A transformation strategy focused on supplying technology-based workforce management solutions has started showing results and has positioned the Kelly Group to take full advantage of growth opportunities.
Revenue from group operations for the six months ended 31 March 2011 was up 4% on the comparable period to R1,2-billion but EBIT for the half year was down to R17,8-million compared to R23,9-million the year before. The group’s South African operations` combined revenue of R773-million was 1% down on the corresponding period despite revenue growth of 18% from its skills training business Torque IT.
The prevailing economic climate, exacerbated by labour law uncertainties, continued to take its toll on the recruitment sector with the staffing operations contracting by 2%. Revenue from permanent placements and conversions reduced by 17% and 19% respectively while annuity revenue from outsourced business declined by 4% as a result of a 3% reduction in the group’s managed headcount and some gross margin pressure.
Kelly Industrial continued to perform well, increasing revenue and EBIT by 12%, InnStaff managed to gain market share in the hospitality industry, increasing its annuity revenue by 10% off the back of a managed headcount growth of 4%.
The group’s US operations posted revenue growth of 35% in dollar terms thanks to improving economic conditions and employment gains in that country. However, an 8% appreciation in the rand/US dollar exchange rate eroded some of this growth in rand terms.
Chief executive Grenville Wilson says the group had achieved continued productivity gains and cost curtailment, largely due to the implementation of a company transformation effort resulting in the development of a number of proprietary workforce management software systems. As a result of this ongoing initiative overall operating expenditure for the six months to March 2011 only increased by 5%.
These systems, he says, have given the group a significant competitive advantage and a differentiated value proposition. They have since been externalised and are being marketed as value added services geared towards saving clients time as well as optimising their workforces.
The group`s new flagship product K-log, a people resource planning tool, almost doubled its revenue compared to the previous year and is now the second largest value added service revenue generator. EBITDA breakeven for this product was achieved within 24 months of launch and it is currently used to manage 17 000 heads, a 34% increase since October 2010.
"K-log is an empowering and enabling system that allows companies to track, manage and control their employees and outsourced workforces in real time. It also enables them to achieve better compliance by enforcing labour legislation and company policies through automated rules; stronger risk management by eliminating silent corruption and fraud; and an improvement in the accuracy and efficiency of workforce management systems. More importantly, it automates workforce systems, freeing up senior resources to focus on real management work and other value-adding activities," says Wilson.
"These benefits have resonated strongly with our existing clients who, in an environment of tough trading conditions, escalating costs and uncertainty regarding the implementation of proposed new labour legislation, are seeking to contain expenses, maximise compliance and improve productivity."
Wilson says that the investment in these technologies combined with the transformation strategy in tough trading conditions had impacted the short term performance of the group. However, the group had made real progress in enhancing its services, which will benefit stakeholders in the medium and long-term.
"The technologies we have developed have provided us with the sophistication and flexibility required to cope with the increasing demands for demonstrable compliance that are likely to emerge as a result of the proposed labour law changes. They will also show our clients and candidates that we don`t simply place people but add value at every link of the human capital management chain," he says.
The group also announced that Wilson has resigned as chief executive and a director of the board, effective 30 June, and that his position would be taken over by Gareth Tindall the next day. Tindall was previously an executive director of Dimension Data, CEO of Hertz SA and the commissioner of the southern African PGA Tour. Wilson, however, will remain an employee of the company until the end of the current financial year on 30 September to facilitate a smooth handover.