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World – Korn/Ferry results below consensus expectations

08 March 2012

Korn/Ferry International (KFY:NYQ) (KFY:BER), the US and German quoted international executive search firm, have published its Q3 results on Thursday which are “below consensus expectations.”

Q3 revenues are down marginally -1% year-on year and amounted to US$186.0 million although the firm had estimated revenues would reach US$192.2 million. Net income for Q3 was US$12.3 million, down from US$13.9 million, a reduction of -11.7%. Pretax income was also down -16.6% to US$18.4 million from US$22.03 million a year ago.

The firm said that Europe was performing better than expected although the environment there remained “clearly difficult.” The firm’s European business generated minor y-o-y growth of 1% during Q3. The operating margin was “solid” at 15.3%, which was above the 13.5% estimate.  Productivity was also said to be tracking near to all-time highs as annualised revenue increased +3% y-o-y, at US$1.4 million.

Revenues in EMEA amounted to US$40.5 million in Q3 2012, up marginally from US$40.06 million in the same quarter last year. The region that experienced most growth by revenue was South America which made sales of US$8.7 million in Q3 2012, up from US$7.6 million in Q3 2011, an increase of +13.4%. North America revenues dropped -5.3% to US$90 million in the quarter from US$95 million in the same period last year. Asia Pacific fared better and achieved a +2.4% increase of revenues which amounted to US$21 million in the quarter, up from US$20.4 million a year ago.

Futurestep, the RPO and mid-level placement business, achieved revenues of US$25.8 million in FQ3 2012, up +13.9% from US$23.3 million in FQ3 2011.

The group said that the results were below expectations in most aspects, and Q4 revenue guidance is also below prior estimates at US$182-196 million, vs. the firm’s prior estimate of US$195.6 million and consensus of US$200.2 million.

Similar to last quarter, management also noted in their guidance commentary that “given that fundamentals lag, and reduced business confidence/uncertainty could cause some firms (particularly in financial services) to reduce hiring plans in coming quarters, we are assuming a very slow growth environment (with a few quarters of slight declines) for KFY in the near term,”.

Korn/Ferry International is a provider of executive search and outsourced recruiting and leadership development solutions. The firm has approximately 2,100 full-time employees, including roughly 441 executive search consultants and about 160 Futurestep consultants, located in 76 offices in 36 countries.

This morning in Germany, the company share price dropped -4.6% to €11.50, down -25.32% but +33.75% above the 52-week low of €8.60 set on 4 October 2011. This values the company at approximately US$7.3 billion. 


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