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UK revenue up 5% in Q4 2018 for Randstad

Randstad has released its results for the fourth quarter and full year 2018.


Organic revenue per working day grew by 0.3% in Q4 resulting in revenue of €6,101m (Q3 2018: up 2.7%). Reported revenue was 2.1% above Q4 2017, of which working days had a positive effect of 1.9% while FX had a negative effect of 0.1%.


In North America, revenue per working day increased 3% (Q3 2018: up 3%). Growth in the US was up 3% (Q3 2018: up 4%), while Canada was up 1% YoY (Q3 2018: up 2%). In Europe, revenue per working day was down 2% (Q3 2018: up 2%). Revenue in France was down 4% (Q3 2018: down 1%), while the Netherlands grew by 3% (Q3 2018: up 4%). Germany was down 7% (Q3 2018: down 2%), while sales growth in Belgium was flat (Q3 2018: up 3%). Italy was down 1% (Q3 2018: up 7%), and revenue in Iberia was down 4% (Q3 2018: up 1%). In the 'Rest of the world' region, revenue increased 12% (Q3 2018: up 12%); Japan increased by 6% (Q3 2018: up 7%), while Australia & New Zealand rose by 10% (Q3 2018: up 14%).


Perm fees grew by 11% (Q3 2018: up 13%), with Europe up 7% (Q3 2018: up 13%) and North America growing 15% (Q3 2018: up 10%). In the 'Rest of the world' region, perm fees growth amounted to 17% (Q3 2018: up 16%). Perm fees made up 9.8% of gross profit.


In Q4 2018, gross profit amounted to €1,207m. Organic growth was down 1.5% (Q3 2018: up 1.7%). Currency effects had a positive impact on gross profit of € 4 million compared to Q4 2017. Gross margin was 19.8%, 30bp below Q4 2017. Temporary staffing had a 40bp negative effect on gross margin (Q3 2018: down 20bp), primarily given adverse mix effects and changes in CICE in France. Permanent placements had a 20bp positive effect on gross margin, while HRS/Monster had a negative impact of 10bp.


On an organic basis, operating expenses decreased by €1m sequentially to €898m. This reflects Randstad’s ability to adjust the cost base to changing market conditions, while still investing in future growth opportunities (including digital). Compared to last year, operating expenses were flat (Q3 2018: up 1%) organically, while there was a €4m negative FX impact.


Underlying EBITA increased organically by 1% to €309m. Currency effects had no impact YoY. EBITA margin reached 5.1%, stable compared to Q4 2017. Randstad achieved an organic incremental conversion ratio (ICR)1 of 56% over the last four quarters.


In Q4 2018, net finance income was €2m, compared to €3m net finance costs in Q4 2017. Interest expenses on Randstad’s net debt position were €5m (Q4 2017: €4m). Foreign currency and other effects had a positive impact of €7m (Q4 2017: positive impact of €1m).


The underlying effective tax rate before amortization and impairment of acquisition-related intangibles and goodwill, integration costs and one-offs amounted to 23.5% for the full year (FY 2017: 26.4%). For 2019, Randstad expects an effective tax rate before amortization and impairment of acquisition-related intangibles and goodwill, integration costs and one-offs of between 26% and 28%.


In Q4 2018, adjusted net income rose by 4% YoY to €233m. Diluted underlying EPS amounted to €1.27 (Q4 2017: €1.22). The average number of diluted ordinary shares outstanding remained almost stable compared to Q4 2017 (183.9m versus 184.0m). Reported net income was adversely impacted by impairments of €103m, related to Monster, as revenue did not recover in line with initial projections. Furthermore, reported net income was positively impacted by an exceptional tax benefit (€86m). Both items are non-cash and have no impact on the company’s dividend policy.


CEO, Jacques van den Broek (pictured), said, "We finished the year with a sound operating performance, expanding our FY 2018 EBITA margin to 4.7% and achieving strong free cash flow conversion in Q4 2018. Our revenue was stable organically year-on year in Q4, reflecting robust sales growth in North America and Rest of the world, but slowing activity in Europe in line with recent macro trends. Over the years, Randstad has increasingly become a truly global company, with more and more countries and regions throughout the world making significant contributions to our growth and profitability. In 2018, Japan, Australia, Singapore, and also the Latin American region, were particularly strong performers. Our tech & touch strategy is in full progress.


“In 2018, we successfully rolled out several digital concepts to other countries, which will fuel our growth in 2019. All our concepts are based on deep customer insights. We research the needs of our clients and candidates through our data led Customer Delight program. This global approach provides the foundation that will enable us to further improve the Human Forward experience for our clients and candidates. Our financial position remains very healthy, reflected by the proposal of a cash dividend of € 3.38 per ordinary share, including a special dividend of € 1.11, a record high. I am very proud of all my colleagues and I would like to thank them and all our stakeholders for an excellent 2018."


In North America, revenue growth was up 3% (Q3 2018: up 3%). Perm fees grew 15% (Q3 2018: up 10%). In Q4 2018, revenue of its combined US businesses was up 3% (Q3 2018: up 4%). US staffing/inhouse services grew by 5% (Q3 2018: up 5%). US professionals revenue was flat (Q3 2018: up 1%). In Canada, revenue was up 1% (Q3 2018: up 2%). EBITA margin for the region came in at 6.4%, compared to 6.0% last year.


In France, revenue was down 4% (Q3 2018: down 1%), impacted by a general market slowdown and strong focus on client profitability. Perm fees were up 15% compared to last year (Q3 2018: up 22%). Staffing/inhouse services revenue declined 7% (Q3 2018: down 4%). Randstad’s professionals business was up 8% (Q3 2018: up 9%), driven by Ausy and healthcare. EBITA margin was 5.7% compared to 6.5% last year.


In the Netherlands, revenue was up 3% YoY (Q3 2018: up 4%). Overall perm fees were down 14% (Q3 2018: up 9%). Randstad’s staffing and inhouse services businesses grew 1% (Q3 2018: up 2%), while its professionals business was up 13% (Q3 2018: up 15%). EBITA margin in the Netherlands was 5.9%, compared to 6.6% last year.


In Germany, revenue per working day was down 7% YoY (Q3 2018: down 2%) but ahead of market, negatively impacted by regulation changes and lower activity in the automotive sector. Perm fees were up 20% compared to last year (Q3 2018: up 10%). Randstad’s combined staffing and inhouse services business was down 12% (Q3 2018: down 4%), while professionals was up 7% (Q3 2018: up 7%). EBITA margin in Germany was 3.9%, compared to 4.7% last year.


In Belgium & Luxembourg, revenue was flat (Q3 2018: up 3%), still ahead of the market. Perm fees were down 6% compared to last year (Q3 2018: up 34%). Its staffing/inhouse services business was flat (Q3 2018: up 3%). Randstad’s EBITA margin was 5.5%, compared to 6.9% last year.


Revenue per working day in Italy was down 1% compared to the prior year (Q3 2018: up 7%), impacted by tough comparables and slowing macroeconomic activity. Overall perm fees were up 28% (Q3 2018: up 38%). EBITA margin was 6.6%, compared to 6.3% last year.


In Iberia, revenue per working day was down 4% (Q3 2018: up 1%), reflecting increased macroeconomic uncertainty and tougher comparables. Perm fees were up 21% compared to last year (Q3 2018: up 4%). Staffing/inhouse services combined was down 5% (Q3 2018: up 1%). Spain was down 3% (Q3 2018: up 3%) while the company’s focus on permanent placements (up 24%) continues to pay off. In Portugal, revenue was down 9% (Q3 2018: down 3%). Overall EBITA margin was 6.0% in Q4 2018, compared to 5.6% last year.


Across 'Other European countries', revenue per working day grew 1% (Q3 2018: up 3%). In the UK, revenue was up by 5% (Q3 2018: up 3%), while in the Nordics, revenue was down 4% on an organic basis (Q3 2018: up 1%). Revenue in its Swiss business was up 6% YoY (Q3 2018: up 6%). Overall EBITA margin for the 'Other European countries' region was 3.2% compared to 3.3% last year.


Overall revenue in the 'Rest of the world' region grew by 12% organically (Q3 2018: up 12%). In Japan, revenue grew 6% (Q3 2018: up 7%). Revenue in Australia/New Zealand grew 10% (Q3 2018: up 14%), while revenue in China grew by 31% YoY (Q3 2018: up 6%). Our business in India was up 21% (Q3 2018: up 1%), while in Latin America revenue grew 25% (Q3 2018: up 30%), driven by Argentina and Brazil. Overall EBITA margin in this region was 4.6%, compared to 3.7% last year, primarily driven by a strong profitability increase in Japan and Australia.


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