Manpower profit, shares drop: But, worldwide, there were solid results, CEO says

Jul 19, 2008 (Milwaukee Journal Sentinel - McClatchy-Tribune Information Services via COMTEX) -- MAN | Quote | Chart | News | PowerRating -- The share price of Manpower Inc. took a hit Friday after the Milwaukee-based employment services company reported lower second-quarter earnings resulting from economic sluggishness worldwide.

The price tumbled 15.3%, to close at $47.55 per share, down $8.58 Friday following Manpower's financial report, released before the markets opened.

Net earnings dropped 33% from the year before, even as revenue for the quarter climbed 17%, to reach a record $5.9 billion for the period. Earnings amounted to $107.4 million or $1.34 a share, including an 18 cent-per-share net charge that included gains from a new payroll tax calculation in France and an increase in the company's legal reserve for a regulatory case in France. The company benefited from the weak dollar, with an impact of about 21 cents per share from exchange rates.

In a conference call Friday, Manpower executives portrayed a reticent hiring market in the United States and much of the world but offered indications that things aren't bad all over and could be worse.

"In many ways, I feel uncomfortable saying that we had a solid quarter because of the backdrop of sour news that we're all hearing. But in fact we did have a solid second quarter," said Jeff Joerres, chairman, president and chief executive officer of Manpower.

U.S. operations, which lost 43% of their operating profit from the year before, showed a slight gain in revenue, and Joerres said that, aside from "hallway chatter," Manpower hasn't seen "massive downsizing" from domestic clients.

"The U.S. market continues to languish with mixed news. We are not seeing, however, any further decline," Joerres said.

And despite a 57% decrease in operating profit in France, which accounted for about one-third of Manpower's revenue for the quarter, other countries, including Italy, Belgium, Israel and Germany, were holding their own.

"While we've seen some softening -- and we believe we'll see further softening in Europe in the third quarter," Joerres said, "there are still some very strong performances, therefore giving us a much better glide path as we go into a potentially slower period."

Milwaukee-based Jefferson Wells International, a financial services arm of Manpower, continued to struggle, with an operating loss of $1.6 million for the quarter. Joerres remained bullish on the subsidiary's future, though, saying that companies have projects in the works for Jefferson Wells but have delayed pulling the trigger because of economic doubts.

"Our backlog is strong, our pipeline is healthy, but it just continues to be strung out," Joerres said.

Mark Marcon, an analyst for Milwaukee's Robert W. Baird & Co. issued a report Friday that notes "macro headwinds" facing Manpower as it lowered third-quarter earnings estimates to $1.45 to $1.489 a share, below most analysts' projections.

Marcon also pointed to increased contributions from Right Management, the Manpower subsidiary that counts on outplacement services for 70% of its business.

Manpower told its employees to expect a couple more quarters of rough sledding, Joerres said, and he expressed confidence that they would rally to the challenge.

"No doubt we will be in choppy waters," Joerres said, "but we have a team that knows how to manage expenses and, equally important, knows how to invest cleverly during this time so that we can rocket out the other side."

Manpower Inc.

2nd quarter

%

06/30 2008 2007 change

Sales $5,905 $5,034 17.3

Net income 107.4 160.4 -33.0

EPS (diluted) 1.34 1.86 -28.0

Six months

Sales $11,292 $9,570 18.0

Net income 182.9 219.9 -16.8

EPS (diluted) 2.27 2.54 -10.6

Figures in millions except for earnings per share. Percentages are based on unrounded sales and income figures.

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