24 August 2023, Johannesburg – Workforce Holdings (JSE code: WKF), the Level 1 B-BBEE human capital services group that operates through four focused investment clusters comprising Staffing and Outsourcing, Training and Education, Healthcare, and Financial Services, released results today for the six-months ended 30 June 2023.
Ronny Katz, CEO of Workforce says that the first six months were challenging due to several factors, including low economic activity, loadshedding, high interest rates, lack of client confidence, and decreased demand for personnel services.
Although revenue increased by 7% to R2,1 billion (2022: R1,9 billion) during the period, Katz said this was mainly due to the investment clusters ensuring continued market presence. He went on to say that overhead costs increased by 12% because of burgeoning inflation rates and operating expenses geared for growth that did not occur due to the prevailing economic climate.
“We embarked on remedial action during March this year to right-size our businesses and to better position the Group for the coming year,” he indicated, adding that the effects of these interventions have become apparent since June as the company’s cost base has been better aligned to its operational requirements.
Katz expressed his appreciation to the investment cluster heads and their teams for their positive handling of the challenging operating conditions, saying that this further demonstrates the exceptional level of expertise and market awareness present in each cluster.
The Staffing and Outsourcing cluster generated revenue of R1,7 billion (2022: R1,5 billion). A tough macroeconomic climate affected the temporary and flexible staffing sector, resulting in reduced volumes and margin pressure given the poor economic growth. This impacted the cluster’s EBITDA performance, reducing it to R48,6 million (2022: R84,9 million).
In South America, the cluster has successfully replicated its South African business model, and the client base is growing, with some 30 clients already secured. Staffing operations are facing margin pressure and are having to renegotiate margins mid-contract in some instances. Because clients tend to reduce temporary staff before they consider reducing permanent staff, the cluster focused on cost consolidation and strict cost monitoring across all brands to improve profitability. However, sales and marketing efforts were maintained to ensure brand visibility.
The cluster has established its presence in Scotland and is awaiting additional contract awards. Technical skills from South Africa are deployed to Scotland for permanent and remote work opportunities. African operations have been focused on relatively stable sectors like mining, oil and gas, hospitality and tourism and manufacturing, which continue to deliver good returns.
The Africa cluster* gained momentum by partnering with companies in countries where Workforce does not have offices, such as Zimbabwe and Guinea, and securing new clients in Botswana and Mauritius where pre- Covid-19 conditions have returned.
Given the various issues facing the South African economy, the first half of this year was challenging for the Recruitment cluster*. Despite this, the cluster secured multiple large corporate clients for permanent recruitment services. The TES segment of the business continues to perform well and is generating good margins.
* Results for the Africa and Recruitment investment clusters are reported in the Staffing and Outsourcing cluster.
The Training and Education cluster successfully improved its cash collections and debtors management during the first six months of the financial year, resulting in a strong cash position. The overall profitability of the cluster aligns close to the budget and the second half of the year is expected to be more robust. Despite South Africa’s macroeconomic challenges, all brands within the cluster remain profitable, with some exceeding expectations. The cluster delivered revenue of R176,6 million (2022: R175,1 million) and EBITDA of R22,3 million (2022: R21,8 million). The training businesses have also secured contracts with mining clients in Zambia, Ghana and Tanzania.
The Financial Services cluster continued to show a positive progression in 2023, building on its previous year’s improvement. This is directly attributed to strategic shifts in management structures and the continuous enhancement of operational systems, bolstered by the successful integration of the GetSavvi acquisition into the cluster’s operations. Through a renewed focus on credit allocation strategies, further optimisation of collection methodologies and a targeted sales approach, the cluster increased interim revenue by an impressive 27%, from R70,8 million in 2022 to R90,2 million in 2023. The commitment to prudent cost management remained a key focus, as it implemented various cost reduction initiatives. These initiatives combined to generate a positive EBITDA of R1,5 million compared to the previous year’s negative EBITDA.
In the Healthcare cluster, the occupational Healthcare and employee wellness business has experienced positive organic growth since the Covid-19 pandemic subsided, with existing clients resuming their wellness programmes and new clients having been acquired. The healthcare professional outsourcing brands successfully secured new clients in the frail care sector and with a leading pharmaceutical Group but were forced to terminate a significant contract in the public sector due to non-payment. As a result, marketing efforts have been refocused, as well as the implementation of a leaner overhead structure to align with current market conditions. Revenue for the cluster was R193,6 million (2022: R206,5 million) with EBITDA of R19,7 million (2022: R27,5 million).
Our projections for the second six months of the year indicate that lower operating costs and a seasonally better second half of the financial year will result in the overall improved profitability for the Group.
“We anticipate that the challenging business environment will continue for the balance of the year and into 2024 but believe that we are better structured to withstand the headwinds. As government and private sector investment into infrastructure development continues to grow, this should impact positively on our own business, Katz said.
He concluded by saying that the Group’s expansion into Africa and beyond is showing positive signs. “We believe this to be an important development and opportunity for the Group in the future. Our diversification policy that we continue to implement through the different investment clusters, will continue to develop and significantly contribute to Group profitability and to our risk management initiatives in the medium term.”
Note to the editor:
For the full SENS announcement and detailed financial results, please visit www.workforce.co.za
About Workforce Holdings Limited (www.workforce.co.za)
Workforce Holdings and its Group of companies is a leading, trusted provider of employment, functional outsourcing, training, healthcare, wellness, financial services and lifestyle benefits to individuals and their employers. Our human capital solutions include temporary employment services, permanent placement recruitment, training and skills development, healthcare and wellness, disability solutions, financial services and lifestyle benefits and business process outsourcing. Workforce Holdings Limited is listed on the AltX board of the JSE.