ManpowerGroup 2013 Annual Report Download - page 35

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Management’s Discussion & Analysis ManpowerGroup 2013 Annual Report
Southern Europe — In 2013, revenues from services in Southern Europe, which
includes operations in France and Italy, decreased 0.2% (–3.6% in constant
currency and –3.9% in organic constant currency) compared to 2012. In 2013,
revenues from services decreased 6.0% in organic constant currency in France
(which represents 73.0% of Southern Europe’s revenues) and decreased 0.3% in
constant currency in Italy (which represents 15.0% of Southern Europe’s
revenues). The decrease in France is due primarily to softening demand in the
staffing/interim business and a 23.5% decline in constant currency in the
permanent recruitment business. The decrease in Italy is due to a slight decrease
in our staffing/interim services. In Other Southern Europe, revenues from services
increased 12.5% (7.9% in constant currency and 6.1% in organic constant
currency) in 2013 compared to 2012 driven by the revenue increase in Portugal,
due to increased demand in the Manpower staffing and ManpowerGroup
Solutions businesses, and in Spain, due mostly to an acquisition of some clients
from a local competitor in July 2013.
In 2012, revenues from services in Southern Europe decreased 11.7% (–4.2% in
constant currency and –5.3% in organic constant currency) compared to 2011.
In 2012, revenues from services decreased 6.1% in organic constant currency in France and decreased 8.9% in constant
currency in Italy and 1.1% (6.9% increase in constant currency) in Other Southern Europe compared to 2011. These
decreases in France and Italy were due primarily to a softening demand in the staffing/interim business as well as a 21.2%
decline in constant currency in our permanent recruitment business, mostly driven by the further winding down of the Pole
Emploi contract in France.
Gross profit margin increased in 2013 compared to 2012 due primarily to the CICE payroll tax credit in France, which was
partially offset by the additional social security reserve recorded in France in 2013, the decrease in our permanent
recruitment business, and pricing pressures in the small/medium-sized business in France and in Italy that unfavorably
impacted staffing/interim gross margins. In 2012, gross profit margin remained flat compared to 2011 as the improvement
related to our two acquisitions in France was offset by the decrease in our permanent recruitment business, including the
further wind down of the Pole Emploi contract in France, and pricing pressures in Italy that unfavorably impacted staffing/
interim gross margins.
In 2013, selling and administrative expenses decreased 3.8% (–6.9% in constant currency and –7.2% in organic constant
currency) compared to 2012 primarily related to the decrease in organic salary-related costs due to lower headcount,
partially offset by an increase in restructuring costs to $7.8 million recorded in 2013 compared to $3.8 million in 2012 and
the additional recurring selling and administrative costs resulting from the 2012 Damilo acquisition in France. In 2012, selling
and administrative expenses decreased 7.6% (–0.1% in constant currency and –2.4% in organic constant currency)
compared to 2011. The decrease in selling and administrative expenses was due to lower organic salary-related costs as
headcount was reduced, partially offset by the additional costs from the Proservia and Damilo acquisitions, additional bad
debt expense incurred in France and Italy as a result of collection issues with certain clients, and $3.8 million of restructuring
costs in 2012 compared to $1.5 million in 2011.
OUP margin in Southern Europe was 3.7%, 2.6% and 3.1% for 2013, 2012 and 2011, respectively. OUP margin increased
in 2013 primarily due to France, where the OUP margin was 3.8%, 2.4%, and 2.7% in 2013, 2012 and 2011, respectively.
France’s margin increase in 2013 was due to the improvement in the gross profit margin and the decrease in salary-related
costs due to lower headcount, partially offset by the increase in restructuring costs in 2013 compared to 2012. Italy’s OUP
margin was 4.9%, 4.3% and 5.9% in 2013, 2012 and 2011, respectively. Italy’s margin increase in 2013 was due to the
decrease in salary-related and lease costs from lower headcount and fewer offices, partially offset by the increase in
restructuring costs in 2013 compared to 2012. Other Southern Europe’s OUP margin was 1.4%, 1.3% and 1.4% in 2013,
2012 and 2011, respectively. Other Southern Europe’s slight margin increase in 2013 was due to the decrease in organic
salary-related costs partially offset by the decrease in the gross profit margin and increase in restructuring costs in 2013
compared to 2012. The margin decrease in Southern Europe in 2012 was primarily due to France as the increase in the
gross profit margin did not fully compensate for the deleveraging of expenses as we did not decrease selling and
administrative expenses to the extent of the revenue decline as well the margin decrease in Italy due to the decrease in
gross profit margin and deleveraging of expenses.
Southern Europe Revenues
In Millions ($)
Southern Europe
Operating Unit Profit
In Millions ($)
’11
’12
’13
185.1
264.6
254.3
’11
’12
’13
7,250.9
8,211.8
7,237.0