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Netherlands – Randstad Q1 results suggest glimmer of improvement

25 April 2013

Randstad (RAND:AEX), the second-largest staffing firm in the world, saw mixed results in the first three months of the year with business still slowing in Europe and revenue declining in all its major staffing markets. However, the company indicated that the rate of decline was easing compared to the prior quarter and also easing during the quarter itself.

In the period, revenue fell -4% on an organic basis to €3.832 billion with the firm reporting a decline in the permanent recruitment market. The monthly decline in January was -5%, but by March this eased to -3%.

Organically, gross profit fell -7% in the quarter to €683.6 million and the gross margin fell from 18% a year ago to 17.8%. Operating profit was down -1% to €47.9 million, but net income improved by +3% to €29.7 million in the first quarter.

Operating expenses decreased by €23.9 million compared to Q4 2012, however, underlying EBITA decreased organically by -16% to €91.5 million. Nevertheless, CEO Ben Noteboom said cost control in the first quarter had been effective. “Profitability rose in HR Solutions, Professionals and Inhouse,” he said.

“Our people in Turkey, Japan, China, India, Brazil and North America achieved another quarter with good profitable growth. European governments still need to do more in unfreezing labor markets and fighting unemployment, especially for younger people. European markets show some signs of improvement, and we will make targeted marketing investments to support organic growth and strengthen our position in the second half of the year.”

Looking ahead, the firm expects a limited cost increase in the second quarter of 2013, but said it was well positioned for 2013. “The first weeks of April showed a continuation of the gradual improvement witnessed in the first quarter,” said the recruiter.

In contrast to rival ManpowerGroup, which announced its Q1 numbers on Friday, Randstad had similar results in North America, France, Italy and Australia but achieved better revenue development in the Netherlands, Germany, UK, Iberia and Japan.

In its largest region, North America, revenue declined by -3% and, in contrasts to the small signs of improvement seen elsewhere, the results here suggested a further deterioration.

Europe still tough

In Europe, revenue during the first quarter fell across many countries and EBITA was down more than a fifth in France, Netherlands, Germany and Belgium. However, Mr Noteboom said that financials were starting to improve in the region. In France, revenue was down -12% to €637.0 million, hit by lower demand in the healthcare, IT, engineering and finance sectors. Overall, demand for professionals declined with many companies hesitant in hiring permanent staff. This follows on from challenging trading conditions in previous quarters. The company has reduced both headcount and offices by -8% compared to the prior year and Randstad expects to shed 163 management positions in France in the future.

In the Netherlands, first-quarter revenue fell by a marginal -1% to €660.4 million, which the company suggests is in line with the Dutch staffing market. The firm said that revenue fell across its Tempo Team and Yacht business. In April, Randstad announced plans to acquire certain staffing activities of local rival USG People with the firm expecting to close the transaction by mid-2013.

In Germany, revenue dropped -4% to €422.4 million although trading improved during the first quarter. The country recently introduced equal pay agreements for temporary workers across a number of key industries and, interestingly, Randstad says that this has not significantly impacted client orders so far. In fact, the company estimates it has benefit directly from a positive improvement in pricing to the value of +6% because of these collective bargaining agreements. IT staffing grew by +5% but the firm’s engineering unit remained under pressure in the first quarter.

In Belgium & Luxembourg, revenue fell -9% to €283.3 million with the firm reporting a slowdown in the industrial segment although demand for professionals staff also declined in the first quarter.

In the United Kingdom, revenue dropped -1% to €180.2 million with the firm seeing demand for temporary staff grow in the IT, education, finance, and managed services & RPO segments. Randstad Sourceright achieved good growth in managed services due to a number of client wins.

In Iberia, revenue was down -4% to €176.4 million. “Despite the challenging economic environment in this region, the rate of decline in revenue eased,” the recruiter said. Revenue in Spain was down -1%, despite increasing demand in manufacturing. In Portugal, revenue contracted by -8%.

In other European countries, revenue grew +5% to €214.7 million while Italy noted a -3% fall. Revenue in Switzerland was up +15% due to stronger demand for staffing services. Revenue also improved by +9% in Poland and by +18% in the Nordic countries, driven by Sweden and Norway. Revenue in the Czech Republic improved by +15% while Hungary and Greece remained under pressure.

Rest of the World revenue rises

In the Rest of the World region, revenue in the first quarter rose by +6% to €357.5 million. In Japan, where other staffing companies have recently reported mixed results, revenue grew by +6%, driven by growth in the logistics and retail segment. But revenue in Australia and New Zealand dropped -11% due to continued weak demand for permanent and professional staff. China grew by +26% based on strong performance in temporary staffing and payrolling. India saw revenue rise +10% and the firm saw further growth in its Latin American businesses.

Results were in line with expectations and in early trading, the company’s share price was up by nearly +7% to €31.83, an increase of +24% from a year ago. Based on its stock price, Randstad has a market value of €5.14 billion. 


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