Revving up the busi­ness

But it’s Torque at a price

Finweek English Edition - - Companies & Markets -

NOW THAT THE ac­qui­si­tion by Kelly of Torque IT has been con­firmed, it seems a good fit for the re­cruit­ment and out­sourc­ing busi­ness. CE Grenville Wil­son says Kelly was weak in the high growth in­for­ma­tion and com­mu­ni­ca­tions tech­nol­ogy (ICT) sec­tor and Torque will sup­port the group’s ac­cel­er­ated growth in that mar­ket.

Torque, ac­cord­ing to a Sens an­nounce­ment in Au­gust, is the lead­ing provider of IT train­ing in sub-Sa­ha­ran Africa. It has a num­ber of arms: tech­ni­cal train­ing for cor­po­rates and the pub­lic sec­tor; Torque Ca­reer Cam­pus, which pro­vides cus­tomised train­ing for school leavers; and (through a part­ner­ship with Cisco) of­fers a spe­cialised train­ing pro­gramme in In­dia.

But what about the price? It’s been capped at R37,85m. How­ever, the fi­nal price will only be de­ter­mined to­wards year-end, when Torque re­leases its re­sults. Wil­son es­ti­mates the fi­nal num­ber will be some­where be­tween R35m and the top-end R37,85m. De­pend­ing on re­sults, Wil­son says the ac­qui­si­tion will be at an earn­ings mul­ti­ple be­tween five and seven times. “I think that will be fair, con­sid­er­ing where the mar­ket is right now. It’s a good fit with Kelly.”

Kelly, on an earn­ings mul­ti­ple of 5,6 times, has seen its share price pun­ished over the past year, along with most of the mar­ket. Its price has lost about 40%. Main com­peti­tor Ad­corp is down around 30% but is on a far more de­mand­ing earn­ings mul­ti­ple of 13,5 times.

Still, around R37m is a lot for Kelly, roughly equal to its in­terim at­trib­ut­able earn­ings. How­ever, Wil­son says the sum will be paid in half cash and half Kelly shares, so the price is prob­a­bly about right, though per­haps a lit­tle on the high side.

If so, it can pos­si­bly be jus­ti­fied by looking for­ward at new mar­kets the ac­qui­si­tion can open for Kelly. It’s also buy­ing man­age­ment. Torque CE Mthunzi Md­waba will be­come ex­ec­u­tive deputy CE of Kelly. Among nu­mer­ous po­si­tions he’s also na­tional chair­man of the Black In­for­ma­tion Tech­nol­ogy Fo­rum. And be­ing 55%

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