Finweek English Edition - - Companies & markets - SHAUN HAR­RIS

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

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