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A slowdown in UK financial markets badly impacted first quarter results at international recruitment firm Hudson Global (HSON:NASD), which also saw further declines in France. Financial results did not meet most analysts’ expectations as revenue in the first quarter of 2012 dropped by -8.2% to US$200.6 million from US$218.5 million in Q1 2011.
Hudson Global, which has changed its corporate name last week from Hudson Highland Group, said in February that it was better positioned to confront the market contraction in Europe, but has continued to suffer from challenging market conditions in the region. Accordingly, the company plans to restructure.
Group gross profit decreased to US$73.2 million in the first quarter of 2012 from US$81.2 million in Q1 2011. The firm also reported a net loss of US$3.2 million against a net loss US$6,000 in the first quarter last year.
“Challenging market conditions persisted throughout the first quarter and drove our results to the low end of our expectations. After making significant progress in 2011 towards our long-term goals, we have initiated the next phase of our strategic transition,” said Manuel Marquez, chairman and chief executive officer at Hudson.
He also announced further investments and was confident that 2012 will be a “foundational year in our progress towards achieving our long-term financial and strategic goals.”
The firm has generated an action plan “to address some of the more imbedded aspects of our operating model that have caused our earnings progress to be too slow,” said the chief financial officer Mary Jane Raymond.
“We have taken the initial steps to move to a leaner regional structure and more consistent global operations. Our 2011 efforts to build greater global coordination have prepared the organization to undertake this work,” she said.
The restructuring activity in the first quarter, which primarily consisted of severance expenses in Europe, amounted to US$1.3 million. Part of the strategic transformation, which was launched in 2011, includes the redirection of resources such as RPO, as well as optimising operations in underperforming sectors, and streamlining its back office support areas and business processes.
Revenue was down in all of Hudson’s segments in the first quarter of 2012. In Europe revenue fell by -13.3% to US$82.2 million from US$93.7 million while gross profit declined to US$32.0 million from US$38.9 million a year ago. The firm said that a slowdown in financial services demand impacted the UK business while in continental Europe, growth in the Netherlands contracting business and steady results in Belgium were not enough to offset declines in France.
In America, revenue also dropped by -1.4% to US$45.2 million from US$45.8 million a year ago. But gross profit was up by +14.2% to US$11.8 million in the first quarter from US$10.3 million. This was mainly driven by growth in permanent recruitment as temporary contracting was down -3%.
In the Asia Pacific region, first-quarter revenue fell -6% to US$74.3 million from US$79.0 million. Gross profit also dropped -12% to US$29.3 million from US$31.9 million, impacted by the European slowdown. China was the only country to report an increase in gross profit of +6%.
Hudson Global is a provider of permanent recruitment, contract professionals and talent management services worldwide. The company employs more than 2,000 professionals serving clients and candidates in approximately 20 countries. The firm has a heavy presence in Europe, including Belgium, France, the Netherlands, the UK, Spain, the Ukraine, Hungary, the Czech Republic and Scandinavia.
On Tuesday the firm’s share price was down -7.90%, closing at US$5.01, which is a decrease of -16.9% from a year ago. This is +18.6% below its 52-week high of US$6.16 set on 27 July 2011, valuing the company at US$162.91 million.