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Summary of the audited consolidated results for the year ended 29 February 2024 and cash dividend declaration
ADCORP HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
Registration number: 1974/001804/06
Share code: ADR
ISIN: ZAE000000139
("Adcorp" or "the Company" or "the Group")
SUMMARY OF THE AUDITED CONSOLIDATED RESULTS FOR THE YEAR ENDED 29 FEBRUARY 2024 AND
CASH DIVIDEND DECLARATION
SALIENT HIGHLIGHTS
- Revenue from continuing operations increased by 7.7% to R13,0 billion (2023: R12,0
billion)
- Gross profit from continuing operations decreased by 2.0% to R1 257,0 million (2023:
R1 282,4 million)
- Operating profit from continuing operations decreased by 21.5% to R128,7 million (2023:
R163,9 million)
- Profit for the year increased by 115.9% to R88,0 million (2023: R40,8 million)
- Net unrestricted cash position of R204,2 million (2023: R311,7 million)
- Earnings per share from total operations increased to 83,8 cents per share (2023: 37,3
cents per share)
- Headline earnings per share from total operations increased to 83,8 cents per share (2023:
61,1 cents per share)
- Earnings per share from continuing operations decreased to 83,8 cents per share (2023:
114,7 cents per share)
- Headline earnings per share from continuing operations decreased to 83,8 cents per share
(2023: 147,8 cents per share)
- Final gross dividend of 24,2 cents per share declared (2023: 16,1 cents per share)
- B-BBEE level 1 rating in South Africa maintained
PERFORMANCE OVERVIEW
We are proud of several significant achievements during the year. We have grown Group
sales, achieved record customer satisfaction scores, employee engagement has lifted, staff
retention has improved, and our brands have garnered numerous awards. The Group
continues to benefit from geographically diversified earnings and cash flows. Adcorp remains
debt-free, and working capital has been well managed. Our strong balance sheet in a weak
macro-economic environment creates valuable capacity for Adcorp to weather difficult times
and remain opportunistic.
We are pleased with the performance achieved across several areas of the business, most
notably Contingent Staffing in both South Africa and Australia. Persistent load shedding and
other infrastructure issues in South Africa led companies to seek more flexible staffing
solutions, thereby boosting demand for our services. The Australian market continues to
grapple with blue-collar labour shortages, which in turn has driven demand for Adcorp's
contingent staffing offering. Contingent Staffing Australia remains the fastest-growing division
in the Group.
Globally, staffing markets have faced headwinds, and Adcorp has not been an exception. This
was a challenging year for the Professional Services South Africa division. The expected
recovery in white collar temporary and permanent placements has not yet materialised, and
this impacted performance in the current year. The performance of Professional Services
Australia was affected by similar market dynamics, but to a lesser degree. These divisions
remain well placed for a recovery in their respective markets.
We announced our Brandshift Adcorp strategy three years ago, which refocused Adcorp into
a staffing and outsourcing business with a decentralised operating model and a brand-centric
customer focus. We have made huge strides on this journey and the delivery of top-line growth
validates our strategic changes. Our unwavering commitment to service excellence, brand
integrity, and the dedication of our exceptional team have remained steadfast.
FINANCIAL OVERVIEW
The Group's revenue from continuing operations increased by 7.7% from R12,0 billion to
R13,0 billion during the year. This marks the second consecutive year of annual revenue
growth, a milestone not achieved since the 2016 financial year, particularly noteworthy amid
widespread reductions among local and global workforce solution companies. The Group,
however, encountered gross margin contraction across several of its brands, declining overall
from 10.6% to 9.7%, leading to a slight decrease in gross profit to R1,26 billion from R1,28
billion.
Despite well controlled operating costs, this gross margin contraction had an outsized impact
on the profit for the year from continuing operations, resulting in a decrease of 27.1% to R88,0
million (2023: R120,8 million).
Cash generated by operations before working capital changes was resilient, decreasing only
slightly to R247,9 million from R274,3 million in 2023. Revenue growth necessitated a net
investment in working capital of R124,1 million and the Group's days sales outstanding (DSO)
increased only marginally to 37 days year-on-year (2023: 36 days). The Group's consolidated
net cash (excluding restricted cash in Angola) ended at R204,2 million (2023: R311,7 million).
This is after a share buy-back programme of R6,8 million, payment of ordinary dividends
totalling R27,4 million and a special dividend of R100,4 million aligned with the Group's capital
allocation framework.
The Group's effective tax rate from continuing operations was 2.1%, largely driven by a non-
recurring deferred taxation liability reversal, utilisation of assessed losses and the tax benefits
of ETI income and learnerships. As at 29 February 2024, total tax losses not recognised were
R788,9 million (2023: R736,7 million) and those recognised were R223,9 million (2023:
R182,6 million).
The South African facilities include a revolving credit facility of R150 million (ZAR revolving
credit facility), an overdraft facility of R100 million and an accordion facility of R100 million
which was effective from 1 September 2022 and matures in three years from the effective
date. The Australian borrowings consist of a revolving borrowing facility, a letter of credit, a
bank guarantee and set-off facility amounting to AU$25 million that would have matured on
10 March 2024; however, an extension was granted to 10 September 2024. A new facility is
currently being negotiated. Neither facility was utilised at year end.
DIVIDEND DECLARATION
Shareholders are hereby advised that the board of directors ("the Board") of Adcorp has
approved and declared a final gross dividend of 24,2 cents per ordinary share (2023: final
gross dividend of 16,5 cents per ordinary share and a special dividend of 91,3 cents per
ordinary share), from income reserves, for the year ended 29 February 2024.
The dividend is subject to a South African dividend withholding tax rate of 20%, resulting in a
net final dividend of 19,36 cents per ordinary share (2023: net final dividend of 13,2 cents per
ordinary share and net special dividend of 73,04 cents per ordinary share), unless the
shareholder is exempt from paying dividend tax or is entitled to a reduced rate of dividend tax
in terms of an applicable double-taxation agreement.
As at the date of this announcement, the Company has 109 880 974 ordinary shares in issue.
The Company's income tax reference number is 9233680710.
Salient dates and times
Shareholders are hereby advised of the following salient dates and times for the payment of
the dividend:
Publication of declaration data and finalisation information Friday, 31 May 2024
Last day to trade cum dividend Tuesday, 13 August 2024
Securities commence trading ex dividend Wednesday, 14 August 2024
Record date for purposes of determining the registered
holders of ordinary shares to participate in the dividend at
close of business on Friday, 16 August 2024
Payment date Monday, 19 August 2024
Share certificates may not be dematerialised or rematerialised between Wednesday, 14
August 2024 and Friday, 16 August 2024, both dates inclusive.
OUTLOOK
In Australia, inflation is coming under control, growth is picking up, and interest rates are
expected to moderate, creating a favourable economic outlook. The easing of tensions
between China and Australia has boosted exports, driving demand for our contingent staffing
services. There is a growing shortage of blue-collar workers in Australia, a gap that can largely
be filled by migrant workers. To maximise this potential, we continue to invest in our contingent
staffing division. In response to relative underperformance in our professional services division
in Australia during FY2024, we have initiated a repositioning of our brand. This includes
deploying a new operating model, leadership changes, and a fresh approach to market. While
repositioning costs will be incurred in FY2025, these strategic changes are expected to
significantly enhance our performance moving forward.
In South Africa, the business environment remains somewhat challenging. The solid
performance of our Contingent Staffing and Functional Outsourcing divisions demonstrates
our ability to navigate and adapt to the evolving business landscape. Easing inflation, and a
softening of interest rates would be positive for the SA consumer and for business confidence
more broadly. The current positive market conditions for Contingent Staffing are likely to
persist, giving us optimism for continued growth in that division, and Functional Outsourcing
is increasingly converting its strong sales pipeline into notable wins. In response to the
underperformance of the Professional Services SA division during FY2024, we have initiated
a restructuring of the division, with tangible operational improvements and cost savings
identified. This division remains very well placed for a recovery in white collar contingent and
permanent placements in SA.
We continue to focus on executing portfolio optimisation, which may involve the disposal of
non-core brands, and we remain actively on the lookout for bolt-on acquisition opportunities
in our high-growth areas. We will continue to prioritise cost control and cost reduction across
the Group, setting specific targets for annualised cost savings in FY2025.
In conclusion, our various strategic initiatives should begin to yield positive results, setting a
strong foundation for future growth. Our contingent staffing businesses are well positioned in
their respective markets and growth is expected to continue. We remain optimistic about
growth in the new sectors and products we launched in FY2024 and continue to focus on
achieving sustainable growth and delivering long term shareholder value. We maintain our
steadfast focus on unlocking human potential to shape the future of markets, economies, and
society as a whole.
SHORT-FORM ANNOUNCEMENT
This short-form announcement is the responsibility of the directors and is only an extract of
the information contained in the audited consolidated annual financial statements of the Group
for the year ended 29 February 2024 ("Annual Financial Statements") and does not contain
full or complete details. The Annual Financial Statements are available on the JSE cloudlink
at https://senspdf.jse.co.za/documents/2024/jse/isse/ADR/YE2024.pdf and on the Company's
website at https://www.adcorpgroup.com/fy24-adcorp-group-consolidation-financial-statements/.
Any investment decision should be based on the contents of the Annual Financial Statements
available on the JSE's cloudlink and the Group's website, as a whole, as the information in
this announcement does not provide all of the details.
The Annual Financial Statements, from which the information contained in this short-form
announcement was extracted, have been audited and reviewed by the Company's auditors,
KPMG Inc., who expressed an unmodified audit opinion on the Annual Financial Statements
in their report dated 31 May 2024. The report also includes communication of key audit
matters. Key audit matters are those matters that, in their professional judgement, were of
most significance in their audit of the Annual Financial Statements. The full audit report along
with the Annual Financial Statements are available for viewing on the Group's website.
On behalf of the Board
GT Serobe Dr JP Wentzel N Prendergast
Chairman Chief Executive Officer Chief Financial Officer
31 May 2024
Directors
Executive
Dr John Wentzel (Chief Executive Officer)
Noel Prendergast (Chief Financial Officer)
Non-executive
Gloria Serobe (Chairman)
Clive Smith
Timothy Olls
Independent non-executive
Melvyn Lubega
Dr Phumla Mnganga (Lead Independent)
Tshidi Mokgabudi
Herman Singh
Ronel van Dijk
Alternative non-executive
Sam Sithole
JSE Sponsor
Valeo Capital Proprietary Limited, Unit 12 Paardevlei Specialist Centre, Somerset West, 7130
Registered office
Adcorp Holdings Limited, Adcorp Place, 102 Western Service Road, Gallo Manor Ext 6
Interim Company Secretary
Newton Chipswa, Adcorp Place, 102 Western Service Road, Gallo Manor Ext 6
Transfer secretaries
CTSE Registry Services (Pty) Ltd, 5th Floor, Block B, The Woodstock Exchange Building, 66-
68 Albert Road, Woodstock Cape Town South Africa, 7915
Investor relations
Singular Systems, Michèle Mackey: +27 (0)10 003 0700 michele@singular.co.za
External auditors
KPMG Inc., KPMG Crescent, 58 Empire Road, Parktown, Johannesburg, 2193
Date: 31-05-2024 09:00:00
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