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World – ManpowerGroup revenue and profits slip

22 October 2012

The world’s third-largest staffing firm ManpowerGroup (MAN:NYSE) saw sales and profits slide in the third quarter of the year, hitting major markets across Europe and the Americas, the firm reported last Friday.

Revenue in the third quarter was down by -10.5% to US$5.17 billion from US$5.78 billion a year ago although in constant currency the decline was only -4% and in line with expectations.  

Gross profit in the period fell to US$856.2 million from US$951.3, a reduction of -10.0%. But the gross margin still improved to 16.6% from 16.5% year-on-year.

In a call to analysts, the firm said that the gross profit margin on temporary recruitment declined by 20 basis points year-on-year while gross profit from permanent recruitment fees was down -7%.

The recruiter also reported that operating profit fell by a quarter to US$118.6 million compared to US$158.0 million last year. Net earnings slipped by -21% to US$63.1 million against US$79.6 million a year ago.

ManpowerGroup generates most of its sales and profit overseas and the firm has been under pressure from a weakening economy in Europe.

“We are acting on the premise that we are entering a prolonged period of soft economic conditions, and as a result we will need to take appropriate adjustments on our expenses,” said chairman Jeffrey Joerres in the analyst call.

In Southern Europe revenue fell by -17% to US$ 1.83 billion, “softening slightly” from the previous quarter. France is the largest market in this region where sales dropped -6% in constant currency to US$1.39 billion. In Italy, sales fell by -13% in constant currency to US$246.8 million although the declines “appear to have stabilized”, the firm said. Spain declined by -12% in constant currency.

In Northern Europe, revenue fell by -11% to US$ 1.4 billion as expected. In constant currency, the UK grew by +5% while all other major European markets declined (Nordics -4%), Germany -10%), Netherlands (-12%) and Belgium (-11%).

In this region the “gross profit margin was below the prior year as pricing remains competitive. We also had lower bench utilization and higher vacation in Germany and Sweden,” said Mike Van Handel, chief financial officer.

“Additionally, the agency workers regulation in the UK impacts gross margin percent but does not impact gross profit dollars. And lastly, permanent recruitment fees were down sequentially from the second quarter and down 11% in constant currency from the prior year.”

In Asia Pacific and the MiddleEast revenue was US$688.2 million, falling by -2% from US$701.0 million a year ago. In the Americas, revenue dropped by -8% to US$760.8 million.

Looking ahead, the firm expects fourth-quarter revenue to be down between 5% and 7% in US dollars, although the firm is not expecting “any dramatic decline” in demand for its services. The gross margin is expected to range between 16.7% and 16.9%, slightly down from the previous year.

Despite the decline in performance, the results were not as bad as the financial market had feared and, on Friday, the company’s share price improved by nearly +10% to US$ 39.53, -18.1% below its 52-week high of US$48.28 seen in April. Manpower has a market value of US$3.14 billion. 

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