Operator: Ladies and gentlemen, good morning. Welcome to the Adecco Q4 Results 2012 Analysts and Investors Conference Call. I am, Zoya, the Chorus Call operator.
I would like to remind you that all participants will be in listen-only mode and the conference is being recorded. After the presentation, there will be a Q&A session. The conference must not be recorded for publication or broadcast.
At this time, it is my pleasure to handover to Mrs. Karin Selfors, Head of Investor Relations, accompanied by Mr. Patrick De Maeseneire, CEO of the Group; and Mr. Dominik de Daniel, CFO of the Group. Please go ahead, ladies and gentlemen.
Karin Selfors-Thomann - Head of IR: Good morning and welcome to Adecco's Fourth Quarter and full year 2012 results conference call. Patrick Group CEO and Dominik Group CFO will lead you through the presentation today followed by a Q&A session. Before we start, please have a look as always at the forward-looking statement in this presentation.
Let me give you a quick overview of today's agenda. Patrick will present the operational highlights to you, then Dominik reviews the financials after which Patrick will give you an outlook on our business before we open the line for your questions.
With that, Patrick, I hand over to you.
Patrick De Maeseneire - CEO: Thank you, Karin. Good morning ladies and gentlemen. Welcome to our Q4 results conference call.
First a few remarks on the full year 2012. After two years of double digit revenue growth, 2012 revenues were flat at EUR20.5 billion or declined 4% organically. General staffing revenues declined 6% organically, whereas professional staffing revenues held up well increasing 1%.
Geographically, we faced diverse trends. Most of Europe was challenging and we had double digit revenue declines in France, Italy and Iberia. Exceptions were the U.K. and Ireland, where revenues grew 6% in constant currency and also we continue to gain market share in Germany and Germany and Austria where revenues increased 1%.
We achieved solid results in North America, where organic revenue growth picked up throughout the year. Also the emerging markets continued to grow in double-digits. In Japan, revenues declined by 10% organically, as some of the bigger outsourcing projects were completed in earlier 2012. Our gross margin improved strongly in 2012. The gross margin was 50 basis points to 17.9% or up 30 basis points organically. We maintained strict price discipline based on our EVA approach and also profited from a better business and country mix.
Our focus on cost control was strongly maintained. SG&A organically and before restructuring and integration costs, was down 1% year-on-year. Despite revenue decline, we were able to protect profitability as we promised. We achieved an EBITDA margin of 4%, down only 10 basis points. We're excluding restructuring and integration costs.
Our balance sheet remains very healthy and we achieved a strong operating cash flow of EUR579 million, up 10% compared to 2011. Thanks to our solid financial position and cash rich balance sheet, the Board of Directors proposes a dividend of CHF1.80 per share for the year 2012, equal to the dividend paid for 2011 and equivalent to a payout ratio of 49% of adjusted net earnings. This is in line with the payout range of 40% to 50% of adjusted net earnings which we introduced as strong 2011.
As well going forward the dividend policy is further enhanced, in addition to the payout range of 40% to 50% Company is committed to pay at least a stable dividend compared to the previous year, even if the payout range is temporarily exceeded, of course, bearing seriously adverse economic conditions.
We continue to be very focused on reaching our mid-term EBITDA margin target of above 5.5%. Based on the good progression made on our six strategic priorities and more favorable economic conditions expected towards the end of 2013 we are convinced that we will achieve this target in 2015.
Let me now focus on the highlights of the fourth quarter of 2012. Revenues were down 3% at EUR5 billion. Organically revenues were down 6%. While revenues in North America developed very well with 8% organic growth, most of Europe remained challenging. France still had double-digit sales decline.
In Italy and Iberia the year-over-year revenue decline rates eased somewhat. Germany weakened, although we were still gaining market share. U.K. and Ireland and Nordics held up reasonably well. Japan was still declining organically, impacted by the high base of last year.
The gross margin in Q4 was down 10 basis points to 17.8%. We were impacted by how the bank holidays fell on working days in Q4.
Costs continue to be very well-controlled. SG&A was down 3% year-over-year and down 1% sequentially on an organic basis and before restructuring and integration costs. This resulted in EBITDA before restructuring costs of EUR194 million and a margin of 3.9%, down 50 basis points compared to the last year. In the first two months of Q1 2013 revenues were down 5% on an organic basis and adjusted for trading days.
Let's have a look at the organic revenue development by region now. In North America, including Lee Hecht Harrison, revenue growth accelerated and was up 7% year-on-year. Both General and Professional Staffing contributed to the good growth. Within Professional Staffing growth in IT segment accelerated to 12% in Q4. Revenues in Europe were down 9% in the fourth quarter. In France, revenues declined 17% year-on-year, I will come back on France in a bit.
Germany and Austria was down 4%, but still ahead of the market. In Benelux, we outperformed the market in Belgium but had weaker growth in the Netherlands. In Italy, revenues were down 8% and in Iberia down 10%. The Nordic still grew as revenues were up 3% and in the U.K. and Ireland's revenues were down only 1% in Q4. Rest of world including emerging markets was down 5%. In Japan, revenues declined by 15%. In Australia and New Zealand revenues were down 6% and the emerging markets grew 4% mainly driven by Latin America.
We now go to our main markets. In France, revenues were down at 17% year-on-year to EUR1.2 billion. From an industry perspective, we saw weakness across the board, but most pronounced in automotives and manufacturing.
Our perm revenues were down 29% in Q4. We incurred EUR33 million restructuring cost in the quarter under review. These were related to the combination of the networks of Adecco and Adia under the single brand of Adecco. The EBITDA margin before restructuring cost was 2.7% compared to 4.3% EBITDA margin in Q4 '11.
The restructuring plan in France is nearly complete. As of yearend, 2012, more than 500 FTEs had left the Company and the number of branches was around 10% lower year-on-year. Given the tough economic environment, we have taken additional actions in 2012 to adjust our capacity which resulted in an additional reduction of around 300 FTEs.
In 2013, to further align the cost base through revenue developments we will incur additional restructuring expenses, mostly in the first half of the year. In recent weeks, since the restructuring is close to completion as a new organization is now in place, we have seen commercial activity picking up.
Revenues year-to-date February 2013, were down 15% adjusted for trading days.
In North America, revenues were up 8% organically to EUR947 million. The amount held up well especially in technology and logistics. Revenues in general staffing increased 7% in constant currency and professional staffing revenues were up 8% organically.
The North American IT professional staffing business grew 12% year-on-year organically, driven by strong growth in the U.S. of 16%. Revenues developed ahead of the market in Finance & Legal and Engineering & Technical both up 4% in constant currency. Medical & Science also had a very robust growth of 21%.
Also in perm our revenues continued to develop very well up 12% organically. Excluding EUR4 million restructuring cost for the consolidation of datacenters in North America, the EBITDA margin in Q4 '12 was 4.3% compared to 5.2% in Q4 '11. The prior year however included a few favorable one-offs. Year-to-date February 2013, revenues were up 4% organically and adjusted for trading base.
Please note that this we adjust the Q4 2012 revenue growth in North America for the trading day impact revenues were also up 4%. Revenues in the U.K. and Ireland amounted to EUR490 million, down 1% in constant currency and compared against the strong base in the prior year, when revenues increased 13% in constant currency, mainly driven by a few large client wins.
In the quarter under review perm revenues were down 25% in constant currency. The EBITDA margin was 2.9% an increase of 170 basis points compared to the EBITDA margin of 1.2% in Q4 '11. Revenues in the first two months of 2013 were up 2% in constant currency and adjusted for trading days.
In Germany and Austria revenues declined by 4% organically, still performing better than the market and compared against the strong base last year when revenues still grew 14% year-on-year. As expected, demand from automotive slowed in Q4. On the other hand demand from the aerospace sector remained solid.
Q4 2012 included EUR5 million restructuring costs to align SG&A with revenue developments. Excluding these costs the Q4 EBITDA margin was at 4.3%. Profitability was impacted by how the bank holidays fell on working days and this will also be the case in the first quarter of 2013.
Year-to-date February 2013, revenues were down 5% organically and adjusted for trading days.
In Japan revenues were down 15% organically to EUR361 million still impacted by the completion of some of the bigger outsourcing projects earlier in the year. Despite revenue decline profitability in Japan continued to be strong. The EBITDA margin was 5.5% down only 10 basis points compared to Q4 '11.
VSN added 50 basis points to Japan's EBITDA margin in fourth quarter. In the first two months of 2013 revenues were down 12% in constant currency and adjusted for trading days. As of Q2 2013 the revenue declined (indiscernible).
Finally we turn to our development by business line on a constant currency basis. In Q4 2012 revenues in our general staffing business were down 7%. Industrial business was down 9% in Q4. In Germany and Austria revenues were down 6% organically year-on-year.
In France revenues declined 18%, Italy was down 9%. Revenues in North America were up a solid 8% year-on-year. The office business was down 3% organically this quarter, revenue growth in North America accelerated to 6% and U.K. and Ireland was up 7%.
Also Nordic's was in positive territory up 1%. On the other hand revenues in Japan were 17%.
Revenues in Professional Staffing were down 1% organically in Q4. North America continued to do very well. Year-on-year revenue growth further accelerated to 8% organically. France on the other hand was down 12% and U.K. 5%. Our Solutions business increased by 4%, revenues at Lee Hecht Harrison were slightly positive and revenue growth in MSP and VMS continue to be strongly double-digits.
With this, I would like to hand over to, Dominik who will discuss the financials in more detail with you now.
Dominik de Daniel - CFO: Thank you, Patrick. Good morning, ladies and gentlemen. I will start with the overview of the P&L. In Q4 2012, we had revenues of EUR5 billion, down 5% in constant currency, organically revenue were down 6%. The gross margin was 17.8% in Q4 down 10 basis points year-on-year and sequentially. SG&A was up 2% in constant currency compared to prior year.
SG&A was 3% lower year-on-year on organic basis and excluding restructuring and integration costs. Sequentially, the cost base was down 1% on organic basis and when excluding restructuring cost. EBITA was EUR148 million. Excluding restructuring cost, EBITA was at EUR194 million and the margin was 3.9% in Q4 2012, down 50 basis points compared to the EBITA margin, excluding integration cost of 4.4% in Q4 2011.
Net income in the quarter under review was EUR35 million as effective tax rate was 70%, mainly impacted by the valuation allowance on the French deferred tax assets.
Let's have a look at the year-on-year gross margin evolution. The Group's gross margin was 17.8% in Q4 2012, down 10 basis points year-on-year and also sequentially. Temporary staffing had 30 basis points negative impact on the gross margin in Q4 2012.
As mentioned earlier the temp gross margin was impacted by how the bank holidays fell on working days. In particular this impacted Germany and Sweden, where temporary employees are on Adecco’s payroll. Perm placement had a neutral impact on the Group's gross margin in Q3. Perm revenues were down 10% in constant currency in the quarter under review.
The Outplacement business had a positive impact of 10 basis points on the Group's gross margin, while other activities also had a positive impact of 10 basis points in Q4. The net impact of acquisitions and divestments had a neutral impact on the gross margin this quarter.
Now let me discuss our cost base developed in the fourth quarter this year. We continue to closely monitor revenue development and manage the cost base accordingly. SG&A in Q4 for the Group was down 3% compared to the same quarter last year on an organic basis and before restructuring and integration costs.
Sequentially, our cost base was down 1%, after decline of 2% sequentially from Q2 to Q3 2012, on an organic basis and before restructuring costs. On an organic basis, FTEs were down 5% year on year. The branch network decreased by 2% organically compared to the prior year.
Our Q4 2012 results included EUR46 million restructuring cost, of which EUR33 million related to France; EUR5 million to Germany; EUR3 million to Italy; and EUR1 million related to Iberia. In North America, we had restructuring cost of EUR4 million for the data center consolidation. In Q4 2011 we had EUR12 million integration cost for DBM. SG&A for the Group in the first quarter this year is expected to decline at a similar rate year-on-year and in Q4 2012, on an organic basis and before restructuring and integration costs.
The current slide shows an overview of the incurred restructuring costs in 2012 and anticipated additional restructuring costs for 2013. In 2012 we incurred EUR60 million restructuring cost for France, and EUR17 million for other European countries and Japan. Costs for data center consolidation in North America amounted to EUR6 million.
Given current trends, we anticipate to invest an additional EUR30 million in 2013. Roughly one-third of this investments are related to the ongoing data center consolidation in North America, remainder will be invested in further aligning the cost base, the revenue development in Francs and in other countries.
Moving on to the balance sheet. In June 2012 we launched a share buyback program of upto EUR400 million on the second trading line with the aim of subsequently canceling the shares and reducing the share capital.
The share buyback starts mid-July 2013. As of yearend 2012, the company had acquired 3.8 million shares under this program for EUR145 million.
Our cash and short-term investments were at EUR1.1 billion at the end of Q4 2012. DSO up 64 days in 2012, down one day compared to the prior year. Goodwill and intangible assets amounted to EUR4.1 billion at the end of December 2012.
Adecco’s shareholders’ equity was at EUR3.7 billion at the end of December 2012.
Turning to the cash flow statement. Operating cash flow generated in 2012 amounted to EUR579 million, compared to EUR524 million in the prior year, an increase of 10%. Cash used in investing activities was impacted by the purchase price consideration for the acquisition of VSN in Japan at the beginning of 2012. The Group invested EUR87 million, net of cash acquired for VSN. CapEx was EUR88 million in 2012.
Cash flow in financing activities was EUR206 million. It included payments of dividend of EUR256 million, net inflows of EUR653 million related to the net increase in short and long-term debt, and EUR191 million related to the purchase of own shares.
Net debt at the end of December 2012 was EUR972 million, compared to EUR892 million at the year-end 2011. As of the end of December 2012, we had short and long-term debt of EUR2.1 billion, and cash and short-term investment of EUR1.1 billion. This was targeted in EUR972 million of net debt at the end of December 2012.
As mentioned earlier, in June last year, we launched a share buyback program of up to EUR400 million, with the aim of subsequently cancelling the share. A CHF250 million five-year's bond and CHF125 million Swiss bank eight-years bond, we issued in July 2012. In October 2012, we paid an additional CHF100 million of the five year assisting bond bringing the total amount issued under this financial instrument to CHF350 million. The proceeds are used to fund the share buyback. Our balance sheet remains in a very heavy state.
Given our solid financial position, strong operation in cash flow and cash rich balance sheet, the Board of Director at the upcoming AGM will propose a dividend of CHF1.80 per share equal to the dividend paid for 2011. At the current share price this year 3.3% is equivalent to payout ratio of 49% of adjusted net earnings.
In additional, as Patrick mentioned earlier, going forward the Company is committed to pay at least pay the stable dividend compared to prior year, even if the payout ratio is temporarily exceeded and barring seriously adverse economic conditions. This underpins our ability to generate strong operating cash flow and our focus on organic growth.
Our financial guidance for the full year 2013 is as follows. CapEx for the year 2013 is expected to be around EUR120 million. Interest expenses excluding interest income, are expected to be around EUR75 million for our 2013.
Our corporate cost for 2013 are expected to be approximately EUR100 million and amortization of intangible assets is expected at EUR45 million for 2013. The underlying tax rate for Q1 2013 is expected to be around 31%.
As mentioned by Patrick, revenues in the first two months of 2013 were down 5%, organically and adjusted for the trading days. Please bear in mind that Q1 2013 has a negative trading day impact of 3% compared to the prior year. (indiscernible) instance for this year in Q1 and in 2012, we have 29 days in February. As such to further align costs to revenue development, we expect to investment EUR30 million in 2013 of which roughly the half of it will be in Q1 2013.
With this, I hand back to Patrick.
Patrick De Maeseneire - CEO: Thank you Dominik. Let me finish with the outlook for our business. Year-on-year revenue growth slowed in the quarter of Q4 2012. But stabilized into the New Year. In the first two months of 2013 the Group's revenues were down 5% compared to the prior year on an organic basis and adjusted for trading days.
Within Europe, France remained challenging while the revenue decline rate in Germany and Austria adjusted for trading days stabilized, despite the comparison against a strong first quarter in 2012.
In North America revenue growth remained healthy and the same held true for the emerging markets. Japan was still down.
In the current environment price discipline and a proactive approach to cost management remained key, therefore we plan to invest further EUR30 million to optimize the cost base. As Dominik said SG&A for the Group in Q1 2013 is expected to decrease at the similar rate year-on-year as in Q4 2012 on an organic basis and before restructuring and integration costs.
We continued to be very focused on reaching our mid-term EBITDA margin target of 5.5%. Based on the good progress made on our 6 strategic priorities and more favorable economic conditions expected towards the end of 2013 we are convinced that we will achieve this target in 2015.
And with this I would like to open the floor for your questions.
Operator: Rolf Kunz, Bank of Bellevue.
Rolf Kunz - Bank of Bellevue: I have got two questions; first on the achievement of the 5.5% EBITDA margin target. So far, my understanding was that you clearly need two years of 5% to 10% top line growth. Is this still valid and what are your other planning assumptions with regard to gross margin for example, because here I always understood that given the higher unplanned rate gross margins you won't have a lot of tailwind on the gross margin side? The second thing is actually along Q4 profitability in France and the U.S. Here you have clearly lost your leading profitability levels when I compare your numbers to many trends that in the U.S. you were actually able to show much better growth, but here it looks like this was clearly at the cost for (feasibility). Are there some explanations for this?
Patrick De Maeseneire - CEO: Rolf, Dominik will handle your second question on the profitability in France and North America. Just one remark from my side, I hope you also look at the full year, and for the full year we have leading profitability as a Group compared to our peers and the only country where we don't have it is Holland where one of our peers is six times bigger than we are. So we have clearly leading profitability in all of our markets, if you look at the year. I hope you only don't look at one quarter always. So that's one remark from my side. On the 5.5%, indeed, we are still aiming at two years of solid growth like we have had in 2010 and 2011 in order to achieve our target and because of what we have done on our six priorities, but also because of the stabilization that we're seeing now in our business because for the first time if we look at historical trends for the first time in six quarters now if we look at our historical strength from Q4 to Q1 we're now on the average whereas the previous six quarters we were below the average. So, that's one indication that the business is kind of stabilizing. We also look at the economical indicators, of course, and we see that all indicators that there is going to be a slight pickup towards the end of the year, which should result then into moderate growth for Europe in 2014 and 2015 and we have seen that with slight economical growth in 2010 and 2011 we really had good solid double-digit growth and that's what we're aiming for. But I agree with you that's what we need as well to achieve our target. On the gross margin from where we are now you have seen we have done a good job again over the year where we're up 50 basis points and 30 basis points organically. So, we're at 17.9%. If we have an additional 30 basis points that will help of course and that's what we're aiming for, but we always said that we didn't overdo it in our planning on the gross margin, so we don't need more. It has to come from topline growth and good leverage and that's what we're aiming to achieve. Dominik if you want to add something on profitability?
Dominik de Daniel - CFO: If we look to just to market front, yes, Joseph what I think it was a (likely) we also have to look for the full year comparison. In France, of course we have to consider and that all our work on the restructuring plans was done, the restructuring cost by the resavings kicking in as of Q1 as from Q4 to Q1 you will have cost savings which we also have the French profitability of analyzed around EUR40 million, but (16) only into Q1 and then even if you has a good temp margin, now it's 17% (indiscernible) it has some negative leverage. Also from year-on-year point of view you have consider last year we said about the Q3 and Q4 2011 it was very stable how we collect the social tax rebates and we say this has been -- not be the case in Q4. So, we still have a very solid temp margin in France, it's only 10 basis points down, but the quarter before we had always increases temp margin nonetheless that the market was dropping and we are dropping and this has to do with the tax that the year before was EBITA stable in terms of social tax rebate. So, going forward, what can you expect from France is definitely that it's margin deduct minus 60 basis points very clearly, EBITA after costs savings now kicking in from our restructuring, which we basically in the way to implement it or primarily have done. Looking to North America on a year-on-year comparison, you see quite a drop in terms of our EBITA margin in Q4, but also what we said in Q3 bear in mind that Q4 last year we had kind of some releases, the workers comp and some other things. If we look sequentially from Q3 to Q4, we have a pretty stable EBITDA margin before the cost for the datacenter consideration, so it is in the pretty stable. But it's also payout day as you know we were not satisfied one year ago for example our IT business. We also invested to our IT business and within our outcome -- we see now double-digit growth North America plus 12%, in U.S. plus 16% and the investments have occurred and we should still benefit from this investment in the quarters to come. If you look to general staffing there we see also good growth. We had basically in '10 and '11 – we are growing very strongly without really adding headcount. We really level it and at about the year 2012, that's really towards the (indiscernible). So we also invested in this market. So I think it was the right decision because we put our money into this market, which basically has shown growth and continued at least from our point of view, we continue to do well you see this also in the good ground development.
Operator: Tom Sykes, Deutsche Bank.
Tom Sykes - Deutsche Bank: I just had some questions on Japan, your office business and also SMEs. Could you maybe say what the demand is like in Japan outside of the big outsourcing contracts that you've lost and whether excluding those you're sort of stable to maybe growing? If one then looks at the office business, is obviously a negative impact on the office organic growth from that Japanese business. But could you maybe say what's causing the acceleration in the U.S. and U.K. and do you think that that will have some positive mix effect for you over the course of the next maybe six, nine months? Then just finally, on SMEs; obviously there are signs of discriminatory lending to SMEs versus large corporates and they are presumably still at a floor as a percentage of your sales, but are you seeing any signs of life at all from SMEs and maybe any commentary on that would be helpful please?
Patrick De Maeseneire - CEO: Tom on Japan, we would still be negative if we were to exclude to effect of the big outsourcing contracts, but, of course, we would only be slightly negative. You will see unfortunately a similar strength into the first quarter but as from the second quarter you will see a lower single-digit decline that's what we're aiming for because the base effect will be then gone in Japan. Again, we continue to protect our profitability as we have always done and this will then also or should also be even better if these decline rates are a lot less as from the second quarter. On the U.K. and U.S. Dominik?
Dominik de Daniel - CFO: If we look to the U.K. front they had good growth in Q4 in the Office business. It decelerated somewhat from Q3 but the deceleration from Q3 was because of the Olympic Games, in fact, which was part of this Office line. Now the underlying growth in Office comes primarily there is – that is kind of demand we cover from the government sector where we had besides IT people also clerical people. Then if we look to North America, also basically if you look throughout the year North America the Office growth was pretty stable a little bit better now, plus 6 after plus 4 in the quarter before, but these are not let's say (office) sector which do particularly well. It's basically across the board. Very (indiscernible) is really in line with the Industrial business where the logistic is picking up and technology sector. But Office is quite stable and it's also true that we also added some headcount to grow a little bit more.
Tom Sykes - Deutsche Bank: UAE (brought to) say approximately what the gross margin difference is between, sort of say office North America versus Industrial North America in kind of, just what approximately the gross margin differential might be.
Dominik de Daniel - CFO: This is in the area of 500, 550 basis points. But you have also see the cost to show off in office typically higher than in industrial business.
Patrick De Maeseneire - CEO: And on the mix between small and medium accounts and large accounts it is clear when in Europe and the business is dropping that large accounts step out further. So the mix is slightly improving, but then again we still see also SMEs not really proportionally increasing a lot, so the customer mix has improved somewhat but not to an extent that this is now having a major effect.
Tom Sykes - Deutsche Bank: Just as an addition to that, SMEs might be more effective by U.S. healthcare reform. Everybody is going to be asked about that every quarter. What inquiries are you getting about U.S. healthcare reform and the impact on your industry?
Patrick De Maeseneire - CEO: Actually we see this as a potential positive for our business. The healthcare reform that’s going to come in place as from 1 January 2014 is related to companies that have more than 50 FTEs. So one of the opportunities we see there is that companies that are around that number will try to stay below that number and fill up the rest with temporary labor just to escape from the Obamacare, if I may say. As far as our business is concerned, because of the length of the assignments of the people in our portfolio and we have tested that against our whole portfolio and the salary levels, the large majority, the very large majority, we are talking really about small things here, small amounts here that leftover of our business, will not be impacted by the Obamacare, and for those few where it does, we will pass it on to our customers, because our customers know about it and have it as well. So, I think the good news here for our Company is that we're not going to be impacted by and that there is even opportunity in the market by having more temps instead of fixed employees because of this measure.
Operator: Paul Sullivan, Barclays Capital.
Paul Sullivan - Barclays Capital: Just couple of questions on cost. Could you just give us a sense or quantify the additional savings that you expect from the restructuring and when you would expect those to flow through this year? Then just more generally, if you look at your guidance, I think it implies sort of flat sequential cost development organically Q1 versus Q4. I know there is some seasonal – a little bit of seasonality in there. But could you give us a sense of any underlying sort of cost inflation that you are seeing elsewhere or any offsets, and how we should expect the underlying costs development to progress through this year on a sequential basis?
Dominik de Daniel - CFO: If we first look to the EUR30 million, one-third is for the datacenter consolidation in North America, and this is really investment to have the basis, to have the platform, to have the datacenter for our new common solutions. So it's not for me a kind of investment where you immediately see the cost savings; it's really the investment into the future, so from this you should not expect – there are, of course, savings, but you should not expect too many savings. The savings are more long-term and it's more – the savings will come through if we then rollout all the global systems basically. Then the other third is related roughly to France, and now in France the pay back of these investments are rather longer than in other countries, European countries. So, we talk there more about one and a half years. The rest is other countries and there the payback is normally between nine and 12 months. So, half of it we'll spend in Q1, and then you can calculate more or less how this will – how it will come through based on the indications which I have given to you. Coming to the development of cost sequentially, you have to see – we really managed always our cost base and our headcount really in line with the development of our temps, in line with the development of our base in gross profit. So, we're also not adding headcount before the kind of negative territory started at the beginning of this year, and we have taken out basically from Q3 to Q4 around 2%. We had 1% decline in SG&A sequentially. Going forward into Q1 we'll take out again roughly 1.5%. Costs are more or less sequentially similar, yes, because the decline is similar. Why is there no savings coming through, because there is – you have to consider that in some countries the underlying savings are there, but in some countries we have wage inflation as of January 1, so this is a compensating item. And then Q1 as compared to Q4 is seasonally a little bit bigger, because at the start of the year you have all the kick-off meetings where you – in these countries where we really bring the people in the right direction for the rest of the year. So, you have somewhat costs at the beginning of the year. Going forward, we have – again, that’s for me then more the question how is also sales developing. We try to manage this very well. If you look to the whole last year, we had 4% sales decline and our EBIT margin was dropping 10 basis points. Why? Because we always try to manage this very close to each other. What is important to say I think for Q1, it's important to mention this. If we say, and I said in my speech but I want to repeat it, if we have in January, February minus 5% decline adjusted for trading days organically, you have to consider we have in Q1 a negative trading day impact of 3%. So if you make calculations, just consider this as well in this respect, but this is a temporary thing, because (indiscernible) not in Q2, so it's just a kind of temporary thing in this respect.
Operator: Toby Reeks, Bank of America Merrill Lynch.
Toby Reeks - Bank of America Merrill Lynch: Just back to that 5%, 5.5% margin in 2015, it sounds like you are looking for double digit top line growth. Can you be a bit more specific about what you think the gross profit, or how you modeled it with the gross profit or gross margin, and are all the cost cutting initiatives in that 5.5% margin factored in now, or should we be looking for more as we go through into the second half of 2013? That’s the first one.
Dominik de Daniel - CFO: If we first look to the cost, I mean, we are still expecting cost savings from our restructuring which we have done, we just finalized the project. We announced additional EUR30 million, and then you may remember on the Investor Day, when Patrick was talking about the six priorities, he said also IT is important priority, and I said in my speech in 2013 as they have now globalized the organization, we will accelerate some of the IT spending, which will impact in 2013 our cost base in terms of cost decline or growth, whatever it will be, by 1%. So this year you have to consider and this investment we will do. Of course, this investment in the long term will give us a lot of more productivity. There will be then better return there in 2015, but that should also more returns coming after 2015, but part of the returns will be definitely there. So from a cost point of view, this is very important. Then if you look – if we have – we still have to align, and therefore we have the restructuring cost. We still feel that we have a little bit of overcapacity in France and especially in Japan, where we have to take out cost and in some other countries smaller things, but otherwise it's been really about – if the economy conditions are more favorable and if the business is ticking up, then we basically leveraged this how we have shown this also in the years 2010 and 2011, in an environment which I would say more of a GDP growth. We had 12% organic growth, 2011 10%. If you remember our presentation at Investor Day, where we showed the FTEs during these two years, the index of FTEs was only up 3%. So there you see how we can achieve these things. Of course, the assumption is also that professional will grow fast, but the mix is improving. This has a positive impact slightly on gross margin and slightly negative on cost, but based on this we have achieved it.
Patrick De Maeseneire - CEO: As I said earlier, on the gross margin we are already up 17.9%, quite an improvement. If we add 30 basis points there, for example – but we don't need more with the top line growth that we're aiming at.
Toby Reeks - Bank of America Merrill Lynch: The second one is on the balance sheet. Clearly, you haven't done all your buyback. Should we be looking for you guys to once you've completed your buyback program, to do another one or how else would you use the balance sheet?
Dominik de Daniel - CFO: I think we announced the buyback of EUR400 million. We still have some things to do. When this is concluded, we have then to rethink, but we have just concluded share buyback, before we have all the discussions, let's say, with the Board about these things.
Toby Reeks - Bank of America Merrill Lynch: So, when would we expect that to be completed then?
Dominik de Daniel - CFO: I mean. it depends not on a trading volume. When we announced that at Investor Day we said trading volumes in equities also in Adecco, but also are rather low, yeah. So, therefore, we had kind of limitation what have to buyback, of course, we do opportunistic. But if you look to the current cash position, EUR1.1 billion, there is no reason to wait here to continue, and we will continue with the share buyback. Until when it's done, it will be somewhere over the course of the year. We have to see how the trading development – how the trading volume will further develop in equities in general.
Toby Reeks - Bank of America Merrill Lynch: Then the final one on tax. Could you talk us through I think those are exceptional tax charge in Q4, can you talk us through that please?
Dominik de Daniel - CFO: So, basically if you look to the Q4 tax rate, which of course looks very high the 70% reported and if we take out the one-time item, we have the tax rate in Q4 of 34% and for the whole year of 31%. The guidance for Q1 is also 31%. The main reason that we had a higher tax rate in Q4 is related to the valuation allowance, which we have booked in France for the DTA in this country. The triggering event to do this valuation allowance is the introduction of the new law. There is a new law called (indiscernible), which basically aims to give companies in France tax credit in order to be more competitive in order to be more productivity. This law will change the kind of the earnings pool, the taxable earnings pool for the following reason. The tax credit which we received is kind of not part of the taxable income, whereas any investments which we are doing i.e. we invest in IT systems and declare this as a kind of usage of this tax credit is tax deductible. So therefore the mix is changing and therefore we are in a kind of tax lock position as the whole tax credit is not taxable and that’s the reason we have timed this valuation allowance in France which is the reason why we had this high tax rate in Q4. There is no cash out flow out of it, its evaluation allowance based on this new law. The law itself we believe is positive for our business and also for the French economy hopefully.
Operator: Michael Foeth, Bank Vontobel.
Michael Foeth - Bank Vontobel: Just one question if you could comment on your out placement business the trends that you see in recent months in particular in U.K. and U.S. and eventually other relevant regions and also what you expect for that business in 2013 given the economy is still quite difficult?
Dominik de Daniel - CFO: If we look to the out placement, the growth slowed somewhat out from Q3 to Q4 just as expected. Because you may remember after Q3 we said, we see that our growth which was in Q3 in the U.S. plus 9% this flowed somewhat down. This is actually happening it is slowing, but not anymore it is growing but not anymore and it is related that the U.S. economy is definitely in a better shape than Europe, but it's not that we are seeing that this now coming totally under pressure, because even this is better economic additions in the U.S. It's still economic conditions. Where lot of restructuring will occur especially in sectors and the structured problems; some area in the IT, but in some piece of the IT segment, some pieces of pharma, some pieces of finance. So there will be still projects going months, so we are not concerned additional flows and may just lead out. If we then look in Europe, unfortunately this business never really picked up for France, and I think needless to say there's a lot of need of restructuring in France. But it's still weak in France, and it's doing well in other European countries. Also the U.K., lost a lot of growth so far, so the growth comes primarily from Asia and from other European countries. But if you look to the mix of the business. 50% is in U.S., they will have similar growth, like they have shown now, a little bit more than 20% is in France, which is still declining and the rest is growing. So I would say in the short run, the growth rate will be in the lower to mid-single digits.
Operator: Konrad Zomer, Berenberg Bank.
Konrad Zomer - Berenberg Bank: I have two questions please. The first, you mentioned you expect another 300 FTEs to layoff in France. Can you tell us if that's part of another social plan? Is that part of social plan you had approved last year, or would you not need a social plan for these 300 people?
Patrick De Maeseneire - CEO: I will answer the first question. Actually the 300 FTEs are already mostly gone because we also had some people – you have some natural attrition of course. We also had some people with a limited time contracts that we have let go. So on top of the program of the – the voluntary program which was limited to more than 500 people these were the people that were additionally let go. Some of them in agreement, some of them because of the ending of the contract are not being replaced and then the natural attrition that we always have, but that we also didn't replace and of course in view of the circumstances. So, this is already done.
Konrad Zomer - Berenberg Bank: But they were…
Patrick De Maeseneire - CEO: A bigger part.
Konrad Zomer - Berenberg Bank: But they were on top of the 500 that were part of the (RIA) integration?
Patrick De Maeseneire - CEO: If you compare to the beginning of the year and you look at the FTE development recently that's the almost the total amount yes.
Konrad Zomer - Berenberg Bank: Then my last question on the automotive business in France and Germany, could you share with us if that business is down more than 10% let's say in Q4 or year-to-date in terms of revenues please?
Patrick De Maeseneire - CEO: In France it is. It's really year-on-year it's down 45%. So, it's tremendously down as you know our exposure is rather important to that. In Germany it's kind of down 1%.
Dominik de Daniel - CFO: In Germany to maybe add something we said that we had done a peak of temps in August and since then it's closed sequentially always a little bit done. We still had strong double digit growth and yeah it slowed down towards the end of the year. The year's start was quite normal by this small decline rate.
Operator: Andy Grobler, Credit Suisse.
Andy Grobler - Credit Suisse: Just a couple of quick ones from me, just on the Q4 gross margin you mentioned the working day adjustments in Germany and Sweden to have quite a big impact. Can you quantify what that impact was in terms of the gross margin decline for Q4 and then secondly just on French social charges and all of the plans and regulation that is going on there, what are your expectations for the impact on your business? Thanks.
Dominik de Daniel - CFO: If we start with gross margin development. The impact on the temp margin was down in Q4 30 basis points in the Group level and 20 basis points is totally related to the bank holidays which occurred in Q4 on a week day compared to weekend day the year before, so 20 out of 30 on the group level from the year-on-year comparison. In Q1 it is a bit more significant, 30 basis points and the reason is that last year we had no bank holiday in Q1, whereas this year if I take the example of Germany this year we have 2 because we have the 1 January which is this year on a week day, last year it was on a weekend and we have Easter Friday which is this year in Q1, last year it was in Q2, so this is the kind of was compared to Q2. So therefore the impact just from the bank holidays of these countries but also in other countries sometimes you have to pay bank holidays, but that’s more important because the people are employed by us maybe in Q1 roughly 30 basis points from a year-on-year comparison. The second question was because of the…
Patrick De Maeseneire - CEO: That's the impact, what we've seen there and you know this, (indiscernible) so the credit that the government is giving to companies to make employment more competitive, the (CC) as it is called, it's applicable to salaries up to 2.5 times the minimum salary and which I think is very good for the economy and if it's good for the economy, in the end it will have a positive effect on our business as well. As far as we are concerned as an employer, of course it will be applied to the majority of our own people, to the majority of our temps, the large majority of our temps because they are below this 2.5 times minimum salary. Now, you have to say that this law came into place on the 29th of December and that's why we have also taken this valuation allowance like Dominik said, because as the law really happened in Q4, despite what other people said and as far as what is true of course is that all the rules are still not clarified. What is clear is that part of the money that companies are getting back has to be reinvested, whether that is in R&D, whether that is in training, whether that is in additional employment. It has to be clarified and has to be agreed with the workers' councils and we think that this is going to be clear over the summer, but by law we are the clear employer and will get those subsidies granted as well.
Andy Grobler - Credit Suisse: So does that mean it's too early to quantify?
Patrick De Maeseneire - CEO: The things on the reinvestment and which part has to be reinvested and what really has to be clarified before we can say anything about the impact on our margin and on our business. So, we'd rather wait for the clarification of the law before making any statements on what the impact would be. But all in all it will be positive.
Andy Grobler - Credit Suisse: Okay. Thank you very much.
Patrick De Maeseneire - CEO: So, ladies and gentlemen this concludes our Q4 conference call. I'm looking forward to speak to you again on – together with Dominik and Karin on May 7 when we announce our first quarter results, if not sooner like tomorrow morning in London at breakfast. Thank you.
Karin Selfors-Thomann - Head of IR: Thank you.
Dominik de Daniel - CFO: Thank you.
Operator: Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call and thank you for participating in the conference. You may now disconnect your lines. Good bye.