Randstad (RAND: NA), the second largest staffing firm in the world, reported growth across most of its markets during the second quarter of 2014. While some of the bigger European countries continued to report a decline in revenue, an improved performance was reported in tougher markets like Australia and the Netherlands.  

The company reported revenue for Q2, ending 30 June 2014, of €4.3 billion, an increase of +4% compared with €4.1 billion a year ago. Gross profit for the period rose by +5% to €786.7 million, up from €746.9 million last year. Randstad achieved an operating profit for the quarter of €137.2 million, an increase of +36% from €100.9 million during Q2 2013.

Jacques van den Broek, CEO of Randstad, commented: “Our markets continued their gradual recovery. The Inhouse and Sourceright business in particular enjoyed good growth. Both are good examples of solutions that help our clients with their total talent architecture. Our people did very well in growing our business in US staffing, Poland, Italy, Switzerland, and in China. The combination of their diligent execution and entrepreneurship [is paying] off.”

“We have also made good progress in the Netherlands where we returned to growth. Our strategic focus on permanent placements returned the highest level of fees since Q4 2008. With a continued focus on efficiency improvements, and a keen eye for growth opportunities and innovation, we face the future with confidence,” he added.

In its largest region, North America, Randstad reported organic revenue growth of +2% to €910.9 million. The company’s combined US businesses grew by +3%, while Canadian revenue remained under pressure. 

Europe reports growth

Revenue in France, Randstad’s largest market in Europe, fell organically by -1% to €719.3 million, down from €728 million last year. Growth continued in the industrial and automotive segments, but was offset by lower demand in logistics, finance, IT, and the public sector.

In the Netherlands revenue in Q2 2014 was €677.8 million, up slightly from €669.8 million last year. The company advised that its initiatives to improve performance are starting to pay off, with strong growth achieved in their Professionals business. Growth, however, was more than offset by lower volumes from some of Randstad’s larger accounts, mainly in the technical and industrial segments.

In Germany revenue increased organically by +5% to €479.4 million, up from €464 million a year ago. The increase of wage costs and other regulatory changes over the past two years have negatively impacted demand for temporary labour. As a result, the German market is recovering at a slower pace than expected.

Revenue from Belgium & Luxembourg increased by +5% on an organic basis to €311 million, up from €295.6 million a year ago, with Randstad reporting improvement in the industrial segment.

In the UK, revenue rose by +3% on an organic basis to €203.8 million, compared with €192.8 million last year. Growth was led by the company’s MSP, RPO, and Construction/Engineering businesses, predominately through temporary staffing. Randstad’s Finance business, however, remains under pressure as a result of continued low demand in permanent recruitment.

Strong organic growth of +12% was reported across Iberia, with revenue rising to €270.5 million from €196.6 million in 2013. Revenue in Spain grew by +11%, hampered somewhat by low volumes in agriculture. In Portugal, revenue grew by +14%, with good performances in the manufacturing and automotive segments.

In other European countries revenue grew by +20% on an organic basis, from €238.4 million in Q2 2013 to €342.1 million this year. In Italy revenue grew by +15%, driven by the industrial segment. Revenue derived from the Swiss market grew by +12%, while Austrian revenue increased by +48%. Revenue growth was also reported in Poland (+27%), the Czech Republic (+55%), and Turkey (+27%).

Revenue growth continues in Rest of the World

In the Rest of the World region, Randstad reported organic revenue growth of +13% to €353.3 million. Growth held up in Asia and Australia, while Latin American growth accelerated. In Japan, revenue grew by +10%, led by good performance in logistics and retail. In Australia, where the staffing market remains quite tight, revenue grew by +13% following solid demand for temporary workers in Business Support. Chinese revenue increased by +67%, as a result of strong performances across all segments. Randstad’s Argentinean business grew by +11%, despite challenging market conditions. Good profit growth was also reported in Brazil, Mexico, and Chile.

Changes to delivery model impact business segment results

Broken down by business segment, Randstad’s Staffing business reported organic revenue growth of +1% to €2.5 billion, up from €2.48 billion last year. Staffing revenue grew organically in North America by +6% and in the Rest of the World region by +10%. In Europe, however, revenue fell by -1%, year-on-year, on an organic basis during Q2 2014.

The company’s Inhouse Services business reported organic revenue growth of +16% to €896.6 million. The business, which focuses on industrial and logistics clients, grew by +7% across North America. In Europe, growth was led by Germany (+27%), France (+25%), Iberia (+24%), and the Netherlands (+7%).

Randstad advised that the company has transferred business from its Staffing business to its Inhouse Services business to ensure clients are offered the right delivery model. This accounts for some of the growth in the Inhouse Services business and the decline in the Staffing business.

Randstad Professionals reported organic revenue growth of +4% during Q2 2014. Revenue rose to €846.6 million, up from €841.7 million last year. Revenue from North America fell by -2%, while the Dutch market grew by +12%. Despite lower demand for permanent placements Australian revenue increased by +15% during the quarter.

Looking forward, the company stated: “The gradual recovery continued in the second quarter. The performance of our US business improved, while our Dutch operations were back in growth by the end of the quarter. Most European countries showed a continued recovery, except for France and Germany, which are slower to pick up. Investments made in the Rest of World should pay off. At this stage, we do not see an acceleration of growth, but we are confident that the Group's gradual recovery will continue.”

Following the company's tentative forecast, in trading today Randstad's share price fell by -3% to €35.99, an increase of +0.3% compared with a year ago. Based on its current share price, the company has a market value of €6.3 billion.