DURBAN - ADCORP Holdings returned to profitability in the six months to end August, largely due to rigorous management of operating costs to mitigate the impact of Covid-19.
Its share price rose more than 24 percent on the JSE yesterday on the results, before closing 20.90 percent higher at R5.38.
The group, which is a workplace solutions provider and has operations in South Africa and Australia, reported a profit of R17 million during the period, improving from a loss of R470m compared to last year.
Adcorp said in last year’s results it suffered impairments of goodwill amounting to R452m in some of its resourcing businesses.
“In the current financial year, none of the companies where goodwill exists have been found to be impaired in the first half of the year,” the group said.
However, its revenue from continuing operations declined by 11 percent to R6.1 billion, but operating profit from continuing operations increased by 30 percent to R71m.
Earnings per share increased to 40.8 cents a share compared to a loss of 413.3c compared to a year earlier while headline earnings per share increased to 41.9c compared to 5.1c reported last year.
Lewis said the Covid-19 lockdown trading restrictions had a severe effect on revenues across all industries with a concomitant effect on the global staffing industry.
“The preservation of revenue and margin under these abnormal circumstances has been challenging. Adcorp responded appropriately by curtailing costs, significantly increasing cash collections and extending credit terms,” the group said.
During the period Adcorp mitigated the impact of Covid-19 by introducing liquidity management measures and interventions and said they continue to remain firmly in place.
“Particularly pleasing was the impact of improved collections on accounts receivable in South Africa, which resulted in cash generated from operations for the period of R861m compared to R110m compared to last year, largely driven by a decrease in trade and other receivables of approximately R513m,” the group said.
Looking ahead, Adcorp said in the face of the uncertainty presented by Covid-19, the financial priorities for the first half of the current year were managing the business for cash and cost containment.
“The strategic focus will begin to shift to gaining market share given a contracting market and negative economic outlook. The process of establishing internal stabilisation will be sustained,” the group said.
It added that its operational outlook is promising despite the precarious market conditions.
“Certain parts of our business are ideally suited to a flexible staffing solution amidst market volatility. The global staffing industry expects to see reliance on project-based terms and short-term contracts creating market opportunities over the next few years,” Adcorp said.
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