Earnings Call: H1 2020

Jul 29, 2020

Good evening and good morning for those who are based in U. S. And thank you for your participation to this event. You know, that we have an with a webcast that doesn't work for us today. So we are doing that through a call which is acting not only today performance seems to be a longer list of companies. So we are going to make it through a call. I hope you have been able to download out to read the first half results at the presentation of the PowerPoint that is accessible on our website So I suppose you are there and I'm going to comment that as proof of call. So, we are of course tonight to comment on all the performance group results at the end of June. We the previous release. Hope you have received the press release that has been launched before the close of the stock market today. Of course, after my presentation, you will have the ability to raise questions through a Queen traction. I'm trying to present that in English and slide of as I mentioned, are available through the webcast are no more available through the webcast. That's the issue. But mainly online on the corporate website. We are recording this this presentation and of course, this will be available hopefully on the on the raw side as quick as we can later on. Just to mention that today's presentation contains certain forward looking statements that address or expected future performance and by the nature, address matters that are uncertain. These expectations are subject to a number of factors or uncertainties that could cause actual results to differ materially from those described in the forward looking statements. For a detailed description of this factor, and uncertainty is referred to the risk section factor on it. You have the available on the corporate website. So let's start now with a key fact and the key figure related to the first half and we'll go with later deeper on Resiltration by region and on cash situation. Finishing with the early long term outlook. If I move to slide 4, in the presentation, let's move to slide 4. I do believe that that are the first half highlights and I think there are 3 of them which are noticeable. First of all, the H1 financial resilience show how much teleperformance is resilient in face of the adversity. We have been able to deliver growth of 5% organically, which is, I believe, significant and has to be noticed. We still continue to deliver high profitability with 9.5 percent EBITA margin and our cash flow is up by 11.6% to close to 1,000,000 at 1,000,000. These figures are other consequence of what we have done all along this response recently. We do believe that Teleperformance achieved an agile transformation to overcome the global S. Crisis. We have this 3 protect free policy, which means employee health business as cash as what does it mean employee as a total of 220,000 employees are now working from home after a confirmation period of just 2 months. I don't know if you imagine what does it mean to move so many people in a so quick period with so many language, so many cultures, so many countries and so many technical issues. This is something which is outstanding and I just wanted to remark it. Just to the point on the fact that this working home is absolutely was the last three issues that were that were linked to that. 1st of all, the safety of the employee working at home, of course, Secondly, the ability for this employee to keep to continue to be paid on a day to day basis, which is absolutely key for the people that are not benefiting from a sellout system or a specific system that we might have in some countries. And lastly, for those who are not able to come to work at home, they were sitting in a, I would say, site where desensitization was significantly increased and they were able to continue to come to work safely. So that is the first step. 2nd stuff, business continuity solution with our clients, what does it mean? It means that we have been able to continue to work with our clients, whatever situation, whatever the country whatever the language. 90% of our clients were agreed in agreement to work at home. It has not been easy to get their approval but we have been able to get it and finally to succeed in doing so. And lastly, key, we have we have we are liquid, we have more than 1,500,000,000 liquidity available for tomorrow if a crisis will continue and I'll come back later on that. More importantly, so we have good results. It explain why the reason why we're going to use the R3 protect 3 policy. But what is interesting is that June 2020 shows business recovery model. We had a strong commercial momentum and we are in a position to deliver new guidance for 2020 and roughly confirms the 2022 outlook. Let's move to the following slide. It's just a slide that just to show that the group is taking care of these people. Confirm a status, confirm of best or great employer in 23 country across the world. That represents 70% of our global network across the world. And it was our priority to make sure that people are safe, all in these days. So far you find here by region and by country where we get certification either from best place to work or workplace to work that is not so easy to get. Finally, since January 1st, We had 17 Countries and have been awarded renewal of first win of this such decension. Meantime, we have been able to get a lot of awards in the industry and to be the leaders by far of Everest, Frost And Student and Forester or OPEC metric. It's not by chance, and I do believe that we have, by far, as a leader in this market. I'm sorry, but I was I am on slide 7. And we had closed a small deal that was made up to explain you how we are going to work on tomorrow on TP Cloud Campus. What is TP Cloud Campus is a comprehensive virtual ecosystem that enable to all of all of our people to work through remote management. I hope we will be able to see the video on our website as quick as we can. But this system is simple how you are able to hire, train, manage and coach people from a remote place and making sure that these people are stick together as they were in the site. This is doing it started in Lisbon early this year and now it's starting to be developed across the world and it will help dramatically to develop this approach. We do believe that since we have moved to work at home, we think that alpha for people will stay at home once the crisis will be over, which is I don't know when, but 50% of our people will stay working at home and to develop, to deploy their job. So we have to have this typical compass approach. Let's move now to the accounts and I'm going to I'm going to slide 9 just to show what we what we have as a figure. We have revenue that is 1,666,000,000 which is a 5% like for like growth and a reported growth of 3.7 percent. Our EBITDA is 1,000,000. It takes of course all the cost of the Waha transformation of the WACCATOM transformation and all the costs that we incurred in this crisis. The operating profit is 150 and come back later on that is in the profit of 1,000,000. If we move now to slide 10, you will see the revenue growth analysis. It's quite simple. 127,000,000 has been added to the figure after neutralization of the currency effect, which is negative, of course, mainly due to the main Latin American currency the Indian rupee that has been that has slipped significantly after the crisis. I just wanted to highlight the fact that probably difficult to swallow that this year, but it's going to help us significantly next year with the level that Translina achieved by this currency. Let's move to an interesting slide, which is slide 11 that show what happened over the like for like growth over this month. As you can see, and I'm sure you remember that the start of the year was good, notably January February where we had good figures, we had of course growth, which was above over 7% guidance at this stage. From March mid March to May 30 or mid May, we had some site shutdown and travel ban. And to us what I call the time of the crazy transformation where during these days more than 160 people move from from site to I can tell you it was a hard time. That's what is interesting. Since that June has been a very strong like for like growth, except for TLS contact. I'll come back later on on that. But we have been able to achieve a better growth even in June that we had in January February. And that shows that gives, I would say, confidence, reasonable confidence for the second part of the This B is absolutely interesting to understand. And it has to understand that this figure not only are taking the core business figure, but also the specialized figure and the difficult timing that TLS is leaving as we speak. Let's move to Page 12. You will see that here as always plenty of figure, but they are interesting. You'll find the breakdown of the 5% that we chief of like for like 1 for like for like in each one. What is interesting is that core service and dips have delivered over this 1st half 7.3% over the period, which is above the initial 7% group guidance despite the death of the COVID crisis, especially from March to May. And this has been achieved by different stuff. Of course, the star is being still Ibero LATAM that is driving the growth at 18.5% over the last year. Knowing that the growth was 18.8% in Q2, even accelerating. CMEA is delivering 8.3% +12 0.9% in Q2 also a good growth. Ewap is roughly 5%. So that gives you the growth and we had it's true, a significant decrease in India and Middle East. For 2 reasons, I'll come back later on. We have a set of shutdown in India and were still shut down in some place, notably in Mumbai, and Chennai, and that is an impact and we decided to concentrate our offer to the international clients and we decided to stop some domestic business that was making business but not sufficient margin. As a whole, we have been able to deliver 7.3% for the like for like growth in H1 with a 7% for the cost service and 7.9% growth in Q2. If we move now to specialized service, solution is simple. The only growth that the only decrease that you are seeing is coming from TNS in the meantime, LLS is still growing is still growing dramatically and I'll come back up later on. But what is true is that TLS is facing a situation in which the case has been kept by more than 70% and it doesn't impact, of course, of our figure. As a whole, this is going to impact us following the 2nd part of the year, but we do believe that we are going to deliver a better growth than the 5% that we achieved in the first half. If we move now on slide 13, sorry, you are here as a result. Of course, H1 margin impact is impacting all activity 3 regions, we had silicon cellular lockdown, Tunisia, Philippine and India. And we had to work at home agents, what we call we are a confirmation cost. I'll come back to that later on. We have to make it simple 22,000,000 of cost into that the million of cost linked to the depreciation of some airline receivable, while we get 1,000,000 positive in the other side, either from rent reduction and either from development measures that help support us. And of course, it has the impact of the travel ban in no beta business or contact. So that's where we land to 9.5%. If I move now region by region and I'm on page 14, you see that what happened in the app, you have a 5% to make it simple, a 5% increase in sales. Made of two things, tweaking activities, of course locked down in Philippines and they are still locked down notably in the north of the country. Reduced demand in travel and accommodation sector where there will be. But also a return to solid growth in APAC, notably China and Malaysia under the jurisdiction in UK too. So, as a whole, it has explaining the 5%, 5%, 4.8% growth. And the reduced margin on EBITDA. If we move to the star, which is Abiola LatAm, reason to say booming growth everywhere in H1 despite the ex crisis, we have been named the company of the year in in Latin America, strong e commerce, E service, financial service wins in each one, and good momentum there. Of course, some impact of the margin by the transformation costs to to remote spot, but not so much given the growth that we experienced. Coming to Europe on page 16, sorry, I'm moving on page 16, we have been able to deliver a growth of 8.3% in H1 with close to 13% in Q2. And surprisingly, institution is contrasting you had the significant decrease in country where they had the stricter done, France, domestic, Tunisia and Italy. While we have growth in other parts of the region leading to Turkey, Greece, North of Europe, Egypt, even Russia, where we have been able to grow significantly. Of course, we have, in term of margin, where we have been hit, I believe we will be back quickly on a classical temperamental situation, especially in this country. Of course, with a very high transformation cost and the lockdown in Tunisia are going hopefully to start. If we move now to India on page 17, clearly we have been limited to a Waha transformation that's to be said that it's more difficult to move people from side to home. Given the situation locally and we suffer from that. And also we have major major cycle done in India. And it has been very, very severe. This is still happening, as I mentioned, to mainly on the macro city, we call it the macro city, it has an impact in income from the margin. On specialized service, the decline in revenue explained by 100% to the near shutdown of TELUS contacts business in Syncreo. Everything has been stopped. The company has been able to reduce dramatically its costs, but has a significant impact on their results. And we are lost in TLS. Probably that not all of you have understood that, but we are making loss in TLS because we even if we have been able to compress the cost, we have no more sales. In the other way, Long Edge line overcomes the impact of the health crisis very quickly and return to a strong growth in June. And even in May, it has to be noted that these people are working at home for now years years And once the crisis has been at least stabilized, it came back very quickly to a significant growth. Of course, it has an impact on the margin, but long as the distribution is delivering significantly high margin and continue to deliver. So that is the comment by region. Let's move on page 19. What happened in fact, I put there all the expenses incurred to protect employee and develop wire. We have described the million that I just mentioned earlier on that has been partially offset by the rent reduction and various government measures for 4,000,000. And we have write down on receivable provision today to be precise on provisions that the first of 'ten, given the station in Tunisia and given the stuff, we had a goodwill impairment for the French speaking market that has been recorded for without cash, of course, impact of 1,000,000 that has been recorded in each one. That explains the reason why the Brazil's operating profit is significantly down versus last year. Compared to the EBITDA before non recurring. So that is the reason that there's no impact in terms of cash, of course. If we move now to the second part of the of the P and L, few things to tell, of course, financial results are roughly flat. In fact, if you take the cost of the debt, we are 1,000,000 below than last year, but there are some costs that are incurred in financial and notably in rents. The income tax has been reduced but increased in the MAPFIFIC tax rates, if you don't take out the goodwill on the if you take out the goodwill, the loss on goodwill, you are still in the range of 30 percent on tax rate and this is normative for the future and we deliver 1,000,000 in term of net profit. For the first half. If we move now on page 21 on the cash flow, I believe it's one of the achievements of the group We increased our CapEx ratio from 3.9to4.5, but if you take out that roughly 1,000,000 that we spend during this crisis for the working at home, we are flat versus last year, which is an achievement given the growth that we have been able to deliver and given the CapEx that was decided last year and was difficult to stop specifically in Q1. So, the CapEx is a little increasing and you have a significant decrease in working cap This is made of 2 things. 1 is the attention paid through the period to the outstanding receivable. We have been very, very strict on what this and our or cash receivable. And we try to take advantage of postponing some payment on certain tax liability that won't be that will continue, of course, at the end of the year. All in all, we have been able to deliver 1,000,000 net free cash flow, which is above year. I'm now going to spend some time on slide 22 with the balance sheet and I'm going on page 23 to show that we have been able to reduce our debt by CHF 130,000,000 compared with the end of last year. It's not the end of 2020, the end of 2019, sorry, and we still have 1,000,000,000 liquidity ahead of us and we confirm our credit rating BBB last April. So a situation that is very liquid that enable us in case of surprises further or improve price and increase prices to be able to swallow what could happen in terms of finance. What is the outlook? We decided to fix the outlook for 2020. So we are not we expect more dynamic growth in H2 than in H1. That's what we believe that annual like for like should be around 6% for this year. And our margin will be at 12.5 percent for the year. For 2022 and believing it was harsh to tell that, but we believe that or annual average like for like growth will be 6% per year over 20202022. And our EBITDA margin will should come to 14.4% in 2023 to 10 basis points lower than it was scheduled. Everything there is of course linked to what we believe that could happen to TLS where we we expect that the situation will be better in 2022 for TLS with no clear visibility in 2021. That's what I can tell you. I'm sorry for this non webcast, but for this call, I hope you will be able to look through our presentation on our website. I'm ready take questions that might come over the phone. This question comes from the line of Edward Stanley calling from Morgan Stanley. Please go ahead. Hi Olivia. Thanks for taking my questions. I've got through, please. You've mentioned the business development team Q1 were already doing a pretty good job and the contract ramp ups are obviously coming through, but you only mentioned them in Latin America. I'm wondering whether there is more to come on the business development front and whether that's spread across all of your core geographies or whether that is predominantly Latin American or Iverao LATAM based anyway? And the second question is we've heard a lot about social media and content moderation and fake news during the pandemic and but we've also on the flip side of that heard quite a lot about Facebook and the advertising boycott and given that you do quite a lot of advertising content moderation, I just wonder how that changes your growth outlook for that portion of the group? And then finally, I'm just curious about given that the cloud campus and work from home has been set up for 2, 3, 4 months now. I can't remember exactly how long. What are the KPIs doing? Are you seeing, and I think surprising in your KPIs as you've ramped up from home, are they sort of better or worse or actually stable versus or you would have expected? Thank you. Okay. 3 question and I'll have an opening remark. What I would tell about the crisis are two things that I just wanted to make in the crisis. Two things for me are related to this crisis. I'm noticeable So the ability to move quickly this 180, 170 people from break and mortar side to home remote sites at the first point. 2nd point is the ability to sell remotely. And again, I'll come back to your just after the ability of these people to have sold remotely by video, by making virtual visits, by different has been astonishing. So it's true in LatAm. And in LatAm, I'm sure you have seen the figure and this figure are ourselves self explaining. But it's true also in Europe. It's true to a certain extent, in China, 5% in U. S. Is a mix of decrease and sales. So are different from region to other region. I cannot tell you, but as a whole, you can say that the group has been able to sell everywhere across the globe. It's less visible because sometimes you have less farming, if I may say, or vanishing business, specifically in transportation and in the hotel industry, as an example and the but as a whole everybody has been able to sell properly and significantly. Content moderation has been impacted. It's still not so big for us given the size because, but I'm sure you have noticed that we increased dramatically in Malaysia in China. In Asia and in Malaysia and this is part of the growth. Yes, I agree. And cloud campus, so it's just a start. I cannot give you precise metrics or whatever. But what we have seen on the remote work is that quality of the work has not been reduced. There are some things that are better, some things that are better than when you are on-site and some things less good, longer. But as a whole, the quality of what is delivered to our clients is still very good. And of course, this has to be managed, it has to be secured, it has to be checked and just to be clear. So most difficult stuff is of course the cybersecurity and the security of the data. So that's what we are working on that. And we try to make it happen. So as a whole, we are really satisfied. And if we if I'm telling you that we do believe that we would be when the COVID crisis would be over at 60% still working at home. It's not by chance, it's because it's working years. I have not precise precise API for cloud computing, it's a little early to tell. Maybe it will be better next time. Okay. And one quick follow-up. You mentioned that I think previously you mentioned that maybe 30% staff or 40% of staff might stay at home permanently. I think you just mentioned 60% of staff. Are you any closer on working out how many you think will stay at home and whether any of your clients are actually demanding that you come back to the site rather than staying at home, is there any sort of shift in the opposite direction, if you will? So today we heard the people to stay home So, we are not going to ask the people to come up to the site and to be obliged in 15 days, 1 month 2 months to come back to the that we lived in March or April. So that's the first stuff. Second point is that we don't know where we are going to end at the end of when the crisis will be over. I don't know whether it would be 40%, 50% or 60%. So I take 60% because it seems that reasonable But clearly as always, when you're obliged to do things, things are done, especially on the client side, also on the management side, people have discovered that they are able to deliver a good quality is a good control on on home or from remote. So we have not clearly precise figure, precise the amount, but I do believe that at the end of the day, we should land something around 50% The next question comes from the line of Alexander Niece calling from JP Morgan. Please go ahead. Good evening, Olivia. And thanks for taking the questions. 3, please. Firstly, there were various one off costs that related specifically to the crisis in the first half, including the working from home transformation. I wonder if you can quantify the costs that occurred in H1 to impact the margin that won't recur in H2. And secondly, the like for like growth 13% or so, it looks like in June. The guidance that you've given implies around 7% like for like growth in H2. So I'm just wondering which parts of the business were growing so strongly in June that you expect to slow down in the months ahead. And just finally, if half of your people do stay at home for, on a permanent basis. So what sort of savings do you think you might achieve in terms of office space over the medium to long term? Tough question to answer precisely. First of all, the impact in fact you have the direct order I've seen the $22,000,000 that are clear. It's a $7,000,000 math that we bought is all this cleaning stuff, all that all that is clear. So probably they are going to decrease to a certain limit in H2. I'm not able to give you a precise figure because when it comes to security, you cannot have a controller say, I don't know, don't spend this money because you are, it's not legit and you have to protect people. So it's so it's difficult to tell. I have budget. I hope it's going to be lower. So we already bought the 7,000,000 mask. We already bought a lot of hydroically alkaline gel and everything is done. So I believe there will be an impact and I'm sure you understood that if you look the first half results versus the second half results you've seen in Pacific and improvement and part is coming from that. To be honest, the major impact On the prices, on the cost of the prices, it's not this 1,000,000 or maybe less if you take out the other part. The major impact in the description, the number of hours that has been lost, the number of calls and has been lost over the wrong interactions that we lost, which is absolutely impossible to conclude. But that's clear. That's clear that we do believe that the 2nd part of the year will be better because that's why we don't want people to come home. To come on-site, sorry, because given the time, it took us to put that in place and given the pain that cost us, we won't make sure that everything is fine before we move on because that's, that is a major cost. Whether we are going to slow down in H2, keep in mind that TLS is still doing low and June, July, August, September are a huge month for TLS. Frankly, I cannot give you a precise figure. You start to know us. We are a careful guy. Of course, we have as usual, little visibility on the last quarter that is key for us. So, I'm not going to give you a precise figure what is sure is that I do believe that, Ebera LATAM is going to continue to climb I don't know if it will be the level of the business in India. I don't know if it will be the level of business in U. S. And you know that California, Texas, Arkansas and the Florida are in that shape as we speak. How long it will stay? I don't know. So, I'm not sure you have to see, a direct link between what, between the the good month of June and the 2nd part of the year, potential reduction. Your third question was on savings, I'm sure. I'm not remember precisely the third question. Can you repeat it to me, please? I was just wondering if, 50% of your people do stay at home. Yes, just office savings really. So again, again, that we are making some plans too early to tell. I do believe one of the major stuff is the ability to nurture the growth I would say with lower CapEx and lowest cost. This is a major impact. The problem is that when you think to do that as a minute, as a global, you say 50% is going to be perfect. Of course, it's always the same story. When you need to work at home, you have hard time to make it. I was speaking of India, I was speaking to Philippines in France, in Europe, good difficulty to work at home for technical reasons. So it's not exactly equal. And since I'm not equal from a country to another So we are not in a position to give you any figures today. 1st, in terms of timing, how long it will last and what will be the stuff. But what I'm convinced of, if we are able to develop more and more, what I call the e company way, we are going to clearly save CapEx in the future. But you won't see that in 2020. You will start to see it in 2020 and I hope. That's too early to tell. The next question comes from the line of Suhastini Varanasi calling from Goldman Sachs. Please go ahead. So much for taking my questions. I had a couple on the long term objectives, please. You're talking about at least 6% organic revenue growth over 20212022. And your earlier objective was I think at least 7%. Given the growth that you've actually seeing through the lockdown period given the demand for your services. I just wanted to clarify, do you see anything changing in the marketplace? In terms of the market growth market structure that you are guiding for slightly less organic growth versus previous expectations? And second question is on the margins. The 200 basis points of margin improvement from between 20202022. Is that going to be evenly spread across the 2 years? Or it's going to be more front end loaded in 2021, for example? Thank you for these good questions, which are very, very difficult, specifically the last one, which is very, very difficult to answer. Clearly long term objective, we don't see a change of the market structure, but what we see there are some businesses that are significantly down I mentioned airlines, transportation and things like that. So I don't know what they are going to become. And in the meantime, you have an emergency growth of e company, especially in the ECRVs and all of that. So all in all, we do believe that it's going to be rough flee equal versus the prior previous forecast. 6% seems to be for us heard of the market. I don't know whether the market will be at 4, 5. I don't know probably 4 today. So we should exceed that by 2%. It's too early to tell. The main question which is difficult to answer today is whether people will start to travel again and partially answer the second question that you have. The second question that you have is mainly linked to the ability of TLS to come back to a situation that is probably come back to what we see. I don't know whether we will be exactly in that position. But what is clear is that I do believe 2020 for TLS is going to be a difficult year. I don't see a recovery even if it start to pick up a little with a student business. But it's not going to replace all the business that we lost. I hope 2021 will be we'll start to see again traveling that might explain this 200 basis points and might explain part of it being recovered as quick as 2021. And frankly, I don't know. I do believe in 2022, we will have solved the issue, whatever it takes, whatever the solution will be, from a solution from another So, that's the way we are seeing it. But frankly it's too early to give you any guidance for 2021. We have not yet started the budget as you can imagine and we are still managing the crisis, still managing the situation. But we do believe that we should be able to come back to this level by 2022. Yes. That's what I can tell you. Got it. Thank you. And just a couple of housekeeping questions, please. What was the impact on working? What was the impact on working capital from the deferment of tax liabilities in the first half? Around 30,000,000. And what also what is the impact of terminating the low margin contracts in India and Middle East in the first half, please? It should so you have an impact in term of, of course, and it should concentrate the level results in terms of percentage of the results should increase. The question is whether we'll be able to get full speed again in India. Because you have 2 things that are sharpening the fact that you reduce the volume You remember when we bought India, there was roughly 1,000,000 of business that was delivering a margin around 4% an EBITDA margin of 4% while the international business was delivering 20% to 22%. So it gives you an idea of the impact But of course, it depends a lot of the ability to restart in the actual speed, which is not the case as to speed. The next question comes from the line of Christophe Chappas calling from ODDO. Please go ahead. Yes. Good evening. Two questions for me, please. The first one is during the Q2, what kind of new contracts have you signed? And do you sign, let's say, unexpected contracts, for example, a player that one to outsource for the first time or something like that. And the second one is regarding the acquisition policy. So it doesn't seem change in term of size, but regarding the activity or the price you are willing to pay, change something in your mind during that period? Thank you. So new contract, I don't know what is in the next expected contract. You don't get new contract without expectations. So we add are specific targets that we start to work on and I'm not going to give you names, but no, nothing unexpected. The fact that we have the depth of this contract maybe have been underestimate at the time we made the budget. Let's put it this way. No problem. Yes, sorry. I mean, perhaps, a player that outsourced for the first time or a player that, I would say, say that work at them in a very efficient way. And once do the business like this, I mean Yes, it happened. Yes, it happened. Not only in North America, but not only there, yes, and in Europe too. Okay, but is that could be a lever, let's say, in your growth for the future? Is it visible, I mean? What is visible? What is visible is the ability of the group to have a The group uncertainty to Global Multinational say you have an issue there, we can solve it across the world and we are still working on that. So that's what makes the difference. The ability to tell, okay, we are going to take care of issue because it's not friendly calls of course your issue across the region, across so we should probably better see still be better again. I strongly believe that we have significantly growth ahead of us if we're able to do that. And we have to increase that and commit to that. Yes. About acquisition policy, of course, we are looking to staff. To be honest, it was not our first priority. First priority. And I'm sure you remember when we announced Q1 figures, we are happy of the figures, but We didn't know what could happen frankly with this global crisis and plenty of us where were questioning what was what could happen. So, we were lucky and happy not to have done any deals before the prices. Now I don't believe we are going to rush September on acquisition, but we are probably looking to some different stuff. Yes. And in terms of price, as always, when you pay cheap, you have not good stuff. So we are very, very concerns about our return on capital employed and on the cost of the capital. So we are not going to make stupid stuff. But so we are going to be more and more selective. Again, the strategy is always the same by companies that make money, companies that help us to and larger portfolio and larger debts or the increased debts of our business. That's that's what I can tell you, but we are, as always in active mode, but not very active as we speak, it might change in the 2nd part of the year. And the last one, please, is on currency effects on top line. So very limited for the H1, considering the actual, let's say, rate of the currency, what is your best assumption for two key. I know that it's 2 key, but To be honest, I was having lunch with the treasure on guys and nobody has expected that the dollar will move from 108 to 118 in 2 days. So it's the my expectation as always difficult. So once it's clear, not two stuff For 2020, I must say that I must confess that most of the things are done. For 2021, I'm just seeing that the currency are in a better position than they were when we started the budget last year. I'm speaking of the transaction risk. About translation, I do believe that if the dollar is staying at 18, 118 versus euro, it's not going to help us. Cross haul translation, not only on sales, but also on the translation in euro of the result of LLS, but that's but we cannot do anything about that. But frankly, I have time to predict anything on that. The next question comes from the line of Antonin Baldry calling from HSBC. Please go ahead. Yes. Good morning, everyone, and thank you to take my question. Most has been answered in fact, but just a quick follow-up on the economy of cost program that you announced earlier this year, which part has been already considered in H1 or is in H1 margins on which parts remain to consider in H2. Thank you. And then the questions which is Jacob, because the cost program has been defined at the time we were not believing that we were growing at this level, to be honest. So of course, there are easy stuff that are done especially on travel ban. Let's say that on the $2.50, you have a for the annual, you have out of it that is much more in the 2nd part of the year and a quarter that is coming from H1, but it's true that in the meantime, which is difficult to understand, but even the growth, you are obliged to put some cost on top of that. So there are some costs that has been made. There are few to come. Yes. There are other to come. But we are going to work on that, but the problem is that things are not equal by far. So there are still to be done and we are working on that yet. But I can tell you the costs have been under scrutiny all on this all on this move and will continue to be so. The next question comes from the line of Rory Mackenzie calling from UBS. Please go ahead. Hi, good evening, everyone. It's it's Roy here. Just two please on Specialized Services. Can you talk about the cost reductions you managed to achieve in K and S contacts? And you've talked about not expecting things to get to get much better, but at any range of kind of things we should think about for H2. And then secondly, on LLS, You talked about how it overcame the impact of the health care crisis and return to strong growth. I'm just wondering whether again there you've managed to win any additional contracts that have kind of stepped up the base of revenues in that business as well? In TLS, of course, we have It's where the cost has been reduced dramatically, not only underwrite, but also direct. Just to give you an idea, roughly half of the workforce has been changed. It disappeared from TELUS. People are no more and no more use. So we have been able to reduce rents, we have been able to push some costs out, but This is, this will continue in the 2nd part of the year. But frankly, even the level of operational gearing that we have in TELUS, it's good. Of course, but it limits the stuff, but it's not sufficient to cover the good margin that we are doing in TLS. For LLS, there is no big contract, if I may say. What we have seen is that this is increasing, you have 26,000 giants in LLS. So you have not the major contract is small compared to core business. This is even not noticeable, but what we see is that the level of of views of LLS is still growing dramatically. And we are looking what we call OPI minutes over the phone over the phone interpreting unit. And we see that we are following a curve that probably Scott claimed presented to you already in different meetings, in different analysis day. But this is increasing from year to year from 3 year from now we have increased significantly over the this is continuing. So, In the meantime, the second step that is continuing is the use of the video that is growing dramatically. So LS is a constant growth. There is no than payroll if I may say. Of course, you having the impact of the March COVID that has an impact for 15 days or 10, 15, 10, 15 days or maybe 1st 20 days, but there is no huge contract that has been signed. There are plenty of smaller contract compared to cost savings that has been signed, but this contract are growing dramatically. So we have 2 effects. 1 is a new contract and the new penetration of LLS in different markets specifically in the hospital industry, in the healthcare industry, but also in the government's part, plus the use of videos that is more expensive, that is increased as a ticket and the margin too. That's what I can tell you. So we are reasonably confident that LLS will continue to grow not only in 2020, but there is no reason why should not continue in 2021 and beyond. And then just to follow-up on TNS. Within your margin guidance for this year of 12.5% and given that obviously it's a very big summer season normally for TLF. Should we assume then that the specialized service margin is going to struggle by more in H2? No, no, of course, of course, you have an impact you know, we have been what we are telling you if you make your math and I'm sure you are going to see that. We are close to swallow, to swallow the impact of STLLS versus in the second half of the year. Got it. But it's difficult to tell today. It's difficult to tell, but you're right. The impact of STLS is the activity of TELUS is higher in H2 than in H1, but some costs has been taken out already. So when you put that together, you are able to make it. The next question comes from the line of Nicholas Tebow calling from MainFirst. Please go ahead. Good evening. Thank you very much. A few questions for me, please. The first one was on these. I wanted to hear what was the latest developments and how the deep services had been doing during the lockdown at PRIMA and now And if you see maybe a slowdown in the maybe the delivery rate you expected, especially in LatAm, Then the second one would be on the work from home. I wanted to understand, first, what is the the main driver for you, not just over the short term where you're just afraid of having a second wave, moving people around, but maybe over the long term, is it really cost driven? Is it employee motivation driven? Where do you find the incentive that makes it the right solution today. On this, known, I would say, contrary, part of the growth of LATAM due to the fact that they have been able to to swallow all the deep sulfur quicker than the other region. It's not so true for for Europe, but in U. S, it's happening also, the dips, it's exactly what we want to sell. We want to solution, you want much more than volume. And of course, the market is there, of course, competition is probably different, but the ability to swallow and to integrate all the aspects of this is a part of the reason of the success of the individual at the time. For the work at home, there are of course different issue and you mentioned them costs Frankly, it will have an impact, but it's too early to mention it. As I mentioned, we cannot today close centers if tomorrow people have to come back to our center. You have also ability to recruit different people and especially and it was particularly true in North Europe and some place in U. S, the ability to have worked at home enables you to find other population that are much more stable than the populations that we might have in some countries. So that is the main reason In terms of quality, as you understood, this is working well. So, people are happy to work at home. Of them are having a shift, let's say, from somebody that wants to stay home, at least I'm working in the morning and not in the and all the others are aware, it's fantastic. So that has a reason, but the flexibility, the agility is probably one of the most important topic that we want where we are looking for that. Great. And maybe going back to the Deeps question, can you give us an idea of where you are in deploying those solutions and ramping them up across different geographies. I mean, leveraging what you acquired with internet. And is it accelerating or has it decelerated versus your initial expectations before the crisis? Or any set expectation, I never met. We want to add more, though I'm joking. No, no, I don't see whether the credits in fact accelerating the necessity of LEAP's because people don't want volume interaction or basic interaction. They want more and more complex interaction. And if you are able to do that, quicker safer and at home, you are going to deliver much more you are going to get much more volume. More and more people generating this credit has generated new business. Surprisingly, some business has been hit, but also have been growing dramatically. A part of the story of the success of Hiberl LATAM is the e client e approach, I would say a business. So, that is a situation clearly LatAm is ahead of the game after your CMEA and just behind the U. S. And UAP with different stuff for the North America and for Asia. But clearly LATAM is ahead of the game and Jimmy is close to. That's what I can tell you today. Thank you very much. I'm going to take 2 more questions. The next question comes from the line of Patrick Guillaume calling from Societe Generale. Please go ahead. Yes, good evening, Olivier and congratulations for these results. My first question is on slide number 19. I just wanted to be to be sure that, the expense incurred for the employees and the write down on receivable are included in the EBITDA before non recurring items? Yes. Yes. And so if we consider this various item, which represents around 1,000,000, It remains 1,000,000 to be explained, the gap in C27 and 253. Would you say that Affovy is coming from TRS and Affovy is coming from the disruption? I don't know how you're comping down. Another way to make a competition is to take the level of sales of last of this year and you applied the rate of the of last year. 1,000,000. And so there is 1,000,000. So, you have roughly Yes, so your fifty-fifty rules is not is correct. It's correct. And in the fifty rules, what is left is a mix of description, less cost savings, less different stuff, less and that is difficult follow because you are not at the same level, but your competition is roughly correct. Yes, Okay, thank you. 2nd question, tax rate, I'm not sure I was able to catch what we said about tax rate. Should I understand that it 30% that we should model for. And 30% should remain, let's say, tax rate that we should take into account for the future. Okay. And last question is an LLS. Is it possible to get more colors about the type of organic growth that this company had in Q2? Close to double digit. I think of the Egypt plan for this way. I'm taking the last question. Thank you. The final question comes from the line of Laurent Galibas calling from Exane. Please go ahead. Yes. Good evening, Olivier. Just coming back on this write down and receivable for 1,000,000. So I would like to understand what happens here. So is it a client going best? And do you have more of the same potential coming later on this year? No, it's simple. You have plenty. So we are looking to the client very precisely. You know that we are working for some airline company. Especially in LatAm but not only. And this company, some of them have been bankrupt, some are under Chapter 11 So we are careful. I hope we will be able to recover this receivable, but I'm not too sure that's what we have been able whether for me being careful in providing for this receivable. That's it. Of course, as a good part of the year, you know, I just wanted first just to compare this 1,000,000 and I'm sure you have not seen that receivable amount on our balance sheet which should be in the range of 1,800,000,000 if I'm not mistaken. So it's not so I don't have API. I am just working but this is not surprising. It's very minimal. Lastly, of course, we put a team to check and to follow precisely in each region what's happening to our main client but we are going to be very, very careful on that either for for July, but also for all the months to come. Yes. Thank you. I have a couple of other questions. The second one relates to your organic growth. Could you share with us which is a part coming from new clients and the rest? No, what I can tell you is that there is a seek I cannot answer like that. The new clients. It's too early. What I can tell you is that the newbies has been more important than last year. That we also lost some business from farming which mainly from the physical sectors and that's been key in the second, in the first part of the prices. So we are much more of a new base but also decrease some business not only disappeared, but reduced dramatically. That's what I can tell you. Okay. The last one, it's not midterm. It's related to TLS. So basically the market is a disaster. We have all understood that. So, I think all your competitors are there. I also have to swallow the same stuff. My question is very simple. I think that in the Shenzhen area, you get a change of regulation earlier this year. Allowing you basically to charge or to increase the 33% more per application when you renew the contract? So, my are you moving from €30, I guess, to €40. My point is, do you believe that all players and you as well are going to renegotiate when the time is coming, all your contracts to increase the base price you can charge Zoom clients? Frankly, I don't know. I must confess that I don't know. Today, today what we are working on TLS is just to make sure to adjust as much as quick and as much as we can the cost base, keeping the good relationship with the major clients. That's we are trying to do. I cannot answer frankly I don't know I have no idea It's a blurry situation as you can understand. What I'm believing is that at the end of the day, people will travel again. I I don't see when. I don't see why they should not should not do that. But when that's the question. But if you look at what Yatta is saying, the belief that traffic would be back to 2019 level in 2024. Yes, yes. But Maybe you don't know. I'm not sure it's true, but I don't know, Franke, I don't know. Okay. Thank you very much. Thank you to all. I'm going to stop the call now. Thank you. And I'm sorry again not to have been able to deliver a webcast hope we were able to put that on our website as quick as we can. We're going to put over some document on the website that I'm addressing notably all the accolades that we get from our clients, all the recognition that we get from government in this crisis that, okay, not money, not figures, but making making showing what we are doing and what has happened during this month that has been so tough for everybody. Thank you to all. And for those who are in holiday, those who will go to holiday, have a good Thank you for joining today's call. You may now disconnect.