USG PEOPLE Almere, 30 October 2015
THIRD-QUARTER 2015 HIGHLIGHTS
Revenue rose 9.7% to € 684.1 million (Q3 2014: € 623.8 million); revenue in September up 10.1%
Growth in revenue in the Netherlands accelerated to 12.1% (Q2 2015: 9.0%); revenue in the Netherlands in September up 15.6%
Expense ratio improved by 150 basis points to 14.0% (Q3 2014: 15.5%)
Underlying EBITA increased 28% to € 37.0 million (Q3 2014: € 28.8 million); underlying EBITA margin rose to 5.4% (Q3 2014: 4.6%)
Underlying net income rose to € 22.9 million (Q3 2014: € 17.7 million)
'In the third quarter we accelerated our growth once again,' said Rob Zandbergen, CEO of USG People. 'In the Netherlands, Belgium and France our focused organisation enabled us to gain market share. The growth in our services continued strong, both for large clients and in the small and medium-sized business (SME) segment. We were able to realise this growth amid lower expenses, resulting in a strong improvement in our profitability. Underlying EBITA rose by 28% to 5.4% of revenue. We expect the positive trend to continue in the final quarter of the year.'
KEY FIGURES
Underlying results 1) 3 months ended 30 September 9 months ended 30 Septemberin millions of euros | 2015 | 2014 | ∆ | 2015 | 2014 | ∆ |
Revenue | 684.1 | 623.8 | 9.7% | 1,873.4 | 1,749.9 | 7.1% |
Gross profit | 136.1 | 128.8 | 5.7% | 380.6 | 363.4 | 4.7% |
Operating expenses | 95.7 | 96.4 | -0.7% | 296.9 | 293.9 | 1.0% |
EBITDA | 40.4 | 32.4 | 24.7% | 83.7 | 69.5 | 20.4% |
EBITA | 37.0 | 28.8 | 28.4% | 73.3 | 58.9 | 24.4% |
Net income | 22.9 | 17.7 | 29.3% | 41.5 | 32.4 | 28.1% |
Gross margin | 19.9% | 20.7% | 20.3% | 20.8% | ||
Expense ratio | 14.0% | 15.5% | 15.8% | 16.8% | ||
EBITDA margin | 5.9% | 5.2% | 4.5% | 4.0% | ||
EBITA margin | 5.4% | 4.6% | 3.9% | 3.4% |
1) Underlying results have been adjusted for non-recurring costs.
NOTES TO THE THIRD-QUARTER 2015 RESULTS
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REVENUE
USG People saw revenue grow 9.7 % in the third quarter to € 684.1 million (Q3 2014: € 623.8 million). The number of working days was on average 0.5 higher than in the third quarter of last year, which had a positive impact of 0.8% on revenue growth. Revenue per working day increased 8.9%. Acquisitions had a positive effect on growth of 0.2%. In the Netherlands year-on-year revenue growth continued to accelerate, to 12.1% from 9.0% in the previous quarter. In Belgium revenue per working day accelerated to 11.1% (Q2 2015: 9.0%). In France revenue per working day rose by 5.0% while in Germany the increase was 1.0%. In the Netherlands, Belgium and France growth amply outpaced market growth, resulting in increased market share for USG People. Growth accelerated during the quarter, with revenue in September increasing 10.1% compared to last year. In the Netherlands revenue in September rose 15.6%, in Belgium 9.0%, in France 7.8% and in Germany 1.0%. There was a further acceleration of growth in the first weeks of October.
GROSS PROFIT
The underlying gross result rose 5.7% to € 136.1 million in the third quarter (Q3 2014: € 128.8 million). As a percentage of revenue the gross margin was 19.9% (Q3 2014: 20.7%).
The decline in the gross margin level was mainly due to mix effects. The first nine months of the year saw strong growth at Start People in the volume segment while conversely the third quarter of 2014 had seen a number of large volume contracts being phased out. The impact of this phasing out on last year's gross margin and the newly won volume contracts in 2015, along with additional strong growth at our existing volume clients, had a significant impact on the gross margin. In addition there was a negative impact as a result of a decline in sales at USG Restart, which has a gross margin of 96%, while high- margin activities, mainly recruitment and selection (gross margin of 100%), were terminated in countries outside the core countries.
Revenue from recruitment and selection equalled 0.7% of total group revenue in the third quarter of 2015 compared to 0.8% in the same quarter last year, with the decline mainly attributable to the aforementioned termination of activities. In the core countries revenue from recruitment and selection rose 3% compared to the same quarter last year.
The reported gross result included an additional charge of € 0.3 million as a result of the transfer of Vakcollege. OPERATING EXPENSES EXCLUDING DEPRECIATION AND AMORTISATION OF INTANGIBLE ASSETS
In the third quarter underlying operating expenses fell by € 0.7 million compared to a year earlier to € 95.7 million (Q3 2014:
€ 96.4 million). Compared to the previous quarter expenses fell by € 5.2 million, with the implementation of optimisation measures producing a saving of € 3.2 million and favourable seasonal effects accounting for the remaining € 2.0 million reduction.
On balance the expense ratio, before depreciation, improved by 150 basis points to 14.0% from 15.5% in the third quarter of last year. The reduction in the cost level is well within our target to lower the expense ratio by at least 60 basis points in 2015 compared to 2014 (from 16.6% in 2014 to no more than 16.0% in 2015). The underlying expense ratio for the first nine months of the year was 15.8%.
Reported expenses included both the underlying expenses and a non-recurring charge of € 1.6 million. This related to costs for organisational changes in connection with the previously announced optimisation programme, aimed at achieving annual cost savings of € 20 million in the Dutch organisation. The programme will be fully executed before the final quarter of 2016.
EBITA
in millions of euros | 2015 | 2014 |
Underlying EBITA | 37.0 | 28.8 |
Non-recurring gross profit | -0.3 | - |
Non-recurring operating expenses | -1.6 | -3.3 |
Non-recurring depreciation | -0.1 | -0.1 |
Reported EBITA | 35.0 | 25.4 |
Underlying EBITA rose 28% to € 37.0 million (Q3 2014: € 28.8 million). A € 7.3 million increase in the gross profit combined with a € 0.9 million decline in expenses (including depreciation) resulted in an incremental conversion rate of 112% (a rise of
€ 8.2 million in EBITA). The underlying EBITA margin increased to 5.4% compared to 4.6% in the same quarter last year. Reported EBITA including non-recurring effects amounted to € 35.0 million (Q3 2014: € 25.4 million).
AMORTISATION OF ACQUISITION-RELATED INTANGIBLE ASSETS
Amortisation of acquisition-related intangible assets amounted to € 0.6 million in the third quarter (Q3 2014: € 1.4 million).
FINANCING RESULTS
Financing charges amounted to € 2.9 million in the third quarter (Q3 2014: € 1.9 million). The increase in financing charges was due to costs in relation to the sale of receivables issued to the French government. Furthermore there was a non- recurring charge of € 0.7 million as a result of accelerated amortisation of recognised expenses related to the early redemption of the subordinated loan on 23 September. Excluding these effects interest charges fell by € 0.3 million compared to last year (from € 1.9 million to € 1.6 million).
INCOME TAX EXPENSE
Tax in the third quarter of 2015 was a negative € 7.4 million (Q3 2014: € -8.0 million). This figure includes a € 2.0 million charge related to business tax in France. Furthermore an amount of € 0.4 million was not recognised for taxation on losses. The termination of activities in Switzerland and the transfer of Vakcollege had a positive impact.
NET INCOME ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY
in millions of euros | 2015 | 2014 |
Underlying net income | 22.9 | 17.7 |
Non-recurring results | -2.0 | -3.4 |
Non-recurring amortisation finance costs | -0.7 | - |
Net income of divested activities | -0.2 | -0.5 |
Non-recurring income tax | 3.7 | -0.2 |
Reported net income | 23.7 | 13.6 |
Net income per share (in euros) | € 0.29 | € 0.17 |
Underlying net income rose to € 22.9 million from € 17.7 million in the third quarter of last year. Reported net income was
€ 23.7 million (Q3 2014: € 13.6 million).
BALANCE SHEET AND CASH FLOW
Working capital was € -58.9 million, € 34.7 million higher than in the third quarter of last year (Q3 2014: € -93.6 million). The increase in working capital was due to a reduction in factoring. The balance of trade receivables sold was reduced by
€ 38.6 million to € 88.2 million (Q3 2014: € 126.8 million). During the third quarter the factoring balance was lowered in order
to optimise financing expenses. Excluding the effect of lowering the factoring, working capital remained virtually stable compared to last year.
The operating cash flow in the third quarter was € 8.7 million (Q3 2014: € 23.0 million). Cash flow was lower due to the rise in working capital. Net debt was € 195.0 million (Q3 2014: € 189.3 million). The leverage ratio (net debt / 12-month underlying EBITDA) improved to 1.8 (Q3 2014: 1.9).
THIRD-QUARTER 2015 RESULTS BY COUNTRY
The Netherlands
In the Netherlands revenue rose 12.1% in the third quarter to € 286.8 million (Q3 2014: € 255.9 million). In the Netherlands there was no difference in the number of working days compared to the third quarter of last year.
The third quarter saw a further acceleration of growth. In the second quarter revenue rose 9.0%, in the third quarter 12.1% and in September growth equalled 15.6%. This growth was well above market growth, which equalled 10.8%. There were no public holidays during the quarter meaning that the growth figures give an undistorted picture of the growth trend.
Start People saw a further acceleration of revenue growth to 15.5% for the quarter (Q2 2015: 12.4%) with a growth rate in September of 23.0% compared to a year earlier. Unique also realised a strong improvement in growth. Revenue in the third quarter rose 8.8% (Q2 2015: 4.0%). Secretary Plus continued the exceptionally high level of growth during the third quarter, with revenue rising 37.9% (Q2 2015: 36.0%). USG Professionals was still registering a decline in revenue in the engineering segment (-9.4%); the other segments achieved growth of 12.7% on balance. Revenue at Online Business Solutions rose to
€ 1.9 million (Q3 2014: € 1.4 million).
The gross margin in the Netherlands was lower due to the strong growth at Start People, which saw a sharp increase in the volume segment while conversely the third quarter of last year saw a number of large volume contracts being phased out. This resulted in a change in the mix with more revenue in the volume segment, where pricing is lower. In addition there was a negative effect from a decline in revenue at USG Restart (part of Start People). This has a relatively great impact on the gross margin given that USG Restart realises a gross margin of 96%. This relates mainly to outplacement where demand tends to be lower in this stage of growth in the cycle.
Expenses continued to fall compared to last year. As a result underlying EBITA rose by 20% to € 16.5 million (Q3 2014:
€ 13.8 million). The EBITA margin rose to 5.8% (Q3 2014: 5.4%).
Belgium
In Belgium revenue rose 12.9% in the third quarter to € 187.2 million (Q3 2014: € 165.8 million). In Belgium there was one more working day than in the third quarter of last year, which had a positive effect of 180 basis points on growth. The growth in revenue per working day amounted to 11.1%.
Growth was higher than in the previous quarter (Q2 2015: 9.1%) and outpaced market growth, with sector association Federgon reporting market growth of 7% in July and 4% in August. No market figures have yet been released for September.
Start People saw growth in revenue per working day accelerate to 14.2% for the third quarter (Q2 2015: 9.4%). Unique realised revenue growth of 6.7%, in line with the previous quarter. Secretary Plus saw revenue per working day rise by 2.7
%, while USG Professionals achieved growth of 3.3%.
The gross margin was slightly higher compared with last year and the expense ratio improved.
Underlying EBITA rose to € 12.9 million from € 9.4 million in the third quarter of last year. The EBITA margin rose to 6.9% of revenue (Q3 2014: 5.7%).
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