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South Africa – Adcorp revenue growth driven by acquisition

18 October 2012

Adcorp Holdings Limited (ADR:JNB), the largest staffing firm in South Africa, reported that revenue was up +41% to ZAR 4.0 billion (approximately €352 million) for the first six months ended August 2012 despite “turbulent” and “uncertain” labour relations in the country.

The mining industry in particular has been impacted by strikes but Adcorp CEO Richard Pike said that demand for services in the period was relatively buoyant. Revenue and earnings growth was driven by the acquisition of ICT specialist Paracon in September 2011.

Gross profit in the period increased by +33% to ZAR 737.5 million (approximately €64.7 million), up from ZAR 555.1 million (approximately €48.8 million) a year ago. 

Operating profit improved by +50% to ZAR 139.8 million (approximately €12.3 million) from ZAR 93.2 million (approximately €8.2 million) last year. Profit after tax was up +47% to ZAR 100.5 million (approximately €8.8 million) compared to ZAR 68.4 million (approximately €6.0 million) a year ago.

Adcorp, placed 48th in Staffing Industry Analysts’ ranking of the world’s largest recruitment firms, also announced a “formal alliance” with Randstad. “There will be cross referral of work across the respective geographies,” the firm said.

The company’s blue collar businesses performed well, given the on-going debate on regulating the staffing market. Draft legislation is in place which will change the Labour Relations Act and the Basic Conditions of Employment Act in order to implement joint liability between staffing firms and client companies. It also proposes equal treatment of contract workers regarding remuneration and benefits.

Performance in the white collar division was mixed as the contracting business reported flat earnings due to a slowdown in the finance sector. Permanent staffing saw strong demand in IT and engineering jobs while business process outsourcing (BPO) was flat.

International business profited from strong demand for technical jobs in the sub-Saharan African market, which has a strong focus on oil, coal, mining, exploration and gas sectors.

Adcorp is a provider of human capital management, recruitment and training services as well as business process outsourcing.

In early trading this morning, the company’s share price dropped -1.5% to ZAR 2,810, up +8.5% from a year ago and -5.1% below its 52-week high of ZAR 2,994 seen in March. The firm has a market value of €2.23 billion. 

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