financial glossary

This section provides you with a summarized overview of all financial definitions we use in the company and throughout this website. It supports you in understanding used terminology and describes the calculations behind it.

Amortization (and impairment) of acquisition-related intangible assets

Upon acquisitions Randstad identifies intangible assets, such as customer relationships, brandnames and candidate databases. These acquisition-related intangible assets are amortized over 5 to 7 years, on average, leading to an annual non-cash amortization charge which is included in operating profit.

Capital expenditures (part of cashflow from investing activities)

Amounts incurred for investments in property, plant and equipment (eg furniture, computer hardware) and software.

Cash flow from operating activities

EBITDA adjusted for changes in working capital, taxes on income, movements in other balance sheet positions, such as provisions, and certain other non-cash items.

Closing price

Share price of Randstad at the end of a certain trading day at Euronext where an (ordinary) share of Randstad is listed.

Cost of services

Expenses which are directly attributable to revenue. These costs mainly include expenses related to staffing employees, such as wages, social charges and taxes.

Diluted earnings per share

Diluted earnings per ordinary share are calculated by adjusting the weighted average number of ordinary shares outstanding, assuming conversion of all dilutive potential ordinary shares. The dilutive potential ordinary shares arise from various share-based payment arrangements.

Dividend on ordinary shares

Part of net income attributable to holders of ordinary shares that will be distributed to holders for ordinary shares.

DSO (Days Sales Outstanding, moving average)

This KPI represents the number of days before we are able to convert sales into cash (received from our customer)

Formula: Trade receivables (before provision doubtful debts) over the last 12 months divided over the revenue over the last 12 months, including value added tax multiplied by 365/12

EBITA

Earnings Before Interest Taxes and Amortization (and impairment of acquisition-related intangible assets and goodwill). It is basically the same as operating profit adjusted for amortization charges on acquisition-related intangible assets. This is the key performance indicator when looking at profitability of our business.

EBITA margin

EBITA as percentage of revenue

Enterprise value

Market capitalization plus net debt

EPS (Basic earnings per share)

Net income attributable to holders of ordinary shares divided by the weighted average number of ordinary shares outstanding.

Free cash flow

Free cash flow is the sum of net cash flow from operating activities and investing activities adjusted for cash flows for acquisitions and disposals of subsidiaries and associates.

Gross margin

Gross profit as percentage of revenue

Gross Profit

Revenue less cost of services

IFRS

International Financial Reporting Standards

Incremental conversion ratio

Additional EBITA in a year, when compared with previous year, as percentage of additional gross profit in a year, when compared with previous year. We target at an incremental conversion ratio of 50%, in case of growth in gross profit.

Leverage ratio

Net debt divided by 12-month EBITDA. We aim at a leverage ratio of between 0 and 2x EBITDA, which is important for continuity. The syndicated loan documentation allows us a leverage ratio of 3.5x EBITDA.

Liquidity of shares

Total number of shares traded on Euronext

Market capitalization

Total shares outstanding multiplied by the share price of Randstad.

Net debt

Cash and cash equivalents less current borrowings and non-current borrowings.

Net finance costs

Net finance costs mainly include net interest expenses in relation to our net debt position. Other items included in net finance costs are foreign currency exchange results, net interest expenses due to passage of time and other items.

Net income

Operating profit less net finance costs, share of profit (or loss) of associates and taxes on income.

Net income attributable for holder of ordinary shares

Net income adjusted for the dividend on preferred shares

Net income attributable for holder of ordinary shares before amortization and impairment of acquisition-related intangible assets and goodwill

Net income attributable for holders of ordinary shares adjusted for amortization and impairment of acquisition-related intangible assets and goodwill after taxes

Operating expenses

Operating expenses comprise personnel and accommodation expenses in relation to the activities at the outlets and the various headoffices, IT expenses, other general and administrative expenses, as well as the amortization and impairment of acquisition-related intangible assets and goodwill.

Operating expenses margin

Operating expenses as percentage of revenue

Operating profit

Gross profit less operating expenses

Operating working capital

Trade and other receivables (excluding current part of held-to-maturity investments) less trade and other payables. The level of working capital is related to the timing of the invoicing and payrolling processes (weekly or monthly). In addition, the payment terms we negotiate with clients and the effectiveness of our collection processes are equally important. Liabilities, such as social security, wage tax and value added tax are settled every month and in some countries on a quarterly basis. Payment terms are often determined by law and therefore difficult to influence.

Other revenue

This category includes revenue for services such as payrolling, outplacement, outsourcing, managed service provider, consultancy and related HR offerings.

Pay-out per ordinary share

Dividend on ordinary shares divided by net income attributable to holders of ordinary shares before amortization and impairment of acquisition-related intangible assets and goodwill and one-offs after taxes.

Permanent placements

Revenue from permanent placements includes the fee received or receivable for the services provided. The fee generally being calculated as percentage of the candidate's remuneration package.

Productivity

We measure productivity in three ways:

  • Number of temporary workers per staff member (EW/FTE)
  • Gross profit per staff member (GP/FTE)
  • Gross profit in relation to personnel expenses (GP/PE)

Recovery ratio

The total year-on-year change in operating expenses as a percentage of the decline in gross profit. We target a recovery ratio ≥ 50% in case gross profit declines.

Revenue

We distinguish three categories of revenue: revenue from temporary billings, permanent placement fees and other revenue.

Revenue categories

Revenue categories are service concept: Staffing (including HR Solutions), Inhouse and Professionals

Revenue from temporary billings

Revenue from temporary billings includes the amounts received or receivable for the services of temporary staff including the salary and salary-related employment costs of those staff. These revenues are generally based on the number of hours worked by the temporary staff.

Segment reporting

Segments are geographical areas and are reported in line internal reporting

Share of profit/loss of associates

Associates are companies where Randstad Holding nv has significant influence, but no control, over the financial and operational policies, generally accompanying shareholding of between 20% and 50% of the voting rights. The share in the net result or loss of the associate is presented in this line of the income statement.

Syndicated credit facility

Randstad has a revolving multi-currency credit facility of € 1,800 million, the majority of which will mature in 2020, with an option to extend by a further year.  In addition, we have uncommitted credit and guaranteed credit lines of € 1,100 million available. The loan documentation of all credit facilities allows a leverage ratio of 3.5 times EBITDA (However in certain cases, we are now allowed to report a maximum leverage ratio of 4.25x EBITDA for a limited amount of time), although we aim for a leverage ratio of between 0 and 2, which is important for continuity.

Taxes on income

Taxes on income comprise current taxes and the realization of deferred taxes. Current taxes on income are the sum of taxes levied on the results before taxes, in the countries where those results were generated, based on local tax regulations and against tax rates of the applicable year. Tax-exempt income and expenses not deductible for tax purposes are taken into account in calculating taxes on income.

Velocity of shares

Velocity represents the average holding period of a share Randstad. It is measured as the total number of shares traded divided by the average number of shares outstanding.

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