Wrap Text
Audited summarised consolidated results for the year ended 31 December 2014 and notice of annual general meeting
Workforce Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number 2006/018145/06)
(JSE Share Code: WKF ISIN: ZAE000087847)
("Workforce" or "the group")
Audited summarised consolidated results for the year ended 31 December
2014 and notice of annual general meeting
HIGHLIGHTS
* Revenue increased by 8,6% to R 1,802 billion compared to December 2013,
* Headline earnings (HEPS) increased to 26,2 cents per share from 1,6
cents per share in 2013.
* Group DSO improved to 42 days from 47 days in December 2013.
* Earnings before impairment, depreciation, amortisation, interest and
taxation (EBITDA) has increased by R 50 million from R 29 million in 2013
to R 79 million in the current year.
Summarised consolidated statement of financial position
as at 31 December
2014 2013
Notes R’000 R’000
Assets
Non-current assets 109,391 97,807
Property, plant and equipment 7 7,052 8,001
Goodwill 41,280 41,280
Intangible assets 8 23,694 20,252
Deferred tax assets 35,349 26,443
Other financial assets 2,016 1,831
Current assets 453,506 434,994
Trade and other receivables 440,039 418,034
Inventories 3,085 2,581
Taxation 38 726
Cash and cash equivalents 9 10,344 13,653
Total assets 562,897 532,801
Equity and liabilities
Equity 272,313 212,561
Equity attributable to owners of the
parent 272,685 212,747
Share capital and premium 236,867 236,867
Treasury shares (7,616) (7,616)
Reverse acquisition reserve (125,499) (125,499)
Available for sale reserve (231) (416)
Equity-settled employee benefits reserve 898 355
Retained earnings 168,264 109,056
Non-controlling interests (371) (186)
Non-current liabilities 14,233 14,736
Financial liabilities 8,822 8,970
Deferred tax liabilities 5,411 5,766
Current liabilities 276,351 305,504
Trade and other payables 84,117 100,228
Financial liabilities 192,210 204,578
Taxation - 693
Bank overdraft 9 24 5
Total equity and liabilities 562,897 532,801
Financial statements
Summarised consolidated statement of comprehensive income
for the year ended 31 December
2014 2013
Notes R’000 R’000
Continuing operations
Revenue 1,801,895 1,658,802
Cost of sales (1,403,346) (1,324,299)
Gross profit 398,549 334,503
Other income 927 -
Operating costs (319,708) (304,949)
Earnings before impairment,
depreciation, amortisation, interest and
taxation (EBITDA) 79,768 29,554
Depreciation and amortisation of non-
financial assets (10,501) (8,844)
Operating profit 69,267 20,710
Finance income 148 3,233
Finance costs (18,194) (15,831)
Profit before taxation 51,221 8,112
Taxation credit 8,313 3,817
Profit for the year from continuing
operations 59,534 11,929
Loss from discontinued operations - (8,297)
Profit for the period 59,534 3,632
Other comprehensive income for the year,
net of tax: 185 (185)
Fair value loss on available-for-sale
financial assets to be reclassified
subsequently to profit or loss 185 (185)
Total comprehensive income for the year 59,719 3,447
Profit for the year attributable to:
Owners of the parent 59,209 3,519
Non-controlling interests 325 113
59,534 3,632
Total comprehensive income attributable
to:
Owners of the parent 59,394 3,334
Non-controlling interests 325 113
59,719 3,447
Earnings per share (cents per share)
Basic and fully diluted 10 26.2 1.6
Financial statements
Summarised consolidated statement of changes in equity
for the year ended 31 December
Attributable to owners of the parent
Share Reverse Available-
capital Acquisition Treasury for-sale-
and premium Reserve shares reserve
R’000 R’000 R’000 R’000
Balance at 1 January
2013 236,867 (125,499) (7,616) (231)
Payment of dividends - - - -
Recognition of share-
based payments - - - -
Total comprehensive
income for the year - - - (185)
Balance at 1 January
2014 236,867 (125,499) (7,616) (416)
Payment of dividends - - - -
Recognition of share-
based payments - - - -
Total comprehensive
income for the year - - - 185
Balance at 31 December
2014 236,867 (125,499) (7,616) (231)
Attributable to owners of the
parent
Equity-
settled
employee Non-
Retained benefits Controlling Total
earnings reserve Total Interests equity
R’000 R’000 R’000 R’000 R’000
Balance at 1
January 2013 105,537 47 209,105 251 209,356
Payment of
dividends - - - (550) (550)
Recognition of
share-based
payments - 308 308 - 308
Total
comprehensive
income for the
year 3,519 - 3,334 113 3,447
Balance at 1
January 2014 109,056 356 212,747 (186) 212,561
Payment of
dividends - - - (510) (510)
Recognition of
share-based
payments - 543 543 - 543
Total
comprehensive
income for the
year 59,209 - 59,394 325 59,719
Balance at 31
December 2014 168,265 898 272,684 (371) 272,313
Financial statements
Summarised consolidated statement of cash flows
for the year ended 31 December
2014 2013
Notes R’000 R’000
Cash generated from operations before
net working capital changes 58,751 6,254
Cash generated from operations 11.1 77,750 18,554
Finance income 148 3,233
Finance costs (18,194) (15,831)
Taxation (paid)/received 11.2 (953) 298
(Decrease)/increase in net working
capital 11.3 (38,620) 10,492
Cash flows from operating activities 20,131 16,438
Cash flows from investing activities (10,432) (12,831)
Property, plant and equipment acquired
- maintaining operations 7 (2,802) (4,329)
- expanding operations 7 - (55)
Proceeds on disposal of property, plant
and equipment 586 147
Intangible assets acquired- maintaining
operations 8 (7,166) (8,194)
Net cashflow on acquisition of business
combination (1,050) -
Acquisition of other financial assets - (400)
Cash flows from financing activities (13,026) (4,019)
Repayment of borrowings (12,516) (3,469)
Dividends paid to shareholder in
subsidiary (510) (550)
Net change in cash and cash equivalents (3,328) (412)
Cash and cash equivalents at the
beginning of the year 13,648 14,060
Cash and cash equivalents at the end of
the year 11.4 10,320 13,648
Financial statements
Notes to the summarised consolidated financial statements
for the year ended 31 December 2014
1. Nature of operations and general information
Workforce Holdings Limited is a holding company. Its subsidiaries carry on
the business of staff outsourcing, recruitment and specialist staffing,
training and consulting, process outsourcing, employee health management
and financial and lifestyle products.
2. Basis of preparation and significant accounting policies
This 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 report and that the financial information has been
correctly extracted from the underlying annual financial statements. The
audited underlying group financial statements are available for inspection
at the company’s registered office. The summarised consolidated financial
statements have been prepared in accordance with the JSE Limited’s Listing
Requirements for annual financial statements, International Accounting
Standard (IAS) 34, Annual Financial Reporting and the South African
Companies Act, No 71 of 2008, as well as the SAICA Financial Reporting
Pronouncements as issued by the Financial Reporting Standards Council.
The summarised annual financial statements for the 12 months ended 31
December 2014 were compiled under the supervision of W van Wyk, the Group
Financial Director. The summarised 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 2014 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 2014 will be
despatched to shareholders on 31 March 2015.
Notice is hereby given that the annual general meeting of shareholders of
Workforce will be held at 11:00 on Tuesday 5 May 2015 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, 24 April 2015. Accordingly, the last day
to trade in Workforce shares in order to be recorded in the Register to be
entitled to vote at the general meeting will be Friday, 17 April 2015.
6. Events after reporting date
No material events occurred between the reporting date and the date of
approval of these summarised financial statements.
7. Property, plant and equipment
2014
Accumulated Carrying
Cost depreciation value
R’000 R’000 R’000
Motor vehicles 6,944 (4,839) 2,105
Computer equipment 18,958 (17,093) 1,865
Industrial equipment 2,700 (2,237) 463
Office equipment 11,453 (10,190) 1,263
Leasehold improvements 1,187 (960) 227
Training manuals 6,605 (5,476) 1,129
47,847 (40,795) 7,052
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
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
2013 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
Additions 714 1,283 372 189
Disposals (1) - - -
Depreciation (995) (1,218) (413) (723)
Carrying value at 31
December 2014 2,105 1,865 463 1,263
Leasehold Training
improvements manuals Total
R’000 R’000 R’000
Carrying value at 1 January 2013 377 1,564 7,657
Additions 85 548 4,384
Disposals - - (179)
Depreciation (124) (667) (3,861)
Carrying value at 31 December
2013 338 1,445 8,001
Additions 24 220 2,802
Disposals - - (1)
Depreciation (135) (536) (3,750)
Carrying value at 31 December
2014 227 1,129 7,052
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 (2013:
Nil)
8. Intangible assets
2014
Accumulated Carrying
Cost amortisation value
R’000 R’000 R’000
Computer software 44 467 (26,170) 18,297
Brands 3,209 (339) 2,870
Work in progress 2,527 - 2,527
50,203 (26,509) 23,694
2013
Accumulated Carrying
Cost amortisation value
R’000 R’000 R’000
Computer software 39,828 (19,732) 20,096
Brands 182 (26) 156
Work in progress - - -
40,010 (19,758) 20,252
The carrying amounts of intangible assets can be reconciled as follows:
Work in Computer
progress Brand software Total
R’000 R’000 R’000 R’000
Carrying value at 1 January
2013 - - 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
Additions 2,527 - 4,639 7,166
Acquired through business
combinations - 3,027 - 3,027
Amortisation - (313) (6,438) (6,751)
Carrying value at 31
December 2014 2,527 2,870 18,297 23,694
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 (2013:
Nil). Computer software is mostly internally generated.
A 100% interest in Nursing Emergencies was acquired on 1 October 2014, in
order to give the group’s nursing business a foothold in Johannesburg. The
brand acquired was valued at R3 027 408 which resulted in the group
realising a gain on bargain purchase price of R 927 408 after taking into
consideration the purchase price of R2 100 000.
The group has no further contractual commitments to acquire intangible
assets at reporting date.
9. Cash and cash equivalents
Cash and cash equivalents include the following components:
2014 2013
R’000 R’000
Cash at bank and in hand 9,964 13,364
Short-term deposits 380 289
10,344 13,653
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:
2014 2013
Profit attributable to equity shareholders
of the parent Company (R’000) 59,209 3,519
Weighted average number of ordinary shares
in issue (‘000) 225,630 225,630
Basic earnings per share (cents) 25.8 1.6
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:
2014 2013
Profit attributable to equity shareholders
of the parent Company (R’000) 59,209 3,519
Headline earnings adjustment (R’000) (1,088) 24
(Gain)/loss on disposal of property, plant
and equipment (584) 33
Gain on bargain purchase (927) -
Tax effects of adjustments 423 (9)
Total headline earnings (R’000) 58,121 3,543
Weighted average number of shares in issue
(‘000) 225,630 225,630
Headline earnings per share (cents) 25.8 1.6
Headline earnings per share from continuing operations
The earnings used in the calculation of headline earnings per share from
continuing operations are as follows:
2014 2013
Headline earnings (R’000) 58,121 3,543
- Loss from discontinued operations - 8,297
Total headline earnings (R’000) 58,121 11,840
Weighted average number of shares in issue
(‘000) 225,630 225,630
Headline earnings per share from continuing
operations (cents) 25.8 5.2
11. Notes to the statement of cash flows
11.1 Cash generated from operations
2014 2013
R’000 R’000
Profit before taxation 51,221 8,112
Interest and dividend income (148) (3,233)
Finance costs 18,194 15,831
Loss from discontinued operations - (11,523)
Adjusted for non-cash items:
(Gain)/loss on disposal of property, plant and
equipment (584) 33
Depreciation and amortisation of non-financial
assets 10,501 9,026
Equity-settled share-based payments 543 308
Gain on bargain purchase (927) -
Increase in contingent consideration payment (1,050) -
77,750 18,554
11.2 Taxation (paid)/received
2014 2013
R’000 R’000
Charged to profit or loss 8,313 3,817
Adjusted for deferred tax (9,261) (4,444)
Movement in taxation balance (5) 925
(953) 298
11.3 Working capital changes
2014 2013
R’000 R’000
Change in trade and other receivables (22,005) (17,773)
Change in inventories (504) 617
Change in trade and other payables (16,111) 27,648
(38,620) 10,492
11.4 Cash and cash equivalents
2014 2013
R’000 R’000
Bank and cash balances 10,344 13,653
Bank overdraft (24) (5)
10,320 13,648
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- and long-term basis,
recruitment and specialist staffing, which includes permanent and
temporary placements, ad-response handling, executive search, call centre
staffing and importing and exporting of skills.
- Training and Consulting, is a registered training provider focused on
delivering industry and job-specific skills assessments and training
interventions to business and their employees across all industry sectors.
Our training programmes are aligned with SAQA (South African
Qualifications Authority) and accredited with SETA Quality Assurance
departments.
- 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 focusses on delivering productive and
functional business process outsourcing solutions, including the statutory
and legal elements associated therewith.
Segment information can be analysed as follows for the reporting periods
under review:
Financial
Staffing Training and Employee
and and Lifestyle Health
Recruitment Consulting Products Management
2014 R’000 R’000 R’000 R’000
Segment revenues 1,570,885 32,893 59,835 26,096
Inter segment revenue 338 6,512 - 830
Cost of sales (1,247,702) (17,946) (18,257) (10,412)
Operating costs (196,113) (19,382) (33,578) (13,972)
Other Income 927 - - -
EBITDA 128,335 2,077 8,000 2,542
Depreciation and
amortisation of non-
financial assets (2,210) (827) (2,975) (325)
Segment operating profit 126,125 1,250 6,571 2,217
Capital Expenditure 9,686 367 774 488
Segment Total Assets 255,465 8,721 145,595 7,411
Segment Total
Liabilities (35,410) (14,666) (149,723) (6,685)
Net Segment Assets 220,056 (5,945) (4,128) 726
2013 R’000 R’000 R’000 R’000
Segment revenues 1,499,845 26,798 55,983 24,019
Inter segment revenue 36 6,454 - 1,095
Cost of sales (1,239,184) (14,038) (13,984) (9,551)
Operating costs (198,625) (16,284) (29,444) (13,529)
EBITDA 62,072 2,930 12,555 2,034
Depreciation and
amortisation of non-
financial assets (1,885) (931) (2,285) (191)
Segment operating profit 60,187 1,999 10,270 1,843
Capital Expenditure 4,067 936 3,284 325
Segment Total Assets 277,613 3,088 121,734 5,978
Segment Total
Liabilities (66,565) (7,152) (119,492) (5,700)
Net Segment Assets 211,048 (4,064) 2,242 278
Process Central Consolidation
Outsourcing cost entries Total
2014 R’000 R’000 R’000 R’000
Segment revenues 112,186 - - 1,801,895
Inter segment
revenue - - (7,680) -
Cost of sales (109,029) - - (1,403,346)
Operating costs (5,842) (58,501) 7,680 (319,708)
Other Income - - - 927
EBITDA (2,685) (58,501) - 79,768
Depreciation and
amortisation of non-
financial assets (96) (4,068) - (10,501)
Segment operating
profit (2,781) (62,569) - 69,267
Capital Expenditure 12 1,668 - 12,995
Segment Total Assets 18,536 127,169 - 562,897
Segment Total
Liabilities (18,895) (65,205) - (290,583)
Net Segment Assets (359) 61,964 - 272,314
2013
Segment revenues 52,157 - - 1,658,802
Inter segment
revenue - - (7,585) -
Cost of sales (47,542) - - (1,324,299)
Operating costs (3,174) (51,478) 7,585 (304,949)
EBITDA 1,441 (51,478) - 29,554
Depreciation and
amortisation of non-
financial assets (77) (3,475) - (8,844)
Segment operating
profit 1,364 (54,953) - 20,710
Capital Expenditure 306 3,659 - 12,577
Segment Total Assets 8,292 116,096 - 532,801
Segment Total
Liabilities (8,390) (113,296) - (320,595)
Net Segment Assets (98) 2,800 - 212,206
13. Group net asset value per share (cents per share)
The net asset value per share and weighted average number of ordinary
shares used in the calculation of basic earnings per share are as follows:
2014 2013
Group net asset value (R’000) 272,683 212,392
Weighted average number of ordinary shares in
issue (‘000) 225,630 225,630
Net asset value per share (cents) 121 94
CEO Report
Operating environment
The economic environment in which Workforce group has traded during 2014
presented itself with multiple challenges, which are not unique to
Workforce. Slower than expected growth in the South African economy as a
result of slower government infrastructure spend and substantial levels of
labour instability that culminated in the longest platinum strike in the
history of South Africa, has compounded the impacts and effects on
industry.
Instability in the regulatory environment with specific reference to the
Labour Relations Amendment Act, Employment Equity Amendment Act, and the
B-BBEE codes of good practice have also impacted business confidence and
the timing of decisions. Rising unemployment rates specifically within our
youth, driven by an inadequate education system is presenting both
challenges and opportunities. The group has responded well to these
challenges by identifying control measures to manage risk and by
identifying opportunities for the group’s various business units.
The ongoing debates around labour legislation seems to have been settled
at the time of writing this report, with the Labour Relations Amendment
Act, 2014 gazetted on 1 January 2015, and requiring businesses to comply
as from the beginning of April 2015. We have continued, over the past two
years, to invest in product and service innovation in order to protect our
existing markets and to ensure growth into new markets.
Our agility and our ability as a business to rapidly respond to market
environmental changes in a productive and a cost efficient way, is of
primary importance to us and we continue to develop scenarios based on
various market forces and risks to ensure that our business model is agile
enough to respond to these various market forces so as not to impact the
business in any negative way.
As part of our management process it is critical for us to identify our
material risks, the impact of these on our business and our control
strategies. Liquidity and our ability to generate sufficient cash flows
within the business to ensure continued operation and our growth, remains
one of our major areas of management. This is being managed through a
control strategy of developing and maintaining sustainable funder
relationships and managing our businesses for profitability and cash
generation. This is measured through specific targets for debt-to-equity
and reduction in our debtors days outstanding.
Technology is the cornerstone of our business and our ability to develop,
roll-out and remain relevant in respect of our client’s requirements and
their developing needs is critical to us. Our technology systems and
processes are managed through our IT steering committee which is tasked
with the ongoing development of our strategy and the execution thereof.
Financial performance
The overall financial performance of the group at a consolidated level
reflects a turnover of R1.8 billion (2013: R1.66 billion)which is an
increase of 8.6%. Gross margins improved to 22% from 20%. Operating
expenses remained relatively constant with an increase of 5% over this
period to R320 million. EBITDA increased to R79,8 million.
The group’s performance overall mirrors the challenges and opportunities
presented during the year. Consolidated profitability has increased.
Earnings per share increased to 26.2 cents (2013: 1.6 cents). Cash
conversion is still not where management would like it – however group
days sales outstanding (DSO) has reduced further to 42 days (47 days
2013).
The government’s recently introduced Employment Tax Incentive (ETI)
Programme, which incentivises companies for the employment of youth in new
projects, has benefitted the group financially. The group continues to
benefit from reduced taxation as a consequence of its roll out of
learnerships, resulting in a net taxation credit of R7.9 million.
Operations
Workforce group creates and adds value through the transformation of
certain inputs via activities and through an operational structure which
comprises of five main segments namely, staffing and recruitment; process
outsourcing; training and consulting; employee health management; and
financial and lifestyle products. This structure is aligned to respond to
the various challenges and opportunities that exist within our core
markets.
We believe that our business model is a robust business model, and we are
able to deliver on our business model through our various brands; we also
believe our value proposition is a compelling value proposition that will
ensure and deliver sustainable positive returns for our stakeholders.
Staffing and recruitment
Staff outsourcing speaks directly to our ability to facilitate job
creation and provide our clients and our assignees with value in respect
of productivity for our clients and the opportunity for our assignees to
earn a decent wage for the work that is being carried out. Recruiting the
right level of skill and the continued focus on scarcity of skills and the
sourcing of those skills, remains a major challenge for most industries in
South Africa and our various niche focused brands included in the
recruitment segment are able to deliver on our client’s requirements in
respect to this.
Our scope of services in respect of staffing and recruitment incorporates
our ability to provide flexible staffing accompanied by tailored staff
outsourcing solutions or access to a wide range of temporary, contract or
permanent staff across various skills levels.
We currently manage in excess of 33,000 assignees on average on a daily
basis, this is managed across a client base extending nationally to 3500
clients and which incorporates SMME’s and corporate clients. The
operational delivery of these solutions takes place through multiple
branches; we currently have a footprint of approximately 100 branches
located throughout South Africa and are in the process of establishing a
footprint in sub-Saharan Africa specifically in the areas of Mozambique
and Botswana.
The much debated legislation, specifically Labour Relations Amendment Act;
Employment Services Act and Employment Equity Act, which have all recently
been gazetted, most definitely did pose our staff outsourcing business
with a challenge of continuing to provide our clients with a value
proposition around staff flexibility. We have continued, over the past two
years, to invest in product and service innovation in order to protect our
existing markets and to ensure growth into new markets. This entailed the
re-development of systems and processes and the review of contracts that
would enable our clients to be able to access our services, while the
roll-out of these solutions to clients began in all earnest in the third
quarter of 2014. We are pleased to report that the major portion of our
client-base has adopted our new solutions; however we do believe there
could be a drop off in some segments as businesses decide to ‘permatise’
portions of their labour. Having said this, market share in respect of
labour outsourcing still has substantial room for growth and we do expect,
given our very aggressive sales strategy, to make up any of these losses.
Executive level and senior management level skills are in short supply –
executive talent search is on the increase and this involves and
incorporates recruitment process outsourcing, and managed service
offerings which effectively provide our clients with the ability to access
scarce skills utilising technology and systems and is something that we
are actively developing.
During the year under review Workforce acquired a small nursing agency
called Nursing Emergencies with a footprint in the greater Gauteng region.
This small transaction was concluded in October 2014 and we expect that
this brand will assist us in extending our footprint into the health
professions and nursing markets.
The consolidated financial review for the staffing and recruitment segment
reflects an increase in turnover to R1,57 billion (2013: R1,50 billion)
which represents an increase in percentage terms of 4.7%. The major
contributor towards this increase came from the blue-collar brand of
Workforce Staffing, with the white collar brands of Only the Best,
Teleresources and Fempower contributing towards this.
Gross margins across this segment, if one excludes the effect of the
employment tax incentive (ETI), remained relatively constant at 18%.
Operating expenses as a percentage of sales were in line with our target
for this segment coming in at 12.5 % and our overall contribution and
earnings at an EBITDA level was R128 million.
Process outsourcing
Clients are demanding more specialised processes and models for the
management of their staffing and resourcing requirements. This is a
growing trend internationally as we see clients’ human resources and
operations becoming more mature in the value chain. Business process
outsourcing and management outsourcing see the provider taking on more
risk and responsibility for processes and the resultant outputs.
Our brand Programmed Process Outsourcing, which seeks to deliver
outsourced solutions for our clients that incorporate labour, management,
processes and systems, has established itself in respect of its team and
has successfully secured some major contracts in this space, with
representation across our major markets throughout the country. It is
envisaged that Programmed Process Outsourcing will gain a lot more
traction as the market matures towards these models of outsourcing and
with the necessary investment of time and resources, will become a bigger
part of our business in 2015 and 2016.
Programmed Process Outsourcing made a marginal contribution towards
profitability in 2014; however its turnover contribution indicated that
there definitely is value within this market. A process of education of
the market is required and we believe this will yield results into the
future.
Turnover for the Programmed Process Outsourcing business increased to R112
million (2013: R52 million) which contributed R715 000 to profitability.
The segment was however pushed into a loss of R2.7 million by bad debts
written off in the discontinued Programmed Construction business, and
losses in the Workforce Payroll business, which was subsequently sold.
Training and consulting
The group continued to play an intrinsic role in respect of skills
development; we hosted more than 1000 learnerships and over 200
internships both internally and within our client-base during 2014. Our
ability to deliver on these learnerships and internships has been proven
and we will continue to strive for 100% successful exit rates.
Skills development and training are a core challenge for our country. We
are required to develop capability in our people so as to ensure they are
sufficiently qualified in order to add value to the economy. The skills
gap within the artisan category of work is critical – and it is therein
that opportunities exist for small and medium business creation.
Our specialist training brand Training Force has over the past few years
built a capability to deliver on this challenge and take advantage of the
opportunity at large. We have been successful in obtaining various
accreditations and qualifications across multiple SETA’s. To date we have
training operations in all the major centres across South Africa and have
more recently conducted training for clients in Mozambique and Ghana.
In our view the demand for specialist and professional training will
continue and increase substantially and hence our investment in creating
capacity within this business will continue. Management’s time and efforts
during 2014 has been on consolidating a solid foundation for growth. As a
result thereof our focus on growing this business is substantial and we
believe there exists opportunities for us to grow both on an organic basis
as well as from an acquisition stand point.
The training division’s turnover amounted to R39.4 million (2013: R33.2
million). Gross margins reduced to 54% (2013: 72%), whilst operating
expenses increased by 19%, resulting in an operating profit of R1.3
million (2013: R2.0 million).
Employee health management
Businesses are obligated to provide occupational healthcare to their
employees to prevent the risk of liability and to avoid the implications
of non-compliance to the Occupational Health and Safety Act. The group’s
employee health management division, Workforce Healthcare, offers a
comprehensive range of on-site and off-site primary and occupational
healthcare services structured in such a way that clients can select the
healthcare elements they need.
Workforce Healthcare’s DNA Wellness brand enables a specialist approach to
employee health management as it incorporates a physical and psycho-social
focus into its employee assistance and wellness programmes. This
includes, a 24 hour call centre with counselling and case management;
face-to-face counselling; education programmes; HIV/Aids management;
substance abuse management, counselling, support and referrals; state-
hospital admissions and emergency assistance programme.
More and more companies are recognising the impact that employee wellness
has on their business. It has been proven that employee health management
programmes not only reduces absenteeism, but also improves productivity
and the quality of life of employees.
This division’s turnover amounted to R26.9 million (2013: R25.1 million).
Gross margins remained constant at 61% (2013: 62%), whilst operating
expenses increased marginally by 3.3%, resulting in an operating profit of
R2.2 million (2013: R1.8 million).
Financial and lifestyle products
The ongoing demand within South Africa from consumers and from our
assignees for a better quality of life is being delivered on through our
financial and lifestyle businesses, incorporating Babereki, which is a
registered credit provider. Babereki’s continuously evolving product range
enhances employee loyalty programmes and currently comprises financial
(micro loans), mobile communications and home appliances.
The Babereki business which primarily provides loans and products to our
assignees on credit and to employees of our clients, has experienced
challenges during 2014, specifically in the areas of debt rehabilitation
and collection. Overall profitability of the business has been stagnant;
however there has been a strong focus on cash flows and the development of
sustainable systems to ensure that we are able to manage the business from
a cash positive point moving forward.
Management’s efforts and time in respect of ongoing development of these
systems and ensuring that our ratio in respect of the collections of
outstanding debt and non-performing debt improves, is ongoing.
Babereki’s turnover amounted to R56.0 million (2013: R54.1 million). Gross
margins were slightly lower at 70% (2013: 76%), whilst operating expenses
increased marginally by 13%, resulting in an operating profit of R4.7
million (2013: R9.2 million).
Within the financial and lifestyle products segment, our recently formed
niche business division, Essential Employee Benefits, continued to grow
its product range of employee benefits by responding to various market
opportunities within our existing employee-base as well as within our
client’s employee base, and offering in particular a range of insurance-
based death and disability plans, including cover for family members.
Essential Employee Benefits focuses on identifying and providing employees
with access to affordable value-added benefits normally associated with
permanent employment; an important offering for our core business,
specifically relating to the new requirements of the recently amended
labour and employment equity legislation which requires employers to
provide equitable benefits to both permanent and fixed term contract
staff.
Transformation
Workforce remains focused on achieving its transformation goals and
objectives. During the reporting period the group established a
transformation committee mandated to ensure implementation of strategies
and achievement of transformation across all operating divisions of the
organisation and in line with the amended B-BBEE codes of good practice.
One of our transformation pillars focuses on the development of talent
across the ‘experience’ gap so that our junior managers can compete more
effectively for middle and senior positions as they arise. Our current B-
BBEE rating is a Level 3 and we anticipate receiving a Level 2 rating in
the next reporting period.
Outlook
Our overall outlook for the group is positive and we believe that 2015,
specifically the first half of the year will be a bedding down period in
respect of the new legislation and we expect there will be a slight fall
off in our head-count as a result of this legislation. Stemming from a
highly fragmented industry, relative market shares remain low and we
believe with our core focus on protecting and growing our business through
the enablement of our extensive sales and business development strategy,
we will see our overall market share increase within our core markets
during 2015.
We do believe that a number of acquisition opportunities exist in the
market across our portfolio of businesses and these acquisition
opportunities will be pursued with a view to extending our share of the
market and increasing our profitability.
For and on behalf of the board
R.S Katz L.H Diamond W.P van Wyk
(Chairman) (Chief Executive Officer) (Group Financial Director)
20 March 2015
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 Schalwyk
Registered office address
11 Wellington Road
Parktown
2193
PO Box 11137
Johannesburg
2000
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