Morningstar | Recruitment Giant Randstad Lurches Through 2Q
All eyes were on no-moat Randstad today, as the first of the large recruitment companies reported second-quarter results, after what has been a volatile nine months for the sector. An organic revenue decline of 1.7% may do nothing to assure investors fearing the effects of a possible global recession, with the direction of travel negative quarter over quarter. The only greenshoot is a margin improvement from the first quarter to 4.6%. While we expect to make adjustments to our 2019 forecasts on the back of these weak numbers, we do not expect to make any material changes to our longer-term forecasts, nor to our EUR 61 fair value estimate. We would be taking advantage of any weakness in the share price to accumulate a position.Geographically there were few bright spots, with performance in key regions deteriorating quarter over quarter, particularly in Northern Europe. In France and the entire Benelux region revenue declined between 2% and 4% year over year, while in Germany revenues declined by 15%, an acceleration from the 10% decline in the first quarter. These declines were mostly attributed to the current weakness in the automotive-related industries.
Of Randstad’s four divisions, professionals, which now generates 22% of group revenue, was the only one to see an organic revenue improvement, rising 3% year over year as structural demand remains high in this area. The company continues to shift its business model toward higher margin, less cyclical areas of recruitment, and even during difficult periods like this it has still managed to make market-share gains. This is however, scant consolation for investors witnessing what appears to be a deteriorating operating environment.
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.
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