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KEL
KEL
KEL - Kelly Group - Unaudited Interim Results For The Six Months Ended
31 March 2008
KELLY GROUP LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1999/026249/06)
Share code: KEL
ISIN: ZAE000093373
("Kelly Group" or "the company" or "the group")
UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 MARCH 2008
* Normalised HEPS up 48% from 26.00c to 38.55c
* EBITDA up 23% at R67m
* Operating profit up 39% at R61.6m
* Operating margin up from 4.6% to 5.7%
COMMENTS
The Kelly Group continued to show solid revenue growth in the six months to
March despite a business climate which deteriorated in the second quarter
in consequence of disruptive power blackouts, higher interest rates and
rising inflation. With the margin also showing further improvement as a
result of the group`s unremitting focus on productivity gains and low-cost
production, operating profit was increased substantially over the
comparable period last year.
The tougher trading conditions impacted on the group`s high-volume
outsourcing business but the slowdown in this sector was more than offset
by increased penetration in the blue-collar and hospitality sectors, and by
growth in the low-volume but high-margin permanent placement market. The
group`s strong showing in the permanent placement market is attributable to
another good performance by its staffing brands and is also a reflection of
the general skills shortage in the professional sector.
Overall, revenue from the South African operations rose by 17% over the
previous half-year while revenue from the group`s businesses in the USA
declined by 4% (in ZAR) as a result of the major contract completion
referred to at the year-end.
M Squared minority buy-out
The group has repurchased the shares held by minority shareholders,
including Alex Dodd and Russel Orelowitz, so as to constitute the Kelly
Group as the sole shareholder in M Squared during February 2008. As Mr
Dodd is both an alternate director of Kelly Group and a director of M
Squared and Mr Orelowitz is a director of M Squared, the acquisition
constituted a related party transaction under Section 10.7 of the Listing
Requirements of the JSE Limited and required a fairness opinion confirming
that the acquisition was fair to Kelly Group shareholders. The settlement
of the purchase price was paid in cash.
The purchase price was allocated as follows:
US$000
Purchase price 3 092
Existing minority interest (713)
Adjustment to equity due to change in control
of interest 2 379
R000
Adjustment to equity due to change in control
of interest 17 825
iChoices
Shareholders are referred to the iChoices update announcement released on
SENS on 16 April 2008, where by mutual agreement the parties allowed the
agreements in respect of the acquisition to lapse.
Dividend
No changes have been made to the group`s dividend policy and no dividend
was declared during the period under review.
Share premium
During the six months under review the company purchased 3 521 334 shares
for an aggregate purchase price of R32.5 million. These shares are
accounted for as treasury shares and will be allocated to qualifying
employees in the group in terms of the group`s share incentive scheme.
Directors
Non-executive director Tami Sokutu did not offer himself for re-election at
the group`s annual general meeting and is consequently no longer on the
board. Executive director Vuyi Radebe resigned to pursue his own business
interests. Non-executive director Vuli Cuba has resigned from the board
and is replaced by his alternate, Kholofelo Molewa.
Basis of preparation and accounting policies
The interim financial statements have been prepared in accordance with
International Financial Reporting Standards in a manner consistent with the
prior year and in accordance with IAS 34, except for the early adoption of
IAS 27: Consolidated and Separate Financial Statements. The group`s
independent auditors have neither reviewed nor audited the group`s results.
Prospects
Despite the slowdown in the economy, we are confident that the group will
nevertheless continue to produce satisfactory growth in revenue and
operating profit through continued margin improvement, market share gains
in certain segments, the penetration of new market sectors and additional
revenue stream generated from new services.
For and on behalf of the Board
MM Ngoasheng GJ Wilson
Chairman Chief executive
7 May 2008
Sandton
ABRIDGED CONSOLIDATED INCOME STATEMENT
Unaudited Unaudited Audited
6 months 6 months 12 months
31 Mar 31 Mar 30 Sept
2008 2007 2007
Notes R000 R000 R000
REVENUE 1 1 089 264 965 501 1 994 019
Earnings before
interest, taxation,
depreciation and
amortisation
(EBITDA) 66 992 54 474 128 113
Depreciation and
amortisation (5 348) (10 113) (13 308)
OPERATING PROFIT 61 644 44 361 114 805
Income from associates - - 267
Interest paid (15 543) (30 381) (41 653)
Interest received 8 908 3 424 8 347
PROFIT BEFORE TAXATION 55 009 17 404 81 766
Taxation 2 17 335 6 956 17 498
PROFIT FOR THE PERIOD 37 674 10 448 64 268
Attributable to
equity holders 36 779 8 929 62 476
Attributable to
minority shareholders 895 1 519 1 792
Basic and fully diluted
Earnings per
share (cents) 3 38.55 14.39 78.42
Headline earnings
per share (cents) 3 38.55 14.46 78.46
NOTES
1 Revenue
Placement fees 80 186 56 583 131 446
Temporary staffing 992 679 895 628 1 830 775
Other revenue 16 399 13 290 31 798
1 089 264 965 501 1 994 019
2 Taxation
The effective tax rate as calculated above is 31%. Included in the
current tax expense is an amount of R3 million paid in respect of STC,
excluding which, the effective rate would be 26%.
3 Earnings per share
As published at year end, the 14.39 cents per share for the six month
period ended 30 March 2007 is calculated taking into account 18 665 682
shares issued at no par value during the month of March 2007. This differs
from the 19.2 cents for earnings per share and headline earnings per share
published in the half year results on 14 May 2007 which did not take these
shares into account.
ABRIDGED CONSOLIDATED CASH FLOW STATEMENT
Unaudited Unaudited Audited
6 months 6 months 12 months
31 Mar 31 Mar 30 Sept
2008 2007 2007
R000 R000 R000
Cash generated by
operations before
working capital changes 66 991 54 474 128 151
Increase in working capital (36 472) (11 074) (11 427)
Cash generated by operations 30 519 43 400 116 724
Net financing costs (6 635) (26 957) (33 306)
Dividends paid (30 223) - -
Taxation paid (10 166) (3 153) (4 581)
Cash flows from operating
activities (16 503) 13 290 78 837
Cash flows from investing
activities (26 475) (54 579) (9 208)
Cash flows from financing
activities (5 204) 47 594 (48 232)
Net (decrease)/increase
in cash and cash
equivalents (48 184) 6 305 21 397
Foreign translation
difference on offshore cash 6 140 - (2 346)
Net cash and cash
equivalents at the
beginning of the period 103 212 84 160 84 160
Net cash and cash
equivalents at the
end of the period 61 168 90 465 103 211
RECONCILIATION OF HEADLINE EARNINGS
Unaudited Unaudited Audited
6 months 6 months 12 months
31 Mar 31 Mar 30 Sept
2008 2007 2007
R000 R000 R000
Attributable profit for
the period 36 779 8 929 62 476
(Profit)/loss on sale of
property and equipment
(net of tax) (1) 41 32
Headline earnings 36 778 8 970 62 508
Adjusted shareholder
interest paid after tax - 16 134 16 427
Shareholder interest paid - 22 724 23 137
Tax effect thereof - (6 590) (6 710)
Normalised headline
earnings (before shareholder
interest) 36 778 25 104 78 935
Normalised earnings and
headline earnings per
share (cents) before
shareholder interest
Normalised earnings per
share (cents) 38.55 25.96 82.80
Normalised headline
earnings per share
(cents) 38.55 26.00 82.83
CONSOLIDATED BALANCE SHEET
Unaudited Unaudited Audited
as at as at as at
31 Mar 31 Mar 30 Sept
2008 2007 2007
Notes R000 R000 R000
ASSETS
Non-current assets 185 725 202 857 196 528
Property and equipment 15 167 19 940 17 802
Goodwill 56 446 53 441 56 446
Trademarks 64 731 64 731 64 731
Other intangible assets 21 711 17 305 19 039
Investments in associates - - 267
Deferred taxation 27 670 47 440 38 243
Current assets 304 582 317 222 317 776
Inventories 100 130 135
Trade and other
receivables 237 871 226 627 214 430
Taxation 5 443 - -
Funds on call, bank
and cash 61 168 90 465 103 211
TOTAL ASSETS 490 307 520 079 514 304
EQUITY AND LIABILITIES
Capital and reserves 166 890 (113 632) 206 631
Share capital 10 7 10
Share premium 295 698 55 790 328 233
Equity due to change in
control of interest 4 (17 825) - -
Foreign currency
translation reserve 14 842 13 627 7 789
Accumulated loss (127 894) (187 997) (134 450)
Attributable to equity
holders in parent 164 831 (118 573) 201 582
Minority interest 2 059 4 941 5 049
Non-current liabilities 160 171 451 561 132 385
Interest bearing
borrowings 5 160 171 104 777 132 385
Shareholders` loans 6 - 346 784 -
Current liabilities 163 246 182 150 175 288
Trade and other payables 97 607 114 505 98 590
Interest bearing
borrowings 8 342 8 921 8 797
Accruals for staff
benefits 55 036 58 520 67 679
Taxation 2 261 204 222
TOTAL EQUITY AND
LIABILITIES 490 307 520 079 514 304
NOTES
US$ US$ US$
4 Equity due to change in
control of interest
purchase price 3 092 - -
Existing minority interest (713) - -
Equity due to change in
control of interest
in US$ 2 379 - -
R R R
Equity due to change in
control of interest
in ZAR 17 825 - -
5 Interest bearing borrowings
Promissory notes issued 160 000 100 000 132 195
Finance leases 171 4 777 190
160 171 104 777 132 385
A further R30 million was drawn down at an interest rate of 12.04% per
annum and is due for repayment on 30 April 2010.
6 Shareholders` loans - 346 784 -
The loans were unsecured and bore interest at 2% above the prime bank
overdraft rate. These loans were repaid in April 2007.
7 Commitments
Authorised capital expenditure
Already contracted for 1 300 - -
Not yet contracted for 250 500 2 000
RECONCILIATION OF SHARES ISSUED
Unaudited Unaudited Audited
6 months 6 months 12 months
31 Mar 31 Mar 30 Sept
2008 2007 2007
000 000 000
Opening balance 100 000 4 267 4 267
Sub-division of
share 1: 10 000 - 42 670 42 670
Shares issued to current
shareholders at par value - 18 666 18 666
Issue for acquisition of
Frontline - 4 144 4 144
Private placement of
shares on listing - - 34 520
Number of shares in issue 100 000 65 480 100 000
Treasury shares (6 518) - (2 996)
Closing balance 93 482 65 480 97 004
Weighted average number
of shares before treasury
shares 100 000 62 041 80 884
Weighted average treasury
shares (4 587) - (1 218)
Weighted average number
of shares after
treasury shares 95 413 62 041 79 666
Normalisation adjustment - 34 520 15 632
Adjusted number of weighted
average shares 95 413 96 561 95 298
The 31 March 2007 comparative number of shares has been adjusted for shares
issued for notional consideration as explained in note 3 above.
STATEMENT OF CONSOLIDATED CHANGES IN EQUITY
Equity
Foreign due to
Share currency change in
capital trans- control Accum-
and lation of ulated
premium reserve interest loss
R000 R000 R000 R000
Balance as at
30 September 2006 32 328 15 785 - (196 926)
Shares issued 23 469 - - -
Foreign currency
translation - (2 158) - -
Profit for the period - - - 8 929
Balance as at
31 March 2007 55 797 13 627 - (187 997)
Foreign currency
translation - (5 838) - -
Profit for the period - - - 53 547
Shares issued net of
treasury shares 272 446 - - -
Balance as at
30 September 2007 328 243 7 789 - (134 450)
Foreign currency
translation - 7 053 - -
Dividends paid - - - (30 223)
Acquisition of
M Squared minorities - - (17 825) -
Profit for the period - - - 36 779
Treasury shares (32 535) - - -
Balance as at
31 March 2008 295 708 14 842 (17 825) (127 894)
STATEMENT OF CONSOLIDATED CHANGES IN EQUITY (cont`d)
Attributable
to equity
holders Minority
in parent interest Total
R000 R000 R000
Balance as at
30 September 2006 (148 813) 3 589 (145 224)
Shares issued 23 469 - 23 469
foreign currency translation (2 158) (167) (2 325)
Profit for the period 8 929 1 519 10 448
Balance as at 31 March 2007 (118 573) 4 941 (113 632)
Foreign currency translation (5 838) (165) (6 003)
Profit for the period 53 547 273 53 820
Shares issued net of
treasury shares 272 446 - 272 446
Balance as at
30 September 2007 201 582 5 049 206 631
Foreign currency translation 7 053 - 7 053
Dividends paid (30 223) - (30 223)
Acquisition of
M Squared minorities (17 825) (3 885) (21 710)
Profit for the period 36 779 895 37 674
Treasury shares (32 535) - (32 535)
Balance as at 31 March 2008 164 831 2 059 166 890
ABRIDGED CONSOLIDATED SEMENTAL REPORT
Revenue EBITDA
6 months ended 6 months ended
31 Mar 31 Mar
2008 2007 2008 2007
R000 R000 R000 R000
Staffing and business
process outsourcing
(BPO) 883 081 751 769 69 608 54 452
USA 206 183 213 732 9 057 9 944
Central costs - - (11 673) (9 922)
Total 1 089 264 965 501 66 992 54 474
ABRIDGED CONSOLIDATED SEMENTAL REPORT (cont`d)
Operating profit Total assets
6 months ended 6 months ended
31 Mar 31 Mar
2008 2007 2008 2007
R000 R000 R000 R000
Staffing and business
process outsourcing
(BPO) 67 926 49 410 181 924 204 043
USA 7 750 8 797 (108 569) (87 649)
Central costs (14 032) (13 846) 416 952 403 685
Total 61 644 44 361 490 307 520 079
ABRIDGED CONSOLIDATED SEMENTAL REPORT (cont`d)
Depreciation
Total liabilities and amortisation
6 months ended 6 months ended
31 Mar 31 Mar
2008 2007 2008 2007
R000 R000 R000 R000
Staffing and business
process outsourcing
(BPO) 120 647 90 996 (1 681) (5 042)
USA 34 429 22 553 (1 307) (1 147)
Central costs 168 341 520 162 (2 360) (3 924)
Total 323 417 633 711 (5 348) (10 113)
Registered office: 6 Protea Place, cnr Fredman Drive, Sandton
Transfer secretaries: Computershare Investor Services (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, CJ Roodt 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: 07/05/2008 12:15:01 Produced by the JSE SENS Department.
The SENS service is an information dissemination service administered by the
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employees and agents accept no liability for (or in respect of) any direct,
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