ACTION SWINGS TO SUPPORT SERVICES
WHAT’S NOW CALLED human capital management – you know, what employment agencies do – is becoming an interesting sub-sector of the JSE’s Support Services. New listings are coming up (smaller labour broker Workforce listed on the AltX recently), there’s been plenty of corporate action, and it’s a sector with a seemingly bright future as demand for skills, especially technical skills, grows.
Adcorp is the major player here and it has sharpened its focus and strategy through a series of disposals and acquisitions. It’s always been a promising share but until recently there’s been a confusing business mix underneath – staffing, sorry human capital management, but also marketing, public relations and graphic design.
CEO Richard Pike admits the range of activities, built up as Adcorp grew through the Nineties, was confusing. Staffing was growing its contribution to earnings and the rest, now called noncore, only contributed about 10%.
So Simeka TWS, Graphicor and Research Surveys have been sold, as might other non-core interests. That made around R200m for Adcorp, which is being applied to new acquisitions on the staffing side, FMS Marketing Solutions, Employrite and most recently (though still to be approved) Capital Outsourcing, a specialist in mainly blue collar and technical temporary staff that will add 14 000 new temporary employees to Adcorp’s current base of around 38 000 temps.
The acquisitions cost a total of R501m, so Pike says the balance will be settled through the issue of Adcorp shares to raise R260m and the remainder from cash resources. “We are now more streamlined and focused, on two main areas – traditional human capital management and business process outsourcing.” Apart from the deals getting Adcorp’s strategic direction in line, Pike points out the transactions were also earnings enhancing – “all the disposals were on a price-to-earnings ratio of 10,2 times or more, while the average ratio on the acquisitions was 7,8 times.”
But why all the activity now? Could it be because main competitor Kelly is listing on the JSE next month? Pike says that’s coincidental, the deals have positioned Adcorp more strongly where it wants to be, though he also admits Kelly is the “most look-a-like company” to Adcorp and that the two were competing for some of the acquisitions.
Adcorp probably remains the most attractive share in this sector, though smaller competitor Primeserv announced last week it had bought contract-staffing company Staff Dynamix. The listing of Kelly will offer more options in what could be the sexy sector this year.
Big fish in the pond. Richard Pike