Morningstar | RAND Updated Forecasts and Estimates from 07 Aug 2018
No-moat recruitment giant Randstad provided a solid second-quarter update, with organic revenue growth of 5% and the EBITA margin up 20 basis points year over year to 4.7%. As these numbers were broadly in line with our expectations for the full year, we do not expect to make any material changes to our forecasts or to our EUR 61 fair value estimate. We believe the shares offer an attractive upside opportunity from here.Geographically, performance was somewhat mixed in the second quarter. Randstad’s largest market, North America, saw a small pickup in growth to 2% in the second quarter, albeit with some loss in margin, while France was affected negatively by strikes, causing a material fall in both organic revenue growth and margins over the period. In other regions, such as Germany, Italy, Iberia, and the Netherlands, growth remained robust with flat to increasing margins over the period. Higher-margin businesses such as in-house services, where Randstad operates from the client’s premises and offers a more tailored service, and permanent placement both saw high growth over the period, with revenue increasing by 14%. These higher-margin businesses are becoming an increasingly large part of the pie, with permanent placement generating over 10% of gross profit for the group in the second quarter.
In the longer term, we believe Randstad, as one of the top three in global recruitment, is well positioned to benefit from numerous structural trends in the recruitment space. We also believe that a structural shift internally towards permanent placement, the professional market, and career transitioning services should ultimately reduce the volatility of the company’s revenue stream.
Randstad is a global staffing and recruitment company, providing various solutions in the human resources (HR) services space. Co.'s services include regular temporary staffing and permanent placement of candidates. In addition, Co. provides several other HR solutions, such as Recruitment Process Outsourcing (RPO), Managed Services Programs (MSP), payroll services, and outplacement. Co. provides four distinct service concepts: Staffing, Inhouse Services, Professionals and HR Solutions.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.
Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.
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