Broken labour broking

The half-year results look awful — but the firm’s shares have risen 7% in days, with the market expecting a big recovery

The stench hovering over Adcorp shares may finally be lifting, even though new CEO Innocent Dutiro admits he still had to “pinch his nose” when paying out six former executives who were given the boot recently.

This week the labour-broking company, which owns Kelly Group and Premier Personnel, released half-year results that were as grim as expected. Adcorp made a net loss of R128m against a profit of R85m last year.

Reasons for the drop included a pricey and unsuccessful foray outside SA, a gamble on the oil and gas industry that backfired badly and paying expensive, underperforming executives.

Dutiro took over as CEO in October after a shareholder putsch, in which Value Capital Partners (VCP) bought a 14.5% stake and set about ringing the changes. CEO Richard Pike was ousted, followed by COO Nelis Swart, with VCP making a number of pointed comments about the vast amounts they were paid.

Dutiro says in future Adcorp will put in place “transparent” contracts with executives that are “related to business performance and value addition — that was not always the case”.

As a result, he says, some executives were “very expensive to get rid of — but it was not because we were generous, it was because of the contracts they had”.

One insider is equally critical of Adcorp’s shareholders, like Allan Gray, which he says allowed Pike’s team to “milk” the company for years, in return for continued dividends.

Dutiro estimates Adcorp’s headoffice costs rose threefold from 2011 “without a corresponding increase in revenue or business performance”. To fix this, he has canned Adcorp’s foray into Africa and scrapped an abortive bid