April 24, 2018 / 9:12 AM / a month ago

UPDATE 2-Staffing firm Randstad's shares fall after Monster disappoints

(Adds shares, analyst)

By Anthony Deutsch

AMSTERDAM, April 24 (Reuters) - Randstad reported a 4 percent rise in core first-quarter profit on Tuesday but shares in the second-largest staffing company fell on underperformance at U.S. unit Monster.

Earnings before interest, taxation and amortisation (EBITA) rose to 217 million euros ($266 million), at the low end of a range of analyst forecasts compiled by the company.

Randstad’s gross margin was 19.6 percent versus a consensus of 20.0 percent, which ING described in a trading note as “weak and even somewhat weaker than feared”.

Randstad shares fell 4 percent.

ING and UBS both said that on balance the full-year earnings outlook would not be hurt.

Randstad, which ranks behind Adecco worldwide, reported 7.4 percent organic revenue growth to 5.68 billion euros and said that pace had been roughly maintained in April.

Sales rose strongly across Europe, with increases of 10 percent in France and 7 percent in Germany. In North America, sales rose just 1 percent, negatively impacted by Monster, which Randstad acquired for $429 million in 2016.

Monster sales fell 16 percent, following a fall of 15 percent in the previous quarter.

Its EBITA margin was minus 1.7 percent versus minus 0.3 percent a year earlier, reflecting higher costs.

Randstad Chief Executive Jacques van den Broek said he hoped to turn Monster around in 2018 through continued investment in branding and technology. But efforts to generate new business were so far unable to make up for a “leaking away” of traditional revenue streams, he said.

“The top line for us is still an issue,” he said in an interview... We have created a cost base where we can work with lower revenue, but the minus 16 percent should not continue through the year.”

Looking ahead, Randstad said it expects the next quarter to be impacted by “a moderate increase in underlying operating expenses” but that its gross margin is expected to be broadly stable quarter on quarter.

“Overall market circumstances remained positive. We continue to outperform in most relevant markets,” he said.

$1 = 0.8187 euros Reporting by Anthony Deutsch; editing by Jason Neely

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