USG People N.V. (USG.AEX), the multi-brand staffing, secondment and HR services group missed expectations for Q4 2011 as revenues declined due to lower demand in the industrial sector and the Dutch public sector although for the full year revenues were up +5% amounting to €3.2 million from €3.09 million in the previous year.

Gross results for the year ended 31 December 2011 were €682.8 million, up from €679.9 million in 2010. Net income also increased by +9% to €25.5 million from €23.4 million, however, this resulted in a lower gross margin of 21%, down from 21.9% in 2010.

But the firm’s 2011 Q4 results did not meet analysts’ expectations as revenues declined -5% from €834.7 million to €795.3 million. The gross result in the quarter also dropped -8% to €169.7 million form €183.8 million, resulting in a lower gross margin of 21.3%, compared to 22% in Q4 2010. The firm said that this was due to fewer working days.

Net income in the quarter also declined substantially by -40% and amounted to €7.3 million from €12.2 million in the same quarter last year.

General Staffing, which realises a large part of revenue from clients in the industrial sector, saw revenues drop to €538.5 million (Q4 2010: € 560.8 million). Specialist Staffing revenue decreased by -10% and totalled €175.7 million (Q4 2010: €194.2 million) while revenue at Professionals went up marginally by +1% to € 74.4 million (Q4 2010: 73.4 million).

Regional Performance

The firm was affected by lower demand in Europe and in the Netherlands revenue declined -6% to €305.3 million (Q4 2010: €324.1 million). Revenue per working day was down -3% compared to the fourth quarter last year. In the public sector, which accounts for 15 to 20% of total revenue in the Netherlands, revenue was 8% lower than in the fourth quarter last year (Q2: -25%, Q3 -11%). The Start People brand also saw a decrease in revenue which amounted to €146 million in the fourth quarter (Q4 2010: € 152.2 million). Revenue at Specialist Staffing dropped -13% to €103.2 million (Q4 2010: 118.0 million) while Professionals realised “an exceptional improvement” and grew +4% to €49.5 million, up from €47.7 million.

The underlying gross margin was slightly lower than last year due to a changed revenue mix, mainly as a result of a rise in the contribution by large clients, including payrolling, at Start People. The underlying gross margin at Specialist Staffing remained stable and the gross margin improved at Professionals. Underlying operating expenses were virtually the same as in the previous quarter, despite a €2 million write-off of trade receivables that was recognised in the fourth quarter as a result of a bankruptcy.

In Belgium and Luxembourg revenues declined -5% to €172.7 million (Q4 2010: €182.4 million).  The slowdown in market demand persisted in the final months of the year and revenue was also lower due to fewer working days. Revenue per working day was -4% lower than last year. Start People saw a decline of revenue of over €8 million to €100.5 million (Q4 2010: € 108.1 million). At Start People revenue per working day was -6% lower than last year. Revenue at Specialist Staffing decreased -3% to €57.2 million (Q4 2010: €59.2 million), with revenue per working day down -2% compared to last year. Professionals increased its revenue by -1% to €15million (Q4 2010: €15.1 million). Revenue per working day at Professionals was 1% higher than in the fourth quarter last year, but slightly lower than the 3% growth achieved in the previous quarter. The firm said that demand for engineers and secretaries continued to be strong while demand for IT, financial and medical staff weakened in the fourth quarter. The gross margin was also lower than the year before due to mix effects.

In France revenue went down -1% to €131.0 million in the fourth quarter (Q4 2010: €132.8 million). The gross margin was negatively impacted by lower revenue at USG Restart, which realised fewer government assignments. General Staffing saw revenues decline -1% to €127.5 million (Q4 2010: €129.3 million) while revenue at Specialist Staffing also dropped -1% to €0.7 million (Q4 2010: €0.6 million). Professionals saw a decline of -3% as revenues lowered to €2.8 million from €2.9 million in the same quarter last year.

In Germany revenue decreased by -6% to €72.2 million (Q4 2010: € 76.6 million). Revenue per working day was down -3% in the fourth quarter compared to the year before. The gross result was lower due to the fact that the fourth quarter had fewer working days than last year. General Staffing saw revenues decline by -4% from €60.6 million in Q4 2010 to €58 million in Q4 2011 while Specialist Staffing also saw a -11% decrease of revenues to €14.2 million (Q4 2010: €16 million).

In the Rest of Europe, Spain posted revenue of €48.8 million, unchanged from the fourth quarter last year. Italy realised revenue of €33.5 million, a -9% decrease from the same quarter last year (€36.7 million). Revenue per working day fell -6% in Italy compared to last year. In the other countries revenue was down -4% (organic per working day -9%). The combined revenue of the other countries totalled €31.9 million.

Looking ahead, the firm refrained from issuing guidance on the development of revenue and profit. It said that “in 2012 we will further structure the implementation of our strategic plans. We will continue to build our positions in the markets we have selected with our strong balance sheet and effective organisation. In the medium term we aim to achieve an average EBITA margin throughout the cycle of 6.0%. In January 2012, revenue was -6% lower than in the previous year. In view of current uncertainty in the market we are refraining from issuing guidance on the development of revenue and profit in 2012.”

Rob Zandbergen, CEO of USG commented, "In 2011 we laid a solid basis for the future of USG People. Now that we have redesigned our strategy, we are adapting our organisation accordingly and are focusing on providing excellent and efficient services through international governance by brand. This will create new commercial dynamics and new synergies across borders. In 2011 we implemented a number of important optimisation measures which have reduced our cost level by €50 million. Our debt position continued to improve in the fourth quarter due to a positive cash flow. The Leverage Ratio including subordinated loans equalled 1.7, which is in line with our strategic target, as a result of which we will distribute a dividend of €0.17 per share for 2011. We aim to maintain continuity in the distribution of dividend.”

USG People NV provide staffing, secondment and Human Resources (HR) and customer care services and operates in three segments: General Staffing which includes Staffing, secondment, recruitment and selection and pool management for call centres, the transport, healthcare and technical sectors; Specialist Staffing which focuses on administrative, commercial, financial, medical, management support, HR, multilingual and technical staff; Professionals, which focuses on qualified and specialist staff in communication and marketing, legal, financial, HR, IT and technical. The firm is the second biggest staffing firm in the Netherlands after Randstad, according to Staffing Industry Analysts.

Despite the negative growth, in early trading this morning, USG People’s share price went up +1.96% to €7.85, down -45.55% from a year ago but +74.43% above the 52-week low of €4.50 set on 25 November 2011. This values the company at €604.05 million.