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 will, of course, start with the operational update from Ben Noteboom, then followed by the financial performance by Robert Jan. Then we have Sjaak van den Broek, our new CEO, who will make some comments on the strategy also going forward. We will end this session with a Q&A. So with that, I would like to hand over to Ben.
Thank you. Good morning, everybody. If you throw a party, there is always some tension whether or not you will get some guests. Until 3 years ago, there was nobody in the building. But thank God we have an audience. My final quarter result presentation, the 46th time I calculated. Quite something. Actually, I think at a good moment in the cycle, especially for the analysts, surely. We will get to the results first. Disclaimers. 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 have seen growth starting. We had in October, 1 point something% growth. At the end of the quarter, December, 2.8, 2.9. January, 3.2.
In spite of the fact that December is usually a difficult month to read trends, the trend is clear, and we still see this trend continuing. For us, that is very positive. We have seen a few things happening, by the way, of course, and we have seen also the expectations of the market. Let us address those for a moment. There was quite a gap in profitability, which was a bit of a surprise to us, but anyhow, it is what was the expectation. We saw a major impact of Forex. We had EUR 142 million less revenue just based on the foreign exchange aspect. We spent, as announced, EUR 13 million, because we announced already at the Q2 numbers that we would spend about 4.2% of revenue extra on marketing. So we spent EUR 13 million on marketing in Q4, which had an effect, which resulted actually in an EBITDA of 3.7%.
Why did we do all this? There are some more aspects in which we invested, and I will 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. That is exactly what we have been doing. So I am more positive than it might look if you look at the stock exchange, because I think we have planned the investments based on positive expectations. Next to the fact that we had some odd, if you want, events like CLA in Germany, et cetera, that had an effect on profitability, but will obviously be compensated for sure in the course of this year.
Revenue 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, EUR 15 million lower in Q1 of this year. The EBITDA margin stable at 3.7% in spite of all those relatively, if you want, one-offs and specific events in a few countries. Revenue recovery in Europe, as we've all seen, and also the statistics of markets that have been published underline this trend, which again is also positive. Difference, of course, being that in the past we saw-
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 on the line and on the web, our analysts, investors, but also our colleagues. Welcome. 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.
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 Ben Noteboom, then followed by the financial performance by Robert Jan, and then we have Sjaak van den Broek, our new CEO, who will all make some comments on the strategy also going forward. End this session with a Q&A.
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 not we got some guests. Until two years ago, there was nobody in the building. Thank God we have an audience. My final quarter result presentation, the 46th time I calculate. Quite something. Actually, I think at a good moment in the cycle, especially for the analysts, surely. Get to the results first. Disclaimers. 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%.
In spite 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 is very positive. We've seen a few things happening, by the way, of course. 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 EUR 142 million less revenue just based on the foreign exchange aspect. We spent, as announced, EUR 13 million, because we announced already at the Q2 numbers that we would spend about 4.2% of revenue extra on marketing. We spent EUR 13 million on marketing in Q4, which had an effect, which resulted actually only with our 3.7%.
Why did we do all this? There are some more aspects in which we invested. I'll get to those in a minute. We have more people in the 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. That's exactly what we've been doing. I'm more positive than it might look if you look at the exchange, the stock exchange, because I think we've timed the investments based on positive expectations. Next to the fact that we had some odd, if you want, events like CLA in Germany, et cetera, that had an effect on profitability, but will obviously be compensated for sure in the course of this year.
Global recovery, gross margin up 20 basis points, operating expenses up, we also manage that expenses will be at least, and I can't emphasize at least enough, EUR 15 million lower in Q1 of this year. EBITDA margin stable at 3.7% in spite of all those relatively, if you want, one-offs and specific events in a few countries. Global recovery in Europe, as we've all seen, also the statistics of markets that have been published underline this trend, which again is also a positive. Difference, of course, being that in the past we saw if the market would change, we would suddenly go to 10%, 15%, sometimes even 20% growth. That's not happening. It's growing 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.
Anyhow, we see the trends improving month-on-month literally. Actually, we saw an increase in growth in emerging markets. A market I will not talk about specifically, but if you look at China, for example, we've seen growth rates high double-digit, and even profitability in a few months that was high, way above others of the company. That is also positive in spite of all the news you see nowadays about the threat of the emerging markets collapsing. In our business anyhow, our trends there have been extremely strong and positive. North America. We shared with you already in Q3, that in professionals, we were not happy with the performance. We had been under-investing a bit. We've corrected 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, we invest 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, et cetera, are high, and we don't want to be responsible for accidents, so we've been avoiding that sort of work. Last but not least, of course, we've been looking at contracts where we can make money, and we have been shedding 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 pool. Linda is now smiling at me, and I don't know if she's happy or not, but we'll see. Again, Professionals, top line, somewhat disappointing trend as we already shared in Q3.
The biggest business by far, IT, has turned the corner. Finance, still weak, but also improved. The other businesses are relatively small, but getting there. As 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. We are not sad that we've lost that business. On the contrary, part of it is actually a conscious decision. EBITDA margin 4.6% in light of the extra investment in both marketing and FTEs, it's something that's okay with us. It's not fantastic. It's not bad either. We think it's reasonable. France, market is improving obviously. We came from a -6 and before that a -11 and a -13. Now it's down only 2%.
The market statistics are actually still climbing up. Gross profit up 10%, still an impact of CICE, be it 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 an impressive operation they've done there. EBITDA margin at 3.7%.
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 what happened in the CICE. 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. Yacht had an excellent profitability. Has taken some time, and I'm very happy I can say this.
I am the market leader in Holland in professionals, making a considerably above average EBITDA, and I think there is still more to come. Randstad Netherlands at the plus three, very profitable. Tempo-Team minus five, but also improving. Gross margin improving. We promised you last year the initiatives to compensate for the changes in Social Security charges, and we more than compensated for those, which, of course, led to the positive EBITA development. Again, strong profitability professionals. Business mix has improved. Small divestment and small stuff next to that. I would say an excellent performance in one of our key markets. Germany, 9% growth. We love it when Germany grows. This is one of the, if you want, sort of one-offs. We will need a little bit of time to compensate for.
Early November, a new CLA was agreed upon, and that month that we had to recalculate quite a few provisions that we had taken. It is both on numbers of hours per employee. It is about holiday pay. It is about sick pay. The new CLA prescribes that we have to calculate those elements, the provisions for that, for the flex workers based on the average of the last 13 weeks. Of course, if you go to equal pay, salaries goes up. That means if we have provided for, let us say, EUR 8 per hour holiday pay and it goes to 10, that obviously has a big effect on our margin. It is more or less a one-off because as usual, and we have been very successful in Germany last year, I think on average, we increased prices by 7% in Germany. We will pass these increases on to our clients.
Speed is difficult to forecast, but I would be disappointed if this would not be relatively fast. 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 is a promising market, and we need to work on the positioning of our company on marketing. Also there we spend a fair share of the EUR 13 million extra on top, of course, our normal spend. Belgium back to growth. They went through a difficult year. Reorganization is getting close to French situations. Took us six months. They have a renewal, which indeed sounds French, and the speed of reorganizations is about that fast. It is sort of a disaster, by the way, both for employees and employers.
It leaves your employees, which you do not want, in uncertainty for way too long. I think it is bad to have legislation that puts people in such a bad position. We canceled 130 jobs. Annual savings, EUR 16 million. As we announced, we took a provision of EUR 24 million, but the payback will be a year and a half instead of our normal one year. Still, it is EUR 16 million cost savings annualized. EBITDA now is getting back to where it used to be at 4.8%, with one working day less, and obviously adjusted for the restructuring costs. Mix is also improving. We have seen a stronger growth in the clerical part of the market. We have seen professionals growing. We have seen perm growing. The mix is also improving, which in my view is also a good sign. U.K., continued growth, +7%. A lot 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 2012, 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 one-offs which caused a downward effect on the total EBITDA. For sure, U.K. is one of them. If you 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, +8% in Portugal, impressive. +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've come a long way. The integration 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. There's still other stuff like IT, et cetera, that we need to organize. Here we are performing well. Same goes in professionals. We started here 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, it's 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. Harbor, being a big client, also went down and also starting up activity again. We are pretty positive about potential volume development in Spain, which, given their 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, and cost synergies will occur these first two quarters. Switzerland at the +2%, and how it's doing well. Japan, 4%, keeps on doing well with a very impressive profitability. Australia, +8%, +9%. We saw actually an acceleration in growth in January even.
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 clerical part that's growing, less so in perm and a bit less so in most of the professionals business. That, of course, in the end is going to cause a real profitability jump. Still, we're on our way. Asia and Latin America, investing in growth. As I said, in China, for example, high double-digit growth. In Brazil, we had high growth again, et cetera. Looking well. Looking at it per industry, automotive is actually doing well everywhere, which is I think encouraging because we have a nice share of our business in automotive and their suppliers, obviously. Food, funny enough, slightly negative in most markets. Manufacturing, improving if you compare these numbers to last quarter.
Transport doing well, logistics, as always. Manufacturing logistics is where growth starts. Business services, and in some markets, even financial services and the public sector, like in the Netherlands, is growing. An improving picture if you look at where we are coming from. That's [inaudible] . My final presentation, 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 not to buy a share price, whatever. I've always tried to manage a company, not a share price, because I think that's a dangerous slope if you get on that one.
One should never do that. I know that my successor and my colleagues that stay here 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, of pension funds, et cetera. I want to thank you for the trust. I'll see you later for sure at a drink and maybe at my party. Now I hand over to Rob Jan. You follow?
Good morning. I'm going to share the financials with you. If you look at this P&L, which is the fourth quarter of 2013 and 2012, it looks as if it has been rather calm in between. It's rather similar numbers. 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 -5, -5.3. Q1 and Q2 were at -3.7. We moved to -1 in Q3 of this year. Now finally we're back to growth. There has been quite a change of climate in between. That makes the comparison of the numbers a little more difficult. Ben already elaborated on most of the issues. If you look at the growth level, 2%, 2.2 actually compared to -1.1 for the third quarter.
I'm going to get back to gross profit and operating expenses separately. If you look at the integration cost, EUR 37 million, that is the Belgium investment that we have made, where the return, like in France, is a little slower. We typically, effectively, the proof is clearly there, we typically get a return within 12 months. The social context in France and Belgium is just different. That makes it take a little longer. EUR 24 million out of the 37 relates to Belgium. Most of the rest relates to integration of both the American SFN Group, the remainder of that, and USG People. Amortization and impairment here, EUR 36 million. That's a regular pattern. No impairment of goodwill in this P&L. Net finance cost EUR 4 million. I would want to add proudly EUR 4 million. This is the reflection of a reduced net debt level.
End of last year, it was EUR 1.1 billion. It moved to EUR 790 million at the end of Q3, and now it's at EUR 761 million. The interest policy of Randstad, as you know, is to 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. 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, EUR 22 million. Last year, there was a lot more.
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 2013. 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, EUR 131 million 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.
The fact that we now have growth means that we have some increased 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 had lower level of receivables, and effectively, that comes back into the net debt level, which is a protection of the company as well. We also have some payments of provisions. 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 EUR 1.1 billion at the end of last year now to EUR 761 million. 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, I'll get back to that later. It stands at EUR 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 CICE subsidies, but also hit by the negative impact in, for example, Germany. 5% EBITDA margin. 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 2012. We should live in the past, but doing this makes it a little difficult. Q4 2012, 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%.
The negative impact of foreign exchange is a little higher here because a big chunk of our permanent placement fees comes from USD and from GBP countries where we have the impact of the exchange rates. 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, the sequential one, left upper corner. Last quarter, which is Q3 2013, EUR 612 going to EUR 628 here. 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, EUR 13 million, then we have a few boxes of adding costs. This amount, EUR 3 million, relates to what we call the Dutch luxury tax.
It's a 16% charge on anything earned north of EUR 150,000, and that includes the exercising of options. We think it's gone now for 2014. Hopefully it is. Comparing year-over-year, last year, EUR 616, we're making the adjustment here for USG. It has added EUR 70 million because it wasn't consolidated. It wasn't acquired at the time. It includes the items that we effectively have discussed before, the synergies here, some effect from small disposals. Here, these two boxes, growth of the cost base in Europe and North America, mainly caused by the additional marketing investments. If you look at the full year, and I already gave you some context of the full year, a gradual recovery clearly since Q2 2013. Unfortunately, the foreign exchange effect plays a role. If you look at the impact relative to consensus, it's close to EUR 60 million.
If you translate that according to a normalized conversion, it will have an effect of up to EUR 10 million at the bottom line. We see the gradual recovery mainly across most of the European countries. We acquired USG. The purchase price was EUR 20 million, and we announced synergies of between EUR 15 million and EUR 20 million, 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 1st of January. 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. That's where we look at a relatively high conversion at the very beginning. New gross profit earned needs to be translated into, as we say, at least 50% incremental conversion at the bottom line into EBITDA. 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. Moving average DSO is stable at 52 days in Q4. This is the income statement for the full year. Most of these items have been discussed already.
Just want to point out that amortization here includes a EUR 36 million charge in Q3 relating to the Australian goodwill position. It's highly subjective, this line, but this is the regular depreciation, mostly of the value of our client database, of our candidate database, brands, et cetera. Now moving to the overview of our invested capital. We have revised our presentation slightly here. As you can see, EUR 3.7 billion invested in the company through equity and net debt. At the bottom, calculated a return on our invested capital of 12.6%. 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, doing 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 EUR 293 million for the year. It's quite substantial difference with last year. Please note that EUR 130 million that I mentioned before has been paid. There is another interesting element that's over here, other items, that includes the fact that in France, there is an additional subsidy on low wage salaries. This money only comes in after three years. 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 2013, to be paid in April. The dividend policy was reset in 2012. We announced it in advance. This was set at a range between 40%-50%. 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 that 45% payout makes sense, which arrives at EUR 0.95. There is a choice between cash and shares, but the default is cash. Finally, the outlook for Q1. Organic revenues for working day in January at 3.2%, compared to 2.9% in December. Ben already mentioned it. These are very difficult months to read working days. You cannot take these numbers completely precisely. We did see 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 -1%. In France it was -3%. In Germany +11%. In Belgium +4%. In the U.K. +3%. Iberia moved to +5%.
North America at -3%. Rest of Europe, +20%. And the rest of the world at a staggering +17%. The challenging weather conditions in the U.S., you can get rather confused by little snow in certain parts of the country. Randstad is geared towards Atlanta, where there have been rather severe problems in January, and if I understand it well, and even more in the month of February. 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 2014. You can see the comparison here, January with -5% and March at -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 the 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 EUR 15 million . 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 Sjaak now to give you a small update on the strategy. Sjaak.
Good morning, everyone. Good morning the investors and finance community in the room and on the phone. Also, hello to all our colleagues. You might not know this, but several hundred of our colleagues are listening in or watching on the website. That's, of course, for me, a great opportunity to also address them, because otherwise you need to fly across the world. 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. Therefore, we did think that it's very interesting to give you a look into our priorities into the market today.
The top-hand side of this slide 29, you'll recognize the total talent architecture, the way we are approaching our large clients. You know, we've presented this last November in our last analyst days. That's all out there. What is happening, albeit slowly, is markets are turning. What happens with turning markets? We've seen it before. 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 going to focus on permanent placements. If there's more security in the market, more confidence in the market, there will be more placements.
Our approach in our company compared to the last cycle to four or to eight, we have some 1,500 people more selling perm, either in staffing or in professionals. In staffing, we do this in blended unit, as we call them. A 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? We can fill both. Predominantly in the white collar segment, where you see this a lot. Then there's the SME. In turning market, 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, we concentrate less in our sales efforts on that segment. In staffing, again, for people who've been watching us as a company, we're trying to do the same as we did in 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 a 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.
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 In-house are good. We see more and more white collar In-houses, at banks, at insurance companies, and call centers.
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 LOLIP. 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. We're also training our people in the 2,000 In-house locations to go after permanent placements, white-collar demand. We think that's an attractive development to keep up the profitability in our In-house segment. HRS, already talked about a lot. Total talent architecture is going well, a good development, 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, the message to our internal audience. Please be aware of this triangle. Print it, put it at the back of 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 a negative market, sometimes we prefer profitability over 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, "Field steering, we concentrated on cost last year, took out a lot of cost." Never nice because you talk about people, but it had to be done.
Now we're going to concentrate on the activity-based part of Field steering, the stuff, the activities we put into our market. Looking at the blue part, I think that's pretty clear, and 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? We plan our activities. What are you going to do in your market? How many calls? How many visits? How many orders? 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 that better with marketing.
Sometimes you need to train your people better. You need to control it every week. Our system works. We've seen it. We've trained 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 bottom-up planning. We've never managed on averages, and even in a market which might be negative, we see prosperous 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. Then, of course, pricing guidelines, because in a large client environment, price is fixed.
When you do a lot of perm, when you have a lot of SME businesses, you get new orders, pricing guidelines are important. Then again, already seen in Q4, when we see momentum, we're willing to invest. 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 over 140 years in the business. Excellent track records. Everyone grew up in the grassroots of the business, worked in several countries and in several businesses. It's the best team that I can definitely think of to manage. Also with the best CEO in the business, Robert not just in the business, but in the country. Thanks. This is where we are.
I just want to mention a few things. François, it needs mentions. Functional area staffing concept. François, with his excellent track record again in France, is going to drive the further professionalization of our staffing concept around the world. Linda is going to do the same for professionals and for perm, and I'm going to stay within house. Yes, before moving to Q&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. I'm optimistic because it's a state of mind. It goes with the territory. Every time you ask me, "Are you optimistic?" I say, "Yes," you need to ask a second question, because I'm always optimistic. That's very important. There's markets.
You know we manage the business on actuals, and that gets us back to today, because the markets are growing on average with 3%. Is it still snowing in Atlanta, Linda?
I hope not.
We hope not, but it has been snowing in the U.S. That's where we are with markets. Those are the actuals. 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 and me personally, you personally from me for 20 years of cooperation. 20 years. We've mastered the art of communicating without talking. Which is great, because if he talks, you don't always know. Seriously, we went through a lot. If you talk about the company, it's also 20 years, and I'll miss you. We'll have our weekly coaching sessions at your billiard table at home. With that said, we'll move to Q&A.
Okay. We'll first start with the questions in the room. 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. 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. Yeah. Arun? You want me to wait or?
It's better now. Okay. First question is on the Netherlands and specifically within Yacht. What happened to profitability over there? Is it the market? Is it the underlying performance within Yacht? Is the performance of Yacht sort of getting to where the company wants to be within professionals? What happened to Yacht all of a sudden? Is it the market? Is it the underlying performance? Second question is on North America, maybe a question for Linda. I tend to see an increasing divergence between the top-line performance of Randstad, but also some of the peers and the market data. Who has it completely right? What is the reason for this divergence? Third question for Robert Jan, quickly on the SG&A. Your guide for an underlying increase of the SG&A for Q1 of around 3.5%.
Is that sort of the way going forward, taking into account a sequential fall of EUR 50 million, right? Going to take the Q1 last year and the Q1 for 2014 [inaudible]. Your guide for a 3.5% increase, is that the way going forward, taking into account all the effects of cost savings and a normal inflation? Those were my questions.
On Yacht first. Yeah, I heard you say all of a sudden. It's been something in the last two years at Yacht. I think Yacht is a good example when I mentioned the triangle on beefing up operational performance. I can say that within Yacht, everyone now knows on a weekly basis the amount of people they need to place, the amount of visits they need to make. I think from an operational point of view, Europe has improved a lot and still a very tough market. Of course, if you talk about Europe, you cannot talk about one market. The engineering part, we are 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. It's a mixed bag, but yeah, it's coming together. It's coming together.
Slowly, but still. Maybe Linda now on the U.S.?
No, over here.
I think on the U.S., the question was about our performance to market. Yeah, there are many different takes on the market in the U.S. We are also sometimes kind of confused when the data comes out. 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.S. is all about mix. It's a very big market. Major shifts in major segments can really affect overall market data because of the way it's calculated. Light industrial, when it goes up, disproportionately drives market data. We compare our performance to like competitors. While I would characterize 2013 as unspectacular in terms of we didn't gain market share in 2013, 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 think that's an important point. 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 go 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. Yeah.
Your final question about SG&A, I try to emphasize at least EUR 50 million less, and that means it should be a little more than that. We don't manage the company exactly by day by day. We respond immediately to whatever happens in the market. I think you should take that into account in terms of the base. Then what's going to happen in the period after 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. 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. That's going to play a role.
Finally, I can only say that I hope to spend more because that should be the response to an improved trend. I think what we did do in the marketing and field of marketing in 2013 might well be repeated into 2014 if the trends do justify that.
Okay. 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 any growth acceleration, that according to market data, there should be a further gradual recovery. Are you just comparing the January figures, the growth trend to December, or also looking at, let's say, the last couple of weeks' trend? Then maybe related to that, one of your competitors was saying that there was kind of a blip in the January comps in France. 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. Secondly, on the CICE impact in France, could you give a little bit more color on the expected impact in 2014?
Maybe confirm that at least there should be a positive impact looking at the 200 basis points increase on a growth figure. Thanks.
Markets, David. It's a mixed bag. As I 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, that's good. The start in France was not too hot. We saw a gradual improvement in France in December, the early weeks of January were not great. We see a slight improvement, 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. Underlying, as we mentioned, it's a continuing trend. It's slowly up. Belgium is good, as mentioned. U.K. is okay-ish, but that's more a poor market. Gradual.
Adding to that, I think typically these developments are not linear. This is always a little bit erratic. That's part of the game. 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 CICE, which is the French low-wage subsidies, these are going to increase, or these have increased as per the beginning of the year from 4% to 6%, that's a 50% increase. That is going to come through in our profit and loss account.
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. So far, I think we've done an excellent job in this field and will aim to do so also in 2014. That would be reflected in a 50% increase.
Maybe a quick follow-up. Are you meaning the 50% increase on, let's say, the net impact of 2013? Because that would be quite significant.
Yeah, that's what it is. It goes from 4% as a subsidy to 6% over the underlying wages.
In your P&L, the impact was 180 basis points. Should we count then on about 90 basis points for 2014 incremental impact? Is that what you're saying, or?
Yes.
Okay. Thanks, Paul.
Yeah. Good morning. Marc Zwartsenburg, ING. First, to follow up on David's question on the trend, January, February. You mentioned also that the trend is moving into February, the trend, is that the trend of January, or is that the improving trend from December, January into February? Given that the first weeks of January had such a big impact from France as 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. I'd like to get a little bit more feel for the real underlying trend.
You mean the trend of yesterday or last week?
Preferably, stripping out perhaps the first week of January.
Okay.
The trend of next week.
The trend of next week. No, David, seriously. Marc, sorry. As a follow-up of David, in that sense, because he lost his question, you take over. No, it's 3.2 for January. Yeah, we see a slowly improving trend. Again, it's not booming into February.
It's not that first week had such a huge impact that we should adjust the number.
No.
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&L, but something is going to come through in Q1 '14. The Belgium model organization has been executed late last year, we expect to see the savings as from Q1. It's rather immediate.
I think it's important to mention, I did it a few times already, 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 will 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 growing French market, that's definitely the main reason behind our change in France. We have a question here in the first row again.
Yves Franco, KBC Securities. Good morning. First question, could you quantify a bit more your planned investments in marketing 2014? You say marketing investments will continue, do we see an increase there or same amount as 2013? Second question, net debt, EBITDA level is at, it's quite low now. Can you update us on your M&A strategy? What are your requirements, and what are you looking for?
First on the marketing. The main markets where we invested was Germany. U.K., two aspects or two parts of our U.K. business, education and construction, property, and engineering. If you look at the results already now in that market, it seems that that being picked up, that's good. France and U.S. profs. It was a marketing boost. We had under-invested 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. Again, as we mentioned, through what Robert Jan mentioned and I mentioned, if we see momentum in markets, we will invest in marketing to support.
The more you invest in marketing, the more effective, as we call it, the families, the easier it is to get an appointment with the client because your top of mind goes up and your preference for candidates goes up. We will not hesitate to do it. Your question is, will it be the same level of 2013? We don't know yet, we'll definitely invest when we see the opportunities.
The M&A question. The balance sheet of 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. Let's say, we always investigate whether we have opportunities in the field of professionals or to strengthen our position in certain geographies. There is nothing, also given the balance sheet, nothing significant imminent as we speak.
Okay. We have two more questions here. Now we move to the line. There are still three questions, let's limit it.
Nope, you don't get the mic.
Hi, it's Konrad Zomer, ABN AMRO. Can you quantify the growth rate in IT staffing in the U.S. in Q4, please? 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 a corner in the U.K. Was this a seasonal impact or was there anything particular going on?
Sorry. In the U.K.?
The growth rate in IT in the U.S. is just north of zero. It just turned a corner.
Again, when you talk about our U.K. business, of course, it's still a group of companies. Overall, the underlying trend is good, but we invested a little over EUR 1.5 million in marketing in the U.K. alone. As mentioned, we had some favorable items last year in Q4, last year as in 2012, which was not really geared to better operations. Definitely the underlying trend as you've seen in the first three quarters remains. Again, we're happy with the investment we made in these two segments. We're optimistic going forward, Konrad. Okay, we have a question in the front row.
Good morning, Walter Koenig, Financial Times Path. One question on the EUR 131 million tax payment. You said it was agreed upon already in 2009, I 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 2009, which you might remember, was when the going got very tough at Randstad. At that time, revenues declined by 27%, from EUR 17 billion to EUR 12 billion. Anything resulting in us not paying cash was more relevant than before. We were a little more tough in the negotiations, and this was a matter of interpretation. As I said, not everything was black and white, and this could have lasted for a very long time. Instead of doing that, we came to the conclusion at that time that this money would be paid at a later point in time.
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, I would like to move to the line. If we can get the first question from the operator.
Turn to questions by pressing star one on the telephone keypad and the hash or pound key to cancel your question. Your first question comes from Nicolas de la Bellasne. Please ask your question.
Good morning, guys. Two questions for me, please. Firstly, on North America. In Q3, you talked about an expectation that you would no longer be underperforming the market in 2014. The Q4 result was perhaps a little bit below the market. Are you still comfortable with the expectation of performing in line with the market in 2014? The second question is on CICE France. The receivable that you put in the account is about EUR 73 million, which is about 250 basis points on French margin. How do I relate that to the 180 basis points that you discussed on these calls? There is a difference. Additional training costs and other offsetting costs of CICE.
Yeah. 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, yeah.
Again, maybe one addition, Nicolas. In the cash flow statement, there was one shown on a slide that was called other non-cash items. There's more items in there. The total gross receivable, you can also find it in the appendix of the press release, is roughly EUR 70 million. That's the gross receivable, which will be collected after three years.
Yes. 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. Are 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.
Yeah. Again, I 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. You would have to take the BLS data weighted according to our, A, mix of clients and B, mix of segments. We prefer to benchmark ourselves against like competitors, meaning competitors of our approximate size that have a similar mix of business. You have access to a lot of that data, I would imagine. Again, I encourage you to look at all numbers, because if revenue is the only measurement of performance, I think perhaps the conclusions are faulty.
Okay. Thanks very much, guys.
Okay, the next question from the line, please.
Next question comes from Laurent Brunelle. Please ask your question.
Good morning, Laurent Brunelle, Exane BNP. Two questions from me. First, on France, looking at your organic growth decline of 3% in January, is it only volume-driven, or is there a price issue? Regarding the CICE, don't you think that you could have some indirect impact in terms of pricing? I heard that some competitors are offering rebates. What's your view on it? Secondly, a follow-up on marketing spend. Do you intend to invest in the same countries in 2014? Can you just remind me how much have you spent overall in 2013, please?
Sure.
Wait.
Boom. First on CICE and clients. The answer we thought about is very long, and the answer is no. No rebates. As you know, we've already talked a lot about client profitability in France. That strategy has not changed, with or without CICE. 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. That's not to say we'll invest the same amounts of money in the same markets. Again, when we see the opportunities, we'll do it. I'm going to answer your question on the marketing spend as a total. By the way, that can be found in our annual report on page 61.
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. 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.
The next question comes from Suhasini Varanasi. Please ask your question.
Good morning, guys. I believe in France, Manpower 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?
Again, in France, we grow a lot in in-house, that's the good news. Overall, we're slightly below market and getting closer to market again. We've taken a lot of share in 2011 and 2012. Shed around EUR 100 million of business in 2012. That still transpires a bit into 2013. Again, we're very happy with our setup. That's more hope than it is fact again. If you look at our base with in-house and the amount of new clients we've opened, many of them have a relatively low [inaudible] demand. If that picks up, we'll benefit, then we'll take market share again.
We have the very last question coming in on the line. I just see. Last question from the line.
The last question comes from Alexandre Manèz. Please ask your question.
Morning. Just a couple 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 backdated for the whole of 2013? Was it pro rata from the point of the negotiation, or was it for the whole year?
Yeah, that's the correct interpretation. This was a negotiation that took place at the very end.
Yeah.
This momentum was at the end of the year, it looks back at the previous 13 weeks, and that resulted in the adjustment of the accruals.
Understood.
It's processed in Q4.
Understood. The 3%-4% wage increases agreed to recapture the additional provision probably presumes something like 4% or 5% price increases you'd need to achieve to recover the margin.
The wage increase is applicable as from January 1st, we had to take into account in the valuation of certain liabilities we have in our balance sheet. 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. The salary increase will be applicable as from January 1st, 2014.
Understood. Just the EUR 5 million profit on disposal. Am I correct in understanding that was booked in Q4 of 2012? That was a Q4 on Q4 comp as opposed to a year-on-year comp?
That's a cost reduction. The cost base was reduced due to disposals. This was the business taken out, I think this was the overview of the year-on-year comparison of the quarter. It's the quarter.
All right, fine. Just on the CICE, from the previous answer, are we correct in understanding that the training and investment costs are booked at the gross level? The question is, are there any further costs booked against the CICE at the operating level? That's the first part of the question. The second one is, to what extent does the booking of a CICE impact the pricing discussions you have with your clients in France? Do they see it as effectively a price subsidy?
Far, I think we're keeping the sheet clean, no giving into this pressure. The calculation is the gross CICE minus the related cost as described in the arrangement, which is, for example, as you rightfully said, training expenses. I don't foresee a change in the way we accrue for that right now.
Understood. Great. Thank you.
Are there any questions left in the room? Before we close the meeting, Sjaak and also Robert-Jan have thanked Ben for your time here as CEO. Pascal and I have thought about a present for you. Of course, the farewell party is this afternoon, but also later in March. You get a lot of more presents, but we have a little present for you to thank you for your contribution, at least on the IR front. I would like to give it to you. It's an original share of Randstad Uitzendbureau, the predecessor of entity of Randstad Holding, and we put your name on it with a signature of Frits Goldschmeding.
Super. Hey, that's awesome.
With that, I would like to close this meeting. For the people here in the room, we have sandwiches outside. For the people on the line, thanks for joining, and see you on the road shows or otherwise in our Q1 results call. Thank you very much.