Robert Jan van de Kraats - CFO Jacques van den Broek - CEO

David Tailleur - Rabobank Paul Sullivan - Barclays Chris Gallagher - JPMorgan Matthew Lloyd - HSBC Tom Sykes - Deutsche Bank Nicholas de la Grense - Bank of America Merrill Lynch Hans Pluijgers - Kepler Cheuvreux Toby Reeks - Morgan Stanley Konrad Zomer - ABN AMRO Marc Zwartsenburg - ING Angus Staines - UBS Yves Franco - KBC Securities

Well, good morning, ladies and gentlemen. Welcome to the conference call of the first quarter results 2015 of Randstad.

It's a busy day today with many announcements in the Netherlands, so we'll try to be efficient again. And I'm here together with all the support needed, including Jacques, and also with Arun and Andrew.

I'll start with the presentation and then at the end we'll get to Q&A. And I'll flip through with the agenda.

You can see that we'll talk about performance, the financial results and outlook, and then we'll do Q&A. And we've also added some appendices for your benefit.

Moving to slide 5 right away, first quarter 2015, it was a continued profitable growth. And that effectively is the combination of continued growth and good leverage in the company.

And that results in an EBITA margin of 3.5% which is a 40 basis points improvement compared to the same quarter last year. Organic growth per working day arrived at 5.6% in the first quarter, whereas gross profit grew a little faster at a pace of 7%, reflecting focus on customer profitability.

Gross margin also improved 50 basis points year-on-year and also our perm business continued to grow at a relatively solid speed in the quarter of 16%. And that is clearly reflecting the micro strategy we have on this business segment.

Operating expenses were up 4% organically and that is defined as operating expenses before integration costs and one-off. This time only €9 million as one-off cost included which is a restructuring project in the professionals business in the Netherlands.

The last four quarters organic incremental conversion ratio, so incremental conversion is the part of additional gross profit that we have earned organically that is converted, that is translated or that drops through into EBITA which arrives at 67%. I would say at a healthy 67%.

Moving to slide 6, the European rebound in Q1 visible in the red line here. You can see that it clearly comes back.

It's the growth expansion in Europe where both Netherlands and France are improving. But it's not just market.

It is also closing the gap to market in these two countries. And we're very proud of the fact that the company is coming back to market again in these two countries.

We also see growth continuing in North America, clearly above market in the staffing segment, and solid growth in most emerging markets also continues. Clearly also Australia reflects that.

Moving on to slide 7 which elaborates on North America, solid growth. The last four quarters incremental-conversion ratio here arrived at 53%.

That I would say again is pretty good, given the phase of growth that we are in. We've been seeing growth in the North American market now for quite a while and still we have an incremental conversion ratio north of 50%.

Revenue grew by 5% which compares to Q4 6%. The bad weather in the first quarter in the U.S.

had some impact clearly also in March. But whether it has impact year-on-year, I don't think so, and winters have been bad in the U.S.

for a while. But the distribution over the quarters clearly has some impact.

And maybe it has some impact at the total level as well, but that's very, very difficult to measure. U.S.

staffing in-house continues to grow clearly by 8% and perm in the staffing segment up 21% - again, the micro strategy of this specific business segment. U.S.

professionals, a focus on customer profitability, gross profit up by 6%, but we also have an ambition to grow the business again at the revenue level. So, that is clearly the strategy, going forward.

Perm up by 4% here. Sourceright doing quite well; it's our RPO and MSP business delivering profitable growth.

And our MSP spend under management was up by 39%. Canada, a difficult market.

Revenue growth of 1% which is ahead of market. Overall, EBITA margin up to 3.5%.

And at this point I'd like to note also that Q1 is always the weakest quarter out of the four quarters in the year. Typically Q1 is the weakest, Q2 better, Q3 the best, and then Q4 just below Q3.

Back to slide 8 now, France a strong rebound, a clear improvement. Revenue flat from a minus 8% in Q4.

I would say that's a remarkable development here. And that is partly Randstad coming back to markets and, on the other hand, the market improving.

The combined staffing and in-house business is at minus 1%, but in-house grew 15%. Construction in the French market is still weak.

Professionals up also 4% compared to minus 1% in Q4 and perm continues to grow here. We have a very strong focus on selective sharing of subsidies, so we're very much focused on customer profitability.

Gross profit up by 1%. Our cost and FTEs down sequentially by 1%.

And that clearly is in line with the fact that we did have the revenues coming back to roughly zero, but in the fourth quarter it was still at minus 8%, EBITA at 4.1%, stable. The Netherlands on slide 9, accelerating growth.

Again, on the one hand, the market improving, but clearly also Randstad coming back to market bridging the gap. Revenue up by 10% compared to 5% in last quarter.

Randstad grows at 8% and Tempo-Team at 9%. A strong focus on the SME segment that is clearly paying off.

Also our professionals business in the Netherlands, Yacht, that is up by 19%, an improvement again against Q4. And in this business we have completed the restructuring in March, so we have combined the professionals business under the Randstad name under the Tempo-Team brand, but also with the Yacht brand together in the Yacht organization.

Our costs are down 6% sequentially. The back-office restructuring that we announced was completed effectively at the end -- in the beginning of January.

So, we can clearly see that coming through now also in the FTEs. The professionals restructuring, by the way, is explaining the €9.2 million charge that we took.

EBITA margin at a solid 6%. Germany, slide 10, with a recovery ratio of 43% - yes, a recovery ratio, because we have negative revenue development here and then we aim to recover part of the lost cost -- gross profit through a reduction of OpEx.

And we typically aim at around 50%. Of course, we have -- this is a marginal reduction of revenues, so the 43% I think is pretty reasonable.

Price effect 2% now; it's reducing from previous higher levels. It's easing out.

Labor market is still subdued by the wage-cost increases and the regulatory changes. Last time Jacques explained to you that minimum wages in Germany have been increased, but have to compete with very competitive rates next door in Poland.

That doesn't make it easier. The perm growth continues by now even at a much higher level.

And we also see a pay-off of our focus on SME and on delivery models in order to deal with the gross-margin developments. We also have a challenge in the sickness rate.

Partly it was explained also in the last call. It can be attractive for candidates to be sick because they might get a higher pay.

But we also at this point in time record -- I have record-high sickness rates in Germany. The gross margin was impacted by the 13-week calculation rule.

So, when people have holidays or are sick they get paid on the basis of the previous 13 weeks' earnings which might be more attractive than the current earnings at the new assignment. Operating expenses were reduced and that explains the recovery ratio, FTEs down arriving at an EBITA margin of 3.4%.

Belgium on slide 11, returning to growth from a minus 1% in Q4 to 7% in Q1. An incremental conversion ratio, very solid at 73%.

Clearly the gap has been reduced with market in Belgium. And that is also reflected in the EBITA margin at 5.4% which is clearly reflecting our focus on customer profitability but, at the same time, trying to bridge the gap with market.

Professionals also improved in Belgium by 13% and also here you see solid continuation of perm growth. Gross profit, stable growth at 9%.

Iberia on slide 12, continued growth. Incremental conversion at an excellent 113% rate.

Revenues and gross profit up by 12%. Specifically, Spain grew by 16%, an improvement clearly.

Growth in the automotive and manufacturing segment. Strong focus on professionals, where we did see growth of 87%, now bringing us to a top-three position in the country.

Perm continuing to grow successfully at the rate of 57%. And that then, combined with excellent cost management, gives us an excellent incremental conversion ratio.

In Portugal we have a strong focus on customer profitability and the growth remains stable as a result of that at the level of 4%. Specifically, growth in manufacturing, call centers.

EBITA margin 3.4%. Slide 13, the UK, improving profitability now to a level north of 2%.

EBITA margin supported by revenue growth at the level of 3%. But gross profit, more importantly, at 5% here.

Strong performance in construction in the UK market and we also see finance returning to growth here. Perm fees up by 15%, almost equal to the previous quarter.

Operating expenses were managed carefully. We're down 1% sequentially.

And headcount was even down 3% sequentially. The other European countries, on slide 14, overall revenue grew by 12%.

It's a mix. Italy at 12% compared to 8% in the previous quarter, with a pretty good return at the bottom line focused on specialties and perm, here also growing.

Switzerland, of course suffering from the exchange-rate adjustments. 9% growth now.

I would say still solid. And we see strong growth at the in-house business.

Poland continues to grow at the rate of 16% and we're clearly investing in growth here. FTEs up.

Overall, the EBITA margin arrived at 2.7%. Looking at the rest of the world, Japan growth slowed in the first quarter to 2%.

And then one has to take into account that last year growth was driven mainly by the adjustments in the consumption tax that resulted in a lot of work for our flex workers and our clients. We continue to invest for growth in Japan.

Australia/New Zealand continued to grow. Business support is the key segment driving this growth, but also perm continued growth at a nice pace.

Asia, we did see growth at 5% compared to 9% previously, but compared to a very high comparable base. China especially you might recall -- you might remember the extremely high growth rates that we have shown.

And we believe we continue to do quite well in this region. Latin America up 18% which is going hand-in-hand with our focus on capturing productivity improvements here, and we have shifted focus to growth and profitability.

And as a result of that our EBITA went up from 0.5% to 1.5%. Moving to the P&L, slide 17, it is summarizing everything that I have mentioned just before.

I would say that EBITA now arrived at €153 million and that includes a favorable currency impact because of the fact that we have translated our earnings in dollars into euros. The effect year-on-year is roughly €5 million, sequentially it's almost €7 million.

Integration cost €9 million. I already mentioned that the restructurings in the Dutch professionals business, the amortization, is just a regular application of the bookkeeping rules.

Net finance cost, it includes the regular interest charges at roughly a level of €3 million. And then it includes some effects of translating U.S.

dollars into euros which, by the way, benefits the company as a whole because we have a significant increase in equity as a result of that. But also applying some bookkeeping rules it results in a charge on the net finance line of €20 million which I want to emphasize is non-cash as you can see in the cash-flow statement.

I don't expect this to happen every quarter, because this is very much related to the strong increase of the dollar in the first quarter, taxes within range. That makes me move to slide 18, because that's where we elaborate on it.

Underlying EBITA up by 40 basis points. The last four quarter organic incremental conversion ratio up by almost 79%.

That I would say is very solid. We have chosen to look at the last four quarters' rate, because one quarter typically can give erratic movements, and it's better to look at this over a longer period of time.

So, that's why we have chosen to include this data point in our presentation. Working capital again improved slightly.

We continue to be focused on that. The effective tax rate at 28%, well within the range that we have indicated before.

Diluted EPS now at €0.50 compared to €0.45. And dividend has been paid now at €1.29 which was split between cash dividend at roughly €82 million and 67% of the shareholders elected for stock dividend.

This compares to a slightly higher number last year. Looking at the various segments, you can see a summary now from looking at -- starting at in-house and professionals.

In-house very solid, very good returns. I already made the remark once that allocation of corporate costs is a bit more art than science, but, whatever you do, in-house is showing great returns here both to us and to our clients.

I leave the explanations to your readings on the right-hand side of the page. The gross-margin bridge on slide 20, bridging the rate of 18.4% this quarter to last years' 18.1%.

Somewhat lower temp margin due to mix, but also due to some pricing pressure that, for example, we see in the Dutch market. Permanent placements are clearly adding value here, 0.3% impacts.

Permanent fees are now north of 11% compared to 10% last year, but we always have the data point in mind of 2007, 2008, where it was 12%. And at that point in time it did not include a micro strategy on the staffing segment, permanent placements in the staffing segment, and this has been added and is clearly paying off now.

So, what you see here is also continued focus on client profitability. The operating-expenses bridge, this one is sequential, so connecting the level in Q1 with last years' Q4.

And what you see here is a massive impact of the foreign-exchange rate translating dollars into euros. And then we had as predicted, some savings in the marketing space in the first quarter.

That's seasonal, more or less. At the EU level it's more or less flat.

So, we're netting out Dutch savings with some other increases here. Organic growth in North American market, resulting in some additional cost and a little lower cost at the corporate level.

And we continue to make investments in markets where we are growing, like North America, Iberia, Poland, Belgium and the emerging markets. The balance sheet as I said, benefited slightly from the, I might also say significantly, from translating dollars into euros.

The working capital as a percentage of revenues at 3.3% now. I would say that's also typically a seasonal pattern here which makes it a little higher than what we see in December.

But also this time it's a little higher than the previous year. I'll get back to that.

Return on invested capital approaching a healthy 15%. The free cash flow on slide 23 as you can see here, it starts with the EBITDA and then our change in operating working capital is a little higher this time.

It's always timing at the end of the quarter that is challenging, but also growth is financed here, so nothing irregular. Income taxes are a little higher than last years' first quarter and that is the result of some selective choices on making payment at the right time giving the right returns.

Sometimes it can be favorable to be a little early with your payments here. There's very little you get for your money on the bank, by the way, so --.

Net additions in plant, property and equipment, in line with previous years. Nothing special.

And then if we go down a little further you can see that we have purchased shares in order to compensate the performance share plan in the company. And then all of that has to reconcile with a net debt decrease at the bottom of the page.

And the net debt, by the way, is composed of various currencies. And we try to reflect the composition of EBITDA, adjusted EBITDA, into the mix of currencies in our net debt in order to have no speculative positions at all.

So, 24, the outlook, going forward, our organic-revenue growth was 5.6% in Q1. March was up 4.3%.

The volume trend in April so far is a touch better than March. And once you keep in mind that last year the improvement from March to April was close to 2%, so this really, from a comparable base, is a bit more challenging.

At the same time we should realize that we are looking at relatively marginal steps, so sensitivity is relatively high. We also expect a significant foreign-exchange impact, again at both the gross profit but also the OpEx level.

And that somewhat will be left at the bottom line positively. We have focus on profitable growth.

That continues. Market share improvements are clearly on our radar screen and this is supported by our activity-based field steering approach.

And we remain on track to achieve the announced cost reductions and efficiencies in the head office and back office as we have previously announced, between €60 million and €70 million to be realized in 2015 half and the other half in 2016. Well on track.

We expect to see a similar number of working days. Actually we're certain that this will happen.

And please keep in mind that seasonally, normally, we'll have a somewhat-higher gross margin in Q2 compared to Q1. And also seasonally the cost base will increase.

Operating expenses are expected to be moderately up on an organic basis. We will continue our targeted investments in headcount.

And reported operating expenses will be inflated somewhat by the foreign-exchange movements. The March exit rates for the whole Group arrived as I already mentioned, at a 4.3%.

That is broken down to America continuing at a pretty healthy base of 5%. In France the exit rate was minus 3%, but I want to note that it is a relatively erratic pattern throughout the quarter.

I think the jump from minus 8% in Q4 to 0% in Q1 explains that. The Netherlands continues at a very healthy pace, 10% growth.

In Germany we are at the same level as for the quarter, but comparisons, going forward, will get a little easier. The price effect will ease out, so we might see that this is bottoming out in Germany.

Belgium, it's 3% here, but we don't think that's a completely correct reflection on what's happening there. I think we -- it's going to be a little higher if you look at the underlying, real, development and if you analyze it a little further.

So, we're not that worried about this number. Iberia continues at a good pace, 8% for the quarter but, again, it has been erratic also in previous months.

The UK continues at 3%, the rest of Europe at 10% and the rest of the world came in, in the month of March, at 8%. And again please note that in the month of March Japan recorded an impact from the fact that in 2014 the month of March was party time, because of consumption tax increase at our clients' as a result of which our clients needed lots of people in that month.

So, that on the month of March exit rate and the feeling for April. And just I want to conclude with slide 26 which is the one we shared with you at the analyst day, the Capital Markets Day, in November.

Targets are clearly within reach. We have the various -- this, by the way, is a bucket or a basket with all the balls in there.

We have assumed top-line growth in the consensus at the time, mid-single digit sales growth. If you put in the current numbers it's a little higher than those assumptions.

And then the savings in the head office and back office, the improved productivity and commercial focus through ABFS, and then the business-mix changes as a result of our focus on permanent placements, professionals and SME. And then, with these assumptions, it's unavoidable to arrive at the range between 4.4% and 4.6% and then also it will bring us into the target range in 2016.

Of course, different assumptions on the growth line will have impact at the -- on the outcome. So, that concludes the elaborations from our side.

We'll now move to Q&A. I'll leave it to the operator now.

Actually two questions on margin expansion, operational leverage. First of all, in France actually, I would have assumed that the new incremental subsidy would have driven margins a bit more.

And also looking at the hard perm growth you had in France. Maybe you can explain what's happening there.

Maybe you passed on all of the benefits to clients or not. And on, secondly, if you look at the margins in Iberia, in rest of Europe, is it right to assume that exit capacity is right now quite limited and as a result, margin expansion, EBITA margin expansion, has been limited as well?

And will it be the trend, going forward, also? Thanks.

Okay. It's Jacques here.

In France it's a mixed picture, so we've been quite hesitant or quite negative on sharing any CCA. This now becoming part of the margin mix, because it's a long-term program.

We also said that we would selectively try to conquer business by sharing some of the CCA. And we think we have a good mix now.

You see us growing fast in in-house, so that's very helpful. You see us at market the last few weeks sometimes when it's erratic as well which upsets, slightly above market.

And we do that at a good return. So we think we've found the right balance there.

Yes, the other markets I think you're right. If you look at Italy, if you look at Switzerland and if you look at Poland which is rest of Europe mainly, we've seen double digit throughout 2014.

So, indeed, if we want to grow further we want to have people. But, again, there's a big seasonal impact here.

Q1 here is also by far seasonally the lowest result.

And, David, adding to what Jacques said here, and we'll talk about it next week as well in Barcelona, we are in phase two effectively, yes, of the growth? So, you remember phase one lasts for one year.

We have a very high incremental conversion. And then after one year more or less as a rule of thumb, we move into phase two with an incremental conversion ratio of 50%.

That clearly reflects the addition of people to support further growth.

What's interesting to see, of course, if that we try to also for the moment change the business mix in the rest of Europe. So, in Portugal, we're shedding low-margin business.

That doesn't effect on the top line, but we're okay. It should over time improve our profitability over there.

You've seen our spectacular improvement from scratch into third place in two years in professionals which will definitely give us a higher return in the Spanish business mix, going forward. And the same, to a lesser extent, it true for the Italian market.

So, yes, we're on the way of, yes, improving our business mix long term there.

Yes, because about 50% conversion rate you are in [indiscernible] I fully agree, but in some markets it seems to be that you might already have entered basically stage three. And then the conversion will probably be a bit below that level.

Yes, it could be. You know how this works.

It's not an inclusive goal for us to manage the incremental conversion. It's what we do is we try to balance the growth, investing in business mix, going forward, to create a better company over time.

And that's also now we now work with a four-quarter conversion rate, so as not to discuss all the time how it was in this quarter because of the weather or whatever, my car had a flat tire, and therefore it's lower. So, it's a bit more of a consistent picture we try.

And, David, by the way, the incremental conversion ratio over the last quarters arrives at 113% supporting the story we just said.

And, by the way, thanks for asking just two questions. I suggest that's the standard for the next questions as well.

Yes. Actually, on France, I had a quick follow up.

Apologies for that, because it was not only related to CCA, actually it was more related to the new subsidy. I think it was called family allowance or whatsoever.

That has impacted your gross margin on a gross level, that that's right or not?

Yes, subsidies is part of life in France. The government is a firm believer that subsidies will shape the world of work.

You know our opinion that as I mentioned earlier, we're trying to find the right balance and we like the growth and we like the results.

And we're not unhappy with 4.1% EBITDA.

Just a follow up on the temp gross margin, the erosion of 20bps within the mix there, in the quarter. I mean, presumably that was largely skewed to Holland.

Maybe you could talk with a bit more color on the pricing pressure there and more generally and you thoughts on that into the second quarter. That's the first question.

And then, just from a technical perspective, the FX drag on the interest cost if rates stay where they are. Can you give us any sense of the drag in the second quarter?

Yes. I'll do the first one.

Yes, there's always pressure on margin with large clients. So, certainly in the Dutch business, but also in the Belgian business, the French business, the German business.

When there are large tenders out there clients are educated. Sometimes they use consultancy firms.

So it's a big party out there. So, what we're trying to do is hold onto these clients if we're got the right delivery model.

You know through our in-house business we've got a conversion of 30% from the gross margin into results, so we can handle a lot. And sometimes, well, we don't.

In the Netherlands, we created delivery models for country-wide clients that are delivered from one central point. Clients are happy.

Costs are relatively low. And you can see in the overall result development in the Netherlands is that we can cope with this price pressure.

And at the same time we're trying to, again, change the business mix more favorably towards SME. Professionals, 19% growth in the Netherlands, and perm, of course, helps enormously.

So, it's a fact of life. It's not a hugely damaging trend but, yes, we can cope with it.

And overall you see that we have a good improvement in our profitability.

And on the conversion that Jacques just mentioned is the conversion of gross profit into EBITA which is very high at the in-house business. And, by the way, if you look at the large-client impact you see it indeed in the Netherlands, but we tend to look also at the bottom line where we see very solid performance.

On the FX impact, your assumption, if the foreign-exchange rates remain as they are the impact will be zero. So, if you look at the previous quarters it started to come in, in Q3 and Q4 last year.

And before that it was typically either around zero or a few million. That's it.

I wondered if you could discuss a little bit the penetration rate you're seeing in North America as the -- in the market and how you see that evolving. Could it go further than peak levels it's at, at the minute?

And then also potentially on M&A, how you're moving in that space, and if you've found any targets you're talking to? Thank you.

Yes, well, penetration rates in the U.S. are at a peak level, so that's the good news.

And it was a bit of a noisy quarter as we call it, in Q1. So, we talked about the weather, but there was also some strikes left and right, so a lot of things happened in the quarter.

Underlying we still see solid trends. We still see good demand in the industrial.

We see a bit of wage inflation even in industrial of around 2% which, for us, it's still an indication that things are moving in the right direction. And we see good and stable perm demand.

So overall as you see in our numbers for us, U.S. is a pretty stable place currently.

On the question on M&A our strategy focus is on organic growth and next to that we look at ways to accelerate. We are very happy with the current geographical footprint that we have.

So, we're not really looking at expanding that. But within that footprint we'd like to increase size and M&A could support that.

Of course, things have changed over the last quarters. It has become more expensive.

But we continue to look at options in a very disciplined manner. And that effectively, potentially, could result in mid-sized acquisitions going forward, but again, the discipline that we have to make sure that we can create economic value is driving us, so I don't expect any announcements in the short term, and that means we're not going to surprise you in the next few weeks.

A couple of questions. From me.

The first one, in France when you book a CDD as a placement fee, so are you calling that perm or are you calling temp, just so I'm sure I understand the dynamics of the French market? And then the second question is about Germany and that's, my understanding from some of your competitors is that the changing in law about contractors, meaning that they might have to go perm has caused a bit of a stalling in temp demand and that's why temp demand's awful but job vacancies are so incredibly strong for perm.

Is that what's really happening in the German market or are there other things going on?

Okay, your first question no. So if we have a CCD, which is for the people on the line that's a contract for a fixed period, we don't book that as perm, so perm for us, by the way, in all of our business that's really when a client demands for perm placement we feel that we get a fee, so that's really what we see in France.

The whole development of CDD, but also CDI, so an indeterminate period, is moving very slowly. I think we now have around 1% of our total workforce on a labor contract, which, comparing to the Netherlands, in our staffing business this is probably between 10% and 15%, so that's quite a while to go, still.

The German one, yes, well, there has been a lot of fuss around, how do you call it, artificial [Foreign Language]. How will I translate that?

Yes, freelancers working for the same clients for 10 years, and then of course they need to be employed, really. We don't see that as a bit of a drag on our business.

What is a drag on our business is, as Robert Jan mentioned, the legal change, equal pay, that sort of thing. Also the fact that there's a gentlemen's agreement between union and some employers to hire temps after two years, hire or replace them, so that's a drag.

We do see penetration rates in Germany, the only country where penetration rates were higher than 2008, going down a bit, however we think this is short lived. Robert Jan already mentioned the bottoming out.

We do see volumes in Germany picking up ever so slightly, and against easier comparisons we are a little bit more positive about Germany, going forward.

From a risk standpoint, from an idle time standpoint in France we are not unhappy with these contracts for a defined period of time or for indefinite contracts. As long as it's a limited part of our portfolio we typically place these people first and we can see in the Netherlands and in Germany that this is a pretty successful business.

One very quick follow-up, because people are asking about penetration rate. In Europe do you know what your penetration rates are as percentage of temporary workers?

So agency temps as a percentage of agency workers? And how that might have changed over the years?

No, and Europe is a pretty diverse place where the quality of market data is hugely different, so no, that's not really a question I can answer.

And Matthew, I suggest you have a call on that with Andrew or with Arun.

Following on from Herr Lloyd's questions on Germany, I just had one on -- so on this split of where growth might be coming from could you outline maybe what's happening in autos versus non-autos, and perhaps East Germany versus the rest of Germany, given what you said about the competitiveness of neighboring countries? And perhaps just in North America, could you maybe give a view of what's happening to non-wage personnel costs?

How quickly are SUI and the workers' comp costs coming down? And is that a benefit to your gross margin?

And are you seeing the same large account issues in North America as you are alluding to in other countries or is it not the case there? Thank you.

Okay, well, in Germany it's not so much a -- call it a geographical difference in where we see the market development. What we do see is that because of the cost of a temp being higher we do see some, well, call it fallout or weak demand in the SME space.

The larger clients, auto, definitely, but also some other large clients have got structural flexibility. They're not changing their strategy as such, so we do see still quite stable demand there.

And on your question on North America, the view on non-wage cost, I think there's nothing peculiar at the moment other than the ACA related costs, which we are charging to our clients. But using your question just to give you a bit more perspective on wage cost itself, we now see some wage inflation coming through, actually the first signs of wage inflation, in the north American market, in the blue collar segment.

So it's early stages, but that is a signal that we see coming.

Can I ask a quick follow up? Just, can you venture some comments on industrial versus clerical versus professional at the market level in the U.S., please?

Yes, it's going well. So blue collar is still doing well, white collar is actually a bit better, and also, professionals, honestly speaking, the market is very solid, and we should improve.

We're not so happy yet. As you know, Tom, we're trying to outperform any markets, took some great steps in quite a few markets.

U.S. profs could still take a step up, but the market is solid.

Firstly, if on the contribution to gross profit from perm you alluded to 12% having been the peak in the past but the micro strategy potentially taking that further. I was wondering if you could give an indication of where that could or could maybe get to, and whether you think that the mix shift towards perm is going to be enough overall to offset continued pricing pressure or gross margin pressure in temp.

And then just in the U.S., I know one of your peers has pointed to decelerating trends through the first quarter, which doesn't seem to be evident in your numbers. I was just wondering if you could maybe give a little bit more color on what impact you may have seen from weather impact in the U.S.

or whether your clients are starting to dial back demand in manufacturing, for example, on the higher dollar impacting competitiveness. Thanks.

Yes, I'll do your last one and then RJ will do your first one. Well, the weather effect and all the somewhat funny stuff, strikes and what have you, we think is around 2% negative impact through the quarter.

Yes, and we don't see it decelerating. We see, as I mentioned earlier, pretty stable picture also in April, in blue collar manufacturing and also improved demand.

So no acceleration, but that's not to be expected. As Robert Jan said, it has been quite stable for us in U.S.

and we do see that picture continuing.

Yes, and the share of gross profit earned from permanent placement fees I already mentioned that it compares to 2007, 2008, being north of 12% now. It improved from 10% in Q1 last year to 11%, more than 11% in Q1 of this year.

At the time, in 2008, 2009, it was primarily the result of permanent placements in the professional space and now we have been building a strategy to also actively sell this in the staffing space, and I have to say that's going very well. It also allows us to have a high level of synergies with the staffing business, because lots of this is sold through what we call hybrid or blended units, where people do both perm and staffing -- sorry, perm and temping.

So the comparable base has changed, so the 12. Because of low capital intensity we try to grow everywhere.

But under normal conditions we should be able to exceed the level of 2007 and 2008, given the fact that it now also includes permanent placements in staffing.

Yes, and then because you also said, if we would see it compensating the price pressure in temp. That's a very tough question.

And perm is not the only tool there, because price pressure says something about the gross margin, but, yes, there's also a lot of stuff going on in delivery models, in-house being our more prevalent one, as we talked about earlier, but again, we do see more and more large scale delivery models, where, again, as I mentioned earlier, in some countries we deliver highly automated a nationwide client from one area and then again we have a good conversion of a relatively low margin. So, it's a mix of things, and we're trying to optimize as best we can, and at the end of the day that should, well, result in the targets, the financial targets, the EBITDA targets that we've put forward for you for the next two years.

And just, sorry, one very quick follow on, on that. When you're talking about the EBITDA margin targets, is there an expectation that gross margin goes up over the next two years or is that more a case of operating leverage?

There you should look at the basket of the bucket. We're still deciding what it is, a basket or a bucket, but if you look at all the balls in the basket then it's a good mix of all of that.

And of course very difficult to predict countrywide growth, firm growth, where are we growing? What kind of clients?

What kind of sectors? It's a big company.

It's a big world.

But helping you out a bit, here, if you follow the normal pattern then Europe should start to contribute more, the Netherlands should contribute more, for example, permanent placement typically goes up. The admin sector starts to grow.

Professional starts to grow. So a typical pattern, normally in a model, would show you gross margin going up.

But again, if we earn through in-house, you can see the EBITDA returns from in-house, we would be very happy as well.

A few questions from my side, first of all, on the U.S., a follow up question on the professional segment. Actually, a little bit still lacking in the market trends, market is quite positive, and you're already making the market for some quarters.

Are you, let's say, intent to implement some additional measures to really catch up with the market? And secondly, on France, you already said construction remains weak, but could you give some other indication on the end markets, how their trends are going?

And I'd say also in France, if you could, your improvement compared to the market is that across the board or in specific segments or with specific clients?

Yes, in France it's pretty much across the board, but driven by in-house. We've opened up quite a few new clients in-house, and as you know this is a unique concept.

We're the only one who really sells this and apparently our clients like it. It also works well in, yes, uncertain circumstances, so, no, it's pretty much across the board, and as you know, we've already targeted the SME space, and we're doing relatively well against market there.

What still needs to come through there is the fact that if we transfer a big client to in-house that the branch that needs to start growing in the rest of the market that is taking time in a sluggish market. We've talked a lot about our ABFS.

You need to put in a lot more sales and it takes longer. That brings me to the U.S.

Yes, as mentioned, we think we can improve. This is an internal thing.

We're not putting in any additional measures, but we're just trying to look hard at where we can improve, and that's a mix of things. Sometimes you're stuck with some attrition rates, some players in branches leaving you.

You need to start all over again. Sometimes it's the conversion from the sales into the order, the conversion from the order into an actual match.

So it's a mix of things. So we need to speed up, work more effectively, and then, yes, we should improve over time.

There's no silver bullet there.

A follow up on the in-house, in the past, let's say, the growth, in-house or the big part, coming from clarification from staffing, general staff into in-house, as I look a bit at the numbers that impact is relatively limited for the growth in-house. Is that correct?

We don't see that much reclarification from staffing to in-house anymore?

Well, I would say, fortunately it's going down. Of course we've been doing this in France for quite a few years, and we're very happy with the fact is that we are more and more selling new clients, so clients we take from competition, that we move from being handled through the branch of competition directly to the in-house model or client has one form of in-house but not really the way we treat it, and they like our story better and they switch.

So yes, it's really taking market share in that segment.

I've got two. Following on from the chat you had with Nick about the drop through rate, I know you don't want to think about drop through rates on a quarterly basis, but your targets imply 100 basis points of margin improvement in 2016, which is a pretty strong drop through rate relative to expectations.

Now, not that the consensus has got that number in, but now we are a bit closer to when that needs to be delivered, I guess, how have your underlying assumptions on how you get there in terms of mix, geographic growth, professional, perm, changed or has that not really changed at all? And then, secondly, on the North American market, could you tell me how big Sourceright is?

And could you talk about the margins achieved in that business at the moment? Thank you.

Yes, so MSP and RPO are different animals, hey?

Yes.

So MSP is almost a cost neutral activity and the value lies in knowing a lot about the client and also trying to deliver there. RPO is a very profitable business mix in itself.

High single digit EBITDA margins, so we're very happy with the growth there, and definitely it helps our overall GP growth, of course, in the U.S., because RPO is a GP business, by and large.

How big is the RPO piece in North America?

How big is the RPO piece in North America? Yes, it's a fee based business.

Well, we'll find out. Yes, if you look at where we are, after -- we said we're right on track, so if you would go through again the buckets, on the slide here, then the cost is on track, maybe a bit better.

The top line growth is at 5.6% so that's in the mid-single digit range, so that's according to our principles. The business mix is improving, mostly through perm but also professionals growing, for example, 19% in the Netherlands.

SME in Europe picking up because economic growth is improving therefore there's more demand, and we're also targeting this segment very effectively through our field steering approach. So the mix of that has made us take a good step in Q1.

That's it.

Okay, so no change to the way you're thinking about--

Toby I'll add something to your analysis, because I don't think we're looking at the same numbers here. 2014 EBITDA was 4.1% to get to the target range, which is 5% to 6%, we need a 100% -- 100 or 90 basis points improvement, and we're now taking the first step, because it's going in two years.

So I think we need to get the numbers right. That's why I'm adding and still I think the comment of Jacques explains how to get there.

Yes, sure. Well, a consensus EBIT margin's at, what, 4.6% in 2015?

You're targeting 5% to 6% in 2016, yes?

Yes, correct.

Yes, so it's 100 basis points margin improvement, which implies a pretty strong drop through rate from gross profit, assuming consensus expectations around gross profit. That's the point I was trying to make.

Yes, it is pretty ambitious and it's also partly supported by additional cost savings, head office, back office that should support that drop through rate.

Although, again it's not just about the drop through rate, because if you grow more in perm then perm might not, essentially, have a huge drop through rate but it might still overall help your performance. So you shouldn't just concentrate on the drop through rate.

This is a tough word. You should concentrate on, again, all the circles in our model.

Yes, sure. So the implicit in the numbers is gross profit -- gross margin improving because perm's going up, yes.

Yes, and again, as Robert Jan said, if the European economy continues then we'll see a somewhat richer business mix. This helps, and is implicit in our model.

And then our Sourceright business is around $0.5b.

I’ve two questions, please. The first one on the Netherlands, can you tell us what you think the impact might be on your business from the regulatory changes that will come into effect on July 1?

[Foreign Language] and the second question is on your finance charges in Q1. Can you explain to us why the strength of the U.S.

dollar led to such a highly negative finance charge in your Q1 results? I know it's non-cash, but I just would like a bit more explanation on the metrics, please.

Okay. I'll do the first one.

Well, we were able to pass through these costs for the effect of a very nice way of calling the [Foreign Language]. You do it with an English accent.

That's very interesting. Yes, just a reshape of the rules of the game.

So it's always been the case that the client, at some point in time, needs to decide if he wants to hire a temp or if we hire a temp. So we don't see it currently as a big effect on the top line.

The biggest effect, as always, on the top line, of course, is economic growth. That is improving in the Netherlands, and it's also a catch up effect, because, at 10% growth rate, given where we are economically, implies that there's again some catch up effect.

As you probably know, Konrad, penetration rates in the Netherlands are lower than they were in 2008. So, yes, we'll have the discussion with clients on the ideal mix that he has as a company, but they're also faced with an uncertain future, so we don't expect penetration rates, as a result of this law, to go down.

Well, Konrad, welcome in the bookkeeping world. The currency change or the increase of the U.S.

dollar, again, has resulted in a significant increase in the equity position of Randstad. But it also looks at positions internally, and let me be very clear.

At Randstad we follow economic logic, so that means that we match U.S. dollar earnings with [indiscernible] with net debt composition, so we aim at redeeming the net -- the syndicated loan through the dollar earnings, for example, so that streams through clearly.

In order to get U.S. dollars from America to our treasury center in Switzerland and then into the syndicated loan you can wait for dividend payments but that takes long time.

We cannot pay a dividend monthly, but we'd like to redeem the loan very frequently because that, economically, is the most efficient way to do it. So what we do is we take out money from the U.S..

We bring it through the treasury center into the syndicated loan, and as a result of that you get a current account, which is netted out against the dividend payment a little later. And that's where you get a currency translation effect in the P&L.

So it is translation of temporary internal positions. I hope this helps.

If it doesn't, give me a call.

Okay. Just a follow up on my first question, what I haven't been able to figure out from the legislative stuff on the [Foreign Language], if a temp has been employed by, let's say, ING or Nationale-Nederlanden which has been in the press recently for two years, they should offer him a permanent contract.

Does this also apply, this two-year period, to temps that have been working or Randstad for two years, i.e. do you need to offer them a permanent contract once they've worked for you at various employers for two years?

First, to ING and Nationale-Nederlanden, it's always a bit interesting that one client then becomes the headline. As you probably know, Nationale-Nederlanden and ING have been trimming down a fixed headcount for quite a while and rather dramatically.

They're not the only one. Many banks and insurance companies are doing that, and you know the reasons why.

So this is client that looks at his flexible layer and also compares it to his own fixed headcount, going down, so he's not prone to hire temps after a certain period, because that's not what he wants to do. So it's an isolated discussion which is far more geared towards the strategic outlook of a client on his headcount than it has to do with the law, as such.

And indeed, if a temp has been working through us at the same employer or two years then the moment comes up, as it has been for three years, in the last legislative system, then something needs to happen. We either hire him, the client hires him or the job gets -- the job finishes.

We do think this is a bit of a too isolated look, from the government. You know our vision on this.

You need to look at changing the labor market towards a future and the future is flexibilization. The future is jobs on demand.

The future is working at home. So you need to regulate flexibility.

If you don't do that you get the systems that we had in Latin Europe, even before the European crisis. There was 8% to 10% structural unemployment.

So, it's not like if you make flexibility unattractive it becomes fixed. It becomes either jobs that disappear or it becomes a bad regulated flexibility, because next to the structural unemployment in southern Europe we've always seen quite an extensive, call it grey or black sector of around 20% to 25% of total economy.

And so, as mentioned, by me, in several media, we're very open to discuss with the legislative in the Netherlands on a holistic approach, creating a modern job market and labor market, with a place for everyone. It's about work, and not a job.

Konrad, I'm adding two lines that might benefit others as well on the currency issue, and if you translate, within Randstad, the value of our American business on the consolidated balance sheet, that adjustment relating to the U.S. dollar goes into equity.

If you translate a U.S. dollar position within the treasury center in Switzerland, which is denominated in euros, if you translate those dollars it goes into the P&L.

So this is bookkeeping, and I'd like you to keep that in mind as well.

Two questions for me as well. First, Robert Jan, can you give an indication of the cost savings that you achieved already in Q1, and if you had to say -- and is it that the €9 million charge you take for your Netherlands, will that add to the cost savings target?

And does this also imply that the Netherlands might over achieve its target in the 6% to 7%? That's my first question.

And the second question is on the Netherlands. Looking to your EBIT margin, and I also heard the accusations from one of your peers a couple of weeks ago on the Dutch gross margin, can you give us a bit of a feel, because that seems to me that that's more a mixed thing and difference in delivery models than pure pricing pressure or how you call it, hey?

So can you give us a bit of a flavor what the gross margin trend is in the Netherlands, and what part of that is driven by mix from in-house, for instance? Thanks.

Yes, on your first question with regard to the cost savings as a result from the restructuring at the end of last year, we said it would come through in the course of Q1, starting relatively early. That means it's just north of €5 million per quarter, so we're very close to that number for Q1.

And the professional space -- the professionals one is a different one, Marc, so what we did, and by the way, one quarter earlier than we would have expected. We've grouped these three companies together.

When you look at our professionals business in the Netherlands, based on what we call effective modeling, the teeth to tail ratio was not great, meaning we had too much management and not a lot -- not enough front line people. So most of what you see coming out at the €9 million severance provision, but it's also real estate, by the way.

It's a mix of these two things, because we've got also, of course, we're going to work with less and combined branches. We would like to put in also, well, a large part of this €9 million, over time, back into front line people, because, as you can see, the business is growing at 19%.

If we keep up this commercial momentum it's definitely the right moment to get these people in. So it's not like €9 million is going to be pure cost savings.

Lots of it is going to be invested in front line people. So that's good.

Yes, well, you know, we're very happy with our Dutch performance. Commercial aggressiveness has been upgraded, as you can see, and it's taken effect in the SME space, definitely helps in our business mix.

Perm is growing 20%, very helpful. And indeed, delivery models, an increasing part of the orders in the Dutch business is not generated through the branch, but through delivery models, not just in-house, but also for large banks, large government offices, in central delivery models, in central locations, heavily automated, so again, it gives us a relatively high return on the gross margin.

So gross margin is one, conversion is the other. Apparently we're doing slightly better than competition here.

Yes, that's true. On the conversion that's also what I see.

Can you give us an indication of the gross margin trend, year on year, and if that is purely down to, for a big part, due to just mix and different delivery models?

Yes, it's overall pretty stable, so we do see pressure with large clients. It's slightly going down, but that's offset by, again, conversion and cost level.

But we can work with going down, as you know. If you would look at the gross margin in the Netherlands quite a few years ago, where it is now.

It's a tough job, but we're coping.

So what you're saying is actually that the price pressure is offset by putting in a different delivery model and that's why the EBIT margin and things like that?

Yes.

Just one question from me. Sorry, you've already discussed it in a bit of detail, but is there any more color you can give around the in-house strength, growing by 17% organically and expansion of margins?

Any idea or indication where that is, regionally? Or perhaps even expand on the comment that you made around the certain circumstances in France where it works well.

Thanks.

So, if I understand you correctly, you want us to give color on the in-house growth per country?

Big picture, yes please. It doesn't need to be too detailed.

Big picture is we see pretty decent growth in many markets, certainly -- it's -- Yes, it's mentioned, but not with percentages, by the way, on slide 19. So, of course France we do it there explicitly, because it's a large part, very much against the market, in a good sense, but also our Dutch business still doing well, also our German business.

This goes back to my earlier answer to another question that our large clients are still using structural temps and like it. So it's a pretty broad basis, you can see, Iberia, North America.

This is partly the uplift, also the fact that our in-house model, which started in the blue collar logistics environment is now increasingly used also in the white collar environment, and it opens up the market more for us. So this also fuels growth.

Some questions from my side. Can you give us some timing or is it difficult, on the rebound of the U.S.

professional segment? I understand from your IR colleagues that should be around the second half of 2015.

And then on the Dutch segments, clearly you're becoming commercially more aggressive in SME for some time now. Can you share with us where you are in the share of wallet there?

Because you were at 20%. Your target was 30% of revenue.

How far are you now? Thanks.

Yes, on the first part that's a tough call, Yves. We're working hard on it and I say to my people -- as soon as possible.

But I cannot give you an exact call. It's simple.

We're working in a good market. Our ambition is to be at or ahead of markets, and, yes, they need to move faster here.

I cannot give you a timetable. This is about people.

Now, the second question was on SME. Yes.

This is a bit too detailed, in a way. It's simple.

SMEs, if it outgrows the overall growth in the Dutch market, so that 10% overall, and then SME growing between 15% and 20%, then it becomes a bit of a larger pie. But it's probably currently around 20% to 25%.

Okay, thanks. And maybe -- okay.

That's fine. That's fine.

Good.

No, tell us. What is it?

No, but maybe some follow up question on the increased activity levels? Last year you recorded a 30% year on year growth.

Where does this figure stand now? And how does this --?

It's difficult to say, but which conversion results from placements that have been recorded from that increased activity, I guess, but can you share with us, if this level goes up first or --?

Yes. We're now focusing -- well, less on the absolute amount of activities, because that's where you start.

You start visiting and calling more, sending out more candidates. We're now focusing more on the quality of the funnel, as we call it, so we're looking at what people are doing.

What are they discussing with clients and how does it lead to a more effective order intake? And then of course, when we talk candidate management, certainly in our professional space, can we fill more orders?

So we're now more focusing on the quality of what we do, and then the quantity is by and large, we think, sufficient to fuel our growth goals.

Thank you. Well, I'm finalizing the call now, but before doing that I would like to again mention the analyst event that we'll have next week in Barcelona, on May 7 and 8.

I think we're going to see 15 of you over there. We'll talk about some of the details of our business, in Southern Europe, for example.

And then we have the publication of the second quarter results, which is scheduled for July 31. So, looking forward to either see you next week or to meet you again at the end of July.

Thank you so much. Have a good day.

Bye, bye.