Gross profit up 1% in Q3 2018 for Randstad
Randstad has released its results for the third quarter of 2018.
Organic revenue per working day grew by 2.7% in Q3 resulting in revenue of €6,006m (Q2 2018: up 5.0%). Reported revenue was 2.3% above Q3 2017, of which working days had a positive effect of 0.3% while FX had a negative effect of 0.7%.
In North America, revenue per working day increased 3% (Q2 2018: up 2%). Growth in the US was up 4% (Q2 2018: up 2%), while Canada was up 2% YoY (Q2 2018: flat). In Europe, revenue per working day grew by 2% (Q2 2018: up 5%). Revenue in France was down 1% (Q2 2018: up 3%), while the Netherlands grew by 4% (Q2 2018: up 4%). Germany was down 2% (Q2 2018: up 6%), while sales growth in Belgium was up 3% (Q2 2018: up 7%). Italy grew by 7% (Q2 2018: up 10%), while revenue in Iberia was up 1% (Q2 2018: up 3%). In the 'Rest of the world' region, revenue increased 12% (Q2 2018: up 11%); Japan increased by 7% (Q2 2018: up 9%), while Australia & New Zealand rose by 14% (Q2 2018: up 7%).
Perm fees grew by 13% (Q2 2018: up 14%), with Europe up 13% (Q2 2018: up 17%) and North America growing 10% (Q2 2018: up 6%). In the 'Rest of the world' region, perm fees growth amounted to 16% (Q2 2018: up 19%). Perm fees made up 10.5% of gross profit.
In Q3 2018, gross profit amounted to €1,191m. Organic growth was 1.7% (Q2 2018: up 2.9%), impacted by adverse mix effects related to Monster. Currency effects had a negative impact on gross profit of €6m compared to Q3 2017.
Gross margin was 19.8%, 30bp below Q3 2017. Temporary staffing had a 20bp negative effect on gross margin (Q2 2018: down 30bp), primarily given adverse mix effects and changes in CICE in France. Permanent placements had 20bp positive effect on gross margin, while HRS/Monster had a negative impact of 20bp.
On an organic basis, operating expenses decreased by €19m sequentially to €892m. This reflects our strong ability to adjust the cost base to changing market conditions, while still investing in future growth opportunities (including digital). The cost optimisation program within Monster is fully on track. Compared to last year, operating expenses were up 1% (Q2 2018: up 2%) organically, while there was a €4m positive FX impact.
Underlying EBITA increased organically by 5% to €299m. Currency effects had a €2m adverse impact YoY. EBITA margin reached 5.0%, 10bp higher than Q3 2017. We achieved an organic incremental conversion ratio (ICR)1 of around 50% over the last four quarters.
In Q3 2018, net finance costs were €10m, similar to Q3 2017. Interest expenses on Randstad’s net debt position were €4m (Q3 2017: €6m). Foreign currency and other effects had an impact of €6m (Q3 2017: impact of €4m).
In Q3 2018, adjusted net income rose by 9% YoY to €220m. Diluted underlying EPS amounted to €1.20 (Q3 2017: €1.10). The average number of diluted ordinary shares outstanding remained almost stable compared to Q3 2017 (183.6 million versus 184.0 million).
"We further improved our margin and strong free cash flow conversion in Q3," said CEO, Jacques van den Broek (pictured). "Our organic sales growth was 3%, reflecting accelerating sales growth in North America and Rest of the world, but slowing activity in Europe in line with recent macro trends. Supported by strong cost management, we were able to deliver ongoing sound shareholder returns. At the same time we continue to invest in the future of our company by scaling up our digital initiatives around the world. The roll-out of workforce scheduling, data-driven sales and talent engagement now spans over 25 countries. These initiatives benefit both clients and talents with improved services and communication and foster great excitement in our company and with our consultants. This is how we contribute to our ultimate goal: touching the work lives of 500 million people worldwide by 2030.”