Adcorp's earnings surge 700% in half year
JOHANNESBURG - Adcorp has flagged a robust balance sheet after recording a 700percent surge in earnings during the half year ended August compared to a year earlier despite the Covid-19 pandemic.
Adcorp, the workplace solutions company, said headline earnings a share would likely soar by up to 732percent compared to the 5.1cents per share recorded a year earlier.
The group said it was also expecting a 112percent jump in earnings per share from a loss per share of 413.3c last August.
The half-year operating profit would likely jump to between R102.1million and R112.9m compared to operating profit of R86.3m in 2019, Adcorp said.
It attributed the strong numbers to the management’s response to the Covid-19 crisis, which included curtailing costs, significantly increasing cash collections and extending credit terms had paid off.
”The group’s profits are higher than in the first half of the prior year largely as a result of rigorous management of operating costs to mitigate the impact of Covid-19. In addition, shareholders are reminded that the results for the 2020 financial half year period were impacted by significant impairment of the goodwill in some of the group’s resourcing businesses,” Adcorp said.
Highlights included being the stable liquidity position by successfully refinancing long-term borrowings until May 2022 and the completion of the divestment in Australia.
The group last month agreed to sell Dare Holdings, an Australian oil and gas recruitment firm, to a Norway based recruitment firm.
The group said following the disinvestment in Australia it was unlikely that it would need to dispose of additional non-core assets other than those already in progress.
Net debt improved to R365m at the end of August compared to R683m at year end February, 29, 2020.
Adcorp said included in net debt at the end of August were the drawn borrowing facilities, cash on hand and deferred accounts payables due to Covid-19.
Net cash on hand increased by R382m to August, 31, 2020, after a net repayment of borrowings of R414m.
However, group revenue fell by 10 to 12percent, largely due to the interruption of classroom-based training in South Africa, coupled with a substantial decline in commercial activity and consequently demand for labour.
In South Africa revenue in the Industrial Services portfolio fell 22 to 24percent, compared to a year earlier, largely in Temporary Employment Services as the hospitality, automotive and industrials sectors.
In contrast, Functional Outsourcing reported an increase in revenue, as it benefited from operating in sectors that were mostly deemed as essential services during lockdown levels 4 and 5. Revenue in the Professional Placements portfolio fell by 23 to 25 percent when compared to the first half of the previous financial year.
“The loss in revenue in Paracon can primarily be attributed to budgetary constraints of major clients which resulted in reduced contractor hours. In addition, permanent placement requirements were minimal during the Covid-19 lockdown period and recovery in this area is proving to be slower than anticipated,” it said.
The Training portfolio also experienced a significant negative effect on earnings before interest, taxes, depreciation, and amortisation due to revenue contraction of 40 to 42 percent compared to the same reporting period in the previous financial year.
“Training recognised minimal revenue for the months of April, May and June due to the business being solely reliant on instructor led training pre-Covid-19. In addition, clients cut back investment in learning and development, and the adoption of the virtual platform offering has been slower than expected,” said the company.
Adcorp shares closed 100percent higher at R3.15 on the JSE yesterday.