30 March 2023, Johannesburg – Workforce Holdings (JSE code: WKF), a Level 1 B-BBEE human capital services company that operates through four focused investment clusters comprising Staffing and Outsourcing, Training and Education, Healthcare, and Financial Services, today released results for the year ended 31 December 2022.
According to CEO Ronny Katz, the performance of the investment clusters are very pleasing. “Given the positive contribution from all clusters at an EBITDA level, this tangibly demonstrates that our strategic interventions, along with improved technology and systems, are working,” said Katz.
He added that this year was particularly notable for additional global expansion undertaken by the group, with Workforce now operational in 10 countries outside of South Africa. “This involves 32 active trading brands, all offering products and services in the human capital space.”
Katz commented further that this had also been a year in which the culmination of the cluster strategy had come to the fore, with Workforce well positioned for additional future growth as a result.
Revenue grew by 24% to R4,3 billion (2021: R3,5 billion), which is a record for the group, supported by a strong result from the Staffing and Outsourcing cluster offering human capital, staffing and outsourcing solutions. This performance was supported by a robust recovery from the other clusters.
EBITDA increased by 10% to R168,3 million (2021: R152,6 million). The lower increase, compared to revenue, is a result of the decline in gross margin. “Margin pressure was felt across the business, particularly in the second half of the year, and net margins were disappointing,” said Katz, indicating that measures are in place to rectify this going forward.
A combination of substantial turnover growth and less than optimal debtor management resulted in a reduced cash flow from operating activities, which fell to negative R65,3 million (2021: negative R29,2 million). “Our biggest priority is to claw back the debtors in the coming financial year through increased monitoring and discipline and better use of technology and monitoring.”
The board of directors decided not to declare a dividend due to the company’s need for debtor funding and future expansion plans.
Investment cluster performance
As the main contributing investment cluster to the group, the Staffing and Outsourcing cluster delivered a robust performance, contributing a significantly large portion of revenue and EBITDA. This was on the back of a strong brand presence in the primary market, which is South Africa, as well as international expansion, a healthy order book, and experienced management and operational teams being in place.
Revenue increased by 24% to R3,4 billion (2021: R2,7 billion), with an EBITDA of R191,5 million (2021: R188,2 million). The cluster contributed 61% to group EBITDA. As is the norm, a solid second half was achieved on the back of increased economic activity, where many industrial clients either stocked up for the festive season or completed large maintenance projects before planned shutdowns.
The ETI remains in place to 2029 and we are hopeful that it will be renewed or other incentives for employing youth will be in place.
The Training and Education cluster delivered a solid performance for the year under review, building on an improved performance in the second six months. All the businesses in this cluster achieved an overall improvement, supported by the relevance of the service offerings and no further Covid-19 restrictions. Revenue grew by 17%, while EBITDA increased by 20%. The cluster contributed 16% to the EBITDA of the group.
The Financial Services cluster experienced a vastly improved performance in 2022 compared with 2021, primarily due to changes in management structures and improved systems, including the successful integration of GetSavvi into the cluster. With renewed strategies for granting credit, collection methodologies and a targeted sales approach, the cluster delivered increased revenue of 36% supported by various cost reduction strategies that we implemented, and a slight decrease in the cost base. Revenue increased from R80,7 million to R110,1 million. The cluster generated positive EBITDA of R14,0 million, compared to the prior year loss of R12,4 million.
Revenue for the Healthcare cluster grew by 38% and contributed 10% of the group’s total revenue. EBITDA improved by 39% to R57,8 million (2021: R41,6 million). The contribution to overall EBITDA of 18% is slightly higher than the previous year and EBITDA margins remained consistently strong across the cluster. Strict cash preservation measures remain in place. Work in support of the public sector added to the growth but revenue collection had to be managed.
“Our diversified business model is proving to be very successful in markets outside of South Africa and, in many cases, our services and offerings are desperately needed. We regard this as a true competitive advantage when we enter new markets,” said Katz.
He added that all clusters foresee better prospects for 2023, although certain offerings such as the permanent placements business, which operates in the general recruitment space, is cyclical due to where the economy is at the moment and is thus not experiencing growth. “However, external developments are starting to bear fruit and we are confident that they will be contributors in the coming financial year. We intend to build on the momentum as strongly as we can.”
In his concluding remark, Katz commented that Workforce had made some bold moves over the past five years. “The business has changed and positioned itself to cater to various sectors, industries, skills and services. With careful global expansion, we are experiencing great demand for our services and products, and our knowledge and expertise are highly sought after. Global expansion sets a foundation for a Rand hedge but given the size of the investment cluster reach in South Africa, the current quantum of foreign earnings is small although it does have the potential to grow.”