Johannesburg - Staffing solutions group Adcorp Holdings lifted its profit for the six months to August and praised the Labour Court for the review decision on legislation affecting labour broking, which allowed the company to stabilise volumes.
In its interim results released yesterday, Adcorp said the new laws had affected volumes negatively in its core market, though a Labour Court judgement in March had helped to stabilise its performance, albeit “at a level approximately 20 percent lower than prior to the introduction of these revised labour laws”.
The group saw revenue increase by 23 percent to R7.8 billion, with normalised earnings before interest, tax, depreciation and amortisation for the period increasing by 2 percent to R304.6 million. Normalised profit rose 2.3 percent to R196m. Normalised earnings per share decreased by 6 percent to 180c per share.
The group declared an interim dividend of 60c per share, which was unchanged from the interim period last year.
After the results, Adcorp’s shares on the JSE rose by 0.79 percent to R25.50.
Adcorp said the uptick in its revenue was due largely to the inclusion of recent acquisitions, Kelly Group and Dare, despite the negative impact of the new laws.
“The passing of the new Labour Relations Act initially led to a high degree of uncertainty in the South African market, resulting in a knee-jerk reaction from a number of prominent clients,” it said.
“The resultant negative impact on volumes whereby a significant number of contract staff were either taken on as permanent employees of the client or simply had their contracts of employment terminated, was far higher than was anticipated.”
It said in reaction to the lower volumes, management had initiated decisive action to minimise the profit impact of the volume losses, including major restructuring, cost cutting, intensive consultation with clients, as well as offering employers alternative outsourced labour solutions.
“These initiatives have significantly limited the bottom line impact of this major loss in gross profits and have resulted in a far better picture than would have been the case had these bold steps not been embarked upon,” it said.
Adcorp said another reason for the sizeable decline in contractor volumes was that, in certain sectors, a number of employers had succumbed to trade union and political pressure to take on contract workers as permanent employees.
But Leonard Gentle, the director of the International Labour and Research Information Group, said it was probably too early to gauge the impact of the judgement.
Another labour expert, who declined to be named, said he was sceptical about attributing the group’s performance to changes in the labour law.
BUSINESS REPORT