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Netherlands – USG People Q3 results mixed but improving

25 October 2013

Dutch recruitment firm USG People (USG: NL) reported revenue for the three months to the end of September of €599.4 million, a fall of -3% compared with €614.9 million for the same period last year. Revenue per working day declined by -4.1% compared with the third quarter last year. This compared favourably with the -8% year-on-year decline reported in Q2 2013. 

Gross profit for the period fell by -4% to €127.9 million in Q3 2013 from €133.7 million in Q3 2012. Net income increased, however, from €7.1 million in 2012 to €8.9 million, equating to a rise of +25.4%.

Commenting on the figures, company CEO Rob Zandbergen said: “The development of our results in the third quarter was very positive. The steps we have taken as part of our strategy are clearly producing results. Our competitiveness has improved further, resulting in a rise in revenue and boosting profitability at our operating companies in all the countries where we are present.”

“The change in the senior management structure announced this week gives the operating companies more responsibility and more direct involvement in decision-making and this will encourage and strengthen entrepreneurship. We take pleasure in noting that our results are improving strongly and I want to offer my sincere thanks to our employees whose work and performance havebeen excellent over the recent period, often in difficult and challenging market conditions. At USG People we are extremely well placed to take advantage now that the markets seem to be picking up,” he concluded. 

It was announced earlier this week that USG People’s board would now consist of two members; CEO Rob Zandbergen and CFO Leen Geirnaerdt, following the departure of the COO and CCO. The senior staffing reduction is part of a 2011 redesign strategy that will save the company an estimated €38 million.   

During the period there was a shift in revenue towards large clients, where demand developed more favourably than in the small and medium-sized business segment. This created a negative mix effect given that larger volumes are supplied at lower margins, with low-cost delivery models being more prevalent with large clients.

There was also an impact from a drop in revenue at units that provide higher margin services, such as USG Restart in France, USG Professionals and at the company’s call centres. In addition to this change in revenue mix, price pressure also drove down margins.

The company’s General Staffing business reported revenue of €357.7 million, a decline of -2% compared with €364.8 million last year. Revenue per working day fell by -4% during the third quarter. In April 2013, USG People sold its General Staffing businesses in Spain, Italy, Austria, Switzerland, Poland, and Luxembourg to Randstad. 

In the Netherlands, revenue fell by -5% to €135.1 million, as demand for medical staff remained weak and there was a sharp drop in revenue from the call centres following the loss of a large client. Excluding medical and call centres, the drop in revenue was -4%. In Belgium, revenue fell by -1% to €93.9 million, with the decline in revenue per working day narrowing further to -2%. In France revenue turned to growth over the course of the quarter, increasing by +1% to €128.7 million.   

The Specialist Staffing segment reported revenue of €205.6 million, a fall of -2% from €210.7 million a year ago. In the Netherlands revenue increased by +2% to €95.7 million. In Belgium, revenue fell by -10% to €48.1 million. Revenue was also depressed by the very weak demand for medical staff. In Germany revenue improved, year-on-year, despite declining by -2% to €59.9 million.

USG People’s Professionals segment reported revenue of €36.1 million, a drop of -8% compared with €39.4 million in Q3 2012. Demand was particularly weak in Finance & Marketing and Communication & Sales. Revenue in the Netherlands fell by -3% to €23.7 million. Engineering in the Netherlands reported an improvement with revenue almost unchanged compared to the previous quarter. Legal showed a mixed picture, with Belgium achieving growth in this segment, while revenue in the Netherlands failed to reach last year’s level. Belgium reported a -16% drop in revenue to €11.6 million.

Looking forward, the company found that the positive signals that emerged during the previous quarter persisted into the third quarter. The decline in revenue compared to last year narrowed steadily. USG People expects this positive trend to continue in the fourth quarter. Returning to growth remains the number one priority within the organisation.

In trading today, the company’s share price increased by +4% to €8.80, an increase of +54.8% compared with a year ago. Based on its share price, the company has a current market value of €705 million.

USG People’s share price has continued to climb since the end of August 2013. Since 30 August 2013 the share price has risen from €5.50 to €8.80, an increase of +60%. When asked by Staffing Industry Analysts to explain why the share price had risen so dramatically, Dick Veerman of USG People responded: “It’s not a question of why the share price is so high, but why was it so low? USG People is a European company and did not have access to other markets to diversify our revenue. That is why we lagged behind. We see it as a sign that investors are more confident in the economic recovery.”

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