Randstad NV
AEX:RAND
Earnings Call Analysis
Q3-2023 Analysis
Randstad NV
Randstad has demonstrated resilience in the face of a challenging global economy, with Q3 witnessing a revenue decline of 7.3%. Despite this, the company delivered a robust gross margin of 20.6% and has achieved an industry-leading EBITA of EUR 273 million along with a solid EBITA margin of 4.4% for the quarter. They have also generated a significant cash flow close to EUR 300 million. Notably, their prior year's Q3 was their strongest ever, making the decline more pronounced in comparison. Certain sectors saw varied declines, with Professionals dipping by 4%, Inhouse by 7%, Staffing by 8%, and Enterprise Solutions by 12%.
Amidst the market trends that have persisted into early October, Randstad announced strategic leadership appointments with Marc-Etienne Julien as Chief Executive for North America and Miriam van der Heijden as Chief Marketing Officer, both expected to bolster client relationships and marketing strategies. Additionally, the launch of Randstad Digital signals a strategic pivot towards becoming a digital enablement partner, a move that illustrates Randstad’s adaptation to the increasingly digital-focused talent landscape.
Regionally, North America faced headwinds with revenues dropping by 16% and a significant 40% drop in perm. Despite these hurdles, North America still maintained a robust EBITA margin of 5.4%. In Europe, the decline was mixed with the Netherlands down 8%, yet achieving a strong EBITA of 6.3%, and Germany seeing a revenue drop of 9% but upholding a solid EBITA margin of 5% which is 90 basis points higher than last year. Belgium also experienced a revenue decline of 6% but held on to a solid EBITA margin of 4.3%. The Nordics, Switzerland, and Poland had contrasting fortunes, with the former two experiencing declines of 15% and 7% respectively, while Poland saw a surge of 14% year-over-year with an EBITA margin at 3.4% for the region. Southern Europe remains focused on rebounding to profitable growth.
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Hello, and welcome to the Randstad Third Quarter Results 2023. My name is Caroline, and I will be your operator for today's event. Please note, this call is being recorded. [Operator Instructions] I will now hand over the call to your host, Sander van 't Noordende, the CEO, to begin today's conference. Thank you.
Thank you very much, Caroline, for the kind introduction. And good morning, everyone. I'm here with Jorge and Bisera and team from Investor Relations, and I'm pleased to share our Q2 -- Q3 results with you. We continue to perform resiliently in the third quarter in a challenging global economy, and I'm particularly pleased with how our teams have adapted to the challenging positions in their market. And it's really great to see how adaptability is an integral part for our DNA. And this is a very good muscle to have in good times but also in challenging times, of course. And as you know, we are always balancing supply and demand to make sure we have the right teams on board as well as the right cost structure for the demand we are serving. Another important trade up we are making every day is volume versus value, because volume and value need to go hand in hand, and we believe we have the right balance here as well. And that's why we have realized very solid profitability again in Q3. Revenue decreased by 7.3% in Q3. Europe, Latin America and Asia Pacific were our better-performing regions, while tough domestic market conditions impacted our performance in North America. In terms of concepts, Professionals was down 4%, Inhouse was down 7%, Staffing was down 8% and Enterprise Solutions was down 12% in the quarter.
One thing to note here, of course, is that Q3 last year was our biggest quarter ever in Randstad. We delivered a robust gross margin of 20.6% with about 16% of gross profit generated by perm and RPO combined. We demonstrated cost management and resilience across our company. And as a result, we have delivered an industry-leading EBITA of EUR 273 million, with a solid EBITA margin of 4.4% for the quarter. The market trends we experienced in the third quarter have continued in early October. And looking ahead, our markets continue to be defined by 3 prevailing trends: first, a scarcity of talent; second, clients seeking greater levels of support; and of course, digital. We are confident in our ability to capture the growth opportunities in our markets, and we are well positioned for when market sentiment improves. And I'm pleased to see that we are progressing very well and realizing our vision to be the world's most equitable and specialized talent company. As part of this, we launched Randstad Digital in August, and this is an important step which positions Randstad as a digital enablement partner for transforming business by providing global talent, capacity and solutions across specialized platforms. We are very excited about the growth opportunities in this area. Now let me give you a few updates on our leadership team. Marc-Etienne Julien has been appointed Chief Executive for North America. As the former leader of our Canadian business, he brings over 20 years of experience in the dynamic North American market as well as a deep commitment to equity and crafting exceptional talent experiences. He also has a track record of growing client relationships. Jesus Echevarria has taken on additional responsibilities and is now our Chief Talent and Client Delivery Officer. Finally, Miriam van der Heijden has joined us as Chief Marketing Officer. She will be responsible for developing and executing our marketing and branding strategy. So in short, perform and progress is what we do at Randstad. And our executive leadership team is very excited to provide an update on our plans next week at our Capital Markets Day in London and online. Let me now hand over to Jorge to present the results in more detail.
Thank you, Sander, and good morning, everyone. Let me start also like you started. So in short, this was a quarter to deliver profitability and, where possible, find pockets of opportunity. And we did just that. We achieved that right balance. We delivered resiliency. We delivered sector-leading margins, so especially the scale and breadth, EUR 273 million of EBITA and close to EUR 300 million of cash flow. So we do remain conscious, like you said, of the economic conditions in which we operate. But from a financial position, we are surely in a position of strength to benefit from any recovery confined in the next quarters. In our previous call, we reported the macro conditions remain challenging, and these trends, like Sander mentioned, continued into the third quarter. Just as an example, in many markets, PMIs, especially manufacturing PMIs and actual industrial production remains somewhat at low level historically, below even in many cases, anything we've seen in 2019 and beyond. Therefore, we are happy with the choice we made to balance demand and supply. We remain, as I said, well positioned for the recovery and find growth where it exists, and I'm also happy with our portfolio and how diversified it is. Please also note before we go into a more kind of breakdown performance of our countries, please note that in terms of growth rates and comparables, last year was very, very strong. It was actually in record the strongest quarter of Randstad, which obviously will [indiscernible] any comparison with this year. We've been seeing a normalization and obviously, that has now an impact. And so therefore, sequentially, it's almost as relevant as year-over-year. This summer, we actually had a quite strong summer through, I would say, a deep summer, prolonged summer. And in September, these trends did not necessarily recover as seen in previous years. The number of employees working remain broadly stable between 590,000 and 600,000. There were different levels per geography. So now let's discuss North America and go a little bit in more detail on Page 7. The softening trends pretty much continued in the third quarter. North American revenue dropped by 16%, remember, Q2, 14%, with perm declining 40%, pretty much like in Q2 as well, 36% after seeing nevertheless than 15% increase last year. So breaking it up. On one hand, our U.S. staffing and Inhouse basically declined by 19% with lower demand across pretty much all sectors. But on the other hand, our Professionals revenue was down 10% to 11% and continue to face challenging market conditions but less than 16% overall. We launched Randstad Digital, as Sander just highlighted, and we were also recognized as a leader in the U.S. IT contingent and solutions space by Everest Group's PEAK, which recognized us in terms of skilled growth and capabilities we are building. The EBITA margin, though, for North America was still a solid 5.4% as we continue to adapt our operations. Moving on to Europe and, close to here, Northern Europe on Slide 8. Our Northern European countries, as you can see, saw mixed growth trends. As in most of these markets, we are established market leaders. So comparables, again, please remember, are very hot, very high in 2022. So we play a key role both, let's say, in the recovery post COVID, but as well on supporting everything that was COVID-specific. So despite the slowdown, and it is important, in manufacturing, we did protect operating profit margins, EBITA margins, and again, above 5%, delivering EUR 102 million of EBITA.
In the Netherlands, in particular, revenue down 8% and continue to be impacted by, I just mentioned, COVID-related business. Perm was down 24% year-over-year and Professionals reflecting portfolio choices we are making, finding this right balance we also made this year. EBITA, again, a strong 6.3%. In Germany, though, revenue was down 9%. Our combined Staffing and Inhouse Services business down 10%, impacted by softening demand in summer. But important, perm performed very well with 29% growth, up from the 10% we talked about in Q2, reflecting again diversification of our portfolio and continued progress to sound profitability and sustainability. We are well positioned for future growth in Germany. EBITA margin for the quarter came in at sound 5%, 90 basis points up compared to last year. In Belgium, again, a market-leader country, we had a revenue decline of 6%, a small improvement from where we were in Q2 sequentially. Belgium is one of our long-established countries, good portfolio diversification and a strong adaptability throughout the years. EBITA margin came in at a solid 4.3%. As a I noted European countries obviously reflect mix trends, but let me break it down to you. Nordics was down 15%. Switzerland was down 7% and Poland was up 14% year-over-year. EBITA margin came in at 3.4%. The -- now let's look at the Southern world, so let's look at Southern Europe, U.K. and LatAm on Slide 9. In Southern Europe, focus remains on getting back to profitable growth as we spoke in Q2. And in many markets, we are making significant progress. We delivered an impressive EUR 122 million of EBITA and margin again above 5% or 5.6% even for the region. Now looking and starting with France, the largest country, revenue was down 3% year-over-year. But here, please remember because it has a significant impact on the group level. In terms of growth rates and comparables last year, we were still increasing quarter-over-quarter in France. Q3 at the time already growing or growing increasing growth of 9%, which obviously, this year affects comparisons and has a very strong impact also on group level. Last year, we were growing fast in our strong health care business, Appel Medical, and that obviously now shows a comparison this year. This year, therefore, we saw relatively weak summer months. And in September or at least we saw prolonged summer that's -- and in September, these trends did not recover as much as it's seen in previous years. Nevertheless, even though Professionals continue to deliver solid growth of 8%, which partly offsets the decline in Staffing and Inhouse over summer. France ended the quarter with an EBITA margin of 5.4%, also 50 basis points up year-over-year. Now moving into Italy. Italy was down 2% year-over-year, continuing improving the trend sequentially. And remember, we're 3%, 4% down in Q2 step-by-step. Perm, again, from a very high base already last year, delivered growth of 5%. So we still are able to find growth where it exists. Italy ended up the quarter again with beyond excellent profitability. Iberia, though, declined also by 2% in the quarter, similar. So also, again, an improvement in trends since Q2. Our focus on delivery models here, and we'll talk about it more next week, is supporting this improvement. Staffing and Inhouse businesses were down 2%, adjusting, let's say, from fees and application of the new legislation in Spain primarily. And also important, we are about to welcome now finally, our new colleagues of Grupo CTC in July, which we expect now to close given that we just received the approval from competition authorities on the 27th of October, which is obviously important for our competitive position in the outsourcing space in Spain. In our Professionals business, we continue to see growth in professions of 10%. Across other Southern European countries, U.K. and Latin America, again also a mixed bag of different things, revenue and profit performance saw a mixed picture. U.K. was down 16%, reflecting portfolio choices. Latin America was up 7%, which shows our ability to drive growth in profitable segments.
And moving on now to Asia Pac on Slide 10. The Asia Pacific region continued to perform well. But also in this region, note these, macroeconomic conditions are softening. The APAC region had a modest growth of 2% in this quarter, coming down slightly from what we left in Q2. Japan continues to show structurally good performance with 5% growth and some profitability and still with significant opportunity in the second largest staffing market in the world.
Australia and New Zealand saw overall softening in demand and saw our revenue declining by 2% in the quarter. At the same time, our education business did very well in the quarter and saw its revenue growth by 21%, again, capturing growth through specialization. We will talk more about it in our Capital Markets Day next week. India grew by 7% and continues to focus on improving the quality of the portfolio. And overall, if now adding up all of it, our EBITA margin for APAC was solid again 5.4%, above 5% in the second quarter, well above the group average. And that brings me now to Global Businesses on Slide 11. The Global Businesses segment showed a decline of 12% year-over-year, and our EBITA margin for Global Businesses came in at 0.5% in the third quarter. So this is a mix of different realities. Monster revenue was down also 12%, in line, as probably you know, with the broader job board market trends. Our RPO business declined by 34% year-over-year compared to a strong Q3 last year, where we were still growing 55%. So again, declined 34% but we're still growing 55% last year. And together with Q2, we also had last year record high levels of hiring. RPO is obviously feeling the effect of a slowing hiring environment. It is also the service that we recover the fastest with our clients. We have ramped up programs, but we also have ramped down our [ products ] with a net reduction this quarter alone of 500 FTE versus last -- versus Q2 sequentially, so versus just June, July. Moving ahead, we are confident about the growth prospects and adaptability of our RPO business. To put it in perspective, we recovered almost 80% of our gross profits or, in other words, a recovery ratio of 80%. This market continues to evolve and we work with the largest Fortune 500 on the companies in shaping the solutions of the future. On a very different dynamic, though, is our outplacement business. Remember, RiseSmart, the company we acquired in 2016, we have continued to develop and roll out the platform and grows and scales significantly throughout the world, heavily digitally delivered, already mitigating, to a large extent, almost half impact on profitability of RPO decline. And okay, that concludes the performance for our key geographies. So let me now walk you through our group financial performance on Slide 13. And in short, it summarizes pretty much everything I just been mentioning before. Organic revenue for the group came in at EUR 6.3 billion, which is a decline of 7% year-over-year. As we have discussed earlier, Europe, Latin America and Asia Pacific were our better-performing regions, some trends increasing while difficult market conditions impacted our market performance in North America. Again, the 7% decline comes on the back of a very hot -- the most -- the strongest, let's say, quarter for Randstad in its history and definitely in 2022 as well. Overall, we continue to see a stabilization in temp placement sequentially as the average number of employees working has broadly stabilized around 600,000 employees. We'll talk in a few minutes about -- in more detail about gross margin and OpEx development, but the outcome in short, as you can see, was an EBITA for the quarter of EUR 273 million and a solid EBITA margin of 4.4%. This is a recovery ratio of 61%, 6-1, emphasizing again the field steering model we've always had and our resolution in adapting our cost base to the best balance we can find in the market. Integration and one-offs were EUR 16 million this quarter. Of this, EUR 4 million are related to M&A integration costs in specific to Finite in Australia. The remaining EUR 12 million is restructuring expenses across many of our markets. Amortization and impairment of intangible assets, as you can see, EUR 12 million, pretty much regular in line with Q2. Our net finance costs in Q3 were also EUR 17 million, again in line with Q2 and primarily just reflecting year-over-year the higher interest rates and as well as slightly higher net debt level compared to last year. The underlying effective tax rate, again also in range, amounted to 25.2%. For 2023, we expect our tax rate to be between 25% and 27%. Now as I mentioned, let's turn to next page to our gross margin bridge and understand our gross profit and gross margin performance. A few things about the margin. So we have the graph there on top of you. The gross margin for the third quarter came in at a robust 20.6%, impacted primarily by mix, as you will see, and practically the same as Q2, if not 10 basis points, just rounded lower. Our temp margin, the first column actually, positively contributed 10 basis points to the overall gross margin. Our temp business in general is showing more resilience than our fee business. Volumes are broadly stable at around 600,000 and net margin is once again reflecting our discipline in value-based pricing.
The price and quantity effect combined means our overall gross profit and temp business has shown more resilience than our fee business and contributes therefore to our performance this quarter. Fee business declining more, but of course, we also have a strong flexibility in adjusting our cost structures in that type of business, our business model. Our perm revenue fell by 22% in Q3 to EUR 139 million, which has led to a negative gross margin impact of 20 basis points. Again, this is purely a mix effect. If perm declines 22% and the overall growth 10%, then the perm business has a negative impact in our margin. Also similar trend with RPO. This year, the normalizing labor market has impacted our RPO business, which declined 34%. And again, therefore, this translated into a negative impact in our margin. In terms of mix, perm and RPO jointly represents about 60% of the group gross profit in the third quarter, which now brings me to the OpEx bridge on Slide 15. Please note, this one is sequential. So in our industry, shortly, we'll get it right in 1 quarter or year, we must be sure we also get it right again, precise in the following quarter or the year. We continue to adapt, making the right choices, finding the right balance and we are well positioned for the recovery slimmer and faster. In short, we have continued to execute a clear focus with respect to OpEx, steering and adaptability looking at the trends we see in the market and making sure we do not make any step bigger than our legs can afford. As a result, in the third quarter, OpEx came in at EUR 1.20 billion, 4% down sequentially and 8% down year-on-year. And as mentioned before, this adds up to a recovery ratio of 61% in Q3. The biggest driver of our OpEx is, by far, personnel expenses, which was 5% lower sequentially. And at the same time, our average account decreased by 320 FTEs sequentially.
With that in mind, let's now move on to our cash flow and balance sheet on Slide 16. And also a few words on cash flow, balance sheet and update on our share buyback program. So our free cash flow for the quarter came in at EUR 297 million, EUR 40 million higher year-over-year. And therefore, our net debt sequentially reduced approximately by EUR 200 million with the difference being mainly our share buyback program. Our balance sheet shows, therefore, a lower net position of EUR 414 million and a leverage ratio of 0.3, please note, excluding lease liabilities. I think despite the volatility of the inherent in the business, 2 important points on cash flow. The strong cash flow generation remains an important characteristic of Randstad and of our business models with good practice on working capital and DSO management well spread out throughout the company. In short, we convert cash from good year's EBITA. At the same time, in declining years, the countercyclical nature of our working capital typically offsets the decline in EBITA [ against this ] year, providing always a line of sight and visibility into our cash flow. In the first 9 months of the year, we generated free cash flow of EUR 592 million, already EUR 147 million more than last year. DSO was 53.4, 0.9 days up year-over-year, primarily driven by our mix and geographical composition. Lastly, an update on our share buyback program. The second tranche is completed. We purchased a total of 1.54 million ordinary shares for a total consideration of EUR 80.5 million. Today, we also announced our intention to cancel 3,090,000 ordinary shares, so the first 2 tranches of our share buyback program that we'll purchase in the first and second tranche. As in previous quarters, we also announced again a third tranche to now repurchase up to a maximum of 1.6 million ordinary shares. And per usual, we continue to provide weekly updates on the progress of the program, which now brings me to our last slide, the outlook on Slide 17. And let me start first with the activity momentum. So the conditions remain challenging across our markets, and these conditions have continued into early October. In early October, the year-on-year growth rate of employees working, the temp momentum, let's call it, was aligned with the one of Q3 or in absolute terms between 59,000 and 600,000 people every week. So it was pretty broadly stable in that context. The perm and RPO moment also similar to Q3 and also showing stability. Q4 2023 gross margin is, therefore, expected to be broadly in line sequentially. Again, just to be clear, we strive to always align gross profit and OpEx development as much as possible. And therefore, we anticipate our OpEx again to be broadly in line sequentially. Please note, there will be a negative half-a-day working impact in Q4 2023. This is our base case, but again, I will say it 1 more time, we will continue to work with scenario planning and adaptability. We remain: one, vigilant; two, cautious; but three, ready. So to summarize, in the third quarter, we delivered strong profitability in a general challenging environment. Account studies adaptability provides us now a basis for choices to benefit from the recovery when it comes. We don't know where the first opportunities will come, which geographies from, digital, staffing, RPO, when those signs will be? But we feel we're operating from strength. We are ready and we will capture that. We have scale and a more diversified portfolio than ever with very sound margins. We have a very solid client base. We have the most experienced team in the industry, and all of this supported by a very sound financial position. We'd like to see more recovery, and we are ready to capture it when it comes. Looking forward to speaking to you about many of these next week. This now concludes our prepared remarks, and we look forward to taking your questions. Operator?
[Operator Instructions] The first question from Rory McKenzie from UBS.
Three questions from me, please. Firstly, just asking about wage inflation. Your temp volumes were, as you said, about minus 9% year-over-year through Q3, similar to Q2. But I guess, the tailwinds you've got from rising wages or fee inflation is now only about 1%, 1.5% compared to about 4% in the last quarter. So is that just the annualization of those wage inflation headwinds? And can you talk about what the sequential trends are looking like, and any regional differences?
And then secondly, just on the cost base. Obviously, you drove that 5% sequential reduction in Q3, and now you're expecting it to be stable into Q4. Does this reflect the bottom of where you want to take the cost base down to? Or would you be able to look for more cuts if the market did deteriorate again?
And then finally, just 1 question on the divisions. Can you just go into a bit more detail on the big step down in RPO trends? And have you actually lost any kind of contracts there in Q3? Or is it just the tough comps that you're up against the growth, that divisional slowdown?
Thank you very much, Rory, for those questions. Let me start on wage inflation. I mean, wage inflation is clearly coming down across our markets. It's now hovering around 2% in the U.S., and it's actually higher in Europe than in the U.S. these days. In Europe, in most countries, 4%, 4% to 6% with France being exception at 1.8%. That means also in our business, wage inflation has come down quarter-over-quarter. I don't think we disclosed the exact numbers there, but you can expect it to be in line with the market, but it depends, of course, on the mix of the countries.
So yes, wage inflation is coming down, which I think for the broader economy is a good thing because inflation is coming down, wage inflation coming down, it all brings us into more normal territory as an economy, which I think is a good thing. Let me take the third question on RPO here. So in RPO, it's primarily existing clients who hire fewer people. Our wins have been significant in Q3 again. And our pipeline of primarily bigger deals, bigger than in the past, still has a good -- at a good level. Keep in mind that many clients are now looking at how can I do my recruitment process more efficiently, more cost effectively, how can I maybe move some of it to global delivery in countries such as India or Latin America? And that's obviously very attractive opportunities for us to work on, and that's what we're working on with many clients in the tech space, in financial services, in life sciences.
Rory, it's Jorge. Let me take your second question on the cost structure. So look, I mean, we kind of guide to broad in line, and I think I also alluded to it in my prepared remarks. Because let's put aside. I know you had a good question, you mentioned it yourself, let's put aside the year-on-year comparisons and let's focus a little bit what we see sequentially. We, at the moment, let's say, we have adjusted our FTE down 9%. I think our revenue was this quarter, 7%. So from a bottom perspective, we feel we are prepared for what we see. And we feel therefore that sequentially, given the stabilization that we see after this normalization period, we have adjusted our OpEx in line with what we need to do. I prefer -- I mean, again, we don't have any sense. So if we need to -- our gross profit goes up, then we are able to spend a little bit more OpEx. If our gross profit for whatever reasonable decline, then we still feel that the ingredients we had in Q3, Q2, Q1, we have again to adjust in Q4. So I feel comfortable on what we see today.
Yes. Maybe to add to that. I mean, clearly, we're starting to see more opportunities in pockets where we can find growth. So we will invest in those areas in specific countries. But we will do that in a very targeted and focused way, Rory.
You can see it actually now that you mentioned that, so just highlighting we -- I mentioned earlier on that we've decreased our RPO headcount by 500 people sequentially. At the same time, overall for the group, we've reduced 300, let's say, from Q2, meaning there are already focus that we are trying to capture opportunities such as Spain, such as Italy, even in certain parts on perm in Germany. So where we find growth, we're not shy. That's the advantage of being in a position of strength and having a very strong financial position.
We will take the next question from Hans Pluijgers from Kepler Cheuvreux.
Yes. Three questions from my side. First, going back on the outlook. I hear what you say with respect to stabilization and also on your cost base. But of course, sequentially Q4 is always, let's say, somewhat more stronger quarter. So how should we read that underlying? Is this also -- are you driven by, let's say, a seasonal impact? Secondly, on Germany, a clear improvement in profitability, perm doing quite well. Could you give maybe some flavor on what the drivers were for the improvement in the margin? Is that for major part perm or also, let's say, cost savings? If you could give maybe some flavor there.
And on the global business units, still down quite materially. Monster still doing, quite some difficulties, of course, RPO. But how do you see, let's say, the longer-term outlook for that business unit and especially looking at profitability? Because profitability has remained quite low over the last few years. How do you see that, let's say, measures you can take to really improve that profitability?
Can I start with Germany and then...
Yes. I'll start with Germany, Hans. Germany, I mean, you've been around longer than I am. So you almost know the story better than I do. Germany has been a market that has been under pressure for a long time. A couple of years ago, we had the major legislation change, and from there, it became harder and harder to do business for us. Our team got on the case, starting around 12 to 15 months ago. We said we need to do things differently here in Germany. We need lower costs, that they have worked on that and they are still working on that. We need to make sure that we have volume and value in terms of the business that we do go hand-in-hand. And that's all -- I mean, it's very much about pricing, and we need to amp it up on our perm business. And therefore, those 3 levers and the results you see in the profitability, and I'm absolutely proud of the team in Germany, how they have got an obligation and the results that they produced. And again, I was there actually 2 weeks ago. I said to them, now you're in a much better space. Now let's focus on growth because we have the platform to grow in a profitable way. On Global Businesses and Monster, this is the story of 2 sides. On our RPO business, our profitability has been decent, I would say. It's been a bit under pressure because volumes have come down. On Monster, we're making progress on the profitability side, which is sort of hard to see because we are now we're going a little bit up on Monster a little bit down on the RPO side. But Monster is still a work in progress, very important as a source for talent for us. And we expect when markets come back in terms of the job postings, we should be able to get that to breakeven over the next year, 1.5 years, I would say.
Yes. Hans, it's Jorge. A little bit on the outlook. So I mean, looking at what we can see in the first 2 weeks of October, and again I'm emphasizing I mean, we see stabilization. So again, let's put comparisons year-over-year aside. We see stabilization from Q3 into Q4, 590,000 to 600,000 employees. Also the pricing dynamics are the same as we just highlighted. So I mean, looking ahead, we see the stabilization. And the same goes to our fee businesses. It will always depend a little bit -- you're right, so Q4 might be the strongest quarter in the year, as you know, compared to Q3. It depends a little bit on how Christmas performs. And as it stands, it's to anyone's guess, let's say, how the world will perform in terms of the buildup for the Christmas break and the holiday period. What I would say is from an adjustment perspective, we are ready, the ingredients are the same. So it's about hopefully riding this normalization, and like Sander mentioned, try to find pockets of opportunity where they are. So we have the financial position to allow for that.
On the global businesses, I'll just complement. I mean, you ask what we have here. If all the regions are at 5% plus EBITA, then if 1 region is not at 5% plus EBITA, then we're not in. So yes, but it's about continuing to working on that day by day and improving.
Okay. Maybe 1 follow-up on the outlook. Could you maybe some -- remind us how the comps developed in Q4 of last year?
The comps improved slightly revenue. But I mean, we pretty much similar volume as last year, if I'm mistaken, I think 10,000 to 15,000 people more working in Q4. So pretty much in line. So there was quite, let's say, 2 high quarters. If looking at revenue, as an example, Hans, was EUR 7.5 billion approximately in Q3, and we have EUR 7 billion in Q4, right, EUR 7 billion. So pretty much, 2 quarters the same. So again, we are trading and competing in super, super, super high comps in terms of the highest comps, whatever, and also strong perm and RPO comparison. So that's basically the comparison, yes. The only 2 quarters in this are the ones that are above EUR 7 billion.
We will take the next question from Kean Marden from Jefferies.
Just 1 from me. I've had a number of clients just trying to understand the 1% sequential reduction in headcount in the quarter versus the 5% reduction in personnel expenses. So maybe you can help us understand that, and I guess whether there's potentially been any accounting change, i.e., maybe whether you've changed bonus accruals in the quarter depending on your view of full year profitability?
Yes. So first of all, Kean, thank you for the question. So let me be clear there are no accounting changes. So I mean, that is -- it's the same accounting principles and practices as always. I mean, first of all, we did reduce, let's say, 9% our FTE year-over-year. So that is kind of how we start Q3. Indeed, this quarter, because of holidays and in general so lower deferred wage components, but also as we go into the year, we can always have the freedom to look and assess our provisions and buildups for bonus, variable compensation. So if we're doing less well, that always has an impact in the quarter in question. But at the same time, taking a step back, the fact is we are 9% down in terms of FTE and the ingredients we had to deliver on cost adaptability that remain into Q4. I mean, it's just basically a timing and practice of how we go through the year and reassess each one of our positions in our wage components. But in general, proud, happy and just contributing as always to the adaptability ambition we have of 50% through the cycle, yes.
And is that recalibration of accruals complete in the third quarter? Or should we expect a little bit more in Q4?
Look, look, we don't micro-report on everything. We look every quarter where we are in terms of gross profit. Again, gross profit and OpEx work hand in hand in Randstad. That's what we strive always to match. I think the ingredients are there in the sense that we have less FTE. We are prepared for revenue trends we see, and we are experiencing now year-over-year. And that makes me, let's say, reasonably comfortable as we go into Q4.
We'll take the next question from Marc Zwartsenburg from ING.
I would like to first come back on the revenue trend to understand it a bit better. Because you started Q3 in July with the same trend as Q2. So that basically implies at August, September it must have been a bit weaker to get to that 7.3%. So if you then tell me that October is in line with Q2, does it then imply that October actually saw a bit -- you mentioned stabilization, actually then it leads to trend maybe that it has become even a little bit better? Is that how I should look at your outlook compared to the previous outlook and what you reported over the quarter? That's my first question. And then on the cost base maybe or a combination of margins and recovery ratio. Recovery ratio came in really, really good. So credits to you, Jorge. And the margins in the Netherlands and Germany even improved while you have quite significant top line declines. Did you then -- should I take it that you've been preparing for even worse trends in specific regions, that you're basically running a bit faster on the cost base than in the end -- the development of volumes ended in the quarter? Is that how I should look at it, that you prepared for the worst and that it came out a little bit better? Is that how I should read the margin improvements in the Netherlands -- sorry, and in Germany, for instance?
Yes. So I mean, definitely not underprepared for the work, but I think I'll let Sander also talk. But first of all, thanks, Marc, and a good question. So let me just -- I mean on exit trend. So I mean, first, what we are talking about is there are volume trends in October. And in that respect, we see pretty much stability where we are in Q3. So that is like the way we look at the quarter with the information we have now. Secondly, especially on the temp side, you alluded to that, let's also make a bit of things like -- yes, our revenue is down 7%. It is also impacted, as I -- we kind of mentioned it by our fee businesses. But overall, from a gross profit perspective, again combining price and quantity effects, that is actually therefore less than 7%. So our temp businesses are showing more resilience, let's say, that -- or obviously, you could see immediately in the results. So that does mean from a trend perspective into October and Q4, it's a stability from where we left in Q3, and it's basically looking ahead with what we can see prepared for it. Sander?
Yes, Marc, on your second question, well, you've heard me saying we are always balancing volume and value. That is the name of the game here. We think we have the right balance. Frankly, volume with no value has no point, to make it very blunt. So even if the times are challenging, we need to make sure that we get the right level of value for the volume that we sell. And we have been focused very hard on doing that. Because if there's 1 thing that I've learned in my career in services, if you drop the price too much, you never going to get it back later. So if we stick with the value that we're looking for now, it will serve us well when times get better.
That recovery ratio of over 60%, does it imply that you have taken a little bit more of -- a few that maybe the market could have been weaker, that at a bit extra Q2 -- got a little bit...
That's a good question. I mean, I did some math for you. You all collectively did your expectations. We -- so we said -- you said 5.8% growth. We have 7.3%, that's 150 basis points. We produced EUR 15 million more profit. So we could have spent more money and get you your 150 basis points more revenue, but we decided to get EUR 15 million more profit. It's the trade-off we're making every day.
Marc, a good point on the 61% , I mean, we don't strive to get it always at 61% or something. I think it's just the timing of some of the adjustments we've made. I always say the match might not be perfect. But over time, it does come very close between GP and OpEx. It's just a natural reflection of different P&L dynamics. There's nothing to read in that respect.
Okay. Maybe a short follow-up on the overhead costs. Should we take the current trend as a trend going forward? Is that a bit a number which we should be looking for? Or should we also expect some savings on that front?
On the? Excuse me?
Corporate overhead costs.
Yes. I mean, for the corporate overhead costs, we manage total OpEx. So I mean, from that perspective it is a collection of choices. Where do we work? We work centrally? Do we do more work locally? I mean, how do we manage best for the overall efficiency of the company? I think as it stands, yes, that's the running level, and that's basically -- we're not predicting any changes in that respect.
[Operator Instructions] We will take the next question from Konrad Zomer from ABN Amro.
I have 2 questions, one on the gross margin and one on your financial charges. The first one on the gross margin. You mentioned in your outlook that you expect it to be broadly in line quarter-on-quarter. And if I then look at the gross margin development of the final 2 quarters of last year, that implies, let's say, a 20 basis point positive impact sequentially. Is that too statistical? Or is that related to, let's say, a less severe impact in your perm placement and RPO business? Or do you expect to continue a higher gross margin in your temp side? And my second question on the finance charges. They've gone up over the quarters because of higher interest rates. And it seems to me that the natural hedge that Randstad has always successfully had in place of the general economy and interest rates may no longer apply to the current market. Is that something you're still comfortable with? Or do you look at your, let's say, variable interest rates with a slightly different view now?
Yes. Let me take the first, the interest rate one. So I mean, yes, the interest expense has increased, as you said, I mean, I think I've highlighted it as well. It's a combination of both, slightly higher net debt than last year, but of course also an increase in interest rates. So indeed, in general, our policy has always been, we will keep, let's say, interest rates on our debt or our net debt floating as much as possible. And that remains the same. I would argue, Konrad, yes, the net debt hedge, it's actually working. I mean, if you look at the cash flow that we generate, so it depends a little bit on how you take the hedging. Yes, EBITA is slightly lower but more than compensated by our flow generation. Interest rates are higher, but at the same time, they don't cause a problem for Randstad in terms of covering or any covenants from covering the interest expense. So it is working. We continue to look if it's still the best way for us to look at our financing needs going forward. Again, our net debt is still, of course, this year a function. It could be even lower. I mean, if we just did not have a share buyback program, for an example, this year, our net debt would have been lower. So I would say the hedge and the comfort with which we approach our financial position is quite solid and still applicable. In terms of gross margin, look, what we do is of course look at what we know from where we live, now Q3 and we look at Q4. We look at our country mix, we look at our business mix, we look at our fee versus temp and the resilience indeed of the pricing in temp. And then we take a stance on how our gross margin is likely to evolve. And from what we know today, we feel quite confident saying broadly stable in line with Q3 into Q4. Again, we still see a reasonably strong perm and RPO mix in -- or impact of mix in Q4, so in 2022, right? So I think it's a matter of mix and just what we see broadly in line with what we now choose to guide for.
Thank you. It appears no further questions at this time. I'll hand it back over to your host.
Caroline, if there are no further questions, then I would like to say before we wrap up the call, I would like to thank all 640,000 Randstad talents and employees for their hard work in this quarter. And of course, many thanks to our clients for doing business with us.
Thank you for joining today's call. You may now disconnect.
Thank you, everyone.