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Revenues were up by +22% from 3,179.7 million Euro in Q4 2009 to 3,891.1 million Euro in Q4 2010 at Randstad Holding (RAND:AEX), the world's second largest staffing firm.
Fourth quarter and annual results for 2010 published today reveal that organic revenue growth was +17%, the net addition of acquisitions/disposals (primarily the 105 million Euro revenue contribution from FujiStaff) was 3%, while currencies added the remainder.
Permanent placement fees increased by +20% organically. Permanent fees made up 1.5% of revenue and 7.6% of gross profit (7.1% in Q4 2009).
In 2010 revenue improved by +14% to 14.2 billion Euro. Organic growth amounted to +12%, strengthening from a -1% decline in Q1 to +17% growth in Q4.
Recovery followed a classical pattern. The combined in-house businesses returned to growth in Q1 2010. The staffing businesses grew as of Q2 2010, whereas professionals turned the corner in the same quarter and showed clear growth as of Q3 2010. The US staffing and in-house businesses started to recover first, followed by the more industrial oriented countries in continental Europe such as Germany, France, Belgium and Poland. The more white collar and public sector geared markets in the UK and the Netherlands returned to growth later in the year.
In Q4 2010, gross profit amounted to 736.7 million Euro. The gross margin amounted to 18.9% compared to 19.1% in Q4 2009. The temporary margin declined -0.3% year-on-year, including mix effects. Sequentially the temporary margin was stable. The growth in permanent fees added +0.1%.
For the full year underlying gross profit amounted to 2,658.7 million Euro, with the gross margin coming down from 19.5% to 18.8%. During the year pressure on the temporary margin eased, while growth in permament fees started to add to gross margin.
In Q4 2010, operating expenses amounted to 575.2 million Euro, up +15% compared to Q4 2009 and up +6% compared to the previous quarter. The consolidation of FujiStaff added +3% (approx. 15 million Euro) to the cost base. Organic growth in operating expenses was +10% year-on-year and +3% sequentially.
At the end of the quarter Randstad operated a network of 4,195 outlets, +80 more than in the previous quarter, largely influenced by the consolidation of FujiStaff. Average headcount amounted to 26,970 for the quarter, up +5% year-on-year and up +4% sequentially. Organically the increase was +2% year-on-year and +1% sequentially. Headcount growth has been significantly below revenue and gross profit growth, allowing for considerable productivity improvements.
For the full year underlying operating expenses amounted to 2,149.1 million Euro, compared to 2,098.5 Euro million in 2009. Whereas operating expenses were below last year in the first half of the year, the cost base began to increase in the second half to support the fast growth in the business.
In Q4 2010 underlying EBITA increased by +52% to 161.5 million Euro, with the EBITA margin reaching 4.2% compared to 3.3% in Q4 2009. Organic EBITA growth was +39%. FujiStaff contributed 5.4 million Euro to EBITA in Q4 2010. For the full year underlying EBITA increased by +61% to 509.6 million Euro. The EBITA margin improved to 3.6%, compared to 2.5% in 2009.
In The Netherlands revenue was up +4% organically compared to flat revenue in the previous quarter. The Dutch market is more late cyclical than other markets due to the relatively higher weight of the services segment in the overall economy. The market gained some momentum during the quarter, with improved growth in staffing segments and a more limited decline in the professionals segment.
Tempo-Team and Randstad continued to be behind market, lagging the growth in the industrial segment. However, both showed growth and solid profitability. The decline in revenue at Yacht, which is active in the more late cyclical and more public sector geared professionals segment, eased to a single
digit figure, while gross margin improved sequentially because of reduced idle time. The EBITA margin reached 6.8%, compared to 7.2% in Q4 2009.
In France revenue increased organically by +21%, compared to +19% in the previous quarter. Strong momentum was maintained and the group was ahead of the market. Manufacturing continued to act as a main growth driver but improvements can be witnessed now in all sectors, including white collar. In-house revenue more than doubled. Randstad now has approximately 100 in-house locations. Over the past quarters more than 250 specialty units have been created in existing branches, improving exposure to this part of the market as well. Growth in professionals was double digit. Permanent fees were up +18% organically.
The EBITA margin amounted to 2.9% (or 1.6% excluding the 10.4 million Euro business tax reclassification) compared to 0.1% in Q4 2009. The changes in the French subsidy system regarding low wage labour have been applicable to the December payroll which was processed in January. This had a negative impact on the December gross margin of approximately 1 full percent as this could not yet be passed on to clients.
In Germany organic growth reached +32%, compared to +40% in the previous quarter. Growth continued to be strong against a more challenging comparison base, as the recovery started in Q4 2009. A continued strong pickup across all industrial segments helped to drive growth in staffing and in-house. In professionals, the aerospace segment remained slow while engineering showed some growth. Results of Yacht Teccon further improved. Growth in the IT business remained very strong. The combined EBITA margin reached 7.5%, compared to 7.1% in Q4 2009.
In Belgium/Luxembourg revenue increased by +17% organically, equal to growth in the previous quarter. Randstad outperformed market growth, beating the market in the industrial segment especially through in-house. Tempo-Team was still below the market, as it is less exposed to the fastest growing automotive and industrial segments. For both Randstad and Tempo-Team growth in white collar gained momentum, whilst non-staffing services such as service checks and HR Solutions lagged. The EBITA margin improved to 6.3% (5.1% in Q4 2009).
In the United Kingdom revenue increased by +9% on an organic basis, equal to growth in the previous quarter. Revenue in in-house maintained solid momentum, whilst staffing revenue was under pressure based on slow demand from the public sector. Revenue in the professionals segment still contracted year-on-year based on reduced temporary revenue. However, backed by growth in permanent fees, gross profit increased in finance, ICT, HR and media. For the whole UK permanent placement fees were up +5%, as improvements in aforementioned segments were partly offset by reduced placement fees in education and healthcare.
Costs were relatively high and included restructuring and integration charges of approximately 3 million Euro and costs for the national marketing campaign above the regular marketing budget of approximately 1 million Euro. The EBITA margin was -2.0%, compared to 0.8% in Q4 2009.
In Spain and Portugal revenue increased by +9%, compared to +6% in the previous quarter. Economic circumstances remain challenging in the region. In Spain Randstad performed better than the market. In-house showed strength towards the end of the year. The Portuguese business grew at about +10%, with solid demand in automotive. Based on strong execution Portuguese DSO was reduced within a difficult climate. Quarterly operating expenses included rebranding costs of a little over 1 million Euro. The rebranding programme is now finalised. The EBITA margin reached 3.3% compared to 4.1% in Q4 2009.
Other European countries showed solid growth across the board. In Italy, revenue was up over +30%, clearly ahead of the market. The Polish and Scandinavian businesses continued to show strong growth, while this was also the case in Turkey, Hungary, and Greece. The Swiss business generated double digit growth as well. The integration of recently acquired businesses in Hungary and the Czech Republic is well ahead of schedule. For the combined region the EBITA margin reached 3.3%, compared to 3.0% in Q4 2009.
Staffing revenue increased by +13%, equal to the growth rate in the previous quarter. Increased demand is still largely driven by demand from industrial clients. However, administrative segments are gaining momentum in several regions.
In-house services showed the strongest improvement, with organic growth reaching a level of +51%, compared to +55% in Q3 2010. Growth is primarily driven by a pickup in demand from the client base in the industrial and logistical segments. Growth also includes client gains and transfers from staffing to in-house, for example in France, where Randstad is transferring clients from the former Vediorbis network.
The professionals segment is lagging the other segments but after recovering in Q2 2010, growth is gradually strengthening. Revenue improved by +9% organically, compared to +8% increase in Q3 2010. The UK and Dutch professionals businesses both still declined, impacted by the late cyclical nature of the services based economies they operate in, as well as by the relatively large dependency on the lagging government sector.
In October 2010, Randstad successfully completed the offer for Japanese FujiStaff, by obtaining a 95% stake. FujiStaff has been consolidated as of 20 October 2010. Delisting occurred in January 2011, resulting in full ownership.
In October 2010, Randstad used its option to increase the stake in Indian Ma Foi from 83% to 100%. In January 2011, Randstad sold Hughes Castell Hong Kong. The financial impact of the latter two transactions is immaterial.
Ben Noteboom, CEO of Randstad, commented "growth has accelerated throughout the year. Not only did we see our in-house and staffing services perform very strongly, in many markets the professionals segment has started to improve as well."
"We have gained market share through the year in many important regions due to the continuing efforts of our people. I would like to thank them for their contribution in the special year of Randstad's 50th anniversary. Market prospects look bright, we see good growth opportunities. At the same time, we will maintain our focus on efficiency."
"It is very satisfying to be able to propose to pay our shareholders dividend again. We are looking forward to a great year in the world of work, delivering value to our clients, candidates, employees and other stakeholders."
Finally, Randstad's founder Frits Goldschmeding will step down from his role as Vice Chairman of the Supervisory Board at the next AGM in March, after serving the statutory maximum of three four-year periods. Frits Goldschmeding (Forbes World Billionaire, ranked 297 in 2010, fortune worth $3.2 billion) founded Randstad Holding in 1960 and took the company public in 1990. He retired from his role as CEO in 1998.
In early trading Randstad's shares were down by -3.06% to 40.67 Euro.