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Netherlands – USG People restructures in challenging market conditions

26 July 2013

Dutch staffing firm USG People (USG: AEX) announced revenue for the second quarter of 2013 of €659.2 million, an organic drop of -8% compared with the same period last year. This is following on from the rollout of a new operating model, the lowering of their cost base by €38 million, financial restructuring and the sale of a number of generalist staffing businesses to rival, Randstad. 

Operating expenses for the period were -9% lower than a year ago, falling to €115.5 million from €126.5 million. Gross profit in the quarter fell -14% from €151.6 million in 2012 to €131 million in 2013. 

Underlying EBITA almost halved organically, dropping -40% from €16.2 million in 2012 to €9.7 million in 2013. In the second quarter, net income totalled €300,000, a reduction of -94% on the €5.3 million for the same period last year.   

Rob Zandbergen, CEO of USG People said: “The sale of our General Staffing activities in six countries and of USG Energy completes an important transition in the first half of this year. Our organisation is now focused on markets in which we have substantial scale and promising earnings potential. We will strengthen out competitive position be refining our positioning with a simplified management structure.” 

The total impact on the net result in the second quarter, from the sale of General Staffing activities in six countries was -€3.1 million. 

On a pro-forma basis, excluding divested activities such as the results of USG Energy and the General Staffing operations in Spain, Italy, Austria, Switzerland, Poland, and Luxembourg, revenue still fell -8% during the period from €597.5 million to €550 million. Operating expenses fell -9% from €112.2 million in Q2 2012 to €102.2 million during the second quarter of this year. Gross profit in the quarter fell -13% from €132.8 million to €115.7 million this year. 

On a pro-forma basis for the quarter, EBITA dropped -40% from €16.2 million in 2012 to €13.5 million in 2013. In the second quarter, net income totalled €300,000, a reduction of -88% on the €2.6 million for the same period last year.    

The drop in gross profit was a result of mix effects and price pressure. There was a shift in revenue towards large clients where the development of demand was more favourable than in the small and medium-sized business segment. Revenue from recruitment and selection fell -16% to 1.1% of group revenue, having a -0.1% impact on the gross margin. 

“We will further reinforce our services by developing a clearly distinct distribution structure and proposition for each brand, at the same time making our organisation more versatile and adjusting it to the changing dynamics in our markets. This will structurally lower the cost base. We have also optimised our financing structure by securing a €60 million subordination loan, for which three banks are already committed. Following the repayment of the €115 million subordinated convertible loan in October 2012, our operation was fully financed with the syndicated bank facility. With the new non-convertible subordinated loan our financing structure is back in balance again,” Mr Zandbergen added. 

Staffing revenue declined during Q2 2013, with revenue derived from the firm’s General Staffing segment falling -7% organically from €348.5 million in 2012 to €323.1 million, on a pro-forma basis. In line with the trend in the market, the decline in revenue in the Netherlands worsened from -8% in Q1 to -10% in Q2. Belgium reported a less worse decline in revenue per working day from -6% in Q1 to -3% on Q2. In France, the decline remained stable at -7%.      

The Specialist Staffing division generated revenue of €188.8 million in the second quarter, down -8% organically compared with €205.4 million during the same period last year. Declines were experienced acros all the company’s regions. In the Professionals unit, revenue also fell -13% organically to €38.1 million compared with €43.6 million for the same quarter last year. 

The company’s German business remains loss making though profitability is still being achieved in the Netherlands, Belgium and France. 

Looking forward, the company admits that no sign of improvement has yet materialised though alluded to “positive signs” and highlighted that the decline in revenue gradually eased in some markets. Despite the persistence of challenging market conditions USG People is confident moving forward. Several operating companies were able to return to growth in June and the expectation is for that trend to continue through Q3 and Q4.

In early trading, the company’s share price rose +1.86%, an increase of +5.52% compared with a year ago. Based on its current share price, the company has a market value of €80.48 million.     

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