Earnings Call: Q1 2020

Apr 24, 2020

Hello, and welcome to the Arcadis MV twenty twenty 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. 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 Pudens, and 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 Ostovier, CEO, and we will start with a short presentation, and then we will open for a Q and A. You all received the presentation this morning, but it is also available through the Investors 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'd like to call your attention to the risks related to these statements, which are more fully described in the press release and in the company's website. So with these formalities out of the way, I'd like to hand over to Peter Osserfir. Okay. Thanks very much, Jochen, and good morning, everyone, and welcome to our Q1 trading update, which we might as well read our book to a COVID-nineteen update because that is obviously going to be a recurring theme throughout conversation today. Let me offer some high level comments. And 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-nineteen, which as we now know, has created a very serious issue for society at large. We became aware as a company of COVID nineteen because of the initial impact it had on us in Asia, which was in the early part of this year. And as we started to see that this could potentially become a global issue, we decided to create a global COVID nineteen 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. And 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. And 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. And I think that is absolutely an Herculean effort. I don't actually think that, or I 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 larger percentage to people working from home. And 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. And 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. So those are people who execute field work, people who are on construction sites, and the likes. But 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 support and support. So those steps were all initiated in the 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. And 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 And 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. So 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 the financing new work. But 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. And as you've seen from our press release, our net revenue was also actually still fairly healthy. So 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 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. And 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. And you've seen in a 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 contingent of people to work from home in a relatively short time frame 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 payout over 2019, which was on the agenda for our AGM on May 6. And we also eliminated the twenty twenty bonuses for the executive leadership team. And also, we introduced a 10% salary reduction for six months for the executive leadership team as well as for our supervisory board. So quite a bit of activity, obviously. All of that and all of what I so far explained is in the context of COVID nineteen. I want to mention one more thing which hit us also last week. It has nothing to do with COVID-nineteen. 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 January 1. The interim CEO is Alex Rothschild, and we are now, announcing or have announced that Alex will be the permanent successor to Joaquin May. But but 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 nineteen 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 a 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. And then, 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. And then lastly, as difficult as managing through this crisis is, we also recognize that there will be time after the crisis. And 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, and you have to think about digitizing particular services. So we're using this crisis also to the extent possible to our advantage to advance certain things we already had on our sleeve anyway. So with that, as a quick reflection of what our focus is in these eight work streams, and I can safely say that this COVID-nineteen 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 Joven. Thanks, Peter. And I will comment on the Q1 numbers. When you look to the net revenues, you have you see an organic growth of 3%. And I will the next slide, I will come back on the net revenues. The EBITDA was in line with last year. You see also on the Slide two EBITDAS. Of course, as you are aware of, we have to report under IFRS 16. So the first EBITDA is €76,000,000 but the EBITDA that is used for the calculation of the bank covenants is still the €56,000,000 comparable with last year. So we report both EBITDAS. The operating EBITA margin was 7.2% compared to 7.6% last year. This was also impacted by the operating EBITA impact of approximately five million in Asia due to COVID-nineteen. So 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-nineteen 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 2019. So in the 2019, there was no Oracle impact. The delta is more or less in line with, say, the delta last year, and we're working hard to solve this, say, midyear. And and that we will do that by implementing, say, some adjustments to the existing Oracle system. The free cash flow is higher than, say, last year. It's EUR 84,000,000, but it is also impacted and it includes a large engineering renewal of approximately EUR 24,000,000. The net debt is EUR $424,000,000, slightly higher than last year, of course, by the cash outflow, but also by the payment of the acquisition of Over Morgan, we did say at the end of last year and say part of the share buyback program we started say early this year, but that program is also stopped. The backlog is in line with last year. And 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 1.06, so higher than net revenues, good order intake in most regions, and 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, and 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 structure. 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. So I think, again, a nice win, and we are still winning projects these times. Also in 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-nineteen was not so visible in Europe in this quarter, but we have seen a strong growth in Germany and solid performance in The Netherlands and Belgium. In UK, also 4% growth, mainly driven by infrastructure, but also by water and environment. And we have seen and that was also important for us also that large infrastructure projects like the HS2 in The UK 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. But of course, we see there also the uncertainty towards the end of the quarter in the market due to COVID-nineteen, but also to the very low oil prices. Asia, clearly, biggest impact from COVID-nineteen, 50% decline in net revenues, but we have seen that, let's say, the businesses is all offices are open and the business is returning to a more normalized situation. Then last but not least, Australia, exceptionally strong growth of 32%. We are working there on large infrastructure projects like in Melbourne and Sydney and all these projects continue. Telesin RTL, we have seen an organic decrease also partly related to COVID-nineteen. As you are aware of that, approximately 20% of the business of CallisonRTL is also in China. But also we have seen that the retail practices 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 Galveston RTKL is picking up and has quite some work as you understand. So 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, so 3% organic growth. Operating EBITA margin from 7.6%, you saw the improvement throughout the quarters, but unfortunately now the 7.2%, but it includes also the €5,000,000 or the 0.8% impact we have from COVID-nineteen in Q1. The deal 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 and that is the major impact we see on the working capital and we discussed that also with the full year results. Net debt. Net debt is €424,000,000 Now clearly, you see that normally the net debt is higher at 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 €320,000,000 and that is basically related to the unused credit facility we have, and that is still in place. So we that headroom is still unused. And on top of that, we have also €200,000,000 cash in the region. So 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. So by having said that, I'd like to return to Peter for some closing remarks. Yes. Thanks, Jochen. 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. And I believe that that that is, caused by the fact that the vital needs of societies, fundamentally remain unchanged. And 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 nineteen. So the fundamental needs of what the world, or 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 Joachim 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, so 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. And as Jochen also mentioned, we are actually trying to address some of the opportunities which are the result of this crisis. Jochen 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 nineteen 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. But 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. So 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, and 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. And we're also committed to present our new strategy, the update to our strategy to you on November 19 later this year. And 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. So as a reminder, if you would like to ask a question, please press star one on your telephone keypad. You. So our first question comes from the line of Henk Fiehman from Kempen and Co. 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 is was historically a lot sort of less strong, and and and the order intake was was sort of weaker than than the sales. And if I look at the backlog as a group, it is actually much stronger than in Asia. So can we assume that the q two and q three performance in terms of organic sales is a lot stronger than sort of the Asian business in q one suggest? That's my first question. Yeah. I think it's 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. So 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 multiyear 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. So 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. So I I I understand the temptation to apply the, dynamics in Asia to the rest, but I think that would potentially be flawed. Okay. That's, that's very clear. Second question is on the unbilled receivables, the net unbilled receivables, which year over year, is an increase of 108,000,000. How much would you say of that 108,000,000 still relates to the Oracle Cloud implementation delays? And how much is related to the COVID nineteen situation in in Asia? And the the question related to that is, when we enter sort of enter q two and and q three, can we expect rises in unbilled receivables across the other regions because of COVID-nineteen or not? Henk, yes, I will start to answer the question. Indeed, you see the increase of €108,000,000 The majority of that is linked to North America. That is 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 €40,000,000 But you can say that roughly €50,000,000 50,000,000 €60,000,000 is related to North America. On the other hand, we see that the unbilled receivables in as well Asia and also CallisonRTL in combination was also somewhat higher than than than before. So you have to take into account, of course, when you look to North America that that it is higher because the gross revenues is higher. But still, if you look to the improvement in this quarter, that is rather limited in The U. S. Of course, we were, say, we're able to stay in line with the gross revenues when it was about our billing, but we were not able that to to accelerate the the billing and so that we were able to reduce the network in progress. And that depends very much also on the additional efforts we have to do, and we will do, let's say, the the the Oracle solution, and that will be be effectuated in the second quarter. And then we expect that we solve the issue in North America. But maybe, Peter, you will add something. I think that that's a fair representation. So to break it down a little further, provide a little bit more insight. So 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 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. And if that functionality is deployed by the May, then that should give us the the confidence and the ability to catch up in the in the second and the third quarter. Okay. And then like on the question, what's not very clear to me is then in Q2 and Q2, we also see a rise in unbilled receivables across the other regions because of COVID-nineteen because that's exactly what happened in Asia in Q1. Not necessarily. I think the what we we see already a a in in April, a a catch up in in Asia, but we have also seen that, to some extent, the the the offices were really closed in in in in Asia. I think that when we when you look to the ability we have here in in in Europe and the other parts of of the world, in in The US, 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. I I I we do see that, especially for public clients, we do don't see any impact of of the the their payment terms. And, 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 to predict exactly the, the impact of COVID-nineteen in total, but we don't expect a further increase in the, I would say, in the unbilled receivables also in other regions. The major the major delta is still the the delta in the in The US, and that is, of course, if you compare apples with apples, we introduced the Oracle solution in q three last year, and now we compare q one with q one. Okay. That's clear. Thank you, guys. The next question comes from the line of Luuk van Dijk from Degroof Petercam. Please go ahead. Yes. Thank you. My first question is on the productivity at home. You have now experienced with six weeks about working at home. Can you say if the employees are just as productive as they are in the office? And also, I can imagine that there is a difference between completing a project in which they're already working and starting up a new project where there's probably more collaboration required. So do you expect there to be a difference between those types of activities? Yeah. I think, Luke, you're you're experiencing what everyone is experiencing, including myself, that, you know, you can be efficient, but but I don't think that our business will ever be a entirely work from home business. And that, of course, is not what we aim for anyway. We we do expect that as more flexibility within what I think will, for the foreseeable future, still be a one and a half or two meter 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, but 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. But 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. And 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's now being accepted. And we see people also trying to still keep all the balls in the air while extending the workday beyond the normal work hours. So that means that a lot of people are still working after, say, 06:00, 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. And 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. And 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. So in the first six weeks, which is the 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. And my second question is on your tender pipeline because you stressed that the the public clients are just continuing more or less as normal. But, obviously, roughly half of your revenues come from commercial clients, and many of them, like you, have decided not to, to hire external companies to do part of their work or to start new projects. So how do you so it's not visible in your backlog yet, but do you see a fewer demands from from customers for new projects that they normally would start up later this year? Yeah. I think the tendering process, because that's what you are we're talking about. It's the work we're still pursuing, follows the same dynamic as 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. But 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 and not just for public clients. We actually see healthy opportunities for private clients as well. So 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 are my questions for now. The next question comes from the line of Martin Dendrovan from ABN AMRO. Please go ahead. Yes. Good morning, gentlemen. I still want to come back to the question about whether Asia is is 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 heads of hesitance, but still good order intake. And if you look at Asia, over 80% of 5% of the clients there were private, whereas in Europe, that's much less. So I'm I I can't really follow why you would be so cautious given these three elements. That would be question one. Then 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. And the third question is, you've had now in the last three quarters roughly €17,000,000 in nonoperating costs mainly relating to restructuring. Should we take into account some material savings from those restructurings in the coming quarters? And the final question is on Alain. Is there anything worth mentioning in terms of that particular project Thank you. Yeah. Let me take the first and the last one, and then I'll ask Jochen to take the second and the third one. So what I was trying to do, Martin, in response to Henk's question on the backlog, and particularly in 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. And you addressed and and then lastly, the mix of private versus public. So 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. So the projects are larger, or actually run a longer period of time, I should say. Most countries don't have multiyear projects except for some of the countries which are involved in the large infrastructure projects such as Australia. But by and large, in those other countries, the backlog spans about a nine to ten months time frame. And 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, and the nature of the work actually didn't allow people to work from home. And 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. So 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 answers the question, but let me take Alan first. Your question is, is there anything noteworthy to mention? And 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 Allen anymore and that we are still in discussions and are going down the path with our partner to allow us an orderly wind down. And 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 over to you, Johann, is is the the answer to the first question a better one? Do you have It's a it's a kind of a repeat because having better Internet in Europe is fits in favor of results. Having a more gradual deployment of soft lockdowns is in favor of results. So not entirely, but maybe we'll do that offline. No. I I I think it is it's 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 months period which was impacted by COVID, don't assume that you'll see the same impact in other place. That's all I'm trying to say. Okay. Yeah, Martin. The other two questions were linked to do you expect a similar, say, payment in second quarter or the third quarter? No. We don't expect a similar large expenditure for, say, software or similar things. Actually, we also mentioned was that we all uncommitted capital expenditure is suspended. So we basically, we we expect also that the capital expenditure will be much lower than it was last year. Then about restructuring, you have seen that, of course, expected to see the savings, and they will be in as well. If you look to the full say, the impact of the COVID-nineteen in the first quarter, yes, if you count it back, then you saw already an improvement first quarter. But having said that, I think that there might be also, of course, it will impact the billability, the efficiency. It's it's also not a straight line that we can see yet. One hand, of course, you see the savings back, but on the other hand, you have also, say, more inefficiency. So that is that's what we can say about it right now. Just 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 50,000,000 approximately. We don't want to say that with what the exact amount is, but it will be so last year, it was €46,000,000 It will be clearly lower. But whether it will be 30,000,000 or 40,000,000 that's it will be clearly lower than last year as long as we suspend the commitments. Thank you. The next question comes from the line of Hans Pavlov from Kepler Cheuvreux. First, coming back on the backlog. I understand, let's say, what you're saying with respect to public and private. But of course, let's say, the the backlog, of course, a big part of your business is also smaller contracts. So do you see, let's say and, of course, they are having, let's say, a continuous renewal of that that kind of contract. So do you see, let's say, a clear change in, let's say, in in in the total overview of the project at lot, especially the smaller projects, are coming in less quickly than we've seen, let's say, in in before with the lockdown. So can you give me some some feeling on that in different in the larger and the in smaller contracts? Then coming back on the restructuring cost. You took already, let's say, some charges in q one. You said for restructuring. I I assume that's main is it mainly related to Asia? Or let's say, maybe give some flavor to that. But more importantly, now we are, let's say, six weeks in in lockdown. Are you, let's say, looking at more restructuring that we could, let's say, should envisage for q two and q three, which is maybe some idea on that? And then on government support, of course, there are all kind 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. But if you could maybe some feeling on on what you're currently using or what are you looking for to maybe make use of. And lastly, on liquidity, of course, you have also parts repayments this year and beginning of next year, my thoughts on the USPP. Is there already discussion going on with banks and the UDP holders on on prepayments. Could you give maybe some feeling on on on that? Okay. I'll start off, Hans, with 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. And I think the specific question, do you see the characteristics change or have changed? And I think the answer is no. And I think you meant specifically characteristics as in large projects versus small projects. I I don't think that has changed. I'll make one more comment. You know, 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. So 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. And 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 does sit there and it doesn't turn into revenue. I will take the government support question as well. Our first aim is to, to the extent possible, not use government support. And in some places, because of what you need to do or to see before you qualify for government support makes 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. And whether you would call it government support is actually, even to be debated. But in The US, 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 UK. And 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. But 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 let's say, again, when you 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 €320,000,000 On top of that, we have also approximately €200,000,000 of net operating cash in our regions. So 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, but we have to repay a Schulzchein in two parts in in this year, in 2020. The first part is will be repaid in May, and the second part will be repaid in October. So we believe we have enough headroom to pay the €70,000,000 in May. What we also have, and this may be linked to the question of Alan, and as you for sure, you are aware of that, that we have also guaranteed the approximately the €75,000,000 bank debt in Alen, and we provided that guarantee. And most likely, we will have to we will repay that by the June, And then you talk about a number of approximately €75,000,000 Of course, when you look to normal, say, the seasonal pattern, you see that the cash outflow is the highest in Q1. And 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. So we believe that at this point in time, we have enough liquidity also to repay the Schuldschein and to repay the debt of Allen, which is a combination, say, 145,000,000. Of course, it is still our intention to go to the Schuldschein market for renewal when the timing is right. But at this point in time, our liquidity is solid. Hans, maybe since you had a question on restructuring and ask if we could provide some insight in potential restructuring in q two and q three. But this this obviously comes down to the whole uncertainty of the situation going forward. I wish that I had a more predictable crystal ball than 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. And 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. But our first aim is to run our business without the need to apply for government support. But, if there is, you know, an opportunity or the situation is deteriorating and you have to, then we will obviously apply for government support. Q two, q three restructuring, we have a number of additional steps we can take, which we have identified for ourselves. We're 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 Molge from Arcadis. Please go ahead. Yes. Good morning, everyone. First of all, I would like to make a remark. I will bring over my companions 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 to break the negative spiral in The U. S. So I think we will think about him. Then my questions. First of all, can you indicate on this 50% 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 March. Can you update us on what your view is on the scenarios given, yes, let me say, rollout of COVID and the lockdowns and what you have seen thus far? And my last question is about the hiring freeze. You have said we are doing a hiring freeze. Does it 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 let me start from the back, Krijane, and and then I'll also handle the scenarios, and Jochen will handle the 15% decline impact on the EBITDA question. The the higher increase actually means that any new hire needs to be approved by me, and a new CFO would have to be approved by me, but not just by me, obviously, by the supervisory board and actually by the AGM as well. The process to hire a new CFO is is obviously an exception to the hiring freeze. The the process has advanced to the point where conversations have started. But I will say that the timing and the speed of the hiring process is is also impacted by the limitations we currently all feel. But, 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. So the CFO doesn't fall under the higher increase. Then the question on the scenarios. So initially, I think we have said that probably at a different location. Initially, we're looking at three scenarios, initially being the March, of which we dropped the most optimistic one because we don't think that that is necessarily a realistic scenario anymore. So we're now looking at two whereby the first scenario is an ongoing impact from COVID in q two, q three with a recovery in q four, and the other scenario would be an extended impact throughout the whole of this year with an improvement in q four. Now 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 q two, q three in Asia would be worse than q one 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 q two and q three from Asia. But other places where a lockdown will be extended or could potentially be extended would still fall under either one of the two scenarios. So the scenario which is an impact in Q2, Q3, we describe as the most likely one. But 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. So, 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. Yes. And then with regard to the question about the results, the impact was approximately €5,000,000 That was also impacted by the fact that Chinese New Year was extended by seven days, which was quite sudden, so it was not able to work. And secondly, also the type of work in Asia is a little bit different than in other parts of the world. So when construction sites are closed, we cannot always do the work. And I think when but Peter also elaborated on that if you look to the work in Europe and also in in in The UK and in The US, then we can do work more from home. So it is not necessarily that you can translate the impact in the Asian business to the rest of Arcadis. And it was not only Asia, was, of course, when we talk about the Asian business, it is also part of the Camelaston RTL business in Asia, which is approximately 20%. But that is included in this 5,000,000 Yes, that is included in the 5,000,000. Yes, there's a combination of Asia and then a little bit in CallisonRTL as well. Okay. Thank you. The next question is a follow-up from Henk Thurman from Kempen and Co. Go ahead. 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 in in April, how the discussions have been with clients with regarding regarding these projects, especially in the in the private in the private sector. Yeah. I think I think sort of the the the the point of measuring being the '1 does not necessarily say a lot, obviously, about project cancellations because especially Europe and The US deteriorated quite significantly from that point onwards. Yeah. I think that's that's that's a fair statement. You know, in in in our comments, or let me say, first of all let me first acknowledge that we are providing q one results. So our commentary, of course, is largely associated with the q one results. We have expressed reservation about being specific about the future because of the degree of uncertainty. But 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, that's clear. And and maybe one last follow-up on on Australia, 32% organic growth. Was that also a one off, or is that something that we can extrapolate into the next quarter? So was it just a favorable comparison base, or what happened there? Yeah. I think it was also also a bit of favorable comparison base that that say we had a relatively weak start in 2019, and I remind Yes. Well, so that we had relatively weak start. And later on, we we won quite some large projects in Sydney and in Melbourne, and you do see so that still continues. So it is also a little bit of favorable comparison. That's right. Thank you. Okay. So we now have a question from the line of Martin from DID. Please go ahead. Good morning. It's Martin Verbique of DID. Concerning Oracle implementation in US, firstly, you mentioned that it will be the last adjustments will be implemented May. And you also stated that everything will be solved by midyear. Does that imply that the 50,000,000 gap in the working capital will be solved within one month? Or how should I read this? Yeah. So, Martin, the the additional functionality I talked about is is piece of the functionality which is required for the costless fixed fee billing. This gets a little detailed, but but I will refrain for providing more detail. But it's part of the contracts we have fall in that category. So we expect to deploy that revised functionality by the May. That will be after, obviously, testing as well. And 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 that would indeed mean if we had said 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 would see the cash in the door. And that's probably not fair to expect. So 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 cost, operating cost? For the Oracle system, you mean? Yes. For billing? No. Okay. And 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, so everyone is quite pleased with, that functionality. And 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. Okay. Thank you very much. We have reached the end of the q and a session now, so I will hand the call back to Peter for any concluding remarks. Yeah. Thank you, Rosie. And first of all, thanks, everyone, for your interest and 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. And 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. And 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. And 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. So with that, let me thank you, for your interest again, and, I'm sure that we will have further dialogue in the not too distant future. Thank you, everyone, for joining today's conference. You may now disconnect your lines. Hosts, please stay on the line and await further instruction. Thank you.