Adcorp bounces back


Adcorp bounces back

Published Date: 2020-10-16 | Source: Stephen Gunnion | Author: Stephen Gunnion

Adcorp bounces back

The recruitment and training company will report improved earnings and says its made good progress in strengthening its balance sheet.

Adcorp's shares more than doubled in value yesterday after it prepared the market for a big recovery in half-year earnings as it slashed debt, cut costs and took measures to mitigate the impact of Covid-19.

In a trading statement, the recruitment and training company said group revenue declined by 10-12% largely due to the interruption of classroom-based training in SA, as well as a big reduction in commercial activity that resulted in lower demand for labour in SA and Australia, its two main geographies. Still, it said operating profit for the six months to end-August would be 18% to 31% higher than the R86.3 million reported for the first half of last year. After reporting a loss previously, earnings would be in the region of 30.5c to 51.1c per share, while headline earnings per share would be as much as 732% higher. The previous year's numbers were impacted by big goodwill impairments in some of its resourcing businesses.

While it had been negatively affected by the economic slowdown and continued trading limitations related to Covid-19, it said it responded by curtailing costs, significantly increasing cash collections and extending credit terms. Liquidity management measures and interventions introduced to mitigate the impact of the pandemic continued to remain firmly in place.

In addition to the improved profit metrics, it cut net debt to R365 million at the end of August from R683 million in February. Net cash on hand increased by R382 million after a net repayment of borrowings of R414 million.

Following the recent disposal of specialist oil and gas workforce recruiter Dare Australia for an estimated A$3.44 million (R41 million) the company said it was unlikely that it would need to dispose of any additional non-core assets other than those already in progress.

Adcorp's shares closed 133% higher at R3.15 yesterday.

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