Revenues were up by +9% from 747 million Euro in Q2 2010 to 815 million Euro in Q2 2011 at Dutch staffing firm USG People (USG:AEX). Acquisitions contributed +0.4% to the growth.

Interim results for the three months ended 30 June 2011 reveal that the temporary employment markets continued their positive development during the second quarter. In most countries growth came in lower than during the previous quarter as growth in the industrial segment moderated.

Demand in the industrial segment saw a period of exceptionally strong growth following the economic crisis which is now making comparisons over the prior year more difficult to beat.

Demand for administrative staff continued to recover at a gradual pace. Growth in this market segment in the Netherlands was slowed by job cuts in the public sector.

General Staffing achieved revenue growth of +16% in the second quarter, with revenue amounting to 562 million Euro against 485 million Euro in the second quarter of last year.

At Specialist Staffing, revenue was down by -4% on last year, equalling 178 million Pounds compared with 185 million Pounds in 2010 (Q1 2011: 179 million Euro).

Revenue at Professionals remained virtually stable, both compared to last year and to the previous quarter. Revenue amounted to 70 million Euro in the second quarter against 71 million Euro in both the second quarter of 2010 and the first quarter of 2011.

The gross result for the second quarter equalled 172 million Euro, up by +4% on the same period last year when a gross result of 164 million Euro was achieved. As a percentage of revenue, the gross result equalled 21%, compared to a gross margin of 22% in the second quarter of 2010. Mix effects had a negative impact of -0.9 percentage points on the gross margin due to an increase in the share of General Staffing activities and revenue from countries with a lower margin.

In addition, an adjustment in French wage subsidies had a negative impact of -0.2 percentage points. This change in social security subsidies, applicable to all companies in France, came into effect in December 2010 and the company has not yet managed to fully  passthis cost on to clients.

Revenues from recruitment and selectionaccounted for 1.1% of total revenue (Q2 2010: 1.0%). This increase in recruitment and selection had a positive impact of +0.1% on group gross margin.

Underlying operating expenses amounted to 143 million Euro compared with 139 million Euro in the second quarter of last year. Underlying operating expenses were -1 million Euro lower than in the previous quarter (Q1 2011: 144 million Euro). The rise in expenses compared to last year was predominantly due to an increase in the number of employees in countries that have been experiencing strong growth for some time now as well as being the result of wage inflation.

In addition to the underlying expenses an amount of 38 million Euro in provisions was booked in the second quarter of 2011. This related to a restructuring provision of 16 million Euro in the Netherlands and a provision of 21 million Euro in Germany in connection with the CGZP/AMP case. The remaining 1 million Euro related to minor reorganisations in various countries. In addition to the underlying expenses, reported expenses in the second quarter of 2010 included one-off expenses of 3 million Euro.

The company estimates that the implementation of IT systems and streamlining of support processes will result in cost-savings in the Netherlands of 11 million Euro in the second half of 2011. From 2012 the structural reduction in costs resulting from these measures will amount to 27 million Euro annually. The associated costs were provided for in the second quarter by means of the aforementioned provision of 16 million Euro.

Underlying EBITA rose to 21.4 million Euro, an increase of +12% compared to 19.2 million Euro in the second quarter of last year. Reported EBITA in the second quarter of 2011 amounted to a negative 6.4 million Euro against a positive 16.4 million Euro in the second quarter of 2010.

Revenues in the Netherlands grew by +2% to 300 million Euro (Q2 2010: 294 million Euro). In line with the overall market, year-on-year growth registered a decline compared to the previous quarter. Market growth in revenue per working day in the industrial segment fell from 17% in the first quarter to 9% in the second quarter. There was a slight increase in market growth in the administrative segment.

In the administrative market the recovery generally continued its gradual progress in the private sector. Growth in this market was weakened by government spending cuts. The public sector represents a substantial part of the administrative market segment in the Netherlands, thus delaying growth of these activities. USG People's revenue in the public sector, which accounts for 15% to 20% of the Dutch revenue, registered a -25% decline in the second quarter compared with last year.

Start People achieved growth of +16% in the second quarter, the third successive quarter in which it has considerably outperformed the market. Revenue at Specialist Staffing was down -10% on last year, whilst Professionals saw a revenue drop of -5%.

Despite the impact of mix effects the decline in the gross margin was limited. Underlying operating expenses were -2% lower than last year and down -3% compared to the previous quarter. In addition to the underlying expenses a provision of 16 million Euro was included in the second-quarter results for the restructuring in connection with the streamlining of processes which will strengthen profitability going forward. On 8 July, the company announced that it would cut its Dutch workforce by almost -10%. Underlying EBITA equalled 8.6 million Euro compared with 7.2 million Euro last year.

In Belgium revenues rose by +6% in the second quarter to 170 million Euro (Q2 2010: 160 million Euro). Growth was down on the 13% registered in the previous quarter. Start People achieved revenue growth of +7%, with Specialist Staffing registering growth of +3% and Professionals +8%. Among the niche labels Secretary Plus, USG Legal Forces and USG Innotiv once again reported a strong quarter.

The gross margin fell slightly compared to last year as a result of mix effects. Start People posted a drop in the gross margin compared to a year ago. A larger share of revenue from large clients and from the workers segment was mainly responsible for the negative mix effects. Operating expenses were fractionally higher due to a rise in the number of employees in the course of 2010 as well as wage inflation. Expenses were lower than in the first quarter. EBITA amounted to 13.4 million Euro, +0.7 million Euro higher than in the second quarter of last year.

Revenues in France increased to 146 million Euro (Q2 2010: 123 million Euro), for the first time regaining pre-crisis peak levels achieved in the second quarter of 2008. Despite the higher comparison base year-on-year growth remained strong at +19% in the second quarter.

The gross margin in France was lower due to the adjustment in social security subsidies (effective from December 2010), the disproportionately strong growth with large customers and a negative mix effect. The reduction in subsidies had a 1.1 million Euro impact on the gross margin and EBITA (around 0.75% of revenue). EBITA equalled 4.3 million Euro (Q2 2010: 4.9 million Euro).

Revenues in Germany rose by +20% to 76 million Euro. The growth rate slowed compared to the previous quarter due to the fact that the comparative revenue figure for the second quarter of 2010 showed a substantial rise. The second quarter of 2010 saw revenue growth of +31% after a revenue decline of -4% was booked for the first quarter of 2010. Underlying operating expenses remained virtually unchanged compared to last year. Compared to the previous quarter underlying expenses fell by -400,000 Euro. USG People is investing in organic growth in Germany meaning that there is room for further revenue growth within the existing capacity, with the focus on expansion of specialist activities.
Due to the large number of public holidays in the second quarter, the quarter under review contained only 60 workable days in Germany (Q1: 63 workable days). The number of workable days has a big impact on results in Germany because flex workers are paid based on monthly wages whilst revenue is billed to clients based on the number of hours worked. This makes for a substantially lower result in months with a small number of hours worked. The third quarter contains 66 workable days. Underlying EBITA in Germany amounted to 400,000 Euro in the second quarter compared to negative EBITA of -300,000 in the same period of 2010.

In the past few months more information has become available concerning the CGZP/AMP case in Germany. On 30 May 2011 the 'Arbeitsgericht' labour court in Berlin ruled, further to the court decision of December 2010, that the collective labour agreements concluded in previous years by CGZP/AMP, which were applied by 1,100 of the staffing companies belonging to AMP (around 25% of the market), were invalid, which could result in claims being brought against USG People with retroactive effect. With the aforementioned ruling and the information which has emerged over the past few months, USG People is now able to make a well-founded estimate of the liability, in light of which it took a 21 million Euro provision in the second quarter, in accordance with IFRS guidelines. The sector federation BAP (successor to AMP following the merger between BZA and AMP) has since appealed against the 'Arbeitsgericht' ruling.

Rest of Europe: Italy achieved growth of +12%. Spain saw growth of +12% after several quarters of zero growth and registered a break-even result. Growth trends remained strong in the other countries (Switzerland organic growth of +32%, Austria +26% and Poland +13%), albeit that the growth was somewhat lower than the extremely high growth rates seen in the preceding quarters.

Rob Zandbergen, CEO of USG People, commented "in most countries growth moved towards a more sustainable pace, following a period in which we saw the markets staged a sharp recovery from their lows during the crisis."

"Growth in the Netherlands was dampened by spending cuts in the public sector. We have further strengthened the effectiveness and continuity of our organisation to a major extent. The IT projects we have continued to invest in over the past few years have been successfully completed. This has improved our cost base and allowed us to create greater stability in our profitability."

"In addition we completed a successful refinancing in the second quarter. Prompted by the extremely favourable market conditions, we decided to move now to renew our existing facility which was due to expire end-2012. In doing so, we have assured ourselves of a solid financial base until 2016 and are already benefiting from the more favourable terms and conditions of the new agreement. We will continue to focus on growth and strengthening profitability."

In contrast to ManpowerGroup’s comments about the market softening in June, USG People commented that growth in June was higher in most countries than the average for the whole quarter. Nevertheless, investors were not enthused by the weakness in the Dutch market and likely continued pressure on public sector finances.

In early trading USG People's shares were down by -1.70% to 11 Euro.