glossary
operational glossary
Agency work
Agency work is a special form of temporary work, where generally the employer does not hire the employee directly on a contract with a limited duration, but through a private employment agency. The employee is mostly hired directly by the employment agency, mostly on a temporary basis but sometimes on a permanent contract. During the contract period the employee can be assigned to different user companies.
Aging population
The process in which the working population is shrinking due to an increasing number of people leaving the labor market because of their age.
Blue-collar worker
Within Staffing we typically divide the market in blue-collar and white-collar work. The distinguishing factor is difference in skill sets. Blue collar is predominantly geared towards industrial and technical job profiles.
Branches
Branches are physical office locations from which our consultants operate.
Branding
Randstad is known for building strong brands in the HR services sector. We believe strongly that branding is not just about advertising. It is also very much about the philosophy and identity of the company behind it. Behind the Randstad brand portfolio are a number of sophisticated systems that enable smart and efficient collaboration between marketing managers worldwide, without constraining creativity. All appearances of the Randstad brand, and the endorsed brands that have the same family characteristics, benefit from the support of a global, web-based marketing operations management system, incorporating state-of-the-art digital asset management. In short, this means that the marketing materials that are developed in one country are also available for the others, and that various marketing disciplines are spearheaded by experts from different countries, working together on a marketing intranet. Over the past years, the use of this system has lowered the non-visible part of our marketing costs considerably, freeing up resources for investments in a wider reach. Other benefits are increased speed to market, enhanced learning and more time to focus on local actions and adaptations where these make the difference.
Candidate
Other term for the people we put to work at our clients (temporary and permanent employees).
Ciett
Our worldwide industry federation, officially known as International Confederation of Private Employment Agencies.
Concepts
Our concepts represent the services we offer to our clients. We standardize the working processes per concept in order to easily copy and paste them across our operations around the world.
Consultant
A consultant is a front-office employee who is located at one of our outlets, directly meeting the demands of clients and candidates.
Deregulation
A driver of market growth we try to influence as much as possible is deregulation. While deregulation is a well-known and accepted term, we stress that we are not looking for a system without rules. In fact, we strive on the one hand for the lifting of unjustified restrictions in overregulated markets, and on the other for a fair and effective regulatory environment in markets where this has yet to be introduced.
Dividend policy
Our current dividend policy is to pay € 1.25 per ordinary share if the payout as percentage of adjusted earnings per share is between 30%-60% and our financial position allows for it. While we maintained our current dividend policy over 2012, we will offer shareholders a choice between shares and cash. As from 2013, we will introduce a new dividend policy which aims at a payout ratio of 40%-50% of adjusted earnings per share. We will also offer shareholders a choice between shares and cash dividend. At the same time we aim to install antidilution measures, such as share buy-backs, when our financial position allows for it.
Employees working/candidates/staffing employees
The number of temporary employees currently working for our clients.
Eurociett
Our European industry federation, officially known as European Confederation of Private Employment Agencies.
FTE
Full-time equivalent.
Field steering
Our field steering model is used to manage and direct performance across our businesses. By embedding operational performance tools at every level of our organization, the field steering model helps operational managers to take the right decisions, at the right time, and translate them into action. Managers receive up-to-date, accurate reports on a weekly basis, covering a range of key performance indicators. These data enable us to manage our units and teams in the field by adapting to changing client and market demands as they occur.
Inhouse location
An inhouse location is a branch that is located at a client’s premises, where our consultants work on-site dedicated to that specific client.
Managed Services Provider (MSP)
An MSP is a company that takes on primary responsibility for managing an organization's contingent workforce program. An MSP may or may not be independent of a staffing supplier.
Outlets
Outlets are the number of branches and inhouse locations.
Outplacement
Within outplacement we counsel and support organizations in situations when a contract between an employer and an employee has to be ended because of a strategic decision or other reasons. We assist employees in their search for a suitable job to make the transition as smooth as possible.
Outsourcing
Outsourcing is the sustainable transfer of several client activities with output responsibility both in the production/logistics and administrative environment.
Penetration rate
The penetration rate is the percentage of flexworkers in the total working population.
Permanent placement
Apart from attracting candidates for temporary jobs, we also service clients by recruiting candidates for permanent positions. The process involved is referred to as permanent placement.
Professionals
Professionals is the service we offer to our clients where we offer a broad and deep range of candidates with an academic or equivalent degree on a temporary or interim basis, as well as on a permanent placement basis through search & selection.
Recruitment
The process of hiring candidates for permanent positions.
Recruitment Process Outsourcing (RPO)
RPO is the transfer of operational responsibility for one or more recruiting functions or tasks, including recruitment administration, from the client to a service provider.
Secondment
Secondment refers to a Staffing variant where we are the legal employer of the temporary worker.
Specialties
Specialties are the specific market segments that dedicated units in our Staffing business focus on, such as for instance healthcare, transport, airports and call centers. The knowledge, experience and expertise we gain by focusing on these specialties translate into added value for clients, flexworkers and candidates.
Staff turnover
The number of employees leaving our company.
Staffing
A service we offer to our clients where we match candidates with temporary positions at our clients.
Temporary work
Compared to part-time work, an even more flexible form of labor is temporary work. This includes both agency workers and limited duration contract workers.
Two-tier board structure
A governance structure where the board is split between an Executive Board and a Supervisory Board. The Executive Board is responsible for developing, driving, executing and achieving the approved strategy and strategic targets, while the Supervisory Board acts in the interest of the company by supervising and advising the Executive Board.
Vendor Management System
A VMS is an internet-enabled contingent worker sourcing and billing application that enables a company to procure and manage a wide range of contingent workers and services in accordance with client business rules.
White-collar worker
Within Staffing we typically divide the market in blue-collar and white-collar work. The distinguishing factor is difference in skill sets. White collar is predominantly geared towards administrative job profiles.
financial glossary
Amortization (and impairment) of acquisition-related intangible assets
Upon acquisitions Randstad identifies intangible assets, such as customer relationships, brand names and candidate databases. These acquisition-related intangible assets are amortized over 1 to 8 years, on average, leading to an annual non-cash amortization charge which is included in operating profit.
Capital expenditures
Part of cash flow from investing activities. Amounts incurred for investments in property, plant and equipment (e.g., furniture, computer hardware) and software.
Cash flow from operating activities
EBITDA adjusted for changes in working capital, taxes on income, movements in other balance sheet positions, such as provisions, and certain other non-cash items.
Closing price
Share price of Randstad at the end of a certain trading day at Euronext where an ordinary share of Randstad is listed.
Cost of services
Expenses which are directly attributable to revenue. These costs mainly include expenses related to staffing employees, such as wages, social security charges and taxes.
DSO (Days Sales Outstanding, moving average)
This KPI represents the number of days before we are able to convert sales into cash (received from our customer). Formula: trade receivables (before provision doubtful debts) over the last 12 months divided over the revenue over the last 12 months, including value added tax multiplied by 365/12
Diluted earnings per ordinary share
Diluted earnings per ordinary share are calculated by adjusting the weighted average number of ordinary shares outstanding, assuming conversion of all dilutive potential ordinary shares. The dilutive potential ordinary shares arise from various share-based payment arrangements.
Dividend on ordinary shares
Part of net income attributable to holders of ordinary shares that will be distributed to holders for ordinary shares.
EBITA
Earnings Before Interest, Taxes and Amortization (and impairment of acquisition-related intangible assets and goodwill). It is basically the same as operating profit adjusted for amortization charges on acquisition-related intangible assets. This is the key performance indicator when looking at the profitability of our business.
EBITA margin
EBITA as percentage of revenue.
EBITDA
Earnings Before Interest, Taxes, Amortization and Depreciation. It is basically the same as operating profit adjusted for amortization and impairment charges on acquisition-related intangible assets and goodwill, depreciation, amortization and impairment of property, plant and equipment and software.
EPS (basic Earnings Per Share)
Net income attributable to holders of ordinary shares divided by the weighted average number of ordinary shares outstanding.
Enterprise value
Market capitalization plus net debt.
Free cash flow
Free cash flow is the sum of net cash flow from operating activities and investing activities adjusted for cash flows for acquisitions and disposals of subsidiaries and associates.
Gross margin
Gross profit as percentage of revenue.
Gross profit
Revenue minus cost of services.
IFRS
International Financial Reporting Standards.
Incremental conversion ratio
Additional EBITA in a year, when compared with the previous year, as percentage of additional gross profit in a year, when compared with the previous year. We target at an incremental conversion ratio of 50%, in case of growth in gross profit.
Leverage ratio
EBITDA divided by net debt. We aim at a leverage ratio of between 0 and 2x EBITDA which is commensurate to an investment grade rating. The syndicated loan documentation allows us a leverage ratio of 3.5x EBITDA.
Liquidity of shares
Total number of shares traded on Euronext.
Market capitalization
Total shares outstanding multiplied by the share price of Randstad.
Net debt
Cash and cash equivalents minus current borrowings and non-current borrowings.
Net finance costs
Net finance costs include net interest expenses in relation to our net debt position, foreign currency exchange results, net interest expenses due to passage of time, and other items.
Net income
Operating profit minus net finance costs, share of profit (or loss) of associates, and taxes on income.
Net income attributable to holders of ordinary shares
Net income adjusted for the dividend on preferred shares, as well as for results of non-controlling interests.
Net income attributable to holders of ordinary shares before amortization and impairment of acquisition-related intangible assets and goodwill
Net income attributable to holders of ordinary shares adjusted for amortization and impairment of acquisition-related intangible assets and goodwill after taxes.
Operating expenses
Operating expenses comprise personnel and accommodation expenses in relation to the activities at the outlets and the various headoffices, IT expenses, other general and administrative expenses, as well as the amortization and impairment of acquisition-related intangible assets and goodwill.
Operating expenses margin
Operating expenses as percentage of revenue.
Operating profit
Gross profit minus operating expenses.
Operating working capital
Trade and other receivables (excluding current part of held-to-maturity investments) minus trade and other payables. The level of working capital is related to the timing of the invoicing and payrolling processes (weekly or monthly). In addition, the payment terms we negotiate with clients and the effectiveness of our collection processes are equally important. Liabilities, such as social security charges, wage tax and value added tax are settled every month and in some countries on a quarterly basis. Payment terms are often determined by law and therefore difficult to influence.
Payout per ordinary share
Dividend on ordinary shares divided by net income attributable to holders of ordinary shares before amortization and impairment of acquisition-related intangible assets and goodwill and one-offs after taxes.
Productivity
We measure productivity in three ways: (1) number of temporary workers per staff member (EW/FTE), (2) gross profit per staff member (GP/FTE), and (3) gross profit in relation to personnel expenses (GP/PE).
Recovery ratio
The total year-on-year change in operating expenses as percentage of the decline in gross profit. We target at a recovery ratio of 50% in case gross profit declines.
Revenue
We distinguish three categories of revenue: revenue from temporary billings, permanent placement fees, and other revenue. 'Revenue from temporary billings' includes the amounts received or receivable for the services of temporary staff including the salary and salary-related employment costs of those staff. These revenues are generally based on the number of hours worked by the temporary staff. 'Revenue from permanent placements' includes the fee received or receivable for the services provided. The fee generally being calculated as percentage of the candidate’s remuneration package. The category 'other revenue' includes revenue for services such as payrolling, outplacement, outsourcing, managed service provider, consultancy, and related HR offerings.
Revenue categories
Revenue categories are service concept: Staffing (including HR Solutions), Inhouse Services, and Professionals.
Segment reporting
Segments are geographical areas and are reported in line internal reporting.
Share of profit/loss of associates
Associates are companies where Randstad Holding nv has significant influence, but no control, over the financial and operational policies, generally accompanying shareholding of between 20% and 50% of the voting rights. The share of profit or loss of the associate is presented in this line of the income statement.
Syndicated credit facility
As of December 31, 2012, Randstad has a € 1,620 million multicurrency syndicated revolving credit facility at its disposal. The facility will mature in May 2013. In July 2011, Randstad secured a new revolving multicurrency credit facility of € 1,300 million, with a forward start structure. In 2012, we added ICBC bank to this syndicate. The total facility of € 1,420 million will become available in 2013 and the majority will mature in 2017. In addition, we secured a Japanese syndicated credit facility with a group of Japanese banks. The facility amounts to 8 billion Japanese yen, or approximately € 70 million, and will mature in 2016. The loan documentation of all credit facilities allow a leverage ratio of 3.5 times EBITDA, although we aim for a leverage ratio of between 0 and 2, which is commensurate with an investment grade rating and is important for continuity.
Taxes on income
Taxes on income comprise current taxes and the realization of deferred taxes. Current taxes on income are the sum of taxes levied on the results before taxes, in the countries where those results were generated, based on local tax regulations and against tax rates of the applicable year. Tax-exempt income and expenses not deductible for tax purposes are taken into account in calculating taxes on income.
Velocity of shares
Velocity represents the average holding period of a share Randstad. It is measured as the total number of shares traded divided by the average number of shares outstanding.