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Netherlands – Randstad net loss widens in Q4

14 February 2013

Dutch staffing firm (RAND:AEX), the second-largest recruiter in the world, will continue  with restructuring processes and cost reduction measures after the firm today reported its fourth-quarter net loss widened to €97.4 million from €16.5 million a year ago. This follows a goodwill impairment of €139.8 million in the quarter.

The firm has suffered from weak client demand in major staffing markets, particularly across Europe where the firm has made job cuts in a number of countries.

CEO Ben Noteboom said 2012 had not been an easy year, but he added: “We maintained good growth in Latin America and Asia and the rate of decline in Europe stabilized. Japan did particularly well.

“The demand for recruitment process outsourcing and managed services in the US has been increasing and the UK professionals segment improved, boosted by the education sector.”

Revenue falls -3% in Q4

Overall, the firm’s results were better than expected. Revenue in the fourth quarter fell -5% organically (per working day) to €4.2 billion as growth in North America slowed to +1% and Europe remained challenging. Rest of the World countries posted a +7% increase in revenue with markets performing well in India and Brazil..

Group gross profit dropped -5% organically to €772.2 million with the gross margin falling to 18.2% from 18.3% a year earlier. Gross profit was adjusted for restructuring costs of €1.6 million in the Netherlands where the firm recently announced job cuts. The Dutch gross margin was under pressure due to higher social security charges, while in Germany the company incurred additional costs reflecting the recent wage increases and the implementation of equal pay. In Southern Europe, Randstad was faced with increased margin pressure.

Underlying EBITA (profit before amortization/impairment acquisition-related intangible assets and goodwill) was down -4% to €156.2 million. On an organic basis, EBITA declined in the Netherlands (-14%), Germany (-32%), Belgium & Luxembourg (-25%), and Iberia (-15%) but the UK market was successfully returned to profitability again.

The recruiter made an operating loss of €78.9 million in the quarter, a sharp -48% fall from the same time last year. Cost reductions continued in the period with the firm cutting operating expenses by €21.8 million from the previous quarter. The firm said the number of full time employees decreased by -2% from the previous quarter, mainly affecting Europe. A total of 71 offices were closed (2% of the total network) of which 38 were in the Netherlands and 28 in the UK.

The firm’s largest business unit dealing with staffing services reported revenues of €2.6 billion, a -9% decline from a year ago. In its professional segment, revenues were down -4% at €846.2 million while inhouse services saw revenue grow +14% to €780.8 million.

European markets remain challenging

Randstad reported lower fourth-quarter sales in much of Europe. In France, revenue per working day fell -14% to €728.1 million, hit by lower demand from the healthcare, IT and finance industries. Staffing revenue fell -15% and professional revenue declined by -17%. The firm also wants to combine 275 branches in larger French cities into 65 offices, which involves letting go 163 managers.

In the Netherlands, revenue per working day was down -3% to €719.4 million. The company claimed that its Tempo-Team business outperformed in the industrial segment while Yacht revenue declined by -13%. In Belgium and Luxembourg, revenue per working day fell -8% to €322.4 million with staffing revenues decreasing by -9%. In its professional unit in these countries, revenue fell -3%.

In neighbouring Germany, revenue per working day fell -9% to €440.8 million with the decline continuing into the New Year. Equal pay arrangements which came into effect in the fourth quarter have not affected client orders so far, the firm said. German staffing revenues dropped -15% while strong demand from IT and engineering helped drive a +3% revenue increase in the company’s professional segment. 

In the United Kingdom, revenue per working day declined by -7% to €199.1 million despite a +10% increase in professional revenue, which was led by education, finance and managed services.

Iberia saw revenue per working decrease by -13% to €190.9 million with the firm posting a -12% fall in Spain and a stronger rate of decline in Portugal at -14%. In other European countries, revenues remained flat at €237.2 million with Switzerland reporting a +8% rise in revenue. Italian revenue was down -8%.

Rest of World more positive

In Japan revenue grew by +6%. Growth continued across all segments, especially in logistics and retail. Outplacement had a strong final quarter of the year. Revenue in Australia and New Zealand was -11% below last year caused by challenging banking & finance markets and lower demand in business services. Good performance was maintained in education. China faced a slowdown in demand for permanent placement and revenue contracted at a mid-single-digit rate. Growth in India was maintained at 10%. In Latin America, Randstad’s Argentinian business expanded while focusing on profitability, the Brazilian business continued to grow rapidly, Mexico was somewhat under pressure, while in Chile, which is mainly focused on Professionals, revenue was just below the level of Q4 2011, but gross profit grew solidly.

Although the company did not provide any forward guidance beyond a limited decrease in its cost base, the exit rate for revenue in January was at -5%, the same organic rate for the fourth quarter as a whole which suggests some hope of stabilisation. Ben Noteboom also noted that “Several legislative changes in some of our key markets will pave the way towards modern and sustainable labor markets in the long run, which is especially beneficial for our industry”.

Despite the weak result, the firm still exceeded analysts’ expectations and in early trading, the company set a new 52-week high when the share price reached €30.90, up around +12% from a year ago. Based on its stock price, Randstad has a market value of €5.10 billion. 

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