| Tue 22 Mar 2011, 10:04 | | WKF - Workforce - Audited condensed financial results for the year ended 31 |
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WKF
WKF
WKF - Workforce - Audited condensed financial results for the year ended 31
December 2010
WORKFORCE HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 2006/018145/06)
JSE code: WKF
ISIN: ZAE000087847
("Workforce" or "the company" or "the Group")
Audited condensed financial results for the year ended 31 December 2010
Condensed statement of comprehensive income
for the year ended 31 December 2010
Group Group
2010 2009
Notes R`000 R`000
Revenue 1,153,842 1,043,064
Cost of sales (875,289) (795,881)
Gross profit 278,553 247,183
Operating costs (242,570) (210,808)
Earnings before impairment, depreciation,
amortisation, interest and taxation (EBITDA) 35,983 36,375
Depreciation and amortisation of
non-financial assets (7,137) (6,819)
Operating profit 28,846 29,556
Finance income 2,240 1,223
Finance costs (12,721) (15,431)
Impairment of available-for-sale financial assets - (739)
Profit before taxation 18,365 14,609
Taxation 10 (2,359) (2,930)
Profit for the year 16,006 11,679
Other comprehensive income for the year, net of tax:
Fair value gains on available-for-sale
financial assets 92 -
Total comprehensive income for the year 16,098 11,679
Profit the year attributable to:
Owners of the parent 15,342 11,421
Non-controlling interests 664 258
16,006 11,679
Total comprehensive income attributable to:
Owners of the parent 15,434 11,421
Non-controlling interests 664 258
16,098 11,679
Earnings per share (cents per share)
Basic and fully diluted 11 6.8 5.1
Headline Earnings per share 11 6.7 6.4
Condensed statement of financial position
at 31 December 2010
2010 2009
Notes R`000 R`000
Assets
Non-current assets 72,721 66,337
Property, plant and equipment 5 9,899 10,087
Goodwill 41,205 40,657
Other intangible assets 6 9,640 6,627
Deferred tax assets 10,038 7,119
Other financial assets 1,939 1,847
Current assets 320,525 314,968
Trade and other receivables 271,352 237,198
Inventories 1,271 1,345
Taxation 105 4,891
Cash and cash equivalents 47,797 71,534
Total assets 393,246 381,305
Equity and liabilities
Equity 173,804 159,216
Share capital and premium 103,752 103,752
Available for sale reserve 92 -
Retained earnings 69,950 54,835
Equity attributable to owners of the parent 173,794 158,587
Non-controlling interests 10 629
Non-current liabilities 13,096 170,509
Borrowings 14 10,129 168,406
Deferred tax liabilities 2,967 2,103
Current liabilities 206,346 51,580
Trade and other payables 46,416 38,334
Borrowings 14 159,578 387
Amounts due to vendors - 11,276
Bank overdraft 352 1,583
Total equity and liabilities 393,246 381,305
Group net asset value per share (cents per share) 77.0 70.6
Condensed statement of cash flows
for the year ended 31 December 2010
2010 2009
Notes R`000 R`000
Cash generated from operations before net
working capital changes 25,516 17,171
Cash generated from operations before net
working capital changes 36,169 37,423
Interest received 1,696 746
Interest paid (12,721) (15,431)
Taxation paid 372 (5,567)
Increase/(decrease) in net working capital (25,999) 27,104
Cash flows from operating activities (483) 44,275
Cash flows from investing activities (7,771) (6,016)
Acquisition of subsidiaries (500) -
Dividends received 544 477
Property, plant and equipment acquired -
maintaining operations (2,955) (3,039)
- expanding operations (613) (384)
Proceeds on disposal of property, plant and equipment 555 530
Intangible assets acquired (4,802) (3,600)
Cash flows from financing activities (14,252) 325
Payment for treasury shares - (922)
Proceeds from borrowings (866) 1,247
Payment of amounts due to vendors (12,376) -
Dividends paid to shareholder in subsidiary (1,010) -
Net change in cash and cash equivalents (22,506) 38,584
Cash and cash equivalents at the beginning of the year 69,951 31,367
Cash and cash equivalents at the end of the year 47,445 69,951
Group statement of changes in equity
for the year ended 31 December 2010
Attributable to owners of the parent
Share capital Treasury Available for Retained
and premium shares sale reserve earnings Total
R`000 R`000 R`000 R`000 R`000
Balance at
1 January
2009 111,368 (6,694) - 43,414 148,088
Transactions
with owners - (922) - - (922)
Total
comprehensive
income
for the year - - - 11,421 11,421
Balance at
1 January
2010 111,368 (7,616) - 54,835 158,587
Payment of
dividends - - - - -
Acquisition
of non-controlling
interests - - - (227) (227)
Total
comprehensive
income
for the year - - 92* 15,342 15,434
Balance at
31 December
2010 111,368 (7,616) 92 69,950 173,794
Non-
controlling Total
interests equity
R`000 R`000
Balance at 1 January 2009 371 148,459
Transactions with owners - (922)
Total comprehensive income for the year 258 11,679
Balance at 1 January 2010 629 159,216
Payment of dividends (1,010) (1,010)
Acquisition of non-controlling interests (273) (500)
Total comprehensive income for the year 664 16,098
Balance at 31 December 2010 10 173,804
* Fair value gains on available-for-sale financial assets.
Notes to the condensed financial statements
at 31 December 2010
1. Nature of Business
Workforce is an investment holding company. Its subsidiaries carry on the
business of staff outsourcing, recruitment and specialist staffing and human
resources support services (including the provision of financial and retail
lending products). There has been no material changes to the nature of the
Group`s business from the previous year. The consolidated financial statements
are presented in South African Rand (ZAR), which is also the functional currency
of the parent company. The consolidated financial statements were approved for
issue by the Board of Directors on 21 March 2011.
2. Basis of preparation and significant accounting policies
The condensed financial statements for the 12 months ended 31 December 2010 have
been prepared in accordance with IAS 34 Interim Financial Reporting and
International Financial Reporting Standards (IFRS) and Listings Requirements of
the JSE Limited.
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, ammendments and interpretations have been adopted in the current
period, which did not have a material impact on the financial results:
Ammendments 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 year end date and the date of approval
of these condensed financial statements.
4. Auditor`s responsibility
The auditors, Horwath Leveton Boner, have issued their opinion on the group
financial statements for the year ended 31 December 2010. The audit was
conducted in accordance with International Standards of Auditing. They issued an
unmodified audit opinion. A copy of their audit report is available for
inspection at the company`s registered offices. These condensed financial
statements have been derived from the group financial statements and are
consistent, in all material respects, with the group financial statements.
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
Carrying value at 1
January 2009 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
Additions 1,968 1,613 165 1,082
Disposals (164) (4) - (20)
Depreciation (1,032) (1,574) (50) (1,796)
Carrying value at 31
December 2010 2,720 1,729 321 2,511
Leasehold Training
improvements manuals Total
R`000 R`000 R`000
Carrying value at 1 January 2009 51 2,843 12,915
Additions 48 847 3,423
Disposals - - (461)
Depreciation (43) (752) (5,790)
Carrying value at 31 December 2009 56 2,938 10,087
Additions 170 350 5,348
Disposals - - (188)
Depreciation (24) (872) (5,348)
Carrying value at 31 December 2010 202 2,416 9,899
6. Additions and disposals of intangible assets
Computer
software
R`000
Carrying value at 1 January 2009 4,056
Additions 3,600
Amortisation (1,029)
Carrying value at 31 December 2009 6,627
Additions 4,802
Amortisation (1,789)
Carrying value at 31 December 2010 9,640
7. 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.
8. Dividends
No dividend was declared relating to the period under review.
9. Business combinations
No business combinations occurred during the period under review.
10. Taxation
The tax rate for the year can be reconciled as follows:
2010 2009
% %
Standard corporate tax rate 28.00 28.00
Adjusted for:
Non-deductible expenses (0.74) 5.16
Tax allowances (14.70) (19.82)
Prior year tax losses now recognised (2.93) -
STC 1.01 -
Unused tax losses 2.20 6.72
Effective tax rate 12.84 20.06
11. 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:
2010 2009
Profit attributable to equity shareholders of the parent
company (R`000) 15,342 11,421
Weighted average number of ordinary shares in issue (`000) 225,630 225,630
Basic earnings per share (cents) 6.8 5.1
Headline earnings per share
The earnings used in the calculation of headline earnings per share are
as follows:
2010 2009
Profit attributable to equity shareholders of the parent
company (R`000) 15,342 11,421
Headline earnings adjustment (R`000) (264) 3,009
(Gain)/loss on disposal of property, plant and equipment (366) (69)
Impairment of loans receivable - 2,320
Impairment loss on available-for-sale-financial assets - 739
(366) 2,990
Tax effects of adjustments 102 19
Total headline earnings (R`000) 15,078 14,430
Weighted average number of shares in issue (`000) 225,630 225,630
Headline earnings per share (cents) 6.7 6.4
12. 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, and includes the provision of
financial and retail lending products.
Segment information can be analysed as follows for the reporting periods under
review:
Human
Recruitment resources
Staff and specialist support Central
outsourcing staffing services cost
2010 R`000 R`000 R`000 R`000
Segment revenues 946,751 136,020 77,149 -
Cost of sales (763,733) (89,811) (21,745) -
Operating costs (126,730) (40,561) (48,070) (34,287)
Depreciation and
amortisation
of non-financial
assets (2,712) (438) (2,306) (1,681)
Segment operating
profit 54,576 5,210 5,028 (35,968)
Consolidation
entries Total
2010 R`000 R`000
Segment revenues (6,078) 1,153,842
Cost of sales (875,289)
Operating costs 6,078 (242,570)
Depreciation and amortisation
of non-financial assets (7,137)
Segment operating profit - 28,846
Human
Recruitment resources
Staff and specialist support Central
outsourcing staffing services cost
2009 R`000 R`000 R`000 R`000
Segment revenues 843,591 147,108 58,897 -
Cost of sales (680,628) (99,975) (15,278) -
Operating costs (111,238) (33,792) (37,602) (34,708)
Depreciation and
amortisation
of non-financial
assets (2,964) (452) (1,604) (1,799)
Segment operating
profit 48,761 12,889 4,413 (36,507)
Consolidation
entries Total
2009 R`000 R`000
Segment revenues (6,532) 1,043,064
Cost of sales - (795,881)
Operating costs 6,532 (210,808)
Depreciation and amortisation
of non-financial assets (6,819)
Segment operating profit - 29,556
13. Contingent liabilities
The outstanding matter relating to assessments issued in terms of the
Compensation for Occupational Injuries and Disease Act, No 130 of 1993, which
gave rise to a contingent liability of R13,5 million in the 2009 financial
statements, has been concluded in the group`s favour. The outcome is that the
company has no liability in this regard.
14. Borrowings
With effect from 15 November 2010 Workforce entered into an Invoice Discounting
Agreement of up to 85% of trade debts with a maximum facility of R160 million.
This facility is classified as a short term liability, whereas the previous
facility was structured as a five year securitisation arrangement, and hence
classified as a long term liability. As from 15 November 2011 onwards, this
facility will be subject to a three month notice period from either party. The
facility bears interest at 1% below prime overdraft rates. At year end debtors
to the value of R158 712 251 were ceded to the bank subject to recourse.
DIRECTORS` COMMENTARY
Operational and financial review
The financial year ending 31 December 2010 ("2010 year") proved to be a
difficult year for the Group. However, in the context of the recessionary
conditions that continued to characterise the South African economy, coupled
with the negative perceptions created by the ongoing debate on the future of the
Temporary Employment Services (TES) industry, the results were generally
satisfactory, though not to management expectation.
HEPS increased marginally to 6.7 cents from a base of 6.4 cents for the
corresponding prior period. EPS for the 2010 year of 6.8 cents per share (2009:
5.1 cents per share) are 34% higher than the comparative
earnings per share for the prior year.
Group revenue of R1,153 billion reflected a 10% increase, on the revenue of
R1,043 billion achieved in the previous year. The expected revenue from the
group`s investment in operations and people did not materialise. Further
increases in revenue are expected in 2011 without additional investment in
operations.
EBITDA of R35.9 million for the 2010 year is marginally down on the R36.3
million for the comparative prior year, primarily as a result of increases in
operational costs across the various businesses.
Operating costs increased by 15% as a result of an ongoing focus on the up
skilling of existing employees and the costs associated with attracting and
retaining key staff, which we believe will position the group well into the
future. Management maintains its focus on streamlining existing operational
processes and developing and implementing new technologies and systems to
augment current internal and client requirements. Specific projects, including
group procurement optimisation and voice over internet protocol implementation,
are progressing well and should contribute to efficiencies in 2011.
The group`s gross margin of 24.2% was marginally up on the 23.7% of the previous
year. Margins were negatively impacted by competitive pricing pressure within
the traditional blue collar markets. This was, however, countered by positive
gains within the human resources support services cluster.
Cash management remains a core focus of management. Average group debtor`s days
for the second half of the year improved from 61 days in 2009 to 55 days in 2010
(excluding financial and retail lending products). Closing debtors days were
marginally higher at 54 days, primarily as a result of some debtors extending
their terms over the December period. Additional operational initiatives
including process and system enhancements will be implemented to reduce debtors
days even further in the year ahead.
Outlook
The expectation for the year ahead is a slow recovery of the South African
economy. The group is focussed on achieving its strategic objectives, being
growth and diversification of revenue streams, the further development and
rollout of customer-centric technology solutions used to augment and
differentiate our solutions, attracting and retaining top industry talent and
cash management.
The group has a strong and robust balance sheet positioning it well to take
advantage of market related growth and broader opportunities. The group embraces
current market challenges and looks forward to sustainable growth.
Changes to the board
Mr Ethan Dube has tendered his resignation as a non-executive director of the
company with effect from 19 May 2010. Messrs Lulu Letlape and Kyansambo Vundla
joined the board as independent directors on 1 November 2010 and are also
serving on the audit committee. Mr Mark Anderson resigned from the audit
committee with immediate effect, however will remain as board member.
Annual General Meeting
The company`s annual general meeting will be held at 11 Wellington Road,
Parktown, Johannesburg on Thursday, 12 May 2011 at 12:00
For and on behalf of the board
RS Katz
(Chairman)
LH Diamond
(Chief Executive Officer)
WP van Wyk
(Group Financial Director)
Johannesburg
22 March 2011
Executive directors
RS Katz, LH Diamond, WP van Wyk
Non-executive directors
JR Macey*, K Vundla*, L Letlape*, NM Anderson
* Independent
Designated adviser
Vunani Corporate Finance
Company secretary
Sirkien Van Schalkwyk
Registered office
The registered office is C/o Horwath Leveton Boner,3 Sandown Valley Crescent
,Sandown 2196, P O Box 652550, Benmore 2010
Transfer secretaries
Link Market Services South Africa (Proprietary) Limited
11 Diagonal Street, Johannesburg, 2001
Date: 22/03/2011 10:04:01 Produced by the JSE SENS Department.
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