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Poland - Work Services reduces forecast due to slowdown in business and higher costs

14 November 2012

Work Services (WSE:WSE), the listed Polish staffing firm, issued a forecast for its financial results for the full year ending 31 December 2012 yesterday, which suggested that revenue and EBIT would rise by more than a quarter. In detail, revenues were forecast to increase by 26.31% from PLN617.2 million  (€147.9m) in 2011 to PLN780.5 million (€186.8m). Earnings before interest and tax (EBIT) are forecast to increase by 28.96% from PLN31.1 million (€7.4m) to PLB40.1 million (€9.6). The gross profit is predicted to rise from PLN22.6 million (€5.4m) to PLN25.1 million (€6.0m), however, the gross margin  is likely to fall slightly from 3.65% to 3.22%. Overall the net results are also predicted to increase by 3.66% from PLN22.3 million (€5.3m) to PLN23.1 million (€5.5m).

The results are based on a number of assumptions, which are of themselves of interest. Work Service predicated sales for the country as whole, based on research by other groups, as follows:

  • Poland, +12.23%, to €816m compared with €727m in 2011. 
  • Czech Republic, up +4.55%, to €218m compared with €209m in 2011. 
  • Slovakia, by 7.44%, from €124m in 2011 to €134m. 

Polish macroeconomic conditions for 2012 are based on a GDP growth rate of 2.4%, an unemployment rate of 12.5%, a rate of inflation (CPI) of 3.4% and a National Bank of Poland reference rate (base rate or minimum money market intervention rate) of 4.5%.

This company forecast differs from the forecast published on 13 February 2012, which estimated sales of  PLN815 million, EBIT: PLN54 million, profit before tax: PLN41 million and net income: PLN35 million.

The lower level of sales now forecast at -4% below the prior estimate is due to a significant decrease in orders in the second half of the year coming from the industrial sector, mainly in the automotive industry. 
The EBIT correction of -26% is due to the reduction of the above-mentioned orders, and also costs related to the launch of the Group's activities in Germany, Turkey and the expansion of its operating structure in Russia (these costs are a one-time investment). The Group also incurred additional, larger than expected cost in its IPO. 
Work Service S.A. Capital Group claims to be the biggest player in the Polish HR services marketalthough Staffing Industry Analysts placed them second after Randstad in our Top 20 staffing firms in list for Poland published in 2011. 

The company conducts its business in five other European countries: the Czech Republic, Slovakia, Russia, Germany and Ukraine. The company has over 2200 clients for which it employs and services over 21,000 employees every day. 

Work Service first traded on the Warsaw Stock Exchange on 26th April 2012. In early trading this morning,  the Company’s share price was at PLN5.78, up just under +4% on the day but on extremely small volumes and 36.97% above the post-IPO low of PLN4.22 set on 24 August, 2012. This means the company is valued at an estimated PLN277 million (€66 million).


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