Adcorp Holdings Limited · JSE:ADR
Adcorp — FY2022 Earnings Presentation
32 slides from Adcorp's earnings presentation, May 2022
Slide 1: Annual Results
Year ended 28 February 2022 Annual Results Annual results | Year ended 28 February 2022
Slide 2: Disclaimer
Disclaimer The statements contained here in may contain certain forward-looking statements relating to the Group that are based on the beliefs of the Group’s management as well as assumptions made by and information currently available to the Group’s management. These forward-looking statements are,
Slide 3: Overview
Overview Dr John Wentzel Chief Executive Officer Annual results | Year ended 28 February 2022 3
Slide 4: How did we do?
How did we do? Earnings Margins Net Dividend up up cash up declared High customer Invested in Capacitated BBBEE 1 satisfaction people for growth South Africa Annual results | Year ended 28 February 2022 4
Slide 5: FY2021: survival
FY2021: survival Gross debt Costs Net debt R' million R' million R' million 1 200 700 -200 1 000 600 645 1 002 -500 500 800 885 -800 400 477 600 (1 123) 300 -1 100 400 200 456 -1 400 (1 697) 100 200 -1 700 0 (1 983) -18 0 -2 000 -100 Feb 2019 Feb 2020 Feb 2021 Feb 2019 Feb 2020 Feb 2021 Feb 2019 Feb
Slide 6: FY2022: Focus on stability
FY2022: Focus on stability Built purpose into what we do Put people at the centre of our business Strengthened our leadership team Built a customer focussed commercial engine Optimised our working capital Injected new discipline into cost management Annual results | Year ended 28 February 2022 6
Slide 7: FY2022: A stable business
FY2022: A stable business Gross profit R' million Margins ROIC up 7% up 9.1% lifted 10x R' million R' million 1 500 12% 20% 1 470 11.4% 8.9% 10% 1 222 11% 10.6% 1 000 1 142 0.8% 0% 10% -10% 500 9.7% 9% -20% (25.8%) 0 8% -30% Feb 2020 Feb 2021 Feb 2022 Feb 2020 Feb 2021 Feb 2022 Feb 2020 Feb 2021 Feb
Slide 8: Financial and Operational Overview
Financial and Operational Overview Noel Prendergast Chief Financial Officer Annual results | Year ended 28 February 2022 8
Slide 9: Financial snapshot
Financial snapshot Operating profit from continuing operations Revenue Gross profit before finance income from continuing operations from continuing operations and finance costs R 11,5 bn R 1,2 bn R 199 m 2021| R11,7bn | -1.7% R' millio 2021| R1,1bn | +7.0% 2021| R118m | +68.2% n Cash generated Net
Slide 10: Financial snapshot: earnings per share
Financial snapshot Earnings per share from Headline Earnings per share continuing operations from continuing operations 92,8 cents 96,2 cents 2021| 2,2 cents | 2021|0,8 cents| R' million >1 000% >1 000% Annual results | Year ended 28 February 2022 10
Slide 11: Summarised consolidated statement of profit and loss
Summarised consolidated statement of profit and loss Audited Audited Feb 22 Feb 21 R’000 R’000 Var % Revenue 11 512 948 11 716 956 (1.7) Revenue decline of 1.7% Cost of sales (10 290 896) (10 575 140) 2.7 Exit of low margin contracts Gross profit 1 222 052 1 141 816 7.0 ZAR impact Gross profit % 10.
Slide 12: Contingent
Contingent Revenue Gross profit R million R million Revenue up despite exit of large unprofitable contracts in Cynergy 3 395 3 502 3.2% BLU revenue up 10% 341 340 Performance negatively affected by July KZN unrest Normalised margin up – prior year contained significant salary sacrifices Increased de
Slide 13: Functional Outsourcing
Functional Outsourcing Revenue Gross profit R million R million Revenue declined following exit of unprofitable contracts 1 227 1 208 94 Margins up on exit of unprofitable contracts and 1.5% 72 new business signed at higher margins 30.5% Increased interest in funxionO offering from large clients Cap
Slide 14: Professional
Professional Revenue Gross profit R million R million Revenue down as economic recovery stalled, and demand fell 2 000 Client retention was high, but in-contract contraction 1 855 reduced revenue 234 216 Gross margins were largely maintained and strong cost control 7.3% 7.6% Contingent demand and pe
Slide 15: Training
Training Revenue Gross profit R million R million Revenue up from increased demand and a strong focus on driving new sales 240 Strong demand drove excellent PMI performance 185 29.9% TorqueIT benefitted from a revised product mix 168 and its move to online delivery from classrooms 61.9% 104 Margins
Slide 16: Australia
Australia Revenue Gross profit R million R million Revenue in ZAR decreased due to a negative currency swing 4 911 4 709 Revenue in AUD increased 1.1% 431 Margins up on changed client focus and a greater 8.4% focus on perm placements 397 4.1% Performance constrained by supply-side constraints 8.1% 9
Slide 17: Segmental performance: EBITDA
Segmental performance: EBITDA Audited Audited Feb 22 Feb 21 R’000 R’000 Var % South Africa continuing operations 200 353 138 201 45.0 Group EBITDA margin improved to 2.5% Industrial 143 030 132 689 7.8 from 2.2% Professional 41 634 25 292 64.6 Training 9 795 (10 046) 197.5 SA EBITDA increased 45% on
Slide 18: Summarised consolidated statement of financial position
Summarised consolidated statement of financial position Audited Audited Audited Feb 22 Feb 21 Feb 20 R’000 R’000 R’000 Assets The right-of-use lease asset decreased Property and equipment 37 171 48 286 72 212 by 12.7% Right-of-use lease assets 323 432 364 572 414 917 Intangible assets and Goodwill 6
Slide 19: Cashflow bridge
Cashflow bridge Interest bearing debt reduced by R369 million DSO maintained at 38 days R’m (369) (61) (64) (50) Annual results | Year ended 28 February 2022 19
Slide 20: Net cash
Net cash Audited Audited Feb 22 Feb 21 R’m R’m ZAR Revolving credit facility (100) (450) R198m net cash position excluding AUD Borrowing base facility (33) (6) restricted cash Total gross debt (133) (456) Restricted cash increased to R89 million Cash and cash equivalents 331 407 Cash and cash equiva
Slide 21: Net cash
Net cash R’m 400 200 198 0 (49) (200) (519) (688) (400) (858) (600) (1271) (800) (1000) (1200) (1400) Feb 2017 Feb 2018 Feb 2019 Feb 2020 Feb 2021 Feb 2022 Annual results | Year ended 28 February 2022 21
Slide 22: From Stability to Growth
From Stability to Growth Dr John Wentzel Chief Executive Officer Annual results | Year ended 28 February 2022 22
Slide 23: New world, new operating model
New world, new operating model Brands • The centre of the business Australia • The market face of Adcorp • Measured as a stand alone Training Contingent Contingent Divisions Brands • Reporting and management control • Brands clustered together by customer use Functional • No market facing presence P
Slide 24: Adcorp Strategy
Adcorp Strategy To be the leading workforce lifecycle solution provider across two continents, delivering agile, skilled and focused solutions in selected industries and geographies. 01 Deliver ROIC > WACC 06 Offboarding Recruitment Lift operating margin >3% 02 Skills Solutions development Superior
Slide 25: Strategy execution
Strategy execution Selling workforce lifecycle solutions Moving Adcorp up the customer value chain Building integrated solutions for customers Lifting operating leverage Driving growth through organic and acquisitive investment Annual results | Year ended 28 February 2022 25
Slide 26: Capital allocation
Capital allocation Adcorp Group WACC of 12% SA - 14% |Australia - 10% Growth Opportunities Excess Cash Organic Growth Ordinary Dividends to Shareholders (dividend policy of 2x HEPS cover) Acquisitive growth Special Dividends Share Buybacks Annual results | Year ended 28 February 2022 26
Slide 27: Dividend declaration
Dividend declaration Adcorp declares a normal dividend of 47c R' million for the year ending 28 February 2022 Annual results | Year ended 28 February 2022 27
Slide 28: Adcorp investment case
Adcorp investment case Established a sustainable earnings base Reduced volatility in earnings High cash conversion rates lead to the ability to pay dividends De-geared balance sheet Trading at a discount to NAV Annual results | Year ended 28 February 2022 28
Slide 29: Outlook
Outlook Dr John Wentzel Chief Executive Officer Annual results | Year ended 28 February 2022 29
Slide 30: The year ahead: constraints
The year ahead: constraints Rising inflation Low economic growth in South Africa Covid pandemic still with us Supply side constraints in Australia The competition for talent Annual results | Year ended 28 February 2022 30
Slide 31: The year ahead: opportunities
The year ahead: opportunities Recovery in demand for white-collar staff Sustained requirements for blue collar contingent staff Increased interest in functional outsourcing Opportunities in South & East Africa Digitalisation Annual results | Year ended 28 February 2022 31
Slide 32: Q&A
Q&A Annual results | Year ended 28 February 2022 32