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Voluntary trading update for the year ending 29 February 2016
Adcorp Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number 1974/001804/06)
(“Adcorp” or “the company” or “the Group”)
Share code: ADR & ISIN: ZAE000000139
VOLUNTARY TRADING UPDATE FOR THE YEAR ENDING 29 FEBRUARY 2016
As reported for the six months ended 31 August 2015, the long awaited, sweeping changes to South
Africa’s labour laws impacted contractor volumes negatively. The initial loss of volume approximated
20 000 contractors or just over 20% of contractor volumes in the South African business.
These losses were principally the result of certain clients opting to offer contract workers permanent
employment, mainly in the white collar space. A number of these client decisions were fuelled by
ambiguity regarding the interpretation of these new labour laws. This negative reaction by certain key
clients was largely unforeseen and unexpected.
Significantly, in a judgement handed down by the Labour Court in September 2015, clarity has been
provided with regard to the interpretation of these laws which has resulted in far greater volume
stability and, most importantly, there have been no new losses of volume as a consequence of these
laws subsequent to this judgement.
Managements’ focus has been on ensuring that the profit impact of these volume losses is minimised.
Whilst the gross margin impact of these lost volumes has been significant, this negative profit impact
has been largely contained to the extent that, approximately 80% of this gross margin impact has been
recovered by way of an aggressive cost reduction exercise which has seen the Group shedding 561
jobs as well as recovering approximately 6 300 new contractor headcount effectively recouping 32%
of the initial head count loss referred to above.
Also impacting Group profits negatively has been a downturn in the commodity cycle and, in
particular, the sharp fall in the oil price which has seen a number of projects either abandoned or
delayed in the Group’s Africa and training businesses.
In addition, whilst volumes have held up relatively well in the recent Australian acquisition, Dare, the
depressed oil price has seen margins come under pressure in that business.
Offsetting a substantial portion of this lower business activity has been a favourable exchange rate
gain.
As previously reported to shareholders, the Group has been active in trying to raise funding in
international capital markets in order to fund its global expansion and take advantage of the
potentially value enhancing opportunities this strategy presents.
Much progress has been made and the Group is hopeful of concluding this shortly. In this regard,
shareholders are referred to the cautionary announcement issued on 9 February 2016.
Recently, the Group has been successful in winning important new business and, whilst FY2016 has
been negatively impacted by the implementation of the new labour legislation, the annualised impact
of which will flow over into FY2017, despite South Africa’s low economic growth projections, sustained
pressure on commodity prices as well as other domestic and global economic challenges, the Group
remains optimistic about prospects for the next year and, in particular, the returns it expects from its
international portfolio.
Any forward looking statements in this announcement have not been reviewed or reported on by the
company’s auditors.
For further information please contact:
Richard Pike
Chief Executive Officer
Tel: (011) 244-5313
Email: richardp@adcorp.co.za
9 February 2016
Bryanston
Sponsor: Deloitte & Touche Sponsor Services (Pty) Ltd
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