Earnings Call: Q2 2020

Jul 21, 2020

Hello, and welcome to the Randstad Second Quarter 2020 Results. 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 Jacques van den Broek to begin today's conference. Thank you. Yes. Thank you, Rosie. Good morning, everybody. Great to talk to you again. I think the last time we had a talk, we talked a bit about not having an AGM and that sort of thing. So when you would have asked us early April and you would have said, well, this is going to be the quarter, We still maybe wouldn't be happy, but in early April, we would have signed up for this one because the two main questions that we were dealing with or have been dealing with is how deep are we going to go and how long is it going to last. Well, how deep and of course you never know might still be a second wave or whatever, but at least how deep was April. And now, of course, it's all about how long. So when we presented our Q1 results 3 months ago, our prime focus was, of course of understanding and grasping this highly uncertain situation. So we really went into survival mode. We had weekly calls with our business leaders geographically organized. So of course, Asia, where we had most of the learnings, then into Europe and then into really learning from each other. And funny enough, although on the one hand, we're not traveling, as you all know and you all probably are not traveling, we've never felt so connected to the field. So we had these calls when we started in Asia and we ended in Latin America. So the closeness of Randstad as a company and of course we were able to pivot within 3 days to digital has really helped. Of course, and still is by the way, our key priority remain the health and safety of our employees, our candidates, our clients and the other stakeholders. So I cannot tell you how proud I am of all the Randstad colleagues with their commitment and education throughout this. We earlier it felt like this quarter had like 4 months, but our results we think and of course still tough result our operational agility of our management teams. And as I mentioned this before, many of our management teams went through 209. So and I can tell you that helps a lot. They knew what was happening in Spain, in Italy, in Germany. So that has really helped us to navigate this crisis. The tone of voice in these weekly calls gradually changed throughout the quarters from survival to what is all this towards a more opportunity driven mindset, if I can call it like that. We created the Safely Back to Work Alliance, 1st with Adecco and Manpower and then taken over by the WEC, the World Employment Confederation, our global sector body. And we worked with in 26 markets throughout the globe, starting in 10, but in 26 markets on getting people safely back to work, updating health and safety protocols and creating sort of country coalitions, of course, with the governments, with employers and employees. And that, of course, meant that in many markets, we had our eyes very close to what was happening and we saw things coming and it also created quite a lot of material and conversation items to reach out to our clients and prospects in many markets, talking to them about the situation, if they needed any update on the protocols. And then of course slightly going into, okay, so what is your outlook for the rest of the year? For us, a case study is our Spanish business. They had extensive client surveys, so you should think 17000, 18000 clients really getting a planning for the rest of the year. And of course, our clients also don't know that, but at least they have a starting point to discuss and you know what goes on. What's interesting is that you know our strategy and our strategy might have been and by the way still is in the longer term around candidate scarcity. But we still use the same tooling in a different market. So we have our data driven sales. So before COVID, we went out to clients and we said, okay, so this was what the market looks like. This is how tough it is going to be to find someone. But yes, now it's all about why don't you update your profiles and on the push of a button we'll get you people within an hour. On a candidate part, it was all about engagement. Let us know which job you're in. Let us know if you want to change jobs. Well, now candidates are more uncertain. So now it is update your profile, so we can match you quickly. Let's talk about re skilling because the sector you're in is going to be on a serious pressure. So same strategy, same digital support, but a different messaging. As a result of all this, we have been able to already from the trough in April bring back close to 90 between 90,000 to 100,000 people back to work, which is great. And fortunately, also in the last few weeks in July, we do see a gradual uplift. Still negative, of course, but we know where we're coming from. So I mentioned this. What is a big theme is the immediate need for re skilling, career coaching and outplacement. You'll see it in our business, RySmart. But let me talk a bit about sectors. So what has happened in our market? So sort of stable sectors where government sometimes even growing, bit of demand, food, retail, also demand in the beginning of the quarter easing a bit in the quarter and also our IT business. Wherever we have an IT business, certainly our American one, the biggest one we have in the group, relatively stable at a minus 3.5 percent negative growth, so because people could continue to work from home. Growth sectors, very much the contact centers where people went for online staff, demands on quest servicing, health care information, anything online, boom, health care, of course. Sectors that were severely down, airlines, travel, hospitality and events, retail and automotive. And of these sectors, hospitality and events, retail, they will bounce back. This is very much COVID related, we think. But airlines and travel and automotive are sectors that seriously need to reinvent itself. Back to reskilling. Last year as a company, we reskilled 300,000 people. And we think this year it will be more. We have 2 great examples already. The first one is the Boost program in the Netherlands reaching out to 14,000 people that have worked for us and currently aren't or throughout the quarter weren't offered half of them more than half of them a training or a skilling. So and next to that our pledge in the U. S. To train, retrain, rescale 40 1,000 people. We think we need to create a public private coalition here because we still will see in Europe many people we think going into unemployment. So back to the Q2, training conditions as I said low point in April and then, of course, the lockdown certainly in Europe were most severe. Since then, revenue decline started to ease into May, Henry will share a bit more on that. But visibility is limited. We have some businesses like the Belgian business that have quite a summer peak on global average, it's like 4%. That might not happen, might happen less, tough to say. But as I said, employees working are still improving in the last weeks. So that's good. We take it day by day. But then again, September will probably really show the trend for the rest of the year. A big difference I mentioned 2009, big difference was government support. So government support, we're very grateful for that because we as a company could also hold on to our people. We have roughly 38,000 people that work at Randstad as a consultant or as a team lead or as a recruiter. And now we have like 33,000 active. So that means that people are at home in some shape or form depending on their situation in the country. So it's very much for us the theme to bring people back. So that's why we embarked upon an aggressive sales campaign. We call it new ways where we use our ability, our content, but also our digital means to connect to clients and prospects. Based on the Spanish example, we have many more to reach out and take as many jobs as possible and go for market outperformance, which we think we already did in quite a few markets. So again, talking about portfolio, we did it many times with works again, our resilient portfolio, rest of the world, Japan, but also through activity have profits only minus 12% in Q2 as paid off again. Our business model also strong free cash flow again, Henry will share a bit more on that, but you know we have this countercyclical effect and it works again. So we think this all further solidifies our strong liquidity and solvency position and we think it's necessary in still a high uncertainty period. So let's look at the markets. North America, yes, mixed there. So the staffing business went down 23%, so comparable to some markets in Europe, but U. S. Profs minus 9%. So our finance business didn't do so good, but certainly IT business did very good. When you talk about situation in the country, so at some point in the U. S, we had to deal with 80, 80 different regulations on safely back to work. So quite complicated, but a big compliment for our team. Also, of course, on safeguarding EBITDA margin, which we think is quite impressive given the circumstances and also the fact that compared to Europe, there's almost no government support in this business. So then our French business, well, we saw a data point somewhere end of March, beginning of April, which was minus 7.0 for the French market that really gave us a massive scare. It didn't turn out that bad, but still France was at some point the worst hit in Europe also because of the role of the unions that immediately took out people where maybe that was not necessary. Anyway, we have a new manager there, Frank Ribeau. Frank came into Paris on basically the last plane out of Australia. And can you imagine taking over a new business, which is a huge business with a few 1,000 people, never had met anyone fully from home, only getting out to do grocery shopping. But he took that on. Fortunately, he's now with his team, made a few changes, but we're very happy with where he is and that he is there. He also takes up the leadership of OZ. Yes, minus 41, well, we think that's better than market. Can you imagine minus 41 being better than market? But anyway, so under the circumstances quite good. Then the OZ business, which Frank is also going to be responsible for, very sector hit. So the French business of OC works with aeronautics, airlines and automotive. It all starts with an A and it's all not good currently. The OC business in Germany and Belgium is very good. So pretty stable, pretty unheard, different sectors, but certainly the French business had some issues there. And the OSG business was loss making. The French Randstad business was breakeven. The Netherlands, again, very diversified portfolio, also very good on the EBITDA margin. You should take into account for Germany and also the Netherlands that the business was not great to begin with. We already had quite severe negative growth pre COVID, certainly driven by automotive and industrial sectors. But again, a picture you'll see more Yacht, our professionals label, doing relatively well and also within Yacht BMC, the company working with governments and the social domain who held out very well throughout this crisis. We talked a lot about government support, the Dutch government support. Let me share some numbers. We had overall in the Netherlands 26,000 people on government support. At the lowest point, 18,011,000 a few weeks ago. Of those 26,000, 2 thirds are back. Of those 2 thirds of the ones not back, 7,500 are young people with very small contracts. Just 6% of the people not working are 25 years older and working more than 25 hours a week. So this system has really worked to keep people motivated and also to work with them and get them back to work quickly. Germany to the Netherlands similar, automotive already weak, you know that already in 2018 we took out people. So that is still weak, although sequentially the drop is less than you see in other markets. Belgium, yes, still good earnings, diversified portfolio. In Belgium, we have a very specific business, 6 1,000 cleaning ladies who immediately had to stop. So that was quite a drop specific for Belgium. Italy, one of the most hit countries, earliest hit. So when we talk about management teams and I've given everybody a compliment, certainly also the Italian management team, in the midst of the deepest crisis they saw, they were optimistic, they still kept their head high. And we see a great return already in terms of employees at work throughout the quarter and a pretty good EBITDA margin development. So the Spanish team, so sometimes COVID hit really close to home. So our Spanish MD had COVID himself and continued to run the business. So that is impressive in itself. But certainly in Italy and Spain, we knew people. We knew people that had COVID. We had people that died, family members. So it got really, really close. But within that, they stayed very resilient and there is still a profit. In Spain, the government support system changed throughout the quarter. So almost a moving target, but anyway. So there is a little bit of still wait and see in the Spanish result. Rest of Europe, of course, the U. K. Has a big education business. Schools were closed. That didn't help. Idle time in Sweden, those are elements to mention in our other European markets. Rest of the world, yes, is becoming well, for me definitely not autonomous to meet this to mention this with you, a big star. Our Japanese business, very low negative growth, great result, very happy with that performance. But you see Australia, New Zealand also minus 6%. In India, 9% growth, record profit. And of course, I ask myself why. And I know Paul Dupuy, our CEO in India has just wrote a management book. So it's called the Rule of 5. You can buy it at Amazon. And I'm honestly, I'm not too much into management books, but given the results of India, I can highly recommend this book. But on a serious note, big compliment for our Indian business because as a country, of course, they're also now seriously hit through COVID. Started slow, but it's unfortunately heating up. Also our Latin America business, many of them actually made budget. They grew. So again, it helps to be all across the globe. Our global businesses, Monster, yes, this is about job ads. So that went sequentially down, but financially still pretty stable picture. Our Sourceright business, certainly our RPO business again, is perm was hit less than the regular perm number, but still was hit. And also our MSP business in some markets just less demand. Many of these businesses, by the way, MonsterSource right there in Asia and the U. S, also no government support in terms of safeguarding result. For our SourcedRider business, we do have a very strong client pipeline and that helps. And then finally, RySmart, our career counseling, career change, reskilling business, up 29% and more to come and we did a small acquisition so that we're now in the German market also. So again, quite a quarter, but happy that we are where we are. And on that note, Henrik, can you share something on the numbers? Absolutely. Good morning, everybody, and thanks, Jack. So let me now dive into quarter 2 results in a bit more detail. And as mentioned by Jacques, our Q2 numbers demonstrate the strong operational agility of our highly experienced management teams and while underpinning the resilience of our diversified portfolio and free cash flow generation. Organic revenue growth for quarter 2 was minus 25 percent with momentum clearly improving during the quarter. This, of course, reflects the gradual relaxation of country lockdowns in most of our regions and our relentless drive and focus to bring our talents back to work is showing up in the numbers already. Gross margin in the period was down 130 basis points year over year, broadly in line with our expectations due to significant adverse impacts related to COVID-nineteen and slowing firm. I will get back to you on this on the next page. We also further managed operational expenses down in the quarter to EUR 763,000,000 17% down organically year over year, achieving a recovery ratio of 42%. And this is slightly ahead of our guidance of 30% to 40%, while still investing in our digital strategy and selective growth areas. EBITA came in at €67,000,000 with 1.5% margin. And obviously, this is significant decline year over year. But given the magnitude of this crisis, it reinforces our confidence to tap into the flexibility of our cost base, while supporting the business for growth. And on the next line, integration and one off costs were €33,000,000 This relates to restructurings in several countries adapting to new realities. Amortization and impairment expenses were €103,000,000 which includes a goodwill impairment of 86 €103,000,000 which includes a goodwill impairment of €86,000,000 related to the UK. And let me now take you to the next page where I talk about the gross margin a little bit more. That is now Page 14. So as you can see on the left, the temp margin was down 60 basis points year over year and is already flat in the second half of March. COVID-nineteen had quite a significant adverse impact on our temp margin amongst others due to an expansion of idle time in several countries and agreements with clients to jointly protect employment. And the bar in the middle shows a decline of 70 basis points as churn fell by 47% in quarter 2. So this is purely a mixed effect. The bar on the right represents HR solutions, which has a neutral impact on gross margin in this quarter. Our gross margin path going forward remains difficult to predict in the short term, given many moving parts such as top line developments, easing of furlough schemes and perm trends, etcetera. And with that, let me go to Page 15 and talk about OpEx. So OpEx, as you can imagine, the rapid decline of revenue in quarter 2 required an all hands on deck attitude with respect to OpEx steering. And sequentially, we reported organic OpEx down by €121,000,000 and a year on year decline of 17%. Those numbers alone can't express the entrepreneurial attitude of all our leadership teams around the globe, which made the job of the CFO quite an easy one. As you would expect in a storm like that, we took instant measures, focused all spending on what made the boat go faster or more resilient, of course, instigating in all our travel ban and hiring freeze and also suspended executive bonuses over 2020. As you would expect, we also accelerated our efforts looking for ways to further unlock the power of 1 Randstad. And in that context, we also benefited from structural cost measures taken as part of our cost optimization program. As communicated during our quarter one results, our cost base was also supported by employment protection schemes in the order of €45,000,000 Overall, it was very good to see how the company came together, virtually, of course, to lean into the new reality of the market without hesitation, knowing what needs to be done to protect the company while serving our customers and talents in these tests and times. And please rely on us that we continue to balance the short term and the long term seeking to protect employment and safeguard profitability levels adequate to see the business in a healthy fashion through the next period. Now let me talk on Page 16 about our strong balance sheet and our working capital movement. So in quarter 2, the company generated a free cash flow of €530,000,000 about €500,000,000 more than last year in quarter 2. Whilst EBITDA was significantly lower year over year, we benefited favorably from positive working capital movement. The development of our receivables in this slowing growth environment provides a very significant liquidity protection, evidenced already in previous downturns. The resulting resilience of our free cash flow generation through the cycle is an important asset of our industry. Please note that we also enjoyed some support from governments, allowing us to postpone payments in several countries. The total positive effect on our working capital was around €145,000,000 in quarter 2 and will gradually reverse in the coming quarters. Income taxes paid turned into receipt in quarter 2, which is mainly caused by a reversal of payments in quarter 1 this year. This is fully in line with our previous communication. Day sales outstanding came in 0.9 days lower than the last year on a 12 month moving average. And so far, there's no material extension in the payment terms visible. However, as stated before, we have further tightened our governance around credit risk management and deployed additional resources to support the cash collection process. At the end of quarter 2, we report a leverage ratio of 0.3 pre IFRS 16, which excludes our CCA receivable of €368,000,000 and our cash position amounted to €327,000,000 We have drawn €200,000,000 from our revolving credit facility, hence €1,650,000,000 is undrawn at this stage. In summary, the excellent amount of free cash flow generated in quarter 2 helped to further bolstering our balance sheet and is providing loads of confidence to the business to weather this storm from a position of strength. That already gets me to my last chart, the conclusion and outlook chart on Slide 17. So as before, the revenue declines in the beginning of quarter 2 significantly eased throughout the quarter in most of our markets. And we exited the quarter at a sales decline of 21% year over year in June and observed further positive momentum in the 1st weeks of July. At the same time, visibility remains very limited with ongoing high macroeconomic uncertainty and some recent signs of regional lockdowns again. Please be aware that quarter 3 normally has some seasonal tailwind given more gig based events and holiday work, so tougher comes to beat. And as stated, we continue to see direct link between our top line developments and the intensity of the lockdown by geography. However, we put our utmost efforts to bring as many talents back to work as possible, utilizing the many new growth opportunities presenting itself in the marketplace. And as every crisis creates new opportunities, as such, we are establishing new benchmarks for the frontline sales productivity, utilizing best in class digital tools and data driven demand projections for optimized sales impact. Our golden rule to aim for 50 percent recovery in downward cycles has served us well in the past and will also be applied in current circumstances. And for quarter 3, we expect a recovery ratio of somewhere between 30% to 40%, reflecting more aggressive investments in growth opportunities, partially offset by ongoing agile cost management. The tailwind from furlough schemes is expected to abate in quarter 3. Well, that concludes our prepared remarks, and we're now happy to take your questions. Rosie, back to you. Thank you. And our first question comes from the line of Paul Sullivan from Barclays. Please go ahead. Yes, good morning, everybody. Just a couple for me. Firstly, I mean, is there any reason why the recovery ratio should be lower in the 3rd quarter than the Q2? And whether the unwind of various follow schemes that you've benefited from will represent a margin headwind into the coming quarter? And then just tied to that, is there anything in the Dutch schemes that prevents a return to dividends and cash returns next year? And what is your thinking with the cash that is now clearly building up, especially if you adjust for the CICE receivable? And then just finally, in terms of the furlough schemes more generally and the rate of improvement into the summer and beyond, Is there a sense that these furlough schemes potentially distort the recovery going forward? Thank you. Right. Let me maybe take the first one. Hi, good morning, Paul. Thanks for the question. So actually, as far as the recovery ratio is concerned in quarter 3, we definitely see some unwinding of furlough schemes. We've mentioned the number of €45,000,000 which helped us to bring flexibility in our numbers. But we also want to definitely drive the company for sales. So at this point in time, you will understand we are not mentioning the company for maximizing profit, but really bring as many talents back to work as possible. When it comes to dividend payments, please allow us to really concentrate the next quarters to go through that crisis where if you ask me, we're still in the middle of it and it's far too early to declare victory. So we really just concentrate on focusing on the normal natural point to talk dividend would be after quarter 4 again. Yes. Paul and on the Dutch scheme, well, there was a scheme for the 1st 3 months and then there was a second scheme. The first scheme had no drawbacks on anything you couldn't do. The second one had, but we didn't apply for the second one because you need to have for the quarter a minus 20 percent of revenue and that might not happen, which of course is good news. So we didn't apply for that scheme. So it's irrelevant what kind of do's or don'ts are in that scheme for us. Your other question was interesting in how far government schemes distort recovery. I don't know that. What it does give people maybe a false sense of certainty or the lack of a sense of urgency of what is happening in the market. So in our Dutch business, we approached 14,000 people, 1-four, offering them because they're not working currently, reskilling. And I would say just 1,000 take it. And then quite a big group is still waiting. And I don't think you should be waiting. If you're not working currently, you need to go to your employer, ask about his plans, if he knows them. And if you get a bit of an uncertain answer, you need to work on yourself and you need to look for where demand is going to be in the future or take time to scale yourself better or more. Great. That's very clear. Thank you both. Okay. Thanks Paul. The next question comes from the line of Anvesh Agarwal from Morgan Stanley. Please go ahead. Hi, good morning everyone and thanks for your comments. I just got a few questions. First, in France, you touched that you have performed better than the market. Maybe if you can touch on the reasons there and sort of is that purely driven like internally driven by the management changes or have you done sort of anything different there to out to the market? And second, just your thoughts on the U. S, we are seeing sort of some cities or regions going into the lockdown again. And what are you seeing there in terms of trend and how we should have think about that? Yes. Well, I could, of course, give you a great story on France. But I think at the moment, it is very much business related. We're not an automotive in France as opposed to Germany. We walked out of Renault 2 years ago. That sort of helps. Amazon is a big, big, big client in France. In France, we're not with them. So I think it's business mix. Having said that, Henry and also myself, we alluded at our what we call digital based sales efforts. So the amount of sales calls and connects with clients is really, really heavy at the moment in every country. So we are optimistic about continuing to take market share, not just in France. In the U. S, yes, well, if you ask me to call the current situation in the U. S. Very tough, there is this our clients are saying more and more like, yes, while we have the COVID situation, well, we're not going to go into lockdown. So the economy is still moving. But yes, at the same time, of course, the infections are going up. So very tough situation in the U. S. To navigate for all of us, I think. Maybe one thing to add from our side. On the SFC, we have fantastic management team there who've reacted brilliantly in the current phase. Also, we have a good more resilient portfolio. We have a very strong professional business and you see that back in the numbers. So that's definitely helping also. Maybe if I can just sneak in one more. I mean, your peer yesterday commented that at the beginning of the quarter, their clients were talking about a V shaped recovery and now they are more talking about U shaped recovery going forward. What is your sense when you sort of talk to your clients and how are they thinking about the recovery going forward? Yes. I learned something from our predecessor and they said, if you don't listen to your clients, you go bankrupt. But if you listen to your clients, you go bankrupt too. So they don't know. If you ask me, it's definitely not a V shape. Remember, 209 in many markets in Europe, less in U. S, but in Europe, it took 4, 5 years to get back to the penetration rates of 2,008. So we're in it for the long haul, and that's why we're investing so much in sales to take market share because this might be a while, let alone the health situation that makes it so tough to predict. So clients don't know, which of course is also for us we do in flexibility that might also prove to be an asset going forward. Okay. That's great. Thank you. The next question comes from the line of Rory McKenzie from UBS. Please go ahead. Good morning, all. It's Rory here. Just 2 for me, please. Firstly, again, following up on North America, just on the near term trends there. You and the peer have both seen no improvement in the trends in June July, unlike in the rest of the world. I appreciate it's a very broad business, but could you say which states or even which sectors are still getting worse at the moment so we have a better picture of the range of things in North America? And then secondly, on the gross margin, the temp gross margin decline was probably a bit better than expected, definitely better than you were kind of, I guess, tracking towards at the end of Q1. So can you talk about what actions you've taken to mitigate that drive there? Yes, the U. S. It's the sectors are the same as in Europe. So anything blue collar is relatively stable. And Henri already alluded to our IT business, which is quite stable, and we do expect that to go forward because it's just less hit by people by locations being closed, people that cannot perform their job. Of course, the U. S. Is Europe was very much like in many countries, total lockdown, closing down the economy and then opening up again. So therefore, not economically driven, but you see a quicker return to work. In U. S, it's been gradual, up and down, open and closed. As I said earlier, 80, 80 different systems within states, cities. So the Mayor of Atlanta is a Democrat. She wants to open up the city and then the Republican government bans that. So we need to follow that up. So within that, it's very tough to recognize a trend. It's definitely not getting worse, but it's not like the steeper thing that we see in Europe, but that was very much lockdown driven. So but still Henry said very happy with the performance in the U. S. How the team is hanging in there, the financial results. So yes, very happy. And as far as gross margin is concerned or temp margins are concerned, obviously, we have commercially very, very strong everywhere. So we always have top line and bottom line in our views. Having said that, in quarter 2, there's also a bit more idle time than what we would normally like to have, also to support our talents and our clients in an optimal way. And we've seen it. We've put in our press statement, we find out probably close to 100,000 jobs regained. So sometimes it's good to be with the client in the to I don't know, to have bit of a margin split or as long as not structure and just kind of getting out through that period. So I think after quarter 3, after quarter 4, we probably have a better view on the margin picture. Okay. Maybe just one follow-up on that gross margin. I guess maybe the amount of idle time cost was probably a bit better than expected. Is that fair? Or do you think that it's just indicative of where the markets and the clients are? Are there any actions you took to try and minimize that within the course that we should be aware about? Yes, absolutely. I would say, I mean, we stated that the temp margin came in the gross margin in general as expected. So we take 100 or 1000 of actions. Every little deal is being a judgment call, a trade off to be made. And as I said, I sit here really in all corners knowing that we are commercially very strong everywhere. We have good people on the ground. But I don't I can't point out any silver bullet we've applied. It's really being in every deal, understanding the numbers and but still being human forward, being with the client and that's what we do. Okay, great. Understood. Thank you very much. The next question comes from the line of Hans Puygus from Kepler Cheuvreux. Please go ahead. Yes, good morning, gentlemen. A few guys from my side. Further going back on the U. S, is it very good performance compared to the market? You already mentioned the professional side and especially IT side. But are any other businesses where you believe you the market or are there any specific big orders you get in, in the quarter? Secondly, on the seasonal effect in Q3, could you give maybe some indication what percentage of sales normally is your seasonal work in Q3? And lastly, on the CICE, still on the balance sheet, and you I wish the Q2 Q1 numbers you indicated you were maybe considering selling it. Could you give maybe an update on that? Yes. I'll take the first two. Yes. Outperformance, the U. S, the sector body updated the market. They were first at minus 21 for the full year, now improved to a bit to minus 17. On that note, well, I don't know, but then we think we're outperforming, but you don't get like you see in the Netherlands and in other markets a month by month comparison. So that's tough to see. It's more later in the game. The seasonal effect is, yes, it's always a bit of a thingy. But for example, in Belgium, you have this special thing where students can work at a very low rate. So the client doesn't pay social premiums and they are used a lot in the seasonal in the summer peak. But of course, there's a few things here. First of all, clients are not working at full throttle, so they might not replace all of their fixed workforce with holiday workers. Many of them also work in events, work in summer, pop festivals and all sorts of events, which will not take place. So on a global average, we've looked at it, but let's say it's around a 4 percent sequential uplift and that might not happen or happen less. So we have it a bit in the Dutch business, we have it not in the U. S. Business. So it's a bit different country per country, but we thought it was important to flag. So there's always two things, right? The first is the sequential uptick throughout the year, while we have most people at work in Q3, then Q4, then Q2 and Q1. So you get the seasonal uptick and of course, the uptick compared to last year. So, so far so good in the early weeks of July, but this might prove tougher in the back end of the summer. Thanks for your question, Hans, regarding CICE. We indeed, quarter 2 is free of any CICE impact. But I'm very pleased to tell you that we have received the 2016 part with CICE, which we normally would have expected to come in, in November that has already been received in quarter 3. And for the remainder part, we indeed in the market as we speak to see whether we can monetize it, can't make any promises, but just confirm that we are actively working on it. Okay. Thanks. The next question comes from the line of Mark Swinckenburg from ING. Please go ahead. Yes. Good morning, everybody. A couple of questions from my side. First of all, maybe coming back immediately on the CICE thing. Henri, what would be your way of thinking about the SEK 368,000,000? What if you can monetize it earlier? How would yes, why would you want to do that? And how would that then impact your capital return policy? Would that then filter into that bucket or not? That's my first question. And then maybe to dig a bit further into the gross margin trends. On the one hand, we see the stocking margin being down, say, 60 basis points. But going forward, is there some impact still in there from maybe some government aid schemes that keep people at work while they're actually not working that there's a positive impact perhaps. And going forward, that might drop out a bit. On the other hand, either time might come down a bit on the better revenue trends. But what is your way of what is your view on the gross margin trend perhaps going into Q3 also? And then the other bucket is, of course, the perm trend. But could you say anything on what you expect from the gross margin? Yes. Let me first reiterate what I said on CICE. Of course, we've taken the decision to strengthen our balance sheet as much as we could going into that crisis. And as I said, we're not declaring victory here. There's still, as far as I'm concerned, quite a long stony road for full recovery. So we definitely will take a more structured look about how to finance at the end of the year when we see how the year was running. I mentioned that €200,000,000 of our RCF is being drawn and then we have currently a €260,000,000 dollars alone maturing in quarter 4. So let's see how that plays in the mix. As far as staffing margin is concerned, if you ask me, if anything, our numbers have been slightly negatively impacted by in our gross margins, idle time is an issue or was an issue in quarter 2, will probably also be an issue going forward. And therefore, giving any guidance on quarter 3 is very, very problematic. There's many moving parts. There's a big moving revenue part makes the play furlough schemes unwinding. So please allow me to stay away from giving any guidance on gross margin. Hi, Mark. I heard you say 368 CICE, yes. But as Henry said, we just received something. So you should think 280 something. Yes. Yes, yes. Sure, sure. Yes, dollars 95 was in the short term one. But maybe going back to the EBITDA ratio. You will have on your OpEx line still some government maybe some drops out. But what is your thinking along investments there if the market improves a little bit further and things stabilizing a bit more into the second half? Would you then try to invest a bit further and that's why you're a bit more cautious with recovery ratio in the 30%, 40% range. Is that the way of thinking? Yes. So let me explain. So we have in a way reinvented our ABFS. So we've looked at what we can do with the current online tools. So instead of calling a client, going there physically, you can also do this online. And of course, we have different marketing support, way more online marketing support, sort of thematic waves around safety back to work, around online HR, around planning for the rest of the year, about reskilling. So we give that to our people. So we want them to do way more than they ever did before. It's sort of a global program with a global basis and then local flavor. And so for example, we're in Spain and we say, okay, we're going to bring back 35 people. Those 35 people are going to sell like hell. And if we see our conversion in the funnel improving, we can bring back more people. So that is how granular we're doing that. In some businesses, for example, our U. S. IT business, that's a very profitable business doing already quite well with still a lot of room to grow in the market. There we're even hiring people for the rest of the year, but the rest is bringing back people as much as we can driven on the commercial input and the results. So that's why it's very tough to call because we don't know that and that's why we stay in the 30 to 40 range. And we still have, if you would add it all up in a way, 4,000 people that are not working. So this is and we want to bring them all back ideally, if possible. But we need to sell our way into it. So that's what that's our first priority, not having 50% recovery ratio and firing colleagues. Yes, that's very good color. Thank you, Shah. The next question comes from the line of Konrad Zomer from ABN AMRO. Please go ahead. Hi, good morning, Henry and Jacques. Just one question. I think you did remarkably well on the cost savings in Q2. Organic operating expenses down 17% on organic revenue decline of 25. Do you think that GAAP could widen in Q3 given that you've given us the exit rates for your geographies and in most areas there is improving momentum because and this relates a little bit to Mark's question a minute ago. You're now at this point where you might want to stop cutting costs as rigorously as you did in Q2 because you see the growth opportunities longer term? Yes. No, that's obviously a very, very good and valid question, Konrad. So we feel we are in full control of our cost base. And the first priority for us is bringing people back in the jobs and grow. And yes, we have the ambition to also take market share along the way. We like to rebuild sustainably into portfolios, which are more resilient even than they've been before. But at the same time, we are a very commercial organization. So that's what I said, the job as a CFO in that company is relatively easy because we have unbelievable experienced leadership team who have always the end to end in mind. And so therefore, I think you can rely on us that we take the medicine where we have to. It's probably not the time now to be, I don't know, not really focused. So we put everything, what I said, to make the boat faster or to build resilient portfolios. But we will keep that in mind. And we will definitely manage for both, but priority is sales and then a very, very healthy profitability, which, yes, secures the future of the company, frankly. Okay. Thanks very much, Henry. The next question comes from the line of George Gregory from Exane. Please go ahead. Good morning, Jack. Good morning, Henry. Just I had just one quick follow-up on the gross margin. You talked about some of the moving parts and the puts and takes on the temp business. As we move forward through the year and perhaps into next year, Could we expect price pressure to build in the temp business as furlough schemes unwind, as that sort of implicit capacity in the market builds? And what offsets are there to that, please? Yes. So just for me quickly and then Chuck, you might chip in. So there's 2 things. So pre COVID, we obviously we benefited actually from pricing power because it was a very, very scarce market. We had good access to talent and therefore we could command pricing with maybe going forward higher unemployment that pricing power might go down a little bit. Therefore, there might be also pressure on salary levels, etcetera, etcetera, I don't know. But time to fill is a total different thing. So therefore, our productivity levels should go up. And in addition to that, what we call the digital version of ABFS, I do expect actually a good counterweight to that. How it really plays out remains to be seen. It's very, very hard to say, but those are the 2 big things. And then, obviously, there's mix at play a lot. We try to grow and accelerate our growth in those places where margin is probably above company margin, etcetera, etcetera. So those are the things in general terms I'd like to mention. Yes. So one thing to add to that, certainly in our in house business, so it's always about cost. So we are urging and we're reaching out to our clients with proactive proposals to bring down their cost. We know their processes really well. The core of this business is to improve the productivity of the Labor Day hire and also the processes around it. So we do expect a lot of demand for our clients, which we had already offered, but not all of them took it to digitize further. And therefore, back to Henri, productivity goes up, client pays us less, our productivity goes up. So that's sort of a sweet spot. So we're trying to take it as proactively as we can. At the same time, if a good client comes up to us with a relatively low margin, but we can serve him very effectively, we'll of course do that. But then also, you know the drill, we're never going to take loss making business just to get revenue. It's always striking the balance. And then the last one is credit check. We beefed that up. So, so far so good. Also in 2009, that was good, but you never know. So sometimes it's very tempting to have a big client that has a lot of temps, but the credit check is not okay. So we are really very rigorous on those procedures. Thanks. And the next question comes from the line of Sylvia Barker from JPMorgan. Please go ahead. Hi, good morning, everyone. Three quick ones please. Could you just give us the split of the EUR 45,000,000 of government scheme help by country or at least kind of the bigger constituents of that. Then you talk about kind of share gains quite a lot. Could you maybe be more specific around kind of countries? Are there any particular markets in which maybe some of your competitors are struggling and you're able to gain share? And then finally, could you just remind us your exposure to SMEs in your largest markets, please? Thank you. Yes. Thanks, Silvia. So I'm afraid I'm I please allow me not to give you a very detailed split, just a bit more color. So we talk mostly about U. S, France, Netherlands, Germany, Belgium, Italy, Spain and UK. And then there's a whole raft of smaller countries, including Canada, etcetera, etcetera. Maybe the 3 biggest is France, Netherlands and Belgium. Maybe Spain is the 4th one in absolute terms. So that's about what I like to give away at this point in time. Hope you understand. That's helpful. Thank you. We have a follow-up. My apologies. Please continue. No. There was a second part on market share. And maybe on market shares, do you like to take that? Yes. What we know for sure is France, Belgium. We're pretty solid about our IT numbers in the U. S. Japan, we don't know. Very happy with the performance, but market numbers are not there yet. Germany, we've taken market share already quite a while, certainly compared to peers. But of course, they've got easier comps now. So that's going forward tough to tell. Happy with our professional performance in the Netherlands. Yes, that's a bit of the rundown. Spain, we don't know yet. Italy has been taking market share, so might be a bit less now, but still. So it's a good mix. Okay. Thank you. And just on SMEs? I think they're relatively large, I guess, in Germany, but if you can give us any color. No, no, because we don't know, because the market numbers don't drill down there. Germany is relatively weak in terms of info on market share development. I'm sorry, I just meant SMEs as the proportion of your customers, whether they're material? Yes. Well, in Germany, that has increased in the last 5, 6 years. Of course, probably also now, I've not checked it recently, but yes, the big ones have gone down, certainly automotive. So that's almost a given. And certainly, if we talk about again this reinventing ABFS, we cover a larger part of the market because if people can do 4 times more in terms of commercials, they can also cover a bigger database. And although Germany is a big country for us, we have less than 10% market share as market leader. So there's a lot of ground to be covered in the family SME type business. So that is definitely a target for us in terms of sales. We have a follow-up question now from the line of Anvesh Agrawal from Morgan Stanley. Please go ahead. Hi, guys. Sorry, just one follow-up and slightly technical one on the tax rate. Your peers are guiding to a higher tax rate because of how the revenues are taxed in France, but your tax rate seems not has not gone up. So is that just an accounting defense because you are on IFRS versus peers and U. S. GAAP or got higher sort of operating losses that you can monetize to offset the tax impact? Anvesh, I hear all the good stuff. So this is Henry. Look, you've seen as far as cash tax is concerned, quarter 2 was actually a receipt and we've seen already in quarter 1 because we overpaid taxes there. Actually, the expected effective tax rate for the full year is expected to go up just by nature of the expected income before tax actually is going down. Therefore, there are some tax elements in there, which are pretty stable. So therefore, when the rate is shooting up. But more than happy to if you call us, really take you through all the technical detail you ever want to know. Okay. That's fine. Thank you so much. We have no further questions in the queue. So Jacques, I will hand back to you. Yes. Thank you, Rosie. Thanks, ladies and gentlemen, for calling in. I'm all for excitement. I think that's the beauty about this business, but I am hoping for Q3, which is slightly less defensible. At the same time, all stay healthy. I wish you a great holiday wherever you're going and hope to see you at our Q3 numbers. Thank you. Thank you so much everybody. Thank you for joining today's conference. You may now disconnect your lines. Thank you.