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World – Hudson Highland better prepared for “market contraction in Europe”

24 February 2012

Hudson Highland Group (HHGP:NSQ), an international provider of professional recruitment and related talent solutions, announced in its financial results for the full year and fourth quarter ended 31 December 2011 that revenue for the quarter went up only marginally by +1.7% to US$222.7 from US$219,061 million.  Full-year revenue, on the other hand, went up by +17.5%, amounting to US$933.7 million from US$794.542 million in 2010.

Commenting on the results, Manuel Marquez, chairman and chief executive officer of Hudson Highland Group, said that "Despite headwinds in the fourth quarter, we achieved double digit revenue growth, generated positive cash flow and realized record net income from continuing operations in 2011. We believe we are now better positioned to confront the market contraction in Europe and its ripple effect in Asia Pacific."

Hudson Europe made revenues of US$91.751 million in the quarter (2010: US$90.616 million), which is more than its American (US$47.802 million) or Asia Pacific division (US$83.185 million). Overall net income amounted to US$3.3 million, up from US$1.191, while cash flow from operations was US$20.4 million in the fourth quarter.

The operating income in Europe in the quarter amounted to US$2.595 million, which saw an increase from US$1.04 million in 2010.

The firm also emphasised regional highlights in Europe where temporary contracting gross margin increased +30% in constant currency, driven by the expansion of its Legal eDiscovery brand in the UK, as well as growth in the Netherlands professional contracting business and Belgium's interim management business.

The temporary contracting gross margin increased to 18.9%, up from 16.9% in 2010, driven primarily by higher margins in eDiscovery. Permanent recruitment delivered modest growth in 2011 through a combination of growth in retained search in Belgium and France, and declines in the U.K.

However, the firm saw a volatile second half of 2011 due to the economic conditions in Europe, which were marked by the sovereign debt crisis and the contraction of the banking and finance industry.  During the fourth quarter, several clients delayed permanent hiring decisions. Nonetheless, the balanced service portfolio helped maintain gross margin flat compared with the fourth quarter of 2010 in constant currency.

Although the company remains optimistic about 2012, the European debt situation has persisted and the weaker economic conditions witnessed in the fourth quarter have continued into the first quarter. Given the current environment, the company expects first quarter 2012 revenue to be down between by -4% to -8% compared to the prior year.

After the company reported its results in the US yesterday, its shares closed at US$4.70, which was down -0.21%, but still +54.1% above the 52-week low of US$3.05 set on 04 October 2011. The firm has a market capitalisation of US$154.40 million. 

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