Our opinion on the current state of WKF

Workforce (WKF) operates as a comprehensive labor broker, offering recruitment, specialist staffing, training, consulting, employee health management, and financial and insurance products. The landmark "Assign" case decision by the Constitutional Court clarified the relationship dynamics within the labor broker industry, establishing a tri-partite relationship between the labor broker, the employee, and the client. According to this ruling, temporary employees would be deemed permanent after three consecutive months of employment, providing much-needed clarity to the status of temporary workers.

Workforce has strategically diversified its offerings beyond labor broking into insurance and other ancillary products, which has been advantageous for its business. However, in its results for the six months ending June 30, 2023, the company reported a 7% increase in revenue but a significant decline in headline earnings per share (HEPS), dropping to 1.7c from 14.7c in the previous period. The company attributed this decline to various factors including low economic activity, load shedding, high interest rates, decreased client confidence, and reduced demand for personnel services. Additionally, overhead costs rose by 12% due to inflation rates and operating expenses.

To mitigate these challenges, Workforce has initiated a workforce reduction plan, aiming to decrease staff by 10% to 15%. However, despite these efforts, the company projected a headline loss for the year ending December 31, 2023, estimating between 11.36c and 16.04c loss per share compared to a profit of 46.8c in the previous year.

One notable limitation of investing in Workforce from a private investor's perspective is its thinly traded nature. With only 8% of its issued shares available to the public and sporadic trading activity, the share lacks the liquidity necessary to justify investment. As a result, it may not be a viable option for private investors seeking to enter the market. Therefore, we do not recommend investing in this share due to its limited liquidity and trading activity.