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Netherlands – Randstad sees no growth in most European markets

26 April 2012

Dutch staffing giant Randstad (RAND:AEX) said today that it saw good growth rates in the first quarter of 2012 in North America although Europe’s situation remained “uncertain” as revenues declined in the region. Particularly market conditions in Southern Europe were “challenging” although did not deteriorate further.

In the financial results published today for Q1 2012, the firm revealed that total revenues increased by +12% from €3,700 million in Q1 2011 to €4,152 million, bolstered by the acquisition of SFN Group. However, on a pro forma basis also adjusted per working day, revenues were flat (but grew by +1% in March). Perm fees made up 1.8% of revenue and remained under pressure in the UK and Australia, while a “good performance” was achieved in the US, Europe, China and Latin America. 

Operating expenses in the first quarter increased by +14% to €637.8 million from €561.9 million in Q1 2011. This included book profits of €3.8 million, mainly related to divestments in the Netherlands and India.

Operating profit (before integration costs) in the period only increased by +2% to €110.4 million from €108.7 million in Q1 2011 while gross profit in rose by +12% to €748.2 million from €670.6 million. The gross margin declined by -0.1% to 18.0% while the temp margin was also -0.3% below last year due to ongoing price/mix effects. The firm said that margin pressures remained in the Netherlands and the UK and have increased in Germany.

Looking at revenue by category, Staffing revenue declined by -4% to €2,563 million compared to €2,400.1 million, hit by a slower performance in Europe. Inhouse services, mainly focused on industrial and logistical clients, saw revenue go up by +17% to €707.3 million, compared to €594.3 million a year ago. Professional staffing increased revenue by +5% to €882.1 million from €705.6 million.

Commenting on the results, Ben Noteboom, CEO at Randstad said, “In North America, we continue to see excellent performance across the board. Our businesses in Asia-Pacific and Latin America show growth, while in Europe the situation remains rather uncertain. European performance in the first quarter was mixed, although it ended with a slightly upward trend. This could be encouraging, but it is too early to draw any major conclusions.”

“Less restrictive European regulation in Italy and Belgium should benefit job markets progressively, although there is union resistance in several countries. We remain focused on profitable market share gains, relying on the quality and dedication of our people in the field, coupled with our strong concepts and execution.”

Looking ahead, the firm said that “We have experienced normal seasonal patterns across most European countries, with the exception of Germany, where we witnessed a rather flat development. Growth in perm fees remained challenging in the UK and Australia, while we achieved good growth in other regions. All these trends have continued into April. In line with our field steering model, we will continue to invest in those activities where growth continues and we will adjust the organization where necessary. Going into Q2 2012 we will also increase our marketing investments. As a result we expect a limited increase in our cost base compared to Q1 2012. We face the near future with confidence and we will remain focused on gaining profitable market share, improving our profitability and strong cash flow generation.”

Global performance in Q1 2012

In the UK revenue decreased by -7% to €198 million, compared to €205 million a year ago. Professionals was improving, led by engineering and finance, predominantly through temporary staffing. But revenue at the inhouse business was -10% lower than Q1 2011, as the firm became stricter on client profitability. Perm fees were down by -19% from the previous year and the firm saw staff reduction of -5% compared to the previous quarter.

In France revenue declined by -3% in the quarter to €741.6 million from €765.6 million a year ago. Revenue per working day decreased by -5% compared to 5% growth in the previous quarter. Perm fees were -1% above last year while the gross margin was flat. The firm also terminated some contracts during the quarter and anticipates that the overall impact for 2012 will remain well below 1% of revenue.

In the Netherlands revenue also dropped by -1% to €688.2 million from €701.3 million in Q1 2011.  The revenue of the Dutch staffing market (which is measured excluding Randstad’s specialist brand, Yacht), declined by around -3% during this period although the firm said that it continued to perform well due to a strong performance in payroll services. Revenue at Randstad’s secondary staffing brand in the Netherlands, Tempo-Team, was behind the market and also declined at Yacht.

Germany was the only country in Europe that saw revenues increase, reaching €461.9 million, compared to €451.6 million. Revenue grew organically by +3% per working day and the firm said this is fully attributable to the positive price effect related to the changes in the Collective Labour Agreement in 2011. However, margin pressure in the staffing and inhouse business has become more pronounced over the last few months due to an increase in public holidays in 2012, which has a negative impact of around 0.7%. Also, as result of a ruling in Germany, the firm is bearing higher salary costs during holidays.

In Belgium and Luxemburg revenue declined by -4% to €320.7 million, compared to €334.7 million a year ago as revenue per working day was -6% below last year. The combined staffing and inhouse business performed below the market, partly because of its high exposure to the blue collar segment, where the decline was more pronounced. The Belgian gross margin was stable although the competitive environment remains challenging.  

In Iberia the economic climate remained challenging as revenue dropped by -7% to €192.1 million from €207.4 million. Revenue per working day was -8% lower than Q1 2011 while revenue in Spain was down -10%, mainly driven by lower demand in manufacturing and distribution. The Portuguese business contracted by 6%, in line with the previous quarter.

Revenue across other European countries declined by -1% from €212.1 million to €210.4 million. In Italy, which makes up roughly 50% of this region, revenue declined by -3% while Swiss revenues remained flat. In Poland, business contracted by -4%, due to the termination of a large contract while in Scandinavia the decline was more pronounced, partly because of a slowdown in the industrial segment, and the deliberate termination of some contracts. The Hungarian business came under pressure due to further loss of contracts, while in the Czech Republic revenue was down year-on-year. Turkey and Greece performed solidly, returning double-digit growth.

In North America revenue jumped to €957.3 million from €476.1 million, due to the acquisition of SFN Group although growth was still +9% on an organic basis. Perm fees in North America were up +16% while the gross margin was flat.

In the Rest of the World revenue was up by +7% to €382.2 from €346.2 million a year ago. In Japan, which makes up almost 40% of the region, revenue grew by +4%, while revenue in Australia and New Zealand (29% of the region) remained flat year-on-year. Perm fees remained under pressure mainly as a result of the challenging banking & finance market. China, with a strong focus on perm, maintained solid growth and investments were accelerated. The Indian business grew organically by +13% and following the divestment of the Indian payrolling business, the firm benefited from a book profit of €1.4 million in operating expenses. In Latin America (18% of the region), the performance of the Argentinian business strengthened based on strong growth in perm. The Mexican business showed good performance while in Brazil, the firm returned to double-digit growth. In Chile, revenue remained under pressure following the deliberate termination of contracts in 2011.

Randstad is the second largest staffing firm in the world and operates in over 40 countries. Following today’s announcement, the company’s share price was up by +4.76% this morning at €26.98, down around -30% from a year ago but +7.7% above the 52-week low of €19.59 set on 1 September 2011. This values the company at €4.43 billion. 

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