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WKF
WKF
WKF - Workforce Holdings Limited - Unaudited condensed financial results for the
six months ended 30 June 2009
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 2009
Directors` commentary
Operational review
The recession has impacted on the trading activities of the group staff
outsourcing and the permanent recruitment divisions resulting in lower
turnovers. The permanent recruiting division was more negatively affected. In
the staff outsourcing segment both the Cape and Natal divisions delivered
marginally lower turnovers whilst Gauteng continued to disappoint with
materially lower sales.
The human resource support division continued to grow but has yet to make a
significant contribution to group profits. The training division secured
lucrative contracts, which are to commence in the second half of the year.
Steps have been taken through the first half-year to reduce overheads where
possible and to introduce more efficient and effective systems. The benefits of
these efforts will be more fully realized in the second half of the year.
The interventions taken to improve debtors` collections and reduce bad debt
risk have had a material effect on the group`s liquidity, cash flows and
interest cost. These steps should continue to reap further benefits.
The group continues to pursue its claim with the Compensation Commissioner
(COIDA) and we are confident that this will have a positive outcome.
Management
Several senior management changes were made during the course of last year and
the first half of this year. These changes integrated with the existing senior
management are proving to be a strong force for building the group`s business.
The roles of Chairman and Chief Executive Officer were split with the
appointment of Lawrence Diamond as Chief Executive Officer and Ronny Katz
retaining the Chairman`s office.
John Macey was appointed as chairman of the audit committee and as a member of
the board of directors.
Rodney Kaplan has tendered his resignation as a director of the Company and
will terminate his services at the end of August.
Financial review
Group turnover has decreased by 11% as explained in the operational review.
The percentage gross margin improvement as per the Statement of comprehensive
income is largely as a result of the previous year`s COIDA additional accrual of
R6.9 million.
Operating expenses reduced by 7% compared to the comparative period, whilst
finance costs have reduced by 32%. The debtors book has improved to 63 days
from 78 days in the corresponding period. Cash generated from operating
activities has improved to R 42.4 million, compared to an outflow of R 22.9
million in the corresponding period.
The result of the above factors has been an improvement in headline earnings per
share (HEPS) of 50%, albeit
from a low base. Whilst the profitability of the company is still below
acceptable levels, the company has been able to strengthen its Statement of
financial position significantly, as well as reduce its overhead base.
Seasonality
In terms of IAS34 it is noted that the first six months of the financial year
have historically always been significantly less profitable than the second six
months. This is due to seasonal factors.
Prospects
Turnover in all divisions of the group is expected to increase in the second
half of the year compared to the first half, which together with a lower cost
base should result in improved profitability. The group`s liquidity is expected
to continue to improve which places it in a strong position to take advantage
of any change in the economic environment.
Condensed Consolidated Statement of Financial Position
at 30 June 2009
6 months to 6 months to Year to 31
30 June 2009 30 June 2008 December 2008
Notes R`000 R`000 R`000
Assets
Non-current assets 67,334 67,999 70,385
Property, plant
and equipment 5 11,329 12,197 12,915
Goodwill 15 41,749 45,629 45,681
Other intangible
assets 6 5,863 4,682 4,056
Deferred tax
assets 6,315 2,063 5,148
Available-for-sale
financial assets 2,078 3,428 2,585
Current assets 320,801 321,223 306,713
Trade and other
receivables 238,100 293,437 269,487
Inventories 704 721 874
Current tax assets 5,113 6,311 3,453
Cash and cash equivalents 76,884 20,754 32,899
Total assets 388,135 389,222 377,098
Equity and liabilities
Equity 150,573 140,105 148,459
Share capital and premium 103,752 106,759 104,674
Retained earnings 46,283 33,023 43,414
Equity attributable
to owners of the parent 150,035 139,782 148,088
Non-controlling
interests 538 323 371
Non-current
liabilities 169,989 189,250 183,136
Borrowings 168,152 174,999 166,622
Amounts due to
vendors 15 - 14,251 15,183
Deferred tax
liabilities 1,837 - 1,331
Current liabilities 67,573 59,867 45,503
Trade and other payables 49,351 52,943 43,046
Borrowings 477 283 925
Amounts due to
vendors 15 11,869 - -
Current tax
liabilities - 653 -
Bank overdrafts 5,876 5,988 1,532
Total equity and
liabilities 388,135 389,222 377,098
Condensed Consolidated Statement of Comprehensive Income
for the six months ended 30 June 2009
6 months to
30 June 2009
Notes R`000
Continuing operations
Revenue 7 500,171
Cost of sales (384,036)
Gross profit 116,135
Administrative expenses (91,568)
Marketing and selling expenses (8,505)
Depreciation and amortisation of non-financial assets (3,352)
Other operating expenses (789)
Operating profit 7 11,921
Finance income 589
Finance costs (8,308)
Impairment of available-for-sale financial assets (507)
Profit before income tax 7 3,695
Tax expense 8 (659)
Profit for the period from continuing operations 3,036
Other comprehensive income:
Other comprehensive income for the period, net of tax -
Available-for-sale financial assets
- current period gains/(losses) (507)
- reclassification to profit or loss 507
Income tax relating to components of other
comprehensive income -
Total comprehensive income for the period 3,036
Profit for the period attributable to:
Owners of the parent 2,869
Non-controlling interests 167
Total comprehensive income attributable to:
Owners of the parent 2,869
Non-controlling interests 167
Earnings per share (cents) 9
Basic earnings per share 1.3
Headline earnings per share 1.5
6 months to Year to 31
30 June 2008 December 2008
R`000 R`000
Continuing operations
Revenue 563,926 1,161,302
Cost of sales (437,889) (895,256)
Gross profit 126,037 266,046
Administrative expenses (95,716) (189,951)
Marketing and selling expenses (11,194) (21,553)
Depreciation and amortisation of
non-financial assets (3,058) (6,617)
Other operating expenses (2,440) (10,331)
Operating profit 13,629 37,594
Finance income 1,748 2,747
Finance costs (12,320) (25,272)
Impairment of available-for-sale financial
assets (126) (761)
Profit before income tax 2,931 14,308
Tax expense (576) (2,398)
Profit for the period from continuing
operations 2,355 11,910
Other comprehensive income:
Other comprehensive income for the period,
net of tax (68) (68)
Available-for-sale financial assets
- current period gains/(losses) (197) (831)
- reclassification to profit or loss 126 761
Income tax relating to components of other
comprehensive income 3 2
Total comprehensive income for the period 2,287 11,842
Profit for the period attributable to:
Owners of the parent 2,137 11,949
Non-controlling interests 218 (39)
2,355 11,910
Total comprehensive income attributable to:
Owners of the parent 2,069 11,881
Non-controlling interests 218 (39)
2,287 11,842
Earnings per share (cents)
Basic earnings per share 0.9 5.3
Headline earnings per share 1.0 5.8
Condensed Consolidated Statements of Changes in Equity
for the six months ended 30 June 2009
Attributable to owners of the parent
Available-
Share for-sale
capital and Treasury financial Retained
premium shares assets earnings
R`000 R`000 R`000 R`000
Balance at 1
January 2009 111,368 (6,694) - 43,414
Transactions with owners (922)
Adjustment to purchase
price of treasury
shares (Note 15) (922)
Profit for the year 2,869
Balance at 30 June 2009 111,368 (7,616) - 46,283
Restated balance at
1 January 2008 111,368 (4,609) 68 41,686
Transactions with owners (10,800)
Payment of dividends (10,800)
Profit for the period - - - 2,137
As previously stated 2,408
Prior period
adjustment (Note 16) (271)
Prior year adjustment
of minority shareholding
Minority shareholders`
share of business
combinations acquired
Other comprehensive income (68)
Balance at 30 June 2008 111,368 (4,609) - 33,023
Restated balance at
1 January 2008 111,368 (4,609) 68 41,686
Transactions with owners (2,085) (10,221)
Payment of dividends (10,800)
Dividends on treasury shares 579
Purchase of treasury shares (2,085)
Profit for the year 11,949
Prior year adjustment of
minority shareholding
Minority shareholders`
share of business
combinations acquired
Other comprehensive income (68)
Balance at 31 December
2008 111,368 (6,694) - 43,414
Attributable
to owners
of the parent
Non-
controlling Total
Total interests equity
R`000 R`000 R`000
Balance at 1 January 2009 148,088 371 148,459
Transactions with owners (922) (922)
Adjustment to purchase price of
treasury shares (Note 15) (922) (922)
Profit for the year 2,869 167 3,036
Balance at 30 June 2009 150,035 538 150,573
Restated balance at 1 January 2008 148,513 285 148,798
Transactions with owners (10,800) (10,800)
Payment of dividends (10,800) (10,800)
Profit for the period 2,137 218 2,355
As previously stated 2,408 218 2,626
Prior period adjustment (Note 16) (271) (271)
Prior year adjustment of minority
shareholding (111) (111)
Minority shareholders` share of
business combinations acquired (69) (69)
Other comprehensive income (68) (68)
Balance at 30 June 2008 139,782 323 140,105
Restated balance at 1 January 2008 148,513 285 148,798
Transactions with owners (12,306) (12,306)
Payment of dividends (10,800) (10,800)
Dividends on treasury shares 579 579
Purchase of treasury shares (2,085) (2,085)
Profit for the year 11,949 (39) 11,910
Prior year adjustment of minority
shareholding 194 194
Minority shareholders` share of
business combinations acquired (69) (69)
Other comprehensive income (68) (68)
Balance at 31 December 2008 148,088 371 148,459
Condensed Consolidated Statement of Cash Flows
for the six months ended 30 June 2009
6 months to 6 months to Year to 31
30 June 2009 30 June 2008 December 2008
R`000 R`000 R`000
Operating activities
Profit before tax 3,695 2,931 14,308
Adjustments for non-cash items 3,860 2,509 7,383
Net changes in working capital 37,860 (21,877) (12,672)
Taxes paid (2,980) (6,443) (7,803)
Cash flow from operating
activities 42,435 (22,880) 1,216
Investing activities
Purchase of property,
plant and equipment (1,099) (1,980) (5,594)
Proceeds from disposals of
property, plant
and equipment - 1,120 96
Purchase of other
intangible assets (2,474) (676) (770)
Financial assets acquired - (108) (111)
Proceeds from disposals of
financial assets - - 1,268
Acquisition of subsidiaries,
net of cash - (1,336) (1,262)
Cash flow from investing
activities (3,573) (2,980) (6,373)
Financing activities
Payment for treasury shares - - (2,085)
Proceeds from loans 161 52,904 44,525
Amounts due to vendors 618 (30,200) (29,268)
Dividends paid - (10,800) (10,221)
Cash flow from financing
activities 779 11,904 2,951
Net change in cash and cash
equivalents 39,641 (13,956) (2,206)
Cash and cash equivalent at
beginning of period 31,367 28,722 33,573
Cash and cash equivalents
at end of the period 71,008 14,766 31,367
Notes to the Condensed Interim Consolidated Financial Statements
at 30 June 2009
1. Nature of operations and general information
The principle activities of Workforce and its subsidiaries are
staff outsourcing, recruitment and specialist staffing and human resources
support services.
The registered office, which is also its principle place of business, is 11
Wellington Road, Parktown, 2193.
The consolidated interim financial statements are presented in South African
Rand (ZAR), which is also the functional currency of the parent company.
The consolidated interim financial statements were approved for issue by
the Board of Directors on 11 August 2009.
2. Basis of preparation and significant accounting policies
The condensed interim consolidated financial statements for the 6 months ended
30 June 2009, have been prepared in accordance with IAS 34 Interim Financial
Reporting.
The accounting policies comply with International Financial Reporting Standards
("IFRS") and have been applied consistently with the accounting policies
adopted in the last annual financial statements, except for the adoption of:
IAS 1 Presentation of financial statements (effective 1 January 2009)
IFRS 8 Operating segments (Effective 1 January 2009)
All other IFRS amendments do not have a material impact on the group`s
accounting policies.
The adoption of IAS 1 makes certain changes to the format and titles of the
primary financial statements and to the presentation of some items within these
statements. It also gives rise to additional disclosures. The measurement and
recognition of the group`s assets, liabilities, income and expenses are
unchanged. However, some items that were recognised directly in equity are now
recognised in other comprehensive income. IAS 1 affects the presentation of the
owner changes in equity and introduces a "Statement of comprehensive income".
In accordance with the new standard, the entity does not present an "Income
statement" as was presented in the 2008 consolidated financial statements.
Further a "Statement of changes in equity" is now presented as a primary
statement.
The adoption of IFRS 8 has not affected the identified operating segments for
the group. However, reported segments results are now based on internal
management reporting information that is regularly reviewed by the chief
operating decision maker. In the previous annual financial statements, segments
were identified by reference to the dominant source and nature of the group`s
risks and returns.
3. Events after reporting date
No material events occurred between the date of the statement of financial
position and the date of approval of these condensed financial statements.
4. Auditors` responsibility
These condensed consolidated interim financial results have not been audited
nor reviewed by the group`s auditors. This is not a requirement of the JSE
Listings Requirements nor IAS 34. The auditors` responsibility is to monitor
compliance with the disclosure requirements of the JSE.
5. Additions and disposals of property, plant and equipment
Motor Computer Industrial Office
vehicles equipment equipment equipment
R`000 R`000 R`000 R`000
6 months to June 2009
Carrying amount at 1
January 2009 2,698 2,999 91 4,233
Additions 492 456 - 151
Depreciation (547) (1,345) (11) (523)
Carrying amount at 30
June 2009 2,643 2,110 80 3,861
6 months to June 2008
Carrying amount at 1
January 2008 2,732 4,101 80 3,820
Additions 527 725 25 661
Disposals (42) (3)
Depreciation (514) (1,273) (20) (602)
Carrying amount at 30
June 2008 2,703 3,550 85 3,879
Year to 31 December 2008
Carrying amount at 1
January 2008 2,732 4,101 80 3,820
Additions 1,214 1,438 60 1,546
Disposals (92) (5) - (5)
Depreciation (1,156) (2,535) (49) (1,128)
Carrying amount at
31 December 2008 2,698 2,999 91 4,233
Leasehold Training
improvements manuals Total
R`000 R`000 R`000
6 months to June 2009
Carrying amount at 1 January 2009 51 2,843 12,915
Additions - - 1,099
Depreciation (38) (221) (2,685)
Carrying amount at 30 June 2009 13 2,622 11,329
6 months to June 2008
Carrying amount at 1 January 2008 145 2,062 12,940
Additions - 42 1,980
Disposals - - (45)
Depreciation (49) (220) (2,678)
Carrying amount at 30 June 2008 96 1,884 12,197
Year to 31 December 2008
Carrying amount at 1 January 2008 145 2,062 12,940
Additions 9 1,327 5,594
Disposals - - (102)
Depreciation (103) (546) (5,517)
Carrying amount at 31 December 2008 51 2,843 12,915
6. Additions and disposals of intangible assets
Computer
software Total
R`000 R`000
6 months to June 2009
Carrying amount at 1 January 2009 4,056 4,056
Additions 2,474 2,474
Amortisation (667) (667)
Carrying amount at 30 June 2009 5,863 5,863
6 months to June 2008
Carrying amount at 1 January 2008 4,386 4,386
Additions 676 676
Amortisation (380) (380)
Carrying amount at 30 June 2008 4,682 4,682
Year to 31 December 2008
Carrying amount at 1 January 2008 4,386 4,386
Additions 770 770
Amortisation (1,100) (1,100)
Carrying amount at 31 December 2008 4,056 4,056
7. Segment analysis
The group`s segmental analysis is based on the following three core business
segments:
- 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.
- Human resources support services, which can be integrated with staffing
solutions to optimise employee performance.
These operating segments are monitored and strategic decisions are made on the
basis of adjusted segment operating results.
Revenues and profit generated by each of the group`s business segments are
summarised as follows:
Recruitment
Staff and specialist
outsourcing staffing
R`000 R`000
6 months to June 2009
Revenue from external customers 399,994 76,145
Inter-segment revenues - 12
Segment operating profit 11,834 3,264
Total assets 162,225 33,058
6 months to June 2008
Revenue from external customers 459,299 82,767
Inter-segment revenues - 110
Segment operating profit 16,391 7,146
Total assets 247,328 33,020
Year to 31 December 2008
Revenue from external customers 953,559 162,157
Inter-segment revenues - 486
Segment operating profit 33,938 11,160
Total assets 212,568 23,453
Human
resources
support
services Total
R`000 R`000
6 months to June 2009
Revenue from external customers 24,032 500,171
Inter-segment revenues 2,741 2,753
Segment operating profit 2,633 17,731
Total assets 54,597 249,881
6 months to June 2008
Revenue from external customers 21,860 563,926
Inter-segment revenues 3,981 4,091
Segment operating profit 2,463 26,000
Total assets 51,247 331,595
Year to 31 December 2008
Revenue from external customers 45,586 1,161,302
Inter-segment revenues 7,229 7,715
Segment operating profit 3,392 48,490
Total assets 53,176 289,197
Segment operating profit can be reconciled to the group`s profit or loss as
follows:
6 months to 6 months to Year to 31
30 June 2009 30 June 2008 December 2008
R`000 R`000 R`000
Segment operating profit 17,731 26,000 48,490
Reconciling items:
Other expenses not allocated (11,625) (14,602) (26,591)
Elimination of
inter-segment profits 5,815 2,231 15,695
Group operating profit 11,921 13,629 37,594
Finance income 589 1,748 2,747
Finance costs (8,308) (12,320) (25,272)
Impairment of
available-for-sale
financial assets (507) (126) (761)
Group profit before tax 3,695 2,931 14,308
8. Taxation
The effective tax rate of 18% for the period was based on the anticipated
weighted average tax rate for the full financial year.
9. Earnings per share
6 months to 6 months to Year to 31
30 June 2009 30 June 2008 December 2008
Basic earnings per share
Profit attributable to
equity shareholders (R`000) 2,869 2,137 11,949
Weighted average number of
shares in issue (`000) 225,630 227,130 226,630
Basic earnings per share (cents) 1.3 0.9 5.3
There are no potential
dilutive shares, therefore
diluted earnings per share
equates to basic earnings
per share.
Headline earnings per share
Profit after taxation
(R`000) 2,869 2,137 11,949
Headline earnings
reconciliaton (R`000)
- Loss on disposal of property,
plant and equipment - - 5
- Gain on sale of
available-for-sale financial assets - (38) (36)
- Impairment of loans receivable - - 500
- Impairment loss on
available-for-sale financial assets 507 164 797
Total headline earnings
(R`000) 3,376 2,263 13,215
Weighted average number of
shares in issue (`000) 225,630 227,130 226,630
Headline earnings per share
(cents) 1.5 1.0 5.8
10. Dividends
No dividend was declared relating to the period under review.
11. Borrowings
No new borrowing arrangements were concluded during the period under review.
Other than disclosed in note 15, changes in borrowings reflect the repayments
made in terms of agreements. Short-term borrowings fluctuate in accordance with
changing working capital needs.
12. Business combinations
No business combinations occurred during the period under review.
13. Related party transactions
The group, in the ordinary course of business, entered into various sale and
purchase transactions on an arm`s length basis at market rates with related
parties.
14. Contingent liabilities
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.
The accrual in the interim consolidated financial statements is deemed prudent
by the board of directors. There remains a contingent liability of R12.8
million (December 2008: R12 million).
15. Change of accounting estimate
Cost of acquisition
The cost of acquisition of Telebest Holdings (Proprietary) Limited included an
amount to be paid in cash at the end of April 2010, dependent on the profits of
the Telebest group for the three years ending 31 December 2009. This amount was
initially estimated at R17.768 million and in terms of IFRS 3 Business
combinations included at its fair market value of R13.318 million.
The forecast profit has been revised and as a result the fair market value of
the purchase price reduced to R11.251 million and in terms of IFRS 3, goodwill
has been adjusted accordingly. The new estimated final payment amounts to
R12.930 million and the net amount after imputed interest due at 30 June 2009
amounts to R11.869 million.
Cost of treasury shares
An error occurred in the calculation of the purchase price of treasury shares
by a subsidiary of the group. The shares and liability raised amounted to R9
111 761 and not R7 593 014 as previously shown. As a result of imputed interest
the effect in the 2008 financial year will be to increase finance costs by
R321 950, increase long term liabilities by R1 243 829 and increase the
treasury shares by R921 879.
The directors of Workforce have concluded that the error is not a "Material
prior year error" as defined, and hence does not result in the restatement of
the comparatives at 30 June 2008 and 31 December
2008.
16. Adjustment to comparatives
The directors, after due consideration, have consolidated an employee trust for
the year ended 31 December 2008 and as a result the shares held in the listed
entity by the trust are treated as treasury shares. The prior year interim
consolidated comparatives have been restated as follows:
Amount at
30 June 2008 Restated
as previously Prior period amount at
stated error 30 June 2008
R`000 R`000 R`000
Statement of financial position
Share capital and premium 111,368 (4,609) 106,759
Retained earnings 34,337 (1,314) 33,023
Borrowings 169,076 5,923 174,999
Statement of comprehensive income
Finance costs 12,025 295 12,320
Administrative expenses 95,740 (24) 95,716
107,765 271 108,037
Weighted average number of
ordinary shares for the
purpose of basic and
headline earnings per
share(`000) 240,000 (12,870) 227,130
Earnings per share (cents) 1.0 (0.1) 0.9
The following reclassifications have been made to the June 2008 comparatives to
be consistent with the reclassifications done in the December 2008 annual
financial statements:
Amount at
30 June 2008 Restated
as previously Reclass- amount at
stated ification 30 June 2008
R`000 R`000 R`000
Statement of financial position
Property, plant and equipment 10,314 1,883 12,197
Other intangible assets 6,565 (1,883) 4,682
Trade and other payables 38,035 14,908 52,943
Bank overdrafts 15,030 (9,042) 5,988
For and on behalf of the Board
RS Katz (Chairman) W van Wyk (Group Financial Director)
Johannesburg
13 August 2009
Executive Directors R.S. Katz, L.H. Diamond, R.S. Kaplan, W.P. van Wyk
Non-executive directors E. Dube, N.M. Anderson, J.R. Macey
Designated adviser Vunani Corporate Finance
Company secretary Eversheds
Transfer secretaries Link Market Services (Pty) Ltd, 11 Diagonal
Street, Johannesburg, 2001
Date: 13/08/2009 15:57:07 Produced by the JSE SENS Department.
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