ADR Trading Statement and Operational Update ADCORP HOLDINGS LIMITED (Incorporated in the Republic of South Africa) Registration number: 1974/001804/06 Share code: ADR & ISIN: ZAE000000139 ("Adcorp" or "the Group") TRADING STATEMENT AND OPERATIONAL UPDATE FOR THE SIX MONTHS ENDED 31 AUGUST 2020 Trading statement In terms of the Listings Requirements of the JSE Limited (JSE), companies are required to publish a trading statement as soon as there is a reasonable degree of certainty that the financial results for the period to be reported upon next will differ by at least 20% from the financial results for the previous corresponding period. Adcorp advises shareholders, with reasonable certainty, that operating profit, total basic earnings per share (EPS) and total headline earnings per share (HEPS) for the six months ended 31 August 2020 will be as follows: - Operating profit of between R102.1 million and R112.9 million compared to operating profit of R86.3 million for the six months ended 31 August 2019 (the Comparative Period), representing an increase of between 18% and 31%. - EPS of between of 30.5 cents per share and 51.1 cents per share compared to a loss per share of 413.3 cents for the Comparative Period (representing an increase of between 107% and 112%). - HEPS of between 41.4 cents and 42.4 cents per share compared to HEPS of 5.1 cents per share for the Comparative Period (representing an increase of between 712% and 732%). In addition to the improved operating profit, EPS and HEPS, Adcorp has also improved its liquidity and debt position. Group net debt has improved to R365 million at 31 August 2020 compared to R683 million at year end 29 February 2020. Included in net debt at 31 August 2020 are the drawn borrowing facilities, cash on hand and deferred accounts payables due to COVID-19. Net cash on hand increased by R382m to 31st August 2020, after a net repayment of borrowings of R414m. As anticipated, Adcorps financial results for the six months ended 31 August 2020 have been impacted by the economic slowdown and continued trading limitations related to COVID-19. Adcorp responded appropriately under these circumstances by curtailing costs, significantly increasing cash collections and extending credit terms. The preservation of revenue and margin under these abnormal circumstamces has been challenging. The Groups profits are higher than in the first half of the prior year largely as a result of rigorous management of operating costs to mitigate the impact of COVID-19. In addition, shareholders are reminded that the results for the FY2020 half year period were impacted by significant impairment of the goodwill in some of the Groups resourcing businesses. Non-recurring costs of approximately R65.7 million relating to initiatives aimed at building a lean operating model and increasing efficiencies, were incurred in the first half. The latter were offset by a significant reduction in operating costs. Group revenue has declined by 10% to 12% largely due to the interruption of classroom- based training in South Africa, as well as a substantial reduction in commercial activity and consequently demand for labour in both our operating geographies. However, operating profits yielded a pleasing outcome with South Africa increasing by 11% to 22% and Australia by 79% to 98%. The liquidity management measures and interventions introduced to mitigate the impact of COVID-19 continue to remain firmly in place. Particularly pleasing was the impact of improved collections on accounts receivable in South Africa, which saw cash generated from operations for the period of R858m (R110m for the six months to 31 August 2019), largely driven by a decrease in trade and other receivables of approximately R499m. The improved collections and reduction in the accounts receivable book also significantly reduces the credit risk for the remaining book. Australia net debt has also improved in the last six months to a credit position of R5 million, raising the possibility of intercompany loan repayments to the South African operations going forward. On the back of the strong generation of cash for the last six months noted above, Adcorp believes it has made tremendous progress in its initiatives aimed at strengthening the balance sheet. The Group has stabilised its liquidity position by successfully refinancing long term borrowings until May 2022. The divestiture of Dare Australia has been concluded shareholders are referred to the detailed terms announcement released on SENS on 22 September 2020. The net result of the above initiatives makes it unlikely that the Group will need to dispose of additional non-core assets other than those already in progress. Operational update South Africa Revenue in the Industrial Services portfolio has decreased by 22% to 24% compared to the same period in the previous financial year. This decline was largely in Temporary Employment Services (TES) as the hospitality, automotive and industrials sectors, which consititute a significant portion of this segment, were the worst affected during lockdown. In contrast, Functional Outsourcing reported an increase in revenue as it benefitted from operating in sectors that were mostly deemed as essential services during lockdown levels 4 and 5. Industrial Services reported an increase in EBITDA largely attributed to the focus on cost savings coupled with a drive to ensure a profitable client mix. Revenue in the Professional Placements portfolio has decreased by 23% to 25% when compared to the first half of the previous financial year. The loss in revenue in Paracon can primarily be attributed to budgetary constraints of major clients which resulted in reduced contractor hours. In addition, permanent placement requirements were minimal during the COVID-19 lockdown period and recovery in this area is proving to be slower than anticipated. Significant cost saving measures were introduced to counter the impact of the loss in revenue, resulting in an overall reduction of overheads and an increase in EBITDA. The Training portfolio experienced a significant negative impact on EBITDA due to revenue contraction of 40% to 42% compared to the same reporting period in the previous financial year. Training recognised minimal revenue for the months of April, May and June due to the business being solely reliant on instructor led training pre-COVID-19. In addition, clients cut back investment in learning and development, and the adoption of the virtual platform offering has been slower than expected. Although the uptake of virtual training has been slow, it has allowed the Group to start providing training in geographies outside of South Africa. Australia Australia showed resilience notwithstanding a sustained lockdown in certain regions. Revenue declined by 6% to 8% in AUD (approximately 10% to 12% increase in ZAR) due to lower permanent recruitment fees, delayed project revenue and a decrease in client demand for labour as a result of COVID-19. However, EBITDA is higher than the same period in the previous financial year driven by a focused reduction in operational costs and the benefit of government relief income. As a result of the increase to bottom line profits, debt has reduced by approximately 45% as free cash has been utilised to pay down loan facilities, thus strengthening the Groups financial position and de-gearing the balance sheet. Adcorp expects to release results for the six months ended 31 August 2020 on or about 25 November 2020 and the results will be presented via webcast in light of the COVID-19 outbreak. The financial information on which this trading statement is based has not been reviewed, or reported on, by the Groups external auditors. Johannesburg 15 October 2020 Sponsor PSG Capital Date: 15-10-2020 11:07:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct, indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on, information disseminated through SENS.