South African recruitment and outsourcing company Workforce Holdings (WKF: JSE) reported revenue today for the six months ended 30 June 2019 of ZAR 1.53 billion (USD 104.3 million), up 7.7% compared to last year.

Workforce said the recently legislated minimum wage requirement in South Africa, which primarily impacts its staffing business, had a minimal effect on revenue, but affected profitability negatively. Overall performance was also negatively affected by the overall subdued economic climate, the election effect and a general contraction in government spend on infrastructure.

The non-staffing components (training, financial services and healthcare) continued to represent a larger contribution than prior years. This is, in the current period, still the largest contributor to revenue and EBITDA, albeit off the back of a lower result in the group’s staffing and outsourcing businesses. The staffing and outsourcing group experienced low growth and a reduction of EBITDA due to economic and legislative challenges

“Uncertainty in the deeming provision had a negative knock-on effect on the staffing and outsourcing segment’s growth in the first six months of the year,” the company stated.

Additional growth was recorded from the group’s training segment, primarily as a result of momentum from the previous year’s organic growth, as well as a contribution from the Dyna acquisition in 2018, which includes a full six-month contribution versus only one month’s

contribution previously.

The company stated that the additional investment in infrastructure and human capital benefitted the healthcare segment.

Revenue by segment

Ronny Katz, the CEO of Workforce Holdings commented, “Looking towards the second half of our financial year, we believe the outlook for the economy remains constrained. Notwithstanding the challenging economic and labour environment, management continues to identify growth opportunities in the segments within which the group operates and remains committed to its growth and diversification strategy.”

Workforce added that it has a number of new initiatives in the financial services cluster that are “coming to fruition which will better position this cluster in the market place.”

“We look forward to the numerous infrastructure projects, both in South Africa and in neighbouring countries, in which Workforce can become a meaningful, relevant and significant player, albeit that we expect a slowing in the allocation of tenders and the implementation of projects,” Katz said.

The group last traded on Friday, 6 September 2019 before the publication of its results. Workforce Holdings shares closed at ZAR 140.00 (USD 9.53), no change on the day. Based on its current share price the company has a market value of ZAR 341.22 million (USD 23.2 million).