Adcorp weighs up Australian presence


Adcorp weighs up Australian presence

Published Date: 2020-06-30 | Source: Stephen Gunnion | Author: Stephen Gunnion

Adcorp weighs up Australian presence

The workplace solutions group says it is exploring opportunities to exit Australia following a review of its portfolio of businesses.

Adcorp may exit Australia as it scales back its operations after a tough year. It is already in talks to sell Dare Australia, the oil and gas recruitment company it paid R280 million for five years ago.

The labour broking, outsourced services and training group swung to a full-year loss as its operations in SA and Australia came under pressure, resulting in a R558 million goodwill impairment. While the contracting economy and rising unemployment affected the local staffing industry, a series of natural disasters ad political uncertainty depressed demand in Australia's labour market.

Revenue from continuing operations fell 10% to R13 billion over the year to end-February. In SA, economic constraints experienced by clients in the Temporary Employment Services segment negatively impacted margins due to downward pressure on pricing. Professional Services was affected by a decline in demand, while revenue in the Training division also contracted. Trading remained stable for the Financial Services division.

Revenue in Australia, excluding Dare, declined by 8% due to a drought in that country, flooding and fires which materially impacted its Labour Solutions Australia business, which primarily provides staff to the adversely affected agricultural sector.

For the year, earnings before interest, tax, depreciation and amortisation (EBITDA) fell 26% to R341 million and operating profit decreased by 49% to R195 million. It reported a loss per share of 561c, down from earnings of 240c, and a headline loss of 6.2c per share, down from earnings of 245c. It hasn't declared a dividend.

Adcorp said efforts to right-size its business and ensure an efficient operating structure and processes had continued to yield positive results. The implementation of phase two of its cost-optimisation programme delivered net savings of R144 million in operating expenses for the year. It said a rigorous assessment of its strategic position in Australia prompted a comprehensive portfolio review, culminating in a decision by its board of directors to explore opportunities to exit the country.

It said the extent of the impact of Covid-19 on its business and future financial results remained uncertain but that it continued to manage its liquidity and take the necessary steps to ensure business continuity.

The company's shares rose 12% to R3.99 yesterday.

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