ManpowerGroup 2008 Annual Report Download - page 26

24 Management’s Discussion & Analysis Manpower Annual Report 2008
Management’s Discussion & Analysis
of financial condition and results of operations
reorganization charges related to office closures in 2008 and $7.5 million of expense related to the payroll tax modification in
2007. Other expenses were well controlled, in response to the slowing demand for services, and showed minimal increase.
Selling and Administrative Expenses as a percent of revenues increased in 2008 compared to 2007 due to continued
investments in the permanent recruitment business.
OUP was $299.0 million, a decrease of 23.4% (26.9% in constant currency) from the prior year. OUP Margin was 4.3%, a
decrease from 5.6% in 2007. Included in 2008 OUP is the impact of the modification to the payroll tax calculation, the legal
reserve related to the competition investigation, the 2004 business tax refund and the reorganization costs. The net impact of
these items was an increase to OUP of $59.6 million, or an 86 basis point (+0.86%) increase in 2008 OUP Margin. Included in
2007 OUP is the impact of the retroactive modification to the payroll tax calculation related to 2006 and the first nine months
of 2007 and the legal reserve related to the competition investigation. The net impact of these items was an increase to OUP
of $134.6 million, or a 192 basis point (1.92%) increase in 2007 OUP Margin. The remaining 24 basis point (-0.24%) decrease
in OUP Margin is the result of expense deleveraging.
Other EMEA – The Other EMEA region includes operations throughout Europe, the
Middle East and Africa (excluding France and Italy), which covers a total of 28
countries delivering services through approximately 1,285 offices. In addition to
employment services delivered under the Manpower and Manpower Professional
brands, this region also includes Elan, which is a leading IT recruitment and
managed services firm operating across 16 countries in the region, and Brook
Street, which provides recruitment services in the U.K. The largest operations in
this segment are in the Nordics, Elan, U.K. and Germany which comprise 18.9%,
17.1%, 13.5% and 11.1% of Other EMEA Revenues, respectively.
Revenues in Other EMEA increased 10.2% in 2008 to $7.4 billion, or 8.1% in
constant currency. In April of 2008, we acquired Vitae, a leading professional
placement firm in the Netherlands. Excluding the acquisition of Vitae, revenues
increased 6.5% for the year. Local currency revenue growth was experienced in most major markets, with the highest growth
rates reported by Elan (+25.6%), the Netherlands (+20.5%), Brook Street (+10.2%) and Belgium (+8.0%), offset by declining
revenues in Spain (-20.0%) and the Nordics (-1.3%).
Revenue growth accelerated in the first half of the year, with growth of 16.1% in constant currency, then gradually declined
through the remainder of the year, with a contraction of 4.3% in the fourth quarter in constant currency. Permanent recruitment
fees increased 12.4%, or 8.1% in constant currency, as a result of our continued focus on this business. However, this
business also showed a significant slowdown through the year, with constant currency growth of 23.2% in the first half of the
year, and a contraction of 17.3% in the fourth quarter.
The Gross Profit Margin increased from the prior year due to the increase in the permanent recruitment business, our
continued focus on improved pricing for our temporary recruitment business, and the acquisition of Vitae, which had a 40
basis points (0.40%) favorable impact on Gross Profit Margin for the year.
Selling and Administrative Expenses increased 16.1%, or 12.8% in constant currency, primarily due to the need to support
the increased business volumes for much of the year. Excluding the acquisition of Vitae, Selling and Administrative Expenses
increased 12.1%, or 9.1% in constant currency. Included in Selling and Administrative Expenses is $20.6 million of
reorganization costs recorded in the fourth quarter of 2008 related to employee severance costs and closure costs for 100
offices. Expenses as a percent of revenues had improved through the first three quarters of the year, but worsened in the
fourth quarter due to the reorganization costs and the expense deleveraging due to the decline in revenues.
OUP was $249.5 million, a decrease of 2.8%, or 6.4% in constant currency. The OUP Margin decreased to 3.4% from 3.8%
in 2007 due to expense deleveraging, as expenses grew faster than revenues as we continued to invest in our strategic
initiatives. The acquisition of Vitae did not have a significant impact on OUP Margin.
07 6,750.4
06 5,230.7
08 7,437.7
Other EMEA Revenues
in millions ($)
07 256.7
06 156.7
08 249.5
Other EMEA Operating Unit Profit
in millions ($)