(Updates to add CFO comments, updates stock price)
DOW JONES NEWSWIRES
Automatic Data Processing Inc.'s (ADP) fiscal first-quarter
earnings rose 2.6%, aided by cost cuts, though mounting
unemployment continued to trim the number of workers at clients'
businesses.
President and Chief Executive Gary C. Butler said he was
encouraged by the better-than-expected results. ADP's new business
sales at its employer services and human-resources outsourcing
segment, which were down 2% in the quarter, "are tracking close to
our expectations" and its dealer services businesses benefited from
the government's cash-for-clunkers program, he added.
Though rising unemployment was slow to hit payroll-processing
companies like ADP, it began cutting into the bottom line early
this year.
Chief Financial Officer Chris Reidy told Dow Jones Newswires
that "We're seeing good signs but a lot of challenges remain ahead
of us." He expects the cost cuts of late last year are behind ADP,
and that the company has been adding service personnel and holding
steady levels of sales people that cater to its large and midsize
markets.
Reidy said ADP raised the low end of the cautious fiscal-year
view given in July amid signs the broader economy is stabilizing
and that he expects the company can return to revenue growth in the
high-single digits on a percentage basis. The timeframe depends on
the length of the economic trough, he said.
For the quarter ended Sept. 30, ADP reported a profit of $284.1
million, or 56 cents a share, up from $276.9 million, or 54 cents a
share, a year earlier. Revenue decreased 4% to $2.1 billion, with
half the drop due to currency changes.
Analysts polled by Thomson Reuters forecast earnings of 50 cents
a share on revenue of $2.05 billion.
Revenue at ADP's employer-services segment, by far its largest,
fell 3%. In the U.S., revenue declined 7% and employees on clients'
payrolls were down 6.5%. Pays per control--an important measure of
profitability for business--fell 6.5%.
ADP does about 80% of its business in the U.S. The number of
companies ADP processes payroll for had fallen 2.5% to 570,000.
Reasons include small business closings, as well as consolidations
and mergers, Reidy said. ADP also has seen pricing pressures,
particularly from local payroll providers for simpler payroll
accounts that don't cross borders or include extra services.
Companies have been negotiating lower fees, or more services at the
same price, though not at the levels seen when things were turning
down, he said.
Shares were recently up 0.8% at $40.96. The stock has gained
just 4% this year.
-By Tess Stynes, Dow Jones Newswires; 212-416-2481;
Tess.Stynes@dowjones.com;