USG People Q1 net profit up 34%
First-quarter 2015 highlights include:
• Revenue rose 5.1% to &euro 570.7 million (Q1 2014: &euro 542.8 million)
• Growth in revenue per working day in the Netherlands up from 2.7% in Q4 2014 to 6.1% in March 2015
• Underlying EBITA increased 15% to &euro 16.9 million (Q1 2014: &euro 14.7 million) underlying EBITA margin up at 3.0% (Q1 2014: 2.7%)
• Underlying net income rose 34% to &euro 9.1 million (Q1 2014: &euro 6.8 million)
• Additional optimisation programme to result in annual cost savings of &euro 20 million
“The positive developments are continuing in all the countries,” said Rob Zandbergen, CEO of USG People. “In the Netherlands the recovery in the employment market is increasingly picking up pace. Demand for staff in the small and medium-sized business segment, which accounts for around half of our revenue in the Netherlands, continued to develop well in the first quarter.
"At USG Professionals we are now seeing growth pick up in most segments too. While we did see continued price competition in the volume segment, we expect this to gradually normalise in the current improving market. In Belgium and France we were able to sustain our good performance in the first quarter, with growth also picking up in Germany. Thanks to our continued strict focus on operational excellence, the growth in revenue led to a strong improvement in our underlying earnings. We expect the positive development in our markets to continue in the coming months.”
USG People saw revenue grow 5.1% in the first quarter to &euro 570.7 million (Q1 2014: &euro 542.8 million). The number of working days was the same as in the first quarter last year. Acquisitions had a positive effect on growth of 0.2%. In the Netherlands revenue growth increased to 3.7% for the quarter, rising from 2.7% in the fourth quarter of 2014 to 6.1% in March. This acceleration of growth was attributable to the commencement of services relating to a number of large contracts acquired by Start People, as announced in previous publications. Growth in Belgium and France remained robust in the first quarter. Belgium achieved growth of 9.3% in the quarter. At 5.7% year-on-year revenue growth, France continued to comfortably outpace the market. The development of our markets in the first quarter showed a somewhat mixed picture. Revenue per working day for the group rose by 5.0% in March, with the Netherlands and Germany seeing a further acceleration of growth in this final month of the quarter, while growth in Belgium and France was slightly lower. Our German activities grew 0.9% in the quarter as a whole, with growth gradually strengthening over the period to reach 3.6% in March.
The gross result amounted to &euro 120.9 million in the first quarter (Q1 2014: &euro 116.5 million). As a percentage of revenue the gross margin was 21.2% (Q1 2014: 21.5%).
In the first quarter revenue from recruitment and selection was virtually unchanged compared to a year earlier. The termination of several unprofitable subscale activities at USG Professionals and Secretary Plus, which derive a large part of their revenue from recruitment and selection, had a negative impact on growth in permanent placements. This lower growth had a negative impact of 10 basis points on the group gross margin. Revenue from recruitment and selection accounted for 1.0% of total group revenue in the first quarter (Q1 2014: 1.1%).
Furthermore there was a negative impact of 20 basis points caused by a drop in revenue from our call centre services. These activities record a gross margin of 100%, meaning that any deviation in revenue growth has a disproportionately large impact on the gross margin of the group.
On balance there was no impact from other mix and pricing effects compared to the first quarter of last year.
The reported gross result for the first quarter of 2015 included not only the underlying gross result but also a non-recurring charge of &euro 1.9 million, relating mainly to an optimisation of the working base of USG Professionals. The reported gross result was &euro 119.0 million.
Operating expenses excluding depreciation and amortisation of acquisition-related intangible assets
Underlying operating expenses rose by &euro 2.0 million compared to a year earlier to &euro 100.3 million (Q1 2014: &euro 98.3 million). Expenses rose as a result of changes to collective labour agreements and of facilitating the growth of our activities, especially in Belgium and France.
On balance the expense ratio, before depreciation, improved by 50 basis points to 17.6% from 18.1% in the first quarter of last year. The relatively low revenue level in the first quarter means that this ratio is always higher for this quarter compared to the figure for the full year.
Reported expenses included both the underlying expenses and a non-recurring charge of &euro 1.4 million. This related to organisational changes at USG Professionals and a provision relating to the transfer of the Vakcollege activities.
Ongoing improvement of cost structure
Following the successful conclusion of project United, which simplified our organisation and resulted in annual cost savings of &euro 38 million, we are now focusing on further optimisation of our productivity and cost to produce.
A new optimisation programme will be launched to further improve our cost structure in 2015 and 2016. The programme will be implemented in phases in 2015 and 2016 and will produce annual cost savings within the Dutch organisation of &euro 20 million. The optimisation will mainly be achieved through standardisation and harmonisation within our organisation as well as more efficient processes through the deployment of online applications. The savings will be realised gradually from the third quarter of 2015. The programme will be fully executed before the final quarter of 2016. The costs of the programme will amount to &euro 11.0 million, of which &euro 1.0 million was recognised in the first quarter. The programme represents the next step to strengthen our effectiveness and optimise our organisation.