Kelly Eager to Fill Computer Staff Shortage in South Africa

Computing

Employment service provider Kelly Group is upbeat about growth opportunities in some segments of its business despite tough trading conditions and a margin squeeze in other segments in the face of an economic downturn.

Opportunities are particularly strong in information and communications technology (ICT), and the group recently bought ICT skills development company Torque IT for R37,9m. It has also set up an ICT placement division.

CE Grenville Wilson said the shortfall of ICT practitioners was estimated at 70000, which offered scope for Kelly. The company posted solid results for the year to September, despite the economy taking a turn for the worse.

Operating profit rose 28% to R146.9m, while headline earnings increased 30% from 78,46c to 102,3c per share. Revenue rose 12% to R2,2bn. Despite tighter conditions in the second half, the company managed to improve margins from 5,8% to 6,6%.

Wilson attributed the performance to productivity gains, technological advances, cost savings and expansion into new sectors. But he cautioned that margins and volumes were set to come under pressure. The slowdown was already evident in lower earnings and slower revenue growth in the second half .

The South African operations grew pre-tax earnings 33%, but growth in the second half, while at a robust 29%, was sharply lower than the 40% of the first half. And while its flagship brand, Kelly, grew earnings before interest and tax 18%, most of that came in the first half, with growth slowing to 15% in the latter half of the year.

The rest of the brands also showed strong growth in pre-tax earnings, the group said. Kelly Industrial, however, posted an under-par earnings growth of 12%. The division's performance was marred by bad debt write-offs during the year.

The group's US operations had a tough year, but managed to maintain earnings at the previous year's $2,8m. Conditions are expected to remain tough, but Wilson punted the ICT market as one segment that could help offset the slowdown in other segments of the business. A dividend of 36c a share was declared, up 20% on the previous year's 30c.

Business Day