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Europe – Improved gross margins in Q4 2010 deliver upside surprise at Manpower

06 February 2011

Revenues were up by +18.1% from $4.41 billion in Q4 2009 to $5.2 billion in Q4 2010 at Manpower Inc. (NYSE:MAN), the world's third-largest staffing firm. In constant currency, revenues were up by +22.1%, in line with management guidance.

On a constant basis, gross profit increased by +23.5% to $906 million. Gross margins increased to 17.4% from 17.1% in Q42009 helped by an increase in temporary gross margins, a shift towards more permanent placement revenues (up by +55% in constant currency) and by changes in French business tax.

In constant currency, operating profit was up by +23.5%. Earnings before income tax were down from $30.2 million in Q4 2009 to a loss of -$352.6 million in Q4 2010. The net loss in the quarter was $350.4 million compared to net earnings of $29.1 million a year earlier. Included in the fourth quarter results is a non-cash goodwill and intangible asset impairment charge of $428.8 million ($384.3 million after tax) and a re-organisation charge, primarily related to office consolidations and severance costs, of $30.5 million ($20.6 million after tax).

Excluding the impairment and re-organisation charges, earnings per diluted share was 66 Cents. Net earnings in the fourth quarter were unfavourably impacted by 2 Cents per diluted share, as foreign currencies were relatively weaker compared to the prior year period.

In France revenues were up by +9.9% from $1.3 billion in Q4 2009 to $1.43 billion in Q4 2010. In constant currency, French revenues were up by +19.5%. Operating profit in France was up by +138% from $5 million in Q4 2009 to $12 million in Q4 2010. In constant currency, French operating profit was up by +156.7%. Management cautioned that margins in France could come under pressure in 2011 as the government has reduced payroll tax subsidies and thereby increased direct costs.

In Italy revenues were up by +9.2% from $269.3 million in Q4 2009 to $294.1 million in Q4 2010. In constant currency, Italian revenues were up by +18.8%.
Operating profit in Italy was up by +43.2% from $11.1 million in Q4 2009 to $15.8 million in Q4 2010. In constant currency, Italian operating profit was up by +55.6%.

In other EMEA countries revenues were up by +13.8% from $1.47 billion in Q4 2009 to $1.68 billion in Q4 2010. In constant currency, other EMEA revenues were up by +19.2%. Operating profit in other EMEA countries was up by +146.9% from $26.5 million in Q4 2009 to $65.8 million in Q4 2010. In constant currency, other EMEA operating profit was up by +157.6%. Particularly good revenue growth (in constant currency) was see in Germany (+26%) and the Nordic region (+19%) while more modest improvements were seen in Belgium (+13%), The Netherlands (+12%) and the UK (+9%).

Jeffrey A. Joerres, Manpower Inc. Chairman and CEO, said, "2010 was a very strong year for us and the fourth quarter was no different. Our revenue growth in all geographies remains robust and we continue to leverage our office structure to drive profitability. Europe performed exceptionally, as did our IT staffing. We also experienced strong trends in our solutions offerings."

"We move into 2011 with much more confidence, a more complete set of solutions and a stronger organisation. We are optimistic for a successful 2011.

"We are anticipating the first quarter of 2011 diluted earnings per share to be in the range of 26 Cents to 34 Cents with a negligible impact from currency."

Despite the good Q4 results, management's 2011 guidance was slightly below analyst expectations and, at the close of NYSE trading yesterday, Manpower's shares were down by -0.67% to 65.46$

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