Adcorp Holdings Limited · JSE:ADR
Adcorp — Investor Day (February 2017)
105 slides from Adcorp's investor day presentation, Feb 23, 2017
Slide 1: Adcorp Investor Day Session
Adcorp Investor Day Session 23 February 2017
Slide 2: Adcorp: An overview
Adcorp An overview
Slide 3: The history of Adcorp
The history of Adcorp Key event Macro / Industry forces Strategic response 1975 Adcorp founded 1987 IPO on JSE 1990’s Acquisitive growth Listings boom “Educor” factor Professional Services Group Staffing Training Marketing advisory Aggressive acquisition strategy 38 brands 3
Slide 4: The history of Adcorp
The history of Adcorp Key event Macro / Industry forces Strategic response 2000 Collapse of tech bubble Turnaround strategy Rationalise brands Cash generation key focus 2,7m jobs created in SA 2000’s TES established as Contractors 1.5m-4m major engine for growth Core defined as Disposal of n
Slide 5: The history of Adcorp
The history of Adcorp Key event Macro / Industry forces Strategic response SA’s largest workforce Bolster the core around 2007/8 management company blue collar, acquiring: Capital SUN FMS Global Financial Crisis Focus on internal efficiencies 2009 SA lost 1m jobs Significant shift in clien
Slide 6: The history of Adcorp
The history of Adcorp Key event Macro / Industry forces Strategic response Cosatu actively mobilised Diversify: against labour broking 2011 S77 protest action / media campaigns / demands on employers etc. Paracon acquired Move into international jurisdictions Defending Adcorp and the Pro
Slide 7: The history of Adcorp
The history of Adcorp Key event Macro / Industry forces Strategic response International Rest of Africa 2012 diversification Paxus acquired in Australia LSA acquired 2013 Investment in alternative solutions Kelly acquired 2014 7
Slide 8: The history of Adcorp
The history of Adcorp Key event Macro / Industry forces Strategic response New LRA promulgated Dare acquired 2015 Global commodity prices slide Extensive client engagement, education Adcorp’s largest client and workshops takes contractors perm Rapid response to declining Approx. 20% SA
Slide 9: The history of Adcorp
The history of Adcorp Key event Macro / Industry forces Strategic response Adcorp 2.0 Stabilise the organisation 2016 strategy conceived and adopted Get buy into new strategy Win new business Africa and Dare scaled back New business models More cost rationalisation Retrace profit growt
Slide 10: Our journey
Our journey 1975 - 2015 future Adcorp 2.0 APS United in strong ASS AIS ASS brands AFS AIS Dynamics that are different… Geography Industry AFS Labour legislation Market forces Clients Financial drivers 10
Slide 11: SWOT analysis
SWOT analysis Strengths Weaknesses Quality people – industry leaders Dependence on few large clients Blue chip client base Relatively high levels of gearing Market positioning / recognised Inadequate BI brands Lack of performance power Geographic reach Reliable back office Globally relevant client r
Slide 12: Global employment companies: Key statistics
Global employment companies: Key statistics Adcorp Adecco Randstad Manpower Robert Half Recruit Headquarters Johannesburg Zurich Amsterdam Milwaukee, WI Menlo Park, CA Tokyo Primary activities Industrial/Tech Industrial/Offic Industrial/Offic Industrial/Tech Finance/Office Industrial/Offic e e e Div
Slide 13: Where to from here?
Where to from here? Adcorp response – Adcorp 2.0 Been subject to FY2017 Where are we on significant forces for arguably the that journey change toughest yet Procurement trends LRA losses Adcorp 2.0 well accepted in Significant changes to SA Commodity cycle the organisation labour legislati
Slide 14: Adcorp Overview: LRA amendments update
Adcorp Overview LRA amendments update Labour relations and union outlook National minimum wage impact
Slide 15: LRA amendments impact, clients and assignees
LRA amendments impact, clients and assignees Workforce Dispute trends 145 disputes Detail 2015/16 Current 80 000 Managed Applicants 2347 (2.9%) 1748* workforce Deeming | equal treatment 38 15 >3 450 4500 applicant Clients attached 30 (-1%) 26 assignees Clients 4.3% 2.1% Organisational rights 10 15 T
Slide 16: LRA amendments impact, assignee headcount and income
LRA amendments impact, assignee headcount and income Gross headcount loss Prof Bhorat, DPRU, UCT Blue collar White (2015/16) (10.5K) collar (9.5K) Adcorp gross impact Gross income loss $$$ White Blue collar collar R139m R188m Current status Significantly recovered F2017 SMME Employment Effects Post-
Slide 17: Unions?
Unions? Background manage closely status 2014 – 9,4% 39 unions with 2015 – 8,02% subscriptions 2016 – 7,55% Status of Stakeholder Advocacy | Lobbying | Innovative collaboration ILO - union membership (future of work, declining union trends) NUMSA – 2,56% Complexity of amended LRA SACCAWU –
Slide 18: Adcorp 2.0 – representing strong brands
Adcorp 2.0 – representing strong brands Our brands 18
Slide 19: NMW TES assignee impact
NMW TES assignee impact (statistics for period 1 March 2016 to Feb 2017) 100% 129 059 assignees placed 28.4% 36 659 earn below R20ph 10 clients account for 23 718 will earn below R20ph on 18.3% 1 May 2018 61% 98% 1% of assignees Kelly/ 0.4% below NMW SUN Quest BLU 19
Slide 20: Strategic and tactical response
Strategic and tactical response Merits of Industry-trends Opportunity to Bespoke consulting Financial modelling each case research and display value- on delivery options: margin protection, DSO trade-off, approach exemption app add and models scenario planning innovation Timing of Business Cost-bene
Slide 21: Adcorp 2.0: A strategic response
Adcorp 2.0 A strategic response
Slide 22: The Fourth Industrial Revolution shifts
The Fourth Industrial Revolution shifts Digitisation, automation, big data and disruptive The world of work is technologies rapidly changing and requires new strategies and skills Individualism and higher client-centricity demand Interconnected economies and a global marketplace Ever changing politi
Slide 23: A major shift is happening
A major shift is happening …. Over the next five years, we’re going to see robots being very much a part of our lives Man and robots will co-exist A major shift is happening in the skill sets people need 23
Slide 24: It is all about our clients!
It is all about our clients! Client and candidate experience drives strategy! 24
Slide 25: Clients want a different experience
Clients want a different experience …. 25
Slide 26: Relationships, knowing your clients and candidates
It is all about relationships, knowing your clients and candidates, data becomes key Community N Building lasting relationships 15 100 4400 to ensure upward Global Platform movement in the Platinum value chain Key accounts N -1 Other CV Candidates Clients 26
Slide 27: The need to innovate, and co-design with clients and candidates
The need to innovate, and co-design with clients and candidates 27
Slide 28: What can happen in 3 years
What can happen in 3 years Online book retailer World’s largest online retailer Technology company 28
Slide 29: Adcorp 2.0 – linking it all together
Adcorp 2.0 – linking it all together To be a global workforce solutions company of consequence Vision focused on Africa, the Middle East and Asia Pacific Mission Relationship driven. Partner of choice. Everybody wins Values Entrust Deliver Together Strategic objectives Thought-leaders and EBITDA
Slide 30: Strategic drivers require new business models
Strategic drivers require new business models A business model is defined by the following characteristics 01 ••| Outcome Value proposition and how it is delivered to the target customers based models Innovative ways to make money and maximize shareholder value • Core competencies and assets needed
Slide 31: Adcorp 2.0 Global Strategic framework
Training solutions Candidate solutions SOLUTIONS Shared Services Internal fulfilment Service lines Support services Industrial services Financial services Professional IT services Bulk TES HRO Contingency TES (current) SUPPLY Perm Employment Services SHIFT Managed Services (MSP/RPO) Adcorp 2.0 Globa
Slide 32: Adcorp 2.0 Organisational Framework
Adcorp 2.0 Organisational Framework Client-centricity, solutions design and digitisation Interdependencies Governance and Operational financial fulfilment management 32
Slide 33: Double speed IT strategy
Double speed IT strategy Traditional Business Automate and digitise Future Business Co-design and build 33
Slide 34: Strategic initiatives aligned to Adcorp 2.0 framework
Strategic initiatives aligned to Adcorp 2.0 framework Community Re-Design IT 10 high platform for 2 strategy and SS fidelity Build of MTN prototypes candidate groups outsource model Model Office and 4 solution builds Torque IT Platinum client business development Managed Services (MSP/RPO) Contingen
Slide 35: Adcorp 2.0 summary
Adcorp 2.0 summary Our client and candidate landscape (segmentation); Our IT and back office processes, moving to self-service, eliminating waste; and Robotisation. Simpler and more digitised processes will improve customer experience and speed to cash Design solutions with our clients and
Slide 36: Adcorp Divisions and operations
Adcorp Divisions and operations
Slide 37: The business of Adcorp
The business of Adcorp Our vision Global workforce solutions company of consequence focused on Africa, Middle East and the Asia Pacific region Workforce Geographic focus Level 2 4500 BBBEE Clients 85 000 Managed 16 workforce Countries Middle East Asia 3800 Permanent employees Africa Australia As a G
Slide 38: Adcorp 2.0 - A two folded approach
Adcorp 2.0 - A two folded approach Adcorp 2.0 Adcorp Adcorp Unlimited Operational excellence Disruptive Making today’s business Co-creating tomorrow’s strong business 38
Slide 39: Operational fulfilment
Operational fulfilment Professional services Industrial services Interdependencies Support services Financial services Operational fulfilment People 39
Slide 40: Operational fulfilment
Operational fulfilment Professional Services Support Services Industrial Services Candidate sourcing Candidate sourcing Candidate sourcing Independent Contracting Bulk, Contingency TES Bulk and Contingency TES and Perm and Perm Outcome Based Outcome Based Outcome Based (Managed Services) (BPO and HR
Slide 41: Adcorp Professional IT Services
Adcorp Professional IT Services
Slide 42: Services, solutions and brands
Services, solutions and brands Professional services Support services Industrial services Unlimited Services and solutions Services and solutions Independent Contracting Brands Contingent Independent Contracting Project management Solutions Bulk Statement OF Work (SOW) / Temporary Employment Managed
Slide 43: Our global footprint
Our global footprint Adcorp Professional IT Services Johannesburg Cape Town 43
Slide 44: Business model
Business model Adcorp Professional IT Services 3500+ Contingent workforce (excluding Nihilent) 7000+ Permanent placements per year 700+ Permanent employees (excluding Nihilent) Tiger tail digital 19,327 students trained in 2016 Contingent Services Permanent Onshore/Offshore Outsourcing Training Free
Slide 45: Nihilent – recent acquisitions & IPO
Nihilent – recent acquisitions & IPO Adcorp Professional IT Services GNet Group LLC is a US based company, specializing in Business Intelligence Experts in BI, Big Data, Analytics and Data Sciences Microsoft’s strategic partner for BI and Analytics SightN2 framework for Digital Marketing, Plan
Slide 46: Key clients and recent wins
Key clients and recent wins Adcorp Professional IT Services Key clients Recent wins 46
Slide 47: Drivers for growth
Drivers for growth Adcorp Professional IT Services RPA (Robotic Process Automation) AI Cyber security Self service platforms Big data Statement Of Work (SOW) Open source MSP and RPO Digital transformation Critical skills shortage Agile Freelancing platforms Cloud solutions 47
Slide 48: Adcorp Industrial Services
Adcorp Industrial Services
Slide 49: Adcorp 2.0 Strategic framework and Business model
Training solutions Financial solutions Candidate solutions solutions Candidate Shared Services Internal fulfilment Service lines B2B TES Support services Industrial services Professional services Contingency Bulk long-term Skilled technical Bulk TES HRO Contingency TES (current) B2B
Slide 50: FXO Division
Adcorp Industrial Services History Temporary Employment Functional Outsourcing Fast Facts Services TES 2017 FXO DIVISON 1,326 client accounts 561 unique clients 2016 870 locations, 10 countries 1,150 perm staff 2014 32 branches 66,300 Assignees deployed 14,2 m hrs processed p/m 2015
Slide 51: FXO key clients and recent wins
Adcorp Industrial Services Recent wins Key clients TES FXO 51
Slide 52: Growth drivers and business strategy
Adcorp Industrial Services Growth drivers and business strategy Growth Consolidate Staff / Value BI Client & Candidate Enhancing Centricity Strategies Leverage Efficiencies Centricity FXO Global Digital Brand Risk Strategy Development Leverage Solutions Positioning Mitigation 52
Slide 53: Adcorp Australia Industrial Services
Adcorp Australia Industrial Services
Slide 54: A shift in the job market
A shift in the job market Adcorp Australia Industrial services Economic growth @ 2% 54
Slide 55: Australian industry outlook
Australian industry outlook Cotton & Cropping Livestock production 2015 & 2016, reduced water availability Current National herd at all time low Currently irrigation storages are filling leading to 18 month timeframe for the predicted large 2017 cotton season and forecasted to be turnaround
Slide 56: Oil industry outlook
Oil industry outlook Adcorp Australia Industrial Services While the outlook is improving, global upstream spending in 2017 will remain 40 percent below 2014, Wood Mackenzie said. Project approvals will also be below the 2007-2014 average of 40 a year. Explorers, still recovering from oil’s collapse,
Slide 57: Services, solutions and brands
Services, solutions and brands Adcorp Australia Professional services Support services Industrial services Unlimited Industrial services Services and solutions Brands Independent Contracting Temporary Employment Services Bulk Temporary Employment Services Contingency Permanent Employment Services Hu
Slide 58: Business model - Dare
Business model - Dare Adcorp Australia Industrial Services Dare has historically facilitated the delivery of technical resources to the Oil and Gas industry through Independent Contractor arrangements; The growth of the business was driven by a contractor management service to large Oil and Gas
Slide 59: Business strategy - Dare
Business strategy - Dare Adcorp Australia Industrial Services Focus on stability of Regional growth plan Integrated business current operations in across Australia and across Australia, Africa, core markets of Asia Pacific Australia, Asia Pacific Australia and Singapore and Middle East 59
Slide 60: Key clients / recent wins – Dare
Key clients / recent wins – Dare Adcorp Australia Industrial Services Key clients Recent wins 60
Slide 61: Business model – Labour Solutions Australia
Business model – Labour Solutions Australia Adcorp Australia Industrial Services LSA offers bulk recruitment and project based solutions for Blue Collar workers with a focus on short duration assignments; The business supports customer needs across a wide variety of industries but has carved a n
Slide 62: Business strategy - LSA
Business strategy - LSA Adcorp Australia Industrial Services Customer- focus: Front and Back Office Client retention and Building a Global Client organic growth Food and Fibre Perm, Industrial, White Construction, Collar Civil, Trades, Health Warehousing, Transport and Logistics Increase client and
Slide 63: Key clients / recent wins – Labour Solutions
Key clients / recent wins – Labour Solutions Adcorp Australia Industrial Services Key clients Recent wins Demolition and Construction daily hire market developing into $10m per annum business Comm Group with potential for $5m to $8m revenue per annum 63
Slide 64: Drivers for growth
Drivers for growth Adcorp Australia Industrial services Industry diversification Client diversification Account management capability and capacity Geographic expansion Integrated value Organic service led client propositions growth Digital platforms Margin management Reduce risk of cyclical and seas
Slide 65: Scenarios for growth
Scenario’s for growth Adcorp Australia Industrial services Oil and commodity prices Geographic, industry and Geographic, industry and remain depressed and capital client diversification strategies client diversification strategies project investment is sluggish make good progress thrive Clim
Slide 66: Adcorp Support Services
Adcorp Support Services WALDORP HE POWER OF POTENTIAL
Slide 67: Every threat to the status quo is an opportunity in disguise
Adcorp Support Services “Every threat to the status quo is an opportunity in disguise” Jay Samit Providing thought leadership via business intelligence 67
Slide 68: Overview of the division
Overview of the division Adcorp Support Services 1969 1974 1992 2015 68
Slide 69: Overview of the division
Overview of the division Adcorp Support Services >18m Services and solutions Level 2 payroll hours >60 000 TES BBBEE processed Bulk and contingency interviews Screen in excess of Permanent 500K candidates Rightsource employment services annually >45 000 Charisma Human Resource Assessments conducted
Slide 70: Our Culture
Our Culture Adcorp Support Services Our Values and espoused Culture Have an Impact , Be an Impact and Make an Impact I integrity in the way we act and deliver M motivated by new and improved ways of doing things Entrust. P passion and dedication for the work we do Deliver. A accountable and responsi
Slide 71: Growth drivers
Growth drivers Adcorp Support Services Growth and Collaborative Operational People and innovation partnerships effectiveness and culture efficiency 71
Slide 72: Business strategy
Business strategy Adcorp Support Services Strategic Intent 2017 - 2020 Positive Shareholder Returns Focused Revenue Growth Great Client Experiences Ease Of Business Leveraging Adcorp Group Innovative Solutions Building External Partnerships Partnership & Co-creation Effective Capacity High Performin
Slide 73: Client Revenue Mix
Client Revenue Mix - 2018 Adcorp Support Services 15 R 1495m 80% 30 R 187m 10% 1230 10% R 186m 73
Slide 74: Key clients / recent wins
Key clients / recent wins Adcorp Support Services Key clients Recent wins 74
Slide 75: Its not about ideas. Its about making ideas happen.
Adcorp Support Staffing Services “ Its not about ideas. Its about making ideas happen.” Unknown Providing thought leadership via business intelligence 75
Slide 76: Adcorp Financial Services
Adcorp Financial Services” A _ THE POWER OF POTENTIAL
Slide 77: Business overview & history
Business overview & history
Slide 78: Our businesses & history
Our businesses & history Adcorp Financial Services FMS – a body repatriation, claims processing business, BPO Employee Benefits - provider of benefits to Adcorp permanent staff and external clients Insurance – provider of long-term and short term insurance solutions internal and external FNDS3000 –
Slide 79: Business maturity diagram
Business maturity diagram Adcorp Financial Services FMS 5 Reinvention EB Pay Card 4 Insurance 3 Exponential 2 1 Introduction Growth Maturity Decline 79
Slide 80: Our Key focus & Strategy
Our “Key” focus & Strategy
Slide 81: Strategy
Strategy Adcorp Financial Services Phase 1 • Enhance culture – Implement new structure – one team • Grow internal base – higher take up – pay card and insurance • Enhance Insurance framework – to be scalable and compliant • Design innovative and appropriate solutions for Global Divisions (loyalty/re
Slide 82: Focus & Functional structure
Focus & Functional structure 82
Slide 83: Key clients
THE POWER OF POTENTIAL
Slide 84: Key clients / recent wins
Key clients / recent wins Adcorp Financial Services Key clients/Partners Recent wins • Road Freight Bargaining Council • Shoprite MSP • Webhelp Nedlife 84
Slide 85: Key drivers for growth
—_ -~ > Key drivers for growth THE POWER OF POTENTIAL
Slide 86: Key drivers for growth
Key drivers for growth Adcorp Financial Services Functional external distribution Adoption of 2.0 Culture channels Internal group take up and Skilled smart people (Spartans) optimisation Digital enablement New Innovative Solutions Compliant Frameworks and licensing structures Integrated back office
Slide 87: Outlook
THE POWER OF POTENTIAL
Slide 88: Outlook and numbers
Outlook and numbers Adcorp Financial Services 2017 2018 2019 2020 Aggressive Growth Targets 88
Slide 89: Value Add to Group
Value Add to Group Adcorp Financial Services Rm Rm Global Group Insurance Workers’ Compensation in Australia Framework & Savings AHA Alignment, structuring and savings Pay card • Reduces transactional costs Consolidated Employee Benefits programme • Reduces risk • Eliminates cash from the system 89
Slide 90: Adcorp Acquisitions
Adcorp Acquisitions THE POWER OF POTENTIAL
Slide 91: Acquisition history
Acquisition history Since FY-2008, 8 significant acquisitions have been made: FY-08 FY-09 FY-12 FY-13 FY-14 FY-15 FY-16 91
Slide 92: Acquisitions – R'million
Acquisitions – R’million 2 850 2 800 2 750 2 828 2 700 2 793 2 650 2 600 2 550 2 500 Cost of Acq's EBITDA 92
Slide 93: Acquisitions – Cost to price (per FY)
Acquisitions – Cost to price (per FY) R'million 700 637 634 600 500 490 400 300 280 276 248 200 210 100 - 2008 2009 2012 2013 2014 2015 2016 93
Slide 94: Goodwill
Goodwill 350 335 300 250 200 188 183 162 150 152 143 128 100 50 27 - FMS COG SUN PARACON PAXUS LSA KGL DARE 94
Slide 95: Cost vs. EBITDA earned
Cost vs. EBITDA earned 900 891 800 Cost EBITDA 700 673 600 637 616 500 448 400 360 300 256 266 259 248 231 200 209 209 100 113 130 29 - FMS COG SUN PARACON PAXUS LSA KGL DARE 95
Slide 96: IRR
IRR (only for acq’s longer than 5 years) 45% 40% 35% 42% 37% 30% 25% 20% 15% 16% 10% 5% 0% FMS COG SUN 96
Slide 97: Kelly Group strategic considerations
Kelly Group Strategic Considerations More stable margins Powerful combined MSP/RPO offerings Kelly operations integrated into existing Adcorp businesses Kelly corporate structure closed, with resultant savings of R94 million CEO, CFO, Co Sec., Internal Audit, HR, Marketing, JSE listing f
Slide 98: Adcorp Remuneration policy
Adcorp Remuneration policy
Slide 99: Convergence, collaboration and context
Convergence, collaboration and context King IV (to Specialist Shareholder Extensive Remco Key executive be tabled advisors and feedback Engagement contracts for adoption best practice FY 2017 expiring Q3 2017) Socio-economic Change Strategic re- Market research Remco-chair focus Drivers management a
Slide 100: Remuneration governance: our journey
Remuneration governance: our journey “Innocence” Awareness Understanding Competence Excellence (1975 onwards…) (listing on JSE 1987) (JSE regulations and (…FYE 2017) (1 March 2017 …) related) Operating business policy Consistency REMCO-engaged philosophy Executive remuneration policy guideli
Slide 101: Re-designed to current needs
Re-designed to current needs (King IV, specialist advisors and best practice) Policy Ethical leadership Attitudes Mindset Behaviour Practice Procedure 101
Slide 102: Strategic intent, sustained value creation
Strategic intent, sustained value creation Implementation report Board adoption and Business strategy Remuneration policy re-consideration Shareholder non-binding Performance Sustainable value creation advisory vote Remuneration protocol Non-executive Base Variable Recruitment, retention director fe
Slide 103: Disclosure requirements (IAR)
Disclosure requirements (IAR) Remuneration Background (context) Remuneration Overview of Implementation remuneration (pay-for- policy performance) (design principles) • New executive contracts and associated performance requirements are being re-drafted in accordance with this remuneration philosoph
Slide 104: Remuneration philosophy, principles and structure
Remuneration philosophy, principles and structure: pay for performance • Variable trumps fixed • Company trumps individual • Financial trumps non-financial TCTC • Performance relative to peer “Attraction, motivation and group retention of outstanding performers” • Benefit payable based on measured p
Slide 105: Thank you!
Thank you!