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World – Kelly Services reports mixed results

08 August 2013

Kelly Services Inc. (NASDAQ: KELYA) announced revenue for the second quarter of 2013 of USD 1.37 billion, a marginal increase of USD 800,000 (+0.1%) compared with the same period in 2012. Earnings from operations dropped during Q2 2013 to USD 16.4 million from USD 23.8 million a year ago, equating to a fall of -30.9%.

Group gross profit fell slightly during the second quarter of 2013 to USD 220.7 million from USD 223.2 million during the same period last year, a fall of -1.1%. Net income fell by -33.2% from USD 15 million in Q2 2012 to USD 10 million in Q2 2013.

Included in the results of operations in the second quarter of 2013 are impairment charges of USD 1.7 million and restructuring charges of USD 800,000. During Q2 2013, Kelly exited the executive search business operating in Germany and restructuring charges mainly relate to severance costs from exiting this business. The results of operations in the second quarter of 2012 included a benefit due to changes in the estimated cost of restructuring of USD 2.2 million. Excluding the impairment and restructuring charges, earnings from operations were USD 18.9 million in Q2 2013, compared with adjusted earning of ISD 21.6 million last year.  

Carl T. Camden, president and CEO of Kelly Services Inc., commented: “We’re pleased with our second quarter performance in each operating segment, given the uneven and generally subpar global economic growth. The Americas delivered solid results that were in-line with our expectations, considering both our investment strategy and the lower volume we’re experiencing.”

“In EMEA and APAC, we’re proud of our efforts in recalibrating our operations to bring costs in-line with revenue in a tough environment. In addition, the growth we are seeing in Kelly Outsourcing and Consulting Group’s (KellyOCG) revenue and fees confirms that our solutions are meeting market demand for outsourced talent management programs, and we believe the investment we’re making will support our long-term growth in that segment,” he added.  

The EMEA region reported an increase in revenue of +3% during the second quarter of 2013, up from USD 255.3 million in Q2 2012 to USD 262.9 million. Increased revenue was reported in both the commercial and professional staffing businesses, by +2.8% and +3.6% respectively. Fee-based income fell in both business segments, by -16.9% in commercial staffing and -12% for professional staffing. Total group fee-based income fell by -14.9%, from USD 10.6 million to USA 9.1 million, year-on-year.

Russia reported the biggest organic increase in revenue of +11.2% to USD 31.8 million. Revenue grew +9.2% in the unspecified ‘Other’ market segment to USD 15.6 million. Revenue in Switzerland grew +6.8% organically to USD 63.6 million, to surpass Kelly’s biggest EMEA market segment France, which grew +0.1% organically to USD 62.3 million. Organic revenue growth was also recorded in the UK (+2% to USD 25.8 million) and in Portugal (+9% to USD 21.1 million).

Organic revenue fell most significantly in Germany, with a -10.7% drop to USD 15.9 million. Norway and Italy also reported organic revenue declines; of -9.2% to USD 15.4 million and of -4.4% to USD 147 million, respectively. 

APAC revenue grew +0.5% from USD 97.1 million in the second quarter of 2012 to USD 97.7 million in the second quarter of this year. Commercial staffing revenue rose +4%, while professional staffing revenue declined -21.5%. Fee-based income fell significantly across the region by -26.2%; the biggest drop was reported in professional staffing, which fell -40%. Total APAC group gross profit fell -8.8% in the second quarter compared with a year ago, from USD 17.8 million in Q2 2012 to USD 16.3 million in Q2 2013.          

Australia and Singapore both reported organic revenue growth of +11.2% and 11.1% respectively. Revenue reached USD 35.3 million in Australia and USD 28 million in Singapore. Revenue declines were reported in Malaysia (-5.6% to USD 17.2 million) and New Zealand (-13.6% to USD 12 million).

The Americas, Kelly’s largest business segment, reported total revenue of USD 908.4 million, down -2.4% from USD 931 million a year ago. The commercial staffing and professional staffing business both reported lower revenue during Q2 2013 than during the same period in 2012. Commercial staffing revenue fell -3% and professional staffing fell -1.1%, quarter-on-quarter. Total fee-based income for the Americas fell by USD 300,000 (-4.2%) to USD 8.1 million from a year ago.      

The biggest organic revenue growth across the Americas was recorded in Mexico, up +27.9% to USD 35.9 million. Puerto Rico was the only other country in the region to report organic revenue growth, up +0.5% to USD 26.1 million. Organic revenue fell in the United States (-1.2% to USD 864.3 million), Canada (-10.1% to USD 55 million), and in Brazil (-0.9% to 13.4 million).

Revenue growth of +20.2% was reported by the outsourcing and consulting business, KellyOCG, rising from USD 91.4 million in Q2 2012 to USD 109.9 million in Q2 2013. Fee-based income grew +23.1% to USD 15.7 million, while gross profit increase +8.4% to USD 25.6 million, compared with USD 23.7 million a year ago.    

Although the results were ahead of expectations, at close of business yesterday, the company’s share price fell -3.25% to USD 19.03, up +35.65% compared with a year ago. Based on its share price, the company has a current market value of USD 710 million. 

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