JSE-listed workplace solutions provider Adcorp Holdings Limited released annual results for the year ended 28 February 2021, reflecting a challenging year marked by Covid-19-induced events that weighed heavily on our clients and staff both in South Africa and Australia.
Revenue from continuing operations decreased by 9.3% to R11,7 billion compared to R12,9 billion in 2020. Total earnings per share increased to 35.6 cents per share compared to 561.6 cents loss per share in 2020, while operating profit from continuing operations increased by 124.4% to R118 million from a loss of R486 million in the prior year. The group EBITDA from continuing operations for the year decreased by 1.6% to R250 million compared to R254 million in 2020.
The newly appointed CEO Dr John Wentzel says: “Despite a challenging year, the group is in a stronger position than a year ago with significantly lower debt, improved earnings and empowerment credentials.” The group’s resilience was underpinned by aggressive cash flow management, divesting of non-core assets and introducing cost savings initiatives. “For Adcorp, the year was also marked by a refocus of its strategy to ensure profitable growth and that business units are closer to their customers and respond more quickly to customer needs.”
Adcorp successfully implemented measures in terms of liquidity and cash flow management early in the financial year. Cash generated by operations increased to R914 million from R209 million in 2020. The group’s consolidated unrestricted cash and cash equivalents totalled R407 million, increasing R93 million from the prior year. Group net debt excluding finance leases was reduced to R49 million from R688 million due to significant improvement in collections and other initiatives. The board has decided that no dividend will be declared as the prevailing economic circumstances demand prudent cash management.
The Industrial Services business experienced a mixed performance. The core business suffered a revenue contraction of 17.2% and a 22.1% reduction in gross profit compared to the prior year. Contingency staff accounted for most of the decline. The functional outsourcing business saw its revenues increase by 9% off the back of organic growth in sectors that were more resilient to the negative impact of Covid.
Consistent with the Covid-19 trading environment, the Professional Services division revenue declined by 20.0%. The most severely impacted business was the permanent placement sector. This reduction also materially affected margins as permanent placements deliver higher than average margins. The portfolio reacted swiftly to the situation, resetting its cost base and changing its product mix.
The Training portfolio saw a 40.5% decline in revenue and 48.6% in gross profit as clients placed large training initiatives on hold during the pandemic and the training portfolio was initially slow to convert to digital learning platforms. The division has subsequently re-capacitated its leadership and changed its delivery models and is now well laced to meet the changing landscape of this sector.
The Australian operations reported an 8,4% increase in revenue from continuing operations in the group’s reporting currency, but this declined by an aggregate 6.5% in its functional currency due to permanent placement fees declining by 35% and staffing services income reducing by 6.7% as the contracting market faced the Covid-19 pandemic.
The group has completed the disposal of Adcorp Support Services, which compromised the FMS Marketing Solutions division and the Employee Benefits Division. The group also disposed of its 100% shareholding in Dare Holdings Proprietary Limited and Adcorp Holdings Singapore Pte Limited and received cash proceeds of R30 million. The group does not anticipate further asset disposals.
During the year Adcorp successfully completed a BBBEE transaction with Adcorp Workforce Solutions achieving a Level 1 rating, considerably enhancing the group’s competitiveness in the South African market.
Looking ahead, Wentzel explains that although Covid-19 will continue to be a significant factor, Adcorp has emerged from 2021 as a stronger, more focused and agile company with a solid balance sheet. “With our enhanced BBBEE, improved IT systems which will improve customer experience, clear strategies to drive profitable growth and blue-chip clients in both geographies we are well-positioned to grow.”
Click here to access Adcorp’s FY2021 results.
At Adcorp, our driving purpose is to connect potential. We are passionate about providing workforce solutions that enable our clients to build workforces of the future whilst helping our staff and assignees to unlock their true potential.