Adcorp Staffing and Business Process Outsourcing in SA

Transcription

1 Presentation to the Investment Analysts Society May 2009

2 Agenda The business of Adcorp Industry overview Macro environment overview Financial overview Group strategy Other issues BEE ERP system implementation Outlook

3 The Business of Adcorp

4 Adcorp s mission To position the Group as the leading provider of human capital management and business process outsourcing services offering: Comprehensive staffing and recruitment services and solutions; Business process outsourcing (BPO) services; Relevant employee benefit, financial, wellness and life style products and services to our sizeable contract workforce

5 The business of Adcorp Staffing (85%) Permanent recruitment (15%) Contingency search and selection Recruitment advertising Executive search Flexible staffing (contract labourand training) (70%) Blue collar (75% of flexi staffing) White collar (20% of flexi staffing) Health care professionals (mainly nurses) Incorporates training Approximately temps on assignment at any given time Business Process Outsourcing (BPO) (15%) Call centres Value added and outsourced services to the life insurance (funeral) and employee benefits market Recruitment process outsourcing (RPO) HR services (incl. training, payroll outsourcing)

6 Brands and service offerings Staffing Capacity Blue collar Capital Blue collar* (June 2007) Employrite Blue collar* (Dec 2006) Staff-U-Need Blue collar (power generation)* (Aug 2008) Emmanuels White collar / call centres Quest White collar / call centres Charisma Nursing DAV Permanent placements (most disciplines strength IT / engineering) Grey Permanent placements (strength financial professionals) Premier Permanent placements (strength financial professionals) Adcorp Search Partners Permanent placements (strength executive search in association with Odgers Berndtson) Business Process Outsourcing FMS Value added / outsourced services to life and employee benefit providers / affinity groupings* (Jan 2007) ATR (incl. Jobvest) Recruitment advertising / employer branding / response handling PMI Manufacturing / warehousing / training * Recent acquisitions

7 Characteristics of the business Permanent recruitment (15%) Beneficiary of skills shortage (engineering, IT professionals, affirmative etc.) Public sector relatively buoyant More susceptible to economic cycle than flexible staffing Flexible staffing (70%) Blue collar Relatively defensive to economic slowdown White collar Impacted by downturn in retail financial services - currently demonstrating stability Market currently highly receptive to value added offerings Workplace optimisation Automated time-sheeting Learnerships Shifting and scheduling VMS etc. Nursing and training- dependable with upside

8 Characteristics of the business (cont.) BPO (15%) - Predominantly annuity income - Typically higher margins - Long term contracts Recently implemented new ERP system Centralised back office offers advantages of scale

9 Industry Overview

10 Industry overview : exceptional growth in international staffing industry From US$132bn p.a. to US$ 325bn p.a. SA industry contributes R 26bn p.a. to the economy (89% a-typical) Approx private employment agencies in SA Approx members represented by Confederation of Associations in the Private Employment Sector (CAPES) a member of BUSA In SA, between 4% and 6% of economically active population are placed by temporary employment services (TES) into flexible, temporary or contract forms of employment on a daily basis (Adcorp 15% market share) Major conduit for first time job seekers into formal employment Global skills deficit still exists, albeit within specific sectors and job categories Strong trend towards Human Resource and Recruitment Process Outsourcing

11 Possible regulation of Temporary Employment Services (TES) Trade Union pressure regarding the use of labour brokers Concerns regarding exploitation of workers ( bakkie brigade ) e.g. Exploitative wage practices Disregard for basic occupational health and safety regulations Tax evasion Inability to organise / unionise Use of illegal immigrants etc. Concept of co-regulation introduced by the industry at Nedlac in 2004 proposal for a Private Employment Agency Board Little to no subsequent response from either Government or labour Suddenly a major electoral issue with calls for a ban by Minister of Labour Desire to ban industry denied by President Zuma, DTI Minister, ANC NEC members Mathews Phosa and Gwede Montashe the (Labour) Minster as an individual can t do this Ministry of Labour spokesman Zingisile Mapazi Government inability to enforce existing legislation which more than adequately addresses requirements around TES

12 Possible regulation of Temporary Employment Services (TES) (cont.) Industry represented via BUSA at Nedlac by CAPES ANC election manifesto. avoid exploitation of workers and ensure decent work for all workers as well as to protect the employment relationship, introduce laws to regulate contract work, subcontracting and out-sourcing, address the problem of labour broking and prohibit certain abusive practices. ILO definition of decent work Reasonable wage Compliance with occupational health and safety regulations Access to social benefits Security of tenure The right to organise Staffing industry endorses these principles Outcome could be positive for responsible operators

13 Macro Environment Overview

14 Global Unemployment Trends

15 Source:

16

17 Positioning (blue collar bias) Market leaders (better quality business) Sustainable differentiation Selective industry exposure Pro-active leadership - Stealth initiatives Quality acquisitions

18 Financial Overview

19 Financial Overview Figures significantly impacted by IFRS Non-Cash Adjustments Figures presented have been normalised to exclude IFRS impact Year to Year to Impact of IFRS Feb 2009 Feb 2008 Amortisation of intangible assets Share based payments Imputed interest charge Lease smoothing Profit on disposal of part of continuing operations Tax effects on above IMPACT ON HEADLINE EARNINGS Impairments Profit / (loss) on disposal of discontinued ops IMPACT ON ALL EARNINGS Impact on HEPS (cents) Impact on EPS (cents) % Impact on HEPS -30% -50%

20 Performance against stated financial targets Financial Year to Year to Year to Target Feb 2009 Feb 2008 Dec 2006 Return on assets managed (ROAM) 33.0% 43.8% 40.5% 32.0% Return on sales (ROS) 5.5% 6.2% 5.9% 4.9% Asset turnover (ATO) - times Cash conversion ratio 90% 81% 141% 75% Debtors days Interim gearing target* 47% 38% 31% 6% * Long term gearing target set at 30%

21 Normalised abridged Income Statement Year to Year to % Feb 2009 Feb 2008 Change REVENUE % Cost of Sales % GROSS PROFIT % Other income % Admin, Marketing and operating expenses % OPERATING PROFIT % Interest received % Share of profits from associates Profit before taxation % Taxation % PROFIT FOR THE YEAR % Weighted average shares (000's) Diluted weighted average shares (000's) Core headline earnings per share % Diluted core headline earnings per share % Total dividends (cents) % Interim dividend (cents) % Final dividend (cents) %

22 Normalised abridged Segment Analysis Year to Year to % Feb 2009 Feb 2008 Change REVENUE % Central costs Staffing % Business process outsourcing % EBITDA % Central costs % Staffing % Business process outsourcing % EBITDA MARGIN 6.7% 6.5% Staffing 6.4% 6.1% Business process outsourcing 22.6% 24.2%

23 Normalised abridged Balance Sheet Year to Year to % Feb 2009 Feb 2008 Change ASSETS Non current assets % -Non-current tangible assets Non-current intangible assets Current assets (excl. cash) % Total assets % EQUITY AND LIABILITIES Capital and reserves % Non-interest bearing liabilities % Net Interest bearing debt % Total equity and liabilities %

24 Key Cash Flow Information Year to Feb 2009 Cash generated by operations Free cash generated by operations Free cash generated by operations per share (cents) Cash conversion ratio 81% Debtors days outstanding 35

25 Analysis Growth Statistics Feb 2009 Revenue growth 23% EBITDA growth 27% Operating profit growth 28% Diluted core HEPS growth 19% Growth in central costs 7% Growth in staffing profit (EBITDA) 29% Growth in BPO profit (EBITDA) 7% Organic growth in diluted core HEPS 15% Acquisitive growth in diluted core HEPS 4% Growth in interim dividend 3% Growth in final dividend* 0% Growth in total dividends 3% *Final dividend held in order to explore share buy backs

26 Analysis - Profitability Year to Feb 2009 Year to Feb 2008 Return on assets managed (ROAM) 43.8% 40.5% Return on equity 28.0% 30.0% Gross profit percentage 23.0% 24.2% EBITDA profit percentage 6.7% 6.5% Operating profit percentage (ROS) 6.2% 5.9% Effective tax rate 24.0% 22.7%

27 Analysis Solvency, liquidity and productivity Year to Year to Feb 2009 Feb 2008 Interest bearing debt to equity (gearing) 38% 31% Interest cover (times) 10 12

28 Group Strategy

29 Strategic priorities Protect top line business as far as possible Realise the potential of stealth initiatives Resourcing Timesheets Payroll Finance Temp Staff Benefits Learnerships HR Focus on cash generation Seek out quality acquisitions Lobby for friendly regulation Retain top talent

30 Other Issues Other Issues

31 The only Level 2 Contributor on the JSE

32 Microsoft Dynamics AX ERP implementation System now live Implementation successful with minimal disruption Will contribute positively to the quality, extent and relevance of management information Focus now on: Automation Standardisation Business Intelligence

33 Outlook Outlook

34 Outlook 2009/10 going to be tough however, a number of mitigating factors: Trend to outsourcing (the case for flexibility) Counter cyclical nature of flexible staffing Strong bias to blue collar contracting Selective industry exposure Learnerships (Skills Development Act) Quality acquisitions Compelling value added offerings (RPO, w/force optimisation, VMS) Financial products to temporary workforce Skills shortage in many disciplines Economies of scale (centralised back office) For these reasons, should outperform the economy

35 Outlook (cont.) Need to be defensive (costs and productivity) as well as offensive (top line and market share) Need to remain extremely focused Opportunities significant if we can weather the storm relatively unblemished Opportunity to use these market conditions to build a more robust, sustainable, market leading and dominant business model positioned exceptionally for the upswing

36 Questions and discussion