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WKF
WKF
WKF - Workforce Holdings Limited - Unaudited condensed interim financial results
for the six months ended 30 June 2010
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 INTERIM FINANCIAL RESULTS FOR THE SIX MONTHS ENDED 30 JUNE
2010
Highlights
- HEPS increased by 20% to 1,8 cents per share.
- EPS increased by 31% to 1,7 cents per share.
- Revenue increased by 8% to R541 million.
- Operational debtors days outstanding improved to 53 days from 64 days.
Condensed Consolidated Statement of Comprehensive Income
for the six months ended 30 June 2010
Six months Six months Year
to to to
30 June 30 June 31 December
2010 2009 2009
Notes R`000 R`000 R`000
Revenue 7 541 081 500 171 1 043 064
Cost of sales (412 666) (384 036) (795 881)
Gross profit 128 415 116 135 247 183
Administrative expenses (102 381) (91 568) (184 819)
Marketing expenses (10 300) (8 505) (19 716)
Depreciation and (3 875) (3 352) (6 819)
amortisation of non-
financial assets
Other operating expenses (456) (789) (6 273)
Operating profit 7 11 403 11 921 29 556
Finance income 637 589 1 223
Finance costs (6 640) (8 308) (15 431)
Impairment of available-for- (231) (507) (739)
sale financial assets
Profit before taxation 7 5 169 3 695 14 609
Taxation 8 (962) (659) (2 930)
Profit for the period 4 207 3 036 11 679
Other comprehensive income - - -
for the period, net of tax
Total comprehensive income 4 207 3 036 11 679
for the period
Profit for the period
attributable to:
Owners of the parent 3 899 2 869 11 421
Non-controlling interests 308 167 258
4 207 3 036 11 679
Total comprehensive income
attributable to:
Owners of the parent 3 899 2 869 11 421
Non-controlling interests 308 167 258
4 207 3 036 11 679
Earnings per share (cents) 9
Basic and fully diluted 1,7 1,3 5,1
Headline 1,8 1,5 6,4
Condensed Consolidated Statement of Financial Position
at 30 June 2010
Six months Six months Year
to to to
30 June 30 June 31 December
2010 2009 2009
Notes R`000 R`000 R`000
ASSETS
Non-current assets 67 583 67 334 66 337
Property, plant and 5 9 094 11 329 10 087
equipment
Goodwill 15 41 205 41 749 40 657
Other intangible assets 6 5 842 5 863 6 627
Deferred tax assets 9 826 6 315 7 119
Other financial assets 1 616 2 078 1 847
Current assets 330 521 320 801 314 968
Trade and other receivables 258 345 238 100 237 198
Inventories 2 202 704 1 345
Taxation - 5 113 4 891
Cash and cash equivalents 69 974 76 884 71 534
Total assets 398 104 388 135 381 305
EQUITY AND LIABILITIES
Equity 163 423 150 573 159 216
Share capital and premium 103 752 103 752 103 752
Retained earnings 58 734 46 283 54 835
Equity attributable to 162 486 150 035 158 587
owners of the parent
Non-controlling interests 937 538 629
Non-current liabilities 171 175 169 989 170 509
Borrowings 11 169 097 168 152 168 406
Deferred tax liabilities 2 078 1 837 2 103
Current liabilities 63 506 67 573 51 580
Trade and other payables 51 754 49 351 38 334
Borrowings 11 507 477 387
Amounts due to vendors 15 - 11 869 11 276
Taxation 883 - -
Bank overdrafts 10 362 5 876 1 583
Total equity and 398 104 388 135 381 305
liabilities
Condensed Consolidated Statement of Cash Flows
for the six months ended 30 June 2010
Six months Six months Year
to to to
30 June 30 June 31 December
2010 2009 2009
R`000 R`000 R`000
Operating activities
Profit before tax 5 169 3 695 14 609
Adjustments for non-cash items 4 265 3 860 8 605
Net changes in working capital (8 584) 37 860 27 106
Taxes refunded/(paid) 2 081 (2 980) (5 569)
Cash flow from operating 2 931 42 435 44 751
activities
Investing activities
Property, plant and equipment (2 189) (1 099) (3 422)
acquired
Proceeds from disposals of - - 530
property, plant and equipment
Intangible assets acquired (68) (2 474) (3 600)
Cash flow from investing (2 257) (3 573) (6 492)
activities
Financing activities
Payment for treasury shares - - (922)
Proceeds from borrowings 811 161 1 247
Amounts due to vendors (11 824) 618 -
Cash flow from financing (11 013) 779 325
activities
Net change in cash and cash (10 339) 39 641 38 584
equivalents
Cash and cash equivalents at 69 951 31 367 31 367
beginning of period
Cash and cash equivalents at end 59 612 71 008 69 951
of period
Condensed Consolidated Statements of Changes in Equity
for the six months ended 30 June 2010
Attributable to owners of the parent
Share
capital and Treasury Retained
premium shares earnings Total
R`000 R`000 R`000 R`000
Six months ended 30 June
2010
Balance at 1 January 2010 111 368 (7 616) 54 835 158 587
Total comprehensive income - - 3 899 3 899
for the period
Balance at 30 June 2010 111 368 (7 616) 58 734 162 486
Six months ended 30 June
2009
Balance at 1 January 2009 111 368 (6 694) 43 414 148 088
Transactions with owners - (922) - (922)
Adjustment to purchase price - (922) - (922)
of treasury shares
Total comprehensive income - - 2 869 2 869
for the period
Balance at 30 June 2009 111 368 (7 616) 46 283 150 035
Year ended 31 December 2009
Balance at 1 January 2009 111 368 (6 694) 43 414 148 088
Transactions with owners - (922) - (922)
Total comprehensive income - - 11 421 11 421
for the year
Balance at 31 December 2009 111 368 (7 616) 54 835 158 587
Non-
controlling Total
interests equity
R`000 R`000
Six months ended 30 June
2010
Balance at 1 January 2010 629 159 216
Total comprehensive income 308 4 207
for the period
Balance at 30 June 2010 937 163 423
Six months ended 30 June
2009
Balance at 1 January 2009 371 148 459
Transactions with owners - (922)
Adjustment to purchase price - (922)
of treasury shares
Total comprehensive income 167 3 036
for the period
Balance at 30 June 2009 538 150 573
Year ended 31 December 2009
Balance at 1 January 2009 371 148 459
Transactions with owners - (922)
Total comprehensive income 258 11 679
for the year
Balance at 31 December 2009 629 159 216
Notes to the Condensed Interim Consolidated Financial Statements
at 30 June 2010
1. Nature of operations and general information
The principal activities of Workforce Holdings Limited and its subsidiaries are
staff outsourcing, recruitment and specialist staffing and human resources
support services (including financial services to employees in the group).
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 10 August 2010.
2. Basis of preparation and significant accounting policies
The condensed interim consolidated financial statements for the six months ended
30 June 2010, have been prepared in accordance with IAS 34 Interim Financial
Reporting and International Financial Reporting Standards (IFRS).
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. The following revised accounting
standards, amendments and interpretations have been adopted in the current
period, which did not have a material impact on the financial results:
Amendments to IAS 7 Statement of Cash Flows (effective 1 January 2010)
IAS 36 Impairment of Assets (effective 1 January 2010)
IAS 38 Intangible Assets (effective 1 July 2009)
IFRS 2 Share-based Payments (effective 1 January 2010)
IFRS 8 Operating Segments (effective 1 January 2010).
3. Events after reporting date
No material events occurred between the reporting date and the date of approval
of these condensed financial statements, other than described in note 11,
relating to a change in the group`s financing structure.
4. Auditor`s responsibility
These condensed consolidated interim financial results have not been audited nor
reviewed by the group`s auditor. This is not a requirement of the JSE Listings
Requirements. The auditors are responsible for monitoring compliance with the
disclosure requirements of the JSE.
5. Additions and disposals of property, plant and equipment
Computer Industrial Office
Motor equip- equip- equip-
vehicles ment ment ment
R`000 R`000 R`000 R`000
Six months to 30 June 2010
Carrying amount at 1 January 1 948 1 694 206 3 245
2010
Additions 601 765 121 429
Disposals (156) (4) - -
Depreciation (491) (1 204) (24) (864)
Carrying amount at 30 June 2010 1 902 1 251 303 2 810
Six months to 30 June 2009
Carrying amount at 1 January 2 698 2 999 91 4 233
2009
Additions 492 456 - 151
Depreciation (547) (1 345) (11) (523)
Carrying amount at 30 June 2009 2 643 2 110 80 3 861
Year to 31 December 2009
Carrying amount at 1 January 2 698 2 999 91 4 233
2009
Additions 839 875 130 684
Disposals (384) (35) - (42)
Depreciation (1 205) (2 145) (15) (1 630)
Carrying amount at 31 December 1 948 1 694 206 3 245
2009
Lease-
hold
improve- Training
ments manuals Total
R`000 R`000 R`000
Six months to 30 June 2010
Carrying amount at 1 January 56 2 938 10 087
2010
Additions 49 224 2 189
Disposals - - (160)
Depreciation (8) (431) (3 022)
Carrying amount at 30 June 2010 97 2 731 9 094
Six months to 30 June 2009
Carrying amount at 1 January 51 2 843 12 915
2009
Additions - - 1 099
Depreciation (38) (221) (2 685)
Carrying amount at 30 June 2009 13 2 622 11 329
Year to 31 December 2009
Carrying amount at 1 January 51 2 843 12 915
2009
Additions 48 846 3 422
Disposals - - (461)
Depreciation (43) (751) (5 789)
Carrying amount at 31 December 56 2 938 10 087
2009
6. Additions and disposals of intangible assets
Computer
software Total
R`000 R`000
Six months to 30 June 2010
Carrying amount at 1 January 2010 6 627 6 627
Additions 68 68
Amortisation (853) (853)
Carrying amount at 30 June 2010 5 842 5 842
Six months to 30 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
Year to31 December 2009
Carrying amount at 1 January 2009 4 056 4 056
Additions 3 600 3 600
Amortisation (1 029) (1 029)
Carrying amount at 31 December 2009 6 627 6 627
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 Human
and resources
Staff specialist support
outsourcing staffing services Total
R`000 R`000 R`000 R`000
Six months to 30 June 2010
Revenue from external 440 977 63 863 33 841 538 681
customers
Inter-segment revenues - - 4 125 4 125
Segment operating profit 11 244 1 023 4 619 16 886
Six months to 30 June 2009
Revenue from external 399 994 76 145 24 032 500 171
customers
Inter-segment revenues - 12 2 741 2 753
Segment operating profit 11 834 3 264 2 633 17 731
Year to 31 December 2009
Revenue from external 838 589 147 436 53 774 1 039 799
customers
Inter-segment revenues - - 4 260 4 260
Segment operating profit 23 124 6 828 2 137 32 089
Segment operating profit can be reconciled to the group`s profit or loss as
follows:
Six months Six months Year
to to to
30 June 30 June 31 December
2010 2009 2009
R`000 R`000 R`000
Total segment revenues 542 806 502 924 1 044 059
Other revenues 2 400 - 5 536
Elimination of inter-segment (4 125) (2 753) (6 531)
revenues
Group revenue 541 081 500 171 1 043 064
Segment operating profit 16 886 17 731 32 089
Reconciling items:
Other income not allocated 2 400 - 5 536
Other expenses not allocated (11 083) (11 625) (24 337)
Elimination of inter-segment profits 3 200 5 815 16 268
Group operating profit 11 403 11 921 29 556
Finance income 637 589 1 223
Finance costs (6 640) (8 308) (15 431)
Impairment of available-for-sale (231) (507) (739)
financial assets
Group profit before tax 5 169 3 695 14 609
Most assets and liabilities are not directly attributable to individual segments
and meaningful allocations to operating segments cannot be done on a reasonable
basis.
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
Six months Six months Year
to to to
30 June 30 June 31 December
2010 2009 2009
Basic earnings per share
Profit attributable to equity 3 899 2 869 11 421
shareholders (R`000)
Weighted average number of shares in 225 630 225 630 225 630
issue (`000)
Basic earnings per share (cents) 1,7 1,3 5,1
There are no potential dilutive
shares, therefore diluted earnings
per share equates to basicearnings
per share.
Headline earnings per share
The earnings used in the calculation
of headline earnings per share are
as follows:
Profit after taxation (R`000) 3 899 2 869 11 421
Headline earnings adjustment (R`000)
- Gain on disposal of property, - - (69)
plant and equipment
- Impairment of loans receivable - - 2 320
- Impairment loss on available-for- 231 507 739
sale financial assets
- Tax effect of adjustments - - 19
Total headline earnings (R`000) 4 130 3 376 14 430
Weighted average number of shares in 225 630 225 630 225 630
issue (`000)
Headline earnings per share (cents) 1,8 1,5 6,4
10. Dividends
No dividend was declared relating to the period under review.
11. Borrowings
Workforce is currently in the process of structuring a new debt financing
arrangement, which should have numerous advantages over the previous
securitisation structure. This pending facility will be classified as a short-
term liability, whereas the current facility is structured as a five year
securitisation arrangement, and hence defined as a long-term liability.
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 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 R12,5 million (2009: R13,5 million). Given the current
progress in this matter, management believes that the uncertainty around this
issue will be resolved before the next reporting date.
15. Change of accounting estimate
Cost of acquisition
The amount owing in respect of the acquisition of Telebest Holdings
(Proprietary) Limited was estimated at R11,676 million as at 31 December 2009.
The final payment amounted to R12,375 million and in terms of IFRS 3, goodwill
has been adjusted accordingly by R548 thousand.
DIRECTORS` COMMENTARY
Operational and financial review
Despite continued difficult trading conditions during the first quarter the
group performed to expectation for the six months ending 30 June 2010.
Management`s continued focus on achieving its strategic objectives has resulted
in a 20% increase in HEPS and 31% increase in EPS.
Revenue increased by 8%. The staff outsourcing business showed steady growth
with a continued focus on growing within core markets and ongoing investment in
people and systems to augment customer solutions. The group`s permanent
recruitment segment is still recovering from recessionary market conditions. The
human resources support services cluster continued to show strong growth
potential contributing material increases in turnover and profitability.
Operating expenses have increased by 9% from the previous year. This increase
has mainly been due to investment in areas of the business that will facilitate
future growth.
Our efforts in the management of working capital continued to realise positive
results with a further decrease in debtors days outstanding to 53 days
(excluding micro loans, installment sale debtors and non-operational debtors)
from 64 days in the previous comparative period. This decrease facilitated
further growth in the human resources support services cluster.
Further investment in the group`s operating systems has assisted in managing
both operational and financial risk. In addition to this, new developments in
customer centric technology solutions to augment existing solutions continue to
be implemented.
There has been no further change in the status of the labour broking industry.
It is our view that the outcome will be further regulation of the temporary
employment service industry as opposed to an outright ban. We believe this will
be beneficial to the group as we are already fully compliant and have the
infrastructure in place to adapt to new regulations.
Cyclical nature of business activities
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 cyclical factors.
Prospects
Turnover in all divisions of the group is expected to increase in the second
half of the year, which together with a continued focus on achieving operational
efficiency and tight working capital management should result in increased
profitability.
Changes to the board
Ethan Dube has tendered his resignation as a non-executive director of the
company. The board is in the process of appointing a new non-executive director.
For and on behalf of the board
RS Katz WP van Wyk
(Chairman) (Group Financial Director)
Johannesburg
12 August 2010
Executive directors
RS Katz, LH Diamond, WP van Wyk
Non-executive directors
NM Anderson, JR Macey
Designated adviser
Vunani Corporate Finance
Company secretary
Routledge Modise Inc practising as Eversheds
Registered office
The registered office, which is also its principal place of business, is 11
Wellington Road, Parktown, 2193.
Transfer secretaries
Link Market Services South Africa (Proprietary) Limited
11 Diagonal Street, Johannesburg, 2001
Date: 12/08/2010 11:48:01 Produced by the JSE SENS Department.
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