Adcorp to slash costs as tough conditions erode jobs market
The employment services group was hit by a 69% plunge in cash generated by operations in the six months to the end of August
Human resources specialist Adcorp’s share price fell to a two-year low on Wednesday, after it said it would slash costs at its operations as SA’s weak economy takes its toll on job numbers.
The company swung into an after-tax loss of R447m during its six months to end-August, from a profit of R99m previously, hit by weak SA conditions and droughts and floods in Australia.
Cash generated from operations slumped 69% to R110m, with the company impairing its business units by R452m due to lower expectations of future revenue.
Adcorp’s share price has been battered since it first warned of falling profits, while its CEO, Innocent Dutiro, resigned on October 8. Adcorp CFO Cheryl-Jane Kujenga will serve as interim CEO.
Kujenga said on Friday the company had already cut R400m in costs over the past two years, but was seeking to be leaner and more agile in light of market conditions. The company would be simplifying its business units.
At 12.15pm, Adcorp’s share price had slipped 7.14% to R13. The company’s share price has fallen almost 36.74% so far in October. This includes a 22.5% slump on the day it issued a trading update, its worst one-day loss in 25 years.
The company said on Thursday it had not responded swiftly enough to the slowdown in activity, but would now act to cut costs and simplify operations.
“In SA, our focus over the short term will be the implementation of tactical interventions to claw back on the losses incurred in the first half of this year,” it said.
“We have also begun simplifying the grouping of our different business units in line with our go-to-market strategies to ensure businesses that serve the same client base and have similar processes operate under the same pillar and benefit from synergies and collaboration.”
Adcorp said on Thursday that conditions in Australia, where it primarily provides agricultural staff, were improving and it would seek to diversify its activities in that country.
Remedial actions to tackle fixed costs at its SA businesses has started, the company said, adding that it remains cash generative and profitable, despite the impairments. “The bulk of our volume reductions have been driven by clients pulling back on their volumes, as opposed to Adcorp losing the clients completely.”
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