Management consultancy company Adcorp’s shares fell as much as 8% on Wednesday morning to R10.80 a share, from Tuesday’s close of R11.74 a share, after it posted a headline loss a share of 27.9c for the year ended February 28.

Its normalised earnings a share decreased by 76% year-on-year to 88.6c, while normalised earnings before interest, taxes, depreciation and amortisation dropped 51% to R303.8-million.

Noting that the past financial year was the most difficult trading year in the group’s history, CEO Richard Pike attributed the downward trend to consequences of recent changes to local labour laws, as well as a material trading loss incurred in the group’s African operations.

“We have had a significant loss in Africa, as a result of the decline in the oil price. Africa has always been a resource-based economy, [with] the biggest [of our operations] being in Angola, which had been particularly hard-hit by the decline in oil price,” Pike said at a presentation of the company’s results in Sandton.

Its earnings were further impacted on by a material swing from a R59-million foreign exchange profit in 2016, to a R30.2-million loss, as a result of its African operations.

To return to profit, the group restructured its operations, cutting 1 000 jobs and saving R200-million. To further stem losses, the company is now looking at scaling back its African operations.

Speaking to Engineering News Online on the sidelines of the event, a fund manager who wished to remain anonymous, noted that directors received “extraordinary” remuneration of R230-million, over the last two years, “for what was being delivered”, while the job cuts took place.

“There has also been a collapse in investor confidence . . . when the share price is back to where you were 15 years ago. I suspect their funding issues are deeper than they are letting on,” the fund manager noted, stating that the company’s next step could possibly include an asset exodus, as Adcorp currently had a “very fragile” debt and balance sheet.

The group has been active over the past year in trying to raise capital to fund its international growth strategy focused on emerging markets and the southern hemisphere and, in particular, Africa, Asia, Australia and the Middle East.

Negotiations regarding a possible funding deal were recently halted given that the proposed funding terms were not considered optimal.

In terms of the labour outlook and how it would pertain to Adcorp, the fund manager pointed out that it was “difficult to operate in a space where government and the unions intrinsically do not like you”.

However, Pike had a positive outlook, noting that stability had largely returned to the temporary employment services (TES) market, resulting in recovery of volumes. He also noted a splintering in the trade union movement in South Africa, pointing out that Federation of Unions of South Africa, which had “a different ideology” to main rival the Congress of South African Trade Unions, was now taking the middle ground.

He said that future changes to labour legislation and incentives would also not significantly impact on the company, as proposed changes were currently focused on strike violence.

Adcorp’s share price rebounded somewhat to R11.24 apiece by 12:25, but was still down more than 4% compared with Tuesday’s close.