Sky is the limit

Interview with Tomasz Misiak and Tomasz Hanczarek

We speak with Tomasz Misiak and Tomasz Hanczarek, the founders of Work Service, about the company’s historic debut on the London Stock Exchange – which they view as a stage of development rather than a final goal – as well as their motivations, ambitions, and future plans.

Since February 18, Work Service has been listed on the London Stock Exchange. What was the purpose?

Tomasz Misiak: Work Service is an international company, generating 50% of its margins and results outside of Poland. We operate in over 15 countries, with our own subsidiaries in 12, and in the remaining ones, we operate through employees delegated to specific tasks for clients. In our plans, the future of the company involves joining the ranks of the largest European firms. Currently, Work Service is ranked 65th in the Top Global list. We decided on a dual-listing without abandoning the Warsaw market because we believe this move should attract the right investors and showcase our growth aspirations.

Tomasz Hanczarek: We believe Work Service must be listed on the most stable markets, like London or the United States; although we have no business interests in the USA for now. We believe that for the safety of our investors, the stability of the company, and our relations with banks, we should insure ourselves against seasonal troubles in the local market, which is the Warsaw Stock Exchange. Although large, it is still treated as local. Any turmoil surrounding the new government results in panic movements there. We want investors who invest in Work Service shares to be insured against such movements—hence our "safety anchor" in London.

T. M.: It’s worth noting that we haven't conducted a public offering yet.

Exactly—the LSE is not a museum. You don’t go there to look at paintings, but to raise capital. Yet, this is a debut without an issuance.

T. M.: Agreed, if we look at our group's free float, it is 30%. That’s not much for London, but it represents hundreds of millions of zlotys. Investors in London will have plenty to trade. All shares are listed 1:1 in Warsaw and London. Furthermore, and importantly, we are focusing on London investors. We are currently preparing a roadshow there for May, and we are heading to meetings with funds as early as April. We will present the company's results and sell our vision. I believe London has huge potential and an understanding of our market. We are the only Polish HR company listed on the LSE. Moreover, we are the only Polish company there overall. It is a historic event. I received a text from my cousin in Glasgow, who is studying at a top economics university, saying she is very proud because a professor mentioned that the first Polish company had just debuted in London. It’s a sign of the times: a united Europe and a united capital market.

T. H.: We are surprised that Polish funds do not invest in Polish companies. There should be some kind of national, business patriotism. We are on the London Stock Exchange because we want all funds to have easy access to buying and selling. Of course, there are information requirements; you have to provide data that is later published and sent to the relevant funds. There are also institutions that inform funds about what is happening in specific companies. The mere presence on the stock exchange ensures that information from Work Service reaches analysts. Maybe not overnight, but over time there will be a boom in Work Service shares. We are convinced they will become increasingly fashionable.

The last two years have been a series of acquisitions that defined your significance and reach. I understand London is a springboard to conduct an issuance and further acquisitions.

T. H.: Work Service will certainly not stop growing. Seven years ago, we assumed organic growth through acquisitions at a level of 20–30%. But the cash generated within a year isn't enough for acquisitions. There must be additional financing from banks or through issuances. The acquisitions to be carried out this year and in the next 18 months should be niche acquisitions in specific high-margin brands that can go global.

T. M.: However, together with the shareholders, we also assume a so-called "Big Bang" theory. If a large investor appears with huge investment potential, capable of doubling the size of the group in a short period and tripling its value, we are able to consider such a variant. We don't hide that we are surprised by how many serious financial institutions want to talk to Work Service in the context of strategic opportunities.

Is this only Europe, or also a move across the Ocean?

T. M.: We are talking about the globalization of the company. After entering the London Stock Exchange, we were noticed by the market in a strongly international context. This is information we haven't shared yet—"Manager" will be the first: we have been invited to talks with the World Employment Confederation (WEC/CIETT), which consists of the largest global companies, our biggest competitors. These companies invited us to join the association. This means that we are considered by the world's biggest players as a partner worthy of sitting at the table and discussing the global market, and certainly the European market.

And this happened specifically after the London debut?

T. M.: Yes. Our competition recognized that we are a player that should be among them at the same table, discussing the future of the European market.

T. H.: The HR market is the market of the future. We have massive consolidation potential. For funds, we are an ideal target. Funds respect our work, but they also see an enormous opportunity for profit.

How does the qualification process for acquisitions work? Is your target a country or rather a specific sector?

T. M.: Our strategy is clear. We want to be a company with a significant position in the main market. We are interested in the recruitment, temporary work, and outsourcing markets of all European countries. We are already present in markets with the highest results, such as France, the UK, Germany, the Netherlands, and Italy—either through delegating employees or through our own subsidiaries. We are interested in specialized markets in three very specific areas: executive search, quality engineering, and IT, because we are leaders in these fields. Our company, Exact Systems, is preparing for a capital-raising process through the stock exchange. It is currently in the Top 6 global firms in its industry. When we bought it, it had 15 million PLN in revenue and 1 million PLN EBITDA. After seven years of cooperation with the Work Service group, it has over 300 million PLN in revenue and nearly 27 million PLN EBITDA. This shows how we can develop entities within our reach.

T. H.: We believe we have three brands that can go global (beyond Europe): Exact Systems, IT Contract (IT, engineering, pre-selection, recruitment), and Work Service (consulting, qualifications, providing employees). We want to grow steadily in Europe and are focused on cooperation. Managers don't leave us, and neither do minority partners. They want to stay with us, and that is most important to us. We never buy 100% of a company; we always buy a majority stake but continue to cooperate.

Because they have the know-how?

T. H.: They have the know-how and we have the know-how. It's know-how squared, even factorial ($n!$). Using Exact Systems as an example: the cooperation has lasted 10 years, the earn-out period has passed three times, and they don't want to sell their shares; they want to keep developing the company with us. And that is the heart of the matter.

As we know, the wealth of a society is defined not by the number of companies, but by the number of global companies, because that is where added value is created. Can Work Service be called a global company?

T. M.: Certainly not in terms of scale yet, as we are the 60th largest company in the world in the HR industry. But Poland only joined the global economy twenty-some years ago and can compete with the world in very few fields. Such a field could be coal, if it were valuable enough (but it isn't), Wyborowa vodka, or canned ham. The problem is that we haven't managed to create many products—though a few exist—that can take on global competition. It’s certainly not high technology, but it is human minds. Thanks to this, we, as a company, are able to grow. For us, there is truly no barrier to growth. We have human potential, a huge hunger for development, and a desire to prove that Poles can do it. It's just a pity that the international successes of Polish companies are not appreciated enough in our country.

What does a local Polish leader need to become a global company?

T. H.: My friend Piotr Krupa from the company Kruk, who developed that firm brilliantly, is a great example. His company has a billion-dollar capitalization and is growing more and more abroad. What is needed above all is: the will, a lack of complexes, and a goal focused not on a "good life" and two cars in the garage, but on achieving success. Western funds often ask me: "Why are you growing twice as fast as your competitors?" I answer: "Because we were and are poor, and we want to lift Poland out of this poverty." It’s determination. We want it more. Secondly: Tomasz Misiak and I didn't start the company to buy a house or a car. From the very beginning, we wanted to create the largest company in the world. The third thing is related to the second: when a Polish player kicks a ball, he doesn't think he wants to be like Lewandowski; he dreams of having 10 or 20 thousand a month. He kicks better and better, the second Bundesliga buys him, he plays there and earns his 20 thousand. He fulfilled his dream, he's happy, and that’s the end. We want to be the Lewandowskis; we aren't interested in half-measures. We want to face the giants, and you have to have that in your backbone.

Let's talk about the Polish labor market. How is it changing?

T. M.: For Poles—it’s fantastic. Wages are rising relatively quickly, and unemployment is falling to historically low levels. We see that in many professions, especially specialized ones, there is a shortage of hands. This is also an effect of labor emigration, but we haven't yet handled immigration to our country. There are many Ukrainians, but not necessarily those we might want. What is both positive and negative is what is happening around the political sphere of the labor market. I believe the government has a duty to civilize it and ensure efficient functioning, but one must be very careful not to inflate the shadow economy. Today's actions, which serve security, might turn into—as we observe in the market—an escape from legal employment. At the same time, companies are being deprived of flexibility through changes in the employment system, and employment costs are being raised by maximizing the burden of insurance on all methods. We aren't actually against this part. The insurance situation we had before was bad for many—including us—because it caused the shadow economy. Nevertheless, in times when the average product lifecycle is a few months, companies need labor flexibility, while the government is simultaneously restricting temporary work, the open market, and forms of employment. This could result in an escape, especially by small and medium-sized firms, into zones where they shouldn't be. It could also result in a decline in the competitiveness of the Polish economy, leading to increased unemployment and a drop in wage growth dynamics. Unfortunately, you cannot regulate the labor market from the top down, especially regarding wages, because we still have a lot to do in terms of productivity.

There is much talk about the immigration Europe is struggling with. We are a natural place for immigration from Ukraine. How do you, as Work Service, see the process of accepting Ukrainians, which is currently "wild"?

T. H.: In many regions, the demand for people is so high that we are reaching for Ukrainians more boldly and more often. More and more of them are working in Poland. And this is a salvation for the Polish economy, not a threat; they are building our GDP. Europe has no way back from this either. In the German economy, there will be a shortage of 5 million people within 10 years. In the next 5 years, a million truck drivers will retire. Does that mean the German transport market will stop? No, they will take Poles, Czechs, and Slovaks. And in Poland, we must support ourselves with people from Ukraine. Ukraine is 50 million people—a reservoir for Europe for many years. The Polish market has labor shortages and more and more jobs. The gap between wages in Poland and Germany will shrink. It’s already leveling out; the process of raises has already begun. We have no other choice, and to maintain the current GDP growth, we must reach for Ukrainians.

The Polish market is changing from an employer's market to an employee's market. What does this mean for your company?

T. M.: We believe that the legal changes currently occurring will positively affect growth in service and outsourcing firms. Due to the market situation and the lifecycle of products and services, many enterprises need flexibility. Companies cannot handle this on their own. This flexibility is provided by specialized firms, and we will certainly be such a firm. Today, we are still perceived through the lens of history as a company dealing with temporary work, even though that is no longer our main area of activity. We are a strategic HR partner for most enterprises, where we can help solve problems from auditing incentive systems to employment systems and providing specialized teams. For the first five years, we were seen through the lens of working with retail chains. Today, we are practically no longer in that market. We managed to break free from that image, but we will still be "slaves" to the image of a company providing temporary work and contracts that don't meet standards. Meanwhile, temporary work is a full employment contract with full insurance, vacation, and health contributions—the only thing that differs from the standard Labor Code contract is the notice period. Worldwide, it is used to activate young people; it is an absolutely normal form of employment.

T. H.: Work Service fulfills the social function of protecting employees—contrary to how trade unions present it. As Tomasz Misiak said, it is a full-fledged contract. Let's remember that any workplace can go bankrupt or have a regression in orders. What do they do then? They fire people. If those people aren't in contact with us, they simply become unemployed. If they are with us—they still have a contract. We only earn when that person works. So if they are let go, we immediately move them elsewhere. Thus, such a person is safer with us than with an employment contract with their employer. We are their private headhunter.

Where do you see yourselves and the company in five years?

T. M.: In five years, Work Service will be among the top firms in Europe. It will have great significance in all of Central and Eastern Europe, being an undefeated, hard leader of the region. It will have global brands in specialized services and will be a well-known, recognizable brand on the London Stock Exchange. Where will we be? I hope still in our company, building it through the next stages of its history. But we also consider a variant where, in five years, we will be merged with one of the large international players and will be busy building new businesses with our investment funds. Five years is a very long time. If someone told me five years ago what today would look like, I probably wouldn't have believed them. If someone then said we would have the opportunity to debut in London, I would have thought it would be extremely difficult. Today, we have achieved these goals and we are proud of them. That’s why one shouldn't limit oneself—as we often said in the company—the sky is the limit.

T. H.: We will definitely be active in business. We believe Work Service can be not just in the Top 5 in Europe, and that it can grow not for five years, but for dozens of years. We want to build the Polish economy, create new businesses, and—I will emphasize again—not to buy an apartment, a house, or a Porsche, but to build great companies.