Labour laws may favour Adcorp

2010-05-04 17:24

Johannesburg - Human resources specialist Adcorp suggested on Tuesday that proposed regulatory changes to labour broking could actually prove advantageous.

In comments accompanying Adcorp’s year to end-February 2010 results, CEO Richard Pike pointed out that the proposed regulations were similar to what had been adopted in Europe.

He said that in Europe such regulations tended to favour the larger, sophisticated players "whose respective market shares have generally increased following the enactment of similar regulation".

Adcorp, which boasts annual turnover of R5bn, is a main player in both blue collar and white collar temporary recruitment markets in SA.

Pike said the case for "intermediating" contract workers was also strengthened by the proposed regulations – which he believed should also favour Adcorp.

While there were initially calls from certain quarters for an outright ban on labour broking, government has proposed regulations in an effort to curtail exploitative practices in the sector.

Politics aside, Adcorp endured a tough financial year, reporting a 38% slump in profits to R104m. Operating margins came under pressure, dropping from 23% last year to 21.7%.

Diluted headline earnings came in at 191 cents per share (270c). Most reassuring, despite the earnings drop, was that free cash generated came in at 222c/share.

Adcorp proposed a scrip dividend, but tagged this to a cash distribution option of 115c/share.