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KEL
KEL
KEL - Kelly Group - Audited results and cash dividend declaration for the year
ended 30 September 2009
KELLY GROUP LIMITED
(Incorporated in the Republic of South Africa)
(Registered number 1999/026249/06)
Share code: KEL
ISIN: ZAE000093373
("Kelly Group" or "the company" or "the group")
AUDITED RESULTS AND CASH DIVIDEND DECLARATION FOR THE YEAR ENDED 30 SEPTEMBER
2009
* EBITDA decreased by 28% to R114.6m
* Cash and cash equivalents down by 10% to R137.8m
* Debtors` days at 29 days, below 30 day mark for 3rd
consecutive year
* HEPS decreased 39.7% from 102.30 to 61.71 cents
* Cash dividend of 21.5 cents declared, and dividend cover
maintained at 2.85 times
* Operating margin contracted from 6.6% to 4.4%
ABRIDGED CONSOLIDATED INCOME STATEMENT
2009 2008 %
Notes R000 R000 change
REVENUE 1 2 256 968 2 232 929 1
Earnings before
interest, taxation,
depreciation and
amortisation (EBITDA) 114 638 158 478 (28)
Depreciation and
amortisation 2 (16 044) (11 535) 39
OPERATING PROFIT
(EBIT) 98 594 146 943 (33)
Interest paid (22 983) (31 439) (27)
Interest received 7 166 18 518 (61)
PROFIT BEFORE
TAXATION (PBT) 82 777 134 022 (38)
Taxation 3 (24 013) (36 736) (35)
PROFIT FOR THE YEAR 58 764 97 286 (39)
* Attributable to
equity holders 56 257 95 525 (41)
* Attributable to
non-controlling shareholders 2 507 1 761 42
Basic and fully diluted
* Earnings per share
(cents) 61.27 102.10 (40)
* Headline earnings
per share (cents) 61.71 102.30 (40)
NOTES
1 Revenue
* Placement fees 115 234 169 012 (32)
* Temporary staffing 2 034 138 2 029 647 0.2
* Skills training 76 677 -
* Other revenue 30 919 34 270 (10)
2 256 968 2 232 929
2 Depreciation and amortization
The increase in depreciation is mostly attributable to the purchase of new
software, technology improvements and computer hardware.
3 Taxation
The effective tax rate is 29%. Included in the current tax expense is an amount
of R4.4 million paid in respect of STC and foreign WHT on dividends, as well as
R1.3 million paid to SARS in respect of historical losses disallowed in the
determination of assessed tax., excluding which, the effective rate would be
22%. This is primarily due to the group taking advantage of substantial
learnership allowances.
ABRIDGED CONSOLIDATED CASH FLOW STATEMENT
2009 2008
R000 R000
Cash generated by operations
before working capital
changes 117 232 158 563
(Increase)/decrease in
working capital (11 766) 17 577
Cash generated by operations 105 466 176 140
Net financing costs (15 817) (12 921)
Net dividends paid (35 355) (28 706)
Taxation paid (16 714) (13 546)
Cash flows from operating
activities 37 580 120 967
Cash flows from investing
activities (48 878) (101 248)
Cash flows from financing
activities (679) 24 462
Net (decrease)/increase in
cash and cash equivalents (11 977) 44 181
Foreign translation difference
on offshore cash (3 220) 5 605
Net cash and cash equivalents
at the beginning of the year 152 997 103 211
Net cash and cash equivalents
at the end of the year 137 800 152 997
RECONCILIATION OF HEADLINE EARNINGS
2009 2008
R000 R000
Attributable profit for the year 56 257 95 525
Loss on sale of property and
equipment (net of tax) 406 186
Headline earnings 56 663 95 711
Earnings and headline earnings
per share (cents)
* Earnings per share (cents) 61.27 102.10
* Headline earnings per
share (cents) 61.71 102.30
CHANGES TO DIRECTORS
EXECUTIVE
PM Mdwaba - (appointed deputy chief executive officer 2 October 2008)
F Pieterse - (appointed group financial director 13 July 2009)
GP Baxter - (resigned 2 September 2009)
NON-EXECUTIVE
J du Toit - (not available for re-election at the AGM on 19 February 2009)
ALTERNATE
AC Dodd (resigned 25 June 2009)
CONSOLIDATED BALANCE SHEET
2009 2008
Notes R000 R000
ASSETS
Non-current assets 222 437 182 078
Property and equipment 22 022 17 502
Goodwill 57 254 56 446
Trademarks 95 175 64 730
Other intangible assets 38 286 28 550
Deferred taxation 9 700 14 850
Current assets 391 747 395 153
Inventories 978 11
Trade and other receivables 245 673 240 044
Taxation 7 296 2 101
Cash and cash equivalents 137 800 152 997
TOTAL ASSETS 614 184 577 231
EQUITY AND LIABILITIES
Capital and reserves 235 346 201 661
Share capital and share
premium 280 848 269 091
Equity due to change in
control of interest (18 038) (18 038)
Share-based payment reserve 1 221 -
Foreign currency translation
reserve 12 629 15 330
Accumulated loss (44 204) (67 406)
Attributable to equity
holders in parent 232 456 198 977
Non-controlling interest 2 890 2 684
Non-current liabilities 6 422 160 514
Interest bearing borrowings 4 1 479 160 514
Deferred taxation 4 943 -
Current liabilities 372 416 215 056
Trade and other payables 129 960 110 897
Interest bearing borrowings 4 164 477 5 130
Accruals for staff benefits 74 519 97 186
Taxation 3 460 1 843
TOTAL EQUITY AND LIABILITIES 614 184 577 231
2009 2008
R000 R000
NOTES
4 Interest bearing borrowings
Promissory notes issued 162 787 162 787
Finance leases 3 170 2 857
165 957 165 644
The promissory notes were drawn in four tranches and bear interest at varying
fixed rates between 9.96%-12.04%. The notes are due for repayment on 30 April
2010 and will be
refinanced on or before the repayment date.
5 Commitments
Authorised capital expenditure
* Not yet contracted for 16 500 22 500
6 Contingencies
From time to time and in the normal course of business, legal claims may be made
against a company in the group. If a claim has been initiated and it is
probable that an outflow embodying economic benefits will be required to settle
the claim, and a reliable estimate can be made of the obligation, a provision
will be made. If no such probability exists, the claim is considered a
contingent liability and is not recorded. During 2009, a former employee of M
Squared Consulting Inc initiated a claim against the company on behalf of
herself and alleged class members. The Company denied all allegations and has
opposed a class certification This claim is considered contingent and no
liability has been recognised.
RECONCILIATION OF SHARES ISSUED
2009 2008
000 000
Number of shares in issue 100 000 100 000
Treasury shares (8 099) (10 121)
Closing balance 91 901 89 879
Weighted average number of shares
before treasury shares 100 000 100 000
Weighted average treasury shares (8 185) (6 443)
Weighted average number of shares
after treasury shares 91 815 93 557
STATEMENT OF CONSOLIDATED CHANGES IN EQUITY
Share Foreign
capital currency
and share translation
premium reserve
R000 R000
Balance at 1 October 2007 328 243 7 789
Foreign currency translation
reserve arising during the year - 7 541
Acquisition of treasury shares (59 152) -
Acquisition of US minorities - -
Net dividends paid - -
Profit for the year - -
Balance at 1 October 2008 269 091 15 330
Foreign currency translation
reserve arising during the year - (2 701)
Share-based payment reserve
during the year - -
Acquisition of Torque IT
utilising treasury shares 11 264 -
Sale of treasury shares 493 -
Dividends paid - -
Profit for the year - -
Balance at 30 September 2009 280 848 12 629
STATEMENT OF CONSOLIDATED CHANGES IN EQUITY (continued)
Equity due
Share-based to change
payment Accumulated in control
reserve loss of interest
R000 R000 R000
Balance at
1 October 2007 - (134 450) -
Foreign currency
translation reserve
arising during
the year - - -
Acquisition of
treasury shares - - -
Acquisition of
US minorities - - (18 038)
Net dividends paid - (28 481) -
Profit for the year - 95 525 -
Balance at
1 October 2008 - (67 406) (18 038)
Foreign currency
translation reserve
arising during the year - - -
Share-based payment reserve
arising during
the year 1 221 - -
Acquisition of
Torque IT utilising
treasury shares - - -
Sale of treasury
Shares - - -
Dividends paid - (33 055) -
Profit for the year - 56 257 -
Balance at
30 September 2009 1 221 (44 204) (18 038)
STATEMENT OF CONSOLIDATED CHANGES IN EQUITY (continued)
Attributable
to equity
holders Non-controlling
in parent interest Total
R000 R000 R000
Balance at
1 October 2007 201 582 5 048 206 630
Foreign currency
translation
reserve arising
during the year 7 541 - 7 541
Acquisition of
treasury shares (59 152) - (59 152)
Acquisition of
US minorities (18 038) (3 901) (21 939)
Net dividends paid (28 481) (225) (28 706)
Profit for the year 95 525 1 761 97 286
Balance at
1 October 2008 198 977 2 683 201 660
Share-based payment
reserve arising during
the year (2 701) - (2 701)
Share appreciation
rights scheme
reserved arising
during the year 1 221 - 1 221
Acquisition of
Torque IT utilising
treasury shares 11 264 - 11 264
Sale of treasury
shares 493 - 493
Dividends paid (33 055) (2 300) (35 355)
Profit for the year 56 257 2 507 58 764
Balance at
30 September 2009 232 456 2 890 235 346
ABRIDGED CONSOLIDATED SEGMENTAL REPORT
Revenue EBITDA
2009 2008 2009 2008
R000 R000 R000 R000
Staffing, Skills
and Value Added
Services 1 808 070 1 814 250 122 525 153 612
International
Operations 448 898 418 679 11 717 21 267
Central costs - - (19 604) (16 401)
Total 2 256 968 2 232 929 114 638 158 478
ABRIDGED CONSOLIDATED SEGMENTAL REPORT (continued)
Operating profit Total assets
2009 2008 2009 2008
R000 R000 R000 R000
Staffing, Skills
and Value Added
Services 113 796 149 454 237 537 85 165
International
Operations 8 479 17 825 71 628 90 379
Central costs (23 681) (20 336) 305 019 401 687
Total 98 594 146 943 614 184 577 231
ABRIDGED CONSOLIDATED SEGMENTAL REPORT (continued)
Total Depreciation and
liabilities amortisation
2009 2008 2009 2008
R000 R000 R000 R000
Staffing, Skills
and Value Added
Services 140 744 99 956 (8 729) (4 479)
International
Operations 31 745 46 069 (3 238) (3 122)
Central costs 206 349 229 545 (4 077) (3 934)
Total 378 838 375 570 (16 044) (11 535)
COMMENTS
Performance overview
The Kelly Group was not immune to the effects of the global economic crisis and
as 2009 progressed it became apparent that it would be a tale of two halves with
the full impact of the deepening recession only manifesting in the second half
of 2009. Revenue and EBIT contracted by 5% and 58% respectively in the second
half of 2009.
Despite this the Kelly Group still managed to marginally grow revenue by 1.08%
in Rand terms for the full period. The South African and US operations
contracted by 0.34% and 11.5% respectively when measured in their respective
functional currencies. The contraction in the US dollar revenues was more than
offset by the fluctuations in the Rand which resulted in the US operations
increasing revenue in Rand terms by 7%. The organic business, excluding Torque
IT acquired during the year, contracted by 2% in revenue terms. Torque IT in
their 1st year as part of the group returned satisfactory results in the current
economic climate.
Productivity improvement measures and cost-saving initiatives initiated during
the prior financial year produced immediate benefits and helped to improve the
gross margin from 27.8% to 28.2%. This also contributed to the modest 3%
increase in operating cost for the organic business. Investments in enabling
technologies resulted in a 39% increase in the depreciation charge. These
investments, strategic in nature, will enhance efficiency through innovation,
generate new sources of revenue and ensure the continuity of operations. As a
result EBIT declined for the first time in six years.
Market conditions in the USA remained extremely tough for most of the year, but
our business there remained profitable and generated EBITDA of US$1.6 million.
A rightsizing exercise combined with cost-saving initiatives drove operating
costs down by 16% in dollar terms and positioned the business well to capitalise
on the expected upswing in the economy. Fourth quarter activity improved and
the business returned three consecutive months of growth, with September being
the record month for the year.
Net financing costs increased by 22% for the period under review. While the
group benefited from declining interest rates, contributing to a 27% decline in
interest paid, reduced cash balances (following the acquisition of Torque IT,
dividend payments and increases in working capital) combined with lower rates
resulted in a 61% decrease in interest earned. This weighed heavily on PBT
which contracted by 38%.
The year was also characterised by a continued debate on the value of the
temporary employment services (TES) industry and its role in the protection and
promotion of rights of casual workers in South Africa. The Confederation of
Associations in the Private Employment Sector (CAPES), of which our human
resources director Elias Monage is president, has played a pivotal role in
leading the dialogue regarding the contribution of the TES industry to the
economy. The group is confident that an amicable solution will be found that
best ratifies the International Labour Organisation`s (ILO) conventions and
recommendations while, at the same time, embracing the fundamental pillars of
decent work namely fair wage, employment security, benefits and a safe working
environment.
Basis of preparation and accounting policies
The summarised consolidated audited results have been prepared using accounting
policies compliant with International Financial Reporting Standards (IFRS)
including IAS 34 and are consistent with the prior year. The group`s
independent auditors, Grant Thornton, have audited the group`s results and their
unqualified report is available for inspection at the company`s registered
office.
Declaration of cash dividend no. 3
The board resolved to declare a final cash dividend to ordinary shareholders of
21.5 cents per share (2008: 36 cents per share) on 23 November 2009 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 day to trade "cum" dividend Thursday, 31 December 2009
First day to trade "ex" dividend Monday, 4 January 2010
Record date Friday, 8 January 2010
Date of payment Monday, 11 January 2010
No share certificates may be dematerialised or rematerialised between Monday 4
January 2010 and Friday 8 January 2010, 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
Despite talks of `greenshoots` in the US and European economies, trading
conditions in the South African market are likely to remain depressed for the
foreseeable future and margins and volumes will continue to be under pressure.
We look forward to the FIFA 2010 World CupTrade Mark and the associated revenue-
generating opportunities in the short term. Looking towards the latter part of
2010 and the anticipated economic recovery, customer acquisitions made during
2009 and embedded efficiencies will be the launchpad for sustainable growth.
For and on behalf of the board
MM Ngoasheng GJ Wilson
Chairman Chief executive
24 November 2009
Sandton
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
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), PM Mdwaba (deputy chief executive), Y Dladla, JA Gnodde, RM
Hartmann, K Molewa, ME Monage, F Pieterse, CJ Roodt and PJJ van der Walt.
Company secretary: KH Fihrer
Date: 24/11/2009 12:15:01 Produced by the JSE SENS Department.
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