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World – Robert Half announces Q4 results

27 January 2012

California-based finance and accountancy recruitment agency Robert Half International Inc. (RHI:NYQ) reported its fourth-quarter results ended 31 December, which saw profits jump +72% to 42.6 million US Dollars from 24.8 million US Dollars a year earlier. Global revenues for the quarter increased, by +14% to 973.5 million US Dollars, from 851.6 million US Dollars. 

However, the results did not quite meet Wall Street expectations as analysts had on average predicted Robert Half would have revenue of 986 million US Dollars, according to the Wall Street Journal. 

Keith Waddell, Vice Chairman explained “There were 61 billing days in the fourth quarter compared to 62 billing days in the fourth quarter a year ago and compared to 64 days in the third quarter of 2011. The current quarter has 64 billing days. Volatile currency markets impacted revenue trends during the quarter.”

The company also revealed that cash flow from operations was 96 million US Dollars, and capital expenditures were 15 million US Dollars during the quarter. The CEO and chairman Max Messmer said, “We paid our stockholders a cash dividend of $0.14 during the quarter at a cost of $20 million. We also repurchased 300,000 RHI shares for a total of $7.5 million. There remain approximately 6.1 million shares under our board approved stock repurchase plan.”

For the year ended December 31, 2011, net income was $149.9 million, on revenues of $3.78 billion. Compared to the year ended December 31, 2010, when net income was $66.1 million, on revenues of $3.18 billion.

On the overall year’s performance, Mr Messmer added, “We are in a strong financial position. We had positive operating cash flow of $256 million in 2011, which helped us to fund approximately $142 million in RHI stock repurchases, $57 million in capital expenditures and the payment of $80 million in dividends to stockholders.” 

In its Q4 results, the company identified the following trends:

  • Temporary help revenue growth is slowing. For 4Q11, Robert Half’s temporary revenue decelerated to 15% YoY, down from the 20% pace last quarter. In the first two weeks of January, RHI’s temp revenue rose a surprisingly strong 17% YoY.
  • Permanent placement slowing, but January had a bounce-back. On a same-day sequential basis, permanent placement fees (8% of revenue) fell in October, fell in November, and fell in December. This resulted in 26% YoY growth for 4Q11, a deceleration from 38% in 3Q11. During the first three weeks of January perm was up 38% YoY.
  • European headcount to fall in 1Q12. Robert Half began selectively hiring recruiters in 4Q10 and hiring continued through 4Q11. For 1Q12, management is planning to decrease the number of perm placement recruiters in Europe and increase the number in the US. In the 4Q, US perm fees were up 37% YoY while international perm fees were up 19% YoY. For temporary help recruiters, management continues to plan for year-over-year increases at a low single-digit pace. Although international operations generate 28% of total company revenue, Robert Half do not disclose more detailed geographical insight into its results.
  • Bill rates keep rising. Increasing the spread between what clients are charged (bill rates) and temporary workers are paid (pay rates) drove the segment-level temporary staffing gross margin up 130bp YoY. In 4Q11 average bill rates rose 4.6% from the prior year. This compares to 7.2% YoY in 3Q11. Management’s guidance assumes that the bill rates will continue at current levels in 1Q12.

Global Divisions:

The firm provided an update on its various global divisions:

Accountemps, the firm’s largest staffing division with 352 offices worldwide, accounts for 37% of company revenues and had fourth quarter revenues of 364 million US Dollars, up +14% from the previous year. 

OfficeTeam, an administrative staffing division which represents 20% of company-wide revenues, had revenues of 196 million US Dollars in the fourth quarter, up +12% from the fourth quarter a year ago.

Fourth quarter revenues for Robert Half Management Resources, a specialist division for senior-level accounting finance professionals which makes up 12% of global revenues, were 116 million US Dollars, up +13% from a year ago. 

For the quarter, Robert Half Technology reported revenues of 113 million US Dollars, up +23% from the previous year. This division target information technology professionals and accounts for 12% of company-wide revenues.

Fourth quarter revenues for Robert Half Finance & Accounting, the firm’s permanent placement division, were 75 million US Dollars, up +26% from the fourth quarter of 2010. This business accounts for 8% of company-wide revenues.

Fourth quarter revenues for Protiviti were 109 million US Dollars, which is 6% higher than the fourth quarter of 2010. Protiviti is a global business consulting and internal audit firm providing risk, advisory and transaction services. Its international operations represent 26% of total Protiviti revenues.

The firm’s International Temporary and Consulting divisions grew by +13% year-over-year and +3% sequentially on a same-day and constant currency basis during the quarter whereas the International Permanent Placement operations grew by +19% year-over-year and were down -0.3% on a same-day constant currency basis. 

Fourth quarter gross margin for the firm’s Temporary and Consulting Staffing operations was 282 million US Dollars or 35.8% of applicable revenues. “This compares with 34.5% of revenues in the fourth quarter of 2010 and 35.5% of revenues in the third quarter of 2011. The fourth quarters of 2011 and 2010 included workers' compensation and other payroll-related credits of $2.5 million and $1.5 million, respectively,” Mr Waddell commented.

Temp-to-hire conversions decreased marginally during the quarter. The staffing gross margin was 357 million US Dollars in the fourth quarter or 41.3% of staffing revenues, which compares with 39.7% of revenues in the fourth quarter a year ago and 41.4% of revenues in the third quarter of 2011. 

The firm’s income tax rate was 40.9% compared to 38.8% in the third quarter of this year, resulting in a 1.5 million US Dollar negative which was mainly due to lower utilization of foreign tax credits. 

Robert Half has over 420 offices in over 20 countries. Its largest markets are the US (70% of total revenues), UK, and Canada.

On Thursday, the company’s shares closed at US$29.76, 12.8% below its 52-week high of US$34.16, set on Feb 07, 2011. This is down 5.7% from a year ago.


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