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World – Heidrick & Struggles: Europe struggles while America and Asia-Pacific grow

31 July 2013

US-based executive search provider Heidrick & Struggles (HSII: NASD) reported revenue growth across the Americas and Asia-Pacific, but losses in Europe during the second quarter of 2013. Year-on-year net revenue increased +11.4% in the Americas and increased +6.5% in Asia Pacific (approximately +9% in constant currency). However, in Europe net revenue fell -11.1% (approximately -13% in constant currency) during the same period.

Jory Marino, interim CEO of Heidrick & Struggles said: “Improving conditions for Executive Search in the Americas and in Asia-Pacific had a positive impact our second quarter results, while Europe remains in a challenging economic environment.”

Growth in the Financial Services and Global Technology & Services Executive Search practices was partially offset by declines in the Education & Social Enterprise and Industrial practices. Net revenue from Leadership & Consulting was USD 9.1 million, a decline of -5.9% compared with Q2 2012. The acquisition of Senn-Delaney Consulting Group LLC on 31 December 2012 contributed USD 5.4 million to net revenue during the period.

Operating income in the second quarter was USD 5.7 million and the operating margin was 4.7%, compared with operating income of USD 6.7 million and operating margin of 5.8% during the same period last year. The year-on-year decline reflects an increase in operating expenses, partially offset by an increase in net revenue.

Net revenue for Asia-Pacific increased by USD 1.5 million in Q2 2013, rising by +6.4% from USD 23.6 million to USD 25.1 million. Operating income increased by +31.8% from USD 2.2 million in 2012 to USD 2.9 million in 2013. Revenue growth in this region was driven by the Financial Services and Industrial search practices, as well as by Leadership Consulting. 

Europe reported declines in net revenue and an operating loss in Q2 2013, compared with the same period last year. Net revenue fell from USD 27.1 million to USD 24.1 million, a drop of -11.1%. The operating loss was USD 2.5 million, compared with operating profit of USD 1.1 million last year. Revenue from Leadership Consulting and all search practices, with the exception of Consumer Markets and Life Sciences, declined year-on-year. The operating loss in Europe compared with the profit last year reflects the decline in net revenue and an increase in general and administrative expenses, partially offset by a decrease in salaries and employee benefits expense.

Net revenue in the Americas rose from USD 65.3 million in Q2 2012 to USD 72.8 million in Q2 2013, an increase of +11.4%. Operating income also rose from USD 15.4 million to USD 18.1 million during the period, an increase of +17.5%. The acquisition of Senn-Delaney, as well as increases in the Financial Services and Global Technology & Services search practices were the primary drivers of growth in the Americas. 

Forecasts for the coming quarter predict net revenue of between USD 115 million and USD 125 million. This forecast among other things, reflects assumptions for the anticipated volume of new Executive Search confirmations, Leadership Consulting assignments, expectations for Senn-Delaney, the current backlog, consultant productivity, consultant retention, the seasonality of its business, the global economic climate, and no change in future currency rates.

Jory Marino added: “With renewed energy, I am confident we can build shareholder value by doing what we do best – serving the leadership talent needs of the world’s top organisations. We will execute our leadership advisory strategy by improving how we attract and retain the best consultants in our profession, managing our cost structure, and solidifying long-term client relationships built on our consulting expertise and quality of service.”

Following the quarterly release the company’s share price rose +1.73% to USD 15.25, an increase of +19.63% compared with a year ago. Based on its share price, the company has a current market value of USD 276.12 million.   


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