Despite changes made to South African labour laws in the past financial year, diversified workforce management and business process outsourcing company Adcorp saw a 17% increase in group revenues increased by 17% to R15.6-billion for the year ended February 29.

The group also saw a slight increase in headline earnings a share of 299.6c, up 0.4% year-on-year.
Reflecting a tougher trading environment and lower sales volumes, normalised earnings before interest, taxes, depreciation and amortisation (Ebitda) of R621.5-million were 7% below the prior year's comparable figure of R668.5-million, though normalised earnings a share of 365.3c were 4% ahead of the prior year.

"Initially, [the new labour laws] impacted volumes negatively in Adcorp's core South African market, where a number of contract staff were either taken on as permanent employees by clients or simply had their contracts of employment terminated," said Adcorp Group CEO Richard Pike. 

He noted that the group's cash performance was “extremely positive”, pointing out that the group's cash conversion ratio was a creditable 87% compared with the target conversion ratio of 80%.

Reflecting on the new Labour Relations Act (LRA), Pike noted that it initially led to a lot of uncertainty in the South African market, resulting in a knee-jerk reaction from a number of clients. 

"The initial resultant negative impact on volumes was owing largely to an element of ambiguity in the interpretation of these laws by employers," said Pike. 

The main source of this ambiguity related to the status of contract workers earning below a certain threshold and employed by temporary employment service providers.
In question was the status of these employees after an initial three-month contracting period.
The new amendment noted that workers in temporary employment should be treated as permanent, unless there was justifiable reason not to do so. It was also illegal in South Africa to hire workers in temporary employment for more than three months without justifiable reasons.
​Meanwhile, the company noted that it had acquired employment agency the Kelly Group in the prior financial year. 

"The integration of the operations of the Kelly Group is now complete and, although Kelly's white collar operations were [also] negatively affected by the recent changes to the South African labour law, the acquisition will benefit the group going forward," maintained Pike.

During the year, Adcorp’s Australian operations were bolstered by the acquisition of oil and gas-focused business Dare.

Pike noted that Dare had integrated well into the group, identifying a number of potentially lucrative cross-selling and collaborative opportunities with other businesses within the Adcorp group.

“The recent decline in global oil prices had a negative impact on the group's African business beyond South Africa's borders, which is highly dependent on the oil and gas industry,” he concluded.