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WKF
WKF
WKF - Workforce Holdings Limited - Unaudited condensed interim financial
results for the six months ended 30 June 2011
Workforce Holdings Limited
(Incorporated in the Republic of South Africa)
Registration number 2006/018145/06
JSE code: WKF SIN: ZAE000087847
("Workforce" or "the group")
UNAUDITED CONDENSED INTERIM FINANCIAL RESULTS
for the six months ended 30 June 2011
Highlights
- HEPS increased by 78% to 3,2 cents per share.
- EPS increased by 88% to 3,2 cents per share.
- Revenue increased by 16% to R630 million.
Condensed Consolidated Statement of Comprehensive Income
for the six months ended 30 June 2011
Six months Six months Year
to to to
30 June 30 June 31 December
2011 2010 2010
Notes R`000 R`000 R`000
Revenue 7 630 221 541 081 1 153 842
Cost of sales (484 459) (412 666) (875 289)
Gross profit 145 762 128 415 278 553
Operating costs (129 271) (113 137) (242 570)
Earnings before impairment, 16 491 15 278 35 983
depreciation, amortisation,
interest and taxation
(EBITDA)
Depreciation and (3 831) (3 875) (7 137)
amortisation of non-
financial assets
Operating profit 7 12 660 11 403 28 846
Finance income 686 637 2 240
Finance costs (5 315) (6 640) (12 721)
Impairment of available-for- - (231) -
sale financial assets
Profit before taxation 7 8 031 5 169 18 365
Taxation 8 (618) (962) (2 359)
Profit for the period 7 413 4 207 16 006
Other comprehensive income 46 - 92
for the period, net of tax
Fair value gains on 46 - 92
available-for-sale
financial assets
Total comprehensive income 7 459 4 207 16 098
for the period
Profit for the period
attributable to:
Owners of the parent 7 170 3 899 15 342
Non-controlling interests 243 308 664
7 413 4 207 16 006
Total comprehensive income
attributable to:
Owners of the parent 7 216 3 899 15 434
Non-controlling interests 243 308 664
7 459 4 207 16 098
Earnings per share (cents) 9
Basic and fully diluted 3,2 1,7 6,8
Headline 3,2 1,8 6,7
Condensed Consolidated Statement of Financial Position
at 30 June 2011
Six months Six months Year
to to to
30 June 30 June 31 December
2011 2010 2010
Notes R`000 R`000 R`000
ASSETS
Non-current assets 72 471 67 583 72 721
Property, plant and 5 9 156 9 094 9 899
equipment
Goodwill 41 280 41 205 41 205
Other intangible assets 6 9 972 5 842 9 640
Deferred tax assets 10 078 9 826 10 038
Other financial assets 1 985 1 616 1 939
Current assets 325 236 330 521 320 525
Trade and other receivables 303 187 258 345 271 352
Inventories 2 498 2 202 1 271
Taxation 2 862 - 105
Cash and cash equivalents 16 689 69 974 47 797
Total assets 397 707 398 104 393 246
EQUITY AND LIABILITIES
Equity 181 263 163 423 173 804
Share capital and premium 103 752 103 752 103 752
Available for sale reserve 105 - 92
Retained earnings 77 153 58 734 69 950
Equity attributable to 181 010 162 486 173 794
owners of the parent
Non-controlling interests 253 937 10
Non-current liabilities 12 983 171 175 13 096
Borrowings 9 776 169 097 10 129
Deferred tax liabilities 3 207 2 078 2 967
Current liabilities 203 461 63 506 206 346
Trade and other payables 56 193 51 754 46 416
Borrowings 134 418 507 159 578
Taxation - 883 -
Bank overdrafts 12 850 10 362 352
Total equity and liabilities 397 707 398 104 393 246
Condensed Consolidated Statement of Cash Flows
for the six months ended 30 June 2011
Six months Six months Year
to to to
30 June 30 June 31 December
2011 2010 2010
R`000 R`000 R`000
Cash generated from operations 8 717 11 515 26 060
before net working capital changes
Profit before tax 8 031 5 169 18 365
Adjustments for non-cash items 3 861 4 265 7 323
Taxes (paid)/refunded (3 175) 2 081 372
Increase in net working capital (23 286) (8 584) (25 999)
Cash flow from operating (14 569) 2 931 61
activities
Investing activities
Property, plant and equipment (2 110) (2 189) (3 568)
acquired
Acquisition of subsidiaries - - (500)
Proceeds on disposal of property, 276 - 555
plant and equipment
Intangible assets acquired (1 615) (68) (4 802)
Cash flow from investing (3 449) (2 257) (8 315)
activities
Financing activities
Reduction in borrowings (25 513) 811 (866)
Dividends paid - - (1 010)
Amounts due to vendors (75) (11 824) (12 376)
Cash flow from financing (25 588) (11 013) (14 252)
activities
Net change in cash and cash (43 606) (10 339) (22 506)
equivalents
Cash and cash equivalent at 47 445 69 951 69 951
beginning of the period
Cash and cash equivalents at end 3 839 59 612 47 445
of the period
The change in cash and cash equivalents has been impacted by the change in
the Group`s borrowing facilities.
Condensed Consolidated Statement of Changes in Equity
for the six months ended 30 June 2011
Attributable to owners of the parent
Share Available
capital and Treasury for sale Retained
premium shares reserve earnings
R`000 R`000 R`000 R`000
Balance at 1 January 111 368 (7 616) 92 69 950
2011
Total comprehensive - - 13 7 203
income for the period
Balance at 30 June 2011 111 368 (7 616) 105 77 153
Attributable to owners
of the parent
Non-con-
trolling Total
Total interests equity
R`000 R`000 R`000
Balance at 1 January 173 794 10 173 804
2011
Total comprehensive 7 216 243 7 459
income for the period
Balance at 30 June 2011 181 010 253 181 263
for the six months ended 30 June 2010
Attributable to owners of the parent
Share Available
capital and Treasury for sale Retained
premium shares reserve earnings
R`000 R`000 R`000 R`000
Balance at 1 January 111 368 (7 616) - 54 835
2010
Total comprehensive - - - 3 899
income for the period
Balance at 30 June 2010 111 368 (7 616) - 58 734
Attributable to owners
of the parent
Non-con-
trolling Total
Total interests equity
R`000 R`000 R`000
Balance at 1 January 158 587 629 159 216
2010
Total comprehensive 3 899 308 4 207
income for the period
Balance at 30 June 2010 162 486 937 163 423
for the year ended 31 December 2010
Attributable to owners of the parent
Share Available
capital and Treasury for sale Retained
premium shares reserve earnings
R`000 R`000 R`000 R`000
Balance at 1 January 111 368 (7 616) - 54 835
2010
Transactions with - - - (227)
owners
Payment of dividends - - - -
Acquisition of non- - - - (227)
controlling interests
Total comprehensive - - 92 15 342
income for the year
Balance at 31 December 111 368 (7 616) 92 69 950
2010
Attributable to owners
of the parent
Non-con-
trolling Total
Total interests equity
R`000 R`000 R`000
Balance at 1 January 158 587 629 159 216
2010
Transactions with (227) (1 283) (1 510)
owners
Payment of dividends - (1 010) (1 010)
Acquisition of non- (227) (273) (500)
controlling interests
Total comprehensive 15 434 664 16 098
income for the year
Balance at 31 December 173 794 10 173 804
2010
Notes to the Condensed Consolidated Interim Financial Statements
at 30 June 2011
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 (including the provision of financial and retail lending products).
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 2011.
2. Basis of preparation and significant accounting policies
The condensed consolidated interim financial statements have been prepared in
compliance with the Listings Requirements of the JSE Limited ("JSE"),
International Accounting Standard (IAS) 34, Interim Financial Reporting and
the South African Companies Act. No 71 of 2008, as well as AC 500 Standards
as issued by the Accounting Practices Board or its successor.
The condensed interim financial statements for the six months ended 30 June
2011 were compiled under the supervision of W van Wyk, the Group Financial
Director. The accounting policies comply with International Financial
Reporting Standards and have been applied consistently with the accounting
policies applied in the last annual financial statements.
3. Events after reporting date
No material events occurred between the reporting date and the date of
approval of these condensed interim financial statements.
4. Auditors` responsibility
These condensed consolidated interim financial results have not been audited
or reviewed by the group`s auditors.
5. Additions and disposals of property, plant and equipment
Com-
puter Industrial Office
Motor equip- equip- equip-
vehicles ment ment ment
R`000 R`000 R`000 R`000
Six months to June 2011
Carrying amount at 1 January 2 720 1 729 321 2511
2011
Additions 518 738 - 467
Disposals (220) - (80) (5)
Depreciation (559) (504) (29) (956)
Carrying amount at 30 June 2 459 1 963 212 2 017
2011
Six months to June 2010
Carrying amount at 1 January 1 948 1 694 206 3 245
2010
Additions 601 765 121 429
Disposals (154) (4) - -
Depreciation (491) (1 204) (24) (864)
Carrying amount at 30 June 1 902 1 251 303 2 810
2010
Year to 31 December 2010
Carrying amount at 1 January 1 948 1 694 206 3 245
2010
Additions 1 968 1 613 165 1 082
Disposals (164) (4) - (20)
Depreciation (1 032) (1 574) (50) (1 796)
Carrying amount at 31 December 2 720 1 729 321 2 511
2010
Lease-
hold
improve- Training
ments manuals Total
R`000 R`000 R`000
Six months to June 2011
Carrying amount at 1 January 202 2 416 9 899
2011
Additions 195 192 2 110
Disposals - - (305)
Depreciation (28) (472) (2 548)
Carrying amount at 30 June 369 2 136 9 156
2011
Six months to 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 97 2 731 9 094
2010
Year to 31 December 2010
Carrying amount at 1 January 56 2 938 10 087
2010
Additions 170 350 5 348
Disposals - - (188)
Depreciation (24) (872) (5 348)
Carrying amount at 31 December 202 2 416 9 899
2010
6. Additions and disposals of intangible assets
Computer
software Total
R`000 R`000
Six months to 30 June 2011
Carrying amount at 1 January 2011 9 640 9 640
Additions 1 615 1 615
Amortisation (1 283) (1 283)
Carrying amount at 30 June 2011 9 972 9 972
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
Year to 31 December 2010
Carrying amount at 1 January 2010 6 627 6 627
Additions 4 802 4 802
Amortisation (1 789) (1 789)
Carrying amount at 31 December 2010 9 640 9 640
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:
Recruit- Human
ment and resources
Staff specialist support
outsourcing staffing services
R`000 R`000 R`000
Six months to 30 June 2011
Segment revenues 511 907 76 007 46 021
Cost of sales (420 070) (52 026) (12 363)
Operating costs (64 644) (22 254) (22 950)
Depreciation and amortisation of (1 420) (202) (1 180)
non-financial assets
Segment operating profit 25 773 1 525 9 528
Six months to 30 June 2010
Segment revenues 443 938 63 933 37 336
Cost of sales (361 179) (42 257) (9 230)
Operating costs (51 169) (19 206) (22 163)
Depreciation and amortisation of (1 485) (217) (1 204)
non-financial assets
Segment operating profit 30 105 2 253 4 739
Year to 31 December 2010
Segment revenues 946 751 136 020 77 149
Cost of sales (763 733) (89 811) (21 745)
Operating costs (125 730) (40 561) (48 070)
Depreciation and amortisation of (2 712) (438) (2 306)
non-financial assets
Segment operating profit 54 576 5 210 5 028
Consoli-
Central dation
costs entries Total
R`000 R`000 R`000
Six months to 30 June 2011
Segment revenues - (3 714) 630 221
Cost of sales - - (484 459)
Operating costs (23 137) 3 714 (129 271)
Depreciation and amortisation of (1 029) - (3 831)
non-financial assets
Segment operating profit (24 166) - 12 660
Six months to 30 June 2010
Segment revenues - (4 126) 541 081
Cost of sales - - (412 666)
Operating costs (24 725) 4 126 (113 137)
Depreciation and amortisation of (969) - (3 875)
non-financial assets
Segment operating profit (25 694) - 11 403
Year to 31 December 2010
Segment revenues - (6 078) 1 153 842
Cost of sales - - (875 289)
Operating costs (34 287) 6 078 (242 570)
Depreciation and amortisation of (1 681) - (7 137)
non-financial assets
Segment operating profit (35 968) - 28 846
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 7,7% for the period was based on the anticipated
weighted average tax rate for the full financial year.
9. Earnings per share
Six months to Six months to Year to
30 June 30 June 31 December
2011 2010 2010
Basic earnings per share
Profit attributable to equity 7 170 3 899 15 342
shareholders (R`000)
Weighted average number of 225 630 225 630 225 630
shares in issue (`000)
Basic earnings per share 3,2 1,7 6,8
(cents)
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:
Profit after taxation (R`000) 7 170 3 899 15 342
Headline earnings adjustment
(R`000)
- Loss/(gain) on disposal of 63 - (366)
property, plant and equipment
- Impairment loss on available- (46) 231 -
for-sale financial assets
- Tax effect of adjustments (13) - 102
Total headline earnings 7 174 4 130 15 078
(R`000)
Weighted average number of 225 630 225 630 225 630
shares in issue (`000)
Headline earnings per share 3,2 1,8 6,7
(cents)
10. Dividends
No dividend was declared relating to the period under review.
11. Business combinations
No business combinations occurred during the period under review.
12. 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.
DIRECTORS` COMMENTARY
Operational review
Our results for the first six months of the year are very encouraging given
the prevailing economic climate combined with the uncertainty brought about
by the ongoing debate around proposed changes to labour legislation. Our
businesses within the oursourcing and human resources support services
segments are performing well and are meeting, and in some cases exceeding,
management`s expectations. Our continued focus on achieving our strategic
objectives has resulted in a 76,9% increase in profit after tax and a 88,2%
increase in earnings per share.
Group turnover increased by 16,47%. The staff outsourcing business showed
steady growth with our 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 showing steady signs of recovery
albeit slowly. The human resources support services segment continued to show
strong growth contributing material increases in turnover and profitability,
specifically from Babereki, the group`s lifestyle benefits business, Training
Force and Workforce Healthcare.
Our focus on diversifying our revenue streams and managing the customer and
product mix resulted in EBITDA of R16,5 million, representing a 12,5%
increase compared to the same period last year.
Cash generated from operating activities before tax amounted to R11,9 million
compared to the previous period`s R9,4 million.
The group continued to take advantage of the roll-out of learnerships through
its skills development initiatives which resulted in the reduction of the
effective tax rate to 7,7%.
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 to augment existing solutions, continued to be
implemented.
The Group`s borrowing facility has been increased from R160 million to R200
million during the period.
Prospects
Based on the trends reflected in these interim results, the directors believe
that turnover in all divisions of the group may further increase in the
second half of the year, which together with a continued focus on achieving
operational efficiencies and tight working capital management, should result
in increased profitability. The group`s liquidity is expected to improve,
which places it in a strong position to take advantage of any market-based
opportunities.
For and on behalf of the Board
RS Katz LH Diamond WP van Wyk
(Chairman) (Chief Executive Officer) (Group Financial Director)
Johannesburg
12 August 2011
Executive directors
RS Katz, LH Diamond, WP van Wyk
Non-executive directors
NM Anderson, JR Macey, L Letlape, K Vundla
Designated adviser
Vunani Corporate Finance
Company secretary
Sirkien van Schalkwyk
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, 19 Ameshoff Street,
Braamfontein, 2001
Date: 12/08/2011 10:47:00 Produced by the JSE SENS Department.
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