KELLY GROUP LIMITED - Disposal of 30% of K-log Proprietary Limited by Kelly Group Limited

Disposal of 30% of K-log Proprietary Limited
by Kelly Group Limited

Kelly Group Limited
(Incorporated in the Republic of South Africa)
(Registration number 1999/026249/06)
Share code: KEL       ISIN: ZAE000093373
("Kelly Group" or "the group")

Disposal of 30% of K-log Proprietary Limited
by Kelly Group Limited

1. Introduction
   Shareholders are advised that Paxsal Payroll Outsourcing Proprietary Limited ("Paxsal"), a wholly owned subsidiary
   of Kelly Group Limited, has concluded a sale of shares agreement with Stands Up Works Proprietary Limited
   ("Stands Up Works") in terms of which 30% of the issued share capital of K-log Proprietary Limited ("K-log") was
   sold by Paxsal to Stands Up Works. This transaction is hereafter referred to as "the Disposal".

2. Rationale
   Kelly Group, through Paxsal, held a majority shareholding in K-log  a company that developed and now licences
   and operates an automated people resource planning tool ("the System"). In line with the strategy of focusing
   on activities that are core to the group, it has divested some of its shareholding, leaving it with a residual non-
   controlling interest. The System remains an integral part of the group's service offering with the added advantage of
   a consortium of investors that can focus on unlocking the true value of the product.

3. Terms of the Disposal

   (i)     Paxsal sells to Stands Up Works, 90 of its 180 ordinary par value shares of R1 each in K-log.
     
   (ii)    The purchase price payable by Stands Up Works to Paxsal is R4.5 million, settled in cash, subject to K-log
           achieving certain EBIT performance conditions.

   (iii)   Stands Up Works retains an option to acquire an additional 10% of the issued share capital of K-log for an additional
           consideration of R4.5 million on any date before K-log achieves earnings before interest and taxation (EBIT) of
           R9.0 million. Should the option not be exercised by this point in time, the option will lapse.
   
   (iv)    Stands Up Works will fund its share of K-log's loan account balances with the group, amounting to R9.4 million
           as at 1 August 2012.

   (v)     The agreement was signed on 22 August 2012, with the effective date of the Disposal specified in the
           agreement as 1 August 2012.

   (vi)    All cash proceeds received in terms of the Disposal, will be invested in the group's existing banking facilities.

   (vii)   There are no outstanding conditions precident to the Disposal.

4. Pro forma financial information
   The table below sets out the unaudited pro forma financial effects of the Disposal on the unaudited interim results for
   the six months ended 31 March 2012. The unaudited pro forma financial effects have been prepared in accordance
   with the JSE Listings Requirements. Accounting policies used to prepare the unaudited pro forma financial effects
   are consistent with those applied in the preparation of the unaudited interim results for the six months ended
   31 March 2012.

   The unaudited pro forma financial effects are the responsibility of the directors and have been prepared for illustrative
   purposes only, in order to provide information about how the Disposal may have affected shareholders on the
   relevant reporting date. Due to the nature of pro forma financial information, it may not give a true reflection of the
   group's actual financial position, changes in equity, results of operations or cash flows after implementation of the
   Disposal or of the group's future earnings.

                                               Before the          After the            
                                             Disposal (1)   Disposal (2  5)   Change   
                                                  (cents)            (cents)      (%)   
EPS                                                (12.8)              (6.0)     53.0   
Headline EPS                                       (12.1)             (11.5)      4.8   
NAV per share                                       238.9              250.3      4.8   
NTAV per share                                       55.2               81.8     48.2   
Number of shares in issue                      98 442 190         98 442 190           
Weighted average number of shares in issue     98 442 190         98 442 190           

The pro forma earnings, headline earnings, NAV and NTAV per share have been prepared on the following
assumptions:

1. figures as reported are based on the published unaudited interim results of the group for the six months ended
   31 March 2012;

2. the pro forma earnings and headline earnings per share calculations assume the effective date of the Disposal
   was 1 October 2011, and the pro forma NAV and NTAV per share calculations assume the effective date was
   31 March 2012;

3. the pro forma calculations reflect the change in accounting treatment of the investment in K-log, from a
   consolidated subsidiary to an equity-accounted investment in associate, including the profit on disposal, that
   would have arisen on the relevant effective date;

4. the pro forma earnings and headline earnings per share calculations assume Stands Up Works settled its
   share of K-log's loan account balances with the group on 1 October 2011, when the balances amounted to
   R8.5 million, and these proceeds were invested at 8.7% per annum. The pro forma NAV and NTAV per share
   calculations assume this settlement occurred on 31 March 2012, when the balances amounted to R8.9 million;
   and

5. a tax rate of 28% was applied to the pro forma adjustments.

Johannesburg
23 August 2012

Sponsor
RAND MERCHANT BANK
A division of FirstRand Bank Limited



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