Adcorp still needs a bit of a trim, but it’s looking up



Adcorp still needs a bit of a trim, but it’s looking up

Activist shareholder Value Capital Partners has been instrumental into kicking the recruitment firm into line

Siseko Njobeni

If this week’s results are anything to go by, Adcorp is slowly turning the corner, with the relatively new management team making good on its promise to ring some changes.
The most noticeable of these changes, which are part of a strategy to turn the firm around, include cutting the company’s net debt by more than half, from R1.3bn to R646m. Tackling the debt burden is a no-brainer if the company is going to make any progress in preparing for future growth.
The new management team must reverse Adcorp’s history of underperformance, an over-geared balance sheet (at the end of August last year, the company’s gearing was 61%) and a complex management structure. That is why the company’s priorities in the current financial year include simplifying its group structure. In SA alone, the company has 53 legal entities, says CFO Cheryl-Jane Kujenga.
Another legacy issue that Adcorp’s new management must tackle is the company’s tendency to pay high dividends. The company now wants to have “a considered approach” to capital allocation. In other words, payouts will be made according to a clear dividend policy. Kujenga says there were many instances in the past when Adcorp’s dividends payouts were “incredibly high.”
The company’s future dividend policy will become clear at the release of its year-end results where it will share with its shareholders details of its capital allocation plans.
Along with the other measures, the group has also prioritised cost-cutting, hence the 16% drop in operating expenses in the interim period. The positive changes at Adcorp came about after Value Capital Partners came on board last year. A 14.55% shareholder in Adcorp, Value is an activist shareholder obsessed with unlocking value in the entities it invests in.

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