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Randstad releases Q1 results

“We are confident that this gradual recovery will continue. Due to market circumstances in the past few years, the focus of our people has been on strong cost control, and they have done a great job. It is now time to turn our attention to generating profitable organic growth through activity-based field steering. Diligent execution in Spain, US Staffing and Japan, and the first signs of improvement in many other countries, illustrate this is the way to go. Excellent execution and delivering top quality service to our clients every day, every week, and every month is our ticket to market out-performance and future profitable growth."

The gradual recovery continued. Organic revenue per working day grew by 3.2% in January and by 3.5% in March. In Q1 2014, revenue per working day was up 3.6% compared to Q1 2013 (Q4 2013: 2.2%). This quarter we had a similar number of working days as last year. The consolidation of the USG activities added around 2.5%. This was offset by negative currency effects of 2.7%, which lowered our revenue by about &euro 100 million. As a result, reported revenue was 3.6% above Q1 2013.

In North America, revenue per working day was down 1% (Q4: -/-2%). In March, it was 1% ahead of last year, driven by good performance in the US. In Europe, revenue per working day grew by 4% (Q4 2013: 3%), while in the Rest of the world revenue per working day was up 13% (Q4 2013: 7%).

Perm fees grew by 9%, following a strong performance in March (Q4 2013: 6%). In North America and Europe, perm fees grew by 8% and 6% respectively. In Asia, demand for permanent placements strengthened further. Growth was led by China. In Australia, perm fees remained low, but the gradual recovery continued, and growth returned in March. Perm fees made up 1.8% of revenue and 10.0% of gross profit (Q1 2013: 10.1%). The share of perm fees was impacted by negative currency effects.

Gross profit
In Q1 2014, gross profit amounted to &euro 717.3 million. The organic change was 5.9% (Q4 2013: 3.6%). Currency effects had a negative impact on gross profit of &euro 18.1 million when compared to Q1 2013.

Gross margin was 18.1%, and 0.3% above Q1 2013 (as shown in the graph above). The consolidation of the USG activities had a 0.1% negative effect on the Group's gross margin. The temp margin was up 0.4% compared to last year (Q4 2013: 0.2%). This was mainly due to higher subsidies in France, which added 0.4% to the temp margin. In North America, gross margin continued to increase. In Europe (excluding the impact of French subsidies) and in the Rest of the world, mix effects continued to have a small negative impact on our gross margin. Perm fees and HR Solutions did not have a material impact on gross margin.

Operating expenses
Operating expenses decreased sequentially by &euro 33.9 million, which included a reduction of &euro 3.8 million due to currency mix effects. Marketing costs reduced following the investments in the second half of 2013. Personnel expenses decreased as a result of normal seasonal fluctuations in staff, phasing of bonus costs, and the completion of the restructuring program in Belgium. Wage inflation had minimal impact at Group level. Besides these effects, we maintained strong cost control. Operating expenses included positive non-recurring items in the US, Italy and Spain of &euro 3.0 million, which all related to previous years. Last year, operating expenses were adjusted for &euro 1.1 million of restructuring costs in Germany.

Average headcount (in FTE) amounted to 28,280 for the quarter, 1% lower than in Q4 2013. We allowed for limited investments in North America, across several European countries, and in the Rest of the world. The overall number of FTEs in Europe declined, mainly due to the implementation of the restucturing programs in France and Belgium, and the progress made in the integration of USG activities. Productivity (measured as gross profit per FTE) was 2% higher than last year. We operated a network of 4,429 outlets (Q4 2013: 4,587). The decrease is largely due to the integration process in Spain and Italy and the branch rationalization in France. The number of Inhouse locations increased further, most notably in France and the US.

The integration of USG activities is well on track, and we achieved synergies of &euro 2.9 million, up from &euro 2.2 million in Q4 2013. We aim to achieve annual pre-tax cost synergies of &euro 15-20 million. The integration processes in Switzerland, Poland and Luxembourg have been completed, as has the rebranding in Austria. In Spain and Italy (the largest part of the acquired activities), the integration process will be completed in Q2 2014. As a result, the remaining synergies will be secured in Q2 2014. Integration costs were &euro 4.9 million. Since the start of the integration process, we have incurred &euro 15.2 million. We have also identified tax synergies of at least &euro 10 million. These mainly comprise net operating losses, which will be used to offset future profits of the combined businesses.

Underlying EBITA increased by 34% to &euro 123.0 million. Currency effects had a negative impact of &euro 1.9 million. The EBITA margin reached 3.1%, up from 2.4% in Q1 2013. We achieved an incremental conversion ratio of 94%, which reflects our ability to achieve solid profitability improvements in the first phase of a recovery. On an annualized basis, EBITA margin improved from 3.2% to 3.7%.




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