Earnings Call: Q1 2020

Apr 22, 2020

Hello, and welcome to Randstad First Quarter 2020 Results. My name is Jose, and I will be your coordinator for today's event. Please note this conference is being recorded. And for the duration of the call, your lines will be on listen only. However, you will have the opportunity to ask questions at the end of the call. I will now hand you over to your host, Jack van den Broek, CEO to begin today's conference. Thank you. Yes. Good morning, everybody. Good to talk to you in these, let's call them, interesting times. As many of you know, I'm all my life in this industry lived through 2,009, but this is a different one. So let's talk you through it. Henry is probably also somewhere, but of course at home. So but he's going to be presenting also as usual after me. And then David and Stefan are also on the call, so to say. Yes, so just a few weeks ago, we shared with you our first thoughts on the impact of COVID-nineteen on our employees, candidates and clients. But yes, situations have been changing by day since then. So today, we're here to share with you our thoughts on the Q1 results, but even more to share an update on COVID-nineteen from our perspective. Given the unprecedented situation as NELs runs such first priorities the health and safety of our employees, our candidates, clients and other stakeholders. And I'm going to come back on that one, by the way, in a minute. I would also like to take this opportunity to thank my Randstad colleagues for their incredible commitment and dedication with which they are responding to these difficult times. I once heard someone say that in times of crisis, you get to know the real character of the company, And I'm very, very happy to be responsible with the Executive Board for this company and these people. As we speak, all our colleagues around the world are remote daily contact with their clients and database with their clients and candidates with full access to their database, underpinning our state of the art digital infrastructure. As you know, we pivoted last year towards all our infrastructure online, and that has worked very well for us. So very happy to be fully operational with more than 30 7,000 people as global market leader. What we talking about health and safety, we last week announced the safety back to work in the new normal alliance. What is this all about? What you see, of course, in a crisis like this is first you go down. It is yes, you end yes, you are in sort of a trough and then you need to get out of it. But how do you get out? And we together with McKinsey, I reached out to Adecco and Menpow to say, what can we do to help societies get back to work? As a sector, we have always worked on health and safety procedures in life sciences, in manufacturing, in transport and logistics. So for us, it's always about analyzing workspaces, providing protective material, checking on procedures, training people. So there's nothing new. And that's 1st and foremost what needs to happen. So what we are doing, and we launched a position paper on that, which is on our website if you want to check it out, is we call upon governments, employees, employers, trade unions to create an alliance per country together with us to get people back safely to work. So we're doing this in 12 countries aiming at 5 secondtors and that's working well for us. There's a lot of interest from this. So we are what do we bring to the table? We bring to the table experience from other markets such as Taiwan, Asia, of course, where the crisis hit first, but also cross sector. So we created a global grid where all these safety protocols can sort of be created and nobody needs to reinvent the wheel. In a Phase 2 where governments open up the economy, then as an industry, because it's not just a top 3, we want this to be an industry thing per country. We can all go out and together with our clients implement this new normal and health and safety. I'm very happy that we are as an industry part of the solution. So back to the Q1. Yes, initially nothing wrong with developing in line with our expectation with organic revenues as we shared with you a minus 3% to 4% until the first half of March. Then things change very rapidly. It has driven an unprecedented deceleration in business activity. So when we talk about how deep, well, we get a feeling for how deep. Comparing it to 209, we went very quickly down from minus 6% in December 208%, minus 9% January to below minus 30% in March. With countries like Spain and Italy being hit with more than 50% negative revenue. So we've seen this before and a lot of our management has lived through this before. Then it stabilized throughout 2009, which was still a tough year with 27% negative top line. So we get a feeling for how deep. We don't know how long, but definitely the project I just mentioned, we hope to help everybody get back to work sooner. Big difference, of course, I was also and Henri will allude to it again, our balance sheet totally different than €209,000,000 but also government support schemes of which we're also going to talk a little bit later. So we do see the trend last 2 weeks of March minus 30. We do see the trend continuing into the 1st weeks of April with an increasing number of key geographies in parcel of full lockdown. And as said in our headline, we do expect, as a result, Q2 to be more challenging with very limited visibility because of course it totally hinges on the amount of openness that a government will allow, which are tough choices. We totally recognize that. But at the same time, it's not just that. It is also when everything is open and you have supply of services, of products, it remains to be seen what the demand will then be because please remember that we went into this certainly in Europe already with an economy that was slowing down. You remember Germany being quite tough for us already for 1.5 years, Netherlands and Belgium who entered this crisis with negative staffing markets as an indication of economic development. So that is still the big question out there. Let me take you to some comments on individual countries and regions. So North America in Q1 was not hit. So as you can see, pretty much low negative growth. But in Q1, no signs of deceleration. But what we see now in the U. S. Certainly in the last few weeks, it is also going down. U. S. Is very mixed picture, very much a state per state thing. So we heard yesterday that, for example, the state of Georgia, which is an important one for us because our head office is in Atlanta, we started our business in that region years ago, is opening up again. So it's going to be interesting to see, 1st of all, what that means for the health situation and second of all, for the business situation. Too soon to tell. What is good about our U. S. Business is half of our business is professionals business. So it's in IT. And so we see more of a deceleration in staffing businesses, certainly perm, of course, way more. But yes, in that sense, our North American business from a negative revenue point of view is better than Europe. Canada also locked down in Ontario and Quebec. And Canada, still we don't know if we are eligible for government support. I'm going to talk about government support later, but it's very much a moving target with for almost many countries a new type of regulation that still needs to pan out and be clear in all the details. On our French business, let me start with sharing my happiness about the fact that Frank Rebu has moved from our Southeast Asian Australian business to running our French business and also responsible for our OZ, Statement of Work business in France. I've worked directly with Frank for the last 5 years. Frank started his career many years ago in France, but has been in Asia Southeast Asia for a long time, done very well for us. And I'm very happy that he is in France, but he started his business from home. He started running the business from home. So that's a strange start, but happy that Frank is there to pick up our performance because our French business continued to perform very well, again, until mid March, subsequently faced an almost complete standstill, a very strict lockdown. Next to the level of lockdowns in countries, we also see reactions. So as you know, in France, unions are very strong. They immediately took the choice to protect their people, which of course is theirs to take, but that meant that many businesses were closed very quickly in France and therefore their debt market is one of the worst hit. We shared with you when we talked about the postponement of the dividend a few weeks ago about the data point we had from the prism at minus 70%. It's not as bad for us. It's 50%, funny to say, but 50% down in the second half of March. So not as bad, but yes, still tough, of course. Back on that thing with the unions, it does mean that again in going back to work in the project I mentioned, it's very important to involve the unions from the start, so that they are part of the solution because they have an interest for their members. Our Professionals business decelerated, of course, as well in France, but it was still growing and outpacing the market. So we have a big medical business also in there, and you can imagine that, that is unfortunately in a way, but from a business point of view, good, doing relatively well. Our profitability was impacted adversely because it happened very quickly, and it's also tough to adjust cost personnel cost certainly in France. Our Dutch business, yes, seems like a long time ago that we talked about the WAB law, but yes, that also happened and then COVID-nineteen. In general, there's still weakness in the industrial related sectors. Professionals, Yacht, again, slightly down in revenues. So remarkable performance. We do think they are above market. So very happy with our performance at Yacht. In the Netherlands, we've been able to support our TEMPs through the government scheme, NOW, until the end of May. And for us, that fits perfectly into the value of our company. Employee protection is the highest priority for us, and we're very happy that the government allows us to do this. They get paid 90% and the remaining 10% we pay, So but very happy to do that. Despite the significant top line impact, we managed to keep our EBITDA almost stable. So we had strict cost control. We mentioned already, I remember that the initial, call it, margin, we kept really well in the change towards WAB. So that has helped us. And we have a slight early days impact of this support scheme, NOW. So yes, very grateful again for the government support in many markets. Why? We want to, of course, have as many people continue to work with us. It's very much about protecting people's jobs and in that sense, so far, so good. Germany, 16%, yes, well Germany we've seen almost a perfect storm for 1.5 years now. It does mean that, of course, for our management, it's they're used to this. For them, it was less of a drop from a cliff. Again, we want to complement also the German government on a strong action to support business activity. For staffers, Kurz Arbeit has been made available. As you know, we already had Kurz Arbeit. So that system has easy access, making it possible again to protect employability in Germany. However, German business, Swedish business, everybody is on our payroll. So in these circumstances, idle time and sickness eat into our margin. Our Belgium business, again, a very stable performer, but also revenue in the second half of March going down quickly. Part of Belgium also has a bit of a sentiment like France with unions going very quickly into lockdown. So we did see in some sectors quite a steep decline. We have a very diverse portfolio in Belgium. So for example, we have mostly ladies people that clean in private homes. Yes, that was not possible again due to the protection for health reasons. So we have several 1,000 people working in that business. So that was a business that we had to immediately close here. But our management experience has taken direct measures in order to protect the profitability and recovery ratio. Italy, let me spend some time on Italy because Italy in Europe was the first hit. It went from China, Singapore and then all of a sudden we heard about Northern Italy. And we basically see Italy as a blueprint for the future trends in other countries. So we have steering groups, so all the OpCo leaders on the Aviation business, in the European business and in the U. S. Business. And we do see that the cycle of the virus and the cycle of lockdowns is quite similar. So we share all those experiences internally. How do you keep a company working motivated 8 to 9 weeks from home? How do you manage your people there? That is an acquired taste. That is new. And we learn very much from each other. Italy has been here the bellwether for our European business. It has been in complete lockdown since March 9. And again, this goes for all our management, but I do also want to talk here about our outstanding management team, how they weather the storm, they're motivated, they keep on running their business. Our EBITA margin, however, was significantly impacted, of course, an instant decline, high decline in revenues, higher sickness and a complete standstill that goes for many markets, as you can imagine, in perm. Iberia, Spain, Portugal, again Spain after Italy, but very, very hard hit. Of course, in many business, we've had people who were sick ourselves, relatives who were sick, even deceased relatives. So it is tough to manage a business amidst all this. Also, we were still growing in Spain. And then in the midst of March, we went from growth to double digit decline. Again, in 2 weeks, never seen it. Revenues down by a modest 3%, but again, going into Q2, we will see the decline. Overall, profitability well under control. There will be government aid in Spain, but the details of this, similar to Canada, for example, are still to be seen in Q2. Rest of Europe, not too much to tell. Of course, perm in the UK being hit. We also have a big education business in the UK, schools closed, people at home. And again, in Sweden, similar to Germany, idle time hits us. The rest of the world, yes, still in good shape. Our Japanese business still growing. Also Australia still growing into Q1. China is getting out of lockdown as we speak. But then yes, where is the market? Very much my supply demand thing people need to consume. And then China, of course, relies on the growth of predominantly Europe and to a lesser extent U. S. So that remains to be seen. Then our global businesses, not so much going into the details, but our global businesses have really served us well. And why? What we've built out of our global businesses is a website that is called Help in Challenging Times for our clients. So we enable our clients to do everything remote. So we have offerings such as how do you manage an online workforce, still recruiting webinars, video interviewing. So we made all of that available for our clients. Monster does free job posting for health care professionals. So very happy with that part of our business. Of course, Monster being down, lack of hiring, they go with perm, so to say. Our Sourcified business down, but at the same time, good profitability in Q1 and a great pipeline in clients, although, of course, being halted at the moment, given the economic situation due to the virus. And then let me end with a bit of color on government support schemes, lockdowns and that sort of thing. So as I said, North America relatively late in the curve, huge differences per state. We call it a selective lockdown. Of course, California, New York, those surrounding states, very heavy hit. Georgia opening remains to be seen what that will mean. Yes, reopening America, it is a plan. And again, time will tell if they strike the right balance between health and the economy, which I'm very aware is tough to do. France. France has a system, economic unemployment that is pretty straightforward. Again, we see less of a decline than the early signs we shared with you in the prism, but still a huge decline. But the government support schemes are in place. Mentioned the Netherlands, again, very happy. Also, we think that there's a lot of debate in society about flexible work, but it's about fixed work and well regulated work. We think that the people we take care of will be better taken care of than gig workers or platform work. So it's going to be interesting after this is all over to start a debate on what that means for the labor market as a whole. Germany, again, we know the system easily accessible. Belgium, very much like the French model, although there is support for flex workers, but a bit independent of us. But they are to a certain extent being taken care of, so very happy with that one. Italy has something that is called the Casa de Integracione, which is also a support up to 50% of wages and the rest is for us, so each into our profits, but happy to do that because again, we want to keep as many people employed with Randstad as we can. And then Spain, significantly impacted, similar lockdowns, but still the government support systems unclear in the details, but we expect to have more clarity on that one. So on that note, as an overview to you, Henrik. Thanks, Jack. So yes, before jumping into the numbers, let me also share some thoughts from my side. So going into this global health crisis, our company could not have been in a better shape and I've seen excellent spirit amongst our colleagues to weather this storm and adding another chapter to the success story of Randstad. Now deeply rooted value to care for our customers, talents and employees, especially in times like these, is an invaluable guide for all our employees and will serve our shareholders well in the short and the long term. Given the unprecedented circumstances, we will provide you with more detail than normal as we know that it's far from easy at the moment to read the market. And in the coming slides, in addition to covering quarter one numbers, I will spend a bit more time on how we see our OpEx position, including impact of governmental schemes and provide reassurance in our liquidity and solvency position. Let me now dive into the quarter one results in more detail. And as mentioned by Jacques, our performance was in line with our expectations until mid March, and then COVID-nineteen kicked in. Reported revenue growth for quarter 1 was minus 7.4, percent, but only 3% to 4% minus down until mid March and in line with our January communicated growth rate. And then suddenly in the second half of March, our group results revenues declined by about 30%. Gross margin in the period was down 30 basis points year over year due to significant adverse impacts related to COVID-nineteen. I will get back to you on this on the next page. Our OpEx came in at €890,000,000 so 2% down organically year over year and ahead of our initial guidance after quarter 4 results. This already reflects first cost measures taken. However, the rapid decline in the second half of March made it tough to drive for deep adjustments. EBITA margin came in at 3%, down 100 basis points year over year, reflecting the rapid deterioration of our gross profit in the second half of March. And on the next line, integration and one off costs per €22,000,000 This relates to pre corona plant restructurings in various countries and some software write downs. Amortization expenses were €59,000,000 which is €29,000,000 higher than last year, reflecting the accelerated amortization of related intangibles in respect to Monster. And net finance costs in quarter 1 came in at €15,000,000 a net increase of €8,000,000 mainly reflecting currency differences and cash balances. And yes, with that, it's probably time to talk more about gross margin. I'm now on Page 15. As you can see on the left, the temp margin was stable year over year, falling positive 40 basis points in quarter 4. Like the revenue trend, our temp margin developed in line with our expectations until mid March. And COVID-nineteen had quite a significant adverse impact on our temp margin, amongst others, due to a significant increase in sickness in several countries, idle time and agreements with clients to jointly protect employment. We feel that our underlying temp margin was up year over year. The bar in the middle shows a decline of 10 basis points as perm fell by 10% in quarter 1. The bar on the right represents HR Solutions, which shows a negative 20 basis points effect on the gross margin, mainly reflecting it was mixed effects of Monster. The watch out for periods to come definitely is the impact of sickness and idle time in our gross margin. And with that, let's go to the OpEx bridge on Page 16. So the rapid decline of revenue in the second half of March made quarter 1 a very challenging quarter with respect to OpEx steering. Sequentially, we reported OpEx down by €18,000,000 a year over year decline of 2%. As you would have expected, we took instant cost measures, talking all non essential spending, instigating an all out travel ban and hiring freeze and also suspended executive bonuses over 2020. Overall, it was very good to see how the company came together, virtually, of course, to face the fast changing 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 testing times. And as quarter 2 will be the real test for agility of the cost base, we're confident that the right answers to the challenges thrown at us. In that context, our cost optimization program activated already in quarter 1 could not have come at a better time. As stated during the Analyst Day in early December in London, the program is addressing our total cost base of €3,600,000,000 and looking for ways to further unlock the power of On Randstad. The context of the corona related market decline has increased the need for accelerated results helping to address the cost base already in quarter 2. And as we speak, we have already activated an enterprise wide cross functional team executing a wide range of savings opportunities touching the cost base in a very significant way. The activity is spent across all businesses and line items. They include appropriate field steering measures, procurement benefits and the elimination of all non essential spend. The program is structured by cost categories and involves senior management, supported by expert teams across the company. We will balance the short term and the long term, seek to protect employment, also with the use of governmental schemes and safeguard profitability levels adequate to see the business in a healthy fashion through the next period. And as mentioned, ready by Jacques, we're on top of various furlough and other government schemes in all regions across our enterprise. And with that, let me talk about a bit more about the government is put forward on Page 17. So as far as those governmental support teams are concerned, Jack has mainly already walked us through the main markets. But I'm sure you will appreciate that it's quite a developing story. And we want to provide a guideline as we expect OpEx to relieve by some €50,000,000 in quarter 2. Please take this down as a rough estimate as many schemes are still in development, shutdown scenarios impacting calculations can change quickly and benefits showing up in many different ways. Some parts of governmental schemes will have a positive impact on liquidity as they provide scope for adjusted payments scheduled for taxes, VAT and social security, just to name a few. And we are very grateful for those governmental programs and conscious about the high moral obligation it carries to ensure it is used exclusively to protect employment, which otherwise would have been in danger to be lost. And with that, to the balance sheet, also more important maybe than normal. On Page 18, this quarter, we specifically shed some light on liquidity and solvency, whilst providing more color on underlying fundamentals of our financing structure. For zooming in, let me share some comments on quarter 1 free cash flow, which was quite comparable to last year. While EBITDA was significantly lower year over year, we benefited favorably from positive working capital movement. The development of our receivables in the slowing growth environment provides a very significant liquidity protection, evidenced already in quarter 1. Cash tax payments were higher than what would have normally appropriate for the adjusted profitability level, and this effect will reverse in quarter 2. The last bullet on the left shows day sales outstanding, which was down 0.8 days versus last year and the quarter for 2019 on a 12 month moving average, mainly driven by mixed effects. As first signs of changing payment patterns start to appear, we further tightening our governance around credit risk management and deployed additional resources to support the cash collection process. Given the unprecedented circumstances, we feel it's important to provide reassurance with regards to solvability and liquidity of our business. Starting with our solvency position, our leverage ratio stands at 0.7 percent to end of quarter 1, pre IFRS 16, which excludes our CICE receivable of €389,000,000 Furthermore, as already communicated, the cash dividend proposal has been withdrawn as a precautionary measure to help keeping the balance sheet in as strong as possible shape. Secondly, our liquidity position is in good shape also. Our cash position amounted to EUR 587,000,000 end quarter 1, which is also a function of drawing EUR 550,000,000 from our revolving credit facility. As such, €1,300,000,000 of our RCF of €1,850,000,000 is undrawn at this stage. Part of our total debt, a portion of the €474,000,000 matures in 2020 and will hence be refinanced at the end of this year. We also looked into options to liquidate our CICE receivable to further support our financing arrangements. So overall, our strong balance sheet provides loads of confidence for the business to weather the storm in a healthy way. And my last slide, number 19. This summary slide also looks a bit different than normal, reflecting the unprecedented market environment we are operating in. As stated, visibility and revenue trends is very limited. However, we do see a direct link between our top line development and the intensity of the lockdown by geography. In the chart on the left, we highlight the simplified overview of the lockdown for our key geographies and the latest status. Although, as we all have witnessed during recent weeks, the status can change quickly. Some countries recently communicated to gradually lift some restrictions, while others are challenged with new waves of infections, which might lead to a tightening of restrictions. And as far as quarter 2 outlook is concerned, lockdowns have intensified in the 1st week of April compared to the second half of March. Our golden rule to aim for 50% recovery in downward cycles has served us well in the past and will also be applied in current circumstances. Given the depth of revenue decline in some geographies, the recovery ratio to be achieved in Q2 expected to be somewhere between 30% 40%, already including the application of employment protection schemes. As the management team, we want to steer the company through the global health crisis in the most responsible way, always being part of the solution. We're helping our customers to return to work safely or supporting displaced talent, finding rapid ways back to employment. It sits in the very core for us to be the leader in our industry and what gives us the energy to come through this period in an even stronger fashion. So that concludes our prepared remarks. We're now happy to take your questions. Operator? Thank you. The first question comes from Anveshan Agarwal from Morgan Stanley. Please go ahead. Hi, good morning, everyone, and thanks a lot for the qualitative comments. I just got like 2 couple of structural questions clearly looking beyond the near term numbers. 1st, with work from home accelerating and 75% of your cost base is employee related, Do you see that as an opportunity in the long term where you can shift some of the consultant to working from home permanently and thereby kind of get some cost savings out of it? And then also from an industry perspective, does this mean some of the delivery models like freelancing and statement of work can really accelerate? And the second question is around like in terms of your exposures to the sectors like retail, airports and hotel, which probably will be under pressure for a longer period of time. What are the new sectors that you think that will emerge after this crisis that can offset some of that pressure we will see in those traditional sectors? Yes, good morning. Yes, you talk about a very interesting topic and that is the new way of working and not just for us, but also for society as a whole. We do see, for example, governments moving very quickly to online signing. In our business, there's a lot of paperwork still. And that is being very quickly removed, which we know also helps us in general. Yes, we're working from home, works very well. Henry didn't say it, but I don't know if he's proud or ashamed, but anyway, we had the quickest close of the quarter ever fully online. So that means something, of course. And we're going to evaluate that. Also, quickly connecting to your clients, you can have way more connects to clients and candidates. So we will definitely look at that. You specifically alluded to the branches. As you know, we've talked about the function of a branch. But most importantly, it is still a presence in the market. It is a presence in a local market. So already in Asia, but also in bigger cities in Europe, we've moved to big platforms where people move in and out, but you can basically work everywhere. But on midsized cities where there's a local sentiment, it's very important to be there. So we'll still see those branches different though, not retail, not high street, very much white collar industrial parks. Having said that, although accommodation is a big part of our cost, it's by far not comparable to personnel, marketing and IT. So yes, I'm going to come back on that one. But of course, it is for us a speed up of the vision we already had on the future way of working. We also see that our clients now see that it's very helpful for them to also do way more online for which we're very well suited. New sectors, yes, again, people see that online is quickly becoming the standard. It's all speeding up. I don't see so I don't see totally new sectors emerging. It's just they speed up of certain developments. Having said that, I also hear a lot from people that they do miss real human connections. So the whole Tech and Touch still works for us. So it's going to be a new balance. Tough to say how quickly, but we'll get back to you on that one. Yes. And maybe just if I can ask one more, which is more bit more related to Q2, wherein I think, Henry, you said 30% to 40% recovery rate. Is that for Q2? Sorry, I missed that part. Yes, that's correct. Already in quarter 2, yes, 30% to 40%. With €50,000,000 of benefit from the government for less teams. Yes, let me you're absolutely right. Let me really clarify what I mean with benefits. Actually, it's a relief of OpEx. So most of the money is not actually hitting our P and L. It's actually governments, which from my point of view, really are doing broadly speaking a very, very good job here, providing the opportunity to have actually keep employment in place, but actually helping us to actually care for those people. And therefore, actually, it's not benefiting the shareholder anyway, it's really protecting employment. It's really important to understand. That's clear. Thanks so much, Bert. The next question comes from Tom Sykes from Deutsche Bank. Please go ahead. Thanks. Yes, morning everybody. So just to dig in a little bit more about the thinking that you have around your cost base and what you want to actually retain? I guess looking at the Italy numbers, I guess it's a bit difficult to read into the quarterly corporate staff numbers, but obviously you haven't changed your Italian staff much. So it looks like you're retaining your capacity as much as you can. And so I just wondered what was your what's your thinking about retaining capacity versus what you're seeing in the market and whether the market is reducing capacity and whether you think, therefore, you can take that market share? Or will we be in a position where there will be more of the capacity around because there are more of these government support schemes? And is that something a bit different that we may expect in the recovery? And then just in your experience of short time working and then how quickly temps can come back? Obviously, last time around, I think, if you look at the movement of your German temps versus Kurzarbeit, there wasn't a delay in temps coming back even because there were even when there was use of Kurtzalbein. But do you see are there any regulatory reasons as to why you wouldn't be able to use a temporary employee if you were an industry or a company, sorry, that was taking short time working? Do you have to get all those people back into employment first? Because that wasn't something that I don't think we saw last time around. There was a lag between the temp market picking up and people coming down off short time working. It kind of happens simultaneously. Is there any effect there that might be a bit different at all, please? Okay. Good morning, Tom. Yes, great question. Certainly the first one. We aim to have as many headcount and to keep as many headcount in the company as possible. 1st of all, because of our values, of course, we do feel we have a responsibility. We are the employer, so we want to protect employment. 2nd, so how that works is you start certainly in Europe, you calculate this down to the individual level. So there are people who are in an in house branch and the client is closed. So basically their job now is gone. So then you see if you can put them somewhere else because there are still growing sectors. If not, yes, then there are different percentages of people being temporarily unemployed. So it goes from 10% to 20% to 50%. So we have a lot of people in a way on idle time partly supported by the government. And for us, we created downward scenarios in Q1 because we saw it coming into Q2. But we also once we've seen the trough, we're going to create upward scenarios. And the challenge is very much to keep as many people employed as we can, again, 1st of all, because who we are as a company second of all, totally to hit the ground running. Can't tell you a lot about competition. What we do see, certainly with smaller companies, is that the whole working from home, continuing to work with clients and to connect with clients fully, have everybody paid on time, that sort of thing. That is a challenge for many of our competitors. What that will mean in the market? I don't know. And you also know that companies who have more of a percentage of perm and a less globally spread business also will have issues to keep functioning with a certain headcount level. On recovery, it's not that we need to bring the people we have on our books back first, so to say. It is a pretty flexible scheme. But in Germany, these people are on our books. So it's also in our interest to bring them back first, of course, because, yes, they are on idle time and that sort of thing. So it is a pretty flexible scheme. So it doesn't in any way hinder us in the upturn, so to say. And thank you, Jacques. And when you're looking at places like France or Spain and sort of short time working there, is there anything I mean, it's just difficult to know what is in the details of the legislation that if a company is, say, putting 10%, 20% of its workforce into short time working, do you know would they be allowed to hire a temp if they still had some people on short time working? Is there any inhibit is there anything that would prohibit that in your view? Maybe not legally, but they will definitely get pushback from unions. That's also not the way normally a company works. I think the first priority for our clients is to get their own workforce back and then have temps back. Again, different per market because some companies, they are so flexibly organized that they do need a certain amount of temps to start producing anyway. So I don't think there's a legal drawback. But yes, again and logically, yes, by the way, I think all employees will first start to get their own people back. But you might have a company that is has 10 locations in France and they go back to work. And in one location, they're fully occupied and they need temps. And in another location, they still have 60% of their own workforce. So then they can be hiring temps. But it very much goes down to a location per location, which again, given our size, we're very well positioned to do that. And sorry, just a quick follow-up to the first one. Is there any way you'd give us a view of potential headcount movement corporate headcount? No, we're all set for Q2 and we really take it week per week. So and when we talk about hitting the trough, we even look at volumes day per day now. So yes. Sure. Okay. All right. Thank you very much indeed. Okay. Good job. The next question comes from Hans Freitas from Kepler Cheuvreux. Please go ahead. Yes, good morning, gentlemen. On the gross margin in 2Q2, I know that there are lots of, let's say, differences in a different government schemes. And you indicated that in Germany, people are on your payroll in the Netherlands that you also want to maintain as much of the temps possible until the end of May. But I understand in the Netherlands, you still paid 10% of the total remuneration. In Germany, let's say, about 60% is, let's say, compensated by the state. Let's say, do you also get pay up for the difference? Could you give some indication on that? And secondly, on that, could you give some more, let's say, indication on what the impact on the gross margin will be in Q2 of all the different government measures and the things you yourself doing just maintaining as much as possible the temps on your payroll? And in which countries, let's say, is there, let's say, support, let's say, from the government, like in France, limited support on for the flex workers? How do you handle there? And what are the risks for you, let's say, your own gross margin in that kind of country like Belgium, France and Spain for film? Yes. There's one question, and the answer would probably last an hour, Hans. Yes. I know. Good morning. Let me correct you on the 10%. It's not that we're paying the 10%. We're paying our people. We're paying our people 100%, which is not to say the 10% comes fully on our books because, of course, first of all, and Henri alluded to this, we discuss with clients if they want to keep these people in some shape or form. The second one is we try to retrain people. We try to give them jobs because it's not like they are fully out of work. So you might say the 10% is a risk we're taking, which is not to say the 10% goes fully into uncovered cost, so to say. So this is very much an entrepreneurial risk we're taking as Randstad, again compared to our values where we do want to show that we take care of our people even if they are flexible workers. So that remains to be seen how that works. All of this, all the government measures don't have a lot to do with gross margin. It's actually separate. This goes very much into P and L, into personnel cost and that sort of thing. So very early to say, Hans. We cannot give you any guidance on that. I think we're very transparent in giving you guidance on the top line. Of course, gross margin in general is under pressure because of less burn. We see it a little bit in Q1, but we definitely will see that way more into Q2. Idle time, sickness, those are moving targets. Try to do it as best as possible, but that's the amount of clarity we can give you now. Okay. The next question comes from Simona Sanli from Bank of America. Please go ahead. Good morning, everybody. I have a couple of questions. So first of all, if you could please provide a rough estimate of your end market exposure? Secondly, if you could give an estimate of your monthly cash expenses? 3rd, if you can give an estimate of the restructuring costs that you are expecting for the full year in 2020? And lastly, I know that you have started to mention that, but if you could provide more details on the phasing of the cost optimization program for the EUR 120,000,000 for the years? And if there are additional levers that you could potentially implement in case the lockdown should last longer than expected? Thanks. Yes. Thanks for your questions. I'm afraid I think I need to disappoint you with a little bit more answers, but let me go through it. So the end market exposures, let me just read it out. So manufacturing is 30% transfer and distribution 20% business and IT services 10% Financial Health, 10% Public Health and Education, 10% Automotive, 7% Construction, 3% and Leisure, 3%. But it also take these numbers with a pinch of salt. So there might be IT people in automotive. So there is a little bit of water and the wine here, but those are the kind of numbers we have and they are quite varying across the portfolio. So that's to your first question. The monthly cash exposure, I mean, we have a €3,600,000,000 OpEx and it's roughly, roughly a linear spread over the year. That's probably all I can say at this point in time. As far as restructuring is concerned, far too early to say. We've in quarter 1, we've reported some restructuring. It was totally pre corona. There was just the normal stuff we do to take our to see where we might feel our cost picture is not as to say. As you can imagine, we are throwing to say. As you can imagine, we are throwing the kitchen sink at it, but with our values. And actually, quarter 2 is not the time to optimize profit. It's actually about caring for our customers, for our employees, for our temps. And that will definitely surface in the short and the long term and our shareholders. So we keep you posted. As soon as we have a better picture, we will give more detail at this point in time, very tough to say. Okay. Thanks. The next question comes from Mark Swartzenbuch from ING. Please go ahead. Yes. Good morning, everybody. First a question, Henry. The €50,000,000 relief from the government schemes, is that just to confirm, is it I think you mentioned fully a relief to OpEx. Is that correct? Yes. Hi, Mark. Good morning. So yes, that is correct. It is to a very, very large extent, it's relieving OpEx. Really, if you compare to mention one more time that it's actually not benefiting our bottom line. And so far, it's really exclusively used to protect employment with which otherwise would be in danger to be lost. Therefore, we are sort of a middleman in between. We're very grateful for those governmental schemes. But I also mentioned the moral obligation it brings for us to deal with that with 100% integrity to really protect employment with it. And yes, it's sitting therefore, it's relieving the OpEx line in quarter 2. And the $50,000,000 is a very, very, very rough number. It's really subject to so many variables. As we speak, the government schemes in development is subject to revenue declines in some countries. In some countries, it's about lockdown scenarios. But we felt that we had to give you some sort of guidance, but please take it with a pinch of salt. It's a very, very rough handle. And then this comes then on top of, say, the normal the schemes that support, say, your terms, your cost of sales in the gross margin, like the crude side item, that's a separate item, right? So that's how I should see it? No, it's not it's a mix of it. For example, if say in a country, it would have been not allowed to let go of people and all of a sudden that government is calling a false majeure and say, in the times we're living in, it is allowed, but we are supporting those people with financial support. Then in the first scenario, we would have sitting on a higher cost and maybe having people on the bench, so it would really burden our P and L. The second scenario with governmental support, we can relieve our OpEx. So it's a very, very wide range of different scenarios we have here. And therefore, it still makes the €50,000,000 is calculated without any of those governmental schemes and doing the normal thing what we normally do as Randstad, we would have probably be burdened with €50,000,000 higher OpEx. So then it is also an OpEx item, so that's quite important for your recovery ratio in the end? It is absolutely important for the recovery ratio. But without those government schemes, we would be feeling more pressure to let go of people, to keep financial health of the company. Maybe then related to this, your recovery ratio guidance of 30%, 40%. You have some relief indeed in your OpEx. What kind of cost cuttings or cost savings do you have from nonessential items and that kind of stuff? Because you take quite a small provision for restructuring if you compare that to Manpower. Can you give us a bit of a feeling what this the savings from those other measures would be roughly going forward? Yes. I will not put a number on it, Mark. But actually, what we do to a large extent is to see where can we really stop spending money to start with. To give you kind of a very stupid example, we're just kind of finishing all our, I don't know, payments for financial times, that kind of stuff. I mean, there's probably more than 100 line items we have in there. We say, do we really need that at this point in time? And if the answer is no, if in doubt, take it out. That is sort of the golden rule. Or push it out. I mean, marketing spend, I'm not saying that marketing spend is not necessary, but it's probably not necessary in quarter 2. So we're pushing that out. We're looking into how many software licenses do we really use from working from home. There are many software licenses that are probably unused at the moment. So we go back to software providers, software license providers, renegotiate those rates. And there's I could go on and on and on. And that's there's many small actions making quite a big difference. That kind of stuff is what we're doing. We also seen that suspended effective bonuses and therefore not providing for bonuses anymore. That is also really part. Also, again, the normal stuff. So if we put in a hiring freeze, we still have people that leave us. So we don't replace them. Variable pay, of course, if you make less revenue, you make less matches. So Neenahperm business goes down massively, highly commission driven business, So that cost automatically goes. On marketing, again, so normally in April, we would have our Ransom Deployer branding research. We still have that, but it will be a big client event in 30 countries. We're not doing that now. It's not even possible, by the way. So that's an easy choice, but that's easily a few €100,000 So yes, many, many line items and absolutely impressed with how our people stepped up to the plate. But again, we have a lot of sharing amongst companies through our marketing community or our digital factory on how to do this intelligently and collectively. Yes. And the energy, as you can imagine, is a total different one. I mean, we also, for example, look at our leased cars, many cars that can idle on the street, it's much easier now to look into whether we should not prolong those contracts just for a year as a total company and then renegotiate those rates with immediate impact. So that kind of stuff. And people get a cost allowance, yes? But yes, if you're all the month at home, you don't use your cost allowance. So long, long No, it sounds all familiar. Then going back to your top line, you mentioned some intensification of the lockdowns into April. Last night, of course, we had your colleagues from the U. S. Reporting. They seem to be guiding to, say, a low 30 years level starting in April in terms of record declines and then stabilizing. Is it something you recognize? Is or are they just trying to be quite precise while actually you can't yet? How should I read that April statement? Yes. This is our April statement and not the manpower one. But yes, our top line was comparable in Q1, as you can see. We are in the same markets. I talked about how deep we do see stabilization in most European markets because if you're in a lockdown for a few weeks, you know which sectors are not hiring, you know which sectors are closed. You know which sectors are actually growing against the curve. So you get a feel for what it is. Then we're not fully there because Q2, the latter part of Q2 is also but that's different per market. But let's say, in the Dutch Belgium business, there are events, there are summer things, there are peaks. So normally, in this case, yes, it sounds funny, but the Dutch flower garden, Kerkhoff, would be open. It's a few hundred people for us. That's closed. So that eats into Q2. So I think we gave you quite some guidance. I don't think it's a total outlier compared to what you saw yesterday. Then there's a bit of a mix thing and yes, but looks familiar, let me put it that way. Stabilizing in Europe, yes, we can, to a certain extent, adhere to that statement. U. S. Is still early days. They are later in the cycle. And also Japan is also Japan is a bit of an outlier because they pre Olympics, they said, goes on. And then post Olympics, they are going quickly into sort of a lockdown. So although it's in Asia, they do they are probably early cycle there. Yes. And the final one, dividend, of course, it's canceled. But looking at your strong cash flow developments and perhaps if things go back to a bit more normal in the second half at some point, Is there any way we might see then if you have some more visibility on the full year and your balance sheet position, cash position remain strong that you might come up with a special dividend somewhere in the second half or to the extent that the regular dividend is back and then postponed? Is it an item on the agenda? Well, Mark, I don't think it's time now to speculate on dividends. It's really time for us to go through quarter 2 to care for our customers and talents and employees. And maybe later in the year, we when everything goes a little bit more back to normal, having those discussions, but it's totally not the time now to speculate about. Yes. And at the same time, there's something else, of course, there is government support and dividends. That's All right. Thank you very much. The next question comes from Sylvia Parker from JPMorgan. Please go ahead. Sylvia, we can't hear you. Still on mute. Hi, morning. First question on the April to date trends, could you maybe talk about kind of professional staffing and whether that's still strong? And then how did the generally staffing and perm do relative to kind of the second half of March? Then secondly, on the €50,000,000 kind of obviously, the programs are a lot bigger this time around. So can you maybe give us an idea of what that would have liked what that would have looked like in a similar quarter kind of back in 2,008, 2009? And within the 50 that you see now, is that mainly France and Germany? Or is that the wrong way to think about it? And then finally, on Germany, as they're getting ready to kind of reopen a lot of the industrial sites, What kind of conversations are you having with clients there? Thank you. Okay. Silvia, good morning. Yes, let's not talk about weeks. In general, profs are doing better than staffing, although at the same time, we do see less new orders in proffs. So it's also slowing down, but to a way lesser extent. So if you, for example, talk about technologies in the U. S, these people can work from home. So as long as the projects they're working on are not canceled, they sort of continue. So that's good. So in general, in the Netherlands, in France, wherever we have pros business, certainly if it's a staffing pros business and less a perm pros business, which IT is predominantly, then it's sort of a safety net. Also our IT freelancer business in Germany is still doing fairly well. So staffing, again, finding the trough throughout Europe mainly, but still some up and down. And in the U. S, I think still some slowing down in the coming weeks, but I know anybody's guess at the moment. Comparing to 209, the big difference was that we had to fire a lot of people. So there were no government schemes. And to protect also our long term viability as a company, we had to fire more people. That is the big difference we hope compared to this crisis, again, depending on how long it lasts. Yes, in Germany, it's interesting because Germany, again, as I said, they were close to recession or in a recession before this happened. So when clients are opening up, it's all about the demand. So if everybody who comes out of a lockdown, the first thing they do is go to a car dealership and buy a car, Germany will be quickly out of the crisis. If that's not the case, then the whole sluggishness in that sort of products will remain, which will have its effects on the German economy. So questions with clients are very much, how many people do you want? Do you want temps? Can you cope in the 1st weeks or months with your own staff? So that remains to be seen. It's not just COVID. It's also the economy and where it was 2 months ago. Okay. Is it fair to say that they are being obviously very, very cautious kind of coming out of this. So you've seen a lot of temps. Obviously, it was a weak market anyway, but you've seen a lot of temps gone because of COVID. But the staffing levels they're thinking about is still 30%, fifty percent of maybe where they were before given the PMIs were actually going up prior to that? Yes, early days. We don't see currently a recovery in our German numbers. It's pretty stable. So automotive suppliers, by and large, don't make a ready supplier. They build on specs from clients directly. So it directly relates to the orders they're having. So that's where we are currently. So too soon. All right. Thank you. The next question comes from Konrad Zomer from ABN. Please go ahead. Hi, good morning. Two questions, please. The first one on your geographical performance. You mentioned France was down something like 50% for you. Is there any other country in your portfolio that is doing a lot worse than that at the moment? And my second question is on your recovery ratio. Can you maybe help us with the normal period of time between your revenues coming down and your costs coming down from your experiences back in 2,009 and if that has changed in the crisis that we're going through at the moment? Yes. Conrad, good morning. Fortunately, there is no country doing worse than France. Again, as said, it is not just COVID. It is also, yes, let me put it nicely, The way unions are reacting, we do see clients that actually could continue to work, but they're closed because the unions won't allow people to work. So that has more of an effect. It is to a lesser extent in Belgium the case and that doesn't help. So again, talking about back to normal, you do need to implicate the unions, you do need to have them at the table from the first instance. Otherwise, you sort of get you say we're opening up the country. And then in hindsight, they say yes, but not for us. And these people are still paid. So people are paid. So the incentive to go back is not financially that high. So you really need to be very open about it is safe to go back. And that is what the government, what unions themselves, employers and we try to contribute need to create in France. Again, big difference between 209 and now because again, we were on our own. Banks were supported, you might remember. But we had to fend for ourselves, which was okay. And unfortunately, then immediately need to go into restructuring, into firing people. Fortunately, that's not the case. So in a way, we have 100% of our workforce in headcount, a little bit less, let's say, 95% of our workforce, 95% of our workforce still active on coal, but in varying forms of inactivity partly financed by the government. So we are carrying way too much cost compared to what we see in our revenue development, partly covered. Yes, and we try to strike the balance and hopefully we can continue that way. That is very much a challenge for the coming months. Thank you very much. That's very clear. The next question comes from Subhasini Varanasi from Goldman Sachs. Please go ahead. Hi, good morning. Can you hear me? Yes, very well. Great. Hope you're doing well and staying safe. I just had a couple of questions, please. On the recovery ratio of 30% to 40%, it obviously excludes the €50,000,000 of benefits, it's been very clear. The question is, are you assuming that these common benefits is there a timeline on when these benefits will end? Because I think in the U. K, they've extended the benefits came to the end of June. Therefore, what are you assuming for recovery ratio going into Q3 or Q4? If the declines continue, maybe not at the same level as Q2, but if the declines continue, what kind of recovery ratio should we be looking at for Q3 and Q4? I think in today's release you mentioned going towards 50%. How do you get there, please? Yes. Good morning. We so in quite a few European countries, the system is not a new system. It's not a COVID developed system. So we're pretty confident that it will remain. But again, what is remaining, of course, this is not just about us, this is about government financings and that sort of thing. The Dutch system, for example, is a system until the end of May. Again, this is a speculation, but given the fact that the government has announced a longer shutdown, hopefully, and they were verbal on that earlier, they might extend it for another 3 months. So again, very much a moving target. In Spain, there's also a sort of COVID related variance on the system that was in place, again, around sort of an economic unemployment. So remains to be seen. We don't know yet, again, aiming the 50% recovery ratio and the financial return of our business is not the only thing which is important. I think Henri voiced it very well. It is also the balance between our own people and their employment. On Tom's question, on taking market share in the upturn, yes. And then shareholders have an interest, that's absolutely true. But we want to balance also the profitability of the company short term versus the long term health, but also the long term responsibility we have to our employers. So very much on our plate. We take it almost week by week, and we'll inform you when the next moment is there. Okay. Thank you. Thank you for your questions. I will now hand you back to your host to conclude today's conference. Yes. Thank you, Marmot, very much. Thanks for calling in. I hope you're having as much fun as I have at home every day. And I wish you good health and everybody good health and your families good health. And hopefully, we all return back to normal and normal work as soon as possible. Talk to you next time. Bye bye. Thank you for joining today's call. You may now disconnect.