© 2013 Crain Communications Inc
Wall Street Eyes Staffing Rebound
Paul Ginocchio, Managing Director, Business Services and Education Equity Research, Deutsche Bank
Concurrent Session: Operations & Finance Track
TUE, FEB 26 10:15 AM CONGRESSIONAL
Sponsored by:
Deutsche Bank
Wall Street Eyes Staffing ReboundPaul Ginocchio, CFABusiness Services & Education Equity ResearchDeutsche Bank SecuritiesSIA Executive Forum 2013, Orlando
All prices are those current at the end of the previous trading session unless otherwise indicated. Prices are sourced from local exchanges via Reuters, Bloomberg and other vendors. Data is sourced from Deutsche Bank and subject companies. Deutsche Bank does and seeks to do business with companies covered in its research reports. Thus, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. DISCLOSURES AND ANALYST CERTIFICATIONS ARE LOCATED IN APPENDIX 1. MICA(P) 072/04/2012
February 26, 2013
Paul Ginocchio, CFASIA Executive Forum
Feb 26, 2013
Deutsche Bank
22/02/2013 16:03:06 2010 DB Blue template
Source: Deutsche Bank Securities
Key Takeaways and Agenda
2
2010 DB Blue template
KEY TAKEAWAYS FROM MY PRESENTATION1. Learn how Wall Street thinks about Staffing2. Understand what investors look and pay for in a staffing company (growth &
efficiency)3. Key operating metrics which are correlated with efficiency
AGENDA1. Introduction and Jargon2. Staffing stock performance for the last 7 years in 4 slides3. Where are we in the staffing and economic cycle4. How this cycle is different from the last cycle + ACA5. What investors look for and pay for in staffing companies6. The conversion ratio7. Drivers of staffing agency efficiency
Paul Ginocchio, CFASIA Executive Forum
Feb 26, 2013
Deutsche Bank
22/02/2013 16:03:06 2010 DB Blue template
Part 1: Bio and coverage universe
3
2010 DB Blue template
Paul Ginocchio started with Deutsche Bank in London in November 1998 to initiate coverage of the Business Services sector on a pan-European basis. During Paul's over four years in London, he was consistently ranked in the top 3 individually by Reuters and also received runner-up recognition in Institutional Investor's survey. Paul moved to New York in February 2003 to initiate coverage of the Advertising & Publishing sector. He covered US newspapers, yellow pages, magazines, advertising agencies and marketing services and was ranked 3rd in II in 2007. In fall 2008, Paul returned to covering Business Services and in 2012 was second in Institutional Investor's All-America research survey after being third the prior year. He was also #1 in his sector in 2010 in the FT-Starmine awards for earnings estimates. Previous to Deutsche Bank, Paul worked for PwC in Valuation Services and was based in Chicago and London. He received a B.A. in Economics from North Carolina State Univ. in 1991, an MBA at Indiana Univ. (Distinction), and is a Chartered Financial Analyst (CFA).
Staffing Consulting / Info Services Education
Robert Half (RHI, Buy) Huron Consulting (HURN, Buy) Grand Canyon Education (LOPE, Buy)
TrueBlue (TBI, Buy) Towers Watson (TW, Buy) American Public Education (APEI, Buy)
Manpower (MAN, Buy) Equifax (EFX, Hold) DeVry (DV, Buy)
On Assignment (ASGN, Buy) Corporate Exec. Board (CEB, Hold) Corinthian Colleges (COCO, Hold)
Kforce (KFRC, Hold) FTI Consulting (FCN, Hold) Capella Education (CPLA, Hold)
Resources Global (RECN, Hold) Advisory Board (ABCO, Hold) Bridgepoint Education (BPI, Hold)
ITT Education Services (ESI, Sell)
Apollo Group (APOL, Sell)
Strayer (STRA, Sell)
New Oriental (EDU, Buy)Source: Deutsche Bank Securities
Paul Ginocchio, CFASIA Executive Forum
Feb 26, 2013
Deutsche Bank
22/02/2013 16:03:06 2010 DB Blue template
Source: Deutsche Bank Securities
Financial jargon to be used in today’s presentation
4
2010 DB Blue template
Correlation = Measure of the effect of a change in one variable on the value of another variable
Gross Profit = GP ($ mark up)
EBIT = Operating Profit, aka Earnings Before Interest and Tax
EBITDA = Earnings Before Interest, Tax, Depreciation, and Amortization
PE = Price to Earnings ratio (most commonly cited valuation metric)
EV/EBITDA = Enterprise Value / EBITDA (Enterprise value is the market value of all equity and debt minus cash)
Paul Ginocchio, CFASIA Executive Forum
Feb 26, 2013
Deutsche Bank
22/02/2013 16:03:06 2010 DB Blue template
Source: Factset and Deutsche Bank Securities
Part 2 Downturn: Staffers typically underperform when economy is decelerating & temp penetration declining
5
2010 DB Blue template
0
20
40
60
80
100
120
140
160
180
200De
c05
Feb0
6
Apr0
6
Jun0
6
Aug0
6
Oct
06
Dec0
6
Feb0
7
Apr0
7
Jun0
7
Aug0
7
Oct
07
Dec0
7
Feb0
8
Apr0
8
Jun0
8
Aug0
8
Oct
08
Dec0
8
Feb0
9
Apr0
9
Jun0
9
Aug0
9
MAN +17%
KFRC -2%SP500 -17%RHI -35%TBI -36%RECN -41%ASGN -48%
Four of six staffing stocks under performed from peak of temp penetration in Dec 2005 (1.97%) to the trough in temp penetration in Sept 2009 (1.33%)
Paul Ginocchio, CFASIA Executive Forum
Feb 26, 2013
Deutsche Bank
22/02/2013 16:03:06 2010 DB Blue template
Source: Factset and Deutsche Bank Securities
6
2010 DB Blue template
Temp penetration rose 28% from 1.34% in July 2009 to 1.72% in Dec 2010,which means temp penetration rose 0.02% a month on average
Early cycle: Investors like the staffing companies as they typically outperform early in the economic cycle
60
80
100
120
140
160
180
200
220
Jul0
9
Aug0
9
Sep0
9
Oct
09
Oct
09
Nov0
9
Dec0
9
Dec0
9
Jan1
0
Feb1
0
Feb1
0
Mar
10
Apr1
0
Apr1
0
May
10
Jun1
0
Jul1
0
Jul1
0
Aug1
0
Sep1
0
Sep1
0
Oct
10
Nov1
0
Nov1
0
Dec1
0
ASGN +93%
KFRC +66%
TBI +42%MAN +31%SP500 +27%RHI +23%RECN +23%
Paul Ginocchio, CFASIA Executive Forum
Feb 26, 2013
Deutsche Bank
22/02/2013 16:03:06 2010 DB Blue template
Source: Factset and Deutsche Bank Securities
Mid-cycle slowdown: Recession fears & temp penetration near previous peak = under performance
7
2010 DB Blue template
40
50
60
70
80
90
100
110
120
130
140
Jan1
1
Feb1
1
Mar
11
Apr1
1
May
11
Jun1
1
Jul1
1
Aug1
1
Sep1
1
Oct
11
Nov1
1
Dec1
1
Jan1
2
Feb1
2
Mar
12
Apr1
2
May
12
Jun1
2
Jul1
2
Aug1
2
Sep1
2
ASGN +144%
SP500 +15%
RHI -13%TBI -13%
KFRC -27%
MAN -41%
RECN -29%
Temp penetration rises only 9% from 1.72% in Jan’11 to 1.88% in Sept’12 (+0.008% / month)
Paul Ginocchio, CFASIA Executive Forum
Feb 26, 2013
Deutsche Bank
22/02/2013 16:03:06 2010 DB Blue template
Source: Factset and Deutsche Bank Securities
This time its different: Outperformance due to belief of an improving economy and ACA
8
2010 DB Blue template
70
80
90
100
110
120
130
140
150O
ct12
Oct
12
Oct
12
Oct
12
Nov1
2
Nov1
2
Nov1
2
Nov1
2
Nov1
2
Dec1
2
Dec1
2
Dec1
2
Dec1
2
Jan1
3
Jan1
3
Jan1
3
Jan1
3
Feb1
3
Feb1
3
ASGN +18%
KFRC +25%
TBI +15%
MAN +42%
SP500 +4%
RHI +35%
RECN -10%
Temp penetration was 1.88% in Sept 2012 and is now 1.90% in Jan 2011
Paul Ginocchio, CFASIA Executive Forum
Feb 26, 2013
Deutsche Bank
22/02/2013 16:03:06 2010 DB Blue template
Source: Bureau of Labor Statistics and Deutsche Bank Securities
Part 3: Where are we in the cycle?
9
2010 DB Blue template
Based on last two cycles, we are approaching the peak in terms of number of temps (4.4% below all time peak in number of temps of 2.676m in April 2000 with 2.558m currently) and temp penetration rate (1.90% currently vs 2.03% in April 2000)
We are 45 months into this economic expansion versus 80 months of expansion in last cycle, ~120 months in the cycle before that, and 39 avg. months in all US business cycles back to 1854
1.00%
1.25%
1.50%
1.75%
2.00%
2.25%
0
500
1,000
1,500
2,000
2,500
3,000
Jan1
998
Sep1
998
May
1999
Jan2
000
Sep2
000
May
2001
Jan2
002
Sep2
002
May
2003
Jan2
004
Sep2
004
May
2005
Jan2
006
Sep2
006
May
2007
Jan2
008
Sep2
008
May
2009
Jan2
010
Sep2
010
May
2011
Jan2
012
Sep2
012
Temporary Help Services, SA (in Thousands) [LHS]
Temp Penetration Rate [RHS]
Paul Ginocchio, CFASIA Executive Forum
Feb 26, 2013
Deutsche Bank
22/02/2013 16:03:06 2010 DB Blue template
Source: BLS and Deutsche Bank Securities
Where are we in the cycle?
10
2010 DB Blue template
Temp usage as a percent of incremental jobs created peaked at much higher levels in this cycle versus last, and has been steady at 10-15% of all new jobs since May 2011
10.6%
6.3%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35Months from Trough
Temp Jobs Created as % of Total Jobs Created Since Trough in Non Farm Payrolls
Current Cycle (Mar 10 - Jan 13) Previous Cycle (Sep 03 - Jul 06)
Paul Ginocchio, CFASIA Executive Forum
Feb 26, 2013
Deutsche Bank
22/02/2013 16:03:06 2010 DB Blue template
68.2% of all readings in a normal distribution should fall between the two bandsSource: Bureau of Economic Analysis and Deutsche Bank
Where are we in the cycle?
11
2010 DB Blue template
Wages as a percent of nominal GDP are currently around 0.3 standard deviations below the 60-year relationship. This should mean stronger labor volume growth this cycle versus last.
42%
44%
46%
48%
50%
52%
54%
56%
Q1
1950
Q3
1951
Q1
1953
Q3
1954
Q1
1956
Q3
1957
Q1
1959
Q3
1960
Q1
1962
Q3
1963
Q1
1965
Q3
1966
Q1
1968
Q3
1969
Q1
1971
Q3
1972
Q1
1974
Q3
1975
Q1
1977
Q3
1978
Q1
1980
Q3
1981
Q1
1983
Q3
1984
Q1
1986
Q3
1987
Q1
1989
Q3
1990
Q1
1992
Q3
1993
Q1
1995
Q3
1996
Q1
1998
Q3
1999
Q1
2001
Q3
2002
Q1
2004
Q3
2005
Q1
2007
Q3
2008
Q1
2010
Q3
2011
Working off excess labor during the up-cycle which muted growth
Hoarding labor at start of last temp cycle
Workforce cut aggressively
Paul Ginocchio, CFASIA Executive Forum
Feb 26, 2013
Deutsche Bank
Temp penetration: Bulls versus Bears
2010 DB Blue template
12
Bulls
Greater incremental usage
ACA is game-changer
Growing economy almost always drives increased temp penetration
Temp penetration grew peak to peak last cycle ex IT
Bears
We are near peak penetration
6-7 months of temp penetration stagnation
ACA will cause a recession and temp penetration will fall
No exec will risk their company by using more temps to avoid incremental ACA costs
Paul Ginocchio, CFASIA Executive Forum
Feb 26, 2013
Deutsche Bank
Part 4: ACA should drive temp penetration to record highs
2010 DB Blue template
13
Healthcare reform creates four opportunities for Temporary Staffing firms Lower wage, higher churn employee opportunity
13.3m workers making between $20-60k who do not have insurance from their employer. If 5% of these workers are made temp, adds 25% more temps to the US temp market.
Less than 50 FTE opportunity 21m workers at companies with between 20 and 99 total employees.
Interpolating, this means 2.5m workers between 45 and 55 employees (50,000 companies). If half of the companies make a workforce change due to the ACA and each hires three more temps, it would add 3% more temps to US temp market. RHI cites 130,000 companies (40-50 EEs)
Quality of the temp labor pool increases Everyone will have access to healthcare coverage, even those with pre-
existing conditions, so more people will chose to be temps Help companies reduce their administrative burden
Paul Ginocchio, CFASIA Executive Forum
Feb 26, 2013
Deutsche Bank
What Towers Watson is telling and hearing from large companies
2010 DB Blue template
14
Jane Jensen, Senior Healthcare Consultant and lead Acturary on HC reform and HC reform consulting strategy for clients1. Ms. Jensen recommends to large employers to use more temps within a
range of solutions that includes: part-time, temps, outsourcing, and restructuring employee healthcare benefits
2. One of Ms. Jensen’s two dozen clients is heading down the path of using significantly more temps
Potential Negatives1. Companies may focus on restructuring healthcare benefits first (2014?),
and workforce restructuring second (2015?)2. Large companies first response to HR reform is to move workers to part-
time, the secondary response is to increase temps/outsource
Paul Ginocchio, CFASIA Executive Forum
Feb 26, 2013
Deutsche Bank
22/02/2013 16:03:06 2010 DB Blue template
Source: Bureau of Labor Statistics, Staffing Industry Analysts, and Deutsche Bank estimates
US temp penetration last cycle impacted by IT
15
2010 DB Blue template
While IT staffing contracted, Non-IT staffing grew 26% peak to peak with a likely 10% rise in peak temp penetration
BLS data shows temp wages grew about 9% from ‘00 to ’06
IT temps were likely down 23% peak to peak, which we believe caused the overall temp penetration rate to be flat peak to peak
Paul Ginocchio, CFASIA Executive Forum
Feb 26, 2013
Deutsche Bank
Temp penetration stagnating right now (but its done this before)
2010 DB Blue template
16
What are your theories why temp penetration has been flat for 8 months?
1.65%
1.70%
1.75%
1.80%
1.85%
1.90%
1.95%
1 2 3 4 5 6 7 8 9
Tem
p Pe
netr
atio
n Ra
te
Months of StagnationJun12 to Jan13 Dec10 to Aug11
Temp penetration spiked 0.16% from July’11 to July’12
Do we see another spike?
Paul Ginocchio, CFASIA Executive Forum
Feb 26, 2013
Deutsche Bank
22/02/2013 16:03:06 2010 DB Blue template
Source: Company data and Deutsche Bank Securities
Part 5: Staffing company differences - Exposures
17
2010 DB Blue template
Investors typically looking to gain exposures to something they think
will outperform or underperform, for example:
Manpower Group Robert Half
Generalist (~64% of GP) vs Professional (~80%) Light Industrial (~48%) vs Acc’t & Finance (~65%)
Large Clients (~55%) vs SME Clients (~80%)
Temporary (87% of GP) vs Permanent (22% of GP)
European (65%) vs US (72%)
Paul Ginocchio, CFASIA Executive Forum
Feb 26, 2013
Deutsche Bank
22/02/2013 16:03:06 2010 DB Blue template
Source: Deutsche Bank Securities
What investors pay for?
18
2010 DB Blue template
The easiest answer is successful strategies within a given exposure. We believe successful strategies are defined by:
Higher organic revenue growth = market share gains
Strong incremental margins = good operating leverage….
…which leads to better EPS growth
Paul Ginocchio, CFASIA Executive Forum
Feb 26, 2013
Deutsche Bank
22/02/2013 16:03:06 2010 DB Blue template
Source: Deutsche Bank Securities
How do investors determine a successful strategy?
19
2010 DB Blue template
Organic revenue growth
compared to peers with similar exposures
versus the market
Conversion ratio
versus the peer group
versus last cycle for the company
Paul Ginocchio, CFASIA Executive Forum
Feb 26, 2013
Deutsche Bank
22/02/2013 16:03:06 2010 DB Blue template
Source: Dice, Wanted Analytics, Monster, Company data and Deutsche Bank Securities
IT Staffing Organic Revenue Growth
20
2010 DB Blue template
On Assignment has shown the fastest revenue growth since 2H10
Kforce has been slower growing, but this is likely due to its larger contract exposure
Manpower (not shown above) has been showing recent declines in its US IT staffing business
-70%
-50%
-30%
-10%
10%
30%
50%
70%
90%O
ct-0
7
Jan-
08
Apr-0
8
Jul-0
8
Oct
-08
Jan-
09
Apr-0
9
Jul-0
9
Oct
-09
Jan-
10
Apr-1
0
Jul-1
0
Oct
-10
Jan-
11
Apr-1
1
Jul-1
1
Oct
-11
Jan-
12
Apr-1
2
Jul-1
2
Oct
-12
Jan-
13
DICE - Contract Positions YoY
KFRC - IT Organic grow th
M EI - Science & Tech YoY
Wanted Analytics IT YoY
RHI - Tech Rev Grow th YoY
ASGN - IT & Engineer YoY
Paul Ginocchio, CFASIA Executive Forum
Feb 26, 2013
Deutsche Bank
22/02/2013 16:03:06 2010 DB Blue template
Source: Company data and Deutsche Bank Securities
Light Industrial Staffing Organic Growth Rate
21
2010 DB Blue template
TrueBlue has been growing its US blue collar business faster than most peers for over a year
-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
1Q07 3Q07 1Q08 3Q08 1Q09 3Q09 1Q10 3Q10 1Q11 3Q11 1Q12 3Q12
Spherion Corporation
Kelly Services
TrueBlue
Barret Business (ex PEO)
Paul Ginocchio, CFASIA Executive Forum
Feb 26, 2013
Deutsche Bank
22/02/2013 16:03:06 2010 DB Blue template
Source: Company data, Factset and Deutsche Bank Securities
The Market pays for Organic Revenue Growth
22
2010 DB Blue template
• The correlation between TrueBlue’s stock price and its organic revenue growth since January 2008 is 62% (which means 62% of TBI’s share price change is explained by the change in organic revenue growth)
-50%
-40%
-30%
-20%
-10%
0%
10%
20%
30%
$0$2$4$6$8
$10$12$14$16$18$20
Jan-
08
May
-08
Sep-
08
Jan-
09
May
-09
Sep-
09
Jan-
10
May
-10
Sep-
10
Jan-
11
May
-11
Sep-
11
Jan-
12
May
-12
Sep-
12
TBI Share Price (LHS) TBI Organic Rev Growth (RHS)
Paul Ginocchio, CFASIA Executive Forum
Feb 26, 2013
Deutsche Bank
22/02/2013 16:03:06 2010 DB Blue template
Source: Adecco data and Deutsche Bank Securities
Part 6: Conversion Ratio
23
2010 DB Blue template
Conversion Ratio = EBIT / Gross Profit Conversion Ratio 25% = $5 EBIT / $20 Gross Profit This is the “true” operating margin of the firm as it excludes the pass through costs, which are salaries of the temps and government taxes
It measuresthe efficiencyof SG&A
Personnel Cost73%
Premises Expenses
10%
Office & Admin. Expenses
7%
Marketing3%
Depreciation3%
Consultants & Associates
3% Bad Debt Expense1%
Adecco 2011 SG&A Breakdown
Paul Ginocchio, CFASIA Executive Forum
Feb 26, 2013
Deutsche Bank
Comparison of Randstad's Three Operating Divisions
Mass-Customized In-House Professional
Euro mil l ions 2005 2006 2007 2005 2006 2007 2005 2006 2007Sales 5,463 6,479 6,687 909 1,222 1,935 288 518 616 GM 1,204 1,412 1,562 124 168 272 79 153 197 SG&A 924 1,051 1,132 92 105 162 60 104 145 EBITA 280 362 430 32 63 110 19 49 52 Working Capital 333 268 234 30 47 122 20 32 42 PP&E 54 69 78 1 1 2 3 7 12
Total Branches YE 1,660 1,937 1,855 527 666 944 48 67 87 Avg. Corporate Staff 11,310 12,620 13,600 1,160 1,310 2,010 440 910 1,400 Avg. Flexworkers 214,300 257,100 291,000 37,000 50,000 72,400 3,100 5,200 5,800
Gross Margin 22.0% 21.8% 23.4% 13.6% 13.7% 14.1% 27.4% 29.5% 32.0%SG&A / Revs 16.9% 16.2% 16.9% 10.1% 8.6% 8.4% 20.8% 20.0% 23.5%EBITA Margin 5.1% 5.6% 6.4% 3.5% 5.1% 5.7% 6.6% 9.5% 8.5%
Conversion Ratio 23.2% 25.6% 27.5% 25.6% 37.3% 40.4% 24.0% 32.2% 26.6%
EBITA / Avg. Op. Assets 86% 100% 132% 88% 159% 128% 79% 160% 113%
Temps / Branch 129 133 157 70 75 77 65 78 67 Temp / Consultant 19 20 21 32 38 36 7.0 5.7 4.1 Consultants / Branch 6.8 6.5 7.3 2.2 2.0 2.1 9.2 13.6 16.1 Revs / Flexworkers 25,500 25,200 23,000 24,600 24,400 26,700 93,000 99,600 106,200 Revs / Branch 3,291,000 3,345,000 3,605,000 1,725,000 1,834,000 2,050,000 6,006,000 7,731,000 7,080,000 Revs / Consultant 483,000 513,400 491,700 783,800 932,600 962,800 655,200 569,200 440,000 EBIT / Branch 168,400 186,600 231,500 60,000 93,800 116,400 393,800 732,800 602,300 EBIT / Consultant 24,700 28,600 31,600 27,200 47,700 54,700 43,000 54,000 37,400
22/02/2013 16:03:06 2010 DB Blue template
Source: Historical company data and Deutsche Bank estimates
Conversion Ratio
24
2010 DB Blue template
Any well executed strategy can produce a strong conversion ratio
Paul Ginocchio, CFASIA Executive Forum
Feb 26, 2013
Deutsche Bank
22/02/2013 16:03:06 2010 DB Blue template
Source: Company data and Deutsche Bank Securities
Comparison of Conversion Ratios over time
25
2010 DB Blue template
ASGN regained its crown as the most efficient temp staffing company, after new management arrived in late 2004
ASGN was back to peak efficiency in 2011 while the peers were still 30% below
Paul Ginocchio, CFASIA Executive Forum
Feb 26, 2013
Deutsche Bank
22/02/2013 16:03:06 2010 DB Blue template
Source: Company data, Factset, and Deutsche Bank Securities
The market pays for an improving conversion ratio
26
2010 DB Blue template
• On Assignment’s share price is 64% correlated to its conversion ratio
0%
5%
10%
15%
20%
25%
30%
35%
$0$2$4$6$8
$10$12$14$16$18$20
Jan-
08Ap
r-08
Jul-0
8O
ct-0
8Ja
n-09
Apr-
09Ju
l-09
Oct
-09
Jan-
10Ap
r-10
Jul-1
0O
ct-1
0Ja
n-11
Apr-
11Ju
l-11
Oct
-11
Jan-
12Ap
r-12
ASGN Share Price (LHS) ASGN Conversion Ratio (RHS)
Paul Ginocchio, CFASIA Executive Forum
Feb 26, 2013
Deutsche Bank
22/02/2013 16:03:06 2010 DB Blue template
Note: Share prices are indexed to October 2007 market peakSource: Factset, and Deutsche Bank Securities
Staffing company stock price performance since 2007 market peak
27
2010 DB Blue template
On Assignment’s IT staffing exposure and conversion ratio improvement have led to outperformance
-80%
-60%
-40%
-20%
0%
20%
40%
60%
80%
100%
11/0
1/07
01/0
1/08
03/0
1/08
05/0
1/08
07/0
1/08
09/0
1/08
11/0
1/08
01/0
1/09
03/0
1/09
05/0
1/09
07/0
1/09
09/0
1/09
11/0
1/09
01/0
1/10
03/0
1/10
05/0
1/10
07/0
1/10
09/0
1/10
11/0
1/10
01/0
1/11
03/0
1/11
05/0
1/11
07/0
1/11
09/0
1/11
11/0
1/11
01/0
1/12
03/0
1/12
05/0
1/12
07/0
1/12
09/0
1/12
11/0
1/12
01/0
1/13
ASGN: +283%
KFRC: +27%TBI: +14%
RHI: +31%
S&P 500: +1%
MAN: -16%
RECN: -41%
Paul Ginocchio, CFASIA Executive Forum
Feb 26, 2013
Deutsche Bank
22/02/2013 16:03:06 2010 DB Blue template
Source: Company data, Staffing Industry Analysts, Factset, and Deutsche Bank Securities
Market liked On Assignment’s Apex Systems deal partly due to Apex’s successful strategy (part I)
28
2010 DB Blue template
2004 2005 2006 2007 2008 2009 2010 2011IT industry Revs ($ millions) 15,800 17,400 19,000 20,500 19,800 15,800 17,900 20,600IT industry rev growth YoY 10.5% 10.1% 9.2% 7.9% -3.4% -20.2% 13.3% 15.1%Apex revs ($ millions) 120 182 301 398 402 383 547 705Apex rev growth YoY 46.3% 51.7% 65.4% 32.2% 1.0% -4.7% 42.8% 28.9%Apex market share 0.8% 1.0% 1.6% 1.9% 2.0% 2.4% 3.1% 3.4%Apex growth / IT industry growth 4.4x 5.1x 7.1x 4.1x -0.3x 0.2x 3.2x 1.9x
Apex has been an incredible market share gain story
Since Apex has come out of hyper-growth mode, conversion ratio has spiked higher
Paul Ginocchio, CFASIA Executive Forum
Feb 26, 2013
Deutsche Bank
22/02/2013 16:03:06 2010 DB Blue template
Note: Share prices are indexed to 3/15/12 opening pricesSource: Factset and Deutsche Bank Securities
Market liked On Assignment’s Apex Systems deal partly due to Apex’s successful strategy (part II)
29
2010 DB Blue template
Not many stocks go up 25% when the company acquires and doubles the size of its revenue base
Price of Apex Systems also attractive, in our view at ~9x 2011 EBITDA (after subtracting the $100m value of the tax shield), or ~6.5x our ’12E
90
95
100
105
110
115
120
125
130
135
3/15
/12
3/16
/12
3/19
/12
3/20
/12
3/21
/12
3/22
/12
3/23
/12
3/26
/12
3/27
/12
3/28
/12
3/29
/12
3/30
/12
ASGN share price S&P 500
Paul Ginocchio, CFASIA Executive Forum
Feb 26, 2013
Deutsche Bank
22/02/2013 16:03:06 2010 DB Blue template
Part 7: How public companies drive efficiency
30
2010 DB Blue template
In review, there are two key fundamental drivers of staffing share prices:
Organic revenue growth
Operating Efficiency (margins)
In this next section we are going to discuss the key drivers of operating efficiency
Defining and determining drivers of market share gains is a huge topic and one where I likely can’t find statistically significant drivers
Paul Ginocchio, CFASIA Executive Forum
Feb 26, 2013
Deutsche Bank
22/02/2013 16:03:06 2010 DB Blue template
Source: Company data and Deutsche Bank Securities
2011 EBIT per Employee: The dominant metric
31
2010 DB Blue template
Since >70% of SG&A costs are personnel, EBIT per employee is a key performance metric.
Paul Ginocchio, CFASIA Executive Forum
Feb 26, 2013
Deutsche Bank
22/02/2013 16:03:06 2010 DB Blue template
Source: Company data and Deutsche Bank Securities
2011 EBIT per Employee vs Conversion Ratio
32
2010 DB Blue template
Correlation = 67% Strong relationship between EBIT per Employee and Conversion Ratio
$38.9k $29.8k $25.6k $25.0k $24.5k $23.0k $20.1k $19.3k $19.1k $17.6k $16.9k $7.2k
23.4%
13.2%
17.4%
22.8%
14.9%
19.5% 19.5%
14.7%15.7% 15.5%
17.6%
6.5%
0%
5%
10%
15%
20%
25%
$0k
$5k
$10k
$15k
$20k
$25k
$30k
$35k
$40k
$45kAS
GN CDI
Hays
Adec
co
Kfor
ce
Robe
rt H
alf
Rand
stad
True
Blu
e
Man
pow
er
M. P
age
Sthr
ee
Kelly
EBIT per Employee [LHS] Conversion Ratio [RHS]
Paul Ginocchio, CFASIA Executive Forum
Feb 26, 2013
Deutsche Bank
22/02/2013 16:03:06 2010 DB Blue template
Source: Company Data and Deutsche Bank Securities
What drives EBIT per Employee?
33
2010 DB Blue template
Each of On Assignment's divisions have very different characteristics Bill rate, gross margin (mark up), assignment length, temps per internal employee
These characteristics generate very different levels of GP per employee
Brand On Assignment On Assignment Oxford Vista On Assignment On Assignment Apex
Staffing discipline nm Life Sciences IT/Engineering Physician Allied Health Nursing ITLTM Temp Rev($m) as of 3/2012 $1,368 $164 $285 $88 $54 $44 $733Percent of revenue 100% 12% 21% 6% 4% 3% 54%Branches* 125 45 14 5 24 2 49Rev per branch ($m) $11 $4 $20 $18 $2 $22 $15Internal Employees 2,380 290 600 200 138 52 1,100Temporary employees 11,370 2,200 1,500 270 800 300 6,300Bill rate per hour $64-$65 $35 $116 $190 $37 $69 $60Length of Assignment (months) 3.7 4.5 5 1.5 2.5 2.25 5Gross margins (temp) 29.5% 33.5% 34.8% 31.1% 32.0% 22.0% 26.4%Client size na Large Medium Large Large Large LargeGP per temp assignment na $7,400 $28,300 $12,400 $4,100 $4,800 $11,100Temps per client na 2.4 <2 1 1.7 2.5 10.9Temps per Internal Employee na 7.6 2.5 1.4 5.8 5.8 5.7Revs per Internal Employee na 565,500 475,000 440,000 390,100 851,100 666,400GP per Internal Employee na 189,400 165,300 136,800 124,800 187,200 175,900
Paul Ginocchio, CFASIA Executive Forum
Feb 26, 2013
Deutsche Bank
22/02/2013 16:03:06 2010 DB Blue template
Source: Company Data and Deutsche Bank Securities
Comparison of EBIT per employee drivers - Example
34
2010 DB Blue template
Brand On Assignment On Assignment
Staffing discipline Life Sciences NursingLTM Temp Rev($m) as of 3/2012 $164 $44Percent of revenue 12% 3%Branches* 45 2Rev per branch ($m) $4 $22Internal Employees 290 52Temporary employees 2,200 300Bill rate per hour $35 $69Length of Assignment (months) 4.5 2.25Gross margins (temp) 33.5% 22.0%Client size Large LargeGP per temp assignment $7,400 $4,800Temps per client 2.4 2.5Temps per Internal Employee 7.6 5.8Revs per Internal Employee 565,500 851,100GP per Internal Employee 189,400 187,200
Nursing and Life Sciences are highest GP per internal employee divisions at On Assignment….
…but have very different drivers.
Paul Ginocchio, CFASIA Executive Forum
Feb 26, 2013
Deutsche Bank
22/02/2013 16:03:06 2010 DB Blue template
Source: Deutsche Bank Securities
What drives EBIT per Employee
35
2010 DB Blue template
Bill RatePay Rate
Gross ProfitTemp Cost
GP per PlacementTaxes / Workers Comp
Length of Assignment GP per Employee
Temps per Employee
EBIT per EmployeeEmployee Salary
Branch Costs Cost Per EmployeeOverhead per Employee
Employees per Branch
In the following slides we are going to look at the drivers I can analyze
Paul Ginocchio, CFASIA Executive Forum
Feb 26, 2013
Deutsche Bank
22/02/2013 16:03:06 2010 DB Blue template
Source: Company data and Deutsche Bank Securities
Drivers of EBIT per Employee: Temps per Employee
36
2010 DB Blue template
2011 Temps per employee vs EBIT per Employee: correlation = -10%
Negative correlation could highlight professional more profitable than generalist staffing
$38.9k $29.8k $25.0k $24.5k $23.0k $20.1k $19.1k $16.9k
11
9
22
5
17
20 20
2
0
5
10
15
20
25
$0k
$5k
$10k
$15k
$20k
$25k
$30k
$35k
$40k
$45k
ASGN CD
I
Adec
co
Kfor
ce
Robe
rt H
alf
Rand
stad
Man
pow
er
Sthr
ee
EBIT per Employee [LHS] Temps per Employee [RHS]
Paul Ginocchio, CFASIA Executive Forum
Feb 26, 2013
Deutsche Bank
22/02/2013 16:03:06 2010 DB Blue template
Note: Correlation excludes Michael Page due to Michael Page’s 80% perm GP exposureSource: Company data and Deutsche Bank Securities
Drivers of EBIT per Employee: Gross Margin
37
2010 DB Blue template
2011 Gross Margin vs EBIT per Employee: correlation = 31%
$38.9k $29.8k $25.6k $25.0k $24.5k $23.0k $20.1k $19.3k $19.1k $17.6k $16.9k $7.2k
33.5%
21.3% 20.3%17.4%
31.2%
39.4%
18.2%
26.4%
16.8%
54.3%
36.0%
16.1%
0%
10%
20%
30%
40%
50%
60%
$0k
$5k
$10k
$15k
$20k
$25k
$30k
$35k
$40k
$45kAS
GN CDI
Hays
Adec
co
Kfor
ce
Robe
rt H
alf
Rand
stad
True
Blu
e
Man
pow
er
M. P
age
Sthr
ee
Kelly
EBIT per Employee [LHS] Gross Margin [RHS]
Paul Ginocchio, CFASIA Executive Forum
Feb 26, 2013
Deutsche Bank
22/02/2013 16:03:06 2010 DB Blue template
Note: Correlation excludes Michael PageSource: Company data and Deutsche Bank Securities
Drivers of EBIT per Employee: Employee per Branch
38
2010 DB Blue template
2011 Employee per Branch vs EBIT per Employee: correlation = 37%
Seems to be a definite industry trend to increase branch size, it creates culture and continuity. Internet has also increased geographic reach of branch.
$38.9k $25.6k $25.0k $24.5k $23.0k $20.1k $19.3k $19.1k $17.6k $16.9k
17
21
6
3331
9
4
8
29
2
0
5
10
15
20
25
30
35
$0k
$5k
$10k
$15k
$20k
$25k
$30k
$35k
$40k
$45k
ASGN
Hays
Adec
co
Kfor
ce
Robe
rt H
alf
Rand
stad
True
Blu
e
Man
pow
er
M. P
age
Sthr
ee
EBIT per Employee [LHS] Employees per Branch [RHS]
Paul Ginocchio, CFASIA Executive Forum
Feb 26, 2013
Deutsche Bank
22/02/2013 16:03:06 2010 DB Blue template
Source: Company data and Deutsche Bank Securities estimates
EBIT per Employee over time
39
2010 DB Blue template
EBIT PER EMPLOYEE ($000s) 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 '11 vs '07 '11 v '10
Manpower NA 12.0 16.8 16.3 20.0 23.0 20.9 4.9 12.9 19.1 -17% 48%
Adecco NA 22.5 24.8 23.2 32.1 36.8 33.0 15.8 31.9 33.2 -10% 4%
Randstad 9.2 14.4 26.3 27.3 38.4 46.4 32.8 13.3 25.4 24.2 -48% -5%
USG People 17.9 2.0 8.1 17.6 32.6 30.7 25.3 7.9 12.3 13.8 -55% 12%
Vedior 14.8 15.2 17.5 19.3 21.1 24.5 NA NA NA NA NA NA
Kelly Services NA 1.1 3.9 6.6 9.2 6.1 4.4 (5.9) 5.5 7.2 17% 30%
SFN Group NA 0.9 NA NA NA NA NA NA NA NA NA NA
True Blue NA 11.8 22.0 31.1 31.0 27.7 22.1 5.5 12.1 19.3 -30% 59%
Generalists Avg 13.5 9.2 17.0 20.4 27.2 28.5 23.1 6.9 16.7 19.5 -32% 17%
Robert Half NA 2.7 28.1 37.8 38.4 33.4 29.1 5.8 11.8 23.0 -31% 94%
MPS Group NA 18.2 23.4 34.1 42.4 42.4 32.9 7.1 NA NA NA NA
CDI NA NA 4.9 11.2 11.9 29.1 19.5 1.7 8.9 29.8 2% 236%
Kforce NA 7.0 8.1 22.7 30.6 33.4 24.4 15.4 21.2 24.5 -26% 16%
Resources Global 54.1 57.4 141.5 151.7 118.0 99.4 95.1 5.6 41.1 45.3 -54% 10%
On Assignment 49.6 6.3 (30.5) 0.9 24.2 52.2 45.7 20.6 20.2 38.9 -26% 93%
ComSys NA 26.8 25.0 41.4 50.8 59.3 44.1 29.8 NA NA NA NA
Michael Page NA 17.0 32.0 41.9 57.5 67.6 40.1 8.1 34.0 27.2 -60% -20%
Hays NA NA NA NA NA 54.6 40.2 19.0 26.8 39.5 -28% 47%
Sthree NA NA 41.1 49.1 62.5 59.7 40.5 18.6 21.5 26.1 -56% 22%
Specialists Avg 51.8 19.4 30.4 43.4 48.5 53.1 41.2 13.2 23.2 31.8 -40% 37%
Total Average NA NA 25.5 31.2 37.9 40.4 30.9 9.8 19.0 22.3 -45% 17%
Paul Ginocchio, CFASIA Executive Forum
Feb 26, 2013
Deutsche Bank
$38.9k $29.8k $25.6k $25.0k $24.5k $23.0k $20.1k $19.3k $19.1k $17.6k $16.9k $7.2k
18.4x
16.1x
18.0x
15.9x14.8x
18.1x
14.2x
19.4x
14.1x
27.5x
22.7x
11.2x
0x
5x
10x
15x
20x
25x
30x
$0k
$5k
$10k
$15k
$20k
$25k
$30k
$35k
$40k
$45kAS
GN CDI
Hays
Adec
co
Kfor
ce
Robe
rt H
alf
Rand
stad
True
Blu
e
Man
pow
er
M. P
age
Sthr
ee
Kelly
EBIT per Employee 13E P/E [RHS]
22/02/2013 16:03:06 2010 DB Blue template
* Note: Correlation excludes Michael Page due to Michael Page’s 80% perm exposureSource: Company data and Deutsche Bank Securities
EBIT per Employee to PE
40
2010 DB Blue template
77% correlation = Very strong relationship between PE (value of company) and operating efficiency
Paul Ginocchio, CFASIA Executive Forum
Feb 26, 2013
Deutsche Bank
22/02/2013 16:03:06 2010 DB Blue template
Source: Deutsche Bank Securities
Conclusions
41
2010 DB Blue template
The market obviously pays for growth and margins
As our examples showed, sometimes stocks are more correlated to organic growth while others are more correlated to operating efficiency
Investors are going to judge you versus the market and your closest peers, particularly in terms of revenue growth
Gross margins do not tell the whole story
Companies can have great conversion ratios with low gross margins, and can have bad conversion ratios with high gross margins
A successful strategy will produce a high conversion ratio, in our view
Drivers of the conversion ratio (EBIT per employee) that I would focus on: Employees per Branch - more controllable than pricing (gross margin)
Length of assignment – may enable higher temps per employee
E-mail me if you would like to get on my research distribution list [email protected]
Paul Ginocchio, CFASIA Executive Forum
Feb 26, 2013
Deutsche Bank
22/02/2013 16:03:06 2010 DB Blue template
Important DisclosuresAdditional Information Available upon RequestDisclosure Checklist Company Ticker Price (02/ 22/ 13) Disclosure Adecco ADEN.VX CHF 53.90 14 Hays plc HAS.LN 97 pence 14 Kforce KFRC $14.49 2 ManpowerGroup MAN $54.90 14, 17 Michael Page Int' l plc MPI.LN 430 pence 6,14 On Assignment ASGN $20.68 7 Randstad RAND.AS Eur 32.76 none Resources Connection RECN $12.58 2 Robert Half Int' l RHI $35.36 none TrueBlue TBI $18.83 none
1. Within the past year, Deutsche Bank and/or its affiliate(s) has managed or co-managed a public or private offering for this company, for which it received fees.
2. Deutsche Bank and/or its affiliate(s) makes a market in securities issued by this company.3. Deutsche Bank and/or its affiliate(s) acts as a corporate broker or sponsor to this company.4. The research analyst(s) or an individual who assisted in the preparation of this report (or a member of his/her household) has a direct ownership position
in securities issued by this company or derivatives thereof.5. The research analyst (or, in the US, a member of his/her household) is an officer, director, or advisory board member of this company.6. Deutsche Bank and/or its affiliate(s) owns one percent or more of any class of common equity securities of this company.7. Deutsche Bank and/or its affiliate(s) has received compensation from this company for the provision of investment banking or financial advisory services
within the past year.8. Deutsche Bank and/or its affiliate(s) expects to receive or intends to seek compensation for investment banking services from this company in the next
three months.10. Deutsche Bank and/or its affiliate(s) holds more than five percent of the share capital of the company whose securities are subject of the research,
calculated under computational methods required by German law (data as of the last trading day of the past month).11. See footnote headed Special Disclosures for any other relevant disclosures.14. Deutsche Bank and/or its affiliate(s) has received non-investment banking related compensation from this company within the past year.15. This company has been a client of Deutsche Bank Securities Inc. within the past year, during which time it received non-investment banking securities-
related services.16. A draft of this report was previously shown to the issuer (for fact checking purposes) and changes were made to the report before publication.17. Deutsche Bank and or/its affiliate(s) has a significant Non-Equity financial interest (this can include Bonds, Convertible Bonds, Credit Derivatives and
Traded Loans) where the aggregate net exposure to the following issuer(s), or issuer(s) group, is more than 25m Euros.
For disclosures pertaining to recommendations or estimates made on securities other than the primary subject of this research, please see the most recently published company report or visit our global disclosure look-up page on our website at http://gm.db.com.
42
2010 DB Blue template
Paul Ginocchio, CFASIA Executive Forum
Feb 26, 2013
Deutsche Bank
2010 DB Blue template
Buy: Based on a current 12-month view of total shareholder return (TSR = percentage change in share price from current price to projected target price plus projected dividend yield), we recommend that investors buy the stock.
Sell: Based on a current 12-month view of total shareholder return, we recommend that investors sell the stock.
Hold: We take a neutral view on the stock 12 months out and, based on this time horizon, do not recommend either a Buy or Sell.
Notes:
1. Newly issued research recommendations and target prices always supersede previously published research.
2. Ratings definitions prior to 27 January, 2007 were:
Buy: Expected total return (including dividends) of 10% or moreover a 12-month period
Hold: Expected total return (including dividends) between -10%and 10% over a 12-month period
Sell: Expected total return (including dividends) of -10% orworse over a 12-month period
Equity Rating Key Equity Rating Dispersion and Banking Relationships
43
Analyst CertificationThe views expressed in this report accurately reflect the personal views of the undersigned lead analyst(s) about the subject issuers and the securities of those issuers. In addition, the undersigned lead analyst(s) has not and will not receive any compensation for providing a specific recommendation or view in this report. Paul Ginocchio, CFA
Paul Ginocchio, CFASIA Executive Forum
Feb 26, 2013
Deutsche Bank
2010 DB Blue template
Regulatory Disclosures
1. Important Additional Conflict Disclosures
Aside from within this report, important conflict disclosures can also be found at https://gm.db.com/equities under the “Disclosures Lookup” and “Legal” tabs. Investors are strongly encouraged to review this information before investing.
2. Short-Term Trade Ideas
Deutsche Bank equity research analysts sometimes have shorter-term trade ideas (known as SOLAR ideas) that are consistent or inconsistent with Deutsche Bank’s existing longer term ratings. These trade ideas can be found at the SOLAR link at http://gm.db.com.
3. Country-Specific Disclosures
Australia & New Zealand: This research, and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act and New Zealand Financial Advisors Act respectively.
Brazil: The views expressed above accurately reflect personal views of the authors about the subject company(ies) and its(their) securities, including in relation to Deutsche Bank. The compensation of the equity research analyst(s) is indirectly affected by revenues deriving from the business and financial transactions of Deutsche Bank. In cases where at least one Brazil based analyst (identified by a phone number starting with +55 country code) has taken part in the preparation of this research report, the Brazil based analyst whose name appears first assumes primary responsibility for its content from a Brazilian regulatory perspective and for its compliance with CVM Instruction # 483.
EU countries: Disclosures relating to our obligations under MiFiD can be found at http://www.globalmarkets.db.com/riskdisclosures.
Japan: Disclosures under the Financial Instruments and Exchange Law: Company name – Deutsche Securities Inc. Registration number – Registered as a financial instruments dealer by the Head of the Kanto Local Finance Bureau (Kinsho) No. 117. Member of associations: JSDA, Type II Financial Instruments Firms Association, The Financial Futures Association of Japan, Japan Investment Advisers Association. Commissions and risks involved in stock transactions –for stock transactions, we charge stock commissions and consumption tax by multiplying the transaction amount by the commission rate agreed with each customer. Stock transactions can lead to losses as a result of share price fluctuations and other factors. Transactions in foreign stocks can lead to additional losses stemming from foreign exchange fluctuations. "Moody's", "Standard & Poor's", and "Fitch" mentioned in this report are not registered credit rating agencies in Japan unless “Japan” or “Nippon” is specifically designated in the name of the entity.
Russia: This information, interpretation and opinions submitted herein are not in the context of, and do not constitute, any appraisal or evaluation activity requiring a license in the Russian Federation.
44
Paul Ginocchio, CFASIA Executive Forum
Feb 26, 2013
Deutsche Bank
Global DisclaimerThe information and opinions in this report were prepared by Deutsche Bank AG or one of its affiliates (collectively "Deutsche Bank"). The information herein is believed to be reliable and has been obtained from public sources believed to be reliable. Deutsche Bank makes no representation as to the accuracy or completeness of such information.Deutsche Bank may engage in securities transactions, on a proprietary basis or otherwise, in a manner inconsistent with the view taken in this research report. In addition, others within Deutsche Bank, including strategists and sales staff, may take a view that is inconsistent with that taken in this research report.Opinions, estimates and projections in this report constitute the current judgement of the author as of the date of this report. They do not necessarily reflect the opinions of Deutsche Bank and are subject to change without notice. Deutsche Bank has no obligation to update, modify or amend this report or to otherwise notify a recipient thereof in the event that any opinion, forecast or estimate set forth herein, changes or subsequently becomes inaccurate. Prices and availability of financial instruments are subject to change without notice. This report is provided for informational purposes only. It is not an offer or a solicitation of an offer to buy or sell any financial instruments or to participate in any particular trading strategy. Target prices are inherently imprecise and a product of the analyst judgement.As a result of Deutsche Bank’s March 2010 acquisition of BHF-Bank AG, a security may be covered by more than one analyst within the Deutsche Bank group. Each of these analysts may use differing methodologies to value the security; as a result, the recommendations may differ and the price targets and estimates of each may vary widely.In August 2009, Deutsche Bank instituted a new policy whereby analysts may choose not to set or maintain a target price of certain issuers under coverage with a Hold rating. In particular, this will typically occur for "Hold" rated stocks having a market cap smaller than most other companies in its sector or region. We believe that such policy will allow us to make best use of our resources. Please visit our website at http://gm.db.com to determine the target price of any stock. The financial instruments discussed in this report may not be suitable for all investors and investors must make their own informed investment decisions. Stock transactions can lead to losses as a result of price fluctuations and other factors. If a financial instrument is denominated in a currency other than an investor's currency, a change in exchange rates may adversely affect the investment. Past performance is not necessarily indicative of future results. Deutsche Bank may with respect to securities covered by this report, sell to or buy from customers on a principal basis, and consider this report in deciding to trade on a proprietary basis.Unless governing law provides otherwise, all transactions should be executed through the Deutsche Bank entity in the investor's home jurisdiction. In the U.S. this report is approved and/or distributed by Deutsche Bank Securities Inc., a member of the NYSE, the NASD, NFA and SIPC. In Germany this report is approved and/or communicated by Deutsche Bank AG Frankfurt authorized by the BaFin. In the United Kingdom this report is approved and/or communicated by Deutsche Bank AG London, a member of the London Stock Exchange and regulated by the Financial Services Authority for the conduct of investment business in the UK and authorized by the BaFin. This report is distributed in Hong Kong by Deutsche Bank AG, Hong Kong Branch, in Korea by Deutsche Securities Korea Co. This report is distributed in Singapore by Deutsche Bank AG, Singapore Branch, and recipients in Singapore of this report are to contact Deutsche Bank AG, Singapore Branch in respect of any matters arising from, or in connection with, this report. Where this report is issued or promulgated in Singapore to a person who is not an accredited investor, expert investor or institutional investor (as defined in the applicable Singapore laws and regulations), Deutsche Bank AG, Singapore Branch accepts legal responsibility to such person for the contents of this report. In Japan this report is approved and/or distributed by Deutsche Securities Inc. The information contained in this report does not constitute the provision of investment advice. In Australia, retail clients should obtain a copy of a Product Disclosure Statement (PDS) relating to any financial product referred to in this report and consider the PDS before making any decision about whether to acquire the product. Deutsche Bank AG Johannesburg is incorporated in the Federal Republic of Germany (Branch Register Number in South Africa: 1998/003298/10). Additional information relative to securities, other financial products or issuers discussed in this report is available upon request. This report may not be reproduced, distributed or published by any person for any purpose without Deutsche Bank's prior written consent. Please cite source when quoting.Copyright © 2012 Deutsche Bank AG
45
2010 DB Blue template