EUR 850.00 For Business Accounts Only

Morningstar | The End is Not Nigh for Randstad

When looking at recruitment stocks we try to look beyond the temporary ups and downs to the longer-term outlook. While this is no different for global recruitment giant Randstad, given its dip in performance in the latter half of 2018 and the subsequent and material fall in the share price because of investor concerns about a near-term recession, quarterly changes have taken front and centre stage this time. We therefore believe that for our Q1 update, while the company is not out of danger yet, there were some improvements made quarter over quarter and concerns about a freefall have been exaggerated. Organic revenue growth improved to 0.5% from 0.3% in the fourth quarter of 2018, while EBITA margins were 10 basis points higher than at this time in 2018. Although this is some way off our full-year forecasts, the company is travelling in the right direction. We are therefore maintaining our EUR 61 fair value estimate and no-moat rating.

Geographically the two culprits in 2018 were Germany and France, which together generate about one quarter of group revenues. Fortunes were mixed for the two countries in the first quarter, with the declines in Germany worsening from minus 7% in the fourth quarter of 2018 to minus 10% in the first quarter of 2019. Meanwhile France saw a marked improvement, with revenues flat in the first quarter, from the minus 4% in the fourth quarter. Elsewhere the picture was less excitable, with the majority of regions still posting a reasonable level of growth. In North America, Randstad’s largest single region, it grew revenues organically by 2%, a similar result to 2018. While we remain vigilant when monitoring the near-term trends in the recruitment market, we believe fears of a 2019 recession are overblown. Despite the strong share price gains since the beginning of 2019, we still see material upside.