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Hello, and welcome to the Randstad Third Quarter Results 2019. My name is Jazz, and I'll be your coordinator for today's event. [Operator Instructions] I will now hand you over to your host, Jacques van den Broek, to begin today's call. Thank you.
Yes. Thank you, Jazz. Good morning, everybody. Jacques van den Broek here in Diemen with Henry and Steven and David, taking you through our third quarter of 2019. So let's go immediately to Slide 6.We're -- yes, it's uncertain macroeconomic circumstances. You all know that. But still, we're satisfied with our good set of numbers, very much in line with what we shared with you on how we're managing this business. Our organic growth, slightly eased in Q2. Again, main culprit here, if you might call it that, is the industrial-related, very much the automotive. If we look at our 2.5% decline in Q3, we can attribute 55.0% to automotive, predominantly in the German market, but certainly also in the Dutch and Belgian one.Europe, in terms of economic growth, is most challenging. The revenue decline in the whole of Europe of 4% stabilized versus Q2, be it on slightly easier comps. Our North American growth, predominantly in our industrial-related areas, in our Inhouse businesses, softened slightly versus Q2. I'll spend a little bit more time on that, of course, while we go through the countries. But Rest of the world and also our Global Professionals Businesses, it's very good to see, of course, that both through our global presence but also through our portfolio of the country, we do weather top line pressure well. Most of our Professionals businesses in quite a few markets still show growth.Given the exit rate of September, we feel that the recent trends will probably persist. Although as always, it's tough to call certainly in these uncertain environments.Our EBITDA margin is slightly down, although our margin was robust. Our gross margin has been robust throughout the year. And at the same time, I mentioned it also before in the second quarter, we don't want to optimize short-term results. We still want to catch growth where we can catch growth and of course definitely still invest in our digital transformation.Within those markets, I'm very happy to mention that in our French business, our German business and our Italian business, we performed better than market. Rest of the world, as mentioned, doing very well against tough comps because this region really started becoming an important one for us last year. So at some point, comps catch up with you. But actually, so far, so good.Gross margins, doing quite well. Several countries, the Dutch, the French, the Japanese, the U.S. market, which is a mix. It is, and we mentioned that before, our focus on pricing supported by our digital pricing tools. At the same time, it is tough to find people even in many markets in Europe and the mix effects of our blue-collar market doing slightly less growth.Highlights for us this quarter, very much our free cash flow, already part of our story for a long time. If we grow less, we need less working capital. We're also very diligent on DSO. Henry will spend, of course, more time, but a record high of EUR 468 million, very proud of what we're doing here.Then on our digital strategy. Very happy to announce the proposed nomination of René Steenvoorden as the Chief Digital Officer to our Executive Board. As you've seen, we are changing also our top team towards the new priorities. Historically, those were always countries and regions. But next to that, that remains important, of course, is very much digital and also clients, international clients and international businesses. And more on that one later.In general, digital strategy progressing well. What I would like to highlight is our workforce scheduling clients, some 1,600 clients now active with this tooling. And what we found is that out of the 22 new Inhouse clients we landed, for example, just in this quarter in the U.S., 88.0% said that they did so because of the tooling and the digital support that we provide them.Let's go to Slide 7. A little bit more in depth in the regions. North American business, Staffing/Inhouse down 4%. This is a mix thing. Yes, we do see, and this is always a good indicator with our Inhouse businesses, less demand. They are uncertain and they just -- well, have less temps with us. At the same time, we also underinvested a bit in this business as we said. We're addressing that. But at the same time, this takes time to bring in people, to train people. So still, 1 or 2 quarters out, but addressing this issue. This, again, in general, in these environments where you see 1% negative growth, 2% negative growth, it's tough to call. And we want to be on the safe side, ideally not to go too fast in cutting costs. There's always this balancing act.Quite happy with our U.S. Profs performance. Our IT business grew 4% in top line but grew 7% in GP. We think we are slightly ahead of market, which is a long time ago. Our F&A business, a mixed picture. Still negative in the Staffing part, but 13%, 1-3 percent, growth in perm. So also some good news from that area.Our Canadian business was hampered by legislative change a year ago, but it's bouncing back so good with also a further progress in profitability. Overall perm, 4%. Still good perm growth, again showing the tight labor market in the U.S. Our EBITA margin, stable, high. 6.2% is high in our book. At the same time, we are investing in Staffing but was also the slower top line growth at very decent pricing. I mentioned Inhouse already earlier, but we will have a record amount of openings in our Inhouse businesses, 62 new clients this year. It doesn't show, but certainly, going forward, having more of these clients will create a bigger base for us. Still, remember, in the North American market, we have a 3.3% market share. So lots of room to grow very profitably.Our French business, quite proud of our French business both on the top line and also the profitability level. Yes, absolutely, uncertain macroeconomics, but we do see a difference in automotive in Germany and France. Germany, really impacted by trade wars; China, the German automotive sales internationally; French, automotive sales in Europe. So yes, absolutely, also pressure there, but less compared to Germany. Yes, 1% down on market, so better than market. As you know, our French business is and has been an early mover in workforce scheduling, in digital adoption in general and that shows. Our Professionals business, very sound growth. This is our OC business in France. But also our health care business and also Expectra really contributing just -- not just to growth but also to profitability because this business comes in at a higher EBITA.The Netherlands. Yes, I want to spend a bit more time in the Netherlands because, of course, you asked us some questions on what goes on in the Netherlands. Well, first of all, on the top line, very much the automotive that also has already in Q2, but certainly now permeates into the Netherlands. In the Netherlands, we make cars, we make buses, we make trucks, and that is under pressure. Also this morning, Tata Steel announcing cutbacks. They are also active in automotive. Professionals, still robust in general. Also here, our portfolio pays off. But at the same time, perm is under pressure, and that does show that the Dutch economy is undergoing a little bit of uncertainty. Still good profitability but slightly less than last year. We will be aligning our cost base further in the Netherlands based on this top line development.So let's talk a bit about the WAB, which in English would say towards a balanced labour market. What the Dutch government tries to do is make fixed labor less fixed and flexible labor a little bit more fixed, if you will. What they're trying to do is increase the cost of flexible labor, therefore hoping that clients will hire more people. Honestly, you see -- honestly, we've seen many of these laws before. They never really pan out because companies need to be flexible. The risk is that you get to a different, less well-regulated flexibility, but time will tell. What is happening here is that due to lower unemployment -- or higher unemployment benefits, flexible labor will be more expensive. Also, there is a, call it, transition allowance of people when they lose their jobs. That was already in place in the market, but now -- and that was after 2 years of working as a temp. Now it is from day 1. So we're all for improving the position of flex workers, of course, but what we'll see here is that the cost of well-regulated flex work is more expensive. It's a bit tough to call how much more expensive, but let's say anywhere between 6% to 9%. So that's quite something. We've seen that before, of course, in many more markets. In Germany, the cost of labor has gone up. We've seen it in Canada recently and also in the U.K. when they went to equal pay. So we've seen it before. Short term, you will see some pressure on volume, we think.At the same time, our clients are not very much aware of what goes on. So we're hosting webinars, we're talking about how you manage your total workforce. There are clients -- I'm also talking to clients, as many of you know, who, by managing the total workforce better, you can probably offset the cost. But time will tell. Lots of work going on, but this is what's happening in the Dutch market as we speak. Very tough to have projections on this one as of January. So you can ask, but again, it's tough to see. It's going to be the result of many discussions with many clients.Germany. Yes, still challenging, goes from minus 15% to minus 14%, but on 5% easier comps, so we're definitely not out of the woods yet. Some signs of stabilization, but we also -- in automotive, but we also see industrial segments in general coming down to some degree. Yes, not much to say there. We got some questions on the [indiscernible]. So as you know, we have all our people in the field on 10% less working hours per week. And we can do this up to the 1st of July next year. So time will tell if this is enough, given the conditions in Germany. We don't see it going up yet, honestly speaking.Belgium market, robust profitability. Very happy with our Belgian business. Although at the same time, also their top line is related to automotive. Our exposure to automotive and related to some 10% of our EUR 2 billion of revenues in Belgium, and so we have a 26% market share. So it does hit us. But as you can see, in the profitability, again, we can weather that storm. Belgian business is a very diversified portfolio also. It has Professionals in the mix. OC is also in Belgium. So in that sense, yes, well done by our Belgian colleagues.A country we're also particularly proud of is our Italian business. Compared to 5 years ago, it's probably 3x as big. It's quite -- it's performing above market. Our Italian business is actually the benchmark when we talk about training people. As you know, we don't own training companies. We don't have the strategic ambition to train -- to own training companies, but we do a lot in training. So we have now, in our Italian business, trained 30,000 people and going forward. So very helpful. These are mainly small training. So 7 hours on average. I'm very -- well, personally -- well, we're out of Formula 1, as you know, but we, for the last 5 years, every year, we provide 50 to 70 young engineers and technicians to Toro Rosso. Very popular job, 3,600 CVs. And then at the end of the day, 50 people come out. So again, almost 6% EBITDA out of our Italian business. Well done there.Iberia, still growth. Well-run business Spain. Improved profitability. Portugal, down. Portugal has -- the large part of our Portuguese business is a call center business, which see some dampers in revenue. But certainly, overall, our Iberian performance, a very stable, well, portfolio with increased returns. Rest of Europe. Yes, rest of Europe very quickly said, but of course, totally different countries. U.K., stable picture for a long time, Brexit, but yes, it is now down 2%. It was stable in Q2. Not much happening there in security. Nordics, 7%. Swiss growth, above market but stable. And our Polish business, also slightly down. At the same time, good cost containment. There is consistency there and also an improved EBITA margin in this region.Going to the Rest of the world. Definitely, a highlight has been for quite a few quarters, and it's not hinged around any specific countries. Japan, absolutely doing well. 19% growth in India. Brazil, Mexico, very happy with the performances over there and really, really helpful for our overall results.Then going to Global Businesses. What I shared with you last time is the fact that, for me, Global Businesses very much represents what the Rest of the world was 5 years ago. So we are investing, we're creating something new. We have put and nominated Rebecca Henderson in our Board to run our enterprise businesses. Our large businesses through Sourceright, but also RiseSmart, I'm also a part of that portfolio. And we've created this quarter an enterprise group. What does that mean? Our enterprise group addresses large clients throughout the world, clients with EUR 500 million to more than EUR 1 billion in spend. These clients are increasingly worried about the future, how they get talent, how they reskill their own workforce for the future, how they use technology to get people in, to assess people, to test people, to train people. And we help them. I call this. We answer the question for these clients on how we organize work. So what we're doing here is we're mobilizing our full suite of services towards these clients. So in their IT part, engineering part, we have our [ statement award ] business. We've got data. Monster is very much a part of this. We can show clients where people are -- still are, how clients stack up on social media, how they also can use job posting and that sort of thing. And we have advisory. So very much helping our clients as we do in Inhouse for a long time, how they set up their workforce now and in the future at the lowest cost and the highest quality. So this is an investment area, very much an investment area, and Monster is very much part of that investment area.As you've seen in Monster, the top line revenues, certainly the -- the old job postings are still going down for us, and that's why we decreased costs. Out of the EUR 35 million we mentioned as a one-off, 40% is related to staff, although not client-facing. And then we have real estate. What we've seen is that while putting people together, so run some people with Monster people, we get a very much a better grasp of the total labor market. So that's why we took this decision in Monster. Sourceright, the biggest, call it, company within our Global Businesses, sees a good and strong acceleration from Q2 into Q3. So a good and healthy client pipeline. So overall, even though in an adverse economic situation, very optimistic about the future of our enterprise group as a whole because in this area, there's not a lot of companies that can play.On that note, Henry?
Thank you so much. Thanks, Jacques. So good morning, everybody. So it's my pleasure now to take you through the Q3 financials. So as mentioned by Jacques, the company delivered another sound operating performance in continued volatile market. And the strong growth margin, controlled OpEx and the excellent cash conversion are setting us up with confidence for the remainder of 2019.But be mindful of market uncertainty. Our healthy gross margin performance provided room for continued selective investment to secure competitive growth. And as you know, it's important for us to balance short-term performance and positioning the company well for the longer term.Let me run you through the P&L to provide you a bit more detail. But before I start, let me point out that our growth numbers are not adjusted for hyperinflation accounting in Argentina, but the impact for the group is very minor. So revenue is down minus 2.5%, with around half of the decline coming from automotive. Europe remains challenging, but it's showing some signs of stabilization. But industrial and manufacturing site in the U.S. is experiencing some slowdown. It's very good that we can rely on our strong portfolio with our Global Professional and Rest of the world business showing sound growth. And equally important is the fact that we could continue to achieve market share gains in several of our countries where we're being very disciplined of our pricing. The wider use of value-based pricing in the context of ongoing tight labor market helped deliver another quarter of robust gross margin performance. 20.1%, up 30 basis points year-over-year, is motivating us to roll out the concept even more aggressively to more markets. And obviously, there are also some supportive mix effects at play, which I will lay out in the gross margin section. Operating expenses were up 1% year-over-year, reflecting our ability to support our most promising growth opportunities whilst going through continued efforts to adapt our cost levels to harsher market realities. [indiscernible] is a given. Personnel expenses are down 1%, FTEs are down 2% year-over-year. EBITA came in at EUR 298 million [ with effects ] EBITA margin.On the next line, integration and one-off costs were EUR 62 million reflecting several items. Firstly, about EUR 35 million is reserved for realizing additional synergies with Monster but also adjusting the cost structure overall. Another EUR 16 million is related to the transfer of the Dutch pension plans with third-party providers, as already announced in our quarter 2 press release. And the remainder is used to adjust our cost base to new market realities in several regions. Clearly, we are taking actions where we need to. So as always, quite the moving parts, and it's good to see the quality of results coming through. But we're also appreciating the fact that we had some tailwinds from 1 extra working day in quarter 3.So now on Page 14. Let me unpack the gross margin for you. As you can see on the left, the temp margin continued to positive territory in quarter 3, being up 30 basis points year-over-year. We're experiencing ongoing healthy pricing trends as a result of the structured management effort to utilize labor market data, feeding our value-based pricing tools across our portfolio. And as a result, we're better able to benefit from tight labor markets. Regions like the U.S., Netherlands, France, Japan and Spain benefited in a significant way, confirms our ability to price with superior value delivered to our clients globally. Please note that our gross margin trends were sound without any tailwind from perm this quarter. Our perm fees were down by 1% driven by increasing uncertainty at our clients, specifically in Europe. However, it is fair to say that 1 additional working day always shows up positively in gross margin.And lastly, the bar on the right represents HR solutions, which shows a neutral effect on the gross margin. And it was Monster mix effect was offset by positive ForEx effect, in other growing HR service businesses. As I highlighted before, in volatile markets, we see some significant shift in growth rates per region and concept and hence keeping a close eye on gross profit in relation to OpEx. It's key to ensure benefit is showing up in EBITA.And that brings me to the OpEx bridge on Page 15. So here, as Jacques already mentioned, when it comes to OpEx ceiling, we always try to find a smart balance to swiftly adjusting the cost base to the macro environment while securing enough funding to capture the many growth opportunities we continue to see in the marketplace. Sequentially, we reported organic OpEx down by EUR 11 million, which is year-on-year up 1% against tough comparable. Please note that this primarily comprised selective investments related to the digital road map and other strategic growth areas.As mentioned, personnel expenses were down year-on-year 1% and full-time equivalents were down minus 2%, underpinning a tight [indiscernible]. Finding the right balance between tough cost management and nurturing our growth engines remains a key priority. And given the tougher macro environment, we would tighten our belt accordingly.Then we close that chart with a confirmation that we're fully on track to deliver our cost savings target of EUR 90 million to EUR 100 million annually by the end of this year.So now on Page 16, let me shed some light what it means for our cash flow and balance sheet. We reported in quarter 3 a record free cash flow of EUR 468 million, which is an improvement of EUR 248 million in absolute terms. The main driver for the good free cash flow is strong working capital performance reflecting our slowing top line growth while benefiting from [indiscernible] management and also a favorable timing of the quarter-end. The development of our receivables and slowing growth environment perfectly illustrates the countercyclical nature of our business model. And please do not forget that the change in the French subsidy system is leading to an instant cash inflow.The last bullet on the left shows day sales outstanding, which was slightly down versus last year and quarter 2 2019 on a 12-month moving average. As mentioned, our dedicated DSO management is delivering good returns and will continue to be a top priority for us.On the right hand of the chart, our strong balance sheet. See, our net debt position improved by EUR 479 million versus quarter 3 2018 to EUR 1.595 billion, which includes our lease liability of EUR 634 million. And please note that the pre-IFRS 16, our leverage ratio arrived at 0.8 versus 1.2 last year in quarter 3. Whereby last year, special dividend, payment happened in quarter 3. This year, it's being paid in quarter 4.This adjusted leverage ratio will also be the basis for our unchanged capital allocation strategy going forward. Our focus now has already turned to land a strong quarter 4. I will call the outlook for the full year 2019 free cash flow very healthy. Finally, let me reiterate that the outstanding CICE receivable of EUR 491 million will be collected in the coming 4 years, of which about EUR 105 million will be received in this quarter.That already brings me to the last page, on Page 17. Let me summarize the key messages and provide you with an outlook for quarter 4 2019.But firstly, it was good to experience a quarter with sound operating performance, competitive top line trends, robust gross margin. And balanced cost management delivered against a backdrop of lower economic growth in some of our main markets. September trade is in line with quarter 3. And we're energized to continue our drive for healthy gross margins, and we're definitely well positioned to monetize the added value of our services in tight labor markets with our pricing tools getting further traction.We see quarter 4 gross margins to be better than last year, however, slightly lower sequentially given working day effect and OpEx broadly stable sequentially. And while market conditions are uncertain, Randstad is very well positioned to capture growth opportunities in the future. The quality of our portfolio, strong customer relations and best access to top talent is giving us the confidence to thrive with some tougher market conditions.So that concludes our prepared remarks, and I hope it helped shed some light in quarter 3. We would like to take your question. Jazz, back to you.
[Operator Instructions] The first question comes from the line of Hans Pluijgers from Kepler Cheuvreux.
First, looking at France. Okay. You a little bit performed better than the market. I'm also looking at the exit rate. You -- let's say, going forward, but stable growth. What's the key reason that you think you are outperforming the market? And are there any segments you're doing better than the market? And how you do, let's say, see the market performing for the quarter? And secondly, on the Netherlands, let's say that the slowdown in growth is that, let's say, mainly driven by demand or is also issues on the supply side? And then looking at Monster, if you can give maybe some feeling of the old business, how big is total sales of Monster? And my last question, you a little bit indicated that you are, let's say, in line to achieve EUR 90 million to EUR 100 million cost savings, but I assume that, let's say, most part of this is already done. So not much we should, let's say, expect for Q1 and Q4. Is that correct?
Yes, Hans. Thanks for your 2 questions, actually 4. On France, yes, outperformance, so our French business, as I mentioned in my presentation, is one of the businesses which, from a digital point of view is further enhanced and Hans, so our people have what we call data-driven sales tools so they can go out to clients at the right moment in time and talk to them on the basis of local market data, what kind of people are available. So that makes them better salespeople. Still very much Inhouse driven by this workforce scheduling tool, which was developed first in France. So an early mover there. And finally, we said goodbye to Renault, a big client. And that comparison is also easing. So that makes -- brings us to an outperformance. Also, our Professionals businesses, OC, high single-digit growth in France. And also, our medical business doing quite well. So that's the total mix that brings us to an outperformance. In the Netherlands, no. Although people are tough to find, Hans, so the margin that we're getting is good for our business. It is really demand-driven, again, predominantly in automotive-related sectors and in the broad sense, industrial.On Monster, no, not really sharing that information, what is old and new. That's very tough. So I cannot really answer that question for you.
Yes. On your last one, Hans, I hope you understand, we focus on delivering quarter 4 in a strong fashion in terms of cost savings and we've performed well, and we're on track to realize our ambition. I think we've demonstrated one more time in quarter 3 that we take actions where we have to. And obviously, going forward also, always look to improve productivity.
The next question comes from the line of Paul Sullivan from Barclays.
Just firstly for me, can you just give us more color on the payback you expect from the additional restructuring you've announced today and the SG&A guidance in light of that? And for the year, is your expectation of flat margins still achievable given the revenue decline? And then secondly, do you have any flexibility in the 50% payout for the dividend, for the ordinary dividend, given the potential for EPS decline? Can you avoid the headline cut in the ordinary even though the overall cash return through specials or buybacks may be very similar to last year?
Thanks, Paul, for your questions. For the first one, payback, we normally seek to have the payback below 1 year time and those will be -- will also steering again, that restructuring we've announced. The second one, we -- also, we're not giving guidance on full year EBITDA margin, but we said all along that we have an ambition to protect EBITDA margin as much as we can. And we are ready having all hands on deck on quarter 4 to bring in another strong quarter. On dividend, please allow us to first go straight on quarter 4, and we will talk dividend once we know how the year ended. And we'll get back, as we always do, in quarter 4 results.
Great. Can I just follow up on the restructuring? Can you -- should we be braced to any more restructuring in this quarter if we don't see -- if we see a similar revenue print to Q3?
There's nothing in the pipeline. I think for the time being, we've made our adjustments. But as I learned, one of my first week, and obviously from Jacques, we have managing business on exit. So we see a further deteriorating of conditions, we definitely do what's necessary to adjust the cost base at this point in time where we don't see any more coming through.
Paul, what you're also seeing, of course, in Q4, you're not just -- from a cost point, you mentioned Q4, you're also preparing for Q1, which also is seasonally lower. So that's very much what we're doing in Q4, but we'll let you know.
The next question comes from the line of Konrad Zomer from ABN AMRO.
My first question is on the OpEx development in the third quarter. As you showed it, it's up 1% despite the revenue decline, and you said it was to fund the growth initiatives in your portfolio. Can you maybe be a bit more specific as to -- in which specific countries you raised your OpEx? And my second question is on the potential of the special dividend. You've said all along that the change to IFRS 16 is not going to change the capital allocation policy of the company. You showed the 0.8 net debt-to-EBITDA today. Is that actually the number we should focus on in terms of calculating this potential special dividend? Or should we look at a slightly higher level related to your post-IFRS 16 numbers?
All right. On the first one, on OpEx, actually we're not providing a breakdown, but what we definitely do is we're managing the business for its long-term health. So if we have programs in terms of digital investments, so we see good returns, we maintain those and ring-fencing those in our attempt to adjust the cost base. And what you've seen, that's why we gave those 2 proof points, there is very tight steering with actually personnel costs going down 1% and FTE 2%, but we're maintaining those, but it would make sense to break that out into countries. But because we're also developing assets for the entire business. On your second one, special dividend, you're about right. So we have -- IFRS 16 will not have an impact on our way we are calculating leverage. Please note the 0.8 compared to the 1.2 last year is also influenced by the dividend payment. And last year, we had a special dividend payment in quarter 3. This year, we made the payment already in quarter 4 in the beginning of October. So therefore, the comparison looks a little bit too positive. But we are looking at the leverage ratio as we did last year. Pre IFRS will not have an influence.
And yes. Based on your question on special dividends, so you know our capital allocation policy, which is unchanged also for this year, so we'll get back to you once we know the full year results and what that entails.
Okay. Just one quick follow-up. Can you share with us what proportion of your Dutch business is related to automotives? I presume PDL is quite a big customer but [indiscernible] Belgium...
Yes. It's a little bit less than 10%, high single digit.
The next question comes from the line of Anvesh Agrawal from Morgan Stanley.
I just got a couple of follow-ups on Monster here really. First of all, given the amount of restructuring you're taking and your payback expectation, assuming that the top line trends of Monster kind of remains negative, but do you -- should -- can we at some point expect the business to turn kind of profitable versus slightly negative on operating profit right now? And then the second is just like, if I look at the outlets by region then within the Global Businesses, your outlets are still growing sequentially in Q3 and year-on-year. And given the amount of restructuring you take on Monster, that kind of doesn't really add up. So maybe if you can give up some details there, please.
Yes. So we expect Monster to be profitable in Q4. That's the first part of your -- the first answer to your question.
These are audit concerns mainly driven by Inhouse locations in the U.S. where we had some nice gains on client activity.
The next question comes from the line of Suhasini Varanasi from Goldman Sachs.
Just a couple for me, please. One is on the gross margin. It's quite impressive that the margins have expanded 30 bps in the third quarter. Can you talk about the competitive landscape and what exactly that you have on the digital side that differentiates your products and you're able to command better pricing in the market? And the second one is on the U.S. What has incrementally changed for you? I may have missed that, but what has incrementally changed between Q2 and Q3 in the U.S. that has led to the weakening market there?
Yes. Well, what has led to a weakening macro is called the trade war in U.S. So we do see clients who trade in, call it, industrial markets and industrial. They have less demand, and we see that both in our franchise business. As you might know, especially now, we have a franchise business, which, also for us, a bit of a market indicator. You also saw the BLS coming down a bit to 1% growth. On a side note, it's more of a still there was a strike at General Motors, and we took out people not at General Motors, we don't but -- out of the supply base, but that didn't help. So that's what's happening in the U.S. Again, slight weakening. And at the same time, we also underinvested in headcount. So therefore, our headcount is lower than our growth compared to last year, and that's not what we like to do. So better balance. So also bringing in more people as we speak in the U.S. On our gross margin, digital support, so what we have is a tool in the Netherlands now rolling out in Germany where the consultant can go to the client and on her handheld, iPad or whatever, they can show the local labor market for the relative job they're talking about, the scarcity of that profile, they can talk about what is being paid for a profile and then they can talk with client through that. And there is a pricing tool adjusted to it, which, in the Dutch market, is a pricing tool for Staffing, for the government or direct perm. So that conversation is working well for us and for our consultants, and it results into better pricing. Also early days because it's a small group in Germany, but also we see the same effects there. And that's why also why Henry said we're going to roll out these tools as quickly as we can. But to be able to do that, we need a certain data set on local labor markets that's only -- the only inhibition for the speed of rollout. But you'll see this tool certainly in 2020 in way more markets.
The next question comes from the line of Tom Sykes from Deutsche Bank.
Yes. First question was just on the gross margin. Presumably -- so your gross margin isn't just the difference between what you're billing out and what you're paying the temps or just your markup. You've got some nonwage costs in there. So I was just wondering what's happening to nonwage costs, your ability to manage sickness, sort of absence and then any other sort of nonwage costs that are going in there and what might be the movement in those year-on-year and perhaps kind of where they are versus history, if you like, as a proportion of sales of those come down. Are they similar to history? Or where do we stand on those, please?
Yes, Tom. If anything, it sort of strengthens our margin story because what we see in Germany also because of the downturn. We see actually more sickness. We see slightly more sickness in the Netherlands. That's also because low unemployment, and you put people in, but the pressure in workforce, this is high nowadays. So it's not like we have a better margin because of our nonwage costs or our company wage costs went down. It's actually the reverse. Our margin is higher because of the pricing tools, the different business mix, yes, and diligence on walking away from clients who don't want to pay. So yes, it's very much that.
Okay. And then how big are nonwage costs as a proportion of sales, please? I'm trying to think about this, just ballpark in aggregate -- the impact on gross margin.
No. I cannot even give you the city the ballpark is in, let alone the ballpark, so sorry.
Okay. Why is that?
Why is that? Yes, it's not something we manage on a global scale. It's very different country by country. That's also driven by legislation, so it changes every year in every country. So it is -- I can talk to you about themes in certain markets, way more in the Netherlands, but it's a big bag of cost that we tightly manage, but it's 38 times different in 38 countries.
Okay. So without knowing it, you're still saying that it's not a benefit to your gross margin.
What I said was that where I know it, where it's a big part. It actually went up, so to say, because of sickness. So yes.
Okay. And then just on the growth in the Staffing business, could you -- I think in your annual report, you said ballpark, 50-50, between light industrial and nonlight industrial. Just wondered if you could make some comments on what's happening in light industrial versus nonlight industrial and whether you're seeing any impacts of weakness in the clerical markets at all, please.
Clerical market is just okay-ish. So it's more light industrial for us certainly in U.S. So light, yes, light, it's very broad term, but it's mostly logistics, that sort of industry, nothing too specific. As you know, we got 3.5% market share in U.S., so it's not like we're hinging on one sector.
You're right. But just overall for your -- excluding Inhouse and Professionals, you say it's about 50-50 light industrial versus clerical. And at the moment, you're not seeing any spillover effects from weakness in manufacturing to weakness elsewhere, you're just seeing it?
Not really. No. No.
The next question comes from the line of Rajesh Kumar from HSBC.
Just on the temporary margin contribution. You've seen a 30-basis point contribution on gross margin. What does that equate to in terms of like-for-like temp gross margin improvement? Also, could you give us some color on, say, in a quarter, how many times on average you would be renegotiating the margins? So just trying to understand how much of the margin lift you're getting is coming from the actions taken in the quarter versus over the last 6 months. And just in terms of the competitive landscape, have you seen any of your competitors change their tack on how they approach pricing? Are they getting more competitive? Or they're adopting digital solutions which make them more disciplined? Any color on that will be quite helpful.
Yes. Well, you asked some tough questions, Rajesh. What we normally do is we negotiate the margin for one-to-one assignments, of course. So when the assignment is in, so I cannot say on a global scale what that means. What I do know is what we can measure or when we have the supporting digital tools is that per match, we see an increase in margin. So that works very well. Competitive landscape is partly tough. I see Manpower with a 40 basis points drop in gross margin. That's a lot. But the digital tools are working well for us. Our pricing policy is unchanged as long as I can remember. We have this basis where we don't want to go under. And if it's too low, we just walk away. But it's not like deteriorating or anything. I would call it a pretty stable environment overall from a competitive point of view.
Okay. And the temp margin? How much is it up? Is it similar to the 30 bps contribution or is it a bit lower than that?
So if -- I mean we've shown 30 bps because we believe it is 30 bps [ absolute ], it's helped by an extra working day. Margin is not helped this time by exceptional perm growth. So I think we've laid it out as much as we can. To just give one more color on value-based pricing and pricing in general, I think we make very, very conscious effort across all our countries to put the pricing -- the ability to price and conscious decisions around pricing as part of our tooling for our business. And we have, as we speak, we're building our model supported by digital tools but also by just general discipline, looking at the pricing and that is also good returns so far.
There are apparently no further questions in the queue. [Operator Instructions] And you have another question in the queue. It comes from the line of [ Martin ] from [ IDF ].
One question about your cash flow, which is extremely very strong in Q3. Has some of the -- a part of this free cash flow being brought forward, so which we should have expected in Q4 and now dropped into Q3? Or otherwise, what are your projections for Q4? Will it be as strong as the last quarter of last year?
Yes. So good question, Martin. Thanks for that. Actually, we said also in our note that actually timing was helpful in quarter 3. So we had -- in 2018, actually the quarter ended 1 day earlier. So we have now in the quarter 3 a benefit of getting money in and paying it out actually on the 1st day of October. That has an effect also in quarter 4 then. So let's look at the -- how the calendar lies. 2018, the year ended on a Monday. 2019, year will end on a Tuesday. Tuesday is quite a material payday for us, so there will be some readjustment coming through, but that is -- we'll not take away from a very, very big cash flow in quarter 3 we had.
But could you quantify the impact to -- in Q3?
No. We don't do that.
There are no further questions in the queue, so I hand back over to your host for any concluding remarks.
Yes, Jazz. Thank you very much. Thanks, everybody, for joining this morning, and we -- we're on our way to finish the year as well as we can. And I hope to see you on the road shows or wherever we meet. Bye-bye.
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