Randstad Nv Unsp/Adr

Welcome to the Randstad Q4 and full year 2025 results conference call and audio webcast. For the first part of the call, participants will be in listen-only mode. And afterwards, there will be a question and answer session. If you wish to ask a question, please press pound key five on your telephone keypad. Please note that you're limited to one question and a follow-up per round. I will now hand the word over to Sander van het Noordende, CEO. Mr. van het Noordende, please go ahead.

Thank you very much, Elba, for that introduction. And good morning, everyone. I'm here with George and our investor relations team to share our Q4 and full year 2025 results. First of all, 2025 has been a year characterized by great strides in our transformation, while I would say navigating the cycle and demonstrating a resilient performance. It's also been a special year as we celebrated Ransat's 65th anniversary, a milestone reflecting our enduring commitment to being a true partner for talent. The market environment in Q4 was in many ways similar to what we saw throughout the year. We remain in a stagnant job market, but we see more resilience in temp with good growth in Southern Europe, and we see further signs of an early cyclical pickup in US operational. As mentioned in the previous call, the professional and per markets remain challenging, particularly in Northern Europe, while APEC remains resilient. Against this backdrop, we delivered solid results. We achieved revenues of 5.8 billion euro and an EBITDA of 191 million euro with a margin of 3.3%. For full year 2025, we delivered revenues of 23.1 billion euro, 2% lower year on year and an EBITDA of 720 million euro with a margin of 3.1%. So I'm very proud of our teams navigated their markets during the year with a consistent focus on delivery of results while transforming the business. So whilst 2025 was a challenging year, we came out of the year in a much better place than we went into it. First of all, from a growth perspective, we now have over 50% of the business in growth compared to around 25% at the end of 2024. From a profitability point of view, we read the benefits of our cost discipline with 181 million euro lower cost in 2025 than in 2024. And our recovery ratio was very strong at 71% for the year. From a productivity point of view, our focus on delivery excellence through our talent and delivery centers is making us more organization. And as a direct chief, 3% productivity gains in Q4 and 1% for the full year. This discipline led to a solid free cash flow of approximately €600 million, further strengthening our balance sheet. In light of this, we will propose a dividend of €1.62 or €284 million in line with our capital allocation policy. We started 2026 with stability in our volumes. Our exit rate in December was solid and the January revenue trend is flattish. Of course, we remain laser focused on serving our clients and talents while steadily executing our partner for talent strategy. In Q3 and Q4, I visited all major countries and on the ground, you can really feel the energy and excitement for our transformation. Our people get it and want to lead the market as we continue to move our business model toward a digital first talent company where we deliver scale through our platforms. While there is still work to do, we are seeing the clear benefits of this transformation in how we run the business day to day. First of all, we continue to life sciences, e-commerce and logistics, healthcare, and of course all the digital hot skills around AI, cloud, data and analytics. Together these segments deliver 9 billion euro in revenue this year, growing 2% year-on-year. Looking at our specializations. In operational we've seen good commercial progress and sustained momentum with an increase in clients visits paying In digital and enterprise, we signed several new blue chip clients in semiconductors and financial services. However, professional job flow was impacted by a combination of year-end slowdown and low hiring confidence. With our digital marketplaces generating approximately €4 billion in annualized revenue, we are running the business at a higher clock speed. In Q4, we saw around 1.4 million shifts self-scheduled by our talent, an increase of 30% quarter on quarter. Clients and talent clearly like the new models. We will further accelerate our digital first strategy, and that's why I'm very pleased to welcome David Coker, who will be Randstad's first Chief Digital Growth Officer. David knows how to build digital experiences at scale and brings over 25 years of experience in driving commercial and platform growth across Europe and Asia, most recently at Booking.com. Finally, none of this is possible without the best team in the industry. Despite the pace of change, our employee engagement remained above benchmark at 7.7. And we also continue to invest in our people's future by providing AI readiness training to all of our colleagues. And you will understand that with everything we've done in 2025, both operationally and strategically, we couldn't be better positioned for a more complete recovery with profitable growth as we are more specialized, more digital, and more efficient. George, over to you.

Thank you, Sander. And let me shed some extra color in our results. So good morning, everyone. All in all, we saw a continuation of the trends observed throughout the year. And always first, from a momentum perspective, once again, the seasonal pattern continued as we added 15,000 talent working sequentially since Q3, again, versus 10,000 last year. Earnings-wise, Q4 and Q3 were very similar. It was somewhat of an erratic quarter, I would say, in what was overall a step towards a stronger exit rate in December and the start of January. That is encouraging, and we'll talk more about that later. We also continue to gain field productivity and materialize structural cost savings in indirect costs achieved even while increasing digital investments. Lastly, discipline cash conversion, allowing us to balance the leveraging with shareholder returns in line with our capital allocation policy and also more about that later. But let's start and break this down, starting with the regional performance now on page eight. In North America, we continue to see good progress this quarter with a pickup in the industrial pockets of our business. In the US, our operational business grew 6%, significantly ahead of the market. And we see this as a very testament to our new way of working, centering on the digital marketplace and central delivery. Elsewhere, professional is down 10% and digital this quarter was flat, but with solid operational average. Enterprise was minus 3%, with demand in RPO becoming more muted as we reached year-end. Meanwhile, in Canada, we continue to grow. Permanent high-rate shorts, also some signs of stabilization, albeit at a low level, declining still 14% as hiring confidence remains low. The EBITDA margin for North America came in at 3.6%, up 20 basis points year over year. This represents a recovery ratio of above 100%, meaning we've been able to expand EBITDA year over year more than the gross profit we lost, with productivity continuing to increase in operational. And now moving to Northern Europe on slide 9. In Northern Europe, we continue to navigate challenging markets, though as we exit the year and enter 2026, exit rates in December and January suggest bottoming out or sequential improvements. In the Netherlands, organic revenue remains subdued at minus 7%, with hiring freezes in government. government and large professional clients. Q4 presidentals this quarter, an increase of the sickness provision reflecting a rise in long-term sickness rates and going forward as well probably to stay relatively high and a 5 million one-off dotation into the new pension scheme. Looking ahead, the new Temp CLA and the Future Pensions Act, WTP, effective of January 1st, will increase some of the wage components. It is still too early to tell what the legislation impact will be, but at first glance, we see higher bill rates offsetting some of the pressure on volumes. We also celebrate one year of the acquisition of Zorgwerk, which continues its impressive growth and synergies path, reinforcing our position in healthcare as a structural growth segment. In Germany, things remain challenging with revenue at minus 10%, driven still by subdued automotive, though manufacturing is stabilizing. More importantly here, our structural improvements on the cost side, as you can see, are paying off, ensuring a profitability base and positioning us for a stronger company into 2026. Belgium declined 5% with operation minus four against tougher comparables. And finally, Poland, 7% growth, Switzerland, 6% growth, continued to lead growth, offsetting the subdued Nordics still at minus 14%. And now moving on to the segment Southern Europe, UK and Latin on slide 10. France remains a story of a two-speed market. On one hand, we see a resilience in our industrial pockets, and this is most visible in in-house, which grew this quarter 13%. On the other hand, the SME segment is still down double digits, leading to an overall operational decline of 4%. Professionals were down 14% year-over-year, and this quarter healthcare saw sequentially less revenue, impacted primarily by legislative changes that came into effect this summer. A leaner structure enabled us to deliver an EBITDA margin of 5.4%, up 130 basis points year-over-year. Italy posted its seventh consecutive quarter of growth. Operational grew 6%. Profitability landed 5.7%, reflecting strategic investments ahead of the Randstad Talent Platform rollout. Iberia remains a stronghold, plus 5%, led by Spain, up 6%, where growth investments are paying off. Elsewhere, the picture is mixed. The UK remains tough, and across these regions, conversion does continue to increase, resulting in a 3% EBITDA margin. And now let's move on to Asia Pacific on slide 11. Japan continued its solid growth at plus 6%, and we continued to invest to capture structural opportunities, particularly in digital engineering, where we're growing 7%. India delivered double-digit growth as we continued to invest in growth segments, while Australia and New Zealand declined 7% against steep comparables in a subdued market. Overall, the EBITDA margin for the region came in at 3.3%. And that concludes the performance of our key geographies. But now let me walk you through our combined financial performance on slide 13. Let's start at the revenue. So looking at the revenue mix, we see the trends of the last few quarters continuing. Operational specialization continued to improve throughout the year and is now flat. Professional and digital remain broadly stable throughout the year, albeit still at a low level. In enterprise, we saw after several quarters of solid growth in RPO, demand softening this quarter, resulting in a 4% decline. If we move down, gross profit and OPEX remain very similar to Q3 levels, and this resulted in an EBITDA margin of 3.3%, stable sequentially and year over year. Underlying EBITDA came in at 191 million, and it's worth noting that we again faced an adverse FX impact of around 8 million. Adjusting for that, our operational profitability was very close to last year's level. Integration costs and one-offs this quarter amounted to 34 million and for the full year one-offs totaled 125 million with the largest focus on structural cost reductions in Northern and Western Europe. Regarding amortization and impairment, we recorded an impairment of 9 million related to our digital business in Belgium, reflecting the ongoing weak market conditions there. Net finance income of $5 million for the quarter, where fair value adjustments, reversal of impairments on our loans and financial commitments resulted this quarter in a gain of $18 million, effectively offsetting our regular interest expenses for the quarter. The effective tax rate was 31% for the year within our guided range. In 2026, we expect a similar tax rate guidance of 29% to 31%. And this all leads to an adjusted net income of 135 million for the quarter. And with that, let's now deep dive deeper into the gross margin slide on page 14. A few things about margin. So temp margin was down 20 basis points year over year. Operational business remains more resilient versus professional and digital specializations. There we continue to see a geographical divergence with Northern Europe below group average and Southern Europe continuing to do better. And as we mentioned before, an adverse effects impact in 2025. Incidental items also took impact in the Netherlands, as mentioned earlier, and that overall brought the gross margin in temp down 20 basis points. Perm contribution was down 20 basis points as well, with a little sign still of stabilization in TP per markets remaining challenging. In HRS and other, this quarter was flat. RPO decline, the 3%, 4%, is pretty much in line with group level, therefore not impacting the overall gross margin mix. This is the market at the moment. Overall, looking back at 2025, the impact of geomix, enterprise clients, and specialization mix, with operational being more resilient, carries a temp margin decline that will progressively unwind with different market dynamics. Which brings me to the OPEX breach on slide 15. And remember, always, this one is sequential. Underlying operating expenses were $880 million. Once again, like throughout the year, moving in lockstep with gross profit. This means OPEX has stayed broadly in line sequentially with seasonality and strategic investments offset by cost savings. The payback of the one-offs executed throughout the year remained well below the 12 months reference we normally provide. And the real story here is our 7 to 1% recovery ratio. Over the last three years, we have become structurally more agile. Our structural changes to how we conduct and support our business have improved our ability to recover the decline in gross profit by reducing operating expenses or to convert more of gross profit into EBITDA in the countries where we see growth. Today, we have more revenue also going through delivery centers, we have more parts of our process done digitally, and we have more and more revenue in our digital solutions. At the same time, in parallel, we continue to drive structural indirect costs down. Linking this back to our capital markets discussions or day discussions in May, I am pleased to share that we've achieved north of 100 million in net structural savings for 2025. And with that in mind, let's now move on to slide 16, which we discussed cash flow and balance sheet. Turning to cash flow, our underlying free cash flow for the quarter was a positive $213 million, reflecting mostly seasonality. For the full year, free cash flow totally closed to $600 million, up $260 million year-over-year, reflecting good cash conversion while year-end timing was supportive in 2025. DSO came in at 56.7 days, up slightly by 0.5 days sequentially. Net debt therefore decreased 274 million year over year, and our leverage ratio now stands at 1.3. Consistent with our capital allocation, we propose a regular dividend of 1.62 per share. This reflects 64% of adjusted net earnings, which equals the floor when we temporarily exceed the 40% to 50% range.