Earnings Call: Q4 2020

Feb 9, 2021

Hello, and welcome to the Randstad 4th Quarter and Annual Results 2020 Call. My name is Jess, and I'll be your coordinator for today's event. For the duration of the call, your lines will be on listen only. However, there will be the opportunity to ask questions. I will now hand you over to your host, Jacques van den Broek to begin today's call. Thank you. Yes. Thank you. Good morning, everybody. It is a sunny day in Amsterdam, so let's hope that is symbolic for the year. You never know, right? So we are here with Henry Bisera Staven. And well, I think under the guidance of Bisera, we delivered a solid So let us take you through that. Well, as you all know, 2020 was a year like no other. I'm very proud of the way we responded to the challenges of the global And I want to thank all our employees who reacted with agility and speed. And we have our new ways program to Support our clients and talent. More on that one later. Responding quickly and effectively, of course, is our business, and I think we shaped up in that sense This year. We generated a strong set of results in the 4th quarter and a solid and competitive performance for the year. Talk more about individual markets, but we're quite ahead of some important markets. Our management team, diversified portfolio and disciplined cost management contributed its outperformance. Since the low point in April, minus 30%, our revenue trends recovered month by month into December. We've experienced a V shaped recovery by year end. And in some markets, we even reported growth in the 4th quarter. But it's not a V shape as in the business we lost is back. It's a different V. So as you know, sectors like hospitality, Leisure, airlines, that all went very quickly away. And the business we see now is different. It's more in logistics. It's in health care, so different sectors. Our in house concept continues to show a strong performance and grew in the 4th quarter, Not just because clients asked more attempts, absolutely, but also because of new in houses, new sites. So again, A good setup for next year. Despite partially reinstalled lockdowns in some of our main markets, we've seen ongoing demand for essential services. Let me remind you what makes our in house concept successful. Well, maybe I don't need to do that, but what is important is In house caters for uncertainty. So we operate a pool of temps on-site with the client in uptimes and downtimes. And that's what we see a lot With clients at the moment uncertainty, although a lot of business and demand. So that is what our in house business is all for. It is maybe in logistics and manufacturing, although we also see it in the professional space increasingly. Our digital transformation helped us to pivot quickly to a virtual working environment. Within 3 days, we were online. And we continue to support our clients with these tools and safety protocols. I'm very proud and more on that later on the role we could play towards our clients but also towards society as a whole To keep as many people at work, but also to get many people back to work as quickly as possible. Based on our NewWave program, Which uses digital support to have a lot of contacts with clients. We have some 150% more commercial activities per consultant. A lot of those in lines online, but supported by digital tooling, digital marketing support. We also, through our data, can show our people Where there's demand? Henry calls this fish where the fish are. Well, fortunately, we did quite some fishing and successful fishing in Q4. So back to the Q4. We already issued a positive trading update in December, as you know, but Top line trends continue to recover across all our geographies and momentum significantly improved throughout the quarter. Several larger regions such as U. S, France, Belgium, Germany being ahead of market, but also countries like Argentina, Brazil and India delivered An outstanding performance. And again, certainly in Argentina and Brazil, for example, with a totally different business segment than they had Last year or 2019. Activity momentum in December and January reached last year's pre pandemic levels. Our industry fundamentals are reconfirmed, the staffing penetration rates bouncing back quickly. We get a lot of questions, of course, but we do expect in the upturn, as we've seen in many Post crisis situations that penetration rates are on the rise. And as you know, there are some markets like Italy and Spain, which are Below economic penetration rate. So might be a good time going forward. Very pleased with our top line and EBITA performance, reflecting a recovery ratio of 61% in the quarter. So let's go to North America to share a bit more color on the markets. Very strong performance in North America, Revenue up 1%. Market numbers are still negative in the U. S. Depending a bit on the statistic you look at. But perm still down, but also a good recovery there. Staffing and in house growing. Our American in house business It's benchmark in terms of new locations. So again, that helped us going forward, Predominantly in logistics and food and detail. U. S. Proffs minus 6. Our Technologies business is minus 3 for the year. IT almost flat year on year. Of course, stable sector as we see in many more countries because people continue to work from home. Our Canadian business also a strong rebound from minus 12% to 5%, Gradual and good recovery throughout the quarter. And an EBITDA margin of 6%, so stable compared to last year, which we think very impressive, Proves the agility of the cost base and might I remind you that there was no government support of any kind in North America. So impressive all around. The fringe market that exceeded our expectations, well ahead of market despite the severity of the lockdown. Strong demand from sectors such as food, retail. We have a we're market leader in health care that has helped a lot and logistics And in house again growth here in the quarter. There is something which you will see in many markets is that the sectors which are down such as restaurants, Leisure, that sort of thing are mostly part time sectors, where we see demand now are mostly full time sectors. So we see employees working. In general, they make more hours than they did last year. So that also helps our revenue going forward. As said, Pfaff's fairly resilient, our Healthcare business into strong growth. Our OZ business in France Was geared towards sectors which are not doing well, such as airline manufacturing, aerospace, aeronautics. So that sector is still under pressure. We continue to see continued recovery in the permafees, as you can see, minus 10 versus minus 20, So not bad. And a strong improvement in profitability for this Q3 through the improved productivity ratios and utilization. In our Professionals business, we do have people on our payroll, so that helps. And a 50% recovery, which we think is a strong performance in France. In the Netherlands, we want to highlight something else, not just in the Netherlands, but we have been and it's called strong social responsibility. And you might ask yourself what is that all about. Well, we've been very active in health care, In tracing, working with governments also in safety back to work. And that's important. We also reskilled Quite a lot of people in the Netherlands. We recently also announced a partnership with an educational institution because we do think There's a lot of work for people, but people need to reskill into different sectors. Our Randstad business is still below market. They are geared more towards hospitality events and travel, so they do carry that Still with them, although they are getting closer to market. Very strong performance from our yard business, almost at prior levels with a great Profitability. As you can see, profitability held up really well. Germany, yes, On the one hand, you might say easy comps, yes, because Germany was a country due to automotive, which was already a negative territory last year. But still, minus 21% in Q3, now minus 5%, we do think and we do know we're ahead of the market there. Also Germany did and performed very well on the new waste program, so improved their commercial efforts. Also good to mention is that we had a cooperation between Molse, Germany and Randstad, Germany offering our clients free job posting. That led to a lot of leads For our general business, it's very much something strategically we're aiming for. So Belgium, Strengthening market leadership. I think it's quite impressive if you have roughly 26% market share that you still for the full year come out ahead of market. Again, in house leading the recovery growth. Healthcare, pharma is a big sector in Belgium. We play there And the same as I said earlier, logistics and retail. Also in Belgium, we see more hours per person due to the shift in sectors. Yes. Again, what can I say? What I do what we do want to flag is the EBITDA margin at 71%, 7.1%. Very happy with that, but I wouldn't say that's the cruising altitude of Belgium. It's more around the 6 Percent level, still for the quarter not bad. Also mentioned top employer award, a very successful online training program. So a lot going on, which is, As I might say, broader than just doing our business, which we think is good if you're the market leader in a country. Italy, Yes. Another clear recovery. This was, of course, the earliest hit country and at some point the most hit country, And it still is, by the way. There's still lockdowns. But as I want to do and I did in general for all our management teams, I want to thank them For holding on as well as they did. And we also, as I said, Italy low, probably 1.3% penetration levels, They will go up. There's a lot of room for growth certainly in the pickup here. We have a good productivity improvement in Italy. We have that for the whole group, 4% productivity improvement in Q4, definitely also in Italy. And Italy is one of the countries. There are more which will be very active in vaccination going forward in 2021. Spain, Again, the trends of other Southern European countries, minus 16 Q3, minus 5 now, good improvement again in house, there's a theme there And the new ways initiative, Spain has been leading here in setting up that program, which we adopted globally, and Portugal down only 3% As opposed to 13 in Q3. Again, here also more hours per employee due to the change in sectors. And then the rest of Europe, Mixed picture. As you can see, the U. K. Still down. Also uncertainty around Brexit, better than Q3, but still I want to flag here Poland. Poland up 23%, which is a very strong performance. But at the same time, Poland is also, You might say the investment area is sort of an early indicator for an improved climate. So very happy with our Polish performance. Rest of the world, mentioned this many times, but why not again, the solid performance, Almost back to growth, minus 1%, but as you can see, very, very good profitability improvement. I mentioned Latin America, predominantly Argentina and Brazil, very strong performances. And India, a country which is hard hit by COVID, Still putting up record numbers. Then global businesses. As I mentioned before, this is a strategic play for us. As we speak, we're rolling out new technology for Monster. We will do that throughout 2021, which If all goes well, we'll make Monster the job board in the world with the most recent technology. There is still a lot of traffic going into Monster, And we do expect this traffic to stay, to also register themselves into the broad sense of our database of candidates, which we call Building the biggest talent engine of all. You will see new websites come going up at the moment in Europe and then At the end of the day at the end of the year or throughout the year in the U. S, we're very optimistic there. When we talk about our Sourceright business and predominantly our enterprise We recognize that clients are more open to what we call total talent discussions. They are uncertain about the future. Some of them have been hit, Of course, by COVID. And they want to talk to us about the fitness of their company, the fitness of their own workforce and how to handle work in the broad sense of the work. Rebecca has presented this for you at our last Capital Markets Day, and we do see a lot of pickup here. This is not a Short term sell. It's a long sales cycle, but very promising for us. And given our global scale and our digital capabilities, we're an attractive partner to handle Those kind of things for our clients, including, of course, our RISE Smart business, up 131%, 97% in Q3, not to shabby, but Q4, 131%. And again, strong pipeline going into the 2021, actually, this year. So we're fully in investment mode as we are in line with what we see in the market also in these businesses. So What do the numbers look like? Henri, can I turn it over to you? Absolutely. Thanks, Jack. Good morning, everybody. So 2020 in all respects It was a unique year. We tried our best not only to manage the short term result and long term financial health, But also to demonstrate our commitment to our customers, talents, employees and society at large. I guess as a result, we experienced the highest level engagement across our Randstad team and our customers honor us to be part of their journeys to recover from the impact of the pandemic. Let me now dive into the Q4 results in a bit more detail. As mentioned already by Jacques, the company delivered another strong quarter with competitive growth, Overall, very strong operational performance and good cash conversion. Our focus to deliver accelerated profitable growth is paying off. We benefited from our diversified geographical footprint with excellent growth coming from the U. S. And rest of the world. Also, our differentiated concepts such as in house and the deep market penetration in sectors like logistics, e commerce, healthcare and government performed well. Revenue in quarter 4 came in at minus 3.6 percent and the growth momentum continued to improve further throughout the quarter. Recovery of volume and revenue is broad based and more and more business units enjoy positive growth. I'm especially pleased with the fact We'll continue to achieve market share gains in significant parts of our portfolio, whilst respecting the need to drive pricing discipline. Gross margin in the period came in better than expected, still down 50 basis points year over year, and I will get back to this on the next page. With regards to OpEx, we delivered another quarter of balanced cost management with operational expenses down 4% organically year over year. And our recovery ratio of 61% benefited from our ability to get talent back into jobs faster than expected. As you would expect from us, we continued investments into our digital journey and will also stay the course going forward. EBITDA came in at €264,000,000 at a margin of 4.6%, also a momentous improvement from quarter 3 and not too far off from prior year's level. And on the next line, integration is one off cost per €32,000,000 as we adjust our cost base to new market realities in some regions. Reported net income and EPS were impacted by an exceptional tax benefit of €76,000,000 which is related to a revaluation of so far unused net operating losses. The underlying effective tax rate came in at 28.9% for the Year 2020 and for 2021, we expect an effective tax rate between 26% 28%. So now let me take you to the next page to talk about gross margin. Here we go. This is on Page 14. So the first red bar shows the temp margin, which is down 10 basis points year over year, quite an improvement to the 30 basis point dilution we've seen in quarter 3. The temp margin was definitely less impacted by COVID-nineteen related effects like idle time And also slightly boosted by some working day tailwinds. On the other hand, we saw some adverse mix impact given the pronounced recovery of our in house business at lower Gross margins offset by some typical year end positive accrual effect, especially in a year like this. Most importantly, we can confirm a generally stable pricing climate across the board. The bar in the middle protects a 30 basis points negative mix effect, Triggered by a 19% decline of perm activities. Also, that is a slight improvement versus the perm mix effect we've seen in quarter 3. And lastly, HR Solutions represent a negative mix on overall gross margin of 10 basis points, pretty much in line with quarter 3. Whilst our gross margin path remains difficult to predict, we reiterate the importance to safeguard attractive gross margins in all our business activities, Also achieved through smart, value based pricing, strategic mix management and winning mass customized digital support. That gets me directly to the OpEx page on Page 15. So We talked about in our previous calls, our OpEx management tries to secure both the full and speedy recovery for our top line Uncompromised investments into our digital capability. In that context, we reported organic OpEx sequentially up by €68,000,000 Still 4% below last year. In a bit more detail, this means that personal expenses decreased by 11% year on year, measured as gross profit per FTE going up by 4% year on year. Cost flexibility introduced through employment protection schemes, like short term working materially decreased from around €50,000,000 in quarter 2 to about €15,000,000 in quarter 3. And in quarter 4, this was close to 0. As part of our cost management initiative, we took quite some short term measures in 2020, which will show up either In part of following the OpEx line in 2021 and onwards, you can think of travel entertainment costs, employee bonuses, fleet costs and cost of accommodation, Just to name a few. However, more than €100,000,000 of structural cost reductions have already been identified across all cost categories, helping to support our top line recovery at attractive conversion ratios, and we will continue to drive cost productivity and utilize the power of 1 run set going forward. Our cost optimization program announced in November 2019 helped us gain more clarity of what makes the boat faster But cost might not be crucial to win in the marketplace. Our journey to drive productivity continues and is part of our DNA. We always like to operate from a position of strength. And as mentioned in my introduction, we seek to stimulate a climate of entrepreneurship within the company where smart growth initiatives can and will be fully supported with appropriate investments. With that in mind, let's now move on to our cash flow and balance sheet on Page 16. We generated free cash flow of €120,000,000 in the 4th quarter, down €304,000,000 year on year. This reflects Investments in working capital driven by top line momentum, partially offset by the favorable timing of working capital payments. Over the full year, We delivered a very strong record free cash flow of €1,132,000,000 up €217,000,000 compared to 2019. The combination of the countercyclical movement of working capital and the CC receivable sold to third parties in quarter 3 more than substituted A lower EBITDA generation. It goes without saying that the one off elements in impacting free cash flow in 2020 can't be taken into account for 2021. Very tight credit control and debt collection helped our DSO to improve year on year And through the COVID period, as a result, we benefit from a very solid underlying free cash flow generation, again confirming The resilience of our free cash flow through the cycle. DSO shows no sign of weakness. However, we do expect it to increase slightly next year due to accelerated growth in parts of the business with the higher disease overexposure. What started as a health crisis It developed into an economic challenge for many companies out there. And hence, we are well served to keep a very close eye on credit risk, Debt collection and risk management in general. In that regard, we continue to deploy additional resources to keep that risk in check. Let's now zoom in on the strength of the balance sheet. Starting with our leverage ratio, it stands at a negative 0.4 times spent of quarter 4, pre IFRS 16, so a clear net cash position, were also supported by the monetization of CICE. Our solid and healthy balance sheet position directly leads to the question of capital allocation and capital return. As we have ended the challenging year 2020 with a strong competitive performance, we feel confident that the time is right to reinstall So dividend payments. We will propose to our shareholders the cash dividend of €3.24 per ordinary €0.06 per ordinary share for 2020, totaling around €600,000,000 This consists of a regular floor dividend of €1.62 The 2 ordinary share, representing a payout of 63% of basic underlying EPS. And in addition, we propose a special cash dividend also of €1.62 ordinary share. The proposal to pay a special dividend over year 2020 should be seen in connection with Randstad's decision to withdraw its 2019 dividend proposal in March 2020. In order to focus on capital preservation, it's precautionary measure to ensure the company's resilience and stability during the COVID-nineteen crisis. With our dividend proposal, we reiterate the importance for Randstad to be seen as reliable, responsible, Long term oriented company, which seeks to simultaneously support all stakeholders. And in that context, We'd like to thank all our stakeholders for the unwavering support throughout the last year. And that brings me to my last So the conclusion and outlook on Slide 17. As stated before, the pace of revenue recovery sustained throughout quarter 4 and is broad based across our portfolio. Our volumes in January are reaching last year's pre pandemic level And improving momentum we saw in quarter 4 continued. At the same time, visibility remains limited with ongoing macroeconomic Uncertainty due to the COVID-nineteen pandemic. Every crisis creates new opportunities. And as such, we're establishing new bench Mark for frontline sales productivity, increasing utilization rates and using best in class digital tools and data driven demand projections for optimal sales impact. For quarter 1, we expect gross margin to be modestly lower sequentially due to seasonality. OpEx, however, is expected to be broadly in line sequentially, reflecting more aggressive investments in growth opportunities, largely offset by ongoing agile cost management. And lastly, let me mention that there will be a negative 1.2 working days impact in the first Quarter. Well, this concludes our prepared remarks. We are now happy to take your questions. Back to the operator. And please ensure your line is unmuted locally as you will be advised when to ask your question. And the first question comes from the line of Andy Grobler from Credit Suisse. Please go ahead. Hi, good morning, everybody. Just 2 for me, if I may. Jack, you mentioned a few times about Growth in sectors like logistics and retail. Can you just give us a bit more detail about how much they grew, what Proportion of the business they represent and kind of the tailwind they provided to growth through 2020. And I guess as an add on to that question, To what extent do you think that additional demand in those sectors is going to prove sustainable through 2021 2022. And then the second question just on the dividend and the special dividend policy. Assuming hopefully that we're back to sort of more normal times this time next year, would you expect to return to your previous policy Of paying special dividends to take you to one times net debt to EBITDA post EBITDA? Thank you very much. Yes, Andy, good morning. So transport and distribution, so this is very much the link with e commerce is Around 20% of our business growing 15%. Yes, well, this is a big alternative for lockdowns, Andy. So people are shopping differently. We still see that in the beginning of the year. Yes, so good for us and we're positioned very well there. We are growing Faster than market based predominantly on our in house segment, as I mentioned, which has been a winner for us in the last 15 years. Yes. And there's good timing. So pretty optimistic about that. Yes. And then we'll see. So that's going to be the first half year. Second half year, If everybody is vaccinated, then yes, logistics might be a little bit less, but people might go out and the old sectors might revive. But that's still early days. But based on what we're seeing right now, limited visibility, but optimistic about what we're seeing right now and not short term. Also a lot of business increasing is in testing and vaccinating, which of course will also be with us for the next 6 to 9 months. Can I just one follow-up on that if I may, sorry to interrupt? And part of the demand In logistics and retail and so forth is, I guess, for you guys is because of all of the uncertainties that companies are just reacting, getting staff in as quickly as they can to meet the demand. Do you feel from your clients there is a sense of change in how they're dealing with their contingent workforce, I. E, When things are more stable and they have a clearer view of what demand is going to be like on a 6, 12 month view that they will Continue with a bigger contingent workforce or will they kind of revert back to previous precautions? Yes. Always tough, My predecessor always said, if you listen to your if you don't listen to your clients, you go bankrupt. If you listen to them, you go bankrupt too. So but what we've seen is they're uncertain. They're uncertain. Many of them have seen that they were not agile enough. So we're talking more, as I mentioned in my prepared remarks, on the fact that they want to have a hard look at their total setup. I would say, if anything, more contingent than fixed, certainly on the short term, which we've seen in previous crisis also. Okay. Thank you. And Niv, with regards to your question about dividends, let me first I'd say that we're happy and thankful to be back in the position to pay dividends to start with. We've certainly not forgotten that all stakeholders contributed to The long term health of the company. And hence our dividend decision, we feel it's balanced reflection of the fact that we're still in the middle of a pandemic. While confident and upbeat, it feels a bit premature to declare victory in COVID-nineteen. So our decision certainly seeks So simultaneously all stakeholders in the best possible way and let me not speculate on what might come after. We now concentrate on Putting another strong quarter in, in quarter 1 and then. Okay. Thank you. The next question comes from the line of Matthew Lloyd from HSBC. Please go ahead. Good morning, gentlemen. Following up from Andy's sort of question, you pivoted very quickly, it would appear towards sort of logistics And health work and congratulations for that. It's impressive. How quickly could you pivot back? And then secondly, slightly more longer term, how much of the sort of improvement in margin Do you think in terms of productivity, do you think you can hold? How much of it is look, we've digitized this business. It's a different business going forward. And how much of it is actually an effect of longer hours in certain sectors, Which are a bit more sort of bulk in order? Yes. Well, Matthew, thanks for the compliment. Always nice to hear. So it's not so much pivoting. It is very much going where we see business. So we have what we call a data lake. So we sort of pick up the net every day, every week, every month in any market to see where the market is. What we're currently asking our people is Say okay, how can we create even more momentum? We mentioned our NuWave program, which is very much about digitizing sales, Supporting sales with digital means and data. So if there's demand, like currently in testing and vaccinating, we're going to be there. Business in logistics, great. When everybody is vaccinated, you will see the SME space bouncing back. So we will be there again in what we call our market units in staffing. So yes, let's see. I think what we've proven and I'm very happy with that and I want to compliment all my colleagues on the call also is how resilient they were and they did pivot and they did bounce back. So that's what we're apparently good at as a company. And on the margins, how much of that Do you think it's digitization and you can keep that sort of effective productivity? Productivity, we're very happy on the one hand with the 4%. You can also say why we brought in not enough people quickly enough. So we're not going to optimize productivity in 2021 because we think this is a year to invest in growth. So productivity might be less, sales will be more. And then again, if 2022 turns out to be a modestly growth year or whatever, then we're going to look at productivity again. And absolutely, On the one hand, automatization and digital support increases productivity of people, but at the same time, we take it more as in it creates room To do selling and to go out in the market and to have good conversations with talent to be matched. So in that sense, productivity enhancement is not A topic in itself for 2021. And one final sort of follow-up. Some of your competitors have talked about taking market share from And you've talked about taking market share. UK's companies have suggested that 6% of temp agencies in the UK went bust In 2020, companies don't know about branches. Do you think that you and perhaps some of the other larger players are taking market Disproportionately from small local players? Yes. We never analyze where we're taking it from. We always compare it to the full market. The UK, of course, is by nature a mom and pop business, so they fall quickly. We're not if we talk about for example, we talked about M and A, there's not going to be bargain buys because we're doing well. But in general, This sector is also doing okay ish, way less pessimistic than we expected early in the year. So We're doing well, and I don't know where we're taking it from. But what we do see, and I mentioned that in the Capital Market Day when we had that, Is that I do think that enterprise, digital investments, global presence, those are attributes that, course, the small businesses don't have. So long term, we do see some consolidation in the market. Thank you very much. The next question comes from the line of Suresimi Varanasi from Goldman Sachs. Please go ahead. Hi, good morning. Just one from me, please. I think it's very clear from your results that you are outperforming the market in some key countries. And it's also very clear from your commentary that things like your IT and digital platforms are anything new to target the verticals by seeing the growth. Maybe can you give some color on some of the other trends, please, like on in house and outsourcing trends? What has been your customers' feedback? Has the trend accelerated through the prices? What are you hearing from customers, please? Thank you very much. Yes. Good morning, Sebastian. Yes. What I mentioned in my prepared remarks, I've seen and we do all of us do a lot of sales, it's very easy to have boardroom access Again, to talk about total talent. So companies are really our proposal in enterprise is how do you organize work, and that is very much top of mind for Our customers, not just because of the crisis, but very much also on the availability of talent going forward and the mismatch Of people in the marketplace. So some of our clients are worried about a large part of their workforce that might become redundant, if not aggressively rescaled. And at the same time, they're worried about finding the people they need to drive their growth. Those are very interesting topics for us. Also, and that's the reason why We invested in digital, but we also want to create this big data lake of talent. We know where to find them. We know how to scale them. We know what to pay them. And that is very much top of mind. In house is also such a solution, right? It's a no hassle. We take care of everything, but it's just a part of the business. Right. Thank you. Your next question comes from the line of Hans Pluegos, Yes. Good morning all. First question on your guidance for the start of this year. You indicated that January are close to pre pandemic levels. Can you maybe talk us through January? I can imagine, especially the numbers Back to work data. Can you give Capstone FreedomNet and especially, let's say, by the key four countries, France, Netherlands, U. S. And Germany? Do you see any Yes, important developments there. Then on your margin for the longer term, You already indicated something from Belgium that you maybe did the current level is a little bit on the high end. Also Italy doing very well on the margin side and some other countries. How do you see that for the longer term? Let's maybe a follow-up on our previous question. But do you believe, let's say, that in the long term, you could exceed previous peak margins on EBITA level? Is that something, let's say, you think is feasible in the longer term? How do you look at that based upon just your current investments also in digital? And the last more detailed question. You mentioned some accruals impact in the gross margin in Q4. Could you give maybe some more detail on that, please? Yes. Good morning, Hans. I'll take the January question. So January, of course, is always a tough month to really call. We had a Very technical. We had a week 53 last year, which wasn't really a week. So we're still comparing week 1, week 2 and whatever. But Yes. We have slightly more, slightly more people at work in January than we had last time this year. And you can look at the arrows in our outlook to see Which markets are improving, which markets are stable and the like. So I think that So, positive start of the year, but let's hope you can keep it up. Yes. Hans, let me take the question around margins. Let me start with your Last one. I think it's probably fair to assume that the 19,500,000 in quarter 4 is what I said in my remarks, It's also benefiting slightly from provision releases, especially in the year like that, many, many moving parts Like idle times, sickness rates, etcetera, etcetera. So I think it's fair to say that probably over the over quarter 2, quarter 3, quarter 4, there have been some balancing effects in there. Longer term, we definitely have not let go of our ambition to see the business between 5% to 6% EBITDA margin. That's more an outcome than a real target. We are driving for more relevance in the market. We see that there's lots of growth potential for us. And then if we pull that off, then the margin will solve itself. I'm absolutely convinced of that. Back to that one, Hans, when I mentioned it earlier, but a bit more in detail. So we have this headcount steering. So we bring in people at Some level of productivity, we bring in new people. If we see momentum in the year, then we're going to bring in people sooner. So therefore, investing a little bit more. So again, as I said, we're not going to maximize productivity and therefore profitability this year. And then if we have created this cruising altitude, then 2022 is another year. So that's roughly underlying. But As Henry said, we do think we're bouncing back professionals. We do as we've always said, by the way, 5% to 6% is in the cards. I don't wake up at night with a maximum profitability. That's not who we are as a company. We're a growth company. That's how we became world market leader, But we're still small. So that's our first and foremost goal, to bring as many people to work as possible. That would keep us Wake at night at a decent return, of course. Okay. Thanks. Your next question comes from the line of Mark Zwartsenburg from ING. Please go ahead. Yes. Good morning, gentlemen. A couple of questions from my side. First on, yes, Sjart, you mentioned to make Monster the best job board in the world with the latest technology. And also you mentioned the 150% higher productivity for sale due to the digital investments. Could you perhaps also give a bit of A few examples or at least some numbers maybe how you compare currently where you stand with Monster versus competition. And in terms of your digital initiatives, can you maybe share a few examples what it did to your Yes. Gross margin is probably the best measure way to look at it in certain countries where you rolled out specific digital like fishing where the fishes are, as you mentioned. Yes, a bit more yes. Numbers to it is to back up the digital story. That's my first question. Sure. Yes, Monster is early days. So what I'm saying is that in 2021, we'll equip Monster with what we call Monster Next, so new websites, easy access. Monster for us, of course, is not a job board on a stand alone basis. It very much figures into the total Randstad strategy of having the best talent engine in the world. So having A few 100,000,000 people in our database because long term nobody is going to look for a job anymore actively. So you really need to Approach people actively through technology. So in our U. S. Business on technology, there's now a 1000000 people, a 1000000 talent That has been going through the conversation with the chatbot we developed. It's rated 4.5 out of 5. So Our talent appreciates this. It's always tough to directly link it to performance, but we do see what it means for people, For our consultants, for talent experience, so that's good. The problem, of course, is that 2020 in that sense was not a stable year. So you cannot really compare In that sense, 2019, now you support the business better. But we do think it already drives some outperformance. And then workforce scheduling again, the whole tooling for in house. The new clients we landed in the U. S, for example, 80% of them said That it was because a lot of things, but certainly also the technical tooling which made it so easy for them and for us To manage that pool in a very transparent and visible way. And then lastly, I mentioned a few countries Such as Argentina, Brazil, but also underlying in our larger countries, this whole pivoting, have fish where the fish are, providing our people With the right data set, sort of heat maps of demand, that really helps. But again, very tough to calculate it into this is what it brought, also given the somewhat typical year it's been. But what is important, I think, and we're very happy with that, in 2020, we didn't stop investing. So we didn't have to go into survival mode, and we kept on investing in Monster in digital, and we're very confident that this will help us going forward In a different market. Yes. Well, thank you very much. And then maybe over to Germany. Yes, but Of course, we talked about easier comps, but nevertheless, in the line still quite an improvement. Is do you see certain segments like automotive, which Big sector there. Do you see tangible signs of more structural improvement in those areas as well, just assuming in a bit on Germany? Well, I wouldn't use the word structural with automotive. I do think there's like 2 sectors which I think are up for a real reinvention. First one is airlines. What will they look like? What will business travelers do coming out of COVID? And the second one is automotive. Of course, we already saw some upcoming huge changes on electrical, on self driving. That has shaken up the world massively. The most successful car company is now a Korean one, let alone the American one, whose name I just forgot. Oh, Tesla. So those are big reshaping. I do think that the German car manufacturing are catching up, But it's very tough for me to say what it means for their sales. I don't think they know, let alone me. But compared to 2019, We do see some improvement. And again, the value chain was broken. That didn't help either. Let me add one thing. I have to because I'm I'm German and I'm born in Volkswagen, believe it or not. So I have to otherwise, I'm in trouble if I'm not pitching in. There's definitely I've heard from first hand lots of very, very strong positive exports going into China Into the Asian market. So there is a recovery. How sustainable that will be on total with JAK, There will be a big transformation, but at the moment, the supply chains are back and also volumes are getting back more and more. Yes. Thank you very much. Thanks for the color and my congrats on the quarter. Thank you. The next question comes from the line of Rory McKenzie from UBS. Please go ahead. Good morning, all. It's Rory here. Firstly, I wanted to ask about the guidance for a sequentially flat cost base, While you're also talking about growth investments. So can you just update us a bit more on where you are on the EUR 120,000,000 Savings program run rate? And then also, maybe talk about how much you are planning to grow headcount now as we look into the start of this year? And then secondly, a broader question. Unemployment is still, of course, quite high overall, but probably not in those Specific sectors you're seeing good growth in. Could you talk about the pockets of wage inflation or wage pressures you're seeing? And what are your thoughts about that becoming a much Broader issue for labor markets this year. I'll take the last one, Rory. Wage inflation is always a bit of a, how do you call it, overstated thing in Anglo Saxon markets. In Mainland Europe, It goes way more sluggish because certainly in many of the main sectors, there are collective labor agreements. So there is never There's a real up on that sense. In general, there's scarcity in the market. So if you are in such a sector, you can create a good wage for yourself In engineering, in technology, that sort of thing. Always helps us, but at the same time, we have a very we don't have a stable workforce. So it's not like we had 1,000 people. Then a year later, we have the same 100,000 people, and therefore, wage inflation plays a role. It's sort of diluted if we bring in young people, if we bring in newly trained people At a different wage level. So very tough for me to comment on that one. It's a big debate solely in Mainland Europe What the support government support will mean for unemployment? So unemployment is very much in the affected sectors. What you've seen in the U. S, No government support to well, a bit, but and so people became unemployed very quickly in Leisure, entertainment, restaurants, that sort of thing. If government European governments, apart from the cost, that's more of a monetary question, keep up the support All the way until everybody is vaccinated, then still people can bounce back into the roles they are having. We're actually advocating people not to wait for this. So we are actively offering reskilling for this not to happen. So interesting space to watch in 2020 Yes. On the first one, on OpEx, yes, you've seen that our quarter for cost base is So indeed EUR 35,000,000 lower organically year over year and definitely our cost optimization program is a major driver of that. As I said before, we are really touching the entire OpEx space of how about EUR 3,400,000,000 In all its dimensions. So there's a company wide program running with senior management being Deployed to it supported by cost experts and we really, yes, more or less turning every stone and asking the question, Does that spend help us to grow faster? Or is it not better deployed on the frontline In more people helping us, actually touching with customers or supporting talent. And it is yes, it goes into more than close to 100 dimensions actually. And we are I would never declare that being over. I said it's part of our DNA. And we have Meetings, the progress meetings, pretty much every 2 weeks with quite a big group. And we're celebrating those costs coming out To be invested into growth. That's really, really important. So why are we guiding now for sequentially more or less in line with quarter 4? As far as OpEx concerned, Because we want to do exactly that. We want to really give ourselves space to grow. We want to be in front of the curve To really get more competitive growth under our belt and so far it has surfaced very well. Okay. That's helpful. Thank you both very much. The next question comes from the line of Sylvia Barker from JPMorgan. Please go ahead. Hi, good morning. Firstly, just on logistics. I know that we've talked about a bit, but The 20% at the group level, just wondering how that looks by region. Just wondering if it might be actually a lot In let's say North America, where obviously in house did particularly well in this quarter. Then on the Vaccines Government COVID-nineteen revenue, is there any chance you can tell us how much that's contributing to growth at the moment? And finally, on hours worked. So we've seen hours worked, obviously, go up in North America, but also you picked out a few other countries within the Prepared remarks. Presumably that's not a massive impact relative to volumes, but is it adding a percent to your growth Revenue growth at the moment or is it less material than that? Thank you. Yes. Well, Sylvia, those are great questions, but a bit too granular. You're asking things that, well, I don't really know by heart and or I'm not really Sherry. Certainly not in our U. S. Business logistics. If you compare Europe, then some European business have more logistics than the American business. And it's not to say that purely in house successes are only in logistics, as also food, manufacturing and that sort of thing. So yes, sorry about that, but Not really good answers to your questions. So you're going to make do with our general remarks. Okay. In that case, could I follow-up on costs as we're not going to get anything on the growth ones? Yes. Just on the 120 again, obviously, you're already asked on that, but How much of the $120,000,000 have you taken as structural cost savings in 2020 already? And how much should we think about is still being worked on for 2021? Also that is a very, very tough One to answer, just give you one example. We have very successfully Transitioned and renegotiated travel fares. But if you're not travel, there's a zero benefit. But as soon as we were to start, You're probably not going back to 100%. Every time we do, we would do it on a more cost efficient base. So It's really quite a mixed bag of things. But as I said already, We are really looking to structurally addressing it, but sometimes it's not a rocket science Solution is just a decision. Do we need it to make the boat faster or is it better placed in the frontline? And then we take we always to support growth in the business. Okay. So So we think half of it at least or you really can't quantify at this point? No, I can't really put a number on Okay. Thank you. The next question comes from the line of Anvesh Agrawal from Morgan Stanley. Please go ahead. Hi, good morning. So most of my questions are answered. I just got a couple of small ones really. Do you guys have a what's your In Mexico because beer Manpower called it out specifically last week, saying pending any regulation change, there might be a significant impact. So Just wondering, is it what's your group exposure there? And then can you just tell us like what's the absolute level of Monster revenue you are at right now? And then, yes, you made some comments at the beginning, but how should sort of should we think about that part of the business in terms of the Growth or revenue sort of decline continues permanently? So our Mexican business is very small, Einverch. As a, call it, Expert, let me call myself an expert, on labor market policies. I think it's very bad legislation. Mexico has a large informal sector. But if you then ban the legal part, so to say, you get more badly regulated work. So It's not going to be good law. If it happens, it will hurt us far less than it does manpower and Adecco. And also, The result would then be certainly to go into RPO. That is a successful and profitable part of our Mexican business and maybe into specialty staffing. So we can easily pivot there. It won't show in our numbers. And then Yes. Sorry, sorry, don't interrupt you. Once the revenue, it's about, I would call it, US2.50 dollars ish To €15,000,000 to €20,000,000 And then just like just on that. So do you should we continue to expect a sort of decline in top line, but you manage the cost Space, so it doesn't really impact the profit numbers? Or how should we think on that going forward? You should not lose sleep over the real result of Monster because again for us it paints a totally different picture. We're still in investment mode overhauling the whole technology. We think it's very sensible to do that and that is probably still going to cost money this year, but we'll take it from there. So yes, it's not material. Okay. And then maybe just one more technical follow-up. So obviously, French business tax is Changing, can you quantify the potential benefits you would have in your numbers in 2021? Or that's baked in your guidance of 26% to 28% Sort of tax rate? I need to come back on that one. I'm always a little bit anxious to really qualify tax benefits Things are changing a lot. I'm more than happy to get back to you on that one. Okay. No worries. Thank you. The next question comes from the line of Konrad Zomer from ABN AMRO. Please go ahead. Hi, good morning. One broader question. I think it's great to see you delivering on a very good quarter. But in terms of investments, It seems like you've gone back into investment mode. Working capital has gone up. The operational expenses have gone up sequentially. Your corporate staff went up 4% sequentially. The way you look at it, because at some point in countries like France, Belgium, Germany, Holland, government support will come to an end. Are you now just back in full investment mode like we've passed Most of the pandemic and we're back on track? Or are you still holding back because Something really bad might happen once the government support schemes come to an end? Yes. Good morning, Conrad. Well, there's 2 things. There's government support schemes and there's vaccination. And they play out differently, I think. As I mentioned earlier, Governments would be intelligent to keep up support for the affected sectors as long as possible. These affected sectors Down because of the virus. It's people can't go into restaurants, can't travel, that sort of thing. So if everybody is vaccinated, This will bounce back and ideally then less people lose their jobs. But it's less of our business. So I can't answer your question whether yes or no. As you know, we go with the flow. What we're seeing is an improvement in our business. We're seeing outperformance. We're seeing momentum in many of our markets. We have a new waste program so that our people are aggressive in sales. And as Henry said, we want to give them all the room to grow. So we're making a bit of a bet on this to continue. So normally, we would take headcount down into Q1. But as you've seen, we've not done that. And if the momentum continues, we're going to put in more people, which is never a risk for us. We can tone down whenever we want to. As Henry said, we have 3,000 people less than a year ago, and we didn't fire anybody. We just didn't replace in many markets because that was not the right timing. At this moment, we're asking our people, our managers, Where do you see momentum? And when they say here and there, they can invest and we'll see if that drives our growth. That's what we're doing. Yes. Maybe one addition that I would call it a sequel, very controlled fit because Our business leaders are really pros that are very commercial. They know that we need top and bottom line. And there Very, very clear expectations of say the minimum returns we want to see even investment models. So and It's also not that we are on, I don't know, put a big production line in there and then hope that volume will come. We really see the business week by week. So we have it really well in control. And I just noticed that your corporate Staff in Germany went up about 17% in the quarter sequentially. Is there any particular reason why that has gone up so much? Yes. That is, I think, the effect of unfurling all people from short term work cost of buy into full time employment. I see. Okay. Okay. And then maybe just one final question on your free cash flow. For the full year 2020, I think more than 10% directly came from government support. If that is likely to disappear this year, Do you think that underlying your free cash flow could possibly still go up? Yes. So I've been very vocal about the fact that our cash flow benefited from 2 things. 1, the CICE flow And also there's €120,000,000 of governmental support in there, which by the way has gone out already early days of January. And that mentally, I always strip that out and that gives you something like €630,000,000 really underlying Free cash flow. Of course, what we would love to see in 2021 is that the composition of the free cash flow goes much more again into EBITDA EBITDA generation, but we will have then the opposite for the OWC, which goes out to support growth. So we're not guiding on cash flow, but we are really on top of it. We managed very, very tightly our DSO, our credit risk and keep a close check on it. Yes. With increased profitability also the EBITDA will increase. And investment in growth. Okay. Thank you very much. Thank you. Thanks, Nicolas. The next question comes from the line of George Gregory from Exane. Please go ahead. Good morning, everyone. Just one quick follow-up, please. I wondered if you could elaborate On Monster Next and what additional capabilities You expect that to bring or the extent to which you expect it to improve the user experience? Thanks. Yes. I think that's an excellent question, George, but I would like to table it for next quarter that we know more, we have no more functionalities, We have more comparison. So hold your breath. Okay. Thank you. There are no further questions in the queue. So I'll hand the call back to your host for any closing remarks. Yes. Thank you very much. Thanks everybody for calling in. Thanks for your questions. Although the sun is covered in clouds, We still are optimistic about the start of the year. So let's hope we can continue to be optimistic. So see you next quarter or well on the virtual roadshows. Bye bye. Thank you for joining today's call. You may now disconnect your lines.