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Johannesburg - Listed workforce management group Adcorp Holdings [JSE:ADR] announced on Tuesday that group revenues for the 2015 financial year increased by 13% to R13.3bn, while earnings before interest, tax, depreciation and amortisation (Ebitda) of R667m were 23% ahead of the prior year’s comparable figure.
This year the Adcorp Group celebrates its 40th year of existence.
Normalised earnings per share of 436.8 cents were 14% ahead of the prior year’s figure, while headline earnings per share of 298.5c were up 58%.
“The 2015 financial year has been an extremely positive and rewarding one for the Adcorp Group, both in terms of financial performance as well as with regard to strategic achievement,” said Adcorp CEO Richard Pike.
This has had the impact of significantly decreasing gearing from a prior year level of 37% to a more comfortable level of 28%, despite using cash resources in the funding of certain acquisitions.
“Also encouraging is the margin performance whereby the group’s normalised Ebitda margin increased to 5.0%. This improved margin is in part reflective of the enhanced back office efficiencies achieved by the group’s shared service centre, which is starting to deliver cost, efficiency and scale advantage,” said Pike.
New labour laws
The new Labour Relations Act has now been passed into law.
“Finality has eventually been achieved with regard to significant amendments to South Africa’s labour laws which have been the subject of much industry consternation for some time and which had the potential to severely disrupt the group’s business model in South Africa,” said Pike.
He maintained that “while these new labour laws will require a fresh and innovative look at some of the group’s South African service offerings and operating structures, Adcorp has weathered this storm over a protracted period and has emerged far stronger, better positioned, appropriately diversified and with the potential to unlock greater value for its shareholders”.
South African operations
As has been the trend for some years, the blue collar businesses turned in a strong result as did the white collar contracting business.
The performance of the professional services businesses was largely in line with management’s expectations.
The contribution from business process outsourcing, training and financial services was higher than in the prior year due largely to a marked improvement in training.
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International expansion
Strategically, the group embarked on a programme of internationalising its operations in 2011.
The focus has been on expanding the reach of the group to the rest of Africa, the Asia Pacific region and the Middle East.
“To date, much has been achieved with approximately one third of the group’s normalised profits now emanating from its international operations with a target to extend that to 45% of earnings in the 2016 financial year,” said Pike.
Accordingly, the group focuses on typically high growth markets with the capacity and capability to offer multinational clients global solutions.
During the year the group registered a company and established a physical presence in Singapore, which will serve as the hub for its international expansion with a planned listing of these international portfolio assets.
“This strategy is in line with the group’s intended objective of becoming a player of consequence, focused on emerging markets and, in particular, Africa, the Asia Pacific region and the Middle East,” said Pike.
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Africa, Australia and India
The group’s African operations, which focus predominantly on mining, oil, gas, exploration and related infrastructure development, continued to show good operational growth in Pike's view.
He said Australian independent IT contracting business Paxus performed in line with expectations and is currently benefiting from an improved IT employment market.
Indian associate IT solutions business Nihilent also achieved strong earnings growth at an operational level.
Labour Solutions Australia, which was acquired by Adcorp in December 2013, has performed in line with expectations and achieved good growth for the year.
Major strategic acquisitions
During the year Adcorp acquired the Kelly Group in South Africa for R248m, which is an important strategic acquisition for the group.
Subsequent to the reporting period, Adcorp also announced the acquisition of Australian oil and gas recruiter Dare for an estimated R280m.
“Dare represents an important strategic acquisition given the group’s already strong position in this important industry vertical, particularly in Africa,” said Pike.
A strategic partnership has also been established with Singapore staffing company APBA, which provides the group with entry into a number of important Asian countries such as China, Japan, Hong Kong, Taiwan and Singapore.
International strategy unlocks value
Pike said the next few years are likely to present an interesting and exciting time for the staffing industry as fresh models evolve, new global entrants emerge, major multinational staffing companies transform and many providers look east for growth.
“In this context, I am confident that Adcorp has chosen the right strategic path. The strategy has been well considered, is exciting, offers significant potential for the group and is certainly achievable,” he said.
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