Employment and staffing services group Workforce Holdings fired 10%-15% of its permanent staff and closed some of its businesses over the past six months after the growth it anticipated did not materialise, leading to profits falling almost 90%.
“We’ve been having quite strong growth over the years, but from the beginning of March we could see that had to right-size the business because that growth is not there,” CEO Ronny Katz said in an interview with Business Day on Thursday after the company released its results for the six months to end-June on Thursday.
The overhead costs of the group, valued at about R349m on the JSE, grew 12% year on year, because of higher inflation rates and greater operating expenses as it hired more personnel as it geared for growth.
But the challenging economic environment also worsened by high inflation, lower business confidence and load-shedding reduced the demand for the company’s services as many tried to contain costs.
This all contributed to Workforce’s drop in profit of 88% year on year to R4.2m and headline earnings per share (Heps), a common profit measure in SA that excludes certain items, by a similar margin to 1.7c.
Revenue increased by 7% to R2.1bn and core earnings (Ebitda) more than halved to R32.8m.
Workforce provides staffing, outsourcing and training services, and its investment clusters include staffing and outsourcing, training and education, healthcare and financial services.
Established in 1972, the company now operates in 10 countries outside SA, but Katz said that virtually all of its profits are still generated in SA.
Commenting on recruitment — the largest segment by revenue — in the reporting period, the group said that it was challenging in SA as quality candidates were less likely to leave their jobs because of economic uncertainty, resulting in lower volumes and decreased profit margins.
Katz added that fewer candidates considered switching jobs with employees worried they might be fired on a last-in-first-out basis if things went south at a new company.
“They rather went for the stability than the change of their jobs,” he said.
The company previously said it is looking to grow abroad after a slowdown in opportunities in SA, which has one of the highest unemployment rates in the world and is hamstrung by poor economic growth.
Katz said on Tuesday they hope to grow its current meagre profits generated abroad over the next two to three years.
But for now the tough environment for businesses is expected to continue in the rest of 2023 and into 2024.
“As government and private sector investment into infrastructure development continues to grow, this should impact positively on our own business,” the company said.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.