South African recruitment and outsourcing company Workforce Holdings (WKF: JSE) reported revenue last week for the year ending 31 December 2017 of ZAR 2.8 billion (USD 236.6 million), up 11.3% and up 4.6% organically compared to last year.

The group’s revenue growth during the year was attributable to acquisitions. Workforce stated that its decrease in gross margins arose as a result of a reduction in the relatively high margin energy infrastructure sector coupled with the acquisition of Oxyon, a high turnover, low margin business.

 “2017 was a year characterised by a volatile political environment, low economic growth and investment and a continued deterioration in unemployment levels,” the group announced. “Notwithstanding the tough trading environment, the group’s results continued to show improvement, albeit modest, on previous years and again highlighted the resilience of our integrated and diversified business model.”

“Government’s promised infrastructure development plan continued to be subject to indefinite delays, resulting in less demand for our services. We are hopeful, however, that 2018 will experience the early stages of project development in this regard,” Workforce Holdings stated.

In 2017 Workforce acquired KBC Holdings Proprietary Limited on 1 January 2017, in order to increase the group’s technical training offerings. Oxyon Human Capital Solutions was acquired on 1 February 2017 in order to expand the group’s skilled artisan and technical segments of the engineering industry. Furthermore, the group acquired 76% interest in temporary employment solutions provider Day-Click Limited on 1 March 2017, in order to give the group an entry point into the Mauritian market where business opportunities have been identified.

During the period the five reporting segments were consolidated into three to better represent the current core trading activities of the group and provide a simpler understanding of the operating entities comprising Workforce. The three segments are Staffing and Outsourcing, Training and Consulting, and Financial and Healthcare.

Revenue by segment is broken down as follows.

Workforce highlighted that the ongoing legal labour legislation dispute, which currently awaits a ruling by the Constitutional Court, following the Labour Appeal Court’s ruling in July 2017, affected its staffing and outsourcing segment.

“We remain confident together with our Temporary Employment Services industry body, the Confederation of Associations in the Private Employment Sector, that the initial ruling in the Labour Court will be upheld and that assignees will continue to be deemed to be an employee of both Workforce and our clients,” Workforce stated. “We have various robust solutions to continue to provide our clients with our services regardless of the ruling of the Constitutional Court.”

Workforce pointed to the TES industry’s upcoming milestone events in the next 12 months including the Constitutional Court ruling on the “deeming provision”; The introduction of the National Minimum Wage in May 2018; and Employment Tax Incentive expiry, pending an extension or replacement, on 28 February 2019.

“We continue to also strategically diversify our business. South Africa experiences significant skills shortages and our training segment is a key area for both organic and acquisitive growth. We are positive and are looking forward to the challenges and exciting opportunities that 2018 presents.”

As of last trade, Workforce Holdings Ltd traded at ZAR 145.00 (USD 12.23), no change on the day and 31.82% above the 52 week low of ZAR 110.00 (USD 9.28) set on 20 February 2018. Base on its current share price the company has a market value of ZAR 353.41 million (USD 29.8 million).