Flat year for Adcorp but market share is up
Business Report - May 26th 2011, 07:22
Employment services company Adcorp reported flat headline earnings for the year to February yesterday and conceded that the year had been challenging as a result of sustained political and regulatory pressure on labour broking.
The group nevertheless managed to gain market share in two of its blue-collar flexible staffing businesses in the wake of the ongoing debate about labour broking in South Africa.
“A number of clients have consolidated their supply of labour with larger, reputable suppliers,” Adcorp chief executive Richard Pike explained.
Trade union federation Cosatu is driving the charge for labour broking to be banned, rather than significantly regulated as proposed in four draft bills released by the Department of Labour in December.
Adcorp said that in any event, the Labour Relations Amendment Bill, Basic Conditions of Employment Amendment Bill, Emloyment Equity Amendment Bill and the Employment Services Bill would have “far-reaching implications” for all employers in South Africa if implemented.
“Should this raft of proposed laws be promulgated, they would be in direct conflict with the government’s primary stated objective of job creation. As such, a total rethink is required (on) labour market policy in South Africa,” Pike said.
Adcorp expected the “likely outcome” of the debate on the issue between the government, business and labour at Nedlac would probably be centred on regulation rather than banning of labour broking. The legislative process would probably spill over into 2012.
“In the interim, it is not anticipated that there will be any immediate or material negative impact on the business of Adcorp. In the longer term we remain confident that the ultimate regulation of the industry will be to the ultimate benefit of the reputable and legitimate players in this industry,” Pike said.
As the labour broking debate simmered, Adcorp said blue-collar flexible staffing businesses Capital Outsourcing and Capacity continued to be the company’s “engine room”. However, Staff-U-Need, which focuses on the supply of specialised blue-collar skills to the power generation industry, was hit by maintenance and payment delays at Eskom.
Most of Adcorp’s white-collar flexible staffing operations increased profit, mainly due to gains in market share but also a more buoyant recruitment market with regard to scarce skills.
While margins were under pressure, the company said it had focused on cost control, offering appropriate and affordable services and products to contractors, and increasing the number of learnerships offered.
Greater spending on learnerships had dented margins, but also lowered the effective tax rate to 11 percent in the year under review from 14 percent previously due to specific learnership tax deductions.
Adcorp said it did not intend to “entrench an enduring dependency” on these tax incentives, but given the need to rapidly develop skills and enhance employability, they would probably continue and possibly increase in the foreseeable future.
Headline earnings came in flat at R1.957 a share, while revenue rose 7 percent to R5.4 billion. Adcorp declared a final dividend of R1.21 a share.
The group’s shares shed 1 percent to R27 yesterday.
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