Adcorp Holdings’ staffing and services divisions generated a R29.4 million taxed profit in the six months to August 31, 16.9% lower than at the same time a year before and the interim dividend was lowered to 13.4 cents from 16.1 cents.
“The first half was characterised by challenging market conditions in South Africa and Australia. In response, we launched initiatives to reduce costs, enhance efficiency, and better align with market conditions,” Adcorp management said at the release of the interim results yesterday.
Once-off restructuring costs of R25.6m impacted earnings in the short term, but management said these actions were expected to drive significant long-term efficiencies. The decline in taxed profit was partially mitigated by a R5.1m tax credit.
During the first half revenue increased 4.8% to R6.8 billion, while operating profit decreased 28.9% to R42.3m. The net cash position improved to R206.4m from R82.1m.
Headline earnings per share fell to 28.2 cents per share from 33.1 cents per share at the same time in 2023. Gross profit margins stabilised at 9.6% (9.7%).
The Professional Services division reported softer demand, but cost management and adapting to shifting client needs ensured a stable performance across the business, resulting in positive year-on-year growth in revenue and gross profit.
“We are optimistic about the second half of the year. In South Africa, economic indicators are improving with reduced inflation, stable interest rates, and the positive impact of no load shedding. These factors are expected to gradually boost demand for our services,” Adcorp’s directors said.
In Australia, the transformation of the Professional Services division was complete, positioning it to unlock cost benefits, while expansion into the aged care and healthcare sectors presented “exciting growth opportunities”, the group’s management said.
“Despite some ongoing economic challenges, we expect sustained demand in key areas and are well-prepared to capitalise on improving market conditions. Our strategic focus and operational improvements give us confidence in delivering stronger performance in the second half of the year,” they said.
The Contingent Staffing division in South Africa delivered a strong performance, with revenue and gross profit exceeding the previous year's figures.
Strategic alignment of the blue-collar staffing and training brands around common client types had enhanced client relationships. This, with the integration of occupational health and wellness services, had strengthened client relationships and improved margins, management said.
The hospitality brand ZEST was relaunched. While BLU had a robust start, reduced client demand in the last two months tempered overall growth. PMI maintained steady momentum.
The Staffing Solutions SA division achieved double-digit revenue growth, bolstered by expanded customer relationships and new business wins. Margins softened somewhat due to set-up costs for clients and adverse weather conditions.
The newly launched Telvuka brand was positioned to tap into demand for outsourced contact centre services. Specialist cleaning brand Capability put in a solid performance.
The Professional Services division maintained stable revenue. Margins contracted slightly. Paracon faced IT talent shortages, which affected contract renewals. Charisma posted strong year-on-year growth. Torque IT delivered solid results.
Although Quest encountered challenges due to client headcount reductions and financial constraints, DAV and Kelly recovered. Restructuring in DAV, Kelly, and TalentCRU was expected to improve efficiency, although short-term profitability was affected.
Contingent Staffing Australia performed strongly and delivered double-digit growth in revenue and gross profit, supported by demand in sectors like manufacturing, horticulture and the meat industry through the PALM Scheme.
Professional Services AUS Paxus, the Australian professional services brand, completed a transformation, shifting from a state-based ICT model to a sector-based white-collar professional structure.
This shift aimed to reduce costs, improve efficiency, and establish a scalable platform for growth.