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Hello, and welcome to the Randstad Full Year 2018 Results. Please note the call is being recorded. [Operator Instructions]I would now like to hand you over to CEO, Jacques van den Broek, to begin today's conference call. Thank you
Yes, thank you, Kevin. Good morning, everybody. Thanks for calling in and listening in on this Q4 call and also 2018 call. I'm in a room with Henry and David and Steven from Investor Relations. Before diving into the numbers, let me first inform you a bit about, at least for me, a very important event that took place in Q4 and that is that Linda Galipeau is leaving us. Linda started in our business in 1995 in the United States and was asked in 1997 to set up our Canadian business, which was nonexistent in those days. Today, our Canadian business is leading in Canada with more than EUR 400 million of revenue. She then took on the responsibility for North America. And in those days, that business was absolutely not what it is today. So she leaves the U.S. in great shape, a clear #2 in the market, with a 5.6% EBITA, and it is by far our biggest business. Next to that, Linda has been instrumental in our innovation and digital journey in the last few years, also taking care of our innovation front. So we owe Linda an enormous debt of gratitude. Linda, I know you're listening. I know you hate this, so I'll keep that brief. But anyway, thank you, thank you very much. Because Linda informed me already a few months ago of her decision, we had time to look at her portfolio with respect to what we see in the market. And that has led to a decision to nominate Rebecca Henderson on a portfolio, which comprises of enterprise clients, Randstad Sourceright, our big clients across the world, which increasingly want to be on what we call a total talent journey with us and our global businesses, Monster and RiseSmart. All 3 are global businesses that has a very specific rhythm to it, and that's why we created this portfolio. That means and that, I think, is quite historic that no longer we organize our company through geo, but we also become more client-centric where necessary. We see big opportunities here. That leaves the North American business and although I mentioned that we are a clear #2 here, we just have 3% market share in a huge market in a profitable market. As you know, we have an 80-20 policy on recruiting and promoting from within. But sometimes, we deliberately deviate from this policy, as is in the case here, because we thought it was very important to -- we're leading in digital transformation in our industry, so it's tough to learn from our peers, so we should learn from other industries. And that's why we very deliberately wanted to hire from someone who made his or her career in a business that went through digital transformation. We're very happy that Karen Fichuk has decided to join us. Karen has made a career in digital -- in news and media, which is a business that transformed fully into digital analytics and selling that and consulting clients on how to use data in improving their business models, which is absolutely also what we're doing at Randstad. So very happy that Karen joins us and Rebecca, of course, a rock star already for quite a few years in the client space. So we think we're well set up for the coming years here.And then taking you through Slide 6. An exciting year. We've been in course with you and also on roadshows talking about the fact that, as a company, we are a value play. Our share price goes up and down on economic sentiment, which is okay, but then still we made the point that we have a global business, we can manage our cost. We got good free cash flow, and we're very happy first of all, with the fact that we've been able to improve our EBITA as a percentage for the full year, but also very happy with a record dividend. And why is that? How did we change our business in the last years? As you know, last year in 2017 actually, Southern Europe was really the growth play, sizable, and this year in a way the new kid on the block is Asia Pacific and Latin America, improving -- they grew 12%, but they also improved their profit quite a lot, so very helpful. But also in country, in country, we now have very diversified portfolios. France and Germany have negative revenue in their Staffing business, but they grow in professionals and perm, and that makes us more resilient.And then digital. On digital, while creating a good year with a record dividend, we also made quite some good steps in digital. Workforce scheduling, so where we have automated planning where our temps get their own app to plan themselves and the client has 24/7 access to how the planning in his factory or his warehouse or his company is going, is going very well. We're now in 9 countries with the solution, and we have more than 1,000 implementations. We're going to talk a bit more when I talk specifically about France and U.S., which are the front runners with this service.Then, data-driven sales, a tool that helps our consultants to be at the right moment at promising clients, and they get a daily input, a system that we tested in the last 2 years in the Netherlands and U.S. and France. We've now made a best-of-breed system that we call Signal, developed it in Belgium, we now have full usage in Belgium. And on the back of that, this system travels, and we're going to bring it to other markets.And then, finally, something which is now ready for global rollout, that's Customer Delight, a data driven new way of measuring client and customer satisfaction and have direct feedback to our consultants. I'm going to talk a little bit more about that when I talk about Belgium. So all in all, very happy with the year.Slide 7. Diving into the regions or on -- or individual markets. Our U.S. business, stable growth overall. U.S. Staffing and Inhouse, 3% to 5% growth. In this business, we have implemented 200 clients with workforce scheduling in our in-house practice. What does that mean? By creating more time and overview for our account specialists, they can spend more time on managing the pool, having contact with clients. And we do see results as in better usage of the pool, less churn in the pool, which of course, is crucial if you see that unemployment is going to very low levels, and you got to make the most of the available talent. Our U.S. pros business, 3% growth, quite stable in our technology business. F&A has been on a positive trajectory throughout the year, slight dip, but we feel they're going to bounce back early this year. Very happy with our perm performance, 15% growth in this U.S. market, which of course, where perm is a large part of what we sell compared to 10% in Q3. And then, as a result, 40 bps up in EBITA because tight field steering, some wage inflation -- I remember last call, we had some talks on that. We think a 2% to 3% wage inflation drives our growth there. And a good start of 2019 in the U.S.France. They're having mixed picture, and that's very much how I feel. Yes, growth is down 4%, but you need to compare this to still a very strong Q4 last year where we had 12% growth. You know that's quite consistent. We've always had a strong focus on profitable growth, getting out of clients where we don't feel the price is justified. And as you know, our French team has had a very steady performance over the year and has also been instrumental in our innovation in digital transformation. So I'm absolutely convinced that they will bounce back and strengthen it. They will weather this market situation. One example, getting back to workforce scheduling in France, 600 locations have been implemented, mostly at our current clients, because this is a new service, nobody offers this, and we want to create a reference in the market for this new service. This year, we're going to go to prospects, so we're very positive on those -- on that potential in the French market. Perm in France very strong, 15%, still very tough comps also there. And OC, our acquisition from 2016 with double-digit growth in the French market.Taking you to the next slide on the Netherlands. Closing the gap with market. We've had many questions like, okay, so in your Dutch market, given your market share, given your discipline on pricing, can you still outperform the market? And we're happy to inform you that we are at market for Q4, but above market in November and December. So I think, a great performance of our Dutch colleagues. Our Professionals business, very strong at 13%, definitely above market. EBITA is down 70 basis points you might ask, but this is in a large part due to a quite aggressive branding and marketing campaign jointly developed with our Dutch and our Belgian colleagues. And the theme is, what are you going to do tomorrow? We firmly believe that a lot of discontent amongst people, people hitting the street, hinges on uncertainty. Uncertainty of their future in the labor market, and we think there are answers. We think that Randstad can provide answers, and we invite people, if they're uncertain about their future, to come talk to us about what they can do in the labor market. And that's why, what are you going to do tomorrow, is this invitation to candidates in the Dutch and the Belgium market. And then last, but not least, our pricing in the Netherlands is quite good. We -- you know that we have a digital pricing tool that developed in the Netherlands, and that absolutely has its effect in the Dutch pricing.Then, the German market. Automotive weakness, we flagged already in Q3. We saw it happening there. But I want to start with a big compliment for our German colleagues because the minus 7 is quite a bit above market and at the same time, they very timely took their measures. So we took out cost in Q4, which will set us up good for 2019. The January growth in Germany is actually in line with Q4, so it feels like we're not slipping further in this market, which by the way, is also true for the French business.Then, the Belgium business. I could do 2 things. I could say steady performance and then go to Italy, but I'm not going to do that, because then I would underestimate the performance of our Belgium colleagues because a consistent market outperformance doesn't come just out of nowhere. And here, I want to flag what I mentioned, the Customer Delight initiative. What does that mean? Customer Delight is a way of measuring constant 24/7, how do you call it, satisfaction of customer and clients. So customer here means -- also the customer, the client, but also means the candidate. What we do is, we develop a set of criteria, a set of results, KPIs and we ask our stakeholders, what do you appreciate most in our service, what would you like to see more of, what would you see -- what you would like to see less of? Maybe not a surprise is that the human contact, the human moments are crucial here. The Belgium team has designed this system 2 years ago, and it gives direct feedback in a daily dashboard to our consultants on what they should do less, what they should do more to get more clients and kind of the satisfaction. The candidate's satisfaction has gone up above 8. And for people who know these instruments, if you're above 8, this will lead to increasing returns and growth. So we firmly believe that this is not only, but certainly, a large part due to this way of managing our business, and that's also why we're going to roll this out to other markets. It doesn't have a lot of IT complicated elements into it. So it is ready for global rollout, and we will do so.Going to Italy. Talk about tough comps. Last year, at this time, Q4 '17, Italy was growing 26%, so that's the toughest comps we had in the group. There is some uncertainty in Italy and therefore, we see growth going down, but our Italian team manages this growth and all this decline very well, as you can see, in our results. Again, here, like in many countries, still very strong perm growth that helps. Italy is now part of our little informal group at Randstad, which we call the EUR 100 million EBITA club. They improved their EBITA margins markedly from 4.3% in 2013 to 6.1% in 2018. And we're here in Amsterdam, of course, are quite confident that our Italian colleagues will agree that there's more to come.And lastly very specifically for Italy, I want to talk about training. So at our company, at Randstad globally, we train more than 350,000 people annually, but Italy is our champion here, training last year 40,000 employees working, not just our own temps but also at our clients. So we do think this is an important thing going forward where increasingly, we see a mismatch in labor markets.Going to Iberia. Strong operators here again. Spain very disciplined on pricing. And if you see, revenue down 3%, but EBITA margin 50 basis points up, is again a good proof point that, as an industry, we can improve our earnings even when the top line is not great. Rest of Europe. Of course, a lot of countries, U.K., yes, get the questions on Brexit. Again, we don't see it in our numbers. Our U.K. revenue is up, although our result isn't. We are embarking on a program in the U.K. to improve our conversion through digitization. So we're quite confident that next year, also our earnings in the U.K., although they will stay below group average, will improve. The Nordics, again a good sign of managing OpEx when the top line is increasing less, protecting our profitability. Switzerland, very, very stable performer, above-market growth and record profitability. And Poland, large clients, doing less, but Professionals business growing here.So rest of the world. Yes, our highlight of the year, absolutely. So overall, 12% growth in the region, driven actually by all countries in this portfolio, also Latin America, Argentina, Brazil, strong performances this year. It's a EUR 2 billion business annualized, so it really, really helps and again, good sign of the diversification we see at Randstad. And record results in Japan, in Australia, in Singapore, but also our Indian business did great this year, and overall because many of these companies are -- perm is very important. A perm growth overall of 17% in the region, so very happy there.Then moving to our global businesses. You may have read we took an impairment charge on our Monster business, on which Henry will further elaborate. Nevertheless, Monster becomes more and more a part of our overall strategy, and that's progressing very well. A large part of why we bought Monster is to be as the least dependent on external sourcing of candidates as necessary. We have -- for example, our Japanese business, we need to rely on external job boards, and that's costly. And we want to own our own destiny, and that's why we're so happy with all the profiles in Monster. And what we now see is that more and more, we do see these combinations. So in the U.S., we use Monster cloud search where the Monster database is directly coupled with Sourceright, the Randstad Sourceright. By the way, the 2 -- these 2 companies are really moving closely together, which is also a reason to put this in 1 portfolio under Rebecca where we shoot orders from our clients directly into the Monster database, finding candidates we don't find in the Randstad database. We do the same at Randstad technologies, our IT business in the U.S., and we do that same at Yacht in the Netherlands. So at the dashboard of a consultant at Yacht, he or she can look both in the Randstad database and the algorithms are directly translated to search into the Monster database. And well, you've seen the growth at Yacht. We know that the Monster availability is definitely a part of that.We call that and we call those activities -- and these are just a few examples, Monster for Randstad, so at the second level. So we got Monster and we got Monster for Randstad, and the third level is new business models. I hinted on that already in Q3 and now, I'm very happy to tell you that we launched a new business model, a better thing powered by Monster. It's a business model in between what a job board can offer and what a perm, a company such as Randstad can offer. And we launched it in 4 cities. It's aimed firstly at drivers. So a driver and a candidate can make a full match on a mobile device. It is Tech & Touch, so there's still people monitoring, chipping in whatever necessary, but most of it can be done online for the full check of all the necessary documents, and we do this at roughly 60% of a normal perm fee. You probably remember that in 2017 at our Capital Markets Day, we talked about the fact that we want to disintermediate certainly, the perm business, and this is interesting. Just to give you a bit of a hint of the potential, Monster has more than 500,000 drivers in its U.S. database. So first matches are being made. If it works, rolling it out in the U.S. and then going to Europe for drivers only, then taking it to new profiles. So very exciting, absolutely. So good year, different Randstad digital success, digital progress, a record dividend.And with that Henry, can you shed some more light on the numbers, please?
Yes, definitely. Thanks, Jacques. So it's my pleasure to take you through the Q4 financials and my third full year results at Randstad.So the fourth quarter can be summarized with strong profit and cash conversion of the competitors in the top line. And this top line is coming through in terms of market share gains from many of our top markets converting into attractive profitability and a record cash flow. Let me run you through the P&L in a bit more detail. I'm on Page 13 now.We already talked about the strength of our portfolio. You've seen revenue in quarter 4 with stable year-on-year. And however, perm and rest of the world grew double digits with excellent conversion. Also, North America continued with solid growth.The next slide, the gross margin came in strongly at 19.8%, down just 30 basis points. We will take you through to more detail on the next slide, demonstrating that it's underlying stable.Operating margins -- our operating expense are flat year-over-year, well monitored and under control. And we have been able to adjust to the cost base quickly to changing market conditions, and the third, geared up to capture further growth opportunities. EBITA came in at EUR 309 million, with the 5.1% EBITA margin, flat year-over-year, but please note against a very strong quarter 4 last year.So we already mentioned our incremental conversion rate for the last 4 quarters was about 56%, and even higher on quarter 4. So we are especially happy about the agility of the cost base helping to build a strong track record of conversion. Let me also point out that our reported net income and EPS were impacted by an impairment on Monster and some one-offs, including an exception in tax benefit. Monster revenue has not yet recovered in line with our initial projections, which triggered a noncash impairment of EUR 103 million, and the tax benefit amounts to EUR 86 million, and it's related to a revaluation of so far, unused net operating losses.Finally, one-offs were higher than last year, mainly related to OpEx alignments in Germany and in the Netherlands.And now, as promised, on Page 14, we show the gross margin in a bit more detail. So here, we go on Page 14. Let me unpack the gross margin for you. As stated, it's underlying stable. And you see the temp margin is significantly impacted by the abolishment of CICE in France in December. It counts for more than half of the 40 basis points dilution. That's the red bar on the left, and the bar in the middle shows the positive impact of our fast-growing perm business, 11% growth, driving 20 basis points, positive mix, fully compensating for the temp margin decline, excluding CICE impact. It's all fee income and therefore, gross margin accretive. And lastly, the red bar on the right represents HR services and Monster. As stated before, Monster is a hunt and fee business still in decline and hence, it shows up as a negative mix in the bridge, a pure technical effect. Also, going forward, there will be quite some mixed effects in play, and we always have an eye on gross profit in relation to OpEx to ensure enough benefit is showing up in EBITA. It is also reassuring that the underlying price environment is stable and even improving in some areas like in Japan and the Netherlands.We go to Page 15, the OpEx spread. Let me open that chart by stating that we brought our operational expenses in line with some new economic reality already mid last year, which helps us to secure some leverage in the bottom line. Excluding ForEx effect, sequentially we reported OpEx down by EUR 1 million, which represents a 30 basis points as percentage of revenue improvement year-over-year for the quarter and 60 basis points improvement for the full year. We continue our work to flexibilize the cost base to stay resilient in the face of a volatile market and also improve our ability to steer our investments into places with the highest long-term return. So finding the right balance between tough cost management and nurturing our growth engines worked out well in quarter 4. We do our best to do the same for the new year as well as the keys to drive the business for leverage going forward.Let me 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 2019.So on Page 16, let me shed some light what it all means for our cash flow and balance sheet. We reported in 2018 a free cash flow of EUR 627 million, which is an improvement of EUR 41 million in absolute terms and 7% up year-over-year. Main driver for the good cash flow was an improved EBITA, helped by reduced working capital requirements due to lower sales growth, and it illustrates perfectly the countercyclical nature of working capital in our business and hence, the resilience of our cash flow generation through economic cycle. Please note that in quarter 4, we also received the CICE receivable related to 2014.The last bullet on the left shows days sales outstanding, which increased by 0.7 days on a 12-month moving average, mainly due to mixed effect. Note, however, this was sequentially stable.On the right-hand chart, let's go straight into our strong balance sheet. We report an improved leverage ratio of 0.8 versus 0.9 last year, despite our record dividend payment of EUR 518 million over book-year 2017. And as a result, we proposed a full year dividend of EUR 3.38 per share, around EUR 620 million in absolute terms. This reflects a 22% increase year-over-year. This consists of a regular dividend of EUR 2.27 based on the 50% payout of adjusted earnings and a special dividend of EUR 1.11, fully in line with our capital allocation strategy. Our reported tax rate came in below our guidance of 23% to 25% in '18, as mentioned before, impacted by one-off tax benefit. The underlying tax rate was around 23.5%. And for 2019, we guided an effective tax rate of 26% to 28%, mainly reflecting the change in the French subsidy system. Our cash tax rate guidance remains around 20%. Looking forward to 2019, we project to see a further improved free cash flow than 2018.Let me go to my last chart on Page 17. I'd like to summarize the key messages and provide you with an outlook for quarter 1 2019. So firstly, it's really good to see that our early intervention on the cost base has led to EBITA margin and free cash flow progression for the full year. All in all, we are pleased to propose a new record high cash dividend with EUR 3.38 per share. This reflects our healthy balance sheet and confidence in future cash flow projections independent of microeconomic scenarios. And secondly, our digital strategy is well underway and embedded to our business. It's not only helping to drive productivity, it also redefines our way we engage with customers and candidates due to proving our business. And thirdly, while market conditions are uncertain, Randstad is very well positioned to capture growth opportunities in the future. Our portfolio is much more diversified than 10 years ago. And even more importantly, we are proud of having a highly engaged and motivated workforce ready to delight candidates and customers with innovative concepts and services. On the right side of the chart, I'd like to mention the fact that January grew at a similar pace as quarter 4. And let me point out that the gross margin for quarter 1 is expected to be modestly lower sequentially, reflecting seasonal trend. We also expect OpEx to be flat or slightly lower sequentially.Please note, quarter 1 has an adverse 0.8 impact on number of working days.So with that, I conclude our prepared remarks. And we'd like to take your questions. Kevin?
[Operator Instructions] The first question comes from the line of Paul Sullivan from Barclays.
Just a couple for me. The restructuring that you took in Holland and the Netherlands, did that fully come through in the fourth quarter? And what's your thoughts on further restructuring for 2019? And more generally, how should we think about SG&A progression in those specific markets where you're seeing revenue decline? So that's the first sort of bucket of questions. And then, secondly, just on Monster, in light of the impairment, what's your expectation to revenue decline as we progress through this year and your thoughts on the sort of profitability profile at Monster now?
Yes. Thanks for your questions. Let me try to answer those, and I'm sure Jacques will chip in. On the first one, actually, we are not seeing the full benefit of it yet. So we've taken the charge, but as we've started restructuring in the second half of 2018, we will see some benefit of that rolling over in 2019. On OpEx, we're not guiding on OpEx. Actually, we were really mentioning the business on what we currently see. We are -- I think in '18, demonstrated that we are really keen to show leverage in the business than protecting EBITA margin, and the same policy will go -- we will do going forward. And as far as Monster is concerned, Paul, please understand we're not guiding on any other business. So also, on Monster, there will be no guidance. And -- but I can just reiterate what Jacques said, Monster makes Randstad stronger. And Jacques, I don't know, would you like to add anything?
No, absolutely. So Henry and I, we were with the Monster team in Boston 2 weeks ago, and we came away impressed, so this is a fighting unit. So that's good, and we're very happy with our business, it's coming together, as I mentioned in -- earlier in my presentation, but there was just a few countries where things are happening. It's happening in more countries where Monster has a sizable presence and Randstad has a sizable presence. So absolutely, it takes more time, but that's not a problem. And we're all ready to go the extra mile here.
And should we expect more restructuring challenges this year below the line?
Yes. I would -- I mean, we are not guiding on that front, or I don't see any kind of unused restructuring coming into '19.
Yes. Because it's just -- Paul, this is the same as guidance. So if we would expect restructuring, then we would guide below revenue and currently, we're quite flattish, which actually, given all the expectations out there we think is good news.
Our next question comes from line of Bilal Aziz from UBS.
Just two from my side, please. Firstly, on the, I suppose, underlying temp gross margin. You alluded to some positive pricing in Holland and perhaps in Japan. I mean, can you perhaps also expand on some of the conversations you've had in France as well as how the CICE rolls off and what are the clients saying there and your potential impacts from there? And secondly, just in -- you previously broke out the sequential slowdown in Germany and France with respect to how much was impacted by the automotive markets, so any color there would be helpful and what you have seen year-to-date in those markets as well in the automotive sector.
Thanks for your question, we'll answer. In terms of the underlying temp margin, you've seen that there is kind of a multiyear pressure on temp margins, but we are doing the utmost we can to get more intelligence from pricing. So we are starting activities in many countries, and there's scarcity in the markets, and where we can, we try to price, and that is stemming some of the product pressure we're seeing. In terms of CICE, I think, CICE -- the change in 2019, we believe is kind of overall neutral for our EBITA. We see probably some pressure quarter 1, 2 and 3 coming through because of the profit balances, the profit sharing. But in quarter 4, also because of better competitors, we see some of that are equaling out. As far as automotive is concerned, there is, I would say, a stabilization we see. I wouldn't call it kind of a bounce back, but it's stable. It's the same numbers we've seen in quarter 3 more or less.
Our next question comes from the line of Tom Sykes from Deutsche Bank.
Would you be able to just run through the outlook for the perm business and just describe what -- which parts of perm you've actually been seeing growth in? Because it just seems to be a little bit more variable compared to your temp top line. So where have you had successes in perm? Is there a lot of RPO in that? And what's your outlook for the perm business, please?
Well, we have a lot of outlooks there, let alone for perm, because as you know, it's the most variable part of the business. We have 3 focus of perms. The first one is perm in staffing. So where we've thought our temp consultants to also sell perm. They sell it to a different person. You sell temp to HR and you sell perm to the one that hires. That has been very successful. That shows double-digit growth quite consistently for, I don't know, the last 4 years or something. And then there's perm in the Professionals businesses also actually doing quite well, so the 15%, for example, growth you're seeing in U.S. is a mix of growing perm in our Staffing business, but also growing perm in our F&A and IT business. And the last one, yes, that's what you mentioned too, is RPO. You see in our growth -- in our Sourceright numbers, which is a mix of MSP and RPO that you also see good growth here. So it's across the board, which is good. I think, that also is partly because it's such a proactive part of our strategy, support increasingly -- so for example, in France, our consultants with the right tools to be with the client at the right moment in time that helps your hit rate. But at the same time, yes, labor markets are getting scarce, our clients are also prone more to perm once they see a good candidate So we -- basically, we allow all our clients to choose between, do you want in perm, do you want in temp or you want them on, how do you call it -- secondment, which is not possible everywhere. But outlook is tougher to give.
Right. Makes sense. And just on France in addition to the CICE comments. So obviously, some degree of renegotiation on unemployment insurance there. Any parts of the proposals that you think would be negative to the staffing industry at all?
No. So far so good. So we -- it's a different system. We now get, how do you call it, benefits directly, which actually is well -- bodes well for the free cash flow this year because it's sort of a double thing. We got CICE and we get the rebates, but no, same discussion with clients always, but back to the pricing tool, maybe. So increasingly, we talk fact-based with clients on scarcity. So what we really do in this pricing tool is, we show the client what the labor market looks like, and it makes us a way more convincing negotiator with clients, and that helps pricing. But at the end of the day, if the client doesn't want to pay, then we sort of cease cooperating.
Our next question comes from the line of Hans Pluijgers from Kepler Cheuvreux.
A few questions from my side. First of all, on segmentation development by -- in France and U.S -- or could you give some feel in how you see, let's say, the trends by the key segments in those 2 markets? And then secondly, also on trends, could you allude or remind us what the trend was through Q1 2018? So did we see, let's say, a deceleration or an acceleration a little bit through the quarter? Could you give some feeling on that? And then on the restructuring cost, my last question, 2 things. First of all, looking at the impact for Q1, let's say, do you already expect some significant impact in Q1 of the restructuring? And secondly, are these restructuring or savings on top of the -- are they already announced or is it part of that? I assume these are on top of. And could you give some feeling on the payback period of these savings -- the restructuring cost, I mean? And lastly, looking at France, you already, let's say, given some guidance or indication on some savings in France restructuring. But yes, looking at the current developments, do you not expect, let's say, some additional savings or restructuring there?
Right. You have many questions. So let me start with the segmentation one. So I can give you a few pointers. In the U.S, for example, we saw transport and distribution coming down from 14% to 10% in quarter 4, we saw a bit of a slowdown there. It's the same in -- actually, the Netherlands, automotive, for example, came down from plus 4 to minus 2. In France, it's pretty much stable, a slight decline in manufacturing, but therefore, automotive stabilized and same in Germany. It's more kind of an industrial play. Manufacturing slightly weakened and automotive is more or less stable in there. In terms of restructuring cost, I don't think I should add an awful lot more than just saying that we're expecting for quarter 1, that's how far we can see at this point in time. OpEx in line with quarter 4 is slightly below that. And as far as payback periods are concerned, yes, we talked about something around one-time payback, so it's relatively flat, but that also depends pretty much on the countries you're in. Not sure whether I've...
Yes. One more thing to add, Hans. I don't know where you picked up French restructuring, we're not going to restructure in France because that's very complicated, it takes a lot of time. You'll be 9 months to a year ahead if you want to do that. So we're not going go do social planning in France. And the good news is also the fact that we don't see the revenue declining further, so there's also no need to do that. So we'll take out the cost on a more organic basis. But in France, it takes a little bit longer due to the legal setup of this country.
And my last question was on the trend, Q1 2018. Could you give us some feeling how the trend was through Q1 last year?
Yes. So -- sorry, we -- and as far as quarter 1 is concerned, we're not guiding on the top line. We just...
No, this is for last year. So January, February, March. Were you stable?
Yes. It's pretty stable throughout the quarter, Hans.
Our next question comes from the line of Marc Zwartsenburg from ING.
First question, again, on the restructuring charges for Netherlands and Germany. Can you give us a bit more color on a split between the 2 countries? And how much is perhaps already rolled in and what you should expect in '19? And the second one is, we're looking now at a bit of a flattish top line, flattish gross margin trend going into '19. How should we think about your conversion for an operational leverage for 2019? And then last year, you gave some indications on what you expected in terms of your operational margins and EBITA margin. Can you give a bit more color on what the line of thinking is there if trends stay as they are? The second one is, yes, you mentioned a sharp digital pricing tool in the Netherlands and that, that's really helping your pricing there. Can you give us an indication what you think the impact has been on the pricing and analysis in general, if you can? But also, will you roll this out and copy pasting a model throughout the group? And then lastly, staying with the Netherlands, some thoughts on regulation there from a minister there, quite crazy talks about more expensive flex pricing. Can you give us a bit of your view of what you expect there in 2020?
Yes. I'll take the last 2. So the digital pricing, I can give you -- it's always tough to say it's precisely because of that. I think in our Yacht business, it's roughly 1%, but that doesn't mean that you can put in your model of percent everywhere. We do this digital tooling because, of course, in blue collar, it's a different candidate market than in a professionals market, but it does help put your people fact-based at the table. At rollout, so we require a set of information. So we need to have market information, market-rate information. So in countries where we currently don't have that, we are acquiring that information. I would expect us to roll it out to 5, 6 markets into '19 to start with. And then on the Netherlands, the legal system, yes, in my view, I've already been quite vocal in quite a few newspapers on this one. I think it's an old-fashioned approach. It still takes the approach that there's 2 kinds of work, so to say, which is a fixed contract with an employer and a flexible contract in whatever shape or form. We think the market is moving towards work being the common denominator. And when you work, you need to have a decent income, you need to be insured, you need to be able to get a mortgage, that sort of thing. If you lose your job, then regardless of how long you've been working somewhere, you will have a whatever 6-month similar to the Danish system period. Well, we're going to work very hard with you to get you a new job with training and all that sort of thing. So we promote a quite massive change, which is not really what this law is all about. This is sort of revamping the old way of looking at things. And we've invited the government to come talk to us and to talk about the facts and our vision.
Thanks for your questions. On your first one, restructuring, we spent about EUR 15 million in Germany and EUR 9 million in the Netherlands in quarter 4. And then, as far as steering is concerned, our operating leverage, it should be -- we generally expect an incremental conversion rate of 40% to 50%. And if things stay as they are, we definitely want to protect our EBITA margin. That's probably all I can say at this point in time.
And this restructuring in the Netherlands because -- yes, in the end, you're still growing. Your margins quite well. So why -- is this then restructuring needed because you're rolling out your digital initiatives and can improve productivity? Is that what it is?
I'd say it's reshaping. It's not 1 project at 1 department, this is absolutely reshaping of some business that we were not too happy with. It's, in a way, I wouldn't say regardless of market growth, but it's not like in Germany where it's a direct play. Market goes down and then you need to do or you can do with less people. Netherlands is a more sophisticated business where we experiment more with digital offerings. And that's why we had to take out some people unfortunately, but it's not -- our goal is cycle related.
Maybe if I can squeeze in a last one. If I look to the trend, you mentioned that the trend in Q4 plus 0.3 and stable going into January/Feb. But you started off Q4 a little bit stronger, it was more in line with Q3 at that time. Does that mean that the trend actually improves a bit in January/February versus December?
December is tough to call, Marc, because we were quite surprised. There were working days, but these working days were I think, on a Monday or something. So -- then you see a slightly negative working day effect. If you would look at volumes, then December is better than it looked like. So that means it's pretty stable going from December into -- in January.
Our next question comes from the line of Anvesh Agrawal from Morgan Stanley.
On the impact from IFRS 16? And will that change the way you look at the special dividend policy?
Sorry. Before you go on, we missed the first part of your question. Can you repeat, please.
Sorry. Can you just comment on the impact from the IFRS 16? And will that change the way you look at special dividend policy? And second, last year, the Q1 gross margins were negatively impacted by the sickness-related issues. Do you see the reversal this -- in Q1 this year? Should we expect some benefit?
Thanks for your questions. So on the first one, in general, we will come back probably to quarter 1 results with a kind of in-detail impact of IFRS 16 on our business. And no, it will not have an impact on the dividend policy. As far as sickness, Jacques?
Sickness is always tough because it's like an epidemic, and I run a staffing firm, so I cannot predict epidemics. There is -- in Germany, I mentioned it a few times, so just to reiterate. There is this funny thing in Germany where in some situations, it pays to be sick. So you actually earn more to be sick than you would earn on your next assignment. So we're working hard to get this out of the collective labor agreement in Germany going forward, but it's the wrong incentive. So that means that relatively, our sickness is actually too high in Germany, and it's too early to call last year if we would have a flu epidemic or not. I wouldn't expect too much of a benefit because of this.
Our next question comes from the line of Andy Grobler from Crédit Suisse.
Just a quick couple from me, if I may. You talked about the workforce scheduling and being in 1,000 locations. Can you give some kind of scale around that? What does that mean in terms of revenues? And what is the opportunity over the next 2 to 3 years, just in approximate terms? And then, secondly, just on Germany, looking at the total staffing employees, they were down 15%, but Randstad employees were up and a number of locations were up. Can you just balance out the moving parts within those numbers, please?
Yes. Well, workforce scheduling, Andy, so what we now see because we've implemented it mostly at our -- so we actually have 2 versions, so -- but it's the same solution. Workforce scheduling is in our in-house locations. So we give the solution at the hand of our account specialists who then have more time and are more proactive in handling the pool. You do see some revenue improvement, but our market share is relatively high. What you do see is higher conversion, the more client satisfaction, so that's helpful. Then you have Youplan. So Youplan is where the client plans. These are smaller clients where we give the tool free of charge by the way, to the client or prospect. We equip all the temps with apps, and they can plan themselves. So we've implemented it now, and also quite a few of these smaller clients again, clients. And this year, we're going to move into, yes, more to prospect base, and it's very tough to really give you guidance on what this means. We're aiming to have another, I don't know, at least 1,000 locations into 2019, but yes, we're selling to prospects. It's always very tough to program that one on how quickly that will go, but we're quite confident that this will drive growth going forward. But it's too early to tell the effect.
And then on your -- on the second question on employees working, FTE is actually -- it's part of the legislation change. So we're going to pick that up, and it's the same because my colleagues would say, hey, guys, we probably -- we did a restructuring, and it's showing on the numbers. And it's actually -- it's sort of like-for-like. Happy to go back to you with real underlying numbers.
Our final question comes from the line of Konrad Zomer from ABN AMRO.
My first question is on Monster. I know we're talking small numbers, but can you share with us exactly what the operating result was in the fourth quarter, please? My second question is on France. The performance of your OC business was very strong at more than 10% growth. Can you give us some tangible reasons why that business outperformed the market in such a great degree? And my final question is on Slide 17 where you give us the January trend for the various regions, you left 5 regions blank. And I was wondering if you could maybe give us an indication with the same sort of dots if that was like a decrease of low single-digit or mid-single, can you fill them in for us, please?
Let me take the first one. I mean, we've -- you've seen Monster revenue was down 17%, but the EBITA actually was slightly positive in quarter 4.
Yes. The French question, what was it again, Konrad? I was -- sorry.
The performance of OC was very strong at more than 10% growth.
Well, first of all, we bought this company because we thought it was a strong company and that shows. And secondly, we are, of course, combining a client knowledge, a client access, that sort of thing. Digital support, not yet. So it actually -- that will help. We've now moved the back office of OC to Randstad France, which is a very efficient and strong back office, and we're going to equip OC also this year with some of the tools that our French consultants have. So actually, quite bullish on this company going forward, very happy with the performance. Yes, it's a combination of a strong company. Well, the combination of 2 strong companies, actually.
Then last question regarding Page 17, I think it is -- it's actually -- it's the same trend that we saw in quarter 4. We had the same actually, in quarter 3, the way we're presenting it. So if you look at what we're reporting in quarter 4, we see in January about the same trend.
We do have one more for the question. And that comes from the line of Bart Cuypers from KBC Securities.
Yes. So just one quick question about Monster. So indeed, it's -- do we have to understand it's merely, mostly a reflection of a recent evolution set within past evolutions compared to the initial projections? Or does it also include lower expectations going forward? And then secondly, also a small question on working capital. So yes, you mentioned the countercyclical aspect of that part in your business. At the current growth levels, has that already fully come through yet or do you expect some more to seep in going forward?
Yes. All right. Thanks, Bart, for your questions. On Monster, yes, what we do is, not just for Monster but for all our businesses, we do an annual impairment that would do that. If you look at projections and as far as Monster is concerned, if we look to projections made at the time of acquisition. And at this point in time, we need to kind of bring them down in so far that we had to take an impairment charge. But yes, it does include also a kind of a forward-looking element in it. So as growing capital is concerned, no, I don't think it has come fully through. I sincerely hope that we're going back into growth and then working capital is being relatively neutral in there. But actually, the cool part of our business system is, if we see quarters like we've seen in 2018, actually, it supports the cash flow generation and hence, our record cash flow and dividend. So it's -- in both ways we are -- a real value play.
There are no further questions. So I'll hand back to our speakers for any concluding remarks, if I may.
Oh, well, our concluding remarks. Yes. Again, as I mentioned, we're very happy with the year. I think it's good news is that we see stable growth going into January. And with that, we wish everybody a great day, and I hope to see you on our roadshows or wherever we meet. Thank you.
Thanks for your questions.
Thank you very much for joining this morning's Randstad's conference call. You may now disconnect your lines.