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World – Hudson to divest loss making business as Q2 results falter

01 August 2014

Global talent solutions company Hudson Global (HSON: NSDQ) reported revenue for the second quarter ending 30 June 2014 of USD 167.4 million, a decrease of -4.4% in constant currency from USD 171.4 million last year.

The company achieved a gross margin of USD 62.8 million, a rise of +1.9% in constant currency from USD 60.5 million in Q2 2013. Hudson reported an operating loss of USD 3.4 million for the three month period; this marks an improvement, however, against an operating loss of USD 5.4 million a year ago.

Manolo Marquez, Chairman and Chief Executive Officer at Hudson, commented: “We delivered gross margin growth in our major markets and continued to make substantial improvements to our bottom line. Our second quarter results are a clear indication that the changes we have put in place are translating to growth and improved financial performance, and will accelerate our path to sustained profitability.”

Year-on-year gross margin growth in the company’s core business lines and geographies was more than offset by the decline of Hudson’s Legal eDiscovery business operating in the Americas. In April, the company’s board of directors authorised management to explore opportunities to divest the Legal eDiscovery business. The divestiture is expected to be completed within the next 12 months. 

Hudson also engaged a consulting firm to assist in a comprehensive assessment of the company’s organisation and operations. The assessment will focus on identifying opportunities to better align the company’s organisational model following the divestiture of eDiscovery, and also to improve Hudson’s operating efficiencies and effectiveness. The initiatives are expected to result in a restructuring charge of USD 7 million, which is expected to be taken over the next 12 months.

Revenue from the Americas fell by -29.6% in constant currency to USD 26.3 million, down from USD 37.3 million last year. Gross margin decreased by -23.5% in constant currency during Q2 2014 to USD 7.1 million, compared with USD 9.2 million in Q2 2013. Strong gross margin growth of +50% in Hudson’s RPO business was offset by declines of -45% in the company’s Legal eDiscovery business and -19% in the IT segment.   

Hudson Asia Pacific reported revenue growth of +6.6% in constant currency during the second quarter, rising to USD 65.1 million from USD 62.9 million a year ago. Gross margin increased by +3.6% in constant currency to USD 24.5 million, up from USD 24.3 million last year. Growth in the region was driven by strength in talent management and permanent recruitment in China, and Australia. Gross margin increased by +30% in China, year-on-year, and in Australia, gross margin increased by +6%, outperforming the company's major competitors.

Across Europe revenue fell slightly by -0.9% in constant currency to USD 76 million during Q2 2014. Gross margin for the period increased by +8.5% in constant currency, rising from USD 27 million in Q2 2013 to USD 31.2 million this year. Particularly strong growth was reported in permanent recruitment in the UK and Belgium, up by +18% and +27% in constant currency, respectively. Talent management in Continental Europe also grew in the quarter, driven by Belgium and France, with gross margin up by +7% compared with last year.

Looking forward and given current economic conditions, the company expects third quarter revenue of between USD 165 million and USD 175 million.

In trading yesterday, the company’s share price closed down -2.3% at USD 3.85, an increase of +56.5% compared with a year ago. Based on its current share price, the company has a market value of USD 126.6 million.