Nicola Mawson
Staffing solutions company Adcorp Holdings yesterday reported a substantial decline in earnings per share for the six months ending in August, attributed primarily to once-off restructuring costs of R25.6 million.
The anticipated drop in earnings ranges from 9.7% to 19.7%, signalling a challenging period for the company as it navigates operational setbacks.
In its recent trading statement, Adcorp revealed that earnings per share are projected to fall between 26.6 cents and 29.9 cents, a stark reminder of the impacts of an underperforming division and challenging economic conditions.
Adcorp added that the unit was still “well placed for a recovery in white collar contingent and permanent placements in South Africa”.
Adcorp said, in response to challenging market conditions in South Africa and Australia, it proactively launched key restructuring initiatives aimed at reducing costs, enhancing efficiency, and better aligning with market conditions.
“While once-off restructuring costs have impacted earnings in the short term, these actions are expected to drive significant long-term efficiencies,” it said.
For the second quarter of the year, unemployment rose 0.6 percentage points, according to Statistics South Africa. This took the rate to 33.5%. At the same time, the working-age population increased 1.4%.
In yesterday’s statement, the group noted that its local Professional Services unit “maintained stable revenue despite broader economic challenges in South Africa, such as high unemployment and inflation”.
Overall, gross margins contracted slightly in the unit, as they were carefully managed, it said. Paracon had to deal with IT talent shortages, which affected contract renewals, but disciplined margin management helped mitigate the impact.
Healthcare staffing unit Charisma posted strong year-on-year growth while DAV, a white collar unit, and Kelly, which provides permanent, temporary, and bulk staffing solutions, showed positive momentum after restructuring efforts, said Adcorp.
In Australia, Paxus underwent a transformation, shifting from a State-based ICT model to a sector-based structure focused on financial and professional services, emerging technologies, and industrial and energy.
“This reorganisation has significantly reduced costs and improved operational efficiency, laying the groundwork for scalable growth,” Adcorp said.
Adcorp’s Staffing Solutions and Contingent Services divisions delivered “solid revenue and gross profit growth”.
It noted that the relaunch of its hospitality brand, ZEST, as well as integrating occupational health and wellness services aided its offering. In Australia, expansion into new sectors such as aged care and aquaculture further diversified revenue streams.
In Staffing Solutions, expanded customer relationships and new business wins led to double-digit revenue growth. However, margins were “softened somewhat due to set-up costs for clients and adverse weather conditions that impacted output volumes”.
The company noted that its newly-launched Telvuka brand is “well-positioned to tap into demand for outsourced contact centre services, particularly from international markets”.
The latest Business Processing Enabling South Africa report on the business processing outsourcing sector stated that, between April and June, 4 280 jobs were created for young people out of a total of 4 863 new positions. More than half of these are based on the Western Cape.
Investec has stated that the sector has grown 41% over the past decade and seeks to employ just more than 20 000 people each year.
Adcorp, which expects to publish its results on the last day of the month, said working capital was well managed, and its balance sheet was strong, with a net cash (including restricted cash) position of R266m at the end of August.
BUSINESS REPORT