SFN Group (NYSE:SFN.DL)
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The Company provides temporary staffing services, managed services and permanent placement services within North America.
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The Company provides temporary staffing services, managed services and permanent placement services within North America.
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Spherion Corporation (SFN) provides temporary staffing services, managed services and permanent placement services in the US and Canada. Temporary staffing services include personnel in clerical, light industrial, information technology, finance and accounting, legal, engineering, sales and marketing and other sectors. Managed services include managing recruitments, administrative services, data center and network operations. Within permanent placement, the company’s employees locate talent on behalf of clients, screen the candidates and assist in the recruitment efforts.
The staffing market in North America, which includes temporary staffing, permanent placement and other services, is worth $108 billion as of 2006 and is expected to grow by 5%-6% annually for the next few years. Demand for skilled workforce is increasing in sectors like finance, accounting, legal, engineering, and information technology. Demographics of the labor force continue to indicate that the overall labor pool may shrink over the next 10 years, creating a shortage of qualified job candidates. This shortage would translate companies to use services provided by Spherion.
SFN is focusing on bringing down its low margin large account business while concentrating on increasing its business mix from small and mid sized accounts, which represented 54% of revenues for 2006. This initiative is likely to drive bill rates and improve its gross margins. Also during the 2005-2006, the company exited some of its non-core business, which should enable the company to return to revenue growth. Thus the shares of Spherion offer good opportunity for long-term investors.
In April 2007, Spherion Corporation acquired Resulte Universal, a specialty technology, accounting and finance staffing services firm based in Dallas, Texas for approximately $18.6 million. For 12 months ending March 2007, Resulte Universal generated revenues of $23 million. This acquisition is expected to be modestly accretive to Spherion's earnings in 2007. Endorsing the same, Spherion presence in Texas will increase, as Texas is one of the US fastest-growing markets for accounting, finance and technology recruiting and staffing services. For the first quarter of 2007, Professional Services exhibited 5.4% revenue growth on a comparable yearly basis, with temporary staffing and permanent placement showcasing strong growth across information technology sector. Gross Profit margins improved due to improved pay/bill spreads, growth of permanent placement revenues and lower employee benefit and insurance costs. The market for company’s Recruitment Process Outsourcing (RPO) remains robust with market demand for the same remaining strong and revenues from this segment up by 70% on a yearly basis.The company anticipates revenue for the second quarter will be between $470 and $485 million, reflecting modest growth, as demand across the industry remains challenging. Earnings from continuing operations are expected to be between $0.09 and $0.13 per share. Demographics of the labor force continue to indicate that the overall labor pool may shrink over the next 10 years, creating a shortage of qualified job candidates. With the long term North American staffing industry being expected to grow by about 5- 6%, the stock of Spherion Corporation offers good opportunity for long-term investors.