Transitional year and disposal strengthens foundation for the future at USG People
Transitional year and disposal strengthens foundation for the future at USG People
USG People Announces Fourth-quarter 2012 Results And Sale of USG Energy
Fourth-quarter 2012 highlights
• Revenue was &euro 704.7 million (Q4 2011: &euro 789.9 million), down 11% year-on-year
• Underlying gross margin was 20.4% (Q4 2011: 21.5%)
• Underlying operating expenses were down 11% on last year
• Underlying EBITA1 totalled &euro 19.3 million EBITA margin: 2.7% (Q4 2011: &euro 28.0 million EBITA margin: 3.5%)
• Underlying net income amounted to &euro 6.9 million (Q4 2011: &euro 8.8 million)
• Robust underlying free cash flow2 of &euro 69.2 million (Q4 2011: &euro 80.5 million)
• Non-cash goodwill impairment of &euro 215.0 million
• Revenue was &euro 2,876.2 million (2011: &euro 3,224.9 million), down 11% on a year earlier
• Sharp reduction in costs underlying operating expenses including depreciation fell by &euro 70 million compared to a year earlier
• Underlying EBITA totalled &euro 85.6 million EBITA margin: 3.0% (2011: &euro 98.0 million EBITA margin: 3.0%)
• Underlying net income amounted to &euro 27.3 million (2011: &euro 27.0 million)
• Healthy underlying free cash flow of &euro 52.0 million
• Distribution of dividend to continue proposed dividend of &euro 0.12 per share, payable either in cash or in shares (2011: &euro 0.17)
“2012 was a transitional year for USG People, in which we achieved a great deal, in challenging economic circumstances,” said Rob Zandbergen, CEO of USG People. “Implementation of the new strategy, further specialisation, more professionals, the consolidation of branches, a new approach to various professional markets, focus on client returns. We also devoted a great deal of attention to stepping up our commercial activities and making them more professional. In the fourth quarter of 2012 in particular this resulted in a large number of new contracts, the positive impact on revenue of which we will start to experience in the coming months. I want to express my appreciation and thanks to our employees, who worked incredibly hard in 2012 to prepare our organisation for the future. I am confident that our commercially focused organisation and reduced cost structure will enable us to capitalise on the growth opportunities we have identified.”
USG People achieved revenue of &euro 704.7 million in the fourth quarter of 2012 (Q4 2011: &euro 789.9 million). The fourth quarter of the year under review had 0.3 more working days than the previous year (an effect of 0.6%) but the timing of the seasonal public holidays was less favourable, with many companies not working the Mondays before Christmas and New Year’s Day while the year-earlier public holidays fell in the weekend. Acquisitions had a positive effect of 0.6%. The year-on-year drop in revenue remained virtually stable compared to the previous quarter (Q4 revenue per working day -11.4%, Q3 -11.0%). In the month of December revenue per working day was down 10.0% on the previous year, narrowing to a decline of 6.9% in January 2013. The Netherlands in particular saw a substantial improvement in January, with the revenue decline narrowing to 3.8% compared to a year earlier.
The underlying gross result for the fourth quarter equalled &euro 143.6 million (Q4 2011: &euro 169.6 million). As a percentage of revenue the gross margin was 20.4% (Q4 2011: 21.5%). The drop in the margin resulted from a combination of mix effects, price pressure and less favourable timing of public holidays in the year under review. A shift towards large clients and growth in the revenue of in-house services resulted in a negative mix effect compared to the previous year. Demand in the SME segment, where higher gross margins tend to be charged, was weak whilst growth in countries such as Spain and Poland was realised mainly by winning large-volume contracts. In addition to these mix effects there was also price pressure. The combined effect of the mix effects and price pressure on the gross margin was a negative 0.7%. In addition results from recruitment and selection fell by 30% to 0.8% of group revenue (Q4 2011: 1.0%). The negative impact of this disproportionately sharp fall on the group margin was 0.2%. A further negative effect of 0.2% on the group gross margin derived from the less favourable timing of the seasonal public holidays compared to the year earlier, particularly in Germany, Austria and Switzerland. In addition a non-recurring charge of &euro 3.8 million was included in the reported gross result in connection with possible pension commitments (Q4 2011 non-recurring charge: &euro 2.6 million).
Fourth-quarter 2012 results by segment
General Staffing achieved revenue of &euro 409.2 million in the fourth quarter (Q4 2011: &euro 455.7 million). Revenue per working day was down 10%, with the decline stable for the third consecutive quarter. The Netherlands still registered a slight decline wilst revenue in Belgium and France stabilised. In both countries USG People pursues a selective client policy focused on profitability. Spain saw a 6% increase in revenue in the fourth quarter and Poland also returned to revenue growth, with the strong commercial focus allowing these countries to outperform the market. In January the year-on-year decline at General Staffing had narrowed to 4%.
The gross margin fell compared to last year, mainly as a result of mix effects and price pressure. Results from recruitment and selection were lower than last year and we saw growth at the in-house activities and in the aforementioned low-margin countries. Underlying expenses were lower, largely offsetting the decline in revenue and margin. EBITA totalled &euro 10.2 million compared to &euro 13.0 million in the final quarter of last year. The EBITA margin was 2.5% (Q4 2011: 2.9%).
Revenue at Specialist Staffing was &euro 237.6 million in the fourth quarter (Q4 2011: &euro 277.2 million). Revenue per working day was 15% lower than in the fourth quarter of last year. The decline in revenue was equal to that reported in the previous quarter. In the Netherlands the revenue decline slowed somewhat in the fourth quarter although it continued to accelerate in Belgium. The countries with the largest declines in revenue started to show some improvement in the final months. In Germany and Italy the revenue decline narrowed after stabilising in the previous quarter. The commercial action plans launched in Germany clearly started to produce an effect in the fourth quarter and it would appear that the worst is also over in Italy, where the year-on-year revenue decline at Specialist Staffing narrowed to 9% in January.
The gross margin declined compared to last year, depressed by negative mix effects and price pressure as well as the less favourable timing of the seasonal public holidays. The Specialist Staffing division also saw a sharp decline in the results from recruitment and selection. The impact of the seasonal public holidays was most marked in Germany and Switzerland. Underlying costs were lower due to cost savings. EBITA, which was depressed by the negative result in Germany, equalled &euro 8.2 million, down from &euro 15.3 million in the fourth quarter of 2011. The EBITA margin was 3.5% (Q4 2011: 5.5%).
Revenue at Professionals rose to &euro 57.9 million (Q4 2011: &euro 57.0 million). Revenue per working day was up 2% compared to the year-earlier period. Organically revenue was down 4%. The greatest growth was realised in the finance segment as a result of sharp organic growth in Belgium and the addition of the Control Finance activities in the Netherlands. Demand in other professional areas weakened in the fourth quarter, with demand remaining weak in ICT and marketing & communication in particular.
The underlying gross margin at Professionals fell as a result of mix effects, especially due to lower results from recruitment and selection, while operating expenses rose somewhat. EBITA equalled &euro 5.9 million (Q4 2011: &euro 6.6 million). The EBITA margin was 10.2% (Q4 2011: 11.5%).
USG People opts for clear positioning of Professionals division with sale of USG Energy
USG People is selling USG Energy as part of its strategic revision aimed at focusing on market segments in which it can offer major added value and create sufficient scope.
Within its Professionals segment USG People has defined focus areas which can achieve sufficient critical mass and synergies within the group using the resources at its disposal. To be able to do this within the HR market for offshore energy would require an investment that would be too one-sided and substantial for this market segment. That is why the group has decided to divest USG Energy. The sale to private equity firm Rabo Capital means that USG Energy will be able to fully benefit from further growth within the market segment in the future, without being bound by USG People’s group strategy.
USG People will realise proceeds of &euro 80 million from the sale which will support the further growth of USG Professionals. A gain of &euro 39 million will be recognised in the results for the first quarter of 2013.
The Central Works Council of USG People has issued a positive advice on the sale of USG Energy. The transaction is subject to the customary conditions precedent.
As previously announced, USG People revised its strategy in October 2011 and is focusing a great deal of its efforts to expand the company on its Specialist Staffing and Professionals divisions.
USG Professionals will launch a new marketing campaign in the second quarter of 2013 in which the different segments – engineering, finance, ICT, HR, legal, science and marketing, communication & sales – will become more jointly recognisable. USG Professionals will position itself even more as an international provider of services for and by professionals.
There will also be important changes at Unique, USG People’s largest specialist brand, which will focus even more on the SME segment as it had in the past. Unique will broaden its services offering and develop new products. These new types of services will provide practical solutions for current issues in the SME job market. In doing so Unique wants not only to provide quality solutions for job vacancies but also to organise the associated HR activities: from practical legal HR compliance to training courses, from advice on workspace to payrolling, from information on market developments to new trends in the field of the internet and social media.
The other two international specialist brands within USG People (Secretary Plus and Technicum) will continue to develop in their own fields of expertise. Secretary Plus is already active in eight European countries and Technicum operates successfully on the Dutch and German markets.