Earnings Call: Q4 2016

Feb 14, 2017

Ladies and gentlemen, welcome to the Randstad Q4 Annual Results 2016 Call. My name is Laura, and I will be coordinator for your call today. I will now hand over to your host, Robert Jan van der Kraat, CFO, to begin. Ladies and gentlemen, good morning. Welcome to our results discussion Q4 2016 and full year 2016. I'm here together with Jacques van den Broek and David Teuur and some other colleagues who will be supporting us to share the results with you. Please also note that our annual report is now available online on our website. I'm going to take you through some of the slides and then we'll end with Q and A. I'm moving to Slide 5 right away, which shows the highlights of Q4, the improving momentum in Europe. And clearly, this was not a bad quarter at all. We've seen accelerated growth in Europe and the rest of the world, and the U. S. Remains in positive territory. We've also made clear progress on our recent acquisitions, and also 2017 shows a relatively good start in line with Q4. Over to Slide 6, the P and L, a strong top line finish of the year, a good organic growth for the year 5 percent and improvement in the EBITDA margin to 4.6% from 4.5%. If you look at Q4 specifically, we've seen growth accelerating a bit, as I just referred to, which has resulted in additional investments in our OpEx to serve these trends. Also, our year end closing, which typically brings some incidentals, showed a little less incidentals this year compared to last year. And one point to note also is our perm growth of 4% in the quarter is a little less due to the effect of having less Mondays. Q1 shows a good start January, so we think we are roughly at high single digit as a comparison base. We've now seen more than 3 years of growth in our book. As you know, we always aim at an incremental conversion rate show of around 50%. The 1st year, we aim at a conversion ratio of between 70% 80%, which we have shown. Then it goes to around 50%. Given the fact that we have now been growing for more than 3 years, the range is towards 50%. The regional split on the next Slide 7, improving momentum in Europe. It's always a little difficult to read the month of December given the holidays because all working days this time had a full impact due to the timing of these days. But across the board, as you can see, in the rest of the world, in Europe, clearly, a good momentum and North America is keeping up. North America on Slide 8, stable growth trends, revenue growth at 1%, perm somewhat down, But again, please note the effect that I just referred to U. S. Staffing, it shows that we're holding up nicely also versus market here. U. S. Professionals revenue down, which probably is close to market at least. And if we look at IT, that seems to improve a little bit. F and A remains challenging. Canada doing well, revenue up by 4% again, and that clearly is market outperformance. Our EBITDA margin improved, which is effectively the same improvement as for the full year. The Netherlands on Slide 9, focus on customer profitability. That's the key theme here. The Pay Rolling business, the impact of the loss of the central government as a client will be dealt with at the end of Q1. So it still comes through here. Revenue remained at 2% growth. Pricing pressure clearly continues, and that's also why our focus is on customer profitability. SME growth 12%, clearly outpacing our large clients. Perm, up double digit. Our combined staffing and in house business shows 3% growth and professionals down. Please note that Q4 last year showed 19% growth, which is a challenging comparable base. And also we have quite a few young consultants in our organization, which are going through their learning curve. The EBITDA margin flat. I think that's a good reflection of our focus here. France on Slide 10, accelerating top line, 10% growth now. We see this level of growth in a few European countries, but it's very good to see this in France also, which most probably is better than market, our combined staffing business at 9%, but also professionals. So across the board, something to point out here is the effect of big data. So our digital efforts, we can see them coming through. Amongst these is perm growth in France, 21%, clearly fueled by that. Our EBITDA margin improved to 5.5%, again, the same delta roughly as for the full year. As you know, we're working on the transaction of OC. We now have control of the company. We owe 93% of the shares. We're working on the next step and are confident that we'll complete this. On CICE, some questions. We have various scenarios, whatever the political changes will be. It's clear that France needs some support on the low wages in order to be competitive. Please also note that at Randstad, we have net operating losses in France, which are not valued given the fact that CICE is not taxed. If anything would change here, these would come into force, but all too early to say at this point in time. And please also note that in Q3 2017 this year, we will receive the first part of the CICE, which is in the balance sheet, roughly €70,000,000 Germany also showing double digit growth on Slide 11, improved from 5% in the previous quarter, especially our SME segment is doing well. Also, our Professional business performing quite well. And the EBITA margin lower this time, which is due to the relays of, as you can read here, holiday accruals and fewer working days and also the effect of the new regulations coming through in higher sickness rates, which is rather unfortunate. There is additional regulation being discussed in the German market. We expect it to come through, and we also expect it not to have a relevant impact. On Belgium, Slide 12, record profitability, which is quite a nice combination with the fact that we are closing the gap with the market. We've been behind market for a while due to focus on customer profitability. Now that gap is being closed and that comes in with record profitability, which I think is an excellent sign. Also the gross profit level, a good improvement and the EBITDA margin now at 7.6%, which I would say is rather high. Part of the delta can be explained by the higher release of Social Security accruals at the end of 2016 compared to previous years. Iberia, Slide 13, strong growth on higher margins, clear acceleration also here, 10% growth. That seems to be the name of the game. In Spain, we see 12% growth and in Portugal, 7%. So that's a pretty good result. Also, our EBITDA margin improved by 30 basis points. Full year, it even improved by 40 basis points, which is reflecting good productivity. The UK, on Slide 14, the Brexit impact continues to be limited for Spire as we can analyze revenues were up by 2%, but our permit fees were down. CPE, the construction space is performing well. Our EBITDA margin lower this time, which is also the result of the fact that we have lower perm. On a full year basis, the EBITDA margin improved by 10 basis points to 2.5. Slide 15, the other European countries. We are especially happy with the performance of Italy, organic revenue at 26% and our recent acquisition completed in the summer of last year, Obitivolavordo, the integration clearly on track, but also we've shared with you that business growth was a key priority in this company. It's back to growth in January. So we're very proud to have achieved that on such short notice. Also, the businesses in Switzerland, Poland are doing well. And in the Nordics, our profits integration is also completely on track. Rest of the world, Slide 16, growth clearly picking up. In Japan, it continues at 5%. Australia is a clear improvement. And as you can see also, the other regions are doing well. We have changed our focus, as we have shared with you before, on profitability here. As a result of that, the EBITDA margin has improved. Now some words on the recent acquisition of Monster. The slide on Page 17 is one that we're going to use going forward. We'll share that more frequently with you, and I'll elaborate on part of it and Jacques will elaborate on another part of it. We have given you some time indications at the top, and these are the components that will support us getting value out of our transaction. Please note at the bottom that the Monster underlying EBITA 2016 was around 0. And for Q1, we expect a small adverse impact. First box, corporate cost synergies. These are annual synergies. Corporate cost synergies, that means taking out the head of the company, the listing and so forth. We are going to see savings, annual savings of US7 $1,000,000 per year. Also, the way the transaction has been structured and financed, it will result in tax synergies of around $17,000,000 per year. So these are key valuable value components that will support the economic value realization of this transaction. Then it is clear that there was a downward trend when we acquired the company. This was known. It doesn't show real loss of clients, but it shows lower spend. That is something we need to work on. And I'm now transferring to Jacques to comment on the other boxes. Yes. Good morning, everybody. Let's talk a bit about Monster. What have we done? So November 1, we had a big global kickoff across the globe. We met with the Monster teams. Lots of excitement and positive energy there. Then we went into a long period of analysis. So what works well with Monster and where would we want to improve? What we share with you is that the business that Monster is in is very much going to a solution sell. So it goes from duration job postings that are not interactive with the client to pay per click and pay per candidate. Monster has that, but it's still, we think, a too limited part of their business and we're very much strengthening that. So we're going in full investment mode there to improve Monster and make it a bigger and better Monster. We made some direct organizational changes, as Robert John already pointed out, to capture some synergies. On the slide that says Y Monster, there's 3 levels that we see us using and embarking upon with this project. The middle one is very much accelerate our digitization. I shared with a part of the analyst community last November what our strategy is on digitizing our traditional business, and Monster is speeding that up. So their platform and technology will definitely help us there. We're very bullish and very enthusiastic about the social media aggregation, the talent bin that they have in there. Search engine optimization, if you're not in the top 3 on Google searches, you don't exist in a way. Monster has an SEO department. With us, that's limited, so we're going to use that and very much mobile. We've got a vision that in the future, every worker will have 2 logos on their mobile, which is the Monster logo and the Randstad logo, where we will communicate together. So this is very much a project. It's underway. It will take the better part of 2017. The first one is something we already found out in our RIF journey, in our Innovation Fund journey is that there are a lot of what we would call them nontraditional players who, fueled by technology, create business models in our space. We very much, together with Monster, will build businesses over time that compete with traditional business models and at the same time will also reposition Monster in a way. Sounds a bit cryptic, but there's more to become there's more to come here at the rest of the year. And the last one, a trend we've seen already for quite a while, it's around the passive job seeker. More and more around 70% of job seekers are not really actively looking for jobs. And although technology can find these people, that's something else than engaging these people. And again, the access to talent is crucial for us going forward. You know Monster has 300,000,000 profiles. They've got the knowledge to give us access to talent. And this is a program again that we've embarked upon together with Monster, which will definitely put both companies in a better space to find the talent that needs to be found. So after the 1st 3 months, we concluded lots of excitement and energy. It's definitely hard work. Of course, as you know, Monster as a company had negative revenue. That we can't change that all of a sudden. It's again hard work, but we're not afraid of it neither at Monster nor at Randstad. So the work has just begun, and we will keep you posted. All right. Thank you, Jacques. This is a way that we think we can share some insights with you. Many others are still in progress. So we'll keep on updating you on the back of this journey. Moving to the financial results and the outlook. Slide 20, the income statement. All of this has been addressed, I think, in the previous comments, with the exception of integration cost one off. Please note that we have some restructuring projects for €60,000,000 across the board in the company. M and A took out roughly $10,000,000 of which Monster clearly is the largest, and we also spent $10,000,000 on integration of both Monster, Obitifelavuro and Profis in this quarter. The amortization and impairment has increased due to the item in relating to India, but also because of new M and A being included here. The net finance cost and associates is rather low, I would say. And in the press release, you can read that it includes the fair value adjustment of which the bookkeepers are rather proud because it's sort of science here. The for the press, you look at the net income here, which I think is indeed is, of course, it is a relevant number, but please note that net income includes the elements that I just referred to. So it is better to look at the adjusted number EBITDA, the underlying EBITDA. That's where the improvement is clearly visible. On Slide 21, we share with you the performance by revenue category. Also here, I would recommend to look at the full year effect where you see clear improvements in every segment. In house last year in the Q4 did have a one off, which hit the performance. Moving to the gross margin bridge on Slide 22. We have a reset here, and that is because of the inclusion of Monster, which clearly comes in with a lot of gross profit. And as a result of that, the numbers are changing roughly. If you look at the 40 basis points decline in the temp margin, the explanation is lower incidentals that I referred to at the beginning, 10 basis points and pricing pressure mainly in the Netherlands and France having an impact of 10%. The rest is resetting the mix. The operating expenses bridge, please note this is sequential rather than comparing year on year. The big box here is M and A. That's not our expense to do M and A. No, these are the operating expenses that come with the acquired companies. I think the story here on the slide clearly shows you that we are investing where we have growth. The balance sheet on Slide 24, net debt, rather comfortable at a leverage ratio of 0.8. I think little to say other than that DSO has gone up, which is contrary to the trend that you we have shown you over the last years. And this is the result of the inclusion of the acquisitions of Obitifo, Livorno and Monster, and we think especially the Italian context is a challenge to work on and improve. By the way, the return on invested capital, a little lower this time, which is clearly fully related to our recent M and A activity. Our free cash flow on Slide 25, it shows a decline of the free cash flow in Q4 and also for the full year. So I have a few notes to make here. One is the fact that we have working capital investments related to M and A, which is, again, obitifolavoro, Monster. It's the increasing DSO and the fact that we have accelerated our sales growth. So this is investments in working capital. Roughly €50,000,000 is explained by that. And then 2015 was rather favorable on the cash tax rate line. Now it's more normalized. That explains another €30,000,000 Some comments on the net capital expenditures. As you can see here, a bit higher, which is related to some projects that we have concluded in 2016. In terms of 2017 CapEx, I would say that our 2016 CapEx, including the acquisition, will serve as the high end of the scale for 2017. Moving to the outlook on Slide 26. On your request, it's all printed here now. The organic revenue growth, again 6.6% in the quarter. January was between 56% growth. The Q1 comparison is a little easier. And volumes, we measure volumes every week of the number of people that we have at work in our organization, and those volumes indicate a clear continuation of the trend that we have seen in January. This trend, as you can see here, is expressed on the slide. 1 plus means low single digit, double is mid and triple is high single. So North America, low single digit, the Netherlands also. France and Germany, clearly high single digit as is Italy, including the acquisition here Belgium, single digit Iberia in the middle rest of the world sorry, rest of Europe, single digit and rest of the world is now at mid single digit. We have revised our geographical presentation here, which will also be announced after this call in a separate press release restating the 2016 data. It's an update on the press on the website, sorry. So you can see the details on our website for 2016 in order to prepare you for 2017. The gross margin in Q1 is expected to slightly decline year on year, which is the result of pricing and acquisition. And for Q1, we expect a roughly stable underlying operating expense base sequentially on an organic basis. In Q1, there's also it's not expected, it's certain, a 1.5 favorable working day impact due to Easter. Now finally, a few words on dividend. We have a dividend proposal included, which is a record high. The proposal will be to pay a €1.89 dividend per share, which is 13 percent improvement. It's a payout of 50%, and it's clearly reflecting the strong financial position of the company, and it will be a full cash dividend. In order to give you some guidance going forward, we've also fine tuned our dividend policy. So we will make an amendment to that, which will mean which will imply that everything remains the same with one exception, up to 1.0x EBITDA, we will not provide the option for stock dividend. It will be cash only dividend. It's a small change, but we think it is relevant and it also fits the anticipated strength of the balance sheet throughout 20 17. So that concludes our comments. Please note that on the 30th March, we'll have our Annual General Meeting starting at 15:00 hours. Thank you. We are now moving to Q and A. Our first question today comes from Toby Reitz from Morgan Stanley. Please go ahead. Hi, guys. I've got a couple if I can. The first is, can you on the Monster side, very interesting to give some details, but thanks for that. You said the Monster platform and technology will enable us to speed up the digitization process. I think when you announced the deal, you said it was going to be run as a stand alone. Is that the case still? Or do you intend to use that platform more, I guess, centrally for the rest of Randstad? And then secondly, could you update on how you're going to account for depreciation within your Monster integration? So that's my Monster question. And then the second one is, could you give us an indication of what your expectations are around CICE, how it might change, I. E, the payment moving potentially from a deferred tax credit to a tax reduction and what that would mean in terms of your conversations with customers? Thank you very much. Thank you. The depreciation element, it will just be following Randstad accounting principles. If I may a quick follow-up on that. So the capitalized internally developed software will be replaced by an acquisition intangible and that will be below the EBITDA line in Randstad Accounting. That part? Yes, that's what you have to do when you acquire a company, the opening balance. But for the rest, for new investments, we'll follow the same rhythm as for the Randstad Group. Now, Simon, Toby, good question on Monster. It's Monster is very much a separate company. And the strategy within Monster is very much to invest in, again, what we call solution selling, so pay per click, pay per candidate, will remain a stand alone company. Having said that, the knowledge this company has can be used to speed up Randstad. So we're not going to have shared platforms. It's very much a standalone company from a technological point of view. On CICE, yes, that's a tough question. As you know, selection is coming up. Again, there's never been a subsidy canceled in France. So CICE is big, but we've had we got many more subsidies in the cost price in France. Only added. Yes. And CICE is widely regarded as one of the successful measures of the Yolanda regime. So our numbers are great. 1 of the few. Excuse me? 1 of the few. Yes. 1 of the few, but still. So the system might change, but as Robert John said, it is a way to keep costs low at the blue collar and low end of the labor market. So in that sense, it's necessary. And for Sorry to jump in. But if it moves to a I think in the past, we talked about it moving to a sort of straight tax reduction. Would that mean that you would have to reengage with your customers and renegotiate contracts? Or is that not the case? And have you handed a lot of the CICE back to your customers already? Or is that the wrong way to think about it? The latter we haven't. As you might remember, we were the last to do this when CICE was still sort of a project. We were very adamant that we would do nothing. That cost us some market share, but deliberately so, When it was then put in a law for a longer period of time, of course, we had to play the game. But no, a large part we keep. Certainly, if the system changes, then we need to go again renegotiate with clients. But yes, that's the name of the game for as long as we've been in this business. So we'll see. And please note, financially, this subsidy has to be pre financed for 3 years. So that, I would say, is a substantial amount of money for us now, EUR 380,000,000 and it also does not allow us to make use of our net operating losses. So that's also the flip side of it. So any changes to that might be beneficial. Okay. Thanks very much guys. Our next question today comes from Paul Sullivan from Barclays. Please go ahead. Yes. Good morning, everybody. Firstly for me, just on the gross margin, the 40 bps, I know there's lots of moving parts there. But underlying, are you seeing any signals that higher growth is coming at an increasing cost? That's the first question. Secondly, can you give us a sense of the organic run rate of Monster as it exits and as it enters 2017? And the you're talking about a small loss operating loss in the Q1. Do you think your sort of run rate of 0 that you were running at in Q4 The EBITDA level for Monster is sensible for fiscal 2017 as a guide. And then my final question is just North America. I mean the underlying economy doesn't appear to be too bad. Why do you think staffing growth is so stubbornly low? And do you think you are starting to see signs across the wider market of pressure coming through from new entrants or sort of online only platforms taking share? Well, thanks for your 4 questions. I forgot to say that we prefer people to stick to 2, but we'll answer these ones now. Gross margin, does it come at a higher cost? No, we think the trend is flat. So we indeed see we've seen now over a few quarters the decline in the margin by 10 basis points roughly, maybe a little just around that, a bit more, a bit less, but that's what it is. No big change here, pricing pressure, especially in the Netherlands brands. Organic run rate of Monster minus 15%. The I made the point of a small operating loss in Q1. I think that's the basis to work with for 2017. That's especially why we're mentioning in it. And in the meantime, we have a lot of projects that Jacques referred to, which should set us up for a great future. Jacques is now going to take the next one. Yes. On the U. S, indeed, on the one hand, you see a good economic base. On the other hand, you see low growth. We're very happy with our own growth. As you've seen, quite some staffing companies posting negative numbers, Manpower, TrueBlue. We see growth very much on the back of our sales success in in house, quite a lot of new clients. So that's good. Your other question is very interesting and goes back to my statements on Monster and that is new entrants. For example, you've seen Robert Half put in not great numbers. And we do see new companies, for example, ahire.com, they're not just a start up with low revenues and a lot of investments, they already have sizable revenue. So these new models are definitely gaining traction in the U. S. Marketplace, which we think is the most developed one globally. And that's also why we have embarked upon our own Tech and Touch strategy. Thank you very much. Very clear. Thank you. Our next question today comes from Chris Gallagher from JPMorgan. Please go ahead. Apologies. Our next question comes from Mark Swartenberg from ING. Please go ahead. Yes, thank you. Two questions. First of all, on your statement of limited M and A, Robert John, can you give us an indication what it means limited M and A? Is that, say south of max €1,000,000,000 in terms of deal size, not one acquisition but all the acquisitions together? That is sort of ballpark figure. That's my first question. And the other one is on the tax line. Can you give us a bit of guidance on the tax line for say 'seventeen 'eighteen including that Monster will have a huge impact due to the deferred the tax synergies you're expecting of €70,000,000 That's it. Thanks. On the limited M and A, well, it will certainly be below a few billion. No, no. No, dollars 1,000,000,000 I mentioned. I understand, Mark. It will be way below that. Just to be clear, as you know, we have a reputation that we don't like stretched balance sheet. So it's going to be significantly below that number. It should be relatively small and bolt on M and A if we that. And then the tax line, I think we have indicated 24% to 27% as an indication for the effective tax rate for 2017. And that will not change due to the inclusion of Monster? Marc, I think it's David here. I think you're referring to the cash tax rate also. Yes. That's of course volatile through the years. So that will probably be flattish versus 2016. Okay. Thank you very much. And this is you know as we try to give you a wide range and then we work hard to be at the best end of the range. So but that needs to come through in 2017. Yes. But especially the cash taxes are important now that you're steering also the CICE cash is coming in. So that's a good one. I have more questions actually. Can I put in one more? Okay. Chris did not put in one, so you can do. Okay. On the U. S, indeed in Q4, you saw some volatile picture around the staffing companies reporting. But you see on the job search figures for January and also the lead indicators, I pointed to a slight improvement, if I'm correct. Is there anything that you see within your business perhaps in your manufacturing or in EIOS segment that indicates that indeed the trend in U. S. Might improve a little bit over January into February? No. Actually, if we would analyze our own mostly manufacturing in blue collar, then the like for like clients are actually going down a bit. So our growth is very much fueled on the back of new clients. So in that sense, we don't see any like improvement yet in January February. Having said that, our own numbers again in Staffing in January look okay ish, but not a steep incline in growth. Okay. All right. Thank you very much. Mark, I will add some comments to your previous question on the tax synergies to give you some clarity. Through tax planning, this comes in and it takes a few years to really hit the P and L and the cash flow as well. But it is given the lengthy term we have 20 years to offset this, it's an extremely highly certain amount of money, the synergies that we just referred to. And the tax and the cash tax rate, we believe, will be around 20%, 22%. 20%, 22%. Okay. Yes. Thank you very much. Our next question today comes from George Gregory from Exane BNP Paribas. Please go ahead. Good morning, everyone. If I could just clarify a few of the numbers on Monster, please. I think you gave a tax synergy number of 17,000,000 dollars and corporate cost synergies of $7,000,000 Are they both U. S. Dollars? Secondly, I think in the statement you said that Monster's contribution to EBITDA was €4,000,000 I think on the call, you just said that the contribution for the entirety of the year was 0 in underlying EBITA. If you could just clarify that point. And then finally, I think you mentioned that you'd be capitalizing the internally developed software and amortizing that below the underlying EBITDA line. Could you just clarify that point and specifically why if that is the case, why you are you'd be amortizing the internally developed software below the EBITA line, please? Thanks. Yes. It's U. S. Dollars, first question. Second question, the indeed, there was a positive contribution that is very much related to the consequences of bookkeeping. So I think the right data point is the 0 for full year and Q1, a small adverse impact, as I said. And finally, on CapEx, this is the scientists behind IFRS have thought that it's a good idea to restate the balance sheet, the opening balance sheet as a result of which you'll get some relief on depreciation going forward of the old investments, but any new investments will work through as we do always, as we have always done at Randstad. So it will be capitalized and then coming through at the depreciation line. But there will be some relief in the P and L as from the beginning due to the fact that things have been reallocated in the balance sheet and not being depreciated anymore. And the annual impact of that at the beginning will be around €15,000,000 €15,000,000 a year? 1 €5,000,000 Just at the beginning because the amount will quickly reduce. Understood. Thanks. And sorry, just one quick follow-up. The €17,000,000 tax synergies, for how long do you envisage that running for? Well, that's quite a long period of time. 15 years, we think that will last. Great. Thank you very much. Thank you. But as I said in the previous as I've been answered in the previous question, it will not kick in as from day 1. It will take a few years to kick in. Great. Thanks. Our next question today comes from Suhasini Varanasi from Goldman Sachs. Please go ahead. Hi. Two questions from me, please. Germany, growth has been very strong. Given the unemployment levels over there and the regulations that changes that are happening, is this something that is sustainable? I know you've had the exit rate of high single digits. But generally speaking about your market, any color on that, that would be great. Yes. So Germany benefited certainly in Q4 from the calendar effect mentioned in December. Still, we do see mid single digit. It's outperformance. We're very happy with that. Also SME, again, outgrows large clients. So that works. But indeed, looking at the labor market, when you, for example, look at the southern part of the country, there's like 3%, 4% unemployment, maybe even lower in some pockets. And certainly, the better qualified people are tough to find. Yes, but yes, so far so good. Happy with our performance in Germany. Also permanent placement is improving, 11% growth in professional. So yes, a good year and again a good start of the year. The only we didn't mention it that much, but sickness is a bit of an issue. So it still pays to be sick in Germany. So we have around 1% more sickness rate than you would humanly expect. So we would like to work on that either in the new CLA. So that's longer term. That's still something that we but not just us, any player in the market. Yes, but apart from that, it's actually in Germany. Thank you. And second question is on EBITDA margin for 2017. I realized on the SG and A there are quite a lot of moving parts. I mean, you've talked about synergies from Monster in a lot of detail. Are there any other synergies from other M and A like for example, Obativo or Pro Office that are yet to come in 2017? And how is that going to get offset by the additional investments? And therefore SG and A for 2017 and implied EBITA margin? Yes. Our focus for 2017 and that is that actually helps to serve the previous question on significance of M and A. Our focus will be on returns from past acquisitions. That's the key theme now, integration and return. So we should see those coming through in our performance. Please note that most acquisitions were, I think, were acquired at an affordable price, and that was the effect of underperformance of those companies. And we see opportunities to lift the performance of the acquired companies at least to the level the average level of the returns at Randstad, and we're working hard to achieve that as quickly as possible. And as I try to share with you in my presentation, all of these acquisitions are well on track now, even the Italian one, I would say, significantly ahead. Yes. And maybe a bit more color, of course, on synergies. Not all acquisitions are synergy prone, yes? Objectiva LaVora, very much so. It's a rebranding, coupling 2 companies. Profis is in a way to a certain extent a reverse takeover. It's rebranding, which is investment in the new brands. So these are more revenue and concept synergies where, for example, we bring our in house to their blue collar clients. Monster is very much a project. It's a company in itself, but also it's our investment into digitization. And OC and BMC improve our business mix again, not so much the synergies, but very much buying more professionals' DNA to become and to shift the business mix in Europe more towards professionals as it is in the U. S. So again, different goals with different acquisitions. Understand. And how will investments balance this out? I mean incremental investments in digitization, for example? Yes, that's too soon to tell. Yes, and that's why I gave you some indication that the 2016 CapEx would be the high end of the scale for 2017. Okay. Okay. Thank you very much. Our next question today comes from Konrad Zomer from ABN AMRO. Please go ahead. Hi, good morning. A question on the integration of BMC in the Netherlands. In the Professionals area, you saw revenues decline by 8% in the final quarter. And is that do you think in line with what happened to the professionals market in Q4 in the Netherlands? And do you think that purely because of the integration of BMC, you will be able to accelerate the track back towards performance in line with the market? Thank you. Yes. Those are for us separate topics. So BMC is in a niche, a big niche, which is the government professionals. We will combine our own business, which is roughly SEK 30,000,000, so so relatively small within Yacht with BMC. So it's less of an integration. We will keep the brand because it's very well known amongst candidates and amongst clients. So again, that's sort of reverse integration here. At Yacht, it's a different one. So what we've seen is we put together the business in 2015, led to a surprisingly good performance, but we created a split model. So we went from 360 consultants to sales and recruiters. What we've seen throughout 2016 is that quite a few people in the sales side didn't perform as we would like, so we replaced them. So we're now at Yacht. We're having a relatively young set of consultants, and this takes time to ramp up. So these are 2 separate topics. The minus 8% is partly the comparison with the plus 19% last year. We think it's below the professionals market. So yes, that's where we are. And Konrad, with government sector, Jacques meant the local public sector mainly, that's where they are active. Yes. And just on BMC, it seems that the growth rate that the company has been able to achieve was higher than what Randstad was able to achieve in the Dutch market. Do you think that, that will continue? Or do you think that will move towards your level of growth? Again, this is incomparable. So BMC is growing in a certain niche. Also our part of that business is growing. So that's good. So we want our professionals business to grow faster and BMC can keep on growth. And management has retained for 1.5 years, I believe, Sean. Yes. Okay. Thank you very much. Okay. Our next question is from Chris Gallagher from JPMorgan. Please go ahead. Hello. Sorry, I got cut off earlier. A couple of questions. The first around CICE. What would be the impact on your tax rate if CICE was removed or changed to a normal subsidy? And then also staying on France, one of your competitors mentioned that there were some cost increases in France through 2017, which more or less offset the increase in CICE. How do you see that? Thank you. Okay. I'll the latter, yes, there are cost increases. Always tries to explain to me which they are, but sometimes they're very complicated. But no, no, no. The increase in CICE day positively offsets these increases in cost. And the impact on tax, which I referred to, I have to stick to the fact that it's material, relevant as an indication because it's all highly technical and uncertain. But it's not a rounding error. It's clearly significant. Okay. Yes, that's helpful. I may just one more on OC. You mentioned, obviously, you've not taken control of that company. Organic growth there has been declining through the year. Do you think you can do anything to improve that going forward? Yes. Again, that's early days. So we as Robert John mentioned, we've got quite a sizable part of the shares. So hopefully, we can start to squeeze out soon and be fully owned. And then we'll more formally get in discussion with them to see where we can help to improve the growth. Our next question is from Raish Kumar from HSBC. Please go ahead. Hi, good morning, gents. When you earlier made a comment about hire.com, do you see hire.com and such businesses coming head to head with you on placements and temporary recruitment? Do you see your customers telling you that, oh, we are not going to recruit from you, but we are going to recruit via hire.com? Or are you drawing the inference looking at the high growth rate of such businesses? No. And again, so Hyatt.hyatt.com has a model which we call Tech and Touch. So you see many of these incumbents and they got a technology tool, but then, yes, they've got a few clients, but it doesn't really gain traction. So Hyatt has humans in contact with candidates, talking to them about the next step in their career and presenting them in a privileged high touch way to clients, with still very strong algorithms to in a way facilitate the first contact with these candidates. We do think that's a model going forward. And again, that's partly the basis of our own tech and touch strategy where, of course, we've got the touch already and increasingly we'll have the tech. So yes, it's not like clients will say we're not going to work with you. It's all about who presents the right candidate first. So you're saying they are able to produce candidates before you? That's not what I'm saying. I'm saying that hire.com has a model that gains traction in the U. S. As you know, the U. S. Marketplace is very fragmented. And I also mentioned that on the back of the question from one of your colleagues, this is a model. And if you are in future still traditionally just doing, yes, the old way of either perm or professional staffing, you might have an issue going forward. And that's why we have formulated our own strategy. But we do think Hyatt is an example of those new players. I understand what you're saying. I just want to clarify if it is at your expense, you know that for sure or is that something you're assuming? The loss. Okay. Thank you. Our next question today comes from Bithan Liwena from NIBC. Please go ahead. Hi, good morning, Bithan Leune, NIBC. Just a couple of follow-up questions, please. One is on the tax synergies for Monster. Did I hear it correctly that you're expecting for 15 years an annual synergy of €17,000,000 to €17,000,000? Yes, sir. Correct. Actually, thanks for asking. Yes. That puts the purchase price in a little bit of a different perspective. And the second one is on the Dutch Professionals and the related impact from the ZZ payers. You mentioned, I think, in the opening statement that you expect that Q1 or after the Q1 of 2017. And what do you expect of the new regulation going forward? I mean, are you repositioning your payroll business now for the new changes in the business? Or do you expect some of that business to come back? Or how do you view that going forward? Freelance is an increasing relevant part of our business. You do see clients not just in Netherlands but also, for example, in Germany being quite aware of the whole governance issues. A few years ago in Germany, we already saw bankruptcy of the number 2 freelance broker, which of course hurt clients. So our brokerage is going very fast. It's also a business we do in yards. You don't see it that much because it's a fee based product. Yes, more is come and go. Certainly on freelancers, we don't know yet. But the freelancer is always worried about 2 things. Is my stuff and my paperwork in order? And where is my next assignment? That's where we play a role. And clients are also saying where can we find the freelancers and how can we manage it compliantly. What we do see is some early signs at Fago, our marketplace there on freelancers can play an interesting role going forward in this whole spiel. Okay. But you do not expect that business that you lost to rapidly come back now that the regulation has changed? Oh, you mean the payrolling business? Yes. The government payrolling business. Yes, I don't know. It was a call by the current government. We'll have elections, but I don't expect them to beef it up quickly. So we're growing in the private sector in our payroll business at the moment. We now have more civil service, okay? Yes, we do. I guess. All right. Thank you very much. Okay. Thank you very much. We currently have no further questions on the phone line. Well, that's great. Well, thank you for joining us at this call. We now will return immediately to work on returns from our acquisitions then on our organic growth. Thank you so much. Hope to see you on the 30th of March. And if not, we'll have our results announcement Q1 end of April. Thank you so much. Bye. Thank you for joining this morning's call, ladies and gentlemen. You may now disconnect your lines.