Hello, and welcome to the Arcadis NV 2020 Q1 trading update call. My name is Rosie, and I'll be your coordinator for today's event. Please note this conference is being recorded, and for the duration, your lines will be on listen only. However, you will have the opportunity to ask questions at the end. This can be done by pressing star one on your telephone keypad to register your question. If you require assistance, please press star zero and you'll be connected to an operator. I will now hand you over to Jurgen Pullens, Director of Investor Relations, to begin today's conference. Thank you.
Good morning, everyone. My name is Jurgen Pullens, I'd like to welcome you to this Arcadis analyst conference call and audio webcast. We are here to discuss the company's results for the first quarter, which were released this morning. With me is Peter Oosterveer, CEO, we will start with a short presentation, then we will open for a Q&A. You all received the presentation this morning, it is also available through the investor section of the Arcadis website, for which the address is arcadis.com/investors. Just a few words about procedures before we start. We will begin with formal remarks. We call your attention to the fact that in today's session, we may reiterate forward-looking statements which were made in the press release.
We like to call your attention to the risk related to these statements, which are more fully described in the press release and on the company's website. With these formalities out of the way, I'd like to hand over to Peter Oosterveer.
Okay. Thanks very much, Jurgen, and good morning, everyone, and welcome to our Q1 trading update, which we might as well re-label to a COVID-19 update because that is obviously going to be a recurring theme throughout the conversation today. Let me offer some high-level comments. On the first slide, it's actually a slide which has at the top, health and safety first. Majority of our services continue. It's already fairly unique for an opening slide to really only touch on one topic per se, and that is, of course, COVID-19, which as we now know, has created a very serious issue for society at large. We became aware as a company of COVID-19 because of the initial impact it had on us in Asia, which was in the early part of this year.
As we started to see that this could potentially become a global issue, we decided to create a global COVID-19 task force, which was in early March, so now almost seven weeks ago. Task force led by someone out of my team, reporting to me, on behalf of the task force. The task force included people from different functions and also, of course, included people from the various regions in which we operate. Needless to say that our initial focus was on our people and the people we work with, so that includes clients, families, to ensure that we kept them safe and healthy. The focus quickly shifted in the context of keeping them safe and healthy to moving people to work from home, to the extent possible.
With about 27,000 people as our total population, we moved about 90% or close to 24,000 people to working from home in a matter of a week and a half. I think that is absolutely a Herculean effort. I don't actually think that, or had expected that we could do it that quickly, but the organization as a whole, and particularly our IT organization, responded extremely well and we moved that large of a percentage to people working from home. That also includes the people who are part of our Global Excellence Center and our Global Shared Service Center, the centers in India and the Philippines. I don't probably have to tell you that it is actually quite unusual for people in these locations to work from home, but also they are now working almost exclusively from home.
The 10% which is not working from home are people who, because of the nature of the work, can't work from home. Those are people who execute field work, people who are on construction sites and the likes. You can safely say that the type of work Arcadis performs does lend itself quite well for working from home, at least for a particular period of time at the scale we're doing it as we speak. We also quickly thereafter introduced a number of proactive steps to contain costs and to address the issues we started to see on the market. Those include measures such as stop any discretionary spending, stop any uncommitted capital expenditure, eliminate any advisory services, put a hiring stop in place, reduce the number of contingent workers we have, and so forth. Those steps were all initiated in the first part of March.
From a market perspective and what we see our clients do in response to the crisis, first, they also, to the extent possible, are moving to a work from home scenario, which puts everyone, you could say, on an equal footing because everyone does experience that. Whereas it does provide opportunities, it also provides challenges as well, and particularly for those who have a home environment which includes, for instance, a young family whereby children are unable to go to school or the care of an aging parent, as an example. Then, of course, people are trying to juggle many things at the same time. If we look at our clients, in addition to the issues they deal with in working from home, on a global basis, we can say that the work we perform for public clients is unaffected.
In fact, we actually see public clients, where possible, accelerate projects they were already planning to do anyway, but now using the opportunity to advance these projects to the extent possible. By and large, the work we perform for our public clients is actually unaffected. For private clients, we see a bit more reservation in terms of advancing new work. In the total scheme, we have seen in the first quarter that we actually had a healthy book-to-bill exceeding one, which is obviously positive. As you've seen from our press release, our net revenue was also actually still fairly healthy. In terms of the first quarter, the impact was not significant other than impact in Asia, which is largely where we had all the impact, which is obviously logical because that's where the virus started to make its impact.
That created for us some challenges in Asia because of the nature of the work we perform. In Asia, unlike many other places, the type of work we perform, or at least in China, I should say, is not necessarily the most easy work to allow work from home. With the Chinese government pretty much shutting down offices and job sites, the work we performed in China, and to a lesser extent, in Hong Kong, was significantly impacted. You've seen in our press release what the financial impact was in Asia. With all of that being said, I would say that our organization has responded extremely well, extremely agile. Again, to move a large contingency of people to work from home in a relatively short timeframe is just an example of the agility which we have demonstrated.
Subsequent to all of this, we, as you have seen, took a number of additional actions. We did stop our share buyback program. We eliminated the dividend pay out over 2019, which was on the agenda for our AGM on May the 6th. We also eliminated the 2020 bonuses for the Executive Leadership Team. Also, we introduced a 10% salary reduction for six months for the Executive Leadership Team, as well as for our Supervisory Board. Quite a bit of activity, obviously. All of that and all of what I so far explained is in the context of COVID-19. I want to mention one more thing which hit us also last week. Has nothing to do with COVID-19, but unfortunately, last week, we were confronted with the sudden passing of Joachim Ebert, who is our CEO in North America.
Joachim fell ill in the latter part of last year, was battling cancer. Was actually expected to return to work and then, unfortunately, passed away as a surprise to all of us. Since he was ill for quite some time, we had already appointed an Interim CEO as of the 1st of January of this year. The Interim CEO is Alex Rothchild, and we are now announcing or have announced that Alex will be the permanent successor to Joachim Ebert. Definitely a very sad moment for the Arcadis family for many reasons, but also because Joachim was instrumental in turning the business in North America around. If you could move to the next slide, please, which is the slide which has the eight work streams we established. I've already talked to some of them.
This is the plan we put in place when we created the global COVID-19 task force in early March. Eight different work streams, which have different owners and contribution from people across the globe. With, again, the focus initially on the safety and health of our employees, of our clients, followed by an even more deeper client intimacy than we would typically already demonstrate to ensure that we stay very closely connected with our clients, that we're able to support them where they do need additional support, and that we're able to guide them through this crisis as well. Of course, the next important component of our response has been to ensure the continuity of the organization, which is largely part of the financial impact box, which includes a number of the actions we have taken, which I shared with you a few minutes ago.
Lastly, as difficult as managing through this crisis is, we also recognize that there will be time after the crisis. The box you see on the bottom right-hand side, the recover and reimagine box, is the box which we use to actually capture and learn from the experiences we currently gather, which includes the more extensive working from home, which includes using the IT system more broadly than we've done in the past, but also is aimed to identify things we believe we can accelerate in this crisis, things we already had planned. We have to think about digitizing particular services.
We're using this crisis also, to the extent possible, to our advantage to advance certain things we already had on our sleeve anyway. With that, as a quick reflection of what our focus is in these eight work streams, and I can safely say that this COVID-19 global task force operates extremely efficiently, creates the coordinated response we need, applies a degree of consistency, and also allows us to freely learn and share experiences across the globe. I am turning it over to Jurgen.
Thanks, Peter. I will comment on the Q1 numbers. When you look to the net revenues, you see an organic growth of 3%. The next slide, I will come back on the net revenues. The EBITDA was in line with last year. You see also from the slide two EBITDAs. Of course, as you are aware of, we have to report under IFRS 16, so the first EBITDA is EUR 76 million, but the EBITDA that is used for the calculation of the bank covenants is still the EUR 56 million comparable with last year. We report both EBITDAs. The operating EBITDA margin was 7.2% compared to 7.6% last year. This was also impacted by the operating EBITDA impact of approximately EUR 5 million in Asia due to COVID-19.
You can say, if we did not have that impact, the margin was better than last year and closer to 8%. When you look to the net working capital, you see the increase from 74.4% to 90.2%. The increase was mainly due to the invoicing efficiencies in the U.S. and partly due to COVID-19 in Asia and also in CallisonRTKL, because the business of CallisonRTKL is also for 20% in Asia. Of course, when we talk about the invoicing inefficiencies, I would like to remind you that we implemented the Oracle implementation in North America in the third quarter of 2019. In the first quarter of 2019, there was no Oracle impact.
The delta is more or less in line with the delta last year. We're working hard to solve this mid-year. We will do that by implementing some adjustments to the existing Oracle system. The free cash flow is higher than last year. It's EUR 84 million. It is also impacted and it includes a large engineering renewal of approximately EUR 24 million. The net debt is EUR 424 million, slightly higher than last year. Of course, impacted by the cash outflow, also by the payment of the acquisition of Over Morgen we did at the end of last year and part of the share buyback program we started early this year. That program is also stopped. The backlog is in line with last year. Even when we look to the organic growth, it is 2% higher.
We have seen also a good order intake, which was actually when you look to the book-to-bill ratio, was 1.06x, higher than net revenues. Good order intake in most regions. We even see that in China, some improvements as they were returning to more normalized business. What is also important to mention is that we don't see material cancellations of projects. We'll look a little bit more deeper into the developments in the regions, that's on the next slide. We see a good organic growth in the Americas, in 7% growth in North America, driven by all businesses, especially in water and in infrastructure. Also this week, we were able to announce a nice contract in the water business in America. It was to improve the flood protection and sustainability of communities along the coast of Texas.
I think again, a nice win, and we are still winning projects these times. South America, we have seen a 12% growth, and that was mainly driven by our environmental business in Brazil. In Europe, we have seen in the first quarter, and of course, the impact of COVID-19 was not so visible in Europe in this quarter. We have seen a strong growth in Germany and solid performance in the Netherlands and Belgium. In the U.K., also 4% growth, mainly driven by infrastructure, but also by water and environment. We have seen, and that was also important for us, also that large infrastructure projects like the HS2 in the U.K. still continue, and we see that in general that most of the projects we do are continuing. In the Middle East, there was a 5% decline.
Margins were also there, still a little bit lower, as mentioned in the press release. Of course, we see there also the uncertainty towards the end of the quarter in the market due to COVID-19, but also to the very low oil prices. Asia, clearly the biggest impact from COVID-19, 50% decline in net revenues. We have seen that, let's say the businesses is, all offices are open and the business is returning to a more normalized situation. Last but not least, Australia, an exceptionally strong growth of 32%. We are working there on large infrastructure projects like in Melbourne and Sydney and on all these projects continue. CallisonRTKL, we have seen a organic decrease, also, partly related to COVID-19, as you are aware of that approximately 20% of the business of CallisonRTKL is also in China.
Also we have seen that the retail practice has also some difficulties and so, all in all, we have seen an organic decline of 8%. On the other hand, we see that currently, the healthcare practice of CallisonRTKL is picking up and has quite some work, as you understand. If we go to the next slide and put it a bit in perspective, you see that the net revenues and the organic growth has a pretty, I would say, steady development. 3% organic growth. Operating EBITDA margin from 7.6%, you saw the improvement throughout the quarters. Unfortunately now the 7.2%. It includes also the EUR 5 million or the 0.8% impact we have from COVID-19 in Q1.
The day sales outstanding and net working capital, it's higher than it was a year ago, but as mentioned before, it is impacted also by the inefficiencies in the billing, which we are currently solving. That is the major impact we see on the working capital, and we discuss that also with the full year results. Net debt is EUR 424 million. Clearly you see that normally the net debt is higher in Q1 than at year-end. That is the seasonal pattern we see also in other years. Maybe also a few words about liquidity, in these days, also important. I can confirm that with year-end, we had a headroom of EUR 320 million, and that is basically related to the unused credit facility we have, and that is still in place. That headroom is still in use.
On top of that, we have also EUR 200 million cash in the region. From a liquidity point of view, but also from a balance sheet point of view, we can say that we still have a solid position. By having said that, I'd like to return to Peter for some closing remarks.
Yes. Thank you, Jurgen. We received some early comments this morning, which expressed some surprise about the fact that we were still able to win new work and that we haven't seen any material cancellations of projects. I believe that is caused by the fact that the vital needs of societies fundamentally remain unchanged. I would go even further by saying that going forward, once we get out of this crisis, the whole definition of resiliency, will probably be appended to also include a component which increases the resiliency of society against viruses as we now experience with COVID-19. The fundamental needs of the world remain unchanged, and that is why I believe that our backlog so far has not been impacted and we've been able to actually create a healthy book-to-bill, as Jurgen commented in the first quarter.
I can't say enough about the agility, the flexibility, the resiliency of our people, to work through this crisis. That's one of the reasons why we have seen little to no interruption in the work we've done. We've not received any complaints from clients that they have noticed an interruption. That's definitely a testament to the agility and the adaptiveness of our people. Our focus, of course, continues to be on business continuity and supporting our clients. This crisis, as severe as it is for society, also offers opportunities. As Jurgen also mentioned, we are actually trying to address some of the opportunities which are the result of this crisis. Jurgen already spoke about our financial position and good liquidity.
That all being said, I don't think there's anyone in the world who can accurately assess what the impact of COVID-19 will be for the rest of the year. That is largely depending on, first of all, the measures governments have taken and will continue to take, the discipline society will apply in dealing with these measures, and the speed of the recovery, which we will see obviously in different parts of the world. I dare to say that the speed will probably differ significantly by region in the world, and then I don't even want to speak about the risk of a potential second wave, which is also still not completely unlikely.
With all these uncertainties, we think that it is important to signal that we believe that it is unlikely that we will meet all our strategic targets for 2020, which is disappointing, but a reflection of the reality and also a reflection of the uncertainty we see in our environment. I think we all see that uncertainty. That being said, we are still pressing ahead full charge with addressing opportunities this crisis is providing, with opportunities to accelerate certain things we already wanted to do and use the crisis to our advantage. We're also committed to present our new strategy, the update to our strategy to you on November the 19th, later this year. With that being said, I turn it back to Rosie and to guide you through the logistics and allow you to ask questions.
Thank you. As a reminder, if you would like to ask a question, please press star one on your telephone keypad. To withdraw your question, please press star two. You will be advised when to ask your question. Our first question comes from the line of Henk Veerman from Kempen & Co. Please go ahead.
Hi. Morning everyone. Thank you for taking my questions. My first question is on your backlog in relation to your growth expectations into Q2 and Q3. Yeah, when I look at Asia, the organic decline was 15%, but the backlog in Asia was historically a lot sort of less strong and the order intake was sort of weaker than the sales. If I look at the backlog as a group, it is actually much stronger than in Asia. Can we assume that the Q2 and Q3 performance in terms of organic sales, is a lot stronger than sort of the Asian business in Q1 suggest? That's my first question.
Yeah, I think, Henk, it would be a little dangerous to extrapolate the Asian backlog, to the total for a number of reasons. One is that the Asian backlog is a bit of an unusual backlog because it typically spans multiple years, because of the nature of the project. A lot of the projects we do in Asia, and particularly in China, which of course had the brunt of the impact in Q1, is typically multi-year projects on buildings where we perform cost management and project management type of services.
The second thing I would say is why it is risky to extrapolate the dynamic in Asia to then potentially apply it to the total, is that the nature of the work, again, which is largely cost management and project management in Asia, doesn't lend itself, unlike virtually all the other things we do across the globe, for working from home. When the Chinese government fundamentally shut down the country or large parts of the country, it also meant that the work we do was shut down, and it didn't allow for working from home. Certainly not to the extent we now see it in other parts of the world, where we are virtually as effective and as productive in working from home as we were in working from the office.
I understand the temptation to apply the dynamics in Asia to the rest, but I think that would potentially be flawed.
Okay. That's very clear. Second question is on the unbilled receivables, the net unbilled receivables, which year-over-year, is an increase of EUR 108 million. How much would you say of that EUR 108 million still relates to the Oracle Cloud implementation delays, and how much is related to the COVID-19 situation in Asia? The question related to that is, when we enter Q2 and Q3, can we expect rises in unbilled receivables across the other regions because of COVID-19 or not?
Henk, yeah, I will start to answer the question. You see the increase of EUR 108 million. The majority of that is linked to North America. We discussed it earlier, that is the delay in invoicing, as you can call it, or inefficiencies. At the same time, we have to take into account that, if you look to the gross revenues increase in North America compared to Q1 last year, then we see an increase of EUR 40 million. You can say that roughly EUR 50 million-EUR 60 million is related to North America. On the other hand, we see that the unbilled receivables in as well Asia and also CallisonRTKL in combination was also somewhat higher than before. You have to take into account, of course, when you look to North America, that it is higher because the gross revenues is higher.
Still, if you look to the improvement in this quarter, that is rather limited in the U.S. Of course, we were able to stay in line with the gross revenues when it was about our billing, we were not able to accelerate the billing and so that we were able to reduce the net working progress. That depends very much also on the additional efforts we have to do and we will do with, say, the Oracle solution, that will be effectuated in the second quarter, then we expect that we solve the issue in North America. Maybe, Peter, you will add something.
I think that's a fair representation. To break it down a little further, provide a little bit more insight. The issue with the Oracle system in North America has to do with a piece of the functionality
Which we are updating as we speak. The expectation is that we will deploy that in the last week of May, and if all goes well, then that functionality will obviously be available for part of the billing. It is a specific, rather detailed part of the billing functionality for contracts which require an extraordinary amount of detail. If that functionality is deployed by the end of May, then that should give us the confidence and the ability to catch up in the second and the third quarter.
Okay. On the question, what's not very clear to me is then in Q2 and Q3, will we also see a rise in unbilled receivables across the other regions because of COVID-19? That's exactly what happened in Asia in Q1.
Not necessarily. I think what we see already in April, a catch-up in Asia. We have also seen that to some extent, the offices were really closed in Asia. I think that when you look to the ability we have here in Europe and the other parts of the world, in the U.S., that it's not necessarily the case that we see an increase in the unbilled receivables. What can happen, of course, but that is a little bit uncertain, and we are on top of that, is what is the behavior of our clients? We do see that, especially for public clients, we don't see any impact of their payment terms. Hopefully, we don't see that as well on the private client sector. Of course, that is still a bit uncertain, like it is uncertain to predict exactly the impact of COVID-19 in total.
We don't expect a further increase in the, I would say, in the unbilled receivables also in other regions. The major delta is still the delta in the U.S., and that is, of course, if you compare apples with apples, we introduced the Oracle solution in Q3 last year, and now we compare Q1 with Q1.
Okay, that's clear. Thank you, guys.
The next question comes from the line of Luuk van Beek from Degroof Petercam. Please go ahead.
Yes. Thank you. My first question is on the productivity at home. You have now experienced six weeks about working at home. Can you say if the employees are just as productive as they are in the office? Also, I can imagine that there is a difference between completing a project on which they are already working and starting up a new project where there's probably more collaboration required. Do you expect there to be a difference between those types of activities?
Yeah, I think, Luuk, you're experiencing what everyone is experiencing, including myself, that you can be efficient, but I don't think that our business will ever be an entirely work from home business. That, of course, is not what we aim for anyway. We do expect that as more flexibility within what I think will, for the foreseeable future, still be a 1.5 or 2 m economy, that some flexibility will be offered. What we're seeing in the first six weeks is that I think by and large, most people deal with it in strides. I can't deny the fact that the situation differs greatly depending on whether you have the perfect environment at home or whether you, for instance, have the environment I described briefly with a young family, children who can't go to school or needing to take care of aging parents.
At this point in time, we also see that whereas it is challenging for a lot of people to keep all the balls in the air, particularly in the circumstance I just described, that the workday is actually extending into a longer period than it typically does. What I mean with that is we do see that people need to juggle a lot of things. We see, for instance, if we have a video conference that all of a sudden you see a family member going through review, which a couple of months ago would be unacceptable, but it is now being accepted. We see people also trying to still keep all the balls in the air while extending the workday beyond the normal work hours.
That means that a lot of people are still working after, say, 6:00 P.M., which is typically when a lot of people would shut down. Your point about starting a project, yes, I think there is a need to ideally be together, still within the confines of the limitations. If we have to start a whole bunch of new projects at the same time, then it would be somewhat challenging, but that's obviously not the way it works. What we also have done in places where it is still allowed, although we are not encouraging people to, in large numbers, go to the office, we actually, in the Netherlands, still have our offices open.
Only a few percent of the people use that opportunity, but if there is a need in those places where offices are open, and that includes the Netherlands, to get together, again, within the confines of the limitations, then that opportunity is there. In the first six weeks, which is the period I'm using, because that's the period most countries have been in a restricted work environment, we have not seen an impact on the productivity.
Yes, that's clear. My second question is on your tender pipeline, because you stressed that the public clients are just continuing more or less as normal. Obviously, roughly half of your revenues come from commercial clients, and many of them, like you, have decided not to hire external companies to do part of their work or to start new projects. It's not visible in your backlog yet, but do you see fewer demands from customers for new projects that they normally would start up later this year?
I think the tendering process, because that's what you were talking about, it's the work we're still pursuing, follows the same dynamic as the dynamic we described in that we see public clients still trying to advance projects and tender them, and private clients being more reserved in that regard. That, of course, is also very much depending on where in the whole cycle a country is. In Asia or in China, more specifically, we actually see a pretty healthy pipeline of opportunities. Not just for public clients, we actually see healthy opportunities for private clients as well. At the end of the day, the success and the ability to capture both work for private and public clients at the rate we know from the past is very much depending on how quickly the economy in a particular country can go back to a degree of normalcy.
Okay. Thank you. Those were my questions for now.
The next question comes from the line of Martijn den Drijver from ABN AMRO. Please go ahead.
Yes. Good morning, gentlemen. I still want to come back to the question about whether Asia is a decent proxy. You mentioned that in Europe, the teams are much more used to working remote. That's positive. Public clients are actually stepping up. In certain cases, there are the number of projects. Private clients, some hesitance, still good order intake. If you look at Asia, over 85% of the clients there were private, whereas in Europe, that's much less. I can't really follow why you would be so cautious given these three elements. That would be question one. The second question is more related to the cash outs. Are there any other material cash outs like this engineering software application in the coming quarters? That's question number two.
The third question is, you've had now, in the last three quarters, roughly EUR 70 million in non-operating costs, mainly relating to restructuring. Should we take into account some material savings from those restructurings in the coming quarters? The final question is on ALEN. Is there anything worth mentioning in terms of that particular project/situation? Thank you.
Let me take the first and the last one, and then we'll ask Jurgen to take the second and the third one. What I was trying to do, Martijn, in response to Henk's question on the backlog, and particularly the Asian dynamic, was to explain that there's differences between Asia and other parts of the world in terms of longevity of the work in the backlog, as well as the ability to work from home. Lastly, the mix of private versus public. I was trying to make the point that what we've seen in Asia is not necessarily the perfect example to assume that the same would happen in other places because of the nature of the work and the longevity of the projects. The projects are larger or actually run a longer period of time, I should say.
Most countries don't have multi-year projects except for some of the countries which are involved in the large infrastructure projects such as Australia. By and large, in most other countries, the backlog spans about a nine to 10 months timeframe. That was the first comment I was trying to make. The second one is that the shutdown in China in particular, initiated by the government, was very abrupt. The nature of the work actually didn't allow people to work from home. Secondly, the infrastructure people have at home in Asia is not necessarily as rich as the infrastructure is in the Western world, where most people have internet at home and can work with a decent internet capability from home.
That is what I was trying to say, and also trying to caution you for using the dynamic in Asia as a proxy for the same type of behavior and dynamic in other parts where simply backlog behavior is different and the ability to work from home is different. I'll check in later if that answered the question, but let me take ALEN first. Your question is there anything noteworthy to mention? The brief answer is no. If there was, then we would have probably also highlighted it in the press release. We are still on the path which we outlined some time ago, is that we are not investing in ALEN anymore, and that we are still in discussions and are going down the path with our partner to allow us an orderly wind down.
When I say there's no news, these conversations have advanced, but not to the point that we can tell you anything new.
Okay. Thank you.
Before I turn it on to Jurgen, is the answer to the first question a better one than Europe?
It's a kind of a repeat, because having better internet in Europe speaks in favor of results. Having a more gradual deployment of soft lockdowns is in favor of results. Not entirely, but maybe we'll do that offline.
No, I think you're certainly correct. All I'm trying to say is that if you've seen something in Asia as a result of the three-month period, which was impacted by COVID. Don't assume that you'll see the same impact in other places. That's all I'm trying to say.
Okay.
Yeah, Martijn. The other two questions were linked to, do you expect a similar, say, payment in the second quarter or the third quarter? No, we don't expect a similar large expenditure for, let's say, software or similar things.
Actually, we also mentioned was that all uncommitted capital expenditure is suspended. Basically, we expect also that the capital expenditure will be much lower than it was last year. About restructuring, y ou have seen that, of course, we expected to see the savings, they will be in as well. If you look to the full, say, the impact of the COVID-19 in the first quarter, if you count it back, you saw already an improvement in the first quarter. Having said that, I think that there might be also, of course, it will impact the billability, the efficiency. It's also not a straight line that we can see yet. One hand, of course, you see the savings back, on the other hand, you have also say, more inefficiency. That's what we can say about it right now.
Just one follow-up on the CapEx. Is there a number that you would like to provide in terms of the CapEx for 2020?
No. Last year, it was about EUR 50 million, approximately. We don't want to say what the exact amount is, but it will be. Last year it was EUR 46 million. It will be clearly lower. Whether it will be EUR 30 million or EUR 40 million, it will be clearly lower than in last year, as long as we suspend the commitments.
Okay. Thank you.
The next question comes from the line of Hans Pluijgers from Kepler Cheuvreux. Please go ahead.
Yes. Good morning, gentlemen. First, coming back on the backlog. I understand, let's say, what you say with respect to public and private. Of course, outside, let's say, the backlog, of course, a big part of your business is also smaller contracts. Do you see, let's say and of course, they're having, let's say, a continuous renewal of that kind of contract. Do you see, let's say, a clear change in, let's say, in the total overview of your project backlog, especially the smaller projects are coming in less quickly than we've seen, let's say, before the lockdown. Could you give me some feeling on that, the difference between the larger and the smaller contracts? Coming back on the restructuring cost. You took already, let's say, some charges in Q1, you said, for restructuring.
I assume that mainly relate to Asia, or let's say, maybe give some flavor to that. More importantly, now we are, let's say, six weeks in lockdown. Are you, let's say, looking at more restructuring that we could, let's say, should envisage for Q2 and Q3? Maybe some idea on that. Then, on government support. Of course, there are all kinds of schemes. Could you give maybe some idea on what kind of schemes you're currently making use of, or any? I can imagine that for some, let's say, wage support, that's not the case. If you could, maybe some feeling on what you're currently using or what are you looking for to maybe make use of. Lastly, on liquidity. Of course, you have also part repayments this year and beginning of next year, among others, on the USPP.
Well, it's already a discussion going on with banks and USPP holders on repayments. Could you give maybe some feeling on that?
Okay. I'll start off, Hans, with handling a few of those. First of all, the characteristics of the backlog, at least that's how I summarized what you were asking for. I think the specific question is, do you see the characteristics change or have changed? I think the answer is no. I think you meant specifically characteristics as in large projects versus small projects. I don't think that has changed. I'll make one more comment. Backlog is one thing, but what you want is for backlog to move, because taking things in backlog, and think about a project which you get awarded, but then the client says, "Well, I can't afford actually to now start it. Keep it in backlog, but I'll let you know when I start it." That is not of a great use to us.
We're actually also, in addition to backlog, also are looking at to what extent the projects are moving through the backlog in the typical way. We have not seen any change at this point in time which would give us concern that, yes, we're taking stuff in backlog, but it just sits there and it doesn't turn into revenue. I will take the government support question as well. Our first aim is to the extent possible, not use government support. In some places, because of what you need to do or to see before you qualify for government support makes that, of course, very unappealing. Like in the Netherlands, we are not qualifying, neither are we seeking or hoping to qualify for government support because it would mean that we would have to see a significant drop in our revenue, and we haven't seen that yet.
That doesn't mean that we're not using government support at all, but it is at a really small scale. Whether you would call it government support is actually even to be debated. In the U.S., you have an opportunity to put people on a so-called furlough, which is to still keep them as employees, but not pay them for a particular period of time as you see work coming down. We have started to do that at a very small scale, and we've done the same at an even smaller scale in the U.K. That is, as far as I know, all the places where we have, if you want to describe it as government support, use government support.
For Arcadis as a whole, I would say the government support we have received is very negligible, and it is our intent and desire to not have to apply for government support.
I will address the question, Hans, from liquidity. As mentioned earlier, but say again, when we look to our unused headroom of committed credit facilities at the end of the quarter, and it's still the case, that was EUR 320 million. On top of that, we have also approximately EUR 200 million of net operating cash in our regions. Quite a, I would say, good liquidity position. Of course, there are a few things which we have to repay. As you can read it also in our Annual Report, we have to repay a Schuldschein in two parts in this year, in 2020. The first part will be repaid in May, and the second part will be repaid in October. We believe we have enough headroom to pay the EUR 70 million in May.
What we also have, this may be linked to the question of ALEN, for sure you are aware of that, we have also guaranteed approximately the EUR 75 million bank debt in ALEN, we provided that guarantee. Most likely we will repay that by the end of June, then you talk about a number of approximately EUR 75 million. Of course, when you look to normal, say, the seasonal pattern, you see that the cash outflow is the highest in Q1, then you see gradually that already the cash flow in the second quarter is normally absolutely not that high. It is closer to zero or even slightly positive. We believe that this point in time we have enough liquidity also to repay the Schuldschein to repay the debt of ALEN, which is a combination, say, EUR 145 million.
Of course, it is still our intention to go to the Schuldschein market for renewal when the timing is right. At this point in time, our liquidity is solid.
Hans, maybe since you had a question on restructuring and asked if we could provide some insight in potential restructuring in Q2 and Q3. This obviously comes down to the whole uncertainty of the situation going forward. I wish that I had a more predictable crystal ball than the one I currently have and be more affirmative on what we're seeing. That being said, obviously, we are looking at the situation all the time. We assess our scenarios all the time, which includes opportunities for government support. Maybe to qualify my earlier statement when I said we're not looking for government support, it is not our number one driver. If we do qualify for government support, then of course, we will not hesitate. Our first aim is to run our business without the need to apply for government support.
Again, if there is an opportunity or the situation is deteriorating and you have to, then we will obviously apply for government support. Q2, Q3 restructuring, we have a number of additional steps we can take, which we have identified for ourselves. We are not sitting here at the end of all our opportunities and all our possibilities. Restructuring is not the next one we would pull, but if the situation in the world or the situation in a particular region would greatly deteriorate, then restructuring could be part of what we would ultimately have to do.
Okay. Thank you.
The next question comes from the line of [Kieran Mulder from Arcadis]. Please go ahead.
Yeah, good morning, everyone. First of all, I would like to make a remark. I would bring over my condolences to the family and the organization for the passing away of Joachim. We have met him in November 2018, and I think for me, he's one of the guys who was very instrumental to break the negative spiral in the U.S., so I think we will think about him. My questions. First of all, can you indicate on this 15% decline in the Far East of revenues, what the impact was on the EBIT, A, to get an idea about the leverage effect you suffered from the COVID there? My second question is about the scenarios. You have built some scenarios in the beginning of March.
Can you update us on what your view is on the scenarios given, let me say, the rollout of COVID-19 and the lockdowns and what you have seen thus far? My last question is about the hiring freeze. You have said we are doing a hiring freeze. Does that also account for the appointment of a CFO, or are we going to get some news from a new CFO in the coming months? That's all my questions.
Let me start from the back, Kieran, and then I'll also handle the scenarios, and Jurgen will handle the 15% decline impact on the EBITDA question. The hiring freeze actually means that any new hire needs to be approved by me, and a new CFO would have to be approved by me, not just by me, obviously by the Supervisory Board and actually by the AGM as well. The process to hire a new CFO is obviously an exception to the hiring freeze. The process has advanced to the point where conversations have started. I will say that the timing and the speed of the hiring process is also impacted by the limitations we currently all feel. No, we have not stopped the search for a new CFO. We still expect that in the not too distant future, we will come forward with the selected new CFO.
The CFO doesn't fall under the hiring freeze. The question on the scenarios. Initially, I think we have said that probably at a different occasion. Initially, we're looking at three scenarios, initially being the early part of March, of which we dropped the most optimistic one because we don't think that that is necessarily a realistic scenario anymore. We're now looking at two, whereby the first scenario is an ongoing impact from COVID in Q2, Q3 with a recovery in Q4, and the other scenario would be an extended impact throughout the whole of this year with an improvement in Q4. We're not trying to force fit all regions into these scenarios, simply because regions see different recovery at a different path and a different timing as well. As an example, we have used the example already a couple of times.
Asia is already in the recovery mode, so it would be foolish to assume that Q2, Q3 in Asia would be worse than Q1 because most of the impact, at least as we see it now with the recovery starting to come to the fruition, that we would expect an impact in Q2 and Q3 from Asia. Other places where a lockdown will be extended or could potentially be extended would still fall under either one of the two scenarios. The scenario which is an impact in Q2, Q3, we describe as the most likely one.
All of this still comes with the same uncertainty which we have used already a couple of times, simply because no one, I have at least not found anyone who can give me any certainty on when a lockdown will be ended, in what place, and how the business would go to a degree of normalcy again. Yes, we use the scenarios. At the same time, though, the uncertainty which I think we all feel is still very applicable to these scenarios.
Yeah, then with regard to the question about the results. The impact was approximately EUR 5 million. That was also impacted by the fact that the Chinese New Year was extended by seven days, which was quite sudden. It was not able to work. Secondly, also the type of work in Asia is a little bit different than in other parts of the world. When construction sites are closed, we cannot always do the work. I think what Peter also elaborated on, that if you look to the work in Europe and also in the U.K. and in the U.S., we can do work more from home. It is not necessarily that you can translate the impact in the Asian business to the rest of Arcadis.
It was not only Asia, it was, of course, when we talk about the Asian business, it is also a part of the CallisonRTKL business in Asia, which is approximately 20%.
That is included in this EUR 5 million?
Yeah, that's included in the EUR 5 million. Yes. There's a combination of Asia and then a little bit in CallisonRTKL as well.
Okay. Thank you.
The next question is a follow-up from Henk Veerman from Kempen & Co. Please go ahead.
Hi. Hi again. Two follow- ups, if I may. The first one, just to get some more clarification. You say that you have not seen material project cancellations. Can you give us just a feeling, a sense of, sort of in April, how the discussions have been with clients regarding these projects, especially in the private sector? Yeah, I think sort of the point of measuring being the end of Q1 does not necessarily say a lot, obviously, about project cancellations, because especially the Europe and the U.S. deteriorated quite significantly from that point onwards.
Yeah, Henk, that's a fair statement. In our comments, first of all, let me acknowledge that we are providing Q1 results. Our commentary, of course, is largely associated with the Q1 results. We have expressed reservation about being specific about the future because of the degree of uncertainty. I will go a little further than that. We are now three weeks or a few days more into April. Have we seen a significant change in April compared to where we formally end the reporting period? The answer is no.
Okay. Well, that's clear. Maybe one last follow-up on Australia, 32% organic growth. Was that also a one-off or is that something that we can extrapolate into the next quarter? Was it just a favorable comparison base, or what happened there?
Yeah, I think it was also a bit of favorable comparison base that, say, we had a relatively weak start in 2019, and I remind as well, so that we had a relatively weak start, and later on, we won quite some large projects in Sydney and in Melbourne, and you do see that still continue. It is also a little bit of favorable comparison. That's right.
Thank you.
Okay. We now have a question from the line of Maarten Verbeek from The Idea . Please go ahead.
Good morning. It's Maarten Verbeek of The Idea. Concerning Oracle implementation in U.S. Firstly, you mentioned that it will be the last adjustments will be implemented end of May, and you also stated that everything will be solved by mid-year. Does that imply that the EUR 50 million gap in the working capital will be solved within one month, or how should I read this?
Maarten, the additional functionality I talked about is piece of the functionality which is required for the costless, fixed fee billing. This gets a little detailed, but I'll refrain for providing more detail. It's part of the contracts we have fall in that category. We expect to deploy that revised functionality by the end of May, t hat will be after, obviously, testing as well. From that point onwards, we should be able to use the Oracle system for the billing of the contracts which fall in that category. I think we've said that we would expect it to catch up in the third quarter.
Yeah, the next quarter.
Not just in the second quarter. That would indeed mean if we had set the second quarter, that in a month you would see actually not only the functionality work, but you will see the invoices going out, and you will see the cash in the door, and that's probably not fair to expect. It will run into the third quarter.
Okay, so, end of Q3, it should be normalized. Does this also mean that you will have additional operating cost?
For the Oracle system, you mean?
Yeah, for billing.
No.
Okay. Will this also delay the rollout of the Oracle system throughout Arcadis at other places?
Actually, what we have done is, and that has gone unnoticed, and it has gone unnoticed because, it went actually quite well. In January, we went live with the Oracle system, the cloud solution that is in Australia, that actually has gone really well. No issues whatsoever. Everyone is quite pleased with that functionality. We had already delayed, because of the issues we encountered initially in North America, the implementation in continental Europe, which is the only remaining region left. We have already delayed that. At this point in time, we're not expecting any further delay, but that delay was already getting us into 2021 anyway.
Okay. Thank you very much.
We have reached the end of the Q&A session now, so I will hand the call back to Peter for any concluding remarks.
Thank you, Rosie. First of all, thanks everyone for your interest and your questions. I think that made the conversation to a very meaningful conversation, allowed us to provide some additional color. Needless to say that we're finding ourselves in absolutely unprecedented times with things, I don't think anyone has seen in their lifetime. Certainly, I can speak for myself. I don't think that I've ever seen anything like this, which comes with the, and we've quoted it a couple of times, the degree of uncertainty no one really likes. Let me assure you that we are keeping all the fingers we have available on the pulse to ensure that we address the uncertainties as quickly as we can, remove the uncertainties as quickly as we can, and I can therefore only be extremely proud of the way the Arcadis organization has responded to this crisis.
To do the things we have done in a relatively short timeframe, to move from an organization which was almost exclusively working from offices to now an organization which is almost exclusively working from home, I think is a testament to the flexibility and the agility of the organization. We're trying to help our clients wherever we can. I still believe and actually have almost become even more convinced that our focus, and our focus being on resiliency and sustainability in the broadest possible sense is the right focus. In fact, I think the focus will even be stronger going forward by the time the dust has settled, we're out of this crisis, and we look at things society will need to try and avoid that we ever get into a situation like this ever again.
With that, let me thank you for your interest again, and I am sure that we will have further dialogue in the not-too-distant future.
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