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World - Kelly's Q2 profit soars but loses market share in the UK

11 August 2011

Revenues were up by +16.2% from $1.2 billion in Q2 2010 to $1.4 billion in Q2 2011 at staffing agency group Kelly Services Inc. (KELYA:NSQ). Interim results for the 13 weeks ended 4 July 2011 reveal that gross profit was up by +17.6% from $191 million in Q2 2010 to $224 million in Q2 2011.

Net earnings were up by +387% from $3.9 million in Q2 2010 to $18.8 million in Q2 2011, well ahead of analyst expectations.

Revenues generated in the Americas were up by +12.7% from $866.4 million in Q2 2010 to $976.4 million in Q2 2011. In constant currency, Americas revenues were up by +12.1%. Net earnings in the Americas increased by +12% to $33.4 million compared to the same quarter last year.

Europe, Middle East and Africa (EMEA) revenues were up by +24.9% from $249 million in Q2 2010 to $311 million in Q2 2011 (up +8.3% in constant currency). The change in revenue from services in EMEA Commercial resulted from a +5% increase in average hourly bill rates on a constant currency basis, combined with a +2% increase in hours worked. Net earnings in EMEA increased to $8.9 million compared with $1.9 million in the same quarter last year.

EMEA gross margins improved from 16.1% in Q2 2010 to 16.3% in Q2 2011 primarily due to higher fee-based income. On a constant currency basis, EMEA SG&A expenses for commercial staffing were relatively flat in comparison to the prior year while professional staffing SG&A increased primarily due to hiring and investments in new offics in Russia, Germany and the UK.

Revenues generated in France were up by +15.5% from $67.6 million in Q2 2010 to $78.1 million in Q2 2011 (up +1.7% in constant currency).

Revenues generated in Switzerland were up by +52.9% from $40.7 million in Q2 2010 to $62.3 million in Q2 2011 (up +19.5% in constant currency).

Revenues generated in Russia were up by +48.4% from $25.4 million in Q2 2010 to $37.8 million in Q2 2011 (up +36.5% in constant currency).

Revenues generated in UK were down by -10.8% from $34.2 million in Q2 2010 to $30.5 million in Q2 2011 (down -18.4% in constant currency). The UK business comprises staffing in the following sectors: office, call centre, industrial, engineering, scientific, IT, education and accounting. Kelly closed a number of UK offices during the course of 2010.

Revenues generated in Portugal were up by +18.8% from $19.1 million in Q2 2010 to $22.7 million in Q2 2011 (up +4.5% in constant currency).

Revenues generated in Germany were up by +29.1% from $16.2 million in Q2 2010 to $21 million in Q2 2011 (up +13.6% in constant currency).

Revenues generated in Italy were up by +26.3% from $14.7 million in Q2 2010 to $18.5 million in Q2 2011 (up +10.9% in constant currency).

Revenues generated in Norway were up by +24% from $14.1 million in Q2 2010 to $17.5 million in Q2 2011 (up +7.6% in constant currency).

Revenues generated in other EMEA countries were up by +33.6% from $16.9 million in Q2 2010 to $22.5 million in Q2 2011 (up +16.2% in constant currency).

Revenues generated in Asia Pacific were up by +26.1% from $94.1 million in Q2 2010 to $118.5 million in Q2 2011 (up +12.6% in constant currency). Despite the strong increase in revenues, net earnings in Asia Pacific moved to a loss of -$400,000 compared to a profit of $600,000 in the same quarter last year.

KellyOCG, the Company’s outsourcing and consulting division increased revenues by +23% to $74 million compared to the same quarter last year and the loss in net earnings was reduced from -$5.8 million in Q2 2010 to -$800,000 in Q2 2011. Growth was achieved in all regions and across the BPO, RPO and CWO practices.

Carl T. Camden, President and Chief Executive Officer, commented "we are pleased that Kelly completed a very strong second quarter, despite the slow moving recovery. Solid revenue growth coupled with our ability to effectively leverage a leaner cost structure resulted in improved earnings."

"A concentration on specialised outsourcing services is also expected to contribute to profits going forward."

"Today's changing labour markets demand new approaches. We are creating custom workforce solutions for customers through our outsourcing and consulting services, and targeting other higher-margin staffing business such as professional & technical."

In a call with financial analysts yesterday, Carl Camden sounded an upbeat note suggesting that “customers are expecting economic expansion in the second half of 2011 to be stronger than the first”.

At close of play in New York yesterday Kelly's shares ended up +1.03% ahead at $13.67 although earlier in the day, a volatile stock market had pushed the shares up by more than +11%.

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