Randstad (RAND: NV), the second-largest staffing firm in the world, today reported revenue for the third quarter ending 30 September 2018 of €6.0 billion, an increase of 3% on an organic basis compared with €5.8 billion a year ago.

Rest of the World led revenue growth in the third quarter with organic growth of 12% when compared to last year. Growth in Europe reported a slowdown.

According to Reuters, analysts forecasted revenue of €6.05 billion, however revenue came below forecasts, reflecting the slowdown in growth in Europe in Q3, particularly in France and Germany.

Overall, group permanent placement fees grew by 13% when compared to last year, but was down slightly compared to the growth in the previous quarter.

In the third quarter, gross profit amounted to €1.19 billion. Organic growth was 1.7%, impacted by adverse mix effects related to Monster. Currency effects had a negative impact on gross profit of €6 million compared to Q3 2017.

Gross margin was 19.8% in the third quarter. Temporary staffing had a negative effect on gross margin, primarily given adverse mix effects and changes in CICE (tax credit for employment and competitiveness) in France.

Underlying EBITA increased organically by 5% to €299 million. According to Reuters, analysts polled by Randstad had expected average EBITA of €292 million.

"We further improved our margin and strong free cash flow conversion in Q3" CEO Jacques van den Broek said. "Our organic sales growth was 3%, reflecting accelerating sales growth in North America and Rest of the world, but slowing activity in Europe in line with recent macro trends.”

“Supported by strong cost management, we were able to deliver ongoing sound shareholder returns. At the same time we continue to invest in the future of our company by scaling up our digital initiatives around the world. The roll-out of workforce scheduling, data-driven sales and talent engagement now spans over 25 countries. These initiatives benefit both clients and talents with improved services and communication and foster great excitement in our company and with our consultants. This is how we contribute to our ultimate goal: touching the work lives of 500 million people worldwide by 2030,” van den Broek said.

Revenue broken by Geography was as follows for the third quarter.

In Q3 2018, revenue in Randstad’s combined US businesses was up 4%. US Staffing/Inhouse Services grew by 5%. US Professionals revenue was up 1%. In Canada, revenue was up 2%. North America perm fees grew 10%.

In the Netherlands revenue grew by 4%, below the market rate but overall perm fees were up 9%. The Staffing and Inhouse Services businesses grew 2% while the Professionals business was up 15%.

In France, revenue growth was down 1%, impacted by a general market slowdown and strong focus on client profitability. Perm fees were up 22% compared to last year. Staffing/Inhouse Services revenue declined 4%, while the Professionals business was up 9%, driven by Ausy (consulting and engineering) and healthcare. EBITA margin was 5.3% compared to 6.0% last year, reflecting the adverse impact of the CICE tax change and lower growth.

In Germany, revenue was down 2% as it was negatively impacted by regulation changes and lower activity in the automotive sector. Perm fees were up 10% compared to last year. Combined Staffing and Inhouse Services business was down 4%, while Professionals was up 7%.

In Belgium & Luxembourg, perm fees were up 34%. The Staffing/Inhouse Services business was up 3%.

In Italy, revenue grew by 7% compared to the prior year, impacted by tougher comparables. Overall perm fees were up 38%.

In Iberia, revenue increased 1%, impacted by tough comparables and slowing macro activity. Perm fees were up 4% compared to last year. Staffing/Inhouse Services combined grew by 1%. Spain was up 3% while revenue in Portugal was down 3%.

In the UK, revenue was up by 3%, while perm fees were up by 2%. In the Nordics, revenue increased by 1%. Revenue in the Swiss business was up 6%. Overall EBITA margin for the 'Other European countries' region was 3.6% compared to 3.3% last year.

Overall revenue in the 'Rest of the world' region grew by 12%. In Japan, revenue grew 7%. Revenue in Australia/New Zealand grew 14%, while revenue in China grew by 6% YoY (Q2 2018: up 7%). In India revenue was up 1%, while in Latin America revenue grew 30%, driven by Argentina and Brazil. Overall EBITA margin in this region was 4.4%, compared to 3.3% last year, primarily driven by a strong profitability increase in Japan and Australia.

In the group’s global business, overall revenue growth was flat. Randstad Sourceright reported high single-digit revenue growth on tougher comps, while Monster revenue was down by 15%.

Revenue by business line was broken down as follows.

Looking ahead, Randstad said its revenue growth in September and the trend of volumes in early October indicate a continuation of the Q3 growth rate.

Q4 2018 gross margin is expected to be modestly lower sequentially, according to Randstad.

"We do not assume a big turnaround in Europe," CFO Henry Schirmer told Reuters, adding that the company does not expect a fourth-quarter return to growth in Germany and France.

Randstad set a new 52-week low during today's trading session when it reached €41.69. Over this period, the share price is down -19.51%. Randstad last traded at €41.76, down 4.85% on the day. Based on its current share price the company has a market value of €8.05 billion.