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Randstad announce Q3 revenue of 4,516m & gross profit of 835.4m

“Revenue growth was stable this quarter but the underlying trends were different,” says Jacques van den Broek, CEO of Randstad. “In the US and the Netherlands, markets are growing. Germany and France see growth slowing down. In several markets, our people are now keeping up with the market or beating it. Our growth rate in permanent placements is also quite encouraging. The attention to commercial activities is paying off. I’m inspired also by some great initiatives, such as our drive to find work for thousands of unemployed young people. All this, coupled with our continued focus on efficiency, will allow us to improve our performance further.”


Organic revenue per working day grew by 4.2% in Q3 compared to 4.5% in Q2. The number of working days had a negative impact of 0.3% in the quarter. There was a negative currency effect of 0.3% and a -/-0.1% impact from disposals. As a result, reported revenue was 3.5% above Q3 2013.

Revenue growth went from 4.3% in July to 3.4% in September. The growth rate throughout the quarter was challenged by the comparison base, as the growth rate last year went from -/-2.6% in July to 0.6% in September.

Revenue per working day in the UK was down 3% (Q2 2014: 3%). Reported revenue was up 4%, reflecting the impact of positive currency effects. However, the most important indicator (gross profit) was up 8% (Q2 2014: 9%), emphasizing the focus on profitable growth and perm.

Construction/Engineering was up 20% again, with our specialty businesses Pareto Law and Student Worker Support showing strong growth. The Finance business remains under pressure with continued low demand in perm. Overall perm fees grew by 12% YoY (Q2 2014: 13%).

Underlying operating expenses were moderately up sequentially, on higher commissions. EBITA margin increased to 1.4% (Q3 2013: 0.6%)

Overall revenue in the Rest of the world grew by 11% organically (Q2 2014: 13%). Reported revenue was up 5%, reflecting the significant currency effects. Growth held up in Asia and Australia, while Latin America saw different trends.

In Japan, revenue grew by 6% (Q2 2014: 10%). Growth was led by good performance in logistics and retail, while growth in the administrative segment continued. Strong process management has limited the negative impact of SPOT regulation.

Revenue in Australia grew by 15% (Q2 2014: 13%). Temp revenue was solid in Business Support, while the industrial segment provides a stable outlook. Perm fees were up 20% in the quarter (Q2 2014: -/- 6%). In Professionals, demand was led by Construction/Engineering, while Banking & Finance also provided notable growth.

China grew by 54% (Q2 2014: 67%), based on a good performance across the IT and manufacturing segments. Growth in permanent placements was up 64% in the quarter. We have continued to invest in headcount, with a 4% sequential increase. Our business in India, where improving efficiency through adherence of field steering remains the focus, grew by 4% (Q2 2014: 3%).

In Latin America, our Argentinean business grew by 13% (Q2 2014: 11%), where market conditions remain challenging due to inflation. Our focus in Argentina is on implementing field steering. We achieved good gross profit growth in Brazil, where we focus on improving our business mix and capturing productivity improvements.

EBITA for the region remains below the desired level, as we continue to invest in these growing activities

In North America, revenue per working day was up 5% (Q2 2014: 2%). Growth has been stable throughout the quarter as we grew 5% in September, driven by a good performance in the US. In Europe, revenue per working day grew by 3% (Q2 2014: 4%), with an improving performance in the Netherlands and Belgium. In the Rest of the world, revenue per working day was up 11%(Q2 2014: 13%), and we continued to book progress in Australia.

As a result of our strategic focus, perm fees grew by 15% (Q2 2014: 13%), making this the strongest quarter since 2008. In North America and Europe, perm fees grew by 8% and 17% respectively. In Asia, fee growth was 42%, led by China. In Australia, perm

fees grew 20%. Perm fees made up 1.8% of revenue and 9.8% of gross profit (Q3 2013: 8.9%).

Gross profit

In Q3 2014, gross profit amounted to &euro 835.4 million. The organic change was 6% (Q2 2014: 6%). Currency effects had a negative impact on gross profit of &euro 2.5 million when compared to Q3 2013. The trend was stable throughout the quarter.

Gross margin was 18.5%, 0.3% above Q3 2013 (as shown in the graph above). The temp margin was up 0.1%, compared to last year (Q2 2014: 0.3%), while perm fees added 0.2%. In North America, the gross margin was slightly lower due to a negative mix impact. In Europe, the gross margin was up, driven by a positive mix impact, while the Rest of the world was stable.

Operating expenses increased sequentially by &euro 12.6 million, which included an increase of &euro 7.3 million due to currency mix effects. Personnel expenses increased as a result of investments in headcount in countries or segments where growth continued, and due to seasonality. Compared to last year, operating expenses were up 2.6% organically. Overall, we maintained good cost control.

Average headcount (in FTE) amounted to 28,920 for the quarter, 1% higher than in Q2 2014. Across North America, headcount was down 1% sequentially as we closed down some unprofitable units. In Europe, headcount increased by 390 FTEs as we added headcount in those countries and segments where growth continued, such as in the Netherlands, the Professionals business in Spain and in Poland. In the Rest of the world, the additions to headcount were predominantly in China. Productivity (measured as gross profit per FTE) was 3.6% higher than last year on a pro forma basis. We operated a network of 4,376 outlets (Q2 2014: 4,419). We continued to close smaller branches in France as we have completed the reorganisation.

The cost base in Q3 2014 was adjusted for &euro 5.1 million restructuring costs in the Netherlands and for &euro 0.6 million for Germany.

Last year's cost base was adjusted for a total of &euro 4.1 million in integration and restructuring costs.


Underlying EBITA increased organically by 15% to &euro 210.2 million. Currency effects had a negative impact of &euro 1.6 million. The EBITA margin reached 4.7%, up from 4.2% in Q3 2013. We achieved an incremental conversion ratio (ICR) of 66%. Based on the last four quarters, underlying EBITA margin improved from 3.5% to 3.9%.

Amortization of intangible assets, impairment of goodwill, and badwill

Amortization of acquisition-related intangible assets amounted to &euro 36.6 million, in line with the level of previous quarters.

Net finance costs

In Q3 2014, net finance costs reached &euro 11.4 million, compared to &euro 3.3 million in Q3 2013, impacted by a &euro 9.9m FX swing. Net finance costs include the net interest expenses on our net debt position, as well as currency effects and adjustments in the valuation of certain assets and liabilities.

Interest expenses amounted to &euro 4.1 million, compared to &euro 4.7 million in Q3 2013. Foreign currency effects had a negative impact of &euro 6.5 million, compared to a gain of &euro 3.4 million in Q3 2013. The remaining negative effect of &euro 0.8 million (Q3 2013: &euro 2.0 million) was mainly due to adjustments in the valuation of certain assets and liabilities.


The effective tax rate before amortization and impairment of acquisition-related intangibles and goodwill, badwill, integration costs and one-offs, in the first nine months, amounted to 29.6% (FY 2013: 31.7%), and is based on the estimated effective tax rate for the whole year 2014.

Net income, earnings per share

In Q3 2014, diluted underlying EPS amounted to &euro 0.77 (Q3 2013: &euro 0.65). Stock dividend and the exercise of stock options increased the average number of diluted ordinary shares outstanding by 1.7%, compared to Q3 2013.

In North America, organic revenue growth per working day was 5% above last year (Q2 2014: 2%). Reported revenue was 4% above Q3 2013. Our combined US businesses grew 6% (Q2 2014: 3%), while Canada was stable (Q2 2014: -/- 4%). The gross margin was slightly down due to mix impact, partially offset by strong growth in perm fees in the US (9%). Gross profit growth in the quarter was 5% (Q2 2014: 3%). In September 2014, revenue growth remained 5% for the region and 6% for the US.

In Q3 2014, our combined US Staffing and Inhouse businesses grew by 10% per working day (Q2 2014: 6%), driven by strong performance in the industrial segment. Overall gross profit grew by 8% (Q2 2014: 10%), as mix impacts were only partially compensated by a continued solid 31% growth in perm fees.

Our US Professionals business was stable in the quarter (Q2 2014: -/-2%). The improvement compared to the previous quarter was driven by finance and engineering, while the core IT business continued to improve when looking at the gross profit development. Perm fees were up 2% in Q3 (Q2 2014: -/-6%).

In Canada, revenue was stable after three quarters of decline (Q2 2014: -/-4%), slightly ahead of the market, which is still showing a modest decline. Our Staffing and Inhouse business was down 2% (Q2 2014: -/- 7%), which was offset by growth in Professionals, notably perm.

The EBITA margin for the region increased from 5.5% to 5.7%. The underlying profitability of the combined US businesses improved, while Canada remained stable.

In France, revenue contracted by 4% (Q2 2014: -/-1%), while it was down 2% in September. Perm fees were up 8% compared to last year (Q2 2014: 5%). Although market circumstances remained challenging, the business was able to increase gross profit by 7% (Q2 2014: 3%).

Revenue of our combined Staffing and Inhouse businesses was -/-5% below last year (Q2 2014: -/-1%). The decline was driven by a significant deterioration in the construction and aeronautics sectors, while this was only partially offset by higher demand in the automotive and industrial sectors. Revenue of Inhouse Services grew by 12%, following a number of client wins and continued transfers from Staffing (Q2 2014: 25%). Staffing was 8% below last year (Q2 2014: -/-6%). Although we have continued to improve in the SME segment, in our large accounts business, we continue to lose share due to our continued focus on profitability. Our Professionals business was up 1% (Q2 2014: -/-0%), driven once again by our Healthcare business, while demand in IT remained weak.

We maintained strong cost control, as reflected in the 6% drop in FTEs compared to last year. The branch rationalization has been completed resulting in 12% fewer outlets. Our EBITA margin increased to 6.0% compared to 4.5% in Q3 2013.

In the Netherlands, revenue per working day was up 4% compared to last year (Q2 2014: 0%). We achieved 4% revenue growth in September in line with the performance over the quarter, led by an above-market performance by Tempo-Team and a resurgent Randstad. Overall perm fee growth increased to 25% (Q2 2014: 16%), with both Randstad and Tempo-Team producing strong sets of numbers.

Randstad’s revenue per working day was up 3% (Q2 2014: -/-1%). While there is still room for improvement, it is clear that the initiatives promoted earlier in the year are paying off as we are closing the gap to market. Revenue at Tempo-Team grew above market at 7% (Q2 2014: 1%), with momentum building through the quarter. At both labels, we saw very strong growth in SME and Professionals.

We remain focused on profitable growth through the strict adherence to our activity-based field steering model, while the recently announced reorganization of our Dutch business will aid us in achieving the efficiency improvements that will help carry our business forward. The restructuring, which will result in a reduction of approx. 250 FTEs, is focused on streamlining management and back-office functions.

Yacht’s revenue was down 1% (Q2 2014: 1%) against the backdrop of a toughening comparison base. IT continued its positive momentum, while Finance and Technology weakened. Yacht continues its focus on growth and on creating a single Professionals label. Overall our Professionals business grew by 16%.

Underlying operating expenses were higher than in the previous quarter, primarily due to the timing of marketing spend and to a higher number of FTEs (3%) sequentially, driven by investment in the growth areas of the business. The Dutch EBITA margin came in at 6.3% compared to 6.5% last year.

In Germany, revenue per working day grew by 2% (Q2 2014: 5%). This was supported by a positive price effect of 6% resulting from the CLA-related price increases and equal pay. The German market outlook has become significantly weaker recently, and the wage cost increases and other regulatory changes have certainly impacted demand for temporary labor. We remain convinced that our German business is well positioned to grow when the prevailing market conditions present the opportunity.

Gulp and Tempo-Team have benefited most from the additional focus on improving activity levels through our activity-based field steering model. Revenue growth in Staffing was stable YoY (Q2 2014 -/-8%), while Inhouse grew 4% (Q2 2014: 25%).

The pressure on gross margin persists in our Staffing and Inhouse businesses, with the 13-week average calculation rule on sickness and vacation having a clear impact.

The number of FTEs was stable sequentially, but underlying operating expenses decreased moderately as the business executed strong cost control in light of the softening macroeconomic outlook. The underlying German EBITA margin reached 5.4%, compared to a relatively strong Q3 2013 (5.7%).

In Belgium & Luxembourg, revenue per working day grew by 6% (Q2 2014: 5%). Gross profit growth was 10% (Q2 2014: 6%).

Inhouse Services saw revenue growth of 13% (Q2 2014: 11%), while Staffing grew 3% (Q2 2014: 2%). Revenue in the administrative segment continues to hold up well, while the industrial segment experienced a slowdown. The Professionals business continued to accelerate with growth of 14% (Q2 2014: 10%). Overall, perm fees were down 3% versus last year (Q22014: -/-2%).

Gross margin is higher YoY, benefiting from the mix impact of the growth in the Professionals business. Underlying operating expenses were down.

EBITA margin moved up to 4.9%, from 3.3% last year (attributable to the reorganization carried out in Q4 2013).

Revenue growth in Iberia was 9% (Q2 2014: 12%), as was the gross profit increase (in line with Q2).

Spain was up 9% (Q2 2014: 11%). Revenue growth continued to be hampered by lower volumes in harbors and agriculture, while growth continued in automotive and manufacturing. This was reflected in the good growth seen in Inhouse, which again saw strong growth of 23%. Solid growth has resulted from our focus on permanent placements and Professionals. The number of FTEs increased by 6% sequentially as we continue to invest in these growing activities.

In Portugal, revenue grew by 9% (Q2 2014: 14%). Growth continued to be led by the automotive and manufacturing segments.

The focus remains on improving profitability.

The overall EBITA margin for Iberia improved to 4.8% in Q3, up from 3.0% in the same period last year. The incremental conversion ratio was 203%.


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