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Randstad Holding nv Reports A Solid Final Quarter of a Challenging Year

Randstad Holding nv Reports A Solid Final Quarter of a Challenging Year

Key points Q4 2012

• revenue down 3% to &euro 4,234.5 million organic growth

• strong cost control, costs down &euro 22 million compared to Q3 2012 per working day -/-5% (-/-5% in January 2013)

• EBITA margin of 3.7%, at the same level as Q4 2011

• solid cash flow generation: free cash flow up &euro 152.3 million to &euro 368.7 million, leverage ratio at 1.7

• (non-cash) impairment on goodwill of &euro 139.8 million

Key points FY 2012

• revenue up 5% to &euro 17.1 billion and underlying EBITA of &euro 562.9 million

• adjusted net income attributable to holders of ordinary shares4 of &euro 365.9 million

• proposed dividend &euro 1.25 per ordinary share, in shares or cash, based on a payout ratio of 59%

“A challenging year has ended with a solid final quarter”, says Ben Noteboom, CEO of Randstad. “We maintained good growth in Latin America and Asia and the rate of decline in Europe stabilized. Japan did particularly well. The demand for Recruitment Process Outsourcing and managed services in the US has been increasing and the UK professionals segment improved, boosted by the Education sector. Our focus on client profitability paid off. In North America revenue growth slowed, while gross profit continued to grow nicely. Our costs continued to decrease quickly. We strengthened our financial position. Several legislative changes in some of our key markets will pave the way towards modern and sustainable labor markets in the long run, which is especially beneficial for our industry. It has not been an easy year and I would like to thank our people, for their solid performance and commitment.”


It was a solid final quarter of a challenging year. Divergent trends across the world remained in place. Growth continued in Asia and Latin America, and the rate of decline in Europe stabilized. Growth slowed in North America, mainly due to our focus on client profitability and low demand in banking and finance.

Revenue per working day was down 5.3% compared to the year-on-year decline of 3.6% in the previous quarter. The effect of working days and disposals was negligible and currency effects had a positive impact of 1.4%. Revenue per working day contracted by 6% in October and 5% in November and December, while it was 5% in January 2013.

The decline in perm fees was -/-9.1% (Q3 2012: -/-6.6%). Growth in perm fees was maintained across Asia and Latin America, while demand weakened in North America. Perm fees made up 1.5% of revenue and 8.0% of gross profit (Q4 2011: 8.2%). The diversification of our services portfolio is supported by strong profitable growth in revenue from other services, such as payroll services, managed services and recruitment process outsourcing (RPO).

North American revenue was at the same level as last year compared to 4% growth per working day in Q3 2012. We maintained good growth in gross profit. In Europe, revenue per working day declined by 8% (Q3 2012: -/-7%). The decline in France (-/-14%) and Germany (-/-9%) accelerated compared to Q3 2012, although the rate of decline was fairly stable throughout the quarter. Revenue trends in the UK strengthened, with Education returning to growth and Finance achieving double-digit growth. In the Rest of the World, Japan and India grew by 6% and 10% respectively, while revenue in China and Hong Kong was under pressure. Australia witnessed challenging market conditions and revenue declined by 12% (Q3 2012: -/-7%). In Latin America our business grew by 31%, led by Brazil and Argentina.

Inhouse services grew by 14%, or 2% (Q3 2012: 3%) taking into account the transfer of the on-site business of SFN. Staffing revenue contracted by 9% (Q3 2012: -/-9%), influenced by lower demand across Europe and North America. Revenue in Professionals was 4% below last year (Q3 2012: -/-3%). Good performance in the UK, Germany and North America was offset by lower demand in France, the Netherlands and Australia.

Gross profit

In Q4 2012 gross profit amounted to &euro 772.2 million, down 4% compared to last year. The organic change was -/-5% (Q3 2012: -/-6%). Currency effects added &euro 13 million to gross profit compared to Q4 2011.

The gross margin was 18.2%, compared to 18.3% in Q4 2011. The temp margin was 0.2% below the level of last year (Q3 2012: -/- 0.4%). Price/mix effects were more or less similar to the previous quarter. Perm fees had no impact on the mix. HR services and other mix effects added 0.1% to the gross margin (Y-o-Y). Our focus on profitability starts to pay off. Our gross margin in North America maintained its momentum and gross profit grew by 4%. In Europe, the decline in gross profit eased to -/-9% (Q3 2012: -/- 11%). The Dutch gross margin was under pressure due to higher social security charges, while in Germany we incurred additional costs reflecting the recent wage increases and the implementation of equal pay. In Southern Europe we faced increased margin pressure.

Gross profit was adjusted for restructuring costs in the Netherlands of &euro 1.6 million and for non-recurring social security benefits in France of &euro 6.9 million, which related to previous years. Last year’s gross profit was adjusted for restructuring costs of &euro 3.2 million, mainly in the Netherlands.

Operating expenses

We continued to adjust our cost base in line with the trend in our revenue and gross profit. Operating expenses decreased by &euro 21.8 million compared to Q3 2012, of which &euro 9.6 million due to currency effects. Cost savings across Europe of &euro 20.7 million (constant currencies), were offset by limited cost increases in North America and Corporate. In the Rest of the World we added around &euro 5.8 million (constant currencies), which was due to our ongoing investments across Latin America and Asia. In Japan and Latin America we incurred some unfavorable items, which was more than offset by favorable items in a few other countries, like the UK, Switzerland and Italy. Cost savings were realized through a combination of field steering, stringent cost control and restructuring programs.

Since Q2 2012, operating expenses reduced by &euro 30 million (constant currencies), or &euro 120 million annualized. As a result of all the actions taken in the second half year of 2012, we achieved the targeted range of &euro 70 – 100 million by the end of Q4 2012. Operating expenses were adjusted for &euro 59.1 million, including restructuring costs of &euro 55.4 million (&euro 28.2 million related to France) for various programs across Europe, integration costs of &euro 6.0 million, a book profit from the sale of subsidiaries of &euro 5.5 million and impairment of buildings of &euro 3.2 million. Last year’s cost base was adjusted for restructuring costs of &euro 22.0 million, integration costs of &euro 8.0 million and costs related to divestments of &euro 3.6 million.

Average headcount (in FTE) amounted to 28,560 for the quarter, down 2% versus Q3 2012. The reduction in FTEs in Q4, which follows the trend in gross profit, occurred mainly across Europe. In North America, headcount reduced by 60 FTEs compared to Q3 2012. Productivity (measured as gross profit per FTE) was 5% ahead of last year. We operated a network of 4,496 outlets (Q3 2012: 4,567), 71 fewer than in the previous quarter, as we continued to optimize our branch network in countries such as the UK (-/-28) and the Netherlands (-/-38).


We achieved the same EBITA margin in Q4 2012 as last year. The underlying EBITA decreased by 5% to &euro 156.2 million, with an EBITA margin of 3.7%. Currency effects added &euro 2.1 million to EBITA.

We focus on capturing profitable growth, client profitability, optimizing our delivery models and costs. Our field steering approach ensures adaptability of the field organization. In addition, we closely monitor productivity and efficiency of the whole organization, including overhead and head office costs. In 2013 we will focus on the implementation of our strategic priorities, while completing the various cost savings initiatives.


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