Section 2 - FTSE

worsen still further in 2009 as America’s recession, triggered
by the meltdown in sub prime mortgages, deepens and
spreads worldwide. “We are a cyclical company,” Joerres
readily admits. “We understand that. During any economic
downturn, we will see our revenues decrease.” Although
revenues for 2008 are expected to rise by 6.3% to $21.8bn,
earnings will be down sharply. For example, analyst Andrew
Steinerman of JPMorgan, who had once expected 2008
earnings per share (EPS) of $5.10, cut his estimate to $4.88,
down 14.8% from 2007’s results.
Even more pain will come in 2009. “We are seeing a global
weakening,”acknowledges analyst Kevin McVeigh of Credit
Suisse.“This has impacted our estimates, which we have cut
dramatically in both earnings and revenues for 2009 on a
magnitude that is even greater than what we saw in the last
economic cycle.” McVeigh looks for 2009 revenues of
$18.7bn, down 14%, and EPS of just $2.50, down 48% from
2008’s results and down 56% from 2007’s record.
This grim outlook comes as no surprise to Joerres and his
management team. Since 1962 the company has conducted
quarterly surveys among large companies regarding hiring
plans for the following three months. The survey for the
quarter ended 31st December found that the net
employment outlook (the difference between those
companies that expect to increase hiring and those that
expect to lay off employees) had fallen to just nine percentage
points, down sharply from the 20-point spread during most
of the 2004 to 2006 period. Similar downturns were found in
key foreign economies, including those of the United
Kingdom, Japan, Singapore, Hong Kong, Australia, New
Zealand, Ireland, Norway, Spain and Mexico. For all that,
many analysts who follow Manpower believe that the
company will emerge from the current recession in a stronger
relative position due to its geographical diversification, range
of services, solid balance sheet, and (perhaps most important)
strong management team. JPMorgan’s Steinerman sums it
up this way: “Manpower’s discipline now will provide for a
more profitable recovery later.”
Weathering recessions
Manpower has weathered ten recessions since its founding
in 1948 by Winter and Aaron Scheinfeld. The two attorneys
were facing a tight deadline to complete a legal brief and
discovered there were no companies that furnished
temporary clerical help. After they met their deadline, they
founded Manpower and promptly ran into America’s first
postwar recession, which lasted nearly a year. Their
business survived and soon had branch offices throughout
the Northeast. After successfully establishing offices in
Montreal and Toronto, Manpower moved overseas to open
offices in the UK and France. Today, the company’s foreign
operations are conducted through more than 330
subsidiaries, such as Intellectual Capital of Australia, Right
Grow Talent Services of India, Elderly House of Israel,
JobSearchpower of Japan, Girlpower of the UK, and
Manpower Business Services France. Virtually all foreign
offices are managed and staffed by locals.
F T S E G L O B A L M A R K E T S • J A N U A R Y / F E B R U A R Y 2 0 0 9
The 1957 move into France has been especially
rewarding. In a country where preserving jobs is more
important than creating them, employers began to rely on
temporary staffing to fill positions at the margin.
Manpower’s French unit now serves not only France but
Guadeloupe, Luxembourg, Martinique, Monaco, Morocco,
New Caledonia, Reunion and Tunisia. Today it is
Manpower’s single largest national market, accounting for a
third of company revenues. The French connection also
illustrates Manpower’s willingness to take reasonable risks
for the sake of long-term growth. Fifty years ago few
companies of Manpower’s size were willing to go overseas.
However, Manpower’s progressive thinking built it into the
world’s third-largest temp firm, behind Swiss-based Adecco
and Randstad Holding, a Dutch company that leapfrogged
past Manpower when it acquired Vedior last year.
“Manpower from its earliest days was fairly agnostic in
regards to where it would invest in terms of new offices,”says
analyst Mark Marcon of Robert W Baird & Co.“The French
were one of the earlier adopters of temporary staffing, and
Manpower was early to the party and established a good
position there.”Marcon (who works from Baird’s Milwaukee
office, not far from Manpower’s headquarters) ticks off other
examples of the company’s well-timed moves. It opened
permanent placement offices in Italy years before temporary
staffing was made legal there, and when it was - in 1998 -
Manpower had a head start. Today, Italy accounts for 7% of
Manpower’s revenues but 13% of its operating earnings.
Marcon believes this will grow steadily as temps become
more accepted by Italian business.
Similarly, Manpower was among the first temp firms in
India and China, has just received a business licence to
operate in Vietnam, and expects to open offices in Egypt
soon. Recession or not, the company intends to continue
expanding abroad. “We work really hard,” says Joerres, “at
balancing between good expense management and
investing in the future so we can accelerate on the other
side of any downturn. When we see a sharp downturn, we
do all the things that you would expect a company to do,
but we will not starve high-growth markets.” Indeed,
despite the accelerating downturn in late 2008, Manpower’s
headcount remained virtually unchanged from a year
earlier.“They have been extremely progressive and flexible,”
Marcon says. “Manpower’s management team is almost
universally highly admired. They are extremely hardworking
and diligent and have been very progressive in
terms of making investments in growth markets.” As a
result, notes Marcon, Manpower has become a worldwide
company with the ability to shift its assets across the globe
much more easily than the vast majority of companies.
McVeigh of Credit Suisse is among those who agree:“We
hold CEO Jeff Joerres and CFO Mike Van Handel in very
high regard for their business acumen, integrity and
transparency. Under the leadership of Joerres, Manpower
has increased its margins, returns and growth rate by
pushing more aggressively into non-US markets, having
more price discipline, and adding more specialised staffing.”
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