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Preliminary audited condensed consolidated results for the year ended 31 December 2013 and notice of AGM
WORKFORCE HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 2006/018145/06)
Share code: WKF
ISIN: ZAE000087847
("Workforce" or "the company" or "the group")
Preliminary audited condensed consolidated results for the year ended
31 December 2013 and notice of annual general meeting
Highlights
- Revenue from continuing operations increased by 13% to R1,658 billion
compared to December 2012
- Headline earnings (HEPS) from continuing operations decreased by
51% to 5,2 cents per share
- Headline earnings (HEPS) decreased by 79%
- Group days sales outstanding ("DSO") decreased to 47 days from 56 days
in December 2012
- Cash flow from operating activities of R16,4 million versus an
outflow of R22,9 million in the previous year
Please note, the above movements are based on prior period restated results
Condensed consolidated statement of comprehensive income
for the year ended 31 December
Restated
Group group
2013 2012
Notes R'000 R'000
Continuing operations
Revenue 1 658 802 1 471 744
Cost of sales (1 324 299) (1 157 365)
Gross profit 334 503 314 379
Operating costs (304 949) (270 486)
Earnings before impairment, depreciation,
amortisation, interest and taxation (EBITDA) 29 554 43 893
Depreciation and amortisation of
non-financial assets (8 844) (8 751)
Operating profit 20 710 35 142
Finance income 3 233 2 670
Finance costs (15 831) (12 460)
Profit before taxation 8 112 25 352
Taxation credit/(expense) 3 817 (1 219)
Profit for the year from continuing operations 11 929 24 133
Loss from discontinued operations 14 (8 297) (6 086)
Profit for the period 3 632 18 047
Other comprehensive income for the year,
net of tax: (185) (462)
Fair value loss on available-for-sale financial assets
to be reclassified subsequently to profit or loss (185) (462)
Total comprehensive income for the year 3 447 17 585
Profit for the year attributable to:
Owners of the parent 3 519 17 688
Non-controlling interests 113 359
3 632 18 047
Total comprehensive income attributable to:
Owners of the parent 3 334 17 226
Non-controlling interests 113 359
3 447 17 585
Earnings per share (cents per share)
Basic and fully diluted 10 1,6 7,8
Condensed consolidated statement of financial position
as at 31 December
Restated Restated
Group group group
2013 2012 2011
Notes R'000 R'000 R'000
Assets
Non-current assets 97 807 85 942 79 081
Property, plant and equipment 7 8 001 7 657 9 187
Goodwill 41 280 41 280 41 280
Intangible assets 8 20 252 17 224 13 165
Deferred tax assets 26 443 18 165 13 371
Other financial assets 1 831 1 616 2 078
Current assets 434 994 423 508 363 615
Trade and other receivables 418 034 400 261 343 434
Inventories 2 581 3 198 3 343
Taxation 726 1 523 861
Cash and cash equivalents 9 13 653 18 526 15 977
Total assets 532 801 509 450 442 696
Equity and liabilities
Equity 212 206 209 309 191 941
Equity attributable to owners of the parent 212 392 209 058 191 832
Share capital and premium 236 867 236 867 236 867
Treasury shares (7 616) (7 616) (7 616)
Reverse acquisition reserve (125 499) (125 499) (125 499)
Available-for-sale reserve (416) (231) 231
Retained earnings 109 056 105 537 87 849
Non-controlling interests (186) 251 109
Non-current liabilities 14 736 14 282 13 091
Financial liabilities 8 970 9 124 9 153
Deferred tax liabilities 5 766 5 158 3 938
Current liabilities 305 859 285 859 237 664
Trade and other payables 100 583 72 935 62 521
Financial liabilities 204 578 207 893 175 139
Taxation 693 565 -
Bank overdraft 5 4 466 4
Total equity and liabilities 532 801 509 450 442 696
Group statement of changes in equity
for the year ended 31 December 2013
Attributable to owners of the parent
Share
capital Reverse
and acquisition Treasury
premium reserve shares
R'000 R'000 R'000
Balance at 1 January 2012 as
previously reported (refer to
note 31) (restated) 236 867 (125 499) (7 616)
Adjustment - - -
Balance at 1 January 2012 236 867 (125 499) (7 616)
Payment of dividends - - -
Total comprehensive income for
the year - - -
Balance at 1 January 2013 as
previously reported (refer to
note 31) (restated) 236 867 (125 499) (7 616)
Adjustment - - -
Balance at 1 January 2013 236 867 (125 499) (7 616)
Payment of dividends - - -
Total comprehensive income for
the year - - -
Balance at 31 December 2013 236 867 (125 499**) (7 616)
Notes 9 9 9
Attributable to owners of the parent
Available-
for-sale Retained
reserve earnings Total
R'000 R'000 R'000
Balance at 1 January 2012 as
previously reported (refer to
note 31) (restated) 231 93 395 197 378
Adjustment - (5 546) (5 546)
Balance at 1 January 2012 231 87 849 191 832
Payment of dividends - - -
Total comprehensive income for
the year (462) 17 688 17 226
Balance at 1 January 2013 as
previously reported (refer to
note 31) (restated) (231) 116 580 220 101
Adjustment - (11 043) (11 043)
Balance at 1 January 2013 (231) 105 537 209 058
Payment of dividends - - -
Total comprehensive income for
the year (185) 3 519 3 334
Balance at 31 December 2013 (416) 109 056 212 392
Notes 5*
Non-
controlling Total
interests equity
R'000 R'000
Balance at 1 January 2012 as
previously reported (refer to
note 31) (restated) 109 197 487
Adjustment - (5 546)
Balance at 1 January 2012 109 191 941
Payment of dividends (217) (217)
Total comprehensive income for
the year 359 17 585
Balance at 1 January 2013 as
previously reported (refer to
note 31) (restated) 251 220 352
Adjustment - (11 043)
Balance at 1 January 2013 251 209 309
Payment of dividends (550) (550)
Total comprehensive income for
the year 113 3 447
Balance at 31 December 2013 (186) 212 206
Notes
*Fair value gains on available-for-sale financial assets are recognised in other
comprehensive income and reclassified to profit or loss on disposal (note 5).
**The reverse acquisition reserve arose on the listing of Workforce Holdings
Limited in the 2006 financial year end.
Condensed consolidated statement of cashflows
for the year ended 31 December
Group Group
2013 2012
Notes R'000 R'000
Cash generated from operations before net working
capital changes 6 254 23 513
Cash generated from operations 11.1 18 554 35 851
Finance income 3 233 2 646
Finance costs (15 831) (12 460)
Taxation paid 11.2 296 (2 524)
Increase in net working capital 11.3 10 185 (46 316)
Cash flows from operating activities 16 438 (22 803)
Cash flows from investing activities (12 831) (11 618)
Dividends received - 24
Property, plant and equipment acquired
- maintaining operations 7 (4 329) (3 108)
- expanding operations 7 (55) (321)
Proceeds on disposal of property, plant and equipment 147 381
Intangible assets acquired - maintaining operations 8 (8 194) (8 594)
Acquisition of other financial assets (400) -
Cash flows from financing activities (4 019) 32 508
Proceeds from borrowings (3 469) 32 725
Dividends paid to shareholder in subsidiary (550) (217)
Net change in cash and cash equivalents (412) (1 913)
Cash and cash equivalents at the beginning of the year 14 060 15 973
Cash and cash equivalents at the end of the year 11.4 13 648 14 060
Notes to the condensed consolidated financial statements
for the year ended 31 December 2013
1. Nature of operations and general information
The principle activities of Workforce Holdings Limited and its subsidiaries are staff
outsourcing, recruitment and specialist staffing and human resources support services
(including the provision of financial and retail lending products).
2. Basis of preparation and significant accounting policies
This preliminary report is extracted from audited information, but is not itself audited.
The board of directors of Workforce takes full responsibility for the preparation of this
preliminary report and that the financial information has been correctly extracted from
the underlying annual financial statements.
The condensed consolidated financial statements have been prepared in accordance with
the JSE Limited's Listings Requirements for annual financial statements, International
Accounting Standard (IAS) 34, Annual Financial Reporting and the South African Companies
Act, No 71 of 2008, as amended, as well as the SAICA Financial Reporting Pronouncements
as issued by the Financial Reporting Standards Council.
The condensed annual financial statements for the 12 months ended 31 December 2013
were compiled under the supervision of W van Wyk, the group financial director.
The condensed consolidated annual financial statements have been prepared in accordance
with International Financial Reporting Standards and have been applied consistently with
the accounting policies applied in the annual financial statements for the year ended
31 December 2013.
3. Audit opinion
The consolidated results for the year ended 31 December 2013 have been audited by the
group's auditors, Horwath Leveton Boner, and their unqualified audit report is available
for inspection at the registered office of the group.
4. Directorate
There have been no changes to the board during the period under review, up to and including
the date of this report.
5. Posting of integrated annual report and notice of annual general meeting
The integrated annual report for the year ended 31 December 2013 will be despatched to
shareholders on 31 March 2014.
Notice is hereby given that the annual general meeting of shareholders of Workforce will
be held at 10:00 on Tuesday 20 May 2014 at 11 Wellington Street, Parktown, Johannesburg,
2193 to transact the business stated in the notice of the annual general meeting, which
is contained in the integrated annual report.
The board of directors of the company determined that, in terms of section 62 (3)(a),
as read with section 59 of the Companies Act, 2008 (Act 71 of 2008), as amended, the
record date for the purposes of determining which shareholders of the company are
entitled to participate in and vote at the annual general meeting is Friday, 9 May 2014.
Accordingly, the last day to trade in Workforce shares in order to be recorded in the
Register to be entitled to vote at the annual general meeting will be Wednesday, 30 April 2014.
6. Events after reporting date
No material events occurred between the reporting date and the date of approval of these
condensed financial statements.
7. Property, plant and equipment
2013
Accumulated Carrying
Cost depreciation value
R'000 R'000 R'000
Motor vehicles 6 644 (4 257) 2 387
Computer equipment 17 701 (15 901) 1 800
Industrial equipment 2 328 (2 094) 234
Office equipment 11 264 (9 467) 1 797
Leasehold improvements 1 162 (824) 338
Training manuals 6 386 (4 941) 1 445
45 485 (37 484) 8 001
2012
Accumulated Carrying
Cost depreciation value
R'000 R'000 R'000
Motor vehicles 4 736 (3 635) 1 101
Computer equipment 16 857 (14 493) 2 364
Industrial equipment 2 148 (2 015) 133
Office equipment 10 944 (8 826) 2 118
Leasehold improvements 1 078 (701) 377
Training manuals 5 838 (4 274) 1 564
41 601 (33 944) 7 657
2011
Accumulated Carrying
Cost depreciation value
R'000 R'000 R'000
Motor vehicles 5 668 (3 807) 1 861
Computer equipment 15 852 (12 926) 2 926
Industrial equipment 2 137 (1 955) 182
Office equipment 10 029 (8 219) 1 810
Leasehold improvements 974 (594) 380
Training manuals 5 256 (3 228) 2 028
39 916 (30 729) 9 187
The carrying value of property, plant and equipment can be reconciled as follows:
Motor Computer Industrial Office
vehicles equipment equipment equipment
R'000 R'000 R'000 R'000
Carrying value at
1 January 2011 2 720 1 729 321 2 511
Additions 672 1 734 - 1 170
Disposals (470) (1) - (51)
Reclassifications - 594 (80) (514)
Depreciation (1 061) (1 130) (59) (1 306)
Carrying value at
1 January 2012 1 861 2 926 182 1 810
Additions 583 1 189 10 967
Disposals (535) (18) - (2)
Depreciation (808) (1 733) (59) (657)
Carrying value at
31 December 2012 1 101 2 364 133 2 118
Additions 2 235 858 180 478
Disposals (109) (11) - (59)
Depreciation (840) (1 411) (79) (740)
Carrying value at
31 December 2013 2 387 1 800 234 1 797
Leasehold Training
improvements manuals Total
R'000 R'000 R'000
Carrying value at
1 January 2011 202 2 416 9 899
Additions 258 562 4 396
Disposals - (1) (523)
Reclassifications - - -
Depreciation (80) (949) (4 585)
Carrying value at
1 January 2012 380 2 028 9 187
Additions 89 591 3 429
Disposals - - (555)
Depreciation (92) (1 055) (4 404)
Carrying value at
31 December 2012 377 1 564 7 657
Additions 85 548 4 384
Disposals - - (179)
Depreciation (124) (667) (3 860)
Carrying value at
31 December 2013 338 1 445 8 001
All depreciation charges are included in "depreciation and amortisation of non-financial
assets" in the statement of comprehensive income. No property, plant and equipment have
been impaired during the year (2012: Nil).
The net book value of motor vehicles held under instalment sales at 31 December 2013
amounted to R1 961 578 (2012: R595 583). Motor vehicles acquired under instalment
sales amounted to R2 398 803 (2012: R394 423).
The group has no further contractual commitments to acquire property, plant and equipment
at the reporting date.
8. Intangible assets
2013
Accumulated Carrying
Cost amortisation value
R'000 R'000 R'000
Computer software 96 529 (76 485) 20 096
Brands 182 (26) 156
96 711 (76 511) 20 252
2012
Accumulated Carrying
Cost amortisation value
R'000 R'000 R'000
Computer software 31 816 (14 592) 17 224
Brands - - -
31 816 (14 592) 17 224
2011
Accumulated Carrying
Cost amortisation value
R'000 R'000 R'000
Computer software 23 263 (10 098) 13 165
Brands - - -
23 263 (10 098) 13 165
The carrying amounts of intangible assets can be reconciled as follows:
Computer
Brands software Total
R'000 R'000 R'000
Carrying value at
1 January 2011 - 9 640 9 640
Additions - 6 634 6 634
Amortisation - (3 109) (3 109)
Carrying value at
1 January 2012 - 13 165 13 165
Additions - 8 594 8 594
Amortisation - (4 535) (4 535)
Carrying value at
31 December 2012 - 17 224 17 224
Additions 182 8 012 8 194
Amortisation (26) (5 140) (5 166)
Carrying value at
31 December 2013 156 20 096 20 252
The above amortisation expense is included in "depreciation and amortisation of
non-financial assets" in the statement of comprehensive income. No intangible
assets have been impaired during the year (2012: Nil). Computer software is mostly
internally generated.
Brands represents the brand "Tshwane Nursing agency" which was bought in June 2013,
in order to give the group's nursing business a foothold in Tshwane.
The group has no further contractual commitments to acquire intangible assets at
the reporting date. Included in intangible assets is computer software that is not
considered integral to computer equipment.
9. Cash and cash equivalents
Cash and cash equivalents include the following components:
2013 2012 2011
R'000 R'000 R'000
Cash at bank and in hand 13 364 17 717 8 797
Short-term deposits 289 809 7 180
13 653 18 526 15 977
The carrying value of cash and cash equivalents is considered a reasonable approximation
of fair value.
10. Earnings per share
Basic earnings per share
The earnings and weighted average number of ordinary shares used in the calculation
of basic earnings per share are as follows:
2013 2012
Profit attributable to equity shareholders
of the parent company (R'000) 3 519 17 688
Weighted average number of ordinary
shares in issue ('000) 225 630 225 630
Basic earnings per share (cents) 1,6 7,8
Diluted earnings per share
There are no potential dilutive shares therefore diluted earnings per share equates
to basic earnings per share.
Headline earnings per share
The earnings used in the calculation of headline earnings per share are as follows:
2013 2012
Profit attributable to equity shareholders
of the parent company (R'000) 3 519 17 688
Headline earnings adjustment (R'000) 24 125
Loss on disposal of property,
plant and equipment 33 174
Tax effects of adjustments (9) (49)
Total headline earnings (R'000) 3 543 17 813
Weighted average number of shares in issue ('000) 225 630 225 630
Headline earnings per share (cents) 1,6 7,9
Headline earnings per share from continuing operations
The earnings used in the calculation of headline earnings per share from continuing
operations are as follows:
2013 2012
Headline earnings (R'000) 3 543 17 813
- Loss from discontinued operations (R'000) 8 297 6 086
Total headline earnings (R'000) 11 840 23 899
Weighted average number of shares in issue ('000) 225 630 225 630
Headline earnings per share from
continuing operations (cents) 5,2 10,6
11. Notes to the statement of cash flows
11.1 Cash generated from operations
2013 2012
R'000 R'000
Profit before taxation 8 112 25 352
Interest and dividend income (3 233) (2 670)
Finance costs 15 831 12 460
Loss from discontinued operations (11 523) (8 452)
Adjusted for non-cash items:
Loss on disposal of property,
plant and equipment 33 174
Depreciation and amortisation of
non-financial assets 9 026 8 939
Share Option Grants 308 48
18 554 35 851
11.2 Taxation paid
2013 2012
R'000 R'000
Charged to profit or loss 3 817 1 147
Adjusted for deferred tax (4 445) (3 574)
Movement in taxation balance 925 (97)
298 (2 524)
11.3 Working capital changes
2013 2012
R'000 R'000
Change in trade and other receivables (17 773) (56 827)
Change in inventories 617 145
Change in share-based payment (308) (48)
Change in trade and other payables 27 649 10 414
10 185 (46 316)
11.4 Cash and cash equivalents
2013 2012
R'000 R'000
Bank and cash balances (note 9) 13 653 18 526
Bank overdraft (5) (4 466)
13 648 14 060
12. Segment reporting
The group's segmental analysis is based on the following five core business segments:
- Staffing and Recruitment comprises staff outsourcing which provides human resources
to clients on both a short-term and long-term basis, recruitment and specialist staffing,
which include permanent and temporary placements, ad-response handling, executive search,
call centre staffing and importing and exporting of skills.
- Training and Consulting, which responds to market demands as a registered Private
Further Education and Training (FET) provider.
- Financial and Lifestyle Products, which offers a range of lifestyle products and
support services to employees.
- Employee Health Management, which offers a comprehensive range of occupational and
primary health management services.
- Process Outsourcing, which focuses on delivering productive and functional business
process outsourcing solutions, including the statutory and legal elements associated
therewith.
These operating segments are monitored and strategic decisions are made on the basis
of adjusted segment operating results.
Segment information can be analysed as follows for the reporting periods under review:
Financial
Staffing and Training and and Lifestyle
Recruitment Consulting Products
2013 R'000 R'000 R'000
Segment revenues 1 499 845 26 798 55 983
Inter-segment revenue 36 6 454 -
Cost of sales (1 239 184) (14 038) (13 984)
Operating costs (198 625) (16 284) (29 444)
EBITDA 62 072 2 930 12 555
Depreciation and amortisation of
non-financial assets (1 885) (931) (2 285)
Segment operating profit 60 187 1 999 10 270
Capital expenditure 3 886 936 3 284
Segment total assets 277 613 3 088 121 734
Segment total liabilities (66 565) (7 152) (119 492)
Net segment assets 211 048 (4 064) 2 242
Employee
Health Process Central
Management Outsourcing cost
2013 R'000 R'000 R'000
Segment revenues 24 019 52 157 -
Inter-segment revenue 1 095 - -
Cost of sales (9 551) (47 542) -
Operating costs (13 529) (3 174) (51 478)
EBITDA 2 034 1 441 (51 478)
Depreciation and amortisation of
non-financial assets (191) (77) (3 475)
Segment operating profit 1 843 1 364 (54 953)
Capital expenditure 325 306 3 659
Segment total assets 5 978 8 292 116 096
Segment total liabilities (5 700) (8 390) (113 296)
Net segment assets 278 (98) 2 800
Consolidation
entries Total
2013 R'000 R'000
Segment revenues - 1 658 802
Inter-segment revenue (7 585) -
Cost of sales - (1 324 299)
Operating costs 7 585 (304 949)
EBITDA - 29 554
Depreciation and amortisation of
non-financial assets - (8 844)
Segment operating profit - 20 710
Capital expenditure - 12 396
Segment total assets - 532 801
Segment total liabilities - (320 595)
Net segment assets - 212 206
Financial
Staffing and Training and and Lifestyle
Recruitment Consulting Products
2012 R'000 R'000 R'000
Segment revenues 1 352 735 25 558 50 088
Inter-segment revenue 7 368 14 055 -
Cost of sales (1 102 190) (10 405) (17 761)
Operating costs (184 580) (33 186) (18 015)
EBITDA 73 333 (3 978) 14 312
Depreciation and amortisation of
non-financial assets (2 246) (1 286) (1 866)
Segment operating profit 71 086 (5 264) 12 446
Capital expenditure 3 513 936 3 284
Segment total assets 277 128 4 982 97 403
Segment total liabilities (40 352) (3 009) (17 906)
Net segment assets 236 776 1 973 79 497
Employee
Health Process Central
Management Outsourcing cost
2012 R'000 R'000 R'000
Segment revenues 22 945 20 418 -
Inter-segment revenue 568 - -
Cost of sales (9 580) (17 429) -
Operating costs (12 449) (2 233) (42 014)
EBITDA 1 484 756 (42 014)
Depreciation and amortisation of
non-financial assets (177) (85) (3 091)
Segment operating profit 1 307 671 (45 105)
Capital expenditure 325 306 3 659
Segment total assets 5 901 1 037 122 999
Segment total liabilities (1 403) (598) (236 873)
Net segment assets 4 498 439 (113 874)
Consolidation
entries Total
2012 R'000 R'000
Segment revenues - 1 471 744
Inter-segment revenue (21 991) -
Cost of sales - (1 157 365)
Operating costs 21 991 (270 486)
EBITDA - 43 893
Depreciation and amortisation of
non-financial assets - (8 751)
Segment operating profit - 35 142
Capital expenditure - 12 023
Segment total assets - 509 450
Segment total liabilities - (300 141)
Net segment assets - 209 309
Financial
Staffing and Training and and Lifestyle
Recruitment Consulting Products
2011 R'000 R'000 R'000
Segment revenues 1 221 279 20 142 45 386
Inter-segment revenue 714 9 122 -
Cost of sales (986 792) (5 479) (12 264)
Operating costs (177 916) (21 458) (14 542)
EBITDA 57 285 (2 327) 18 580
Depreciation and amortisation of
non-financial assets (2 630) (1 236) (1 334)
Segment operating profit 54 655 (1 091) 17 246
Capital expenditure 2 767 466 3 971
Segment total assets 244 898 11 112 75 194
Segment total liabilities (65 929) (1 693) (2 131)
Net segment assets 178 969 9 419 73 063
Employee
Health Process Central
Management Outsourcing cost
2011 R'000 R'000 R'000
Segment revenues 20 744 41 010 -
Inter-segment revenue 541 - -
Cost of sales (8 318) (26 733) -
Operating costs (11 054) (12 761) (40 620)
EBITDA 1 913 1 516 (40 620)
Depreciation and amortisation of
non-financial assets (123) (275) (2 096)
Segment operating profit 1 790 1 241 (42 716)
Capital expenditure 91 133 3 602
Segment total assets 3 992 1 527 105 973
Segment total liabilities (897) (149) (179 956)
Net segment assets 3 095 1 378 (73 983)
Consolidation
entries Total
2011 R'000 R'000
Segment revenues - 1 348 561
Inter-segment revenue (10 377) -
Cost of sales - (1 039 586)
Operating costs 10 377 (267 974)
EBITDA - 41 001
Depreciation and amortisation of
non-financial assets - (7 694)
Segment operating profit - 33 307
Capital expenditure - 11 030
Segment total assets - 442 696
Segment total liabilities - (250 755)
Net segment assets - 191 941
No segmental information is provided in respect of geographical analysis as the group
operates primarily in South Africa.
13. Prior period error
Due to the fraud as detailed in note 14, the financial results had to be adjusted
as detailed below.
Previously
reported Restated Adjustment
2012 2012 2012
R'000 R'000 R'000
Condensed consolidated statement of
comprehensive income
(Loss) from discontinued operations (589) (6 086) 5 497
Earnings per share (cents per share)
Basic and fully diluted 10,3 7,8 2,5
Headline 10,4 7,9 2,5
Condensed consolidated statement of
financial position
Non-current assets
Deferred tax assets 13 757 18 165 (4 408)
Current assets
Trade and other receivables 415 712 400 261 15 451
Equity and liabilities
Equity
Retained earnings 116 580 105 537 11 043
Condensed consolidated statement of cash flows
Cash generated from operations before net
working capital changes 31 214 15 763 15 451
Cash generated from operations 43 555 32 512 11 043
Finance income 2 646 2 646 -
Finance costs (12 463) (12 463) -
Taxation paid (2 524) (6 932) 4 408
Increase in net working capital (54 017) (38 566) (15 451)
Cashflows from operating activities (22 803) (22 803) -
Previously
reported Restated Adjustment
2011 2011 2011
R'000 R'000 R'000
Condensed consolidated statement of
comprehensive income
Profit/(loss) from discontinued operations 2 193 (3 353) 5 546
Earnings per share (cents per share)
Basic and fully diluted 10,4 7,9 2,5
Headline 10,4 7,9 2,5
Condensed consolidated statement of
financial position
Non-current assets
Deferred tax assets 11 215 13 371 (2 156)
Current assets
Trade and other receivables 351 136 343 434 7 702
Equity and liabilities
Equity
Retained earnings 93 395 87 849 5 546
Condensed consolidated statement of cash flows
Cash generated from operations before net
working capital changes 30 428 22 726 7 702
Cash generated from operations 40 932 35 386 5 546
Finance income 3 271 3 271 -
Finance costs (10 896) (10 896) -
Taxation paid (2 879) (5 035) 2 156
Increase in net working capital (65 751) (58 049) (7 702)
Cashflows from operating activities (35 323) (35 323) -
14. Discontinued operations
As previously communicated to shareholders Workforce discovered that an act of fraud had
been perpetrated by senior members of management in the Programmed Construction business.
Accordingly, the board decided to discontinue the affected business. The business has been
in the process of being wound up during the year and will effectively be abandoned early
in 2014. The net effect on the financial results are shown below.
2013 2012
R'000 R'000
Condensed consolidated statement of
comprehensive income
Revenue 1 964 17 767
Cost of sales (8 144) (16 270)
Gross profit (6 180) 1 497
Operating costs (5 161) (9 757)
Earnings before impairment, depreciation,
amortisation, interest and taxation(EBITDA) (11 341) (8 260)
Depreciation and amortisation of non-financial
assets (182) (188)
Operating (Loss) (11 523) (8 448)
Finance costs - (4)
Loss before taxation (11 523) (8 452)
Taxation 3 226 2 366
(Loss) for the period from discontinued
operations (8 297) (6 086)
Condensed consolidated statement of
financial position
Total assets 11 727 24 050
Trade and other receivables 5 683 20 155
Taxation 6 044 2 818
Property, plant and equipment - 455
Cash and cash equivalents - 30
Inventory - 592
Total equity and liabilities 11 727 24 050
Retained earnings (18 361) (10 064)
Loan from group company 29 483 31 978
Trade and other payables 605 2 136
Condensed consolidated statement of cash flows
Net cash flows from operating activities 2 466 (11 820)
Net cash flows from investing activities - (643)
Net cash flows from financing activities (2 496) 12 493
Net cash inflow/(outflow) (30) 30
Workforce Holdings Limited
Overview
The financial year ended 31 December 2013 has been a positive one for the group with
strong performance in top line growth and cost control. The negative impact of the
losses incurred from discontinued operations and higher than normal bad debt write offs
due to the board of directors implementing a more stringent evaluation of the debtors
book impacted negatively on net profits. We believe the group's core business is very
well positioned for growth and its strategy of diversifying revenue and risk is on track.
Management across the group is confident of producing solid results in 2014 in line
with budget.
Operational
Group revenues increased 13% to R1,6 billion off a well controlled cost base. Tight cost
management resulted in a slight increase in operating costs before bad debt charges of 5%.
EBITDA from continuing operations of R30 million was impacted by the R19 million bad debts
charge that the group had to absorb. Losses from discontinued operations of R8,3 million
resulted in a reduced net profit of R3,6 million for the period under review. Net EPS of
1,6 cents was down from 7,8 cents in the same period 2012.
The group's staffing and recruitment segment which includes both blue-collar industrial
staffing and white-collar recruitment made inroads into the market with an increase in
revenue to R1,5 billion from R1,35 billion in the previous year.
The blue-collar operations performed well showing strong signs of growth in market share
and a well controlled cost base. New branches have been established across South Africa
and in neighboring Mozambique to take advantage of what we believe are strong growth
trends. The group's strategy of decentralising its sales and operations focus off a
centralised administration and control function is serving the group well.
The white-collar operations including the brands of Teleresources and Fempower experienced
a difficult year. Management changes within the Teleresource group are expected to impact
positively on 2014 results. The group's nursing and allied medical support business -
Allmed and Albrecht Nursing - continued there expansion into new geographies, which has
come on the back of increased cost.
The training and consulting operations continued to show signs of recovery. Various cost
saving initiatives were implemented including the consolidation of numerous branches into
the Workforce Staffing infrastructure. Sales pipelines look strong and good deal flow is
expected in 2014 which will further strengthen the business. The training operations
delivered less learnership than in prior years due to problems experienced with the
relevant SETA administration. The group's tax benefits from learnerships resulted in
a positive tax contribution from continuing operations of R2,6 million.
The group's financial services business continued to expand its revenue base. Further
implementations of new systems to enhance the businesses debt recovery and rehabilitation
process continued.
The cash collections environment continues to present challenges, however the group's
days sales outstanding ("DSO") improved materially from 56 days in 2012 to 47 days at
year-end. Further system enhancements are being made to assist with credit control and
with the timeous collection of outstanding debt. The group expects to achieve its target
DSO of 40 days during the next reporting period.
Group sustainability
The group is continually assessing its environment to determine potential risk areas
and its relative impact on sustainability. This is an iterative process which includes
all layers of management and employees within the group. Material sustainability issues
which we have identified and actively managed include the following:
Labour law regulation
It is common knowledge that we are all facing a change within labour legislation in
South Africa. Specifically with regards to the amendments
to the following Acts:
- the Labour Relations Act;
- the Basic Conditions of Employment Act;
- the Employment Equity Act;
- the Broad-Based Black Economic Empowerment Act;
- Codes of Good Practise on Broad-Based Economic Empowerment; and
- the implementation of the Employment Services Bill.
Our business has invested in its resources to ensure that all our systems, policies,
processes and contracts are aligned with the pending amendments. We have aligned
ourselves as a business to ensure that as a temporary employment service we are still
able to provide comprehensive staffing solutions to all our clients whilst operating
within the necessary legislative framework.
Liquidity
Liquidity and the availability of cash to ensure that the group is able to meet its
growth objectives remain a major focus for management. Various initiatives are ongoing
and substantial progress has been made in 2013. Cash generated from operations improved
to R16,4 million from an outflow of R22,8 million in the previous period. These initiatives
include and focus on:
1. credit granting and terms and management of debtors days outstanding;
2. sustainable growth, with specific focus on improving current debt to equity and
cash conversion ratios; and
3. the diversification of income streams.
Progress is monitored against targets which includes: 1) group DSO of 40 days; and
2) a cash conversion ratio of 80%. Management believes that these targets could
be realised in 2014.
Human resource
Developing and retaining top talent has been identified by the group as a strategic
priority. Substantial progress has been made toward achieving this goal. Various
initiatives are being implemented which include senior management training and
development to facilitate sustainability and succession, the implementation of
various incentive schemes including the group's Share Appreciation Rights Scheme
which made its second allocation in December 2013 and the identification and
training of talent at lower and middle management levels across all functions.
These initiatives together with the implementation and roll out of our group
code of conduct, delegation of authority and whistleblower programme reinforce
governance and create a diverse cultural environment with clear performance objectives.
Targets and outlook
Current market trends and ongoing developments within the group augur well for its future
growth and profitability. Labour legislation is creating renewed growth opportunity
resulting from consolidation of smaller players and a requirement by business to partner
with compliant staffing providers. Our systems place us in a unique position to take
advantage of this growth, and scale across geographies into Africa and other territories.
The global requirement for flexible staffing solutions continues to expand amid a growing
global challenge of skills shortages. Our group has over the past 43 years developed core
competencies to assist clients wherever they need to manage these challenges. We remain
focused on achieving our stated objectives and KPIs which include:
KPI Target
Return on sales 3%
Return on equity 16%
OPEX 17%
DSO 40 days
Dividend % payout 25%
Our solid positioning in the market coupled with great people, process and systems
will ensure that we deliver on our targets. We believe the group is well positioned
for the future.
For and on behalf of the board
RS Katz
(Chairman)
LH Diamond
(Chief executive officer)
WP van Wyk
(Group financial director)
20 March 2014
Johannesburg
Designated Advisor
Merchantec Capital
Auditor
Horwath Leveton Boner
Transfer Secretaries
Link Market Services South Africa Proprietary Limited
Directors
Ronny Katz (Chairman)
Lawrence Diamond (Chief executive officer)
Willie van Wyk (Financial director)
Mark Anderson (Non-executive director)
Lulu Letlape (Independent non-executive director)
Kyansambo Vundla (Independent non-executive director)
John Macey (Independent non-executive director)
Company Secretary
Sirkien van Schalkwyk
Registered office address
11 Wellington Road
Parktown
2193
PO Box 11137
Johannesburg
2000
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