Revving up the business
But it’s Torque at a price
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%