Unaudited interim results
for the six months ended 31 August 2022
UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 AUGUST 2022
Contents
2 - 4 Commentary
- Consolidated statement of financial position
- Consolidated statement of profit or loss
- Consolidated statement of other comprehensive income 8 - 9 Consolidated statement of changes in equity
10 | - 11 | Consolidated statement of cash flows |
12 | - 15 | Segment report |
16 | - 28 | Notes to the unaudited interim financial statements |
29 Corporate information
www.adcorpgroup.com
Salient highlights
REVENUE
FROM CONTINUING OPERATIONS
R5,9 bn
2021* | R5,7 bn | + 3,2% |
OPERATING PROFIT
FROM CONTINUING OPERATIONS BEFORE FINANCE INCOME AND FINANCE COSTS
R69 mil
2021* | R69 mil | - 0,3% |
INTEREST-BEARING DEBT
EXCLUDES LEASES
R23 mil
2021 | R133 mil | - 82,5% |
EARNINGS PER SHARE*
FROM CONTINUING OPERATIONS
24,6 cents
2021* | 23,8 cents | + 3,4% |
- Restated.
- Net debt defined as interest-bearing debt excluding leases less unrestricted cash and cash equivalents from continuing operations. This is not an IFRS measure.
01
GROSS PROFIT
FROM CONTINUING OPERATIONS
R627 mil
2021* | R590 mil | + 6,3% |
CASH GENERATED
BY OPERATIONS
R89 mil
2021 | R69 mil | + 29,4% |
NET CASH POSITION**
REDUCED TO
R145 mil
2021 | R198 mil | - 26,7% |
HEADLINE EARNINGS PER SHARE*
FROM CONTINUING OPERATIONS
24,6 cents
2021* | 25,7 cents | - 4,3% |
DIVIDEND DECLARED
PER SHARE
12,2 cents
2021 Nil
02 | UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 AUGUST 2022 | |
Commentary
Performance overview
The performance of Adcorp and its subsidiaries ("group") for the first six months to 31 August 2022 reflected ongoing execution of its growth strategy. Adcorp's revenue and gross profit was up compared to the six months ending 31 August 2021 ("comparative period") and also lifted profit before tax on a continuing operations basis. This is the first time since August 2018 that we can report a rise in revenue over prior period and the ongoing focus on improving the quality of our business has seen gross margins rise over the comparable period. Overall results were negatively impacted by problems in the allaboutXpert ("aaX") brand in Australia and at 31 August 2022 aaX has been classified as a discontinued operation in terms of IFRS 5: Non- current Assets Held for Sale and Discontinued operations.
Financial overview
Group revenue from continuing operations of R5,9 billion was up 3,2% compared to the comparative period. Margin improvement has resulted in gross profit from continuing operations increasing by 6,3% to R626,8 million (2021: R589,6 million).
Operating profit from continuing operations was similar to the comparative period. While gross profit improved, operating expenses increased by 9,1%. The majority of this increase was attributable to an investment in people, particularly in Australia.
Profit before taxation rose by 22,3% to R45,4 million (2021: R37,1 million), largely due to a reduced interest expense of R26,9 million (2021: R35,1 million). Earnings per share from continuing operations is up to 24,6 cents (2021: 23,8 cents). The loss from discontinued operations amounted to R13,7 million.
The group's effective tax rate from continuing operations was 40,8%, largely driven by current year tax losses not recognised and holding company non-deductible expenses in South Africa. The South African tax system does not
operate on group taxation principles and therefore all subsidiary group companies are taxed at an entity level. From the accounting charge of R18,5 million in income tax, only R6,1 million is payable as cash tax. As at 31 August 2022, total tax losses not recognised were R798 million (2021: R751 million) and those recognised were R238 million (2021: R332 million). As our businesses become more profitable, we anticipate recognising more of the assessed losses.
Cash generated by operations improved to R89,1 million from the comparative period (2021: R68,9 million) an increase of 29,4%. Net cash of R144,8 million was lower at 31 August 2022 (2021: 197,7 million) primarily due to investment in working capital, share buybacks of R12,6 million and returning cash to shareholders via a distribution of a net dividend of R49,2 million during the period. This is in line with the capital allocation framework shared with investors at year end. The group has extended its banking facilities for both South Africa and Australia during the period.
While the group continues to face pressure for extended terms from clients, the Days Sales Outstanding for the group has been carefully managed and has remained unchanged from year end on 38 days, with South Africa at 41 and 35 days in Australia.
Contingent Staffing
Overall performance was solid as in the comparative period; considerable revenue losses in Cynergy were progressively replaced with new business in the division. BLU saw growth in demand in Q1, but had a weaker Q2 as GDP contracted. Despite this, margins were up, and the forward-looking pipeline is solid, although some of these opportunities may only materialise in FY2024.
03
Functional Outsourcing
Overall performance was in line with expectations. The core FO brand continued to replace revenue lost from large contract withdrawals in the prior year with new sales. Gross profit margins improved as a continued focus on the quality of earnings paid dividends. The forward-looking pipeline remains strong. Capability performed strongly as its niche cleaning offering found willing customers.
Professional
The division's performance reflected the efforts to stabilise the business and pursue higher quality contracts. Quest showed excellent growth while talentCRU showed signs of recovery in the Recruitment Process Outsourcing market. Charisma showed a sharp decline as hours worked were significantly less than the comparative period at a COVID-19 peak. Paracon performed in line with expectations, with lack of resource supply affecting our ability to meet demand.
Training
Training had a weaker H1 than the comparative period. Large clients delayed spending in Q1, but these came through in Q2. Results were therefore negatively affected on a comparative basis to the prior year. PMI saw a decline in
turnover as clients cut back on training. In Torque IT, major suppliers discontinued longstanding incentive programmes, demand for IT training also fell, and clients adopted a wait- and-see attitude to training spending.
Australia
The Australia division produced a strong underlying performance. Investments in Labour Solutions Australia ("LSA") during H1 produced excellent results, with revenue climbing substantially over the prior year. Paxus revenue was also ahead of prior year.
The division's results have been markedly impacted by considerable losses on contracts at aaX, a subsidiary of Adcorp Holdings Australia, ultimately held by Adcorp, which required extensive investment to remediate. This brand is not core to the Adcorp staffing business, therefore a programme to market the assets was launched and aaX has accordingly been disclosed as a discontinued operation in terms of IFRS 5: Non-currentAssets Held for Sale and Discontinued Operations.
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Adcorp Holdings Limited published this content on 31 October 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 31 October 2022 07:29:08 UTC.