Workforce Holdings, the Level 1 B-BBEE human capital services group, experienced difficult trading in the six months to June 30 because of the low economic activity, load shedding, high interest rates, lack of client confidence and less demand for personnel services.
The company, which operates through four clusters comprising Staffing and Outsourcing, Training and Education, Healthcare, and Financial Services, lifted revenue 7% to R2.1 billion, with the growth mainly due to the financial services cluster ensuring continued market presence, CEO Ronny Katz said at the release of the results yesterday.
He said overhead costs increased 12% because of high inflation rates and operating expenses geared for growth that did not occur due to the prevailing economic climate.
Earnings before interest, tax, depreciation and amortisation (Ebitda) fell sharply to R32.8 million from R68.7m, while headline earnings a share came to only 1.7 cents versus 14.6 cents at the same time last year. Cash generated fell to R22.5m from R64.6m.
“We embarked on remedial action during March to right-size our businesses and to better position the group for the coming year,” he said.
The effects of these interventions had already become apparent since June, as the company’s cost base was better aligned to operational requirements, he said.
“Our projections for the second six months indicate that lower operating costs and a seasonally better second half of the financial year will result in the overall improved profitability for the group,” he said.
The Staffing and Outsourcing cluster generated R1.7bn of revenue, up from R1.5bn in 2022. A tough macroeconomic climate affected the temporary and flexible staffing sector, resulting in reduced volumes and margin pressure given the poor economic growth.
As a result, the cluster’s Ebitda reduced to R48.6m from R84.9m.
The cluster had successfully replicated its South African model in South America, and the client base was growing, with some 30 clients secured.
Staffing operations were facing margin pressure and were having to renegotiate margins mid-contract in some instances.
Because clients tend to reduce temporary staff before they consider reducing permanent staff, the cluster focused on cost consolidation and strict cost monitoring across all brands to improve profitability. However, sales and marketing efforts were maintained.
The cluster established a presence in Scotland and was awaiting additional contract awards. African operations were focused on relatively stable sectors like mining, oil and gas, hospitality and tourism and manufacturing, which continued to deliver good returns.
The Africa cluster gained momentum by partnering with companies in countries where Workforce did not have offices, such as Zimbabwe and Guinea, and securing new clients in Botswana and Mauritius, where pre-Covid-19 conditions had returned.
The first half was challenging for the Recruitment cluster, but multiple large corporate clients were secured for permanent recruitment services.
The Training and Education cluster improved its cash collections and debtors management, resulting in a strong cash position. The overall profitability of the cluster aligned close to budget, and the second half of the year was expected to be more robust. All brands in the cluster were profitable.
The Financial Services cluster built on its previous year's improvement. Through a focus on credit allocation strategies, better collections and a targeted sales approach, the cluster increased interim revenue 27% to R90.2m, and generated positive Ebitda of R1.5m compared to the previous year’s negative Ebitda.
In the Healthcare cluster, the occupational healthcare and employee wellness business’ existing clients resumed wellness programmes after the Covid pandemic and new clients were acquired.
The healthcare professional outsourcing brands secured new clients in the frail care sector and with a leading pharmaceutical group, but were forced to terminate a big public sector contract due to non-payment. Revenue for the cluster fell to R193.6m from R206.5m.
BUSINESS REPORT