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Kellan Group plc Trading Update

Kellan Group plc Trading Update

Kellan Group plc says in a trading statement for the fourth quarter of 2008. Following a strong first half of the year in which we reported a 2.8m turnaround in profit before tax over the loss making comparative period, and a third quarter in which the Company continued to perform in line with expectations, Kellan, along with many recruitment companies, has encountered increasingly difficult market conditions in its fourth quarter, specifically during the last few weeks' trading.

Whilst demand for temporary placements remains stable on the whole, as with many of our peers, the continuing deteriorating economic conditions have resulted in a rapid and significant slowdown in the demand for permanent placements across Kellan's markets. However, despite trading profitably in the second half, earnings for the full financial year ended 31 December 2008 are now expected to fall materially short of the current market expectations.

Given the challenging economic environment faced by the Group we are taking the requisite steps to reduce our cost base, and consequently expect to generate significant savings across the Group from the first quarter of 2009, in addition to those synergies previously identified following the acquisition and successful integration of Quantica plc.

Whilst the trading conditions that Kellan is currently facing are extremely difficult, we remain confident that the strength of our balance sheet, with greatly reduced net debt and significant unutilised facilities, together with the experience of our management team and our sector diversification position us well to deal with the difficult current and expected economic climate.

Commenting John Rose, CEO of Kellan Group said:

"Despite the difficult market conditions at present we intend to continue, where appropriate, the Group's strategy for expansion, with the ongoing review of good quality acquisition opportunities and the opening of additional offices in strategically identified locations, such as the new branch of RK Accountancy in Sheffield, which opened this month. In addition, our plans to move into a new London Head Office during the first quarter of 2009 are moving ahead as anticipated. However, we are now intending to commence 2009 with a reduced consultant headcount of approximately 10 per cent.

"We remain committed to the longer term strategy of the Group and maintain our confidence in the strength and longer term scalability of our brands which we believe will position us well for any future improvement in market conditions."

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