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WKF
WKF
WKF - Workforce - Audited condensed financial results for the year ended
31 December 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")
Audited condensed financial results for the year ended 31 December 2009
- HEPS increased by 10% to 6.4 cents per share.
- EPS decreased by 4% to 5.1 cents per share.
- Revenue decreased by 10% to R1.043 million.
- Operating costs decreased by 5% to R217.6 million.
- Debtors days outstanding improved to 50 days from 64 days.
- Cash available increased by R38.5 million to R69.9 million.
- Net Finance cost decreased by 38% to R14.2 million.
Condensed group statement of financial position at 31 December 2009
2009 2008
Notes R`000 R`000
Assets
Non-current assets 66,337 70,385
Property, plant and equipment 5 10,087 12,915
Goodwill 40,657 45,681
Other intangible assets 6,627 4,056
Deferred tax assets 7,119 5,148
Other financial assets 1,847 2,585
Current assets 314,968 306,713
Trade and other receivables 237,198 269,487
Inventories 1,345 874
Taxation 4,891 3,453
Cash and cash equivalents 71,534 32,899
Total assets 381,305 377,098
Equity and liabilities
Equity 159,216 148,459
Share capital and premium 103,752 104,674
Retained earnings 54,835 43,414
Equity attributable to owners of the parent 158,587 148,088
Non-controlling interests 629 371
Non-current liabilities 170,509 183,136
Borrowings 168,406 166,622
Amounts due to vendors - 15,183
Deferred tax liabilities 2,103 1,331
Current liabilities 51,580 45,503
Trade and other payables 38,334 43,046
Borrowings 387 925
Amounts due to vendors 11,276 -
Bank overdraft 1,583 1,532
Total equity and liabilities 381,305 377,098
Condensed group statement of comprehensive income for the year ended 31
December 2009
2009 2008
Notes R`000 R`000
Revenue 6 1,043,064 1,161,302
Cost of sales (795,881) (895,256)
Gross profit 247,183 266,046
Administrative expenses (184,819) (187,192)
Marketing expenses (19,716) (24,314)
Depreciation and amortisation of
non-financial assets (6,819) (6,617)
Other operating expenses (6,273) (10,329)
Operating profit 6 29,556 37,594
Finance income 1,223 2,747
Finance costs (15,431) (25,272)
Impairment of available-for-sale
financial assets (739) (761)
Profit before taxation 6 14,609 14,308
Taxation 7 (2,930) (2,398)
Profit for the year 11,679 11,910
Other comprehensive income for the year, net of tax:
Revaluation loss on available-for-sale
financial assets - (68)
Movement in fair value - (79)
Income tax relating to components of
other comprehensive income 7 - 11
Total comprehensive income for the year 11,679 11,842
Profit for the year attributable to:
Owners of the parent 11,421 11,949
Non-controlling interests 258 (39)
11,679 11,910
Total comprehensive income attributable to:
Owners of the parent 11,421 11,881
Non-controlling interests 258 (39)
11,679 11,842
Earnings per share (cents per share)
Basic and fully diluted 8 5.1 5.3
Headline 8 6.4 5.8
Condensed group statement of changes in equity for the year ended
31 December 2009
Attributable to owners of the parent
Share capital Treasury Revaluation Retained
and premium shares reserve earnings
R`000 R`000 R`000 R`000
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) - -
Prior year adjustment of
minority shareholding - - - -
Minority shareholders`
share of business
combinations acquired - - - -
Total comprehensive
income for the year - - (68) 11,949
Balance at
1 January 2009 111,368 (6,694) - 43,414
Transactions with owners - (922) - -
Total comprehensive
income for the year - - - 11,421
Balance at
31 December 2009 111,368 (7,616) - 54,835
Attributable to owners of the parent
Non-
controlling Total
Total interests equity
R`000 R`000 R`000
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)
Prior year adjustment of minority
shareholding - 194 194
Minority shareholders` share of
business combinations acquired - (69) (69)
Total comprehensive income for the
year 11,881 (39) 11,842
Balance at 1 January 2009 148,088 371 148,459
Transactions with owners (922) - (922)
Total comprehensive income for the
year 11,421 258 11,679
Balance at 31 December 2009 158,587 629 159,216
Condensed group statement of cash flows for the year ended 31 December 2009
2009 2008
Notes R`000 R`000
Cash flows from operating activities 44,750 3,801
Cash generated from operations 64,527 34,129
Interest received 746 1,144
Dividends received 477 1,603
Interest paid (15,431) (25,272)
Taxation paid (5,568) (7,803)
Cash flows from investing activities (6,492) (6,373)
Cash flows to maintain operating capacity
Financial assets acquired - (111)
Proceeds on sale of financial assets - 1,268
Acquisition of subsidiaries - (1,262)
Property, plant and equipment acquired (3,422) (5,594)
Proceeds on disposal of property, plant and equipment 530 96
Intangible assets acquired (3,600) (770)
Cash flows from financing activities 325 366
Payment for treasury shares (922) (2,085)
Proceeds from borrowings 1,247 44,525
Payment of amounts due to vendors - (31,853)
Dividends paid - (10,221)
Net change in cash and cash equivalents 38,584 (2,206)
Cash and cash equivalents at the beginning of the year 31,367 33,573
Cash and cash equivalents at the end of the year 69,951 31,367
Notes to the condensed group financial statements at 31 December 2009
1. Nature of operations and general information
Workforce Holdings Limited is an investment holding company. Its subsidiaries
carry on the business of staff outsourcing, recruitment and specialist staffing
and human resources support services (including financial and other value added
services to the staff of the group).
The condensed group financial statements are presented in South African
Rand (ZAR), which is also the functional currency of the parent company.
The condensed group financial statements were approved for issue by
the Board of Directors on 19 March 2010.
2. Basis of preparation and significant accounting policies
The condensed group financial statements for the year ended 31 December 2009,
have been prepared in accordance with IAS 34 Interim Financial Reporting,
International Financial Reporting Standards("IFRS") and Listings Requirements of
the JSE Limited.
The accounting policies comply with 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)
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.
All other IFRS amendments have no material impact on the group`s accounting
policies.
3. Events after reporting date
No material events occurred between the year-end date and the date of approval
of these condensed annual financial statements.
4. Audit opinion
Horwath Leveton Boner, the group`s independent auditor, has audited the group
annual financial statements of Workforce from which the condensed group
financial results has been derived. They have expressed an unmodified audit
opinion on the group annual financial statements, and in a separate report have
expressed the opinion that the condensed financial results are consistent, in
all material respects, with the annual financial statements. The audit reports
are available for inspection at the company`s registered office.
5. Property, plant and equipment
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 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 value at 31
December 2008 2,698 2,999 91 4,233
Additions 839 875 130 684
Disposals (384) (35) - (42)
Depreciation (1,205) (2,145) (15) (1,630)
Carrying value at 31
December 2009 1,948 1,694 206 3,245
Leasehold Training
improvements manuals Total
R`000 R`000 R`000
Carrying value at 1 January 2008 145 2,062 12,940
Additions 9 1,327 5,594
Disposals - - (102)
Depreciation (103) (546) (5,517)
Carrying value at 31 December 2008 51 2,843 12,915
Additions 48 846 3,422
Disposals - - (461)
Depreciation (43) (751) (5,789)
Carrying value at 31 December 2009 56 2,938 10,087
6. Segment reporting
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.
Segment information has been analysed as follows for the reporting periods under
review:
Recruitment
Staff and specialist
outsourcing staffing
2009 R`000 R`000
Segment revenues 838,589 147,436
Revenue from external customers 838,589 147,436
Intersegment revenues - -
Cost of sales (679,705) (99,789)
Administration expenses (112,018) (37,255)
Marketing expenses (13,390) (2,472)
Depreciation and amortisation of
non-financial assets (2,964) (452)
Other operating expenses (7,388) (640)
Segment operating profit 23,124 6,828
Human
resources
support
services Total
2009 R`000 R`000
Segment revenues 58,034 1,044,059
Revenue from external customers 53,774 1,039,799
Intersegment revenues 4,260 4,260
Cost of sales (14,068) (793,562)
Administration expenses (21,632) (170,906)
Marketing expenses (2,583) (18,444)
Depreciation and amortisation of
non-financial assets (8,837) (12,253)
Other operating expenses (8,777) (16,805)
Segment operating profit 2,137 32,089
Segment assets 6,054 174,497
Recruitment
Staff and specialist
outsourcing staffing
2008 R`000 R`000
Segment revenues 954,352 162,170
Revenue from external customers 954,352 162,170
Intersegment revenues - -
Cost of sales (768,885) (106,032)
Administration expenses (122,638) (41,111)
Marketing expenses (18,645) (2,846)
Depreciation and amortisation of
non-financial assets (2,557) (583)
Other operating expenses (7,689) (438)
Segment operating profit 33,938 11,160
Human
resources
support
services Total
2008 R`000 R`000
Segment revenues 53,050 1,169,573
Revenue from external customers 48,058 1,164,581
Intersegment revenues 4,992 4,992
Cost of sales (16,878) (891,795)
Administration expenses (19,603) (183,353)
Marketing expenses (2,881) (24,373)
Depreciation and amortisation of
non-financial assets (8,327) (11,466)
Other operating expenses (1,968) (10,095)
Segment operating profit 3,393 48,490
All segments traded in South Africa. Revenue from external customers in the
three provinces have been identified on the basis of the internal reporting
systems.
No segmental information is provided in respect of geographical analysis as the
group operates primarily in South Africa.
Most assets and liabilities are not directly attributable to individual segments
and meaningful allocations to operating segments cannot be done on a reasonable
basis.
Reconciliation of segment totals to the group`s key financial figures presented
in the financial statements:
2009 2008
R`000 R`000
Segment Revenues
Total segment revenues 1,044,059 1,169,573
Other revenues 5,536 (556)
Elimination of intersegment revenues (6,531) (7,715)
Group revenue 1,043,064 1,161,302
Segment profit or loss
Segment operating profit 32,089 48,490
Other income not allocated 5,536 (556)
Other expenses not allocated (24,337) (24,783)
Elimination of intersegment profits 16,268 14,443
Group operating profit 29,556 37,594
Result from equity accounting investments:
Finance income 1,223 2,747
Finance costs (15,431) (25,272)
Impairment of available-for-sale financial assets (739) (761)
Group profit before tax 14,609 14,308
Revenues and expenses that are directly attributable to segments are allocated
to those segments. Those that are not directly attributable to segments are
allocated on a reasonable basis. Unallocated operating income and expenses
mainly consist of head office administration expenses and regional and
administration fees recovered.
7. Taxation
Taxation recognised in profit and loss
2009 2008
R`000 R`000
Current tax expense 4,129 3,765
Current year 4,129 3,767
Prior year adjustments - (2)
Deferred tax expenses/(income) (1,199) (1,367)
Origination and reversal of temporary differences (1,199) (1,384)
Prior year adjustments - (67)
Reduction in tax rate - 84
2,930 2,398
Estimated tax losses of subsidiaries of the group for utilisation against
future taxable income:
2009 2008
R`000 R`000
Tax losses recognised for deferred tax 8,518 9,354
Tax losses not recognised for deferred tax 8,449 3,818
16,967 13,171
The taxation rate for the year can be reconciled to the accounting profit
As follows:
2009 2008
% %
Standard corporate tax rate 28.00 28.00
Adjusted for:
Exempt revenue or non-deductable expenses 5.16 (0.36)
Prior year adjustments 0.00 (0.38)
Change in income tax rate - 0.59
Tax allowances (19.82) (20.00)
Unused tax losses 6.72 8.91
Effective tax rate 20.06 16.76
Income tax recognised in other comprehensive income
Tax arising on income and expenses recognised in other comprehensive income
2009 2008
R`000 R`000
Deferred tax
Revaluations of available-for-sale financial assets - 11
8. 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
2009 2008
Profit attributable to equity shareholders of the
parent company (R`000) 11,421 11,949
Weighted average number of ordinary shares in issue
(`000) 225,630 226,630
Basic earnings per share (cents) 5.1 5.3
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:
2009 2008
Profit attributable to equity shareholders of the
parent company (R`000) 11,421 11,949
Headline earnings adjustment (R`000) 3,009 1,266
(Gain)/loss on disposal of property, plant and equipment (69) 5
Gain on sale of available-for-sale financial assets - (36)
Impairment of loans receivable 2,320 500
Impairment loss on available-for-sale-financial assets 739 797
Tax effects of adjustments 19 -
Total headline earnings (R`000) 14,430 13,215
Weighted average number of shares in issue (`000) 225,630 226,630
Headline earnings per share (cents) 6.4 5.8
9. Dividends
No dividend was declared relating to the period under review.
10. Borrowings
No significant changes in borrowings took place during the year.
11. Business combinations
No business combinations occurred during the period under review.
12. Related party transactions
Transactions between the company and its subsidiaries have been eliminated on
consolidation and are not disclosed in this note. Unless otherwise stated, none
of the transactions incorporate special terms and conditions and no guarantees
were given or received. Outstanding balances are usually settled in cash.
During the year, group entities entered into the following trading transactions
with related parties that are not members of the group:
2009 2008
R`000 R`000
11 Wellington Street Investments (Pty)Ltd 1 851 3 326
Relationship: Shareholder - R S Katz
Type of transaction: Operating lease rentals paid
A Taylor - 2 085
Relationship: Director
Type of transaction: Purchase of treasury shares
Vunani Capital (Proprietary) Limited 54 30
Relationship: Shareholder
Type of transaction: Designated advisors` fees
Hunts Attorneys 1 274 1 482
Relationship: Director with an interest in a legal
practice - R S Katz
Type of transaction: Disbursements for advocates`
fees paid
13. Contingent liabilities
Workmen`s compensation
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 2007
year and provisional assessments for 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 this with the Compensation Commissioner in an attempt
to resolve the matter. At the reporting date, no final assessments for the
2008 year or provisional assessments for 2009 were received. There remains
a contingent liability of R13.5 million (2008: R12 million).
Third party claims
Various legal claims were brought against the group during the year. Unless
recognised as a liability, the directors consider these claims to be
unjustified and the probability that they will require settlement at the
group`s expense to be remote, since the claims are not in accordance with
either the contracts with the customers or normal business practices in the
industry. This evaluation is consistent with external independent legal advice.
Potential claims by third parties amount to R1,3 million. The directors believe,
based on past history, that the likelihood of such claims being implemented are
minimal.
14. Change of accounting estimate
Cost of acquisition
The cost of acquisition of Telebest Holdings (Proprietary) Limited includes an
amount payable at the end of April 2010, dependent on the profits of the
Telebest Group for the three years ended 31 December 2009. This amount was
initially estimated at R17.048 million and in terms of IFRS 3 Business
combinations included at its fair market value of R15.183 million. As a result
of the difference between the forecast and actual profit, the fair market
value of the purchase price reduced to R10.159 million and in terms of IFRS 3,
goodwill has been adjusted accordingly. The final payment amounts to R11.676
million and the net amount due, after imputed interest, at 31 December 2009
amounts to R11.276 million.
Cost of treasury shares
An adjustment was made 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.
15. Directors` commentary
Operational Review
The review period presented a succession of difficulties and challenges. The
economic downturn which began in 2008 was felt to a much greater degree from
the beginning of 2009. The group was faced with numerous terminations or
reductions by its clients in their staff outsourcing requirements, as well as a
much lower level of activity in its permanent placement divisions. Workforce
responded with a balanced cutback in overheads which mainly involved branch
consolidation and staff reduction where this was possible without affecting the
management of the group`s business.
The economic downturn also resulted in substantially reduced performance levels
in the permanent placement divisions, namely Fempower and the Telebest group.
Fempower took active steps to replace lost business with other forms of
recruitment and advisory services on a retainer basis. It also reduced
overheads as far as possible, but was not able to stop trading losses. Judging
by its current performance, Fempower should be restored to profitability during
the 2010 financial year.
The second major challenge was the management of the debtors` book, due to
tight financial conditions which resulted in debtors` impairment at a higher
level than normal for the business. The group`s debtors department was
restructured and software control systems significantly improved, leading to
reduced debtors` days outstanding and a significantly improved cash position.
The third significant challenge came with the call from certain quarters to
`ban labour brokers`. The group was active in various forums to place this
issue in proper perspective and to position itself for any new regulations
which may be introduced. The negative effect of this call was that many clients
and prospective clients became uncertain on their position in a new employment
environment, resulting in a freeze on many new opportunities that would
otherwise have been finalised. At this stage, it seems clear that the outcome
will be further regulation of the temporary employment service industry as
opposed to any outright ban. The Directors believe this will be beneficial to
the group as we are already fully compliant and has the infrastructure in
place to easily adapt to new regulations. This is not true of a large number of
`labour brokers`.
Despite these challenges, the group has taken large strides in the past year to
position itself for good growth in the coming year. The financial results were
satisfactory given the circumstances, but they are far below what the group is
able to achieve - as it has proved in recent years.
Financial Review
Group Turnover decreased by 10% and operating expenses have been reduced by 5%
in nominal terms. The decrease in debtors` days outstanding to 50, from 64
days, has resulted in a net inflow of cash of R38.5 million. These factors have
resulted in a net decrease in Earnings per share to 5.3 cents from 5.1 cents.
Headline Earnings per share increased by 10% to 6.3 cents per share from 5.8
cents per share.
Outlook
Prospects for the coming year are considered to be more positive and should
reflect the increased optimism in an economic recovery and the group`s improved
readiness to take more than its share of the business available. It is, however,
anticipated that the recovery in the overall economy will be slow.
Annual General Meeting
The company`s annual general meeting will be held at 11 Wellington Road,
Parktown, Johannesburg on 13 May 2010 at 12:00.
For and on Behalf of the Board
RS Katz WP van Wyk
(Chairman) (Group Financial Director)
Johannesburg
19 March 2010
Executive Directors R.S. Katz, L.H. Diamond, W.P. van Wyk
Non-executive directors E.G. Dube, N.M. Anderson, J.R. Macey
Designated adviser Vunani Corporate Finance
Company secretary Routledge Modise Inc practicing as Eversheds
Transfer secretaries Link Market Services South Afica(Proprietary)
Limited, 11 Diagonal Street, Johannesburg, 2001
Registered office 11 Wellington Road, Parktown, 2193
Date: 19/03/2010 15:15:01 Produced by the JSE SENS Department.
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