Earnings Call: Q3 2015

Oct 29, 2015

Ladies and gentlemen, welcome to the Randstad Third Quarter Results 2015 Conference Call. My name is Haley, and I'll be the coordinator for your call today. I will now hand you over to your host, Robert Jan Vanderkrupp, CFO to begin today's call. Robert, please go ahead. Thank you so much. Good morning, ladies and gentlemen. Good morning to the Q3 2015 results announcement of Randstad Holding. I'm here together with Jacques van den Broek and Arun Rambockus and also the other troops supporting us. We're going to talk about the Q3 of 2015 and just remind you the Q3 in terms of the seasonal pattern is the most relevant quarter of the year typically, closely followed by Q4. But if we have acceleration, Q4 might even be more important. But the second half of the year typically is the stronger part of the year. I'm going to take you through the presentation. We'll move to Slide 5 right away, which summarizes the key items of what happened in the Q3. Revenue grew by 5.4%. July came out a little less strong than anticipated. And through the quarter, we did see growth being more or less flat. One should remind that the differences are marginal. Top line growth broadly stable across most countries. And if we look at the month of October, we look at our volumes in October, we see that continuing. The gross margin improved by 30 basis points to 18.8 and also perm fees are clearly showing continued outperformance of the market by 13% growth. Underlying EBITDA, the margin came out at 5.0 percent for the quarter with an ICR, an incremental conversion ratio or what it expresses is the drop through of additional gross profit into EBITDA at 59%, which is a strong result. ROIC at 16.2%. I think Arun that's almost a record level, but excellent performance here. And also working capital measured in terms of DSO here improved again, so solid working capital continued. Global MSP spend grew significantly as did RPO. And finally, Randstad has announced the acquisition of RISE Smart, an outplacement innovator, effectively an online outplacement provider. We're going to provide you with an update at the Capital Markets Day on 17th November. Slide 6, the P and L. I'll elaborate on most of these items mentioned here. One thing that I'd like to draw your attention to, if we look at the last four quarters, the column L4Q of 2015, you can see that over the 3 quarters 2015 and the last quarter 2014, the EBITDA margin now stands at 4.4%. Organic growth came out at 5.3% over the last four quarters. So this resulted in a EBITDA percentage that is into the range that we have communicated at the end of last year. On Slide 7, the context in which we have operated, top line stable in most countries. And please remember that we typically see erratic trends. It's never linear here. And that is what you see reflected here. Stable growth in the majority of the European countries, the Netherlands and France, both in line with market and Italy accelerating, whereas it had already been at a very significant level. Also in North America, growth continues. We are clearly above market in our U. S. Staffing business, but the Canadian market is more difficult and that is consolidated into our numbers in North America. We continue to see growth in most of our emerging markets. So effectively, we have 3 cylinders running North America, Europe and Asia. If we look at North America on Slide 8, we do see stable growth in U. S. Staffing and I'd like to add to the headline here excellent returns and probably even record returns. Revenue grew by 4% compared to 5% in the Q2, but please remember that the comparison base has toughened a bit. Permanent placement fees continue to do well and GP also improved by 9%. Our staffing and in house business grew by 6. U. S. Professionals focused on gross profit, this was up by 3%. Wealth of Source Right, net fee growth of 17%, it We have absorbed some restructuring here, some adjustments in the back office in the U. S. And also some adjustments throughout the organization in Canada in order to deal with the difficult tough market circumstances and of course the RiceSmart related M and A charges. France was in line with the market on Slide 9. We think that continues also into October, the growth that we see in Q3. But please remember that in Q4 last year, we arrived at minus 8. So the comparison base is going to be relaxing here. So that should result in pretty solid growth of the Q4. Our combined staffing and in house business grew 3%. This is mostly industrial. Professionals also up and our perm business across the board in the group, but also in France grew by 23%, a significant amount. Gross profit improved also and our EBITDA margin came out at 5.8% for the quarter. We are balancing client profitability here with market circumstances and it's always an art to accrue properly for the revenues and subsidies in the French market. The Netherlands, we see solid growth on tougher comparisons, but continued solid returns in the Dutch market. Revenue now 10%, Q2 was 15%, but then we explained to you that complex calculation of working day effects did affect that number. Perm also continued to be successful at 28% and the comparison base became 4% tougher. Staffing in house doing well, 9% growth, broadly in line with the market. I would also say professionals excellent continued growth even higher now at 20%. We have now combined all the businesses since earlier this year and it continues to do well with a solid EBITA margin. So this is a relatively tough market. Randstad has adjusted timely to what happened in the market and the move to more efficient delivery models and the back office adjustments facilitated this and result in continued good returns here. Germany returned to growth, which is excellent and actually also that combined with an EBITDA margin of 5.7% now for the quarter. Revenue grew by 2% and if we look at the underlying volumes, we are approaching 0 here. So one way or another, we are moving into positive territory. Perm growth 15% compared to previous quarter it continues. Gross profit by 2% up now and their SME is clearly outgrowing the large client segment. This is the result of our micro strategy on this segment. Slide 12 Belgium, strong focus on profitability, also best ever profitability in this quarter, 6.1 percent, revenue up 1%, staffing and in house growth that is and we have also concluded that we need to focus on our commercial activities to get closer to market here. Gross profit up by 6% due to strong focus here. Slide 13, Iberia. Stable growth, a solid story. Growth was 8%, in Spain 12%, professionals continue to grow at a very high pace at 68%, perm at 32% and we continue to invest in further growth here. In Portugal, we have a strong focus on client profitability. There are opportunities to grow, but we want to make sure we choose the right ones. We do see strong growth in our call center business and the EBITDA margins remain very good. UK on Slide 14 improved profitability, which is our key focus in this market. Revenue up just a little bit, gross profit 2% and we do see good performance in Construction and Education. The EBITDA margin improved to 2% now. Slide 15. Other European countries, we continue to see a solid growth here and good returns. Italy, revenue growth 20%, as I mentioned before, acceleration penetration increased clearly in this market, but also the focus on specialties and perm continued to pay off here as well. Switzerland, not easy as a story, but our growth was flat and that brings us ahead of a difficult market given the currency situation. Poland, growth accelerated again back to 7% here and we see a continued impact here of candidate scarcity and also the fact that we grew fast last year. Solid profitability was already mentioned. 16 Slide 16, rest of the world, stable growth here and we also said we would strengthen our focus on profitability and that is starting to come through here as well. Japan grew 6%, that's comparable to the previous quarter and perm clearly very successfully at 63%. Australia also continued to show growth, but very important in these markets is the perm growth and that also arrived at 11%. So overall, Asia growth at 10%, which is India and China both double digit. We continue to invest in growth in both countries. Latin America up 15% roughly equal to the previous quarter and EBITDA margin now to 1.5 percent as a result of the shift in focus. The financial results on slide 18, our income statement is pretty straightforward, nothing special. You can see again our relatively low finance costs due to the fact that net debt has reduced further and interest rates are effectively only the spreads that we are paying. The tax rate also stable more or less at 26%, 27%. Then performance by the revenue categories on Slide 19. Staffing has clearly arrived in the zone that we believe is appropriate. It should ideally return between 5% maybe 7%. So we're clearly in the zone, but it still indicates potential for further improvement. In house, it's really at the very high end of the zone, excellent return 5.3%. We should keep it going. And then Professionals, clearly improving to 5.7%, but still a way to go. Strong profitable growth in the Dutch business contributes here. Also the IT segment in the U. S. Is doing quite well. Gross margin bridge on Slide 20. This is from last year to this year, 18.5% last year, 18.8% this year. The temp margin is more or less stable. The mix effect is offsetting some pricing pressure. Firm fees are clearly contributing here as you can see 0.2 and then our MSP and RPO business is also successful here. Operating expenses. This is where we compare sequentially from Q2 this year into Q3 of this year as well. OpEx are up slightly. I think this was well managed throughout the quarter. Favorable foreign exchange impact clearly. The FTE growth in North America and Europe is clearly justified by growth in those specific markets, but there's also some seasonal pattern here where we have relatively low cost additional employees to go through this exciting Q3. And we continue to make investments in our emerging markets. Slide 22, net debt now at 5.53 with a leverage ratio of 0.5 return on invested capital, which I mentioned at 16.2. I think successful data here. Then the Q3 2015 free cash flow on Slide 23. Most important, the best way to look at this is the last 4 quarters 2015 because timing differences have an effect on each and every quarter. So as you can see a solid improvement again over the last 4 quarters. This quarter specifically invested more in growth, had a little less benefit from the payables, but across the board nothing special. Net acquisitions include the acquisition of RISE Smart. That brings us then to the outlook on Slide 24. The organic revenue growth in the quarter was 5.4%, September at 5.7%. Again, this is marginally different. Volumes in October so far indicate a continuation of the trend. The gross margin we expect to be more or less sequentially stable. No significant working day impact in Q4 compared to last year. And for Q4, we expect a minor increase in operating expenses measured on an organic basis. And if we look like last quarter at the organic so at the underlying exit rate, the excess rate for the month of September, then these are as follows. The Netherlands was around 10. France is north of 3. Germany at 3. Belgium it's a bit low. Low single digits. Low single digits, sorry. U. K. At 2%, Iberia continues at 11%, North America 4%, rest of Europe at the high 14%, rest of the world at 11%. And if you add that all up, it is around 6%. On the next slide 25, we confirm that we believe we're on track in terms of the ranges that we discussed at the Capital Markets Day between 4.4 and 4.6 for this year, I already showed you that the last 4 quarters bring us at the 4.4. Percent. So hopefully the next quarter is going to support that further. And then for 2016, we still believe we're on track to get within that range indicated 5% to 6%. We now move to Q and A. So operator? Our first question is from Chris Gallagher from JPMorgan. Just a few questions around market conditions in terms of how competitive is becoming from a price perspective. So give me what you're seeing in the Netherlands and in France, one of your peers recently flagged it was getting more competitive? Let me do France and then Chris I think will do the Netherlands. France is not getting more competitive. It's pretty stable environment. And as Robert John stated, we do expect sequential growth into Q4 in France and we believe to be above market currently based on the success certainly of our in house, but increasingly our SME growth. So that's good. So in the Netherlands, yes, as Rob Jan already stated in his opening statements on the Netherlands, Competitive environment also due to some market concentration. So we see that we made the right decisions last year in order to restructure and get our organization ready for it. I will tell you a bit more on the developments on central delivery on our Capital Markets Day in the coming 2017 November in London. So we are heading up with this and we had some investment of course in terms of growth and also in terms of marketing. So we're pretty positive actually about the picture. Okay. And one more question, if I may. It's just around costs in France around health insurance coming in from 2016 and also a change in the welfare tax in April 2016? How do you see that impacting margins next year? Yes. That's early days. Stuff is not fair. It's not so much finalized. We see a mix of some negatives and some positives, and we're still figuring how that will play out. So we'll keep you posted. Thanks for limiting yourself to 2 questions. Thank you. Our next question is from Matthew Lloyd from HSBC. Matthew, please go ahead. Good morning, gentlemen. I'm going to go for one question. In France, the pickup in perm, is that mainly CDD fees? Or is it what as an Anglo Saxon you would think of as perm as in proper permanent jobs? Yes. This is what you as an Englishman would call proper perm. Absolutely. We currently have around 1,000 CDDs, CDIs in our TAM base and that's based on the new development. With that, we have roughly 1 third of that market. So we are taking a proactive approach, which is logical because as Randstad, we've lobbied for a long time for this possibility in the French market. So we like it. So this is really pure perm fee growth, which as you know is a group strategy for us. Thank you very much. Our next question is from David Taylor from Rambo Bank. David, please go ahead. Yes. Good morning, gentlemen. First of all, follow-up on the Netherlands, the margin coming down a bit. Do I understand correctly, it's mainly driven by gross marginpricing pressure out there? And maybe you can also give a little bit more color on the underlying temp margin development. Is that more driven now by mix and is pricing still, let's say, visible as it has been visible in Q1, Q2? And my second question is on the incremental conversion ratio. If I calculate correctly, I arrived still slightly south of 40%. The last two quarters, it was also slightly below that level. Do you still expect a level of around 50% next year if you would assume a reasonable growth? Thanks. David, this is Chris coming back to your first question. Yes, of course, if there's a competitive market with market concentration, there's also some margin pressure, but it's also due to the investment we did in marketing in FTE. Okay. And do I understand correctly then that let's say your SG and A increase is quite close to your top line increase? I think it is, yes. Yes. Okay. Thanks. And on the ICR, we tried to measure it over the last four quarters. But if you look at the last quarter and then make the right adjustments to look at it on an organic basis, it's 52% for Q3. I'll just give you the details, Dave, if you want to. Okay. So then the answer on my second question or my follow-up on that is yes for 2016. That's still your ambition probably. Yes. Okay. Thanks a lot guys. Our next question is from Mark Sodzenberg from ING. Mark, please go ahead. Yes. Thank you. Good morning, guys. I want to also follow-up on the Netherlands, following up on David's question, because you have say €20,000,000 of cost savings, you see professionals going up 20%. You mentioned gross margin pressure and marketing and SG and A. But how should we see this going forward? How much of the cost savings is in? And will the operational leverage improve in the Netherlands? Because I do not get the feeling of the gross margin pressure. Is that severe if I look to underlying RB data or trends at USG for instance, keeping aside some company specifics? That's my first question. And then last year around the same time, you updated the market on the cost saving of €60,000,000 to €70,000,000 How far in the process are we? Is everything in? Should we expect still some more? Could you give us an update on that one? That's it. Thanks. I'll introduce it briefly and then Kees can give you some details. But the way to look at the Dutch performance is that whatever we do is directed towards securing a 6% to 7% return at the bottom. That is sort of the strategic approach underlying here. Kees? Yes. And as you probably I don't know it was in the presentation, although I think Robbyon mentioned it. We are looking of course at incremental conversion ratios and which are pretty much above 60%, and we are actually heading for that also in combination with what Rob Jan was saying, the 6% to 7% target in combination with a decent incremental conversion ratio of above 50 years, but probably even above 60. That's where we're targeting at and that's actually what we are doing. Coming back to your comment on your professional business, As you know, we started this actually as of April in the new structure. So you will see some we see a lot of growth, but we need to work a bit more on the conversion of growth into gross profit, so that will happen in time. On your second question Maybe sorry to interrupt. Maybe is it then that you because of the strong growth acceleration in the beginning of the year in the Netherlands and your in professional starting in April that we should expect even operational leverage to improve? Or will you invest at all back in the business to keep within the 6% to 7% business? I'm trying to get a feel for the potential in the next, say, 4, 5 quarters. We will still invest. And as I also told you in the last meeting, we in professional business, we have still a lot of room to invest because we changed our completely changed our model. So we will still invest and stay within the 6% to 7% range. Okay. Good. Clear. Thank you. On the cost savings, Marc, the target was €60,000,000 to €70,000,000 €70,000,000 divided over 2 years, this being the 1st year completely on track. And please note that next to the Dutch restructuring, we also have just announced some adjustments in the U. S. And Canadian organization. And earlier this year, we announced German organization. So that's coming through. But the largest chunk of the 1st year of savings was already in us from the beginning of the year, and we are working on next year's reduction. So I think we're completely on track here. So there's still some to come in 2016? Sure. Yes, yes, yes. Good, good, good. All right. Yes. At the same time, Robert John will also, in our Capital Markets Day, brief you on our midterm cost initiatives. Okay. Sounds good. Can't wait. Thanks. We knew that. I'm in sales, so I'm making this an attractive program, yes. Thanks. Our next question is from Heinz Plieger from Kepler Cheuvreux. Heinz, please go ahead. Yes, good morning, gentlemen. Two questions from my side. First, looking at the U. S, there you continue to grow ahead of the market, particularly a little bit maybe talk us through the quarter, what the trends are? And especially why do you believe you, let's say, are ahead of the market? And are there still additional measures you've taken to improve your performance there? And then looking at Belgium there, we saw some weakness in Q3. You indicated that you've taken some additional measures also to focus on profitability. Could you maybe elaborate a little bit on what you're doing and how you expect it will work out in the coming quarters? Yes. I'll take those. Well, you know our story and how we get to grow above market in our U. S. Staffing business is a very well run business on the base of what we call field steering. What we also see certainly in our staffing portfolio in U. S. Is increased success of in house, although this is already quite a chunk of the portfolio. It's still a huge market out there. And the more consistent we get into conversations with clients, the more attractive and the more potential we see for this. So we've opened up quite some new branches in in house and that also fuels the growth in staffing. So good to see. On a more general market note here, we have around €350,000,000 of franchise business, which are basically also of course staffing entrepreneurs. And they are also to a large part to a large extent in the blue collar part of the business. And we also see good growth there, just as a general comment on market developments in America. Belgium, there's 2 things in Belgium. The first is Q3 in Belgium is specifically also a quarter where you see a lot of students working. This is pretty low margin stuff. We used to take that on board years ago and then we saw a significant drop in our gross margin into Q3. We became more hesitant. So that also means that our growth against market is subdued in Q3, but it translates into a great and actually for the quarter record profitability in Belgium. So we're happy there. But of course, we're never fully happy and we're not happy in Belgium yet with our overall commercial pressure in the market. And Belgium actually is our only business, large business, which is below market. We're not happy there. So we hope to see this improve throughout the year. But are you taking additional measures? Can you elaborate on that what you're doing? Yes. It's very academically, we talk a lot about this and then the end effect is sell more. And that's what we're going to do. If you compare the activities, commercial activities of Belgium per person to other markets, there's room to grow. So in my view, our Belgian colleagues should well roughly double their commercial activities. And that we know they'll get improvement against market. We've seen it in the Netherlands. We're seeing it in France. We see it everywhere. More calls, more visits. Can't make it more complicated than that. Okay. Clear. Thanks. Our next question is from Konrad Zomer from ABN AMRO. Konrad, please go ahead. Hi, good morning, gentlemen. First question is on the Netherlands. Can you share with us if your high growth in the Professionals business had a positive impact on the EBITDA margin for the country? And secondly, can you share with us what your performance of the Professionals business in North America was in terms of margins, please? The first is a yes. Yes. The second, no, that's not a yes because it's an open question. We are against market, we're very happy with our staffing performance in the U. S. As just explained. We do feel that our overall U. S. Portfolio, which is a spread portfolio, shows a more nuanced picture. Very happy with our SourceRite performance, our engineering business, but that's a small business, is doing well. Our IT business is doing well, but we do think there's upside. And our financial business should definitely see some upside. This market is still very good as in high single digit GP growth and we're below that. We changed management. New management is in place And we hope that we also will turn the corner there. So yes, there's still upside in our Professionals portfolio, which by the way is a very comfortable portfolio. So in that sense, we're very happy. But from a top line point of view, this we do see there's still some potential. Okay. If I quickly come back on the Netherlands, I noticed you added about 180 people in the Q3 versus Q2. And that explains some of the margin pressure, if you like. But I still struggle to fully understand why your EBITDA margin in Holland came down Q3 year on year because the perm business grew very strongly, had a positive impact. The professionals business grew strongly, had a positive impact. You say it's partly pricing pressure, but you do not sound too concerned about it. So I still struggle to understand why your EBITDA margin had to come down 20 basis points year on year? Yes. Then I have to repeat myself probably, but I think what you probably you missed it, but there was also a total investment in marketing. You saw, I think, the campaign for Yolked Professionals Business, which is actually the first time we did even in a TV campaign. We did a broad marketing campaign on Randstad in the Wardenbee event. I think you cannot have missed it. So there was also a lot of investment in that part, not only in FTE. But underlying the point is indeed it's a competitive market. We have early responded to that by making sure we adjust our delivery and our back office. And the overall target is between 6% and 7%, and that's where we are. And that's where we should remain. Right. Okay. So just to conclude, pricing pressure in the Q3 was not different from pricing pressure in the 1st 2 quarters of the year? No, not really. There seems to be sort of a structural shift in the Dutch business whereas large contracts are heavily fought. We know that. We've changed our delivery model. We now have we mentioned that to you. But again, Chris is going to elaborate. 5% of our business doesn't come from the branches anymore. That's not to say it's all in this delivery model, but we can cope. So it's all about increasingly conversion as in what do you get in gross profit and what do you get as a bottom line return. So we can weather that storm and we'll see. And if you're smaller in the Netherlands, I think that's more of an issue. But again, we're happy with the returns. We're growing 10% guys. So that's 7,000 people more at work in the Dutch place at Randstad, very happy and great returns. Okay. Thank you. Our next question is from Yves Franco from ABC. Hey, good morning, gentlemen. Some questions from me. Some have already been asked, but maybe elaborate more on Belgium evolution going forward. If you say you're shutting some student businesses, Can we expect a decent return to growth again in the Q3 then the Q4 of the year? Secondly, on the savings and the restructuring done in the U. S. And in Canada, Maybe elaborate on what has specifically been decided there. And if I understand well, this is not included in the EUR 60,000,000 to EUR 70,000,000 savings plan. This is some extra again. Thanks. Yes. Again, Yves, on Belgium, it's a matter of time. So we exited the holiday period in Belgium with a lot of commercial aggressiveness and the heat is on. And then how quickly we can see the benefit, that's always tough to say. Yes, we always say, yes, 6 quarters. Okay. But normally the biggest hit has come, obviously, in the Q3 with the holiday and increased student activity I guess? Yes. Well, we always were a bit hesitant that if we didn't take the student business, then we would run the risk of damaging the relationship with the client. Well, we take a little bit more risk there and we don't mind that too much. And the cost reduction programs, the restructuring programs in the Netherlands, in Germany, in Canada and in the U. S. All relate to the €60,000,000 to €70,000,000 savings program overall, which we decided half in 2015, the other half in 2016. And the current the ones that we have just announced, the U. S. Is back office and Canada is more across the board also including front office because we have difficult market circumstances. Can you maybe elaborate more on the market circumstances there in Canada, Robert John? It has been flattish previous quarters already kind of what's currently happening there in the market? Well, it is a negative and our strategy is to make sure that we adjust our organization adequately and that's exactly what is coming through now. So it is clearly a difficult situation. Revenue was down by 4%. We are ahead of the market as a whole and we're making the necessary adjustments. Okay, guys. Thanks. As you know, the Canadian economy is largely driven by oil and gas. Oil, yes. That's in the States throughout the country. So they are in a recession. Yes. Okay. Thanks a lot. Our next question is from Matija from Goldman Sachs. Matija, please go ahead. Yes, hello. Good morning. It's Matija Gergolet from Goldman Sachs. I have a question on, well, U. K. And Rest of the World, first of all. I mean, you seem to have sacrificed a little bit of growth for the margin sake. So in the U. K, significant improvement of margin from a relatively low base, similarly in the rest of the world. Just wanted to make sure if you can on one hand elaborate a little bit on the U. K. Margin improvement and particularly whether you see that margin improvement sustainable and effectively there is no more to go hopefully going forward. And a second question would be just on the group overall growth rates. I appreciate you might have sacrificed a bit of say growth for the sake of margin, but so we are told that the exit rate at the end of say Q2 was 6.7. The exit rate in September is 5.7. But for the quarter as a whole, it's only 5.4 only. Well, it implies like on August in the 4% or less level. Is that right? What happened like in the middle of the quarter? Thank you. Your last question first. I tried to shine some light on this. July was not as high as we were anticipating when we announced the results. We only know the volumes, which are indicative, not precise, and we didn't know the revenues at the time because this was late July. So in your analysis, you should include that the month of July came in below expectation. The month of August was not the dip that you were describing and September was slightly better. Okay. Thank you. And on margins in the UK and rest of the world? Sorry. So your first question was 2 questions, but that's okay. We don't mind too much. UK, you've seen a stable improvement in the UK. We're not firing from all cylinders yet in the UK. So we're not happy with all of our business. Having said that, the UK will still in terms of overall profitability remain below group average, we think, although we're definitely looking to continuously improve also the result in UK as you've seen in the last 2 years. The rest of the world, no absolutely, we announced the fact that we would like to have a more balanced approach between growth and profitability. Also because when you get in a certain market above 50% 5.0 growth, then it's tough to get good induction programs with your candidates. You have high attrition rates yourself. So you don't build a stable business as such where at 20%, 30% growth, there's good induction, good ramp up of productivity and overall you create a longer term stable business. So that's what we're doing. And that also comes through in the improvement of the results as you can see. Okay. Thank you. Thank you very much. Clear. Our next question is another question from Mark Zwartsenburg from ING. Mark, please go ahead. Yes. Thank you. I've got a follow-up. First on the U. S, manpower mentioned in the light industrial to see some weakening. If you look to your most cyclical and GDP sensitive segment in the U. S. Or region, do you see any slowdown that makes you a bit more concerned on the cycle in the U. S? That's my first one. And then a follow-up on let's take this one first, sorry. Yes. So Marc, I think it's more a follow-up question for Manpower than for us on why they see the weakness. We do see pretty stable environment still in what we call industrial. Again, in house drives most of the growth here, but our franchise business again sees good returns. So for us, it's still a good market. We're actually we would like to see more growth in the Professionals business as such, where the market is also good and we're still a little bit below market. So that's more our internal improvement. No, so still good, still good. Okay. Thanks. And then All increase growth, that's stable. Yes, but tough comparables. Yes, yes. Exactly, yes. And then on your outlook on the OpEx line, a modest increase first Q3 ex ForEx. Can you perhaps give a bit more color on the ForEx impact? What do you expect there? More or less the same. So flat. That's not going to have a big impact in the market. Okay, good. Thank you. That's it. Our next question is from Matthew Lloyd from HSBC. Matthew, please go ahead. Good morning again gentlemen. Two quick questions. One for Robert Yan. What is a small or medium sized acquisition in terms of spend? And second question, more operational. In the RPO and MSP contracts, what's your self fill rate doing? Is that stable? Or are you beginning to lose some of the taking the fee for doing the administration, but somebody else is doing the filling? Yes. So small, midsized acquisitions is max a few €100,000,000 Good. Thank you. Yes. The self filling question is a very, call it, U. K. Question because MSP and RPO are different businesses. And again, per region, they're also different. So MSP in the U. S. Is very much just MSP managing suppliers, pretty stable fill rate ourselves. RPO is where we fill everything. So growing that business is that we fill it there because RPO is where you really take care of the recruitment arm of the client and by and large you fill everything yourself. What we see in Europe is we see more blended models, MSP and RPO sort of blends together. But that's early days. So it's not the growth, which of course was very, very high is still high. But of course, those comparisons, if you will, are getting a little bit more difficult certainly in the U. S. It's not so much as a result of less filling ourselves that the growth is slightly lower than it was in Q2. And can I quickly follow-up? That's very interesting. When I speak to clients I know you have a big contract with and I ask them what percentage of the total hiring goes through the agreement, I never get an answer higher than 70%. And yet you just said everything. Is that everything that you see? Or because I've tried to speak to what you see. That's depending where the client is located and if it's an MSP or an RPO client. Okay. Thank you. So that's a tough to answer that question as such. Of course, we always aspire to fill as much as possible, but sometimes there are contractual limits, absolutely. Yes. And the clients don't put everything into our MSPs themselves. Thank you. We have a follow-up question from David Taylor from Randburg Bank. David, please go ahead. Yes. Two more quick ones, I would say. Just also on M and A, Robert John, looking at your statements in your interview, it seems to be that you are quite concrete. So talks are already pending and ongoing, if you say you expect takeovers in the coming quarters? Right. Your second question first or what do you want? Well, maybe this one first. Okay. This is the one. Yes. I was asked what we are doing in this space and is that we constantly have teams working on both on acquisitions and disposals. We have to look at quite a few targets before we are able to have one come through. So there's a lot of work involved. We have discipline on the economic side, which means we're looking at a few, but then expectations are too high and we can't meet them. So we're constantly working on a pipeline of, again, small and mid sized targets. And hopefully, I would say we're going to see something coming through in the next few quarters. Nothing imminent, but next few quarters hopefully we're going to see some successes here. We're working more on M and A than and acquisitions than we are on disposals by the way. Okay. That's what I'm going to take. We disposed our strengthening business which was very dynamic. Okay. And then the second one on France. I mean, the margin coming down a bit despite growth. What kind of top line growth do you need to further see operational leverage and margin expansion? David, remember last year in Q3, we discussed that assessing the accruals of the subsidies in terms of what goes to clients through pricing, it was a difficult one. We were relatively conservative at the early stages and we had some changes to those accruals, which have an impact at the GM level, gross margin level. So take that into account when looking at those numbers. And I think in general, in France, we should be able to show solid ICRs as well. Yes. Despite bouncing on some of the CICE subsidies? Correct. Yes. Okay. Thanks a lot, gents. We have a follow-up question from Konrad Zomer from ABN AMRO. Konrad, please go ahead. Hi. Just one follow-up question on the gross margin. At the in the Q2 outlook for Q3, you thought that the gross margin was likely to come down sequentially. Today, we've seen that the gross margin actually went up sequentially. Can you tell us which country or what part of your business particularly outperformed your own expectations in terms of gross margin? Yes. The temp margin has been stable from Q2, Q3. I would say the seasonal pattern is typically also impacted by the Belgium student workers, which was elaborated upon earlier in our call that we have made the choice to not focus on that segment. So that helped the temp margin to remain better than normal in a seasonal pattern. Okay. Thank you. We have another question from Patiyan Loja from N. S. Securities. Please go ahead. It's Peter Ing speaking here at Sines. Just one question on France. You were talking indeed the previous quarter that you wanted to speed up commercial activity a bit and when we're talking about passing through some of the gains of the subsidies. If you're now looking at your growth in the quarter, how does that relate to your own expectation? Because I would have maybe expected a bit more growth on the back of those commercial, let's say, stronger activity that you wanted to initiate? Yes. We are definitely initiating these commercial activities. We do see between 20% 30% more sales in our branch business that is translating into SME growth. The September outlook as well as September result in terms of top line underlying, it's a bit stronger. So we do expect, as Robert John said, an increase in growth in Q4 because of easier comps, but also because our business as such is strengthening. So yes, early signs, but looks good. I mean, but does that mean that the French market as a whole, I appreciate the easier comps, but did you still that we're still not seeing the, let's say, the oomph growth that we saw, let's say, for instance, earlier this year in the Netherlands? Do you have any color what could drive, let's say, stronger growth in France than what we've been seeing so far? It looks like very much like a muted recovery in France. Yes. Well, there's one element which is in the not doing so well. That's construction, which is roughly 23%, 24% of the market. So that doesn't help. I wouldn't compare in this case the Netherlands and the growth in the Netherlands with France. They are quite incomparable markets. They have quite different situation also as an economy. As you know, the Dutch economy has been underperforming for quite a while and picked up. The French economy is not nearly as bullish as the Dutch one. So I don't think that's a comparison. But no, our performance against market is improving. So again, on that and also on the comparison base, we are very optimistic about sequential growth into Q4 in the French business. Okay. Sequential growth on the top line? Sorry? Sequential growth on the top line compared to Q3? Yes. All right. That looks good. Thanks. Yes. Yes, we also think that looks good. Yes. Thank you, Jacques. Okay. Taylor. Operator, this was the last question, I guess. This is the last question. We have no further questions on the line. Okay. Then I'd just like to say thank you very much for participating and also remember our Capital Markets Day in London 17 November. We've made it rather efficient. It's just an afternoon and we are going to elaborate on the most relevant issues on that date. Thank you so much for joining us. See you soon. Bye. This concludes the Randstad Third Quarter Results 2015 Conference Call. If you would like to hear any part of the call again, a recording will be available to listen to shortly. Thank you for joining. 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