Workforce sees drop in profit, confirming difficult environment

While Workforce Holdings has expanded its operations to offer financial services and general and occupational healthcare solutions to its clients and their workers, the company is still highly reliant on its core business of providing workers to its corporate clients and jobs to the workers on its books.

Thus, its results for the year to end December paint a fairly accurate picture of what’s happening in the labour market.


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“We are right at the coalface,” says CEO Ronny Katz. “We see the demand for workers, all the way from short-term staff requirements to one- and two-year contracts, as well as the demand for permanent staff.

“Obviously, the first half of the financial year was terrible,” says Katz. Businesses had to close for most of the second quarter of 2020 and needed no staff, while the recruiting segment could not operate either, even if there were any companies looking to employ more people.

This disruption is clear from the figures.

Nearly R500 million in revenue simply disappeared, with Workforce reporting that this figure dropped to R2.78 billion in 2020 compared with around R3.23 billion in the 2019 financial year.

The decline in revenue largely reflected the lower demand for workers, on which other services piggyback, such as training, payroll services, industrial relations and HR services.

Katz told Moneyweb that the healthcare cluster, which includes operating healthcare clinics at the premises of 68 of its clients, actually fared better than in previous years.

The loss of revenue from the core business of staffing and recruitment, as well as turnkey outsourcing, was the major reason for the two-thirds drop in earnings per share (EPS).

EPS declined from 42.5 cents in 2019 to only 13.9 cents in the past year.

And then – some light

“There was, however, a visible step change after July 2020, as lockdown levels eased and our clients reopened for business,” says Katz in his commentary to the results.

He told Moneyweb the second half of the financial year was “very good” and actually better than in 2019, before the Covid-19 pandemic hit companies.

He attributes the recovery in staffing requirements on an outsourced basis to companies wanting to be more flexible in an uncertain environment, that some jobs are being seen as short-term in nature, and a more cautious approach that enables the movement of staff from one site to another as needs change.

“To date, 2021 is also looking better, despite remaining challenges,” says Katz.

“It is envisaged that the first six months of the new financial year will remain challenging given the second wave of Covid-19 infections. However, compared to the first half of 2020, activity levels are already much improved.”

Management says it also expects to see a good recovery in profitability as the group itself has had a hard look at its operations, costs and way of working. It reported cost savings, which will continue to benefit earnings for the foreseeable future.


Interestingly, management also noted that the recent budget speech was encouraging, and business-friendly rather than heavily weighted towards ideology.

“We eagerly await the rollout of infrastructure projects as a growth driver for the economy, understanding that although SA [will] only reach pedestrian growth in the coming years, the country still needs infrastructure spend to achieve a higher economic growth path into the future,” it says.

Infrastructure spending boost in the budget
The state of infrastructure investment in SA

Needless to say, Workforce hopes that a large programme to build infrastructure will boost demand for workers of all shapes and sizes.

Workforce Holdings share price