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Trading statement & operational update for the six months ended 31 August 2019

Adcorp Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number 1974/001804/06)
Share code: ADR & ISIN: ZAE000000139
(“Adcorp” or “the Company”)

TRADING STATEMENT AND OPERATIONAL UPDATE FOR THE SIX MONTHS ENDED 31 AUGUST 2019

Trading statement

In terms of the Listings Requirements of the JSE Limited (“JSE”), companies are required to publish a trading statement as soon as there is a reasonable degree of certainty that the financial results for the period to be reported upon next will differ by at least 20% from the financial results for the previous corresponding period.

Adcorp advises shareholders, with reasonable certainty, that total basic earnings per share (“EPS”) and total headline earnings per share (“HEPS”) for the six months ended 31 August 2019 will be as follows:

  • ¬†Loss per share of between (375.5) cents and (450.6) cents compared to EPS of 90.2 cents for the six months ended 31 August 2018 (“the Comparative Period”) (representing a decrease of between 516.3% and 599.6%).
  • HEPS of between 5.9 cents and 4.9 cents compared to HEPS of 88.3 cents for the Comparative Period (representing a decrease of between 93.3% and 94.5%).

Included in earnings are impairments amounting to at least R450 million from the resourcing based cash-generating units of the Company.

Operational update

Adcorp has encountered challenging macro-economic conditions in both South Africa and Australia, the two principal geographies within which the Company operates.

In South Africa, macro-economic challenges have been aggravated by record-high unemployment rates. We have seen many of our clients respond to the current economic climate by cutting back on the volume of their contingent workforce requirements and delaying the appointment of permanent employees.

This has resulted in a higher than anticipated volume reduction in our South African Industrial Services business, exacerbated by margin pressure from our clients. It has also negatively impacted the South Africa Professional Services business, which also faces a challenge in sourcing the increasing demand for scarce skills in the digital and technology sphere. This negative performance has been somewhat mitigated by positive performance in our Training business, which has more than doubled in earnings, and Functional Outsourcing and FMS which both posted strong operational performance.

Drought conditions and flooding in Australia have materially impacted the Labour Solutions Australia (“LSA”) business which primarily provides staff to the agricultural sector. The last twelve months have seen record-high daily temperatures followed by unprecedented torrential rain and flooding, resulting in widespread crop failures and livestock losses, hence a decline in demand for the staff provided by LSA. Volumes were also lower in the remaining Australia businesses due to lower economic activity in the first half of the year as a result of a combination of the banking sector enquiry and National elections. We are seeing volumes slowly return to normal levels in these businesses which should have a positive impact on the second half of the year.

Adcorp expects to release results for the six months ended 31 August 2019 on or about 28 October 2019.

The financial information on which this trading statement is based has not been reviewed, or reported on, by the Company’s external auditors.

4 October 2019
Bryanston
Sponsor: Nedbank Corporate & Investment Banking, a division of Nedbank Limited

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