Poor economy, floods and drought hit Adcorp's earnings

Shares in workforce-management company Adcorp [JSE:ADR] fell sharply in late trade on Friday after it announced that poor trading conditions in South Africa and extreme weather events in Australia had taken a major bite out of its earnings.

In a trading update Adcorp said it expects headline earnings per share to fall to between 4.9c and 5.9c for the first six months of the financial year, compared to 88.3 cents for H1 2018. This represents a decrease of between 93.3% and 94.5%.

Its share price had fallen 17% to R16.50 a share by 16:55. 

The workplace solutions provider said that in SA, high unemployment and a struggling economy saw its clients cutting back on temporary hires and delaying the appointment of permanent employees.

"This has resulted in higher than anticipated volume reduction in our South African Industrial Services business, exacerbated by margin pressure from our clients."

In Australia, meanwhile, severe droughts and flooding impacted on its business which primarily provides staff to that country's agricultural sector.

"The last twelve months have seen record-high daily temperatures followed by unprecedented torrential rain and flooding, resulting in widespread crop failures and livestock losses, hence a decline in demand for the staff provided by Labour Solutions Australia."

The group said it expects to release its results for the six months ended August on or about 28 October 2019.