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Randstad - Strong start of the year

Randstad - Strong start of the year with revenue up 22% and net income up 82%

Key points Q1 2011
Revenue up 22% to 3,700.0 million organic growth1 per working day 15%
Operating expenses sequentially down 2% to 562 million
EBITA2 reached 108.7 million (44%), with the EBITA margin at 2.9% (vs. 2.5% in Q1 2010)
Adjusted net income3 attributable to holders of ordinary shares 65.8 million, up 38%
Diluted EPS4 0.38, up 36%
Free cash flow increased to 130 million, up 234%
Launch of (organic) growth accelerator for professionals

"We saw continued strong growth in many markets like Germany, France and North America during the quarter", says Ben Noteboom, CEO of Randstad. "Efficiency and market shares increased further in many countries. All segments showed good growth. To benefit from the improving market conditions, we will increase our investment in the professionals segment, where we have started a growth accelerator plan. With continuing economic improvement, we look to the coming quarters with confidence. The most notable aspect for this quarter, however, is how our people in New Zealand and then in Japan dealt with the consequences of the earthquakes. Their resilience in the face of such major adversity has been exemplary."

Financial performance Q1 2011
RevenueIn Q1 2011 revenue increased by 22% to 3,700.0 million. Organic revenue growth was 17%, or 15 % per working day. The net addition of acquisitions/disposals (primarily FujiStaff with 123 million revenue) was 4%. Currency movements added 1%. Permanent placement fees increased by 15% organically. Perm fees made up 1.8% of revenue and 9.6% of gross profit (9.2% in Q1 2010).

Organic revenue growth per working day was fairly stable throughout the quarter and reached 15% in March. This means a strong start of the year despite tougher comparables. In 2010 revenue growth improved through the quarter from -5% in January to 4% in March.

Our inhouse businesses, mainly focused on industrial and logistical segments, continued to show high growth rates, resulting in 41% organic growth. Our staffing businesses grew by 16% organically, up from 15% in the previous quarter. Growth in the administrative segment built momentum in various regions. Our late cyclical professionals businesses grew by 6% organically.

Of the major regions, France and Germany continued to show solid organic growth of 22% and 29% respectively. Despite a more challenging comparison base, the North American businesses showed a strong organic growth of 19%. Our late cyclical Dutch business grew by 7% organically compared to 4% in the previous quarter. Randstad the Netherlands was back at market growth. Slow demand in the public sector continued to have a significant impact on our Dutch and UK businesses.

Gross profitIn Q1 2011 gross profit amounted to 670.6 million. Organic growth in gross profit was 12%. The gross margin was 18.1% compared to 18.9% in Q1 2010.

The temp margin declined by 0.6% YoY. First of all, the decline is caused by mix effects. Our inhouse businesses grew strongly, whereas growth in the higher margin professionals businesses was significantly slower. Secondly, the change in the French subsidy system for low wage labor had an effect of around 0.2% on the temp margin. Finally, in some markets like the Netherlands and Belgium, price pressure is still apparent. Some large contracts were renegotiated and price increases, to offset higher cost prices, follow in a more gradual pace.
The growth in perm fees had no impact in the mix. Other mix changes, such as strong growth in the relatively lower gross margin payrolling businesses, had a negative impact of 0.2%.

Operating expensesIn Q1 2011 operating expenses amounted to 561.9 million, up 12% compared to Q1 2010 and down 2% sequentially. The consolidation of FujiStaff added 4% (approx. 20 million) to the cost base. On an organic basis operating expenses were up 8% YoY and -/-4% sequentially, in line with the development in gross profit.

Average headcount (measured by FTE) amounted to 27,210 for the quarter, up 9% YoY and up 1% sequentially. Organically, average headcount was up 5% YoY and down 1% sequentially. Productivity (measured as gross profit per FTE) was up 7% as we continued to make use of overcapacity in our network. At the end of the quarter we operated a network of 4,185 outlets, around the same level as in the previous quarter.

EBITAIn Q1 2011 EBITA increased by 44% to 108.7 million, with the EBITA margin reaching 2.9% compared to 2.5% in Q1 2010. Organic EBITA growth was 40%. FujiStaff contributed 3.7 million to EBITA in Q1 2011.


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