Earnings Call: Q4 2015

Feb 18, 2016

Good morning, and welcome to the Randstad 4th Quarter and Annual Results 2015. My name is Tyler, and I will be the coordinator for your call today. I will now hand over to this morning's host, Robert Jan Van de Kratz, to begin. Thank you so much. Good morning, ladies and gentlemen. Welcome to the discussion on our Q4 2015 and full year 2015 results. I'm here together with both Chuck van den Broek and Arun Rambockas. But given the fact that we have very nice results, the rest of the Board is also participating here. We have here Chris Hoetting, Linda Gallipo of Francois BRL next to some other staff supporting us. Today, we have also published our 2015 integrated annual report, which includes the 2015 audited annual accounts. The title of this annual report is Tech and Touch and you can find it on our website. Also today, in the press release, we have included a paragraph on the updated arrangement with our founder, which has been strengthened further and is now future proof. It confirms the existing long term relationship and the focus on continuity. Another point is during our Capital Markets Day in November, we have discussed the longer term issues such as strategy, progress on strategy, including innovation, M and A, productivity and efficiencies. Today, we'll focus on a discussion of the results. I'm taking you through the presentation now and then we'll follow with Q and A. I'm moving right away to Slide 5, which summarizes our Q4 quarter, which showed profitable growth. In our book, this was a good quarter. And the key items of this quarter were revenue growth at 6.6 per working day that compares to 5.4 in the 3rd quarter. And what we have seen in this quarter is that France has accelerated, while at the same time growth remains stable in North America. So next to the Netherlands, Southern Europe, we also have France running in the European zone. The gross margin improved by 20 basis points, which was partly the result of the perm fees going up, which is now 9.7 percent of gross profit. Our underlying EBITDA arrived at 245 €1,000,000 which is a 4.9 percent EBITDA margin and an organic full year ICR incremental conversion ratio or drop through rate drop through of new gross profit into EBITDA of 52%, which gels well with our ambition of being around 50. Our adjusted net income arrived at €193,000,000 and an ROIC of 18,800,000, which is even higher than last year's. CSO, the key element of our balance sheet, arrived at 50.7 days, which also was an improvement compared to last year, and the leverage ratio of the company stands at 0.2 at the end of last year. The proposed cash only dividend has arrived at €1.68 and that is a record high payout. It is in line with the announcements made at the Capital Markets Day. The month of January showed us growth of 6.6%, and I'll get back to that when discussing the outlook. And the full year EBITDA margin arrives at 4.5%, which is in line with the guided range. Moving to Slide 6. Again, the margin is improving. We're on track. A few elements to mention on this slide. Full year perm growth arrived at 14% and again the ICR 52%, which was maintained throughout the year above 50%, which we consider to be in line with our ambitions. Moving to Slide 7. This reflects the Randstad world in the various regional zones. The top line remains stable in most countries. If you look at the developments in Europe, France accelerated ahead of market and strong growth continues in the Netherlands, Italy and Spain. The stable growth in North America and certainly staffing performance in the U. S. Is excellent, but also Canada is ahead of markets in a very challenging environment. In the emerging markets, we see growth held back somewhat because of challenging market circumstances, and the green line looks like it's reducing. But a big contributor here is the midst of Japanese elections, which happened in 'fourteen Q4. North America on Slide 8. Stable growth in U. S. Staffing. The revenue improvement arrived at 4%, in line with Q3. Firm was up again and GP grew by 9%, also in line with Q3. The staffing business was up 7%, just a little better than Q3. U. S. Professionals, the revenue development was flat year on year, and we have an ambition here to get closer to market. Nonstop source rights continued to show significant growth at 16%. Canada was mentioned, and I'm very happy to see the EBITDA margin for North America arrive at 5.6% compared to 30 basis points lower than previous year. In the Netherlands, on Slide 9, we see growth, solid growth continuing, revenue again at 9% close to the previous quarter, firm growth at +3 this quarter. Our combined staffing business grew at 7. If one would exclude the payrolling business, which shows a different trend, the growth in this segment would even arrive at 13%. Professionals, very successful growth at 21%, even a bit higher than Q3 and the vertical approach we are applying here is clearly paying off. The EBITDA margin slightly lower mainly the result of investments made in our Sourceright business which serves the RPO and MSP clients. In France, on Slide 10, we see accelerated growth ahead of market even when adjusting for the relatively easy comparables of the previous year. The revenue up 10%, combined staffing and in house business up 10%. And if you look at the Construction segment, that has started to show growth as well now finally. Professionals growing significantly 10% and also firm continues nicely. That results in sizable gross profit growth of 6%, our EBITDA margin at 5.2%, which effectively compared to last year is a little lower, but the underlying trend is stable. Last year benefited from some subsidy related releases. Germany on Slide 11, it's improving. It shows an improving profitability trend. Revenue roughly at the same level as the previous quarter. Gross profit up 13%, however. And SMEs chose growth that outgrowth the large client segment, which is in line with our strategy as communicated. Last year was impacted by the complications of the 13 week rule. The EBITA margin improved significantly, and this is also resulting from the fact that last year we had to catch up at the end of the year because we were calibrating the impact of the 13 week rule. This year this was better managed and distributed across the year. On Slide 12, Belgium, a very nice level of profitability, a record profitability. We see growth moving to 6%, staffing and in house even at 8%. Our gross profit was also up by 8%, but we continue to focus here on client profitability. And there are a few deals out there in the Belgium market that we have rejected and will continue to be very selective here. Iberia on Slide 13, strong growth continues on better margins even, 11% for the region in Spain, 16% revenue growth. Professionals continued to grow very high pace, 61% and it's by now compared to more tough comparables. Also, our perm strategy works out quite well that we continue to invest in growth in Spain. In Portugal, this was a year of adjustment in the client portfolio, but now revenue is up 1%. Our contact center business continues to show good growth and that results in improved profitability. If one looks at the details, for example, DSO, that's also improving as a result of client portfolio selections. EBITDA margin of 5.2%, a good 5.2%. In the U. K. On Slide 14, we see improvements step by step. The revenue is down this time by 4%, gross profit was flat, but our specialties business is doing well despite a challenging market situation. Firm fees 11% up, EBITDA margin now at 3.6%. Slide 15, the other European countries, we do see a strong growth continuing across the board more or less in Italy quite nicely 19% and our focus on specialties and perm is effective here. Also in Switzerland, we continue to see some improvements now back to growth of 3% ahead of a difficult market. Also Poland accelerated again. In the Nordics, we are going to consolidate profits as from February 2016 onwards. We're very happy to have strengthened our position in the Nordics market, making us 3rd largest player now with significant presence both in Sweden and also in Norway. Revenue growth at 7% of the year. This is clearly. Our EBITDA margin is slightly lower than the previous year because of our investments in growth, but also we did have a specific impact in the last quarter of last year due to a release of the provision. The rest of the world, growth in challenging markets, I already mentioned the specific comparables in Japan, but Australia and New Zealand grew 5%, ACS now up 5%. Latin America continues to show growth at 15%. Our EBITDA margin is reflecting our focus that has shifted from growth to profitability now at 1.5%. Slide 18 on the financials. The P and L was more or less discussed. One element is addressed with regards to gross profit. If you look at our GP over FTEs, so our productivity indicator has improved by 3.1 percent, which is slightly above the previous quarter. Just below the line, amortization and impairment, it now includes our Risemart acquisition in Q4. This was included. And our net finance and associates reflect a positive amount that is the result not just of the fact that we have a very low net debt and that we pay very low floating interest rates, but also the fact that we have sold a position under associates disposal and that was a positive one next to some foreign exchange effects here. Our tax rate comes in at 25.5 percent, a bit lower than expected in the earlier point in time, mostly the result of the revaluation of net operating losses. The For the for the full year €36,000,000 at EBITDA. On Slide 19, performance by revenue category. The comments I think you explained is we continue to make investments in staffing. We have a pretty good level of profitability now in the quarter, 5.3 for the full year 4.6 still room to improve here. In house continues to do excellent with good growth 12%. And if you look at professionals 5.8 percent now, it's leading the troops in terms of the returns and that's the way it should be. We do see the IT vertical performing well, but also the Dutch Professionals business is clearly contributing here. Our gross margin bridge confirms what I've said before, the permanent placement contribution here. We do see pricing pressure continuing in markets like the Netherlands, but it's offset by price improvements in other markets, amongst which is the American market. Operating expenses, this is sequential comparison. So from Q3 to Q4, it went up sequentially with a marginally negative foreign exchange impact. We continue to make investments in the countries where we do see growth, especially in FTEs and we had somewhat lower commission than expected in the emerging markets. Slide 22, the balance sheet. Net debt at €173,000,000 below the leverage ratio, I'm very proud to see our DSO arriving at 50.7, which is due to successful management of over dues because we continue to see pressure in the markets on our agreed payment terms. Our working capital now more normalized at 3.2%. Last year was a very low point, so 3.2%. That means if we grow only 3.2% of revenues needed to grow. Return on invested capital, again, I'm very proud, 18.8%. Free cash flow on Slide 23. Q4 showed growth of free cash flow by 28%. That's a pretty good result. You see purchase of ordinary shares here. That is the result of us preparing the dilution in the Performance Share Plan. For the full year, free cash flow, you see a moderate increase, but one needs to include here the fact that our provisions, the few lines above, have been used in 2015. They had been formed at the end of Q4 'fourteen. They have been used in 2015. And next to that, we now have a more normalized use, as I mentioned, of working capital as a percentage of revenues going from 2.8 to 3.2 if adjusting for that a very normal picture. Our outlook on Slide 24. Organic revenue growth came in at 6.6 in the quarter. January growth showed a level of 6.6. If you look at the month of January, the Q1 comparison base is going to be 2.2% tougher. If I I'm going to give you some indications on the revenue trend in the month of January due to working day calculation effects. We have again looked at this and we think that providing you with indications is more helpful than to give you precise rates. So the implied exit rate in the Netherlands is high single digit. In France, also high single digit. In Germany, it's mid single digit, so clearly improving from the level in the previous quarter, mainly as a result of pricing. In Belgium, low single digit. In the U. K, it continues flat. Iberia, low double digit. North America, mid single digit. The rest of Europe high single digit and the rest of the world mid single digit arriving at 6.6. Our volumes in the month of February, early February because the month is only 18 days old, they indicate a continuation of the trend. These are only the volumes that we measure weekly, but that is what we believe we see up until today. Our forward visibility into March or into the Q2 is effectively absent. We have no recurring revenues that we can build any expectations on. So this is what we know. Sequentially, the gross margin is expected to be seasonally lower and we do not expect a relaxation of the pricing pressure as mentioned for certain markets. There is no significant working day impact and that is because Easter falls in March this year versus April last year. Of course, February has an extra day. For Q1, we expect a moderate seasonal decrease in the underlying operating expenses sequentially, which is a typical trend. And a final point to make is that we'll have our Annual General Meeting of Shareholders. We're inviting you on March 31st in the Netherlands. On Slide 25, a record high dividend proposal in line with our discussion at the Capital Markets Day. We have used the standardized formula. We adjust net profit for the dividend pay to preferred shareholders and the amortization of other intangibles. And we have agreed that because of the strong financial position the payout should be to the high end of the rate 50% full cash arriving at €1.68 In terms of our strategic progress and our ranges, I'm not going to discuss extensively with you because we did so at the Capital Markets Day. Just want to point out that our 5% to 6% in order to get there, I want to refer to the scenarios that we discussed at the Capital Markets Day. And in order to get there, we discussed a scenario with higher growth than we see today. And then at the same time, we have to make sure that our gross profit development and our mix development support this as well. So summarizing on Slide 27, again, the key element that I discussed with you at the beginning of this presentation. We now move to Q and A. The first question today comes from David Talyer from Brabobanca. David, please go ahead. Yes. Good morning, gentlemen. Two questions. First of all, on the U. S, could you maybe give a breakdown between your blue color and your white color segment in terms of organic sales growth? I know it's not in the press release, but maybe you can shed a little bit more color on that. And then secondly, on your dividend, the €168,000,000 could be used as kind of a floor for the coming years? Or do you really believe that in sync with earnings trends, the payout could decrease and the €168,000,000 could easily fall in sync with earnings declines potentially? That's a challenging one, David, the last one. We're happy with the record dividend, and then you asked us if this discontinued going forward. And we also made clear that given the balance sheet, we have now not given the option for stock dividend. If we see growth continuing long term, then for sure our dividend will grow as well. But as I mentioned, we have no clue what the growth rate will be going forward. So dividend will be a function of the success of the company. Yes. If I may, quick follow-up on that because if you look at your balance sheet, you would have sufficient room to keep it stable even if the earnings would grow by, let's say, 10%, 20%. It will be a function of earnings. And a function, of course, of M and A. And we made that also clear at the Capital Markets Day. We have a pipeline. You've seen profits coming through now. We continue to look at targets, but they need to be yes, they need to fit our requirements, and that is not that's challenging. So we expect to be successful in some cases, but we'll see again at the end of the year. That's very clear. Thanks. And maybe the first question. Linda? Yes. On the U. S, I'll speak directionally. Certainly, blue collar was the fastest growing segment and continued strong and started strong. So good trends on the blue collar side. If we are thinking about the net feline on the white collar and professional side, permanent continues very strong. So it's all kind of how it washes out on the gross margin line. So I would say no clear weakness in any segment and no significant change in any of the trends. So certainly, blue collar remains our strongest growth area. And does it mean you're taking share? Or do you believe the market in itself is also stable because some of your competitors are actually not as bullish as you are? Yes, it's clearly both. I mean, we don't see we judge market by growth in existing customers, and that remains strong. We judge share by winning new customers and new programs and it's about 16% new percent of the growth is coming from new wins, 40% from the market. So I think we are picking up share and the market is fine. That's fair to The next question today comes from Chris Gallagher from JPMorgan. Please go ahead, Chris. Good morning. A couple of questions. The first, just if you talk a little bit about some of the pricing pressure you're seeing in Netherlands and France, where that's intensifying? And then secondly, just on healthcare costs in France for this quarter, can we give some guidance on how much that could impact the margin? Thank you. Yes. Well, pricing pressure is continuing, and you see it in tenders. So certainly our French and our Dutch business, they are they do have quite a lot of big clients, therefore big tenders. And in these markets, there are competitors who are underperforming their market. So apparently, that's the reason for some price aggressivity. We do see these same names, and I'm not quoting these names, of course, that's not elegant. But certainly in the Netherlands, we take our role as a market leader, by the way, also in Belgium, where we are selective. So we do like to outperform outperformance, but well, time will tell because it's a trade off. And in France, yes, we're outperforming. We're taking a lot of market share through our in house business. And yes, again, some parts are growing less than we see them as aggressive players. We try to offset this with our delivery models to get a higher productivity, but it is definitely a trend. We cannot deny it. The only thing I can say is we are not initiating it. And just on that, sorry, one of your biggest competitors has mentioned they want to grow up market and they might not have been doing so recently, do you think there is a chance it gets worse? Yes. Well, I don't know. I always find it a stunning lack of creativity to compete on price. I think it's very bad for the long term outlook of the market. I also think there's different reasons to compete or different ways to compete, but I cannot influence my competition. So that's up to them. We'll see. Your question on the impact of the health care costs in France, we expect a small impact from that given the market situation, which was just discussed. Offsetting this with price increases is a bit more complicated. That's why we expect to see some impact of that in our P and L of the French business. The next question today comes from Toby Reeks from Morgan Stanley. Toby, please go ahead. Hi, there. I'll stick to my 2. You've given a level of global MSP revenue under management, up 14%. Is that a strong level? Could you give us an idea of what that's been growing at? And then could you as part of the same question, could you give the level of actual revenue from you guys attached to that? And then the second question would be, you've indicated that your UK Specialty business is performing well in an increasingly challenging environment. Could you talk a bit about which specialties what you're sort of talking mean about the increasingly challenging environment that may be an outlook for the UK particularly head towards referendum? Thank you. Yes, we're looking up. So if I understand you correctly, you are referring to the total volume of our business in MSP or RPO? You gave global MSP spend under management was up 14% in the quarter. Yes. That's Is that a particularly strong number? Or is that an acceleration, deceleration? And then could you give what that actually means for you in terms of revenue or gross profit? Of course, the revenue in MSP is always low because we just get the fee. So the trend of the spend on the management is, of course, yes, 14% growth. Is that good or not? But depending on who you ask, when I talk internally, I always say it's not good enough. We do think it's an okay number. Maybe more telling is the RPO revenue, which is 22% up, and that's really fee based profitable business, whereas the business model in MSP is also, for us, far more important to deliver into these MSPs, which is a different number, and that revenue is just collected in the revenue of our businesses. Okay. But is that 14% an acceleration or deceleration? Can you give us an idea of what that how that sort of trended over the last 4 quarters? Yes. Well, a large chunk of our MSP spend under management is in the U. S, where the acceleration is even at a higher level. And I would say that the MSP market in the U. S. Is probably more mature in terms of new product adoption. So we have definitely won a record number of new clients. I think the other thing to read into that number is that MSP in the U. S, which was traditionally more of a vendor neutral environment, there is an increased pressure or drive from the client to have a vendor positive environment, meaning they want to do business with a company that is doing more than just vendor management that's providing a little bit more on the supply side and the solution design and what we've talked about for some time, the total talent architecture within the MSP program, we're definitely seeing an increasing demand for that. And we are a 1st mover in that space in the U. S. And globally. So I would interpret the 14% to be both a strong demand in Europe, a growing demand in Europe and us picking up share globally, most particularly in the U. S. And it's not significantly different from the rest of the year. It's clearly ahead of the growth of the company itself. And so we don't disclose the underlying revenues. We have a very high level of disclosure, and that's what we'd like to stick to. Okay. Sure. And then on the UK? Yes, on the UK. Yes, the UK had a disappointing second half of the year. Where we're definitely seeing improvements in specialty business is in some of our alternative delivery there. Our sourced right business performed particularly well, and we're definitely the shining star in the 4th quarter. Underlying our CP and E business is still very healthy. Our Education and Care business is still very healthy. Some of our other segments, it is a tougher market, but we also have a performance gap to market that we're working hard to close. But a lot of the alternative delivery, direct deliveries through the MSP and RPO program is what's supporting the growth at the moment. Okay. Thank you, guys. The next question today comes from Paul Sullivan from Barclays. Paul, please go ahead. Just some color on the German market situation from a volume standpoint. It sounds like it's still pretty flat. Is that the way we should think about it currently? And what's going on in auto in particular? That's the first question. And then just coming back on the U. S, it's interesting that you're doing so well on the blue collar side of things. I mean, the backdrop in manufacturing and light industrial seems to be pretty challenging. Everybody's talking about sort of industrial recession. How where do you see the disconnect there? Let me do the German one, and then Linda will pick up on the U. S. We do see throughout the year in Germany a quite consistent improvement in volume and indeed also pricing is improving. So and we see Germany improving throughout the Q4 also and then into this year. So I've got a feeling, of course, a lot of the volume, well, less volume development in Germany compared to the rest of Europe was due to the regulation change, which put a bit of a damper on the volume development for the last 2 years. It seems to be easing out, and see we do see this steady volume increase. On auto, there are a few auto clients who not so much complain about volume developments. Underlying, we see slightly less development in volume, but that's again due to regulation. There is a regulation in Germany that if the temp has been working for 2 years, then they something needs to happen. And we do see with some of our big auto suppliers that there is some increased hiring of our temps, which of course is good for the temps in general, but we have slightly less development. But overall, yes, we're quite happy with the developments in Germany currently. On the blue collar side, logistics is definitely driving the growth more than manufacturing. I would also say, when you dig into our numbers, and this is true actually in all of our business lines in the U. S, The branch business today is not what's driving the growth on the contingent side, on the temporary side. The branch business remains very strong on the permanent placement side, but we see the demand in temporary is being driven by our solutions. Most in blue collar, that's RIS. This remains a very unique product offering in the U. S. And it is definitely the locomotive in our growth there's no question about that. But that's true across all of the sectors. It is the solutions, the more strategic business offerings that are driving growth far more than the traditional brands offering. And I think we've just gotten ahead of the market in that regard, and it's helping us right now. The next question today comes from Tom Sykes from Deutsche Bank. Just sorry, another question on the U. S. First. Just the outlook for profitability improvement in the first half, so what are your headcount ambitions? And then also, what indications or clarity can you give us on movement in nonwage labor costs, so SUI and workers' comp, please? And then just on the in house business. So obviously, your organic growth overall for the group there seem to be sorry, for the in house business seems to be about 12%. Organic profits up 5%. Is that a function of pricing pressure? Is it a function of investment to drive the top line growth? Could you just be a bit clearer about the profit outlook for the in house business, please? Okay. These are three questions, Tom. But I'll help I'll take the first and last one. In the returns in Randstad in house, there is a one off case that we have settled, which has an impact specifically on the returns here. So you should adjust for that and then the pattern is normal. Your first question on future growth in FTEs in the U. S, it's the ICR that we are following here. So the drop through rate of new gross profit into EBITDA, and that's where the U. S. Staffing business has been growing for quite a few years now. And that means that the 50% is at the high end of the range. So as they are in the 4th quarter, going forward, they'll be a little lower, but that's the way we measure the business. Professionals is earlier stage of growth, but it is professional business where it always starts at a lower level. I mean the ICR and that also steers. So everything will be dependent on the rate of growth. 2nd question, Linda? Yes. Workers' comp costs are now stable in the U. S. A couple of years ago. We did a lot of work on that and I think we brought them. So I think on a percentage basis, they'll vary based on our mix. Obviously, blue collar is higher than white collar. But I think that within each of the segments, they'll remain stable at this point. We don't see additional upside there. In terms of SUI, indeed, the SUI environment going into this year is slightly better. That is far more impactful on the commercial staffing side than on the professional side, certainly. We are also seeing a little bit of wage inflation. We want to make sure that our flexible workforce is appropriately paid in line with the outside market. So we are reviewing pay rates and certainly passing those increases along to the clients. The clients participate as we react to the market on the wage levels. So SUI, yes, it is a favorable environment. It's not fully quantified yet because we're still hearing from some of the states. So maybe at the end of the first quarter, we can provide more guidance, but that will be a small upside there. Okay. And Paul, finally, on the ICR in North America, if you again just for in house case that I mentioned, the ICR over the last quarter was just north of 30%. Okay. Thank you very much. The next question today comes from Mark Swartenberg from ING. Mark, please go ahead. Yes. Thank you. Good morning. Robert John, you mentioned that you still have an active pipeline on M and A. But is there any change in your view? Or are you becoming a bit more hesitant to do acquisitions due to the increased macro uncertainty? That's my first question. And the other one is on your slide on track. One of the assumptions says mid single digit sales growth in 2015 and 'sixteen. And I know what you said in the Capital Market Day, but does it mean that with the increase of certainty that perhaps you do less investments or less spend on marketing just out of caution and therefore that the ICR might come in a bit higher for 'sixteen than you initially thought in the growth scenario? Is that what I should read into mid single digit sales growth that is say around 5% is already enough? Those were my 2 questions. Yes. Mark, indeed scenarios, we will respond to whatever happens in the market. And our outlook into March and Q2 is effectively nonexistent. So it will very much depend on what's happening there. And then we will at every day reconsider our position and in that context look at whatever investments we want to make. So I think the assumption you're showing is not the one that we have on the table. On M and A, the increased uncertainty in the financial markets, we also have noted clearly when we prepare for M and A, we do extensive DCF. And these DCFs always include peak and trough calculations. And timing of the peak and timing of the trough, that's where the where we have sensitivity. But this is how we try to prepare. If we see growth trends changing in the market, we'll probably build change those data points in our DCF calculation to other moments in the timing. And that will have an effect on our valuation and that then will have an effect on our willingness to pay a certain price. So this is how we try to drive ourselves. And Mark, good morning, Jacques here. Good morning. We don't time M and A on where we are in the cycle. We time M and A because we want to create better positions there either in regions such as profits or in professionals portfolio, whatever. And then if everything works from the DCF point of view, but also from a is the target willing to be acquired, then we're going to do it. If the market is then at minus 5, well then too bad. That, of course, also has some upside on price. And we want to stay within the bandwidth of our financing so that the overall cost burden or how do you call it, investment burden doesn't really make us turns off, gives us a lot of heartache. So it's more of a long term vision than just where the cycle is going. Yes. And in Chuck's example, if we have a negative market, then that has a direct impact on our DCF and as such, on our willingness to pay a price. We have been rather, I would say, disciplined. If you look at our most recent acquisitions over the last couple of years, we have been rather disciplined, and we intend to continue doing that. If you look at our pipeline, the fact that we haven't announced too many deals is very much the result of that. Okay. Now that's very clear. I just want to get a feel for whether the financial markets indeed and then what's going on around in terms of PMIs is affecting your fuel this year and perhaps on the cycle or in terms of M and A, but that's a clear answer. Thank you. The next question today comes from Hans Ploegers from Kepler Cheuvreux. Hans, please go ahead. Yes. Good morning, gentlemen. A question and then later, of course, sorry. Question, first of all, on the pricing, going back on that. A little bit of feeling is that there's a shift, let's say, from the pressure from the clients more that now the pressure is coming, let's say, from the competitors on pricing. Could you elaborate on that, what you see there is a clear shift? And secondly, on the outlook for the Netherlands and investments because of last few years you have been growing quite significantly Are they enough close to, let's say, to maximum capacity? Do you plan to put in some additional headcounts and could you elaborate a little bit on what you're seeing there? Yes. So it's always a bit of a difficult question where the pressure comes from. Clients certainly when you talk to purchasing, which with large standards in France and that is the case is of course their objective to lower the price. So that's where it starts. Yes, and then someone gives in or someone doesn't give in. So yes, we don't really know. And by the way, we don't really care where the pressure is coming from. Yes, I've got nothing to add to what I mentioned earlier. We do see some funding deals. Sometimes there's also I didn't mention that, but sometimes clients get bought by private equity and they want to manage cash and then you get some very funny requirements payment terms. That's also sometimes for us a reason to walk away. So again, we do see this as our role to keep a healthy environment going forward, sometimes at the expense of sacrificing revenue. We'll see how that continues into 2016. And maybe one follow-up on that because of last few quarters, Belgium had not been really mentioned as where you see some additional pressure. And now you mentioned it. Is there something changing? No. Well, it goes up and down. Belgium as a market is less a large client market, but we have seen, like I mentioned that again in the Q4, a few large tenders coming in where we declined. And on the one hand, we're getting in 4th quarter on the back of better fuel steering closer to market. Given the sacrifice of these clients, probably will go down a bit in growth in the Q1. That's too bad. But at the same time, we want to have a healthy book. So that's happening. So Belgium is then now we're on the radar screening it. On the Dutch business, we have been investing because on the one hand, we took out cost in the back office, but we have been investing certainly on the front end in our businesses, in our staffing businesses. And if we see continued growth, we will continue to do so. Although in the Netherlands, it's less of a trade investment as in putting people in branches like we used to do, where we've mentioned at the Capital Markets Day that more and more of our business currently a little over 60% is not generated through the branches anymore. So investments in the Netherlands are far more into technology and different delivery models and therefore different profiles in people. So it makes it a slightly different way to look at it. Okay, thanks. The next question today comes from Konrad Zomer from ABN AMRO Bank. Konrad, please go ahead. Hi, good morning, gentlemen. My first question is on the assumptions to get to your margin guidance of 5% to 6% in 2016. I refer to the slide where you mentioned mid single digit sales growth. I think that is what you've achieved, and I think you're currently growing a bit faster. Did I misunderstand it when I thought I heard Robert John say during the prepared remarks that the that you need higher growth than what you currently achieve Because I think mid single digit is like 5%, and you're doing 6.6%. Are you not on track to get to that margin? And my second question is on the U. S. Professionals business, which produced no growth in the 4th quarter. If we assume that the U. S. Economy will continue to grow but maybe not accelerate and you've had 5 years of good growth. Is it fair to say that it looks less likely that, that business will start to grow for you going forward? Because I guess it would have happened by now if that business could grow in a healthy economic environment. Thank you. Konrad, on the assumption, as you call it, for margin guidance, I think the wording is wrong here. It was something we discussed at the Capital Markets Day in November. At that point in time, we said it's not the guidance, it's the scenarios. We want to be very clear about that, explicit these are scenarios. And we also addressed the point you were now raising, and that is that in the meantime, between the first time showing this overview that you were referring to in 2014 November 'fifteen something changed in the underlying development. So the statement we made in November was that if growth would continue at the level that we saw at that point in time, which was close to 8%, just below 8%, then assuming a certain development in gross profit and mix changes, which typically come with further growth, it should be feasible to arrive at the low end of that range. That's what we said at the moment. So I was also very clear in the remarks during the presentation, the current growth rate is not enough to get there clearly. So the things you should keep in mind is our focus is on market share whenever appropriate, but at the same time, we need to make sure that we get decent returns here. The second point is that we look at ICRs, And that's where we gave you some guidance also at the Capital Markets Day that sort of in every scenario should help you to get to a certain outcome. I hope this clarifies. Yes, I misunderstood. And I was slightly wrong footed by the fact that the slide in your back today still talks about the mid single digit sales growth. But I understand now, and I misunderstood from your No, thanks for asking, Corina, because this helps us to make sure that people understand this. Just to clarify also a bit on how we manage the company. So you saw what is better than ours what happens if you focus just on the percentage return. We're not managing the business on the percentage return. We're managing the business on growth and the investments in growth. And then yes, profit is a result of that. So please keep it in that order. Then on the U. S, Linda, I'll let U. S. Profit. Yes. U. S. Profit, the market is healthy. The IT market, which is half of our business, remains very healthy. We have an underperformance due to our failure to aggressively evolve delivery models on the professional side, the way we have on the staffing side. We continue to address that. We have new leadership on the S and A business, which is a very strong business. And that's already yielding dividends. In the IT business, we are moving aggressively to accelerate the evolution of their delivery model. So the market is strong. We're underperforming. I find that heartening because it's much easier for us to address our performance in the market. And I hope that that remains quite an opportunity for us going forward. So even if other segments were too soft and which we have not yet seen, but even if they were closing the gap to IT, it's certainly a lot of bump. The next question today comes from Laurent Brunel from Exane BNP Paribas. Laurent, please go ahead. Yes. So two quick ones for me, please. First, in France, could you maybe give us more color about the trends by segment? And you've been saying that the Construction business was back to growth. Is it correct? And could you comment a bit on the manufacturing sector as well, please? And second, is there any new elements regarding your cost saving targets for 2016, please? Thank you. Okay. So your first question regarding the every sector also in 2015 Francois D'Arrig speaking, sorry. In 2015, all sectors have improved the pace. So clearly, excluding the construction sector of minus 2% through the year, but the good news come from Q4 because double digit growth in construction. So it will help the total market staffing market in 2016. The automotive sector is doing very well, also manufacturing, also aeronautics on logistics. So as you mentioned before, everything is green excluding construction, but it's much better today. Just one point regarding cost saving, we are not concerned, the project concerned the whole company at the group level. Yes. Just adding to what Francois said, we have had our €60,000,000 €70,000,000 ambition, and we're right on track here. Then at the Capital Markets Day in November, we announced another element, which is the IT, data centers and data communication side, where we expect to see the savings coming in gradually, but that is going to happen following this year, after this year then. And it's going to be step by step. And then finally, final point to make here is we run productivity and check referred just before. We run productivity every day. Through activity based field steering, we should show improved productivity. And that is what is leading us. So these bigger projects are to address the back office or to address structures like IT. Okay. Thank you very much. And just maybe on France, could you remind me your mix? I mean, what is your exposure to construction? Is it in line with the market, I. E. Below 20%? Sorry, it's less than 20%. Okay. Okay. Thank you. Thank you. The next question today comes from Josh Piedl from Berenberg. Josh, please go ahead. Yes. Hi. Good morning, gentlemen. First question, can you talk about why your perm growth slowed in Q4 in the Netherlands? And then also following on from that, in the last quarter, you talked about significant marketing investment made in that market. Was this across all segments? Or was this specific to a certain part of the business? Thank you. There's 3 things in the Netherlands, why growth is easing a bit. The first one is a reclassification of what last year was like what we call firm business in yards. By the way, you're also doing very well, not so much in the perm, mostly is the content and professional staffing. That gives a bit of a negative, but it's more of a reclassification of revenue. The second one is the fact that we've created EMEA source rights, so European organization. And that part of the perm business has been again reclassified into debt business and that's fast growing area. The third one is that it's growth over growth. So it is somewhat tougher to keep up growth, but we're working on it. So the 22% growth in RPO contains some of that, definitely Dutch business, yes, large client Dutch business. And on the marketing? I don't recognize marketing investments in perm. There are sales investments in perm. So we train our people. We're going much more out to sell. But I don't recognize sizable out of pocket marketing expenses in perm. So I don't know where you get that from. I thought you talked about last time a big step up in marketing investment made in the Netherlands market as a whole. I was just wondering which segment that was focused on. So I mentioned in the Capital Markets Day, I think the 3 commercial campaigns for Tempur, Deep, Ramstad and Yacht. So that's true. You can see it on Telly. But not typically with Perm. Okay. Thank you. Yes, we invested in the branding of the 3 brands. The next question today comes from Yi Franco from KBC Securities. Please go ahead. Hey, good morning, gentlemen. Only one question left for me. Wondering a bit about the Dutch building blocks EBITDA margin. It's fair to assume some pricing pressure in the staffing, but can you give us some light on the profitability in the Professional segment given that it's growing at substantially higher rates now? We see a 20 bps decline in the margin year on year. So is that pure pricing pressure from staffing and investments being bigger than some savings? Or do we also see some slowing profitability in the Professionals business Yes. There's 2 things that's for the development. First of all, we didn't mention that Robert John did a bit, but it's a payrolling business. Our payrolling business is roughly 10% of our total revenue in the Netherlands. And of our total revenue in the Netherlands. And quite a large client, if you might call it that, is the government. And they've issued an internal statement that they want to sort of get rid of payrolling. I don't know why you should ask them, but anyway, so that's quite a decline. Funny thing about the payroll business is although it comes at a relatively low margin, it comes at a very high leverage because it's a fully automated or highly automated part of our business. So it eats into our leverage, if you will. And the second one is the investments we're doing in the Storzweig Organization. So we have created this European Storzweig Organization. We are scaling, we are upfront investing because we do think and it's already growing very fast that this is going to be a big part of our organization. So we're investing in Budapest in our sourcing center that you know of. We've invested in quite some product management and development and that also eats into our leverage. If you take those 2 out, then the underlying development, including the pricing pressure, by the way, in the Netherlands is quite stable. Okay. And if you look at costs taken out, investments done, that's broadly net flat? Or could you give some color on that on the Netherlands? Yes. Yes. And the last question today comes from Zohr Hasini Veronassi from Goldman Sachs. Zuhasini, please go ahead. Hi, good morning. In interest of time, I'll keep it very short. Just one question. On the UK market, you saw a nice pickup in growth in perm plus 11% in Q4. Can you give some detail on whether it was the market which drove this growth or whether it was execution by Randstad because some of the other data points you've seen on perm growth in Q4 were actually weak? Thank you. Yes. As I mentioned earlier, the perm growth in our traditional business was disappointing. So the uptick in perm is entirely related to an increased adoption of our SourceRight product. So what you're seeing is our increased ability to do direct delivery through our MSP RPO programs through SourceRight. That's what's driving the firm growth. The underlying traditional firm market, I think is challenging, and our performance against that market was disappointing. Okay. Thank you. Operator? We have no further questions on the phone lines. Excellent. Well, ladies and gentlemen, thank you so much for joining us at this call. We are looking forward to either talk to you at the General Meeting of Shareholders later in the month of March or at the next announcement of the Q1 results in the month of April. Thank you so much. Have a good day. Bye.