| Thu 22 Nov 2007, 14:00 | | KEL - Kelly Group - Audited results and cash divid |
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KEL
KEL
KEL - Kelly Group - Audited results and cash dividend declaration for the year
ended 30 September 2007
KELLY GROUP LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 1999/026249/06)
ISIN: ZAE000093373
Share Code: KEL
("Kelly Group" or "the group" or "the company")
AUDITED RESULTS AND CASH DIVIDEND DECLARATION FOR THE YEAR ENDED 30 SEPTEMBER
2007
* HEPS increased from 22.92 cents to 78.46 cents
* Operating profit increased by 47% to R114.8m
* EBITDA grew by 31% year-on-year to R128.1m
* Cash flow from operating activities improved from R26.4m to R78.8m
* Operating margin improved from 4.7% to 5.8%
* Maiden dividend of 30 cents declared
COMMENTS
The Kelly Group`s first year as a JSE-listed company was a busy one in which it
made substantial advances on the strategic as well as the operational front.
The Kelly Group produced outstanding results increasing revenue by 20.3% to
R1.994 billion and operating profit by 46.7% to R114.8 million. The operating
profit margin improved from 4.7% to 5.8% due to improvements in efficiencies and
strong productivity gains.
The performance of the South African operations was particularly impressive:
revenue increased by 27.6% and operating profit by 73.8%. On the permanent
placement side, revenue was up 30.35% and temporary staffing grew by 27.2%.
Particularly notable showings came from the flagship brand Kelly, which
continued to outperform expectations from an already high base, and PAG, which
under new management came from a loss in the first quarter to end the year
showing strong real growth.
As the group noted at the half-year, its American business, while still a major
contributor to the group`s overall performance, had a drop in EBITDA mainly due
to the completion of a major project. However, the business is moving in the
right direction, aided by a strong productivity drive, a renewed focus on core
activities and a reduction in overheads.
Acquisitions
The group acquired the businesses of Frontline Recruitment (Pty) Ltd, Frontline
Executive Search (Pty) Ltd and Frontline Assignments (Pty) Ltd for an amount of
R46.4 million on 1 March 2007. The settlement of the purchase price was by way
of cash and the issue of 4 143 616 shares.
The purchase price was allocated to the fair value of underlying assets and
liabilities as follows:
Rm
Trademarks 10.2
Fair value of assets acquired 0.2
Goodwill 36.0
Total purchase consideration 46.4
The acquisition of Frontline has strengthened the group`s presence in the upper
end of the financial placement market, where it is an established leader.
Frontline has an outstanding reputation for successfully sourcing top-level
financial candidates and an impressive client base which includes many of South
Africa`s major corporations.
The business unit contributed R3.7 million towards operating profit for the 7
month period.
Post balance sheet events
iChoice acquisition
The Kelly Group entered into an agreement on 13 November 2007 with MMC
(Proprietary) Limited and Crestwell Trading 2 (Proprietary) Limited to purchase
the entire issued share capital of iChoice Call Centre Outsourcing (Proprietary)
Limited at a maximum purchase price of R110 000 000. The purchase price is
inclusive of the estimated agterskot payments.
The transaction is subject to the completion of a successful due diligence and
Competition Commission approval.
MSquared minority buy-out
Pursuant to the private placement circular issued at the listing of the Kelly
Group, the market was advised that Kelly Group would in due course after its
listing, repurchase the shares held by minorities so as to constitute Kelly
Group as the sole shareholder in MSquared.
Kelly Group has reached agreement with the minority shareholders in MSquared to
buy the remaining 10.01% of the shares for the aggregate purchase price of
US$2.7 million, resulting in Kelly Group owning 100% of MSquared. The
transaction is subject to a fairness opinion.
Directors
Corrie Roodt, Thami Sokutu and Peet van der Walt joined the board as independent
non-executive directors. Vuyi Radebe, formerly an alternate director, and human
resources director Elias Monage were appointed as executive directors.
Kholofelo Molewa was appointed as an alternate director in place of Marc Ber.
Basis of preparation and report of the independent auditors
The summarised consolidated audited results have been prepared using accounting
policies compliant with the IAS 34 (Interim Financial Reporting) and
International Financial Reporting Standards (IFRS), and are consistent with the
prior year. The group`s independent auditors Grant Thornton have audited the
group`s results. The unqualified report is available for inspection at the
company`s registered office.
Cash dividend declaration
The board has resolved to declare a final cash dividend to ordinary shareholders
of 30 cents per share (2006: Nil) on 22 November 2007 payable to shareholders
recorded in the register of the company at the close of business on the record
date appearing below. The salient dates pertaining to the final dividend are as
follows:
Last date to trade "cum" dividend Friday, 7 December 2007
First day to trade "ex" dividend Monday, 10 December 2007
Record date Friday, 14 December 2007
Date of payment Tuesday, 18 December 2007
No share certificates may be dematerialised or rematerialised between Monday, 10
December 2007 and Friday, 14 December 2007, both days inclusive.
Dividend cheques will be posted and electronic payments made, where applicable,
to certificated shareholders on the payment date.
Dematerialised shareholders will have their accounts with their Central
Securities Depository Participant or broker credited on the payment date.
Prospects
In the year ahead, the Kelly Group will continue to focus on optimising its
existing businesses, developing its people, driving efficiencies, keeping costs
down and improving its client and candidate acquisition channels. Given the
expected continuation of the positive economic conditions, the Kelly Group is
likely to generate a high level of organic growth again with all its business
budgeting for earnings increases. In addition, the group remains on the lookout
for suitable acquisition opportunities. The strength of its balance sheet means
that it is well-placed to take advantage of any opportunities that meet its
investment criteria.
ABRIDGED CONSOLIDATED INCOME STATEMENT
Notes 30 Sept 2007 30 Sept 2006 % change
R000 R000
Revenue 1 1 994 019 1 657 483 20
Earnings before interest, 128 113 98 172 30
taxation, depreciation
and amortisation (EBITDA)
Depreciation and (13 308) (19 926) (33)
amortisation
Operating profit 114 805 78 246 47
Income from associates 267 -
Interest paid (41 653) (57 971) (28)
Interest received 8 347 5 962 40
Profit before taxation 81 766 26 237 212
Taxation 2 17 498 11 480
Profit for the year 64 268 14 757 336
- Attributable to equity 62 476 14 026
holders
- Attributable to 1 792 731
minority shareholders
Basic and fully diluted
- Earnings per share 3 78.42 22.87 243
(cents)
- Headline earnings per 3 78.46 22.92 242
share(cents)
NOTES
1 Revenue
- Placement fees 131 446 103 808 27
- Temporary staffing 1 830 775 1 530 978 20
- Other revenue 31 798 22 697 40
1 994 019 1 657 483 20
2 Taxation
Effective tax rate
The effective tax rate for the year was 21.4%. Going forward, the effective tax
rate is approximated to be 29%.
Changes in estimate
During the current period, R3.9 million in normal taxation and R 5.8 million in
deferred taxation was released to the income statement due to a change in
estimate.
3 Earnings per share
The 22.87 cents per share for the year ended 30 September 2006 results is
calculated taking into account 18 665 682 shares issued at no value during the
month of March 2007. This differs from the 32.9 cents for earnings per share
and 33.0 cents for headline earnings per share respectively published in the
half year results on 14 May 2007 which did not take these shares into account.
ABRIDGED CONSOLIDATED CASH FLOW STATEMENT
30 Sept 30 Sept
2007 2006
R000 R000
Cash generated by operations before working 128 151 98 221
capital changes
Increase in working capital (11 427) (5 632)
Cash generated by operations 116 724 92 589
Net financing cost (33 306) (52 009)
Taxation paid (4 581) (14 140)
Cash flows from operating activities 78 837 26 440
Cash flows from investing activities (9 208) (31 492)
Cash flows from financing activities (48 232) 4 565
Net increase/(decrease) in cash and cash 21 397 (487)
equivalents
Forex translation difference on offshore cash (2 345) 3 290
Net cash and cash equivalents at the 84 160 81 356
beginning of the year
Net cash and cash equivalents at the end of 103 212 84 160
the year
RECONCILIATION OF HEADLINE EARNINGS
30 Sept 30 Sept %
2007 2006 change
R000 R000
Attributable profit for the period 62 476 14 026 345
Loss on sale of property and equipment 32 35
(net of tax)
Headline earnings 62 508 14 061 345
Adjusted shareholder interest paid 16 427 28 854 (43)
after tax
Shareholder interest paid 23 137 40 639
Tax effect thereof (6 710) (11 785)
Normalised headline earnings (before 78 935 42 915 84
shareholder interest)
Normalised earnings and headline
earnings per share (cents) before
shareholder interest
- Normalised earnings per share (cents) 82.80 44.73 85
- Normalised headline earnings per 82.84 44.77 85
share (cents)
CONSOLIDATED BALANCE SHEET
Notes 30 Sept 30 Sept
2007 2006
R000 R000
ASSETS
Non-current assets 196 528 165 990
Property and equipment 17 802 21 621
Goodwill 56 446 20 450
Trademarks 64 731 54 557
Other intangible assets 19 039 18 840
Financial assets - 601
Investment in associates 267 -
Deferred taxation 38 243 49 921
Current assets 376 418 333 799
Inventories 135 135
Trade and other receivables 214 430 220 698
Taxation - 1 117
Funds on call, bank and cash 161 853 111 849
TOTAL ASSETS 572 946 499 789
EQUITY AND LIABILITIES
Capital and reserves 206 631 (145 224)
Share capital and premium 328 243 32 328
Foreign currency translation 7 789 15 785
reserve
Accumulated loss (134 450) (196 926)
Attributable to equity shareholders 201 582 (148 813)
in parent
Minority shareholders` interest 5 049 3 589
Non current liabilities 132 385 432 358
Interest bearing borrowings 132 385 108 297
Shareholders` loans 4 - 324 061
Current liabilities 233 930 212 655
Interest bearing borrowings 8 797 6 547
Trade and other payables 98 590 121 259
Accruals for staff benefits 67 679 57 160
Taxation 222 -
Bank overdraft 58 642 27 689
TOTAL EQUITY AND LIABILITIES 572 946 499 789
NOTES
4 Shareholders` loans
Loan from South African Private Equity Fund - 121 213
III
Loan from South African Private Equity Trust - 128 255
Loan from Must Have Investments - 74 593
(Proprietary) Limited
- 324 061
The loans were unsecured and bore interest at 2% above the prime bank overdraft
rate. These loans were repaid in April 2007.
5 Commitments
Operating leases
Next year 25 007 19 142
- Equipment 2 074 1 109
- Premises 22 933 18 033
2 to 5 years 30 371 38 367
- Equipment 2 379 1 959
- Premises 27 992 36 408
Authorised capital expenditure
- Already contracted for - -
- Not yet contracted for 500 2 000
RECONCILIATION OF SHARES ISSUED
000 30 Sept 2007 30 Sept 2006
Opening balance 4 267 4 267
Sub-division of share 1:10 000 42 670 42 670
Shares issued to current shareholders at par 18 666 18 666
value
Issue for acquisition of Frontline 4 144 -
Private placement of shares on listing 34 520 -
Number of shares in issue 100 000 61 336
Net movement in treasury shares (2 996) -
Closing balance 97 004 61 336
Weighted average number of shares before 80 884 61 336
treasury shares
Treasury shares (1 218) -
Weighted average number of shares 79 666 61 336
Normalisation adjustment 15 623 34 520
Adjusted weighted average number of shares 95 289 95 856
The 2006 comparative number of shares has been adjusted for shares issued for
notional consideration.
ABRIDGED STATEMENT OF CONSOLIDATED CHANGES IN EQUITY
Share Foreign currency Share based
capital and translation payment reserve
premium reserve R000
R000 R000
Balance as at 1 October 2005 32 328 7 157 4 077
Foreign currency translation - 8 628 -
Profit for the year - - -
Transfer of share based - - (4 077)
payment to accumulated loss
Balance as at 1 October 2006 32 328 15 785 -
Shares issued 295 915 - -
Foreign currency translation - (7 996) -
Profit for the year - - -
Balance as at 30 September 328 243 7 789 -
2007
ABRIDGED STATEMENT OF CONSOLIDATED CHANGES IN EQUITY (continued)
Accumulated Attri-butable Minority Total
loss to equity share- R000
R000 share-holders holders`
in parent interest
R000 R000
Balance as at 1 (215 029) (171 467) 2 377 (169 090)
October 2005
Foreign currency - 8 628 481 9 109
translation
Profit for the 14 026 14 026 731 14 757
year
Transfer of share 4 077 - - -
based payment to
accumulated loss
Balance as at 1 (196 926) (148 813) 3 589 (145 224)
October 2006
Shares issued - 295 915 - 295 915
Foreign currency - (7 996) (332) (8 328)
translation
Profit for the 62 476 62 476 1 792 64 268
year
Balance as at 30 (134 450) 201 582 5 049 206 631
September 2007
ABRIDGED CONSOLIDATED SEGMENTAL REPORT
Revenue EBITDA
2007 2006 2007 2006
R000 R000 R000 R000
- Staffing and 1 578 728 1 237 447 123 766 87 175
business process
outsourcing (BPO)
- USA 415 291 420 036 20 614 24 791
- Central costs - - (16 267) (13 794)
TOTAL 1 994 019 1 657 483 128 113 98 172
ABRIDGED CONSOLIDATED SEGMENTAL REPORT (continued)
Operating profit Total assets
2007 2006 2007 2006
R000 R000 R000 R000
- Staffing and 120 138 84 022 (130 750) (157 890)
business process
outsourcing (BPO)
- USA 18 184 22 493 (88 789) (82 134)
- Central costs (23 517) (28 269) 792 485 739 813
TOTAL 114 805 78 246 572 946 499 789
ABRIDGED CONSOLIDATED SEGMENTAL REPORT (continued)
Total liabilities Depreciation and
amortisation
2007 2006 2007 2006
R000 R000 R000 R000
- Staffing and 98 765 83 670 (3 629) (3 153)
business process
outsourcing (BPO)
- USA 37 738 45 940 (2 429) (2 298)
- Central costs 229 812 515 403 (7 250) (14 475)
TOTAL 366 315 645 013 (13 308) (19 926)
For and on behalf of the board
MM Ngoasheng GJ Wilson
Chairman Chief executive
22 November 2007
Sandton
Registered office: 6 Protea Place, cnr Fredman Drive, Sandton
Transfer secretaries: Computershare Investor Services 2004 (Proprietary) Limited
Sponsor: Rand Merchant Bank (A division of FirstRand Bank Limited)
Directors: MM Ngoasheng (chairman), MW McCulloch (deputy chairman), GJ Wilson
(chief executive), GP Baxter, VW Cuba, AC Dodd+*, J du Toit, JA Gnodde, RM
Hartmann, K Molewa*, ME Monage, VO Radebe, CJ Roodt, TM Sokutu and PJJ van der
Walt
+ United Kingdom * alternate
Company secretary: KH Fihrer
Our website is regularly updated to supply you with the latest information on
the company. For further information contact: investor and media relations
Helen McKane on Tel: 011 728 4701, Fax: 011 728 2547, e-mail:
kellygroup@dpapr.com
www.kellygroup.co.za
Date: 22/11/2007 14:00:01 Produced by the JSE SENS Department.
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