| Tue 15 May 2012, 14:00 | | KEL - Kelly Group Limited - Unaudited interim results for the six months ended |
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KEL
KEL
KEL - Kelly Group Limited - Unaudited interim results for the six months ended
31 March 2012
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 2012
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Unaudited Unaudited
six months six months
31 March 31 March
R`000 Note 2012 2011
Revenue 1 969 670 1 023 517
Cost of sales (763 696) (793 296)
Gross profit 205 974 230 221
Operating expenses 2 (196 490) (201 794)
Earnings before interest, tax,
depreciation and amortisation (EBITDA) 9 484 28 427
Depreciation and amortisation (8 843) (10 273)
Operating (loss) profit 641 18 154
Impairments 3 (851) -
Share of net losses from joint ventures (38) (371)
(Loss) profit before financing costs (248) 17 783
Finance income 2 920 3 359
Finance costs (11 609) (10 442)
(Loss) profit before taxation (8 937) 10 700
Taxation 4 (4 069) 1 064
(Loss) profit for the period (13 006) 11 764
- Attributable to equity holders in parent (12 560) 12 486
- Attributable to non-controlling interests (446) (722)
Other comprehensive (loss) income (1 005) (553)
Total comprehensive (loss) income
for the period (14 011) 11 211
- Attributable to equity holders in parent (13 565) 11 933
- Attributable to non-controlling interests (446) (722)
Attributable to equity holders in parent:
Basic
- (Loss) earnings per share (cents) (12,8) 13,5
- Headline (loss) earnings per share (cents) (12,1) 13,5
Fully diluted
- (Loss) earnings per share (cents) (12,8) 13,5
- Headline (loss) earnings per share (cents) (12,1) 13,5
NOTE
1. Revenue
Placement fees 35 183 34 889
Temporary staffing 870 150 914 725
Skills training 43 738 44 629
Other revenue 20 599 29 274
969 670 1 023 517
Audited
12 months
30 Sept
R`000 % change 2011
Revenue (5) 1 988 618
Cost of sales (1 552 096)
Gross profit (11) 436 522
Operating expenses (401 154)
Earnings before interest, tax,
depreciation and amortisation (EBITDA) (67) 35 368
Depreciation and amortisation (19 782)
Operating (loss) profit (96) 15 586
Impairments (33 191)
Share of net losses from joint ventures 17
(Loss) profit before financing costs (101) (17 588)
Finance income 6 959
Finance costs (21 881)
(Loss) profit before taxation (184) (32 510)
Taxation 10 764
(Loss) profit for the period (211) (21 746)
- Attributable to equity holders in parent (22 057)
- Attributable to non-controlling interests 311
Other comprehensive (loss) income 4 384
Total comprehensive (loss) income
for the period (225) (17 362)
- Attributable to equity holders in parent (17 673)
- Attributable to non-controlling interests 311
Attributable to equity holders in parent:
Basic
- (Loss) earnings per share (cents) (195) (23,0)
- Headline (loss) earnings per share (cents) (190) 13,3
Fully diluted
- (Loss) earnings per share (cents) (195) (23,0)
- Headline (loss) earnings per share (cents) (190) 13,3
NOTE
1. Revenue
Placement fees 1 68 104
Temporary staffing (5) 1 775 276
Skills training (2) 93 639
Other revenue (30) 51 599
1 988 618
2. Operating expenses
Included in operating expenses are charges for restructuring amounting to R6,9
million. These costs are primarily in respect of retrenchment costs and the
provision for onerous lease contracts where certain branches have been closed
and the fair value of related unavoidable lease costs have been recognised.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Unaudited Unaudited Audited
six months six months 12 months
31 March 31 March 30 Sept
R`000 2012 2011 2011
(Loss) profit before taxation (8 937) 10 700 (32 510)
Adjustments 19 946 18 273 72 999
Cash generated by operations
before working capital changes 11 009 28 973 40 489
(Increase) decrease in working
capital and other movements (12 075) (28 040) (57 819)
Cash (utilised) generated by operations (1 066) 933 (17 330)
Net financing costs (8 689) (7 083) (14 922)
Net dividends paid (360) - -
Taxation received (paid) 3 102 (9 619) (13 149)
Cash flows from operating activities (7 013) (15 769) (45 401)
Cash flows from investing activities (9 015) (10 058) (24 292)
Cash flows from financing activities 904 53 720 54 440
Net (decrease) increase in
cash and cash equivalents (15 124) 27 893 (15 253)
Foreign translation
difference on offshore cash (760) (407) 2 952
Net cash and cash equivalents
at the beginning of the period 73 187 85 488 85 488
Net cash and cash equivalents
at the end of the period 57 303 112 974 73 187
RECONCILIATION OF SHARES ISSUED
Unaudited Unaudited Audited
six months six months 12 months
31 March 31 March 30 Sept
`000 2012 2011 2011
Number of shares in issue 100 000 100 000 100 000
Treasury shares (1 558) (1 576) (1 558)
Closing balance 98 442 98 424 98 442
Weighted average number of shares
before treasury shares 100 000 100 000 100 000
Weighted average treasury shares (1 558) (7 310) (4 042)
Weighted average number of
shares after treasury shares 98 442 92 690 95 958
Dilutive effects of
equity-settled share reserve - 12 2
Fully diluted weighted
average number of shares
after treasury shares 98 442 92 702 95 960
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Unaudited Unaudited Audited
31 March 31 March 30 Sept
R`000 Note 2012 2011 2011
ASSETS
Non-current assets 244 836 260 115 244 963
Property and equipment 12 871 15 579 13 599
Goodwill 25 346 57 334 25 346
Trademarks 95 175 95 175 95 175
Other intangible assets 60 302 56 895 60 293
Investment in joint ventures 563 212 601
Deferred taxation 4 50 579 34 920 49 949
Current assets 372 865 414 856 425 876
Inventories 1 720 2 108 1 543
Intra-group loan receivables 18 447 22 547 18 691
Trade and other receivables 252 174 249 580 282 751
Taxation 4 371 11 548 7 510
Cash and cash equivalents 96 153 129 073 115 381
Total assets 617 701 674 971 670 839
EQUITY AND LIABILITIES
Capital and reserves 235 136 276 058 248 206
Share capital and share premium 305 779 305 709 305 779
Accumulated loss (72 502) (25 399) (59 942)
Other components of equity 1 477 (4 407) 1 181
Attributable to equity holders
in parent 234 754 275 903 247 018
Non-controlling interests 382 155 1 188
Non-current liabilities 161 670 152 247 161 751
Interest-bearing borrowings 5 150 579 149 577 149 896
Provisions and accruals for
staff benefits 9 039 - 9 302
Deferred taxation 2 052 2 670 2 553
Current liabilities 220 895 246 666 260 882
Interest-bearing borrowings 5 2 403 1 849 2 181
Intra-group loan payables 3 157 - 3 357
Trade and other payables 107 337 141 508 129 016
Provisions and accruals for
staff benefits 62 091 82 508 82 406
Taxation 7 057 4 702 1 728
Bank overdraft 38 850 16 099 42 194
Total equity and liabilities 617 701 674 971 670 839
NOTE
3. Impairments
The impairment balance comprises primarily the impairment of software assets.
4. Taxation
The entity in the group that benefits from learnership allowances, has generated
a substantial tax loss.
It was decided not to increase the deferred tax on this entity and the value of
the deferred tax asset not recognised amounts to R7,8 million.
5. Interest-bearing borrowings
Debentures issued 151 677 150 430 151 219
Finance leases 1 305 996 858
152 982 151 426 152 077
The debentures bear interest at a blended fixed rate of 11,2% per annum
(adjusted for structuring fees), are repayable on 30 April 2013, and are secured
by a cession of South African trade receivables amounting to R164 million.
RECONCILIATION OF HEADLINE (LOSS) EARNINGS
Unaudited Unaudited Audited
six months six months 12 months
31 March 31 March 30 Sept
R`000 2012 2011 2011
Attributable (loss) profit for the
period (12 560) 12 486 (22 057)
Loss (profit) on disposed property and
equipment (net of tax) 184 (5) 2 830
Impairment of goodwill - - 31 988
Impairment of other intangibles 447 - -
Headline (loss) earnings (11 929) 12 481 12 761
STATEMENT OF CONSOLIDATED CHANGES IN EQUITY
Foreign Equity due to
Share capital currency change in Share-based
and share translation control of payment
R`000 premium reserve interests reserve
Balance at 1
October 2010 280 970 10 539 (18 038) 2 483
Share-based
payment reserve - - - 1 162
Sale of treasury
shares 24 739 - - -
Total comprehensive
income for the period - (553) - -
Balance at 31
March 2011 305 709 9 986 (18 038) 3 645
Share-based
payment reserve - - - 651
Sale of treasury shares 70 - - -
Total comprehensive
loss for the period - 4 937 - -
Balance at 30
September 2011 305 779 14 923 (18 038) 4 296
Share-based payment
reserve - - - 1 301
Total comprehensive
loss for the period - (1 005) - -
Dividends paid - - - -
Balance as at
31 March 2012 305 779 13 918 (18 038) 5 597
Non-
Accumulated controlling
R`000 loss Sub-total interests Total
Balance at 1 October 2010 (37 885) 238 069 877 238 946
Share-based payment reserve - 1 162 - 1 162
Sale of treasury shares - 24 739 - 24 739
Total comprehensive
income for the period 12 486 11 933 (722) 11 211
Balance at 31 March 2011 (25 399) 275 903 155 276 058
Share-based payment reserve - 651 - 651
Sale of treasury shares - 70 - 70
Total comprehensive
loss for the period (34 543) (29 606) 1 033 (28 573)
Balance at 30 September
2011 (59 942) 247 018 1 188 248 206
Share-based payment reserve - 1 301 - 1 301
Total comprehensive
loss for the period (12 560) (13 565) (446) (14 011)
Dividends paid - - (360) (360)
Balance as at 31 March
2012 (72 502) 234 754 382 235 136
CONDENSED CONSOLIDATED SEGMENTAL ANALYSIS
Revenue Operating profit
six months 31 March six months 31 March
R`000 2012 2011 2012 2011
Staffing, skills and value
added services 723 302 773 257 4 045 22 585
USA 246 368 250 260 6 604 5 304
Central costs - - (10 008) (9 735)
Total 969 670 1 023 517 641 18 154
Total assets Total liabilities
at 31 March at 31 March
R`000 2012 2011 2012 2011
Staffing, skills and value added
services 340 456 353 009 102 188 144 635
USA 83 906 85 132 46 179 51 866
Central costs 193 339 236 830 234 198 202 412
Total 617 701 674 971 382 565 398 913
COMMENTS
The first six months of FY2012 continued to be challenging for the Kelly Group.
The roll out of a sophisticated new time recording and payroll billing system
temporarily impacted operational efficiencies and renewed activism against
labour brokers negatively impacted market sentiment. This, together with
continued margin pressure in parts of the business impacted profitability. This
reflected in an overall 5% decline in revenue against the prior year comparative
number and directly contributed to an 11% reduction in gross profit, which
totalled R206 million for the period.
The Kelly division remains the most significant contributor to group revenue and
a 15% decline in revenue and 61% decline in earnings before interest and tax
(EBIT) weighed heavily on the group`s results. Following the appointment of
Graham Bentley as MD of Kelly, the division was restructured to ensure that the
business is focused on its core competencies and excellence in service delivery.
This restructuring came at a cost of some R7 million, comprising mainly the
costs associated with a management restructure as well as a R3,5 million onerous
lease provision following the closure of nine Kelly branches and consolidating
the Kelly footprint.
SA staffing revenue declined by R49 million year-on-year from R728 million to
R679 million, a reduction of 7%. Gross revenue for skills training conducted
through Torque IT declined by 2% to R43,7 million. Overall, the operating result
for SA business reflects a loss of R6 million, including the costs of shared
services.
The USA-based subsidiaries continue their contribution to group revenue and
profits. Revenue declined by 2% to R246 million whereas contribution to EBIT
increased by 25% to R6,6 million. The class action lawsuit has been finalised
and the provision raised in the previous year financial results was adequate to
cover the entire settlement.
Net finance charges increased 23% from the previous period and are attributable
to the 25% increase in the funding for the securitisation structure from R120
million to R150 million on 31 March 2011.
The implementation of a sophisticated new time recording and payroll billing
system is part of a focused strategy to improve operational efficiencies and
customer services levels, which should yield benefits in the future. However,
this required some internal focus during the period under review, which
inevitably impacted on productivity and revenues despite the tireless efforts of
the Kelly staff, who we thank for their efforts to continue to maintain service
levels to clients during the system implementation. Our new management team and
staff have a renewed commitment to provide consistent service excellence to
clients.
The effective tax rate for the current period was negatively impacted by taxable
profits in parts of the group, the taxation effects of which were not fully
offset by deferred tax assets recognised in respect of taxable losses elsewhere
in the group. The unrecognised deferred tax assets relating to taxable losses
totalled R7,8 million for the period.
Dividend
No dividend is declared.
Basis of preparation
The condensed financial results included in this announcement have been prepared
in accordance with the measurement and recognition criteria of International
Financial Reporting Standards (IFRS) and have been prepared in accordance with
the presentation and disclosure requirements of IAS 34, Interim Financial
Reporting, the AC 500 Standards as issued by the Accounting Practices Board or
its successor, the Listings Requirements of the JSE Limited and the requirements
of the Companies Act. The condensed financial results have been prepared under
the supervision of the group`s financial director, Lionel Wilson.
These results have not been audited or reviewed by the company`s auditors.
Accounting policies
The same accounting policies, presentation and measurement principles have been
followed in the preparation of the condensed financial information for the
period ended 31 March 2012 as were applied in the preparation of the group`s
annual financial statements for the year ended 30 September 2011.
Changes to directors
The group welcomed Lionel Wilson as the new Financial Director. Ferdie Pieterse
assumed the role of COO and remains an executive director. Both these changes
were effective from 13 February 2012.
Prospects
The board expects industry conditions to remain tough during the current trading
period, but remains confident that the management changes and restructuring of
the group in the recent past will entrench its market position and improve
profitability over time.
For and on behalf of the board
MM Ngoasheng GJ Tindall
Chairman Chief Executive
14 May 2012
Sandton
Our website is regularly updated to supply you with the latest information on
the company.
www.kellygroup.co.za
Registered office: 6 Protea Place, corner Fredman Drive, Sandton
Transfer secretaries: Computershare Investor Services (Pty) Limited
Sponsor: Rand Merchant Bank (A division of FirstRand Bank Limited)
Auditors: Grant Thornton
Directors: MM Ngoasheng (chairman), MW McCulloch (deputy chairman),
GJ Tindall (chief executive), Y Dladla, MG Ilsley, ME Monage, B Ngonyama,
F Pieterse, CJ Roodt, PJJ van der Walt and L Wilson
Company secretary: KH Fihrer
15 May 2012
Date: 15/05/2012 14:00:03 Produced by the JSE SENS Department.
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