Listed human capital management group, Adcorp Holdings Limited, announced today that Group revenue of R 6.4 billion for the financial year ended 29 February 2012 was 19% ahead of revenue generated in the prior year whilst headline earnings of 209.1 cents per share (2011: 195.7 cents) were 7% ahead of those reported for the prior year.
The Group declared a final dividend of 80 cents per share resulting in total dividends declared for the year of 137 cents.
Normalised EBITDA for the year of R 309 million (2011: R 259 million) which excludes non-trading IFRS accounting adjustments were 20% ahead of the prior year whilst normalised earnings per share of 300.4 cents (2011: 290.2 cents) were some 4% up on the prior year comparative figure.
“The financial results are most pleasing given a relatively tough trading environment as well as the ongoing regulatory and legislative uncertainty the Group has been subjected to with regard to the future of labour broking”, says Adcorp CEO, Richard Pike.
The blue-collar flexible-staffing businesses which are the largest contributors to group profitability performed exceptionally well, recording solid growth for the year. Predominantly this growth was achieved by way of market share gains as well as by way of an increased demand for highly skilled artisans and technicians.
The white-collar businesses had mixed fortunes with the permanent placement business recording strong profit growth buoyed by a shortage of skills, particularly in the engineering and information technology sectors.
The white-collar contracting business endured relatively difficult market conditions, particularly in the financial services sector where volumes remain under pressure.
The business process outsourcing (BPO) operations also had mixed fortunes. Training delivered a credible contribution whilst the operations focused on delivering relevant, affordable financial products to the Group’s sizeable contract workforce performed particularly well. Disappointing was the performance of the fulfilment business which recorded a decline in profitability largely due to the non-renewal of one of their major contracts.
Overhead costs were kept roughly in line with inflationary trends despite continuing upward cost pressure.
The collections environment has remained difficult and challenging. Despite this, the number of debtors’ days outstanding at year end remained static at 36 days, in line with the prior year. R 215 million cash was generated by operations.
The debate surrounding the future of labour broking continues with on-going negotiations at Nedlac whereby, Government, business and labour have sought to find common ground in an attempt to negotiate a new labour dispensation for South Africa.
Following this process and, despite a lack of support from either business or labour, the Department of Labour (DoL) published various draft bills in March 2012 dealing with labour broking as well as proposing other amendments to labour legislation. These bills have received cabinet approval and it is believed that the DoL intend submitting these bills to Parliament for final approval and proclamation.
“Whilst the Group is still busy assessing, understanding and analysing the impact of these proposed bills, it is anticipated that their impact on Group performance is expected to be relatively minimal. Given the increased complexity this additional legislation could entail, it may even have the potential to be positive for the business”, says Pike.
During the year under review, the Group bought leading, listed, specialist information and communications technology (ICT) resourcing and solution business, Paracon for an amount of R 637 million. The business also holds a 35% stake in Indian based ICT solutions provider, Nihilent. Paracon has subsequently delisted from the JSE.
The acquisition has substantially strengthened the Group’s offerings with regard to the resourcing and placement of professional ICT skills.
“Strategically, the acquisition adds significant advantage as it broadens the spectrum of comprehensive staffing solutions we are able to offer our clients under one roof, particularly in the specialised, niched area of ICT where we currently have a limited offering”, says Pike.
Following the acquisition of Paracon, borrowings have increased significantly due to the inclusion of additional loan funding raised in order to finance the Paracon transaction resulting in a higher year on year interest charge. Group gearing is now at 28%.
“The Group remains focused on driving value for its clients, enhancing their labour compliance and governance requirements and minimising labour risk”, says Pike.
“There is now far greater sophistication with regard to procurement of talent as well as far greater adoption of technology by clients. To this extent, Adcorp has invested for the future in these emerging industry and marketing trends.
“To this extent, we believe that we are uniquely positioned strategically”, continues Pike.
“Given the potential opportunities arising from the changing face of the South African labour market, proposed impending changes to labour legislation, the Group’s strong and continued commitment to Black Economic Empowerment, technological advances in the industry as well as our unique market positioning, the Adcorp Group is extremely well positioned for the future”, concludes Pike.