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Cape Town - Listed workforce management group, Adcorp Holdings, announced on Tuesday that group revenues increased by 17% to R15.6bn for the financial year ended February 29 2016.
Normalised earnings per share of 365.3 cents were 4% ahead of the prior year, while headline earnings per share of 299.6 cents were 0.4% ahead of the prior year's comparative figure.
This financial year saw the introduction of the long-awaited, substantial changes to South African labour laws, Adcorp pointed out.
“Initially, these new laws impacted volumes negatively in Adcorp’s core South African market where a number of contract staff were either taken on as permanent employees by clients or simply had their contracts of employment terminated,” said Adcorp group CEO Richard Pike.
“In response to this net loss of volumes, the group successfully embarked on a major operational restructure during the year, focused on shedding costs and attracting new business which offset much of the negative impact of these lost volumes.”
Normalised earnings before interest, tax, depreciation and amortisation (EBITDA) of R621.5m were 7% below the prior year’s comparable figure of R668.5m reflecting a tougher trading environment and lower sales volumes achieved during the financial year.
“The group’s cash performance has once again been extremely positive,” said Pike. In this regard, the Group’s cash conversion ratio was a creditable 87% compared to the Group’s target conversion ratio of 80%.
Pike maintained that the passing of the new Labour Relations Act (LRA) initially led to a high degree of uncertainty in the South African market resulting in a knee jerk reaction from a number of prominent clients.
“The initial resultant negative impact on volumes was due largely to an element of ambiguity in the interpretation of these laws by employers,” said Pike.
The main source of this ambiguity related to the status of contract workers, earning below a certain threshold and employed by Temporary Employment Service providers (TES). In question was the status of these employees after an initial three month contracting period.
This was clarified in a milestone Labour Court ruling in September 2015 where the court found that, after this initial three month contracting period, the TES retains the employment contract and that the client becomes a concurrent employer with the TES for the purposes of the LRA. Accordingly, both parties need to ensure compliance with the LRA in a co-employment relationship.
Pike said that, “subsequent to this ruling, much stability has returned to the TES market. As a consequence, there has been a relatively strong recovery in volumes, albeit not yet to the levels achieved prior to the new legislation”.
Adcorp also acquired the business of Kelly Group in the prior financial year.
With regard to the Group’s international operations, Australian IT specialist, Paxus, produced a solid performance, recording real earnings growth in its local currency whilst earnings in respect of Australian blue collar business, LSA, were slightly lower than in the prior year due in part to an increase in costs invested in positioning the business optimally for growth.
“During the year, the Group’s Australian operations were bolstered by the acquisition of oil and gas focused business, Dare,” said Pike.
The recent decline in global oil prices had a negative impact on the group’s African business beyond South Africa’s borders which is highly dependent on the oil and gas industry.
The Group has established a physical presence in Singapore which now serves as the hub for its international expansion and the group is in the process of raising capital in international markets necessary to fund its international growth strategy.
Pike feels that the global outlook for economic growth, and the associated growth in employment, remains relatively muted.
Against this background, he believes that the group is well positioned strategically, has the advantage of a cost competitive and operationally efficient back office, as well as access to the funding necessary to fulfil its international expansion aspirations.
