Workforce produces strong results supported by diversification strategy

Salient features of these results

• Revenue increased by 7.7% to R1.53 billion (2018: R1.42 billion)
• Cash generated from operations increased by 28.5% to R48.5 million (2018: R37.7 million)
• EBITDA increased by 5.2% to R80 million (2018: R76 million)
• EPS decreased by 6.1% to 18.5 cents per share (2018: 19.7 cents per share)
• Positioned to benefit from diversification

9 September 2019, Johannesburg – Workforce Holdings, the human capital services company, today released results for six months ended 30 June 2019. The results continued to show growth despite an extremely difficult operating environment, with revenue increasing by 7.7% to R1.53 billion (2018: R1.42 billion).

EBITDA for the period increased by 5.2% to R80.0 million (2018: R76.1 million) on the back of this. The period saw many Workforce clients experience financial pressure as a result of the economy but, despite this, the company improved its cash flow from operating activities to R48.5 million (2018: R37.7 million). Operating cash conversion improved to 0:61 (2018: 0:58).

Ronny Katz, the CEO of Workforce, revealed that, “Workforce continues to make excellent progress in realising its vision of being a diversified services company with various subsidiaries that provide an extensive range of innovative, integrated and diversified people solutions to all industry sectors in southern Africa.”

“Overall performance was also negatively affected by the overall subdued economic climate, the election effect and a general contraction in government spend on infrastructure.”

Despite these challenges and supported by the group’s diversification strategy, the non-staffing components continue to represent a larger contribution than prior years. “This is, in the current period, still the largest contributor to revenue and EBITDA, albeit off the back of a lower result in our staffing and outsourcing businesses,” Katz elaborated. Uncertainty in the deeming provision had a negative knock-on effect on the staffing and outsourcing cluster’s growth in the first six months of the year.

Operations and financial review

Workforce continues to feel the pressure of a poor operating environment, challenged by pedestrian economic growth and a delayed project approval cycle, especially in the solar sector where Workforce is strongly positioned. Workforce is encouraged by the stance taken by Government in the stemming of corruption and a drive to stimulate the economy. However, the changes in cabinet positions have tended to delay decision-making, which the group expects will be smoother in the coming six months as the portfolios are bedded down.

The ETI, a programme which incentivises the employment of unemployed youth between the ages of 18 and 29, remains a significant contributor to group financial results. The ETI contribution, however, was lower during the period due to lower economic activity experienced by our staffing cluster. However, due to the enormous success of the programme, Government has announced an extension to 28 February 2029.

The staffing and outsourcing cluster (which includes the recruitment and Africa clusters) experienced low

growth in turnover and a reduction in EBITDA of 15% to R65.0 million (2018: R76.0 million) due to economic and legislative challenges.

The training cluster improved EBITDA by 42% to R27.3 million as a result of a higher gross margin and organic growth in turnover. Dyna Group, our latest acquisition, contributed R2.8 million to the increase in EBITDA. The Training cluster now contributes 25% to total EBITDA, compared to 17% in the previous year.

The healthcare cluster invested in new business growth resulting in an increase in EBTIDA of 54% to R15.9 million (2018: R10.3 million). The additional investment in infrastructure and human capital benefitted the healthcare cluster, which has continued to focus on new service offerings, including expanding its presence at wellness days and establishing various healthcare solutions such as multidisciplinary healthcare practices. Although the healthcare landscape remains competitive, Workforce managed to increase market share through building brand awareness, creating on-line visibility, coupled with an aggressive growth strategy that has yielded positive results.

Fair value adjustments and depreciation resulting from acquisitions amounted to R9.9 million.

No interim dividend was declared.

Outlook

Katz indicated that, “Looking to the second half of our financial year, we believe the outlook for the economy remains constrained. Notwithstanding the challenging economic and labour environment, our management team continues to identify growth opportunities in the segments within which the group operates and remains committed to its growth and diversification strategy.”

He added that Workforce has a number of new initiatives in the financial services cluster that are coming to fruition, and which will better position this cluster in the market place.

“We look forward to the numerous infrastructure projects, both in South Africa and in neighbouring countries, in which Workforce can become a meaningful, relevant and significant player, albeit that we expect a slowing in the allocation of tenders and the implementation of projects,” Katz concluded.

For the full SENS announcement and detailed financial results please visit www.workforce.co.za

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