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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. [Operator Instructions] I will now hand you over to your host, Jacques van den Broek, CEO, to begin today's conference. Thank you.
Yes, good morning, everybody. Good to talk to you in this, let's call them, interesting times. As many of you know, I'm all my life in this industry, lived through 2009, 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 Dave and Steven 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-19 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-19 from our perspective. Given the unprecedented situation, as any else, Randstad's first priority is 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 our 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 37,000 people as global market leader. What we -- talking about health and safety. We, last week, announced the 'safely 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 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, have reached out to Adecco and Manpower 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, first 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 sectors, 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-sectors. 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 the 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 in health and safety. I'm very happy that we are, as an industry, part of the solution. So back to the first quarter. Yes, initially, nothing wrong. We developed in line with our expectation with organic revenues, as we shared with you, minus 3% to 4% until the first half of March. Then things changed very rapidly. It has -- yes, 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 2009, we went very quickly down from minus 6% in December 2008, minus 9% in 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, it was also -- and Henry will allude to it again, our balance sheet, totally different than 2009, 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 first weeks of April with an increasing number of key geographies in partial or 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 will remember Germany has been 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 a 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, first 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 businesses is Professionals business, so it's in IT. 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 Ribuot has moved from our Southeast Asia and Australian business to running our French business and also responsible for our Ausy 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 almost complete standstill. They have a very strict lockdown, next to the level of lockdowns in countries. And 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, there -- that 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, yes, 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-19. In general, there's still weakness in the industrial-related sectors. Professionals, Yacht, again, slightly down in revenue. 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 values 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 EBITA 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, at 16%, yes. 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 compliment the German government on this prompt action to support business activity. For staffers, Kurzarbeit has been made available. As you know, we already had Kurzarbeit. 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 lockdowns. 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 thousand 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. We basically see Italy as a blueprint for the future trend in other countries. So we have a steering group, so all the opco leaders in the Asian 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 the 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, and 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 EBITDA margin, however, was significantly impacted. Of course, an instant decline, high decline in revenues, higher sickness and a complete standstill, but 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 relative. 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 U.K. being hit. We also have a big education business in the U.K. 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 Sourceright 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 difference at the state. We call this selective lockdown. Of course, California and 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. Now 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 Cassa de Integrazione (sic) [ Cassa Integrazione ], which is also a support up to 50% of wages and the rest is for us, so eats 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, Henry.
Thanks, Jacques. So 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 the 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 you know, that it's far from easy at the moment to read the market. And in the coming slides, in addition to covering quarter 1 numbers, I will spend a bit more time on how we see our OpEx position, including impact of governmental schemes, and provide reassurance on our liquidity and solvency position. Let me now dive into the quarter 1 results in more detail. And as mentioned by Jacques, our performance was in line with our expectations until mid-March and then COVID-19 kicked in. Reported revenue growth for quarter 1 was minus 7.4%, 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 result 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-19, and we'll get back to you on this on the next page. Now OpEx came in at EUR 890 million, 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 for EUR 22 million. This relates to pre-corona planned restructurings in various countries and some software write-downs. Amortization expenses were EUR 59 million, which is EUR 29 million 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 EUR 15 million, a net increase of EUR 8 million, mainly reflecting currency differences on 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 following 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-19 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 point effect on the gross margin, mainly reflecting it with mix effects of Monster. The watch out for periods to come definitely is the impact of sickness and idle time on our gross margin. And with that, let's go to the OpEx bridge on Page 16. 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 EUR 18 million, a year-over-year decline of 2%. As you would have expected, we took in some cost measures, stopping all nonessential 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 whilst 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 to have the right answers to the challenges in front of 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 EUR 3.6 billion and looking for ways to further unlock the power of One 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 activities span across all businesses and line items. They include appropriate field-steering measures, procurement benefits and the elimination of all nonessential 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 steer the business in a healthy fashion through the next period. And as mentioned already by Jacques, we are 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 governmental support on Page 17. So as far as those governmental support schemes are concerned, Jacques has mainly already walked you 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 EUR 50 million in quarter 2. Please take this sum as a rough estimate as managed 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 payment, 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. Before zooming in, let me share some comments on quarter 1 free cash flow, which was quite comparable to last year. Whilst EBITA was significantly lower year-over-year, we benefited favorably from positive working capital movement. The development of our receivables and the slowing growth environment provide a very significant liquidity protection, evidenced already in quarter 1. Cash tax payments were higher than what we would have normally appropriated for the adjusted profitability level, and this effect will reverse in quarter 2. The last bullet on the left shows days sales outstanding, which was down 0.8 days versus last year and the quarter 4 2019 on a 12-month moving average, mainly driven by mix effect. As first signs of changing payment patterns start to appear, we further tightened 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 at the end of quarter 1, pre-IFRS 16, which excludes our CICE receivable of EUR 389 million. 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 million at end quarter 1, which is also a function of drawing EUR 550 million from our revolving credit facility. As such, EUR 1.3 billion of our RCF of EUR 1.85 billion is undrawn at this stage. Part of our total debt, a portion of the EUR 474 million matures in 2020 and will hence be refinanced at the end of this year. We also look into options to liquidate our CICE receivable to further support our financing arrangements. So overall, our strong balance sheet provides loads of confidence to the business to weather this storm in a healthy way. And my last slide, #19. This summary slide also looks a bit different than normal, reflecting the unprecedented market environment we are operating in. As stated, visibility in 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. On the chart on the left, we highlight the simplified overview of the lockdown for our key geographies and the latest status, although as we always witnessed during recent weeks, this status can change quickly. Some countries recently communicated to gradually lift some restrictions while others are challenged with new ways of infections, which might lead to a tightening of restrictions. And as far as quarter 2 outlook is concerned, lockdowns have intensified in the first 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 quarter 2 expected to be somewhere between 30% and 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 with helping our customers to return to work safely or supporting displaced talents finding rapid ways back to employment. It sits in the very core, which brought 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 are now happy to take your questions. Operator?
[Operator Instructions] The first question comes from Anvesh Agrawal from Morgan Stanley.
I've just got like 2 couple of structural questions clearly looking beyond the near-term numbers. First, 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 hotels, 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. Yes, you talk about a very interesting topic and that is the new way of working, 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, we kind of 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 a 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 & 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 a 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 EUR 50 million of benefits from the governmental schemes.
Yes. Let me -- 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&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 in a way. It's really protecting employment. It's really important to understand.
The next question comes from Thomas Sykes from Deutsche Bank.
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'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 they were -- even when there was use of Kurzarbeit. 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 of short-time working. It kind of happened simultaneously. Is there any effect there that might be a bit different at all, please?
Okay. Yes, great question. Certainly, the first one. We aim to have as many head count and to keep as many head count in the company as possible. First 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. Second -- so how that works is you sort of, 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 temporary 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 and 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, first of all, because of 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 head count 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 book, 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 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. But 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 have some people on short-time working? Is there any -- 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. But I don't think there's a legal drawback, but yes, again, and logically, yes, by the way, I think all employers 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 head count movement in corporate section?
No, no, 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...
The next question comes from Hans Pluijgers from Kepler Cheuvreux.
On the gross margin in 2Q, so I know there a lot sort of, let's say, differences in the 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 as possible until the end of May. But to understand, hence, you still pay 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 there 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 are 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 kind of countries like Belgium, France and Spain, for example?
Yes. There's 1 question and the answer would probably last an hour, Hans. Let me correct you on the 10%. It's not that we're paying the 10%. You take -- yes, 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 Henry alluded to this, we discussed 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&L, into personnel costs 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 perm. You see 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.
The next question comes from Simona Sarli from Bank of America.
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. Third, 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 million for the year and if there are additional levers that you could potentially implement in case the lockdowns should last longer than expected.
Yes. Thanks for your questions. I'm afraid, I think I need to disappoint you with a little bit my answers, but let me go through it. So the end market exposures, let me just read it out: manufacturing is 30%; transport and distribution, 20%; business and IT services, 10%; financial has 10%; public health and education, 10%; automotive, 7%; construction, 3%; and leisure, 3%. But it's 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 in 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 EUR 3.6 billion 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 with -- 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 optimal and then we take our medicine. And the phasing of EUR 120 million program, also very, very tough 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 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.
[Operator Instructions] The next question comes from Marc Zwartsenburg from ING.
First question, Henry, the EUR 50 million relief from the government schemes, is that -- just to confirm it, that's I think you mentioned fully relieved to OpEx? Is that correct?
Yes. 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 in so far it's really exclusively used to protect employment, which otherwise would be in danger to be lost. Therefore, we are sort of a middleman in between. Very grateful for those government 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. The EUR 50 million is a very, very, very rough number. It's really subject to so many variables actually. As we speak, the governmental 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. Very, very rough number.
And this comes then on top of, say, the normal -- the schemes that support, say, your temps, your cost of sales and the gross margin like the Kurzarbeit and that's a separate item then? So that's how I should see it?
So 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 force 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&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 makes it -- the EUR 50 million 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 EUR 50 million 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% to 40%, you have some relief in your OpEx. What kind of cost cuttings or cost savings do you have from nonessential items in that time. Of course, you take quite a small provision for restructuring if you compare that to manpower? Can you give us a bit of a feeling what the savings from those other measures will be roughly going forward?
Yes. I will not put a number on it, Marc, 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 just kind of finishing all our, I don't know, payments for, I don't know, 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. In marketing spend. I'm not saying that marketing spend is not necessary, but 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 I could go on and on and on and that -- there are many small actions making quite a big difference. That kind of stuff is what we're doing. You've also seen that we suspended executive bonuses and therefore not providing for bonuses anymore. That is also clearly 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 perm business goes down massively, highly commission-driven business, so that cost automatically goes. On marketing again. So normally, in April, we would have our Randstad Employer Branding Research. We still have that. That 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 hundred thousand euros. 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 own Digital Factory on how to do this intelligently and collectively.
Yes. The energy, as you can imagine, is a totally different one. I mean we also, for example, look at our leased cars, many cars sitting 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. But yes, if you're all the month at home, you don't use your cost allowance. So long, long list.
No. It sounds all familiar. Then coming 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 seemed to be guiding to say, a low 30-ish level starting in April in terms of revenue declines and then stabilizing. Is it something you recognize? 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 and 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, 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 by 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, Keukenhof, would be open. That'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. That it's a bit of a mixed thing and then -- 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, it goes on. And then post-Olympics, they're going quickly into sort of a lockdown. So although it's in Asia, they do -- they are probably early cycle there.
Yes, yes. Then a final one. Dividends, 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 in your balance sheet position, cash position remains 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, but then postponed, is it an item on the agenda?
So Marc, 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 talent 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 the dividends.
Yes. And at the same time, there's something else, of course, there is government support and dividends. That's a...
Next question comes from Sylvia Barker from JPMorgan.
Sylvia, we can't hear you.
I was still on mute. First question on the April to-date trends, could you maybe talk about kind of Professionals staffing and whether that's still strong? And then how did generally Staffing and perm do relative to kind of the second half of March? Then secondly, on the EUR 50 million, obviously, the programs are a lot bigger this time around. So can you maybe give us an idea of what that would have looked like in a similar quarter kind of back in 2008, '09? And within the EUR 50 million 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, if they're getting ready to kind of reopen a lot of the industrial sites, what kind of conversations are you having with clients there?
Okay. 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 Profs. So it's also slowing down, but to a way lesser extent. Now 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 cross-business, certainly, if it's a Staffing Prof business and less the perm Profs 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 anybody's guess at the moment. Comparing to 2009, 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 a 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 product will remain, which will have its effect on the German economy. So questions with clients are very much how many people do you want, do you want them, can you cope in the first 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. They start to say 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 this still 30%, 50% 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. 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.
The next question comes from Konrad Zomer from ABN.
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 2009, and if that has changed in the crisis that we're going through at the moment?
Yes, Konrad. Fortunately, there is no country doing worse than France. Again, as I 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. Yes. Again, big difference between 2009 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 head count a little bit less, let's say, 95 of our workforce -- 95% of our workforce, still active, on call, 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.
The next question comes from Suhasini Varanasi from Goldman Sachs.
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 exposed the EUR 50 million of benefits has been pretty clear. Now the question is are you assuming that these government benefits -- is there a time line on when these benefits will end because I think, in the U.K., they've extended. The benefits came to the end of June. And 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. 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. And this is not just about us. This is about government financing 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 Henry 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.
Thank you for your questions. I will now hand you back to your host to conclude today's conference.
Yes. Thank you very much. Thanks for all calling in. I hope you're having as much fun as I have at home every day. And 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.