financial strategy Robert Jan van de Kraats, CFO Capital Markets Day London November 17 th 2015

Transcription

1 financial strategy Robert Jan van de Kraats, CFO Capital Markets Day London November 17 th 2015

2 disclaimer & definitions Certain statements in this document concern prognoses about the future financial condition, risks, investment plans, productivity and the results of operations of Randstad Holding and its operating companies as well as certain trends, 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, achievement of cost savings, changes in the business mix, 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 EBITA: operating profit before amortization and impairment acquisition-related intangible assets and goodwill, badwill, integration costs and one-offs. organic growth is measured excluding the impact of currency effects, acquisitions, disposals and reclassifications. diluted EPS is measured before amortization and impairment acquisition-related intangible assets and goodwill, badwill, integration costs and one-offs. 2

3 agenda current trading funnel update where do we stand? capital allocation/ dividend policy update 3

4 current trading 7.7% revenue growth in October (vs. 5.7% in September) Q3 revenue growth was 5.4% Gross profit growth in October was 8.4% (+5.8% in Q3) Perm fees up 9% (vs. 13% in Q3) volume trend in November so far appears to be in line with October North America +5% (vs. +4% in Q3 and Sept) US business up 6% (+5% in Q3) European countries up 8% (vs. +5% in Q3) France +8% (vs. 3% in Q3) Netherlands +10%, in line with Q3 Belgium +10% (vs. +1% in Q3) Iberia +14% (vs. +8% in Q3) Italy +26% (vs. +20% in Q3) Germany +2% in line with Q3 Q4: minor (sequential) increase to SG&A as per outlook 4

5 agenda current trading funnel update where do we stand? capital allocation/ dividend policy update 5

6 targets within reach on track, more to come growth & activities +14% YTD, productivity (GP/FTE) +4% YTD on track, though 8Qs of low growth Perm/SME double-digit, competitive market L4Q15 at 4.4% 6

7 organic growth in a historical context topline growth 30% 20% 8Q's of lowmid single digit growth 10% 0% 1Q02 2Q03 3Q04 4Q05 1Q07 2Q08 3Q09 4Q10 1Q12 2Q13 3Q14-10% -20% -30% -40% consistent mid-single digit topline growth USA above peak and still growing Europe still ~20% below peak Opportunity in EM remains 7

8 strong relative performance topline growth 10,0% USA* 15,0% The Netherlands 5,0% 10,0% 5,0% 0,0% 0,0% -5,0% -5,0% -10,0% Randstad Market (ASA) Q1'13 Q2'13 Q3'13 Q4'13 Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 Q3'15-10,0% Randstad Market (ABU) Q1'13 Q2'13 Q3'13 Q4'13 Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 Q3'15 5,0% France 0,0% -5,0% -10,0% -15,0% Randstad Market (Prism) Q1'13 Q2'13 Q3'13 Q4'13 Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 Q3'15 8

9 field productivity addresses largest component of our operating expenses ABFS OPEX FY ~40% accommodation, IT, marketing & general costs PE HO staff ~60% PE field staff ABFS management layers, span of control, support staff ratio further centralization of sourcing and delivery models 2.5bn 9

10 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 what has ABFS brought us so far? productivity trend YOY growth for GP & PE field ABFS 10% 8% 6% 4% 2% 0% -2% -4% -6% -8% Gross Profit Personnel expenses 10

11 activity growth vs LY conversion of activities growth in commercial activities vs. productivity (GP/FTE Field) ABFS conversions activities OPCO s staffing & professionals activity growth vs productivity growth YTD 160% 150% 140% 130% 120% 110% 100% 90% 80% 70% 90% 95% 100% 105% 110% 115% GP/FTE field growth vs LY activity levels up to +14% YTD (2014 >30%), productivity (GP/FTE) up 4% 11

12 group US staffing UK AUS China perm: a major opportunity perm as % of GP 100% embryonic/developing markets business mix 90% 80% 70% 60% 50% primarily established temp markets 40% 30% 20% 10% 0% 2 avg growth competitors 1 YTD perm growth 13% 15% 16% In 2014 perm made up 10.0% (Q3 15; 10.5% or 12.9% Inc. RPO) of group GP (~12% in 2007) We have the potential to double in established markets Strategic focus paying off as we outgrow our peer group average 1 revenue includes perm + RPO 2 Competitors; Page group, Hays, Adecco, Manpower & Robert Half 12

13 perm growing double-digit business mix 120% 100% 80% 60% 40% 20% 0% France The Netherlands Germany Iberia % of GP growth ( *) 13

14 60-70M cost savings in cost ~ 50M realized so far (annualized) mainly in HO/BO functions OPEX FY ~40% accommodation, IT, marketing & general costs size and location of branches digitization procurement PE HO staff internal HO benchmark sustainable reductions span control and field support ~60% PE field staff 2.5bn 14

15 next steps are taken... cost IT costs (~10% of SG&A) should come down 20% over time OPEX FY ~40% accommodation, IT, marketing & general costs create global IT infrastructure SSC utilize purchasing power in generic IT (telco, networks and hardware) PE HO staff increase in business systems which drive GP ~60% PE field staff benchmarking continues Support function benchmark continues 2.5bn 15

16 agenda current trading funnel update where do we stand? capital allocation/ dividend policy update 16

17 solid free cash flow & conservative leverage ratio strategic target 800 3, , , , ,0 0, Free cash flow ( M) Leverage Ratio 17

18 capital allocation priorities invest FTE in growth markets 1 investments in organic growth invest in tech / innovation strategic M&A not likely 2 M&A activity bolt on (supplement current geographical mix, strengthen professionals optional dividend based on current leverage ratio of dividend payout of 40-50% of adjusted EPS 4 share buybacks anti-dilution measures when financial position allows for not being considered currently 5 special dividend potentially when net cash for a longer period 18

19 dividend policy proposal to pay full cash dividend for year 2015 dividend policy since 2013: payout of 40-50% of adjusted EPS optional dividend: leverage ratio < 2.0x: optional dividend leverage ratio < 2.5x: optional dividend with premium on stock dividend leverage ratio > 2.5x: stock dividend anti-dilution measures when financial position allows for it: performance share plans optional dividend dividend policy : 1.25 cash per ordinary share payout ratio between 30% and 60% of adjusted EPS (amortization, etc) financial position must allow for it dividend policy until 2006: 40% of net income (basic EPS), cash only 19

20 key criteria when considering an acquisition randstad perspective 1 strengthens our strategic position 2 provides significant value creation 3 manageability create base for growth in existing markets (support global clients, high growth markets) professionals is the preferred growth segment (profitability and market growth) increases our market share ( Big is beautiful, density of network is critical) create an entry point into new markets through diversification acquire capabilities in outsourcing/sow space minimum size of 100M revenue (or at least 80 FTE s when in small markets) DCF valuation for entire business cycle (different scenarios to be considered); Considerable cost synergies give best safety net in worst case scenario cost synergies identified and valued (including the costs to realize and possible loss of revenue) tax and revenue synergies to be treated separately from valuation EVA positive within 3 years, including post-deal tracking agreed price negotiation framework before first indicative offer management selected and approved integration plan prior to closing the transaction we have sufficient understanding of the target and its business environment (Due diligence with the involvement of all disciplines and business people) OPCO concept needs to be proven prior considering local acquisitions OPCO management able to deal with acquisition and integration and the target has a good cultural fit and strong management 20

21 aiming for leading positions randstad market position US has largest HR services industry worldwide 2014 USA Japan United Kingdom Germany France Netherlands Australia Belgium Canada Italy Brazil Switzerland Iberia India #3 #6 top 5 #1 #3 #1 #6 #1 #1 top 5 top 10 #3 #1 # source: various staffing associations et al., Randstad estimates 21

22 M&A: easy to buy, difficult to make it successful challenging to manage emotions 22

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