Adcorp shares jump 22% as market welcomes dividend windfall

Adcorp posted a 6.5 percent increase in revenue from continuing operations to R12 billion, which the firm said was ‘the first annual revenue increase in half a decade, reflecting a successful year of sustained business growth’. File photo

Adcorp posted a 6.5 percent increase in revenue from continuing operations to R12 billion, which the firm said was ‘the first annual revenue increase in half a decade, reflecting a successful year of sustained business growth’. File photo

Published May 30, 2023

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Workforce solutions provider Adcorp’s shares jumped nearly 22% after the market welcomed a windfall annual dividend as the company’s strategic repositioning bears fruit, despite the challenging economic conditions in South Africa.

The shares jumped to an intraday high of R5.99.

In its annual financial results yesterday for the year ended February 28 this year, Adcorp declared a final ordinary dividend of 16.5 cents per share, taking the total ordinary dividend to 28.7c for the year. It also declared a special dividend of 91.3c per ordinary share, bringing the total ordinary plus special dividends declared to 120c per share.

“This development came as a result of the execution of the group's robust capital allocation framework. Although there were considerable contract losses at allaboutXpert Australia (aaX ) and an impairment loss at the Paracon business, measures have been expediently instituted to counter these drawbacks, ” the group said.

aaX was placed in voluntary administration on December 12, 2022, while in the Paracon business an impairment of goodwill of R34.4 million was recognised as a result of increases in the cost of capital and the worsening economic outlook in South Africa.

Adcorp posted a 6.5% increase in revenue from continuing operations to R12 billion, which the firm said was “the first annual revenue increase in half a decade, reflecting a successful year of sustained business growth".

Two years ago, it embarked on an ambitious strategic journey to reposition Adcorp as a premier workforce recruitment and outsourcing business, utilising a customer-centric, brand-focused operating model.

Headline earnings per share from continuing operations rose to 147.8c, up 48.3% from the prior year. Profit after tax from continuing operations rose 14.7% to R121m. Earnings before interest, taxes, depreciation and amortisation, excluding impairment, from continuing operations rose by 3.8% to R284m.

Chief executive Dr John Wentzel said: “The past year stands as a strong testament to our adaptable nature and capacity to prosper in the face of adversity. Our strategic acumen, unwavering commitment to customer satisfaction, and robust resilience have not only enabled us to surmount challenges, but also to grasp growth opportunities.”

Cash generated by operations rose from R260m to R378m. This as the management continued to deleverage its debt.

“Despite difficult macroeconomic conditions in South Africa, Adcorp's Contingent Staffing and Functional Outsourcing divisions demonstrated impressive resilience and adaptability, witnessing growth in revenue year-on-year, despite significant exposure to the volatile fast moving consumer goods and manufacturing sectors, it said.

In the Training division, substantial changes and enhancements were expected to yield positive outcomes in financial year 2024, aligning the training brands more closely with its core workforce recruitment brands.

Professional Services stabilised its performance while returning much-loved brands to the market, it said, while the Australian division emerged as an exemplar of exceptional growth, delivering commendable results despite supply side constraints and rising inflation.

Looking ahead, Adcorp said the focus for the year remained on optimising the group’s brand collection, and driving superior growth and returns for shareholders.

“The board is cognisant of the current outlook in South Africa; however, the strength of Adcorp’s balance sheet and cash flow positions the group well to weather any storms and take advantage of any opportunities that arise,” it said.

Adcorp added that it was optimistic about the growth achieved in Australia and had identified additional areas to expand into and new services to launch.

Deep Value Situations (@DV_Situations) tweeted: “Final results out and boom! Final + special dividend of R1.08 per share! If you took advantage of the sub R4 price-level buying opportunity window a few weeks ago, you’re yielding close to 30% !!”

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