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Netherlands – Randstad reports big jump in net income

31 October 2013

The second largest staffing firm in the world, Randstad (RAND: NA) reported revenue for the third quarter ending 30 September 2013 of €4.36 billion, a small drop of -1% compared with revenue of €4.4 billion a year ago.

Gross profit for the period of €795.8 million rose by +1.7% on an organic basis from a gross profit of €799.2 million last year. Net income for the period rose by +22%, rising to €83.8 million compared with €68.8 million during Q3 2012.

Group CEO Ben Noteboom, who the company announced today will step down from his post on 28 February 2014, commented: “September saw a return to growth and we achieved the highest profitability since 2008. In Europe, an increasing number of countries now show growth. Iberia, the UK, Poland, Italy, Germany, Norway, and Sweden are good examples.”

“Elsewhere, Brazil continues to grow fast. The USG Integration is on track, with Switzerland, Poland, and Luxembourg completed with the successful introduction of the Randstad brand in Austria. As announced before, during this quarter we launched new marketing campaigns in some of our larger markets. We face the future with confidence,” he concluded.

Revenue generated in North America, the company’s largest business region, fell organically by -3% during Q3 2013. In Q3 2012 revenue reached one billion euros but dropped back to €925.4 million in Q3 2013. Revenue per working day across the region was -3% below last year. Gross profit, however, increased by +2%, year-on-year, as a direct result of a +6% increase in permanent placement fees. North America accounts for 21% of total company revenue.  

In France revenue fell by -6% on an organic basis, from €797 million in Q3 2012 to €762.1 million in Q3 2013. The decline in revenue was evident across all business segments, with the exception of food and aerospace, which delivered good growth. From 1 July 2013 the company has been focusing on five regions, each integrating the existing industry segments. Randstad is in the process of consolidating 275 branched in larger cities into 65 larger offices. The program is expected to be completed in Q2 2014. France accounts for 18% of total company revenue.

 In the Netherlands revenue fell -4% on an organic basis to €696.4 million from €718.5 million, year-on-year. A combination of focusing on client profitability and decreased demand put additional strain on revenue during the quarter. The Netherlands, Randstad’s home market, accounts for 16% of total company revenue.

Revenue in Germany grew by +4% on an organic basis, rising from €484.9 million during Q3 2012 to €510 million this year. The company noted normal season patterns in volume, which were slightly below last year toward the end of the quarter. This was supported by a positive price effect of around +8%. The relatively large price effect is due to the implementation of equal pay and wage increased in the company’s Collective Labour Agreement (CLA) which entered into effect in November 2012. The implementation of equal pay is in line with expectations and has not yet significantly impacted client demand. Germany accounts for 12% of total company revenue.

In Belgium & Luxembourg, the company reported a -6% organic drop in revenue to €338.3 million from €352.9 million, year-on-year. The countries were impacted by a slowdown in demand in the industrial and automotive segments. Belgium & Luxembourg account for 8% of total company revenue.

In the United Kingdom revenue grew by +5% on an organic basis to €195.6 million compared with revenue of €203.5 million last year. Growth was led by Education, Construction & Engineering, IT, and MSP & RPO; predominately through temporary staffing. Permanent placement fees were -2% lower compared with last year. The UK accounts for 4% of total company revenue.

Across Iberia, revenue increased organically by +1% to €267 million, up from €202.2 million last year. Revenue in Spain was in line with last year. Growth was negatively impacted by lower volumes in the recently acquired USG business. In Portugal, revenue increased by +4% on an organic basis, with growth led by good performances in the manufacturing segment and call-centre business. Iberia accounts for 6% of total company revenue.

Revenue from ‘Other European Countries’ increased organically by +9% in Q3 2013. Revenue rose to €308.7 million from €228.2 million. In Italy, revenue grew by +5% led by growth in the industrial segment. Revenue from Switzerland rose by +4% led by strong performances in the construction and industrial segments. The integration of the USG business has been completed in Switzerland and Austria, where revenue rose by +11%.

In Poland revenue increased by +15% driven by strong performances in Staffing, Inhouse, and permanent placement. In the Nordic countries revenue increased by +32% led by solid performances in Sweden and Norway. Revenue in the Czech Republic grew by +18% while revenue returned to growth in Greece. Revenue in Hungary and Turkey remained under pressure throughout the quarter. The ‘Other European Countries’ account for 7% of total company revenue.

Revenue from the ‘Rest of the World’ grew organically by +8% to €359.2 million during the quarter, compared with €408 million last year. In Japan revenue grew by +4% led by good performances in logistics and retail. Across the Antipodes, revenue increased organically by +4%, good performance in the industrial segment was offset by continued weak demand in Professionals and permanent placements.

Chinese revenue grew organically by +19% based on strong performances in temporary staffing and Payroll Services. The business was somewhat affected by uncertainty associated with the implementation of new legislation on 1 July 2013. Growth in India eased and was marginally below that reported last year. In Latin America, Randstad’s Argentinian business expanded further while the Brazilian business continued to grow rapidly. Strong gross profit growth was reported in Mexico and Chile. The ‘Rest of the World’ region accounted for 8% of total company revenue.               

By business segment, Randstad’s Staffing business reported a -5% drop in organic revenue during the period, from €2.7 billion to €2.65 billion. The company’s Staffing business, including HR Solutions, accounted to 61% of total revenue for the period.

Randstad’s Inhouse Services business, which mainly focuses on industrial and logistical clients, reported organic growth of +13% to €876.4 million from €786.1 million, year-on-year. Inhouse Services accounted for 20% of total company revenue. 

The Professionals business segment, accounting for 19% of total company revenue, reported negligible change in revenue of 0% on an organic basis. 

Looking forward, the world's second largest recruitment firm, according to research by Staffing Industry Analysts, expects an increase in costs for Q4 2013, mainly as a result of marketing investments. As previously announced, the company intends to make additional investments in marketing of around €15 - €20 million in some of its largest markets. Most of the investment will be in France, Germany, the UK, and North America.

Randstad also announced today that company CEO Ben Noteboom will be stepping down effective from 28 February 2014. Having joined the board in 2001, he was appointed interim CEO in September 2002, before being appointed CEO and Chairman of the Executive Board in March 2003. He will be replaced by Jacques van den Broek on an initial four-year term.

Commenting on the leadership change Fritz Frӧhlich, Chairman of the Randstad Supervisory Board, said: “Ben has an outstanding track record within Randstad and after 11 years as CEO we owe him thanks for his exemplary performance through some very challenging times. Randstad favours long careers and has successfully managed to constantly develop and promote management from within. We are fortunate that we can appoint Jacques van den Broek as the new CEO and I am confident of a smooth and orderly transition."

In trading today, the company’s share price rose by +2.6% to €44.75, an increase of +83.9% compared with a year ago. Based on its current share price, the company has a market value of €7.7 billion. 

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