Continued growth in a challenging environment

Printer-friendly versionPDF version

revenue and earnings per share up 12%

Key points Q3 2011

• Revenue up 12% to € 4,232.4 million; organic growth per working day 7%
• Transaction with SFN Group closed as of September 2, 2011; revenue of € 118 million included in September 2011
• Gross margin sequentially down 0.3% in line with seasonal patterns and mix effects
• Tight cost control maintained, costs at constant currencies sequentially down
• Underlying EBITA

  ²

  up 14% to € 175.1 million, EBITA margin at 4.1%
• Strong cash flow generation, free cash flow up 12% to € 193.9 million
• Diluted EPS € 0.66, up 12%

"Our people have done a great job in realizing good growth once again", says Ben Noteboom, CEO of Randstad. "Across the board profitability improved and we managed our costs well. We extend a warm welcome to our new colleagues in North America where the integration with SFN Group is in full swing. Combined with the rebranding of the Professionals businesses in the US, we will approach the largest market in the world with an integrated and enhanced service portfolio, for example in Recruitment Process Outsourcing. On industry level, the final quarter of this year sees the implementation of the EU Agency Work Directive. An important step in lifting restrictions and improving the position of agency work. All the more relevant as private employment agencies play a pivotal role in social and economic progress, job creation, and assisting customers, governments and candidates to maintain their competitive advantage during changes in the employment market."

Financial performance Q3 2011

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

Revenue

In Q3 2011 revenue increased by 12% to € 4,232.4 million. Organic revenue growth was 7% compared to 12% in Q2 2011. The net addition of acquisitions/disposals (primarily SFN in the US and FujiStaff in Japan) with revenue of € 118 million and € 125 million, respectively) was 6%. Currency movements had a negative impact of 1%. Perm fees increased by 11% organically, compared to 14% in the previous quarter. Perm fees made up 1.6% of revenue and 9.0% of gross profit (8.5% in Q3 2010). Organic revenue growth per working day decreased gradually from 9% in July to just below 7% in September, while in Q3 2010 revenue growth was 16%. The seasonal patterns in our business have remained intact, albeit that growth trends eased. Over the past few months we reinforced our focus on client profitability, which resulted in exiting some low margin contracts in a few countries.

Germany, North America and France continued to lead the way with solid organic growth of 10%, 10%, and 9%, respectively. Our combined Dutch business grew by 4% organically. Randstad Netherlands gained further market share whereas the other Dutch businesses remained behind, partly because of the continued slow demand in the public sector. The UK was impacted by lower demand in the City oriented business and low demand in the public sector.

Inhouse services, mainly focused on industrial and logistical segments, continued to show double-digit growth, and grew 18% organically, while growth in Staffing eased to 5% organically. Growth in the industrial segments remained stronger than in the administrative segment. Professionals grew by 7% organically in line with Q2 2011.

Gross profit

In Q3 2011 gross profit amounted to € 764.9 million and grew 4% organically. The gross margin was 18.1%, down from 18.4% in the previous quarter and 0.4% below last year. The sequential decline is mostly related to seasonal patterns in our business. The YoY decline is caused by continued decline in the temp margin (0.5%), partly offset by a 0.2% contribution of SFN Group. Perm fees did not have impact on the change in gross margin. Other mix changes, like high growth in the low margin payrolling business, had a negative impact of 0.1%.

The temp margin was 0.5% below last year. First of all, the decline is caused by mix effects as Inhouse continued to grow faster than the administrative and Professionals segments. Secondly, the geographic mix continued to change with high growth in France, relatively low growth in the Netherlands and an increased share of Rest of World in the mix with relatively low margins. Finally, the impact of price pressure is stable compared to previous quarters. The change in the French subsidy system for low wage labor had no impact at Group level due to successful price adjustments.

Operating expenses

In Q3 2011 operating expenses amounted to € 589.8 million, up 8% compared to Q3 2010. On an organic basis operating expenses increased 2% YoY. However, when measured at constant currencies, underlying operating expenses decreased sequentially by about € 1 million and reflect that we maintained tight cost control. Operating expenses have been adjusted for acquisition-related expenses of € 6.1 million and integration costs of € 4.6 million, both related to the acquisition of SFN. Last year's cost base included € 2 million related to the acquisition of FujiStaff.

Average headcount (in FTEs) amounted to 29,070 for the quarter, up 12% YoY, of which 5% is attributable to the acquisition of FujiStaff. Since we measure averages, the impact of the consolidation of SFN was only 4%. The number of FTEs at the end of the quarter amounted to 31,230 and reflects the addition of 3,250 FTEs of SFN. In Q3 2011 we added, adjusted for the impact of SFN, 520 FTEs predominantly in North America, France and Germany in line with the growth of these businesses. We hired 88 FTEs as part of the Professionals growth accelerator. Productivity (measured as gross profit per FTE) was in line with last year. At the end of the quarter we operated a network of 4,784 outlets. The sequential increase of 600 outlets is mainly attributable to SFN, which operates through 592 outlets.

EBITA

In Q3 2011 underlying EBITA increased by 14% to € 175.1 million, with an EBITA margin of 4.1% (Q3 2010: 4.0%). Organic EBITA growth was 8%.

Amortization of intangibles

Amortization of acquisition-related intangible assets amounted to € 43.4 million compared to € 45.3 million in Q3 2010. Following the acquisition of SFN and FujiStaff we identified intangible assets, such as brandnames, customer relationships, and candidate databases in the balance sheet, which resulted in a combined amortization charge of € 11.1 million in Q3 2011. In Q3 2010 additional charges of € 7 million were included related to the successful rebranding of Professionals businesses.

Net finance costs

In Q3 2011 net finance costs reached € 7.1 million versus € 7.6 million in Q3 2010. Interest expenses on our net debt position amounted to € 7.1 million compared to € 6.2 million in Q2 2011 (Q3: 2010 € 7.1 million). The sequential increase is caused by somewhat higher interest rates (for example Euribor) and a higher net debt position as a result of the SFN acquisition. Net finance costs also included foreign currency effects and adjustments in the valuation of certain assets and liabilities.

Tax

The effective tax rate before amortization and impairment of acquisition-related intangibles, integration costs and one-offs amounted to 31% (2010: 29%), in line with our full-year guidance of between 29% and 32%. The increase compared to last year is mainly caused by a changed geographical mix with above average tax rates in countries with the highest growth. Additionally, as our results improve, the relative effect of tax-exempt income resulting from tax efficiencies in the Group decreases.

Net income and earnings per share

In Q3 2011 diluted EPS increased by 12% to € 0.66 (Q3 2010: € 0.59).

Balance sheet

Operating working capital increased in line with the growth of our business and as a result of the acquisition of SFN. The moving average of DSO improved by 1.4 days to 53.8 days compared to Q3 2010 and was in line with the previous quarter. We remain focused on making continuous improvements in our invoicing and collection processes, while managing pressure on payment terms.

At the end of Q3 2011 net debt amounted to € 1,486.7 million compared to € 946.5 million at the end of Q3 2010 and € 1,069.7 million at the end of Q2 2011. Net debt increased sequentially as a result of the acquisition of SFN, which caused a cash outflow of around € 550 million. The leverage ratio, which includes the EBITDA of SFN on a pro forma basis, reached 2.0. The covenants of the syndicated credit facility allow a leverage ratio of up to 3.5. As stated before, we expect the leverage ratio to fall back below 2.0 again by the end of the year.

Free cash flow increased by 12% to € 193.9 million as we remained focused on strong cash flow generation. The movement in working capital is in line with normal seasonal patterns and partly influenced by phasing in payments of liabilities. Income taxes amounted to € 56.4 million in line with the growth of our operational results. Net capital expenditures were at the same level as in the previous quarter and mainly related to investments in IT and refurbishment of outlets in some regions.

On September 2, 2011 we acquired the outstanding ordinary shares of SFN Group. The total consideration paid was € 548.3 million, which includes € 45.1 million for settlements in cash of share based payments arrangements of SFN. The remaining cash outflow for acquisitions relates to arrangements for previous acquisitions in preceding years. Net finance costs paid increased in line with our higher net debt position. Translation effects and other are mainly caused by the currency effects on the valuation of drawings under the syndicated facility, which are denominated in USD and JPY.

Performance by geography - underlying

¹

Revenue was up 4% organically per working day, broadly in line with the previous quarter. Organic growth per working day in September was 3%. The growth of the Dutch staffing market, which does not include Yacht, was around 5%. Randstad the Netherlands continued to perform well ahead of the market, while revenue of Tempo-Team was flat compared to last year. Revenue at Yacht continued to decline, but at a low single digit rate. In its private sector business Yacht achieved low double-digit growth. Both Yacht and Tempo-Team, especially in Professionals, continued to be affected by their exposure to the public sector. Our overall exposure to the Dutch public sector remained stable at 13% of revenue (Q3 2010: 16%), following a decline of 8% YoY. Revenue growth in the private sector reached 6%.

Price pressure was stable, while we see ongoing high growth in lower margin activities which is not yet offset by growth in the administrative and Professionals segment. As a result, the Dutch EBITA margin reached 6.4% compared to 6.8% in Q3 2010.

Strong performance was maintained and we continued to gain market share. Revenue increased organically by 9%, which was stable throughout the quarter and compared to 16% in the previous quarter. Automotive, Manufacturing continued to be the leading growth sectors, while Construction and Logistics were somewhat lagging. Inhouse services grew solidly by 54%. Transfers of clients from Staffing to Inhouse continued, while we accelerated growth at existing clients. In Inhouse we now operate from over 100 locations. Professionals grew by 10%. Growth was led by Healthcare and Engineering, whereas Finance was somewhat under pressure. Perm fees were up 23% organically. The negative impact on the French gross margin from the changes in the subsidy system regarding low wage labor was in line with expectations and did no longer have a significant impact on the French gross margin. In Q3 2011 we added 95 FTEs, predominantly in Staffing and Inhouse services. In Professionals we gradually expanded the number of FTEs as part of the growth accelerator. The EBITA margin reached 3.6% against a strong comparison base. As announced earlier we have started reviewing client profitability. This did not have an effect yet but it could, going forward, gradually impact growth and contribute to profitability.

Against a strong comparison base and a somewhat tighter labor market, revenue grew 10% organically. Revenue per working day was stable throughout the quarter and continued at the same level as in the previous quarter. Revenue growth per working day in September was 6%. The combined Staffing and Inhouse business performed slightly behind the market with volume growth slowing to a low single digit rate towards the end of the quarter. The Industrial segments continued to drive growth. In Professionals, the IT segment maintained its strong momentum. Engineering showed moderate growth. In Q3 2011 we added 80 FTEs, mainly in Staffing and Inhouse. The combined EBITA margin increased to 7.4% based on strong operating leverage and good cost control.

Revenue increased by 3% organically, or 4% when adjusted for working days. Growth of the combined Staffing and Inhouse business performed slightly lower than the market as we remained strict on client selection criteria. We continued to focus on growth in the white collar segment resulting in market outperformance in this segment. Growth of Professionals was at the same level as in the previous quarter. Revenue from non-staffing services, such as service checks and HR Solutions, showed low single digit growth. In Q3, 2011 we added 70 FTEs mainly in our Staffing businesses. The EBITA margin increased to 4.3%.

On an organic basis revenue increased by 2%, in line with the previous quarter. Our overall exposure to the public sector came down to 17% of revenue compared to 22% in Q2 2011, partly driven by the seasonal pattern in our Education business. The demand in Construction and public sector administration remained challenging, while the decline in Healthcare and Education seemed to have stabilized against an easier comparison base. The decline in the public sector of 25% was partly offset by growth in private sector revenue of 11%, primarily driven by continued strong growth in our combined staffing and inhouse business, of which Inhouse services grew by 25%. Perm fees were 8% below last year, mainly caused by lower demand in the City oriented businesses. Strong performance was maintained in Engineering and graduate recruitment. Based on the aforementioned mix effects, the EBITA margin amounted to 0.2%, compared to 1.2% in Q3 2010.

Economic circumstances remained challenging in this region. Revenue grew by 3% organically, compared to 5% in the previous quarter. The Iberian region exited the quarter with flat revenue versus last year. In Spain the combined staffing and inhouse business achieved low single digit growth, predominantly driven by solid performance through Inhouse services. The Portuguese business grew by 5% compared to 7% in the previous quarter. Strong operating leverage and good cost control in both countries resulted in an EBITA margin of 3.3%, compared to 2.4% in Q3 2010.

The other European countries maintained solid double-digit organic growth, with growth in perm fees of 30%. In Italy, revenue was up 21% organically, ahead of the market. The Swiss business continued to show low double-digit growth. Our Polish and Scandinavian businesses grew solidly, although somewhat slower than in the previous quarter. In Turkey, Hungary and the Czech Republic strong growth was maintained, fuelled by perm fees. In Greece profitability improved. For the region the EBITA margin was 3.6% in line with last year.

The results of North America include Randstad and SFN as of September 2, 2011 when the transaction was closed.

Revenue increased by 25% or 10% organically, compared to 14% in the previous quarter. Perm fees in North America were up 30% organically. SFN Group contributed € 118 million of revenue in the period as of September 2, 2011. Our combined US staffing and inhouse business grew by 2% organically, against a strong comparison base, while growth was also impacted by our focus on client profitability. The revenue mix strengthened further as we maintained focused on expansion in the administrative segment and permanent placements. Inhouse services continued to grow at 16%. Organic revenue growth in our US professionals businesses was 15%, and held up well compared to the previous quarter. IT maintained solid double-digit growth, while in Engineering and Healthcare growth accelerated. Finance and Accounting was somewhat under pressure. The rebranding of our US Professionals businesses is on track and in line with expectations. We continued to add FTEs in our US businesses, mainly in US Professionals. Canada continued its solid performance in both staffing and professionals. The EBITA margin for the region improved to 4.7%, compared to 3.8% in Q3 2010, based on a strong operating leverage.

Performance of SFN Group in Q3 2011 (pro forma basis)

²

To better reflect the performance of SFN this section includes the full third quarter results of SFN, whereas only the results of September 2011 were consolidated.

By combining with SFN Group, Randstad becomes the third largest HR Services provider in North America with leading positions across various segments. The performance of SFN in the third quarter was in line with expectations. Overall revenue was 1% below last year, a trend which is similar to Q2 2011. In line with SFN's strategy growth was impacted by the stronger focus on client profitability. Combined with accelerating growth in higher margin activities, such as permanent placements, the gross margin improved significantly. Combined with strong cost control, the EBITA margin increased to 3.8% compared to 2.7% in Q3 2010.

Staffing revenue (52% of SFN Group) was 1% lower than last year. This gradual slow down is in line with the trend in the previous quarter. The focus on gross margin improvements and tight cost control resulted in good profitability improvements. The EBITA margin of the combined Staffing business reached 2.1% compared to 1.7% in the previous year. Professionals revenue (39% of SFN Group) increased by 2%. IT continued to grow at a low single digit rate, while Finance showed 8% growth. Both segments benefited from strong growth in perm fees. The combined Professionals business achieved an EBITA margin of 5.7% compared to 3.6% in Q3 2010. HR Solutions revenue (9% of SFN Group) mainly comprises Recruitment Process Outsourcing, Managed Services Provider and Payrolling. In the RPO and MSP segments strong growth was maintained. The lower margin payrolling business was impacted by the termination of some large volume contracts by the end of 2010. As a result of these factors the EBITA margin for the HR Solutions business improved to 5.8% compared to 4.5% in Q3 2010.

Integration SFN

Following the announcement of the acquisition of SFN Group on July 21, 2011 we were able to close the transaction quickly thereafter on September 2, 2011. This enabled us to start the integration process of SFN Group, which is well on track. In Q3 2011 we incurred € 4.6 million as integration costs.

Synergies SFN

We remain committed to achieve annual pre-tax cost synergies of at least $30 million and recurring annual tax savings of $10 million. In September we realized $ 0.8 million of cost synergies, which are mainly related to stock compensation plans and costs that were related the US listing. Integration costs to capture the cost synergies will amount to around 80% of the cost synergies.

Revenue of our combined Japanese business was just below last year. The industrial segment showed strong growth, mainly as a result of activities associated with the recovery from the earthquake earlier this year, while the administrative segment remained somewhat behind. The rebranding is Japan is well on track. Revenue of our combined business in Australia and New Zealand grew by a low single digit rate and improved throughout the quarter. Growth in Professionals remained strong and FTEs were added as part of the Professionals growth accelerator. The Staffing business was somewhat behind. India and China showed solid growth, in line with previous quarters. In Latin America, the performance of the Argentinean business further strengthened, like in Mexico. Brazilian and Chilean revenues were under pressure. For the combined region, the EBITA margin reached 0.9% compared to 0.5% in Q3 2010. The EBITA in Q3 2010 was impacted by acquisition-related expenses of about € 2 million related to the FujiStaff transaction.

Performance by revenue category - underlying

¹

Staffing revenue grew 9%, or 5% organically, down from 10%3 in the previous quarter. Growth in the major countries slowed sequentially, partly impacted by the continuing transfer of clients from Staffing to Inhouse, like in France and Spain. For example, in the US and Belgium we have also exited some low margin contracts. Growth in Germany and France held up reasonably well at around 9% and 6% respectively. Belgium slowed to 3% partly driven by low demand over the summer. Overall demand is still largely driven by industrial clients, while growth in the administrative segments remained moderate. As a result, the EBITA margin reached 4.2%.

Inhouse services, mainly focused on industrial and logistical clients, continued to show double digit growth against a strong comparison base. Organic growth reached 18% compared to 29% in the previous quarter. Besides the ongoing transfers from Staffing, we accelerated growth at existing clients, and continued to add new clients like in the UK and US. The EBITA margin reached 4.7%.

Professionals grew 10%, or 7% organically, which is in line with the previous quarter. The US professionals business showed strong growth in IT, Engineering and Healthcare. Canada performed solidly, driven by IT and Engineering. Overall growth in the North American region was 15% compared to 17% in the previous quarter. Our French business grew steadily, especially in permanent placements. Growth in Australia remained strong and we expect further investments to benefit from good market conditions. The Dutch professionals businesses still declined although the impact from low demand in the public sector became smaller. The decline in the UK business accelerated mainly as a result of the slowdown in the City oriented business and continued low demand in the public sector business. In both countries, growth outside the public sector strengthened. The EBITA margin reached 4.7% equal to last year. Profitability improvements are somewhat hampered by low contributions from the Netherlands, UK while in other countries strong performance was maintained.

Other information

Professionals growth accelerator

In Q1 2011 we launched the Professionals growth accelerator plan. In addition to regular expansion we aim to recruit over 500 consultants in various countries over the next two years based on a gradual approach and our field steering model. In Q3 2011 we added 88 FTEs and the total net investment amounted to € 1.4 million. Since it started we have added 178 FTE and the total net investment amounted to € 2.2 million. We will continue with this program and benefit from productivity improvements, which have been ahead of expectations so far.

M&A

In October we agreed to sell the business of Compliance Inc., a small US based company. Compliance is a legal project outsourcing company that supports law firms and corporate legal departments by supplementing their full-time staff. This business no longer fits with our core expertise for which reason we decided to divest its business. This transaction does not have a material impact on Randstad's earnings nor on its financial position.

Financing structure

After signing a commitment letter in July with seven lead banks, we have completed the general syndication process and increased the commitment for the new revolving syndicated credit facility to € 1,300 million. The new facility, which is made available by a total of 13 banks, has a forward start structure and will only become available once the current facility, which runs until May 2013, has been canceled in full. Financial covenants are comparable to the existing facility.

Randstad has decided to refinance early to benefit from favorable credit market circumstances and ensure financing until at least September 2016.

Outlook

Organic growth per working day was just below 7% in September reflecting a gradual slow down in the third quarter. This trend has continued into the fourth quarter. We will continue to focus on client profitability which could gradually impact growth going forward.

The fourth quarter will see a full quarter of results from SFN Group. Synergies will gradually start to materialize in line with the progress of the integration and we anticipate a similar level of integration costs as in Q3 2011.

Apart from the consolidation of SFN and our Professionals Growth Accelerator program, we expect that underlying operating expenses will be broadly in line with Q3 2011. We will continue to invest in those regions where growth continues or even accelerates, while we will further streamline the cost base elsewhere.

We will remain focused on strong cash flow generation, and as a result, we anticipate the leverage ratio to end below 2.0 by the end of the year.

Financial calendar
Analyst & Investor Days	December 1 and 2, 2011
Publication fourth quarter and annual results 2011	February 16, 2012
Publication first quarter results 2012	April 26, 2012
Publication second quarter and half year results	July 26, 2012

Analyst conference call

Today, at 11.00 CET Randstad will host an analyst conference call. The dial-in number is +31 (0) 20 796 52 13 or +44 (0) 208 817 93 01 for international participants. The confirmation code is: 5849310. You can listen the analyst conference through real-time video webcast. A replay of the presentation and the Q & A will also be available on our website as of today 18.00 CET. The link is:http://www.ir.randstad.com/presentations.cfm

Disclaimer

Certain statements in this document concern prognoses about the future financial condition, risks, investment plans and the results of operations of Randstad Holding and its operating companies as well as certain plans and objectives. Obviously, such prognoses involve risks and a degree of uncertainty since they concern future events and depend on circumstances that will apply then. Many factors may contribute to the actual results and developments differing from the prognoses made in this document. These factors include, but are not limited to, general economic conditions, a shortage on the job market, changes in the demand for (flexible) personnel, changes in legislation (particularly in relation to employment, staffing and tax laws), the role of industry regulators, future currency and interest fluctuations, our ability to identify relevant risks and mitigate their impact, the availability of credit on financially acceptable terms, the successful completion of company acquisitions and their subsequent integration, successful disposals of companies and the rate of technological developments. These prognoses therefore apply only on the date on which this document was compiled. The results as presented in this press release, including the interim financial statements, are unaudited.

Randstad profile

Randstad specializes in solutions in the field of flexible work and human resources services. Our services range from regular temporary staffing and permanent placement to inhouse, professionals, search & selection, and HR Solutions. The Randstad Group is one of the leading HR services providers in the world with top three positions in Argentina, Belgium & Luxembourg, Canada, Chile, France, Germany, Greece, India, Mexico, the Netherlands, Poland, Portugal, Spain, Switzerland, the UK, and the United States as well as major positions in Australia and Japan. End 2010 Randstad had approximately 26,000 corporate employees and close to 4,200 branches and inhouse locations in 43 countries around the world.

Randstad generated a revenue of € 14.2 billion in 2010. Randstad was founded in 1960 and is headquartered in Diemen, the Netherlands. Randstad Holding nv is listed on the NYSE Euronext Amsterdam, where options for stocks in Randstad are also traded. For more information seewww.randstad.com

Interim financial statements

Underlying	Page
Consolidated income statement	15
Information by geographical area	16
Information by revenue category	18
Actuals	Page
Consolidated income statement	19
Information by geographical area	20
Information by revenue category	21
Consolidated balance sheet	22
Consolidated statement of cash flows	23
Consolidated statement of comprehensive income	24
Consolidated statement of changes in equity	24
Breakdown operating expenses	25
Depreciation and amortization/impairment software	25
Earnings per ordinary share	25
Core data balance sheet	25
Notes to the consolidated interim financial statements	26

Notes to the consolidated interim financial statements

Reporting entity

Randstad Holding nv is a public limited liability company incorporated and domiciled in the Netherlands and listed on Euronext Amsterdam.

The consolidated interim financial statements of Randstad Holding nv as at and for the three and nine months' period ended September 30, 2011 include the company and its subsidiaries (together called the 'Group').

Significant accounting policies

These consolidated interim financial statements have been prepared in accordance with International Financial Reporting Standards and its interpretations issued by the International Accounting Standards Board (IASB), as adopted by the European Union (hereafter: IFRS).

The accounting policies applied by the Group in these consolidated interim financial statements are unchanged compared to those applied by the Group in its consolidated financial statements as at and for the year ended December 31, 2010.

Basis of presentation

These consolidated interim financial statements are condensed and prepared in accordance with (IFRS) IAS 34 'Interim Financial Reporting'; they do not include all of the information required for full (annual) financial statements, and should be read in conjunction with the consolidated financial statements of the Group as at and for the year ended December 31, 2010.

The consolidated financial statements of the Group as at and for the year ended December 31, 2010 are available upon request at the Company's office or atwww.ir.randstad.com.

Estimates

The preparation of consolidated interim financial statements requires the Group to make certain judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

In preparing these consolidated interim financial statements, the significant judgments, estimates and assumptions, were the same as those applied to the consolidated financial statements as at and for the year ended December 31, 2010.

Seasonality

The Group's activities are impacted by seasonal patterns. The volume of transactions throughout the year fluctuates per quarter, dependent upon demand as well as variations in items such as the number of working days, public holidays and holiday periods. Historically, the Group usually generates its strongest revenue and profits in the second half of the year. Historically, in the second quarter cash flow is usually negative due to the timing of the payments of holiday allowances and dividend; cash flow tends to be the strongest in the second half of the year.

Effective tax rate

The effective tax rate for the nine months' period ended September 30, 2011 is 30.2% and is based on the estimated effective tax rate for the whole year 2011. Compared to the whole year 2010 (28.1%), the effective tax rate (before tax one-offs) is higher, which is mainly due to changes in the relative mix of results and a relatively lower share of tax-exempt income items.

Acquisition of Group companies and buy-out of non-controlling interests

The total cash out for acquisitions YTD Q3 2011 is € 564.6 million (Q3 only: € 549.3 million), which relates for € 548.3 million to the acquisition of the shares of SFN Group Inc (SFN) in the United States as per September 2, 2011 and the settlement in cash of share based payments arrangements SFN. SFN contributed € 118 million to the Group's revenue and € 7 million (excluding acquisition related one-offs and integration costs) to the Group's EBITA in Q3. If this acquisition had occurred on January 1, 2011 the contribution to revenue and EBITA would have been approximately € 1.1 billion and € 30 million respectively.

The remainder cash out for acquisitions YTD Q3 2011 of € 15,3 million (Q3 only: € 1,0 million) relates to the increase of our shareholding in our Brazilian company RHI from 51% to 100% in Q2 and to arrangements with regard to acquired group companies in preceding years. As these companies were already consolidated in full in 2010, no additional contribution to revenue and operating profit resulted from these acquisitions in 2011.

The assets and liabilities as well as the breakdown of the total amount of goodwill related to the acquisition of SFN, based on a provisional purchase price allocation, are specified below:

The total cash-out for acquisitions in Q3 of € 549.3 million relates to the acquisition of SFN (€ 548.3million) and to arrangements with regard to acquired group companies in preceding years (€ 1,0 million).

Disposal of Group companies

In Q1 2011 the Group disposed of a small business in Hong Kong leading to a cash inflow of € 1.9 million.

Shareholders' equity

The issued number of ordinary shares increased as follows:

Net debt position

The net debt position as of September 30, 2011 (€ 1,486.7 million) is € 587.4 million higher compared to December 31, 2010 (€ 899.3 million), which is mainly influenced by the positive cash flow from operations, the dividend payment in Q2 (€ 208.8 million), the acquisition of SFN in Q3 (€ 548.3 million) as well as the seasonality in cash flows.

Related-party transactions

There are no material changes in the nature, scope and (relative) scale in this reporting period compared to the disclosures in note 41 and 42 of the consolidated financial statements as at and for the year ended December 31, 2010.

Commitments

There are no material changes in the nature and scope compared to the disclosures in note 33 of the consolidated financial statements as at and for the year ended December 31, 2010, except for the acquisition of SFN, that reported in its consolidated financial statements approximately € 45 million (lease-) commitments as per end of 2010.

Event after balance sheet date

In October we agreed to sell the business of Compliance Inc., a small US based company. This transaction does not have a material impact on Randstad's earnings nor on its financial position.

For more information

Jan-Pieter van Winsen/Machteld Merens
Telephone
+31 (0)20 569 56 23

News Source : Continued growth in a challenging environment