Kelly Services, Inc. (NASDAQ:KELYA)
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Provides staffing services to a diversified group of customers through offices located in major cities of North America, Europe and the Pacific Rim.
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Provides staffing services to a diversified group of customers through offices located in major cities of North America, Europe and the Pacific Rim.
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Kelly Services Inc is a staffing provider, assigning professional and technical employees in the fields of finance and accounting, education, engineering, information technology (IT) legal, science, health and home care. Likewise, it also offers staff leasing, outsourcing, consulting, and recruitment and vendor management services. It operates in 30 countries across America, Europe and Asia Pacific and its operations are divided into three segments namely US Commercial Staffing, Professional Technical and Staffing Alternatives (PTSA) and International.
The staffing industry is estimated to be worth $250 billion. As per Bureau of Labor Statistics, while the overall job creation remained healthy throughout 2006, temporary employment experienced a slowed growth. Because of low entry barriers, the industry is very much fragmented with too many players fighting for the larger pie. Geographic presence is very important, as temporary employees are unwilling to travel long distances for their assignments. Kelly Services aims to expand into new geographic regions and different business and service lines. But industry being cyclical in nature offers slim growth opportunities for the company.
Kelly recorded a slow topline growth for 2006 mainly on account of slower economic growth in the U.S. This could be a major cause of concern as two third of the revenues are derived from the same market. Kelly competes with heavy weights like Adecco and Manpower for multi national staffing contracts. Kelly’s future continues to look challenging considering slowdown in the temporary staffing in the country. Endorsing the same, investors are better safe with not considering the shares of Kelly Services at current price, as they offer very limited upside potential for growth.
Kelly is responsive to both demographic and economic changes and the firm's growth plan allows it to capitalize on workforce dynamics and compete in the global marketplace. Very recently Kelly Services acquired a New York based creative services staffing firm named CGR/seven LLC. CGR/seven specializes in providing a wide range of creative talent, including graphic designers, art directors, copywriters, Web developers, Flash and motion graphics artists. It is estimated that it would add $ 8 million of its revenues to Kelly for fiscal 2007.
Temporary staffing is getting stronger worldwide, especially in Europe. The trend is also evident in emerging economies like China and India, where US based firms are scaling up operations thanks to rising corporate profits and the need for higher headcounts. The focus is on professionals and management personnel, a high-margin area.
Also it has acquired Talents Technology, a permanent placement and executive search firm with operations in the Czech Republic and Poland. Talents Technology has a solid reputation for the highest customer service standards and provides specialized executive search services to a broad range of information technology, pharmaceutical and life science companies. This acquisition adds 2.4 million in annual revenues for Kelly in 2007 and increases its footprints across 32 countries and territories.
Kelly Services acquired the remaining 51% stake in Tempstaff Kelly, a joint venture originally created with Sony Corporation and Tempstaff. Kelly Services will now have 100% ownership and it will add $ 40 million to its revenues. Considering the above facts, the shares of Kelly Services offer good potential returns to long-term investors.