Impact of Covid-19 on clients reflects in Adcorp results, says CFO Noel Prendergast

The group has reported a 5.4 percent decrease in revenue, but expects it to improve as the market recovers.

Adcorp Holdings’ half-year results ended 31 August 2021 reflect the impact of the Covid-19 pandemic on its clients. The group reported a 5.4 percent decrease in revenue from continuing operations to R5.8 billion.

“The client market, particularly in South Africa, is not yet fully recovered,” says Adcorp CFO Noel Prendergast. “As a consequence, volumes in certain industries within our contingent staffing related businesses are not yet at pre-pandemic levels.”

He explains that non-margin generating clients have been exited, resulting in reduced revenues, but increased overall gross margins.

Adcorp reported a 6.7 percent increase in gross profit from continuing operations to R559.5 million, as well as a 10.3 percent increase in operating profit from continuing operations to R71.6 million. The group also reported an increase in headline earnings per share from continuing operations to 27.2 cents per share.

“We believe we have achieved a quality of earnings and a cost rebase that is largely sustainable,” says Noel.

He adds that rigorous cash management has resulted in a far stronger net cash position than comparable high levels of net debt in recent years. “Both of these factors provide an improved platform to leverage off as the market recovers from Covid-19.”

Noel concludes that Adcorp is “forging ahead” with investment in its commercial engine to improve quality top line revenue generation and margin enhancement.