Our opinion on the current state of ADR

Adcorp (ADR) is an employment company with subsidiaries operating in South Africa and Australia. Managerially, efforts have been made in (1) defining and focusing on the core business (2) reducing costs (3) strengthening the brand and (4) transforming the culture. In its results for the year to 28th February 2023 the company reported revenue up 6,5% and headline earnings per share (HEPS) of 147,8c compared with 99,7c in the previous year. The company said, "The overall Group performance was impacted by the following: • Considerable contract losses at allaboutXpert Australia Proprietary Limited (“aaX”), a subsidiary of Adcorp Holdings Australia and Impairment of goodwill of R34,4 million (2022: Rnil) recognised in the Paracon business". In a trading statement for the six months to 31st August 2023 the company estimated that HEPS would increase by between 175% and 195%. The company said, "The results for the comparative period were markedly impacted by the exceptional losses incurred in allaboutXpert Australia Pty Ltd". Technically, the share has been drifting sideways and downwards for the past 20 months although the prospect of a special dividend saw the share jump in late May 2023. Obviously, the high unemployment level in the economy had negatively impacted on this business and COVID-19 made the situation worse. It has suffered from the difficult conditions in the South African economy, but the new management team appears to be making the right moves. We believe that the share has potential.