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Investing.com -- Randstad (AS:RAND) shares dropped over 3% on Wednesday after the staffing firm reported fourth-quarter results that showed continued weakness in organic growth and a slight miss on gross margin.
While cost-cutting measures helped offset some of the pressure, investors reacted negatively to the company’s outlook, which signaled ongoing challenges in the labor market.
Randstad’s organic revenue declined 5.5% in the quarter, in line with analyst expectations, though sales received a slight boost from FX.
Gross margin came in at 18.8%, missing the company’s forecast of a modest sequential improvement from the 19.0% reported in the third quarter.
The decline was driven by weak permanent placements, negative mix effects across both geography and sector, and higher idle time. Additionally, the Monster disposal accounted for 60bps of the margin contraction.
Despite the gross margin pressure, Randstad’s adjusted EBITA came in at €200 million, about 3% above consensus. However, exceptional costs were significantly higher than expected at €79 million, up sharply from €17 million in Q3 and a 75% increase year-over-year.
Interest expenses also surged to €165 million from just €22 million last year, driven by a €139 million fair value adjustment on loans and financial commitments related to CareerBuilder and Monster.
This led to adjusted net income of €40 million, down 84% year-over-year and approximately 69% below consensus estimates.
Free cash flow declined by 70% YoY to €87 million due to lower EBITA, elevated one-off costs, and a negative working capital effect.
Regionally, North America’s organic revenue fell 7%, slightly better than anticipated. Northern Europe declined 7%, with Germany down 8%, the Netherlands 10%, and Belgium/Luxembourg flat. Southern Europe, the UK, and Latin America proved more resilient with a 4% decline.
Asia Pacific fell 3%, with Australia and New Zealand down 8%, India growing 13%, and Japan remaining flat.
Randstad expects first-quarter organic growth to remain stable, with gross margin projected to improve slightly. Operating expenses are expected to decline modestly, though the quarter will have 0.8 fewer working days.
Barclays (LON:BARC) analysts estimate that the recently completed Zorgwerk acquisition, with its 40-50% gross margin, could contribute 10-15bps to overall margins.
However, achieving the company’s implied 30bps margin improvement remains unlikely, keeping expectations for gross margin at around 19.0%-19.1%.
Company-compiled consensus for full-year 2025 projects a working day-adjusted organic growth of 1.8%, a gross margin of 19.4%, and an EBITA margin of 3.4%. However, Barclays analysts believe Randstad’s Q1 guidance could result in a 5-10% downside risk to EBITA consensus.
While the company has emphasized stabilizing volumes in early 2025, the elevated costs and continued margin pressures suggest further headwinds for profitability.