Growth was better again in June in almost all countries, which gives hope for the coming summer months. The Netherlands remains very difficult and we don’t see this changing in the remainder of 2011. For Germany, the 3rd quarter will be important as REBITA should improve and will be decisive for the FY German profits. Following the release, we will lower our estimates by mid to high single digit rates.
Details of the analyst meeting:
- Growth rates in June better than in 2Q11: Group 12% (vs. 9% in 2Q11), NL 3,5% (vs. 2%), Bel. 11% (vs. 6%), FR: 23% (vs.19%), : 14% (vs. 20%) and Spain 16% (vs.10%). Growth accelerated again in June while Manpower and Randstad both referred to decelerating growth, which is logic because of more difficult comps.
- Gross margin: will improve in 3Q vs. 2Q driven by i) more working days, ii) easing negative impact from the French subsidy system, iii) no deterioration in mix effects and iv) stable pricing. But as expected and in line with our and other analysts’ scenarios, CEO said that its earlier expectation of a higher gross margin in 2011 vs. 2010 won’t materialize.
- M&A: More small add-on acquisitions can be expected going forward. CEO has received a high amount of M&A files over the last weeks and expects M&A activity to rise further. No specific focus on countries, but they do prefer professional staffing.
- Germany: Less working days hit theGerman operations and management was also disappointed about this result. 2Q11 had € 0.5m REBITA with 60 working days. Given that each additional working day adds more than € 1m to REBITA and that 3Q11 has 6 more working days than 2Q11, REBITA should easily exceed € 6m in 3Q11 and 4Q11. The calculation of the € 21m provision is based on information on 1) social security claims and 2) claims from temps that worked under this CLA in that particular period.
- Netherlands: Dutch growth rates should only improve slightly in the coming months, but no more restructurings will follow.
- Belgium: growth reached 6% in 1Q11, significantly lower than the Federgon figures. There are 2 reasons: 1) higher share in specialist and professional staffing and 2) USG walksaway from low margin contracts as they are very focused on profitability in Belgium.