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ANNUAL RESULTS: DIVERSIFICATION STRATEGY PAYS OFF FOR WORKFORCE HOLDINGS

Highlights from the year

• Revenue increased by 11.3% to R2.8 billion
• Gross profit increased by 6.1%
• EBITDA decreased marginally by 0.4% to R133.9 million
• Profit after tax increased by 7.6% to R98.5 million
• Headline earnings per share increased by 7.0% to 42.8 cents
• NAV per share increased by 21.5% to 237 cents per share
• Net tangible asset value per share increased by 18.7% to 159 cents per share
• Net interest-bearing debt to total assets is 28% (2016: 27%)

15 March 2018, Johannesburg – Workforce Holdings, the listed human capital services company, whose subsidiaries provide employment, training, healthcare, wellness, financial services and lifestyle benefits to individuals and their employers, covering all industry sectors of the economy, today released results for the year-ended 31 December 2017. Not withstanding the tough trading and economic environment in 2017, the group’s results continued to show solid, albeit modest, growth and again highlighted the resilience of Workforce’s diversified business model.

Revenue for the year increased by 11.3% to R2.8 billion (2016: R2.5 billion), of which 4,6% is attributable to organic growth, with the remaining growth resulting from acquisitions.
Lower gross margins of 22.6% (2016: 23.7%) resulted due to the conclusion of several large infrastructure projects in 2017 and a challenging recruitment environment reduced EBITDA marginally to R133.9 million (2016: R134.4 million).

Operating expenses, including costs from acquisitions, increased by 11.1% resulting in an unchanged operating expense to turnover ratio of 18.3% (2016: 18.3%). Organic operating expenses only increased by 2.9%. Debtor’s impairments were, however, at improved levels compared to the comparative period. Excluding debtor’s impairments, organic operating expenses increased by 8,8% compared to the comparative period.

Profit after tax increased by 7.6% to R98.5 million (2016: R91.6 million) and headline earnings per share increased by 7.0% to 42.8 cents per share (2016: 40.0 cps).

“We are proud that the group continues to make a meaningful and sustainable difference to people’s lives. We are providing permanent employment to 1 343 employees, remunerating 34 241 assignees weekly, training 137 000 people annually, facilitating 4 600 learnership and internship programmes, insuring over 36 277 lifestyle benefit policies and conducting over 71 396 medical examinations through our 26 operating brands, network of 103 branches and 18 training centres across South Africa,” said Philip Froom, Group CEO of Workforce.

Operational structure and review

During the year under review, Workforce consolidated its previous five reporting segments into three segments – the three segments now being: Staffing and Outsourcing, Training and Consulting, and Financial and Healthcare. According to Froom, this provides for a better representation of the current core trading areas of the group and allows for a simpler understanding and communication of the performance of the business.

The Staffing and Outsourcing segment accounts for 81% of EBITDA prior to central costs (2016: 82%). Recent acquisitions have contributed to the Training and Consulting segment now accounting for 11% of total EBITDA (2016: 10%). The Financial and Healthcare segment contributed 8% to EBITDA (2016: 8%).

“The growth in our Training and Consulting segment is particularly pleasing considering that this segment has grown from a contribution of 2% of our total EBITDA just two years ago to the current 11%. South Africa experiences significant skills shortages and this segment is a strategic focus area for us for both organic and acquisitive growth,” said Froom.

Outlook

The Group indicated that pending labour legislation including the Constitutional Court ruling on the ‘Deeming provision’ and the introduction of the National Minimum Wage in May 2018, afforded it the opportunity to actively engage with clients and provide them with robust solutions to meet the changing regulatory landscape.

“Workforce is committed to facilitating employment by enabling a flexible workforce for corporates while simultaneously ensuring protection of workers’ rights in terms of fair remuneration, pay parity, employee benefits and opportunities for growth and development.”

Froom went on to explain that the world of work is constantly changing. “In an increasingly competitive and regulated environment, companies need to be flexible and as a result, they tend to focus more on their core activities, increasingly outsourcing human capital management activities.”

The Temporary Employment Service (“TES”) industry has created more jobs in the South African economy than any other industry since 1995. Furthermore, the TES industry employs far more youth than any other industry of the economy. This is crucial as more than 50% of the current youth in South Africa is unemployed.
“Many of the assignees Workforce places into employment are the ‘vulnerable’ – in other words, the youth, people with disabilities and the unemployed or first-time job seekers. Although we are driven commercially, we are proud of the meaningful societal impact we make,” Froom said.

He concluded by saying that several initiatives and partnerships between government and business are underway to spur growth and create jobs, and government’s progress on its delayed infrastructure development plans should result in further demand for the group’s services.

-Ends-

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