2nd UPDATE: Randstad Earnings Rebound As Recovery Picks Up

Dutch staffing group Randstad Holding NV (RAND.AE) Wednesday reported its first-quarter earnings swung back into the black as revenue showed signs of improvement and it said it will boost spending on marketing to benefit from a recovery in all of its markets.

Randstad, the second-largest staffing agency by sales behind Switzerland's Adecco SA (ADEN.VX), said it sees a broad-based recovery in all of its regions and segments and that near-term prospects haven't looked so good for a long time.

Randstad's upbeat outlook echoed comments by U.S. peer Manpower Inc. (MAN), which said last week that the recovery will continue into the second quarter as companies need more temporary staff to respond to increased demand.

It indicates that global staffing markets may have put the worst behind them after suffering a deep slump in the past year as companies cut back on hiring or laid off staff in response to the downturn.

While warning that the recovery might not be sustainable, Randstad said it provides optimism, and it announced it will raise spending on marketing this year to benefit from the uptick.

Demand for temporary staff is likely to stay strong as companies, still recovering from the downturn, will be reluctant to hire permanent workers, Chief Executive Ben Noteboom said. "The harder the hit, the longer the trauma will last," he said.

In the first quarter, Randstad's revenue trend improved, with the rate swinging from a contraction of 5% in January to an increase of 4% in March. Some markets did better than others. Randstad recorded growth in the manufacturing and automotive industries in the U.S, Germany and France. However, in the Netherlands, where Randstad generates about one-fifth of total revenue, sales were still down due to the late cyclical nature of the country's economy. Nevertheless, Randstad said it also expects a return to growth in its key home market.

"Staffing activity is picking up and the recovery is gaining momentum," said KBC Securities analyst Margo Joris in a note to investors. Joris added that Randstad's top-line was a positive surprise and noted that, for the first time since the beginning of the downturn, the company recorded sales growth in North America, Germany and France, which is "psychologically important." Joris upgraded the stock to buy from hold.

Randstad shares Wednesday gave up early gains amid a wider market slump. At 1042 GMT, the stock traded down 0.6% at EUR40.02, while the AEX market in Amsterdam traded down 1.3%.

Diemen-based Randstad posted net profit of EUR20 million in the first quarter of 2010 from a net loss of EUR54.2 million. The bottom line benefited from a 20% drop in operating expenses to EUR499.6 million. Revenue fell 1% to EUR3.04 billion from EUR3.1 billion, above analysts' forecasts of EUR3 billion.

Earnings before interest tax and amortization, or Ebita excluding one-off items, rose 53% to EUR75.4 million, beating analysts' expectations of EUR71.5 million.

In an effort to cope with the slump, Randstad has been cutting costs since early 2008 and was able to realize additional savings through the integration of Vedior, a Dutch rival it acquired that year. Cost reductions were accelerated as the recession started to gain pace, with Randstad cutting branches and personnel.

-By Maarten van Tartwijk, Dow Jones Newswires; +31 20 571 5201; maarten.vantartwijk@dowjones.com

Randstad NV (EU:RAND)
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