Adcorp cancels its dividend payments for the financial year to end February 2020
LABOUR broking group Adcorp said yesterday that it was planning to exit the Australian market after revenues plummeted during the year to end February. The JSE-listed company advised shareholders to exercise caution when dealing in its securities until a full announcement was made.
It said that it had entered into advanced negotiations to offload Dare Australia. The company pulled a handbrake on dividends during the period, compared to R106 million paid a year earlier, saying that excess cash in the first half of the 2020 financial year would be used for repurchasing shares.
It said it also planned to invest in technology transformation.
Incoming chief executive Phil Roux said the group faced a cocktail of challenges during the year under review.
“Looking back over the year,” Roux said, “there were various external factors that created headwinds, including high unemployment, slow and delayed market adjustment to labour legislative changes, corporate budgetary constraints, vagaries of nature in Australia and contracting economies within the markets we operate.”
Roux said Adcorp continued to judiciously manage liquidity and implement the necessary actions to ensure business continuity and cost-savings in the midst of the coronavirus pandemic. Adcorp reported a 10 percent fall in revenue to R13 billion from R14.5bn a year earlier amid challenges compounded by internal operational difficulties.
In South Africa, the Industrial Services division, which houses Temporary Employment Services (TES), recorded a 7 percent decline in revenue due to reduced demand for labour and the final effects of the July 2018 Constitutional Court ruling on the “deeming” provision in the Labour Relations Act.
“The reduction in headcount volumes in Industrial Services has precipitated a review and restructure of the TES portfolio to prevent further erosion of margins,” said the company.
In 2018 the Constitutional Court ruled that for the first three months of employment, the TES is the employer of the placed worker, thereafter the client becomes the “sole” employer.
The TES segment is one of Adcorp’s largest revenue generators, with Adcorp saying yesterday that the TES sector remained a pillar of job creation for the South African economy, particularly, for first-time job seekers and the youth.
The group said economic constraints experienced by clients in the TES segment also impacted on margins due to downward pricing pressure.
In Australia revenue declined largely due to drought conditions and flooding in the first half of the year.
Group earnings before interest, taxation, depreciation and amortisation from continuing operations for the year took a 26 percent dent to R341m compared to R458m in the prior year. As a result cash generated by operating activities more than halved to R213m from R500m. It was also hit by a slight deterioration in the days sales outstanding from 52 days to 54 days.
Adcorp impaired R558m of goodwill in the resourcing-based cash-generating units in both South Africa and Australia. Its shares gained 12.39 percent on the JSE yesterday to close at R3.99.