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WIKI ANALYSIS
Robert Half International (NYSE:RHI) is a temporary staffing company with over $4.6 billion in 2007 revenue. The company provides its customers with temporary, project, and full-time workers specializing in accounting and finance.[1] Though Robert Half competes with companies such as Adecco SA (ADO), Manpower (MAN), Spherion (SFN), Kelly Services (KELYA), and MPS Group Inc. (MPS) in the temporary staffing market, its employees' high degree of specialization sets it apart from its peers.
Robert Half uses its reputation for providing specialized financial and accounting workers to charge a premium price, making it the most profitable of the large temporary staffing companies, with operating margins of 10.56% in 2007.[2] Despite Robert Half's advantages, several external factors, such as unemployment rates, which rose from 4.5% to 5.2% between March 2007 and March 2008, affect its profitability.[3] On the other hand, higher demand for flexible workers has led to an increase in the average number of temporary workers employed on a given day to 2.96 million in 2007,[4] and a weak dollar boosted Robert Half's 2007 revenue.[5]
Business Segments
Temporary and Consultant Staffing (78%)
Temporary and Consultant Staffing provides customers with temporary and consultant workers.[7] The workers are employed and paid by Robert Half and customers pay Robert Half a fee for hours worked. Temporary and Consultant Staffing operates under the following brand names:
- Accountemps provides customers with temporary accounting workers to deal with predictable events such as vacations, tax season, and taking inventories as well as unpredictable events such as illness or emergencies.
- OfficeTeam provides customers with full time temporary workers in administration and office settings. Employees range from word processors to office managers.
- Robert Half Technology provides customers with experts in programming, networking, help desk support, etc. for technology consulting and full time worker placement.
- Robert Half Legal provides customers with temporary and full time attorneys, paralegals, legal administrators, and legal secretaries.
- Robert Half Management Resources provides customers with senior level finance and accounting professionals such as CFOs and senior financial analysts to assist with projects such as financial systems conversions, expansions into new markets, and post-merger financial consolidation.
- The Creative Group supplies clients in the marketing, advertising, and web design businesses with project consultants that fill positions such as graphic designers, public relations specialists, and creative directors.
Permanent Placement Staffing (10%)
Permanent Placement Staffing provides customers with full time accounting and finance workers under the Robert Half Finance & Accounting brand name. Customers pay Robert Half Finance & Accounting a placement fee (usually a percentage of the new employees salary) to help them find new workers. Workers are not charged any fees by Robert Half Finance & Accounting. Additionally, customers sometimes hire a worker from one of Robert Half's Temporary and Consultant Staffing programs to work full time. If this happens, the customer pays Robert half a one-time fee to convert the worker from a temporary worker to a full-time employee.[8]
Risk Consulting and Internal Audit Services (12%)
Risk Consulting and Internal Audit Services provides customers with independent internal audit and risk consulting services under the Protiviti brand name. Customers pay Protiviti a consulting fee for internal audit and risk management consulting.[9]
Business Financials
Robert Half International Revenue, Operating Income, and Net Income[11] ($ in millions)
| Segment | 2007 | 2006 | 2005 |
| Temporary and Consultant Staffing | 3,649 | 3,134 | 2,640 |
| Permanent Placement Staffing | 444 | 336 | 219 |
| Risk Consulting and Internal Audit Services | 552 | 543 | 479 |
| Total Revenues | 4,646 | 4,014 | 3,338 |
| Operating Income | 480 | 450 | 382 |
| Net Income | 296 | 283 | 237 |
Key Trends and Forces
Increasing unemployment results in low demand for temporary workers
Temporary workers are generally the first hired as unemployment drops and the first fired as unemployment rises. Situations in which unemployment rises usually result in decreased demand for temporary workers.[12] Between March 2007 and March 2008, unemployment rose from 4.5% to 5.2%.[13] During that period, Robert Half's net profit margins decreased from 6.44% to 5.77%.[14]
Demand for flexible jobs and workers increases the demand for Robert Half's temp services
Partially as a result of the demand for more flexibility in the workplace, the average number of temporary workers employed per day in the U.S. rose from 2.91 million in 2005 to 2.96 million in 2006.[15] During the same period of time, Robert Half's total revenue increased from $2.6 billion to $3.1 billion.[16] According to the American Staffing Association, two-thirds of temporary employees cite increased flexibility as their main reason for choosing to become a temporary or contract employee, along with having more time to spend with family.[17] Businesses also prefer to hire temporary workers because they can add employees during peak work periods without incurring the costs of hiring full time.[18]
Weak U.S. dollar boosts Robert Half's international revenue
Between June 18, 2007 and June 18, 2008, the dollar value of one euro increased from $1.34 to $1.55.[20] Robert Half's international revenue benefits when the U.S. dollar depreciates relative to foreign currencies. As the value of the dollar falls, each euro or pound it earns abroad converts to a larger number of dollars, boosting Robert Half's USD-reported revenue. Also, the percentage of RHI's revenue earned abroad increased from 19% to 24% between 2005 and 2007, making the company more exposed to exchange rate fluctuations.[21] As a result of these trends, Robert Half's free cash flow was boosted by about $19 million in 2007.[22] At the same time, sharp appreciations of the USD reduce the value of international sales.
Key Competitors
- Manpower (MAN)- Manpower is a world wide staffing agency with a presence in over 80 countries. Manpower gets 90% of its revenues from outside the US and is an international competitor for Robert Half. However, Manpower doesn't offer as many specialized temporary workers as Robert Half.[23]
- Adecco SA (ADO)- Adecco SA is a staffing agency based in Switzerland. It offers some specialized labor, but for the most part offers unspecialized labor, much like Manpower (MAN).[24]
- Spherion (SFN)- Spherion offers temporary skilled workers and managed services such as recruiting, data center, and networking.[25]
- Kelly Services (KELYA)- Kelly Services provides scientific temporary workers in IT, engineering, and financial services. The company has a presence in 36 countries.[26]
- MPS Group Inc. (MPS)- MPS Group provides customers with temporary workers in areas such as IT, financial services, engineering, health care, and workforce automation positions. The company operates throughout North America, Continental Europe, Australia, and Asia.[27]
Robert Half and Competitors 2007[28]
| Company | Revenue (in millions) | Net Income (in millions) | Net Profit Margin | Offices | Number of Clients | Number Employed in permanent, temporary, and contract positions | Countries Occupied |
| Robert Half | $4,646 | $296 | 6.38% | 360 | - | 257,000 | 18 |
| Manpower | $20,500 | $485 | 2.36% | 4,498 | 400,000 | 5,000,000 | 80 |
| Adecco | $28,922 | $1,150 | 3.98% | 7,000 | 150,000 | - | 60 |
| Spherion Corporation | $2,017 | $25 | 1.25% | 940 | 8,000 | 300,000 | 8 |
| Kelly Services | $5,668 | $61 | 1.08% | 2,500 | - | 750,000 | 34 |
| MPS Group Inc. | $2,172 | $87 | 4.01% | 230 | - | - | - |
References
- ↑ RHI 2007 10-K: Business pg 1
- ↑ RHI 2007 10-K: Notes to Consolidated Financial Statements, pg 38
- ↑ US Department of Labor Search for total unemployment rate
- ↑ Staffing Industry Economic Analysis 2006
- ↑ EUR to USD Exchange Rates
- ↑ RHI 2007 10-K: Notes to Consolidated Financial Statements, pg 38
- ↑ RHI 2007 10-K: Business, pg 2
- ↑ RHI 2007 10-K: Business, pg 2
- ↑ RHI 2007 10-K: Business, pg 2
- ↑ RHI 2007 10-K: Notes to Consolidated Financial Statements, pg 38
- ↑ RHI 2007 10-K: Notes to Consolidated Financial Statements, pg 38
- ↑ RHI 2007 10-K: Risk Factors, pg 4
- ↑ US Department of Labor Search for total unemployment rate
- ↑ RHI 2008 Q1 Revenues, pg 3
- ↑ Staffing Industry Economic Analysis 2006
- ↑ RHI 2007 10-K: Notes to Consolidated Financial Statements, pg 38
- ↑ Staffing Industry Economic Analysis 2006
- ↑ Staffing Industry Economic Analysis 2006
- ↑ EUR to USD Exchange Rates
- ↑ EUR to USD Exchange Rates
- ↑ RHI 2007 10-K: Notes to Consolidated Financial Statements, pg 38
- ↑ RHI 2007 10-K: Consolidate Statements of Cash Flows, pg 21
- ↑ Google Finance: Manpower
- ↑ Adecco SA 2007 Annual Report: Key Figures
- ↑ Google Finance: SFN
- ↑ Google Finance: KELYA
- ↑ Google Finance: MPS
- ↑ EUR to USD Exchange Rates Euros converted to dollars using the average exchange rate for 2007]
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