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Sweden – Domestic market constraining Proffice’s revenue

20 February 2014

Swedish recruitment firm Proffice AB (PROEB: SS) reported revenue of SEK 1.1 billion (€123.1 million) for the fourth quarter ending 31 December 2013, a year-on-year decline of -12% compared with SEK 1.2 billion (€134.3 million) a year ago.

The company achieved an operating profit of SEK 35 million (€3.9 million), a substantial improvement on an operating loss of SEK 1.2 million (€134,327) last year. Proffice reported a profit after tax of SEK 25 million (€2.8 million), compared with a loss after tax of SEK 5 million (€559,695) a year ago.

On an annual basis, the company reported revenue of SEK 4.3 billion (€481.3 million), a year-on-year decline of -11% compared with SEK 4.9 billion (€548.5 million) in 2012. Proffice reported an operating profit for the year of SEK 125 million (€14 million), an increase of +14% compared with SEK 110 million (€12.3 million) in 2012. Profit after tax for the year increased by +33% to SEK 104 million (€11.6 million), up from SEK 78 million (€8.7 million) last year.

Henrik Hӧjsgaard, the recently appointed President and CEO of Proffice, commented on the results: “In the second half of the year, an improvement in the Swedish market was cautiously anticipated. Overall, 2013 turned out to be a transitional year for our Swedish operation, where continued cost consciousness and internal efficiency resulted in increased profitability, despite substantial price pressure. The proportion of revenue from small and medium-sized customers continued to increase, affecting both profitability and cash flow in a positive direction. Demand from of a number of our major customers was lower, as well.”

“Growth continues to be our ambition in Norway. We see great potential in the Norwegian market and our goal is to strengthen our market position. However, the business was affected by the slump in early 2013 that affected the Norwegian economy and by increased uncertainty among customers with the introduction of the temporary worker legislation (Vikarbyrå Directive). Despite this, we managed to increase profitability in 2013. Our specialisation strategy has continued to ensure the right conditions exist for better profitability by meeting our customers’ needs with excellence and continuously refined service offerings.”

“Both in Finland and Denmark, revenue and profitability increased significantly during the year as a result of the establishment of Proffice Aviation, one of our specialist companies,” Mr Hӧjsgaard added.

Revenue from Sweden fell by -10% during the fourth quarter to SEK 778 million (€87.1 million), down from SEK 863 million (€96.6 million) in Q4 2012. Swedish revenue accounted for 74% of total company revenue during Q4 2013. On an annual basis, revenue fell by -14% to SEK 3.2 billion (€358.2 million), down from SEK 3.7 billion (€414.2 million).

Norway proved to be Proffice’s most challenging market, with revenue dropping by -25%, year-on-year, to SEK 237 million (€26.5 million) during Q4 2013, compared with SEK 317 million (€35.5 million) in Q4 2012. Norwegian revenue contributed 22% of total company revenue in Q4. Annually, revenue fell by -10% to SEK 998 million (€111.7 million), down from SEK 1.1 billion (€123.1 million) last year.

The biggest year-on-year growth during Q4 was reported in Finland, which grew by +150% to SEK 35 million (€3.9 million), up from SEK 14 million (€1.6 million) in Q4 2012. Revenue from Finland accounts for 3% of total revenue. In 2013 revenue rose by +74% to SEK 118 million (€13.2 million) from SEK 68 million (€7.6 million) in 2012.

Revenue derived from the Danish market rose by +100% to SEK 10 million (€1.1 million), up from SEK 5 million (€559,695) last year. Danish revenue accounts for 1% of company revenue. On an annual basis, Denmark reported the biggest year-on-year growth with +111% to SEK 40 million (€4.5 million), up from SEK 19 million (€2.2 million) in 2012.

Proffice’s Staffing business remains its largest business segment. During the fourth quarter the company achieved revenue of SEK 1 billion (€111.9 million), a decrease of -14% compared with SEK 1.1 billion (€123.1 million) last year. On an annual basis, Staffing revenue fell by -12% to SEK 4.1 billion (€459 million), down from SEK 4.6 billion (€514.9 million) in 2012.

The company’s Recruitment business reported year-on-year growth of +10% during the fourth quarter to SEK 43 million (€4.8 million), up from SEK 39 million (€4.4 million) in Q4 2012. Annually, revenue decreased by -8% to SEK 168 million (€18.8 million), down from SEK 183 million (€20.5 million).

Revenue from Proffice’s Outsourcing business fell by nearly a third to SEK 17 million (€1.9 million) from SEK 25 million (€2.8 million) in the fourth quarter. However, on an annual basis revenue increased by +6% to SEK 87 million (€9.7 million) up from SEK 82 million (€9.2 million) in 2012. The Outsourcing business currently operates only in Sweden and Norway, although 100% of the revenue from the fourth quarter derived from Sweden.

Mr Hӧjsgaard concluded: “As the new CEO, I can conclude that Proffice made it through a period of tough economic market conditions. The Group has successfully implemented major cost savings, streamlined internal processes, and improved profitability, while winning major contracts.”

“Proffice is an efficient, profitable company that is well prepared to meet changes in the market with attractive offerings and good sales pressure. Our long-term strategy remains unchanged and our 2014 agenda reflects the Group’s ambitious business plans. Proffice will continue to play its leading role in the market and generate profitable growth through innovation and improved customer experiences. I look forward to leading Proffice toward our vision of becoming the most successful staffing company in the Nordics.”

In trading today, the company’s share price rose by +2.5% to SEK 24.70 (€2.76), an increase of +4.4% compared with a year ago. Based on its current share price, the company has a market value of SEK 1.7 billion (€190.3 million).   

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