CHIEF EXECUTIVE’S NEWSLETTER

Johannesburg, 29 July 2008

Dear Stakeholder

Coping well with challenging times
As expected, South African business confidence was shaken over the past quarter by the global economic jitters and by rising inflation, high interest rates and political uncertainty at home. While some industry sectors, notably those focused on infrastructure development, tourism and commodities, continued to show strong growth, others such as financial services and retail took a battering.

Considering this environment, the Kelly Group is doing reasonably well, although the rate of revenue and EBIT growth is obviously not at last year’s high levels. Overall, group revenue grew by 13.9% for the quarter, marginally up from the previous two quarters. Revenue from the group’s South African operations grew by 14.9% during the quarter, while revenue from our American operations grew by 9.8% over the same period. It is worth noting that this growth was entirely organic, while the results for the comparable period were impacted by the Frontline acquisition.

Our flagship Kelly brand, which plays primarily in the white-collar staffing space, experienced a slowdown in revenue growth but still managed to achieve a satisfactory increase in EBIT. The rest of the business units, with the exception of Kelly Industrial, all showed strong revenue and EBIT growth, with Renwick posting a particularly good turnaround performance. It is also worth noting that our focus on the US operations has started paying off in terms of improving results. Kelly Industrial’s revenue grew substantially but its EBIT declined and it has been placed under new leadership.

Looking ahead, it is likely that trading conditions will remain tough for the foreseeable future, and that margins and volumes in certain segments will be under pressure for the rest of this financial year and probably beyond. Despite this challenging environment, we are confident that the Kelly Group should be able to deliver reasonable growth for the year to 30 September 2008.

PAG launches new interim management division
PAG has established a new division, called GAP Executive Management Solutions, aimed at supplying highly skilled and experienced senior business executives to companies, parastatals and government on an interim basis.

The business model for the new division has been identified from similar solutions offered by M2 in America, where the use of highly skilled executives on short-term or part-time contracts to address critical management issues is common practice. This resourcing strategy, known internationally as interim management, is rarely used in South Africa, despite the country’s critical skills shortage at the very senior level.

The types of assignments GAP Executive Solutions will cater for include: interim appointments to key management positions while vacancies are being filled; rapid skills and knowledge transfer to newly appointed managers; project management of organisations in transitions such as merger or acquisition activity; the facilitation of strategy development and implementation; non-executive and independent directorships for listed companies; operational executive management when the incumbent is unavailable; and BEE structuring and management.

Kelly takes gold at the Contact Center World’s 2008 (EMEA) Awards
Kelly was presented with the gold award for “Best Community Spirit” at the 2008 annual Contact Center World’s Europe, Middle East and Africa Awards ceremony in recognition of the company’s outstanding contribution towards social upliftment projects in its community and, in particular, its upskilling initiative in Alexandra.

Kelly now qualifies to compete for the “Best Community Spirit” world title at the Contact Center World Global Finals, which take place in Las Vegas in December this year.

Kelly has now opened a new branch in Soweto, which hopes to follow the success of Kelly Alexandra. It offers free computerbased upskilling on all widely used computer packages and provides residents with extensive lecture-based training in soft skills.

Kelly has also partnered with the Department of Education to provide 1 000 previously disadvantaged Grade 11 and 12 students from 50 Gauteng government schools with job-shadowing opportunities. This initiative, known as Ikusasa Lami, aims to address South Africa’s critical skills shortage, while developing and providing these learners with exposure to different job roles.

RPO now offered through the Kelly Group
We have expanded our portfolio of services to include recruitment process outsourcing (RPO). RPO is a form of business process outsourcing where an employer outsources all or part of its recruitment activities to an external service provider.

This service allows us to act as a company’s own internal HR department, managing the entire recruitment process from job profiling, screening and induction to training and performance management. By using this service, companies will improve their time to hire, increase the quality of the candidate pool available to them, while reducing costs and improving legislative compliance.

Yours sincerely
Grenville Wilson
Chief executive