- Key points Q1 2013
Revenue of € 3,832 million; organic growth1 per working day -/-3.7%
Strong cost control, costs down € 24 million compared to Q4 2012
EBITA margin of 2.4% compared to 2.7% in Q1 2012, impacted by 1.8 fewer working days
Net debt reduced by € 165 million compared to Q4 2012, leverage ratio at 1.5
Net income up 3% to € 29.7 million
Diluted EPS down to € 0.33 per ordinary share
Ben Noteboom, CEO of Randstad: "In line with the last two quarters, cost control in Q1 has been very effective, supporting further efficiency improvements. Profitability rose in HR Solutions, Professionals and Inhouse. Our people in Turkey, Japan, China, India, Brazil and North America achieved another quarter with good profitable growth. We welcome our prospective new staffing colleagues from USG People in Spain, Italy, Switzerland, Austria, Poland and Luxembourg. European governments still need to do more in unfreezing labor markets and fighting unemployment, especially for younger people. European markets show some signs of improvement, and we will make targeted marketing investments to support organic growth and strengthen our position in the second half of the year."
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1Organic growth is measured excluding the impact of currencies, acquisitions, disposals and reclassifications. Revenue growth is adjusted for the impact of working days
2Underlying: gross profit and operating expenses adjusted for restructuring costs, one-offs and integration costs
3EBITA: operating profit before amortization/impairment of acquisition-related intangible assets and goodwill
4Before amortization amortization/impairment of acquisition-related intangible assets and goodwill

Financial performance
In order to measure underlying performance, we have adjusted the financials for integration costs and one-offs.

Revenue
The first quarter of 2013, which is seasonally the slowest quarter, was a relatively good start of the year. Revenue per working day was down 3.7%, compared to the year-on-year decline of 5.3% in the previous quarter. This quarter we had 1.8 fewer working days, which had an effect of around 3% on our revenue. The effect of disposals was negligible, and currency effects had a negative impact of 1%. As a result, revenue was 7.7% below Q1 2012. Revenue per working day fell by 5.2% in January and by 2.6% in March. The decline in perm fees was 4.9% (Q4 2012: -/-9.1%). Growth in perm fees was maintained across Asia and Latin America. Growth returned in North America. Demand for permanent placements remained weak across Europe and Australia, resulting in lower perm fee revenue. Perm fees made up 1.8% of revenue and 10.1% of gross profit (Q1 2012: 9.9%). The diversification of our services portfolio is supported by strong profitable growth in revenue from other services, such as payroll services, managed services and recruitment process outsourcing (RPO).

North American revenue was 3% below Q1 2012 (Q4 2012: 0%), and our focus here is on profitability. In Europe, revenue per working day declined by 5% (Q4 2012: -/-8%). The rate of decline eased across most countries. In the Rest of the World, our investments continued to pay off, and revenue grew by 6%. We achieved good performance in Japan and other Asian markets. In Australia, revenue declined by 11% (Q4 2012: -/-12%), however, the rate of decline eased to -/- 3% in March. In Latin America, our business grew by 29%, led by Brazil and Argentina.

Inhouse Services grew by 3% (Q4 2012: 2%). We continued to transfer business to Inhouse, while focusing on client profitability. The decline in Staffing revenue eased to -/-5% (Q4 2012: -/-9%), mainly due to a lower rate of decline in Europe. Revenue in Professionals was 4% below last year (Q4 2012: -/-4%). Good performance in the UK was offset by lower demand in continental Europe, North America and Australia. HR Solutions achieved strong profitable growth and shows that our policy of diversifying our service portfolio is successful.

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1 Organic change is measured excluding the impact of currencies, acquisitions, disposals and reclassifications. Revenue growth is adjusted for the impact of working days.

Gross profit
In Q1 2013, gross profit amounted to € 683.6 million, down 9% compared to last year and reflects that we had 1.8 fewer working days (impact of approx. € 18 million). The organic change was -/-7% (Q4 2012: -/-5%). Currency effects had a negative impact on gross profit of € 8 million when compared to Q1 2012.

Gross margin was 17.8%, compared to 18.0% in Q1 2012. The temp margin was 0.4% below the level of last year (Q4 2012: -/- 0.2%). Gross margin enhancements in North America and France were more than offset by lower gross margins in the Netherlands and Germany. HR Solutions and other mix effects added 0.2% to the gross margin (Q4 2012: 0.1%). Perm fees had no impact on the mix. Our focus on profitability continues to pay off. Our gross profit in North America was at the same level as last year, despite the revenue decline and fewer working days. In Europe, the decline in gross profit was -/-11% (Q4 2012: -/- 9%).

Operating expenses
Operating expenses decreased by € 23.9 million compared to Q4 2012, of which € 9.3 million was due to currency effects and € 1.5 million to disposals of businesses. Marketing costs were € 8.0 million below the level of Q4 2012, which is in line with normal seasonal patterns. The remainder (€ 5.1 million) was a net result of restructuring programs and field steering, partly offset by wage inflation and higher bonus costs. Underlying operating expenses were adjusted for additional restructuring costs of € 1.1 million in Germany.

Average headcount (in FTE) amounted to 27,670 for the quarter, down 3% compared to Q4 2012. The reduction in FTEs in Q1, which follows the trend in gross profit, occurred mainly across Europe and North America. Productivity (measured as gross profit per FTE) was 2% ahead of last year. We operated a network of 4,449 outlets (Q4 2012: 4,496), 47 fewer than in the previous quarter.

EBITA
Underlying EBITA decreased organically by 16% to € 91.5 million, with an EBITA margin of 2.4%. Assuming the same number of working days, EBITA margin would have been the same as in Q1 2012. The recovery ratio (change in operating expenses/change in gross profit) was 71%, well above the targeted level of at least 50%.

We focus on capturing profitable growth and client profitability, while optimizing our delivery models and costs. Our field steering approach ensures adaptability of the field organization. In addition, we closely monitor the productivity and efficiency of our organization as a whole, including overhead and head-office costs. We will focus on the implementation of our strategic priorities, while completing various cost savings initiatives.

Amortization of intangible assets
Amortization of acquisition-related intangible assets amounted to € 40.8 million. The year-on-year decrease was mainly due to the fact that some of the brand names, acquired as part of the SFN acquisition, were amortized over 10 months.

Net finance costs
In Q1 2013, net finance costs reached € 5.5 million compared to € 7.4 million in Q1 2012. Net finance costs include the net interest expenses on our net debt position, as well as currency effects and adjustments in the valuation of certain assets and liabilities.

Interest expenses amounted to € 4.5 million compared to € 6.0 million in Q1 2012. Interest costs decreased in line with the decrease in net debt. Foreign currency changes had a positive impact of € 0.1 million compared to a gain of € 0.8 million in Q1 2012. The remaining negative effect of € 1.1 million (Q1 2012: € 2.2 million) was mainly due to adjustments in the valuation of certain assets and liabilities.

Tax
In Q1 2013, the effective tax rate before amortization and impairment of acquisition-related intangibles and goodwill, integration costs and one-offs amounted to 31% (FY 2012: 32%). Following the implementation of the Tax Credit and Competitive Employment Act ('CICE') in France the recoverability of the French deferred tax assets was reassessed. As CICE is expected to have a negative impact for income tax purposes, it triggered a lower valuation of French deferred tax assets.

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1Amortization and impairment of acquisition-related intangible assets

Net income, earnings per share
In Q1 2013 diluted EPS decreased from € 0.39 to € 0.33.


Balance sheet
Operating working capital increased to € 562.8 million sequentially, which is a similar trend as last year. The moving average of Days Sales Outstanding (DSO) was 1.2 days lower than Q1 2012 driven by efforts to make further improvements in our invoicing and collection processes, as well as by changes in the country mix.

At the end of Q1 2013, net debt fell to € 930.6 million. This was partly due to the issue of preference shares C based on a capital contribution of € 140 million. The leverage ratio reached 1.5. The documentation of the syndicated credit facility allows a leverage ratio of up to 3.5, while we aim at a maximum leverage ratio of 2. The liability of € 131 million to the Dutch tax authorities will be settled when we complete the tax filing over 2012, most likely towards the end of 2013.

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1Amortization and impairment of acquisition-related intangible assets
2Diluted EPS before amortization and impairment acquisition-related intangible assets and goodwill, integration costs and one-offs
3Operating working capital is trade and other receivables excluding the current part of financial fixed assets minus trade and other payables

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