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Kelly revenue slips, but OCG rises

January 31 2013

Revenue fell 1.5 percent year over year at Kelly Services Inc. (NASD: KELYA) to approximately $1.38 billion in the fourth quarter. Revenue slipped in most global segments, but rose in the KellyOCG division.

KellyOCG reported fourth-quarter revenue was up 20.1 percent on a year-over-year basis to $113.3 million. The increase was 20.0 percent in constant currency. OCG provides recruitment process outsourcing, contingent workforce outsourcing and other services.

"Growth within our OCG segment is being driven by two core elements of our talent supply chain management strategy, business process outsourcing and contingent workforce outsourcing," said President and CEO Carl Camden in a conference call with analysts. "Revenue in our business process outsourcing practice was up 41 percent year over year, driven primarily by high demand in our KellyConnect contact center solution within that practice, as well as an increase in our more traditional BPO solutions within the Americas."

Revenue in the Americas segment — including professional and commercial staffing, but excluding Kelly OCG — fell 0.2 percent in the fourth quarter to $917.9 million.

Including KellyOCG revenue, U.S. revenue fell 0.7 percent to $877.9 million, and Canadian revenue dipped 0.8 percent to $60.5 million. However, fourth-quarter revenue from Mexico rose 34.8 percent to $35.3 million. The decrease in Canada in constant currency was 3.9 percent, and the increase in Mexico in constant currency was 27.7 percent.

Fourth-quarter revenue in Kelly’s Europe, Middle East and Africa segment fell 9.6 percent (7.8 percent in constant currency) to $256.4 million, including professional and commercial staffing but excluding Kelly OCG. Asia Pacific fourth-quarter revenue fell 9.0 percent (11.7 percent on a constant currency basis) to $96.6 million.

Kelly’s global fourth-quarter gross margin improved to 16.2 percent from 16.1 percent in the year-ago quarter.

Global fourth-quarter net income fell 15.2 percent (63.2 percent in constant currency) to $8.9 million from $24.1 million in the fourth quarter of 2011. The most-recent quarter included asset impairment charges of $3.1 million and restructuring charges of $1.3 million.

The asset impairment charge is related to the write-off of previously capitalized costs associated with the PeopleSoft billing system. The restructuring costs are related to severance and lease terminations at commercial branches in the company’s Europe, Middle East and Africa segment.

Camden said headwinds and mediocre job growth are foreseen for the months ahead, but skilled workers will continue to be in short supply. "We're operating more efficiently, and we're investing flexible solutions that meet the fastest-growing demands in the market."

Kelly Services Inc. (NASD: KELYA)
 For the fourth quarter ended Dec. 30, 2012, compared with the same period in the previous year.
 Revenue: $1.38 billion, -1.5 percent
 Net income: $8.9 million, -63.2 percent

For the 2012 fiscal year ended Dec. 30, 2012, compared with the previous year:
 Revenue: $5.45 billion, -1.8 percent
 Net income: $50.1 million, -21.4 percent


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