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The financial year ending 28 February 2018 has been a time of "intensive transformation", JSE-listed workplace solutions group Adcorp Holdings [JSE:ADR] said on Monday.
Adcorp had a change in leadership at both board and management level.
“We took a hard look at the business and made some tough decisions to establish a platform for improved business performance through substantial cost reductions, improving working capital management, unlocking cash generation and strengthening the balance sheet,” CEO Innocent Dutiro said in a statement.
Group revenues for the financial year were R15.3bn - a decline of 3% year-on-year (y/y). Gross margins remained stable at 14.5% when compared to the 14.8% in 2017, while earnings before interest, tax, depreciation and amortization (EBITDA) for the year was R137m, 60% down from the 2017 financial year.
According to Adcorp, this large drop in earnings was driven largely by the group "clean-up exercise" that resulted in a number of once-off costs. However, excluding the impact of the once-off costs, the underlying EBITDA for FY2018 is R387m, a 4% improvement from the prior financial year.
“This year’s results reflect that we still have a great deal to accomplish to reach our full potential, however, the quality of our earnings indicates that the Adcorp business is fundamentally sound and that the overall group performance can be turned around," says Dutiro.
"Results of the first two months of FY2019 look positive and in line with forecasts, indicating that our turnaround efforts are already bearing fruit.”
Revenue in Adcorp Industrial Services remained flat, while revenues declined in both the Support Services (7%) and Training Services businesses (29%). Performance was somewhat mitigated by a 17% increase in revenue in the Financial Services business and an 11% increase in the Professional Services South Africa business.
Revenue in Australia declined by 8%, largely due to shifting the business focus away from low margin clients, which resulted in an EBITDA increase of 6% in that region.
Short-term focus
“Our focus in the short term remains on ensuring that we stabilise and turnaround Adcorp Training Services and Adcorp Support Services; optimisation of Adcorp Industrial Services through increased efficiency and reduction in costs; and growing our Adcorp Professional Services business in the emerging digital and robotic process automation space,” says Dutiro.
“We have set ourselves an ambitious but attainable target of R1bn EBITDA by 2022, which we believe we can reach through further adoption of lean processes to reduce our cost-to-serve as well as exploring the various growth options available to our business. In addition, the use of technology to enable efficiency and client centricity will be important as rapid adoption of innovative and potentially disruptive technologies will play a significant role in the way we work.”
Four strategic priorities have been set, namely building a strong business that is focused on leveraging its core; ensuring the business is lean and agile; strengthening the brand; and transforming the organisation’s culture.
By early afternoon on Monday Adcorp shares were trading down 2.51% at R17.51 per share.
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