2nd UPDATE: ADP 4Q Profit Rises 16% On New-Business Sales Growth
July 28 2011 - 2:38PM
Dow Jones News
Automatic Data Processing Inc.'s (ADP) fiscal fourth-quarter
profit improved 16% due to solid new-business sales growth and
higher payroll revenue, while the number of employees on U.S.
clients' payrolls increased.
The payroll-processing and human-resources-outsourcing company
has seen its revenue grow in recent quarters, helped by strong
new-business sales growth in its employer-services and professional
employer organization services segments. The company said it is
seeing strength from employers in the Central U.S.--including
Chicago, Texas and Oklahoma, as well as Northern California.
In an interview with Dow Jones Newswires, Chief Financial
Officer Chris Reidy said the company's investments in its sales and
service staff and product innovation helped lift retention and new
bookings. The company began making those investments in the fourth
quarter of fiscal 2010, and has now achieved an all-time high
retention of 91%.
Reidy added the company's focus on product innovation has helped
drive results, including mobile applications and deal and
management systems. For example, ADP earlier this month began
offering small-business owners a mobile application that would
allow them to input payroll and run reports on their
smartphone.
For the quarter ended June 30, ADP reported a profit of $241.8
million, or 48 cents a share, compared with $207.9 million, or 42
cents a share, a year earlier. Revenue rose 14% to $2.51
billion.
Analysts surveyed by Thomson Reuters had expected a profit of 49
cents a share on revenue of $2.44 billion.
Gross margin declined to 39.4% from 41.5%.
Revenue at the company's employer-services segment, the largest
top-line contributor by far, climbed 9%. New-business sales for
Employer Services and PEO Services 8%.
In the U.S., revenue from the traditional payroll and payroll
tax filing business grew by 4%. The number of employees on ADP's
clients' payrolls in the U.S. increased 2.6%, as measured on a
same-store-sales basis.
The company now sees earnings rising 8% to 10% and revenue
growth of 7% to 9%. In a conference call with analysts, Chairman
and Chief Executive Gary Butler said the company sees stronger
top-line growth for dealer services, due to a larger sales force
and new products. He did warn the new year would see pressure from
the continued low-interest rate environment.
Shares were down 0.6% to $52.07 in recent trading. The stock is
up 13% this year.
-By John Kell, Dow Jones Newswires; 212-416-2480; john.kell@dowjones.com
--Mia Lamar contributed to this report.
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