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Full Year Statutory Accounts August 2012

31.8.2012

Investor Announcement

Adcorp Australia Limited FY12 Final Results
Market Announcement


Billings $148.2m

Revenue $28.6m

Revenue Margin 19%

Net Profit After tax attributable to the owners of Adcorp Australia Ltd $1.6M

Final dividend per Share Fully Franked 0.75 cent

Read the original 31 August 2012 announcement.
 
The company delivered a profit for the year after tax and after non controlling interests of $1.562m, up 12% on the prior year.
Billings have decreased by 13% to $148.162m with a 4% drop in normal operating revenues (before sundry income items) from $29.18m to $27.98m

The billings reduction was mainly attributable to residential real estate accounts which we no longer service, plus significantly reduced spend by the Australian Government, construction and recruitment consultant clients. Partly offsetting these reductions was an increase in spend by commercial real estate, engineering, infrastructure and mining clients, bolstered by a full year’s billings for Northern Territory Government that was won in October 2010.

Our revenue margins have improved from 17% in FY2011, to 19% in the current financial year. This is largely due to the decrease in residential real estate clients and a significant reduction in traditional print media spend, combined with the growth of digital and creative offerings, video production projects and strategic media services.

During the period, we implemented the following initiatives:
  • Completed the formation of our core Digital team, implementing the findings of our 2011 review of this area. We are now experiencing a positive uptake of our digital marketing and social media solutions and platforms.
  • Re-focused our media team to embrace the rapid changes in consumer media habits affecting our industry, and adapt our offerings accordingly, while continuing to work closely with our media partners.
  • Expanded our television and video production capabilities that previously resided within our Western Australian office, to roll these out to the rest of Australia and New Zealand.
  • In August 2012, we launched our new website and social media platforms to highlight not only our digital capabilities but also to showcase the diversity and quality of work we are producing across Australia and New Zealand.
Our overall expenses have reduced by 3% to $26.439m

Administration overheads have reduced from $1.330m to $1.169m with lower legal fees in our 75% subsidiary Andrews Advertising, who have continued to prosecute the claim against the former director and former manager. There is an update on these proceedings in the statutory accounts.

Marketing expenses have reduced significantly from $1.846m to $1.352m. This includes substantial savings in travel and a significant reduction in bad debt charges due to streamlined billings and debtors processes.

Office and communications overheads have increased from $5.090m to $5.279m mainly as a result of annual increases in our premises leases, but such has been partly offset by reduced telephony and data communications costs, an area where we are continuing to drive efficiencies.

Client service overheads have reduced from $18.968m to $18.646m primarily in response to the reduced billings for the business. We also successfully implemented our new real estate marketing system “Breeze” in the latter half of FY2011 that has delivered efficiencies in processing and booking advertising and marketing collateral while also increasing reporting
capabilities. To adapt to the challenges of a changing industry, we will continue to evaluate skills and capabilities within our teams, and ensure we are well positioned to seize growth opportunities in our markets.

Our balance sheet at the 30th June reflects a solid $9.314m in cash and an improvement in our outstanding debtor’s position. Total trade receivables at 30 June were $17.228m (June 2011: $28.043m) and the balances past due but not impaired, have reduced from $11.449m at June 2011, to $5.967m at June 2012.

Given these improvements in receivables, we have reduced our commercial bill facility from $6.0m to $4.0m in June 2012, (June 2011: $6.0m) that will further reduce administration charges and bank fees.

The current economic uncertainty and the requirements of government and businesses alike to drive cost savings in response, are impacting Adcorp. Likewise the challenges faced in the media industry which is in a state of large scale transition from traditional to new media channels, continue to influence the markets in which we are operating.

Accordingly, we are experiencing substantial decreases in traditional print media spend by clients and are re-focusing our business on addressing these changes, as a matter of priority. The transition to online advertising, digital solutions and rapid growth of social media advertising is imperative and presents us with significant opportunities.

A full review of our technology platforms and online systems is currently underway to ensure we are meeting changing client needs, and enhancing accessibility to new media and advertising platforms.

The impact of these reductions in traditional spend and the significant challenge facing our business and our industry is not something we underestimate and we are taking steps to ensure we are adaptable, to seize the opportunities to grow the business in coming years.

We are confident of our capabilities in servicing a broad range of clients from high volume government clients through to clients across any sector that require niche or specialty offerings that can include social media, video, digital, targeted research, consultative services and quality creative services.

In this uncertain environment, management and the Board are committed to transitioning the business and continuing to innovate and adapt to the market.

The board has accordingly declared a final dividend of 0.75 cents per share, fully franked, paid out of current profits. This takes our full year dividend to 1.75 cents per share, fully franked.

We thank our dedicated Adcorp team for all their efforts during this year.

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