Adcorp : FY2022 Adcorp Group Results Booklet

Summarised audited Group results

for the year ended 28 February 2022,

and cash dividend declaration

SUMMARISED AUDITED GROUP RESULTS FOR THE YEAR ENDED 28 FEBRUARY 2022, AND CASH DIVIDEND DECLARATION

Contents

02 Commentary

1. Audited summarised consolidated statement of financial position
2. Audited summarised consolidated statement of profit or loss
3. Audited summarised consolidated statement of other comprehensive income
4. Audited summarised consolidated statement of cash flows

1. Audited summarised consolidated statement of changes in equity

1. Segment report

1. Notes to the audited summarised consolidated financial statements

1. Independent auditor's report on summarised consolidated financial statements

1. Corporate information

www.adcorpgroup.com

Salient highlights

REVENUE

FROM CONTINUING OPERATIONS

R11,5bn

2021 R11,7bn -1,7%

OPERATING PROFIT

FROM CONTINUING OPERATIONS BEFORE FINANCE INCOME AND FINANCE COSTS

R199m

2021		R118m		+68,2%

INTEREST-BEARING DEBT

EXCLUDING LEASES

R133m

2021

R456m

-70,8%

TOTAL EARNINGS

PER SHARE

109,1 cents

2021		35,6 cents		+206,5%

DIVIDEND DECLARED

PER SHARE

47,0 cents

2021 Nil

01

GROSS PROFIT

FROM CONTINUING OPERATIONS

R1,2bn

2021		R1,1bn		+7,0%

CASH GENERATED

BY OPERATIONS

R260m

2021		R914m		-71,6%

NET CASH POSITION*

IMPROVED TO

R198m

2021

-R49m

+505,0%

TOTAL HEADLINE EARNINGS

PER SHARE

99,4 cents

2021		34,2 cents		+190,6%

B-BBEE

Level 1 rating

MAINTAINED FOR SOUTH AFRICAN

OPERATIONS

• Net debt/cash defined as interest-bearing debt excluding leases less unrestricted cash and cash equivalents from continuing operations and this is a non-IFRS measure.

02 Commentary

SUMMARISED AUDITED GROUP RESULTS FOR THE YEAR ENDED 28 FEBRUARY 2022, AND CASH DIVIDEND DECLARATION

Company profile

The Adcorp Group is a workforce solutions provider that seeks to connect and develop human potential to shape markets, economies and our shared future. Adcorp and its constituent brands are represented within South Africa and Australia, employing in excess of 1 600 permanent staff, assigning more than 43 000 contingent staff daily and training multiple learners through a vast spectrum of disciplines.

Introduction

The focus for the year was to stabilise the group through improving the quality of earnings, raising the amount of earnings and lifting ROIC. Adcorp achieved these three objectives. Further emphasis was also placed on improving working capital levels, building a customer focused commercial engine and strengthen the leadership team. Adcorp deployed a new operating model moving away from the "one Adcorp" philosophy and placing the brands at the centre of the business.

The COVID-19 pandemic remains with us which has affected the group in both South Africa and Australia. In South Africa, we were further challenged by slow economic recovery and unrest in KwaZulu-Natal in July 2021. In Australia, the lockdowns lasted longer and were more severe than expected.

Financial overview

Adcorp Group's revenue from continued operations in South Africa was in line with prior year however Australia was lower in ZAR terms, reporting currency, although revenue increased in AUD (functional currency). Revenue was negatively affected by the strategic exit of low margin contracts, the July KwaZulu-Natal unrest in South Africa, flooding in Australia and the impact of COVID-19 in key markets. The economic recovery in South Africa remains slow and uneven, and the recovery in Australia was slowed by the COVID-19 surge.

Adcorp's revenue from continuing operations increased in the Industrial and Training divisions, however decreased in the Professional and Australia divisions, which resulted in a consolidated group revenue decline of 1,7% from R11,7 billion to R11,5 billion.

The group EBITDA from continuing operations for the year increased by 17,3% to R293 million compared to R250 million in the prior year. Our focus on improving the quality of the earnings has resulted in higher gross margins, improved EBITDA margins and continued prudent cost control resulting in increased profit before tax.

Following the liquidity management measures and interventions introduced to mitigate the impact of COVID-19, the second half of FY2022 has continued to demonstrate good working capital management and effective debt reduction.

Cash generated by operations decreased to R260 million from R914 million in 2021; this was due to the material reduction of working capital that occurred in 2021, however, it is relevant to note that the group's days sales outstanding (DSO) has been maintained at 38 days year on year. The group's consolidated cash and cash equivalents (excluding restricted cash in Angola) totalled R331 million, decreasing by R76 million from the prior year (2021: R407 million).

The group's effective tax rate from continuing operations was 25,0%, largely driven by current year tax losses not recognised and non-deductible expenses. The South African tax system does not operate on group taxation principles and therefore group companies are taxed at an entity level. The effective tax rate was also impacted by the positive financial

performance of our Australian operations. As at 28 February 2022, total tax losses not recognised were R776 million (2021: R751 million) and those recognised were R259 million (2021: R332 million).

One of our primary goals for the financial year was stabilising the company. We have now concluded the process of revising our capital allocation strategy, which has resulted in a rigorous shareholder-returns focused framework which seeks to reward shareholders and invest in growth for the organisation.

Liquidity and cash flow

Significant improvement in collections throughout the group and other cash positive initiatives resulted in group debt excluding finance leases decreasing to R133 million from R456 million in 2021.

Group net debt excluding finance leases and unrestricted cash has improved by R247 million to R198 million net cash as at 28 February 2022 (2021:- R49 million).

03

The South African operation is in the final stages of renegotiating a facility of R250 million plus an accordion feature of R100 million which is expected to be effective from 1 September 2022. The facility is expected to mature in three years from the effective date and will be used to fund working capital requirements.

The lenders of the Australian operations agreed to extend the Revolving Borrowing Base facility. The agreement was extended on the same terms and conditions with a change in maturity date to 10 March 2024.