Earnings Call: Q4 2013

Feb 20, 2014

Ladies and gentlemen, good morning. Welcome to our Q4 and Annual Results. I would like to welcome all the people here in the room, analysts but also representatives from the Dutch press. Welcome also to the people listening in to this call on the line and on the web, our analysts, investors, but also our colleagues. Welcome. The agenda for today is slightly different from previous sessions. We'll of course start with the operational update from Benautobahn then followed by the financial performance by Robert Jan and then we have Jacques van Bruck, our new CEO who will make some comments on the strategy also going forward. And we'll end this session with a Q and A. So with that, I would like to hand over to Ben. Thank you. Good morning everybody. If you throw a party, there's always some tension whether or you'll get some guests until three years ago there's nobody in the building. But thank God we have an audience. My final quarter results presentation, the forty sixth time I calculated quite something. And actually, I think at a good moment in the cycle, especially for the analysts, surely. We'll get to the results first. Disclaimers, performance, performance. If you look at the performance of the company, Q4 some growth, actually 2.2% organic per working day and a slowly but a gradual improvement month on month. As from September where we've seen growth starting, we had in October one point something percent growth at the end of the quarter December 2.8%, 2.9 generally 3.2%. And as part of the fact that December is usually a difficult month to retrench, the trend is clear and we still see this trend continuing. For us that's very positive. We've seen a few things happening by the way of course and we've seen also the expectations of the market. Let's address those for a moment. There was quite a gap in profitability, which was a bit of a surprise to us, but anyhow it's what was the expectation. We saw a major impact of ForEx. We had €143,000,000 less revenue just based on the foreign exchange aspect. We spent as announced €13,000,000 because we announced already at the Q2 numbers that we would spend about 22% of revenue extra on marketing. So we spent €13,000,000 on marketing in Q4, which had an effect which resulted actually only about 3.7%. Why did we do all this? And there are some more aspects in which we invested with and I'll get to those in a minute. We have more people in specific markets. Again the marketing because we see the markets improving. Obviously, have to pre invest in markets that are improving in order to take advantage of the fact that you actually have a growing market. And that's exactly what we've been doing. So I'm more positive than it might look if you look at the exchange the stock exchange because I think we've spent the investments based on positive expectations. Next to the fact that we have some odd if you want events like CLA in Germany etcetera that had an effect on profitability, but will obviously be compensated for sure in the course of this year. So blended recovery gross margin up 20 basis points, operating expenses up and we also managed that expenses will be at least and I can't emphasize at least enough €15,000,000 lower in Q1 of this year. And EBITDA margin stable at 3.7% in spite of all those relatively, if you want, one offs and specific events in a few countries. So, weather recovery in Europe as we've we've also seen and also the statistics of markets that have been published underlying this trend, which again is also positive. Difference of course being that in the past we saw so with that, I would like to hand over to Ben. Thank you. Good morning, everybody. Ladies and gentlemen, good morning. Welcome to our Q4 and Annual Results. I would like to welcome all the people here in the room, analysts but also representatives from the Dutch press. Welcome also to the people listening in to this call online and on the web, our analysts, investors, but also our colleagues. Welcome. The agenda for today Ladies and gentlemen, good morning. Welcome to our Q4 and Annual Results. I would like to welcome all the people here in the room, analysts but also representatives from the Dutch press. Welcome also to the people listening in to this call on the line and on the web, our analysts, investors, but also our colleagues. Welcome. The agenda for today is slightly different from previous sessions. We'll of course start with the operational update from Benautobaum then followed by the financial performance. Ladies and gentlemen, good morning. Welcome to our Ladies and gentlemen, good morning. Welcome to our Q4 and Annual Results. I would like to welcome all the people here in the room, analysts but also representatives from the Dutch press. Welcome also to the people listening in to this call on the line and on the web, our analysts, investors but also our colleagues. Welcome. The agenda for today is slightly different from previous sessions. We'll of course start with the operational update from Beneltsbaum, then followed by the financial performance by Robert Jan and then we have Jacques van Bruck, our new CEO who will make some comments on the strategy also going forward and we'll end the session with a Q and A. So with that, I would like to hand over to Ben. Thank you. Good morning everybody. If you throw a party, was there's always some tension whether or we'll get some guests until three years ago there's nobody in the building, but some words we have an audience. My final quarterly results presentation, the forty sixth time I calculated quite something. And actually I think at a good moment in the cycle, especially for the analysts, surely. We'll get to the results first. Disclaimers, performance, performance. If you look at the performance of the company, Q4 some growth, actually 2.2 organic per working day and a slowly but gradual improvement month on month. As from September where we've seen growth starting, we had in October one point something percent growth at the end of the quarter December 2.8%, 2.9 January 3.2. And as part of the fact that December is usually a difficult month to retrench, the trend is clear and we still see this trend continuing. For us that's very positive. We've seen a few things happening by the way of course and we've seen also the expectation of the market. Let's address those for a moment. There was a slight gap in profitability, which was a bit of a surprise to us but anyhow it's what was the expectation. We saw a major impact of ForEx. We had $143,000,000 less revenue just based on the foreign exchange aspect. We spent as announced €13,000,000 because we announced already at the Q2 numbers that we would spend about 20% of revenue extra on marketing. So we spent €13,000,000 on marketing in Q4, which had an effect which resulted actually only about 3.7%. While we do all this and there are some more aspects on which we invested and I'll get to those in a minute. We have more people in specific markets. Again the marketing because we see the markets improving. Obviously, you have to pre invest in markets that are improving in order to take advantage of the fact that you actually have a growing market and that's exactly what we've been doing. So I'm more positive than it might look if you look at the exchange the stock exchange because I think we've planned the investments based on positive expectations Next to the fact that we have some of if you want events like CLA in Germany etcetera that had an effect on profitability, but will obviously be compensated for sure in the course of this year. So, Body Recovery gross margin up 20 basis points, operating expenses up and we also announced that expenses will be at least and I can't emphasize at least enough €15,000,000 lower in Q1 of this year. And EBITDA margin stable at 3.7% in spite of all those relatively if you want one offs and specific events in a few countries. So, net recovery in Europe, as we've all seen and also the statistics of markets that have been published underlying this trend, which again is also positive. Difference of course being that in the past we saw if the market would change, would certainly go to 10%, 15%, sometimes even 20% growth. That's not happening. It's going very, very gradual. You could think that if things go slow, they are more solid. I don't know if that's the case by the way. But anyhow, we see the trends improving month on month literally. We see actually we saw an increase in growth in emerging markets, a market I will not talk about specifically. If you look at China for example, we've seen growth rates high, high double digit and even profitability in a few months that was high, very, very well over the That is also positive in spite of all the news we see nowadays about the threat of the emerging markets collapsing. And our business and our trends there have been extremely strong and positive. North America. We shared with you already in Q3 that in the professionals we were not happy with the performance. We have been underinvesting a bit. We've collected that. So we've done two things in professionals in The U. S. We have added more people especially in our IT business. They actually also turned into growth at the end of the quarter, very positive and we invested quite a lot in marketing. The effect of that effort of course will be noticed in the coming quarters about which we are very positive. Starting with very well gross profit up. Again, we've been looking at quality of the business. We've been looking at a number of things in the mix. We've been boosting perm. It has actually had excellent growth through the year. And also in Q4 again, we've looked at risky jobs where our risks, workers' comp etcetera are high and we don't want to be responsible for accidents. So, we've been avoiding that sort of work. And last but not least, of course, we've been looking at contracts where we can make money and we have been shutting quite a lot of contracts, especially low margin blue collar business where we didn't see profitability coming. We are very pleased with the performance of Staffing, a record profitability for both Q4 and full year and I wouldn't be surprised. I'm not saying this because I'm leaving, if that would still improve if you look at the perm. And Linda is now smiling at me. I don't know if she's happy or not, but we'll see. Again, Professionals top line somewhat disappointing trend that we already shared in Q3. The biggest business by far IT has turned the corner. Finance still weak but also improved. The other business are relatively small but getting there. And third, a part of the top line if you want reduction is quite a few of the payroll businesses contracts that we actually also don't have anymore. Payroll is big volume. It looks fantastic in your revenue, but lower profitability in The U. S. So we are not sad that we've lost that business. On the contrary, part of it is actually a conscious decision. So EBITDA margin 4.6% in light of the extra investments in both marketing and FTEs, it's something we that's okay with us. It's not fantastic. It's not bad either. We think it's reasonable. France, market has improved and obviously, we came from a minus 6% and before that minus 11% and minus 13%. Now it's down only 2%. Statistics the market statistics are actually still trending up. Gross profit up 10%. Same impact of CSA be up 20 basis points less than in Q3. The costs are up 11%. We had a sort of a one off bonus, which we had to pay. We did also invest here in marketing. France is actually performing in an excellent way if you look at the bundling of small branches into big ones. It will be finished by the second quarter of this year, which means that we will then have closed 165 branches, which is a tremendous operation as you can imagine because we have to find new branches, we have to make sure that they are ready, that we have everything in there, the building has to be done, people have to be moved. It's actually it's an impressive operation they've done there. EBITDA margin up 3.7%. And again, if you would normalize for things that we cannot book as one offs, but still if you take them into account, it would be still higher than even the 3.7%, which I think is a good sign for the coming quarters. At the bottom right hand, we explain how what happens in the Cisse. I think we explained it a lot before, so I don't need to get into those details. The Netherlands, back to where it should be, margin of 7% EBITDA, which we feel is impressive. Again, the message is boring, I know, but it's still true. We're looking at the right quality business where we can make a decent profit. We've done a lot actually in Holland. If you look at the performance of our companies, Europe had an excellent profitability. It has taken some time and I'm very happy I can say this. I'm the market leader in Holland in professionals making a considerably above average EBITDA and I think there's still more to come. Water margins at the plus 3%, very profitable company minus 5%, but also improving gross margin improving and we promised you last year the initiatives to compensate for the changes in social security charges. We more than compensated for those, which of course led to the positive EBITDA development. Again, strong profitability professionals, business mix has improved, small divestment and small stuff next to that. But I would say, excellent performance in one of our key markets. Germany, 9% growth. We love it when Germany growth. This is one of the if you want sort of one offs, we'll need a little bit of time to compensate for. Early December sorry November, a new CLO was agreed upon and that month that we had to recalculate quite a few provisions that we had taken. It's both on number of hours per employee. It's about holiday pay. It's about sick pay. Because the new CLA prescribes that we have to calculate those elements, the provisions for that for the FlexWorks based on the average of the last thirteen weeks. So and then, of course, if you go to equal pay, salaries goes up. That means if we are provided for let's say €8 per hour holiday pay and it goes to €10 that obviously has a big effect on our margin. It's more or less a one off because as usual and we've been very successful in Germany last year, I think on average we increased prices by 7% in Germany. We'll pass these increases on to our clients. Speed is difficult to forecast, but I would be disappointed if this would not be relatively fast. So that means, it will have a positive effect again on our gross margin. That was the biggest effect on our profitability, if you want the second biggest of course is also here we decided because it's a promising market and we need to work on the positioning of our company on marketing. So also there we spent a fair share of the €30,000,000 extra net on top of course our normal spend. Belgium back to growth. They went through a difficult year. The reorganization is getting close to fund situations, took us six months. They have a renewal which indeed sounds French and the speed of the organization is about that fast. It's sort of a disaster by the way both for employees and employers because it leaves your employees which you do not want in uncertainty for way too long. I think it's bad to have legislation that puts people in such a bad position. So we canceled 130 jobs, annual savings 16,000,000 As we announced, we took a provision of 24,000,000 but the payback will be one years point instead of our normal one year, but still at $16,000,000 cost savings annualized. Ibrana is getting back to where it used to be at 4.8%, but one working day less obviously adjusted for the restructuring costs. Mix is also improving. We've seen a stronger growth in the clerical part of the market. We've seen professionals growing. We've seen perm growing. So the mix is also improving, which in my view is also a good sign. U. K. Continued growth plus 7% led by education, construction and finance. Finance is good news by the way as is construction. Education has been doing well anyhow. We've been doing well. In Q4 last year, last year meaning 12 obviously, we had some extra windfall that didn't help payroll related items that is meant here. We have again in a number of countries we have a few of one offs which has a downward which caused a downward effect on the total EBITDA. For sure U. K. Is one of them. If you would compensate for that it would at least be equal to last year if not better. Also here we launched a marketing boost plan and the results of those should be visible within six months as usual. Iberia strong conversion, plus 8% in Portugal impressive, plus 2% in Spain. For sure, if you look at Spain, it's one of our I think tightest operations we have in the world. They are extremely sophisticated in field steering, know exactly what's happening. We come along the that the integration is will be done will be finished in the first half of this year. Although, if you look at the important elements of the integration and that's people and management that of course has all been done already a few months ago. Everybody knows what his or her job is actually today. They're all in place, but there's still other stuff like IT etcetera that we need to organize. We have a very solid growth in professionals. We started here at grassroots and it has been after two years of trial and error has been a big success and a big growth that we've shown here. We've also seen some major clients with a major slowdown. Coincidentally, these were USG clients, but it has nothing to do with USG, its market. One of the biggest clients in Spain in automotive actually went down to zero and now start to order again at better margins than they had in the past by the way for us. Hardware being a big client also went down and also starting up activity again. So we are pretty positive about the potential volume development in Spain, which given that efficiency will be for a big part translated into EBITDA. Other regions, just to give you a view, Italy up by 7%, again in spite of the fact that they have to merge. In cost, the synergies will occur these first two quarters. Switzerland at the plus 2% and housing well. Japan 4% keeps on doing well with a very impressive profitability. Australia was 8%, plus 9%. We saw actually an acceleration in growth in January even. So we are actually fighting our way out of the local crisis we have there. It's still the lower part if you want the blue collar and lower classical part that's growing and less so in Poland and a bit less so in most of the professional business that's of course in the end is going to cause a real profitability jump, but still we're on our way. And Asia and Latin America, investing in growth, but as I said, in China for example, high double digit growth. In Brazil, we had high growth again, etcetera, etcetera, so looking well. Looking at it per industry, automotive is actually doing well here, which is I think encouraging because we have a nice share of our business in automotive and their suppliers obviously. Third, funny enough, slightly negative in most markets. Manufacturing, improving if you compare these numbers to last quarter. Transport and logistics, as always manufacturing logistics is where growth starts. Business services and in some markets even financial services and the public sector like in Holland is growing. So an improving picture if you look at where we are coming from. Then that's AimoEd Intel. My final presentation, I because I might not have the opportunity, I want to thank you for your trust. I hope that we were always as transparent as we should have been because we see it as one of our most important responsibilities. It's for the investor community obviously to decide whether or to buy share price whatever. I've always tried to manage a company not a share price because I think that's a dangerous focus you get on that one. One should never do that and I know that my successor and my colleagues that say he will not try to do that either. I hope I did again my best to be transparent because I know that what you guys do is extremely important for society. You take care of people's money, your pension funds, etcetera. So I thank you for your trust and I'll see you later for sure at a drink and maybe at my party. And now I hand over to Rob Good morning. I'm going to share the financials with you. And if you look at this P and L, which is the fourth quarter of twenty thirteen and 2012, it looks as if it has been rather calm in between. It's rather similar numbers, but that's not the truth. If you look at what happened in between, we've gone through a quarter four last year, which was at minus five minus 5.3. Then Q1 and Q2 were at minus 3.7%. We moved to minus one in Q3 of this year. And now finally, we're back to growth. So there has been quite sort of a change of climate in between and that makes the comparison of the numbers a little more difficult. But Ben already elaborated on most of the issues. If you look at the growth level, 2%, 2.2% actually compared to minus 1.1% for the third quarter. I'm going to get back to gross profit and operating expenses separately. But if you look at the integration costs, 37,000,000, that is the Belgium investment that we have made, What the return like in France is a little slower, so we typically and effectively the proof is clearly there, we typically get a return within twelve months. The social context in France and Belgium is just different. That makes it take a little longer. 24,000,000 out of the 37,000,000 relates to Belgium and most of the rest relates to integration of both the American SFM business, the remainder of that and USG. Amortization and impairment here, 36,000,000. That's a regular pattern, so no impairment of goodwill in this P and L. Net finance cost $4,000,000 I would want to add proudly 4,000,000 This is the reflection of a reduced net debt level. End of last year, was 1,100,000,000 It moved to $790,000,000 at the end of Q3 and now it's at $761,000,000 And the interest policy of Randstad, as you know, to is use floating interest rates because that's the best hedge with the economy. Higher level of growth creates higher level of interest, low level of growth creates low level of interest and the ambition of Randstad, the policy is to pay as little as possible when times get tough in order to protect the company. We have increased the level of taxes a little bit. That's also because the blend in our business is that we earn a little more in countries with a higher level of corporate income tax. The key financial points. The first one is free cash flow, 22,000,000 last year. There was a lot more. But as I said in between, quite something happened. We had a wonderful finish. I'm going to the third bullet first, a wonderful finish of Q3 twenty thirteen. I already stated it at the time that we did not anticipate a huge improvement in Q4. A second point is that we also paid a long standing item, 131,000,000, to the Dutch tax authorities, which was an arrangement we agreed upon in 2009 and it was delayed once, but finally now this has been paid. We also have a change. I shared the climate with you. So the fact that we now have growth means that we have some increased capital working capital requirements coming back in, whereas, for example, last year with 5.3% decline in our business, you get a release of working capital because we have lower level of receivables and effectively that comes back into the net debt level, which is a protection of the company as well. And we also have some payments of provisions. So we have provided for a couple of items in the past, which translated into cash out in the fourth quarter. Leverage ratio now at 1.2, stable compared to Q3, but at a, I would say, comfortable level from 1.1 at the end of last year now to €761,000,000 Effective tax rate, I mentioned this already. Diluted EPS almost flat if you take out the dilutive effect of stock dividend and options. The proposed dividend of debt back to debt later stands at $0.95 per share. Looking at the segmental performance here, staffing business that includes most of the marketing investments, the additional marketing investments, so on top of the regular spend that we have. I'm not going to elaborate on every point because Ben already did that when going through the countries. Solid performance of in house, as you can see here, somewhat supported by the CCI subsidies, but also hit by the negative impact in, for example, Germany, 5% EBITDA margin. And professionals, improving trend in North America. We can see our IT business in North America getting back into growth also, an improving trend in the rest of the world. Japan continues to provide growth and also in the perm business. We have a gross margin bridge here. It compares last year Q2, last year being the fourth quarter of 12%. We should live in the past, but doing this makes it a little difficult. So Q4 twenty twelve, 18.2%, now a little higher, 18.4%, 20 basis points higher. In between, we have the buckets as you know them. We can see some margin expansion in North America and rest of the world. We see the CICE benefits of France coming in a little less in the first quarter and then accelerated into Q2, Q3, Q4 just north of 200 basis points impact. Legislative changes in The Netherlands and Germany, which were mentioned already. Perm fees were a little lower as a percentage of gross profit for the full year. It's around 9%. In the fourth quarter, it's 7.8%. And the negative impact of foreign exchange is a little higher here because a big chunk of our permanent placement fees comes from dollar and from sterling countries where we have the impact of exchange rates. And our continued focus on client profitability, for example, in our American Staffing business leads to decline in revenues, but increase in GP. Operating expenses, a bridge to sequential one, left upper corner. Last quarter, which is Q3 twenty thirteen, dollars $612,000,000 going to $628,000,000 here. And if you look at the foreign exchange here coming in as a benefit on the cost base, it has a positive effect. Marketing, the additional spend, 13,000,000, and then we have a few boxes of adding costs. This amount, 3,000,000, relates to what we call the Dutch luxury tax. It's a 16% charge on anything earned north of €150,000 and that includes the exercising of options. We think it's gone now for 2014. Hopefully, it is. And then comparing year on year, last year, $616,000,000, we're making the adjustment here for USD. It has added €70,000,000 because it wasn't consolidated it wasn't acquired at the time. And it all sorry, it includes the items that we effectively have discussed before, the synergies here, some effect from small disposals. And here, these two boxes, growth of the cost base in Europe and North America, mainly caused by the additional marketing investments. So if you look at the full year, and I already gave you some context of the full year, a gradual recovery clearly since Q2 twenty thirteen. Unfortunately, the foreign exchange effect plays a role. If you look at the impact relative to consensus, it's close to €60,000,000 If you translate that according to a normalized conversion, it will have an effect of up to €10,000,000 at the bottom line. And we see the gradual recovery mainly across the most of the European countries. We acquired USG. The purchase price was $20,000,000 and we announced synergies of between 15,000,000 and 20,000,000 and these will come in gradually in 2014. We have seen a small impact in 2013, but most of it will come in, in 2014 and that is because three quarters of the acquisition relates to Spain and Italy and that's where the integration has started as from the January 1. Productivity improvement, when we measure gross profit earned by FTE per FTE, it's up 2%, a very strong recovery ratio. That's the ratio we use when being in a downturn. We look at how much we recover from the lost gross profit. We clearly have some guidelines for that. This is a high level of recovery. We're now gradually moving into incremental conversion again, which is the better side of the coin. So that's where we look at a relatively high conversion at the very beginning. So new gross profit earned needs to be translated into, as we say, at least 50% incremental conversion at the bottom line into EBITDA. And typically at the very beginning, that goes without huge investments, more bonuses, more marketing, but not really adding a lot of people and certainly not branches and back office. Underlying EBITDA is up by 3% due to the elements mentioned also by Ben. And moving average DSO is stable at fifty two days in Q4. This is the income statement for the full year. Most of the these items have been discussed already. I just want to point out that amortization here includes €36,000,000 charge in Q3 relating to the Australian goodwill position. It's highly subjective, this line, but this is the sort of the regular depreciation mostly of the value of our client database, of our candidate database, brands, etcetera. Now moving to the overview of our invested capital. We have revised our presentation slightly here. As you can see, 3,700,000,000.0 invested in the company through equity and net debt. And at the bottom, calculated a return on our invested capital of 12.6%. And that I would say is the result of the development in our EBITDA, but also I would say our increased efficiency in working capital, which is now below 3% of revenues going quite well, relatively low interest charges as you can have seen them. Also when we benchmark ourselves, it looks rather low and pretty solid tax planning. Our free cash flow is at €293,000,000 for the year. It's quite substantial difference with last year, but please note that $130,000,000 that I mentioned before has been paid. And there is another interesting element that's over here, other items, and that includes the fact that in France, is an additional subsidy on low wage salaries and this money only comes in after three years. So that's being taken as a profit, but the cash in is delayed for a while. That's the item in here. Our dividend for $20.13 to be paid in April. The dividend policy was reset in 2012. We announced it in advance. This was set at a range between 4050%. It was intended to be 40% and it could be higher when we have special circumstances or when the balance sheet is solid. We've read your expectations. We've discussed it in the company. We've decided that, especially given the strength of the balance sheet, we think the 45% payout makes sense, which arrives at €0.95 There is a choice between cash and shares, but the default is cash. Then finally, the outlook for Q1. Organic revenues per working day in January at 3.2% compared to 2.9% in December. Ben already mentioned that these are very difficult months to read working days. So you cannot sort of take these numbers completely precisely. We do see we did see a gradual improvement throughout Q4 with a significant foreign exchange impact. We do see the trends in January moving into the month of February. I'm going to give you the exit rates now for the various countries. In January 2014, The Netherlands was at minus 1% in France, it was minus three in Germany, plus 11% in Belgium, plus 4% in The U. K, plus 3% Iberia, moved to plus 5% North America at minus three rest of Europe plus 20, and the rest of the world at a staggering plus 17. The challenging weather conditions in The U. S, you can get rather confused by little snow in certain parts of the country. And Randstad is geared towards Atlanta where there have been rather severe problems in January, and if I understand it well, even more in the month of February. So that plays a role. Two inches of snow driving on the summer tires makes it very difficult. The comparison base is going to be 2% tougher into Q1 twenty fourteen. You can see the comparison here, January with minus five percent and March at minus 3%. We're going to have the same number of working days as last year, by the way. That applies to every quarter in 2014. We anticipate to see seasonally lower gross margin in Q1. Q1 is always our softest quarter. And we expect the cost base to move down sequentially by at least €15,000,000 And if we say at least, it means we thought about it, which is the result of lower marketing and bonus costs. We do see a minimal impact from wage inflation. Cost savings will come in from the investment in restructuring in Belgium and the synergies from USG will be gradually improving. I'm going to hand over to Jacques now to give you a small update on the strategy. Jacques? Yes. Good morning, everyone. Good morning, the investor and finance community in the room and on the phone. But also, hello to all our colleagues. You might not know this, but several hundreds of our colleagues are listening in or watching on the website. So that's, of course, really a great opportunity to also address them because otherwise you need to fly across the world. So welcome and good morning. Let me start with the big surprise. New CEO, same strategy. That's probably not a surprise if you've been following the business. There's two reasons for it. One is there's nothing wrong with our strategy. And the second one is in our business, yes, strategy is important, but operations is far more important. So therefore, we did think that it's very interesting to give you a look into our priorities into the market today. The top end part of this slide, Slide 29, you'll recognize the total talent architecture, the way we are approaching our large clients. You know, we presented this last November in our last Analyst Days. So that's all out there. What is happening, albeit slowly, is markets are turning and what happens with turning markets? We've seen it before. And let me take you to the left bottom side, what happens in Staffing? What are we focusing on? We're leveraging from basic staffing more into what we call specialty staffing. There is going to be demand in IT, in finance, and we're trying to get that. We're to focus on permanent placements. If there's more security in the market, more confidence in the market, there will be more placements. On average, in our company compared to the last cycle to 'fourteen or 'eighteen, we have some 1,500 people more selling perm, either in staffing or in professionals. In staffing, we do this in in the unit as we call them. So our consultant goes out to the client and he has two messages or two questions. Are you in need of temporary staff or are you in need of permanent staff? And we can feel both, predominantly in the white collar segment where you see this a lot. And then there's the SME. In turning markets, for example, in The Netherlands, you see when the market turns, there's more demand in the SME for our business. If you've listened to our stories in the last few years, in a negative market, we concentrate much more on large clients because there's always business there. In the SME segment, that goes down a bit. So we concentrate less in our sales efforts on that segment. So in Staffing again for people who've been watching us as a company, we're trying to do the same as we did in 02/2004, 2008 where you saw our business mix change a lot towards specialty staffing, less so in perm, might be the upside in the years to come. Professionals, We're very happy that we're able to say that we now have a global concept in Professionals and perm, thanks to Linda, who together with the team from BCD has now developed the way to go to market in the ideal way in IT, in engineering and in finance, both in mature markets and in emerging markets. You heard Ben talk already about the growth we see in emerging markets. And in these emerging markets, we concentrate more on professionals than we do in staffing. Again, here focus on permanent placements and SME. These two segments, what do they mean for our operational priorities? It's all about a high frequency of contacts. If you have a large client, sure you have contacts, but there's demand, you keep up the contact. In the SME part and certainly in perm, it's all about being out there every week with a high frequency. I'll come back on that one later. In house, as you've seen the results in house are good. And we see more and more white collar in houses at banks, at insurance companies and call centers. And we now have a little bit more than 10, what we call professional in house sites where we take care in the same way we do in the manufacturing and logistics historically, but then for IT professionals or finance professionals. We think that's a very attractive development. Next to that, increase the share of wallet. That's not so much the share of market that we have in the pool part, in the large volume part, no, it's getting perm because sometimes they also have a need of perm. So we're also training our people in the 2,000 in house locations to go after permanent placements, white collar demand and we think that's an attractive development to keep up the profitability in our in house segment. HLS, already talked about a lot. In total telecom architecture, it's going well, a good development. So we'll continue doing that. Back to the high frequency, how are we going to run our operations going forward and intensify what we've been doing so far. First, I'll leave a message to our internal audience. Please be aware of this triangle. Print it, put it above your desk or your bed because we're going to come back on this triangle a lot every week for the years to come. It's pretty clear, we're going to concentrate again on profitable organic growth. You've heard us in the negative market, sometimes we prefer profitability of market share. In a turning market, there's a lot of profitable organic growth to be had. Field Steering, we took out a lot of cost. You might say, in our Field Steering, we concentrated on cost last year, took out a lot of cost. Now, we're going to concentrate on the activity part based part of field steering, the stuff, the activities we put into our market. So looking at the group part, I think that's pretty clear. I'm not so much trying to improve productivity by working with less people, but improving productivity by selling more. The activity based field steering part. We start with a market validation. Where do we want to sell? Are we selling to the right clients? Are we focusing on the right profiles? Then we plan our activities. What are you going to do in your market? How many calls? How many visits? How many orders? And of course, you plan this, but then you need to look at what we call conversion, do the visits and the calls lead to the right amount of orders. Sometimes you need to support us better with marketing, sometimes you need to train your people better, but you need to control it every week. Our system works. You've we've seen it, we've you almost in our last before last Investor Day on field steering, you have a plan, you judge or you analyze what you've done and then you make an adjusted plan. It's weekly activity management and thus more planning. So we've never managed on averages. And even in a market which might be negative, we see cost per units and then we need to invest whenever we see the momentum. Going to the pink triangle, it's all about management. We have a lot of consultants. They're willing to do the job, but our management needs the support. Our management needs to coach and our management needs to control. And then, of course, pricing guidelines because in a large client environment, price is fixed. When you do a lot of perm, when there's a lot of SME businesses, you get new orders, pricing guidelines are important. And then again, already seen in Q4, when we see momentum, we're willing to invest. So again, this is our plan for this year. I also would like to take the opportunity to introduce the responsibilities of the team. It's by far the best team in the business. I've just made a quick calculation of the years in the business. It's a whole over one hundred and forty years in the business, excellent track records, everyone grew up in the grassroots of the business, worked in several countries and in several businesses. So it's the best team that I can definitely think of to manage. Also with the best CFO in the business, Robert not just in the business, but in the country. So thanks. So this is where we are. I just want to mention a few things. Francois, it mentions functional area staffing concept. So Francois, with his excellent track record again in France, is going to drive the further professionalization of our staffing concept around the world. And Linda is going to do the same for professionals and for perm, and I'm going to stay with in house. So, before moving to Q and A, I'm optimistic. I'm optimistic because of the team. I'm optimistic because of the capabilities of our people around the world, our concepts and our brand. And I'm optimistic because it's a state of mind, it goes with the territory. So every time you ask me, are you optimistic? And I say yes, you need to ask a second question because I'm always optimistic. So that's very important. But then there's markets. And you know we manage the business on actuals. That gets us back to today because the markets are growing on average with 3%. Is it still snowing in Atlanta, Linda? We hope not, but it has been snowing in The U. S. So that's where we are with markets. Those are the actuals. So Ben, also on my behalf, I'll do this a few more times I think on several occasions, but still every occasion is an occasion to thank you me personally and you personally for me for twenty years of cooperation. We've mastered the art of communicating without talking, which is great because if he talks you don't always know. But seriously, we went through a lot. If you talk about the company, it's also twenty years and I'll miss you, but we'll have our weekly coaching sessions at your billiard table at home. So with that said, we'll move to Q and A. Okay. We'll first start with the questions in the room. Then we have only a couple of questions on the line and then we'll move back to the room to address some last questions from the analysts, but also the Dutch press. So we'll start here in the room. I suggest we start here on the right side and then move because you're all sitting in the front. Start over here. Arun? You want me to wait or it's bad now. Okay. First question is on The Netherlands and then specifically within the yard. So what happened to profitability over there? Is it the market? Is it the underlying performance within the yard? Is the performance of your sort of getting to where the company wants to be within professionals? So what happened to yours all of a sudden is the market is the underlying performance? Second question is on North America maybe a question for Linda. Actually, I tend to see an increasing divergence between the top line performance of Randstad, but also some of the peers and the market data. So who has it completely right? What is the reason for this divergence? And then third question for Robert Jan, quickly on the SG and A. Basically, you guide for an underlying increase of the SG and A for Q1 of around 3.5%. Is that sort of the way going forward taking into account so you guide for a sequential downfall of $50,000,000 right? And I think the Q1 last year and Q1 for '20 fourteen JP. So you guide for a 3.5% increase. Is that the way going forward taking into account all the effects of cost savings and the normal inflation? Those were my questions. On that first, yes, I heard you say all of a sudden. It's been something in the last two years at Jalt. I think Jalt is a good example when I mentioned the triangle on leafy nut operational performance. So I can say that within Europe everyone now knows on a weekly basis the amount of people they need to place, the amount of visits they need to make. So I think from an operational point of view, Europe has improved a lot and still a very tough market. And of course, you talk about Europe, you cannot talk about one market. In the engineering part, we're growing quite fast. The IT part certainly project based IT that's still tough. The old government market certainly the legal part of government that's still not great. So, it's a mixed bag. But yes, it's coming together. It's coming together, but slowly, slowly, slowly, but still. Maybe early now on U. S? So I think on The U. S, the question was about our performance to market. So yes, there are many different takes on the market in The U. S. We are also sometimes kind of confused when the data comes out. So we have governmental data, but then we have the data that we rely on a little bit more, which would be based on a cocktail if you wish of like competitors. The U. Is all about mix. It's a very big market. And major shifts in major segments can really affect overall market data because of way it's calculated. So light industrial when it goes up disproportionately drives market data. So we compare our performance to light competitors. While I would characterize 2013 as unspectacular in terms that we didn't gain market share in 'thirteen, I don't think we lost very much either. From a profitability standpoint, I think that we are best in class or close to it. I mean, I think that's an important point. And when you adjust for a couple of the very conscious choices we've made around clients and we have to do that because if I'm only worried about how I look to market, I'm going to make some different decisions, I think that you find the performance to be quite solid to market to competition and I think we're starting off well this year. Your final question about SG and A. I mean, I try to emphasize at least €50,000,000 less and that means it's going to it should be a little more than that. But we don't manage the company exactly by day by day. We respond immediately to whatever happens in the market. So I think you should take that into account in terms of the base. And then what's going to happen in the period after that, that's going to be a cocktail. Typically, as I explained, the first phase of recovery goes hand in hand with increased bonus commissions and marketing expenses. That phase should last for a while. But the blend in our business is that we have been growing in a few markets already for quite a while. Take Japan, for example, where we will be adding people. So that's going to play a role. And finally, I can only say that I hope to spend more, because that should be the response to an improved trend. And I think what we did do in the marketing in field of marketing in 2013 might well be repeated into 2014 if the trends do justify that. Okay. Then we'll move to the next question over here. David? Good morning gentlemen. First of all on the outlook, I think you mentioned you don't see actually right now in a growth acceleration that according to market data, there should be a further gradual recovery. So I am just comparing the January figures, the growth trend to December, are also looking at, let's say, the last couple of weeks trend? And then maybe related to that, one of your competitors was saying that there was kind of a blip in the January comps in France. So maybe that's also had an impact and maybe you see a different trend the last couple of weeks. That's a long first question. And secondly, on CICE impact in France, could you give a little bit more color on the expected impact in 2014? And maybe confirm that at least it should be a positive impact looking at the 200 bps increase on a gross figure? Thanks. Yes. Now markets, David, again, it's a mixed bag. As I've already mentioned, if you go from December into January, it's always tough to look at the comparisons. We do see a slight uplift in The Netherlands, so that's good. The start in France was not too hot. So, saw a gradual improvement in France in December, but then the early weeks of January were not great, see a slight improvement. But there's definitely a bit of a break in the trend, which is unfortunate. Germany looks good. Belgium looks good. U. S. Looks a bit less good because of the weather. But underlying, yes, as we mentioned, it's a continuing trend, but slowly up. Belgium is good, yes, as mentioned, yes. U. K. Is okay ish, but that's more a poor market. So, yes, gradual. And adding to that, I think typically these developments are not linear. This is always a little bit erratic. That's part of the game. But I think underlying we do see exactly what one anticipates to see is that the blue collar, so industrial logistics that is improving across the board. With regards to your question on the CISO, which is the French low wage subsidies, these are going to increase these have increased as per the beginning of the year from 4% to 6%, so that's a 50% increase. That is going to come through in our profit and loss account. And of course, commercially, we will continue to have the challenge about how to sort of retain this into our books, because that clearly is the purpose of the arrangement. And so far, I think we've done an excellent job in this field and we'll aim to do so also in 2014. So that would be reflected in a 50% increase. Maybe a quick follow-up. Are you meaning the 50% increase on the let's say the net impact of 2013 because that would be quite significant? Yes. That's what it is. It goes from 4% as a subsidy to 6% over the underlying wages. But in your P and L the impact was 180 bps. So should we count then on about 90 bps for 2014 incremental impact? Is that what you're saying or? Yes. Okay. Thanks a Good morning. Mark Wattsberg, ING. First, a follow-up on David's question on the trend January, February. You mentioned also that the trend is moving into February, but the trend is that the trend of January or is that the improving trend from December, January into February? And given that the January had such a big impact from France, has weather related impact in The U. S, could you give us a bit more feel for what the last four weeks dating from now as a sort of a trend have been. The 3.2% seems to me undershooting the real thing. So I'd like to get a little bit more feel for the real underlying trend. So you mean the trend of yesterday or last week? Preferably, but stripping out perhaps the January. Okay. No, trend of next week. David seriously. We've given oh, Marc sorry. But also follow-up on David so in that sense because he got he lost his question so you take over. No, it's time for April for January. And yes, we see a slowly improvement front. But again, it's not booming into February. It's not that first such a huge impact that we should No. Adjust the a question on the cost savings. Can you remind us a bit on the phasing of the French and the Belgian cost savings? How that should phase into 2014? How much was already in? And what should we still expect there? The French cost savings have mostly been earned already in the P and L, but something is going to come through in Q4. And the Belgium model organization has been executed late last year. So we expect to see the savings as from Q1. It's rather immediate. And I think it's important to mention I did it a few times already, but still we didn't do this in France with the first and foremost objective to save cost. We did it to get to bigger branches and bigger branches will lead to more effectively managed teams that goes hand in hand with what I explained earlier on improved operations and would also lead to more cross selling because the biggest thing we need to do in France is change the business mix more towards perm, more towards white collar, which is definitely the current French market, but that's definitely the main reason behind our change in France. Then we have a question here in the first row again. Yves Francois, Kepler Cheuvreux. Good morning. First question, could you quantify a bit more your planned investments in marketing 2014? You said marketing investments will continue, but do we see an increase there or same amount as 2013? Second question, net debt to EBITDA level is at yes, it's quite low now. Can you update us on your M and A strategy? What are your requirements and what are you looking for? Okay. Well, first on the marketing. So, some markets where we invested was Germany, U. K. Two aspects or two parts of our U. K. Business, education and construction property and engineering. And if you look at the results already now in that market, it seems that that's been picked up, so that's good. France and U. S. Props. So, it was a marketing boost. So, we had underinvested in marketing and we announced I think in Q2 that we're going to create a boost. Q1 will be lower than the boost in Q4. But again, as we mentioned, which I mentioned and I mentioned, if we see momentum in markets, we will invest in marketing to support. Because the more you invest in marketing, the more effective as we call it the funnel is, the easier it is to get an appointment with the client, because your top of mind goes up and your preference with candidates goes up. So, will not hesitate to do it. Your question is will it be the same level of two thirteen? We don't know yet, but we'll definitely invest when we see the opportunities. The M and A question, the balance sheet at Randstad has improved. We have always shared with you that we also next to organic growth, which is our priority have ambitions to look at growth through acquisitions to support the strategic success of the company. There is let's say, we always investigate whether we have opportunities in the field of professionals or to strengthen our position in certain geographies. But there is nothing also given the balance sheet, nothing significant imminent as we speak. Okay. Then we have two more questions here and then we'll move to the line. There are still three questions. Just limit it. No, you don't get the mic. Hi. It's Konrad Zorba, ABN AMRO. Can you quantify the growth rate in IT Staffing in The U. S. In Q4 please? And the second question is on The U. K. Particularly now that the perm business is growing again, Can you tell us a bit more as to why the EBITDA margin came down again instead of going up? Because it looked up until Q3 that you had turned the corner in The U. K. Was this a seasonal impact? Or was there anything particular going on? Sorry? The U. K? The growth rate in IT in The U. S. Is just north of zero. It just turned the corner. And again, when you talk about our U. K. Business, of course, it's still a group of companies. Overall, underlying trend is good, but we invested a little over €1,500,000 in marketing in U. K. Alone. And as mentioned, we had some favorable items last year in Q4, which was last year as in 2012, which was not really geared to better operations. So definitely the underlying trend as you've seen in the first three quarters remains. And again, we're happy with the investment we made in these two segments. So we're optimistic going forward, Konrad. Okay. We have a question in front Raul. Morning. Walter Koenig, Vinciel Dartbart. One question on the €131,000,000 tax payment. You said it was agreed upon already in 02/2009, think it was paid now. What's the reason for that? This is what you typically have with tax authorities. Not everything is black and white. You get to interpretation. We did have this issue on the table in 02/2009, which you might remember was when the going got very tough at Randstadt. At that time, revenues declined by 27% from €17,000,000,000 to 12,000,000,000 So anything sort of resulting in us not paying cash was more relevant than before. So we were a little more tough in the negotiations. And this was a matter of interpretation. Not as I said, not everything was black and white. And this could have lasted for a very, very long time. And instead of doing that, we came to the conclusion at that time that this money would be paid at a later point in time. So the company benefited from it and the tax authorities also because we did not have to spend extensive time in negotiating this, which might have resulted in more or less. Okay. Then I would like to move to the line. If we can get the first question from the operator. France. The receivable that you put in the account is about €73,000,000 which is about two fifty basis points on French margins. How do I relate that to the 180 basis points that you discussed on these calls is the difference, additional training costs and other offsetting costs of CCIE? Yes. And your second question was the right interpretation. On your first question, Yes, we committed to returning to market levels in 2014. And during the course of 2014, you will see that reflected in the numbers, yes. Again, maybe one addition Nicolas. In the cash flow statement that was shown on the slide that was called other non cash items. There's more items in there. The total gross receivable you could also find it in the appendix of the press release is roughly €70,000,000 That's the gross receivable which will be collected after three years. Can I just ask one follow-up on The U? S? You'd mentioned that the BLS data isn't necessarily a very good guide to market growth. Is there other metrics that we should be looking at? Because the BLS data does seem to be what we would expect to be consistent with current levels of GDP growth. Yes. So again, can just repeat what we look at because the BLS data weighs things one way, but certainly depending on the mix of business that you have and the types of customers you do business with, it can be reflected differently. So you would have to take the BLS data weighted according to our A, mix of clients and B, mix of segments. So we prefer to benchmark ourselves against light competitors, meaning competitors of our approximate size that have our similar mix of business. You have access to a lot of that data I would imagine. And again, I encourage you to look at all numbers because if performance is if revenue is the only measurement of performance, I think perhaps the conclusions are faulty. Okay. Thanks very much guys. Okay. Next question from the line please. The next question comes from Laurent Brunel. Please ask your question. Good morning, Laurent Brunel, Exane BNP. Two questions from me. First on France. Looking at your organic sales growth decline of 3% in Jan, is it only volume driven? Or is there a price issue? And regarding the CC, I mean, don't you think that you could have some indirect impact in terms of pricing? And I heard that some competitors are offering rebates. So what's your view on it? And secondly, a follow-up on the markets in Spain. Do you intend to invest in the same countries in 2014? And can you just remind me how much have you spent overall in 2013, please? First on CCIE and clients. So the answer we thought about is very low and the answer is no. So no rebates. As you know, we've already talked a lot about client profitability in France. Our strategy has not changed with or without CSAIC. So that's unchanged. Again on the marketing, that goes back to my answer I gave earlier to the colleague from KBC here in the room. When we see momentum in markets, regions or segments, we'll invest in marketing. So that's not to say we'll invest the same amounts of money in the same markets. But again, when we see the opportunities, we'll do it. I'm going to answer your question on the marketing spend as a total. And by the way that is can be found in our annual report on page 61. And that gives me the opportunity to emphasize the annual report, which is now an integrated annual report. I hope you'll enjoy it. It's online available. And it also states the marketing spend at the group level is 0.6% of revenues, which compares to 0.7% in 2012. On a monetary basis, that means it's flat. Okay. Next question from the line please. Your next question comes from Anja Suriyasama. Please ask your question. Good morning, guys. I believe in France, Mantou saw positive growth of 1%. They seem to think that they were gaining share in a muted market. You clearly saw an improvement from last quarter, but still a decline. Do you think you are more reflective of the market growth? Yes. Again, in France, we grow a lot in in house. So that's the good news. But overall, we're slightly below market and getting closer to market again. We've taken another share in 2011 and 2012, shed around $100,000,000 of business in 2012. That still transpires a bit into 2013. But again, we're very happy with our setup. What is hope but that's more hope than it is fact again. If you look at our base with in house, the amount of new clients we've opened, none of them have a relatively low printing demand. If that picks up, we'll benefit and then we'll take market share again. Okay. We have a very last question coming on the line. I just see so last question from the line. And your last question comes from Alex Magni. Please ask your question. Good morning. Just a couple of ones on Germany and a quick one on the CICE just to wrap up the understanding. Regarding the collective labor agreement, was the change in your assumptions on the provisions, I presume that was from the date of the negotiation and was not sort of backdated for the whole of 'thirteen. Was it pro rata from the point of the negotiation or was it for the whole year? Yes, that's the correct interpretation. This was a negotiation that took place at the very end. This is momentum was at the end of the year and it looks back at the previous thirteen weeks and that resulted in the adjustment of the accruals. Understood. So, we processed in Q4. Understood. So the 3% to four percent wage increases agreed to recapture the additional provision probably presumes something like 4%, 5% price increase that you'd need to achieve to recover the margin? Now the duration increase is applicable as from January 1, but we had to take into account in the valuation of certain liabilities we have in our balance sheet. And on top of that we had that system change as of November where we had to pay a higher amount of salaries during holiday pays and during sickness days. But the salary increase will be applicable as November as from 01/01/2014. Understood. And then just the €5,000,000 profit on disposal, am I correct in understanding that was booked in Q4 of twenty twelve? That was a Q4 on Q4 comp as opposed to a year on year comp? That's a cost reduction. So the cost base was reduced due to disposals. This was the business taken out. And I think this was the overview of the year on year comparison of the quarter. So it's the quarter. All right, fine. And then just on the From the previous answer, are we correct in understanding that the sort of the training and investment costs are booked at the gross level? And so the question is, are there any further costs booked against the at the operating level? That's the first part of the question. And the second one is, to what extent does the booking of the CICE impact the pricing discussions you have with your clients in France? So do they see it as effectively a price subsidy? So far, I think we're keeping the sheet clean. So no given into this pressure. And the calculation is the gross CCE say, minus the related cost as described in the arrangement, which is, for example, as you rightfully said, training expenses. And I don't foresee a change in the way we accrue for that right now. Great. Thank you. Okay. Are there any questions left in the room? No? Okay. Then before we close the meeting, Jacques and also Robert Jani, thank you again for your time as CEO. Pascal and I have thought about a presence for you. Of course, the third parties this afternoon, but also later in March. So we get a lot of more presence, but we have another presence for you to thank you for your contribution at least on the IR front. And I would like to give it to you. It's an original share of Randstad Eisen without the predecessor of entity of Randstad Holding and we put your name on it with a signature of Fritz Carlsmanni. And with that, I would like to close this meeting. For the people here in the room, we have sandwiches outside. And for the people on the line, thanks for joining and see you on the roadshows or otherwise in our Q1 results call. Thank you very much.