ManpowerGroup 2004 Annual Report Download - page 48

2004 Annual Report MANPOWER INC.46
Right – On January 22, 2004, we completed our exchange offer
to acquire RMC, the world’s largest career transition and organi-
zation consulting services firm, operating through approximately
300 offices in 35 countries. The results of RMC’s operations are
included in our consolidated financial statements since that date.
The acquisition of RMC expands the range of services that we
offer to customers as a strategic partner through every stage of
the employment cycle. We have merged our Empower operations
into RMC, and the results of the combined entity are reported as
the Right segment. Right’s revenues for the year are $431.1 million,
of which, approximately 65% relates to career transition services
and 35% relates to organizational consulting in 2004. Historically,
the career transition services have a slightly higher gross profit
margin than the organizational consulting services.
During the first nine months of the year, demand for career transi-
tion services declined as the economy improved. Fourth quarter
revenues, however, improved 4.3% sequentially due in part to seasonal factors. Demand for organizational consulting
services has improved modestly during the course of the year as companies became more willing to invest in these
services with an improving economy.
Operating Unit Profit for the year was $24.5 million, which is net of $8.1 million of integration costs related to the merger
of Empower into RMC.
The Operating Unit Profit Margin for the year was 5.7%. This below-normal Operating Unit Profit Margin not only reflects
the integration costs discussed above, but also reflects a transition period in adjusting expense levels to support lower
revenue levels.
Other Operations – The Other Operations segment includes our
operations in the Asia Pacific region, Canada, Mexico and South
America, delivering service through 491 offices. Our largest country
operation within this segment is Japan, which accounts for
approximately 45% of the segment’s revenues.
Revenues in the region improved 22.3% to $1.8 billion, or
16.0% in constant currency. This strong local currency revenue
growth was fueled by South America (+50.4%), Japan (+11.6%),
Mexico (+15.0%), Australia (+10.3%) and Canada (+5.9%).
The Gross Profit Margin improved in the region primarily due to an
increase in permanent placement fees. This improvement was
partially offset by a decline in Gross Profit Margin in Japan, as
increases in social costs were not fully recovered through higher
bill rates due to competitive pressures.
Selling and Administrative Expenses increased 28.0%, or 21.3% in constant currency, reflecting increased investments
in 52 new offices in the segment and additional personnel to support the growth of the permanent placement business.
Operating Unit Profit increased 14.9% to $46.0 million, or 8.5% in constant currency. The Operating Unit Profit Margin
declined from 2.7% to 2.5% as Selling and Administrative Expense increases exceeded the gains in Gross Profit Margin.
MANAGEMENT’S DISCUSSION AND ANALYSIS
of financial condition and results of operations
2002
2003
2004
54.4 (+36.5%)
66.9 (-+23.0%)
431.1
RIGHT(a) REVENUES
in millions ($)
2002
2003
2004
(4.5)
(2.3)
24.5
RIGHT OPERATING UNIT PROFIT(a)
in millions ($)
2002
2003
2004
1,220.3 (+3.7%)
1,476.4 (+21.0%)
1,806.2 (+22.3%)
OTHER OPERATIONS REVENUES
in millions ($)
2002
2003
2004
19.4 (+27.1%)
40.1 (+106.4%)
46.0 (+14.9%)
OTHER OPERATIONS
OPERATING UNIT PROFIT
in millions ($)
(a) Represents the operations of Right Management Consultants, Inc.,
since its acquisition in January 2004, and the Empower Group.