| Thu 28 Aug 2008, 17:01 | | WKF - Workforce - Unaudited condensed financial results for the six months ended |
|
WKF
WKF
WKF - Workforce - Unaudited condensed financial results for the six months ended
30 June 2008
Workforce Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number 2006/018145/06)
(JSE code: WKF ISIN: ZAE000087847)
("Workforce" or "the group")
UNAUDITED CONDENSED FINANCIAL RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2008
COMMENTARY
Introduction
The interim financial statements have been prepared in accordance with IAS34:
Interim Financial Reporting. The accounting policies comply with International
Financial Reporting Standards ("IFRS") and have been applied consistently with
the policies applied in the previous year.
Results
Revenue for the six months ended 30 June 2008 was 20.3% higher than the same
period for the prior year. Organic growth was up 6% with the balance arising
from the acquisitions in the second half of 2007.
All divisions showed good results and are in line with expectations, with the
exception of the KwaZulu-Natal and Gauteng blue collar outsourcing divisions.
The poor performance of these divisions together with an unexpected accrual in
respect of charges by the Compensation Commissioner as detailed below, dragged
down earnings before interest, taxation, depreciation and amortisation
("EBITDA") to R 16.5 million from R 20.9 million. The EBITDA margin also
decreased to 2.9% from 4.5% previously. Excluding the accrual for rates levied
by the Compensation Commissioner, EBITDA would have been R 23.5 million and the
EBITDA margin would have been 4.2%.
Finance costs have been adversely affected by the increase in the prime lending
rate, as well as higher funding needs due to acquisitions funded by cash. This
has resulted in net finance cost increasing to R 10.2 million from R 3.2
million in the prior year.
Results have also been negatively affected by an increase in the bad debt
provision due to current economic conditions.
Cash flows were negatively impacted by weaker collections from debtors in a
more difficult environment compared to the prior year.
The effective tax rate of 18.0% for the period is based on the anticipated
weighted average tax rate for the full financial year.
Operational Review
The overall market for blue collar staff in the outsourcing segment has been
resilient during the past six months. Certain sectors have shown small
weaknesses whilst others have grown strongly, with Workforce having
representation across most sectors of the economy. Despite the potential for
higher growth in the blue collar outsourcing sector the KwaZulu-Natal and
Gauteng regions were unable to capitalise on new contracts to replace contracts
lost.
The white collar temporary staffing market has softened during the first six
months of the year, particularly in the financial services sector. Nevertheless
the group`s various operations in this sector have shown acceptable growth.
The debtors book has deteriorated to 78 days sales outstanding ("DSO") from 69
in the corresponding period. Despite improvements in systems to improve
collections, debtors still remain at disappointingly high levels. Workforce
continues to put the highest priority on improving the DSO.
Compensation Commissioner charges accrual and contingent liability
During May 2008, new assessments were received from the Compensation
Commissioner in terms of the Compensation for Occupational Injuries and
Diseases Act, No. 130 of 1993. These included final assessments for the year
ended 28 February 2007 and provisional assessments for the year ended 29
February 2008, which were at substantially higher rates than the previous
assessments.
Workforce has obtained legal opinion from senior counsel, whose view is that
the Compensation Commissioner did not have the authority to increase the
tariffs on the final assessments. Workforce is consequently pursuing the matter
with the Compensation Commissioner in an attempt to resolve this matter.
In the interim, a partial accrual of R 6.9 Million, deemed prudent by the board
of directors, has been made. There remains a possible contingent liability of
R 5.5 Million.
Adjustment to comparatives in Balance Sheet
An error in the Trade and Other Receivables amount on the balance sheet was
recently discovered. This error, which largely pertains to 2006 and possibly
prior thereto, is still being investigated. As a consequence of this error, the
Trade and Other Receivables amount for 2007 has been restated, in accordance
with IAS8, for the purposes of the interim financial statements, and has had no
effect on the current or prior year`s income.
Prospects
Steps have been taken to address performance in the KwaZulu-Natal and Gauteng
regions. Whilst these steps should result in improved trading results during
the second half of the year, they are unlikely to be at the same level as the
prior year.
For and on behalf of the Board
RS Katz
(Chairman and CEO)
28 August 2007
Directors: R Katz (Chairman and CEO), E Dube*, R Kaplan, A Taylor*,
M Anderson*, W Van Wyk
*non-executive
Registered office: 11 Wellington Road, Parktown, PO Box 78333, Sandton City,
2146.
Transfer secretaries: Link Market Services South Africa (Proprietary) Limited,
11 Diagonal Street, Johannesburg, 2001, PO Box 4844, Johannesburg, 2000.
Company secretary: Routledge Modise
Designated Adviser: Vunani Corporate Finance
CONSOLIDATED BALANCE SHEETS
At 30 June 2008
30 June 30 June 31 December
2008 2007 2007
R`000 R`000 R`000
ASSETS
Non-current assets 67,999 17,197 68,652
Property, vehicles and equipment 10,314 10,277 10,878
Goodwill 45,629 4,275 44,293
Other intangible assets 6,565 6,448
Deferred tax 2,063 2,645 2,450
Other financial assets 3,428 4,583
Current assets 321,223 246,478 296,695
Trade and other receivables 293,437 210,349 251,400
Tax 6,311
Inventories 721 917
Cash and bank balances 20,754 36,129 44,378
Total assets 389,222 263,675 365,347
EQUITY AND LIABILITIES
Total equity 146,028 132,280 154,360
Issued capital 111,368 111,368 111,368
Outside shareholders` interest 323 195
Revaluation reserve 68
Retained earnings 34,337 20,912 42,729
Non-current liabilities 183,327 87,767 129,772
Deferred tax 11
Amounts due to vendors 14,251 13,318
Borrowings 169,076 87,767 116,443
Current liabilities 59,867 43,628 81,215
Tax 653 98 585
Trade and other payables 43,901 27,104 32,889
Amounts due to vendors 31,133
Borrowings 283 250 952
Bank overdrafts 15,030 16,176 15,656
Total equity and liabilities 389,222 263,675 365,347
CONSOLIDATED INCOME STATEMENTS
for the six month period ended 30 June 2008
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2008 2007 2007
R`000 R`000 R`000
Revenue 563,926 468,707 968,980
Cost of sales 437,889 364,268 745,450
Gross Profit 126,037 104,439 223,530
Operating costs 109,500 83,525 170,392
Earnings before
interest, taxation and
depreciation 16,537 20,914 53,138
Investment revenue 1,748 3,907 8,740
Finance costs 12,025 7,111 14,796
Depreciation and amortisation 3,058 2,176 4,549
Profit before taxation 3,202 15,534 42,533
Taxation 576 3,573 8,530
Profit after taxation 2,626 11,961 34,003
Attributable to equity
shareholders 2,408 11,961 33,778
Attributable to outside
shareholders 218 225
Reconciliation of
headline earnings
Profit after taxation 2,408 11,961 33,778
Headline earnings 2,408 11,961 33,778
Weighted average number
of shares 240,000,000 240,000,000 240,000,000
Earnings per share (cents) 1.0 5.0 14.1
Headline earnings per 1.0 5.0 14.1
share (cents)
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
for the six month period ended 30 June 2008
Share capital Retained Outside
and premium Earnings Shareholders
R`000 R`000 R`000
Balance at 1 January 2007 111,368 8,951
Profit for the year 33,778
Outside shareholders` share
acquired through business combinations 60
Outside shareholders` share of profits 225
Dividend declared to outside
shareholders of subsidiary -90
Fair value adjustment on available
for sale financial assets
Balance at 31 December 2007 111,368 42,729 195
Profit for the period 2,408
Outside shareholders` share of profits 218
Dividend declared to outside
shareholders of subsidiary -90
Dividend declared -10,800
Fair value adjustment on available
for sale financial assets
Balance at 30 June 2008 111,368 34,337 323
Revaluation Total
Reserve Equity
R`000 R`000
Balance at 1 January 2007 120,319
Profit for the year 33,778
Outside shareholders` share
acquired through business combinations 60
Outside shareholders` share of profits 225
Dividend declared to outside
shareholders of subsidiary -90
Fair value adjustment on available
for sale financial assets 68 68
Balance at 31 December 2007 68 154,360
Profit for the period 2,408
Outside shareholders` share of profits 218
Dividend declared to outside
shareholders of subsidiary -90
Dividend declared -10,800
Fair value adjustment on available
for sale financial assets -68 -68
Balance at 30 June 2008 - 146,028
CONSOLIDATED CASH FLOW STATEMENTS
for the six month period ended 30 June 2008
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2008 2007 2007
R`000 R`000 R`000
Cash flows from
operating activities -31,561 2,609 3,379
Cash generated by
(utilised in) operating
activities -14,841 15,978 24,010
Dividend income 1,557 2,484 5,198
Interest income 191 1,423 3,542
Finance costs -12,025 -7,111 -14,796
Taxation paid -6,443 -10,165 -14,575
Cash utilised in
investing activities -2,980 -2,741 -67,674
Vehicles and
equipment acquired -1,980 -2,741 -5,042
Intangibles acquired -676 -6,495
Acquisition of
subsidiaries -1,336 -51,824
Proceeds on disposal of assets 1,120 191
Financial assets acquired -108 -4,504
Cash flows from
financing activities 11,543 30,755 103,687
Borrowings raised 52,633 30,755 59,326
Amounts due to vendors -30,200 44,451
Dividends paid -10,890 -90
Increase in cash and
cash equivalents -22,998 30,623 39,392
Cash and cash
equivalents at
beginning of year 28,722 -10,670 -10,670
Cash and cash
equivalents at end of year 5,724 19,953 28,722
Date: 28/08/2008 17:01:01 Produced by the JSE SENS Department.
The SENS service is an information dissemination service administered by the
JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or
implicitly, represent, warrant or in any way guarantee the truth, accuracy or
completeness of the information published on SENS. The JSE, their officers,
employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature,
howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
