30 May 2022
Adcorp Group posts strong results, declares dividend
Johannesburg, 30 May 2022 – JSE-listed workforce solutions provider Adcorp Holdings Limited today released annual results for the year ended 28 February 2022, reflecting strong results and declaring a dividend.
Group revenue from continuing operations declined by 1,7% from R11,7 billion to R11,5 billion following the strategic exit of unprofitable contracts, negative currency translation and the ongoing effect of the Covid-19 pandemic in both markets. Total earnings per share increased to 109,1 cents per share compared to 35,6 cents in 2021 (earnings per share from continuing operations increased to 92,8 cents per share compared to 2,2 cents per share in 2021), while operating profit from continuing operations before finance income and finance costs increased by 68,6% to R199 million from R118 million in 2021. The group EBITDA from continuing operations for the year increased by 17,3% to R293 million compared to R250 million in 2021.
CEO Dr John Wentzel says: “The results are testament to our focus on improving the quality of our earnings, sustaining improved working capital and lifting operating margins. With the primary goal of stabilising the business completed, we now have the opportunity to allocate capital for growth while rewarding shareholders.” During the year Adcorp moved away from the ‘one Adcorp’ philosophy and deployed a new operating model positioning its market leading brands at the centre of the business.
Following the liquidity management measures and interventions introduced to mitigate the impact of COVID-19, the second half of FY2022 continued to demonstrate good working capital management. The group further reduced interest-bearing debt by R369 million and consolidated cash and cash equivalents (excluding restricted cash in Angola) totalled R331 million, decreasing by R76 million from the prior year. Group net debt excluding finance leases and unrestricted cash has improved by R247 million to R198 million net cash as at 28 February 2022.
The board has approved the payment of a final dividend of 47,0 cents for the financial year (2021: Nil). “We have targeted a 2 x HEPS dividend cover. 50% of distributable cash will be returned to shareholders via dividends, and 50% of distributable cash will be invested in organic and acquisitive growth,” says Wentzel.
The South African business environment remained constrained. Client pressure to cut costs due to the continuation of the COVID-19 pandemic was evident. Low economic growth and ongoing electricity supply and infrastructure challenges also negatively affected business performance. Australia’s performance was impacted by the longer than anticipated lockdowns at both international and state border levels. Eastern Australia floods also negatively affected the business.
The Contingent division showed resilience with revenue up 3.2% despite the strategic exit of low margin contracts. Margins were up over the prior year, as margin enhancement activities delivered results. Blue collar demand in Q4 showed signs of recovery. The Functional Outsourcing divisional challenges largely mirrored that of Contingent and revenue declined by 1.5% following the strategic exit of low margin contracts. Gross margin was sharply up, however, as interest in the product suite from customers grew, new business was sold at higher margins than legacy business.
The Professional division experienced a tough year with revenue declining 7.2%. Revenue declined as the economic recovery in South Africa stalled, and demand for its services fell. Many client projects remained on hold, resulting in lower contingent and contract resource needs. Skills shortages in critical sectors continued, particularly amongst nursing and IT resources, affecting Charisma and Paracon. Despite the contraction in revenue, gross profit margins were largely maintained.
The Training division saw a 29,9% increase in revenue and lifted gross profit. The division benefited from a move to online delivery channels, optimisation of product mix and a strong drive on new sales. Training margins also lifted compared to prior year.
The Australian operations reported a 4.1% decrease in revenue as a consequence of exchange rate movements. In AUD revenue improved 1.1% with strong performance in white collar contingent and permanent placements lifting margins. Meeting blue collar demand was constrained by supply-side issues, but these started to lift in Q4.
Looking ahead, Wentzel explains that with the business stabilised, the focus for FY2023 will be on growth. “We will be investing in organic and acquisitive growth opportunities to drive business expansion and move up the customer value chain. Our acquisitive growth opportunities will only be pursued if the potential return on invested capital on such investment exceeds the weighted average cost of capital in the geography.”
Click here to view: FY2022 Adcorp Group Results Booklet
Click here to view: FY2022 Adcorp Group Consolidation Annual Financial Statement
About Adcorp Group
At Adcorp Group, our purpose is to enable agile, focused and skilled workforces for the future for our clients across two continents. Adcorp is passionate about connecting human potential and through that helping businesses, companies and economies grow.
Connect with us through our website adcorpgroup.com or social channels:
Facebook: facebook.com/adcorpgroupza | LinkedIn: @adcorpgroupza | Twitter, YouTube and Instagram: @AdcorpGroup
Singular Systems – IR
010 003 0700 / 082 497 9827
On behalf of Adcorp Holdings Limited
Dr John Wentzel, CEO