Daily News

View All News

South Africa – Adcorp eyeing further overseas acquisitions following H1 growth

23 October 2014

Adcorp (ADR: JSE), South Africa’s largest staffing firm, yesterday reported revenue of ZAR 6.4 billion (USD 576.9 million) for the six months ending 31 August 2014, an increase of +12% compared with ZAR 5.7 billion (USD 514.1 million) a year ago.

Gross profit for the period rose by +11% to ZAR 981.8 million (USD 89 million), up from ZAR 888.4 million (USD 80.5 million) last year. Operating profit for the six-month period rose substantially by +194%, from ZAR 76.8 million (USD 7 million) in H1 2013 to ZAR 226 million (USD 20.5 million) this year.

Earlier this month, Adcorp announced that the company’s earnings per share (EPS) for the period was expected to increase by between +564% and +582% compared with last year. Headline earnings per share (HEPS) were expected to increase by between +560% and +578%.

HEPS, which accounts for all of the company’s profits and losses from operational, trading, and interest activities that have been discontinued or acquired at any point during the period, increased by +573% during H1 2014. 

Commenting on the report, Adcorp’s Board advised: “The Adcorp Group performed well and in line with managements’ expectations during the six month period ended 31 August 2014. The Group’s blue-collar business continued to perform well, delivering strong earnings and margin growth. This is despite being affected by strike action, which negatively impacted volumes.”

Revenue from blue-collar staffing rose by +20.4% to ZAR 3.5 billion (USD 317.1 million), up from ZAR 2.9 billion (USD 263.4 million) last year.

The statement continued: “The new Labour Relations Act (LRA) has now been signed into law, although the implementation date has yet to be gazetted. It is likely that the implementation date will be prior to the end of the 2014 calendar year. Arguably, these long anticipated new labour laws have, and will continue to benefit, the Group’s blue-collar businesses as employers have tended to favour larger, more sophisticated and reputable providers, such as Adcorp, who are better positioned to ensure regulatory and legislative compliance.”

“The white collar businesses were slightly down compared to the prior period and management’s expectations. The independent contracting (professional services) business although down compared to the prior period due to seasonality, was in line with management’s expectations. A stronger performance in the second half should be achieved. The revenue contributed from BPO, training, and financial services was lower than in the prior period due to the significant, downward price revision of a major contract, as reported last year.”  

Revenue from white-collar staffing rose marginally by +0.3% to ZAR 672.4 million (USD 60.9 million), up from ZAR 670.4 million (USD 60.8 million) in 2013. Independent contracting revenue during H1 2014 was ZAR 2 billion (USD 187 million), up by +4.5% from ZAR 1.9 billion (USD 176.7 million) in H1 2013. 

“The Group’s African operations, which focus predominately in the areas of mining, oil, gas exploration, and related infrastructure development continued to show good growth. [Our] Australian independent IT contracting business, Paxus, also achieved solid growth, which is reflective of an improving IT employment market in that country,” the Board added.

In April 2014, Adcorp acquired approximately 30% of the issued shares in South African staffing firm Kelly Group (not to be confused with the American firm of the same name) for a total consideration of ZAR 73.8 million (USD ). Adcorp has made an offer to acquire the remaining shares that it does not currently own with the requisite majority of Kelly shareholding approving the scheme.

The proposed takeover of Kelly is now subject to the approval of the South African competition authorities.

Looking forward, the company stated that: “The Group’s South African operations are well prepared for the impending changes to labour legislation. Whilst the full practical implications of these changes are yet to unfold, it is unlikely that they will have any meaningful, negative impact on the Group’s overall financial performance. In addition, the Group continues to strengthen its presence and seek out opportunities across Africa and Asia Pacific.” 

In trading today, the company’s share price closed up yesterday by +0.2% at ZAR 31.58 (USD 2.86). Based on its current share price, the company has a market value of ZAR 3.3 billion (USD 299.1 million).