Final Results Presentation for the year ended 31 December 2017
Agenda Group Overview: Philip Froom Financial Results: Willie van Wyk Segments and Strategic Overview: Philip Froom Outlook: Ronny Katz
Group Overview 1 Philip Froom Chief Executive Officer
The World of Workforce 4
Group at a Glance 5
Group by Numbers 6
Our Clients 7
Footprint Activated in Africa South Africa Botswana Namibia Mozambique Mauritius 8 8
TES Industry P FACTS Highest single creator of jobs (Haroon Lorghat 2014) Giving corporates flexibility Blue collar to semi skilled to professional occupations Biggest employer of youth International precedent Strong focus on training Significant percentage move to permanent workforce (Labour force data) Equivalent benefits Flexible nature contributes to industry, tax, income and economic growth 9
Demystifying the Deeming Provision Who is the Employer? Earning below R17 119.41 gross per month and working longer than 3 months Dual employment or is the client the sole employer? Only relevant in relation to the LRA BCEA, PAYE, SDL, UIF, the TES (Workforce) is still the sole employer Dual employer actually protects the vulnerable more Good broker, Bad employer (e.g. client liquidation) Many robust solutions available regardless of outcome 10
TES Important Role Corporate TES Workforce Assignee Client Access to jobs Provides Protecting worker’s flexibility rights & ensuring fair and equitable pay 11
Macro Economic Environment Volatile political Delays in infrastructure Growing unemployment landscape investment Recruitment industry Low economic growth Mining Charter challenging Deeming provision National minimum wage Constitutional Court 12
Macro Economic Environment Employment Tax Complexity Incentives Global shift to flexible Training environment work Government and YES program development funding 13
Financial Results 2 Willie van Wyk Financial Director
Financial Highlights EBITDA Revenue Gross Profit Profit after Tax Up 11,3% to R2,8bn Up 6,1% to R635,4m Down 0,4% to R133,9m Up 7.6% to R98,5m Tangible Net Interest Bearing Headline Earnings Net Asset Net Asset value Debt to Total Per share Value per share per share Tangible Assets Up 7% to 42,8 cps Up 21,5% to 237 cps Up 18,7% to 159 cps 34% (2016: 32%) 15
Financial Indicators Gross Profit (Rm) Revenue (Rm) CAGR CAGR 16,82% 15,94% 11% 6% 2 808 635 599 2 523 455 1 950 1 802 399 2014 2015 2016 2017 2014 2015 2016 2017 Organic revenue growth of 5% Gross profit margin 23% (2016: 24%) • • Remaining growth attributable to acquisitions Fewer high margin energy infrastructure • • projects and Oxyon acquisition is high turnover, low margin business 16
Financial Indicators Operating Costs (Rm) EBITDA (Rm) CAGR 18,86% 11% 513 134.4 133 462 107 350 320 80 2014 2015 2016 2017 2014 2015 2016 2017 Operating expense to turnover ratio maintained Decreased marginally • • at 18,3% EBITDA to turnover reduced to 4,8% • Organic operating expenses increased by 2,5% (2016: 5,3%) • Management of operating expenses continues • to be focus area 17
EPS and HEPS EPS (Cents) HEPS (Cents) CAGR CAGR 18,56% 18,38% 7% 7% 42,8 43,0 40,0 40,1 33,3 34,1 26,2 25,8 2014 2015 2016 2017 2014 2015 2016 2017 Contribution of acquired companies to EPS is • minimal due to IFRS charges 18
Income Statement Year to Year to % change Rm 31 Dec 2017 31 Dec 2016 Revenue 2 807,8 2 523,4 11,3 Gross profit 635,4 598,9 6,0 Other income 1,0 0,7 42,9 Imputed interest due Operating costs (512,9) (461,8) 11,1 to acquisitions – Fair value adjustments 10,4 (3,5) nm R6,8m (2016: R3,4m) EBITDA 133,9 134,3 (0,3) Depreciation (26,1) (17,5) 49,1 Operating profit 107,8 116,8 (7,8) Interest cover ratio Finance income 1,5 0,7 114,3 4,9x (2016: 4.5x) Finance costs (23,4) (26,5) 11,7 Profit before taxation 85,9 91,0 (5,7) Tax: ETI, learnership Taxation 10,8 0,7 nm and fair value adjustment Profit for the year 96,7 91,7 5,3 Non-controlling interest 1,7 (0,3) nm Profit after tax 98,4 91,4 7,6 19
Compound annual growth rates Revenue (Rm) Gross profit (Rm) EBITDA (Rm) Profit after tax (Rm) CAGR CAGR CAGR CAGR 15,94% 16,82% 18,86% 18.51,% 134.4 1802 1940 2523 2808 399 455 599 635 107 133 80 59 77 92 99 2014 2015 2016 2017 2014 2015 2016 2017 2014 2015 2016 2017 2014 2015 2016 2017 Earnings per share Headline earnings per Net asset value per Tangible net asset value (cents) share (cents) share (cents) per share (cents) CAGR CAGR CAGR CAGR 18,56% 18,38% 25,12% 20,01% 25,8 33,3 40,1 43,0 25,8 33,3 40,0 42,8 121 157 195 237 115 134 159 92 2014 2015 2016 2017 2014 2015 2016 2017 2014 2015 2016 2017 2014 2015 2016 2017 20
Summarised Cash Flow Year to Year to Rm 31 Dec 2017 31 Dec 2016 Cash flow from operating activities 15,9 69,2 Acquisition of business combinations (43,1) (41,8) (Repayment) / increase of borrowings (1,9) 51,8 Cash balance at end of year 25,5 75,1 Oxyon investment December 2017 – 5 week Non cashflow EBITDA items impacted operating cash billing cycle flows 21
Assets As at As at % change Rm 31 Dec 2017 31 Dec 2016 Non-current assets 251,9 199,1 26,5 Property, plant and equipment 23,6 18,0 Goodwill 134,5 102,3 Intangible assets 44,2 39,1 Deferred tax assets 44,3 37,0 Other financial assets 5,3 2,7 Current assets 744,2 688,0 8,2 Trade and other receivables 714,4 610,2 Inventories 3,6 2,7 Taxation 0,8 - Cash and cash equivalents 25,5 75,1 Total assets 996,2 887,1 12,3 Trade and other receivables – Days outstanding - 53 days includes net advances of R188,2m (2017: 46 days) (2016: R171,5m) 22
Equity and Liabilities As at As at % Rm 31 Dec 2017 31 Dec 2016 change Equity 542,3 446,8 21,3 Equity attributable to owners of the parent 543,8 446,5 Non-controlling interest (1,5) 0,3 Non-current liabilities 38,2 40,3 (5,2) Financial liabilities 26,4 30,8 Deferred tax liabilities 11,8 9,5 Current liabilities 415,6 400,0 3,9 Trade and other payables 136,9 115,2 Financial liabilities 278,7 283,9 Taxation and bank overdrafts - 0,9 Total equity and liabilities 996,2 887,1 12,3 NAV per share (cents) 237 195 21,5 NTAV per share (cents) 159 134 18,7 23
Balance Sheet Ratios 2017 2016 1 53 Days Debtors days outstanding 46 Days 2 8,9% Debtors greater than 90 days 5,0% 3 Net interest bearing debt to total 28% 27% assets 4 Net interest bearing debt to total 34% 32% tangible assets 5 18,2% Return on equity 20,5% 6 4.9 Interest cover (times) 4.5 24
Financial Prospects Acquisitions start to contribute to HEPS 20 2018 Greater cash availability for acquisitions Emphasis on organic growth and acquisitions 25
Segments and Strategic Overview 3 Philip Froom Chief Executive Officer
Revised Segmental Structure Staffing and Recruitment Staffing and Outsourcing Process Outsourcing Training and Consulting Training and Consulting Workforce Healthcare is Financial and Lifestyle Products now included with the Financial & Healthcare Financial and Healthcare segment as opposed to the Training & Consulting Employee Health Management sector as was presented in June 2017 interim results 27
Three Segments 2015 2016 2017 8% 8% 10% 2% 10% 11% 81% 82% 88% EBITDA Staffing & Outsourcing Training & Consulting Financial & Healthcare (prior to central costs) Progress continues to be made on a more balanced, diversified approach to the business to underpin sustainability 28
Staffing & Outsourcing Revenue (Rm) EBITDA (Rm) 9,5% (4,7%) 2521,1 2301,6 1795,2 180,2 171,7 141,3 2015 2016 2017 2015 2016 2017 2016 large Gross margin decline infrastructure project Delays in government Recruitment industry Encouraging pipeline 18.5% (2016: 20.3%) came to an end in early infrastructure projects tough in place 2017 29
Training & Consulting Revenue (Rm) EBITDA (Rm) 79% 3,0% 158,0 88,3 84,8 23,5 22,9 6,6 2015 2016 2017 2015 2016 2017 KBC acquisition contributed Mining slowdown in 2017 Training Force solid organic substantially to turnover and hurt Prisma, expecting Strategic growth cluster growth EBITDA improvement in 2018 30
Financial & Healthcare Revenue (Rm) EBITDA (Rm) (4,4%) 4,8% 132,9 127,0 106,3 17,8 16,9 16,1 2015 2016 2017 2015 2016 2017 Credit vetting criteria EEB business small but now Investing in Workforce tightened resulting in lower Improved cash utilisation profitable and growing Healthcare turnover 31
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