Workforce business model gains traction despite economic constraints

Highlights of the year

  • Revenue increased by 7,1% to R3,2 billion from R3,0 billion
  • Operating expenses increased by 8,3% to R562,9 million from R519,8 million
  • HEPS decreased by 5,1% to 42,4 cents from 44,7 cents
  • NAV increased by 17% to 308 cents from 264 cents
  • Days sales outstanding improved to 50 days from 53 days
  • Chartall acquisition – total acquisition value of R34,8 million


31 March 2020, Johannesburg – Workforce Holdings, the human capital services company, today released results for the year ended 31 December 2019.  In what CEO Ronny Katz described as “one of the most challenging operating environments in many years”, EBITDA declined by 19,0% from R173,9 million to R140,9 million, mainly due to modest sales growth of 7,1%, flat gross margins in rand terms and an increase of 8,3% in operating expenses.

Katz explained that this increase was  to support a significant drive from the healthcare, training and Africa clusters to increase their capacity in the areas of human capital, technology, geographical expansion and the establishment of new verticals.

“Our cluster model was implemented last year to ensure a strong base from which to generate additional income from current and new income streams in future,” said Katz, adding that this strategy was working extremely well. “We took a further step forward during this reporting period with the appointment of dedicated cluster executives to further drive the holistic Workforce offering. The clusters are positioned in such a way that many are able to cross-sell services.”

The group’s debt:equity ratio improved to 0,45 (2018: 0,54), with a goal of maintaining a debt:equity ratio of between 0,4 and 0,7.

Katz said that Workforce continues to have to deal with a faltering economy, the ever-increasing unemployment rate, and poor investor sentiment. “Minimum wage legislation was introduced in 2019 and we actively engaged with our clients at the time to assist with any implications and opportunities arising from this. From a regulatory perspective we welcomed the introduction of the legislation, believing it will, in the longer term, improve the stability of labour in the country and provide fairer and more sustainable pay structures. However, the recent increase in the minimum wage by 3.8% undoubtedly had an impact on clients.”

Katz also noted that key to Workforce’s business model was the extension to 28 February 2029 of the Employment Tax Incentive (“ETI”) by Government. No dividend was declared in order to conserve cash resources given the current economic circumstances.

Post the financial year-end, the group acquired Chartall Business College with funding secured through an existing facility with the group’s bankers. In terms of this deal, a maximum purchase consideration of R34,8 million in cash is payable by Workforce subject to various performance conditions being achieved by Chartall Business College. The value of the net assets acquired as at 31 December 2019 equate to R6,8 million and the unaudited profit after tax attributable to these net assets was R6,9 million.

Operational structure and financial review

The staffing and outsourcing cluster had to navigate previous uncertainty relating to the deeming provision, the introduction of a minimum wage and a depressed employment market. Revenue increased by 6% to R2.6 billion (2018: R2.5 billion) albeit with a reduction in headcount but EBITDA reduced by 22% to R125,9 million (2018: R161,8 million). This was mainly due to margin pressures resulting of the minimum wage introduction and further maturity of the Employment Tax Incentive (“ETI”), which had a small effect. The end of the financial year saw an increase in headcount serviced by staffing and outsourcing, which was evidenced by significant growth in turnover during November and December.

The training cluster increased operating expenses by 32% to R109,5 million. Despite this, the cluster produced satisfactory results with an increase of 16% in revenue to R286,4 million (2018: R247,1 million) and an increase in EBITDA contribution of 5%. During the year the cluster contended with job losses in the mining sector, which was countered by quickly incorporating training arising from new B-BBEE code changes and acquiring more corporate clients.

Similarly the healthcare cluster increased its delivery capacity, with an increase in operating expenses of 13% to R52,8 million (2018: R46,7 million). It delivered robust results by increasing revenue by 11% to R274,0 million (2018: R244,0 million) and EBITDA contribution increased by 16% to R29,0 million (2018: R25,0 million). The cluster, year-on-year, placed more healthcare professionals and brand recognition and credibility drove growth in wellness services. All growth was organic and resulted from focused strategic initiatives in place.

The 4% increase in operating expenses in the financial services cluster is mainly attributable to it hosting 60 YES Programme participants in its call centre and establishing a presence outside of South Africa. In this cluster there a decline in revenue of 7% to R94,2 million (2018: R101,9 million) with EBITDA flat at R15,8 million (2018: R16,0 million). Management has spent a large part of the year increasing its capability to service the African market outside of South Africa. Whilst some revenue was generated in Africa, management is planning for an increase in activity outside of South Africa during the coming year.

Covid-19 and outlook

The Covid-19 pandemic and resultant 21-day national lockdown has created an uncertain and unpredictable environment for the entire economy. Accordingly, management is highly focused on maintaining cash flow by the reduction of overheads and strictly managing and generating working capital throughout the group.

Despite the national lockdown negatively impacting some of our clients and business activities, we also have a fair portion of clients and our own business clusters that are deemed to be essential services and we anticipate good demand in these areas going forward. Taking these factors into consideration, Workforce is confident that the group has the necessary capabilities and resources in place to cope with the current situation.

For the full SENS announcement and detailed financial results please visit


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