WorkService reports loss in H1, sells Hungarian subsidiary

The market value of Work Service (traded on the Warsaw Stock Exchange) has plummeted to just €13.39 million.

The Polish staffing, RPO, and outsourcing company reported revenue of PLN 1.04 billion (€244.8 million) for the first six months of 2018, an increase of 2% compared with the same period last year.

Revenue growth was mainly due to the positive results in the Polish, Hungarian, and Czech markets. However, the group added that the dynamics of revenue growth was adversely affected by the results on the German market and contracts executed by the Work Express group (cross-border exchange of employees). Both business units underwent business restructuring during the period which impacted its results.

The group also reported that its operating ratios were negatively affected by non-cash write-offs, which impacted EBITDA results by more than PLN 26 million (€6.0 million) to a loss of (PLN 17.2 million (€-4.0 million)). The group’s management also announced further active restructuring aimed at minimising the levels of indebtedness, which includes the sale of Exact Systems.

Work Service said its operating loss primarily arises from one-time events which occurred in 2018 in the form of write-downs on receivables and intangible assets as well as write-downs on inventories.

“The first half results, excluding non-financial write-offs, are comparable to last year’s, but are below our expectations,” Maciej Witucki, CEO of Work Service, said. “To a large extent, the loss on operating activities is the result of non-cash write-offs from previous years and one-off events, which lowered our result by PLN 26.6 million (€6.2 million). We also bear the costs associated with restructuration processes and access to capital. However, following our strategy, we focus today on organic growth in key Central European markets.”

“The effects of these activities can be seen in the results of companies from Poland, the Czech Republic and Hungary. What is more, due to falling unemployment and growing recruitment problems on the Polish labour market, the demand of companies for employees from the East remains at high levels. Among other things, this demand, as well as our increased operational and sales activities, translated into a doubling of the number of employees from Ukraine, which our group recruited for customers over the last year.”

During the H1 period, the group also announced that it would sell its subsidiary Hungary-based Prohuman Group. The group acquired Prohuman in 2013. Prohuman, founded in 2004, provides comprehensive HR services in the areas of temporary and permanent placement, consulting and outsourcing. The sale would help in overcoming the group’s indebtedness.

“We decided to sell off companies from Prohuman Group, the leader on the Hungarian temporary work market,” Witucki said. “It is a very attractive asset, the sale of which will allow us to reduce our financial liabilities to a minimum. At the same time, this will enable us to introduce a new business model based mainly on low-cost and sustainable operations in Poland.”

The group also said that it is continuing its sale of 69% of its subsidiary Exact Systems. Work Service stated that the sales process is at an advanced stage, with the expected completion and financial inflows in October 2018.

Work Service describes Exact Systems’ range of services to include resident engineering, subassembly/production, sorting & rework, final product control and controlled shipping and says that it “assists leading manufacturers and distributors raise their overall quality through the selection, inspection and reworking of components during the entire production chain.”

“The funds obtained from the sale of Exact Systems will be used to a significant reduction of the group’s net debt,” Witucki said.

According to Google Finance, Work Service last traded at PLN 0.88 (€0.21), down 8.33% on the day. Based on its current share price the company has a market value of PLN 57.28 million (€13.39 million).

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