Adcorp's earnings drop sharply

Adcorp's earnings down 82%. Image: Free Digital Photos

Headline earnings per share were 82% lower at 22.4c from 127.1c a year ago because of the finalisation‚ with effect from 27 August‚ of its broad-based black economic empowerment (B-BBEE) deal.

The International Financial Reporting Standards (IFRS) required that R87m be shown as a once-off non cash flow share-based payment charge to profits‚ it said.

Revenue was up 41% to R5.7bn while normalised earnings before interest‚ tax‚ depreciation and amortisation (ebitda) was up 26% to R247m.

Normalised earnings per share were 6% higher at 176.5c. An interim dividend of 60c per share was declared.

The company said the result reflected a slight half-year dilution effect arising from the inclusion of the Australian information technology contracting business‚ Paxus‚ because its earnings were being seasonally biased to the second half of the year.

Payment charge

The half-year results were affected by a once-off share-based payment charge relating to the implementation of the new 10-year BBEE transaction‚ which was approved by shareholders in May. This charge did not affect the group's cash flows nor does it affect its normalised earnings but has the effect of reducing reported headline earnings per share.

The group's blue collar operations continued to perform well as did the information technology contracting business of Paracon‚ its associate investment‚ Nihilent‚ the white collar business of Quest as well as the permanent recruitment business.

Business process outsourcing business FMS continued to experience difficult trading conditions while the training operations were still being adversely affected by an inability to register learnerships‚ because of problems experienced with the administration of the relevant Seta‚ it said. The training business had‚ however‚ gained renewed momentum in other parts of Africa‚ which held much promise.

Adcorp was recently appointed to partner a large South African bank in the establishment of a master service provider portal to manage the bank's sizeable contract workforce.

Looking ahead‚ it said the staffing industry has seen various substantial changes and evolving macro trends over the recent past. These included generally increasing tension between employers and employees‚ the introduction of more restrictive and complex legislation as well as the move of large employers to more cost effectively manage the efficiency of their workforce by appointing large‚ sophisticated service providers with the skill‚ geographic reach and financial strength to provide an all-encompassing staffing solution.

The company said that given these fast evolving industry developments‚ Adcorp had positioned itself competitively to capitalise on these trends.