Adcorp Holdings Limited - Review Of Trading Operat
(Incorporated in the Republic of South Africa)
(Registration number 1974/001804/06)
Share code: ADR ISIN number: 00000139
REVIEW OF TRADING OPERATIONS
- HEADLINE EPS MAY BE LOWER THAN 2000
- DIVIDEND WILL BE IN LINE WITH 2000
- GROUP REMAINS PROFITABLE AND CASH-GENERATIVE
Adcorp Holdings headline earnings per share for the year ending December
2001 are not expected to exceed earnings reported by the Group for the same
period last year (192 cents). Should certain contracts not commence in the
current financial year, headline EPS could be behind the earnings reported
for the prior year. Despite this, the dividend per share payable by the
Group against its 2001 profits is expected to be in line with the dividend
paid in 2000 (28 cents per share), as Adcorp remains profitable and cash-
generative, with a strong balance sheet.
At the time of releasing the interim results for the six months to 30 June
2001, management had indicated that certain sections of the Group, namely
permanent recruitment and training, which are most dependent on a strong
economy, were already experiencing mixed fortunes. The training division had
a disappointing first half with a number of sizeable contracts being
delayed. Those areas less subject to a negative economic climate, including
flexible staffing, have continued to perform well.
The flexible staffing division has exceeded budgets and most companies have
reported record profit growth.
The recruitment advertising division, albeit a relatively minor contributor
to overall profitability, has achieved a commendable turnaround in its
trading fortunes this year through an effective redesign of its business.
The communications and market research division is on target to meet budget
despite a difficult year. Market research performed according to
expectations while a significant cutback in corporate finance activity
affected the design companies.
The negative trading conditions experienced by the permanent recruitment
companies in the first half have further deteriorated as a result of the
fallout in the information technology and financial services sectors which
traditionally have shown significant net growth in employment. This trend is
apparent globally, where all major international recruitment companies have
experienced a significant slowdown in placements.
Speedy action has been taken to maximise back office synergies in the
permanent recruitment division and to change focus areas to growth sectors.
With respect to the training companies, one of the delayed contracts
referred to at the interim stage, has now been signed. The benefits of any
further contracts may only be realised in the next financial year.
Companies and brands in the training division have been consolidated,
business models have been revisited, and the division has downsized by 25%
and moved to an outsourced model to reduce further risks.
PROSPECTS
Management's key focus remains to capitalise on niche market opportunities,
to focus strongly on working capital and cash management, to further enhance
the Group's black economic empowerment credentials, to encourage
intercompany synergies and to unlock internal productivity.
Trading conditions are expected to remain difficult leading into the 2002
financial year but management is confident that the Adcorp Group will return
to positive profit growth next year.
Richard Pike Faunce Burd
Chief Executive Officer Financial Director
8 November 2001
Sponsor
Investec Securities Limited
(Member of the JSE Securities Exchange South Africa)
(Registration number 1972/008905/06)
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