Johannesburg - JSE-listed workforce management group Adcorp managed to weather changes made to South African labour laws and yesterday posted a 17 percent increase in revenue.
In the year to February, the group’s revenue rose to R15.6 billion and normalised earnings a share increased by 4 percent to 365.3 cents.
Read: Adcorp unscathed by labour law changes
Chief executive Richard Pike said yesterday that 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. In response to the net loss of volumes, the group embarked on a major operational restructure during the year, focused on shedding costs and attracting new business.
“The initial resultant negative impact on volumes was due largely to an element of ambiguity in the interpretation of these laws by employers. The wrong interpretation cost us business and we lost volumes because employers were not so keen to take on new employees on a permanent basis.
But after the labour department clarified their stance we saw business picking up again. Actually we have done well since September and the future looks positive,” said Pike.
The new amendment from the department said workers in temporary employment should be treated as permanent, unless there was justifiable reason not to do so, and it was illegal in South Africa to hire workers in temporary employment for more than three months without justifiable reasons.
Normalised earnings before interest, tax, depreciation and amortisation of R621.5 million were 7 percent below the previous year’s comparable figure of R668.5m and Pike said this reflected a tougher trading environment and lower sales volumes achieved during the financial year. Headline earnings a share of 299.6c were 0.4 percent higher than the 298.5c a share for the comparative previous year. Adcorp also acquired the business of Kelly Group in that period.
“The integration of the operations of the Kelly Group is now complete and, although Kelly’s white collar operations were similarly, negatively affected by the recent changes to South African labour laws, the acquisition will benefit the group going forward,” Pike said. Adcorp also has operations in Australia and Asia.
Difficult year
Pike said the Indian associate IT solutions business, Nihilent, in which the group owns a 34.6 percent stake, had a difficult year, being negatively impacted by a reduction in business emanating from South Africa, as well as the weakened rand, which affected its margins negatively. The share of profits from associates was R23.1m, down by 22.48 percent.
Statistics South Africa reported that unemployment had risen to 26.7 percent in the last quarter. Pike said the country could help to bring the unemployment rate down by training young people in the fields that were needed in the job market.
“There is a huge demand for welders, technicians and boiler makers in the country, and we provide training for those with skills. However, the supply is not meeting the demand and I would advise young people to consider those fields for their careers, instead of opting for degrees that are not really needed by the market,” he said.
The group said while general market conditions were not expected to improve substantially in the foreseeable future it remained positive about its prospects given its international expansion strategy.
Adcorp declared a final cash dividend of 75c a share, down by 14.78 percent from the prior period. Its share price was down 0.29 percent at the close on the JSE yesterday to R17.44.
BUSINESS REPORT