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World – Manpower beats expectations but outlook remains difficult

23 April 2012

The US-based staffing firm ManpowerGroup (MAN:NYSE) reported Friday that first quarter revenue in both Southern and Northern Europe exceeded expectations but turnover dropped in France, the company’s largest single market. The firms said that the outlook remained difficult as Group revenue rose marginally by +0.5% in the quarter (3% at constant currency), from US$5.07 billion to US$5.10 billion.

While operating profit increased  by +9.5% to US$93.8 million in Q1 2012 from US$85.6 million a year ago, gross profit for the three months ended 31 March 2012 dropped by -1.2%, amounting to US$847.4 million from US$857.6 million a year ago. This was mainly due to sluggish demand in some markets and resulted in a lower gross margin which narrowed to 16.6%, compared to 16.9% last year.

Executive Vice President and Chief Financial Office, Mike van Handel, said in a conference call that “staffing gross margins are stable in most markets, but margins have been negatively impacted by slightly higher unbillable bench times and stronger growth from a few lower gross margin key accounts.”

Nonetheless, the firm spoke of strong first quarter results as net income in the period rose by +12.8% to US$40.2 million from US$35.7 million in the first quarter of last year.

Revenue in Southern Europe was slightly stronger than expected but still decreased by -3.5%, reaching US$1.75 billion compared to US$1.81 billion a year ago. The gross profit margin was down slightly while revenue in France declined by -4.6% to US$1.29 billion, compared to 1.35 billion a year ago. “While France revenues softened in the first quarter, the level of contraction stabilized in March and held in April. So while we continue to see year-over-year contraction, the rate of decline is not increasing at this point,” said Mr Van Handel.

In Italy, revenue gradually weakened during the quarter, dropping to US$267.5 in the first quarter of 2012 from US$284.6 million in the previous year. The firm said that this includes two additional billing days and therefore, on an average daily basis, revenues were down -7%. But gross profit margins in Italy were up slightly as an increase in permanent recruitment fees offset the deterioration in staffing gross margins. 

The firm also operates in Spain and Mr Van Handel commented that “Our Spanish market continues to be difficult. We are able to achieve growth of 2% in constant currency.”

But prospects were better in Northern Europe where the staffing group exceeded expectations. Revenue came to US$1.44 billion, and although this is slightly down from US$1.45 billion a year ago, the firm achieved growth of +3% at constant currency.  Within Northern Europe the gross profit margin decreased by 70 basis points, which was due to the mixed impact of stronger growth from lower gross margin clients.

The firm said within Northern Europe, the UK was the “star performer” as revenue grew by +14% in constant currency which was fuelled by growth in one large key account. 

Revenue in Germany remained flat although gross profit was up as the firm improved pricing and staffing services. “Revenue growth in the Netherlands and Belgium also weakened further in the quarter with the Netherlands declining by 4% in constant currency and Belgium flat with the prior year,” Mr Van Handel commented.

In the Americas region revenue overall increased by +2.3% to US$1.13 billion compared to US$1.12 billion a year ago. But US first-quarter revenue shrank by -2% to US$735.8 million from US$750.9 million in the first quarter of last year. Revenue rose +11.3% in the company’s other Americas segment to US$402.5 million from US$361.8 billion with particular strength in Mexico and Argentina.

In the Asia Pacific region, the company achieved revenue of US$680.0 million, up +12.8% from the same period last year. The Middle East segment reported the strongest performance, with revenue up +10% in constant currency. The revenue growth included China and India which add about 7% to the growth rate.

“The outlook is still difficult for us, we are dealing with uncertainties in Europe and US economy is moving forward, but it does have its ups and downs. Slow if you will, choppy growth is a little bit difficult on a day-to-day basis, but it is pointing in the right direction. And therefore as we work through these uncertain economic times, we continue to gain momentum, add profitability to the organization, and position ourselves better for the future,” said President and CEO at the Group, Jeffrey A. Joerres.

ManpowerGroup has around 3,900 offices in over 80 countries providing recruitment and assessment, training and development, career management, outsourcing and workforce consulting. Its portfolio of recruitment services includes permanent, temporary and contract recruitment of professionals, as well as administrative and industrial positions.

On the New York stock exchange on Friday, Manpower’s shares were down by -4%, closing at US$44.92, down -34% from a year ago but +41% above the 52-week low of US$31.81 set on 22 September 2011. This values the Group at US$3.60 billion.


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