
These facilities are repayable on demand and bear interest at rates linked to the prime overdraft rate.
56. Subsequent eventsThe following events have taken place since 29 February 2008, none of which has resulted in changes to the financial position as of that date:
– Acquisition of Staff U Need (Pty) Limited for R210 million – effective from 1 July 2008 subject to Competition Commission approval.
– Standard Bank long-term loan facility raised for part acquisition of Staff U Need (Pty) Limited – R120 million.
– Reduction in ABSA facilities from R130 million to R80 million as facility no longer required.
Proof 13 - 18 July
Proof 13 - 18 July
Annexure A: DETAILS OF SUBSIDIARIES AND ASSOCIATES
90 | ADCORP Annual Report 2008 | The Power of Potential
Adcorp Accountability (Pty) Limited* Accounting 4 000 4 000 200 200
Adcorp Communication Solutions (Pty) Limited Holding company 10 000 10 000 10 000 10 000
Adcorp Flexible Staffing Solutions (Pty) Limited Holding company 10 000 10 000 10 000 10 000
Adcorp Grey Consulting (Pty) Limited Recruitment 10 000 10 000 9 000 9 000
Adcorp Management Services (Pty) Limited Accounting 4 000 4 000 400 400
Adcorp Staffing (Pty) Limited* Flexible staffing 4 000 4 000 1 1
Adcorp Staffing Solutions (Pty) Limited Recruitment 4 000 4 000 100 100
Adcorp UK Limited Dormant 3 384 3 384 308 308
Business Employee and Management
Training (Pty) Limited* Training 1 000 – 100 –
Capacity Outsourcing (Pty) Limited* Flexible staffing 4 000 4 000 200 200
Capital Outsourcing Group (Pty) Limited* Flexible staffing 100 000 – 10 600 –
Capital Outsourcing Group (Pty) Limited – Australia* Flexible staffing 100 – 100 –
Capital Outsourcing Group – Malawi* Flexible staffing 10 000 – 10 000 –
Capital Outsourcing Group Limitada – Mozambique* Flexible staffing – – – –
Capital Outsourcing Group (UK) Limited
– United Kingdom* Flexible staffing 1000 – 1 –
Charisma Healthcare Solutions (Pty) Limited* Flexible staffing 1 000 1 000 100 100
D/@bility (Pty) Limited Deregistered – 1 000 – 100
DAV Professional Placement Group (Pty) Limited Recruitment 1 000 1 000 100 100
Emmanuels Staffing Services (Pty) Limited* Flexible staffing 1 000 1 000 100 100
Employ-Rite (Pty) Limited Flexible staffing 1 000 1 000 100 100
FMS Marketing Solutions
(Pty) Limited Business Process Outsourcing 1 000 – 1 000 –
Graphicor (Pty) Limited Sold – 100 – 100
Ikhwezi Staffing Solutions (Pty) Limited* Dormant 1 000 1 000 100 100
International Centre for Management
Development (Pty) Limited Liquidation 1 000 1 000 200 200
JobVest (Pty) Limited (70% owned) Recruitment – 4 000 – 2 000
Knovation (Pty) Limited Sold – 200 000 – 200 000
Premier Personnel (Pty) Limited Dormant 100 100 100 100
PMI of South Africa (Pty) Limited Training 100 100 100 100
Quest Flexible Staffing Solutions (Pty) Limited* Flexible staffing 100 100 100 100
Quest Holdings (Pty) Limited Holding company 10 000 10 000 10 000 10 000
Research Surveys (Pty) Limited Dormant 20 000 20 000 200 200
Sibanye Staffing (Pty) Limited Dormant 1 000 1 000 1 000 –
Simeka TWS Communications
(Pty) Limited Sold – – – 4 000
Stand 948, Melville (Pty) Limited Deregistered 1 000 1 000 100 100
The Design and Media
Company (Pty) Limited Deregistered – 4 000 – 4 000
Subtotal negative
Subtotal positive
Total subsidiaries
Name of associateCareer Junction (Pty) Limited Sold – 400 000 – 50 000
The Customer Equity Company (Pty) Limited Sold – 1 000 – 400
Private Sector Finance Financial services** – – – –
Klatrade 200074 (Pty) Limited Training 1 000 1 000 1 000 1 000
Shopper Behaviour Research (Pty) Limited Sold – 1 000 – 100
Sishayele Contact Centre Solutions (Pty) Limited Sold – 1 000 – 100
Thetha Call Centre Staffing (Pty) Limited Sold – 4 000 – 1 000
Subtotal negative
Subtotal positive
Total associates
* Owned by subsidiary companies.** Joint venture operation between Capital Outsourcing Group (Pty) Limited and PSF Sector Finance.
Authorised Issuedshare capital share capital
Name of subsidiary Nature of business/status Feb 2008 Dec 2006 Feb 2008 Dec 2006
The Power of Potential | ADCORP Annual Report 2008 | 91
Proof 13 - 18 July
200 200 – – 14 845 (523) (1 875) (134)
7 500 7 500 – 10 – 6 105 (2 706) (21 484)
7 500 7 500 357 469 332 564 – – – –
9 000 9 000 59 59 6 840 6 980 1 014 885
400 400 – – 6 814 5 973 1 328 (28)
1 1 – – 2 880 3 181 8 050 4 002
100 100 12 855 12 855 154 217 (9 674) 6 538 5 907
308 308 – – – – – –
100 – – – – – 2 139 –
200 200 – – 60 220 38 111 21 948 16 993
10 600 – – – 5 895 – 19 893 –
100 – – – – – (312) –
10 000 – – – – – 2 –
– – – – – – 9 –
1 – – – – – (189) –
100 100 – – 6 993 10 460 5 591 7 537
– 100 – – – 1 913 1 920 –
100 100 7 270 7 270 15 104 2 080 6 604 6 889
100 100 – – 4 260 6 543 21 701 22 478
100 100 41 478 41 383 2 124 (2 942) 4 777 1 406
1 000 – 231 363 – 2 684 – 20 715 –
– 100 – – – – – (2 471)
100 100 – – – – – –
200 200 – – – – – 15
– 1 400 3 1 8 230 14 725 465 (3 720)
– 200 000 – – – 31 332 (842) (425)
100 100 1 946 1 946 – – – –
100 100 629 629 2 082 2 850 2 603 1 934
100 100 – – 30 563 9 348 32 874 33 564
10 000 10 000 – – (197 031) (197 031) – –
200 200 6 726 7 790 (18 232) (23 140) 48 732 37 020
650 – – – – – – –
– 4 000 – – – – – (2 657)
100 100 – – – (171) (22) 232
– 4 000 – – – – – 27
– – (215 263) (233 481) (5 946) (30 919)
659 798 404 507 323 751 139 601 206 903 138 657
659 798 404 507 108 488 (93 880) 200 957 107 738
– 12 500 – 3 045 – – 813 2 284
– 100 – – – (51) – 3 185
– – 222 – – – 54 –
750 500 48 103 – – 45 12
– 35 – – – – – 14
– 30 – 67 – – 600 16
– 500 – (26) – – – (34)
– (26) – (51) 1 512 (34)
270 3 215 – – – 5 511
270 3 189 – (51) 1 512 5 477
Cost of investment Indebtedness (to)/ AttributableNumber of (before write-downs) by the subsidiary profit/(loss)shares held R’000 R’000 R’000 R’000 R’000 R’000
Feb 2008 Dec 2006 Feb 2008 Dec 2006 Feb 2008 Dec 2006 Feb 2008 Dec 2006
92 | ADCORP Annual Report 2008 | The Power of Potential
Administration
Adcorp Holdings Limited Registration number 1974/001804/06
Founded 1968, listed 1987
Secretary and registered office L Sudbury
Block A, 28 on Sloane
Sloane Street
Bryanston, 2021
PO Box 7156, Johannesburg, 2000
Tel 011 244 5300
Fax 011 244 5310
Email [email protected]
Legal advisorsRoodt Inc Attorneys
Registration number 2003/016254/21
Block A, Eton Road Office Park
7 Eton Road
Sandhurst, 2196
PO Box 78894, Sandton, 2146
Auditors Deloitte & Touche
The Woodlands
20 Woodlands Drive
Woodmead
Sandton
2146
Private Bag X6
Gallo Manor, 2052
Tel 011 806 5000
Fax 011 806 5111
Transfer secretaries Link Market Services SA (Pty) Limited
Registration number 2000/007239/07
11 Diagonal Street
Johannesburg, 2001
PO Box 4844
Johannesburg, 2000
Tel 011 834 2266
Fax 011 834 4398
Commercial bankers FirstRand of Southern Africa Limited
Registration number 1905/001225/06
ABSA Bank Limited
Registration number 1986/004794/06
The Standard Bank of South Africa Limited
Registration number 1962/000738/06
Sponsors Deloitte & Touche Sponsor Services (Pty) Limited
The Woodlands
20 Woodlands Drive
Woodmead
Sandton
2146
Private Bag X6
Gallo Manor, 2052
Tel 011 806 5616
Fax 011 806 5666
Shareholders’information
94 | ADCORP Annual Report 2008 | The Power of Potential
Proof 13 - 18 July
Shareholder analysis and diary
Number of % of total Number of % of shareholders shareholders shares shares
1. Analysis of shareholdings1 – 1 000 807 46,30 332 116 0,651 001 – 10 000 665 38,15 2 322 034 4,5710 001 – 100 000 184 10,56 5 877 212 11,56100 001 – 1 000 000 80 4,59 26 763 995 52,651 000 001 – and above 7 0,40 15 536 082 30,57
Totals 1 743 100,00 50 831 439 100,00
2. Distribution of shareholdersBanks 7 0,40 1 988 567 3,91Close corporations 13 0,75 120 533 0,24Individuals 1 416 81,24 3 735 934 7,35Insurance companies 33 1,89 8 349 558 16,43Collective investment schemes and mutual funds 78 4,47 19 998 780 39,34Nominees and trusts 91 5,22 3 298 206 6,49Pension funds and medical schemes 87 4,99 9 996 987 19,67Private companies 16 0,92 3 280 784 6,45Adcorp share trust 1 0,06 19 288 0,04The company 1 0,06 42 802 0,08
Totals 1 743 100,00 50 831 439 100,00
3. Shareholder spreadShare trust 1 0,06 19 288 0,04Directors 3 0,17 264 730 0,52PDI trust 1 0,06 42 802 0,08
Non-public 5 0,29 326 820 0,64
Public 1 738 99,71 50 504 619 99,36
Totals 1 743 100,00 50 831 439 100,00
4. Major shareholders (5% and more of the shares in issue)Investec Asset Management 7 645 875 15,04Allan Gray Asset Management 4 500 777 8,85JP Morgan 3 977 463 7,82RMB Asset Management 3 825 718 7,53Sanlam Asset Management 3 494 005 6,87Fuman Investments (Pty) Limited 2 631 628 5,18
Shareholders’ diary for 2008Financial year-end February
Annual general meeting 09:00 Wednesday, 27 August 2008
ReportsInterim results October
Reviewed annual results May
Audited annual financial statements July
Final dividendFinal dividend of 160 cents per share (2006: 126 cents per share) was declared on 7 May 2008 payable to shareholders recorded in the 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 day to trade cum final dividend Friday, 22 August 2008
First day to trade ex final dividend Monday, 25 August 2008
Record date Friday, 29 August 2008
Payment date Monday, 1 September 2008
No share certificates may be dematerialised or rematerialised between Monday, 25 August and Friday, 29 August 2008 both days inclusive.
Dividend cheques will be posted and electronic payments made, where applicable, to certificated shareholders on the payment date. Dematerialised
shareholders will have their account with Central Securities Depository Participant or broker credited on the payment date.
Proof 13 - 18 July
Adcorp Holdings stats from 2 January 2007 to 29 February 2008 2008 2006
Closing price of Adcorp Holdings (at 29 February) (cents) 3 555 3 000
Total number of trades (million) 25,0 19,6
Total value traded (million rands) 917,2 477,6
Price of shares traded – highest (cents) 4 500 3 000
Price of shares traded – lowest (cents) 2 900 2 100
Total value traded as % of year-end market cap 50,8 36,7
Total value traded as % of average market cap 51,5 44,9
0
500
1 000
1 500
2 000
2 500
3 000
3 500
4 000
4 500
1 JAN2003
1 JAN2004
1 JAN2005
1 JAN2006
29 FEB2008
1 JAN2007
cents
Five-year share price performance
2 800
3 000
3 200
3 400
3 600
3 800
4 000
4 200
4 400
JAN2007
FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC JAN2008
FEB
cents
0100 000200 000300 000400 000500 000600 000700 000800 0009 00000
1 000 0001 100 000
JAN2007
FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC JAN2008
FEB
Numb
er of
share
s
Adcorp price chart – daily closing price
Adcorp volume chart – 2 January 2007 to 29 February 2008
The Power of Potential | ADCORP Annual Report 2008 | 95
Notice of annual general meeting
96 | ADCORP Annual Report 2008 | The Power of Potential
Proof 13 - 18 July
ADCORP HOLDINGS LIMITED(Incorporated in the Republic of South Africa)
(Registration number 1974/001804/06)
Share code: ADR
ISIN: ZAE000000139
(Adcorp or the company)
Notice is hereby given that the annual general meeting of the shareholders of Adcorp Holdings Limited will be held at Block A, 28 on Sloane, Sloane
Street, Bryanston, Johannesburg, on Wednesday, 27 August 2008 at 09:00 to consider and, if deemed fit, to pass, with or without modification, the
following resolutions:
As ordinary resolutions1. To receive, approve and adopt the audited annual financial statements for the period ended 29 February 2008.
2. To elect Robinson Ramaite as a director of the company (CV on page 31).
3. To elect Peter Ward as a director of the company (CV on page 31).
4. To elect Tryphosa Ramano as a director of the company (CV on page 31).
5. To elect Louisa Mojela as a director of the company (CV on page 31).
6. To resolve that 1 500 000 shares in the authorised but unissued share capital of the company be and are hereby placed under the control of the
directors of the company as a specific authority in terms of section 221(2) of the Act. These shares are specifically for the issue of shares in order
to meet Adcorp’s commitment in terms of the Adcorp Employee Share Trust.
7. To resolve that 10% of the ordinary shares in the authorised but unissued share capital of the company be and are hereby placed under the control
of the directors of the company as a specific authority in terms of section 221(2) of the Companies Act, 61 of 1973, as amended (the Act).
8. To transact such other business as may be transacted at an annual general meeting.
9. To resolve that Deloitte & Touche be reappointed as auditors of the Group until the next annual general meeting.
Special resolutions 1Resolved that the directors of the company be and are hereby authorised by way of a general authority to facilitate the repurchase by the company, or
any of its subsidiaries, of shares in the capital of the company, as they in their discretion, from time to time, deem fit. The repurchase will be in
accordance with the provisions of the Act, the JSE Listings Requirements and the articles of association of Adcorp, from time to time, which are:
• the repurchase of securities being affected through the order book operated by the JSE trading system and done without any prior understanding or
arrangement between the company and the counterparty;
• this general authority shall be valid only until the company’s next annual general meeting, or for 15 months from the date of this special resolution,
whichever period is shorter;
• an announcement will be published as soon as the company has acquired ordinary shares constituting, on a cumulative basis 3% or every 3%
thereafter, of the number of ordinary shares in issue prior to the acquisition pursuant to which the aforesaid, 3% threshold is reached, containing full
details of such shares;
• any general repurchase shall not in the aggregate in any one financial year exceed 20% of the company’s ordinary issued share capital;
• in determining the price at which ordinary shares issued by the company will be acquired by the company and/or its subsidiaries in terms of this
general authority, the maximum premium at which such ordinary shares may be acquired will be no more than 10% above the weighted average of
the market value at which such ordinary shares are traded on the JSE, as determined over the five trading days immediately preceding the date of
repurchase of such ordinary shares by the company and/or its subsidiaries; and
• the sponsor of the company provides a letter to the JSE on the adequacy of working capital in terms of section 2.12 of the JSE Listings Requirements,
before the share repurchase commences.
Having considered the effect of the maximum repurchase of 20% of the company’s issued share capital in any one financial year, the directors are of
the opinion that:
• the company and the Group will, after payment for such ordinary course of business for a period of 12 months following the date of the annual general
meeting;
• the company’s and the Group’s consolidated assets, fairly valued according to generally accepted accounting practice and on a basis consistent with
the last financial year of the company, will, after such payment, exceed their consolidated liabilities for a period of 12 months following the date of
the annual general meeting;
• the company’s and the Group’s ordinary share capital and reserves will, after such payment, be sufficient to meet their needs for a period of
12 months following the date of the annual general meeting;
• the company and the Group will, after such payment, have sufficient working capital to meet its needs for a period of 12 months following the date
of the annual general meeting;
• at any point in time, may only appoint one agent to effect any repurchase on the company’s behalf;
The Power of Potential | ADCORP Annual Report 2008 | 97
• the company may only undertake a repurchase of securities if, after such repurchase, it still complies with the shareholder spread requirements as set
out in the JSE Listings Requirements; and
• the company or its subsidiaries may not repurchase securities during a prohibited period, as defined in the JSE Listings Requirements.
The board of directors of Adcorp will use this authority as and when opportunities arise.
The effect of this special resolution and the reason therefore is to grant the company and its subsidiaries a general approval in terms of the Companies
Act No 61 of 1973, as amended, for the acquisition by the company of its own shares and/or acquisition by a subsidiary of shares in the company,
which general approval shall be valid until the next annual general meeting of the company, provided that this general authority shall be valid only
until the company’s next annual general meeting or for 15 months from the date of special resolution number 1, whichever period is shorter. Such
general authority will provide the board with the flexibility to repurchase shares should same be in the interest of the company at the time while the
general authority subsists.
Special resolutions 2Resolved that the authorised share capital of Adcorp be increased from R2 500 000, consisting of 100 000 000 ordinary shares of
2,5 cents each to R5 000 000, consisting of 200 000 000 ordinary shares of 2,5 cents each, by the creation of 100 000 000 new ordinary share of
2,5 cents each. The new ordinary shares shall rank pari passu in all respects with the other shares in the authorised ordinary share capital of Adcorp.
The reason for the proposed increase in the authorised share capital is that the board believes it is prudent to increase the authorised share capital of
Adcorp in order to provide Adcorp with adequate unissued shares for the future.
The effect of the proposed increase in the authorised share capital is illustrated below:
The share capital of Adcorp prior to the proposed increase is:
R
Authorised
83 177 151 ordinary shares of 2,5 cents each 2 079 428,78
16 822 849 “A” shares of 2,5 cents each 420 571,22
Total authorised share capital 2 500 000,00
Issued: Adcorp ordinary shares
50 841 439 ordinary shares of 2,5 cents each 1 271 035,98
Share premium 283 158 541,41
Total ordinary shares 284 429 577,39
Issued: “A” shares
16 822 849 “A” shares of 2,5 cents each 420 571,23
Total “A” shares 420 571,23
The share capital of Adcorp after the proposed increase is:
R
Authorised
183 177 151 ordinary shares of 2,5 cents each 4 579 428,78
16 822 849 “A” shares of 2,5 cents each 420 571,22
Total authorised share capital 5 000 000,00
Issued: Adcorp ordinary shares
50 841 439 ordinary shares of 2,5 cents each 1 271 035,98
Share premium 283 158 541,41
Total ordinary shares 284 429 577,39
16 822 849 “A” shares of 2,5 cents each 420 571,23
Total “A” shares 420 571,23
Proof 13 - 18 July
98 | ADCORP Annual Report 2008 | The Power of Potential
Proof 13 - 18 July
Other disclosures in terms of section 11.26 of the JSE Listings Requirements• Directors and management (page 30 and 31)
• Major shareholders of Adcorp (page 94)
• Directors’ interests in securities (page 85)
• Share capital of Adcorp (page 71)
Material changeOther than the facts and developments as referred to on page 89 of the annual report, there have been no material changes in the affairs or financial
position of Adcorp and its subsidiaries since the date of signature of the audit report and the date of this notice.
Directors’ responsibility statementThe directors, whose names are given on pages 30 and 31 of the annual report, collectively and individually accept full responsibility for the accuracy
of the information pertaining to the special resolution and certify that to the best of their knowledge and belief there are no facts that have been omitted
which would make any statement false or misleading, and that all reasonable enquiries to ascertain such facts have been made and that this resolution
contains all such information.
Litigation statementIn terms of section 11.26 of the Listings Requirements of the JSE, the directors, whose names are given on pages 30 and 31 of the annual report of
which this notice forms part, are not aware of any legal or arbitration proceedings, including proceedings that are pending or threatened, that may have
or have had in the recent past, being at least the previous 14 months, a material effect on the Group’s financial position.
VOTING AND PROXIESIf you are a certificated or own name dematerialised shareholder and unable to attend the annual general meeting of ordinary shareholders to be held
on Wednesday, 27 August 2008 at 09:00 at the premises of the company on Block A, 28 on Sloane, Sloane Street, Bryanston, Johannesburg, and wish
to be represented thereat, you must complete and return the attached forms of proxy in accordance with the instructions therein to be received by the
transfer secretaries by not later than 09:00 on Tuesday, 26 August 2008.
If you have dematerialised your shares with a Central Securities Depository Participant (CSDP) or broker, other than with own name registration, you
must arrange with them to provide you with the necessary letter of representation to attend the annual general meeting or you must instruct them as to
how you wish to vote in this regard. This must be done in terms of the agreement entered into between you and the CSDP or broker, in the manner and
cut-off time stipulated therein.
Additional proxy forms are obtainable from the company secretary and must be deposited at the transfer secretaries not less than 24 hours before the
meeting.
By order of the board
LJ Sudbury
Company secretary
16 July 2008
Proof 13 - 18 July
T H E P O W E R O F P O T E N T I A L
Form of proxy
ADCORP HOLDINGS LIMITED (Incorporated in the Republic of South Africa)
(Registration number 1974/001804/06)
Share code: ADR
ISIN: ZAE000000139
(Adcorp or the company)
For use at the annual general meeting of shareholders of Adcorp Holdings Limited to be held at 09:00 on Wednesday, 27 August 2008.
For use by the certificated holders or holders of dematerialised shares in their own name at the annual general meeting to be held at 09:00 on
Wednesday, 27 August 2008 at the premises of the company on Block A, 28 on Sloane, Sloane Street, Bryanston, Johannesburg.
If shareholders have dematerialised their shares with a Central Securities Depository Participant (CSDP) or broker, other than with own name
registration, they must arrange with the CSDP or broker to provide them with the necessary letter of representation to attend the annual general meeting
or the shareholder must instruct them as to how they wish to vote in this regard. This must be done in terms of the agreement entered into between the
shareholder and the CSDP or broker, in the manner and cut-off time stipulated therein.
For the annual general meeting
I/We
(Name/s in block letters)
of
(Address in block letters)
being a member/s of the abovementioned company and holding shares in Adcorp Holdings Limited, and entitled
to vote, do hereby appoint (refer to note 1 on page 100):
or, failing him/her,
Dr F van Zyl Slabbert of Block A, 28 on Sloane, Sloane Street, Bryanston, Johannesburg, or failing him, the Chairman of the meeting as my/our
proxy(ies) to vote on a poll on my/our behalf at the annual general meeting of the company to be held at 09:00 on Wednesday, 27 August 2008 and at
any adjournment thereof.
Please indicate with an “X” in the spaces below how you wish your proxy to vote in respect of the resolutions to be proposed, as contained in the notice
of the abovementioned annual general meeting.
*I/We desire my/our proxy to vote on the resolutions to be proposed, as follows:
For Against Abstain
Ordinary resolution 1 (Adopt audited financial statements)
Ordinary resolution 2 (Elect Robinson Ramaite)
Ordinary resolution 3 (Elect Peter Ward)
Ordinary resolution 4 (Elect Tryphosa Ramano)
Ordinary resolution 5 (Elect Louisa Mojela)
Ordinary resolution 6 (Employee share scheme shares
placed under control of directors)
Ordinary resolution 7 (10% of unissued shares placed under
the control of directors)
Ordinary resolution 8 (Transact other business)
Ordinary resolution 9 (Appointment of auditors)
Special resolution 1 (General authority to repurchase shares)
Special resolution 2 (Increase share capital)
Signed by me/us this day of 2008
Signature
Assisted by me (where applicable) (see note 4 on reverse of proxy form)
Full name/s of signatory if signing in a representative capacity (see note 5 on reverse of proxy form)
* If this form of proxy is returned without any indication of how the proxy should vote, the proxy will exercise his/her discretion both as to how he/she votes and as to whether or nothe/she abstains from voting.
Notes
100 | ADCORP Annual Report 2008 | The Power of Potential
Proof 13 - 18 July
1. A member entitled to attend and vote at the abovementioned meeting is entitled to appoint one or more proxies to attend, speak and, on a poll, vote
in his/her stead or abstain from voting. The proxy need not be a member of the company.
2. To be valid, this form of proxy must be completed and returned to the company’s transfer secretaries, Link Market Services (SA) (Pty) Limited,
11 Diagonal Street, Johannesburg, 2001 (PO Box 4844, Johannesburg, 2000), to be received by not later than 09:00 on Tuesday, 26 August 2008.
3. In the case of a joint holding, the first-named only need sign.
4. The authority of a person signing a proxy in a representative capacity must be attached to the proxy unless that authority has already been recorded
by the company.
5. A minor or any other person under legal incapacity must be assisted by his/her parent or guardian as applicable, unless the relevant documents
establishing capacity are produced or have been registered with the transfer secretaries.
T H E P O W E R O F P O T E N T I A L
T H E P O W E R O F P O T E N T I A L
The Power of Potential
www.adcorp.co.za
po•ten•tialHaving or showing the capacity to become
or develop into something in the future.
From late Latin potentialis, from potentia‘power,’ from potent –‘being able’
ANNUAL REPORT 2008
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FSC – The FSC (Forest Stewardship Council) is a system of forest
certification and product labelling. It identifies wood and wood-based
products from well-managed forests. It is applicable to suppliers of
wood products from certified forests who wish to label as FSC. For
more information visit http://www.fsc.org
PEFC – The PEFC (Programme for the Endorsement of Forest
Certification schemes) provides a framework for the development of
and mutual recognition of national or sub-national forest certification
schemes that have been developed locally according to international
recognised requirements for sustainable forest managements. For
more information visit http://www.pefc.org
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po•ten•tialHaving or showing the capacity to become
or develop into something in the future.
From late Latin potentialis, from potentia‘power,’ from potent –‘being able’