Professional services company Adcorp has sold two of its noncore business units for R227.3m.
Following a review of its strategy and portfolio, the group said in a statement the two units — FMS Division and Employee Benefits Division — do not fit into its criteria of becoming “a leading workplace solutions company in select geographies” and have therefore been deemed noncore.
FMS Division, provides body repatriation and funerary support related services that include emergency medical services, legal, trauma, assault and HIV support. The Employee Benefits Division offers employee benefits, insurance products and services, inclusive of core insurance benefits, income protector, lifestyle benefits and provident fund services.
The value of net assets for the two units as at the half-year ended August, was R181.1m, including intragroup loan receivables and payables. Profit after tax attributable to the units for the interim period was R14.4m.
Adcorp, which operates in SA and Australia, said a special general meeting of shareholders will be convened to give the deal final approval.
Proceeds from the sale will be used to reduce the group’s debt and add to its cash reserves.
This sale comes as Adcorp said last week interim revenue from continuing operations decreased 11% to R6.1bn from R6.9bn at the same time a year earlier. Profit after tax from continuing operations increased to R17m, recovering from a R470m loss last year.
Now valued at R626.74m on the JSE, the group reported that headline earnings per share (HEPS) increased to 41.9c, from 5.1c previously, a more than eight-times increase.
Due to the lockdown, the group said it doubled down on increasing cash collections, reducing costs and extending credit terms. This resulted in profits being higher than in the first half of the prior year “largely due to rigorous management of operating costs to mitigate the impact of Covid-19”.
The group improved its cash position, generating R861m for the period up from R110m, while reducing its gearing ration to 45%.
The company says certain parts of its business are ideally suited to a flexible staffing solution amid market volatility. Adcorp anticipates that the global staffing industry will see a reliance on project-based terms and short-term contracts “creating market opportunities over the next few years”.
Adcorp’s stock, which trading 56% so far in 2020, closed 3.64% firmer on Tuesday at R5.70.