South Africa-based workforce management solutions group Adcorp Holdings Ltd. (ADR: JSE) reported revenue declined 1.7% to ZAR 15.0 billion (USD 1.04 billion) for the year ended 28 February 2019.

The decline in revenue was primarily as a result of the headcount volume reduction in the company's Temporary Employment Services (TES) businesses, as well as the sale of the paycard solution business in the financial services segment.

The group also recovered from a loss last year with net profit after tax increased to ZAR 262 million (18.2 million) compared to last year's loss of ZAR 561 million (USD 44.5 million).

“In the midst of macroeconomic challenges such as rising unemployment, shortage of critical skills and a highly regulated labour market in South Africa, coupled with persistently low GDP growth rates in  Australia, the group has achieved a positive financial performance as a result of its strategic turnaround plan and is well positioned to take advantage of any upturn in the macroeconomies of its core markets,”Adcorp Holdings said in a statement.

"This reflects the early successes resulting from the implementation of a turnaround strategy aimed at achieving a sustainably lean and agile business, defining and focusing on our core, strengthening our brand and transforming our culture," Innocent Dutiro, Adcorp CEO said.

"We are pleased by the significant transformation of the group's performance.  The positive outcomes arising from the drive to right-size the business are evidenced in a reduction of our operating expenses and growth in EBITDA. We have restored discipline relating to cost and working capital management which has contributed to increased cash generation and a reduction in net debt," Dutiro said.

In July 2018, a constitutional court in South Africa ruled in a landmark case that labour brokers (formerly known as Temporary Employment Services (TES)) can no longer be entitled to a portion of a recruit’s earnings after their third month in employment.

"TES remains relevant in the South African labour market and will continue to provide opportunities for first-time job seekers, skills development, training and career growth," Dutiro said. "Our ability to provide flexibility and enhance labour productivity means that we continue to be a key contributor to our clients' efforts to weather South Africa's current economic challenges, thus the response to the Constitutional Court ruling from our clients has been largely positive and there has been minimal impact on the group's 2019 financial results.”

Segment Revenue 

Revenue for the Adcorp Industrial Services business decreased marginally for both South Africa and Australia operations. Overall industrial revenue decreased by 4.6%.

Adcorp Professional Services continued its strong trajectory in both South Africa and Australia, with 7.0% revenue growth in South Africa and 4.0% in Australia. Overall revenue growth stood at 5.1%

Adcorp Support Services revenue declined by 6.8% on the back of another challenging year for the business regarding top line growth.

The Financial Services revenue declined by 22.3% due to the sale of the paycard subsidiary, FNDS 3000.

The Training segment revenue also declined by 6.9% as a result of decisions to cancel non‐performing contracts.

“In the new financial year, we will turn our attention to the implementation of our new operating model and growth strategy in South Africa and provide greater focus on the prospects for our Australia business,” the company stated. “The group is committed to achieving its transformation, ensuring future revenue growth and sustained EBITDA margin improvement, while continuing to deliver strong free cash flow.”

As of last trade Adcorp Holdings traded at ZAR 2,350.00 (USD 163.18), down 1.59% on the day and 6.00% below its 52-week high of ZAR 2,500.00 (USD 173.59), set on 10 May 2019. Based on its current share price the company has a market value of ZAR 2.63 billion (USD 182.61 million).