Capital Markets Day 2015 · Welcome to the Randstad Capital Markets Day: Networking lunch with...

1

Capital Markets Day 2015

program

November 17, 2015 Capital Markets Day 2015 2

Tuesday, November 17 2015

1200 Welcome to the Randstad Capital Markets Day: Networking lunch with senior management

1300 Randstad Group strategy update Jacques van den Broek, CEO

1430 coffee break

1540 “Big Data” exploitation Christophe Montagnon, France CIO

1650 Wrap-up Jacques van den Broek, CEO

1800 End of event

1345 Financial strategy Robert Jan van de Kraats, CFO

1500 From staffing to integrated talent solutions Linda Galipeau, Executive Board member

1610 Trends in global clients and delivery models Chris Heutink, Executive Board member

1700 Drinks

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to watch the video currently being shown at our Capital Markets Day in London click on 'Randstad Videos'

then click on the first video 'The changing world - Randstad Capital Markets Day' you can watch it from this screen or you can open it on YouTube once the video is finished, please return to the tab 'Slides'

the presentation will continue where you left off

November 17, 2015 Capital Markets Day 2015

Capital Markets Day

Capital Markets Day London November 17th 2015

Jacques van den Broek, CEO

disclaimer & definitions

Certain statements in this document concern prognoses about the future financial condition, risks, investment plans, productivity and the results of operations of Randstad Holding and its operating companies as well as certain trends, plans and objectives. Obviously, such prognoses involve risks and a degree of uncertainty since they concern future events and depend on circumstances that will apply then. Many factors may contribute to the actual results and developments differing from the prognoses made in this document. These factors include, but are not limited to, general economic conditions, a shortage on the job market, changes in the demand for (flexible) personnel, achievement of cost savings, changes in the business mix, changes in legislation (particularly in relation to employment, staffing and tax laws), the role of industry regulators, future currency and interest fluctuations, our ability to identify relevant risks and mitigate their impact, the availability of credit on financially acceptable terms, the successful completion of company acquisitions and their subsequent integration, successful disposals of companies and the rate of technological developments. These prognoses therefore apply only on the date on which this document was compiled.

--------------------------------------------------------------------------------------------------------------

EBITA: operating profit before amortization and impairment acquisition-related intangible assets and goodwill, badwill, integration costs and one-offs.

organic growth is measured excluding the impact of currency effects, acquisitions, disposals and reclassifications.

diluted EPS is measured before amortization and impairment acquisition-related intangible assets and goodwill, badwill, integration costs and one-offs.


agenda


changing global HR landscape

update on our strategy total talent architecture (TTA)

talent management

technology & innovation

7

the world around is changing…..

There are Key forces shaping the global talent & HR landscape….. Economics, demographics, human relationships & preferences, regulations, technology, automization & data-driven services

….Randstad is adapting the way we approach our clients, candidates to differentiate and outperform the competition


market dynamics creating a complex landscape


Specialization: Clients are more willing to pay higher fees for specialist skilled staff in short supply.

Outsourcing: Clients are more open to outsource tasks into BPO/SOW/packages

Large and Complex: Clients require more

sophisticated solutions to manage workforce

recruitment better and more cost effectively.

Low-cost disruption: Clients and small agencies have access to technology platforms that offer an

alternative to recruit differently

e.g: Adecco Manpower Randstad

Traditional agency model

strategic roadmap

9

driven by best people, strong concepts, excellent execution and superior brands shape the world of work • optimal workforces for

clients • the best jobs for

candidates

grow to 5-6% EBITA • profitable growth • improve margin • increase productivity

HR technology • being the most agile integrator of

technology & services in our industry

Randstad Innovation Fund • capturing trends & future business in

HR technology

M&A, seamless fit integrations • strategic fit • value creation • manageability

Total Talent Architecture, World Class Customer Experience • creating quantifiable business impact addressing the entire

workforce of our clients

Activity-Based Field Steering • driving commercial excellence;

brand strength, leads and conversion

World League People, at the right place, at the right time • optimized organization structure • high performance culture & people engagement • continuous process improvement

Org

TTA

Tech

ABFS

M&A

today

goals

Talent management, unique candidate engagement • optimal integration of technology and touch • leader in speed to match and quality of hire • foster talent engagement and communities

Talent


strategic roadmap


activity based field steering

Org

TTA

Tech

ABFS

M&A

today

goals

Talent

shape the world of work • optimal workforces for


candidates


Activity levels up + 14% YTD (2014: >30%) • Productivity (GP/FTE) up 4% YTD • Perm grew 14% YTD • SME picking up in NL, FR & Ger

strategic roadmap


organization

Org

TTA

Tech

ABFS

M&A

today

goals

Talent



candidates


• € 60-70m cost savings on track (2015-16) • New Sourceright EMEA organization in

place • Vertical approach in Professionals • New IT strategy

strategic roadmap


total talent architecture

Org

TTA

Tech

ABFS

M&A

today

goals

Talent

• TTA implemented in 10 countries • Growth in MSP (+ 31%) & RPO (+ 24%) • Inhouse surpassed € 1b revenue in Q2



candidates


the time for TTA is now


10 countries

130 trained

100+ clients approached

100+ targeted in near future

TTA status now

Total Talent Architecture – core tenants

connecting client talent

landscape to Randstad concepts

relationship/entry level is key success determinant

initiates with business strategy

benchmarking, best practices, and Randstad insights inform roadmap

key anchor concepts – Randstad Sourceright (MSP/RPO) & Inhouse

strategic roadmap


talent management

Org

Tech

ABFS

M&A

today

goals

TTA

Talent

• State of the art in talent attrition: • Sourcing Centers (Hungary, India &

Malaysia) • Talent engagement programs • End-to-end marketing



candidates


Randstad recruiting centers


Birmingham sourcing pre-screening & assessment interview & selection candidate care offer management onboarding reporting supports EMEA (all OpCos)

Budapest sourcing pre-screening & assessment interview & selection candidate care offer management onboarding reporting supports EMEA (all OpCos)

Kuala Lumpur sourcing reporting candidate care supports APAC

Seattle recruitment admin interview scheduling offer management onboarding candidate care supports RPO NA

Hyderabad sourcing interview & selection reporting candidate care reporting supports NA(all OpCos)

from recruiting to talent engagement


Seeking

Know Nothing

Very Passive Not interested

How much we know about the candidate

Cand

idat

e Se

ekin

g?

Source

Match

CULTIVATE

Know Everything

Attract

strategic roadmap


technology

Org

ABFS

M&A

today

goals

TTA

Talent

Tech

• Randstad Innovation Fund (RIF): 7 investments made to date

• Career Transition – RiseSmart • Business systems development /

Innovation • Sales Navigator • “Big Data” matching tool • Hackathon



candidates


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then click on the second video 'Hackathon Randstad NL' you can watch it from this screen or you can open it on YouTube once the video is finished, please return to the tab 'Slides'



business models are evolving


traditional staffing traditional model matches clients with the local candidates

with limited value added services

$400B+ industry with limited growth (=GDP)

hybrid model Randstad delivers multiple tools to both clients and

candidates which help in increasing efficiency and engagement

online platform digital platforms provide intermediation between clients

and candidates which may include matching, billing, compliance, etc.

$3B market (2014), with projected CAGR > 40%* (2020)

digital experience with a recruitment platform


strategic roadmap


mergers & acquisitions

Org

TTA

Tech

ABFS

M&A

today

goals

Talent

• Leverage ratio at 0.5 • Bolt-on acquisitions

• Professionals • Scale – top 3 in any

market • No additional Geos • Niche additions to service

offering portfolio



candidates



Randstad’s most recent acquisition (September 2015)

Reduced outplacement spend and Unemployment Tax

Putting people back to work 60% faster than US national average

Improved Employer Brand Protection

RiseSmart’s scalable outplacement model provides a lower cost structure with technology-driven solutions including a job and network matching technology and a virtual coach

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then click on the third video 'RiseSmart animation' you can watch it from this screen or you can open it on YouTube once the video is finished, please return to the tab 'Slides'



financial strategy

Capital Markets Day London November 17th 2015

Robert Jan van de Kraats, CFO

agenda


current trading

funnel update – where do we stand?

capital allocation/ dividend policy update

current trading


7.7% revenue growth in October (vs. 5.7% in September)

Q3 revenue growth was 5.4%

Gross profit growth in October was 8.4% (+5.8% in Q3)

Perm fees up 9% (vs. 13% in Q3)

volume trend in November so far appears to be in line with October

North America +5% (vs. +4% in Q3 and Sept)

US business up 6% (+5% in Q3)

European countries up 8% (vs. +5% in Q3)

France +8% (vs. 3% in Q3)

Netherlands +10%, in line with Q3

Belgium +10% (vs. +1% in Q3)

Iberia +14% (vs. +8% in Q3)

Italy +26% (vs . +20% in Q3)

Germany +2% in line with Q3

Q4: minor (sequential) increase to SG&A as per outlook

agenda


current trading



targets within reach


growth &

activities +14% YTD, productivity (GP/FTE) +4% YTD

Perm/SME double-digit, competitive market

on track, though 8Qs of low growth

on track, more to come

L4Q15 at 4.4%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

1Q02 2Q03 3Q04 4Q05 1Q07 2Q08 3Q09 4Q10 1Q12 2Q13 3Q14

8Q's of low-mid single digit growth

organic growth in a historical context

consistent mid-single digit topline growth Europe still ~20% below peak


topline growth

USA above peak and still growing Opportunity in EM remains

strong relative performance


topline growth

-10,0%

-5,0%

0,0%

5,0%

10,0%

15,0%

Q1'13 Q2'13 Q3'13 Q4'13 Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 Q3'15

The Netherlands

Randstad Market (ABU)

-15,0%

-10,0%

-5,0%

0,0%

5,0%

Q1'13 Q2'13 Q3'13 Q4'13 Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 Q3'15

France

Randstad Market (Prism)

-10,0%

-5,0%

0,0%

5,0%

10,0%

Q1'13 Q2'13 Q3'13 Q4'13 Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 Q3'15

USA

Randstad Market (ASA)

field productivity


ABFS

addresses largest component of our operating expenses

PE field staff

ABFS

management layers, span of control, support staff ratio

further centralization of sourcing and delivery models

PE HO staff

accommodation, IT, marketing & general costs

OPEX FY

€2.5bn

~60%

~40%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%3Q

12

4Q12

1Q13

2Q13

3Q13

4Q13

1Q14

2Q14

3Q14

4Q14

1Q15

2Q15

3Q15

Gross Profit Personnel expenses

what has ABFS brought us so far?


productivity trend – YOY growth for GP & PE field

ABFS

conversion of activities


growth in commercial activities vs. productivity (GP/FTE Field)

ABFS

activity levels up to +14% YTD (2014 >30%), productivity (GP/FTE) up 4%

70%

80%

90%

100%

110%

120%

130%

140%

150%

160%

90% 95% 100% 105% 110% 115%

acti

vity

gro

wth

vs

LY

GP/FTE field growth vs LY

conversions activities OPCO’s staffing & professionals activity growth vs productivity growth YTD

perm: a major opportunity

In 2014 perm made up 10.0% (Q3’15; 10.5% or 12.9% Inc. RPO) of group GP (~12% in 2007) We have the potential to double in established markets Strategic focus paying off as we outgrow our peer group

average


business mix

Chin

a

UK

AUS

grou

p

US

staf

fing

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

perm as % of GP

primarily established temp markets

embryonic/developing markets

1 revenue includes perm + RPO 2 Competitors; Page group, Hays, Adecco, Manpower & Robert Half

YTD perm growth

13%

15%

16%

avg growth competitors

1

2

0%

20%

40%

60%

80%

100%

120%

France

The NetherlandsGermany

Iberia

% of GP growth (2013-15*)

perm growing double-digit


business mix

€ 60-70M cost savings in 2015-16


cost

~€ 50M realized so far (annualized) mainly in HO/BO functions

PE field staff

span control and field support

PE HO staff


OPEX FY

€2.5bn

~60%

~40%

internal HO benchmark sustainable reductions

size and location of branches digitization procurement

next steps are taken...


cost

IT costs (~10% of SG&A) should come down 20% over time

PE field staff

PE HO staff


OPEX FY

€2.5bn

~60%

~40%

increase in business systems which drive GP

create global IT infrastructure SSC utilize purchasing power in generic IT

(telco, networks and hardware)

Support function benchmark continues

benchmarking continues

agenda


current trading



solid free cash flow & conservative leverage ratio


-

0,5

1,0

1,5

2,0

2,5

3,0

-

100

200

300

400

500

600

700

800

2008 2009 2010 2011 2012 2013 2014

Free cash flow (€M) Leverage Ratio

stra

tegi

c ta

rget

capital allocation priorities


1 investments in organic growth

3 dividend

4 share buybacks

5 special dividend

2 M&A activity

invest in tech / innovation

payout of 40-50% of adjusted EPS

anti-dilution measures when financial position allows for

potentially when net cash for a longer period

bolt on (supplement current geographical mix, strengthen professionals

invest FTE in growth markets

optional dividend based on current leverage ratio of 0.5

not being considered currently

strategic M&A not likely

dividend policy


proposal to pay full cash dividend for year 2015

dividend policy since 2013: payout of 40-50% of adjusted EPS optional dividend: leverage ratio < 2.0x: optional dividend leverage ratio < 2.5x: optional dividend with premium on stock dividend leverage ratio > 2.5x: stock dividend anti-dilution measures when financial position allows for it: performance share plans optional dividend

dividend policy 2007-2012: €1.25 cash per ordinary share payout ratio between 30% and 60% of adjusted EPS (amortization, etc) financial position must allow for it

dividend policy until 2006: 40% of net income (basic EPS), cash only

key criteria when considering an acquisition


randstad perspective

1 strengthens our strategic position

2 provides significant value creation 3 manageability

create base for growth in existing markets (support global clients, high growth markets)

professionals is the preferred growth segment (profitability and market growth)

increases our market share (“Big is beautiful”, density of network is critical)

create an entry point into new markets through diversification

acquire capabilities in outsourcing/SOW space

minimum size of € 100M revenue (or at least 80 FTE’s when in small markets)

DCF valuation for entire business cycle (different scenarios to be considered); Considerable cost synergies give best safety net in worst case scenario

cost synergies identified and valued (including the costs to realize and possible loss of revenue)

tax and revenue synergies to be treated separately from valuation

EVA positive within 3 years, including post-deal tracking

agreed price negotiation framework before first indicative offer

management selected and approved integration plan prior to closing the transaction

we have sufficient understanding of the target and its business environment (Due diligence with the involvement of all disciplines and business people)

OPCO concept needs to be proven prior considering local acquisitions

OPCO management able to deal with acquisition and integration and the target has a good cultural fit and strong management

aiming for leading positions


US has largest HR services industry worldwide

source: various staffing associations et al., Randstad estimates

2014

rand

stad

mar

ket

posi

tion

0 20 40 60 80 100 120

India

Iberia

Switzerland

Brazil

Italy

Canada

Belgium

Australia

Netherlands

France

Germany

United Kingdom

Japan

USA #3

#6

top 5

#1

#1

#6

#1

#1

top 5

top 10

#3

#1

#2

#3

M&A: easy to buy, difficult to make it successful


challenging to manage emotions

Capital Markets Day 2015 · Welcome to the Randstad Capital Markets Day: Networking lunch with...

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