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Unaudited interim results for the six months ended 31 March 2014
KELLY GROUP LIMITED
("Kelly Group" or "the Group" or "Kelly")
(Incorporated in the Republic of South Africa)
Registration number: 1999/026249/06
Share code: KEL
ISIN: ZAE000093373
Unaudited interim results
for the six months ended 31 March 2014
HIGHLIGHTS
Turnaround strategy delivering results:
- Revenue +13% to R786.3 million
- Operating profit +117% to R10.4 million
- Headline EPS up to 5.7 cents
COMMENTS
Performance overview
Kelly Group is pleased to report significantly improved results for the six months ending 31 March 2014. The results
highlight the positive impact of the new strategy implemented over the past two years and are a pleasing reward for
management's efforts. Net profit for continued operations increased to R6.2 million from a loss of R4.3 million for the
comparative period.
Group consolidated revenue for the year increased by 13% to R786.3 million largely as a result of the 31% increase
in "Blue Collar" revenues with the "White Collar" divisions managing to maintain revenue levels in a tough and
competitive market. As a result of the shift in business mix, the gross margin declined from 20.8% to 19.0%.
Efforts to manage and curtail costs continued; for the period under review, operating costs were below the comparative
period despite inflationary pressures. Focus on telecoms and IT related expenses continue to bear fruit and manpower
costs are closely monitored to ensure that the largest expenses in the Group are managed appropriately. The combined
effect resulted in operating profit of R10.4 million, up 117% on the R4.8 million for the comparative period last year.
Net finance charges of R2.2 million were incurred, down from R8.3 million in the previous period. The decrease is
attributable to improved cash flow management, a reduction in the use of overdraft facilities, and the receipt of the USA
sale proceeds. Profit before tax improved to R8.2 million from a loss of R1.7 million for the comparative period last year.
During the period under review the Group finalised the acquisition of Anglo African Outstaffing (Pty) Ltd, and the results
of the acquisition were consolidated into the Group's results effective 1 March 2014.
In an extremely tough collections environment, "Days Sales Outstanding" (DSO) increased from 29 at year-end to 33 at
the end of March 2014. The group has a strong balance sheet with cash balances of R147 million at 31 March 2014.
Interest bearing borrowings reduced from R141 million to R101 million over the reporting period.
Events after the reporting period
Shareholders are referred to the cautionary announcements issued regarding the receipt of non-binding expressions
of interest to acquire 100% of Kelly Group and the related discussions currently being pursued by Kelly Group's
independent board of directors with Adcorp.
Dividend
No interim dividend declaration is proposed to be paid. This position will be reviewed at year end.
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, the SAICA Reporting Guides as issued by the Accounting
Practices Committee and the Financial Reporting Pronouncements as issued by the Financial Reporting Accountants
Council. In addition they have been prepared in the manner required by the South African Companies Act as well as the
Listings Requirements of the JSE. These financial results have been prepared under the supervision of Lionel Wilson CA
(SA), the Group financial director. The Group's independent auditors have not audited or reviewed the Group's results.
Accounting policies
The same accounting policies, presentation and measurement principles have been followed in the preparation of
the condensed financial information for the six months ended 31 March 2014 as were applied in the preparation of the
Group's annual financial statements for the year ended 30 September 2013.
Changes to directors
The Group welcomed Josta Nkosi as anˆ executive director on 1 April 2014. Cornelius Roodt, Babalwa Ngonyama and
Malcolm McCulloch resigned from the Group effective 31 December 2013, and are thanked for their past contribution
as non-executive directors on the board.
Prospects
The turnaround strategy implemented by the current management team over the past two years is beginning to deliver
results as evidenced by the 13% revenue growth and 117% improvement in operating profits for the current period. The
Group is focused on building on this improvement in the second half of the year.
For and on behalf of the board
MM Ngoasheng GJ Tindall
Chairman Chief executive
28 May 2014
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Unaudited Unaudited Audited
six months six months 12 months
31 March 31 March 30 Sept
R'000 Note 2014 2013 % change 2013
CONTINUING OPERATIONS
Revenue 1 786 267 695 497 13 1 422 637
Cost of sales (637 101) (550 791) (1 125 476)
Gross profit 149 166 144 706 3 297 161
Operating expenses (133 983) (134 349) (274 523)
Earnings before interest, tax, depreciation
and amortisation (EBITDA) 15 183 10 357 47 22 638
Depreciation and amortisation (4 775) (5 559) (10 658)
Operating profit 10 408 4 798 117 11 980
Impairments – (261) (35 109)
Fair value adjustment to deferred consideration
on acquisition – 1 964 2 040
Share of net (loss)/profit from joint ventures (18) 60 87
Profit/(Loss) before financing costs 10 390 6 561 58 (21 002)
Finance income 3 826 2 341 4 878
Finance costs (6 043) (10 635) (18 724)
Profit/(Loss) before taxation 8 173 (1 733) 572 (34 848)
Taxation 2 (1 974) (2 596) (3 360)
Profit/(Loss) for the period from
continuing operations 6 199 (4 329) 243 (38 208)
DISCONTINUED OPERATIONS
Profit for the period from discontinued operations 3 – 4 845 76 132
PROFIT FOR THE PERIOD 6 199 516 1 101 37 924
– Attributable to equity holders of the parent 6 152 423 37 831
– Attributable to non-controlling interests 47 93 93
Other comprehensive income/(loss) – 4 827 (16 833)
Total comprehensive income for the period 6 199 5 343 16 21 091
– Attributable to equity holders of the parent 6 152 5 250 20 998
– Attributable to non-controlling interests 47 93 93
EARNINGS/(LOSS) PER SHARE (CENTS)
Basic earnings
Earnings/(loss) per share from continuing operations 6.2 (4.5) 239 (38.9)
Earnings per share from discontinued operations – 4.9 (100) 77.3
Total earnings per share 6.2 0.4 1 462 38.4
Basic headline earnings
Earnings/(loss) per share from continuing operations 5.7 (4.5) 226 (5.4)
Earnings per share from discontinued operations – 4.9 (100) 14.4
Total headline earnings per share 5.7 0.4 1 314 9.0
Diluted earnings
Earnings/(loss) per share from continuing operations 6.2 (4.5) 238 (38.7)
Earnings per share from discontinued operations – 4.9 (100) 77.0
Total diluted earnings per share 6.2 0.4 1 455 38.3
Diluted headline earnings
Earnings/(loss) per share from continuing operations 5.6 (4.5) 225 (5.4)
Earnings per share from discontinued operations – 4.9 (100) 14.4
Total diluted headline earnings per share 5.6 0.4 1 307 9.0
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Unaudited Unaudited Audited
31 March 31 March 30 Sept
R'000 Note 2014 2013 2013
ASSETS
Non-current assets 161 582 211 757 158 778
Property and equipment 8 972 8 571 7 998
Goodwill 2 973 21 338 888
Trademarks 83 850 92 131 83 850
Other intangible assets 23 395 37 824 22 645
Investments in joint ventures and associate 911 902 929
Loan to associate – 10 078 –
Deferred taxation 2 41 481 40 913 42 468
Current assets 392 193 285 860 403 886
Inventories 1 782 819 1 547
Loans to joint ventures and associate 81 14 005 15 218
Trade and other receivables 242 799 173 581 188 159
Taxation 608 724 671
Cash and cash equivalents 146 923 96 731 198 291
Assets included in disposal group classified
as held for sale 3 – 97 578 –
TOTAL ASSETS 553 775 595 195 562 664
EQUITY AND LIABILITIES
Capital and reserves 251 481 227 881 244 642
Share capital and share premium 305 779 305 779 305 779
Accumulated loss (61 056) (86 578) (67 208)
Other components of equity 4 633 8 680 6 071
Attributable to equity holders of the parent 249 356 227 881 244 642
Non-controlling interests 2 125 – –
Non-current liabilities 3 589 6 075 104 978
Interest-bearing borrowings – 252 100 000
Provisions – 547 80
Trade and other payables 1 518 3 482 2 882
Deferred taxation 2 071 1 794 2 016
Current liabilities 298 705 315 346 213 044
Interest-bearing borrowings 101 336 152 950 41 442
Loans from joint ventures, associate and
discontinued operation 1 469 5 569 –
Provisions 577 2 089 1 300
Accruals for staff benefits 45 135 36 427 44 326
Trade and other payables 148 743 94 265 125 075
Taxation 1 445 2 865 901
Bank overdraft – 21 181 –
Liabilities included in disposal group classified
as held for sale 3 – 45 893 –
TOTAL EQUITY AND LIABILITIES 553 775 595 195 562 664
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Unaudited Unaudited Audited
six months six months 12 months
31 March 31 March 30 Sept
R'000 Note 2014 2013 2013
Profit/(Loss) before taxation from continuing operations 8 173 (1 733) (34 848)
Adjustments 7 539 13 089 59 146
Cash from operations before working capital changes 15 712 11 356 24 298
Net changes in working capital and other movements (17 942) 10 632 33 306
Cash (utilised)/generated by operations (2 230) 21 988 57 604
Net financing costs (2 217) (8 294) (13 846)
Dividends paid – (118) (118)
Taxation paid (447) (2 862) (6 870)
Cash flows from operating activities (4 894) 10 714 36 770
Cash flows from investing activities (6 367) (7 478) 84 678
Cash flows from financing activities (40 107) 67 (11 693)
Net (decrease)/increase in cash and cash equivalents from
continuing operations (51 368) 3 303 109 755
Net increase/(decrease) in cash and cash equivalents from
discontinued operations 3 – 2 666 (5 293)
– Cash flows from operating activities – 3 840 (2 297)
– Cash flows from investing activities – (1 174) (2 996)
– Cash flows from financing activities – – –
Foreign translation difference on offshore cash related to
discontinued operation – 2 867 4 653
Net cash and cash equivalents at the beginning of the period 198 291 89 176 89 176
Net cash and cash equivalents at the end of the period 146 923 98 012 198 291
– Included in the statement of financial position 146 923 75 550 198 291
– Included in disposal group classified as held for sale 3 – 22 462 –
STATEMENT OF CONSOLIDATED CHANGES IN EQUITY
Foreign Equity due to
Share capital currency change in Share-based Non-
and share translation control of payment Accumulated controlling
R'000 premium reserve interests reserve loss Subtotal interests Total
Balance at 1 October 2012 305 779 16 833 (18 038) 5 964 (87 001) 223 537 3 866 227 403
Acquisition of non-controlling interests in subsidiaries – – (1 863) – – (1 863) (3 841) (5 704)
Share-based payment reserve – – – 957 – 957 – 957
Total comprehensive income for the period – 4 827 – – 423 5 250 93 5 343
Dividends paid – – – – – – (118) (118)
Balance at 31 March 2013 305 779 21 660 (19 901) 6 921 (86 578) 227 881 – 227 881
Transfer to distributable reserves on sale of discontinued operations – – 18 038 – (18 038) – – –
Share-based payment reserve – – – 1 013 – 1 013 – 1 013
Total comprehensive loss for the period – (21 660) – – 37 408 15 748 – 15 748
Balance at 30 September 2013 305 779 – (1 863) 7 934 (67 208) 244 642 – 244 642
Non-controlling interest on acquisition of subsidiary – – – – – – 2 078 2 078
Share-based payment reserve – – – 1 162 – 1 162 – 1 162
Total comprehensive income for the period – – – – 6 152 6 152 47 6 199
Acquisition of non-controlling interest option – – (2 600) – – (2 600) – (2 600)
Balance as at 31 March 2014 305 779 – (4 463) 9 096 (61 056) 249 356 2 125 251 481
CONDENSED CONSOLIDATED SEGMENTAL ANALYSIS
Revenue Operating profit Total assets Total liabilities
six months ended 31 March six months ended 31 March at 31 March at 31 March
R'000 Note 2014 2013 2014 2013 2014 2013 2014 2013
Staffing, skills and value added services 786 267 695 497 22 421 15 488 511 110 375 460 127 077 97 276
Central costs – – (12 013) (10 690) 42 665 122 157 175 217 224 145
Continuing operations 786 267 695 497 10 408 4 798 553 775 497 617 302 294 321 421
USA – discontinued operations 3 – 278 634 – 8 433 – 97 578 – 45 893
Total 786 267 974 131 10 408 13 231 553 775 595 195 302 294 367 314
RECONCILIATION OF HEADLINE EARNINGS/(LOSS)
Unaudited Unaudited Audited
six months six months 12 months
31 March 31 March 30 Sept
R'000 Note 2014 2013 2013
CONTINUING OPERATIONS
Attributable profit/(loss) for the period 6 152 (4 422) (38 301)
(Profit)/Loss on disposed property and equipment (net of tax) (585) 1 (438)
Impairments (net of tax) – – 33 439
Headline profit/(loss) 5 567 (4 421) (5 300)
DISCONTINUED OPERATIONS 3
Attributable profit for the period – 4 845 76 132
Profit on sale of discontinued operations – – (37 496)
Foreign currency translation reserve recycled through profit or loss – – (24 479)
Headline earnings – 4 845 14 157
Total headline earnings 5 567 424 8 857
RECONCILIATION OF SHARES ISSUED
Unaudited Unaudited Audited
six months six months 12 months
31 March 31 March 30 Sept
'000 2014 2013 2013
Shares in issue 100 000 100 000 100 000
Treasury shares (1 558) (1 558) (1 558)
Closing balance 98 442 98 442 98 442
Weighted average number of shares before treasury shares 100 000 100 000 100 000
Weighted average number of treasury shares (1 558) (1 558) (1 558)
Weighted average number of shares after treasury shares 98 442 98 442 98 442
Dilutive effects of equity-settled share reserve 446 170 447
Fully diluted weighted average number of shares after treasury shares 98 888 98 612 98 889
NOTES
1. Revenue
Unaudited Unaudited Audited
six months six months 12 months
31 March 31 March 30 Sept
R'000 2014 2013 2013
Placement fees 28 400 32 186 60 905
Temporary staffing 689 529 598 033 1 217 239
Skills training 54 286 51 105 114 652
Other revenue 14 051 14 173 29 841
786 267 695 497 1 422 637
2. Taxation
The main Kelly operating entity has generated significant accumulated tax losses as a result of past trading losses
and substantial special tax deductions for learnership allowances. A decision was made in the 2012 financial year
not to increase the related deferred tax asset recognised in the group balance sheet. In the current period, the
group has benefitted from R1.8 million of tax relief against the unrecognised portion of the deferred tax asset. The
remaining unrecognised deferred tax asset at 31 March 2014 totalled R31.5 million.
3. Discontinued operations
The results of discontinued operations reflected in comparative figures are in respect of the Group's US operations,
which were sold in the prior year.
Registered office: 6 Protea Place, corner Fredman Drive, Sandton
Company secretary: KH Fihrer
Transfer secretaries: Computershare Investor Services (Pty) Limited
Sponsor: PSG Capital
Auditors: Grant Thornton
Directors: MM Ngoasheng (Chairman), GJ Tindall* (Chief Executive), L Wilson* (Financial Director), Y Dladla, MG Ilsley, HJM Nkosi*, RG Tomlinson (Lead Independent Director) * Executive
For more information contact:
www.kellygroup.co.za
Date: 28/05/2014 09:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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