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Management’s฀Discussion฀&฀Analysis18 Manpower฀2006฀Annual฀Report
MAN AGEME NT’S฀DI SCUSS ION฀&฀ANA LYSIS
of฀financi al฀condition ฀and฀res ults฀of ฀op erations
EMEA฀–฀The฀EMEA฀region฀includes฀our฀operations฀in฀Europe,฀the฀Middle฀East฀
and฀Africa฀(excluding฀France),฀which฀covers฀a฀total฀of฀24฀countries฀delivering฀
services฀through฀approximately฀1,586฀offices.฀In฀addition฀to฀employment฀฀
services฀delivered฀under฀the฀Manpower฀brand,฀this฀region฀also฀includes฀Elan,฀
which฀is฀a฀leading฀IT฀recruitment,฀staffing฀and฀managed฀services฀firm฀operating฀
across฀17฀countries฀in฀the฀region,฀and฀Brook฀Street,฀which฀provides฀general฀
staffing฀and฀recruitment฀services฀in฀the฀United฀Kingdom.฀The฀largest฀operations฀
in฀this฀segment฀are฀the฀U.K.,฀Italy,฀the฀Nordics,฀Elan฀and฀Germany฀which฀฀
comprise฀20%,฀17%,฀15%,฀13%฀and฀8%฀of฀EMEA฀revenues,฀respectively.฀
Revenues฀in฀EMEA฀increased฀16.3%฀in฀2006฀to฀$6.4฀billion,฀or฀14.7%฀in฀฀
constant฀currency.฀Revenue฀growth฀improved฀at฀most฀entities฀in฀the฀region,฀
with฀significant฀local฀currency฀growth฀coming฀from฀the฀Netherlands฀(+27.5%),฀
Belgium฀(+25.4%),฀the฀Nordics฀(+24.7%),฀Italy฀(+24.2%),฀Elan฀(+16.5%),฀
Germany฀(+14.6%),฀and฀Spain฀(+12.1%),฀offset฀by฀declining฀revenues฀at฀
Manpower฀in฀the฀U.K.฀
The฀Gross฀Profit฀Margin฀increased฀from฀the฀prior฀year฀primarily฀due฀to฀the฀฀
increase฀in฀permanent฀recruitment฀revenues฀and฀improved฀pricing฀discipline฀in฀many฀markets.฀Permanent฀recruitment฀฀
revenues฀increased฀30.7%฀on฀a฀constant฀currency฀basis฀during฀the฀year.
Selling฀and฀Administrative฀Expenses฀increased฀14.2%,฀or฀12.8%฀in฀constant฀currency,฀primarily฀due฀to฀the฀cost฀of฀supporting฀
the฀increased฀business฀volumes.฀A฀portion฀of฀the฀increase฀in฀2006฀is฀due฀to฀$7.8฀million฀of฀reorganization฀charges฀recorded฀in฀
the฀U.K.฀in฀the฀first฀quarter.฀Selling฀and฀Administrative฀Expenses฀as฀a฀percent฀of฀revenues฀decreased฀during฀the฀year฀primarily฀
due฀to฀productivity฀improvements,฀as฀EMEA฀has฀been฀able฀to฀increase฀the฀billable฀hours฀from฀the฀temporary฀recruitment฀฀
business฀and฀increase฀permanent฀placements฀without฀a฀similar฀increase฀in฀branch฀headcount.฀
Operating฀Unit฀Profit฀was฀$220.2฀million,฀an฀increase฀of฀52.9%,฀or฀48.1%฀in฀constant฀currency.฀The฀Operating฀Unit฀Profit฀Margin฀
increased฀to฀3.5%฀from฀2.6%฀in฀2005,฀primarily฀the฀result฀of฀leveraging฀our฀expense฀base฀with฀the฀increased฀revenue฀and฀gross฀
profit฀levels.
Jefferson฀Wells฀–฀Jefferson฀Wells฀provides฀highly฀skilled฀project฀personnel฀
along฀four฀primary฀business฀lines฀–฀internal฀controls,฀tax฀operations,฀finance฀
operations฀and฀technology฀risk฀management.฀Our฀services฀are฀provided฀
through฀54฀offices,฀which฀include฀major฀U.S.฀metropolitan฀markets,฀Toronto฀
and฀five฀European฀cities.฀The฀majority฀of฀employees฀assigned฀by฀Jefferson฀
Wells฀are฀full-time฀company฀employees฀and฀therefore฀employee฀utilization฀is฀a฀
significant฀factor฀in฀determining฀Gross฀Profit฀Margins.
Revenues฀decreased฀during฀the฀year,฀to฀$373.0฀million฀from฀$386.2฀million฀in฀
2005฀due฀primarily฀to฀a฀decline฀in฀demand฀for฀Sarbanes-Oxley฀related฀control฀
services.฀Jefferson฀Wells฀expects฀to฀see฀continuing฀declines฀in฀its฀Sarbanes-
Oxley-related฀services.฀However,฀we฀expect฀these฀declines฀to฀be฀offset฀by฀
strong฀growth฀in฀other฀business฀lines฀in฀2007.
Gross฀Profit฀Margins฀have฀declined฀from฀the฀prior฀year฀level฀primarily฀due฀to฀a฀
change฀in฀the฀mix฀of฀business฀and฀the฀impact฀of฀a฀large฀client฀contract฀that฀had฀
a฀lower฀than฀average฀Gross฀Profit฀Margin.
Selling฀and฀Administrative฀Expenses฀decreased฀by฀6.1%฀mainly฀due฀to฀a฀reduction฀in฀office฀expenses฀as฀a฀result฀of฀cost฀฀
control฀efforts.
Operating฀Unit฀Profit฀was฀$31.9฀million,฀or฀8.6%฀of฀revenue,฀compared฀to฀$33.3฀million,฀or฀8.6%฀of฀revenue฀in฀2005.฀This฀฀
decrease฀in฀Operating฀Unit฀Profit฀is฀due฀to฀lower฀revenues฀in฀2006.
EMEA฀Revenues
in฀millions฀($)
4,883.0
5,471.2
6,363.3
2006
2005
2004
EMEA฀Operating฀Unit฀Profit
in฀millions฀($)
116.9
144.1
220.2
2006
2005
2004
Jefferson฀Wells฀Revenues
in฀millions฀($)
340.6
386.2
373.0
2006
2005
2004
Jefferson฀Wells฀Operating฀Unit฀Profit
in฀millions฀($)
51.4
33.3
31.9
2006
2005
2004