ARYZTA AG (ARYN) Earnings Call Transcript & Summary

Welcome to the ARYZTA AG's Financial Year 2020 Results Call, hosted by Urs Jordi, Chairman of ARYZTA. [Operator Instructions] I will now hand over to Gerard Wichers of ARYZTA Investor Relations.

Good morning, ladies and gentlemen. Thank you for taking the time to join our call this morning. Before we begin, I would just want to briefly draw your attention to the safe harbor statement on Slide 2 of the presentation, which applies to today's announcement and discussion. I will now hand over to Urs Jordi, Chairman of ARYZTA.

Thank you, Gerard. Good morning, and welcome to today's call. Before I begin, please note the forward-looking statement on Page 2 of the presentation, as Gerard mentioned. As many of you know, I became Chairman of ARYZTA on September 16 at the Extraordinary General Meeting where you, the shareholders, voted overwhelming for a change of direction. I personally want to thank you, our owners and shareholders, for your vote of confidence and trust to deliver this change in the challenging circumstances we face ahead. Regarding to today's call, I will now hand the call over to Kevin Toland, CEO; and Frédéric Pflanz, CFO, to take you through the financial performance for fiscal year 2020. I will then make some further remarks regarding the key developments since becoming Chairman just over 2 weeks ago. I will now pass the call to Kevin and Frédéric for the financial review. Kevin and Frédéric, please.

Thank you, Urs. Good morning, everybody. I'm just going to cover very, very briefly the results summary, the COVID actions we've taken and what the impact currently is on our markets. On Page 3 of our presentation deck, you'll see clearly the revenue impact of the second half as we went through COVID. That was at the end of half one, we're running at minus 3%. We were back at minus nearly 12% for the full year. Remember, at the half year when we last spoke, we were broadly on track except in North America. We had substantially refocused the business to B2B, have completed 85% of our disposals, EUR 385 million of our EUR 450 million target. We've made ongoing progress on our capital structure to net debt. The EBITDA was running at 1.96x, the lowest since 2013. Renew was delivering well, and we had good momentum. And we had good operational progress in Europe and Rest of World, and we work in progress but intend to focus on completing our North American turnaround. The H1 impacts were clear and we covered them. And the clearer focus through H2 was revenue stabilization by the year-end to get the operational improvements all through and settling, and to advance our Renew program. You can see the impact of COVID, and I'll cover that now in a moment in a little bit of detail. But I suppose the good news is we have seen gradual sales improvement. At the end of half one, we were running at about minus 3%. February and March -- in February, we were running in line with our expectations, which is to get back to stabilization. In March, COVID kicked in, so we started to decline. And you'll see in April, May, June and July, minus 49%, minus 36%, minus 23%, minus 18% revenue evolution. So you can see a very deep fall through April, where COVID impacted right across all of our markets pretty much, and a steady recovery over the following period. So still down but now relatively stable over the last time period. And with good liquidity and a cash position at the end of the year with EUR 424 million of net liquidity. Moving to Slide 4, looking at the actions we took. I think what we did was we took tough but rapid and effective actions. We spent some time on these at Q3, but I just would remind people of the 3 key group callouts, which we've had as our guiding principle all the way through COVID. Protect our people and the safety of our people. Secondly, look after our customers, and that was on the way down as we shuttered and closed down capacity and also on the way back. And then thirdly, taking care of the company in terms of cash, liquidity costs, and also critically important continuing to adapt to our environment. We took a number of key actions around production pauses, manufacturing capacity alignment, cost and efficiency steps, furlough headcount, short-time working, et cetera, utilizing where appropriate the various government relief mechanisms in the different geographies, and suspending CapEx and reducing discretionary costs where we could. A critical thing to remember is that we've had to have ongoing management of capacity to match demand up and down with a lot of noise and a lot of volatility and variants through the system. At the peak or the trough of COVID in April at one point with almost 20% of our plants shuttered, half our capacity was shut down and we had 5,000 people on either furlough or short-time working at the very end of April. At this stage, we're now at about 15% of capacity back, 2 plants still not resumed and with 2,000 people on furlough as at the end of last week. And we continue to be, what I call, in that measured crisis mode. That's a better crisis approach, having the right focus and data points, being agile and adaptable, and having very short frequent communication lines. It's also making sure we're continuing to align the market conditions and our supply chain. And it's about staying really, really close to and aligned with our customers and what is happening in their business, so that we have best visibility and we can take the best actions and we can adapt as quickly as possible. Two things I'd just call out in terms of the COVID period in a way is, one, the very strong performance right across the world of our staff and management in every country and in every region. And I must say I'm very, very proud of that. And I simply couldn't have asked for a single additional effort from many other people working in ARYZTA. And secondly, we've had good, strong action on cash and liquidity management. I'm very, very happy to have had the ongoing conferences with the Board of our lenders. And again, as you have seen, we had additional measures put in place last week to continue to best protect the company. Moving to Slide 5, which is the COVID impact on the market. I'd just give you a flavor of what happened through the second half in each of our markets and the key channels. Starting with Europe. Retail was the strongest sector, but it was still down through the period in Q3, slightly improved in Q4. The key factor in Q3 really was around supply chain, where many retailers simplified their ranges and they had, in many cases, distribution and store staffing challenges. And in some countries and locations, even retailers closed down stores in the central business district, in shopping centers, where there wasn't demand. That improved in Q4 as we saw some of the benefits of stability and the resumption of more normal behavior. We also saw some benefits of staycation where people were staying in their home country rather than traveling abroad for their holidays. One of the key reasons our business in Europe is slightly negative is we have a high [ impulse ] in snacking component in our mix in the retail business, and that hasn't come back as quickly or done as well given the environment; and also less frequent, bigger shopping trips and baskets haven't really been that positive for us. And there's also been quite limited promotion and new product introduction activity. QSR was impacted heavily initially, really due to lockdowns and a lot of customers closing down. But it has steadily recovered, but it is still down year-on-year. So steady recovery through the back end of Q3 and through into Q4. The early heavy impact was down to market closures, store closures. There's been very much a big focus on drive-thru delivery in many markets. And there still has been and continues to be caution on in-store dining. But some slow evidence of reopening coming through now, relatively stable, but still down year-on-year. Foodservice has been a channel that's been most impacted and the recovery will lag, with a significant impact in Q3 and an even more significant impact in Q4. There's a lack of morning and lunchtime business with working from home and restrictions in place, and then a lack of what I call real tourism level on a cross-border basis. There was a little bit of recovery at the end of the quarter due to staycations and also a major push to get back-to-school and college in most countries across Europe, but it is going to continue to lag in -- through the medium term. The overall European landscape, we've got secondary restrictions in many countries. If you think of, for example, the U.K., the Northeast, France, Paris, Hungary reclosing many borders. And we've got local restrictions in place across Ireland and Spain, just to quote a few. Tourism remained very depressed, both on a cross-border. And importantly in some markets, the continental base, if you think of France, in particular, versus the old norm, the amount of people that come to France from outside of Europe, not happening at the moment in any scale. And varying rates of resumption of return to work are in place across Europe, and it varies from east to west. And you're also going through a period now where subsidies have either ended or are ending. Moving to North America. QSR was impacted, but it's had an okay recovery. So improved -- down in Q3, some slight improvement but still down through Q4. Very much the focus has been on drive-thru, online delivery versus dine-in, simplification in the menu and the offer has been a key factor. And a lack of return to work in many cities is still an inhibitor. Foodservice has been the most heavily impacted, with a sustained heavy impact increasing in Q4. Bear in mind, in Q3, the first half of the quarter, we've had pretty normal trading. So it was the second 2 weeks of March and through April that we had the impact. We saw a small recovery at the back end of Q4. There still is, what I'd call, a lack of eating out-of-home and a daypart problem in terms of morning and lunch with people working from home. And also reduction in the institutional sector, for example, education. And it's still down, it's likely to stay down through the medium term. For example, the education sector in North America, only 50% of students are, at this point, estimated to be back in a classroom as opposed to pretty much across the board in Europe. Retail has been positive, with a relatively strong performance all the way through. We're up year-on-year in both Q3 and in Q4. Remember in H1, we talked about we had a strong pipeline going into the market at the end of H1 and into H2, and it's continuing to do well. And the focus for '21 continue to build on that progress. Overall, taking North America, the U.S. and Canada border remains closed for personal travel. A large number of states at this stage have rising case rates, some lockdowns are going back in place. Only half of the schools are back in the classroom and there are pretty mixed signals economically. Moving to Rest of World, QSR is the bulk of the business. That was heavily impacted, but now recovery. It had what I call a reasonable performance. Quite heavily down in Q3 because, in fact, many markets were very restricted or closed, the exception being Australia and Taiwan that were more resilient. And Brazil, in particular, you had a very, very heavy decline at the end of Q3. Through Q4, there's been some gradual recovery, but it's still fair to say that pretty much lagging in Brazil and in some markets in Southeast Asia. Big focus on drive-thru and delivery in all markets. And there's now -- we're seeing a good sign in terms of some expansion of menu and limited time promotional offers in some Asian markets starting back up again. Foodservice, particularly in Asia Pacific, was the most heavily impacted area in the region. It was materially impacted in Q3 and further into Q4, with many markets very, very heavily restricted. And the critical inhibitor there is the lack of cross-country travel and tourism. I think overall, if you take Asia at this stage, very, very strong restrictions remaining in place. We've had countries that have rapid action to deal with secondary issues implemented, and so far those are working. There's likely, on the foodservice side, to be a slow recovery with, for example, Australia, New Zealand tourism resumption up to a year away. In Japan, they started a promotion of a staycation in July. They had to stop over rising case rates, and they've started again now. So starting to see some green shoots there. And we're starting to see a small relaxation of business travel, for example, Singapore to Malaysia is just starting up at very, very limited numbers. But cross-border, travel restrictions are staying very, very high as countries try to keep case rates down. In Latin America, which for us is really Brazil, heavily impacted, but is in the process of reopening, most customers are back up and running at this stage in drive-thru, takeout, delivery. And the sales recovery is continuing to come through. So if you take the overall current position as we are now, sales are steadied over the past period. I think one of the important things is there's been a number of second waves and secondary restrictions and lockdowns to a large number of our markets. And so far, sales haven't gone backwards, which I suppose is good news. We're very much still focused on what we can control and what we should do and what we see in front of us. It is clear that cases are rising in many parts of the world. But what's really key and important to remember is governments are taking a far more rapid surgical action rather than blanket lockdown. And so far, most businesses have been able to continue. And as you look year-on-year, the impact, as we see going forward, is going to be more wide rather than deep. If you think in April, we had that massive depth of the lockdown impacting us, and now what we're more likely to see is a slow gradual recovery. So with that, I'd like to hand over to Frédéric to go through the financials. Thank you.

Thank you, Kevin. Good morning, everybody, on the phone. Good morning, everybody. Before going into the detail of the financial review, please allow me to point you to the new norm on leases that the group applies for the first time in this recurring period. This norm brings major changes to our financial indicators, especially EBITDA and net debt. We applied the new norm using the modified respective (sic) [ retrospective ] approach, where we do not restate the full pro forma for 2019. So we have added in this IR presentation on Pages 25 to 28, a special appendix for this, like we did in H1, where you will find the necessary bridges to understand how we move from one to the other. And I will also refer it to where necessary, specifically, and please refer to it our annual report under Note 14 to see more detail on the releases. If appropriate, later on, I will refer in the next pages to before IFRS 16 effects or after application of IFRS 16, when the numbers stated is fully like-for-like for 2019 or when it is not. In this financial review, we'll provide a short financial overview. We will present our income statement under IFRS, and we also detailed the performance that management believes describes best our operational results, the underlying EBITDA. We will also show the revenue and EBITDA development per region, per quarter, speak about cash flow and the debt position and our covenant ratios, and finish with Project Renew. Now let's move please to Page 7 for the financial summary. As Kevin already said, group organic revenue is down by 11.6% organically and reaches EUR 2.93 billion. While at H1, we were at EUR 1.65 billion, organically down only by 2.5%. This decline stems entirely from the COVID crisis that pushed us into 2 negative successive quarters of the depths of minus 22% and minus 26%, and Kevin gave already the monthly results and he touched all regions. Our EBITDA decreased by 15% after the application of IFRS 16, but in fact, was down 33% on a like-for-like basis before. This would mean that we last year had EUR 307 million, and the decrease comes down to EUR 206 million for FY '20, basically EUR 100 million less where we were at H1, only EUR 10 million behind prior year and had almost caught up in February and March until COVID crisis hit. We were on track to reach our general objective of 2020 and then the crisis came. Moving to our operating cash flow, which was minus EUR 85 million. Again, we saw a cash outflow in H2, and I will come to that later on in the cash statement. Thus, our net debt prior to IFRS is almost stable versus prior year because we were -- we would have been at EUR 742 million before IFRS 16 versus EUR 733 million the year before. Together with IFRS lease effects, we will reach EUR 1.11 billion number. The net debt over EBITDA ratio established itself at 3.7, above H1 due to lower EBITDA and higher debt in H2. Still, we have significant headroom compared to the amended covenant ratios that were agreed with our lending banks in the month of May. You can see at the bottom of the page that our IFRS operating loss is minus EUR 774 million, and the total IFRS loss is minus EUR 1.092 billion. This loss comes mostly from the North American goodwill impairment and disposal impairment charges; and secondly, from the disposals in H1 of Picard joint venture. Most of these charges were already recorded in H1, and thus are not a future surprise. I will also give more detail on that on the following page. Moving now to Page 8, showing the group underlying income statement. As mentioned, revenue is EUR 2.9 billion. EBITDA is EUR 260 million, giving us an underlying EBITDA margin of 8.9%. But if you look on the right-hand column, you will see that before the application of IFRS 16, we would not have been down 20 bps, but 210 bps, and I will explain that in the regional numbers. Depreciation increased versus prior year by about EUR 47 million. Again, this is the effect of IFRS 16. Joint venture of Picard, that we sold in H1 was still EUR 18 million positive in H1 versus the prior year of EUR 27 million. Finance costs were much lower by 16% after IFRS and by 37% before IFRS 16, thanks to lower debt levels throughout the year FY '20 and lesser interest charge because of the better leverage ratio. The hybrid dividends increased to EUR 46 million versus EUR 39 million in prior year. We have paid no dividends for the hybrids throughout the year 2020, and we're currently not planning to pay either for the future. After an income tax charge of EUR 23 million, one finds an underlying EBITDA -- net loss, sorry, at EUR 18 million compared to a profit of EUR 74 million in the year before. Now let's move to the important reconciliation of our underlying profit to the IFRS result. Starting with EBITDA of EUR 260 million and the same EBITA of EUR 75 million. As on the page before, we see slightly lower than before amortization of other intangible assets at EUR 123 million. We then have the net loss on disposal of assets held for sale in A&A of a total of EUR 164 million. That also includes the disposal of the asset in the U.K. foodservice that was sold in H1. Impairments of goodwill are mostly related to North America, and we have a total of EUR 502 million. Impairment of intangible assets, again, are linked to North America. Restructuring-related costs and COVID-related costs of EUR 10 million and EUR 26 million, respectively, are leading us to a total IFRS loss of minus EUR 773 million, as mentioned before. Underneath, you can see the effect of Picard between the net loss on disposal and the positive share of profit, and that leads us to a loss of before income tax after the finance cost of EUR 42 million of EUR 1.097 billion. Again, this was not a good year for ARYZTA due to the impairment charges that we took and due to the fact that the COVID crisis degraded the second half year performance. Now let's move to Page 10 to see the revenue performance of the group. I've already explained and it has been mentioned before that the organic movement was minus 11.6%. Disposals, especially the U.K. foodservice in the first half, negative by 2.4%. And a positive currency movement of plus 0.6%, which had lessened in the second half compared to H1 due to the re-loss of value of the U.S. dollar. Please note that it's important on the bottom of the page the variation of the channel movement to the -- in the middle, the second one, channel revenue, where you can see that retail gained 4% of weight from 33% to 36% and from 10% to 11% for the independent retail. QSR are almost stable. But mostly other foodservice loses 5% of percentage rate, that's where we have the most and the strongest underperformance under COVID due to the government restrictions. If you look to the right and look at the customer concentration, where you see the top 20 and all other customers. Again, top 20 customers fared better with a weight of 57%, before they were 53%; and others at 43%, before they were at 47%. Again, foodservice and smaller clients was less resistant; and major QSR and retailers fared better. Let's now move to Page 11, where you can see the quarterly organic revenue, and you can see directly the influence of the COVID pandemic. If you look on the bottom of the page, you will see the organic movement by quarter, minus 2.5%, minus 2.6%, minus 21.5% and minus 26.2%. You can see this is relatively, unfortunately, even split over the regions. Even so that in the end, Rest of the World fared a little bit better. It is all volume related. Even though we lost a little bit of price effect in the second half linked to mix between the channels, mostly the losses that we faced in the second half were linked to the volume. Europe, H1 minus 2%, finished the year at minus 12.7%, again, volume related. A&A at H1 was at minus 5.3%, finishes the year at minus 12%. Rest of the World, H1 was a plus 8.7%, equally mixed between volume and price, and now is at minus 3.5%, again behind volume. Clearly, the COVID crisis hit all regions and hard. Again, foodservice was the most touched, and QSR fared better and retail comparably better. Let's now move to the EBITDA margins on Page 12. You can see on the left-hand column, our EBITDA of EUR 260 million and the EBITDA margin underlying for the company at 8.9%. You can see, at the same time, the second column which is the FY 2019 numbers, where you can see that we were at 9.1%, down 20 bps year-on-year. But it's clear that these are not comparable because our EBITDA has been increased by the new norm on leases. This is why we added the change before effects of IFRS 16. In fact, Europe and North America in underlying EBITDA evolution -- sorry, Europe and Rest of the World in underlying EBITDA evolution fared a little bit better at minus 24% and minus 29%, whereas North America was down 50%, basically a loss of EUR 50 million almost 1 year on the other on the basis before IFRS 16. If you go further down, you can see that the margin in Europe held relatively well up, were comparably down 80 bps, and there was a stronger decrease in North America and Rest of the World, whereas in rest of the world, the EBITDA margin is still double-digit and at a good level. Let's now move to the cash flow page on Page 13, and let's look in detail of how our cash was generated. After a positive cash flow in H1 of plus EUR 23 million for cash generated from activities, the full year shows it's down at EUR 134 million. Two major movements explains that. The first is the third line. You can see that we have with the outflow from debtor securitization of minus EUR 69 million and minus EUR 71 million compared to H1. This is entirely linked to the fact that we invoiced less at our year-end close this summer compared to the prior year because the volumes of invoices were down. Thus, you cannot expect it to rise at the same level. And second, the rest comes from the line above, an outflow of working capital movement of EUR 106 million versus prior year, EUR 70 million of which came in the second half. This is coming behind the reduction in accounts payable that we did not compensate fully by our inventory reduction. We also have a small reduction in accounts receivable. You can see clearly that the cash flow is negative at minus EUR 134 million. Please also note that the net payments on lease contracts of EUR 56 million have been added to allow that we have the full comparability of our cash flows year-on-year. You also note the fact that we have restructuring and COVID-related costs in the second half, which are stronger than they were in the first half and in 2019, and we reached here EUR 40 million. I want to move on now to Page 14 to show the net debt evolution. On Page 14, you can see that our net debt shows an almost stable year-on-year number of net debt EUR 733 million to EUR 742 million on a pre-IFRS basis comparable. The negative cash flow of the year is being compensated by the Picard joint venture disposal, we had a negative cash flow by EUR 134 million negative and we have the disposal of joint venture positive of EUR 140 million. The closing net debt after IFRS 16 application stands at EUR 1 billion, as it was mentioned before. Let's move on now to Page 15, where we can see the regional numbers. Kevin has already covered the regions very much in detail, and I just want to add again the comment that I made already at group level. But you can see, in the customer concentration, the top customers in Europe got better than the smaller customers, increasing its weight to 48% for the top 20 versus 41%; whereas the others went down, the smaller customers, from 59% to 52% weight. And then again, at the bottom right-hand of the page, please note that the large retail increased from 41% to 45% and that other foodservice went down from 32% to 25%. I just want to add the fact that in terms of performance, prior to the COVID crisis, the European region saw underlying EBITDA growth -- margin growth in a strong way. If we go now to the page in North -- sorry, on the bottom of the pitch to North America on Page 16, you can see the review for North America. Again, we have seen Renew revenue and EBITDA already. Again, I want to point you to the table of the underlying EBITDA margin on the top hand corner to the right. Underlying EBITDA margin, 5.3%. That margin without the effects of IFRS 16, which have been 3.9% down from 7%, which explains the underlying EBITDA before IFRS 16 goes down by 50%. This is linked to a very challenging year. Kevin talked about that. We have done major progress in reorganization. 80% of revenue automation -- sorry, of Renew automation projects were completed. We closed 3 bakeries in 8 months. But still, the transformation process is ongoing and profitability needs to be improving. We see, again, like in Europe, the same effect of the large retail gaining weight by 4%, QSR staying stable and we can see the smaller foodservice customers going down from 25% to 21%. Let's now move to Rest of the World on Page 17. The region was growing well in H1. We were up more than 8% and up to the start of the pandemic. And in APMEA, it was handled relatively better in terms of consequences to the revenue than in other regions. But still, it has suffered like all other regions, but the least. Only Q4 was not as good as Q3. It is clear that the exposure of 72% -- again, bottom of the page to the right, to QSR at 72% of sales allowed the region to resist better, whereas the 2 other parts of the business, which are small and large retail, but a smaller piece of the other foodservice were down 5% in weight. Again, profitably, as I said before, remains comparatively strong and growth perspective are intact once the pandemic will be behind the region. It is very clear that we have, indeed, with the Rest of the World, a growth potential once the effects of the pandemic are reduced. Let's move on now to Page 18 and to update on our senior net debt financing. First of all, you see that our RCF is almost fully drawn, which is the measure that the company did at the beginning of the pandemic to protect liquidity of the company and to have all available liquidities and cash in the company itself. Compared to H1 of last year, we reduced our term loan facility. In H1, we had a little bit more than EUR 300 million, EUR 313 million, we're now at EUR 210 million. There has been no changes to Schuldschein. We took state bonds of COVID-related loans of EUR 2 million. And post the year-end close, we had another EUR 20 million loan coming from France. And you can see then, moving down the line after net -- term debt, net of upfront borrowing cost is EUR 1.165 billion. We have cash and cash equivalents of EUR 424 million, a number that is up by EUR 60 million from the beginning of the pandemic on the 24th of March and they are comparable to it. Then you will have net debt excluding leases of EUR 742 million, as we already mentioned. You have the leases of EUR 269 million. And we come to a total net debt of EUR 1.1 billion (sic) [ EUR 1.01 billion ] after the application of IFRS 16. Underneath, you can see our leverage covenant at 3.7, very far away from the 6-point multiple that we had amended in the month of May with the help of our lending banks. And you can see that the interest covenant is 2.63. And again, more than 1 turn available to the 1.5 amended statement. And underneath, we have shown, as we have received last week on the 28th of September and validated on the 5th of October, executed the final documentation that we have 2 further covenant facilities amendment. The leverage covenant for the next 2 tests in H1 2021 and in full year 2021 will be at 2x before resetting afterwards to 3.5. And the interest covenant for the coming 2 periods will be 1x compared to the 1.5x at end of year 2020, and will reset back to 3. Now let's move on to Page 19, where I can pass more quickly because I already mentioned most of the points in the introduction. Indeed, there are net losses on disposals of business and asset write-downs of the joint venture of Picard of minus EUR 297 million linked to the disposal of business. And then following that, an impairment of goodwill of one of the regions in Europe of EUR 125 million; North America, EUR 565 million. Most of these numbers were here already in the first half with the exception of the impairment of intangibles. And you can see the COVID-19-related costs, EUR 12 million in Europe, EUR 11.5 million in North America and a smaller number of EUR 1.7 million in the Rest of the World. Total impairment disposal, restructuring and COVID-19-related costs amount to EUR 1.023 billion. Moving on just for completeness to Picard, the business that we have disposed of in H1, the joint venture part was sold. We have sold 43% of our shares. We keep another 4.6%, which contributed EUR 18 million to the underlying net profit in the first half. To add to that, we have a vendor loan remaining that was due in October. We have received the cash last week in a totality of EUR 10 million as was planned, and we continue to hold our 4.6% as the financial investment at fair value to be monetized at a later stage. And now last but not least, passing on to Project Renew. We were on track for achieving our run rate target before COVID of EUR 70 million, and we have mentioned that through our H1 call. We finished the year finally at EUR 65 million run rate, which is in the current circumstances, in my opinion, not bad. It is clear that for cash conservation reasons, we postponed new projects. We lost benefits on automation projects due to the lower volumes that we produced in the second half to adapt to the COVID crisis. But our objective is clear. We want to restart/postpone projects when it is safe to do so and when it is practical to do so, and also, when we have the volumes coming back to the level where we want to be. Nevertheless, and even though we had difficulties for Renew in the second half, we have realized a total of EUR 92 million savings over the first 24 months of the program's existence, and we expect to continue and to push fully on that project until the end of the 30-month -- 36-month period. On the bottom of the page, you can see the detail of the cumulative savings, on the left according to manufacturing, supply chain and operating model streams. And you can see that, indeed, manufacturing and automation, even though it was hindered in the second half by lower volumes, is now the strongest part of the savings, reaching a little bit more than 1/3. Before handing back to the Chairman, please allow me to point to Appendix 1 again, where we find the bridges to IFRS 16 on Pages 31 -- sorry, on Pages 25 to 28. On Page 31, you can find the maturities of our debt, where still the most part is maturing in FY '23 and September '22. On Page 30, you can find the summary balance sheet, and the hybrid funding are detailed on Page 32. Now I hand back to our Chairman, Urs. Thank you, and handing over to you.

Thank you. Thank you, Frédéric. Thank you, Kevin. I will then move on Page 23 and returning briefly to the Extraordinary General Meeting on September 16, and to also highlight that all the shareholder group resolutions were carried on the day, indicative of a very strong mandate for change. It is also a mandate to deliver significant improvements in the performance of ARYZTA, which I believe has a very strong future, focusing on its core markets and core businesses. The 2020 financial performance outlined by Kevin and Frédéric highlights the need for significant action to deliver improvements in the business and financial performance. This improvement will be guided by a strengthened Board with the added benefits of having deep bakery industry knowledge. COVID-19 impacted the results in 2020 and is likely to continue to impact in the current year. However, our job is to control what we can control. And we have already secured second bank covenant waiver, which secures the financial resources needed to make calm, orderly decisions about the future strategic direction of ARYZTA and to ensure we maximize value for shareholders and not rush such important decisions. I would like now to update you on other key developments since September 16. Your Board has established a special subcommittee to deal with strategic M&A across the group. It's very positive to note that since September 16, we continue to receive unsolicited expressions of interest to acquire parts of the ARYZTA Group, these are in addition to the already known public earlier interests. The Extraordinary General Meeting has endorsed a change in direction for the company and the Board, and we will conduct a full assessment of all strategic options available, internal and external, acting always in the best interest of ARYZTA and its stakeholders. And this process will continue to evaluate all unsolicited expressions of interest received. On Slide 24, then, I want to restate my view that ARYZTA has a long positive future. My vision for ARYZTA is one that is less complex, more focused and structured around its core markets and core businesses. This will improve the sustainable financial performance and reduce its current excessive debt significantly. This business case is well supported by strong customer relationship, well-invested assets and experienced employees around the world. This facilitates calm, well-thought and -- well-thought-out and orderly decision-making process around any change involving disposals, reorganization and debt repayment plans. This will allow ARYZTA quickly to refocus on organic growth within our core markets and core businesses. I'm fully convinced that ARYZTA has a great potential, and we will do our utmost to put the company back on the road to success. We will communicate further updates in a timely manner. Due to the challenging COVID-19 external environment, it is not prudent to provide forward guiding today. I would like to thank all ARYZTA employees for their positive efforts in the past year in very challenging conditions. I would like to express my thanks to you, the owners and shareholders of ARYZTA, for your support and an overwhelming endorsement of the new mandate for change on September 16. Thank you for this. I will now hand the call back to the operator to open the lines for questions.

[Operator Instructions] And your first question comes from the line of Jörn Iffert from UBS.

The first then would be -- please to Mr. Jordi, would you think it would make sense for ARYZTA to only focus on the European business? Second question, then more a general question also to the CFO, please, and Mr. Toland, regarding cash consumption. What is your best guess? Or can you provide a range for the first half '21, also seeing recent exit rates? And the last question, can you help us better understand what the sales exit rates were in August and September?

Thank you for the question. Maybe allow me to answer my question first, and then I will hand it over to Frédéric. We are doing actually our analysis. As I told, there is a strategic committee formed. And we will evaluate there, as I mentioned, what the core businesses are and the core markets. The outcome there is not yet done. We will provide guidance on this in a timely manner, not for now. Frédéric, question 2 and question 3, please.

Yes. Thank you, Jörn. On the -- naturally, we don't give guidance of capital evolution for the next 6 months. But what I can tell you is that we have liquidity which is at very similar levels as they were at the end of the month prior -- sorry, at the end of the month of this period end, and we have similar liquidities currently and we're already early in October. And I do note from the forecast that we see for the next few weeks -- we do weekly forecast projections in the current crisis to be sure that we monitor liquidity as tightly as we can, we do not see any significant outflows for the 2 or 3 months to come. And I would want to add the second point is, as you have seen, and we were down strongly on our revenues due to the COVID crisis and that partly gets you into question 3, we have an outflow of debtor securitization of EUR 70 million that happened between H1 and H2. When sales will come back, this securitization should come back at the same level and in the same way as it was before. So -- and that depends on the sales reestablishment. So that gives you also a good feeling how things may improve. On the revenue side, it has -- and we are naturally not publishing the quarter 1 results yet, but we see a slight improvement. And I think we have mentioned that already when we communicated our July numbers. We see a slight improvement sequentially also in the month of October and September. But naturally, we will have to wait for the Q1 results at the end of November when they are published for the real numbers.

Your next question comes from the line of Jean-Philippe Bertschy from Vontobel.

The first question is out of interest, considering all the potential scenarios that you have in your hands. How are you characterizing the investments and the CapEx in the different regions? And the second one would be on the LTIP plan. The question is like, do you consider the level of this LTIP as a potential conflict in terms of exploring all options available, especially considering the partial disposals or business continuation option? Probably that question will be for the Chairman, please.

Okay. Maybe around the CapEx, let -- you would allow me to put again the statement that we elaborate and evaluate all options. Therefore, the CapEx plan is done and maintained for all regions and all businesses so far until there is a position in place. Frédéric, this is correct, like this, yes?

Absolutely. We have set our business plan for the year 2021 with all regions, and we have a CapEx plan that is adapted to the needs of each individual region.

Okay. Then the question about the LTIP. There is an operational LTIP. And as you understand it from the slide that there is a big part in the maybe [ Western ] part. At the moment, we are examining all these papers and all these plans, and we will make sure that all interests and all directions, all options are covered by these plans and not highlighting out the preferred one.

And your next question comes from the line of Andreas von Arx from Baader.

I have 3 questions. First one, also for the Chairman, could we know who is on that subcommittee looking at the strategy right now? That's question number one. Question number two, with regards to the restructuring costs, could you give an indication how much restructuring and COVID-19-related one-off costs you expect for the next year? In case you are not willing to do that, could you remind us how much is left of the Renew program in terms of restructuring costs for next year? And also related to that, can I ask how you define what is COVID-related restructuring costs, so the EUR 25 million you have booked in the second half? And what is our operating part of that business? Maybe also related -- sorry, to add to that one is, I mean, adjusted EBITDA is part of your long-term incentive plan. I mean, given COVID-19 restructuring costs, do you then adjust that again to calculate the LTIP? Or with just booking COVID-19 costs, you basically can increase the basis of the LTIP program? And then the last question, can you provide some insights of what was the result of the strategic review of your external bank adviser Rothschild that provided a strategic review end of July? I mean shareholders paid for that study, maybe you can highlight some of the results.

Thank you for the question. Let me answer the first part and then the last one as well, handing them over to Frédéric. In the strategic committee, there are the 3 new members of the Board, which is Armin Bieri, Heiner Kamps and me, and 2 existing members, which is Luisa Delgado and Alejandro Legarda. We are exploring, again, all these options, which are now available and finding then a conclusion how to deal with it and where to proceed and how to proceed. So the last question on the strategic review is there was a full analysis of the entire situation. A partial sale and full sale were examined, with the recommendation then at the end to sell the entire company. That was the Rothschild's review. Frédéric now to you for the other questions.

Yes. Thank you, Andreas. So on the restructuring costs. Indeed, in the prior year 2019, which was the first year of Project Renew, we had restructuring costs of Renew, which were related to it, around EUR 24 million and those were communicated at that point of time. This year, the number for Renew is a number which is lower as there were less reorganizational projects. And we have a number here which are linked to about EUR 10 million of restructuring-related costs, and again, linked to Renew and there was severance and other staff-related costs, which is the biggest number of EUR 7.3 million, which is again relinked to the operating model. And if you do then the sum, EUR 24 million plus EUR 10 million, you still have EUR 15 million left over -- sorry, not left over, but still available to be done in terms of reorganizations in the third year. It is a higher number than initially planned because we postponed a few projects because they were just not reasonable to do so. So this is the second piece. So we're still in the level and we have confirmed that of Renew at around EUR 50 million in terms of reorganizational costs. Now the COVID-19-related costs, there is EUR 25 million of them. I have given the regional split on Page 20 -- sorry, 19 of the presentation. In fact, there are -- if you look where they come from, and you can find it in the note around COVID-related costs in the annual statement, there are employee-related costs and safety costs. And these were mostly linked to the fact that we have furloughed employees, we had redundancy costs of people and incidental labor costs on top. And at the same time, we needed to adapt our business and our bakeries while implementing safety measures across the group. And this was the second piece for a value of EUR 1.8 million. Then we had specific inventory write-offs and impairment of trade receivables, which were linked to the fact that because of the COVID crisis reduction in volumes, we had production pauses and we have finished good write-offs because of the short shelf life that was linked to this. These were naturally analyzed in detail, and only the ones which were linked to an important drop, immediate drop linked to the COVID crisis were registered. And last, in the trade receivables, I just want to give a detail. We have naturally identified accounts receivables that were no longer being recoverable because there was a direct impact to many of the foodservice businesses over the world and other smaller businesses, where they have not been able to be paying and they were linked to the fact that were closed or locked down, this is about EUR 3.5 million. And then we have another EUR 3.3 million of total costs, which included penalties on cancellation of commodity contracts on lower volumes, and travel and conference costs that we couldn't stop but have already priorly engaged. These numbers amount to a total of EUR 25 million. At the current moment, it's difficult naturally to preview whether we will have further related safety and employee-related costs, but we will naturally -- and the same thing is true for inventory write-offs and the impairment of trade receivables. We do not expect, though, to have any incremental costs more linked to lower volumes by the commodity contracts, except if there was again a major lockdown. And nonrefundable travel costs at the moment, naturally, they are no more because they were all taken. And this is the way this plays out. I hope that detail is enough. You can see it on Page -- on note 3.5 on the Page 132 of our annual results, and you see a little bit detail by region on Page 19 of our IR document.

Is there any insurance payments that offset these costs?

No. There are -- we are looking into that, but no, we don't expect any of these for the moment, but we are still looking at that. This needs a very, very detailed verification. If we can, we will naturally try to make that available to us. But I haven't identified any as of today. I think this is very detailed, and we have been very, very prudent on that in order to identify them precisely.

Your next question comes from the line of Patrik Schwendimann from ZKB.

Patrik Schwendimann, Zürcher Kantonalbank. You have mentioned a slight improvement sequentially in August and September. What does it mean? I mean July was minus 18%, so this means maybe in August, minus -- or in September, minus 10%. Could you be a little bit more precise here? And then second question, how fast, if possible, to move more from the difficult foodservice channel to the retail channel? And what are your projects here? Third question, you had a significant outflow in the net working capital. You just have mentioned EUR 106 million. What's your best guess here for the current year for -- in terms of net working capital? And last question, what's your best guess for the CapEx for the current year?

Thank you for the questions. Allow me to answer the question about the movement from foodservice to retail. Retail today is facing a change in the assortment mix they are selling. So it's -- carbohydrates are the most efficient calorie in -- on the table. So this is visible in sales due to COVID, more packed, more safe products are going to be sold there. So these are the projects ARYZTA is targeting in cooperation with customers. There is a shift visible in this part. For the other questions, I would hand over to Frédéric.

Yes, Patrik. Thank you, Urs, for handing over. Patrik, if I would have -- well, I'll put it this way. I think we were down in July at 18%, and you suggested a 10%, this would be an improvement by more than -- sorry, an improvement by more than 50% or at around 50%, then I would have not considered a slide. But again, we are not publishing our Q1 results. But you can clearly see when I mentioned slide, it would not be an improvement of 50% or 40% versus prior year. It is a slight improvement and it is all over the world as the lockdowns from COVID were levied over the summer. And at the same time, as people were going back to work normally, and we see that improvement slide and sequentially and not strong and sequentially. On the working capital outflow, indeed, the EUR 106 million of outflow. And please let's say that, first of all, in the first half, there was already EUR 35 million. So there was a EUR 70 million chunk, I would say, in the second half, and that is clearly an outflow in the second half. And you need to add the EUR 70 million of securitization. I would expect securitization when revenues come back, and then they would come back. That depends on the speed of the revenue, and that is very difficult to forecast at the moment as we're still in the middle of the pandemic. And on the working capital, we had an outflow, as I mentioned, in accounts payable that was not fully compensated in the reduction of inventories. I think we're at better levels of inventories now. I think we can improve maybe a little bit accounts payable over the next month, but we will need to see that. And again, please let's not forget, we're still in the COVID crisis, we hear about it every day. And it is very difficult to forecast that at the moment, which is why we are keeping our daily cash monitoring, our weekly cash forecasting with a weekly rollover in the future, and we're treating that still as a crisis management. And that leads me to CapEx, which exactly is defined the same way. We do have CapEx projects that have been validated in the budget and that are with us, and we will adapt them to the needs of the business in the crisis. For the moment, for example, all Renew capital expenditures that we have planned is only partially restarted because we said we would postpone the projects until it makes sense to start them again and it is safe to do so. And the same is true for other capital expenditures, especially when they're volume related. So at the moment, we're spending less than we would do in a normal moment. And you have seen that we were slightly underneath, but with an increased Renew capital expenditures in 2020 versus 2019. Because, let's not forget, we have spent last -- in 2019, EUR 20 million behind Renew, and we spent EUR 30 million in FY '20 behind Renew. And we -- because we wanted to get to our EUR 100 million, but only when it makes sense. So I would say we will be very prudent in the spending of capital expenditures in order to make the company fit for the crisis. And when it's right to do so, we will start again. I'm sorry that it's not a more detailed guidance, but I think this is the reasonable thing to do in a crisis like that.

And Frédéric -- but regarding net working capital, you have just mentioned, you would like to improve the accounting payables, what does this mean? Then you don't expect -- as best guess, I know it's a best guess, it's very difficult to predict. But as a best guess, you would say it's a fair assumption to not expect any further outflows? Or would you say just the outflow is reduced from last year?

Yes. So we had, as I said, we had an outflow of EUR 106 million, of which EUR 70 million were in the second half. I think in a normalized situation, but I think this will time where we get there. And I don't know whether H1 will be normalized. But today, everything does not look like it. One could at least hope for a little bit better position, but I would not count too much on it. What I know is that we have adjusted our inventories, with post-production in the right way and we did it correctly. So I would not be too positive about the short-term working capital movement. And if you -- I know that your model is important and it needs to be updated, I would say that if there is a slight working capital movement, stabilized, slight outflow, slight inflow, you're probably on the safe side. We expect that the working capital movement from debtor securitization to improve, and that will improve when sales improve. But sales needs to improve, they're improving sequentially slightly. And sorry for that little bit long answer.

Your next question comes from the line of Jon Cox from Kepler.

A couple of questions. Maybe sort of split into the operations and debt and then maybe strategy. On the operations side, I know it's very difficult for you guys. But is there -- if sales are the same as they were in 2020, and I guess that H1 will be not quite as bad as H2, but H2 won't be as good as your H1 2020. Is there any reason why your EBITDA will go up if your sales are flat for this year? That's the first question. Second question, just on the debt situation, and we know your miles away from covenants. But the real elephant in the room is these hybrids, which will probably be about EUR 1 billion by the end of this year when you have the deferrals. Have you thought about going back to the hybrid holders and trying to renegotiate that debt? Because, obviously, while you have them, it's very difficult to function as a normal company in terms of paying dividends or whatever it may be down the road. And then the last one really on strategy, Urs, and welcome back to the company. You seem to have gone on record saying you would prefer to remain a slimmed down version of yourself, a partial -- maybe partial sales. Wondering if you can just confirm that. Because I think you had an interview saying now was not the right time to sell the company. As a result, I'm just wondering where the Elliott Advisors talks are, because obviously, that announcement was -- talks were well advanced in what looked like to be a full takeover? And then just a final question on that. Is the risk that you guys will be left with maybe most of your Europe business and some of that Canada business and maybe a few bits and pieces? But you've just basically sold off some of the poor, underperforming businesses, it won't make any difference to speak off to your total debt, which is probably going to be about EUR 1.7 billion on the EUR 200 million EBITDA business. And it looks like, ultimately, you're going to have to do another sort of big capital increase down the road. I wonder if you have any thoughts on that.

Thank you. I would start with the last part of your question and would then hand over to Frédéric. At the moment, we can't talk about the status with talks. So Elliott is one option which on the table. As you mentioned, there is another option, which is partial sale of assets. We are exploring both opportunities. This is our obligation from the Board. We take there our full fiduciary duty and always with the aim to get the best out for the shareholders. Let me repeat that there is a relevant number of additional unsolicited offers to purchase part of the business of ARYZTA. And this is beside the Elliott approach, the status we can't talk about. I would then give back to Frédéric for the first 2 questions.

Jon, yes, and thank you. You have asked the question whether we believe that H1 or H2 or the full year FY '21 would be better or worse. Now you have seen the statement of the company in the press release and you have heard the Chairman, due to the current uncertainty that we are facing, it is very difficult. So we do not to estimate. We know that there will be a material effect to our results, but we cannot give a precise -- any guidance at the current time. And it is clear when the -- if the pandemic persists and as it persists at the moment, we will be expecting a bumpy recovery over the next month. Now what that means is we see sequential improvements and they are there, but you are perfectly right, H1 of 2019 was at a level of EUR 141 million. And other than that, I cannot provide any further guidance. On the question on the hybrids that you've asked, indeed, your estimation is probably a little bit on the high side. We're at EUR 929 million. We had EUR 46 million of dividends that's adjusted to it. If you would add those to that, you are probably slightly under EUR 1 billion. We have currently no plan to take the hybrid dividends. And I have not engaged with hybrids, and my understanding is that we will, for the moment, not engage on anything like that. I think what needs to be done is, first of all, take care of the business in a pandemic and we need to make that one, say, as a company first before any other things thought about.

Maybe I'll just rephrase the question on the operations. If your sales are flat this year, this financial year, could there be any improvement in the EBITDA? Because some of the levers you have in terms of the restructuring you've done and some of the projects. Or are you saying that even if sales are flat this year, there will be no improvement in EBITDA?

I have said not that. I have said that due to the current pandemic and the uncertainty around COVID-19, we are not in the capacity to give a guidance at the moment. But we expect the recovery to be bumpy.

And your last question comes from the line of Roland French from Davy.

So I've got a couple of questions. Maybe starting with the first, just trying to dial into the North American EBITDA performance. And I guess big picture conceptually, the revenue performance is similar to Europe but has materially underperformed on an EBITDA level. I'm trying to locate the driver of that. Is this channel mix? Is this the extent of operating leverage in the business? Or is it around the cost base? So maybe if you could help us put some color on the North American margin performance. And then secondly, on the other cost buckets, I guess, some update and color around logistics and freight, your key raw materials and labor costs? And then maybe one for Kevin around innovation. I know it's been talked about before, but how important does that innovation tap become through COVID and through FY '21? And clearly, you've had to rationalize SKUs, and certainly at a retail level have had to rationalize SKUS and that's -- there's been a benefit there in terms of production efficiency. But are customers dialing up their focus on innovation and new product development? Or is it taking, I guess, a backseat in context of prioritizing the main SKUs? So they are my 3 questions.

Thank you. We would maybe start first with innovation, Kevin?

Thank you, Urs. Thanks, Roland. I think on innovation, what you see is customers have been just very focused over the last time period, Roland, on the base business, having base supply. In many instances, they've actually rationalized down their ranges to core products, core -- if you went into any supermarket, you see a lot less variety and range, not just in bakery but in general. So I think it's the first point. Second point is there have been limited appetite generally over the last period for innovation or promotional activity. We're starting to see some of that starting to reemerge. I think the third point then is what we've done is very much focused our innovation work over that time period, as Urs pointed out earlier, to looking at the shift in retail to do we change our product format, do we change our packaging format. I think within QSR, we've been looking very much at how we support our customers as they expand their daypart, as they expand their actual upsell, if you like, by bringing in extra products. And it's going to be less is more for the short term. So very much we've adapted to what our customers want and need, which is things that fit their strategy for the coming periods. I think we're going to just keep a watching brief on it. It's not as active as it was and we have to adapt, as I said, and work with our customers, but still very focused on it.

Thank you, Kevin. And allow me to add, there is most probably as well an opportunistic approach. Customers are having less buying opportunities per week. Before customers were shopping maybe a 4, 5x a week, now once or twice a week. It is impacting the assortment. And customers, consumers are looking more for safe products, which are packed products, products being baked at home, refreshed at home, making sure that nothing is brought home which shouldn't be there. So this is the aim. But as Kevin told, this is a process ongoing now with customers and all now impacted by the situation, the actuality we have. Thank you, Kevin. For the first 2 questions, I would then give the voice to Frédéric, please.

Yes, hello. I'll take them in reverse order, if I may, Roland. Cost buckets. The first thing is logistics costs, you mentioned raw materials and you mentioned other costs. I will start from the bottom of the P&L. Our admin cost over the year, because of the actions we've taken, are about similar to where they were in percentage of sales to the prior year. And I think that is at a like-for-like basis, naturally, by definition, is in current circumstances a very good result. We were really, really tight already before, but even more tight in what we were spending in the period. And naturally, we helped our -- we availed ourselves to every help that we could get from the government during the lockdown period, and we have done so. On the logistics side, logistics cost during the COVID crisis, the most important one for us was to continue to serve our customers with lockdowns, which sometimes stopped cross-country transportation or long hauls and so on. So we were working very hard on that. And we maintained a reasonable level of distributing costs, and we believe we can do that also for the coming year. At least this is the way that we see it looking forward under the current circumstances. We don't know what, for example, a European general border lockdown would mean, and we're preparing naturally for the U.K. Brexit. Raw materials came out slightly better in percentage of sales in 2020 than the prior year. And at the moment, the market was very uncertain. And you remember what happened around the price of petrol and oil, and then there was also ups and downs in the different parts of our business between flour and butter. But they look at the moment at a stable rate. And we have covered where we could we have a few pieces where it has a little bit inflation. And in the other way, demand has come down, so we have less inflation. The most important thing for us is to cover what we need and to adapt our forecasting very closely. But in terms of financial outcome in FY '20, raw materials and percentage of sales were slightly better than they were in 2019, and we will continue to fight. So this continues. That's probably all the cost buckets. On A&A, indeed, North America was already underperforming in H1, under all the transforming actions that we were taking. We mentioned the EUR 7 million cost between logistics costs and transfer costs and extra production costs after the closing and transfer of -- closing of bakeries and transfer of lines in H1. We have naturally continued our effort behind Renew until COVID struck, but we still have continued. And I can assure you, we are very, very cost conscious in North America. But it is true that at the moment, the current profitability is, of the business, where it should not be. And we have engaged on that. And we said in H1 and confirm that at the moment that the profitability ratios that we had initially done to achieve, we will not be able to achieve. There is probably one difference. In Europe, we have a European-wide business but it is managed country per country. North America is treated as one country, and that's how we work it. So we need to improve the totality of the business there. And last but not least, we hold assets held for sale, which is the disposal of an unprofitable business that we have mentioned in H1 and we're working on that. And I think that should improve focus and concentration of the management also for the future when that business is sold.

Okay. As I understood, this was the last question around. I apologize that the information is as tight as it is now. It's a bit driven by the situation that the new Board is since 2.5 weeks working and exploring all opportunities and situations, and driven as well by the COVID-19 situation. Let me rephrase again that the Board is exploring all options for the best of the shareholders without any pre-taken decisions. And we will find alternatives which serves shareholders' needs and themes serving shareholders value. We are confident that we will find a good way to deal with all these impacts now being on the business. Thank you for your time, and I will then hand over to the operator.

That does conclude our conference for today. Thank you for participating. You may all now disconnect.