Randstad (RAND: NV) today reported revenue for the second quarter ending 30 June 2019 of €5.9 billion, down 1.7% on an organic basis compared with €6.0 billion a year ago. The results were slightly below analysts’ forecasts.

Revenue was hit by challenging macroeconomic conditions in Europe, with negative revenue growth reflecting slowing market growth in particularly Germany, the Netherlands and Belgium, which Randstad said was mainly related to weakness in automotive-related industries.

Currency effects had a positive impact on gross profit of €19 million compared to Q2 2018. Underlying EBITA decreased organically by 5% to €277 million. Currency effects had a €4 million positive impact, year-on-year.

Permanent fees grew by 2%, with Europe stable year-on-year.  Permanent fees in North America were up 6%. In the 'Rest of the world' region, permanent fees grew by 2%. Overall, permanent fees made up 11.3% of gross profit.

Randstad CEO Jacques van den Broek commented, “We delivered solid Q2 2019 results, as robust gross margins and balanced cost management offset ongoing challenging macroeconomic conditions in Europe."

"Our organic revenue growth turned slightly negative, reflecting slowing market growth in particularly Germany, the Netherlands and Belgium, mainly related to weakness in automotive-related industries. We continued to gain market share in several countries, while maintaining strong pricing discipline,” van den Broek continued.

Randstad said weakness in Europe is set to continue throughout 2019.

“We planned for a weaker Europe for the remainder of the year and take measures accordingly," CFO Henry Schirmer told Reuters. "We are re-aligning the cost-base with the top line." Corporate staff decreased to 38,240 in Q2 2019 compared to 38,590 in Q2 2018.

Earlier this month Randstad signed an agreement to acquire Aurec Group in Australia, an IT Professional staffing solutions specialist. Also in July 2019, Randstad subsidiary Ausy announced it has expanded its 5% stake in Optedis towards a 100% acquisition. Optedis is specialised in engineering projects in networks and telecom. The group said both acquisitions fit into Randstad’s strategic ambition to increase its Professionals business not only organically, but also by bolt-on acquisitions, and will be ‘economic value added’ enhancing within three years.

“Our sound regional diversification continued to pay off, as Asia Pacific and the Latin America region delivered significant contributions to our growth and profitability. Furthermore, our digital strategy progressed well, reflected by a successful worldwide cloud migration and implementation of a new front-office system in Germany and Japan,” van den Broek said.

Revenue by Geography

In North America, revenue of Randstad’s combined US businesses was up 1%. Permanent fees were up 6%. US Staffing/Inhouse Services was stable, reflecting tougher comparables. US Professionals revenue was up 2%. In Canada, revenue was up 1%.

In France, revenues were down 2% organically. Permanent fees were up 7%. Staffing/Inhouse Services revenue declined 5%. The Professionals business was up 11%, driven by Ausy and healthcare.

In the Netherlands, revenue was down 3% which the company claims is above the market trend. Overall perm fees were up 2%. Staffing and Inhouse Services businesses were down 4%, while the Professionals business was up 5%.

In Germany, revenue was down sharply at -15% negatively impacted by regulation changes and lower activity in the automotive sector. Permanent fees were down 11% and combined Staffing/Inhouse Services business was down 19%, while Professionals was down 4%.

In Belgium & Luxembourg, permanent fees were down 21% compared to last year. Staffing/Inhouse Services business was down 5%.

In Italy, overall permanent fees were up 11%. In Iberia, permanent fees were up 2%. Staffing/Inhouse Services combined was up 1%. Spain was up 3%, while in Portugal, revenue was down 3%.

In the UK, revenue was flat, while in the Nordics, revenue was down 7%. Revenue in the Swiss business was up 1%.

In the group’s global business, Randstad Sourceright revenue increased by 4%, while Monster continued its decline with revenue down by 16%.

Revenue by business line

 “The development of volumes in early July indicate a continuation of the Q2 2019 trend,” Randstad said. “Q3 2019 gross margin is expected to be slightly lower sequentially given seasonality. For Q3 2019, we expect slightly lower operating expenses sequentially. There will be a positive 0.9 working day impact in Q3 2019.”

As of last trade Randstad traded at €48.12, up 3.46% on the day and 12.79% below its 52-week high of €55.18, set on 28 August 2018. Based on its current share price the company has a market value of €8.53 billion.