Adecco Group AG

David Hancock - Head of Investor Relations Alain Dehaze - Chief Executive Officer Hans Ploos van Amstel - Chief Financial Officer

Denis Moreau - UBS Nicholas de la Grense - Bank of America Merrill Lynch Robert Plant - JP Morgan Chase & Co. Paul Sullivan - Barclays Capital, Inc.

Alain Oberhuber - MainFirst Bank AG Konrad Zomer - ABN AMRO Bank N.V. Toby Reeks - Morgan Stanley Hans Pluijgers - Kepler Cheuvreux Andy Grobler - Credit Suisse

Thank you, and good morning, everybody. Welcome to the Adecco Group's First Quarter 2017 Results Conference Call.

To present to you today, I'm joined by Alain Dehaze, Group CEO; and Hans Ploos van Amstel, Group CFO. Before we start, please have a look, as usual, at the disclaimer regarding forward-looking statements in this presentation.

So let me give you a quick overview of today's agenda. Alain will first briefly present the highlights of the quarter.

Hans will take over to review the financial performance and to comment on the outlook. And Alain will then discuss our strategic and operational progress and initiatives.

We will then open the lines for your questions. And with that, Alain, I hand over to you.

Thank you, David, and good morning, ladies and gentlemen. Welcome to our first quarter 2017 results conference call.

I will start on Slide 5 with the key highlight of this first quarter. In Q1, we delivered a very solid performance, and I would like to start here by thanking my 33,000 colleagues who are collectively responsible for the good results.

Revenue momentum has been maintained, 6% organically and adjusted for trading days, basically the same momentum as in Q4. All regions are positive, and this is the first time since more than five years.

Also, the underlying gross margin trends continued in Q1, similar to last year. The headcount productivity has also improved, with SG&A up only 2% and FTE up 1% organically.

So managing the productivity is, for us, a key focus area. We had also a very good working capital management this quarter with strong cash flow generation, reduction of our DSO is one day, and this drove our strongest Q1 cash flow generation for five years.

And it resulted in a net debt-to-EBITDA ratio of 0.7 time. We entered the second quarter with good momentum, and the trend is broadly steady.

For sure, there are many geopolitical uncertainties, and they are here to stay, but we are well placed to support clients with the flexible solutions they need to succeed in this volatile and unclear environment. On strategy, we made good progress on implementing our six strategic priorities, and I will give you more color on segmentation later on during the presentation.

As the leader in our industry, we will continue to perform, and we will invest to transform and innovate. Today, also, it is an important date as we are relaunching our historic brand Adia as an end-to-end online staffing platform for the small and medium enterprise segment.

And with this, I hand over to Hans for more insight on the financial performance.

Thank you, Alain. Our sales growth momentum continued in the first quarter.

First quarter growth came on the back of strong results in Q4 of 2016. France and Southern Europe delivered continued robust sales growth.

We would like to see more growth in North America and Germany and are working on that, like what we're already doing in the Nordics, Switzerland and Holland. This gives us the confidence that we will continue to broaden the growth across all of our businesses, which is important to deliver on our objective to lead in relative sales growth.

Our margin leadership strengthened in the first quarter. The 4.8% EBIT margin confirms our leadership.

The 50 basis points margin improvement is helped by the timing of Easter and supported by further solidifying our productivity. Couple of points to mention by region.

In France, the 30 basis point increase in the chart understates the underlying improvement because we had a positive social security release in Q1 of last year. If we exclude this, the underlying improvement is up 90 basis points in the first quarter of 2017.

The strong margin progress in Germany, Austria and Switzerland and the Benelux and Nordics were helped by the timing of Easter and bank holidays. Looking at the EBIT in a little bit more detail, starting with the gross margin, down 20 basis points in total, but the underlying gross margin is down 40 basis points.

The first quarter gross margin was impacted by favorable impact of timing of Easter and bank holidays, which helped the gross margin by 40 basis points. On the other hand, we have the discrete benefit in France, the social security benefit in Q4 of last year, which had a negative impact of 20 basis points in the comparison.

Adjusting for those two items, this leaves the underlying gross margin down 40 basis points. This is nothing different than what we have seen in the past, about half comes from pricing and the other half from mix.

What is important to mention is that the mix includes the increased share in all sites, which have a gross margin below the average but will also have a lower cost to serve. Alain will give a little bit more color on this later in the presentation.

Turning to SG&A. We see our continued strong commitment to drive productivity.

Sales increased 6% with only 1% more headcount. The organizational changes we made last year are supporting the productivity.

SG&A is up 2% and is also including the investments we're making in digital and IT. Our conversion ratio at 25%, which measures from gross profit to EBITDA our converting, confirms our cost leadership.

In summary, we strengthened the productivity and solidified our margin leadership while we are investing in the future of our business. Our cash conversion improved, and we have a strong balance sheet.

Overall, the cash conversion was strong at 92%. Receivables measured in days sales outstanding, or DSO, reduced by 1 day to 51 days.

Net debt-to-EBITDA at 0.7 times versus 1x EBITDA last year. We bought back €31 million in shares in March and April.

Turning to the outlook. The growth continues in Q2.

March and April combined show 5% to 6% sales growth, adjusted for trading days. The exit rates confirmed a continuation of growth across the business.

It is important to remember that we had the benefit from the timing of Easter in the first quarter of this year. This benefit will reverse in Q2, so please bear that in mind for your models.

On the cost base, we expect SG&A, excluding one-offs, to be sequentially up slightly on an organic basis in Q2 versus Q1. So to conclude, we're pleased with the performance in Q1 and with the growth at the start of Q2.

Back to Alain to talk on perform, to transform and innovate.

Thank you, Hans. Now let's zoom into our strategic and operational progress.

Looking at the future, we have a clear vision around the world of work. This vision is articulated around the five key drivers of our industry: technology, demographics, sociology, political economy and regulation.

And to drive efficiently this vision, we have a strategy based on three work streams: perform, transform and innovate. Perform means for us strengthening our current operations and our competitive position by reinforcing our operating discipline and streamlining our business and brand portfolio.

Transform means enhancing the solutions and experience that we provide to our clients, our candidates, associates and colleagues. And finally, with innovation, we are developing and acquiring new approaches and capabilities to capture the emerging opportunities in this changing world of work.

So a clear vision and a clear strategic agenda. In our perform agenda, segmentation is one of our key strategic priorities.

Segmentation is about deploying the right go-to-market channel to the right customers with the right pricing and the right cost to serve. And as a result, the segmentation strategy ensures that we generate profitable growth.

We are now clearly harvesting the fruit of the global practice leader and countries work on segmentation. This is evident in the results in Q1.

We are delivering superior growth of 13% in the small segment, where gross margins are highest. We are delivering an accelerated growth in the Onsite segment, plus 27%.

The Onsite model is perfectly suited to types of business with below-average gross margins. As those who joined us for our Investor Day in January 2016 will recall, our Onsite business represented just over €2 billion of annual revenue at that point.

In the meantime, we have rapidly grown our offering. And in the meantime, our annual revenues now stand at over €3 billion, and we have strong positions in Onsite solutions across our markets, including now the leadership by revenues in the French market.

In our transform and innovate agenda, digital is a key strategic priority. In the Q4 and full year results, I gave you some example what we are doing.

As a reminder, we are innovating in the area of big data analytics with Adecco Analytics and Talentoday. We are developing leading offerings in online staffing with Beeple and with WoWooHR in China, and we have strategic partnership with Partech Ventures that provides us with access to comprehensive sourcing of digital ventures in the European and U.S.

start-up ecosystem. Today, I would like to focus on our latest venture, the digital revival of Adia.

As you probably know, the market for short-term finance in the small client segment is very attractive but difficult to serve cost-effectively using the branch network. That's why we have launched a new application to address this market under the brand Adia.

Adia was originally founded in Switzerland 60 years ago. It was one of the pioneers of the temporary staffing industry and a key building block in making the Adecco Group the global leader of today in workforce solutions.

Today, the launch of the new digital Adia brand is a building block in making the Adecco Group the leader in digital workforce solutions of the future. The new Adia is a mobile-first and cloud-based recruitment platform, targeting hospitality and events candidate profile for the SME segment.

The Adia application has been co-created by the Adecco Group and the global technology leader, Infosys. It covers the full cycle of recruiting, matching, invoicing and payrolling with state-of-the-art functionalities such as feedback and rating and geolocalization.

We have already deployed Adia in five Swiss cities and plan multiple international launches in the next 12 months. Adia illustrates perfectly our digital strategy as the platform offers, in particular, better user experience with high speeds, convenience, transparency, flexibility, effectiveness of the solutions for clients, candidate, associate and colleagues.

Adia also offers an enlargement of our market with more services and more models, and it lowers our cost to serve by reducing the manual processes and leveraging technology. Adia also reflects the distinctive features of our approach, the way we are driving digital, especially that of co-creation and partnership, working with the best companies, the best people and the best ideas, being actively engaged in our ventures and not just passive investors.

Coming to the concluding messages. In the first quarter 2017, we have performed, we have transformed and we have innovated.

We performed by delivering on relative growth, the margin leadership and cash generation. And this growth momentum continued in March and in April.

We are transforming by making good progress on our six strategic priorities and especially the segmentation and the digital ones. And we have innovated by relaunching the brand Adia as an online platform targeting the small and medium enterprise segment.

I thank you for your attention. And now I would like to open the line for questions.

And to be fair to everyone, may I ask you please to limit yourselves to two questions.

Yes, hello, everybody Denis Moreau, UBS. The two topics I'd like to discuss with you this morning are Adia and your Onsite business.

Firstly, on Adia, can you detail the benefit for the clients in terms of prices and costs? And can you elaborate on the profitability metrics of Adia?

Is that already profitable as it is? And how much revenues and profit margin do you target in 12 months' time and, say, two years, three years?

That's my first question. My second question is on the Onsite business with an impressive revenue growth of 27%.

How is pricing developing in the Onsite activity in comparison to the other businesses with large plans? And did the EBITA margin of the Onsite business expand in line with the other activities over the past 12 months?

Okay. Regarding Adia, first of all, I would like to say that all our digital ventures and Adia, specifically, are still at a relatively early stage.

So we will not provide detailed financials and operational KPIs and so on. And also, Denis, you will understand that this conference call is public, so we don't also want to give too much details on pricing when we know that we are listeners.

Now more specifically on pricing, what I can say is that with our digital solutions, we are providing an excellent user experience. We are always aiming at differentiation versus the competition and also disallow for us dynamic pricing, and at the end, it should and it will provide pricing power.

Now on costs, we are clearly in investment phase. But models, digital models like Adia will have a lower cost to serve in comparison with our other offering.

And it means that this is really our strategy that digital should drive profitable growth and contribute to – or target to expand our EBITA margin through the cycle. So it should be accretive, and it should be contribute to our overall objectives.

That's what I am willing to say and I can say. And for the Onsite, Hans will take it.

Yes. We're very pleased with the progress we're making in the Onsite business.

It's an important delivery vehicle for us to serve large clients. The profitability of Onsite versus serving large customers by the branch allows that at that competitive price level of large clients that we can serve it with a more attractive cost to serve, which helps the profitability.

And part of the productivity you see in the quarter is driven by driving more business to the Onsite. So between the pricing and the cost to serve, it's a much better delivery model, which is margin-accretive for us.

Very clear. Very helpful.

Thank you.

Yes. Good morning, guys.

Two questions, please. The first one, a follow-up on the Adia relaunch.

You've mentioned that it's going to be – or is currently focused on SMEs and just in Switzerland. I'm just wondering, can you comment on what your thoughts are with regard to online-only service offerings with larger clients and also how quickly you expect to expand outside of hospitality and events, which presumably lends itself quite well to this kind of model?

And then the second question was just in terms of the operating leverage. Obviously, it was very, very strong in the quarter.

It sounds like cost growth is going to be quite low in Q2 as well. I was just wondering, how much of the improvement in productivity is coming from wage inflation versus the number of temps being covered per consultant?

And also, just how much longer you could sustain organic growth in sales much higher than organic growth in costs? Thanks.

Thank you, Nicholas, and good morning also to you. Regarding Adia, so this online digital platform is, indeed, focused on the small and medium enterprise segment.

Why? For two reasons.

First of all, because we know that it is very difficult to tackle the small segment with a classical branch network organization. It's a cost.

A digital platform is allowing us to tackle new areas of the segment, but also new type of contract. This type of events, hospitality contracts, short-term [indiscernible], a digital platform fully automated is the best answer to that.

Now how we intend to roll out this concept? We have started with a so-called MVP, a minimum viable product, in Zürich.

We tested that together with our partner, Infosys. We improved the product, and then now we are in five Swiss cities.

So we are rolling out here in Switzerland. And our intention is to roll out the platform in four other countries in the next 12 months.

It is primarily a platform dedicated to the small segment. For Onsite, I would say that the customers and the processes and so on are requesting all the type of technology.

For sure, we can always learn and duplicate, copy and paste some of the process automation we do in Adia into our other systems, but we need another approach for Onsite. And also, our branch network, which is mainly focused on medium and, I would say, the low launch and the high small will continue because there, we provide numerous services in our agency.

So it's really three go-to channels, go-to vehicles to the market with different needs, different customer experience.

Hans here. To further elaborate on your question on cost and operating leverage.

If you look in the quarter, we drove 6% sales growth with adding 1% FTE growth. So that confirms a strong operating leverage on the business.

Our SG&A grew 2% and includes making the right investments in digital and IT, which confirm that we continue to focus on productivity and driving strong conversion. Your question on how will this go going forward, we believe that through our performance metrics, we'll continue to drive strong operating leverage and conversion ratio.

But we also recognize that we need to find, continue new ways to drive the productivity. Therefore, we launched productivity initiative, and we are starting with the pilot so that we can continue to drive strong conversion ratio with new ways to drive productivity because they are very important to control our margin objective to improve structurally our margin through the cycle.

And sorry, one quick follow-up on that. Just how much wage inflation are you seeing in temp wages?

And how much has that contributed to the increase in GP per FTE?

For us, the wage rates in our cost is still relatively modest, it had, if you look at the 1% and the 2%, so that's nothing. What we have seen with the temp business, and that's different inflation.

We have seen in the U.S. some inflation into the billing rates for our temps, the associate.

Right. So in percentage terms, what kind of – in terms of the temp wage inflation, what are you seeing in the U.S.

versus Europe at the moment?

In the U.S., we see below 5%, 2.5%, 3% like wage rates into the temps.

Okay. Thank you very much.

You are welcome.

Good morning. Two questions, please.

Given the Easter impact for the gross margin, could you give us perhaps what it was in terms of the 50 basis points for EBITA? And we've added – you mentioned the partnership with Infosys.

Was that purely for development? Or is there a stake owned by that company as well?

Thank you.

I will start with Adia. No, the development of Adia has been purely a co-creation in the development.

It is not a financial construction with them, so it's purely development. And then on the gross margin?

Yes. The way the timing of Easter and bank holidays falls over the quarters is very transparent to quantify the gross margin.

The way with SG&A that works and how sales force is more at, you can't be that precise, we have 40 basis points impact on gross margin. And we see, if we look at the underlying operating leverage, strong operating leverage, but it's hard to quantify that precise at the EBIT level.

Do you think there was more impact from productivity than Easter at the EBITA?

Yes. I think that what you see is that in the quarter, I think what you can conclude that if you take away Easter, we had a good operating leverage into the quarter.

You just can't be precise to the last decimal there, but the operating leverage would have been there before and after Easter.

Great. That’s clear.

Thank you.

Thank you.

Yes. Good morning, everybody.

Just a couple for me. Firstly, on the areas of underperformance.

I think it looks like you're sort of lagging behind a little bit in Germany. And the U.S., remain stubbornly sort of flat despite the improving market trends there.

Can you maybe elaborate on turnaround or improvement that we can envisage over the next few quarters there? And then just on Adia.

In terms of the separation of the business models, presumably this will be run as a completely stand-alone business. And if it wants to cannibalize existing customers or existing business from the group, will it be allowed to do so?

Okay. Thank you for your question.

Regarding, first of all, Germany, what we see in Germany is that we have a strong performance in the professional staffing. We have a strong performance in the perm recruitment, plus 32%.

Where we are lacking traction and revenue growth is in the general staffing, and this can be explained by two reasons. First of all, the same reason we gave you the last time for the Q4, it's – now 30% of our revenues is coming from the automotive.

We had one customer activity reduction and also the hiring of all temps at the end of Q3. And we are in the process to – on one hand, to reconstruct the tool, but it takes time.

I gave also already this explanation the last time. It will take time.

And second, we are diversifying our portfolio in Adecco Tuja. And it takes also time.

We have done that in Switzerland for all the reasons, but looking at less exposed to export customers. Now we are there in Switzerland with plus 8%, and it will be the same in Germany, taking the time to diversify the portfolio.

Also, in combination with the integration of Adecco and Tuja in one single operation. Regarding the U.S., I would say, the figure – this modest growth can be also explained by the rather low GDP figures, 1.6%.

So forecast, you cannot expect high growth in such macro environments, with rather flat for general staffing, with still some good performance in professional staffing, in particular, medical and science. Now coming to your question of Adia, yes, it will be a separate business model, stand-alone, so we intend to do that.

For sure, Adia will give us the opportunity to tackle part of the small segments and type of activities. Today, we are not tackling because the financial impossibility to do it with a classical branch network cost to serve.

If there are cannibalization, there will be – let's say, the market will play its role. Important is that it is financially accretive for the company and for the investors, and that's what we will look for and be upend.

Thank you very much.

You are welcome.

Good morning. I have two questions.

First is regarding gross margin development in the future. Do I understand it correctly, given that you have very strong growth rate on the Onsite business and there you have lower gross margins, could there be that also in the next couple of quarters we could see some pressure on gross margins as well as midterm?

The same question goes from the gross margin development and the mix effect. Could you give us a little bit more view when we could see positive mix effect, i.e.

higher professional staffing growth to general staffing growth? And then the second question is on France regarding the recent development on the election.

Have you seen any impact so far yet? Have you talked to the clients right after the election time?

I will start with France, no, we haven't seen any impact of the election or the campaign period in our figures. That's what also you can see when you look at our figures, 8% growth in Q1.

The only impact we have seen from the election period is in the old placement activities at LHH. And we had the same – or we have the same pattern we had also five years ago in the previous presidential election.

And in that kind of period, French companies are not restructuring, and so we have seen the same pattern this year. That's point one.

Second, we expect the new President elected to take the labor code reform as one of his key priority. It was part of his campaign.

He has announced it, and it would be one of the first reforms he wants to tackle. For sure, it's still wait and see.

You will have the parliamentary election in June, but it should provide much more flexibility to the labor market. It should also provide much more visibility, clarity for the employers, especially when they have to restructure the companies.

There is one proposal is to cap or to have very clear layoff indemnities fixed by the law, so it will make any restructuring very feasible, very manageable. And the third point, which is also very good, like, by the way, you have in Switzerland, Alain, is to give much more power to the company, to the enterprise to negotiate their own agreement with the unions regarding the number of hours worked, the flexibility and so on.

And we think that all these measures should – yes, should increase the competitiveness of France and, thus, its attractiveness and, thus, the growth and the labor market at the end.

Hans here. Turning to the question on gross margin.

We saw in the quarter 40 basis points election gross margin. That is no different than what we have seen in the past at around 30.

So it's maybe good to mention that, that will go at the lower end of the 30, so if it's above 35, you round it up to 40, so it's not a full 40. We had good insights in that.

I think what is important what we do to mitigate the competitiveness of the market, one is segmentation. The other one is driving continued operating leverage and productivity.

And if you look where we're already applying those recipes well, we see strong margin progress. I think if we take a market like France, where we have broad-based growth with segmentation, the perm business has a very strong improvement in margin.

If you look at what we have achieved in the Nordics, Netherlands and Switzerland, there, we are putting segmentation to work there. You see we're coming out of the decline in Holland.

We're driving good growth in the Nordics, and also, we're improving the margin. Japan is another example where we have a good mix between professional staffing and general staffing and the perm business and in the rest of the world, in the quarter, we're focusing on a more profitable business mix.

Why I'm giving you those examples? We will continuously balance between driving the operating leverage into that competitive environment while we are shifting the mix to make sure that we steer the gross margin in the right direction as well as keeping the operating leverage to drive profitable growth.

Thank you very much.

You are welcome Alain.

Hi, good morning. Two questions from me as well.

The first one, on your revenue growth in Q1, the 6% adjusted for trading days, I seem to remember that at your full-year results presentation, you mentioned that the year had started well in Q1 with 4% to 5% growth in January and February, which implies a slightly higher growth rate for March. As you haven't given us the specific growth rate for March, I'd like to ask if you could give us that, adjusted for trading days?

And my second question is on the performance of DIS in Germany. You just mentioned the Tuja and Adecco integration into one organization.

But can you just share with us what you currently experience in the German specialized market for engineering and what the performance of DIS has been in Q1, please? Thank you.

Yes. Shall I start with your first question on revenue?

Sure.

Actually, we're going through that question yesterday because that is a good question to answer. A long story short, the trading days play in the first quarter, but also during March and April to a large extent, what should reassure you, if you look between March and April.

We said the exit rate is between 5% and 6%, and that is constant between March and April. So it's not like April is showing something different than March.

So it's a very consistent performance. If you then do the math, it's fair to conclude that we did a little bit better in February than what we expected from the February result.

But the key so far is if you take away the trading days, a continuation of growth in the second quarter.

And then coming to your – the second question and Germany. What we see is that some of the segment and we don't disclose the details by companies, but what I can tell you is that we have quite a strong double-digit growth in the professional staffing in Germany, especially strong in the IT, also in medical and science, high double-digit growth there.

I told you also about the perm recruitment, also very good performance there at 30% for Germany. Now when you zoom in into the sectors further, software and technology, we are more at 18%; computer hardware, also 18%.

Where really we are suffering, like what I was saying in the previous question, it is in the automotive sector.

Okay, thank you.

You’re welcome.

I've got a couple as well. Just on your digital investment, clearly, that's an interesting market you're going into.

Could you comment on how much you already do in hospitality and events in terms of temp staffing? And secondly, do you think you're spending enough?

I mean, it sort of strikes me the market is changing essentially quite quickly. Do you think you guys should be looking to invest more rather than sort of flexing on the margins as they are?

And then my second question is, what's your view around the CICE following the presidential election weekend? I think the new President has sort of said that he would look to change it and offer lower social charges in the past.

Could you comment on what you think that changes to and what the implications of that are, please?

Yes. Maybe I start with the digital and the spending, and then Alain can give some color on the CICE.

Hospitality is still a relatively small part of our business. So there we see that this will be growth accretive and that this type of product offering fits that market very well, that pure online solution, and as Alain said, we're investing in that.

But it's also important that to the pricing and the customer experience and the cost to serve that this will help us to drive profitable growth. Your question, are we spending enough, we will make constantly the right investment choices to sustain our profitable growth, and with that, also invest in digital and IT.

If you look how much we are investing in IT today, that's already around €300 million, and that will go to more new technologies, which will help us there.

Is it mostly there on sort of IT systems that you've got already rather than sort of developing new distribution models like ADIA digital?

Today, a big part of that goes in indeed, against the current systems, but we will, within that €300 million invest in newer solutions, like newer home office client-facing solutions for our customers. So with the investments we are making, we will get better technology.

In addition to that, we do the digital investments. And there, we co-create with partnerships like we are doing of ADIA because we believe that the partnership, of course, allows us to combine the best technology with our insight of our markets and business to bring products to markets we'd serve, will bring the human customer interface and the latest technology together.

And we are making the right investments. Of course, what's important for us is that we drive the growth through the cycle and improve the margins through the cycle, so...

I would like just to add one point on – and elaborate on what Hans has said. It's not only a question of how much we invest.

It's also how you invest. And the way we are doing it is also quite innovative.

When we partner with Infosys for ADIA, it means that we are co-creation, so it is also quite an innovative investment. When we take a participation in Partech Ventures, it's also somehow outsourcing the research and development to a very professional partner who have 4,500 deals per year that's – so besides how much, there is also the how.

So under that, so if we think about that €300 million a year, how much of that isn't going on updating current systems or investing in the front or how much is actually being spent on stuff like ADIA digital?

I think, over time, what you will see is obviously a chunk of your IT spending goes against the current infrastructure. But every time you make an upgrade, you can really bring the insights of what we learned through the productivity initiative, on how we can drive better customer experience by choosing reallocating that money to better technology.

So I think in the evolution, that money will get more productive use that...

Okay. But it's a small amount now is what we think about then it will just grow a lot over time.

Is that right?

Yes.

Okay.

So the mix shift will go more into it.

Okay. Then coming to your second question, CICE, first of all, we don't see and we don't plan any change this year.

This is now the sixth-year that the CICE has been put in place. And it is, in the meantime, well known by all and we have defended it really with our strict pricing.

Like everybody, we have heard what Marcon has said during his campaign. First of all, we have to see next month in June what the parliamentary election will give and what kind of majority of – not majority he will get and how it will be developed.

I do also know it is not the first priority in his action plan. I think the labor code reform is really one of his top three, top four priority, CICE will be for later.

Now if the approach would be changed, we know that France have to continue to improve its attractiveness, its competitiveness. So the CICE could be converted, for example, in reduction of social charges and corporate tax reduction to be confirmed later on.

But on our side, we will continue to maintain our pricing discipline in order to protect our profitability. Changing the CICE is not easy.

It's a complex – let's say, complex engineering. So let's wait and see later on what the new government will give as direction, but as said for us, on the short term, no change.

And so you think a sort of change to a reduction of social charges, that's likely to be sort of the hit, I guess on that and it would be taxable income. So you think they would come with a tax cut as well?

That's what we heard. It will be a combination of social charges reduction, especially directed for the lower paid salary and in combination with corporate tax cut.

Okay, thanks guys.

Question on the trends by in general staffing by segment, you see a quite strong pickup in the office segment. Could you maybe elaborate on that, let's say, maybe specific regions there and strong increase?

And is it for you also a sign that more or later in the cycle or not we get some feeling on that? And coming back on the IT, you already gave, let's say, an indication of the total number, but could you give some feeling on what is increasing year-on-year?

Is it clearly ahead of, let's say, your average SG&A increase? Could you give some feeling on that?

I will start with the general staffing cycle. So first of all, we don't believe anymore that there is one cycle in the world.

There are numerous cycle being geographical one and being also by industry. It is something which is obvious, for example, in the U.S.

But you see also in Europe that there are also different maturity regarding recovery. As an example, we have always said that France would be the latest to recover, and that's exactly what you see.

And you see some other countries being further in the recovery. Now looking at the more specifically by segment, overall you see a good growth everywhere in car manufacturing, especially in Europe.

You see good development in manufacturing, in car manufacturing, but also for logistics construction in a lot of countries, good development. Logistics, distribution, that's the major sector where we see a good growth.

Where we see some slowdown, that's, for example, the traditional retail in the U.S. That's where we see – and financial services in the U.S., I would say that's the two major slowdown we see in the world.

And with respect to the office segment, where do you, let's say, see the clear acceleration compared to Q4? Could you give maybe some feeling on countries or regions?

I think the trends we're seeing, because you have to be careful to sometimes just look at it is – this by the lands sectors that there are a few things. The growth is broad-based across a multiple of sectors.

We have in Germany the automotive, but if you take that away, is that the growth momentum, it should take between France, Southern Europe continues to be across a multiple of sectors, so it's broad-based. And we also see that between small, medium, and so across the different, call it that between small and medium part of the economy and larger companies.

If you look at the more mature business like the U.S., we see stability and what our focus is, is to drive our market share there because we see a continuation of that stability. So we don't read into the quarter any sign that what we have been seeing for a while is continued growth momentum in Southern Europe and France, with the more mature economies being a little bit more mature, but we see opportunity there to grasp market share to drive relative growth going forward.

If we turn to your question on the IT investments, we continue to drive investments in the future of our business, and those include strategic IT initiatives, our productivity initiatives and the digital events we discussed. And those are included in the SG&A we reported.

So we are investing in the business while we drive the operating leverage.

I guess that's what I understand, but let's say, are those IT investments clearly, let's say, ahead of average SG&A increase? Could you give some feeling on that or...?

Yes. Underlying, you see that we're relatively making more investments into the future as part of SG&A.

So the share of the investments in the future is bigger than in Q1 last year.

Okay. Thanks.

Just one question, if I may, on ADIA and online recruitment in general. How do you manage the quality of that service, not just with that development, but more generally given that you are sort of dislocated from your clients and from your candidates?

How – because that's one of the issues that these kind of products have had in the past. What is your plan to retain high-quality service and kind of maintain the broader Adecco brand within it?

A combination of three things, as said strategically, we really want to provide better user experience, thanks to the digital. And for example, if you take the ADIA application, you will see that there is a satisfaction system, so both customers and candidates can – are quoting the quality of the service.

That's on one hand. Second, it's a little bit like in the retail financial services.

So we will have the full online application, for example, with ADIA. But we can also rely on our branch network structure in case of specific needs.

And I think that's one of the key advantage we have is that we can leverage both channels according to the needs of the customers, the needs of the candidates. And I can perfectly imagine that both customer and the candidate for a certain type of function will use more the online passing, and for others we'll just recruit through our branch network because they need another profile and other type of process with more in-depth assessment of the candidate and so on.

So that's how we see that. But definitely, the customer experience should be enhanced.

And just to follow-up on that. You mentioned earlier that it was going to be a stand-alone business.

So as a stand-alone business, how does that interaction with the branch network that you were just talking about, how does that occur or are these separate?

It's really separate. It's really 2 organizations.

By the way, they don't report to the same people, so it's really separate.

And so that – you're not interviewing the candidates, you're not interacting with the clients...?

It doesn't mean that we don't want to play the synergies where we can and leverage the synergy where we can and – or assets being the candidate database, the customer database, the back office, the payrolling and so on. There, we can – we have somehow competitive assets that we will leverage, for sure.

End of Q&A

So I think if there are no more questions, and it is perfectly 12 O’clock, I would like, ladies and gentlemen to thank you for your interest and your questions. We are looking forward to meeting some of you over the coming days during our road show.

And otherwise, we invite you and we hope to hear you again on the second quarter call on August 10, and see you also at the latest at our Investor Day on September 22 in London. Have a great day.

Thank you.