Earnings Call: Q1 2018

Apr 24, 2018

Hello, and welcome to the Randstad First Quarter 2018 Results Call. Just to remind you, this conference call is being recorded. Today, I'm pleased to present CEO, Jack Vandenbroek. Please go ahead with your meeting. Yes. Good morning, everybody. Good to talk to you. I'm here with Henry Schirmer and our IR team to take you through our earnings call of the Q1 of 2018. Time flies. I'll move immediately to Slide 5. We think it's a good start of the year, good growth, 7.5% and quite some ongoing market share gains. Our eternal star in house at 17 percent growth, so very happy with that. Also perm, 13% growth, it's also quite good start of the year and broad based also in the U. S. 8% growth but more about that later. It's a bit of a tough call on the quarter because there's quite some one offs and incidentals in there. So there's €8,000,000 ForEx expense, ForEx change, which of course we cannot do much about, but there is one less working day. And also there's sickness. I'll talk more about that in our German and our Dutch business. As some of you might have experienced personally, there has been a flu epidemic, which hurt our business. We think overall, these three elements account for a €15,000,000 to €20,000,000 less EBITDA. Still, if you then look underlying, we're quite happy with the quarter. Again, the growth 7%, 2% increase in cost base. And you might wonder if we are under investing in the business, which we're not. You need to take apart the business investments, 5% growth in our regular business, but it adds up with the cost savings in Monster to a 2% cost base. So very much looking at that. Stable margin development, 30 basis points down, not decreasing, we think. So overall, there's good underlying leverage in the business, meaning for us that for the rest of the year, we feel quite comfortable with the guidance we gave you at our Capital Markets Day on a mid single digit growth. Course, we don't know for the rest of the year, but let's take that as a guidance and an improvement in our EBITA percentage. Very proud of our French business, again, with everything I just mentioned, having a 10% increase in EBITA percentage despite CICE and all that, very good. OC in France doing very well with high single digit growth, very happy with that new part of our company. The Dutch business growth increasing. So yes, in that sense a good start. A theme which will be recurring throughout the presentation is our pricing discipline. You know we've been doing that in Germany and the Netherlands and in France for quite a while. But now that we have a sizable business in Italy, we also see that those choices recurring regularly. So in a way, you could say we could grow faster, but we're balancing growth and profitability here. Slide 6. As I mentioned, gross margin 80 bps, so it looks like a margin pressure, but 50% is related to Monster. Monster is gross margin. So if Monster and I'll spend some more time on Monster later in the presentation, but if Monster has a negative growth, which it has, it looks like margin decline in our book, but on the rest of the business, a 30 basis points margin decline. OpEx, a slight increase. We said a clear increase, but a slight increase. ICR 41, we guided for 40% to 50% throughout the year trying to get to the higher end of the range. So 41% for this quarter again with the calendar effects, happy with that one and a stable 3.8% margin. And perm 13% growth, stable for Q4, but we think a good result and it has a positive effect of 10 basis points on our margin. Slide 7, the regional split, growth very much driven by Europe but also Rest of the World, outperformance in markets such as France, Belgium, Canada, Germany and Spain, again with the mix of profitability and growth. In house, I mentioned it in my introduction, 17% growth, 2018% in Q4, so stable double digit growth, meaning that the growth in Europe is still in this segment, which is you might say also partly early cyclical certainly in Southern Europe. Top line growth 7.4%, 8.7% in Q4. Comps are pretty comparable, so good there, driven by Europe 9% versus 11%. Again, calendar effects here, but pretty stable. And U. S, yes, still a stable market, but you've seen a peer of us on minus 7%. So happy there. I'll shed some more color on the North American market. Rest of the world, driven by mainly Japan, 11%, so a good contributor to our total book. Slide 8, North America. So our staffing and in house business is growing, our white collar business less so. As I mentioned, perm up 8%, so a sign of what we see in the market. It's tough to get people, so clients are hiring quickly. We get a lot of questions on okay, North American market economy is doing well, why don't we see more demand? Yes, we do see growth in the blue collar part of our business, less in the white collar. U. S. Proffs, a mixed picture. Although our IT growth went down from 6% to 3%, We're still happy with the positive development here. Our U. S. Products business is actually 3 businesses. It's a solution space similar to OC, so where we sell a service, double digit growth, very solid. We have our mid market, so the retail part of IT staffing. This was a suffering part for a long time. Now sees growth, happy with that. But on the other hand, there's always something. Our large clients, which were growing last year, a few of our bigger clients in the financial sector predominantly have toned down spending in the 1st part of the year. We don't know if it's structural, but anyway that's why growth goes down slightly, but still a good improvement. On the other hand, our financial and accounting business that we call professionals is although somewhat improving still, it sees negative growth. Our Canadian business doing very well, Head of Market, a clear market leader there and overall an improvement in EBITDA. Let's move to the Dutch business, Slide 9. Accelerating top line, happy with that one. Again, nothing new here, strong focus on client profitability. Our SME growth is 15%. You might remember the presentation that Dominik Hermans gave at a Capital Markets Day, where we do support our people in the sales in this market through technology tools. Well, that is paying off, so that does well. Professionals business also up. And then, yes, still the EBITDA margin slightly down. So this is back to my introduction, calendar effects, but also certainly sickness. In the Netherlands, we carry our own cost. So at around a 4% sickness percentage, we can cover that, but we went to 6% to 7% in February and also March. So it was high, but it was also prolonged. We do see this going down into April, so it will be less of a damper on our margin development because this goes into margin. Overall pricing pressure is stable. We do see on the one hand some pricing power due to scarcity, still some clients that want to buy at the cheap. So then we don't go there. We are nearing the market, still have underperformance, but we're closing the gap. One point we're not so happy with and you might have seen it, the perm development, although perm grows in quite some market, it does not in the Netherlands. So this is something we would like to improve going forward and action plans are in place. Going to the French market, you know we sacrificed clients here still 10% growth here, very happy with that. Professionals up 13% and perm for the 3rd year in a row a very, very hefty growth. So this is really and we've it's not new for many of you. This is really a business where our Tech and Touch strategy is really working and overall an improved result. We're very happy with our performance in France. Germany. Germany is probably at the moment the toughest market to call because there's a lot of things going on. There have been strikes. Unemployment is lower is low in Germany. So we have seen quite some strikes predominantly in the metal related sector, automotive also to get better collective labor agreements. So we've seen closures. We cannot deliver our temps when there are strikes going on. Equal treatment, so the next phase of equal pay after 9 months in a job, candidates need to get to equal treatment, so the bill rate goes up. We have seen around a 1% damper on our growth because of people being hired after these 9 months. So that's been a new element here. And lastly, sickness. So it's slightly different system from the Netherlands, but in Germany everybody is on our books and sickness hurts us, 1st of all because people are not working, 2nd of all because we need to pay more. And we've had historic sickness levels in Germany, again, going down in Q in April now, but still hurt us in Q1. And this goes directly into the margin, and we had 2 less working days in Germany. So all in all, underlying from a volume point of view, quite a stable situation. We still see good growth, but a lot of things going on in Germany currently. Belgium, far less to mention. It's all good. It's above market with great returns. So my Belgian colleagues will probably say I'm selling them short, but a very stable performance in our Belgium business. Italy on Slide 13, yes, the biggest grower last year and still 19% growth in Q1. This is very much a business where we balance profitability and growth. We can still grow faster here, but we balance this. And you see it in our EBITA performance up 70 basis points doing quite well. Iberia comprised of Spain. Spain last year touched the €1,000,000,000 mark, very happy there. And they continue to grow 13% into Q1, perm also 13% and at an above group average return. Portugal, from 12% to 6%. This looks like a slowdown in the market, but this is again very much driven by calendar effects. A large part of our Portuguese business is actually call center business where we own infrastructure and we actually operate call centers. So this calendar effect hurts us a little bit more than in our regular business. Then to other European countries, on the UK, still good growth, but it doesn't transpire that much into result. Unfortunately, in the UK, not so much related to the UK, but we closed our Middle Eastern business in Dubai. This was managed from the UK because it's originally UK businesses. It was a loss making and small business that we closed this quarter. And apart from the U. K, all other markets, Nordic, Switzerland, Poland also all show good growth. Rest of the world, I mentioned it already. Japan double digit growth. The Japanese market is a very scarce labor market. Our management does really well on pricing, so the growth really transpires into good returns. Australia and New Zealand, well, certainly our Australian business, slightly less growth but still doing well. And we've seen a good ramp up in our Chinese business from a negative growth of 10%. This is predominantly a perm business into China, up 5%, so pretty good. And Latin America, although small, still shows good profitability. Then our 2 global businesses, 1st of all, Randstad Sourceright, showing double digit growth here in actually all regions, slightly less in U. S. But still at very good returns and double digit growth in Europe and in Asia. So happy with that business, very much a business of the future for us. And then finally Monster. So as you know, well, first of all, we're very happy with the fact that we have created and we are creating this big data lake of 350,000,000 profiles. Whenever you read something about the labor market and almost wherever you go, scarcity is hitting us and there's a change in the labor market. So candidates are not going to look for jobs, jobs need to look for candidates. So we're very happy with the fact that we are creating this big data lake. At the same time, we've got 3 areas that we want to work on with Monster. The first one is repairing the company itself. The second one is Monster as a facilitator for Randstad growth and digitization. And the third one is new business by combining the strong points of 2 businesses. On call it repairing Monster, on the one hand we're investing in growth and we're going to continue to do that and we're investing in technology and marketing. What we found is that the Monster brand is still a very strong brand. We've created and implemented a mobile app to apply and we see 30 percent more traffic and traffic at the end of the day leads to business in this business model. We are creating new products, for example, a premium job ad where we have a very customized campaign to look for the right candidates, not just in the Monster database, but also on social media, of course, with all privacy concerns. We've got a resume service. So it's a sort of an online career coach comparable to the business model of RySmart, which is now on the Monster side. This is all getting a lot of traction, but at the same time, the traditional business is still going down as you've seen, and we've not yet converted that trend. So hard work here, very happy with the Monster for Randstad. We have now integrated Monster technology, direct linkage to the database of Monster in the U. S, in the YARL business of the Netherlands, in Germany and in the U. K. So that means that thousands of Randstad consultants and recruiters now have immediate access to this data. We know they make no matches because of that. We know they've got access to more candidates. Funny enough, we cannot really measure that at the moment because it's way too much administration to really see where people are coming from. But looking at our growth in many markets, we do see this helps. And we're rolling this out in the second half of the year into Italy, Switzerland, Sweden and in the other Dutch businesses. Again, I mentioned the Monster new job app, 30% more traffic and apps applications on jobs. What we're now working on and we already have it in U. K. And U. S. Is when you apply through Monster, you immediately also apply through Randstad. So there is a lot going on. We're not saying it's not a lot of hard work, but still we're very happy with Monster. And then finally, new business models, we're laying low here. What I can tell you is at our Capital Markets Day, we talked about disintermediating small perm And our business model we're currently trying to set up is really aiming at this disintermediating small perm. Sounds a bit confidential, but we never know who's listening in. So more to follow throughout the year. So that's it for me. And then moving to Henry for the financial results. And I'll be back with you for the outlook. Thanks, Jacques. So let me go straight to Page 18, the income statement. As Jacques mentioned, our revenue grew by 7% organically and our gross profit grew by 4%, impacted by it with Monster mix effect. We will mention Monster a couple of times despite its relatively small size as the nature of the business is 100% fee based. OpEx was well under control with a 2% organic increase year over year, mainly driven by Monster cost savings. This 2% was below the 5% of quarter 4 while doing continued investments in digital. EBITA margin was stable at 3.8%, while our absolute EBITA grew 7% organically. Underlying ICR adjusted for sickness and working days was around 50%, and as a result, our adjusted net income grew by 6%. And lastly, on that page, the effective tax rate for quarter 1 came in at 24.2%, and we stick to our guidance of 24% to 26% ETR for the full year, probably more towards the lower end with a cash tax rate of about 20%. On Page 19, let me take you through the gross margin bridge. As you can see, the gross margin is down 80 bps year over year, of which 50 bps is due to the mix effect of Monster and 30 bps pressure on temp margins facing headwinds of working days, higher sickness rate and CICE changes year over year. However, underlying, we see a pretty stable price environment. Go straight to Page 20. The OpEx chart, you can see here we are tight on cost control as OpEx was virtually flat versus quarter 4 and just up 2% year over year. We faced ForEx tailwinds both year over year and sequentially, while investment in growth seeing the company as is. Then straight to net debt on Page 21. Net debt quarter 1 arrived at 1059, down from 11.29 last year. The leverage ratio was 0.9, down from 1.1. As you know, return on invested capital is a strong focus area for Randstad, rising to 17.6%. And as we shared with you at our quarter 4 results, we have a strong focus on organic growth combined with selective M and A. We aim to further improve the ROIC of the acquisitions done in 2016 2017, which is progressing well so far. DSO was up to 53.8%, largely impacted by the unfavorable combination of closing the quarter and the weekends and timings of Easter. Also, we faced the impact of unfavorable timings of payments, partially related to tax. And finally, there were ongoing adverse mix effects due to fast growth in high DSO countries, mainly in Southern Europe. Please be reminded here that our quarter 2 will be impacted by our regular dividend payment, followed by the special dividend payment until the 27th September. Then straight into the free cash flow chart on Page 22. Free cash flow, I'm sure you've seen it already, both impacts by timings of payments around Easter worth about EUR 80,000,000 of about €50,000,000 is based on working capital and €30,000,000 is due to timing differences and tax. The remainder is DSO offset by an additional €15,000,000 absolute EBITDA. Please let me reiterate here that we will be very disciplined in all areas driving cash, and we confirm our full year 2018 outlook of an increase in free cash flow versus 2017. Jack, back to you. Yes. Thank you, Henry. So that brings us to the outlook. Early days, but so we have pretty stable growth throughout Q1. And our volumes of people at work in early April indicates a continuation of the Q1 growth rate, although there will be an adverse 2.9% comparison into Q2, mainly into the back end of Q2 in June last year, we grew quite high. Gross margin, broadly stable sequentially and a moderate increase in underlying operating expenses, investing where we think we need to facilitate growth, but still below the growth level, of course. And contrary to Q1, there will be a positive 0.4 working day impact in Q2 and also Q3 and Q4 will have a more favorable working day. Again, for the full year, we maintain the outlook of our further EBITA progression, assuming a mid single digit growth throughout the year, as we stated at our Capital Markets Day. And our ICR for the full year will be in between 40% to 50% at the higher end of this range. And with that, we want to give over to you for questions and answers. Thank And we have our first question from the line of Bilal Azis from UBS. Please go ahead. Your line is now open. Good morning, everyone. And just two quick questions from me, please. Can you perhaps help us understand the building blocks of the gross margin going into the Q2, particularly around the temp gross margin given the potential working day impact and with respect to price mix as well? And finally, tied to that, your latest expectations for how Monster evolves both from a gross margin and EBITDA level perspective going forward? And secondly, on wage inflation, just broadly a bit of a mix sort of bag in terms of expectations coming out from some of your competitors. What are you seeing in some of your key markets write down? Yes. Well, nothing to add to what we just stated on both gross margin development into Q2 and Monster. It's not like we give you the quotes on last week and then this week it's slightly different. So we do see stable margin development. So yes, we set 30 bps down. Might be some tailwinds from working days, absolutely, but stable underlying. And Monster is what I just explained, so no new developments here since the last 2 weeks. On wage inflation, yes, we get a lot of questions there. We do see wage inflation in the U. S. Around 1% to 2%. In Europe, not yet massively. We do see in some pockets really the jobs which are high in demand. So in the technical part definitely, but yes, as you might know, still a lot of wages in Europe are driven by collective labor agreements hence the strikes, for example, in Germany. There will be some results probably going forward, but we don't think this will massively improve our growth. It always comes through very late in the game and very, how do you call it, general. Bilal, if I may, to give you a bit more color on the gross margin. So most components will remain stable. Expected the changes would be sickness, working day, that's a tailwind and then there was some tailwind from M and A in Q1 and it will be gone in Q2. Sure. Thank you. The next question comes from the line of Paul Sullivan from Barclays. Please go ahead. Your line is now open. Good morning, everyone. Just a couple for me. Firstly, the restructuring charges and integration costs you took, what is your expectation for the Q2 and second half of the year? Should we assume more of the same? And are they really truly exceptional because we are we saw restructuring charges all the way through last year relating to Monster. And it looks like we could be seeing them again this year. So that's the first question. And then just secondly, your have you got any further thoughts on or any more information on how you feel CICE will change going through next year? And whether you could update us on the tax implications and the impact on the tax rate next year from CICE? Yes. Paul, let me do the restructuring. So that will gradually come down throughout the year. Yes, there are real restrictionings and below the line, and they're also significantly lower than previous years related to, of course, the M and A activity, which is clearly less. On CICE, yes, there's a lot of talk. We don't think it's really worthwhile to elaborate on it if we don't have real plans yet. It does feel like there's going to be a change this year. But as you know, Macron is visiting the United States currently, so he's not working on CICE. As soon as we know, we'll fill you in and also with the tax consequences. Okay. All right. Thank you. And the next question comes from the line of Konrad Zuma from ABN AMRO. Please go ahead. Your line is now open. Hi. Good morning, gentlemen. My first question is on Monster. Q4 saw a very small operating profit for the Q1 since you acquired it. Can you tell us what the operating loss was in the Q1, please? And also, do you think that Monster is on track to achieve an operating profit for the full year 2018? And my second question is on France. Can you tell us what the underlying organic growth rate of your French business was excluding the OC business, which obviously did very well? Yes. Coraline, good morning. I'll do the French one. So actually, our French business is growing faster than the OC business. So the 10% OC is high single digit and then 10% for the whole portfolio. On Monster, in general, yes, we had a small profit in Q4. We also mentioned that we want to continue to invest. So Q1 saw a loss. And it's going to be we're not going to stop investing because we think that's the only way to, 1st of all, improve this business and second of all, to also improve and also use the capability of Monster for Randstad. So there's a lot of investments in mobile, in combining databases and in marketing. We probably could arrive at a breakeven, but if then we should stop investing, we're not going to do that. So the development of the top line is going to decide for the rest of the year the actual underlying result, but we're not ruling out this might be again a small loss, but then on the back of investments and not so much the business in itself not being in control. But can you tell us how big the operating loss was in the Q1? I mean was it like a few €1,000,000 Was it more than €10,000,000 Conrad, we can help you with. So if you look at Global Businesses, you see an EBITDA swing of €4,000,000 year on year, which is to a large degree Monster. And we said last year Q1, Monster did a small loss. So it's a very small figure of last year, plus the €4,000,000 change. Okay. And then one other small question. Can you indicate to us what proportion of your U. S. Professionals business of your revenue should generate with large financial institutions? Yes. Well, it's an important part, but it's not like more than half or something. It's, I don't know, something between 20% to 30% probably. Sorry? Yes. I wanted to say maybe it's better to check also Conrad and get back to you all of you and give you a broad range of that. Okay. Thank you very much. The next question comes from the line of Mark Sargenborg from ING. Please go ahead. Your line is now open. Yes. Good morning, gentlemen. I just want to come back on the gross margin again. You mentioned that you had the sickness rate and the working day impact that should become a tailwind, but then the M and A will drop out. But yes, sequentially, it doesn't really matter. So isn't the guidance then on the gross margin for the Q2 a little bit cautious given that mix effect should? Hello, this is operator. If you need to ask a question, I'm going to have to take your full name. Hello. Is there anyone on this line? So through in house, you get a mix effect still going forward. So it's tough to call. If you think it's cautious, then yes, there are some tailwinds here from a calendar effect and from a sickness effect, absolutely. And then the line of thinking around the cost base throughout the year, given that the gross margin is what it is and your guidance for Q2 is flat and modeling that forward. How should we look to the cost base going forward? Is because Monster is squeezing in, well, already quite a significant chunk of cost savings in Q1. How much more can you take out in the second half? And how much more room do you have to achieve the cost base growing less than the top line? In general for the group or for Monster specifically? Yes, for Monster. And then a little bit added to that also how should think about the cost base going forward over the quarters? Okay. Yes. Well, for the group, of course, we always balance growth with cost. So what I said, 5% cost increase in the regular business and then going down to 2% basically on cost savings on Monster. Yes, it largely depends on, 1st of all, our appetite for investments, which we're going to continue to do and hopefully also the stabilization of the top line in Monster that you don't need to cut down on cost further because at some point you want to stop doing that, of course. So tough to say. We will take out some cost at Monster again in Q2. No plans currently for the second half of the year. And then Monster will still be breakeven in Q4? Is it still maintained? Yes. I just gave Konrad the answer. So I hope you're paying attention here. But nothing has changed to that timing. Well, honestly, of course, the top line in Q1 didn't materialize as planned. So we need to really counter that trend throughout the year. And then the final one on the Can you explain us why the margin in the Netherlands is down despite that the top line accelerated a little bit to plus 5? And recall at the last call that there was some better pricing feasible. Yes. What happened? It's sickness, Mark. Is that purely the sickness impact? Yes. And the calendar, of course, one working day less and really historically high and long sickness. And as I mentioned, any sickness above 4% hurts us in the margin, both on the direct and indirect employees, by the way. Indirect so our own people in terms of cost, but direct in terms of margin. This will be going down. So in that sense, we're quite positive about our result development in the Netherlands going forward. But yes. Let me come back to Conor's question, sorry, on U. S. Professor, Finance and Accounting, which is 50% to 20% of IT. Okay. Maybe the final one on the pricing, Jacques. You mentioned a few positive signs you saw at the Q when you mentioned well in February when we had the Q4 results. If you look underlying, underlying, it seems that there's some positive pricing. Is that still the case? Is that continuing? Is that strengthening? Yes, absolutely. Yes, we do see some clients also coming back because they can't find the right people. So when you look at labor markets in the Netherlands and in France and Germany, yes, we don't think pricing will worsen. And at some point, hopefully, Yes. But if you overall if you and the gross margin, of course, we grow so much in in house that it puts a bit of a damper on the overall gross margin, but we have great conversion, as you know. So that doesn't really hurt our result. All right. Thank you very much. Thank you. The next question comes from the line of Hans Plouwes. Please go ahead. Your line is now open. Yes. Good morning, gentlemen. A few questions from my side. First of all, on the CICE, of course, you can give an indication what's happening for next year. But you also indicated that at the beginning of the year, you would, let's say, really work on trying to recoup the decline from 7% to 6%. Can you give some indication how, let's say, the other market is reacting to that? Then on the U. S. Professional business, yes, you were, let's say, working on quite some time to improve that business. IT, let's say, had been doing somewhat better in recent quarters, but this time, again, slightly slowed down, but it's explained. But let's say, are you taking additional measures with respect to the rest of the Professional business because that's still, let's say, lacking? What's your view on that? What's your feeling on that? And second and thirdly, on Monster, could you give some indication what, let's say, the traditional business still is of the total Monster sales? The last part is no. As you can we're not going to fully present the Monster business because there's also competition in this space. So sorry about that. On CICE, what you see in our French results, and that's why we're so happy, despite the calendar effect also in France, we improved our percentage earnings despite CICE. So we're very happy there. That has to do with walking away from some clients, still growing and the perm at 38%. So in that sense, we mentioned that we were confident that we would compensate the CICE going down in our results and so far so good in our French business. On U. S. Props, so the F and A part, we've closed that we've grouped that closer to our U. S. Staffing business, which is a well run business, which has seen above market performance. The process in financial staffing in professionals is similar to staffing in general. We are combining branches. We do see some early results here that combining our U. S. Proffs F and A business and our staffing business in similar sectors works. The negative development is also improving, but we're not there yet. This is, by the way, a much smaller business, so €1,000,000,000 is technologies and €300,000,000 to €400,000,000 is F and A. Not there yet, but we see some improvement. Okay. Thanks. The next question comes from the line of Tom Sykes from Deutsche Bank. Please go ahead. Your line is now open. Just going back to your comments on in house. I just wondered, so how much of the Italy growth would you consider came from in house, please? And obviously, you're getting quite strong leverage in Italy, and you mentioned leverage for the in house business overall. But would you be able to just sort of say what your leverage is on non Italy in house growth, if possible, because we've maybe seen some peers not generating much leverage there. So just wondering how you were getting on, please. Yes. Tom, good morning. The Italian growth is pretty broad based. But of course, what we've seen in earlier acquisitions in Objectiva La a new company, we go with the concept to our large clients. So we get a better conversion on clients. So that's very good. Yes, our conversion of the overall in house business has always been around 40%. Okay. And you would consider that in the non Italy business that you're getting around about that level? Or that's not at the moment what you're at? So this is the group picture, right? Okay. So Italy is a little bit higher than that. And then just on the sorry, back on Monster again. Where your the traditional business is going down, are you seeing anywhere that that's going to competitors with a similar business model? Or you it's just all disappearing to a different form of business model at the moment? Yes. Again, for confidentiality, I'm not going to bone out every part of the business and where it's going. By the way, a large part of Europe is growing. So this is very much happening in the U. S, which is a competitive market and a more mature market to begin with. So we see more of these things happening in the U. S. I don't know if it goes to competition or clients stop doing it or have their own job boards. That's tough to pull. We don't analyze this to get, But at the same time, also bringing in new business needs to change the profile of the revenue of Monster going forward. But that's hard work. Okay. And just in terms of your sort of forward visibility, because I guess again, there's sort of a change between February and now, and it seems to have happened relatively quickly. Are there any large contracts that sit within that that are particularly skew the outlook in Monster? Or is it fairly broad based, the change in view? Yes. Tom, I would like to remind you of the fact that Monster, relative to our total book, is quite a small company. So I think we've given you Quite high gross profit, right? Yes, whatever you want. But I think we've given you quite some transparency on this business, Elwar. Okay. Okay. Fair enough. Thank you. Your next question comes from the line of Rajesh Kumar from HSBC. Just trying to understand the divergence between your commentary that sequentially pricing is getting better. But when you say stabilizing gross margin quarter on quarter, that implies a Q2 decline of 60 bps to 80 bps. So what are the pieces which we need to think about? I mean, temp gross margin impact was 30 bps in Q1. But what did the TEM gross margin on line did? And do you expect that to continue declining in Q2 as well? Yes. Again, I think we've answered those questions already. So not to repeat myself, we quite a stable underlying margin development. We will have some tailwind from calendar and sickness in some markets. And yes, a large part of the decline in margin is related to the decline of revenue in Monster, which is gross margin. So yes, that's what it is. And if I may answer this, Tobias, sorry. So the structural part of the gross margin decline, that's really mix effect and CICE. CICE, of course, is being to be expected whether that's structural or not. But these two components, you will see in the coming quarters. And pricing is stable. Yes. And we see a good conversion of the margin into results in in house. And CICE fortunately is fully compensated in our French result. So sequentially, you expect the temp gross margins to go up, but Monster and CICE and the Italian in house mix could drag basically 100, 120 bps? No, that's not the conclusion, but maybe we should take it offline. The 10 margin outlook for Q2 is around minus 20, 30 again because of the reasons I just mentioned to you. And on top of that, there's more the technical issue of Monster. So is that an impact number you're giving or like for like temp gross margin number? That's year on year, basis points year on year. Is the impact number, which is contribution times the change? Or is it the change number you're giving? Maybe we should discuss this offline because I'm not sure if I understand you correctly, Raees. I will call you after the conference call. Thank you. Yes, welcome. The next question comes from the line of Matthew Lloyd from HSBC. Please go ahead. Your line is now open. Good morning, gentlemen. I apologize for this. And I know you think you've answered it, but I'm not convinced that anybody thinks that they understand the answer. So I'm going to try it in a slightly different way. Could you just refresh our memories on what the sort of the KPIs and the remuneration are for salespeople in in house and people sort of working more normally out of the branch network? Because there does seem to be a point where you would expect a bit more sort of gross margin expansion and perhaps a little bit more gearing. Is this that we're now paying people on volumes and speed and less on gross profit growth? Can you talk to us about the way in which the business is now structured and remunerated? And why we're seeing the patterns we're seeing? I accept the Monster bit and various other bits, but I think we're all sort of struggling to understand whether stabilizing gross margins underlying starts to make for better numbers later in the year or whether there's something else going on? Okay. Yes, there's nothing else going on. So we have a stable EBITA return in a quarter where we have 1 working day less and 2 large businesses of ours are hurt by sickness. The sickness will go away. The calendar effects will be reversed. Apart from the FX, you're looking at a 15% to 20 less result there. So that's why we said that we would we're confident that our EBITDA as a percentage will improve throughout the year. Okay. And as just sort of the KPIs and remuneration within in house and the branch network, are we can you just refresh our memories on broadly what if I'm a salesman in either of those 2 sort of structures I get paid to deliver? Yes. It's in house is the least variable paid part of our business. Okay. But the variable pay is based on volume, fulfillment? How does that work? Yes, overall growth and return. Of sales or gross profit? Yes. If you sell at a low margin, you get less return, of course. So it's more a volume business with tight pricing. Okay. And in the branch network And it gives us a very stable 40% Okay. Okay. And in the branch network? Yes. We've got 4,500 branches and very different business lines. So that's tough to see that's tough to handle in this call if you want to have a little bit more color there. But I don't quite understand what's the reason behind the question because then the reason As a rule, salesmen tend to do what you pay them to do. So if they're paid to drive up the gross margin or the total gross margin or the sales number or if they're failed to fill them at this quickly, high fill rates, you tend to get that's I'm sure salesmen are all lovely. But if we make the assumption that they're mainly pecuniary in their motivations, then that's what you tend to get. So I'm trying to understand whether Yes. No, no, no. Okay. But that's good. So that's why I said we're very tight on growth and profitability, as you can see in our underlying market development if you compare it to some of our peers. So that means that you can sell, but you sell within a price range. So it's for you to decide within the price range you get if you want to sell to a client. If you can sell a client but it's not within the price range that you need to decide upon, it goes to upper level. And for some clients, it goes all the way up to us and not just on pricing but also on liabilities and that sort of thing. So therefore, it's both. So growth for us normally transpires into leverage because that's the pricing policy. See, I've spoken to people in the industry that tell me that the sort of the habit of going for trying to nudge up the markup or the gross margin is sort of in a number of the players just isn't there anymore people that habituated to sort of taking perhaps its RPO, MSP contracts. And I've spoken to other people who say, no, no, no, no, we have dynamic pricing and the guys get paid for and I have to say that the gross margin performance of the businesses tends to reflect like that. Do you feel that there's room to pay the people more to or encourage the people or train the people to use dynamic pricing tools to charge for a forklift truck driver a higher gross margin because they're as rare as hems teeth? Is that still a culture of the business? Yes. It's even more than a culture of the business. We have data tools now that some of our businesses, for example, in the Netherlands use and also in France to show scarcity for certain profiles, and that then materializes into a price. So we're ahead of what you're now saying, driven by data. So that works well. And there we see a margin increase. Okay. Thank you very much. Okay. Okay. Maybe we I've just been informed that apparently the slides didn't match with what we were talking about, but I hope you got the general message at the end. But my apologies for that. We have one more question. We have a follow-up question from the line of Konrad Silmar from ABN AMRO. Please go ahead. Your line is now open. Hi. Thanks again. Firstly, on CICE, I think that Manpower also talked about it last week in their Q1 results statement. The potential impact on your gross profit is could be very significant if the change is bigger than what people expect at the moment. If the CICE contribution generates about €100,000,000 a year on an EBITDA of about €1,000,000,000 then that's quite a significant amount of money. When changes will be applied as from 2019 onwards, will you find out at a very early stage because maybe Francois is having talks with the French government? Or how are you being notified on these changes? Because I think it probably deserves a slightly bigger part of this conference call because it's such a big proportion of your profits. And the second question is for Henri. You've been in Randstad's, let's say, engine room for maybe about 6 months now. And I'm sure it's all great because the company is doing really well. But if you could highlight maybe one thing that you would think requires a bit of change or a bit of your input or I wouldn't say is disappointing to you, but if there's something that is likely to change because of your input to the company, could you maybe share that with us, please? Conrad, I'll do the French one first. Of course, once we know what goes on, I think we'll spend time on it. First of all, we've had many discussions when CICE came into play, if it was to be competed away and what Randstad would do. You've seen us quite consistent on, well, not sharing a large part here because it legally belongs to us and it's a commercial thing. Once the system changes, we'll inform you and we'll also inform you on how we're going to deal with it commercially. But yes, we've got nothing to talk about currently. So therefore, yes, it's not really a good moment to spend more time on it. But yes, we are quite confident that we will be informed as soon as possible. And then well, when we know more, you will know more. On the second one, thanks for your So I'm in week 4. So I've started April 1 in my new role. So I hope you understand that. I will not comment on that yet, but I'm very much looking forward to meeting you all in person. And couple of months down the road, I'm sure I will have a few observations to make. Right. Okay. Thank you. Yes. That's it. Thanks everybody for calling in. This now concludes our conference call. Thank you all for attending. You may now disconnect your