Randstad Report Solid profitable growth in Q3
- Revenue of &euro 4,977 million organic growth 5.4% gross profit up 5.8%
- Topline growth broadly stable across most countries
- Gross margin up 30 bp to 18.8% perm fees up 13%, now 10.5% of gross profit (vs. 9.8% last year)
- Underlying EBITA of &euro 249 million (13% organically) EBITA margin up 30 bp to 5.0% organic L4Q ICR of 59%
- Adjusted net income up 24% from &euro 139 million to &euro 172 million ROIC at 8 year high of 16.2%
- DSO improved to 50.8 (from 52.0 in Q3 2014) leverage ratio of 0.5 compared to 0.9 last year
- Global MSP spend under management up 27%, RPO revenue up 24%
- Volumes in October so far indicate a continuation of the trend
- Randstad acquired RiseSmart, an outplacement innovator
"Q3 was another quarter in which mid-single digit growth translated into a solid operational leverage," says Randstad CEO Jacques van den Broek. "We have seen stable growth in most regions, while the focus on perm and HR services continued to pay off. The recent RiseSmart acquisition complements our offering, as technology is playing a more prominent role in the future of our company. This quarter, we celebrated our 55th anniversary, which clearly shows that we have been able to adapt to the ever changing environment. We continue to strengthen the foundations for the next 55 years."
Revenue per working day in the UK improved marginally and was up 1% compared to the prior year (Q2 2015: 0%). Gross profit was up 2% (Q2 2015: up 5%). Overall perm fee growth was stable, up 4% year-on-year (Q2 2015: up 5%). Our Construction/ Engineering and Education businesses continue to perform well in an increasingly challenging market. EBITA margin continued to improve, now at 2.0% from 1.4% last year. third quarter results 2015.
In North America, revenue growth was 4% YoY (Q2 2015: up 5%) against a 3% tougher comparison base. Reported revenue was 22% above Q3 2014. Gross profit growth was 9% (Q2 2015: up 10%), in line with the 9% growth in perm fees (Q2 2015: up 16%). In Q3 2015, our combined US businesses grew 5% (Q2 2015: up 6%), with US Staffing/Inhouse growing by 6% (Q2 2015: up 7%). US Professionals gross profit grew 3%, while revenue was up 2% YoY (Q2 2015: up 2%). Randstad Sourceright North America reported 17% net fee growth (Q2 2015: up 25%). Spend under management within MSP was up 18% due to expansion of existing programs and significant new customer wins. In Canada, revenue declined by 4% (Q2 2015: down 2%), ahead of a challenging market. Underlying EBITA margin for the region increased from 5.7% to 6.3%. In the quarter, &euro 6.4 million of restructuring and M&A charges were taken.
In France, revenue was sequentially stable, with growth of 3% (Q2 2015: 4%), which was broadly in line with the market. Staffing and Inhouse revenue increased 3% (Q2 2015: up 4%). Our Professionals business was up 2%, driven by healthcare. Perm fees improved significantly, up 23% compared to last year (Q2 2015: up 6%). Our EBITA margin was 5.8%, compared to 6.0% last year.
In the Netherlands, revenue was up 10% YoY (Q2 2015: up 15%) on a 4% tougher comparison base. In addition, the previous quarter benefited from a favorable working days impact. Overall perm fee growth improved to 28% (Q2 2015: up 21%). Our Staffing and Inhouse businesses grew 9% (Q2 2015: up 15%), broadly in line with the market. Our Professionals business was up 20% (Q2 2015: up 12%). EBITA margin in the Netherlands was 6.1%, compared to 6.3% last year.
In Germany, revenue per working day was up 2% YoY (Q2 2015: 0%). Our combined Staffing and Inhouse business was up 2% (Q2 2015: 0%), while Professionals improved to 1% (Q2 2015: down 2%). Gross profit also improved, up 2% in the quarter (Q2 2015: down 1%). Underlying EBITA margin in Germany improved to 5.7%, compared to 5.4% last year. Belgium & Luxembourg In Belgium & Luxembourg, revenue per working day was up 1% (Q2 2015: up 6%). Our Staffing/Inhouse business grew 1% (Q2 2015: up 7%), while the Professionals business was down 7% (Q2 2015: down 3%). Overall, our focus on client profitability, combined with strong cost control, is paying off. Gross profit increased by 6% (Q2 2015: up 5%), while EBITA margin moved up to 6.1% from 4.9% last year.
In Iberia, revenue growth was stable, up 8% (Q2 2015: up 8%), with gross profit growth of 10% (Q2 2015: up 11%). Spain was up 12% (Q2 2015: up 14%), with Staffing/Inhouse combined growing 12% (Q2 2015: up 14%). Our focus on permanent placements (up 32%) and Professionals (up 68%) continues to pay off. In Portugal, revenue declined by 2% (Q2 2015: down 3%), as a result of our focus on client profitability. Overall underlying EBITA margin was 4.7% in Q3 2015, compared to 4.8% in the same period last year. A &euro 1.3 million restructuring charge was taken in the quarter.
Other European countries
Across 'Other European countries', revenue per working day grew by 11% (Q2 2015: up 9%). This was supported by accelerating growth in Italy, which was up 20% (Q2 2015: up 16%). In Poland, revenue growth accelerated to 7% (Q2 2015: up 2%), despite a tough comparison base. Revenue in our Swiss business was flat year-on-year, but still ahead of a difficult market (Q2 2015: up 2%). In the Nordics, revenue improved to 11% (Q2 2015: up 7%). Overall EBITA margin reached 5.0% (Q3 2014: 4.2%).
Rest of the world
Overall revenue in the 'Rest of the world' region showed stable growth, up 11% organically (Q2 2015: up 12%). In Japan, revenue grew by 6% in line with the previous quarter (Q2 2015: up 6%). Revenue in Australia/New Zealand grew by 11% (Q2 2015: up 16%) and China improved to 27% growth YoY, against a tough comparison base (Q2 2015: up 20%). Our business in India continued to pick up, growing by 16% (Q2 2015: up 14%), while Latin America grew by 15% (Q2 2015: up 16%), driven by Argentina and Chile. Overall, EBITA margin in these regions improved to 1.5%, from 1.0% last year. We continue to invest in growth.
Revenue grew by 5.4% in Q3. In September, revenue grew by 5.7%. Volumes in October so far indicate a continuation of the trend. The gross margin is expected to be stable sequentially. For Q4, we expect a minor increase in operating expenses (on an organic basis). There will be no significant working day impact in Q4.
Randstad acquired a 100% stake in career transition and outplacement specialist RiseSmart. Originally identified through the Randstad Innovation Fund (RIF), RiseSmart provides transitioning solutions to companies whose employees are impacted by restructuring, downsizing, mergers and similar events. Powered by a virtual, scalable model, RiseSmart is considered disruptive to traditional competitors by utilizing a proprietary, smart-technology-driven approach, which accelerates the time to place transitioning candidates by 60% compared to the national US average.