Earnings Call: Q3 2020

Oct 29, 2020

Good morning, ladies and gentlemen, and welcome to our Q3 2020 sales call. And this morning, I am with Laurent de Labrau, Group CFO, and we will take you through the different aspects. First of all, let me wish each of you a healthy condition in this very fragile sanitary environment. And We are very glad to have you on the call, which is a good sign in any case. We continue to operate in a very volatile environment. And as you will see, Rexel has shown its ability to adjust, to demonstrate its resilience, to deliver on these priorities and while almost weekly adapting to an evolving situation. It's new to all of us, but now we have learned since March to get things done. Q3 brought further confirmation that the investments we have made over the past 3 years in people, In inventories, the branch openings, the IT and digital aspects of All have proven to be relevant and contributed to transform Rexel into a robust, but also agile company able to navigate the current turmoil without compromising on our medium term ambition. And beyond these words, we will demonstrate to you today that this is a daily reality. I will start by focusing on key highlights. Then I will take you through our geographical performance, and Laurent will do so and touch on profitability and cash also. And then I will come back for concluding remarks before we move to the Q and A session. Now if we go to the key highlights and when you see on Page 3. When you run 23 countries and 10 entities in the U. S, regions being an entity or a sister company being 1. Every week, You adapt to new conditions. The COVID regularly, but also the fires, the hurricanes and all the different aspects of social life. And every week since March, We managed to, 1st, ensure healthy conditions to employee and to customers 2nd, assure the business continuity. We never, never Have let a customer without being delivered, without having access to an inventory, without having access to the needed product, never. And we did that with a high level of service. The other dimension was to make sure They threw out the turmoil. We would keep our customer base very active and healthy from both the sanitary aspect, but also the financial aspect, so that they could pay us in time and in full, and therefore, we were even helping them on that front. Every week, we managed to adjust inventories and receivables despite some headwinds, disruptions in certain supply chain, so that we had to find replacement products and so on, but we always manage through this very changing environment. And every week, We managed to use overuse, I should say, and rely on our digital tools and still continuing to get the adoption of our digital transformation initiated before. This is what the Adaptation has been throughout since March and continue to be and will continue to be. On the Page 4, there are strategic decisions, which translates into performance. And first of all, by having a real good service level, we were able to stabilize sales at good level in Europe and positive trends in our most profitable countries. It was essential for the company, for the investment for all of us. Asia Pac proceed organic growth by good underlying internal demand in China. This was already immediately when the pandemic started in Europe that China was showing a comeback, and it has stayed like that since that moment. In North America, even if it's lagging behind the other geographic, even if it's very contrasted by regions, but it's improving sequentially months after months. And therefore, we feel confident about the global group performance on a sales standpoint. And we have today same day sales growth evolution in the quarter 3 that ended up with minus 4.2 percent. Despite a drop of 17.7% in Q2. But all of this was really reached because customer always found in Rexel a solution to their needs, because our employee always promoted Rexel as a solution to the customers. Whether it was digitally connected, whether it was through the phone, I would say, physically connected or whether it was to come to a place in order to get their product. We managed to get and to value the best in class customer service in this very volatile environment. And why do I talk with you about this here and this morning? Speakers' recipe for success is made of good efficient people, intensive training. Therefore, you could see 785 modules versus 35 available in March 2020. The second recipe for success is excellent offer availability despite all kind of headwinds, as I have said before. And look, 97.5 percent stock availability back to the pre crisis level. The recipe for success is also the customer satisfaction feedback. In this very unstable environment, customer needs To be sure, there is somebody predictability is there. Resilience is there. They don't want to spend time in looking around and not finding what their needs are. And therefore, the Net Promoter Score is key in order to judge about our complete capability to satisfy their needs. And this Net Promoter Score grew. And if you compare to end of 2019 And July 2020, just immediately after the consignment in France, our Net Promoter Score grew by 12 points. And last but not least, certain adoption on tools in order to really get The customer stickiness understanding in what and how do they need us for, and this is, for example, the CRM adoption in the U. S. With 96% of adoption by our teams compared to only 75%, 76% at the end of 2019. It's the adoption of tools and we are working, which has always also created the best in class customer service. At the same time, and very often you asked me in the past, Digital adoption, digital leverage, digital effect, when do we see something and so on. Allow me that we are with this chart on Page 6, we are one of the leading multichannel operator in this business. Yes, we have the physical footprint, But we have, for example, take 1, 80% roughly Q4 expectations for European sales followed by track and trace. 80% of European orders could be tracked and traced followed directly by the customer, where is my product? Take another element of this pie. One single web and one data platform in the U. S, 1 single web and 1 data platform in Europe and the one in the U. S, which allow now to deploy this month One web for all, one CRM for all, one track and trace for all. This is what's going on And the investments of the past are now hiding highly proving their efficiency. Not to underestimate, for example, in France, 46% of connected customer, it doesn't mean 46% of our sales, but they come to the site. They do their quotation. They look for product availability. They use it for something daily, 46%, which is 550 bps higher than in December 2019. This has been a quantum leap in the use of our tools and obviously, customer stickiness and obviously, the fact that we could capture the demand by week when it was coming back. And plus 62% improvement versus last year on transactions done on mobile in France. And we enriched this mobile approach because the more people have to work by distancing from each other, by not coming to places again, They use the mobile very, very intensively. We have adjusted to it. This is elements just to demonstrate how important it is. And some of the AI investment, quite expensive investments at the beginning before we could prove to have an efficiency on the company profitability. 74% of customer churn adoption versus 66% in Jan 2020 in Europe, excluding France. And this is quite a mean. The sales force Sitting far away from coming to the customer site or buildings, we're able to have immediately 75% on alert of which customer could have a tendency to churn, which allows us to be highly reactive and a lot of anticipation. On Page 7, allow me to tell you that the action plan in place to make step changes in our digital journey. And the key thing is that, thanks God, we have started early on the data, Power BI, CRM. And now we have a uniform customer segmentation, which allow us to be even more reactive and even more solid because this is a driver by which we can run all kind of different programs digitally or physically. And this is what the second Transaction, web, EDI platform, track and trace, e mail to EDI, digital customer invoicing and so on, plus other things like pricing And that you'll find under predictive, all is workable because the data and the platforms now well structured, global, uniformed. And more and more, it will allow in the coming weeks months to continue to have the predictive modules helping us coming throughout this very changing fast changing environment, rollout of branch assortment. It may change within a month. The churn, customer leaving, customer saying customizing a tenancy not to do well and so on, quite critical in this changing environment. And it's being reactivated. Why reactivated? Because the data stream were polluted by the confinement. And at the end of the day, you need to retrain the algo. But we also learned that Analgo can be retrained, is being retrained and is being efficient, like a sportsman and next best offer to be deployed and also pricing module. I wanted to tell you that nothing of the past has proven not to be efficient. Nothing of the past is now kind of obsolete to the opposite. Everything we have done is a help to, plus the quality of our people and the training to them, high level of service. This has been our Q3 recipe for the results that you see here. And I will now hand over to Laurent, We'll give you more color on the sales of your Q3. Yes. Thank you very much, Patrick, and good morning to everybody. I will go take you Through our geographical performance and touch on profitability and cash. First, on the sales review on Slide 9, You can see our Q3 sales performance, which sharply improved sequentially versus Q2. At €3,160,000,000 our sales were down 7.7% on a reported basis and then 4.2% on a same day basis. In the quarter, currency has an unfavorable impact of 2.3%, mainly as a result of the depreciation of the U. S. And Canadian dollar against the euro. And we now anticipate the full year 2020 currency impact to be circa minus 0.9%, Assuming, as usual, spot rates remain unchanged. Scope stood at minus 1.7 as a result of the disposal of Gxposed Services in February 2020. Conversely, we had a positive calendar effect of 0.4% And more important, a favorable copper effect of plus 0.5% in the quarter after 6 quarters of negative copper contribution. Slide 10 illustrates the persistent volatile environment in which we are operating. As you see, we were ups and downs in all regions across the quarter, which can be explained by a series of factors, notably the catch up effect to complete projects that were inserted, changing customer habits regarding vacation amid the pandemic and differing restrictions from geography to geography. As you can notice, compared to other publication, we did not Producing exit rate for October. In fact, October is better than our Q3 evolution, but Based on the volatile environment, we believe it's a bit early to draw a line on all of Q4. And by geography, you see that Europe has returned to broadly stable sales versus last year, but still very volatile across countries. Pacific has recently recovered after being impacted by partial lockdown both in New Zealand and Australia in August. As far as Asia is concerned, the region has benefited from a strong recovery, notably in China. It's not shown on the graph as we exclude Asia because the business is more volatile on a weekly basis as it is largely project driven. North America, while showing signs of improvements in October, continued to lag with very diverging trends between regions. On Slide 11, we turn to Europe, where we have seen a recovery in Q3 in large majority of countries. The exception are in the UK and Southern Europe, which are clearly outliers as shown on the graph. On Slide 12, we look more closely at our performance in Europe. Overall, sales in our biggest regions stood at €1,790,000,000 in the quarter, up 0.3% on a same day basis. In our home market of France, which accounts for close to 40% of European sales, Our revenue rose 3.9% after dropping 25% in Q2. This growth was driven by a high level of service and business continuity as well as strong demand in the residential and HVAC businesses. Sales in Scandinavia were up 0.7%, with positive momentum in Norway, up 3.2%, mainly driven by price increases to offset the impact of the Norwegian France devaluation on imports. Sweden was down 4% due to the lower demand from medium and large contractors. Benelux grew by 2.3% With good momentum in the photovoltaic business in Belgium, while the Netherlands were broadly flat, with the positive residential market offsetting lower renewable energy. Sales in Germany posted a strong 9.4% growth, thanks to positive trend in our Proximity business and less negative demand in automotive compared to Q2 2020. In the UK, sales dropped by 17%, mainly due to a difficult commercial project market, while proximity is progressing well, as illustrated by our robust performance in our Denman's banner, up 3.6%. Note that this performance marks an improvement of our Q2 when sales were down 41.7% in the UK. While the new management put in place with the new management put in place recently, we are accelerating our repositioning on the proximity market with a focus on our digital offering deployments. On Slide 13, you We see a very contracting situation by region and market in North America. As shown on the graph, Canada has been clearly improving since August, while the U. S. Has seen very sharp swings. Slide 14 focused on the reasons behind the volatility we are seeing in North America with both strong headwinds and strong tailwinds. The pandemic has led us to face a combination of unfavorable impacts. These include cancellation of projects that have been commercial end markets such as hotels, entertainment, airports lower demand in heavy industries such as automotive, metal, mining and of course, oil and gas limited allocation of products due to production capacity constraints at supplier level, especially from Mexico, adaptation needed to manage fires and hurricanes that forced temporary progress. On the other hand, we benefited from incremental demand in the residential markets. In the face of these contracted trends, Rexel has demonstrated agility to win new business, notably through customer service and our diversified positioning. We benefit in VIVAS from our 3 banners that allow us to distribute different suppliers and overcome local availability constraints. In addition, our more recent reorganization in the Northeast allowed us to regain market share in the region. Lastly, and as already mentioned, we have successfully launched 1 single web and data platform in the U. S. That is now common to all banners, region and customers. We consider this, as pointed out already by Patrick, as a return on leap in our digital transformation and a strong enabler for our business. Slide 15 focuses more specifically on the U. S. And shows the very uneven recovery passed by region with sales evolutions ranging from minus 37% to plus 0.6%. Very clearly, we can identify 2 blocks of regions. On one hand, 4 regions showing strong resilience: California, Northwest, Mountain Plains around Denver and Florida, driven by strong positioning in proximity business and market share gains in region where we have invested notably in sales force and branch openings in the past. On the other hand, another block of 4 regions that are facing more challenging situation, the Midwest, Northeast, Southeast and, of course, Gulf Central, which are impacted by the exposure to Heavy Industry and Oil and Gas. On Slide 16, we turn to Asia Pacific, where we also see constructive strength between China, which has sharply improved, and the Pacific countries, which are just emerging from to lockdowns. Slide 17 shows this in greater details. In the Pacific, Sales were down 3% on a constant and same day basis. In Australia, sales were down 1.2%, thanks to good resilience in the Proximity business, broadly offset by the loss of some industrial contracts and the partial lockdown in Victoria's states. Excluding those effects, the underlying trends is closer to 4%. In New Zealand, sales dropped by 10.7%, impacted by a depressed market before election and partial lockdown in Ukraine in Q3 with an impact of minus 2.7%. In Asia, sales posted solid 7.6% growth on a constant and same day basis. In China, sales grew by 11.2%, mainly driven by our value added in the growing Automation segment and by governmental spending in Infrastructure and Automation. And India grew by 5.4%, showing a recovery of Sotheby's remain active in this country. Also, we are on the sales call. We thought it was important given the current context to remind you of the levers that we have to manage sales volatility in order to protect both profitability and cash. As you see on Slide 19, we have several levels. First of all, we are very focused on customer service and business selectivity in order to support our gross margin. 2nd, we can reactivate temporarily unemployment measures in countries that impose new lockdown measures. 3rd, let me remind you that we are enforced hiring freeze in certain countries and certain functions and have a natural turnover of around 5% on group employees, excluding sales and digital force. 4th, we have further local reorganization underway where necessary that could lead to a charge up to €30,000,000 for restructuring in 2020, which will mostly be booked in H2. 5th We continue to be very selective in all type of hover rates, including, of course, travel and expense, without compromising our digital and customer service. On Slide 20, we reemphasize that cash Cash flow generation is, by definition, a key focus for us. We continue to work hard to maintain healthy receivable collection, And we have an improved DSO to 50.6 days at the end of September from 53.5 days 1 year ago. And days of inventory also improving to 56.9 days from 58.5 days a year ago. With this and following the cash generation in H1, we confirm that we anticipate robust free cash flow generation for the full year 2020. This has contributed to the confirmation of our long and short term ratings during the crisis. You should note that following a change in commercial policy at Moody's, we have asked the rating agency to withdraw the short term nonprime rating. Indeed, this short term rating does not differentiate between noninvestment grade companies, And Moody's has recently changed its commercial policy asking for an additional fee for this service. And the standard press release should be by the working agents in the coming days. With this, let me hand back to Patrick for his concluding remarks. Thank you, Laurent. I will conclude with the Slide 22. And obviously, it's a balance between short term aspects and medium term drivers and some of them materializing already. Obviously, there is a number of uncertainties, which we will permanently have to adopt to like we did in the last 6 months. What we noticed on one hand is to have a continued economic impact of key industries, which remain was low, remain low and have not picked up Aerospace, entertainment businesses, leisure, hotels, office buildings, they are what they were since It's May, June and remain in the similar pattern. Only one has changed a little bit and makes a beginning of a comeback in the automotive world, especially in Germany, where we see the production has restarted and we see a little bit of an improvement. Partial lockdowns and your restriction linked to a second wave of the pandemic, this is what daily, whether it was We had yesterday or the day before in Germany, Macron yesterday night in France. It's in the UK, it's Belgium, Even Switzerland closing all the borders of any kind, even within the different continents and so on, okay? And we have to adapt to this, and we do. And obviously, we privileged local business in that case, but we also have to adapt to which could be missing because of all of this. And then there are uncertainties, U. K. Post Brexit, which kind of a Brexit and whether it's post Brexit or not post Brexit. And then you have the U. S. Around the election. We are close to the elections, very good account. And what we'll be after the election, nobody knows. Therefore, Okay. We see all of this as elements to which we need to adjust some time to anticipate. And Brexit, for example, we need to anticipate if there would be any issue with the supply chain. Therefore, we are ready. We have taken our measures already to be sure that our customer in the UK will not be missing Critical Products, if there would be supply chain issues. On the other hand, we see medium tough drivers, And the first one, start to become real. The first is our, obviously, ability to act as one company so that we can provide best solutions, experience solutions, solid solutions to our customer. That's a key thing. What we propose is the assortment of 1st Class and the availability of 1st Class. 2nd, we see opportunities in residential, in datacom, food and beverage, wastewater treatments, Just to name a few which are really solid and obviously, on the little bit medium term, Green Deal and Energy Efficiency Solutions. Fact is, I have to recognize that Green Deal, we still don't know exactly how it would materialize and when it will materialize, But it's obvious that the longest you spend in the class, the most the screen deal will become something real that needs to flow down to our customers. And but on the other hand, the Energy Efficiency Solutions, because it becomes really on the front line, we see demand And we participate, too. For example, I can tell you, we just endorsed yesterday a full energy efficiency solution subsection on the web shop. So that if people wants to know what is an absolute most efficient Energy Efficiency Solution, it will be made available on the web shop in a special portfolio segmentation. And 1st, we should see, even if today it's not the main driver yet, an onshoring of industrial activity in the U. S. And in Europe. And but short term, which is the 5th point, we noticed a real high level of backlog in construction. And the backlog in construction is giving us quite confidence for the coming months. And Now obviously, the shape of recovery remain uncertain, but the medium term drivers to the opposite makes it very attractive, and we see the first of the medium term, which are becoming a little bit more real. This volatile context with the plus and the minus and not exactly knowing how and when and how deep each of them will contribute to, That's not allow us to provide guidance for the rest of the year because the short term is really something that change every day. And I cannot read between the lines. But in line with our H1 results, We will continue to focus on best in class customer service. We will capitalize and do more of our digital transformation. We adjust our OpEx, and OpEx Management is becoming weekly adjustments. And free cash flow generation remained the underlying priorities that everybody is working at. Therefore, what we have seen in the Q3 will continue to be the main drivers how to manage through the Q4. In full fairness, we look at the future with a lot of realism. It's changing. It might be tough. There is opportunities. Let's focus on our strengths and opportunities and make the best out of it and adjust for the rest. And it's realism about today's situation, but highly confident about the future. And thank you for your attention. And now let's take your question, and thank you. Thank And the first question comes from the line of Lucy Carrier. Please go ahead. Good morning, gentlemen, and thanks for taking my question. I have three questions, and I will go one at a time. So I understand from Laurent that you are indicating that October had been tracking at a better level than the overall 3rd quarter. I was just hoping if you could maybe help us understand how it compares division by division In terms of that current trading and obviously on the back of the announcement of new national lockdown in France and in Germany yesterday, How do you compare those with what you have faced in the spring? Do you think you can derail that sequential improvement that you seem to be still seeing in October? The if we go before we go to the regions, Allow me to say, for example, North America, I have no clue idea what the election could mean. On the other hand, We have been through fires. There was a week where I had 47 branches closed. We have been through 3 hurricanes. There was 3 times a week where I had half of a region completely down for a week or 2 underwater, Meaning the numbers of our Q3 already have a lot of adverse component. Now how much of this could be if in North America, there would be a little bit of social problems after the election. The underlying demand at the end of the day is more affected by the fires and The water and the hurricanes and the distraction, because we cannot deliver, we cannot sell, they cannot contract. But the rest so far, but very little impact on our demand. Therefore, I'm hesitant about North America to give you something for the balance of the year because I don't know. It's an unknown for me the election story. But otherwise, they improve every day. They continue to come back. They are not at the level of Europe, which came back faster. But I don't expect worsening if not for these unknown of the election. The lockdown in France, the key thing for me was schools, and schools remain open. And when the lockdown was decided in March, we could see how much demand collapsed when People having to work from home and school being closed and people having to take care of the schools of their kids, we are really changing the ability for people to go to work, even if on some could have been. And second, the Le Batimont old deconstruction was closed. Yesterday, what has been said, construction should remain open and school remain open. Now it's a week of school holidays, but next Monday it will start and people will bring their kids to school. Now I think the country from an economic standpoint, especially for us being related to construction and maintenance and all these things will suffer far less then in spring. At least that's the approach I take. This morning just before the call, we had obviously with the French team. Business continuity, yes. Health and safety, yes. What do we have to deliver in the coming weeks? We know the kind of backlog we need to deliver. We are calling every single customer. They all confirm for the few I could see this morning They will maintain their activity. Transportation is between the Six centers and the customer locations is absolutely no issue. So far, it's only the entertainment business, which worries me a lot, but it was down already before. It's more the shops and this kind of demand in the retail shops for the non essential, which will be closed. But in full fairness, we all know that the last quarter because of shopping, Christmas shopping and coming close to Christmas was not a place where people were making a lot of modifications for us. Other segments will suffer more. Other probably activities will suffer much more of this than we will do. I cannot tell you how much. We will continue to adjust. We will continue to make sure we take the most of which will be available, but I see that far less impacting on us. I'm not saying on the rest, on us than it was in Spain. Same story in Germany. They didn't stop anything of the industry yesterday. It's all the entertainment business. It's all the schools. This is the sports. This is all the things. But in Germany, Merkel, everything she has announced allow us to continue and the construction will continue. Residential demand is strong. Automotive is coming back. We will do the best we can in order to grab even more market share than ever before, that so far. It's not the case in the UK. In the UK, there is a double effect of reconfinement and Brexit ahead of us. Now as I said, Brexit, we got prepared for, we are prepared for without knowing exactly what will come out, but we are pretty sure there will be supply chain Disruptions more by the way in Jan, Feb than before, but we need to get prepared now. Therefore, all the essential components We will have an inventory in order to overcome any disruptions before Christmas or after Christmas, whatever happens there. The reconfirmment is really locking down more people at home that could create a lower demand. Here again, we have adjusted heavily. And if need be, we will continue to adjust heavily. This should it will not be an easy journey, But it was not an easy journey in Europe neither in the U. S. For the last since March. Up, downs, adjustment, assortment, availability, Customer being sure they will pay us and things like that. This is the entire company going after all the positive things to do and avoiding all the negative rocks that are in the middle of us, of the road. And so far, so good. Therefore, Q4, no guidance, but Q4 so far on the ramp up of Q3 further. Thank you, Patrick. My second question was around the profitability. And you've kind of tried to give us some maybe insight In terms of how you want to manage that in the second half. I guess what I was curious to know is you have seen a very strong rebound In some countries in Europe, France included or Benelux, Scandinavia was positive as well. We know historically Those geographies tend to be a little bit higher margin than the rest of the group. I'm just trying to understand if the rebound you have seen Needed additional investment or additional cost or whether you feel that you could preserve what I would call Kind of stable margin in this geography compared to history. No, no, no. Lucie, We are extremely cautious on our cost structure. And through the recovery, we applied a few management rules, which if you remember, I had given already a color in the previous call when I was saying We wait for margin to be back before we add cost and we ask people to come back or not. If there is not Delta growth in gross margin, there is not a delta growth in the staffing. And we are people related in our business for 50% of our OpEx. Our gross margin is in SMB cost. Therefore, we always manage the ratio, margin generated, absolute value versus SMB. This is one thing. There was not an explosion of other costs like transportation. We still maintain a low level of OpEx on other nonessential costs, somewhere easy like travel. No need to tell you, if there is one guy who is frustrated of not traveling, it's me. And but Not to say that, that was the most expensive, but I participated to the savings, the okay side. And by the way, You know that we are looking at every Penny, distribution is a low margin business anyway. And it's therefore, we look at pennies, but it works. And it's a cultural thing. And so far, so good. It give us for the profitability levers, it give us a sound so far, very sound construction. And we have a balance between temporary measures that we can continue to activate where necessary and more structural measures that we put in place where necessary as well. So that's as that helps us to protect the cost structure because the top line is recovering, but it's not yet at the level before the crisis by definition. Thank you. And my last question, if I may, is a bit more long term. You mentioned the EU Green Deal. Of course, we know we are still awaiting a lot of details in terms of implementation and so on. But maybe could you help us Understand or give us a range maybe how much you think your European business is exposed to building renovation As part of the division. And which type of segment do you think could benefit the most as part of your product The green deal has different there are different aspects to it. First of all, we do not expect anything before 2022 to materialize in real life. And by the way, I think there is enough of backlog to go deep into 2021. The second is, My worry is more on if money is coming down, the people available, which was already a shortage before of skilled people, could become 1 in the future. On the other hand, The one thing I see is that it has it will have a direct impact on HVAC and Cooling Systems. It's favorable to electricity because of CO2 reduction targets that has been given to many. But on the other hand, the HVAC people through the regulations Could be also beneficiaries because if they regulate existing configuration is cheaper than moving to a full electricity, But there will be it's unknown yet how much will be chosen by whom for what. And the impact for Vexcel is an unknown to me. It's unknown because when I try to find product range, I don't see a major product range being so far identified. I see more Electricity need, which will be really, really positive, Should, by the way, be electric coal generation be sufficient. If everything come at the same time, more electrical and hybrid auto cars. More electrical engines, even if very efficient and less of thermal engines, not just in the car business, but in the industry, in the forklift, in all of this. The demand for electrical needs will be high. Will the generation of electricity be Sufficient, I don't know. The Green Deal contains elements of limitations if it would be heavily favorable to Electrical Solutions. But there is enough so that we see that as a very good underlying driver for a company like Vaxel. Very good. And just maybe if I can ask, I mean, How much do you think roughly your business in Europe is exposed to renovation or retrofit? Are you able to give us maybe a range or value for that? Retrofits, definitely, we always benefited from because it's local everywhere, and therefore, Stay safe. Thank you. Next question comes from the line of Iris Fang. Please go ahead. Hi, Rishi. Good morning, everyone, and thank you for taking my questions. I've got 2 from my side, and I will go 1 by 1. The first one is on digital profitability. So appreciate that. You get cut. Hello. Hello? We have no connection. Are you back? Are you back? We heard you are back. You're cut again. Sorry about that. We cannot get your question, I'm sorry. Cathar, can we move to the next question, please? Sorry about that. Let's move to the next and come back if it works better. Okay. No problem. Next question comes from the line of Alfred Glaser. Please go ahead. I was wondering, could you be maybe a bit more specific of how you manage the investment costs in Digital in particular, what kind of adjustments are you doing? And how do you put this in sync with the low visibility you have On business in the current context? Obviously, we review all our digital investment Under the light of how much transformation we can get and the kind of leverage we could expect out of it, more by object and by nature than in the past, but even more selectively in the number of countries that will adopt. The adoption rate by different countries is a driver for the priorities. But globally speaking, if you compare 2020 to 2019, I have not reduced The intensity, it has not increased, but I have not reduced the intensity. I have no intention to reduce the intensity It's more the appropriate choice for the country to adapt and to transform. What do you mean exactly by intensity of your investment? Amount of dollar and euro. As percentage of revenues or in absolute numbers? In absolute numbers. Okay. Thank you. It's a conscious choice and not as a proportion of revenue. Hello? Yes. Thank you very much. That was very clear. Thank you. Can we take the next question? I think we lost a person who couldn't come through. Yes. We've got her line back. Okay? Okay. Great. Hi, gentlemen, and thank you for giving me a second So hopefully, you can hear me now. And yes, so I've just got 2 questions. One is on the On the profitability of digital, so I remember that you've mentioned before that 40% is kind of a threshold that you look at To get the business to be profitable, but given that the business is growing very well and that you are not increasing or decreasing the investment around it, So can you give us maybe a bit color on the evolution of the digital business margin? And why you think it's going to be So basically, the outlook. Making a customer a multichannel customer It's not short term having the payback of the digital. It's simply having more SKUs, better service, And now we enter into the phase and we got the benefit during the COVID because we accelerated The productivity gains that we could get out of our digital transformation, whether it's sales force productivity because the churn is making every sales rep more efficient, whether it's another branch assortment tool to help getting a better assortment and a better availability so that We have resisted pretty well during the COVID, and we have such a short, fast come back at by a week When at a sudden, the market is reopening, these are the benefits I could measure. Now in giving you a specific profitability on digital, I will be frank, I cannot because it's not isolated As such, because it's the number of customers that becomes digital, which increase their sales. And by the moment they add one order line on every order or every second order, obviously, this is an improvement. I think we would have been in much more difficult troubled waters without our digital journey. Difficult to isolate, but the one thing I know, at the worst time in the April journey, That was really down the 1st 2 weeks. We saw the digital interface to our customer that exploded. And we maintained the link digitally. We maintained Our turnover digitally through digital tools, we maintained the vision and the including with our suppliers through digital tools in order to better assess on a weekly base What could be missing, they should deliver us 4 given the change in demand, meaning these reactivity capabilities without the digital tools, we would have Totally missed. It was impossible to do without that. Now I have not calculated the GAAP because it's difficult to imagine Rexel without our digital tools. But I feel extremely confident to tell you that this is part of our resilience and the comeback. That's very helpful. Thank you. And another one is on maybe do you have any Indications of these are on the nonresidential markets in the U. S. Going into 2021? No, no, I will be frank. We are in the budget process. We make our own assumptions. They are contrasted nonresidential, they are contrasted by region. Industry is rather stable these days, and we expect It remains stable at the level it is of today, the U. S. Industry. The uncertainties on the project side, which stopped heavily, I have to admit, during the many months behind us Have not really reopened. Therefore, the level of today should remain the 1. But how much of this of the money would be Reinjected post election into the system and how will be the driver for reopening on that certain project. On the other hand, we were able to be agile enough, for example, to offset in Florida The missing revenue from the Entertainment business of Universal Studios and all the Entertainment in Miami by taking projects, which we started 3, 4 years ago around SpaceX and the activity for the space industry, north of Orlando. We have been able to do this kind of thing. And with a lot of changes in the assortment, in the people, in the skills and so on, We started before we were lucky enough not to be dependent on 1 sector, not being only residential, only commercial, only industrial, But having the 3, which by the way, we were rich of our multi banner approach of the past, so that we had access to different suppliers, and we have the skills internally that we were able, I can tell you here very effectively, More than what I have saw 3 years ago, we were able to get a switch from 1 sector down, fully stopped. Like I mentioned, the entertainment in this Disneyland and Disney Park and Universal Studio Park and move to more industry around SpaceX and sub suppliers. And we are very glad of having been able to do that. Yes, that's very helpful. Thank you. I guess, no one really has The crystal ball, and thank you for the additional color. Thank you. Sorry, there are no more questions at this time. Please continue. Well, ladies and gentlemen, thank you a lot for having joined this call this morning. Obviously, the next moment we will meet together will be in February, when we will present the full year results and a little bit more color on 2021, obviously. In the meantime, there will be a lot of adaptation that we will be going through, And we will always be happy to stay in contact with you at any moment, and Ludovic will always Be happy to take your calls. Thanks a lot for being with us, and Rexel is doing fine. Thank you.