UPDATE: ADP 4Q Profit Up On Tax Gain, Gives Cautious View

(Updates with interview with ADP's chief financial officer, stock price)

 
   DOW JONES NEWSWIRES 
 

Automatic Data Processing Inc.'s (ADP) fiscal fourth-quarter earnings rose 51% on a tax gain, though mounting unemployment continued to trim the number of workers at clients' businesses.

The payroll-processing and human-resources outsourcing company also projected results for the new year below Wall Street expectations. It expects earnings of $2.29 to $2.39 a share and a revenue drop of 1% to 4%. Analysts polled by Thomson Reuters recently were looking for $2.44 and a 1% revenue increase.

Shares recently were down 2.1% at $37.04 amid a broad market upturn.

Chief Financial Officer Chris Reidy told Dow Jones Newswires that ADP was happy with its performance for the year and that its forecast reflects continued uncertainty about the length and the depth of the downturn.

Though unemployment has been rising for some time, its effects on payroll-processing companies like ADP were slower to appear. But they began cutting into the bottom line in the prior quarter.

For the quarter ended June 30, the company reported a profit of $352.8 million, or 70 cents share, up from $233.5 million, or 45 cents, a year earlier. Excluding items such as the tax gain, earnings rose to 45 cents from 42 cents.

Revenue fell 5% to $2.11 billion, with foreign exchange reducing the figure by 4 percentage points.

Analysts polled by Thomson Reuters most recently were looking for earnings of 45 cents on revenue of $2.12 billion.

Revenue at ADP's employer-services segment, by far its largest, was flat. In the U.S., revenue fell 4% and employees on clients' payrolls were down 5.7%. Pays per control - an important measure of profitability for business - fell 5.7% amid the declining numbers, which turned down in the fiscal second quarter.

Reidy said the company expects the number of employees on client payrolls to fall 5% to 6% in the just-started year, potentially trimming revenue by $100 million to $120 million.

Combined new business sold in its employer-services and human-resources benefits outsourcing businesses tumbled 29%, partly owing to several big accounts booked in the prior year, according to Reidy. The results are combined as some clients use both services.

Its smaller human-resources outsourcing segment, which also provides recruiting, screening and other services, remained a bright spot, as revenue rose 7% and the number of employees on clients' payrolls expanded by 4%.

-By Tess Stynes, Dow Jones Newswires; 212-416-2481; [e-mail]