USG People's revenue rises 6%
Positive trend persists demands from SMEs increasing
Second-quarter 2014 results
Almere, 30 July 2014
Second quarter 2014 highlights
• Revenue rose 6% to &euro 583.3 million (Q2 2013: &euro 550.0 million)
• Operating expenses fell 3% compared to underlying expenses a year earlier
• EBITA increased to &euro 15.4 million (underlying1 EBITA Q2 2013: &euro 9.8 million) EBITA margin: 2.6%
(underlying EBITA margin Q2 2013: 1.8%)
• Underlying net income rose to &euro 7.9 million (Q2 2013: &euro 1.0 million)
“The positive developments have continued in the second quarter,” said Rob Zandbergen, CEO of USG
People. “We are seeing that the recovery that started mid-2013 is gradually spreading. For the first time in
years we are once again seeing a traditional pattern in demand for students in the holiday season and the
number of permanent placements also rose in the second quarter. These are clear signs that our clients
need extra staffing capacity and that there is confidence that growth will continue. A positive development is
now also visible in the SME segment too, where we are also experiencing a rise in the number of requests.
The outlook is good and we are confident that the positive trend will continue this year. We continue to focus
fully on providing the right solutions to facilitate our clients’ growth in the best possible way.”
The revenue achieved by USG People rose 6.0% in the second quarter to &euro 583.3 million (Q2 2013:
&euro 550.0 million). The average number of working days was 0.3 higher than in the second quarter last year
(there was one working day more in the Netherlands, one day less in Germany and the same number of
working days as last year in Belgium and France). The growth in revenue per working day accelerated to
5.5% from 3.5% in the first quarter. Revenue per working day for the group was up 7.8% in June compared
to the same month last year.
The underlying gross result rose to &euro 118.1 million in the second quarter (Q2 2013: &euro 115.7 million). As a
percentage of revenue the gross margin was 20.2% compared to 21.0% in the second quarter last year. The
gross margin percentage was lower than last year due to changes in the revenue mix, lower selling prices
and the impact of public holidays and long weekends.
The share of revenue achieved with high-volume clients has risen since mid-2013. Demand for staff in the
SME segment, where USG People has traditionally held a strong position and can provide high added value
to specialist placements, generally picks up a bit later in the cycle and was still lagging. On balance, this shift
resulted in a drop in the gross margin compared to last year. Demand for staff in the SME segment is now
growing, however, stabilising the mix compared to the first quarter.
The tax credit scheme (CICE) in France had a positive impact on the group margin. The tax credit was
higher than last year, boosting the group gross margin by 50 basis points. The aforementioned mix and
pricing changes had an overall effect on the gross margin of -60 basis points compared to the second
quarter last year.
Revenue from recruitment and selection grew again in the second quarter (1.0% of group revenue). This
revenue rose 4% compared to last year. This growth was virtually in line with the growth of group revenue in
the second quarter and therefore had no impact on the development of the gross margin percentage.
In the second quarter the large number of public holidays and long weekends had a considerable seasonal
effect on the gross margin. This impact was particularly substantial in Belgium and Germany. These
countries do not create reserves evenly for the salaries paid to flex workers on public holidays. These salary
expenses are fully recognised as cost in the actual period, meaning that the gross margin is lower in a
quarter with many holidays. The impact was -20 basis points compared to the second quarter last year.
Compared to the first quarter the impact was -100 basis points on the group margin. Calculated based on
the even reserve throughout the year, the gross margin for the second quarter would be 60 basis points
higher at 20.8% (Q2 2013: 21.4%).
The reported gross result in the second quarter of 2013 included not only the underlying gross margin but
also a &euro 0.9 million non-recurring charge relating to the creation of a provision for own-bearer risk status with
regard to payments under the Dutch sickness benefit act (Ziektewet).
Operating expenses excluding depreciation and amortisation of acquisition-related intangible assets
The operating expenses fell by &euro 3.0 million compared to a year earlier to &euro 99.2 million (underlying
expenses Q2 2013: &euro 102.2 million). Compared to the previous quarter operating expenses rose slightly due
to redundancy costs (&euro 0.5 million), costs for implementing a new sourcing concept in Belgium (&euro 0.5 million)
and a rise in the number of FTEs in France and Belgium. These countries operated at maximum capacity in
the past year. Both countries can further grow revenue by adding capacity.
The implementation of the brand clustering and simplification of the organisational structure are proceeding
according to plan. On balance there were no additional cost savings in the second quarter.
In addition to the underlying expenses in the second quarter of 2013 the reported expenses also included a
non-recurring charge of on balance &euro 25.1 million.
In the second quarter EBITA amounted to &euro 15.4 million (underlying EBITA Q2 2013: &euro 9.8 million). The
EBITA margin was 2.6% compared to 1.8% in the second quarter last year.
Amortisation of acquisition-related intangible assets
Amortisation of acquisition-related intangible assets amounted to &euro 1.5 million in the second quarter, down
from &euro 4.0 million in the year-earlier quarter. The acquisition-related intangible assets concern brand rights,
client portfolios and candidate databases valued at the time of acquisition.
The financing expenses declined to &euro 2.3 million in the second quarter compared to &euro 4.4 million in
underlying financing expenses recorded in the same period of last year.
In addition to the aforementioned underlying financing expenses in the second quarter of 2013 an unrealised
revaluation of interest-rate derivatives was recognised equalling a positive &euro 2.5 million. Including this
unrealised revaluation, reported financing expenses amounted to &euro 1.9 million last year.
Income tax expense
Tax in the second quarter of 2014 was a negative &euro 13.9 million. This figure includes a &euro 10.3 million
downward revaluation of deferred tax assets. The tax also includes a &euro 1.7 million charge relating to
business tax in France (Q2 2013 business tax: &euro 1.6 million). The tax burden as a percentage of pre-tax
profit was distorted due to the impact of the business tax en and the untaxed tax credit in France (CICE).
The group tax burden excluding these factors was 33.9%.
Net result from divested activities
The second quarter of 2014 did not include any results from divested or discontinued activities. On balance
there was a net result of &euro -3.1 million from the sale of activities in the second quarter of 2013.
Balance sheet and cash flow
Working capital increased by &euro 13.5 million in the second quarter compared to the previous quarter due to
seasonal effects. Factoring of trade receivables rose by &euro 16.7 million to &euro 121.2 million (Q1: &euro 104.5
million). Factoring increased by &euro 3.8 million compared to the second quarter of last year as a result of a rise
in revenue. Working capital including factoring was a negative &euro 92.1 million at the end of the quarter.
The operating cash flow totalled &euro -6.2 million in the second quarter (Q2 2013: &euro 6.2 million). Net debt
amounted to &euro 205.8 million in the second quarter (Q1: &euro 187.4 million). The reasons for the rise in net debt
included the rise in working capital in the second quarter and the payment of the cash dividend and holiday
pay. The leverage ratio (net debt / 12-month underlying EBITDA) was 2.3.
Second-quarter 2014 results by segment
General Staffing achieved revenue of &euro 351.1 million in the second quarter (Q2 2013: &euro 331.2 million).
Revenue per working day rose 5.3% compared to the year-earlier period. Despite a positive underlying trend
in every country the Netherlands still recorded a 1.0% drop in revenue per working day, in line with the first
quarter. There was a further decline in revenue from the call centre activities which are increasingly
internally focused on providing services that support the USG People star brands. Revenue per working day
rose slightly in the month of June compared to the year-earlier period. The positive development has
continued in July.
Start People in Belgium reported an 11.1% rise in revenue per working day compared to a year ago. In the
second quarter the growth at Start People once again clearly outperformed the market. The market recovery
in Belgium continued to be fast-paced. Demand picked up further in every region and the number of
requests was visibly higher in the SME segment.
In France Start People was able to maintain its lead in the market. Revenue per working day at Start People
rose 8.3% in the second quarter. In France a market growth of around 2% was reported in April and May.
EBITA rose to &euro 12.6 million from &euro 8.6 million in the second quarter last year. The EBITA margin rose to
3.6% (Q2 2013: 2.6%). The gross margin as a percentage of revenue was lower than last year due to mix
effects and pricing pressure. A higher tax credit (CICE) in France partly offset these effects. A drop in
revenue at the call centres, with a 100% gross margin, had a negative impact on the margin percentage.
The cost level fell compared to last year due to the brands being combined under Start People.press release
Specialist Staffing generated revenue of &euro 194.0 million in the second quarter (Q2 2013: &euro 180.8 million).
Revenue per working day rose by 6.8% year-on-year, with growth continuing at Unique and recovery also
visible at Secretary Plus. In the Netherlands Specialist Staffing once again realised a strong growth of 14%
compared to the same quarter last year. Unique was able to maintain a high level of growth in the
Netherlands. Revenue at Secretary Plus was lower year-on-year but stabilised compared to the first quarter.
Revenue in the second quarter was slightly higher than in the first quarter. Following a long period of
contraction Secretary Plus in the Netherlands also appears to have turned the corner to recovery.
After reaching the turning point to growth in March Specialist Staffing in Belgium grew 2.9% in the second
quarter. Unique grew 4.4% and Secretary Plus reached a turning point to year-on-year growth in June.
Growth at Unique was hampered by weak demand for medical staff. Excluding Express Medical (part of the
Unique star brand) Unique grew 7.7% in the second quarter.
In Germany revenue per working day rose 1.6% in the second quarter. Here recovery was the most
noticeable at Unique in the industry and office segments. Developments in the technical segment were
complicated by a shortage of technical staff and the fact that clients gave candidates permanent placements.
EBITA improved to &euro 6.1 million from &euro 5.3 million in the second quarter last year. The EBITA margin rose to
3.1% of revenue (Q2 2013: 2.9%). In the second quarter profitability was impacted by public holidays in
Belgium and Germany. The relatively large number of holidays had a negative effect on the gross result and
EBITA, particularly at Specialist Staffing due to the share of the activities in Germany. This effect is largely
neutralised in the third quarter.
USG Professionals generated revenue of &euro 38.2 million (Q2 2013: &euro 38.0 million). Revenue was virtually the
same as in the second quarter last year. Slight growth was achieved in the Netherlands compared to the
year-earlier period. The revenue decline in Belgium continued to shrink, mainly due to a recovery in finance
and legal. USG Professionals also reached a turning point to growth in France in the second quarter.
EBITA amounted to &euro 0.6 million (Q2 2013: 1.9 million). The gross margin rose, due in part to growth in
recruitment and selection. Expenses were higher compared to the underlying expenses reported in the
second quarter last year. Investments relating to the rollout of the USG Professionals activities outside
the Netherlands and Belgium will be fully recognised in reported expenses this year. The underlying
expenses in the comparative figures for last year have been adjusted accordingly.