South Africa-based workforce management solutions group Adcorp Holdings Ltd. (ADR: JSE) issued a trading statement and operational update for the six months ended 31 August 2019.

Adcorp said it has encountered challenging macro-economic conditions in both South Africa and Australia, the two principal geographies within which the company operates and said its profits would take a hit.

“In South Africa, macro-economic challenges have been aggravated by record-high unemployment rates,” the company stated. “We have seen many of our clients respond to the current economic climate by cutting back on the volume of their contingent workforce requirements and delaying the appointment of permanent employees.”

“This has resulted in a higher than anticipated volume reduction in our South African Industrial Services business, exacerbated by margin pressure from our clients,” Adcorp stated. "It has also negatively impacted the South Africa Professional Services business, which also faces a challenge in sourcing the increasing demand for scarce skills in the digital and technology sphere. This negative performance has been somewhat mitigated by positive performance in our Training business, which has more than doubled in earnings, and Functional Outsourcing and FMS (Funerary Management Services) which both posted strong operational performance.”

The group added that drought conditions and flooding in Australia have materially impacted its Labour Solutions Australia business which primarily provides staff to the agricultural sector.

“The last twelve months have seen record-high daily temperatures followed by unprecedented torrential rain and flooding, resulting in widespread crop failures and livestock losses, hence a decline in demand for the staff provided by LSA,” the group said. “Volumes were also lower in the remaining Australia businesses due to lower economic activity in the first half of the year as a result of a combination of the banking sector enquiry and national elections. We are seeing volumes slowly return to normal levels in these businesses which should have a positive impact on the second half of the year.”

Adcorp said that with reasonable certainty that headline earnings per share would fall between 93.3% and 94.5% for the six-months period. It also expects a loss per share decrease between 516.3% and 599.6%.

The company added that it impaired its resourcing-based cash generating units by at least ZAR 450 million (USD 29.53 million) during the period.

Following its trading update, BusinessLive South Africa reported that the share price for Adcorp had its worst one-day fall in 25 years on Friday. Shares closed at ZAR 1,550 (USD 101.67) on Friday, down 22.5% on the day. Based on its current share price the company has a market value of ZAR 1.77 billion (USD 116.1 million).