Monster (NYSE:MWW) reported financial results for the fiscal year 2012 on February 7, and also announced progress in implementation of its corporate restructuring plans. It completed the sale of ChinaHR business and included Latin America and Turkey in discontinued operations. The ChinaHR business was sold to Saongroup for an undisclosed amount, even as it retained a 10% share in the combined China entity.
Revenues from continuing operations dropped almost 10% y-o-y to $890 million. The decline reflects continued weakness in European and Asian job markets. The company expects the reduced uncertainty around the debt ceiling and budget negotiations to produce a lower risk environment as the year progresses. We believe this would result in an increase in bookings and help the North America business arrest the decline in sales.
North America Business At The Cusp Of A Turnaround?
The company reported that bookings in North America were down 5% on an annual basis and up 26% on a sequential basis in the fourth quarter. During the quarter, the primary drag was the government business, down 19% year-over-year. However on a full year basis, bookings from government business had a strong performance with an increase of 8% as the North America career bookings declined 3%. Newspaper and e-comm staffing were other sectors that reported a growth in 2012. These increases were offset by a decline in field and telesales bookings. The company notes that its clients are seeing a significant increase in the number of replies they get to their job listings. We expect the efficacy of Monster’s services to help it attract listings from competitors and register marginal growth in listings in the near term.
International Business Still Slow
The international business still continues to be the biggest worry for Monster. Bookings in Europe were down 30% year-over-year in the fourth quarter. The German market led the decline with a 41% decrease in bookings. Other major European markets were also down between 20% and 25%. The Asia-Pacific region also registered a decline with bookings down 6% year-over-year. Bookings in South Korea, where the company is a major player in recruitment services industry were flat, and bookings in India declined 9% on a year-over-year basis. The company has been gradually rolling out its Power Resume Search (PRS) and SeeMore services in Europe. It noted that PRS consistently outperformed its traditional products. SeeMore bookings during the year were $8 million and the pipeline is increasing significantly. We expect that the growing popularity of its tools will mitigate the negative impact of the bleak economic scenario in Europe.
Updates On Strategic Alternatives
The company noted that the search for strategic alternatives has slowed down with no concrete offers available for consideration. The company has reduced its focus on the search in the near term and will be spending little additional management or financial resources in pursuit of such alternatives. It is however rapidly implementing the corporate restructuring plans to improve its competitive position and profitability. Besides exiting its operations in China, Brazil, Mexico and Turkey in 2012, it also reduced headcount in non-sales functions.
It expects to lower operating expenses by about $50 million annually from the initiatives. These actions are expected to cost between $50 million and $60 million, of which about $23 million was incurred in the fourth quarter. The remaining costs will be accounted for in the coming quarters and will make it tougher for the company to turn profitable. In 2012, the company reported a net loss of $258 million from continuing operations, down from a net income of $54 million in 2011.
We are revising our $7.50 Trefis price estimate for Monster.