Salient Features:
- Normalised EBITDA down by 14%
- Normalised earnings per share down by 19%
- Cash conversion ratio 92%
- Balance sheet strengthened by R112,5 million capital raised
- 4500 learnerships facilitated
- Scrip distribution with a cash dividend of 115 cents per share.
In the context of the severe recessionary conditions that characterised the South African economy, human capital management and business process outsourcing group, Adcorp Holdings Limited, today reported generally satisfactory results albeit lower than the earnings for the prior year.
Normalised earnings for the year of 315,3 cents per share (FY2009: 390,1 cents per share) were some 19% lower than the comparable normalised earnings per share for the prior year. Group revenue improved by 4% to R5,1 billion.
Commenting on the results, Adcorp Chief Executive Officer, Richard Pike, said whilst different reporting entities within the Group experienced the effects of the recession in varying degrees, the dominant blue collar flexible staffing businesses continued to perform well, whilst the business process outsourcing (BPO) operations showed strong growth.
“This vindicates the Group’s decision in 2006 to significantly increase its exposure to these particular sectors of the market.”
The white collar flexible staffing businesses as well as the permanent recruitment businesses had a difficult year. Volumes in the retail banking sector, where typically business activities are high, proved to be particularly vulnerable.
During the year, certain cost cutting initiatives were implemented in order to benefit the Group in the longer term. As a result central costs were well controlled and showed a marginal 4% increase year on year. Reducing overall overhead and back office costs continues to remain a key management focus area. A number of
efficiency projects have also been identified and the benefits are starting to be realised.
Following much negotiation, debate and political rhetoric regarding the role of the temporary employment service (“TES”) or “labour broking” industry over the past year whereby certain elements within Government as well as trade union federation, Cosatu, have been calling for an outright ban of the industry, the Parliamentary Portfolio Committee on Labour recently announced that there would be no ban but rather, proposed regulations to curtail exploitative practices believed to exist within certain quarters of the industry.
Pike says “Adcorp is in favour of the proposed regulatory changes which are likely to be similar to those adopted in Europe, where such regulations typically favoured larger and more reputable players.”
The Group’s EBITDA margin was 5.5% as opposed to 6.8% in the prior year. Margins were negatively affected by pricing pressure in the white collar flexible staffing operations and by reduced scale in the permanent recruitment businesses.
“The biggest impact on Group margin was, however, a greater mix-swing in favour of the typically lower margin blue collar businesses. Also impacting margins negatively were retrenchment, restructuring costs, foreign exchange losses and the costs associated with delivering learnerships,” says Pike.
Cash management continues to remain a high priority for Adcorp’s management. Debtors’ days outstanding were contained to 38 days (FY2009: 35 days). This was achieved despite an extremely difficult collections environment, particularly with regards to the public sector where some significant balances remained unpaid at year end.
The Group’s overall effective tax rate has been reduced to 14% (FY2009: 24%) due to the tax benefits arising out of the facilitation of some 4 500 registered learnerships in compliance with the Skills Development Act.
In order to reduce the Group’s levels of absolute debt, the Group raised R112,5 million by way of a limited private placement in February 2010.
During the year under review, the Chairman of the Board of Directors, Dr Fredrick Van Zyl Slabbert, retired due to ill health. Van Zyl provided exceptional service to the Adcorp Group, its shareholders, clients and staff for fifteen years.
“I would like to thank Dr Slabbert on behalf of Adcorp for his immense contribution to the Group. Adcorp will make an announcement in due course with regard to the appointment of a new Chairman,” says Pike.
On the outlook for the year ahead, Pike says the anticipated limited economic recovery coupled with the benefits of a number of strategic initiatives initiated by management will contribute positively to the Group overall.
“In addition, the ‘sweet spot’ Adcorp finds itself in with regards to the alignment of its own objectives with those of the stated Government imperatives around skills development and job creation, means that Adcorp is well positioned for the future.”
Adcorp Holdings is South Africa’s leading provider of staffing, human capital management and business process outsourcing services.
The Adcorp Group of companies specialises in optimising people and process performance, and through its leading brands, provides innovative staffing solutions and business process outsourcing services to clients in business and government.
Issued by:
Meropa Communications
Alex van Essche / Charlene Hawkes
Tel: 011 506 7300
Email: alexve@meropa.co.za / charleneh@meropa.co.za
Cel: 082 321 1167 / 082 569 7873
On behalf of:
Adcorp Holdings
Group Marketing Manager
Mandy Jones