Staffing and business process outsourcing (BPO) company, Adcorp Holdings Limited, today announced interim normalised headline earnings per share of 156,3 cents which reflected a 13% decrease compared to the prior comparative figure of 180,1 cents per share.
The Group also declared an interim dividend of 50 cents per share (2008: 62 cents).
Adcorp CEO, Richard Pike, said that the trading results for the six month interim period ended 31 August 2009 reflect the impact of the generally tougher economic conditions.
“Whilst trading conditions have tightened since the commencement of the financial year, the blue collar flexible staffing and BPO operations of the Group continued to perform relatively well for the period under review”, said Pike.
The blue collar flexible staffing operations which contribute in excess of 50% of Group profitability have proved to be relatively resilient given the current tough economic conditions as clients opt for the labour cost flexibility afforded by the option that contract labour provides.
In this regard, whilst volumes have been under pressure as consumer demand has declined in certain sectors such as manufacturing, volume gains have been made in previously untapped market segments such as mining where the need for labour flexibility has become a necessary ingredient for survival.
Also making a positive contribution to the blue collar operations has been Staff-U-Need which was acquired in August 2008.
“The business has integrated well into the Group and is performing in line with expectations”, said Pike.
The financial performances of the white collar flexible staffing businesses as well as the permanent recruitment operations, however, have been negatively affected by sustained downward volume and margin pressure as a direct result of the economic downturn.
Pike commented that “whilst volumes appear to be stabilizing in terms of the white collar flexible staffing operations albeit at significantly lower levels than in buoyant markets, it is far more difficult to make predictions with regard to the Group’s permanent recruitment operations where volumes have yet to stabilize”.
The group’s cash flows were well managed over the first six months despite a particularly tough collections environment. In this regard, debtors’ days outstanding were contained to 33 days. The conversion ratio of cash generated by operating activities to operating profit was 88% compared to a Group target of 90%.
During the current financial year, the Group expects to initiate and facilitate in excess of 5 000 learnerships in terms of the Skills Development Act. In this regard, the Group is a major provider of skills development in the South African market.
Whilst the costs associated with the implementation of these learnerships are charged against operating profit, there are commensurate tax grant benefits which have positively impacted the Group’s overall effective tax rate.
There has been much public debate recently with regard to the prospect of further regulation governing the a-typical, contract labour or temporary employment services (TES) market.
The matter is currently being debated at the National Economic and Development Council (Nedlac) and it is likely that certain additional regulations will be enacted to protect vulnerable workers and to promote the concept of “decent work”.
Whilst it is still uncertain as to the exact nature of this impending legislation, Adcorp has taken an active role in these deliberations and is generally supportive of certain of the recommendations which, if dealt with appropriately, could be positive for the staffing industry as a whole.
After 15 years as Chairman of Adcorp Holdings Limited, Dr Van Zyl Slabbert will be retiring as Chairman of the Group with immediate effect. His retirement has been necessitated due to health considerations. Due to the relative suddenness of his retirement, a replacement Chairman has yet to be appointed. In the interim, Ms Louisa Mojela will serve as acting Chairman until such time as a suitable replacement has been found.
In terms of future prospects, Pike commented that “whilst there is little prospect of trading conditions improving over the remainder of the financial year, it is also not anticipated that there will be a significant further deterioration in trading conditions.
“The relatively defensive nature the Group portfolio with its overweight exposure to blue collar flexible staffing should continue to stand the Group in good stead while there remain other potentially lucrative pockets of opportunity which the Group will continue to explore”.