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Randstad (RAND:AEX) hosts its Analyst & Investor conference today; when it will announce a trading update that shows the gradual slowdown experienced in Q3 2012 continued in October by -6% per working day. It will also reaffirm its strategic target of an EBITA margin of 5%-6% over time, through revenue growth and mix improvement and provide information on its credit facility and dividend policy.
According to Randstad the trends that were discussed in their Q3 press release have continued into Q4 2012. In October revenue per working day decreased by -6% organically. Revenue in North America was at the same level as last year and it has been partly impacted by the effects of hurricane Sandy. In Europe, the gradual slowdown, as witnessed in the third quarter, continued in October (-/-9%). The Netherlands and Belgium declined at a similar level as in September whereas the declines in France (-/-14%) and Germany (-/-9%) were more pronounced.
The firm anticipate their underlying costs in Q4 to be lower than in Q3 and they expect to incur non-recurring costs of at least €25 million in the next six months. Discussing their strategy going forward, the group puts the emphasis on “manage adaptability, improve profitability”. As they go on to say: “The structural growth drivers in our industry remain in place. Clients have a strong focus on becoming more efficient and having access to candidates with specific skills and expertise. Demographic trends, such as the growing mismatch between supply and demand for labor, require higher mobility and participation in the labor market. Other opportunities will emerge from the implementation of appropriate regulation in all our markets”.
Apart from certain uncommitted credit lines, Randstad has a committed syndicated credit facility of €1,755 million which runs until May 2013. To extend the maturity of committed financing, Randstad secured a forward start syndicated credit facility of €1,300 million as of May 2013, and the majority of this facility runs until May 2017. As announced in their Q3 press release. Randstad aims to refinance the remaining part of around €450 million and according to the firm they are making good progress in exploring various forms with different maturity profiles (short-term, medium-term, long-term). Randstad has agreed to expand the group of banks in the syndication with Industrial and Commercial Bank of China. Following this agreement the forward start syndicated credit facility will amount to €1,420 million, of which the majority will mature in 2017.
In addition, Randstad has entered into negotiations with a selected number of banks for providing separate committed credit facilities with similar conditions as the forward start syndicated credit facility. Randstad expects to complete this process as soon as possible and aims to secure up to €200 million with an average maturity of approximately 2 years.
The firm also anticipates launching a Medium Term Note (MTN) program by the end of the year which will have the possibility to attract financing through bonds, private placements and notes with fixed or floating rates.
As part of the refinancing of the remainder of the current credit facility, Randstad is also considering alternatives to reduce its leverage ratio. As such, Randstad has entered into negotiations with a selected group of investors on the issue of preference shares C for an amount up to €200 million. Randstad expects to make further announcements regarding this in the next two weeks.
Randstad’s current dividend policy aims at paying €1.25 per ordinary share if the payout as a percentage of adjusted earnings per share is between 30-60% and the financial position allows for it. The dividend policy was linked to the strategy which aimed at achieving EBITA margins of more than 4%. As the company has witnessed diverging trends in its business and higher volatility in earnings, Randstad have reviewed this dividend policy.
Accordingly,the current dividend policy will be maintained over 2012, but they will offer shareholders a choice between shares or a cash dividend. As from 2013 they will introduce a new dividend policy which aims at a payout ratio of 40-50% of adjusted earnings per share. They will also offer shareholders a choice between shares and a cash dividend. At the same time they aim to install anti-dilution measures, such as share buy-backs, when the financial position will allow for it.
Reporting on the proposed change to the dividend policy, ING financial analyst, Marc Zwartsenburg commented "The dividend for 2012 is likely safe but, based on current forecasts, 2013 (is likely) to be cut,"
Following the announcement, Randstad’s share price declined by almost -5% to €23.96 in early trading this morning.You can listen to the presentations of Ben Noteboom and Robert Jan van de Kraats through real-time audio webcast Today (21/11/12) at 14:00 CET (13:00 GMT). A replay of the webcast and all other presentations will be available on Randstad’s website by the end of the day, here.