Rexel S.A.

Good morning, ladies and gentlemen and thank you for joining us today. And welcome to this presentation of Rexel's Second Quarter 2020 Sales and First Half Results.

And next to me is Laurent Delabarre, our CFO. And both of us, we will bring you through the presentation and obviously, at the end to answer any questions.

We continue to operate in an uncertain and volatile environment, but as you will see Rexel has also shown its resilience. All the investment we have made over the past three years in people, in inventories, in branch openings, in IT, in digital transformations all has proven to be relevant and contributed to transform Rexel into a much more robust company, able to navigate the current turmoil without compromising its medium-term ambition.

It was my goal. We always explained it, but until you are in the middle of a real crisis you never really know.

And now we know. And I will start this call explaining how we are adapting to the current environment and how we have managed to mitigate its impact.

Laurent will bring you through the detail of our Q2 sales and first half financial performance. And then I will conclude with a look at our immediate priorities and actions.

And obviously, we will take all your questions. Now if I look at Rexel in the crisis and if there would be one way to say it, agility and one company responsiveness.

Under this agility and one company responsiveness what does it mean? If you look at this slide -- slide 3 successfully navigating the turmoil, it means, first of all, protecting our people, protecting our customer, protecting our stakeholders.

And across the group at every site from branches to logistic to our headquarters we have implemented all sanitary measures to ensure the health and safety of all employees and all our customers. We have put in place a strategy called Zero COVID at Rexel.

And I am pleased to report that we have largely contained the first wave of this terrible pandemic and that we are gradually resuming normal working conditions, while remaining very vigilant and adapting to every situation. I would like to thank our team once again for their remarkable dedication in these moments and the way they are living through and with all these measures.

Second, preserving the business continuity for our customers. We managed to be very quickly.

We have been able to switch our operations online and at home, while at the same time maintaining a high level of customer service. We always kept a high level of delivery.

This allowed us to preserve the quality of our customer relations. Third, we demonstrated a great agility and responsiveness and as promised in our Q1 presentation, we maintained a very strong focus on OpEx management and free cash flow generation.

This allowed us to reimburse at the end of June the senior credit line we had drawn down as a precautionary step in mid-March. And fourth, leveraging our digital investments.

From an internal point of view, our enhanced digital tools such as Power BI enabled us to monitor the business in real time and take agile decisions. From a sales standpoint, digital sales reached almost 21% at group level in H1 and represented 31% of sales in Europe; a level never reached before by far and as you can see up 572 bps.

And last but not least, throughout this crisis, Rexel operated as one company, one way of doing, one way of protecting the people, one way of preserving business continuity, one way to create agility and responsiveness. Nobody was out, one way of leveraging our digital investment.

Nothing was forgotten and sharing best practices and applying clear strict rules across the group. And I'm very proud of how the team responded demonstrating that Rexel has become a robust company.

What does it mean to be a robust company? Delivering robust KPIs in H1 2020 despite sharp sales drop in Q2.

It means same-day sales in H1 minus 10.6%; but digital sales up plus 7%. And as you can see the key aggregates of this first half show that we managed to deliver robust KPIs whatever the challenge was at the outdoor.

We maintained the drop in sales, notably thanks to the strong online performance. Digital sales really came as a way to get -- to mitigate the outside world changes in the pattern in the way they were purchasing.

Gross margin was resilient at 24.6 points down 36 basis points and this drop was mainly due to an unfavorable country mix as our most profitable countries recorded significant drops. While at the same time, the drop in volume directly impacted the amounts of rebates we anticipated to receive from our suppliers.

Our adjusted EBITA margin stood at 3.3% down 136 bps. This resilient performance is attributable to the major efforts we made to reduce the OpEx in Q2 by adjusting our cost base throughout the organization either through internal actions or by taking full advantage of government measures where there were some available.

We managed to reduce salary and benefits by 19.7% in Q2, while our top-line was down 17.7%. At the same time, we posted very strong cash flow generation at almost €177 million versus an outflow of circa €17 in H1 last year.

This enabled us to lower our net debt to €1.69 billion the lowest level since 2008. As a result, our leverage ratio was even better than last year at 2.59 times EBITDA after leases despite the crisis.

On the page after, we wanted to share with you the gradual recovery since mid-April and recognizing through the curve that North America is lagging and lagging behind. And when you look at these curves, we reached the worst in the first two weeks of April when group sales were down 27.7% and then we saw gradual recovery quite uneven to reach minus 5.6% in the first two weeks of July.

This gradual recovery is largely driven by the residential market, while commercials recovery started later due to sanitary measures. Industry has been harder hit then with sharp and continuing drops in sectors, such as automotive, aerospace oil and gas.

Europe saw the biggest fall and as much as 37% in early April, but has since gradually recovered as lockdown measures were lifted. Overall in the first two weeks of July, sales are down 3.6% year-on-year, despite very contrasting trends from country to country.

France and Belgium have rebounded quite well, while U.K. and Southern Europe continued to be affected.

North America has lagged behind falling less at the start but taking longer to recover. And we experienced very diverging trends from region to region.

Pacific, overall trends were resilient with a low point at minus 19.2%, before bouncing back to minus 0.7% in the first two weeks of July. Here too, there was a clear difference between Australia that helped well through the crisis, while Zealand felt the impact of a very severe lockdown.

One thing – if you go on Page 6, we have succeeded to navigate without compromising our mid-term ambition as shown on this slide. Despite the fall in activity, we have not closed branches during the crisis, first of all.

This compare with 265 branch closure during 2008, 2009 crisis. And we believe our broad footprint will be a competitive advantage and allow us to benefit from the recovery.

But the long-term patient rebuilt that we just had been finished in the U.S., we didn't want it to jeopardize. We are not done.

It's all intact. We have adjusted restructuring, adjusted the OpEx, not given away the asset of the footprint.

We also took the opportunity of the crisis to reinforce our relationship with our main suppliers. We have intensified in content and frequency, the interaction with them.

Our analytical tools make us the eyes and the ears of our suppliers in our markets providing them with business intelligence to navigate the crisis and demonstrating our key role in the value chain. We continued investing for growth, notably in digital, in all three layers: data, layer of transaction and layer of predictive, as well as we have continued progressing in automatized storage solution that plays for broad offer at the disposal of our customer with minimal time spent, enhancing efficiency and productivity.

And we will not stop doing. We will continue.

This also minimizes human interactions and improved safety condition in a COVID-19 context. Finally, we continued to favor social and environmental actions.

For instance, we did not suspend any apprentice contract in France to protect youth employment and we are revising transportation as we target carbon neutrality. On the Page 7, further crisis, we all saw changes.

And in order to continue having the full benefits and the full support and engagement of our Board and therefore for example, we held nine exceptional short Board meetings since mid-March by enabling rapid decision-making and buying forward our measures. Our Board is experienced, diverse, international with 80% independent members, nearly half of our Directors non-French.

And we recently appointed Brigitte Cantaloube, as an Independent Director and so that we have reached full gender parity at our Board. And this Board worked in a very reactive way, fully supporting of us in these special phases.

Let me also point out that our recent AGM, which was held behind closed doors due to the pandemic, it was decided to extend the age limit of the CEO to 70 years old from 68 previously. And I intend to use this period to continue the transformation that has put Rexel in a stronger position to navigate in turbulent waters.

Now, I will come back later. In order to go through Q2 sales and H1 financial review, I leave the floor to Laurent.

And I thank you all the employees, all the Board members, all the stakeholders for having reacted extremely well during this H1 period.

Thank you very much, Patrick, and good morning to everybody. I will start on Slide 9, where you see the geographical breakdown of our sales in H1, Q2 and June to share with you the latest trend of the quarter.

Let's focus on Q2. Patrick has already commented on the overall trends on a biweekly basis region by region.

Let me remind you that same-day sales were down 17.7% in Q2 with minus 23% in North America, minus 16.7% in Europe and minus 0.6% in Asia Pacific. In June specifically, conditions remained difficult in North America with sales down 20.5%.

Europe benefited from a gradual recovery and was down 6.9%. Asia Pac for its part was down 2.2%.

On the next few slides, I'd like to show how our sales have evolved by region starting with Europe on Slide 10. Europe sales were down 16.7% in Q2 with a particularly sharp drop in the first half of April followed by a gradual but steady recovery overall, reaching minus 3.6% in the first two weeks of July with diverging trends from country to country.

Let me highlight four key trends. First, we saw an imperfect V-shape performance in our most profitable markets, France and Belgium.

Specifically for France, sales dropped up to minus 64% in the last week of March, before gradually recovering mainly as a result of positive momentum in the residential and industrial activities. Commercial business lagged in the recovery phase mainly due to sanitary measures in large projects and lower public expense partly related as you know to the three months postponement of the municipal elections.

The combination of business continuity offered to our customers and our digital offering translated into circa two points of market share gains in the first six months. Second, the countries that had light lockdown measures namely the Netherlands and Nordics countries posted a resilient performance.

Nordic countries also benefited from good demands from utilities. Third, Germany remained positive throughout the crisis notably thanks to the construction-related business and the limited lockdown.

And fourth, Southern Europe and U.K. were particularly hard hit and the rebound is slower.

In the U.K. specifically, activity was hit by the lockdown until beginning of July and the continuing effects of Brexit.

On slide 11, let's have a look at the situation in North America. Sales were down 23% in Q2 in the regions with a broadly similar performance in the U.S.

and Canada. Overall, the drop was less severe than in Europe, but the pickup is less noticeable as well with sales down circa 13% in the first two weeks of July.

This is largely due to the stop and go measures from lockdown and to contracting performance in different regions that I will comment on the next slide. In Canada, sales dropped by 23.6% in Q2 on a same-day basis.

Sales recovered since mid-May driven by the western part of the country, notably helped by more positive downstream activity in oil and gas. In the U.S.

on the next slide, we observed very divergent situations from region-to-region. As an illustration, the western part of the country namely California and Northwest were the first states to lockdown before gradually recovering.

In regions like the Midwest or the Gulf, activity was largely impacted by depressed end markets such as automotive, aerospace and oil and gas. In the New York area, the pandemic impact has been significant and we are adjusting cost and taking the opportunity to adapt quicker the organization.

Overall, recovery in the U.S. will of course largely depend on whether some regions see a second wave of lockdown.

Finally, in Asia Pac on slide 13 sales in the region were resilient at minus 0.6% in Q2 with sharply contrasting trends. China was hit by the pandemic earlier than other countries and also rebounded earlier and was up almost 14% in the quarter.

However, much of this is due to a catch-up in activity and we anticipate a lower pace of growth in H2. Australasia benefited from a relatively mild lockdown and was broadly stable at minus 0.9%.

New Zealand and India were severely impacted by strict lockdown measures with activity dropping between 80% to 100% in April before gradually picking up. On slide 14, we take a look at our overall Q2 sales performance.

Our Q2 sales of €2.8 billion were down 17.7% on a same-day basis and minus 19.1% on a reported basis. Organic same-day sales growth was impacted by negative copper impact of minus 0.7%.

Even so copper price have recovered in the quarter. Sales were also impacted by a scope effect as Gexpro Services was deconsolidated as of end of February.

In the quarter, we benefited from the positive foreign exchange impact of plus 0.2% and we now anticipate for the full year of 2020 currency impact to be circa minus 0.5% assuming spot rates remain unchanged. On slide 15, we turn to our profitability by region.

Overall, with adjusted EBITA of €199.3 million in the first half, our adjusted EBITA margin stood at 3.3% down 136 basis points compared to last year with the negative contribution in every geography. In Europe, adjusted EBITA margin was down 193 basis points to 4% with a gross margin contraction of 60 basis points mainly due to negative country mix from France and Germany, negative customer mix especially in the Nordics and lower volumes leading to lower rebates.

On the cost side, we have been reactive and agile in Q2 after having increased OpEx in Q1. I will come back more specifically on the measure initiative in every geography on Salary & Benefits when I will comment the evolution of the operating expense on slide 18.

In North America, adjusted EBITA margin was resilient, down 73 basis points to 3.2% thanks to gross margin stability notably through good pricing management. On OpEx, Salary & Benefits dropped more than sales.

In Asia Pacific, adjusted EBITA margin decreased by 89 basis points to 0.8%. The gross margin contraction came mainly from negative country mix due to stronger growth in China and negative product mix in the Pacific.

Here too, we have been very agile and reactive in OpEx management. Lastly, our corporate costs stood at €9.5 million down by €3.4 million compared to last year from lower project costs and partial unemployment measures.

For the full year, we anticipate the corporate hosted cost to be close to €25 million. On slide 16, we turn to our H1 adjusted EBITA bridge.

Adjusted EBITA was down almost 37% to €199 million and margin stood at 3.3% down 136 basis points. This can be explained by a negative volume and price contribution of 261 basis points resulting from the pandemic crisis.

This was partly offset by cost discipline which had a positive impact of 128 basis points from partial unemployment and internal measures. So the cost inflation was limited to 60 basis points and more than offset by structural productivity gains mainly from last year's restructuring that contribute for 26 basis points in the half.

Lastly, our investment for growth initiatives were reduced to the most critical areas representing only 12 basis points. And we now anticipate circa 20 basis points impact for the full year.

On slide 17, we focus on the different actions we took to manage our operating costs. Overall, we succeed in limiting the increase in OpEx to 111 basis points as a percentage of sales, while our sales in the quarter were down 17.7%.

By cost category, first our fixed costs were stable as we managed to completely offset inflation through lease renegotiations notably in the Pacific and in the south of Europe. Second, our flexible cost mostly Salary & Benefits decreased in Q2 more than sales dropping by 20%.

This is a result of the combination of making use of governmental measures in euro to support salaries of furloughed workers and internal measures to control costs. I will detail this on the next slide.

Our variable costs were down 10% impacted by bad debt provisioning and delivery costs that cannot be made fully valuable in such a volatile environment. On the next slide 18, we illustrate how Rexel has demonstrated agility and reactivity in the face of this new environment, using all available measures to quickly adapt the workforce to protect profitability.

Overall we have temporarily reduced workforce by equivalent balance of 4000 full-time employees a 16% reduction. By geography in €ope, we have largely used flexibility offered by various governments especially in France, Belgium, the U.K.

In France partial unemployment has been negotiated until end of August and until end of October in the U.K. In North America we have combined governmental and internal measures which put in place temporary layoffs mainly for logistics and transportation staff.

We put in place absence, no pay and furloughs for people working in our branch network. We put also in place salary reduction of between 10% to 20% for management and back-office functions.

In Asia Pac, we put in place absence no pay policies in Australia and froze salaries in China. We also implemented more structural measures in some countries or regions as illustrated by the -- in the Northeast region in the U.S.

in the U.K. and also in Germany.

Lastly the 20% cut in CEO and in the Board compensation was extended for three months. As a result salary and benefits in Q2 have been cut by 19.7% more than the 17.7% sales drop in actual days.

On Slide 19, we look at the bottom line part of our P&L. Let's start with our adjusted EBITA of €199.3 million down 36.6%.

Reported EBITA was slightly lower at €192.3 million down 39.9% year-on-year reflecting the nonrecurring swing in copper price. Other income and expense amount to a negative €482.5 million largely due to a goodwill impairment of €486 million on which I will come back on the next slide.

It also includes limited restructuring costs of €1.9 million as most of the workforce adaptation in H1 bore no cost. For the full year 2020, it's a bit early to provide a precise number as it will largely depend on the economic situation as well as the evolution of the pandemic and the level of government support.

We will update you more precisely in our Q3 call, but at this stage you can forecast restructuring costs of circa €30 million on a full year basis. Our net financial expense decreased by €31.2 million mainly due to the €21.8 million one-off cost of the bank refinancing that took place in H1 last year, as well as the reduction in our effective interest rate which is now at 2.43% versus 2.82% in the first 6 months of 2019.

Excluding one-off ForEx and interest rate hedging impact we now anticipate our financial costs to be close to €87 million in the full year compared to €96.6 million in 2019. Our income tax was up to €79.9 million with a combination of two one-off effects: a €29 million release of a tax provision in H1 2019; and a bad debt of €33 million deferred tax asset depreciation in H1 2020.

As a result net income was negative €439.8 million and our recurring income stood at €82.5 million down 50.7%. On the next slide, let's detail the charge of €486 million coming from goodwill impairments mainly reflecting lower volume related to the COVID-19 crisis and higher WACC as risk premium increased in the COVID-19 environment.

Overall, despite this impairments medium-term profitability at group level have not changed showing that we will maintain our roadmap. This goodwill impairments from some various countries including the U.K., U.S., Canada, Germany, Australia and Norway.

Those countries carried historical high level of goodwill as just from the LBO step-up in '05 or from the Hagemeyer acquisition in '08. On Slide 21, we turn to our cash flow statement.

We generated very strong cash flow in the half reaching €176.8 million where reflecting in part the effort we made to manage working capital. This compared with a slightly negative outflow last year in the period which is traditionally negative as you know due to the seasonality of our business.

This strong cash inflow translated into a high conversion rate of 77.7%. Concerning working capital which is the main factor behind the cash flow improvements, the bulk of the evolutions come from trade working capital which I will detail on the next slide.

There was a smaller but significant contribution from non-trade working capital as the reduced level of activity led to lower tax and to lower rebates receivables. Let me share a few details on the evolution of CapEx.

It is broadly stable in the half but most was incurred in Q1. In Q2, we reduced CapEx by €9 million.

Our strong cash flow performance combined with the proceeds from the disposal of Gexpro Services and to a lower extent our Spanish export business allowed us to significantly reduce net debt which was down by nearly €500 million to €1.69 billion the lowest level since '08. This led to a leverage ratio of 2.59x better than last year's ratio despite the crisis.

Let me focus specifically on our cash generation on Slide 22. As we already mentioned in Q1 we have focused relentlessly on cash collection as shown on the graph.

We made strong effort to manage inventories to adapt to the abrupt drop in demand. Between March and June inventories were down by about €190 million, while trade payable were down by about €130 million which also contributed to the strong cash generation.

We focused strongly, of course, on trade receivable, with particular emphasis on receivable monitoring credit management and cash collection. As shown on the graph, our trade receivable were reduced by circa €230 million between March and June.

On slide 23, we turn to our liquidity picture, which shows that we have no short-term issues. As of June 30, we have €1.27 billion of liquidity, including the available cash and the undrawn facilities on the senior credit agreement.

As you remember, at the start of the crisis, we draw down €550 million from our €850 million senior credit line, as a precautionary step. Thanks to our efforts to preserve strong cash generation, we were able to more than offset the expected drop of our securitization receivable, which are down by a limited €213 million.

Given our debt maturities and debt reduction, we were able to quickly pay back this facility that was paid back end of June. As you know we also decided to suspend the dividend payment this year, and this will result in a cash saving of €145 million in H2.

Our deleveraging efforts, over the past few years, have strengthened our balance sheet and this is really an asset in the current environment. Let me conclude on slide 24, by reiterating our capital allocation priorities, which we are maintaining unchanged despite the crisis.

First, we will reaccelerate our digital journey, and finance it through organic growth in order to continue our transformation. We anticipate CapEx to sales of around 0.9% of sales this year and a normative rate of around 1% in the medium-term.

Second, after an exceptional dividend cancellation this year due to the crisis, our dividend policy will resume in 2021 with a minimum payout of at least 40% of adjusted net income. The objective is to maintain a good balance between shareholder return and investments.

Third, our priority is to focus on the deleveraging of the company, thanks to our free cash flow generation. Fourth, we will also consider targeted bolt-on acquisitions, with a priority in the digital space to acquire competencies and speed up our development on some geographies, notably the U.S.

Any acquisition of course will have to respect strict criteria to be completed. With this, let me hand back to Patrick for his concluding remarks.

Thank you, Laurent. Let's now look at our priorities going forward in an environment that remains obviously uncertain and volatile.

It is -- one thing which we will not compromise on is our fundamentals with clear five priorities here. First and foremost, continue to preserve the health and safety of our employees and customers.

We have done every day. We will continue to do every day.

Second, continue to ensure business continuity. We have been able to adapt fast.

We have learned a lot how to continue to do so even better therefore preserve business continuity under any circumstances. Third, focus on liquidity as our key performance indicator.

All the company is really engaged behind that and we will continue to do so every day. Fourth, protect the company and prepare it for the resumption of, let's say more normal activity by focusing on gross margin OpEx and cash management.

Gross margin, OpEx, cash management, three pillars by which all our country BUs entities are all driving the business every day, and this is the main focus to adapt to all these volatile situations. And fifth, continue the digital transformation through the systematic rollout of our digital capabilities.

Even more through the crisis, we found reasons to do so to accelerate to get the fundamentals in place, if they were not everywhere, so that there is absolutely no delay in this transformation. As such, we will continue to act as one company.

We realized through the crisis that we were able to act, to behave and to have one way of facing the issue. For a company made of so many acquisitions, it's a real company.

It's a one company with sharing best practices and like we never had before. On the page 27, well-positioned, because we want to capture and we are well-positioned for the new growth opportunities.

There will be different plans after the COVID pandemic. Some are financed by big governmental heads, some are financed by the EU level, some come from different angles.

And we want to be definitely part of the green recovery plans, the social responsibility and health and well-being plans, which will structurally increase in any case the electrical usage. Electrical usage will be more and more demanded in most of these plans.

And as an illustration, the emergence obviously of electrical vehicles, but also of many other adoption like heat pumps, alternative energy increase and so on, in order to electrical products solving also a portion of the CO2 reduction emission. And, I should not forget intelligent building solutions.

Pandemic raised the need for social distancing for making sure of lower propagation and intelligent building solutions can be a major contributor to it as well as a recovery of the economy. And we will see -- in parallel, we will see a greater use of automation.

It's also a way to social distancing and partial lockdown risks. And we see that in the lips of many people having to make their decision soon, and we will see this greater use and we will be part of it.

Our broad value proposition in product and solution, position us well to seize these growth opportunities. And we are working closely with several suppliers to put innovation into the market around IoT, building automation and more.

To better seize these opportunities, we have revamped our organization. Our organization will be more and more aligned with customer needs.

We are increasing customer touch points without adding staffing and manning, but through lockers for example; through automation in logistics too; other solution and services to bring us faster and closer to our customer contacts and needs. We are also enhancing the competencies of our employees to increase their ability and prescriptive capacity while building up the sales force of tomorrow.

The sales force of tomorrow will be extremely important to influence on all these new choices. On page 28, we will reaccelerate there was a little bit of a put on hold in terms of mid-March when things came out, put on hold the few developments while seeing where how is it going, we zoom forward how and how fast and the amount of money involved and kind of stuff.

It's clear now that even more than before we will accelerate this digital transformation road map. And we will not compromise on these three levels.

The data and the uniformization of customer segmentation across Europe is almost finished. The uniformization of product segmentation to better address customer needs and optimized pricing is actively being done.

All the transactional tools where EDI platform, track and trace e-mail to EDI digital customer invoicing, they have proven so valid, so needed, so accurate, so powerful. There is absolutely no doubt that this has been part of the solution throughout the crisis.

It will be the solution for during and after the crisis. And, therefore, Rexel easy how to make sure that our processes vis-à-vis the customer totally facilitated by data handling is allowing to have a much better coverage of their needs at a much lower costs.

And all the productive modules, even if historical data series [ph] were interrupted, we realized how important these predictive modules were and are now once we get out of the crisis even more and making rollout of branch assortment readjust it right now rather than doing one by one having a tool in order to get it done and adjusted we had to retrain the machine, we are retraining the machine. We have to improve.

Yes we are adjusting. We have the skills.

We have the people. We have the capability.

We have the tools. They are all valid.

Same for customer churn. Same for the next best offer ready to be deployed and we will deploy.

And there was a short interruption. Nobody could make the test.

There was nobody outside. We weren't even allowed to do so, but we have not forgotten how to get it even better.

Therefore, all these modules are ready to be part of the solution for being more efficient, more agile, more customer-driven, even much more let's say lower cost for -- after the COVID. Now on page 29, how do we see the situation?

I mean, nobody has a clear view on where it was how it could be. Allow me to be quite a little bit advanced in trying to make the shape of potential curve.

You remember the pre-crisis level, the group at minus 27.7% it's a fact. It went down, boom.

Now on the way up you have seen the curves before. They are not of the same shape, same speed, same kind of.

Right now where are we? We are about to recovering at a minus 10% compared to where we were okay?

How is it going to happen? I don't know.

But one thing I know, we are ready to take both, the bumpy road or any pockets of growth that would offset pocket of depression. We are ready to be more agile.

And, therefore, the question is when do we cross the next line level in activity? Yes everybody would like to know.

But in fact it's not the target. The target is continue to be more effective even if it does not come back to the level of activity of before, because we don't know but we have to be prepared for lower, recognizing that automotive aerospace oil and gas, we remain under pressure and should not be opportunistic solution short-term.

It's only fundamental structural solutions that will help us making it happen. And, therefore, where are we going to be in H2?

We are reaccelerating the medium-term digital transformation roadmap. It's on its way, making digital multichannel and the backbone of the organization.

We see an increase in number of customers that during the COVID became mono-channel. They want to become multichannel.

They were digital channel and they want to come back to multichannel, fine, and here we are and we know how to get it done right. Continuous rigorous management of gross margin, gross margin and gross margin.

There is no volume price sensitivity to low margin. Therefore, gross margin, there is an OpEx.

Let's say any OpEx that is not directly needed in order to get the leverage on whatever the sales level could be. And free cash flow and liquidity, we have demonstrated we can generate free cash flow, and we will continue to demonstrate.

We can increase this generation of free cash flow throughout the quarters. And also we have our own KPIs and objectives.

We manage by -- we don't manage by budget anymore. We manage by the next six months' phases, because the budget for this year, obviously, was shaken up heavily and therefore we have set targets for the first half -- end of first half.

We have demonstrated and they were shown to you. And now we have our targets for second half so that people reach their maximum.

And at least you can count on us for managing the different components of the P&L in order to provide the max results that we can get out of this industry and our market positions. And I hope we have provided you with certain clarity on how we have responded to the unprecedented situation that we were facing, but also how we look at the future that we are facing.

And as of now, Laurent and myself will be very happy to take your questions. Thank you.

Sorry. There was plenty of noise.

We didn't got anything.

Hi. Thank you for taking my question.

I hope you're all well. I actually have three questions.

I'll ask them one at a time. The first one is regarding, you mentioned you've started some first structural measures.

I think you mentioned the Americas and Asia. I was wondering, if you could talk about the opportunity to turn more of the temporary savings into more structural savings as you walk into the second half in 2021 namely with the things that you talked about in automation, what shall we expect there?

You want to put the three, or should I answer this one?

One by one.

One by one, okay. On the measures, first of all, the measures are of different nature.

You have -- in the adaptation, you have the measure that we were looking at everything that we could stop, put on hold, knowing we would have to restart depending on volume. And they are the one that we decided that we could do differently and never restart.

And the use of certain partners outside to do certain things that we could re-internalize the reduction something -- a few things that we decided okay, we don't need to do anymore, don't do it and so on. Meaning, you have a lot of management measures that when we thought it was suspending, it becomes suspendible and now it becomes non-indispensable and to the point that it becomes a structural change.

And it's true in logistics. It's true in making everything more simpler, more shorter.

This is what we call Rexel easy, but in a much more active way. In such, it has to do with spending outside of the company with partners or it could be internally and so that we can reduce for example the temps and use our people.

We can reduce over time and run very differently by a new shift system and different way of using the time available and optimization. All of these things we went through which already lower some of the cost base.

Complementary to it obviously, due to volume there was a lot of temporary measures of people benefiting from furlough, partial unemployment, Kurzarbeit, name it the way you want. And we all use in different places where they were.

The question is, how much is only to face, let's say a fall? And how much will come back?

And how much will become structural at the end depending upon the level of the comeback? Now, obviously, a portion due to the volume came back because there is a minimum to be done proportionally.

And by the way in doing so, we have new productivity targets. We have the targets that we have increased so that even in this phase, we maintained the pressure on how to be efficient.

And it is obvious that part of it will not come back and it becomes structural. Now, we've already done several of them.

We have done a portion of them. Depending on the market, they are more or less severe and we are still uncertain exactly how much depending on the markets.

But for example, I can tell you without naming it in detail that one region in the U.S. has already done.

Even if people who are on furlough, a portion will never come back has been told and it becomes structural measures. And we are doing this and we look at it every week, everywhere in order to come to new structural level compared to before.

In that spirit that's why we have the 30 -- around €30 million of restructuring costs allocated for H2.

Got it. Thank you.

And then in terms of the gross margin, as you said sort of you had a negative mix in the gross margin, some of your best margin countries falling down sharply. On your slide, it looks like some of them have recovered quite nicely towards the end of the quarter.

Do you expect -- could we go back to prior gross margin levels in the second half? Do you expect like a reversal of the mix?

Yes. What we say is that on the gross margin down 36 bps.

One-third is linked to the country mix that obviously will come back. Two-thirds is what we call the trading margin.

The trading margin is down three blocks. The front margin where you have the customer mix.

For example, we have more direct customer in the U.S. than one coming to the branch driving lower margin.

We have also a product mix where we sell less of for example own brand toolings and things which are carrying high margin. So part of that will come back in the second half.

Then we have the global relationship with our supplier with less volume. It's not a major part of our rebate, but we have a conditional rebates to volume.

On the other side, during this period, we create a stronger stickiness with our suppliers who -- a lot of analytics. So there will be some discussion around that part, but that could decrease to some point.

And the third because of the sharp drop, we are a bit mechanically hit by the offshore and our inventory and we are pushing out to make sure that we can get rid of that second half of the year. So I would say that probably a good half should come back quite quickly in H2.

And the second part, we have to -- really to work strong on that.

Understood. And my final question relates to I guess sort of this point of working capital and on cash into the second half.

Can we assume that you can continue to destock in the second half or would you have to get sort of working capital back? How should we think about the second half free cash flow basically compared to normal seasonality?

Well, first, I was very -- I was quite conservative in April on the cash flow of the half and we pushed a lot. I mean Patrick put a strict rule on replenishment simply called the two to one, so you can only replenish one when you sell two products.

Such we managed to drive inventory down of course helped by the better momentum on the topline than what we at first on minus 27% month of April we were anticipating for Q2. And then the good part of it is, while having a better topline, we get a very good cash collection from our customer.

Most -- a lot of them helped by also this temporary measure government subsidies postponement of payments. So, having even more receivable, we managed to cash a lot and this give us a strong free cash flow generation in H1.

All the measure we have taken will continue and we will be very cautious also going into H2 on the inventory side. We believe on the customer side, probably the month of summer will be a tough one.

So, we are very, very cautious on that. And we expect today that, our full year cash conversion should be probably very close to what we achieved at the end of H1.

We will also have the help of our digital tools in order to optimize the assortment which we will use more in the future than in the past. And this assortment should bring us to really be even more closer to our pure exact needs.

At the same time -- and yes, to your question there is potential to go to a little bit lower level, better optimization and better adjustments and better turnaround. It was the first adjustment which was really brutal.

And when it's brutal we reacted brutally. And obviously there is a lot of fine-tuning that has to be done after.

I would like to add that, in Europe, we don't face that. But in the U.S.

the industry, it's not just Rexel, and probably Rexel due to the complementary supplier that they do have will suffer less than others, there are supply chain issues in the U.S. that make everybody try to keep on inventory certain special components which cannot be easily supplied out of the Mexican factories of the key vendors.

And therefore, then there is a limit to how far we can go out, as long as people try to keep a minimum level of inventory, should there be some more severe supply chain issue in the U.S., which is an unknown, depending on the COVID in Mexico.

Clear. Thank you very much.

Thank you, Daniela.

Hi. Good morning gentlemen.

Thanks for taking my question. I have three questions and I will also go one at a time.

The first one is more, maybe, a shorter-term question. And your exit rates or your starting rates in the third quarter are significantly better than what we've seen in a lot of other companies in the sector.

And I was particularly looking at France, where, I know, you tend to have sometimes a bit more market intelligence. This is almost going back to flat now at the beginning of July.

How much visibility do you have in terms of the sustainability of the momentum in France, i.e., are we talking just about a rebound post the lockdown, or you are seeing genuine activity resuming. That's my first question.

The French market, which has been really severe and disciplined in the lockdown, didn't found an easy way out in the way we -- that our customers could operate. Therefore, the exit went slow.

And, because how to cross on the job site, how to be more than -- without being more than two in a car to go to a job site, these were the conditions to operate until 10th of July. A little bit earlier than this for most of them, but mid-June.

Therefore, right now, what do we experience? There is, first of all, a catch-up effect of what has been delayed, slow or not done.

And this effect is bringing us through the summer for sure. Therefore, what we see is close to normal.

On the construction dimension, I leave the production, the industrial side. And on the construction site and you see lots of job site just catching up, because they need to be finished, need to be done.

And this could bring us through the summer. Some company may work in August; some others not.

We know some will limit it so far, but it will be probably keeping the pace, the momentum through into September. And there's a similar effect in France.

Even if the industry is not a very strong one, they stopped like everybody else. They restarted that they will have to run through maintenance and kind of stuff which, I consider, will be needed in the second half of the year.

Therefore, we should go back to slightly lower, but no catastrophic level in industrial demand for us. It's different and an output of the industry to the world, okay, industrial products demand to Rexel.

Which we are less dependent upon, how many cars will be produced, but we are really dependent upon how efficient the automotive lines are working, because they need electrical maintenance, that's where we are. And then, there is a third uncertainty, which should bring -- we should be ahead to the market.

The mayor election happened the first two -- the day of the lockdown. Meaning no community could really elect the mayor per se and no mayor were really in charge of anything before early July, when the second tour happened.

Then they could regroup their conseil municipal, then they could be elected. And meaning, everything which the money and the spending and the budget that should have been voted in March, couldn't be now voted until now.

And this now means how much will we spend for schools, for the swimming pool, for whatever, which is public buildings of communities and this is still to come. Meaning, we suffered very, very, very low and we are still suffering very, very low demand on that side.

However, there is money for -- however, there are grants, there is money floating around, but the decision-making process we'll not free-up. And this, I expect, to come, let's say, for September 1 choices and I expect some demand to come by the end of the year, which will for sure help next year -- into next year.

The uncertainty for me, what could it be in October, November, Jan, Feb. These are the four months where I don't know.

But some of it is inevitably needed and will come out. Now when it comes to the construction, obviously, there is a construction of demand in the buildings -- for new buildings commercial buildings.

So far there is a high need for residential buildings, even more after than before the COVID, people realize how uncomfortable it could be, how much they need to change in the housing, the way to be able to do remote working and kind of stuff. It's not just a long-term horizon.

There is already a short-term demand for. Therefore, I don't see a depression, there could be up and downs, but nothing severe in the next 18 months in the residential.

And the big uncertainty is on the commercial building, because the old ones -- people didn't even came back to work in the old ways. We have to wait for the second half of the year to see how that will run and what kind of a new demand.

So far, there is not a lot of project going on, except outside of Paris -- Grand Paris Olympic games and the rest, which so far is a driver for demand and we are focusing on like many other people. Yes.

The market is not the worst market. The rest of Europe is probably -- I was surprised how residential building resisted in Germany.

We may have a few surprise, positive and negative, but we are adjusting to it.

Thank you. Just to extend, this is bringing me to my second question, a bit more long term.

We've heard a lot of rumors then there has been some preliminary information about the EU Green recovery plan and renovation in buildings. I was hoping you can maybe give us some color in terms of how that could be possibly applicable to what you're doing in terms of product, but also in terms of type of buildings that you think could be applicable to this program?

Let's see, whether it's in France or outside of France. I will speak for Europe, but France, I know by heart.

There is a huge demand for making existing buildings. Commercial building, let's say, I could even say, COVID-compatible.

Allow me to say that, it's a little bit here -- I mean who wants to be compatible to the COVID. But because you need to reorganize differently, manage the lighting, manage the airflow, manage the access, manage differently.

And there will be a lot of -- it could be automatized. It could be a lot of controls -- data control buildings, intelligent buildings without being too smart, but just making life possible and so that they can have a better use of.

We know it's feasible. We worked on it.

We have solutions. We work with suppliers, during the COVID, after the COVID.

We have intensified which solution, could apply to work for whom and what. Meaning, if there is a real support -- financial support, so that people go and invest in this, there should be a push for more, let's say, intelligent data-driven capturing information in order to work with this constraint of the COVID, to become COVID-compatible.

There is a business of making buildings COVID-compatible. And this is emerging.

We worked on it. And it's needed.

The economy needs it. And that's what we work on.

And it's long-term, but it's also -- it's not next year, it starts tomorrow. And the vast majority of building thousands, medium-sized building 2,000-square meters to 8,000-square meter buildings.

They are all under equipped for that. In the moment there is a demand for, energy efficiency, COVID-compatible and kind of stuff, this is becoming a demand.

We work on it. We will be there.

Right. And maybe just my last question, on digital.

I appreciate maybe you cannot give quantitative comments on that. But, if you think about your digital initiatives and how they helped during the COVID crisis, can you maybe highlight a couple that were of particular help?

And also as I was looking in your CapEx or even the EBIT bridge, it seems that, even though you might have reduced a little bit some of the investments you have continued to invest for growth during this crisis, especially on the digital, is that correct?

The one thing first, nothing of what we invested got lost. It could have been.

Let's put it this way. When a crisis like this comes, you don't know how much you have spent in the past that go to the garbage, okay?

Nothing is a wrong investment. Everything is valid.

And when I say valid, it means, everything is being restarted. Everything will be reused 100%, slightly modified.

As I said before, for example, we have to retrain the machine when you do predictive stories like customer churn. Customer churn you know, last week in March, every customer was churnable at minus 70%.

And you don't need algo. And I was really thinking Jesus, maybe you have done all of this for nothing Patrick because, at 70% you don't need an algo.

But guess what? A churn today -- my sales force is asking, I cannot go to customer more easily.

I cannot go and share a coffee. I cannot go and say hello.

Like this it's me, and shakes the hands. But I need to know, who is fragile, who I should give a call, who I should do things differently.

Opposite to the past, my own sales force now is asking for, hey, when do we have a churn? The machine retrained, so that we can work with it.

It’s a total shift in the way we will behave vis-à-vis also you know that churn rate. It's a fact.

It's what has happened last week. Meaning, we will continue to maintain this.

And therefore, I'm able to tell you nothing but last, first of all. Second, right now, the investments we are making, as I say, it's to retrain the machine, retrain the algo work on the fundamentals.

And the things which have happened during the last four, five months, we have used a lot of time to unify the basis customer segmentation, product segmentation data streams, so that everything could be put on one platform, as European scale and leverage our initial investments. And when it comes to the payback, our initial investment will have a broader base.

And it's not France, it's not Belgium. This is 80% of Europe will be able by the end of the year to use 100% of all the tools that we have already spent money for.

And obviously, branch assortments. Branch assortment algorithm, which have -- which were in the early stage of become now even more needed.

Which branch in Toulouse in the region of Airbus, when there is no demand is the assortment the same, as a branch in Paris, when the Grand Paris will create a total shift in demand. And you take yesterday they were close by.

Tomorrow they will be quite different. And here we have all the tools, so that we can adapt immediately.

We can adjust on the job, without creating over inventory, without creating obsolescence. We are creating all this pollution that we hate in our accounts all the time.

And this is where digital we have a high leverage. Now, yes we will spend time, money, effort.

We have maintained 100% of our digital teams. We have not reduced anything.

As part of the structural changes, they are not the ones to be the negative in the structural changes. We are making other efforts on other fronts, in order to maintain that.

And I'm really glad, customer churn is great. Branch assortment is great.

All the predictive things or track and trace of the web shop, such functionalities by which 100% where every bucket is where and how during the crisis. And you can tell the guy exactly by the minutes where you should get the goods received.

These were elements quite decisive. We continue.

Thank you very much.

Hi. Good morning.

Yes. Thank you for taking my question.

Again, three from my end, as well and I'll stick to the pattern of going one at a time. Just the first one on, working capital management and with the good sort of results in the second quarter, I remember back in the first quarter results, you had mentioned that the nature of products being sold was different with more products et cetera being sold to the health care end market for example versus the traditional product.

So how are you able to navigate your inventory levels? And do you think -- do you see these sort of sales going back to the more normal product mix?

The inventory level in terms of normality so to speak of the mix, obviously will be more adaptation -- regional adaptations, where we were heavily dependent. I will take the example again Airbus in Toulouse or if you say automotive in certain region in Germany and so on -- is there is a mix which is no longer the same in terms of proportion to serve the local market, okay?

We are adjusting to it. Therefore, the normal mix of before in terms of value number of SKU and the depths -- the widths and the depths of the inventory will not be the same.

We are -- we have to -- we are driven by Net Promoter Score in order to make sure that the customer gets this is our number one function therefore we need to adjust all of this. It's a permanent effort.

Obviously, sometimes it creates a little bit of obsolescence in the moment you change the mix. This obsolescence will exist some of it.

Obviously, we are supported sometime for some products by the suppliers who understand and help us in the adjustments. Sometime we face and we have to take our own hit on so to speak, okay?

The hit could be it takes longer to get rid of and the hit could be that some product keep on shelf and at the end there is no demand for. We try to reduce this to the max.

The size of the group allows this to be minimized, however, it could happen. And it's funded by the way of the margin erosion at the end of the day when it comes.

Nevertheless, when I look at the number of days today where we are compared to where we were the year before, we will continue to drive down our inventories in order to come to more normative numbers. The huge portion has been done, but they are still four, five, six days to go depending on the countries.

And it all depends about how fast the recovery comes. In the U.S.

right now it's a bit slower, because when you're at minus 20 for three weeks in a region then it goes up to minus 10 and then it goes down backwards to minus 25, it's quite delicate to what is the pro forma normative that we should have. In Europe, it's time to normalize in 80% of the country and we still have days to go and we will use it and we work on it.

The digital branch assortment type of thing will help also. The more accurate is and less normative and little more fine-tuned down to Earth, the assortment is the better.

We can even reduce further. Meaning, there is still ways to go.

On the other hand, fine-tuning takes longer than getting the big boat as we got, but we don't give up. By the way, I'm not sure there will not be another pandemic regional crisis here and there.

And at the same time, I don't want to be overloaded by inventories. I will all remember that when it happens mid-March, Europe was doing so fine that we were building inventories for significant growth.

And when you get all the orders being delivered and that -- a sudden it falls down, it's not just vis-à-vis the previous year. It's vis-à-vis the one that we wanted to get to capture the growth.

And this correction was huge to make. Let's say this is gone.

But I don't want to reenter into another kind of let's say to enthusiastic inventory build-up before the sale. Therefore, we have enough to take an enthusiastic bump, if we would come in the market without having to add inventories too.

Right. Right.

Got it. Thank you.

And second one is on the digital sales and you also again reported a growth in fact in sales through digital channels in this period. Do you think that the current environment has potentially -- of course accelerated the shift into digital channels for sure.

But do you see a permanent shift in the change of customer behavior is more acceptable to use digital channels versus physical channels? And how much of this do you expect to continue maybe on a long-term basis and also eventually impact on profitability as well?

I was quite happy to see the 30% digital sales line floating line that we crossed in Europe in the last month. COVID has accelerated.

But without having done all the tools before, it would have been impossible and let's put it like this. What we saw is everywhere we saw eight to 10 points increase at the worst moment of the lockdowns, whether it was in Switzerland, in France or in other countries.

We saw between eight and 10 points of an increase and we saw an increase in the number of existing customers becoming digital customers. We saw also new customers coming for digital.

But the vast majority was existing customers becoming a digital customer. And when everything restarted in a more normal way, they became multi-channel customer, meaning they didn't stay as pure digital, but they remain meaning less, a little bit less digital and little bit more branch-driven recognizing the branch is more probably for different function than before.

This is what we are looking in detail now because when it comes to the cost base of the future depending upon what is the role of the branch, obviously will depend certain of the cost structure elements. It's too early to say.

There is a shift, but there is not a big bang. There is an optimization.

It becomes really multi-channel. The big bang we will have to produce ourselves by changing the right OpEx and cost allocated to get this multi-channel mix being run.

But on the long-term, there is no customer, not a single customer which now is not interested. They are all interested by being a multi-channel.

Great. Great.

And…

Allow me to say again, we gained probably two or three years of cultural adoption by three months of crisis.

Okay. Okay.

And lastly, on the restructuring and cost savings. So you did mention that the € 30 million into edge.

Could you quantify potentially how much of savings you expect from this, or even subjectively, do you see savings from the restructuring program enough or even more than offsetting the partial reversal of the short-term savings that you had taken in the second quarter?

We don't want to -- I mean we have no visibility. So it's even that we don't want is that today we know already in some places that we need to adjust and we have implemented that started end of last year when we reorganized the Northeast region in the U.S.

and to a lesser extent the U.K. So this is structural.

And out of the 4,000 people that were reduced at the end of H1, we've got around 600 that were structurally down. So we need by pocket by country adapting.

What we wanted to show you is the agility by which we are monitoring the short-term with very low visibility. So we have a couple of plans that are -- or could be activated depending on the outturn of the coming weeks, but it's too early to guide on what could be a full year impact on H2.

The one thing -- to support Laurent's point, the one thing that we are running with our managers is, what if there would be 10% less in the U.S.? What if there would be x percent less in certain regions market segments and all?

We are running all these what ifs looking at ourselves. This is not what if in theory, what if when we look at ourselves and what could happen here and there.

It's only one month that we have a minimum of visibility of how it's getting operating, but we are ready. And therefore, we are able by all the simulations we do ready to do these structural adjustments.

Therefore we're able to say, with restructuring costs. As we have said before, we have enough to face the structural reorganization that may be of different shape, different nature, different timing in different parts of the world, but it's already going on.

As you say, the 600 of the 4,000 are done. And every day there are some of it being done here and there, and we cannot wait.

It's a permanent adjustment -- structural adjustments, because the first state was sport, and now we know we will be alone. We will be alone one day.

And therefore, we face our own destiny and reality. And therefore, we do daily adjustments, where it's needed, vis-à-vis you it's normal whether we try to quantify.

And therefore, we have been able to quantify the wood tips of different scenario, and therefore, we can tell you the €30 million we should be able to do what's needed to do.

Great. That does it from my end.

Thank you very much. And hope everyone stay safe.

Thank you.

Thank you.

Thank you.

Hi, good morning everybody. I have two questions please.

The first one to follow-up on the market share discussion earlier. You quantified that for France, but I assume it also means you think you've gained share in some other regions if that was possible too already measure.

Was there a benefit in the U.S. in terms of others having bigger supply issues in terms of Mexico that could be temporary?

And maybe if you could comment a bit on the market share gains as well in France what is due to having the digital capabilities during the lockdown? And what do you think is actual underlying momentum if that's possible to comment on already?

And the second question I have in terms of the U.S. trends, which are quite volatile from kind of if you look at your chart also by regions and some of the regions that have improved lately are also the ones who have seen a pickup in virus.

Is that just some restocking ahead of feared lockdowns, or how do you assess that?

In the U.S., there is -- there are regions, which faced fundamental structural issues. The Gulf region due to the oil and gas activity, due to -- or related industries, plus the pandemic, which is quite severe where all the entertainment business is closed.

And we never speak at the entertainment business as a segment, but we should speak as the entertainment business, whether it's bar hotels, real entertainment or even sports stadiums and the rest, which is the driving force of the demand. And this is the first time we really measure that it could be plus/minus 20 points up and down depending if this is open or this is closed.

And such let's say, service economy where people live partially outside may vary by $1 out of $4 will be related depending upon if it goes. Now there is another issue, which now starts to be visible.

At the beginning people lockdown, furlough, partial unemployment. Now some regions face a real, real issue of no employment to come until many other things really comes back.

And it's the Midwest or the automotive industry and the auto -- and all these heavy industries, where the internal demand is low. And so therefore, for certain regions coming back to previous levels is not on the horizon for me.

It's how do we adjust our own cost base in order to cope with what will be available, and there are other regions where it's much more volatile. It can go fast quite fast enough.

All the West Coast, for example, whether it's California or whether it's the northern part, it's ready to go up again at any time. In many industries, from the nuts industry in the north to the other industry in the south, even if you have pockets like Boeing in Seattle creating a hold at the end of the day the total cost is really took up again, if there is a little bit of a demand and visibility.

I think the political by the way the political situation of uncertainty, it's adding uncertainty to uncertainty to uncertainty. Right now immediately when one or two would be a relief, there's plenty of money available to go and get a boost.

Therefore, we will adjust according to this -- between these two. This is for the U.S.

And I wish I would be more intelligent in telling you more what's behind each of the curves, but it's not easy even for ourselves. And we have weekly, weekly calls, weekly watch, weekly and analytical things, but there are customers ready to go for.

There were project completely abandoned. Many in Vegas for example many projects were abandoned, but abandon, but it could I should say put on hold, because they could restart if there would be some visibility and trust in something.

And that's probably an additional layer of demand missing right now. This is the demand of having trust in something, which need to be reestablished somewhere in the U.S.

And because this factor they operate with the virus more than in Europe. In Europe, the virus brings real lockdown.

It brings real stop to the economy unhappily because they deal with the risk, the life, the health, the death, they live with it in a different way and it impact less the economy than the global demand which is psychologically hurt not just by the pandemic but the way of life. In the moment, where all life is disturbed, the spending is disturbed.

And in Europe, market -- and by the way market share in the U.S. to continue on it if there is market share gains is because we deal with suppliers that could have been probably littered by -- okay, we have our own difficulties more limited than others.

It's true. But they are badly hurt on projects and projects are down also.

Meaning you don't know what is what in this vicious circle too. On the other hand, we don't lose market share.

I'm sure of it. We probably gained some in certain places where we were low.

I know that in Florida we have gained. In the Northeast, we have stopped losing.

We are regaining the first because we see old customers coming back even for limited amounts of wood but they are coming back. I know that in the Northwest and California, we gained continuously and in Denver region too.

The branch opening of the past made that happen. Because in fact we never mentioned that because there is these big issues and this -- but the investment of the past you remember branch opening it takes 24 months up to 36 months to get the full effect before November, we still have the positive effect of them.

Phoenix, Albuquerque, and a few others where we had zero market share we are gaining market share because we have opened the branch before all of this. And they make their living and they are obviously lower staff than we thought but making their living and coming with additional sales.

Therefore, yes, we do gain market share. And in Europe, it's more contrasted.

One thing is clear you remember this discussion that we are on the table during the last two years that if there would be a crisis all the digital platforms and -- would whipped away -- conventional distribution they couldn't face it. The fact that we transformed ourselves quite severely the fact that we have this digital link to every customer the fact that we have this physical link, the fact that we got the mobile link and the mobile push, the fact that we add all kind of features with the such powerful CRMs being used everywhere in Europe probably has avoided something of that kind and probably kept every customer through the crisis every day in a directly digital verbal link with us we did not lost any of them.

And therefore I think yes the digital investment made us getting out of the crisis in the shape we are today. Yes, I can answer firmly, yes.

Thank you very much.

Thank you. It's Martin from Citi.

The first question is about projects and obviously, you have limited visibility in the best of times. But now are you beginning to see any signs of new tendering activity for projects, or when we look at the rebound in sales or the less negative sales in June and July is that really a reflection of projects that had stopped and restarted?

Just to give some sort of sense if in any part of the world you are seeing any signs of activity in new projects? Thanks.

Well, there are the new projects that needs to be new project. In the Paris area around the Grand Paris and around the Olympics games the tenders were out.

The tenders were a bit suspending during four months. But this has to happen.

This has to accelerate. Yes, we are working like on such structural projects we are working on it and to be part of -- it's only a little bit of a shift in time.

The flow projects if this exists like in the U.S. that comes regularly on they are down.

They are down. And either suspending no news or they are simply canceled.

Now, again canceled in Miami, canceled in Vegas, canceled in LA, but you know also the U.S. In six months' time, it could be contradict, because there will be another surge of different projects different nature.

The one dependent will be taken over by somebody else. But for the time being there is no -- yes, there is decrease in projects.

For example lighting project in all the malls. In the moment the malls for social distancing in certain regions you can't bring people into it it's all suspended.

It may come differently because the malls one day if they want to exit, they will have to refurbish differently whether this is the lighting, the social distancing, the way it will be set up all of this we wait for clarification. Now, a conventional project I also expect from the health world hospitals elderly people houses this will be a demand that -- I mean there is a tendency not to talk about it, but there will be huge there are billions available for this.

And this is probably a demand because it calls for electrical solution, it calls for detection solution, it calls for sophisticated solution from cabling to lighting from power from panels and power to reception desks. And all of this there is let's say demand waiting for translation.

This should come as projects quite soon and we wait for.

We once again see a role in the U.S. where we have backlogs.

Backlog compared to a year ago are down around 8% and are stable since May. And in the crisis they didn't decrease as much as the topline.

So, they are steady. So, we have no big pickup, but it is rather stable probably a bit of hedging into this pipeline of projects because they have been -- the start have been postponed.

But 8% decrease year-on-year?

It's not that much.

It's surprisingly resilient. And I mean you would have asked me before the crisis, I would have say 25% and it's only 8%.

Now, maybe it would become 10% and maybe it will be delayed by three months, but they are not gone. And it's still going on.

Therefore, yes, it's impressive the pandemic. But the way in the U.S.

its impact it's much more – it's never resolved. It's heavy.

It's pressure – mental pressure, it's blocking certain industries, gathering gone and a lot is based on gathering. But on other aspects like projects right now quite low impact.

I give you – it's an insight visibility. We share with you quite let's say intimacy numbers in such numbers, but it's the best we can give you as the benchmark of the market.

That was actually very helpful. If I can just also just ask a follow-up just coming back to the market share, it sounds like some of that market share gain should be quite sticky whether it's to do with your digital investment on new branch openings.

But is some of it – are you expecting some of it to be transient? If some of it was to do with perhaps turmoil at some of your smaller competitors would you expect to give a little bit of that market share back as the pandemic eases, or do you think that all the market share gains should be somewhat sticky?

I always say that in this industry nobody dies. And I'm now 18 years.

It would be the first time that, I would see a recession putting some people out of business in the distribution. And it could be that people give up, because it's too complex, because succession because many issues.

Will this want create a wave of people giving up and disappearing? It could be small guys not having digitalized because they realized that it's too late.

They realize that the effort will be too big. Because if you have not done it before, I think it will be quite complex heavy to catch up.

But the one which are multichannel today, I don't know if some bouncing back to the people who have not done so well during the crisis I doubt. Customer behavior, if they feel there is no longer – the loyalty is to efficiency.

Through such a crisis, the loyalty it will be an amazing moment. Yes, it's personalized.

But it's less to the sales rep than it was before because they cannot even come together. They cannot – they talk together.

The sales rep role is key, but is now selling the company capabilities and less of a one-to-one person relationship. And through his credibility, he sells the multichannel, digital capabilities of the company.

And in a moment he sells these capabilities it creates new links. And this is what's going on.

Therefore, I don't think a lot will bounce back.

Okay. Thank you.

That was very helpful.

Yes. Good morning.

I have two questions. One is on the demand side.

How do you view demand evolving in the next few months between residential, commercial and office? And I'll detail my question on costs and margins afterwards.

If I would know. If I would know.

If I would know, I would be rich. In full sense, industry you can derive from -- you watch them better than me -- as much as they do what will be the automotive world, the airline world, the aircraft world -- this part of the industry, which is key because they drive a lot of OEMs, a lot of subscale companies complementary.

They drive even logistics. They are key industries to the rest of the economy.

The food and beverage industry, the water treatment industry all these things that we do fine. But the fundamental heavy industries, I would like to know.

It's really -- I watch every index and kind of -- they have destocking issues for some of them and they have a fundamental demand for the others. And they have a survival issue.

And the big names will survive, but the medium name behind. And how much of this, for example, in our cash, I can tell you that the credit in our company are watching each of them every day.

We have not seen yet the consequences of this on this front. We didn't talk about it because so far there was enough liquidity in the market.

But if long-term demand is not there -- there will -- it's not just a matter of liquidity to pay the bill of today. It's a matter of activity to exist tomorrow.

And this question is on the table nobody wants to touch on, but believe me it's part of what I watch very carefully. It's more volatile and easy on the construction and -- on the construction side.

For residential, we can -- we will watch carefully in the coming months the new housing staff, the new permits, how much the permit will be released by different administration in different countries. And as long as the interest rates do not go up in the U.S.

severely not 0.5 point, but more severely the trends, I think, we can consider it will continue to be rather stable. If you neutralize the four months of down or even six months of down we may go back to similar pattern.

That's what I see coming. The building -- commercial building, I see a real issue.

I don't know if there is an over stock or an under stock, if there is a need for refurbishing which would be great for us, but just average for the market. There will be new conditions of how to -- who we change and relocate our headquarter today.

And there is a reconfiguration of how things should be done. There could be a 6 months to 12 months delay until the market find the ways to go, what to do, the kind of building they need and for whom and for what.

The fundamental question behind would 20% of the workforce now work-from-home compared to working in an office? 20%.

If in Europe, 20% of the blue collar disappear a couple of years ago what if 20% of the white color would not come to an office tomorrow? Same revolution.

And in terms of demand, square footage, type of nature of the building, operational conditions, all of this we watch. We are not better than others to try to figure out.

It's a more complex subject. I don't see an easy demand in this particular one, except few places.

Zurich is a place where a lot is being done. And again, maybe we will see something we already shared more actively on that front.

There will be the city, 50 driving cities in Europe and the rest. And there will be two types of demands.

And I feel it. I cannot substantiate it yet.

But there are other players who could answer this better than me probably you are following Nexity and or Efash Group or and so on. And they probably have a more precise view on the short-term in any way.

Thank you. That was very interesting.

I wanted to ask you about costs and margin outlook. You mentioned before that some of the cost reductions will not be permanent.

Then you also described the challenges you're facing in terms of gross margin. Where does it leave the margin outlook going forward this year and maybe next year?

When do you think, you could actually get back to the margins you had in 2019? And you mentioned, you're looking at different scenarios together with your local managers.

What would be the bandwidth of margin you could imagine going forward in terms of operating margins?

Why don't you – with the sense of humor – why don't you send me your excel spreadsheet? If I could fill it up I would answer.

I will tell you one thing on the margin. We run scenarios.

What if it's minus 5%, minus 10%, minus 15% in a country A B C D? What if it's only residential and industry maintained and the rest collapsing?

What if then? And obviously, we have margin targets in our mind, okay?

I have EBITA percentage, as a percentage of sales in my head. It's obvious.

It's obvious that as a management team going to last year and going back to our future numbers is on our list, key list. Now we are working backwards.

What would it take to do it? And it's very different if it's 5% or 10% lower demand and depending on the mix.

Now, yes we are on it. Yes, we are watching how to get there.

Yes this is a target and to be above previous years. And yes, because we want to leverage our investment there should be a payback for.

Now it's more or less tough depending on the volume. And therefore we run these scenarios.

My best answer is we have not forgotten to get there. Is it next quarter in three quarters or in five quarters?

I cannot answer today. This is otherwise, I would guide.

And if there is no guidance, it's because there are too many balls in the air, so they can fix one way of getting there. There are too many subjects around.

All the cost saving has been borne at no cost in H1. We have guided on what we could expect in H2 at restructuring cost.

So, it shows you the intensity we want to put into to the performance of the second part. And as pointed out by Patrick, we have different scenarios, and it's too early to say on which one we will be in.

To have a 3.3% in H1, allow me to say, it's like having a rate, years of effort, from a pure number standpoint. Nobody can be happy with this.

On the other hand, we are happy that it is 3.3%, because it shows we have been able in a very difficult time to reduce it, yes, to constrain and make it at 3.3%. But it's not -- hey, the target is go back as fast as we can to where we were, and partially through cost, partially through margin, pricing, partially through model evolution, and capitalizing on digital, and how much of the above, we have not done all this to stay there either.

But I don't want to speak about it at now, because we have to readjust. And is it €1 billion less?

Is it €1.5 billion? Is it €600,000 -- €600 million less, I don't know.

And if I would know, then it would be easier, but we are prepared for it. Okay?

All right. Thank you.

Good morning. It's actually Andre Kukhnin with Iris here.

I'm sorry I had an issue with my line. As conscious of time, we'll limit it to just one question.

I guess the main one I have is on your digital transformation and looking at your road map. How would you assess your current status in that -- in terms of that digital transformation versus your traditional peers?

And maybe if we drop-off the kind of small mom-and-pops that haven't been investing, but more kind of really traditional peers, other large distribution players. So, how would you set the current state?

And then where would that next step take you with all the priorities you very helpfully outlined, where would that place you? And also, if I can then extend that on, how would that compare to broader distribution industry not, maybe specifically in electrical and industrial, and kind of state of the art best-in-class players, specifically on digital?

On the road map, you could consider that we have put things on hold for three, four months, but with probably an impact on six months, because some side effect, as I say, you need to retrain the data, retrain the machine six months, but nothing has changed. The difficulty to roll out was also detected to be in the countries with the people and when you cannot travel.

We are relearning how to do it. We're organizing how to do it, because we will not be able to travel easily either in order to make sure the rollout is fast enough.

But on the other hand, every country has such a desire to capture everything that I know we have done in the group, that I think there will be an easier from the management standpoint, an easier penetration of our digital solutions. This is level one.

Level two is that, my customer behavior changes, some of the developments will be more change than others on the one that we had in view. And we are making some of them right now, which probably by the end of the year we will be able to make it more visible that is highly demanded by customers in the way they are changing their habits.

And it has to do with supply chain too, because supply chain could be also digitally information in order to make the product available to people in different ways than ever before. And that's what we work on.

We talked about lockers, but they are different systems. Some of them in the industry, some of them for the residential, some of them for special accounts, one-to-one with accounts.

Full digital integration of key accounts for example has never been – is very high on the list. It's on product portfolio, product management, inventory management for them.

They know exactly what they have with us for which job this is an increasing interpenetration of the relationship both on the custom – digital interference and relationships both with customers and with suppliers. These are new things that we work through even and we define and work through the difficult time, because we don't give up.

We don't stop. It's not the reason to stop this.

The rest we adjust this. It's unconditional.

I think it's part of the answer, but I forgot – sorry for that.

Patrick, sorry, I think I misled you a little bit. I was just thinking more in terms of your current digital capability.

Does that – how does that compare to digital capability of your competitors from what you can see? And then – so in terms of customer segmentation track and trace churn assessment et cetera.

And then if we go forward on your road map in terms of things that you target you to do once those are done where would that place you versus your traditional competition? And then I was just thinking more broadly in terms of kind of other distributors outside of your traditional space.

If we take the best-in-class of those how would that benchmark?

I understand better, thank you. On our journey we are 80%.

In the future, there is a second wave of different sets of developments to be made, we have the resources to do. And we have the resources internally both in digital and in non-digital meaning application people rollout.

And if we need to allocate more people to it we will allocate more people to it. And today, we capitalize on what we have.

And by the way, remember we have 50-and-so people in the U.S. around Portland.

We have an equivalent to 40 to 50 in Europe, they are absolutely untouched by any measures and not that they can do what they want. That's in terms of numbering and it's not part of the adjustments by no means.

And we also add to them good – digital marketing candidate, we also add new categories of complementary products to them, because developing is one thing, running is another thing. Leveraging require certain capabilities like digital marketing.

And this is for example a place where there might be an increase just to give you a sense for. How do we benchmark vis-à-vis the best-in-class?

If I take grandeur [ph] as being a real benchmark for me, if they are on the level of -- on the digital multichannel, if they are at 10, we are probably at six, and we still have ways to go. Not just functionalities but the large use and the agility and certain views how they can leverage it.

And that they are probably in our world a very good benchmark. The pure players are always in different lots.

And I don't want to -- pure players they have their own competition between themselves on level of sophistication and they do not apply to our needs anyway this sophistication. It's more the people coming from let's say like grandeur really developed over time a real digital strategy where every customer is a multichannel customer where they have two banners, the real banner and they have which is more the very open to different contributor and they have the grandeur banner.

This is a digital well-maintained and evolving benchmark for me.

Thank you very much.

Yes. Good morning.

I'm conscious of time. So very two quick questions.

First of all, on pricing what has been the contribution of pricing in the 10.6% decline on the like-for-like basis, so what is the policy of your supplier? And the second question is on COVID-19.

COVID-19 has given you to review the value of some of your assets. Does it change also the way you look at disposal?

Would you -- will make -- do you review some of the assets? And could you do some more disposals in the future after Gexpro?

Thank you.

The last point is defer into the future of?

If you in the future because of COVID-19 a lot of things has changed in your markets. Will you consider to do more disposal of subsidiaries in the future, Gexpro being not the last one for instance?

Well first of all, Gexpro we sold the export services by the way before the COVID, thank you. We sold the Gexpro services because it was a non-strategic item, that's one piece.

We have no other Gexpro services in the pipeline. Gexpro as a banner in the U.S.

remain a banner in the U.S.. The second thing is we don't have a plan for disposal right now.

We will focus steadily on managing the situation. We will see at the end of all of this, if we go back to the way we were looking at what is core?

What is less core? What is to be adjusted?

Where to grow and what to? There are always a few evolutions that we keep alive.

I give you an example the Rockwell EPR in the U.S. we buy and sell Rockwell EPR throughout the year.

We could sell one, we could buy one. There is always discussion in the world of reorganization of Rockwell, we participate to sell and buy of components.

Therefore, the disposal and is not on the agenda, but acquiring and disposal of an EPR, I don't consider it being part of it because it's part of the footprint. Now, to the rest of the question, I will -- on the pricing, I will hand over to Laurent, if you don't mind Laurent?

Yes, the pricing impact in Q2 is around 2% at group level excluding cable. Around 1.7% in Europe with a positive pricing in the Nordics mostly compensated the negative currency especially in Norway.

North America is at plus 2.8% and APAC at 0.9%. And that's excluding cable and you have seen that copper is going up and is back now to the US$6,500 per tonne.

We have not seen major supplier increase today, but probably I mean with all the distanciation, the productivity will be lower and may drive in the future some price increase, but it's not yet factored in our figure at the end of June.

Okay. Thank you.

Well, first of all, I would like to thank you for all your questions. I would have loved to be sometime a little bit more precise on the outlook.

I think it's not a matter of prudence. It's a matter of transparency not to speak about things where I have no visibility.

And we will keep the line open with you obviously whether on a one-to-one or whatever you would like to get and I thank you for your time, thank you, working on our case and helping us going through the crisis. And I wish individually in case we don't see each other, I would like to wish you all of you good vacation.

And as I tell my own people, protect yourself a lot. Thank you.