highlights
The Vedior Group has been consolidated since May 16, 2008. This has a significant impact on results. We focus in our analysis of revenue, gross profit, operating expenses and EBITA on the pro forma comparison, as if the companies had been combined since January 1, 2007. Pro forma figures have been adjusted for integration costs, restructuring charges and one-offs. This best reflects underlying performance and the way the companies have been managed. Below EBITA, and regarding the balance sheet and cash flow, we focus on actual results to reflect the impact of the merger. |
The offer for all issued and outstanding shares of Vedior N.V. was settled on May 16th, after 93.5% of the shares had been tendered. The statutory legal merger became effective on July 1st, when the remaining 6.5% of the Vedior shares was converted into Randstad shares, providing Randstad with full ownership.
In 2002 we established a number of strategic targets:
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EBITA margin of 5-6% on average through the cycle; |
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continuous market share gains; |
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an increasing share of revenue from outside the Netherlands; |
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maintaining a sound financial position (leverage ratio, or net debt divided by EBITDA, of between 0 and 2). |
These targets were updated slightly in 2008 (click here for details), but the combination with Vedior certainly fitted the targets well. It has given Randstad a much better balance in terms of our service portfolio and our geographic presence. |
It has given Randstad a much better balance in terms of our service portfolio and our geographic presence. It has given us the scale and scope to capitalize on the key trends in the HR services industry. These range from profitable growth in the professionals segment, through new opportunities for growth in staffing in deregulating and emerging markets, to large global accounts looking for a broader portfolio of services from a smaller number of vendors. With the broadest service portfolio, we are now a global industry leader in the professionals segment. We have combined our highly regarded and leading service offerings in the traditional staffing segment in many countries, serving both large accounts and the SME sector even better. We now have leading positions in most of the key staffing markets worldwide, with additional growth potential from emerging staffing markets. By leveraging our scale and complementary strengths we are able to serve both our clients and candidates even better.
We regret that we had to sell Randstad Portugal in order to obtain clearance for the merger from the European Commission. Given the complexity of the transaction and the large number of countries involved however, we regard it as a great achievement that we were able to obtain the Commission’s approval in March 2008. After obtaining this clearance, the offer could officially be launched. In view of the deteriorating credit markets, it proved to be very helpful that the financing structure, including committed credit facilities and preset credit spreads, had been arranged well in advance, even before announcing the deal in December 2007.
Following the careful preparations that started in December 2007, the integration remained on schedule and progressed well throughout the year. Recurring pre-tax run rate cost synergies and additional tax saving synergies were even better than initially anticipated. The annual cost synergies are expected to amount to at least € 90 million and recurring cash tax savings will be around € 40 million, against original expectations of € 80 million and € 20 million respectively. The tax synergies are derived through the optimized use of the existing group financing centers in Brussels and Zurich. We achieved 65% of the annualized cost savings in 2008 (target was 40%), and the full annualized amount should be realized in 2009 (target was 75%). We realized € 15 million of the tax savings in 2008 and should realize the full amount in 2009.
Despite increasingly challenging market conditions, which required a € 500 million impairment on Vedior-related goodwill, we managed to achieve a pro forma EBITA margin of 4.9% (2007 reported: 6.0%, pro forma 5.1%). The pro forma share of non-Dutch revenue increased to 78% (2007 stand alone: 65%). We continued to achieve organic growth in our business in the first half of the year and managed to maintain strong margins and cash flow as market conditions deteriorated in the second half. Against the background of these conditions, we controlled costs where needed. While keeping our integration plans on track we participated in many more client proposals than before and grew our share of several key markets.
These efforts resulted in:
- total pro forma revenue of € 17,177.4 million, a decrease of 3% compared to € 17,625.2 million pro forma in 2007;
- pro forma EBITA of € 834.4 million, a decrease of 8% compared to € 907.1 million pro forma in 2007;
- net income of € 18.4 million, a decrease of 95% compared to € 384.9 million in 2007, mostly caused by the goodwill impairment mentioned earlier; and
- diluted EPS before one-offs of € 3.21, a decrease of 8% compared to € 3.47 in 2007.