ManpowerGroup 2013 Annual Report Download - page 36

34 ManpowerGroup 2013 Annual Report Management’s Discussion & Analysis
MANAGEMENT’S DISCUSSION & ANALYSIS
of financial condition and results of operations
Northern Europe — In Northern Europe, which includes operations in the United
Kingdom, the Nordics, Germany and the Netherlands (comprising 30.7%, 23.1%,
12.1%, and 9.6%, respectively, of Northern Europe’s revenues), revenues from
services decreased 0.6% (–1.7% in constant currency and –2.3% in organic
constant currency) in 2013 as compared to 2012. The decrease in revenues from
services was primarily attributable to the 8.2% decline in constant currency in
our Experis business line, which saw softening demand for IT services among
our larger clients, in both our interim and permanent recruitment businesses.
In 2012, revenues from services in Northern Europe decreased 6.3% (–1.3% in
constant currency) primarily attributable to declines in our Experis business
line, which saw softening demand in both interim and permanent recruitment, as
well as a decline in our ManpowerGroup Solutions business. This decline
was partially offset by growth in our Manpower business line, primarily in the
United Kingdom.
Gross profit margin decreased in 2013 due to the decline in our staffing/interim margins as we experienced lower bench
utilization in our Manpower business line in Sweden and new collective labor agreements and higher holiday pay costs in
Germany, encountered general pricing pressures in several markets, and saw a 9.8% decrease in constant currency in our
permanent recruitment business. In 2012, gross profit margin decreased due to the decline in our staffing/interim margins
as we had an increase of unbillable labor due to lower bench utilization and higher vacation pay in Germany and Sweden,
and general pricing pressures in the Netherlands. The decrease in 2012 was also due to the business mix changes in our
revenues, as staffing/interim revenue growth came from our lower-margin United Kingdom market, and our higher-margin
permanent recruitment and ManpowerGroup Solutions revenues declined.
In 2013, selling and administrative expenses decreased 3.8% (–5.3% decrease in constant currency and –5.9% in organic
constant currency) compared to 2012. The decrease in selling and administrative expenses was due primarily to lower
headcount, which reduced compensation-related expenses such as salaries and variable incentive-based costs, lower
lease costs, and the additional cost savings from the simplification and cost recalibration plan put in place in the fourth
quarter of 2012, partially offset by an increase in restructuring costs to $39.0 million recorded in 2013 compared to $13.2
million in 2012 and the additional recurring selling and administrative costs resulting from an acquisition in April 2013. In
2012, selling and administrative expenses decreased 9.6% (–4.4% in constant currency) compared to 2011 due primarily to
lower headcount, which reduced compensation-related expenses such as salaries and variable incentive-based costs, and
overall tighter expense controls.
OUP margin for Northern Europe was 2.4%, 2.8% and 3.5% in 2013, 2012 and 2011, respectively. The OUP margin
declined in 2013 as the decrease in compensation-related expenses and lease costs as well as additional cost savings
from the simplification and cost recalibration plan was not enough to offset the decrease in the gross profit margin and the
increase in restructuring costs in 2013. The margin decline in 2012 was primarily due to the decline in gross profit margin.
APME — In 2013, revenues from services for APME decreased 10.3% (–1.4% in
constant currency) compared to 2012. In Japan (which represents 37.7% of
APME’s revenues), revenues from services decreased 3.7% in constant currency
due primarily to soft demand for our staffing/interim services as a result of
legislative changes and fewer billing days in 2013 compared to 2012, and the
run-off of a large TBO client contract that began to wind down in early 2013,
partially offset by a 31.7% increase in constant currency in the permanent
recruitment business. In Australia (which represents 23.5% of APME’s revenues),
revenues from services were down 6.6% in constant currency compared to 2012
due to the decreased demand for interim services in our Experis business line,
partially offset by an increase in the permanent recruitment business.
In 2012, revenues from services for APME increased 2.5% (3.1% in constant
currency and 1.6% in organic constant currency) compared to 2011. China and
India both made acquisitions in 2011, which significantly increased their revenues.
Excluding acquisitions, revenue growth in constant currency for 2012 in China
and India was 11.4% and 17.5%, respectively. In Japan, we saw a slight decrease
APME Revenues
In Millions ($)
APME Operating
Unit Profit
In Millions ($)
’11
’12
’13
2,728.8
2,661.7
’11
’12
’13
90.7
78.8
2,447.7
70.8
Northern Europe Revenues
In Millions ($)
Northern Europe
Operating Unit Profit
In Millions ($)
’11
’12
’13
5,773.9
5,738.8
6,159.4
’11
’12
’13
159.8
212.6
139.7