Earnings Call: Q1 2019

Apr 24, 2019

Hello, and welcome to the Randstad First Quarter 2019 Results. My name is Molly, and I'll be your coordinator for today's event. I will now hand you over to your host, CEO, Jacques van den Buch to begin today's conference. Thank you. Yes. Thank you very much. Good morning, everybody. Another quarter, the Q1 of 2019. Good to talk to you all. I'm here in the room with Henry Schimmer, David and Steven from IR and Ingrid Palfe from Communications to answer all your questions after the presentation. So let's dive right in and start on Slide 6. What we indicated in Q4 when we present those numbers was that our feeling was that the slowdown was more of a pause than sliding into recession. And that's actually what we're seeing in Q1. So markets in Europe are bouncing back slightly. U. S. Has for a long time already is quite robust. And our rest of the world continues its great performance with the growth of 10%. Very happy with our EBITDA conversion, very happy also with the fact that we've improved our gross margin compared to Q1 last year and as you could expect also agile cost management. And that drives our EBITDA margin up with 10 basis points. So in a no growth environment, we're very happy with the fact that we can show an EBITDA improvement. Also in these markets with relative real growth, it's also about, I call it, relative performance. Quite pleased with our outperformance in the Dutch market, the Belgian market and even the German market, which I'll explain, and several other markets. And also our French business, minus 4% in Q4 and back to market. Back to gross margin. So why the improvement? It's a mix of few things. As you know, we've always been very deliberate on demanding a certain price for our service. And at the end of the day, if a client doesn't want to play ball, also say no to those clients. We've got improved pricing in the Netherlands, in Japan, which we already flagged in Q4, but continuing into 2019, but also in our French market and our U. S. Market. So first of all, it starts with a strong focus from our management on pricing, very clear escalation rules on where to go from a pricing point of view, calculators on client level on where we make money and where we don't. So that helps. Then talked about it, but rolling it out more aggressively, our digital pricing tools, where we not only show the client what the market is all about, specifically for certain job categories, but that also materializes into a proposed price. Yes. And then lastly, new in the market, although relatively less growth, the demographics and scarcity in some markets lead to pricing power for us. Digital progress, I can spend more than an hour on this alone, but just take out a few. The first one we would like to highlight here is workforce scheduling and new plan. This is where for clients either already in house clients or clients that have 20 to 50 temps, we provide them with a free planning tool. We equip our temps with app technology so they can plan themselves. We've already rolled that out in 13 countries, and we have more than 1,000 implementations going on. In our German market, despite the automotive slowdown, we rolled out some 60 of these clients already in our German market. We think this has added some half of fifty basis points growth to our top line and more to come because this is early days. In France, of course, also impact on our growth, always tough to calculate because there we started with our in house clients, but we have implemented between 400 and 500 clients in France alone. So definitely a reason for us to decrease the gap and close the gap to market. In general, we're going to highlight this every time. Digital is not about the tools. It's about what our people do with the tools. It should change the way we're working, not just for our own consultants, but also for our clients, but very happy with their performance. And then lastly, I would like to highlight Customer Delight. So Customer Delight is a solution developed in Belgium, where we go to our stakeholders, our clients, our candidates, but also our own staff to ask them what they appreciate, what in our service specifically do they appreciate, What do they appreciate less? And that gives very clear guidance to our people on what to do more of and what to do less. Not surprising probably is what all our stakeholders appreciate most is the human touch, is human attention, is human follow-up whenever an assignment ends, for example. Our Belgian people have set this up in a scientific way. 1st, we go out and we ask those expectations. Then we develop a dashboard and we measure continuously. And then at a branch level, people can adopt their way of working directly compared to what clients and candidates appreciate. In our German sorry, in our Belgian business, we are above 8% in our appreciation for candidates. And not surprisingly, that has led to an outperformance in the Belgian market, and we're rolling this now out to 9 other countries. Let's go to the next slide to a few of our geographies. North American market, I mentioned it already, a quite stable performance, 3% growth, now solid at 2%. Some slowdown in staffing and in house, mostly visible in our mass customized, But it's in line with the general market trend. Our U. S. Frost business, a mixed picture here. Our biggest business is quite stable. IT Technology business quite stable in low single digit growth. Our F and A white collar business still down quite stable, but our smaller businesses, Randstad Corporate Services, what is Randstad Corporate Services? This is a client in one location where we supply all staff, both contingent and perm, doing well. And also our life sciences, relatively small business, but doing well. And therefore, we have an improved growth performance in our U. S. Professionals business. Overall, a good margin improvement in our U. S. Business, as you can see, due again, like it is at a global level, by the way, good pricing. This is a market that gives us good pricing. Wage inflation, it's around 3% probably, and very tight fuel steering on cost. Our French business, I mentioned in the last call that I was very confident that our strong French management team could definitely in this market come back, and they've done so. Very happy with their performance. We were below market also because of saying no to very low margin clients. We're now back at market, very much driven by growth in SME and growth in our workforce scheduling and Youplan implementations. Again, very happy with our current performance because these comparisons are very tough, very high double digit growth last year, but also our Professionals business still having good growth. Our home market, the Dutch market, very happy with the fact that we are ahead of market because if you're ahead of market with better pricing, I think that's a great performance. Anybody can grow, but grow at a better margin. That's really a challenge. Very happy with our current performance in the Netherlands, up 20%. We were not happy with our current performance last year in the Dutch market. What the Dutch team did is they visited their French colleagues to really detail out what was not going well in the Netherlands and in that sense shaped up and it shows in performance. Perm is sometimes it's a volatile part, as you know, but you can beef it up relatively quickly as they've done here. Our professionals growth, very robust at 7%, lower than Q4, but some the comps are like 5% tougher. So a great performance there. The Dutch market is ahead of the rollout of the pricing tool. This is what they develop. What it looks like is we go to a client and we can show the client a sort of a heat map where you fill in the job. And then relative to the region and the scarcity in the region, you can talk to the clients on the possibilities. Should you go for a younger profile? Should you go for an older profile? Should you go into training people who are not matching the profile? So we're probably going to train more than 30,000 people in the Dutch market alone to make them eligible for a placement at a client. Stable margin at 5.2%, including, of course, one working day less. The German market, yes, sometimes I thought I would never say that, but I'm quite happy with the German performance at minus 10%. We're way above market. You've seen manpower coming in at minus 23%. So it's tough out there. Of the 10%, roughly 7% or 72% of the decline is automotive related. We saw the trend before the summer, so last year around this time, prepared to take cost out. We did that in November. And therefore, we still have a good EBITDA, given the circumstances, because of proactive managing of cost. So again, happy with our German performance. We don't see this market bouncing back anytime before the summer, certainly not. So probably in the German market as of September, we'll see more. Again, 60 workforce and UPlan clients rolled out. Our plan is to do 180 for this year. So this will help in a tough German market. Our Belgium business, challenging market. The market went negative, but we're still growing. Actually, a slight improvement on the back of Q4, so good outperformance. And this is with a market share of 26%, 27%. So quite a stable and impressive performance of our Belgium team. As I mentioned, they developed customer delight. What we also have been doing in Belgium is rolling out our data driven sales tool, experimented, piloted in the Dutch, French and U. S. Business. In Belgium, we have created the data driven tool that can travel. We call it signal in Belgium. We now have full usage in Belgium for all consultants. They know where to go. It's mobile enabled, so whenever they're visiting clients, they can see where the demand is in the immediate region. Combine that with showing what the labor market looks like, then the visit of a Randstad consultant is increasingly of a lot of added value and different from competition, and that leads to, again, outperformance. Italian business, bouncing back also, as you can see, 1% negative growth in Q4, 1 up this quarter, very happy with that performance. Our Italian team, it's not too long ago that we did a massive acquisition here, but they keep it up. It's a company with a strong culture, good steering on actuals. Perm also very impressive at close to 30% growth and an improved EBITA margin. Very happy with our Italian performance, which as you know is a big business with more than €1,500,000,000 revenue. Also to the Southwest of Europe, where Spain returned to growth, down 3%, now 3% up. As you might have known, there's an increase in the minimum wage, which our Spanish team has passed on very successfully to clients and therefore, also a stable high EBITDA margin. Other European countries, yes, a mixed bag. Probably good to mention that in U. K, we had 5% growth in perm, which given all the Brexit thermals is quite positive to mention. Also, our Polish business, which had quite a negative top line in Q4, seems to be bouncing back and overall a pretty stable EBITDA return. Rest of the world, top performer last year, keeping it up. Of course, this is a big region. I would really like to single out India this time. India is a market where we've been already for more than 10 years. It's a tough market. Margins are low, and you really, as a management team, need to scope out the parts of the market, the clients that are willing to pay for our services. So I really want to give a big compliment to our Indian management team for pulling out the performance. Already, we saw it in 2018, continuing into Q1 2019. So definitely an important part of our Rest of the World performance here. Then lastly, our global businesses. We presented as global businesses because increasingly, we merge the possibilities of these markets of all these businesses on behalf of our clients. Sourceright, good double digit growth in EMEA and APAC really driving the performance there where we very much go to clients and we show them not just on a one to one basis like we do with our consultants, but also on a global basis what talent looks like, what the access to talent needs to entail and how we can organize that. It's a very promising part of our portfolio. Where increasingly Monster is a part of that, where we fuel demands from our clients directly into the Monster database and back. Overall, at Monster, a pretty stable decline versus Q4. So all in all, pretty stable picture, leading to an improved performance in our EBITA margin compared to last year overall. So that said, good start of the year. And on that, the numbers and everything else. Henry? Thank you so much, Jacques. So my pleasure now to take you through the Q1 financials, which are definitely satisfying. And please note that all figures are including IFRS 16 unless specifically stated otherwise. So as mentioned by Jacques, it was good to experience another quarter of competitive top line growth and further improved EBITDA margin, delivered against the backdrop of low economic growth in some of our main markets and in adverse working day effects. Our take and touch strategy works for both top and bottom line. Now the key drivers to margin progression was our sound gross margin performance supported by value based pricing industries across our global footprint. Now let me take you through the P and L in a bit more detail. So we already talked about the strength of our portfolio. Revenue in quarter 1 was slightly up year over year as growth improved in several European countries, overall stabilizing sequentially as mentioned in our quarter 4 call. We are pleased with another quarter of market share gains achieved in several of our largest countries. Now on the next line, gross margin came in strongly at 19.7%, up 10 basis points year over year and ahead of our guidance. And I will take you through it in more detail on the next slide. Operating expenses showing up slightly lower year over year, well monitored and under control. Now our agile cost management continues to pay off, safeguarding our ability to support our most promising growth opportunities whilst adapting cost leverage to sometimes harsher market realities. EBITDA, as you see, came in at €2,000,000 to €7,000,000 227,000 with a 4% EBITDA margin, up 10 basis points year over year. So all in all, we see good quality for our quarter 1 results as it's driven by healthy gross margins protecting our ability to continue to invest into our strategic growth initiative. And as already mentioned, our incremental conversion rate for the last four quarters was about 78%, further building our strong track record of conversion. And as promised, on Page 14, we show you the gross margin in a bit more detail. Right, Page 14, let me unpack the gross margin for you. As you can see, the temp margin reversed significantly and positively from a minus 40 basis points in quarter 4 last year to plus 10 basis points in quarter 1. Let me explain the underlying drivers. The price mix effect is still positive as a result of structured management efforts to strengthen our pricing capabilities, increasingly utilizing digital value based pricing tools across our portfolio. As a result, we're better able to benefit from tight labor markets. And in quarter 1, regions like the Netherlands, Japan and Spain benefited in a very significant way. It confirms our ability to price for superior value delivered to our clients globally, and this has more than offset the negative impact of working days in quarter 1. The bar in the middle shows positive impact of our growing firm business, 5% growth, driving 10 basis points positive mix It's all fee income and therefore gross margin accretive. And lastly, the bar on the right represents HR Services and Other, which shows minus 10 basis points effect on gross margin, which is mainly the mix effect from Monster. And that gets me to the OpEx page on Page 15. Let me open that chart by stating that we brought our operational expenses in line with some new economic already mid last year, which helps us to secure some leverage in the bottom line. Excluding ForEx effects of €3,000,000 sequentially, we reported OpEx up by €7,000,000 but down €10,000,000 year over year. We continue our work to flexibilize the cost base to stay resilient in the face of volatile markets and also improve our ability to steer our investments in the places with the highest long term return. So finding the right balance between tough cost management and nurturing our growth engines worked out well again in quarter 1, and we do our best to do the same for the rest of the year. It's one of the keys to drive the business for leverage going forward. Let me close that chart with a confirmation that we are fully on track to deliver our cost savings target of €90,000,000 to €100,000,000 annually for 2019. So moving on to Page 16, where we shed some light what it all means for our cash flow and balance sheet. We reported in quarter 1 2019 a free cash flow of minus €2,000,000 which is an improvement of €23,000,000 in absolute terms. And the main driver for the good free cash flow was the change in the French subsidy system. Under the new system, we received the subsidy without the laborers and more than 3 outstanding, VSO, which is virtually stable versus last year and quarter 4 2018 on a 12 month moving average. On the right hand of the chart, going straight into our strong balance sheet. Our net debt position decreased by $86,000,000 versus quarter 1 2018 to $1,640,000,000 And please note, this includes the lease liabilities related to IFRS 16. As we reported to you, this is optically a slight upward effect on our leverage ratio. However, pre IFRS 16, we arrived at 0.8percent to 0.9percentlast year in quarter 1. The adjusted leverage ratio will also be the basis of our unchanged capital allocation policy going forward. And for 2019, we project to see further improved free cash flow versus 2018. Let me also reiterate that the outstanding CCA receivable of €491,000,000 will be collected in the coming 4 years. And also please do remind me that we will pay a special cash dividend of €1.11 per share in quarter for 2019 on top of the €2.27 we paid already beginning of this month. That brings me to my final page, Page 17. Let me summarize the key messages and provide you with an outlook for quarter 2. So firstly, it was good to experience another quarter of competitive top line growth and to further improve EBITDA margin in a low growth environment. We're especially pleased to be able to report positive gross margin trends. Our company wide effort to fully utilizing our digital value based pricing tools gained even more traction. This combined with the early intervention of our cost base has led to another quarter of EBITDA margin progression. Secondly, our digital strategy is well underway and embedded in our business. It's not only helping to drive productivity, it also redefines our way to engage with customers and candidates future proofing our business. And thirdly, last but not least, while market conditions are uncertain, Randstad is very well positioned to capture growth opportunities in the future. Our portfolio is much more diversified than a couple of years ago. But even more importantly, we are proud of working alongside the highly engaged and motivated Randstad team. I'd like to thank them all for a very solid quarter on performance. On the right side of the chart, I'd like to mention the fact that March grew at a similar pace as quarter 1. And let me point out that the gross margin for quarter 2 is expected to be slightly up with quarter 1. We also expect OpEx to slightly increase sequentially, both reflecting seasonal trends. Please note, quarter 2 has an adverse 0.3 impact on number of working days. Well, that concludes my remarks, and I hope it helps shed some light on our quarter for 1 performance. We will be delighted to take your questions. Back to Molly. The first question comes from the line of Bilal Aziz calling from UBS. Please go ahead. Good morning, everyone. Just two quick questions from my side, please. Firstly, on gross margins, can you please break out the negative impact from working days you had in the temp margin? And separately, if there was any reversal of the German sickness issue you had last year, which I think had a 10 bps drag in 1Q last year. Separately, just looking at France and your performance versus the broader market data that we get, how did that region perform as you went through the quarter? And are there any specific verticals that improved sequentially more so than the others? Thank you. Yes. I'll take the German sickness one. Yes. There's something not great in the system in Germany, and that is it sort of pays to get sick. The system is such that if an assignment ends, for example, we got this 18 month rule and if you're then not hired, there are some people that don't want to take a new assignment actually sometimes at a lower salary. So the German sickness is still relatively high, which is more of a system thing than a weather thing. So it didn't help, but fortunately, we took out all the costs. So therefore, still an okay performance. On France, yes, it is pretty broad based automotive, slightly better manufacturing improved, but for us very much small and medium sized businesses. So we sell a lot on the back of that, also supported by the digital tools we have in place. In house is still doing well. And last but not least, but that also fuels in house, by the way, our Youplan and workforce scheduling solution, which is actually attractive for any client in the French market regardless of the sector they're in. So yes, it's very much our own performance are not so much sector related. Yes. Maybe just chip in on the working day impact, we're calculating with about minus 10 basis points on impact on this quarter on gross margin. Thank you very much. The next question comes from the line of Kean Martin calling from Jefferies. Please go ahead. Good morning all. My first question just touches on perm, which I appreciate can be lumpy. But could you help us understand why North American perm decelerated so much from the Q4 into the Q1 of this year? And then a similar question, but in reverse, why the Netherlands flipped from minus 14% to plus 20%. And then secondly, on gross margins, the last two quarters, you've beaten your gross margin guidance. So I'm wondering if you can help us with a bit more detail about what assumptions you've included in your guidance for the Q2 sequential movement. And in particular, are you looking for price mix to move further up from the 10 basis points improvement that you mentioned for the Q1 driven by the self help initiatives? Thanks. Okay. I'll start with the Purim one. The U. S, as you partly answered the question yourself by posing it, which is a lumpy thing. The U. S. Had a tough to explain slow start in Jan February, looks better in March. So that's good. At the same time, there was one less Monday in the quarter, which doesn't help in perm. So those are two reasons. Again, no predictions, but I don't expect it to bounce back to Q4 levels, but it will definitely bounce back to growth as far as we're seeing it now. And the Netherlands, yes, very much our own performance. Perm is still an acquired taste in many markets, and you need to find the right way. It's always we've got a standard of working, but the way we approach it is sometimes slightly different to market. And as I mentioned, the Dutch colleagues went to France to further tweak with the French team who's been quite successful for the last 4 years in perm what they could improve and apparently it shows. So that's more related to our own performance than it is to market. Yes. And then thanks for your question on gross margin For quarter 2, actually nothing too fancy. We actually expect similar trends as in quarter 1. The working day effect will be slightly less dramatic, so that will help a little bit. But yes, then in general, just implementing with disciplined pricing, be very conscious about driving top and bottom line at the same time and using more and more pricing tools in there. So that's where we try to continue that trend we see in quarter 1. But presumably, as you roll out the pricing tools across the group, though, the price mix tailwind should increase? No. Actually, we are not guiding in that regard. So we take it quarter by quarter. We fight for every customer. And we're not guiding on gross margin going forward. Okay. I understand. Thank you. The next question comes from the line of Paul Sullivan calling from Barclays. Please go ahead. Good morning, everybody. Just following up on the gross margin and pricing. How much of the pricing or the improved pricing backdrop would you say is just a function of the Thai market versus some of these new tools you're rolling out? Just trying to gauge the sort of the proportion of the improvement that is more structural versus sort of cyclical. Then in terms on SG and A, were you braced for a worse revenue environment, hence the margin beat? And if we see sort of revenue growth in this sort of positive stability in this sort of 0% to plus 1% going forward, Could we see sort of costs creep back into the second half? And then finally, it's been pretty quiet on the M and A front. Any thoughts on activity there? Thank you. Okay. Well, let's start with the last one. The core of our strategy is organic growth based on data availability and technological support of our people in their daily business, redefining the human moment we have with our clients and candidates based on technology. So that's the core of our strategy. So there's not going to be any sizable as in earth shattering M and A. So low on that front. Pricing, yes, we commented on what we're doing. So first of all, but that's not new, disciplined on pricing, walking away from clients. We can grow faster than we're currently doing, but sometimes we're deliberately not doing that. We think it's important also to set the scene as a market leader on where the market is going. So that's one. The second one is the pricing tools. That's not just the pricing tool per se. It's also a much more impactful conversation with clients. So we always had, call it, the conviction and the drive of a consultant to talk to clients from the market. And now we increasingly have data. So we're quite confident that, that will lead to good pricing, and that's about it. And I think that's quite a lot of guidance on what we're doing on pricing. Just on OpEx, we do see a normal seasonal increase for OpEx as our revenue will also increase with seasonality. And yes, we continue our work to look for opportunities to improve the OpEx level while it's safe starting the investments into future growth opportunities, which is still plenty, yes? Even the flat market, there are pockets of unbelievable growth everywhere, and we would like to support that. Yes. And scope creep is a word that, to me, sounds like we're not watching things. In this current environment, as always, we're very diligent on cost. And yes, the ICR for us is the guideline to balance growth and investing in growth and stable returns. So that's an ongoing management effort here. I wouldn't expect anything else. Thank you very much. Thanks, Paul. The next question comes from the line of Conor Sykes calling from Deutsche Bank. Please go ahead. Yes. Good morning, everybody. Just could you go or maybe just give the answer to the question earlier from Bilal on the sickness issue in Germany. You didn't actually say whether it was more or more negative or less negative than last year. And also, just is there an FX impact in your gross margin? And if so, could you say what that is? And also just on temp to perm conversions, I believe you put those into your gross margin in temp. Could you say whether those were more or less benefits to gross margin, please? Okay. Yes, the temp to perm conversion is very tough. We don't Would it go into pricemix? Would it go into pricemix? Yes, everything goes into pricemix, Tom. Yes. But maybe to answer your question differently, we do believe that the majority of our pricing increase is due to our own effort and not temp to perm or that sort of thing. There is something going on in our strategy regarding pricing, and very happy with the fact that, that reached the results. The German sickness, if anything, is slightly lower. But last year, there was really, I call it, a flu thing going on. It's quite disappointing that we still have this sickness, which again we think is a system error, although being very hard with workers councils and unions to in the next release of German collective labor agreements regarding our sector to take this out because we think it's the wrong incentive. And Tom, it's really I can confirm. It's a limited impact on Signals. It's slightly positive, but very limited. Okay. And FX? FX is about 10 basis points positive impact in there. 10 basis points positive on the gross margin, okay. And then just a follow-up on the wage impact. I just wondered if you could give the wage impact overall at the revenue level. And then also, is there you obviously have the big increase in Spain. But is there a timing difference between when you pass on wage impacts at the revenue time revenue level, sorry, and the wage impact that you pass on to your own staff? And I know this happens every year, but would there have been anything particular in the different months when these things came in about which would have given you an EBITA benefit in this quarter at all? Yes. No, there's no specific EBITA benefit. Henley already commented on the quality of our numbers. So the EBITDA improvement is like real. And so it always affects. We don't calculate. It's very tough also to have the full wage inflation impact in there because we don't have a stable workforce. As you know, we're into temporary work, so there's a lot of changes there. In the U. S, we got a little bit more guidance. That's why I mentioned it in the presentation. There is also in Germany, yes, because there we have these collective labor increases, but in other markets, it's not debt regulated. In Europe, in general, wage inflation is still at the early days, so to say. But of course, it helps. But yes, that's about it. Yes, we don't have the majority of our people at minimum wage. So the mandatory increase, it doesn't automatically translate. And you also need to discuss with clients. It's mostly equal pay. So it's also what happens with their own pay scales to really define what happens in our business. Just briefly comment on Spain. It's just very disciplined execution of that change we've seen in the Spanish market. So the team has done a great job there. But it also shows that our service, our offering is well received by the customers that we have the negotiation power to execute that. Okay, perfect. Thank you very much indeed. The next question comes from the line of Mark Zwartsenburg calling from ING. Please go ahead. Yes, good morning everybody. A couple of questions left. First of all, on the OpEx line, there are the all the results, top line better, gross margin was better on OpEx, trended up a bit stronger than anticipated in my view. But do you foresee any programs for the second half that you can still see OpEx perhaps flattening out a bit more than currently is the case to squeeze out a bit more operational leverage? That's my first question. Then in general, maybe for Jacques, do you feel when you're talking to clients and also looking to your dashboards that you really have passed a trough in Q1 and that things are getting a little bit better and that there's a bit more conviction in clients to hire more staff. And the final one, maybe also for you, Jacques. Can you also give a few maybe examples or indications how your digital investments now really add to productivity and translate into better conversion ratios? Can you it's any tangible? I know that Monster is throughout the organization, but can you give maybe a few tangible examples where you see some benefits? Thanks. Yes. So I'll lead into the first one. Yes. We'll basically get you out of the way. Hi, Mark. Thanks for your question. So on OpEx, really, I wouldn't say we take quarter by quarter, but we do assume that we keep operating in a volatile environment going forward. So therefore, we are very careful with investment. Having said that, competitive growth is a very high priority. And we so far, we've found a way to be to start with a good execution there. And whenever we have kind of a bit left to still protect EBITA margin, we are investing further into our positive growth. And that is, I think, so far working. So let me not comment for the remaining part of the year, but let us jointly assume that we just assume volatile environment and we stay very close to the cost line. Yes. The PMIs in the Q1, the end of last year, beginning of the year, they trended really down. Was there not a reaction within also to push a bit on the brake there and then maybe now to invest a bit more again? Is there any balance in that? Yes. We are I always say we plan for the worst and hope for the best. So we're disciplined. But we're seeing data coming through week by week, and we're very agile there. There's extremely good teamwork at Randstad. We stay very close altogether and making calls of how to navigate through the quarters. And we're also very, very clear as far as strategy is concerned and as far as investment priorities are concerned. So and in that balance, we are working. And as you know, Mark, we run the company on actuals and not on PMIs. And we're also still aiming for relative outperformance, which we did in quite a few markets. So you mentioned in your question to squeeze out a bit more leverage. That is, of course, a part of running a business. But at the end of the day, for us, it's about profitable growth and the right balance there. Their clients, my predecessor Ben always said, if you don't listen to your clients, you go bankrupt. And if you listen to your clients, you go bankrupt, too. So they are in an uncertain environment where we help them. So they sometimes push on the brake. The worry for most clients is not so much the cost level or putting people to work or not. Increasingly, it's about still getting the people when they want it at the moment and in the region that they are operating in. So that's also a reason why we created the portfolio for Rebecca Henderson to really help navigate clients in this increasingly complex world of talent. And that's where we see a lot of traction. So they are as again as uncertain as we are and looking for improvements to run the business better and that's where we come in. On digital, maybe, yes, also a bit the same theme. So our digital tools are not primarily geared at bringing costs down. So our strategy is Tech and Touch, so redefining the human moment where it really makes the difference. So our data driven sales tools mean that our consultants only talk to clients that have a need. Our candidate engagement tools, so in 24 markets, we now have video interviewing and analysis. So we make it very easy for our candidates to come in. And that means that the moment that a consultant touches a candidate, they are in a way further along in the process. You might say that increases productivity. We like to think way more important, it improves our candidate engagement and candidate centricity. But still on productivity maybe, almost all our temps in our major markets have their own app. So their schedule is on the app, information is on the app, communication is through the app. So that leads to quite some efficiency and again candidate centricity for our consultants. We work a lot with RPA, so robotic automation of our own administrative processes, and that helps. Our search engines and our access to the data, including the country where Monster is in, is improving. So our consultants have quicker, more reliable, more artificially driven improvements in the way they look for candidates. So that's all driving improvements. But again, it's early days there. We do think there's more to come. But you do see some improved matching statistics, for example, on your dashboard? Yes, absolutely. So we always we run you know our funnel, right? So you have the candidate part on the left side, the client part on the other side, and it leads to the match. And we're measuring all those statistics and where we support it through technology to improve the way we do business, partly to create more growth, I think deliberately create more growth over time, but yes, of course, also bring our overall cost to deliver down. All right. Thank you very much. The next question comes from the line of Rajesh Kumar calling from HSBC. Please go ahead. Good morning. I'm sorry to have the millionth follow-up question on the temp gross margins. Just looking at the numbers you've presented, it seems like you've got a positive contribution from perm growth margin. And if you just back out the proportionate rate of temp revenues, temp margins have gone up as well. Can you give us some color on how much of that improvement is due to shift in mix from lower contribution from Germany versus your pricing effort just in terms of order of magnitude rather than the precise numbers? Yes. So order of magnitude on perm, we have that 5% growth and we allocate about 10 basis points positive contribution in Yes. So the gross margin in Germany is actually above group average. So the fact that Germany grows less in a funny way has a negative effect on our overall gross margin at the group level. When you used to report gross profits by geography, it used to be lower. So have it changed since? No, that's not what I recognize. Okay. Okay. So yes, I think there's nothing to worry about. I think this is it. Yes. I think there's one thing you need to remember. We've improved our gross margin. Yes. No, I get that. And we're working very hard to continue doing that. And we're very happy that it happens, and we hope to continue that. Okay. But we also keep both feet on the ground, right? I mean, it's a very competitive market. So there is yes, it needs to be earned every quarter. So don't take it that we declare victory in gross margin there. But it's good to see that the efforts we're making are at least in quarter 1 sold out positively. And do you think your competitors are also in a place where they're trying to increase the prices? Or is it a very company specific bottom up effect? Yes. We comment on our own performance, yes? And we leave it to market and Yes, we leave it to a competition to present our own numbers. Thank you. The next question comes from the line of Konrad Zomer calling from ABN AMRO. Please go ahead. Hi, good morning all. Two questions, please. The first one on the performance of your permanent business, which I think was very strong, particularly in countries like Italy, Spain, but also the Netherlands. How can you square that with the general macro trend that volatility is quite high, uncertainty as well and that at least historically a lot of companies were slightly more reluctant to recruit people on a permanent basis. And my second question is related to your policy on your special dividend in relation to IFRS 16. You obviously confirmed that it won't have an impact on shareholders, and you gave the 0.8 percent on a pre IFRS basis. How are you going to present this going forward, I. E, your net debt obviously has gone up because of the changes, but how are we going to forecast your special dividend based on your leverage? Yes. If you like to take the first one, I'll take Yes. I'm not going to take the second one. I think that's really your ballpark, but let me start on perm. So thank you, Konrad, for the compliment. Yes, there is no general trend, of course. So first of all, we're very actively selling this. And on the one hand, there's the economics and cycle and that sort of thing, but it's also scarcity. So clients are prone when they see a good candidate to also hire him or her. And next to us going out there and increasingly we've trained certainly in what we call temp in our call it mass customized perm. So the same profiles that we deliver in temp. We always ask both questions now very consistently. And yes, that leads to good growth. I'm very happy. That's also why I gave our Italian and our Spanish, but also our Dutch colleagues compliments because we don't feel this is just a market. We do feel these performances are better than market. Yes. And on that IFRS 16, I'm sure you've seen our press statement and you've picked it up from there. It's absolutely right. There is no impact on revenues, gross profit, underlying, debit EPS or any of those measures. And at least for 2019, we keep on referring to our leverage ratio pre IFRS to just keep the confusion out of the way. And then, yes, our capital allocation policy remains to be intact. It's confirmed, and we just refer back to the old way of calculating it. Right. And then probably as from next year onwards, when we have like a full 4 quarter comparison base, you might change the absolute number without it having an impact on shareholder remuneration? Yes. We will make that call somewhere in the course of the year, at least for 2019. Don't be worried also for 2020. If we make the change, indeed, we will not make it an impact on our capital allocation policy. Okay. Excellent. Thank you very much. The next question comes from the line of Anvesh Agrawal calling from Morgan Stanley. Please go ahead. Hi, good morning. I got three questions. The first, at the beginning of the presentation, you talked about rolling out of workforce scheduling and you plan at multiple client locations. And as we understand, you provide these tools for free. So just wondering how should we think about the implementation cost and whether it could have an impact on the operational leverage? And second, you have taken the cost action in Germany last quarter. And I understand the profitability is still good, but the margins still kind of declined Y o Y. So when should we expect the payback or the market conditions won't allow the flat margin going forward? And then finally, the restructuring in Monster has continued in this quarter as well. So just wondering what is your outlook there? Thank you. Yes. So workforce scheduling, new plan, yes, the implementation cost is fairly limited. So you shouldn't expect anything on SG and A being higher on the back of that. It just fuels our growth. So that's the good news actually. On Germany, yes, again, given the market circumstances, we're quite happy with the performance, yes, and it remains to be seen how the rest of the year looks. We're not optimistic in Germany as far as we can see now towards the summer. What you sometimes see is there's a reset after summer. But for Germany, again, relatively good performance, very happy there, but we're not expecting any improvements in Q2 in Germany. And third one was? On Monster. On Monster. Yes, it's another restructuring. So part of that is that what we still saw in Monster is that for very small clients, we still have manual sales. We're now building in an e commerce platform. Our clients can have their own online job orders and place them through e commerce. So yes, that's where unfortunately we had to take out some people. There's no guidance for Monster for the rest of the year as we don't do guidance on any business for the rest of the year. Yes. Just to follow-up on Germany, I understand you're not expecting any improvement in performance. But from the margin side, given you have taken restructuring, should we expect some kind of improvement sequentially or like in Y o Y trends? Or do you think given what the growths are, it's kind of difficult to maintain the margins there? Yes. It's depending on the top line. So yes, if it deteriorates further, it's going to be tougher, and we need to again look at cost. If it's like this, then yes, we know where we are. And hopefully, it bounces back at some point, which we're not seeing. And Andreas, please be aware on that Q1 EBITDA margin in Germany also included a negative working day effect. Okay. Can you quantify that, please? Because it's a bit early days, but you can see at the group level, it's about 10 basis points. And you can see how big Germany is for the group. And in Germany, everybody is on our payroll. So in that market, it has a more pronounced effect. Yes. That's very clear. Thank you so much. The next question comes from the line of Sohasini Varanasi calling from Goldman Sachs. Please go ahead. Hi, there. Just a couple of quick ones on your medium term strategy. The Pick N Touch trend seems to be working out for you quite well as we've seen in the Q1 results. How far do you think your competition is versus you guys? And the second one is on pricing pressure generally in Europe. Has that stabilized? Has that worsened because your growth is slowing down? Can you comment on that, please? Thank you. Yes. How far ahead are we on competition? The biggest question is always who is competition. So first of all, you need to sell to your clients, so the big clients, they always have the question, do I do it myself? Do I rely on a partner? And again, Google, LinkedIn, and there's all sorts of new competitors out there. So I don't really care that much how far ahead we are on competition. We have our own strategy. And I'm Dutch, so I also always think we're not going fast enough, but we try to do it ourselves as fast as possible. And as you know, we have a 6% market share globally. So there's a lot of room to maneuver here. Pricing pressure has eased. We increasingly see clients and certainly again because we show them what markets look like in many geographies not yet in all, but they are increasingly aware of what's out there. And it's all of the basic assumption So that So that's yes, that looks pretty good. And it's because you mentioned the cycle, yes, and then relatively new is that you have the cycle, but there's less availability of people. And that structurally has that demographics mismatch in the labor market. So that gives us a lot of power. And also, I think, we're attractive to clients to help them navigate this increasingly complex space. Okay. Thank you. The next question comes from the line of George Gregory calling from Exane. Please go ahead. Good morning, everyone. Just one quick follow-up. I think someone earlier asked about the perm versus temp trend. I wondered whether you could perhaps indicate how the temp versus perm exited the quarter, please? And whether perm sort of continued to outgrow temp at a broadly similar rate as through Q1? Yes, George. Both are stable. So in that sense, it's the same thing into early days again, early days at Q2 and throughout the quarter. So nothing spectacular happening there. So is stable, Jack? Or do you mean it's the growth rate is stable? Growth rate is stable. Yes. The growth rate is stable. Great. Thanks. The final question The final question comes from the line of Andy Grobler calling from Credit Suisse. Please go ahead. Hi, good morning. Just one very quick one for me, hopefully. Just on France, where the margin was down year on year. There's lots of moving parts within the French market as of now. Can you transpute out what is driving the EBITA margin down? To what extent is it mix versus price or all the changes to CICE would be helpful? Thank you. On the let me take a look. So actually we are let me have good numbers. So we obviously, we do see a booking day impact and then we have plus 20 basis points despite net profit sharing in the numbers. So, 20 basis points of the decline is the profit sharing? Yes. I need to clarify. So we have a negative impact of net profit sharing, which is visible in the EBITDA margin in France and that's the vast majority of the EBITDA margin decline year on year. Okay, perfect. And the expectation would be that, that all else being equal, which it probably won't be, but that will continue Q2 and Q3 and then we get the change to the or the proposed change to the regulation in Q4. Is that the right way to think about it? Basic. And then year on year, it could be about Unco, yes. Okay. Okay. Thank you very much. We have no further questions in the queue. So I'd like to hand the call back over to your host for any concluding remarks. Yes. So thank you all for calling in. Thanks for your questions. Again, we're happy with the start, but we keep both feet on the ground because you know us. And we're looking forward to meet with you wherever you are to further discuss our business. So I wish you all a great day. Bye bye. Thank you for joining today's call. You may now disconnect your lines.