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Revenues down 4% in Europe in Q2 2019 for Randstad

Randstad has released its results for the second quarter of 2019.

Organic revenue per working day declined by 1.7% in Q2 resulting in revenue of €5,957m (Q1 2019: up 0.5%). Reported revenue was 1.1% below Q2 2018, of which working days had a negative effect of 0.5% while FX had a positive effect of 1.1%.

Perm fees grew by 2% (Q1 2019: up 5%), with Europe stable YoY (Q1 2019: up 7%) and North America up 6% (Q1 2019: flat). In the 'Rest of the world' region, perm fees grew by 2% (Q1 2019: up 8%). Perm fees made up 11.3% of gross profit.

In Q2 2019, gross profit amounted to €1,193m. Organic growth was down 1.0% (Q1 2019: up 0.6%). Currency effects had a positive impact on gross profit of €19m compared to Q2 2018.

Jacques van den Broek (pictured), Randstad CEO, commented, "We delivered solid Q2 2019 results, as robust gross margins and balanced cost management offset ongoing challenging macroeconomic conditions in Europe.

"Our organic revenue growth turned slightly negative, reflecting slowing market growth in particularly Germany, the Netherlands and Belgium, mainly related to weakness in automotive-related industries. We continued to gain market share in several countries, while maintaining strong pricing discipline. Our sound regional diversification continued to pay off, as Asia Pacific and the Latin America region delivered significant contributions to our growth and profitability. Furthermore, our digital strategy progressed well, reflected by a successful worldwide cloud migration and implementation of a new front-office system in Germany and Japan. These new systems enable our sales and recruiting colleagues to focus even more on the human touch.

"On a different note there was good news not only for Randstad but for the whole private employment sector. It is great to see that we are widely recognized to stimulate an inclusive and well regulated labor market by the centenary declaration of the International Labour Organisation (ILO) toward a human centered future of work. This is fully aligned with our values, principles, and in particular our Human Forward promise."

Gross margin was 20.0%, 20bp above Q2 2018. Temporary staffing had a 10bp positive effect on gross margin (Q1 2019: up 10bp), primarily reflecting improving price/mix effects. Permanent placements had a 10bp positive effect on gross margin, while HRS/other had a neutral impact (including 10bp positive FX effect).

On an organic basis, operating expenses increased by €12m sequentially to €916m. This reflects balanced cost management, as we still selectively invest in future growth opportunities. Compared to last year, operating expenses were flat (Q1 2019: down 1%) organically, while there was a €15m negative FX impact.

Underlying EBITA decreased organically by 5% to €277m. Currency effects had a €4m positive impact YoY. EBITA margin reached 4.7%, down 10bp compared to Q2 2018. Randstad achieved an organic incremental conversion ratio (ICR)2 of 60% over the last four quarters.

In Q2 2019, net finance costs were €12m, versus €4m net finance income in Q2 2018. Interest expenses on our net debt position were €6m (Q2 2018: €5m), and interest expenses related to lease liabilities were €5m (Q2 2018: €5m). Foreign currency and other effects had a negative impact of €1m (Q2 2018: positive impact of €14m).

In North America, revenue per working day increased 1% (Q1 2019: up 2%). Growth in the US was up 1% (Q1 2019: up 3%), while Canada was up 1% YoY (Q1 2019: down 2%). In Europe, revenue per working day was down 4% (Q1 2019: down 1%). Revenue in France was down 2% (Q1 2019: flat), while the Netherlands was down 3% (Q1 2019: up 1%). Germany was down 15% (Q1 2019: down 10%), while sales in Belgium were down 4% (Q1 2019: up 1%). Italy was flat (Q1 2019: up 1%), and revenue in Iberia was up 2% (Q1 2019: flat). In the 'Rest of the world' region, revenue increased 10% (Q1 2019: up 10%); Japan increased by 9% (Q1 2019: up 5%), Australia & New Zealand rose by 2% (Q1 2019: up 5%), while Latam was up 28% (Q1 2019: up 24%).

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