Adecco Group AG

David Hancock – IR Patrick De Maeseneire – CEO Dominik de Daniel – CFO

Chris Gallagher – JPMorgan Laurent Brunelle – Exane BNP Paribas Nicholas de la Grense – Bank of America Merrill Lynch Alain Oberhuber – MainFirst Tom Sykes – Deutsche Bank Toby Reeks – Morgan Stanley Hans Pluijgers – Kepler Cheuvreux Konrad Zomer – ABN Amro

Thank you. Good morning and welcome to Adecco's third quarter 2014 results conference call.

Patrick De Maeseneire, Group's CEO, and Dominik de Daniel, Group's CFO will lead you through the presentation today followed by a Q&A session. Before we start please have a quick look at the disclaimer regarding forward-looking statements.

So let me give you a quick overview of today's agenda. Patrick De Maeseneire, will present the operational highlights followed by an overview of the country performances.

Then Dominik will review the financials and finally Patrick will make some comments on the outlook. We will then open the lines for your questions.

With that Patrick, I hand over to you.

Thank you, David. Good morning ladies and gentlemen.

I will start with the highlights of the third quarter where my colleagues around the world delivered another good performance. We had revenues of €5.2 billion, an increase of 4% in constant currency.

Gross profit grew by 5%, underlying in constant currency and the gross margin was 18.4%. On an underlying basis the gross margin was up 10 basis points year-on-year.

Costs continued to be well controlled. SG&A of constant currency and excluding restructuring costs was up 2% year-on-year and down 2% sequentially.

This resulted in EBITDA excluding restructuring costs of €280 million, the EBITDA margin excluding restructuring cost was 5.4% up 40 basis points on an underlying basis. Revenues were up 2% for September in constant currency and adjusted for trading days.

Our current share buyback program of €250 million is close to completion. We announced today that after its completion we will launch a new share buyback program also of up to €250 million.

Let's have a look at the third quarter operating performance in more detail now. On this and the following slides I will give all growth rates organically unless otherwise stated.

I will start with revenue development by region. In Europe revenue growth was 2% in the quarter with a slowdown from 5% in Q2 mainly coming from France and Germany.

Within Europe, the strongest growth rates continue to be in Iberia and Italy. In North America growth picked up further to 5% after an increase of 3% in Q2, this growth was driven by strong performances in industrial and medical and science.

Rest of world was again up 5%, in Japan the revenues were up 4% in the quarter. In Australia and New Zealand our revenues declined by 8% but here it has now turned the corner.

Emerging markets revenues grew 9% let again by continued double digit growth in Eastern Europe. Looking next at the revenue development from a business line perspective we see that the industrial business continues to be the main driver of growth.

In Q3, 2014, revenues in industrial grew by 6% below the 8% growth in the previous quarter. This is mainly due to the softening growth in Germany and France whereas the growth further accelerated in North America.

In office, revenues grew by 1% year-on-year a slight improvement compared to Q2 as our office business in North America and Japan returned to growth. Professional staffing revenues grew by 1%, this was just below to 2% seen in Q2.

Finally within our solutions business line we saw continued strong double digits revenue growth in our re-MS, MSP and RPO businesses. We also have a look now at the third quarter revenue development by service line.

Temporary staffing is our largest service line. Growth here was 2% this quarter after 4% growth in Q2.

Revenues from permanent placement grew strongly, up 15% in Q3, a further improvement from the 8% growth in the previous quarter. This acceleration is being driven by very good performances in several European countries where we have been investing in our current staffing in the past quarters.

Growth in outplacements slowed further to 5% this quarter from 9% in Q2, mainly due to softer demand in North America. We now go to our main markets in more detail.

In France, revenues were down 3% on the prior year. Revenue growth in our large industrial segment turned negative with minus 1% after being slightly positive in Q1 and Q2.

Revenues in office and in professional staffing continued to decline. From an industry perspective we continue to see growth in automotive and food [ph] but demand remains subdued across most of the sectors.

In the construction sector, the activity we can further discuss with revenues declining 11%. Perm revenues in France were up 15% this quarter compared to up 5% in Q2 again driven by our investments in this area.

The EBITDA margin was strong at 6.6%. Please note that in Q3, 2013 the reassessment of CICE resulted in a benefit relating to prior periods of 190 basis points on the French EBITDA margin.

This impacts both the reported profit growth and the margin development year-on-year this quarter. Excluding this effect the EBITDA margin excluding restructuring costs increased by 110 basis points year-on-year.

In September revenues were down 5% adjusted for trading days. We go next to North America, revenues were up 6% in constant currency or 5% organically.

We had growth of 7% in general staffing and 3% in professional staffing. Within general staffing we saw good growth in industrial business at 12%.

This was again driven by good demand from the logistics, chemicals and technology sectors. After five quarters of decline the office business returned to growth of 1% as financial services returned to growth.

Within professional staffing we saw growth across all our business lines with 2% in IT, 1% in engineering and technical, 5% in finance and legal and 15% in medical and science. In perm, we delivered another strong performance with revenue growth of 10% driven by a very strong September.

The EBITDA margin excluding restructuring costs was 6.1% in the quarter, three, up 170 basis points year-on-year. Last year, an assets write-down negatively impacted the Q3 margin by 30 basis points.

In September, revenues were up 5% adjusted for trading days. We now go to the UK and Ireland.

Revenues overall were up 1% with professional staffing up 2% and office down 1%. In our large IT segment revenue growth was 3%.

Revenue growth in permanent placement continued to outpace the growth in temporary staffing. Perm revenues were up 9% in the quarter.

This growth is a good improvement in profitability. The EBITDA margin was 2.7% up 50 basis points compared to last year's EBITDA margin excluding restructuring costs.

Revenues in September were down 1% adjusted for trading days. As we announced last quarter, due to changes for some of our UK Master Vendor and the related sub-supplier agency contracts, third party revenues that were previously reported gross will now be reported on a net basis.

This have the effect of reducing the reported rates of revenue growth in the UK and Ireland. Excluding this impact revenue growth in Q3 and in September would have been 4% higher than reported.

In Germany, and Australia revenue growth decelerated to 1% in Q3, from 7% in Q2. This slowdown reflects two factors, first, the impact of price inflation has reduced to 1% compared to approximately 4% in the second quarter.

Second, demand in parts of the automotive and equipment manufacturing sectors has weakened negatively impacted by geo-political uncertainties. This is evident in the slowdown in our industrial business line with growth of 2% in the quarter compared to 11% in Q2.

Revenues in professional staffing fell by 1%, engineering and technical which is our largest professional staffing business declined by 5% largely offset by good growth in IT. In our perm business, revenue growth accelerated to 45% as we began to see the benefit of our investments in this area in Germany.

EBITDA was €36 million given an EBITDA margin of 8.3%, this was down 70 basis points year-on-year negatively impacted especially in the automotive business by a higher bench since in Germany as you know we have all the pipeline on the payroll. In September revenues were down 2% adjusted for trading days.

In Japan revenue growth accelerated to 4% from 2% in Q2, in general staffing the revenue growth was 2% while the growth rate was again high single digit in our smaller professional staffing business. Profitability remained good at 5.9% although this was down compared to the prior year when we had an especially good quarter in our outsourcing business.

In September revenues were up 5% adjusted for trading days. Finally, in terms of regional performance, I will touch briefly on some of our other markets.

Iberia and Italy continued to deliver strong revenue growth up 21% and up 15% respectively. In Australia and New Zealand our performance has become to improve with return to profitability in Q3.

In Lee Hecht Harrison, revenue growth was still 6% while the margin remained strong at 25.6%. Yet again Lee Hecht Harrison outperformed the market on the top and bottom-lines.

And with this I hand over to Dominik to take you through the financials in more detail.

EBITDA excluding restructuring costs increased by 1% or by 30% in constant currency and on an underlying basis. In Q3, 2013 the reassessment of the French CICE resulted in a benefit relating to prior period of 50 basis points on temporary staffing gross margin and on the EBITDA margin of the Adecco Group.

Underlying for (indiscernible) to the Q3, 2014 year-on-year change excluding this affect. Looking further down the P&L, effective tax rate was 22% this quarter, due to the successful resolution of prior audits as well as the expiration of the statute of limitations in several jurisdictions.

Net income grew by 4% and basic EPS grew by 6% as by the ongoing share buyback program. Now we look at our sequential revenue growth analysis.

This slide shows a sequential growth adjusted for currency, acquisitions and trading days for each quarter compared to the long term sequential medium growth of that quarter. In this rate we showed a sequential growth adjusted for seasonality.

Based on this analysis we can see that – have back in-line for the long term growth trend since Q1 2013. However, sequential growth from Q2 to Q3 this year should be slight under performance compared to the long term trend driven by Germany and the Nordic.

Japan was about the long term and all the other reasons we analyzed with the long term trend. While we’re careful not to read too much into the sequential analysis on a monthly basis, we note that October again showed an equal sign for the group.

Next let's have a look at the year-on-year gross margin evolution. The group's gross margin was 18.4% in Q3, 2014.

As mentioned before in Q3, 2013 the reassessment of the French CICE that result in a benefit relating to prior period which amounted to 40 basis points on the group's gross margin. Excluding this affect in Q3, 2014 temporary staffing had a 10 basis point positive impact on the gross margin year-on-year, including by our continued strict approach to pricing as well as the effect of the French CICE.

The improvement in perm placement had a positive effect of 20 basis points, outplacement was neutral while other activities had a negative effect of 20 basis points. Now let me discuss our (indiscernible) development in the third quarter, we continue to monitor revenue development closely and manage the cost base accordingly.

SG&A in Q3 was up 2% compared to the same quarter last year in constant currency and excluding restructuring costs. This is in-line with the increase in headcount with the FTE up 2% year-on-year.

Our Q3, 2014 results included restructuring cost of €5 million compared to €3 million in the same period last year. Sequentially our cost base was down 2% in constant currency and excluding restructuring cost reflecting the normal season better.

FTE was stable sequentially. Turning to the cash flow statement, in Q3, 2014 cash flow from operating activity was €268 million compared to €281 million in the same period last year.

These (indiscernible) in 2014 were 54 day, the same as in Q3, 2013. In Q3 2014 the group invested €20 million in CapEx and spent €118 million on the purchase of share.

We also acquired OnForce to enhance our Beeline service offering. To-date and our share buyback program of up to €250 million we have acquired 4.3 million shares for a total consideration of €239 million.

Net debt at the end of September 2014 decreased to 1.1 billion compared to 1.3 billion at the end of--. Our net debt to EBITDA ratio stood at 1.1 at the end of Q3, 2014.

Looking forward to our financial guidance is as follows. CapEx for the year is expected to be approximately €80 million, interest expense excluding interest income is expected to be around €70 million for 2014.

We anticipate covered cost of up to €110 million and amortization of intangible assets is expected to be approximately €35 million. In response to recent market development, in Q4 2014 we will spend an additional €50 million to further structure [ph] improvement our profitability in certain key markets such as Germany.

This is in addition to the remaining €5 million planned spend for the headquarter consolidation in North America. This means that the total restructuring spend for the group in 2014 will be approximately €35 million out of which €20 million will occur in Q4.

For Q4, the effective tax rate is expected to be around 27%. SG&A in Q4 is expected to increase slightly compared to Q3 organically and excluding the restructuring cost reflecting the normal seasonal pattern.

Finally I will turn to update to our capital allocation slide, as you know (indiscernible) to use of capital. In 2011, we increased our dividend payout ratio to 40% to 50% of adjusted net earnings.

Further we’re committed to pay at least a stable dividend compared to the previous year even if the payout ratio is temporarily exceeded bearing to economic condition. In addition, as a result of our decision not to pursue acquisitions in our staffing business for the foreseeable future, we also a initiated a series of share buyback programs.

In July 2012, we began the share buyback program of up to €400 million and this while completed in September 2013, we launched a new program of up to €250 million. The second share buyback program is now close to completion and this morning we announced that after the completion we will launch a new share buyback program also of up to €250 million.

With this I hand back to Patrick De Maeseneire.

Thank you Dominik. Now let me finish with that outlook, growth in Q3 slowed compared to the first half mainly driven by weaker growth in France and Germany, we exited the quarter with revenue growth of 2% in September and we saw similar growth in October both organically and adjusted for trading days.

This load exit rate reflects uncertainty in some parts of Europe. By contrast activity in improving in North America and we see a more broad based pickup in our business there.

Based on these trends and the reacceleration of GDP growth that is forecasted for next year, we expect demand for flexible labor to improve again over the course of 2015. Given the current development in profitability and the additional structural cost improvement measures we announced today, we’re convinced we will achieve our EBITDA margin target of above 5.5% in 2015.

And with this I would like to open the floor for your questions.

I just like to ask in terms of October and what you see in terms of regional split, so Australia, New Zealand are getting comfortable compared to by some of the other areas? And also on the 50 million restructuring in Q4, what are you going to use that for?

Thank you.

Maybe I will take the first one on the development in the different regions. We see a similar development in most of our regions, we see a slight improvement in the U.S.

maybe a slight from the exit rate that we have in Japan, maybe a slight decline there. In Europe, October is really similar to the exit rates that we have mentioned for September.

Maybe additional remark if you compare the prior year in September the exit rate of for the whole company of minus 1% and October was plus 3%. So we see a similar development compared to a tougher comp exit in this respect.

If we look to the restructuring it's 50 million, this is mainly related to the fact that we have in one of the other country we see that we can take cost out as the growth rate so far not there but it's also related reorganization. We do some reorganization of our professional staffing business in Germany, we do some reorganization also in Japan.

So we have a stable approach over €50 million spending in Q4 and this should give us a cost saving of close to €20 million next year.

Three question if I may, first can you comment on the German trends I mean is the reduce demand temporary thing for you in the auto segments or do you think it should carry on? So going on, can you share with us why do you believe that you can still achieve above 5.5% EBITDA margin target in 2016 and given slower top line growth and do you expect when your payback for the 60 million investment please and lastly can you comment on the tax rate for Q4, you said 27%.

I mean it's not too conservative like you did in Q3? Thank you.

Laurent, I will take your second question, of 5.5% target and Dominik will take your other questions. On the 5.5% yes Laurent, we’re too confident that we can achieve this target as we also said during our investor days (indiscernible) for this.

The growth next year has to slightly improve from the rate we have had in the first half, so and we were between 5% and 6% for the first seven months of the year and we said clearly in our investor days it should slightly improve from this level into next year in order to achieve our target. Now as we also said there are three components of course to the 5.5%, there is a top line, there is a gross margin and the cost, as you’ve seen in the past and as you’ve seen also this quarter, our costs are very well managed sequentially that minus 2% and we will continue to manage them in the future for along with the top line development and very tightly.

If you look at the gross margin development, we are rather happy with the development there and we see some further improvement possibilities especially that the perm is accelerating. It has now accelerated from 8% to 15% in the third quarter and we see a further improvement also for the fourth quarter especially because we had a very strong September in the U.S., the 10% was really made by the very strong September.

So we see further improvement in our perm development in Q4 and also into next year which should help also on the gross margin side. And then as far as the top line acceleration is concerned, you know if I take the most conservative GDP outlook from the IOS [ph] for this year it has been revised down to 0.7% and it has been revised down to 1.2% for next year but this is still an acceleration into next year and always said in the past we need 1% GDP growth in Europe in order to have this kind of high single digit growths in our business and if we look at the recent past also last year in the third quarter we were at 0% and it moved to plus 6% in the first quarter also in a modest GDP environment and a slight improvement of GDP, so as you’ve seen and as you will see in our business it can move fast.

And to the other questions, just have a look to the German trends, the German trends cost to configure that we had at the beginning of the year, one high wage inflation if I look back to Q1, wage inflation of 7%, not demand driven just driven by the fact of the wage inflation related to this collective wage increment and premier [ph] systems which were implemented in Germany and every quarter we come out to a base comparison. So the kind of component of bill rate or pay rate inflation in Q3 is now is only left by 1%, it's slow down from 4 in Q2 to 1% in Q3.

So this was one trial of the acceleration in Germany. If we then look to our development within Germany is what we basically said at investor days, we have seen that in Germany the seasonal pickup in September was somewhat weaker than what we have experienced and therefore we had an exit rate of minus 2%.

In September in Germany and that is coming from part of the automotive suppliers, it was – not suppliers, OEM producers, one was sending a couple of temp specs and the other ones partly postponed (indiscernible) but more volume supplier, the kind of larger economic, the demand situation is very good and maybe the one or the other machinery industry has not seen a seasonal pickup but I think this is somewhat also in-line with the rather weak GDP growth in Q3 in Germany and we still believe also we talked to our clients. This is a lot sentiment driven that is just certain decisions or projects get postponed and I'm also referring to certain GDP from expectations for next year.

We believe that is definitely upside potential from this point of view, maybe not for the rest of the year and for October we the similar trends, what we have seen in September and also here we have to bear in mind that we have rather good acceleration last year from September to October, so this to Germany. What is the payback period of the 60 million assessment, answer to the question, that the same should be close to 20 million so that would mean the payback period is around nine months.

To the tax rate if you look to the tax rate you know sometimes in one or the other quarter we have a couple of treaty rents and we had some and the reason why the tax rate interest was lower than our guidance if you look for the effective tax rate for the first nine months it's 27% but it is discreet events in the last quarter and therefore I think you should use the guided one and if there is discreet one we will adjust but I think for the time being we have no knowledge about the discreet event so therefore use this one.

Two for me please, firstly you’ve been pointing to the industrial staffing out performance in recent quarters as evidenced that we’re still early in the business cycle and I'm reading to be optimistic. Given the industrial is now slowed for the last two quarters and we haven't seen a pickup, a corresponding pickup in the other segments.

Are you still confident that we’re in that early phase of the cycle and that we can accelerate from here? And the second one is just, if we were to assume that organic growth in 2015 was lower than current consensus based on that like 3%, what would you expect your underlying cost growth to be?

Thanks.

I mean if we look at the development and you’re right the industrial business was the growth driver and it decelerated a bit. But we have also looked at why decelerated, it was primarily France and also Germany if I look to North America where the economic environment is in a good shape and industrial growth is still doing extremely well, slightly accelerating and we had in Q1 industrial growth of 9%, in Q2 10%, in Q3 12% in the U.S.

So it's still a continues trend there. We see in the U.S.

that office business is finally coming back to the growth, not a lot only 1% but there we’re seeing it was always a lot down because financial services were weak and we see that in the U.S. some of the other professional skills start to get somewhat better.

We have not seen this is Europe or in Continental Europe because the GDP growth unfortunately the last month rather weekend and we would think, if we would see a reacceleration in GDP that it's again in the beginning [ph] driven by industrial and then later then in the other segments especially in Europe but in the U.S. we see that the other segments are coming up.

And then your second question was related to?

What the cost base would be if we grow 3% in 2015?

But the cost base would be--

Cost increase.

The cost increase for next year depends on the top line growth, I mean we basically manage our cost base very close to (indiscernible) revenue development and it depends and it depends also somewhat on the mix here. So if we have products this higher gross margin like a comp product or operating product doing well or it has also some mix effect but we will mention our cost is very tight and very careful.

And just to kind of follow-up on that, obviously I'm like – if you’ve any exact number for next year by any means but just more to just get an idea of what if you didn’t grow at all how much your cost would grow? So the level of wage inflation or increased--

If we have no growth in sales next year then we will take cost out and the cost should be little bit down. We try always to protect profitability if we have no growth or say decline and (indiscernible) then also cost management if you look back to the year 2012 we had a sales decline of 4% and our EBIT margin I think was down 10 basis points.

Yes, there is of course an effect coming in the outplacement business has been but it's not so big as outplacement business, it's basically helping but we have to take the cost part.

Three question from my side, the first is about gross margins it's a bit looking into the future. So we feel you stated out that I expect that TC and HK will have no impact on the gross margins whatsoever.

Will we see then giving what you said with stronger growth in professional, temp will have positive impact on the gross margins and the perm will remain flat and outplacement is flat. So there is the improvement in gross margin next year is probably more about 10 to 20 basis point.

So is there a mistake in that thinking? Second question is about DSO, will that remain flat as well for the – could we see deferred reduction if we expect slower growth next year just to about 3% and the last question is about the margin development in Japan.

You mentioned that there was a group pick up in organic growth but EBIT margins came down. Could you now expect an improvement in the next couple of quarter of the EBIT margin as well?

If we first look to the gross margin, overall we have a strong gross margin I would say and you’re right this will not give an additional benefit but the good thing that the EBIT is in place so it will definitely continue to help in this respect. I would say it depends of course on the country, on the business line mix, how the temp margin is going, so this is definitely the case.

If one professional staffing start to grow general staffing, it is gross margin supported. I would be a bit more optimistic on perm, because on perm we have all the cadence throughout an investment and you see this now with our growth in perm of 15%, it adds 20 basis points to the gross margin in this respect.

So and we will see how the mix is working and they are based on economic expectations and our growth expectations. For next year I think the margin increase primarily to a large extent come from operational level but it's still a big upside in gross margin but the gross margin there is already very strong I would say.

DSO 54 days, it's a pretty stable number since some time. I see no reason that is changed in one or the other direction in general and if you look to Japan, what Patrick also said in his introduction remarks is the margin is somewhat down because last year was strong because we finished very important outsource and the project had a good profitability.

So from a margin point of view a bit of I would say not an easy comparison. The margin now immediately grow next quarter, I would not go in this rate but we will not see such a decline.

I wondered if it's possible to walk us through a little bit more than near term outlook for profitability in France and in the U.S. So obviously I mean you’ve given some comments on France little bit already but your top line if you were to continue with sort of minus 5% in Q4, Q1.

And you’re annualizing say at the end of this year. How strong do you view the perm trends for you in France and how sustainable and what are you doing to the SG&A there?

And then maybe just on the U.S. leverage, I mean obviously it's being pretty significant over the last three years, a very high level of incremental drop through in the U.S.

To what extent are you actually putting SG&A into the U.S. now and what is the outlook for leverage there, please?

If we first have a look on France, I mean it's definitely a positive trend. Of course this has more to do with our view with our investment in this respect because the current environment is not one where you expect a lot of firm growth.

So the question is of course always how low can something like this hold up, if the GDP growth is not coming materialistic and if it comes a little bit back it will help the temp business but it's most like not help the overall labor market but it's also fair to say that yes we have a very good margin increase currently but still even last quarter if you look to the 110 basis points increase it's not only gross margin. It's still a small part of a leverage and which indicates to you that our cost base run-rate is still below safe development and in a country like France we try to be very careful on cost side and part of the €60 million not a biggest part but part of the €50 million we will also take for France to take some cost out.

If we look to North America, we had good margin increase, now for Q3 you’ve to consider and we told in the call that last year we had buyback – on the asset and it's also fair to say that last year and we mentioned this last in Q3 the margin was a bit low because we had some effect on healthcare cost for our internal people which has an impact when we compare here a bit better but you will see also in the next quarter that operation leverage will be good, not so strong like in Q3 but it will be very solid. One reason is that we see very good perm trends in the U.S.

and we’re there markets where we selective investment as we mentioned and yes this is in the U.S. we make unselective but it's rather selective, I think for the starting business in the U.S.

we still in the bigger businesses like IT, we have very high 2% still enough capacity. We don’t have add – do we have to actually add in the industrial business especially now for the ramp up after thanksgiving, yes and here in the perm, so we’re adding a bit of headcount in the U.S.

but operational leverage will continue to be good.

And just if I can follow-up on say in France if you were let say at the same year-on-year movement in revenues in say Q1 when there is probably no CICE? Let's say there will be no CICE benefit again.

Is the SG&A, is your flexibility on SG&A, do you think you can still hold profitability I mean would you even think you can maybe increase profitability still in France.

I would say it would be pretty stable, of course assuming that the CICE environment or the price environment space is negative.

And then just on the U.S. leverage, could you please give a perm split by geography now that would help looking at the U.S.

please? Say just what's the overall group perm split by geography now please?

And say therefore how much of the U.S. is actually perm?

If you look to North America, it is the perm phase is roughly 10% of the gross profit in the U.S.

Okay.

And this is primarily, I mean the big piece is our finance and legal, we see where we have our perm business. It's one market where we have more comp exposure than it seems to over cross the residual case.

It's more than 20% but the U.S. has roughly 12% exposure to perm and this is basically a function of very high exposure in our finance business and then close to nothing in our industrial business.

And do you know where that was on a pro forma basis if you take into NPS and that group, at the previous peak?

Let's say if we look to the previous development let me think, so we were – we’re today I would say, 2% lower than the prior peak currently in terms of gross profit.

Can I ask three as well, the first is just kind of following on some Tom's question, could you talk about how difficult it is to restructure in France going forward given your sort of inflexibility in holding onto the CICE and how your clients would see potentially a drop in service. The second one is, the American Care Act, it sounds like most people expect that not to have an impact on the business in terms of gross margin, it will pass through.

What's your expectation at the moment? And then the final one is could you update us on the roll out of your IT system, are we still expecting a 40 basis points margin improvement in 2016 from that alone.

Thank you.

First one on France, like Dominik already mentioned in one of the answers there is a small part of the 15 million that we restructuring now for CICE for Q4 also related to France but it's a small part, it's mainly headquarter related. We’re not talking about the social plan here.

So it's really limited what we’re doing but it's a further cost of optimization and as you know we’re constantly looking at cost optimizations and in especially in the French environment, whatever opportunity we see we will do this but it's not that this is now a difficult plan or so. It's really, gradual improvement of our operations.

Okay but just from the perspective of the CICE and hanging on to that, I mean would your clients be unhappy if you did have to turnaround so let's say revenues keep going, becoming negative and you have to decide you needed to change the front office and go into the social plan. Would that be a much more difficult thing to do now given your sort of your inflexibility on the CICE or do you not think that’s relevant.

We’re not going for social plan. And I think we have gained structurally a lot of cost out in front and restructured a lot.

It also is the case that you also in front have concept like CDD so there we have employees, it's a limit of contract so if we have attrition we will replace people with CDD contract to also have some flexibility which we’re using and not because of CICE we’re not allowed anymore to manage our business, how we should manage it. And regarding – we also think that this will (indiscernible) and we also believe we can pass this in the U.S.

and general maybe in terms back to question of Tom, was – I mean our margin in the U.S. is also very strong, the pricing environment is rather rational.

It's not that we see there massive price pressure or so on. And then regarding the IT segment, this was the kind of explanation, how systems can help in the productivity over certain period and we give more details and we showed you things in our investor day and we’re now basically on track to hold step by step out, so we said the first country where you will get solutions is Japan where we’re currently programming and working on it which is at least to a little bit of more cost but I think it will be very timing and we will then be implement it and then we go to other market.

But I have a note of you guys talking about roughly 40 basis points and margin improvements that’s due in 2016 as you switch off the old IT platform. Should I assume that was just sort of hypothetical if it's going to be more granular and that will be an improvement when it comes through a step by step basis and why is that changed if that has changed?

There is nothing changed, while there always, there are two drivers to get the product here let's say to have the – with Germany's IT spending, first of all this is the important record [ph]. We want to have solution which allows us to be have a higher productivity till the ratios goes up that our people in the branch can manage more then by using better technology and this has the productivity and of course this productivity which should then finally lead to the fact that we have the better capacity in terms of management of additional phase, this is one main driver.

The second driver is of course that we can then if we implement a new tool, the new systems we can basically shut down and close down the old ones and save the cost on this side. But this is only coming if the new ones are running and the efforts they take don’t expect now for 2015, a lot of impact it will be as of '16 I never said it's in '15, it's as of '16 this should once they kick in.

Two questions from my side, first of all on the share buyback I feel you had accelerated buybacks in Q3, could you give us some explanation why you did that and secondly for your new buyback what's the schedule there on the timing of the buybacks? And secondly on your corporate cost you increased a little bit to guidance on the corporate cost what's the reason behind that and should we assume a comparable level of corporate cost for next year?

If we look to the share buyback and basically what is the recent amount in new share buyback. We said in Investor Day and also before we said that we’re not looking for the foreseeable future for acquisitions in the starting business and yes we bought something and we’re also looking in the non-starting business, we bought this OnForce but these are rather smaller amounts and taking this into account and taking into our account, our policy, and our view and on redistributing our free cash flow to our shareholders.

It just makes sense to announce after the completion of this program, a new one, because it shouldn’t also look back to the recent years for the assumption that we basically via dividend and via share buyback basically which are on the free cash flow because you see that our net debt level if you look really quite some time or you expect, it's pretty stable on the round plus, minus €1.1 billion – €1.2 billion and this is basically the next share buyback program because the other one we only have €11 million left and since we have to do resize before we announce this now and then and say we intent them to do this with other branches which is done, which is of course in the short term. If you think about corporate cost, corporate cost we had in Q3 we had the write-down, so there corporate cost is a bit higher than usually there was a write-down and we increased the guidance basically because we had this write down plus the effect that we have this hour global investments in IT sometimes investments which are a link to corporate and less to countries, so it's a bit of a rather country to corporate and I would say for next year you should assume corporate cost more again on this kind of €100 million maybe 105 million, so in this kind of area.

Going back to the share back, I was referring to you that you’ve seen an acceleration in buyback. I understand the reason behind buyback or about to buyback from about 50 million in Q2 to a 118 million as far as you can see in Q3.

So we had in Q3, we had outflow of 180 million and of course we do is also somewhat opportunistic and share price is lower, we buy more back then.

And also the new buybacks could you show me around the current share price you maybe lets high level than we have seen over the last few quarters, maybe comparable to Q3, is that a logical issue?

That’s pretty logical to assume.

That we would buyback more at the current levels?

Yes that’s correct.

I have two questions please, the first on permanent placements, you mentioned a few times that you’ve invested specifically in this business to boast your growth rate. Can you tell us what specifically you’ve done to increase the growth rate and how sustainable you think this growth could be?

Because obviously in an environment with let's say more debatable macroeconomic growth forecasts, it's counter-intuitive to see your business picking up 15% for another year. And then the second question on Germany, some of the car manufacturers occasionally close down some production facilities around the Christmas period.

If that was to happen again this year, do you’ve any sense what the impact could be in terms of loss revenues in Germany on your German business? Thank you.

Congrats on your question around perm, likely certain in most countries around the world especially in those countries perm was not a big part of our gross profit. We have invested last year and this year in recruiting perm consultants or transferring people from the staffing side into the perm side because you haven't seen our cost go up tremendously but so somewhere else a replacement, monitoring the markets and what was going on.

For us it's a clear priority. We have also done the roll out in a lot of countries of Badenoch & Clark which is mainly focusing on perm.

Also in an organic way and have recruited for that business people to manage that business people with extensive perm experience in the market and if we now see the growth that we had in the second quarter, the 15% from 8%, indeed you can expect that also in the fourth quarter this growth should be higher and I already alluded to it when the question came about the 5.5% that we still see some potential gross margin slight potential gross margin expansion into next year, also thanks to the perm, so because we of course we want these investments that we have done in countries also like Spain and Italy where perm growth is also very high to continue to deliver and but perm consultants they really become productive after 6 to 9 months and we’re now in that period and that’s why we’re seeing that acceleration in France, in Germany but also in other countries that I have mentioned like Italy and Spain and we expect this to continue also into next year.

Regarding the churn question, whether the automotive clients have shut down or not in December, I mean it's very difficult to say and surely if you ask them they don’t know yet, right, it's too early to see what's happening there. I mean in January we know how to manage this, we’re prepared for this thing, we use our time accounts to counter balance in this respect but of course the Q4 EBITDA margin, and Germany is always lower than the exception of Q2, than the other quarters because of this risk and because of the bank holidays around this.

Now they have had in Q4 last year, the EBIT margin generally was somewhat weaker also due to the fact that you may recall there was this new system where we have to basically apply (indiscernible) load which basically means they always have to go back to last 12 weeks what was the kind of average payment including stop losses [ph], including overtime and we have to basically the balance sheet position of our time accounts. We adjust to that – had a special hit in Q4 last year.

Yes two quick follow-up, please. On perm what it represent as a percentage of gross profit, I didn’t now find it and second can you give again the September exit rate in Iberia, on Italy, please.

Say that again, the second question Laurent.

Exit rates in September for Iberia and Italy.

The exit rates for these markets we really don’t disclose but I should say they are at a bit at the same level as what we have seen in the quarter. And maybe a touch lower but only a small touch.

And perm is approximately 10% of our gross profits, a bit less.

Thank you very much for your interest in our company for attending the call. If we don’t meet earlier on one of our road shows we speak again on the 11th of March when we announce our fourth quarter and full year results.

Thank you very much and have a good end of the year.

Thank you.